[
  {
    "id": 1,
    "question": null,
    "answer": "The Federal Land Transaction Facilitation Act (FLTFA), which expired on July 25, 2011, provided for the sale or exchange of lands owned by the Bureau of Land Management (BLM) that have been identified for disposal under BLM's land use plans. Most of the proceeds were to be used for land acquisition. The law's goals included allowing for reconfiguration of land ownership patterns to better facilitate resource management, improving administrative efficiency, and increasing the effectiveness of the allocation of fiscal and human resources.  The authority to sell or exchange BLM lands under FLTFA was initially authorized for 10 years, expiring on July 25, 2010. When it expired, an estimated $52 million in the account ceased to be available for purposes of the law. These funds have not been reinstated in the FLTFA account. On July 29, 2010, the authority was subsequently extended for one year, expiring on July 25, 2011. Upon expiration, there was $2 million in the FLTFA account, which also ceased to be available. An issue for Congress is whether to reauthorize the FLTFA authority and, if so, in what form. One question is the extent to which there is a need for this authority, given other laws authorizing the sale and acquisition of federal land and other sources of funding for these purposes. A second question is whether any extension of FLTFA should be relatively short (e.g., one year) or relatively long (e.g., 10 years or more). A third question is whether to continue to require land use plans as of July 25, 2000, to be used as the basis of land sales, or to allow updated plans to be used. A fourth set of questions relates to the retention and use of proceeds, including the extent to which any future proceeds should be retained by the agencies, used exclusively for land sales and acquisitions, and used primarily in the state in which they were generated, and whether the previously generated funds should be returned to the FLTFA fund.  The Obama Administration has proposed making FLTFA permanent, and using current land management plans for determining which lands to sell or exchange. S. 3525, S. 714, and H.R. 3365 would extend the law for varying numbers of years. In other respects they are similar, for instance, in allowing BLM to use updated land management plans to sell and exchange land.  Proceeds from the sale or exchange of BLM lands under FLTFA were split between the state in which the lands were disposed of (4%) and a separate Treasury account (96%). No more than 20% of the funds in the account could be used for administrative expenses. While BLM alone disposed of land, not less than 80% of the funds in the account were used by the four major federal land management agencies to acquire lands. In addition to BLM, these agencies were the Fish and Wildlife Service, National Park Service, and Forest Service. The agencies could acquire inholdings and other non-federal lands (or interests therein) that are adjacent to federal lands and contain exceptional resources. Of the funds for acquisition, at least 80% were to be used in the state in which the funds were generated; remaining funds could be used in any state. Further, not less than 80% of the funds for land purchases within a state were for acquisition of inholdings.  From the enactment of FLTFA through FY2010, a total of $115.7 million was raised through the sale or exchange of BLM lands, and 25,967 acres were sold. Disposal of land under FLTFA was concentrated in Nevada and Oregon, with most of the revenues (76%) being generated in Nevada. Over the same period, about $63.7 million in funding was disbursed, of which $49.2 million was spent on the purchase of 18,135 acres (together with $9.7 million in other funds). The acquisition of lands and expenditures on acquisitions were less concentrated in particular states than land sales and receipts.\n",
    "docs": [
      "Background Historically, proceeds from the sale of lands managed by the Bureau of Land Management (BLM) under various laws were deposited in the general fund of the Treasury. However, certain laws have provided for the proceeds of land sales to be deposited in separate Treasury accounts, with funds available to agencies for subsequent land acquisition and other purposes. The Federal Land Transaction Facilitation Act (FLTFA, 43 U.S.C. \u00a72301), which expired on July 25, 2011, was one such law.  The law's purposes included allowing for the reconfiguration of land ownership patterns to better facilitate resource management, improving administrative efficiency,",
      " and increasing the effectiveness of the allocation of fiscal and human resources. FLTFA provided for the sale or exchange of land identified for disposal under BLM's land use plans \"as in effect on July 25, 2000\"\u2014the date of enactment. Most BLM lands (except some lands in Alaska) are covered by a land use plan. Most of the proceeds were to be used for land acquisition, as described below.  Proceeds from the sale or exchange of BLM lands under FLTFA were split between the state in which the lands were disposed of (4%) and a separate Treasury account (96%), called the Federal Land Disposal Account.",
      " Funds in this account, often called the FLTFA account, were available without further appropriation.  The authority to sell or exchange BLM lands under FLTFA briefly expired on July 25, 2010\u201410 years after enactment. On July 29, 2010, it was subsequently extended for one year. An issue for Congress is whether to reauthorize this authority and, if so, in what form. The 112 th Congress has considered related legislation. (See \" Administrative and Legislative Action \"below.) The funds in the Treasury account when FLTFA initially expired, an estimated $52 million, ceased to be available under the law.",
      " An estimated $2 million in the account at the end of the one-year extension (July 25, 2011) also has ceased to be available.  The funds in the FLTFA account were available to both the Secretary of the Interior and the Secretary of Agriculture to acquire inholdings and other non-federal lands (or interests therein) that are adjacent to federal lands and contain exceptional resources, with no more than 20% for BLM's administrative expenses to carry out the land disposal program. Of the funds for acquisitions, at least 80% were to be used in the state in which the funds were generated, and the remaining funds could be used in any state.",
      " Further, not less than 80% of the funds for land purchases within a state were to be used to acquire inholdings. Figure 1 illustrates how $1.0 million in receipts from the sale or exchange of land under FLTFA was to be disposed of, in accordance with the percentage categories in the law. From the enactment of FLTFA through FY2010, a total of $115.7 million was raised through the sale or exchange of BLM lands, and 25,967 acres were sold. Over the same period, about $63.7 million in funding was disbursed, with $49.2 million spent on the purchase of 18,",
      "135 acres.  The balance of this report is organized into four sections. First, \" Overview of FLTFA Authority \" describes FLTFA's provisions on selling and acquiring land, and provides a summary of the program's termination. Second, \" Implementation of FLTFA \" presents an overview of how the land sale and acquisition authorities were used over the past decade, including the acreage of land sold and acquired and the amount of money collected and spent, both nationally and in particular states. Third, \" Administrative and Legislative Action \" outlines President Obama's proposal to amend FLTFA and make it permanent, and 112 th and 111 th Congress measures to extend and amend FLTFA.",
      " Fourth, the \" Issues \" section discusses several issues related to whether to extend or make FLTFA permanent that have been of focus, including the need for FLTFA, length of any extension, currency of land use plans, and retention and use of proceeds.  Overview of FLTFA Authority Land Sales BLM is authorized to sell tracts of land that meet specific criteria under the Federal Land Policy and Management Act of 1976 (FLPMA). These criteria include that the land is difficult and uneconomic to manage, is no longer required for a federal purpose, and will serve important public objectives if disposed of. These tracts are identified through BLM's land use planning process,",
      " and then reflected in the land use plans that govern management of BLM lands.  FLTFA required the Secretary of the Interior to establish a program for the sale or exchange of land identified for disposal under BLM's approved land use plans. Eligible lands were those identified for potential disposal in the land management plans that were in effect at the time FLTFA was enacted\u2014July 25, 2000. Public lands identified for disposal after July 25, 2000, in a land management plan, could still be considered for sale or exchange. However, the proceeds of any such disposal would not be deposited into the account established under FLTFA.",
      " There was no regular schedule for sale of lands under FLTFA. In deciding which lands to offer for sale, BLM might have been responding to expressions of interest from individuals or local governments or activities in the local real estate market. The size and configuration of parcels offered for sale were determined by various factors, including the land ownership in the area, marketability of the land, and cost of processing the sale.  Lands selected for sale were subject to laws, regulations, and processes governing BLM land sales generally, such as those requiring an appraisal of the value of the land. BLM lands cannot be sold for less than fair market value,",
      " determined by an appraisal approved by the Department of the Interior's Appraisal Services Directorate. In most cases, lands will be sold through competitive bidding. Other provisions of law require environmental studies of lands proposed for sale. These studies could cover a variety of issues, such as air quality, cultural resources, hazardous materials, minerals, recreation, wildlife, vegetation, and wetlands/riparian areas. Still other provisions of law provide that the public must be made aware of the proposed land sale, and be given an opportunity to comment on that proposal. The time to complete a land sale varies depending on the complexity of the issues that must be addressed,",
      " but can be a year or longer.  Land Acquisitions The law provided for the revenue in the FLTFA account in the Treasury to be used for certain administrative expenses and land acquisitions. No more than 20% of the amount in the FLTFA account could be used to reimburse administrative and other expenses incurred by the BLM in carrying out the land disposal program under FLTFA.  Not less than 80% of the money in the FLTFA account was to be used to acquire lands or interests therein that were otherwise authorized by law to be acquired. While BLM alone disposed of land under FLTFA, the four major federal land management agencies could acquire lands with the proceeds.",
      " In addition to the BLM, these agencies were the Fish and Wildlife Service (FWS) and the National Park Service (NPS), within the Department of the Interior, and the Forest Service (FS), within the Department of Agriculture.  Under FLTFA, the Secretary of the Interior and the Secretary of Agriculture were authorized to acquire inholdings within the boundaries of certain federally designated areas, or lands adjacent to such federally designated areas that contain exceptional resources. As defined in the law, federally designated areas included units of the National Park System, managed by the National Park Service; units of the National Wildlife Refuge System, managed by the Fish and Wildlife Service;",
      " and areas within wilderness, wilderness study areas, the Wild and Scenic Rivers System, and the National Trails System. The term included areas within the National Forest System, managed by the Forest Service, that have been designated by Congress for special management, as well as certain areas managed by BLM, including national monuments, national conservation areas, and areas of critical environmental concern. The law defined exceptional resource as \"a resource of scientific, natural, historic, cultural, or recreational value that has been documented by a Federal, State, or local governmental authority, and for which there is a compelling need for conservation and protection under the jurisdiction of a Federal agency in order to maintain the resource for the benefit of the public.\"  Of the funding allocated for acquisitions,",
      " FLTFA provided that not less than 80% must be spent in the state where the funds were generated. Thus, up to 20% could be used for acquisitions in any state. Of the funding for acquisitions within a state, not less than 80% was to be used to acquire inholdings. Thus, up to 20% could be used to acquire adjacent lands (known as edgeholdings) that contain exceptional resources. In focusing on acquisition of inholdings, FLTFA noted that the existence of inholdings often caused problems for the land management agencies, that many private landowners within the boundaries of federal land units desired to sell their land to the federal government,",
      " and that acquisition of inholdings would be mutually beneficial to both the federal government and private landowners in many cases. The acquisition of land under FLTFA was governed by authorities pertaining to acquisitions generally, as well as by FLTFA itself, a memorandum of understanding (MOU) among the four agencies, and related state-specific guidance. FLTFA required the Secretary of the Interior and the Secretary of Agriculture to establish a program to identify and prioritize the acquisition of inholdings and lands with exceptional resources. The Secretaries were to consider the extent to which the acquisition of land would facilitate management efficiency, among other criteria. Any land acquired had to be from a willing seller,",
      " acquired at a price that was not more than fair market value, and contingent on the conveyance of title acceptable to the Secretary of the Interior or the Secretary of Agriculture. The Secretaries could not acquire land that contained a hazardous substance or other contaminant, or that was difficult or uneconomic to manage based on the land's location or other characteristics.  The MOU among the four land management agencies for the implementation of FLTFA became effective on May 5, 2003. It provided a targeted allocation of the acquisition funds among the four land management agencies as follows: 60% to BLM, 20% to FS, 10%",
      " to FWS, and 10% to NPS. Notwithstanding that allocation, the Secretary of the Interior and the Secretary of Agriculture could mutually agree to allocate funds for a specific acquisition. The MOU also directed the preparation of state-level implementation plans, and each state developed such a plan, according to BLM.  Any of the four participating land management agencies could make recommendations as to lands that should be acquired with the FLTFA funds. However, all four agencies ultimately had to agree on all the expenditures of funds from the account.  Program Termination Under FLTFA as originally enacted, the authority in the law to sell or exchange BLM lands was to terminate 10 years after the date of enactment,",
      " on July 25, 2010. Any money remaining in the account on that date was to become available for appropriation under the Land and Water Conservation Fund Act (LWCF; 16 U.S.C. \u00a7\u00a7460 l -4 et seq.). FLTFA expired on July 25, 2010. On that date, the monies in the account ceased to be available for FLTFA purposes\u2014acquisition of lands and the administrative costs of BLM land sales. BLM has estimated that nearly $52 million was in the account on that date.  On July 29, 2010, FLTFA was subsequently extended for one year.",
      " During that year, land sales under the law were relatively modest. This was due primarily to a lack of funds for the up-front costs of conducting land sales, according to BLM. Of the $52 million in the account when it expired, an estimated $13 million had been anticipated to be used to cover the administrative costs of land sales.  From July 25, 2010, through July 25, 2011, BLM collected $3.8 million from land sales under FLTFA. These funds were derived primarily from land sales that were nearing completion prior to the initial expiration of FLTFA on July 25, 2010.",
      " Approximately $0.2 million (4%) was to be paid to the states in which the lands were sold, leaving $3.6 million in the FLTFA fund to administer land sales and acquire additional lands during the year. BLM estimated that approximately $2 million was in the FLTFA account at the end of the one-year extension, and thus ceased to be available for FLTFA purposes. Implementation of FLTFA  From the enactment of FLTFA through FY2010, a total of $115.7 million was raised through the sale or exchange of BLM lands under the authority. Of this total, BLM collected $103.",
      "2 million from the sale of 25,967 acres, and another $12.5 million from equalization payments for exchanged lands. Of the total receipts, $4.6 million (4%) was provided to the states in which the lands were conveyed, and $111.0 million (96%) was deposited into the FLTFA fund. Of the money in the fund, approximately $59 million was spent, with $49.2 million used for acquiring land and an estimated $10 million for the costs of administering the land sale program, according to BLM. Acquisitions were smaller than sales in terms of acreage and value. Specifically,",
      " the agencies acquired a total of 18,135 acres, using $49.2 million in FLTFA funds and $9.7 million in other funds, for a total cost of $58.9 million. The approximately $59 million in spending from the FLTFA account represented about half (53%) of the $111.0 million that was available before the program's initial termination, when the revenues ceased to be available. Several factors accounted for this relatively low level of spending relative to available funding. In a 2008 report, the Government Accountability Office (GAO) identified challenges to completing land acquisitions, including the time, cost,",
      " and complexity of acquisitions; difficulty in identifying a willing seller; insufficient realty staff to conduct acquisitions; lack of funding for some states; and public opposition to land acquisitions.  Initial expenditures for acquisitions were not made until FY2007, pending the development of interagency agreements and the availability of funding. Specifically, the acquisition of lands under FLTFA was delayed while implementing agreements were being developed among the four participating agencies. In 2003, the agencies issued the national MOU on implementation, which included provisions on how the receipts were to be distributed among the agencies, and by March 2007 all BLM state offices had developed and published state-specific interagency implementation agreements,",
      " according to BLM. Also, little funding for land acquisition was available in the earlier part of the decade, because the land sales needed to raise funds for acquisitions began slowly following the enactment of FLTFA. For instance, only $5.0 million in receipts from sales was generated from FY2000 to FY2003. Receipts from land sales increased dramatically over the next three years, with an additional $87.4 million in receipts from FY2004 to FY2006. The $49.2 million in total expenditures occurred between FY2007 and FY2010. Acreage Sold and Revenues from Land Sales Of the $115.",
      "7 million in receipts under FLTFA, 89% was from the sale of land and 11% was from cash equalization payments for exchanged lands. Equalization payments are generally required under law if the values of the BLM and nonfederal lands exchanged are not equal. In this case, the values are to be equalized by the payment of money up to 25% of the value of the federal lands conveyed in the exchange. The parties in the exchange may agree to waive this payment, within limitations, including if it involves not more than 3% of the value of the federal lands or $15,000. Another way of equalizing value is for either party to add or remove lands.",
      "  Sale of land under FLTFA was concentrated in two states. While land was sold in 12 states, sales in Nevada and Oregon accounted for more than three-quarters of the 25,967 total acres sold. Specifically, they accounted for 78% of acres sold (45% and 33%, respectively). Another 7% of the acreage sold was in Idaho, while 4% was in Wyoming and 3% was in New Mexico. The other seven states in which land was sold collectively accounted for 8% of the acreage. (See Table 1.) The average price per acre sold varied considerably among the states,",
      " from a low of $198 per acre in Montana to a high of $24,850 per acre in Arizona. The average price of all 25,967 acres sold was $3,973. It would likely be problematic to make more general comparisons about the value of lands among the states, or to generalize about the value of all BLM landholdings based on this data. This is because the total acreage sold under FLTFA is likely to be too small to be representative of lands within a state or of all BLM lands. In fact, the total acreage sold under FLTFA was 0.01% of the 247.",
      "5 million acres managed by BLM. The parcels sold are unlikely to be representative of the variety of lands in each state and throughout the West, in terms of natural resources, development potential, location, and other variables.  Most of the revenues from both land sales and exchanges came from Nevada\u2014$88.1 million (76%). Nevada has generated the most revenue due to the large BLM holdings in areas of population growth, the high demand for such land to develop, and the experience of BLM with selling land in Nevada under another land sale program. Another 6% of the revenues from land sales and exchanges were generated in each of Arizona and New Mexico,",
      " while 3% of the revenues were derived from sales and exchanges in each of California and Colorado. Nine other states collectively accounted for 6% of the total receipts. Acreage Acquired and Expenditures on Acquisitions The acquisition of lands and expenditures on acquisitions were less concentrated among states than land sales and receipts. Lands were acquired in 10 states, with about a quarter of the acreage acquired in each of two states\u2014California (28%) and Colorado (26%). Acquisitions in Idaho accounted for another 18% of the total acreage, while acquisitions in New Mexico and Montana accounted for 14% and 7%, respectively.",
      " The other five states collectively accounted for 8% of the acreage acquired. (See Table 2.) The $49.2 million in expenditure of FLTFA funds was dispersed among the 10 states. While expenditures ranged from a high of 38% in Nevada to a low of 1% in Utah, six states each had between 11% and 7% of total expenditures. These states were Idaho (11%), Arizona (10%), California (9%), New Mexico (8%), Wyoming (8%), and Colorado (7%). An additional $9.7 million of non-FLTFA funds was used to help pay for parcels acquired with FLTFA funding,",
      " which comprised 17% of the total funding for these parcels ($58.9 million).  The average price per acre acquired by BLM varied more widely among the states than the average price per acre sold. The price per acre acquired (including non-FLTFA funds) ranged from a low of $763 per acre in Colorado to a high of $88,878 in Nevada. The average price of all 18,135 acres acquired was $3,250. As in the case of sale data, the acquisition data are too limited a sample to allow for generalizations about the value of all nonfederal lands within a state or throughout the West.",
      " Like federal lands, nonfederal lands exhibit great variety in resources and attributes, commercial use potential, and location, among other factors.  Acreage Sold and Acquired, and Receipts and Expenditures, by\u00a0State The data on activity under FLTFA is depicted by state in the bar graphs below. Figure 2 depicts the acreage sold and acquired within each state from the enactment of FLTFA through FY2010. In the two states with the preponderance of the land sales, Nevada and Oregon, the acreage sold vastly exceeded the acreage acquired. Two other states sold more land than they acquired\u2014Utah and Wyoming.",
      " In Utah, both sales and acquisitions were small (76 acres and 10 acres, respectively), while in Wyoming the acreage sold (1,095) was more than three times the acreage acquired (317 acres).  By contrast, several states acquired more land than they sold, namely, Arizona, California, Colorado, Idaho, Montana, and New Mexico. The largest differences occurred in California and Colorado; California acquired 12 times the amount of land sold, while Colorado acquired 9 times the amount sold. Many factors might have influenced the extent to which land was acquired within each state, including whether the land was an inholding or an edgeholding,",
      " whether there was a willing seller, the cost of the land, and the land's natural resources and other attributes.   Figure 3 depicts the receipts and expenditures within each state from enactment of FLTFA through FY2010. It shows that Nevada had by far the highest amount of both receipts and expenditures, although the receipts from land sales vastly exceeded expenditures on acquisitions. This is likely due to the large BLM land holdings in Nevada and the relative ease in selling these lands for community growth and development and other purposes. Three other states had higher receipts than expenditures, namely, Arizona, New Mexico, and Oregon.  Six states had higher expenditures than receipts.",
      " In some cases the difference was small, as in California, which had $3.1 million in receipts and $3.5 million in expenditures. In other cases the difference was greater. In Montana and Wyoming, for instance, expenditures were more than triple receipts. States can have higher expenditures than receipts because up to 20% of the funds for acquisition can be used in any state. In this way, a portion of the large collections in Nevada, for instance, could be used to purchase land in other states.  Administrative and Legislative Action The Obama Administration's FY2013 budget proposed making FLTFA permanent and using current land management plans for determining which lands to sell or exchange.",
      " The Administration also testified in the 112 th Congress in support of reauthorizing FLTFA. In one such testimony, the Administration asserted that FLTFA has been a \"critical tool for enhancing our Nation's treasured landscapes,\" and further stated that there are difficulties with relying on land exchanges under other BLM authorities, that using current land use plans as the basis for sales would foster land disposals, and that important acquisitions have been made under FLTFA. The George W. Bush Administration also supported using updated land management plans for determining which lands to sell or exchange, and proposed extending FLTFA for about 10 years.  In the 112 th Congress,",
      " legislation to amend FLTFA has been introduced in both chambers. S. 3525, S. 714, and H.R. 3365 contain provisions to extend the authority to sell or exchange BLM lands under FLTFA, although the length of the extension varies among the measures. S. 3525 would extend the authority for 11 years (from July 25, 2011, until July 25, 2022), S. 714 would extend it for 10 years (until July 25, 2021), and H.R. 3365 would extend it for 7 years (until July 25,",
      " 2018). In other respects the bills are identical. They would remove the provision that terminates the FLTFA account should the authority to sell and exchange lands expire. This would allow funds in the account to continue to be used for acquisitions. They also would allow for updated land management plans to be used as the basis for identifying lands for sale and exchange. Specifically, they call for use of plans in effect as of the date of enactment of the measures. Further, the bills would allow for acquisition of lands within or adjacent to federally designated areas regardless of when they were established.  On November 26, 2012, S. 3525 was considered on the Senate floor.",
      " However, it was returned to the Senate calendar after a point of order against an amendment in the nature of a substitute was sustained and the amendment was ruled out of order. The Senate majority leader sought and received unanimous consent to resume consideration of S. 3525 at a future time. S. 714 was placed on the Senate calendar on September 6, 2011, and a House subcommittee held a hearing on H.R. 3365 on May 17, 2012.  Legislation pertaining to FLTFA also was introduced in the 111 th Congress, but was not enacted. Among the measures, H.R. 6206 and S.",
      " 3762 had proposed to reinstate the monies that were in the FLTFA account when the law expired on July 25, 2010. Both measures specified that the balance in the FLTFA account as of July 24, 2010, was to be reinstated, and available until expended, for the purposes covered by the FLTFA law.  Issues Several issues concerning whether to extend or make FLTFA permanent have been under debate. One issue is the extent to which there is a need for this authority in the context of other laws authorizing the sale and acquisition of federal land and other sources of funding for these purposes.",
      " A second issue is whether any extension of FLTFA should be relatively short (e.g., one year) or relatively long (e.g., 10 years or more). A third issue is whether to require land use plans as of July 25, 2000, to continue to be used as the basis of land sales. A fourth set of issues relates to the retention and use of proceeds, including the extent to which any future proceeds should be retained by the agencies, used exclusively for land sales and acquisitions, and used primarily in the state in which they were generated, and whether previously generated proceeds should be returned to the FLTFA fund.",
      "  Need for FLTFA The expiration of FLTFA does not bar BLM from selling or exchanging land identified for disposal, because BLM has authority to dispose of lands under FLPMA and other laws. Further, the expiration of FLTFA does not preclude BLM, FWS, NPS, and FS from acquiring land, because the agencies have authorities (of varying breadth) to acquire nonfederal lands. Thus, an issue for Congress is the extent to which FLTFA provides a more efficient mechanism for the government to sell and purchase lands.  In enacting FLTFA, Congress asserted that \"a more expeditious process for disposal and acquisition of land,",
      " established to facilitate a more effective configuration of land ownership patterns, would benefit the public interest.\" To establish a \"more expeditious process\" for disposing and acquiring land, FLTFA provided that the proceeds of BLM land sales would be retained by the agencies for subsequent land acquisitions. The expiration of FLTFA prevents the proceeds of sales from being retained. Allowing the agencies to keep the proceeds was intended to provide incentive to BLM to sell land that had been identified for disposal. It was also intended to provide a permanent, reliable source of funding for important acquisitions, rather than have such acquisitions depend primarily on the variability of the annual appropriations process.",
      " For these reasons, Congress may reinstate this permanent source of funding for land acquisitions. Alternatively, Congress may continue to centralize decision-making on acquisition funding in the annual appropriations process. Annual appropriations for programs are often regarded as opportunities to target funding levels to changing needs and circumstances, and to conduct program oversight and evaluation.  The extent to which FLTFA has fostered land sales and acquisitions is not clear from publicly available data. Consistent data on the number, acreage, and value of agency sales and acquisitions in the decade before and after the enactment of FLTFA are not readily available. Further, it is unclear to what extent sales and acquisitions under other standing authorities,",
      " or individually enacted laws of Congress, would have occurred since 2000 if FLTFA had not been enacted. Challenges to selling and acquiring land could arise independent of FLTFA, since FLTFA did not change the general land sale and acquisition processes. For instance, land sales and acquisitions are typically voluntary, unless specifically directed by Congress. Some of the BLM land for sale is in relatively low-value markets where the sales would not be expected to raise significant funding, or in some cases even to cover the administrative costs of the sales. This could create a disincentive to selling these lands. Further, there may not be much demand for some of the BLM lands available for sale,",
      " and BLM does not typically market land for sale in the absence of expressed interest. Also, BLM is required by law to sell land for at least fair market value, and may have difficulty finding buyers willing to pay market value.  In 2008, GAO determined that BLM had not made sale of land under FLTFA a priority, and that few parcels had been purchased with FLTFA funds. The agency cited several challenges to the sale and acquisition of land under FLTFA. GAO noted a limited availability of knowledgeable realty staff, given the focus of realty staff on other agency priorities (e.g., processing rights-of-way for energy purposes). Other obstacles included the lack of sales goals or a sales implementation strategy,",
      " and weaknesses in developing a strategy for identifying and acquiring inholdings. Other factors, mentioned above, included the cost and complexity of acquisitions, difficulty in finding willing sellers, insufficient funding for some states, and public opposition. BLM has taken steps to address GAO recommendations on setting goals for land sales, developing a strategy for implementing sales goals, and identifying and setting priorities for acquiring inholdings.  Another issue is whether sufficient funding for land sales and acquisitions exists without the revenues derived from FLTFA. The amount of funding for BLM land sales is not readily available, because appropriations for this particular purpose are not typically specified in appropriations laws or agency budget justification materials.",
      " By contrast, each year, each of the four federal land management agencies receives a specified appropriation for land acquisition, primarily derived from the LWCF and provided through annual laws appropriating funds for Interior, Environment, and Related Agencies. Over the past decade (FY2003-FY2012), appropriations from LWCF for the four agencies have ranged from a low of $119.2 million for FY2006 to a high of $316.0 million for FY2003. Appropriations for land acquisition for the most recent fiscal year, FY2012, were $199.2 million. The portion for each of the four agencies has varied considerably.",
      " It is not clear whether different levels of appropriations from LWCF might have been provided if FLTFA funding were not available for acquisitions.  Length of Extension  Another short-term extension of FLTFA could provide additional time to assess whether there is a long-term need for FLTFA relative to other sale and acquisition authorities. A short-term extension also could be used if Congress had specific sale and acquisition goals to be achieved under FLTFA, such as the sale of a particular amount of land. If this were the intent, Congress could allow the authority to expire or could repeal it when the acreage goals were reached. In general, shorter and more frequent program extensions could be viewed as fostering oversight and evaluation of the effectiveness of FLTFA,",
      " and opportunities to amend the law to address changing circumstances and problems that might arise.  A longer-term extension might facilitate the establishment of a more vigorous and stable sale and acquisition program. Land sales might occur slowly during the early years of any extension, due to a lack of sufficient funds for the up-front costs of administering sales. A longer-term extension might allow for the hiring of additional realty staff with some of the proceeds of sales. Further, the length and complexity of many sales and acquisitions could require a longer-term extension. GAO determined that the anticipated sunset of the original 10-year program and the uncertainty of renewal might have weakened the incentive to sell land.",
      " Further, GAO reported that the acquisition process can take 2\u00bd to 3 years, given the need for the four agencies to coordinate on and approve of proposed acquisitions.  Land Use Plans The changing nature of land use plans has prompted interest in amending FLTFA to allow the most current land use plans to be used as the basis of land disposals. In 2001, BLM began a multiyear effort to develop new land use plans and to update existing ones to address changing circumstances, such as increased demand for energy resources. BLM estimates that, from the start of that effort, it has completed over 75 plan revisions and major plan amendments.",
      " Further, as of May 2012, the agency was working on an additional 48 management plans, which were expected to be completed by 2016.  The use of plans in effect as of enactment of FLTFA does not keep BLM from selling land identified for disposal in plans after that date, but prevents BLM from keeping the proceeds of such sales. The FLTFA sales authority was not tied to future land use plans due to concerns that BLM might revise plans to pursue a broad land disposal program as a way to generate funds. BLM asserts that its authorities to dispose of public lands would preclude this. Under FLPMA,",
      " for example, BLM is authorized to sell certain tracts of land only if they meet specified criteria. The agency also has asserted that land use plan revisions since 2000 have not changed significantly the acreage identified for disposal. Further, GAO concluded in its 2008 report that, while BLM land use plans identified areas for disposal, BLM had not made sale of lands under FLTFA a priority.  Retention and Allocation of Proceeds Several issues arise regarding the allocation of proceeds of land sales. One question has been whether to continue to allow 96% of the proceeds to be retained by the agencies, or whether to direct some portion of these receipts to the general fund of the Treasury.",
      " Under a proposal in the FY2009 George W. Bush Administration budget, for instance, 70% of the net proceeds would have been deposited in the general fund of the Treasury. The proposal was promoted to reduce the federal deficit, to ensure that the public would benefit from land sales, and to reduce the amount of money not subject to oversight during the appropriations process. However, such a change would reduce funds for acquisition of priority areas. Funding from the primary acquisition source\u2014the Land and Water Conservation Fund\u2014has varied widely over the past decade and remains uncertain.  A related question is whether some of the proceeds from land sales should be used for other federal lands purposes.",
      " This idea was proposed by the George W. Bush Administration in several years. For instance, in 2004 the Bush Administration had sought to dedicate 20% of the funds in the FLTFA fund to conservation projects on federal lands, to include habitat restoration, rehabilitation, and improvement.  Another issue regarding the allocation of proceeds is whether to retain the requirement that most of the funds for land acquisition be used in the state where the funds were generated. GAO concluded in 2008 that this requirement has made it difficult to acquire priority lands in states that sell relatively little land. As mentioned above, 76% of the revenues raised through FY2010\u2014$",
      "88.1 million\u2014came from land sales in Nevada. However, retention of funds within a state could foster stability of landownership in those states.  Still another focus is on whether to reinstate the estimated $52 million in proceeds that were in the FLTFA fund when the law initially expired and the $2 million in proceeds that were in the fund at the end of the one-year extension. BLM had intended to use a sizeable portion of the monies to sell lands under the law, and the agencies would resume the acquisition of priority inholdings and edgeholdings with these funds. The $54 million in total funds was to become available for appropriation under the LWCF when FLTFA expired.",
      " It is uncertain whether these funds will be appropriated, whether in addition to or in lieu of traditional LWCF appropriations. Under current law, the LWCF accumulates $900.0 million in revenues, primarily from offshore oil and gas development. Historically, Congress has appropriated this level of funding only twice, and on average typically appropriates less than half of the annual revenues. Another option could be to redirect these revenues to another specific government program or activity or to the general fund of the Treasury. \n"
    ],
    "length": 7666,
    "hardness": null,
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  },
  {
    "id": 2,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed beneficiary access to military health care in Europe, focusing on the: (1) availability of health care in military facilities; (2) obstacles in providing military health care; (3) experiences of beneficiaries that have used host nation providers instead of military health care providers; and (4) Department of Defense's (DOD) handling of service delivery problems and beneficiary concerns. GAO found that: (1) since the downsizing of U.S. military personnel in Europe, beneficiaries have found it difficult to obtain health services at overseas military facilities; (2) although beneficiaries have access to primary health care services, their access to specialty and dental care services is limited; (3) the reduced military health care system has resulted in DOD relying on the German and Italian medical systems to provide health services to beneficiaries; and (4) beneficiaries must contend with language barriers, cultural differences, unfamiliar doctors, and the general lack of information about how to obtain host nation health care. In addition, GAO found that DOD: (1) is developing an interservice health care plan for all beneficiaries in Europe; (2) has hired liason personnel to help beneficiaries obtain health care from German and Italian health care providers; and (3) plans to contract for services to monitor the care that beneficiaries receive from host nation providers, an education program that explains beneficiary health care options in Europe, and the translation of host nation medical records.\n",
    "docs": [
      "Background The MHSS consists of military medical facilities and private sector health care providers. The primary mission of the MHSS is to maintain the health of military personnel and to support the services during time of war. In addition, the MHSS provides health care to dependents of active duty members, retirees and their dependents, and survivors of service members. Active duty members receive their care almost entirely from military medical facilities. When space and resources are available, other beneficiaries may obtain their care from military medical facilities as well. Overseas, U.S. civilian government employees are also eligible to receive care in military medical facilities on a space-available basis. The collapse of the Warsaw Pact and the end of the Cold War have significantly changed the American military landscape in Europe.",
      " Because of the easing of East-West tensions, the United States has chosen to substantially reduce its military forces in Europe. Between July 1990 and April 1993, DOD initiated three major plans to reduce its military forces in Europe, each with successively lower personnel levels. The first plan, developed in July 1990, would have reduced military positions in Europe to 225,000; the second to 150,000; and the latest plan calls for about 100,000 Army, Air Force, and Navy personnel in Europe by the end of fiscal year 1996. The U.S. military medical system in Europe has also been reduced and reorganized.",
      " The number of military hospitals and clinics in Europe is being cut from 23 hospitals and 89 clinics in 1989 to 9 hospitals and 48 clinics in 1995. In Germany, for example, the Air Force is reducing its hospitals from three to one and its clinics from six to five. Army hospitals and clinics in Germany are being reduced from 9 to 3 and 55 to 25, respectively. In northern Italy, the Air Force has one clinic and the Army has one hospital and one clinic, the same as in 1989. The Army, however, plans to convert the hospital to a clinic in October 1995 because (1)",
      " very low utilization makes it difficult to maintain a high-quality hospital and (2) quality medical care is available from host nation providers. Appendix II lists those Air Force and Army medical facilities operating as of April 21, 1995. The number of dental clinics is also being significantly cut back. Prior to the downsizing, the Army had 94 dental clinics in Europe. The Army has completed its reduction and now has 35 dental clinics. The Air Force is reducing its dental clinics from 31 to 11. Beneficiaries Have Access to Primary Care but Specialty and Dental Care Are Limited Beneficiaries have access to primary care at military facilities,",
      " including outlying clinics. Most of the outlying clinics are closed in the evenings and on weekends, however, necessitating that after-hours primary care and emergency services be obtained from German and Italian providers. In general, U.S. military specialty care is available to active duty personnel and is most accessible to beneficiaries living near U.S. military hospitals. Dental care is more readily available to active duty personnel than other beneficiaries. Most Beneficiaries Can Obtain Primary Care at Military Facilities Military providers told us that primary care clinics are able to serve most beneficiaries. Since 1989, the ratio of primary care providers (general medical officers, family practice physicians,",
      " physician\u2019s assistants, and nurse clinicians) to beneficiaries has improved\u2014from 1:1,222 to 1:868\u2014and plans call for further improvement to 1:661 by November 1995. Generally, clinics are open Monday through Friday, and some have extended hours\u2014one evening during the week or morning hours on the weekend. Two Army clinics in Germany are open 24 hours, 7 days a week. Beneficiaries in all categories expressed general satisfaction with their access to primary care in military facilities. They did, however, express frustration over difficulties in making appointments by telephone and delays in obtaining routine physical exams and well-woman exams.",
      " They also stated concerns about delays in obtaining test results. Although the overall ratio of primary care providers is improving, staff at many of the outlying clinics we visited mentioned that they need more physicians trained in family practice and pediatrics. Some of the clinics had no family practice, pediatric, or other primary care specialty physician except the clinic commander who also had administrative and supervisory responsibilities. Army clinics rely heavily on general medical officers to provide primary care. Army officials stated that they do not have enough family practice or other specialty-trained primary care physicians to assign to clinics. Access to Specialty Care in Military Facilities Varies and Can Be Inconvenient DOD was unable to provide us with data to compute how the ratios of specialists to beneficiaries have changed since 1989 or to measure how long it takes to get an appointment with a specialist.",
      " However, the military medical leadership, military physicians, and beneficiaries all commented that there has been a significant reduction in the amount and location of U.S. military specialty care available in Europe since the downsizing began. As a result, access to specialty care varies by specialty and among categories of beneficiaries. Some specialty areas have substantially fewer physicians than before the downsizing began. For example, the number of Army obstetricians/gynecologists has been reduced from 42 to 17; urologists from 6 to 2; otolaryngologists (ear, nose, and throat) from 8 to 4; general surgeons from 32 to 11;",
      " and orthopedic surgeons from 26 to 11. Only one specialty (nephrology), however, is no longer available in Europe. Active duty members are generally able to obtain the specialty care they need, although in some instances they must wait a month or longer. Service members needing inpatient psychiatric services are sometimes sent back to the United States for such care because of limited inpatient mental health resources in Europe. Non-active duty beneficiaries have less, and in some cases no, access to specialty care, particularly otolaryngology, orthopedics, and mental health\u2014also because of limited resources. Beneficiaries and military medical officials commented that many people who need these services must either wait a substantial period of time to get the care from military facilities in Europe or return to the United States for it.",
      " Access to specialty care is also less convenient because of the reduction in U.S. military hospitals. In 1989 the Army had nine hospitals in Germany. Now U.S. military specialty care is provided almost entirely in the three remaining Army hospitals in Germany: Landstuhl, Wuerzburg, and Heidelberg. Beneficiaries in Augsburg, for example, must travel about 130 miles one way to obtain the specialty care that is available at the U.S. Army hospital in Wuerzburg or about 170 miles one way to Landstuhl to obtain specialty care that is not available in Wuerzburg. Beneficiaries in many communities throughout Germany find themselves in similar circumstances.",
      " Obtaining specialty care is also inconvenient for beneficiaries when repeat hospital visits are required. For example, most outlying clinics do not have physical therapists or mental health professionals on staff. Consequently, patients must travel to one of the military hospitals to obtain these recurring services. Each visit frequently requires patients to spend a full day traveling and receiving services. To help beneficiaries living in remote areas, specialists assigned to the three Army hospitals periodically visit clinics to provide care, but these visits are infrequent. Also, military communities provide shuttle bus service to the nearest U.S. military hospital. In most communities, the shuttle bus makes one trip daily between the military community and the hospital,",
      " leaving early in the morning and returning in the late afternoon of the same day. In some communities, however, the service is limited to only a few days each week. Regardless, making long trips for follow-up appointments created hardships on family members and active duty service members with family and work responsibilities. Also, we were told that soldiers\u2019 full-day absences from their assigned duties can adversely affect their units\u2019 wartime readiness. In northern Italy, the Army plans to convert its hospital in Vicenza to an outpatient clinic in October 1995. The clinic will maintain an after-hours acute care capacity to treat minor injuries and illnesses. Emergency and specialty care,",
      " now available at the Vicenza Army hospital, will be provided by the city hospital in Vicenza, by other Italian facilities, or by military facilities in Germany or the United States. (For some time now, life-threatening emergencies have been sent to Vicenza\u2019s city hospital.) For other military communities in northern Italy, such as Aviano and Livorno, specialty care will continue to be provided by host nation facilities, as it has since 1989. Relatively few military retirees and their dependents age 65 and older live overseas. Those that do are especially concerned about their access to specialty health care because Medicare coverage does not extend to beneficiaries living overseas.",
      " DOD estimates that fewer than 1,400 such beneficiaries reside in Europe. These beneficiaries, who have chosen to reside overseas, have been largely dependent on the military health care system to provide their medical care and, as a result, many have never purchased supplemental health insurance through U.S. or host nation health companies. Obtaining private insurance may not be an option for some elderly retirees and family members because it is costly. Dental Care Is Limited Access to dental care is limited for many beneficiaries living in Europe. Active duty personnel have better access to dental care than do their family members, who are generally able to obtain only emergency dental care, annual examinations,",
      " and cleanings. Many beneficiaries, except for active duty, have limited or no access to specialty dental care. The dental staff in some clinics dedicate most of their orthodontic care to patients whose treatment programs were initiated in the United States. New cases are seldom started. In Vicenza and Livorno, all beneficiaries have access to dental services. Many beneficiaries and U.S. military dentists do not consider host nation dental care a viable option. It is expensive, and beneficiaries do not like the differences in the practice patterns of host nation dentists. The MHSS in Europe Faces Numerous Obstacles Numerous obstacles confront the MHSS in Europe. Some existed prior to the downsizing,",
      " including medical staffing shortages, long waits for laboratory results, and equipment problems. Many U.S. military physicians stated that these obstacles hinder their ability to provide quality medical care. MHSS Faces Personnel Shortages and Other Staffing Problems Many clinic and hospital officials we met with stated that they have too few military and civilian personnel. Their facilities are staffed at less than 100 percent of authorized military levels in such positions as nurses, medics, X-ray technicians, and pharmacy technicians. In addition, medical staff frequently complained about shortages in civilian personnel, including receptionists, custodians, and patient liaisons. Medical staff are working long hours attempting to meet the demand for care.",
      " Two other factors have had a serious impact on the military\u2019s ability to meet the health care needs of all beneficiaries in Europe. First, medical and dental units have been under additional strain to meet the demand for care during the downsizing. The military had intended to keep medical resources in Europe at levels proportionally higher than nonmedical units so that access to health care would be improved during the downsizing. To the contrary, many of the health and dental clinics we visited were staffed at their so called \u201cendstate\u201d levels, while nonmedical units had not yet reached their final levels. Army officials were unable to provide documents showing how a coordinated withdrawal of medical and nonmedical personnel was planned to ensure improved access to health care.",
      " However, they did provide data indicating that the ratios of total medical personnel to beneficiaries have changed little since 1989\u2014from 1:31 to 1:38. Over time, as more units withdraw from Europe, this tension should ease somewhat. Second, until recently, Army medical units have not received replacements when their medical personnel are temporarily reassigned to other units. Between October 1993 and December 1994 the Army in Europe sent 715 men and women from medical units to other areas of the world without providing replacement personnel for the affected medical units. These actions often resulted in immediate personnel shortages for the medical units in Europe and further hindered the delivery of health care to beneficiaries there.",
      " The Army has implemented a policy which calls for replacing medical personnel (not necessarily on a one-for-one basis) who are temporarily assigned to other units for more than 14 days. Since March 1995, the Army has provided temporary replacements to medical units in Europe. Equipment Problems and Untimely Laboratory Test Results Medical staff experience daily problems with equipment failures and delays in obtaining laboratory test results. Generally, these problems are attributed to old and unreliable equipment. Staff repeatedly told us that X-ray, X-ray processor, and culture machines are frequently broken. They also mentioned that problems exist with the ambulance fleet, defibrillators, CT scanners,",
      " and pulse oximeters because they are old, outdated, or in short supply. Medical staff also experience problems in obtaining laboratory test results. Although data were unavailable on the specific or average times needed to get laboratory results, staff said that all test results require more time than they should to get back. Results of glucose, potassium, cholesterol, liver and thyroid function, and tissue exams are typically delayed, as are X rays. Health care providers at one clinic estimated that it took between 2 and 4 weeks to obtain the results for such tests. They cited delays as long as 2 months for Pap test results. DOD is currently implementing a medical information system that will allow providers to obtain test results via computer rather than mail.",
      " The new computer system, officials believe, should enable military providers to get laboratory results in a more timely manner. Beneficiaries Are Frustrated When Obtaining Host Nation Care Beneficiaries under age 65 who either are unable or do not want to receive care from military medical facilities have the option of obtaining care from host nation providers. Although the beneficiaries we spoke with were generally satisfied with the outcome of the host nation health care they received, they expressed a great deal of frustration over their specific experiences in obtaining that care. They also expressed a strong preference to receive their health care from military facilities. Beneficiaries and military medical officials agree,",
      " however, that as less and less care is available from military medical facilities in Europe, beneficiaries will have to rely more on host nation providers. Beneficiaries are frustrated with host nation medical care for a variety of reasons. Some host nation providers, for example, require payment or a large deposit in advance of treating U.S. military beneficiaries. These upfront payments, we were told, amount to as much as the equivalent of about $6,000. Also, U.S. military officials provide beneficiaries little information or help in choosing German or Italian providers. Essentially, beneficiaries are given a list of English-speaking doctors and encouraged to ask other beneficiaries about their experiences with these doctors before selecting one.",
      " In addition, beneficiaries feel abandoned by military medical physicians when they use host nation providers. In general, military physicians are not required to actively monitor U.S. patients\u2019 care in host nation facilities. Although they may be aware of their patients\u2019 progress, the lack of direct contact gives beneficiaries the impression that they have been \u201cdumped\u201d on host nation providers and that the military is not concerned about their care. The Aviano community is an exception. Several patient assistance services have been in place for some time there. For example, the Air Force contracts with bilingual Italian physicians to help beneficiaries understand their diagnosis and treatment. Beneficiaries also mentioned that they need help obtaining services from host nation facilities,",
      " especially during evenings and weekends. They are concerned about such matters as knowing where to go, having someone available to translate their medical emergency, and getting assistance with paperwork. In addition, beneficiaries using host nation providers were required to pay deductibles and copayments for their care. When admitted, beneficiaries explained that they must contend with language barriers, cultural differences, and quality of care concerns such as differences in treatment. Military physicians told us that some differences in treatment do exist among the U.S., German, and Italian systems. Although the cultural and treatment differences are unsettling to U.S. patients, the military medical staff, for the most part, are confident about the quality of health care delivered in Germany and northern Italy.",
      " Once care is completed and patients are released from host nation providers, many patients are left with their medical information in a foreign language. This problem is most prevalent in Germany where, currently, treatment records are written in German, and often the only information translated is that done by bilingual physicians working for the U.S. military. In several communities, military physicians estimated that less than 10 percent of medical records are ever translated. Consequently, patients may not have an adequate record of their medical conditions and treatments. DOD Actions to Address Beneficiaries\u2019 Concerns DOD and beneficiaries recognize that there must be a greater reliance on host nation care: Rebuilding U.S.",
      " military medical facilities overseas is not an option. Therefore, DOD has taken and is planning a number of steps to alleviate beneficiary concerns and improve access to host nation care. Although some of DOD\u2019s actions have been slow in coming, most are expected to be in place by October 1995. In our view, these actions are positive steps toward alleviating the concerns voiced by beneficiaries. However, the extent to which beneficiaries will be satisfied remains to be seen. To address beneficiaries\u2019 overall concern, DOD is developing an interservice health care plan for all beneficiaries in Europe that seeks to maximize the use of military medical facilities. This effort is being headed by a tri-service executive steering committee made up of senior medical officials in Europe and assisted by a military treatment facility commander\u2019s council\u2014a group representing military hospital and clinic commanders in Europe.",
      " Instead of focusing on tangible outcomes, most efforts to date have focused on planning, coordinating, and determining how the military services can effectively work together to better serve their beneficiaries. These formative sessions represent a significant step because, in the past, the services have essentially operated independently rather than working in a collaborative way. Beginning in the summer of 1994, DOD also initiated efforts to establish a preferred provider network in Europe, Africa, and the Middle East. Once completed, this network will enable beneficiaries to choose among various host nation providers who (1) are interested in serving them, (2) are willing to accept payment under CHAMPUS,",
      " and (3) will not require advance payments from beneficiaries. At the outset approximately 20,000 host nation providers were identified as having billed CHAMPUS for services. DOD contacted these providers and asked if they were willing to treat U.S. beneficiaries, outlining the conditions. DOD is also working to ensure the quality of network participants by verifying their qualifications. As of February 1995, over 4,000 of these providers had indicated an interest in joining a CHAMPUS-preferred provider network. In April 1995, the Army established a toll-free telephone number for beneficiaries to obtain after-hours referrals to host nation facilities.",
      " The service is currently available at Army hospitals in Heidelberg and Wuerzburg and is planned for Landstuhl as well. To assist beneficiaries who are using host nation providers, DOD established a patient liaison coordinator program. As of June 5, 1995, 59 patient liaisons were assigned to Europe. These liaisons (1) coordinate consultations with host nation facilities and follow-up care, (2) help make appointments at host nation facilities, (3) educate beneficiaries on host nation medical services, (4) interpret information between host nation providers and beneficiaries, (5) assist with paperwork associated with hospitalization at host nation facilities,",
      " and (6) visit patients in hospitals. Beneficiaries generally agree that the patient liaisons reduce the anxiety involved in using host nation facilities. However, most communities have only one or two patient liaisons and whose services are generally available only on weekdays until 4 p.m. The patient liaison program is intended to be supplemented with a volunteer system to provide coverage after business hours. However, none of the communities we visited had yet established a volunteer system that provided evening and weekend coverage. Consequently, beneficiaries using host nation facilities after normal business hours often obtained that care without assistance. In response, DOD has agreed to increase the availability of liaisons to provide 24-hour coverage.",
      " Effective October 1, 1994, DOD expanded an existing CHAMPUS initiative to improve access to host nation facilities for active duty family members. DOD estimates this initiative will cost approximately $2.8 million annually. The expanded CHAMPUS initiative waives cost sharing for active duty family members who obtain outpatient and inpatient care at host nation facilities. Beneficiaries are pleased and indicated that the elimination of copayments and deductibles has enhanced their willingness to seek care at host nation facilities. DOD is also planning to use host nation physicians to act as liaisons and assist military doctors in monitoring beneficiaries admitted to host nation facilities for care.",
      " The direct involvement of a physician representing the military may ease beneficiaries\u2019 feelings of being \u201cdumped\u201d when they are referred to host nation facilities. To better inform beneficiaries and thereby reduce their anxieties about health care\u2014military and host nation\u2014available in their communities in Europe, DOD is creating an education program. DOD is also planning to have host nation medical records translated into English. This should help ensure that in the future patients will have an adequate record of previous medical conditions and treatments. To improve beneficiaries\u2019 access to dental care, DOD is taking a number of steps. First, DOD is striving to efficiently use its existing dental capabilities,",
      " including sharing resources among the three services. Second, DOD is increasing the number of dentists, orthodontists, pedodontists, and other dental support personnel assigned in Europe. The Air Force plans to assign an additional 23 general dentists, 2 orthodontists, 2 pedodontists, and 54 dental assistants to Europe during fiscal year 1995. As of May 26, 1995, all but four dentists had arrived overseas. The Army has contracted with civilians to fill 22 general dentist, 5 orthodontist, and 10 dental hygienist positions. Third, at remote locations or areas with small populations where military dental services may not be available,",
      " DOD plans to arrange for dental care through host nation providers. Fourth, family members will be allowed to remain enrolled in the Dependents Dental Plan while the service member is assigned overseas. This will permit family members to obtain dental care in the United States, for example, during stateside visits. Finally, over the past year, DOD has made an effort to educate beneficiaries on the forthcoming changes in Vicenza and to develop a plan to ensure the availability of quality medical care. For example, it has (1) prepared a new detailed handbook to inform patients about host nation obstetrical services; (2) developed a questionnaire to obtain beneficiary feedback about host nation medical care;",
      " (3) held meetings with beneficiaries to educate them on the changes; (4) hired a host nation physician to perform oversight and liaison services among the host nation facility, the patient, and the military medical providers; and (5) made arrangements for translators to assist when Italian ambulance service is needed. Several other significant steps are described in detail in a plan DOD prepared and sent to the Congress in March 1995. In February 1995, an Italian newspaper reported that the hospital in Vicenza\u2014the primary host nation referral facility\u2014was alleged to have engaged in poor health care practices. These practices included improper disposal of contaminated waste in the emergency room,",
      " operating rooms, and the pathologic anatomy and metabolic disease sections. Expired or spoiled medicines were also reportedly discovered throughout the hospital. Army medical officials in Vicenza followed up with hospital administrators and were assured that U.S. beneficiaries did not receive expired medicines or have resultant bad medical outcomes. Army officials believe the situation is resolved and that beneficiaries are not at any risk. They believe the hospital provides superb care overall. This incident does, however, provide sufficient reason for military medical providers to remain actively involved in their patients\u2019 care when they are referred to host nation facilities. Army officials recognize this need and have pledged to actively monitor all patient care in host nation facilities.",
      " Conclusions Military health and dental care professionals are working long hours attempting to meet beneficiary demands that are greater than military facilities are staffed to provide. Even though some of the strain placed on medical and dental resources may decrease slightly as the beneficiary population in Europe continues to shrink, the military medical facilities in Europe will not have the capacity to handle all care to eligible beneficiaries. Nor does it appear practical to staff and maintain enough military medical facilities to meet the peace-time health care needs of all eligible beneficiaries. Troops are widely dispersed and, in some places, too few in number to provide the workload necessary to justify a full service medical facility and enable medical staff to maintain their skills.",
      " Therefore, beneficiaries\u2019 use of host nation medical care will continue and may increase. Given these circumstances, the U.S. military medical leadership needs to continue to take an active role in attending to and managing the health care needs of beneficiaries\u2014particularly those who must rely on host nation care. An active military role not only will ensure that beneficiaries receive appropriate care but should also improve the perceptions that beneficiaries have about host nation health care. DOD has been slow to address the problems confronting military beneficiaries. In our view, though, the steps that have been taken are directed toward alleviating the major concerns of most beneficiaries. Because of these actions, we are not making any recommendations.",
      " Agency Comments In a letter dated June 20, 1995, the Assistant Secretary of Defense (Health Affairs) generally concurred with this report. (See app. III.) The letter acknowledged that we accurately described the problems and the corrective actions under way and planned. In addition, DOD officials provided updated information on some of the actions they are taking, and this has been added to the report. We are sending copies of this report to the Chairman and Ranking Minority Member, Senate Committee on Armed Services; the Chairman and Ranking Minority Member, Subcommittee on Military Personnel, House Committee on National Security; the Secretary of Defense; and other interested parties.",
      " This work was performed under the direction of Stephen Backhus, Assistant Director. Other major contributors were Timothy Hall and Barry DeWeese. Please contact me on (202) 512-7101 if you have any questions about this report. Scope and Methodology To assess how DOD is meeting the needs of beneficiaries overseas as the number of military personnel and facilities are reduced, we visited the following 15 military communities: Augsburg, Darmstadt, Frankfurt, Grafenwoehr, Hanau, Heidelberg, Kaiserslautern, Katterbach, Nuremberg, Spangdahlem, Stuttgart, Wiesbaden,",
      " and Wuerzburg, Germany; and Aviano and Vicenza, Italy. During these visits we met with numerous military health officials, including the commanders of the of the five remaining U.S. military hospitals in Germany and northern Italy (four Army and one Air Force). In addition, we interviewed 29 physicians representing obstetrics/gynecology, family practice, pediatrics, orthopedics, allergy/immunology, psychiatry, ambulatory patient care, internal medicine, radiology, otolaryngologists, and general surgery. We also met with 11 Army and Air Force commanders and staff of outlying health clinics. Because beneficiaries indicated concerns over a lack of access to U.S.",
      " dental facilities overseas, we interviewed six Army dental commanders, including three Army dental clinic commanders assigned to outlying military communities. We conducted \u201cround-table\u201d panel discussions to obtain input from beneficiaries as to changes in the availability of health care. We convened 20 panels with a total of 102 beneficiaries in the military communities we visited in Europe. Most of the beneficiaries were active duty members and their dependents. The beneficiaries were not randomly selected but were identified by representatives of the National Military Family Association, Army Community Services, and Air Force Family Support Centers. These meetings with (1) military medical and dental staff and (2) beneficiaries provided the basis for much of the information contained in this report.",
      " Both before and after our visit to Europe, we met with officials of the Office of the Assistant Secretary of Defense (Health Affairs) and Offices of the Surgeons General to discuss the status of their actions and plans to meet the health care needs of beneficiaries overseas. In addition, we met with representatives of the National Military Family Association\u2014an advocacy group for military families\u2014to discuss their concerns about military and host nation health care in Europe. We reviewed documents obtained from military medical officials in the Office of the Assistant Secretary of Defense (Health Affairs), Offices of the Surgeons General, and various medical activities in Europe. These documents included legislation, policy memorandums,",
      " medical drawdown information, data on beneficiary access to care, data on military medical staffing in Europe, analyses of beneficiary complaints, and beneficiary handbooks about military and host nation medical care. We did our work between March 1994 and March 1995 in accordance with generally accepted government auditing standards. U.S. Military Medical Facilities in Germany and Northern Italy The following is a list of all U.S. Air Force and U.S. Army medical facilities operating in Germany and northern Italy as of April 21, 1995. Air Force facilities are noted with an asterisk. Hospitals Clinics Comments From the Department of Defense The first copy of each GAO report and testimony is free.",
      " Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (301)",
      " 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists. Address Correction Requested\n"
    ],
    "length": 6308,
    "hardness": null,
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  },
  {
    "id": 3,
    "question": null,
    "answer": "In the United States, desalination and membrane technologies are used to augment municipal water supply, produce high-quality industrial water supplies, and reclaim contaminated supplies (including from oil and gas development). Approximately 2,000 desalination facilities larger than 0.3 million gallons per day (MGD) operate in the United States; this represents more than 2% of U.S. municipal and industrial freshwater use. At issue for Congress is what should be the federal role in supporting desalination and membrane technology research and facilities. Desalination issues before the 114th Congress may include how to focus federal research, at what level to support desalination research and projects, and how to provide a regulatory context that protects the environment and public health without disadvantaging desalination's adoption. Desalination processes generally treat seawater or brackish water to produce a stream of freshwater, and a separate, saltier stream of water that requires disposal (often called waste concentrate). Many states (e.g., Florida, California, and Texas) and cities have investigated the feasibility of large-scale municipal desalination. Coastal communities look to seawater or estuarine water, while interior communities look to brackish aquifers. The most common desalination technology in the United States is reverse osmosis, which uses permeable membranes to separate freshwater from saline waters. Membrane technologies are also effective for other water treatment applications. Many communities and industries use membranes to remove contaminants from drinking water, treat contaminated water for disposal, and reuse industrial wastewater. For some applications, there are few competitive technological substitutes. Wider adoption of desalination is constrained by financial, environmental, and regulatory issues. Although desalination costs have dropped in recent decades, significant further decline may not happen with existing technologies. Electricity expenses represent one-third to one-half of the operating cost of many desalination technologies. The energy intensity of some technologies raises concerns about greenhouse gas emissions and the usefulness of these technologies for climate change adaptation. Concerns also remain about the technologies' environmental impacts, such as saline waste concentrate management and disposal and the effect of surface water intake facilities on aquatic organisms. Construction of desalination facilities, like many other types of projects, often requires a significant number of local, state, and federal approvals and permits. Emerging technologies (e.g., forward osmosis, capacitive deionization, and chlorine resistant membranes) show promise for reducing desalination costs. Research to support emerging technologies and to reduce desalination's environmental and human health impacts is particularly relevant to future adoptions of desalination and membrane technologies.  The federal government generally has been involved primarily in desalination research and development (including for military applications), some demonstration projects, and select full-scale facilities. For the most part, local governments, sometimes with state-level involvement, are responsible for planning, testing, building, and operating desalination facilities. Some states, universities, and private entities also undertake and support desalination research. While interest in desalination persists among some Members, especially in response to drought concerns, efforts to maintain or expand federal activities and investment are challenged by the domestic fiscal climate and differing views on federal roles and priorities.\n",
    "docs": [
      "A Primer on Desalination Interest in using desalination technologies to treat seawater, brackish water, wastewaters, and contaminated sources has increased globally and in the United States, as costs have fallen and pressure to develop drought-proof water supplies has grown. Adoption of desalination, however, remains constrained by financial, environmental, regulatory, and social factors. At issue is the role Congress establishes for the federal government in desalination, particularly in desalination research and development and the federal regulatory environment for desalination projects. Also of congressional interest is what role desalination may play in meeting water demands.  Desalination processes generally treat saline or impaired waters to produce a stream of freshwater,",
      " and a separate, saltier stream often called waste concentrate or brine. The availability and regulation of disposal options for waste concentrate can limit adoption in some locations; this is a particular challenge for large-scale inland facilities. For seawater desalination, the impacts of intake facilities on marine life also often are raised as concerns. Desalination's attractions are that it can create a new source of freshwater from otherwise unusable waters, and that this source may be more dependable and drought-proof than freshwater sources that rely on annual or multi-year precipitation, runoff, and recharge rates. Another significant application of desalination technologies is for treatment of contaminated waters or industrial water or municipal wastewater.",
      " Some communities and industries use desalination technologies to produce drinking water that meets federal standards, to treat contaminated water supplies to meet disposal requirements, or to reuse industrial wastewater. Many of the technologies developed for desalination also can produce high-quality industrial process water. For many of these applications, there may be few technological substitutes that are as effective and reliable as desalination technologies. There are multiple desalination methods. Two common categories of desalination technologies\u2014thermal (e.g., distillation) and membrane (e.g., reverse osmosis)\u2014are the most common, with reverse osmosis technologies dominating in the United States.",
      " For more information on traditional and emerging technologies, see Appendix A.  Desalination treatment costs have dropped in recent decades, making the technology more competitive with other water supply augmentation and treatment options. Electricity expenses vary from one-third to one-half of the cost of operating desalination facilities. A rise in electricity prices could reverse the declining trend in desalination costs; similarly, drops in electricity costs improve desalination's competitiveness. Costs and cost uncertainties remain among the more significant challenges to implementing large-scale desalination facilities, especially seawater desalination plants. Desalination's energy intensity also raises concerns about the greenhouse gas emissions emitted and desalination's usefulness as part of a climate change adaptation strategy.",
      " Substantial uncertainty also remains about the environmental impacts of large-scale desalination facilities. Social acceptance and regulatory processes also affect the technologies' adoption and perceived risks. Research and additional full-scale facilities may resolve uncertainties, alleviate concerns, and contribute to cost reductions and options for mitigating environmental impacts.  To date, the federal government primarily has supported research and development, some demonstration projects, and select full-scale facilities (often through congressionally directed spending). The federal government also may support construction of municipal desalination facilities through loans or other credit assistance provided through programs of the U.S. Environmental Protection Agency (EPA). For most municipal desalination facilities,",
      " local governments or public water utilities (often with state-level involvement and federal construction loans) have been responsible for planning, testing, building, and operating desalination facilities, similar to their responsibility for treating freshwater drinking water supplies.  During recent Congresses, legislative proposals have identified a range of different potential federal roles in desalination. Desalination issues before the 114 th Congress may include how to focus federal research to produce results that provide public benefits, at what level to support desalination research and projects, and how to provide a regulatory context that protects the environment and public health without unnecessarily disadvantaging these technologies.  Recent Congressional Consideration The 113 th Congress authorized a new federal credit assistance program,",
      " the Water Infrastructure Finance and Innovation Act (WIFIA, 33 U.S.C. \u00a73901), as part of P.L. 113-121. The portion of the program administered by EPA may be used in financing a range of water projects, including desalination projects. The Water Desalination Act of 1996, as amended (42 U.S.C. \u00a710301), authorized the main desalination research and demonstration outreach program of the Department of the Interior, which is carried out by the Bureau of Reclamation. The 112 th Congress extended through FY2013 its annual authorization of appropriations at $3 million.",
      " Bills in the 113 th Congress proposed another extension, but the 113 th Congress did not extend the authorization of appropriations. Although an extension was not enacted, the 113 th Congress provided appropriations for these desalination research and demonstration activities (e.g., $1.75 million for FY2015) and for operation and maintenance of the Department of the Interior's operation of the Brackish Groundwater National Desalination Research Facility ($1.15 million for FY2015).  Federal Desalination Research Research Agenda Several reports since 2000 have aimed to inform the path forward for U.S. desalination research. The first was the 2003 Desalination and Water Purification Technology Roadmap produced by the Bureau of Reclamation and Sandia National Laboratories at the request of Congress.",
      " The National Research Council then reviewed the roadmap in a 2004 report, Review of the Desalination and Water Purification Technology Roadmap, which called for a strategic national research agenda. To this end, the National Research Council (NRC) convened a Committee on Advancing Desalination Technology. That NRC committee published its own assessment in 2008, Desalination: A National Perspective. The NRC concluded that research should focus on reducing desalination costs and that substantial further cost savings were unlikely to be achieved through incremental advances in the commonly used technologies, like reverse osmosis. Consequently, the report recommended that federal desalination research funding be targeted at long-term,",
      " high-risk research not likely to be attempted by the private sector that could significantly reduce desalination costs. It also recommended a line of research on minimizing or mitigating the environmental impacts of desalination. The NRC specifically identified for federal investment research that had potential for widespread benefit and that the private sector had little willingness to perform. (See \"National Research Council 2008 Desalination Research Recommendations\" box for more details.)  In 2010, the Water Research Foundation, WateReuse Foundation, and Sandia National Laboratories published a report on how to implement the 2003 roadmap. The report identified research agendas for a range of topics\u2014membrane and alternative technologies,",
      " concentrate management, and institutional issues such as energy cost reduction and regulatory compliance. Evolution of Federal Research Funding No single federal agency has responsibility for all federal desalination and membrane research; instead numerous agencies and departments are involved in research based on their specific missions. In FY2005, FY2006, and FY2007, federal desalination research totaled $24 million, $24 million, and $10 million, respectively. (These are the most recent comprehensive data on federal desalination funding.) The Bureau of Reclamation was responsible for half or less of that spending at $12 million, $11 million, and $4 million,",
      " respectively. Other agencies and departments with spending on desalination research included the Army, National Science Foundation, Office of Naval Research, U.S. Geological Survey, and four of the Department of Energy's National Laboratories. Sandia National Laboratory has had the largest role among the national laboratories. In FY2005 and FY2006, much of the federal desalination research was congressionally directed to specific sites and activities. The level of funding fell after FY2006, when the appropriations process began to include less congressionally directed spending. The optimal level and type of federal support for desalination research is inherently a public policy question shaped by factors such as fiscal priorities and views on the appropriate role of the federal government in research,",
      " industry development, and water supply. Federal support for desalination research raises questions, such as what should be the respective roles of federal agencies, academic institutions, and the private sector in conducting research and commercializing the results, and should federal research be focused on basic research or promoting the use of available technologies? In addition to federal and private research activities, some states, such as California and Texas, also have supported desalination research.  In 2008, the National Research Council recommended a federal desalination research level of roughly $25 million, but recommended that the research be targeted strategically, including being directed at the research activities described above.",
      " The NRC drew the following conclusion: There is no integrated and strategic direction to the federal desalination research and development efforts. Continuation of a federal program of research dominated by congressional earmarks and beset by competition between funding for research and funding for construction will not serve the nation well and will require the expenditure of more funds than necessary to achieve specified goals. No recent authoritative estimate of all federal desalination spending is available. Data for Reclamation indicate a reduction in federal desalination spending. Reclamation's desalination funding has declined from $11 million in FY2006 to between $2 million and $4 million in recent years,",
      " with FY2015 funding at $3 million. While some traditional avenues for federal desalination research may be receiving less support, new avenues of support may be opening. Two of these are the Advanced Research Projects Agency-Energy (ARPA-E) and the National Science Foundation's Urban Water Engineering Research Center, which was initiated in 2011.  Desalination Adoption in the United States Desalination and membrane technologies are increasingly investigated and used as an option for meeting municipal and industrial water supply and water treatment demands. The nation's installed desalination capacity has increased in recent years, reflecting the technology's growing competitiveness and applications and increasing demands for reliable freshwater supplies.",
      " As of 2005, approximately 2,000 desalination plants larger than 0.3 million gallons per day (MGD) were operating in the United States, with a total capacity of 1,600 MGD. This represents more than 2.4% of total U.S. municipal and industrial freshwater withdrawals, not including water for thermoelectric power plants. Two-thirds of the U.S. desalination capacity is used for municipal water supply; industry uses about 18% of the total capacity.  Municipal use of desalination for saline water and wastewater treatment in the United States expanded from 1990 to 2010;",
      " the number of facilities rose from 98 facilities with a total capacity of 100 MGD in 1990 to 324 facilities with 1,100 MGD of capacity in 2010. By 2010, 32 states had municipal desalination facilities. Florida, California, and Texas have the greatest installed desalination capacity and account for 68% of the municipal desalination facilities. Florida dominates the U.S. capacity, with the facility in Tampa being a prime example of large-scale desalination implementation (see box); however, Texas and California are bringing municipal plants online or are in advanced planning stages. Several other efforts also are preliminarily investigating desalination for particular communities,",
      " such as Albuquerque.  The saline source water that is treated using desalination technologies varies largely on what sources are available near the municipalities and industry with the demand for the water. In the United States, only 7% of the existing desalination capacity uses seawater as its source. More than half of U.S. desalinated water is from brackish sources. Another 25% is river water treated for use in industrial facilities, power plants, and some commercial applications. Globally, seawater desalination represents 60% of the installed desalination capacity. While interest in obtaining municipal water from desalination is rising in the United States,",
      " desalination is expanding most rapidly in other world regions, often in places where other supply augmentation options are limited by geopolitical as well as natural conditions, such as arid conditions with access to seawater. The Middle East, Algeria, Spain, and Australia are leading in the installation of new desalination capacity, with Saudi Arabia and the United Arab Emirates leading in annual production of desalinated water. Roughly 98% of the desalination capacity worldwide is outside of North America, with 65% in the Middle East. Energy Concerns and Responses Reducing Energy Intensity To Reduce Cost Uncertainties The cost of desalination for municipal water remains a barrier to adoption.",
      " Like nearly all new freshwater sources, desalinated water comes at substantially higher costs than existing municipal water sources. Much of the cost for seawater desalination is for the energy required for operations; in particular, the competitiveness of reverse osmosis seawater desalination is highly dependent on the price of electricity. Reverse osmosis pushes water through a membrane to separate the freshwater from the salts; this requires considerable energy input. Currently the typical energy intensity for seawater desalination using reverse osmosis with energy recovery devices is 3-7 kilowatt-hours of electricity per cubic meter of water (kWh/m 3 ). The typical energy intensity of brackish reverse osmosis desalination is less than seawater desalination,",
      " at 0.5-3 kWh/m 3, because the energy required for desalination is a function of the salinity of the source water.  Uncertainty in whether electricity prices will rise or fall creates significant uncertainty in the cost of desalinated water. If electricity becomes more expensive, less electricity-intensive water supply options (which may include conservation, water purchases, and changes in water pricing) become comparatively more attractive.  Cost-effectively reducing desalination's energy requirements could help reduce overall costs. In recent decades, one of the ways that desalination cost reductions were achieved was through reduced energy requirements of reverse osmosis processes.",
      " Now the energy used in the reverse osmosis portion of new desalination facilities is close to the theoretical minimum energy required for separation of the salts from the water. Therefore, although there still is some room for energy efficiency improvements in using desalination as a water supply, dramatic improvements are not likely to be achieved through enhancements to standard reverse osmosis membranes. Instead energy efficiency improvements are more likely to come from other components of desalination facilities, such as the pretreatment of the water before it enters the reverse osmosis process, enhanced facility and system design, or the use and development of a new generation of technologies (see Appendix A ). For example,",
      " energy efficiency advances in the non-membrane portions of water systems and the use of energy recovery technologies are reducing energy use per unit of freshwater produced at desalination facilities. Pumps are responsible for more than 40% of total energy costs at a desalination facility. Energy efficiency advances in a type of pump that is useful for smaller applications (called a positive displacement pump) have made desalination more cost-effective for some applications and locations and less sensitive to electricity price increases.  The Affordable Desalination Collaboration is an example of combining federal, state, local, private, and other financial resources to support research; funding from these sources was combined to build and operate a demonstration plant at the U.S.",
      " Navy's Desalination Test Facility in Port Hueneme, California. The plant tests the combined use of commercially available reverse osmosis technologies, energy recovery devices and practices, and other energy-efficient technologies to reduce the energy inputs required for seawater and brackish desalination. According to the researchers involved, the energy-efficient demonstration facility has the equivalent energy input per unit of freshwater produced as water imports into southern California from northern California and the Colorado River. While this research is an example of reducing energy demand, other efforts are looking to substitute the type of energy used for desalination from fossil fuels to renewable energy or waste heat.",
      " The use of desalination as a climate change adaptation strategy is questioned because of its potential fossil fuel intensity relative to other adaptation and water supply options. Electricity price uncertainty and emissions considerations have driven some desalination proponents to investigate renewable energy supplies and co-location with power plants and industrial facilities to reduce electricity requirements and costs. Renewable and Alternative Energy Opportunities  The extent to which desalination technologies can be coupled with intermittent renewable or geothermal electric generation, use off-peak electricity or waste heat, and operate in areas of limited electric generation or transmission capacity but with renewable energy resources is increasingly receiving attention. Desalinating more water when wind energy is available (which requires facilities that can operate with a variable water inflow)",
      " and storing the treated water for when water is demanded can almost be viewed as a means of electricity storage and reduction of peak demand. Efforts to jointly manage water and energy supply and demand and to integrate renewable energy with desalination may bolster support for desalination. The first large-scale photovoltaic-powered reserve osmosis seawater desalination facility is in Saudi Arabia, with multiple additional facilities planned in the country before 2018. Concern over declining aquifer levels in Saudi Arabia was one driver for these investments. With demand for desalination increasing in energy-importing countries like India, China, and small islands, there may be particularly strong interest in facilities combining desalination with renewable energy.",
      " Some research also is being directed at opportunities for direct solar distillation desalination technologies, particularly smaller-scale production units in solar-abundant remote areas with available land and low-cost labor. Health and Environmental Concerns From a regulatory, oversight, and monitoring standpoint, desalination as a significant source of water supply is relatively new in the United States, which means the health and environmental regulations, guidelines, and policies regarding its use are still being developed. Existing federal, state, and local laws and policies often do not address unique issues raised by desalination. This creates uncertainty for those considering adopting desalination and membrane technologies.  Environmental and human health concerns often are raised in the context of obtaining the permits required to site,",
      " construct, and operate the facility and dispose of the waste concentrate. A draft environmental scoping study for a facility in Brownsville, TX, identified up to 26 permits, approvals, and documentation requirements for construction and operation of a seawater desalination facility. According to the Pacific Institute's report Desalination, With a Grain of Salt, as many as 9 federal, 13 state, and additional local agencies may be involved in the review or approval of a desalination plant in California. For example, during the Corps' process for issuing a seawater desalination facility permits for placing structures in waterways and dredging and filling in navigable waters,",
      " the U.S. Coast Guard would consult with the Army Corps of Engineers on whether an intake facility would be a potential navigation hazard and the National Oceanic and Atmospheric Administration would consult on whether intake facilities and discharge of waste concentrate may affect marine resources.  As previously noted, most states do not have policies and guidance specifically for desalination facilities, and instead deal with each project individually. California, through its State Water Resources Control Board, is working toward statewide guidance in order to improve statewide consistency in review and permitting of seawater desalination facilities.  Some of the regulatory requirements are not seen as particularly onerous; others may be seen as challenging depending on the location and size of the facility.",
      " Some stakeholders view the current permit process as a barrier to adoption of desalination. Other stakeholders argue that rigorous review and permitting is necessary because of the potential impact of the facilities on public health and the environment. Particular attention often is paid during permitting to the impingement and entrainment of aquatic species by intake structures for coastal and estuarine desalination facilities and the disposal of waste concentrate. Evolving Drinking Water Guidelines  While the quality of desalinated water is typically very high, some health concerns remain regarding its use as a drinking water supply. The source water used in desalination may introduce biological and chemical contaminants to drinking water supplies that are hazardous to human health,",
      " or desalination may remove minerals essential for human health.  For example, boron, which is an uncommon concern for traditional water sources, is a significant constituent of seawater and can also be present in brackish groundwater extracted from aquifers comprised of marine deposits. Boron levels after basic reverse osmosis of seawater commonly exceed current World Health Organization health guidelines and the U.S. Environmental Protection Agency (EPA) health reference level. While the effect of boron on humans remains under investigation, boron is known to cause reproductive and developmental toxicity in animals and irritation of the digestive tract, and it accumulates in plants,",
      " which may be a concern for agricultural applications. Boron can be removed through treatment optimization, but that treatment could increase the cost of desalted seawater.  EPA sets federal standards and treatment requirements for public water supplies. In 2008, EPA determined that it would not develop a maximum contaminant level for boron because of its rare occurrence in most groundwater and surface water drinking water sources; EPA has encouraged affected states to issue guidance or regulations as appropriate. Most states have not issued such guidance. Therefore, most U.S. utilities lack clear guidance on boron levels in drinking water suitable for protecting public health. The National Research Council recommended development of boron drinking water guidance to support desalination regulatory and operating decisions;",
      " it recommended that the guidance be based on an analysis of the human health effects of boron in drinking water and other sources of exposure.  Similarly, the demineralization (particularly the removal of the essential minerals calcium and magnesium) by desalination processes also can raise health concerns. This has prompted researchers to promote the remineralization of desalinated water prior to the water entering the distribution system in communities that are highly dependent on desalinated water. Another health-related concern is the extent to which microorganisms unique to seawater and algal toxins may pass through reverse osmosis membranes and enter the water supply, and how facilities may need to be operated differently when these organisms and algal toxins are present.",
      " Algal toxins are a consideration for desalination facilities in locations affected or potentially affected by harmful ocean algal blooms that can produce a range of substances, including neurotoxins (e.g., domoic acid). How to effectively manage desalination facilities in order to avoid public health threats from algal blooms is an emerging area of interest and research.  Some of the coastal facilities contemplated in the United States would treat estuarine water. Estuarine water, which is a brackish mixture of seawater and surface water, has the advantage of lower salinity than seawater. The variability in the quality and constituents in estuarine water,",
      " as well as the typical surface water contaminants (e.g., infectious microorganisms, elevated nutrient levels, and pesticides), may complicate compliance of desalinated estuarine water with federal drinking water standards.  Concentrate Disposal Challenges and Alternatives Unlike desalination treatment costs, concentrate disposal costs generally have not decreased. For inland brackish desalination, significant constraints on adoption of the technologies are the uncertainties and the cost of waste concentrate disposal. For coastal desalination projects, the concentrate management options are often greater because of surface water disposal opportunities. EPA is authorized to manage the disposal and reuse of desalination's waste concentrate.",
      " The disposal option selected largely is determined by which alternatives are appropriate for the volumes and specific characteristics of the concentrate and the cost-effectiveness of the alternatives, which is largely shaped by the proximity of the disposal option and the infrastructure, land, and treatment investments required.  The dominant concentrate disposal options for municipal desalination facilities are surface and sewer disposal; in 26 of the 32 states with municipal desalination facilities, only surface and sewer discharge are used for concentrate disposal. Surface water disposal of waste concentrate is permitted on a project-specific basis based on predicted acute and chronic effects on the environment. Inland surface water disposal is particularly challenging because of the limited capacity of inland water bodies to be able to tolerate the concentrate's salinity.",
      " Limited amounts of concentrate also may be sent through sewer systems with large-volume wastewater treatment facility. As of 2010, deep well injection for municipal concentrate disposal had been used primarily in Florida. For injection, EPA generally classifies waste concentrate as an industrial waste, thus requiring that the concentrate be disposed of in deep wells appropriate for industrial waste. Desalination proponents argue that desalination's concentrate is sufficiently different from most industrial waste that it should be reclassified to increase the surface and injection well disposal opportunities. Some states have made efforts to promote the beneficial use of waste concentrate (e.g., use as liquids in enhanced oil and gas recovery)",
      " and facilitate its disposal including land application techniques. Notwithstanding these state efforts, land application and evaporation ponds are seldom and decreasingly used disposal options. While states can have such policies and programs in place, federal environmental regulations administered by EPA for the most part define the regulatory context of concentrate disposal.  Concluding Remarks Desalination and membrane technologies are playing a growing role in meeting water supply and water treatment needs for municipalities and industry. The extent to which this role further expands depends in part on the cost-effectiveness of these technologies and their alternatives. Desalination's energy use, concentrate disposal options, and environmental and health concerns are among the top issues shaping the technology's adoption.",
      " How to focus federal desalination research and support to produce results that provide public benefits, and how to provide a regulatory context that protects the environment and public health without unnecessarily disadvantaging these technologies, are among the desalination issues before the 114 th Congress.  Appendix A. Traditional and Emerging Desalination\u00a0Technologies There are a number of methods for removing salts from seawater or brackish groundwater to provide water for municipal and agricultural purposes. The two most common processes, thermal distillation and reverse osmosis, are described below; their descriptions are followed by descriptions of some of the more innovative and alternative desalination technologies.",
      " The earliest commercial plants used thermal techniques. Improvements in membrane technology have reduced costs, and membrane technology is less energy-intense than thermal desalination (although it is more energy-intense than most other water supply options). Reverse osmosis and other membrane systems account for nearly 96% of the total U.S. desalination capacity and 100% of the municipal desalination capacity. Reverse Osmosis Reverse osmosis forces salty water through a semipermeable membrane that traps salt on one side and lets purified water through. Reverse osmosis plants have fewer problems with corrosion and usually have lower energy requirements than thermal processes.",
      "  Examples of how research advances in the traditional desalination technologies of reverse osmosis have the potential for improving the competitiveness and use of desalination are: nanocomposite and nanotube membranes and chlorine resistant membranes. Nanocomposite membranes appear to have the potential to reduce energy use within the reverse osmosis process by 20%, and nanotube membranes may yield a 30%-50% energy savings.  Membranes are susceptible to fouling by biological growth (i.e., biofouling), which reduces the performance of the membranes and increases energy use. The most widely used biocide is chlorine because it is inexpensive and highly effective.",
      " The most common membranes used in reverse osmosis, however, do not hold up well to exposure to oxidizing agents like chlorine. Advancements in chlorine resistant membranes would increase the resiliency of membranes and expand their applications and operational flexibility.  Distillation  In distillation, saline water is heated, separating out dissolved minerals, and the purified vapor is condensed. There are three prominent ways to perform distillation: multi-stage flash, multiple-effect distillation, and solar distillation. In general, distillation plants require less maintenance and pretreatment before the desalination process than reverse osmosis facilities.  While solar distillation is an ancient means for separating freshwater from salt using solar energy,",
      " research into improving the technology is increasing. In large part the interest stems from the potential application for the technology to supply freshwater to small remote settlements where saline supplies are the only source and power is scarce or expensive.  Innovative and Alternative Desalination Processes  Capacitive Deionization Capacitive deionization desalinates saline waters by absorbing salts out of the water using electrically charged porous electrodes. The technology uses the fact that salts are ionic compounds with opposite charges to separate the salts from the water. The limiting factor for this technology is often the salt absorption capacity of the electrodes. Flow-through capacitive deionization shows promise for energy-efficient desalination of brackish waters.",
      " Electrodialysis  Electrodialysis and capacitive deionization technologies depend on the ability of electrically charged ions in saline water to migrate to positive or negative poles in an electrolytic cell. Two different types of ion-selective membranes are used\u2014one that allows passage of positive ions and one that allows negative ions to pass between the electrodes of the cell. When an electric current is applied to drive the ions, fresh water is left between the membranes. The amount of electricity required for electrodialysis, and therefore its cost, increase with increasing salinity of feed water. Thus, electrodialysis is less economically competitive for desalting seawater compared to less saline,",
      " brackish water.  Forward Osmosis Forward osmosis is an increasingly used but relatively new membrane-based separation process that uses an osmotic pressure difference between a concentrated \"draw\" solution and the saline source water; the osmotic pressure drives the water to be treated across a semi-permeable membrane into the draw solution. The level of salt removal can be competitive with reverse osmosis, and forward osmosis membranes may be more resistant to fouling than reverse osmosis membranes. A main challenge is the selection of a draw solute; the solute needs to either be desirable or benign in the water supply, or be easily and economically separated out.",
      " Research is being conducted on whether a combination of ammonia and carbon dioxide gases or polymers can be used in the draw solution, and on the effects of marine biology on the membranes. The attractiveness of forward osmosis is that when combined with industrial or power production processes that produce waste heat, its electricity requirements can be significantly less than for reverse osmosis. Potential disadvantages of forward osmosis are a lower quantity of freshwater per unit of water treated and a larger quantity of brine requiring disposal.  Freezing Processes Freezing processes involve three basic steps: (1) partial freezing of the feed water in which ice crystals of fresh water form an ice-brine slurry;",
      " (2) separating the ice crystals from the brine; and (3) melting the ice. Freezing has some inherent advantages over distillation in that less energy is required and there is a minimum of corrosion and scale formation problems because of the low temperatures involved. Freezing processes have the potential to concentrate waste streams to higher concentration than other processes, and the energy requirements are comparable to reverse osmosis. While the feasibility of freeze desalination has been demonstrated, further research and development remains before the technology will be widely available. Ion Exchange In ion exchange, resins substitute hydrogen and hydroxide ions for salt ions. For example,",
      " cation exchange resins are commonly used in home water softeners to remove calcium and magnesium from \"hard\" water. A number of municipalities use ion exchange for water softening, and industries requiring extremely pure water commonly use ion exchange resins as a final treatment following reverse osmosis or electrodialysis. The primary cost associated with ion exchange is in regenerating or replacing the resins. The higher the concentration of dissolved salts in the water, the more often the resins need to be renewed. In general, ion exchange is rarely used for salt removal on a large scale.\n"
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  },
  {
    "id": 4,
    "question": null,
    "answer": "Over the past decade, a series of devastating and deadly wildland fires has burned millions of acres of federal forests, grasslands, and deserts each year, requiring federal and management agencies to spend hundreds of millions of dollars to fight them. GAO was asked to provide an interim update on key segments of an ongoing review of the use of geospatial information technologies in wildland fire management. Specifically, GAO was asked to provide an overview of key geospatial information technologies and their uses in different aspects of wildland fire management and to summarize key challenges to the effective use of these technologies. The final report is expected to be issued in September 2003. GAO's review focused on the five federal agencies that are primarily responsible for wildland fire management: the Department of Agriculture's Forest Service and the Department of the Interior's National Park Service, Bureau of Land Management, Fish and Wildlife Service, and Bureau of Indian Affairs. Geospatial information technologies--sensors, systems, and software that collect, manage, manipulate, analyze, model, and display information about locations on the earth's surface--can aid in managing wildland fires by providing accurate, detailed, and timely information to federal, state, and local decision makers, fire-fighting personnel, and the public. This information can be used to help reduce the risk that a fire will become uncontrollable, to respond to critical events while a fire is burning, and to aid in recovering from fire disasters. However, there are multiple challenges to effectively using these technologies to manage wildland fires, including challenges with data, systems, infrastructure, staffing, and the effective use of new products. Clearly, effective management of information technology and resources could help address these challenges. In our final report, due to be issued next month, we will further discuss geospatial information technologies, challenges to effectively using these technologies, and opportunities to improve the effective use of geospatial information technologies. We will also make recommendations to address these challenges and to improve the use of geospatial technologies in wildland fire management.\n",
    "docs": [
      "Background Over the past decade, there has been a series of devastating and  deadly wildland fires on federal lands. These fires burn millions of  acres of forests, grasslands, and deserts each year, and federal land  management agencies spend hundreds of millions of dollars to  fight them. Wildland fires also threaten communities that are near  federal lands. During the 2002 fire season, approximately 88,458  wildland fires burned about 6.9 million acres and cost the federal  government over $1.6 billion to suppress. These fires destroyed  timber, natural vegetation, wildlife habitats, homes, and  businesses,",
      " and they severely damaged forest soils and watershed  areas for decades to come. The 2002 fires also caused the deaths of  23 firefighters and drove thousands of people from their homes.  Only 2 years earlier, during the 2000 fire season, approximately  123,000 fires had burned more than 8.4 million acres and cost the  federal government over $2 billion. Wildland Fire Management Life Cycle: An Overview Effectively managing wildland fires can be viewed in terms of a life  cycle\u2014there are key activities that can be performed before a fire  starts to reduce the risk of its becoming uncontrollable;",
      " other  activities that can take place during a fire to detect the fire before  it gets too large and to respond to it; and still others that can be  performed after a fire has stopped in order to stabilize,  rehabilitate, and restore damaged forests and rangelands. Pre-fire activities can include identifying areas that are at risk for  wildland fire by assessing changes in vegetation and the  accumulation of fuels (including small trees, underbrush, and dead  vegetation) as well as these fuels\u2019 proximity to communities; taking  action to reduce fuels through a variety of mechanisms (including  timber harvesting, management-ignited or prescribed fires,",
      "  mechanical thinning, and use of natural fires); and monitoring fire  weather conditions. Other activities during this phase can include  providing fire preparedness training and strategically deploying  equipment and personnel resources to at-risk areas. Activities that take place during a fire include detecting fires,  dispatching resources, planning the initial attack on the fire,  monitoring and mapping the fire\u2019s spread and behavior, and  planning and managing subsequent attacks on the fire\u2014if they are  warranted. Post-fire activities can include assessing the impact of the fire,  providing emergency stabilization of burned areas to protect life,  property, and natural resources from post-fire degradation,",
      " such as  flooding, contamination of a watershed area, and surface erosion;  rehabilitating lands to remove fire debris, repair soils, and plant  new vegetation; and monitoring the rehabilitation efforts over time  to ensure that they are on track. Other activities\u2014such as enhancing community awareness\u2014can  and should take place throughout the fire management life cycle. Figure 1 depicts a fire management life cycle, with key activities in  each phase. Federal Land Management Responsibilities Five federal agencies share responsibility for managing the  majority of our nation\u2019s federal lands\u2014the Department of  Agriculture\u2019s Forest Service (FS) and the Department of the  Interior\u2019s National Park Service (NPS), Bureau of Land Management  (BLM), Fish and Wildlife Service (FWS), and Bureau of Indian Affairs  (BIA). While each agency has a different mission and responsibility  for different areas and types of land,",
      " they work together to address  catastrophic wildland fires, which often cross agency boundaries.  In addition, state, local, and tribal governments and private  individuals own thousands of acres that are adjacent to federal  lands and are similarly susceptible to wildland fires. Figure 2  shows the number of acres of land managed by each of the five  federal agencies. The National Fire Plan After years of catastrophic fires, in September 2000, the  Departments of Agriculture and the Interior jointly issued a report  on managing the impact of wildland fires. This report forms the  basis of what is now known as the National Fire Plan\u2014a long-term  multibillion-dollar effort to address the nation\u2019s risk of wildland  fires.",
      " The plan directs funding and attention to five key initiatives: Hazardous fuels reduction\u2014investing in projects to reduce the  buildup of fuels that leads to severe fires. Firefighting\u2014ensuring adequate preparedness for future fires by  acquiring and maintaining personnel and equipment and by placing  firefighting resources in locations where they can most effectively  be used to respond to fires. Rehabilitation and restoration\u2014restoring landscapes and  rebuilding ecosystems that have been damaged by wildland fires. Community assistance\u2014working directly with communities to  ensure that they are adequately protected from fires. Accountability\u2014establishing mechanisms to oversee and track  progress in implementing the National Fire Plan,",
      " which includes  developing performance measures, processes for reporting  progress, and budgeting information. A key tenet of the National Fire Plan is coordination between  government agencies at the federal, state, and local levels to  develop strategies and carry out programs. Building on this goal of  cooperation, the five land management agencies have worked with  state governors and other stakeholders to develop a comprehensive  strategy and an implementation plan for managing wildland fires,  hazardous fuels, and ecosystem restoration and rehabilitation on  federal and adjacent state, tribal, and private forest and rangelands  in the United States. In developing these integrated plans and  initiatives,",
      " the land management agencies identified other federal  agencies that have roles in wildland fire management: agencies that  manage other federal lands, including the Department of Defense  and Department of Energy; agencies that research, manage, or use  technologies that can aid in wildland fire management, including  the Department of the Interior\u2019s U.S. Geological Survey, the  National Aeronautical and Space Administration, the Department  of Commerce\u2019s National Oceanic and Atmospheric Administration,  and the Department of Defense\u2019s National Imagery and Mapping  Agency; and agencies with other fire-related responsibilities,  including the Department of Homeland Security\u2019s Federal  Emergency Management Agency and the Environmental Protection  Agency.",
      " The integrated plans also identify key state and local  organizations that may collaborate on wildland fire management. An Interagency Framework Supports the National Fire Plan Over the past four decades, the Departments of Agriculture and the  Interior have established an interagency framework to handle  wildland fire management\u2014a framework that currently supports  the National Fire Plan. In 1965, the Forest Service and the Bureau of  Land Management established the National Interagency Fire Center,  in Boise, Idaho. The fire center is the nation\u2019s principal  management and logistical support center for wildland firefighting  and now includes the five land management agencies, the National  Weather Service,",
      " and the Department of the Interior\u2019s Office of  Aircraft Services. The Department of Homeland Security\u2019s Federal  Emergency Management Agency and the National Association of  State Foresters also have a presence at the center. Working  together, representatives from this mix of organizations exchange  fire protection information and training services and coordinate  and support operations for managing wildland fire incidents while  they are occurring, throughout the United States. In 1976, the departments established the National Wildfire  Coordinating Group to coordinate government standards for  wildland fire management and related programs, in order to avoid  duplicating the various agencies\u2019 efforts and to encourage active  collaboration among entities.",
      " This group comprises representatives  from the five land management agencies and from other federal,  state, and tribal organizations. Figure 3 identifies these member  organizations. The coordinating group seeks to foster more  effective execution of each agency\u2019s fire management program  through agreements on common training, equipment, and other  standards; however, each agency determines whether and how it  will adopt the group\u2019s proposals. The group is organized into 15  working teams, which focus on issues including information  resource management (IRM), fire equipment, training, fire weather,  and wildland fire education. Most recently, the coordinating group  established the IRM program management office to further support  the IRM working team by developing guidance and products.",
      " In  addition, the IRM working team has established two subgroups to  focus on specific issues involving geospatial information and data  administration. In recent years, we have reported that despite these interagency  efforts, the Forest Service and the Department of the Interior had  not established clearly defined and effective leadership for  ensuring collaboration and coordination among the organizations  that respond to wildland fires. Further, the National Academy of  Public Administration recommended that the Secretaries of  Agriculture and the Interior establish a national interagency council  to achieve more consistent and coordinated efforts in  implementing national fire policies and plans. In response to these  concerns,",
      " in April 2002, the Secretaries of the two departments  established the Wildland Fire Leadership Council. This council  comprises senior members of both departments and of key  external organizations, and is supported by the Forest Service\u2019s  National Fire Plan Coordinator and the Department of the Interior\u2019s  Office of Wildland Fire Coordination. The Council is charged with  providing interagency leadership and oversight to ensure policy  coordination, accountability, and effective implementation of the  National Fire Plan and Federal Wildland Fire Management Policy.  Figure 4 identifies members of the Leadership Council. Numerous Geospatial Technologies Can Be Used to Address  Different Aspects of Wildland Fire Management Geospatial information technologies\u2014sensors,",
      " systems, and  software that collect, manage, manipulate, analyze, model, and  display information about positions on the earth\u2019s surface\u2014can aid  in managing wildland fires by providing accurate, detailed, and  timely information to federal, state, and local decision makers, fire- fighting personnel, and the public. This information can be used to  help reduce the risk that a fire will become uncontrollable, to  respond to critical events while a fire is burning, and to aid in  recovering from fire disasters. Specific examples of geospatial technologies include remote  sensing systems, the Global Positioning System, and geographic  information systems.",
      " In addition, specialized software can be used  in conjunction with remote sensing data and geographic  information systems to manipulate geographic data and allow  users to analyze, model, and visualize locations and events. Table 1  describes key geospatial technologies. While individual technologies can be used to obtain information  and products, the integration of these technologies holds promise  for providing even more valuable information to decision makers.  For example, remote sensing systems provide images that are  useful in their own right. However, when images are geo-referenced  and combined with other layers of data in a geographic  information system\u2014and then used with specialized software\u2014a  more sophisticated analysis can be performed and more timely and  sound decisions can be made.",
      " Figure 5 provides an overview of the  relationships among the different technologies and some resulting  products. Federal Land Management Agencies Are Using Geospatial Technologies to  Support Wildland Fire Management The geospatial information technologies mentioned above\u2014remote  sensing systems, the Global Positioning System, geographic  information systems, and specialized software\uf8e7are being used to  some extent in managing wildland fires. These technologies are  used throughout the wildland fire management life cycle. Key  examples follow. Before a fire starts, local and regional land managers often use  vegetation and fuels maps derived from remote sensing data in  conjunction with a geographic information system to understand  conditions and to identify areas for fuels treatments.",
      " Some land  management offices have also developed software to help them  assess risk areas and prioritize fuels treatment projects. For  example, figure 6 depicts a vegetation map, and figure 7 depicts a  map showing areas with increased risk of fires. Interestingly, an  area that the map identified as being at high risk of fire later  burned during the Hayman fire of 2002. Land management agencies also use geospatial products related to  the weather to aid in fire planning, detecting, and monitoring  activities. Weather-based products are derived from ground-based  lightning detection and weather observing systems as well as from  fire-related weather predictions from the National Weather Service.",
      " Figure 8 depicts a seasonal fire outlook, and figure 9 depicts a fire  danger map that is based on daily weather predictions. During a fire, some fire responders use satellite and aerial imagery,  in combination with Global Positioning System data, geographic  information systems, and specialized fire behavior modeling  software, to obtain information about the fire and to help plan how  they will respond to it. For example, the Forest Service uses  satellite data to produce images of active fires. Also, the National  Interagency Fire Center manages an aerial infrared program that  flies aircraft equipped with infrared sensors over large fires to  detect heat and fire areas.",
      " These images contribute to the  development of daily fire perimeter maps. Figure 10 depicts a  satellite image of active fires. Figure 11 depicts a satellite image of  a fire perimeter, and figure 12 depicts an aerial infrared image and  a fire perimeter map based on that image. Some incident teams  also use fire growth modeling software to predict the growth of  wildland fires in terms of size, intensity, and spread, considering  variable terrain, fuels, and weather. Using this information, incident  managers are able to estimate short- and long-term fire behaviors,  plan for potential fires, communicate concerns and needs to state  and local governments and the public,",
      " and request and position  resources. Figure 13 shows the output of a fire behavior model. Geospatial technologies are also used to provide information on  active fires to the general public. The wildland fire community and  the U.S. Geological Survey established an Internet Web site, at  www.geomac.gov, to provide access to geospatial information  about active fires. This site allows visitors to identify the location  of wildland fires on a broad scale and then focus in to identify  information on the location and status of specific fires. Figure 14  shows images from the Web site. It is important to note that there are many commercial products  and services available for use during a fire\u2014ranging from high-",
      "  resolution aerial and satellite imagery, to handheld Global  Positioning System devices, to enhanced visualization models, to  on-site geographic information systems, equipment, and personnel.  Incident commanders responsible for responding to fires often  choose to purchase commercial products and services to  supplement interagency resources. After a fire occurs, burned-area teams have recently begun to use  remote sensing data in conjunction with geographic information  systems to determine the extent of fire damage and to help plan  and implement emergency stabilization and rehabilitation efforts.  Typical products include burn severity and burn intensity maps.  Figure 15 depicts a satellite image and a burn severity map  showing areas that have a high priority for emergency stabilization  measures.",
      " Geospatial technologies also aid in monitoring  rehabilitation efforts for years after a fire to ensure that  restoration plans are on track. New Uses of Geospatial Information Technologies to Aid in Wildland Fire  Management Are under Development The Forest Service and Interior are researching and developing new  applications of geospatial information technologies to support  business needs in wildland fire management. In addition, the Joint  Fire Science Program, a partnership of the five land management  agencies and the U.S. Geological Survey, funds numerous research  projects each year on fire and fuels management. Once again, these  initiatives vary greatly\u2014ranging from research on remote sensing  systems to the development of interagency information systems  with geospatial components,",
      " to improvements in existing software  models. Examples of these efforts include the following: Sensor research. Several new research projects are under way on  LIDAR and hyperspectral sensors. For example, a BLM state office  is researching the use of high-resolution hyperspectral and LIDAR  imaging technologies for improving the identification of vegetation;  planning hazardous fuels projects; and monitoring wildland urban  interface projects, the effects of wildland fires, and fire  rehabilitation efforts. Additionally, the Forest Service is exploring  the use of mobile LIDAR systems for assessing smoke plumes, and  it is conducting research on using LIDAR data,",
      " satellite data, and  modeling techniques to forecast air quality after a fire. Vegetation data and tools. The five land management agencies and  the U.S. Geological Survey are working together to develop a  national geospatial dataset and a set of modeling tools for wildland  fire planning. This effort, called LANDFIRE, is to provide a  comprehensive package of spatial data layers, models, and tools  needed by land and fire managers. The system is expected to help  prioritize, plan, complete, and monitor fuel treatment and  restoration projects on national, regional, and local scales. A  prototype of the system covers central Utah and Northwestern  Montana and is expected to be completed by April 2005.",
      " Interagency information systems. The five land management  agencies are developing information systems for use by Interior  and Forest Service offices to track efforts under the National Fire  Plan. The National Fire Plan Operations and Reporting System is an  interagency system designed to assist field personnel in managing  and reporting accomplishments for work conducted under the  National Fire Plan. It is a Web-based data collection tool with  geographic information system (GIS) support that locates projects  and treatments. It consists of three modules\u2014hazardous fuels  reduction, restoration and rehabilitation, and community  assistance. While the agencies are currently using the system, it will  not be fully operational until 2004.",
      " Another information system,  the Fire Program Analysis system, is an interagency planning tool  for analysis and budgeting to be used by the five federal wildland  fire management agencies. The first module\u2014preparedness\u2014is  scheduled for implementation in September 2004 and will evaluate  the cost effectiveness of alternative initial attack operations in  meeting multiple fire management objectives. Additional system  modules are expected to provide geospatial capabilities and to  address extended attack, large fires and national fire resources,  hazardous fuels reduction, wildland fire use, and fire prevention. Improvements in existing systems. There are multiple efforts  planned or under way to improve existing systems or to add  geospatial components to systems that are currently under  development.",
      " For example, researchers at a federal fire sciences  laboratory are exploring possible improvements to the Wildland  Fire Assessment System, an Internet-based system that provides  information on a broad area of national fire potential and weather  maps for fire managers and the general public. Specifically,  researchers are working to develop products that depict moisture  levels in live fuels, which will aid in assessing the potential for  wildland fires. The Wildland Fire Community Faces Numerous Challenges in  Using Geospatial Information Technologies Effectively There are numerous challenges in using geospatial information  technologies effectively in the wildland fire community. Key  challenges involve data, systems,",
      " infrastructure, staffing, and the  effective use of new products and technologies\u2014all complicated by  the fact that wildland fire management extends beyond a single  agency\u2019s responsibility. Data issues. Users of geospatial information have noted problems  in acquiring compatible and comprehensive geospatial data. For  example, GIS specialists involved in fighting fires reported that  they did not have ready access to the geospatial data they needed.  They noted that some local jurisdictions have geospatial data, but  others do not. Further, they reported that the data from  neighboring jurisdictions are often incompatible. Geospatial  information specialists reported that the first days at a wildland  fire are spent trying to gather the geospatial information needed to  accurately map the fire.",
      " While concerns with data availability and  compatibility are often noted during fire incidents, these issues are  also evident before and after fire incidents. For example, we  recently reported that the five land management agencies did not  know how effective their post-fire emergency stabilization and  rehabilitation treatments were because, among other reasons, local  land units do not routinely collect comparable information. As a  result of unavailable or incompatible data, decision makers often  lack the timely, integrated information they need to make sound  decisions in managing different aspects of wildland fire. On a related note, the development of data standards is a well- recognized solution for addressing some of the problems  mentioned above,",
      " but there are currently no nationally recognized  geospatial data standards for use on fires. GIS specialists  frequently cited a need for common, interagency geospatial data  standards for use with fires. They noted that the land management  agencies and states do not record information about fires\u2014such as  fire location, fire perimeter, or the date of different fire  perimeters\u2014in the same way. System issues. In 1996, NWCG reported that there was a  duplication of information systems and computer applications  supporting wildland fire management, noting that agencies were  using 15 different weather-related software applications, 9 logistics  applications,",
      " and 7 dispatch applications. Since that time, the  number of applications has grown\u2014as has the potential for  duplication of effort. Duplicative systems not only waste limited  funds, but they also make interoperability between systems more  difficult. This issue is complicated by the fact that there is no single,  comprehensive inventory of information systems and applications  that could be of use to others in the interagency wildland fire  community. A single comprehensive inventory would allow the  wildland fire community to identify and learn about available  applications and tools, and to avoid duplicating efforts to develop  new applications. We identified five different inventories of  software applications\u2014including information systems,",
      " models, and  tools\u2014that are currently being used in support of wildland fire  management. While these listings are not limited to geospatial  applications, many of the applications have geospatial components.  The most comprehensive listing is an inventory managed by NWCG. This inventory identifies 199 applications used in support of  wildland fire, but even this inventory is not complete. That is, it did  not include 45 applications that were included in the other  inventories. Additionally, it did not include 23 applications that we  had identified. Infrastructure issues. Many geospatial specialists noted that there  are problems in getting equipment,",
      " networking capabilities, and  Internet access to the areas that need them during a fire. For  example, at a recent fire in a remote location, geospatial specialists  reported that they were unable to produce needed information and  maps because they had problems with networking capabilities.  Again, this issue is critical during a fire, when incident teams try to  set up a command center in a remote location. However, it is also  an issue when federal regional managers try to obtain consistent  information from the different land management agencies\u2019 field  offices before or after fires. The majority of local field offices have  equipment to support geospatial information and analysis,",
      " but  some do not. Staffing issues. Geospatial specialists noted that the training and  qualifications of the GIS specialists who support fire incidents is  not consistent. Specifically, officials noted that skills and  qualifications vary widely among those who work with geographic  information systems. For example, some GIS specialists are capable  of interpreting infrared images as well as developing maps, but  others are not. Some have experience working with GIS applications  but are not specifically trained to develop GIS maps for fires. Use of new products. While many commercial vendors are  developing geospatial products and services that could be of use to  the wildland fire community\u2014including advanced satellite and  aerial imaging;",
      " GIS applications and equipment; and advanced  mapping products including analyses, visualization, and  modeling\u2014many have expressed concern that the wildland fire  community is not aware of these advancements or has little  funding for these products. Land managers acknowledged the  value of many of these products, but noted that they need to be  driven by business needs.  Agency officials also expressed concern  that the cost of these products and services can be prohibitive and  that licensing restrictions would keep them from sharing the  commercial data and products with others in the wildland fire  community. Clearly, effective interagency management of information  resources and technology could help address the challenges faced  by the wildland fire community in using geospatial information  technologies.",
      " Such an approach could address the implementation  and enforcement of national geospatial data standards for  managing wildland fires; an interagency strategic approach to  systems and infrastructure development; a plan for ensuring  consistent equipment and training throughout the wildland fire  community; and a thorough evaluation of user needs and  opportunities for meeting those needs through new products and  technologies. The National Wildfire Coordinating Group\u2014comprising  representatives from the five land management agencies and from  other federal, state, and tribal organizations\u2014has several initiatives  planned or under way to address challenges to effectively using  geospatial technologies and to improve the interagency  management of information resources.",
      " However, progress on these  initiatives has been slow. In our report, due to be issued in  September 2003, we further discuss the use of geospatial  technologies in support of wildland fire management, challenges to  effectively using these technologies, and opportunities to address  key challenges and to improve the effective use of geospatial  technologies. We will also make recommendations to improve the  use of geospatial technologies in support of wildland fire  management. In summary, the federal wildland fire management community is  using a variety of different geospatial technologies for activities  throughout the fire management life cycle\u2014including identifying  dangerous fuels,",
      " assessing fire risks, detecting and fighting fires,  and restoring fire-damaged lands. These technologies run the  gamut from satellite and aerial imaging, to the Global Positioning  System, to geographic information systems, to specialized fire  models. Local land managers and incident teams often acquire, collect, and  develop geospatial information and technologies to meet their  specific needs, resulting in a hodgepodge of incompatible and  duplicative data and tools. This problem is echoed throughout the  fire community, as those who work with different aspects of fire  management commonly cite concerns with unavailable or  incompatible geospatial data, duplicative systems,",
      " lack of  equipment and infrastructure to access geospatial information,  inconsistency in the training of geospatial specialists, and  ineffective use of new products and technologies. These challenges  illustrate the need for effective interagency management of  information technology and resources in the wildland fire  community. We will report on opportunities to improve the use of  these technologies in our final report. This concludes my statement. I would be pleased to respond to any  questions that you may have at this time. Contact and Acknowledgements If you have any questions on matters discussed in this statement,  please contact David Powner at (202) 512-",
      "9286 or by E-mail at  pownerd@gao.gov, or Colleen Phillips at (202) 512-6326 or by E- mail at phillipsc@gao.gov. Individuals making key contributions to  this statement include Barbara Collier, Neil Doherty, Joanne  Fiorino, Chester Joy, Richard Hung, Anjalique Lawrence, Tammi  Nguyen, Megan Secrest, Karl Seifert, Lisa Warnecke, and Glenda  Wright. Appendix I: Objectives, Scope, and Methodology Our objectives were to provide an overview of key geospatial  information technologies for addressing different aspects of  wildland fire management and to summarize key challenges to the  effective use of geospatial technologies in wildland fire  management.",
      " To accomplish these objectives, we focused our  review on five key federal agencies that are responsible for  wildland fire management on public lands: the Department of  Agriculture\u2019s Forest Service and the Department of the Interior\u2019s  National Park Service, Bureau of Land Management, Fish and  Wildlife Service, and Bureau of Indian Affairs. To identify key geospatial information technologies for addressing  different aspects of wildland fire management, we assessed  policies, plans, and reports on wildland fire management and  technical documents on geospatial technologies. We assessed  information on Forest Service and Interior efforts to develop and  use geospatial technologies. We also interviewed officials with the  Forest Service and the Interior,",
      " interagency organizations,  commercial vendors, and selected states to determine the  characteristics and uses of different geospatial technologies in  supporting different phases of wildland fire management. In  addition, we met with officials of other federal agencies, including  the Department of the Interior\u2019s U.S. Geological Survey, the  Department of Defense\u2019s National Imagery and Mapping Agency,  the National Aeronautics and Space Administration, the  Department of Commerce\u2019s National Oceanic and Atmospheric  Administration, and the Department of Homeland Security\u2019s  Federal Emergency Management Agency, to identify their efforts to  develop geospatial information products in support of wildland  fire management.",
      " To summarize key challenges to the effective use and sharing of  geospatial technologies, we reviewed key reports and studies on  these challenges. These include the following:  Burchfield, James A., Theron A. Miller, Lloyd Queen, Joe Frost,  Dorothy Albright, and David DelSordo. Investigation of Geospatial  Support of Incident Management. National Center for Landscape  Fire Analysis at the University of Montana. November 25, 2002. Committee on Earth Observation Satellites, Disaster Management  Support Group. The Use of Earth Observing Satellites for Hazard  Support: Assessments & Scenarios. National Oceanic and  Atmospheric Administration,",
      " n.d. Department of Agriculture (Forest Service) and Department of  Interior. Developing an Interagency, Landscape-scale Fire Planning  Analysis and Budget Tool. n.d.. Fairbanks, Frank, Elizabeth Hill, Patrick Kelly, Lyle Laverty, Keith F.  Mulrooney, Charlie Philpot, and Charles Wise. Wildfire Suppression:  Strategies for Containing Costs. Washington, D.C.: National  Academy of Public Administration, September 2002. Fairbanks, Frank, Henry Gardner, Elizabeth Hill, Keith Mulrooney,  Charles Philpot, Karl Weick, and Charles Wise. Managing Wildland  Fire:",
      " Enhancing Capacity to Implement the Federal Interagency  Policy. Washington, D.C.: National Academy of Public  Administration, December 2001. National Oceanic and Atmospheric Administration. Wildland Fire  Management: Some Information Needs and Opportunities. Working  paper, National Hazards Information Strategy, July 2002. National Wildfire Coordinating Group.  Information Resource  Management Strategy Project: Wildland Fire Business Model.   National Interagency Fire Center. August 1996. National Wildfire Coordinating Group, Information Resource  Management Working Team, Geospatial Task Group. Geospatial  Technology for Incident Support: A White Paper.",
      " April 12, 2002.\n"
    ],
    "length": 6404,
    "hardness": null,
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  },
  {
    "id": 5,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed the Air Force's program for solving its year 2000 computer systems problem, focusing on the: (1) status of the Air Force's efforts to oversee its Year 2000 program; and (2) appropriateness of the Air Force's strategy and actions for ensuring that the problem will be successfully addressed. GAO noted that: (1) as with other military services, the Air Force is taking a decentralized approach to year 2000 correction--that is, it is relying heavily on its components to identify and correct year 2000 problems affecting their own systems; (2) however, in providing oversight for this effort, the Air Force must ensure that all of its systems have been accounted for and that component actions are successful; (3) it must also be well-positioned to make the resource tradeoff decisions that are inevitable in any year 2000 effort and to address conflicts between component approaches toward identifying and correcting interfaces; (4) further, it must be able to provide additional resources, such as testing facilities, that may be necessary to correct and validate systems; (5) the Air Force has taken a number of positive actions toward fulfilling its year 2000 oversight responsibilities; (6) for example, it is taking inventory of its systems and prioritizing them for conversion or replacement, and it has issued extensive guidance on dealing with the year 2000 problem; (7) it has also established a year 2000 working group comprised of focal points from the components which aims to eliminate duplicative efforts, share resources, and track component progress; (8) at the same time, the Air Force has not yet adequately addressed several critical issues that would ensure that it is well-positioned to deal with the later, and more difficult, phases of year 2000 correction; (9) GAO's review revealed that some components are failing to plan for the testing phase of their year 2000 effort and develop contingency plans; (10) GAO also found that some components are taking conflicting approaches toward determining the actual impact or the program status of their system interfaces; (11) if components and the Air Force do not promptly address and take consistent action on these issues, they may well negate any success they may have in making systems within their control year 2000 compliant; and (12) while the Air Force has enlisted the services of the Air Force Audit Agency to help address some of these concerns, this work needs to be backed by comprehensive and continued Air Force oversight in order to ensure that it can address unforeseen problems and delays in the next, more difficult phases.\n",
    "docs": [
      "Scope and Methodology In conducting our review, we assessed the Air Force\u2019s Year 2000 efforts against our own Year 2000 Assessment Guide. This guide addresses common issues affecting most federal agencies and presents a structured approach and a checklist to aid in planning, managing, and evaluating Year 2000 programs. The guidance, which is consistent with DOD\u2019s Year 2000 Management Plan and the Air Force\u2019s own Year 2000 management approach, describes five phases\u2014supported by program and project management activities\u2014with each phase representing a major Year 2000 program activity or segment. The phases and a description of each follows. Awareness - Define the Year 2000 problem and gain executive-level support and sponsorship.",
      " Establish a Year 2000 program team and develop an overall strategy. Ensure that everyone in the organization is fully aware of the issue. Assessment - Assess the Year 2000 impact on the enterprise. Identify core business areas and processes, inventory and analyze systems supporting the core business areas, and prioritize their conversion or replacement. Develop contingency plans to handle data exchange issues, lack of data, and bad data. Identify and secure the necessary resources. Renovation - Convert, replace, or eliminate selected platforms, applications, databases, and utilities. Modify interfaces. Validation - Test, verify, and validate converted or replaced platforms, applications, databases, and utilities.",
      " Test the performance, functionality, and integration of converted or replaced platforms, applications, databases, utilities, and interfaces in an operational environment. Implementation - Implement converted or replaced platforms, applications, databases, utilities, and interfaces. Implement data exchange contingency plans, if necessary. During our review, we concentrated primarily on the Air Force\u2019s efforts to oversee its Year 2000 program during the awareness and assessment phases. We focused our review on Year 2000 work being carried out by (1) DOD\u2019s Office of the Assistant Secretary of Defense for Command, Control, Communications, and Intelligence (OASD/C3I)\u2014which is responsible for promulgating DOD guidance on Year 2000 and providing assistance to Defense components,",
      " (2) Air Force headquarters, including the Air Force Communications and Information Center (AFCIC)\u2014which is responsible for day-to-day management and supervision and for issuing Air Force Year 2000 policy and guidance, (3) Air Force Communication Agency, the designated Air Force Year 2000 program office, and (4) selected program offices managed by the Air Force Materiel Command\u2019s Aeronautical Systems Center at Wright-Patterson Air Force Base, Ohio. To assess OASD/C3I efforts in providing Year 2000 support to the Air Force, we met with the Acting Assistant Secretary of Defense for Command, Control,",
      " Communications and Intelligence, the Principal Director for Information Management, the Director for Information Technology, and other senior staff responsible for Year 2000 issues. We reviewed the office\u2019s Year 2000 guidance and other documentation on Year 2000 funding, reporting, and date format requirements. To assess Air Force headquarters efforts to manage and oversee the Year 2000 computer problem, we (1) met with the Air Force Communications and Information Center officials and Year 2000 focal points, (2) obtained and analyzed documents issued by these offices that describe organizational structure and responsibilities for carrying out the Air Force Year 2000 program, and (3)",
      " reviewed the Air Force\u2019s Year 2000 Guidance Package to assess the level of guidance, roles, and responsibilities, and target milestone dates for the Year 2000 effort. Further, we obtained and analyzed the Air Force Year 2000 inventory data to determine (1) the number of systems owned and operated by Air Force organizations and (2) the status of Air Force systems in their Year 2000 efforts, proposed strategy, and the number of systems reporting to be compliant. We reviewed pertinent Year 2000 program documentation such as Defense and Air Force guidance and management directives, working group minutes, status reports, and cost and schedule data.",
      " We performed our work primarily at the Air Force Materiel Command, Wright-Patterson Air Force Base, Ohio; Headquarters Air Force at the Pentagon, Washington, D.C.; and the Office of Assistant Secretary of Defense for Command, Control, Communications and Intelligence at Arlington, Virginia. We conducted our work from July 1996 through August 1997 in accordance with generally accepted government auditing standards. We received written comments on a draft of this report from the Chief Information Officer for the Department of the Air Force. His comments are discussed in the \u201cAgency Comments and Our Evaluation\u201d section and are reprinted in appendix II. Background Most of the Air Force\u2019s automated information systems and embedded weapon systems are vulnerable to the Year 2000 problem,",
      " which is rooted in the way dates are recorded and computed in automated information systems. For the past several decades, systems have typically used two digits to represent the year, such as \u201c97\u201d representing 1997, in order to conserve on electronic data storage and reduce operating costs. With this two-digit format, however, the Year 2000 is indistinguishable from 1900, or 2001 from 1901, etc. As a result of this ambiguity, system or application programs that use dates to perform calculations, comparisons, or sorting may generate incorrect results when working with years after 1999. Should Air Force computer systems fail on the morning of the Year 2000,",
      " Air Force operations at all levels could be affected by the incorrect processing of data, as well as corrupted databases, or even massive system failures. In turn, this could result in such problems as delays in supply shipments, faulty inventory forecasts, unreliable budget estimates, and erroneous personnel-related information. Moreover, the problem could adversely affect critical warfighting functions such as combat, communications, command and control, intelligence, surveillance, reconnaissance, and air traffic control. Like the other military services, the Air Force has adopted DOD\u2019s Year 2000 management strategy, which calls for centralized oversight with decentralized execution of Year 2000 correction. In February 1995,",
      " the Air Force designated the Air Force Communication Agency (AFCA) as the focal point for Year 2000 efforts, with responsibility for (1) coordinating Year 2000 efforts being carried out by its 9 major commands, 36 field operating agencies, and 3 direct reporting units, (2) ensuring that components completed Year 2000-related tasks on time, (3) developing Year 2000 guidance, (4) collecting and reporting progress and inventory-related data, and (5) chairing the Air Force Year 2000 working group which is comprised of representatives from components. In April 1997, the Air Force established a Year 2000 program office at AFCA.",
      " The program office is currently staffed with 24 full-time personnel and it reports to the Air Force Communications and Information Center (AFCIC). AFCIC, which was established in April 1997 due to a Headquarters Air Force reorganization, was tasked with responsibility for implementing Year 2000 policy and programmatic changes across the Service. AFCIC also reports to the Office of the Chief Information Officer and it has assigned three full-time staff members to oversee the Air Force\u2019s Year 2000 Program. Appendix I illustrates the Air Force\u2019s Year 2000 organizational structure and describes the complexity involved in carrying out Year 2000 efforts at the command level.",
      " Early in its Year 2000 effort, the Air Force introduced a five-phased management approach for addressing the Year 2000 problem, which was later adopted by DOD and the Federal Government CIO Council\u2019s Year 2000 Subcommittee. According to Air Force officials, if properly implemented, this phased approach will enable the Air Force to achieve its goal of having every mission-critical system compliant by December 1998. The five phases and their supporting program and project management activities are consistent with those identified in our Year 2000 Assessment Guide, which draws heavily on the best practices work of the CIO Council\u2019s Year 2000 Subcommittee.",
      " In addition to following the five-phase approach, our guidance addresses common issues affecting most federal agencies and provides a checklist to aid them in planning, managing, and evaluating their year 2000 programs. Also, because the Year 2000 is a massive and complex management challenge, our guidance recommends that agencies plan and manage a Year 2000 program as a single large information system development effort and promulgate and enforce good management practices on the program and project levels. To comply with DOD\u2019s current Year 2000 funding mandate, the Air Force does not plan to provide system/program managers with any additional funds to manage and fix the Year 2000 problem.",
      " Rather, system/program managers have been directed to reprioritize or reprogram previously budgeted funds (primarily operational & maintenance (O&M) funds) to fix Year 2000 problems. Current Status of Air Force Year 2000 Efforts The Air Force estimates there are 2,944 automated information systems and weapons embedded systems in its inventory and that the majority of these systems will have to be either renovated, replaced, or retired before January 1, 2000. Of the 2,944 systems, 550 (about 19 percent) are considered to be mission-critical systems, that is, they directly support wartime operations.",
      " As of September 4, 1997, the Air Force reported that all of its 2,944 systems completed the awareness phase, 33 percent were in the assessment phase, 32 percent in renovation, 17 percent in validation, 12 percent were in implementation, and 6 percent will be decommissioned by December 1999. As of September 1997, the Air Force estimated that it will cost about $405 million to successfully complete its Year 2000 program. Table 1 details the status of Air Force systems according to their mission impact. The Air Force has taken a number of positive steps to ensure that its personnel are fully aware of the impact should Air Force systems not be compliant at the turn of the century.",
      " For example, in November 1995, the Air Force established a Year 2000 working group comprised of focal points from each major command, field operating agency, and direct reporting unit. This group has focused on such matters as sharing lessons learned, eliminating duplicative efforts, sharing resources, and tracking component progress. In the same month, the Air Force released an Air Force-wide impact assessment survey to all major commands, field operating agencies, and direct reporting units for the purpose of obtaining a rough order-of-magnitude of the Year 2000 problem throughout the Air Force. The results of this survey indicated that the Air Force Year 2000 problem would be significant and that it required immediate and sustained management attention.",
      " The Air Force has also addressed a number of steps associated with the assessment phase of Year 2000 correction, including the following. Developing a comprehensive Air Force-wide system inventory, which will include information on information systems, weapons systems, and infrastructure-related devices that could be affected by the Year 2000 problem. Prioritizing systems for conversion or replacement according to their mission impact. Tasking the Air Force Software Technology Support Center at Hill Air Force Base, Utah, to evaluate in-house and vendor tools and services that could be used to identify and fix Year 2000 problems. Creating a dedicated Year 2000 database, which contains system inventory-related information as well as information on component progress.",
      " Issuing a Year 2000 Guidance Package for senior managers and Year 2000 points-of-contact, which (1) explains how to prepare individual project management plans and develop Year 2000 strategies, (2) includes milestones and exit criteria for Year 2000 tasks, (3) provides a flowchart illustrating the five-phase resolution process, and (4) provides cost estimating formulas. This package is continually updated to reflect new managerial, technical, legal and other Year 2000-related developments. Developing a checklist to assist system managers in ensuring that their systems are compliant for the Year 2000, which covers (1) the identification of systems and interfaces,",
      " (2) assessment of date usage by the systems, and (3) compliance testing, among other subjects. Directing each major command and field operating agency to appoint Year 2000 certifiers to ensure that all systems belonging to the components have completed the necessary steps to become Year 2000 compliant. The Assessment Phase Is Running Behind Schedule The Air Force originally anticipated that it would complete the assessment phase of its Year 2000 effort in May 1997. It acknowledged that approximately 66 percent of its systems did not meet this deadline and it subsequently revised the deadline to October 1997. However, as of September 4, 1997,",
      " about 33 percent of its systems had still not been assessed. With less than 26 months remaining before the Year 2000 deadline, this will add pressure on the Air Force to renovate, validate, and implement systems as quickly as possible. According to an industry expert, June 1997 is apt to be the latest point in time to start fixing systems and to have a reasonable probability of finishing before year 2000. The Air Force\u2019s Year 2000 guidance, as well as GAO and OMB\u2019s Year 2000 guidance, call for a similar completion date. In addition, according to the Gartner Group\u2014an independent contractor hired by Defense to provide Year 2000 technical support primarily in the areas of scheduling and cost estimating\u2014no more than 26 percent of an organization\u2019s total Year 2000 effort should be spent in the awareness and assessment phases.",
      " Our analysis shows that the Air Force has used nearly 46 percent of its available time to complete these two phases. While Air Force officials acknowledge that the assessment phase is taking longer than expected, they do not believe it will significantly affect their Year 2000 program because system and program managers have already begun to fix systems identified with Year 2000 problems. One reason for the delay in completing the assessment phase is that it has taken longer than anticipated to develop a complete systems inventory. Before its Year 2000 effort, the Air Force did not have a comprehensive servicewide system inventory. As such, it could not readily determine the magnitude (much less the cost to fix)",
      " of the Year 2000 problem servicewide when it began the assessment phase. While its inventory now contains 2,944 systems, the Air Force is still expanding it to include information on infrastructure-related devices, such as elevators, traffic control and security devices, telephone switching systems, and medical equipment. These devices rely on either microprocessors or microcontroller chips that may be vulnerable to Year 2000 problems. In addition, the Air Force is contending with slow and incomplete reporting by system and program managers. As a result, it has revised reporting requirements to facilitate better reporting on the part of its components. Furthermore, the Air Force must still resolve discrepancies between its inventory and recent findings by the Air Force Audit Agency.",
      " In June 1997, the Audit Agency identified over 6,000 information systems that were not included in the Air Force inventory (which contained 2,543 systems at the time this audit was conducted). These additional systems included 1,600 mission-critical systems. The Air Force is currently reconciling its database to the audit findings. The Air Force has recently enlisted the Air Force Audit Agency to help evaluate component progress in completing the assessment phase. The agency will determine whether selected components have (1) completed timely assessments, (2) addressed all system interfaces, (3) accomplished mandatory system certifications, (4) prioritized and scheduled required renovations,",
      " and (5) developed contingency plans. Key Issues Need Prompt Attention for the Air Force to Solve Its Year 2000 Problem Even though the Air Force is entering the next phases of its Year 2000 correction effort, it has yet to complete several critical assessment steps, which are designed to ensure that it is well-positioned to deal with the later, and more difficult, phases of Year 2000 correction. These include (1) recalculating its $405 million cost estimate, based on actual assessment data, so that it can make informed choices about information technology priorities, (2) ensuring that interfaces are properly accounted for, (3)",
      " ensuring that components are developing contingency plans, and (4) ensuring that components are adequately prepared for the testing phase. The Air Force Audit Agency audit should help the Air Force complete these steps; however, this work will be carried out only at selected sites and it will not provide the comprehensive and continued oversight that is needed to ensure that the Air Force can handle unforeseen problems and delays. Full Cost of Year 2000 Problem Needs to Be Determined As DOD\u2019s Year 2000 Management Plan and our Year 2000 Assessment Guide state, the primary purpose of the assessment phase is to gather and analyze the information in order to determine the size and scope of the problem.",
      " Among other things, this enables an agency to estimate the cost of its Year 2000 effort in terms of dollars and work years, and, in turn, to make informed choices about information technology priorities and whether other system development efforts should be deferred or canceled so that resources can be freed up to solve the Year 2000 problem. The Air Force, however, has not yet fully defined the scope of its Year 2000 problem or refined cost estimates, using actual assessment data, in order to gauge what resources are needed for correction. The need to take immediate action in this regard is critical, given that some organizations are already discovering that they do not have sufficient funding to correct their systems.",
      " Currently, the Air Force expects to spend about $405 million from fiscal year 1997 through 1999 to fix its Year 2000 problem. Table 2 breaks down the estimated cost by fiscal year. According to AFCIC officials, the cost estimate was calculated using the Gartner cost formula, which recommends multiplying $1.10 by the lines of code contained in the agency\u2019s automated information systems and $8.00 by the lines of code for weapon systems. The Gartner method is helpful in developing a rough estimate of what it will cost to resolve the problem early in the Year 2000 effort. However, according to a directive from Defense\u2019s Chief Information Officer as well as Year 2000 consultants,",
      " agencies should refine their cost estimates as they progress through the assessment phase and into the later Year 2000 phases to factor in the actual resources they believe are needed to renovate and implement their systems. According to DOD\u2019s Year 2000 Management Plan, these can include: The age of the systems being corrected. Age can have a significant impact on the cost of correction since older code tends to be less structured and thus harder to understand and correct than newer code. The Year 2000 strategy that the program is pursuing. Strategies that involve keeping the two-digit code, for example, are much less expensive than those that involve changing the two-digit code to a four-digit code.",
      " The degree of documentation that is available on the system and its understandability and the availability of source code. The skill and expertise of in-house programmers. Projected engineering costs. Labor hours required to fix systems. Testing requirements. The September estimate still used the Gartner formula and did not take into account other factors that can have a significant impact on the cost of correction including those identified in DOD\u2019s Year 2000 Management Plan. Air Force officials acknowledged that the $405 million estimate is a rough figure. They planned to re-estimate costs at some point after the assessment phase is completed. Costs should be continuously reestimated through the assessment and subsequent Year 2000 phases.",
      " By waiting to refine its cost estimates, the Air Force will be delaying the availability of information needed to make informed resource trade-off decisions. In fact, trade-off issues and other funding disputes, which call for the need to develop more accurate cost estimates, have already surfaced in some Air Force programs. For example, one aircraft weapon system program found that correcting the Year 2000 problem in ground software equipment that is used to program the aircraft\u2019s operational avionics software for navigation and weapons delivery would cost $42 million more than what was budgeted for routine maintenance of the aircraft. In August 1997, the program office reported that it fixed the problem for about $300,",
      "000 using a temporary workaround. However, according to a program office official, because the existing equipment consists of old IBM mainframes and outdated Jovial code it will have to be replaced eventually\u2014and likely at a higher cost\u2014in order to support future planned aircraft enhancements such as Joint Direct Attack Munition and Joint Standoff Weapon. In addition, the Air Force estimates that it will cost between $70 million and $90 million to fix telephone switches throughout the Service. This estimate is not included in the $405 million total Air Force Year 2000 cost estimate. The Air Force is currently in a dispute with the contractor that supplied the switches over who is responsible for Year 2000 correction.",
      " At the same time, Air Force components have not budgeted funds to fix their telephone switches. Since then, and according to AFCIC officials, the Air Force has begun to address this funding issue through its normal corporate funding process. System Interfaces Need More Attention It is critically important during the Year 2000 effort that agencies protect against the potential for introducing and propagating errors from one organization to another and ensure that interfacing systems have the ability to exchange data through the transition period. According to our Year 2000 Assessment Guide, to address the issue of interfaces, agencies should (1) identify their internal and external interfaces, (2) determine the need for data bridges and filters,",
      " (3) notify outside data exchange partners of their interface plans, (4) test their interface correction strategies, and (5) develop contingency plans that address the possibility of failing to receive data from an external source or receiving invalid data. DOD\u2019s Year 2000 Management Plan places responsibility on component heads or their designated Year 2000 points of contact to document and obtain system interface agreements in the form of memorandums of agreement or the equivalent. Since October 1996, the Air Force has participated in six high-level DOD Year 2000 interface workshops, including finance, intelligence, command and control, communications, logistics, and weapons systems.",
      " However, to date, the Air Force has not been tracking (1) how its components are going about identifying their interfaces, (2) how they plan to correct interfaces, and (3) whether they are instituting memorandums of agreement in order to communicate their interface plans to their data exchange partners. It is important for the Air Force to immediately begin tracking these issues since individual components are embarking on varying\u2014and possibly conflicting\u2014approaches to addressing interfaces. Moreover, others have not yet addressed the interface issue. For example, none of the five weapon system program offices we surveyed had fully determined the actual impact or program status of their system interfaces.",
      " One program office told us that it did not plan to do so until the Air Force prescribed a uniform approach to interfaces. In addition, we found other weapon system program approaches to identifying their interfaces to be considerably different. For example, the F-22 weapon systems program formally requested its development contractor, in writing, to assess the impact of the Year 2000 problem on the aircraft. This assessment would include identification of interfaces and an evaluation on whether they pose a Year 2000 problem. By contrast, the F-16 program office planned to informally contact its subcontractors to identify the status of interfaces and Year 2000 issues for on-board components of the aircraft that the program office does not directly manage.",
      " For components that the program office directly manages, it plans to informally request that its contractor assess Year 2000 problems and identify the status of interfaces. However, that assessment will not be documented as the F-22 program office\u2019s assessment will be. Clearly, the second approach will provide the Air Force with less assurance that all interfaces have been accounted for than the first approach. Without centralized oversight over the identification and correction of interfaces, there is a chance that some systems and interfaces, for which ownership is unclear, may not be identified and corrected. In addition, there is also a higher risk that conflicting interface solutions will be implemented without the data bridges that are necessary to ensure that information can still be transferred.",
      " For example, one system manager may choose to fix a system by expanding its date and year, while another may choose to keep the two-digit format and use procedural code or sliding windows as a strategy for becoming Year 2000 compliant. According to current Defense guidance, either fix is acceptable, but both parties need to know of the potential conflict so that they can install the data bridge. AFCIC plans to recommend that responsible system/program managers prepare interface memorandums of agreement, which describe the method of interface and assign responsibility for accommodating the exchange of data. If implemented, these agreements could ensure that information can be transferred even when components take conflicting approaches to their interfaces.",
      " At the time of our review, however, none of the five program offices we visited had prepared such agreements, and the Air Force was not tracking whether these or comparable agreements were being instituted. Air Force Is Not Ensuring Components Are Planning for Testing Our Year 2000 Assessment Guide calls on agencies to develop validation strategies and test plan, and to ensure that resources, such as facilities and tools, are available to perform adequate testing. This planning should begin in the assessment phase since agencies may need over a year to adequately validate and test converted or replaced systems for Year 2000 compliance and since the testing and validation process may consume over half of the Year 2000 program resources and budget.",
      " At the time of our review, however, the Air Force was not ensuring that components were developing test plans. It was also not assessing the need for additional testing resources, even though it acknowledged that these resources would be in demand. Instead, AFCIC officials told us that they are relying heavily on system/program managers to organize, plan, and manage the necessary resources to test Year 2000 fixes. Our review showed that more attention is needed in this area. For example, none of the five program offices we surveyed had completed a master Year 2000 test plan. Due to the complexities and risks involved with testing, components that are not currently planning their testing strategies run a high risk of not completing the Year 2000 effort on time.",
      " This is because components must not only test the year 2000 compliance of individual applications, but also the complex interactions between scores of converted or replaced computer platforms, operating systems, utilities, applications, databases, and interfaces. Moreover, in some instances, components may not be able to shut down their production systems for testing and thus have to operate parallel systems implemented on a year 2000 test facility. Components may also find that they need computer-aided software testing tools and test scripts to help prepare and manage test data, automate comparisons of test results, and schedule tests. AFCIC officials themselves believe that there is a good chance that adequate test facilities may not be available to conduct joint interoperability testing involving systems that interface with one another.",
      " For these reasons, it is critical that Air Force headquarters ensure that components are taking time now to assess their testing needs and that the Air Force is well-positioned to provide components with additional testing facilities and tools. In August 1997, the Air Force working group began to address this testing issue in part by directing its components to identify and develop an inventory of existing testing facilities that could support Year 2000 testing of selective platforms such as Unisys and IBM. This effort is ongoing. Required Contingency Plans Not Being Prepared DOD\u2019s Year 2000 Management Plan and our Year 2000 Assessment Guide call on agencies to develop realistic contingency plans during the assessment phase for critical systems and activities to ensure the continuity of their core business processes.",
      " Contingency plans are important because they identify the manual or other fallback procedures to be employed should some critical systems miss their Year 2000 deadline or fail unexpectedly even after they are found to be compliant. Contingency plans also establish a series of checkpoints that allow the agency to identify performance problems early enough to correct them. The Air Force itself has acknowledged that components need to develop contingency plans and it has directed system/program managers to prepare, at a minimum, contingency plans for all mission-critical systems. It has also incorporated this requirement into its assessment phase exit criteria. However, the Air Force has not been tracking the extent to which components have prepared plans for mission-critical functions/systems.",
      " Without greater oversight over the preparation of such plans, some components may fail to adequately plan for contingencies without the Air Force\u2019s knowledge. In fact, at the time of our review, none of the five system program offices we surveyed had prepared contingency plans. Officials from these offices told us that contingency plans are not needed because they believed that their systems did not require extensive Year 2000 work and thus their corrections would be made before the Year 2000 deadline expired. In addition, they did not believe that contingency planning was cost-effective. All Air Force organizations need to be engaged in contingency planning since there is no guarantee that the corrections they will make will be completed on time or be free of unforeseen problems.",
      " As such, according to DOD\u2019s Year 2000 Management Plan, components, at a minimum, need to (1) analyze the impact of a system failure, (2) identify alternative activities\u2014including manual or contract procedures\u2014to be employed should critical systems fail to meet their Year 2000 deadline, and (3) identify procedures and responsibilities for implementing such alternatives. Furthermore, given the dangers associated with not having contingency plans, we believe the Air Force headquarters\u2019 oversight responsibility must involve ensuring that all components are planning for contingencies for mission-critical systems. Conclusions To its credit, the Air Force has recognized that virtually every computer system it operates is vulnerable to the Year 2000 problem,",
      " it has raised the awareness of the Year 2000 problem among system owners, and it has begun assessing the Year 2000 impact on Air Force systems. However, the Air Force is unnecessarily putting its Year 2000 program at risk of failure because it has not yet refined cost estimates based on actual assessment data, fully examined resource trade-offs, and ensured strong and continuous oversight for interface, testing, and contingency planning issues. Because these steps are designed to ensure that organizations are well-positioned to deal with the more difficult stages of Year 2000 correction, neglecting any one of them can seriously endanger the Air Force\u2019s ability to meet its Year 2000 deadline.",
      " Given its role in national security, and its interdependence with other military organizations, the Air Force cannot afford this risk. Recommendations We recommend that the Secretary of the Air Force immediately require that the Air Force ensure its cost estimates factor in the actual resources it believes are needed to renovate and implement systems so that the Service can make informed resource trade-off decisions and ensure that this estimate is periodically refined throughout the Year 2000 program. We also recommend that the Secretary ensure that an approach is developed to continuously track how components are going about identifying interfaces, how they plan to correct interfaces, and whether they are instituting memorandums of agreement. In addition,",
      " we recommend that the Secretary ensure that components are developing test plans and identifying the need for additional testing resources and design an approach to obtain any needed testing resources that are identified by Air Force components. Finally, we recommend that the Secretary act to ensure that components have prepared contingency plans for their mission-critical systems. Agency Comments and Our Evaluation In written comments on a draft of this report, the Office of the Air Force Chief Information Officer agreed with all of our recommendations to improve the Air Force\u2019s Year 2000 program. In response to our recommendations, the Air Force agreed to update its cost estimates as it progresses through the remaining Year 2000 phases and include actual resources needed to renovate and implement systems so that it can make informed resource trade-off decisions.",
      " The Air Force also agreed to place greater management attention on identifying system interfaces and improve reporting practices to ensure that interface corrections are properly accounted for and can be readily tracked. In addition, the Air Force agreed to have major commands and product centers outline and prioritize their test requirements to ensure that testing resources will be available when needed. The Air Force pointed out that it is working with components to develop Year 2000 contingency plans as part of the renovation and validation phases. In addition, the Air Force plans to open servicewide crisis response centers around August or September 1999 to deal with critical systems that will not be Year 2000 compliant by January 1,",
      " 2000. The Air Force is taking steps to ensure that contingency plans will be prepared on each noncompliant system identified and be made readily available to the crisis response centers. The full text of Air Force\u2019s comments is provided in appendix II. This report contains recommendations to you. The head of a federal agency is required by 31 U.S.C. 720 to submit a written statement on actions taken on these recommendations to the Senate Committee on Governmental Affairs and the House Committee on Government Reform and Oversight not later than 60 days after the date of this report. A written statement also must be sent to the House and Senate Committees on Appropriations with the agency\u2019s first request for appropriations made more than 60 days after the date of this report.",
      " We appreciate the courtesy and cooperation extended to our audit team by Air Force officials and staff. We are providing copies of this letter to the Chairman and Ranking Minority Members of the Senate Committee on Governmental Affairs; the Subcommittee on Oversight of Government Management, Restructuring and the District of Columbia, Senate Committee on Governmental Affairs; the Subcommittee on Defense, Senate Committee on Appropriations; the Senate Committee on Armed Services; the Subcommittee on Government Management, Information, and Technology, House Committee on Government Reform and Oversight; the Subcommittee on National Security, House Committee on Appropriations; and the House Committee on National Security. We are also sending copies to the Honorable Thomas M.",
      " Davis, III, House of Representatives; the Deputy Secretary of Defense; the Acting Assistant Secretary of Defense for Command, Control, Communications and Intelligence; the Air Force Chief Information Officer, Department of Defense; and the Office of Management and Budget; and other interested parties. Copies will be made available to others on request. If you have any questions on matters discussed in this letter, please call me at (202) 512-6240 or John B. Stephenson, Assistant Director at (202) 512-6225. Major contributors to this report are listed in appendix III. Air Force Year 2000 Organizational Structure As figure I.",
      "1 below indicates, the size and complexity of the Air Force\u2019s organization structure will pose a significant management challenge. Year 2000 management and oversight efforts will have to be coordinated among 9 major commands, each with complex and diverse organizational structures of their own, 3 direct reporting units, and 36 field operating agencies. Figure I.2 provides an example of just one command\u2019s organizational structure. To understand the complexity involved in carrying out Year 2000 efforts at the command level, consider the following: the Air Force Materiel Command employs about 112,000 personnel; the command manages about 1,700 computer applications and embedded systems;",
      " 175 of these systems cover 21 various types of aircraft, including the F-22 and F-16 fighters, the B-1 and the B-2 bombers, and C-17 cargo plans; 410 of these systems are business applications; 266 of these systems are applications covering command, control, communications and intelligence activities; 915 of these systems are base-level owned and operated applications, such as local area networks and medical systems; and the Air Force Materiel Command alone has about 50 Year 2000 points-of-contact. Air Force Chief of Staff 11th Wing, Bolling AFB,  Washington,",
      " D.C. Figure I.2: The Air Force Materiel Command Organizational Structure Air Force Office of  Scientific Research,  Bolling AFB,  Washington, D.C. Comments From the Department of the  Air Force Major Contributors to This Report Accounting and Information Management Division, Washington, D.C. Chicago/Dayton Field Office Robert P. Kissel, Jr., Senior Evaluator Steven M. Hunter, Senior Evaluator Robert G. Preston, Senior Evaluator The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents,",
      " when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC  20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (202) 512-6061, or TDD (202) 512-2537.",
      " Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
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    "id": 6,
    "question": null,
    "answer": "This report provides an overview of the child tax credit under current law, including temporary changes made by the 2017 tax revision (P.L. 115-97). When calculating the total amount of federal income taxes owed, eligible taxpayers can reduce their federal income tax liability by the amount of the child tax credit. Currently, eligible families that claim the child tax credit can subtract up to $2,000 per qualifying child from their federal income tax liability. The maximum amount of credit a family can receive is equal to the number of qualifying children in a family multiplied by $2,000. If a family's tax liability is less than the value of their child tax credit, they may be eligible for a refundable credit calculated using the earned income formula. Under this formula, a family is eligible for a refund equal to 15% of their earnings in excess of $2,500, up to the maximum amount of the refundable portion of the credit. The maximum amount of the refundable portion of the credit is $1,400 per qualifying child. The credit phases out for single parents with income over $200,000 and married couples with income over $400,000. Many of these parameters are scheduled to expire at the end of 2025 under P.L. 115-97. The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 (P.L. 105-34) to help ease the financial burden that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for dollar of the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only reduce a taxpayer's income tax liability to zero, while a refundable tax credit can exceed a taxpayer's income tax liability, providing a cash payment to low-income taxpayers who owe little or no income tax.  Since it was first enacted, the child tax credit has undergone significant changes. Most recently at the end of 2017, Congress expanded the credit, especially for middle- and upper-income taxpayers, by doubling the credit amount and more than tripling the income level at which the credit begins to phase out. Additional, although comparatively more modest, changes were made to the refundable portion of the credit as well, including increasing the refundable credit amount from $1,000 to $1,400 per child and lowering the refundability threshold from $3,000 to $2,500. These changes are scheduled to be in effect from 2018 through the end of 2025.  Estimates from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment from approximately $22 billion to $54 billion. These estimates do not include the impact of recent legislative changes made by P.L. 115-97, which will, all else being equal, expand the total cost of this tax benefit.  The Tax Policy Center (TPC) estimated the distribution of the child tax credit by income level for 2018 under current law (including the changes made by P.L. 115-97) and found that the majority of child tax credit dollars will go to taxpayers with more than $75,000 of income, with nearly one-third of the benefit going to taxpayers with income between $100,000 and $200,000. In comparison, a relatively small share will go to very-low-income or very-high-income taxpayers. TPC also estimated that the vast majority of taxpayers with children will receive the child tax credit. About half of the lowest-income taxpayers will receive the credit and no taxpayers with children and income over $1 million will receive the credit. Finally, TPC estimated that taxpayers with income between $100,000 and $200,000 will on average receive the largest credit of over $3,000. Taxpayers with children and income under $20,000 will receive on average a credit of less than $1,000, while the wealthiest taxpayers with children will receive on average a credit of $10.\n",
    "docs": [
      "Introduction The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) to help ease the financial burden that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for dollar of the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only reduce a taxpayer's income tax liability to zero, while a refundable tax credit can exceed a taxpayer's income tax liability, providing a cash payment primarily to low-income taxpayers who owe little or no income tax.",
      " Over the past 20 years, legislative changes have significantly changed the credit, transforming it from a generally nonrefundable credit available only to the middle and upper-middle class, to a refundable credit that more low-income families are eligible to claim.  This report provides an overview of the credit under current law and also provides some summary data on these benefits. For a complete legislative history of the credit, see CRS Report R45124, The Child Tax Credit: Legislative History, by [author name scrubbed].  Current Law The child tax credit allows taxpayers to reduce their federal income tax liability (the income taxes owed before tax credits are applied)",
      " by up to $2,000 per qualifying child. If the value of the credit exceeds the amount of tax a family owes, the family may be eligible to receive a full or partial refund of the difference. The refundable portion of the credit is sometimes referred to as the additional child tax credit or ACTC. The total amount of their refund is calculated as 15% (the refundability rate) of earnings that exceed $2,500 (the refundability threshold), up to the maximum amount of the refundable portion of the credit ($1,400 per child).  The credit phases out for higher-income taxpayers. The child tax credit can offset a taxpayer's Alternative Minimum Tax (AMT)",
      " liability. Currently, the maximum credit per child, refundability threshold, and phaseout thresholds are not indexed for inflation. From 2018 to 2025, the maximum amount of the ACTC is indexed for inflation. Table 1 provides an overview of key provisions of the child tax credit under current law and how they will change, as scheduled under P.L. 115-97.  Detailed Overview of Current Credit Each of the key parameters of the child tax credit as in effect from 2018-2025 is described in more detail below. The legislative changes made to the child tax credit by P.L. 115-97 have significantly expanded the child tax credit,",
      " especially for upper-income taxpayers, as illustrated in Figure 1.  Maximum Credit per Child Eligible families can claim a child tax credit and reduce their federal income tax liability by up to $2,000 per qualifying child. The maximum credit a family can receive is equal to the number of qualifying children a taxpayer has, multiplied by $2,000. For example, a family with two qualifying children may be eligible for a $4,000 credit. Families may receive the child tax credit as a reduction in tax liability (the nonrefundable portion of the credit), a refundable credit (the amount of the credit in excess of tax liability), or a combination of both.",
      " The refundable portion of the credit\u2014the ACTC\u2014is discussed in the subsequent section. Beginning in 2026, the maximum amount of the credit is scheduled to revert to $1,000 per qualifying child.  Maximum Additional Child Tax Credit (ACTC) per Child, the Refundability Threshold and Refundability Rate For taxpayers with little or no federal income tax liability, they will be eligible for little if any of the nonrefundable portion of the child tax credit. Instead, they may be eligible to receive the child tax credit as a refundable credit. The refundable portion of the child tax credit is often referred to as the additional child tax credit or ACTC.",
      " The amount of the refundable child tax credit is generally calculated using the \"earned income formula\" up to the maximum ACTC amount of $1,400 per qualifying child. Under the earned income formula, a taxpayer may claim an ACTC equal to 15% of the family's earned income in excess of $2,500, up to the maximum ACTC amount (i.e., up to $1,400 multiplied by the number of qualifying children). The $2,500 amount is referred to as the refundability threshold; the 15% is referred to as the refundability rate. If a taxpayer's earnings are below the refundability threshold,",
      " they are ineligible for the ACTC. For every dollar of earnings above this amount, the value of the taxpayer's ACTC increases by 15 cents, up to the maximum amount of the credit ($1,400 per qualifying child). For purposes of calculating the ACTC, earned income is defined as wages, tips, and other compensation included in gross income. It also includes net self-employment income (self-employment income after deduction of one-half of Social Security payroll taxes paid by a self-employed individual). Beginning in 2026, the refundability threshold is scheduled to increase to $3,000 and the maximum ACTC per child (the amount that exceeds income tax liability)",
      " is scheduled to decrease to $1,000 per child.  The Phaseout Threshold and Phaseout Rate The child tax credit phases out for higher-income families. The $2,000-per-child value of the credit falls by a certain amount as a family's income rises. Specifically, for every $1,000 of modified adjusted gross income (MAGI) above a threshold amount, the credit falls by $50\u2014or effectively by 5% of MAGI above the threshold. The threshold amount depends on a taxpayer's filing status, and equals $200,000 for single parents and married taxpayers filing separate returns, and $400,000 for married taxpayers filing joint returns.",
      " The actual income level at which the credit is entirely phased out (i.e., equals zero) depends on the number of qualifying children a taxpayer has. Generally, it takes $40,000 of MAGI above the phaseout threshold to completely phase out $2,000 of credit. For example, the credit will completely phase out for a married couple with two children if their MAGI exceeds $480,000 (see Figure 1 ). Definition of a Qualifying Child In order to claim the child tax credit, a taxpayer's child must be considered \"a qualifying child\" and meet several requirements which may differ from eligibility requirements for other child-related tax benefits:",
      " 1. The child must be under 17 years of age during the entire year for which the taxpayer claims the credit (for example, if the child was 16.5 years on December 31, 2017, the taxpayer could claim the credit on their 2017 federal income tax return). 2. The child must be eligible to be claimed as a dependent on the taxpayer's return. 3. The child must be the taxpayer's son, daughter, grandson, granddaughter, stepson, stepdaughter, niece, nephew, or an eligible foster child of the taxpayer. 4. The child must live at the same principal residence as the taxpayer for more than half the year for which the taxpayer wishes to claim the credit.",
      " 5. The child cannot provide more than half of their own support during the tax year. 6. The child must be a U.S. citizen or national. If they are not a U.S. citizen or national, they must be a resident of the United States.  The age and citizenship requirements for a qualifying child for the child tax credit differ from the definition of qualifying child used for other tax benefits and can cause confusion among taxpayers. For example, a taxpayer's 18-year-old child may meet all the requirements for a qualifying child for the EITC, but will be too old to be eligible for the child tax credit.",
      " ID Requirements to Claim the Child Tax Credit The statute requires that taxpayers who intend to claim the child tax credit provide a valid taxpayer identification number (TIN) for each qualifying child on their federal income tax return. Under a temporary change in effect from 2018 through the end of 2025, the child's TIN must be a work-authorized Social Security number (SSN). The SSN must be issued before the due date of the tax return. Failure to provide the child's SSN may result in the taxpayer being denied the credit (both the nonrefundable and refundable portions of the credit). Absent any legislative changes,",
      " beginning in 2026, a valid TIN for qualifying children will include individual taxpayer identification numbers (ITINs) and Social Security numbers (SSNs). ITINs are issued by the Internal Revenue Service (IRS) to noncitizens who do not have and are not eligible to receive SSNs. ITINs are supplied solely so that noncitizens are able to comply with federal tax law, and do not affect immigration status. In addition, in order to claim the child tax credit in a given tax year, the taxpayer must also provide their own taxpayer identification number that must be issued before the due date of the tax return.",
      " This is a permanent ID requirement that is not scheduled to expire. Disallowance of the Credit Due to Fraud or Reckless Disregard of the Rules A tax filer is barred from claiming the child tax credit for a period of 10 years after the IRS makes a final determination to reduce or disallow a tax filer's child tax credit because that individual made a fraudulent child tax credit claim. A tax filer is barred from claiming the child tax credit for a period of two years after the IRS determines that the individual made a child tax credit claim \"due to reckless and intentional disregard of [the] rules\" of the child tax credit,",
      " but that disregard was not found to be due to fraud.  Data on the Child Tax Credit Estimates from the Internal Revenue Service (IRS) and Tax Policy Center highlight several key aspects of the child tax credit: The total dollar amount of the child tax credit has grown over time: Data from the IRS indicate that the total dollar amount of the child tax credit has increased significantly since enactment. These estimates do not include the impact of recent legislative changes made by P.L. 115-97, which, all else being equal, will expand the total cost of this tax benefit. In 2018, the majority of the tax benefit will go to taxpayers with income between $75,",
      "000 and $500,000 : The Tax Policy Center (TPC) estimates that the majority of child tax credit dollars in 2018 will go to taxpayers with more than $75,000 of income, with nearly one-third of the benefit going to taxpayers with income between $100,000 and $200,000. In comparison, a relatively small share will go to very-low-income or very-high-income taxpayers. In 2018, over 90% of taxpayers with children and income between $30,000 and $500,000 will receive the child tax credit. The Tax Policy Center (TPC) estimates that across most income groups,",
      " the vast majority of taxpayers with children will receive the child tax credit in 2018. About half of the lowest-income taxpayers will receive the credit and no taxpayers with children and income over $1 million will receive the credit. In 2018, taxpayers with income between $100,000 and $200,000 will on average receive the largest credit. The Tax Policy Center (TPC) estimates that taxpayers with children and income between $100,000 and $200,000 will on average receive a credit of over $3,000 in 2018. Taxpayers with children with income under $20,000 will receive on average a credit of less than $1,",
      "000, while the wealthiest taxpayers with children will receive on average a credit of $10. Total Child Tax Credit Dollars, 1998-2015  IRS estimates of the amount of total child tax credit dollars (inflation adjusted to 2015 dollars) received by taxpayers indicate that this tax benefit has more than doubled in size since enactment, from aggregate receipt of $22 billion in 1998 to approximately $54 billion in 2015, as illustrated in Figure 2.  A significant component in the growth of the child tax credit has been the growth in the refundable portion of the credit, which now comprises approximately half of child tax credit dollars received by taxpayers.",
      " (For an overview of the legislative changes that have influenced the expansion of both the refundable and nonrefundable portions of the credit, see CRS Report R45124, The Child Tax Credit: Legislative History, by [author name scrubbed].) The most recent IRS data available are for the 2015 tax year (i.e., 2015 income tax returns filed in 2016), and hence do not include the impact of the legislative changes made to the credit by P.L. 115-97. As previously discussed, these legislative changes are currently scheduled to be in effect from 2018 through the end of 2025.",
      " The Joint Committee on Taxation has estimated that the modification to the child tax credit formula will cost an estimated $573.4 billion between 2018 and 2026, or on average $64 billion a year. (These estimates include the budgetary cost of the $500 nonrefundable credit for non-child tax-credit-eligible dependents.) JCT also estimates that the new SSN requirement will save $29.8 billion between 2018 and 2026, or on average $3 billion per year.  Total Child Tax Credit Dollars by Income Level The Tax Policy Center (TPC) estimated the distribution of aggregate child tax credit by income level for 2018 under current law (i.e., including the changes made by P.L.",
      " 115-97 ). These estimates include the $500 credit for non-child tax-credit-eligible dependents. TPC estimates that nearly one-third of all child tax credit dollars (31%) will go to taxpayers with income between $100,000 and $200,000, as illustrated in Figure 3.  Slightly more than one-quarter of all child tax credit dollars (26.5%) will go to taxpayers with income under $50,000. Lower-income taxpayers will generally receive a credit of $1,400 or less per child, depending on their earnings. In contrast, higher-income taxpayers with sufficient income tax liability will receive a credit of $2,",
      "000 per child. For example, a single parent with two children and $15,000 of income will be eligible for a $1,875 credit (received entirely as the refundable child credit or ACTC), less than the maximum ACTC for two children of $2,800 (2x $1,400) and less than the maximum credit for two children of $4,000 (2 x $2,000). The highest-income taxpayers will not receive a credit due to the credit phaseout. Share of Taxpayers with Children Receiving the Child Tax Credit TPC estimated the share of all taxpayers and taxpayers with children that would receive the child tax credit in 2018.",
      " The estimates indicate that among taxpayers with children, almost all taxpayers will receive the child tax credit. More than 90% of taxpayers with children and income between $40,000 and $500,000 will receive the child tax credit. In contrast, about half (51%) of taxpayers with children and income under $10,000 will receive the child tax credit in 2018, and less than one-fifth (18%) of taxpayers with income between $500,000 and $1 million will receive the credit, as illustrated in Figure 4. Fewer low-income families with children will benefit from the child tax credit since taxpayers with income under $2,",
      "500 (the refundability threshold) will not be eligible for the refundable portion of the credit. In contrast, due to the phaseout of the credit at higher income levels, virtually no taxpayers with income over $1 million will be eligible to claim it. Average Child Tax Credit Amount  TPC estimated the average child tax credit amount by income level for all taxpayers and taxpayers with children in 2018. Their estimates indicate that taxpayers with children and income between $100,000 and $200,000 will receive the largest credit on average\u2014an estimated $3,100. Taxpayers with income under $20,000 will receive on average a credit of less than $1,",
      "000, while the wealthiest taxpayers with children (income over $1 million) will on average receive a credit of $10. Lower-income taxpayers are eligible to receive a credit of up to $1,400 per child, although they may receive less depending on their earned income. In contrast, higher-income taxpayers, with sufficient income tax liability, will be eligible for up to a $2,000 credit per child. The highest-income taxpayers will be ineligible for the credit due to the phaseout. \n"
    ],
    "length": 3512,
    "hardness": null,
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  },
  {
    "id": 7,
    "question": null,
    "answer": "GAO discussed the Internal Revenue Service's (IRS) tax debt collection practices. GAO noted that: (1) each year, billions of dollars in taxes remain unpaid; (2) impediments to improving tax debt collection include the lack of accurate and reliable accounts receivable data and effective collection tools and programs, a backlogged receivables inventory, outdated collection processes, and antiquated computer systems; (3) some accounts receivable may be overstated, not valid, or owed by deceased or unlocatable taxpayers and defunct businesses; (4) IRS is modernizing its information and processing systems, but these actions will not be completed for several years; (5) although IRS use of private debt collectors could increase tax collections by locating and encouraging taxpayers to pay their delinquent taxes, they cannot actually collect taxes; (6) some states have successfully used private debt collectors to increase their delinquent tax collections; (7) IRS accounts receivable have been designated a high-risk area, but IRS cannot make major changes in its business operations by itself; (8) IRS needs a comprehensive strategy to guide its efforts to improve tax debt collections, starting with having accurate and reliable information; and (9) IRS could adopt private industry practices and use private debt collectors in some collection-related activities.\n",
    "docs": [
      "Tax Administration: IRS Tax Debt Collection Practices Madam Chairman and Members of the Subcommittee: We are pleased to be here today to assist the Subcommittee in its review of the Internal Revenue Service\u2019s (IRS) tax debt collection practices. Every year IRS successfully collects over a trillion dollars in taxes owed the government, yet at the same time tens of billions more remain unpaid. As Congress works to balance the federal budget, these unpaid taxes become increasingly important, as do IRS\u2019 efforts to collect them. While most taxpayers voluntarily pay their taxes on time, some are unable or unwilling to do so. It is this latter group whom IRS must deal with in its efforts to collect delinquent taxes.",
      " In doing so, IRS faces several significant challenges, including a lack of accurate and reliable information on either the makeup of its accounts receivable or the effectiveness of the collection tools it has at its disposal, as well as receivables that are often years old, out-of-date collection practices, and antiquated technology. It is these problems and challenges\u2014and their results\u2014that led us, the Office of Management and Budget (OMB), and IRS to recognize IRS\u2019 accounts receivable as a high-risk area. To address these challenges, significant changes are needed in the way IRS does business, but IRS cannot do it alone. Recently, the IRS Commissioner has compared IRS to financial service organizations such as banks,",
      " credit card companies, and investment firms. Like these organizations, IRS processes data, maintains customer accounts, responds to account questions, and collects money owed. We agree with the Commissioner\u2019s functional comparison and believe that, while there are significant differences between IRS and these private sector businesses, IRS may benefit from using private collectors as a part of its portfolio of collection programs, and it is reasonable to assume that IRS could learn from their best practices as it works to resolve long-standing problems with its debt collection activities. My testimony today, which is based on past reports and ongoing work, discusses the debt collection challenges facing IRS and the potential benefits of involving private parties in the collection of tax debts.",
      " Long-Standing Problems Continue to Undermine the Effectiveness of IRS Collection Programs A number of long-standing problems have complicated IRS\u2019 efforts to collect its accounts receivable. Of foremost concern is the lack of reliable and accurate information on the nature of the debt and the effectiveness of IRS collection tools. Better Information Needed Access to current and accurate information on tax debts is essential if IRS is to enhance the effectiveness of its collection tools and programs to optimize productivity, devise alternate collection strategies, and develop programs to help keep taxpayers from becoming delinquent in the first place. Without reliable information on the accounts they are trying to collect and the taxpayers who owe the debts,",
      " IRS agents generally do not know whether they are resolving cases in the most efficient and effective manner, and may spend time pursuing invalid or unproductive cases. Of the approximately $200 billion currently in the IRS accounts receivable inventory, IRS data shows that approximately $63 billion represents taxes that, although they have been assessed, may not be valid receivables, but rather are \u201cplace markers\u201d for compliance actions. For example, under IRS procedures, when IRS\u2019 information return matching process identifies a taxpayer who received a Form W-2 but did not file a tax return, IRS creates a return for the taxpayer. Generally, this is done using the standard deduction and single filing status,",
      " and often results in the taxpayer owing taxes. IRS then sends balance due notices to the taxpayer reflecting the amount of taxes owed as calculated by IRS\u2014to encourage the taxpayer to file a return with the correct tax amount owed. If the taxpayer does not subsequently file the return, IRS records the amount it calculated as taxes due and generates a receivable. However, when contacted by IRS collection staff, the taxpayer may demonstrate that either no tax or a lesser amount of tax is actually owed. To more efficiently account for and collect money actually owed to the government, IRS would have to be able to differentiate these IRS-calculated accounts from those where there is an acknowledged balance due.",
      " System (ERIS) and other computerized systems. However, IRS has noted in the past that there are questions regarding the accuracy of the data produced by these systems. Age and Nature of Tax Debts The age of the debts in IRS\u2019 accounts receivable inventory is also problematic. IRS\u2019 inventory of tax debt includes delinquent debts that may be up to 10 years old. This is because there is a 10-year statutory collection period, and IRS generally does not write off uncollectible delinquencies until this time period has expired. As a result, the receivables inventory includes old accounts that may be impossible to collect because the taxpayers cannot be located,",
      " or are deceased, or the corporations are defunct. Of the over $200 billion total receivables inventory as of September 30, 1995, IRS data show that about $38 billion was owed by either deceased taxpayers or defunct corporations. Out of a total of 460 accounts receivable cases that we reviewed in our audit of IRS\u2019 1995 financial statements, IRS identified 258 as currently not collectible; 198 of these cases represented defunct corporations, while the remaining 60 cases represented entities that either could not pay or could not be located. These cases represented $12 billion of the $26 billion included in accounts greater than $10 million.",
      " The age of the receivable does not reflect the additional time it took for IRS to actually assess the taxes in the first place. Enforcement tools, such as IRS\u2019 matching programs and tax examinations, may take up to 5 years from the date the tax return is due until IRS finally assesses the additional taxes. This reduces the likelihood that the outstanding amounts will be collected. The age factor significantly affects the collectibility of the debt because, as both private and public sector collectors have attested, the older the debt, the more problematic collection becomes. Because of these and other factors, IRS considers many of the accounts in the inventory to be uncollectible.",
      " Specifically, IRS has estimated that only about $46 billion of the $200 billion inventory of tax debt as of September 30, 1995, was collectible. who have taxes withheld from their wages. Taxpayers with nonwage income are required to calculate their projected income and make estimated tax payments to IRS during the year. According to IRS data, the average tax delinquency for taxpayers with primarily nonwage income was about 4 times greater than that for wage earners\u2014$15,800 versus $3,600. IRS data also show that, at the end of fiscal year 1995, about $75 billion,",
      " or 74 percent of the $101 billion in IRS\u2019 inventory of tax debts owed by individuals, was owed by taxpayers whose income was primarily nonwage. Out-of-Date Collection Processes IRS\u2019 collection process was introduced several decades ago, and although some changes have been made, the process generally is costly and inefficient. The three-stage collection process\u2014computer-generated notices and bills, telephone calls, and personal visits by collection employees\u2014generally takes longer and is more costly than collection processes in the private sector. While the private sector emphasizes the use of telephone collection calls, a significant portion of IRS\u2019 collection resources is allocated to field offices where personal visits are made by revenue officers.",
      " IRS has initiated programs and made procedural changes to speed up its collection process, but historically it has been reluctant to reallocate resources from the field to the earlier, more productive collection activities. IRS\u2019 fiscal year 1997 budget request states that, although \u201cthese  positions still comprise the lion\u2019s share of IRS\u2019 enforcement efforts, they also represent on the margin the least efficient use of IRS resources.\u201d Due to budget cuts, however, IRS is in the process of temporarily reassigning about 300 field staff to telephone collection sites to replace temporary employees who were terminated. Antiquated Computer Systems Upgrading its computer systems is another challenge facing IRS.",
      " IRS is in the midst of a massive long-term modernization effort\u2014Tax Systems Modernization (TSM)\u2014that if successful would, among other things, help IRS to better collect tax debts by providing its collectors with on-line access to information they need, when they need it. Modernized systems would also help provide the management information needed to evaluate the effectiveness of collection tools and the ability to adopt flexible and innovative collection approaches. Existing IRS computer systems do not provide ready access to needed information and, consequently, do not adequately support modern work processes. Although TSM is not expected to be completed any time in the near future, IRS has started to automate some collection activities.",
      " For example, IRS is currently developing an automated inventory delivery system that is intended to direct accounts, based on internally developed criteria, to the particular collection stage where they can be processed most efficiently and expeditiously. This system, which IRS plans to test in July 1996, is intended to move accounts through the collection process faster and cheaper than under the current system. Another effort under way involves the automation of certain field collection tasks. These tasks, like many in IRS, have for years involved the manual processing of paper, which has resulted in IRS field collection employees spending significant amounts of time on routine administrative duties. The Integrated Collection System (ICS)",
      " is a computer-based information system that is intended to automate some of the labor-intensive tasks performed by field revenue officers. While this effort is not a major technological advancement, it will be a step toward helping IRS employees be more productive by spending their time on more effective and efficient collection-related activities. Basic automation is a given in today\u2019s business environment, and if IRS is to operate like a private sector business as it says, systems that automate basic work processes are a must. According to IRS, implementing this system in two pilot districts has resulted in increased collections, faster case closings, and less time spent on each case. IRS employees using the system were also very supportive of it and enthusiastic about its benefits.",
      " The system is currently operating in six districts, and IRS plans to roll it out in three additional districts this year. According to IRS, further implementation is dependent on future funding and final measurements of productivity. Potential Benefits From Involving the Private Sector in Tax Debt Collection Many private and governmental entities are involved in debt collection. We believe that these entities offer the potential for improving IRS debt collection practices. For example, as is being tried currently, there may be a role for private debt collectors in collecting federal tax debt. Potential Benefits of Using Private Debt Collectors the use of private law firms and debt collection agencies to help collect delinquent tax debts.",
      " In May 1993, we recommended that IRS test the use of private debt collectors to support its collection efforts. IRS had looked into testing the use of private collectors as early as 1991, but had not carried through with any of its plans. IRS issued a request for proposals from prospective participants in the pilot program on March 5, 1996. The proposals were due by April 12, 1996, and the pilot is to last 1 year. Under the pilot, the private collectors are to attempt to first locate and then contact delinquent taxpayers, remind them of their tax debt, and inform them of available alternatives to resolve the outstanding obligation.",
      " An important limitation of the pilot is that the private collectors will not be able to actually collect the taxes owed; rather, the intent is for them to facilitate information exchange and contacts between IRS and the taxpayer. There is an OMB policy determination and IRS Office of Chief Counsel guidance that specify that the collection of taxes is an inherently governmental function that must be performed by government employees. Private collectors, however, can perform collection-related activities, such as locating taxpayers and attempting to secure promises to pay. In addition, the private collectors will face some of the same problems in working the pilot cases that IRS employees face. First, these are not new cases.",
      " All will have already gone through much of IRS\u2019 collection process, and in some cases, the entire process. This means, in effect, that some of the cases may have been in the accounts receivable inventory for up to 10 years, and some may involve even earlier tax years. The cases may also contain some of the other information problems we discussed previously. improve its collection programs. The private collectors will be bound by the same taxpayer rights and disclosure considerations as apply to IRS employees. Other useful information could also be obtained from the pilot. For example, IRS could learn what actions are most productive based on the type of case, type of taxpayer,",
      " and age of the account. For the information to be useful to IRS and Congress in evaluating the pilot, however, the sample of cases must be drawn and the data captured in such a way that the appropriate analyses and tests can be done. We have not analyzed IRS\u2019 methodologies for selecting its sample of cases or for evaluating the pilot. Industry Best Practices May Be Helpful to IRS IRS faces many challenges in its efforts to improve the management and collection of its accounts receivable. The key is to find solutions to the major problems we previously discussed and their underlying causes that affect IRS\u2019 ability to collect more delinquent taxes. Solutions will take time because the problems are pervasive and may involve all IRS functions and processes.",
      " Currently, IRS is making some changes to its collection process as a part of its modernization effort. We reported in the past that private collectors and states that are engaged in collection activities similar to IRS\u2019 may provide some best-practice examples for IRS to use in benchmarking its efforts. Many states use private collectors to supplement their own collection programs, thereby taking advantage of private sector capability in managing receivables, gaining access to better technology, or avoiding the expense of hiring permanent staff. Although many states\u2014including 33 of the 43 states that responded to our survey\u2014have used private collectors, their experiences have varied widely. collections from its proposed pilot,",
      " but not necessarily a significant windfall. IRS may, however, benefit and learn from the private companies\u2019 collection techniques and use of technology. Next Steps IRS faces significant challenges in collecting tax debts. As we have previously recommended, because the problems are pervasive across all IRS activities and processes, IRS needs to develop a detailed and comprehensive long-term plan to deal with the major challenges it faces and their interrelationships. With such a plan, IRS could better assure itself and Congress that it is on the right track and thereby better position itself to obtain the backing and support it needs. Key to improving IRS\u2019 collections of tax debt is the need for up-to-date and accurate information as well as modern equipment and technology.",
      " IRS also needs to determine the most cost-effective ways to prevent delinquencies from occurring, as well as what it can do in its return, payment, and compliance processes to reduce the number of invalid accounts entering the collection process. To stay competitive in today\u2019s business environment, IRS must continually strive to improve collections by testing new and innovative approaches. Madam Chairman, this concludes my prepared statement. I would be pleased to answer any questions. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents,",
      " when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (301) 258-4066, or TDD (301)",
      " 413-0006. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
    "length": 3312,
    "hardness": null,
    "role": null
  },
  {
    "id": 8,
    "question": null,
    "answer": "GAO is required to audit the consolidated financial statements of the U.S. government. Due to the significance of the federal debt held by the public to the governmentwide financial statements, GAO has also been auditing the Bureau of the Public Debt's (BPD) Schedules of Federal Debt annually. The audit of these schedules is done to determine whether, in all material respects, (1) the schedules are reliable and (2) BPD management maintained effective internal control relevant to the Schedule of Federal Debt. Further, GAO tests compliance with a significant selected provision of law related to the Schedule of Federal Debt. Federal debt managed by BPD consists of Treasury securities held by the public and by certain federal government accounts, referred to as intragovernmental debt holdings. The level of debt held by the public reflects how much of the nation's wealth has been absorbed by the federal government to finance prior federal spending in excess of federal revenues. Intragovernmental debt holdings represent balances of Treasury securities held by federal government accounts, primarily federal trust funds such as Social Security, that typically have an obligation to invest their excess annual receipts over disbursements in federal securities. In GAO's opinion, BPD's Schedules of Federal Debt for fiscal years 2007 and 2006 were fairly presented in all material respects and BPD maintained effective internal control relevant to the Schedule of Federal Debt as of September 30, 2007. GAO also found no instances of noncompliance in fiscal year 2007 with the statutory debt limit. As of September 30, 2007 and 2006, federal debt managed by BPD totaled about $8,993 billion and $8,493 billion, respectively. Total federal debt increased over each of the last 4 fiscal years. Total federal spending has exceeded total federal revenues which have resulted in increases in debt held by the public. Further, certain trust funds (e.g., Social Security) continue to run cash surpluses, resulting in increased intragovernmental debt holdings since the federal government spends these surpluses on other operating costs and replaces them with federal debt instruments. These debt holdings are backed by the full faith and credit of the U.S. government and represent a priority call on future budgetary resources. As a result, total gross federal debt has increased about 33 percent between the end of fiscal years 2003 and 2007. On September 29, 2007, legislation was enacted to raise the statutory debt limit by $850 billion to $9,815 billion. This was the third occurrence since the end of fiscal year 2003 that the statutory debt limit had to be raised to avoid breaching the statutory debt limit. During that time, the debt limit has increased by over $2.4 trillion, or about 33 percent, from $7,384 billion on September 30, 2003, to the current limit of $9,815 billion.\n",
    "docs": [
      "Opinion on Schedules  of Federal Debt The Schedules of Federal Debt including the accompanying notes present  fairly, in all material respects, in conformity with U.S. generally accepted  accounting principles, the balances as of September 30, 2007, 2006, and  2005 for Federal Debt Managed by BPD; the related Accrued Interest  Payables and Net Unamortized Premiums and Discounts; and the related  increases and decreases for the fiscal years ended September 30, 2007 and  2006. Opinion on Internal  Control BPD maintained, in all material respects, effective internal control relevant  to the Schedule of Federal Debt related to financial reporting and  compliance with applicable laws and regulations as of September 30,",
      " 2007,  that provided reasonable assurance that misstatements, losses, or  noncompliance material in relation to the Schedule of Federal Debt would  be prevented or detected on a timely basis.  Our opinion is based on criteria  established under 31 U.S.C. \u00a7 3512 (c), (d), the Federal Managers\u2019 Financial  Integrity Act, and the Office of Management and Budget (OMB) Circular A- 123, Management\u2019s Responsibility for Internal Control. We found matters involving information security controls that we do not  consider to be significant deficiencies.  We will communicate these  matters to BPD's management,",
      " along with our recommendations for  improvement, in a separate letter to be issued at a later date. Compliance with a  Selected Provision of  Law Our tests for compliance in fiscal year 2007 with the statutory debt limit  disclosed no instances of noncompliance that would be reportable under  U.S. generally accepted government auditing standards or applicable OMB  audit guidance.  However, the objective of our audit of the Schedule of  Federal Debt for the fiscal year ended September 30, 2007, was not to  provide an opinion on overall compliance with laws and regulations.   Accordingly, we do not express such an opinion.",
      " Consistency of Other  Information BPD\u2019s Overview on Federal Debt Managed by the Bureau of the Public Debt  contains information, some of which is not directly related to the  Schedules of Federal Debt.  We do not express an opinion on this  information.  However, we compared this information for consistency with  the schedules and discussed the methods of measurement and presentation  with BPD officials.  Based on this limited work, we found no material  inconsistencies with the schedules or U.S. generally accepted accounting  principles. Objectives, Scope, and  Methodology Management is responsible for (1) preparing the Schedules of Federal Debt  in conformity with U.S.",
      " generally accepted accounting principles;   (2) establishing, maintaining, and assessing internal control to provide  reasonable assurance that the broad control objectives of the Federal  Managers\u2019 Financial Integrity Act are met; and (3) complying with  applicable laws and regulations. We are responsible for obtaining reasonable assurance about whether   (1) the Schedules of Federal Debt are presented fairly, in all material  respects, in conformity with U.S. generally accepted accounting principles  and (2) management maintained effective relevant internal control as of  September 30, 2007, the objectives of which are the following:    Financial reporting:  Transactions are properly recorded,",
      " processed, and  summarized to permit the preparation of the Schedule of Federal Debt  for the fiscal year ended September 30, 2007, in conformity with U.S.  generally accepted accounting principles. Compliance with laws and regulations:  Transactions related to the  Schedule of Federal Debt for the fiscal year ended September 30, 2007,  are executed in accordance with laws governing the use of budget  authority and with other laws and regulations that could have a direct  and material effect on the Schedule of Federal Debt. We are also responsible for (1) testing compliance with selected provisions  of laws and regulations that have a direct and material effect on the  Schedule of Federal Debt and (2)",
      " performing limited procedures with  respect to certain other information appearing with the Schedules of  Federal Debt. In order to fulfill these responsibilities, we    examined, on a test basis, evidence supporting the amounts and  disclosures in the Schedules of Federal Debt;  assessed the accounting principles used and any significant estimates   evaluated the overall presentation of the Schedules of Federal Debt;  obtained an understanding of the entity and its operations, including its  internal control relevant to the Schedule of  Federal Debt as of  September 30, 2007, related to financial reporting and compliance with  laws and regulations (including execution of transactions in accordance  with budget authority);  tested relevant internal controls over financial reporting and  compliance,",
      " and evaluated the design and operating effectiveness of  internal control relevant to the Schedule of Federal Debt as of  September 30, 2007;  considered the process for evaluating and reporting on internal control  and financial management systems under the Federal Managers\u2019  Financial Integrity Act; and   tested compliance in fiscal year 2007 with the statutory debt limit (31  U.S.C. \u00a7 3101(b) (Supp IV 2005), as amended by Pub. L. No. 109-182, 120  Stat. 289 (2006), and Pub L. No. 110-91, 121 Stat.",
      " 988 (2007)). We did not evaluate all internal controls relevant to operating objectives as  broadly defined by the Federal Managers' Financial Integrity Act, such as  those controls relevant to preparing statistical reports and ensuring  efficient operations.  We limited our internal control testing to controls  over financial reporting and compliance.  Because of inherent limitations in  internal control, misstatements due to error or fraud, losses, or  noncompliance may nevertheless occur and not be detected.  We also  caution that projecting our evaluation to future periods is subject to the  risk that controls may become inadequate because of changes in conditions  or that the degree of compliance with controls may deteriorate.",
      " We did not test compliance with all laws and regulations applicable to BPD.   We limited our tests of compliance to a selected provision of law that has a  direct and material effect on the Schedule of Federal Debt for the fiscal  year ended September 30, 2007.  We caution that noncompliance may occur  and not be detected by these tests and that such testing may not be  sufficient for other purposes. We performed our work in accordance with U.S. generally accepted  government auditing standards and applicable OMB audit guidance. Agency Comments In commenting on a draft of this report, BPD concurred with the  conclusions in our report.",
      " The comments are reprinted in appendix I. Overview, Schedules, and Notes Federal debt managed by the Bureau of the Public Debt (BPD) comprises debt held by the public and debt held by certain federal  government accounts, the latter of which is referred to as intragovernmental debt holdings.  As of September 30, 2007 and 2006, outstanding gross federal debt managed by the bureau totaled $8,993 and $8,493 billion, respectively.  The increase in gross federal  debt of $500 billion during fiscal year 2007 was due to an increase in gross intragovernmental debt holdings of $294 billion and an  increase in gross debt held by the public of $206 billion.",
      "  As Figure 1 illustrates, both intragovernmental debt holdings and debt held  by the public have steadily increased since fiscal year 2003.  The primary reason for the increases in intragovernmental debt holdings  is the annual surpluses in the Federal Old-Age and Survivors Insurance Trust Fund, Civil Service Retirement and Disability Fund, Federal Hospital Insurance Trust Fund, Federal Disability Insurance Trust Fund, and Military Retirement Fund.  The increases in debt  held by the public are due primarily to total federal spending exceeding total federal revenues.  As of September 30, 2007, gross debt  held by the public totaled $5,",
      "049 billion and gross intragovernmental debt holdings totaled $3,944 billion. Total Gross Federal Debt Outstanding (in billions) Interest expense incurred during fiscal year 2007 consists of (1) interest accrued and paid on debt held by the public or credited to  accounts holding intragovernmental debt during the fiscal year, (2) interest accrued during the fiscal year, but not yet paid on debt  held by the public or credited to accounts holding intragovernmental debt, and (3) net amortization of premiums and discounts.  The  primary components of interest expense are interest paid on the debt held by the public and interest credited to federal government  trust funds and other federal government accounts that hold Treasury securities.",
      "  The interest paid on the debt held by the public affects the current spending of the federal government and represents the burden in servicing its debt (i.e., payments to outside creditors).  Interest credited to federal government trust funds and other federal government accounts, on the other hand, does not  result in an immediate outlay of the federal government because one part of the government pays the interest and another part  receives it.  However, this interest represents a claim on future budgetary resources and hence an obligation on future taxpayers.  This  interest, when reinvested by the trust funds and other federal government accounts, is included in the programs\u2019 excess funds not  currently needed in operations,",
      " which are invested in federal securities.  During fiscal year 2007, interest expense incurred totaled $433 billion, interest expense on debt held by the public was $239 billion, and $194 billion was interest incurred for  intragovernmental debt holdings.  As Figure 2 illustrates, total interest expense has increased in fiscal years 2003 through 2007. (in billions) Debt held by the public reflects how much of the nation\u2019s wealth has been absorbed by the federal government to finance  prior federal spending in excess of total federal revenues.  As of September 30, 2007 and 2006, gross debt held by the  public totaled $5,",
      "049 billion and $4,843 billion, respectively (see Figure 1), an increase of $206 billion.  The borrowings  and repayments of debt held by the public increased from fiscal year 2006 to 2007.  After Treasury took into account the  increased issuances of State and Local Government Series securities, Treasury decided to finance the remaining current  operations using more short-term securities. Callable securities mature between fiscal years 2013 and 2015, but are reported by their call date. Debt Held by the Public, cont. The government also issues to the public, state and local governments, and foreign governments and central banks  nonmarketable securities,",
      " which cannot be resold, and have maturity dates from on demand to more than 10 years.  As of  September 30, 2007, nonmarketable securities totaled $621 billion, or 12 percent of debt held by the public.  As of that date,  nonmarketable securities primarily consisted of savings securities totaling $197 billion and special securities for state and local governments totaling $297 billion. The Federal Reserve Banks (FRBs) act as fiscal agents for Treasury, as permitted by the Federal Reserve Act.  As fiscal agents  for Treasury, the FRBs play a significant role in the processing of marketable book-entry securities and paper U.S.",
      " savings  bonds.  For marketable book-entry securities, selected FRBs receive bids, issue book-entry securities to awarded bidders and  collect payment on behalf of Treasury, and make interest and redemption payments from Treasury\u2019s account to the accounts of  security holders.  For paper U.S. savings bonds, selected FRBs sell, print, and deliver savings bonds; redeem savings bonds; and handle the related transfers of cash. Callable securities mature between fiscal years 2012 and 2015, but are reported by their call date. Intragovernmental debt holdings represent balances of Treasury securities held by over 230 individual federal government  accounts with either the authority or the requirement to invest excess receipts in special U.S.",
      " Treasury securities that are  guaranteed for principal and interest by the full faith and credit of the U.S. Government.  Intragovernmental debt holdings  primarily consist of balances in the Social Security, Medicare, Military Retirement, and Civil Service Retirement and  Disability trust funds.  As of September 30, 2007, such funds accounted for $3,419 billion, or 87 percent, of the $3,944  billion intragovernmental debt holdings balances (see Figure 4).  As of September 30, 2007 and 2006, gross  intragovernmental debt holdings totaled $3,",
      "944 billion and $3,650 billion, respectively (see Figure 1), an increase of $294  The majority of intragovernmental debt holdings are Government Account Series (GAS) securities. GAS securities consist of  par value securities and market-based securities, with terms ranging from on demand out to 30 years.  Par value securities are  issued and redeemed at par (100 percent of the face value), regardless of current market conditions.  Market-based securities,  however, can be issued at a premium or discount and are redeemed at par value on the maturity date or at market value if  redeemed before the maturity date.",
      " Com ponents of Intragovernm ental Debt Holdings  as of Septem ber 30, 2007 The Social Security trust funds consist of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal  Disability Insurance Trust Fund.  In addition, the Medicare trust funds are made up of the Federal Hospital Insurance  Trust Fund and the Federal Supplementary Medical Insurance Trust Fund. On May 17, 2007, a house bill was introduced and approved to increase the debt limit from $8,965 billion to $9,815 billion. The bill was then referred to the Senate Committee on Finance on May 21,",
      " 2007, where it gained approval on September 12,  2007.  Projections determined that the United States would hit the statutory debt limit on October 1, 2007, and consequently,  the full senate passed this measure to raise the debt limit by $850 billion on September 27, 2007.  On September 29, 2007,  Public Law 110-91 was enacted, which raised the statutory debt ceiling to $9,815 billion. Thirty-Year Bond Issuance/Discontinuation of 3-Year Note The thirty-year bond was re-introduced in February 2006 with semi-",
      "annual issuance planned.  In August 2006, Treasury  announced that the 30-year bond would be issued on a quarterly basis beginning in February 2007.  The February issue was  reopened in May 2007, followed by an original issue in August 2007 that will be reopened in November 2007.  This quarterly  issuance pattern has benefited the Separate Trading of Registered Interest and Principal of Securities (STRIPS) market by  creating interest payments for February, May, August and November.  Beginning in February 2006, the auction and issuance of  the monthly 5-year note was shifted to month end to accommodate the re-introduction of the 30-year bond.",
      " Additionally, Treasury\u2019s ongoing monitoring of the fiscal year\u2019s economic outlook has resulted in the discontinuance of the 3- year note.  Discontinuance of the 3-year note will allow Treasury to ensure large liquid benchmark issuances, better balance its portfolio, and manage the fiscal outlook.  The final scheduled auction of the 3-year note was held on May 7, 2007. Discontinuance of Long-Term Securities in Legacy Treasury Direct On January 18, 2007, a final amendment to the Uniform Offering Circular (UOC) was published in the Federal Register  clarifying that the Treasury Department may announce certain marketable Treasury securities as not eligible for purchase or  holding in Legacy Treasury Direct.",
      "  Legacy Treasury Direct, which was implemented in 1986, will be phased out and replaced  by the newer, online TreasuryDirect system.  To assist with this phasing out, the offering of longer-term securities in Legacy  Treasury Direct was discontinued.  Since January 2007, 30-year bonds and 20-year TIPS are no longer available in Legacy  Treasury Direct.  This amendment also clarified that the announcement for each auction, in conjunction with the UOC,  provides the terms and conditions for the sale and issuance of marketable Treasury bills, notes, bonds, and TIPS. TreasuryDirect is an Internet-accessed system that enables investors to purchase the full range of Treasury securities and  manage their holdings in a single account.",
      "  Sensitive online transactions such as bank account changes and securities sales and transfers could become vulnerable to fraud.  In July 2007, BPD initiated certified paper requests to process these sensitive  transactions.  This third-party investor identification helps mitigate risk and assure individual investors of the security of their  Treasury Direct investments by providing additional verification and a written record of transaction requests. Significant Events in FY 2007, cont. Postal Retiree Health Benefits Fund On December 20, 2006, the President signed H.R. 6407, which enacted Public Law 109-435, the \u201cPostal Accountability and  Enhancement Act.\u201d  This Act created a new Government Account Series Trust Fund,",
      " the Postal Retiree Health Benefits Fund. This fund is administered by the Office of Personnel Management and receives transfers from the United States Postal Service  (USPS).  The initial transfer in the amount of $3 billion was received and invested in par value securities on April 6, 2007. Additional amounts of $17.1 billion and $5.4 billion were transferred and invested on June 30, 2007 and September 28, 2007,  respectively.  The fund is not expected to make payouts until 2017. Beginning with the accounting date of June 1, 2007, BPD is publishing key daily debt-related financial data on our website,",
      "  http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_daily.htm.  Similar financial information is currently published  monthly.  During the past fiscal year, BPD strengthened internet communications with customers by redesigning the  government section of the Treasurydirect.gov website.  Additional on-line resources are now available and the overall  functionality and accessibility features are greatly improved.  The Schedules of Federal Debt daily reporting was implemented  to support the Treasury strategic objective to \u201cmake accurate, timely financial information on U.S. Government programs  readily available.\u201d The enhanced financial reporting is geared toward providing our customers more timely information and is  one of BPD\u2019s strategic goals for FY 2007.",
      " Federal debt outstanding is one of the largest legally binding obligations of the federal government.  Nearly all the federal debt has been issued by the Treasury with a small portion being issued by other federal government agencies.  Treasury issues debt  securities for two principal reasons, (1) to borrow needed funds to finance the current operations of the federal government and (2) to provide an investment and accounting mechanism for certain federal government accounts\u2019 excess receipts, primarily  trust funds.  Total gross federal debt outstanding has dramatically increased over the past 25 years from $1,142 billion as of  September 30, 1982, to $8,993 billion as of September 30,",
      " 2007 (see Figure 5).  Large budget deficits emerged during the  1980\u2019s due to tax policy decisions and increased outlays for defense and domestic programs.  Through fiscal year 1997, annual  federal deficits continued to be large and debt continued to grow at a rapid pace.  As a result, total federal debt increased almost  five fold between 1982 and 1997. By fiscal year 1998, federal debt held by the public was beginning to decline.  In fiscal years 1998 through 2001, the amount of debt held by the public fell by $476 billion, from $3,",
      "815 billion to $3,339 billion.  However, higher Federal outlays and tax  policy decisions have resulted in an increase in debt held by the public from $3,339 billion in 2001 to $5,049 billion in 2007. Historical Perspective, cont. Even in those years where debt held by the public declined, total federal debt increased because of increases in  intragovernmental debt holdings.  Over the past 4 fiscal years, intragovernmental debt holdings increased by $1,085 billion,  from $2,859 billion as of September 30, 2003, to $3,",
      "944 billion as of September 30, 2007.  By law, trust funds have the  authority or are required to invest surpluses in federal securities.  As a result, the intragovernmental debt holdings balances primarily represent the cumulative surplus of funds due to the trust funds\u2019 cumulative annual excess of tax receipts, interest  credited, and other collections compared to spending. As shown in Figure 6, interest rates have fluctuated over the past 25 years.  The average interest rates reflected here represent  the original issue weighted effective yield on securities outstanding at the end of the fiscal year. Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30,",
      " 2007 and 2006  (Dollars in Millions) (Note 2) (Note 3) (Discounts) (Discounts) ($35,531) (48,568) (12,630) Accrued Interest (Note 4) (48,568) (12,630) Net Amortization (Note 4) (43,934)  (43,934) (40,165) (1,159) (48,776) Accrued Interest (Note 4) (48,776) Net Amortization (Note 4) (49,500)",
      " (49,500) ($39,441) The accompanying notes are an integral part of these schedules. Notes to the Schedules of Federal Debt Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2007 and 2006   (Dollars in Millions) Note 1. Significant Accounting Policies  The Schedules of Federal Debt Managed by the Bureau of the Public Debt (BPD) have been prepared to report  fiscal year 2007 and 2006 balances and activity relating to monies borrowed from the public and certain federal  government accounts to fund the U.S.",
      " government's operations.  Permanent, indefinite appropriations are available  for the payment of interest on the federal debt and the redemption of Treasury securities. The Constitution empowers the Congress to borrow money on the credit of the United States.  The Congress has  authorized the Secretary of the Treasury to borrow monies to operate the federal government within a statutory debt  limit.  Title 31 U.S.C. authorizes Treasury to prescribe the debt instruments and otherwise limit and restrict  the  amount and composition of the debt.  BPD, an organizational entity within the Fiscal Service of the Department of  the Treasury, is responsible for issuing Treasury securities in accordance with such authority and to account for the  resulting debt.",
      "  In addition, BPD has been given the responsibility to issue Treasury securities to trust funds for  trust fund receipts not needed for current benefits and expenses.  BPD issues and redeems Treasury securities for  the trust funds based on data provided by program agencies and other Treasury entities. The schedules were prepared in conformity with U.S. generally accepted accounting principles and from BPD's  automated accounting system, Public Debt Accounting and Reporting System.  Interest costs are recorded as  expenses when incurred, instead of when paid.  Certain Treasury securities are issued at a discount or premium. These discounts and premiums are amortized over the term of the security using an interest method for all long term  securities and the straight line method for short term securities.",
      "  The Department of the Treasury also issues  Treasury Inflation-Protected Securities (TIPS).  The principal for TIPS is adjusted daily over the life of the security  based on the Consumer Price Index for all Urban Consumers. Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2007 and 2006   (Dollars in Millions) Note 2.  Federal Debt Held by the Public  As of September 30, 2007 and 2006, Federal Debt Held by the Public consisted of the following:  Total Federal Debt Held by the Public Treasury issues marketable bills at a discount and pays the par amount of the security upon maturity.",
      "  The average  interest rate on Treasury bills represents the original issue effective yield on securities outstanding as of September  30, 2007 and 2006, respectively.  Treasury bills are issued with a term of one year or less. Treasury issues marketable notes and bonds as long-term securities that pay semi-annual interest based on the  securities' stated interest rate.  These securities are issued at either par value or at an amount that reflects a discount  or a premium.  The average interest rate on marketable notes and bonds represents the stated interest rate adjusted  by any discount or premium on securities outstanding as of September 30,",
      " 2007 and 2006.  Treasury notes are  issued with a term of 2 \u2013 10 years and Treasury bonds are issued with a term of more than 10 years. Treasury also issues TIPS that have interest and redemption payments, which are tied to the Consumer Price Index,  a widely used measure of inflation.  TIPS are issued with a term of 5 years or more.  At maturity, TIPS are  redeemed at the inflation-adjusted principal amount, or the original par value, whichever is greater.  TIPS pay a  semi-annual fixed rate of interest applied to the inflation-adjusted principal.",
      "  The TIPS Federal Debt Held by the  Public inflation-adjusted principal balance includes inflation of $50,517 million and $43,927 million as of  September 30, 2007 and 2006, respectively. Federal Debt Held by the Public includes federal debt held outside of the U. S. government by individuals,  corporations, Federal Reserve Banks (FRB), state and local governments, and foreign governments and central  banks.  The FRB owned $775 billion and $765 billion of Federal Debt Held by the Public as of September 30, 2007  and 2006, respectively.  These securities are held in the FRB System Open Market Account (SOMA)",
      " for the  purpose of conducting monetary policy. Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2007 and 2006   (Dollars in Millions) Note 2.  Federal Debt Held by the Public (continued) Treasury issues nonmarketable securities at either par value or at an amount that reflects a discount or a premium. The average interest rate on the nonmarketable securities represents the original issue weighted effective yield on  securities outstanding as of September 30, 2007 and 2006.  Nonmarketable securities are issued with a term of on  demand to more than 10 years.",
      " As of September 30, 2007 and 2006, nonmarketable securities consisted of the following:  State and Local Government Series  Government Account Series (GAS) securities are nonmarketable securities issued to federal government accounts. Federal Debt Held by the Public includes GAS securities issued to certain federal government accounts.  One  example is the GAS securities held by the Government Securities Investment Fund (G-Fund) of the federal  employees\u2019 Thrift Savings Plan.  Federal employees and retirees who have individual accounts own the GAS  securities held by the fund.  For this reason, these securities are considered part of the Federal Debt Held by the  Public rather than Intragovernmental Debt Holdings.",
      "  The GAS securities held by the G-Fund consist of overnight  investments redeemed one business day after their issue.  The net increase in amounts borrowed from the fund  during  fiscal years 2007 and 2006 are included in the respective Borrowings from the Public amounts reported on  the Schedules of Federal Debt. Fiscal years-end September 30, 2007 and 2006, occurred on a Sunday and Saturday, respectively.  As a result,  $26,591 million and $31,656 million of marketable Treasury notes matured but not repaid is included in the balance  of the total Federal Debt Held by the Public as of September 30,",
      " 2007 and 2006, respectively.  Settlement of these  debt repayments occurred on Monday, October 1, 2007, and Monday, October 2, 2006. Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2007 and 2006   (Dollars in Millions) Foreign Service Retirement and Disability Fund  National Service Life Insurance Fund  Social Security Administration (SSA); Office of Personnel Management (OPM); Department of Health and Human   Services (HHS); Department of Defense (DOD); Department of Labor (DOL); Federal Deposit Insurance  Corporation (FDIC); Department of Energy (DOE); Department of Housing and Urban Development (HUD);  Department of the Treasury (Treasury); Department of State (DOS); Department of Transportation (DOT);  Department of Veterans Affairs (VA). Intragovernmental Debt Holdings primarily consist of GAS securities.",
      "  Treasury issues GAS securities at either par  value or at an amount that reflects a discount or a premium.  The average interest rates for fiscal years 2007 and  2006 were 5.1 and 5.2 percent, respectively.  The average interest rate represents the original issue weighted  effective yield on securities outstanding as of September 30, 2007 and 2006.  GAS securities are issued with a term  of on demand to 30 years.  GAS securities include TIPS, which are reported at an inflation-adjusted principal  balance using the Consumer Price Index.  As of September 30,",
      " 2007 and 2006, the inflation-adjusted principal  balance included inflation of $28,643 million and $19,576 million, respectively. Fiscal years-ended September 30, 2007 and 2006, occurred on a Sunday and Saturday, respectively.  As a result,  $53 million and $360 million of GAS securities held by Federal Agencies matured but not repaid is included in the  balance of the Intragovernmental Debt Holdings as of September 30, 2007 and 2006, respectively.  Settlement of  these debt repayments occurred on Monday, October 1, 2007 and Monday,",
      " October 2, 2006. Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2007 and 2006   (Dollars in Millions) Note 4. Interest Expense  Interest expense on Federal Debt Managed by BPD for fiscal years 2007 and 2006 consisted of the  Federal Debt Held by the Public   Net Amortization of Premiums and Discounts  Total Interest Expense on Federal Debt Held by the Public  Net Amortization of Premiums and Discounts  (1,116) (3,269) Total Interest Expense on Intragovernmental Debt  Total Interest Expense on Federal Debt Managed by BPD  The valuation of TIPS is adjusted daily over the life of the security based on the Consumer Price Index for all  Urban Consumers.",
      " This daily adjustment is an interest expense for the Bureau of the Public Debt.  Accrued interest  on Federal Debt Held by the Public includes inflation adjustments of  $10,276 million and $14,512 million for  fiscal years 2007 and 2006, respectively.  Accrued interest on Intragovernmental Debt Holdings includes inflation  adjustments of $378 million and $607 million for fiscal years 2007 and 2006, respectively. Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2007 and 2006   (Dollars in Millions)",
      " Note 5. Fund Balance With Treasury  The Fund Balance with Treasury, a non-entity, intragovernmental account, is not included on the Schedules of  Federal Debt and is presented for informational purposes. Comments from the Bureau of the Public  Debt GAO Contact and Staff Acknowledgments GAO Contact Acknowledgments In addition to the individual named above, Dawn B. Simpson, Assistant  Director; Dean D. Carpenter; Emily M. Clancy; Dennis L. Clarke; Chau L.  Dinh; Lisa M. Galvan-Trevi\u00f1o; Vivian M. Gutierrez; Erik S. Huff;",
      " Bret R.  Kressin; Nicole M. McGuire; and Jay R. McTigue made key contributions to  this report.\n"
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  {
    "id": 9,
    "question": null,
    "answer": "The U.S.-South Korean Land Partnership Plan (LPP), signed in March 2002, was designed to consolidate U.S. installations, improve combat readiness, enhance public safety, and strengthen the U.S.-South Korean alliance by addressing some of the causes of periodic tension associated with the U.S. presence in South Korea. The Senate report on military construction appropriations for fiscal year 2003 directed GAO to review the LPP. GAO adjusted its review to also address the effect of ongoing reassessments of U.S. overseas presence upon the LPP and other infrastructure needs. In this report, GAO assessed (1) the scope of the LPP, (2) the implications on the LPP and other construction projects of proposals to change basing in South Korea, and (3) implementation challenges associated with the LPP that could affect future U.S. military construction projects in South Korea. Although broad in scope, the LPP was not designed to resolve all U.S. military infrastructure issues. Specifically, the plan was intended to resolve 49 of the 89 separate land disputes that were pending in South Korea. Of the land disputes the plan did not address, the most politically significant, complex, and expensive dispute involves the potential relocation of U.S. forces from Yongsan Army Garrison, located in the Seoul metropolitan area. As a result, the LPP, as approved, covered about 37 percent of the $5.6 billion in construction costs planned at U.S. military installations in South Korea over the next 10 years. Ongoing reassessments of U.S. overseas presence and basing requirements could diminish the need for and alter the locations of many construction projects in South Korea, both those associated with the LPP and those unrelated to it. For example, over $1 billion of ongoing and planned construction associated with improving military infrastructure at Yongsan Army Garrison and U.S. installations located north of Seoul--areas where there is uncertainty about future U.S. presence--has recently been put on hold, canceled, or redirected to an installation located south of Seoul. GAO identified some key challenges that could adversely affect the implementation of the LPP and future U.S. military construction projects throughout South Korea. First, the plan relies on various funding sources, including funding realized through land sales from property returned by the United States. The extent to which these sources of funding would be required and available for broader infrastructure changes is not yet clear. Second, a master plan would be needed to guide future military construction to reposition U.S. forces and basing in South Korea.\n",
    "docs": [
      "Background U.S. interests in South Korea involve a wide range of security, economic,  and political concerns. The United States has remained committed to  maintaining peace on the Korean Peninsula since the 1950 to 1953 Korean  War. Although most of the property that the United States once controlled  has been returned to South Korea, the United States maintains about  37,000 troops in South Korea, which are currently scattered across  41 troop installations and an additional 54 small camps and support sites. According to U.S. Forces Korea officials, many of the facilities there are  obsolete, poorly maintained, and in disrepair to the extent that the living  and working conditions in South Korea are considered to be the worst in  the Department of Defense (DOD). We observed many of these conditions  during our visits to U.S.",
      " facilities and installations in South Korea. While  improvements have been made in recent years, U.S. military personnel still  use, as shown in figure 1, some Korean War-era Quonset huts for housing. Improving overall facilities used by the United States in South Korea will  require an enormous investment. At the same time, rapid growth and  urbanization in South Korea during the last several decades have created a  greater demand for land and increased encroachments on areas used by  U.S. forces. Consequently, many of the smaller U.S. camps and training  areas that were originally located in isolated areas are now in the middle  of large urban centers,",
      " where their presence has caused friction with local  residents; urban locations also limit the ability of U.S. forces to train  effectively. Figure 2 shows the boundaries of Yongsan Army Garrison and  other U.S. installations that have become encircled by the city of Seoul. Historically, DOD reports difficulties filling its military personnel  assignments in South Korea, which are generally 1-year hardship tours in  which 90 percent of the assigned military personnel are unaccompanied  by their families. A DOD survey conducted in 2001 found that Army and  Air Force personnel considered South Korea as the least desirable  assignment and that many soldiers were avoiding service in South Korea  by various means,",
      " including retirement and declining to accept command  assignments. U.S. Forces Korea has wanted to make South Korea an  assignment of choice by improving living and working conditions,  modifying assignment policies to increase accompanied tours to  25 percent by 2010, and reducing the out-of-pocket expenses for personnel  to maintain a second household in South Korea. Korea Land  Partnership Plan To address these problems, military officials from the United States and  South Korea signed the Land Partnership Plan on March 29, 2002. The LPP,  as originally approved, was described as a cooperative U.S.-South Korean  effort to consolidate U.S.",
      " installations and training areas, improve combat  readiness, enhance public safety, and strengthen the U.S.-South Korean  alliance. The United States views the plan as a binding agreement under  the Status of Forces Agreement, not as a separate treaty. However,  U.S. Forces Korea officials told us that South Korea views the plan as a  treaty requiring approval by the South Korea National Assembly and that  approval occurred on October 30, 2002. The three components of the plan are as follows:  Installations\u2014establishes a timeline for the grant of new land, the  construction of new facilities, and the closure of installations.",
      " The plan  calls for the number of U.S. military installations to drop from 41 to 23.  To accomplish this, the military will close or partially close some sites,  while enlarging or creating other installations. Training areas\u2014returns training areas in exchange for guaranteed time on  South Korean ranges and training areas. The plan calls for the  consolidation and protection of remaining U.S. training areas. Safety easements\u2014acknowledges that South Korean citizens are at risk of  injury or death in the event of an explosion of U.S. weapons, provides a  prioritized list of required safety easements, and establishes a procedure  and timeline for enforcing the easements.",
      " The costs of the LPP must be shared between the United States and  South Korea. U.S. funding is provided from the military construction and  operations and maintenance accounts and from nonappropriated funds.  The South Korean government provides host nation funds and funding  obtained from sales of property returned to South Korea by the United  States. As a general rule, the United States funds the relocation of units  from camps that it wishes to close, and South Korea funds the relocation  of units from camps South Korea has asked to be closed. The execution of  the LPP is shown on figure 3. The target date for the completion of the LPP was December 31,",
      " 2011,  although the timetable and the scale could be adjusted by mutual  agreement. More information on the plan as originally envisioned is  included in appendix II. Infrastructure Funding U.S. military infrastructure funding in South Korea involves multiple  organizations and sources. It involves 10 organizations from the United  States (Army, Navy, Air Force, Marine Corps, Special Operations, Army  and Air Force Exchange Service, Defense Logistics Agency, Department  of Defense Dependents School, Medical Command, and Defense  Commissary Agency), as well as construction funded by South Korea.  These organizations provide funding for military construction using  five different sources of money\u2014U.S.",
      " military construction funds,  U.S. operations and maintenance funds, U.S. nonappropriated funds,  South Korea-funded construction, and South Korea combined defense  improvement program funding. Figure 4 shows the sources of funding for  $5.6 billion that, until recently, was planned for infrastructure construction  costs for U.S. installations in South Korea during the 2002 through 2011  time frame. Most of the approximately $2 billion projected cost of implementing the  plan was expected to be paid for by the government of South Korea, with  much of it financed through land sales from property returned by the  United States.",
      " Figure 5 shows all planned funding sources and amounts for  the plan. More information on funding and sequencing actions associated with the  LPP, as originally approved, is included in appendix II. A wide array of military operations-related facilities (command and  administrative offices, barracks, and maintenance facilities) and  dependent-related facilities and services (family housing units; schools;  base exchanges; morale, welfare, and recreation facilities; child care  programs; and youth services) have recently been constructed or are  in the process of being constructed in South Korea. Typically, as U.S.  installations overseas are vacated and turned over to host governments,",
      "  the status of forces agreements between the United States and host  governments address any residual value remaining, at the time of release,  of construction and improvements that were financed by the United  States. The agreement in South Korea differs from the agreements used in  some other overseas locations where the United States receives residual  value for returned property\u2014such as currently in Germany\u2014in that South  Korea is not obliged to make any compensation to the United States for  any improvements made in facilities and areas or for the buildings and  structures left there. Stationing of Troops  in South Korea May  Be Changing In recent months, political dynamics in South Korea have been changing  as DOD has been reassessing future overseas basing requirements.",
      "  According to U.S. Forces Korea officials, there have always been groups in  South Korea that have criticized the U.S. presence and have claimed that  the U.S. presence hinders reconciliation between North and South Korea.  Demonstrations against American military presence increased sharply  during last year\u2019s South Korean presidential election. South Koreans  were angered in November 2002 by a U.S. military court\u2019s acquittal of  two American soldiers charged in association with a tragic training  accident that claimed the lives of two South Korean schoolgirls in  June 2002. The South Korean government wanted the two American  soldiers who had been operating the vehicle involved in the accident  turned over to South Korean authorities;",
      " however, they were tried in a  U.S. military court. As a result, South Koreans demonstrated against  U.S. forces in Korea, carried out isolated violence directed at U.S. soldiers,  and practiced discrimination against Americans (such as businesses  refusing to serve them). Subsequently, other groups demonstrated in  support of the U.S. government. At the same time, the United States and  South Korea were working to strengthen their alliance and to address  issues involving North Korea\u2019s active nuclear weapons program and the  proliferation of its missile programs. In December 2002, the Secretary of Defense and the Defense Minister of  South Korea agreed to conduct a Future of the Alliance study to assess the  roles,",
      " missions, capabilities, force structure, and stationing of U.S. forces,  including having South Korea assume the predominant role in its defense  and increasing both South Korean and U.S. involvement in regional  security cooperation. The results of the Future of the Alliance study  are not expected until later this year. In February 2003, the Secretary  of Defense testified before the Congress that the United States was  considering the relocation of U.S. troops now based within and north of  Seoul, including those near the demilitarized zone. Consideration of such  a move would be in keeping with a broader reassessment of U.S.",
      " presence  overseas that is now underway. In April 2003, the Deputy Assistant  Secretary of Defense for Asian and Pacific Affairs and other U.S. officials  met with officials of the South Korean Ministry of National Defense to  discuss redeploying U.S. troops and relocating key military bases in South  Korea. Following these discussions, the U.S. and Korean press reported  that the United States would relocate from Yongsan Army Garrison in  Seoul to an area located south of Seoul. According to the U.S. Deputy  Assistant Secretary of Defense for Asian and Pacific Affairs, both  South Korea and the United States have decided that this is an issue that  cannot wait any longer for resolution.",
      " U.S. and South Korean officials  are expected to hold more discussions to finalize the realignment of  U.S. troops by fall 2003. Moreover, the Secretary of Defense has recently directed acceleration  on work that began during the development of the 2001 Quadrennial  Defense Review, related to the global positioning of U.S. forces and their  supporting infrastructure outside the United States. In March 2003, the  Secretary of Defense requested that the Under Secretary of Defense for  Policy and the Chairman, Joint Chiefs of Staff, develop a comprehensive  and integrated presence and basing strategy for the next 10 years.",
      " An  Integrated Global Presence and Basing Strategy will build upon multiple  DOD studies, including the Overseas Basing and Requirements Study, the  Overseas Presence Study, and the U.S. Global Posture Study. In addition,  the Integrated Global Presence and Basing Strategy will use information  from the combatant commanders to determine the appropriate location  of the infrastructure necessary to execute U.S. defense strategy. The  Integrated Global Presence and Basing Strategy is not expected to be  completed until the summer of 2003. However, we were recently told by  DOD officials that the United States will likely concentrate its forces in  South Korea in far fewer,",
      " though larger, installations than were initially  envisioned under the LPP, and that over time the forces now located  north of Seoul will be relocated south of Seoul. Land Partnership  Plan as Originally  Approved Addressed  a Portion of  Previously Existing  U.S. Military  Infrastructure Needs  in South Korea Although the Land Partnership Plan as approved was broad in scope, it  was designed to address only a portion of the U.S. military\u2019s previously  existing infrastructure needs in South Korea, and it left unresolved a  number of significant land disputes. Specifically, the LPP covered about  37 percent of the construction costs planned at U.S.",
      " military installations  in South Korea over the next 10 years, encompassing about $2 billion of  the $5.6 billion that the U.S. military and South Korea planned to spend to  improve the U.S. military infrastructure in South Korea from 2002 through  2011. It was intended to resolve 55 percent, or 49, of the 89 separate land  disputes that were pending in South Korea in January 2003, which was  considered a significant step forward. One example of a land dispute that  would be resolved under the LPP involves Camp Hialeah, located on the  southern tip of the Korean peninsula in the port city of Pusan,",
      " South  Korea\u2019s second largest city. According to press reports, South Korea  wanted this base returned because of its proximity to the port and the  impediments it posed to urban redevelopment. However, no relocation  agreement could be reached until the LPP included an agreement to begin  relocating Camp Hialeah\u2019s functions to a new site in Noksan, South Korea,  in 2008 and to close Camp Hialeah in 2011. According to press reports  attributed to an official from the South Korean Ministry of Foreign Affairs  and Trade, relocating in-city bases like Camp Hialeah would help lessen  the potential tension between U.S.",
      " forces and neighboring communities. Although the plan was considered a major step forward, it was not  designed to resolve a number of significant land disputes. As far back as  far as 1982, negotiations over some land returns have been deadlocked  and left unresolved. For example, the relocation of Yongsan Army  Garrison remained unresolved because of its projected financial cost to  South Korea. The relocation of the garrison has been and continues to be a  politically sensitive, complex, and expensive issue for U.S. Forces Korea  and the South Korean government. In 1991, the governments of the United  States and South Korea signed an agreement to relocate the garrison by  1996.",
      " In 1993, the plan was suspended, largely because of the anticipated  high cost and the lack of alternative locations for the garrison. More than  a decade later, the relocation of Yongsan is an ongoing, contentious  issue. Since the 1990s, U.S. military and South Korean officials have  held discussions on moving the military base out of the city, including  screening various suburb locations. In December 2002, the United States  and South Korea agreed on the need to find a mutually acceptable way to  relocate U.S. forces outside the city of Seoul as a result of the Future of  the Alliance Study.",
      " Ongoing Studies  Are Expected to Alter  Previously Planned  LPP Construction  Projects DOD has had many construction projects underway in South Korea, both  within and outside of the LPP. However, DOD-sponsored studies now  underway examining future overseas presence requirements are likely to  significantly change the number and locations for U.S. military bases in  South Korea. As noted, we were recently told that the United States will  likely concentrate its forces in far fewer, though larger, installations than  were envisioned under the LPP and that, over time, the forces would be  relocated south of Seoul. Therefore, a number of sites and facilities  retained under the LPP are likely to be affected.",
      " Figure 6 shows the  locations of U.S. troop installations in South Korea under the LPP, as  originally approved. Except as otherwise provided by the LPP, South Korea is not obliged to  compensate the United States for any improvements made in facilities  and areas or for the buildings and structures left behind. This could be  particularly important because of military infrastructure projects planned  or underway in areas from which the United States is considering  relocating its troops, including Seoul\u2019s Yongsan Army Garrison and  U.S. installations located north of Seoul, which, according to a U.S. Forces  Korea official, had recently represented $1.",
      "3 billion in ongoing or planned  construction projects. For example, construction projects in Yongsan  included apartment high-rises for unaccompanied soldiers, a hospital,  a sports and recreation complex, a mini-mall, and an overpass between  Yongsan\u2019s main and south posts. We discussed with U.S. Forces Korea  officials the need to reassess construction projects under way or planned  in South Korea and to delay the execution of some projects until better  decision-making information becomes available. Subsequently,  U.S. Forces Korea officials announced that they were reviewing all  projects and that over $1 billion in ongoing and planned construction had  been put on hold.",
      " Further, DOD recently submitted an amendment to  the President\u2019s fiscal year 2004 budget to the Congress to cancel about  $5 million of construction projects planned for the garrison and to redirect  $212.8 million of construction planned for the garrison and northern  installations to an installation located south of Seoul. Challenges to  Completing Land  Partnership Plan  and Other Planned  Construction  Projects throughout  South Korea During the initial phase of our review we identified funding and other  management challenges that could adversely affect the implementation  of the Land Partnership Plan. As we considered these issues in light of the  potential for even greater basing changes,",
      " we recognized that they could  also affect the associated U.S. military construction projects throughout  South Korea. First, the LPP is dependent on substantial amounts of  funding that South Korea expects to realize through land sales from  property returned by the United States, host-nation-funded construction,  and U.S. military construction funds. While U.S. Forces Korea officials  expect to build on this LPP framework for likely additional basing  changes, the details have not been finalized for the broader changes. As  U.S. Forces Korea revises its plans, competition for limited funding for  other priorities could become an issue. Second,",
      " U.S. Forces Korea does  not have a detailed road map to manage current and future facilities  requirements in South Korea. Funding Sources and  Competition for Funding  Are Challenges The LPP, as originally approved, was dependent on substantial amounts of  South Korean funding to be realized through land sales, host-nation- funded construction, and U.S. military construction funds. The extent to  which these sources of funding would be required and available for  broader infrastructure changes is not yet clear, particularly for the  relocation of Yongsan Army Garrison. While U.S. officials expect the South  Korean government to fund much of the cost of these additional basing  changes,",
      " details have not yet been finalized. The South Korean  government is also expected to remain responsible for providing funding  for the relocation of forces now based at the Yongsan Army Garrison  property, although those costs could be reduced by the fact that a residual  number of U.S. and United Nations personnel are expected to remain at  Yongsan. It should also be noted that the Yongsan Garrison property is  expected to be used for municipal purposes and is not subject to resale to  provide funding to support relocation of U.S. forces. At this point,  insufficient information is available to determine precisely how many  replacement facilities will be required for U.S.",
      " troops moving out of  Yongsan Garrison and to anticipate any difficulties that might be  encountered in obtaining the funding. However, if South Korea encounters  problems or delays in acquiring needed lands and providing replacement  facilities, future projects could be delayed. Figure 7 presents the amount  of funding, as of May 2003, that the United States and South Korean  governments expected to pay for the LPP\u2014as originally approved\u2014by  fiscal year. The funding amounts for fiscal year 2004 and beyond are  subject to revision. The LPP, as originally approved, was dependent on designating up to  50 percent of South Korea\u2019s host nation funding for construction.",
      "  Historically, the stability of host nation funding from South Korea has  been subject to some uncertainty because international economic factors  have played a part in determining the level of funding. South Korea host  nation payments are paid in both South Korean won and U.S. dollars;  consequently, a downturn in the South Korean economy or a sharp  fluctuation in the South Korean currency could affect the South Korean  government\u2019s payments. For example, during South Korea\u2019s economic  downturn in 1998, host nation payments were less than expected (the  United States received from South Korea $314.2 million of the $399 million  that had been agreed to). Designating up to 50 percent of host nation funding for the LPP would also  limit funding for readiness and other needs.",
      " Non-LPP readiness-related  infrastructure funding shortages previously identified in readiness reports  at the time of our visit to South Korea in November 2002 were estimated  to be in the hundreds of millions of dollars and represented competing  requirements for limited funding. Such needs included Air Force facilities  at Osan and Kunsan ($338.2 million), Navy facilities at Pohang and  Chinhae ($10.3 million), and Army facilities at Humphreys, Carroll, and  Tango ($25.2 million). Recently, U.S. Forces Korea officials have also  expressed the desire to increase from 10 percent to 25 percent the number  of servicemembers in South Korea who are permitted to be accompanied  by their families.",
      " While these expressions have not been finalized, such an  increase could be expected to cause a significant increase in the demand  for housing, schools, and other support services and could result in greater  competition for U.S. and Korean funding. For example, U.S. Forces Korea  officials estimated that the increased demand for housing alone would  cost $900 million in traditional military construction funding and, to  reduce costs, officials were exploring a build-to-lease program using  Korean private-sector funding and host-nation-funded construction,  where possible. In the past, funding from U.S. military construction accounts, which  represent 13 percent of funding for the LPP as originally approved,",
      " has  fluctuated. From 1990 through 1994, U.S. forces in South Korea did not  receive any military construction funds, resulting in a significant backlog  of construction projects. Managing Current  and Future Facilities  Requirements Is Also  a Challenge Implementation of the LPP was expected to involve a closely knit series  of tasks to phase out some facilities and installations while phasing in  new facilities and expanding other facilities and installations. U.S. Forces  Korea was developing an implementation plan for each installation  encompassed by the LPP and, at the time of our visit there, was developing  a detailed, overarching implementation plan capable of integrating and  controlling the multiple,",
      " sometimes simultaneous, actions needed to  relocate U.S. forces and support their missions. According to U.S. Forces  Korea officials, such a master plan is needed to accomplish training,  maintain readiness, and control future changes. During our visits to U.S. installations in South Korea, we found that, in  the absence of a completed master plan for implementation, installation  commanders had varying interpretations of what infrastructure changes  were to occur. U.S. Forces Korea officials told us that this was not  unusual, given that detailed implementation plans were still being  developed. At the same time, these officials emphasized the need for  a detailed plan to guide future projects and to help minimize the costly  changes that can occur when subsequent commanders have a different  vision of the installations\u2019 needs than their predecessors,",
      " which could  lead to new interpretations of the LPP and more changes. In light of the  potentially broader repositioning of forces in South Korea, the master plan  under development could be substantially changed; thus, a significantly  revised road map will be needed to manage future facilities requirements  and changes in South Korea. Conclusions As approved, the Land Partnership Plan represented an important step  to reduce the size of the U.S. footprint in South Korea by leveraging the  return of facilities and land to South Korea in order to obtain replacement  facilities in consolidated locations. However, subsequent events suggest  the LPP, as originally outlined,",
      " will require significant modification.  Available data indicate that changes in the U.S. basing structure in  South Korea are likely; therefore, a significant portion of the $5.6 billion in  construction projects planned over the next 10 years is being reassessed  based on currently expected basing changes and may need to be further  reassessed when the results of ongoing overseas presence and basing  studies are completed. The LPP was to require 10 years of intensive management to ensure  implementation progressed as planned. The master plan U.S. Forces Korea  officials are developing to guide its implementation will require significant  revision to accommodate the more comprehensive changes in basing now  anticipated and to identify funding requirements and division of funding  responsibilities between the United States and South Korea.",
      " Recommendations for  Executive Action We recommend that the Secretary of Defense require the Commander,  U.S. Forces Korea, to (1) reassess planned construction projects in South  Korea as the results of ongoing studies associated with overseas presence  and basing are finalized and (2) prepare a detailed South Korea-wide  infrastructure master plan for the changing infrastructure for U.S. military  facilities in South Korea, updating it periodically as needed, and  identifying funding requirements and division of funding responsibilities  between the United States and South Korea. Agency Comments  and Our Evaluation The Deputy Assistant Secretary of Defense for Asian and Pacific Affairs  provided written comments to a draft of this report.",
      " DOD agreed with our  recommendations and pointed out that it is taking actions that address our  recommendations. In commenting on our recommendation to reassess  planned construction projects in South Korea, DOD stated that U.S. Forces  Korea is already reassessing all planned construction in South Korea and  will ensure that all planned construction projects support decisions  regarding global presence and basing strategy. In commenting on our  recommendation for a detailed South Korea-wide infrastructure master  plan, DOD stated that U.S. Forces Korea is already developing master  plans for all enduring installations and, once decisions have been reached  on global presence and basing strategy,",
      " they will ensure that all master  plans are adjusted to support these decisions. DOD\u2019s comments are  reprinted in appendix IV. DOD also provided a separate technical  comment, and we revised the report to reflect it. We are sending copies of this report to the appropriate congressional  committees, the Commander, U.S. Forces Korea, and the Director, Office  of Management and Budget. The report is also available at no charge on  GAO\u2019s Web site at http://www.gao.gov. If you or your staff have any questions on the matters discussed in this  report, please contact me at (202) 512-",
      "5581. Key contributors to this report  were Ron Berteotti, Roger Tomlinson, Nelsie Alcoser, Susan Woodward,  and Ken Patton. Appendix I: Scope and Methodology To determine the scope and cost of the plan in relation to total  infrastructure issues in South Korea, we analyzed provisions of the  Land Partnership Plan (LPP), identified the scope and cost of construction  projects outside of the LPP, compared the scope and cost of LPP  construction projects to the scope and cost of all construction projects  in South Korea, and analyzed some of the key unresolved infrastructure  issues not included in the plan,",
      " such as the relocation of U.S. troops from  Yongsan Army Garrison. We met with officials from the Joint Chiefs of  Staff (Logistics Directorate and Strategy Division); Under Secretary of  Defense for Policy (Office of Asia-Pacific Affairs); Deputy Under Secretary  of Defense (Installations and Environment); U.S. Pacific Command,  Headquarters Pacific Air Forces, U.S. Army Pacific, Marine Forces Pacific,  U.S. Pacific Fleet; U.S. Forces Korea, Eighth U.S. Army and 7th Air Force;  U.S. Department of State; U.S. Embassy (South Korea); and South Korea\u2019s  Defense Ministry to document their input to the plan.",
      " We visited 16 U.S.  military installations and facilities in South Korea that are affected by the  plan. We selected these installations and facilities because they provided a  cross-section of the activities that are covered by the plan (i.e., some that  will be closed, some that will be scaled back, some that will be expanded,  some where new construction will take place, and some possible new  installation locations). We also visited land transfer sites that remain  unresolved and military construction projects that are not addressed in the  plan to gain an understanding and perspective on the wide range of  infrastructure issues affecting U.S. troops stationed in South Korea.",
      " To determine the implications of potential basing changes on the plan  and other construction projects in South Korea, we obtained the views of  officials from the Joint Chiefs of Staff (Logistics Directorate and Strategy  Division); Under Secretary of Defense for Policy (Office of Asia-Pacific  Affairs); and U.S. Forces Korea on the potential impact of changing  defense policies. We conducted a literature review of U.S. and South  Korean publications to collect information on the LPP and possible basing  changes in South Korea. We also attended various congressional hearings,  which discussed funding for U.S. Forces Korea construction projects and  potential basing changes.",
      " We used this information to identify the costs  of ongoing and planned construction associated with improving  military infrastructure in areas where there is uncertainty about future  U.S. presence\u2014such as Yongsan Army Garrison and U.S. installations  located north of Seoul. We did not verify the accuracy and completeness  of this information. To identify implementation challenges associated with the plan that could  affect future U.S. military construction projects in South Korea, we met  with officials from the above organizations and reviewed the Status of  Forces Agreement, an agreement under Article IV of the Mutual Defense  Treaty between South Korea and the United States, and other related  agreements and defense guidance.",
      " We discussed challenges that must be  addressed during implementation of the LPP and implementation issues  associated with the plan that could affect future construction projects  throughout South Korea. We performed our review from September 2002 through May 2003 in  accordance with generally accepted government auditing standards. Appendix II: Summary of the Land  Partnership Plan The Land Partnership Plan (LPP) provides a comprehensive plan for  more efficient and effective stationing of U.S. Forces in South Korea. The  LPP is intended to strengthen the South Korea-U.S. alliance, improve the  readiness posture of combined forces, reduce the overall amount of land  granted for U.S.",
      " Forces Korea use, and enhance public support for both  the South Korean government and U.S. Forces Korea, while positioning  U.S. forces to meet alliance security requirements well into the future. According to U.S. Forces Korea officials, LPP imperatives are as follows:    The agreement should be based on readiness and security, not the amount  of land involved. The agreement should be comprehensive, allowing for land issues that  cannot be resolved independently to be resolved as part of a package and  ensuring stationing decisions that fit into a comprehensive vision for the  disposition of U.S. forces. When new land and facilities are ready for use,",
      " U.S. Forces Korea can  release old land and facilities. U.S. Forces Korea needs all existing  facilities and areas and can only return them when replacement facilities  are available or the requirement is met in another manner. The agreement should be binding under the Status of Forces Agreement.  The LPP is not just an \u201cagreement in principle\u201d but also a commitment to  take action, and it operates within the Status of Forces Agreement\u2014which  means there are no new rules. The agreement should be self-financing\u2014the costs of the LPP must be  shared between the United States and South Korea. U.S. funding is  provided from the military construction account.",
      " The South Korean  government provides host nation funds and funding obtained from sales  of property returned to South Korea by the United States. As a general rule, the United States funds the relocation of units from  camps the United States wishes to close, and South Korea funds the  relocation of units from camps that South Korea has asked the United  States to close. The execution of the LPP is shown in figure 1. The LPP has been negotiated under the authority of the Joint Committee  under the Status of Forces Agreement. The Status of Forces Agreement  gives the Joint Committee the authority and responsibility to determine  the facilities and areas required for U.S.",
      " use in support of the United  States/South Korea Mutual Defense Treaty. The Joint Committee  established the Ad-hoc Subcommittee for LPP to develop and manage  the LPP. The LPP components address installations, training areas, and  safety easements. Installations: The LPP reduces the number of U.S. installations from  41 to 23 and consolidates U.S. forces onto enduring installations. The LPP  establishes a timeline for the grant of new land, the construction of new  facilities, and the closure of installations. Figure 8 illustrates the sequence  in which new lands are to be granted to the United States and their  relationship to facilities that will be returned to South Korea from calendar  years 2002 through 2011.",
      " Training Areas: The LPP returns U.S. training areas in exchange for  guaranteed time on South Korean ranges and training areas. To ensure  the continued readiness of U.S. Forces Korea, the United States agrees  to return certain granted facilities and areas and to accept the grant of  joint use of certain South Korea military facilities and areas on a limited  time-share basis as determined by the Status of Forces Agreement Joint  Committee. The United States is expected to return approximately  32,186 acres, or 39,396,618 pyong, of granted training areas. Table 1  shows the exclusive use of existing grants retained by U.S.",
      " Forces Korea. Table 2 shows training areas that will be provided on a temporary basis to  U.S. Forces Korea. Table 3 shows new safety easements to be designated for training areas. Table 4 shows training areas that will be returned to South Korea under  the LPP. Table 5 shows training areas where parts of the land will be returned to  South Korea. Table 6 shows training facilities and areas that the South Korean  government is expected to grant to the U.S. for joint use for the  time specified. Safety Easements: According to U.S. Forces Korea officials, a safety  easement is a defined distance from an explosive area that personnel and  structures must be kept away from and is directly related to the quantity  and types of explosives and ammunition present.",
      " The presence of Korean  citizens in areas requiring explosive safety easements has placed them at  risk of injury or death in the event of an explosion. Tables 7, 8, and 9 show  the various tiers of easements established under the LPP at U.S. military  installations. Upper tier easements are those required at enduring  installations; middle tier easements are required during armistice, but will  not be required after a change in the armistice condition; and lower tier  easements are those required at closing installations. U.S. Forces Korea  shall enforce safety easements inside U.S. installations,",
      " while South Korea  will enforce safety easements outside U.S. installations. Appendix III: Comments from the  Department of Defense\n"
    ],
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  },
  {
    "id": 10,
    "question": null,
    "answer": "In 1998, the Health Care Financing Administration implemented a prospective payment system (PPS) for skilled nursing facility (SNF) services provided to Medicare beneficiaries. PPS is intended to control the growth in Medicare spending for skilled nursing and rehabilitative services that SNFs provide. Two years after the implementation of PPS, the mix of patients across the categories of payment groups has shifted, as determined by the patients' initial minimum data set assessments. Although the overall share of patients classified into rehabilitation payment group categories based on their initial assessments remained about the same, more patients were classified into the high and medium rehabilitation payment group categories, and fewer were initially classified into the most intensive (highest paying) and least intensive (lowest paying) rehabilitation payment group categories. Two years after PPS was implemented the majority of patients in rehabilitation payment groups received less therapy than was provided in 1999. This was true even for patients within the same rehabilitation payment group categories. Across all rehabilitation payment group categories, fewer patients received the highest amounts of therapy associated with each payment group.\n",
    "docs": [
      "Background Generally, Medicare covers SNF stays for patients needing skilled nursing  and therapy for conditions related to a hospital stay of at least   3 consecutive calendar days, if the hospital discharge occurred no more  than 30 days prior to admission to the SNF. For qualified beneficiaries,  Medicare will pay for medically necessary services, including room and  board, nursing care, and ancillary services such as drugs, laboratory tests,  and physical therapy, for up to 100 days per spell of illness. For more than a decade beginning in 1986, Medicare SNF spending rose  dramatically\u2014averaging 30 percent annually. During this period,",
      " Medicare  payments to each SNF were based on the costs incurred by the SNF in  serving its Medicare patients. There was minimal program oversight,  providing few checks on spending growth. Although Medicare imposed  payment limits for routine services, such as room and board, it did not  limit payments for capital and ancillary services, such as therapy. Cost  increases for ancillary services averaged 19 percent per year from 1992  through 1995, compared to a 6 percent average increase for routine service  costs. To curb the rise in Medicare SNF spending, BBA required a change in  Medicare\u2019s payment method.",
      " HCFA began phasing in the SNF PPS on   July 1, 1998. Under PPS, SNFs are paid a prospectively determined rate  intended to cover most services provided to a patient during each day of a  Medicare-covered SNF stay. The SNF payment rate is based on the 1995  national average cost per day, updated for inflation. Because the costs of  treating patients vary with their clinical conditions and treatments, daily  payments for each patient are adjusted for the patient\u2019s expected care  needs depending on the patient\u2019s assignment into one of 44 different  payment groups, also called resource utilization groups (RUG). A RUG  describes patients with similar therapy,",
      " nursing, and special care needs  and has a corresponding payment rate. The RUG classification system is hierarchical. The first distinction made is  whether the patient has received (or is expected to receive) at least   45 minutes a week of therapy (see fig. 1). For these rehabilitation patients,  further divisions\u2014into ultra high, very high, high, medium, and low  therapy categories\u2014are made based on the total minutes and type of  physical, occupational, and speech therapy provided over 7 days. Each of  these categories is defined by a range of therapy minutes and the type of  therapy provided. For example,",
      " patients in the very high category receive  between 500 and 719 minutes of therapy over 7 days. Each category is  further subdivided into RUGs, based on a patient\u2019s dependency in  performing ADLs, such as eating, transferring from a bed to a chair, or  using the toilet. There are 14 rehabilitation RUGs, which account for three- fourths of Medicare-covered stays. Among patients who have not received (or are not expected to receive)   45 minutes a week of therapy, the system distinguishes between patients  requiring extensive or special care or who are clinically complex   (12 RUGs)",
      " and those receiving custodial care (18 RUGs). The  classification system uses specific medical conditions (such as having  multiple sclerosis or being comatose) and special care needs (such as  requiring tracheostomy care or ventilator support) within the past 14 days  to group patients into extensive services, special care, and clinically  complex categories. Patient characteristics such as the ability to perform  ADLs, signs of depression, and conditions requiring more technical clinical  knowledge and skills are used to assign patients into RUGs within these  categories. MDS Patient Assessments Since 1991, SNFs have carried out a requirement to periodically assess and  plan for residents\u2019 care using the MDS,",
      " which documents 17 aspects of a  patient\u2019s clinical condition, including the amount of therapy provided or  planned, diagnoses, certain care needs, and the ability to perform ADLs at  the patient\u2019s most dependent state. In addition to determining Medicare  payments, these data are used to measure patient needs, develop a plan of  care, and monitor the quality of care. To gather the MDS, an in-house interdisciplinary team assesses each  patient\u2019s clinical condition at established intervals throughout the patient\u2019s  stay. The Medicare assessment schedule requires that the initial  assessment be performed during days 1 through 5 of a patient\u2019s stay,",
      " but  may be performed as late as days 6 through 8, termed \u201cgrace days,\u201d which  give staff additional flexibility in conducting the assessments. The initial  assessment is used to assign patients to a RUG that establishes payments  for the first 14 days of care. For patients staying longer than 14 days, a  second assessment must be conducted during days 11 through 14 that  determines the RUG assignment and payment rate for days 15 through   30 of the patient\u2019s stay. An additional assessment is performed prior to the  30th day of care and every 30 days thereafter; each of these assessments  establishes the payment for the next 30 days up to the 100th day.",
      " SNFs can classify patients primarily needing therapy into the high,  medium, or low rehabilitation payment group categories for the initial  assessment using either actual minutes of therapy provided or an estimate  of the amount that will be provided over the 2 weeks covered by the initial  assessment. If a patient is classified into one of these rehabilitation  categories using an estimate, but actually receives less than the amount of  therapy to qualify into that category, payments to the SNF for the initial  assessment period are not reduced. To classify patients into the very high  or ultra high payment group categories on the initial assessment, SNFs  must have already provided the minimum amount of therapy that defines  these categories when the assessment is done.",
      " Possible SNF Responses to  PPS Incentives The accuracy and completeness of the patient assessment information are  critical to ensure appropriate categorization of patients into payment  groups. For example, to distinguish between different levels of assistance  required in performing ADLs, a SNF needs to document how often and  how much assistance was provided to a patient during the past 7 days. For  a patient receiving over 720 minutes of therapy a week (the ultra high  rehabilitation category), the difference between assessing a patient as  needing \u201cextensive\u201d versus \u201climited\u201d assistance in performing one ADL,  such as eating, may result in an additional payment of up to $48 per day to  the SNF.",
      " (See app. II for a comparison of ADLs and payment rates for each  RUG.) Thus, a SNF might respond to the PPS by increasing the resources  devoted to completing the MDS. This possible SNF response to the new payment system may be similar to  how hospitals responded to the inpatient hospital PPS. Under the inpatient  PPS, hospitals are paid a prospectively determined rate per patient stay,  which is adjusted for expected resource needs based on factors such as  patient diagnoses and treatment. After the implementation of the inpatient  PPS in 1983, hospitals expanded the number of diagnoses they reported to  describe patients.",
      " These changes in documentation resulted in some  patients being classified into higher payment categories, which increased  hospital payments. A SNF also has an incentive to change the amount of care provided to  minimize its costs and maximize its payments. Because the amount of  therapy provided is key to classifying the majority of patients into RUGs, a  SNF benefits when it provides an amount of therapy on the low end of the  range of therapy minutes associated with that RUG. For example,  furnishing 1 additional minute of therapy a week could move a patient  from the very high to the ultra high category. The SNF would receive an  additional $63 or $99 more per day,",
      " depending on the patient\u2019s ADL needs,  but there may not have been a proportionate increase in costs. To ensure that its patients are grouped into the highest possible payment  groups, a SNF may adjust the timing of its initial patient assessments.  Grace days are intended to give SNFs the flexibility to delay care until  patients are ready to receive therapy, while ensuring that payments reflect  the treatment levels that are provided to the patient. SNFs may opt to use  grace days when conducting the initial assessment of patients who may be  grouped into the payment group categories that require actual minutes of  therapy (ultra and very high rehabilitation). Otherwise,",
      " if initial  assessments are done before the grace days, patients may not have  received enough therapy to reach the weekly threshold for placement into  one of these categories. Refinements to the SNF  PPS Since the implementation of the SNF PPS, some nursing home chains have  claimed that payments are inadequate and that this has caused their  financial condition to erode. We have reported that total SNF PPS  payments are likely to be adequate and may be excessive given that the  payment rates include the costs of inefficient delivery, unnecessary care,  and improper billings. But the Medicare Payment Advisory Commission  and we have raised concerns that the payment rates for certain types of  patients may be inadequate because the patient classification system may  not appropriately reflect the differing needs of patients who require  multiple kinds of health care services,",
      " such as extensive or special care,  rehabilitative therapy, and ancillary services. We have also expressed  concern that the use of therapy minutes provided to patients as a way to  classify patients might encourage the provision of unnecessary services. In response to concerns about the overall adequacy of Medicare payments  and their distribution across different types of patients, the Congress has  raised payments twice since the PPS implementation. These actions  increased payments across-the-board for all RUGs and, in addition, for  certain RUGs. The Medicare, Medicaid, and SCHIP Balanced Budget  Refinement Act of 1999 (BBRA)",
      " temporarily increased Medicare\u2019s  payments for all RUGs by 4 percent, beginning in fiscal year 2001 through  the end of fiscal year 2002. In addition, BBRA increased payments for   15 RUGs (3 rehabilitation RUGs and all extensive services, special care,  and clinically complex RUGs) by 20 percent beginning in April 2000. The  Congress intended this increase to be temporary\u2014until refinements to the  RUGs patient classification system were implemented. However,  refinements have not been implemented and the Congress again revised  the payment rates. The Medicare, Medicaid,",
      " and SCHIP Benefits  Improvement and Protection Act of 2000 (BIPA) temporarily increased the  portion of the payment related to nursing costs by 16.66 percent for all  payment groups, which raised the overall payment rates from   4 to 12 percent, depending on the RUG, beginning April 1, 2001, through  September 30, 2002. In addition, BIPA replaced the 20 percent BBRA  increase that applied to 3 out of the 14 rehabilitation RUGs with a   6.7 percent increase for all rehabilitation RUGs. CMS has also responded to concerns about PPS.",
      " In July 2001, CMS  awarded a contract to determine the feasibility of refinements to PPS,  including alternatives to the RUGs patient classification system. To date,  this contract has not resulted in proposed refinements to the RUGs system  and the contractor\u2019s preliminary report is not due until fall 2004. CMS has  also supported work to assess and verify the MDS data that underlie PPS.  However, we recently reported that CMS\u2019s proposed on-site and off-site  review of MDS assessments may not be sufficient to ensure the accuracy  of MDS assessments in most nursing homes or to systematically evaluate  the performance of state efforts to do so.",
      " In September 2001, CMS  awarded a contract to determine if there are differences between the  documentation of patient care needs and actual patient care needs and to  detect irregularities in MDS assessments. The contractor began these data  monitoring activities in the spring of 2002, which include checking that the  RUGs reported on the Medicare claims match those on the MDS  assessments and examining the distribution of patients across the  payment groups. Distribution of  Patients Across  Payment Categories  Has Changed Among patients primarily receiving rehabilitation care, more were  classified at their initial assessment into moderate rehabilitation payment  group categories and fewer into the intensive and low rehabilitation  categories since the implementation of PPS.",
      " Providers reported that the  payments for the moderate rehabilitation payment groups were more  favorable, relative to their costs, than other payment groups. Further, the  share of patients initially classified into the rehabilitation RUGs whose  payments were increased by BBRA provisions grew, while the share of  patients initially classified into most of the other payment groups declined  or stayed the same. Across patients initially assigned to the extensive,  special care, or clinically complex categories, more were classified as  requiring extensive services\u2014the highest paying category\u2014and fewer into  the special care or clinically complex categories. SNFs changed two  patient assessment practices that could have contributed to these shifts in  patients\u2019 initial payment group assignments.",
      " First, SNFs increased their  use of estimated\u2014rather than actual\u2014therapy minutes to assign patients  to rehabilitation categories. Second, SNFs assessed patients later in their  stays, making it more likely that they received more therapy and therefore  would be classified into categories with higher payments. More Patients Initially  Categorized into Payment  Groups with Payment  Increases Although the proportion of SNF Medicare patients initially classified into  rehabilitation payment group categories remained the same overall, the  distribution of patients within these categories changed considerably from  first quarter 1999 to first quarter 2001 (see table 1). By 2001, more  Medicare patients receiving therapy were initially classified into the two  moderate rehabilitation categories\u2014medium (16 percent more)",
      " and high  (17 percent more), which made up about two-thirds of Medicare SNF  admissions. The share of patients initially classified into ultra high\u2014the  most intensive rehabilitation category\u2014decreased to comprise just   3 percent of all Medicare SNF patients at their initial assessment in 2001.  This shift is consistent with the industry\u2019s assertions that the high and  medium categories have more favorable payments, relative to their costs,  than other categories. We do not know if this shift reflects a change in the  care needs of patients from 1999 to 2001. Some of the shifts in the distribution across individual rehabilitation RUGs  paralleled changes in payment rates made by the Congress.",
      " Within the  high and medium rehabilitation payment group categories, the shares of  patients initially classified into RUGs that received congressionally  mandated payment increases in 2000 grew substantially more than the  shares of patients classified into rehabilitation RUGs that did not (see  table 2). For 8 of the 11 rehabilitation RUGs without this special increase,  the shares of patients at their initial assessment declined and only one  experienced an increase. Among the patients initially classified into the extensive and special care  or clinically complex categories (all of which were increased 20 percent by  BBRA), the share of patients initially assessed as requiring the most  intensive care\u2014those in the extensive services category\u2014increased to  become about two-thirds of patients in these categories,",
      " while the share of  patients in the special care and clinically complex categories decreased. Changes in Assessment  Practices May Contribute to  Different Classifications and  Higher Payments Since the introduction of PPS, changes in SNF patient assessment  practices have made it easier to classify patients into some categories with  higher payments. When performing their initial patient assessments, SNFs  have increasingly opted to use estimates of the amount of therapy they  expect to provide (rather than actual therapy given during the first week  of care) to categorize patients into the high, medium, and low therapy  categories for the first 14 days of care. Because payments are based on  these estimates,",
      " payments for some patients were higher than they would  have been if the payments were based on actual therapy provision.  Comparing the first quarters of 1999 and 2001, the practice of using  estimated therapy minutes, rather than actual therapy provided, to classify  patients into therapy categories increased more than 35 percent, becoming  the mechanism for classifying nearly two-thirds of all patients in high,  medium, and low rehabilitation categories. Of the patients who could be  evaluated, one quarter of the patients classified using estimated minutes  of therapy did not receive the amount of therapy they were assessed as  needing, while three-quarters eventually did.",
      " SNFs increasingly performed initial patient assessments later in patient  stays, during the grace days, for patients in the highest paying therapy  categories\u2014ultra high and very high. Because classification into these  categories is based on the actual amount of care provided, conducting the  patient assessments during the grace days allows additional time for more  therapy services to be provided, making it likelier that patients would be  classified into the ultra high and very high categories. To classify patients  into these categories, the use of grace days increased more than   40 percent from the first quarter of 1999 to the first quarter of 2001. Since PPS,",
      " SNFs  Provide Fewer  Minutes of Therapy In the 2 years following the implementation of PPS, SNFs provided less  therapy to almost two-thirds of all Medicare SNF patients\u2014those in the  medium and high rehabilitation payment group categories. The typical  patient in these categories received 22 percent less therapy, at least   30 fewer minutes, per week during the initial assessment period between  the first quarters of 1999 and 2001. Indeed, in 2001 half of the patients  initially categorized in these two groups did not actually receive the  amount of therapy required to be classified into those groups, due in part  to the use of estimated therapy minutes for classification (see table 3).  Further,",
      " during their initial assessment period, fewer patients received  therapy near the higher end of the range that defines each category. For  example, to be assigned to the high rehabilitation category, patients are  assessed as needing between 325 and 499 minutes of therapy a week. In  1999, 20 percent of patients in the high rehabilitation payment group  category received 390 minutes or more of therapy per week during their  initial assessment period. Two years later, less than 13 percent received  this much therapy. In 1999, 5 percent of patients initially assessed in the  high rehabilitation payment group category received 480 minutes or more  of therapy per week.",
      " Two years later, only 2 percent of patients received  this level of therapy. Across all therapy patients, the median amount of therapy provided during  the initial assessment period also declined from 1999 through 2001. The  declines in therapy service use and resultant reductions in costs were not  uniform across the rehabilitation payment group categories. Consequently,  payments for some categories of RUGs are likely to be higher than their  service costs, compared to other categories of RUGs. For patients in the  more intensive rehabilitation payment group categories, where estimated  minutes cannot be used to classify patients, median therapy minutes did  not decline.",
      " Concluding  Observations Our work indicates that SNFs have responded to PPS in two ways that  may have affected how payments compare to SNF costs. SNFs have   (1) changed their patient assessment practices and (2) reduced the amount  of therapy services provided to Medicare beneficiaries. The first change  can increase Medicare\u2019s payments and the second can reduce a SNF\u2019s  costs. CMS\u2019s ongoing efforts to refine the payment system are particularly  important in light of these provider responses to the PPS. Agency Comments In its written comments on a draft of the report, CMS agreed that ongoing  evaluations of PPS are important.",
      " CMS stated that our findings are  generally consistent with its analyses and with its expectations regarding  provider responses to the incentives of the PPS. CMS noted that it intends  to examine whether therapy provided is consistent with payment levels  and ADL coding accuracy through its program safeguard contractor  project. CMS stated that reporting the percentage change of relatively  small shares of patients across payment categories may overemphasize the  changes and is somewhat misleading. However, the percentage changes  reported in table 1 demonstrate that the shifts in shares of patients across  payment categories are consistent with the industry\u2019s assertions that high  and medium categories have the most favorable payments,",
      " relative to  costs. In addition, the percentage changes reported in table 2 demonstrate  that the shifts among RUGs parallel the congressionally mandated  payment increases. CMS also provided technical comments, which we  incorporated as appropriate. CMS\u2019s comments are in appendix III. We are sending copies of this report to the Administrator of CMS,  appropriate congressional committees, and other interested parties. We  will also provide copies to others upon request. In addition, the report is  available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff has any questions, please call me at (202)",
      " 512-7114.  Laura Sutton Elsberg, Leslie Gordon, and Walter Ochinko prepared this  report under the direction of Carol Carter. Appendix I: Scope and Methodology We used data from the 1998 Medicare cost reports to identify SNFs that  began participating in PPS on or before January 1, 1999. Facility  ownership and other characteristics were taken from HCFA\u2019s end-of-year  Provider of Services file for 1999. We included in our analysis only those  SNFs that had transitioned to PPS before or during January 1999, were  active in 1999,",
      " and submitted Medicare MDS assessments in the three  periods used in this study. This cohort comprised approximately   80 percent of all SNFs that filed a 1998 cost report and was representative  of the universe of SNFs in terms of bed size, location (rural and urban),  and ownership characteristics. For the SNFs in our sample, we analyzed data from the nursing home MDS  national repository to compare differences in patient classification and  therapy services across three points in time\u2014early in PPS (January-  March 1999), 1 year later (January-March 2000), and 2 years later (January-",
      " March 2001). Data to examine the distribution of Medicare patients after  the implementation of BIPA-mandated changes (applied to services on or  after April 1, 2001) were not available in time for this analysis. Our sample  included over 350,000 MDS assessments for Medicare beneficiaries for  each time period. To examine the differences in patient classification, we  grouped patient assessments into 11 major categories\u2014the 5 major  rehabilitation categories (ultra high, very high, high, medium, and low),   3 categories for patients requiring extensive or special care or who are  clinically complex,",
      " and 3 categories for patients requiring custodial care,  based on the RUG reported on the initial assessment. To examine the differences in the provision of therapy services, we  aggregated the reported physical, occupational, and speech therapy  minutes for each assessment. We calculated the number of initial  assessments that had used estimated minutes to qualify patients into a  rehabilitation category by counting the number of first assessments that  reported actual therapy minutes below the minimum number of minutes  required in the three rehabilitation categories (high, medium, and low). To  determine the extent to which patients received the estimated therapies,  we calculated, for the patients who had a second assessment,",
      " the percent  who had received less than the minimum number of therapy minutes  required for the RUG reported on the initial assessment. We also  interviewed CMS staff responsible for SNF policy and we reviewed  regulations, literature, and other documents relating to SNF PPS and MDS. Appendix II: Therapy Minutes, Activities of  Daily Living, and Medicare Payment Rates to  SNFs Appendix II: Therapy Minutes, Activities of  Daily Living, and Medicare Payment Rates to  SNFs  Patients are classified into the custodial categories according to their need for nursing services and  assistance with ADLs. These patients typically do not meet the criteria for Medicare coverage  because they generally do not require skilled nursing care.",
      " Appendix III: Comments from the Centers for  Medicare & Medicaid Services\n"
    ],
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  },
  {
    "id": 11,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed: (1) how susceptible the Department of State's unclassified automated information systems are to unauthorized access; (2) what State is doing to address information security issues; and (3) what additional actions may be needed to address the computer security problem. GAO noted that: (1) State's information systems and the information contained within them are vulnerable to access, change, disclosure, disruption or even denial of service by unauthorized individuals; (2) GAO conducted penetration tests to determine how susceptible State's systems are to unauthorized access and found that it was able to access sensitive information; (3) moreover, GAO's penetration of State's computer resources went largely undetected, further underscoring the department's serious vulnerability; (4) the results of GAO's tests show that individuals or organizations seeking to damage State operations, commit terrorism, or obtain financial gain could possibly exploit the department's information security weaknesses; (5) although State has some projects under way to improve security of its information systems and help protect sensitive information, it does not have a security program that allows State officials to comprehensively manage the risks associated with the department's operations; (6) State lacks a central focal point for overseeing and coordinating security activities; (7) State does not routinely perform risk assessments to protect its sensitive information based on its sensitivity, criticality, and value; (8) the department's primary information security policy document is incomplete; (9) the department lacks key controls for monitoring and evaluating the effectiveness of its security programs and it has not established a robust incident response capability; (10) State needs to greatly accelerate its efforts and address these serious information security weaknesses; (11) however, to date, its top managers have not demonstrated that they are committed to doing so; (12) Internet security was the only area in which GAO found that State's controls were currently adequate; (13) however, plans to expand its Internet usage will create new security risks; (14) State conducted an analysis of the risks involved with using the Internet more extensively, but has not yet decided how to address the security risks of additional external connectivity to the concerns this review has raised; and (15) if State increases its Internet use before instituting a comprehensive security program and addresses the additional vulnerabilities unique to the Internet, it will unnecessarily increase the risks of unauthorized access to its systems and information.\n",
    "docs": [
      "Background State relies on a variety of decentralized information systems and networks to help it carry out its responsibilities and support business functions, such as personnel, financial management, medical, visas, passports, and diplomatic agreements and communications. The data stored in these systems is sensitive enough to be attractive targets for individuals and organizations seeking monetary gain or desiring to learn about or damage State operations. For example, much of this information deals with State employees and includes American and Foreign Service National personnel records, employee and retiree pay data, and private health records. Background investigation information about employees being considered for security clearances is also processed on State\u2019s unclassified network as is sensitive financial and procurement information.",
      " The potential consequences of misuse of this information are of major concern. For example, unauthorized deletion or alteration of data could enable dangerous individuals to enter the United States. In addition, personnel information concerning approximately 35,000 State employees could be useful to foreign governments wishing to build personality profiles on selected employees. Further, manipulation of financial data could result in over- or underpayments to vendors, banks, and individuals, and inaccurate information being provided to agency managers and the Congress. Objectives, Scope, and Methodology Our objectives were to (1) determine how susceptible the State Department\u2019s automated information systems are to unauthorized access, (2) identify what the State Department is doing to address information security issues,",
      " and (3) determine what additional actions may be needed. To determine how susceptible State\u2019s systems are to unauthorized access, we tested the department\u2019s technical and physical controls for ensuring that data, systems, and facilities were protected from unauthorized access. We tested the operation of these controls to determine whether they existed and were operating effectively. We contracted with a major public accounting firm to assist in our evaluation and testing of these controls. We determined the scope of our contractor\u2019s audit work, monitored its progress, and reviewed the related work papers to ensure that the resulting findings were adequately supported. During our testing, we performed controlled penetration attacks at dial-in access points,",
      " the department\u2019s Internet gateways, and public information servers. We also performed penetration activities to access security controls on State\u2019s major internal networks. In addition, we performed social engineeringactivities to assess user awareness, and attempted to gain physical access to two State facilities. We attempted to access State\u2019s sensitive data and programs under conditions negotiated with State Department officials known as \u201crules of engagement.\u201d These rules were developed to assist us in obtaining access to State\u2019s facilities and information resources and to prevent damage to any systems or sensitive information. Under the rules, all testing was required to take place within the department\u2019s headquarters building between 8:00 a.m.",
      " and 10:00 p.m. and was physically monitored by State employees and contractor personnel. In addition, State monitors were authorized to stop our testing when we obtained access to sensitive information or systems. We were also required to inform State personnel about the types of tests we planned to conduct prior to the testing. As agreed with State, we limited the scope of our testing to unclassified systems. To identify what State is doing to address the issue of unauthorized access to its information systems, we discussed with department officials their efforts to protect these systems and reviewed supporting documentation. For example, we obtained information on the department\u2019s initiatives to improve the security of its mainframe computers and establish a centrally managed information system security officer program at headquarters.",
      " We also discussed with department officials preliminary plans to expand the use of the Internet and reviewed supporting documentation. We reviewed numerous evaluations of information security at domestic State locations and foreign posts performed by the department\u2019s Bureau of Diplomatic Security. We reviewed recent reports submitted by State to the President and the Congress under provisions of the 1982 Federal Managers\u2019 Financial Integrity Act, which outlined known information management and technology weaknesses and plans for corrective actions. We reviewed the department\u2019s policy guidance on information security as contained in the Foreign Affairs Manual, Volume 1 and Volume 12, Chapter 600, and its Fiscal Year 1997-2001 Strategic and Performance Management Plan for Information Resources Management.",
      " We visited a computer security assessment center in Fairfax, Virginia, which the department uses primarily for certifying and accrediting software to be used on State information systems. To evaluate State\u2019s security program management and formulate recommendations for improvement, we compared State\u2019s practices to guidelines in two National Institute of Standards and Technology (NIST) publications, the \u201cGenerally Accepted Principles and Practices for Securing Information Technology Systems\u201d and \u201cAn Introduction to Computer Security: The NIST Handbook,\u201d as well as other guides and textbooks. In addition, we reviewed a Department of State Inspector General report on unclassified mainframe systems security. We also relied on our work to identify the best information security management practices of non-federal organizations which is presented in our Executive Guide Information Security Management:",
      " Learning From Leading Organizations (GAO/AIMD-98-21 Exposure Draft, November 1997). The guide identifies key elements of an effective information security program and practices which eight leading nonfederal organizations have adopted and details the management techniques these leading organizations use to build information security controls and awareness into their operations. We performed our audit work primarily at State Department headquarters offices from July 1996 through August 1997 in accordance with generally accepted government auditing standards. Information Systems Are Vulnerable to Unauthorized Access Our penetration tests revealed that State\u2019s sensitive but unclassified information systems can be easily accessed by unauthorized users who in turn can read, delete,",
      " modify, or steal sensitive information on State\u2019s operations. First, while simulating outside attackers without knowledge of State\u2019s systems, we were able to successfully gain unauthorized access to State\u2019s networks through dial-in connections to modems. Having obtained this access, we could have modified or deleted important data, shut down services, downloaded data, and monitored network traffic such as e-mail and data files. We also tested internal network security controls and found them to be inadequate. For example, we were able to gain privileged (administrator) access to host systems on several different operating platforms (such as UNIX and Windows NT). This access enabled us to view international financial data,",
      " travel arrangements, detailed network diagrams, a listing of valid users on local area networks, e-mail, and performance appraisals, among other sensitive data. Our tests also found that security awareness among State employees is problematic. We were able to gain access to State\u2019s networks by guessing user passwords, bypassing physical security at one facility, and searching unattended areas for user account information and active terminal sessions. For example, in several instances we were able to enter a State facility without required identification. In an unlocked work area for one office, we found unattended personal computers logged onto a local area network. We also found a user identification and password taped to one of the computers.",
      " Using these terminals, we were able to download a file that contained a password list. In another unlocked area, we were able to access the local area network server and obtain supervisor-level access to a workstation. With this access, we could have added or deleted users, implemented unauthorized programs, and eliminated audit trails. Our tests of dial-in-security, internal network security, and physical security demonstrated that information critical to State\u2019s operations as well as to the operations of other federal agencies operating overseas can be easily accessed and compromised. For example, we gained access to information that detailed the physical layout of State\u2019s automated information infrastructure. These data would make it much easier for an outsider who had no knowledge of State\u2019s operations or infrastructure to penetrate the department\u2019s computer resources.",
      " In addition, we obtained information on administrative and sensitive business operations which may be attractive targets to adversaries or hackers. At the conclusion of our testing, we provided senior State managers with the test results and suggestions for correcting the specific weaknesses identified. State Lacks a Comprehensive Information Security Program Our tests were successful primarily because State\u2019s computer security program is not comprehensive enough to effectively manage the risks to which its systems and networks are exposed. For example, the department does not have the information it needs to effectively manage its risks\u2014it does not fully appreciate the sensitivity of its information, the vulnerabilities of its systems, or the costs of countermeasures. In addition,",
      " security is not managed by a strong focal point within the agency that can oversee and coordinate security activities. State also does not have the types of controls needed to ensure the security of its sensitive information, including current and complete security policies and enterprisewide incident reporting and response capability. Moreover, top managers at State have not demonstrated that they are committed to strengthening security over the systems that they rely on for nearly every aspect of State\u2019s operations. Elements of a Comprehensive Security Program Our study of information security management at leading organizations identified the following five key activities that are necessary in order to effectively manage security risks. A strong framework with a central management focal point and ongoing processes to coordinate efforts to manage information security risks.",
      " Risk assessment procedures that are used by business managers to determine whether risks should be tolerated or mitigated and to select appropriate controls. Comprehensive and current written policies that are effectively implemented and then updated to address new risks or clarify areas of misunderstanding. Steps to increase the awareness of users concerning the security risks to information and systems and their responsibilities in safeguarding these assets. Ability to monitor and evaluate the effectiveness of policy and other controls. Furthermore, each of these activities should be linked in a cycle to help ensure that business risks are continually monitored, policies and procedures are regularly updated, and controls are in effect. Perhaps the single most important factor in prompting the establishment of an effective information security program is commitment from top management.",
      " Ultimately, it is top managers who ensure that the agency embraces all elements of good security and who drive the risk management cycle of activity. However, State\u2019s top managers are not demonstrating the commitment necessary to practice good security and State\u2019s information security program does not fully incorporate any of the activities described above. Specifically, there is (1) no central management focal point, (2) no routine process for assessing risks, (3) no comprehensive and current set of written policies, (4) inadequate security awareness among State personnel, and (5) no effective monitoring and evaluation of policies and controls. In addition, State lacks a comprehensive information security plan that would help ensure that these elements are in place.",
      " Top Management Commitment at State Is Insufficient While senior management at State has shown some interest in information security through actions including drafting memoranda, forming working groups to improve information security, and approving limited funding for selected security activities, this interest has not been sufficient to overcome longstanding and institutionalized security weaknesses. For example, while top management at State is aware of longstanding problems associated with its information management and information security and has reported a number of these high-risk and material weaknesses to the President and the Congress under provisions of the 1982 Federal Managers\u2019 Financial Integrity Act, these weaknesses remain unresolved. For example, mainframe computer security was identified as a material weakness 10 years ago but has not yet been corrected.",
      " \u201cThe lack of senior management\u2019s involvement in addressing authority, responsibility, accountability and policy is the critical issue perpetuating the Department\u2019s lax approach to mainframe security.... In addition, the lack of clear management responsibility has resulted in incomplete and unreliable security administration....\u201d Many mid-level State officials told us that the information security problems we and others identified during our review were already known throughout the department. Collectively, they believed that senior State management was not convinced of the seriousness of the problems and were unable or unwilling to commit the requisite attention and resources to resolve them. They noted that budget requests for security measures, such as information systems security officers,",
      " were approved but later rescinded. Many officials said that while the assignment of a chief information officer (CIO) was a critical step in elevating the importance of information management and security throughout the department, the CIO does not have the authority needed to ensure that improvements are made throughout State\u2019s decentralized activities. They also said that budgets for important controls, such as Bureau of Diplomatic Security information security evaluations at worldwide posts, are severely constrained and that the same security deficiencies are found and ignored year after year. Other officials reported that State personnel do not carry out their security responsibilities satisfactorily because security is assigned as a low-priority collateral duty.",
      " State Lacks a Clearly Defined Central Focal Point The Department of State is a decentralized organization with bureaus operating semi-autonomously in their areas of responsibility. As a result, information resources management is scattered throughout the department. There is no single office responsible for overseeing the architecture, operations, configuration, or security of its networks and systems. The chief information officer, the Bureau of Diplomatic Security, and the information management office all perform information security functions. Many offices and functional bureaus also manage, develop, and procure their own networks and systems. In addition, according to Bureau of Diplomatic Security officials, some of the approximately 250 posts operated by State around the world have established their own network connections,",
      " further complicating security and configuration management. \u201cSince there is no enterprise-wide authority for ensuring the confidentiality, integrity and availability of information as it traverses the unclassified network, it is extremely difficult to detect when information is lost, misdirected, intercepted or spoofed. Therefore, a post that is not expecting to receive information will not miss critical information that never arrives. More importantly, if a post does receive information it was not expecting, there is no office to confirm that the transmission was legitimate and not disinformation sent by a network intruder or disgruntled employee.\u201d State Does Not Routinely Assess Risks In assessing risks, managers should consider the (1)",
      " value and sensitivity of the information to be protected, (2) vulnerabilities of their computers and networks, (3) threats, including hackers, thieves, disgruntled employees, competitors, and in State\u2019s case, foreign adversaries and spies, (4) countermeasures available to combat the problem, and (5) cost-effectiveness of the countermeasures. In addition to providing the basis for selecting appropriate controls, results obtained from risk assessments should also be used to help develop and update an organizations\u2019s security plan and policies. We met with representatives from the Office of Information Management and Bureau of Diplomatic Security who told us that they are unaware of any significant risk management activity related to information security within the department.",
      " These officials stated that they have not been requested to provide technical assistance to program managers at State. One significant exception to this is the comprehensive risk analysis performed by the Bureau of Diplomatic Security, which evaluated the risks associated with Internet connectivity. Computer security evaluations performed at posts located around the world by Bureau of Diplomatic Security staff further demonstrate that State officials are not addressing and correcting risks appropriately. The evaluations revealed numerous problems at foreign posts such as use of inappropriate passwords and user identifications, failure to designate an information systems security officer, poor or nonexistent systems security training, and lack of contingency plans. Diplomatic security staff also told us that they have found that some posts have installed modem connections and Internet connections without approval,",
      " further complicating the department\u2019s ability to manage and secure its networks. Annual analyses of these evaluations show a pattern in which system security requirements are continually overlooked or ignored. Diplomatic security staff noted that the majority of the security deficiencies that they found are correctable with modest capital outlay and more attentive system administration. State\u2019s Information Security Policies Are Incomplete State\u2019s information security policies are primarily contained in its Foreign Affairs Manual. State also provides policy guidance in other formats, including instructions, cablegrams, letters, and memoranda. These policies are deficient in several respects. First, they fail to acknowledge some important security responsibilities within the department. For example,",
      " while the security manual details responsibilities of system managers and information systems security officers, it does not address the information security responsibilities of the Department\u2019s chief information officer (CIO). The CIO\u2019s authority and ability to operate effectively would be enhanced with departmental policy recognition of the legislatively prescribed security responsibilities. State\u2019s Foreign Affairs Manual was updated in February 1997 to describe the CIO position, but it does not discuss any information security responsibilities. Second, the Foreign Affairs Manual does not require and consequently provides no mandate for, or guidance on, the use of risk assessments. As previously discussed, the department does not routinely assess and manage its information security risks.",
      " There is no specific State policy requiring threat and vulnerability assessments, despite their known value. Third, State\u2019s policy manual does not sufficiently address users\u2019 responsibilities. For example, the manual does not emphasize that users should be accountable for securing their automated data, much as they are held responsible for securing classified paper documents. And it does not adequately emphasize the importance of information and computer resources as critical assets that must be protected. A significant finding in the department\u2019s Internet risk analysis is that users and even systems administrators \u201cdo not feel that their unclassified data is sensitive and therefore spend little to no effort in protecting the data from external disclosure.\u201d Clearly stated policy and effective implementation could contribute greatly to increased awareness.",
      " State Is Not Adequately Promoting Awareness Often, computer attacks and security breakdowns are the result of failures on the part of computer users to take appropriate security measures. For this reason, it is vital that employees who use a computer system in their day-to-day operations be aware of the importance and sensitivity of the information they handle, as well as the business and legal reasons for maintaining its confidentiality and integrity. In accepting responsibility for security, users need to follow organizational policies and procedures, and acknowledge the consequences of security violations. They should also devise effective passwords, change them frequently, and protect them from disclosure. Further, it is important that users not leave their computers,",
      " workstations, or terminals unattended, and log out when finished using their computers. In addition, users should help maintain physical security over their assigned areas and computer resources. Many computer users at State had weak passwords that were easily guessed, indicating that they were unaware of or insensitive to the need for secure passwords. During our testing of State\u2019s systems, we were able to guess passwords on a number of machines on various networks using both manual guessing and automated password cracking programs. One way to prevent password guessing is to ensure that users use complex passwords such as those composed of alphanumeric, upper- and lower-case characters. However, there was no evidence that State was training its users to employ these techniques.",
      " We also found little evidence that State was training its users to prevent unauthorized access to information. For example, we called a user under the pretense that we were systems maintenance personnel and were able to convince her to disclose her password. We also bypassed physical security at a State facility and searched unattended areas for user account information and active terminal sessions. For example, in several instances we were able to enter a facility without the required State identification by using turnstiles designed for handicapped use. Once inside the facility, we entered unlocked work areas and found unattended personal computers logged onto a local area network. From one of these computers, we downloaded a file that contained a password list.",
      " We also noticed that a password and user identification code were taped to the desk in a workstation. State Does Not Regularly Evaluate Its Controls Some key controls are not in place at State to ensure that it can defend its sensitive information and systems. For example, State has very little departmentwide capacity to respond to security incidents and individual bureaus currently handle incidents on an ad hoc basis. Problems experienced are not shared across the department because the incidents are not reported or tracked centrally and very little documentation is prepared. Furthermore, State does not regularly test its systems and network access controls through penetration testing. Finally, State has limited ability to visit all its worldwide locations to perform security evaluations.",
      " Our study of information security management at leading organizations found that an organization must monitor and evaluate its policies and other controls on a regular basis to periodically reassess whether it is achieving its intended results. Testing the existence and effectiveness of controls and other risk reduction efforts can help determine if they are operating effectively. Over time, policies and controls may become inadequate because of changes in threats, changes in operations, or deterioration in the degree of compliance. Because breaches in information security, computer viruses, and other related problems are becoming more common, an aggressive incident response capability is an important control and a key element of a good security program. Organizations need this capability to respond quickly and effectively to security incidents,",
      " help contain and repair any damage caused and prevent future damage. In recognition of the value of an incident response capability, federal agencies are now required by the Office of Management and Budget to establish formal mechanisms to respond to security incidents. Many organizations are now setting up emergency response teams and coordinating with other groups, including the Federal Computer Incident Response Capability and Carnegie Mellon\u2019s Computer Emergency Response Team. Knowing that organizations have a formidable response capability has proved to be a deterrent to hackers and other unauthorized users. State acknowledges that it needs the capability to detect and react to computer incidents and information security threats in a timely and efficient manner. At the time of our review,",
      " Department personnel were drafting incident response procedures. Bureau of Diplomatic Security officials told us that they are beginning to develop an incident response capability at the laboratory that they use to evaluate and accredit systems and software. Information management officials also told us that efforts were underway to obtain some services from the Federal Computer Incident Response Capability that would help them detect and react to unauthorized access to their systems. As discussed earlier, Bureau of Diplomatic Security performs evaluations of field locations to identify and make recommendations for correcting security weaknesses. However, Bureau of Diplomatic Security officials told us that budget constraints limit their ability to perform these evaluations and visit all locations on a systematic and timely basis.",
      " State officials also told us that they need to periodically assess the vulnerabilities of and threats to their systems. They also acknowledged the need for and importance of developing a reporting mechanism that can be used across the department to share information on vulnerabilities and incidents. An additional control mechanism that could help State ensure that controls are in place and working as intended, and that incident response capability is strong, is the annual financial statement audit. This audit is required to be conducted annually by the Chief Financial Officers Act of 1990. A part of this audit could involve a detailed examination of an agency\u2019s general and application computer controls. We have been working with the department\u2019s inspector general to ensure that State\u2019s financial audit includes a comprehensive assessment of these controls.",
      " When this audit is complete, management will be able to better gauge its progress in establishing and implementing sound information security controls. State Lacks a Comprehensive Information Security Plan Federal agencies are required by the Computer Security Act to develop and implement security plans to protect any systems containing sensitive data. The February 1996 revision to Appendix III of OMB Circular A-130 requires that a summary of the security plans be incorporated into an agency\u2019s strategic information resources management plan. State has no information security plan. Instead, the department\u2019s IRM Strategic and Performance Management Plan includes several pages of text on information security and its implementation. This discussion highlights the development of computer security and privacy plans for each system containing sensitive information,",
      " as required by the Computer Security Act. However, when we requested copies of these individual plans, we were told that they could not be located and that even if they were found, they would be virtually useless because they were drafted in the late 1980s, never updated, and are now obsolete. The strategic plan also references other efforts underway within the department, including assessments of various software applications to identify vulnerabilities and evaluations of antivirus software products. However, this discussion is insufficient. It merely lists a set of ad hoc and largely unrelated programs and projects to improve information security. It does not relate these programs to any risk-based analysis of threats to and vulnerabilities of the department\u2019s networks or systems.",
      " Furthermore, this discussion mentions the existence of but does not endorse or discuss planned efforts to implement any key recommendations identified in the Internet Risk Analysis. A companion document to the strategic plan, the department\u2019s February 1997 Tactical Information Resources Management Plan, indicates the lack of emphasis that information security receives. According to this plan, the department should closely monitor and centrally manage all information resource management initiatives that \u201care critical to the Department missions; will cost more than $1 million through their life cycle; have schedules exceeding one year; and cut across organizational lines.\u201d However, the plan acknowledges that \u201cat this time the Department has no Security projects that meet the criteria\u201d above.",
      " In addition, the plan ignores the need for centralized management for information technology projects and, instead, requires individual offices to fund and manage their own security requirements. Greater Internet Connectivity Poses Additional Risks Internet security was the only area in which we found that State\u2019s controls were currently adequate. We attempted to gain access to internal State networks by going through and around State\u2019s Internet gateways or exploiting information servers from the outside via the Internet, but we were not able to gain access to State\u2019s systems. State\u2019s protection in this area is adequate, in part, because the department has limited its use and access to the Internet. However, State officials have been requesting greater Internet access and the department is considering various options for providing it.",
      " Expansion of Internet services would provide more pathways and additional tools for an intruder to attempt to enter unclassified computer resources and therefore increase the risk to State systems. Recognizing this, State conducted an analysis of the risks involved with increasing Internet use. However, the department has not yet decided to what extent it will accept and/or address these new risks. Until it does so and implements a comprehensive security program that ensures that top managers are committed to enforcing security controls and users are fully aware of their computer security responsibilities, State will not be in a good position to expand its Internet use. Conclusions Networked information systems offer tremendous potential for streamlining and improving the efficiency of State Department operations.",
      " However, they also greatly increase the risks that sensitive information supporting critical State functions can be attacked. Our testing demonstrated that State does not have adequate controls to protect its computer resources and data from external attacks and unauthorized activities of trusted users who are routinely allowed access to computer resources for otherwise legitimate purposes. These weaknesses pose serious risk to State information and operations and must be mitigated. We recognize that no organization can anticipate all potential vulnerabilities, and even if it could, it may not be cost-effective to implement every measure available to ensure protection. However, State has yet to take some basic steps to upgrade its information systems security and improve its position against unauthorized access.",
      " These steps include ensuring that top managers are fully aware of the need to protect State\u2019s computer resources, establishing a strong central management focal point to remedy the diluted and fragmented security management structure, and addressing the risks of additional external connectivity before expanding its Internet usage. Until State embraces these important aspects of good computer security, its operations, as well as those of other federal agencies that depend on State, will remain vulnerable to unauthorized access to computer systems and data. Recommendations We reaffirm the recommendations we made in our March 1998 classified report. These recommendations called on State to take the following actions. Establish a central information security unit and assign it responsibility for facilitating,",
      " coordinating, and overseeing the department\u2019s information security activities. In doing so, assign the Chief Information Officer the responsibility and full authority for ensuring that the information security policies, procedures, and practices of the agency are adequate; clarify the computer security responsibilities of the Bureau of Diplomatic Security, the Office of Information Management, and individual bureaus and diplomatic posts; and consider whether some duties that have been assumed by these offices can be assigned to, or at a minimum coordinated with, the central information security unit. Develop policy and procedures that require senior State managers to regularly determine the (1) value and sensitivity of the information to be protected, (2)",
      " vulnerabilities of their computers and networks, (3) threats, including hackers, thieves, disgruntled employees, foreign adversaries, and spies, (4) countermeasures available to combat the problem, and (5) cost-effectiveness of the countermeasures. Revise the Foreign Affairs Manual so that it clearly describes the legislatively-mandated security responsibilities of the Chief Information Officer, the security responsibilities of senior managers and all computer users, and the need for and use of risk assessments. Develop and maintain an up-to-date security plan and ensure that revisions to the plan incorporate the results obtained from risk assessments. Establish and implement key controls to help the department protect its information systems and information,",
      " including periodic penetration testing to identify vulnerabilities in State\u2019s assessments of the department\u2019s ability to (1) react to intrusion and attacks on its information systems, (2) respond quickly and effectively to security incidents, (3) help contain and repair any damage caused, and (4) prevent future damage, and central reporting and tracking of information security incidents to ensure that knowledge of these problems can be shared across the department and with other federal agencies. Ensure that the results of the annual financial statement audits required by the Chief Financial Officers Act of 1990 are used to track the department\u2019s progress in establishing, implementing, and adhering to sound information security controls.",
      " Require department managers to work with the central unit to expeditiously review the specific vulnerabilities and suggested actions we provided to State officials at the conclusion of our testing. After the department has reviewed these weaknesses and determined the extent to which it is willing to accept or mitigate security risks, assign the central unit responsibility for tracking the implementation and/or disposition of these actions. Direct the Assistant Secretary for Diplomatic Security to follow-up on the planned implementation of cost-effective enhanced physical security measures. Defer the expansion of Internet usage until (1) known vulnerabilities are addressed using risk-based techniques and (2) actions are taken to provide appropriate security measures commensurate with the planned level of Internet expansion.",
      " Agency Comments and Our Evaluation The Department of State provided written comments on a draft of our classified report and concurred with eight of our nine recommendations. In summary, State said that its Chief Information Officer is beginning to address the lack of a central focus for information systems security through the establishment of a Security Infrastructure Working Group; agreed to formalize and document risk management decisions; agreed to revise provisions of the Foreign Affairs Manual related to information security and undertake an evaluation of one of its most significant networks based on our review; and said it is implementing a plan to correct the technical weaknesses identified during our testing. State also took steps to minimize unauthorized physical access to a State facility.",
      " State did not concur with our recommendation to defer the expansion of Internet usage. In explaining its nonconcurrence, State asserted that expanded use of Internet resources is a priority; the Chief Information Officer, Office of Information Management, and Bureau of Diplomatic Security are coordinating on architecture and security functionality that should mitigate any significant security vulnerabilities through the use of a separate enclave; segmenting the network, implementing controlled interfaces, restricting services, restricting the processing or transmission of sensitive unclassified information, and proactive network monitoring and incident handling should mitigate these risks; and a formal risk analysis of expanding the Internet throughout the department has been conducted and known risk factors are being considered in the Internet expansion.",
      " Some of these assertions are invalid; the rest do not fully address our recommendation. First, designating expanded Internet usage as a priority does not mean that State should proceed before it fully implements appropriate security controls. If State expands Internet connectivity without effectively mitigating the significant additional risks that entails, it will increase its already serious vulnerabilities to individuals or organizations seeking to damage State\u2019s operations, commit terrorism, or obtain financial gain. Second, State does not explain how \u201ccoordination on architecture and security functionality\u201d between the Chief Information Officer, Office of Information Management, and Bureau of Diplomatic Security will reduce Internet risks, including computer attacks from those wishing to steal information or disable the department\u2019s systems.",
      " As noted in this report, the organizations cited by State share various information security responsibilities, but have different missions and interests. This assertion does not address our recommendation that State establish an organization unit with responsibility for and authority over all information security activities, including protecting the department from computer attacks via Internet. Third, State identified a number of controls with it believes will reduce Internet security risks, including establishing a (logically) separate network (enclave) dedicated to Internet usage, and proactively monitoring the network and handling incidents. If effectively implemented and maintained, these measures can help reduce security risks. However, State did not specify how it planned to implement these controls,",
      " what resources it has allocated to these efforts, or if they would be completed before State expands its Internet usage. Our point is that State must actually implement and maintain security measures to mitigate these risks prior to increasing Internet usage. Finally, we discussed State\u2019s risk analysis of expanded Internet usage in our report. This analysis identifies numerous risks associated with expansion and options for addressing them. It is not sufficient that \u201cknown risk factors are being considered in the Internet expansion\u201d; as previously noted, State must mitigate these risks prior to increasing Internet usage. As agreed with your offices, unless you publicly announce the contents of this report earlier, we will not distribute it until 30 days from its date.",
      " At that time, we will send copies of this report to the Chairman and Ranking Minority Members of the House Government Reform and Oversight Committee, Senate Committee on Appropriations, Subcommittee on Commerce, Justice, State, the Judiciary and Related Agencies, the House Committee on Appropriations, Subcommittee on Commerce, Justice, State, the Judiciary and Related Agencies, and the Secretary of State. Copies will be available to others upon request. If you have questions about this report, please contact me at (202) 512-6240. Major contributors are listed in appendix I. Major Contributors to This Report Accounting and Information Management Division, Washington, D.C. Keith A.",
      " Rhodes, Technical Director John B. Stephenson, Assistant Director Kirk J. Daubenspeck, Evaluator-in-Charge Patrick R. Dugan, Auditor Cristina T. Chaplain, Communications Analyst The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O.",
      " Box 37050 Washington, DC  20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-",
      "6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
    "length": 7148,
    "hardness": null,
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  },
  {
    "id": 12,
    "question": null,
    "answer": "The devastation and displacement caused by Hurricane Katrina in the Gulf Coast region ofthe United States has very specific implications for foreign nationals who lived in the region. Whether the foreign national is a legal permanent resident (LPR), a nonimmigrant (e.g., temporaryresident such a foreign student, intracompany transferee, or guest worker) or an unauthorized alien(i.e., illegal immigrant) is a significant additional factor in how federal laws and policies are applied. In this context, the key question is whether Congress should relax any of these laws pertaining toforeign nationals who are victims of Hurricane Katrina . Many of the victims of Hurricane Katrina lack personal identification documents as a resultof being evacuated from their homes, loss or damage to personal items and records, and ongoingdisplacement in shelters and temporary housing. As a result of the widespread damage anddestruction to government facilities in the area affected by the hurricane, moreover, many victimswill be unable to have personal documents re-issued in the near future. Lack of adequate personalidentification documentation, a problem for all victims, has specific consequences under immigrationlaw, especially when it comes to employment and eligibility for programs and assistance. Noncitizens -- regardless of their immigration status -- are not barred from short-term,in-kind emergency disaster relief and services, or from assistance that delivers in-kind services atthe community level, provides assistance without individual determinations of each recipient's needs,and is necessary for the protection of life and safety. As legislation to ease the eligibility rules ofmajor federal programs for Hurricane Katrina victims generally is under consideration, the questionof whether to ease the specific rules for immigrants has arisen ( S. 1695 ). Most avenues for immigration require that aliens have a family member or employer who iseligible, able, and willing to sponsor them. There are very few immigration opportunities based onself petitioning. The loss of life, devastation of businesses, or depletion of personal assets directlyaffects visa qualifications for otherwise eligible aliens who are victims of Hurricane Katrina or thefamily of victims. It also affects nonimmigrants whose purposes for the temporary visas aredisrupted by the hurricane and its aftermath. Legislation comparable to that enacted for survivingfamily of victims of the September 11, 2001 terrorist attacks has passed the House ( H.R. 3827 ). Finally, at various times in the past, the government has given discretionary relief fromdeportation so that aliens who have not been legally admitted to the United States or whosetemporary visas have expired nonetheless may remain in this country temporarily. Following theSeptember 11, 2001 terrorist attacks, for example, family members of victims whose ownimmigration status was dependent on the victim's immigration status were assured that they shouldnot be concerned about facing immediate removal from the United States. This report will beupdated.\n",
    "docs": [
      "Introduction The devastation and displacement caused by Hurricane Katrina in the Gulf Coast region ofthe United States pose a host of environmental, human resource, and other public policy challenges. Caught in the web of this tragedy and its sweeping dilemmas are a unique subset ofimmigration-related issues. The loss of livelihood, habitat, and life itself has very specificimplications for foreign nationals who lived in the Gulf Coast region. Whether the noncitizen orforeign national is a legal permanent resident (LPR), a nonimmigrant (e.g., temporary resident sucha foreign student, intracompany transferee, or guest worker) or an unauthorized alien (i.e., illegalimmigrant)",
      " is a significant additional factor in how federal immigration and public welfare laws areapplied. In this context, the key question is whether Congress should relax any of these lawspertaining to foreign nationals who are victims of Hurricane Katrina. The total number of foreign nationals affected by Hurricane Katrina is not known. Surveydata from the U.S. Census Bureau estimate that over 270,000 foreign-born persons lived in Alabama,Louisiana, and Mississippi in 2004. (1) The Department of Homeland Security (DHS) estimates that34,242 naturalized citizens, 24,087 LPRs, and 71,992 nonimmigrants may be affected by HurricaneKatrina.",
      " (2) Jeffrey Passel,a demographer who specializes in unauthorized migration, estimates that at least an additional20,000 to 35,000 unauthorized aliens are victims of Hurricane Katrina. (3)  This report focuses on four immigration policy implications of Hurricane Katrina. It openswith a discussion of employment verification and other documentary problems arising for those whohave lost their personal identification documents. It follows with an overview of the rules fornoncitizen eligibility for federal benefits. Issues pertaining to how the loss of life or livelihoodaffects eligibility for immigration visa benefits are discussed next. The report closes withbackground on relief from removal options for Katrina-affected aliens.",
      " Legislation addressing thesepolicy areas is discussed in the relevant sections. Personal Identification and Employment Eligibility Many of the victims of Hurricane Katrina lack personal identification documents as a resultof being evacuated from their homes, loss or damage to personal items and records, and ongoingdisplacement in shelters and temporary housing. As a result of the widespread damage anddestruction to government facilities in the area affected by the hurricane, moreover, many victimswill be unable to have personal documents re-issued in the near future. Lack of adequate personalidentification documentation, a problem for all victims, has specific consequences under immigrationlaw, especially when it comes to employment. The Immigration and Nationality Act (INA)",
      " requires employers to verify employmenteligibility and establish identity through specified documents presented by the employee -- citizensand foreign nationals alike. Specifically, \u00c2\u00a7274(a)(1)(B) of the INA makes it illegal for an employerto hire any person -- citizen or alien -- without first verifying the person's authorization to work inthe United States. Employers (and recruiters and referrers for a fee) must examine documents andattest that they appear to be genuine and relate to the individual. If a document does not reasonablyappear on its face to be genuine and relate to the person presenting it, the employer may not acceptit. Under INA \u00c2\u00a7274(b), employers may not specify which document(s)",
      " the person must present. TheINA and applicable regulations provide for three categories of documents: (1) those that establishboth identity and employment eligibility; (2) those that establish identity only; and (3) those thatestablish work eligibility only. (4)  Employers who fail to properly comply as required by law are subject to sanctions. Specifically, employers who fail to complete, retain, and/or present the proper form (known as theI-9) for inspection may be subject to a civil penalty for violations ranging from $110-$1,100 peremployee. For a violation of hiring unauthorized aliens, an employer can also face:",
      " $275-$2,200fine for each unauthorized individual; $2,200-$5,500 for each employee if the employer haspreviously been in violation; and, $3,300-$11,000 for each individual if the employer was subjectto more than one cease and desist order. (5)  On September 6, 2005, DHS, the federal department responsible for enforcing theseprovisions of law, issued a statement that it would not bring sanction actions against employers forhiring individuals evacuated or displaced as a result of Hurricane Katrina.... the Department of Homeland Security will refrainfrom initiating employer sanction enforcement actions for the next 45 days for civil violations,",
      " underSection 274A of the Immigration and Nationality Act, with regard to individuals who are currentlyunable to provide identity and eligibility documents as a result of the hurricane. Employers will stillneed to complete the Employment Eligibility Verification (I-9) Form as much as possible but shouldnote at this time that the documentation normally required is not available due to the eventsinvolving Hurricane Katrina. At the end of 45 days, the Department of Homeland Security willreview this policy and make further recommendations. (6) Given that the individuals affected by Hurricane Katrina are now scattered across the UnitedStates, this moratorium on sanctioning employers may have broad implications and is not withoutits critics.",
      " Representative Lamar Smith, for example, is quoted as saying: \"Hurricane Katrina hascaused a situation unlike any we have ever had to endure, but that does not mean that the Departmentof Homeland Security has the authority to ignore important laws.\" Representative Smith, who sitson the House Committee on the Judiciary Subcommittee on Immigration, Border Security andClaims, continued, \"the end result may be worthwhile, but that does not mean that federal agenciescan disregard statutes put in place to protect American jobs.\" (7)  U.S. Citizenship and Immigration Services (USCIS) announced that the records in its NewOrleans office were not damaged and that field offices assisting hurricane victims in replacingofficial documentation.",
      " USCIS stated that it will be verifying identity and immigration status beforere-issuing any immigration related document and will be utilizing its electronic file data to performidentity verification where possible. (8)  On September 21, 2005, the House of Representatives passed under suspension of the rules, H.R. 3827, the Immigration Relief for Hurricane Katrina Victims Act of 2005. Amongother provisions, H.R. 3827 would amend the INA to authorize DHS to waive for not more than 90days employer attestation or verification requirements due to disaster-caused document loss (duringa major disaster-declaration period). The House-passed bill also would authorize DHS to replace orprovide temporary identity and employment authorization documents lost,",
      " stolen, or destroyed asa consequence of Hurricane Katrina. Noncitizen Eligibility for Federal Assistance Lack of sufficient documentation to confirm eligibility for federal programs and assistanceis a core issue for all victims, not merely those who are noncitizens. The eligibility of noncitizensfor public assistance programs, moreover, is based on a complex set of rules that are determinedlargely by the type of noncitizen in question and the nature of services being offered. (9) The Personal Responsibilityand Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ) is the key statute that spells outthe eligibility rules for noncitizens seeking federal assistance.",
      " As legislation to ease the federaleligibility rules for public assistance for Hurricane Katrina victims generally is under consideration,the question of whether to ease the specific rules for noncitizens has arisen (S. 1695). (10)  Legal Permanent Residents Under current law, noncitizens' eligibility for the major federal means-tested benefitprograms largely depends on their immigration status and whether they arrived in the United States(or were on a program's rolls) before August 22, 1996, the enactment date of the PersonalResponsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ). The basic rulesare as follows:",
      " Refugees and asylees are eligible for SSI benefits and Medicaid for seven yearsafter arrival, and for five years under TANF. (11) After this term, they generally are ineligible for SSI, but may beeligible, at state option, for Medicaid and TANF. LPRs with a substantial work history -- generally 10 years (40 quarters) ofwork documented by Social Security or other employment records -- or a military connection (activeduty military personnel, veterans, and their families) are eligible for the full range ofprograms. All aliens who have resided in the United States for five or more years as\"",
      "qualified aliens\" -- i.e., LPRs, refugees/asylees, and other non-temporary legal residents (such asCuban/Haitian entrants) are eligible for food stamps. LPRs receiving SSI as of August 22, 1996, continue to beeligible. Medicaid coverage is required for all otherwise qualified SSI recipients (theymust meet SSI noncitizen eligibility tests). Disabled LPRs who were legally resident as of August 22, 1996, are eligiblefor SSI. LPRs receiving government disability payments, so long as they pass anynoncitizen eligibility test established by the disability program (e.g., SSI recipients would have tomeet SSI noncitizen requirements in order to get food stamps)",
      " are eligible for food stamps. (12) LPRs who were elderly (65+) and legally resident as of August 22, 1996, areeligible for food stamps. LPRs who are children (under 18) are eligible for foodstamps. LPRs entering after August 22, 1996, are barred from TANF and Medicaid forfive years, after which their coverage becomes a state option. (13) For SSI, the five-year barfor new entrants is irrelevant because they generally are denied eligibility (without a timelimit). Several bills that would waive the categorical eligible requirements for various federalprograms in the case of Hurricane Katrina victims have been introduced,",
      " but most are silent on theissue of noncitizens. On September 13, however, legislation to provide the Secretary of Agriculturewith additional authority and funding to provide emergency relief to victims of Hurricane Katrina( S. 1695 ) was introduced, and, among other provisions, this bill would treat legalimmigrants in the United States who are victims of Hurricane Katrina as refugees for the purposesof food stamps. (14)  Unauthorized Aliens The PRWOR of 1996 ( P.L. 104-193 ) also denies most federal benefits, regardless of whetherthey are means tested, to unauthorized aliens (often referred to as illegal aliens). The class ofbenefits denied is broad and covers:",
      " (1) grants, contracts, loans, and licenses; and (2) retirement,welfare, health, disability, housing, food, unemployment, postsecondary education, and similarbenefits. So defined, this bar covers many programs whose enabling statutes do not individuallymake citizenship or immigration status a criterion for participation. Thus, programs that previouslywere not individually restricted -- the earned income tax credit, social services block grants, andmigrant health centers, for example -- became unavailable to unauthorized aliens, unless they fallwithin the act's limited exceptions. These programmatic exceptions include treatment under Medicaid for emergency medical conditions (other than thoserelated to an organ transplant); (15)",
      " short-term, in-kind emergency disaster relief; (16) immunizations against immunizable diseases and testing for and treatment ofsymptoms of communicable diseases; services or assistance (such as soup kitchens, crisis counseling andintervention, and short-term shelters) designated by the Attorney General as: (i) delivering in-kindservices at the community level; (ii) providing assistance without individual determinations of each recipient's needs; and (iii) being necessary for the protection of life and safety; (17) and  to the extent that an alien was receiving assistance on the date of enactment,programs administered by the Secretary of Housing and Urban Development,",
      " programs under TitleV of the Housing Act of 1949, and assistance under Section 306C of the Consolidated Farm andRural Development Act. (18) P.L. 104-193 also permits unauthorized aliens to receive Old Age, Survivors, and DisabilityInsurance benefits under Title II of the Social Security Act (SSA), if the benefits are protected by thattitle or by treaty or are paid under applications made before August 22, 1996. (19) Separately, the P.L.104-193 states that individuals who are eligible for free public education benefits under state andlocal law shall remain eligible to receive school lunch and school breakfast benefits.",
      " (The act itselfdoes not address a state's obligation to grant all aliens equal access to education under the SupremeCourt's decision in Plyler v. Doe, 457 U.S. 202 (1982).) P.L. 104-193 expressly bars unauthorizedaliens from most state and locally funded benefits. The restrictions on these benefits parallel therestrictions on federal benefits. Disaster Assistance As noted in the above discussion, noncitizens -- regardless of their immigration status -- arenot barred from short-term, in-kind emergency disaster relief and services or assistance that deliverin-kind services at the community level, provide assistance without individual determinations of eachrecipient's needs,",
      " and are necessary for the protection of life and safety. (20) Moreover, the Robert T.Stafford Disaster Relief and Emergency Assistance Act, (21) the authority under which the Federal Emergency ManagementAgency (FEMA) conducts disaster assistance efforts, requires nondiscrimination and equitabletreatment in disaster assistance: The President shall issue, and may alter and amend,such regulations as may be necessary for the guidance of personnel carrying out Federal assistancefunctions at the site of a major disaster or emergency. Such regulations shall include provisions forinsuring that the distribution of supplies, the processing of applications, and other relief andassistance activities shall be accomplished in an equitable and impartial manner,",
      " withoutdiscrimination on the grounds of race, color, religion, nationality, sex, age, or economic status. (22) FEMA assistance provided under the Stafford Act includes (but is not limited to) grants forimmediate temporary shelter, cash grants for uninsured emergency personal needs, temporaryhousing assistance, home repair grants, unemployment assistance due to the disaster, emergency foodsupplies, legal aid for low-income individuals, and crisis counseling. (23)  Media accounts of aliens who are fearful of seeking emergency assistance followingHurricane Katrina infer that the reported reluctance is due more to the risk of deportation thanrestricted access to benefits. \"We want to provide food,",
      " water, shelter and medical supplies toeveryone,\" stated DHS spokesperson Joanna Gonzalez. She further assured, \"No one should beafraid to accept our offers to provide safety.\" According to Gonzalez, rescuers had not been askingpeople whether they are in the country legally when they are rescuing them. DHS initially did notissue a statement clarifying whether information that FEMA gathers on unauthorized aliens wouldbe shared with law enforcement agencies, most notably the DHS Immigration and CustomsEnforcement (ICE) bureau. (24) Subsequently, Gonzalez explained, \"... as we move forward withthe response, we can't turn a blind eye to the law.\" (25)",
      "  Preservation of Immigrant Visa Benefits Immigration admissions are subject to a complex set of numerical limits and preferencecategories that give priority for admission on the basis of family relationships, needed skills, andgeographic diversity. There are very few immigration avenues based on self petitioning; mostrequire that aliens have a family member or employer who is eligible, able, and willing to sponsorthem. The loss of life, devastation of businesses, or depletion of personal assets directly affects visaqualifications for otherwise eligible aliens who are victims of Hurricane Katrina or the family ofvictims. It also affects nonimmigrants whose purposes for the temporary visas are disrupted by thehurricane and its aftermath.",
      " Loss of Sponsor The largest number of immigrants is admitted because of a family relationship to a U.S.citizen or LPR. Specifically the family relationships are: immediate relatives of U.S. citizens; (26) the spouses and childrenof LPRs; the adult children of U.S. citizens; and, the siblings of adult U.S. citizens. (27) As of July 2005, mostrelatives of U.S. citizens and LPRs were waiting in backlogs for a visa to become available, with thebrothers and sisters of U.S. citizens waiting almost 12 years. (28) Married adult sons anddaughters of U.S.",
      " citizens who filed petitions seven years ago (February 1, 1998) were beingprocessed for visas in July. Prospective family-sponsored immigrants from the Philippines have themost substantial waiting times before a visa is scheduled to become available to them; consularofficers are now considering the petitions of the brothers and sisters of U.S. citizens from thePhilippines who filed 22 years ago. If the person in the United States who is petitioning for therelative dies while the alien is waiting for the visa, the prospective LPR is no longer eligible for theLPR visa. In terms of most employment-based LPRs, employers hiring prospective LPRs to work forthem petition with USCIS on behalf of the alien and submit applications with the Employment andTraining Administration in Department of Labor (DOL)",
      " to certify employment of the worker. Theprospective LPR must demonstrate that he or she meets the qualifications for the particular job aswell as the INA preference category. If DOL determines that a labor shortage exists in theoccupation for which the petition is filed, labor certification will be issued. (29) If the petitioning employerno longer can employ the worker, the prospective LPR is no longer eligible for an immigrant visa. The \"Immigration Relief for Hurricane Katrina Victims Act of 2005\" ( H.R. 3827 ) was introduced by the Hon. James Sensenbrenner, chairman of the House Committee on theJudiciary,",
      " and Hon. John Conyers, the ranking member of the House Committee on the Judiciary onSeptember 20,2005 and passed the House under suspension of the rules on September 21, 2005. Thisbill is comparable to the provisions in the USA PATRIOT Act ( P.L. 107-56 ) that providedimmigration relief for family members of those killed by the September 11, 2001 terrorist attacks  H.R. 3827 would authorize DHS to provide special immigration status to an alien beneficiary of an immigration petition, nonimmigrant fiance or fianceeK-visa, or labor certification application filed on or before August 29,",
      " 2005 (Hurricane Katrina) ifthe petitioner, applicant, or beneficiary died, was disabled, or lost employment due to the damageor destruction of his or her workplace;  an alien who as of such date was the spouse or child of such alien and wasaccompanying or following to join such alien by August 29, 2007; and an alien who is the grandparent of a child whose parents died as a consequenceof Hurricane Katrina, if at least one of the parents on August 29, 2005, was a U.S. citizen, national,or legal permanent resident.  H.R. 3827 also would automatically extend legal nonimmigrant visa status in the UnitedStates for some nonimmigrant visa holders.",
      " This provision would cover those aliens who weredisabled due to Hurricane Katrina-related injury, or spouses and children of an alien who died or wasdisabled in Hurricane Katrina. In addition, H.R. 3827 would provide that an alien who, as of August 29, 2005,was the spouse or child of a refugee, asylee, or employment-based immigrant who died as aconsequence of Hurricane Katrina would have his or her respective refugee, asylee, or statusadjustment claim determined as if the death had not occurred. In these instances, the bill wouldwaive the public charge inadmissibility grounds.",
      "  Similarly, the USA PATRIOT Act contained provisions designed to insure that certain aliensdid not lose immigration benefits due to circumstances resulting from the September 11, 2001terrorist attacks against the United States. The act granted immigration benefits to some survivingspouses, children, and in some cases, parents, of U.S. citizens or LPRs killed or disabled onSeptember 11, 2001. More specifically under \u00c2\u00a7421 of the Patriot Act, a surviving spouse, child, orfianc\u00c3\u00a9 regained the chance to immigrate by self-petitioning for him or herself. The act also enableda grandparent of a child orphaned by the events of September 11 to self-petition,",
      " if the alien was thegrandparent of a child, both of whose parents died in the terrorist attacks.  In addition, \u00c2\u00a7421 of the Patriot Act allowed prospective employment-based LPRs who werebeneficiaries of approved labor certifications that were revoked due to the disabling of the principalalien or the loss of his/her employment due to physical damage caused by the terrorist attacks ofSeptember 11 to pursue their visa petition. It also extended that opportunity to surviving spousesor children of aliens killed in the attacks who were employment-based LPR or who hademployment-based petitions pending on September 10, 2001. Finally, \u00c2\u00a7422 of the Patriot Act automatically extended legal nonimmigrant visa status in theUnited States for some nonimmigrant visa holders.",
      " This provision covers those aliens who weredisabled in the terrorist attacks of September 11, 2001, or spouses and children of an alien who diedor was disabled in those attacks. Public Charge Ground of Inadmissibility The grounds of inadmissibility are an important basis for denying foreign nationals admissionto the United States, and one of these grounds bars the admission of aliens who are considered likelyto become a public charge (e.g., indigent). (30) All aliens seeking LPR visas who are family-based immigrantsas well as employment-based immigrants who are sponsored by a relative must have bindingaffidavits of support signed by U.S.",
      " sponsors in order to show that they will not become publiccharges. (31) To qualifyas a sponsor, the individual must be a U.S. citizen or legal permanent resident who is at least 18years old, domiciled in the United States, and able to support both the sponsor's family and the alien'simmigrating family members at an annual income level equal to at least 125% of the federal povertyguideline. (32) Theaffidavit of support is a legally binding contract enforceable against the affiant (i.e., sponsor) if theimmigrant collects any means-tested benefit. (33)  At issue is whether victims of Hurricane Katrina will be considered public charges in thecontext of admissibility for LPR visas if they or their sponsors cannot now support their family atan annual income level equal to at least 125%",
      " of the federal poverty guideline. (34) In 1999, the formerImmigration and Naturalization Service (INS) proposed a regulation that defined \"public charge\" tomean an individual who has become or who is likely to become \"primarily dependent on thegovernment for subsistence, as demonstrated by either the receipt of public cash assistance forincome maintenance or institutionalization for long-term care at government expense.\" (35)  At that same time, the INS also issued field guidance to alleviate \"considerable publicconfusion about the relationship between the receipt of federal, state, and local public benefits\" and\"public charge\" determinations in immigration law.",
      " (36) Among other policy pronouncements, this 1999 guidanceaddresses the following concerns: use of non-cash benefits by an immigrant (other than institutionalization forlong-term care at government expense) may not be considered during public charge determinations,nor may cash benefits be considered unless they are for purposes of incomemaintenance; use of cash benefits for income maintenance by an immigrant's family membersis not attributed to the immigrant when determining if the immigrant is likely to become a publiccharge unless the family relies on the benefits as its sole means of support;and an immigrant's use of cash public assistance for income maintenance orinstitutionalization for long-term care at government expense may be considered during publiccharge determinations.",
      " (37) Final regulations on this matter have not been promulgated. Relief from Removal At various times in the past, the Attorney General has provided, under certain conditions,discretionary relief from deportation so that aliens who have not been legally admitted to the UnitedStates or whose temporary visa has expired nonetheless may remain in this country temporarily. Thestatutory authority cited for these discretionary procedures has generally been that portion ofimmigration law that confers on the Attorney General the authority for general enforcement and thesection of the law covering the authority for voluntary departure. (38)  The Attorney General has provided blanket relief by means of the suspension of enforcementof the immigration laws against a particular group of individuals.",
      " In addition to TemporaryProtected Status (TPS) which may be provided by the Secretary of DHS, (39) the two most commondiscretionary procedures to provide relief from deportation have been deferred departure or deferredenforced departure (DED) and extended voluntary departure (EVD). Unlike TPS, aliens who benefitfrom EVD or DED do not necessarily register for the status with USCIS, but they trigger theprotection when they are identified for deportation. If, however, they wish to be employed in theUnited States, they must apply for a work authorization from USCIS. In 1992, the Administration of George H.W.",
      " Bush granted DED to about 80,000 Chinesefollowing the June 1989 Tiananmen Square massacre, and the Chinese retained DED throughJanuary 1994. The George H.W. Bush Administration also granted DED to what was then anestimated 190,000 Salvadorans through December 1994. On December 23, 1997, President WilliamClinton instructed the Attorney General to grant DED to the Haitians for one year. (40)  Following the September 11, 2001 terrorist attacks, INS issued a press release announcingthat family members of victims of the terrorist attacks whose own immigration status was dependenton the victim's immigration status should not be concerned about facing immediate removal fromthe United States.",
      " The then-Commissioner James Ziglar stated: \"The INS will exercise its discretionin a compassionate way toward families of victims during this time of mourning and readjustment. On September 19, we began to advise our offices to exercise compassionate discretion in thesecircumstances.\" (41)  Some, including a group of Democratic Senators, have requested that DHS Secretary MichaelChertoff issue a formal statement reassuring immigrant victims of Hurricanes Rita and Katrina thatthey can seek help from relief agencies without fear of deportation or being turned over toimmigration authorities. (42)  Meanwhile, it appears that some foreign nationals who were adversely affected by HurricaneKatrina are beginning to depart the United States voluntarily.",
      " Mexican consular officials in theUnited States, for example, are reportedly helping to repatriate Mexicans when the person who hasbeen displaced by the hurricane requests it. (43) Initially it was unclear whether ICE would initiate forciblerepatriations targeting unauthorized aliens who were victims of Hurricane Katrina. (44) More recently there havebeen reports, however, of unauthorized aliens who were victims of Hurricane Katrina being arrested,detained, and ordered deported. (45) \n"
    ],
    "length": 5709,
    "hardness": null,
    "role": null
  },
  {
    "id": 13,
    "question": null,
    "answer": "Recent cyber attacks demonstrate the potentially devastating impact these pose to our nation's computer systems and to the federal operations and critical infrastructures that they support. They also highlight that we need to be vigilant against individuals and groups with malicious intent, such as criminals, terrorists, and nation-states perpetuating these attacks. Federal law and policy established the Department of Homeland Security (DHS) as the focal point for coordinating cybersecurity, including making it responsible for protecting systems that support critical infrastructures, a practice commonly referred to as cyber critical infrastructure protection. Since 2005, GAO has reported on the responsibilities and progress DHS has made in its cybersecurity efforts. GAO was asked to summarize its key reports and their associated recommendations aimed at securing our nation's cyber critical infrastructure. To do so, GAO relied on previous reports, as well as two reports being released today, and analyzed information about the status of recommendations. GAO has reported over the last several years that DHS has yet to fully satisfy its cybersecurity responsibilities. To address these shortfalls, GAO has made about 30 recommendations in the following key areas. Specifically, examples of what GAO reported and recommended are as follows: (1) Cyber analysis and warning--In July 2008, GAO reported that DHS's United States Computer Emergency Readiness Team (US-CERT) did not fully address 15 key cyber analysis and warning attributes. For example, US-CERT provided warnings by developing and distributing a wide array of notifications; however, these notifications were not consistently actionable or timely. Consequently, GAO recommended that DHS address these attribute shortfalls. (2) Cyber exercises--In September 2008, GAO reported that since conducting a cyber attack exercise in 2006, DHS demonstrated progress in addressing eight lessons it learned from this effort. However, its actions to address the lessons had not been fully implemented. GAO recommended that the department schedule and complete all identified corrective activities. (3) Control systems--In a September 2007 report and October 2007 testimony, GAO identified that DHS was sponsoring multiple efforts to improve control system cybersecurity using vulnerability evaluation and response tools. However, the department had not established a strategy to coordinate this and other efforts across federal agencies and the private sector, and it did not effectively share control system vulnerabilities with others. Accordingly, GAO recommended that DHS develop a strategy to guide efforts for securing such systems and establish a process for sharing vulnerability information. While DHS has developed and implemented capabilities to address aspects of these areas, it still has not fully satisfied any of them. Until these and other areas are effectively addressed, our nation's cyber critical infrastructure is at risk of increasing threats posed by terrorists, nation-states, and others.\n",
    "docs": [
      "Background The same speed and accessibility that create the enormous benefits  of the computer age can, if not properly controlled, allow  individuals and organizations to inexpensively eavesdrop on or  interfere with computer operations from remote locations for  mischievous or malicious purposes, including fraud or sabotage. In  recent years, the sophistication and effectiveness of cyberattacks  have steadily advanced. Government officials are increasingly concerned about attacks from  individuals and groups with malicious intent, such as criminals,  terrorists, and nation-states. As we reported in June 2007,  cybercrime has significant economic impacts and threatens U.S.  national security interests. Various studies and experts estimate the  direct economic impact from cybercrime to be in the billions of  dollars annually.",
      " In addition, there is continued concern about the  threat that our adversaries, including nation-states and terrorists,  pose to our national security. For example, intelligence officials  have stated that nation-states and terrorists could conduct a  coordinated cyber attack to seriously disrupt electric power  distribution, air traffic control, and financial sectors. In May 2007,  Estonia was the reported target of a denial-of-service cyber attack  with national consequences. The coordinated attack created mass  outages of its government and commercial Web sites. To address threats posed against the nation\u2019s computer-reliant  infrastructures, federal law and policy establishes DHS as the focal  point for cyber CIP.",
      " For example, within DHS, the Assistant  Secretary of Cyber Security and Communications is responsible for  being the focal point for national cyber CIP efforts. Under the  Assistant Secretary is NCSD which interacts on a day-to-day basis  with federal and nonfederal agencies and organizations (e.g., state  and local governments, private-sector companies) regarding, among  other things, cyber-related analysis, warning, information sharing,  major incident response, and national-level recovery efforts.  Consequently, DHS has multiple cybersecurity-related roles and  responsibilities. In May 2005, we identified, and reported on, 13 key  cybersecurity responsibilities called for in law and policy.",
      " These    responsibilities are described in appendix I. Since then, we have performed detailed work and made  recommendations on DHS\u2019s progress in fulfilling specific aspects of  the responsibilities, as discussed in more detail later in this  statement. In addition to DHS efforts to fulfill its cybersecurity responsibilities,  the President in January 2008 issued HSPD 23\u2014also referred to as  National Security Presidential Directive 54 and the President\u2019s  \u201cCyber Initiative\u201d\u2014to improve DHS and the other federal agencies\u2019  cybersecurity efforts, including protecting against intrusion  attempts and better anticipating future threats. While the directive  has not been made public, DHS officials stated that the initiative  includes steps to enhance cyber analysis related efforts,",
      " such as  requiring federal agencies to implement a centralized network  monitoring tool and reduce the number of connections to the  Internet. DHS Needs to Address Several Key Areas Associated with Its  Cybersecurity Responsibilities Over the last several years, we have reported that DHS has yet to  comprehensively satisfy its key cybersecurity responsibilities. These  reports included about 30 recommendations that we summarized  into the following key areas that are essential for DHS to address in  order to fully implement its cybersecurity responsibilities. Bolstering Cyber Analysis and Warning Capabilities In July 2008, we identified that cyber analysis and warning  capabilities included (1) monitoring network activity to detect  anomalies,",
      " (2) analyzing information and investigating anomalies to  determine whether they are threats, (3) warning appropriate  officials with timely and actionable threat and mitigation  information, and (4) responding to the threat. These four  capabilities are comprised of 15 key attributes, which are detailed in  appendix II. We concluded that while US-CERT demonstrated aspects of each of  the key attributes, it did not fully incorporate all of them. For  example, as part of its monitoring, US-CERT obtained information  from numerous external information sources; however, it had not  established a baseline of our nation\u2019s critical network assets and  operations.",
      " In addition, while it investigated if identified anomalies  constitute actual cyber threats or attacks as part of its analysis, it  did not integrate its work into predictive analyses of broader  implications or potential future attacks, nor does it have the  analytical or technical resources to analyze multiple, simultaneous  cyber incidents. The organization also provided warnings by  developing and distributing a wide array of attack and other  notifications; however, these notifications were not consistently  actionable or timely\u2014providing the right information to the right  persons or groups as early as possible to give them time to take  appropriate action. Further, while it responded to a limited number  of affected entities in their efforts to contain and mitigate an attack,",
      "  recover from damages, and remediate vulnerabilities, the  organization did not possess the resources to handle multiple events  across the nation. We also concluded that without the key attributes, US-CERT did not  have the full complement of cyber analysis and warning capabilities  essential to effectively perform its national mission. As a result, we  made 10 recommendations to the department to address shortfalls  associated with the 15 attributes in order to fully establish a national  cyber analysis and warning capability. DHS concurred with 9 of our  10 recommendations. Reducing Organizational Inefficiencies In June 2008, we reported on the status of DHS\u2019s efforts to  establish an integrated operations center that it agreed to adopt per  recommendations from a DHS-commissioned expert task force.",
      " The  two operations centers that were to be integrated were within the  department\u2019s National Communication System and National Cyber  Security Division. We determined that DHS had taken the first of  three steps towards integrating the operations centers\u2014called the  National Coordination Center Watch and US-CERT\u2014it uses to plan  for and monitor voice and data network disruptions. While DHS  completed the first integration step by locating the two centers in  adjacent space, it had yet to implement the remaining two steps.  Specifically, although called for in the task force\u2019s  recommendations, the department had not organizationally merged  the two centers or involved key private sector critical infrastructure  officials in the planning,",
      " monitoring, and other activities of the  proposed joint operations center. In addition, the department lacked  a strategic plan and related guidance that provides overall direction  in this area and has not developed specific tasks and milestones for  achieving the two remaining integration steps. We concluded that until the two centers were fully integrated, DHS  was at risk of being unable to efficiently plan for and respond to  disruptions to communications infrastructure and the data and  applications that travel on this infrastructure, increasing the  probability that communications will be unavailable or limited in  times of need. As a result, we recommended that the department  complete its strategic plan and define tasks and milestones for  completing remaining integration steps so that we are better  prepared to provide an integrated response to disruptions to the  communications infrastructure.",
      " DHS concurred with our first  recommendation and stated that it would address the second  recommendation as part of finalizing its strategic plan. DHS has recently made organizational changes to bolster its  cybersecurity focus. For example, in response to the President\u2019s  January 2008 Cyber Initiative, the department established a National  Cybersecurity Center to ensure coordination among cyber-related  efforts across the federal government. DHS placed the center at a  higher organizational level than the Assistant Secretary of Cyber  Security and Communications. As we previously reported, this  placement raises questions about, and may in fact, diminish the  Assistant Secretary\u2019s authority as the focal point for the federal  government\u2019s cyber CIP efforts.",
      " It also raises similar questions about  NCSD\u2019s role as the primary federal cyber analysis and warning  organization. Completing Corrective Actions Identified During A Cyber Exercise In September 2008, we reported on a 2006 major DHS-coordinated  cyber attack exercise, called Cyber Storm, that included large scale  simulations of multiple concurrent attacks involving the federal  government, states, foreign governments, and private industry. We  determined that DHS had identified eight lessons learned from this  exercise, such as the need to improve interagency coordination  groups and the exercise program. We also concluded that while DHS  had demonstrated progress in addressing the lessons learned,",
      " more  needed to be done. Specifically, while the department completed 42  of the 66 activities identified to address the lessons learned, it  identified 16 activities as ongoing and 7 as planned for the future.  In addition, DHS provided no timetable for the completion dates of  the ongoing activities. We noted that until DHS scheduled and  completed its remaining activities, it was at risk of conducting  subsequent exercises that repeated the lessons learned during the  first exercise. Consequently, we recommended that DHS schedule  and complete the identified corrective activities so that its cyber  exercises can help both public and private sector participants  coordinate their responses to significant cyber incidents.",
      " DHS  agreed with the recommendation. Developing Sector-Specific Plans That Fully Address All of the Cyber-Related Criteria In 2007, we reported and testified on the cybersecurity aspects of  CIP plans for 17 critical infrastructure sectors, referred to as sector- specific plans. Specifically, we found that none of the plans fully  addressed the 30 key cybersecurity-related criteria described in DHS  guidance. We also determined that while several sectors\u2019 plans fully  addressed many of the criteria, others were less comprehensive. In  addition to the variations in the extent to which the plans covered  aspects of cybersecurity, there was also variance among the plans in  the extent to which certain criteria were addressed.",
      " For example,  fewer than half of the plans fully addressed describing (1) a process  to identify potential consequences of cyber attack or (2) any  incentives used to encourage voluntary performance of risk  assessments. We noted that without complete and comprehensive  plans, stakeholders within the infrastructure sectors may not  adequately identify, prioritize, and protect their critical assets.  Consequently, we recommended that DHS request that the lead  federal agencies, referred to as sector-specific agencies, that are  responsible for the development of CIP plans for their sectors fully  address all cyber-related criteria by September 2008 so that  stakeholders within the infrastructure sectors will effectively  identify,",
      " prioritize, and protect the cyber aspects of their CIP efforts.  The updated plans are due this month. Improving Cybersecurity of Infrastructure Control Systems In a September 2007 report and October 2007 testimony, we  identified that federal agencies had initiated efforts to improve the  security of critical infrastructure control systems\u2014computer-based  systems that monitor and control sensitive processes and physical  functions. For example, DHS was sponsoring multiple control  systems security initiatives, including efforts to (1) improve control  systems cybersecurity using vulnerability evaluation and response  tools and (2) build relationships with control systems vendors and  infrastructure asset owners. However, the department had not  established a strategy to coordinate the various control systems  activities across federal agencies and the private sector.",
      " Further, it  lacked processes needed to address specific weaknesses in sharing  information on control system vulnerabilities. We concluded that  until public and private sector security efforts are coordinated by an  overarching strategy and specific information sharing shortfalls are  addressed, there was an increased risk that multiple organizations  would conduct duplicative work and miss opportunities to fulfill  their critical missions. Consequently, we recommended that DHS develop a strategy to  guide efforts for securing control systems and establish a rapid and  secure process for sharing sensitive control system vulnerability  information to improve federal government efforts to secure control  systems governing critical infrastructure. In response, DHS officials  took our recommendations under advisement and more recently  have begun developing a Federal Coordinating Strategy to Secure  Control Systems,",
      " which is still a work in process. In addition, while  DHS began developing a process to share sensitive information; it  has not provided any evidence that the process has been  implemented or that it is an effective information sharing  mechanism. Strengthening DHS\u2019s Ability to Help Recovery from Internet Disruptions We reported and later testified in 2006 that the department had  begun a variety of initiatives to fulfill its responsibility for  developing an integrated public/private plan for Internet recovery.  However, we determined that these efforts were not comprehensive  or complete.  As such, we recommended that DHS implement nine  actions to improve the department\u2019s ability to facilitate  public/private efforts to recover the Internet in case of a major  disruption.",
      " In October 2007, we testified that the department had made  progress in implementing our recommendations; however, seven of  the nine have not been completed. For example, it revised key plans  in coordination with private industry infrastructure stakeholders,  coordinated various Internet recovery-related activities, and  addressed key challenges to Internet recovery planning. However, it  had not, among other things, finalized recovery plans and defined  the interdependencies among DHS\u2019s various working groups and  initiatives. In other words, it has not completed an integrated  private/public plan for Internet recovery. As a result, we concluded  that the nation lacked direction from the department on how to  respond in such a contingency.",
      " We also noted that these incomplete  efforts indicated DHS and the nation were not fully prepared to  respond to a major Internet disruption. In summary, DHS has developed and implemented capabilities to  satisfy aspects of key cybersecurity responsibilities. However, it still  needs to take further action to fulfill all of these responsibilities. In  particular, it needs to fully address the key areas identified in our  recent reports. Specifically, it will have to bolster cyber analysis and  warning capabilities, address organizational inefficiencies by  integrating voice and data operations centers, enhance cyber  exercises by completing the identified activities associated with the  lessons learned, ensure that cyber-related sector-specific critical  infrastructure plans are completed,",
      " improve efforts to address the  cybersecurity of infrastructure control systems by completing a  comprehensive strategy and ensuring adequate mechanisms for  sharing sensitive information, and strengthen its ability to help  recover from Internet disruptions by finalizing recovery plans and  defining interdependencies. Until these steps are taken, our nation\u2019s  computer-reliant critical infrastructure remains at unnecessary risk  of significant cyber incidents. Mr. Chairman, this concludes my statement. I would be happy to  answer any questions that you or members of the subcommittee  may have at this time. If you have any questions on matters discussed in this testimony,  please contact me at (202) 512-",
      "9286, or by e-mail at  pownerd@gao.gov. Other key contributors to this testimony include  Camille Chaires, Michael Gilmore, Rebecca LaPaze, Kush Malhotra,  and Gary Mountjoy. Appendix I: DHS\u2019s Key Cybersecurity Responsibilities Developing a comprehensive national plan for securing the key resources and critical  infrastructure of the United States, including information technology and  telecommunications systems (including satellites) and the physical and technological  assets that support such systems. This plan is to outline national strategies, activities, and  milestones for protecting critical infrastructures. Fostering and developing public/private partnerships with and among other federal  agencies,",
      " state and local governments, the private sector, and others. DHS is to serve as  the \u201cfocal point for the security of cyberspace.\u201d  Improving and enhancing information sharing with and among other federal agencies, state  and local governments, the private sector, and others through improved partnerships and  collaboration, including encouraging information sharing and analysis mechanisms. DHS is  to improve sharing of information on cyber attacks, threats, and vulnerabilities. Providing cyber analysis and warnings, enhancing analytical capabilities, and developing a  national indications and warnings architecture to identify precursors to attacks. Providing crisis management in response to threats to or attacks on critical information  systems.",
      " This entails coordinating efforts for incident response, recovery planning,  exercising cybersecurity continuity plans for federal systems, planning for recovery of  Internet functions, and assisting infrastructure stakeholders with cyber-related emergency  recovery plans. Leading efforts by the public and private sector to conduct a national cyber threat  assessment, to conduct or facilitate vulnerability assessments of sectors, and to identify  cross-sector interdependencies.   Leading and supporting efforts by the public and private sector to reduce threats and  vulnerabilities. Threat reduction involves working with the law enforcement community to  investigate and prosecute cyberspace threats. Vulnerability reduction involves identifying  and remediating vulnerabilities in existing software and systems.",
      " Collaborating and coordinating with members of academia, industry, and government to  optimize cybersecurity-related research and development efforts to reduce vulnerabilities  through the adoption of more secure technologies.  Establishing a comprehensive national awareness program to promote efforts to  strengthen cybersecurity throughout government and the private sector, including the home  user. Improving cybersecurity-related education, training, and certification opportunities.  Partnering with federal, state, and local governments in efforts to strengthen the  cybersecurity of the nation\u2019s critical information infrastructure to assist in the deterrence,  prevention, preemption of, and response to terrorist attacks against the United States. Working in conjunction with other federal agencies,",
      " international organizations, and  industry in efforts to promote strengthened cybersecurity on a global basis. Coordinating and integrating applicable national preparedness goals with its National  Infrastructure Protection Plan. Appendix II: Key Attributes of Cyber Analysis and Warning  Capabilities Attribute    Establish a baseline understanding of network assets and normal network traffic volume and flow     Assess risks to network assets     Obtain internal information on network operations via technical tools and user reports    Obtain external information on threats, vulnerabilities, and incidents through various relationships,  alerts, and other sources     Detect anomalous activities    Verify that an anomaly is an incident (threat of attack or actual attack)    Investigate the incident to identify the type of cyber attack,",
      " estimate impact, and collect evidence    Identify possible actions to mitigate the impact of the incident    Integrate results into predictive analysis of broader implications or potential future attack    Develop attack and other notifications that are targeted and actionable     Provide notifications in a timely manner     Distribute notifications using appropriate communications methods    Contain and mitigate the incident     Recover from damages and remediate vulnerabilities     Evaluate actions and incorporate lessons learned  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.\n"
    ],
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  {
    "id": 14,
    "question": null,
    "answer": "Russia will host the Asia-Pacific Economic Cooperation's (APEC) week-long series of senior-level meetings in Vladivostok on September 2-9, 2012. The main event for the week will be the 20th APEC Economic Leaders' Meeting to be held September 8-9, 2012. President Barack Obama will not attend the event; Secretary of State Hillary Clinton will lead the U.S. delegation. As host for the 20th APEC Economic Leaders' Meeting, Russia has set the main agenda items as: advancing trade and investment liberalization and regional economic integration; strengthening food security; establishing reliable supply chains; and promoting cooperation to foster innovative growth. The United States hopes to complete priorities established at last year's Economic Leaders' Meeting in Honolulu and support Russia's agenda in cases where the two nations share a common objective. On November 12-13, 2011, the United States hosted the 19th APEC Economic Leaders' Meeting in Honolulu. While in Honolulu, the nine leaders of negotiating nations\u2014Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam\u2014met and announced the broad outline for the Trans-Pacific Partnership (TPP) trade agreement, which to the United States and some other APEC members may serve as a stepping stone for a broader Free Trade Area of the Asia-Pacific open to all APEC members. However, not all APEC members support such a vision for the TPP.  Following the 19th APEC Economic Leaders' Meeting, the APEC leaders issued a declaration, reaffirming their opposition to protectionism and pledging to advance regional integration and the expansion of trade among APEC members. The leaders also agreed to set a cap tariff rate on \"environmental goods\" of 5%, and to phase out tariffs on environmental goods by 2015. However, they could not reach a final agreement on which goods would be considered \"environmental goods.\" Given the growing number of alternative regional events or organizations at which the United States can present its views, the heightened U.S. engagement in the Asia-Pacific region has raised questions about APEC's continued role and relevance in U.S. foreign policy. Since taking office, President Obama has strengthened ties with the Association of Southeast Asian Nations (ASEAN) and the East Asian Summit (EAS), raising questions about the roles of each of these groups in U.S. relations in the region. In addition, China has grown concerned about greater U.S. interest in the region, with some Chinese officials viewing it as part of a U.S. containment policy aimed at China. Congressional interest in APEC has generally focused on three issues\u2014implications for U.S. trade policy in general, potential effects on relations with China, and budgetary matters. On occasion, the trade liberalization measures proposed to APEC by the United States have required changes in U.S. trade laws. As an APEC member, the United States must contribute to the annual budget of APEC. The Congressional Budget Justification for FY2013 includes a request for $1.028 million for APEC support.\n",
    "docs": [
      "Main Points Russia will host the Asia-Pacific Economic Cooperation's (APEC) week-long series of senior-level meetings in Vladivostok on September 2-9, 2012. The main event for the week will be the 20 th APEC Economic Leaders' Meeting to be held September 8-9, 2012. For the United States, the main points for these APEC meetings are the following.  President Obama does not plan to attend the 2012 APEC Economic Leaders' Meeting. Secretary of State Hillary Clinton will represent the United States. As host, Russia has identified food security, supply chain reliability,",
      " and fostering innovative growth through cooperation as priorities for the meetings, in addition to APEC's general goals of trade and investment liberalization and regional economic integration. A major backdrop for the meeting will be the status of the ongoing Trans-Pacific Partnership (TPP) negotiations and the potential implications for APEC's future; all of the TPP-negotiating nations are APEC members. The U.S. priorities in Vladivostok are to build on the accomplishments made during the 19 th APEC Economic Leaders' Meeting held in Honolulu on November 12-13, 2011; and to cooperate with Russia on the elements of the 2012 agenda for which the two nations share a common perspective.",
      " Overview of APEC The Asia-Pacific Economic Cooperation (APEC) was founded in 1989 for the purpose of promoting trade and investment liberalization in the Asia-Pacific as a means of fostering sustainable economic growth and prosperity in the region. APEC currently has 21 members: Australia, Brunei, Canada, Chile, China, Hong Kong (officially Hong Kong, China), Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan (officially Chinese Taipei), Thailand, the United States, and Vietnam. APEC is one of a few international organizations in which both China and Taiwan are members.",
      "  During the 1994 Economic Leaders' Meeting in Bogor, Indonesia, APEC members agreed to the Bogor Goals of \"free and open trade and investment in the Asia-Pacific by 2010 for developed economies and 2020 for developing economies.\" APEC has also made trade facilitation\u2014changes in governmental procedures to increase the ease and efficiency of trade\u2014a major priority. APEC has three distinct features among multilateral trade organizations. First, all the liberalization measures taken by its members are voluntary. Members announce their liberalization measures via \"Individual Action Plans\" (IAPs). Second, these liberalization measures are generally extended to all economies\u2014not just APEC members\u2014under the concept of \"open regionalism.\" Third,",
      " decisions are made by consensus rather than through a process of formal negotiations.  Over the years, APEC has been subject to some criticism, in part because of its lack of formal, binding agreements. However, APEC's proponents point to its accomplishments in lowering trade barriers and facilitating trade. Since APEC's inception, the average tariff rate among its members has declined from 16% to 5%, in part due the commitments made in the IAPs. An APEC trade facilitation initiative from 2002 to 2006 lowered the cost of business transactions for APEC members by an average of 5%. According to some business leaders,",
      " APEC's trade facilitation efforts have had a greater effect on international trade in the region than formal trade agreements that selectively lower tariff rates. According to APEC supporters, these APEC accomplishments have directly contributed to the growth in intra-APEC trade and the region's economic growth. Since 1989, intra-APEC trade has increased four-fold, significantly outpacing the growth in world trade. In 2011, APEC members had grown to account for 44% of global exports and 46% of global imports (see shaded box).  Every year, a different APEC member organizes and hosts a series of meetings held throughout the year,",
      " including the annual Economic Leaders' Meeting, which is traditionally held in October or November. The United States was the host in 2011, Russia is this year's host, and Indonesia will be the host in 2013. This year's Economic Leaders' Meeting is being held in September in part due to anticipated weather conditions in Vladivostok, Russia's economic hub on its Pacific coast. The host member usually picks a theme for the year. Russia chose as the theme for 2012, \"Integrate to Grow, Innovate to Prosper.\" U.S. Trade Relations with APEC The other 20 APEC members are important trading partners for the United States.",
      " Between 2001 and 2011, U.S. total trade with APEC increased from $1.2 trillion to $2.3 trillion. U.S. exports to APEC members over the same period rose from $461 billion to $894 billion; U.S. imports from APEC members jumped from $751 billion to $1.389 trillion. The U.S. trade deficit with other APEC members increased from $290 billion in 2001 to $495 billion in 2011. In 2011, 60% of U.S. exports went to APEC members and 63% of U.S. imports came from APEC members.",
      "  Six of the top 10 U.S. bilateral trading partners in 2011 were APEC members (see Appendix B ). As a group, these six APEC members\u2014Canada, China, Mexico, Japan, South Korea, and Taiwan\u2014received 48.5% of U.S. exports and provided 54.6% of U.S. imports in 2011. Other significant U.S. trading partners in APEC include (by rank in terms of total trade with the United States): Singapore (15 th ; $50.3 billion); Russia (20 th ; $42.9 billion); Hong Kong (21 st ; $40.",
      "9 billion); Malaysia (22 nd ; $40.0 billion); and Australia (24 th ; $37.8 billion). The November 2011 APEC Meetings in Honolulu On November 12-13, 2011, the United States hosted the 19 th APEC Economic Leaders' Meeting in Honolulu. President Obama was joined by the leaders of the other 20 APEC members, or their chosen representatives. The U.S. President held separate bilateral meetings (in chronological order) with Japan's Prime Minister Yoshihiko Noda, Russia's President Dmitry Medvedev, and China's President Hu Jintao.  In addition,",
      " the nine leaders of the nations that were then negotiating the TPP agreement\u2014Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam\u2014met and announced what the Office of the U.S. Trade Representative (USTR) described as \"the broad outlines of an ambitious, 21 st century Trans-Pacific Partnership (TPP) agreement.\" According to USTR, the outline calls for a full regional agreement that provides for comprehensive market access for goods and services, addresses emerging trade issues, and provides for the accession of new members. Since the Honolulu meeting, Canada and Mexico have been accepted into the TPP negotiations,",
      " and Japan is considering joining the talks. In a speech given during the Honolulu meetings, President Obama stated, \"Along with our trade agreements with South Korea, Panama, and Colombia, the TPP will also help achieve my goal of doubling U.S. exports, which support millions of American jobs.\" As is the tradition, a Leaders' Declaration was released following the two-day event. Entitled \"The Honolulu Declaration\u2014Toward a Seamless Regional Economy,\" the 2011 declaration: reaffirmed the members' pledge against protectionism; affirmed that APEC's core mission \"continues to be further integration of our economies and expansion of trade among us\"; indicated that APEC pursues its core mission \"by addressing next-generation trade and investment issues,",
      " including through our trade agreements and a Free Trade Area of the Asia-Pacific [FTAAP]\"; stated a shared commitment to \"green growth\" by \"speeding the transition toward a global low-carbon economy,\" including the phasing out of \"inefficient fossil-fuel subsidies\" and measures to prohibit trade in illegally harvested forest products; pledged APEC members to pursue regulatory reform and convergence to eliminate \"unjustifiably burdensome and outdated regulation\"; and committed APEC members to \"take concrete actions to expand economic opportunities for women.\" For the United States, another important outcome of the 2011 APEC Economic Leaders' Meeting was the agreement to set a cap tariff rate on \"environmental goods\"",
      " of 5%, and to phase out tariffs on environmental goods by 2015. However, the 21 APEC members could not reach a final agreement on which goods would be considered \"environmental goods.\" The Agenda for the 2012 Economic Leaders' Meeting As host for the 20 th APEC Economic Leaders' Meeting, Russia has the lead in setting the agenda for the two-day event. According to the APEC 2012 webpage, the main priorities are: trade and investment liberalization and regional economic integration; strengthening food security; establishing reliable supply chains; and intensive cooperation to foster innovative growth. In order to address those priorities,",
      " Russia has promoted discussions about improving transportation infrastructure in the region, enhancing information and communications technology, and advancing regulatory reform and facilitation. This will be the first APEC meeting at which Russia is a member of the World Trade Organization. The United States has several objectives for this year's meeting in Vladivostok, either to complete priorities established in Honolulu or in cooperation with Russia's agenda. The United States hopes to conclude the discussion of which goods will qualify as \"environmental goods,\" and thereby fall under the tariff phase-out agreed to last year in Honolulu. Similarly, the United States would like APEC to continue its efforts begun in 2011 to improve supply chain efficiency by identifying and eliminating technical choke points in the operation and regulation of international trade.",
      " In May 2012, APEC held a meeting on food security in Kazan, Russia, at which its members made a commitment to support sustainable agriculture and facilitate trade in agricultural goods. The United States would like to continue this discussion of food security, and adopt a more explicit statement regarding restrictions on the export of agricultural goods.  One area where Russia and the United States differ concerns education. Russia and some other APEC members would like to explore the mutual accreditation of tertiary education degrees, but the United States and another group of APEC members have serious concerns about this initiative.  APEC and Other Regional Fora  Since its beginning,",
      " the Obama Administration has signaled that the Asia-Pacific region is a foreign policy priority, and that APEC has an important role in U.S. relations in the region. Besides several high-level trips to Asia, the Obama Administration has sought to strengthen U.S. ties to the region. In 2011, the United States officially joined the East Asia Summit (EAS), \"a forum for dialogue on broad strategic, political and economic issues [emphasis added] of common interest and concern with the aim of promoting peace, stability and economic prosperity in East Asia.\" The United States has also enhanced relations with the Association of Southeast Asian Nations (ASEAN), by appointing the first resident U.S.",
      " Ambassador to ASEAN (David L. Carden, confirmed by the Senate on May 4, 2011) and initiating an annual U.S.-ASEAN Summit. The heightened U.S. engagement in the Asia-Pacific region has raised questions about APEC's continued role and relevance in U.S. foreign policy, particularly given the growing number of alternative regional events or organizations at which the United States can present its views. The Obama Administration has stated that the \"rebalancing\" of U.S. foreign policy towards Asia has a significant economic component, but there are a plethora of economic and trade groupings in the region. The Obama Administration frequently has portrayed APEC as the premier economic and trade organization in the Asia-Pacific region,",
      " and views the EAS as the main geopolitical association in the region. This view is not shared by all of the other members of these two associations.  The Obama Administration has also actively pursued progress in the ongoing TPP negotiations, promoting the potential trade agreement as a stepping stone for creating the FTAAP envisioned by APEC. Not all of APEC's members agree with this representation of the TPP and some do not share the U.S. conceptualization of a future FTAAP. Some Chinese scholars and officials have expressed considerable concern about U.S motivations behind fostering a comprehensive free trade agreement in the Asia-Pacific region, perceiving TPP as part of a U.S.",
      " containment policy aimed at China. Some observers challenge the consistency of a negotiated, binding, and discriminatory TPP with APEC's Bogor Goals and its consensus-based, voluntary, \"open regionalism\" approach to trade and investment liberalization.  In addition, along with reemphasizing the importance of APEC to the region, the Obama Administration has spoken extensively about the \"central role\" of ASEAN in Asia-Pacific relations. While 7 of the 10 ASEAN members are also APEC members, there remains some tension between the supposed importance of APEC as the primary path for regional economic integration and the U.S. view of ASEAN as the pivotal player in regional relations.",
      " The 10 ASEAN members have already concluded a free trade agreement amongst themselves, as well as with China, India, Japan, and South Korea, and are negotiating a free trade agreement with the European Union. ASEAN also is central to the ongoing ASEAN+3 (China, Japan, and South Korea) and ASEAN+6 (Australia, China, India, Japan, New Zealand, and South Korea) free trade agreement negotiations. It is unclear if the United States would welcome the conclusion of a free trade agreement between ASEAN and other nations that did not include the United States. Implications for Congress Congressional interest in APEC has generally focused on three issues\u2014implications for U.S.",
      " trade policy in general, potential effects on relations with China, and budgetary matters. APEC's original vision of a voluntary \"open regionalism\" approach to trade and investment liberalization has proven difficult to implement in the traditional U.S. structure of binding trade agreements. On occasion, the trade liberalization measures proposed to APEC by the United States in its Individual Action Plan (IAP) have required changes in U.S. trade laws (such as the lowering of tariff rates) or trade policy. On November 12, 2011, the 112 th Congress passed the Asia-Pacific Economic Cooperation Business Travel Card Act of 2011 ( P.L.",
      " 112-54 ), authorizing the Secretary of Homeland Security to issue APEC Business Travel Cards, which allow expedited immigration processing through airline crew lanes upon arrival at any U.S. international airport port of entry, but are not a substitute for an entry visa (if required). Over the last few years, APEC has emerged as an issue in U.S. relations with China. While some U.S. observers are apprehensive about China's growing assertiveness in Asia and its active program to negotiate free trade agreements in the region, some Chinese officials and scholars view the U.S. effort to use APEC to promote an FTAAP and negotiate a TPP without China's participation as part of a greater U.S.",
      " strategy of containment of China.  Finally, as an APEC member, the United States must contribute to the annual budget of APEC to maintain the APEC Secretariat in Singapore and finance various APEC activities and programs. In previous fiscal years, the level of direct U.S. financial support for APEC was $901,000 per year. Congress appropriated additional funds in fiscal years 2009, 2010, and 2011 to finance preparations and programs related to hosting APEC in 2011. The Congressional Budget Justification for FY2013 includes a request for $1.028 million for APEC support.  Appendix A.",
      " Agenda for APEC Meetings in Vladivostok, Russia Appendix B. U.S. Trade with APEC Trade with the 20 other APEC members constitutes a major component of U.S. merchandise trade. The top 3 U.S. trading partners in 2011 are APEC members, as are 6 in the top 10. The following table lists the U.S. exports, imports, total trade and balance of trade with each of the 20 other APEC members.\n"
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  {
    "id": 15,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed the activities of other countries' agricultural state trading enterprises (STE), focusing on: (1) General Agreement on Tariffs and Trade (GATT) members' reporting of STE activities from 1980 to 1994; (2) Uruguay Round commitments relating to STE; (3) the potential increase of STE under GATT and the World Trade Organization (WTO); and (4) U.S. efforts to monitor the activities of other countries' STE with respect to GATT and WTO requirements. GAO found that: (1) some information on STE in GATT member countries has been obtained through the notification process, but only about 21 percent of the member countries complied with the reporting requirement between 1980 and 1994; (2) GATT and WTO officials attributed the noncompliance to definitional problems, the lack of a systematic review of STE notifications, and the overall burden and the low priority that some member countries assigned to GATT reporting; (3) WTO officials plan to evaluate the questionnaire used to collect information about STE in order to improve member countries' compliance with the reporting requirements; (4) the Uruguay Round Agreement on Agriculture requires member countries to reduce market access restrictions, export subsidies, and internal support and report on how they complied with these commitments, beginning in 1996; (5) while countries like Russia and China are undertaking privatization efforts to move toward more market-oriented economies, the role of STE in GATT and WTO will likely increase if these countries become members of GATT and WTO; and (6) the U.S. Trade Representative is responsible for monitoring STE activities and their compliance with Uruguay Round commitments, while the Foreign Agricultural Service and the Foreign Commercial Service are responsible for monitoring STE activities in the countries where they are located and reporting on STE activities as needed.\n",
    "docs": [
      "Background When GATT came into force in 1948, some member countries had active state trading programs and wanted to ensure their governments\u2019 right to engage in market activities. However, governments with a dual role as market regulator and market participant can act in ways that protect domestic producers and disadvantage foreign producers. While the drafters of GATT 1947 accepted STEs as legitimate participants in trade, they recognized that STEs, especially those with a monopoly of imports or exports, could be operated to create serious obstacles to trade. GATT 1947 addressed STEs in article XVII (see app. I for the complete text). However,",
      " article XVII did not define the term \u201cstate trading enterprise,\u201d and as discussed later in this report, GATT members have had problems understanding which entities were subject to the provisions of article XVII. As a result of the Uruguay Round, GATT 1994 defined STEs in the Understanding on the Interpretation of Article XVII of the General Agreement on Tariffs and Trade 1994 (the \u201cUnderstanding\u201d\u2014see app. III for the complete text or page 11 of this report for the definition). All entities covered by this definition are subject to article XVII. Article XVII establishes a number of guidelines and requirements with respect to the activities of STEs and the obligations of member countries.",
      " For example, it stipulates that STEs shall act in a manner consistent with the principles of STEs shall make any purchases or sales in accordance with commercial considerations and shall allow enterprises from other member countries the opportunity to compete; member countries shall provide certain information to the GATT/WTO secretariat about their STEs\u2019 activities; and member countries are not required to provide confidential information that (1) would impede law enforcement, (2) would be contrary to the public interest, or (3) would prejudice the legitimate commercial interests of their STEs. Information is provided to the GATT/WTO secretariat about STEs and their activities on the basis of a questionnaire adopted in 1960.",
      " (The full text of the questionnaire is contained in app. II.) GATT/WTO members are to provide responses, called \u201cnotifications,\u201d to the questionnaire. Ideally, the notifications should provide enough transparency (openness) about STE operations to determine whether or not they are adhering to GATT disciplines. The questionnaire asks members to list their STEs, the products for which STEs are maintained, and the reasons for maintaining STEs. It also asks them to provide certain information about how their STEs function and statistics that indicate the extent of trade accounted for by STEs. Other portions of GATT 1947 and GATT 1994 also contain references to STEs.",
      " For example, countries that have negotiated with other GATT/WTO members to provide a certain level of protection for domestic producers cannot allow their STEs to operate in a way that affords a level of protection greater than was negotiated. Also, references made in certain GATT articles to import or export restrictions include those made effective through STEs. Scope and Methodology We prepared this report for congressional requesters to provide information about the nature of state trading in other countries and the treatment of STEs in GATT/WTO. To determine the extent of STEs in GATT member countries, the type of information available about STEs, and the level of compliance with article XVII,",
      " we reviewed article XVII notifications provided to the GATT/WTO secretariat from 1980 to 1994. (Details on our analysis of STE reporting are contained in apps. IV and V.) We also reviewed reports of the Panel on Notifications of State Trading Enterprises, member country position papers on article XVII presented during the Uruguay Round, and GATT/WTO secretariat notes on article XVII prepared for the Uruguay Round. Finally, we discussed the effectiveness of article XVII prior to the Uruguay Round with officials from the United States, GATT/WTO, and other countries. We discussed the results of the Uruguay Round as contained in GATT 1994 and the Agreement on Agriculture with officials from the United States,",
      " GATT/WTO, and other countries, including the chairmen of the WTO Working Party on State Trading Enterprises and the WTO Committee on Agriculture. We also reviewed relevant documents, including the Understanding and the Uruguay Round Agreement on Agriculture. We discussed the potential for an increase of STEs in GATT/WTO with relevant officials from the United States, GATT/WTO, the United Nations, and other countries. We also reviewed studies of economies in transition by the Organization for Economic Cooperation and Development (OECD) and other expert organizations. We discussed U.S. efforts to monitor the activities of STEs in other countries with respect to GATT/WTO requirements with officials from USTR,",
      " USDA/FAS, the Department of Commerce, and the International Trade Commission. We obtained oral comments on a draft of this report from the U.S. Trade Representative and the Department of Agriculture. Their comments are discussed on page 19. We conducted our review in Washington, D.C., and Geneva, Switzerland, from April 1995 to July 1995 in accordance with generally accepted government auditing standards. Compliance With Article XVII Reporting Requirements Has Been Poor A central objective of article XVII is the collection of information about STEs in member countries in order to provide transparency about their activities and ensure they operate in accordance with GATT disciplines. However,",
      " according to GATT/WTO and member country officials, article XVII has generally been ineffective in meeting this objective. The notifications we reviewed provided much of the information requested in the questionnaire, including sectors in which STEs operate, their purposes and activities, and some statistics about their operations. However, compliance with the notification requirement was limited during 1980 to 1994, as 79 percent of GATT members did not submit STE notifications during 1981, the best year of reporting. The evidence we obtained suggested the lack of compliance could be attributed to (1) confusion over the definition of STEs, (2) the lack of systematic review of notifications received,",
      " (3) the apparent low priority some GATT members assigned to article XVII\u2019s reporting requirement, and (4) the overall burden associated with GATT reporting requirements. Under these circumstances, it is impossible to determine whether article XVII has yielded information on the full nature and extent of STE activity in GATT/WTO member countries. Moreover, the lack of notifications from most member countries has hindered GATT/WTO members in identifying all STEs in GATT/WTO member countries and determining whether they operate in accordance with GATT disciplines. Some STE Information Available Twenty-nine member countries submitted STE notifications to the GATT/WTO secretariat at least once during the period 1980 to 1994,",
      " with 21 of the countries reporting some form of state trading. These notifications provided some insight into the activities of STEs in member countries. For example, the majority of STEs described in these notifications operated in the agriculture sector, covering such products as grains and cereals, dairy products, beef and veal, and sugar (see fig. 1). Member countries also reported that they maintained state trading in alcoholic beverages and petroleum products. In addition to the products listed in figure 1, a few countries also provided notifications about state trading in salt, coal, inflammables, aircraft, and nuclear fuel. The notifications also provided information related to the purpose of STEs and how they operate.",
      " With respect to purpose, some member countries have reported using STEs to help agricultural producers \u201cachieve their full potential in overseas markets,\u201d to ensure \u201cprotection of the domestic agricultural production against low-priced imports,\u201d and to ensure a \u201cstable and adequate supply\u201d of certain agricultural commodities as part of \u201cnational defense preparedness.\u201d Regarding operations, member countries have reported that STEs acted as sole agents for production, imports, and/or exports in the sectors covered. Additionally, the STEs assessed levies on production and/or imports, issued export licenses, and received government guarantees on borrowed funds. Other state trading practices reported included government-guaranteed minimum prices and subsidized exports.",
      " The variety of state trading practices reported to GATT makes comparisons between countries difficult since the level of state involvement, and therefore impact on trade, may differ in each case. In general, most notifications have contained statistical information on STE operations, but the information has occasionally been less than requested in the questionnaire. For example, although the questionnaire asked that statistics be furnished on the value and quantity of imports, exports, and national production for the products notified where possible, several countries did not provide information covering national production. In addition, some countries provided information on the quantity, but not the value, of trade and production. Most GATT Members Did Not Submit STE Notifications In accordance with article XVII,",
      " each GATT/WTO member country should provide new and full responses to the questionnaire on state trading activities every 3 years, called \u201cfull notifications,\u201d even if the country does not have any STEs. Additionally, GATT/WTO members should provide notifications of any changes to their state trading regimes in intervening years, called \u201cupdating notifications.\u201d Nonetheless, compliance with article XVII was poor during the period we reviewed. Regular, full notifications of STEs by GATT members were the exception and not the rule. Even during 1981, the full notification year with the best response rate, approximately 79 percent of GATT member countries failed to submit a notification.",
      " (Article XVII notifications by year and by country from 1980 to 1994 are contained in apps. IV and V, respectively.) As shown in appendix IV, compliance with the full notification requirement every 3 years was poor. The number of countries responding during full notification years varied from a high of 18 notifications in 1981 (about 21 percent of GATT members) to a low of 7 notifications in 1990 (about 7 percent of GATT members). Only Finland, Norway, and Sweden provided full notifications for all five of the full notification years occurring during the period we reviewed. Between 1980 and 1994,",
      " a total of 29 countries responded at least once to article XVII, providing either full or updating notifications. In several cases, the updating notifications provided the same amount of information contained in some member countries\u2019 full notifications. As shown in appendix V, Austria, Norway, South Africa, and Yugoslavia were the most regular reporters, providing notifications in at least 11 of the 14 years under review. However, of the 29 countries submitting any notification, about 62 percent of the countries reported 3 or fewer times during the 1980 to 1994 period. Eight countries, including the United States, reported once during the 14 years.",
      " Due to poor compliance by most countries over the period reviewed, the GATT/WTO secretariat may lack current information about STEs in GATT/WTO member countries. For example, in our review of notifications we found that 6 of the 29 countries that provided notifications during this period had not updated their notification since 1981, and another 5 countries had not updated their notifications since 1984. Whether or not the level of state trading in these countries has increased or decreased over the past 15 years remains unclear. In addition, the lack of information hinders GATT/WTO members in determining whether other member countries\u2019 STEs are adhering to GATT disciplines.",
      " Various Problems May Explain the Lack of STE Reporting We reviewed documents that indicated that some GATT members were uncertain about the definition of STEs and the coverage of article XVII and that this uncertainty may have caused some countries to not report STEs. The GATT Panel on Notifications of State Trading Enterprises emphasized in a 1960 report that STEs encompass a variety of activities or entities. However, our review of STE notifications confirmed what GATT/WTO and member country officials told us\u2014that some member countries continued to struggle with the definition of STEs. In one case, for example, a country decided not to report at all since \u201cthe meaning and coverage of the term \u2018state enterprise\u2019 in Article XVII:",
      "1(a) of the General Agreement are not clear.\u201d Inconsistent responses to the questionnaire further illustrate this possible lack of understanding of the definition of STEs. For example, two Central European countries submitted notifications in 1984 claiming that they had no state trading in the meaning of article XVII. However, two other Central European countries with similarly structured economies both reported extensive STE activity during this same period. Considering that all four countries operated command economies in which most aspects of trade involved the government, the inconsistent answers demonstrated a possible lack of agreement regarding the article XVII questionnaire. The lack of article XVII reporting by some member countries may also be attributed to the absence of a regular process within GATT for reviewing the notifications submitted.",
      " For example, one member country, in explaining its decision not to submit a notification, noted \u201cthe absence of any regular procedure for examining notifications so as to afford greater transparency.\u201d The member country went on to state that \u201cone may also note that because of the absence of such a procedure, many countries do not see themselves in some way as \u2018motivated\u2019 to notify.\u201d A U.S. official told us countries did not report STEs because there was no review of the notifications and thus no scrutiny over the notification process. Similar perceptions that article XVII reporting was not a priority may exist among other member countries. For example, an official of one country\u2019s permanent mission told us that some countries have been lax in meeting their reporting responsibilities because they felt the disciplines on article XVII were not as rigid as other GATT disciplines.",
      " Finally, a USTR official suggested that the low response rate among developing countries might also have been linked to the burden of reporting under GATT. The official said many of the developing and smaller GATT member countries may not have the administrative capacity in their governments to comply fully with the multiple reporting requirements under the various GATT articles. Discussions with an official from one country\u2019s permanent mission confirmed this observation. However, this explanation does not address why some of the larger GATT members either did not report during the period we reviewed or had low response rates. Uruguay Round Improved Some Aspects of Article XVII, but Weaknesses Remain Although state trading was not a major negotiating issue during the Uruguay Round,",
      " GATT member countries agreed to clarify article XVII to address some of the problems previously described. The clarifications are contained in the Understanding, which is part of GATT 1994. The Understanding provided a definition of STEs and contained several measures to address procedural weaknesses of article XVII. The Understanding did not change the questionnaire used to collect information about STEs, but WTO members have agreed to review the questionnaire and the adequacy of information provided about STEs. Because these measures have not been fully implemented, it is too early to assess whether Uruguay Round changes will improve compliance with article XVII and, thereby, increase the amount of information available about STE activities and improve the quality of such information.",
      " United States and Others Proposed Clarifications to Article XVII Officials from the United States, GATT/WTO, and other countries we contacted recalled that state trading and the revision of article XVII were not major issues during the Uruguay Round. Nevertheless, the United States and other countries identified problems with article XVII and proposed modifications during the late 1980s to correct these problems. The United States proposed clarifying the application of all GATT disciplines to STEs, particularly marketing boards, and increasing the transparency about state trading practices. The United States suggested transparency could be improved by creating a working party to clarify the definition of STEs, review and revise the questionnaire,",
      " and conduct periodic comprehensive reviews of STE notifications. Other countries noted the need to clarify the definition of STEs, improve the notification process, and better understand the role of STEs in trade. According to U.S. officials, the text of the Understanding was made final in 1990 with the expectation that the Uruguay Round would end shortly thereafter. Although negotiations did not end until December 1993, they said article XVII was not revisited after 1990. One U.S. official told us if the United States had known in 1990 that negotiations were to continue for 3 years, it might have sought additional improvements to article XVII.",
      " Uruguay Round Defined STEs and Addressed Procedural Weaknesses of Article XVII \u201cgovernmental and nongovernmental enterprises, including marketing boards, which have been granted exclusive or special rights or privileges, including statutory or constitutional powers, in the exercise of which they influence through their purchases or sales the level or direction of imports or exports.\u201d The Understanding addressed procedural weaknesses of article XVII by improving the process for obtaining and reviewing information. For example, the Understanding required member countries to review their policies on submitting notifications about STEs and consider the need to ensure transparency in order to permit a clear appreciation of STEs\u2019 operations and their effect on international trade.",
      " It also gave member countries the opportunity to question information provided by another member country. If a member country believes another member country has not adequately met its notification obligation, it can raise the matter for discussion among WTO members and can submit a counternotification to the WTO Council for Trade in Goods if its concerns are not resolved. The Understanding further addressed procedural weaknesses by establishing the WTO Working Party on State Trading Enterprises (the Working Party). The Working Party\u2019s responsibilities include (1) reviewing notifications and counternotifications; (2) in light of notifications received, reviewing the adequacy of the questionnaire and the coverage of STEs notified; and (3)",
      " developing an illustrative list of the kinds of relationships between governments and STEs and the kinds of activities engaged in by STEs. One U.S. official said the creation of a regular process in the Working Party to review STE notifications was an important step towards improving compliance with article XVII. The Working Party met for the first time on April 6, 1995, to discuss the timetable for its work program during the next year. Some Working Party members told us they expect to meet informally through the summer to prepare for their next official meeting in the fall of 1995, when they will begin formal work on meeting their responsibilities.",
      " Finally, in order to improve member countries\u2019 knowledge about STEs, the Understanding authorized the GATT/WTO secretariat to produce a background paper on the operations of STEs as they relate to international trade. GATT/WTO members told us they expect the paper to describe the countries that engage in state trading, the products traded, and the attributes of their STEs. The paper, which is due at the next official Working Party meeting, is to consider information provided so far to GATT/WTO about STEs as well as the next set of full STE notifications that were due on June 30, 1995. The Understanding did not change the form or content of the questionnaire used to collect information about STEs.",
      " Officials from the United States, GATT/WTO, and other countries told us the questions in the questionnaire can be answered with very specific or very general information and, as a result, the information provided so far about STEs does not provide sufficient transparency about STE activities to ensure they are adhering to GATT disciplines. However, GATT/WTO members differed on the exact information necessary to achieve such transparency. For example, officials from the United States and some other countries told us they are interested in obtaining more detailed information about transaction prices. Other GATT/WTO members maintained that such information is confidential and related to an STE\u2019s commercial interest and that countries are not required by article XVII to disclose this type of information.",
      " The Understanding obligated the Working Party to study the adequacy of the questionnaire. Some Working Party members, including U.S. officials, told us they hope their discussions will produce a revised questionnaire that could be implemented at the ministerial conference scheduled for late 1996. It Is Premature to Assess Whether Compliance With Article XVII Will Improve Several U.S. and GATT/WTO officials said they expect that compliance with article XVII\u2019s notification requirement will increase. Although the next set of article XVII notifications was due June 30, 1995, the majority of WTO member countries, including the United States, did not meet the deadline.",
      " More notifications were expected to be submitted during the summer of 1995. Until all or most notifications have been received and the Working Party can begin to review them, it would be premature to assess whether the addition of a definition and procedural measures would increase compliance with article XVII\u2019s reporting requirements and improve the information available about STEs. A GATT/WTO official suggested that the general willingness to comply with article XVII\u2019s notification requirement would be affected by the notification decisions of major trading countries, such as Canada, European Union (EU) member countries, or the United States. For example, a representative from one country, which views its own level of state intervention in trade as comparable to the EU\u2019s,",
      " told us his country would probably postpone its own notification of STEs until it saw how the EU interpreted the notification requirement. In addition, representatives from several countries\u2019 permanent missions to GATT/WTO told us they think the United States should provide an STE notification for USDA\u2019s Commodity Credit Corporation (CCC). Representatives from other countries\u2019 missions told us they were not sure whether CCC would come under the Understanding\u2019s definition of an STE. The United States reported CCC as an STE in 1979 but subsequently reported no state trading in 1984. No decisions have yet been made about enforcing compliance with article XVII and related procedural issues. For example,",
      " it is not clear how the Working Party will handle situations in which countries (1) do not comply with the notification requirement, (2) do not respond to all questions in the questionnaire, or (3) submit a counternotification about another country\u2019s STEs. Officials from GATT/WTO and other countries said that in general, enforcing compliance with article XVII is up to the Working Party and therefore is dependent on the will of member countries. Agreement on Agriculture Applies to STEs According to officials from the United States and other countries, the treatment of STEs was also discussed during Uruguay Round agriculture negotiations because of the prevalence of STEs engaged in agricultural trade.",
      " STEs that trade agricultural products are subject to all disciplines contained in the Uruguay Round\u2019s Agreement on Agriculture, including several specific references made to STEs. WTO members are asked to provide certain information to the WTO Committee on Agriculture regarding implementation of their Uruguay Round commitments, including those made effective through STEs. However, because the first implementation year will not be completed until 1996, it is too early to tell whether countries with agricultural STEs are meeting their commitments. The Agreement on Agriculture contained a variety of disciplines designed to liberalize trade in agricultural products. GATT/WTO members are required to make specific reductions in three types of agricultural support\u2014market access restrictions,",
      " export subsidies, and internal support\u2014over a 6-year period beginning in 1995. In the area of market access restrictions, countries are required to convert all nontariff barriers, such as quotas, to tariff equivalents and reduce the resulting tariff equivalents (as well as old tariffs) during the implementation period. In the area of export subsidies, countries are required to reduce their budgetary expenditures on export subsidies and their quantity of subsidized exports. Finally, countries are required to reduce an aggregate measurement of selected internal support policies. In addition, the agreement established a WTO Committee on Agriculture to monitor implementation of Uruguay Round commitments. The disciplines on market access restrictions contain two specific references to STEs.",
      " First, the definition of nontariff barriers subject to conversion to tariff equivalents includes nontariff measures maintained through STEs. Second, when providing information to the Committee on Agriculture regarding implementation, GATT/WTO members are asked to explain the administration of market access commitments. Where such commitments are administered by STEs, details about the STE and its relevant activities should be provided. The Chairman of the Committee on Agriculture told us it is premature to assess whether commitments on market access restrictions are being met. The first year of implementation of the Agreement on Agriculture will be completed during 1996, depending on member countries\u2019 implementation dates. A USDA official emphasized the importance of STE notifications submitted to the Working Party on STEs,",
      " as this information could help determine whether GATT/WTO members with agricultural STEs are meeting their market access commitments. A GATT/WTO official told us that references to STEs in the export subsidy disciplines are less specific than those in the market access disciplines. The agreement defines the types of export subsidies subject to reduction. If any such subsidies were paid to or received by an STE, they would be subject to reduction. Moreover, export subsidies not targeted for reduction cannot be applied in a manner that allows member countries to circumvent their commitments to reduce export subsidies. This would include export subsidies provided to or by STEs. According to a GATT/WTO official,",
      " it should be relatively easy to determine whether countries are meeting their commitments to reduce export subsidies, because the relevant subsidies tend to be quantifiable and easily identified. The official suggested it may be more difficult to know whether countries are circumventing these commitments because other types of export subsidies, including some that could be provided through STEs, are not as easily identified. Officials from the United States, GATT/WTO, and other countries recalled that during the agriculture negotiations, obtaining disciplines on STEs was not considered to be as important as obtaining disciplines on market access restrictions, export subsidies, and internal support. GATT members focused on the latter group of policy tools because of their distortive effect on trade.",
      " U.S. officials told us the United States viewed the EU\u2019s agricultural policies as particularly problematic. During the negotiations, the United States relied on the support of countries in the Cairns Group to achieve meaningful concessions from the EU. Because some countries in the Cairns Group use STEs in the agriculture sector, U.S. officials said it would have been counterproductive to ask these countries to support U.S. efforts and challenge their agricultural policies at the same time. Role of STEs in GATT/WTO May Increase The role of STEs in GATT/WTO may increase as countries whose governments play major or dominant roles in their economies apply to join GATT/WTO.",
      " A number of such countries have already applied to join GATT/WTO, including China, Russia, and Ukraine. Officials in current member countries and at the GATT/WTO secretariat observed that integrating these countries into the GATT/WTO trading system would be a tremendous challenge because their economic traditions and attitudes towards state trading differ significantly from those of most current members. Several of these officials said that the role of state trading in GATT/WTO is a key issue for future discussion. Some GATT/WTO members told us they are interested in strengthening the disciplines contained in article XVII, but they also said that substantive changes to the article\u2019s text will not likely occur until the next round of multilateral trade negotiations that is expected to begin in 1999 or the year 2000.",
      " Studies and other available information indicate that STEs play a more significant role in these applicant countries than in countries that have provided STE notifications to GATT/WTO. According to an official at the United Nations Economic Commission for Europe (ECE), STEs still play a large role in the economies of countries in the former Soviet Union (FSU), particularly in the case of exports. For example, at the beginning of 1994 Ukraine still maintained STEs in a number of sectors, including machine building, transportation, agriculture, coal, oil, and gas. However, this official said the FSU countries are also committed to follow the example of the Central and East European countries and slowly eliminate state trading regimes.",
      " Thus, it is also possible the role of STEs in these countries will decline over time. Some GATT/WTO members told us the state\u2019s role in China\u2019s economy may not decrease. The state has been instrumental in opening China\u2019s economy and implementing market-oriented reforms. One aspect of reform has been the decentralization of trade authority from the national Ministry of Foreign Trade and Economic Cooperation to provincial governments. However, recent studies by OECD and the Brookings Institution note that this decentralization has not ended government control over trade. U.S. officials told us that meetings concerning China\u2019s accession to GATT/WTO have been dominated by discussions of state trading,",
      " as member countries attempt to understand the government\u2019s economic role and negotiate disciplines on its ability to control trade. Officials from the United States, GATT/WTO, and other countries told us China has agreed to abide by the requirements of article XVII regarding the activities of its STEs. However, several officials from the United States and other countries indicated that article XVII alone is not sufficient to help GATT/WTO members develop an understanding of China\u2019s STEs nor to discipline them should the need arise. Multiple Agencies Have STE Monitoring Role USTR coordinates STE monitoring, with the participation of several U.S. agencies. USTR has primary responsibility for monitoring developments related to WTO and requests assistance from other agencies through an interagency group called the Trade Policy Staff Committee (TPSC).Monitoring STE issues is the responsibility of the TPSC Subcommittee on WTO Market Access,",
      " which includes officials from USDA; the Departments of Commerce, Defense, Energy, the Interior, Labor, State, and the Treasury; and the Office of Management and Budget. The USTR official who chairs the subcommittee told us that because state trading is a broad subject, monitoring it requires a wide range of expertise. Therefore, these officials attempt to monitor the activities of STEs in other countries according to their areas of expertise and then provide this information to USTR. They are to help USTR review the next round of STE notifications. In addition to these monitoring activities, U.S. officials participate in the WTO Working Party on STEs. USTR officials told us they would rely on the Working Party to monitor other countries\u2019 compliance with the reporting requirements of article XVII and the Understanding.",
      " U.S. officials also participate in the WTO Committee on Agriculture. According to officials from the United States and other countries, the United States has been active in proposing agricultural STEs as a topic for discussion within the committee. In addition, USDA/FAS officials told us senior USDA officials have informed senior GATT/WTO officials of the importance the United States places on such discussions. One U.S. official told us USDA/FAS would monitor the extent to which STE notifications have enough information to determine whether countries are meeting the commitments contained in the Agreement on Agriculture. If the notifications do not allow such a determination, the United States can request that additional information be provided to the committee.",
      " USDA/FAS and Foreign Commercial Service staff are also responsible for monitoring STE activities in the countries where they are located as part of their regular reporting responsibilities. For example, USDA/FAS reports on major commodity sectors like wheat and dairy have covered STE activities. A USDA/FAS official told us the reporting instructions are flexible, and more information can be requested from staff in the field as necessary. Agency Comments We requested comments on a draft of this report from the U.S. Trade Representative and the Secretary of Agriculture, or their designees. On August 1, we obtained oral comments from USDA/FAS officials, including the General Sales Manager of FAS;",
      " and on August 2, we obtained oral comments from USTR officials, including the Director, Office of Tariff Affairs. USDA and USTR officials generally agreed with the information presented in the draft report and noted that it presented an accurate picture of some of the problems with STEs in the WTO/GATT context. In addition, they provided some technical comments, which we incorporated into the report where appropriate. We are sending copies of this report to the Secretary of Agriculture and to the U.S. Trade Representative. We will also make copies available to other parties upon request. If you have any questions about the information contained in this report, please contact me at (202)",
      " 512-5889. Major contributors to this report are listed in appendix VI. Article XVII of the General Agreement on Tariffs and Trade (GATT) GATT Article XVII Questionnaire Adopted in 1960 The 1994 Understanding on the Interpretation of GATT Article XVII Article XVII Notifications by Year, 1980-94 Response rate to questionnaire (percent) 1981(F) 1984(F) 1987(F) 1990(F) 1993(F) Article XVII Notifications by Country, 1980-94 1980,1981,1983,1984,",
      " 1986,1988,1990,1993, 1994 1980,1981,1982,1983, 1984,1985,1986,1987, 1988,1989,1991,1993, 1994 1981,1982,1983,1984, 1986,1987,1988,1990, 1993 1981,1984,1985,1986, 1987,1988,1989,1990, 1991,1993,1994 1980,1981,",
      "1983,1984, 1985,1986,1987,1988, 1989,1990,1991,1994 1980,1981,1982,1984, 1987,1988,1989,1990, 1991,1993 (continued) Major Contributors to This Report General Government Division, Washington, D.C. Phillip J. Thomas, Assistant Director Michael Kassack, Adviser Stanton J. Rothouse, Senior Evaluator Rona Mendelsohn, Evaluator (Communications Analyst) European Office Office of the General Counsel, Washington, D.C.",
      " Office of the Chief Economist, Washington, D.C. Loren Yager, Assistant Director The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts.",
      " NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists. Address Correction Requested\n"
    ],
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    "hardness": null,
    "role": null
  },
  {
    "id": 16,
    "question": null,
    "answer": "Challenges to Russia's democratic development have long been of concern to Congress as it has considered the course of U.S.-Russia cooperation on matters of mutual strategic interest and as it has monitored problematic human rights cases. Most recently, elections for the 450-member Russian State Duma (lower legislative chamber) on December 4, 2011, have heightened concerns among some Members of Congress about whether Russia can be an enduring and reliable partner in international relations if it does not uphold human rights and the rule of law.  In the run-up to the December 2011 State Duma election, seven political parties were approved to run, although during the period since the last election in late 2007, several other parties had attempted to register for the election but were blocked from doing so. These actions had elicited criticism from the U.S. State Department that diverse political interests were not being fully represented. As election day neared, Russian officials became increasingly concerned that the ruling United Russia Party, which had held most of the seats in the outgoing Duma, was swiftly losing popular support. According to some observers, Russian authorities, in an attempt to prevent losses at the polls, not only used their positions to campaign for the party but also planned ballot-box stuffing and other illicit means to retain a majority of seats for the ruling party. In addition, Russian President Dmitriy Medvedev and Prime Minister Vladimir Putin had increasingly criticized election monitoring carried out by the Organization for Security and Cooperation in Europe (OSCE), and insisted on limiting the number of OSCE observers. Russian authorities also moved against one prominent Russian non-governmental monitoring group, Golos, to discourage its coverage of the election. According to the OSCE's preliminary report on the outcome of the election, the close ties between the Russian government and the ruling party, the refusal to register political parties, the pro-government bias of the electoral commissions and most media, and ballot-box stuffing and other government manipulation of the vote marked the election as not free and fair. The day after the election, about 5,000 protesters rallied in central Moscow against what they viewed as a flawed election. When many of them began an unsanctioned march toward the Central Electoral Commission, police forcibly dispersed them, reportedly detaining hundreds. The Kremlin quickly mobilized pro-government youth groups to hold large demonstrations termed \"clean victory\" to press home their claim that minority groups would not be permitted to impose their will on the \"majority\" of the electorate. On December 7, 2011, several U.S. Senators issued a statement condemning Russian police crackdowns on those demonstrating against the \"blatant fraud\" of the Duma election. On December 10, large demonstrations under the slogan \"For Honest Elections!\" were held in Moscow and dozens of other cities. At the rally, Boris Nemtsov, the co-head of the unregistered opposition Party of People's Freedom, reflected popular sentiment with a list of demands that included the ouster of the head of the Central Electoral Commission, the release of those detained for protesting and other \"political prisoners,\" the registration of previously banned parties, and new Duma elections.  Many observers have raised concerns that public unrest may continue, although security forces appear firmly in control and unlikely to permit the unrest to threaten the government. The Obama Administration has been critical of the apparently flawed Duma election, but has called for continued engagement with Russia on issues of mutual strategic concern. Some in Congress also have criticized the Duma election and the subsequent crackdown on protesters, and Congress may consider the implications of lagging democratization and human rights abuses as it considers possible future foreign assistance and trade legislation and other aspects of U.S.-Russia relations.\n",
    "docs": [
      "Background The trajectory of Russia's democratic development has long been of concern to Congress and successive Administrations as they have considered the course of U.S.-Russia cooperation on matters of mutual strategic interest and as they have monitored problematic human rights cases. A major question of U.S.-Russia relations is whether Russia can be an enduring and reliable partner in international relations if it fails to uphold human rights and the rule of law. Most analysts agree that Russia's democratic progress was uneven at best during the 1990s, and that the three cycles of legislative and presidential elections held under the leadership of President Vladimir Putin (in 1999-2000, 2003-",
      "2004, and 2007-2008) demonstrated serious weaknesses in Russian democratization. After the pro-Putin United Russia Party gained enough seats and allies to dominate the State Duma (the 450-member lower legislative house of the Federal Assembly; the upper house is not directly elected) after the 2003 election, the Kremlin moved to make it more difficult for smaller parties to win seats in the future, including by raising the hurdle of minimum votes needed to win seats from 5% to 7%. Also the election of 50% of Duma deputies in single-member district races, where independent candidates and those from small opposition parties usually won some seats,",
      " was abolished, with all Duma members to be elected via party lists. Changes in campaign and media laws also made it more difficult for small parties and opposition groups to gain publicity in the run-up to the December 2007 Duma election. Putin assumed leadership of the ruling United Russia Party and when it gained a two-thirds majority in the Duma election that year, United Russia no longer needed to seek accommodation with the three other parties that won seats in order to pass favored laws, including those amending the constitution. Electoral changes since 2007 included a provision that parties gaining between 5% and 6.99% of the vote would be granted one or two seats,",
      " and an increase in the Duma's term from four to five years.  At a meeting of United Russia on May 6, 2011, Prime Minister Putin called for the creation of a \"broad popular front [of ] like-minded political forces,\" to participate in the 2011 Duma election, including United Russia and other political parties, business associations, trade unions, and youth, women's and veterans' organizations. Putin also proposed that non-party candidates nominated by these various organizations would be included on United Russia's party list. Critics objected that the idea of the \"popular front\" was reminiscent of the one in place in the former German Democratic Republic when Putin served there in the Soviet-era KGB.",
      " On September 24, 2011, at the annual convention of the United Russia Party, Prime Minister Putin announced that he would run in the March 2012 presidential election. President Medvedev in turn announced that he would not run for re-election, and endorsed Putin's candidacy. Putin stated that he intended to nominate Medvedev as his prime minister, if elected. Until these announcements, the United Russia Party had left the leading slot open on its proposed party list of candidates for the planned December 2011 State Duma election. Putin suggested that Medvedev head the party list, and hence be in charge of assuring that the party win a majority of seats in the December election.",
      " In mid-October 2011, Medvedev unveiled his idea of \"big government,\" involving the establishment of a group of his supporters to back the United Russia Party in the Duma election. He stated that during his presidency, he had \"tried to develop our party and political system. This was not entirely successful and there were some failures, but nevertheless this is what I tried to do.\" He also argued that his government had worked to combat corruption and encourage the development of civil society and economic modernization, and should be endorsed by the electorate to continue such work. Some observers suggested that by forming such a political support group, Medvedev aimed to attract more liberal voters who might not normally support the United Russia Party but had favorable views toward Medvedev.",
      " A \"popular front\" program was released on October 24, 2011. Although there were some plans for the program to be the main document used in the elections, the United Russia Party decided after the September 2011 convention to use a compilation of Putin's and Medvedev's speeches, with the program serving a supporting function. The program calls for setting up a retirement system that pays larger pensions to those who voluntarily delay their retirements, lowering taxes on businesses and increasing alcohol and tobacco taxes, raising the drinking and smoking ages, and drawing up an ostensibly more humane criminal code. Despite these proposals, the program appears to emphasize the \"stability\"",
      " of the existing political and economic system over \"modernization\" initiatives as urged by Medvedev. The election environment in the months leading up to the December 2011 Duma vote seemed to indicate increased public discontent with the current political system dominated by Putin. According to a July 2011 opinion survey by the Russian Levada Center polling organization, 53% of respondents believed that the upcoming Duma election would be \"an imitation of an election and seats in the State Duma will be distributed as the authorities wish,\" and 59% of respondents agreed with a statement that the election was \"a struggle of bureaucratic clans for access to the state budget,\" rather than a free and fair election.",
      " In December 2011, Russian analyst Andrey Kolesnikov argued that Medvedev was the symbol of modernization, and that when Putin announced in September 2011 that he would re-assume the presidency, the public became more aware of and discontented with the basic authoritarianism of the political system. The discontent was evidenced by two incidents involving Prime Minister Putin, one when he was booed when he appeared at a boxing match on November 20, 2011, and another when some Communist Party and Just Russia Party deputies refused to stand up on November 23, 2011, when he entered the State Duma to address the body.",
      " The Campaign By the end of October 2011, all seven legal political parties had been approved by the Central Electoral Commission (CEC) to run in the December 4, 2011, Duma election. Four of these\u2014the ruling United Russia Party, the Communist Party, the Liberal Democratic Party of Russia (LDPR), and Just Russia\u2014already held seats in the State Duma, so they enjoyed an easy process of registering for the election. The other three\u2014Patriots of Russia, Yabloko, and Right Cause\u2014had to each obtain 150,000 signatures in order to run. Of these parties, Just Russia is a social-democratic party,",
      " the LDPR and Patriots are nationalist parties, and Right Cause and Yabloko are centrist-liberal parties. To make the United Russia Party more appealing, the list of candidates fielded by the party included nearly 200 non-party members who were added to the ticket during \"primaries\" held with the \"popular front.\" Some oppositionists belonging to parties that had been refused registration called for a boycott of the election or the spoiling of ballots, while others urged the public to vote for any party but United Russia. A short campaign season officially lasted from November 5 to December 2. Russia permitted the Organization for Security and Cooperation in Europe's Office for Democratic Institutions and Human Rights (ODIHR), the OSCE's Parliamentary Assembly,",
      " and the Parliamentary Assembly of the Council of Europe (PACE) to deploy 325 monitors, about two-thirds less than those permitted in 2003. These monitors were able to visit 1,300 polling stations, as opposed to 2,500 in 2003, arguably an attempt by Russian authorities to limit their observations, according to some critics. Additional election monitors from the members of the Commonwealth of Independent States (CIS) were also invited to participate. As in the previous 2007 campaigning for the Duma, United Russia backers emphasized anti-Americanism and warned against the return of supposed Yeltsin-era populists and demogogues.",
      " For instance, in late November 2011, President Medvedev warned that if talks with NATO on cooperative missile defense failed, Russia would deploy tactical nuclear missiles to Russia's Kaliningrad enclave and would break off implementation of START II. The Communist Party and the LDPR also endorsed Medvedev's statement. Opposition leader Boris Nemtsov denounced the statement as a campaign effort to create a \"war scare\" to rally the public around the United Russia Party, an accusation President Medvedev strongly rejected. During campaign debates on television and in the media, parties running against United Russia referred to it frequently as the \"party of crooks and thieves,\" an expression reportedly invented months previously by anti-corruption fighter and nationalist Alexey Navalny.",
      " The phrase reportedly incensed the Kremlin and may well have contributed to an accelerating loss of popular support for the United Russia Party. In one much-discussed debate, LDPR leader Vladimir Zhirinovskiy used the expression, whereupon the United Russia representative retorted that \"it is better to be in a party of crooks and thieves than in a party of murderers, rapists and robbers.\" The private Russian election observation group Golos issued two pre-election assessments that alleged that officials at all levels, including the President and the members of the electoral commissions, were openly campaigning or otherwise supporting the United Russia ticket in violation of electoral laws.",
      " These officials had been ordered to maximize the party's vote, Golos alleged, and had pressured public institutions (including colleges and hospitals) and even local businesses to get their employees to vote for United Russia. Golos criticized campaigning by the \"popular front\" that was not included in the spending limits of the United Russia Party and alleged that Russian security officials increasingly were harassing the NGO during the run-up to the election. During the week before the election, the United Russia Party held a congress where it formally endorsed Putin as its candidate for president. The extravagant congress\u2014held after a September 2011 congress had already proclaimed Putin as the party's prospective candidate\u2014appeared to be an attempt to link Putin's greater popularity more closely to the fate of the party.",
      " At the congress, Putin warned that unnamed foreign interests (presumably including the United States) were funding Russian groups to try to influence the election. Three Duma deputies immediately wrote a letter to the Moscow Prosecutor's Office calling for an investigation of whether Golos had violated electoral and NGO laws. CEC chairman Churov also wrote a letter to the prosecutor, stating that he thought that Golos was illegally campaigning against the United Russia Party rather than acting as an NGO. The prosecutor quickly ordered Golos to halt the posting of reported electoral violations on its website and referred the case to a court, which in turn ruled that articles on the Golos website constituted polling in violation of a ban on such activities five days before the election.",
      " One regional electoral commission also called for the local prosecutor to block Golos as an election monitor on the grounds that Golos aimed to \"oppose the work of the electoral commission.\" Russian Presidential Human Rights Council Chairman Mikhail Fedotov decried the prosecution of Golos in the final stages of the election. In a final appeal to voters on December 2, Medvedev warned them against electing a fractious Duma, and instead appeared to urge them to support United Russia Party candidates, who would form \"a capable legislative body, where the majority is made up of accountable politicians who are able to, in deed, facilitate improvements to the quality of life for our people,",
      " whose actions will be guided by the interests of voters, by national interests.\" Results and Assessments According to the final results reported by the CEC, four parties won enough votes to pass the 7% hurdle and win seats in the Duma (see Table 1 ). United Russia lost 77 of the 315 seats it held since 2007, but it still retained over one half of the seats (238), and more than it had after the 2003 election (224 seats). The losing parties garnered about 5% of the vote (another 1.57% of the votes were deemed invalid). Russian authorities praised the CEC for the turnout of 60.",
      "1% of 109.24 million registered voters, a slightly smaller turnout than in 2007 (about 64%), but more than in 2003 (56%). The North Caucasus republics continued their \"tradition\" of reporting improbably high turnouts and vote counts for the ruling United Russia Party. Despite harsh weather, 99.51% of Chechnya's voters turned out and 99.48% voted for the United Russia Party. According to one observer, these republics deliver reliable support for the government in return for substantial self-rule and federal budgetary assistance. Golos reported that it had long-term monitors in 48 regions and short-term monitors in 40 regions that visited 4,",
      "000 polling stations. Because of last minute pressure, however, electoral commissions blocked it from fully monitoring some of the regional elections. In its preliminary report, Golos concluded that the election was characterized by \"significant and massive violations of many key voting procedures.\" It argued that several political parties had been prevented from forming and participating in the election, that electoral commissions had been packed with government officials lacking knowledge of electoral procedures, and that many officials campaigned for United Russia as part of their duties. Golos observers reported instances in which absentee ballots appeared to be abused, groups appearing to be transported from polling place to polling place to vote repeatedly, folded or even tied batches of votes were seen in the ballot boxes,",
      " and the counting of votes appeared to violate procedures. The OSCE's preliminary report on the outcome of the election echoed many of the findings of Golos and other observers. The report judged that close ties between the Russian government and the ruling party, refusal to register political parties, pro-government bias of the electoral commissions and most media, and ballot-box stuffing and other government manipulation of the vote marked the election as not free and fair. The report stated that monitors had received numerous credible allegations of attempts by local officials to pressure civil servants, factory workers, and social organization employees into voting for United Russia. The voting process appeared orderly, but the vote count was assessed as bad or very bad in about one-third of 115 polling stations observed.",
      " Frequent procedural violations and instances of apparent manipulation were observed, including serious indications of ballot-stuffing in 17% of these polling stations. Vote tabulation was observed to be poor in 16% of 73 territorial electoral commissions. Observers were deliberately obstructed from carrying out their activities in a number of cases. In contrast to the OSCE assessment, observers from the Commonwealth of Independent States reported that the election was \"held legally and without serious violations.\" Although Yabloko did not win any seats, it received enough votes (over 3%) to be able to receive public financing and free airtime in the next election.  In addition to the electoral issues mentioned above,",
      " several websites belonging to opposition or independent news organizations or civil society NGOs were disabled on election day, allegedly by denial of service attacks, including the Golos website. These cyberattacks have raised concerns by Russian and U.S. observers (including Secretary of State Hillary Clinton; see below) about new efforts to curb freedom of expression on the part of the Russian government. Implications for Russia and Putin Meeting with his supporters the day after the election, Medvedev hailed the \"completely free, fair, and democratic election,\" and argued that the United Russia Party \"got more or less what the various sociological agencies predicted\u2026. Discussion and debate between people usually end up producing more balanced decisions.... I therefore think that a 'livelier'",
      " and more energetic parliament will be good for our country, and I hope we will have just such a parliament.\" Putin reported to United Russia officials on December 6 that \"United Russia has won a majority, a stable majority. True, there are losses, but they... would be inevitable for any political force... that has borne the burden of responsibility for the situation in the country for years.\" The First Deputy Chief of the Presidential Staff, Vladimir Surkov, asserted that \"in a society which is colorful, irritated and far from being united, I repeat that United Russia's 50% is an excellent result\u2026. Attempts to rock the boat and interpret the situation in a negative and provocative light are doomed to failure.",
      " Everything is under control. The system is working. Democratic institutions are working.\" Russian officials denounced the OSCE's preliminary report as biased and hypocritical, but seemed to focus their ire on a statement by Secretary Clinton (see below).  United Russia's control of over 50% of the seats and the leadership positions assure the passage of legislation it supports. Some analysts suggest that United Russia will need to seek allies in the Duma in order to pass legislation changing the constitution, which requires a 60% vote. Others discount this as a serious impediment, since the LDPR in particular has usually supported United Russia on major issues. Debate and the tenor of legislation may be affected,",
      " however. The minority parties that gained seats in the Duma are socialist-nationalist parties, reflecting increasing \"leftist\" and nationalist views among the public, according to some polls. The Post-Election Protests On December 4-5, rallies were held in Moscow and St. Petersburg to protest against what was viewed as a flawed election, leading to hundreds of detentions by police. On December 5, about 5,000 protesters held an authorized rally in central Moscow. When many of them began an unsanctioned march toward the CEC, police forcibly dispersed them, reportedly detaining hundreds, including some prominent dissidents.",
      " Protest attempts the next two nights were suppressed. The Kremlin quickly mobilized pro-government Nashi and Young Guard youth groups to hold large demonstrations termed \"clean victory\" to press home their claim that minority groups would not be permitted to impose their will on the \"majority\" of the electorate. On December 10, 2011, demonstrations under the slogan \"For Honest Elections!\" were held in Moscow, St. Petersburg, and dozens of other cities. In Moscow, the crowd was estimated by the police at about 25,000 (other estimates were up to 70,000), one of the largest such demonstrations in years. Police presence was massive,",
      " but there were few if any detentions. At the rally, Boris Nemtsov, the co-head of the unregistered opposition Party of People's Freedom, issued a list of demands that included the ouster of the CEC head, the release of those detained for protesting and other \"political prisoners,\" the registration of previously banned parties, and new Duma elections. In some other cities, the protests were broken up by police. Additional protests against the election are planned for December 17 and 24, 2011. Some observers suggest that public dissatisfaction over the election may contribute to further unrest, but that security forces appear determined to prevent a \"color revolution\"",
      " such as occurred in Ukraine, Georgia, and Kyrgyzstan after tainted elections. Until the post-election protests, most analysts and observers appeared to discount any effect of the Duma election on the prospects for Putin's (re-)election as president in March 2012. However, the widespread public dissatisfaction with the electoral results appears to have emboldened those who object to Putin (re)assuming the presidency. Since the Duma election, several individuals quickly announced that they intend to run against Putin, including Just Cause's Sergey Mironov, LDPR's Vladimir Zhirinovskiy, Other Russia head Eduard Limonov,",
      " retired General Leonid Ivashov, and businessman and former Right Cause head Mikhail Prokhorov. Putin's popularity also may have been further harmed by the perceived problems of the Duma election, in which case he will need to bolster his image in the run-up to the presidential election. Implications for U.S. Interests and Congressional\u00a0Concerns The Obama Administration selectively has praised Russia for respecting human rights and the rule of law in some areas, but also has stressed that serious problems remain. In the run-up to the election, the Administration mostly avoided open calls for free and fair polling, but reportedly about $9 million in U.S.",
      " assistance was provided over several months for voter education and other non-partisan efforts to enhance the electoral environment. The day after the Duma election, on December 5, 2011, Secretary of State Clinton stated that the United States has \"serious concerns about the conduct of the elections,\" as detailed in the OSCE observers' preliminary report, including ballot-box stuffing. She stated that \"we are also concerned by reports that independent Russian election observers, including the nationwide Golos network, were harassed, had cyber attacks on their websites, totally contrary to what should be the protected rights of people to observe elections and participate in them and disseminate information.\" She averred that she was \"proud\"",
      " of Golos and other Russians who attempted to bring about a fair and free and credible election, and that \"Russian voters deserve a full investigation of all credible reports of electoral fraud and manipulation.\" Prime Minister Putin retorted that he considered Secretary Clinton's comments to be a \"signal\" to the Russian opposition to \"begin active work,\" with State Department help, to foment unrest. He stated that it was \"unacceptable\" that \"foreign money is pumped into electoral processes,\" and called for new laws to limit such alleged funding. Secretary Clinton responded to Putin on December 8 by stating that while the United States values its relationship with Russia, \"the United States and many others around the world have a strong commitment to democracy and human rights.... We expressed concerns that we thought were well-founded... and we are supportive of the rights and aspirations of the Russian people....\"",
      " The White House also responded that the United States would continue to speak out about human rights violations in Russia and elsewhere and would continue to seek engagement both with the Russian government and with civil society groups. Seeming to heighten tensions, on December 9, Russian media reported alleged emails between Golos and the U.S. Agency for International Development (USAID) that ipso facto were claimed to show U.S. interference in electoral processes. Also, on December 9, Russian Federation Council Deputy Speaker and United Russia Party official Svetlana Orlova asserted that the CIA was fomenting the opposition demonstrations in Russia. Russian opposition leaders Garry Kasparov and Vladimir Ryzhkov have called for the United States and the European Union not to ignore what they term the flawed election.",
      " Kasparov has called for sanctions against Russia's leaders, including by targeting investments and visas, and he has endorsed the sanctions called for by the U.S. Congress as a result of the 2009 death of Sergey Magnitsky while in Russian detention. Ryzhkov calls for PACE to refuse to recognize the credentials of the Russian Duma delegates, for the new EU-Russia Partnership and Cooperation Agreement to include strong provisions on democratization and respect for human rights, and for the EU to impose a visa ban and economic sanctions against Russian officials who commit human rights abuses. Some observers have raised concerns that campaigning by the United Russia Party and Russian political leaders speaking on its behalf during the election could represent a shift in official views of the United States that might damage U.S.-Russia relations.",
      " A major element of United Russia's campaign, as mentioned above, included anti-Americanism, in an effort to foster and appeal to ultranationalists and jingoists. It remains unclear whether these anti-American themes will be continued, but if they do, there could be harm to U.S.-Russia relations and cooperation. Such anti-Americanism may play a greater role in Putin's presidential campaign as well as in the campaigns of other prospective candidates. To date, the Administration has not indicated that it would impose travel bans or other sanctions against officials responsible for the Duma election and repression against protesters after the election, as it did in the wake of the 2010 Belarusian presidential election.",
      " Some U.S. analysts recently have called for boosting U.S. assistance to Russian civil society and human rights groups. However, Putin's increased criticism of such U.S. aid in recent days may place it in added jeopardy, particularly in the wake of past Russian tightening of reporting requirements and other restrictions on the use of such aid. In mid-December 2011, the Ministerial meeting of the World Trade Organization (WTO) in Geneva is expected to invite Russia to join the WTO. In the period leading up to and after the Russian legislature's ratification of membership in the WTO, perhaps in the Spring of 2012, Congress may consider whether to extend permanent normal trade relations to Russia,",
      " or to invoke the non-application provision of WTO rules. Some observers argue that Russia's membership in WTO would enhance the rule of law in Russia, through the necessity of bringing Russian trade legislation and regulations into compliance with WTO rules. Others dispute that the rule of law will be substantially strengthened, unless Western countries continue to press for further reforms. They argue that Congress should either retain the so-called Jackson-Vanik provisions of the Trade Act of 1974 as one means of monitoring human rights and democratization progress in Russia (albeit indirectly, since Jackson-Vanik specifically applies to freedom of emigration), or enact other measures to sanction Russia or restrict U.S.",
      " assistance if Moscow violates human rights standards. Many in Congress have had continuing concerns about democratization and human rights progress in Russia, as reflected in calls in recent foreign operations appropriations bills as well as other legislation and hearings for added Obama Administration attention to Russian democratization. Among recent Member attention, Speaker of the House John Boehner in a speech in October 2011, called for conditioning U.S.-Russia relations on Russian progress on democratization and respect for human rights, and offered the support of the House of Representatives for such a policy. On December 2, 2011, members of the U.S. Commission on Security and Cooperation in Europe criticized a court action against Golos just days before the election,",
      " and on December 7 criticized the balloting as the \"most controversial election in decades.\" The Commission also raised concerns about the detention of those protesting against what the Commission termed the flawed election. Senator John McCain raised concerns on December 7, 2011, that democratization and human rights have been declining in Russia, as evidenced by the problematic Duma election\u2014as well as by the death of Sergey Magnitsky, the new conviction of Mikhail Khodorkovskiy, and worsening corruption\u2014and called for protesters detained after the election to be released. He also warned that \"as Russia's Government grows less tolerant of its own people's rights at home,",
      " we should not be surprised if it treats us the same way.\" Also on December 7, Senators McCain, Joseph Lieberman, and Jeanne Shaheen issued a statement condemning Russian police crackdowns on those demonstrating against the \"blatant fraud\" of the Duma election and calling for their release.  These challenges to Russia's democratic development likely will continue to be of concern to Congress and the Administration as they consider the course of U.S.-Russia cooperation on matters of mutual strategic interest and as they monitor problematic human rights cases. A major question of U.S.-Russia relations is whether Russia can be an enduring and reliable partner in international relations if it fails to uphold human rights and the rule of law.\n"
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  },
  {
    "id": 17,
    "question": null,
    "answer": "Every year thousands of veterans volunteer to participate in research projects under the auspices of the VA. Research offers the possibility of benefits to individual participants and to society, but it is not without risk to research subjects. VA studies, like other federally funded research programs, are governed by regulations designed to minimize risks and protect the rights and welfare of research participants. VA must ensure that veterans have accurate and understandable information so that they can make informed decisions about volunteering for research. In September 2000, GAO reported on weaknesses it found in VA's systems for protecting human subjects. VA concurred with GAO's recommendations that its human subject protections could be strengthened by taking actions in five domains--guidance, training, monitoring and oversight, handling of adverse event reports, and funding of human subject protection activities. (VA Research: Protections for Human Subjects Need to Be Strengthened, (GAO/HEHS-00-155, Sept. 28, 2000)). GAO was asked to assess whether VA has made sufficient progress in implementing the recommendations and to examine the recent changes in VA's organizational structure for monitoring and overseeing human subject protections. VA has not taken sufficient actions to strengthen its human subject protection systems since GAO made recommendations nearly 3 years ago. Continuing weaknesses VA has not sufficiently addressed include ensuring that its policy for implementing federal regulations for the protection of human subjects is up to date; training occurs periodically for all personnel involved in human subject protections; those charged with reviewing risks have information that can help them interpret reports of adverse events; and sufficient funding is allocated to support human subject protection activities. VA has taken some important steps to strengthen aspects of its human subject protections by providing some necessary guidance and offering training to research personnel. Moreover, it strengthened its internal oversight and instituted an external accreditation program, with reviews of all its medical centers' human subject protection programs scheduled through summer 2005. VA is now in the midst of a reorganization of its headquarters research offices that was begun without adequate planning and notice. VA did not initially ensure the independence of compliance activities although more recent actions appear to have restored the integrity of the compliance function. VA has not clarified responsibilities for education, training, and policy development. Until it does so, it is unclear how the reorganization will affect VA's efforts to further strengthen its human subject protections.\n",
    "docs": [
      "Background Conducting research is one of VA\u2019s core missions. VA researchers have  been involved in a variety of important advances in medical research,  including development of the cardiac pacemaker, kidney transplant  technology, prosthetic devices, and drug treatments for high blood  pressure and schizophrenia. In fiscal year 2002, VA supported studies by  more than 3,000 scientists at 115 VA facilities. VA researchers receive  additional grants and contracts from other federal agencies, such as the  National Institutes of Health, research foundations, and private industry  sponsors, including pharmaceutical companies. To protect the rights and welfare of human research subjects, 17 federal  departments and agencies,",
      " including VA, have adopted regulations  designed to safeguard the rights of subjects and promote ethical research.  These regulations, known as the Common Rule, establish minimum  standards for the conduct and review of research to ensure that studies  are conducted in accordance with certain basic ethical principles. These  principles require that subjects voluntarily give their informed consent to  participate in research, that the risks of research are reasonable in relation  to the expected benefits to the individual or to society, and that  procedures for selecting subjects are fair. The Common Rule creates a system in which the responsibility for  protecting human subjects is assigned to three groups:  Investigators are responsible for conducting research in accordance with  regulations.",
      "  Institutions are responsible for establishing oversight mechanisms for  research, including committees known as institutional review boards  (IRB), which are to review both research proposals and ongoing research  to ensure that the rights and welfare of human subjects are protected. VA  medical centers engaged in research involving human subjects may  establish their own IRBs or secure the services of an IRB at an affiliated  university or other VA medical center. Agencies, including VA, are responsible for ensuring that their IRBs  comply with applicable federal regulations and have sufficient space and  staff to accomplish their obligations. VA is responsible for ensuring that all human research it conducts or  supports meets the requirements of VA regulations,",
      " regardless of whether  that research is funded by VA, the research subjects are veterans, or the  studies are conducted on VA grounds. In addition, two components of the  Department of Health and Human Services (HHS) have oversight  responsibilities for some VA research. The Food and Drug Administration  (FDA) is responsible for protecting the rights of human subjects enrolled  in research with products it regulates\u2014drugs, medical devices, biologics,  foods, and cosmetics. HHS-funded research is subject to oversight by its  Office for Human Research Protections (OHRP). Both FDA and OHRP  have the authority to monitor those studies conducted under their  jurisdiction,",
      " and each can take action against investigators, IRBs, or  institutions that fail to comply with applicable regulations. To facilitate  assurance of compliance with federal regulations for the protection of  human subjects, VA awarded a contract to the National Committee for  Quality Assurance (NCQA) to provide external accreditation of its medical  centers\u2019 human research protection programs in August 2000. Two VA headquarters offices have responsibilities that are directly related  to human subject protections. Responsibility for the administration of VA\u2019s  research program rests with its Office of Research and Development  (ORD), which allocates appropriated research funds to VA researchers. To  help ensure that VA research is conducted ethically,",
      " legally, and safely, VA  created an independent office to conduct compliance and oversight  activities\u2014the Office of Research Compliance and Assurance (ORCA)\u2014in  1999. This office was given responsibilities for promoting and enhancing  the ethical conduct of research and investigating allegations of research  noncompliance; it reported directly to the Under Secretary for Health. In  early 2003, VA reorganized its research offices and replaced ORCA with a  new office, the Office of Research Oversight (ORO). ORCA\u2019s  responsibilities for education, training, and policy guidance were  transferred to ORD. ORCA\u2019s responsibilities for compliance activities were  assigned to ORO.",
      " In March 2003, ORD issued a memorandum announcing a 90-day national  \u201cstand down\u201d for VA human subject research to be effective from March 10  through June 6, 2003, although research was permitted to continue during  this period. The stand down was intended to focus efforts on identifying  and correcting problems with VA\u2019s systems for protecting human subjects  and to notify investigators that disciplinary actions may result from  noncompliance with federal regulations governing the conduct of their  research. ORD also asked medical center managers to attest that their  IRBs are constituted as required by VA regulations and that they meet  regularly enough to review research protocols and adverse events;",
      " that  their research staff has obtained training in human subject protections;  and that they have checked the credentials of all personnel involved in  research, including investigators, research team members, IRB members  and staff, and research and development committee members. Earlier Evaluation Showed  VA Needed to Strengthen  Human Subject  Protections In 2000, we concluded that medical centers we visited did not comply with  all regulations to protect the rights and welfare of research participants.  Based on our review of eight medical centers, we documented an uneven,  but disturbing, pattern of noncompliance with human subject protection  regulations. The cumulative weight of the evidence indicated failures to  consistently safeguard the rights and welfare of research subjects.",
      " Among  the problems we observed were failures to provide adequate information  to subjects before they participated in research, inadequate reviews of  proposed and ongoing research, insufficient staff and space for IRBs, and  incomplete documentation of IRB activities. We found relatively few  problems at some sites that had stronger systems to protect human  subjects, but we observed multiple problems at other sites. Although the  results of our visits to medical centers could not be projected to VA as a  whole, the extent of the problems we found strongly indicated that human  subject protections at VA needed to be strengthened. Although primary responsibility for implementation of human subject  protections lies with medical centers,",
      " their IRBs, and investigators, we  identified three specific systemwide weaknesses that compromised VA\u2019s  ability to protect human subjects. First, VA headquarters had not provided  medical center research staff with adequate guidance about human subject  protections and thus had not ensured that research staff had all the  information they needed to protect the rights and welfare of human  subjects. Second, insufficient monitoring and oversight of local human  subject protections by headquarters permitted noncompliance with  regulations to go undetected and uncorrected. Third, VA had not ensured  that funds needed for human subject protections were allocated for that  purpose at medical centers, with officials at some medical centers  reporting that they did not have sufficient resources for the staff,",
      " space,  training, and equipment necessary to accomplish their mandated  responsibilities. To strengthen VA\u2019s protections of the rights and welfare of human  subjects, we recommended that VA take immediate steps to ensure that  VA medical centers, their IRBs, and VA investigators comply with all  applicable regulations for the protection of human subjects. The specific  actions we recommended involved guidance, training, monitoring and  oversight, handling of information about adverse events, and funding of  human subject protection activities. VA concurred with our  recommendations. Insufficient Action  Taken to Strengthen  Protections for  Human Subjects,  Although VA Has  Made Some Progress VA has not taken sufficient action to strengthen protections for human  subjects since we made our recommendations nearly 3 years ago although  it has taken some important steps.",
      " ORD has not revised its policy on  human subject protections, and it has not established training  requirements, in policy, to ensure that research personnel obtain periodic  training. Moreover, VA has not established a mechanism for handling  adverse event reports to ensure that IRBs have the information they need  to safeguard the rights and welfare of human research participants and it  has not ensured that sufficient resources are allocated to support human  subject protection activities. On the other hand, VA has strengthened  aspects of its human subject protection systems. ORCA developed a  training program and conducted oversight activities by investigating  claims of research improprieties or noncompliance and restricting or  suspending four medical centers\u2019 research activities when it found  evidence of serious problems.",
      " VA also instituted an external accreditation  program that has the potential to further strengthen VA\u2019s oversight of  human subject protections. Policy for Human Subject  Protections Has Not Been  Revised, but Other  Important Guidance Was  Issued In 2000, we reported that we had found problems with VA\u2019s policy for  implementing federal regulations for the protection of human subjects.  These problems included requirements for obtaining and documenting  informed consent. For example, the policy requires use of a particular  form to document a subject\u2019s consent to participate in research. This form  calls for the signature of a witness, but does not indicate who may serve as  a witness,",
      " to what the witness is attesting, or the circumstances under  which a witness is needed. In its comments to that report, VA indicated that ORD was in the process  of updating its policy on human subject protections and that it expected to  submit that policy for internal review by the end of August 2000. When we  followed up in September 2001, VA reported that comments were being  incorporated into the draft policy. In September 2002, VA reported that it  was awaiting final review but has not issued its revised policy as of June  2003. As a result, investigators, IRB members and staff,",
      " and other research  personnel do not yet have a clear, up-to-date policy to follow when  implementing human subject protections. Consequently, VA cannot ensure  that research staff know what they need to do to protect the rights and  welfare of human research subjects. In addition to the problems we noted with VA\u2019s policy, we reported in 2000  that VA headquarters had not provided medical center staff with adequate  guidance to help them ensure the protection of human research subjects.  VA has made some progress in this area. For example, ORCA had begun  distributing some information to medical centers in early 2000. By January  2003,",
      " it had posted about 60 information letters and 14 alerts on its web  page and through electronic mail to research facilities. These letters and  alerts provide information about new HHS guidance and policies regarding  human subject protections, reports on research ethics, and problems that  ORCA staff observed during site visits to VA medical centers. In addition,  ORCA developed guidance about human subject protections. For example,  ORCA published a best practices guide for IRB procedures in September  2001 and a tool for medical centers to use to assess their human subject  protection programs in October 2001. Training Requirement Not  Established in Policy,",
      "  Although Training  Opportunities Offered In 2000, we found that VA did not have a systemwide educational program  focused on human subject protection issues. Although VA\u2019s human subject  protection regulations do not include any specific educational  requirements, we concluded that periodic training for investigators, IRB  members, and IRB staff is necessary to ensure that they can meet their  obligations to protect the rights and welfare of human research subjects. VA has not established training requirements in policy, although on two  occasions it has issued memorandums that required training. In August  2000, ORD issued a memorandum to medical center associate chiefs of  staff for research stating that all VA investigators had to meet specific  education requirements before submitting research proposals during 2001.",
      "  ORD\u2019s memorandum regarding the March 2003 stand down stated that all  research personnel must provide documentation that they have completed  both a course on the protection of human research subjects and a course  on good clinical practices within the past year; otherwise all research  personnel must complete this training by June 6, 2003. These additional  personnel include research coordinators and research assistants involved  in human research; all members of VA research offices, research and  development committees, and IRBs; and IRB staff (except secretarial  staff). According to VA\u2019s policy for distributing information, however,  memorandums are not used to establish permanent requirements or  policy,",
      " and education and training requirements for investigators were not  published in a directive or handbook, which are the documents VA uses to  communicate policy requirements. As a result, headquarters cannot  systematically ensure that all VA personnel involved in human subject  research will be informed of, and stay current with, ways to comply with  all applicable regulations for the protection of human subjects. Despite the lack of policies requiring human subject protections training,  both ORD and ORCA have provided information since we made our  recommendation about available educational programs to investigators  and other research personnel. ORCA worked with academic institutions to  develop an optional training program for use by VA investigators,",
      " IRB  members, IRB staff, research administrative staff, and medical center  officials. This web-based training program includes quizzes after each  module; certification of successful completion requires achieving a score  of at least 75 percent correct. ORCA also presented a seminar on research  compliance and assurance to senior managers of each of VA\u2019s networks,  and ORD recently began providing training to senior managers about their  responsibilities regarding human subject protections. Internal and External  Oversight Strengthened In 2000, we reported that VA had not identified widespread weaknesses in  its human subject protection systems because of its low level of  monitoring. VA has made progress in strengthening its oversight.",
      " ORCA,  which was created in 1999, was charged with advising the Under Secretary  for Health on all matters related to human subject protections, promoting  the ethical conduct of research, and conducting prospective reviews and  \u201cfor cause\u201d investigations. Since becoming operational, ORCA has  investigated claims of improper conduct of research and noncompliance.  In about a dozen cases, it sent teams to medical centers to conduct  intensive for cause reviews. ORCA also conducted six on-site reviews to  follow up on findings from external accreditation reviews. As a result of its  investigations, ORCA restricted or suspended research at four VA medical  centers until identified problems were corrected.",
      " For example, in March  2001, ORCA restricted one medical center\u2019s human research activities by  suspending enrollment of new subjects in research after its investigation  revealed noncompliance with several regulations pertaining to IRBs. ORCA lifted this restriction in February 2002 after the medical center  corrected the identified problems. In addition to its internal oversight mechanisms, VA became the first  research organization to arrange for external accreditation of human  subject protection systems. External accreditation has the potential to  significantly strengthen oversight of human subject protections. In August  2000, VA awarded a $5.8 million, 5-year contract to NCQA to operate an  accreditation program to assess medical centers\u2019 compliance with federal  regulations for the protection of human subjects.",
      " VA\u2019s contract with NCQA  requires it to develop accreditation standards, to conduct a site visit every  3 years to each VA medical center conducting human research, and to  decide on the accreditation status of each facility. According to a 2001  report by the Institute of Medicine, the accreditation standards developed  by NCQA provide a promising basis for accreditation because they are  explicitly linked to federal regulations and pay attention to quality  improvement. The Institute of Medicine recommended that the NCQA  standards be strengthened, for example, by specifying how research  subjects will be involved in human subject protection systems. NCQA began accrediting VA medical centers and has revised its  accreditation process.",
      " NCQA conducted accreditation visits to 23 VA  facilities from September 2001 through May 2002. An ORD official told us  that, of those 23 facilities, 20 were accredited with conditions, 2 were not  accredited, and 1 withdrew from the process. A facility accredited with  conditions met most of the accreditation standards. On the basis of its  experience and feedback on its standards, NCQA proposed\u2014and ORD  approved\u2014revising the standards. NCQA discontinued accreditation  reviews while it revised its standards for evaluating human subject  protection programs. Revisions involved clarification of standards,  reduction of redundancies,",
      " and changes to the scoring system. Some  revisions were designed to respond to comments from the Institute of  Medicine. For example, NCQA adopted standards to encourage a facility  to obtain input from research subjects to improve its human subject  protection system. ORD approved a new set of standards in April 2003.  Site visits are expected to resume in October 2003, with accreditation  reviews of all VA facilities involved in human subject research planned for  completion by summer 2005. Actions Regarding Adverse  Event Reports and  Funding for Human  Subject Protection  Activities Are Incomplete In 2000, we reported that IRBs have difficulty handling adverse event  reports and often lack key information necessary for their interpretation.",
      "  Since then, VA has not developed a mechanism for handling adverse event  reports to ensure that IRBs have information that can help them interpret  reports of actual adverse events that research subjects experience while  participating in studies. Federal regulations require investigators to report  to the IRB unanticipated problems involving risks to subjects. In turn,  IRBs are to review these adverse event reports as part of their continuing  assessment of the adequacy of a study\u2019s protections for human subjects.  ORD issued guidance stating that analyses of adverse events should be  provided to IRBs for those clinical trials that VA funds at multiple medical  centers. ORCA staff participated in interagency discussions about how to  help IRBs handle adverse event reports and developed guidance regarding  what adverse events IRBs are to report to ORCA.",
      " As of June 2003, this  guidance has not been issued and VA still lacks comprehensive guidance  to help IRBs interpret reports of adverse events. In 2000, we reported that VA did not know what level of funding was  necessary to support human subject protection activities and research  officials at five of eight medical centers we visited told us that they had  insufficient funds to ensure adequate operation of their human subject  protection systems. In May 2000, ORD provided networks with suggestions  for the level of administrative staffing of IRBs. ORD also commissioned a  study of the costs of operating IRBs within VA, which was completed in  June 2002.",
      " On June 13, 2003, VA issued a policy regarding funding for  human subject protection programs that medical centers are to obtain  from external sponsors of VA research. Specifically, the sponsor of each  industry-funded study is to be charged 10 percent of the direct costs of the  study or a flat fee of $1,200, whichever is greater, by the medical center to  help cover the costs of the human subject protection program. We have  not had the opportunity to study the potential for this mechanism to help  ensure sufficient funding. VA has not specified a procedure for ensuring  that its medical centers\u2014which conduct VA-funded research and research  funded by federal agencies and research foundations as well as  industries\u2014-",
      "will be allocated the funds necessary for their human subject  protection programs. Recent  Reorganization  Appears to Maintain  Independent  Compliance Function,  but Other Roles and  Responsibilities  Unclear In 2003, VA began a reorganization of its research offices without adequate  planning and notice. We found that VA did not initially ensure the  independence of compliance activities, although more recent actions  appear to have restored the integrity of the compliance function. In  addition, VA has not clarified responsibilities for education, training, and  policy development. VA\u2019s initial action to reorganize its research offices failed to ensure the  independence of compliance activities.",
      " In January 2003, officials  announced that the existing compliance office, ORCA, would be disbanded  and the compliance function and staff reassigned to ORD. As a result,  compliance field personnel began reporting their activities to ORD,  potentially compromising the independence of their compliance  investigations. In a series of memorandums issued from March through  May of 2003, VA announced that a new office, ORO, would replace ORCA.  VA memorandums indicated that ORO, like ORCA, would be independent  of ORD, and that ORO would be organizationally responsible to the Under  Secretary for Health.",
      " According to generally accepted government auditing standards, offices  with responsibility for assessing regulatory compliance should be  organizationally independent of the offices they review and should report  to, and be accountable to, the head or deputy head of the government  entity. Because VA considered making ORD responsible for compliance  activities\u2014where its independence would be compromised\u2014legislation  was proposed in the House of Representatives to establish an independent  office within VA to oversee research compliance with federal regulations. According to VA memorandums and discussions with agency officials,  ORO will have responsibility for investigating allegations of research  noncompliance, misconduct, and improprieties. However,",
      " it is not clear  whether ORO will have authority to review a medical center\u2019s human  subject protection program in the absence of a prior allegation of a  problem; that is, whether it can conduct prospective investigations. While  VA memorandums indicate that ORO will have the same compliance  responsibilities that ORCA had and specify that for cause inspections will  be conducted; they are silent on routine inspections. Experts in human  subject protections have said that these routine inspections, sometimes  referred to as prospective inspections, are an essential way to help prevent  noncompliance. As of June 2003, a directive to formalize the authorities  and responsibilities of ORO has not been issued.",
      " Consequently, ORO\u2019s  compliance responsibilities remain unclear. Other roles and responsibilities are also unclear. For example, ORCA  previously had responsibilities for education and training. VA\u2019s  reorganization now assigns these responsibilities solely to ORD. The  implications of this transfer of responsibilities for strengthening human  subject protections are unclear. For example, when ORCA conducted  compliance reviews or followed up on results of accreditation reviews, it  provided instruction about what steps would be necessary to correct  identified problems. It is not clear whether or to what extent such  instruction, including technical assistance regarding a specific area of  noncompliance, would be considered to be education and training and  therefore not within ORO\u2019s responsibilities.",
      " ORCA also had responsibility to participate in the development of policies  involving human subject protections. Under the reorganization, ORD  would have responsibility for policy development. Existing memorandums  are silent on whether ORO will have any role in, or can contribute its  expertise to, policy development. ORCA had been created with the  understanding that it would collaborate with ORD on dissemination of  information, communication, and policy development. It is not clear to  what extent VA\u2019s efforts to strengthen its human subject protections will  bring to bear the collective expertise of the staff in its compliance and  operational research offices. However, having ORD take the lead on  policies regarding compliance functions or activities could be  inappropriate to the extent that it interferes with ORO\u2019s independence in  executing its compliance functions.",
      " Mr. Chairman, this concludes my prepared remarks. I will be pleased to  answer any questions you or other members of the subcommittee may  have. Contact and  Acknowledgments For further information regarding this testimony, please contact Cynthia  A. Bascetta at (202) 512-7101. Kristen Joan Anderson, Jacquelyn Clinton,  Pamela Dooley, Lesia Mandzia, Marcia Mann, and Daniel Montinez also  contributed to this statement. Related GAO Products Human Subjects Research: HHS Takes Steps to Strengthen Protections,  but Concerns Remain. GAO-01-775T. Washington,",
      " D.C.: May 23, 2001. VA Research: Protections for Human Subjects Need to Be Strengthened.  GAO/HEHS-00-155. Washington, D.C.: September 28, 2000. VA Research: System for Protecting Human Subjects Needs  Improvements. GAO/T-HEHS-00-203. Washington, D.C.: September 28,  2000. Scientific Research: Continued Vigilance Critical to Protecting Human  Subjects. GAO/T-HEHS-96-102. Washington, D.C.: March 12, 1996. Scientific Research:",
      " Continued Vigilance Critical to Protecting Human  Subjects. GAO/HEHS-96-72. Washington, D.C.: March 8, 1996. This is a work of the U.S. government and is not subject to copyright protection in the  United States. It 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.\n"
    ],
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  {
    "id": 18,
    "question": null,
    "answer": "In Whole Woman's Health v. Hellerstedt, the U.S. Supreme Court (Court) invalidated two Texas requirements that applied to abortion providers and physicians who perform abortions. Under a Texas law enacted in 2013, a physician who performs or induces an abortion was required to have admitting privileges at a hospital within 30 miles from the location where the abortion was performed or induced. In general, admitting privileges allow a physician to transfer a patient to a hospital if complications arise in the course of providing treatment. The Texas law also required an abortion facility to satisfy the same standards as an ambulatory surgical center (ASC). These standards address architectural and other structural matters, as well as operational concerns, such as staffing and medical records systems. Supporters of the Texas law maintained that the requirements would guarantee a higher level of care for women seeking abortions. Opponents, however, characterized the requirements as unnecessary and costly, and argued that they would make it more difficult for abortion facilities to operate. In Hellerstedt, the Court concluded that the admitting privileges and ASC requirements placed a substantial obstacle in the path of women seeking an abortion, and imposed an undue burden on the ability to have an abortion. In applying the undue burden standard that is now used to evaluate abortion regulations, the Court explained that a reviewing court must consider the burdens a law imposes on abortion access together with the benefits that are conferred by the law. The Court also indicated that courts should place considerable weight on the evidence and arguments presented in judicial proceedings when they consider the constitutionality of abortion regulations. Hellerstedt has been recognized both for its impact in Texas and for its perceived refinement of the undue burden standard. Because at least 25 states are believed to have either an admitting privileges or ASC requirement, Hellerstedt is expected to have an impact in other jurisdictions. This report examines Hellerstedt and discusses how the decision might affect the application of the undue burden standard in future abortion cases.\n",
    "docs": [
      "The Undue Burden Standard and Planned Parenthood of Southeastern Pennsylvania v. Casey The undue burden standard that is now used to evaluate abortion regulations was formally adopted by the Court in Planned Parenthood of Southeastern Pennsylvania v. Casey, a 1992 decision involving five provisions of the Pennsylvania Abortion Control Act. In a joint opinion, the Court reaffirmed the basic constitutional right to an abortion, while simultaneously allowing new restrictions to be placed on the availability of the procedure. The Court declined to overrule Roe v. Wade, its 1973 decision that first recognized the right to terminate a pregnancy, explaining the importance of following precedent: \"The Constitution serves human values,",
      " and while the effect of reliance on Roe cannot be exactly measured, neither can the certain cost of overruling Roe for people who have ordered their thinking and living around that case be dismissed.\" At the same time, however, the Court refined its holding in Roe by abandoning the trimester framework articulated in the 1973 decision, and rejecting the strict scrutiny standard of judicial review it had previously espoused. In Casey, the Court adopted a new undue burden standard that attempts to reconcile the government's interest in potential life with a woman's right to terminate her pregnancy. The Court observed: The very notion that the State has a substantial interest in potential life leads to the conclusion that not all regulations must be deemed unwarranted.",
      " Not all burdens on the right to decide whether to terminate a pregnancy will be undue. In our view, the undue burden standard is the appropriate means of reconciling the State's interest with the woman's constitutionally protected liberty. According to the Court, an undue burden exists if the purpose or effect of an abortion regulation is \"to place a substantial obstacle in the path of a woman seeking an abortion before the fetus attains viability.\" The Court further indicated that unnecessary health regulations that have the purpose or effect of presenting a substantial obstacle to a woman seeking an abortion would impose an undue burden. Evaluating the Pennsylvania law under the undue burden standard, the Court concluded that four of the five provisions at issue did not impose an undue burden.",
      " The Court upheld the law's 24-hour waiting period requirement, its informed consent provision, its parental consent provision, and its recordkeeping and reporting requirements. The Court invalidated the law's spousal notification provision, which required a married woman to tell her husband of her intention to have an abortion. Acknowledging the possibility of spousal abuse if the provision were upheld, the Court maintained: \"The spousal notification requirement is thus likely to prevent a significant number of women from obtaining an abortion. It does not merely make abortions a little more difficult or expensive to obtain; for many women, it will impose a substantial obstacle.\" The Court's decision in Casey was particularly significant because it appeared that the new undue burden standard would allow a greater number of abortion regulations to pass constitutional muster.",
      " Prior to Casey, the application of Roe's strict scrutiny standard of review resulted in most state abortion regulations being invalidated during the first two trimesters of pregnancy. For example, applying strict scrutiny, the Court invalidated 24-hour waiting period requirements and informed consent provisions in two cases: Akron v. Akron Center for Reproductive Health, Inc. and Thornburgh v. American College of Obstetricians and Gynecologists. Casey also recognized that the state's interest in protecting the potentiality of human life extended throughout the course of a woman's pregnancy. Thus, the state could regulate from the outset of a woman's pregnancy, even to the point of favoring childbirth over abortion.",
      " Under the trimester framework articulated in Roe, a woman's decision to terminate her pregnancy in the first trimester could not be regulated generally by the state. Following Casey, the Court applied the undue burden standard in just three cases prior to Hellerstedt. In Mazurek v. Armstrong, the Court reversed a decision by the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) involving a Montana law that restricted the performance of abortions to licensed physicians. The Ninth Circuit vacated a district court's judgment that denied a motion for a preliminary injunction based on the lower court's conclusion that a group of physicians and a physician assistant had not established a likelihood of prevailing on their claim that the law imposed an undue burden.",
      " The Supreme Court concluded that there was no evidence that the law had an improper purpose or that it would place a substantial obstacle in the path of a woman seeking an abortion. Although the Court did not specifically address the law's effect, it did note that it would have an impact on only a single practitioner. Stenberg v. Carhart and Gonzales v. Carhart both involved the so-called \"partial-birth\" abortion procedure. In Stenberg, the Court invalidated a Nebraska law that restricted the procedure, in part, because it imposed an undue burden on a woman's ability to terminate a pregnancy. Finding that the statute's plain language prohibited the performance of both the \"partial-birth\"",
      " abortion procedure and another more commonly used abortion procedure, the Court maintained that the law imposed an undue burden because abortion providers would fear prosecution, conviction, and imprisonment if they acted. In Gonzales, the Court considered the validity of the federal Partial-Birth Abortion Ban Act of 2003. The Court distinguished the federal law from the Nebraska statute at issue in Stenberg, noting the inclusion of \"anatomical landmarks\" that identify when an abortion procedure will be subject to the law's prohibitions. Because the plain language of the law did not restrict the availability of alternate abortion procedures, the Court concluded that it was not overbroad and did not impose an undue burden on a woman's ability to terminate her pregnancy.",
      " Admitting Privileges Requirement At least 15 states have adopted laws or regulations that require physicians who perform abortions to have admitting privileges at a nearby hospital. Texas's requirement provided that a physician \"performing or inducing an abortion... must, on the date the abortion is performed or induced, have active admitting privileges at a hospital that: (A) is located not further than 30 miles from the location at which the abortion is performed or induced; and (B) provides obstetrical or gynecological health care services.\" A physician who violated the requirement could be subject to a fine of up to $4,000. The Texas legislature indicated that the requirement raised the standard and quality of care for women seeking abortions,",
      " and protected their health and welfare. Opponents maintained, however, that the requirement would likely result in the closure of numerous abortion facilities as physicians faced difficulty obtaining admitting privileges. In 2013, Planned Parenthood and a group of abortion providers and physicians, including Whole Woman's Health, challenged the constitutionality of the admitting privileges requirement and a separate requirement involving the administration of abortion-inducing drugs. In Planned Parenthood of Greater Texas Surgical Health Services v. Abbott, the Fifth Circuit concluded that the admitting privileges requirement was facially constitutional. The Fifth Circuit found that the requirement did not impose an undue burden despite the possibility of facility closures and increased travel distances to obtain an abortion.",
      " With regard to travel, the court maintained: \" Casey counsels against striking down a statute solely because women may have to travel long distances to obtain abortions.\" Whole Woman's Health subsequently challenged the admitting privileges requirement as applied to two specific clinics in El Paso and McAllen, Texas. In Whole Woman's Health v. Lakey, a federal district court concluded that the requirement was unconstitutional as applied to both clinics and, when considered together with the ASC requirement, was unconstitutional \"as applied to all women seeking a previability abortion.\" On appeal, the Fifth Circuit considered both facial and as-applied challenges to both requirements. In Whole Woman's Health v.",
      " Cole, the appeals court found that the provider's facial challenge to the admitting privileges requirement failed on procedural grounds. The court maintained that the provider's facial claim violated the principle of res judicata, and should have been precluded by its decision in Abbot t. The court noted: \"By granting a broad injunction against the admitting privileges requirement... the district court resurrected the facial challenge put to rest in Abbott...\" Although the Fifth Circuit rejected the facial challenge to the admitting privileges requirement, it upheld an injunction of the requirement as applied to the abortion facility in McAllen, when it utilized a specific physician. This physician was unsuccessful at obtaining admitting privileges at local hospitals for reasons other than his competence.",
      " At the same time, however, the Fifth Circuit reversed an injunction of the requirement as applied to the abortion facility in El Paso. Citing a nearby abortion facility in Santa Teresa, New Mexico, and the fact that people travel regularly between the two cities for medical care, the court maintained that the admitting privileges requirement did not impose an undue burden. The Fifth Circuit distinguished the Texas admitting privileges requirement from a similar Mississippi requirement that it invalidated in Jackson Women's Health Organization v. Currier, a 2014 decision. The Fifth Circuit explained that invalidating the Mississippi requirement would have led to the closure of the last abortion facility in the state. An invalidation of the Texas requirement would not have the same effect.",
      " Ambulatory Surgical Center Requirement State laws that require abortion providers to satisfy the same standards as ASCs have become increasingly more common. Texas regulations define an ASC as a facility \"that primarily provides surgical services to patients who do not require overnight hospitalization or extensive recovery, convalescent time or observation.\" Under Texas law, ASCs are required to satisfy a variety of operating, fire prevention and safety, and construction standards. In Cole, the Fifth Circuit concluded that the plaintiffs' claim involving the ASC requirement failed on both procedural grounds and on the merits. The court found that the claim was precluded by its decision in Abbott. Although the plaintiffs did not challenge the requirement in Abbott because implementing regulations had not yet gone into effect,",
      " the Fifth Circuit maintained that because Abbott involved the same parties and legal standards, the requirement should have been challenged in that case. The Fifth Circuit determined that a facial challenge to the ASC requirement would also fail on the merits because the requirement did not have the purpose or effect of placing a substantial obstacle in the path of a woman seeking an abortion. The court maintained that the plaintiffs failed to show that the ASC requirement was adopted for an improper purpose. Although the lower court found an improper purpose based on what it concluded was a lack of credible evidence to support the proposition that abortions performed in ASCs lead to better health outcomes, the Fifth Circuit observed: \"All of the evidence referred to by the district court is purely anecdotal and does little to impugn the State's legitimate reasons for the Act.\" In addition,",
      " the Fifth Circuit found that the ASC requirement did not have the effect of placing a substantial obstacle in the path of a woman seeking an abortion. In Casey, the Court indicated that if a law would be invalid in a large fraction of the cases in which it is relevant, it should be found to have an improper effect. Notably, the Court considered the effect of Pennsylvania's spousal notification requirement only on married women who did not want to notify their husbands of their plans to have an abortion, rather than its effect on all women or all pregnant women in the state. In that equation, the Court concluded that the spousal notification requirement would have an effect in a large fraction of the relevant cases.",
      " In Cole, however, the Fifth Circuit found that the ASC requirement would not have a similar effect. After considering the number of women of reproductive age in Texas and the number of women of reproductive age who would have to travel more than 150 miles to have an abortion because of the implementation of both the admitting privileges and ASC requirements, the court determined that only 16.7% of women of reproductive age would have to travel more than 150 miles to have an abortion. The Fifth Circuit reasoned that 16.7% did not constitute a large fraction of the relevant cases, and thus, the effect of the ASC requirement was not improper.",
      " Although the Fifth Circuit rejected a facial challenge to the ASC requirement, it affirmed an injunction of the requirement as applied to the abortion facility in McAllen, with some modifications. The court acknowledged that the McAllen facility is the sole abortion provider in the Rio Grande Valley and discussed the 235-mile distance some women in the Rio Grande Valley would have to travel to obtain an abortion. In light of this distance, the court indicated that the state would be enjoined from enforcing the requirement until another facility opened at a location that was closer than those located in San Antonio. Acknowledging its discussion of Casey and travel distances in Abbott, the Fifth Circuit observed:",
      " \"[I]n the specific context of this as-applied challenge as to the McAllen facility, the 235-mile distance presented, combined with the district court's findings, are sufficient to show that [the requirement] has the 'effect of placing a substantial obstacle in the path of a woman seeking an abortion.'\" The Fifth Circuit declined, however, to affirm the lower court's judgment involving the ASC requirement as applied to the El Paso facility. Because abortion services are available at the facility in Saint Teresa, New Mexico, and there was evidence that many women traveled to that facility before enactment of H.B. 2, the court concluded that the ASC requirement did not place a substantial obstacle in the path of women seeking an abortion in the El Paso area.",
      " Whole Woman's Health v. Hellerstedt In its petition for review of the Fifth Circuit's decision, Whole Woman's Health asked the Court to consider the extent to which the Texas requirements actually supported women's health. Whole Woman's Health maintained that the Fifth Circuit's refusal to consider the promotion of women's health conflicted with the approaches taken by other federal courts of appeals. Whole Woman's Health also challenged the Fifth Circuit's conclusion that res judicata barred it from considering newly developed facts that could have an impact on the provider's facial challenges to the requirements. Whole Woman's Health argued that when a claim rests on facts developed after a judgment is entered in a prior case,",
      " the claim is not barred by that judgment, and a court may award any remedy that is otherwise appropriate. In a 5-3 decision, the Court rejected both the procedural and constitutional grounds for the Fifth Circuit's decision in Cole. Writing for the majority in Hellerstedt, Justice Breyer found that res judicata did not bar facial challenges to either the admitting privileges requirement or the ACS requirement. Justice Breyer also concluded that the requirements provide \"few, if any, health benefits for women, pose[] a substantial obstacle to women seeking abortions, and constitute[] an 'undue burden' on their constitutional right to do so.\" Justice Breyer noted that the undue burden standard requires courts to consider \"the burdens a law imposes on abortion access together with the benefits those laws confer.\" Moreover,",
      " Justice Breyer maintained that courts should place considerable weight on the evidence and arguments presented in judicial proceedings when they consider the constitutionality of abortion regulations. In addressing the admitting privileges requirement and res judicata, the Court distinguished the pre-enforcement challenge in Abbott with the post-enforcement challenge at issue. Citing the Restatement (Second) of Judgments, the Court noted that the development of new material facts, such as the large number of clinics that closed after H.B. 2 began to be enforced, could mean that a new case and a prior similar case do not present the same claim. The Court observed: \"When individuals claim that a particular statute will produce serious constitutionally relevant adverse consequences before they have occurred\u2014and when the courts doubt their likely occurrence\u2014the factual difference that those adverse consequences have in fact occurred can make all the difference.\" In addition,",
      " the Court found that res judicata did not preclude a facial challenge to the ASC requirement. The Court emphasized that the ASC and admitting privileges requirements were separate and distinct, and that the Fifth Circuit failed to account for their differences when it concluded that the challenge to the ASC requirement was precluded by Cole : \"This Court has never suggested that challenges to different statutory provisions that serve two different functions must be brought in a single suit.\" The Court also indicated that the decision not to bring a facial challenge to the ASC requirement in Abbott was reasonable in light of the absence of regulations to implement the ASC requirement and the possibility that some abortion facilities might receive a waiver from the requirement.",
      " In its application of the undue burden standard to the admitting privileges and ASC requirements, the Hellerstedt Court referred heavily to the evidence collected by the district court. With regard to the admitting privileges requirement, the Court cited the low complication rates for first and second trimester abortions, and expert testimony that complications during the abortion procedure rarely require hospital admission. Based on this and similar evidence, the Court disputed the state's assertion that the purpose of the admitting privileges requirement was to ensure easy access to a hospital should complications arise. The Court emphasized that \"there was no significant health-related problem that the new law helped to cure.\" Citing other evidence concerning the closure of abortion facilities as a result of the admitting privileges requirement and the increased driving distances experienced by women of reproductive age because of the closures,",
      " the Court maintained: \"[T]he record evidence indicates that the admitting-privileges requirement places a'substantial obstacle in the path of a woman's choice.'\" The Court again referred to the record evidence to conclude that the ASC requirement imposed an undue burden on the availability of abortion. Noting that the record supports the conclusion that the ASC requirement \"does not benefit patients and is not necessary,\" the Court also cited the closure of facilities and the cost to comply with the requirement as evidence that the requirement poses a substantial obstacle for women seeking abortions. While Texas argued that the clinics remaining after implementation of the ASC requirement could expand to accommodate all of the women seeking an abortion,",
      " the Court indicated that \"requiring seven or eight clinics to serve five times their usual number of patients does indeed represent an undue burden on abortion access.\" The majority's focus on the record evidence, and a court's consideration of that evidence in balancing the burdens imposed by an abortion regulation against its benefits, is noteworthy for providing clarification of the undue burden standard. Although the Casey Court did examine the evidence collected by the district court regarding Pennsylvania's spousal notification requirement, and was persuaded by it, the Fifth Circuit discounted similar evidence collected by the lower court in Abbott and Lakey. In Hellerstedt, the Court maintained that the Fifth Circuit's approach did \"not match the standard that this Court laid out in Casey...\" In a dissenting opinion joined by Chief Justice Roberts and Justice Thomas,",
      " Justice Alito maintained that the petitioners' claims should have been barred by res judicata. With regard to the ACS requirement, in particular, Justice Alito contended that the claim should have been brought in Abbott because it imposed the same kind of burden on the availability of abortion. Justice Alito also criticized the absence of \"precise findings\" to support the argument that the admitting privileges and ASC requirements caused the closure of abortion facilities. If such facilities closed for reasons other than the requirements, he contended, \"the corresponding burden on abortion access may not be factored into the access analysis.\" Whether Hellerstedt should be interpreted to guarantee the invalidation of all of the other state admitting privileges and ASC requirements is not certain.",
      " The Court's emphasis on balancing the burdens imposed by an abortion regulation with its benefits, and its reliance on the record evidence, seems to suggest that each regulation would have to be examined on its own terms. Nevertheless, because of the similarities between the Texas requirements and the other admitting privileges and ASC requirements, it seems possible that other courts will also conclude that these requirements do not provide an appreciable benefit to women. The impact of Hellerstedt will likely become clearer as courts apply the decision to other cases. Notably, following the issuance of its decision in Hellerstedt, the Court declined to review two other cases involving state admitting privileges requirements.",
      " In Jackson Women's Health Organization v. Currier and Planned Parenthood of Wisconsin v. Schimel, the Fifth Circuit and the U.S. Court of Appeals for the Seventh Circuit determined that admitting privileges requirements in Mississippi and Wisconsin imposed an undue burden on the availability of abortion. In addition, in light of Hellerstedt, the Attorney General of Alabama indicated that he would dismiss his appeal of Planned Parenthood Southeast v. Strange, a 2014 decision that concluded that the state's admitting privileges requirement imposed an undue burden. Hellerstedt appears to have prompted groups that oppose abortion to explore other legislative options that would restrict the procedure by promoting the health of the fetus rather than the health of the woman.",
      " For example, legislation that would prohibit the performance of an abortion once a fetus has reached a gestational age of 20 weeks, a point in development when some contend that the fetus can experience pain, has been considered by state legislatures and the U.S. Congress. It should be noted, however, that fetal pain laws in Idaho, Arizona, and Utah have already been invalidated by the Ninth Circuit and the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit). In 2014, the Court declined to review the Ninth Circuit's decision in Isaacson v. Horne, a 2013 case that invalidated Arizona's fetal pain law.",
      " Even if the Court were to review a case involving a fetal pain law, it seems possible that it could apply the undue burden standard in a manner that deviates from its analysis in Hellerstedt. Unlike the admitting privileges and ASC requirements, which seek to promote women's health, the fetal pain laws were enacted to protect fetuses. Whether the Court would balance the burdens and benefits of a fetal pain law like it did in Hellerstedt is not entirely certain. Notably, the Ninth and Tenth Circuits focused on the Court's discussion of viability in Roe and Casey when they examined the Idaho, Arizona, and Utah fetal pain laws.",
      " In Casey, the Court emphasized that a state may not unduly interfere with a woman's right to terminate a pregnancy prior to viability: \"Before viability, the State's interests are not strong enough to support a prohibition of abortion or the imposition of a substantial obstacle to the woman's effective right to elect the procedure.\" Because the state fetal pain laws banned most abortions after a specified gestational age, regardless of whether a fetus had attained viability, the Ninth and Tenth Circuits concluded that the laws were unconstitutional. Like the appellate courts, the Supreme Court may focus on viability, rather than a balancing of burdens and benefits, in an examination of a fetal pain law.\n"
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  },
  {
    "id": 19,
    "question": null,
    "answer": "The Indian Health Service (IHS) within the Department of Health and Human Services (HHS) is the lead federal agency charged with improving the health of American Indians and Alaska Natives. IHS provides health care for approximately 2.2 million eligible American Indians/Alaska Natives through a system of programs and facilities located on or near Indian reservations, and through contractors in certain urban areas. IHS provides services to members of 573 federally recognized tribes. It provides services either directly or through facilities and programs operated by Indian tribes or tribal organizations through self-determination contracts and self-governance compacts authorized in the Indian Self-Determination and Education Assistance Act (ISDEAA). The IHS has three major sources of funding: (1) discretionary appropriations, (2) collections, and (3) mandatory appropriations.  Unlike most agencies within HHS, which receive their appropriations through the Labor, Health and Human Services, and Education appropriations act, IHS receives its discretionary appropriations through the Interior/Environment appropriations act. IHS's discretionary appropriations are divided into three accounts: (1) Indian Health Services, (2) Contract Support Costs, and (3) Indian Health Facilities. IHS collects payments for the health services it provides. IHS, unlike other federal agencies, has the authority to receive payments from other federal programs such as Medicaid, Medicare, and the Department of Veterans Affairs for the health services it provides to IHS beneficiaries who are also enrolled in those programs. IHS also receives payments from state programs (such as workers' compensation) and from private insurance. In addition to these payments, IHS collects rent from facilities it owns.  Since FY1998, IHS has received a mandatory appropriation each fiscal year to support the Special Diabetes Program for Indians. This funding source was most recently extended in the Bipartisan Budget Act of 2018 (P.L. 115-123), which provided mandatory appropriations for FY2018 and FY2019. The President's budget requests that these funds be moved to discretionary appropriations in FY2019.  This fact sheet focuses on the funding that IHS has received between FY2014 and FY2019 (proposed). \n",
    "docs": [
      "IHS Overview  The Indian Health Service (IHS) within the Department of Health and Human Services (HHS) is the lead federal agency charged with improving the health of American Indians and Alaska Natives. IHS provides health care for approximately 2.2 million eligible American Indians/Alaska Natives through a system of programs and facilities located on or near Indian reservations, and through contractors in certain urban areas. IHS provides services to members of 573 federally recognized tribes. It provides services either directly or through facilities and programs operated by Indian tribes or tribal organizations through self-determination contracts and self-governance compacts authorized in the Indian Self-Determination and Education Assistance Act (ISDEAA). The Snyder Act of 1921 provides general statutory authority for IHS.",
      " In addition, specific IHS programs are authorized by two acts: the Indian Sanitation Facilities Act of 1959 and the Indian Health Care Improvement Act (IHCIA). The Indian Sanitation Facilities Act authorizes the IHS to construct sanitation facilities for Indian communities and homes. IHCIA authorizes programs such as urban health, health professions recruitment, and substance abuse and mental health treatment, and permits IHS to receive reimbursements from Medicare, Medicaid, the State Children's Health Insurance Program (CHIP), the Department of Veterans Affairs (VA), and third-party insurers. Finally, the Public Health Service Act provides funds for the Special Diabetes Program for Indians grants administered by IHS.",
      "  Funding Sources  The IHS has three major sources of funding, described here in order of magnitude: (1) discretionary appropriations, (2) collections, and (3) mandatory appropriations. Unlike most agencies within HHS, which receive their appropriations through the Labor, Health and Human Services, and Education appropriations act, the IHS receives its discretionary appropriations through the Interior/Environment appropriations act. IHS's discretionary appropriations are divided into three accounts: (1) Indian Health Services, (2) Contract Support Costs, and (3) Indian Health Facilities. As a second source of funding, IHS collects and expends funds received as payment for health services provided.",
      " IHS has the authority to receive payments from other federal programs such as Medicaid, Medicare, CHIP, and the Department of Veterans Affairs. IHS also receives payments from state programs (such as workers compensation) and from private insurance. IHS, under its IHCIA collection authority, is able to retain these payments to increase services available to its beneficiaries. In addition to these collections, IHS collects rent from facilities it owns.  The third and smallest source of IHS funding is a mandatory appropriation of $150 million annually to support the Special Diabetes Program for Indians. This mandatory funding was extended through FY2019 in the Bipartisan Budget Act of 2018 (BBA 2018,",
      " P.L. 115-123 ). The President's budget request proposes to shift the FY2019 appropriation to discretionary funding.  FY2019 Budget Request and Funding History   Table 1 presents IHS's funding from FY2014 through the proposed President's FY2019 budget submission. The table generally shows increases in both appropriated funds and funds collected by IHS through FY2018. The table presents IHS's three budget accounts\u2014Indian Health Services, Contract Support Costs, and Indian Health Facilities\u2014and the funds collected and allocated to programs under these accounts. Collections and proposed and actual mandatory funding are subtracted from program-level funding to show the agency's discretionary budget authority.",
      " Although appropriations for IHS have increased over time, the FY2018 appropriation represents a larger increase than in prior years. In particular, the FY2018 appropriation included increases for a number of programs funded under the Indian Health Facilities account, which includes maintenance and improvement and construction of new facilities. In addition, the FY2018 appropriation increased funding for mental health and alcohol and substance abuse services, provided new funding for the Indian Health Care Improvement Fund, and included language to require IHS to conduct an analysis of IHS locations and services relative to the IHS user population.  The FY2019 President's request represents a decrease from FY2018 levels for a number of IHS programs and activities.",
      " However, final FY2018 appropriations had not been enacted during the period in which the FY2019 President's request was being formulated. While the total request for IHS represents a decrease from FY2018-enacted levels, it represents an increase from FY2017-enacted levels and the FY2018 annualized continuing resolution levels that were in place at the time the FY2018 request levels were being determined. IHS Third-Party Collections  IHS facilities collect payments from third-party payors for services provided to IHS beneficiaries who are also enrolled in other programs. These collections are an important source of IHS's clinical services (see Table 1 ). Medicaid is the largest source of IHS's collections\u2014accounting for approximately 68%",
      " of all third-party collections in FY2017, the most recent year of final data available\u2014followed by Medicare (21% in FY2017) and private insurance (9% in FY2017). Beginning in FY2014, IHS began receiving payments from the VA for services provided to IHS beneficiaries who were also enrolled in the VA (these payments were 2% of all of IHS's third-party collections in FY2017). \n"
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  },
  {
    "id": 20,
    "question": null,
    "answer": "The National Aeronautics and Space Administration (NASA) plans to spend nearly $230 billion over the next two decades implementing the President's Vision for Space Exploration (Vision) plans. In July 2006, GAO issued a report that questioned the program's affordability, and particularly, NASA's acquisition approach for one of the program's major projects--the Crew Exploration Vehicle (CEV). This testimony, which is based upon that report and another recent GAO report evaluating NASA's acquisition policies, highlights GAO's continuing concerns with (1) the affordability of the exploration program; (2) the acquisition approach for the CEV, and; (3) NASA's acquisition policies that lack requirements for projects to proceed with adequate knowledge. NASA's proposals for implementing the space exploration Vision raise a number of concerns. NASA cannot develop a firm cost estimate for the exploration program at this time because the program is in its early stages. The changes that have occurred to the program over the past year and the resulting refinement of its cost estimates are indicative of the evolving nature of the program. While changes are appropriate at this stage of the program, they leave the agency unable to firmly identify program requirements and needed resources and, therefore, not in the position to make a long term commitment to the program. NASA will likely be challenged to implement the program, as laid out in its Exploration Systems Architecture study (ESAS), due to the high costs associated with the program in some years and its long-term sustainability relative to anticipated funding. As we reported in July 2006, there are years when NASA, with some yearly shortfalls exceeding $1 billion, does not have sufficient funding to implement the architecture; while in other years the funding available exceeds needed resources. Despite initial surpluses, the long-term sustainability of the program is questionable, given its long-term funding outlook. NASA's preliminary projections show multibillion-dollar shortfalls for its exploration directorate in all fiscal years from 2014 to 2020, with an overall deficit through 2025 in excess of $18 billion. NASA's acquisition strategy for the CEV was not based upon obtaining an adequate level of knowledge when making key resources decisions, placing the program at risk for cost overruns, schedule delays, and performance shortfalls. These risks were evident in NASA's plan to commit to a long-term product development effort before establishing a sound business case for the project that includes well-defined requirements, mature technology, a preliminary design, and firm cost estimates. NASA adjusted its acquisition approach and the agency included the production and sustainment portions of the contract as options--a move that is consistent with the recommendation in our report because it lessens the government's financial obligation at this early stage. However, risks persist with NASA's approach. As we reported in 2005, NASA's acquisition policies lacked major decision reviews beyond the initial project approval gate and lacked a standard set of criteria with which to measure projects at crucial phases in the development life cycle. These decision reviews and development measures are key markers needed to ensure that projects are proceeding with and decisions are being based upon the appropriate level of knowledge and can help to lessen identified project risks. The CEV project would benefit from the application of such markers.\n",
    "docs": [
      "Background Despite many successes in the exploration of space, such as landing the  Pathfinder and Exploration Rovers on Mars, NASA has had difficulty  bringing a number of projects to completion, including several efforts to  build a second generation reusable human spaceflight vehicle to replace  the space shuttle. NASA has attempted several costly endeavors, such as  the National Aero-Space Plane, the X-33 and X-34, and the Space Launch  Initiative. While these endeavors have helped to advance scientific and  technical knowledge, none have completed their objective of fielding a  new reusable space vehicle. We estimate that these unsuccessful  development efforts have cost approximately $4.",
      "8 billion since the 1980s.  The high cost of these unsuccessful efforts and the potential costs of  implementing the Vision make it important that NASA achieve success in  its new exploration program beginning with the CEV project. Our past work has shown that developing a sound business case, based on  matching requirements to available and reasonably expected resources  before committing to a new product development effort, reduces risk and  increases the likelihood of success. High levels of knowledge should be  demonstrated before managers make significant program commitments,  specifically: (1) At program start, the customer\u2019s needs should match the  developer\u2019s available resources in terms of availability of mature  technologies,",
      " time, human capital, and funding; (2) Midway through  development, the product\u2019s design should be stable and demonstrate that  it is capable of meeting performance requirements; (3) By the time of the  production decision, the product must be shown to be producible within  cost, schedule, and quality targets, and have demonstrated its reliability.  Our work has shown that programs that have not attained the level of  knowledge needed to support a sound business case have been plagued by  cost overruns, schedule delays, decreased capability, and overall poor  performance. With regard to NASA, we have reported that in some cases  the agency\u2019s failure to define requirements adequately and develop  realistic cost estimates\u2014two key elements of a business case\u2014resulted in  projects costing more,",
      " taking longer, and achieving less than originally  planned. Firm Cost Estimates  Cannot Be Developed  at This Time Although NASA is continuing to refine its exploration architecture cost  estimates, the agency cannot at this time provide a firm estimate of what it  will take to implement the architecture. The absence of firm cost estimates  is mainly due to the fact that the program is in the early stages of its life  cycle. NASA conducted a cost risk analysis of its preliminary estimates  through fiscal year 2011. On the basis of this analysis and through the  addition of programmatic reserves (20 percent on all development and 10  percent on all production costs), NASA is 65 percent confident that the  actual cost of the program will either meet or be less than its estimate of  $31.",
      "2 billion through fiscal year 2011. For cost estimates beyond 2011,  when most of the cost risk for implementing the architecture will be  realized, NASA has not applied a confidence level distinction. Since NASA  released its preliminary estimates, the agency has continued to make  architecture changes and refine its estimates in an effort to establish a  program that will be sustainable within projected resources. While  changes to the program are appropriate at this stage when concepts are  still being developed, they leave the agency in the position of being unable  to firmly identify program requirements and needed resources. NASA  plans to commit to a firm cost estimate for the Constellation program at  the preliminary design review in 2008,",
      " when requirements, design, and  schedule will all be baselined. It is at this point where we advocate  program commitments should be made on the basis of the knowledge  secured. Expected Budget and  Competing Demands  Will Challenge  Architecture  Implementation NASA will be challenged to implement the ESAS recommended  architecture within its projected budget, particularly in the longer-term. As  we reported in July 2006, there are years when NASA has projected  insufficient funding to implement the architecture with some yearly  shortfalls exceeding $1 billion; while in other years the funding available  exceeds needed resources. Per NASA\u2019s approach, it plans to use almost $1  billion in appropriated funds from fiscal years 2006 and 2007 in order to  address the short-term funding shortfalls.",
      " NASA, using a \u201cgo as you can  afford to pay\u201d approach, maintains that in the short-term the architecture  could be implemented within the projected available budgets through  fiscal year 2011 when funding is considered cumulatively. However,  despite initial surpluses, the long-term sustainability of the program is  questionable given the long-term funding outlook for the program. NASA\u2019s  preliminary projections show multibillion-dollar shortfalls for its  Exploration Systems Mission Directorate in all fiscal years from 2014 to  2020, with an overall deficit through 2025 in excess of $18 billion.  According to NASA officials,",
      " the agency will have to keep the program  compelling for both Congress and potential international partners, in  terms of the activities that will be conducted as part of the lunar program,  in order for the program to be sustainable over the long run. NASA is attempting to address funding shortfalls within the Constellation  program by redirecting funds to that program from other Exploration  Systems Mission Directorate activities to provide a significant surplus in  fiscal years 2006 and 2007 to cover projected shortfalls beginning in fiscal  year 2009. Several Research and Technology programs and missions were  discontinued, descoped, or deferred and that funding was shifted to the  Constellation Program to accelerate development of the CEV and CLV.",
      " In  addition, the Constellation program has requested more funds than  required for its projects in several early years to cover shortfalls in later  years. NASA officials stated the identified budget phasing problem could  worsen given the changes that were made to the exploration architecture  following issuance of the study. For example, while life cycle costs may be  lower in the long run, acceleration of development for the five segment  Reusable Solid Rocket Booster and J-2x engine will likely add to the near- term development costs, where the funding is already constrained. NASA  has yet to provide cost estimates associated with program changes. NASA must also contend with competing budgetary demands within the  agency as implementation of the exploration program continues.",
      " NASA\u2019s  estimates beyond 2010 are based upon a surplus of well over $1 billion in  fiscal year 2011 due to the retirement of the space shuttle fleet in 2010.  However, NASA officials said the costs for retiring the space shuttle and  transitioning to the new program are not fully understood; thus, the  expected surplus could be less than anticipated. This year, NASA plans to  spend over 39 percent of its annual budget for space shuttle and  International Space Station (ISS) operations\u2014dollars that will continue to  be obligated each year as NASA completes construction of the ISS by the  end of fiscal year 2010.",
      " This does not include the resources necessary to  develop ISS crew rotation or logistics servicing support capabilities for the  ISS during the period between when the space shuttle program retires and  the CEV makes its first mission to the ISS. While, generally, the budget for  the space shuttle is scheduled to decrease as the program moves closer to  retirement, a question mark remains concerning the dollars required to  retire the space shuttle fleet as well as transition portions of the  infrastructure and workforce to support implementation of the  exploration architecture. In addition, there is support within Congress and  the scientific community to restore money to the Science Mission  Directorate that was transferred to the space shuttle program to ensure its  viability through its planned retirement in 2010.",
      " Such a change could have  an impact on future exploration funding. Lack of Sound  Business Case Puts  CEV Acquisition at  Risk In July 2006, we reported that NASA\u2019s acquisition strategy for the CEV  placed the project at risk of significant cost overruns, schedule delays, and  performance shortfalls because it committed the government to a long- term contract before establishing a sound business case. We found that the  CEV contract, as structured, committed the government to pay for design,  development, production and sustainment upon contract award\u2014with a  period of performance through at least 2014 with the possibility of  extending through 2019.",
      " Our report highlighted that NASA had yet to develop key elements of a  sound business case, including well-defined requirements, mature  technology, a preliminary design, and firm cost estimates that would  support such a long-term commitment. Without such knowledge, NASA  cannot predict with any confidence how much the program will cost, what  technologies will or will not be available to meet performance  expectations, and when the vehicle will be ready for use. NASA has  acknowledged that it will not have these elements in place until the  project\u2019s preliminary design review scheduled for fiscal year 2008. As a  result, we recommended that the NASA Administrator modify the current  CEV acquisition strategy to ensure that the agency does not commit itself,",
      "  and in turn the federal government, to a long-term contractual obligation  prior to establishing a sound business case at the project\u2019s preliminary  design review. In response to our recommendation, NASA disagreed and  stated that it had the appropriate level of knowledge to proceed with its  current acquisition strategy. NASA also indicated that knowledge from the  contractor is required in order to develop a validated set of requirements  and, therefore, it was important to get the contractor on to the project as  soon as possible. In addition, according to NASA officials, selection of a  contractor for the CEV would enable the agency to work with the  contractor to attain knowledge about the project\u2019s required resources and,",
      "  therefore, be better able to produce firm estimates of project cost. In our  report, we highlighted that this is the type of information that should be  obtained prior to committing to a long-term contract. To our knowledge,  NASA did not explore the possibility of utilizing the contractor, through a  shorter-term contract, to conduct work needed to develop valid  requirements and establish higher-fidelity cost estimates\u2014a far less risky  and costly strategy. Subsequent to our report, NASA did, however, take steps to address some  of the concerns we raised. Specifically, NASA modified its acquisition  strategy for the CEV and made the production and sustainment schedules  of the contract\u2014known as Schedules B and C\u2014contract options that the  agency will decide whether to exercise after project\u2019s critical design  review in 2009.",
      " Therefore, NASA will only be liable for the minimum  quantities under Schedules B and C when and if it chooses to exercise  those options. These changes to the acquisition strategy lessen the  government\u2019s financial obligation at this early stage. Table 1 outlines the  information related to the CEV acquisition strategy found in the request  for proposal and changes that were made to that strategy prior to contract  award. While we view these changes as in line with our recommendation  and as a positive step to address some of the risks we raised in our report,  NASA still has no assurance that the project will have the elements of a  sound business case in place at the preliminary design review.",
      " Therefore,  NASA\u2019s commitment to efforts beyond the project\u2019s preliminary design  review\u2014even when this commitment is limited to design, development,  test and evaluation activities (DDT&E)\u2014is a risky approach. It is at this  point that NASA should (a) have the increased knowledge necessary to  develop a sound business case that includes high-fidelity, engineering- based estimates of life cycle cost for the CEV project, (b) be in a better  position to commit the government to a long-term effort, and (c) have  more certainty in advising Congress on required resources. Sound Management  and Oversight Key to  Addressing CEV  Project Risks Sound project management and oversight will be key to addressing risks  that remain for the CEV project as it proceeds with its acquisition  approach.",
      " To help mitigate these risks, NASA should have in place the  markers necessary to help decision makers monitor the CEV project and  ensure that is following a knowledge based approach to its development.  However, in our 2005 report that assessed NASA\u2019s acquisition policies, we  found that NASA\u2019s policies lacked major decision reviews beyond the  initial project approval gate and a standard set of criteria with which to  measure projects at crucial phases in the development life cycle\u2014key  markers for monitoring such progress. In our review of the individual  center policies, we found that the Johnson Space Center project  management policy, which is the policy that the CEV project will be  required to follow,",
      " also lacked such key criteria. We concluded that  without such requirements in place, decision makers have little knowledge  about the progress of the agency\u2019s projects and, therefore, cannot be  assured that they are making informed decisions about whether continued  investment in a program or project is warranted. We recommended that NASA incorporate requirements in its new systems  engineering policy to capture specific product knowledge at key junctures  in project development. The demonstration of such knowledge could then  be used as exit criteria for decision making at the following key junctures:    Before projects are approved to transition in to implementation, we  suggested that projects be required to demonstrate that key  technologies have reached a high maturity level.",
      " Before projects are approved to transition from final design to  fabrication, assembly, and test, we suggested that projects be required  to demonstrate that the design is stable. Before projects are approved to transition to production, we suggested  that projects be required to demonstrate that the design can be  manufactured within cost, schedule, and quality targets. In addition, we recommended that NASA institute additional major  decision reviews that are tied to these key junctures to allow decision  makers to reassess the project based upon demonstrated knowledge. While NASA concurred with our recommendations, the agency has yet to  take significant actions to implement them. With regard to our first  recommendation,",
      " NASA stated that the agency would establish  requirements for success at the key junctures mentioned above. NASA  planned to include these requirements in the systems engineering policy it  issued in March 2006. Unfortunately, NASA did not include these criteria  as requirements in the new policy, but included them in an appendix to the  policy as recommended best practices criteria. In response to our second  recommendation, NASA stated it would revise its program and project  management policy for flight systems and ground support projects, due to  be completed in fall 2006. In the revised policy, NASA indicated that it  would require the results of the critical design review and,",
      " for projects that  enter a large-scale production phase, the results of the production  readiness review to be reported to the appropriate decision authority in a  timely manner so that a decision about whether to proceed with the  project can be made. NASA has yet to issue its revised policy; therefore, it  remains to be seen as to whether the CEV project decision authorities will  have the opportunity to reassess and make decisions about the project  using the markers recommended above after the project has initially been  approved. Briefings that we have recently received indicate that NASA  plans to implement our recommendation in the revised policy. The risks that NASA has accepted by moving ahead with awarding the  contract for DDT&E for CEV could be mitigated by implementing our  recommendations as it earlier agreed.",
      " Doing so would provide both NASA  and Congress with markers of the project\u2019s progress at key points. For  example, at the preliminary design review, decision makers would be able  to assess the status of the project by using the marker of technology  maturity. In addition, at the critical design review, the agency could assess  the status of the project using design stability (i.e., a high percentage of  engineering drawings completed). If NASA has not demonstrated  technology maturity at the preliminary design review or design stability at  the critical design review, decision makers would have an indication that  the project will likely be headed for trouble. Without such knowledge,",
      "  NASA cannot be confident that its decisions about continued investments  in projects are based upon the appropriate knowledge. Furthermore,  NASA\u2019s oversight committees could also use the information when  debating the agency\u2019s yearly budget and authorizing funds not only for the  CEV project, but also for making choices among NASA\u2019s many competing  programs. If provided this type of information from NASA about its key  projects, Congress will be in a better position to make informed decisions  about how to invest the nation\u2019s limited discretionary funds. NASA\u2019s ability to address a number of long-standing financial management  challenges could also impact management of NASA\u2019s key projects. The  lack of reliable,",
      " day-to-day information continues to threaten NASA\u2019s  ability to manage its programs, oversee its contractors, and effectively  allocate its budget across numerous projects and programs. To its credit,  NASA has recognized the need to enhance the capabilities and improve the  functioning of its core financial management system, however, progress  has been slow. NASA contract management has been on GAO\u2019s high-risk  list since 1990 because of such concerns. Conclusions In conclusion, implementing the Vision over the coming decades will  require hundreds of billions of dollars and a sustained commitment from  multiple administrations and Congresses. The realistic identification of the  resources needed to achieve the agency\u2019s short-term goals would provide  support for such a sustained commitment over the long term.",
      " With a range  of federal commitments binding the fiscal future of the United States,  competition for resources within the federal government will only increase  over the next several decades. Consequently, it is incumbent upon NASA  to ensure that it is wisely investing its existing resources. As NASA  proceeds with its acquisition strategy for the CEV project and other key  projects, it will be essential that the agency ensure that the investment  decisions it is making are sound and based upon high levels of knowledge.  NASA should require that the progress of its projects are evaluated and  reevaluated using knowledge based criteria, thereby improving the quality  of decisions that will be made about which program warrant further  investment.",
      " Furthermore, it will be critical that NASA\u2019s financial  management organization delivers the kind of analysis and forward- looking information needed to effectively manage its programs and  projects. Clear, strong executive leadership will be needed to ensure that  these actions are carried out. Given the nation\u2019s fiscal challenges and  those that exist within NASA, the availability of significant additional  resources is unlikely. NASA has the opportunity to establish a firm  foundation for its entire exploration program by ensuring that the level of  knowledge necessary to allow decision makers to make informed  decisions about where continued investment is justified. Doing so will  enhance confidence in the agency\u2019s ability to finally deliver a replacement  vehicle for future human space flight.",
      " Mr. Chairman, this concludes my prepared statement. I would be pleased  to respond to any questions that you or other Members of the Committee  may have. GAO Contact and  Staff  Acknowledgements For further information regarding this testimony, please contact Allen Li at  (202) 512-4841 or lia@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this testimony. GAO staff who made key contributions to this testimony  include Greg Campbell, Richard Cederholm, Hillary Loeffler,   James L. Morrison, Jeffrey M. Niblack,",
      " and Shelby S. Oakley. This is a work of the U.S. government and is not subject to copyright protection in the  United States. It 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.\n"
    ],
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  },
  {
    "id": 21,
    "question": null,
    "answer": "Both the market and government have important roles in ensuring the availability, affordability, and adequacy of private health insurance. These roles complement one another, but even together the market and government have limitations. The market provides a variety of insurance products for consumers and employers with different needs and preferences. These products differ on many dimensions, including the breadth of provider networks, amount of beneficiary cost-sharing, and techniques for managing the use of health care services. Large employers, small employers, and individuals have different health insurance options, but all must make tradeoffs between the cost of coverage and desired features. A strength of the market is its flexibility to adapt over time to changing circumstances. As economic conditions, consumer preferences, and government policies evolve, the market generates different products with different features. The primary limitation of the market is its failure to provide affordable options for all consumers. The federal government helps ensure access to health coverage through public programs, such as Medicare and Medicaid, and it influences the market for private insurance through tax and regulatory policies. Some tax subsidies help people purchase insurance, and others\u2014including those for Health Savings Accounts\u2014help pay for medical expenses not covered by insurance. By far the largest subsidy is the tax exclusion for employer-provided health benefits. Because of this exclusion, most people get health insurance through work. Tax subsidies make health insurance and health care seem more affordable for certain taxpayers, but do not provide equivalent support to everyone. In addition, subsides may increase health care spending by reducing the apparent cost of health insurance and health care services. Regulations affect both access to insurance and the adequacy of benefits. States have primary responsibility for regulating insurance, but the federal government has sought to address selected issues regarding health coverage. For example, the Health Insurance Portability and Accountability Act of 1996 and the Consolidated Omnibus Budget Reconciliation Act of 1985 include provisions that allow certain people to obtain or continue health coverage under certain circumstances. In addition, several federal laws mandate coverage for specific health benefits. Although regulations provide some protection for consumers, neither federal nor state rules guarantee access to coverage for everyone. In addition, even where regulations require insurers or employers to offer coverage, consumers may find this coverage unaffordable. This report will be updated.\n",
    "docs": [
      "The Market By generating diverse insurance products and by adapting to different and changing conditions, the market for private health insurance provides choices for consumers and employers who have different needs and preferences. Offering Insurance Products with Different Features Consumers and employers want affordable yet generous coverage. They also want unfettered access to health care providers and services, but generally they must make tradeoffs between cost on the one hand and generous coverage and access on the other. For example, some may be willing to pay higher premiums in exchange for unrestricted access to health care providers, while others accept restrictions or higher cost-sharing to make coverage more affordable. To meet demand, the market offers a variety of health insurance products.",
      " These products include traditional indemnity insurance, relatively restrictive health maintenance organizations (HMOs), and high-deductible health plans with associated savings accounts. Certain products are characterized by certain features. For example, indemnity coverage is associated with choice of health care providers, while HMOs are associated with restricted choice, including limited provider networks and constrained access to care. In practice, distinctions between the product types are not clear. Any type of product may have nearly any combination of features, including broad or restricted access to health care providers, low or high cost-sharing, and limited or fully integrated programs for managing patients' use of services. Consumers and employers choose among different products according to their preferences,",
      " although individuals, small employers, and large employers tend to have different options. In addition to having more options, large employers can choose between purchasing insurance and self-insuring and buying administrative services from an entity that processes paperwork but does not bear financial risk. Adapting to Changing Conditions In addition to providing a variety of products, the market adapts over time to changing circumstances. Health insurance products evolve, and different features become more or less prominent. In the early 1990s, the trend was toward managed care, with restricted access to health care providers, low beneficiary cost-sharing, and health plan management to limit use of services. These strategies slowed growth in premiums for health insurance,",
      " but also led to complaints by patients and providers about restrictions on access to care and interference in the practice of medicine. In response to these complaints, the market began to offer more flexible products with higher premiums. By the late 1990s, with a booming economy and low unemployment, employers were willing to pay more for health insurance in an effort to recruit and maintain a qualified workforce. More recently, as prices have continued to rise, renewed concern by consumers and employers about the cost of health benefits has led to more changes in insurance products. Given the managed care backlash, these products have fewer restrictions on access to care, and instead rely on higher cost-sharing to influence consumers'",
      " use of services. In addition to responding to changing circumstances, the market responds to policy changes. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) authorized new tax-advantaged accounts to pay for medical expenses not covered by insurance or other reimbursements. These Health Savings Accounts (HSAs) must be paired with high-deductible health plans, and the market has responded by developing such plans. The MMA also established Medicare drug coverage. Private insurers provide this coverage through Medicare Advantage (MA) and stand-alone prescription drug plans (PDPs). Depending on where beneficiaries live, they may be able to choose among one or more MA plans with drug coverage and more than 50 PDP options.",
      " Limitations of the Market Although private insurers offer a variety of products and respond to changing conditions, they do not serve everyone equally. Premiums and access to health insurance vary across and within geographic markets, and for different consumers and employers. Across markets, premiums vary with differences in the cost of living, in patterns of health care practice, in the mix of medical providers, and in the relative market power of health care providers and insurers. Within markets, premiums vary both because products differ and because individual consumers and employers differ. Differences in consumer and employer characteristics affect not just premiums, but also access to insurance, including the number, type, and generosity of plan options.",
      " Some people and firms have many choices, while others have few. Large firms and their employees tend to have more options than smaller firms and their employees. Many people have no employment-based option, either because their employer does not offer coverage or because they are not working. Lack of employment-based coverage can be a particular problem for high-risk populations\u2014including people who are older, sick, or disabled\u2014as they may have few or no choices in the private market. A large number of choices may or may not improve insurance coverage. On the one hand, many options increase the likelihood that consumers and employers will find a satisfactory combination of benefits and costs. On the other hand,",
      " the number of options may be irrelevant if prices are burdensome or unaffordable. The Government Government plays a role in helping ensure access to health coverage. In 2007, federal spending on Medicare, Medicaid, and the State Children's Health Insurance Program (SCHIP) is expected to total $634 billion. These programs serve primarily older, low-income, and disabled people, populations that otherwise would have difficulty finding adequate and affordable coverage in the private market. For vulnerable individuals who lack access to employer-paid insurance, government benefits may be the only viable alternative. In addition to providing health benefits for vulnerable populations, the federal government uses tax and regulatory policy to influence the market for private health insurance.",
      " Tax policy supports access to care through subsidies for insurance and medical care expenses, while regulatory policy supports access by laying ground rules that affect the availability and adequacy of insurance coverage. Tax Policy Federal law includes significant tax benefits for health insurance and medical care expenses. In addition to supporting access to care, these benefits have shaped the market for private health insurance. Largely because of tax policy, in 2006 about 60% of Americans got health benefits through work. Subsidies for Health Insurance By far the largest health-related tax benefit is the exclusion for employer-paid insurance. For people receiving employer-paid benefits, premium costs are not counted as income and therefore not subject to income and employment taxes.",
      " In 2007, the income tax exclusion for employer-paid insurance is expected to be about $100 billion. Employers also do not pay employment taxes on health insurance premiums. These tax benefits help make insurance more affordable for consumers and employers, but they also reduce federal revenue that otherwise could be used for different purposes. In effect, consumers who receive employer-paid insurance transfer part of the cost of coverage to taxpayers. Other tax benefits for health insurance include a deduction for self-employed taxpayers, and a tax credit for a limited group of individuals who either lost manufacturing jobs or receive payments from the Pension Benefit Guaranty Corporation. These tax benefits serve fewer people than the exclusion for employer-paid coverage.",
      " In 2007, the deduction for self-employed workers is expected to be about $4.2 billion and the tax credit only about $200 million. Other Subsidies Tax benefits also help consumers pay for qualified medical expenses not covered by insurance. Taxpayers who itemize may deduct health insurance premiums and other costs to the extent that qualified expenses exceed 7.5% of adjusted gross income (AGI). Because eligibility depends on high spending relative to income, this deduction limits financial loss for people who face catastrophic costs. In 2007, this tax benefit is expected to be about $8 billion. People also can use several tax-",
      "advantaged accounts to pay for qualified medical expenses. These accounts include Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), Health Reimbursement Accounts (HRAs), and Flexible Spending Accounts (FSAs). The newest such option, HSAs, is expected to provide about $300 million in tax benefits in 2007. Limitations of Tax Policy Although all of these tax benefits help people pay for health insurance and health care, government\u2014like the market\u2014does not serve everyone equally. People may or may not be eligible for various benefits; and if they are eligible, support may or may not affect access. Because many tax benefits are tied to employment,",
      " workers may receive support that is not available to the unemployed. In addition, higher-income workers realize greater tax savings than lower-income workers because tax benefits are based on marginal tax rates. Tax support does not guarantee access, and lack of support does not preclude it. Low-income people may be unable to afford coverage or all of the care they desire, even with support. Conversely, high-income people may be able to buy insurance and whatever care they need, even without support. In addition to failing to distribute support based on need, tax benefits may increase health care spending. With subsidies, people can afford more insurance than they would otherwise; and with insurance,",
      " people may use more care. Regulation Regulatory policy is another tool for influencing the market for health insurance. Regulations affect access to coverage and the adequacy of benefits by setting ground rules for insurance companies and employers that provide health benefits. States have primary responsibility for regulating insurance, but the federal government has sought to address selected issues regarding health coverage. In general, federal regulations do not address premiums. Access to Insurance Federal policy does not guarantee access to private health insurance, but it does help certain consumers get or keep access to coverage under certain conditions. For example, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) helps ensure access to new insurance coverage for individuals and their families when the policyholder changes jobs.",
      " This protection is called portability. The act also helps ensure continuing coverage when a beneficiary gets sick. HIPAA accomplishes these guarantees by requiring insurers to sell or renew both individual and group insurance policies without regard to health status or claims experience. The law similarly helps small businesses. Insurers that offer coverage in the small group market must accept every applicant without regard to the claims history of the group. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) also helps ensure access to health insurance. COBRA allows certain workers and family members who lose eligibility for group coverage to continue to purchase this coverage for a limited time period.",
      " Under the law, firms that employ at least 20 people must allow beneficiaries to continue health coverage following a qualifying event. For workers, qualifying events include loss of coverage due to job termination, a reduction in work hours, or a firm's reorganization due to bankruptcy; for family members, qualifying events include loss of coverage due to the death of or divorce from a covered employee. Adequacy of Benefits In addition to helping ensure access to insurance, regulations address the adequacy of coverage. Almost all such regulations come from the states. According to the Council for Affordable Health Insurance, an industry group, the number of state-mandated benefits currently tops 1,",
      "900. These mandates require affected insurers to cover specific health benefits, providers, and patients. Examples include mandated coverage for cancer screening tests, chiropractors, and handicapped dependents. Federal law includes a few benefit mandates. These mandates regard parity for mental health benefits, hospital coverage following normal childbirth or cesarean delivery, and coverage for prosthetic devices and reconstructive surgery following a mastectomy. Limitations of Regulation Regulations may facilitate access to insurance or specific benefits, but they do not serve everyone equally. For example, although HIPAA and COBRA require insurers and employers to offer coverage to certain individuals under certain circumstances, these Acts do not guarantee access to insurance for everyone.",
      " In addition, even where regulations require insurers to sell or employers to offer coverage, eligible people may find coverage unaffordable. Benefit mandates also do not serve everyone equally. Sometimes the issue is uniform protection, and sometimes the issue is variable protection. On one hand, while some argue that benefit mandates help guarantee adequate coverage, others maintain that mandates increase costs and limit coverage options for consumers. On the other hand, because most benefit mandates come from the states, consumers may or may not be protected, depending on where they live. In addition, while policies sold by insurance companies generally must comply with state mandates, firms that self-insure are exempt from the requirements.",
      " Current Policy Initiatives In the 110 th Congress, committees in both the House and the Senate have held hearings and developed legislation regarding access to and the adequacy of private insurance. For example, the Senate Budget Committee has held a series of hearings on health care costs and universal coverage. In addition, committees in both the House and Senate have reported legislation that would regulate private insurance. One set of House and Senate proposals would extend and expand federal requirements affecting mental health coverage under group health insurance policies. Another set would prohibit the use of genetic information by insurers in making enrollment determinations and setting insurance premiums. State policy makers have been more proactive in pursuing policies to increase the availability and affordability of private health insurance.",
      " For example, both Massachusetts and Maine currently are implementing a variety of initiatives with an eye to achieving universal coverage. These initiatives include insurance market reforms, requirements on employers and consumers, public subsidies for private insurance, and the expansion of public coverage under Medicaid. In California, policy makers continue to debate the merits of different approaches for achieving universal health coverage. These approaches include requiring individuals to have coverage, requiring employers to make contributions for health benefits, and adopting a statewide single-payer system. Conclusion Both government and the market have important roles in helping ensure the availability, affordability, and adequacy of private health insurance. The market excels in creating new products and adapting to changing demand,",
      " but is not set up to guarantee that everyone gets coverage. Government complements the market through tax and regulatory policies aimed at improving access to coverage and the adequacy of benefits. Ideally, these policies would reflect widely held social values, but setting priorities is difficult. Should the priority be affordability, and if so, for whom? For consumers and employers purchasing insurance? For taxpayers who subsidize coverage? Or should the priority be facilitating access to benefits? Again, for whom? For workers; for people with lower income; for people who are older, sick, or disabled; or for everyone? Policymakers face a challenge in improving access to health insurance,",
      " while making efficient use of limited public resources and avoiding unnecessary regulations that might hinder market innovation.\n"
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  },
  {
    "id": 22,
    "question": null,
    "answer": "To encourage lenders to make student loans under the Federal Family Education Loan Program (FFELP), the federal government guarantees lenders a statutorily specified rate of return--called lender yield. Some lenders may issue tax-exempt bonds to raise capital to make or purchase loans; loans financed with such bonds issued prior to 10/1/93 are guaranteed a minimum lender yield of 9.5% (hereafter called 9.5% loans). When the interest rate paid by borrowers is less than the lender yield, the government pays lenders the difference--a subsidy called special allowance payments. In light of the upcoming reauthorization of the Higher Education Act of 1965, we examined special allowance payments for 9.5% loans. Special allowance payments for 9.5% loans have risen dramatically in recent years, increasing from $209 million in FY 2001 to well over $600 million as of June 30, 2004. A primary reason for the increase is the sharp decline in the variable interest rates paid by borrowers relative to the minimum 9.5% lender yield. Another reason for the increase in special allowance payments is the rising dollar volume of 9.5% loans, which increased from about $11 to over $17 billion from FY 1995 to June 30, 2004. Given that current market interest rates are at or near historic lows, lenders have a financial incentive to maintain or increase their 9.5% loan volume and can do so in three ways. After paying costs, including payments to bond investors, associated with a pre 10/1/93 tax-exempt bond, lenders can use any remaining money to reinvest in more FFELP loans that, by law, are also guaranteed a minimum 9.5% yield. Lenders can issue a new bond, called a refunding bond, to repay an outstanding pre 10/1/93 tax-exempt bond that financed 9.5% loans. Consequently, the refunding bond finances the 9.5% loans and may have a later maturity date than the original bond, allowing lenders to maintain their 9.5% loan volume for a longer time. By issuing a taxable bond and using the funds obtained to purchase 9.5% loans financed by a pre-10/1/93 tax-exempt bond, lenders can significantly increase their loan volume. Lenders can use the proceeds from the sale of loans previously financed by the pre-10/1/93 tax-exempt bond to make or buy additional loans, which are also guaranteed a 9.5% yield. Under Education's regulations, loans previously financed by a pre 10/1/93 tax-exempt bond and subsequently financed by (i.e., transferred to) a taxable bond continue to be guaranteed a 9.5% yield. Some Members of Congress and the Administration have proposed making statutory changes with respect to 9.5% loans, which could save billions of dollars in future special allowance payments. An official representing a leading credit rating agency and some major lenders told us that making changes to the minimum 9.5% yield for loans made or purchased in the future should not affect lenders' ability to make required payments on outstanding tax-exempt bonds.\n",
    "docs": [
      "Special Allowance  Payments For 9.5  Percent Loans Have  Increased More Than  Threefold Since Fiscal  Year 2001 Special allowance payments for 9.5 percent loans have risen dramatically  in recent years, increasing from $209 million in fiscal year 2001, to   $556 million in fiscal year 2003 and reached about $634 million at the end  of the third quarter of fiscal year 2004. Two reasons account for this  increase: (1) a decline in the interest rate paid by borrowers and (2) a rise  in the dollar volume of 9.5 percent loans.",
      " In some cases, restrictions exist  on how the nonprofit, for-profit, and state agency lenders that hold 9.5  percent loans may use their earnings, including their special allowance  payments, from 9.5 percent loans. Decline in Interest Rate  Paid by Borrowers Is  Primary Reason for  Increase in Special  Allowance Payments The primary factor influencing the increase in special allowance payments  has been the sharp decline in interest rates paid by borrowers relative to  the minimum 9.5 percent government guaranteed yield for lenders. As  borrower rates have declined, the amount the government has been  required to pay to make good on its promise to lenders has increased.",
      " To  illustrate, in 2001, the borrower interest rate was 8.2 percent. Because this  borrower rate is tied to the 91-day Treasury-bill rate and the Treasury-bill  rate subsequently declined, the borrower interest rate on the same loan in  2003 was 5.4 percent. While the borrower rate declined, the yield for a  lender who used the proceeds, or funds obtained, of a pre-October 1, 1993,  tax-exempt bond to originate or purchase the loan remained at 9.5 percent.  Over this period, the difference, or spread,",
      " between the borrower rate and  the 9.5 percent lender yield increased from 1.3 percent to 4.1 percent. As a  result, the special allowance payment required to ensure a lender yield of  9.5 percent increased for each dollar of loan volume in this example. Increasing 9.5 Percent  Loan Volume Is Another  Reason for the Increase in  Special Allowance  Payments Another factor influencing the increase in special allowance payments has  been the rising dollar volume of 9.5 percent loans. Although the overall  volume of 9.5 percent loans has increased since fiscal year 1995,",
      " volume  among lenders has varied. Most lenders experienced a decrease in their   9.5 percent loan volume between fiscal years 1995 and 2003, but by the end  of the third quarter of fiscal year 2004, some of these lenders had sharply  increased their 9.5 percent loan volume. For example, one lenders\u2019   9.5 percent loan volume had decreased by 46 percent between fiscal years  1995 and 2003 but then increased by 136 percent between 2003 and the end  of the third quarter of fiscal year 2004, making its 9.5 percent loan volume  greater than it was in 1995.",
      " There are primarily three ways\u2014referred to as recycling, refunding, and  transferring\u2014that a lender can slow the decrease in, maintain, or increase  its 9.5 percent loan volume. First, after paying costs associated with a pre-October 1, 1993 tax- exempt bond (such as payments of interest and principal to bond  investors), lenders can reinvest, or recycle, any remaining money  earned from 9.5 percent loans to make or purchase additional loans  that, under the law, are also guaranteed a minimum 9.5 percent lender  yield.   Using this method, lenders are able to slow the decrease in,",
      "  maintain, or slightly increase their 9.5 percent loan volume. Second, lenders can issue a new bond, called a refunding bond, to  repay the principal, interest, and other costs of an outstanding pre- October 1, 1993 tax-exempt bond. Based on how the HEA has been  interpreted, 9.5 percent loans originally financed with a pre-October 1,  1993 tax-exempt bond, but subsequently financed by a refunding bond,  continue to carry the government guaranteed minimum yield for  lenders of 9.5 percent. Moreover, the refunding bond may have a later  maturity,",
      " or payoff, date than the original bond. Using this method,  lenders can maintain their 9.5 percent loan volume. Third, under Education regulations, a lender can significantly increase  its 9.5 percent loan volume by issuing a taxable bond and using the  proceeds to purchase 9.5 percent loans financed by a pre-October 1,  1993 tax-exempt bond. The lender then uses the cash available from the  pre-October 1, 1993 tax-exempt bond to make or buy additional loans,  which are guaranteed the minimum 9.5 percent yield. Under  regulations issued in 1992,",
      " the loans transferred to the taxable bond  continue to be guaranteed the minimum 9.5 percent lender yield, so  long as the original bond is not retired or defeased. (At the time the  regulation was promulgated, Education anticipated that interest rates  would rise, resulting in a higher lender yield for loans financed with  taxable bonds than for loans financed with tax-exempt bonds.  Education believed that if the 1992 regulation was not promulgated,  lenders would have had an incentive to transfer loans from tax-exempt  bonds to taxable bonds in order to obtain a higher yield, thus resulting  in higher special allowance payments for the government.) Among the  top 10 lenders holding 9.",
      "5 percent loans, more than half of the dollar  volume of their 9.5 percent loans had been transferred to taxable bonds  as of March 31, 2004. The extent to which lenders have transferred   9.5 percent loans to taxable bonds varies considerably. For example,  one lender had none of its 9.5 percent loans in a taxable bond, while  another held 90 percent of its 9.5 percent loans in a taxable bond as of  March 31, 2004. Some lenders interviewed have been transferring   9.5 percent loans for several years, while another lender just started to  transfer 9.",
      "5 percent loans in 2004. Additionally, some lenders have also  transferred 9.5 percent loans to tax-exempt bonds issued after October  1, 1993, thereby continuing the 9.5 percent minimum guaranteed yield. As a result of recycling, refunding, and transferring, the overall dollar  volume of 9.5 percent loans has increased from about $11 billion in fiscal  year 1995 to over $17 billion at the end of the third quarter of fiscal year  2004. While the dollar volume of 9.5 percent loans presently accounts for  only about 8 percent of all outstanding FFELP loan volume,",
      " these loans  account for 78 percent of all special allowance payments made to FFELP  lenders thus far in fiscal year 2004. Earnings on Tax-Exempt  Bonds that Finance 9.5  percent Loans May be  Used for Borrower  Benefits Under the Internal Revenue Code (IRC), earnings on loans financed by  tax-exempt bonds are limited.  Lenders can reduce their earnings on loans  financed with tax-exempt bonds, and avoid exceeding IRC limitations, by  providing benefits to borrowers.  Some lenders reported that they have  used, or plan to use, earnings in excess of IRC limits to provide interest  rate reductions or loan cancellation for borrowers.",
      " In contrast to tax- exempt bonds, earnings on taxable bonds are not limited. As a result,  lenders have discretion in how they use their earnings from taxable bonds  that have financed 9.5 percent loans. Changes to the  Minimum 9.5 Percent  Yield For Loans Made  or Purchased in the  Future Could Save  Billions and Is  Unlikely to Cause  Lenders to Default on  Outstanding Tax- Exempt Bonds Changing law and regulations with respect to 9.5 percent loans made or  purchased in the future could reduce the amount of special allowance  payments required to be paid by the government without compromising  lenders\u2019 ability to meet their obligations under their outstanding tax-",
      " exempt bonds. The Administration and some members of Congress have,  in fact, already put forth proposals to make such changes. The  Administration has proposed limiting the extent to which lenders can  receive the substantially higher special allowance payments on 9.5 percent  loans in the future and estimates savings of $4.9 billion over fiscal years  2005 through 2014 by doing so. Proposed legislation introduced in the  108th Congress also seeks to revise the law pertaining to 9.5 percent loans  in order to reduce special allowance payments and change lender yields to  reflect current market interest rates. Changing current regulations that allow lenders to transfer 9.",
      "5 percent  loans to taxable bonds and retain the minimum 9.5 percent yield could  also significantly reduce potential special allowance payments in the  future. While Education officials told us that they had considered revising  the department\u2019s regulations, they believed that Congress could effect  such a change by law more quickly and easily. Education officials told us  that promulgating new FFELP regulations would likely be difficult and  time-consuming, in light of the HEA\u2019s requirement that the department  engage in negotiated rule making in promulgating FFELP regulations.  Negotiated rule making requires the department to convene a committee  that would include FFELP industry representatives,",
      " such as lenders, and  attempt to reach consensus among committee members on proposed  regulations. Given the interest of lenders who hold 9.5 percent loans,  reaching consensus on new regulations would likely prove to be very  difficult, according to Education officials. However, the inability to reach  consensus does not invalidate the negotiation of rules.  Moreover,  regulations are not subject to the negotiated rulemaking requirement if the  Secretary determines that applying this requirement would be  'impracticable, unnecessary, or contrary to the public interest.'   Representatives from a major credit rating agency as well as some lenders  who hold 9.5 percent loans told us that eliminating the minimum   9.",
      "5 percent yield for loans made or purchased in the future should not  affect lenders\u2019 ability to meet their obligations under, and make required  payments on, their outstanding tax-exempt bonds, nor should it have long- term negative effects in the student loan bond market. Conclusions Unlike other loans for which the lender yield varies with current market  interest rates, the lender yield for loans financed with pre-October 1, 1993  tax-exempt bonds are guaranteed a minimum yield of 9.5 percent. Given  that current market interest rates are at or near historic lows, lenders have  a significant financial incentive to slow the decrease in,",
      " maintain, or  increase the volume of loans that yield such a relatively high rate of return  unavailable on other FFELP loans. This incentive will remain even if  market interest rates gradually rise in the future. Ironically, moreover, an  Education regulation over 10 years old and originally intended to limit the  government\u2019s exposure to increased special allowance payments has today  presented lenders with an extraordinary opportunity to generate  additional loans that earn a 9.5 percent yield. As we have shown, lenders  are taking advantage of these opportunities. Industry experts acknowledge  that the government could take action to eliminate the 9.5 percent yield for  loans made or purchased in the future without compromising the ability of  lenders to meet their obligations with respect to their pre-",
      "October 1, 1993  tax-exempt bonds. Without government action, the taxpayers remained  exposed to additional special allowance payments that can easily and  rapidly escalate into the billions of dollars. Matter for  Congressional  Consideration In light of the rapid increase in special allowance payments for loans  guaranteed a minimum 9.5 percent yield and the continuing financial  incentive for lenders to originate or purchase additional loans that qualify  for a guaranteed yield of 9.5 percent, Congress should consider amending  the HEA to address the issues identified by this report, but particularly to  change the yield for loans made or purchased in the future with the  proceeds of pre-",
      "October 1, 1993 tax-exempt bonds, and any associated  refunding bonds, to more closely reflect these loans\u2019 financing costs and  current market interest rates. Recommendation for  Executive Action Given that lenders are increasing the volume of 9.5 percent loans based on  Education regulations that allow lenders to transfer 9.5 percent loans to  taxable bonds and tax-exempt bonds issued after October 1, 1993 while  retaining the special allowance payment provisions applicable to loans  financed with pre-October 1, 1993 tax-exempt bonds, and the resulting  increased costs for taxpayers, we recommend that the Secretary of  Education promulgate regulations to discontinue the payment of the  special allowance applicable to loans financed with pre-",
      "October 1, 1993  tax-exempt bonds that are subsequently transferred to taxable bonds or  tax-exempt bonds issued on or after October 1, 1993. Agency Comments We provided a draft of this report to Education for review and comment.  In commenting on our report, Education agreed that special allowance  payments for 9.5 percent loans should be scaled back considerably and  that, as noted in our report, such a proposal was included in the  President\u2019s fiscal year 2005 budget. Education also stated that it had  considered changing its regulation or its interpretation of the regulation  last year, but believed at that time that the HEA would be reauthorized and  amended to address the issues discussed in our report before any  proposed regulation or regulatory interpretation it might undertake could  become effective.",
      " Education stated this was the case because of certain  requirements contained in the HEA and other laws, including a  requirement that it engage in negotiated rule making. Education also commented on the statutory exception to the general  requirement that it engage in negotiated rule making, which we highlighted  in our report. As mentioned in our report, the Secretary need not subject a  rule making to the negotiated rule making process if the Secretary  determines that the process would be \u201cimpracticable, unnecessary, or  contrary to the public interest.\u201d In its comments, Education stated that the  courts have construed this exception only to cover routine determinations  that are insignificant in nature and impact,",
      " inconsequential to industry and  to the public, or which raise issues of public safety. While we believe that  it is Education\u2019s responsibility to interpret the law as it relates to its own  programs, on the basis of our review of the case law, we disagree with  Education\u2019s characterization of the case law concerning the scope of the  exception in the Administrative Procedure Act. Specifically, it does not  fully address the courts\u2019 treatment of the \u201cpublic interest\u201d prong of the  three-pronged exception noted above. The federal courts have interpreted the three-pronged exception in many  cases involving a wide variety of factual situations.",
      " Education\u2019s  characterization of the case law describes the courts\u2019 discussion of the  first two prongs, \u201cimpracticable\u201d or \u201cunnecessary,\u201d but does not fully  address the potential applicability of the third prong, which, if met, would  independently justify use of the exception. In fact, in the case cited by  Education in its comments, Utility Solid Waste Activities Group v.  E.P.A., 236 F.3d 749 (D.C. Cir. 2001), the court briefly explains the \u201cpublic  interest exception\u201d by pointing to a situation where announcement of the  rule in advance would \u201cenable the sort of financial manipulation the rule  sought to prevent.\u201d  Id.",
      " at 755; see also, Attorney General\u2019s Manual on the  Administrative Procedure Act, pp. 30-31.  Thus, it is clear that the  applicability of the \u201cpublic interest\u201d exception turns neither on the  insignificance of the rule nor on whether it raises issues of public safety.   See also Nader v. Sawhill, 514 F.2d 1064 (D.C. Cir. 1975).  Moreover, in  reviewing challenges to an agency\u2019s use of an exception, the Court of  Appeals for the District of Columbia has stated that it will review the  \u201ctotality of the circumstances,\u201d including the complexity of the statute and  congressionally imposed time frames.",
      "  See Methodist Hosp. of  Sacramento v. Shalala, 38 F.3d 1225 (D.C. Cir. 1994); Petry v. Block, 737  F.2d 1193 (D.C. Cir. 1984). Determining whether the unique circumstances present here support the  agency\u2019s use of an exception is beyond the scope of our report and is a  matter, in the first instance, for Education.  Nevertheless, we continue to  believe that Education should consider all of its options in effecting the  desired policy change as we recommend in the report.  This could include,",
      "  for example, determining whether Education could use less formal  guidance, as it has in the past, to clarify or alter its position; whether a full  consideration of all the facts and circumstances as well as all the  applicable case law would support use of an exception to the negotiated  rule making requirement; whether an interim final rule could be issued to  take effect immediately; or whether negotiated rule making could be  accomplished on an expedited basis.  Given Education\u2019s position that it is  essentially unable to implement regulations until July 1, 2006, more than  21 months away, we think it is important that Education fully explore all  of its options,",
      " consistent with applicable law.  Education\u2019s written  comments appear in appendix II. We are sending copies of this report to the Secretary of Education,  appropriate congressional committees, and other interested parties. In  addition, the report will be available at no charge on GAO\u2019s Web site at  http://www.gao.gov. If you or your staff have any questions about this report, please contact me  at (202) 512-8403 or Jeff Appel, Assistant Director, at (202) 512-9915. You  may also reach us by e-mail at ashbyc@gao.gov or appelc@gao.gov.",
      " Other  contacts and staff acknowledgments are listed in appendix III. Appendix I: Briefing Slides Lender subsidy payments for loans Overview \u2022 Introduction  Research Objectives  Scope and Methodology  Summary of Findings  Background  Key Findings  Concluding Observations Introduction Private and public lenders made about $42 billion in new loans to students in school year 2002-03 through the Federal Family  Education Loan Program (FFELP). To encourage lenders to make FFELP loans, the federal  government guarantees repayment and provides lenders a  guaranteed rate of return. Guaranteed rate of return equals the greater of the statutorily  specified lender yield or the borrower interest rate.",
      " When the borrower rate is less than the lender yield, the  government makes subsidy payments, called special allowance  payments (SAP), to lenders. Introduction Through the years Congress has made changes to the lender yield to reflect lenders\u2019 financing costs and to limit SAP. The Education Amendments of 1980 changed the SAP for loans  financed with tax-exempt bonds to reduce profits for loans financed  with tax-exempt bonds.  Loans disbursed on or after 10/1/80 receive  half the SAP of loans financed with taxable bonds but are guaranteed  a minimum yield of 9.5 percent. The Omnibus Reconciliation Act of 1993 eliminated the minimum  9.",
      "5 percent yield for loans financed with tax-exempt bonds issued on  or after 10/1/93 and these loans are guaranteed the same rate of return as that for loans financed with taxable bonds or other sources. Because of these changes, loans that are financed with tax-exempt  bonds issued prior to 10/1/93 are guaranteed a minimum 9.5 percent  yield, hereafter called 9.5 percent loans. Introduction Bonds are used to finance student loans. Research Objectives To what extent have lenders received SAP for 9.5 percent loans? What factors influence SAP?  What would be the effects of making statutory and regulatory  changes to the guaranteed minimum 9.",
      "5 percent yield? Scope and Methodology Analyzed student loan data submitted by lenders to the Department of Education (Education).  These data include information on 9.5  percent loan volume and SAP paid to lenders.  On the basis of our  analysis, we have determined that data from 1986 onward are  sufficiently reliable for purposes of our review. Interviewed 12 lenders that reported holding 9.5 percent loans in  fiscal year 2003. \u2013 Gathered data from top 10 lenders that held 9.5 percent loans  in FY 2003. These lenders held 70 percent of reported 9.",
      "5  percent loan volume in FY 2003. Interviewed officials at Education about laws, regulations and  policies related to the minimum 9.5 percent yield and Internal  Revenue Service (IRS) about legal aspects of tax-exempt bonds. Scope and Methodology Interviewed a major ratings agency that examines and rates the  quality of bonds and a law firm that provides legal advice to lenders  that issue tax-exempt bonds for student loans. To estimate what the SAP for 9.5 percent loans would have been  from FY 1995 to 2003 had these loans not been guaranteed a  minimum 9.5 percent yield,",
      " we used Education\u2019s data on SAP  made by fiscal year, loan type, and special allowance code (which  contains information on when the loan was issued), along with  several assumptions. Had the loans not been guaranteed a minimum 9.5 percent  yield, we assumed that they would have received the yield for  the same loan type financed with taxable bonds with the same  disbursement date and repayment status. Summary of Findings In FY 2003, 37 lenders received SAP for 9.5 percent loans and these  payments have increased by $347 million, from $209 million in FY 2001 to  $556 million in FY 2003.",
      "  SAP have exceeded $600 million through the  third quarter of FY 2004. A decline in the interest rates paid by borrowers and a rise in the dollar  amount of 9.5 percent loans have influenced the increased SAP. Changing the yield for 9.5 percent loans made or purchased in the future  should decrease SAP and is unlikely to cause outstanding bonds to default,  but lenders may not be able to offer the same borrower benefits, such as  loan cancellation and interest rate reductions, in the future because  earnings from their tax-exempt bonds may decrease. Two factors have influenced increase in SAP for 9.5  percent loans Major factor that has influenced increase in SAP is the significant drop in borrower rate relative to 9.",
      "5 percent yield. The volume of 9.5 percent loans has not decreased as  expected, which has also influenced the SAP increase. Difference between borrower rate and minimum 9.5 percent yield has  widened significantly since FY 2001 Interest rate (in percent) Example of how low borrower rates affect SAP SAP = (9.5% - borrower rate) These borrower rates are for Stafford loans from October to June of that fiscal year disbursed after July 1, 1998, that were in repayment. The volume of 9.5 percent loans has not decreased as expected, which  has also contributed to the SAP increase 9.",
      "5 percent loan volume (nominal dollars in millions) For 21 lenders, the amount of 9.5 percent loans they held between FY 1995 and FY 2003 decreased. Some of these lenders, however, have increased the amount of  9.5 percent loans they held in the first three quarters of 2004. For the remaining 16 lenders, the amount of 9.5 percent loans held  between FY 1995 and FY 2003 has increased. Recycling allows lenders to maintain or slightly increase 9.5 percent  loan volume  After lenders pay costs (such as interest payments and servicing fees)",
      " associated with a tax-exempt bond, they may use any remaining money  earned from loans to reinvest in FFELP loans, called recycling.  These  loans are guaranteed the minimum 9.5 percent yield. All 12 lenders interviewed utilize recycling to reinvest in 9.5 percent loans.  Length of time that a lender can recycle depends on the terms of the  bond\u2014some lenders have recycling periods of 1 to 3 years while others have recycling periods that last until the bond matures \u2013 Lenders may ask ratings agency to extend their recycling period up to  the bond\u2019s maturity date. \u2013 For a bond with a maturity date in 2025 and a recycling period that  lasts until maturity,",
      " the lender can likely recycle and slow the decrease  in, maintain, or slightly increase its 9.5 percent loan volume until that  time. Transferring loans from pre-10/1/93 tax-exempt bonds to taxable bonds  increases lenders\u2019 9.5 percent loan volume Almost all lenders interviewed have transferred loans to taxable bonds,  which has increased their 9.5 percent loan volume  Among top 10 lenders the proportion of 9.5 percent loans that have been transferred to a taxable bond increased between FY 2003 and 2004. Proportion of Top 10 Lenders' 9.",
      "5% Loans Financed by Taxable Bonds FY 2004 (as of 3/3/1/04) half of FY 2004 varied among the 10 lenders, from 0 to 90 percent. \u2013 Some lenders interviewed have been transferring for several years while another just started in 2004. \u2013 Some lenders have also transferred to tax-exempt bonds issued after  10/1/93. Policy that allows lender to transfer loans and increase 9.5 percent loan  volume was intended to limit SAP In 1992, Education issued regulations intending to limit SAP by changing  how SAP is calculated for a loan that is transferred from a tax-exempt bond  to a taxable bond.",
      "   \u2013 Under the 1992 regulation and clarified in a 1996 guidance letter, a  loan transferred from a pre-10/1/93 tax-exempt bond to a taxable bond  remains subject to the SAP provisions applicable to loans financed  with the tax-exempt bonds so long as the lender retains a legal interest  in the original tax-exempt bond and the original bond has not been  retired or defeased. At that time, Education anticipated that interest rates would rise, resulting in  a higher lender yield for loans financed with taxable bonds compared with   loans financed with tax-exempt bonds. Education believed that if the regulation was not issued lenders would have  an incentive to transfer loans from tax-exempt bonds to taxable bonds,",
      "  which would mean that the federal government would have paid greater  SAP for those loans. Refunding a pre-10/1/93 tax-exempt bond extends the life of a bond, and  loans continue to be guaranteed the minimum 9.5 percent yield  Lenders may refund a pre-10/1/93 tax-exempt bond, and the refunding bond may have a later maturity date than the original  bond. Based on interpretation of the Higher Education Act, loans now  financed with the refunding bond continue to be guaranteed the  minimum 9.5 percent yield. Almost all nonprofit lenders interviewed refunded a pre-",
      "10/1/93 tax- exempt bond. \u2013 A lender that did not refund made this choice because its bonds  had maturity dates 20 to 30 years from their issue date. \u2013 For-profit lenders are not permitted to refund tax-exempt bonds. \u2013 Some reported reasons to refund included: to obtain a lower  interest rate than paid on the original bond or to extend period of time loans are guaranteed the minimum 9.5 percent yield. Lenders have refunded tax-exempt bonds using the IRS\u2019s 17-year rule or  with new volume cap allocation  Most lenders interviewed refunded using the 17-year rule. \u2013 Using the 17-year rule,",
      " a lender does not need to receive  authority to issue a refunding bond from the state.  However,  the maturity date must not be later than the longer of 17 years  from the original bond issue date or the average maturity of the original bond. Some lenders interviewed have used a new volume cap allocation  from the state to refund a bond, and the loans continue to be  guaranteed the minimum 9.5 percent yield. \u2013 When a lender uses new volume cap allocation from the state  to refund a bond, the maturity date for the new bond is not  restricted as it is under the 17-year rule. Changing the yield for 9.",
      "5 percent loans to a yield that eliminates the minimum could lower SAP for loans  made or purchased in the future. Changing the yield for 9.5 percent loans made or  purchased in the future is unlikely to cause outstanding  bonds to default, but lenders may not be able to offer  the same borrower benefits, such as loan cancellation  and interest rate reductions, in the future. Unlike other loans whose rates of return vary because they are tied to market interest rates, those financed with pre-10/1/93 tax-exempt  bonds have a guaranteed minimum rate of return. In an environment where interest rates are low, current law and  policies provide an opportunity for lenders to increase the amount  of loans guaranteed a minimum 9.",
      "5 percent rate. Even if interest rates rise somewhat in the future, the difference  between the borrower rate and the minimum 9.5 percent yield will still be large.  This will require the government to continue to pay  larger SAP than it would otherwise have if the loans did not have a  guaranteed minimum of 9.5 percent. Appendix II: Comments from the Department  of Education Appendix III: GAO Contacts and Staff  Acknowledgments GAO Contacts Staff  Acknowledgments In addition to those named above, the following people made significant  contributions to this report: Cynthia Decker, Margaret Armen, Richard  Burkard,",
      " Jason Kelly, Rebecca Christie, and Jeff Weinstein.\n"
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  {
    "id": 23,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed the Food and Drug Administration's (FDA) review of medical devices, focusing on how FDA review time has changed from fiscal year 1989 to May 18, 1995. GAO found that: (1) FDA review times for medical device applications remained stable from 1989 to 1991, increased sharply in 1992 and 1993, and dropped in 1994; (2) in 1994, the median review time for 510(k) applications was 152 days, which was higher than the median review time during 1989 through 1991; (3) the review time trend for original premarket approval (PMA) applications was unclear because many applications remained open; (4) the median review time for original PMA applications peaked at 984 days in 1992; (5) the review time trend for supplementary PMA applications fluctuated slightly in the first 3 years, peaked in 1992, and declined to 193 days in 1994; (6) in many instances, FDA placed 501(k) applications on hold while waiting for additional information, which comprised almost 20 percent of its total elapsed review time; and (7) the mean review time for investigational device exemptions was 30 days.\n",
    "docs": [
      "Background Types of FDA Reviews Medical devices can range in complexity from a simple tongue depressor to a sophisticated CT (computed tomography) x-ray system. Most of the devices reach the market through FDA\u2019s premarket notification (or 510(k)) review process. Under its 510(k) authority, FDA may determine that a device is substantially equivalent to a device already on the market and therefore not likely to pose a significant increase in risk to public safety. When evaluating 510(k) applications, FDA makes a determination regarding whether the new device is as safe and effective as a legally marketed predicate device. Performance data (bench, animal, or clinical)",
      " are required in most 510(k) applications, but clinical data are needed in less than 10 percent of applications. An alternative mode of entry into the market is through the premarket approval (PMA) process. PMA review is more stringent and typically longer than 510(k) review. For PMAs, FDA determines the safety and effectiveness of the device based on information provided by the applicant. Nonclinical data are included as appropriate. However the answers to the fundamental questions of safety and effectiveness are determined from data derived from clinical trials. FDA also regulates research conducted to determine the safety and effectiveness of unapproved devices. FDA approval is required only for \u201csignificant risk\u201d devices.",
      " Applicants submit applications for such devices to obtain an investigational device exemption (IDE) from regulatory requirements and approval to conduct clinical research. For an IDE, unlike PMAs and 510(k)s, it is the proposed clinical study that is being assessed\u2014not just the device. Modification of Cleared or Approved Applications for Devices Modifications of medical devices, including any expansion of their labeled uses, are also subject to FDA regulation. Applications to modify a device that entered the market through a PMA are generally linked to the original PMA application and are called PMA supplements. In contrast, modifications to a 510(k) device are submitted as new 510(k)",
      " applications. References may be made to previous 510(k) applications. Measuring the Length of FDA Reviews FDA uses several measures of duration to report the amount of time spent reviewing applications. In this letter, we use only three of those measures. The first is simply the time that elapses between FDA\u2019s receipt of an application and its final decision on it (total elapsed time). The second measure is the time that FDA has the application under its review process (FDA time). This includes both the time the application is under active review and the time it is in the FDA review queue. The amount of time FDA\u2019s review process has been suspended,",
      " waiting for additional information from the applicant, is our third measure (non-FDA time). Our measures of review time are not intended to be used to assess the agency\u2019s compliance with time limits for review established under the Federal Food, Drug, and Cosmetic Act (the act). The time limits for PMA, 510(k), and IDE applications are 180, 90, and 30 days, respectively. FDA regulations allow for both the suspension and resetting of the FDA review clock under certain circumstances. How review time is calculated differs for 510(k)s and PMAs. If a PMA application is incomplete, depending on the extent of the deficiencies,",
      " FDA may place the application on hold and request further information. When the application is placed on hold, the FDA review clock is stopped until the agency receives the additional information. With minor deficiencies, the FDA review clock resumes running upon receipt of the information. With major deficiencies, FDA resets the FDA clock to zero upon receipt of the information. In this situation, all previously accrued FDA time is disregarded. (The resetting of the FDA clock can also be triggered by the applicant\u2019s submission of unsolicited supplementary information.) The amount of time that accrues while the agency is waiting for the additional information constitutes non-FDA time. For 510(k)s,",
      " the FDA clock is reset upon receipt of a response to either major or minor deficiencies. For this report, we define FDA time as the total amount of time that the application is under FDA\u2019s review process. That is, our measure of FDA time does not include the time that elapses during any suspension, but does include time that elapsed before the resetting of the FDA clock. The total amount of time that accrues while the agency is waiting for additional information constitutes non-FDA time. (The sum of FDA and non-FDA time is our first measure of duration\u2014total elapsed time.) Classes and Tiers of Medical Devices The act establishes three classes of medical devices,",
      " each with an increasing level of regulation to ensure safety and effectiveness. The least regulated, class I devices, are subject to compliance with general controls. Approximately 40 percent of the different types of medical devices fall into class I. At the other extreme is premarket approval for class III devices, which constitute about 12 percent of the different types of medical devices. Of the remainder, a little over 40 percent are class II devices, and about 3 percent are as yet unclassified. In May 1994, FDA implemented a three-tier system to manage its review workload. Classified medical devices are assigned to one of three tiers according to an assessment of the risk posed by the device and its complexity.",
      " Tier 3 devices are considered the riskiest and require intensive review of the science (including clinical data) and labeling. Review of the least risky devices, tier 1, entails a \u201cfocused labeling review\u201d of the intended use. In addition to the three tiers is a group of class I devices that pose little or no risk and were exempted from the premarket notification (510(k)) requirements of the act. Under the class and tier systems, approximately 20 percent of the different types of medical devices are exempted from premarket notification. A little over half of all the different types of medical devices are classified as tier 2 devices.",
      " Tiers 1 and 3 constitute 14 and 12 percent of the different types of medical devices, respectively. Principal Findings Premarket Notifications (510(k)s) From 1989 through 1991, the median time between the submission of a 510(k) application and FDA\u2019s decision (total elapsed time) was relatively stable at about 80 to 90 days. The next 2 years showed a sharp increase that peaked at 230 days in 1993. Although the median review time showed a decline in 1994 (152 days), it remained higher than that of the initial 3 years. (See figure 1.) Similarly,",
      " the mean also indicated a peak in review time in 1993 and a subsequent decline. The mean review time increased from 124 days in 1989 to 269 days in 1993. In 1994, the mean dropped to 166 days; however, this mean will increase as the 13 percent of the applications that remained open are closed. (See table II.1.) Of all the applications submitted to FDA to market new devices during the period under review, a little over 90 percent were for 510(k)s. Between 1989 and 1994, the number of 510(k) applications remained relatively stable,",
      " ranging from a high of 7,023 in 1989 to a low of 5,774 in 1991. In 1994, 6,446 applications were submitted. Of the 40,950 510(k) applications submitted during the period under review, approximately 73 percent were determined to be substantially equivalent. (That is, the device is equivalent to a predicate device already on the market and thus is cleared for marketing.) Only 2 percent were found to be nonequivalent, and 6 percent remained open. Other decisions\u2014including applications for which a 510(k) was not required and those that were withdrawn by the applicant\u2014account for the rest.",
      " (See appendix I for details on other FDA decision categories.) For applications determined to be substantially equivalent, non-FDA time\u2014the amount of time FDA placed the application on hold while waiting for additional information\u2014comprised almost 20 percent of the total elapsed time. (See table II.7.) Figure 2 displays FDA and non-FDA time to determine equivalency for 510(k) applications. Premarket Approvals (PMAs) The trends in review time differed for original PMAs and PMA supplements. There was no clear trend in review times for original PMA applications using either medians or means since a large proportion of the applications had yet to be completed.",
      " The median time between the submission of an application and FDA\u2019s decision (total elapsed time) fluctuated from a low of 414 days in 1989 to a high of 984 days in 1992. Less than 50 percent of the applications submitted in 1994 were completed; thus, the median review time was undetermined. (See figure 3.) Except for 1989, the means were lower than the medians because of the large number of open cases. The percent of applications that remained open increased from 4 percent in 1989 to 81 percent in 1994. The means, then, represent the time to a decision for applications that were less time-consuming.",
      " When the open cases are completed, lengthy review times will cause an increase in the means. (See table III.1.) For PMA supplements, the median time ranged from 126 days to 173 days in the first 3 years, then jumped to 288 days in 1992. In 1993 and 1994, the median declined to 242 and 193 days, respectively. (See figure 4.) This trend was reflected in the mean review time that peaked at 336 days in 1992. Although the mean dropped to 162 days in 1994, this is expected to increase because 21 percent of the applications had not been completed at the time of our study.",
      " (See table III.7.) Applications for original PMAs made up less than 1 percent of all applications submitted to FDA to market new devices in the period we reviewed. PMA supplements comprised about 8 percent of the applications. The number of applications submitted for PMA review declined each year. In 1989, applications for original PMAs numbered 84. By 1994, they were down to 43. Similarly, PMA supplements decreased from 804 in 1989 to 372 in 1994. (See tables III.1 and III.7.) Of the 401 applications submitted for original PMAs,",
      " 33 percent were approved, 26 were withdrawn, and nearly a third remained open. The remainder (about 9 percent) fell into a miscellaneous category. (See appendix I.) A much higher percentage of the 3,640 PMA supplements (78 percent) were approved in this same period, and fewer PMA supplements were withdrawn (12 percent). About 9 percent of the applications remained open, and 2 percent fell into the miscellaneous category. For PMA reviews that resulted in approval, non-FDA time constituted approximately one-fourth of the total elapsed time for original PMAs and about one-third for PMA supplements. The mean FDA time for original PMAs ranged from 155 days in 1994 to 591 days in 1992.",
      " Non-FDA times for those years were 34 days in 1994 and 165 days in 1992. For PMA supplements, FDA review times were lower, ranging from a low of 105 days (1990) to a high of 202 days (1992). Non-FDA time for those years were 59 days (1990) and 98 days (1992), respectively. (See table III.13.) Figures 5 and 6 display the proportion of FDA and non-FDA time for the subset of PMAs that were approved. Investigational Device Exemptions (IDEs) For IDEs,",
      " the mean review time between submission and FDA action was 30 days, and it has not changed substantially over time. Unlike 510(k)s and PMAs, IDEs are \u201cdeemed approved\u201d if FDA does not act within 30 days. Of the 1,478 original IDE submissions from fiscal year 1989 to 1995, 33 percent were initially approved (488) and 62 percent were denied or withdrawn (909). The number of IDE submissions each year ranged from a high of 264 in 1990 to a low of 171 in 1994. (See table IV.1.) Objectives,",
      " Scope, and Methodology Our objective was to address the following general question: How has the time that 510(k), PMA, and IDE applications spend under FDA review changed between fiscal year 1989 and the present? To answer that question, we also looked at a subset of applications that were approved, distinguishing the portion of time spent in FDA\u2019s review process (FDA time) from that spent waiting for additional information (non-FDA time). For applications that were approved, we present the average number of amendments that were subsequently added to the initial application as well as the average number of times FDA requested additional information from the applicant. (Both of these activities affect FDA\u2019s review time.) We used both the median and mean to characterize review time.",
      " We use the median for two reasons. First, a large proportion of the applications have yet to be completed. Since the median is the midpoint when all review times are arranged in consecutive order, its value can be determined even when some applications requiring lengthy review remain open. In contrast, the mean can only be determined from completed applications. (In this case, applications that have been completed by May 18, 1995.) In addition, the mean will increase as applications with lengthy reviews are completed. To illustrate, for applications submitted in 1993, the mean time to a decision was 269 days for 510(k) applications that have been closed.",
      " However, 3 percent of the applications have yet to be decided. If these lengthy reviews were arbitrarily closed at May 18, 1995 (the cutoff date for our data collection), the mean would increase to 285 days. In contrast, the median review time (230 days) would remain the same regardless of when these open applications were completed. The second reason for using the median is that the distributions of review time for 510(k), original PMA, and PMA supplement applications are not symmetric, that is, having about the same number of applications requiring short reviews as lengthy reviews. The median is less sensitive to extreme values than the mean.",
      " As a result, the review time of a single application requiring an extremely lengthy review would have considerably more effect on the mean than the median. Figure 7 shows the distribution for 510(k)s submitted in 1993, the most recent year in which at least 95 percent of all 510(k) applications had been completed. The distribution is skewed with a mean review time of 269 days and a median review time of 222 days for all completed applications. Frequency Mean = 269 Median = 222 To provide additional information, we report on the mean review times as well as the median. The discrepancy between the two measures gives some indication of the distribution of review time.",
      " When the mean is larger than the median, as in the case of the 510(k)s above, it indicates that a group of applications required lengthy reviews. Another reason we report the means is that, until recently, FDA reported review time in terms of means. In appendix I, we provide the categories we used to designate the different FDA decisions and how our categories correspond to those used by FDA. Detailed responses to our study objective are found in tabular form in appendixes II, III, and IV for 510(k)s, PMAs, and IDEs, respectively. We report our findings according to the fiscal year in which the applications were submitted to FDA.",
      " By contrast, FDA commonly reports review time according to the fiscal year in which the review was completed. Although both approaches measure review time, their resultant statistics can vary substantially. For example, several complex applications involving lengthy 2-year reviews submitted in 1989 would increase the average review time for fiscal year 1989 in our statistics and for fiscal year 1991 in FDA\u2019s statistics. Consequently, the trend for review time based on date-of-submission cohorts can differ from the trend based on date-of-decision cohorts. (See appendix V for a comparison of mean review time based on the two methods.) The two methods provide different information and are useful for different purposes.",
      " Using the date-of-decision cohort is useful when examining productivity and the management of resources. This method takes into consideration the actual number of applications reviewed in a given year including all backlogs from previous years. Alternatively, using the date-of-submission cohort is useful when examining the impact of a change in FDA review policy, which quite often only affects those applications submitted after its implementation. To minimize the effect of different policies on review time within a cohort, we used the date-of-submission method. We conducted our work in accordance with generally accepted government auditing standards between May and June 1995. Agency Comments Officials from FDA reviewed a draft of this report and provided written comments,",
      " which are reproduced in appendix VI. Their technical comments, which have been incorporated into the text where appropriate, have not been reprinted in the appendix. FDA believed that the report misrepresented the current state of the program as the draft did not acknowledge recent changes in the review process. FDA officials suggested a number of explanations for the apparent trends in the data we reported (see appendix VI). Although recent initiatives to improve the review process provide a context in which to explain the data, they were outside the scope of our work. We were not able to verify the effect these changes have actually had on review time. To the extent that these changes did affect review time,",
      " they are reflected in the review times as presented and are likely to be reflected in future review times. The agency also believed that the draft did not reflect the recent improvements in review time. We provided additional measures of review time in order to present the review times for the more recent years. We have also included more information on the difference between the date-of-submission and date-of-decision cohorts, and we have expanded our methodological discussion in response to points FDA made on the clarity of our presentation. (Additional responses to the agency comments are included in appendix VI.) As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after its date of issue.",
      " We will then send copies to other interested congressional committees, the Secretary of the Department of Health and Human Services, and the Commissioner of Food and Drugs. Copies will also be made available to others upon request. If you or your staff have any questions about this report, please call me at (202) 512-3092. The major contributors to this report are listed in appendix VII. FDA Decision Codes and GAO\u2019s Categories FDA uses different categories to specify the type of decision for 510(k)s, PMAs, and IDEs. For our analysis, we collapsed the multiple decision codes into several categories. The correspondence between our categories and FDA\u2019s are in table I.",
      "1. Additional information requested; applicant cannot respond within 30 days Drug (CDER) review required (continued) Premarket Notification (510(k)) Tables II.1 - II.12 Review Time for Premarket Notification The following tables present the data for premarket notifications, or 510(k)s, for fiscal years 1989 through May 18, 1995. The first set of tables (tables II.1 through II.6) presents the time to a decision\u2014from the date the application is submitted to the date a decision is rendered. We first present a summary table on the time to a decision by fiscal year (table II.",
      "1). The grand total for the number of applications includes open cases\u2014that is, applications for which there had not been any decision made as of May 18, 1995. As the distribution for time to a decision is not symmetric (see figure 1 in the letter), we present the means and percentiles to characterize the distribution. (The means and percentiles do not include open cases.) The second table is a summary of the time to a decision by class, tier, medical specialty of the device, and reviewing division (table II.2). The next four tables (II.3 through II.6) provide the details for these summary tables.",
      " The totals in these tables include only applications for which a decision has been rendered. The class, tier, and medical specialty of some of the devices have yet to be determined and are designated with N/A. Medical specialties other than general hospital or general and plastic surgery include anesthesiology; cardiovascular; clinical chemistry; dental; ear, nose, and throat; gastroenterology/urology; hematology; immunology; microbiology; neurology; obstetrics/gynecology; ophthalmic; orthopedic; pathology; physical medicine; radiology; and clinical toxicology. The five reviewing divisions in FDA\u2019s Center for Devices and Radiological Health are Division of Clinical Laboratory Devices (DCLD); Division of Cardiovascular,",
      " Respiratory and Neurological Devices (DCRND); Division of General and Restorative Devices (DGRD); Division of Ophthalmic Devices (DOD); and Division of Reproductive, Abdominal, Ear, Nose and Throat, and Radiological Devices (DRAER). The second set of tables (tables II.7 through II.12) presents the mean time to determine equivalency. We provide the means for total FDA time, non-FDA time, and total elapsed time. FDA time is the total amount of time the application was under FDA review including queue time\u2014the time to equivalency without resetting the FDA review clock.",
      " The total elapsed time, the duration between the submission of the application and FDA\u2019s decision, equals the sum of the FDA and non-FDA time. We deleted cases that had missing values or apparent data entry errors for the values relevant to calculating FDA and non-FDA time. Therefore, the total number of applications determined to be equivalent in this group of tables differs from that in the first set. Again, we have two summary tables, followed by four tables providing time to determine equivalency by class, tier, medical specialty, and reviewing division (tables II.7 through II.12). Premarket Approval Tables III.1 - III.18 Review Time for Premarket Approval In reviewing a PMA application,",
      " FDA conducts an initial review to determine whether the application contains sufficient information to make a determination on its safety and effectiveness. A filing decision is made\u2014filed, filed with deficiencies specified, or not filed\u2014based on the adequacy of the information submitted. The manufacturer is notified of the status of the application at this time, especially since deficiencies need to be addressed. As part of the substantive review, a small proportion of PMA applications are also reviewed by an advisory panel. These panels include clinical scientists in specific medical specialties and representatives from both industry and consumer groups. The advisory panels review the applications and provide recommendations to the agency to either approve,",
      " deny, or conditionally approve them. FDA then makes a final determination on the application. To examine in greater detail those cases where the intermediate milestones were applicable, we calculated the average duration between the various dates\u2014submission, filing, panel decision, and final decision. The number of applications differs for each of the milestones as not all have filing or panel dates. (See figure III.1.) The following tables present information on review time for PMA applications for fiscal years 1989 through 1995. Original PMA applications are distinguished from PMA supplements. Some observations were deleted from our data because of apparent data entry errors. The first set of tables (tables III.",
      "1 through III.6) presents the time to a decision for original PMAs\u2014from the date the application is submitted to the date a decision is rendered. The second set of tables (tables III.7 through III.12) provides similar information, in the same format, for PMA supplements. We first present a summary table on the time to a decision by fiscal year (tables III.1 and III.7). Again, the grand total for the number of applications includes the number of open cases\u2014that is, applications for which there had not been any decision made as of May 18, 1995. As with 510(k)s,",
      " the distributions of time to a decision for original PMAs and PMA supplements are not symmetric. Thus we report means and percentiles to characterize these distributions. (These means and percentiles do not include open cases.) Figure III.2 presents the distribution for original PMAs submitted in 1989, the most recent year for which at least 95 percent of the applications had been completed. Figure III.3 presents the distribution for PMA supplements submitted in 1991, the most recent year with at least a 95-percent completion date. The second table is a summary of the time to a decision by class, tier, relevant medical specialty of the device,",
      " and reviewing division (tables III.2 and III.8). The two summary tables are followed by four tables (tables III.3 through III.6 and III.9 through III.12) presenting the details by class, tier, medical specialty, and reviewing division. The totals in these tables include only applications for which a decision has been rendered. The class, tier, and medical specialty of some of the devices have yet to be determined and are designated with N/A. Medical specialities other than cardiovascular or ophthalmic include anesthesiology; clinical chemistry; dental; ear, nose, and throat; gastroenterology/urology;",
      " general and plastic surgery; general hospital; hematology; immunology; microbiology; neurology; obstetrics/gynecology; orthopedic; pathology; physical medicine; radiology; and clinical toxicology. The third set of tables provides information on the time to an approval, for both original PMAs and PMA supplements (tables III.13 through III.18). Four different measures of duration are provided\u2014total FDA time, non-FDA time, total elapsed time, and FDA review time. Total FDA time is the amount of time the application is under FDA\u2019s review process. Non-FDA time is the time the FDA clock is suspended waiting for additional information from the applicant.",
      " The total elapsed time, the duration from the date the application is submitted to the date of FDA\u2019s decision, equals the sum of total FDA and non-FDA time. FDA review time is FDA time for the last cycle\u2014excluding any time accrued before the latest resetting of the FDA clock. Again, we first provide a summary table for time to an approval by fiscal year (table III.13). In this table, we also provide the number of amendments or the number of times additional information was added to the initial submission. Not all amendments were for information requested by FDA as can be seen from the number of requests for information. Table III.",
      "13 is followed by a summary by class, tier, medical specialty, and reviewing division (table III.14). Tables III.15 though III.18 provide the details for these two summary tables. Investigational Device Exemption Tables IV.1 - IV.6 Review Time for Investigational Device Exemptions The following tables present the average days to a decision for investigational device exemptions. The first table presents the averages for the years from October 1, 1988, through May 18, 1995. This is followed by summaries by class, tier, medical specialty, and then reviewing division. The next four tables (tables IV.",
      "3 through IV.6) provide the details for these summary tables. Comparision in Table V of Alternative Methods for Determining Average Days to Decision by Fiscal Year Alternative Calculation of Review Time by Year of Decision We reported our findings according to the fiscal year in which the applications were submitted to FDA (date-of-submission cohort). By contrast, FDA commonly reports review time according to the fiscal year in which the review was completed (date-of-decision cohort). This led to discrepancies between our results and those reported by FDA. The following table illustrates the differences in calculating total elapsed time by the year that the application was submitted and the year that a decision was rendered.",
      " Comparisons are provided for 510(k)s, PMA supplements, original PMAs, and IDEs. Our dataset did not include applications submitted before October 1, 1988. Consequently, the results presented in the following table understated the number of cases, as well as the elapsed time, when calculated by the year of decision. That is, an application submitted in fiscal year 1988 and completed in 1989 would not have been in our dataset. Comments From the Food and Drug Administration The following are GAO\u2019s comments on the August 2, 1995, letter from FDA. GAO Comments 1.",
      " The purpose of our review was to provide to FDA\u2019s congressional oversight committee descriptive statistics on review time for medical device submissions between 1989 and May 1995. It was not to perform an audit of whether FDA was in compliance with statutory review time, nor to examine how changes in FDA management practices may have resulted in shortening (or lengthening) review times. FDA officials suggested that a number of process changes and other factors may have contributed to the trends we reported\u2014for example, the increased complexity of the typical submission that resulted from the agency\u2019s exemption from review of certain low-risk devices. We are not able to verify the effect changes have actually had on review time,",
      " and it may be that it is still too early for their impact to be definitively assessed. 2. In discussing our methodology in the draft report, we noted the differences between FDA\u2019s typical method of reporting review time according to the year in which action on applications is finalized, as opposed to our method of assigning applications to the year in which they were submitted. We also included an appendix that compares the results of the two different approaches. (See appendix V.) We agree with FDA that it is important for the reader to understand these differences and have further expanded our discussion of methodology to emphasize this point. (See p. 14.) 3.",
      " We agree with FDA that our report \u201cdeals only with calculations of averages and percentiles\u201d\u2014that is, with means, medians (or 50th percentile), as well as the 5th and 95th percentiles. However, FDA\u2019s suggested additions do not extend beyond such descriptive statistics. We also agree that mean review times in the presence of numerous open cases may not be meaningful. For this reason, we have included open cases in our tables that report review time, but we have excluded them from the calculation of means. FDA suggests that we include open cases in our calculation of medians. We have adopted this suggestion and presented our discussion of trends in terms of the median review time for all cases.",
      " It should be noted, however, that including open cases increases our estimate of review time. (For example, including open cases raises the calculation of 510(k) median review time from the 126 days we reported for 1994 to 152 days.) Figure VI.1 depicts the relationship among the three measures of elapsed time for 510(k) submissions: the mean of closed cases, the median of closed cases, and the median of all cases. The two measures of closed cases reveal roughly parallel trends, with median review time averaging some 45 days fewer than mean review time. The two estimates of median review time are nearly identical from 1989 through 1990 since there are very few cases from that period that remain open.",
      " The divergence between the two medians increases as the number of open cases increases in recent years until 1995, when the median, including open cases, is larger than the mean of closed cases. Mean (Closed Cases) Median (Closed Cases) Median (All Cases) 4. While we are unable to reproduce the calculations performed by FDA, we agree in general with the trends indicated by FDA. Specifically, Our calculations, as presented in our draft report tables II.7 and following, showed a decrease from 1993 to 1994 in FDA review time for finding a 510(k) submission substantially equivalent. By our calculation,",
      " this declined from a mean of 173 days in 1993 to 100 days in 1994. The proportion of 510(k) applications reaching initial determination within 90 days of submission increased from 15.8 percent in 1993 to 32 percent in 1994 and 57.9 percent between October 1, 1994, and May 18, 1995. Clearly, since 1993, more 510(k) cases have been determined within 90 days, and the backlog of undetermined cases has been reduced. Because a review of the nature and complexity of the cases still open was beyond the scope of this study,",
      " we cannot predict with certainty whether, when these cases are ultimately determined, average review time for 1995 cases will be shorter than for cases submitted in 1993. 5. FDA time was reported in our draft report tables II.7 through II.12, and findings contrasting the differences between FDA time and non-FDA time were also included. Additional language addressing this distinction has been included in the text of the report. 6. FDA\u2019s contends that 1989 was an atypical year for 510(k) submissions and therefore a poor benchmark. However, we do not believe that starting our reporting in 1989 introduced any significant bias into our report of the 510(k)",
      " workload. Indeed, our draft report concluded that the number of 510(k) submissions had \u201cremained relatively stable\u201d over the 1989-94 period. If we had extrapolated the data from the first 7-1/2 months of 1995 to a full year, we would have concluded that the current fiscal year would have a substantially lower number of 510(k) submissions (16 percent to 31 percent) than any of the previous 6 years. 7. The tier classification was created by FDA to manage its review workload; however, it was not our intention to evaluate or in any way assess the use of tiers for such purposes.",
      " The tier classification was based on \u201cthe potential risk and complexity of the device.\u201d Accordingly, both class and tier provide a rough indication of a device\u2019s complexity. 8. We agree that our draft report aggregated original PMA submissions and PMA supplements in summarizing its findings. We have now disaggregated PMA statistics throughout. 9. We interpret the figures presented by FDA to represent the mean number of days elapsed between receipt (or filing) of a PMA submission and a given month for cases that have not been decided. We agree with FDA that the average review time for open original PMAs does not appear to have increased substantially since the beginning of calendar 1994 and that the average review time has decreased for PMA supplements since late 1994.",
      " Decreasing these averages is the product of either an increasing number of new cases entering the system or of closing out older cases in the backlog or both. Since the number of PMAs (originals and supplements) submitted in recent years has declined, the evidence suggests that the drop in average time for pending PMA supplements resulted from eliminating lengthy backlogged cases. 10. As noted earlier, assessing the impact of specific management initiatives is beyond the scope of this report. However, we do agree with FDA that the approval rate for initial IDE submissions doubled between 1994 and 1995; by our calculations, it increased from 25 percent to 54 percent.",
      " We have not independently examined the total time to approval for all IDEs. Major Contributors to This Report Program Evaulation and Methodology Division Robert E. White, Assistant Director Bertha Dong, Project Manager Venkareddy Chennareddy, Referencer Elizabeth Scullin, Communications Analyst The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O.",
      " Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202)",
      " 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
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  },
  {
    "id": 24,
    "question": null,
    "answer": "In February 2016, the Obama Administration proposed a $96.9 billion budget for the Department of Transportation (DOT) for FY2017. That is approximately $22 billion more than was provided for FY2016. The budget request reflected the Administration's call for significant increases in funding for highway, transit, and rail programs. The DOT appropriations bill funds federal programs covering aviation, highways and highway safety, public transit, intercity rail, maritime safety, pipelines, and related activities. Federal highway, transit, and rail programs were reauthorized in the fall of 2015, and their future funding authorizations were somewhat increased. There is general agreement that more funding is needed for transportation infrastructure, but Congress has not been able to agree on a source that could provide the additional funding. The federal excise tax on motor fuel, which is the primary funding source for federal highway and transit programs, has not been increased in over 20 years, and does not raise enough revenue to support even the current level of spending. To address this shortfall, Congress periodically transfers money from the general fund to keep the programs going. The annual appropriations for DOT are combined with those for the Department of Housing and Urban Development (HUD) in the Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. In the 114th Congress, the Senate passed H.R. 2577, in which Division A was FY2017 appropriations for THUD. The bill would have provided $76.9 billion in new budget authority for DOT, $1.8 billion more than the comparable figure in FY2016 but roughly $20 billion less than the Administration request. The increase in spending over FY2016 was not obvious in budget tables due to a proposed rescission of $2.2 billion of contract authority, which made the net FY2017 amount $344 million less than the comparable FY2016 appropriation. The House Committee on Appropriations reported out H.R. 5394, which would have provided $76.9 billion in new budget authority for DOT.  The major changes from FY2016 levels in these bills were more funding for highways, transit, and intercity passenger rail. FY2017 funding is being provided by a continuing resolution (CR) at roughly FY2016 levels. The current CR ends on April 28, 2017. According to press reports, the Trump Administration has requested a $1 billion reduction in DOT funding from FY2016 levels, with cuts to the Essential Air Service, TIGER (National Infrastructure Investment), and transit New Starts grant programs.\n",
    "docs": [
      "Introduction The Obama Administration requested $94.5 billion for the Department of Transportation (DOT) for FY2017, $19.5 billion (26%) more than DOT received in FY2016. The Obama Administration proposal included significant increases in funding for highway, transit, and intercity passenger rail programs. Around 75% of DOT's funding is mandatory budgetary authority drawn from trust funds; the Administration's request would have drawn a larger portion (87%) from mandatory budget authority, reducing the amount of discretionary budget authority in DOT's budget from $18.6 billion in 2016 to $12.0 billion for FY2017.",
      " The Senate Committee on Appropriations recommended a total of $76.9 billion in new budget authority for DOT for FY2017 ($74.7 billion after scorekeeping adjustments); this is $1.8 billion (2.5%) above the comparable FY2016 amount. The committee rejected the request to reclassify some DOT expenditures as \"mandatory.\"  On May 12, 2016, the full Senate began consideration of FY2017 appropriations for Transportation, HUD, and Related Agencies. By custom, appropriations bills originate in the House of Representatives. Because House action on the FY2017 THUD bill had not yet occurred, the Senate substituted the text of the Senate-reported FY2017 THUD bill ( S.",
      " 2844 ) for the text of H.R. 2577, which originally contained the text of the Senate-reported FY2016 THUD bill. The Senate Appropriations Committee substitute amendment ( S.Amdt. 3896 ) to the bill also includes as Division B the text of the Senate Appropriations Committee-reported FY2017 Military Construction, Veterans Affairs, and Related Agencies bill.  On May 24, 2016, the House Committee on Appropriations reported out H.R. 5394.  According to press reports, the Trump Administration has requested that the Essential Air Service program and the TIGER (National Infrastructure Investment)",
      " grant program be eliminated, and that the transit New Starts (Capital Investment Grants) program be reduced by $400 million from its FY2016 level, for FY2017. Understanding the DOT Appropriations Act DOT's funding arrangements are unusual compared to those of most other federal agencies.  Two large trust funds, the Highway Trust Fund and the Airport and Airway Trust Fund, provide 91% of DOT's budget authority (see Table 1 ). The scale of the funding coming from these funds is not entirely obvious in DOT budget tables, because most of the funding from the Airport and Airway Trust Fund is in the form of discretionary budget authority and so is combined with the discretionary budget authority provided from the general fund.",
      " Also, for most federal agencies discretionary funding is close or identical to total funding. But roughly three-fourths of DOT's funding is mandatory budget authority derived from trust funds. Only one-fourth of DOT's budget authority is truly discretionary authority. Table 2 shows the breakdown between the discretionary and mandatory funding in DOT's budget. Approximately 80% of DOT's funding is distributed to states, local authorities, and Amtrak in the form of grants (see Table 3 ). Of DOT's largest sub-agencies, only the Federal Aviation Administration, which is responsible for the operation of the air traffic control system and employs roughly 83% of DOT's 56,",
      "252 employees, many as air traffic controllers, has a budget whose primary expenditure is not making grants. Reauthorization of Air Transportation Programs Since most DOT funding comes from trust funds whose revenues typically come from taxes, the periodic reauthorizations of the taxes supporting these trust funds, and the apportionment of the budget authority from those trust funds to DOT programs, are a significant aspect of DOT funding. The current authorization for the federal aviation programs is scheduled to expire during FY2017. Reauthorization of this program may affect both its structure and funding level. DOT Funding Trend In current (nominal) dollars, DOT's nonemergency annual funding has risen from a recent low of $70 billion in FY2012 to $75 billion in FY2016.",
      " However, adjusting that funding for inflation tells a somewhat different story. DOT's inflation-adjusted funding peaked in FY2010 at $85.4 billion (in constant 2016 dollars) and declined from that point until FY2015, before rising in FY2016 (see Figure 1 ). Since FY2012, DOT's funding has been lower, after adjustment for inflation, than in any year during the FY2006-FY2011 period. DOT FY2017 Appropriations  Table 4 presents a selected account-by-account summary of FY2017 appropriations for DOT, compared to FY2016. Selected Issues Overall, the Obama Administration's FY2017 budget request totaled $96.",
      "9 billion in new budget resources for DOT. The requested funding is $21.9 billion more than that enacted for FY2016. The Obama Administration request called for significant increases over the authorized amounts for highways, transit, and intercity rail.  According to press reports, the Trump Administration has requested $1 billion in reductions from FY2016 levels, zeroing out the Essential Air Services program (-$150 million) and the TIGER (National Infrastructure Investment) grant program (-$500 million) and reducing funding for the transit New Starts program (-$400 million). Highway Trust Fund Solvency Virtually all federal highway funding and most federal transit funding come from the Highway Trust Fund,",
      " whose revenues comes largely from the federal motor fuels excise tax (\"gas tax\"). For several years, expenditures from the fund have exceeded revenues; for example, for FY2017, revenues are projected to be approximately $42 billion, while authorized outlays are projected to be approximately $56 billion. Congress transferred about $143 billion, mostly from the general fund of the Treasury, to the Highway Trust Fund during the period FY2008-FY2016 to keep the trust fund solvent.  One reason for the shortfall in the fund is that the federal gas tax has not been raised since 1993. The tax is a fixed amount assessed per gallon of fuel sold,",
      " not a percentage of the cost of the fuel sold: whether a gallon of gas costs $1 or $4, the highway trust fund receives 18.3 cents for each gallon of gasoline and 24.3 cents for each gallon of diesel. Meanwhile, the value of the gas tax has been diminished by inflation (which has reduced the purchasing power of the revenue raised by the tax) and increasing automobile fuel efficiency (which reduces growth in gasoline sales as vehicles are able to travel farther on a gallon of fuel). The Congressional Budget Office (CBO) has forecast that gasoline consumption will be relatively flat through 2024, as continued increases in the fuel efficiency of the U.S.",
      " passenger fleet are projected to offset increases in the number of miles driven. Consequently, CBO expects Highway Trust Fund revenues of $40 billion to $42 billion annually from FY2017 to FY2026, well short of the annual level of projected expenditures from the fund. National Infrastructure Investment (TIGER Grants) For FY2017, the Administration requested $1.25 billion for TIGER grants, the same amount as in previous years. The Senate bill would have provided $525 million, $25 million above the FY2106 amount. The Senate bill also recommended that the portion of funding allocated to projects in rural areas be increased from 20%",
      " to 30%; the same change was included in the Senate-passed bill in FY2016, but was not enacted. The House Committee on Appropriations recommended $450 million. The Transportation Investments Generating Economic Recovery (TIGER) grant program originated in the American Recovery and Reinvestment Act ( P.L. 111-5 ), where it was called \"national infrastructure investment\" (as it has been in subsequent appropriations acts). It is a discretionary grant program intended to address two criticisms of the current structure of federal transportation funding: that virtually all of the funding is distributed to state and local governments, which select projects based on their individual priorities,",
      " making it difficult to fund projects that have national or regional impacts but whose costs fall largely on one or two states; and that federal transportation funding is divided according to mode of transportation, making it difficult for projects in different modes to compete on the basis of comparative benefit.  The TIGER program provides grants to projects of national, regional, or metropolitan area significance in various modes on a competitive basis, with recipients selected by DOT. Although the program is, by description, intended to fund projects of national, regional, and metropolitan area significance, in practice its funding has gone more toward projects of regional and metropolitan area significance. In large part this is a function of congressional intent,",
      " as Congress has directed that the funds be distributed equitably across geographic areas, between rural and urban areas, and among transportation modes, and has set relatively low minimum grant thresholds ($5 million for urban projects, $1 million for rural projects). Congress has continued to support the TIGER program through annual DOT appropriations. It is heavily oversubscribed; for example, DOT announced that it received a total of $10.1 billion in applications for the $500 million available for FY2015 grants. The U.S. Government Accountability Office (GAO) has reported that, while DOT has selection criteria for the TIGER grant program, it has sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects without explaining why it did so,",
      " raising questions about the integrity of the selection process. DOT has responded that while its project rankings are based on transportation-related criteria (e.g., safety, economic competitiveness), it must sometimes select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards. Critics argue that TIGER grants go disproportionately to urban areas. For several years Congress has directed that at least 20% of TIGER funding should go to projects in rural areas. According to the 2010 Census, 19% of the U.S. population lives in rural areas. As Table 5 illustrates,",
      " the TIGER grant appropriation process has followed a pattern for several years: the Administration requests as much as or more than Congress has previously provided; the House zeroes out the program or proposes a large cut; the Senate proposes an amount similar to the previously enacted figure; and the final enacted amount is similar to the previously enacted amount. Essential Air Service (EAS)14 As Table 6 shows, the Obama Administration requested $150 million for the EAS program in FY2017, in addition to $104 million in mandatory funding for a total of $254 million. The Senate bill would have provided a total of $254 million, the requested amount.",
      " This was a reduction of $29 million (10%) from the FY2016 level. The requested reduction is based on an expectation of reduced costs as cost-saving measures previously enacted come into effect. The House Committee on Appropriations likewise recommended $150 million. The program is funded through a combination of mandatory and discretionary budget authority. In addition to the annual discretionary appropriation, there is a mandatory annual authorization, $108 million in FY2016, financed by overflight fees collected from commercial airlines by FAA. These overflight fees apply to international flights that fly over, but do not land in, the United States. The fees are to be reasonably related to the costs of providing air traffic services to such flights.",
      " The EAS program seeks to preserve commercial air service to small communities by subsidizing service that would otherwise be unprofitable. The cost of the program in real terms has doubled since FY2008, in part because route reductions by airlines resulted in new communities being added to the program (see Table 7 ). Congress made changes to the program in 2012, including allowing no new entrants, capping the per-passenger subsidy for a community at $1,000, limiting communities that are less than 210 miles from a hub airport to a maximum average subsidy per passenger of $200, and allowing smaller planes to be used for communities with few daily passengers.",
      " Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, anticipating that airlines would reduce or eliminate service to many communities that were too small to make such service economically viable. Supporters also contend that subsidizing air service to smaller communities promotes economic development in rural areas. Critics of the program note that the subsidy cost per passenger is relatively high, that many of the airports in the program have very few passengers, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports. Intercity Rail Safety In 2008,",
      " Congress directed railroads to install positive train control (PTC) on certain segments of the national rail network by the end of 2015. PTC is a communications and signaling system that is capable of preventing incidents caused by train operator or dispatcher error. Freight railroads have reportedly spent billions of dollars thus far to meet this requirement, but most of the track required to have PTC installed was not in compliance at the end of 2015; in October 2015 Congress extended the deadline to the end of 2018\u2014with an option for individual railroads to extend to 2020 with Federal Railroad Administration (FRA) approval.",
      " Congress provided $50 million in FY2010 and again in FY2016 for grants to railroads to help cover the expenses of installing PTC. The Obama Administration's FY2017 budget request included $875 million for the cost of PTC implementation on commuter railroad routes. The Senate recommended $199 million for PTC implementation on commuter and state-supported intercity passenger rail lines, as did the House Committee on Appropriations. Intercity Passenger Rail Development The Passenger Rail Reform and Investment Act of 2015 (Title XI of P.L. 114-94 ) reauthorized Amtrak while changing the structure of its federal grants: instead of getting separate grants for operating and capital expenses,",
      " it will now receive separate grants for the Northeast Corridor and the rest of its national network. This act also authorized three programs to make grants to states, public agencies, and rail carriers for intercity passenger rail development. The Administration's FY2017 budget for intercity rail development requested a total of $6 billion in two new programs: a Current Rail Passenger Service Program, which would primarily fund maintenance and improvement of existing intercity passenger rail service (i.e., Amtrak), and a Rail Service Improvement Program, which would fund new intercity passenger rail projects as well as some improvements to freight rail. The funding would come from a new transportation trust fund rather than discretionary funding.",
      " The Administration has made a similar proposal annually since FY2014. The Senate bill includes $1.42 billion for Amtrak, $30 million more than its FY2016 appropriation of $1.39 billion (see Table 8 ), and observed that creating a new transportation trust fund was a task for authorizing committees, not appropriations committees, while acknowledging that Amtrak has a state of good repair backlog of $28 billion on the Northeast Corridor. The House Committee on Appropriations likewise recommended $1.42 billion for Amtrak. The $85 million in the Senate bill, and $50 million recommended in the House bill, for intercity passenger rail grants in FY2017 in addition to the grants to Amtrak would be the first funding provided for intercity passenger rail (other than grants for positive train control implementation)",
      " since the 111 th Congress (2009-2010), which provided $10.5 billion for DOT's high-speed and intercity passenger rail grant program. Since then, Congress has provided no additional funding, and in FY2011 rescinded $400 million that had been appropriated but not yet obligated. Federal Transit Administration Capital\u00a0Investment Grants The majority of the Federal Transit Administration's (FTA's) roughly $12 billion in funding is funneled to state and local transit agencies through several formula programs. The largest discretionary transit grant program is the Capital Investment Grants program (commonly referred to as the New Starts and Small Starts program). It funds new fixed-guideway transit lines and extensions to existing lines.",
      " The program has four components. New Starts funds capital projects with total costs over $300 million that are seeking more than $100 million in federal funding. Small Starts funds capital projects with total costs under $300 million that are seeking less than $100 million in federal funding. Core Capacity grants are for projects that will increase the capacity of existing systems. The Expedited Project Delivery Pilot Program will provide funding for eight projects in the previous three categories that require no more than a 25% federal share and are supported, in part, by a public-private partnership. The Capital Investment Grants program funds for any project are typically disbursed over a period of years.",
      " Much of the funding for this program each year is committed to projects with multiyear grant agreements signed in previous years. For FY2017, the Obama Administration requested $3.5 billion for the program, $1.323 billion (61%) more than the $2.177 billion provided in FY2016. The Senate bill would have provided $2.338 billion, the authorized level, which is 7% ($161 million) above the FY2016 level. The House Committee on Appropriations recommended $2.5 billion. A New Starts grant, by statute, can be up to 80% of the net capital project cost.",
      " Since FY2002, DOT appropriations acts have included a provision directing FTA not to sign any full funding grant agreements for New Starts projects that would provide a federal share of more than 60%. That provision was not included in the Senate bill. The House-reported bill included a provision prohibiting grant agreements where the federal share was more than 50%. Critics of lowering the federal share provided for New Starts projects note that the federal share for highway projects is typically 80%, and in some cases is higher. They contend that the higher federal share makes highway projects relatively more attractive than public transportation projects for communities considering how to address transportation problems. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount available,",
      " so requiring a higher local match allows FTA to support more projects with the available funding. They also assert that requiring a higher local match likely encourages communities to estimate the costs and benefits of proposed transit projects more carefully, reducing the risk of subsequent cost overruns. Grant to the Washington Metropolitan Area Transit Authority The Passenger Rail Investment and Improvement Act of 2008 authorized $1.5 billion over 10 years in grants to the Washington Metropolitan Area Transit Authority (WMATA) for preventive maintenance and capital grants, to be matched by funding from the District of Columbia and the states of Maryland and Virginia. Under this agreement, Congress has provided $150 million to WMATA in each of the past six years.",
      "  WMATA faces a number of difficulties. It is dealing with a backlog of maintenance needs due to inadequate maintenance investment over many years, and it has experienced several fatal incidents, most recently in January 2015, and a number of other incidents that have raised questions about the safety culture of the agency. An investigation that found numerous instances of mismanagement of federal funding has led FTA to restrict WMATA's use of federal funds. An FTA audit of WMATA's safety practices in 2015 produced many recommendations for change, and in October 2015 FTA assumed oversight of WMATA's safety compliance practices from the Tri-State Oversight Committee,",
      " the agency created by the governments of the District of Columbia, Maryland, and Virginia to oversee WMATA safety performance. The three jurisdictions are to create a new, more effective oversight entity to replace the Tri-State Oversight Committee. The National Transportation Safety Board has recommended that oversight of WMATA's rail operations be assigned to the Federal Railroad Administration (FRA), which has a long history of safety enforcement, rather than the FTA, which is primarily a grant management agency. However, Congress would have to act to give FRA authority to oversee WMATA, while FTA already has such authority. For FY2017, the Senate bill would have provided $150 million for WMATA,",
      " while expressing frustration at the lack of progress the agency has made in improving safety with the additional funding it has been receiving. The House Committee on Appropriations likewise recommended $150 million. Commercial Driver Hours of Service and the 34-Hour Restart Requirement The Senate bill would have amended a provision from the FY2016 THUD act, and made a provisional change in the hours-of-service rule. The FY2016 THUD act included a provision that suspends portions of the commercial driver hours-of-service rules pending a study of their costs and benefits. These Federal Motor Carrier Safety Administration (FMCSA) rules took effect in June 2013.",
      " Prior to that time, drivers were required to take at least 34 hours off duty after working for 60 hours in a seven-day period (or 70 hours in an eight-day period); this was referred to as the \"34-hour restart requirement.\" The 2013 rules required that the 34-hour off-duty period cover two consecutive 1 a.m.-5 a.m. periods, and drivers were limited to taking this 34-hour \"restart\" once in a 168-hour (seven-day) span. If drivers work for less than 60 hours in a week, they do not have to take the 34-hour restart;",
      " for example, if a driver works eight hours every day, for a total of 56 hours in any seven-day period, that driver is not required to take a 34-hour rest period. The purpose of the 2013 change in the hours-of-service rules was to promote highway safety by reducing the risk of driver fatigue. Under the previous rules, drivers could start their 34-hour rest period at any time of the day, and could take more than one such rest period per seven-day period. Thus a driver was able to work the maximum permitted time per day (14 hours) and take the 34-hour restart after five days,",
      " and then, after a rest period of as little as one night and two daytime periods, work 14 hours a day for another five consecutive days. FMCSA asserted that this schedule allowed a driver to work up to 82 hours over a seven-day period, which it judged to not allow sufficient rest over time to prevent driver fatigue. By requiring that the 34-hour restart period cover two 1 a.m.-5 a.m. periods, the 2012 rule was intended to allow drivers to get more sleep during the night hours, when studies indicate that sleep is most restorative (compared to sleeping during other times of the day). A provision included in the FY2016 THUD appropriations act prohibited enforcement of the new requirements,",
      " returning the rule to what it was prior to June 2013, unless a study required by Section 133 of Division K of P.L. 113-235 (the FY2015 THUD act) finds that commercial drivers operating under the new restart provisions showed \"statistically significant improvement in all outcomes related to safety, operator fatigue, driver health and longevity, and work schedules.\" This is slightly different than the original standard set in the FY2015 DOT appropriations act, P.L. 113-235, which set as the standard whether the study showed a \"greater net benefit for the operational, safety, health and fatigue impacts of the restart provisions.\" The Senate bill would have made a technical correction to the provision in the FY2016 THUD bill.",
      " It also would have provided that, should the results of the study be such that the rule changes implemented in 2013 are rolled back, the maximum work time for a driver would be 73 hours in a seven-day period (down from the potential 82 hours calculated by FMCSA). FMCSA published a cost-benefit analysis in the final rule that implemented the 2013 changes, which found that the changes were cost-beneficial, but critics of the changes said that the costs were greater than FMCSA had estimated. FMCSA submitted the new study to Congress at the beginning of March 2017; it found that the 2013 rule changes did not result in significant safety benefits.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 25,
    "question": null,
    "answer": "U.S. immigration policy is governed largely by the Immigration and Nationality Act (INA), which was first codified in 1952 and has been amended significantly several times since. At a fundamental level, U.S. immigration policy can be viewed as two sides of a coin. One side emphasizes the faciliation of migration flows into the United States according to principles of admission that are based upon national interest. These broad principles currently include family reunification, labor market contribution, humanitarian assistance, and origin-country diversity. The United States has long distinguished permanent immigration from temporary migration. Permanent immigration occurs through family and employer-sponsored categories, the diversity immigrant visa lottery, and refugee and asylee admissions. Temporary migration occurs through the admission of visitors for specific purposes and limited periods of time, and encompasses two dozen categories of visitors, including foreign tourists, students, temporary workers, and diplomats.  The other side of the immigration policy coin emphasizes the restriction of entry to and removal of persons from the United States who lack authorization to reside in the country, are identified as criminal aliens, or whose presence in the United States is not considered to be in the national interest. Such immigration enforcement is broadly divided between border enforcement\u2014at and between ports of entry\u2014and other enforcement tasks including detention, removal, worksite enforcement, and combatting immigration fraud.  The dual role of U.S. immigration policy creates challenges for balancing major policy priorities, such as ensuring national security, facilitating trade and commerce, protecting public safety, and fostering international cooperation.\n",
    "docs": [
      "Introduction This report provides a broad overview of U.S. immigration policy. The first section addresses policies governing how foreign nationals enter the United States either to reside permanently or to stay temporarily. Related topics within this section include visa issuance and security, forms of quasi-legal status, and naturalization. The second section discusses enforcement policies both for excluding foreign nationals from admission into the United States, as well as for detaining and removing those who enter the country unlawfully or who enter lawfully but subsequently commit crimes that make them deportable. The section also covers worksite enforcement and immigration fraud. The third section addresses policies for unauthorized aliens residing in the United States.",
      " While intended to be comprehensive, this primer may omit some immigration-related topics. It does not discuss policy issues or congressional concerns about specific immigration-related policies and programs.  Immigration Inflows and Related Topics U.S. immigration policy is governed largely by the Immigration and Nationality Act (INA), which was first codified in 1952 and has been amended significantly several times since. Implementation of INA policies is carried out by multiple executive branch agencies. The Department of Homeland Security (DHS) has primary responsibility for immigration functions through several agencies: U.S. Citizenship and Immigration Services (USCIS), Customs and Border Protection (CBP), and Immigration and Customs Enforcement (ICE). The Department of State (DOS)",
      " issues visas to foreign nationals overseas, and the Department of Justice (DOJ) operates immigration courts through its Executive Office of Immigration Review (EOIR). Foreign-born populations with different legal statuses are referred to throughout this report. The term a liens refers to people who are not U.S. citizens, including those legally and not legally present. The two basic types of legal aliens are (1) immigrants (not including refugees and asylees) and (2) nonimmigrants. Im mi grant s refers to foreign nationals lawfully admitted to the United States for permanent residence. N onimmigrant s refers to foreign nationals temporarily and lawfully admitted to the United States for a specific purpose and period of time,",
      " including tourists, diplomats, students, temporary workers, and exchange visitors, among others. Refugees and asylees refer to persons fleeing their countries because of persecution, or a well-founded fear of persecution, on account of race, religion, nationality, membership in a particular social group, or political opinion (see \" Refugees and Asylees \"). Refugees and asylees are not classified as immigrants under the INA, but once admitted, they may adjust their status to lawful permanent resident (LPR). Na turalized citizens refers to LPRs who become U.S. citizens through a process known as naturalization (described below), generally after residing in the United States continuously for at least five years.",
      " Noncitizen s are persons who have not naturalized and may include immigrants as well as nonimmigrants.  U nauthorized alie ns refers to foreign nationals who reside unlawfully in the United States and who either entered the United States illegally (\"without inspection\") or entered lawfully and temporarily (\"with inspection\") but subsequently violated the terms of their admission, typically by \"overstaying\" their visa duration.  Permanent Immigration5  Four general principles underlie the current system of permanent immigration: family reunification, U.S. labor market contribution, origin-country diversity, and humanitarian assistance. These principles are reflected in different components of permanent immigration.",
      " Family reunification occurs primarily through family-sponsored immigration. U.S. labor market contribution occurs through employment-based immigration. Origin-country diversity is addressed through the Diversity Immigrant Visa. Humanitarian assistance occurs primarily through the U.S. refugee and asylee programs. These permanent immigration pathways are discussed further below. The INA limits worldwide permanent immigration to 675,000 persons annually: 480,000 family-sponsored immigrants, made up of family-sponsored immediate relatives of U.S. citizens (\"immediate relatives\"), and a set of ordered family-sponsored preference immigrants (\"preference immigrants\"); 140,000 e mployment-based immigrants ; and 55,000 diversity visa immigrants.",
      " This worldwide limit, however, is referred to as a \"permeable cap\" because immediate relatives are exempt from numerical limits placed on family-sponsored immigration (described below) and thereby represent the flexible component of the 675,000 worldwide limit. In addition, the annual number of refugees is determined not by statute but by the President, in consultation with Congress. Consequently, actual total annual LPRs (immigrants, refugees, and asylees) have averaged roughly 1 million persons during the past decade. To ensure that a few countries do not dominate permanent immigration flows, the INA further specifies a \"per-country limit\" or \"cap\"",
      " limiting the number of family-sponsored preference immigrants and all employment-based immigrants from any single country to 7% of the limit in each preference category.  Family-Sponsored Immigration Family-sponsored immigration consists of two immigrant groups ( Table 1 ). I m mediate relative s include spouses and minor unmarried children of U.S. citizens and parents of adult U.S. citizens. An unlimited number of immediate relatives can acquire LPR status each year if they meet the standard eligibility criteria required of all immigrants. Pre ference immigrants, on the other hand, are numerically limited to 226,000 per year and, unlike immediate relatives, are also bounded by the 7%",
      " per-country limit. In recent years, family-sponsored immigrants have accounted for two-thirds of all permanent immigration. Employment-Based Immigration Employment-based immigration occurs through five numerically limited preference categories ( Table 2 ), the first three of which are ranked by professional accomplishment and ability. The fourth preference category includes various \"special immigrants,\" and the fifth preference category includes immigrant investors (i.e., EB-5 visa holders), a category created in 1990 to benefit the U.S. economy through employment creation and capital investment. Employment-based immigrants include accompanying spouses and children of qualifying LPRs, are limited to 140,000 total annual admissions, and are subject to the same 7%",
      " per-country limit as family-sponsored preference immigrants.  Visa Queue The number of foreign nationals seeking to immigrate to the United States each year through family-sponsored and employment-based preference categories typically exceeds the INA-mandated numerical limits. Prospective immigrants are further constrained by the 7% per-country cap that primarily impacts foreign nationals from countries that send many immigrants to the United States (e.g., Mexico, China, India, Philippines). As a result, many foreign nationals who meet the U.S. immigrant qualifications and whose petitions have been approved by USCIS must wait years before a numerically limited visa from DOS becomes available.  When a visa becomes available,",
      " it allows an approved prospective immigrant to travel to the United States and, if admitted to the country by an immigration officer at a port of entry, receive LPR status. If the approved prospective immigrant already resides in the United States on a nonimmigrant visa, the availability of a visa allows him or her to \"adjust status\" (i.e., change from a temporary nonimmigrant to a permanent immigrant with LPR status) without having to return to the country of origin to complete visa processing through a DOS consulate. As of November 1, 2017, the queue of approved family-sponsored and employment-based immigrants waiting for visas numbered 4.",
      "1 million persons. Diversity Immigrant Visa  The diversity immigrant visa fosters legal immigration from countries that send relatively few immigrants to the United States. Each year, 50,000 visas are made available to selected natives of countries from which immigrant admissions totaled less than 50,000 over the preceding five years. Since the visa's inception in the early 1990s, the regional distribution of diversity lottery immigrants has shifted from Western European to African and Eastern European countries. To be eligible for a diversity immigrant visa, foreign nationals must have a high school education or two years of work experience within the past five years in an occupation that requires at least two years of training or experience to perform.",
      " Diversity immigrant visa applicants are selected by lottery. Winners of the diversity immigrant visa lottery must also meet the standard eligibility criteria required for most immigrants. Refugees and Asylees The United States has long held to the principle that it will not return a foreign national to a country where his or her life or freedom would be threatened. This is embodied in several INA provisions, notably in those defining refugees and asylees. A refugee is a person who is outside his or her home country (a second country that is not the United States) and is unable or unwilling to return because of persecution, or a well-founded fear of persecution, on account of five possible criteria:",
      " (1) race, (2) religion, (3) nationality, (4) membership in a particular social group, or (5) political opinion. An asylee is a person who meets the definition of a refugee in terms of persecution or a well-founded fear of persecution but who has been admitted in the United States or is present at a land border or port of entry to the United States. Refugee status is granted within numerical limits. Refugee admissions differ from other immigrant admissions because their annual number, known as the refugee ceiling, and their allocation by world region are not mandated in statute but set each year by the President, in consultation with Congress.",
      " For FY2018, the worldwide refugee ceiling was set at 45,000, allocated among world regions (Africa, East Asia, Europe and Central Asia, Latin America/Caribbean, and Near East/South Asia).  Asylum is granted on a case-by-case basis and is not numerically limited. An alien in the United States may \"affirmatively\" apply to USCIS for asylum or may \"defensively\" seek asylum before an immigration judge during proceedings that determine an individual's removability under the INA. Typically, aliens arriving at a U.S. port of entry who lack proper immigration documents for admission or who engage in fraud or misrepresentation are placed in expedited removal (described below); however,",
      " if they express a fear of persecution, they receive a \"credible fear\" review by a USCIS asylum officer and\u2014if found to have credible fear\u2014are referred to an immigration judge for a hearing. Other Pathways to Lawful Permanent Resident Status  In addition to the primary components of permanent immigration discussed above, there are several other pathways to LPR status, though they account for relatively few immigrants. The most prominent among these are c ancellation of r emoval, U nonimmigrant visas, and T status. Cancellation of r emoval is a discretionary, case-by-case form of relief granted by an immigration judge to aliens in removal proceedings.",
      " To receive it, an alien must demonstrate substantial ties to the United States, be of good moral character, and not have been convicted of a crime that makes him or her removable. More specific requirements differ by legal status. Because an immigration judge grants cancellation of removal at his or her discretion, no fixed standard exists for who merits relief. The alien must show that he or she is eligible for and deserves the relief. Grants of cancellation of removal are limited to 4,000 LPRs and 4,000 nonpermanent residents per year. U nonimmigrant visas are granted to certain victims who help law enforcement agencies investigate and prosecute domestic violence,",
      " sexual assault, human trafficking, and other crimes. After meeting specific requirements, U visa recipients, as well as their immediate family members, can acquire LPR status. The INA limits U visas to 10,000 per year. T status is granted to alien victims of severe forms of human trafficking. T status recipients may remain in the United States for four years and apply for LPR status after three. To qualify for T status, trafficking victims must also (1) be physically present in the United States, its territories, or a U.S. port of entry either because of such trafficking or to participate in related investigations or prosecutions; (2)",
      " have complied with requests to assist law enforcement investigating or prosecuting trafficking acts; and (3) be likely to suffer unusual and severe harm upon removal. Such aliens must also be admissible to the United States or obtain a waiver of inadmissibility. The INA limits T status to 5,000 principal aliens annually. Requirements for Permanent Admissions To obtain LPR status, prospective immigrants must traverse a multistep process through several federal departments and agencies. If they already reside legally in the United States, obtaining LPR status involves adjusting from a temporary nonimmigrant status to lawful permanent resident status. If they live abroad and have not established a lawful residence in the United States,",
      " their petitions are forwarded to DOS's Bureau of Consular Affairs in the home country after they have been adjudicated and approved by USCIS. The consular officer (when the alien lives abroad) and USCIS adjudicator (when the alien is adjusting status within the United States) must be satisfied the alien is entitled to the immigrant status. These reviews are intended to ensure that prospective immigrants are not ineligible for visas or admission under the INA's grounds for inadmissibility (see section on \" Visa Issuance and Security \"). Temporary Admissions Each year, the United States admits millions of nonimmigrants, including tourists, foreign students, diplomats,",
      " temporary workers, exchange visitors, internationally known entertainers, foreign media representatives, intracompany business personnel, and crew members on foreign vessels. DOS issues 87 specific types of nonimmigrant visas within 24 major nonimmigrant visa categories. Categories are often referred to by the letter and numeral denoting their subsection within INA Section 101(a) (e.g., B-2 tourists, E-2 treaty investors, F-1 foreign students). Requirements for Temporary Admission  Foreign nationals who apply for temporary admission must demonstrate, both to DOS consular officers at the time they apply for a visa in their home countries, as well as to CBP officers when they apply for admission upon arrival in the United States,",
      " that they are eligible for both nonimmigrant status and the specific requested nonimmigrant visa. In addition, because the INA presumes that all aliens seeking admission to the United States are coming to live permanently, nonimmigrant applicants must demonstrate that they intend to stay for a temporary period and a specific purpose. With certain exceptions, nonimmigrants are prohibited from working in the United States. In recent years, the most numerous nonimmigrants entering the United States have included B-1 business visitors; B-2 tourists; Border Crossing Card holders; L intracompany transferees employed with international firms; H-1B professional specialty workers;",
      " H-2A agricultural guest workers and H-2B nonagricultural guest workers; J cultural exchange visitors (including professors, students, foreign medical graduates, teachers, resort workers, camp counselors, and au pairs); and F foreign students. Visa Waiver Program The Visa Waiver Program (VWP) allows nationals from certain (mostly high income) countries to enter the United States as temporary visitors for business or pleasure without obtaining visas from U.S. consulates abroad. Those entering the country under the VWP undergo a biographic (e.g., name, address, date of birth) rather than a biometric (e.g., fingerprint)",
      " security screening and do not need to be interviewed by a U.S. government official before their trip. In FY2016, roughly 18.7 million pleasure and 3.1 million business visitors entered the United States using the VWP. Border Crossing Card Mexican citizens who live in Mexico and who are admissible as B-1 business or B-2 tourist visitors can apply for a border crossing card (BCC) to gain short-term entry into the United States. In FY2017, roughly 1.1 million Mexican nationals were issued border crossing cards. The BCC may be used for multiple entries and is valid usually for 10 years.",
      " Current rules limit BCC holders to visits of up to 30 days within a zone of 25 miles along the border in Texas and California, 55 miles along the New Mexico border, and 75 miles along the Arizona border. U.S. admissions from persons possessing border crossing cards in FY2016 totaled 101.9 million. Visa Issuance and Security All nonresident foreign nationals who wish to come to the United States, whether permanently or temporarily, must obtain a visa. A visa permits a foreign national to travel to a U.S. port of entry and request permission from CBP to enter the country. To obtain a visa,",
      " foreign nationals must establish their qualification for a specific visa under its admission criteria. Visa issuances to the United States can be denied under three INA provisions:  insufficient information under INA Section 221(g); the grounds of inadmissibility under INA Section 212(a); and for nonimmigrant applicants, the presumption of seeking permanent residence under INA Section 214(b). Visa applications must be complete. A visa denial under INA Section 221(g) indicates that the DOS consular officer abroad lacks sufficient information to determine if a foreign national is eligible to receive a visa. A consular officer may also disqualify a visa applicant if (1)",
      " he or she knows or has reason to believe that the alien is inadmissible under INA Section 212(a) (described below) or any other provision of law; or (2) the application fails to comply with INA provisions or regulations.  All foreign nationals must undergo admissibility reviews. Consular officers must decide whether a foreign national is excludable under the grounds in INA Section 212(a), which include the following: health-related grounds; criminal grounds; security and terrorist concerns; public charge risk (e.g., indigence); seeking to work without proper labor certification; illegal U.S. entry and U.S.",
      " immigration law violations; ineligibility for U.S. citizenship; and having been previously removed from the United States. The INA describes procedures for making and reviewing an inadmissibility determination, and specifies conditions under which some of these provisions may be waived.  For nonimmigrant applicants, a visa denial under INA Section 214(b) indicates that the foreign national was unable to demonstrate to the consular officer that he or she had sufficient ties to his or her home country to return home. This is the most common reason that DOS denies nonimmigrant visas. All visa applicants are required to submit their photographs, fingerprints, and biographic and demographic information.",
      " All prospective LPRs and certain prospective nonimmigrants must also submit to physical and mental examinations. Visa applicants are checked against multiple databases and information sources for security purposes. Consular officers' decisions on whether or not to grant foreign nationals a visa are not subject to judicial appeals. Types of \"Quasi-legal\" Status Two immigration mechanisms that allow persons to remain legally in the United States without being legally admitted into the country, Temporary Protected Status and parole, are described below. Other options, including Deferred Enforced Departure, withholding of removal, and deferred action, are described in later sections of this report. Temporary Protected Status When extraordinary conditions such as civil unrest,",
      " violence, or natural disasters occur in foreign countries, foreign nationals from those places who are present in the United States may not be able to return home safely. The INA allows DHS, in consultation with DOS, to grant Temporary Protected Status (TPS) to such foreign nationals, provided that doing so is consistent with U.S. national interests. Congress has also provided TPS legislatively.  While TPS beneficiaries may obtain employment authorization, TPS does not provide a path to LPR status. DHS can designate TPS for 6 to 18 months and may extend it if conditions do not change in the designated country. Based on the most recent designations for each country,",
      " there are an estimated 317,600 TPS recipients from 10 countries: El Salvador, Haiti, Honduras, Nepal, Nicaragua, Somalia, Sudan, South Sudan, Syria, and Yemen. Parole DHS may, at its discretion and on a case-by-case basis, \"parole\" an alien into the United States for urgent humanitarian reasons or significant public benefit. Parole does not constitute formal admission to the United States and is not classified as a formal immigration status (e.g., nonimmigrant, immigrant). It is granted for a specified period of time. Parolees may obtain employment authorization but must leave when the parole expires or,",
      " if eligible, be admitted in a lawful status. Naturalization Under U.S. immigration law, all LPRs may become U.S. citizens through a process known as naturalization. With some exceptions, aliens must do the following to naturalize: reside continuously in the United States as LPRs for five years; demonstrate that they possess good moral character; demonstrate basic English skills and knowledge of U.S. history and civics; and take an oath of allegience to the United States. An estimated 43.7 million foreign-born persons resided in the United States in 2016, roughly divided between 21.2 million (49%) naturalized citizens and 22.",
      "5 million (51%) noncitizens. Immigration Enforcement Immigration enforcement encompasses enforcement of the INA's civil provisions (e.g., violations of admission conditions) as well as its criminal provisions (e.g., marriage fraud, alien smuggling). It involves border security where foreign nationals enter the United States (at ports of entry) and along U.S. borders (between ports of entry), as well as enforcing immigration laws in the U.S. interior, including worksite enforcement. Immigration enforcement also involves the identification, investigation, apprehension, prosecution, and deportation of foreign nationals who violate U.S. laws and become removable. Border Security at Ports of Entry Foreign nationals arrive in the United States at one of 329 ports of entry (POEs), including land checkpoints,",
      " airports, and seaports. They are met by CBP officers whose primary immigration enforcement mission is to ensure that such travelers are eligible to enter the United States and to exclude inadmissible foreign nationals. Possession of a visa by a foreign national does not guarantee U.S. admission if a CBP officer finds the individual inadmissible under law.  About 390 million travelers (citizens and noncitizens) entered the United States in FY2016, including roughly 251\u00a0million land travelers, 119 million air passengers and crew, and 20 million sea passengers and crew. During the same period, about 274,",
      "000 aliens were denied admission and 21,000 aliens were arrested on criminal warrants. To balance facilitating the flow of lawful travelers with the competing interest of ensuring border security and immigration enforcement, DHS relies on a risk management strategy that includes screening at multiple points in the immigration process, beginning well before travelers arrive at U.S. POEs. DHS and other departments involved in the \"inspection\" process use screening tools to distinguish known, low-risk travelers who may be eligible for expedited admissions processing from lesser-known, higher-risk travelers who are usually subject to more extensive secondary inspections.  DHS is also responsible for implementing an electronic entry-exit system at POEs,",
      " a task Congress mandated in 1996. While CBP collects a portion of the requisite biographic and biometric data from noncitizens at various stages of their entry to and exit from the United States, implementation of a fully automated biometric system has proven challenging.  Border Security Between Ports of Entry Border security between POEs focuses on unauthorized land border entry into the United States, which has been a concern for Congress since the 1970s, when unauthorized migration first registered as a major national issue. It has received greater attention since the September 11, 2001, terrorist attacks. CBP's unauthorized migration control strategy between POEs has involved \"prevention through deterrence,\" or concentrating personnel,",
      " infrastructure, and surveillance technology along heavily trafficked border regions. More recently, CBP's strategy has involved \"enforcement with consequences,\" which includes making migrants who commit crimes face criminal charges and incur penalties (including incarceration) prior to removal. For Mexican nationals, this can include repatriation to Mexican locations geographically remote from where migrants were apprehended. Criminal charges, penalties, and formal removal generally bar migrants from legally entering the United States for varying lengths of time. Remote repatriation is intended to disrupt migrant smuggling networks and reduce the likelihood that removed migrants will reenter the country illegally. The United States has substantially increased appropriations for personnel,",
      " fencing, infrastructure, and surveillance technology for border enforcement over the last three decades, particularly after 2001. Since receiving authorization from Congress in 1996, DHS has built 653 miles of several types of barriers along the U.S.-Mexico border. CBP also employs land-based, aerial, and marine surveillance technologies.  The most widely cited metric of border security is unauthorized migrant apprehensions, which are usually positively related to the flow of unauthorized migrants. Annual apprehensions were relatively low in the 1960s, climbed sharply after 1965, and reached peaks of roughly 1.7 million in both 1986 and 2000.",
      " They have fallen since then to 310,531 apprehensions in FY2017. The extent to which reduced inflows resulted from more effective enforcement rather than other factors, like the U.S. economic downturn in the late 2000s, remains subject to debate. Detention U.S. law provides broad authority to detain foreign nationals awaiting the outcomes of their removal proceedings. The law mandates detention for certain categories of aliens, including those arriving to the United States with fraudulent or no documentation; who are inadmissible or deportable on criminal or national security grounds; who are certified as terrorist suspects; or with final orders of deportation (with some limitations).  Detention priorities are specified in statute and regulations and have been expanded legislatively in recent years.",
      " Other detained aliens include persons who are arrested for being illegally present in the United States. Most detained aliens are quickly returned to their country of origin through a process known as expedited removal (described below). Aliens not subject to mandatory detention may be either detained, paroled, or released on bond. DHS detained 352,880 noncitizens during FY2016. The amount of detention space, which has increased from 21,100 beds in FY2002 to 34,000 beds in FY2016, is controlled almost exclusively through congressional appropriations. In FY2016, almost all detained aliens had been prioritized for removal because they had committed specific felony crimes,",
      " multiple misdemeanors, or specific immigration violations targeted by ICE.  The U.S. Supreme Court has ruled that the detention of unauthorized foreign nationals generally may not last beyond six months. In addition, ICE must obtain travel documents to repatriate foreign nationals. Because some countries refuse to provide such documents or do so in a protracted manner, ICE has regularly released sizeable numbers of detainees following their full detention term, including criminal aliens\u2014an outcome that has been criticized repeatedly by some Members of Congress.  Removal Removing foreign nationals who violate U.S. immigration laws is central to immigration enforcement, and the INA provides broad authority to DHS and DOJ to remove certain foreign nationals from the country.",
      " This includes unauthorized aliens as well as lawfully present foreign nationals who commit certain acts that make them removable. Any foreign national found to be inadmissible (either before or after U.S. entry) or deportable under grounds specified in the INA may be ordered removed.  To remove a lawfully admitted alien, the U.S. government must prove that the noncitizen has violated one of the following six grounds of deportation specified in INA Section 237(a): being inadmissible at the time of entry or violating one's immigration status; committing certain criminal offenses, including crimes of \"moral turpitude,\" aggravated felonies, alien smuggling,",
      " and high-speed flight from an immigration checkpoint; failing to register with DHS (if required) or committing document fraud; being a security risk (including violating any law relating to espionage, engaging in criminal activity that endangers public safety, partaking in terrorist activities, or assisting in Nazi persecution or genocide); becoming a public charge within five years of entry; or voting unlawfully.  The INA describes procedures for making and reviewing a removal determination, and specifies conditions under which certain grounds of removal may be waived. DHS officials may exercise some discretion in pursuing removal orders, and certain removable aliens may be eligible for permanent or temporary relief from removal. Other grounds for removal (e.g., criminal,",
      " terrorist) render foreign nationals ineligible for most forms of relief and may make them subject to more streamlined (expedited) removal processes, both at the U.S. border and within the U.S. interior. Under the standard removal process, an immigration judge from EOIR determines in a civil judicial proceeding whether an alien is removable. The immigration judge may grant certain forms of relief (e.g., asylum, cancellation of removal), and removal decisions are subject to administrative and judicial review.  Under streamlined removal procedures, including expedited removal and reinstatement of removal (i.e., when DHS reinstates a removal order for a previously removed alien), opportunities for relief and review are generally limited.",
      " Under expedited removal (INA \u00a7235(b)), an alien who lacks proper documentation or has committed fraud or willful misrepresentation to gain admission into the United States is inadmissible. That individual may be removed without any further hearings or review, unless he or she indicates an intention to apply for asylum.  Two other removal options that are often referred to as \"returns\"\u2014 voluntary departure and withdrawal of petition for admission \u2014require aliens to leave the United States promptly but exempt them from certain penalties associated with other types of removal. Following an order of removal, an alien is generally ineligible to return to the United States for a minimum of five years and possibly longer depending on the reason for and type of removal.",
      " Absent other factors, unlawful presence in the United States is a civil violation, not a criminal offense, and removal and its associated administrative processes are civil proceedings. As such, aliens in removal proceedings generally have no right to free government-provided counsel, although they may obtain counsel at their own expense. Programs Targeting Criminal Aliens Although all unauthorized aliens are potentially subject to removal, the removal of criminal aliens (noncitizens who have been convicted of a crime in the United States) has been a statutory priority since 1986. Programs targeting criminal aliens for removal have grown substantially since DHS was established in 2002. ICE currently operates several programs that identify and remove criminal and other removable aliens,",
      " including the Criminal Alien Program (CAP), an umbrella program for coordinating the agency's resources. CAP includes a data sharing infrastructure, or \"interoperability,\" between DHS and DOJ that screens for both immigration and criminal violations when individuals are booked into jail.  To pursue known at-large criminal aliens and fugitive aliens outside of controlled settings (i.e., administrative offices or custodial settings), ICE uses the National Fugitive Operations Program (NFOP). In addition to programs using DHS personnel, ICE's Section 287(g) program allows DHS to delegate certain immigration enforcement functions to specially trained state and local law enforcement officers, under federal supervision.  Options for Aliens in Removal Proceedings Provisions in the INA permit certain removable aliens to remain in the United States,",
      " either permanently or temporarily. Options that provide permanent relief by conferring or leading to lawful permanent resident status include cancellation of removal (discussed above) and \"defensive\" asylum applied for during removal proceedings. Options that provide temporary relief include withholding of removal, the Convention Against Torture, Deferred Enforced Departure, and deferred action (described below).  Worksite Enforcement The INA prohibits the employment of individuals who lack work authorization. Its provisions, sometimes referred to as employer sanctions, make it unlawful for an employer to knowingly hire, recruit or refer for a fee, or continue to employ an alien who is not authorized to be so employed.",
      " ICE's worksite enforcement program primarily targets cases involving critical infrastructure or employers who commit \"egregious\" violations of criminal statutes and engage in worker exploitation. Employers who violate prohibitions on unauthorized employment may be subject to civil monetary penalties and/or criminal penalties.  Combatting Immigration Fraud There are two general types of immigration fraud: document fraud and benefit fraud. Some view immigration fraud as a continuum of events, because people may commit document fraud to engage in benefit fraud. The INA addresses immigration fraud in several ways. It makes \"misrepresentation\" (e.g., obtaining a visa by falsely representing a material fact or entering the United States by falsely claiming U.S.",
      " citizenship) a ground for inadmissibility. The INA also has civil enforcement provisions, distinct from removal or inadmissibility proceedings, to prosecute individuals and entities that engage in immigration document fraud. Apart from the INA, the U.S. Criminal Code classifies knowingly producing or using fraudulent immigration documents (e.g., visas, border crossing cards) as criminal offenses.  In addition to relying on document inspection to determine if noncitizens are eligible for federal benefits, USCIS operates the Systematic Alien Verification for Entitlements (SAVE) system, which provides federal, state, and local government agencies access to data on immigration status. USCIS does not determine benefit eligibility;",
      " rather, SAVE enables program administrators to ensure that only those noncitizens and naturalized citizens who meet their own programs' eligibility rules actually receive public benefits. Unauthorized Aliens Determining how to address the unauthorized alien population residing in the United States has arguably been among the most divisive immigration issues facing Congress. Unauthorized aliens consist of those who (1) entered the country surreptitiously without inspection, (2) were admitted on the basis of fraudulent documents, or (3) overstayed their nonimmigrant visas. In all three instances, the aliens violated the INA and may be removed. Aliens who attempt to enter the United States illegally and those who assist them also are subject to INA-mandated penalties.",
      " Because the exact number of unauthorized aliens residing in the United States remains unknown, demographers have developed methods to estimate their population size and characteristics. According to the most recent and widely cited estimates available, the size of the unauthorized alien population increased from 8.6 million in 2000 to a peak of 12.2 million in 2007. It has fluctuated between 11.0 and 11.5 million since that time. Scholars attribute the general decline and changing country-of-origin composition in illegal migration flows in recent years to increased border security, relatively large numbers of alien removals, high U.S. unemployment, crime in Central America,",
      " and other factors. Options proposed for addressing the unauthorized alien population often emphasize reducing its size. Some approaches would require or encourage unauthorized aliens to depart the United States. Other strategies would grant qualifying unauthorized residents various immigration benefits, including an opportunity to obtain legal immigration status. Immigration Law Regarding Unauthorized Aliens Federal law places various restrictions on unauthorized aliens. In general, they have no legal right to live or work in the United States and are subject to removal from the country. At the same time, the INA provides limited forms of immigration relief for some unauthorized aliens to be legally admitted to the country, including crime victims or those seeking asylum. Unauthorized aliens who were present illegally in the United States for between 6 and 12 months are barred from readmission to the United States for 3 years,",
      " and those present for more than 1 year are barred for 10 years (the \"3- and 10-year bars\"). Deferred Action For unauthorized aliens who cannot obtain LPR status, existing mechanisms enable some to remain in the United States. One such mechanism, deferred action, is defined by DHS as \"a discretionary determination to defer removal action of an individual as an act of prosecutorial discretion.\" Deferred action is not an immigration status and does not have a statutory authority; it is a form of administrative discretion. Examples of deferred action may include DHS terminating removal proceedings, declining to initiate removal proceedings, or declining to execute a final order of removal.",
      " Approval of deferred action means that no action will be taken against a removable\u00a0alien for a specified time or in some cases indefinitely. Under the Deferred Action for Childhood Arrivals (DACA) initiative begun by DHS in June 2012, certain individuals without a lawful immigration status who were brought to the United States as children and who meet other criteria may be granted deferred action for two years, subject to renewal. DACA recipients can apply for employment authorization but are not afforded a pathway to a legal immigration status. DACA was initiated not by congressional legislation but by the Obama Administration. The Trump Administration announced the planned rescission of the DACA initiative on September 5,",
      " 2017, but due to federal court orders enjoining the rescission, DACA remains in effect pending the outcome of further litigation.\n"
    ],
    "length": 7538,
    "hardness": null,
    "role": null
  },
  {
    "id": 26,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed states efforts to improve the permanency planning process and reduce the time a child spends in foster care, focusing on what: (1) statutory and policy changes states have made to limit the time allowed to determine permanent placements for foster children; (2) changes states or localities have made in their operations in an attempt to achieve more timely permanent placements and what the impact of those changes has been; and (3) factors officials believe helped them meet the challenges of achieving more timely permanent placements. GAO noted that: (1) signaling the importance of a permanent placement to the well-being of children, 23 states have enacted laws establishing requirements regarding the timing of the permanency hearing that are more stringent than those under federal law; (2) federal law requires a hearing within 18 months after the child's entry into foster care; (3) an additional three states, while not enacting such statutes, have imposed similar requirements as a matter of policy; (4) statutory or policy changes alone, however, are not sufficient to resolve the final placement of foster children more quickly; (5) the states GAO reviewed have made changes in their operations to facilitate reunifying children with their families, expedite terminating parental rights when reunification efforts have failed, or modify the role and operations of the court both to streamline the process and to make well-informed permanent placement decisions; (6) while these initiatives focus on certain stages of the permanency planning process, such as when a child first enters foster care, two states are implementing major changes to their overall foster care systems; (7) although initiatives are in place, most of these states have not systematically evaluated the impact of them, and data concerning these efforts were limited; (8) however, most states did report that many of these initiatives contributed to reducing the time spent in foster care or decreasing the total number of placement changes while a child is in foster care; (9) state officials identified a number of factors that helped them meet the challenges involved in making changes; (10) in some cases, child welfare officials and staff had to undergo significant culture change, modifying long-held views about the merits of pursuing termination of parental rights versus family reunification; (11) they found that changing the way they approached making decisions about the well-being of children and their families was a lengthy process; (12) to implement these initiatives successfully, program officials believed that it was necessary to have the long-term and active involvement of key officials at all levels, including the governor, legislators, and agency officials as well as caseworkers, service providers, attorneys, and judges; (13) this participation was essential to define the problem and reach consensus; and (14) doing so required considerable coordination efforts and an extended commitment of resources.\n",
    "docs": [
      "Background State child welfare systems consist of a complicated network of policies and programs designed to protect children. Today, these systems must respond to growing numbers of children from families with serious and multiple problems. Many of these families also need intensive and long-term interventions to address these problems. With growing caseloads over the past decade, the systems\u2019 ability to keep pace with the needs of troubled children and their families has been greatly taxed. In addition, the continued growth in caseloads expected over the next few years will give child welfare agencies little relief. When parents or guardians are unable to care for their children, state child welfare agencies face the difficult task of providing temporary placements for children while simultaneously working with a wide array of public and private service providers,",
      " as well as the courts, to determine the best long-term placement option. The permanency planning process is guided by federal statute and typically occurs in stages requiring considerable time. Finding an appropriate placement solution is extremely difficult because it often involves numerous steps and many different players. In each case, states must make reasonable efforts to prevent the placement of a child in foster care. If the child must be removed from the home, states are required under the Adoption Assistance and Child Welfare Act to take appropriate steps to make the child\u2019s safe return home possible. Once removed, if reunification with the parents cannot be accomplished quickly, a child will be placed in temporary foster care while state child welfare agencies and community service providers continue to work with the parents in hope of reunification.",
      " To be eligible for federal funding, the state must demonstrate to the appropriate court that it has made reasonable efforts to prevent out-of-home placement and to reunify the family. Federal law further requires that placement be as close as possible to the parent\u2019s home in the most family-like setting possible. To guide the permanency planning process by which a state is to find permanent placements for foster care children, the act also requires that the state develop a case plan for each child within 60 days of the time the state agency begins providing services to the child. This plan must describe services to be provided to aid the family and must outline actions that will be expected of various agencies and family members to make reunification possible.",
      " States are then required to hold reviews every 6 months before a court or administrative panel to evaluate progress made toward reaching a permanency goal. If progress toward reunification cannot be made, state agencies often face the arduous task of either preparing a case for the termination of parental rights or finding a long-term foster care placement. The federal requirement of conducting a permanency hearing within 18 months serves to ensure that child welfare agencies focus on determining a permanent placement, including return to the family or adoption, in a timely manner rather than continuing a child in foster care. For abused and neglected children, living with their parents may be unsafe. Yet foster care is not an optimal situation,",
      " especially not as a permanent solution. State child welfare agencies and the courts are confronted with the dilemma of whether to reunite families as quickly as possible or keep the children in foster care with the expectation of future reunification. They must also determine at what point to abandon hope of reunification, terminate the parents\u2019 rights, and initiate a search for an adoptive home or other permanent placement for the child. If children are reunited with their families too quickly, they may return to foster care because the home environment may still be unstable. On the other hand, when children remain in foster care too long, it is difficult to reestablish emotional ties with their families.",
      " Furthermore, the chances for adoption can be reduced because the child is older than the most desirable adoption age or has developed behavioral problems. Determining an appropriate placement option for children quickly is of twofold importance. First, finding permanent placements for children removed from their families is critical to ensure their overall well-being. Children without permanent homes and stable caregivers may be more likely to develop emotional, intellectual, and behavioral problems. A second reason for placing children more quickly is the financial costs of children remaining in foster care. The federal share of the average monthly maintenance payment for title IV-E was $574 in 1996. While some options for permanent placements,",
      " such as providing long-term support to a relative to care for a child, may not realize cost savings, other options, such as adoption, will reduce foster care costs. Title IV-E payments, between fiscal years 1984 and 1996, increased from $435.7 million to an estimated $3.1 billion. Statutory and Policy Changes Require States to Hold First Permanency Hearing Sooner The prolonged stays of children in foster care have prompted states to enact laws or policies to shorten to less than the federally allowed 18 months the time between entry into foster care and the first permanency hearing at which permanent placement is considered.",
      " As shown in figure 1, 23 states have enacted such laws, with a majority of these requiring the hearing to be held within 12 months. In two states, the shorter time frame applies only to younger children. Colorado requires the permanency hearing be held within 6 months for children under 6, and Washington requires the hearing to be held within 12 months for children 10 years old or younger. An additional three states, while not enacting such statutes, have policies requiring permanency hearings earlier than 18 months. For a description of the 26 state statutes, policies, and time requirements, see appendix II. The remaining 24 states and the District of Columbia have statutes consistent with the federal requirement of 18 months.",
      " The state laws, like federal law, do not require that a final decision be made at the first hearing. Ohio and Minnesota, however, do require that a permanency decision be determined after a limited extension period. Ohio, for example, requires a permanency hearing to be held within 12 months, with a maximum of two 6-month extensions. At the end of that time, a permanent placement decision must be made. According to officials in Ohio\u2019s Office of Child Care and Family Services, this requirement was included in an effort to expedite the permanency planning process and reduce the time children spend in foster care. However, state officials also believed that this requirement may have had the unintended result of increasing the number of children placed in long-term foster care because other placement options could not be developed.",
      " State data, in part, confirmed this observation. While long-term foster care placements for children supported with state-only funds dropped from 1,301 in 1990 to 779 in 1995, long-term placements for children supported with federal funds rose from 1,657 to 2,057 for the same period. The reasons for the difference between these two groups are unknown. States Make Changes in Permanency Planning Process With Some Positive Results for Foster Care Children Although the states we reviewed did not systematically evaluate the impact of their initiatives, they implemented a variety of operational and procedural changes to expedite and improve the permanency process.",
      " Other efforts made changes to the operation of the courts and the use of resources available to them for making permanency decisions. These states reported that these actions have improved the lives of some children by (1) reuniting them with their families more quickly, (2) expediting the termination of parental rights when reunification efforts were determined to be unfeasible\u2014thus making it possible for child welfare agencies to begin looking for an adoptive home sooner\u2014or (3) reducing the number of different foster care placements in which they lived. States are also addressing changes in the permanency planning process through larger reform efforts of their child welfare systems. However,",
      " because these efforts were only recently implemented or were still in the initial implementation stage, no evaluation information on their effect was available. New Service Strategies Help Reunification Efforts Two states we reviewed implemented low-cost and creative methods for financing and providing services that address specific barriers to reunification. For example, Arizona\u2019s Housing Assistance Program focused on families where children had been removed and placed in state custody and the major barrier to reunification was inadequate housing for the family. In 1989, the state enacted a bill authorizing the use of state foster care funds to provide special housing assistance. According to state reports summarizing the program and statistics provided by Arizona Department of Economic Security officials,",
      " between 1991 and 1995, 939 children were reunited with their families as a result of this program, representing almost 12 percent of those children reunified during this period. This program saved the state over $1 million in foster care-related costs between 1991 and 1995. Also, Tennessee\u2019s Wraparound Funding Program allowed caseworkers to use state funds to provide services that removed economic barriers to reunification. These services were not typically associated with traditional reunification services and prior to this program were not allowable foster care expenditures. Examples include home or car repairs, utilities or rent payments, and respite care. According to a report summarizing the program,",
      " during one 6-month period in 1995, the program provided services to 1,279 children. A state Department of Children\u2019s Services official estimated that had these children remained in care as long as the average child in foster care, the state would have incurred an additional $700,000 in state and federal foster care maintenance payments. States Streamline Termination Procedures Regarding other changes, Arizona and Kentucky placed special emphasis on expediting the process by which parental rights could be terminated. Arizona\u2019s Severance Project focused on cases where termination of parental rights was likely or reunification services were not warranted and for which a backlog of cases had developed.",
      " In April 1986, the state enacted a bill providing funds for hiring severance specialists and legal staff to work on termination cases. The following year, in 1987, the state implemented the Arizona State Adoption Project. This project focused on identifying additional adoptive homes, including recruiting adoptive parents for specific children and contracting for adoptive home recruitment activities. State officials reported that the Adoption Project resulted in a 54-percent increase in the number of new homes added to the state registry in late 1987 and 1988. In addition, they noted that the Severance Project contributed to a more than 32-percent reduction in the average length of stay between entry into care and the filing of the termination petition for fiscal years 1991 through 1995.",
      " To reduce a backlog of pending cases, Kentucky\u2019s Termination of Parental Rights Project focused on reducing the time required to terminate parental rights once this permanency goal was established. This effort included retraining caseworkers, lawyers, and judges on the consequences of long stays in foster care and streamlining and improving the steps caseworkers must follow when collecting and documenting the information required for the termination procedures. A report on this effort indicated that between 1989 and 1991, the state decreased the average time to terminate parental rights by slightly over 1 year. In addition, between 1988 and 1990, the average length of stay for children in foster care decreased from 2.",
      "8 years to 2 years, and the number of different foster care placements for each child decreased from four to three. However, as the number of children available for adoption rose, the state was forced to focus its efforts on identifying potential adoptive homes and shifted its emphasis to strategies to better inform the public about the availability of adoptive children. Concurrent Planning Can Lead to Greater Efficiency Tennessee\u2019s Concurrent Planning Program allowed caseworkers to work toward achieving family reunification while at the same time developing an alternate permanency plan if reunification efforts did not succeed. The goal was to obtain permanency for the child by either (1) strengthening the family and reducing the risks in the home so that the child can be reunified with his or her family;",
      " or (2) verifying that the family cannot protect the child, meet the child\u2019s needs, or reduce the risks to the child in a timely manner and that termination of parental rights should be pursued. By working on the two plans simultaneously, caseworkers reduced the time required to prepare the necessary paperwork to terminate parental rights if reunification efforts failed. Under a concurrent planning approach, caseworkers emphasize to the parents that if they do not adhere to the requirements set forth in their case plan, parental rights can be terminated. Since this program was initiated in 1991, state officials report that 70 percent of the children in the program obtained permanency,",
      " primarily through reunification, within 12 months of placement in foster care. Without this program the children would have stayed in foster care longer than 12 months. The officials attributed obtaining quicker permanency in part to parents making more concerted efforts to make the changes needed to have their children return home. Use of Community Resources and Streamlined Procedures Improve Court Functioning All decisions regarding both the temporary and final placement of foster care children come through states\u2019 court systems. As a result, some states and counties focused attention on the courts\u2019 involvement in achieving permanency more quickly. Georgia\u2019s Citizen Review Panel Program created local advisory panels of private citizens within the child\u2019s community to assist judges in their review and decisions regarding foster care placements for each child in care.",
      " The objective of these panels is (1) to gather additional information regarding the placement options for each foster child\u2014often information that cannot be collected by state agencies because of large caseloads and limited staff resources\u2014and (2) to review compliance with court-ordered case plans to ensure that the state agencies are working toward permanent placements. The program operates in 56 counties and, in 1996, covered over 42 percent of Georgia\u2019s foster care population. The state reported that between 1994 and 1996, the review panels recommended that 5,855 children be placed for adoption, 10,845 children be reunified with their families,",
      " and 3,048 children remain in foster care. In Hamilton County, Ohio, juvenile court officials focused attention on the court\u2019s involvement in achieving permanency more quickly by developing new procedures to expedite case processing. In 1985, they revised court procedures by (1) designating lawyers specially trained in foster care issues as magistrates to hear cases, (2) assigning one magistrate to each case for the life of that case to achieve continuity and consistent rulings, and (3) agreeing at the end of every hearing\u2014while all participants are present\u2014to the date for the next hearing. According to court officials, the county saved thousands of dollars because it could operate three magistrates\u2019 courtrooms for the cost of one judge\u2019s courtroom.",
      " Also, a report on court activities indicated that because of these changes, between 1986 and 1990, the number of children placed in four or more different foster care placements decreased by 11 percent and the percentage of children leaving temporary and long-term foster care in 2 years or less increased from 37 percent to 75 percent. Even where improvements have been made, there can still be problems that are beyond the control of officials. According to reports prepared by court officials, between 1986 and 1989 the number of children in care in Hamilton County decreased 15 percent. However, in 1992, the number returned to the 1986 level of about 1,",
      "100 children and continued to increase through the first half of 1996 to about 1,500. According to court officials, a dramatic rise in crack cocaine use in the county contributed to this sharp increase. Child welfare agencies were unable to readily arrange for the increased services that these families needed. Some Initiatives Attempt Systemwide Changes to Improve the Permanency Process Some states are also addressing the need for quicker permanency as part of larger initiatives designed to make major changes in their foster care programs. One state plans to privatize foster care services. Another state has redesigned its foster care operating policies and procedures to improve outcomes for children. Because these efforts are recent,",
      " no information on results was available. Privatization Proposes Incentives for Speedier Placements In 1996, Kansas began privatizing most child welfare services, including foster care. Two events contributed to this decision. First, because of rising state costs, the Governor directed all state agencies to consider privatizing services to reduce the size of the state workforce. Second, the state had settled a suit brought by the Kansas chapter of the American Civil Liberties Union citing unacceptable increases in the number of children in foster care and lengthy stays in care. The goal of privatization is to allow children in out-of-home placements to experience a minimal number of placements or to achieve permanency in their lives in the shortest time possible.",
      " Kansas contracted with private social services agencies for family preservation services, foster and residential care, and adoption services. State officials continue to be responsible for determining if the original charges of dependency, neglect, or abuse are substantiated and to monitor contractor performance. The contracted service providers are responsible for providing all services to the families. Under the contracts, providers will be paid a per-child rate, with a payment structure that pays contractors for results. For example, in the foster care contract, 25 percent of costs will be paid at the time of referral, 25 percent upon receipt of the first 60-day progress report, and 25 percent upon receipt of the 180-day formal case plan.",
      " The final 25 percent will not be paid until reunification or a permanent placement is achieved. If a child reenters care before 12 months have passed, the contractor is responsible for all the foster care maintenance costs for out-of-home placement. Agency Redesign Intended to Expedite Placement Decisions Arizona also is pursuing major changes to its child welfare system. Arizona\u2019s Project Redesign was prompted by a number of fatalities of young children in foster homes in a very short time. Begun in 1994, this project focused on writing and implementing new child welfare policies and procedures with a goal of increasing caseworker contact with foster families and reducing caseworkers\u2019 caseloads and the length of time children spend in foster care.",
      " The major activities of Project Redesign included rewriting policies and licensing rules, preparing a new supervisors\u2019 handbook, creating a mentoring program for new supervisors, developing and implementing a method to more equitably distribute workload among staff, and creating the Uniform Case Practice Record. This record methodically guides caseworkers through all the steps necessary to make a permanent placement decision. This helps ensure that all the needed information is available to the courts, thus preventing delays in the process. States Have Not Assessed the Impact of Initiatives Our efforts to assess the overall impact of these initiatives were hampered by the absence of evaluation data. In general, we found that the states did not conduct evaluations of their programs,",
      " and outcome information was often limited to state reports and the observations of state officials. While many of these efforts reported improvements, for example, in speeding the termination of parental rights once this permanency goal was established, the lack of comparison groups or quality pre-initiative data made it difficult to reach definitive conclusions about the effectiveness of these initiatives. Several national efforts are under way that may improve the information available on foster children and facilitate states\u2019 design and implementation of systematic evaluations in the future. Nationwide, most states are currently designing or implementing Statewide Automated Child Welfare Information Systems as required under the title IV-E foster care program. These systems are to include case-specific data on all children in foster care and all adopted children placed or provided adoption assistance by the state or its contractors.",
      " From 1994 to 1996, federal funds have provided up to 75 percent of the costs of planning, design, development, and installation of these state systems. The Personal Responsibility and Work Opportunity Reconciliation Act (P.L. 104-193), enacted in August 1996, continues this enhanced federal match through 1997, at which time the federal match rate will be reduced to 50 percent. In addition, P.L. 104-193 appropriated funds for a national longitudinal study based on random samples of children at risk of abuse or neglect or determined by a state to have been abused or neglected. This study is to include state-level data for selected states.",
      " Key Factors Essential for Meeting Goals of New Initiatives States increased their chances for successfully developing and implementing new initiatives when certain key factors were a part of the process. When contemplating changes, state officials had to take into consideration the intricacies of the foster care process; the inherent difficulty that caseworkers and court officials face when deciding if a child should be returned home; and the need in some cases to change the culture of caseworkers and judges to recognize that, in certain cases, termination of parental rights should be pursued. Some experts believe that current child welfare practices often discourage caseworkers from finding permanent placements other than with the biological parents.",
      " Officials in the states we reviewed recognized that addressing these challenges required concerted time and effort, coordination, and resources. These officials identified several critical, often interrelated, factors required to meet these challenges. These included (1) long-term involvement of officials in leadership positions; (2) involvement of key stakeholders in developing consensus and obtaining buy-in concerning the nature of the problem and the solution; and (3) the availability of resources to plan, implement, and sustain the project. The following two examples illustrate these concepts. Statewide Involvement Culminates in New Child Welfare Legislation In the mid-1980s, Ohio officials began a multiyear effort that culminated with the state enacting a new child welfare law that became effective in January 1989.",
      " Before enacting this law, the legislature created a task force whose members were involved in planning throughout the drafting and passage of legislation. The task force was cochaired by a state senator and a representative. Other members included state and county child welfare agency officials, juvenile court judges, attorneys, and county commissioners. In addition, public hearings were held throughout the state that provided a forum for input from all parties interested in child welfare, including private citizens, service providers, caseworkers, judges, attorneys, and foster care parents. By involving all interested parties and by providing numerous opportunities for input, state officials were able to develop consensus on the problems and solutions and obtain buy-in to the proposed solutions from program staff.",
      " For example, there were numerous discussions about whether a specific time frame for remaining in temporary foster care should be stipulated. They ultimately compromised on 12 months plus two 6-month extensions. Statewide Efforts Shorten Termination of Parental Rights Process In 1988, to shorten the termination of parental rights process, the Kentucky Department of Social Services collaborated with seven other agencies to obtain a federal grant to develop new approaches to address this issue. As part of this effort and to ensure buy-in, the Secretary of Human Resources appointed a multidisciplinary advisory committee chaired by a chief Circuit Court judge. Other members of the committee included representatives from social service agencies,",
      " court officials, attorneys, the legislature, and child welfare advocacy groups. The committee met quarterly throughout the 2-year project. Committee members recognized they needed to change the way caseworkers and members of the legal system viewed termination of parental rights. Many caseworkers had viewed terminating parental rights as a failure on their part because they were not able to reunify the family. As a result, they were reluctant to pursue termination and instead kept the children in foster care. Also, often judges and lawyers were not sufficiently informed of the negative consequences for children who do not have permanent homes. Thus, as part of this project, newsletters and training were provided about the effects on the child of delaying termination of parental rights.",
      " After 2 years, many meetings, and retraining caseworkers, state officials reported that they had reduced the time to complete the termination of parental rights process by 1 year. Among the changes they believed contributed to this reduction were (1) simplifying the process caseworkers follow when providing termination of parental rights information to the attorneys that handle these cases and (2) using an absent parent search handbook, which was developed to assist caseworkers in conducting more timely and complete searches. Conclusions Many of the children in foster care are among the nation\u2019s most vulnerable citizens. The consequences of long spells in foster care and multiple placements,",
      " coupled with the effects of poverty, highlight the need for quick resolution of placement questions for these children. With the expected rise in foster care caseloads through the start of the next century further straining state and federal child welfare budgets, increasing pressure will be placed on states to develop strategies to move children into permanent placements more quickly. Many of these initiatives will need to address the difficult issues of deciding under what circumstances to pursue reunification and what time is appropriate before seeking the termination of parental rights. We found promising initiatives for changing parts of the permanency process so that children can be moved out of foster care into permanent placements more quickly. Developing and successfully implementing these innovative approaches takes time and often challenges long-standing beliefs.",
      " To succeed, these initiatives must look to local leadership involvement, consensus building, and sustained resources. As new initiatives become a part of the complex child welfare system, however, they can also create unintended consequences. For example, if states are identifying appropriate cases for the quicker termination of parental rights and processing them more expeditiously\u2014thereby freeing more children for possible adoption\u2014additional problems can occur if efforts to develop more adoptive homes have not been given equal emphasis. Also, if states require more stringent time frames for holding permanency hearings, they must adjust to this shorter time to avoid placements based on expedience rather than careful deliberation about what is best for the child.",
      " We also found that a critical feature of these initiatives was often absent: Many of them lacked evaluations designed to assess the impact of the effort. The availability of evaluation information from these initiatives would not only point to the relative success or failure of an effort but also such information could assist in identifying unintended outcomes. The absence of program and evaluation data will continue to hinder the ability of program officials and policymakers to fully understand the overall impact of these initiatives. Efforts are under way, however, to improve the availability of information on foster children. Agency Comments In its written comments on a draft of this report, HHS generally concurred with the conclusions in this report.",
      " It agreed that efforts to improve the timeliness of permanent placements are important and indicated that they are a priority of the department. HHS also commented that it would be useful to include a definition of permanency planning in the report, and we revised the report in response to this comment. Although federal requirements establish some guidelines, variation in state policies and priorities make the development of a single definition difficult. Finally, the department recognized the benefits of presenting different approaches to speeding the permanency planning processes while stressing the need for systemic changes. Because of the complex nature of the child welfare system, we agree that states and localities must consider the entire system when attempting to make reforms.",
      " We have incorporated the department\u2019s technical comments into our report where appropriate. See appendix III for HHS\u2019 comments. We are sending copies of this report to the Secretary of HHS, state child welfare agencies, and other interested parties. Copies also will be made available to others on request. If you or your staff have any questions about this report, please call me at (202) 512-7215. Other major contributors to this report are listed in appendix IV. Scope and Methodology To identify states that have enacted laws or implemented policies establishing requirements regarding the timing of the first permanency hearing that are more stringent than those under federal law,",
      " we reviewed pertinent state legislation and policies of 50 states and the District of Columbia. We also discussed those laws and state policies with state legal and child welfare officials. Federal law allows the hearing to be held as late as 18 months after the child\u2019s entry into foster care, but state laws vary widely in the terms they use for various hearings. In cases where state law did not specifically identify a hearing as a permanency hearing, we asked for further clarification from state officials. If we determined that the state law was consistent with the federal requirement, we treated the required hearing as a permanency hearing. To determine what changes states and localities have made to achieve more timely permanent placements and factors that contributed to their success,",
      " we first reviewed literature on foster care and permanency planning. In addition, we discussed permanency planning and permanent placement decisions with experts in the field, including child welfare officials in all 50 states and the District of Columbia. In the course of our discussions with state officials and experts, we identified specific state and local initiatives that were attempting to permanently place foster care children in a more timely manner. We selected six states that had implemented initiatives that addressed making more timely permanent placements for children in foster care. The states were Arizona, Georgia, Kansas, Kentucky, Ohio, and Tennessee. Each state selected had at least one initiative that was implemented between 1989 and 1992,",
      " ensuring that we would be able to obtain historical information about the planning and implementation of those initiatives and that the initiatives had been in place long enough to have some impact. We included states that had initiatives that addressed different aspects of the permanency process. We also included states with statutory requirements for holding the first permanency hearing that were stricter than the federal requirement as well as states with requirements that were consistent with the federal requirement. We conducted site visits in four of the six states\u2014Georgia, Kansas, Kentucky, and Tennessee\u2014and obtained information from Arizona and Ohio through telephone interviews. We interviewed state and county foster care and adoption officials and juvenile court officials and collected information on the initiatives,",
      " including descriptions of program goals and objectives and factors that facilitated change, reports on program results, and other statistical information on the foster care population. We did not verify program data from these states. We did our work between January 1996 and January 1997 in accordance with generally accepted government auditing standards. States That Require a Permanency Hearing Earlier Than the Federal Requirement of 18 Months, as of December 31, 1996 Ariz. Rev. Stat. Ann., Section 8-515.C.(West Supp. 1996) Colo. Rev. Stat., Section 19-3-702(1)(Supp.",
      " 1996) Conn. Gen. Stat. Ann., Section 46b-129(d),(e) (West 1995) Ga. Code Ann., Section 15-11-419 (j),(k)(1996) 705 Ill. Comp. Stat. Ann., 405/2-22(5)(West Supp. 1996) Ind. Code Ann., Section 31-6-4-19(c)(Michie Supp. 1996) Iowa Code Ann., Section 232.104 (West 1994) Kan. Stat. Ann., Section 38-1565(b),(c)(1995)",
      " La. Ch. Code Ann., Arts. 702,710(West 1995) Mich. Stat. Ann., Section 27.3178(598.19a)(Law Co-op Supp. 1996) Minn. Stat. Ann., Section 260.191 Subd. 3b(West Supp. 1997) Miss. Code Ann., Section 43-21-613 (3)(1993) New Hampshire Court Rules Annotated, Abuse and Neglect, Guideline 39 (Permanency Planning Review) N.Y. Jud. Law, Section 1055(b)(McKinney Supp.",
      " 1997) Ohio Rev. Code Ann., Sections 2151.353(F), 2151.415 (A) (Anderson 1994) 42 Pa. Cons. Stat. Ann., Section 6351(e-g)(West Supp. 1996) R.I. Gen. Laws, Section 40-11-12.1(1990) (continued) S.C. Code Ann., Section 20-7-766(Law. Co-op. Supp. 1996) Utah Code Ann., Sections 78-3a-312,(1996) Va. Code Ann., Section 16.",
      "1-282(Michie 1996) Wash. Rev. Code Ann., Section 13.34.145(3)(4) (West Supp. 1997) W. Va. Code, Sections 49-6-5, 49-6-8(1996) Wis. Stat. Ann., Sections 48.355(4); 48.38; 48.365(5)(West 1987) Wyo. Stat. Ann., Section 14-6-229 (k)(Michie Supp. 1996) Michigan\u2019s time frame to hold the permanency hearing was calculated by adding the days needed to conduct the preliminary hearing,",
      " trial, dispositional hearing, and the permanency hearing. Virginia\u2019s time frame to hold the permanency hearing was calculated by adding the number of months required to file the petition to hold the permanency hearing plus the number of days within which the court is required to schedule the hearing. Comments From the Department of Health and Human Services GAO Contacts and Staff Acknowledgments GAO Contacts Staff Acknowledgments In addition to those named above, Diana Eisenstat served as an adviser; David D. Bellis, Octavia V. Parks, and Rathi Bose coauthored the report and contributed significantly to all data-gathering and analysis efforts.",
      " Also, Julian P. Klazkin provided legal analysis of state statutes. Related GAO Products Child Welfare: States\u2019 Progress in Implementing Family Preservation and Support Activities (GAO/HEHS-97-34, Feb. 18, 1997). Child Welfare: Complex Needs Strain Capacity to Provide Services (GAO/HEHS-95-208, Sept. 26, 1995). Child Welfare: Opportunities to Further Enhance Family Preservation and Support (GAO/HEHS-95-112, June 15, 1995). Foster Care: Health Needs of Many Young Children Unknown and Unmet (GAO/",
      "HEHS-95-114, May 26, 1995). Foster Care: Parental Drug Abuse Has Alarming Impact on Young Children (GAO/HEHS-94-89, Apr. 4, 1994). Residential Care: Some High-Risk Youth Benefit, But More Study Needed (GAO/HEHS-94-56, Jan. 28, 1994). Foster Care: Services to Prevent Out-of-Home Placements Are Limited by Funding Barriers (GAO/HRD-93-76, June 29, 1993). Foster Care: State Agencies Other Than Child Welfare Can Access Title IV-E Funds (GAO/",
      "HRD-93-6, Feb. 9, 1993). Foster Care: Children\u2019s Experiences Linked to Various Factors; Better Data Need (GAO/HRD-91-64, Sept. 11, 1991). Child Welfare: Monitoring Out-of-State Placements (GAO/HRD-91-107BR,  Sept. 3, 1991). The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary.",
      " VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (301) 258-4066, or TDD (301) 413-",
      "0006. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 27,
    "question": null,
    "answer": "The Pipeline Safety Improvement Act of 2002 established a risk-based program for gas transmission pipelines--termed integrity management--which requires pipeline operators to identify areas where the consequences of a pipeline incident would be the greatest, such as highly populated areas. Operators must assess pipelines in these areas for safety threats (such as corrosion), repair or replace defective segments, and reassess their pipelines at least every 7 years. Under the Pipeline and Hazardous Materials Safety Administration's (PHMSA) regulations, operators must reassess their pipelines for corrosion at least every 7 years and for all safety threats at least every 10, 15, or 20 years. State pipeline safety agencies that assist PHMSA are eligible to receive matching funds up to 50 percent of the cost of their pipeline safety programs. This statement is based on ongoing work for Congress and for others. It focuses on three areas germane to current legislative reauthorization proposals: (1) an overall assessment of the integrity management program, (2) the 7-year reassessment requirement, and (3) provisions to increase state pipeline safety grants. GAO contacted more than 50 pipeline operators and a broad range of stakeholders and surveyed state pipeline agencies. GAO also reviewed PHMSA and industry guidance and reviewed PHMSA pipeline performance data. While the gas integrity management program is still being implemented, early indications show that the program benefits pipeline safety. For example, the condition of transmission pipelines is improving as operators assess and repair their pipelines. As of December 31, 2005 (latest data available), 33 percent of the pipelines in highly populated or frequently used areas had been assessed and over 2,300 repairs had been completed. In addition, we estimate that up to 68 percent of the population that lives close to natural gas transmission pipelines is located in highly populated areas and is expected to receive additional protection as a result of improved pipeline safety. Furthermore, despite some uncertainty on the part of operators over the program's documentation requirements, operators, gas pipeline industry representatives, state pipeline officials, and safety advocate representatives all agree that the program enhances public safety, citing operators' improved knowledge of the threats to their pipelines as the primary benefit. Although periodic reassessments of pipeline threats are beneficial, the 7-year reassessment requirement appears to be conservative. Through December 2005, 76 percent of the operators (182 of 241) reporting baseline assessment activity to PHMSA reported that their pipelines were in good condition, requiring only minor repairs. Most of the problems found were concentrated in just 7 pipelines. These results are encouraging, since operators are required to assess their riskiest segments first and operators are required to repair defects, making them safer before reassessments begin toward the end of the decade. There have been no deaths or injuries from corrosion related pipeline incidents over the past 5-1/2 years. An alternative approach is to permit pipeline operators to reassess their pipeline segments at intervals based on technical data, risk factors, and engineering analyses. Such an approach is consistent with the overall philosophy of the 2002 act and would meet its safety objectives. Under this approach, operators could reassess their pipelines at intervals longer than 7 years only if operators can adequately demonstrate that corrosion will not become a threat within the chosen time intervals. Otherwise, the reassessment must occur more frequently. As a safeguard to ensure that operators have identified threats facing these pipeline segments and have determined appropriate reassessment intervals, PHMSA and state regulatory agencies are already conducting integrity management inspections of operators. They plan to inspect most operators' integrity management activities by 2009. The provision to increase the cap on pipeline safety grants to states appears reasonable given that states' workloads are expanding, but funding sources and oversight of states' expanded activities would need to be addressed in order to ensure that the increased grants are appropriately carried out. PHMSA has identified several potential funding sources, such as reprioritizing the agency's budget and increasing pipeline user fees. For oversight, PHMSA anticipates integrating states' expanded activities into the agency's current oversight approach that relies on annual reports from states and field evaluations.\n",
    "docs": [
      "Background The United States has a 295,000-mile network of natural gas transmission  pipelines that are owned and operated by approximately 900 operators.  These pipelines are important to the nation because they transport nearly  all the natural gas used, which provides about a quarter of the nation\u2019s  energy supply. Gas transmission pipelines typically move gas products  over long distances from sources to communities and are primarily  interstate. They generally deliver natural gas to local distribution pipelines,  which distribute the gas to commercial and residential end-users. Local  distribution companies may also operate small portions of transmission  pipelines. PHMSA administers the national regulatory program to ensure the safe  transportation of natural gas and hazardous liquid by pipeline.",
      " In general,  PHMSA retains full responsibility for inspecting and enforcing regulations  on interstate pipelines, but it has arrangements with 48 states, the District  of Columbia, and Puerto Rico to assist with overseeing intrastate  pipelines. These states are currently authorized to receive reimbursement  of up to 50 percent of the costs of their pipeline safety programs from  PHMSA. Traditionally, PHMSA has carried out its oversight role using minimum  safety standards that were uniformly applied to all pipelines based on the  \u201cclass location\u201d of the pipeline. A pipeline\u2019s class location\u2014based on  factors such as population within 660 feet of the pipeline\u2014determines the  applicable standards such as the thickness of the pipe required and the  pressure at which it can operate.",
      " The Pipeline Safety Improvement Act of  2002 modified PHMSA\u2019s traditional oversight approach by supplementing  the minimum standards with a risk-based program for gas transmission  pipelines. This program\u2014termed \u201cintegrity management\u201d\u2014requires gas  transmission pipeline operators to assess and mitigate safety threats, such  as leaks or ruptures due to incorrect operation or corrosion, to pipeline  segments that are located in highly populated or frequently used areas,  such as parks. Specifically, operators are required to perform baseline  assessments on half of the pipeline mileage located in these areas by  December 2007, and the remainder by December 2012.",
      " Those pipeline  segments potentially facing the greatest risks of failure from leaks or  ruptures are to be assessed first. As of December 2005 (latest data  available), 447 gas pipeline operators reported to PHMSA that about  20,000 miles of their pipelines (about 7 percent of all gas transmission  pipeline miles) lie in highly populated or frequently used areas. Individual  operators reported that they have as many as about 1,600 miles and as few  as 0.02 miles of pipeline in these areas. The 2002 act also requires that operators reassess these pipeline segments  for safety threats at least every 7 years.",
      " Under flexibility provided by the  act, PHMSA requires that operators reassess these pipeline segments for  corrosion damage at least every 7 years in its implementing regulations,  because corrosion is the most frequent cause of failures that can occur  over time. (See fig. 1.) PHMSA\u2019s regulations also incorporated, as  mandatory, voluntary industry consensus standards on maximum  reassessment intervals into these regulations for other types of safety  threats. The industry standards require that operators reassess gas  pipelines at least every 10, 15, or 20 years for all safety threats depending  primarily on the condition of the pipelines and the pressure under which  they operate.",
      " If conditions warrant, reassessments must occur more  frequently. In addition, operators must perform prevention and mitigation  activities\u2014such as monitoring their pipelines for excavation or corrosion  damage\u2014on a continuing basis. Gas Integrity  Management Program  Benefits Pipeline  Safety Operators are making good progress in assessing and repairing their  pipelines, thereby improving the safety of their pipeline systems. As of  December 2005, operators had assessed about 6,700 miles of their 20,000  miles\u2014or about 33 percent\u2014of pipelines located in highly populated or  frequently used areas. This progress indicates that they are well on their  way to meeting the requirement to conduct baseline assessments on 50  percent of their pipelines in these areas by December 2007.",
      " In addition to  assessing their pipelines, operators are also making progress in fulfilling  the requirement to repair problems found on their pipelines in highly  populated or frequently used areas. In the 2 years that operators have  reported the results of integrity management, they have completed 340  repairs that were immediately required and another 1,981 scheduled  repairs in highly populated or frequently used areas. While it is not  possible to determine how many of these needed repairs would have been  identified without integrity management, it is clear that the requirement to  routinely assess pipelines enables operators to identify problems that may  otherwise go undetected. Furthermore, the benefits of integrity  management expand beyond highly populated or frequently used areas  because a large number of operators are using internal inspection tools to  assess their pipelines.",
      " These tools must be inserted and removed from the  pipelines at designated locations that often run through other areas.  Consequently, operators reported having assessed about 44,000 miles of  pipelines located outside highly populated or frequently used areas,  representing about 15 percent of all gas transmission pipelines. While  operators are not required to report to PHMSA the results of these  expanded assessments, operators we spoke with said that they plan to  make necessary repairs identified through the assessments regardless of  where they are identified. We estimate that the integrity management program should offer  additional safety benefits over the minimum safety standards for up to 68  percent of the population living close to gas transmission pipelines.",
      " This  estimate corresponds with PHMSA\u2019s estimate of two-thirds of the  population. A number of representatives from pipeline industry organizations, state  pipeline agencies, safety advocate groups, and operators that we  contacted agree that integrity management benefits public safety because  it requires all operators to systematically assess their pipelines to gain a  comprehensive knowledge about the risks to their pipeline systems. Other  benefits cited by operators include improved communications within their  companies and more strategic resource allocation. While the operators we contacted generally believe integrity management  is beneficial, the program is not without its costs. For example, over half  of the operators we spoke with said that they have hired additional staff or  contractors as a result of the integrity management requirements.",
      " In  addition, 19 of the operators we contacted (37 percent) were concerned  about the level of documentation needed to support their gas integrity  management programs. PHMSA requires operators to develop an integrity  management program and provides a broad framework for the elements  that should be included in the program. The regulations provide operators  the flexibility to develop their programs to best suit their companies\u2019  needs, but each operator must develop and document specific policies and  procedures to demonstrate its commitment to compliance with and  implementation of the integrity management program. Operators may use  existing policies and procedures if they meet the requirements of integrity  management. In addition,",
      " an operator must document any decisions made  related to integrity management to demonstrate that it understands the  threats to their pipelines and is systematically managing their pipelines for  these threats. While the operators we contacted generally agreed with the  need to document their policies and procedures, some said that the  detailed documentation required for every decision is very time consuming  and does not contribute to the safety of pipeline operations. In addition, a  few operators expressed concern that they will not know if they have  sufficient documentation until their programs have been inspected. Initial  inspections of operators by PHMSA and state pipeline agencies have  confirmed that some operators are experiencing difficulty with  documentation but are generally doing well with assessments and repairs.",
      "  According to PHMSA and state officials, as operators continue to develop  and implement their integrity management programs and as they are  provided feedback during inspections, the documentation issues identified  during these initial inspections should be resolved. Another concern raised by 33 (65 percent) of the operators is the  requirement to reassess their pipelines for corrosion problems at least  every 7 years. This issue is discussed in the following section. The 7-year  Reassessment  Requirement Appears  to be Conservative Periodic reassessments of pipeline threats are beneficial because threats\u2014 such as the corrosive nature of the gas being transported\u2014can change  over time.",
      " However, the findings from baseline assessments conducted to  date and the generally safe condition of gas transmission pipelines leads  us to conclude that the 7-year requirement appears to be conservative.  Through December 2005 (latest data available), 76 percent of the  operators (182 of 241) reporting baseline assessment activity to PHMSA  told the agency that their pipelines were in good condition, free of major  defects, and requiring only minor repairs. (See fig. 2.) The remaining 59  operators found 340 problems requiring immediate repairs. About 60  percent of these problems occurred in seven operators\u2019 pipelines. Since  PHMSA does not require that operators tell it the nature of the problems  found,",
      " we do not know how many, if any, were due to corrosion. These  assessments covered about 6,700 miles, or about one-third of the  nationwide total to be assessed. It is encouraging that the majority of operators nationwide reported that  they found few or no problems requiring immediate repairs, because  operators are supposed to assess pipeline segments facing the greatest  risk of failure from leaks or ruptures first, as required by the 2002 act. In  addition, since operators are required to identify and repair significant  problems, the overall safety and condition of the pipeline system should  be enhanced before reassessments begin toward the end of the decade.",
      " Regarding the industry\u2019s overall safety record, over the past 5-1/2 years  (from January 2001 through early July 2006), there were 143 corrosion- related incidents over the 295,000-mile transmission system (26 per year,  on average)\u2014none of which resulted in death or injury. Over the past 10- 1/2 years, 12 people have died and 3 have been injured in two corrosion- related incidents. Neither of these incidents occurred in a highly  populated or frequently used area. About 80 percent of the 52 operators that we contacted prefer that  reassessment intervals be based on the condition and characteristics of  the pipeline segment rather than on a prescriptive standard.",
      " About half of  these operators (28) expressed a preference for the industry consensus  standard developed by the American Society of Mechanical Engineers  (ASME B31.8S-2004) for setting reassessment intervals for time-dependent  threats because it incorporates a risk-based approach (for pipeline failure)  and is based on science and engineering knowledge. This standard sets  reassessment intervals at a maximum of 10 years for high-stress pipeline  segments, 15 years for medium-stress segments, and 20 years for low- stress segments. Maximum reassessment intervals, such as those in the  industry consensus standard, incorporate such risk concepts as built-in  safety factors (e.g., wall stress,",
      " test pressure, or predicted failure),  conditions, and potential consequences of a pipeline incident on a  segment-by-segment basis. The maximum intervals of 10, 15, and 20 years  are based on worst-case corrosion growth rates. Industry consensus standards allow for maximum reassessment intervals  for time-dependent threats of 10, 15, or 20 years only if the operator can  adequately demonstrate that corrosion will not become a threat within the  chosen time interval. If not, then the reassessment must occur sooner,  perhaps at 7 or even 5 or fewer years. Furthermore, according to industry  consensus standards,",
      " it typically takes longer than the 10, 15, or 20 years  specified in the standard for corrosion problems to result in a leak or  rupture. The industry consensus standards were developed in 2001 and updated in  2004 based on, among other things, the experience and expertise of  engineers, contractors, operators, local distribution companies, and  pipeline manufacturers; more than 20 technical studies conducted by the  Gas Technology Institute, ranging from pipeline design factors to natural  gas pipeline risk management; and other industry consensus standards  including the National Association of Corrosion Engineers standards, on  topics such as corrosion.",
      " Contributors have been practicing aspects of  risk-based assessments successfully for over 10 years. The ASME standard  serves as a foundation for nearly every section of PHMSA\u2019s integrity  management regulations. The ASME standard was reviewed by the  American National Standards Institute. The Institute found that the  standard was developed in an environment of openness, balance,  consensus, and due process and therefore approved it as an American  National Standard. While the mechanical engineering standards are voluntary for the industry,  PHMSA incorporated them as mandatory in its gas transmission integrity  management regulations. The mechanical engineering society\u2019s standard  for setting reassessment intervals is not the only industry consensus  standard in PHMSA\u2019s integrity management regulations.",
      " The regulations  incorporate other industry consensus standards for assessing corrosion  threats and for determining temporary reductions in operating pressure. In  addition, it is federal policy to encourage the use of industry consensus  standards: Congress expressed a preference for technical standards  developed by consensus bodies over agency-unique standards in the  National Technology Transfer and Advancement Act of 1995. The Office of  Management and Budget\u2019s Circular A-119 provides guidance to federal  agencies on the use of voluntary consensus standards, including the  attributes that define such standards. Of the 52 operators we contacted, 44 had undertaken baseline  assessments, and 23 of these have calculated their own reassessment  intervals.",
      " Twenty of these 23 operators indicated that, based on the  conditions they identified during their baseline assessments, they would  reassess their pipelines at maximum intervals of 10, 15, or 20 years\u2014as  allowed by industry consensus standards\u2014if the 7-year reassessment  requirement were not in place. The remaining three operators told us that  they would reassess their pipelines at intervals shorter than the industry  consensus standards but longer than 7 years because of the condition of  their pipelines. These results add weight to our assessment that the 7-year  requirement appears to be conservative for most pipelines. Safeguards Exist if an  Alternative Standard for  Corrosion Reassessments  is Allowed PHMSA and the state pipeline agencies plan to inspect all operators\u2019  compliance with integrity management reassessment requirements,",
      " among  other things, to ensure that operators continually and appropriately assess  the conditions of their pipeline segments in highly populated or frequently  used areas. These inspections should serve as a check as to whether  operators have identified threats facing these pipeline segments and  determined appropriate reassessment intervals. PHMSA and states have  begun inspections and expect to complete most of the first round of  inspections no later than 2009. As of June 2006, PHMSA has completed 20  of about 100 inspections and, as of January 2006, states have begun or  completed about 117 of about 670 inspections. Initial results from these  inspections show that operators are doing well in assessing their pipelines  and making repairs,",
      " but, as discussed earlier, some need to better  document their programs. Based on the initial inspection results to date,  PHMSA and states did not find many issues that warranted enforcement  actions. Finally, it is important to note that, in addition to periodic reassessments,  operators must perform prevention and mitigation activities on a  continuing basis. PHMSA regulations require that all operators of  pipelines, including those outside highly populated or frequently used  areas, patrol their pipelines for excavation and other damage, survey for  leakage, maintain valves, ensure that corrosion-preventing protections are  working properly, and take other prevention and mitigation measures.",
      "  (Attachment I summarizes results of our work to date on the expected  availability of resources for pipeline reassessments and the likely impact  of assessment activity (including reassessments) on the nation\u2019s natural  gas supply. We will discuss these topics in more detail in when we report  on the 7-year reassessment requirement this fall.) Increasing State  Funding Appears  Reasonable, but  Funding Sources and  Oversight Plans  Would Need To Be  Addressed The Subcommittee\u2019s draft bill proposes to increase the matching funds  that PHMSA provides to states for pipeline safety program activities from  a maximum of 50 percent to a maximum of 80 percent of a state\u2019s pipeline  safety program costs.",
      " The increased funding would offset states\u2019 increased  workload, such as activities related to gas transmission integrity  management and other provisions in the 2002 act. All three legislative  proposals also contain provisions, such as damage prevention programs,  that could increase states\u2019 workloads. Furthermore, state pipeline safety  activities would increase if PHMSA implements its planned integrity  management program for distribution pipelines. Our recent survey to state  pipeline safety agencies about their integrity management oversight  programs showed that 39 of 47 state agencies are experiencing challenges  in staffing, which could require increased funding. For example, two state  officials told us that state agencies are losing trained inspectors because  the state salaries are typically lower than what operators pay.",
      " PHMSA  proposes to implement the increased funding in 5 percent increments over  a 6-year period starting in fiscal year 2008. We believe that the proposed increase in state grants to offset expanded  state activities appears reasonable, provided that appropriate funding  sources are identified and that the activities are included in PHMSA\u2019s  oversight of state pipeline safety programs. According to PHMSA, the  agency has several options for increasing funding for state grants, but has  not developed a specific plan for how to provide additional funds. One  option is for PHMSA to reprioritize its budget to channel additional funds  from other activities,",
      " such as research, to states. Another option may be to  increase user fees that are charged to pipeline companies. User fee  assessments in fiscal year 2006 were about $150 per pipeline mile for  natural gas transmission operators and about $76 per pipeline mile for  hazardous liquid pipelines. All of these options involve tradeoffs among  PHMSA\u2019s pipeline safety oversight activities or could result in increased  fees from the pipeline industry. Therefore, the effects of these options  would need to be carefully analyzed in order to find a balanced solution. According to PHMSA, the agency plans to monitor increased state pipeline  safety activities through its current oversight approach,",
      " which consists of  reviewing annual reports from states and field evaluations of state  activities. States are required to submit documentation annually about  their pipeline safety program activities for the previous year, including  information on the state\u2019s pipeline operators, inspections conducted, and  enforcement of pipeline regulations. States are also required to submit a  description of all ongoing and planned activities and an estimate of the  total expenses for the next calendar year. PHMSA validates the  information submitted by each state and attends at least one state  inspection during field evaluations. As state pipeline safety activities  expand, PHMSA would need to determine the best approach for including  the new activities in its oversight of state pipeline safety programs.",
      " Concluding  Observations The overall integrity management framework laid out in the Pipeline  Safety Improvement Act is improving the safety of gas transmission  pipelines. We have not identified issues that bring into question the basic  framework of integrity management. Overall, we believe that PHMSA has  done a good job in implementing the act. While we expect to make several  recommendations to PHMSA when we complete our work, they will be  aimed at incremental improvements, rather than major restructuring.  Finally, regarding the 7-year reassessment requirement, our preliminary  view is that these reassessment intervals should be based on technical  data, risk factors,",
      " and engineering analyses rather than a prescribed term.  We expect to make a recommendation to the Congress that the 2002 act be  amended along these lines when we report on this issue. We expect to  report to this Subcommittee and to other committees both on PHMSA\u2019s  implementation of integrity management and the 7-year reassessment  requirement in September. GAO Contact and  Staff  Acknowledgements For further information on this statement, please contact Katherine  Siggerud at (202) 512-2834 or siggerudk@gao.gov. Individuals making key  contributions to this statement were Jennifer Clayborne, Anne Dilger,",
      " Seth  Dykes, Maria Edelstein, Heather Frevert, Bert Japikse, Timothy Guinane,  Matthew LaTour, James Ratzenberger, and Sara Vermillion. Appendix: Availability of Resources to  Conduct Reassessments and Possible  Impacts on the Nation\u2019s Natural Gas Supply This appendix summarizes results of our work to date on the expected  availability of resources for pipeline reassessments and the likely impact  of assessment activity (including reassessments) on the nation\u2019s natural  gas supply. Impact of Periodic  Reassessments on  Natural Gas Supply  May be Less than  Foreseen As the Pipeline Safety Improvement Act of 2002 was being considered,",
      "  INGAA analyzed the possible impact of requiring assessments and periodic  reassessments and found that significant disruptions in the natural gas  supply and considerable price increases could occur. A more moderate  impact was predicted in three subsequent analyses\u2014two reviews of the  INGAA study performed for PHMSA by the John A. Volpe National  Transportation Systems Center and by the Department of Energy during  the congressional debate over the pipeline bill, and a post-act PHMSA  evaluation of its implementing regulations. A waiver provision was  included in the 2002 act after INGAA\u2019s study was completed; this may  serve as a safety valve if it appears that the natural gas supply may be  disrupted.",
      " Finally, of the 44 natural gas pipeline operators that we  contacted that had begun baseline assessments, 26 operators (59 percent)  indicated that their assessments and repairs did not require them to  shutdown their pipelines or reduce their operating pressure. Sixteen (36  percent) reported minor disruptions in their gas supply because they  temporarily shut down pipelines and reduced operating pressure to  conduct assessments or repairs. They told us that they used alternate gas  sources, such as liquefied natural gas, to sustain their customers\u2019 gas  supply. The remaining two operators told us that they were not able to  meet all their customers\u2019 needs,",
      " but the customers were able to obtain  natural gas from other sources. This is a work of the U.S. government and is not subject to copyright protection in the  United States. It 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.\n"
    ],
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  {
    "id": 28,
    "question": null,
    "answer": "Although the short-term outlook of Medicare's hospital insurance trust fund improved in the last year, Medicare's long-term prospects have worsened. The Medicare Trustee's latest projections, released in March, use more realistic assumptions about health care spending in the years ahead. These latest projections call into question the program's long-term financial health. The Congressional Budget Office also increased its long-term estimates of Medicare spending. The slowdown in Medicare spending growth in recent years appears to have ended. In the first eight months of fiscal year 2001, Medicare spending was 7.5 percent higher than a year earlier. This testimony discusses several fundamental challenges to Medicare reform. Without meaningful entitlement reform, GAO's long-term budget simulations show that an aging population and rising health care spending will eventually drive the country back into deficit and debt. The addition of a prescription drug benefits would boost spending projections even further. Properly structured reform to promote competition among health plans could make Medicare beneficiaries more cost conscious. The continued importance of traditional Medicare underscores the need to base adjustments to provider payments on hard evidence rather than on anecdotal information. Similarly, reforms in the management of the Medicare program should ensure that adequate resources accompany increased expectations about performance and accountability. Ultimately, broader health care reforms will be needed to balance health care spending with other societal priorities.\n",
    "docs": [
      "Medicare\u2019s Long-Term Financial Future Looks Worse As I have stated in other testimony, Medicare as currently structured is fiscally unsustainable. While many people have focused on the improvement in the HI trust fund\u2019s shorter-range solvency status, the real news is that we now have a more realistic view of Medicare\u2019s long-term financial condition and the outlook is much bleaker. A consensus has emerged that previous program spending projections have been based on overly optimistic assumptions and that actual spending will grow faster than has been assumed. Traditional HI Trust Fund Solvency Measure Is a Poor Indicator of Medicare\u2019s Fiscal Health First, let me talk about how we measure Medicare\u2019s fiscal health.",
      " In the past, Medicare\u2019s financial status has generally been gauged by the projected solvency of the HI trust fund, which covers primarily inpatient hospital care and is financed by payroll taxes. Looked at this way, Medicare\u2014more precisely, Medicare\u2019s Hospital Insurance trust fund\u2014is described as solvent through 2029. However, even from the perspective of HI trust fund solvency, the estimated exhaustion date of 2029 does not mean that we can or should wait until then to take action. In fact, delay in addressing the HI trust fund imbalance means that the actions needed will be larger and more disruptive. Taking action today to restore solvency to the HI trust fund for the next 75 years would require benefit cuts of 37 percent or tax increases of 60 percent,",
      " or some combination of the two. While these actions would not be easy or painless, postponing action until 2029 would require more than doubling of the payroll tax or cutting benefits by more than half to maintain solvency. (See fig. 1.) Given that in the long-term, Medicare cost growth is now projected to grow at 1 percentage point faster than GDP, HI\u2019s financial condition is expected to continue to worsen after the 75-year period. By 2075, HI\u2019s annual financing shortfall\u2014the difference between program income and benefit costs\u2014will reach 7.35 percent of taxable payroll. This means that if no action is taken this year,",
      " shifting the 75-year horizon out one year to 2076\u2014a large deficit year\u2014and dropping 2001\u2014a surplus year\u2014would yield a higher actuarial deficit, all other things being equal. Moreover, HI trust fund solvency does not mean the program is financially healthy. Under the Trustees\u2019 2001 intermediate estimates, HI outlays are projected to exceed HI tax revenues beginning in 2016, the same year in which Social Security outlays are expected to exceed tax revenues. (See fig. 2.) As the baby boom generation retires and the Medicare-eligible population swells, the imbalance between outlays and revenues will increase dramatically.",
      " Thus, in 15 years the HI trust fund will begin to experience a growing annual cash deficit. At that point, the HI program must redeem Treasury securities acquired during years of cash surplus. Treasury, in turn, must obtain cash for those redeemed securities either through increased taxes, spending cuts, increased borrowing, retiring less debt, or some combination thereof. Finally, HI trust fund solvency does not measure the growing cost of the Part B SMI component of Medicare, which covers outpatient services and is financed through general revenues and beneficiary premiums. Part B accounts for somewhat more than 40 percent of Medicare spending and is expected to account for a growing share of total program dollars.",
      " As the Trustees noted in this year\u2019s report, a rapidly growing share of general revenues and substantial increases in beneficiary premiums will be required to cover part B expenditures. Clearly, it is total program spending\u2014both Part A and Part B\u2014relative to the entire federal budget and national economy that matters. This total spending approach is a much more realistic way of looking at the combined Medicare program\u2019s sustainability. In contrast, the historical measure of HI trust fund solvency cannot tell us whether the program is sustainable over the long haul. Worse, it can serve to distort perceptions about the timing, scope, and magnitude of our Medicare challenge. New Estimates Increase Urgency of Reform Efforts These figures reflect a worsening of the long-term outlook.",
      " Last year a technical panel advising the Medicare Trustees recommended assuming that future per-beneficiary costs for both HI and SMI eventually will grow at a rate 1 percentage point above GDP growth\u2014about 1 percentage point higher than had previously been assumed. That recommendation\u2014which was consistent with a similar change CBO had made to its Medicare and Medicaid long-term cost growth assumptions\u2014was adopted by the Trustees.  In their new estimates published on March 19, 2001, the Trustees adopted the technical panel\u2019s long-term cost growth recommendation. The Trustees note in their report that this new assumption substantially raises the long-term cost estimates for both HI and SMI.",
      " In their view, incorporating the technical panel\u2019s recommendation yields program spending estimates that represent a more realistic assessment of likely long-term program cost growth. Under the old assumption (the Trustees\u2019 2000 best estimate intermediate assumptions), total Medicare spending consumed 5 percent of GDP by 2063. Under the new assumption (the Trustees\u2019 2001 best estimate intermediate assumptions), this occurs almost 30 years sooner in 2035\u2014 and by 2075 Medicare consumes over 8 percent of GDP, compared with 5.3 percent under the old assumption. The difference clearly demonstrates the dramatic implications of a 1-percentage point increase in annual Medicare spending over time.",
      " (See fig. 3) In part the progressive absorption of a greater share of the nation\u2019s resources for health care, as with Social Security, is a reflection of the rising share of the population that is elderly. Both programs face demographic conditions that require action now to avoid burdening future generations with the program\u2019s rising costs. Like Social Security, Medicare\u2019s financial condition is directly affected by the relative size of the populations of covered workers and beneficiaries. Historically, this relationship has been favorable. In the near future, however, the covered worker-to-retiree ratio will change in ways that threaten the financial solvency and sustainability of this important national program.",
      " In 1970 there were 4.6 workers per HI beneficiary. Today there are about 4, and in 2030, this ratio will decline to only 2.3 workers per HI beneficiary. (See fig. 4.) Unlike Social Security, however, Medicare growth rates reflect not only a burgeoning beneficiary population, but also the escalation of health care costs at rates well exceeding general rates of inflation. Increases in the number and quality of health care services have been fueled by the explosive growth of medical technology. Moreover, the actual costs of health care consumption are not transparent. Third-party payers generally insulate consumers from the cost of health care decisions.",
      " All of these factors contribute to making Medicare a much greater and more complex fiscal challenge than even Social Security. When viewed from the perspective of the federal budget and the economy, the growth in health care spending will become increasingly unsustainable over the longer term. Figure 5 shows the sum of the future expected HI cash deficit and the expected general fund contribution to SMI as a share of federal income taxes under the Trustees 2001 intermediate estimates. SMI has received contributions from the general fund since the inception of the program. This general revenue contribution is projected to grow from about 5 percent of federal personal and corporate income taxes in 2000 to 13 percent by 2030.",
      " Beginning in 2016, use of general fund revenues will be required to pay benefits as the HI trust fund redeems its Treasury securities. Assuming general fund revenues are used to pay benefits after the trust fund is exhausted, by 2030 the HI program alone would consume more than 6 percent of income tax revenue. On a combined basis, Medicare\u2019s draw on general revenues would grow from 5.4 percent of income taxes today to nearly 20 percent in 2030 and 45 percent by 2070. Figure 6 reinforces the need to look beyond the HI program. HI is only the first layer in this figure. The middle layer adds the SMI program,",
      " which is expected to grow faster than HI in the near future. By the end of the 75- year projection period, SMI will represent almost half of total estimated Medicare costs. To get a more complete picture of the future federal health care entitlement burden, Medicaid is added. Medicare and the federal portion of Medicaid together will grow to 14.5 percent of GDP from today\u2019s 3.5 percent. Taken together, the two major government health programs\u2014 Medicare and Medicaid\u2014represent an unsustainable burden on future generations. In addition, this figure does not reflect the taxpayer burden of state and local Medicaid expenditures. A recent statement by the National Governors Association argues that increased Medicaid spending has already made it difficult for states to increase funding for other priorities.",
      " Our long-term simulations show that to move into the future with no changes in federal health and retirement programs is to envision a very different role for the federal government. Assuming, for example, that Congress and the President adhere to the often-stated goal of saving the Social Security surpluses, our long-term simulations show a world by 2030 in which Social Security, Medicare, and Medicaid absorb most of the available revenues within the federal budget. Under this scenario, these programs would require more than three-quarters of total federal revenue even without adding a Medicare prescription drug benefit. (See fig. 7.) Revenue as a share of GDP declines from its 2000 level of 20.",
      "6 percent due to unspecified permanent policy actions. In this display, policy changes are allocated equally between revenue reductions and spending increases. The \u201cSave the Social Security Surpluses\u201d simulation can only be run through 2056 due to the elimination of the capital stock. This scenario contemplates saving surpluses for 20 years\u2014an unprecedented period of surpluses in our history\u2014and retiring publicly held debt. Alone, however, even saving all Social Security surpluses would not be enough to avoid encumbering the budget with unsustainable costs from these entitlement programs. Little room would be left for other federal spending priorities such as national defense, education,",
      " and law enforcement. Absent changes in the structure of Medicare and Social Security, sometime during the 2040s government would do nothing but mail checks to the elderly and their health care providers. Accordingly, substantive reform of the Medicare and Social Security programs remains critical to recapturing our future fiscal flexibility. Demographics argue for early action to address Medicare\u2019s fiscal imbalances. Ample time is required to phase in the reforms needed to put this program on a more sustainable footing before the baby boomers retire. In addition, timely action to bring costs down pays large fiscal dividends for the program and the budget. The high projected growth of Medicare in the coming years means that the earlier reform begins,",
      " the greater the savings will be as a result of the effects of compounding. Beyond reforming the Medicare program itself, maintaining an overall sustainable fiscal policy and strong economy is vital to enhancing our nation\u2019s future capacity to afford paying benefits in the face of an aging society. Today\u2019s decisions can have wide-ranging effects on our ability to afford tomorrow\u2019s commitments. As I have testified before, you can think of the budget choices you face as a portfolio of fiscal options balancing today\u2019s unmet needs with tomorrow\u2019s fiscal challenges. At the one end\u2014 with the lowest risk to the long-range fiscal position\u2014is reducing publicly held debt. At the other end\u2014offering the greatest risk\u2014is increasing entitlement spending without fundamental program reform.",
      " Reducing publicly held debt helps lift future fiscal burdens by freeing up budgetary resources encumbered for interest payments, which currently represent about 12 cents of every federal dollar spent, and by enhancing the pool of economic resources available for private investment and long- term economic growth. This is particularly crucial in view of the known fiscal pressures that will begin bearing down on future budgets in about 10 years as the baby boomers start to retire. However, as noted above, debt reduction is not enough. Our long-term simulations illustrate that, absent entitlement reform, large and persistent deficits will return. Medicare\u2019s Bleak Financial Outlook Drives Need for Meaningful Program and Management Reform Despite common agreement that,",
      " without reform, future program costs will consume growing shares of the federal budget, there is also a mounting consensus that Medicare\u2019s benefit package should be expanded to cover prescription drugs, which will add billions to the program\u2019s cost. This places added pressure on policymakers to consider proposals that could fundamentally reform Medicare. Our previous work provides, I believe, some considerations that are relevant to deliberations regarding the potential addition of a prescription drug benefit and Medicare reform options that would inject competitive mechanisms to help control costs. In addition, our reviews of HCFA offer lessons for improving Medicare\u2019s management. Implementing necessary reforms that address Medicare\u2019s financial imbalance and meet the needs of beneficiaries will not be easy.",
      " We must have a Medicare agency that is ready and able to meet these 21st century challenges. Adding a Fiscally Responsible Prescription Drug Benefit Will Entail Multiple Trade-Offs Among the major policy challenges facing the Congress today is how to reconcile Medicare\u2019s unsustainable long-range financial condition with the growing demand for an expensive new benefit\u2014namely, coverage for prescription drugs. It is a given that prescription drugs play a far greater role in health care now than when Medicare was created. Today, Medicare beneficiaries tend to need and use more drugs than other Americans. However, because adding a benefit of such potential magnitude could further erode the program\u2019s already unsustainable financial condition,",
      " you face difficult choices about design and implementation options that will have a significant impact on beneficiaries, the program, and the marketplace. Let\u2019s examine the current status regarding Medicare beneficiaries and drug coverage. About a third of Medicare beneficiaries have no coverage for prescription drugs. Some beneficiaries with the lowest incomes receive coverage through Medicaid. Some beneficiaries receive drug coverage through former employers, some can join Medicare+Choice plans that offer drug benefits, and some have supplemental Medigap coverage that pays for drugs. However, significant gaps remain. For example, Medicare+Choice plans offering drug benefits are not available everywhere and generally do not provide catastrophic coverage. Medigap plans are expensive and have caps that significantly constrain the protection they offer.",
      " Thus, beneficiaries with modest incomes and high drug expenditures are most vulnerable to these coverage gaps. Overall, the nation\u2019s spending on prescription drugs has been increasing about twice as fast as spending on other health care services, and it is expected to keep growing. Recent estimates show that national per-person spending for prescription drugs will increase at an average annual rate exceeding 10 percent until at least 2010. As the cost of drug coverage has been increasing, employers and Medicare+Choice plans have been cutting back on prescription drug benefits by raising enrollees\u2019 cost-sharing, charging higher copayments for more expensive drugs, or eliminating the benefit altogether. It is not news that adding a prescription drug benefit to Medicare will be costly.",
      " However, the cost consequences of a Medicare drug benefit will depend on choices made about its design\u2014including the benefit\u2019s scope and financing mechanism. For instance, a Medicare prescription drug benefit could be designed to provide coverage for all beneficiaries, coverage only for beneficiaries with extraordinary drug expenses, coverage only for low-income beneficiaries. Policymakers would need to determine how costs would be shared between taxpayers and beneficiaries through premiums, deductibles, and copayments and whether subsidies would be available to low-income, non-Medicaid eligible individuals. Design decisions would also affect the extent to which a new pharmaceutical benefit might shift to Medicare portions of the out-of- pocket costs now borne by beneficiaries as well as those costs now paid by Medicaid,",
      " Medigap, or employer plans covering prescription drugs for retirees. Clearly, the details of a prescription drug benefit\u2019s implementation would have a significant impact on both beneficiaries and program spending. Experience suggests that some combination of enhanced access to discounted prices, targeted subsidies, and measures to make beneficiaries more aware of costs may be needed. Any option would need to balance concerns about Medicare sustainability with the need to address what will likely be a growing hardship for some beneficiaries in obtaining prescription drugs. Reform Options Based on Competition Offer Advantages but Contain Limitations The financial prognosis for Medicare clearly calls for meaningful spending reforms to help ensure that the program is sustainable over the long haul.",
      " The importance of such reforms will be heightened if financial pressures on Medicare are increased by the addition of new benefits, such as coverage for prescription drugs. Some leading reform proposals envision that Medicare could achieve savings by adapting some of the competitive elements embodied in the Federal Employees Health Benefits Program. Specifically, these proposals would move Medicare towards a model in which health plans compete on the basis of benefits offered and costs to the government and beneficiaries, making the price of health care more transparent. Currently, Medicare follows a complex formula to set payment rates for Medicare+Choice plans, and plans compete primarily on the richness of their benefit packages. Medicare permits plans to earn a reasonable profit,",
      " equal to the amount they can earn from a commercial contract. Efficient plans that keep costs below the fixed payment amount can use the \u201csavings\u201d to enhance their benefit packages, thus attracting additional members and gaining market share. Under this arrangement, competition among Medicare plans may produce advantages for beneficiaries, but the government reaps no savings. In contrast, a competitive premium approach offers certain advantages. Instead of having the government administratively set a payment amount and letting plans decide\u2014subject to some minimum requirements\u2014the benefits they will offer, plans would set their own premiums and offer at least a required minimum Medicare benefit package. Under these proposals, Medicare costs would be more transparent:",
      " beneficiaries could better see what they and the government were paying for in connection with health care expenditures. Beneficiaries would generally pay a portion of the premium and Medicare would pay the rest. Plans operating at lower cost could reduce premiums, attract beneficiaries, and increase market share. Beneficiaries who joined these plans would enjoy lower out-of- pocket expenses. Unlike today\u2019s Medicare+Choice program, the competitive premium approach provides the potential for taxpayers to benefit from the competitive forces. As beneficiaries migrated to lower- cost plans, the average government payment would fall. Experience with the Medicare+Choice program reminds us that competition in Medicare has its limits. First,",
      " not all geographic areas are able to support multiple health plans. Medicare health plans historically have had difficulty operating efficiently in rural areas because of a sparseness of both beneficiaries and providers. In 2000, 21 percent of rural beneficiaries had access to a Medicare+Choice plan, compared to 97 percent of urban beneficiaries. Second, separating winners from losers is a basic function of competition. Thus, under a competitive premium approach, not all plans would thrive, requiring that provisions be made to protect beneficiaries enrolled in less successful plans. Effective Program Management Key to Successful Reform Efforts The extraordinary challenge of developing and implementing Medicare reforms should not be underestimated.",
      " Our look at health care spending projections shows that, with respect to Medicare reform, small implementation problems can have huge consequences. To be effective, a good program design will need to be coupled with competent program management. Consistent with that view, questions are being raised about the ability of CMS to administer the Medicare program effectively. Our reviews of Medicare program activities confirm the legitimacy of these concerns. In our companion statement today, we discuss not only the Medicare agency\u2019s performance record but also areas where constraints have limited the agency\u2019s achievements. We also identify challenges the agency faces in seeking to meet expectations for the future. As the Congress and the Administration focus on current Medicare management issues,",
      " our review of HCFA suggests several lessons:   Managing for results is fundamental to an agency\u2019s ability to set meaningful goals for performance, measure performance against those goals, and hold managers accountable for their results. Our work shows that HCFA has faltered in adopting a results-based approach to agency management, leaving the agency in a weakened position for assuming upcoming responsibilities. In some instances, the agency may not have the tools it needs because it has not been given explicit statutory authority. For example, the agency has sought explicit statutory authority to use full and open competition to select claims administration contractors. The agency believes that without such statutory authority it is at a disadvantage in selecting the best performers to carry out Medicare claims administration and customer service functions.",
      " To be effective, any agency must be equipped with the full complement of management tools it needs to get the job done. A high-performance organization demands a workforce with, among other things, up-to-date skills to enhance the agency\u2019s value to its customers and ensure that it is equipped to achieve its mission. HCFA began workforce planning efforts that continue today in an effort to identify areas in which staff skills are not well matched to the agency\u2019s evolving mission. In addition, CMS recently reorganized its structure to be more responsive to its customers. It is important that CMS continue to reevaluate its skill needs and organizational structure as new demands are placed on the agency.",
      " Data-driven information is essential to assess the budgetary impact of policy changes and distinguish between desirable and undesirable consequences. Ideally, the agency that runs Medicare should have the ability to monitor the effects of Medicare reforms, if enacted\u2014such as adding a drug benefit or reshaping the program\u2019s design. However, HCFA was unable to make timely assessments, largely because its information systems were not up to the task. The status of these systems remains the same, leaving CMS unprepared to determine, within reasonable time frames, the appropriateness of services provided and program expenditures. The need for timely, accurate, and useful information is particularly important in a program where small rate changes developed from faulty estimates can mean billions of dollars in overpayments or underpayments.",
      " An agency\u2019s capacity should be commensurate with its responsibilities. As the Congress continues to modify Medicare, CMS\u2019 responsibilities will grow substantially. HCFA\u2019s tasks increased enormously with the enactment of landmark Medicare legislation in 1997 and the modifications to that legislation in 1999 and 2000. In addition to the growth in Medicare responsibilities, the agency that administers this program is also responsible for other large health insurance programs and activities. As the agency\u2019s mission has grown, however, its administrative dollars have been stretched thinner. Adequate resources are vital to support the kind of oversight and stewardship activities that Americans have come to count on\u2014inspection of nursing homes and laboratories,",
      " certification of Medicare providers, collection and analysis of critical health care data, to name a few. Shortchanging this agency\u2019s administrative budget will put the agency\u2019s ability to handle upcoming reforms at serious risk. In short, because Medicare\u2019s future will play such a significant role in the future of the American economy, we cannot afford to settle for anything less than a world-class organization to run the program. However, achieving such a goal will require a clear recognition of the fundamental importance of efficient and effective day-to-day operations. Conclusions In determining how to reform the Medicare program, much is at stake\u2014 not only the future of Medicare itself but also assuring the nation\u2019s future fiscal flexibility to pursue other important national goals and programs.",
      " I feel that the greatest risk lies in doing nothing to improve the Medicare program\u2019s long-term sustainability. It is my hope that we will think about the unprecedented challenge facing future generations in our aging society. Engaging in a comprehensive effort to reform the Medicare program and put it on a sustainable path for the future would help fulfill this generation\u2019s stewardship responsibility to succeeding generations. It would also help to preserve some capacity for future generations to make their own choices for what role they want the federal government to play.\n"
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  {
    "id": 29,
    "question": null,
    "answer": "Hurricane Katrina was one of the largest natural disasters in U.S. history. Despite a large deployment of resources at all levels, many have regarded the federal response as inadequate. GAO has a body of ongoing work that covers the federal government's preparedness and response to hurricanes Katrina and Rita. This statement summarizes key points from GAO's report on the military's response to Katrina (GAO-06-643), which was issued earlier this month. It addresses (1) the support that the military provided in responding to Hurricane Katrina along with some of the challenges faced and key lessons learned; (2) actions needed to address these lessons, including GAO's recommendations to the Secretary of Defense; and (3) the extent to which the military is taking actions to identify and address the lessons learned. In its report, GAO made several recommendations to improve the military response to catastrophic disasters. The recommendations called for updating the National Response Plan to reflect proactive functions the military could perform in a catastrophic incident; improving military plans and exercises; improving National Guard, Reserve, and active force integration; and resolving response problems associated with damage assessment, communication, search and rescue, and logistics issues. The Department of Defense (DOD) partially concurred with all of the recommendations. The military mounted a massive response to Hurricane Katrina that saved many lives, but it also faced several challenges that provide lessons for the future. Based on its June 2005 civil support strategy, DOD's initial response relied heavily on the National Guard, but active forces were also alerted prior to landfall. Aviation, medical, engineering, and other key capabilities were initially deployed, but growing concerns about the disaster prompted DOD to deploy active ground units to supplement the Guard beginning about 5 days after landfall. Over 50,000 National Guard and 20,000 active personnel participated in the response. However, several factors affected the military's ability to gain situational awareness and organize and execute its response, including a lack of timely damage assessments, communications problems, uncoordinated search and rescue efforts, unexpected logistics responsibilities, and force integration issues. A key lesson learned is that additional actions are needed to ensure that the military's significant capabilities are clearly understood, well planned, and fully integrated. As GAO outlined in its recommendations to the Secretary of Defense, many challenges that the military faced during Katrina point to the need for better plans and more robust exercises. Prior to Katrina, disaster plans and exercises did not incorporate lessons learned from past catastrophes to fully identify the military capabilities needed to respond to a catastrophe. For example, the National Response Plan made little distinction between the military response to smaller regional disasters and catastrophic natural disasters. In addition, DOD's emergency response plan for providing military assistance to civil authorities during disasters lacked adequate detail. It did not account for the full range of assistance that DOD might provide, address the respective contributions of the National Guard and federal responders, or establish response time frames. National Guard state plans were also inadequate and did not account for the level of outside assistance that would be needed during a catastrophe, and they were not synchronized with federal plans. Moreover, none of the exercises that were conducted prior to Katrina had called for a major deployment of DOD capabilities to respond to a catastrophic hurricane. Without actions to help address planning and exercise inadequacies, a lack of understanding will continue to exist within the military and among federal, state, and local responders as to the types of assistance and capabilities that DOD might provide in response to a catastrophe; the timing of this assistance; and the respective contributions of the active, Reserve, and National Guard forces. DOD is examining the lessons learned from a variety of sources and is beginning to take actions to address them and prepare for the next catastrophe. It is too early to evaluate DOD's actions, but many appear to hold promise. However, some issues identified after Katrina, such as damage assessments, are long-standing, complex problems that cut across agency boundaries. Thus, substantial improvement will require sustained attention from the highest management levels in DOD and across the government.\n",
    "docs": [
      "Background About 9 months prior to Katrina\u2019s landfall, the NRP was issued to frame  the federal response to domestic emergencies ranging from smaller,  regional disasters to incidents of national significance. The plan generally  calls for a reactive federal response following specific state requests for  assistance. However, the NRP also contains a catastrophic incident annex  that calls for a proactive federal response when catastrophes overwhelm  local and state responders. The NRP generally assigns DOD a supporting  role in disaster response, but even in this role, DOD has specific planning  responsibilities. For example, the NRP requires federal agencies to  incorporate the accelerated response requirements of the NRP\u2019s  catastrophic incident annex into their own emergency response plans.",
      " Within DOD, the Strategy for Homeland Defense and Civil Support, which  was issued in June 2005, envisions a greater reliance on National Guard  and Reserve forces for homeland missions. The military response to  domestic disasters typically varies depending on the severity of an event.  During smaller disasters, an affected state\u2019s National Guard may provide a  sufficient response, but larger disasters and catastrophes that overwhelm  the state may require assistance from out-of-state National Guard or  federal troops. For Katrina, the response heavily relied on the National  Guard, which is consistent with DOD\u2019s Strategy for Homeland Defense and  Civil Support.",
      " This represents a departure from past catastrophes when  active duty forces played a larger role in response efforts. During disaster response missions, National Guard troops typically  operate under the control of the state governors. However, the National  Guard Bureau has responsibility for formulating, developing, and  coordinating policies, programs, and plans affecting Army and Air National  Guard personnel, and it serves as the channel of communication between  the U.S. Army, the U.S. Air Force, and the National Guard in U.S. states  and territories. Although the Chief of the National Guard Bureau does not  have operational control of National Guard forces in the states and  territories,",
      " he has overall responsibility for National Guard Military  Support to Civil Authorities programs. The U.S. Northern Command also  has a mission to provide support to civil authorities. Because of this  mission, U.S. Northern Command was responsible for commanding the  federal military response to Hurricane Katrina. The Military Response  Was Massive but  Faced Several  Challenges, Which  Provide Lessons for  the Future During its massive response to Hurricane Katrina the military faced many  challenges, which provide lessons for improving the future military  response to catastrophic natural disasters. Issues arose with damage  assessments, communications, search and rescue efforts, logistics, and the  integration of military forces.",
      " The Military Response Was  Massive In the wake of Hurricane Katrina, the military mounted a massive response  that saved many lives and greatly assisted recovery efforts. Military  officials began tracking Hurricane Katrina when it was an unnamed  tropical depression and proactively took steps that led to a Katrina  response of more than 50,000 National Guard and more than 20,000 federal  military personnel, more than twice the size of the military response to  1992\u2019s catastrophic Hurricane Andrew. By the time Katrina made landfall  in Louisiana and Mississippi on August 29, 2005, the military was  positioned to respond with both National Guard and federal forces.",
      " Prior to Katrina\u2019s landfall, active commands had published warning and  planning orders and DOD had already deployed Defense Coordinating  Officers to all the potentially affected states. DOD also deployed a joint  task force; medical personnel; helicopters; ships from Texas, Virginia, and  Maryland; and construction battalion engineers. Many of these capabilities  were providing assistance or deploying to the area within hours of  Katrina\u2019s landfall. DOD also supported response and recovery operations  with communications equipment and many other critically needed  capabilities. Growing concerns about the magnitude of the disaster  prompted DOD to deploy large active duty ground units beginning on  September 3,",
      " 2005, 5 days after Katrina\u2019s landfall. Prior to landfall, anticipating the disruption and damage that Hurricane  Katrina could cause, the governors of Louisiana and Mississippi activated  their National Guard units. In addition, National Guard officials in  Louisiana and Mississippi began to contact National Guard officials in  other states to request assistance. While National Guard forces from  Louisiana and Mississippi provided the bulk of the military support in the  first days after landfall, most of the Guard response to Hurricane Katrina  came later from outside the affected states. The National Guard Bureau  acted as a conduit to communicate requirements for assistance in  Louisiana and Mississippi to the adjutants general in the rest of the  country.",
      " The adjutants general of other states, with the authorization of  their state governors, then sent their National Guard troops to Louisiana  and Mississippi under emergency assistance agreements between the  states. Requirements for out-of-state National Guard or federal assistance  were increased because thousands of National Guard personnel from  Mississippi and Louisiana were already mobilized for other missions and  thus unavailable when Hurricane Katrina struck their states. The National  Guard troops that had been mobilized from within the affected states were  able to quickly deploy to where they were needed because they had  trained and planned for disaster mobilizations within their states. The  deployment of out-of-state forces,",
      " though quick when compared to past  catastrophes, took longer because mobilization plans were developed and  units were identified for deployment in the midst of the crisis. At the peak  of the military\u2019s response, however, nearly 40,000 National Guard  members from other states were supporting operations in Louisiana and  Mississippi\u2014an unprecedented domestic mobilization. Challenges Provide  Lessons for the Future While the military response to Katrina was massive, it faced many  challenges, which provide lessons for the future, including the need for the  following:    Timely damage assessments. As with Hurricane Andrew, an underlying  problem in the response was the failure to quickly assess damage and gain  situational awareness.",
      " The NRP notes that local and state officials are  responsible for damage assessments during a disaster, but it also notes  that state and local officials could be overwhelmed in a catastrophe.  Despite this incongruous situation, the NRP did not specify the proactive  means necessary for the federal government to gain situational awareness  when state and local officials are overwhelmed. Moreover, DOD\u2019s planning  did not call for the use of the military\u2019s extensive reconnaissance assets to  meet the NRP catastrophic incident annex\u2019s requirement for a proactive  response to catastrophic incidents. Because state and local officials were  overwhelmed and the military\u2019s extensive reconnaissance capabilities  were not effectively leveraged as part of a proactive federal effort to  conduct timely,",
      " comprehensive damage assessments, the military began  organizing and deploying its response without fully understanding the  extent of the damage or the required assistance. According to military  officials, available reconnaissance assets could have provided additional  situational awareness during Hurricane Katrina, and in September 2005,  considerable surveillance assets were made available to assess damage  from Hurricane Rita, primarily because of the lessons learned from  Hurricane Katrina. Improved communications. Hurricane Katrina caused significant  damage to the communication infrastructure in Louisiana and Mississippi,  which further contributed to a lack of situational awareness for military  and civilian officials. Even when local officials were able to conduct  damage assessments,",
      " the lack of communication assets caused delays in  transmitting the assessments. Under the NRP, the Department of  Homeland Security has responsibility for coordinating the  communications portion of disaster response operations. However,  neither the NRP, the Department of Homeland Security, nor DOD fully  identified the extensive military communication capabilities that could be  leveraged as part of a proactive federal response to a catastrophe. DOD\u2019s  plan addressed internal military communications requirements but not the  communication requirements of communities affected by the disaster.  Because state and local officials were overwhelmed and the Department of  Homeland Security and DOD waited for requests for their assistance  rather than deploying a proactive response,",
      " some of the military\u2019s  available communication assets were never requested or deployed. In  addition, some deployed National Guard assets were underutilized  because the sending states placed restrictions on their use.  Communications problems, like damage assessment problems, were also  highlighted following Hurricane Andrew. Coordinated search and rescue efforts. While tens of thousands of  people were rescued after Katrina, the lack of clarity in search and rescue  plans led to operations that according to aviation officials, were not as  efficient as they could have been. The NRP addressed only part of the  search and rescue mission, and the National Search and Rescue Plan had  not been updated to reflect the NRP.",
      " As a result, the search and rescue  operations of the National Guard and federal military responders were not  fully coordinated, and military operations were not integrated with the  search and rescue operations of the Coast Guard and other rescuers. At  least two different locations were assigning search and rescue tasks to  military helicopter pilots operating over New Orleans, and no one had the  total picture of the missions that had been resourced and the missions that  still needed to be performed. Clear logistics responsibilities. DOD had difficulty gaining visibility  over supplies and commodities when FEMA asked DOD to assume a  significant portion of its logistics responsibilities. Under the NRP,",
      " FEMA is  responsible for coordinating logistics during disaster response efforts, but  during Hurricane Katrina, FEMA quickly became overwhelmed. Four days  after Katrina\u2019s landfall, FEMA asked DOD to take responsibility for  procurement, transportation, and distribution of ice, water, food, fuel, and  medical supplies. However, because FEMA lacked the capability to  maintain visibility\u2014from order through final delivery\u2014of the supplies and  commodities it had ordered, DOD did not know the precise locations of  the FEMA-ordered supplies and commodities when it assumed FEMA\u2019s  logistics responsibilities. As a result of its lack of visibility over the meals  that were in transit,",
      " DOD had to airlift 1.7 million meals to Mississippi to  respond to a request from the Adjutant General of Mississippi, who was  concerned that food supplies were nearly exhausted. Better integration of military forces. The military did not adequately  plan for the integration of large numbers of deployed troops from different  commands during disaster response operations. For example, a Louisiana  plan to integrate military responders from outside the state called for the  reception of not more than 300 troops per day. However, in the days  following Hurricane Katrina, more than 20,000 National Guard members  from other states arrived in Louisiana to join the response effort.",
      " In  addition, the National Guard and federal responses were coordinated  across several chains of command but not integrated, which led to some  inefficiencies and duplication of effort. Because military plans and  exercises had not provided a means for integrating the response, no one  had the total picture of the forces on the ground, the forces that were on  the way, the missions that had been resourced, and the missions that still  needed to be completed. Also, a key mobilization statute limits DOD\u2019s  Reserve and National Guard units and members from being involuntarily  ordered to federal active duty for disaster response. As a result,",
      " all the  reservists who responded to Hurricane Katrina were volunteers, and they  made up a relatively small portion of the response compared to the  National Guard and active component members. Moreover, the process of  lining up volunteers can be time-consuming and is more appropriate for  mobilizing individuals than it is for mobilizing entire units or capabilities  that may be needed during a catastrophe. After Hurricane Andrew, we  identified this issue in two 1993 reports. Better Plans and  Exercises Needed to  Define and Guide  Future Military  Responses during  Catastrophic Natural  Disasters Operational challenges are inevitable in any large-scale military  deployment,",
      " but the challenges that the military faced during its response  to Hurricane Katrina demonstrate the need for better planning and  exercising of catastrophic incidents in order to clearly identify military  capabilities that will be needed and the responsibilities that the military  will be expected to assume during these incidents. Prior to Katrina, plans  and exercises were generally inadequate for a catastrophic natural  disaster. The National Response Plan. The NRP, which guides planning of  supporting federal agencies, lacks specificity as to how DOD should be  used and what resources it should provide in the event of a domestic  natural disaster. The NRP makes little distinction between the military  response to smaller,",
      " regional disasters and the military response to large- scale, catastrophic natural disasters. Even though past catastrophes, such  as Hurricane Andrew in 1992 and the 1989 earthquake in the San Francisco  area, showed that the military tends to play a much larger role in  catastrophes, the NRP lists very few specific DOD resources that should  be called upon in the event of a catastrophic natural disaster. Given the  substantial role the military is actually expected to play in a catastrophe\u2014 no other federal agency brings as many resources to bear\u2014this lack of  detailed planning represents a critical oversight. The DOD plan.",
      " When Hurricane Katrina made landfall, DOD\u2019s plan for  providing defense assistance to civil authorities was nearly 9 years old and  was undergoing revision. The plan had not been aligned with the NRP and  had been written before the 2005 Strategy for Homeland Defense and Civil  Support, which called for a focused reliance on the reserve components  for civil support missions. The plan did not account for the full range of  tasks and missions the military could need to provide in the event of a  catastrophe and had little provision for integrating active and reserve  component forces. It did not address key questions of integration,  command and control,",
      " and division of tasks between National Guard  resources under state control and federal resources under U.S. Northern  Command\u2019s control. Moreover, the plan did not establish time frames for  the response. National Guard plans. At the state level, the plans of the Louisiana and  Mississippi National Guards were inadequate for Katrina and not well  coordinated with those of other National Guard forces across the country.  The Mississippi and Louisiana National Guard plans appeared to be  adequate for smaller disasters, such as prior hurricanes, but they were  insufficient for a catastrophe and did not adequately account for the  outside assistance that could be needed during a catastrophe. For  example,",
      " Joint Forces Headquarters Louisiana modified its plan and  reassigned disaster responsibilities when thousands of Louisiana National  Guard personnel were mobilized for federal missions prior to Hurricane  Katrina. However, the Louisiana plan did not address the need to bring in  thousands of military troops from outside the state during a catastrophe.  Similarly, Mississippi National Guard officials told us that even their 1969  experience with Hurricane Camille, a category 5 storm that hit the same  general area, had not adequately prepared them for a catastrophic natural  disaster of Katrina\u2019s magnitude. For example, the Mississippi National  Guard disaster plan envisioned the establishment of commodity  distribution centers,",
      " but it did not anticipate the number of centers that  could be required in a catastrophic event or following a nearly complete  loss of infrastructure. In addition, the National Guard Bureau had not  coordinated in advance with the governors and adjutants general in the  states and territories to develop plans to provide assistance for  catastrophic disasters across the country. Specifically, the bureau had not  identified the types of units that were likely to be needed during a  catastrophe or worked with the state governors and adjutants general to  develop and maintain a list of National Guard units from each state that  would likely be available to meet these requirements during catastrophic  natural disasters.",
      " Exercises. An underlying reason that insufficient plans existed at all  levels is that the disaster plans had not been tested and refined with a  robust exercise program. Such exercises are designed to expose  weaknesses in plans and allow planners to refine them. As a result, when  Hurricane Katrina struck, a lack of understanding existed within the  military and among federal, state, and local responders as to the types of  assistance and capabilities that the military might provide, the timing of  this assistance, and the respective contributions of the National Guard and  federal military forces. The Homeland Security Council has issued 15  national planning scenarios\u2014including a major hurricane scenario\u2014that  provide the basis for disaster exercises throughout the nation.",
      " While DOD  sponsors or participates in no less than two major interagency field  exercises per year, few exercises led by the Department of Homeland  Security or DOD focused on catastrophic natural disasters, and none of  the exercises called for a major deployment of DOD capabilities in  response to a catastrophic hurricane. In addition, although DOD has  periodically held modest military support to civil authorities exercises, the  exercises used underlying assumptions that were unrealistic in preparing  for a catastrophe. For example, DOD assumed that first responders and  communications would be available and that the transportation  infrastructure would be navigable in a major hurricane scenario. Finally,",
      "  the First U.S. Army conducted planning and exercises in response to six  hurricanes in 2005. These exercises led to actions, such as the early  deployment of Defense Coordinating Officers, which enhanced disaster  response efforts. However, DOD\u2019s exercise program was not adequate for  a catastrophe of Hurricane Katrina\u2019s magnitude. Based on our evaluation of the aforementioned plans and exercises, we  made several recommendations to the Secretary of Defense. First, we  called for DOD to work with the Department of Homeland Security to  update the NRP to fully address the proactive functions the military will be  expected to perform during a catastrophic incident.",
      " Second, we  recommended that DOD develop detailed plans and exercises to fully  account for the unique capabilities and support that the military is likely to  provide during a catastrophic incident, specifically addressing damage  assessments, communication, search and rescue, and logistics as well as  the integration of forces. Third, we called for the National Guard Bureau  to identify the National Guard capabilities that are likely to respond to  catastrophes in a state status and to share this information with active  commands within DOD. Finally, we recommended that DOD identify the  scalable federal military capabilities it will provide in response to the full  range of domestic disasters and catastrophes.",
      " We also raised a matter for  congressional consideration, suggesting that Congress consider lifting or  modifying the mobilization restriction\u201410 U.S.C. \u00a7 12304 (c)(1)\u2014that  limits reserve component participation in catastrophic natural disasters. DOD Is Taking Steps  to Address Lessons  Learned DOD has collected lessons learned following Hurricane Katrina from a  variety of sources. Within the department, DOD has a formal set of  procedures to identify, capture, and share information collected as a result  of operations in order to enhance performance in future operations. Even  in the midst of the Hurricane Katrina response operation, officials from  various military organizations were collecting information on lessons  learned and this continued well after most operations had ceased.",
      " For  example, communications issues that had surfaced were studied by both  active and National Guard commands that had responded to Hurricane  Katrina. DOD also formed a task force to study the response and is  compiling and analyzing various military and other lessons-learned reports  to help design an improved response to future natural catastrophic events.  According to DOD officials, they have also reviewed White House and  congressional reports identifying lessons to be applied or challenges to be  addressed in future response operations. As of today, DOD has also begun taking actions to enhance the military\u2019s  preparedness for future catastrophic events. Specifically, in responding to  our recently issued report,",
      " DOD generally concurred with our  recommendations for action and told us that it had developed plans to  address them. DOD noted, for example, that the NRP would be revised to  plan for a significant DOD role in a catastrophe and a more-detailed DOD  operational plan that has been in draft would be finalized. Our  recommendations and DOD\u2019s response to them are shown in appendix I. In addition, DOD said that it was taking several additional actions,  including    colocating specially trained defense department personnel at FEMA  regional offices;  folding support from federal reconnaissance agencies into the military\u2019s  civil support processes;",
      "    developing \u201cpre-scripted\u201d requests that would ease the process for civilian  agencies to request military support;    conducting extensive exercises, including the recently completed Ardent  Sentry and other planned events, with FEMA; and    delegating authority for deploying defense coordinating elements and  placing on \u201cprepare to deploy\u201d orders communications, helicopter, aerial  reconnaissance, and patient-evacuation capabilities. The department plans to complete many of these steps by June 1, 2006\u2014 the start of the next hurricane season\u2014but acknowledged that some  needed actions will take longer to complete. Since details about many of  the department\u2019s actions were still emerging as we completed our review,",
      "  we were unable to fully assess the effectiveness of DOD\u2019s plans, but they  do appear to hold promise. Concluding  Observations In conclusion, while DOD\u2019s efforts to date to address the Hurricane  Katrina lessons learned are steps in the right direction\u2014and the  department deserves credit for taking them\u2014these are clearly only the  first steps that will be needed. The issues cut across agency boundaries,  and thus they cannot be addressed by the military alone. The NRP  framework envisions a proactive national response involving the collective  efforts of responder organizations at all levels of government. Looking  forward, part of DOD\u2019s challenge is the sheer number of organizations at  all levels of government that are involved,",
      " both military and civilian. In  addition, many of the problems encountered during the Katrina response  are long-standing and were also reported after Hurricane Andrew in 1992.  Because of the complexity and long-standing nature of these problems,  DOD\u2019s planned and ongoing actions must receive sustained top- management attention, not only at DOD but across the government, in  order to effect needed improvements in the military\u2019s support to civil  authorities. While the issues are complex, they are also urgent, and  experience has illustrated that the military has critical and substantial  capabilities that will be needed in the wake of catastrophic events. Contact and Staff  Acknowledgements For further information regarding this statement,",
      " please contact me at  (202) 512-9619 or pickups@gao.gov. Individuals making key contributions  to this statement include John Pendleton, Assistant Director, Michael  Ferren, Kenya Jones, and Leo Sullivan. Appendix I: GAO\u2019s Recommendations to the  Secretary of Defense to Improve Military  Support and DOD\u2019s Response Department of Defense (DOD) Response (dated May 5, 2006) Provide the Secretary of the Department of Homeland Security with  proposed revisions to the National Response Plan (NRP) that will  fully address the proactive functions the military will be expected to  perform during a catastrophic incident,",
      " for inclusion in the next NRP  update. DOD said that it is working with the Department of Homeland  Security to revise the NRP. While DOD stated that the long-term  focus of the U.S. government should be to develop more robust  domestic disaster capabilities within the Department of  Homeland Security, it acknowledged that DOD will need to  assume a more robust response role in the interim period and  when other responders lack the resources and expertise to  handle a particular disaster. Establish milestones and expedite the development of detailed  plans and exercises to fully account for the unique capabilities and  support that the military is likely to provide to civil authorities in  response to the full range of domestic disasters,",
      " including  catastrophes. The plans and exercises should specifically address  the use of reconnaissance capabilities to assess damage, use of  communications capabilities to facilitate support to civil authorities,  integration of active component and National Guard and Reserve  forces, use of search and rescue capabilities and the military\u2019s role  in search and rescue, and role the military might be expected to  play in logistics. DOD listed a number of steps it is taking to improve its disaster  response planning and exercises and said that consistent with its  Strategy for Homeland Defense and Civil Support, the active  component should complement, but not duplicate, the National  Guard\u2019s likely role as an early responder.",
      " DOD also said that  planning and exercises should include local, state, and federal  representatives and should stress the responders with the  highest degree of realism possible\u2014to the breaking point if  possible. Direct the Chief of the National Guard Bureau to work with the state  governors and adjutants general to develop and maintain a list of  the types of capabilities the National Guard will likely provide in  response to domestic natural disasters under state-to-state mutual  assistance agreements along with the associated units that could  provide these capabilities, and make this information available to  the U.S. Northern Command, U.S. Joint Forces Command, and  other organizations with federal military support to civil authority  planning responsibilities.",
      " DOD listed steps the U.S. Northern Command is taking to better  understand the capabilities of National Guard units, and it stated  that the National Guard is creating a database to facilitate  planning its employment in support of the homeland. Establish milestones and identify the types of scalable federal  military capabilities and the units that could provide those  capabilities in response to the full range of domestic disasters and  catastrophes covered by DOD\u2019s defense support to civil authorities  plans. DOD noted that it has developed scalable capability packages in  conjunction with pre-scripted requests for assistance and U.S.  Northern Command\u2019s Contingency Plan 2501,",
      " which is  scheduled to be signed in the spring of 2006. This is a work of the U.S. government and is not subject to copyright protection in the  United States. It 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.\n"
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  {
    "id": 30,
    "question": null,
    "answer": "Controversy over the proposed Keystone XL pipeline project has focused attention on U.S. requirements for authorization to construct and operate pipelines and other energy infrastructure at international borders. For the most part, developers are required to obtain a Presidential Permit for border crossing facilities. The agency responsible for reviewing applications and issuing Presidential Permits varies depending on the type of facility. Oil and other hazardous liquids pipelines that cross borders are authorized by the U.S. Department of State. Natural gas pipeline border crossings are authorized by the Federal Energy Regulatory Commission (FERC). Electricity transmission facilities are authorized by the Department of Energy (DOE). CRS has identified over 100 operating or proposed oil, natural gas, and electric transmission facilities crossing the U.S.-Mexico or U.S.-Canada border.  The authority for federal agencies to review applications and issue Presidential Permits for oil pipelines comes from a series of executive orders. These executive orders have been upheld by the courts as legitimate exercises of the President's constitutional authority over foreign affairs as well as his authority as Commander in Chief. It is worth noting, however, that Congress has enacted statutes applying to cross-border natural gas and electric transmission facilities that require developers of such projects to apply for authorization from executive branch agencies.  In recent years, in the context of the Presidential Permit application for the proposed Keystone XL crude oil pipeline project, Congress has attempted to modify the permitting process for border crossing energy facilities. An Executive Memorandum issued on January 24, 2017, by President Trump inviting TransCanada Corp. to resubmit its Presidential Permit application for the Keystone XL border crossing facility, and the Administration's subsequent issuance of the Presidential Permit, reduced any need for legislative action in order to authorize the border crossing for that particular project. However, Congress remains interested in overhauling the existing permitting framework, which was created exclusively by the executive branch, in favor of a framework which would be established by statute. Accordingly, on July 19, 2017, the House passed the Promoting Cross-Border Energy Infrastructure Act (H.R. 2883), which would eliminate the Presidential Permit requirement for cross-border crude oil, petroleum products, natural gas, and electric transmission infrastructure. Instead, developers would require \"certificates of crossing\" from FERC for cross-border oil, petroleum products, and gas pipelines, or from DOE for cross-border electric transmission. The statute does not appear to apply to other hazardous liquids infrastructure\u2014notably natural gas liquids (e.g., propane) pipelines\u2014so the State Department would retain its traditional Presidential Permit authority for these facilities.\n",
    "docs": [
      "Introduction The executive branch of the U.S. federal government has mandated for decades that developers of border crossing energy facilities must first obtain a Presidential Permit. Until recently, this administrative oversight was undertaken with little fanfare. However, controversy over the proposed Keystone XL oil pipeline\u2014a project that would transport oil sands crude from Alberta, Canada, into the United States\u2014has focused attention on federal permitting of energy infrastructure border crossings. Generally, the construction, operation, and maintenance of facilities that cross the U.S.-Mexico or U.S.-Canada border must be authorized by the federal government through the issuance of a Presidential Permit in accordance with requirements set forth in a series of executive orders.",
      " This report discusses these executive orders, including the source of the executive branch authority to issue the orders, the standards set forth in the orders, and the projects approved pursuant to the orders. The report also discusses proposed changes to the Presidential Permitting framework in the Promoting Cross-Border Energy Infrastructure Act ( H.R. 2883 ), which passed in the House on July 19, 2017. Oil and Products Pipelines The executive branch exercises permitting authority over the construction and operation of \"pipelines, conveyor belts, and similar facilities for the exportation or importation of petroleum, petroleum products\" and other products pursuant to a series of executive orders.",
      " This authority has been vested in the U.S. State Department since the promulgation of Executive Order 11423 in 1968. Executive Order 13337 amended this authority and the procedures associated with the review, but did not substantially alter the exercise of authority or its delegation to the Secretary of State. Executive Order 11423 provided that, except with respect to cross-border permits for electric energy facilities, natural gas facilities, and submarine facilities: The Secretary of State is hereby designated and empowered to receive all applications for permits for the construction, connection, operation, or maintenance, at the borders of the United States, of: (i)",
      " pipelines, conveyor belts, and similar facilities for the exportation or importation of petroleum, petroleum products, coal, minerals, or other products to or from a foreign country; (ii) facilities for the exportation or importation of water or sewage to or from a foreign country; (iii) monorails, aerial cable cars, aerial tramways and similar facilities for the transportation of persons or things, or both, to or from a foreign country; and (iv) bridges, to the extent that congressional authorization is not required. Executive Order 13337 designates and empowers the Secretary of State to \"receive all applications for Presidential Permits,",
      " as referred to in Executive Order 11423, as amended, for the construction, connection, operation, or maintenance, at the borders of the United States, of facilities for the exportation or importation of petroleum, petroleum products, coal, or other fuels to or from a foreign country. \" Executive Order 13337 further provides that after consideration of the application and comments received: If the Secretary of State finds that issuance of a permit to the applicant would serve the national interest, the Secretary shall prepare a permit, in such form and with such terms and conditions as the national interest may in the Secretary's judgment require, and shall notify the officials required to be consulted... that a permit be issued.",
      "  Thus the Secretary of State is directed by the order to authorize those border crossing facilities that the Secretary has determined would \"serve the national interest,\" although the text of the Executive Order provides no further guidance on what is considered to \"serve the national interest.\" Agency documents for a specific permit have discussed the \"national interest\" determination stating, for example, that \"determination of national interest involves consideration of many factors, including: energy security; environmental, cultural, and economic impacts; foreign policy; and compliance with relevant federal regulations.\" One example of a national interest determination is the one made for Enbridge Energy's Alberta Clipper crude oil pipeline,",
      " which was issued a Presidential Permit by the State Department in August 2009. The 36-inch-diameter pipeline provides crude oil transportation from the oil sands region of Alberta, Canada, to oil markets in the Midwestern United States, crossing the international border in North Dakota. The State Department's national interest determination concluded that, for this particular project, the addition of crude oil pipeline capacity between Canada and the United States would advance a number of U.S. \"strategic interests.\" These included increasing the diversity of available supplies among the United States' worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions;",
      " shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer. Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply.... Approval of the permit sends a positive economic signal, in a difficult economic period, about the future reliability and availability of a portion of United States' energy imports, and in the immediate term, this shovel-ready project will provide construction jobs for workers in the United States....  The State Department also considered the greenhouse gas emissions associated with the project, concluding that \"the reduction of greenhouse gas emissions are best addressed through each country's robust domestic policies and a strong international agreement.\" The State Department has considerable discretion with respect to making national interest determinations,",
      " so its conclusions for one project may not apply to another due to differences in project configuration, energy market conditions, technology, environmental conditions, and other important factors. Thus, Presidential Permit applications even for projects that appear similar are evaluated on a case-by-case basis by the agency and may realize different permit outcomes.  Natural Gas Pipelines and Electric Transmission Executive Orders 11423 and 13337 explicitly exclude cross-border natural gas pipelines and electric energy facilities (among others) from their reach. Instead, permitting for these facilities is addressed in the Federal Power Act, the Natural Gas Act, and Executive Order 10485. Executive Order 10485 designates and empowers the now-defunct Federal Power Commission:",
      " (1) To receive all applications for permits for the construction, operation, maintenance, or connection, at the borders of the United States, of facilities for the transmission of electric energy between the United States and a foreign country.  (2) To receive all applications for permits for the construction, operation, maintenance, or connection, at the borders of the United States, of facilities for the exportation or importation of natural gas to or from a foreign country.  (3) Upon finding the issuance of the permit to be consistent with the public interest, and, after obtaining the favorable recommendations of the Secretary of State and the Secretary of Defense thereon,",
      " to issue to the applicant, as appropriate, a permit for such construction, operation, maintenance, or connection. The Secretary of Energy shall have the power to attach to the issuance of the permit and to the exercise of the rights granted thereunder such conditions as the public interest may in its judgment require.  In many ways this authority resembles the authority granted to the State Department in Executive Orders 11423 and 13337. However, as mentioned above, those orders do not describe the source of the executive branch permitting authority granted by the orders. Judicial opinions have found that this permitting authority is a legitimate exercise of the President's \"inherent constitutional authority to conduct foreign affairs.\" By contrast,",
      " Executive Order 10485 cites federal statutes for the permitting authority granted to the Department of Energy. The order states:  Section 202(e) of the Federal Power Act, as amended... requires any person desiring to transmit any electric energy from the United States to a foreign country to obtain an order from the Federal Power Commission authorizing it to do so... Section 3 of the Natural Gas Act... requires any person desiring to export any natural gas from the United States to a foreign country or to import any natural gas from a foreign country to the United States to obtain an order from the Federal Power Commission authorizing it to do so.",
      "  Executive Order 10485 empowered the Federal Power Commission (FPC) to receive applications for and to issue Presidential Permits for cross-border electric facilities. The Department of Energy Organization Act of 1977 eliminated the Federal Power Commission, transferring its functions to either the newly created Department of Energy (DOE) or the Federal Energy Regulatory Commission (FERC), an independent federal agency that regulates the interstate transmission of electricity, natural gas, and oil. Section 402(f) of the act specifically reserved import/export permitting functions for DOE rather than FERC. As a result, DOE took over the FPC's Presidential Permit authority for border crossing facilities under Executive Order 10485 pursuant to the act.",
      " The authority to issue Presidential Permits for natural gas pipeline border crossings was subsequently transferred to FERC in 2006 via DOE Delegation Order No. 00-004.00A. Modifications: When is a New or Amended Permit Needed? As described above, Presidential Permits authorize specific border crossing facilities. Obviously a new facility requires a new Presidential Permit, and a significant overhaul of existing facilities would similarly require a new or amended Permit to authorize the changed facility. On the other hand, at some point a change to a facility is presumably small enough that no new permit would be required. Because every border crossing facility and proposed modification is different,",
      " there is no bright line rule about when a proposed modification is significant enough to require a new or amended Presidential Permit. For example, the Presidential Permit issued by the State Department in 2013 for the NOVA Chemicals natural gas liquids pipeline states \"the permittee shall make no substantial change in the United States facilities, the location of the United States facilities, or in the operation authorized by this permit until such changes have been approved by the Secretary of State or the Secretary's delegate.\" Thus, whether a Presidential Permit must be amended ultimately will depend on both the nature of the modification and on the exact nature of the authorization found in the existing permit language.",
      " However, the relevant agencies have provided some helpful guidance on this subject.  FERC Review of Natural Gas Pipeline Modifications FERC regulations governing authorization of facilities to construct, operate, or modify natural gas import/export facilities are set forth at 18 C.F.R. Part 153. Applications for Presidential Permits are subject to these regulatory requirements. 18 C.F.R. \u00a7 153.5 articulates \"who should apply\" for such FERC authorizations. The regulation provides that any person proposing to site, construct, or operate natural gas import or export facilities or to \"amend an existing Commission authorization, including the modification of existing authorized facilities,\" must apply for a permit.",
      "  State Department Review of Oil Pipeline Modifications In February 2007, the State Department's Bureau of Western Hemisphere Affairs\u2014Office of Canadian Affairs published Interpretive Guidance on Non-Pipeline Elements of E.O. 13337, A mending E.O. 11423. As the title indicates, the document is not binding with respect to pipeline facilities, although dialogue with State Department staff indicated that the guidance found in the document would be applied in a similar manner to pipeline facility permitting decisions. It may also be informative as applied to how other agencies may view the need for new or amended Presidential Permits for the facilities under their purview. According to the Interpretive Guidance,",
      " any \"substantial modifications of existing border crossings\" would fall under Executive Order 13337 and thus require a new or amended Presidential Permit. The Interpretive Guidance defines \"substantial modifications\" as  1. An expansion beyond the existing footprint or land port-of-entry inspection facility, including its grounds, approaches, and appurtenances, at an existing border crossing in such a way that the modification effectively constitutes a new piercing of the border;  2. a change in ownership of a border crossing that is not encompassed within or provided for under an applicable Presidential permit; 3. a permanent change in authorized conveyance (e.g., commercial traffic,",
      " passenger vehicles, pedestrians, etc.) not consistent with (a) What is stated in an applicable Presidential permit, or (b) current operations if a Presidential permit or other operating authority has not been established for the facility; or 4. any other modification that would render inaccurate the definition of covered U.S. facilities set forth in an applicable Presidential permit. The Interpretive Guidance also provides that projects should be placed in one of three categories: Red (both notification to the State Department and a new or amended permit is required), Yellow (notification required and a new permit may be required), and Green (neither notification nor a permit required). The \"Red\"",
      " category is described in language similar to that found in the document's definition of a \"substantial modification.\" The \"Yellow\" category includes capacity changes, temporary changes due to construction projects and changes in responsibility for ownership, operations, or maintenance, among other things. The \"Green\" category includes regular maintenance and repair work, exterior changes to a facility within its existing footprint, systems changes (e.g., HVAC, electrical), and changes made at the request or direction of the State Department, among other changes.  Department of Energy Review of Electric Transmission Modifications DOE regulations provide limited express guidance as to when an electric transmission facility modification is significant enough to trigger a requirement that a new or amended Presidential Permit be obtained.",
      " For example, DOE regulations note that a new permit application is required when the border crossing facility changes ownership. Recent permitting decisions, however, suggest that any modification that goes beyond regular maintenance and may have reliability impacts would likely require the party to obtain a new or amended Presidential Permit. For example, a new Presidential Permit issued to Energia Sierra Juarez by DOE in August 2012 provided in part that the permit should be amended if/when subsequent phases of a related wind generation project necessitate changes to the facility, including higher capacity transmission lines or other changes that could impact the reliability of the U.S. power grid. Six months earlier, DOE issued a new Presidential Permit to ITC Transmission to account for transformer upgrades at an existing facility.",
      "  Executive Branch Authority: Constitutional Issues The source of the executive branch's permitting authorities in the Executive Orders described above is not explicitly stated in all cases. Powers exercised by the executive branch are authorized by legislation or are inherent presidential powers based in the Constitution. Executive Order 11423 does not reference any statute or constitutional provision as the source of its authority, although it does state that \"the proper conduct of foreign relations of the United States requires that executive permission be obtained for the construction and maintenance\" of border crossing facilities. Executive Order 13337 refers only to the \"Constitution and the Laws of the United States of America, including Section 301 of title 3,",
      " United States Code. \" 27 3 U.S.C. \u00a7 301 simply provides that the President is empowered to delegate authority to the head of any department or agency of the executive branch. Executive Order 10485 cites Section 202(e) of the Federal Power Act as a source of executive branch authority to permit cross-border electricity transmission facilities and Section 3 of the Natural Gas Act as a source of the executive branch authority to permit cross-border natural gas pipelines. It also states that \"the proper conduct of the foreign relations of the United States requires that executive permission be obtained for the construction and maintenance at the borders of the United States of facilities for the exportation or importation of electric energy and natural gas.\"  Federal courts have addressed the legitimacy of cross-border permitting authority not explicitly granted by statute.",
      " In Sisseton-Wahpeton Oyate v. U.S. Department of State, the plaintiff tribes asked the court to suspend or revoke a presidential permit issued under Executive Order 13337 for the TransCanada Keystone Pipeline. The plaintiffs claimed that the issuance of the national interest determination and the border crossing permit for the project violated NEPA and the Administrative Procedure Act (APA). The U.S. District Court for the District of South Dakota determined that even if the plaintiffs' injury could be redressed, \"the President would be free to disregard the court's judgment,\" as the case concerned the President's \"inherent constitutional authority to conduct foreign policy,\" as opposed to statutory authority granted to the President by Congress.",
      " The court further found that even if the tribes had standing, the issuance of the Presidential Permit was a presidential action, not an agency action subject to judicial review under APA. The court stated that the authority to regulate the cross-border pipeline lies with either Congress or the President. The court found that \"Congress has failed to create a federal regulatory scheme for the construction of oil pipelines, and has delegated this authority to the states. Therefore, the President has the sole authority to allow oil pipeline border crossings under his inherent constitutional authority to conduct foreign affairs.\"  In Sierra Club v. Clinton, the plaintiff Sierra Club challenged the Secretary of State's 2009 decision to issue a permit authorizing the Alberta Clipper.",
      " The plaintiff claimed that issuance of the permit was unconstitutional because the President had no authority to issue the permits referenced in Executive Order 13337. The defendant responded that the authority to issue permits for these border crossing facilities \"does not derive from a delegation of congressional authority... but rather from the President's constitutional authority over foreign affairs and his authority as Commander in Chief.\" The U.S. District Court for the District of Minnesota agreed, noting that the defendant's assertion regarding the source of the President's authority has been \"well recognized\" in a series of Attorney General opinions, as well as a 2009 judicial opinion. The court also noted that these permits had been issued many times before and that \"Congress has not attempted to exercise any exclusive authority over the permitting process.",
      " Congress's inaction suggests that Congress has accepted the authority of the President to issue cross-border permits.\" Based on the historical recognition of the President's authority to issue those permits and Congress's implied approval through inaction, the court found the permit requirement for border facilities constitutional. Legislative Proposals for Cross-Border Permits As the aforementioned cases show, courts have analyzed the President's exercise of cross-border infrastructure permitting authority and have held that it is a legitimate exercise of the President's constitutional authority, and that it does not require legislative authorization. However, they have indicated that congressional inaction plays a role in validating this exercise of executive branch authority, suggesting that these roles could be amended through legislation should Congress choose to do so.",
      "  During the Obama presidency, Congress considered various bills to amend the presidential permitting process generally, or to authorize construction and operation of the Keystone XL border crossing facility. The January 24, 2017, Executive Memorandum issued by President Trump and the subsequent permitting of the Keystone XL pipeline border crossing facility by the State Department in accordance with that Memorandum appear to have obviated the need for the latter in this case. However, many in Congress still seek to overhaul the existing permitting framework, which was created entirely by the executive branch, in favor of a framework established by statute. Accordingly, on July 19, 2017, the House passed the Promoting Cross-Border Energy Infrastructure Act ( H.R.",
      " 2883 ). Among other provisions, the act would eliminate the Presidential Permit requirement for cross-border crude oil, petroleum products, natural gas, and electric transmission infrastructure (\u00a7 2(d)). Instead, developers would require \"certificates of crossing\" from FERC for cross-border oil, petroleum products, and gas pipelines, or from DOE for cross-border electric transmission (\u00a7 2(a)(2)). However, the statute does not appear to apply to other hazardous liquids infrastructure\u2014notably natural gas liquids (e.g., propane) pipelines\u2014so the State Department would retain its traditional Presidential Permit authority for these facilities.\n"
    ],
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  },
  {
    "id": 31,
    "question": null,
    "answer": "Legislation reauthorizing the Library Services and Technology Act (LSTA) as Title II\u00e2\u0080\u0094Library Services and Technology, of the Museum and Library Services Act of 2003 (MLSA), was signed into law ( P.L. 108-81 ) on September 25, 2003. The LSTA's authorization had expired at the end of FY2002; however, funding was not interrupted. Library Services and Technology (LST) is administered by the Institute of Museum and Library Services (IMLS). The IMLS contains an Office of Museum Services (OMS) and an Office of Library Services (OLS). Beginning in FY2003, the OMS and the OLS were combined in one appropriation account within the Labor, Health and Human Services, and Education (L-HHS-ED) Appropriations bill. In the past there had been two funding streams, one account for OMS within the Department of the Interior Appropriations, and one for OLS within the L-HHS-ED Appropriations. P.L. 108-81 authorized $232 million for LST in FY2004, and such sums as may be necessary for FY2005-FY2009. The bulk of LST funding is distributed to states via formula grants. Funding is also provided for library services for Native Americans, and for national activities. Participating states are required to develop five-year plans that set goals and priorities consistent with LST purposes (i.e., to enhance information-sharing networks and target library services to disadvantaged populations). The plans must provide for independent evaluations of federally assisted library services. A wide variety of types of libraries\u00e2\u0080\u0094public, public school, college or university, research (if they provide public access to their collections), and (at state discretion) private libraries\u00e2\u0080\u0094may receive LST aid. P.L. 108-81 provides for an increase in minimum state allotments for library services to $680,000, if the amount appropriated for a year, and available for state allotments, exceeds the amount of allotments to all states in FY2003. In addition, minimum state allotments for outlying areas are increased to $60,000, if appropriations in a given year are sufficient to meet the higher state minimums of $680,000. Library Services received funding of $210.597 million in FY2006; the Administration has requested increasing that funding to $220.855 million for FY2007. The House Committee on Appropriations has recommended $220.855 million in funding for FY2007; the Senate Committee on Appropriations has recommended funding of $213.337 million. This report will be updated in response to legislative developments.\n",
    "docs": [
      "Background The Library Services and Technology Act (LSTA) was originally adopted as part of the Museum and Library Services Act of 1996, which was enacted on September 30, 1996, as part of P.L. 104-208, the Omnibus Consolidated Appropriation Act of 1997. The LSTA's authorization expired at the end of FY2002; however, funding was not interrupted. P.L. 108-81, the Museum and Library Services Act of 2003 (MLSA), reauthorized the LSTA as Title II, Library Services and Technology (LST), of the MLSA.",
      " P.L. 108-81 authorized $232 million for Library Services and Technology in FY2004, and such sums as may be necessary for FY2005-FY2009. The bulk of LST funding is distributed to states via formula grants. Funding is also provided for library services for Native Americans, and for national leadership projects. LST grants to the states are allocated to state library administrative agencies (SLAAs), and may be used for the following basic purposes: (a) expanding services for learning and access to information in a variety of formats in all type of libraries, developing and improving electronic or other linkages and networks connecting providers and consumers of library services and resources;",
      " and/or (b) targeting library services to under served or disadvantaged populations, such as persons with disabilities, those with limited literacy skills, or children from poor families. Although the bulk of funds appropriated for LST are used for state grants, a percentage of total funds is reserved for national activities, Native Americans, and federal administration. Out of total LST appropriations for a given year, 3.75% must be reserved for national activities. The latter may include competitively awarded grants or contracts for research, demonstrations, preservation, and conversion of materials to digital form, plus education and training for librarians. Congressionally directed grants have also been included in this category,",
      " and President Bush's Librarians for the 21 st Century program (described below) is included under this heading. In addition, 1.75% of appropriations is reserved for services to Native Americans (including Indian tribes, Alaskan Natives, and Native Hawaiians), and up to 3.5% of appropriations may be used for federal administration of LST programs. Of the total funding reserved for state grants, each state receives a \"flat grant\" of $340,000 ($40,000 in the case of outlying areas); remaining funds are allocated on the basis of total population in each state. The federal share of the total costs of assisted activities is 66%",
      " in all cases. If there is no year-to-year decline in federal funding for LST, states must maintain levels of spending for library programs, or their LST grants will be reduced in proportion to the reduction in state funding. P.L. 108-81 provides for an increase in minimum state allotments for library services and technology to $680,000, if the amount appropriated for a year, and available for state allotments, exceeds the amount of allotments to all states in FY2003. In addition, minimum state allotments for outlying areas are increased to $60,000, if appropriations in a given year are sufficient to meet the higher state minimums of $680,",
      "000. If remaining funds are insufficient to reach $60,000, they are to be distributed equally among outlying areas receiving such funds. However, the level of FY2004 and FY2005 appropriations for the IMLS were not sufficient to trigger the higher state grant amounts authorized by P.L. 108-81. Participating states are required to develop five-year plans that set goals and priorities consistent with the purposes of LST grants (i.e., to enhance information-sharing networks and target library services to disadvantaged populations). The plans must provide for independent evaluations of federally assisted library services. A wide variety of types of libraries\u00e2\u0080\u0094public,",
      " public school, college or university, research (if they provide public access to their collections), and (at state discretion) private libraries\u00e2\u0080\u0094may receive LST aid, not just the public and research libraries eligible for aid under the predecessor legislation, the Library Services and Construction Act (LSCA). No more than 4% of each state's grant may be used for administration; however, there is no limit on the share of funds that can be used at the state level to provide services, as opposed to being allocated to local libraries. Library Services and Technology grants are intended to provide states with considerable latitude in the use of funds.",
      " LST funds are allocated within states on a competitive basis by the SLAA. LST is administered by the Institute of Museum and Library Services (IMLS). The IMLS was created through expansion of the previous Institute of Museum Services (IMS). The IMLS contains an Office of Museum Services (OMS) and an Office of Library Services (OLS). The IMLS is under the general aegis of the National Foundation on the Arts and the Humanities, which also includes the National Endowment for the Arts (NEA) and the National Endowment for the Humanities (NEH). Nevertheless, the Institute acts as an independent agency. The IMLS directorship alternates between persons with \"special competence\"",
      " in library and information services or in museum services. The current IMLS director is Robert Martin, who includes in his past professional experience service as a Director and Librarian of the Texas Library and Archives Commission. At all times, an Office of Library Services within the IMLS is directed by a Deputy Director with a graduate degree in library science, and expertise in library and information services. Funding for Library Services and Technology  Table 1 below, shows the FY1997-FY2007 appropriations for Library Services and Technology (LST). For FY2006, LST was funded at $210.597 million. The Administration has requested increasing that funding to $220.",
      "855 million in FY2007. The House Committee on Appropriations has recommended $220.855 million in funding for FY2007; the Senate Committee on Appropriations has recommended funding of $213.337 million. The FY2006 budget includes $23.8 million for an initiative first funded in FY2003 to train and recruit librarians, provide scholarships, support distance learning in under served rural areas, and enhance the diversity of librarians to better serve communities. Beginning in FY2003, the OMS and the OLS were combined in one appropriation account within the Labor, Health and Human Services, and Education (L-HHS-",
      "ED) Appropriations bill. In the past there had been two funding streams, one account for OMS within the Department of the Interior Appropriations and one for OLS within the L-HHS-ED Appropriations. History The federal government has provided direct aid for public libraries since initial adoption of the Library Services and Construction Act (LSCA) in 1956. The 104 th Congress considered legislation to extend and amend LSCA programs, as well as to consolidate these programs with separate authorizations of federal aid to elementary and secondary school and college libraries. The Library Services and Technology Act consolidated and replaced a number of programs under Title VII,",
      " Subtitle B of the L-HHS-ED Appropriations Act of 1997 within P.L. 104-208. These programs included the LSCA, plus library assistance programs authorized by Title II of the Higher Education Act (HEA), and Title III, Part F, of the Elementary and Secondary Education Act (ESEA). P.L. 108-81, the Museum and Library Services Act of 2003 (MLSA), reauthorized the LSTA as Title II, Library Services and Technology (LST), of the MLSA. While states have had a large degree of discretion in selecting grantees and deciding how funds are to be used under both the former LSCA and the current LST,",
      " overall state discretion would appear to be increased under the current program. At the same time, some funds\u00e2\u0080\u0094particularly aid for construction under the former LSCA Title II\u00e2\u0080\u0094were intended for specific purposes that are not authorized for LST grants. In fact, P.L. 108-81 includes a provision explicitly prohibiting the use of funds for construction. The library services and technology provisions of P.L. 108-81 also focus more thoroughly on relatively new forms of information sharing and networking, such as the Internet, than the LSCA. Reauthorization Issues Issues that were discussed during the reauthorization of the LSTA included the adequacy of minimum state grants and overall authorization levels;",
      " the need for additional funding to provide for evaluations of the LSTA; and new provisions disallowing grants for projects deemed obscene. 108th Congress On September 25, 2003, the Museum and Library Services Act of 2003 was signed into law ( P.L. 108-81 ). The LSTA was reauthorized as Title II, Library Services and Technology of the MLSA. The major changes regarding Library Services adopted in the reauthorized Museum and Library Services Act of 2003 include the following: prohibiting the funding of projects deemed obscene; defining \"obscene\" and the term \"determined to be obscene\"; requiring the Director of the IMLS to establish procedural standards for reviewing and evaluating grants;",
      " increasing minimum state allotments for library services to $680,000 if the amount appropriated for a year, and available for state allotments, exceeds the amount of allotments to all states in FY2003 (the level of FY2004 appropriations for the IMLS is not sufficient to trigger the higher state grant amounts authorized by P.L. 108-81 ); increasing minimum state allotments for outlying areas to $60,000, if appropriations in a given year are sufficient to meet the higher state minimums of $680,000. If remaining funds are insufficient to reach $60,000, they are to be distributed equally among outlying areas receiving such funds;",
      " authorizing $232 million for Library Services and $38.6 million for Museum Services for FY2004, and such sums as may be necessary for FY2005-FY2009; locating advisory functions (which for libraries were previously delegated to the National Commission on Libraries and Information Sciences) within a new National Museum and Library Services Board (previously solely a Museum Services Board) in the IMLS; making the Chairman of the National Commission on Library and Information Science a member (nonvoting) of the national Museum and Library Services Board; requiring the Director to carry out and publish analyses of the impact of museum and library services, and increasing from 3%",
      " to 3.5% the amount available for federal administrative costs, to provide funding for this new function; prohibiting the use of IMLS funds for construction; and permitting the Director of the IMLS to make national awards for library service, in addition to the already authorized national awards for museum service. H.R. 13 (Hoekstra), a bill to reauthorize Library Services and Technology within the Museum and Library Services Act of 2003, was introduced on January 7, 2003, and was reported favorably by the House Committee on Education and the Workforce on February 13, 2003. H.R.",
      " 13 was passed by the full House on March 6, 2003. H.R. 13, as passed by the House, would have changed the authorization for Library Services and Museum Services to $210 million and $35 million, respectively, for FY2004 and such sums as may be necessary for 2005 through 2009. H.R. 13 contained new provisions that would have required the IMLS Director to establish procedural standards for reviewing and evaluating grants, including a provision prohibiting the funding of projects determined to be obscene. New provisions in H.R. 13 also provided a definition of \"obscene\" and of the term \"determined to be obscene.\" It would have required the Director to carry out and publish analyses of the impact of museum and library Services,",
      " and would have increased from 3% to 3.5% the amount available for federal administrative costs, to provide funding for this new function. H.R. 13 would have located advisory functions (which for libraries were previously delegated to the National Commission on Libraries and Information Sciences) within a new National Museum and Library Services Board (previously solely a Museum Services Board) in the IMLS. It would have permitted the Director of the IMLS to make national awards for library service, in addition to the already authorized national awards for museum service. It would have increased minimum state allotments for Library Services to $680,000, if the amount appropriated for a year,",
      " and available for state allotments, exceeded the amount of allotments to all states in FY2003. Finally, the bill would have increased minimum state allotments for outlying areas to $60,000 if appropriations in a given year were sufficient to meet the higher state minimums of $680,000. S. 888 (Gregg), was introduced on April 11, 2003, and reported favorably by the Senate Committee on Health, Education, Labor, and Pensions on May 14, 2003. On August 1, 2003, the Senate incorporated S. 888 into H.R. 13 and passed H.R.",
      " 13 in lieu of S. 888 with an amendment by unanimous consent. Authorization levels for FY2004 contained in the Senate passed bill were reduced from the authorization levels contained in S. 888 as reported by the Senate Committee on Health, Education, Labor, and Pensions (from $250 million to $232 million for Library Services and Technology; and from $41.5 to $38.6 million for Museum Services). The Senate-passed bill included the following provisions that were contained in S. 888 as reported by the Senate Committee on Health, Education, Labor, and Pensions, but were not contained in H.R.",
      " 13 as passed by the House: provisions that would have made the Chairman of the National Commission on Library and Information Science a member (nonvoting) of the National Museum and Library Services Board; a prohibition against using IMLS funds for construction; and provisions that would have raised liability amounts in the Arts and Artifacts Indemnity Act. S. 238 (Reed) was introduced on January 29, 2003, and was referred to the Senate Committee on Health, Education, Labor and Pensions. The Library Services and Technology provisions of this bill were essentially the same as those in S. 2611 (Reed), introduced in the 107 th Congress.",
      " Authorization levels in S. 238 were $350 million for Library Services and Technology and $65 million for Museum Services. S. 238, however, unlike S. 2611, also included amendments raising liability amounts in the Arts and Artifacts Indemnity Act.\n"
    ],
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  },
  {
    "id": 32,
    "question": null,
    "answer": "After decades of generally falling U.S. crude oil production, technological advances in the extraction of crude oil from shale formations have contributed to increases in U.S. production. In response to these and other market developments, some have proposed removing the 4 decade old restrictions on crude oil exports, underscoring the need to understand how allowing crude oil exports could affect crude oil prices, and the prices of consumer fuels refined from crude oil, such as gasoline and diesel. This testimony discusses what is known about the pricing and other key potential implications of removing crude oil export restrictions. It is based on GAO's September 2014 report ( GAO-14-807 ), and information on crude oil production and prices updated in June 2015. For that report, GAO reviewed four studies issued in 2014 on crude oil exports; including two sponsored by industry and conducted by consultants, one sponsored by a research organization and conducted by consultants, and one conducted at a research organization. Market conditions have changed since these studies were conducted, underscoring some uncertainties surrounding estimates of potential implications of removing crude oil export restrictions. For its 2014 report, GAO also summarized the views of a nongeneralizable sample of 17 stakeholders including representatives of companies and interest groups with a stake in the outcome of decisions regarding crude oil export restrictions, as well as academic, industry, and other experts. In September 2014, GAO reported that according to studies it reviewed and stakeholders it interviewed, removing crude oil export restrictions would likely increase domestic crude oil prices, but could decrease consumer fuel prices, although the extent of price changes are uncertain and may vary by region. The studies identified the following implications for U.S. crude oil and consumer fuel prices: Crude oil prices . The four studies GAO reviewed estimated that if crude oil export restrictions were removed, U.S. crude oil prices would increase by about $2 to $8 per barrel\u2014bringing them closer to international prices. Prices for some U.S. crude oils have been lower than international prices\u2014for example, one benchmark U.S. crude oil averaged $52 per barrel from January through May 2015, while a comparable international crude oil averaged $57. In addition, one study found that, when assuming low future crude oil prices overall, removing export restrictions would have no measurable effect on U.S. crude oil prices. Consumer fuel prices. The four studies suggested that U.S. prices for gasoline, diesel, and other consumer fuels follow international prices. If domestic crude oil exports caused international crude oil prices to decrease, consumer fuel prices could decrease as well. Estimates of the consumer fuel price implications in the four studies GAO reviewed ranged from a decrease of 1.5 to 13 cents per gallon. In addition, one study found that, when assuming low future crude oil prices, removing export restrictions would have no measurable effect on consumer fuel prices. Some stakeholders cautioned that estimates of the price implications of removing export restrictions are subject to several uncertainties, such as the extent of U.S. crude oil production increases, and how readily U.S. refiners are able to absorb such increases. Some stakeholders further told GAO that there could be important regional differences in the price implications of removing export restrictions. The studies GAO reviewed and the stakeholders it interviewed generally suggested that removing crude oil export restrictions may also have the following implications: Crude oil production . Removing export restrictions may increase domestic production\u2014over 8 million barrels per day in April 2014\u2014because of increasing domestic crude oil prices. Estimates ranged from an additional 130,000 to 3.3 million barrels per day on average from 2015 through 2035. Environment . Additional crude oil production may pose risks to the quality and quantity of surface groundwater sources; increase greenhouse gas and other emissions; and increase the risk of spills from crude oil transportation. The economy . Three of the studies projected that removing export restrictions would lead to additional investment in crude oil production and increases in employment. This growth in the oil sector would\u2014in turn\u2014have additional positive effects in the rest of the economy, including for employment and government revenues.\n",
    "docs": [
      "Background The export of domestically produced crude oil has generally been  restricted since the 1970s. In particular, the Energy Policy and  Conservation Act of 1975 (EPCA) led the Department of Commerce\u2019s  Bureau of Industry and Security (BIS) to promulgate regulations that  require crude oil exporters to obtain a license.that BIS will issue licenses for the following crude oil exports: exports from Alaska\u2019s Cook Inlet, exports to Canada for consumption or use therein, exports in connection with refining or exchange of SPR crude oil, exports of certain California crude oil up to twenty-five thousand  barrels per day, exports consistent with certain international energy supply exports consistent with findings made by the President under certain exports of foreign origin crude oil that has not been commingled with  crude oil of U.S.",
      " origin. Other than for these exceptions, BIS considers export license applications  for exchanges involving crude oil on a case-by-case basis, and BIS can  approve them if it determines that the proposed export is consistent with  the national interest and purposes of EPCA. In addition to BIS\u2019s export  controls, other statutes control the export of domestically produced crude  oil, depending on where it was produced and how it is transported. In  these cases, BIS can approve exports only if the President makes the  necessary findings under applicable laws. Some of the authorized  exceptions, outlined above, are the result of such presidential findings.",
      " As we previously found, recent increases in U.S. crude oil production  have lowered the cost of some domestic crude oils. For example, prices  for West Texas Intermediate (WTI) crude oil\u2014a domestic crude oil used  as a benchmark for pricing\u2014were historically about the same price as  Brent, an international benchmark crude oil from the North Sea between   However, from 2011 through  Great Britain and the European continent.2014, the price of WTI averaged $12 per barrel lower than Brent (see fig.  1). In 2014, prices for these benchmark crude oils narrowed as global oil  prices declined,",
      " and WTI averaged $52 from January through May 2015,  while Brent averaged $57. The development of U.S. crude oil production  has created some challenges for crude oil transportation infrastructure  because some production has been in areas with limited linkages to  refining centers. According to EIA, these infrastructure constraints have  contributed to discounted prices for some domestic crude oils. Much of the crude oil currently produced in the United States has  characteristics that differ from historic domestic production. Crude oil is  generally classified according to two parameters: density and sulfur  content. Less dense crude oils are known as \u201clight,\u201d and denser crude oils  are known as \u201cheavy.\u201d Crude oils with relatively low sulfur content are  known as \u201csweet,\u201d and crude oils with higher sulfur content are known as  \u201csour.\u201d As shown in figure 2,",
      " according to EIA, most domestic crude oil  produced over the last 5 years has tended to be light oil. Specifically,  according to EIA estimates, about all of the 1.8 million barrels per day  increase in production from 2011 to 2013 consisted of lighter sweet crude  oils. Light crude oil differs from the crude oil that many U.S. refineries are  designed to process. Refineries are configured to produce transportation  fuels and other products (e.g., gasoline, diesel, jet fuel, and kerosene)  from specific types of crude oil. Refineries use a distillation process that  separates crude oil into different fractions,",
      " or interim products, based on  their boiling points, which can then be further processed into final  products. Many refineries in the United States are configured to refine  heavier crude oils and have therefore been able to take advantage of  historically lower prices of heavier crude oils. For example, in 2013, the  average density of crude oil used at domestic refineries was 30.8, while  nearly all of the increase in production in recent years has been lighter  crude oil with a density of 35 or above. According to EIA, additional production of light crude oil over the past  several years has been absorbed into the market through several  mechanisms,",
      " but the capacity of these mechanisms to absorb further  increases in light crude oil production may be limited in the future for the  following reasons: Reduced imports of similar grade crude oils: According to EIA,  additional production of light oil in the past several years has primarily  been absorbed by reducing imports of similar grade crude oils. Light  crude oil imports fell from 1.7 million barrels per day in 2011 to 1  million barrels per day in 2013. As a result, there may be dwindling  amounts of light crude oil imports that can be reduced in the future,  according to EIA.  Increased crude oil exports:",
      " Crude oil exports have increased  recently, from less than thirty thousand barrels per day in 2008 to 396  thousand barrels per day in June 2014. Continued increases in crude  oil exports will depend, in part, on the extent of any relaxation of  current export restrictions, according to EIA.  Increased use of light crude oils at domestic refineries: Domestic  refineries have increased the average gravity of crude oils that they  refine. The average American Petroleum Institute (API) gravity of  crude oil used in U.S. refineries increased from 30.2 degrees in 2008  to 30.",
      "8 degrees in 2013, according to EIA. Continued shifts to use  additional lighter crude oils at domestic refineries can be enabled by  investments to relieve constraints associated with refining lighter  crude oils at refineries that were optimized to refine heavier crude oils,  according to EIA.  Increased use of domestic refineries: In recent years, domestic  refineries have been run more intensively, allowing the use of more  domestic crude oils. Utilization\u2014a measure of how intensively  refineries are used that is calculated by dividing total crude oil and  other inputs used at refineries by the amount refineries can process  under usual operating conditions\u2014increased from 86 percent in 2011  to 88 percent in 2013.",
      " There may be limits to further increases in  utilization of refineries that are already running at high rates,  according to EIA. Removing Crude Oil  Export Restrictions Is  Expected to Increase  Domestic Crude Oil  Prices and Could  Decrease Consumer  Fuel Prices In our September 2014 report, we reported that according to the studies  we reviewed and the stakeholders we interviewed, removing crude oil  export restrictions would likely increase some domestic crude oil prices,  but could decrease consumer fuel prices, although the extent of  consumer fuel price changes are uncertain and may vary by region. As  discussed earlier, increasing domestic crude oil production has resulted in  lower prices of some domestic crude oils compared with international  benchmark crude oils.",
      " Three of the studies we reviewed also concluded  that, absent changes in crude oil export restrictions, the expected growth  in crude oil production may not be fully absorbed by domestic refineries or  through exports (where allowed), contributing to even wider differences in  prices between some domestic and international crude oils. According to  these studies, by removing the export restrictions, these domestic crude  oils could be sold at prices closer to international prices, reducing the  price differential and aligning the price of domestic crude oil with  international benchmarks. Specifically, the Department of Commerce\u2019s definition of crude oil includes condensates,  which are light liquid hydrocarbons recovered primarily from natural gas wells.",
      " subject to export restrictions. One stakeholder stated that this may  lead to more condensate exports than expected. Within the context of these uncertainties, estimates of potential price  effects vary in the four studies we reviewed, as shown in table 1.  Specifically, estimates in these studies of the increase in domestic crude  oil prices due to removing crude oil export restrictions ranged from about  $2 to $8 per barrel. was $103 per barrel, and these estimates represented 2 to 8 percent of  that price. In addition, NERA Economic Consulting found that removing  export restrictions would have no measurable effect in a case that  assumes a low future international oil price of $70 per barrel in 2015   According to the NERA Economic  rising to less than $75 by 2035.Consulting study,",
      " current production costs are close to these values, so  that removing export restrictions would provide little incentive to produce  more light crude oil. Unless otherwise noted, dollar estimates in the rest of this report have been converted  to 2014 year dollars. These are average price effects over the study time frames, and  some cases in some studies projected larger price effects in the near term that declined  over time. ICF International  West Texas Intermediate  crude oil prices increase  $2.35 to $4.19 per barrel  on average from 2015- 2035. IHS   Prices increase $7.89  per barrel on average  from 2016-",
      "2030. NERA Economic  Consulting  Prices increase $1.74 per  barrel in the reference case  and $5.95 per barrel in the  high case on average from  2015-2035. Implications refer to the difference between the reference case and its baseline with export  restrictions in place, and also the difference between the high oil and gas recovery case and its  corresponding baseline. NERA Economic Consulting also found that removing crude oil export  restrictions would have no measurable effect in the low world oil price case. Regarding consumer fuel prices, such as gasoline, diesel, and jet fuel, the  studies we reviewed and most of the stakeholders we interviewed  suggested that consumer fuel prices could decrease as a result of  removing crude oil export restrictions.",
      " A decrease in consumer fuel prices  could occur because such prices tend to follow international crude oil  prices rather than domestic crude oil prices, according to the studies  reviewed and most of the stakeholders interviewed. If domestic crude oil  exports caused international crude oil prices to decrease, consumer fuel   Table 2 shows that the estimates of the  prices could decrease as well. price effects on consumer fuels varied in the four studies we reviewed.  Price estimates ranged from a decrease of 1.5 to 13 cents per gallon.  These estimates represented 0.4 to 3.4 percent of the average U.S. retail  gasoline price at the beginning of June 2014.",
      " In addition, NERA  Economic Consulting found that removing export restrictions would have  no measurable effect on consumer fuel prices when assuming a low  future world crude oil price. Resources for the Future also estimates a decrease in consumer fuel prices but this  decrease is as a result of increased refinery efficiency (even with an estimated slight  increase in the international crude oil price). ICF International  Petroleum product prices  would decline by 1.5 to 2.4  cents per gallon on average  from 2015-2035. IHS   Gasoline prices would  decline by 9 to 13  cents per gallon on  average from 2016-",
      " 2030. NERA Economic Consulting Petroleum product prices would  decline by 3 cents per gallon on  average from 2015-2035 in the  reference case and 11 cents per  gallon in the high case. Gasoline  prices would decline by 3 cents  per gallon in the reference case  and 10 cents per gallon in the high  case. Fuel prices would not be  affected in a low world oil price  case. Implications refer to the difference between the reference case and its baseline with export  restrictions in place, and the difference between the high oil and gas recovery case and its  corresponding baseline.",
      " The effect of removing crude oil export restrictions on domestic consumer  fuel prices depends on several uncertainties, as we discussed in our  September 2014 report. First, it would depend on the extent to which  domestic versus international crude oil prices determine the domestic  price of consumer fuels. A 2014 research study examining the  relationship between domestic crude oil and gasoline prices concluded  that low domestic crude oil prices in the Midwest during 2011 did not  result in lower gasoline prices in that region. This research supports the  assumption made in the four studies we reviewed that to some extent  higher prices of some domestic crude oils as a result of removing crude  oil export restrictions would not be passed on to consumer fuel prices.",
      "  However, some stakeholders told us that this may not always be the case  and that more recent or detailed data could show that lower prices for  some domestic crude oils have influenced consumer fuel prices. The Merchant Marine Act of 1920, also known as the Jones Act, in general, requires that  any vessel (including barges) operating between two U.S. ports be U.S.-built, -owned, and  -operated. closure, especially those located in the Northeast. However, according to  one stakeholder, domestic refiners still have a significant cost advantage  in the form of less expensive natural gas, which is an important energy  source for many refineries.",
      " For this and other reasons, one stakeholder  told us they did not anticipate refinery closures as a result of removing  export restrictions. Removing Crude Oil  Export Restrictions Is  Expected to Increase  Domestic Production  and Have Other  Implications The studies we reviewed for our September 2014 report, generally  suggested that removing crude oil export restrictions may increase  domestic crude oil production and may affect the environment and the  economy: Crude oil production. Removing crude oil export restrictions may  increase domestic crude oil production. Even with current crude oil  export restrictions, given various scenarios, EIA projected that  domestic production will continue to increase through 2020.",
      "  If export  restrictions were removed, according to the four studies we reviewed,  the increased prices of domestic crude oil are projected to lead to  further increases in crude oil production. Projections of this increase  varied in the studies we reviewed\u2014from a low of an additional  130,000 barrels per day on average from 2015 through 2035,  according to the ICF International study, to a high of an additional 3.3  million barrels per day on average from 2015 through 2035 in NERA  Economic Consulting\u2019s study.almost 40 percent of production in April 2014.",
      " This is equivalent to 1.5 percent to Environment. Two of the studies we reviewed stated that the  increased crude oil production that could result from removing the  restrictions on crude oil exports may affect the environment. Most  stakeholders we interviewed echoed this statement. This is consistent  with what we found in a September 2012 report.we found that crude oil development may pose certain inherent  environmental and public health risks. However, the extent of the risk  is unknown, in part, because the severity of adverse effects depends  on various location- and process-specific factors, including the  location of future shale oil and gas development and the rate at which  it occurs.",
      " It also depends on geology, climate, business practices, and  regulatory and enforcement activities. The stakeholders who raised  concerns about the effect of removing the restrictions on crude oil  exports on the environment identified risks including those related to  the quality and quantity of surface and groundwater sources;  increases in greenhouse gas and other air emissions, and increases  in the risk of spills from crude oil transportation. The economy. The four studies we reviewed suggested that  removing crude oil export restrictions would increase the size of the  economy. Three of the studies projected that removing export  restrictions would lead to additional investment in crude oil production  and increases in employment.",
      " This growth in the oil sector would\u2014in  turn\u2014have additional positive effects in the rest of the economy.  For  example, NERA Economic Consulting\u2019s study projected an average of  230,000 to 380,000 workers would be removed from unemployment  through 2020 if export restrictions were eliminated in 2015. These  employment benefits would largely disappear if export restrictions  were not removed until 2020 because by then the economy would  have returned to full employment. Two of the studies we reviewed  suggested that removing export restrictions would increase  government revenues, although the estimates of the increase vary.  One study estimated that total government revenue would increase by  a combined $1.",
      "4 trillion in additional revenue from 2016 through 2030,  and another study estimated that U.S. federal, state, and local tax  receipts combined with royalties from drilling on federal lands could  increase by an annual average of $3.9 to $5.7 billion from 2015  through 2035. Chairman Conaway, Ranking Member Peterson, and Members of the  Committee, this completes my prepared statement. I would be pleased to  answer any questions that you may have at this time. GAO Contact and  Staff  Acknowledgments If you or your staff members have any questions concerning this  testimony,",
      " please contact me at (202) 512-3841 or ruscof@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. Other individuals  who made key contributions include Christine Kehr (Assistant Director),  Quindi Franco, Alison O\u2019Neill, and Kiki Theodoropoulos. 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.\n"
    ],
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  },
  {
    "id": 33,
    "question": null,
    "answer": "Media projections may be based both on exit polls and on information acquired as toactual ballot counts.  The FirstAmendment would generally preclude Congress from prohibiting the media from interviewing voters after they exitthe polls.  It apparently would also precludeCongress from prohibiting the media from reporting the results of those polls.  Congress, could, however, ban votersolicitation within a certain distance from apolling place, and might be able to include exit polling within such a ban.  It also might be able to deny media accessto ballot counts, either when the polls havenot closed in the jurisdiction whose votes are being counted, or when the polls have not closed across the nation.\n",
    "docs": [
      "I. Banning Media Projections Media projections are speech, and the First Amendment provides that \"Congress shall make no law... abridging the freedom of speech, or of the press.\" It ispossible, however, though by no means certain, that Congress could limit the right of broadcast radio and televisionstations to report election result projections. This is because the Supreme Court, citing \"spectrum scarcity,\" i.e., the limited number of availablebroadcast frequencies, has \"permitted more intrusive regulationof broadcast speakers than of speakers in other media.\" Turner Broadcasting System v. FederalCommunications Commission, 512 U.S. 622,",
      " 637 (1994). But torestrict broadcast radio and television, but not cable television and the Internet, would seem to go only a small waytoward banning media election projections. A statute that restricted speech of media other than broadcast radio and television, if challenged, would be subject to \"strict scrutiny\" by the courts. This meansthat the courts would uphold it only if the government proves that it is necessary \"to promote a compelling interest\"and is \"the least restrictive means to furtherthe articulated interest.\" Sable Communications of California, Inc. v. Federal CommunicationsCommission, 492 U.S. 115, 126 (1989).  Would there be a \"compelling interest\"",
      " in prohibiting media projections? Though there might be a compelling interest in preventing the media from interferingwith elections so as potentially to affect the outcome, it seems questionable whether election projections, if theyare understood by potential voters to be merelyprojections, could be said to interfere with elections. Voters who hear or read such projections presumably knowthat they are only projections, and that their votescould still make a difference in the election. If they decide that that difference is not significant enough to makeit worth their while to vote, then they have made afree choice. The Supreme Court has written in another context: \"The First Amendment directs us to be especiallyskeptical of regulations that seek to keep peoplein the dark for what the government perceives to be their own good.\" 44 Liquormart,",
      " Inc. v. RhodeIsland, 517 U.S. 484, 503 (1996). If there is concern that some potential voters might be misled by projections to think that the winner of an election has been determined, then Congress might beable to require that disclosures accompany projections. Although the First Amendment protects the right not tospeak as well as the right to speak, the courtsmight view compelled disclosures in this case as serving a compelling interest in protecting the right to vote. In the seemingly unlikely event that a court were to find a compelling interest in prohibiting media election result projections, then the government would stillhave to show that there was no less restrictive means to further that interest.",
      " Making this determination would entailconsideration of other proposals to deal withthe perceived problem. II. Banning Exit Polling Within a Prescribed Distance from the Polls The purpose of legislation banning exit polling within a prescribed distance from the polls would be to make exit polling more difficult. In Burson v. Freeman,504 U.S. 191 (1992), the Supreme Court upheld a Tennessee statute that prohibited the solicitation of votes and thedisplay or distribution of campaign materialswithin 100 feet of the entrance to a polling place. The Court recognized that this statute both restricted politicalspeech, to which the First Amendment \"has itsfullest and most urgent application,\" and \"bar[",
      "red] speech in quintessential public forums,\" the use of which forassembly and debate \"has, from ancient times,been a part of the privileges, immunities, rights, and liberties of citizens.\" Id. at 196, 197. Further, thestatute restricted speech on the basis of its content, as itrestricted political but not commercial solicitation, and therefore was not \"a facially content-neutral time, place, ormanner restriction.\" Id. at 197. The Court therefore subjected the Tennessee statute to strict scrutiny, which means that it required the state to show that the regulation serves a compelling stateinterest and \"is necessary to serve the asserted interest.\" Id.",
      " at 199. Although applying strict scrutinyusually results in a statute's being struck down, in this casethe Court concluded \"that a State has a compelling interest in protecting voters from confusion and undueinfluence,\" and \"in preserving the integrity of itselection process.\" Id. Or, more simply, in preventing \"two evils: voter intimidation and election fraud.\" Id. at 206. The next question, then, was whether a100-foot restricted zone is necessary to serve this compelling interest. The Court, noting that \"all 50 States limitaccess to the areas in or around polling places,\"said that, though it would not specify a precise maximum number of feet permitted by the First Amendment,",
      " 100feet \"is on the constitutional side of the line.\" Id.at 206, 211. In Daily Herald Co. v. Munro, 838 F.2d 380 (9th Cir. 1988), decided prior to Burson, the Ninth Circuit struck down a Washington statute that prohibited exitpolling within 300 feet of a polling place. The court granted that \"[s]tates have an interest in maintaining peace,order, and decorum at the polls and 'preservingthe integrity of their electoral processes.'\" Id. at 385. But the court found that \"the statute is notnarrowly tailored to advance that interest,\" because it prohibitsnondisruptive as well as disruptive exit polling.",
      " Id. \"Moreover, the statute is not the least restrictivemeans of advancing the state's interest. The statute isunnecessarily restrictive because [another Washington statute] already prohibits disruptive conduct at the polls,\"and \"that several other less restrictive means ofadvancing this interest exist: for example, reducing the size of the restricted area; requiring the media to explain thatthe exit poll is completely voluntary;requiring polling places to have separate entrances and exits,... or prohibiting everyone except election officialsand voters from entering the polling room.\" Id. This reasoning of the Ninth Circuit may no longer stand after the Supreme Court's decision in Burson.",
      " As for the statute's being unnecessary because anotherstatute already prohibited disruptive conduct, the Court in Burson found that \"[i]ntimidation andinterference laws [ i.e., laws that prohibit only disruptive conduct]fall short of serving a State's compelling interests because they 'deal with only the most blatant and specific attempts'to impede elections.\" 504 U.S. at 206-207. As for there being a less restrictive means to preserve the integrity of the electoral process, the Court in Burson did not require the state to provide \"factual findingto determine the necessity of [its] restrictions on speech.\" 504 U.S.",
      " at 222 (Stevens, J., dissenting). Rather, it foundthat \"the link between ballot secrecy andsome restricted zone surrounding the voting area... is common sense.\" Id. at 207. But the plaintiffs in Munro also \"argue[d] that the statute is unconstitutional for another reason: that the stated purpose for the statute of protecting order at thepolls was a pretext, and that the state's true motive was to prevent the media from broadcasting election resultsbefore the polls closed.\" Id. at 386. The courtfound \"that, assuming that at least one purpose of the statute was to prevent broadcasting early returns,",
      " the statuteis unconstitutional because this purpose isimpermissible.... [A] general interest in insulating voters from outside influences is insufficient to justify speechregulation.\" Id. at 387. \"In addition,\" the courtsaid, even if this were a permissible purpose, \"the statute is not narrowly tailored to protect voters from thebroadcasting of early returns. Election-daybroadcasting is only one use to which the media plaintiffs put the information gathered from exit polling...\" Id. at 387-388. The information is also used toanalyze the results of elections, and prohibiting exit polling prohibits speech involving such other uses of theinformation.",
      " Reading Munro together with Burson suggests that Congress could prohibit the solicitation of votes and the display or distribution of campaign materials within100 feet (or some other reasonable distance) of the entrance to a polling place, but could not prohibit exit pollingfor the purpose of preventing voters fromreceiving media projections. Any limit on exit polling would seem permissible only to the extent it could bejustified as part of a general restriction on interferingwith voters before they vote. In Burson, the Court found that the Tennessee statute'srestriction could be limited to voter solicitation, and need \"not restrict othertypes of speech, such as charitable and commercial solicitation or exit polling,",
      " within the 100-foot zone.\" 504 U.S.at 207. But the Court did not say that a statutecould not also restrict other types of speech, if it could demonstrate that doing so was necessary to servea compelling governmental interest. A post- Burson court of appeals case found greater justification for restricting campaigning than for restricting exit polling, because, \"[w]hile there is no evidenceof widespread voter harassment or intimidation by exit-pollers, there is evidence that poll workers do create theseproblems.\" Schirmer v. Edwards, 2 F.3d 117,122 (5th Cir. 1993), cert.",
      " denied, 511 U.S. 1017 (1994). The court distinguished Munro on this basis, and upheld a 600-foot campaign-free zone. III. Banning Media Access to Ballot Counts If Congress could not ban media projections outright, could it prohibit government officials from releasing ballot counts to the media? Could Congress, that is,deny media access to ballot counts, either when the polls have not closed in the jurisdiction whose votes are beingcounted, or when the polls have not closedacross the nation? The purpose of restricting access in the latter case would be to prevent potential voters in statesin western time zones from being influenced bylearning the results in states in eastern time zones.",
      "  The First Amendment, the Supreme Court has written,  goes beyond protection of the press and the self-expression of individuals to prohibit government from limiting the stock of information from which members ofthe public may draw.\" Free speech carries with it some freedom to listen. \"In a variety of contexts this Court hasreferred to a First Amendment right to'receiveinformation and ideas.'\" Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 575-576 (1980). Nevertheless, although \"news gathering is not without its First Amendmentprotections\"( Branzburg v. Hayes, 408 U.S.",
      " 665, 707 (1972)), these protections are not generally as greatas are protections from censorship. The Court has heldthat the First Amendment does not prevent prison officials from prohibiting \"face-to-face interviews between pressrepresentatives and individual inmates.\" Pellv. Procunier, 417 U.S. 817, 819 (1974).  In so holding, the Court did not find it necessary for the government to establish a compelling need to justify the prohibition, as the government in the ordinarycase must to justify statutes that censor speech. Rather, the Court \"balance[d] First Amendment rights\" againstgovernmental interests such as \"the legitimatepenological objectives of the corrections system\"",
      " and \"internal security within the corrections facilities,\" taking intoaccount available alternative means ofcommunication. Id. at 824, 822, 823. Furthermore, the Court wrote, although the First Amendmentbars the \"government from interfering in any way with a freepress,\" it does not \"require government to accord the press special access to information not shared by members ofthe public generally.\" Id. at 834, 833. If Congress enacted a statute prohibiting the release of ballot counts, and it were challenged as unconstitutional, the court presumably would apply the sort ofbalancing test it used in Pell v. Procunier to reach a decision.",
      " It would assess the importance of denyingmedia access to ballot counts, perhaps consideringwhether media projections, or learning the results in other states, tend to mislead potential voters, or whetherpotential voters are merely making free choices aboutthe importance of their vote in light of status of the election at the time they hear a media projection or the resultin another state. A court might also evaluate the efficacy of prohibiting the release of ballot counts, considering, for example, whether, if denied access to ballot counts, the mediamight nevertheless make projections based merely on exit polls, which might be more misleading than those basedon ballot counts. Finally, a court mightconsider whether Congress could accomplish its goal by alternative means that would restrict speech less.",
      " Anexample might be to require that projections beaccompanied by disclosure of the information on which the projection is based. IV. Concluding Note Whether or not there is a First Amendment barrier to banning exit polling within a prescribed distance from the polls, or to prohibiting the release of ballot counts,there is still the question of Congress's power to regulate in this area. Congress has clear power to regulate Houseand Senate elections, but less clear power toregulate presidential elections, aspects of which the Constitution vests in the states. For additional information onthis subject, see CRS Report RL30747, Congressional Authority to Standardize National Election Procedures, by [author name scrubbed].\n"
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  {
    "id": 34,
    "question": null,
    "answer": "The Social Security Administration's (SSA) Disability Insurance (DI) program paid almost $123 billion in benefits in fiscal year 2010 to more than 10 million workers and dependents. The program has grown rapidly in recent years and is poised to grow further as the baby boom generation ages. GAO examined (1) what is known about the extent SSA makes work-related overpayments to, and recovers overpayments from, DI beneficiaries, and (2) SSA's policies and procedures for work continuing disability reviews (work CDRs) and potential DI program vulnerabilities that may contribute to overpayments to beneficiaries who have returned to work. To answer these questions, GAO reviewed work CDR policies and procedures, interviewed SSA headquarters and processing center officials, and visited 4 of 8 processing centers. We reviewed a random nongeneralizable sample of 60 CDR case files across those 4 centers to ensure we had a wide range of cases for our review (15 cases from each). These 4 centers received almost 80 percent of all work CDRs from SSA's Internal Revenue Service enforcement data match in fiscal year 2009. Disability Insurance overpayments detected by SSA increased from about $860 million in fiscal year 2001 to about $1.4 billion in fiscal year 2010, though the full extent of overpayments to beneficiaries who have returned to work and are no longer eligible is unknown. Overpayments may also go to beneficiaries who are no longer eligible due to medical improvement, but SSA estimates about 72 percent of all projected DI overpayments were work related during fiscal years 2005 through 2009. While the agency collected, or recovered, $839 million in overpayments in fiscal year 2010, monies still owed by beneficiaries grew by $225 million that same year, and total DI overpayment debt reached $5.4 billion. SSA does not have agency-wide performance goals for debt collection, for example, the percent of outstanding debt collected annually. And while SSA does have a policy for full repayment within three years, 19 of the 60 continuing disability review (work CDR) cases we reviewed had repayment plans exceeding three years. SSA officials told us lengthy repayment plans are often the result of an individual's limited income, but SSA does not review or approve repayment plans which exceed agency policy. During the course of our review, we also found a limitation in SSA's Recovery of Overpayments, Accounting and Reporting (ROAR) system. Used to track overpayments and collections, ROAR does not reflect debt due SSA past year 2049 so the total balance due the program is unknown, and likely larger than the agency is reporting. SSA officials acknowledged this issue, but are unable to determine the extent of the problem at this time. They told us they have a work group which will recommend action to correct the problem. But until this issue is addressed, SSA officials told us the agency can only track and report on overpayments scheduled to be repaid through 2049. The amount owed after that year is unreflected in current totals even as it annually increases. SSA has numerous policies and processes in place to perform work CDRs, though two key weaknesses have hindered SSA's ability to identify and review beneficiary earnings, which affect eligibility for DI benefits. First, SSA lacks timely earnings data on beneficiaries who return to work. In 49 of the 60 CDR cases we reviewed, there was no evidence in the file that the beneficiary reported returning to work, as required by the program. To identify these unreported earnings, SSA primarily relies on data matching with the Internal Revenue Service (IRS), then sends these matches to staff for a work CDR. However, the IRS data may be more than a year old when received by SSA, and SSA says it is not cost effective to gain access to and use other sources of earnings information, such as the National Directory of New Hires database. In addition, we found cases may wait up to 15 additional months before SSA staff begin work on the CDR. Second, SSA lacks formal, agency-wide performance goals for work CDRs. While it targets 270 days to develop a case, actual processing time taken ranged from 82 to 992 days (with a median of 396 days) in the 60 cases we reviewed, and overpayments which accrued as a result topped $1 million total. SSA officials reported several initiatives to more effectively prioritize work CDR cases, for example, those with the largest potential overpayment amounts, but these efforts are in the early stages and we could not yet assess their effectiveness. GAO has ongoing work on this issue and has no recommendations at this time.\n",
    "docs": [
      "Background SSA conducts periodic reviews called work continuing disability reviews  (work CDRs) to determine if beneficiaries are still eligible or are working  above the SGA level. While work CDRs can be prompted by several  events, most are generated by SSA\u2019s Continuing Disability Review  Enforcement Operation (enforcement operation). This process involves  periodic data matches between SSA\u2019s Master Beneficiary Record database  and IRS earnings data. The enforcement operation generates alerts for  cases that exceed specified earnings thresholds,  which are then  forwarded to 1 of 8 processing centers for additional development by SSA  staff. In fiscal year 2010, the enforcement operation flagged  approximately 2 million records of which more than 531,",
      "000 were sent to  SSA\u2019s processing centers and field offices for review. Most DI  Overpayments Are  Work Related, and  Their Recovery Can  Take Decades Medical and work-related overpayments in the DI program detected by  SSA grew from about $860 million in fiscal year 2001 to about $1.4 billion  in fiscal year 2010. Though the true extent of overpayments due to  earnings is currently unknown, our review suggests that most of them are  related to beneficiaries who work above SGA while receiving benefits. SSA  officials estimate that from fiscal years 2005 through 2009, about 72  percent of all projected DI overpayments were work-related,",
      " or to  beneficiaries who returned to work and were no longer eligible. SSA  officials attribute increases in the percentage of overpayments that are  work-related during this period to improved detection by its enforcement  operation, and to changes in how the agency estimates the overpayment  numbers. Agency officials also explained that the approximately half of  the increase in overpayment dollars during the 10 year period may be due  to the increase in DI program benefit levels. Beyond SSA\u2019s estimates, we found that detected overpayments could be  even larger than SSA\u2019s data reflect because some overpayments have been  accidentally removed from SSA records due to manual processing errors.",
      "  In our current review of 60 work CDR cases, we found two manual  processing errors which resulted in overpayments totaling $53,097 being  removed from agency records. In one case, staff entered a code to correct  an overpayment amount but instead deleted the overpayment entirely. As  a result of our detection, SSA officials reentered the overpayment debts  into the system and indicated they would proceed with debtor notification  and recovery. Because the results of our case review are not generalizable,  the incidence of such occurrences is currently unknown and thus the  potential impact on total DI overpayments owed by ineligible beneficiaries  is not clear.",
      " SSA officials said that they do not have a mechanism for  detecting, or a process of supervisory review to catch, such errors. A beneficiary\u2019s total DI overpayment debt can also increase because of  multiple periods of employment. DI beneficiaries may reenter and leave  the workforce based on their ability to perform SGA. As a result, a  beneficiary could be subject to multiple periods of DI overpayments if he  or she does not report increased earnings to SSA in a timely manner, as  regulations instruct. In 49 of the 60 cases we randomly selected for review,  there was no indication in the file that the individual had reported his or  her earnings to SSA,",
      " and in 15 of the 60, SSA had detected two or more  separate periods of earnings which resulted in overpayments. In one of  these cases, the ineligible beneficiary owed SSA a total of $69,976. SSA Lacks Agency-Wide  Performance Goals for DI  Debt Recovery, and  Overpayment Debt  Continues to Mount SSA does not currently have formal, agency-wide performance goals for  debt recovery. Specifically, the agency does not have goals for the  percentage of DI overpayment debt recovered within the 36 month  timeframe as required by its own policy. Under the Government  Performance Results Act of 1993 (GPRA), federal agencies are required to  establish performance goals to define level of performance and establish  performance indicators to be used in measuring relevant outputs,",
      " service  levels, and outcomes for each program activity.  SSA\u2019s policy manual  (POMS) requires staff to ask for full repayment within 36 months, but the  agency has not made this time frame a performance goal. SSA officials  said they are currently working to develop debt recovery goals. In the  meantime, without agency-wide performance goals for debt recovery, SSA  cannot adequately measure its performance or fully leverage and target its  resources to recover overpayments from ineligible beneficiaries and  reduce the total owed to SSA. Despite a substantial increase in DI debt  collections\u2014$340 million to $839 million from fiscal year 2001 through  fiscal year 2010\u2014outstanding DI debt grew from $2.",
      "5 billion to $5.4  billion during this time, including a $225 million increase in fiscal year  2010. (see fig. 2) Most overpayment debt is collected by SSA through  offsets, or the withholding of future DI benefits for which a beneficiary is  still eligible. SSA attributes 77 percent of the approximately $839 million of  debt collected in fiscal year 2010 to withholding of DI benefits. The  amount withheld from benefits to recoup previous overpayments may be  negotiated with the debtor and based on a monthly amount the debtor can  afford. The remainder of overpayment debt is collected in a variety of  ways,",
      " including payments by the debtor and return of uncashed DI benefit  checks; withholding of other SSA benefits, such as Supplemental Security  Income (SSI);  or through external collection including federal salary  offset, administrative offset (other than against SSA benefits), tax refund  offset, and administrative wage garnishment.  SSA estimates that only  about 11 percent of collections is through external means. Of the 60 cases,  5 were referred for external collection at the time of our review, for a total  owed of $79,950, but just $2,478 had been recovered through these  methods. SSA Policy Does Not  Require Supervisory  Review of Repayment  Plans SSA does not require supervisory review of repayment plans prior to  approval,",
      " including those in which repayment periods exceed the  recommended 36 months. The agency reported that in fiscal year 2010, the  median time to collect a DI overpayment debt in full was 48 months.  However, in our review of 60 cases, we found that SSA agreed to some  initial repayment plans which will take many decades. We analyzed the  initial payment plans established for individuals in these cases and found  42 of the 60 had a payment plan in place, with a median repayment time  for all 42 of approximately 34 months. While SSA\u2019s POMS require that staff  should seek full repayment within 36 months,",
      " SSA officials reported that  no supervisory approval is needed to exceed the 36 months. Of the 42  cases with a payment plan, 19 had initial plans requiring more than 36  months for payment in full and 7 of these required 20 years or more.  Repayment time frames for the 42 cases ranged from less than 1 year to  nearly 223 years for a case with a 60-year-old debtor who was paying $10 a  month on $26,715 owed. (See fig. 3.) SSA officials told us they are often  unable to increase monthly payment amounts and thus shorten repayment  time frames because of a debtor\u2019s limited income.",
      " For instance, in a case  we reviewed with an initial repayment plan of 148 years for $44,465 in  overpayments owed to SSA, SSA records show the individual earned less  than $100 in 2010. In the course of analyzing repayment plans, we found that the ROAR  system cannot capture and track overpayment debt scheduled to be  collected beyond the year 2049. As a result, the overpayment debt on the  agency\u2019s books, and reported to the Department of the Treasury for the  federal government\u2019s consolidated financial statements, is understated to  some unknown extent. This ROAR system limitation stems from a  program modification used to address the change of the century (Y2K)",
      "  computer issue, and which extended the debt recovery date in ROAR from  \u201c1999\u201d to \u201c2049\u201d. Under existing SSA policies and procedures, SSA staff  manually remove from the ROAR system the portion of any debt that  cannot be collected before the year 2050, and create a reminder in the  system to recover that balance beginning in the year 2050. However,  because this is a manual process, the intended recovery action could be  potentially missed by staff. For example, 3 of the 60 cases we reviewed  had a total of $43,285 in overpayments removed from ROAR system  records because collection of these payments will occur after the year  2049.",
      " Because the results of our case review are not generalizable, we  could not determine how many additional disability overpayment cases  detected by SSA fell into this category. Unless corrected, more  overpayments will likely to continue to be underreported as the years  progress. Since bringing this issue to their attention, SSA officials told us  that the agency has begun to study this ROAR system limitation and an  agency working group will recommend a course of action to correct the  problem.  SSA officials also reported several initiatives either planned or  under way that could improve the recovery of overpayment debt, including  charging interest and penalties, offsetting state payments,",
      " and eliminating  the 10-year limit on making referrals of some debts for external collection. Lack of Timely  Earnings Data and  Inconsistent  Processing of Work  CDRs Allow  Overpayments to  Accrue SSA conducts periodic computer matches with wage data from the  Internal Revenue Service to independently verify beneficiaries\u2019 earnings.  However, earnings data provided through the IRS match are often more  than a year old when SSA staff begin the work CDR prompted by the IRS  data. Managers and staff at the four processing centers we visited cited  this delay as a major obstacle to limiting the occurrence and size of  overpayments.",
      " Our work shows that this has delayed processing of work  CDRs. In the 60 cases we reviewed, the earnings data were already  between 6 and 26 months old by the time they were available to SSA staff  for performing work CDRs. (See fig. 4). While DI beneficiaries are responsible for notifying SSA when they return  to work as a condition of receiving benefits, they sometimes fail to make  such notifications. Our review of 60 cases found no indication in 49 that  the individual had reported earnings to SSA as instructed by regulation. In  the other 11 cases, beneficiaries had reported returning to work,",
      " including  the name of their employer and the amount of their wages, at some point.  Yet 6 of these cases resulted in about $78,000 in total overpayments, even  though the beneficiary reported returning to work more than a year prior  to initiation of the work CDR. In the remaining 5 cases, the beneficiary  reported working only after the CDR was initiated. Earnings data from IRS or from beneficiaries may age further once  received by SSA because staff sometimes do not begin a work CDR  immediately. From the date of the initial IRS alert to the date staff begin  work on the CDR,",
      " it is categorized as a case \u201cpending development\u201d. In the  60 cases we reviewed, the median time cases were pending development  was 205 days, or about 7 months, and ranged from 2 to 466 days, or more  than 15 months. For example, in the 466-day case, the IRS alert came to  SSA in September 2007, when earnings (for 2006) were already 15 months  old, then aged an additional 15 months until SSA staff began developing  the work CDR. SSA officials could not explain what caused the delay in  initiating development of this case or of several others we reviewed.",
      " The delays that occur when staff do not act promptly to begin a work  CDR, in combination with the initial delays in receiving beneficiary  earnings data (either from the IRS enforcement operation, or beneficiaries\u2019  failure to self-report earnings), result in multiple DI overpayments which  may continue to accrue for extended periods of time before they are  addressed. For example, in the 60 cases we reviewed, delays which  occurred after IRS alerts were delivered to SSA resulted in individual  beneficiaries being overpaid for up to 38 months. Most received fewer  than 12 months of overpayments, but 19 of the cases received 18 or more  months of overpayments.",
      " According to an SSA official, staff shortages and  the need to focus resources on competing workloads, such as initial DI  claims and medical CDRs, are among the factors delaying development of  work CDRs in SSA\u2019s processing centers once earnings information is  received. (See fig. 5) In 2004, we recommended that SSA seek to use large scale batch matches  with an alternative database of earnings, the National Directory of New  Hires (NDNH), which was originally established to help states locate  noncustodial parents for child support payments. The NDNH could  provide SSA with quarterly wage information on existing employees within  four months of the end of a calendar quarter.",
      " Several federal programs  and agencies currently use the NDNH to verify program eligibility, detect  and prevent potential fraud or abuse, and collect overpayments. SSA  already has the authority to obtain NDNH earnings data on a case by case  basis, but as we previously reported lacks the authority to match SSA  and NDNH data on a large scale, or batch, basis. In 2009, SSA conducted a  cost effectiveness study on use of the NDNH, but SSA officials told us the  study showed such matches would generate a large number of alerts  needing development that were not of high quality due to data reliability  issues,",
      " or \u201cfalse positives\u201d. They also said the study found return on  investment of only about $1.40 in savings for each $1 spent. SSA provided  GAO with a limited overview of the study but we were unable to  independently verify its accuracy or completeness because the  information provided lacked sufficient detail. However, the agency\u2019s  experience with the NDNH in its SSI program suggests it may be more  cost-effective than indicated by SSA\u2019s analysis. The NDNH provides SSA  staff with access to more comprehensive and timely employment and  wage information, according to SSA officials, and the match has resulted  in an estimated $200 million in SSI overpayment preventions and  recoveries per year.",
      " Moreover, even if the benefit-to-cost ratio of using the  NDNH for identifying DI beneficaries\u2019 earnings is only 1.4 to 1.0, as  reported by SSA, this still represents a 40 percent rate of return. SSA Lacks Agency-Wide  Performance Goals and a  Consistent Approach for  Processing Work CDRs SSA does not have agency-wide performance goals or a consistent  approach for processing work CDRs across its processing centers.  Specifically, the agency lacks performance goals for the number of cases  that are pending development or for number of days taken to process a  work CDR.",
      " While SSA has established an agency-wide goal for processing  a certain number of medical CDRs in a fiscal year, and includes this goal in  the agency\u2019s annual performance plan, SSA officials told us they have not  established similar goals for work CDRs. Instead, they have established  targets for the processing centers. For example, SSA has set targets for 95  percent of IRS alerts on earnings generated in 2008 or earlier to have a  work CDR completed by September 24, 2010, and for processing centers to  complete development of cases within 270 days. SSA officials said work  CDRs completed were generally not tracked prior to fiscal year 2010.",
      "  We  also found that while SSA\u2019s policies establish steps for work CDR  processing to be followed across all processing centers, processing times  across the four centers we visited varied widely once development was  initiated. More specifically, we found that processing times for the 60  cases we reviewed ranged from 82 to 992 days (with a median of 396 days)    and resulted in combined overpayments totaling more than $1 million. We  also found processing times varied depending on processing center. For  example, while the median processing time for the cases we reviewed  from three centers ranged from 307 to 397 days,",
      " median processing time at  the fourth center, which processes about 50 percent of all work CDRs, was  626 days. (See fig. 6) Within the last year, SSA has started work on some new initiatives to  identify CDR enforcement alerts that pose a greater likelihood of resulting  in large overpayments. These include prioritizing IRS alerts with reported  earnings that are greater than or equal to 12 times the current SGA level in  an effort to better target cases for work CDRs, as well as working to  update and streamline existing procedures regarding the initiation, follow- up timeframes, and overall completion of work continuing disability  reviews for processing center personnel.",
      " While these and other recent  initiatives represent promising steps, it is too early to assess what impact  they may have on the prevalence and size of DI overpayments. Chairmen, Ranking Members, and Members of the Subcommittees, this  concludes my prepared statement. I would be pleased to respond to any  questions you or other Members of the subcommittees may have at this  time. Contact and Staff  Acknowledgments Daniel Bertoni at (202) 512-7215 or bertonid@gao.gov  In addition to the contact mentioned above, Jeremy Cox, Assistant  Director; Arthur T. Merriam Jr., Analyst-in-Charge;",
      " Susan Aschoff; James  Bennett; David Forgosh; Monika Gomez; Angela Jacobs; Joel Marus; Sheila  McCoy; Cady Panetta; Nyree Ryder Tee; Vanessa Taylor; Walter Vance;  and Craig Winslow made key contributions to this statement. 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.\n"
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  {
    "id": 35,
    "question": null,
    "answer": "Since the terrorist attacks on September 11, 2001, and the subsequent anthrax incidents, there has been concern about the ability of the federal government to prepare for and coordinate an effective public health response given the broad distribution of responsibility for that task at the federal level. More then 20 federal departments and agencies carry some responsibility for bioterrorism preparedness and response. The President's proposed Homeland Security Act of 2002 would bring many of these federal entities with homeland security responsibilities--including public health preparedness and response--into one department to mobilize and focus assets and resources at all levels of government. The proposed reorganization has the potential to assist in the coordination of public health preparedness and response programs at the federal, state, and local levels. There are concerns, however, about the proposed transfer of control of public health assistance programs that have both basic public health and homeland security functions from Health and Human Services to the new department. Transferring control over these programs, including priority setting, to the new department has the potential to disrupt some programs critical to basic public health responsibilities. The President's proposal is unclear on how both the homeland security and the public health objectives would be accomplished.\n",
    "docs": [
      "Background Federal, state, and local government agencies have differing roles with  regard to public health emergency preparedness and response. The federal  government conducts a variety of activities, including developing  interagency response plans, increasing state and local response  capabilities, developing and deploying federal response teams, increasing  the availability of medical treatments, participating in and sponsoring  exercises, planning for victim aid, and providing support in times of  disaster and during special events such as the Olympic games. One of its  main functions is to provide support for the primary responders at the  state and local level, including emergency medical service personnel,  public health officials, doctors,",
      " and nurses. This support is critical because  the burden of response falls initially on state and local emergency  response agencies. The President\u2019s proposal transfers control over many of the programs that  provide preparedness and response support for the state and local  governments to a new Department of Homeland Security. Among other  changes, the proposed legislation transfers HHS\u2019s Office of the Assistant  Secretary for Public Health Emergency Preparedness to the new  department. Included in this transfer is the Office of Emergency  Preparedness (OEP), which currently leads the National Disaster Medical  System (NDMS) in conjunction with several other agencies and the  Metropolitan Medical Response System (MMRS). The Strategic National  Stockpile,",
      " currently administered by the Centers for Disease Control and  Prevention (CDC), would also be transferred, although the Secretary of  HHS would still manage the stockpile and continue to determine its  contents. The President\u2019s proposal would also transfer the select agent  registration enforcement program from HHS to the new department.  Currently administered by CDC, the program\u2019s mission is the security of  those biologic agents that have the potential for use by terrorists. The  proposal provides for the new department to consult with appropriate  agencies, which would include HHS, in maintaining the select agent list. Under the President\u2019s proposal, the new department would also be  responsible for all current HHS public health emergency preparedness  activities carried out to assist state and local governments or private  organizations to plan,",
      " prepare for, prevent, identify, and respond to  biological, chemical, radiological, and nuclear events and public health  emergencies. Although not specifically named in the proposal, this would  include CDC\u2019s Bioterrorism Preparedness and Response program and the  Health Resources and Services Administration\u2019s (HRSA) Bioterrorism  Hospital Preparedness Program. These programs provide grants to states  and cities to develop plans and build capacity for communication, disease  surveillance, epidemiology, hospital planning, laboratory analysis, and  other basic public health functions. Except as otherwise directed by the  President, the Secretary of Homeland Security would carry out these  activities through HHS under agreements to be negotiated with the  Secretary of HHS.",
      " Further, the Secretary of Homeland Security would be  authorized to set the priorities for these preparedness and response  activities. The new Department of Homeland Security would also be responsible for  conducting a national scientific research and development program,  including developing national policy and coordinating the federal  government\u2019s civilian efforts to counter chemical, biological, radiological,  and nuclear weapons or other emerging threats. This would include  establishing priorities and directing and supporting national research and  development and procurement of technology and systems for detecting,  preventing, protecting against, and responding to terrorist acts using  chemical, biological, radiological, or nuclear weapons. Portions of the  Departments of Agriculture,",
      " Defense, and Energy that conduct research  would be transferred to the new Department of Homeland Security. For  example, the Department of Energy\u2019s (DOE) chemical and biological  national security research and some of its nuclear smuggling and  homeland security activities would be transferred to the new homeland  security department. The Department of Homeland Security would carry  out civilian health-related biological, biomedical, and infectious disease  defense research and development through agreements with HHS, unless  otherwise directed by the President. As part of this responsibility, the new  department would establish priorities and direction for a program of basic  and applied research on the detection, treatment,",
      " and prevention of  infectious diseases to be conducted by the National Institutes of Health  (NIH). Transfer of Certain  Public Health  Programs Has  Potential to Improve  Coordination The transfer of federal assets and resources in the President\u2019s proposed  legislation has the potential to improve coordination of public health  preparedness and response activities at the federal, state, and local levels.  Our past work has detailed a lack of coordination in the programs that  house these activities, which are currently dispersed across numerous  federal agencies. In addition, we have discussed the need for an  institutionalized responsibility for homeland security in federal statute.  We have also testified that one key consideration in evaluating whether  individual agencies or programs should be included or excluded from the  proposed department is the extent to which homeland security is a major  part of the agency or program mission.",
      " The President\u2019s proposal provides the potential to consolidate programs,  thereby reducing the number of points of contact with which state and  local officials have to contend. However, coordination would still be  required with multiple agencies across departments. Many of the agencies  involved in these programs have differing perspectives and priorities, and  the proposal does not sufficiently clarify the lines of authority of different  parties in the event of an emergency, such as between the Federal Bureau  of Investigation (FBI) and public health officials investigating a suspected  bioterrorist incident. Let me provide you with more details. We have reported that many state and local officials have expressed  concerns about the coordination of federal public health preparedness and  response efforts.",
      " Officials from state public health agencies and state  emergency management agencies have told us that federal programs for  improving state and local preparedness are not carefully coordinated or  well organized. For example, federal programs managed by the Federal  Emergency Management Agency (FEMA), Department of Justice (DOJ),  OEP, and CDC all currently provide funds to assist state and local  governments. Each program conditions the receipt of funds on the  completion of a plan, but officials have told us that the preparation of  multiple, generally overlapping plans can be an inefficient process. In  addition, state and local officials told us that having so many federal  entities involved in preparedness and response has led to confusion,",
      "  making it difficult for them to identify available federal preparedness  resources and effectively partner with the federal government. The proposed transfer of numerous federal response teams and assets to  the new department would enhance efficiency and accountability for these  activities. This would involve a number of separate federal programs for  emergency preparedness and response, whose missions are closely  aligned with homeland security, including FEMA; certain units of DOJ; and  HHS\u2019s Office of the Assistant Secretary for Public Health Emergency  Preparedness, including OEP and its NDMS and MMRS programs, along  with the Strategic National Stockpile and the select agent program. In our  previous work,",
      " we found that in spite of numerous efforts to improve  coordination of the separate federal programs, problems remained, and we  recommended consolidating the FEMA and DOJ programs to improve the  coordination. The proposal places these programs under the control of  the Under Secretary for Emergency Preparedness and Response, who  could potentially reduce overlap and improve coordination. This change  would make one individual accountable for these programs and would  provide a central source for federal assistance. The proposed transfer of MMRS, a collection of local response systems  funded by HHS in metropolitan areas, has the potential to enhance its  communication and coordination. Officials from one state told us that  their state has MMRSs in multiple cities but there is no mechanism in  place to allow communication and coordination among them.",
      " Although  the proposed department has the potential to facilitate the coordination of  this program, this example highlights the need for greater regional  coordination, an issue on which the proposal is silent. Because the new department would not include all agencies with public  health responsibilities related to homeland security, coordination across  departments would still be required for some programs. For example,  NDMS functions as a partnership among HHS, the Department of Defense  (DOD), the Department of Veterans Affairs (VA), FEMA, state and local  governments, and the private sector. However, as the DOD and VA  programs are not included in the proposal,",
      " only some of these federal  organizations would be brought under the umbrella of the Department of  Homeland Security. Similarly, the Strategic National Stockpile currently  involves multiple agencies. It is administered by CDC, which contracts  with VA to purchase and store pharmaceutical and medical supplies that  could be used in the event of a terrorist incident. Recently expanded and  reorganized, the program will now include management of the nation\u2019s  inventory of smallpox vaccine. Under the President\u2019s proposal, CDC\u2019s  responsibilities for the stockpile would be transferred to the new  department, but VA and HHS involvement would be retained, including  continuing review by experts of the contents of the stockpile to ensure  that emerging threats,",
      " advanced technologies, and new countermeasures  are adequately considered. Although the proposed department has the potential to improve  emergency response functions, its success depends on several factors. In  addition to facilitating coordination and maintaining key relationships  with other departments, these factors include merging the perspectives of  the various programs that would be integrated under the proposal and  clarifying the lines of authority of different parties in the event of an  emergency. As an example, in the recent anthrax events, local officials  complained about differing priorities between the FBI and the public  health officials in handling suspicious specimens. According to the public  health officials, FBI officials insisted on first informing FBI managers of  any test results,",
      " which delayed getting test results to treating physicians.  The public health officials viewed contacting physicians as the first  priority in order to ensure that effective treatment could begin as quickly  as possible. New Department\u2019s  Control of Essential  Public Health  Capacities Raises  Concern The President\u2019s proposal to shift the responsibility for all programs  assisting state and local agencies in public health emergency preparedness  and response from HHS to the new department raises concern because of  the dual-purpose nature of these activities. These programs include  essential public health functions that, while important for homeland  security, are critical to basic public health core capacities. Therefore, we  are concerned about the transfer of control over the programs,",
      " including  priority setting, that the proposal would give to the new department. We  recognize the need for coordination of these activities with other  homeland security functions, but the President\u2019s proposal is not clear on  how the public health and homeland security objectives would be  balanced. Under the President\u2019s proposal, responsibility for programs with dual  homeland security and public health purposes would be transferred to the  new department. These include such current HHS assistance programs as  CDC\u2019s Bioterrorism Preparedness and Response program and HRSA\u2019s  Bioterrorism Hospital Preparedness Program. Functions funded through  these programs are central to investigations of naturally occurring  infectious disease outbreaks and to regular public health communications,",
      "  as well as to identifying and responding to a bioterrorist event. For  example, CDC has used funds from these programs to help state and local  health agencies build an electronic infrastructure for public health  communications to improve the collection and transmission of  information related to both bioterrorist incidents and other public health  events. Just as with the West Nile virus outbreak in New York City, which  initially was feared to be the result of bioterrorism, when an unusual case  of disease occurs public health officials must investigate to determine  whether it is naturally occurring or intentionally caused. Although the  origin of the disease may not be clear at the outset,",
      " the same public health  resources are needed to investigate, regardless of the source. States are planning to use funds from these assistance programs to build  the dual-purpose public health infrastructure and core capacities that the  recently enacted Public Health Security and Bioterrorism Preparedness  and Response Act of 2002 stated are needed. States plan to expand  laboratory capacity, enhance their ability to conduct infectious disease  surveillance and epidemiological investigations, improve communication  among public health agencies, and develop plans for communicating with  the public. States also plan to use these funds to hire and train additional  staff in many of these areas, including epidemiology.",
      " Our concern regarding these dual-purpose programs relates to the  structure provided for in the President\u2019s proposal. The Secretary of  Homeland Security would be given control over programs to be carried  out by HHS. The proposal also authorizes the President to direct that these  programs no longer be carried out through agreements with HHS, without  addressing the circumstances under which such authority would be  exercised. We are concerned that this approach may disrupt the synergy  that exists in these dual-purpose programs. We are also concerned that the  separation of control over the programs from their operations could lead  to difficulty in balancing priorities. Although the HHS programs are  important for homeland security,",
      " they are just as important to the day-to- day needs of public health agencies and hospitals, such as reporting on  disease outbreaks and providing alerts to the medical community. The  current proposal does not clearly provide a structure that ensures that the  goals of both homeland security and public health will be met. Transfer of Control  and Priority Setting  over Dual-Purpose  Research and  Development Raises  Concern The proposed Department of Homeland Security would be tasked with  developing national policy for and coordinating the federal government\u2019s  civilian research and development efforts to counter chemical, biological,  radiological, and nuclear threats. In addition to coordination, we believe  the role of the new department should include forging collaborative  relationships with programs at all levels of government and developing a  strategic plan for research and development.",
      " However, we have many of  the same concerns regarding the transfer of responsibility for the research  and development programs that we have regarding the transfer of the  public health preparedness programs. We are concerned about the  implications of the proposed transfer of control and priority setting for  dual-purpose research. For example, some research programs have broad  missions that are not easily separated into homeland security research and  research for other purposes. We are concerned that such dual-purpose  research activities may lose the synergy of their current placement in  programs. In addition, we see a potential for duplication of capacity that  already exists in the federal laboratories. We have previously reported that while federal research and development  programs are coordinated in a variety of ways,",
      " coordination is limited,  raising the potential for duplication of efforts among federal agencies.  Coordination is limited by the extent of compartmentalization of efforts  because of the sensitivity of the research and development programs,  security classification of research, and the absence of a single  coordinating entity to ensure against duplication. For example, DOD\u2019s  Defense Advanced Research Projects Agency was unaware of U.S. Coast  Guard plans to develop methods to detect biological agents on infected  cruise ships and, therefore, was unable to share information on its  research to develop biological detection devices for buildings that could  have applicability in this area. The new department will need to develop mechanisms to coordinate and  integrate information on research and development being performed  across the government related to chemical,",
      " biological, radiological, and  nuclear terrorism, as well as user needs. We reported in 1999 and again in  2001 that the current formal and informal research and development  coordination mechanisms may not ensure that potential overlaps, gaps,  and opportunities for collaboration are addressed. It should be noted,  however, that the legislation tasks the new department with coordinating  the federal government\u2019s \u201ccivilian efforts\u201d only. We believe the new  department will also need to coordinate with DOD and the intelligence  agencies that conduct research and development efforts designed to  detect and respond to weapons of mass destruction. In addition, the first  responders and local governments possess practical knowledge about  their technological needs and relevant design limitations that should be  taken into account in federal efforts to provide new equipment,",
      " such as  protective gear and sensor systems, and help set standards for  performance and interoperability. Therefore, the new department will  have to develop collaborative relationships with these organizations to  facilitate technological improvements and encourage cooperative  behavior. The President\u2019s proposal could help improve coordination of federal  research and development by giving one person the responsibility for  creating a single national research and development strategy that could  address coordination, reduce potential duplication, and ensure that  important issues are addressed. In 2001, we recommended the creation of  a unified strategy to reduce duplication and leverage resources, and  suggested that the plan be coordinated with federal agencies performing  research as well as state and local authorities.",
      " The development of such a  plan would help to ensure that research gaps are filled, unproductive  duplication is minimized, and that individual agency plans are consistent  with the overall goals. The proposal would transfer parts of DOE\u2019s nonproliferation and  verification research and development program to the new department,  including research on systems to improve the nation\u2019s capability to  prepare for and respond to chemical and biological attacks. However, the  legislation is not clear whether the programmatic management and dollars  only would move or the scientists carrying out the research would also  move to the new department. Because the research is carried out by  multiprogram laboratories that employ scientists skilled in many  disciplines who serve many different missions and whose research  benefits from their interactions with colleagues within the laboratory,",
      " it  may not be prudent to move the scientists who are doing the research. One  option would be rather than moving the scientists, the new department  could contract with DOE\u2019s national laboratories to conduct the research. The President\u2019s proposal would also transfer the responsibility for civilian  health-related biological defense research and development programs to  the new department, but the programs would continue to be carried out  through HHS. These programs, now primarily sponsored by NIH, include a  variety of efforts to understand basic biological mechanisms of infection  and to develop and test rapid diagnostic tools, vaccines, and antibacterial  and antiviral drugs. These efforts have dual-purpose applicability.",
      " The  scientific research on biologic agents that could be used by terrorists  cannot be readily separated from research on emerging infectious  diseases. For example, NIH-funded research on a drug to treat  cytomegalovirus complications in patients with HIV is now being  investigated as a prototype for developing antiviral drugs against  smallpox. Conversely, research being carried out on antiviral drugs in the  NIH biodefense research program is expected to be useful in the  development of treatments for hepatitis C. The proposal to transfer responsibility to the new department for research  and development programs that would continue to be carried out by HHS  raises many of the same concerns we have with the structure the proposal  creates for public health preparedness programs.",
      " Although there is a clear  need for the new department to have responsibility for setting policy,  developing a strategy, providing leadership, and overall coordinating of  research and development efforts in these areas, we are concerned that  control and priority-setting responsibility will not be vested in those  programs best positioned to understand the potential of basic research  efforts or the relevance of research being carried out in other, non- biodefense programs. In addition, the proposal would allow the new department to direct, fund,  and conduct research related to chemical, biological, radiological, nuclear,  and other emerging threats on its own. This raises the potential for  duplication of efforts,",
      " lack of efficiency, and an increased need for  coordination with other departments that would continue to carry out  relevant research. We are concerned that the proposal could result in a  duplication of capacity that already exists in the current federal  laboratories. Concluding  Observations Many aspects of the proposed consolidation of response activities are in  line with our previous recommendations to consolidate programs,  coordinate functions, and provide a statutory basis for leadership of  homeland security. The transfer of the HHS medical response programs  has the potential to reduce overlap among programs and facilitate  response in times of disaster. However, we are concerned that the  proposal does not provide the clear delineation of roles and  responsibilities that is needed.",
      " We are also concerned about the broad  control the proposal grants to the new department for research and  development and public health preparedness programs. Although there is  a need to coordinate these activities with the other homeland security  preparedness and response programs that would be brought into the new  department, there is also a need to maintain the priorities for basic public  health capacities that are currently funded through these dual-purpose  programs. We do not believe that the President\u2019s proposal adequately  addresses how to accomplish both objectives. We are also concerned that  the proposal would transfer the control and priority setting over dual- purpose research and has the potential to create an unnecessary  duplication of federal research capacity.",
      " Mr. Chairman, this completes my prepared statement. I would be happy to  respond to any questions you or other Members of the Committee may  have at this time. Contact and  Acknowledgments For further information about this testimony, please contact Janet  Heinrich at (202) 512-7118. Gene Aloise, Robert Copeland, Marcia Crosse,  Greg Ferrante, Gary Jones, Deborah Miller, Roseanne Price, and Keith  Rhodes also made key contributions to this statement. Related GAO Products Homeland Security Homeland Security: Proposal for Cabinet Agency Has Merit, but  Implementation Will Be Pivotal to Success.",
      " GAO-02-886T.   Washington, D.C.: June 25, 2002. Homeland Security: New Department Could Improve Coordination but  May Complicate Public Health Priority Setting. GAO-02-883T.  Washington, D.C.: June 25, 2002. Homeland Security: Key Elements to Unify Efforts Are Underway but  Uncertainty Remains. GAO-02-610. Washington, D.C.: June 7, 2002. Homeland Security: Responsibility and Accountability for Achieving  National Goals. GAO-02-627T. Washington, D.C.: April 11,",
      " 2002. Homeland Security: Progress Made; More Direction and Partnership  Sought. GAO-02-490T. Washington, D.C.: March 12, 2002. Homeland Security: Challenges and Strategies in Addressing Short- and  Long-Term National Needs. GAO-02-160T. Washington, D.C.:   November 7, 2001. Homeland Security: A Risk Management Approach Can Guide  Preparedness Efforts. GAO-02-208T. Washington, D.C.: October 31, 2001. Homeland Security: Need to Consider VA\u2019s Role in Strengthening Federal  Preparedness.",
      " GAO-02-145T. Washington, D.C.: October 15, 2001. Homeland Security: Key Elements of a Risk Management Approach.  GAO-02-150T. Washington, D.C.: October 12, 2001. Homeland Security: A Framework for Addressing the Nation\u2019s Efforts.  GAO-01-1158T. Washington, D.C.: September 21, 2001. Public Health Bioterrorism: The Centers for Disease Control and Prevention\u2019s Role in  Public Health Protection. GAO-02-235T. Washington, D.C.:   November 15,",
      " 2001. Bioterrorism: Review of Public Health Preparedness Programs. GAO-02- 149T. Washington, D.C.: October 10, 2001. Bioterrorism: Public Health and Medical Preparedness. GAO-02-141T.  Washington, D.C.: October 9, 2001. Bioterrorism: Coordination and Preparedness. GAO-02-129T.  Washington, D.C.: October 5, 2001. Bioterrorism: Federal Research and Preparedness Activities. GAO-01- 915. Washington, D.C.: September 28,",
      " 2001. Chemical and Biological Defense: Improved Risk Assessment and  Inventory Management Are Needed. GAO-01-667.   Washington, D.C.: September 28, 2001. West Nile Virus Outbreak: Lessons for Public Health Preparedness.  GAO/HEHS-00-180. Washington, D.C.: September 11, 2000. Chemical and Biological Defense: Program Planning and Evaluation  Should Follow Results Act Framework. GAO/NSIAD-99-159.   Washington, D.C.: August 16, 1999. Combating Terrorism: Observations on Biological Terrorism and Public  Health Initiatives.",
      " GAO/T-NSIAD-99-112. Washington, D.C.:   March 16, 1999. Combating Terrorism National Preparedness: Technologies to Secure Federal Buildings. GAO- 02-687T. Washington, D.C.: April 25, 2002. National Preparedness: Integration of Federal, State, Local, and Private  Sector Efforts Is Critical to an Effective National Strategy for Homeland  Security. GAO-02-621T. Washington, D.C.: April 11, 2002. Combating Terrorism: Intergovernmental Cooperation in the  Development of a National Strategy to Enhance State and Local  Preparedness.",
      " GAO-02-550T. Washington, D.C.: April 2, 2002. Combating Terrorism: Enhancing Partnerships Through a National  Preparedness Strategy. GAO-02-549T. Washington, D.C.: March 28, 2002. Combating Terrorism: Critical Components of a National Strategy to  Enhance State and Local Preparedness. GAO-02-548T. Washington, D.C.:  March 25, 2002. Combating Terrorism: Intergovernmental Partnership in a National  Strategy to Enhance State and Local Preparedness. GAO-02-547T.",
      "  Washington, D.C.: March 22, 2002. Combating Terrorism: Key Aspects of a National Strategy to Enhance  State and Local Preparedness. GAO-02-473T. Washington, D.C.:   March 1, 2002. Chemical and Biological Defense: DOD Should Clarify Expectations for  Medical Readiness. GAO-02-219T. Washington, D.C.: November 7, 2001. Anthrax Vaccine: Changes to the Manufacturing Process. GAO-02-181T.  Washington, D.C.: October 23, 2001. Chemical and Biological Defense:",
      " DOD Needs to Clarify Expectations for  Medical Readiness. GAO-02-38. Washington, D.C.: October 19, 2001. Combating Terrorism: Considerations for Investing Resources in  Chemical and Biological Preparedness. GAO-02-162T.   Washington, D.C.: October 17, 2001. Combating Terrorism: Selected Challenges and Related  Recommendations. GAO-01-822. Washington, D.C.: September 20, 2001. Combating Terrorism: Actions Needed to Improve DOD Antiterrorism  Program Implementation and Management. GAO-01-",
      "909.   Washington, D.C.: September 19, 2001. Combating Terrorism: Comments on H.R. 525 to Create a President\u2019s  Council on Domestic Terrorism Preparedness. GAO-01-555T.   Washington, D.C.: May 9, 2001. Combating Terrorism: Accountability Over Medical Supplies Needs  Further Improvement. GAO-01-666T. Washington, D.C.: May 1, 2001. Combating Terrorism: Observations on Options to Improve the Federal  Response. GAO-01-660T. Washington, DC: April 24, 2001.",
      " Combating Terrorism: Accountability Over Medical Supplies Needs  Further Improvement. GAO-01-463. Washington, D.C.: March 30, 2001. Combating Terrorism: Comments on Counterterrorism Leadership and  National Strategy. GAO-01-556T. Washington, D.C.: March 27, 2001. Combating Terrorism: FEMA Continues to Make Progress in  Coordinating Preparedness and Response. GAO-01-15.   Washington, D.C.: March 20, 2001. Combating Terrorism: Federal Response Teams Provide Varied  Capabilities; Opportunities Remain to Improve Coordination.",
      " GAO-01- 14. Washington, D.C.: November 30, 2000. Combating Terrorism: Need to Eliminate Duplicate Federal Weapons of  Mass Destruction Training. GAO/NSIAD-00-64. Washington, D.C.:   March 21, 2000. Combating Terrorism: Chemical and Biological Medical Supplies Are  Poorly Managed. GAO/T-HEHS/AIMD-00-59. Washington, D.C.:   March 8, 2000. Combating Terrorism: Chemical and Biological Medical Supplies Are  Poorly Managed. GAO/HEHS/AIMD-",
      "00-36. Washington, D.C.:   October 29, 1999. Combating Terrorism: Observations on the Threat of Chemical and  Biological Terrorism. GAO/T-NSIAD-00-50. Washington, D.C.:   October 20, 1999. Combating Terrorism: Need for Comprehensive Threat and Risk  Assessments of Chemical and Biological Attacks. GAO/NSIAD-99-163.  Washington, D.C.: September 14, 1999. Chemical and Biological Defense: Coordination of Nonmedical Chemical  and Biological R&D Programs. GAO/NSIAD-",
      "99-160. Washington, D.C.:  August 16, 1999. Combating Terrorism: Use of National Guard Response Teams Is  Unclear. GAO/T-NSIAD-99-184. Washington, D.C.: June 23, 1999. Combating Terrorism: Observations on Growth in Federal Programs.  GAO/T-NSIAD-99-181. Washington, D.C.: June 9, 1999. Combating Terrorism: Analysis of Potential Emergency Response  Equipment and Sustainment Costs. GAO/NSIAD-99-151.   Washington, D.C.: June 9,",
      " 1999. Combating Terrorism: Use of National Guard Response Teams Is  Unclear. GAO/NSIAD-99-110. Washington, D.C.: May 21, 1999. Combating Terrorism: Observations on Federal Spending to Combat  Terrorism. GAO/T-NSIAD/GGD-99-107. Washington, D.C.: March 11, 1999. Combating Terrorism: Opportunities to Improve Domestic Preparedness  Program Focus and Efficiency. GAO/NSIAD-99-3. Washington, D.C.:  November 12, 1998. Combating Terrorism:",
      " Observations on the Nunn-Lugar-Domenici  Domestic Preparedness Program. GAO/T-NSIAD-99-16. Washington, D.C.:  October 2, 1998. Combating Terrorism: Observations on Crosscutting Issues. GAO/T- NSIAD-98-164. Washington, D.C.: April 23, 1998. Combating Terrorism: Threat and Risk Assessments Can Help Prioritize  and Target Program Investments. GAO/NSIAD-98-74. Washington, D.C.:  April 9, 1998. Combating Terrorism: Spending on Governmentwide Programs  Requires Better Management and Coordination.",
      " GAO/NSIAD-98-39.  Washington, D.C.: December 1, 1997. Disaster Assistance Disaster Assistance: Improvement Needed in Disaster Declaration  Criteria and Eligibility Assurance Procedures. GAO-01-837.   Washington, D.C.: August 31, 2001. Chemical Weapons: FEMA and Army Must Be Proactive in Preparing  States for Emergencies. GAO-01-850. Washington, D.C.: August 13, 2001. Federal Emergency Management Agency: Status of Achieving Key  Outcomes and Addressing Major Management Challenges. GAO-01-",
      "832.  Washington, D.C.: July 9, 2001. Budget and Management Budget Issues: Long-Term Fiscal Challenges. GAO-02-467T.   Washington, D.C.: February 27, 2002. Results-Oriented Budget Practices in Federal Agencies. GAO-01-1084SP.  Washington, D.C.: August 2001. Managing for Results: Federal Managers\u2019 Views on Key Management  Issues Vary Widely Across Agencies. GAO-01-592. Washington, D.C.:   May 25, 2001.\n"
    ],
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  {
    "id": 36,
    "question": null,
    "answer": "Authorized under Section 101 of the Veterans Access, Choice, and Accountability Act of 2014 (VACAA), the Veterans Choice Program (VCP) is a temporary program that enables eligible veterans to receive medical care in the community. Since the program was first established by VACAA, it has been amended and funded several times. More recently, P.L. 115-26 eliminated the August 7, 2017, expiration date for the VCP and allowed the program to continue until the initial $10 billion deposited in the Veterans Choice Fund (VCF) was expended. P.L. 115-46 authorized and appropriated an additional $2.1 billion to continue the VCP until funds were expended, and when these funds were also nearing their end, Division D of P.L. 115-96 appropriated an additional $2.1 billion to continue the VCP until funds were expended. Lastly, Section 510 of the VA MISSION Act (P.L. 115-182), signed into law on June 6, 2018, authorized and appropriated $5.2 billion for VCP without fiscal year limitation, and Section 143 of this same act imposed a sunset date that is one year after the date of enactment (June 6, 2018) of the VA MISSION Act (i.e., June 6, 2019). Title 101 of the VA MISSION Act also authorized a permanent program known as the Veterans Community Care Program (VCCP), which is to replace VCP when VCCP is established by the Department of Veterans Affairs (VA) around June 2019 (when regulations are published by the VA no later than one year after the date of enactment [June 6, 2018] of the VA MISSION Act; that is, June 6, 2019, or when the VA determines that 75% of the amounts deposited in the VCF have been exhausted).  Eligibility and Choice of Care Veterans must be enrolled in the VA health care system to request health services under the VCP. A veteran may request a VA community care consult/referral, or his or her VA provider may submit a VA community care consult/referral to the VA Care Coordination staff within the VA. Veterans may become eligible for the VCP in one of four ways. First, a veteran is informed by a local VA medical facility that an appointment cannot be scheduled within 30 days of the clinically determined date requested by his or her VA doctor or within 30 days of the date requested by the veteran (this category also includes care not offered at a veteran's primary VA facility and a referral cannot be made to another VA medical facility or other federal facility). Second, the veteran lives 40 miles or more from a VA medical facility that has a full-time primary care physician. Third, the veteran lives 40 miles or less (not residing in Guam, America Samoa, or the Republic of the Philippines) and either travels by air, boat, or ferry to seek care from his or her local facility or incurs a traveling burden of a medical condition, geographic challenge, or an environmental factor. Fourth, the veteran resides 20 miles or more from a VA medical facility located in Alaska, Hawaii, New Hampshire (excluding those who live 20 miles from the White River Junction VAMC), or a U.S. territory, with the exception of Puerto Rico.  Once found eligible for care through the VCP, veterans may choose to receive care from a VA provider or from an eligible VA community care provider (VCP provider). VCP providers are federally qualified health centers, Department of Defense (DOD) facilities, or Indian Health Service facilities, and hospitals, physicians, and nonphysician practitioners or entities participating in the Medicare or Medicaid program, among others. A veteran has the choice to switch between a VA provider and VCP provider at any time.  Program Administration and Provider Participation The VCP was administered by two third-party administrators (TPAs): Health Net and TriWest. At the end of September 2018, the VA has announced that it would end its contract with Health Net as a TPA because of low patient volume, customer service issues, and late payments to community providers in its network. TriWest would continue to be a TPA for the areas they manage. Generally, a TPA manages veterans' appointments, counseling services, card distributions, and a call center. The TPA contracts directly with the VA. Then, the TPA contracts with eligible non-VA community care providers interested in participating in the VCP.  Payments Generally, a veteran's out-of-pocket costs under the VCP are equal to VHA out-of-pocket costs. Veterans do not pay any copayments at the time of their medical appointments. Copayment rates are determined by the VA after services are furnished. Enactment of P.L. 115-26 on April 19, 2017, allowed VA to become the primary payer when certain veterans with other health insurance (OHI) receive care for nonservice-connected conditions under VCP\u2014veterans would not have to pay a copayment under their OHI anymore. The VA would coordinate with a veteran's OHI and bill for any copayments that the veteran would be responsible for similar to what they would have paid had they received care within a VA medical facility. Participating community providers are reimbursed by their respective TPA, and VA pays the TPAs on an aggregated basis, known as bulk payments.\n",
    "docs": [
      "Introduction In response to concerns about access to medical care at many Department of Veterans Affairs (VA) hospitals and clinics across the country in spring 2014, Congress passed the Veterans Access, Choice, and Accountability Act of 2014 (VACAA, P.L. 113-146, as amended). On August 7, 2014, President Obama signed the bill into law. Since the VACAA was enacted, Congress has amended the act several times: P.L. 113-175, P.L. 113-235, P.L. 114-19, P.L. 114-41, P.L.",
      " 115-26, P.L. 115-46, P.L. 115-96, and P.L. 115-182. In addition, the VA has issued implementation regulations and guidance on several occasions in response to the changes to VACAA and challenges encountered during implementation of the law. Table 1 provides major highlights pertaining to the Veterans Choice Program (VCP)\u2015a new, temporary program authorized by Section 101 of the VACAA that allows eligible veterans to receive medical care in the community. On June 6, 2018, President Donald Trump signed the John S. McCain III, Daniel K.",
      " Akaka, and Samuel R. Johnson VA Maintaining Internal Systems and Strengthening Integrated Networks Act of 2018 (the VA MISSION Act of 2018) into law ( P.L. 115-182 ). Section 101 of this act established a new permanent Veterans Community Care Program (VCCP) that would replace VCP. This new program is expected to be operational around June 6, 2019. (The MISSION Act of 2018 stipulates that VCCP must be effective when the VA determines that 75% of the amounts deposited in the Veterans Choice Fund [VCF] have been exhausted,",
      " or when regulations are published by the VA, which is no later than one year after the date of enactment of the VA MISSION Act\u2014June 6, 2019.)  This report provides details on how the VCP is being implemented. It is meant to provide insight into the execution of the current VCP program that is still functioning until the new VCCP program becomes operational sometime in June 2019.  Scope and Limitations Information contained in this report is drawn from regulations published in the Federal Register, conference calls, numerous meetings with VHA staff, and briefing materials and other information provided by the VA Office of Congressional and Legislative Affairs (which may not be publicly available). This report does not discuss the new VCCP program established by Section 101 of the VA MISSION Act of 2018.",
      "  Medical Services Under VCP  Once an eligible veteran is authorized to receive necessary treatment, including follow-up appointments and ancillary and specialty medical services, under the VCP, a veteran may receive similar services that are offered through their personalized standard medical benefits package at a VA facility. VA's standard medical benefits package includes (but is not limited to) inpatient and outpatient medical, surgical, and mental health care; pharmaceuticals; pregnancy and delivery services; dental care; and durable medical equipment, and prosthetic devices, among other things. Currently, 81 categories of medical services and procedures are authorized to be provided under VCP. However,",
      " institutional long-term care and emergency care in non-VA facilities are excluded from the VCP. \"It is important to note that the VCP does not provide guaranteed health care coverage or an unlimited medical benefit.\" These services are authorized and provided under separate statutory authorities outside the scope of VCP. Eligibility Generally, all veterans have to be enrolled in the VA health care system to receive care under the VCP. Once this initial criterion is met, a qualified veteran may choose to receive care through VCP. Veterans may become eligible for care under the VCP through one of four different pathways: 30-d ay w ait l ist (Wait-Time Eligible)",
      " : A veteran is eligible for care through the VCP when he or she is informed, by a local VA medical facility, that an appointment cannot be scheduled within 30 days of the clinically determined date of when the veteran's provider determines that he or she needs to be seen (this category also includes care not offered at the veteran's primary VA medical facility and a referral cannot be made to another VA medical facility or federal facility), or within 30 days of the date of when the veteran wishes to be seen. 40 miles or m ore d i stance (Mileage Eligible) : A veteran is eligible for care through the VCP when he or she lives 40 miles or more from a VA medical facility that has a full-time primary care physician.",
      " 40 m iles or l ess d istance (Mileage Eligible) : A veteran is eligible for care through the VCP when he or she resides in a location, other than one in Guam, American Samoa, or the Republic of the Philippines, and travels by air, boat, or ferry in order to seek care from his or her local VA facility; or incurs a traveling burden based on environmental factors, geographic challenges, or a medical condition. State or t erritory without a f ull- s ervice VA medical f acility: A veteran is eligible for care through the VCP when his or her residence is more than 20 miles from a VA medical facility and located in either Alaska,",
      " Hawaii, New Hampshire (excluding veterans who live 20 miles from the White River Junction VAMC), or U.S. territory (excluding Puerto Rico).  Table 2 provides a breakdown of the unique number of veterans utilizing the VCP, by eligibility category, from November 2014 through August 28, 2018, unless otherwise noted.  A veteran who believes that he or she meets one of the eligibility criteria to receive care through the VCP is to have his or her eligibility status confirmed by local VA staff. A high-level overview of the eligibility process to access care through the VCP is illustrated in Figure 1.",
      " Local VA facility staff members are to review clinical and administrative records of the veteran to determine the appropriate medical benefits package and clinical criterion. Confirmation of the veteran's eligibility status is generally determined within 10 business days from when the request for confirmation was submitted. Veterans who are found ineligible to participate in the VCP are to be given instructions, in their notification letters, on how to appeal the VA's decision. Also see Appendix A for a detailed high-level workflow of how care is obtained through VCP. Choice of Care Eligible veterans have two options for receiving health care services under the Veterans Choice Program (VCP). First, veterans may choose to receive their medical care from a VA provider.",
      " A veteran who chooses this option is to receive an appointment with a VA provider. The veteran may be offered a VA appointment that is more than 30 days out or at a facility that is more than 40 miles from the veteran's residence. If an offered appointment does not accommodate the veteran's clinical needs, the local VA staff may place the veteran on an electronic waiting list until an alternate appointment becomes available. At any time, the veteran (based on the availability of clinical appointments) may choose to receive his or her medical services from a VA community care provider. The second option allows veterans to receive health care services from a VA community care provider (VCP provider)",
      " who accepts eligible VCP veterans. Veterans who choose this option are to have their names and medical authorization information sent to a VCP provider of their choice. At any time, veterans (based on the availability of clinical appointments) may choose to receive their medical services from a VA provider.  VCP Providers Under the VCP, several entities and providers are eligible to provide care and services. These include, among others, federally qualified health centers, Department of Defense (DOD) medical facilities, Indian Health Service outpatient health facilities or facilities operated by a tribe or tribal organization, hospitals, physicians, and nonphysician practitioners or entities participating in the Medicare or Medicaid program,",
      " an Aging and Disability Resource Center, an area agency on aging, or a state agency or a center for independent living. VA employees are excluded from providing care or services under VCP, unless the provider is an employee of VA, and is not acting within the scope of such employment while providing hospital care or medical services through the VCP. Generally, VCP providers \"must maintain at least the same or similar credentials and licenses as those required of VA's health care providers.\" Program Administration The Veterans Choice Program (VCP) is not a health insurance plan for veterans. Under the VCP, veterans are given the option of receiving care in their local communities instead of waiting for a VA appointment and/or enduring traveling burdens to reach a VA facility.",
      "  All veterans who are enrolled in the VA health care system are to be mailed a VCP card. The card lists relevant information about the VCP. Many veterans have attempted to use the VCP card as an insurance card. The VCP card may not be used to pay for medical services performed outside of or within the VA. Specifically, the VCP card does not replace veterans' identification cards, guarantee eligibility under the VCP, or provide health insurance-like benefits (i.e., the VCP, like all VA health care, is not health insurance). Third-Party Administrators (TPAs) In September 2013, the VA awarded contracts to Health Net and TriWest to expand veterans'",
      " access to non-VA health care in the communities, under the Patient-Centered Community Care (PC3) initiative. Later, in November 2014, the VA modified those contracts to include support services under the Veterans Access, Choice, and Accountability Act of 2014 (VACAA, or the Choice Act). Under the Veterans Choice Program (VCP), Health Net and TriWest manage the appointments, counseling services, card distributions, and a call center. They also oversee VCP providers, medical services reporting and billing processes, and the coordination of care with private health insurers. As illustrated in Figure 2, Health Net covers Regions 1,",
      " 2, and 4, and TriWest covers Regions 3, 5A, 5B, and 6.  End of Contract with Health Net  In March 2018, the VA announced that the VCP contract with Health Net would end by September 30, 2018. Low volume of patients, customer service issues, and delayed payments to community providers were potentially some of the reasons for this decision. The contract with TriWest would continue. The VA has issued guidance to veteran patients, community providers, and local VA medical center staff regarding next steps after the contract with Health Net ends in September 2018.",
      " These documents have been reproduced in their entirety in Appendix B. Activities previously undertaken by Health Net, such as VCP authorizations, care coordination, and billing and payments, will now be managed directly between local VA medical centers and community care providers.  Community Care Provider Participation24 Eligible non-VA community care providers may become VCP providers. Providers who are interested in participating in the VCP may do so either through the Patient Centered Community Care (PC3) network or the Choice network. Community providers who are under the Choice network may only render authorized services to VCP-eligible veterans. Under the PC3 network, all veterans who are eligible for VA community care may be seen.",
      " The reason is that there are two different statutory authorities for care delivered through VCP and PC3. Interested providers are required to contact TriWest to determine whether they qualify as a VA community care provider. To qualify, providers must meet the following criteria: Have a full, current, and unrestricted state license and the same/similar VA credentials. Not be named on the Centers for Medicare and Medicaid Services (CMS) exclusionary list. Meet all Medicare Conditions of Participation (CoPs) and Conditions for Coverage (CfCs). Accept Medicare or Medicaid rates. Provide resources (services, facilities, and providers) that are in compliance with applicable federal and state regulatory requirements.",
      " Submit all medical records of rendered services to veterans to the TPA for inclusion in veterans' VA electronic medical records. After determining that a provider is eligible for participation, he or she may enroll (with TriWest) as a VCP provider. At this time, the VA community care provider and respective third-party administrator (TPA) are to establish an agreed-upon reimbursement amount for rendered services to veterans. When TriWest is unable to coordinate the delivery of health care services to veterans, local VA Medical Centers (VAMCs) may enter into VCP Provider Agreements with eligible VA community providers through the VAMCs' Community Care Departments.",
      " Consults/Referral Processes30 Consults and referrals, known as the VA community care consults/referrals, are initiated in two different manners. First, a VA physician may submit a VA community care consult/referral (through the Computerized Patient Record System [CPRS]) on behalf of a veteran when there is a clinical need for the veteran to receive timely medical services. Second, a veteran may request a VA community care consult/referral (from his or her VA provider or local VA staff) in order to receive a medical service that is also timely. Regardless of how the consult/referral is initiated, all VA community care consults/referrals are to be processed by the VA Community Care Coordination staff within the VA.",
      " VA community care consults/referrals are processed based on whether the veteran requires emergent or urgent care. For urgent VA community care consults/referrals, VA providers are to coordinate the veteran's care directly with the VA Community Care Coordination staff.  When a veteran's request for a VA community care consult/referral cannot be approved, the veteran's local VA facility staff are to notify the veteran. On behalf of the veteran, his or her VA provider is to continue coordinating the veteran's medical services within the VA. The veteran's provider might also explore other existing community care options offered by the Veterans Health Administration (VHA).  After a veteran's request is approved or the VA community care consult/referral is submitted by the veteran's provider,",
      " the VA Community Care Coordination staff are to confirm the veteran's eligibility status. A veteran may decline enrollment into the VCP. When a veteran declines enrollment, his or her respective third-party administrator (TPA) is to document the veteran's reason for opting out of the program. Then, on behalf of the veteran, his or her VA provider is to continue coordinating the veteran's medical services within the VA. The veteran's provider might also explore other existing community care options offered by the VHA.  If a veteran is found eligible to access care through the VCP, the VA Community Care Coordination staff is to then electronically upload the veteran's VA community care consult/referral and pertinent medical documentation in the Contractor Portal,",
      " which is visible to TriWest. Once TriWest receives the documentation, the respective TPA is to contact the veteran. During this contact, the eligible veteran is to be provided with an overview of VCP benefits and asked to confirm his or her choice to receive medical services under the VCP. If a veteran reiterates his or her choice to receive medical care under the VCP, the veteran may select his or her VA community care provider and coordinate with a TPA to schedule an appointment. In addition, the veteran is to be asked to provide other health insurance information, if applicable, and is made aware of possible copayments and deductibles.",
      " A veteran with a clinical need for a service-connected and/or special authority condition (SC/SA) is to have his or her screening information reviewed by Revenue Utilization Review (R-UR) nurses. The veteran's appointment is then to be entered in the Contractor Portal so that it can be viewed by the VA Community Care Coordination staff. Daily, the VA Community Care Coordination staff is to check the Contractor Portal for appointment statuses and other updates. After the appointment is scheduled, the VA Community Care Coordination staff are to enter the appointment information into the Appointment Management system (within the VA) and update the veteran's status to \"scheduled.\"  Unusual or Excessive Burden Determination35  Along with the environmental factors,",
      " geographic challenges, and medical conditions, veterans are assessed by  the nature or simplicity of the hospital care or medical services the veteran requires, how frequently the veteran needs hospital care or medical services, and the need for an attendant for a clinical service.  Authorization of Care and an Episode of Care  Prior to delivering medical services to veterans under the Veterans Choice Program (VCP), such services are to be authorized by the VA. If a veteran requires services beyond those authorized, his or her VCP provider may request another authorization. The delivery and usage of unauthorized medical services could result in nonreimbursement. Over 5.9 million authorizations have been made under the VCP.",
      " These authorizations of care, shown in Table 3, were authorized from November 5, 2014, to August 28, 2018, unless otherwise noted.  The VA defines an episode of care (EOC) as \"a necessary course of treatment, including follow-up appointments and ancillary and specialty services, which last no longer than one calendar year from the date of the first appointment with a non-VA health care provider.\" This one-year Choice EOC period of validity begins when the first appointment is scheduled. VA community care providers may request an authorization extension for a veteran's current EOC through the veteran's respective TPA.",
      " Appointment Scheduling Veterans and VCP providers verify eligibility status before scheduling medical appointments for clinical needs. Appointments are to be scheduled on the basis of clinical appropriateness. VCP-eligible veterans are to receive a call from their respective third-party administrator (TPA). The TPAs are to provide veterans with information about the organization and schedule their appointments. Once appointments are scheduled, the contractor is to inform the VA. Emergent or urgent care authorizations are to be done expeditiously (see text box below). After receiving the notification, a veteran's local VA facility staff are to cancel his or her appointment at the VA. Veterans may also choose to schedule their own appointments after receiving an authorization of care under the VCP.",
      " If veterans choose to do so, they are asked to provide their appointment information to the TPA.  Appointment information that is provided to the TPA is to get uploaded into the Contractor Portal, so that it can be viewed by the VA Community Care Coordination staff. Daily, the VA Community Care Coordination staff are to check the Contractor Portal for veterans' appointment statuses and other updates. After receiving the notification, the veteran's local VA facility staff are to cancel his/her appointment at the VA.  Medication Process Veterans may have their prescriptions filled at their local VA pharmacies, non-VA pharmacies, and through the Consolidated Mail Outpatient Pharmacy (CMOP). If the VA is unable to fill a medication request within a prescribed timeframe or one that is not within the VA formulary,",
      " a non-VA pharmacy may fill the initial 14-day supply (without refills). For veterans who require prescriptions for more than 14 days, the VCP prescribing clinician is to have the remaining supply of medication filled at a VA pharmacy. Similar to the provisions of health care services under the VCP, medications filled at non-VA pharmacies will also require prior authorizations from the VA.  The VA is to reimburse veterans for out-of-pocket expenses related to the purchase of medications that treat service-connected conditions. For nonservice-connected conditions, veterans may also be reimbursed for their out-of-pocket expenses, including those with other health insurance plans.",
      " To be reimbursed, veterans submit a copy of their prescriptions, authorizations, and original receipts to their local VA Community Care Office. The VA also allows non-VA pharmacies to process medication claims on a veteran's behalf.  Processing Medical Claims Medical claims under the Veterans Choice Program (VCP) are processed through the veteran's respective third-party administrator (TPA). TriWest uploads and manages veterans' medical claims through the Contractor Portal. Through this web portal, the VA Community Care Coordination staff are to retrieve a veteran's documentation of clinical need and upload it in the veteran's medical records.  The VA community care provider is to submit medical claims to a veteran's respective third-party administrator.",
      " After TriWest receives the claim, the TPA is to submit it through its web portal. Subsequently, the VA is to retrieve the documentation from the TPA's web portal and upload it in the veteran's medical records. The VA reimburses the TPAs for the care veterans obtain through the VCP, and the TPA then reimburses the community care providers in their networks. Since 2016, the VA has processed payments to the TPA on an aggregated basis known as \"bulk payments.\" Per Federal authority, VA is the primary and exclusive payer for medical care it authorizes. As such, non-VA medical care providers may not bill the Veteran or any other party for any portion of the care authorized by VA.",
      " Federal law also prohibits payment by more than one Federal agency for the same episode of care; subsequently any payments made by the Veteran, Medicare, or any other Federal agency must be refunded to the payer [from the VCP provider] upon acceptance of VA payment. Medical Services Not Previously Authorized Under the VCP, medical claims for unauthorized non-VA health care services may be submitted to the VA for payment consideration. Veterans, VA community care providers, and persons who paid for services on behalf of a veteran are required to submit to the VA the following documentation:  a standard billing form, or an invoice (i.e., Explanation of Benefits [EOB]), and/or receipt of services paid and/or owed;",
      " an explanation of the circumstance that led to the veteran receiving unauthorized care outside of the VA; any statements and/or supporting documentation; and VA Form-10-583, Claim for Payment of Cost of Unauthorized Medical Services.  Payments Veterans' Out-of-Pocket Costs Veterans who are enrolled in VA health care do not pay premiums, deductibles, or coinsurances for their medical services. However, they may be required to pay a fixed copayment amount (for nonservice-connected disabilities or conditions) as shown below. When veterans receive care at a VA facility, they do not pay copayments at the time of their medical appointments; copayment rates are determined by the VA after services are furnished\u2014based on if the care was for a service-connected or nonservice-connected condition.",
      " Therefore, veterans' out-of-pocket costs under the VCP are the same as if they were receiving care and services from a VA provider in a VA facility\u2014if a veteran does not pay any copayments at VA health care facilities, the veteran will not have to pay any copayments under the VCP. For example A veteran could pay $50 copayments for a specialty care visit and $15 for a primary care visit for a nonservice-connected disability or condition. A veteran in Priority Groups 2 thru 8 could pay a copayment between $5 and $11 per 30-day or less supply of medication. All veterans are exempt from paying copayments for services and medications that are related to a service-connected disability or condition.",
      "  Cost Shares for Veterans with Other Health Insurance (OHI) The VA defines other health insurance (OHI) as commercial insurance. Commercial insurance, often referred to as private insurance, is not funded by federal and state taxes. This type of insurance is offered by companies such as Blue Cross and Blue Shield, Aetna, Cigna, and the Kaiser Foundation. Plans purchased through the state health exchanges are also considered as OHI. In addition, veterans who purchase commercial insurance plans agree to cost-sharing responsibilities. Such cost-sharing obligations include copayments, deductibles, and coinsurance (e.g., 80/20 rule:",
      " 80% insurer responsibility/20% patient responsibility). Due to various issues related to primary payment responsibility and veterans therefore experiencing adverse credit reporting to credit bureaus or debt collections by collections agencies, Congress enacted P.L. 115-26, which amended P.L. 113-146 and made VA the primary payer for veterans with OHI who seek care for nonservice-connected conditions through the VCP. This change went into effect on April 19, 2017. The VA would coordinate with a veteran's OHI and recover any costs, and bill the veteran for any copayments that the veteran would be responsible for similar to what they would have paid had they received care within a VA medical facility (see Figure 3 ). Community care providers or the TPAs are no longer required to collect copays,",
      " cost-shares, or deductibles from veterans with OHI. Medicare, Medicaid, or TRICARE are not considered OHI plans under the VCP. Provider Payment Methodologies Guidance on rates for the delivery of care is outlined in Table 4. As stated before, first, the Veterans Choice Program providers are to receive their reimbursements from the TPA. Then the VA is to reimburse the third-party administrator. Eligible VA community care providers who decide to participate under the PC3 network (rather than the Choice network) may incur reimbursement rates lower than those of Medicare. If these providers move to the Choice network, they may negotiate for a similar rate as contracted under the PC3 Network.",
      "  Veterans and VA community care providers may call the Community Care Call Center to discuss billing issues. These issues range from the need to resolve a debt collection to inappropriately billed services.  Appendix A. Veterans Choice Program (VCP) High-Level Work Flow  Appendix B. VA Information Pertaining to the End of the Contract with Health Net \n"
    ],
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  },
  {
    "id": 37,
    "question": null,
    "answer": "The Judicial Survivors' Annuities System (JSAS) was created in 1956 to provide financial security for the families of deceased federal judges. It provides benefits to eligible spouses and dependent children of judges who elect coverage within 6 months of taking office, 6 months after getting married, 6 months after being elevated to a higher court, or during an open season authorized by statute. Active and senior judges currently contribute 2.2 percent of their salaries to JSAS, and retired judges contribute 3.5 percent of their retirement salaries to JSAS. Pursuant to the Federal Courts Administration Act of 1992 (Pub. L. No. 102-572), GAO is required to review JSAS costs every 3 years and determine whether the judges' contributions fund at least 50 percent of the plan's costs during the 3-year period. If the contributions fund less than 50 percent of these costs, GAO is to determine what adjustments to the contribution rates would be needed to achieve the 50 percent ratio. For the 2005 to 2007 time frame covered by this review, the participating judges funded approximately 54 percent of JSAS costs, and the federal government funded 46 percent. The increase in the government's contribution rate over the 3-year period was a result of increases in costs. The increase in costs reflected the combined effects of changes in actuarial assumptions; lower-than-expected rates of return on plan assets; demographic changes such as retirement, death, disability, new members, and pay increases; as well as an increase in plan benefit obligations. GAO determined that an adjustment to the judges' contribution rate was not needed because their average contribution share for the 3-year period exceeded the 50 percent minimum contribution goal specified by law. GAO examined the annual share of normal costs covered by judges' contributions over a 9-year period and found that, on average, the participating judges funded approximately 60 percent of JSAS's costs.\n",
    "docs": [
      "Objectives, Scope,  and Methodology Our objectives were to determine whether participating judges\u2019  contributions for the 3 plan years ending on September 30, 2007, funded at  least 50 percent of the JSAS costs and, if not, what adjustments in the  contribution rates would be needed to achieve the 50 percent ratio. To  satisfy our objectives, we used the normal cost rates determined by  actuarial valuations of the system for each of the 3 fiscal years. We also  examined participants\u2019 contributions, the federal government\u2019s  contribution, and other relevant information in each plan years\u2019 JSAS  actuarial valuation report.",
      " An independent accounting firm hired by the  Administrative Office of the United States Courts (AOUSC) audited the  JSAS financial and actuarial information included in the JSAS actuarial  valuation reports, with input from the plan\u2019s actuary regarding relevant  data, such as the actuarial present value of accumulated plan benefits. The  plan\u2019s actuary certified those amounts that are included in the JSAS  actuarial valuation reports. We discussed the contents of the JSAS  actuarial valuation reports with officials from AOUSC for the 3 plan years  (2005 through 2007). In addition,",
      " we discussed with the plan\u2019s actuary the actuarial assumptions  made to project future benefits of the plan. We noted that the JSAS  actuarial valuation for plan years 2005 through 2007 used a 0.0 percent  salary increase per year, above inflation, in contrast to the September 30,  2007, Civil Service Retirement and Disability System valuation which used  a 0.75 percent salary increase per year, above inflation. We determined  that the use of 0.0 percent salary increase for the JSAS is reasonable, and  consistent with a recent trend analysis we performed on judicial pay  plans.",
      " We also reviewed the qualifications of the plan\u2019s actuary who  prepared the JSAS actuarial valuation reports for plan years 2005 to 2007  and nothing came to our attention that would lead us to question the  qualifications of the actuary. We did not independently audit the JSAS  actuarial valuation reports or the actuarially calculated cost figures. We conducted this performance audit in accordance with generally  accepted government auditing standards. Those standards require that we  plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives.",
      " We performed our review in Washington, D.C., from June 2008  through August 2008. We made a draft of this report available to the  Director of AOUSC for review and comment. Background Depending on the circumstances, judicial participants may be eligible for  some combination of five retirement plans, including the Civil Service  Retirement System (CSRS) or the Federal Employees\u2019 Retirement System  (FERS). Three other separate retirement plans, described in appendix I,  apply to various groups of judges in the federal judiciary, with JSAS being  available to participants in all three retirement plans to provide annuities  to their surviving spouses and children.",
      " History of JSAS JSAS was created in 1956 to help provide financial security for the families  of deceased federal judges. It provides benefits to surviving eligible  spouses and dependent children of judges who participate in the plan.  Judges may elect coverage within 6 months of taking office, 6 months after  getting married, if they were not married when they took office, 6 months  after being elevated to a higher court, or during an open season authorized  by statute. Active and senior judges currently contribute 2.2 percent of  their salaries to JSAS, and retired judges contribute 3.5 percent of their  retirement salaries to JSAS.",
      " Upon a judge\u2019s death, the surviving spouse is  to receive an annual annuity that equals 1.5 percent of the judge\u2019s average  annual salary during the 3 highest consecutive paid years (commonly  known as the high-3) times the judge\u2019s years of creditable service. The  annuity may not exceed 50 percent of the high-3 and is guaranteed to be  no less than 25 percent. Separately, an unmarried dependent child under  age 18, or 22 if a full-time student, receives a survivor annuity that is equal  to 10 percent of the judge\u2019s high-",
      "3 or 20 percent of the judges\u2019 high-3  divided by the number of eligible children, whichever is smaller. JSAS  annuitants receive an annual adjustment in their annuities at the same  time, and by the same percentage, as any cost-of-living adjustment (COLA)  received by CSRS annuitants. Spouses and children are also eligible for  Social Security survivor benefits. Since its inception in 1956, JSAS has been amended several times. Because  of concern that too few judges were participating in the plan, Congress  made broad reforms effective in 1986 with the Judicial Improvements Act  of 1985.",
      " The 1985 act (1) increased the annuity formula for surviving  spouses from 1.25 percent to the current 1.5 percent of the high-3 for each  year of creditable service and (2) changed the provisions for surviving  child benefits to relate benefit amounts to judges\u2019 high-3 rather than the  specific dollar amounts provided in 1976 by the Judicial Survivors\u2019  Annuities Reform Act. In recognition of the significant benefit  improvements that were made, the 1985 act increased the amounts that  judges were required to contribute from 4.5 percent to 5 percent of their  salaries,",
      " including retirement salaries. The 1985 act also changed the requirements for government contributions  to the plan. Under the 1976 Judicial Survivors\u2019 Annuities Reform Act, the  government matched the judges\u2019 contributions of 4.5 percent of salaries  and retirement salaries. The 1985 act modified this by specifying that the  government would contribute the amounts necessary to fund any  remaining cost over the future lifetime of current participants. That  amount is limited to 9 percent of total covered salary each year. In response to concerns that required contributions of 5 percent may have  created a disincentive to participate, Congress enacted the Federal Courts  Administration Act of 1992.",
      " Under this act, participants\u2019 contribution  requirements were reduced to 2.2 percent of salaries for active and senior  judges and 3.5 percent of retirement salaries for retired judges. The 1992  act also significantly increased benefits for survivors of retired judges.  This increase was accomplished by including years spent in retirement in  the calculation of creditable service and the high-3 salary averages.  Additionally, the 1992 act allowed judges to stop contributing to the plan if  they ceased to be married and granted benefits to survivors of any judge  who died in the interim between leaving office and the commencement of  a deferred annuity.",
      " As of September 30, 2007, there were 1,303 active and senior judges, 223  retired judges, and 333 survivor annuitants covered under JSAS, according  to the JSAS actuarial valuation report for plan year 2007. Calculation of Federal  Share JSAS is financed by judges\u2019 contributions and direct appropriations in an  amount estimated to be sufficient to fund the future benefits paid to  survivors of current and deceased participants. The plan\u2019s actuary, using  the plan\u2019s funding method\u2014in this case, the aggregate cost method\u2014 determines the plan\u2019s normal cost rate and the normal costs for each plan  year.",
      " The normal cost rate is the level percentage of future salaries that  will be sufficient, along with investment earnings and the plan\u2019s assets, to  pay the plan\u2019s benefits for current participants and beneficiaries. Normal  cost calculations are estimates and require that many actuarial  assumptions be made about the future, including, but not limited to  mortality rates, turnover rates, and returns on investment, salary  increases, and COLA increases over the life spans of current participants  and beneficiaries. There are many acceptable actuarial methods for  calculating normal cost. Regardless of which cost method is chosen, the  expected total long-term cost of the plan should be the same;",
      " however,  year-to-year costs may differ, depending on the cost method used. The  expected annual federal, actuarially recommended contribution is the  product of the federal government\u2019s contribution rate and the participating  judges\u2019 salaries. However, the actual federal government contribution is  approved through annual appropriations which have varied, both above  and below the actuarially recommended amount. To determine the actuarially recommended annual contribution of the  federal government, AOUSC, which is responsible for the administration  of the JSAS, engages an enrolled actuary to perform the calculation of  funding needed based on the difference between the present value of the  expected future benefit payments to participants and the present value of  net assets in the plan.",
      " Appendix II provides more details on the  methodology used to determine the federal government\u2019s contribution rate  and lump sum payments. Portion of JSAS Cost  Covered by Judges\u2019  Contributions Varied For JSAS plan years 2005 through 2007, the participating judges  contributed, on average, about 54 percent of the plan\u2019s costs. In plan years  2005 and 2006, participating judges paid slightly more than 61 percent and  50 percent of JSAS normal costs, respectively, and in plan year 2007, they  paid slightly less than 50 percent of JSAS normal costs. Table 1 shows the judges\u2019 and the federal government\u2019s contribution rates  and shares of JSAS\u2019 normal costs (using the aggregate cost method,",
      " which  is discussed in appendix II) for the period covered in our review. The judges\u2019 and the federal government\u2019s contribution rates for each of the  3 years shown in Table 1 were based on the actuarial valuations that  occurred at the end of the prior year. For example, the judges\u2019  contribution rate of 2.32 percent and the federal government\u2019s  contribution rate of 1.48 in plan year 2005 were based on the September  30, 2004, valuation contained in the plan year 2005 JSAS report. The total normal costs expressed as a percentage of the present value of  participant\u2019s future salaries shown in table 1 increased from 3.",
      "8 percent in  plan year 2005 to 5.13 percent in plan year 2007. The judges\u2019 share of the  JSAS normal costs decreased from approximately 61 percent in plan year  2005, to approximately 50 percent in plan years 2006 and 2007. The federal  government\u2019s share of JSAS normal costs increased, from approximately  39 percent in plan year 2005, to approximately 50 percent in plan years  2006 and 2007. During those same years, the government\u2019s contribution  rates increased from 1.48 percent of salaries in plan year 2005 to 2.",
      "5  percent of salaries in plan year 2006, and then to 2.59 percent in plan year  2007. The increase in the federal government\u2019s contribution rates was a  result of the increase in normal costs resulting from several combined  factors, such as changes in actuarial assumptions; lower-than-expected  investment experience on plan assets; demographic changes\u2014retirement,  death, disability, new members, pay increases; as well as an increase in  plan benefit obligations. However, the majority of the increase in the  federal government\u2019s contribution rate is because of changes in actuarial  assumptions and a lesser degree the government\u2019s contributing less than  the actuarially recommended amounts,",
      " in plan years 2005, 2006, and 2007. No Adjustment  Required to  Contribution Rates Based on our review of the judges\u2019 contribution rates for the JSAS, we  determined that there was no need for any adjustments in the judges\u2019  contribution rate. JSAS actuarial reports for the 3 years under review  show that participating judges\u2019 contributed at least 50 percent of JSAS  normal costs as required by the Federal Courts Administration Act for plan  years 2005 and 2006, and slightly below half for plan year 2007. As shown  in Table 1 above,",
      " the judges\u2019 average contribution for JSAS normal costs  for this review period was approximately 54 percent, which exceeded the  50 percent contribution goal for judges. Table 2 provides a summary of the percentage share of contribution for  judges and the federal government over the past 9 years. As shown above, the judges\u2019 contribution share, in any given year, may  vary from the 50 percent contribution goal, either exceeding or not  meeting this goal. The judges\u2019 average contribution share for the 9-year  period was approximately 60 percent. Therefore, there is no reason to  modify the judges\u2019 contribution rates at this time.",
      " Agency Comments  and Our Evaluation We requested comments on a draft of this report from the Director of  AOUSC or his designee. In a letter dated September 10, 2008, the Director  provided written comments on the report, which we have reprinted in  appendix III. AOUSC also provided technical comments, which we have  incorporated as appropriate. In its comments, AOUSC stated that our report showed that for a third  consecutive triennial cycle, judges have paid a greater share of the cost of  this system. AOUSC stated that our report showed that over the past 9  years,",
      " judges\u2019 contributions have funded approximately 60 percent of the  costs of JSAS. In AOUSC\u2019s view, we did not present in our report the  downward adjustment that would be needed to the participating judges\u2019  contribution rates to attain the 50 percent level, and this omission is not  consistent with Congress\u2019s intent in enacting the Federal Courts  Administration Act of 1992. We disagree with AOUSC\u2019s view as to the purpose of section 201(i), of the  Act. Since enactment, we have interpreted this section as providing a  minimum percentage of the costs of the program to be borne by its  participants because the statute requires us to recommend adjustments  when the judges\u2019 contributions have not achieved 50 percent of the costs  of the fund.",
      " We do not view the section as calling for parity between the  participants and the federal government with respect to funding the  program. For the 3-years covered by this review, we determined and  reported that judges\u2019 contributions represented approximately 54 percent  of the normal costs of JSAS, and therefore, an adjustment to the judges\u2019  contribution rates was not needed under the existing legislation because  the judges\u2019 contribution achieved 50 percent of JSAS costs. We have  consistently applied this interpretation of the Act\u2019s requirements in all of  our previously mandated reviews. However, if one were to interpret the Act as calling for an equal sharing of  the program\u2019s cost between participants and the government,",
      " then, on the  basis of the information contained in the JSAS actuarial reports over the  last 9 years, participating judges\u2019 future contributions would have to  decrease a total of 0.32 percentage points below the current 2.2 percent of  salaries for active judges and senior judges and 3.5 percent for retired  judges in order to fund 50 percent of JSAS costs over the last 9 years. If the  decrease were distributed equally among the judges, those currently  contributing 2.2 percent of salaries would have to contribute 1.88 percent,  and those currently contributing 3.",
      "5 percent of retirement salaries would  have to contribute 3.18 percent. We have not declined to include downward adjustment information, as  AOUSC states, but we are not recommending such an adjustment because  of our interpretation of the statute\u2019s requirements. We are sending copies of this report to interested congressional  committees and the Director of AOUSC. Copies of this report will be made  available to others upon request. This report is also available at no charge  on the GAO Web site at http://www.gao.gov. Please contact Steven J.  Sebastian at (202) 512-3406 sebastians@gao.gov,",
      " or Joseph A. Applebaum  at (202) 512-6336 applebaumj@gao.gov, if you or your staff have any  questions concerning this report. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report were Julie Phillips, Assistant  Director; Jehan Abdel-Gawad; and Kwabena Ansong. Appendix I: Retirement Plans Available to  Federal Judges The Administrative Office of the United States Courts (AOUSC)  administers three retirement plans for judges in the federal judiciary. The Judicial Retirement System automatically covers United States  Supreme Court justices;",
      " federal circuit and district court judges; and  territorial district court judges; and is available, at their option, to the  Administrative Assistant to the Chief Justice; the Director of AOUSC;  and the Director of the Federal Judicial Center. The Judicial Officers\u2019 Retirement Fund is available to bankruptcy and  full-time magistrate judges. The United States Court of Federal Claims Judges\u2019 Retirement System  is available to the United States Court of Federal Claims judges. Also, judges who are not automatically covered under the Judicial  Retirement System may opt to participate in the Federal Employees\u2019  Retirement System (FERS) or elect to participate in the Judicial  Retirement System for bankruptcy judges,",
      " magistrate judges, or United  States Court of Federal Claims judges. Judges who retire under the judicial retirement plans generally continue to  receive the full salary amounts that were paid immediately before  retirement, assuming the judges met the age and service requirements. Retired territorial district court judges generally receive the same cost-of- living adjustment that Civil Service Retirement System retirees receive,  except that their annuities cannot exceed 95 percent of an active district  court judge\u2019s salary. United States Court of Federal Claims judge retirees  continue to receive the same salary payable to active United States Court  of Federal Claims judges. Those in the Judicial Retirement System and the United States Court of  Federal Claims Judges\u2019 Retirement System are eligible to retire when the  number of years of service and the judge\u2019s age total at least 80,",
      " with a  minimum retirement age of 65, and service ranging from 10 to 15 years. Those in the Judicial Officers\u2019 Retirement Fund are eligible to retire at age  65 with at least 14 years of service or may retire at age 65 with 8 years of  service, on a less than full salary retirement. Participants in all three  judicial retirement plans are required to contribute to and receive Social  Security benefits. Appendix II: Explanation of the Method Used  to Determine the Federal Government\u2019s  Contribution Rate and Lump Sum Payout Aggregate funding method. This method, as used by the Judicial  Survivors\u2019 Annuities System (JSAS)",
      " plan, defines the normal cost rate as  the level percentage of future salaries that will be sufficient, along with  investment earnings and the plan\u2019s assets, to pay the plan\u2019s benefits for  current participants and beneficiaries. The following discussion is  intended to illustrate the use of the aggregate funding method. For plan year 2007, the JSAS\u2019s actuary estimated the present value of  future benefits for participating judges and beneficiaries was $649,628,473  and the JSAS had assets amounting to $491,788,627. The difference  between these amounts, $157,839,846, must be financed through future  contributions to be paid by the participating judges and the federal  government.",
      " Using the same assumptions as used to estimate the present  value of future benefits, the actuary estimated the present value of  participating judges\u2019 future salaries to be $3,078,464,410 so that the  amount to be financed represented 5.13% ($157,839,846 divided by  $3,078,464,410) of the future participating judges\u2019 salaries. This percentage  is the JSAS\u2019s normal cost rate. If all the actuarial assumptions proved  exactly correct, then a total contribution of 5.13% of the participating  judges\u2019 salaries annually would make up the difference between the JSAS\u2019s  future payments and its assets (the $157,",
      "839,846 mentioned above). The  JSAS\u2019s actuary also estimated the present value of participating judges\u2019  future contributions to be $78,123,909. Thus the federal government\u2019s  share for plan year 2007 is the difference between $157,839,846 and  $78,123,909, or $79,715,937. Federal government\u2019s actuarially recommended contribution rate.  The federal government\u2019s actuarially recommended contribution rate is  equal to the federal government\u2019s share of future financing ($79,715,937)  divided by the present value of the participating judges\u2019 future salaries  ($3,",
      "078,464,410). For the plan year 2007 the rate was 2.59% ($79,715,937  divided by $3,078,464,410). Thus, the actuarially recommended federal  contribution is the product of the federal government\u2019s actuarially  recommended contribution rate and the participating judges\u2019 salaries. The  federal government\u2019s contribution is approved through an annual  appropriation. It has varied, both above and below the actuarially  recommended amount. Lump sum payout. Under JSAS, a lump sum payout may occur upon the  dissolution of marriage either through divorce or death of spouse.",
      " Payroll  contributions cease, but previous contributions remain in JSAS. Also, if  there is no eligible surviving spouse or child upon the death of a  participating judge, the lump sum payout to the judge\u2019s designated  beneficiaries is computed as follows:    Lump sum payout equals the total amount paid into the plan by the  judge plus 3 percent annual interest accrued, less 2.2 percent of  salaries for each participating year (forfeited amount). In effect, the interest plus any amount contributed in excess of 2.2 percent  of judges\u2019 salaries will be refunded.\n"
    ],
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  },
  {
    "id": 38,
    "question": null,
    "answer": "This testimony discusses issues related to the reauthorization of the Violence Against Women Act (VAWA). In hearings conducted from 1990 through 1994, Congress noted that violence against women was a problem of national scope and that the majority of crimes associated with domestic violence, sexual assault, and stalking were perpetrated against women. These hearings culminated in the enactment of VAWA in 1994 to address these issues on a national level. VAWA established grant programs within the Departments of Justice (DOJ) and Health and Human Services (HHS) for state, local, and Indian tribal governments and communities. These grants have various purposes, such as providing funding for direct services including emergency shelter, counseling, and legal services for victims of domestic violence, sexual assaults and stalking across all segments of the population. Recipients of funds from these grant programs include, among others, state agencies, tribes, shelters, rape crisis centers, organizations that provide legal services, and hotlines. In 2000, during the reauthorization of VAWA, language was added to the law to provide greater emphasis on dating violence. The 2006 reauthorization of VAWA expanded existing grant programs and added new programs addressing, among other things, young victims. In fiscal year 2011, Congress appropriated approximately $418 million for violence against women programs administered by DOJ and made an additional $133 million available for programs administered by HHS. The 2006 reauthorization of VAWA required us to study and report on data indicating the prevalence of domestic violence, dating violence, sexual assault, and stalking among men, women, youth, and children, as well as services available to the victims. Such data could be used to inform decisions regarding investments in grant programs. In response, we issued two reports in November 2006 and July 2007 on these issues, respectively. This testimony is based on these reports and selected updates we conducted in July 2011 related to actions DOJ and HHS have taken since our prior reviews to improve the quality of recipient data. This testimony, as requested, highlights findings from those reports and discusses the extent to which (1) national data collection efforts report on the prevalence of men, women, youth, and children who are victims of domestic violence, sexual assault, dating violence, and stalking, and (2) the federal government has collected data to track the types of services provided to these categories of victims and any challenges federal departments report that they and their grant recipients face in collecting and reporting demographic characteristics of victims receiving such services by type of service. In November 2006, we reported that since 2001, the amount of national research that has been conducted on the prevalence of domestic violence and sexual assault had been limited, and less research had been conducted on dating violence and stalking. At that time, no single, comprehensive effort existed that provided nationwide statistics on the prevalence of these four categories of crime among men, women, youth, and children. Rather, various national efforts addressed certain subsets of these crime categories among some segments of the population and were not intended to provide comprehensive estimates. For example, HHS's Centers for Disease Control and Prevention's (CDC) National Violent Death Reporting System, which collects incident-based data from multiple sources, such as coroner/medical examiner reports, gathered information on violent deaths resulting from domestic violence and sexual assaults, among other crimes. However, it did not gather information on deaths resulting from dating violence or stalking incidents. We reported in July 2007 that recipients of 11 grant programs we reviewed collected and reported data to the respective agencies on the types of services they provide, such as counseling; the total number of victims served; and in some cases, demographic information, such as the age of victims; however, data were not available on the extent to which men, women, youth, and children receive each type of service for all services. This situation occurred primarily because the statutes governing the 11 grant programs do not require the collection of demographic data by type of service, although they do require reports on program effectiveness, including number of persons served and number of persons seeking services who could not be served. Nevertheless, VAWA authorizes that a range of services can be provided to victims, and we determined that services were generally provided to men, women, youth, and children. The agencies administering these 11 grant programs--HHS and DOJ--collect some demographic data for certain services, such as emergency shelter under the Family Violence Prevention and Services Act and supervised visitation and exchange under VAWA. The quantity of information collected and reported varied greatly for the 11 programs and was extensive for some, such as those administered by DOJ's Office on Violence Against Women (OVW) under VAWA. The federal agencies use this information to help inform Congress about the known results and effectiveness of the grant programs. However, even if demographic data were available by type of service for all services, such data might not be uniform and reliable because, among other factors, (1) the authorizing statutes for these programs have different purposes and (2) recipients of grants administered by HHS and DOJ use varying data collection practices.\n",
    "docs": [
      "National Data  Collection Efforts on  the Prevalence of  Domestic Violence  and Sexual Assault  Provided Limited  Data, but Efforts  Underway Help  Address Some  Information Gaps In November 2006, we reported that since 2001, the amount of national  research that has been conducted on the prevalence of domestic violence  and sexual assault had been limited, and less research had been  conducted on dating violence and stalking. At that time, no single,  comprehensive effort existed that provided nationwide statistics on the  prevalence of these four categories of crime among men, women, youth,  and children. Rather,",
      " various national efforts addressed certain subsets of  these crime categories among some segments of the population and  were not intended to provide comprehensive estimates. For example,  HHS\u2019s Centers for Disease Control and Prevention\u2019s (CDC) National  Violent Death Reporting System, which collects incident-based data from  multiple sources, such as coroner/medical examiner reports, gathered  information on violent deaths resulting from domestic violence and sexual  assaults, among other crimes. However, it did not gather information on  deaths resulting from dating violence or stalking incidents. In our November 2006 report, we noted that designing a single,  comprehensive data collection effort to address these four categories of  crime among all segments of the population independent of existing  efforts would be costly,",
      " given the resources required to collect such data. Furthermore, it would be inefficient to duplicate some existing efforts that  already collect data for certain aspects of these categories of crime.  Specifically, in our November 2006 report, we identified 11 national efforts  that had reported data on certain aspects of domestic violence, sexual  assault, dating violence, and stalking. However, limited national data were  available to estimate prevalence from these 11 efforts because they (1)  largely focused on incidence rather than prevalence, (2) used varying  definitions for the types of crimes and categories of victims covered, and  (3) had varying scopes in terms of incidents and categories they  addressed.",
      " Focus on incidence. Four of the 11 national data collection efforts  focused solely on incidence\u2014the number of separate times a crime is  committed against individuals during a specific time period\u2014rather than  prevalence\u2014the unique number of individuals who were victimized during  a specific time period. As a result, information gaps related to the  prevalence of domestic violence, sexual assault, dating violence, and  stalking, particularly in the areas of dating violence among victims age 12  and older and stalking among victims under age 18 existed at the time of  our November 2006 report. Obtaining both incidence and prevalence data  is important for determining which services to provide to the four differing  categories of crime victims.",
      " HHS also noted that both types of data are  important for determining the impact of violence and strategies to prevent  it from occurring. Although perfect data may never exist because of the sensitivity of these  crimes and the likelihood that not all occurrences will be disclosed,  agencies have taken initiatives since our report was issued to help  address some of these gaps or have efforts underway. These initiatives  are consistent with our recommendation that the Attorney General and  Secretary of Health and Human Services determine the extent to which  initiatives being planned or underway can be designed or modified to  address existing information gaps. For example, DOJ\u2019s Office of Juvenile  Justice and Delinquency Prevention (OJJDP), in collaboration with CDC,",
      "  sponsored a nationwide survey of the incidence and prevalence of  children\u2019s (ages 17 and younger) exposure to violence across several  major crime categories, including witnessing domestic violence and peer  victimization (which includes teen dating violence). OJJDP released  incidence and prevalence measures related to children\u2019s exposure to  violence, including teen dating violence, in 2009. Thus, Congress, agency  decision makers, practitioners, and researchers have more  comprehensive information to assist them in making decisions on grants  and other issues to help address teen dating violence. To address  information gaps related to teen dating violence and stalking victims  under the age of 18,",
      " in 2010, CDC began efforts on a teen dating  violence prevention initiative known as \u201cDating Matters.\u201d  One activity of  this initiative is to identify community-level indicators that can be used to  measure both teen dating violence and stalking in high-risk urban areas.  CDC officials reported that they plan to begin implementing the first phase  of \u201cDating Matters\u201d in as many as four high-risk urban areas in September  2011 and expect that the results from this phase will be completed by  2016. Thus, it is too early to tell the extent to which this effort will fully  address the information gap related to prevalence of stalking victims  under the age of 18.",
      " Varying definitions. The national data collection efforts we reviewed  could not provide a basis for combining the results to compute valid and  reliable nationwide prevalence estimates because the efforts used  varying definitions related to the four categories of crime. For example,  CDC\u2019s Youth Risk Behavior Surveillance System\u2019s definition of dating  violence included the intentional physical harm inflicted upon a survey  respondent by a boyfriend or girlfriend. In contrast, the Victimization of  Children and Youth Survey\u2019s definition did not address whether the  physical harm was intentional. To address the issue of varying  definitions, we recommended that the Attorney General and the Secretary  of Health and Human Services,",
      " to the extent possible, require the use of  common definitions when conducting or providing grants for federal  research. This would provide for leveraging individual collection efforts so  that the results of such efforts could be readily combined to achieve  nationwide prevalence estimates. HHS agreed with this recommendation.  In commenting on our November 2006 draft report, DOJ expressed  concern regarding the potential costs associated with implementing this  and other recommendations we made and suggested that a cost-benefit  analysis be conducted. We agreed that performing a cost-benefit analysis  is a critical step, as acknowledged by our recommendation that DOJ and  HHS incorporate alternatives for addressing information gaps deemed  cost-effective in future budget requests.",
      " HHS agreed with this  recommendation and both HHS and DOJ have taken actions to address it  by requesting or providing additional funding for initiatives to address  information gaps, such as those on teen dating violence. In response to our recommendation on common definitions, in August  2007, HHS reported that it continued to encourage, but not require, the  use of uniform definitions of certain forms of domestic violence and  sexual assault it established in 1999 and 2002, respectively. At the same  time, DOJ reported that it consistently used uniform definitions of intimate  partner violence in project solicitations, statements of work, and published  reports.",
      " Since then, officials from CDC reported that in October 2010, the  center convened a panel of 10 experts to revise and update its definitions  of certain forms of domestic violence and sexual assault given  advancements in this field of study. CDC is currently reviewing the results  from the panel and plans to hold a second panel in 2012, consisting of  practitioners, to review the first panel\u2019s results and to obtain consensus  on the revised definitions. Moreover, HHS reported that it is also  encouraging the use of uniform definitions by implementing the National  Intimate Partner and Sexual Violence Survey. This initiative is using  consistent definitions and methods to collect information on women and  men\u2019s experiences with a range of intimate partner violence,",
      " sexual  violence, and stalking victimization. Thus, by using consistent methods  over time, HHS reported that it will have comparable data at the state and  national level to inform intervention and prevention efforts and aid in the  evaluation of these efforts. In addition, according to a program specialist  from OJJDP, in 2007, OJJDP created common definitions for use in the  National Survey of Children\u2019s Exposure to Violence to help collect data  and measure incidence and prevalence rates for child victimization,  including teen dating violence. While it is too early to tell the extent to  which HHS\u2019s efforts will result in the wider use of common definitions to  assist in the combination of data collection efforts,",
      " OJJDP efforts in  developing common definitions have supported efforts to generate  national incidence and prevalence rates for child victimization. A program  specialist from OJJDP noted that OJJDP plans to focus on continuously  improving the definitions. Varying scope. The national data collection efforts we reviewed as part  of our November 2006 report also could not provide a basis for combining  the results to compute valid and reliable nationwide prevalence estimates  because the efforts had varying scopes in terms of the incidents and  categories of victims that were included. For example, in November 2006,  we reported that CDC\u2019s Youth Risk Behavior Surveillance System  excludes youth who are not in grades 9 through 12 and those who do not  attend school;",
      " whereas the Victimization of Children and Youth Survey  was addressed to youth ages 12 and older, or those who were at least in  the sixth grade. National data collection efforts underway since our report  was issued may help to overcome this challenge. For instance, in  September 2010, HHS reported that CDC was working in collaboration  with the National Institute of Justice to develop the National Intimate  Partner and Sexual Violence Survey. Specifically, HHS reported that,  through this system, it is collecting information on women\u2019s and men\u2019s  experiences with a range of intimate partner violence, sexual violence,  and stalking victimization.",
      " HHS reported that it is gathering experiences  that occurred across a victim\u2019s lifespan (including experiences that  occurred before the age of 18) and plans to generate incidence and  prevalence estimates for intimate partner violence, sexual violence,  dating violence, and stalking victimization at both the national and state  levels. The results are expected to be available in October 2011. These agency initiatives may not fill all information gaps on the extent to  which women, men, youth, and children are victims of the four  predominant crimes VAWA addresses. However, the efforts provide  Congress with additional information it can consider on the prevalence of  these crimes as it makes future investment decisions when reauthorizing  and funding VAWA moving forward.",
      " Data Collected by  Grant Programs Did  Not Contain  Information on the  Extent to Which  Victims Receive  Services and  Challenges Exist for  Collecting Such Data We reported in July 2007 that recipients of 11 grant programs we  reviewed collected and reported data to the respective agencies on the  types of services they provide, such as counseling; the total number of  victims served; and in some cases, demographic information, such as the  age of victims; however, data were not available on the extent to which  men, women, youth, and children receive each type of service for all  services. This situation occurred primarily because the statutes  governing the 11 grant programs do not require the collection of  demographic data by type of service,",
      " although they do require reports on  program effectiveness, including number of persons served and number  of persons seeking services who could not be served. Nevertheless,  VAWA authorizes that a range of services can be provided to victims, and  we determined that services were generally provided to men, women,  youth, and children. The agencies administering these 11 grant  programs\u2014HHS and DOJ\u2014collect some demographic data for certain  services, such as emergency shelter under the Family Violence  Prevention and Services Act and supervised visitation and exchange  under VAWA. The quantity of information collected and reported varied  greatly for the 11 programs and was extensive for some,",
      " such as those  administered by DOJ\u2019s Office on Violence Against Women (OVW) under  VAWA. The federal agencies use this information to help inform Congress  about the known results and effectiveness of the grant programs.  However, even if demographic data were available by type of service for  all services, such data might not be uniform and reliable because, among  other factors, (1) the authorizing statutes for these programs have  different purposes and (2) recipients of grants administered by HHS and  DOJ use varying data collection practices. Authorizing statutes have different purposes. The authorizing statutes  for the 11 grant programs we reviewed have different purposes;",
      " therefore  the reporting requirements for the 11 grant programs must vary to be  consistent with these statutes. However, if a grant program addresses a  specific service, the demographic data collected are more likely to  address the extent to which men, women, youth, and children receive that  specific service. For example, in commenting on our July 2007 report,  officials from OVW stated that they could provide such demographic data  for 3 of its 8 grant programs we reviewed\u2014the Transitional Housing  Assistance Grants Program, the Safe Havens: Supervised Visitation and  Safe Exchange Grant Program, and the Legal Assistance for Victims  Grant Program.",
      " Recipients of grants administered by HHS and DOJ use varying data  collection practices. For example, some recipients request that victims  self-report data on the victim\u2019s race, whereas other recipients rely on  visual observation of the victim to obtain these data. Since we issued our  July 2007 report, officials from HHS\u2019s Administration for Children and  Families (ACF) and OVW told us that they modified their grant recipient  forms to improve the quality of the recipient data collected and to reflect  statutory changes to the programs and reporting requirements. Moreover,  ACF officials stated that they adjusted the demographic categories on  their forms to mirror OVW\u2019s efforts so data would be collected  consistently across the government for these grant programs.",
      " In addition,  OVW officials stated that they have continued to provide technical  assistance and training to grant recipients on completing their forms  through a cooperative agreement with a university. As a result of these  efforts, and others, officials from both agencies reported that the quality of  the recipient data has improved resulting in fewer errors and more  complete data. As we reported in our July 2007 report, HHS and DOJ officials stated that  they would face significant challenges in collecting and reporting data on  the demographic characteristics of victims receiving services by type of  service funded by the 11 grant programs included in our review. These  challenges included concerns about victims\u2019 confidentiality and safety,",
      "  resource constraints, overburdening recipients, and technological issues.  For example, according to officials from ACF and OVW, requiring grant  recipients to collect this level of detail may inadvertently disclose a  victim\u2019s identity, thus jeopardizing the victim\u2019s safety. ACF officials also  said that some of their grant recipients do not have the resources to  devote to these data collection efforts, since their primary focus is on  service delivery. In addition, ACF officials said that being too prescriptive  in requiring demographic data could overburden some grant recipients  that may report data to multiple funding entities, such as federal,",
      " state,  and local entities and private foundations. Furthermore, HHS and DOJ  reported that some grant recipients do not have sophisticated data  collection systems in place to allow them to collect additional information. In our July 2007 report, we did not recommend that federal departments  require their grant recipients to collect and report additional data on the  demographic characteristics of victims receiving services by type of  service because of the potential costs and difficulties associated with  addressing the challenges HHS and DOJ officials identified, relative to the  benefits that would be derived. In conclusion, there are important issues to consider in moving forward on  the reauthorization of VAWA.",
      " Having better and more complete data on  the prevalence of domestic violence, sexual assault, dating violence, and  stalking as well as related services provided to victims of these crimes  can without doubt better inform and shape the federal programs intended  to meet the needs of these victims.  One key challenge in doing this is  weighing the relative benefits of obtaining these data with their relative  costs because of the sensitive nature of the crimes, those directly  affected, and the need for services and support. Chairman Leahy, Ranking Member Grassley, and Members of the  Committee, this completes my prepared statement. I would be happy to  respond to any questions you or other Members of the Committee may  have at this time.",
      " Contacts and  Acknowledgements For questions about this statement, please contact Eileen R. Larence at  (202) 512-8777 or larencee@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  include Debra B. Sebastian, Assistant Director; Aditi Archer, Frances  Cook, and Lara Miklozek. Key contributors for the previous work that this  testimony is based on are listed in each individual report. 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.\n"
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  {
    "id": 39,
    "question": null,
    "answer": "Foreign investment in the United States is a matter of congressional concern. It is believed by some that the United States has an unusually liberal policy which allows foreigners to invest in virtually all American businesses and real estate and that these foreign investments undermine the American economy by making it vulnerable to foreign influence and domination. These critics argue that there is even foreign domination of some key defense-related industries and that the ability of the country to protect itself in a time of national emergency could greatly suffer. These critics further argue that extensive foreign investment in this country drives up prices which Americans have to pay for investments and, even more importantly, for houses and farmland in areas where there is a significant amount of foreign ownership. However, others argue that the United States should welcome foreign investment because the influx of foreign money contributes to the creation of jobs in this country. Some also believe that the United States should be a kind of sanctuary for foreign money because of the political and economic instability which characterizes much of the rest of the world. It is also argued that, in this age of globalization of the world's economy, United States restrictions on foreign investment will only impair this nation's economy and cause us to appear isolationist. This report takes a look at some of the major federal statutes which presently restrict investment by foreigners. The report first gives a brief history of foreign investment in the United States. It then reviews constitutional justifications and constitutional limitations which exist concerning federal statutory restrictions on foreign ownership of property. After that follows a discussion of some of the major federal statutes which limit foreign investment in the United States. Some of these statutes will be looked at in detail, but a detailed treatment of such other laws as the tax laws, the antitrust laws, and the immigration laws is beyond the scope of this report. The report will be updated as needed.\n",
    "docs": [
      "History of Foreign Investment in the United States Traditionally accepted principles of international law state that the sovereign powers of a nation include the power to exclude alien persons and property. However, in most cases, so as to be mutually beneficial to commerce, nations usually do not fully exercise this power of exclusion. Sometimes a nation writes the restraints into its domestic law. For example, Clause XXX of the Magna Carta has the following provision: All merchants, if they were not openly prohibited before, shall have their safe and sure Conduct to depart out of England, to come into England, to tarry in, and go through England, as well by land as by water,",
      " to buy and sell without any manner of (evil tolts) by the old and rightful Customers, except in time of war; and if they be of a Land making War against Us, and be found in our Realm at the beginning of the wars, they shall be attached without harm of body or goods, until it be known unto Us, or our Chief Justice, how our Merchants be entered therein the Land making War against Us; and if our merchants be well entreated there, theirs shall be likewise with Us. Treaties and other forms of bilateral and multicultural agreements have also restricted foreign persons and property. For example, the Greek city-states formed agreements which allowed the reciprocal entry of and ownership of property of foreigners from other contracting states.",
      " The United States has through the years accepted both kinds of restraint. The American colonies were formed to realize profits for their English and Continental investors. After the War of Independence, the new government moved quickly to resolve the outstanding foreign claims so as to assure creditworthiness and to provide a favorable climate for foreign investment. The Jay Treaty, for example, stated that the new United States government would compensate the British for any property which had been seized or destroyed and for unpaid debts caused by the Revolution. In his Report on Manufactures in 1791, Alexander Hamilton urged the new nation to keep investment open to foreigners. It is not impossible that there may be persons disposed to look with a jealous eye on the introduction of foreign capital,",
      " as if it were an instrument to deprive our own citizens of the profits of our own industry; but, perhaps, there never could be a more unreasonable jealousy. Instead of being viewed as a rival, it ought to be considered as a most valuable auxiliary, conducing to put in motion a greater quantity of productive labor, and a greater portion of useful enterprise, than could exist without it. Hamilton's ideas prevailed. During the 18 th and 19 th centuries, foreign capital contributed enormously to the nation's development. As the nation grew, its roads, bridges, canals, banks, and finally railroads were largely financed by state bonds sold overseas.",
      " The Erie Canal, the first American canal to achieve commercial success, was made possible by the first state bonds to be quoted on the London market, in 1817. Europe was eager for investments such as these, and a group of Anglo-American banking houses were established in London\u2014led by Baring Brothers\u2014which specialized in American finance. They bought up entire issues for resale in England. In their eagerness for foreign capital, American states and private enterprises sent their agents to Europe. Generals and congressmen turned to bond selling....  By the middle of the 19 th century, foreigners held half of the federal and state and one-quarter of the municipal debts.",
      " The 1849 California Gold Rush sparked even more foreign investment. It is also interesting to note that American real estate was quite popular with foreign investors. Europeans acquired substantial holdings in such states as New York, Maine, Florida, West Virginia, and Iowa. The state of Texas granted an English company 3 million acres in payment for building the state capitol building in Austin. Some of the titled Europeans, including the German Baron von Richthofen and the British Earl of Dunraven, attempted to create baronial estates in the West. At the turn of the century, with the invention of the automobile and the increasing importance of oil,",
      " foreign oil companies, such as Royal Dutch Shell, began buying American properties. However, World War I made a drastic change in the influx of foreign capital into the United States. The creditor countries of Europe sold many of their American holdings in order to supply their wartime needs. In just a few years, the United States shifted from a debtor to a creditor nation, a position which it retained for a number of years. Throughout the nation's history, there has been criticism of foreign investment in the United States. When the first and second banks of the United States were created in 1791 and 1816, their organic statutes barred the election of aliens as directors.",
      " The Know-Nothing Party advocated discriminatory taxation of foreign capital as early as the 1850s. The Alien Land Law of 1887 prohibited aliens from owning land in federal territories. During the 20 th century Congress passed a number of statutes aimed at restricting foreign investment in certain industries such as shipping, aviation, and communications. Nevertheless, by the early 1970s foreign investment in the United States began to rise dramatically, and since then there has been frequent congressional debate as to whether there should be more restriction on investment by foreign citizens in American businesses. Constitutional Justifications and Limitations Federal constitutional provisions may be interpreted as legal validation of federal statutes restricting investments by foreigners;",
      " other constitutional provisions have to be adhered to by the states in imposing additional restrictions on foreign investment. The federal government is a government of limited powers. There is no express constitutional provision permitting the regulation of foreign investment in the United States. Thus, other federal powers mentioned in the Constitution must be looked at to justify such regulation. Three constitutional bases for such legislation are the federal powers over immigration and naturalization, the federal power to regulate interstate and foreign commerce, and the power to provide for the national defense. Congress has the exclusive power to establish naturalization and citizenship requirements and to admit and expel aliens. That the government of the United States,",
      " through the action of the legislative department, can exclude aliens from its territory is a proposition which we do not think open to controversy. Jurisdiction over its own territory to that extent is an incident of every independent nation. It is a part of its independence. If it could not exclude aliens, it would be to that extent subject to the control of another power.... The United States, in their relation to foreign countries and their subjects or citizens, are one nation, invested with powers which belong to independent nations, the exercise of which can be invoked for the maintenance of its absolute independence and security throughout its entire territory. Congress has also been held to have the power to regulate the conduct of alien residents and to prescribe the conditions for their admission and residency.",
      " Thus, it is arguable that Congress can condition entry and residency of an alien upon his or her not acquiring investments in the United States. Although this might be an extreme condition to apply, no federal case appears to suggest limits to Congress's ability to place substantive conditions upon entry and residency of aliens. Congress also has the exclusive power to \"regulate Commerce with foreign Nations, and among the several States.\" The Commerce Clause would appear to give Congress the power to restrict the use of instrumentalities of interstate commerce to transact the sale or exchange of property to a foreign citizen or to the representative of a foreign citizen. Finally, Congress's power to \"raise and support Armies\"",
      " would also appear to be a constitutional basis for restricting foreign investment in the United States. If it is determined that foreign investments impair national preparedness in the event of an emergency, it appears that prohibition of foreign investments could on this basis be construed as constitutional. Further, it should be noted that the federal government has exclusive authority over foreign relations. In the case Zschernig v. Miller, the Supreme Court held unconstitutional an Oregon statute which provided for the escheat to the state of property which would otherwise pass to a nonresident alien unless the laws of the foreign nation had reciprocal rights for United States citizens. The Oregon statute required the local probate courts to inquire into:",
      " the type of governments that obtain in particular foreign nations\u2014whether aliens under their law have enforceable rights, whether the so-called \"rights\" are merely dispensations turning upon the whim or caprice of government officials, whether the representation of consuls, ambassadors, and other representatives of foreign nations is credible or made in good faith, whether there is the actual administration in the particular foreign system of law any element of confiscation. The Court found the Oregon statute to be unconstitutional because it infringed upon the exclusively federal authority over foreign relations. On the other hand, it has been stated that: The imposition of any significant investment controls would likely violate both the spirit and the letter of more than forty bilateral treaties regulating trade and investment relations,",
      " many of which laws have been signed within the last ten years, as well as derogating our commitment to the OECD Code of Liberalization of Capital Movements. The treaties mentioned in the above quotation are Treaties of Friendship, Commerce, and Navigation which grant foreign countries the right to enter, trade, invest, or establish and operate businesses in the other signatory country. Thus, any foreign investment statute would need to take into account those Friendship, Commerce, and Navigation Treaties to which the United States is a signatory. Further, treaties such as the North American Free Trade Agreement (NAFTA) among the United States, Canada, and Mexico provide for foreign investment opportunities.",
      " Chapter 11 of NAFTA requires each party to \"accord to investors of another Party treatment no less favorable than it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.\" Other constitutional provisions may be interpreted to protect foreigners from certain acts of state and local governments. Because the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the United States Constitution apply to persons instead of to citizens, these provisions guarantee that states cannot abridge the rights of foreign nationals within the United States. The Supreme Court has in the past voided state laws which establish classifications in government actions solely on the basis of citizenship.",
      " In doing so, the Court has stated that a classification based solely upon citizenship or nationality is inherently suspect and subject to strict scrutiny. For example, in Graham v. Richardson the Court held that state laws which denied welfare benefits to resident aliens who had not resided in the United States for a required number of years were unconstitutional because they deprived these persons of equal protection of the laws. Under traditional equal protection principles, a State retains broad discretion to classify as long as its classification has a reasonable basis [citations omitted]. This is so in \"the area of economics and social welfare\" [citations omitted]. But the Court's decisions have established that classifications based on alienage,",
      " like those based on nationality or race, are inherently suspect and subject to close judicial scrutiny. Aliens as a class are a prime example of a \"discrete and insular\" minority [citations omitted] for whom such heightened judicial solicitude is appropriate. Accordingly, it was said in Takahashi, 334 U.S. at 420, that \"the power of a state to apply its laws exclusively to its alien inhabitants as a class is confined within narrow limits.\" As mentioned in the Takahashi case in the above quotation, a state must be careful in applying state laws exclusively to aliens. This case challenged a California statute which barred the issuance of commercial fishing licenses to persons ineligible for citizenship.",
      " The Supreme Court held that this statute violated the Fourteenth Amendment's Equal Protection Clause and the federal laws concerning citizenship. Citizenship has also been rejected as a legitimate classification concerning membership in a state bar, complete bans on employment of aliens in the state civil service system, and the granting of educational benefits to aliens. Yet, the Supreme Court has limited the application of these protections in other cases, one concerning a New York statute limiting appointment to the state police force to United States citizens, and another concerning a New York statute forbidding certification of a non-citizen as a public school teacher unless the person had evidenced intent to become a citizen. Therefore, there appears to be an exception to the general rule that a classification based on citizenship is subject to strict judicial scrutiny in situations where the classification relates to an essential governmental,",
      " political, or constitutional function. In such situations the less strict, rational basis test may be applied. From this discussion it may be concluded that state laws restricting investments by at least resident aliens may come under strict judicial scrutiny. Yet, it must be remembered that, in contrast to the states, the federal government has broad authority over naturalization and immigration. For reasons long recognized as valid, the responsibility for regulating the relationship between the United States and our alien visitors has been committed to the political branches of the Federal Government. Since decisions in these matters may implicate our relations with foreign powers, and since a wide variety of classifications must be defined in the light of changing political and economic circumstances,",
      " such decisions are frequently of a character appropriate to either the Legislature or the Executive than to the Judiciary. The Supreme Court has held, for example, that aliens can be denied Medicare coverage and that the federal government can deny a visa to a Marxist invited to speak on world communism. The power of Congress to exclude aliens from the United States and to prescribe the terms and conditions on which they enter is virtually absolute and is an attribute of the sovereignty of the United States. Present Federal Restrictions on Foreign Investment Four major federal statutes which have an impact upon foreign investment in the United States are information-gathering and disclosure statutes, instead of actual restriction statutes. One of these statutes is the International Investment and Trade in Services Survey Act of 1976.",
      " Congress intended this act: to provide clear and unambiguous authority for the President to collect information on international investment and United States foreign trade in services, whether directly or by affiliates, including related information necessary for assessing the impact of such investment and trade, to authorize the collection and use of information on direct investments owned or controlled directly or indirectly by foreign governments or persons, and to provide analyses of such information to the Congress, the executive agencies, and the general public. The President by executive order delegated responsibility under this act for studying direct investment to the Commerce Department and portfolio investment to the Treasury Department. The act directs the President to conduct a benchmark survey of foreign direct investment in the United States every five years.",
      " Amendments to the act in 1990 direct the President to publish for the use of the general public and federal agencies periodic information concerning foreign investment, including information on ownership by foreign governments of United States affiliates of business enterprises the ownership or control of which by foreign persons is more than 50% of the voting securities or other evidence of ownership of these enterprises, as well as business enterprises the ownership or control of which by foreign persons is 50% or less of the voting securities or other evidence of ownership of these enterprises. The 1990 Amendments also provide that the President may request a report from the Bureau of Economic Analysis (BEA) of the Department of Commerce of the best available information on the extent of foreign direct investment in a given industry.",
      " Another federal statute having an impact upon foreign investment in the United States is the Foreign Direct Investment and International Financial Data Improvements Act of 1990. The purpose of this act is: to allow the Department of Commerce's Bureau of Economic Analysis (BEA) access to information collected by the Bureau of the Census (Census). This access will improve the accuracy and analysis of BEA's reports to the public and to Congress on foreign direct investment in the United States. This act, among other requirements, adds chapter 10 to title 13 of the United States Code to provide that the Bureau of the Census shall exchange with the Bureau of Economic Analysis of the Department of Commerce any information that is collected under the census provisions and under the International Investment and Trade in Services Survey Act that pertains to a business enterprise operating in the United States if the Secretary of Commerce determines that the information is appropriate to augment and improve the quality of the data collected under the Survey Act.",
      " The Data Improvements Act of 1990 also requires that other reports be prepared by the Secretary of Commerce and the Comptroller General and submitted to congressional committees. The Bureau of the Census may provide business data to the Bureau of Economic Analysis and the Bureau of Labor Statistics (BLS) if the information is required for an authorized statistical purpose and the provision is the subject of a written agreement with that Designated Statistical Agency or its successors. The third of these information-gathering and disclosure statutes is the Agricultural Foreign Investment Disclosure Act of 1978. This act has the following two major requirements: (1) any foreign person who acquires or transfers any interest,",
      " other than a security interest, in agricultural land must submit a report to the Secretary of Agriculture not later than 90 days after the date of the acquisition or transfer; (2) any foreign person who holds any interest, other than a security interest, in agricultural land on the day before the effective date of this act must submit a report to the Secretary of Agriculture not later than 180 days after the effective date of the act. The fourth statute is also a disclosure statute. It is known as the Domestic and Foreign Investment Improved Disclosure Act of 1977 and is a requirement added to the Foreign Corrupt Practices Act of 1977. This provision amended Section 13(d)",
      " of the Securities Exchange Act of 1934 to require that anyone who acquires 5% or more of the equity securities of a company registered with the Securities and Exchange Commission must disclose certain specified information, including citizenship and residence. Hearings indicate that this statute is directed at foreign investors in order to improve the ability of the federal government to monitor foreign investment in the United States. All of the statutes discussed above are information-gathering and disclosure in nature. There are not across-the-board, blanket restrictions on foreign investment in the United States. Instead, over the years Congress has believed that certain industries which could affect national security should have limits on foreign investment.",
      " These industries include the maritime industry, the aircraft industry, banking, resources and power, and the various businesses which are parties to government contracts. Shipping Industry Laws that have provisions concerning barriers to foreign investment in the maritime industry are dispersed throughout Title 46 of the United States Code. In the area of merchant shipping, there are restrictions on foreign ownership of ships which are eligible for documentation in the United States. Any vessel of at least five tons that is not registered under the laws of a foreign country is eligible for documentation if it is owned by: (1) a United States citizen; (2) an association, trust, joint venture, or other entity,",
      " all of whose members are United States citizens and that is capable of holding title to a vessel under the laws of the United States or of a state; (3) a partnership whose general partners are United States citizens and whose controlling interest is owned by United States citizens; (4) a corporation established under federal or state laws whose chief executive officer and chairman of its board of directors are United States citizens and no more of its directors are noncitizens than a minority of the number necessary to constitute a quorum; (5) the United States government; or (6) a state government. Aircraft Industry Statutory restrictions bar a considerable amount of foreign investment in the aircraft industry.",
      " It is unlawful for any person to operate any aircraft unless it is registered. An aircraft is eligible for registration only if it is: (1) not registered under the laws of a foreign country and is owned by a citizen of the United States, a citizen of a foreign country lawfully admitted for permanent residence in the United States, or a corporation not a citizen of the United States when the corporation is organized and doing business under the laws of the United States or a state and the aircraft is based and primarily used in the United States; or (2) an aircraft of the United States Government or a state, the District of Columbia, a territory or possession,",
      " or a political subdivision of a state, territory, or possession. A citizen of the United States is defined as: (a) an individual who is a citizen of the United States, (b) a partnership of which each member is a United States citizen, or (c) a corporation or association organized under the laws of the United States or of any state, the District of Columbia, territory, or possession of the United States, of which the president and two-thirds or more of the board of directors and other managing officers are United States citizens, which is under the actual control of United States citizens and in which at least 75% of the voting interest is owned or controlled by persons who are citizens of the United States.",
      " Foreign aircraft which are not a part of the armed forces of a foreign nation may be navigated in the United States by airmen holding certificates or licenses issued or rendered valid by the United States or by the nation in which the aircraft is registered if the foreign nation grants a similar privilege concerning United States aircraft. Aircraft operators may be subject to restrictions based on citizenship. It is unlawful for a person to operate an aircraft without an airman certificate. The Administrator of the Federal Aviation Administration may restrict or prohibit issuing an airman certificate to an alien or make issuing the certificate to an alien dependent upon a reciprocal agreement with the government of a foreign country.",
      " The Secretary of Transportation is authorized to provide insurance and reinsurance against loss or damage arising from the risk of operation of aircraft. Citizenship requirements may be important in obtaining this insurance. For example, some air cargoes may be insured only if they are owned by citizens or residents of the United States. Mining All valuable mineral deposits in lands belonging to the United States that are open to exploration and purchase may be purchased by United States citizens and by those who have declared their intention to become United States citizens. Proof of citizenship may consist, in the case of an individual, of his affidavit; in the case of an association of unincorporated persons,",
      " of the affidavit of their authorized agent or upon information and belief; and in the case of a corporation organized under the laws of the United States, a state, or territory, by the filing of a certified copy of their charter or certificate of incorporation. Deposits of coal, phosphate, sodium, potassium, oil, oil shale, gilsonite, or gas and lands containing these deposits owned by the United States, including within national forests and in incorporated cities, towns, villages, and national parks and monuments, shall be subject to disposition in the approved manner to United States citizens, associations of United States citizens, or any corporation organized under United States,",
      " state, or territorial laws. Citizens of another country whose laws, customs, or regulations deny similar privileges to citizens or corporations of the United States shall not by stock ownership, stock holding, or stock control own any interest in any lease concerning these mineral lands. The leasing of oil, natural gas, and other mineral deposits is allowed in the submerged lands of the Continental Shelf. Regulations require that only United States citizens, resident aliens, domestic corporations, or associations of one or more of these groups may obtain these leases. Energy Licenses for the construction, operation, or maintenance of facilities for the development, transmission, and utilization of power on land and water over which the federal government has control may be issued only to United States citizens and domestic corporations.",
      " A license for nuclear facilities cannot be acquired by a foreign citizen or by a corporation believed to be controlled by a foreign citizen or government. Lands There appear to be few federal restrictions on the ownership of land by foreign individuals or by foreign corporations. However, such past acts as the Homestead Act required American citizenship in order to make claims on these lands. Today, the Desert Land Act requires citizenship or a declared intention of citizenship in order to make claims. Also, the Secretary of the Interior continues to require American citizenship or a declared intention of citizenship for authorizing permits for grazing on public lands, and, as discussed above, the Agricultural Foreign Investment Disclosure Act requires the disclosure to the Secretary of Agriculture by foreigners of agricultural land purchases in the United States.",
      " Further, public lands improved at the expense of funds from a reclamation project can be sold only to United States citizens. Communications Federal statutes restrict foreign ownership and operation of mass communications media in the United States. Radio station licenses shall not be granted to or held by any foreign government or representative of a foreign government. No broadcast or common carrier or aeronautical en route or aeronautical fixed radio station license shall be granted to or held by any alien or the representative of any alien, any corporation organized under the laws of a foreign government, any corporation of which more than one-fifth of the capital stock is owned or voted by aliens or their representatives or by a foreign government or representative or by any corporation organized under the laws of a foreign country,",
      " or by any corporation directly or indirectly controlled by any other corporation of which any officer or more than one-fourth of the capital stock is owned or voted by aliens, their representatives, or by a foreign government or representative, or by any corporation organized under the laws of a foreign country if the public interest will be served by the refusal or revocation of the license. There does not appear to be a federal statute prohibiting the investment by foreign citizens in United States newspapers and magazines. However, the Foreign Agents Registration Act requires that agents of foreign principals must register with the Attorney General of the United States, that informational materials for or in the interests of a foreign principal must be labeled to show the relationship between the agent and the foreign principal,",
      " and that the agent must file two copies of the printed propaganda with the Justice Department. The statute defines foreign principal to include (1) foreign governments and foreign political parties; (2) persons outside the United States unless it is determined that the person is an individual and a citizen of and domiciled within the United States or that the person is not an individual and is organized under or created by the laws of the United States or a state and has its principal place of business within the United States; and (3) a business organized under the laws of or having its principal place of business in a foreign country. However, agent of a foreign principal does not include any news or press service or association which is a corporation organized under United States or state law or any newspaper,",
      " magazine, periodical, or other publication having on file with the United States Postal Service required information so long as it is at least 80% beneficially owned by United States citizens, its officers and directors are all United States citizens, and the news or service or association, newspaper, magazine, periodical, or other publication is not owned, controlled, subsidized, or financed and none of its policies is determined by a foreign principal or its agent. Banking The Bank Holding Company Act (BHCA) regulates as a bank holding company (BHC) any company that controls a United States bank; i.e., a bank chartered by a state or the federal government to do banking in the United States (as distinguished from a foreign bank\u2014a bank chartered by a foreign government and doing business in the United States pursuant to the terms of the International Banking Act of 1978 ). \"Control\"",
      " of a bank or BHC is defined in terms of: (1) acquiring a 25% share or more of any class of voting securities of a bank or a BHC; (2) controlling the election of a majority of the directors or trustees of the bank or BHC; or (3) having been determined by the Board of Governors of the Federal Reserve System (FRB) to be exercising a controlling influence over the management or policies of the bank or BHC. The BHCA is administered by the FRB, which must solicit the \"views and recommendations\" of the Comptroller of the Currency for national bank acquisitions and the appropriate state bank supervisor for state-chartered bank acquisitions.",
      " The BHCA presumes that \"any company which owns, controls, or has power to vote less than 5 per centum of any class of voting securities of a given bank or [bank holding] company does not have control over that bank or company.\" Before any company may take any action which would cause that company to become a BHC or before any BHC may acquire a 5% share or more of the voting stock of any U.S. bank or BHC, it must seek approval from the FRB. FRB's implementing regulation makes this requirement applicable to \"foreign banking organizations.\" The BHCA generally subjects BHCs to activity restrictions that essentially confine their portfolios to banking and financial services.",
      " Under the BHCA, subject to specified, limited exceptions, any company which controls a bank may engage only in banking or managing or controlling banks and subsidiaries; specified, limited non-banking activities; and activities that are financial in nature or incidental to such financial activity as determined by the FRB and the Secretary of the Treasury. Permissible banking activities are found in Section 4(k) of the BHCA. A list of permissible non-banking activities for BHCs is found at 12 C.F.R. Section 225.28. A further list of permissible non-banking activities for BHCs which have qualified as Financial Holding Companies under Section 4(l)(1)",
      " of the BHCA is found at 12 C.F.R. Section 225.86. In addition, the FRB has promulgated individual orders under the BHCA determining that particular activities are \"so closely related to banking as to be a proper incident thereto.\" The BHCA's Section 2(h)(2) states that a foreign company that acquires stock of a U.S. bank or BHC is not subject to BHCA activities restrictions if: (1) it is organized as a bank holding company under foreign law and is principally engaged in the banking business outside of the United States. A further provision states that nothing in the preceding provision authorizes such a foreign company to hold more than 5%",
      " of the outstanding shares of any class of voting securities of a company engaged in banking, securities, insurance, or other financial activities, as defined by the Federal Reserve Board, in the United States. There is also authority for the Federal Reserve Board to provide a foreign company which acquires the stock of a U.S. bank or BHC an exemption from the activities restrictions if the Federal Reserve Board determines \"by regulation or order... under circumstances and subject to the conditions set forth in the regulation or order, [that] the exemption would not be substantially at variance with purposes of [the BHCA]... and would be in the public interest.\" Government Contracting Corporations which are controlled or owned by foreign citizens can conduct business with the federal government on generally the same basis as domestic corporations which are owned completely by United States citizens.",
      " However, some federal statutes restrict purchases of products by federal agencies to those manufactured in the United States. For example, American materials may be required for public use. Only unmanufactured articles, materials, and supplies that have been mined or produced in the United states, and only manufactured articles, materials, and supplies that have been manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States, shall be acquired for public use unless the head of the department or independent establishment concerned determines their acquisition to be inconsistent with the public interest or their cost to be unreasonable. Every contract for the construction or repair of a public building or public work shall have a provision that the contractor or supplier shall use only unmanufactured articles or materials mined or produced in the United States.",
      " Some exceptions should be noted. For example, the Trade Agreements Act of 1979 gives the President the authority to waive application of foreign citizen restrictions on the products of our trading partners. However, this does not authorize the waiver of any small business or minority preference. No entity controlled by a foreign government is allowed to merge with, acquire, or take over a company engaged in interstate commerce in the United States which is performing a Department of Defense (DOD) contract or a Department of Energy (DOE) contract under a national security program that cannot be performed satisfactorily unless that company is given access to information in a proscribed category of information.",
      " Such a merger, acquisition or takeover is also not allowed to occur if the company engaged in interstate commerce in the United States was during the previous fiscal year awarded Department of Defense prime contracts in an aggregate amount exceeding $500 million or Department of Energy prime contracts under national security programs exceeding $500 million. This limitation shall not apply if the merger, acquisition, or takeover is not suspended or prohibited under the statutes carried out by the Committee on Foreign Investment in the United States, as discussed below. Investment Company Regulation The Investment Company Act of 1940 requires registration with the Securities and Exchange Commission (SEC) of an investment company which does business in the United States.",
      " Only investment companies organized or created under the laws of the United States or a state are allowed to sell their own securities in interstate commerce in connection with a public offering unless the SEC finds that it is legally and practically feasible to enforce the federal securities laws against the investment company and that the exemption from registration is consistent with the public interest and the protection of investors. The Trust Indenture Act of 1939 prohibits the sale in interstate commerce of certain securities which have not been registered under the Securities Act of 1933 unless the securities have been issued under an indenture. There must be at least one or more trustees under the indenture, at least one of whom shall be a corporation organized and doing business under the laws of the United States,",
      " a state, territory, or the District of Columbia or a corporation or other person permitted to act as trustee by the SEC which is authorized to exercise corporate trust powers and is subject to supervision or examination by federal, state, territorial, or District of Columbia authority. Committee on Foreign Investment in the United States98 The Committee on Foreign Investment in the United States (CFIUS) is a multi-member board headed by the Secretary of the Treasury. CFIUS may review any \"covered transaction,\" defined as any merger, acquisition, or takeover by or with a foreign person which could result in foreign control of any person engaged in interstate commerce in the United States,",
      " for its possible impact upon national security. Factors to be considered in determining the impact upon national security are numerous and include domestic production needed for projected national defense requirements, the capability and capacity of domestic industries to meet national defense requirements, the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the United States to meet the requirements of national security, and the potential effects of the proposed or pending transaction on United States international technological leadership in areas affecting United States national security. If the Committee determines that the acquiring party is an entity controlled by a foreign government, the Committee shall conduct an investigation of the transaction as a national security investigation.\n"
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  {
    "id": 40,
    "question": null,
    "answer": "The 2005 Defense Base Closure and Realignment Commission (commonly referred to as the BRAC Commission) submitted to the President its report on domestic military base closures and realignments on September 8, 2005. The President approved the list and forwarded it to Congress on September 15. This report summarizes some of the report's highlights and examines in detail the Commission's proposed legislation for the conduct of a potential future BRAC round. It will not be updated.\n",
    "docs": [
      "Highlights of the 2005 BRAC Commission Report Closures and Realignments In the 2005 BRAC round, the Department of Defense (DOD) recommended 190 closures and realignments. Of this number, the BRAC Commission approved 119 with no changes and accepted 45 with amendments. These figures represented 86% of the Department of Defense's overall proposed recommendations. In other words, only 14% of DOD's list was significantly altered by the Commission. Of the rest, the Commission rejected 13 DOD recommendations in their entirety and significantly modified another 13. It should be pointed out that the BRAC Commission approved 21 of DOD's 33 major closures,",
      " recommended realignment of 7 major closures, and rejected another 5. Costs and Savings Over the next 20 years, the total savings of the Commission's recommendations are estimated at $35.6 billion \u00e2\u0080\u0093 significantly smaller than DOD's earlier estimate of $47.8 billion. The difference between Commission and DOD estimates has proved controversial. Results of Jointness According to the Commission, DOD achieved only minor success in promoting increased jointness with its recommendations. Most of the proposed consolidations and reorganizations were within, not across, the military departments. Air National Guard Among the most difficult issues faced by the 2005 BRAC Commission were DOD's proposals to close or realign Air National Guard bases.",
      " Thirty seven of 42 DOD Air Force proposals involved Air National Guard units. Commission Process According to the Commission, its process was open, transparent, apolitical, and fair. Commissioners or staff members made 182 site visits to 173 separate installations. It conducted 20 regional hearings to obtain public input and 20 deliberative hearings for input on, or discussion of, policy issues. Differences between Current and Prior Rounds In 2005, DOD adopted an approach supporting an emphasis on joint operations. The 1988, 1991, and 1993 rounds did not include a Joint Cross-Service element. The 1995 round did utilize Joint Cross-",
      "Service Groups in its analytical process, but the three military departments were permitted to reject their recommendations. In 2005, the Joint Cross-Service Groups were elevated to become peers of the military departments. The 2005 Commission consisted of nine members rather than eight, thereby minimizing the possibility of tie votes. For the 2005 round, the time horizon for assessing future threats in preparing DOD's Force Structure Plan was 20 years rather than six. The 1995 selection criteria stated that the \"environmental impact\" was to be considered in any base closure or realignment. The 2005 criteria required the Department of Defense (and ultimately the Commission)",
      " to consider \"the impact of costs related to potential environmental restorations, waste management and environmental compliance activities.\" Existing BRAC law specifies eight installation selection criteria. The 2005 Commission emphasized the sixth, which directed consideration of economic impact on local communities. In prior rounds, homeland defense was not considered a selection criterion. It is now a significant element among the military value selection criteria. The 1991 Commission added 35 bases to the DOD list of recommendations, the 1993 Commission added 72, and the 1995 Commission added 36 \u00e2\u0080\u0093 where as the 2005 Commission added only 8. Finally,",
      " prior BRAC rounds did not take place in the face of the planned movement of tens of thousands of troops from abroad back to the United States. Subsequent Commission-recommended Legislation Overview The 2005 Defense Base Closure and Realignment Commission recommended various changes to the existing statute governing its creation, organization, process, and outcome. The proposed revision of the governing Act, if enacted, would arguably represent a significant change in scope of the BRAC law. It would expand the Commission's lifespan and mission. It would explicitly link reconsideration of the defense infrastructure \"footprint\" to security threat analysis by the new Director of National Intelligence (DNI)",
      " and the periodic study of the nation's defense strategy known as the Quadrennial Defense Review. It would also formalize BRAC consideration of international treaty obligations undertaken by the United States, such as the scheduled demilitarization of chemical munitions. By passing legislation containing the Commission's recommended language, Congress would authorize the Secretary of Defense to conduct a 2014-2015 BRAC round, should he or she deem it necessary. Other recommended provisions would enable the Commission to suggest new vehicles for the expeditious transfer of title of real property designated for disposal through the BRAC process. In addition, recommended legislative language suggests expanding the requirement for Department of Defense release of analytical data and strengthens the penalty for failure to do so.",
      " It would increase the responsibilities of the Commission's General Counsel and would exempt the Commission from the Federal Advisory Committee Act (FACA) while retaining conformity with the Freedom of Information (FOIA) and Government in the Sunshine Acts. The recommended legislation would also make permanent the existing temporary authority granted to the Department of Defense to enter into environmental cooperative agreements with federal, state, and local entities (including Indian tribes). Finally, the recommended legislation, while it retains many of the features new to the 2005 round (such as the super majority requirement), it repeals others, such as statutory selection criteria. Placing BRAC in the Broader Security Context The 2005 BRAC round was the fourth in which an independent commission reviewed recommendations drawn up by the Department of Defense,",
      " amended them, and submitted the revised list to the President for approval. While the 2005 process resembled the previous three rounds, it was profoundly different in many respects. For example, the DOD's analytical process attempted to reduce former rounds' emphasis on individual military departments by enhancing the joint and cross-service evaluation of installations. BRAC analysis in 2005 also attempted to project defense needs out to 20 years, whereas previous rounds used a much shorter six-year analytical horizon. This encouraged DOD analytical teams to base their assessments on assumptions of the needs of transformed military services, not formations created for the Cold War. These assumptions were embodied in the force-",
      "structure plan and infrastructure inventory submitted by the Secretary of Defense. In its legislative recommendation, the Commission suggested that a potential 2014-2015 BRAC round be placed in a strategic sequence of defense review, independent threat analysis, and base realignment. The new statute would couple the existing Quadrennial Defense Review (QDR), currently required every four years, with consideration of a new BRAC round. If the QDR leads the Secretary of Defense to initiate a new BRAC round, the DNI would produce and forward to Congress an independent threat assessment. BRAC Commission Under the 2005 statute, the BRAC Commission was terminated on April 16,",
      " 2006. The proposed legislation would have extended the life of a subset of the Commission (Chairman, Executive Director, and staff of not more than 50), which would have maintained the Commission's documentation and formed the core of an expanded staff for a possible 2014-2015 Commission. In addition, the continued Commission would have been tasked to monitor and report on: (1) the use of BRAC appropriations; (2) the implementation and savings of 2005 BRAC recommendations; (3) the execution of privatizations-in-place at BRAC sites; (4) the remediation of environmental degradation and its associated cost at BRAC sites;",
      " and (5) the impact of BRAC actions on international treaty obligations of the United States. Commission Reports The proposed law would have required the prolonged Commission to prepare and submit three reports to Congress and the President: an Annual Report, a Special Report (due on June 30, 2007), and a Final Report (due on October 31, 2011). Annual Reports The Commission would have reported not later than October 31 of each year on Department of Defense utilization of the Defense Base Closure and Realignment Account 2005, implementation of BRAC recommendations, the carrying out of privatization-in-place by local redevelopment authorities, environmental remediation undertaken by the Department (including its cost), and the impact of BRAC actions on international treaty obligations of the United States.",
      " Special Report The legislation would have authorized the Commission to study and analyze the execution of BRAC 2005 recommendations. This report, undertaken if the Commission considered it beneficial, would have been completed not later than June 30, 2007. It would have focused on actions taken and planned for those properties whose disposal proves to be problematic, including: Properties Requiring Special Financing. Some properties planned for transfer to local redevelopment authorities or others may require special financial arrangements in the form of loans, loan guarantees, investments, environmental bonds and insurance, or other options. National Priorities List (NPL) Sites. NPL sites and other installations present particularly difficult environmental remediation challenges necessitating long-term management and oversight.",
      " The 2005 Commission report proposed that this study examine freeing the Department, after a set period, to withdraw from unsuccessful title transfer negotiations with local redevelopment authorities in order to seek other partners. It also envisioned potential Department contracts with private environmental insurance carriers after the completion of remediation in order to mitigate risk of future liability. The study could have considered the advisability of crafting a financial \"toolbox,\" similar in concept to the special authorizations granted to the Department of Defense in the creation of the Military Housing Privatization Initiative, in order to expedite the disposal of challenging properties. Other alternatives studied were the creation of public-private partnerships, limited-liability corporations,",
      " or independent trusteeships to take title to and responsibility for properties. The Commission would have consulted closely with the Department of Defense, the military departments, the Comptroller General of the United States, the Environmental Protection Agency, and the Bureau of Land Management, Department of the Interior, in preparing its study and report. Final Report Existing law requires all BRAC implementation actions to be completed not later than six years after the date that the President transmitted the current Commission's report, or September 15, 2011. The recommended legislation would have required the Commission to submit a final report on the execution of these actions not later than October 31,",
      " 2011. Other Noteworthy Considerations The recommended legislation included other provisions suggested by the experience of the 2005 round. Submission of Certified Data The proposed legislation would require the Secretary of Defense to release the supporting certified data not later than seven (7) days after forwarding his or her base closure and realignment recommendations to the congressional defense committees and the Commission. Failure to do so would terminate the BRAC round. Prolongation of Commission Analysis and Recommendation Period The 2005 Commission report notes that the four months allotted by statute for the Commission to complete its work was shortened considerably by delays in staffing the Commission, the appointment of Commissioners,",
      " and the release of Defense Department certified data, among other considerations. The Commission proposed legislation to extend the period to seven (7) months. Commission Subpoena Power The 2005 Commission suggested that a future body be granted the Commission the power to subpoena witness for its hearings. Commission General Counsel as Sole Ethics Counselor The Commission recommended a statutory designation of the Commission's General Counsel as its sole ethics counselor. The 2005 Commission found that questions concerning recusal from consideration, potential conflicts of interest, etc., were not materially assisted by consultation with other agency counsel. Transparency Legislation recommended by the Commission stated that the \"records, reports, transcripts,",
      " minutes, correspondence, working papers, drafts, studies or other documents that were furnished to or made available to the Commission shall be available for public inspection and copying at one or more locations to be designated by the Commission. Copies may be furnished to members of the public at cost upon request and may also be provided via electronic media in a form that may be designated by the Commission.\" It would continue the traditional practice of opening all unclassified hearings and meetings of the Commission to the public and provides for official transcripts, certified by the Chairman, to be made available to the public. Repeal of Existing Law The recommended legislation would have repealed Sec. 2912-",
      "2914 of the existing law. These sections authorized the 2005 round and include, among other provisions, the statutory installation selection criteria.\n"
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  },
  {
    "id": 41,
    "question": null,
    "answer": "Members of Congress and Administrations have periodically considered reorganizing the federal government's trade and development functions to advance various policy objectives. In its 2019 budget request, the Trump Administration included a proposal to consolidate the Overseas Private Investment Corporation (OPIC) and other agency development finance functions, specifically noting the Development Credit Authority (DCA) of the U.S. Agency for International Development (USAID), into a new U.S. development finance agency. The policy objectives that the new agency would aim to support include enhancing the efficiency and effectiveness of government functions and advancing U.S. national security interests. The Administration also proposed the creation of a new Development Finance Institution as part of a comprehensive government-wide reform and reorganization plan released in June 2018. In February 2018, two proposed versions of the Better Utilization of Investments Leading to Development (BUILD) Act, H.R. 5105 in the House and S. 2463 in the Senate, were introduced on a bipartisan, bicameral basis to create a new U.S. International Development Finance Corporation (IDFC). The companion bills would consolidate all of OPIC's functions and the DCA, enterprise funds, and development finance technical support functions of USAID. While there were some significant discrepancies between the two bills, as introduced, including the period of authorization, amendments made in both chambers have bridged some differences. Stakeholders differ in their views of particular aspects of the proposal and certain issues remain open questions. Congress would play a major role in any reorganization of federal development finance functions. The proposal to create a new U.S. government agency involves legislative, oversight, and appropriations functions. Key questions for Congress may include the following:  What are the rationales for and against modifying and expanding OPIC's functions?    Should development finance functions be reorganized or should alternative approaches be considered?    If reorganization is pursued, how should a new development finance institution (DFI) be structured?     How should a proposed new DFI be funded?     What implications would a proposed new DFI have for USAID and U.S. development objectives?    How can adequate coordination be ensured between the new DFI and other U.S. government agencies involved in development?    What are the competitiveness and other strategic implications of the proposed DFI?\n",
    "docs": [
      "Introduction Members of Congress and Administrations have periodically considered reorganizing the federal government's trade and development functions to advance various U.S. policy objectives. In the 115 th Congress, these issues have come to the fore in the context of development finance. \"Development finance\" is a term commonly used to describe government-backed financing to support private sector capital investments in developing and emerging economies. It can be viewed on a continuum of public and private support, situated between pure government support through grants and concessional loans and pure commercial financing at market-rate terms.  Development finance institutions (DFIs) are specialized entities that supply such finance. In the United States,",
      " the primary provider of development finance is the Overseas Private Investment Corporation (OPIC), but other agencies, such as the U.S. Agency for International Development (USAID), also provide development finance. President Trump renewed the debate over the future of U.S. development finance at the Asia-Pacific Economic Cooperation (APEC) CEO Summit in Danang, Vietnam in November 2017, where he announced that the United States is committed \"to reforming our development finance institutions so that they better incentivize private sector investment in your economies and provide strong alternatives to state-directed initiatives that come with many strings attached.\"  The Trump Administration's National Security Strategy,",
      " released in December 2017, identified modernizing U.S. development finance tools as a priority to advance U.S. global influence. It noted that, \"[w]ith these changes, the United States will not be left behind as other states use investment and project finance to extend their influence.\" Competition for influence with China, which is a major supplier of development finance, especially appears to be a prominent driver of the Administration's interest in development finance reform. Moreover, potential reorganization of the executive branch has been a broader interest of the Trump Administration. The President's FY2019 budget proposed the consolidation of OPIC and other agency development finance functions,",
      " specifically noting the Development Credit Authority (DCA) of USAID, into a new U.S. development finance agency to advance a number of U.S. policy objectives.  In February 2018, two proposed versions of the Better Utilization of Investments Leading to Development (BUILD) Act, H.R. 5105 in the House and S. 2463 in the Senate, were introduced on a bipartisan, bicameral basis to create a new U.S. International Development Finance Corporation (IDFC). Both bills would consolidate all of OPIC's functions and the Development Credit Authority (DCA), enterprise funds, and development finance technical support functions of USAID.",
      " A major difference between the two bills, as introduced, was that S. 2463 H.R. 5105 would authorize the new DFI for seven years, while would authorize it until September 30, 2038. However, the House-passed (July 17, 2018; H.Rept. 115-814 ) and Senate committee-reported (June 27, 2018) versions bridge some differences, including both now providing a seven-year authorization. The Trump Administration issued a statement strongly supporting the BUILD Act, noting that it was broadly consistent with the Administration's goals and FY2019 budget proposal. At the same time,",
      " the Administration called for some modifications to the bills to enhance the proposed DFI's alignment with national interests and institutional linkages, as well as to address risk management and other concerns. Stakeholders differ in their views of particular aspects of the DFI proposal and certain issues remain open questions.  In June 2018, the White House published a government-wide reorganization plan. It included a proposal to consolidate the U.S. government's existing development finance tools, citing OPIC and DCA as examples. The Administration appears to view the BUILD Act as the primary vehicle for implementing its development finance consolidation proposal. While some executive branch reorganizations can happen administratively,",
      " the changes contemplated here would likely require changes to U.S. law.  Background Overview of Development Finance Institutions At the bilateral level, national governments can operate DFIs. The United Kingdom was the first country to establish a DFI in 1948. Many countries have followed suit. These DFIs are typically wholly or majority government-owned. They operate either as independent institutions or as a part of larger development banks or institutions. Their organizational structures have evolved, in some cases, due to changing perceptions of how to address identified development needs in the most effective way possible. Unlike OPIC, other bilateral DFIs tend to be permanent and not subject to renewals by their countries'",
      " legislatures.  DFIs also can operate multilaterally, as parts of international financial institutions (IFIs), such as the International Finance Corporation (IFC), the private sector arm of the World Bank. They can operate regionally through regional development banks as well. Examples of these banks include the African Development Bank (AfDB), Asian Development Bank (AsDB), European Bank for Reconstruction & Development (EBRD), and the Inter-American Development Bank (IDB).  The primary role of nearly all DFIs is promoting economic development by supporting foreign direct investment (FDI) in underserved types of projects, regions, and countries; undercapitalized sectors;",
      " and countries with viable project environments but low credit ratings (see text box ). DFIs use a range of financial instruments to support private investment in development projects; depending on the DFI, these may include equity, direct loans, loan guarantees, political risk insurance, and technical assistance. Varied as they may be, DFIs aim to be catalytic agents in promoting private sector investment in developing countries. Their support is aimed to increase private sector activity and public-private partnerships that would not happen in the absence of DFIs because of the actual or perceived risk associated with the activity.  In providing support for development, DFIs typically pursue \"additionality,\" that is,",
      " limiting their support to circumstances when commercial financing for a project is not available on commercially viable terms in order to complement, not compete with, the private sector. The presence of DFIs is considered to provide a guarantee of a long-term commitment to development that private capital would otherwise not bear on its own.  At the same time, DFIs generally are market-oriented in their project support, such as in the fees they charge. They generally aim to be financially sustainable or profitable, investing in projects that generate returns. As such, DFIs often have a double bottom line of development impact and financial sustainability or profitability\u2014prompting debate within the development community about the extent to which these goals are complementary or in tension.",
      "  DFIs vary in the size of their activities, as well as their portfolio compositions\u2014whether by financial instrument, geographic region, or economic sector. They often cofinance investment projects with each other, both at the multilateral and bilateral level. Such financing pools additional funds and diversifies risks across DFIs, such as for certain large-scale infrastructure projects that may be too big and risky for one DFI to finance alone. Unlike government-backed export financing, no international rules govern DFIs' investment financing activities. For decades, the major players in development funding were international financial institutions and bilateral government donors. By the end of the 1980s,",
      " private capital flows began to accelerate, and bilateral DFIs, including those of the United States and European countries, became more active in development finance. With their growing economic power, emerging economies increasingly are now also major suppliers of such finance.  It is difficult to find centralized, comprehensive, and comparable sources of information on DFI activities.\u00a0According to one study, the amount of financing committed by some major DFIs grew from about $10 billion in 2000 to nearly $70 billion 2014. That year, DFI annual commitments for private sector investment in developing countries were comprised of 40% by multilateral DFIs (including the IFC and the Multilateral Investment Guarantee Agency,",
      " MIGA); 35% by bilateral DFIs (15 European DFIs, OPIC, and Japan's DFI); and 25% by regional finance institutions. By many accounts, the magnitude and scope of China's development finance outsizes that of other historical suppliers of development finance. For example, at the end of 2016, assets of the China Development Bank (CDB, discussed below) stood at 14.3 trillion yuan ($2.3 trillion). Measured by assets, the CDB is larger than the World Bank's IFC, whose assets totaled $90.4 billion in 2016.  The growth of direct investment flows has outpaced that of official development assistance (ODA)",
      " provided by the 29 members of the Organization for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC), which includes the United States. As ODA has decreased and FDI to developing countries has increased, development finance has become more prominent as a way to encourage private investment to go to undercapitalized areas. For example, global investments in infrastructure total about $2.5 trillion a year, but do not meet demand, such as in developing countries experiencing population growth, expanding economies, and industrialization. Based on current trends, there is a shortfall in infrastructure investment of about $350 billion a year. That gap triples if the United Nations Sustainable Development Goals (SDGs)",
      " are taken into account.  Key U.S. Government Agencies in Development Finance OPIC and USAID are at the center of the current development finance reorganization debate. While outside of the scope of this report, it is important to note that the United States also supports development finance at the multilateral and regional level through its contributions to entities such as the IFC and various regional development banks. This section provides an overview of OPIC and USAID and, for context, also briefly discusses some other agencies that employ tools similar to these agencies but generally for different purposes. Overseas Private Investment Corporation (OPIC) OPIC is the official U.S.",
      " DFI. Established by the Foreign Assistance Act of 1961, as amended (FAA; 22 U.S.C. \u00a72191 et seq.), it officially began operations in 1971 (see text box ). It seeks to promote economic growth in developing economies by providing, on a demand-driven basis, project and other investment financing for overseas investments and insuring against the political risks of investing abroad, such as currency inconvertibility, expropriation, and political violence. OPIC provides loans, guarantees, and political risk insurance for qualifying investments. OPIC does not take equity positions in investment funds (pools of capital that make direct equity and equity-related investments in companies). Rather,",
      " OPIC supports investment funds through financing. OPIC also generally does not conduct technical assistance. Congress most recently extended OPIC's authority to conduct its programs through September 30, 2018 ( P.L. 115-141 ). Although OPIC uses financial tools and is oriented toward private enterprise, it is a foreign assistance tool. The FAA requires it to conduct its work under the Secretary of State's policy guidance. By statute, OPIC is governed by a 15-member Board of Directors, with 8 \"private sector\" Directors (with requirements for small business, labor, and other representation) and 7 \"federal government\"",
      " Directors (including the OPIC President, USAID Administrator, U.S. Trade Representative, and a Labor Department officer).  In FY2017, OPIC reported authorizing $3.8 billion in new commitments for 112 projects, and its exposure reached a record high of $23.2 billion (see Figure 1 ). OPIC estimated that it helped mobilize $6.8 billion in capital and supported 13,000 new jobs in host countries that year.  OPIC's activities are backed by the full faith and credit of the U.S. government. Projects must meet certain requirements, including that investors must have a meaningful U.S.",
      " connection in order to be eligible for OPIC support. OPIC must take certain considerations into account when determining whether to support a project (e.g., U.S. economic impact, environmental impact, worker rights, and development impact on country of investment destination). Projects are subject to certain limitations as well. The FAA directs OPIC to operate \"on a self-sustaining basis, taking into account... the economic and financial soundness of projects\" and with regard to risk management principles. OPIC charges interest, premia, and other fees for its services to cover the cost of its operations. It assesses credit and other risks of proposed transactions,",
      " monitors commitments, and guards against potential losses through reserves. Unlike USAID (discussed below), OPIC's international presence is limited. OPIC states that it relies on expertise of other U.S. government agencies at U.S. missions abroad. U.S. Agency for International Development (USAID) USAID has been actively involved in providing development finance in various forms since its establishment in 1961. In its first 20 years, provision of development loans to developing country governments, mostly for infrastructure projects, made up a significant proportion of its operations. In the 1980s, with the Reagan Administration's Private Enterprise Initiative, the agency greatly expanded efforts to develop the private sector in developing countries,",
      " including lending to micro, small, and medium business. At this time, the agency possesses a range of development finance capacities: The Development Credit Authority (DCA), managed by the DCA office in the Bureau for Economic Growth, Education, and the Environment (E3), supports bank lending for specific development purposes by employing the promise of U.S. government repayment typically of up to half of each loan in case of default. By lessening the liability to the lending bank, these partial loan guarantees aim to encourage banks to make loans for purposes and clients that they may have previously avoided as commercially unviable or too risky. In FY2016,",
      " nearly half of DCA guarantees issued by value (47%) promoted activity in energy and 26% focused on agriculture, while fully half of the value of guarantee assistance went to sub-Saharan Africa and 25% to Asia.  Enterprise Funds are private sector-managed entities established with the purpose of stimulating free market economic growth. Following a model of venture capital funds, they featured equity investment as a significant feature of their activities. The funds also, in varying degrees, provide support for mortgage securitization, microfinance, equipment leasing, credit cards, and other efforts to introduce new financial instruments. Ten such funds, supported by $1.",
      "2 billion in taxpayer assistance, were launched in Eastern Europe and the former Soviet Union in response to the fall of communist governments and economies in the late 1980s to early 1990s. Two enterprise funds have been established in recent years in Tunisia and Egypt. Micro, Small, and Medium Enterprise (MSME) Finance and Technical Support. Since the 1960s, USAID has provided financial and technical assistance to entrepreneurs through a range of intermediaries\u2014cooperatives, commercial banks, credit unions, business associations, and other nongovernmental organizations (NGOs)\u2014that offer loans and business development services. In addition,",
      " the agency has been instrumental in promoting policy reforms that facilitate a legal environment conducive to private sector lending in the developing world. For example, to help small and medium enterprises (SME) in rural areas of Nicaragua with limited access to finance and investment capital, the Enterprise and Employment Program (2009-2013) provided direct technical assistance and training to banks so they could create SME lending programs. The USAID mission also supported development of a new credit scoring tool to assist lenders in making better lending decisions, leading to $39 million in new lending. Catalyzing Private Sector Finance. For many decades\u2014from the commercialization of contraceptive production and distribution in support of family planning,",
      " as well as the sale and manufacturing of oral rehydration therapy (ORT), in the 1980s, to the public-private partnerships of the Global Development Alliance in the early 2000s\u2014USAID has sought to increase its development impact by leveraging the resources of the private sector. In drawing the financial support of the private sector, especially U.S. business, the agency has exploited its \"convening power\" as the leading development agency in the U.S. government with a mission presence in dozens of countries and expertise in the full range of development sectors.  Efforts to catalyze private sector finance are ongoing throughout the agency,",
      " at both mission and central bureau levels. In 2017, the USAID mission in Pakistan established three equity funds with a contribution of $24 million for each fund, matched or exceeded by private investors to help the expansion of small and medium business in that country. In Ethiopia, a $6 million Innovation Investment Fund has attracted private sector cost sharing of about $25 million in support of medium to large-scale businesses operating within pastoral areas.  Launched in 2014, the Africa Bureau's Private Capital Group for Africa (PCGA) works to attract private capital to support development-related projects by identifying profitable transactions. With a team based in South Africa,",
      " it seeks to facilitate transactions by eliminating risk and other barriers to finance; to improve cities' ability to finance and service debt for public service projects; and to encourage the use of South African pension funds\u2014a major source of finance capital\u2014in development projects. The USAID Global Health Bureau's Center for Accelerating Innovation and Impact is exploring ways of funneling private sector finance to meet global health needs, including a pilot program to provide working capital to independent pharmacies in order to improve access to medicine in Africa. In 2015, a new Office of Private Capital Development and Microenterprise (PCM) was established in the E3 Bureau specifically to find new ways to mobilize private sector capital and expertise in support of development and facilitate USAID mission activity in this area.",
      " It has, for example, partnered with CrossBoundary Energy to pilot a new model of financing solar installations for enterprises in Africa and, working with Sarona Asset Management, it is piloting a currency risk mitigation tool that may help attract more institutional investment (pension funds, insurance companies) in development programs. U.S. Government Context In addition to OPIC and USAID, some other U.S. government agencies administer functions similar to development finance but generally for different purposes (see Figure 2 ).  Several agencies also provide financing and insurance, notably the Export-Import Bank of the United States (Ex-Im Bank). Known as the official U.S.",
      " export credit agency (ECA), Ex-Im Bank helps finance U.S. exports of goods and services, not U.S. private sector investment. Unlike OPIC and USAID, Ex-Im Bank is not authorized under the FAA, but rather has its own charter, the Export-Import Bank Act of 1945, as amended (12 U.S.C. \u00a7635 et seq. ). It focuses on supporting U.S. exports to contribute to U.S. employment, although its activities can have U.S. foreign policy implications. Other agencies, such as the U.S. Department of Agriculture (USDA) and the Small Business Administration (SBA), also provide export financing,",
      " but in a more limited manner and specific to their constituencies, that is, for U.S. exports of agricultural products and exports by U.S. small businesses, respectively.  The U.S. Trade and Development Agency (TDA) is among the agencies that also provide technical assistance. Authorized under the FAA (22 U.S.C. \u00a72421), TDA has a dual mission in supporting both U.S. foreign policy and trade objectives, as its name would suggest. TDA aims to link U.S. businesses to export opportunities overseas, including by infrastructure development, that lead to economic growth in developing and middle-income countries. TDA funds pre-export activities,",
      " such as feasibility studies and pilot projects. Comparison to Selected Foreign Bilateral DFIs  This section highlights selected foreign bilateral DFIs (see Appendix for comparative table).  Europe The most direct counterparts and perhaps most easily comparable DFIs to OPIC are arguably the bilateral European DFIs that are members of the Association of European Development Finance Institutions (EDFI). Unlike OPIC, European DFIs can take equity positions and offer some technical assistance. However, they do not offer political risk insurance as OPIC does. Collectively, the EDFI members' portfolios reached $45 billion in 2015, more than double OPIC's $20 billion portfolio in 2015\u2014through OPIC's portfolio was larger than that of any individual EDFI member.",
      " Like OPIC, the European DFIs overall tend to be most concentrated in Africa and Latin America. The UK's DFI is distinct in its exclusive focus since 2012 on Africa and South Asia, which it says allows it to focus on regions where the world's poorest people live. Financial services was the largest sector of support for EDFI members collectively, as for OPIC. Also, comparable to OPIC's focus on economic and social governance in its support of projects, EDFI states that its members have adopted a \"shared set of principles for responsible financing, which underlines that respect for human rights and environmental sustainability is a prerequisite for financing by EDFIs.\" China China,",
      " which has become a major, if not the leading, global supplier of development finance, provides development finance through several entities. At the national level, the key entity is China Development Bank (CDB), a state-owned \"policy bank\" that conducts development finance for specific purposes. More recently, China established two new multilateral development banks, the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), also known as the BRICS development bank. Data on China's development finance activities are limited and estimates vary widely, but China may have provided upwards of $100 billion in financing in recent years. China's development finance activities have been prominent in their linkages to major Chinese national efforts,",
      " notably the Belt and Road Initiative (BRI). Announced in 2013, the BRI is China's vision for economic connectivity across Asia, Africa, Europe, and other parts of the world over land and sea routes, including major financing for infrastructure. It is unclear how much funding China plans to commit to BRI, with reports of Chinese investments potentially reaching $4 trillion, if not more. A number of China's financial institutions are involved in BRI. CDB reportedly has provided support for 100 BRI projects totaling $30 billion. Much of China's support for development is directed toward infrastructure and energy projects, with involvement of Chinese firms,",
      " including state-owned enterprises (SOEs). China's development finance activity in Asia, Africa, and Latin America has been a focal point for development finance watchers, but its range is broader, particularly in light of the BRI. China's support for overseas investment often is not associated with the same environmental and social standards to which OPIC and many other DFIs subscribe. On one hand, some recipient governments may welcome that Chinese support is not as conditional as that of other DFIs on environmental and social requirements. At the same time, projects supported by China have raised questions about environmental and social risks, including displacement of large populations due to major infrastructure work,",
      " such as hydropower projects. China's financing also appears to take on risks that other DFIs may not want to take. Many of the countries in which China invests have high debt-to-GDP ratios, raising questions about debt sustainability. One illustration of debt challenges associated with China's lending is Sri Lanka; in December 2017, Sri Lanka leased its Hambantota port to Beijing for 99 years after finding itself unable to repay China-backed loans to fund the port. This has \"grant[ed] China a foothold in the Indian Ocean and its critical shipping lanes.\" Japan Japan provides development finance through its Japanese Bank for International Cooperation (JBIC), which is wholly owned by the Japanese government.",
      " JBIC was established in 2012, combining Japan's investment and export financing functions. JBIC characterizes itself as a \"policy-based institution\" that conducts its operations based on policy needs in response to economic and financial situations domestically and internationally. A major focus of JBIC's activities is projects related to securing medium- to-long-term supplies of energy and mineral resources. The composition of JBIC's commitments by financial instrument type has changed over time. In earlier decades, export loans comprised the majority of JBIC's commitments, while presently overseas investment loans represent the bulk of new commitments. By geographic region, Asia represented the largest share of JBIC's FY2016 commitments,",
      " followed by North America and Europe. Potential Issues for Congress This section discusses issues raised by the potential reorganization of U.S. government development finance functions. While many of the issues draw from the Administration's development finance reform proposal and the BUILD Act bills, the discussion has applicability to other proposals Congress may consider for development finance reorganization.  Modifying Development Finance Functions At the outset, Congress may consider the rationales for and against the United States being involved in development finance and modifying that involvement.  Supporters of \"upgrading\" OPIC assert that outdated rules, limited resources and authorities, and lack of a long-term authorization constrain the agency.",
      " They have opposed proposals to eliminate OPIC or to consolidate it into a broader trade agency. They argue that OPIC helps fill in gaps in private sector support that arise from market failures, as well as helps U.S. firms compete against foreign firms backed by foreign DFIs for investment opportunities\u2014thereby advancing U.S. foreign policy, national security, and economic interests. While even a strengthened OPIC may not be able to compete \"dollar-for-dollar\" with China's DFI activity, supporters argue that the United States \"can and should do more to support international economic development with partners who have embraced the private sector-driven development model.\"  At the same time,",
      " OPIC has been the subject of long-standing criticism. Opponents of OPIC dispute the notion that the federal government should be involved in financing and insuring private sector investments. They argue that OPIC diverts capital away from efficient uses and crowds out private alternatives, take issue with OPIC assuming risks unwanted by the private sector, and question the development benefits of its programs. \u00a0Critics have called for terminating OPIC's functions or privatizing them, rather than boosting them through a new DFI. From an economic perspective, the impact of government-backed financing on markets is often debatable. Some economists contend that officially backed financing by other countries is likely to have little effect on the overall level of U.S.",
      " investment, although certain foreign government policies may have harmed specific U.S. industries, and even if it has an impact, the net benefit may be small or negative due to opportunity costs. Other experts contend that U.S. government support is critical for U.S. investors to offset the effects of similar programs used by foreign governments.  While some development financing is complementary, one point of debate is the extent to which there is direct competition for investment projects between U.S investors and foreign investors backed by other governments. Moreover, a range of factors beyond investment financing may influence competitiveness. Proof that state-backed foreign investment financing places U.S. firms at a competitive disadvantage in overseas markets is difficult to identify,",
      " in part because of the lack of transparency for DFI activities. Nevertheless, the sheer magnitude of financing provided by emerging economies suggests that such financing may have discernable impacts on U.S. commercial activity in the long term.  Debate Over Reorganization  In the event that Congress determines that U.S. development finance functions should be reformed, a key question is whether consolidation is the best way to proceed, or if reforms should be made within individual agencies, keeping their current structures intact. A proposal to create a new DFI has been in the making for some time. In recent years, various civil society stakeholders, including some analysts at the Center for Global Development (CGD), have proposed consolidating the functions of OPIC and other agencies that they view as development finance into a new DFI.",
      "  Congressional hearings have been held in recent years on development assistance reform that have considered changes to OPIC. The Administration's FY2019 budget proposal to create a new DFI was the outgrowth of interagency discussions, led by the Office of Management and Budget (OMB) and the National Security Council (NSC) and involving OPIC, USAID, the State Department, and others, on challenges related to development; these discussions were prompted by the President's executive order on government reorganization. Against this backdrop, the BUILD Act was introduced in the House and Senate in February 2018. The Trump Administration issued a statement strongly supporting the BUILD Act,",
      " noting that it was broadly consistent with the Administration's goals and FY2019 budget proposal while also calling for some modifications to the bills. From the Administration's perspective, the bills should be modified to enhance the new DFI's alignment with U.S. national interests, as well as its institutional links with USAID and other development agencies. The Administration also held that the bills require other changes, including to the DFI's funding structure, to enhance the DFI's risk management and prevent it from displacing private sector resources. Supporters of reorganization argue that it could enhance government efficiency by eliminating overlap of functions and reducing costs. They also argue that consolidating the U.S.",
      " government's development finance functions would allow the U.S. government to better leverage its suite of development finance tools. Supporters also argue that the new DFI would help the United States compete more effectively with China and foreign counterparts by better matching the resources and authorities of those foreign DFIs. In addition to these rationales for reorganization, supporters also may see the creation of a broader DFI as a way to strengthen OPIC or shield it from potential future risk of elimination.  Critics of reorganization argue that it could incur costs through the creation of a new bureaucracy, at least in the short run. Other concerns raised include the risk that reorganization could dilute or undermine the effectiveness of the development finance functions at issue because OPIC and USAID,",
      " while both focused on development, have different constituencies and approaches in their work. For instance, although both have programs that deal with private enterprise, OPIC has had to be self-sustaining and accordingly less of a risk-taker than USAID. Still others may argue that a more effective way for the United States to focus on enhancing coordination of development finance functions among agencies or to support development goals is to focus on its activities through multilateral and regional DFIs. Structuring a New DFI If Congress pursues reorganization, it faces a number of issues regarding how to structure the proposed new DFI. The proposed DFI can be viewed as a distinct new entity but also would be a successor to OPIC.",
      " Thus, the issues raised by reorganization are discussed here as potential changes to OPIC. Objective The BUILD Act would create a new International Development Finance Corporation (IDFC), a wholly owned U.S. government corporation, by consolidating all of OPIC's functions and USAID's DCA, enterprise funds, and development finance technical support functions. The IDFC would aim to facilitate private sector participation in providing capital and skills to support economic development of developing countries. In doing so, the IDFC would promote U.S. development assistance objectives and advance foreign policy and economic interests. Since the BUILD Act's introduction, various concerns have been raised about the proposed DFI's objectives among supporters.",
      " For example, some in the development community questioned whether the new DFI would have a sufficiently strong development mandate. Other concerns among supporters have been about the transparency, environmental, and social standards of the new DFI relative to OPIC. Some critics of OPIC have supported strengthening statutorily the aim of the DFI in specifically countering China's influence in the developing countries. Of the myriad issues regarding China's development finance, a frequently noted one is the debt burdens it imposes on developing countries. Amendments to the BUILD Act appear to reflect these concerns. Both the House-passed and Senate committee-reported versions would direct the new DFI to take into account in its financing operations \"the economic and financial soundness and development objectives\"",
      " of the projects it supports. They also expand the statement of policy to include providing countries with a \"robust alternative to state-directed investments by authoritarian governments and [U.S.] strategic competitors using high standards of transparency and environmental and social safeguards, and which take into account the debt sustainability of partner countries.\"  Management Structure Congress may consider how the structure and composition of the proposed DFI's management structure may reflect policy priorities. Under the BUIILD Act, the proposed DFI's Board of Directors would vary from OPIC's Board of Directors. The new DFI's nine-member Board of Directors would be composed of the Chief Executive Officer of the new DFI,",
      " four U.S. government officials (the Secretary of State, USAID Administrator, Secretary of the Treasury, and Secretary of Commerce\u2014or their designees), and four private sector members. The Chairperson of the Board would be designated by the President from among the members of the Board, while the USAID Administrator (or his/her designee) would be the Vice Chairperson.  In comparison, by statute, OPIC's 15-member Board of Directors is composed of eight \"private sector\" Directors (with requirements for small business, labor, and cooperatives interests) and seven \"federal government\" Directors (including the OPIC President,",
      " USAID Administrator, U.S. Trade Representative, and a Labor Department officer). The Chairman and Vice Chairmen of OPIC's Board are to be appointed by the President of the United States among the members of the Board.  Thus, distinctions include that the new DFI's Board of Directors would be smaller; have more \"federal government\" than \"private sector\" representation; not have a specific requirement to have small business, organized labor, or cooperatives representation; and be required to have the USAID Administrator (or his/her designee) as the Vice Chairperson of the Board. These differences could raise questions about how the new DFI's management structure vis-",
      "\u00e0-vis OPIC's management structure could affect its emphasis on various stakeholder interests in its operations and institutional ties with other government agencies. As introduced in the House and Senate, the BUILD Act would require private sector board members to have \"relevant private sector experience to carry out\" the new DFI's purposes. Following committee action, the House-passed and Senate committee-reported versions modify this requirement to note that such experience \"may include experience relating to the private sector, the environment, labor organizations, or international development.\" Length of Authorization A question for Congress is whether to establish the new DFI as a permanent entity or one subject to reauthorization and,",
      " if the latter, how frequently. As introduced, the House version of the BUILD Act would extend the new DFI's authority by seven years and the Senate version would extend it until FY2038. The current versions reconciled this difference in favor of seven years. In considering this issue, Congress may consider looking to OPIC. In recent years, OPIC has been subject to yearly extensions of its authority through the appropriations process. Some argue that a multiyear or permanent authorization would enhance OPIC's ability to plan in the long term and provide assurances to investors about its programs. (OPIC commitments and obligations can be made for multiyear periods extending beyond any particular reauthorization.) Others argue that periodic reauthorizations allow for enhanced congressional oversight of OPIC's activities.",
      " Other DFIs tend not to be subject to a regular reauthorization process, as they were established as \"permanent\" entities, but remain subject to ongoing oversight and scrutiny by legislative bodies or executive agencies. Maximum Contingent Liability (Exposure Cap) Congress may consider whether to modify the new DFI's \"maximum contingent liability\"\u2014the total amount of financing and insurance that the DFI is permitted statutorily to have outstanding at any one time\u2014compared to that of OPIC. Variously referred to as the portfolio or exposure limit, it has been statutorily set at $29 billion for OPIC. In FY2017,",
      " OPIC's exposure was $23.2 billion, or 80% of OPIC's exposure limit. The BUILD Act would set the new development finance agency's exposure limit at $60 billion for five years. It would adjust the maximum contingent liability limit every five years to reflect any percentage of increase in the average of the Consumer Price Index (CPI) over the preceding five years.  A larger maximum contingent liability would allow the new DFI to take on more projects and have the potential to have a greater development impact, yet it might increase risks to U.S. taxpayers if the projects that were supported experienced defaults or were subject to claims recoveries.",
      "  In Senate committee consideration, two proposed amendments related to the exposure cap were defeated. One amendment would have reduced the statutory exposure limit for the new DFI from $60 billion to $35 billion, and the other would have eliminated the automatic increase of the limit based on the CPI five-year average. Financial and Other Program Authorities Under the BUILD Act, the IDFC's authorities would expand beyond OPIC's existing authorities to make loans and guarantees and issue insurance or reinsurance; they would also include the authority to take minority equity positions in investments, subject to limitations. In addition, unlike OPIC, the IDFC would be able to issue loans in local currency.",
      " Drawing from USAID, the IDFC would be authorized to establish and operate enterprise funds as well. In addition, the IDFC would have the authority to conduct feasibility studies on proposed investment projects (with cost-sharing) and provide technical assistance. Like OPIC, the IDFC's authorities to support development finance would be backed by the full faith and credit of the U.S. government. Congress may examine proposed changes to OPIC's existing authorities under the BUILD Act, including in the following areas. Equity Authority The BUILD Act would give the new DFI the authority to take a minority equity stake in investment funds, subject to limitations. Supporters of such authority argue that the new DFI would be able to use the higher returns generally associated with equity investments to support more projects,",
      " as well as be more competitive vis-\u00e0-vis foreign counterparts, given that most other DFIs have equity authority. OPIC asserts that the ability to invest in investment funds as a limited partner could help diversify its total exposure in the long run through its \"incremental return,\" as well as enable it to partner more effectively with other DFIs. However, there remains resistance to the notion of the U.S. government taking an ownership stake in a private enterprise. Critics argue that equity authority would require more resources in managing an investment, compared to one supported through debt instruments alone, and could lead to additional risk and financial exposure.  Technical and Other Project Assistance Under the BUILD Act,",
      " the new DFI would have the authority to administer and manage special projects and programs, including technical assistance, grants, and studies for a range of activities, including renewable and small business activities. The House-passed and Senate committee-reported versions expand this list of activities to include activities related to women's economic empowerment and microenterprise households. In addition, the IDFC would have the authority to conduct feasibility studies on proposed investment projects (with cost-sharing). The authority to make grants for feasibility studies and other technical assistance would be a distinction from OPIC's current and typical operations. Presently, OPIC has limited authority to provide technical assistance for certain investment projects in Africa.",
      " Other U.S. government agencies focus more specifically on technical assistance for foreign policy programs, including the Department of State, USAID, and TDA\u2014sometimes in collaboration with OPIC. For example, in the wake of the \"Arab Spring,\" OPIC approved $500 million in lending to Egypt and Jordan to support small businesses in those countries, and USAID provided grant funding and technical assistance. Those in favor of technical assistance capacity for the DFI contend that this function would enhance the agency's effectiveness. Nevertheless, the new DFI's technical assistance function could overlap with other government agencies' roles. The technical assistance issue has prompted some to question the rationale for excluding TDA from the consolidation.",
      " Others point out that TDA aims to support U.S. exports through its programs to support economic development overseas. The new DFI would be able to make loans in U.S. or foreign currency, expanded authority compared to OPIC, which was limited to making loans in U.S. currency. Both the House-passed and Senate committee-reported bills would only permit foreign currency-denominated support if the Board determines there is a \"substantive policy rationale for such support.\" In addition, S. 2463, as reported by the Senate Foreign Relations Committee, would require the DFI to collect data on the involvement of minority- and women-owned businesses in projects support by the DFI,",
      " and to include the data in its annual report to quantify the effectiveness of the DFI's outreach activities to minority-owned and women-owned business. This language is similar to provisions in OPIC's enabling legislation regarding outreach to women- and minority-owned businesses and related data collection (22 U.S.C \u00a72200(b)). The House-passed version does not include any substantively similar provision. Policy Parameters for Project Support Congress may consider what requirements and limitations to impose on the new DFI's support for projects. Through such conditions, Congress can exercise its authority over the DFI and guide its activities more directly, even if it is not involved in approving individual projects.",
      " At the same time, it may wish to consider the impact of layering conditions on the new DFI's support on its flexibility and agility, including vis-\u00e0-vis other DFIs, which may attach different terms and policy conditions to their support. Many of the BUILD Act's provisions mirror OPIC's current parameters, such as requirements to take into account worker rights and environmental impact factors. Some provisions would vary. Under the BUILD Act, the IDFC's activities would be subject to statutory requirements and limitations.  Scope of geographic operations. OPIC, by its statute, must give preferential consideration to investment projects in less-developed countries and restrict its support in higher-income countries;",
      " it has interpreted this requirement to allow it to support projects in higher-income countries that are highly developmental or focus on underserved areas or populations. The BUILD Act also would prioritize support in low-income or lower-middle-income economies, but set a higher bar for providing support in upper-middle-income countries, including subjecting it to a national interest determination by the President. This could enhance the DFI's development impact in the poorest regions, but also inhibit its impact to the extent that investors prefer supporting projects that are in higher-income countries but that are nevertheless development oriented. Market-based support. Compared to OPIC, the IDFC would be subject to greater specifications on interest rates and ensuring the market-based nature of the new entity's support.",
      " \"U.S. nexus\" requirement. While OPIC support is only available to investors that have a U.S. connection, the new DFI would only have to give preferential consideration to projects sponsored by or involving the U.S. private sector. Such a modification could expand the DFI's development impact, but at the same time, decrease benefits to U.S. employment interests. International trade considerations. The IDFC would have to give preferential consideration to countries in compliance with or making substantial progress in coming into compliance with their international trade obligations. OPIC does not have a comparable obligation with respect to international trade obligations. Worker rights and environmental impact.",
      " As with OPIC, the IDFC's support would also have to take into account worker rights and environmental impact considerations. Support could not be provided in countries and to projects benefiting persons subject to U.S. sanctions. The House-passed and Senate committee-reported versions of the BUILD Act would also require the DFI to include specified language in all contracts for DFI support regarding worker rights and child labor. Additionality. Reflecting OPIC's current practice of making sure that its support is \"additional\" to the private sector support for investment, the new DFI would be required to supplement, not compete with, private sector support. The House-passed and Senate committee-reported versions also would require the new DFI to develop safeguards,",
      " policies, and guidelines to ensure that its support does not have a \"significant adverse effect\" on U.S. employment. Women's economic empowerment consideration. The House-passed and Senate committee-reported versions of the bills would require the new DFI to consider the impact of its support women's economic opportunities and outcomes and to take steps to mitigate gender gaps and maximize development impact by working to improve women's economic opportunities. Boycott restriction. Based on an amendment offered during committee mark-up, the House-passed version of the BUILD Act would require the new DFI, when considering whether to approve a project, to take into account whether the project is sponsored by or would benefit individuals who,",
      " within the past three years, have supported a boycott on a foreign country that is \"friendly\" with the United States and is not subject to a boycott under U.S. law or regulation. The measure is aimed at ensuring that beneficiaries of the new DFI's support are \"not undermining [U.S.] foreign policy goals.\" Concerns about boycotts against Israel appear to figure prominently. The Senate committee-reported version also has this provision. Sanctions restrictions. Under the BUILD Act, support could not be provided in countries and to projects benefiting persons subject to U.S. sanctions. H.R. 5105, as amended during committee markup, would further require that any beneficiaries of the new DFI's support to certify that they are not conducting business that is subject to sanctions under U.S.",
      " law. The Senate committee-reported version also has this provision. Risk Management, Oversight, and Accountability The House and Senate committee-approved versions of the BUILD Act would both establish a risk committee and audit committee to monitor the new entity's performance. The IDFC also would be required to develop a performance measure system and monitor projects, building on OPIC's current development impact measurement system. It would be subject to reporting and auditing requirements.  The House-passed and Senate committee-reported versions of the BUILD Act would require the risk committee to develop policies for assessing, before and while providing support to any foreign entities, whether those entities have in place due diligence policies and practices to prevent money laundering and corruption.",
      " The aim of the proposed requirements would be to ensure the IDFC does not provide to persons knowingly engaged in corruption, providing support for terrorism, drug trafficking, human trafficking, or otherwise supporting gross violations of human rights. In addition, they would add \"developmental, environmental, and social risk\" to the list of risks for which the risk committee is required to develop policies.  The DFI's risk management practices could be of interest for Congress, as the BUILD Act would expand the new DFI's exposure cap and its authorities. Some may argue that any increased risks relative to OPIC would be limited, and that the proposed DFI would have the organizational structure to manage risks properly,",
      " such as through the Chief Risk Officer and audit and risk committees prescribed by the BUILD Act. Others say that technical assistance conducted by the new DFI for projects could help to strengthen projects, and lead to projects that are more financially sound. Still others may argue that for the new DFI to be effective, it must be willing to take on risks, because it is in those riskier markets where it will be able to make the most the difference in terms of development.  The BUILD Act would establish an Inspector General (IG) specific to the new DFI. Presently, the USAID IG has legal authority to conduct reviews, investigations,",
      " and inspections of OPIC's operations and activities. Given the differing roles of OPIC and USAID and the fact that the new DFI, as a merger, would be a distinctly new entity, one view could be that there is a need to establish an IG specific to the new DFI. Another view could be that the current OPIC-USAID arrangement suffices and no additional resources should be directed to creating a new IG. The House-passed and Senate committee-reported bills would require the new DFI to establish a transparent and independent accountability mechanism to annually evaluate and report to the Board of Directors and Congress about compliance with environmental, social,",
      " labor, human rights, and transparency standards, consistent with the agency's statutory mandates; provide a forum for resolving concerns regarding the impact of projects supported by the DFI with respect to these standards; and provide advice regarding the DFI's projects, policies, and practices.  Measuring Performance If Congress structures a new DFI, a consideration is how to measure the proposed agency's performance. Under the BUILD Act, the new DFI would be required to develop a performance measurement system and monitor projects, using OPIC's current development impact measurement system as a starting point. Measuring development impact can be complicated for a number of reasons, including definitional issues,",
      " difficulties isolating the impact of development finance from other variables that affect development outcome, challenges in monitoring projects for development impact after DFI support for a project ends, and resource constraints. Comparing development impacts across DFIs is also difficult as development indicators may not be harmonized. To the extent that the proposed DFI raises questions within the development community about whether it would be truly \"developmental\" at its core, rigorous adherence to development objectives through a measurement system will likely be critical to gauging its effectiveness. Moreover, Congress may wish to take a broader view of U.S. development impact, given the active U.S. contributions to regional and multilateral DFIs.",
      "  In terms of the performance measurement system, the House-amended and Senate committee-reported bills both would further require that the new DFI to develop standards for measuring the projected and ex post development impact of a project.  Notification, Advisory, and Other Provisions Transparency and public participation opportunities in the new DFI's activities have been part of the debate over the BUILD Act. Both the House-passed and Senate committee-approved bills would require the new DFI to notify Congress 15 days before making a financial commitment above $10 million. They also would impose reporting requirements on the new DFI.  The BUILD Act, in both the House-passed and Senate committee-approved versions,",
      " would require the new DFI's Board of Directors to develop, in consultation with stakeholders and other interested parties, a publicly available policy for consultations, hearings, and other forms of engagement in order to provide \"meaningful\" public participation in the Board's activities. The version of S. 2463 reported by the Senate Foreign Relations Committee would establish a Development Advisory Council to advise the Board on development objectives. Its members would be appointed by the Board, on the recommendation of the CEO and Chief Development Officer. The council would be composed of no more than nine members \"broadly representative\" of NGOs, think tanks, and other institutions engaged in international development.",
      " The council would not be subject to the Federal Advisory Committee Act. The House-passed version does not include a similar provision. Funding If Congress decides to establish a new DFI, it would face consideration of how to fund it. Under the BUILD Act, the new DFI would be directed to be \"self-sustaining\" like OPIC and similarly to fund its operation through the fees and other revenues it collects. Congress may consider to what extent the DFI's potentially expanded capacity and functions, as well as other features, may shape its ability to operate on a self-sustaining basis or not. For example, one consideration is how the new DFI would fund its grant-making functions.",
      " The Administration proposal allocates $56 million in Economic Support and Development Fund (ESDF) money for development finance related programming and authorizes \"additional transfers\" of funds from USAID. OPIC leadership points to the ESDF as a possible way to fund grants by the new DFI. Some contemplate that the DFI's grant-making activities would be limited. Neither the House nor Senate committee-approved State-Foreign Operations appropriations bills for FY2019 ( H.R. 6385 and S. 3108, respectively) include funding for a DFI, but both proposals indicate that they will consider funding for a DFI if legislation authorizing a new institution is enacted.",
      "  Impact on USAID and U.S. Development Objectives If enacted into law, both the proposed legislation and the Administration's FY2019 budget proposal on the new DFI would have an impact on USAID, although, lacking detail, the full extent of these initiatives' impact is not yet clear. The Administration proposal and the legislation both call for USAID to transfer the Development Credit Authority to the new DFI. Both the House-passed and Senate committee-passed versions also authorize but do not require the transfer from USAID to the DFI of the enterprise funds and the Office of Private Capital and Microenterprise, though the Senate bill authorizes this only with the concurrence of the USAID Administrator.",
      " This section discusses possible consequences for USAID. Removal of the DCA The DCA is one of many assistance tools available to USAID. It has generally been used by the agency to produce specific development outcomes. Almost all DCA projects have originated through the country- or region-based missions which identified a problem and used DCA guarantees to help address the problem, often in conjunction with an array of other project activities, including technical assistance and training that, in their totality, made the loans more effective. Supporters of the proposed reorganization assert that consolidating DCA with other development finance functions would increase the efficiency of these functions. However, former USAID Administrator Andrew Natsios and former Associate Administrator Eric Postel argue that removing the DCA from USAID would end the integration of this tool in that broader project design,",
      " making its use as a development tool less effective. As discussed below, proponents suggest that, with effective interagency coordination, USAID could still access the full benefits of DCA guarantee instruments. H.R. 5105 and S. 2463, as amended, would both establish the position of Chief Development Officer within the new DFI, and that officer would be tasked with, among other things, directly working with USAID missions to ensure their continuous access to the development credit tools that are transferred to the DFI.  Removal of the Enterprise Funds Some observers say that the existing authorities for the Europe/Eurasia enterprise funds, which the legislation would transfer to the proposed DFI,",
      " are specific to the time and place in which they operated. Those older funds are also substantially different from the two current funds, which, like existing models of investment funds managed directly by OPIC, are more restricted in their range of activities to equity investments and lending. The new USAID enterprise funds, however, remain primarily funded by U.S. government grant funds, while OPIC's are supported with private sector money. The USAID model is also private sector-managed, likely requiring close USAID oversight and an in-country presence to ensure the funds fulfill a development, rather than a purely for-profit, mission. As such, their removal to an agency without either feature may make this model less effective as a development instrument.",
      " Relatedly, it has been argued that if the new DFI would have the authority to conduct equity investment, there is no need for an enterprise fund.  Removal of the Office of Private Capital and Microenterprise (PCM) PCM conducts both a research/project pilot function in identifying opportunities to draw in private capital and a technical expertise resource function benefitting USAID missions. The latter function would likely be lost if the office is transferred to the new DFI or, as some have noted, would have to be reintroduced in some other form if USAID is to play any continuing role in this sphere. It is also not clear whether legislators intend to transfer microfinance functions out of the agency as well\u2014PCM does little on this issue,",
      " as microenterprise activities have been incorporated into other sectors and mechanisms. Transfer of these financing functions, whether for efficiency or nonduplication purposes, could have unintended impacts on USAID's overall development efforts. For example, USAID has employed loan guaranties in support of its broader health, agriculture, environment, and other sector programs. To a more limited extent, it has supported equity investment programs separate from the enterprise funds in Pakistan and elsewhere. Efforts to leverage private capital in support of development are conducted throughout the agency and in every sector with or without PCM assistance. To the extent that the DFI proposals would prevent duplication of methodologies that employ private funding,",
      " many USAID development efforts could be made less effective.  In addition, the proposal calls for the transfer of $56 million from traditional USAID accounts to the new DFI to be used for development finance-related programming, including advisory services, technical assistance, capacity building, and credit subsidies. This funding, and \"additional transfers\" for which the proposal seeks authority, would otherwise presumably remain with USAID to achieve similar objectives. As currently constituted, the proposals imply that cost savings and operational efficiencies would ensue from concentrating development finance capabilities in one institution. It is unclear how the transfer of offices, personnel, and loan authorities from one agency to the next would save funds.",
      " It is also unclear how the new DFI would be able to efficiently conduct its activities without seeking to duplicate the features that give USAID its advantage as a development programming and implementation agency, namely its convening power, development know-how, and mission presence. One possible answer that the legislation implies is close coordination (see below). Both the House-passed and Senate committee-passed versions of the BUILD Act require a joint report to Congress by the DFI CEO and the Administrator of USAID on how the DFI and USAID will coordinate the transfer of functions from USAID to the DFI prior to the implementation of such transfers. Language was also added to clarify the interagency consultation process required for the establishment of new enterprise funds by the DFI.",
      " Interagency Coordination If Congress determines that consolidation is the best way to proceed, a critical issue is how to ensure sufficient, long-term interagency coordination between the new DFI and other federal agencies. The legislation suggests that coordination between the DFI and two key development agencies\u2014USAID and the Millennium Challenge Corporation (MCC)\u2014would be a necessary feature of the proposal by requiring appointment of a Chief Development Officer who would be responsible for coordinating policy and its implementation with the development missions of its sister agencies. The Administration budget proposal similarly anticipates the DFI's \"strong linkages\" to USAID, suggesting that it would work \"closely with the missions and other parts of USAID to enhance the enabling environment for private sector investment.\"  Supporters of the DFI proposal appear to recognize the role of USAID missions in identifying and funding financing needs and USAID's Development Credit Authority in implementing those financing programs.",
      " Many supporters of the DFI proposal believe that this system should continue even with DCA consolidation into the DFI. They argue that the proposal might have positive benefits for USAID if its relationship with the DFI provides USAID missions with access, not only to its former DCA guarantee instrument, but to the whole range of finance tools, including equity and risk insurance, that the DFI would manage. Similarly, the DFI would be able to significantly expand its overseas presence through access to USAID's missions. The trick, as some observers have noted, is to make the process for USAID missions to draw on DFI tools and the DFI to draw on USAID\u2014the coordination between the two distinct agencies\u2014\"seamless.\"  The history of foreign aid interagency cooperation and coordination suggests the difficulties of achieving smoothly functioning coordination.",
      " In the past, commentators have pointed to, as examples of interagency differences, the fragmentation of development assistance among multiple players; the problems of coordination between the State Department Office of the Global AIDS Coordinator and its program implementers; tensions between State and USAID in Pakistan and Arab Spring countries; and the lack of complementarity between MCC and USAID (despite the latter's presence on the MCC Board of Directors).  Different agencies develop different corporate cultures and focus and observers note strong distinctions between OPIC and USAID. Currently, OPIC provides relatively larger-scale financing, has been more oriented toward infrastructure historically but has offered support for financial and other noninfrastructure investments lately,",
      " and can only support projects that have meaningful involvement by the U.S. private sector. USAID works at a significantly more small-scale, locally oriented level, and has been described as more risk tolerant in its development efforts as it works in a much less structured environment. Each agency approaches development in vastly different ways\u2014the fact that they do not do the same deals now suggests these differences. Some have suggested that OPIC is unlikely to understand the myriad USAID regulations and legislative restrictions under which it operates and question whether it or the DFI would be able to work successfully in the USAID mission environment (and vice versa). Some observers believe that, for the new DFI to effectively play a development assistance role in support of USAID,",
      " coordination should be hard-wired into the authorizing legislation, rather than depending on impermanent interpersonal relationships or shared board membership to effect a temporary cooperation. One suggestion is a dual-hatted\u2014both DFI and USAID\u2014Chief Development Officer, to help ensure that the DFI operates in a way that would meet USAID needs in the field. Another possible path forward is to require that DCA guarantees continue to draw their funding from USAID mission budgets, thereby ensuring that the DFI views USAID as a key customer. In addition, the metrics required by the legislation to measure development success could include support for USAID programs as an indicator.",
      " In addition to examining interagency coordination from a development perspective, Congress also may consider coordination issues from the export promotion perspective. OPIC has a strong private sector orientation, and investment is linked to U.S. exports and other economic impacts. OPIC and Ex-Im Bank have a history of collaboration, including on financing projects under Administration initiatives such as Power Africa and conducting outreach to small businesses on U.S. government financing resources. OPIC also is a member of the interagency Trade Promotion Coordinating Committee (TPCC) and involved in Administration export promotion efforts. To the extent that the proposed DFI's role with respect to the private sector is different from that of OPIC,",
      " Congress may consider to what extent the proposal would affect the current synergies between OPIC and Ex-Im Bank, as well as broader implications for interagency coordination of the U.S. government's export promotion activities. Several Members of Congress have sought to address some of these concerns during House and Senate committee consideration of the BUILD Act, with both chambers amending the act to require the DFI to have a Chief Development Officer tasked with coordinating development policies and implementation efforts with USAID and giving the USAID Administrator a direct role in the appointment of the Chief Development Officer.  Competitiveness and Future Rules-Setting Congress may examine how the new DFI would support U.S.",
      " businesses in competing with foreign businesses for overseas investment opportunities. For example, how would the capacity, authorities, policy parameters, and other features formulated by Congress enable or constrain the DFI from supporting U.S. private investment overseas for development? What policy trade-offs would these features entail?  The new DFI's potential role in supporting U.S. strategic economic interests also may be of congressional interest. The Trump Administration has cast development finance reorganization as a way to advance U.S. influence and serve as an alternative to state-directed investment models, notably by China. The National Security Strategy stated, \"American-led investments represent the most sustainable and responsible approach to development and offer a stark contrast to the corrupt,",
      " opaque, exploitive, and low-quality deals offered by authoritarian states.\" Given that a U.S. DFI would not be able to match the resources of China's DFIs, Congress may examine how the new DFI could deploy its resources strategically to advance U.S. policy objectives. Another potential issue for consideration is whether to strengthen statutorily the aim of the DFI in specifically countering China's influence in the developing countries. At the same time, Congress may examine how a more strategic orientation for the DFI would align with the typically demand-driven nature of U.S. government support for private sector activity, as has been the case for OPIC.",
      " In addition, Congress may consider whether to advocate for creating international \"rules for the road\" for development finance. Such rules could help ensure that the proposed DFI operates on a \"level playing field\" relative to its counterparts, given the variation in terms, conditions, and practices of DFIs internationally. U.S. involvement in developing such rules could help advance U.S. strategic interests. However, such rules would only be effective to the extent that major suppliers of development finance are willing to abide by them. For example, China is not a party to international rules on export credit financing, though it has been involved in recent negotiations to develop new rules on such financing.",
      " Outlook While Congress has demonstrated bipartisan, bicameral support for moving forward with development finance reorganization, the current proposals present Congress with a number of issues in terms of structuring the proposed new DFI and the implications of reorganization. Development finance is a cross-cutting issue implicating U.S. interests in terms of foreign policy, national security, economic interests, and international investment. Combining public support with private sector capital, development finance also intersects with a range of stakeholder interests and any reorganization may raise questions about how to balance various policy goals. Thus, consideration of the BUILD Act or any other legislation introduced to reorganize federal development finance functions may be an active area of debate for Congress.",
      " Appendix. Comparison: OPIC and Foreign DFIs \n"
    ],
    "length": 13501,
    "hardness": null,
    "role": null
  },
  {
    "id": 42,
    "question": null,
    "answer": "School buses transport over 26 million students to school and other activities every day. While school buses have a strong safety record, crashes with fatalities and injuries do occur. Since school buses transport precious cargo\u2014our children\u2014government and industry strive to further improve their safety. Federal and state agencies both oversee school bus safety, and locally, school buses can be operated by school districts or private contractors, working on behalf of school districts. The Fixing America's Surface Transportation Act included a provision for GAO to review school bus safety. GAO examined (1) fatal crashes involving school buses for 2000 to 2014 and (2) federal and state school-bus-related laws and regulations, among other objectives. GAO analyzed two sets of data from the National Highway Traffic Safety Administration and the University of Michigan Transportation Research Institute on fatal school bus crashes for 2000 to 2014, the latest year for which data were available; reviewed federal laws and regulations; and systematically searched state laws and regulations on school-bus inspections, driver training, and maximum vehicle age and capacity in all 50 states. GAO also interviewed federal officials from the Department of Transportation (DOT), school bus industry associations and manufacturers, and other stakeholders. DOT reviewed a draft of this report and provided technical comments that GAO incorporated as appropriate. Based on GAO's analysis of data for 2000 to 2014, 115 fatal crashes involved a school bus on average each year\u2014which is 0.3 percent of the 34,835 total fatal motor-vehicle crashes on average each year. The school-bus driver and school-bus vehicle (e.g., a defect) were cited as contributing factors in 27 percent and less than 1 percent of fatal school-bus crashes, respectively. Seventy-two percent of fatal crashes occurred during home-to-school and school-to-home travel times. Limited national data on school bus crashes exist beyond data on fatal school-bus crashes, but some states have richer data\u2014for example, on the type of bus or whether the operator was a school district or private contractor. Federal laws and regulations set requirements for certain aspects of school bus safety, and state laws and regulations in many cases go beyond the federal requirements. Federal regulations for school-bus vehicle standards and driver licensing apply to both school districts and contractors. DOT has reported that new school buses must meet more Federal Motor Vehicle Safety Standards than any other type of new motor vehicle. Federal safety regulations for commercial motor-vehicle operations apply in certain cases, such as for contractors hired by schools to provide transportation for extracurricular activities across state lines. Based on a systematic search of state laws and regulations, GAO found that all 50 states require school bus inspections while most states\u2014GAO found 44\u2014require refresher training for school bus drivers. However, GAO found that less than a quarter of states set specific requirements for the maximum age and seating capacity of school buses. Overall, according to stakeholders GAO interviewed, states' requirements vary by state for school bus inspections, driver training, and vehicles but tend not to differ based on the type of operator.\n",
    "docs": [
      "Background School buses are used to transport students to and from home and  school and extracurricular activities like field trips and athletic events. The  industry defines four basic types of school buses. Types A and B are  comparatively small in size, while types C and D are comparatively large  in size, as shown in figure 1. In general, the capacity of a school bus  increases from type A to type D buses, and type D school buses can  have a capacity up to 90 students. Type C school buses are most  common, representing 70 percent of school bus sales in 2014 (23,715 of  34,",
      "021 buses) according to figures reported by School Bus Fleet. School districts or private contractors can operate school buses  transporting public school students. School districts have a spectrum of  contracting options from which to choose school bus transportation.  When a school district contracts with a private company, the contractor  could manage and provide all or some aspects of student transportation,  depending on the school district\u2019s needs and preferences. In full-service  or \u201cturnkey\u201d contracts, the contractor takes on all aspects of pupil  transportation services, such as hiring and training drivers and managing  school bus routes. In other contracts, the district may retain ownership of  school buses but have the contractor operate the buses,",
      " or the district  may only have the contractor provide particular operations, such as  special needs transportation. Whether district-operated or contracted, oversight of school bus  transportation occurs across all levels of government and can involve  multiple agencies at each level of government. At the federal level, NHTSA sets vehicle safety standards for new  motor vehicles and administers grant programs as part of its mission  to reduce deaths, injuries, and economic losses resulting from motor  vehicle crashes. NHTSA also collects and analyzes crash data for a  variety of purposes, such as to determine the extent of a safety  problem and steps it should take to develop countermeasures.",
      " Two  data sets are used to generate national statistics: FARS is a census of  fatal crashes, and the General Estimates System (GES) is a sample  of fatal, injury, and property-damage crashes. In addition to these  activities that apply broadly to motor vehicle safety, including school  buses, NHTSA provides guidance and holds workshops specific to  school bus safety. For example, in December 2016 NHTSA hosted a  day-long meeting on school transportation safety that included panels  on school transportation risks and school bus vehicle technology,  among other topics. Also at the federal level, FMCSA\u2019s mission is to reduce crashes and  fatalities involving commercial motor vehicles.",
      " FMCSA is responsible  for setting and enforcing federal safety regulations that apply to large  commercial truck and bus operators. For school bus transportation,  FMCSA\u2019s safety regulations for commercial motor vehicle operations  do not apply to home-to-school and school-to-home transportation.  These regulations apply in very limited circumstances such as for  contractors hired by schools who provide transportation for  extracurricular activities across state lines. The primary exception to  this, however, is commercial driver\u2019s licensing; school bus drivers  must have a commercial driver\u2019s license with a school bus  endorsement, which requires a driver to pass additional knowledge  and skills tests specific to operating a school bus,",
      " and are subject to  drug and alcohol testing. FMSCA collects data on motor vehicle  crashes but focuses on crashes involving large trucks and commercial  buses, given its mission and jurisdiction. This crash data is collected  in the Motor Carrier Management Information System. At the state level, multiple agencies are often responsible for setting  or enforcing state-specific requirements for school-bus driver  qualifications and training, vehicles, inspections, and other operational  aspects. Some states require school districts to provide students with  transportation to and from home and school, while other states allow  school districts to decide whether to provide such transportation. Finally, local school districts are responsible for implementing and  supervising school bus operations.",
      " This includes managing and  establishing routes and policies, operating and maintaining school  buses, and training and assigning staff, sometimes in conjunction with  contractors. Detailed Data Are  Limited on School  Bus Crashes, but  Fatal School-Bus  Crashes Are a Very  Low Percentage of All  Fatal Motor Vehicle  Crashes While Little Federal Data  Exist beyond School Bus  Fatalities, State Data May  Contain More Detailed  Information At the federal level, both NHTSA and FMCSA collect data on motor  vehicle crashes that include crashes involving school buses. Since these  data cover crashes involving a range of vehicles, information that is  specific to school buses,",
      " like the specific type of school bus or whether it  was operated by a school district or contractor, is not included in these  national data. States may have richer data on school bus crashes, and  we found that a small number of states collect some school-bus-specific  information in their crash data, such as the type of operator. However,  state data on school bus crashes vary because states determine what  specific data elements to collect in crash data. Federal Crash Data NHTSA collects basic data on motor vehicle crashes, including school- bus-related crashes, but not any in-depth data specific to school buses,  such as whether a school bus was district or contractor operated or the  type of school bus.",
      " NHTSA\u2019s FARS and GES crash data both include a  variable to identify school-bus-related crashes. Therefore, NHTSA uses  this variable to isolate school-bus-related crashes in FARS data and  generates an annual report describing the number and some  characteristics of fatal school-bus-related crashes. For example, the  report describes characteristics of fatal school-bus crashes such as the  time of day and whether the fatality(ies) was an occupant or non- occupant of the school bus or other involved vehicles. NHTSA can also  isolate school bus crashes from GES data; however,",
      " because GES is a  sample of crashes and school bus crashes are such rare events, GES  data cannot be used to reliably examine year-to-year trends, according to  NHTSA. NHTSA\u2019s crash data aim to cover all types of traffic accidents,  and as such, FARS and GES do not include additional variables tailored  to accidents involving school buses. Moreover, the source for FARS and  GES\u2014police accident reports\u2014vary from state to state and may not  contain such school-bus-specific information, such as type of bus and  type of operator, for NHTSA to aggregate across states.",
      " FMCSA\u2019s crash data for large truck and bus crashes do not include a  variable to identify school-bus-related crashes. FMCSA\u2019s crash data,  which come from police accident reports, identify the vehicle involved as  a bus or truck but does not further delineate the type of bus (e.g., transit  bus or school bus). In addition, it does not define or collect data on the  type of school bus operator. State Crash Data States collect crash data to help implement and evaluate highway safety  policies, but the specific crash data that states collect vary. Some states  have richer data on all types of school bus crashes,",
      " including fatal, injury,  and property-damage-only crashes than NHTSA and FMCSA, based on  our review of federal and select state\u2019s crash data collection processes.  However, since states have discretion in determining what specific data  elements to collect, state data on school bus crashes vary. Each state  has its own crash data system, and police accidents reports\u2014a key  source of crash data\u2014are unique to each state. For example, on  California\u2019s police accident report, officers enter codes to identify the  involved vehicles, and specific codes classify the type of school bus and  operator (e.g., public or contractor). Other states\u2019 police accident reports  may not collect as detailed information on a school bus involved in a  crash.",
      " For example, our review of police accident reports in our selected  states found that one state\u2019s police accident report had a field to indicate  whether a crash involved a school bus, and another state\u2019s report used  the narrative section to note a school bus\u2019s involvement. We surveyed states to determine whether they track the type of school  bus operator in crash data, or other state data such as inspection or  funding data, since information states collect on school bus crashes and  operations differs. In our survey of states, about half of states that  responded (22/47) reported that they track whether school buses are  district operated or contracted,",
      " though least often in crash data. States  most commonly reported tracking the type of operator in funding or  reimbursement data (15), followed by inspection data (10), and statewide  crash data (7). We asked these states why they tracked the type of  operator, and states reported doing so most often for funding purposes  (18), followed by compliance with state contracting laws (10), and  educational or training purposes (7). For example, in its inspection data,  New York state officials said they track the type of school bus operator  along with several other variables that allow the state to analyze data on  inspection outcomes, such as the number of buses passing inspection or  being placed out of service,",
      " to see if there are different outcomes across  these variables. For the 25 states that reported they do not track whether  school buses are school-district or contractor operated, states nearly  always indicated there was no need or requirement to track such data.  For example, 17 states said there is no distinction made in state law or  regulation on the type of operator. Three states also reported that there  are no contractors operating school buses in the state because school  districts choose not to use them, so there is no need to track such  information. The Transportation Research Board noted in 2002 that fatalities and  injuries involving students make up a relatively small proportion of all  fatalities and injuries,",
      " so the benefits of additional data collection efforts  that focus solely on school travel should be carefully considered before  being recommended or implemented. Stakeholders we interviewed had  mixed views on whether data improvements should be a priority for the  federal government. For example, one stakeholder said that the federal  government could create a repository for national school-bus data that  would require standardized methods of data collection by the states and  that the resultant data would help illuminate key areas of school bus  safety, such as illegal passing of stopped school buses, that are not  currently being highlighted. However, another stakeholder we  interviewed, who believes national data is lacking,",
      " said examining and  collecting additional crash data for other modes of transportation may be  more revealing than it would be for school buses, given the safety record  of school buses. School buses continue to have a strong safety record  relative to other types of motor vehicles based on more recent fatal crash  data, which we discuss in more detail below. According to NHTSA, only 8  percent of fatalities in crashes involving a school bus from 2005 to 2014  were school bus occupants (i.e., drivers or passengers). We also found  that school bus crashes constituted less than 1 percent of all crashes in 6  of our selected states for which annual crash reports included a section  on school bus crashes.",
      " NHTSA and FMCSA officials we interviewed said the agencies have no  plans to change their data collection processes specific to school bus  crashes, but both have efforts under way to improve the overall quality of  crash data. For example, FMCSA is in the process of establishing a  working group, as required in the FAST Act, to examine the information  collected in police accident reports on commercial motor vehicles, a  process that could lead to improvements in the data collected on crashes  involving large trucks and buses. Also, if funding is available, NHTSA  officials said the agency plans to analyze states\u2019 reporting requirements  for school bus crashes in fiscal year 2017.",
      " This analysis would identify  sources of crash data and whether these sources provide reliable  information that could be used to determine causative factors and  examine potential countermeasures for all reported school bus crashes. Additionally, states play a primary role in overseeing school bus safety, as  described later in this report, and states have their own mechanisms to  use state crash data to identify and use federal grant programs to  address highway safety issues in their state. NHTSA and FMCSA have  grant programs whereby each state identifies its priorities for highway and  motor carrier safety, respectively. For example, for NHTSA\u2019s Highway  Safety Grant Program,",
      " each state must develop a Highway Safety Plan  based on an evaluation of highway safety data, including crash data, to  identify safety problems within the state. Therefore, if a state identifies a  need for initiatives to improve school bus safety and has jurisdiction, the  state could include it as a priority in its grant application and target federal  and state spending for related initiatives. NHTSA and FMCSA said that,  at present, no states identified school bus safety as a priority area in  applications for the State and Community Highway Safety Grant Program  or Motor Carrier Safety Assistance Program. Fatal Crashes Involving  School Buses Constitute a  Very Low Percentage of  All Fatal Motor Vehicle  Crashes While national data on school bus crashes are limited,",
      " from 1999 to 2010  UMTRI collected BIFA data, with support from FMCSA; however, these  data are no longer collected. BIFA data supplemented FARS data with  detailed information collected through interviews and from police accident  reports about the physical configuration and operating authority of each  bus involved in a fatal crash, including the type of operator. For this  report, we analyzed BIFA data for 2000 to 2010 to describe  characteristics of fatal crashes involving school buses during that time  period. However, for variables included in BIFA data that originated in  FARS data, we also analyzed data from FARS for fatal crashes involving  school buses for 2011 to 2014 to provide more recent information as  BIFA data were only collected through 2010.",
      " Since this analysis  examined data on fatal crashes involving school buses, it is not  generalizable to all types of crashes involving school buses. Further, we  did not have exposure data (e.g., vehicle miles traveled by school buses  of different types or used for different types of trips) to allow us to report  rates of crashes for the characteristics we examined. We found that from 2000 to 2010, an average of 118 fatal crashes  involving a school bus occurred each year. The total number per year  ranged from 93 (2009) to 128 (2008). When we extended our analysis to  include 2011 to 2014,",
      " the average fell slightly to 115 fatal crashes each  year, which is 0.3 percent of the 34,835 fatal motor-vehicle crashes that  occurred on average each year during this time. Most fatal crashes  involved local travel and occurred during times that would indicate the  buses were traveling to and from school, according to our analysis. For  2000 to 2010, most fatal crashes (89 percent) were considered local,  meaning the total trip distance was less than 50 miles. Seventy-four  percent of fatal crashes from 2000 to 2010 occurred during home-to- school and school-to-home travel times.",
      " From 2011 to 2014, this  percentage fell to 65 percent of fatal crashes, with the remainder of fatal  crashes occurring during other times (see fig. 2). Our analysis of BIFA and FARS data also examined driver and vehicle  factors that may have contributed to the fatal school bus crashes and  found such factors were not prevalent. Driver-related factors: The data on fatal school bus crashes from 2000  to 2014 identified a driver-related factor involving the school bus driver  for 27 percent of these crashes (see fig. 3). The most common type of  driver-related factor was miscellaneous (e.g., leaving vehicle  unattended with engine running,",
      " failing to keep in the proper lane), at  68 percent of all driver-related factors. The next most common  category, identified for 12 percent of driver-related factors, was  physical or mental condition (e.g., careless driving, reaction to or  failure to take drugs or medications). In 8 percent of fatal crashes from  both 2000 to 2010 and 2011 to 2014, the school bus driver was  charged with a violation. The most common type of violation fell under  either the \u201crules of the road\u201d turning, yielding, and signaling category  (e.g., failure to signal for a turn or stop)",
      " or the reckless/careless/hit- and-run category (e.g., inattentive, careless, improper driving),  representing 36 and 32 percent of all violations, respectively. Vehicle-related factors: Vehicle-related factors involving the school  bus were rarely cited in fatal crashes involving school buses. Of the  1,731 total fatal crashes from 2000 to 2014, only 5 crashes had an  identified vehicle factor for the school bus\u20143 for brakes, 1 for tires  and wheels, and 1 for other components. Examining other vehicle and crash characteristics, we found that about 80  percent of fatal crashes involved large school buses (type C or D)\u2014which  account for most bus sales,",
      " according to in recent sales data\u2014and 6  percent involved small school buses (type A or B), with the remainder  unknown or of another body type. Seven percent of buses involved in  fatal crashes during this time were classified as special needs school  buses. In addition, the average age of the school buses in fatal crashes  from 2000 to 2010 was 7 years; the average age for school buses in fatal  crashes rose slightly to 8 years for 2011 to 2014. Most of these crashes  occurred on dry roads (81 percent) and in clear weather conditions (85  percent) for both the 2000 to 2010 and 2011 to 2014 time period.",
      " We found that school districts operated 67 percent of school buses  involved in fatal crashes from 2000 to 2010, and contractors working for  school districts operated 25 percent of school buses involved in these  fatal crashes, which is roughly proportional to the operations conducted  by districts and contractors. We found no definitive national data on the  number of each type of operator or the miles driven by each type of  operator, so we cannot directly compare the rates of fatal crashes for  each type of operator. However, the percentage of fatal crashes involving  buses operated by school districts and contractors roughly aligns with  industry association estimates of operations conducted by each type of  operator.",
      " One association estimates that contractors provide one-third of  pupil transportation services in the United States. An official from another  association estimated the extent of contracting in two ways: first, by  number of buses (contractors operate about one-third of school buses);  second, by the number of operations (contractors conduct about one- fourth of school bus operations). We also examined the share of fatal  school bus crashes with driver- or vehicle-related factors, by type of  operator, and did not find any major deviations from the overall  percentage of fatal crashes involving school-district and contractor- operated school buses. Federal Laws and  Regulations Set a  Baseline for School  Bus Safety,",
      " upon  which State Laws and  Regulations Build Federal laws and regulations establish minimum requirements for school  bus safety. Building on federal requirements, states establish more  comprehensive safety requirements for school bus vehicles and  operations. We found that all 50 states require school bus inspections,  and most states also require driver training. However, fewer states  require a specific maximum vehicle age or seating capacity for school  buses. While state requirements build on federal laws and regulations,  the specific requirements states set for school bus safety vary. Federal Regulations Lay  the Groundwork for School  Bus Safety and Can Differ  Based on the Type of  Operator The same two federal agencies that collect crash data set minimum  safety regulations for school bus vehicles and operations.",
      " NHTSA sets Federal Motor Vehicle Safety Standards (vehicle safety  standards) that create a baseline for school bus standards. Forty-eight  out of 62 vehicle safety standards apply to new school buses,  according to NHTSA. For example, Federal Motor Vehicle Safety  Standard No. 217 establishes standards for emergency exits and  window retention and release, and Federal Motor Vehicle Safety  Standard No. 221 specifies requirements for the strength of the body  panel joints in the bodies of school buses. NHTSA has reported that  new school buses have to meet more vehicle safety standards than  any other type of new motor vehicle. All manufacturers of new motor  vehicles and equipment must certify compliance with vehicle safety  standards;",
      " therefore, school buses operated by school districts and  contractors all must meet these federal standards. FMCSA is responsible for setting and enforcing Federal Motor Carrier  Safety Regulations that apply to large commercial truck and bus  operations. However, FMCSA\u2019s safety oversight of school bus  operations is limited because most school bus transportation is  exempt from its safety regulations. In particular, all school bus  transportation to and from home and school is exempt. Beyond  home-to-school and school-to-home transportation, the type of  operator\u2014whether it is a private contractor or a school district or other  governmental entity\u2014and the type of trip\u2014including whether the trip  will cross state lines\u2014determine whether all Federal Motor Carrier  Safety Regulations apply.",
      " For example, contractors hired to provide  interstate transportation for extracurricular activities, such as field trips  or sporting competitions, are required to comply with other Federal  Motor Carrier Safety Regulations such as limits on driving and on-duty  time. School district employees are exempt from these  requirements. However, even with these exemptions, federal  regulations for commercial drivers\u2019 licenses and drug and alcohol  testing for commercial driver\u2019s license holders apply to all school bus  drivers and operators. Figure 4 provides examples of federal  regulations for school bus safety. Within federal laws and regulations for school bus operations and  vehicles, we specifically examined what federal requirements exist for  school bus inspections,",
      " driver training, and maximum vehicle age and  seating capacity. While many federal requirements, like vehicle standards  for school buses, apply to both school districts and contractors, some  federal requirements apply to only certain types of school transportation. School Bus Inspections FMCSA\u2019s safety regulations require inspections of commercial motor  vehicles. However, most school bus operations are exempt from this  requirement, as noted above. Federal Motor Carrier Safety Regulations  require other types of commercial operators to systematically inspect,  repair, and maintain vehicles under their control, requirements that  include inspecting service brakes, the steering mechanism, lighting, and  tires, among other components.",
      " For inspections, commercial operators  must conduct periodic (at least annual) vehicle inspections, which could  be conducted in-house, at a commercial business, or through a state-run  inspection program. Therefore, a contractor\u2019s school-bus operations  may be subject to this federal inspection requirement if, for instance, the  contractor is hired by the school district to transport students across state  lines for school-sponsored extracurricular activities; a school district\u2019s  school-bus operations would not be subject to the federal inspection  requirement if the district provides the transportation for this type of trip.  Representatives of contractors we spoke with stated that in practice,",
      " most  contractors usually comply with Federal Motor Carrier Safety Regulations,  even when they are not using the school buses for interstate activities, as  contractors want the flexibility and maximum ability to operate buses  under different circumstances, such as chartered services on the  weekend. NHTSA does not have an oversight role in school bus  operations but recommends that states establish procedures for regularly  scheduled inspections of school buses in accordance with FMCSA\u2019s  requirements, as described above. Driver Training FMCSA recently established minimum training regulations for entry-level  school bus drivers. In December 2016, FMCSA issued a final rule  requiring all drivers\u2014employed by school districts and contractors\u2014to  complete entry-level driver training when applying for a commercial  driver\u2019s license,",
      " including those seeking a school bus endorsement. As  part of this final rule, FMCSA established a training curriculum to address  the specific training needs of school bus drivers. Training providers are  required to cover all topics in the curriculum, including loading and  unloading, railroad-highway grade crossings, and emergency exit and  evacuation, but FMCSA set no minimum hours for the knowledge and  behind-the-wheel training for the school bus endorsement. Additionally,  NHTSA developed a series of refresher (i.e., in-service) training modules  for school bus drivers in 2011. NHTSA officials told us they developed  this training module because school bus stakeholders often asked  NHTSA for guidance and assistance on training experienced school-bus  drivers.",
      " Stakeholders we interviewed, including selected state officials,  told us that they widely use NHTSA\u2019s refresher training materials for  school bus drivers. Vehicle Standards for  Maximum Age and Capacity As previously noted, 48 federal vehicle safety standards apply to school  buses. However, federal vehicle safety standards do not stipulate a  maximum vehicle age or maximum seating capacity for school buses  because, according to NHTSA, it does not have regulatory authority  regarding how school buses are used. Nevertheless, NHTSA has made  recommendations and issued guidance related to both of these items. In  its pupil transportation guideline, issued in March 2009,",
      " NHTSA  recommended replacing school buses manufactured before April 1, 1977,  with school buses that meet current vehicle safety standards for buses  and recommended prohibiting schools from purchasing school buses built  prior to April 1, 1977, for school transportation. For capacity, NHTSA  has reported in information posted on its website that school bus  manufacturers determine the maximum number of persons who can sit on  a school bus seat, which is based on sitting three small elementary age  school children or two high school age persons into a typical 39-inch  school-bus seat. In this same posting, NHTSA also reported that states  and school bus operators are responsible for determining the number of  persons who can safely fit into a school bus seat,",
      " and NHTSA  recommended that all passengers be seated entirely within the confines  of the school bus seats while the bus is in operation. NHTSA sets vehicle  safety standards, and FMCSA does not have a role setting vehicle  standards for school buses. Building on Federal  Requirements, States Set  Requirements for School  Bus Safety That Vary by  State but Generally Not by  Type of Operator States build upon federal laws and regulations and usually set additional,  state-specific requirements for school bus safety that generally apply to  both school districts and contractors, according to stakeholders we spoke  with. We found that multiple state agencies often play a role overseeing  school bus vehicles and drivers.",
      " For example, in Illinois, the State Board  of Education and Secretary of State oversee school bus driver training,  and the Department of Transportation oversees school bus inspections,  while in Pennsylvania the Department of Transportation oversees school  bus driver training and the State Police oversees school bus inspections.  In addition, state laws and regulations vary widely across states. For  example, three school bus manufacturers we spoke with told us that no  two states have the same vehicle standards for school buses, with  varying requirements for eight-way flashing signal lights, content and  location of first aid kits, and location of switch panels, among other things.  Figure 5 describes examples of state requirements for school bus  transportation.",
      " Upon examination of state laws and regulations, we found that states set  requirements for inspections, driver training, and vehicle standards that  supplement the baseline federal requirements. States\u2019 school-bus safety  requirements vary widely across states but tend not to differ based on the  type of operator, according to all eight selected state officials we spoke  with, as described below. Four other stakeholders we interviewed  affirmed that there are no differences in state requirements for school bus  transportation for different types of operators. However, for state  requirements for commercial motor vehicles, which can apply to but are  not specific to school buses, six stakeholders we interviewed, including  manufacturers and contractors,",
      " said there are some differences in  requirements for contractors and school districts. For example, two  stakeholders commented that states vary in the extent to which they  exempt school bus operations from state requirements for commercial  motor vehicles, requirements that are not school-bus-specific but apply to  a wider range of vehicles and that are similar to Federal Motor Carrier  Safety Regulations. See appendix II for additional descriptions of state  requirements for school bus inspection, driver training, and maximum  vehicle age and seating capacity in the eight selected states. School Bus Inspections Based on our review of laws and regulations in the 50 states, we found  that all 50 states require school bus inspections to check for defects and  safety compliance with state rules at the state or local level.",
      " We also  found that the frequency of these inspections and agency conducting or  overseeing inspections varies across states. For 41 states, we found that  the state required periodic inspections of school buses to be conducted  by state inspectors or third-party inspectors. For example, California  requires its state highway patrol to inspect school buses at least once  every year, while the Illinois state transportation agency requires  certified, private inspection stations to inspect school buses at least twice  a year. In the other nine states, we found the state requires local school  districts to conduct inspections and/or authorizes the state to conduct  spot check inspections of school buses without any set frequency.",
      " For  example, Nebraska requires local school districts to conduct an  inspection of each school bus before the start of the school year and then  every 80 days during the school year. According to a Nebraska state  official, the state discontinued its state school bus inspection program due  to resource constraints and delegated responsibility for inspections to  local school districts. State officials in all eight selected states told us that  all school bus operators, including contractors, are subject to the state\u2019s  school-bus inspection requirements. States may also require additional inspections to supplement the periodic  inspections, including conducting random or unannounced inspections.  Officials from four of the eight states we interviewed\u2014Illinois,",
      "  Washington, Tennessee, and Pennsylvania\u2014stated that they  complement annual or biannual inspections with unannounced or random  school-bus inspections. For example, a Tennessee state official told us  that the state conducts random inspections of school buses for at least 10  percent of the statewide school-bus fleet annually to ensure that all  operators maintain their buses safely and appropriately. States may also  require even more frequent inspections, sometimes on a daily basis. For  example, California requires all school bus operators to inspect their  school buses regularly\u2014every 45 days or 3,000 miles, whichever occurs  first\u2014as part of a preventive maintenance program.",
      " To provide context to understand how states implement these  requirements and the results of inspections, we asked the selected states  about the data they collect on inspection outcomes. The selected states  vary in how they collect and maintain inspection data and the extent to  which results are accessible to the public, as was the case with the  frequency of inspections. Officials from selected states told us there are  different methods of collecting and compiling inspection results. For  example, a Tennessee state official told us that the state uses electronic  devices (e.g., tablets, laptops) to collect data during inspections and  maintain results in a central database. Illinois state officials told us that  private,",
      " certified inspection stations can use an electronic or paper form to  document inspection results, and all completed forms are maintained by  the state. Given these differences, states vary in their ability to easily  search and summarize inspection results for school buses in the state.  We found school bus inspection results are generally accessible to the  public, but how the public can access results varies. For instance,  Washington posts the number of school buses inspected and the number  and percentage of buses placed out of service by school district each  school year on its state agency website, while Pennsylvania and  Tennessee state officials told us that school bus inspection results are  accessible only through a formal request.",
      " Additionally, in our review of selected states\u2019 school-bus inspection  results, we found that a relatively small number of school buses were  placed out of service after an inspection because they were determined to  be unsafe to operate without repairs. Specifically, 3 to 5 percent of  inspected school buses in a given year were put out of service for  violations, based on data from four of our selected states, as shown in  table 1 below. By contrast, the out-of-service rate for all types of buses  nationwide is about 7 percent, according to FMCSA. Problems that could  put a school bus out of service in one state we interviewed include any  leaks on the exhaust system,",
      " an exterior brake or stop-arm light that  doesn\u2019t work, or a bus alarm not sounding when the emergency door is  opened. In three states, the most common problems identified during  inspection involved brakes, lights or signals, and exhaust systems.  Officials we spoke with in the six selected states that had state inspection  programs stated that out-of-service school buses cannot be operated until  the identified problem has been fixed and the bus passes another  inspection. We found that a majority of states require training for all school bus  drivers. Specifically, we found that 44 states require entry-level (i.e.,  pre-service) training and 44 states require refresher training for all school  bus drivers.",
      " However, as with inspection requirements, we found that  the frequency, length, and other attributes of the required training vary  across states. For example, Pennsylvania requires a minimum of 20 hours of school-bus-specific training for all entry-level drivers and a  minimum of 10 hours of refresher training for drivers every 4 years.  Tennessee requires all school bus drivers to receive at least 4 hours of  annual refresher training on various topics, including operational safety of  school buses, loading and unloading of students, and managing student  behavior, but the state does not require entry-level school-bus driver  training,",
      " according to a Tennessee state official. While the training  requirements vary across states, officials from all eight of our selected  states stated that all school bus drivers must meet state training  requirements, whether they are employed by a school district or  contractor. States administer school bus driver training in different ways, and  additional training requirements may exist at the local level. For example,  in Virginia and New York, the state departments of education oversee  school bus driver training programs and train and certify instructors, who  can be school district or contractor employees, to provide training to  drivers. In Nebraska, the state department of education contracts with the  Nebraska Safety Center at the University of Nebraska to develop training  curriculum and train instructors to provide training.",
      " Beyond state  requirements, local school districts and contractors may have additional  training programs and requirements for school bus drivers. Contractors  we spoke with told us that they also require entry-level and refresher  training for their drivers that meets or exceeds state requirements. State  officials in California, Pennsylvania, and Tennessee also told us that local  school districts may require additional, supplemental training for drivers.  For example, a state official told us that one large school district requires  drivers to complete a minimum of 40 hours of gang awareness training. Additionally, all eight selected states require school bus drivers to receive  training on transporting students with special needs.",
      " Drivers in these  states typically receive training on transporting special needs students as  part of the training curriculum for entry-level or refresher training for  school bus drivers. For example, in New York, under state law, entry-level  school bus drivers are required to take a minimum of two hours of  instruction related to transporting special needs students during the first  year of employment, and all school bus drivers are required to take one  hour of annual training related to transporting special needs students. State officials in a few of our selected states said additional training on  special needs transportation is provided to drivers at the local level. A  Washington state official told us that the state trains all instructors on  special needs transportation topics so the instructors can in turn provide  more targeted training to drivers,",
      " such as how to secure wheelchairs on a  particular bus model. Vehicle Standards for  Maximum Age and Capacity In our search of state laws and regulations, we found six states that set a  requirement for the maximum vehicle age for when a school bus must be  replaced or no longer used. The requirements in these six states varied.  For example, Tennessee sets a maximum age for school buses that  applies to school districts and contractors; specifically, type A and B  buses can be used for up to 15 years, and type C and D buses can be  used for up to 18 years with unlimited miles, or up to 19 years for buses  with less than 200,",
      "000 miles that have passed inspections twice a year.  According to a state official, Tennessee has a maximum vehicle age  requirement because older school buses may not be cost-effective to  maintain, as older vehicles have more mechanical and maintenance  issues. In other states, all types of school buses were subject to the same  maximum age, such as stating that school buses used to transport  students cannot be more than 20 or 25 years old. In addition to these six states with specific requirements, we also found  instances where states provide funding or set a school bus depreciation  schedule to replace school buses. Although these programs do not  necessarily prohibit school bus operators from operating school buses  that exceed the parameters of a state\u2019s funding program,",
      " they encourage  school districts to regularly replace school buses. For example, according  to a state official, Washington provides replacement funding for school  buses to school districts and contractors, and the state established a  useful life cycle for each type of school bus, but the state does not require  school districts and contractors to retire or stop using a bus at the end of  the established life cycle. Washington sets an 8-year life cycle for type A  buses and a 13-year life cycle for type C and D buses owned by the  school district. In Virginia, the state has a 15-year life cycle for all school  bus types,",
      " but according to state officials, a school bus older than 15  years can continue to be used as long as it passes inspections. While states do not typically set maximum school bus age requirements,  local school bus operators usually make decisions on when to replace a  school bus, according to stakeholders we interviewed. In particular,  according to seven stakeholders we interviewed\u20143 manufacturers, 3  state agencies that conduct inspections, and 1 contractor\u2014local  operators make these decisions based on a business case that includes  factors such as maintenance costs and environmental conditions.  Representatives from two school bus manufacturers we interviewed told  us that most states do not have a maximum vehicle age requirement and  that many school districts will continue to use buses as long as they pass  inspections and maintenance costs are not too high.",
      " State officials from  Washington and Virginia said school bus operators need to maintain any  school buses that are used for longer than the state-established life cycle  and that these buses must pass the state inspection. With regard to school bus seating capacity, we found eight states that  have a specific requirement for maximum seating capacity on school  buses. Eight states set a specific maximum capacity or parameter that  would yield a specific maximum capacity. For example, New York has a  maximum seating capacity of 84 student passengers in type C and D  school buses. We also found that about half of the states (23) had other  types of seating capacity requirements,",
      " such as explicitly restricting  school buses from transporting more student passengers than the  manufacturer\u2019s rated seating capacity. For example, Illinois does not  allow a school bus to be operated with more passengers than  recommended by the manufacturer\u2019s rated seating capacity. Stakeholders  Identified Voluntary  Industry Standards as  a Primary Source of  Leading Practices,  and Work Is Under  Way in Areas Where  Stakeholders Most  Often Said Additional  Federal Guidance  Would Be Useful Stakeholders from the school bus industry most commonly cited the  National Congress on School Transportation (NCST) and its National  School Transportation Specifications and Procedures as a source of  leading practices for safe school bus transportation.",
      " Seventeen of the  30 stakeholders we interviewed, including state directors of student  transportation and manufacturers, identified NCST and the voluntary  document as a national standard for school bus safety. An NCST official  told us that the National School Transportation Specifications and  Procedures is meant to build on federal laws and regulations and for  states to consider when establishing their standards, specifications,  regulations, and guidelines for school transportation. NCST holds a congress roughly every 5 years. The primary purpose and  product of the congresses is the specifications and procedures document  that contains recommendations across different aspects of student  transportation, including school-bus body and chassis specifications,",
      "  procedures for conducting school bus inspections, and selecting and  training drivers. As the congress meets regularly, NCST has discussed  new safety concerns or needed guidance and amended its specifications  and procedures document accordingly. For example, one stakeholder we  spoke with said a relatively recent change in the document was the  inclusion of criteria, based largely on federal regulations, to use in a  school-bus inspection program to determine when a school bus should be  placed out of service. Stakeholders also cited federal and state requirements and industry  associations and experts as sources of leading practices. Eleven of 30  stakeholders we spoke with identified state laws and regulations,",
      " while 10  stakeholders identified federal laws and regulations and industry  associations as sources they turn to for leading practices. Eight  stakeholders also mentioned federal guidance as sources of best  practices for school bus operations and inspections. For federal guidance,  two stakeholders mentioned they look to NHTSA\u2019s Highway Safety  Program Guideline No. 17, Pupil Transportation Safety, which  recommends strategies for a school bus safety program at the state level.  For example, this guideline recommends developing a training plan for drivers and establishing a systematic preventive-maintenance program  for school buses that includes periodic vehicle inspections. Our literature review identified these same sources and also provided  general practices for states and local school districts and contractors to  follow.",
      " For example, we found NCST\u2019s specifications and procedures  document, NHTSA\u2019s Highway Safety Program Guideline No. 17, and  textbooks that often cited federal vehicle safety standards and FMCSA\u2019s  safety regulations in our literature research. In our review of these  sources, including NCST\u2019s specifications and procedures document, we  found recommended practices for maintaining school buses, including  establishing an inspection program with uniform criteria for placing school  buses out of service and analyzing the intended life cycle of school buses  with ongoing efficiencies associated with vehicle replacement. A few stakeholders we spoke with indicated that specific, national leading  practices for certain aspects of school bus transportation may not always  be appropriate,",
      " as school bus operations are driven by local or regional  factors such as available funding and environmental and geographic  conditions. For example, stakeholders we spoke with said that different  factors, like weather and road conditions, can contribute to how long a  school bus should remain in use. Three stakeholders, including a  manufacturer, noted that school buses operating in adverse road and  weather conditions in some states may need to be replaced more  frequently due to higher maintenance costs. A 2002 National Association  of State Directors of Pupil Transportation Services (NASDPTS) report  noted that accurate and thorough records on operating and maintenance  costs of a school bus fleet provide data needed to analyze and  understand costs and said that establishing school bus replacement  policies are important.",
      " As noted earlier, states and local districts largely  oversee school bus safety, and as such, school bus transportation is  subject to local district decisions, practices, and differences in operations. When we asked stakeholders what additional federal research and  guidance would benefit the school bus industry, there was no consensus  among the stakeholders. Seven of thirty stakeholders said current federal  research and guidance is sufficient and did not cite a need for additional  guidance. For the two areas stakeholders mentioned most often, federal  agencies have related efforts under way. Five stakeholders said data on or guidance to combat illegal passing  of school buses would be useful. NASDPTS conducts an annual  survey on illegal passing,",
      " whereby school bus drivers voluntarily count  the number of vehicles that pass them when they stop to load and  unload students. For each of the 5 years NASDPTS has collected this  data, participating school bus drivers have observed more than  74,000 instances of illegal passing on a single day. In 2000, NHTSA  issued a best practices guide on reducing the illegal passing of school  buses. Further, NHTSA officials told us that research on the  effectiveness of using cameras to enforce laws on passing school  buses is currently under way with data collected at multiple locations,  to be completed in early 2018.",
      " Based on the results of this research,  NHTSA officials said they may update the content of the best  practices guide on reducing the illegal passing of school buses. Four stakeholders said that additional federal guidance on school bus  driver training on various topics, including loading and unloading  students and technology distraction, would be helpful. As previously  mentioned, FMCSA recently established minimum training regulations  for entry-level training for school bus drivers when applying for  commercial driver\u2019s license, and two school bus associations\u2014 NASDPTS and the National School Transportation Association\u2014were  part of the negotiated rulemaking committee that helped develop the  training regulations.",
      " Additionally, NHTSA\u2019s 2011 refresher training for  school bus drivers covers several topics, including loading and  unloading students. NHTSA officials said they plan to update the  content, if needed, after consulting with school-bus industry  stakeholders in fiscal year 2017. Finally, NHTSA officials and stakeholders commented that the school bus  industry is a close-knit community that keeps one another informed with  conferences and networks across all levels of government. Stakeholders  we spoke with said that much of the school bus industry\u2019s awareness  comes from annual forums and conferences at the state and national  level.",
      " For example, the annual NASDPTS conference held in November  2015 included sessions on incidents of dragging students in bus doors  and FMCSA\u2019s then proposed rule on entry-level driver training. Another  stakeholder told us that they confer with state school transportation  associations\u2014state organizations of school bus drivers and transportation  managers\u2014to identify and address any school-bus safety issues in the  state. In addition, NHTSA and FMCSA officials and one stakeholder told  us that three of the national school bus associations meet annually with  FMCSA and NHTSA to discuss various school-bus safety issues. Agency Comments We provided a draft of this product to the Department of Transportation  for comment.",
      " The Department of Transportation provided technical  comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional  committees, the Secretary of the Department of Transportation, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@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 who made key contributions to this  report are listed in appendix III.",
      " Appendix I: Objectives, Scope, and  Methodology The Fixing America\u2019s Surface Transportation Act included a provision for  GAO to conduct a review of school bus safety, including examining any  differences in the safety performance of different types of school bus  operators\u2014that is, school districts and contractors\u2014and what safety  requirements apply to them. We examined: (1) data federal and state  agencies collect on school bus crashes and the number and  characteristics of fatal school-bus crashes that have occurred since 2000;  (2) federal and state laws and regulations pertaining to school bus  inspections, vehicles, and drivers, as well as state data on inspections\u2019  outcomes;",
      " and (3) sources for leading practices for safe school-bus  transportation, as identified by stakeholders and literature, as well as any  areas where further federal guidance could be useful. As part of our work,  we also examined whether there were differences for school-district and  contractor-operated school buses in any of the above areas. Overall, we  focused our review on the transportation of public K-12 students traveling  to and from home and school and for extracurricular activities and not  transportation of private school students. To describe what data federal and state agencies collect on school bus  crashes, we reviewed agency documents that describe or use National  Highway Traffic Safety Administration (NHTSA)",
      " and Federal Motor  Carrier Safety Administration (FMCSA) crash datasets, including the 2014  FARS/NASS GES Coding and Validation Manual and Large Truck and  Bus Crash Facts 2014. We interviewed NHTSA and FMCSA officials to  understand what data each agency collects on school bus crashes and  whether they track the type of operator involved in school bus crashes.  We also asked about any planned or ongoing efforts to change or  improve the data collected on school bus crashes. To understand crash  data collected by states, we reviewed NHTSA guidance on crash data  systems, primarily the Traffic Records Program Assessment Advisory.",
      "  We also interviewed school-bus industry associations, the Association of  Transportation Safety Information Professionals, and other stakeholders  to identify national and state data on school bus crashes and to discuss  the strengths and limitations of existing datasets. We also administered an e-mail survey to the 50 state pupil-transportation  directors to gather information on school bus data. Specifically, the survey  asked whether states systematically collect data on the type of school bus  operator\u2014that is, school district or contractor\u2014in crash or other data, and  the reasons why these data were or were not collected. We obtained  contact information for the survey recipients from the National Association  of State Directors of Pupil Transportation Services (NASDPTS)",
      " and  administered the survey between June 20, 2016, and August 8, 2016.  Because this was not a sample survey, there are no sampling errors.  However, the practical difficulties of conducting any survey may introduce  errors, commonly referred to as nonsampling errors. For example,  difficulties in how a particular question is interpreted can introduce  unwanted variability into the survey results. We took steps in the  development of the questionnaire, the data collection, and the data  analysis to minimize these nonsampling errors. For example, we  pretested the survey with the pupil transportation directors in three states  and NASDPTS to ensure that questions were clear and unbiased and to  minimize the burden the survey placed on respondents.",
      " Based on  feedback from the pretests, we made minor changes to the content and  format of survey questions. We received completed surveys from 47  respondents for an overall response rate of 94 percent. To describe the number and characteristics of fatal school-bus crashes  since 2000, we analyzed data from two data sets. First, we analyzed  Buses Involved in Fatal Accidents (BIFA) data from the University of  Michigan Transportation Research Institute (UMTRI) for calendar years  2000 to 2010 to describe the attributes of crashes involving school buses.  BIFA includes data on fatal traffic crashes in the United States involving a  bus.",
      " We used BIFA data as they were the only source of national crash  data we identified that included bus-specific variables like type of operator  and bus, and 2010 was the last year for which BIFA data were collected.  Cases for BIFA are selected from NHTSA\u2019s Fatality Analysis Reporting  System (FARS) file. BIFA supplements the FARS data; UMTRI collected  police reports for each crash and trained interviewers to contact owners,  operators, or drivers of the buses to collect detailed information on the  bus, operator, and driver. Our analysis of BIFA data included variables  collected by UMTRI,",
      " such as the type of bus, type of operator (school  district or contractor), and length of trip, as well as FARS variables, such  as driver- and vehicle-related factors, model year of the vehicle, and road  and atmospheric conditions. Since the BIFA data were last collected for  calendar year 2010, we reviewed NHTSA\u2019s school-transportation-related  analysis for 2000 through 2014 to compare the overall number of fatal  school-bus crashes during and after BIFA data collection and examine  whether there were any trends or changes after 2010. We also examined  whether there were any changes to federal rules for school bus vehicles  and operators that would substantially change the regulatory landscape  for school bus operations after 2010.",
      " In reviewing the data and federal  rule changes, we found no substantial changes that would raise concerns  about using the BIFA data from 2000 to 2010 for our review. For BIFA, we  identified crashes using the included variable for \u201cschool-bus-related  crashes.\u201d Second, we analyzed FARS data for calendar years 2011 to  2014, the latest year for which data were available, to examine this more  recent FARS data to extend our analysis for certain variables like  atmospheric and road conditions and time of day of the crash. For FARS,  we implemented guidance NHTSA provided to use four variables from the  accident and vehicle data files to identify school-bus-related crashes.",
      "  Based on interviews with NHTSA and UMTRI officials, as well as  reviewing system documentation and electronic data testing, we  determined that the data were sufficiently reliable for the purpose of  describing the number and type of fatal school-bus crashes. While these  data sets allow us to describe the attributes of fatal crashes, the  descriptive information is not generalizable to crashes with non-fatal  injuries or with property damage only. Moreover, we did not have  exposure data, such as the total miles traveled by different types of buses  or operators, so we could not calculate crash rates that would allow for  directly comparing different types of crashes.",
      " To describe federal school bus safety requirements, we reviewed federal  laws and regulations on school bus inspections, driver training, and  vehicle standards\u2014specifically, vehicle age and seating capacity of  school buses. We primarily focused our review on these three areas  based on our initial research into school bus safety requirements and the  content of the mandate. We reviewed inspection requirements in the  Federal Motor Carrier Safety Regulations that would apply to school bus  operators, but the scope of our review did not include all other aspects of  these regulations, such as hours-of-service requirements for drivers and  driver qualifications. We did not examine seat belts as part of our review  due in part to NHTSA\u2019s current effort to further research seat belts on all  school buses.",
      " We also reviewed and analyzed guidance and reports  from NHTSA, FMCSA, and the National Transportation Safety Board,  including NHTSA\u2019s Highway Safety Program Guideline No. 17, Pupil  Transportation Safety; National Transportation Safety Board\u2019s accident  investigation reports involving school buses; and FMCSA\u2019s March 2016  Notice of Proposed Rulemaking and December 2016 Final Rule on entry- level driver training. We also interviewed officials from those agencies to  understand the scope and applicability of federal laws and regulations for  school bus vehicles and operators. To describe state laws and regulations, we systematically searched laws  and regulations for all 50 states to determine the extent to which states  set requirements for school bus inspections,",
      " driver training, and vehicle  standards. Specifically, we searched for state requirements for: (1) school  bus inspections; (2) entry-level or refresher training for school bus  drivers; (3) maximum age, mileage, or use that require retiring or no  longer using school buses; and (4) maximum seating capacity for school  buses. We conducted this search on state statutes and administrative  codes in a legal database. In consultation with GAO\u2019s Office of General  Counsel and our librarian, we developed search terms and protocols and  used a data collection instrument for each of the requirements to ensure  consistent collection of information.",
      " For example, for our searches on  state requirements for school bus inspections, we used the search term  \u201cschool bus w/10 inspect!\u201d and increased the proximity of the key words  from within 10 words to within 15 and 20 words. When our search  returned no results for a state, we then searched the websites of the  state\u2019s education, transportation, motor vehicle, and/or police agencies  and used any information found from these searches, such as a legal  citation or terminology, to direct additional searches in a legal database. We also consulted with our Office of General Counsel on coding the  results of our searches in the data collection instrument.",
      " After completing  our searches, we compared the results of our search on states\u2019 school- bus inspection requirements with the 2011 survey results from South  Carolina and NASDPTS on school bus inspection practices to verify our  research. We also compared the results of our research on vehicle age  with a list provided by the National Conference of State Legislatures and  the results of our research on vehicle age and seating capacity with a  stakeholder\u2019s compiled list of state requirements and practices on school  bus vehicle age/life cycle use and seating capacity. We took steps to  reconcile any identified differences, including conducting further research  in a legal database and state agency websites and contacting state  officials to clarify and verify the information we found in our legal search.",
      "  We also validated our search results with eight selected states as part of  our in-depth review on how selected states implement school-bus safety  requirements, as further described below. Finally, our Office of General  Counsel reviewed and verified the search results for all 50 states. The  scope of our research did not include local requirements, and thus we did  not include any local requirements for school bus inspections, driver  training, or maximum vehicle age or seating capacity that may be  applicable to school bus operators. In addition, our search terms and  protocols aimed to identify states with requirements, but due to the nature  of keyword searches,",
      " we may not have identified all relevant school bus  requirements. Further, for states for which we didn\u2019t identify requirements,  we attempted several types of searches to try to find state inspection,  driver training, or maximum age or capacity requirements. However, we  cannot definitively conclude that there are no requirements in the  mentioned categories for these states. To better understand implementation of federal and state rules and  whether public and private bus operators face different safety  requirements, we performed additional research on and conducted in- depth interviews with state officials from eight selected states. Using  School Bus Fleet\u2019s 2013\u20132014 school year school transportation data,",
      " we  selected states to include those with the highest number of students  transported daily by school bus, the highest annual route miles traveled  per student, and variation in the number of school buses owned by  states/school districts and contractors. We also selected states that vary  geographically and maintained data available on school bus involved  accidents and school bus inspections. We selected eight states:  California, Illinois, Nebraska, New York, Pennsylvania, Tennessee,  Virginia, and Washington. These eight states account for about 28  percent of public K-12 students transported daily on school buses. We  conducted semi-structured interviews with state officials from the selected  eight states and,",
      " when available, collected data on the outcomes of  school bus inspections and the age of school buses. These eight selected  states are a non-probability sample of states, and thus, the information  we obtained is used for illustrative purposes and is not generalizable. To identify sources of leading practices, we conducted a literature search  to identify leading practices on school bus inspections, driver training, and  maximum vehicle age and seating capacity. We reviewed literature for the  last 15 years for pertinent studies in peer-reviewed journals, trade  publications, and conferences, among others, to identify sources and  leading practices. We also interviewed school bus industry stakeholders,",
      "  including officials from school-bus industry associations, federal agencies,  select state agencies, school bus manufacturers, and school bus  contractors, to identify sources of leading practices. We selected  stakeholders to represent a range of roles in the school bus industry and  the federal and state levels of government. A full list of stakeholders  interviewed for this review is provided in table 2 below. In these  interviews, we asked stakeholders an open-ended question for them to  generate sources of leading practices, rather than offering a list of  possible sources. Therefore, not every stakeholder we interviewed  commented on whether a particular document or organization  represented a source of leading practices;",
      " we can only report counts of  stakeholders that identified a particular document or organization. We  also asked school bus industry stakeholders what areas of additional  federal guidance and research, if any, are needed. In identifying sources  of leading practices and areas of further federal guidance and research,  our questions did not apply to 4 of the 30 stakeholders in both cases. For  example, we did not ask federal agencies about what additional federal  research or guidance would be useful as we instead asked them about  current or future research on school bus safety. The views of these  school bus stakeholders are not generalizable to the entire school bus  community,",
      " but they provide us with valuable insights. We analyzed the  content of interviews with stakeholders and identified sources of leading  practices from our literature review in the areas of inspections, driver  training, and vehicle standards. Appendix II: Description of Eight Selected  States\u2019 Requirements on School Bus Safety In our review of eight selected states, we found variation in state  requirements for and implementation of school bus inspection, driver  training, and vehicles standards for maximum age and seating capacity,  as shown in table 3 below. Appendix III: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the contact named above,",
      " Susan Zimmerman (Assistant  Director), Joanie Lofgren (Analyst in Charge), Carl Barden, Pamela  Daum, Leia Dickerson, H. Brandon Haller, David Hooper, Jennifer Kim,  Avani Locke, Grant Mallie, Janet Mascia, SaraAnn Moessbauer, Malika  Rice, Amy Rosewarne, and Carter Stevens made key contributions to this  report.\n"
    ],
    "length": 13219,
    "hardness": null,
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  },
  {
    "id": 43,
    "question": null,
    "answer": "As of February 2011, EM and NNSA remained on GAO's high-risk list for contracting and project management. These two offices manage numerous construction and cleanup projects that each cost less than $750 million and are called nonmajor projects. DOE requires its program offices to establish performance targets for the expected scope, cost, and completion date of each project before starting construction or cleanup. GAO has encouraged federal agencies to use strategic workforce planning to help them meet present and future mission requirements. Two key elements of workforce planning are to identify mission-critical occupations and skills and any current and future shortfalls in these areas. GAO was asked to examine the (1) extent to which EM and NNSA nonmajor projects have met their scope, cost, and completion date targets, (2) factors affecting EM's and NNSA's management of nonmajor projects, and (3) extent to which EM's workforce plans identify mission-critical occupations and skills and any current and future shortfalls in these areas. GAO reviewed DOE documents and project data, examined EM workforce plans, toured selected DOE facilities, and interviewed DOE officials. Of the 71 nonmajor projects that the Department of Energy's (DOE) Office of Environmental Management (EM) and National Nuclear Security Administration (NNSA) completed or had under way from fiscal years 2008 to 2012, 21 met or are expected to meet their performance targets for scope, cost, and completion date. These projects included a $22 million EM project to expand an existing waste disposal facility at the Oak Ridge Reservation in Tennessee and a $199 million NNSA project to equip a radiological laboratory and office building at the Los Alamos National Laboratory in New Mexico. Another 23 projects did not meet or were not expected to meet one or more of their three performance targets for scope, cost, and completion date. Among these, 13 projects met or are expected to meet two targets, including a $548 million NNSA project to shut down a nuclear reactor in Russia for nonproliferation purposes; 8 projects met or are expected to meet one target; 1 project did not meet any of its targets; and 1 project was cancelled. Of the remaining 27 projects, many had insufficiently documented performance targets for scope, cost, or completion date, which prevented GAO from determining whether they met their performance targets. EM and NNSA often did not follow DOE requirements for documenting these performance targets, making it more difficult for GAO and DOE to independently assess project performance. Several factors affected EM's and NNSA's management of their nonmajor projects that were completed or ongoing from fiscal years 2008 to 2012. These factors included the suitability of a project's acquisition strategy, contractor performance, and adherence to project management requirements. For example, EM officials managing an ongoing project to remediate soil and water at the Idaho National Laboratory used an acquisition strategy that tied incentives for the contractor to different performance milestones across the multiple subprojects within the contract, which will help the project meet its performance goals, according to EM officials. In contrast, NNSA encountered problems meeting its performance goals for a project to build an office building and radiological laboratory at the Los Alamos National Laboratory partly due to its acquisition strategy. According to NNSA project officials at the Los Alamos site office, the project team should have hired one contractor to design the project and solicited bids from other contractors to build the project rather than using the same contractor for both activities. The former strategy might have resulted in a more mature project design and more time to evaluate various contractors' qualifications to construct the project, according to the NNSA project officials. EM's workforce plans do not consistently identify mission-critical occupations and skills and current and future shortfalls in these areas for its federal workforce. In addition, many EM workforce plans indicate that EM may soon face shortfalls in a number of important areas, including project and contract management. EM officials said that they recognize these issues and have taken a number of steps to address them, including conducting a skills assessment to identify key occupational series to target for succession planning. However, the inconsistent terms used to describe mission-critical occupations and skills in EM's workforce plans make it difficult for GAO and DOE to understand EM's most critical needs regarding its workforce. GAO recommends that EM and NNSA clearly define, document, and track the scope, cost, and completion date targets for each of their nonmajor projects and that EM clearly identify critical occupations and skills in its workforce plans. EM and NNSA agreed with GAO's recommendations.\n",
    "docs": [
      "Background NNSA\u2014a separately organized agency within DOE\u2014has primary  responsibility for ensuring the safety, security, and reliability of the  nation\u2019s nuclear weapons stockpile. NNSA carries out these activities at  eight government-owned, contractor-operated sites: three national  laboratories, four production plants, and one test site (see fig. 1). These  sites, taken together, have been a significant component of U.S. national  security since the 1940s. Contractors operate these sites under  management and operations (M&O) contracts.the contractor with broad discretion in carrying out the mission of the  particular contract,",
      " but grant the government the option to become much  more directly involved in day-to-day M&O. Currently, NNSA\u2019s workforce is  made up of about 34,000 M&O contractor employees across the eight  sites, and about 2,400 federal employees directly employed by NNSA in  its Washington headquarters, at offices located at each of the eight sites,  and at its Albuquerque, New Mexico, complex. Some Projects Have  Met or Are Expected  to Meet Their  Performance Targets,  but EM and NNSA Did  Not Clearly Document  Information Needed  to Determine the  Performance of  Others Of the 71 EM and NNSA nonmajor projects we reviewed that were  completed or ongoing for fiscal years 2008 to 2012,",
      " we were able to  determine performance for 44 projects. Among these 44 projects, 21 have  met or are expected to meet all three of their performance targets for the  scope of work delivered, cost, and completion date, while 23 have not  met or are not expected to meet one or more of their three targets. The  remaining 27 of the 71 projects we reviewed had insufficiently  documented performance targets or had modified scope targets, among  other things, which prevented us from determining whether they met or  were expected to meet their performance targets, according to our  analysis of DOE data. Determining whether projects fully met or partially  met performance targets was difficult because EM and NNSA did not  always follow DOE requirements for documenting these targets.",
      " DOE has  taken steps to ensure that EM and NNSA more clearly document  performance targets for their projects, but some problems persist. EM and NNSA Have Met or  Are Expected to Meet All  Performance Targets for  Some Nonmajor Projects Of the 71 nonmajor projects we reviewed, 44 projects\u201417 EM projects  and 27 NNSA projects\u2014had documented targets for scope, cost, and  completion date, enabling us to determine their performance. Table 2  shows the expected or completed performance of these 44 EM and  NNSA nonmajor projects. As the table shows, of the 44 projects for which we were able to  determine performance,",
      " 21 projects met or are expected to meet their  performance targets for scope, cost, and completion date. Specifically, 17  completed projects\u20145 EM and 12 NNSA projects\u2014met all three of their  performance targets. These projects included a $22 million EM project to  expand an existing waste disposal facility at the Oak Ridge Reservation in  Tennessee and a $469 million NNSA project to construct chemical,  electrical, and other laboratories and workspaces at the Sandia National  Laboratories in New Mexico. In addition, as of August 29, 2012, 4  ongoing projects\u20141 EM and 3 NNSA projects\u2014were expected to meet all  three of their performance targets,",
      " according to DOE estimates. These  projects included a $77 million EM project to construct two disposal units  for storing waste at the Savannah River Site in South Carolina and a  $199 million NNSA project to equip the Radiological Laboratory/Utility/  Office Building at the Los Alamos National Laboratory in New Mexico to  make it suitable for performing programmatic work. Table 2 also shows that 23 EM and NNSA projects did not meet or are  not expected to meet one or more of their three performance targets. Of  these 23 projects, 13 projects met or are expected to meet two of their  three performance targets,",
      " and eight met or are expected to meet one of  their three performance targets (see apps. II and III for more details). In  addition, one project did not meet any of its performance targets.  Specifically, EM\u2019s project to decontaminate and decommission the Main  Plant Process Building in West Valley, New York, did not complete all of  its planned scope of work when it was completed in October 2011, almost  4 months after its completion date target and more than $50 million over  its cost target of $46 million. EM cancelled the remaining project\u2014 Uranium-233 Disposition project,",
      " at the Oak Ridge Reservation in  Tennessee\u2014in December 2011 after spending approximately $225  million. (See apps. II and III for more details.) In assessing whether projects had achieved their scope, cost, and  completion date targets, we followed DOE and Office of Management and  Budget performance metrics.must be completed within their original scope target. For cost targets,   For the scope, DOE states that projects  Office of Management and Budget guidance and DOE performance  metrics regard projects completed at less than 10 percent above their  original cost targets as having achieved satisfactory performance.  Regarding completion date, DOE\u2019s performance metrics do not address  targets for completion.",
      " However, because Office of Management and  Budget guidance includes performance standards for project schedule,  we considered projects to be on time if they were or are expected to be  completed at less than 10 percent past their original completion date  targets. Inconsistent  Documentation of Scope  Targets, Among Other  Things, Made Assessment  of the 44 Projects\u2019  Performance Difficult We encountered two major problems in assessing the performance of the  44 projects described above, which made it more difficult for us and DOE  to independently assess project performance. First, EM and NNSA did  not consistently follow DOE requirements for documenting scope targets  and tracking these targets using DOE\u2019s performance database.",
      " Second,  EM did not always establish credible completion date targets or conduct  required independent reviews when it restructured its PBSs in 2010. Establishing a clearly defined target for scope is critical for an agency to  accurately track and assess a project\u2019s overall performance. In particular,  a project\u2019s scope of work directly affects estimates of the project\u2019s cost  and completion date. If the scope target is too broad or vaguely stated, it  can be difficult to track whether or to what extent certain aspects of  project scope were reduced or eliminated between CD-2 (when the  baseline was established) and CD-4 (when the project was completed),  potentially affecting cost and completion date targets.",
      " Accordingly, since  2003, DOE Order 413.3 has required that information on scope targets be  documented in a project execution plan as part of CD-2. The current  order also requires a project\u2019s acquisition executive to sign a  memorandum approving CD-2 that contains this information. In addition,  the order requires that information on scope targets, as well as other  critical performance information, be entered into DOE\u2019s centralized  database on project performance\u2014the Project Assessment and  Reporting System (PARS).OAPM, is used to track and report on project performance. This database, which is administered by  However,",
      " EM and NNSA did not always follow the order\u2019s requirement on  documenting scope targets, and we encountered the following problems  when we attempted to identify scope targets for EM and NNSA projects: Key project documents associated with CD-2 and identified in Order  413.3\u2014project execution plans and CD-2 approval memorandums\u2014 often did not contain information on scope targets. Instead, we had to  obtain and review a variety of other project documents to try and  locate this information. For example, we obtained information on  scope targets for several EM and NNSA projects from briefing slides  (i.e., a PowerPoint presentation)",
      " prepared for a DOE advisory board  involved in reviewing and approving projects. We also used  independent project review reports, documents describing the  functional and operational requirements of the projects, and contractor  documents that provided detailed descriptions of a project\u2019s scope of  work, among other documents. (See app. I for more details on our  scope and methodology.) The additional project documents that EM and NNSA provided to  verify scope targets were often dated several months (or more) before  or after the approval of CD-2. Because these documents were often  not contemporaneous with the date when CD-2 was approved, we  had difficulty determining whether any scope targets had changed  during the interval.",
      " For example, we obtained information on scope  targets for two EM projects from a project execution plan that was  signed and dated almost 9 months after the CD-2 approval  memorandum had been signed. (If documents were not dated within  1 year of CD-2 approval, we did not consider them sufficient and  reliable for purposes of determining scope targets.) EM and NNSA often did not clearly or uniformly identify scope targets  in their documents, instead providing this information in a variety of  ways. For example, a NNSA project provided this information in  briefing slides for a project advisory board under the headings  \u201cprogrammatic requirements summary\u201d and \u201cphysical design  summary.\u201d In cases where we were unable to clearly identify scope  targets,",
      " we relied on EM and NNSA officials to identify the information  that they considered to represent scope targets. OAPM has encountered similar problems in trying to identify scope  targets for projects at CD-2 and track how well completed projects had  met these targets at CD-4. Specifically, OAPM officials told us that DOE  program offices may have documented a project\u2019s scope targets in a  variety of project documents, such as a project execution plan or an  acquisition strategy plan, rather than in an approval memorandum at CD- 2. As a result, OAPM officials said they occasionally must reconstruct a  project\u2019s scope targets from other contemporaneous planning documents  near the time of the CD-",
      "2 approval. In a few instances, they said that no  audit trail exists to compare scope targets established at CD-2 with the  scope targets cited in a project\u2019s CD-4 approval memorandum. In  addition, an OAPM official told us that OAPM has not completed the  process of locating and entering these data into PARS and continues to  work with EM and NNSA to reconstruct project scope targets near the  time of CD-2 approval. We found two problems with the performance baselines of many projects  that EM restructured from its portfolio of PBS activities in 2009 and 2010.",
      "  First, several projects did not have a credible completion date target. For  example, EM\u2019s April 2010 memorandum approving CD-2 for the Zone 1  Remedial Actions project, located in Oak Ridge, Tennessee, gave a  target completion date of fiscal year 2017, which meant that the target  completion date was at the end of the fiscal year (September 30, 2017),  according to EM officials. However, EM approved the formal completion  of this project, via a CD-4 approval memorandum, on September 30,  2011\u20146 years ahead of the completion date target identified in the CD-",
      "2  approval memorandum. In explaining this difference, EM officials stated  that they had linked the target completion date for this project to the end  of the existing PBS near-term baseline, which had been established  before the restructuring process. According to EM officials, EM used this  method because it already had a contract in place to conduct work  activities associated with the PBS near-term baseline. Since the end of  the PBS near-term baseline was to coincide with the end of the contract  period, EM officials said that they did not think it would be appropriate to  change the target completion dates. In addition, EM officials told us that  they were more focused on finishing the scope of work for a given project  within a specific dollar amount,",
      " and that it was not worth the additional  expenditure of time and dollars to modify contracts to change the  completion date. EM used this same methodology in establishing target  completion dates for several other projects we examined. When we found that EM\u2019s practice of establishing target completion dates  did not provide a meaningful benchmark for assessing project  performance, we had to locate additional documentation to establish a  more credible completion date target. For example, for the Zone 1  Remedial Actions project, we reviewed additional documentation and  decided that a more credible completion date target was December 15,  2011. As a result, for this and other projects,",
      " the completion date targets  we used to evaluate the performance of some projects are different than  the ones that DOE uses in its PARS database. Second, EM often established a new performance baseline and approved  CD-2 for a project without having the baseline reviewed by an  independent team of experts, as DOE Order 413.3 requires. Among other  things, the review team is responsible for examining a project\u2019s cost and  completion date targets to ensure that they are credible and valid.  However, EM did not conduct such reviews when it restructured some of  the projects we examined. Instead, according to EM officials, EM relied  on independent reviews conducted in the 2007 to 2008 time frame as part  of the CD-",
      "2 approval process for PBS activities. In addition, EM officials  said that it was not worth the additional expenditure of time and dollars to  conduct new independent reviews for these projects. If EM had conducted new reviews as part of its restructuring process, it is  possible that these reviews would have uncovered problems with some of  the performance targets that EM had to correct later. Specifically, we  identified two projects\u2014the decontamination and decommissioning of the  Paducah Gaseous Diffusion Plant in Paducah, Kentucky, and the Main  Plant Process Building in West Valley, New York\u2014for which EM had to  significantly increase the cost targets it had approved 10 and 5 months  earlier,",
      " respectively. In both cases, these cost increases were due to  errors that EM project officials made in calculating total project cost. For  example, for the Paducah Gaseous Diffusion Plant project, the project  team did not incorporate additional project costs, including funds for  contingencies and the contractor\u2019s fee, into the project\u2019s cost estimate.  This omission resulted in underestimating the project\u2019s cost target by  about $8 million, or about 21 percent. In both cases, these errors  increased the projects\u2019 cost targets and caused EM to miss the original  cost targets, according to our assessment of performance.",
      " Limited Documentation or  Changing Performance  Baselines Complicates  Evaluation of 27 Projects\u2019  Performance We were unable to determine the extent to which 27 of the 71 nonmajor  projects that EM and NNSA completed or had under way from fiscal year  2008 through fiscal year 2012 had met their scope, cost, and completion  date targets for four reasons. First, EM and NNSA did not establish a  performance baseline for eight projects. Second, EM and NNSA did not  provide documentation that fully identified one or more performance  targets\u2014including targets for scope, cost, and completion date\u2014for eight  projects.",
      " Third, NNSA did not fully document a final project cost or a  current completion date for three projects. Fourth, EM and NNSA  modified the scope targets of eight projects after CD-2, rendering the  original performance targets unusable for purposes of assessing  performance. EM and NNSA did not establish a performance baseline for a total of 8 of  the 71 nonmajor projects we reviewed that were completed or ongoing for  fiscal years 2008 to 2012. Without a performance baseline, a project\u2019s  performance cannot be assessed. Specifically, we found the following: EM. EM did not establish a performance baseline for 6 of the 30 EM  nonmajor projects we reviewed.",
      " According to EM documentation,  when the office established near-term baselines for its PBS activities  in the 2007 time frame, it decided that it would not establish a  baseline for a few projects that were near completion or for which  physical work was essentially complete, and remaining costs were  low. Because EM had essentially completed all physical work before  fiscal year 2008 on the 6 projects we identified, EM never established  a performance baseline for these projects, according to EM officials.  However, we included these projects in our review because EM did  not formally approve the completion of these projects (via a CD-4  approval memorandum)",
      " until the 2010 to 2011 time frame, which  meant that these projects would have been ongoing until that time.  The combined cost of these 6 projects is approximately $1.5 billion.  (See app. II for more details.) NNSA. NNSA did not establish a performance baseline for 2 of the 41  NNSA nonmajor projects we reviewed. According to NNSA  documents and project officials, after a May 2000 wildfire damaged  lands and buildings at the Los Alamos National Laboratory, NNSA  formally authorized two emergency recovery efforts in July 2000.",
      "  Because this authorization was granted outside of the critical decision  process, NNSA did not establish formal performance targets for these  projects. The combined cost of these two projects is $145 million.  (See app. III for more details.) For 8 of the 71 nonmajor construction projects we reviewed, EM and  NNSA did not fully define and document one or more performance targets  for scope, cost, and completion date when they established and approved  performance baselines for these projects at CD-2. Specifically, we found  the following: For EM, 2 of the 30 EM nonmajor projects we reviewed did not have  clearly defined and documented targets for scope and completion  date,",
      " 1 project did not have a clearly defined and documented scope  target, and 1 project did not have a clearly defined and documented  completion date target. The combined cost of these 4 projects, 2 of  which are ongoing, is estimated to be at least $182 million. (See app.  II for more details.) For NNSA, 4 of the 41 NNSA nonmajor projects we reviewed did not  have clearly defined and documented scope targets. The combined  cost of these 4 projects, 2 of which are ongoing, is estimated to be  $122 million. (See app.",
      " III for more details.) For 2 of the 71 nonmajor projects we reviewed, NNSA did not fully  document the final project cost at CD-4. The final cost has not yet been  settled for these 2 projects due to pending litigation with the contractor.  NNSA estimated the combined cost of these 2 projects, both of which  have been completed, to be $195 million. In addition, for the Nuclear  Materials Safeguards and Security Upgrades, Phase II project at the Los  Alamos National Laboratory, NNSA and contractor officials have  determined that the project\u2019s remaining construction costs will exceed the  existing funds for the project and have halted work on the project.",
      " As a  result, NNSA has not determined what the project\u2019s revised completion  date target will be. EM and NNSA modified the scope targets of 8 of the 71 projects we  reviewed after approving them at CD-2. EM and NNSA used procedures  to control and approve these modifications but did not establish new CD-2  performance targets. As a result, the scope modifications rendered the  original CD-2 performance targets unusable for assessing project  performance. We consider a project\u2019s scope target to have been modified  if, among other things, EM or NNSA increased the scope of the project  after approving it at CD-",
      "2 or reduced the scope for programmatic reasons  and provided a sound justification for this reduction. In contrast, if EM or  NNSA reduced project scope solely to meet a project\u2019s cost target, we did  not consider the scope target to have been modified; rather, we  considered the scope target not to have been met. (See apps. II and III  for more information.) Projects for which EM or NNSA had modified the scope target sometimes  exceeded expectations. For example, an NNSA project to build a highway  at the Nevada National Security Site had an original scope target of 19.2  miles of highway and a cost target of about $14 million,",
      " but the project  team completed an additional 12 miles of highway at an incremental cost  of about $4 million, ahead of the original completion date target. However,  because the scope target changed, the total cost of the project also  changed, which made it unfair to judge the project\u2019s performance against  its original cost target. Table 3 provides an example of a NNSA project for which we consider the  scope target to have been modified. We have previously reported on problems with the way DOE documents  and tracks the scope of its projects, and DOE has taken actions to  address this issue. In a 2008 report on DOE\u2019s Office of Science,",
      " we noted  concerns within DOE that projects sometimes had overly broad definitions  of scope, making it difficult to determine the effects of a change in project   To address this issue, we recommended that DOE consider  scope.whether it could strengthen its project management guidance to help  ensure that each project\u2019s scope is clearly and sufficiently defined. DOE  generally agreed with our recommendation and revised Order 413.3 in  November 2010 to establish clearer requirements for identifying and  documenting project scope at CDs 2 and 4. Specifically, the revised order  requires a project\u2019s acquisition executive to clearly identify the scope  target in the documentation approving CD-",
      "2. In the documentation  approving CD-4, when a project is declared complete, this official must  clearly identify the scope accomplished and compare this scope with the  target established at CD-2. To determine whether NNSA and EM had improved their documentation  of scope targets since DOE revised Order 413.3, we identified two  nonmajor projects for which NNSA and EM established performance  targets in 2011. These projects are NNSA\u2019s Sanitary Effluent Reclamation  Facility Expansion project at the Los Alamos National Laboratory and  EM\u2019s Purification Area Vault project at the Savannah River Site. In  reviewing project documentation,",
      " we found that both NNSA and EM had  provided information on targets for scope, cost, and completion date in  their memorandums approving CD-2. In particular, NNSA\u2019s approval  memorandum identified the following scope targets: (1) expand the  existing Sanitary Effluent Reclamation Facility capacity to treat 300  gallons per minute of product water in an 18-hour day; (2) provide a  400,000-gallon product water storage tank, which provides a consistent  supply of water to the cooling towers in the event the facility is off-line for  maintenance; and (3) provide additional evaporation capacity.",
      " These  scope targets provide a quantitative measure of how the project is to  perform at completion, as required by DOE\u2019s order. However, we found problems with the way EM documented the scope  target for its Purification Area Vault project. EM\u2019s approval memorandum  provided a high-level description of the project\u2019s scope, stating that the  project will modify an existing portion of the K-Area Complex at the  Savannah River Site in South Carolina to accommodate a vault;  implement passive and active fire protection features as identified in the  project fire hazards analysis; and install a new heating, ventilation, and air  conditioning system. However, the scope target cited in the approval  memorandum did not provide sufficient detail for measuring scope  performance at project completion and,",
      " therefore, it may be difficult for an  independent reviewer to accurately assess project performance.  Specifically, we found the following: The first part of the scope target\u2014construct a secure storage location  for holding at least 500 containers\u2014provides a quantitative measure  of how the project is to perform at completion, as required by DOE\u2019s  order. The second part of the scope target\u2014attain CD-4 approval for  storage of containers\u2014does not provide a quantitative measure and  instead reflects a stage in DOE\u2019s critical decision framework.  Therefore, only one part of the scope target can be used to  independently measure project performance regarding scope.",
      " The scope target only captures some of the elements of scope  contained in the high-level scope description. As a result, the effect of  any changes to these other elements of scope on project performance  is unclear. For example, if EM decided not to fully implement the fire  protection features identified in its hazards analysis, it is not clear  whether EM or an independent reviewer would consider the project to  have met its scope target. Only the scope target\u2014as opposed to the other elements of scope in  the high-level scope description\u2014is currently being tracked in DOE\u2019s  centralized database for project performance. Given the other issues  we identified with this scope target,",
      " an independent reviewer relying  solely on information in DOE\u2019s database may not have enough  information to assess the project\u2019s performance accurately. Several Factors Affect  EM and NNSA in  Managing Nonmajor  Projects Several factors affected EM and NNSA in managing their nonmajor  projects that were completed or ongoing from fiscal years 2008 to 2012.  According to our interviews with project officials, these factors included  the suitability of the acquisition strategy, contractor performance, and  adherence to project management requirements. Acquisition Strategy Because EM and NNSA carry out their work primarily through  agreements with private contractors, a project\u2019s acquisition strategy is a  critical factor that affects the ability of these offices to properly manage  their nonmajor projects.",
      " According to DOE guidance, an acquisition  strategy is the high-level business management approach chosen to  achieve project objectives within specified resource constraints. The  acquisition strategy is the framework for planning, organizing, staffing,  controlling, and leading a project. As part of this framework, agency  officials have to choose the most appropriate contract alternative for a  given project. Alternatives can include the use of multiple contractors to  perform different tasks or the use of a prime contractor (such as the M&O  contractor at a DOE site), who would be responsible for awarding  subcontracts for different tasks. In addition, agency officials should  identify the use of special procedures,",
      " such as the use of a \u201cdesign-build\u201d  contract, whereby a single contract is awarded for both design work and  construction, or the use of a \u201cdesign-bid-build\u201d contract, whereby separate  contracts are awarded for the design and construction. Some EM and NNSA officials told us that the acquisition strategy was an  important factor in the successful management of their projects. For  example, EM retained a prime contractor to manage the Soil and Water  Remediation\u20132012 project at the Idaho National Laboratory using a  contract containing incentives based on cost and schedule performance.  According to project officials, the fee structure under this acquisition  strategy is relatively simple and gives the project team flexibility to tie  incentives to different performance milestones across the multiple  subprojects within the contract.",
      " These officials said that this contract  structure has been a very effective tool in achieving performance goals.  EM expects this project to meet its cost target of $743 million and its  completion date target of September 2012, and officials said that they  expect the contractor to receive its incentive fee, as called for in the  contract. Other EM and NNSA officials cited the existence of an inadequate  acquisition strategy as having a negative effect on the performance of  their projects. For example, according to NNSA project officials at the Los  Alamos site office, the M&O contractor at the Los Alamos National  Laboratory decided to construct the Radiological Laboratory/",
      "Utility/Office  Building project using a design-build acquisition strategy with a single  prime subcontractor responsible for both design and construction. This  approach was chosen based on the M&O contractor\u2019s experience with  constructing office buildings. However, the project also involved the  construction of a radiological laboratory, which entailed the use of  rigorous documentation standards to show that the project can meet  nuclear quality assurance standards, among other things. Officials of the  NNSA site office said that one of their key lessons learned would be to  use a design-bid-build acquisition strategy if they had to manage a similar  project in the future.",
      " The use of a design-bid-build contract would have  offered several advantages over a design-build contract, according to  these officials. First, it would have allowed NNSA staff more time to  develop more robust project specifications and a more mature project  design before having contractors bid on the construction of that design.  Second, NNSA staff might have had more time to evaluate bids from  contractors to see if they had the skills to construct the project. Third, with  a more mature design, NNSA might have been able to reduce the number  of federal staff and the time spent overseeing the project. This project  was completed in June 2010,",
      " a few months after its completion date  target. Its cost target was $164 million; however, the final cost of this  project has not been determined because of ongoing litigation. According  to the officials of the site office, NNSA withheld the M&O contractor\u2019s  performance incentive fee as a result of less than desirable contractor  and subcontractor management during the design and construction of the  facility. DOE has previously identified ineffective acquisition strategies as being  among its top 10 management challenges. Specifically, in its 2008 root  cause analysis, DOE reported that its acquisition strategies and plans  were often ineffective.acquisition planning early enough in the process or devote the time and  resources to do it well.",
      " Contractor Performance Because contractors carry out the work associated with EM and NNSA  nonmajor projects, contractor performance is a fundamental factor  affecting EM\u2019s and NNSA\u2019s management of these projects. According to  EM and NNSA project officials, poor contractor performance was a  significant factor impeding their ability to successfully manage nonmajor  projects. Among other things, officials cited concerns with finding qualified  contractors that understood DOE\u2019s nuclear safety requirements and  maintained adequate internal control processes. Examples are as follows: Nuclear Facility Decontamination & Decommissioning \u2013 High Flux  Beam Reactor Project, Brookhaven National Laboratory, New York:",
      "  This project was completed in December 2010, more than a year  ahead of its completion date target, and at a cost of $16 million, which  was 31 percent higher than its cost target of $12 million. EM officials  stated that the major factor increasing costs was that the contractor  did not properly prepare for and pass internal safety reviews, which  were necessary to demonstrate the contractor\u2019s readiness to begin  removal and disposal of key reactor components. Because the  contractor required more time than originally planned to prepare for  and pass internal safety reviews, work on the project was delayed,  and the total project cost increased.",
      " Officials did not explain why the  project was completed well ahead of its completion date target despite  the delays encountered. Officials stated that one of the most important  lessons learned was to better ensure earlier in the process that the  contractor had a rigorous process in place (e.g., procedures and  training) to demonstrate that their personnel were ready to perform  the decontamination and decommissioning work. Because EM\u2019s  cleanup work at Brookhaven National Laboratory is performed under  the Laboratory Management and Operations Contract under the  purview of DOE\u2019s Office of Science, EM officials said that they have  provided information to the Office of Science to be included in the  contractor\u2019s overall performance evaluation.",
      " Process Research Unit Project, Niskayuna, New York: EM  established a cost target of $79 million for this ongoing project. In  September 2010, a contamination incident occurred while the  contractor was performing open air demolition of a building at the site.  According to DOE\u2019s incident report, the contamination incident had  two root causes: (1) the contractor failed to fully understand,  characterize, and control the radiological hazard; and (2) the  contractor failed to implement a work control process that ensured  facility conditions supported proceeding with the work. As a result of  this incident, as well as weather-related issues,",
      " the project has  exceeded its cost target, and the project\u2019s final cost and completion  date depend on the outcome of negotiations between DOE and the  contractor, according to project officials. Nuclear Materials Safeguards and Security Upgrades Project, Phase  II, Los Alamos National Laboratory, New Mexico: This ongoing project  is expected to meet its cost target of $245 million but not its  completion date target of January 2013. NNSA used a design-bid- build acquisition strategy for this project, with one contractor  responsible for designing the project, and another contractor  responsible for construction activities. According to project officials,",
      "  during the construction phase, the building contractor had to stop  work when it discovered errors with the design of the project.  Specifically, officials told us the designs contained an erroneous  elevation drawing that did not adequately account for the presence of  a canyon and a pipeline containing radioactive liquid waste on the  north side of the project site. In addition, other construction  subcontractors, whose work was to be performed in sequence, had to  wait to begin their work. As a result of these problems, the design  contractor spent considerable time redesigning the project, according  to project officials, and NNSA has had to award additional funding and  schedule time to the construction contractors to compensate for the  inadequate design.",
      " All told, officials told us the additional costs  resulting from redesign and the delay of construction ranged from $15  million to $20 million. In addition, NNSA and contractor officials  recently determined that the project\u2019s remaining construction costs will  exceed the existing funds for the project and have halted work. As a  result, NNSA has not determined what the project\u2019s revised  completion date target will be. Adherence to Project  Management Requirements Effective project management also depends on having project officials  consistently follow DOE\u2019s project management requirements. Among  other things, these requirements are aimed at ensuring that projects       (1) have a sufficiently mature design before establishing performance  targets and beginning construction activities;",
      " (2) have had their earned  value management systems certified for more accurate reporting on  performance; (3) undergo a review by an independent group of experts  before beginning construction activities; and (4) maintain an adequate  process to account for any significant changes to the project\u2019s scope,  cost, or completion date targets (known as a change control process).  DOE has previously identified adherence to project management  requirements as among its top 10 management challenges, stating in its  2008 root cause analysis that the agency has not ensured that these  requirements are consistently followed. That is, in some instances,  projects are initiated or carried out without fully complying with the  processes and controls contained in DOE policy and guidance.",
      " We found a similar problem with adherence to DOE project management  requirements in some of the projects we reviewed, although these  problems were more often associated with EM projects than with NNSA  projects. Specifically, in half of the 10 EM projects we reviewed in depth,  officials cited a lack of adherence to project requirements, particularly not  having a sufficiently mature design when establishing performance  targets and beginning work activities, as a significant factor impeding their  ability to manage projects within the performance baseline. For example, EM\u2019s project to convert depleted uranium hexafluoride into  a more stable chemical form at two locations\u2014Paducah,",
      " Kentucky and  Portsmouth, Ohio\u2014was completed in November 2010, more than 2 years  after its completion date target and more than $200 million over its cost  target of $346 million. A lessons-learned report, completed in 2009 at the  request of DOE, concluded that DOE\u2019s critical decision process had  become a \u201cmere rubber stamp of approval.\u201dProject had results consistent with its level of definition at the time of  project commitment and execution start. Future DOE projects will likely  demonstrate similar performance unless they are better defined at the  start of detailed design and they follow not only the letter of DOE\u2019s [critical  decision]",
      " process, but also its spirit.\u201d According to EM officials, EM  withheld the construction contractor\u2019s incentive fee due to its poor  performance. It stated: \u201cIn the end, the \u2026  In contrast, among the 10 NNSA projects we reviewed in depth, several  NNSA project managers credited adherence to project management  processes as contributing positively to project performance. The  advantages of adhering to project management processes are illustrated  by one of the projects we reviewed\u2014the Ion Beam Laboratory project at  Sandia National Laboratories, New Mexico. This project\u2014to use ion  beams to qualify electronics and other nonnuclear weapon components  for use in the nuclear stockpile\u2014was completed ahead of schedule in  September 2011 at a cost of $31 million,",
      " which was 22 percent lower than  its cost target of $40 million. Project officials stated that implementing a  procedure to control any changes to the performance baseline and a  Baseline Change Control Board served as the foundation to manage all  changes to ensure that cost, schedule, and technical aspects were  evaluated to meet the mission of the project. In addition, project officials  made active use of earned value management data, with several officials  noting that applying earned value management principles on a regular  basis assisted the project team in taking management actions to keep the  project on track. For example, the Sandia Project Manager provided  monthly reports to Sandia senior managers and the federal project  director to communicate the project\u2019s progress,",
      " the accomplishment of  milestones, financial outlays, project issues, and appropriate corrective  actions. Owing to the project\u2019s success in meeting its performance  targets, NNSA did not withhold any fee from the contractor. EM\u2019s Workforce Plans  Do Not Consistently  Identify Mission- Critical Occupations  and Skills or  Shortfalls in These  Areas EM\u2019s eight workforce plans for its federal workforce do not consistently  identify (1) mission-critical occupations and skills and (2) current and  future shortfalls in these areas. As shown in table 4, of the eight EM  workforce plans, one fully identifies both mission-critical occupations and  mission-critical skills;",
      " another four plans identify either mission-critical  occupations or mission-critical skills, but not both; and four of the eight  plans identify current and future shortfalls in mission-critical occupations. EM\u2019s workforce plans may not consistently identify mission-critical  occupations and skills and shortfalls in these areas in part because EM\u2019s  Office of Human Capital has not established a consistent set of terms that  all EM sites use to define and describe mission-critical occupations and  skills, according to our analysis. Instead, the five EM workforce plans that  identified or partially identified these occupations and skills (as shown in  table 4) used different terms to identify them.",
      " The plans also differed in  the number and type of occupations or skills identified as mission-critical.  For example, two plans identified three such occupations and skills, while  another identified 20 different job series associated with 40 different  position titles. Table 5 shows the variations in mission-critical occupations  and skills identified in these five EM workforce plans. When we brought the issue of inconsistent terminology to the attention of  EM officials, they agreed that it would be useful to establish a consistent  set of terms for mission-critical occupations and skills and told us that  they plan to address this issue in the fiscal year 2013 planning cycle.",
      "  However, we note that EM\u2019s guidance to its site offices already instructed  them to describe shortfalls and surpluses in the skills most critical to site  performance; nonetheless, not all site offices did so. Notwithstanding the variations in terms for mission-critical occupations  and skills in EM\u2019s workforce plans, many of the plans indicate that EM\u2019s  federal workforce may soon face shortfalls in a number of important  areas, including project and contract management. Examples are as  follows: The Portsmouth/Paducah Project Office\u2019s plan states that the office  will need more staffing, including in project management and  contracting,",
      " to meet mission needs in future years. Specifically, the  plan notes that 31 percent of its current federal workforce could retire  by fiscal year 2017, including up to 67 percent of its contract  specialists and up to 64 percent of its general engineers. The workforce plan for EM headquarters, issued in July 2011, stated  that 26 percent of its federal workforce was currently eligible to retire,  with an additional 22 percent of the workforce projected to become  eligible for retirement by fiscal year 2015. The EM headquarters plan  projected that 60 percent of contracting officers would be eligible for  retirement by fiscal year 2015.",
      " The Idaho Operations Office workforce plan states that a significant  number of federal employees in leadership and mission-critical  positions were already eligible for retirement at the end of fiscal year  2011, but the plan does not specify the number or positions of these  employees. The Carlsbad Field Office workforce plan indicates that both of that  office\u2019s \u201ccontract/procurement specialists\u201d will be eligible to retire by  fiscal year 2017, along with 10 of its 15 general engineers. The workforce plan for the Office of River Protection, which manages  the storage, retrieval, treatment, and disposal of tank waste at the  Hanford Site in Washington State,",
      " projects that the office will face a  61 percent shortfall in \u201ccontracting\u201d and a 53 percent shortfall in  \u201cproject management\u201d by fiscal year 2017. EM officials said that they recognize the need to better identify mission- critical occupations and skills and shortfalls in these areas, and that they  have taken a number of steps to address these issues. For example,  officials in EM\u2019s Office of Human Capital told us that they conducted a  skills assessment in 2010 that helped EM identify key occupational series  to target in its succession planning efforts. In addition, officials in this  office told us that they are actively engaged in mitigating the risk of having  a large number of EM federal employees retire in the near future by  developing a voluntary separation incentive plan and voluntary early  retirement plan.",
      " If employees eligible for retirement participate in this  plan, EM could fill vacated positions with younger employees who could  develop their skills in future years. Moreover, officials in EM\u2019s Office of  Acquisition and Project Management told us that to ensure that each  project team has the skilled staff it needs to meet project goals, they  consult with the EM officials in charge of each project team, consider the  project\u2019s execution plan, and use DOE staffing guidance as a tool to  inform staffing decisions. EM officials also said that EM sites serve diverse functions and that,  therefore, some variation in the workforce plans and their descriptions of  mission-critical occupations and competencies is to be expected.",
      "  Nonetheless, without a workforce plan or summary document presenting  a consistent set of occupations and skills that are critical to every site  office\u2019s mission, such as project and contract management, it is difficult  for DOE and us to understand EM\u2019s most critical current and future  human capital needs. Conclusions The 71 nonmajor projects that we reviewed cost an estimated $10.1  billion and are critical to DOE\u2019s mission to secure the nation\u2019s nuclear  weapons stockpile and manage the radioactive waste and contamination  that resulted from the production of such weapons. EM and NNSA are  making some progress in managing these projects. For example,",
      " we  identified some NNSA and EM nonmajor projects that used sound project  management practices, such as the application of effective acquisition  strategies, to help ensure the successful completion of these projects.  However, some contract and project management problems persist.  Specifically, both EM and NNSA have approved the start of construction  and cleanup activities for some nonmajor projects without clearly defining  and documenting performance targets for scope, cost, or completion date  in the appropriate CD-2 documentation, as required by DOE\u2019s project  management order. In addition, EM and NNSA have not consistently  tracked project performance, particularly for scope,",
      " in DOE\u2019s centralized  database for tracking and reporting project performance, as required by  DOE\u2019s project management order. Moreover, EM has approved new  performance targets for projects without ensuring that these targets are  reviewed by an independent team of experts, as required by DOE\u2019s  project management order. Without clearly defining and documenting a  project\u2019s performance targets and tracking performance against these  targets through project completion, and without ensuring that projects are  independently reviewed, neither DOE nor we can determine whether the  department is truly delivering on its commitments when its contractors  complete work on its projects. Problems also persist regarding DOE\u2019s workforce\u2014specifically, its current  and potential shortfalls in federal personnel with the skills necessary to  manage its contracts and projects,",
      " an issue that has received attention in  our high-risk list. EM recognizes the need to address this issue and has  taken steps to do so, such as conducting succession planning based on  an assessment of key skills, as well as having EM\u2019s Office of Project  Management consult with EM\u2019s project teams to ensure that the project  teams have the skilled personnel they need to execute projects  successfully. However, EM does not consistently identify in its workforce  plans the occupations and skills most critical to the agency\u2019s mission, as  well as current and future shortfalls in these areas. This issue is  compounded by EM\u2019s decentralized planning process,",
      " in which site  offices produce their own workforce plans that do not use consistent  terminology and are not aggregated centrally by EM headquarters into a  single workforce plan or summary document. Some variation among site- specific workforce plans is to be expected, but EM officials have stated  that it would be useful to establish a consistent set of terms for mission- critical occupations and skills and told us that they plan to address this  issue in the fiscal year 2013 planning cycle. That said, previous EM  guidance for workforce planning specified that the plans describe  shortfalls and surpluses in the skills most critical to site performance, but  not all of EM\u2019s plans did so.",
      " Without a summary document or single  workforce plan presenting a consistent set of occupations and skills that  are critical to every site office\u2019s mission, such as project and contract  management, using consistent terms, it is difficult for DOE or us to  understand EM\u2019s most critical current and future human capital needs. Recommendations for  Executive Action To ensure that DOE better tracks information on its nonmajor projects,  including the extent to which these projects meet their performance  targets, and that EM consistently identifies mission-critical occupations  and skills, as well as any current and future shortfalls in these areas, in its  workforce plans, we recommend that the Secretary of Energy take the  following five actions:",
      " Ensure that the department clearly defines performance targets\u2014 including targets for scope, cost, and completion date\u2014for each of its  projects and documents the targets in appropriate CD-2  documentation, as is required by DOE\u2019s project management order. Ensure that the department tracks the performance of its projects  using the performance targets, particularly scope, it establishes for its  projects, as is required by DOE\u2019s project management order. Ensure that each project is reviewed by an independent team of  experts before the department approves performance targets, as is  required by DOE\u2019s project management order. Direct EM to develop a summary document or a single workforce plan  that contains information on mission-critical occupations and skills,",
      " as  well as current and potential future shortfalls in these areas, for all EM  sites. Ensure that EM follows through on its plan to address the use of  consistent terms across all EM sites for mission-critical occupations  and skills. Agency Comments We provided a draft of this report to DOE for review and comment. In  written comments, DOE agreed with our recommendations. DOE\u2019s written  comments are reprinted in appendix IV. DOE also provided technical  clarifications, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date.",
      " At that time, we will send copies to the Secretary of Energy,  the appropriate congressional committees, and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov. If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or trimbled@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 who made key contributions to  this report are listed in appendix V. Appendix I: Scope and Methodology To determine the extent to which the Department of Energy\u2019s (DOE)",
      "  Office of Environmental Management (EM) and National Nuclear Security  Administration (NNSA) nonmajor projects have met their scope, cost, and  completion date targets, we obtained performance information on 71  nonmajor projects. These 71 nonmajor projects included 30 EM projects  and 41 NNSA projects that were either: (1) completed (i.e., reached  critical decision 4) from fiscal year 2008 to fiscal year 2011 or (2) ongoing  from fiscal year 2008 to fiscal year 2011 and for which EM and NNSA had  established performance baselines at critical decision 2.",
      " We also  collected performance information for ongoing projects for fiscal year  2012. The total estimated cost of these 71 projects is approximately $10.1  billion. The names and locations of these 71 projects are provided in  apps. II and III. We excluded the following types of projects from our  review: (1) major projects, or those projects that each cost more than  $750 million; (2) EM projects funded entirely by the American Recovery  and Reinvestment Act of 2009 because of a separate GAO review looking  at these projects; (3) information technology acquisitions; and (4)",
      "   We identified these projects using DOE\u2019s Project  operational activities.Assessment and Reporting System (PARS). To assess the reliability of  PARS data, we interviewed officials about the system and reviewed  relevant documents. On the basis of this information, we determined that  the system has adequate and sound controls for entering and maintaining  data. We also conducted electronic testing on the specific data fields of  interest, including cost, schedule, and scope targets. We determined that  the cost and schedule data were complete and sufficiently reliable for our  purposes; however, we found the scope data to be incomplete. Through  interviews with officials, we ascertained that the scope data were not  missing because of a system or data entry problem;",
      " instead, because EM  and NNSA had not consistently identified and documented scope targets  for the 71 projects we reviewed, these data could not be entered into  PARS. Therefore, we obtained data on project scope, cost, and schedule  directly from EM and NNSA officials. For the 71 nonmajor projects, we reviewed selected documents providing  information about the projects\u2019 targets for scope, cost, and completion  date. We relied on DOE Order 413.3 for requirements on (1) specifying  the scope, cost, and schedule targets for a project\u2019s performance  baseline and (2) documenting the performance baseline.requirements,",
      " we reviewed the relevant documentation (including critical  decision memoranda and project execution plans) and compared the  performance targets established for scope, cost, and schedule with the  actual performance of completed projects and the expected performance  of ongoing projects. For completed projects, we compared the  performance targets for scope, cost, and schedule\u2014as documented in  critical decision 2 (CD-2) approval memorandum and project execution  plans\u2014with the completed scope, actual costs, and approval dates as  documented in critical decision 4 (CD-4) approval memorandum. For  ongoing projects, we compared the performance targets for scope, cost,  and schedule with DOE project performance reports;",
      " we also had officials  from EM, NNSA, and DOE\u2019s Office of Acquisition and Project  Management review performance information as of August 29, 2012. In  cases where key project documents\u2014including the CD-2 and CD-4  approval memoranda and project execution plans\u2014did not identify all  three performance targets for scope, cost, and completion, we requested  and reviewed alternative project documents. These included, among  other things: independent project review reports; briefing slides prepared  for DOE advisory boards; contractor work packages; DOE documents  listing the functional and operational requirements of projects;  memoranda used to request approval of changes to project baselines;",
      "  final acceptance reports documenting that contractors delivered project  requirements; and DOE quarterly and monthly status reports on ongoing  projects. When reviewing alternative project documents, we requested  documents dated as close to CD-2 and CD-4 as possible. If documents  were not dated within 1 year of CD-2 approval, we did not consider them  sufficient and reliable for purposes of determining scope targets. In keeping with our prior work, and in recognition of Office of  Management and Budget guidance and DOE\u2019s project performance  goals, we characterized nonmajor projects that met or exceeded (or are  expected to meet or exceed) their cost and schedule targets by less than  10 percent as completed within budget and on time,",
      " whereas we  considered projects that exceeded (or will exceed) their targets by 10  percent or more to be over cost or late.whether a project had successfully met its scope target. Projects that  reduced their scope target to meet their cost targets were considered not  to have met their scope targets. In a few cases, EM and NNSA increased  the scope of work associated with a project after establishing  performance targets at CD-2; in these cases, we noted that these projects  had been modified and did not calculate whether they had met or  exceeded their original cost and schedule targets. In addition, we considered  To evaluate factors affecting EM\u2019s and NNSA\u2019s management of nonmajor  projects,",
      " we selected a nongeneralizable sample of 20 out of the 71  projects\u2014including 10 EM projects and 10 NNSA projects\u2014for more  detailed review. The names of these 20 projects are provided in apps II  and III. Results from nonprobability samples, including our sample of 20  projects, cannot be used to make inferences about EM\u2019s and NNSA\u2019s  overall project performance or generalized to projects we did not include  in our sample. We were interested in gathering information on the  selected projects to identify material factors that may not exist across all  projects but could help us understand EM\u2019s and NNSA\u2019s organization  strengths and potential challenges.",
      " We selected these 20 projects to  ensure that our sample included completed and ongoing projects, with a  wide range of project costs. Together, the 20 projects represented about  $4.1 billion, or approximately 41 percent, of the total value of the 71  projects. For these 20 projects, we developed a structured interview template to  identify the key factors that affected the management of these projects.  We used three primary sources in developing this structured interview  template\u2014GAO\u2019s cost guide, DOE\u2019s Order 413.3, and DOE\u2019s guidance  document on conducting project reviews. The structured interview  template focused on certain aspects of project management,",
      " such as the  preparation of project designs, risk estimates, and cost and schedule  targets, as well as the adherence to DOE project management  requirements. We pretested the structured interview template during a  site visit to the Y-12 National Security Complex and the Oak Ridge  Reservation near Oak Ridge, Tennessee. At each site, we selected six  projects and interviewed relevant EM and NNSA federal project directors  and other knowledgeable staff using the structured interview template.  Based on our pretesting, we revised the structured interview template and  conducted 20 interviews with the relevant EM and NNSA federal project  directors and other knowledgeable staff to gather their perspectives on  their projects\u2019 performance and reasons for it.",
      " To evaluate the extent to which EM\u2019s workforce plans identify mission- critical occupations and skills and any current and future shortfalls in  these areas, we examined EM\u2019s strategic workforce plans for its  headquarters and site office staff, DOE\u2019s corrective action plan for  contract and project management, and the Office of Personnel  Management\u2019s Human Capital Assessment and Accountability  Framework. Specifically, we obtained the eight EM workforce plans,  prepared by EM headquarters, the Consolidated Business Center, the  Richland Operations Office and Office of River Protection (which manage  operations at the EM site in Hanford, Washington), the  Portsmouth/Paducah Site Office,",
      " the Savannah River Operations Office,  the Idaho Operations Office, the Carlsbad Field Office, and the Oak Ridge  Office. We reviewed these plans in their entirety, and also searched for  relevant terms, to determine the extent to which the plans identified  mission-critical occupations and skills and any current and future  shortfalls in these areas. In addition to our document review, we  interviewed DOE and EM officials with knowledge of EM\u2019s practices in  workforce planning, including officials in EM\u2019s Office of Acquisition and  Project Management and Office of Human Capital and Corporate  Services. We conducted these interviews to determine how EM develops  its workforce plans and to obtain EM officials\u2019 points of view regarding the  state of the EM workforce.",
      " We conducted this performance audit from June 2011 to December 2012  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix II: Summary of Office of  Environmental Management Nonmajor  Projects Reviewed We obtained and reviewed performance information on 30 EM nonmajor  projects that were either completed or ongoing from fiscal year 2008  through fiscal year 2012.",
      " Table 6 summarizes this information for 17 EM  projects for which we could determine performance. Table 7 summarizes  this information for 6 projects for which EM did not establish performance  targets. Table 8 summarizes this information for 4 EM projects with  incomplete documentation of their performance targets, which meant that  we could not determine performance. Table 9 summarizes this  information for 3 projects for which EM modified the scope after  establishing performance targets for these projects, rendering the original  performance targets unusable for purposes of assessing performance. Appendix III: Summary of National Nuclear  Security Administration Nonmajor Projects  Reviewed We obtained and reviewed performance information on 41 NNSA  nonmajor projects that were either completed or ongoing from fiscal year  2008 through fiscal year 2012.",
      " Table 10 summarizes this information for  27 NNSA projects for which we could determine performance. Table 11  summarizes this information for 2 projects for which NNSA did not  establish performance targets. Table 12 summarizes this information for 7  NNSA projects with incomplete documentation of their performance  targets or final cost, which meant that we could not determine  performance. Table 13 summarizes this information for 5 projects for  which NNSA modified the scope after establishing performance targets  for these projects, rendering the original performance targets unusable for  purposes of assessing performance. Appendix IV: Comments from the  Department of Energy Appendix V:",
      " GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the individual named above, Dan Feehan, Assistant  Director; Sandra Davis; Robert Grace; and Jason Holliday made key  contributions to this report. Also contributing to this report were John  Bauckman; Jennifer Echard; Cindy Gilbert; Steven Lozano; Minette  Richardson; Cheryl Peterson; and Carol Hernnstadt Shulman.\n"
    ],
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  {
    "id": 44,
    "question": null,
    "answer": "DHS was provided with significant flexibility to design a modern human capital management system. Its proposed system has both precedent-setting implications for the executive branch and farreaching implications on how the department is managed. GAO reported in September 2003 that the effort to design the system was collaborative and consistent with positive elements of transformation. In February, March, and April 2004 we provided preliminary observations on the proposed human capital regulations. Congressional requesters asked GAO to describe the infrastructure necessary for strategic human capital management and to assess the degree to which DHS has that infrastructure in place, which includes an analysis of the progress DHS has made in implementing the recommendations from our September 2003 report. DHS generally agreed with the findings of our report and provided more current information that we incorporated. However, DHS was concerned about our use of results from a governmentwide survey gathered prior to the formation of the department. We use this data because it is the most current information available on the perceptions of employees currently in DHS and helps to illustrate the challenges facing DHS. To date, DHS's actions in designing its human capital management system and its stated plans for future work on the system are helping to position the department for successful implementation. Nonetheless, the department is in the early stages of developing the infrastructure needed for implementing its new human capital management system. DHS has begun strategic human capital planning efforts at the headquarters level since the release of the department's overall strategic plan and the publication of proposed regulations for its new human capital management system. Strategic human capital planning efforts can enable DHS to remain aware of and be prepared for current and future needs as an organization. However, this will be more difficult because DHS has not yet been systematic or consistent in gathering relevant data on the successes or shortcomings of legacy component human capital approaches or current and future workforce challenges. Efforts are now under way to collect detailed human capital information and design a centralized information system so that such data can be gathered and reported at the departmentwide level. DHS and Office of Personnel Management leaders have consistently underscored their personal commitment to the design process. Continued leadership is necessary to marshal the capabilities required for the successful implementation of the department's new human capital management system. Sustained and committed leadership is required on multiple levels: securing appropriate resources for the design, implementation, and evaluation of the human capital management system; communicating with employees and their representatives about the new system and providing opportunities for feedback; training employees on the details of the new system; and continuing opportunities for employees and their representatives to participate in the design and implementation of the system. In its proposed regulations, DHS outlines its intention to implement key safeguards. For example, the DHS performance management system must comply with the merit system principles and avoid prohibited personnel practices; provide a means for employee involvement in the design and implementation of the system; and overall, be fair, credible, and transparent. The department also plans to align individual performance management with organizational goals and provide for reasonableness reviews of performance management decisions through its Performance Review Boards.\n",
    "docs": [
      "Background Mission and Organization of  DHS The DHS strategic plan, released on February 23, 2004, includes the  following mission statement: \u201cWe will lead the unified national effort to  secure America.  We will prevent and deter terrorist attacks and protect  against and respond to threats and hazards to the nation.  We will ensure  safe and secure borders, welcome lawful immigrants and visitors, and  promote the free-flow of commerce.\u201d  The strategic plan further identifies  seven strategic goals: awareness, prevention, protection, response,  recovery, service, and organizational excellence. DHS is generally organized into four mission-related directorates: Border  and Transportation Security,",
      " Emergency Preparedness and Response,  Science and Technology, and Information Analysis and Infrastructure  Protection.  These directorates include the following legacy agencies:  The Border and Transportation Security directorate consolidates the  major border security and transportation operations under one roof,  including legacy Customs, parts of the legacy INS, TSA, the Federal Law  Enforcement Training Center, the Federal Protective Service, the Office  for Domestic Preparedness from the Department of Justice (DOJ), and  part of the U.S. Department of Agriculture\u2019s Animal and Plant Health  Inspection Service (APHIS).  This directorate includes the newly formed  Bureau of Immigration and Customs Enforcement (ICE)",
      " and the Bureau  of Customs and Border Protection (CBP). The Emergency Preparedness and Response (EPR) directorate  integrates domestic disaster preparedness training and government  disaster response and includes FEMA, the Strategic National Stockpile,  the National Disaster Medical System, the Nuclear Incident Response  Team, the Domestic Emergency Support Teams from DOJ, and the  National Domestic Preparedness Office from the Federal Bureau of  Investigation (FBI). The Science and Technology directorate coordinates scientific and  technological advantages for securing the homeland and includes the  Chemical, Biological, Radiological, and Nuclear Countermeasures  Programs, the Environmental Measurements Laboratory, the National  Bio-",
      "Weapons Defense Analysis Center, and the Plum Island Animal  Disease Center. The Information Analysis and Infrastructure Protection directorate  accesses and analyzes intelligence, law enforcement data, and other  information involving threats to homeland security and evaluates  vulnerabilities from state and local agencies, the private sector, and  federal agencies such as the Central Intelligence Agency, FBI, and the  National Security Agency.  It includes the Critical Infrastructure  Assurance Office, the Federal Computer Incident Response Center, the  National Communications System, the National Infrastructure  Protection Center, and the energy security and assurance program  activities of the Department of Energy. In addition to the mission directorates, the Management Directorate,",
      " led  by the Undersecretary for Management, is responsible for integrating  the activities of the Chief Financial Officer, the Chief Procurement  Officer, the Chief Human Capital Officer, the Chief Information Officer,  and the Chief of Administrative Services. In addition to the four mission-related directorates, the U.S. Secret Service  and the U.S. Coast Guard remain intact as distinct entities in DHS.  The  Bureau of Citizenship and Immigration Services, composed of legacy INS  adjudications and benefits programs, reports to the Deputy Secretary. DHS\u2019s People DHS has just under 158,000 civilian employees.  Of the civilian employees,  a vast majority transferred from seven organizations:",
      " TSA, INS, Customs,  FEMA, the U.S. Coast Guard, the Secret Service, and APHIS.  Of the civilian  employees who transferred from these seven organizations, approximately  90 percent are stationed outside the Washington, D.C. metropolitan area.   These employees hold positions ranging from inspectors, investigators,  police and intelligence to attorneys and administrative services. According to OPM, just over 49,000, or just under one-third, of DHS civilian  employees are represented by unions.  This includes 16 different unions  divided into 75 separate bargaining units.  The 3 unions representing the  largest number of employees are the American Federation of Government  Employees,",
      " the National Treasury Employees Union, and the National  Association of Agricultural Employees. Process Used to Design the  Human Capital System The design process of the DHS human capital management system  included DHS and OPM employees and union representatives.  Figure 1  describes the development of the DHS human capital system. DHS Is Beginning  Strategic Human  Capital Planning  Efforts Using the department\u2019s strategic plan as a starting point, DHS recently  began drafting a strategic human capital plan and a more detailed  workforce plan for the department.  One of the goals of the strategic plan,  organizational excellence, makes it a priority for the agency to value its  people and create a culture that promotes a common identity,",
      " innovation,  mutual respect, trust, accountability, and teamwork.  To support the  accomplishment of this goal, the department has an objective focused on  ensuring effective recruitment, development, compensation, succession  management, and leadership of a diverse workforce to provide optimal  service at a responsible cost.  While the plan broadly states a few strategies  that could be used to achieve this objective, it does not identify the skills  needed, resources required, or timetables associated with the strategies.   Additional programmatic objectives within the strategic plan will require  human capital approaches to ensure they are realized. The Director for Human Resources Policy and the Senior Advisor for  Human Resources Policy said that the strategic human capital plan will be  completed later this spring and will include goals for transforming the  human capital management of the department over the next 5 years.",
      "  These  same officials report that this will be a \u201cliving document\u201d and expect that  revisions will be made as they learn more about the human capital needs  across the department. Below the headquarters level, strategic human capital planning of different  levels of detail is being done in the five legacy components we studied.   These plans vary in terms of the time frame covered by the plan and the  degree to which future skill and competency needs are identified. In July 2003, FEMA/EPR released a 5-year strategic human capital plan  that identified the challenges it faces, improvement initiatives, and  outcome measures for the initiatives.  A timeline and the unit  responsible for implementation are also identified.",
      "  Part of FEMA\u2019s  \u201cModel for Success\u201d articulates the need to identify strategic  competencies.  The plan states that FEMA intends to integrate its  competency management system with future workforce planning  efforts.  According to agency officials, FEMA was invited to present its  Competency Assessment System to the DHS Human Capital  Management Forum and OPM. Customs/CBP workforce planning efforts are currently short-term and  tactical in nature.  The component does not have a consolidated plan  that identifies human capital needs or strategies and the planning  horizon is less than 1 year in duration.  Instead, CBP informally sets  annual targets for various human capital activities that are articulated in  various agency meetings and memoranda.",
      "  Progress towards the targets  is tracked in a biweekly report that includes information such as  changes in staffing levels, retirement eligibilities, and the gender  breakdown of the workforce. INS/ICE officials reported that they used workforce plans to respond to  Congressional mandates in managing large-scale recruiting and  retention efforts, beginning in 1996.  It released a 3-year plan in June  1996 to manage this growth, placing a priority on deployment,  recruiting, hiring, and training strategies.  Since the original release of  the plan, it has been updated annually through individual memoranda  and charts reflecting current human capital data.",
      "  According to an  agency official, the component is working with a contractor to identify a  baseline understanding of workforce demographics and skills and  determine future workforce requirements. TSA hired a consultant in September 2003 to conduct a study of  screener staffing levels at the nation\u2019s commercial airports in an effort  to right-size and stabilize its screener workforce.  Among the tasks the  contractor is to complete are the implementation of a staffing analysis  model to be used as a management tool to determine daily and weekly  staffing levels and the deployment of the model to commercial airports  nationwide. The Coast Guard has a 5-year strategic human capital plan covering the  period 2001 to 2005 that integrates approaches for managing military,",
      "  civilian, and reserve employees.  Identified within the plan are current  challenges and desired characteristics for the workforce of the future.   Strategies are adjusted annually and the objectives and approaches are  continuously evaluated for their impact so that midcourse corrections  can be made if necessary, according to an agency official.  The Coast  Guard plans to do a major update of its plan once the department\u2019s  human capital system is completed. DHS headquarters has not yet been systematic or consistent in gathering  relevant data on the successes or shortcomings of legacy component  human capital approaches or current and future workforce challenges,  despite the potential usefulness of this information to strategic human  capital planning activities.",
      "  Efforts are now under way to gather such data. During the design process, from April through September 2003, the  subgroups that identified options for the human capital system gathered an  extensive amount of research on innovative practices outside of DHS and  basic demographic data on employees in the department.  DHS also  reported that it gathered policy documents from legacy components and  specifically noted meeting with TSA, Coast Guard, legacy Customs, and  FEMA to understand their policies and practices.  However, at a briefing for  DHS stakeholders in August 2003, DHS and OPM officials said that they did  not evaluate the successes or shortcomings of legacy agency human capital  approaches or current and future workforce challenges,",
      " nor had they  analyzed the results from the OPM FHCS. The department is now beginning to collect more detailed, internal human  capital data, according to one DHS official.  With the support of a  contractor, focus groups are planned for this summer so that human capital  challenges can be identified and validated.  According to the same official,  the Chief Human Capital Officer is holding monthly meetings to spotlight  the successful practices of components within the department and  disseminate best practices.  Moving forward, the department plans to  design a centralized information system so that human capital data can be  gathered and reported at the corporate level.",
      " With this information, the department will be better positioned to conduct  data-driven evaluations of the successes and shortcomings of its new  human capital management system.  DHS documents indicate that the  department is committed to an ongoing comprehensive evaluation of the  effectiveness of the human capital system.  The department described  efforts to identify human capital metrics and an intent to use employee  surveys to gauge employee satisfaction and needs.  We testified that DHS  should consider doing evaluations that are broadly modeled on the  evaluation requirements of the OPM demonstration projects.  Under the  demonstration project authority, OPM requires agencies to evaluate and  periodically report on results, implementation of the demonstration  project,",
      " cost and benefits, impacts on veterans and other equal  employment opportunity groups, adherence to merit system principles, and  the extent to which the lessons from the project can be applied  governmentwide.  A set of balanced measures addressing a range of results  and customer, employee, and external partner issues may also prove  beneficial.  An evaluation such as this would facilitate congressional  oversight; allow for any midcourse corrections; assist DHS in  benchmarking its progress with other efforts; and provide for documenting  best practices and sharing lessons learned with employees; stakeholders;  other federal agencies; and the public.  We have reported on key principles  for effective strategic human capital planning and the importance of data-",
      " driven human capital decision making (see app. II). Continued Leadership  Is Necessary to  Marshal the  Capabilities Required  for Successful  Implementation DHS and OPM leaders have consistently underscored their personal  commitment to the design process and speak openly in support of it.  As we  have reported, this is a very positive start.  DHS will need to sustain this  effort to overcome the views reflected in the OPM FHCS, administered  prior to the formation of DHS, in which employees now in the department  responded with the following perceptions:  28 percent believe that leaders generate high levels of motivation and  commitment in the workforce,",
      " compared to a governmentwide  response of 36 percent; 35 percent hold their leaders in high regard, compared to a  governmentwide response of 43 percent; and  43 percent believe their organization\u2019s leaders maintain high  standards of honesty and integrity, compared to a governmentwide  response of 47 percent. Resources.  DHS is recognizing that there are up-front costs to design and  implementation and that its components are starting from different places  regarding the maturity of their human capital management systems.   Members of the Senior Review Advisory Committee agreed during their  deliberations that creating the new human capital management system will  require a substantial investment,",
      " and identified this as a core principle for  the design of the system.  Additionally, during the DHS focus groups,  employees expressed an interest in increasing the resources available for  training and professional development, and noted the importance of having  an adequate budget for the performance management system in  particular. The administration recognizes the importance of funding this major reform  effort and has requested, for fiscal year 2005, $102.5 million to fund  training, the development of the performance management and  compensation system, and contractor support, and over $10 million for a  performance pay fund in the first phase of implementation (affecting about  8,",
      "000 employees) to recognize those who meet or exceed expectations.   Approximately $20 million was also requested to fund the development of a  departmental human resources information technology system.  While the  investments are important to the ultimate success of DHS\u2019s efforts, it is  equally important to recognize that certain costs are one-time in nature  and, therefore, should not be built into the base of DHS\u2019s budget for future  years. Communication.  In our September 2003 report, we commended the  structured approach the department developed to communicate with  stakeholders on the human capital system and recommended that the  Secretary of DHS ensure that the message communicated across the  department was consistent.",
      "  Officials we interviewed in five legacy  components of the department agreed that communication from DHS  headquarters on the human capital system has been consistent.  In  particular, three noted that the information contained in the weekly  departmental newsletter is helpful.  As an example of the consistency of  the communication on the new human capital management system,  between December 5, 2003 and February 27, 2004, employees were assured  in five different newsletters that the new human capital system would not  lead to a loss in pay or benefits and four different newsletters reported that  no layoffs would result due to the implementation of the new system.",
      "  To  ensure the consistency of the message, a Communications Coordination  Team, which includes members from across the department, has been  established to disseminate information and promote a clear understanding  of the new human capital system.  This team meets biweekly or weekly   and is co-chaired by the Director of Internal Communications and the  Director of Human Resource Management. In our September report we also recommended that the department  maximize opportunities for two-way communication and employee  involvement through the completion of the design process and  implementation, and noted that special emphasis should be placed on  seeking the feedback and buy-in of front-line employees in the field.",
      "   Opportunities for two-way communication were limited between the  conclusion of the town hall meetings in July 2003 and the publishing of the  proposed regulations in February 2004.  The primary means for employees  to provide feedback was through the Human Resources Design Team  e-mail box.  Employees and the general public were also allowed to  participate in the public comment period of the Senior Review Advisory  Committee meetings in October 2003.  While the department continued to  consult intermittently with leaders of the three major unions during this  period, one agency official noted that the department does not have a  similar mechanism in place to obtain feedback from nonunionized  employees.",
      "  One action taken to overcome this challenge was the effort to  notify employees how to comment on the proposed regulations, which was  communicated in six different newsletters between February 13 and March  22, 2004.  DHS received over 3,400 comments on its proposed regulations,  in part due to its efforts to encourage employees to submit comments on  the system. Since the release of the proposed regulations, DHS has provided  information to employees through a variety of formats.  For example, a link  to the proposed human capital regulations was placed in a prominent  position on the intranet home page of the department for easy access.",
      "  On  February 13, 2004, a satellite broadcast outlined the major features of the  human capital management system, reaching approximately 500 DHS  locations around the country.  During the broadcast, employees submitted  questions, and those unable to view the broadcast could access it through  the DHS Internet Web site.  Additionally, a senior leadership conference  was held, in part, to brief executives on the proposed system.  The  department has developed tool kits to provide information to both  executives and line managers about the changes and to provide them with  talking points for discussion with their employees and developed a quad- fold to distribute to line employees containing questions and answers about  the new system.",
      "  Town hall meetings that were held around the country to  mark the one-year anniversary of the department included discussions  about the proposed human capital system.  Finally, between February 13  and March 22, 2004, the time in which employees could submit comments  on the proposed regulations, the weekly DHS newsletter included answers  to commonly asked questions and details on what would be changed and  remain the same under the proposal. The success of DHS communication efforts is especially important, given  employee responses to the OPM FHCS:  40 percent report that managers promote communication among  different work units, which is less than the governmentwide response of  51 percent;",
      "  65 percent feel they have enough information to do their job well, which  is less than the governmentwide response of 71 percent; and  37 percent are satisfied with the information they receive from  management on what is going on in the organization, which is less than  the governmentwide response of 45 percent. Training.  Members of the Senior Review Advisory Committee identified  training and development as a critical component for implementing the  human capital system.  Furthermore, participants in the DHS focus groups  expressed a need for training and professional development opportunities  in a number of areas, including general supervisory capabilities, assessing  employee performance,",
      " labor-management relations, and alternative  dispute resolution.  The DHS proposal correctly recognizes that a  substantial investment in training is a key aspect of implementing a  performance management system.  The need for in-depth and varied  training will continue as the system is implemented, as indicated by results  from the OPM FHCS in which 53 percent of respondents believe  supervisors/team leaders in their work unit encourage their development at  work, which is less than the governmentwide response of 59 percent.   Furthermore, 47 percent feel they are given a real opportunity to improve  their skills, which is less than the governmentwide response of 57 percent.",
      " Our recently released guides for agencies to help ensure investments in  training and development are targeted strategically and could prove helpful  to DHS as it develops its training and development programs. Employee Participation.  The Undersecretary for Management has  already noted her commitment to move forward on implementing the  human capital system in a collaborative way, and reiterated that support in  a December 19, 2003 memorandum to DHS employees regarding the human  capital system.  Regardless of whether it is a part of collective bargaining,  involving employees in such important decisions as how they are deployed  and how work is assigned is critical to the successful operations of the  department.",
      "  This is likely to be a significant challenge for the department  in light of employee responses to the OPM FHCS in which 28 percent of  DHS employees indicated a feeling of personal empowerment, which is  fewer than the governmentwide response of 40 percent.  Additionally, 44  percent of DHS employees reported satisfaction with their involvement in  decisions that affect their work, compared to 53 percent governmentwide. Implementation Teams.  DHS formed three implementation teams at the  end of February 2004 to support the design and implementation of the  human capital management system because of the multiple areas that  require management attention.  This includes a Training and  Communications team;",
      " a Pay, Performance, and Classification team; and a  Labor Relations, Adverse Actions, and Appeals team.  According to agency  officials, the teams will initially focus their efforts on data collection and  project planning activities until the department issues interim final  regulations for the human capital management system, at which time the  teams will begin to draft departmental policies to support implementation.   Agency officials reported that, as they move forward, they will pay  particular attention to how their decisions may affect other human capital  approaches across the department. The mission of the Training and Communications team is to develop  comprehensive communication and training plans, coordinate and manage  the development of training,",
      " coordinate the delivery of training, and to  disseminate information related to the design and implementation of the  department\u2019s human capital system.  The co-leads of the team said their  work largely depends on the efforts of the other two implementation teams  and acknowledged the concerns raised by employees on the need for  training, especially for departmental managers.  They also said they plan to  rely on the training capacity already in the department.  A second goal is for  the team to ensure that communication with employees about the new  human capital management system is coordinated and consistent across  components and to ensure that avenues are available for DHS employees to  communicate ideas to the implementation teams.",
      " The mission of the Pay, Performance, and Classification team is to design  departmental policies, procedures, guidance, implementation instructions,  and evaluation criteria so that components can implement new systems in  the areas of pay, performance management, and classification.  The team is  beginning its work by gathering information in these areas from  departmental components and defining the system objectives.  Officials  noted this would be a significant challenge because of differences in the  types of data collected, the varied manner in which the data are stored, and  uneven levels of data reliability.  As the team develops its proposals, it  plans to use advisory groups to evaluate the efficacy of draft policies.",
      "   Particular attention will be paid to ensuring there are adequate safeguards  in the classification, pay, and performance management systems, according  to officials. The mission of the Labor Relations, Adverse Actions, and Appeals team is  to prepare rules, regulations, policies, procedures, guidance, implementing  instructions, and evaluation criteria for the department to deploy new  systems in these areas.  The co-leads noted that they intend to work  collaboratively to design systems that encourage cooperation.  These  officials reported that their initial tasks are to explore how to staff different  boards and panels identified in the proposed regulations and determine  how to transition pending cases to the new system.",
      "  They further plan to  identify elements that require departmental-level guidance, identify  elements where policy variation is appropriate among departmental  components, and collect data on historical levels of grievances and appeals  to forecast the potential workload once the department is transitioned to  the new system. The composition of the implementation teams sends an important signal.   Each of the three implementation teams is co-led by professional staff from  DHS headquarters and a component agency.  As of mid-March 2004,  officials noted the membership of the teams was still evolving, but was  composed mainly of human capital professionals.  Agency officials noted  that decisions had not yet been made about the level of involvement of  union officials.",
      "  These same officials reported that OPM staff would serve  as advisers when needed as opposed to participating on a full-time basis,  and noted an intention to pull together groups of employees to serve as  \u201csounding boards and challenge groups\u201d throughout the process.   Contractors will be integrated with the teams to provide project  management and other support. As DHS moves forward, it may find helpful a set of key capabilities that our  work has found to be central to the use of human capital authorities.   These practices center on effective planning and targeted investments,  employee training and participation, and accountability and cultural  change (see app. II). DHS Proposes  Implementing Key  Safeguards In its proposed regulations,",
      " DHS outlines its intention to implement key  safeguards that we have found essential to implementing performance  management systems in a fair, effective, and credible manner.  For  example, the DHS performance management system must comply with the  merit system principles and avoid prohibited personnel practices; provide a  means for employee involvement in the design and implementation of the  system; and overall, be fair, credible, and transparent.  The department also  plans to align individual performance management with organizational  goals and provide for reasonableness reviews of performance management  decisions through its Performance Review Boards. Moreover, employees  and their union representatives played a role in shaping the design of the  proposed systems.",
      " These safeguards are generally consistent with our  work identifying key practices that leading public sector organizations here  and abroad have used in their performance management systems to link  organizational goals to individual performance and create a \u201cline of sight\u201d  between an individual\u2019s activities and organizational results (see app. II). Our February 2004 testimony identified additional steps DHS could take to  build safeguards into its revised performance management system.  For  example, we suggested that DHS commit to publishing the results of the  performance management process to assure reasonable transparency and  provide appropriate accountability mechanisms in connection with the  results of the performance management process.  This can include  publishing overall results of performance management and individual pay  decisions while protecting individual confidentiality and reporting  periodically on internal assessments and employee survey results relating  to the performance management system.",
      " Publishing the results in a manner  that protects individual confidentiality can provide employees with the  information they need to better understand the performance management  system. Conclusions The proposed DHS human capital management system has both significant  precedent-setting implications for the executive branch and far-reaching  implications on how the department is managed.  However, how it is done,  when it is done, and the basis on which it is done can make all the  difference in whether such efforts are successful.  To date, DHS\u2019s actions in  designing its human capital management system and its stated plans for  future work on the system are positioning the department for successful  implementation.",
      " Looking forward, DHS will need to make continued  progress in a number of key areas including the following. Strategic workforce planning and the gathering of relevant human  capital data -- Strategic human capital planning activities can enable the  department to capitalize on the strengths of its workforce and address  challenges in a manner that is clearly linked to achieving DHS\u2019s mission  and goals.  The potential for human capital planning activities to  positively impact the department, however, depends on its gathering of  valid, reliable data on workforce demographics and the successes and  shortcomings of new approaches at the headquarters level. Communication and training -- As we previously noted, communicating  with employees and their representatives about the new system and  providing opportunities for feedback,",
      " placing a special emphasis on  reaching out to line employees in the field, can facilitate gaining  employee buy-in to the new human capital management system.  Additionally, the delivery of training on the new system can enable  employees to understand their rights and how the agency will use its  authority. Safeguards -- Publishing the results of the performance management  process can provide employees with the information they need to better  understand the performance management system and make the system  more transparent. Agency Comments and  Our Evaluation In commenting on a draft of this report, DHS generally agreed with its  findings.  DHS comments provided more current information on  implementation timelines and described further research conducted by the  design teams between April and September 2003,",
      " which we have  incorporated.  In addition, DHS raised concerns about our use of data from  the OPM governmentwide FHCS since the survey was administered before  the formation of DHS.  Since the administration of the survey, DHS notes a  significant amount of change has been made in the department.  We agree  that the department is making progress in designing its human capital  system and outline in this report where the department is making strides.   This report notes that the FHCS was conducted during the same time frame  that the administration proposed legislation to form DHS.  FHCS data are  the most current information available on the perceptions of employees  currently employed by DHS and are valuable because of their illustration of  the challenges the department faces.",
      "  DHS provided additional technical  comments, which were incorporated where appropriate.  Comments from  DHS are provided in full in appendix III. As agreed with your offices, unless you publicly release its contents earlier,  we plan no further distribution of this report until 30 days from its date.  At  that time, we will send copies of this report to the Chairman and Ranking  Minority Member, Senate Committee on Governmental Affairs; the  Chairman and Ranking Minority Member, House Committee on  Government Reform; the Chairman and Ranking Minority Member, House  Select Committee on Homeland Security; and other interested  congressional parties.  We will also send copies to the Secretary of the  Department of Homeland Security and the Director of the Office of  Personnel Management.",
      "  Copies will be made available at no charge on the  GAO Web site at http://www.gao.gov. If you have any questions about this report, please contact me on   (202) 512-6806.  Key contributors to this report are listed in appendix IV. Scope and Methodology Scope This work was conducted from March 2003 through March 2004 in  accordance with generally accepted government auditing standards.  We  performed our work in the Washington, D.C., metropolitan area in the  headquarters offices of Department of Homeland Security (DHS) and the  five largest legacy components that transferred to the department:",
      " The  Transportation Security Administration (TSA), the Federal Emergency  Management Agency (FEMA), the organizations formerly known as the  Immigration and Naturalization Service (INS) and the U.S. Customs  Service, and the U.S. Coast Guard. Methodology To address our objective, we examined the workforce planning efforts of  the five largest legacy components that transferred to the department.   Data on workforce planning and capabilities needed for successful human  capital management were supplemented by information gathered in  interviews with officials from DHS headquarters and the five legacy  components.  A standard set of questions was used for interviewing the  legacy components.  Interviews with the components were conducted  between January and February 2004.",
      "  Presentations made by DHS and the  Office of Personnel Management (OPM) in August 2003 were evaluated to  understand the level of data analysis conducted during system design.  We  were observers at the August 2003 briefing.   We also examined the  transcripts and report summarizing the proceedings of the Senior Review  Advisory Committee meetings in October 2003 and relevant issues of the  weekly DHS newsletter.  Our findings were analyzed against criteria  articulated in relevant GAO human capital reports. To be responsive to your particular interest in seeking out and  incorporating employee perspectives on the human capital system, we  gathered information on employee perceptions from a variety of sources  and presented these findings throughout the report.",
      "  Insights into employee  opinions were gathered from the OPM Federal Human Capital Survey,  administered between May and August 2002, and a DHS report  summarizing findings from the department\u2019s focus groups held during the  summer of 2003.  A description of the objective, scope, methodology, and  limitations of these two studies was detailed in appendix I of Human  Capital: Preliminary Observations on Proposed DHS Human Capital  Regulations (GAO-04-479T). In the background section of this report, we cite information from OPM\u2019s  Central Personnel Data File (CPDF).  The CPDF contains personnel data  for most employees of the executive branch.",
      "  The largest executive branch  employee groups not included are in the intelligence agencies (CIA, etc.)  and the Postal Service.  Agencies submit data to the CPDF at the end of  each fiscal quarter.  We have found the CPDF to be sufficiently reliable for  the purposes of this report. Criteria Used for Evaluation The success of DHS\u2019s efforts to design and implement its new human  capital system depends, in part, on building and maintaining an  institutional infrastructure to make effective use of its flexibilities.  At a  minimum, this infrastructure includes a strategic human capital planning  process that integrates the agency\u2019s human capital approaches with  program goals,",
      " desired outcomes, and mission; the capabilities to  effectively develop and implement a new human capital system; and a  modern, effective, and credible performance management system that  includes a set of institutional safeguards, including reasonable  transparency and appropriate accountability mechanisms to ensure the  fair, effective, and credible implementation of the new system. Strategic Human  Capital Planning Strategic workforce planning is the first essential element of the  institutional infrastructure that an agency needs to ensure that its human  capital program capitalizes on its workforce\u2019s strengths and addresses  related challenges in a manner that is clearly linked to achieving the  agency\u2019s mission and goals.  Strategic workforce planning addresses two  critical needs:",
      " (1) aligning an organization\u2019s human capital programs with  its current and emerging mission and programmatic goals and (2)  developing long-term strategies for acquiring, developing, and retaining  staff to achieve programmatic goals. At its core, strategic workforce planning, also called human capital  planning, focuses on developing long-term strategies for acquiring,  developing, and retaining an organization\u2019s total workforce (including full-  and part-time federal staff and contractors) to meet the needs of the future.   We recently described five principles for strategic workforce planning. Involve top management, employees, and other stakeholders in  developing, communicating, and implementing the strategic workforce  plan.",
      " Determine the critical skills and competencies that will be needed to  achieve current and future programmatic results. Develop strategies that are tailored to address gaps in the number and  deployment of employees and the alignment of human capital  approaches for enabling and sustaining the contributions of all critical  skills and competencies. Build the capability needed to address administrative, educational, and  other requirements important to support workforce strategies. Monitor and evaluate the agency\u2019s progress towards its human capital  goals and the contribution that human capital results have made toward  achieving programmatic goals. Consistent with these principles, we have identified that one of the critical  success factors for strategic human capital planning is data-driven human  capital decision making.",
      "  A fact-based, performance-oriented approach to  human capital management is crucial for maximizing the value of human  capital as well as managing risk.  High-performing organizations use data to  determine key performance objectives and goals that enable them to  evaluate the success of their human capital approaches.  Valid and reliable  data are critical to assessing an agency\u2019s workforce requirements and  heighten an agency\u2019s ability to manage risk by allowing managers to  spotlight areas for attention before crises develop and identify  opportunities for enhancing agency results.  Reporting on the results of  these evaluations can facilitate congressional oversight of the system,  allow for midcourse corrections,",
      " and serve as a tool for documenting best  practices and sharing lessons learned with employees, stakeholders, other  federal agencies, and the public. Key Capabilities for  Implementing Human  Capital Approaches As DHS moves forward, it may find helpful a key set of capabilities that our  work has found to be central to the use of human capital authorities.   These practices center on effective planning and targeted investments,  employee participation and training, and accountability and cultural  change. Institutionalizing  Performance  Management  Safeguards We testified last spring that Congress should consider establishing  statutory standards that an agency must have in place before it can  implement a more performance-based pay program and developed an  initial list of possible safeguards to help ensure that pay for performance  systems in the government are fair,",
      " effective, and credible. Assure that the agency\u2019s performance management systems (1) link to  the agency\u2019s strategic plan, related goals, and desired outcomes and   (2) result in meaningful distinctions in individual employee  performance. This should include consideration of critical  competencies and achievement of concrete results. Involve employees, their representatives, and other stakeholders in the  design of the system, including having employees directly involved in  validating any related competencies, as appropriate. Assure that certain predecisional internal safeguards exist to help  achieve the consistency, equity, nondiscrimination, and  nonpoliticization of the performance management process (e.g.,  independent reasonableness reviews by Human Capital Offices and/or  Offices of Opportunity and Inclusiveness or their equivalent in  connection with the establishment and implementation of a  performance appraisal system,",
      " as well as reviews of performance rating  decisions, pay determinations, and promotion actions before they are  finalized to ensure that they are merit-based; internal grievance  processes to address employee complaints; and pay panels whose  membership is predominately made up of career officials who would  consider the results of the performance appraisal process and other  information in connection with final pay decisions). Assure reasonable transparency and appropriate accountability  mechanisms in connection with the results of the performance  management process.  This can include reporting periodically on  internal assessments and employee survey results relating to the  performance management system and publishing overall results of  performance management and individual pay decisions while protecting  individual confidentiality.",
      "  Publishing the results in a manner that  protects individual confidentiality can provide employees with the  information they need to better understand the performance  management system. While incorporating these safeguards into performance management  systems, our work indicates that there is a set of key practices for agencies  to create a clear linkage, or \u201cline of sight,\u201d between individual performance  and organizational success.  These key practices include the following.  1. Align individual performance expectations with organizational  goals. An explicit alignment helps individuals see the connection between  their daily activities and organizational goals. 2. Connect performance expectations to crosscutting goals. Placing  an emphasis on collaboration,",
      " interaction, and teamwork across  organizational boundaries helps strengthen accountability for results. 3. Provide and routinely use performance information to track  organizational priorities. Individuals use performance information to  manage during the year, identify performance gaps, and pinpoint  improvement opportunities. 4. Require follow-up actions to address organizational priorities. By  requiring and tracking follow-up actions on performance gaps,  organizations underscore the importance of holding individuals  accountable for making progress on their priorities. 5. Use competencies to provide a fuller assessment of performance.   Competencies define the skills and supporting behaviors that individuals  need to effectively contribute to organizational results. 6. Link pay to individual and organizational performance.",
      " Pay,  incentive, and reward systems that link employee knowledge, skills, and  contributions to organizational results are based on valid, reliable, and  transparent performance management systems with adequate safeguards. 7. Make meaningful distinctions in performance. Effective  performance management systems strive to provide candid and  constructive feedback and the necessary objective information and  documentation to reward top performers and deal with poor performers. 8. Involve employees and stakeholders to gain ownership of  performance management systems. Early and direct involvement helps  increase employees\u2019 and stakeholders\u2019 understanding and ownership of the  system and belief in its fairness.  9. Maintain continuity during transitions.",
      " Because cultural  transformations take time, performance management systems reinforce  accountability for change management and other organizational goals. Comments from the Department of Homeland  Security GAO Contact and Staff Acknowledgments GAO Contact Acknowledgments In addition to the person named above, Ed Stephenson, Ellen V. Rubin, Tina  Smith, Lou V.B. Smith, Masha Pasthhov-Pastein, Karin Fangman, and Ron  La Due Lake made key contributions to this report. GAO\u2019s Mission The General Accounting Office, the audit, evaluation and investigative arm of  Congress, exists to support Congress in meeting its constitutional responsibilities  and to help improve the performance and accountability of the federal government  for the American people.",
      " GAO examines the use of public funds; evaluates federal  programs and policies; and provides analyses, recommendations, and other  assistance to help Congress make informed oversight, policy, and funding  decisions. GAO\u2019s commitment to good government is reflected in its core values of  accountability, integrity, and reliability. Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost is  through the Internet. GAO\u2019s Web site (www.gao.gov) contains abstracts and full- text files of current reports and testimony and an expanding archive of older  products. The Web site features a search engine to help you locate documents  using key words and phrases.",
      " You can print these documents in their entirety,  including charts and other graphics. Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as \u201cToday\u2019s Reports,\u201d on its Web site  daily. The list contains links to the full-text document files. To have GAO e-mail this  list to you every afternoon, go to www.gao.gov and select \u201cSubscribe to   e-mail alerts\u201d under the \u201cOrder GAO Products\u201d heading. Order by Mail or Phone To Report Fraud,  Waste, and Abuse in  Federal Programs Public Affairs\n"
    ],
    "length": 8659,
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  {
    "id": 45,
    "question": null,
    "answer": "The rising cost of attending U.S. colleges and universities is a growing concern, as most Americans believe that college is out of financial reach for qualified students. For federal policymakers, concerns focus on issues of affordability, access for low-income students, and whether federal student financial aid is keeping pace with rising prices. This report presents the current status and historical trends of college costs, with an emphasis on the prices undergraduate students are ultimately charged at the varying types of institutions of higher education and how they pay for postsecondary education using student financial aid. College tuition and fees have been rising more rapidly than household income over the past two decades. In 2005-2006, the average price charged for tuition, fees, room, and board at four-year public and private institutions was $17,447\u2014a 577% increase from 30 years ago. On the basis of the mean household income of a household in the bottom fifth of the population, the price of college in 2005 was 71.3% of their income. Historically, congressional involvement with issues of college costs and prices has focused on issues related to student access to postsecondary education. However, as Congress has considered the reauthorization of the Higher Education Act (HEA), attention has been given to additional actions that could be taken at the federal level to address college costs and prices. Actions considered have included creating price indices, providing incentives for controlling costs, making it easier for students to earn college credits, reducing regulatory burden, and increasing the availability of relevant public information. It is not clear which of these strategies would be most effective at addressing the issue of college costs or prices, or whether some of these strategies would be more effective if implemented at the state or institutional level. As Congress continues to debate the reauthorization of the HEA, an expanded federal role regarding college costs and prices may be considered. This report begins by exploring three core concepts: college cost (what institutions spend), sticker price (what students are charged), and net price (what students actually pay)\u2014defining each and presenting current and historical data. This information is followed by a discussion of various influences on costs and prices. The report concludes with an overview of relevant issues for reauthorization of the Higher Education Act of 1965 (HEA, P.L. 89-329 as amended by P.L. 105-244). Where data are available, this report considers all types of postsecondary education institutions: public, private not-for-profit, and private for-profit institutions.\n",
    "docs": [
      "Introduction The rising cost of attending U.S. colleges and universities is a growing concern, as three out of five Americans believe many qualified people will not have the opportunity to pursue a college education, and a large majority of Americans believe that the students who do make it to college have to borrow too much to go. For students and their families, these concerns raise questions as to whether they will be able to afford a college education and whether their choice of postsecondary institutions is limited by price. For federal policymakers, concerns focus on issues of affordability, access for low-income students, and whether federal student financial aid is keeping pace with rising prices. The public,",
      " lawmakers, researchers, and the higher education community offer numerous theories as to why the costs of providing a college education continue to rise, but there is little consensus as to either root causes or ways of mitigating the problem. This report presents the current status and historical trends of college costs, with an emphasis on the prices students are ultimately charged at the varying types of institutions of higher education (IHEs) and how they pay for postsecondary education using student financial aid. Although prices are certainly an issue for graduate and professional education, the focus of this report is on undergraduates, particularly full-time undergraduates. College tuition and fees have been rising more rapidly than household income over the past three decades.",
      " In the 1976-1977 school year, the average price charged to students for tuition, fees, room, and board at four-year public and private institutions was $2,577; in 2005-2006, it was $17,447\u2014a 577% increase. Looking at family resources to pay for college, from the mid-1980s to the mid-1990s, tuition and fee levels averaged across public and private four-year institutions and public 2-year institutions increased by 41%. During the following decade, they increased by 36%. Mean household income, on the other hand, increased by 9%",
      " and 10% respectively. The divergence is particularly pronounced for low-income households. For households in the bottom fifth of the population, their mean household income increased 5% from the mid-1980s to the mid-1990s and declined by 0.4% during the following decade. In general, a complex set of factors affects college prices directly and indirectly, making it hard to say definitively what are the underlying causes of price increases. This complexity, coupled with the tremendous diversity of institutions that constitute postsecondary schools, makes it difficult to determine what can or should be done about the issue of rising college prices. Historically,",
      " congressional involvement with issues of college costs and prices has focused on issues related to student access to postsecondary education. However, as Congress has considered the reauthorization of the HEA, attention has been given to additional actions that could be taken at the federal level to address college costs and prices. Actions considered have included creating price indices, providing incentives for controlling costs, making it easier for students to earn college credits, reducing regulatory burden, and increasing the availability of relevant public information. It is not clear which of these strategies would be most effective at addressing the\u00a0issue of college costs or prices or whether some of these strategies would be more effective if\u00a0implemented at the state or institutional level.",
      " As Congress continues to debate the reauthorization of the HEA, an expanded federal role regarding college costs and prices may be\u00a0considered. This report begins by exploring three core concepts: college cost (what institutions spend), sticker price (what students are charged), and net price (what students actually pay)\u2014defining each and presenting current and historical data. This exploration is followed by a discussion of various influences on costs and prices. The report concludes with an overview of relevant issues for reauthorization of the Higher Education Act of 1965 (HEA, P.L. 89-329 as amended by P.L. 105-244 ). Where data are available,",
      " this report considers all types of postsecondary education institutions: public, private not-for-profit, and private for-profit. Definitions of Cost and Price In discussing how much it costs to attend college, how much it costs to educate students, or how much families need to save for college, it is critical to distinguish between two concepts: cost and price. College costs generally refer to what institutions spend to provide education and educational-related services to students. Price commonly refers to what students and their families are charged for higher education and what they pay. As discussed throughout this report, these amounts are not necessarily the same. Three distinctions are frequently made in the definition of price.",
      " First, there is sticker price. This is the tuition and fees that institutions charge (e.g., the published price). The second distinction is the total price of attendance, which is often referred to as the cost of attendance (COA). This includes the tuition and fees that institutions charge students as well as other expenses related to attending that institution. These expenses may include room and board for on-campus housing, rent for off-campus housing, books, and transportation. A third distinction in the definition of price involves net price. This is what students pay after financial aid is deducted from the total price of attendance. Educators and policy makers commonly look at the effects of net price in two ways.",
      " The first is a measure of affordability, subtracting only grants from the total price of attendance. Loans remain in the total price of attendance for this measure, as loans must ultimately be repaid by the student or student's parents. This may affect decisions to attend college if students and their families are considering the overall out-of-pocket (today or future) price of college attendance. The second is a measure of access, subtracting all financial aid, including loans, from the total price of attendance. This measure focuses on the amount of money a student would need to attend college in a given year, without considering how much money will ultimately have to be repaid over time.",
      " Students generally are awarded financial aid based on merit or financial need. These awards may take various forms, including grants, loans, and subsidized work opportunities. Thus, financial aid may increase access to postsecondary education but not necessarily reduce the ultimate price students will pay to attend. For the purposes of this report, the term price generally refers to the sticker price. References are also made to net price, but the specific net price measure considered depends on the data that were available for the analysis. Cost of a College Education Few students in American higher education are asked to pay the full cost of their education. Although tuition and fees are an important source of revenue at all types of institutions,",
      " other sources of revenue help defray the total costs, and students are then asked to pay significantly less. As shown in Table 1, for public institutions, the primary source of subsidy revenue is state appropriations (and local appropriations for some community colleges), and public institutions are increasingly relying on private philanthropic support and endowment income as well. Private non-profit institutions rely heavily on donations, income earned from endowments, supplements from affiliated religious organizations, and other sources of support. Private for-profit institutions, by contrast, are most likely to be tuition dependent and to have few other sources of revenue. Two approaches to cost\u2014revenues and expenditures\u2014are discussed below,",
      " because both are used in discussions of college costs; however, references to college costs in the remainder of this report refer to expenditures. Revenues Sources of revenues for institutions of higher education have shifted over time and vary by type of institution. Table 1 shows revenue sources by institution type for 2003-2004, the most recent year for which data are available. The greatest revenue source for public institutions was from state support, amounting to 28% of revenues. Without large public appropriations, private institutions are more tuition-dependent than public colleges. Sixteen percent of public institutions' revenues come from tuition and fees, but approximately 29%",
      " of private not-for-profits' revenues and 90% of for-profits' revenues are from student tuition. In addition, not-for-profit institutions realize 35% of their revenues from private donations and endowment income. The mix of revenue sources has also changed over time. For public institutions of higher education, direct state appropriations (not including state-funded grants and contracts) have risen from $19.0 billion in 1980-1981 to $53.9 billion in 2003-2004\u2014but this represents a decrease in share of revenues, from 44% to 24%. Although state support has grown over the past 25 years,",
      " public college budgets have grown faster and have come to depend more heavily on sources other than appropriations. Private support, from donations and endowment income, has grown from 3% of public college revenues in 1980-1981 to 7% in 2003-2004. Even as colleges aggressively seek increased private support, over the past two decades, tuition has accounted for an increasing share of revenue. At public institutions, tuition and fees comprised 13% of revenues in 1980-1981, compared to 16% in 2003-2004. Expenditures Economist Howard Bowen developed the \"revenue theory of costs.\" The theory states that college revenues determine college expenditures.",
      " That is, institutions attempt to raise as much money as possible and then spend the money on various activities including teaching, research, administration, and service. According to this theory, a single standard could not be used to determine how much college should cost, as colleges make expenditure decisions on the basis of their particular circumstances. Postsecondary institutions' expenditures generally are grouped into several broad categories: educational and general (E&G) expenditures, auxiliary enterprises, independent operations, hospitals, and other expenditures. The E&G expenditures category includes the majority of institutional expenditures across all types of institutions and is part of total current-fund expenditures ( Table 2 ). The E&",
      "G expenditure category includes several subcategories such as instruction, research, public service, academic support, student services, institutional support, operation and maintenance of plant, and scholarships and fellowships. In 2003-2004, total expenditures for degree-granting institutions were about $315.5 billion, and\u00a0educational and general expenditures were about $239.2 billion, or about 76% of total expenditures ( Table 2 ). Considering a fall 2003 enrollment of 16.9 million students, this represents overall expenditures of $18,670 per student and E&G expenditures of $14,150 per\u00a0student.",
      " Spending on instruction was fairly similar across institutions, accounting for about one-third of expenditures at public (28%) and private not-for-profit institutions (33%). At public and private not-for-profit institutions, spending on instruction accounted for the largest or nearly the largest proportion of expenditures. While instruction also accounted for 29% of expenditures at private for-profit degree-granting institutions, expenditures for student services, academic support, and institutional support composed the largest proportion of expenditures (60%). One aspect of institutional expenditures particularly relevant for net price (after deducting grant aid) are institutional expenditures for student support ( Table 2 ). Scholarships and fellowships accounted for 3%",
      " of expenditures at public degree-granting institutions in 1980-1981, increasing to 4% by 2003-2004. At both private not-for-profit and for-profit institutions, net grant aid (excluding allowances) accounted for 1% of expenditures in 2003-2004. Sticker Price of a College Education The price of higher education has increasingly become a topic of both public and congressional debate. It should be noted, however, that during the 2007-2008 academic year, over half of full-time undergraduates at all four-year institutions attended institutions charging less than $9,000 in tuition and fees.",
      " At four-year public institutions, 45% of full-time undergraduates attended institutions charging less than $6,000. While $6,000 or $9,000 may still be more than most students can afford to pay, the issue of price may be more productively viewed through this lens rather than one colored by the relatively high prices of the most selective institutions in the country. Only 9% of undergraduates attended institutions charging more than $30,000 for tuition (all of which are private institutions). There are also public misconceptions about the price of college. For example, a study conducted for the American Council on Education found that the general public substantially overestimates the price of tuition at public institutions.",
      " In answering questions about the price of tuition, the average respondent estimate put the price of tuition more than three times higher than the average actual price. Increases and decreases in tuition, fees, and financial aid may affect student access to college, choice of schools, affordability, and, ultimately, the completion of a degree or certificate program. This section focuses on sticker price. Data on net price are discussed in a subsequent section. Subsidizing Costs The cost of educating college students exceeds the sticker price charged by institutions; that is, in general, those students who pay the full price of their bills out of their own pockets do not pay actually pay the full amount it costs an institution to educate them.",
      " Institutions make up the difference between what students pay and the actual cost of providing an education through subsidy payments supported by other sources of revenue, such as state appropriations, endowment earnings, private donations, and federal grants. Both public and private institutions provide some level of subsidy to students. To illustrate how the subsidy works, assume that the cost of education at a given institution is $10,000. The institution receives $8,000 per student in state appropriations and charges $2,000 in tuition; thus, each student is then facing a tuition level of 20% of the actual cost. Thus, all students, even students who pay the full $2,",
      "000 in tuition, are subsidized. As some researchers have noted, increases in college price do not necessarily mean that costs have increased but could mean that a source of revenue used to support the subsidy has decreased. Returning to the previous example, suppose the next year that the state appropriation per student is reduced to $7,000, while the cost of providing an education remains at $10,000. Tuition is raised to $3,000 to accommodate the change in state appropriations; thus, each student now pays 30% of the actual cost, but tuition has increased by 50%. As discussed elsewhere in this report, the proportion of revenue that institutions derive from tuition and fees has been increasing over time.",
      " In the previous example, the subsidy came simply from state appropriations, which is the largest source of revenue for public institutions. The largest source of funds for subsidizing education costs at private not-for-profit institutions, however, is investment income from endowments and annual donations. Even public institutions are increasingly relying on philanthropic support for operations and capital projects. By contrast, private for-profit institutions are tuition-dependent and, in keeping with their business model, price the education they provide higher than cost in order to make a profit. In-State Versus Out-of-State Tuition at Public Institutions The majority of this report focuses on in-state tuition. Students and families'",
      " tax dollars support public institutions in the form of appropriation subsidies to state colleges and universities. Public institutions then grant their state residents a greater subsidy, in the form of lower tuition, than is provided to out-of-state students (who have not paid state taxes). Further, state leaders contend that it is in the best interest of the state to educate its residents in order to subsequently realize long-term human capital gains. Thus, to encourage attendance and increase access to higher education for state residents, institutions charge a lower price for in-state residents than for out-of-state residents. Although out-of-state tuition is higher than that charged to resident students, the differences in these two prices vary from state to state.",
      " Several states charge out-of-state students tuition at or near the full cost of instruction. Other states index non-resident tuition to the price charged for resident students. Note that although non-resident students are charged a higher sticker price, they still might be subsidized in other ways. States and institutions often have pricing policies and scholarship aid designed to encourage resident students to stay or to encourage out-of-state students to enroll. Price of Attendance Trends in tuition and required fees point to steady increases in current dollars over the past 30 years ( Table 3 ). From 1976-1977 to 2005-2006, tuition at all institutions increased from $924 to $7,",
      "601, an increase of 723%. The rate of increase in tuition and fees was higher at four-year institutions, 744%, and lower at two-year institutions, 599%. An examination of institutions by control over the same time period reveals that tuition and fees at public institutions increased more rapidly than tuition and fees at private institutions. Among all public institutions, tuition and fees rose 709% compared with a 665% increase at private institutions.  Figure 1 presents the average sticker price of tuition and required fee charges at the nation's public and private four-year universities from 1964-1995 to 2005-2006.",
      " Although college prices have continually increased over the past several decades, the rate of increase is not even. For example, in the 1980s, public four-year universities increased tuition and fee charges by 9.28% annually, on average; for private four-year universities, the average annual increases were 10.53%. By contrast, in the 1990s university price increases slowed down, with public four-year universities raising undergraduate rates by an average of 6.38% annually and private four-year universities by 6.45% annually. In the current decade, rates of increases have begun to climb again for public four-year universities,",
      " with tuition and fee prices increasing by an average of 9.26% annually. For private four-year universities in the 2000s, increases have slowed to an average of 5.72% annually. Other Ways of Interpreting Price In addition to simply viewing college prices and changes over time, there are alternate ways of analyzing price. One approach looks at price in relation to overall inflation increases. A second looks at price as a percent of family incomes. Tuition and Fees Adjusted for Inflation Examining tuition using current dollars identifies changes in tuition over time but fails to take into account inflationary factors affecting college price. Adjusting college prices for inflation using an index such as the Consumer Price Index for All Urban Consumers (CPI-U)",
      " enables direct comparisons in college price to be made across years by adjusting all prices to be comparable with a base year. More simply, adjusting for inflation means that the price of tuition in a given year, such as 1981-1982, has been recalculated to determine what the price of tuition that year would have been in today's dollars. When increases in tuition are considered in constant dollars (i.e., dollars adjusted for inflation), the increase in tuition over the past 30 years is substantially lower (see Appendix, Table A-1 ). From 1976-1977 to 2005-2006, the tuition increase in constant dollars for all institutions was 140%",
      " compared with an increase of 723% in current dollars. Similar differences in increases are evident for four-year, two-year, public, and private institutions. For example, in constant dollars, the increase in tuition at public four-year institutions over this time period was 153% in constant dollars compared with 767% in current dollars. An alternative method of using inflation to analyze price is to consider whether price increases are outpacing inflation\u2014whether annual percentage increases in tuition exceeds annual percentage increases in the CPI-U. Any such increase that exceeds the inflation rate can be thought of as an increase that \"outpaces\" inflation. From 1976-",
      "1977 to 2005-2006, average tuition at public and private institutions increased by 723%. At four-year institutions, the growth has been even higher, 744%, while it was 599% at two-year colleges. By comparison, the CPI-U grew 243% from 1976 to 2005. By this estimation, four-year college tuition has risen by more than 3 times the rate of inflation over the past 30 years. Looking more specifically at year-to-year changes, Figure 2 shows annual price increases for just one segment of higher education institutions\u2014public four-year universities\u2014in comparison to annual changes in inflation.",
      " Price as a Share of Family Income An alternate perspective is to consider college prices as a share of family income. Researchers have found that family incomes have not kept pace with tuition increases\u2014particularly for the lowest-income families. This analysis focuses on overall mean household income and the mean household income of households in the lowest and highest 20% of households according to mean income, as well as households in the middle of this distribution of mean income (i.e., third or middle quintile). The share that college prices represent relative to family income has been growing over the past two decades because tuition is increasing faster than income. From the mid-1980s to the mid-",
      "1990s, increases in tuition levels averaged across institutions were about four times higher than growth in mean household income. While the discrepancy in growth diminished during the following decade, tuition increases continued to outpace the growth in mean household income,\u00a0across public and private four-year institutions and public two-year institutions, as shown\u00a0in Figure 3. When income is analyzed by households using mean income in the top quintile, third quintile (or middle quintile), and lowest quintile, other trends become apparent. From the mid-1980s to the mid1990s, all three groups saw growth in their mean household income outpaced by increases in tuition ( Figure 4 ). For households in the lowest quintile,",
      " tuition increased at a rate about eight times higher than mean income. For households in the middle quintile, tuition increased at a rate of about 20 times that of mean income. For households in the highest quintile, tuition increased at a rate of about 2.5 times that of mean income. During the following decade, only the middle and highest income groups experienced growth in mean income; the lowest income group had their mean income decline by 0.4%. Similar to the previous decade, the growth in tuition and fees continued to outpace the growth in mean income for all three income groups, but the difference in growth rates was particularly substantial for those in the lowest income group.",
      " As a percentage of income, tuition consumed a larger proportion of mean household income for households in each of the quintiles over time for each of the education options considered in Table 4 but consistently consumed a larger share of household income for households in the lowest quintile. For example, the percentage of household income for households in the lowest income quintile needed to pay tuition at public and private four-year and public two-year institutions increased from 38.9% in 1985 to 71.3% in 2005, while increasing from 9.3% to 16.4% for households in the middle quintile and increasing from 3.",
      "3% to 4.8% for households in the highest quintile. When only public institutions were considered, the percentage of mean household income needed to pay tuition and fees dropped, particularly for public two-year institutions, but still required a substantially greater proportion of mean household income from households in the lowest quintile than from those in the middle- or higher-income quintiles. These comparisons are based on sticker prices, not net prices. Because many students do not pay the sticker price to attend college, the discrepancies between increases in income and tuition may not be as substantial if net price were considered. Prices by State This section provides a brief overview of the price of higher education across the 50 states and the District of Columbia during the 2005-",
      "2006 academic year. As shown on Table 5, the average tuition, fees, room, and board charged for full-time students attending public four-year degree-granting institutions was $12,108. The average tuition, fees, room, and board at private (non-profit and for-profit) four-year degree-granting institutions was more than twice this amount. The difference in average tuition, fees, room, and board charged by public and private four-year degree-granting institutions was driven primarily by differences in average tuition and required fees ($5,351 versus $19,292, respectively), as the difference in average room and board between public and private four-year degree-grant institutions was about $1,",
      "300. The average tuition and fees at public two-year degree-granting institutions was just under $2,000. In just over half the states, average tuition and fees at public two-year institutions were less than or equal to 50% of the average tuition and fees at public four-year institutions in the same state. Net Price of a College Education After considering the cost of a college and the price students are initially asked to pay, a third measure of college expenses is net price. Net price is a measure of price that takes into account financial aid provided to students. It is the actual price students and their families need to pay out of their own pockets to attend college.",
      " Student aid for postsecondary education may be need-based aid or merit-based aid. Need-based aid addresses concerns of access and affordability through grants and loans, while merit-based aid programs are designed to recognize student achievement through tuition waivers and scholarships. Numerous entities provide student aid, including states, local governments, institutions, foundations, and the federal government. In 2006-2007, over $149.0 billion was awarded in student aid from all sources. About 58% of this amount was generated by the federal government through appropriations, loan guarantees, and tax credits. For the federal government, providing access to postsecondary education for low-income students has been the focus of student aid programs.",
      " Federal grant aid from all programs totaled $19.6 billion in the last academic year, while federally backed loan disbursements totaled $59.6 billion. From federal, state, institutional, and private sources, grant aid to students\u2014which does not have to be repaid and therefore lowers out-of-pocket payments\u2014totaled $63.9 billion. Total federal aid has grown 128% over the past ten years (starting from $37.9 billion). However, its overall proportion of student aid is falling: in 1996-1997, federal aid represented 66% of all aid, compared with about 58% in 2006-",
      "2007. State, institutional, and private aid have been outpacing federal aid growth over the past decade, with private grants growing by 206% and private loans growing by 989%. Although student financial aid from non-federal sources contributes substantially to lowering net price, the focus of this section is on federal student aid programs and their role in lowering out-of-pocket expenses for students. The two largest federal aid programs, Pell Grants and federal student loans, are authorized under Title IV of the HEA. The third largest (measured in terms of aid provided) source of financial assistance is federal income tax-related credits, deductions, and\u00a0benefits.",
      " Federal Financial Aid The federal government currently provides several forms of support to help students pursue a postsecondary education. This aid takes the form of grants, loans, tax credits, tax deductions, and tax-favored education savings benefits. Pell Grants and federal student loans are the two largest federal aid programs. Pell Grants35 The Pell Grant program, authorized by Title IV of the HEA, is the single largest source of grant aid for postsecondary education provided by the federal government. Pell Grants are need-based aid intended to be the foundation for all federal student aid awarded to undergraduate students. There is no absolute income threshold that determines program eligibility, but most Pell Grant recipients are low-income students.",
      " For FY2006, it is estimated that the program provided nearly $13 billion to about 5.4 million undergraduate students. For FY2007, the maximum Pell Grant award was $4,310. Loan Programs36 The federal government operates two major student loan programs: the Federal Family Education Loan (FFEL) program, authorized by Part B of Title IV of the HEA; and the William D. Ford Direct Loan (DL) program, authorized by Part D of Title IV of the HEA. These programs provide loans to undergraduate and graduate students and the parents of undergraduate students to help them meet the costs of postsecondary education.",
      " The FFEL and DL programs provide more direct aid to students pursuing postsecondary education than any other single source. The loans made through these programs are low-interest loans. In FY2005, these programs provided $56.2 billion in new loans to students and their parents. Loans made through the FFEL and DL programs are provided to students pursuing a postsecondary education on at least a half-time basis at eligible postsecondary institutions. Student borrowers receiving loans through these programs are able to postpone loan repayment until they complete their academic programs and may also defer payment to pursue additional postsecondary studies. Students Receiving Aid In 2003-2004,",
      " about 76% of all full-time, full-year undergraduates received some form of financial aid ( Table 6 ). The percentage of students receiving any federal aid varied by control of institution, ranging from 56% of students at public institutions to 87% of students at private for-profit institutions. Over two-fifths (41%) of full-time, full-year undergraduates attending public institutions received federal loans. Higher percentages of students received federal loans at private institutions, with 64% of students at private not-for-profit institutions and 78% of students at private for-profit institutions receiving federal loans. Nearly a quarter of full-time, full-year undergraduates at private not-for-profit colleges received federal work study,",
      " but far fewer students did so at other types of institutions. Surprisingly similar percentages of students in different income groups received financial aid in 2003-2004. Nearly 63% of dependent undergraduates from families earning less than $20,000 per year received some form of aid, while approximately 61% of students from families earning over $100,000 did so. However, the distribution of aid by income group varies significantly by type of aid. For example, over 32% of dependent undergraduates in the lowest income group were awarded federal grant aid, while these awards went to 1% of dependent undergraduates in the highest income group.",
      " Reliance on loans to finance higher education is increasing. In 1996-1997, students and their parents took out nearly $28.8 billion in federal student loans. By 2006-2007, students and families are expected to borrow approximately $59.6 billion in federal student loans\u2014more than doubling in 10 years. Net Price After Grants A recent study of college price and financial aid awards for 2003-2004 examined the issue of net price by type of institution. Defining net price as total price of attendance minus grant aid, the average net price for all students (including those not receiving any grant aid)",
      " was as follows: at public two-year colleges, $8,700; at public four-year institutions, $12,400; at private not-for-profit four-year institutions, $17,400; and at private for-profit institutions, $20,600. For low-income families of dependent undergraduates (whose incomes are in the bottom quartile of families, earning less than $32,000), net price was lower: at public two-year colleges, $6,700; at public four-year institutions, $9,000; at private not-for-profit four-year institutions, $15,500; and at private for-profit institutions, $15,",
      "700. Influences on College Costs and Prices Researchers have been studying the issue of tuition increases for many years. On the basis of their work, it has been determined that the price of postsecondary education is established in multiple ways and differs for public and private institutions. Because of limitations in the data, however, it has been difficult to determine specific internal and external factors that have a strong relationship with price increases. Influences on Costs Researchers have studied whether institutional costs, that is, trends in the cost of items for which colleges and universities pay, drive increases in price. Current analysis suggests that there is not a strong relationship between costs colleges incur and price.",
      " Although evidence does not point to a strong relationship, it could be argued that revenue must cover or exceed institutional costs or an institution may go into debt. Researchers have determined, however, that most postsecondary institutions do not function like businesses (with the notable exception of for-profit colleges). The labor-intensive nature of providing a higher education makes it difficult to realize productivity gains. For example, increasing class sizes to reduce costs might result in a decline in quality rather than an increase in productivity. Researchers have identified various factors that drive institutional costs. For example, a recent summary of relevant literature identified five primary cost drivers: (1) revenue availability; (2)",
      " institutional aid; (3) mission and discipline; (4) faculty compensation and workload policies; and (5) class size. Other researchers have pointed to specific costs that institutions are facing, including the provision of technology, increasing health care costs, burdens associated with government regulation, facilities, enrollment, and student expectations. More specifically, for example, the mission and discipline of an institution can have substantial cost ramifications, as institutions with research programs, graduate education, and public service missions have higher costs than other institutions. These costs may be even higher if the institution offers engineering or other science programs with laboratory components. Providing students, faculty, and staff with access to technology incurs infrastructure costs,",
      " as well as costs associated with continual updating of hardware, software, and connections. Some institutions have imposed new technology fees to have students cover some of these costs. Establishing Price at Public Institutions States differ in the basic philosophy that guides their decision making with respect to setting tuition levels for public institutions. The majority of states have embraced a philosophy of low tuition to maximize access to postsecondary education by making it as affordable as possible. States that have adopted a philosophy on the basis of higher levels of tuition, on the other hand, often provide substantial student financial aid to help ensure access for low-income students. Primary authority to establish tuition levels may rest with the legislature,",
      " state coordinating or governing agency, individual system boards, or individual institutions. In 13 states, the state coordinating/governing agency has the primary authority to establish tuition levels. Fourteen states delegate this power to individual institutions with varying levels of discretion, while 26 states rely on individual system or local district boards. Five states give primary tuition-setting authority to the state legislature. According to states, when setting in-state tuition, state general fund appropriations have the most significant influence on this decision. For most states, there are no formal incentives to limit tuition increases, but many operate under informal incentives, such as the desire to provide an affordable education.",
      " States or institutions also may opt to place self-imposed limitations on tuition increases. For example, a State Higher Education Executive Officers study found that 18 states had applied some type of limitation on tuition increases during the previous three fiscal years, including capping tuition increases at a certain percentage, freezing tuition at a specific level, or indexing tuition to a measure of inflation. An NCES-commissioned study examining college costs and price provides some evidence as to factors that may be related to tuition increases. The specific factors differ according to the level and control of the institution. At public four-year institutions, a decline in state appropriations revenue was found to be the most important factor associated with changes in tuition.",
      " According to the Institute for Higher Education Policy (IHEP), the increase in price results from institutions attempting to maintain their total revenue when state appropriations decline. An increase in instructional expenditures also was associated with changes in tuition, but the relationship was not as strong. At public two-year institutions, changes in revenues, including state appropriations, and expenditures accounted for only a small proportion of changes in tuition. This is attributed to overriding efforts by public two-year institutions to maintain relatively low tuition. These institutions often will opt to make other changes, such as reducing courses, eliminating programs, or reducing services before they will increase price. Thus, tuition changes at public two-year and public four-year institutions are affected by different factors.",
      " State Support For FY2006, state tax funds appropriated for higher education operating expenses (e.g., colleges and universities, student aid, governing boards) totaled $67.2 billion. This represented an overall increase of 7.1% in appropriated funds from the previous year and a 14.4% increase in appropriated funds from FY2004. Looking at trends over time, from FY1996 to FY2006, overall state appropriations increased 54.7%, with increases in appropriations occurring in every state for which data were available. When states contend with serious financial difficulties, resulting in smaller increases in support for higher education than in previous years or outright reductions in support for higher education,",
      " public institutions are affected by these decisions. A substantial decline in state appropriations, especially at four-year institutions, may lead to large percentage or dollar increases in tuition (or both), regardless of whether the actual cost of providing the education also increases. In addition, as enrollment in higher education continues to increase, per student appropriations may be reduced if corresponding increases are not made in state appropriations for higher education. Research has shown that changes in revenues and expenditures do not have as substantial an effect on tuition at public two-year institutions. These institutions may maintain current tuition levels or eliminate the need for large tuition increases by reducing course offerings, services, or enrollment. These types of changes ultimately may be restricting access to postsecondary education,",
      " as there may be fewer seats or services available. This could be particularly troublesome for low-income students, non-traditional students, and individuals seeking to return to school for additional training. Decreases in state appropriations may also mean less money is available to support institutional aid, which may, in turn, reduce student access to postsecondary education. For example, institutions that rely on state appropriations to offer institutional aid may find that they need to shift money that would have been used to provide aid to other purposes. They might use available\u00a0state appropriations to affect tuition levels rather than using state appropriations to support student aid. Although this practice may be beneficial to all students in terms of the price\u00a0of college,",
      " low-income students dependent on institutional aid may no longer receive needed support. Establishing Price at Private Institutions In a discussion of primarily non-public institutions, IHEP divides the non-public sector into three markets: (1) highly selective institutions\u2014predominantly private not-for-profit institutions, as well as a few highly selective public institutions; (2) competitive institutions; and (3) proprietary institutions. Highly selective institutions are primarily private not-for-profit institutions that experience excess demand for their available openings. These institutions tend to compete against one another on the basis of non-price mechanisms, such as institutional reputation. They generally have similar prices and often have higher levels of institutional wealth than other types of institutions.",
      " Competitive institutions also compete with their peer institutions but on a regional rather than national level. They tend to compete through non-price mechanisms and tuition discounting for specific groups of students. Prices within a specific group of peer institutions tend to cluster in a narrow range. Less is known about proprietary institutions. However, by definition, these for-profit institutions exist to make a profit. As previously discussed, tuition is their primary source of revenue, so the costs of educating students at these institutions may be more closely related to price than at other types of institutions. The NCES study examining college costs and prices found that factors affecting tuition at private not-for-profit four-year institutions are more varied.",
      " That is, unlike public four-year institutions, no single factor is strongly related to tuition changes. Rather, prices at private not-for-profit four-year institutions are driven by internal institutional budget controls and external market conditions. Among the internal factors associated with higher tuition were higher costs for institutional aid and faculty salaries and declining revenues from endowments and private giving. Among the external factors associated with tuition changes were the availability of institutional aid, price of public institutions in the same state, and per capita income in the state. Tuition Discounting and Net Price Tuition discounting is a practice by which institutions charge students less than the sticker price. This is intended to increase net revenue,",
      " attract minority students, increase enrollment, or attract academically talented students. It is unclear whether this strategy ultimately accomplishes these goals. For example, one question focuses on whether reductions in tuition provided for students who are able to pay based on formulas such as the Expected Family Contribution (EFC), but are unwilling to pay the sticker price, results in enrollment in the institution that otherwise would not have occurred, potentially contributing to net revenue. Another issue focuses on whether by subsidizing students able to pay to attend college, funds are being diverted from needy students or from improvements in academic programs or services. A third issue focuses on whether the practice of tuition discounting causes institutions to raise prices,",
      " knowing that many students will not pay the full sticker price ultimately. Last, the question remains whether an alternative strategy of across-the-board reductions in price to the level at which tuition is generally discounted would result in increased enrollment, increased net revenue, or recruitment of the desired student body. A recent study conducted by the Lumina Foundation examined the use of tuition discounting. Researchers state that the practice does work successfully at some institutions but that, when institutional aid practices are examined across all institutions, tuition discounting has some adverse financial effects on low-income students in terms of accessibility and affordability. For example, researchers suggest that if institutions use financial resources to attract students that could afford to pay to attend,",
      " then institutions had fewer funds to provide institutional support to low-income students. Researchers support this argument on the basis of data from the National Postsecondary Student Aid Study, which show that between 1995-1996 and 2000-2001, institutional grant aid for higher-income undergraduates rose more quickly than for lower-income undergraduates at four-year institutions. The Lumina Foundation study also found that the use of tuition discounting does not always produce the desired result of increased net revenue, nor does it necessarily lead to the recruitment of the most academically talented students based on the median SAT scores of the students attending institutions using tuition discounting.",
      " Federal Policy Effects on College Price In analyzing college prices, researchers have considered whether a relationship exists between federal aid and price increases. Although federal grant aid does not seem to affect college prices directly, less is known about the effects of federal loans and tax credits. A direct relationship between loans and higher tuition has not been identified, but an indirect relationship may exist.\u00a0With respect to tax credits, limited evidence suggests that a relationship may exist under certain circumstances. Federal Financial Aid and Sticker Price Federal student aid takes many forms, including grants, loans, and education tax credits. Concerns have been raised by researchers, interest groups, and some Members of Congress about whether increased federal aid contributes to increasing college price.",
      " Debate about whether federal financial aid provides incentives for tuition increases was widespread in the 1980s. By the 1990s, much of the debate had narrowed to focus on the relationship, if any, between federal loan aid and price. Students apply for federal grants and loans using the Free Application for Federal Student Aid (FAFSA) form. Based on information reported on the FAFSA, ED calculates the EFC. In general, most institutions use the EFC to determine students' financial need by determining the difference between the price of attendance and the EFC. Since this calculation takes the price of attendance into account, a direct relationship between federal aid and price only would be likely if increased financial need resulted in increased federal aid.",
      " However, federal grant and loan aid are capped at specific amounts. These amounts generally are lower than the price of attendance at many institutions. Thus, an incentive for institutions to increase their price in anticipation of students receiving additional financial aid may exist for institutions with relatively low prices, but it is not as clear that this is so at institutions whose price already exceeds available federal aid. According to one of the major recent reviews of research, in general, research has shown that no relationship exists between federal grants and college prices. Research on the relationship between federal student loans and tuition, however, has been less conclusive, with some researchers believing that there may be an indirect relationship between federal student loans and college price.",
      " For example, institutions may raise prices knowing that students can apply for loans to cover tuition increases. Institutions then may use revenue from tuition increases to provide additional institutional aid to make it possible for some students to access and afford the price of college. At the same time, increased loan availability could reduce the need for institutions to increase price to generate revenue to provide institutional aid because students can receive aid in the form of loans. Thus, it is difficult to determine whether federal student loan programs are contributing to tuition increases. In its examination of college costs and prices, NCES found virtually no associations between price and most student aid variables, including federal grants and loans,",
      " and tuition. The only association that was identified was that institutional aid had a positive association with tuition increases at comprehensive public institutions and comprehensive private not-for-profit institutions. This could be related to institutions increasing tuition to increase revenue to provide institutional aid to students. Thus, in the NCES study, federal grants and loans were not found to have a positive relationship with tuition increases. Federal Tax Legislation and Sticker Price Limited data are available about the effect of federal tax credits on tuition increases. A recent Government Accountability Office study concluded that data and methodological challenges make it difficult to identify and isolate the effects of tax credits, as well as grants and loans,",
      " on attendance, choice, completion, or costs. In a recent survey of state higher education agencies, few states reported raising tuition in response to new tax credits or taking federal tax credits into account when calculating student aid eligibility. Most states reported taking advantage of opportunities to create a tax-advantaged state prepayment or college savings plan, and many states indicated they publicize the availability of federal tax credits to help finance college. However, an analysis of the effect of tax credits on state support for higher education and changes in college prices found that a relationship does exist between tax credits and state appropriations and tax credits and price under certain circumstances. For example,",
      " the study found that when other factors were held constant, state appropriations to public two-year institutions charging less than $2,000 fell relative to other institutions after the introduction of tax credits. At the same time, states that had developed a track record of supporting student aid programs continued to support, and possibly bolster, these programs despite the availability of additional federal aid. At the institution level, incentives existed for institutions to increase their prices for students who benefitted from the tax credits; that is, the tax credits increased student income, providing students with more money to pay for college. Evidence indicates that public two-year colleges raised prices higher than what could be explained by fluctuations in state appropriations,",
      " and the increases were greater at schools with higher percentages of tax credit-eligible students. Actions at the State and Institutional Levels Congress may include provisions related to college costs and prices in HEA reauthorization legislation, but there are also steps to increase affordability that could be taken or are being taken by states and institutions that could either complement federal actions or minimize the need for federal action in some areas. This section provides several examples of strategies currently being implemented by states and institutions to address issues of college costs and price. More specifically, the overview focuses on three key areas: (1) tuition and fees, (2) reducing costs, and (3)",
      " college credits. Tuition and Fees States and institutions have taken a variety of approaches to making college more affordable for students. For example, Harvard University and the University of Virginia have eliminated tuition and fees for students whose family incomes fall below a specified level. Colorado implemented a voucher system that provides directs stipends to students for tuition payments. Arizona, Mississippi, and New York are considering or implementing tuition policies that link tuition increases to increases in measures of inflation. For example, the former chancellor at the State University of New York (SUNY) proposed tying tuition increases to the Higher Education Price Index (HEPI, discussed below). Other states have proposed freezing tuition and fees at a certain level for a specific number of years.",
      " For example, Illinois implemented a strategy to keep tuition at a constant level for four years for each entering class beginning fall 2004, and similar policies are being or have been considered in other states, such as Kansas, Texas, and Indiana. Under a policy that locks in tuition, the tuition charged to a cohort of freshman students will remain constant for four years or more. This enables families to plan for the price of college, essentially making a payment for a college education similar to a mortgage payment that can be anticipated monthly. Questions have been raised about tuition freeze proposals, including concerns that there will be substantial differences in the price charged from one cohort to another.",
      " Reducing Costs Many states and institutions have already taken the initiative to reduce costs. For example with respect to health care, institutions have formed their own health-care consortia; linked employee contributions to health care costs to salary, meaning that staff members with higher salaries pay more; and focused on employee wellness to achieve costs savings. Other institutions have focused on finding cost savings by sharing other services. For example, five colleges in Massachusetts built their own fiber-optic network rather than paying high fees for broadband Internet service. Institutions in Wisconsin formed a consortia to share office functions while enhancing services at a reduced cost. Some institutions have accepted greater financial risks in exchange for likely long-term savings.",
      " For example, institutions are raising insurance deductibles and altering borrowing strategies to get better interest rates while assuming more risk. Others are considering energy efficiency in their building designs and renovations to achieve long-term savings. A more widespread cost-saving initiative is to replace tenured, full-time faculty with lower-paid, part-time faculty. Some institutions have instituted differential tuition levels, whereby students in more expensive programs (e.g., engineering) are charged a higher tuition. Institutions are also outsourcing services. Although this has been done for a number of years with respect to bookstores and food services, institutions have now started to outsource facility management, on-campus housing, payroll,",
      " and printing. College Credits One of the major areas in which states and institutions are focusing their efforts to reduce college costs and the total price of college attendance is with respect to enabling students to earn college credits prior to college attendance and ensuring that credits earned at one institution will be accepted at another institution. According to data collected by the Education Commission of the States (ECS), dual enrollment policies have been implemented through state statute, board policy, or institutional agreement in 47 states. These policies enable high school students to earn college credits while in high school. Many institutions also award students credits on the basis of the completion of Advanced Placement (AP) courses and specific levels of performance on the AP tests.",
      " Some institutions also provide students with college credit for completion of an International Baccalaureate (IB) diploma and specific levels of performance on the related tests. Texas recently implemented a law that provides students graduating from a Texas high school with an IB diploma and specific scores on the IB exams with at least 24 semester credits upon enrollment in a Texas public IHE. All states have some type of agreement with respect to the transfer of credit. These agreements may be established by legislation or created voluntarily on a course-by-course, department-to-department, or institution-to-institution basis. Often these agreements are created between two-year institutions and four-year institutions to facilitate the transfer of credit as students move from one type of institution to the next.",
      " They may also exist solely among four-year institutions, two-year institutions, a group of institutions, or just two institutions. The more extensive the agreement in terms of the number of institutions included, the greater the benefit to the student. Some states have enhanced their articulation agreements by establishing a set of general education core curriculum requirements. A general education core curriculum generally refers to a set of courses that fulfill lower-division general education requirements at all institutions participating in the core curriculum system. Some states have adopted common general education courses, while others have identified blocks of courses that are guaranteed to transfer from one institution to another. Overall, 37 states have general education common core courses that transfer from one institution to another under specific circumstances.",
      " The completion of these requirements often carries some type of benefit, such as transferring from a two-year institution into a four-year institution with junior status. Nine states have also developed common course numbering. Having common course numbers at two-year and four-year institutions makes it more likely that students will enroll in courses that will ultimately transfer from one institution to\u00a0another. Issues for the Higher Education Act Reauthorization Work on the reauthorization of the HEA began during the 108 th Congress and has continued through the 110 th Congress. During this time, Congress has held numerous hearings on and introduced and passed bills addressing affordability and accessibility issues. Clearly there are concerns about students'",
      " and their families' ability to afford college and, consequently, their ability to access postsecondary education opportunities. Congressional involvement with the issue of college price has historically been limited, focusing on issues of access. This raises the question of what the appropriate federal role is, if any, in relation to college prices. Concomitantly, a second question of whether Congress has tools at its disposal that will effectively address issues of college price and cost can be asked. A key issue is how to develop and implement effectively a federal policy related to college price given the diversity of institutions, policies, and price drivers affecting those institutions nationwide. Regardless of the approach ultimately selected,",
      " Congress faces the need to balance concerns about affordability and access with the goal of maintaining a high quality system of postsecondary education. Price Indices Traditionally, Congress has not embraced a policy role with respect to the prices charged by public and private institutions, choosing instead to address issues of access and affordability from the student financial aid perspective. However, proposals for indexing increases in college price to some measure have been introduced in the 108 th, 109 th, and 110 th Congresses. For example, proposals have been introduced that would compare an institution's percentage increase in tuition and fees against two times the increase in the Consumer Price Index-All Urban Consumers (CPI-U), and require institutions whose percentage increase in tuition and fees exceeded two times the increase in the CPI-U to submit to additional reporting requirements or other penalties.",
      " Congressional debate may continue to focus on the use of price indices as a means to temper anticipated increases in tuition. When considering the implementation of a price index requirement, perhaps the most obvious issue is what to select as the measure to which tuition and fees will be indexed. Three options have been considered in recent years. The first is the CPI-U, produced by the Bureau of Labor Statistics (BLS). The CPI-U is a measure of changes in the price of a market basket of goods and services purchased for consumption by all urban consumers. BLS also produces indices that make it possible to examine changes in the price of college textbooks and college tuition and fees,",
      " although these items have not been included in a single index. A second measure that has been discussed is the Higher Education Price Index (HEPI). The HEPI was created in 1961 by Dr. Kent Halstead and was first published by the U.S. Department of Education in 1975. Since 2005, the HEPI has been managed by the Commonfund Institute. According to the Commonfund, the \"HEPI measures the average relative level in the prices of a fixed market basket of goods and services purchased by colleges and universities through current fund educational and general expenditures excluding expenditures for research.\" The HEPI is calculated using a regression formula that includes professional salaries (e.g., faculty and administrative salaries), nonprofessional wages and salaries (e.g., clerical salaries), fringe benefits,",
      " contracted services, supplies and materials, and utilities. It functions as a tool to examine the purchasing power of colleges and universities. That is, by reporting only price changes, without quality or quantity changes, the index essentially tells institutions how much it will cost to maintain the status quo. Although there are several differences between the CPI-U and the HEPI, two in particular are worth considering. First, as previously discussed, most spending by colleges and universities is for personnel, primarily faculty. Salary increases for postsecondary education personnel are different from those included in the CPI-U, which includes urban wage earners and salaried clerical workers. In addition,",
      " the HEPI focuses specifically on goods and services purchased by colleges and universities, while the CPI-U also includes housing, transportation, medical care, and other items. While the CPI-U does have a separate index for tuition and fees, for example, this index has not been considered for use in HEA reauthorization bills that have been reported out of committee in recent years. Finally, the third index option that has been considered is to create indices using a market basket of higher education goods and services, possibly having a different index for different types of institution on the basis of level and control. It is unclear exactly how this type of index would be different from the HEPI,",
      " for example, except that the indices may be designed to further account for distinctions among different types of institutions. A second difficulty associated with using price indices is related to differences between (1) percentage increases in price and (2) dollar increases in price. If a certain percentage increase is set as a limit in price increases, institutions with relatively low tuition may be penalized for making small changes in the actual dollar amount being charged to students, while institutions with already high tuition levels may be able to make relatively small percentage increases resulting in relatively large dollar increases without penalty. Similar problems could arise from establishing a specific dollar increase as a price increase limit. One possible way to address these problems,",
      " in part, would be to establish an index by which to evaluate percentage increases in tuition and fees, while including an exception for institutions for whom violation of the established requirement is associated with a relatively small dollar increase in tuition and fees. Another issue to consider is that, depending on the implementation timeline of such a policy, in the years just prior to the policy taking place, institutions nationwide may seize on their last opportunities to have relatively large tuition and fee increases (in dollars, percentages, or both) without being subject to penalties. Controlling College Costs College costs, as previously discussed, refer to what institutions actually expend to educate students. In examining ways to reduce price increases experienced by students,",
      " some attention has been given to reducing college costs as a means to reduce the need for institutions to increase their prices. One problem with this approach is the subsidy that students at public and non-profit institutions receive\u2014even students paying the sticker price to attend college are not paying what\u00a0it actually costs institutions to educate them. Therefore, it is possible that institutions may raise their prices to reduce the subsidy provided to students rather than to address an actual increase in costs. Congress has proposed addressing college prices via college costs through incentive programs. For example, a demonstration program could provide grants to consortia of institutions working together to reduce costs (e.g., by sharing administrative functions or purchasing health care collectively). As previously discussed,",
      " institutions are already forming these consortia on their own, but it is possible that more consortia would be formed if incentives to do so existed. It might also be useful to examine the levels of costs savings and areas in which cost savings have been achieved by existing consortia to help determine how to structure an effective incentive. Encouraging institutions to control costs might be more appealing and more feasible than other routes for controlling price increases, but these strategies may not have as large an impact on prices as desired, as productivity gains in labor-intensive enterprises are difficult to obtain. In addition, efforts to control costs could inadvertently result in diminished quality and quantity of courses,",
      " programs, and services. Finally, providing funding directly to institutions as incentives to increase college affordability rather than to students through the federal student aid system has not been the primary traditional role of the federal government in higher education. In general, however, Congress has not focused as intensively on college costs as it has on college prices, but it could be argued that college costs could be addressed indirectly by legislation focused on college prices. That is, by encouraging institutions to reduce their price increases, institutions may find it necessary to also reduce their cost increases. Earning College Credits Another approach to making college more affordable for students focuses on the development of\u00a0articulation agreements,",
      " the transfer of credits, dual enrollment, and programs to help students\u00a0finish their coursework. Although many of these proposals also represent actions that could be taken by states and institutions, Congress may continue to examine ways to encourage these practices. These types of measures may result in cost savings to institutions and reduce the overall price students pay for higher education. For example, articulation agreements (also known as cooperative agreements), transfer agreements, and transfer of credit agreements, are generally established to facilitate students' transfer of credit from one postsecondary institution to another. They are intended to help students understand which of their credits may be accepted at another institution; reduce the time,",
      " effort, and money required to review transcripts and determine compatibility between courses; reduce the number of courses that a student may need to repeat, thereby saving the student time and money; and potentially reduce the amount of federal aid needed by a student to complete an education. Congress could also consider addressing the transfer of credit issue more specifically by requiring institutions to make public their transfer of credit policies or place restrictions on these policies, such as prohibiting institutions from denying the transfer of credit on the basis of the accreditation held by the sending institution. While transfer of credit requirements may be helpful to students in many of the same ways that articulation agreements are beneficial, they may also result in increased costs at IHEs that had previously made decisions about the transfer of credit on the basis of the accreditation held by the sending institution.",
      " That is, if IHEs were required to examine every transfer applicant's transcripts on an individual basis, it could increase the amount of time and effort needed to make a determination about the transfer of credit. These costs could potentially be passed on to students, resulting in increased tuition and fees. The use of articulation agreements, however, could help to reduce these potential burdens, and widely publishing institutions' transfer of credit policies may help students make more informed decisions about their postsecondary education. Relieving Regulatory Burden Regulations encompass requirements that function as control strategies (e.g., accountability measures), but these regulations often add to the costs institutions shoulder in providing higher education to students.",
      " Postsecondary institutions and some researchers have agreed that institutions may already be overburdened by regulation. Most agree that public accountability is essential, but there are questions about whether public accountability could be maintained through less costly and cumbersome measures and whether the related savings would be passed on to students. For example, performance-based models and requirements could be implemented, allowing institutions to determine how to meet specific requirements, rather than specifying both standards and procedures for meeting standards. Congress has previously considered implementing a demonstration program that would have supported innovative approaches in the delivery of higher education and student financial aid at reduced costs for students and institutions. A specific goal of the program would have been to identify specific statutory and regulatory requirements that should be modified to allow for the more efficient and effective delivery of federal student aid,",
      " as well as to provide access to distance education, to enable students to complete their postsecondary education more efficiently. It is possible that continued consideration may be given to relieving regulatory burden as Congress continues work on HEA\u00a0reauthorization. Providing Better Public Information Another possible approach to the issues of price and cost is to provide potential and current students with more and better information about these issues, enabling them to make more informed decisions about their postsecondary education; that is, providing information to enable the higher education market to operate more efficiently without controls or incentives. Some information is available to the general public through various college guides and websites, but concerns have been raised by researchers that there is not enough information available.",
      " It has also been suggested that data related to college costs and price should be designed to be useful, accurate, timely, and understandable. On the basis of the bills already introduced by Congress related to these issues, Congress may continue to consider how to make better information more readily available to current and prospective students. While Congress may consider addressing the need for more useful information to be made available to the public (e.g., additional data on instructional expenditures, completion and graduation rates, or faculty information), it might do so by building on existing data collection strategies. Current legislation mandates that the National Center for Education Statistics (NCES) collect data from postsecondary institutions and that institutions respond to the Integrated Postsecondary Education Data System (IPEDS)",
      " surveys in a timely manner. There are some concerns, however, that institutions do not respond appropriately to IPEDS. In addition, there are time lags between when the data are collected and released to the public. This could be a problem, however, with any data collection designed to include the universe of institutions. In addition, existing HEA legislation requires institutions to provide current and prospective students and their families with a variety of institutional information. While institutions are required to tell enrolled students what information is available, Congress could consider strengthening existing requirements by specifying how data must be presented in terms of user-friendly formats and how individuals must be notified about the existence of the data and how to easily obtain it.",
      " There also is discussion of adding additional accountability measures for institutions. If these measures are added, provisions could be made to ensure that this information is made available to students and their families. The U.S. Department of Education currently maintains an online database of information about postsecondary institutions known as the College Navigator. Congress could use the College Navigator as one venue for making any additional information about postsecondary institutions available to the public and could consider whether changes are needed in the design of the website or in the information presented on the current site to improve the usefulness of the data. Appendix. Average Undergraduate Tuition and Fees\n"
    ],
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  },
  {
    "id": 46,
    "question": null,
    "answer": "This report discusses the Special Inspector General provisions in the Emergency Economic Stabilization Act of 2008 (EESA), which was enacted as P.L. 110-343 on October 3, 2008. This act created a Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Under EESA, TARP funds may be used by the Secretary of the Treasury to purchase \"troubled assets,\" defined to include both mortgage-related financial instruments and \"any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability.\" The broad authorities provided to the SIGTARP by EESA have not changed even though the Secretary of the Treasury has modified the approach to stabilize the financial industry through the TARP. The 111th Congress has passed two bills containing provisions related to SIGTARP. P.L. 111-15 (S. 383/H.R. 1341), the Special Inspector General for the Troubled Asset Relief Program Act of 2009, was enacted on April 24, 2009, and addresses the SIGTARP's auditing, investigative, and hiring authorities. P.L. 111-22, the Helping Families Save Their Homes Act of 2009 (H.R. 1106/S. 895/S. 896), was enacted on May 20, 2009, and contains provisions concerning SIGTARP in the context of public-private investment funds. Other bills addressing the SIGTARP include H.R. 384 (which passed the House on January 21, 2009), H.R. 1242, H.R. 3179, S. 910, and S. 976.  This report will compare the duties and authorities of the SIGTARP to those of the Special Inspector General for Iraq Reconstruction (SIGIR) and the Special Inspector General for Afghanistan Reconstruction (SIGAR), as well as statutory IGs under the Inspector General Act of 1978, as amended (IG Act).  The report will also cover the authority that Inspectors General possess to conduct audits and investigations. Finally, the report will provide an overview of the SIGTARP's request to TARP recipients regarding their use or expected use of TARP funds, as well as their plans for following executive compensation limitations, and possible issues raised by the Paperwork Reduction Act. \n",
    "docs": [
      "Introduction Congress has established statutory offices of inspectors general (IGs) in many executive and legislative branch agencies, as well as two special IGs for programs and operations funded with amounts appropriated for the reconstruction of Iraq and Afghanistan. The four principal responsibilities of IGs are: (1) conducting and supervising audits and investigations; (2) providing coordination and recommending policies for activities designed to promote economy and efficiency in agency programs and operations; (3) preventing and detecting fraud, waste, and abuse; and (4) keeping the agency head and Congress fully and currently informed about problems and deficiencies relating to such programs and recommending corrective actions. The Emergency Economic Stabilization Act of 2008 (EESA), which was enacted as P.L.",
      " 110-343 on October 3, 2008, established an additional Special IG for the Troubled Asset Relief Program (SIGTARP). Under EESA, TARP funds may be used by the Secretary of the Treasury to purchase \"troubled assets,\" defined to include both mortgage-related financial instruments and other types of securities which the Secretary, after consulting the Chairman of the Board of Governors of the Federal Reserve System, determines to purchase as necessary \"to promote financial stability.\"  The 111 th Congress has passed two bills containing provisions related to the SIGTARP. P.L. 111-15, the Special Inspector General for the Troubled Asset Relief Program Act of 2009,",
      " was enacted on April 24, 2009. The Senate had passed a similar bill in the 110 th Congress. P.L. 111-15 makes modifications to the SIGTARP's audit and investigative authorities, grants the SIGTARP temporary hiring power outside of the competitive civil service process, grants the SIGTARP authority to hire up to 25 retired annuitants, requires coordination with other Inspectors General with regard to audits and other responsibilities, and makes SIGTARP reports publicly available, with certain exceptions. P.L. 111-15 makes SIGTARP, as well as the special IGs for Iraq and Afghanistan reconstruction,",
      " members of the newly codified Council of the Inspectors General on Integrity and Efficiency until the date that each special IG terminates.  P.L. 111-22, the Helping Families Save Their Homes Act of 2009, was enacted on May 20, 2009, and contains provisions with regard to SIGTARP in the context of public-private investment funds. Section 402 requires any public-private investment fund program (PPIP) to, in consultation with SIGTARP, impose conflict of interest rules on fund managers; allows the SIGTARP access to the books and records of such public-private investment funds; requires the Treasury Secretary to consult with the SIGTARP and issue regulations governing the interaction of the PPIP,",
      " the Term Asset Backed Securities Loan Facility (TALF), and other similar public-private investment programs; and mandates a report from the SIGTARP 60 days after such a program is established. The law also provides additional appropriations for the SIGTARP, and mandates that priority for those appropriations be given to the performance of audits or investigations of recipients of non-recourse federal loans made under programs funded in whole or in part by EESA funds.  EESA's Provisions Regarding the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) The provisions in EESA establishing the SIGTARP are similar to the IG provisions for SIGIR and SIGAR in many respects.",
      " However, there are important substantive distinctions between these three special IGs, as well as between the SIGTARP and the statutory IGs created under the Inspector General Act of 1978, as amended (IG Act). Due to the ambiguous nature of the statutory language in EESA, the scope of the powers and authorities of the SIGTARP, although clarified by P.L. 111-15, remains unclear in certain respects, as discussed below. Appointment, Confirmation, and Removal The SIGTARP is a presidentially appointed and Senate confirmed IG, selected \"on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis,",
      " law, management analysis, public administration, or investigations.\" Unlike statutory IGs under \u00a7 3 of the IG Act, who are also presidentially appointed and Senate confirmed, there is no provision in EESA that requires the SIGTARP to be appointed \"without regard to political affiliation and solely\" on the basis of the skills listed above. Although the absence of the additional IG Act language regarding political affiliation and appointment based only on job qualification skills does not change the legal protections that the IG Act and EESA afford to the SIGTARP, the SIGTARP may be less independent than other IGs as a practical matter, given that the SIGTARP is not subject to the same appointment constraints.",
      " The nomination of a SIGTARP was required \"as soon as practicable\" after the establishment of the TARP and the Troubled Assets Insurance Financing Fund. The SIGTARP nominee appeared in hearings before the Senate Committee on Banking, Housing and Urban Affairs and the Senate Committee on Finance in November, although the Finance Committee hearing was not an official nomination hearing. A Senate standing order approved on January 9, 2007, provided for sequential referral for a nomination to an \"Office of Inspector General\" to the Senate Homeland Security and Governmental Affairs Committee after proceedings in the committee with primary jurisdiction over the \"department, agency, or entity.\" That order did not refer to special IGs,",
      " however, and both SIGIR and SIGAR are not Senate-confirmed positions, so there was no controlling precedent for the nomination of a special IG prior to the SIGTARP's nomination. The Parliamentarian determined that \"the Senate Banking Committee [would] be charged with reporting the IG nominee to the full Senate.\" Neil Barofsky was confirmed by the Senate on December 8, 2008. Like other presidentially appointed and Senate-confirmed IGs, the SIGTARP can be removed only by the President, and the President must notify Congress of the reasons for the IG's removal. The President's reasons need not be given in writing and no time limit is set.",
      " Supervision Unlike agency IGs, who \"shall report to and be under the general supervision\" of the agency head, the SIGTARP will not be required to report to, or be supervised by, the head of any agency, including the Secretary of the Treasury. The IG Act does not explicitly define the meaning of \"general supervision\" and its legislative history does not appear to address the scope of the agency head's supervisory role. A court case relying on the legislative history of the IG Act described the agency head's supervisory authority over the IG as \"nominal.\" Instead, under one interpretation of the SIGTARP's duties and responsibilities,",
      " discussed below, the SIGTARP will report only to Congress and not the agency head. This reporting arrangement would be unique among statutory IGs. Additionally, as discussed further below in the section entitled \"EESA Authority to Conduct Investigations and Audits,\" the SIGTARP will have complete discretion in pursuing audits and investigations, and in issuing subpoenas. The SIGTARP appears to possess greater latitude in pursuing audits and investigations than the Treasury IG, as the Treasury IG is one of six IGs that may be prevented by an agency head from initiating, carrying out, or completing an audit or investigation, or from issuing a subpoena, for specified reasons such as preventing disclosure of national security matters.",
      " In contrast to the SIGTARP, the other special IGs report to, and are supervised by, the Secretary of State and the Secretary of Defense. SIGIR and SIGAR are also required to keep the Secretaries of State and Defense \"fully and currently informed about problems and deficiencies\" in program administration and the need for and progress on corrective action. Additionally, SIGIR and SIGAR must coordinate with the IGs for the Departments of State and Defense, and the United States Agency for International Development IG \"in carrying out the duties, responsibilities, and authorities of the Inspector General.\" Prior to the enactment of P.L. 111-15,",
      " the provisions for the SIGTARP did not require coordination with the Treasury IG or other IGs, although the SIGTARP had established a TARP-IG Council, with a GAO representative and representatives of the following IGs as members: the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Federal Housing Finance Agency, the Federal Reserve Board, the Department of Housing and Urban Development, the Treasury IG for Tax Administration, and the Treasury. P.L. 111-15 required the SIGTARP to coordinate with the IGs for Treasury, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Federal Reserve Board,",
      " the Federal Housing Finance Board, and \"any other entity as appropriate.\" Duties and Responsibilities This section discusses the interaction of EESA provisions and the duties and responsibilities section of the IG Act. The SIGTARP's authorization under EESA \u00a7 121(c)(1) to conduct audits and investigations related to the TARP, as well as proposals to modify his authorities, are discussed in detail starting on page 9 of this report. EESA \u00a7 121(c)(3) provides that the SIGTARP \"shall also have the duties and responsibilities of inspectors general under the Inspector General Act of 1978.\" On one hand, this provision could mean that the SIGTARP would be responsible for all of the IG duties outlined in the IG Act,",
      " presumably as amended, even those that reference interaction with the head of an establishment or those that reference responsibilities not specifically delineated in EESA. Yet it appears more likely that \u00a7 121(c)(3)'s reference to duties and responsibilities may be limited to those under \u00a7 4 of the IG Act, which is entitled \"Duties and responsibilities; report of criminal violations to Attorney General.\" The provision that grants the SIGTARP the same duties and responsibilities as those of IGs under the IG Act also appears in the acts that created SIGIR and SIGAR. This provision seems to bridge some, but not all, of the differences between the authorities of the special IGs and IGs created under the IG Act.",
      " If interpreted broadly, this provision will likely encompass the powers, duties, and responsibilities in certain sections of the IG Act, including, but not limited to \u00a7\u00a7 4(a)(2)-(a)(5), which encompass general IG duties and the responsibility to \"keep the head of such establishment and the Congress fully and currently informed, by means of the reports required by section 5 and otherwise, concerning fraud and other serious problems, abuses, and deficiencies relating to the administration of programs and operations\"; and \u00a7 4(d), which requires IGs to report expeditiously to the Attorney General when there exist \"reasonable grounds to believe there has been a violation of Federal criminal law.\" The \"and otherwise\"",
      " language in the requirement that IGs keep Congress \"fully and currently informed\" includes testifying at congressional hearings, direct communications with Members and staff, various selective or specialized reporting techniques, and responses to congressional inquiries for information, audits, and reports (both verbal and written). Depending on how \u00a7 121(c)(3) is interpreted, it is possible that the SIGTARP's responsibilities will not encompass \u00a7 4(a)(1) of the IG Act. That section provides that IGs are \"to provide policy direction for and to conduct, supervise, and coordinate audits and investigations relating to the programs and operations of such establishment.\" Since the provisions creating the SIGTARP contain specific language with regard to conducting,",
      " supervising, and coordinating audits and investigations, and this specific language does not mention \"policy direction,\" this provision of the IG Act would not seem to be included in the duties mentioned in \u00a7121(c)(3). SIGTARP Reports If the SIGTARP's duties and responsibilities are interpreted to be confined to those in \u00a7\u00a04 of the IG Act, the above cross reference to \"the reports required by section 5\" in \u00a7\u00a04(a)(5) of the IG Act appears to subject the SIGTARP to the IG Act \u00a7 5 reporting requirements as well. However, it is not clear as to whether the SIGTARP would need to submit the reports in \u00a7 5 of the IG Act in addition to the reports required in EESA or whether the SIGTARP would only be responsible for the required reports set forth in EESA.",
      " For example, \u00a7 5(d) of the IG Act requires establishment IGs to immediately report \"particularly serious or flagrant problems, abuses, or deficiencies\" to the head of the establishment whenever the IG becomes aware of such issues. The head of the establishment then must send the report to the appropriate congressional committees within seven days, along with the establishment head's comments in his or her own report. Since EESA requires the SIGTARP to report to Congress only, and not to an establishment head, it is not clear if the SIGTARP would be required to comply with those reporting requirements in \u00a7 5(d) of the IG Act.",
      " If EESA is interpreted to include the reporting requirements in \u00a7 5 of the IG Act, then the SIGTARP could be required to submit certain reports to the establishment head, which would appear to be the Secretary of the Treasury, as TARP itself has not been designated an establishment. EESA \u00a7 121(f) specified certain reporting requirements for the SIGTARP, including a report 60 days after the SIGTARP's confirmation by the Senate and every calendar quarter thereafter. P.L. 111-15 amended this provision to require the SIGTARP to submit reports to the appropriate congressional committees no later than 30 days after the end of each fiscal quarter,",
      " instead of each 120-day period after the initial 60 day report following the SIGTARP's confirmation.  The SIGTARP report must include \"a detailed statement of all purchases, obligations, expenditures, and revenues associated with\" the TARP. The specificity of the language of this report provision could be interpreted to imply that the \"duties and responsibilities\" provision in \u00a7 121(c)(3) would not extend to the reporting requirements set out in \u00a7 5 of the IG Act, which provides that the IG office must prepare semiannual reports and submit them to the head of the establishment, who in turn must transmit them to appropriate congressional committees with his or her own report.",
      " Alternatively, the IG Act \u00a7 5 reports could be required in addition to the reports set out in EESA. There is no explicit requirement in EESA that the Treasury Secretary (or anyone else) be allowed to comment on the reports that the SIGTARP submits to Congress. Although there may be other reporting requirements with respect to TARP, they would not be intended to respond to SIG concerns or criticisms. SIGAR and SIGIR have such requirements enabling the Secretaries of State and Defense to submit comments to the appropriate congressional committees, as well as requirements that the reports be made public, and even published on a website. The IG Act also provides that the head of the establishment must make the semiannual IG reports and the semiannual establishment head reports available to the public,",
      " on request, within 60 days of the establishment head's transmission of the reports to the appropriate congressional committees. P.L. 111-15 added a provision requiring the Treasury Secretary to \"take action to address deficiencies identified by a [SIGTARP] report or investigation,\" or to certify to the appropriate congressional committees \"that no action is necessary or appropriate.\" Additionally, P.L. 111-15 required a September 1, 2009, report to Congress \"assessing use of any funds, to the extent practical, received by a financial institution under the TARP.\" Such a report would be publicly available on the SIGTARP's website \"within 24 hours after the submission of the report.\" P.L.",
      " 111-15 also required all reports submitted by the SIGTARP to be publicly available, with exceptions prohibiting public disclosure of certain information. Whistleblower Protections It is important to note that EESA \u00a7 121(c)(3) will not necessarily encompass the whistleblower protections in \u00a7 7 of the IG Act. These provisions address complaints or information provided by a whistleblowing employee, the disclosure of a whistleblower's identity, and reprisals threatened or taken against a whistleblower. Under the IG Act, not every complaint must be investigated, and the IG has discretion in accepting complaints from individuals other than employees. However, it appears that IGs are willing to accept complaints from anyone,",
      " not just employees, and the legislative history of the IG Act does not prohibit IGs from receiving and acting on information or complaints from any source. On a related note, EESA provides that the Financial Stability Oversight Board, as established by the legislation, will be responsible for \"reporting any suspected fraud, misrepresentation, or malfeasance\" to the SIGTARP or the Attorney General. However, a whistleblower with information concerning the possible existence of illegal activities or mismanagement regarding the purchase or insurance of troubled assets could conceivably be covered by the IG Act \u00a7 7 protections if he or she reported the information to the Treasury IG,",
      " as opposed to the SIGTARP. The acts that created SIGIR and SIGAR do not contain whistleblower protections either. In view of the fact that the current TARP approach is concentrating on banking concerns, it is interesting to note that federal law providing whistleblower protection to employees of insured depository institutions and federal banking agencies applies only to information turned over to federal banking agencies or the Attorney General. Resources and Law Enforcement Authority Section 121(d) of EESA states that the SIGTARP will have the authorities of \u00a7 6 of the IG Act, which provides in subsection (c) that the head of an establishment must give the IG office within the establishment adequate office space,",
      " equipment, supplies, and other services. It could be argued that the Secretary of the Treasury is the head of the establishment in which the TARP is located, as \u00a7 11(2) of the IG Act defines \"establishment\" to include the Treasury. In addition, \u00a7\u00a06(a)(3) of the IG Act provides that the IG is authorized \"to request information or assistance as may be necessary for carrying out the duties and responsibilities provided by the IG Act from any Federal, State, or local government agency or unit thereof.\" It is not clear if \"assistance\" would cover office space, however, if it does,",
      " the SIGTARP would appear to be able to request such resources from the Treasury Department. In practice, Treasury initially provided space to SIGTARP. In contrast, EESA specifically provides that \"[t]he Secretary shall provide the Comptroller General with appropriate space and facilities in the Department of the Treasury as necessary to facilitate oversight of the TARP until the termination date established in section 120.\" The provisions in the act creating SIGAR enabled that special IG to rely on the personnel, facilities, and resources of another special IG, SIGIR. SIGIR, in turn, could rely on the Department of State or the Department of Defense for equipment,",
      " office supplies, and communications facilities and services within either agency, including at appropriate locations of the Department of State in Iraq. Section 6(e) of the IG Act enables the Attorney General to authorize certain IGs, assistant IGs, and special agents supervised by assistant IGs to carry firearms, make arrests without warrants, and seek and execute arrest warrants. The Attorney General may authorize such powers after an initial determination that the affected IG's office is \"significantly hampered\" by the lack of such powers, that assistance from other law enforcement agencies is insufficient, and that internal safeguards are in place. IG Act \u00a7 6(e)(3)",
      " lists the IG offices of certain entities that are exempt from the Attorney General's initial determination. P.L. 111-15 added the SIGTARP to the list of IG offices exempt from such initial determination by the Attorney General. Hiring Staff for the SIGTARP Office EESA \u00a7 121(e) provides that the SIGTARP \"may select, appoint, and employ such officers and employees as may be necessary for carrying out the duties of the [SIG], subject to the provisions of title 5, United States Code, governing appointments in the competitive service, and the provisions of chapter 51 and subchapter III of chapter 53 of such title,",
      " relating to classification and General Schedule pay rates.\" This provision mirrors the language in SIGIR's provisions, and means that SIGTARP employees would be hired under civil service laws. However, Congress recently provided SIGIR with temporary employment authority that follows the authority granted to temporary federal organizations. Employees in such temporary federal organizations are excepted from competitive civil service rules in title 5, United States Code regarding appointment, pay, and classification. There are several categories of positions excepted by the Office of Personnel Management (OPM) from competitive service\u2014Schedules A, B, and C\u2014for which it is not practical to adhere to qualification requirements of the competitive civil service or hold competitive examinations or which are political appointments.",
      " P.L. 111-15 gave the SIGTARP temporary hiring power outside of competitive civil service requirements akin to that of SIGIR under 5 U.S.C. \u00a7 3161. Such temporary hiring power is only in effect for six months after the date on which P.L. 111-15 was enacted\u2014until the end of October 2009. Additionally, P.L. 111-15 granted the SIGTARP the authority to hire up to 25 retired annuitants. Their annuity will continue while they are employed by the office of the SIGTARP. Although EESA does not provide for this temporary hiring authority for the SIGTARP,",
      " EESA \u00a7 121(e)(3) provides that the SIGTARP \"may enter into contracts or other arrangements for audits, studies, analyses, and other services with public agencies and with private persons, and make such payments as may be necessary to carry out the duties of the Inspector General.\" Thus, it appears that the SIGTARP has the authority to hire employees for the office under such contracts or arrangements. Funding EESA \u00a7 121(g) provides that the SIGTARP shall have $50 million to carry out the duties of the office. P.L. 111-15 would make such funds available \"not later than 7 days\"",
      " after the date of the enactment of P.L. 111-15 on April 24, 2009. P.L. 111-15's provisions regarding funding may have been aimed at preventing issues similar to those that arose with funding for SIGAR, for which $20 million authorized in initial funding was not disbursed. Congress allotted a total of $7 million, but the SIGAR noted in a report that \"due to current funding restraints, SIGAR does not expect to reach full operational capacity until the 4 th quarter of fiscal year 2009.\" Termination EESA \u00a7 121(h) establishes that the office of the SIGTARP \"shall terminate on the later of\u2014(",
      "1) the date that the last troubled asset acquired by the Secretary under section 101 has been sold or transferred out of ownership or control of the Federal Government; or (2) the date of expiration of the last insurance contract issued under section 102.\" In contrast, SIGIR and SIGAR \"shall terminate 180 days after the date on which amounts appropriated or otherwise made available for the reconstruction of Iraq [or Afghanistan] that are unexpended are less than $250,000,000.\" While the continuation of the other special IGs is limited based on the amount of the reconstruction accounts, the SIGTARP may be a continuing necessity to audit the purchase,",
      " transfer, sale, and insurance of troubled assets, in whatever form they may take under EESA \u00a7 3(9).  IGs' Authority to Conduct Audits and Investigations This portion of the report provides a legal analysis of the general ability of IGs to conduct audits and investigations, as well as the specific authority of the SIGTARP to conduct audits and investigations. At the outset, it is important to recognize that most IGs have virtually unfettered discretion over initiating and conducting audits and investigations dealing with waste, fraud, and abuse within their own agencies. As a corollary, they may accept, delay, modify, or reject a request to conduct an audit or investigation from any party,",
      " including individual Members of Congress, officials at the Office of Management and Budget, other IGs, IG councils, agency officials, and private parties and organizations. Only a provision in a statute could officially order an IG investigation or audit. However, IGs are intended to serve as an oversight arm of Congress within agencies, and it is Congress that has explicitly delegated auditing and investigative functions to IGs. Congress is not prohibited from requesting IGs to conduct audits or investigations, and no improprieties are raised when a committee or a Member makes such a request. The legislative history of the IG Act supports the understanding that Congress could ask IGs for information.",
      " IGs generally comply with such requests. Background Under \u00a7 6 of the IG Act, IGs have been granted broad authority to conduct audits and investigations; to gain direct access to agency records and information; to request assistance from other federal, state, and local government agencies; to subpoena information and documents; to administer oaths when taking testimony; to hire staff and manage their own resources; and to carry firearms, make arrests, and execute warrants. The SIGTARP retains these powers as well, as EESA \u00a7 121(d) provides that the SIGTARP \"shall have the authorities provided in section 6 of the Inspector General Act of 1978.\" However,",
      " concerns have been expressed with regard to the SIGTARP's ability to obtain records from third parties. The equity purchase transactions under the TARP involve applications to Treasury from regulated banks, thrifts, bank holding companies, and thrift holding companies, through their federal regulators, who have access to virtually all the records of the institutions and are required to examine them periodically. Some of these records may be subject to laws preventing disclosure except to bank regulators. On the other hand, this may not be the case with many of the entities that may be involved in mortgage-related securities purchases, either as contractors to aid Treasury in pricing the assets or as holders of mortgage-related securities.",
      " Such entities include mortgage-backed securities trusts, hedge funds, and investment banks. The books of these entities would not have undergone the routine scrutiny involved in bank supervision, and the entities may be unaccustomed to opening their books to federal regulators outside of their participation in the TARP program. Prioritization and Breadth of SIGTARP Audits and Investigations EESA grants discretion for the SIGTARP in setting investigative priorities and making specific commitments. The SIGTARP is authorized under EESA \u00a7 121(c)(1) \"to conduct, supervise, and coordinate audits and investigations of the purchase, management, and sale of assets by the Secretary of the Treasury under any program established by the Secretary under section 101,",
      " and the management by the Secretary of any program established under section 102, including by collecting and summarizing [certain] information\" related to troubled assets. Other than these categories, EESA contains no requirements or criteria directing what types of audits and investigations might be conducted, at what level and extent, when, and at what expense (within the office's budget).  Congress did provide priorities for SIGTARP audits and investigations in a later law\u2014P.L. 111-22 made additional funds available to the SIGTARP, for which the SIGTARP must \"prioritize the performance of audits or investigations of recipients of non-recourse Federal loans made under any program that is funded in whole or in part by funds appropriated under [EESA], to the extent that such priority is consistent with other aspects of the mission of the [SIGTARP].\" The provision states that \"[s]",
      "uch audits or investigations shall determine the existence of any collusion between the loan recipient and the seller or originator of the asset used as loan collateral, or any other conflict of interest that may have led the loan recipient to deliberately overstate the value of the asset used as loan collateral.\" In another post-EESA law, Congress amended EESA \u00a7 121(c) to address concerns regarding whether the SIGTARP's audit and investigative authority was limited to TARP-specific duties specified in EESA \u00a7 121(c)(1) or whether the SIGTARP could conduct audits and investigations of activities related to EESA funds. P.L. 111-",
      "15 added a provision to the SIGTARP's existing authorities stating that the SIGTARP \"shall have the authority to conduct, supervise, and coordinate an audit or investigation of any action taken under this title [which covers the TARP] as the [SIGTARP] determines appropriate,\" with the exception of actions taken under EESA \u00a7\u00a7 115, 116, 117, and 125. These sections respectively address graduated authorization granted to the Treasury Secretary to purchase troubled assets, oversight and audits by the Comptroller General (head of the Government Accountability Office), a Comptroller General study and report on margin authority \"to determine the extent to which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis,\" and the Congressional Oversight Panel.",
      " The language in P.L. 111-15 provided additional authorities to the SIGTARP's existing authority regarding audits and investigations under the TARP program and appears to be broader than similar language proposed in H.R. 384.  H.R. 384 would also amend EESA to address auto industry financing and restructuring and provide an additional duty for the SIGTARP\u2014conducting, supervising, and coordinating audits and investigations of the \"President's designee.\" H.R. 384 defines the \"President's designee\" as \"one or more officers from the Executive Branch having appropriate expertise in such areas as economic stabilization, financial aid to commerce and industry,",
      " financial restructuring, energy efficiency, and environmental protection to carry out\" the auto industry financing and restructuring. Additionally, H.R. 384 provides that \"[t]he Special Inspector General shall also have the duties, responsibilities, and authorities of inspectors general under the Inspector General Act of 1978, including section 6 of such Act.\" The bill may add this sentence regarding \u00a7 6 because it would emphasize that the SIGTARP's duties, responsibilities, and authorities are not confined to those in EESA \u00a7 121(c). EESA \u00a7 121(d)(1) states: \"In carrying out the duties specified in subsection(c), the Special Inspector General shall have the authorities provided in section 6 of the Inspector General Act of 1978.\" Jurisdiction Additionally,",
      " for most IGs, there are no boundaries on the jurisdiction of the IG over agency programs, operations, or internal units. Most IGs are authorized \"to make such investigations and reports relating to the administration of the programs and operations of the applicable establishment as are, in the judgment of the Inspector General, necessary or desirable.\" As with other references to IG Act \u00a7 6, this provision applies to the SIGTARP. Courts have also held that the IGs' investigative authority extends to private contractors: [T]he legislative history of the Act clearly indicates that Congress specifically intended to extend the OIG's power of review over private entities working closely with government agencies because such entities are privy to highly confidential information and are paid large sums of federal funds for their services,",
      " creating a potential risk for abuse both inside and outside government agencies. Access to Agency Materials Supporting their responsibilities, IGs are \"to have access to all records, reports, audits, reviews, documents, papers, recommendations, and other material available to the applicable establishment which relate to programs and operations with respect to which that Inspector General has responsibilities under this Act.\" There is no limitation on this right of access in the IG Act. The IG's ability to \"have access to all records\" indicates that the IG's investigative and audit powers extend into the private sector and to individuals outside the agency, for instance, when the IG audits contracts with industry or investigates suspected fraud in agency purchases or other wrongdoing by private individuals in connection with agency operations and programs.",
      " The SIGTARP retains these powers as well, as EESA \u00a7 121(d) provides that the SIGTARP \"shall have the authorities provided in section 6 of the Inspector General Act of 1978.\" As a result, it appears that the SIGTARP would be able to access records of third-parties that participate in the TARP program and that relate to EESA funds. However, additional legislation could make the SIGTARP's authority in this area more explicit. In the event that a private entity would not voluntarily yield its records to the SIGTARP, the IG would have the option of using his subpoena power,",
      " as discussed below. Subpoena Power Section 6(a)(4) of the IG Act, states that \"each Inspector General, in carrying out the provisions of this Act, is authorized... to require by subpoena the production of all information, documents, reports, answers, records, accounts, papers, and other data in any medium (including electronically stored information, as well as any tangible thing) and documentary evidence necessary in the performance of the functions assigned by this Act.... \" Subpoena authority under the IG Act is delegable, and subpoenas issued under the act are judicially enforceable. The IG Act contains no explicit prohibition on disclosure of the existence or specifics of a subpoena issued under this authority.",
      " The SIGTARP retains these subpoena powers as well, as EESA \u00a7 121(d) provides that the SIGTARP \"shall have the authorities provided in section 6 of the Inspector General Act of 1978.\" The legislative history of the IG Act addresses the subpoena as an investigative tool intended for use in both administrative and criminal investigations: Subpoena power is absolutely essential to the discharge of the Inspector and Auditor General's functions. There are literally thousands of institutions in the country which are somehow involved in the receipt of funds from Federal programs. Without the power necessary to conduct a comprehensive audit of these entities, the Inspector and Auditor General could have no serious impact on the way federal funds are expended.... The committee does not believe that the Inspector and Auditor General will have to resort very often to the use of subpoenas.",
      " There are substantial incentives for institutions that are involved with the Federal Government to comply with requests by an Inspector and Auditor General. In any case, however, knowing that the Inspector and Auditor General has recourse to subpoena power should encourage prompt and thorough cooperation with his audits and investigations. The committee intends, of course, that the Inspector and Auditor General will use this subpena power in the performance of is statutory functions. The use of subpena power to obtain information for another agency component which does not have such power would clearly be improper. The Justice Department reports that the \"the Inspector General['s administrative subpoena] authority is mainly used in criminal investigations,\" and the courts have held that \"the Act gives the Inspectors General both civil and criminal investigative authority and subpoena powers coextensive with that authority.\" The legislative history of the IG Act also discusses subpoenas of third-party bank records,",
      " in other words, financial records of individuals held by a bank. Authority to Administer Oaths and Conduct Interviews IGs and the SIGTARP (through the authorities in IG Act \u00a7 6 as provided by EESA \u00a7 121(d)) have the authority \"to administer to or to take from any person an oath, affirmation, or affidavit, whenever necessary in the performance of the functions assigned by this Act.\" The phrase \"any person\" indicates that the IG's investigative powers extend into the private sector and to individuals outside the agency. Oaths administered by IGs \"shall have the same force and effect as if administered or taken by or before an officer having a seal.\" False material statements made to an IG under oath may subject an individual to criminal prosecution or perjury charges.",
      " Several court cases discuss an OIG's ability to conduct interviews in the course of investigations. In United States Nuclear Regulatory Commission v. Federal Labor Relations Authority (FLRA), the United States Court of Appeals for the Fourth Circuit noted that the IG Act facilitates the IG's auditing and investigative functions by giving \"each Inspector General access to the agency's documents and agency personnel.\" The court held that four proposals by a union \"regarding procedures to be followed during investigatory interviews of the agency's employees by the Inspector General\" were not consistent with the IG Act because \"Congress intended that the Inspector General's investigatory authority include the power to determine when and how to investigate.\" To grant the union's proposals regarding interviews \"would directly interfere with the ability of the Inspector General to conduct investigations.\" The United States Court of Appeals for the D.C.",
      " Circuit echoed the Fourth Circuit's remarks regarding IG independence in United States Department of Justice v. FLRA. The court stated \"there cannot be the slightest doubt that Congress gave the Inspector General the independent authority to decide 'when and how' to investigate; that the Inspector General's authority encompasses determining how to conduct interviews under oath.\" Although both this case and United States Nuclear Regulatory Commission v. FLRA dealt with OIG interviews of agency employees, the D.C. Circuit noted that \"[a]nyone\u2014whether a union member, a management official or an individual not employed by the federal government\u2014would be prudent to secure legal representation if they are to be questioned under oath.\" In National Aeronautics and Space Administration (NASA)",
      " v. FLRA, the United States Supreme Court detailed the independent characteristics of OIGs and their authority to conduct audits and investigations. The court held that, in the context of a federal labor relations statute, the NASA-OIG investigative interviewer was a representative of the agency and found that \"those [independent IG Act] characteristics do not make NASA-OIG any less a representative of NASA when it investigates a NASA employee.... As far as the IG [Act] is concerned, NASA-OIG's investigators are employed by, act on behalf of, and operate for the benefit of NASA.\" The Court also noted two limitations of the IG Act:",
      " (1) it \"grants Inspectors General the authority to subpoena documents and information, but not witnesses,\" and (2) \"[t]here may be other incentives for employee cooperation with OIG investigations, but formal sanctions for refusing to submit to an OIG interview cannot be pursued by the OIG alone.\" Rather, the OIG may request assistance from the agency head \"insofar as is practicable and not in contravention of the law,\" which has been interpreted to mean that the agency head could direct the employee to appear at an OIG interview. Possible Rationales for Delaying, Modifying, or Rejecting a Requested Audit or Investigation As noted above,",
      " IGs have discretion in mounting audits and investigations. IGs may decline requests to conduct audits or investigations, citing other investigative priorities. IGs may also determine that indications of wrongdoing are insufficient to warrant the OIG's commitment of resources to investigate them. Additionally, the IG might consider that an investigation now could prove disruptive to, delay, or compromise any ongoing administrative and judicial proceedings. An immediate IG investigation could also prove counterproductive to future inquiries, including an effort by the OIG itself. Conversely, an investigation started after the conclusion of administrative and judicial proceedings could benefit from the potential presentation of additional information. The SIGTARP Letter to TARP Recipients and the Paperwork Reduction Act On January 22,",
      " 2009, SIGTARP Neil Barofsky noted in a letter to the Chairman of the House Committee on Financial Services that his office was preparing requests to TARP recipients asking them to provide information and documentation related to their use or expected use of TARP funds, as well as their plans for following executive compensation limitations, within 30 days of the request.  On January 30, 2009, in a letter to the Director of the Office of Management and Budget (OMB), Peter R. Orszag, Senator Grassley disclosed that OMB had \"advised the IG that SIGTARP could not initiate its significant oversight effort to improve the general transparency of TARP funds due to restrictions of the Paperwork Reduction Act\"",
      " (PRA). According to the letter, SIGTARP requested \"Emergency Processing\" by OMB of its letter to TARP recipients. Reportedly, OMB initially noted that SIGTARP \"would not be limited\" by the PRA, and then subsequently withdrew its emergency approval within several minutes of granting such approval. According to the letter, it was Senator Grassley's understanding at the time that OMB \"is requiring SIGTARP to post a proposed letter of inquiry to TARP recipients for 15 days, wait for comments, and then justify to OMB that it has taken into account the public comments in redrafting the inquiry letter.\" It is not clear if a proposed letter of inquiry was posted for 15 days,",
      " but it appears unlikely that it was posted, given the following chain of events. According to testimony on February 5, 2009, by SIGTARP Neil M. Barofsky, the office \"received approval from OMB to send letter requests to each of the TARP recipients\" that week. On that day, the SIGTARP began issuing letters with an OMB control number that expires in August 2009. Such letters were sent from February 5-11, 2009, and encompass the issues indicated in the SIGTARP's January 22, 2009 letter. According to the SIGTARP's testimony on February 24,",
      " 2009, the office has \"already begun to receive responses to these requests and look[s] forward to providing an interim report to Congress on this audit project after we receive the responses.\" Also on February 5, 2009, the Department of the Treasury posted a comment request regarding the collection of information that the SIGTARP proposed to undertake under the PRA with regard to TARP recipients. It was published in the Federal Register on February 11, 2009. The comment request noted that the SIGTARP's information collection requirement was submitted to OMB \"for emergency review, and it has been approved under the [PRA].\" The section of the comment request describing the purpose of the SIGTARP information collection noted that the questionnaires \"are intended to accommodate a September 2009 report to Congress,\" and the summary of the proposed information collection estimated that the questionnaires would be sent to 350 respondents,",
      " \"[b]ased upon current program participants.\" This estimate may increase as the Treasury announced its plan for the use of the remainder of the TARP funds on February 10, 2009, the date before the comment request was published.  The Paperwork Reduction Act Under the PRA, agencies must receive approval (signified by an OMB control number displayed on the information collection) for each collection of information request before it is implemented. Failure to obtain approval for an active collection, or the lapse of that approval, represents a violation of the Act, and triggers the PRA's public protection provision. Under that provision, no one can be penalized for failing to comply with a collection of information subject to the PRA if the collection does not display a valid OMB control number or if the agency does not inform the respondents that they are not required to respond unless the collection of information contains a valid OMB control number.",
      " OIRA can disapprove any collection of information if it believes the collection is inconsistent with the requirements of the PRA. It has been estimated by some in the IG community that it takes nine to ten months to receive approval for a collection of information under the PRA. The Act generally defines a \"collection of information\" as the obtaining or disclosure of facts or opinions by or for an agency by 10 or more nonfederal persons. The PRA does not apply to collections of information \"during the conduct of a Federal criminal investigation,\" or \"during the conduct of... an administrative action or investigation involving an agency against specific individuals or entities,\" which would appear to include IG investigations that fall within this category.",
      " However, the PRA does apply to \"the collection of information during the conduct of general investigations... undertaken with reference to a category of individuals or entities such as a class of licensees or an entire industry.\" The PRA requires agencies to justify any collection of information from the public by establishing the need and intended use of the information, estimating the burden that the collection will impose on respondents, and showing that the collection is the least burdensome way to gather the information.  Each agency must \"establish a process within the office headed by the Chief Information Officer\" whereby the proposed collections of information are reviewed before being submitted to OMB. Agencies cannot conduct a collection of information until after undertaking such a review,",
      " evaluating public comments received, and submitting a certification that the information collection meets statutory requirements (such as being written in plain terms and \"necessary for the proper performance of the functions of the agency\" ), in addition to receiving OMB approval and a control number. However, an agency \"may request the Director [of OMB] to authorize a collection of information,\" upon the agency head's determination that  (A) a collection of information- (i) is needed prior to the expiration of time periods established... ; and  (ii) is essential to the mission of the agency; and  (B) the agency cannot reasonably comply with the provisions of [the PRA]",
      " because\u2014 (i) public harm is reasonably likely to result if normal clearance procedures are followed;  (ii) an unanticipated event has occurred; or  (iii) the use of normal clearance procedures is reasonably likely to prevent or disrupt the collection of information or is reasonably likely to cause a statutory or court ordered deadline to be missed. OMB must report to Congress annually and include in such report \"a list of all violations\" of the PRA. Neither the PRA, the IG Act, nor EESA contain explicit language discussing whether IG investigations and audits are subject to the requirements of the PRA. Both the PRA and IG Acts and their subsequent major amendments or reform acts (in 1986 and 1995 for the PRA,",
      " and in 1988 and 2008 for the IG Act) are silent on this issue, as is EESA. A search of the Congressional Record debate regarding EESA similarly indicated that this issue was not raised. Nor does it appear that the issue of the PRA and its potential impact on the SIGTARP's ability to obtain information was raised in SIGTARP confirmation hearings.  Potential Approaches for the SIGTARP and Congress with Regard to Requests Presumed to be Subject to the PRA Assuming that the PRA is construed to apply to the SIGTARP and future information collection requests, in the event that the SIGTARP encounters additional difficulties under the PRA process,",
      " there are several approaches that the SIGTARP or Congress could pursue. One approach would be for the SIGTARP to proceed with the information collection regardless of the requirements of the PRA or to only send future requests to nine entities. The potential repercussions of ignoring the PRA would be that the public protection provision of the PRA would be triggered and that the entities that received the SIGTARP request could not be penalized for failing to comply with that collection of information. However, public expectations might decrease potential noncompliance by recipients of TARP funds or the challenge of a request from SIGTARP, whose purpose is to provide oversight of such expenditures,",
      " for information regarding how the entity spent its funds.  A second approach to address the SIGTARP's responsibilities and the PRA would be for Congress to enact an amendment to the PRA that would exclude SIGTARP, or executive branch IGs generally, from the definition of \"agency,\" similar to the exclusions currently provided for the GAO and the Federal Election Commission. It could be argued that GAO has similar auditing and investigative functions to those of IGs. The former President's Council on Integrity and Efficiency, a council of presidentially appointed IGs that has now been codified, reconstituted, and renamed under the Inspector General Reform Act of 2008,",
      " has previously suggested amendments that would (1) exempt federal IGs from the PRA definition of \"agency,\" and (2) add a new section which, when read with the rest of the statute, would state: \"Except as provided in paragraph (2), this chapter shall not apply to the collection of information... (B) during the conduct of... (iii) audits, inspections, evaluations, investigations or other reviews conducted by federal inspectors general.\" S. 976 would provide such an exemption for statutory IGs, special IGs, the Council of IGs on Integrity and Efficiency, and the Recovery Accountability and Transparency Board, which is comprised of IGs and a presidential designee or appointee.",
      " A third approach would be for Congress to create an exemption from the PRA for collections of information undertaken specifically with regard to TARP funds in 44 U.S.C. \u00a7 3518(c)(2), which states that the PRA applies to \"the collection of information during the conduct of general investigations... undertaken with reference to a category of individuals or entities such as a class of licensees or an entire industry.\" Such a legislative fix could state that the provision would not apply to collections of information undertaken by the SIGTARP. A fourth approach would be for SIGTARP to use its subpoena powers to compel the production of such information by TARP fund recipients.",
      " As mentioned above, EESA \u00a7 121(d) gives the SIGTARP the \"authorities provided in section 6\" of the IG Act, which encompass subpoena powers. \n"
    ],
    "length": 10255,
    "hardness": null,
    "role": null
  },
  {
    "id": 47,
    "question": null,
    "answer": "Tanzania is an East African country comprising a union of Tanganyika, the mainland territory, and the semiautonomous Zanzibar archipelago. The United States has long considered Tanzania a partner in economic development and, increasingly, in regional security efforts. With nearly 54 million people, Tanzania is one of the largest countries in Africa by population and is endowed with substantial natural resource wealth and agricultural potential. Over the past decade, it has experienced robust economic growth based largely on favorably high gold prices and tourism; growth has averaged nearly 7% annually. The ongoing development of large reserves of offshore natural gas discovered in 2010 has raised the prospect of substantial foreign investment inflows and export revenue. Nevertheless, corruption and poor service delivery have hindered efforts to curb widespread poverty, and extensive development challenges remain. Since 1977, Tanzanian politics have been dominated by the ruling Chama Cha Mapinduzi (CCM, Party of the Revolution), created through the merger that year of the single parties that had controlled the mainland and Zanzibar since 1964. Opposition parties face periodic harassment and de facto restrictions on their activities. President John Magufuli, who leads the CCM, was elected in late October 2015 and is serving his first five-year term in office. His predecessor, Jakaya Kikwete, also of the CCM, assumed power in 2005 and won reelection in 2010, but was constitutionally barred from running for a third term. The 2015 polls featured a close contest between the CCM and a coalition of the leading opposition parties.  Tanzania is generally stable and peaceful, despite periodic threats to public safety. These include sporadic attacks on tourists in Zanzibar, several unattributed armed attacks on police, and occasional bombings of Christian churches and other targets. Tanzania has occasionally arrested suspected Islamic extremists, as in April 2015, when a group of 10 alleged members of the Somali Al Qaeda-linked terrorist group Al Shabaab were taken into custody.  U.S.-Tanzanian relations are cordial, but have suffered tensions over the contentious 2015/2016 election in Zanzibar, restrictions on civil liberties, and other issues. President Kikwete was the first African head of state to meet with former President Obama after the latter took office, and President Obama stated that a \"shared commitment to the development and the dignity of the people of Tanzania\" underpins bilateral ties. Tanzania also maintains close economic and political ties with China. Under the Obama Administration, aid cooperation was generally robust. How ties and assistance cooperation may proceed under the Administration of President Donald Trump and during the 115th Congress has yet to be determined. U.S. aid for Tanzania has focused primarily on health, food security, agricultural development, and infrastructure, largely under multiple major presidential initiatives. U.S. assistance has also supported Tanzania's hosting of large numbers of refugees from the region. Tanzania is eligible for African Growth and Opportunity Act (AGOA) trade benefits and in 2013 completed a $698 million Millennium Challenge Corporation (MCC) compact focused on poverty reduction and economic growth. The MCC has since suspended activity in support of a possible second compact, citing governance concerns. U.S. security assistance increased after the 1998 Al Qaeda bombing of the U.S. Embassy in Dar es Salaam. Tanzania was one of six initial participants in the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP), which aims to build the peacekeeping capacity of African militaries. Tanzania is a troop contributor to United Nations (U.N.) peacekeeping operations in multiple African countries and Lebanon. \n",
    "docs": [
      "Introduction The United Republic of Tanzania is an East African country of nearly 54 million people that is about twice as large as California. The International Monetary Fund (IMF) estimates it to have been the 31 st -poorest country globally in 2016 when ranked by per capita gross domestic product (GDP), which stood at $970 in 2016. The country has substantial natural resource wealth and agricultural potential, however, and multiple socioeconomic development indicators have generally improved in recent years. Its relative political stability and government reforms have attracted substantial official development aid, although there are abiding concerns regarding corruption and a difficult business climate. Despite such challenges,",
      " some sectors of the economy, most notably the extractive industries, are attracting private investment. President John Magufuli was elected in 2015 and is serving his first five-year term in office. U.S.-Tanzanian ties have generally been cordial and U.S. aid expanded significantly under the last two U.S. Administrations. Since the 2015 elections, however, U.S. concerns about Tanzania's governance have raised some tensions. Such concerns have centered on the nullification of the 2015 election results (and the subsequent rerun in 2016) in the semiautonomous coastal region of Zanzibar,",
      " restrictions on civil liberties, and similar issues. Citing such concerns, in March 2016, the U.S. Millennium Challenge Corporation (MCC) Board announced it would suspend its partnership with Tanzania, deferring a vote on the country's continued eligibility for a potential second large development compact; this effectively ended, for the time being, the development of a second MCC compact with Tanzania, following its completion of an initial compact between 2008 and 2013. The MCC had previously authorized and helped fund initial research and concept design activities focused on the development of a second compact, which had been expected to center on the electrical power sector\u2014and in mid-",
      "2015 had informed Congress of its intent to negotiate such a compact Tanzania. These developments ran counter to a prior narrative of improving governance and economic development in Tanzania and closer U.S. ties, underscored by former President Obama's July 2013 visit to the country, during which he highlighted such progress, as well as growing U.S. trade and investment ties. Despite the later tensions, the Obama Administration described bilateral ties as being characterized by a \"strong\" partnership focused on a \"shared vision of improving the quality of life for all Tanzanians\" in its FY2017 State Department/U.S. Agency for International Development (USAID)",
      " foreign aid budget submission to Congress. How bilateral ties may proceed under the Trump Administration and during the 115 th Congress has yet to be determined, but they appear likely to remain on a positive track. An April 26, 2017, press release issued under the name of Secretary of State Rex Tillerson characterized the U.S.-Tanzanian relationship as \"strong,\" and \"marked by a collaborative effort toward shared goals and close cooperation on a variety of programs and initiatives, from health and education, promoting economic growth and democratic governance, and advancing regional security,\" and projected similar trends in the future. Tanzania may also benefit from the fact that Mark Green,",
      " the new USAID Administrator, is a former U.S. ambassador to the country (2007 to 2009). In recent years, Tanzania has been the second- or third-largest annual recipient of such aid in sub-Saharan Africa, with funding reaching a high of $634.1 million in FY2015 and a low of $546.6 million in FY2017 (provisional current estimate; see Table 1 ). The Trump Administration has requested $535 million for Tanzania in FY2018, the second-highest level requested for a country in the region and a minimal 2% drop relative to the current FY2017 estimate for Tanzania.",
      " This decrease would be modest compared to the roughly one-third decrease in overall global aid levels proposed by the Trump Administration. The bulk of U.S. development aid for Tanzania in recent years has been provided under Obama Administration presidential development initiatives, including Feed the Future (FTF), the Global Health Initiative, the Global Climate Change Initiative, Power Africa, and Trade Africa. In 2014 Tanzania was selected as one of six initial partner countries under the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP). It was also chosen to be a Partnership for Growth (PFG) country, one of four worldwide. (See assistance section, below,",
      " for more on these efforts.) While most U.S. aid has focused on health and economic growth, bilateral security cooperation has also increased. Tanzania is a top African contributor of personnel to international peacekeeping operations. While there is generally little Tanzania-focused congressional activity or legislation, some Members of Congress occasionally travel to the country and periodically host visits from Tanzanian leaders, such as that of former President Jakaya Kikwete during the August 2014 U.S.-Africa Leaders Summit. Some Members have sponsored legislation advocating protections for albinos, who are the target of attacks, as discussed below. Background Tanzania, formed in 1964, is a union of Tanganyika,",
      " the mainland territory, which gained independence from Britain in 1961, and the Zanzibar archipelago. Zanzibar, which gained independence from the United Kingdom in 1963, remains semiautonomous, with its own government. Julius Nyerere, Tanzania's president from 1964 until 1985, remained influential until his death in 1999. Under Nyerere, Tanzania was governed as a socialist state, but maintained cordial, albeit sometimes tepid relations with the West. Nyerere advanced a set of national social policies known collectively as ujamaa (\"socialism\" in Swahili,",
      " the lingua franca), which centered on rural, village-based collectivism and self-reliance and the nationalization of key industries.  U jamaa had a decidedly mixed record. At a national level, central state control of economic policy failed to spur transformative growth and industrialization and inhibited market-based economic transaction efficiencies and private sector growth, while at the village level, collectivization faced increasing resistance. Such factors, together with a range of global ones (e.g., the oil crisis of the 1970s and poor commodity prices for Tanzania's core agricultural exports) led the country to seek credit and technical cooperation with international financial institutions in the mid-",
      "1980s. This led to the gradual liberalization of the economy and later of the state. In contrast to the economic effects of ujamaa, Nyerere's leadership and policies are widely seen as having united an ethnically and religiously diverse population under a strong shared national identity. His leadership, by many accounts, spared the mainland from the ethnic tensions that have inhibited national unity or destabilized some other African countries. Zanzibar, however, has experienced some internal ethnic and religious frictions. Since the mid-1990s, successive governments have taken steps to further liberalize the economy, but Tanzania's business environment remains challenging,",
      " due, in part, to the enduring effects of state-centric policies and bureaucratization during the socialist period. A 2016 State Department assessment observed that \"in certain sectors the legacy of socialist attitudes has not fully dissipated, sometimes resulting in suspicion of foreign investors and slow decision making.\" Despite a stated commitment to reform, corruption and poor service delivery have hampered Tanzania's efforts to curb widespread poverty and reduce reliance on subsistence agriculture. As is common in the region, Tanzania's aging infrastructure has suffered from chronic underinvestment. Nevertheless, the Obama Administration viewed the Tanzanian government as committed to development and governance reform, and provided substantial aid to spur progress in these areas,",
      " and to invest in infrastructure.  Politics and Governance Tanzania's ruling party, Chama Cha Mapinduzi (CCM, Swahili for Party of the Revolution), was created by Nyerere in 1977 through the merger of the ruling parties of the mainland and Zanzibar. It has dominated Tanzanian politics since its inception, a key point of criticism by opposition parties. In the first multiparty elections in 1995, the CCM won a landslide victory in voting marred by irregularities. The party has continued to enjoy considerable electoral success on the mainland, in part due to the powers of incumbency, but opposition parties have won a growing share of legislative seats in successive elections.",
      " Still, opposition parties reportedly face periodic harassment and de facto restrictions on their activities. Increased political pluralism may distribute political power more widely, but it may also hold the potential to spur increasing ethnic, regional, and/or religious divisions, which the CCM long sought to avert.  Recent years have seen a rise in the harassment of opposition political figures and restrictions on their activities. In September 2017, Tundu Lissu, a member of parliament and parliamentary chief whip of the opposition Chadema party ( Chama Cha Demokrasia na Maendeleo, the Party for Democracy and Progress), was shot by unknown assailants and seriously wounded.",
      " Lissu, who is also the president of the Tanganyika Law Society, is a fierce critic of President Magufuli and his government, but also a long-standing critic of corruption who may face hostility from many quarters. Lissu has often been arrested for his long-standing criticism of the government. The shooting was preceded by a firebombing of a local blue chip law firm, IMMMA Advocates, a local affiliate of the U.S. firm DLA Piper, which Lissu alleged police were involved in.  Other opposition parliamentarians also face frequent duress from police. In late September 2017, police arrested a Chadema MP after a party event,",
      " and another complained that police were prohibiting his meetings with constituents, as had another in August. Such events have been preceded by many similar ones in recent years, notably during electoral periods. Similarly, newspapers have faced suspension or other sanction for coverage seen as critical of the government. Most recently, in September 2017, the publication of two newspapers was banned, in one case for 90 days and in another for two years, three months after another publication was also shuttered for two years. The strength of electoral challenges to the CCM has grown during the past two national elections, in 2010 and in 2015 (see below), notably from Chadema,",
      " which was formed prior to the 2000 elections. In 2014, opposition parties boycotted the process of drafting of a new constitution, claiming the CCM had refused to include opposition proposals to limit the power of the executive and establish a federal government system. The CCM-majority legislature then adopted a draft charter and the government scheduled a nationwide referendum for April 2015, but later postponed it indefinitely. Opposition parties had called for a referendum boycott and had legally challenged the reform process. Rivalry between the CCM and UKAWA (an opposition alliance made up of Chadema, the Civic United Front [CUF], and two smaller parties)",
      " remains a key focus of politics.  The 2015 Elections Tanzania held national and Zanzibari elections on October 25, 2015. Key electoral issues included access to land, poverty and unemployment, state service provision, corruption, and political dominance of the state by the CCM, as well as energy sector development. Then-President Kikwete was constitutionally barred from running for a third term, but his CCM party was widely favored to win the polls, given its power of incumbency. The opposition, however, mounted a strong challenge, resulting in the closest presidential election in Tanzania's history. The CCM chose as its candidate,",
      " Dr. John Magufuli, a long-time government minister (see profile below), while the main UKAWA opposition coalition candidate was Edward Lowassa, of the Chadema party. Lowassa's candidacy was unusual, as he was a major CCM figure and former prime minister (2005-2008)\u2014albeit a controversial one\u2014who defected shortly before the election to become the main opposition candidate after not being selected in a contentious CCM nomination process, a major development in Tanzanian politics. Lowassa drew large crowds of supporters, and his challenge to the CCM was seen as energizing the 23 million-person electorate,",
      " especially among the large youth population, and as a credible threat to the CCM. The apparently close election contest raised tensions, and there was some limited campaign-period violence, notably between militant members of party youth wings and in Zanzibar, where opposition supporters were reportedly subject to intimidation. Opposition parties also complained of a few instances of police interference or limitations on assembly.  In the presidential race, Magufuli won a 58.5% vote share, while Lowassa won 40%. The CCM also won 74% of elected legislative seats for which results were announced, while Chadema won just under 13%, the CUF 12%, and two minor parties less than 1%",
      " each. Due to additional indirect elections and seat apportionment, the CCM holds 69% of parliamentary seats, Chadema just under 19%, the CUF just over 11%, and the two minor parties each old one seat. Zanzibar Election Controversy and Implications for Mainland Election An October 27, 2015, European Union (EU) Election Observation Mission (EUEOM) characterized the national election as \"largely well administered\" but asserted that \"insufficient efforts at transparency meant that both the National Electoral Commission (NEC) and the Zanzibar Electoral Commission (ZEC) did not enjoy the full confidence of all parties.\" In Zanzibar,",
      " this finding was strongly substantiated the next day, when the ZEC chairman announced a unilateral decision to nullify the Zanzibari elections while vote-counting was underway. His action came after soldiers reportedly \"stormed the collation centre\" and evicted journalists and observers, and two days after CUF candidate Seif Sharif Hamad had announced that he had won the Zanzibar presidency with 52% of votes. The ZEC chair later announced that new elections would be held. The ZEC chief's decision raised questions over the credibility of the Zanzibari vote and spurred electoral violence in Zanzibar. A string of small bombings using homemade devices occurred days after the annulment,",
      " along with some youth protests. The ZEC's actions also cast a shadow over the Union elections, as the latter took place in concert with the Zanzibar polls and at the same polling stations. Tanzania's NEC, however, did not take account of the Zanzibari poll nullification in its vote tallies, and coun ted Zanzibari votes in determining the outcome of the presidential election. The NEC decision also came despite opposition calls for a recount of the Union presidential vote, based on alleged voting irregularities and vote-tallying fraud. While the NEC's Union decision did not draw international concern, the ZEC's nullification did,",
      " along with criticism and calls for its reversal.  There were several late 2015 ad hoc dialogue and mediation efforts involving the CUF and parties interested in finding a resolution, including figures in the CCM and foreign missions. Details about the focus and outcomes of these efforts were not made public, however, and they resulted in no changes to the outcome. Instead, despite CUF opposition, on March 21, 2016, the ZEC held a rerun of the Zanzibar vote, which the CUF boycotted. The ZEC subsequently announced that the CCM candidate, Ali Mohamed Shein, had won the election\u2014with 91%",
      " of votes\u2014and that his party had also won a majority in the House of Representatives and local councils. In a joint declaration on the election, the United States, 14 European governments, and the European Union stated that We regret the Zanzibar Electoral Commission's decision to hold a rerun of the 25 October 2015 election, without a mutually acceptable and negotiated solution to the current political impasse. In order to be credible, electoral processes must be inclusive and truly representative of the will of the people. We reiterate our call on the Government of Tanzania to exercise leadership in Zanzibar, and to pursue a negotiated solution... with a view to maintaining peace and unity in... Tanzania.",
      " We commend once again the population of Zanzibar for having exercised calm and restraint throughout this process, and call on all parties and their supporters to re-start the national reconciliation process to find an inclusive, sustainable and peaceful resolution. As discussed elsewhere in this report, due to the outcome of the Zanzibar vote and due to concerns over freedom of expression, in March 2016, the U.S. MCC Board voted to suspend the MCC's partnership with Tanzania. Since the vote there have been periodic acts of aggression against putative opposition supporters by so-called \"Zombies,\" informal pro-CCM youth militia, and in the latter half of 2016,",
      " several opposition politicians were reportedly arrested. The CUF advocates the creation of a caretaker interim government of national unity and that it conduct new, fully legitimate elections. Magufuli Administration President Magufuli is a former MP who previously held several government ministerial posts, notably including two stints as public works minister. He came to office with a generally positive reputation for public service, based especially on his infrastructure project leadership. He also had a reputation as a loyal, mainstream party member not allied to any particular factions, rather than as a charismatic leader. Magufuli's running mate, Samia Hassan Suluhu, a former minister of state in the vice president's office,",
      " became Tanzania's first female vice president. Upon taking office, Magufuli took a tough, proactive line against corruption and state agency inefficiency, promoted civic service, and advocated austerity and cost-saving measures. These actions initially drew a degree of public support\u2014and humorous social media commentary centering on Magufuli's reputed penchant for thrift, frugality, and micromanagement\u2014as well as provisional support from Western donors. His presidency has also been characterized by a more controversial form of populist, often top-down leadership by the president in diverse issue areas. While his emphasis on austerity has reportedly caused some apprehension within the political establishment and others who have traditionally influenced or benefitted from state funding,",
      " he reportedly has remained popular. His unilateral decisionmaking\u2014often sans consultation with other relevant policymakers, absent the involvement of cabinet ministries and, in some cases, accompanied by procedural or legal irregularities\u2014has, however, prompted observers to raise concerns about an autocratic, and even semiauthoritarian governance pattern under his presidency. Such concerns have deepened amid efforts by Magufuli's administration to prosecute critics, censor critical media outlets, and otherwise curtail freedom of expression.  Corruption Challenges Corruption\u2014a key Magufuli target\u2014is a long-persistent problem in Tanzania. A 2012 public audit revealed widespread corruption in several ministries and state entities,",
      " and six cabinet ministers resigned in connection with the controversy that year. Other scandals have arisen since, including, notably, the illicit diversion by senior government officials of $122 million in central bank funds, ostensibly to pay for energy contracts, to overseas accounts\u2014a finding which led international donors to suspend $490 million in budget support in October 2014 pending an investigation, and culminated in the resignation of three government ministers. Tanzania's ranking in Transparency International's Corruption Perception Index (CPI) has slipped in recent years (from 100 th in 2011 to 116 th in 2016, slightly up from its 119 th place ranking in 2014).  Security Challenges and Human Rights Trends While Tanzania is generally stable and peaceful,",
      " there are periodic, usually generally limited threats to state and public security. There have been sporadic attacks on tourists in Zanzibar attributed to Islamist radicals, and there have been several unattributed armed attacks on police stations in which weapons have been looted, as in 2015, or on police personnel (with seven killed in April 2017 in the Pwani region). There have also been occasional bombings of Christian churches, among other targets, that analysts have speculatively attributed to Islamist radicals. Tanzania has occasionally arrested Islamic extremists, including 10 alleged members of the Somali Al Qaeda-linked terrorist group Al Shabaab, in April 2015.",
      " In May 2015, Tanzanian authorities also arrested Jamil Mukulu, the leader of the Allied Democratic Forces (ADF), a rebel group of Ugandan origin that is made up of Islamist extremists whom Uganda claims have ties with Al Shabaab. In July 2015, Tanzania extradited Mukulu\u2014who is also wanted in the Democratic Republic of the Congo, where the ADF is currently based\u2014to Uganda. Tanzania has a mixed human rights record. Freedom House rates Tanzania as \"partly free\" due to various legal restrictions on the press and nongovernmental organization operations, media bias favoring the CCM, and crackdowns on opposition protests.",
      " According to Tanzania's independent, nonprofit Legal and Human Rights Centre (LHRC) and other sources, key issues include a lack of capacity and institutional weakness in providing access to justice, as well as the conduct of security and law enforcement agencies. The U.S. State Department, in its 2016 Country Report on Human Rights on Tanzania, states: The most widespread human rights problems in the country were use of excessive force by security forces, resulting in death and injury; restrictions on assembly and political expression; and gender-based violence, including rape, domestic violence, and female genital mutilation/cutting. Other major human rights problems included harsh and life-threatening prison conditions,",
      " lengthy pretrial detention, limits to freedom of expression on the internet, restrictions on religious freedom, restrictions on the movement of refugees, official corruption at many levels nationwide, child abuse, discrimination based on sexual orientation, mob killings and injuries, and societal violence against persons with albinism. Trafficking in persons, both internal and international, and child labor were also problems.  The State Department also reports that while the government took some steps to \"investigate and prosecute officials who committed abuses... generally impunity in the police and security forces was widespread\"; and that while \"security forces reported to civilian authorities... there were instances in which elements of the security forces acted independently of civilian control.\" According to various reports,",
      " a particular human rights challenge faced by Tanzania is witchcraft-related killings and mutilation. Albinos are a notable target of such acts by attackers who reportedly harvest their body parts for use or sale in traditional witchcraft rites. There have been multiple reports of such albino murders and attacks in recent years. The problem has attracted the attention of some Members of Congress supportive of efforts to end such acts. In March 2017, four Tanzanian albino children who have lost limbs in attacks and had been living in so-called \"safe houses\" in Tanzania arrived in the United States to receive medical treatment and a \"respite from a homeland where they are persecuted and feared.\" Lesbian,",
      " gay, bisexual, and transgender (LGBT) persons also face discrimination. Homosexuality is illegal in Tanzania, and homosexuals and transgender persons have been the focus of threatening comments by government officials, as well as police harassment. In 2016 the Tanzanian government halted \"U.S.-funded programs that provide testing, condoms and medical care to gays,\" according to the Washington Post, and in 2017 reportedly prohibited 40 private clinics from providing services HIV/AIDS \"to 'key populations'\u2014a category that includes gay men, transgender people and sex workers,\" according to National Public Radio. The Economy Tanzania's GDP stood at about $47.",
      "2 billion in 2016, and has grown at an estimated 6.6% annually, on average, over the past decade. This growth has been based largely on earnings from agricultural exports, such as coffee, tea, and cotton; tourism, which has steadily increased and is a key source of hard currency; and exports of gold, the price of which rose over the past decade and spiked in 2011, but has since declined. Gradual diversification into manufacturing is occurring, and development of uranium and gemstone mining is underway. Industry contributes about 26% of GDP. Tanzania also has coal, iron, and nickel resources,",
      " as well as a newly discovered massive reserve of helium, which remains critical to numerous technologies despite depleted worldwide supplies. The communications, transport, financial services, construction, and retail sectors are also growing rapidly. Services contribute about 43% of GDP. Agriculture, however, remains a mainstay of the economy, contributing about 31% of GDP. Roughly 68% and by some estimates up to 77% of the workforce engaged in agriculture in 2014, but agricultural growth has been relatively slow, at 3.1% between 2010 and 2015.  The benefits of growth often have not reached the large rural population or been evenly distributed.",
      " Tanzania's per capita GDP, estimated at $970 in 2016, ranks low globally but higher than roughly half of countries in sub-Saharan Africa. Nearly 47% of Tanzanians live on $1.90 or less per day. Key barriers to economic development include poor infrastructure, low productivity growth, a high population growth rate, and a cumbersome and uncertain regulatory environment that generally deters foreign investment. Tanzania ranked 132 nd out of 190 countries surveyed in the World Bank's 2017 Doing Business index, notwithstanding marked recent improvements in ensuring access to credit. Tanzania's overwhelmingly youthful population, 71% of which is under the age of 30,",
      " poses a major challenge, as growing demand for health and education services could stir unrest.  Energy and Mining Sectors Since 2010, the discovery of large reserves of natural gas off the southern coast, in a region near far larger reserves in Mozambican territory, has increased foreign investment and raised the prospect of export revenue. The government estimates that the country has 57 trillion cubic feet of natural gas reserves, and it may also have additional onshore resources. Key firms that have been active in exploring and/or developing Tanzania's reserves have included U.S.-based ExxonMobil and several European firms, including Statoil (Norway), Eni (Italy), and BG Group (United Kingdom), as well as several smaller ones.",
      "  Many Tanzanians have welcomed the discoveries, especially as the resources at issue, notably gas, are slated to be used in part for domestic electricity generation, potentially vastly increasing Tanzania's limited supply of power. There have been sometimes violent protests against a natural gas pipeline in the southern port city of Mtwara, however, due to local fears that gas revenues from the Mnazi Bay gas field along the shore zones south of the city may not benefit the gas-rich region. The sector has been the subject of substantial periodic political controversy. In 2015, for instance, the CCM-dominated parliament overwhelmingly passed an oil and gas development and regulation bill after the speaker of the parliament suspended 40 opposition MPs for shouting during an earlier debate on the matter.",
      " The bill was controversial because it has important implications for future revenue earnings, state-corporate relations, and the role of the sector in helping to spur development, and transparency advocates asserted that its passage was rushed without adequate public scrutiny. Despite such controversies, many Tanzanians are generally likely to benefit from gas development and gas-fueled electricity generation. Transmission of gas has begun along a 330-mile natural gas pipeline run by Tanzania's state-run Petroleum Development Corp (TPDC). The line links gas reserves in Mnazi Bay area, along the southern coast, to gas-fired power plants near the commercial capital, Dar es Salaam. The government hopes to greatly expand gas-fired electricity generation capacity.",
      " Tanzania is also expanding its use of significant national coal reserves to fuel power production, and plans to construct a geothermal power plant within the next decade. A planned cross-border oil pipeline, which will carry crude oil from Western Uganda to a port in northern Tanzania, is scheduled to be completed by 2020. The expansion of gas-fueled, coal-fired, and geothermal power generation is in part intended to diversify the country's hydroelectricity-dependent energy mix, which is periodically hamstrung by recurrent droughts. In late 2015, for instance, drought conditions caused all of Tanzania's hydroelectric plants, which provide a reported 35%",
      " of power supplies, to temporarily suspend production.  The manner in which a key 2015 oil and gas bill was enacted may raise questions among some analysts regarding whether Tanzania has adequately developed its energy governance capacity, as may its mixed record of implementing the Extractive Industries Transparency Initiative (EITI), an international effort to foster transparent and accountable governance in resource-rich countries. Under EITI, countries voluntarily agree to abide by EITI reporting guidelines, most notably including the public release of government revenues from extractive industry firm payments. Tanzania was suspended by the EITI Board in September 2015 for failing to issue a mandatory EITI transparency report;",
      " that suspension was lifted in late 2015. Tanzania has since complied with EITI reporting requirements, and began a new process of \"validation\" (i.e., proof of compliance with EITI standards) under the 2016 EITI Standard, an updated set of benchmarks that compliant countries must meet. As noted earlier (see text box entitled \"Magufuli: Priorities in Action\"), increased national beneficiation from the mining sector is another key priority of the Magufuli administration. In July, the government extended the normal parliamentary session and successfully pushed through legislative changes fundamentally reshaping the mining sector. The changes allow the government to annul current contracts with firms if they are found to be detrimental to the national interest,",
      " abolish the use of international arbitration in dispute resolution, give the government a 16% ownership share in mining projects (with an acquisition option of up to 50% of a project's value), require local processing of minerals prior to export and the deposit of mining sector earnings in local banks, and marginally increase the royalty rate on multiple mined commodities. The changes come on the heels of several disputes between the government and foreign mining firms. Observers see the changes as likely to negatively affect levels of foreign investment in Tanzania's mining sector. Foreign Affairs Lake Malawi Malawi and Tanzania have engaged in a long-standing dispute over competing sovereign claims to Lake Malawi (also known as Lake Nyasa); the dispute has periodically flared since the mid-",
      "1960s but never been resolved. The dispute reemerged in 2012, amid reports that the lake may contain deep-water fossil fuel reserves. Malawi has claimed the entire lake while Tanzania claims half, based on different interpretations of maps and the colonial administrative history of the lake. Regional efforts to mediate the dispute, which had stalled in recent years, have been facilitated by Mozambique's former president, Joaquim Chissano.  The dispute recommenced in early 2016, when Malawi lodged a diplomatic protest with Tanzania's government after the latter published an official map showing the international border equally splitting the lake zone between the two countries.",
      " In May 2017, despite earlier statements that mediation would resume, Malawian President Peter Mutharika announced that Malawi would take the dispute to the International Court of Justice in the Hague, though the Court's jurisdiction would require the consent of both parties. Meanwhile, Malawi's government has allowed exploration for oil and gas in the lake to continue, drawing criticism from environmentalists and UNESCO. Some analysts contend that economic plans for the lake, including oil development and shipping projects, may remain stymied by uncertainty linked to the ongoing border dispute.  Refugee Flows  Tanzania has for decades hosted refugees from various conflicts and political crises in the conflict-afflicted and densely inhabited countries in the Great Lakes region of central Africa\u2014some for extended periods\u2014and has played a mediational role in attempts to resolve such crises.",
      " In 2014, Tanzania also naturalized a large number of long-term Burundian refugees. In September 2016, Tanzania participated in the Leaders' Summit on Refugees, an event hosted by then-President Obama and intended to increase shared global efforts to aid refugees worldwide. At the summit, Tanzania agreed to \"continue to receive persons running from wars, conflicts, political instability and persecution,\" as per its commitments under various international accords, among other related pledges. Observers have nonetheless periodically questioned Tanzania's commitment to these principles, noting that Tanzanian domestic sensitives over land access and the country's regional diplomatic ties have sometimes led the government to curtail protections for refugees and asylum seekers,",
      " and/or pressure them to return to their countries of origin. Since 2015, Tanzania has faced a new influx of refugees from Burundi in connection with a political and security crisis rooted in that country's disputed 2015 elections. The number of refugees from both Burundi has grown steadily since the start of the Burundi crisis in April 2015, and stood at 358,600 in early September 2017. Almost all of the recently arrived Burundian refugee population resides in the Kigoma Region, adjacent to Burundi, in three large camps supported by Tanzanian and international public and nongovernmental humanitarian and social services agencies.",
      " Tanzania also hosts a smaller number of refugees from the Democratic Republic of the Congo (DRC). The United States and other donors provide funding to support these camps (see U.S. aid section below). Despite its 2016 pledges at the Leaders' Summit on Refugees, in early 2017, the Tanzanian government stopped providing prima facie refugee recognition of Burundian refugees, according to UNHCR. In July 2017, during a visit to Tanzania\u2014on his first foreign trip outside Burundi since a May 2015 putsch and his later controversial July 2015 reelection\u2014Burundian President Pierre Nkurunziza urged all Burundians in Tanzania to repatriate.",
      " President Magufuli mirrored his statement, calling on the refugees to \"voluntarily return home,\" and later in the month suspended further registrations and naturalizations of Burundian refugees. In late August, Magufuli again called for the UNHCR to voluntarily repatriate thousands of Burundian refugees, and a Burundian-Tanzanian-UNHCR coordinating group met to discuss the purportedly voluntary repatriation of nearly 12,000 Burundians. These moves have sparked criticism from human rights advocacy groups, which assert that Burundi's crisis is far from settled; Amnesty International, for instance, called for a halt to what it called \"mounting pressure\"",
      " on Burundian refugees \"to return to their country where they would be at risk of death, rape and torture.\" Tanzania's Contribution to Mediation in Burundi Tanzania facilitated the landmark peace settlement that helped end Burundi's decade-long civil war in the 1990s, and it is involved in halting regional mediation efforts aimed at resolving the current Burundian crisis. In March 2016, the East African Community (EAC) appointed former Tanzanian President Benjamin Mkapa to facilitate an \"inter-Burundian dialogue,\" though President Yoweri Museveni of Uganda technically remains the chief EAC mediator. After consultations,",
      " Mkapa set out a plan of action at an EAC summit in September 2016 and later presented Museveni with a more detailed roadmap. It provided for a series of engagements beginning in late 2016 and culminating in a \"final agreement\" in mid-2017, an outcome that was not achieved. Mkapa has so far been unable to convene fully representative government-opposition talks. This has been due to disagreements over who is entitled to participate and Burundian opposition doubts over Mkapa's credibility and neutrality, and what they see as his bias toward the Burundian government, based on Mkapa's repeated assertion that Nkurunziza's 2015 reelection\u2014a highly contentious key factor driving the ongoing crisis\u2014was \"legitimate.\" In May 2017,",
      " an EAC summit heard a progress report on Mkapa's efforts and the broader dialogue, but took no substantive actions to enhance its conflict mitigation approach. Individual EAC leaders, including President Magufuli, did, however, issue statements opposing U.S. and EU targeted sanctions on Burundi, angering the Burundian opposition. An EAC summit communiqu\u00e9 also tied the EU's sanctions on Burundi, among other issues of concern, to an ongoing EU-EAC negotiation over a proposed EU-EAC regional Economic Partnership Agreement. The U.N. Security Council (UNSC) has continued to endorse Mkapa's efforts and the overall \"inter-Burundian dialogue\"\u2014which,",
      " in an August 2017 statement, the UNSC called \"the only viable process for a sustainable political settlement.\" The council also, however, stated that it \"remains deeply concerned over the lack of progress in this dialogue\" and a range of related human rights, political, and other developments inside Burundi. It also reiterated its \"intention to pursue targeted measures against all actors, inside and outside Burundi, who threaten the peace and security of Burundi.\" The council has previously outlined similar concerns. China China is among Tanzania's top international partners. The two countries have a long history of warm political relations and close trade and economic development cooperation,",
      " dating back to the early postcolonial period and, notably, China's construction in the 1970s of the Tanzania\u2013Zambia Railway (TAZARA). China is Tanzania's largest trading partner, and several large Chinese firms are active there. China is also a key security partner for Tanzania; the two militaries share long ties and retain a close relationship. After Chinese President Xi Jinping took office in 2013, Tanzania was the first country he visited.  The natural gas pipeline project noted above was financed by a $1.23 billion Chinese loan. Construction is also underway on a $10 billion megaproject at Bagamoyo,",
      " former President Kikwete's home town, which includes a multipurpose deep water port, special economic zone, and linked railway. The multiyear project is financed by China Merchants Holdings-International (CMHI), China's largest port operator, and Oman's State General Reserve Fund. CMHI is the designated construction manager and, according to some reports, may have multidecade concession rights to the facility. The Bagamoyo development\u2014with a planned annual 20 million container throughput capacity\u2014is projected to dwarf ports in Dar es Salaam and Mombasa, Kenya, and provide access to multiple countries in East and Southern Africa. In mid-",
      "2016, Tanzania's government also reported that China's Export-Import Bank had agreed to provide Tanzania with a $7.6 billion loan to fund construction of a railroad to boost linkages between Tanzania to its EAC neighbors. Other major deals in recent years include a $500 million housing project between Tanzania's SOE National Housing Corporation and China Railway Jianchang Engineering signed in 2013; several power project deals signed in 2013 worth more than $828 million; an integrated coal mine and power plant project; and an integrated iron ore mine and steel mill project worth a total investment of up to $3 billion.  Tanzanian-Chinese bilateral trade reached a reported $4.",
      "67 billion in 2015, but fell to $4 billion in 2016. The balance of this trade varies considerably year to year, but in recent years has grown exponentially in favor of China (e.g., Chinese exports were almost 12 times larger than its imports from Tanzania in 2016). U.S.-Tanzanian trade, in comparison, is much lower, with U.S.-Tanzania trade totaling $278 million in 2015 and $309 million in 2016. Chinese-Tanzanian economic ties have periodically prompted domestic backlash among Tanzanians negatively affected by Chinese businesses, such as communities displaced during large construction projects or Tanzanian traders hurt by direct competition from Chinese retail rivals.",
      " International Security Tanzania actively contributes to regional and international peace and security efforts. In addition to being a troop contributor to United Nations (U.N.) peacekeeping operations, with personnel deployed in multiple African countries and Lebanon, Tanzania hosts large numbers of refugees from the region, including from Burundi and the Democratic Republic of the Congo. The International Criminal Tribunal for Rwanda, which tries Rwandan genocide suspects, is located in the northern Tanzanian city of Arusha, as is the African Union's African Court on Human and Peoples' Rights, a continental court with a mandate to protect human rights. In September 2017, Tanzania drew negative attention after U.N.",
      " sanctions investigators reported that they were \"investigating information by a Member State\" that North Korea's Haegeumgang Trading Corporation was \"repairing and upgrading the surface-to-air missile Pechora (S-125) systems\" of the Tanzanian military, which was also reported to be \"repairing and upgrading its P-12 air defence radar.\" Both systems originate in the Soviet bloc. Such actions may violate various provisions in U.N. Security Council sanctions on North Korea, including arms and related materiel embargoes and proliferation-related and potentially financial-transaction-related sanctions. The investigators reported that the \"prohibited military-related contracts\"",
      " between Tanzania and North Korea were reportedly worth \u20ac10.5 million. Tanzania had not responded to the panel's enquiries as of the date of the report's publication. U.S. Relations and Policy U.S.-Tanzanian ties are robust and have grown in recent years, despite tensions since 2015 related to Tanzanian governance patterns, as discussed in this report's introduction. Another irritant in bilateral relations has been a contract dispute between TANESCO, the national power utility, and Symbion Power, a U.S. firm. Along with partners, Symbion received more than $110 million in MCC procurement awards to help improve Tanzania's electrical power sector and later reportedly expanded its business beyond its initial MCC contract.",
      " Notwithstanding these tensions, as of late 2016, the State Department portrayed the bilateral relationship as \"an established partnership characterized by mutual respect, shared values, and aspirations for a more peaceful and prosperous future.\" Such sentiments had been reflected in cordial high-level engagements over several years. Former President Kikwete was the first African head of state to meet with former President Obama after Obama took office in 2009. Later, in 2013, then-President Obama visited Tanzania, and in 2014, President Kikwete attended the U.S.-Africa Leaders Summit. President Obama's 2013 trip followed prior high-profile visits (e.g., by then-Secretary of State Hillary Clinton in 2011 and then-President George W.",
      " Bush in 2008). How U.S.-Tanzanian relations may change under the Trump Administration, if at all, has yet to be determined but, as noted in the introduction of this report, they appear set to remain on a generally positive track. Trade Issues Tanzania is eligible for U.S. trade preferences, including apparel benefits, under the African Growth and Opportunity Act (AGOA, reauthorized under P.L. 114-27 ) and is a member of the East African Community (EAC) along with Burundi, Kenya, Rwanda, and Uganda. The EAC has taken several steps to promote regional integration: a customs union was formed in 2005,",
      " followed by a common market in 2010 and, in 2013, an agreement to establish a monetary union within the next decade. The bloc seeks to adopt a single currency by 2024. Many of its trade integration efforts have been supported under an Obama Administration-initiated initiative called Trade Africa. Tanzanian-U.S.-trade is moderate by global comparison. It hit a record $482 million in 2013, but later dropped. It stood at $310 million by 2016 (made up of nearly $153 million in U.S. imports from Tanzania and $157 million in U.S. exports). The proportion of U.S.",
      " imports from Tanzania that benefit from AGOA has risen markedly in recent years, reaching 24% in 2016. Top U.S. imports from Tanzania include precious stones, apparel, coffee, and cashews. U.S. exports are more diverse; top ones include machinery, used clothes, cereals, and aircraft and parts. In June 2017, the Office of the U.S. Trade Representative (USTR) initiated an out-of-cycle review of Tanzania's eligibility for AGOA trade benefits. It was launched in response to a petition by the Secondary Materials and Recycled Textiles Association (SMART), a U.S. used clothes exporting trade group whose member firms source used clothes in the United States,",
      " mostly from charity or other donations, and export them, mostly to developing countries. SMART asserts that a March 2016 EAC decision to initiate a phased-in ban on imports of used clothing and footwear, preceded by the imposition of large tariffs, has imposed a significant and \"untenable\" economic hardship on the U.S. used clothing industry. SMART outlined its concerns about EAC's actions at an August 2016 USTR annual AGOA eligibility hearing. A July 2017 out-of-cycle hearing spurred SMART's petition; Tanzanian and other EAC member country officials and other parties also testified. One expert at the hearing, Stephen Lande,",
      " head of Manchester Trade (a consulting firm), contended that that AGOA eligibility should not be determined based upon individual objections to \"each and every trade restriction a country has,\" and that any decision to entirely revoke Tanzania's AGOA eligibility based on the complaint of an single industry group might cause disproportionate damage to overall trade and investment.  USTR officials are to submit their out-of-cycle review recommendations to U.S. Trade Representative Robert E. Lighthizer, who is to then make his own recommendations to President Trump. USTR officials are also conducting a regular annual review of Tanzania's AGOA eligibility. They plan to announce the results of both reviews simultaneously,",
      " so that any resulting determinations on Tanzania's eligibility would come into effect in early January 2017, alongside the routine annual eligibility announcements for other AGOA-implementing countries. In 2012, U.S. and EAC officials agreed to pursue a trade and investment partnership dialogue potentially leading to a U.S.-EAC Investment Treaty and discuss a possible Trade Facilitation Agreement, among other ends. Toward such ends, the U.S. Department of Commerce opened a new office in Tanzania in 2014. In 2015, the United States and the EAC signed a cooperation agreement on technical cooperation to advance EAC implementation a the World Trade Organization (WTO)",
      " Agreement on Trade Facilitation, sanitary and phytosanitary trade capacity-building, and the reduction of technical barriers to trade. In late 2016, U.S. officials also launched a $194 million, five-year grant in support of the EAC. It centers on institutional capacity-building for the EAC's Secretariat, and increasing regional economic integration and U.S.-EAC member state trade and investment, enhancing the sustainable management of natural resources in the Lake Victoria Basin and Mara River ecosystems, and increasing access to integrated healthcare in border areas. The grant complements Trade Africa, a U.S. trade capacity-building and related assistance initiative aimed at increasing U.S.-Africa and intra-African trade and investment.",
      " It was initially focused primarily on the EAC and its member states, but has been expanded to other regions of Africa. U.S. Bilateral Assistance U.S. assistance to Tanzania has focused primarily on health, food security, agricultural development, infrastructure, and environmental conservation. The State Department and USAID administer most of this aid. In addition, Tanzania implemented an MCC Compact between 2008 and 2013 (see below). Under the Obama Administration, the bulk of U.S. aid for Tanzania was channeled through several global presidential development initiatives\u2014most of which were launched under the Obama Administration, most notably Feed the Future (FTF), the Global Health Initiative,",
      " and the Global Climate Change Initiative\u2014as well as two initiatives launched by former President George W. Bush: the President's Emergency Plan for AIDS Relief (PEPFAR), the President's Malaria Initiative (PMI). Tanzania was also a focus country under the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP, see below) and its Partnerships for Growth (PFG) initiative. In practice, Tanzania's applied PFG goals largely centered on and have largely been subsumed under Power Africa, a presidential initiative launched under President Obama to vastly increase access to electricity in Africa. Power Africa is expected to continue under the Trump Administration.",
      " Tanzania is also a beneficiary of the regional Trade Africa initiative (see above). In mid-2016, Tanzania and USAID signed a five-year strategic agreement for continued development assistance to support Tanzania's transition toward middle income status by 2025, including through programs in the areas of health, agriculture, natural resource management, education, energy, and democratic governance. Like most African countries, Tanzania is also a participant in the U.S. Young African Leaders Initiative (YALI), initiated during the Obama Administration. YALI has been retained by the Trump Administration, albeit potentially at a reduced level. Tanzanians also participate in several other educational or professional State Department exchange programs,",
      " and there is a Peace Corps program in Tanzania with roughly 220 volunteers, who work in various areas, such as agriculture, education, and health, as of September 2017.  Focus on Healthcare Assistance Health funding has comprised the bulk of State Department/USAID aid, and accounted for $480.1 million, or nearly 88% of a total of $546.6 million (provisional estimate) in FY2017 bilateral aid. Health aid would be funded at $511.5 million (95.5% of total aid) under the Trump Administration's total bilateral $535.3 million FY2018 aid request.",
      " Such health aid has been largely devoted to fighting HIV/AIDS under PEPFAR, and HIV/AIDS-centered aid would make up about 92% of all FY2018 total health spending under the Trump Administration's FY2018 proposal. Antimalaria programs carried out under the President's Malaria Initiative (PMI) are another key focus of U.S. health programs, as are maternal and child health efforts, although both are funded at far lower levels than are HIV/AIDS programs. Tanzania is also a partner country under the Global Health Security Agenda (GHSA), which seeks to mitigate the impact of disease outbreaks, notably those that threaten global health.",
      "  According to UNAIDS, in 2016 Tanzania had an adult HIV/AIDS prevalence rate of 4.7% and a total population of 1.4 million people living with the disease, and suffered 55,000 new infections but averted 1.1 million additional ones. The State Department's U.S. Global AIDS Coordinator reports that Tanzania's HIV/AIDS epidemic varies greatly by region (between 0.1% and 14.8%) and is higher in urban areas (7.2%) than in rural ones (4.3%) and by gender (male prevalence stands at 3.8% and that for females at 6.",
      "2%). Tanzania is making efforts to achieve the UNAIDS \"90-90-90\" target\u2014the goal of ensuring that by 2020, 90% of people living with HIV are diagnosed, 90% of those diagnosed receive antiretroviral treatment (ART), and 90% of those in treatment have fully suppressed viral loads. It is making fair progress toward the \"first 90\" goal, as 70% of those with HIV are diagnosed, and is quickly progressing toward the second, as 88% of those diagnosed are in treatment. The overall estimated treatment rate (including those who are estimated to be HIV-positive but may not be diagnosed)",
      " is lower, at 62%. Data were insufficient to determine progress toward the third goal. Tanzania has also made substantial progress toward prevention of mother-to-child HIV transmission; 84% of pregnant women who needed antiretroviral therapy were receiving it. According to PEPFAR, key challenges relating to improved HIV/AIDS responses include \"weak health infrastructure, shortages of health and social workers, high levels of stigma, and cumbersome government procurement systems.\" PEPFAR efforts support HIV/AIDS prevention, care, and treatment and related health systems and governance programs, and center on helping Tanzania to meet the UNAIDS 90-90-90 targets and diverse related goals outlined under its national HIV/AIDS multisectorial framework and other plans.",
      " Tanzania is one of 13 focus countries under the Trump Administration's PEPFAR Strategy for Accelerating HIV/AIDS Epidemic Control (2017-2020), released by Secretary of State Rex Tillerson in September 2017. Key PEPFAR foci to date have included prevention of mother-to-child transmission (PMTCT) through antiretroviral therapy throughout pregnancy and breastfeeding for affected women. Others have included efforts to scale up ART coverage, expand access to and participation in voluntary medical male circumcision (VMMC), increase HIV counseling and testing (HCT), and enhance prevention through the provision of condoms. PEPFAR programs prioritize gender-differentiated strategies,",
      " given the higher female rate of infection, and pediatric treatment is another special priority. To decrease new infections and enhance epidemic control, PEPFAR efforts are also being shifted toward prioritizing responses in high-prevalence and high-burden geographic areas and population sub-groups facing high HIV/AIDS infection risks or prevalence rates. PEPFAR also supports efforts to counter cervical cancer through a public-private partnership called Pink Ribbon Red Ribbon (PRRR). Between FY2011 and 2015, an average of 29% of PEPFAR funds in Tanzania went to prevention, 21% to care, 34% to treatment, and 16%",
      " to health governance and system support. Development Assistance Agriculture development aid, which constituted $54 million of the Obama Administration's FY2017 request, has been the second-largest target of U.S. support in recent years, but funding would fall to $10 million under the Trump Administration's FY2018 request. Such aid has been channeled primarily through Feed the Future, a major global U.S. food security and agricultural economic growth initiative. In Tanzania, it has focused on improving agricultural productivity and rural infrastructure, including roads and irrigation; bolstering staple food and horticulture commodity value chain and marketing efficiency; improving access to nutrition for children and mothers;",
      " and improving private- and public-sector policymaking, including regarding land tenure. Roughly 80% of FTF resources are focused on southern Tanzania, an area that the government sees as having great untapped agricultural potential, while much of the balance is devoted to work in the Zanzibar region and selected areas of central and northern Tanzania. FTF activities have also involved collaboration with U.S. global health programming. Tanzania is also a participant in the New Alliance for Food Security and Nutrition, a Feed the Future-supported, G8-led global agricultural investment initiative in Africa. It has also received U.S. support under the Scaling Seeds and Other Technologies Partnership,",
      " a project of the Alliance for a Green Revolution in Africa, an international multistakeholder effort to boost African farm production. The future of FTF is uncertain. U.S. assistance has also supported strengthening of governance; infrastructure building (roads, power, water, and sanitation); economic growth; primary education; law enforcement capacity-building (see below); and biodiversity preservation.  Focus on Wildlife Conservation A range of U.S. bilateral and regional programs support Tanzanian efforts to combat wildlife trafficking. In mid-2015, the U.S. embassy in Tanzania launched a five-year project called the Promoting Tanzania's Environment, Conservation, and Tourism (PROTECT)",
      " Project, a $14.5 million, five-year contractor-implemented project. Its aim is to enhance conservation and combat wildlife poaching and trafficking nationwide by supporting capacity building centered on wildlife resource management policymaking and institutions and trafficking law enforcement and prosecution. It also aims to enhance cooperation between civil society and the government and support development of community capabilities relating to the management of wildlife management areas (WMAs, locally controlled natural areas). PROTECT activities are accompanied by $2.75 million in natural resource small grants supporting wildlife management innovation, incentives for private investment, and other purposes. A second, $14 million, five-year program called \"Endangered Ecosystems Northern Tanzania Project,\" launched later in the year,",
      " aims to increase antipoaching incentives and directly support WMAs, communities, and tourism operations in order to improve wildlife management in northern Tanzania. Another is the Southern Highlands and Ruaha-Katavi Protection Program (SHARPP), an $8.5-million, five-year program launched by USAID in 2014, centering on Support for WMAs; livelihoods; habitat management; and elephant monitoring and protection. These efforts follow on similar ones in prior recent years. Other Assistance The U.S. Department of Labor (DOL) Bureau of International Labor Affairs also funds projects aimed at combatting child labor in Tanzania, particularly in agricultural and domestic service contexts.",
      " U.S. assistance to support Tanzania's hosting of refugees is administered by the State Department's Bureau of Population, Refugees, and Migration (PRM), which reports that U.S. funding for refugee support in Tanzania totaled roughly $1.2 million in FY2014, $16.7 million in FY2015, $36.2 million in FY2016, and $12 million in FY2017 to date, with more planned. Millennium Challenge Corporation  In September 2013, Tanzania completed a $698 million, five-year MCC compact. Awarded in 2008, this compact sought to reduce poverty and stimulate economic growth through targeted investments in roads and access to electrical services and potable water.",
      " In late 2014, the MCC agreed to provide an additional $9.78 million to support further feasibility studies and other work linked to the development of a second compact focused on the power sector.  In June 2015 the MCC Board stated that a second compact \"will not be considered for approval until, among other pending items,\" Tanzania's government \"makes progress on energy sector reform commitments made in 2014.\" The agency stated that once a compact was prepared, the MCC would again \"scrutinize the government's track record on good governance, including control of corruption and freedom of expression.\"  In March 2016, the MCC suspended negotiations toward a second compact that would reportedly have been worth $472 million.",
      " It did so on the basis that Tanzania had \"moved forward with a new election in Zanzibar that was neither inclusive nor representative, despite the repeated concerns of the U.S. Government and the international community.\" Another issue was that Tanzania had \"not taken measures to ensure freedom of expression and association are respected in the implementation of the Cybercrimes Act,\" which had also been the focus of repeated U.S. expressions of concern. In addition to stating that the elections in Zanzibar had not been credible, the Board stated that \"Tanzania has taken no measures to ensure freedom of expression and association are respected in the implementation of the Cybercrimes Act.\" Security Cooperation U.S.",
      " security cooperation and assistance has grown since the 1998 Al Qaeda bombing of the U.S. Embassy in Dar es Salaam, but it remains limited compared to that pursued with Tanzania's East African neighbors. Peacekeeping support is a top main focus of military cooperation and aid ties, and expanded in FY2014-FY2016 under APRRP. That initiative's future is uncertain, as the Trump Administration has not requested funding to continue it. Tanzanian troops have also received training under the U.S. Global Peace Operations Initiative (GPOI) and its train-and-equip African Contingency Operations Training and Assistance (ACOTA) program,",
      " which seeks to increase available international peacekeeping troops. Such assistance is complemented by a U.S. International Military Education and Training (IMET) program, which supports military professionalization and institutional reform in the Tanzanian military.  Tanzania receives some counterterrorism assistance through the State Department-led, multicountry Partnership for Regional East Africa Counterterrorism (PREACT). It also hosts the regional East and Southern Africa Anti-Money Laundering Group, in which the United States has observer status, and receives U.S. regional funding to combat terrorist financing. Smaller U.S. security aid programs center on strengthening border security and improving police capacity to deter crime and terrorism.",
      " Some recent military-to military or U.S. military activities, all in 2016, have included the following: U.S. and Tanzanian participation, with other partner nations, in Eastern Accord 2016, an annual, combined, joint military exercise that took place in Tanzania and centered on a simulated peacekeeping operation command post exercise. The Tanzania military's hosting of the U.S.-aided African Land Forces Summit (ALFS), a seminar of land military chiefs from across Africa focused on developing cooperative solutions to regional challenges and threats. Specialized training of Tanzanian game scouts by U.S. military personnel on \"surveillance and patrol techniques,",
      " arrest and detention procedures, search and seizure, crime scene investigation, first aid, human rights and rules of engagement\" aimed at enhancing their ability to counter wildlife poaching and trafficking. Law Enforcement Cooperation The United States and Tanzania have increasingly cooperated in a limited number of criminal cases and with respect to joint efforts to build Tanzania's law enforcement capabilities. Among the most notable recent cases, cooperation occurred between 2016 and 2017. In May 2017, a Tanzanian named Ali Khatib Haji Hassan (a.k.a. \"Shkuba\") and two associates were extradited to the United States to face a U.S.",
      " federal indictment brought against them by a Houston, TX, grand jury charging them with conspiracy to possess and then distribute heroin between 2010 and 2015. In March 2016, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) had designated Hassan and his trafficking organization as significant foreign narcotics traffickers under the Foreign Narcotics Kingpin Designation Act (Kingpin Act). Recent U.S. law enforcement capacity training has focused on such activities as the following: canine training by U.S. Customs and Border Protection (CBP) aimed at detecting illegal drugs and ivory at ports and airports, as well as related investigations and prosecutions;",
      " anticorruption training of Tanzanian prosecutors and investigators by the U.S. Embassy's Office of Overseas Prosecutorial Development, Assistance and Training (OPDAT); and wildlife crime scene investigations and evidence collection training by USAID and the U.S. Fish and Wildlife Service (FWS), in at least one case facilitated by the conservation and antipoaching organization the PAMS Foundation, whose cofounder was murdered in 2017 (see above). Outlook Tanzania is likely to remain a generally stable but poor developing country for the foreseeable future. Increasing multiparty competition may contribute to gradual growth in demand for political change, democratic accountability, improved governance, and greater political pluralism\u2014but potentially also to increased political tension.",
      " Growing access to information, notably via mobile phones, may spur similar trends by increasing exposure to information on current events, and global social and governance norms. It may also contribute to market growth through increased information to pricing data and improved social services. Such changes, along with continuing infusions of foreign assistance, including from the United States, and gradually improving public infrastructure and government services, are likely to spur increasing economic activity, production, and trade, thus improving quality of life for the Tanzanian people. The United States, while expressing periodic concern over issues such as corruption, appears likely\u2014as suggested by bilateral relations trends and aid levels in recent years\u2014to continue to support the strengthening of Tanzania's democratic system and the socioeconomic development of its people,",
      " and to look to Tanzania as a key development partner in East and Southern Africa.\n"
    ],
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    "hardness": null,
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  {
    "id": 48,
    "question": null,
    "answer": "This report provides background information on the responsibilities, financial challenges, and workforce issues facing the U.S. Postal Service (USPS). Additionally, it covers the current strategies and initiatives under development by the USPS and discusses further options for postal reforms.  In FY2015, the USPS marked its ninth consecutive year of financial losses with a net loss of $5.1 billion. In addition, the USPS has reached its statutory debt limit of $15 billion. In recent years, the USPS has experienced growth in the package and shipping part of its business (known as Competitive Products). The USPS, however, has experienced sharp declines in both volume and revenue of its Market Dominant Products (e.g., First Class single-piece mail).  The USPS has struggled in recent years to fulfill its statutory obligation to prefund its health benefits liability for future postal retirees. Under a prefunding schedule established by the Postal Accountability and Enhancement Act, the USPS has made $20.9 billion in contributions since FY2007 but defaulted on its remaining $28.1 billion in payments. In its most recent financial statement, the USPS requested reforms that would integrate postal employee healthcare options with Medicare, thereby reducing costs and making the prefunding liability expense more manageable. Such reforms would require statutory authorization from Congress. This report also covers several issues facing the USPS workforce. In recent years, initiatives designed to restructure the USPS retail and mail processing networks allowed the USPS to implement several workforce reduction strategies that helped cut costs. In FY2015, however, workforce costs increased. According to the USPS, this reversal was due to contract obligations and work hours associated with the growth in its labor-intensive package and shipping business. Additional postal initiatives and reform options discussed in this report include (1) changes to postal delivery standards, (2) consolidation of mail processing facilities, (3) closure of retail post offices, (4) five-day delivery, (5) updates to the postal fleet, (6) nonpostal products and services; and (7) postal banking. Appendix B of this report includes a table of House and Senate postal reform legislation introduced in the 113th and 114th Congresses, such as S. 2051, Improving Postal Operations, Service, and Transparency Act of 2015 (iPOST Act), and H.R. 5714, Postal Service Reform Act of 2016. For each bill, the table in Appendix B provides the bill number, title, sponsor, the committee(s) to which the bill was referred, a list of selected issues the bill covers, and the last major action (e.g., referral to committee, markup held). \n",
    "docs": [
      "Overview Prior to enactment of the Postal Reorganization Act of 1970 (PRA), mail delivery in the United States was the responsibility of the U.S. Post Office Department, a Cabinet-level department in the executive branch. PRA reform efforts were driven largely by the view that the Post Office Department was ill equipped to meet the demands of the growing U.S. population and the changing economy. Mail volume had risen sharply and the Post Office Department lacked the institutional flexibility to quickly respond to market changes.  Today, the U.S. Postal Service (USPS or Postal Service) faces similar challenges but for different reasons. Between 2006 and 2015,",
      " total mail volume dropped sharply. Market changes and global economic conditions contributed to the Postal Service's financial challenges and affected its efforts to control expenses and expand revenue. Statutory mandates, such as the requirements to maintain six-day delivery and prefund health benefits for future retirees, may limit the actions USPS might take to mitigate these challenges. According to the Postal Service, \"many of the structural reforms needed to ensure long-term financial viability, such as the resolution of our unsupportable [retiree health benefit] liability, can only be achieved with comprehensive legislation.\"  Financial Challenges Facing the U.S. Postal Service8 This section of the report covers the current financial responsibilities,",
      " challenges, and limitations facing USPS. These issues are the result of a confluence of factors including (1) the USPS's statutorily designed organizational and financial structure, (2) U.S. and global economic conditions over the past decade, and (3) the impact that technological innovations have had on the demand for postal products and services.  On the one hand, the USPS must sell enough postal products to maintain self-sufficiency and meet other statutory requirements, such as the retiree health benefit prefunding obligation. On the other hand, the USPS generally cannot expand its operations beyond the scope of postal products and services and other limited nonpostal products authorized by statute.",
      " Statute also limits the USPS's ability to raise rates on certain postal products. These facts underlie many of the challenges facing the USPS and are also at the core of many of the reform efforts undertaken by the USPS and considered by Congress. Financial Structure of the U.S. Postal Service The current financial structure of the USPS was largely established by two statutes: the PRA and the Postal Accountability and Enhancement Act of 2006 (PAEA). The PRA created the USPS, which replaced the U.S. Post Office Department, as an independent agency of the executive branch, responsible for generating enough revenue to finance its own operations. Prior to the PRA,",
      " the U.S. Post Office Department was a Cabinet-level agency and was not financially self-sustaining.  Since the passage of the PRA, the USPS has generated nearly all of its funding\u2014about $69 billion in FY2015 according to the USPS's most recent financial report\u2014by charging users of the mail for the costs of the services it provides. Congress, however, does provide an annual appropriation\u2014about $55 million in FY2016\u2014to compensate the USPS for revenue it forgoes in providing free mailing privileges to the blind and certain overseas voters. In addition, the annual appropriation compensates the USPS for debt it accumulated in the 1990s while providing postal services at below-cost rates to non-profit organizations.",
      " Funds appropriated to the USPS for the annual reimbursement and revenue forgone are deposited in the Postal Service Fund, a revolving fund in the Treasury that consists largely of revenues generated from the sale of postal products and services. The revenue in the Postal Service Fund is used to fund the operations of (1) the Postal Service, which includes the U.S. Postal Inspection Service (USPIS); (2) the U.S. Postal Service Office of Inspector General (USPSOIG); and (3) the Postal Regulatory Commission (PRC).  Financial Condition of the U.S. Postal Service The USPS's end-of-year financial results for FY2015 marked the ninth consecutive year of losses for the agency.",
      " In the years immediately prior to FY2007, the USPS ran modest profits. Between FY2007 and FY2015, the USPS accumulated $56.8 billion in financial losses, including a net loss of $5.1 billion in FY2015. This trend was reversed in the first quarter of FY2016, which showed a net income of $300 million, compared to a net loss of $800 million at the same point in FY2015. The first quarter of FY2016 includes the holiday shipping season, which is one of the busiest times for USPS. The improvement in USPS's first quarter financial results is due in part to an increase in shipping and package volume and revenue as compared to the first quarter of FY2015.",
      " Additional factors, such as a temporary increase in select postal rates, known as a \"temporary exigent surcharge\" or \"exigent increase,\" will be discussed in greater detail later in this section. What Happens When USPS Ends the Year with a Net Loss? Constituents may ask if the USPS receives appropriations, subsidies, or a \"bailout\" when it ends the fiscal year with a net financial loss. The USPS does not receive additional appropriations when it ends a fiscal year with a financial loss. The USPS does, however, benefit from access to debt instruments from the U.S. Treasury. The USPS has statutory authority to borrow a maximum of $3 billion per fiscal year and hold a maximum total debt of $15 billion.",
      " At the end of FY2012, the USPS reached its statutory debt limit. Further, USPS's total debt obligations have remained at $15 billion since FY2012. As the USPS pays down its existing debt, it accumulates new debt up to its statutory maximum. For example, on October 1, 2015, the USPS repaid $4 billion of its debt. It is expected, however, to borrow up to its statutory ceiling amount by the end of FY2016.  USPS's $15 billion in debt is issued through a variety of loan instruments, which includes fixed and floating rate loans, an overnight credit line of $600 million,",
      " and a short-term credit line that allows the USPS to borrow up to $3.4 billion with two days prior notice. The USPS's credit lines were fully drawn at the end of FY2015. Additionally, financial losses have caused the USPS to default on certain statutorily required payments, such as the retiree health benefit prefunding obligations. Since FY2012, the USPS has defaulted on over $28 billion in statutorily required retiree health benefit prefunding obligations. Use of debt instruments and default on certain retiree health prefunding payments has likely allowed the USPS to maintain cash-on-hand sufficient to cover its operational expenses throughout each fiscal year.",
      " As Table 1 shows, the USPS has ended each fiscal year since FY2007 with at least $889 million cash-on-hand.  As shown in Table 1 and Figure 1, in FY2015, the USPS had, on average, about 24 days of operating cash-on-hand, sufficient to pay its day-to-day operating expenses, despite ending the year with $15 billion total debt outstanding. As of the end of FY2015, when all assets and liabilities are considered (including retirement accounts, health fund balances, cash and other assets), the USPS's total liabilities exceeded its assets by about $101 billion.  Postal Services,",
      " Revenue, and Expenses The PAEA, for the first time, provided a definition of the term postal service. Under the PAEA, postal service is defined as \"the delivery of letters, printed matter, or mailable packages, including acceptance, collection, sorting, transportation, or other functions ancillary thereto.\" This definition is significant because it prevents the Postal Service from developing new nonpostal products (e.g., expanded banking and financial services) that could compete with private industry.  The PAEA also changed how postal rates are established and divided postal products into two distinct groups: market dominant products and competitive products.  Prior to the passage of the PAEA,",
      " there was concern that the USPS was using its revenue from market dominant products to subsidize the costs of competitive products. Cross-subsidization could, potentially, provide an advantage for the USPS in the competitive market by creating artificially low prices that did not include all the costs attributable to those products. The PAEA addressed this issue by forbidding the subsidization of competitive products with market dominant revenue and establishing the Competitive Products Fund (CPF), which receives deposits from the Postal Service Fund for revenues derived from the sale of competitive products.  Postal Revenue In FY2015, overall revenue from postal products and services was $68.951 billion, which was an increase of $1.",
      "097 billion (or 1.6%) from FY2014. The increase was due in large part to revenue from competitive products, which offset decreased revenue from market dominant products. Nevertheless, revenue generated from the sale of market dominant products accounts for approximately 74% of USPS's annual operating revenue.  As shown in Figure 2, total revenue from market dominant products was $52.426 billion in FY2015, a decrease of approximately $340 million (or 0.64%) from FY2014. Total revenue from competitive products, however, was approximately $16.52 billion in FY2015, an increase of $1.",
      "437 billion (or 9.52%) from FY2014.  Within the market dominant category, standard mail (i.e., advertising mail) remained one of the few profitable products. Revenue from standard mail increased approximately $217 million (or 1.24%) from FY2014 to FY2015. Historically, competitive products have constituted a much smaller share of USPS revenue than market dominant products. Competitive products account for a larger proportion of USPS revenue than they do of USPS volume. For example, in FY2015, competitive products represented approximately 3% of mail volume, but they accounted for approximately 24% of USPS revenue.",
      " See Figure 3 below. While market dominant products made up 97% of USPS's FY2015 volume, they generated less revenue per piece ($0.35) than competitive products ($4.17). As explained by the USPS, since competitive products are a relatively small percentage of total mail volume, future growth in shipping and packages might not offset future decline in market dominant products: Because Shipping and Packages represents only 20.3% of our 2014 operating revenue, compared to First-Class and Standard Mail, which represents 67.5% of operating revenue, revenue growth in Shipping and Packages, by itself, cannot fully offset the declines in First-Class Mail.",
      " Furthermore, the profit margins on both First-Class Mail and Standard Mail are greater than that of Shipping and Packages. As a result, revenue from Shipping and Packages would have to grow at a substantially higher rate than the decline in First-Class Mail revenue in order to replace the lost profit contribution of First-Class Mail.  Furthermore, the processing and delivery costs for competitive products, such as First-Class Package Service or Priority Mail, are greater than those of most market dominant products. For this reason, USPS's competitive products might be sold at a lower margin than their market dominant counterparts, meaning that a lower percentage of competitive product revenue is retained as profits for the USPS.",
      " Mail Volume In FY2015, mail volume for market dominant products dropped by 1.9 billion pieces, which is approximately 1.3% below FY2014. The decline for certain market dominant products was more pronounced than others. For example, in FY2015, first-class single-piece mail, a market dominant product that has historically been the largest source of revenue for the USPS, saw volume drop by nearly 1.4 billion pieces, or 2.1%.  In contrast, competitive mail volume, which is primarily shipping and package services, increased by more than 556 million pieces. This increase represents growth of 16.",
      "4% from FY2014.   Figure 4 shows the mail volume for market dominant and competitive products for FY2014 and FY2015. Detailed information on USPS's revenue and volume for FY2014 and FY2015 is provided in Appendix A.  Long-Term Trends Total mail volume and revenue have been consistent or in decline for the past 10 years. Periods of decline have been driven largely by reductions in market dominant mail volume and revenue, which have dropped sharply since FY2009. The decline in market dominant volume has been driven by a variety of economic factors and long-term market trends, such as transition to electronic mail,",
      " that have altered the public's use of the postal service for more than a decade.  As shown in Figure 6, growth in both competitive product volume and revenue has likely offset some of the revenue lost from the continued decline in market dominant products. Figure 7 below shows USPS's total annual mail volume and operating revenue for FY2005 through FY2015.  From FY2005 to FY2015, total annual mail volume dropped 57.5 billion pieces. The drop was largely due to volume lost in market dominant products. Total annual operating revenue, however, has remained relatively flat over the past decade. The figure shows the sharp declines in revenue and volume,",
      " which were likely due to the economic recession. While total annual volume remained in decline after FY2012, total annual revenue began to recover. By FY2015, total annual revenue was $68.9 billion, or $1 billion below what it had been in FY2005. Additionally, in FY2014 and FY2015, total annual revenue included a temporary increase in market dominant prices.  Exigent Price Increase Under the PAEA, price increases for market dominant products are limited to a formula based on annual, unadjusted changes in the Consumer Price Index for Urban Customers (CPI-U). During \"extraordinary or exceptional\"",
      " circumstances (a term not defined in statute or regulation), the PAEA allows the USPS to petition the PRC for an expedited postal rate adjustment. This exigent surcharge is a rate increase above what USPS would otherwise receive based on the CPI-U formula.  In July 2010, the USPS made its first request to the PRC for an exigent surcharge. In its 2010 exigent request, the USPS sought to increase rates on its market dominant products by approximately 5.6% due to poor economic conditions and decreased mail volume. The \"extraordinary or exceptional\" circumstance, according to USPS's request, was the \"unprecedented drop in mail volume,\" which they argue was caused by the recession.",
      " The PRC denied USPS's request, in part because PRC found that multiple factors contributed to reduced mail volume, not all of which were due to the recession. In 2013, the USPS filed and the PRC approved a rate increase of 4.3% on market dominant products. Pursuant to the PRC's order, the increase went into effect on January 26, 2014. Originally, the increase was only to be in effect until the USPS recovered an additional $2.8 billion in lost revenue, which was the amount the PRC determined to be attributable to the recession. At the time, the temporary increase was expected to be in place for less than two years.",
      " The exigent price increase has allowed the USPS to hold revenue for market dominant products steady, despite continued losses in volume. The USPS challenged the PRC methodology in court, arguing that the increase should be permitted to continue indefinitely. On June 5, 2015, the DC Circuit Court delivered an opinion upholding the temporary nature of the increase. This opinion, however, stated that the one aspect of the PRC methodology for calculating the cumulative losses attributable to the recession was \"arbitrary and capricious\" and must be revisited to resolve disagreement with the methodology proposed by the USPS. Following the ruling of the DC Circuit Court, the PRC increased the amount that the USPS could collect in exigent price revenue by an additional $1.",
      "4 billion.  On February 25, 2016, the PRC issued a \"Notice of the Removal of the Exigent Surcharge,\" which announced the Postal Service's plan to remove the surcharge on April 10, 2016. As of April 10, rates on many market dominant products and services have dropped to the price they were prior to the exigent surcharge. For example, the price of a First-Class Forever stamp dropped from $0.49 to $0.47, and the price of an International Forever stamp dropped from $1.20 to $1.15. Rates for select products and services used largely by bulk mailers (e.g., discounted rates for presorted mail)",
      " were adjusted using additional criteria.  The exigent surcharge had been in place since January 26, 2014. Table 2 shows the estimated revenue from the exigent surcharge for FY2014 and FY2015.  In FY2014 and FY2015, the estimated revenue from the temporary exigent surcharge was $1.4 billion and $2.1 billion, respectively. Total revenue (excluding the surcharge) was $66.4 billion in FY2014 and $66.8 billion in FY2015. In the two full years that the exigent surcharge has been in place, it has contributed an estimated 2.",
      "1% and 3.2% to the total revenue of the USPS (or an estimated 2.7% and 4.0% to the total market dominant revenue, respectively). Expenses from Operations To address its financial challenges, the USPS has made several operational adjustments intended to align its revenue, mail volume, and operating expenses, including  changes to its workforce (e.g., increased use of non-career employees); consolidation of delivery routes and reductions in number of delivery facilities; reductions to retail office hours; and realignment of its mail processing and distribution network. For FY2015, USPS's operating expenses were about $67.",
      "7 billion. Table 3 provides a further breakdown of expenses for FY2014 and FY2015.  Each fiscal year, roughly two-thirds of the USPS's operating expenses are attributable to personnel costs, through salaries, compensation benefits, workers' compensation, and retiree benefits\u2014excluding the retiree health prefunding payments. For FY2015, personnel-related expenses were $51.8 billion, an increase of $1.5 billion (or 2.9%) from FY2014. The largest line-item for personnel costs is salaries. From FY2010 to FY2014 the costs for salaries and other compensation decreased steadily. USPS spent $35.",
      "1 billion on these costs in FY2014 and $37.5 billion in FY2010, with expenditures dropping an average of $600 million each year. These reductions have been driven by a number of USPS management decisions, including the use of voluntary separation incentives and the increased reliance on non-career employees. The current labor and employment challenges of the USPS are discussed in greater detail in the \" Current Issues Facing the USPS Workforce \" section of this report.  This trend, however, reversed in FY2015 when USPS's salaries and compensation costs increased by 2.3% to $35.9 billion. The USPS attributes the increased costs to \"contractually obligated salary escalations and additional work hours associated in part with the growth in the more labor-intensive Shipping and Packages business.\"  The USPS has not seen significant reductions in non-personnel costs in recent years.",
      " For the period from FY2010 to FY2015, total non-personnel related expenses have been about $15 billion to $16 billion annually. The largest non-personnel expenses are transportation costs. The USPS spent $6.6 billion for transportation in FY2015, largely on contracts for air, ground, and water transportation of the U.S. mail. Fuel expenses are also included under transportation, but they contribute a relatively small portion of costs. The other non-personnel expenses for FY2015 include supplies and services ($2.7 billion), rent and utilities ($4.8 billion), and depreciation of USPS assets ($1.8 billion).  While the USPS has control over the majority of its expenses,",
      " there are expenses mandated by law, including the RHBF prefunding requirement. Additionally, the USPS reached its statutory debt limit of $15 billion in FY2012 and as a result the USPS has no remaining flexibility to finance operations or respond to market changes through borrowing without further action from Congress. Prefunding Requirement for Retiree Health Benefits64 The PAEA requires the USPS to prefund its retiree health benefits. To accomplish this task, the PAEA established a prefunding schedule beginning in FY2007. For the first 10 years (FY2007-FY2016), the USPS is to make statutorily prescribed prefunding payments into the Postal Service Retiree Health Benefits Fund (RHBF). The RHBF was created under the PAEA as an on-budget account in the U.S.",
      " Treasury. The statutorily prescribed prefunding payments range from $5.4 billion to $5.8 billion annually. The statutorily prescribed payments conclude in FY2016. Beginning in FY2017, the USPS is to continue to make annual payments to the RHBF in amounts determined by OPM. Per the PAEA, OPM is to, on an annual basis, compute the difference between the size of current employees' future retiree healthcare benefit liability and the current RHBF balance, and then determine a schedule of annual payments to liquidate any outstanding liability by September 30, 2056. Pursuant to the PAEA,",
      " the USPS payments to the RHBF are to be derived from operating revenue held in the Postal Service Fund. Beginning in FY2017, the USPS may begin accessing funds from the RHBF to pay for its current retirees' health benefits.  Since the prefunding payment schedule began in FY2007, the USPS has made three of its annual payments in full\u2014FY2007, FY2008, and FY2010. Congress reduced the FY2009 payment owed from $5.4 billion to $1.4 billion, which the USPS paid. The USPS defaulted on each of its annual payments for FY2011 through FY2015.",
      " The FY2016 payment is due September 30, 2016. In total, through FY2015 the USPS has contributed $20.9 billion to the RHBF and has defaulted on payments totaling $28.1 billion.  The prefunding policy has been a contentious issue. Arguments advanced in favor of the policy center on the policy protecting future customers of the USPS and taxpayers by ensuring that they will not need to finance retirement benefits currently incurred by the USPS. However, according to the USPS, the prefunding requirement has contributed \"significantly\" to its financial losses. In its most recent financial statement, the USPS reiterated its pursuit of legislation that would allow the USPS to change how it offers health insurance to its employees and retirees.",
      " The USPS argues that such changes would \"eliminate any necessity for the [RHBF] prefunding requirement....\" The changes would require statutory authorization from Congress. Current Issues Facing the USPS Workforce71 USPS's challenging financial circumstances have prompted the agency to implement several cost-cutting strategies, one of which has been to reduce the size and cost of the USPS workforce. The sections below discuss three USPS initiatives to reduce its workforce size and cost: (1) attrition and separation incentives, (2) increased use of non-career employees, and (3) non-personnel initiatives that could impact workforce size and cost. The sections focus on implementation of these three initiatives since FY2007,",
      " at which time the USPS began to experience substantial revenue losses. Size and Cost of the USPS Workforce The USPS has reduced its workforce size through voluntary attrition and separation incentives. The total number of USPS employees declined 21% (168,052 employees) between FY2007 and FY2014, from 785,929 to 617,877. To increase the voluntary attrition rate, the USPS has offered certain employees separation incentives to resign or retire early, which have ranged from $10,000 to $20,000 per person. Between FY2007 and FY2014, 55,473 employees accepted a separation incentive ( Table 4 ). Many of the separation incentives offered between FY2012 and FY2014 were associated with various postal facility closure initiatives,",
      " which are discussed later in this report.  The USPS has utilized separation incentives to avoid reductions in force (RIFs), which involve involuntary employee layoffs upon the abolishment of agency positions. On January 9, 2015, however, the USPS implemented a RIF for 249 postmasters who did not accept a separation incentive offered in FY2014. Of the 249 postmasters subject to the RIF, 169 opted for a Discontinued Service Retirement (DSR), and the remaining 80 who were not eligible for DSR received severance pay based on their age and years of service. According to the USPS, all postmasters affected by the RIF were offered part-time career positions at the USPS.",
      " Increased Use of Non-Career Employees The USPS categorizes its workforce into two employee types: career and non-career. Career employees serve in permanent positions and are typically provided full federal benefits. Non-career employees, in contrast, serve in time-limited or otherwise temporary positions. In many cases, non-career employees earn lower wages and are not provided benefits that are provided to career employees. For example, non-career employees are not eligible for federal life insurance and are not covered under the Federal Employees Retirement System (FERS).  The USPS has increased its use of non-career employees in an effort to contain costs. The number of non-career employees grew by 28%",
      " between FY2007 and FY2014, from 101,167 to 129,577. The number of career employees, in contrast, decreased by 28% over the same time period, from 684,762 to 488,300. The largest increase in the number of non-career employees occurred between FY2011 and FY2014, rising by 46.1% (40,878 employees). The influx of non-career employees during that period was primarily attributable to the establishment of three new non-career positions: Postal Support Employees (PSEs), City Carrier Assistants (CCAs), and Mail Handler Assistants (MHAs). Employees in these three positions constituted 51%",
      " of the USPS non-career workforce in FY2014. According to the USPS, non-career employees can reduce the overall costs of certain agency functions. Non-career employees can often perform the full range of duties undertaken by their career counterparts at lower wage rates. For instance, non-career CCAs can perform the duties of career city letter carriers at a starting rate of $15.00 per hour versus $16.71 per hour. The wage difference between CCAs and city letter carriers is greater after accounting for benefits and overtime ($19.35 per hour versus $46.11 per hour, respectively), according to a 2014 Government Accountability Office (GAO)",
      " report. In addition, the USPS OIG reported that non-career employees could be used in place of career employees earning overtime and thus could reduce compensation costs.  Impact of USPS Workforce Initiatives on Costs The USPS's initiatives to reduce the size and cost of its workforce have reportedly contributed to lowered compensation expenses in recent years. The USPS's total compensation costs decreased $526 million from FY2013 to FY2014, and the PRC found that 36.1% of the decreased amount ($190 million) resulted from increased use of non-career employees and a decrease in employee work hours. For instance, the PRC reported that increased use of CCAs and MHAs,",
      " combined with the reduction in their career counterparts, reduced the productive hourly wage rate for the mailhandling and city carrier functions by 3.5% and 5.4%, respectively, from FY2013 to FY2014. The remaining 63.9% of the reduced amount ($336 million) reflected a one-time cost of separation incentives that were paid in FY2013, according to a 2015 PRC report. Similarly, a 2016 USPS OIG report asserted that the decline in work hours over time\u2014a 2.8% average decline per year between 2006 and 2015\u2014has translated into cost savings.",
      " A 2014 GAO report on the USPS workforce, however, found that the USPS's overall expenses did not decrease amid the agency's efforts to reduce workforce size and work hours. According to the report, USPS's total expenses did not decline alongside reduced workforce size and work hours from FY2006 to FY2014 and instead fluctuated over the eight-year period. The report attributed the fluctuation to required annual RHBF payments, which varied by year. The USPS's overall expenses still declined at a slower rate compared to employee work hours (7.1% versus 24%, respectively) when excluding RHBF payments, according to the report.",
      " In response to the GAO report, the USPS attributed the slower rate of decline in overall expenses to increased hourly wage and benefit costs, increased non-personnel expenses, and other fixed costs that do not decline with decreases in mail volume. U.S. Postal Service's Current Strategies and Initiatives This section provides information on the U.S. Postal Service's current five-year business plan and several ongoing USPS reform initiatives. The reform initiatives discussed in this section cover a wide range of issues and various aspects of postal operations. In many instances, these initiatives are underway, pursuant to the USPS's current legal authorities. Continuation of these initiatives does not require legislative action by Congress.",
      " In some cases, however, Congress has proposed legislation that would halt or amend actions that the USPS has already initiated.  U.S. Postal Service's Five-Year Business Plan95  The USPS's Five-Year Business Plan (hereinafter, USPS Business Plan ) provides detailed analyses of the short- and long-term financial situation of the USPS and includes several reform proposals that the Postal Service argues would help it progress toward financial stability and long-term sustainability. Many of the proposed initiatives involve further adjustments to postal delivery networks. In its Business Plan, the USPS argues the adjustments\u2015which include the closure and consolidation of selected mail processing facilities\u2015are necessary to improve efficiency and address recent changes to mail volume (i.e., decreases in first-class mail volume and increases in package volume). Below is a selected list of the proposals contained in the USPS Business Plan :  continued consolidation of mail processing facilities (known as the Network Rationalization Initiative); full implementation of revised postal service delivery standards;",
      " adjustments to staffing and the means of providing products and services at retail locations, including increases in \"self-service\" kiosks and reduced hours at selected retail locations; a shift to centralized and curbside mail delivery for both business and residential customers, where appropriate; an expanded scope of products and services offered at retail locations; and a move to five-day delivery of mail while maintaining six-day delivery of packages. Of the initiatives in the bulleted list above, the first two items are currently being implemented by the Postal Service. The third and fourth items have been implemented in part. The USPS arguably does not have authority to implement the final two items,",
      " and would likely require legislative action from Congress. Additional information on select initiatives developed and implemented (in full or in part) by the Postal Service is provided in the sections below.  Postal Service Delivery Standards99 The USPS's delivery standards are performance goals that reflect \"the number of days after acceptance of a mail piece by which the sender and recipient can expect it to be delivered.\" Delivery standards differ for each mail class and product. Since 2012, the Postal Service has phased-in revisions to its delivery standards for market dominant products. For example, as shown in Table 5, the length of delivery time for First-Class mail ranges from one to three days,",
      " while periodicals take between three and nine days. Prior to the most recent revisions, the range for periodicals was from two to nine days and First-Class mail sent within a certain geographical boundary was generally guaranteed to be delivered overnight. The delivery standards are not, however, a guarantee of specific delivery times. Based on the delivery standards, the Postal Service sets \"Service Performance Targets,\" which are the percentage of time it expects to meet its delivery standards. Table 6 shows FY2015 service performance targets and the USPS's actual percent on-time score for each category of market dominant mail. Actual percent on-time scores that fail to meet the percent on-time service performance targets are shown in italics.",
      " Those that are more than 10 percentage points below the percent on-time performance targets are in italics and bold.  In FY2015, USPS failed to meet its percent on-time performance targets for nearly all types of market dominant mail, including all categories of First-Class mail. Single-piece letters and flats that fell within the 3-day processing window met USPS's on-time performance standards about 77% and 65% of the time, respectively. In many other instances, on-time performance was more than 10% below the USPS's targets. According to the PRC's Annual Compliance Report, the USPS largely attributes these results to (1)",
      " winter weather storms, (2) insufficient air transportation capacity, and (3) staff realignments and other issues related to the network rationalization initiative, which is discussed below.  Restructuring the Processing and Delivery Network105 The revised delivery standards discussed above are part of the USPS's broader Network Rationalization Initiative (NRI). The NRI involves the changes to delivery standards (discussed above) and the closure and consolidation of selected mail processing facilities. The USPS argues these changes are necessary to (1) address recent changes to mail volume (i.e., decreases in first-class mail volume and increases in package volume) and (2)",
      " improve the efficiency of the overall postal delivery network.  The NRI was implemented in two phases. Phase I is complete and Phase II has been partially implemented beginning in January 2015. In late 2015, the Postal Service decided to defer until 2016 most of the remaining mail processing plant consolidations that were scheduled as part of Phase II. Further, in February 2016, the Postal Service acknowledged that the Phase II closures failed to capture the savings originally projected. In its filing to the PRC, the USPS reported $64.3 million in savings and $130.2 million in costs attributable to Phase II of the NRI,",
      " which is a net loss of $65.9 million. The filing, however, did not state if the costs were a factor in USPS's decision to halt the closures.  In comparison, the USPS reported an annualized savings of $865 million from Phase I. The USPS states that the increased costs of Phase II are due to \"unplanned package growth and workload shift.\" The U.S. Postal Service OIG, however, argues that the consolidations have likely led to increased transportation costs and it encourages greater transparency regarding USPS transportation contracts.  Unanticipated Effects of the NRI on the USPS Workforce A 2015 USPS OIG report found that the NRI had some unanticipated effects on USPS operations,",
      " including the USPS workforce. The report asserted that revised service standards under the NRI allowed the USPS to expedite mail processing timelines, which prompted the agency to transition 5,000 employees from night to day shifts. The shift changes have resulted in decreased differential pay and additional training for new jobs for some employees, according to the report. The report further asserted that shift changes required larger mail processing plants to re-bid hundreds of jobs to employees with the new shift times, noting that the job bidding process can take \"several months to complete.\" Restructuring the Retail Business Two reforms the USPS included in its Five-Year Business Plan were (1)",
      " a proposal to move from six- to five-day delivery of all or most classes of mail, but maintain or expand package delivery, and (2) a proposal to further reduce retail post office hours to better align them with estimates of operational demand. Six- to Five-Day Delivery118 One reform that the USPS has repeatedly proposed in recent years is to move from six- to five-day delivery of all or most classes of mail\u2014typically, USPS's market dominant products, such as first-class mail, standard mail (i.e., advertising mail), and periodicals. To maximize revenue from the competitive portion of its product line, however, USPS proposes maintaining six-day delivery of packages,",
      " or further expanding its Sunday package delivery services.  Opponents of reducing USPS's delivery days argue that it will have a negative effect on postal delivery standards, which\u2014according to the PRC's FY2015 Annual Compliance Report \u2014have already suffered following the closure and consolidation of postal processing facilities prior to the 2015 suspension of the process.  According to economic estimates prepared for the PRC, shifting to five-day delivery of mail while maintaining Saturday delivery of packages would increase revenues by an estimated $912 million to $1.677 billion. The estimated net profit would be less, however, due to two factors. The Postal Service may incur additional labor costs due to increased mail volume on Mondays.",
      "  Also, proposals may differ regarding Saturday operating hours at local post offices. If local post offices are open, there would be additional operational costs. In contrast, some customers may mail fewer items or choose another service for shipping packages if their local post office is closed on Saturday, potentially leading to lost revenue in competitive products. The PRC report based its estimation on a model where post offices remained open but did not sort or dispatch letter mail. Under this scenario, the PRC report estimated that the annual net savings to the Postal Service would be between $625 million and $1.393 billion. Retail Post Office Closures126 In 2012,",
      " the USPS announced a plan to reduce hours at 13,000 \"low foot traffic\" U.S. Post Offices in rural communities. The Post Office Structure Plan, commonly referred to as the \"POStPlan,\" is, according to the USPS, an initiative intended to prevent closures of postal retail facilities by reducing operational hours at selected locations. According to communications from the PRC, most POStPlan facilities are small and often in rural areas, though neither term (i.e., \"small\" or \"rural\") has been defined by either the USPS or the PRC for the purpose of identifying specific retail postal facilities.   Table 7 below provides data on the number of USPS retail facilities in existence at the end of each fiscal year from FY2010 through FY2015.",
      "  Impact of Postal Facility Closures on Postal Workforce The USPS has implemented several non-personnel initiatives that have reportedly affected the size and cost of its workforce. GAO and the PRC, for example, reported that streamlining and consolidating activities associated with the POStPlan and NRI have reduced the number of career employees and work hours for postmasters, clerks, mailhandlers, and equipment maintenance personnel. According to a 2014 GAO report, the USPS projects the POStPlan will generate $347.2 million in savings through FY2016. The GAO report also discusses other initiatives to streamline and consolidate operations that have affected workforce size and cost,",
      " such as changes to delivery schedules and modes.  Possible Issues Facing the USPS Workforce132 Achievement of Workforce Reduction Goals The USPS anticipates its strategic initiatives, which appear to include the aforementioned workforce initiatives, would reduce its career workforce to around 404,000 employees by FY2017. The number of career employees, however, has not decreased at projected annual rates. While USPS anticipated the career workforce to decrease by about 84,000 employees from FY2012 to FY2014, it decreased by 40,158 employees over the two-year time period. Consequently, achievement of workforce reduction targets for FY2015-FY2017 might become more difficult.",
      " It is unclear if USPS still intends to reach its FY2017 workforce reduction goal, as the agency has not explicitly revised it since April 2013. Additional separation incentives, or other workforce reduction initiatives, might be needed, however, if the USPS intends to achieve the goal. The USPS's ability to achieve its workforce reduction goal might be affected by unanticipated policy changes or actions of stakeholders. According to a 2014 GAO report, for example, the USPS's FY2017 workforce reduction goal assumed the adoption of actions that would impact workforce size that have not occurred, such as adoption of six-day package/five-day mail delivery service.",
      " In addition, USPS postponed implementation of Phase II of the NRI, which was projected to affect around 15,000 employees. Finally, postal labor unions have made efforts to curtail reductions to the career workforce. For example, in September 2014, the American Postal Workers Union (APWU) won an arbitration award that was projected to create 9,000 positions within the clerk craft function, at least 3,000 of which must be career positions.  Limitations on Use of Non-Career Employees The USPS's use of certain non-career employees is governed by postal labor union contracts, which limit the total number of non-career employees that can comprise the USPS workforce.",
      " Union contracts current through 2015 and 2016 raised the number of non-career employees that can be used for certain functions. The 2006-2011 National Association of Letter Carriers (NALC) contract raised the limit on the total number of covered non-career employees to 15% of the total number of career carriers in a district, compared to 3.5% in the 2006-2011 contract. (See Table 8.)  The USPS's ability to maintain or increase its use of certain non-career employees will depend on contract negotiations. Some labor unions seem to oppose increased use of non-career employees,",
      " which appear to have affected negotiations for certain unions. For example, negotiations between the USPS and the APWU ended without an agreement on May 28, 2015. The APWU subsequently issued a press release stating that \"proposed changes to the [USPS] workforce structure were completely unacceptable.\" The press release then cited USPS workforce proposals for the new contract, which included, among other things, an increase in the percentage of non-career employees. The APWU workforce proposals, in contrast, called for more career employees. On July 8, 2016, an arbitration panel issued a new APWU contract that maintained current levels of covered non-career employees.",
      " Lower caps on the percentage of non-career employees might have implications for the size and cost of the USPS's workforce. According to a 2014 GAO report, the USPS asserted that it is close to reaching current caps on non-career employees. Lower caps, therefore, might require the USPS to reduce the number of non-career employees, which might prompt changes to the agency's workforce composition in ways that might increase personnel costs. For instance, compensation costs might increase if the USPS increases the number of career employees to comply with lower caps, either through additional hires or transitioning non-career employees to career positions. Alternatively, overtime pay cost might increase if the USPS reduces the number of non-career employees that were being used in place of career employees earning overtime.",
      "  Employee Morale Some postal labor unions and Members of Congress have expressed concern about employee morale at the USPS, particularly amid the agency's efforts to reduce the size and cost of its workforce. For example, the APWU asserted that post office closures and mail processing plant consolidations are lowering employee morale. On March 5, 2014, Senator Heidi Heitkamp sent a letter to the Postmaster General that highlighted challenges identified by USPS employees in North Dakota that might lead to low morale, including long hours, poor working conditions, a lack of training, and a lack of managerial focus on addressing such issues.  On July 9,",
      " 2015, Senator Heitkamp introduced the Rural Postal Act of 2015. The bill seeks to, among other things, improve employee morale at the USPS by establishing a Chief Morale Officer. The Officer would be responsible for developing national initiatives that address employee morale and factors that might influence morale, such as factors related to working conditions, communication, and training. For example, the bill would require national initiatives to address wages and the balance between temporary and career employees. The bill also proposes the establishment of Regional Morale Officers, who would be responsible for (1) implementing the national initiatives; (2) holding monthly roundtables with employees to discuss concerns related to working conditions,",
      " staffing, communication, and training; (3) submitting biennial feedback reports to the Chief Morale Officer; and (4) communicating regularly with other Regional Morale Officers and the Chief Morale Officer to provide progress updates on achieving the initiatives. As of August 10, 2016, there has been no committee or floor action on this bill.  Further Postal Reform Issues for Congress Updating the Postal Fleet153 To fulfill its mission of providing \"prompt, reliable, and efficient\" postal services to its customers, the USPS has a fleet of approximately 190,000 delivery vehicles. These vehicles transport more than 153 billion pieces of mail each year to more than 150 million delivery points.",
      " Approximately 75% of the delivery fleet (142,000 vehicles) is comprised of long-life vehicles (LLVs), which have an expected useful life of 24 years. Many LLVs were purchased in the late 1980s and early 1990s, and have now met or exceeded their life expectancy. Indeed, the average age of an LLV reached 23 years in 2015. Moreover, the USPS OIG determined the current fleet can only meet delivery needs through FY2017.  Given the need to replace much of its aging delivery fleet, the USPS has proposed acquiring up to 180,000 new delivery vehicles through its Next Generation Delivery Vehicle (NGDV)",
      " acquisition program. The NGDVs would cost between $25,000 and $35,000 each, and have a life span of 20 years. The new fleet would differ from the current LLV fleet in several ways, notably that they would be configured to handle a larger number of packages \u2014which analysts believe will continue to grow in volume in coming years. The NGDVs would also use less fuel and more advanced safety features than the current LLV fleet. The NGDV acquisition program will take an estimated five to seven years to complete. In January, 2015, the USPS issued a Request for Information (RFI), which provided prospective suppliers with the specifications of the NGDVs,",
      " and invited interested parties to submit information that demonstrated their ability to meet the manufacturing and production requirements of the program. Based on responses to the RFI, the USPS developed a list of \"prequalified\" suppliers who showed they could meet the program's requirements. Only the prequalified suppliers are eligible to participate in the next phase of the program. In October, 2015, the USPS issued a Request for Proposal (RFP) seeking a qualified supplier to design and manufacture six \"fully functional\" prototypes of its NGDVs. The USPS anticipates that this phase of the program\u2014the design, build, and testing of the prototypes\u2014will take about two years to complete.",
      "  The final phase of the program, the production and delivery of the NGDV fleet, would begin in 2017. At that point, a second RFP would be released, which would establish the final NGDV production requirements, and indicate whether the USPS will purchase the vehicles, lease them, or both. The USPS has stated that while it is likely that just one supplier would be awarded the contract, it is possible that more than one supplier may be selected. Nonpostal Products and Services175 The PAEA defines postal services as \"the delivery of letters, printed matter, or mailable packages, including acceptance, collection, sorting, transportation,",
      " or other functions ancillary thereto\" and prohibits the USPS from offering all but a limited number of excepted nonpostal products and services. This restriction prevents the Postal Service from offering or developing new nonpostal products (e.g., expanded banking and financial services) or expanding into new markets that might increase its market share and revenue. Under the PAEA, the Postal Service is currently authorized to offer 11 nonpostal products and services, including two market dominant and nine competitive products. The two market dominant products are USPS/public sector alliances, e.g., MoverSource, which allows the USPS to provide free change-of-address services by including moving tips and related advertisements;",
      " and philatelic sales intended for stamp collectors, e.g., uncut press sheets, framed stamps, binders for storing stamps, and philatelic guides. The nine competitive products are private sector advertising on USPS.com, within U.S. post offices, or in other postal venues; licensing of USPS's copyrights and trademarks; mail service promotions, which \"allow merchants who offer web-based customers the ability to create mail pieces through an online service.\" Prices for these products are negotiated between the merchant and the Postal Service; sale of officially licensed USPS retail products; U.S. Passport photo services; photocopying services; rental, leasing, and non-sale of USPS property;",
      " use of USPS training facility and courses; and the USPS Electronic Postmark (EPM) program, which \"authorizes vendors to provide their customers with Postal Service-authorized timestamps.\" In FY2015, revenues from nonpostal market dominant products were $75 million and expenses were $13 million, for a net gain of $62 million. For nonpostal competitive products, revenues were $106 million and expenses were $17 million, for a net gain of $89 million. This was an increase of 13% and 4% from FY2014 nonpostal market dominant and competitive revenues, respectively.  The Postal Service is also authorized,",
      " with limitations, to conduct short-term market tests that may include nonpostal products. Market tests are generally limited to two years and have included the sale of gift cards, a same-day delivery service (Metro Post\u2122), and an international eCommerce shipping service (GeM Merchant). The USPS OIG suggested grocery delivery as another possible market test in its June 2016 OIG Blog post.  Select postal reform legislation introduced in the 113 th and 114 th Congresses would provide the USPS with authority to offer additional nonpostal products and services. The nonpostal products and services covered in recent bills include  public Internet access; drivers' license services;",
      " hunting and fishing license services; voter registration; and postal banking and financial services. Further, legislation introduced in the 114 th Congress, such as S. 2051, Improving Postal Operations, Service, and Transparency Act of 2015 (iPOST Act), and H.R. 5714, Postal Service Reform Act of 2016, includes provisions that would allow the USPS to offer a range of nonpostal products and services that are currently prohibited under the PAEA.  Postal Banking202 In looking for ways to grow USPS's nonpostal products and services, one option is to expand the financial services it offers (e.g., international money orders,",
      " prepaid cards). The USPS offered select financial products in the 20 th century, but they have not been available since the termination of the Postal Savings System in 1967.  One reason that postal financial services are still raised as a potentially beneficial product line may be the example provided by other nations. Countries with some form of postal financial services include the United Kingdom, France, Japan, Germany, South Korea, and Brazil, in addition to many others. These examples also highlight the numerous different models that a postal system can utilize to provide financial services. In some cases, the postal service offers its own financial products through a separate entity established within the postal department.",
      " In other cases, the postal service facilitates the sale of financial services that are managed by a private financial institution. Some nations have implemented a hybrid of these two approaches. For example, South Korea uses a system wherein its postal service (Korea Post) offers its own financial services while also handling deposits made to private banks.  To further explore this idea, the USPS OIG issued a white paper in early 2014 to study whether the USPS is well positioned to offer financial services. In this report, the USPS OIG determined that financial services are the best opportunities for the USPS to generate new revenue. In addition, the report estimated there would be significant demand for these services from populations currently underserved by private banks.",
      "  Following the publication of the initial white paper, the USPS OIG completed a second study in 2015 that examined the statutory authority required to offer financial services and offered possible models that could be used. First, the report stated that the USPS could simply expand its current offering of financial products, which includes paper money orders, gift cards, and check cashing. This approach would provide limited growth opportunities, but would also incur relatively low implementation costs and is permissible under current statutory authority. The USPS OIG estimates that after a five-year period of developing these services, the USPS could generate $1.1 billion in additional revenue annually.  Beyond this approach,",
      " the white paper also identified four alternative models that draw heavily on the experience of other countries. For each of these approaches, the upfront costs would be higher and the USPS OIG states additional statutory authority would be needed. These four approaches are (1) a partnership with one outside firm to offer services through the USPS; (2) partnerships with multiple outside firms that are specialized for each individual product; (3) a marketplace model wherein the USPS facilitates many options for each financial service; and (4) a full-fledged postal bank, which would offer financial products wholly managed by the USPS or an entity within the agency.  Arguments For and Against Postal Banking The work of the USPS OIG began a national conversation around the merits of developing postal financial services at the USPS,",
      " with many advocates for and against the concept. As mentioned above, proponents of postal financial services believe that such an expansion would offer financial services to underserved populations and provide needed revenue to the postal service at a time when demand for their traditional product line of first class mail delivery is declining.  Recently, many journalists and organizations have recommended a postal savings system as a way to reach households and individuals that do not currently make use of an insured financial institution and instead rely on alternative financial services (AFS). According to a 2013 report from the Federal Deposit Insurance Corporation (FDIC), this population is relatively large. The report found that 7.",
      "7% of all U.S. households were unbanked, meaning they had no account at an insured financial institution, while 20% of households were considered underbanked, meaning they had used AFS in the previous 12 months.  On the other side of the debate over postal financial services are those who believe the expanded services would not generate revenue or would unfairly encroach on the private market for financial services. Specifically, some have critiqued the revenue forecasts developed by the USPS OIG and the assumption that the underserved populations trust the USPS more than other institutions. Some have questioned whether there is a conflict between the two primary benefits that are currently suggested by postal banking advocates.",
      " Writing in the Washington Post, Charles Lane stated, At bottom, though, the problem with postal banking is a certain inherent tension between its policy objectives: is the primary purpose to help low-income people, or is it to help the postal service make more money to offset the irreversible decline of its bread-and-butter business, first-class mail? Without a more detailed estimate of the costs at which the USPS could profitably provide these services, the validity of this particular critique cannot be determined.  The U.S. Postal Savings System: 1911-1967 In evaluating the merits of expanding USPS financial products and services, many have looked to the USPS's own experience with postal banking in the first half of the 20 th century.",
      " From 1911 until 1967, the USPS operated the U.S. Postal Savings System (PSS) throughout the United States. At its peak in the late 1940s, this system had more than 4 million depositors and $3.4 billion in accounts. The purpose of this system at the time of its creation was to \"get money out of hiding, to attract savings of a large number of immigrants who were accustomed to savings at post offices in their native countries, and to provide safe depositories for people who had lost confidence in private banks.\" This emphasis on reaching new underserved populations, providing an alternative beyond private institutions,",
      " and looking to international examples mirrors many of the arguments being made on behalf of postal financial services today.  Select Postal Banking Legislation In the 113 th Congress, Representative Cummings introduced H.R. 2690, Innovate to Deliver Act of 2013, which if enacted, would have expanded USPS's authority to offer nonpostal products and services, including \"check-cashing services.\"  As discussed in the 2015 USPS OIG report, a more comprehensive approach is for the Postal Service to become a chartered and licensed bank. As a bank, the USPS would have authority to provide a range of financial services, such as savings accounts,",
      " personal loans, check cashing services, and insurance products. In the 114 th Congress, Representative Richmond introduced H.R. 4422 which, if enacted, would provide the Postal Service with authority to \"provide basic financial services\" including small-dollar loans, checking and savings accounts, and other services in the public interest. Under the bill, the USPS would have authority to provide some of these services \"alone, or in partnership with depository institutions.\" The bill, however, stopped short of establishing a new postal banking system with a chartered and licensed USPS bank.  While the specific proposals in the USPS OIG white paper, in articles,",
      " and in legislation differ in the financial products they cover, each of the proposals appears to share certain characteristics and goals. Each leverages the nationwide service network and accessibility of the USPS. Further, each seeks to achieve one or both of two goals: reach populations that are underserved by current financial institutions or provide additional revenue opportunities to the USPS. Appendix A. USPS Revenue and Volume by Mail Category and Class Appendix B. Postal Reform Legislation Introduced in the 113 th and 114 th Congresses\n"
    ],
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  },
  {
    "id": 49,
    "question": null,
    "answer": "The Department of Defense's (DOD) new human resources management system--the National Security Personnel System (NSPS)--will have far-reaching implications for civil service reform across the federal government. The 2004 National Defense Authorization Act gave DOD significant flexibilities for managing more than 700,000 defense civilian employees. Given DOD's massive size, NSPS represents a huge undertaking for DOD. DOD's initial process to design NSPS was problematic; however, DOD adjusted its approach to a more deliberative process that involved more stakeholders. NSPS could, if designed and implemented properly, serve as a model for governmentwide transformation in human capital management. However, if not properly designed and implemented, it could severely impede progress toward a more performance- and results-based system for the federal government as a whole. On February 14, 2005, DOD and the Office of Personnel Management (OPM) released for public comment the proposed NSPS regulations. This testimony provides GAO's preliminary observations on selected provisions of the proposed regulations. Many of the principles underlying the proposed NSPS regulations are generally consistent with proven approaches to strategic human capital management. For instance, the proposed regulations provide for (1) elements of a flexible and contemporary human resources management system--such as pay bands and pay for performance; (2) DOD to rightsize its workforce when implementing reduction-in-force orders by giving greater priority to employee performance in its retention decisions; and (3) continuing collaboration with employee representatives. The 30-day public comment period on the proposed regulations ended March 16, 2005. DOD and OPM have notified the Congress that they are preparing to begin the meet and confer process with employee representatives who provided comments on the proposed regulations. The meet and confer process is critically important because there are many details of the proposed regulations that have not been defined, especially in the areas of pay and performance management, adverse actions and appeals, and labor-management relations. (It should be noted that 10 federal labor unions have filed suit alleging that DOD failed to abide by the statutory requirements to include employee representatives in the development of DOD's new labor relations system authorized as part of NSPS.) GAO has several areas of concern: the proposed regulations do not (1) define the details of the implementation of the system, including such issues as adequate safeguards to help ensure fairness and guard against abuse; (2) require, as GAO believes they should, the use of core competencies to communicate to employees what is expected of them on the job; and (3) identify a process for the continuing involvement of employees in the planning, development, and implementation of NSPS. Also, GAO believes that DOD (1) would benefit if it develops a comprehensive communications strategy that provides for ongoing, meaningful two-way communication that creates shared expectations among employees, employee representatives, and stakeholders and (2) should complete a plan for implementing NSPS to include an information technology plan and a training plan. Until such a plan is completed, the full extent of the resources needed to implement NSPS may not be well understood.\n",
    "docs": [
      "Preliminary  Observations on  Proposed Regulations  for DOD\u2019s National  Security Personnel  System DOD and OPM\u2019s proposed NSPS regulations would establish a new human  resources management system within DOD that governs basic pay, staffing,  classification, performance management, labor relations, adverse actions,  and employee appeals. We believe that many of the basic principles  underlying the proposed DOD regulations are generally consistent with  proven approaches to strategic human capital management. Today, I will  provide our preliminary observations on selected elements of the proposed  regulations in the areas of pay and performance management, staffing  and employment, workforce shaping,",
      " adverse actions and appeals, and  labor-management relations. Pay and Performance  Management In January 2004, we released a report on pay for performance for  selected OPM personnel demonstration projects that shows the variety  of approaches taken in these projects to design and implement  pay-for-performance systems. Many of these personnel demonstration  projects were conducted within DOD. The experiences of these  demonstration projects provide insights into how some organizations in  the federal government are implementing pay for performance, and thus  can guide DOD as it develops and implements its own approach. These  demonstration projects illustrate that understanding how to link pay to  performance is very much a work in progress in the federal government  and that additional work is needed to ensure that performance  management systems are tools to help agencies manage on a day-to-day  basis and achieve external results.",
      " When DOD first proposed its new civilian personnel reform, we strongly  supported the need to expand pay for performance in the federal  government. Establishing a clear link between individual pay and  performance is essential for maximizing performance and ensuring the  accountability of the federal government to the American people. As we  have stated before, how pay for performance is done, when it is done, and  the basis on which it is done can make all the difference in whether such  efforts are successful. DOD\u2019s proposed regulations reflect a growing  understanding that the federal government needs to fundamentally  rethink its current approach to pay and better link pay to individual and  organizational performance.",
      " To this end, the DOD proposal takes another  valuable step toward a modern performance management system as well  as a market-based, results-oriented compensation system. My comments  on specific provisions of pay and performance management follow. Aligning Individual Performance  to Organizational Goals Under the proposed regulations, the DOD performance management  system would, among other things, align individual performance  expectations with the department\u2019s overall mission and strategic goals,  organizational program and policy objectives, annual performance plans,  and other measures of performance. However, the proposed regulations do  not detail how to achieve such an alignment, which is a vital issue that will  need to be addressed as DOD\u2019s efforts in designing and implementing a new  personnel system move forward.",
      " Our work on public sector performance  management efforts in the United States and abroad has underscored the  importance of aligning daily operations and activities with organizational  results. We have found that organizations often struggle with clearly  understanding how what they do on a day-to-day basis contributes to  overall organizational results, while high-performing organizations  demonstrate their understanding of how the products and services they  deliver contribute to results by aligning the performance expectations of  top leadership with the organization\u2019s goals and then cascading those  expectations to lower levels. A performance management system is critical to successful organizational  transformation. As an organization undergoing transformation, DOD can  use its proposed performance management system as a vital tool for  aligning the organization with desired results and creating a \u201cline of sight\u201d  to show how team,",
      " unit, and individual performance can contribute to  overall organizational results. To help federal agencies transform their  culture to be more results oriented, customer focused, and collaborative in  nature, we have reported on how a performance management system that  defines responsibility and ensures accountability for change can be key to a  successful merger and transformation. Establishing Pay Bands Under the proposed regulations, DOD would create pay bands for most of  its civilian workforce that would replace the 15-grade General Schedule  (GS) system now in place for most civil service employees. Specifically,  DOD (in coordination with OPM) would establish broad occupational  career groups by grouping occupations and positions that are similar in  type of work,",
      " mission, developmental or career paths, and competencies.  Within career groups, DOD would establish pay bands. The proposed  regulations do not provide details on the number of career groups or the  number of pay bands per career group. The regulations also do not provide  details on the criteria that DOD will use to promote individuals from one  band to another. These important issues will need to be addressed as DOD  moves forward. Pay banding and movement to broader occupational career  groups can both facilitate DOD\u2019s movement to a pay-for-performance  system and help DOD better define career groups, which in turn can  improve the hiring process.",
      " In our prior work, we have reported that the  current GS system, as defined in the Classification Act of 1949, is a key  barrier to comprehensive human capital reform and that the creation of  broader occupational job clusters and pay bands would aid other agencies  as they seek to modernize their personnel systems. The standards and  process of the current classification system are key problems in federal  hiring efforts because they are outdated and thus not applicable to today\u2019s  occupations and work. Under the proposed regulations, DOD could not reduce employees\u2019 basic  rates of pay when converting to pay bands. In addition, the proposed  regulations would allow DOD to establish a \u201ccontrol point\u201d within a band  that limits increases in the rate of basic pay and may require certain criteria  to be met for increases above the control point.",
      " The use of control points  to manage employees\u2019 progression through the bands can help to ensure  that their performance coincides with their salaries and that only the  highest performers move into the upper half of the pay band, thereby  controlling salary costs. The OPM personnel demonstration projects at  China Lake and the Naval Sea Systems Command Warfare Center\u2019s  Dahlgren Division have incorporated checkpoints or \u201cspeed bumps\u201d in  their pay bands. For example, when an employee\u2019s salary at China Lake  reaches the midpoint of the pay band, the employee must receive a  performance rating that is equivalent to exceeding expectations before he  or she can receive additional salary increases.",
      " Setting and Communicating  Employee Performance  Expectations Under the proposed regulations, DOD\u2019s performance management system  would promote individual accountability by setting performance  expectations and communicating them to employees, holding employees  responsible for accomplishing them, and making supervisors and managers  responsible for effectively managing the performance of employees under  their supervision. While supervisors are supposed to involve employees,  insofar as practicable, in setting performance expectations, the final  decisions regarding performance expectations are within the sole and  exclusive discretion of management. Under the proposed regulations, performance expectations may take  several different forms. These include, among others, goals or objectives  that set general or specific performance targets at the individual,",
      " team, or  organizational level; a particular work assignment, including  characteristics such as quality, quantity, accuracy, or timeliness; core  competencies that an employee is expected to demonstrate on the job; or  the contributions that an employee is expected to make. As DOD\u2019s human  resources management system design efforts move forward, DOD will need  to define, in more detail than is currently provided, how performance  expectations will be set, including the degree to which DOD components,  managers, and supervisors will have flexibility in setting those  expectations. The range of expectations that DOD would consider in setting individual  employee performance expectations are generally consistent with those  used by high-performing organizations.",
      " DOD appropriately recognizes that  given the vast diversity of work done in the department, managers and  employees need flexibility in crafting specific expectations. However, the  experiences of high-performing organizations suggest that DOD should  require the use of core competencies as a central feature of its performance  management effort. Based on our review of other agency efforts and our  own experience at GAO, we have found that core competencies can help  reinforce employee behaviors and actions that support the department\u2019s  mission, goals, and values, and can provide a consistent message to  employees about how they are expected to achieve results. By including  such competencies as change management,",
      " cultural sensitivity, teamwork  and collaboration, and information sharing, DOD would create a shared  responsibility for organizational success and help ensure accountability for  the transformation process. Making Meaningful Distinctions  in Employee Performance High-performing organizations seek to create pay, incentive, and reward  systems that clearly link employee knowledge, skills, and contributions to  organizational results. These organizations make meaningful distinctions  between acceptable and outstanding performance of individuals and  appropriately reward those who perform at the highest level. DOD\u2019s  proposed regulations state that supervisors and managers would be held  accountable for making meaningful distinctions among employees based  on performance and contribution, fostering and rewarding excellent  performance,",
      " and addressing poor performance. Under the proposed regulations, DOD is expected to have at least three  rating levels for evaluating employee performance. We urge DOD to  consider using at least four summary rating levels to allow for greater  performance-rating and pay differentiation. This approach is in the spirit of  the new governmentwide performance-based pay system for the Senior  Executive Service (SES), which requires at least four rating levels to  provide a clear and direct link between SES performance and pay as well as  to make meaningful distinctions based on relative performance. Cascading  this approach to other levels of employees can help DOD recognize and  reward employee contributions and achieve the highest levels of individual  performance.",
      " Providing Adequate Safeguards  to Ensure Fairness and Guard  Against Abuse Although DOD\u2019s proposed regulations provide for some safeguards to  ensure fairness and guard against abuse, additional safeguards should be  developed. For example, as required by the authorizing legislation, the  proposed regulations indicate that DOD\u2019s performance management  system must comply with merit system principles and avoid prohibited  personnel practices; provide a means for employee involvement in the  design and implementation of the system; and, overall, be fair, credible, and  transparent. However, the proposed regulations do not offer details on how  DOD would (1) promote consistency and provide general oversight of the  performance management system to help ensure it is administered in a  fair,",
      " credible, and transparent manner, and (2) incorporate predecisional  internal safeguards that are implemented to help achieve consistency  and equity, and ensure nondiscrimination and nonpoliticization of the  performance management process. Last month, during testimony, we  stated that additional flexibility should have adequate safeguards, including  a reasonable degree of transparency with regard to the results of key  decisions, whether it be pay, promotions, or other types of actions, while  protecting personal privacy. We also suggested that there should be both  informal and formal appeal mechanisms within and outside of the  organization if individuals feel that there has been abuse or a violation of  the policies,",
      " procedures, or protected rights of the individual. Internal  mechanisms could include independent human capital office and office of  opportunity and inclusiveness reviews that provide reasonable assurances  that there would be consistency and nondiscrimination. Furthermore, it is  of critical importance that the external appeal process be independent,  efficient, effective, and credible. In April 2003, when commenting on DOD civilian personnel reforms, we  testified that Congress should consider establishing statutory standards  that an agency must have in place before it can implement a more  performance-based pay program, and we developed an initial list of  possible safeguards to help ensure that pay-for-performance systems in the  government are fair,",
      " effective, and credible. For example, we have noted  that agencies need to ensure reasonable transparency and provide  appropriate accountability mechanisms in connection with the results of  the performance management process. This can be done by publishing  the overall results of performance management and individual pay  decisions while protecting individual confidentiality and by reporting  periodically on internal assessments and employee survey results relating  to the performance management system. DOD needs to commit itself to  publishing the results of performance management decisions. By  publishing the results in a manner that protects individual confidentiality,  DOD could provide employees with the information they need to better  understand their performance and the performance management system.",
      "  Several of the demonstration projects have been publishing information  about performance appraisal and pay decisions, such as the average  performance rating, the average pay increase, and the average award for  the organization and for each individual unit, on internal Web sites for use  by employees. As DOD\u2019s human resources management system design  efforts move forward, DOD will need to define, in more detail than is  currently provided, how it plans to review such matters as the  establishment and implementation of the performance appraisal  system\uf8e7and, subsequently, performance rating decisions, pay  determinations, and promotion actions\uf8e7before these actions are finalized,",
      "  to ensure they are merit based. Staffing and Employment The authorizing legislation allows DOD to implement additional hiring  flexibilities that would allow it to (1) determine that there is a severe  shortage of candidates or a critical hiring need and (2) use direct-hire  procedures for these positions. Under current law, OPM, rather than the  agency, determines whether there is a severe shortage of candidates or a  critical hiring need. DOD\u2019s authorizing legislation permits that DOD merely  document the basis for the severe shortage or critical hiring need and then  notify OPM of these direct-hire determinations.",
      " Direct-hire authority allows  an agency to appoint people to positions without adherence to certain  competitive examination requirements (such as applying veterans\u2019  preference or numerically rating and ranking candidates based on their  experience, training, and education) when there is a severe shortage of  qualified candidates or a critical hiring need. In the section containing  DOD\u2019s proposed hiring flexibilities, the proposed regulations state that the  department will adhere to veterans\u2019 preference principles as well as comply  with merit principles and the Title 5 provision dealing with prohibited  personnel practices. While we strongly endorse providing agencies with additional tools and  flexibilities to attract and retain needed talent,",
      " additional analysis may be  needed to ensure that any new hiring authorities are consistent with a  focus on the protection of employee rights, on merit principles\u2014and on  results. Hiring flexibilities alone will not enable federal agencies to bring on  board the personnel that are needed to accomplish their missions.  Agencies must first conduct gap analyses of the critical skills and  competencies needed in their workforces now and in the future, or they  may not be able to effectively design strategies to hire, develop, and retain  the best possible workforces. Workforce Shaping The proposed regulations would allow DOD to reduce, realign, and  reorganize the department\u2019s workforce through revised RIF procedures.",
      "  For example, employees would be placed on a retention list in the  following order: tenure group (i.e., permanent or temporary appointment),  veterans\u2019 preference eligibility (disabled veterans will be given additional  priority), level of performance, and length of service; under current  regulations, length of service is considered ahead of performance. We have  previously testified, prior to the enactment of NSPS, in support of revised  RIF procedures that would require much greater consideration of an  employee\u2019s performance. Although we support greater consideration of  an employee\u2019s performance in RIF procedures, agencies must have  modern, effective, and credible performance management systems in place  to properly implement such authorities.",
      " An agency\u2019s approach to workforce shaping should be oriented toward  strategically reducing, realigning, and reorganizing the makeup of its  workforce to ensure the orderly transfer of institutional knowledge and  achieve mission results. DOD\u2019s proposed regulations include some changes  that would allow the department to rightsize the workforce more carefully  through greater precision in defining competitive areas, and by reducing  the disruption associated with RIF orders as their impact ripples through  an organization. For example, under the current regulations, the minimum  RIF competitive area is broadly defined as an organization under separate  administration in a local commuting area. Under the proposed regulations,",
      "  DOD would be able to establish a minimum RIF competitive area on a more  targeted basis, using one or more of the following factors: geographical  location, line of business, product line, organizational unit, and funding  line. The proposed regulations also provide DOD with the flexibility to  develop additional competitive groupings on the basis of career group,  occupational series or specialty, and pay band. At present, DOD can use  competitive groups based on employees (1) in the excepted and  competitive service, (2) under different excepted service appointment  authorities, (3) with different work schedules, (4)",
      " pay schedule, or  (5) trainee status. These reforms could help DOD approach rightsizing  more carefully; however, as I have stated, agencies first need to identify the  critical skills and competencies needed in their workforce if they are to  effectively implement their new human capital flexibilities. Adverse Actions and  Appeals As with DHS\u2019s final regulations, DOD\u2019s proposed regulations are  intended to streamline the rules and procedures for taking adverse actions,  while ensuring that employees receive due process and fair treatment.  The proposed regulations establish a single process for both performance- based and conduct-based actions, and shorten the adverse action process  by removing the requirement for a performance improvement plan.",
      " In  addition, the proposed regulations streamline the appeals process at the  Merit Systems Protection Board (MSPB) by shortening the time for filing  and processing appeals. Similar to DHS, DOD\u2019s proposed regulations also adopt a higher standard  of proof for adverse actions in DOD, requiring the department to meet a  \u201cpreponderance of the evidence\u201d standard in place of the current  \u201csubstantial evidence\u201d standard. For performance issues, while this higher  standard of evidence means that DOD would face a greater burden of proof  than most agencies to pursue these actions, DOD managers are not  required to provide employees with performance improvement periods,",
      " as  is the case for other federal employees. For conduct issues, DOD would  face the same burden of proof as most agencies. DOD\u2019s proposed regulations generally preserve the employee\u2019s basic right  to appeal decisions to an independent body\u2014the MSPB. However, in  contrast to DHS\u2019s final regulations, DOD\u2019s proposed regulations permit an  internal DOD review of the initial decisions issued by MSPB adjudicating  officials. Under this internal review, DOD can modify or reverse an initial  decision or remand the matter back to the adjudicating official for further  consideration. Unlike other criteria for review of initial decisions,",
      " DOD can  modify or reverse an initial MSPB adjudicating official\u2019s decision where the  department determines that the decision has a direct and substantial  adverse impact on the department\u2019s national security mission. According  to DOD, the department needs the authority to review initial MSPB  decisions and correct such decisions as appropriate, to ensure that the  MSPB interprets NSPS and the proposed regulations in a way that  recognizes the critical mission of the department and to ensure that MSPB  gives proper deference to such interpretation. However, the proposed  regulations do not offer additional details on the department\u2019s internal  review process, such as how the review will be conducted and who will  conduct them.",
      " An internal agency review process this important should be  addressed in the regulations rather than in an implementing directive to  ensure adequate transparency and employee confidence in the process. Similar to DHS\u2019s final regulations, DOD\u2019s proposed regulations would  shorten the notification period before an adverse action can become  effective and provide an accelerated MSPB adjudication process. In  addition, MSPB would no longer be able to modify a penalty for an adverse  action that is imposed on an employee by DOD unless such penalty is so  disproportionate to the basis of the action as to be \u201cwholly without  justification.\u201d In other words, MSPB has less latitude to modify agency-",
      " imposed penalties than under current practice. The DOD proposed  regulations also stipulate that MSPB could no longer require that parties  enter into settlement discussions, although either party may propose doing  so. DOD, like DHS, expressed concerns that settlement should be a  completely voluntary decision made by parties on their own initiative.  However, settling cases has been an important tool in the past at MSPB,  and promotion of settlement at this stage should be encouraged. Similar to DHS\u2019s final regulations, DOD\u2019s proposed regulations would  permit the Secretary of Defense to identify specific offenses for which  removal is mandatory. Employees alleged to have committed these  offenses may receive a written notice only after the Secretary of Defense\u2019s  review and approval.",
      " These employees will have the same right to a review  by an MSPB adjudicating official as is provided to other employees against  whom appealable adverse actions are taken. DOD\u2019s proposed regulations  only indicate that its employees will be made aware of the mandatory  removal offenses. In contrast, the final DHS regulations explicitly provide  for publishing a list of the mandatory removal offenses in the Federal  Register. We believe that the process for determining and communicating  which types of offenses require mandatory removal should be explicit and  transparent and involve relevant congressional stakeholders, employees,  and employee representatives. Moreover, we suggest that DOD exercise  caution when identifying specific removable offenses and the specific  punishment.",
      " When developing these proposed regulations, DOD should  learn from the experience of the Internal Revenue Service\u2019s (IRS)  implementation of its mandatory removal provisions. (IRS employees  feared that they would be falsely accused by taxpayers and investigated,  and had little confidence that they would not be disciplined for making an  honest mistake.) We reported that IRS officials believed this provision had  a negative impact on employee morale and effectiveness and had a  \u201cchilling\u201d effect on IRS frontline enforcement employees, who were afraid  to take certain appropriate enforcement actions. Careful drafting of each  removable offense is critical to ensure that the provision does not have  unintended consequences.",
      " DOD\u2019s proposed regulations also would encourage the use of alternative  dispute resolution and provide that this approach be subject to collective  bargaining to the extent permitted by the proposed labor relations  regulations. To resolve disputes in a more efficient, timely, and less  adversarial manner, federal agencies have been expanding their human  capital programs to include alternative dispute resolution approaches.  These approaches include mediation, dispute resolution boards, and  ombudsmen. Ombudsmen typically are used to provide an informal  alternative to addressing conflicts. We previously reported on common  approaches used in ombudsmen offices, including (1) broad responsibility  and authority to address almost any workplace issue,",
      " (2) their ability to  bring systemic issues to management\u2019s attention, and (3) the manner in  which they work with other agency offices in providing assistance to  employees. Labor-Management  Relations The DOD proposed regulations recognize the right of employees to  organize and bargain collectively. However, similar to DHS\u2019s final  regulations, the proposed regulations would reduce the scope of bargaining  by (1) removing the requirement to bargain on matters traditionally  referred to as \u201cimpact and implementation\u201d (which include the processes  used to deploy personnel, assign work, and use technology) and  (2) narrowing the scope of issues subject to collective bargaining.",
      " A  National Security Labor Relations Board would be created that would  largely replace the Federal Labor Relations Authority. The proposed board  would have at least three members selected by the Secretary of Defense,  with one member selected from a list developed in consultation with the  Director of OPM. The proposed board would be similar to the internal  Homeland Security Labor Relations Board established by the DHS final  regulations, except that the Secretary of Defense would not be required to  consult with the employee representatives in selecting its members. The  proposed board would be responsible for resolving matters related to  negotiation disputes, to include the scope of bargaining and the obligation  to bargain in good faith,",
      " resolving impasses, and questions regarding  national consultation rights. Under the proposed regulations, the Secretary of Defense is authorized to  appoint and remove individuals who serve on the board. Similar to DHS\u2019s  final regulations establishing the Homeland Security Labor Relations  Board, DOD\u2019s proposed regulations provide for board member qualification  requirements, which emphasize integrity and impartiality. DOD\u2019s proposed  regulations, however, do not provide an avenue for any employee  representative input into the appointment of board members. DHS  regulations do so by requiring that for the appointment of two board  members, the Secretary of Homeland Security must consider candidates  submitted by labor organizations.",
      " Employee perception concerning the  independence of this board is critical to the resolution of issues raised over  labor relations policies and disputes. Our previous work on individual agencies\u2019 human capital systems has not  directly addressed the scope of specific issues that should or should not be  subject to collective bargaining and negotiations. At a forum we co-hosted  in April 2004 exploring the concept of a governmentwide framework for  human capital reform, participants generally agreed that the ability to  organize, bargain collectively, and participate in labor organizations is an  important principle to be retained in any framework for reform. It also was  suggested at the forum that unions must be both willing and able to actively  collaborate and coordinate with management if unions are to be effective  representatives of their members and real participants in any human  capital reform.",
      " DOD Faces Multiple  Implementation  Challenges Once DOD issues its final regulations for its human resources management  system, the department will face multiple implementation challenges that  include establishing an overall communications strategy, providing  adequate resources for the implementation of the new system, involving  employees in designing the system, and evaluating DOD\u2019s new human  resources management system after it has been implemented. For  information on related human capital issues that could potentially affect  the implementation of NSPS, see the \u201cHighlights\u201d pages from previous GAO  products on DOD civilian personnel issues in appendix I. Establishing an Overall  Communications Strategy A significant challenge for DOD is to ensure an effective and ongoing two-",
      " way communications strategy, given its size, geographically and culturally  diverse audiences, and different command structures across DOD  organizations. We have reported that a communications strategy that  creates shared expectations about, and reports related progress on, the  implementation of the new system is a key practice of a change  management initiative. This communications strategy must involve a  number of key players, including the Secretary of Defense, and a variety  of communication means and mediums. DOD acknowledges that a  comprehensive outreach and communications strategy is essential for  designing and implementing its new human resources management system,  but the proposed regulations do not identify a process for the continuing  involvement of employees in the planning,",
      " development, and  implementation of NSPS. Because the NSPS design process and proposed regulations have received  considerable attention, we believe one of the most relevant  implementation steps is for DOD to enhance two-way communication  between employees, employee representatives, and management.  Communication is not only about \u201cpushing the message out,\u201d but also using  two-way communication to build effective internal and external  partnerships that are vital to the success of any organization. By providing  employees with opportunities to communicate concerns and experiences  about any change management initiative, management allows employees to  feel that their input is acknowledged and important. As it makes plans for  implementing NSPS,",
      " DOD should facilitate a two-way honest exchange  with, and allow for feedback from, employees and other stakeholders.  Once it receives this feedback, management needs to consider and use  this solicited employee feedback to make any appropriate changes to its  implementation. In addition, management needs to close the loop by  providing employees with information on why key recommendations were  not adopted. Providing Adequate  Resources for Implementing  the New System Experience has shown that additional resources are necessary to ensure  sufficient planning, implementation, training, and evaluation for human  capital reform. According to DOD, the implementation of NSPS will result  in costs for,",
      " among other things, developing and delivering training,  modifying automated human resources information systems, and  starting up and sustaining the National Security Labor Relations Board.  We have found that, based on the data provided by selected OPM  personnel demonstration projects, the major cost drivers in implementing  pay-for-performance systems are the direct costs associated with salaries  and training. DOD estimates that the overall cost associated with implementing NSPS  will be approximately $158 million through fiscal year 2008. According to  DOD, it has not completed an implementation plan for NSPS, including an  information technology plan and a training plan; thus, the full extent of the  resources needed to implement NSPS may not be well understood at this  time.",
      " According to OPM, the increased costs of implementing alternative  personnel systems should be acknowledged and budgeted up front.  Certain costs, such as those for initial training on the new system, are one- time in nature and should not be built into the base of DOD\u2019s budget. Other  costs, such as employees\u2019 salaries, are recurring and thus would be built  into the base of DOD\u2019s budget for future years. Therefore, funding for NSPS  will warrant close scrutiny by Congress as DOD\u2019s implementation plan  evolves. Involving Employees and  Other Stakeholders in  Implementing the System The proposed regulations do not identify a process for the continuing  involvement of employees in the planning,",
      " development, and  implementation of NSPS. However, DOD\u2019s proposed regulations do provide  for continuing collaboration with employee representatives. According to  DOD, almost two-thirds of its 700,000 civilian employees are represented  by 41 different labor unions, including over 1,500 separate bargaining  units. In contrast, according to OPM, just under one-third of DHS\u2019s  110,000 federal employees are represented by 16 different labor unions,  including 75 separate bargaining units. Similar to DHS\u2019s final regulations,  DOD\u2019s proposed regulations about the collaboration process, among other  things, would permit the Secretary of Defense to determine (1)",
      " the number  of employee representatives allowed to engage in the collaboration  process, and (2) the extent to which employee representatives are given an  opportunity to discuss their views with and submit written comments to  DOD officials. In addition, DOD\u2019s proposed regulations indicate that  nothing in the continuing collaboration process will affect the right of the  Secretary of Defense to determine the content of implementing guidance  and to make this guidance effective at any time. DOD\u2019s proposed  regulations also will give designated employee representatives an  opportunity to be briefed and to comment on the design and results of the  new system\u2019s implementation. DHS\u2019s final regulations,",
      " however, provide for  more extensive involvement of employee representatives. For example,  DHS\u2019s final regulations provide for the involvement of employee  representatives in identifying the scope, objectives, and methodology to be  used in evaluating the new DHS system. The active involvement of employees and employee representatives will  be critical to the success of NSPS. We have reported that the involvement  of employees and employee representatives both directly and indirectly  is crucial to the success of new initiatives, including implementing a  pay-for-performance system. High-performing organizations have found  that actively involving employees and stakeholders, such as unions or other  employee associations, when developing results-oriented performance  management systems helps improve employees\u2019 confidence and belief in  the fairness of the system and increases their understanding and ownership  of organizational goals and objectives.",
      " This involvement must be early,  active, and continuing if employees are to gain a sense of understanding  and ownership of the changes that are being made. The 30-day public  comment period on the proposed regulations ended March 16, 2005.  DOD and OPM notified the Congress that they are preparing to begin the  meet and confer process with employee representatives who provided  comments on the proposed regulations. Last month, during testimony, we  stated that DOD is at the beginning of a long road, and the meet and confer  process has to be meaningful and is critically important because there are  many details of the proposed regulations that have not been defined.",
      " These  details do matter, and how they are defined can have a direct bearing on  whether or not the ultimate new human resources management system is  both reasoned and reasonable. Evaluating DOD\u2019s New  Human Resources  Management System Evaluating the impact of NSPS will be an ongoing challenge for DOD. This  is especially important because DOD\u2019s proposed regulations would give  managers more authority and responsibility for managing the new human  resources management system. High-performing organizations continually  review and revise their human capital management systems based on  data-driven lessons learned and changing needs in the work environment.  Collecting and analyzing data will be the fundamental building block for  measuring the effectiveness of these approaches in support of the mission  and goals of the department.",
      " DOD\u2019s proposed regulations indicate that DOD will establish procedures  for evaluating the regulations and their implementation. We believe that  DOD should consider conducting evaluations that are broadly modeled on  the evaluation requirements of the OPM demonstration projects. Under the  demonstration project authority, agencies must evaluate and periodically  report on results, implementation of the demonstration project, cost and  benefits, impacts on veterans and other equal employment opportunity  groups, adherence to merit system principles, and the extent to which the  lessons from the project can be applied governmentwide. A set of balanced  measures addressing a range of results, and customer, employee, and  external partner issues may also prove beneficial.",
      " An evaluation such as  this would facilitate congressional oversight; allow for any midcourse  corrections; assist DOD in benchmarking its progress with other efforts;  and provide for documenting best practices and sharing lessons learned  with employees, stakeholders, other federal agencies, and the public. We have work under way to assess DOD\u2019s efforts to design its new human  resources management system, including further details on some of the  significant challenges, and we expect to issue a report on the results of our  work sometime this summer. Concluding  Observations As we testified previously on the DOD and DHS civilian personnel reforms,  an agency should have to demonstrate that it has a modern,",
      " effective,  credible, and, as appropriate, validated performance management system  in place with adequate safeguards, including reasonable transparency and  appropriate accountability mechanisms, to ensure fairness and prevent  politicization of the system and abuse of employees before any related  flexibilities are operationalized. DOD\u2019s proposed NSPS regulations take a  valuable step toward a modern performance management system as well as  a more market-based, results-oriented compensation system. DOD\u2019s  proposed performance management system is intended to align individual  performance and pay with the department\u2019s critical mission requirements;  hold employees responsible for accomplishing performance expectations;  and provide meaningful distinctions in performance.",
      " However, the  experiences of high-performing organizations suggest that DOD should  require core competencies in its performance management system. The  core competencies can serve to reinforce employee behaviors and actions  that support the DOD mission, goals, and values and to set expectations for  individuals\u2019 roles in DOD\u2019s transformation, creating a shared responsibility  for organizational success and ensuring accountability for change. DOD\u2019s overall effort to design and implement a strategic human resources  management system\uf8e7along with the similar effort of DHS\uf8e7can be  particularly instructive for future human capital management,  reorganization, and transformation efforts in other federal agencies.",
      " Mr. Chairman 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. Contacts and  Acknowledgments For further information, please contact Derek B. Stewart, Director, Defense  Capabilities and Management, at (202) 512-5559 or stewartd@gao.gov. For  further information on governmentwide human capital issues, please  contact Eileen R. Larence, Director, Strategic Issues, at (202) 512-6512  or larencee@gao.gov. Major contributors to this testimony include  Sandra F.",
      " Bell, Renee S. Brown, K. Scott Derrick, William J. Doherty,  Clifton G. Douglas, Jr., Barbara L. Joyce, Julia C. Matta, Mark A. Pross,  William J. Rigazio, John S. Townes, and Susan K. Woodward. \u201cHighlights\u201d from Selected GAO Human  Capital Reports Highlights of GAO-04-753, a report to the  Ranking Minority Member, Subcommittee  on Readiness, Committee on Armed  Services, House of Representatives   During its downsizing in the early  1990s, the Department of Defense  (DOD)",
      " did not focus on  strategically reshaping its civilian  workforce.  GAO was asked to  address DOD\u2019s efforts to  strategically plan for its future  civilian workforce at the Office of  the Secretary of Defense (OSD),  the military services\u2019 headquarters,  and the Defense Logistics Agency  (DLA).  Specifically, GAO  determined: (1) the extent to which  civilian strategic workforce plans  have been developed and  implemented to address future  civilian workforce requirements,  and (2) the major challenges  affecting the development and  implementation of these plans. OSD, the service headquarters, and DLA have recently taken steps to  develop and implement civilian strategic workforce plans to address future  civilian workforce needs,",
      " but these plans generally lack some key elements  essential to successful workforce planning.  As a result, OSD, the military  services\u2019 headquarters, and DLA\u2014herein referred to as DOD and the  components\u2014do not have comprehensive strategic workforce plans to guide  their human capital efforts.  None of the plans included analyses of the gaps  between critical skills and competencies (a set of behaviors that are critical  to work accomplishment) currently needed by the workforce and those that  will be needed in the future.  Without including gap analyses, DOD and the  components may not be able to effectively design strategies to hire,",
      " develop,  and retain the best possible workforce.  Furthermore, none of the plans  contained results-oriented performance measures that could provide the  data necessary to assess the outcomes of civilian human capital initiatives. GAO recommends that DOD and  the components include certain key elements in their civilian strategic  workforce plans to guide their  human capital efforts.  DOD  concurred with one of our  recommendations, and partially  concurred with two others because  it believes that the department has  undertaken analyses of critical  skills gaps and are using strategies  and personnel flexibilities to fill  identified skills gaps.  We cannot  verify DOD\u2019s statement because  DOD was unable to provide the gap  analyses.",
      "  In addition, we found  that the strategies being used by  the department have not been  derived from analyses of gaps  between the current and future  critical skills and competencies  needed by the workforce. The major challenge that DOD and most of the components face in their  efforts to develop and implement strategic workforce plans is their need for  information on current competencies and those that will likely be needed in  the future.  This problem results from DOD\u2019s and the components\u2019 not  having developed tools to collect and/or store, and manage data on  workforce competencies.  Without this information, it not clear whether they  are designing and funding workforce strategies that will effectively shape  their civilian workforces with the appropriate competencies needed to  accomplish future DOD missions.",
      "  Senior department and component  officials all acknowledged this shortfall and told us that they are taking steps  to address this challenge.  Though these are steps in the right direction, the  lack of information on current competencies and future needs is a  continuing problem that several organizations, including GAO, have  previously identified. www.gao.gov/cgi-bin/getrpt?-GAO-04-753. To view the full product, including the scope  and methodology, click on the link above.  For more information, contact Derek Stewart  at (202) 512-5559 or stewartd@gao.gov. Highlights of GAO-",
      "03-851T, testimony before the Committee on  Governmental Affairs, United States  Senate People are at the heart of an  organization\u2019s ability to perform its  mission. Yet a key challenge for the Department of Defense (DOD),  as for many federal agencies, is to  strategically manage its human  capital. DOD\u2019s proposed National  Security Personnel System would  provide for wide-ranging changes  in DOD\u2019s civilian personnel pay and  performance management and  other human capital areas.  Given  the massive size of DOD, the  proposal has important precedent- setting implications for federal  human capital management. GAO strongly supports the need for government transformation and the  concept of modernizing federal human capital policies both within DOD  and for the federal government at large.",
      "  The federal personnel system is  clearly broken in critical respects\u2014designed for a time and workforce of  an earlier era and not able to meet the needs and challenges of today\u2019s  rapidly changing and knowledge-based environment.  The human capital  authorities being considered for DOD have far-reaching implications for  the way DOD is managed as well as significant precedent-setting  implications for the rest of the federal government.  GAO is pleased that  as the Congress has reviewed DOD\u2019s legislative proposal it has added a  number of important safeguards, including many along the lines GAO has  been suggesting, that will help DOD maximize its chances of success in  addressing its human capital challenges and minimize the risk of failure.",
      " This testimony provides GAO\u2019s  observations on DOD human  capital reform proposals and the  need for governmentwide reform. More generally, GAO believes that agency-specific human capital reforms  should be enacted to the extent that the problems being addressed and  the solutions offered are specific to a particular agency (e.g., military  personnel reforms for DOD).  Several of the proposed DOD reforms meet  this test.  In GAO\u2019s view, the relevant sections of the House\u2019s version of  the National Defense Authorization Act for Fiscal Year 2004 and the  proposal that is being considered as part of this hearing contain a  number of important improvements over the initial DOD legislative  proposal.",
      " www.gao.gov/cgi-bin/getrpt?GAO-03-851T. To view the full testimony, click on the link  above.  For more information, contact Derek  Stewart at (202) 512-5559 or  stewartd@gao.gov. Moving forward, GAO believes it would be preferable to employ a  governmentwide approach to address human capital issues and the need  for certain flexibilities that have broad-based application and serious  potential implications for the civil service system, in general, and the  Office of Personnel Management, in particular.  GAO believes that  several of the reforms that DOD is proposing fall into this category (e.g.,  broad banding,",
      " pay for performance, re-employment and pension offset  waivers).  In these situations, GAO believes it would be both prudent and  preferable for the Congress to provide such authorities governmentwide  and ensure that appropriate performance management systems and  safeguards are in place before the new authorities are implemented by  the respective agency.  Importantly, employing this approach is not  intended to delay action on DOD\u2019s or any other individual agency\u2019s  efforts, but rather to accelerate needed human capital reform throughout  the federal government in a manner that ensures reasonable consistency  on key principles within the overall civilian workforce.  This approach  also would help to maintain a level playing field among federal agencies  in competing for talent and would help avoid further fragmentation  within the civil service.",
      " People are at the heart of an  organization\u2019s ability to perform its  mission.  Yet, a key challenge for  the Department of Defense (DOD),  as for many federal agencies, is to  strategically manage its human  capital. With about 700,000 civilian  employees on its payroll, DOD is  the second largest federal employer of civilians in the nation.  Although  downsized 38 percent between  fiscal years 1989 and 2002, this  workforce has taken on greater  roles as a result of DOD\u2019s  restructuring and transformation.   DOD\u2019s proposed National Security  Personnel System (NSPS)",
      " would  provide for wide-ranging changes  in DOD\u2019s civilian personnel pay and  performance management,  collective bargaining, rightsizing,  and other human capital areas. The  NSPS would enable DOD to  develop and implement a  consistent DOD-wide civilian  personnel system.  Given the  massive size of DOD, the proposal  has important precedent-setting  implications for federal human  capital management and OPM. DOD\u2019s lack of attention to force shaping during its downsizing in the early 1990s  has resulted in a workforce that is not balanced by age or experience and that  puts at risk the orderly transfer of institutional knowledge.",
      " Human capital  challenges are severe in certain areas.  For example, DOD has downsized its  acquisition workforce by almost half.  More than 50 percent of the workforce  will be eligible to retire by 2005.  In addition, DOD faces major succession  planning challenges at various levels within the department.  Also, since 1987,  the industrial workforce, such as depot maintenance, has been reduced by about  56 percent, with many of the remaining employees nearing retirement, calling  into question the longer-term viability of the workforce.  DOD is one of the  agencies that has begun to address human capital challenges through strategic  human capital planning.",
      "  For example, in April 2002, DOD published a  department wide strategic plan for civilians. Although a positive step toward  fostering a more strategic approach toward human capital management, the plan  is not fully aligned with the overall mission of the department or results  oriented.  In addition, it was not integrated with the military and contractor  personnel planning. We strongly support the concept of modernizing federal human capital policies  within DOD and the federal government at large.  Providing reasonable  flexibility to management in this critical area is appropriate provided adequate  safeguards are in place to prevent abuse.  We believe that Congress should  consider both governmentwide and selected agency,",
      " including DOD, changes to  address the pressing human capital issues confronting the federal government.   In this regard, many of the basic principles underlying DOD\u2019s civilian human  capital proposals have merit and deserve serious consideration. At the same  time, many are not unique to DOD and deserve broader consideration. This testimony provides GAO\u2019s  preliminary observations on  aspects of DOD\u2019s proposal to make  changes to its civilian personnel  system and discusses the  implications of such changes for  governmentwide human capital  reform.  Past reports have  contained GAO\u2019s views on what  remains to be done to bring about  lasting solutions for DOD to  strategically manage its human  capital.",
      "  DOD has not always  concurred with our  recommendations.    www.gao.gov/cgi-bin/getrpt?GAO-03-493T. To view the full testimony, including the scope  and methodology, click on the link above.  For more information, contact   Derek B.Stewart at (202) 512-5140 or  Stewartd@gao.gov. Agency-specific human capital reforms should be enacted to the extent that the  problems being addressed and the solutions offered are specific to a particular  agency (e.g., military personnel reforms for DOD).  Several of the proposed DOD  reforms meet this test.",
      "  At the same time, we believe that Congress should  consider incorporating additional safeguards in connection with several of  DOD\u2019s proposed reforms.  In our view, it would be preferable to employ a  government-wide approach to address certain flexibilities that have broad-based  application and serious potential implications for the civil service system, in  general, and the Office of Personnel Management (OPM), in particular.  We  believe that several of the reforms that DOD is proposing fall into this category  (e.g., broad-banding, pay for performance, re-employment and pension offset  waivers).  In these situations, it may be prudent and preferable for the Congress  to provide such authorities on a governmentwide basis and in a manner that  assures that appropriate performance management systems and safeguards are  in place before the new authorities are implemented by the respective agency.",
      " However, in all cases whether from a governmentwide authority or agency  specific legislation, in our view, such additional authorities should be  implemented (or operationalized) only when an agency has the institutional  infrastructure in place to make effective use of the new authorities.  Based on  our experience, while the DOD leadership has the intent and the ability to  implement the needed infrastructure, it is not consistently in place within the  vast majority of DOD at the present time. DOD is in the midst of a major  transformation effort including a  number of initiatives to transform  its forces and improve its business  operations.  DOD\u2019s legislative  initiative would provide for major  changes in civilian and military  human capital management,",
      " make  major adjustments in the DOD  acquisition process, affect DOD\u2019s  organization structure, and change  DOD\u2019s reporting requirements to  Congress, among other things. Many of the basic principles underlying DOD\u2019s civilian human capital proposal  have merit and deserve serious consideration.  The federal personnel system is  clearly broken in critical respects\u2014designed for a time and workforce of an  earlier era and not able to meet the needs and challenges of our current rapidly  changing and knowledge-based environment.  DOD\u2019s proposal recognizes that,  as GAO has stated and the experiences of leading public sector organizations  here and abroad have found,",
      " strategic human capital management must be the  centerpiece of any serious government transformation effort. DOD\u2019s proposed National Security  Personnel System (NSPS) would  provide for wide-ranging changes  in DOD\u2019s civilian personnel pay and  performance management,  collective bargaining, rightsizing,  and a variety of other human  capital areas.  The NSPS would  enable DOD to develop and  implement a consistent DOD-wide  civilian personnel system. More generally, from a conceptual standpoint, GAO strongly supports the need  to expand broad banding and pay for performance-based systems in the federal  government.  However, moving too quickly or prematurely at DOD or elsewhere,",
      "  can significantly raise the risk of doing it wrong.  This could also serve to  severely set back the legitimate need to move to a more performance- and  results-based system for the federal government as a whole.  Thus, while it is  imperative that we take steps to better link employee pay and other personnel  decisions to performance across the federal government, how it is done, when it  is done, and the basis on which it is done, can make all the difference in whether  or not we are successful.  One key need is to modernize performance  management systems in executive agencies so that they are capable of  supporting more performance-based pay and other personnel decisions.",
      "   Unfortunately, based on GAO\u2019s past work, most existing federal performance  appraisal systems, including a vast majority of DOD\u2019s systems, are not currently  designed to support a meaningful performance-based pay system. This testimony provides GAO\u2019s  preliminary observations on  aspects of DOD\u2019s legislative  proposal to make changes to its  civilian personnel system and  discusses the implications of such  changes for governmentwide  human capital reform.  This  testimony summarizes many of the  issues discussed in detail before  the Subcommittee on Civil Service  and Agency Organization,  Committee on Government  Reform, House of Representatives  on April 29,",
      " 2003. The critical questions to consider are: should DOD and/or other agencies be  granted broad-based exemptions from existing law, and if so, on what basis?  Do  DOD and other agencies have the institutional infrastructure in place to make  effective use of any new authorities?  This institutional infrastructure includes,  at a minimum, a human capital planning process that integrates the agency\u2019s  human capital policies, strategies, and programs with its program goals and  mission, and desired outcomes; the capabilities to effectively develop and  implement a new human capital system; and, importantly, a set of adequate  safeguards, including reasonable transparency and appropriate accountability  mechanisms to ensure the fair,",
      " effective, and credible implementation of a new  system. www.gao.gov/cgi-bin/getrpt?GAO-03-741T. To view the full testimony, click on the link  above.  For more information, contact Derek  Stewart at (202) 512-5559 or  stewartd@gao.gov. In GAO\u2019s view, as an alternative to DOD\u2019s proposed approach, Congress should  consider providing governmentwide broad banding and pay for performance  authorities that DOD and other federal agencies can use provided they can  demonstrate that they have a performance management system in place that  meets certain statutory standards,",
      " that can be certified to by a qualified and  independent party, such as OPM, within prescribed timeframes.  Congress  should also consider establishing a governmentwide fund whereby agencies,  based on a sound business case, could apply for funding to modernize their  performance management systems and ensure that those systems have adequate  safeguards to prevent abuse.  This approach would serve as a positive step to  promote high-performing organizations throughout the federal government  while avoiding further human capital policy fragmentation. Between 1987 and 2002, the  Department of Defense (DOD)  downsized the civilian workforce in 27 key industrial facilities by about  56 percent.",
      " Many of the remaining  72,000 workers are nearing  retirement. In recent years GAO  has identified shortcomings in  DOD\u2019s strategic planning and was  asked to determine (1) whether  DOD has implemented our prior  recommendation to develop and  implement a depot maintenance  strategic plan, (2) the extent to  which the services have developed  and implemented comprehensive  strategic workforce plans, and  (3) what challenges adversely  affect DOD\u2019s workforce planning. DOD has not implemented our October 2001 recommendation to develop  and implement a DOD depot strategic plan that would delineate workloads  to be accomplished in each of the services\u2019 depots.",
      " The DOD depot system  has been a key part of the department\u2019s plan to support military systems in  the past, but the increased use of the private sector to perform this work has  decreased the role of these activities. While title 10 of the U.S. code requires  DOD to retain core capability and also requires that at least 50 percent of  depot maintenance funds be spent for public-sector performance, questions  remain about the future role of DOD depots. Absent a DOD depot strategic  plan, the services have in varying degrees, laid out a framework for strategic  depot planning, but this planning is not comprehensive.",
      " Questions also  remain about the future of arsenals and ammunition plants. GAO reviewed  workforce planning efforts for 22 maintenance depots, 3 arsenals, and  2 ammunition plants, which employed about 72,000 civilian workers in fiscal  year 2002. GAO recommends that the DOD  complete revisions to core policy,  promulgate a schedule for  completing core computations, and  complete depot strategic planning;  develop a plan for arsenals and  ammunition plants; develop  strategic workforce plans; and  coordinate the implementation  of initiatives to address various  workforce challenges. DOD  concurred with 7 of our 9  recommendations;",
      " nonconcurring  with two because it believes the  proposed National Security  Personnel System, which was  submitted to Congress as a part of  the DOD transformation legislation,  will take care of these problems.  We believe it is premature to  assume this system will (1) be  approved by Congress as proposed  and (2) resolve these issues. The services have not developed and implemented strategic workforce plans  to position the civilian workforce in DOD industrial activities to meet future  requirements. While workforce planning is done for each of the industrial  activities, generally it is short-term rather than strategic. Further, workforce  planning is lacking in other areas that OPM guidance and high-performing  organizations identify as key to successful workforce planning.",
      " Service workforce planning efforts (1) usually do not assess the competencies;  (2) do not develop comprehensive retention plans; and (3) sometimes do not  develop performance measures and evaluate workforce plans. Several challenges adversely affect DOD\u2019s workforce planning for the  viability of its civilian depot workforce. First, given the aging depot  workforce and the retirement eligibility of over 40 percent of the workforce  over the next 5 to 7 years, the services may have difficulty maintaining the  depots\u2019 viability. Second, the services are having difficulty implementing  multiskilling\u2014an industry and government best practice for improving the  flexibility and productivity of the workforce\u2014even though this technique  could help depot planners do more with fewer employees.",
      " Finally, increased  training funding and innovation in the training program will be essential for  revitalizing the aging depot workforce. Staffing Levels, Age, and Retirement Eligibility of Civilian Personnel in Industrial Facilities  Percent eligible  to retire by 2009  www.gao.gov/cgi-bin/getrpt?GAO-03-472. To view the full report, including the scope  and methodology, click on the link above.  For more information, contact Derek Stewart  at (202) 512-5559 or stewartd@gao.gov. Highlights of GAO-03-717T, testimony  before the Subcommittee on Civil Service  and Agency Organization,",
      " Committee on  Government Reform, House of  Representatives  DOD is in the midst of a major  transformation effort including a  number of initiatives to transform  its forces and improve its business  operations.  DOD\u2019s legislative  initiative would provide for major  changes in the civilian and military  human capital management, make  major adjustments in the DOD  acquisition process, affect DOD\u2019s  organization structure, and change  DOD\u2019s reporting requirements to  Congress, among other things. Many of the basic principles underlying DOD\u2019s civilian human capital proposals have merit and deserve serious consideration.  The federal personnel system is  clearly broken in critical respects\u2014designed for a time and workforce of an  earlier era and not able to meet the needs and challenges of our current rapidly  changing and knowledge-based environment.",
      "  DOD\u2019s proposal recognizes that,  as GAO has stated and the experiences of leading public sector organizations  here and abroad have found strategic human capital management must be the  centerpiece of any serious government transformation effort. DOD\u2019s proposed National Security  Personnel System (NSPS) would  provide for wide-ranging changes  in DOD\u2019s civilian personnel pay and  performance management,  collective bargaining, rightsizing,  and a variety of other human  capital areas.  The NSPS would  enable DOD to develop and  implement a consistent DOD-wide  civilian personnel system. More generally, from a conceptual standpoint, GAO strongly supports the need  to expand broad banding and pay for performance-based systems in the federal  government.",
      "  However, moving too quickly or prematurely at DOD or elsewhere,  can significantly raise the risk of doing it wrong.  This could also serve to  severely set back the legitimate need to move to a more performance and  results- based system for the federal government as a whole.  Thus, while it is  imperative that we take steps to better link employee pay and other personnel  decisions to performance across the federal government, how it is done, when it  is done, and the basis on which it is done, can make all the difference in whether  or not we are successful.  In our view, one key need is to modernize  performance management systems in executive agencies so that they are  capable of supporting more performance-based pay and other personnel  decisions.",
      "  Unfortunately, based on GAO\u2019s past work, most existing federal  performance appraisal systems, including a vast majority of DOD\u2019s systems, are  not currently designed to support a meaningful performance-based pay system. This testimony provides GAO\u2019s  preliminary observations on  aspects of DOD\u2019s legislative  proposal to make changes to its  civilian personnel system and  poses critical questions that need  to be considered. The critical questions to consider are: should DOD and/or other agencies be  granted broad-based exemptions from existing law, and if so, on what basis; and  whether they have the institutional infrastructure in place to make effective use  of the new authorities.",
      "  This institutional infrastructure includes, at a minimum,  a human capital planning process that integrates the agency\u2019s human capital  policies, strategies, and programs with its program goals and mission, and  desired outcomes; the capabilities to effectively develop and implement a new  human capital system; and, importantly, a set of adequate safeguards, including  reasonable transparency and appropriate accountability mechanisms to ensure  the fair, effective, and credible implementation of a new system. www.gao.gov/cgi-bin/getrpt?GAO-03-717T. To view the full report, including the scope  and methodology, click on the link above.  For more information,",
      " contact Derek Stewart  at (202) 512-5559 or stewartd@gao.gov. In our view, Congress should consider providing governmentwide broad banding  and pay for performance authorities that DOD and other federal agencies can  use provided they can demonstrate that they have a performance management  system in place that meets certain statutory standards, which can be certified to  by a qualified and independent party, such as OPM, within prescribed  timeframes.  Congress should also consider establishing a governmentwide fund  whereby agencies, based on a sound business case, could apply for funding to  modernize their performance management systems and ensure that those  systems have adequate safeguards to prevent abuse.",
      "  This approach would serve  as a positive step to promote high-performing organizations throughout the  federal government while avoiding fragmentation within the executive branch in  the critical human capital area. The Department of Defense\u2019s  (DOD) civilian employees play key  roles in such areas as defense  policy, intelligence, finance,  acquisitions, and weapon systems  maintenance.  Although downsized  38 percent between fiscal years  1989 and 2002, this workforce has  taken on greater roles as a result of  DOD\u2019s restructuring and  transformation. Responding to  congressional concerns about the  quality and quantity of, and the  strategic planning for the civilian  workforce,",
      " GAO determined the  following for DOD, the military  services, and selected defense  agencies: (1) the extent of top-level  leadership involvement in civilian  strategic planning; (2) whether  elements in civilian strategic plans  are aligned to the overall mission,  focused on results, and based on  current and future civilian  workforce data; and (3) whether  civilian and military personnel  strategic plans or sourcing  initiatives were integrated. Generally, civilian personnel issues appear to be an emerging priority among  top leaders in DOD and the defense components.  Although DOD began  downsizing its civilian workforce more than a decade ago,",
      " it did not take  action to strategically address challenges affecting the civilian workforce  until it issued its civilian human capital strategic plan in April 2002.    Top-level leaders in the Air Force, the Marine Corps, the Defense Contract  Management Agency, and the Defense Finance Accounting Service have  initiated planning efforts and are working in partnership with their civilian  human capital professionals to develop and implement civilian strategic  plans; such leadership, however, was increasing in the Army and not as  evident in the Navy.  Also, DOD has not provided guidance on how to  integrate the components\u2019 plans with the department-level plan.  High-level  leadership is critical to directing reforms and obtaining resources for  successful implementation.",
      " The human capital strategic plans GAO reviewed for the most part lacked  key elements found in fully developed plans.  Most of the civilian human  capital goals, objectives, and initiatives were not explicitly aligned with the  overarching missions of the organizations.  Consequently, DOD and the  components cannot be sure that strategic goals are properly focused on  mission achievement.  Also, none of the plans contained results-oriented  performance measures to assess the impact of their civilian human capital  initiatives (i.e., programs, policies, and processes).  Thus, DOD and the  components cannot gauge the extent to which their human capital initiatives  contribute to achieving their organizations\u2019 mission.",
      "  Finally, the plans did  not contain data on the skills and competencies needed to successfully  accomplish future missions; therefore, DOD and the components risk not  being able to put the right people, in the right place, and at the right time,  which can result in diminished accomplishment of the overall defense  mission. GAO recommends DOD improve  the departmentwide plan to be  mission aligned and results- oriented; provide guidance to align  component- and department-level  human capital strategic plans;  develop data on future civilian  workforce needs; and set mile- stones for integrating military and  civilian workforce plans, taking  contractors into consideration.",
      "   DOD comments were too late to  include in this report but are   included in GAO-03-690R. Moreover, the civilian strategic plans did not address how the civilian  workforce will be integrated with their military counterparts or sourcing  initiatives.  DOD\u2019s three human capital strategic plans-- two military and one  civilian--were prepared separately and were not integrated to form a  seamless and comprehensive strategy and did not address how DOD plans to  link its human capital initiatives with its sourcing plans, such as efforts to  outsource non-core responsibilities.  The components\u2019 civilian plans  acknowledge a need to integrate planning for civilian and military  personnel\u2014taking into consideration contractors\u2014but have not yet done so.",
      "  Without an integrated strategy, DOD may not effectively and efficiently  allocate its scarce resources for optimal readiness. www.gao.gov/cgi-bin/getrpt?GAO-03-475. To view the full report, including the scope  and methodology, click on the link above.  For more information, contact Derek B.  Stewart at (202) 512-5559 or  stewartd@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the  United States. It 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.\n"
    ],
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  },
  {
    "id": 50,
    "question": null,
    "answer": "While four previous base closure rounds have afforded the Department of Defense (DOD) the opportunity to divest itself of unneeded property, it has, at the same time, retained more than 350,000 acres and nearly 20 million square feet of facilities on enclaves at closed or realigned bases for use by the reserve components. In view of the upcoming 2005 base closure round, GAO undertook this review to ascertain if opportunities exist to improve the decision-making processes used to establish reserve enclaves. Specifically, GAO determined to what extent (1)specific infrastructure needs for reserve enclaves were identified as part of base realignment and closure decision making and (2) estimated costs to operate and maintain enclaves were considered in deriving net estimated savings for realigning or closing bases. The specific infrastructure needed for many DOD reserve enclaves created under the previous base realignment and closure process was generally not identified until after a defense base closure commission had rendered its recommendations. While the Army generally decided it wanted much of the available training land for its enclaves before the time of the commission's decision making during the 1995 closure round, time constraints precluded the Army from fully identifying specific training acreages and facilities until later. Subsequently, in some instances the Army created enclaves that were nearly as large as the bases that were being closed. In contrast, the infrastructure needed for Air Force reserve enclaves was more defined during the decision-making process. Moreover, DOD's enclave-planning processes generally did not include a cross-service analysis of military activities that may have benefited by their inclusion in a nearby enclave. The Army did not include estimated costs to operate and maintain its reserve enclaves in deriving net estimated base realignment or closure savings during the decision-making process, but the Air Force apparently did so in forming its enclaves. GAO's analysis showed that the Army overestimated savings and underestimated the time required to recoup initial investment costs to either realign or close those bases with proposed enclaves. However, these original cost omissions have not materially affected DOD's recent estimate of $6.6 billion in annual recurring savings from the previous closure rounds because the Army subsequently updated its estimates in its budget submissions to reflect expected enclave costs.\n",
    "docs": [
      "Background To enable DOD to more readily close unneeded bases and realign others  to meet its national security requirements, the Congress enacted base  realignment and closure (BRAC) legislation that instituted base closure  rounds in 1988, 1991, 1993, and 1995. A special commission established for  the 1988 round made recommendations to the Committees on Armed  Services of the Senate and House of Representatives. For the remaining  rounds, special BRAC commissions were set up to recommend specific  base realignments and closures to the President, who in turn sent the  commissions\u2019 recommendations with his approval to the Congress.",
      " The  four commissions generated nearly 500 recommendations\u2014on 97 major  base closures and hundreds of realignments and smaller closures. As a result of the BRAC process, DOD has reported that it reduced its  infrastructure by about 20 percent; has transferred over half of the  approximately 511,000 acres of unneeded property to other federal and  nonfederal users and continues work on transferring the remainder; and  generated about $16.7 billion in estimated savings through fiscal year  2001, with an estimated $6.6 billion in annual recurring savings expected  thereafter. We and others who have conducted reviews of BRAC savings  have found that the DOD\u2019s savings are substantial,",
      " although imprecise,  and should be viewed as rough approximations of the likely savings.  Under the property disposal process, unneeded DOD BRAC property is  initially made available to other federal agencies for their use. After  the federal screening process has taken place, remaining property is  generally provided to state and local governments for public benefit and  economic development purposes. In other cases, DOD has publicly sold its  unneeded property. Under the decision-making processes during the last 3 BRAC rounds,  DOD assessed its bases or activities for closure or realignment using  an established set of eight criteria covering a broad range of military,",
      "  fiscal, environmental, and other considerations. DOD subsequently  forwarded its recommended list of proposed realignments and closures  to the BRAC Commission for its consideration in recommending specific  realignments and closure actions. Although military value considerations  such as mission requirements and impact on operational readiness were  critical evaluation factors, potential costs and savings, along with  estimated payback periods associated with proposed closure or  realignment actions were also important factors in the assessment  process. To assist with the financial aspects of proposed actions, DOD  and the BRAC Commissions used a quantitative analytical model,  frequently referred to as the Cost of Base Realignment Actions (COBRA),  to provide decision makers with a relative assessment of the potential  costs,",
      " estimated savings, and payback periods of proposed alternative  realignment or closure actions. Although the COBRA model was not  designed to produce budget-quality financial data, it was useful in  providing a relative financial comparison among potential alternative  proposed base actions. DOD generally provided improved financial data  for each of the services in its annual BRAC budget submission to the  Congress following a BRAC Commission\u2019s recommendations. The four previous BRAC Commissions recommended 27 actions in  which either a reserve enclave or similar reserve presence was to be  formed at a base that was to be realigned or closed (see app. II). In many  instances,",
      " these actions were relatively minor in that they involved only  several acres, but in other cases the actions involved creating enclaves  with large acreages and millions of square feet of facilities under reserve  component management to conduct training for not only the reserve  component but also the active component as well. Figure 1 shows the  locations of DOD\u2019s 10 major (i.e., sites exceeding 500 acres) reserve  component enclaves established under the previous BRAC rounds. As shown in figure 1, the Army has 7 enclave locations; all of these  enclaves, with the exception of Fort Devens (a 1991 round action),  were created during the 1995 round.",
      " The Air Force has the remaining  3 enclaves: Air Reserve\u2014Grissom Air Reserve Base (a 1991 round action);  Homestead Air Reserve Base (a 1993 round action); and March Air Reserve  Base (a 1993 round action). Neither the Navy nor the Marines created any  major enclaves. Infrastructure Needs  of Many Enclaves  Not Identified Until  after BRAC  Decision Making Many of DOD\u2019s specific enclave infrastructure needs were not identified  until after the commission for a BRAC round held its deliberations and  had rendered its recommendations. Although the Army\u2019s enclave planning  process\u2014particularly for the 1995 BRAC round\u2014began before the  issuance of commission recommendations,",
      " specificity of needed  infrastructure was not defined until after the recommendations were  finalized. The subsequent size of several of these enclaves was much  greater than seemingly reflected in commission recommendations that  called for minimum essential facilities and land for reserve use. On the  other hand, the Air Force\u2019s planning process was reportedly further along  and enclave needs were better defined at the time the commission made  its recommendations. In addition, DOD\u2019s enclave-planning processes  generally did not include a cross-service analysis of the needs of military  activities or activities in the vicinity of a realigning or closing base with  a proposed enclave. As a result,",
      " the commission often held deliberations  without the benefit of some critical information, such as the extent of the  enclave infrastructure needed to support training and potential  opportunities to achieve benefits by collocating nearby reserve  components on enclave property. Army Enclave  Infrastructure Needs Not  As Well Defined As Those  of the Air Force during  BRAC Decision Making While the Army\u2019s enclave planning process for the 1995 round began  previous to completion of the BRAC Commission\u2019s deliberations, specific  enclave infrastructure needs were not identified until after commission  recommendations had been issued on July 1, 1995. Army officials told us  that it was recognized early in the process that the Army wanted to retain  the majority of existing training land at some of its bases slated for closure  or realignment that also served as reserve component maneuver training  locations,",
      " but time constraints precluded the Army from fully identifying  specific enclave needs before the commission completed decision-making.  According to a 1999 DOD report on the effect of base closures on future  mobilization options, the retention of much of the Army maneuver training  acreage at the enclave locations served not only to meet current training  needs but also could serve, if necessary, as future maneuver bases with  new construction or renovation of existing facilities for an increased force  structure. In testimony before the commission, the Army had indicated  that much of the training land should be retained, but the Army was less  specific on the size and facility needs (i.e., in total square footage)",
      " for  the enclaves. Most facility needs fall within the enclaves\u2019 primary  infrastructure (or cantonment area) necessary to operate and maintain  the enclaves. The Army formed an officer-level committee\u2014a \u201cCouncil of Colonels\u201d\u2014 that reviewed reserve component enclave proposals but did not approve  them for higher-level reviews until July 7, 1995\u2014about 1 week after the  BRAC Commission had issued its recommendations. Following the  Council of Colonels\u2019 approval, a General Officer Steering Committee  worked with the Army reserve components to refine the infrastructure  needs for the enclaves, needs that the steering committee approved  (except for Fort Hunter Liggett)",
      " in October 1995\u2013-more than 3 months  following the 1995 BRAC Commission\u2019s recommendations. Although Army approval for most of its enclaves\u2019 infrastructure needs  occurred in late 1995, the number of acres and facilities for some  installations changed as various implementation plans took effect to  establish the enclaves. Changes occurred as a result of Army decisions and  community reuse plans for property disposed of by the department, as  illustrated in the following examples. At Fort Hunter Liggett, the number of facilities to be retained in the  enclave increased over time based on an Army decision to retain some of  the family housing (40 units); morale,",
      " welfare, and recreation facilities  (9 facilities) and other training-related facilities (3 barracks and  2 classrooms) that had originally been excluded from the enclave. At Fort McClellan, the expected cantonment area decreased considerably  from an initial proposal of about 10,000 acres (excluding about 22,200  training-range acres) to about 286 acres in response to concerns raised by  the local community. The Air Force\u2019s enclave infrastructure needs were reportedly more defined  than those of the Army at the time of commission deliberation and  decision making. Air Force officials told us that the base evaluation  process for the 1991 and 1993 rounds\u2014the rounds when the Air Force\u2019s  major reserve enclaves were created\u2014included a detailed analysis of  the infrastructure needed for the enclaves,",
      " including enclave size,  identification of required facilities, and expected costs to operate and  maintain its proposed enclaves prior to commission consideration of its  proposals. These officials did note that some revisions in the sizing of the  enclaves and associated enclave boundaries were minor and have  occurred over time as plans were further defined, but stated that these  changes did not materially affect enclave costs. Although documentation  on the initial plans was not available (due to the passage of time), we were  able to document some enclave revisions made after the issuance of the  BRAC Commissions\u2019 recommendations as follows:    At March Air Reserve Base,",
      " the Air Force made at least 3 sets of revisions  to its enclave size which now encompasses 2,359 acres. These revisions  were relatively minor in scope, such as one revision that expanded the  boundaries by about 38 acres to provide a clear zone for flight operations. At Grissom Air Reserve Base, the Air Force has made one revision\u2014an  exchange of about 70 acres with the local redevelopment authority\u2014to  its enclave configuration, which now encompasses 1,380 acres. In  addition, base officials are negotiating with the redevelopment authority  for acquisition of a small parcel to improve force protection at the  enclave\u2019s main gate.",
      " At Rickenbacker Air National Guard Base, the Guard made several  revisions prior to reaching its current 168-acre enclave, including  the transfer of 3.5 acres of unneeded property to the local redevelopment  authority after the Guard relocated its fuel tanks for force protection  reasons. The degree of specificity in a commission\u2019s recommendation language for  proposed enclaves varied between the Army and the Air Force. In general,  the recommendation language for the Army\u2019s 1995 round enclaves was  based largely on the Army\u2019s proposed language, specifying that the bases  were to be closed, except that minimum essential ranges,",
      " facilities, and  training areas be retained for reserve component use. In contrast, for  Army and Air Force enclaves created in earlier rounds, the  recommendation language was more precise\u2014even specifying specific  acreages to be retained in some cases. Acting on the authority contained in the commissions\u2019 recommendations,  the Army and Air Force created enclaves that varied widely in size  (i.e., from several acres to more than 164,000 acres). Table 1 provides a  comparison of the reported size and number of facilities of pre-BRAC  bases with those of post-BRAC enclaves for DOD\u2019s 10 major enclaves.",
      " As shown in table 1, the vast majority\u2014nearly 90 percent\u2014of the  pre-BRAC land has been retained for the major reserve enclaves with  most enclaves residing in Army maneuver training sites (e.g., Forts Hunter  Liggett, Chaffee, Pickett, and Indiantown Gap). While the management of  these Army enclaves has generally shifted from the active to the reserve  component, the training missions at these Army bases have remained,  although the extent of use has decreased slightly in some instances and  increased in others (see app. I). On the other hand,",
      " the Air Force enclaves  are generally much smaller in acreage than those of the Army due in large  part to the departure of active Air Force organizations and associated  missions from the former bases. While the Army retained much of the  pre-BRAC acreage, it generally made greater reductions in the amount of  square footage for its enclave facilities. Many of these reductions were  due in part to the demolition of older unusable facilities built during  World War II, and the transfer of other facilities (such as family housing  activities once required for the departing active personnel) to local  redevelopment authorities. At Fort Indiantown Gap,",
      " for example, the  Army has reportedly demolished 349 facilities since the Army National  Guard assumed control of the base in 1998. As shown in table 1, the Air  Force significantly reduced the amount of its facilities\u2019 square footage for  2 of its 3 major enclaves. While the language of the 1995 BRAC Commission recommendations  regarding enclaves allowed the Army to form several enclaves of  considerable size, these enclaves are considerably larger than one might  expect from the language, which provided for minimum essential land and  facilities for reserve component use. In this regard, the Army\u2019s Office of  the Judge Advocate General questioned proposed enclave plans during the  planning process.",
      " For example, the Judge Advocate General questioned  Fort Indiantown Gap and Fort Hunter Liggett enclave plans, calling for  retention of essentially the entire former base while the commission\u2019s  recommendation would suggest smaller enclaves comprising a section of  the base. Nonetheless, the Army approved the implementation plans based  on mission needs. Having more complete information regarding expected  enclave infrastructure would have provided previous commissions with an  opportunity to draft more precise recommendation language, if they chose  to do so, and produce decisions having greater clarity on enclave  infrastructure and expected costs and savings from the closure and  realignment actions. Enclave Planning  Analyses Generally  Did Not Consider  Cross-",
      "Service Needs DOD generally did not consider cross-service needs of nearby military  activities in planning for many of its reserve enclaves, although their  inclusion may have been beneficial in terms of potential for increased cost  savings, force protection, or training reasons. While some other reserve  activities have subsequently relocated on either enclaves created as part of  the closure decision or later on former base property after it was acquired  by local redevelopment authorities, those relocations outside enclave  boundaries have not necessarily been ideal for either DOD or the  communities surrounding the enclaves. Ideally, enclave planning analyses  would involve an integrated cross-service approach to forming enclaves  and enable DOD to maximize its opportunities for achieving operational,",
      "  economic, and security benefits while, at the same time, providing for the  interests of affected communities surrounding realigning or closing bases. Officials at several Air Force bases we visited told us that while other  service and federal government organizations that had already resided  on the former bases may have been included in the enclaves, military  activities of other services in the local area were not generally considered  for possible inclusion in the proposed enclaves. These officials told us that  these activities were either not approached for consideration or were not  considered due to service interests to minimize the size and relative costs  to operate and maintain the enclaves.",
      " Following the formation of the enclaves, some additional reserve activities  have since relocated on either enclave or former base property. Some  have occupied available facilities on enclaves as tenants and are afforded  various benefits such as reduced operating costs, training enhancements,  or increased force protection. For example, a Navy Reserve training  center, originally based in South Bend, Indiana, moved its operations to an  available facility at Grissom Air Reserve Base in August 2002 because the  activity could not meet force protection requirements at its previous  facilities in South Bend. After the move, the commander of the activity  told us that his personnel have experienced enhanced training  opportunities since they can now work closely with other military  activities on \u201chands-on\u201d duties during weekend reserve drills.",
      " This  opportunity has led, in turn, to his assessment that both his recruiting  efforts and readiness have improved. On the other hand, the relocation of some activities to the former base,  or those remaining on the former property outside the confines of the  enclave, has resulted in a less-than-ideal situation for both the department  and the communities surrounding the former base. For example, at the  former March Air Force Base in California, other service activities from  the Army Reserve, Army National Guard, Navy Reserve and Marine Corps  Reserve reside outside the enclave boundaries in a non-contiguous  arrangement. This situation, combined with the enclave itself and other  enclave \u201cislands\u201d established on the former base,",
      " has resulted in a  \u201ccheckerboard\u201d effect, as shown in figure 2, of various military-occupied  property interspersed with community property on the former base. Further, some of the activities located outside the enclave boundaries  have incurred expenses to erect security fences, as shown in figure 3, for  force protection purposes. These fences are in addition to the fence that  surrounds the main enclave area. Local redevelopment authority officials told us that a combination of  factors (including the dispersion of military property on the former base  along with the separate unsightly security fences) has made it very  difficult to market the remaining property.",
      " In its April 16, 2003, policy guidance memorandum for the 2005  BRAC round, DOD recognizes the benefits of the joint use of facilities.  The memorandum instructs the services to evaluate opportunities to  consolidate or relocate active and reserve components on any enclave of  realigning and closing bases where such relocations make operational and  economic sense. If the services adhere to this guidance in the upcoming  round, we believe it will not only benefit DOD but also will mitigate any  potential adverse effects, such as the checkerboard base layout at the  former March Air Force Base, on community redevelopment efforts.",
      " Many Initial Base  Savings Estimates  Did Not Account  for Projected  Enclave Costs The estimated costs to operate and maintain the infrastructure for many  of the Army enclaves were not considered in calculating savings estimates  for bases with proposed enclaves during the decision-making process.  As a result, estimated realignment or closure costs and payback periods  were understated and estimated savings were overstated for those  specific bases. The Army subsequently updated its savings estimates in  its succeeding annual budget submissions to reflect estimated costs to  operate and maintain many of its enclaves. On the other hand, Air Force  officials told us that its estimated base closure savings were partially  offset by expected enclave costs,",
      " but documentation was insufficient to  demonstrate this statement. Because estimated costs and savings are an  important consideration in the closure and realignment decision-making  process and may impact specific commission recommendations, it is  important that estimates provided to the commission be as complete and  accurate as possible for its deliberations. Army Enclave Costs Were  Not Generally Considered  in BRAC Decision-Making  Process During the 1995 BRAC decision-making process, estimated savings for  most 1995-round bases where Army enclaves were established did not  reflect estimated costs to operate and maintain the enclaves. The Army  Audit Agency reported in 1997 that about $28 million in estimated annual  costs to operate and maintain four major Army enclaves,",
      " as shown in  table 2, were not considered in the bases\u2019 estimated savings calculations. Enclave costs are only one of many costs that may be incurred by DOD in  closing or realigning an entire base. For example, other costs include  expenditures for movement of personnel and supplies to other locations  and military construction for facilities receiving missions from a realigning  base. The extent of all costs incurred have a direct bearing on the  estimated savings and payback periods associated with a particular  closure or realignment. Table 3 provides the results of the Army Audit  Agency\u2019s review (which factored in all costs)",
      " of the estimated savings and  payback periods for the realignment or closure of the same Army bases  shown in table 2 where enclaves were created. As shown in table 3, the  commission\u2019s annual savings\u2019 estimates were overstated and the payback  periods were underestimated for these particular bases. Our analysis showed that the omission of enclave costs significantly  affected the initial estimates of savings and payback periods at all  locations except Fort McClellan as shown in table 3. For example, the  omission of $6.8 million in enclave costs at Fort Chaffee (see table 2)  accounted for more than 50 percent of the $12 million in estimated  reduced annual recurring savings at that location.",
      " Further, the enclave  cost omissions were instrumental in increasing Fort Chaffee\u2019s estimated  payback period from 1 year to 18 years. On the other hand, at  Fort McClellan, estimates on costs other than those associated with the  enclave had a greater impact on the resulting estimated annual recurring  savings and payback periods. Although it is unknown whether the enclave cost omissions or any other  similar omissions would have caused the 1995 BRAC Commission to revise  its recommendations for these installations, it is important to have cost  and savings estimates that are as complete and accurate as possible in  order to provide a commission with a better basis to make informed  judgments during its deliberative process.",
      " Although the Army omitted enclave operation and maintenance costs  from its savings calculations for most of its 1995 actions during the initial  phases of the BRAC process, it subsequently updated many of these  savings estimates in its annual budget submissions to the Congress. In our  April 2002 report on previous-round BRAC actions, we noted that even  though DOD had not routinely updated its BRAC base savings estimates  over time because it does not maintain an accounting system that tracks  savings, the Army had made the most savings updates of all the services in  recent years. According to Army officials, the Army Audit Agency report  provided a basis for the Army to update the annual BRAC budget  submissions and adjust the savings estimates at the installations reviewed.",
      "  As a result, the previous estimated cost omissions have not materially  affected the department\u2019s estimate of $6.6 billion in annual recurring  savings across all previous round BRAC actions due to the fact that the  savings estimates for these locations have been updated to reflect many  enclave costs in subsequent annual budget submissions. Because of the passage of time and the lack of supporting documentation,  we were unable to document whether the Air Force had considered  enclave costs in deriving its savings estimates for the former air bases we  visited at Grissom in Indiana (a 1991 round action), March in California  (a 1993 round action), and Rickenbacker in Ohio (a 1991 round action).  Air Force Reserve Command officials,",
      " however, told us that estimated  costs to operate and maintain their enclaves were considered in  calculating savings estimates for these base actions. Officials at the bases  we visited were unaware of the cost and savings estimates that were  established for their bases during the BRAC decision-making process. Conclusions With an upcoming round of base realignments and closures approaching  in 2005, it is important that the new Defense Base Closure and  Realignment Commission have information that is as complete and  accurate as possible on DOD-proposed realignment and closure actions in  order to make informed judgments during its deliberations. Previous  round actions indicate that,",
      " in several cases, a commission lacked key  information (e.g., about the projected needs of an enclave infrastructure  and estimated costs to operate and maintain an enclave) because DOD had  not fully identified specific infrastructure needs until after the commission  had issued its recommendations. Without the benefit of more complete  data during the deliberative process, the commission subsequently issued  recommendation language that permitted the Army to form reserve  enclaves that are considerably larger than one might expect based on the  commission\u2019s language concerning minimum essential land and facilities  for reserve component use. In addition, because DOD did not adequately  consider cross-service requirements of various military activities located  in the vicinity of its proposed enclaves and did not include them in the  enclaves,",
      " it may have lost the opportunity to achieve several benefits to  obtain savings, enhance training and readiness, and increase force  protection for these activities. DOD has recently issued policy guidance  as part of the 2005 closure round that, if implemented, should address  cross-service requirements and the potential to relocate activities on  future enclaves where relocation makes operational and economic sense. Recommendations for  Executive Action As part of the new base realignment and closure round scheduled for 2005,  we recommend that you establish provisions to ensure that data provided  to the Defense Base Closure and Realignment Commission clearly specify  the (1) infrastructure (e.g., acreage and total square footage of facilities)",
      "  needed for any proposed reserve enclaves and (2) estimated costs to  operate and maintain such enclaves. As you know, 31 U.S.C. 720 requires the head of a federal agency to submit  a written statement of the actions taken on our recommendations to the  Senate Committee on Government Affairs and the House Committee on  Government Reform not later than 60 days after the date of this report. A  written statement must also be sent to the House and Senate Committees  on Appropriations with the agency\u2019s first request for appropriations made  more than 60 days after the date of this report. Agency Comments In commenting on a draft of this report,",
      " the Assistant Secretary of  Defense for Reserve Affairs concurred with our recommendations. The  department\u2019s response indicated that it would work to resolve the  issues addressed in our report, recognizing the need for improved planning  for reserve enclaves as part of BRAC decision making and include  improvements in selecting facilities to be retained, identifying costs of  operation, and assessing impacts on BRAC costs and savings. DOD\u2019s  comments are included in appendix III of this report. Scope and  Methodology We prepared this report under our basic legislative responsibilities as  authorized by 31 U.S.C. \u00a7 717. We performed our work at,",
      " and met with  officials from, the Office of the Assistant Secretary of Defense for Reserve  Affairs, the Army National Guard, the Air National Guard, the headquarters  of the Army Reserve Command and Air Force Reserve Command, and  Army and Air Force BRAC offices. We also visited and met with officials  from several reserve component enclave locations, including the Army\u2019s  Fort Pickett, Virginia; Fort Indiantown Gap, Pennsylvania; Fort Chaffee,  Arkansas; Fort McClellan, Alabama; and Fort Hunter Liggett, California;  as well as the Air Force\u2019s March Air Reserve Base, California; Grissom  Air Reserve Base,",
      " Indiana; and Rickenbacker Air National Guard Base,  Ohio. We also contacted select officials who had participated in the  1995 BRAC round decision-making process to discuss their views on  establishing enclaves on closed or realigned bases. Our efforts regarding  previous-round enclave planning were hindered by the passage of time,  the lack of selected critical planning documentation, and the general  unavailability of key officials who had participated in the process. To determine whether enclave infrastructure needs had been identified  prior to BRAC Commission decision making, we first identified the scope  of reserve enclaves by examining BRAC Commission reports from the four  previous rounds and DOD data regarding those enclave locations.",
      " To the  extent possible, we reviewed available documentation and compared  process development timelines with the various commission reporting  dates to determine the extent of enclave planning completed before a  commission\u2019s issuance of specific BRAC recommendations. We examined  available commission hearings from the 1995 round to ascertain the  extent of commission discussion regarding proposed enclaves. We also  interviewed officials at most of the major enclave locations as well as at  the major command level to discuss their understanding of the enclave  planning process and associated timelines employed in the previous  rounds. We also discussed with these officials any previous planning  actions or actions currently underway to relocate various reserve activities  or organizations to enclave locations.",
      " To determine whether projected costs to operate and maintain reserve  enclaves were considered in deriving estimated savings during the  BRAC decision-making process, we reviewed available cost and savings  estimation documentation derived from DOD\u2019s COBRA model to ascertain  if estimated savings were offset by projected enclave costs. We reviewed  Army Audit Agency BRAC reports issued in 1997 on costs and savings  estimates at various BRAC locations, including some enclave sites.  Further, we analyzed how omitted enclave costs affected estimated annual  recurring savings and payback periods at selected Army bases. We also  discussed cost and savings estimates with Army and Air Force BRAC  office officials as well as officials at bases we visited.",
      " However, as in our  other efforts, we were generally constrained in our efforts by the general  unavailability of knowledgeable officials on specific enclave data and  adequate supporting documentation. We also examined recent annual  BRAC budget submissions to the Congress to ascertain if savings  estimates at the major enclave locations had been updated over time. In performing this review, we used the same accounting records and  financial reports DOD and reserve components use to manage their  facilities. We did not independently determine the reliability of the  reported financial and real property information. However, in our recent  audit of the federal government\u2019s financial statements, including DOD\u2019s  and the reserve components\u2019 statements,",
      " we questioned the reliability of  reported financial information because not all obligations and  expenditures are recorded to specific financial accounts. In addition, we  did not validate infrastructure needs for DOD enclaves. We conducted our work from July 2002 through April 2003 in accordance  with generally accepted government auditing standards. We are sending copies of this report to the Secretaries of the Army,  Navy, and Air Force; the Commandant of the Marine Corps; the Director,  Office of Management and Budget; and interested congressional  committees and members. In addition, the report is available to others  upon request and can be accessed at no charge on GAO\u2019s Web site at  www.gao.gov.",
      " Please contact me on (202) 512-8412 if you or your staff have any  questions regarding this report. Key contributors to this report are listed in  appendix IV. Appendix I: General Description of Major  Reserve Component Enclaves (Pre-BRAC  and Post-BRAC) Appendix I: General Description of Major  Reserve Component Enclaves (Pre-BRAC and  Post-BRAC) BRAC recommendation  Realign Fort Hunter Liggett by  relocating the Army Test and  Experimentation Center missions and  functions to Fort Bliss, Texas. Retain  minimum essential facilities and  training area as an enclave to support  the reserve component.",
      " Utilization    Prior to BRAC 1995, the Army Reserve  managed the base, assuming control of the  property in December 1994 from the active  Army.  In September 1997, the base became a  sub-installation of the Army Reserve\u2019s  Fort McCoy. The training man days have  increased by about 55 percent since 1998. Close Fort Chaffee except for minimum  essential ranges, facilities, and training  areas required for a reserve  component training enclave for  individual and annual training. Prior to BRAC 1995, the active Army  managed the base. The reserve components  had the majority of training man days  (75 percent)",
      " while the active component  had 24 percent; the remaining training was  devoted to non-DOD personnel.  In October 1997, base management  transferred to the Arkansas National Guard.  Overall training has decreased 51 percent  with reserve component training being down  59 percent. Close Fort Pickett except minimum  essential ranges, facilities, and training  areas as a reserve component training  enclave to permit the conduct of  individual and annual training. Prior to BRAC 1995, the Army Reserve  managed the base. The reserve components  had the majority of the training man days  (62 percent) while the active component  had 37 percent;",
      " the remaining training was  devoted to non-DOD personnel.  In October 1997, base management  transferred to the Virginia National Guard.  Overall training has increased by 6 percent. Realign Fort Dix by replacing the active  component garrison with an Army  Reserve garrison. In addition, it  provided for retention of minimum  essential ranges, facilities, and training  areas as an enclave required for  reserve component training. Prior to BRAC 1995, the active Army  managed the base. The reserve components  had the majority of training man days  (72 percent) while the active component  had 8 percent;",
      " the remaining training was  devoted to non-DOD personnel.  In October 1997, base management  transferred to the Army Reserve. Overall  training has increased 8 percent. Close Fort Indiantown Gap, except  minimum essential ranges, facilities  and training areas as a reserve  component training enclave to permit  the conduct of individual and annual  training. Prior to BRAC 1995, the active Army  managed the base. The reserve components  had the majority of training man days  (85 percent) while the active component  had 3 percent; the remaining training was  devoted to non-DOD personnel.  In October 1998,",
      " base management  transferred to the Pennsylvania National  Guard. Overall training has increased by  about 7 percent. Utilization    Prior to BRAC 1995, the active Army  managed the base.   In May 1999, base management transferred  to the Alabama National Guard. Overall  training has increased 75 percent. BRAC recommendation  Close Fort McClellan, except minimum  essential land and facilities for a  reserve component enclave and  minimum essential facilities, as  necessary, to provide auxiliary support  to the chemical demilitarization  operation at Anniston Army Depot,  Alabama.  Close Fort Devens.",
      " Retain 4600 acres  and those facilities necessary for  reserve component training  requirements. Prior to BRAC 1991, the active Army  managed the base.   In March 1996, base management  transferred to the Army Reserve as a  sub-installation of Fort Dix. Realign March Air Force Base. The  445th Airlift Wing Air Force Reserve,  452nd Air Refueling Wing, 163rd  Reconnaissance Group, the Air Force  Audit Agency and the Media Center will  remain and the base will convert to a  reserve base. Prior to BRAC 1993,",
      " the active Air Force  managed the base, with major activities  being the 452nd Air Refueling Wing, 445th  Airlift Wing and the 452nd Air Mobility Wing,  163rd Air Refueling Wing.   In April 1996, base management transferred  to the Air Force Reserve with major activities  being the 63rd Air Refueling Wing and the  144th Fighter Wing as well as tenants such as  U.S. Customs. Close Grissom Air Force Base and  transfer assigned KC-135 aircraft to the  Air reserve components. Prior to BRAC 1991, the active Air Force  managed the base with major activities being  the 434th Air Refueling Wing and several Air  Force Reserve units.",
      "  In 1994, base management transferred to  the Air Force Reserve. Grissom Air Reserve  Base houses the 434th Air Refueling Wing as  well as other tenants such as the Navy  Reserve. Realign Homestead Air Force Base.  The 482d F-16 Fighter Wing and the  301st Rescue Squadron and the North  American Air Defense Alert activity will  remain in a cantonment area. Prior to BRAC 1991, the active Air Force  managed the base, with major activities  being the 482nd Fighter Wing and the 301st  Rescue Squadron.  In August 1992,",
      " Hurricane Andrew destroyed  most of the base. After the base was rebuilt  and management transferred to the Air  Force Reserve, operations were reinstated  with major activities being the 482nd Fighter  Wing and the NORAD Air Defense Alert  activity. Appendix II: Reserve Enclaves Created under  Previous BRAC Rounds Bases With Enclaves  Fort Douglas, Utah  Fort Sheridan, Ill.  Hamilton Army Airfield, Calif.  Mather Air Force Base, Calif.  Pease Air Force Base, N.H.  Fort Benjamin Harrison, Ind.  Fort Devens, Mass.  Grissom Air Force Base,",
      " Ind.  Sacramento Army Depot, Calif.  Griffiss Air Force Base, N.Y.  Homestead Air Force Base, Fla.  March Air Force Base, Calif.  Rickenbacker Air National Guard Base, Ohio  Camp Kilmer, N.J.  Camp Pedricktown, N.J.  Fitzsimmons Medical Center, Colo.  Fort Chaffee, Ark.  Fort Dix, N.J.  Fort Hamilton, N.Y.  Fort Hunter Liggett, Calif.  Fort Indiantown Gap, Pa.  Fort McClellan, Ala.  Fort Missoula, Mont.",
      "  Fort Pickett, Va.  Fort Ritchie, Md.  Fort Totten, N.Y.  Oakland Army Base, Calif. Appendix III: Comments from the  Department of Defense Appendix IV: GAO Contact and Staff  Acknowledgments GAO Contact Acknowledgments In addition to the individual named above, Julie Chamberlain, Shawn  Flowers, Richard Meeks, Maria-Alaina Rambus, James Reifsnyder,  Donna Weiss, and Susan Woodward made key contributions to this report.\n"
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  {
    "id": 51,
    "question": null,
    "answer": "Distributional issues often lie at the center of tax policy debates. Distributional analysis may address several issues: How should the tax burden be distributed or, are progressive (increasing as a share of income as income rises) taxes justified? What is the estimated distribution of the current system? How does a particular proposal change that distribution? Unlike many analyses that study optimal behavior related to allocative issues and economic efficiency, economic analysis cannot be used to answer the questions of how the tax burden should be distributed. Such an answer would depend on social preferences. Economic analysis can, however, identify trade-offs and frame the issue analytically. For example, a number of plausible answers to this question could justify progressive tax structures. Methodological issues, such as the income classifier, the unit of analysis, and assumptions regarding incidence all affect the estimates of the distribution of the current tax burden. Yet all show a similar qualitative result: the federal tax system is progressive throughout its range, although it tends to get much flatter at the top. This pattern is primarily due to the individual income tax, which is quite progressive, and actually provides subsidies at lower-income levels. The other major tax is the payroll tax, which is a larger burden than the individual income tax for more than 80% of the population. This tax is first progressive and then regressive (effective tax rates fall with income). The corporate income and the estate taxes, while much smaller, are also progressive, whereas excise taxes are regressive. This overall progressive pattern has been in place historically, and is expected to continue in the future, although effective tax rates are currently low compared with other periods. Unlike the federal tax system, state and local taxes tend to be regressive. Thus, a progressive federal tax system would be necessary to prevent overall U.S. taxes from being regressive. The combined taxes appear slightly progressive. Looking at taxes from a lifetime perspective would move the system more toward a proportional tax because average lifetime incomes reduces the variability of income. Studies have suggested that overall lifetime taxes are roughly proportional to income. Many different measures have been used to characterize the effects of a particular tax change on the distribution of income. A very different impression of tax changes may be obtained depending on the measure used. One popular measure, the percentage change in tax, can be misleading, because as taxes become very small even a negligible absolute change in taxes leads to a very large percentage change. For measuring the relative distribution of income, percentage change in disposable income provides a better measure of how resources are distributed. By this measure, the recent tax cuts made incomes less equal. This report will not be updated.\n",
    "docs": [
      "Introduction Distributional effects are often central policy issues in debates over tax legislation. Although economic analysis can be used to estimate the distribution of the tax system, or a tax change (a positive or descriptive analysis), it cannot be used to provide a normative or prescriptive analysis. Descriptive analyses indicate the expected effects of policies, but normative analyses indicate the optimal policy. Most normative analysis in economics is focused on efficiency. Even in the case of distribution issues, however, economic analysis can be used to facilitate the understanding of desirable distributions, measure them correctly, and determine the implications of different assumptions about social welfare for the optimal distribution of the tax burden.",
      " The first section of this report, which is normative in nature, therefore discusses different philosophies about how the tax burden should be distributed, and what those philosophies imply for the shape of the tax system. In particular, it addresses the question of the justifications for a progressive tax system (one where the share of income collected as a tax rises as income rises). This section is presented for the interested reader, but is not a necessary preliminary to examining the analysis in the second section, which presents estimates of the distribution of the federal and total U.S. tax burden. The third section of the report discusses the measures that can be used to characterize the distributional effects of tax changes.",
      " Is a Progressive Federal Tax Structure Justified? There are two separate, albeit related, questions about tax burden distribution. One of them is how to pay for the goods that the government provides (such as national defense, or highways). The second issue is whether the tax system should be used for direct income redistribution; in that case the optimal tax burden depends on the degree to which redistribution is deemed desirable. How Should Taxes be Levied to Pay for Government Spending? Even if an economy had no redistribution, it would be necessary to provide \"public goods\" (such as defense or roads) and to determine how taxes should be collected to pay for these goods.",
      " A public good, in its purest form, is one that each person can enjoy without detracting from anyone else's consumption and where there is no way to exclude a person from enjoying it. As a result of the last effect, in most cases, such goods would not be provided by the private market or would not be provided efficiently. Many goods are not pure public goods, but have aspects of public goods in that person A benefits from person B's expenditure\u2014such quasi-public goods (or goods with positive external effects) would be provided in the private economy but not in sufficient amounts. To supply these and pure public goods, it is necessary to raise revenues through taxes and distribute the resultant taxes'",
      " burden somehow among the society's members. The distribution of the tax burden with respect to taxpayers' incomes may be characterized as progressive, proportional, or regressive. The behavior of the effective tax rate\u2014the share of income paid in taxes\u2014determines this classification. If the share rises with income, the distribution is called progressive; if it stays constant, it is proportional; and if the share falls, the distribution is called regressive. Federal taxes, taken one by one, fall into all of the three categories. For the working population, the payroll tax is first proportional, then regressive, because its rate falls once the ceiling of taxable wages is reached.",
      " For the population as a whole, the payroll tax rate rises initially, and would therefore be first progressive, then essentially proportional, and for higher-income ranges, regressive. Excise and sales taxes are generally regressive, especially those imposed on products primarily consumed by lower-income individuals, such as cigarettes. The income tax is progressive, and even provides subsidies (negative taxes) for lower-income working individuals, often through the earned income credit. The corporate income tax is imposed on corporate profits as a proportional tax, but its burden on individuals depends on behavioral responses, as discussed subsequently in the \" Incidence Assumptions \" subsection of this report. Most people would judge that a tax-collection system is fair if it satisfies two limited criteria:",
      " horizontal and vertical equity. The criteria state respectively that it is desirable (1) for taxpayers with the same \"capacity to pay\" to face the same tax liability in dollar terms and (2) for liability to increase with ability to pay. The application of both depends critically on definitions of the same \"capacity to pay,\" which is difficult to determine for the families of different size and other characteristics. Even under a regressive tax system, a higher-income taxpayer may pay higher taxes in dollar terms than a lower-income taxpayer. What decreases is the share of the tax paid to the income. Therefore a regressive system could still satisfy the principles of vertical and horizontal equity.",
      " Two Alternative Principles of Burden Distribution Traditionally, there are two theoretical notions of how tax payments should be assigned. One is the benefit principle and another is the \"ability-to-pay\" principle. Benefit Principle The benefit principle simply states that taxpayers who benefit from government services should bear the burden of the tax used to finance the services. The benefit principle seemingly has its roots in market-inspired solutions to paying for public goods. It is commonly associated with such taxes as the gasoline tax, used to finance highways. Although such taxes are not voluntary, as free-market purchases are, they are directly related to the value individuals receive from public goods. The benefit principle has a much broader reach,",
      " if one allows individuals to pay variable prices reflecting their willingness to pay, rather than each individual paying the same amount. Higher-income individuals have a greater willingness to pay for social goods because they have more income. They also might find some goods, such as defense and police protection, more valuable because they have more property to protect. Under this principle, the distribution may be regressive, proportional, or progressive, depending on whether the taxpayers' income elasticity is greater than, equal to, or less than the price elasticity. Unfortunately, it is difficult to estimate these elasticities, particularly for national level expenditures where there is no cross-sectional variation. Some studies of municipal spending or spending on local education generally indicate that income elasticity exceeds the price elasticity,",
      " providing some support for progressive taxes using the benefit principle. There is also some international evidence that tax shares rise as income rises: according to the World Bank, high-income countries have taxes as a share of output that are over twice as high as low-income countries, and expenditure shares that are almost twice as large. Ability to Pay The \"ability-to-pay\" principle suggests that people with higher incomes should pay more than those with lower incomes. Yet the standard does not answer the question of how much more. Its policy implications are based on a diminishing marginal benefit of a dollar assumption\u2014the widely accepted belief that the value of an additional dollar of income falls,",
      " as income rises (i.e., a rich man values an additional dollar less than a poor). Notions of ability to pay have generally appealed to some measure of equal sacrifice. Potential measures of \"equal sacrifice\" include equal absolute sacrifice (each person's welfare declines by the same amount), equal proportional sacrifice (each person's welfare declines by the same proportion), and equal marginal sacrifice (each person's \"displeasure\" from taking away an additional dollar is the same). Equal absolute sacrifice would suggest proportional taxation if the marginal benefits of a dollar of income fell proportionally with income. That is, following this principle, if person A with five times as much income as person B values a dollar approximately a fifth as much as B,",
      " then for every dollar one collects from B, one collects $5 from A. In this example, the principle implied a proportional tax system. If the marginal benefit of a dollar diminishes, but at a fairly slow rate, a regressive tax system could also be consistent with the principle, whereas if it diminishes at a faster rate, a progressive tax would be appropriate. An alternative measure of sacrifice is equal proportional sacrifice. This method is much more likely to justify a progressive tax system, but it too depends on how fast the value of an additional dollar declines with income. There are many reasonable functional forms that do not support progressivity. The equal marginal sacrifice principle suggests steeply progressive taxes that will collect the least valued dollars in the economy.",
      " The result also uses the assumption that the value of a dollar falls as income rises. Under this principle, in contrast with the previous two cases, the progressivity does not depend on the rate with which the value declines. Thus, without further information on the nature of welfare and the exact standard to be used, the ability to pay criterion does not necessarily justify regressive, proportional, or progressive taxes. The equal marginal sacrifice principle suggests an extreme degree of progression. Distribution as a Public Good Before discussing general principles of a \"just\" income distribution, direct redistribution itself as a public good is discussed. There is normally a natural conflict between equity and efficiency objectives when the equity criterion suggests redistribution or progressive tax rates.",
      " That conflict occurs because taxes distort behavior and reduce economic efficiency. It means that the \"size of the pie\" becomes smaller. There are, however, circumstances in which redistribution can enhance rather than reduce efficiency\u2014when redistribution itself is a public good. Recall that a pure public good can be characterized as a good where one person can benefit from the good without detracting from another's benefit. Redistribution can, in fact, be characterized as a public good. Suppose that higher and middle income individuals care about the poor and their welfare\u2014that is, they benefit from knowing that the poor have more income. In this case, redistribution is a public good because A's contribution to the poor benefits B.",
      " Such redistribution is under-supplied in an open economy, and so there is justification for redistributing to the poor\u2014based not on a concern about the welfare of the poor, but rather about the welfare of the rich. The non-poor may also benefit in other ways from providing income to the poor, such as a reduction in crime. Secondly, some redistribution that occurs in the economy may be justified as insurance in circumstances where private insurance markets do not work well. A social safety net may be regarded as insurance against falling, for whatever reason, on hard times. Certain features of our social safety net, such as unemployment compensation, need-based transfers (such as food stamps and Medicaid), and retirement benefits (Social Security and Medicare)",
      " may be justified in part as an attempt to deal with failure of private insurance markets. How Should Income in the Economy be Distributed? It is possible to go beyond the issue of the provision of public goods (including redistribution) and ask a more general question: should income in society be redistributed to achieve a more equitable society\u2014that is, a \"just income distribution.\" There are three basic philosophical approaches to the question of a just income distribution: the endowment approach, the utilitarian approach, and the egalitarian approach. There are also permutations of each approach. Endowment, Utilitarian, and Egalitarian Approaches The endowment approach says that people should get what they earn.",
      " In its simplest form, it would imply no redistribution at all. Variations include allowing people to get what they earn in a competitive economy, so that excess profits arising from market power should be redistributed; to keep their labor earnings, so that assets and earnings from assets should be redistributed; or to keep what they would earn if they started equally in terms of wealth and family status. The last would, in theory, permit differences in income based on effort and willingness to take risk and innate earning ability, in contrast to the first approach that would also permit differences in income based on inherited wealth. Although the endowment philosophy does not support direct redistribution to yield a just society,",
      " the benefit principle is philosophically consistent with endowment notions of income redistribution and may support progressive taxation. The endowment approach suggests there should be little or perhaps no redistribution, which is difficult to argue as a case of distributive justice. For example, it suggests that people with mental and physical disabilities that prevent them from working at a normal wage and who have no family to rely upon, should have little or no income. Given that people do have different innate physical endowments, many would argue that there is nothing especially fair about a system that allows individuals to have varied earnings based on inherited characteristics. At the same time, it seems unfair to penalize higher-income people who have those incomes because they worked harder or undertook more risk.",
      " On the whole, there may be a lot of support in our culture for allowing people to keep most of the fruits of their labor, but also a distaste for allowing individuals limited by circumstances of birth to suffer poverty. The absolute lack of redistribution may also be inefficient, because of the presence of public goods in externalities in the real world, as discussed above. It means that everyone can be made better off, or not worse off, by allowing some redistribution. The utilitarian approach says that society chooses to maximize welfare in the economy\u2014a \"greatest good for the greatest number\" philosophy. The simplest utilitarian welfare measure is simply one that adds up all the welfare of the individuals in the economy and tries to make shifts that will make that welfare sum the greatest.",
      " Such an approach suggests that income should be shifted to those who are able to benefit the most from it at the margin. This sort of assumption also implies an extremely progressive tax system in some circumstances: if we assume that all individuals are otherwise identical and that the value of each dollar of income declines as income rises (i.e., a dollar is more valuable to a poor man than to rich one), and ignore behavioral responses, then total welfare is greatest when all individuals incomes are equal. This redistribution would require a 100% tax on incomes above a certain level to be redistributed until everyone has the same income\u2014a super-progressive tax system, with positive taxes at the top and negative taxes at the bottom.",
      " Although the idea of the \"greatest good for the greatest number\" sounds attractive, its practical implementation is ambiguous, because there is no objective measure of \"welfare\" and no objective method of describing a maximum social welfare. The assumption of identical individuals may be a reasonable approximation for policymaking, but in reality individuals are not identical. The third type of approach is the egalitarian approach, which says that everyone should be equally happy. In this case, the government would make transfers to the poor and also transfer more money to those who enjoy it less so as to raise their level of happiness. As with the case of the utilitarian measure,",
      " if one assumes all people are identical and that the value of an additional dollar of income falls as income rises, an aggressive redistribution scheme should be called for to equalize everyone's income. Both utilitarian and egalitarian welfare functions are consistent with the ability-to-pay principle. A variation of the egalitarian approach that takes into account behavioral responses is called the \"maximin\" or \"Rawlsian\" criteria. With this approach, society redistributes so as to maximize the welfare of the poorest individual. With no behavioral responses, and identical enjoyments of income, society would again equate income by taxing away all income above the average and giving it to those below the average,",
      " but with behavioral response, a 100% marginal tax on the rich would not work because it would cause individuals to reduce their work effort. In the Rawlesian system one would raise the tax just high enough so that the revenue to be distributed was greatest. It has been argued that this approach would reflect the choices risk-averse individuals would make as a social contract if they had to decide on the distribution of income before they knew which position they would fill in society. One of the problems with using a welfare function, such as the utilitarian function, which might be persuasive to people as a practical guide to dealing with income distribution, is that it does not take account of the possibility that income varies because people differ in their work effort and risk taking.",
      " Although many people might feel it is appropriate to redistribute income to lower-income individuals because they do not have the capabilities to earn a higher income, they are less likely to favor redistribution to people who earn less because they work less or because they do not work as hard as the average person. Similarly, even if everyone were identical in wealth, and innate ability and work effort, incomes would vary if some people took more risks than others. Taxing away the returns to risky projects and providing a guaranteed cushion against any risk would make risk-taking irrelevant to economic decisions. As a result, individuals might be willing to take more or less risk than appropriate, and an optimal level of risk-taking is important to the efficient operation of an economy.",
      " Because differences in income that arise from innate capabilities or inherited wealth (whether financial and physical wealth, or human wealth provided by one's family) cannot easily be separated from those that arise from work effort and risk-taking, it is more difficult to assess the appropriate level of redistribution. Nevertheless, it is clear that appeals to a social welfare function do suggest that income redistribution may be appropriate. The U.S. tax system including all government layers actually engages in very little means-based redistribution, however. What are the Implications for Tax Burden Distribution? Unfortunately, these guidelines about redistribution and about rules for paying for government expenditures do not provide a concrete answer as to how the tax burden should be distributed.",
      " What is perhaps most interesting about the analysis is that certain social welfare philosophies that might seem compelling do potentially support progressive taxation, as does the benefit principle of charging for public goods. The ability to pay criteria for charging for public goods, while often invoked to support progressive taxes, however, provides little guidance without more information on individuals' preferences, unless the marginal equal sacrifice form is assumed. It is also important to keep in mind that even if the federal tax is progressive, such progressivity may be needed to offset state and local taxes that tend to be regressive, in order to avoid an overall regressive U.S. tax system. The Estimated Distribution of the Tax Burden Several public and private organizations have produced distributional tables.",
      " The governmental entities include the Treasury Department, the Congressional Budget Office (CBO), and Joint Committee on Taxation (JCT). Some of the private researchers involved in this work include the Urban Institute and Brookings Institution Tax Policy Center (TPC) and the Institute on Taxation and Economic Policy (ITEP) of Citizens for Tax Justice (CTJ). Their analyses vary in several ways, including how they define income, the definition and ordering of tax units, and the taxes included. The following several sections discuss the rationale behind certain methodological choices and report the results of distributional analyses for different organizations, for different time periods, and for different kinds of taxes.",
      " These measures are presented as effective tax rates, which makes comparison meaningful despite the methodological differences. The effective rates are simply the ratio of taxes paid to the income measure. They are different from the statutory marginal rates that apply to an extra dollar of taxable income only. When effective tax rates rise with income a tax system is progressive, it is proportional when effective tax rates are relatively constant, or regressive, if effective tax rates fall as income increases. The Concept of Income The theoretical discussion of the previous sections operated with a concept of \"income,\" but what is the practical meaning of this word? There are several \"incomes\" mentioned in instructions to a single tax form\u2014gross,",
      " adjusted gross, and taxable\u2014to mention just three of them. Most states have state-specific income measures, such as \"Wisconsin Income,\" usually different from the federal analogs. Other, non-tax, entities may use their own definitions of income better suited to their objectives. Economic income encompassing all sources regardless of their taxability would be the best descriptor of the taxpayer's access to economic resources, but, unfortunately, none of the accounting or tax concepts of income exactly matches it. The discrepancy may happen for many reasons; one of them is statutory exclusions of certain items from income. For example, employees may have an option of purchasing their medical insurance through their employers with \"pre-tax\"",
      " dollars. \"Pre-tax dollars\" clearly represent income in the economic sense of this word, because employees can use them to consume, in this case\u2014medical coverage. Yet they do not enter the calculation of \"gross income\" for individual income tax purposes, because of the special treatment of these transactions by law. Organizations providing distributional analyses use measures of income that are expanded from tax measures, such as adjusted gross income (AGI). They estimate a more comprehensive income using various techniques. One of them, Treasury's Office of Tax Analysis (OTA), used Family Economic Income (FEI) as taxpayers' income measure in a 1999 paper.",
      " The starting point of the intended income measure was the definition of income as the sum of consumption and the change in net-worth in a given period\u2014commonly referred to as Haig-Simons income. This measure would include both cash and non-cash income, such as imputed rent on owner-occupied homes\u2014the payments homeowners would have to make if they rented their dwellings instead of owning them. OTA modified this definition in several ways. First, under the definition some retirees drawing largely on their savings would appear to have no or little income, because their consumption would be offset by a change in their net worth. At the same time,",
      " this money may be taxable, depending on the savings vehicle used. Their tax burden relative to their comprehensive income would appear extremely high because for several types of retirement accounts income is taxed on withdrawal. To correct for this mismatch, Treasury includes pension benefits in FEI. Another departure from the definition of income is exclusion of non-cash transfers, such as Medicare benefits, caused primarily by data limitations. Other analyses use measures of income that may not be as broad as economic income, but broader than AGI. In its distributional table in 2003, Treasury used a slightly narrower measure than in its 1999 study, cash income. CBO measures income as pretax cash income plus in-kind transfers.",
      " JCT expanded AGI by adding tax-exempt interest, employer contributions for health plans and life insurance, employer share of FICA tax, worker's compensation, nontaxable social security benefits, insurance value of Medicare benefits, alternative minimum tax preference items, and excluded income of U.S. citizens living abroad. The Brookings Urban Tax Policy Center initially used a narrower measure, but their current measures use both economic income and cash income. The choice of the income measure is influenced by data availability and other technical considerations as well as the types of taxes being distributed. Using an expanded AGI or cash income measure is simpler and requires fewer assumptions,",
      " but it can mislead. For example, individuals may be accruing huge gains in assets, such as their houses, relative to their cash income. These problems with measuring income are reduced, however, when distributions are reported based on population shares (such as quintiles) rather than dollar amounts. On the other hand, dollar amounts lend a concreteness to a distribution table. The overall tax burden measured as a share of AGI, or expanded AGI, would always appear higher than when measured as a share of comprehensive income. Also, any change in the distribution would appear to be more pronounced when measured as a percentage of AGI,",
      " because AGI would normally be lower than comprehensive income. For example, the comparison between AGI and FEI measures for 2000 shows that the former is smaller than the latter: $5,649 billion versus $8,419 billion. This relationship between the two measures is likely to persist across time. Some distributions may be reported based solely on AGI, which may be a good choice for a quick \"back-of-an-envelope\" analysis, but it is preferable to use more comprehensive income measures whenever technically feasible. None of the organizations engaged in regular distributional analysis rely solely on AGI, however. The measure of income can also affect impressions of tax burden unless distributional tables are presented based on population shares rather than measures of income.",
      " Unit of Analysis Another question facing the researchers is how to measure the unit of analysis, and also whether and how to account for differences in tax unit composition, especially when ordering data by population share (such as lowest quintile, second quintile, etc.). The unit may be the family, the household, or the taxpayer unit. In many cases, these units would be the same, but in others they would not. For example, an adult working child living in the parent's home may be part of the household, but would be a separate tax-filing unit. In addressing unit composition, regardless of method of classification, issues arise with respect to ordering taxpayers.",
      " It is obvious that a large family may have more income than a single person, but still have the same ability to pay. Where is that family to be placed in ordering units for distributional analysis\u2014with the same families by ability to pay or with the same by income but of different size? Researchers differ in their answers. The first approach, used by most organizations, is not adjusting for the size of the unit at all. This approach can be argued to implicitly assume that income necessary to maintain a given standard of living for one person is the same as the one for four persons, which is certainly not realistic. Nevertheless, this approach is common.",
      " It is straightforward, eliminates some sources of ambiguity, and is the easiest to implement from a technical standpoint. If households' positions in the income distribution are to be adjusted by family or household size, researchers must determine how to make adjustments. One possibility is dividing the burden by the number of persons, in other words conducting the analysis on a per capita basis. This approach fails to recognize the economies of scale larger tax units enjoy: buying a four-bedroom residence is usually less than twice as expensive as buying a two-bedroom unit. A price of a bedroom in the first case would be lower than in the second. In a way, the purchasing power of a dollar would be higher for a large household compared with a small one.",
      " Several adjustment methods lie between these extremes. CBO orders households by ability to pay using this method: it divides income by the square root of the household's size. In this case a four-person family would need to have twice as much income as a single taxpayer to be as well off. Another methodology is to normalize income by expressing it in terms of the applicable poverty level. For example, if the poverty level for a single person is $9,000, and for a four-person family\u2014$19,000, then a single taxpayer with $27,000 of income would be equated to the four-person family earning $57,000,",
      " because both of them would be making three times the poverty level for a household of the respective size. These ordering procedures and unit measures probably do not make a great deal of difference in the overall qualitative pattern of the effective tax rates. Incidence Assumptions Another important factor in distributional analysis is the economic incidence of taxes. It reflects the notion that a tax burden is not necessarily borne by the taxpayers legally responsible for paying the tax. For example, imposing an excise tax may lead to a price increase. Thus, even though the seller would be legally responsible for paying the tax, the economic cost would be split between the sellers and the buyers in some way,",
      " possibly with the buyers bearing all of it. Researchers have to make reasonable assumptions about incidence, because calculating the precise shares in every case is impossible. They depend on factors specific to every market segment and may fluctuate across segments and in time within every market. Table 1 lists the assumptions about tax incidence incorporated in the models of OTA, CBO, JCT, and TPC. Even though the variations in income, unit definition and incidence assumptions would cause the quantitative results to be different in every case, the implications about the tax system are actually quite similar. The incidence of the corporate tax, in particular, has been the subject of a considerable economic literature,",
      " with the distributional effects depending on the responses of investors and workers and the technology of the firm. The incidence of all taxes, even individual income and payroll taxes, depends, however, on behavioral responses. If savings and labor supply are relatively insensitive to taxes, as much evidence suggests, these taxes will fall on the individual who pays them. Note that the same assumptions about incidence are used (given the tax is distributed at all) for the different taxes except in the case of excise taxes. CBO and JCT allocate the tax based on the consumption of the taxed items. The Treasury allocates the tax to income, and also adjusts at the consumption level by imposing a burden for taxed items and a benefit for non-taxed items that nets to zero.",
      " Measures of Tax Burden Distribution Current Federal Effective Tax Rates  Table 2, Table 3, and Table 4 reproduce the burden distribution estimates from different sources for 2000, 2005 and 2006 ordered by population shares. Because of the methodological differences described above, the data are not precisely comparable. In addition, there is also timing discrepancy. TPC does not have a 2000 law distribution table using 2000 incomes, so the appropriate column uses 2004 incomes but 2000 law. OTA does not have the table for 2005. Note that the absolute measures of effective tax rates can be affected by the income measure and the composition of included taxes.",
      " Table 4 differs from Table 3 in that the tax rates are based on cash income for the TPC rather than economic income, and this difference results in much more similar tax rates. At the same time, all sources depict a similar qualitative picture about the progressivity of the federal tax burden distribution. For example, in every case the effective tax rates for the lowest quintile are estimated in the low to middle single digits. The highest quintile in 2000 faced an effective rate of close to or above 25%. The numbers for other quintiles and the general pattern seem consistent, too. Tax rates rise more slowly, however,",
      " at the top of the distribution.  Table 5 and Table 6 present data from the Joint Committee on Taxation, reflecting the tax burden at 2003 levels of income, based on tax law prior to the 2003 tax cut and the tax burden in 2008 without incorporating the 2008 rebates. The tables are arrayed by income level rather than population proportion, but again present a very similar picture of the federal total effective tax rates. Burden Distribution of Different Kinds of Federal Taxes The federal tax system contains two major types of taxes, payroll and income taxes, and two minor ones, excise and estate taxes.",
      " Income taxes can be divided into individual taxes that are applied to wage income, passive capital income (interest, dividends and capital gains), and profits of unincorporated businesses, along with a separate flat rate tax on corporate profits. Each kind of tax has a different degree of progressivity (or regressivity) and therefore, the distribution of the burden depends on the mix of taxes within the system. Table 7 and Table 8 show the distribution of the tax burden by type, before the 2001-2003 changes. Table 7 reports the Treasury (1999) estimates and Table 8 reports the CBO estimates, for all but the estate tax.",
      " Table 9 reports the distribution for 2006. The slight differences in the two 2000 distributions reflect differences in the income measures, in the taxes covered, and in the way in which families are ordered. For example, CBO places more larger families in the lowest quintile because they order by ability to pay, while Treasury orders by income. Since large families are likely to have larger benefits from the earned income credit, the tax rates of the individual tax are larger negatives in the CBO analysis than in the Treasury analysis. This effect also causes the lowest quintile to have higher payroll taxes because larger families are more likely and elderly individuals less likely to be represented in the CBO ordering.",
      " The updated numbers in Table 9 show similar patterns by tax types from CBO (data are not available from Treasury), but with some changes. Most significant is the income tax, whose burden is smaller at every level, but particularly at higher incomes, due to the 2001 tax cuts. Some effects are due to the shifting of income across the brackets as well, which reduces income (and effective tax rates) in the lower incomes and raises them in the higher ones. Without these incomes shifts, the tax cuts would be smaller in the higher brackets and larger in the lower ones. This effect due to income redistribution can be seen with the corporate tax,",
      " whose overall level rose due in part to cyclical factors, but whose burden at lower incomes fell.  Table 7, Table 8, and Table 9 show that the degree of progressivity is very different among the types of federal taxes. The effective rate of the individual income tax rises from a negative tax in the lowest quintile to 20% or so for the top 1%. As noted earlier, the earned income credit can lead to subsidies at low levels. Payroll, or social insurance, taxes rise slightly and then fall. This pattern occurs because the tax rate is flat with a dollar ceiling, but only applies to workers.",
      " Tax rates are lower at the bottom of the distribution because of the greater share of retired people, and are lower at the top because of the dollar ceiling. So the tax is regressive at the higher end of the distribution. Another important observation is that for the four bottom quintiles the effective rates of payroll taxes are higher than for the income tax. Conversely, the effective rates of the corporate income tax increase with income from 0.9% to 2.8% in the Treasury analysis, from 0.5% to 3.7% in the CBO 2000 analysis, and from 0.4% to 4.",
      "9% in the CBO 2005 analysis. The rates are even higher for the top10%, top 5%, and top 1%. These rates are well below the statutory rates, because a relatively small share of taxpayers receive income from the source, and their tax payments are dispersed among all taxpayers in the class. The progressivity of the corporate tax is due not to the progressive tax structure, but to the allocation of capital income to higher-income individuals. Excise taxes' effective rates vary markedly between the two research organizations, reflecting the allocation of the tax to factor incomes for the Treasury and to consumption for CBO. The Treasury analysis depicts this tax as largely proportional,",
      " while the CBO analysis shows it to be regressive. (The CBO approach, which is also used by JCT, is probably the more widely used in distributional analysis). The regressivity of consumption taxes under this incidence assumption occurs because consumption tends to decline with income. The estate tax is the most progressive of all, although it is small. Since most estates are exempt or largely exempt from the estate tax, only relatively high-income people pay this tax. (The estate tax does not appear in Table 8 and Table 9 because CBO does not include the estate and gift tax in its analysis.) Distribution over Time Another important issue is the change in the distribution in time.",
      " This issue is particularly relevant after the recent tax law changes of 2001-2003, but even in a more stable statutory environment the distribution evolves continually in response to economic and demographic developments. Table 10 shows the historic effective rates for selected years made in December\u00a02007. The years shown include the first year that CBO provided such analysis, and years after major tax changes and economic changes (the 1981 tax cut phased in over three years, the 1986 tax reform phased in 1987-88, the 1993 tax increase, the year prior to the 2001 tax cuts, and the most recent year). Over this period,",
      " the tax system continued to be progressive, although overall taxes today are slightly lower than was typical earlier.  Table 11 examines the current and projected burden around the period of the recent tax changes and into the future. Tax rate cuts are still being phased in as one moves from 2004 to 2008, with 2008 the last year for the lower capital gains taxes and dividend taxes. The year that the original 2001 tax cut is fully phased in is 2010. As currently scheduled, none of the tax cuts would be effective in 2014. Note that effective tax rates are higher in 2014 than in 2000 because of real bracket creep\u2014the failure to adjust the tax system parameters to the real income growth.",
      " It affects the lower quintiles most, while the legislative changes have benefitted the higher-income groups the most, and that effect would be more pronounced if the CBO burden tables included the estate tax, which, according to Table 7, accounted for 1.3% of income of the top 1% prior to recent tax changes. The estimates in Table 11 reflect current federal law; the actual pattern of tax changes will depend on whether and to what extent the 2001 and 2003 tax cuts are made permanent and what changes might be made to the alternative minimum tax, which, if it is not addressed, will eventually apply to a very large fraction of taxpayers,",
      " especially those with large families. State and Local Tax Burden Consideration of the tax burden would be incomplete without taking into account the burden from state and local taxes. It is difficult to draw consistent comparisons among all states, because their public finance systems are different. ITEP calculated U.S. average effective combined state and local rates for non-elderly taxpayers. Table 12 presents these results.  Table 12 demonstrates that the overall state and local taxation system is regressive, at least as far as non-elderly taxpayers are concerned. It is difficult to make broad generalizations, but the main reasons for the result may be a relative \"flatness\"",
      " of state and local income tax schedules, high reliance on sales and use taxes, and the relative importance of excise taxes. Both sales and excise taxes are regressive when allocated to consumption. States and localities are not as flexible as the federal government in their ability to choose their tax structure, because they face competition from other states and localities. It is relatively easy to move from one state to another, and even easier to move across local jurisdictions. Large differences in tax rates would induce taxpayers, especially higher-income taxpayers, to move to states with lower taxes. Thus, one can argue that it is primarily the federal government's role to ensure that the overall burden distribution is progressive,",
      " if progressivity is desired. The combined total U.S. tax system appears to be progressive but not steeply so, as regressive state and local taxes are combined with the progressive federal tax. Lifetime Tax Burden So far, discussion in this report has centered around the analysis of the tax burden at a single point in time, but there is an alternative view that cumulative lifetime tax burden is a better representation of the concept. Lifetime tax burden is simply the sum of all taxes paid each year during the lifetime. In most cases, individual income grows with time and then drops after retirement. That pattern means that the lowest percentile may include a very heterogeneous taxpayer mix:",
      " younger people still in school, retirees, and mid-career low-income earners. From the policy perspective, each of these groups is different and bundling them together makes little practical sense. For example, a policy redistributing the tax burden from the higher to the lower quintiles may have different effect on a younger taxpayer and a retiree. It is conceivable that a younger taxpayer may welcome the policy, because of the lower tax on an anticipated higher future income. In the meantime, a retiree would be unambiguously worse off, because he or she has a small chance of benefitting from the lower future burden. The issue of lifetime burden distribution is especially important in the analysis of intergenerational fairness,",
      " and in conjunction with national debt issues. The debt incurred today would have to be paid off in the future, meaning that the taxes of the future generations could be lower in its absence. At the same time, the approach does not take into account the fact that a marginal unit of money is likely to have a higher value to the lower-income individuals than to the higher-income ones. Even though a younger taxpayer in the previous example may pay a lower aggregate lifetime tax bill, he or she might still prefer to pay less taxes when income is low rather than when it is high. So, in order to compensate the taxpayer for the reduction in his or her disposable income today,",
      " the increase in the disposable income in the future should be more than today's loss. Each taxpayer's rate of intertemporal substitution is different, and incorporating it into the analysis would add another hard-to-verify assumption. Another reason that simple addition of tax liabilities throughout lifetime is not an ideal indicator is the time value of money principle. Under this principle, a dollar today is worth more than a dollar tomorrow. Although the complication can be circumvented in theoretical analysis, it may be another source of contention in the analysis of real-life events. Nevertheless, examining tax burdens from a lifetime perspective is likely to reduce the progressivity of the tax system,",
      " as some of the progressivity observed in a single cross section reflects the tendency of individuals to have lower incomes in the early and later years of life. How to Measure Changes in Tax Distribution Although it is straightforward to describe what makes a tax system regressive, proportional, or progressive, it is more difficult to characterize changes to an existing tax system. Indeed, it is difficult even to determine the degree of progressivity or regressivity of a system so that the old and new tax systems can be compared based on their degree of progressivity. Although a variety of progressivity indices and measures have been proposed, none has been entirely satisfactory and they can lead to different conclusions about relative progressivity.",
      " This report will instead examine the measures that are often used to characterize tax changes. Reports of the distributional effects of tax cuts sometimes appear to depict the same tax change very differently. This difference in how the cut is perceived for distributional purposes arises from the choice of distributional measure. Some of the measures that have been presented include (1) the share of taxpayers benefitted that fall below an income level; (2) the percentage reduction in taxes paid; (3) the tax cut as a percentage of income (both pre-tax and disposable); (4) the distribution of the tax cut by income class; and (5) the average tax cut.",
      " The first of these measures is most likely to tend to depict a tax change as favoring lower-income individuals relative to higher-income ones; the second measure is next most likely, and so forth. An Illustrative Example To illustrate this point, consider a 10% across-the-board income tax cut (all positive net tax liabilities reduced by 10%). Assuming that the bottom quintile of the distribution does not have tax liability, this tax cut could be described as one in which three quarters of the beneficiaries have cash income below $80,000, which might make the cut appear not to be particularly targeted to high-income individuals. Almost any tax cut that is a general one will benefit,",
      " in numbers, those outside the high-income taxpayers, because high-income taxpayers are, by definition, not very numerous. But this description of the tax cut does not reveal anything about how much of a tax cut different groups receive. Table 13 illustrates how such quantitative measures of the types described above would look assuming everyone in each quintile and group has the same average income (an assumption that allows the calculation of measures in the lower brackets where some individuals have negative tax liability because of the earned income tax credit). Based on percentage changes reported in the second column, the tax cut as a percentage of income tax liabilities, the tax cut may appear to be fairly equal across income classes (except for the lowest group). But that measure does not reveal very much about distribution,",
      " because people in the lower-income categories may have extremely small tax liabilities and a tiny change in tax could result in a very big percentage change. Expanding the measure to a percentage reduction in all taxes shows that a proportional cut in income taxes reduces total taxes proportionally more for high-income individuals. Even in this case, however, measuring the percentage reduction in tax liability has not demonstrated anything about the effect on income equality; it merely reveals that individual income taxes are more progressive than total taxes. In discussing these measures that do relate to effects on income inequality, it is important to distinguish between absolute measures and relative measures. For example, average tax reductions per unit provide information on the absolute size of a tax benefit across the income classes,",
      " which is a straightforward measure, and is shown in the last column of Table 13. In this example, the second quintile has a tax cut of $21 per person and the highest quintile a cut of $2,841. Another way of examining this same effect is to compare the distribution of the tax benefit with the distribution of the population in the first column of Table 13. If each taxpayer class is getting 20% (one-fifth) of the benefit, then the benefits are evenly distributed. But the 10% tax cut distributes benefits disproportionally to higher-income individuals, indicating that incomes are becoming more unequal on an absolute basis.",
      " Both of these measures can inform us about how a tax cut is changing income without being misleading, although it is important to remember that existing income and tax payments are more concentrated among high-income individuals. Thus, there is a tendency for absolute measures to show most across-the-board tax cuts as favoring higher-income individuals\u2014because these individuals have a larger proportion of the income and pay an even larger fraction of the income tax. Moreover, unless a tax provision is refundable, it will have little benefit for the bottom fifth of the population. A different type of measure is a relative one that tries to examine how the tax benefit is changing the overall relative distribution of income in the country\u2014that is,",
      " is it making income shares more equal or less equal? In this case, a tax change that does not alter distribution provides tax benefits to different income classes in proportion to some measure of income. (Higher-income individuals would still receive high absolute tax cuts, but not higher tax cuts as a percentage of income.) In general, the best method for measuring this type of effect on inequality is to examine the percentage change in disposable (after-tax) income. If the percentage change is equal, then the tax change is not making incomes shares more equal or less equal. If the percentages are higher among higher-income individuals the change is making income shares less equal.",
      " Clearly, the across-the-board proportional tax cut is increasing inequality measured by the relative concept: incomes in the lower brackets are increased by considerably less than 1%, whereas incomes in the higher brackets are increased by 2% or more. Illustrations from Recent Tax Legislation These different measures have been used to report different tax cuts, sometimes with very different depictions, which are illustrated from distributional data provided for two recent individual tax cuts: the 2001 tax cut (originally H.R. 1836 ) and the 2003 tax cut (originally H.R.\u00a02). 2001 Tax Cut The 2001 tax cut was a multi-year phased in tax cut,",
      " which sunsets after 2010. Table 14, Table 15, and Table 16 provide data from the three sources we are aware of that provided distributional data for the 2001 tax cut. The first table presents data from the Joint Tax Committee for the latest year provided, 2006, when most provisions would be fully phased in. The percentage change in federal tax liability was reported directly. The percentage change in after-tax, or disposable, income, the measure suggested above as conceptually the best measure of changes in distribution, was derived from data in the JCT table. As suggested in the previous section, the percentage change in federal tax liability shows the largest percentage changes at the lower income and the smaller ones at higher levels,",
      " except for the very top level. These numbers give the appearance of a tax cut favoring lower-income individuals. The numbers showing the percentage change in after-tax income suggest, however, that the largest benefit was in the highest income class. Both patterns show that benefits fell, and then rose at very high-income levels, but the percentage change in tax liability suggests the biggest benefits for the lower-income class, while the percentage change in after-tax income measure shows the biggest benefits for the top measure.  Table 15 shows the percentage increase in after-tax income, based on data from CBO. CBO provided effective tax rates and distributional shares,",
      " but did not present any direct comparisons of the effects of tax changes; our distributional measures could be derived from their data, however. The effect of the 2001 tax cut is approximated by comparing 2010 and 2011, because the provisions of the 2002 and 2003 tax cuts that add to the 2001 cuts would be phased out before 2010. The analysis indicates that the largest percentage changes in after-tax income were received by the highest income classes.  Table 16 shows a distribution of the tax cut measure provided directly and a percentage of income that was derived from the Citizens for Tax Justice (CTJ)",
      " data. The CTJ measures are a percentage of pre-tax income rather than disposable income, which tends to make all percentages slightly smaller. In contrast with the JCT table, the CTJ data show fully phased-in taxes. Unlike both the JCT and the CBO data, it also included the effect of the cut in estate taxes, which was a significant part of the 2001 tax cut. The distribution of the tax cut shows, as expected, a very large share of the cut going to high-income individuals\u2014almost 40% went to the top 1% of individuals. The tax cut as a percentage of income, a measure similar to the last column of Table 14,",
      " shows the lowest decile with the smallest amount, the broad middle receiving slightly less than average, and higher benefits in the top decline, particularly the top 1%\u2014clearly showing a cut skewed to the rich. The larger effect for the top 1% as compared with Table 15 probably reflects the estate tax. 2003 Tax Cut For the 2003 tax cut, the JCT did not produce a distributional table, but the Treasury Department did. CBO's effective tax rate tables cannot be used because they mix phase-ins from 2001 in the data. For the Treasury data, the only measure of distributional change presented (and no other could be derived from their data)",
      " was the percentage change in individual income taxes. Like the JCT, they present a percentage change in taxes, but unlike the JCT the change is confined to income taxes. Note that, unlike the analysis presented in their 1999 study, the income measure is cash income, rather than economic income. The Treasury analysis, shown in Table 17, confronted a problem that illustrates the difficulty of reporting distributional effects through percentage change when the base can approach zero or become negative, as in the case with percentage change in income tax liability. The lower part of the income distribution actually had negative taxes, when refundable items such as the child credit and earned income credit were taken into account.",
      " Therefore, what Treasury actually reports for that class is a percentage increase in negative taxes; technically speaking (as a mathematical issue) the percentage increase should have been positive change, because negative taxes became larger. There is really no way to compare this number with the other changes; moreover, the class of under $30,000 probably accounts for almost half (about 40%) of the population. So it is difficult to know what to make of this analysis. For the remaining classes, however, the measure appears to favor the lower-income individuals. A very different picture is presented with the distributional effect measured as a change in after tax income based on analysis by the Brookings-Urban Tax Policy Center (TPC), using the measure they favor,",
      " percentage change in after tax income. Table 18 and Table 19 present this data for income classes and population shares. At that point, the TPC was using adjusted gross income as their income measure, although they later developed expanded income measures. Among a variety of statistics released by the Urban-Brookings Tax Policy Center, one statistic presented is the average tax change among income quintiles. Their discussion cautions the reader in using this measure (as would the authors of this report), but it is included here for comparison purposes and to lend some concreteness to understanding the problem with percentage change in tax liability. As Table 20 demonstrates,",
      " the average tax change in the lowest quintile, a group accounting for about half of the under $30,000 cash income group in the Treasury table, is only a dollar. Clearly, this group gained essentially nothing from the tax change. The entire under $30,000 group probably gained an average of about $20\u2014again, a very negligible amount. Thus, while the Treasury table seems to suggest that this group benefitted more than average (\"15%\" as compared with an overall benefit of 11%), many people would not characterize the relative benefits in this way. The percentage change in after tax income, by contrast, suggests that these lower-income groups gained very little.",
      " It is particularly in these lower-income classes where average tax liabilities are small or negative, that percentage changes in tax liability can be highly misleading.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 52,
    "question": null,
    "answer": "FDIC has a demanding responsibility enforcing banking laws, regulating financial institutions, and protecting depositors. Because of FDIC's reliance on information systems, effective information security controls are essential to ensure that the corporation's systems and information are adequately protected from inadvertent or deliberate misuse, improper modification, unauthorized disclosure, or destruction. As part of its audit of the 2016 and 2015 financial statements of the Deposit Insurance Fund and the Federal Savings and Loan Insurance Corporation Resolution Fund, which are administered by FDIC, GAO assessed the effectiveness of the corporation's controls in protecting the confidentiality, integrity, and availability of its financial systems and information. To do so, GAO examined security policies, procedures, reports, and other documents; tested controls over key financial applications; and interviewed FDIC personnel. The Federal Deposit Insurance Corporation (FDIC) implemented numerous information security controls intended to protect its key financial systems. However, further actions are needed to address weaknesses in access controls\u2014including boundary protection, identification and authentication, and authorization controls\u2014and in configuration management controls. For example, the corporation did not sufficiently isolate financial systems from other parts of its network, ensure that users would be held accountable for the use of a key privileged account, or establish a single, accurate listing of all IT assets in its environment. The corporation established a comprehensive framework for its information security program and implemented many aspects of its program. For example, FDIC (1) defined security categories for the general support systems we reviewed based on risk; (2) assessed the risk from control deficiencies identified during security control tests; and (3) conducted a disaster recovery test of its general support systems and mission-critical applications. In addition, FDIC addressed 15 of the 21 previously reported weaknesses that were unresolved as of December 31, 2015, as indicated in the following table. However, an underlying reason for many of the information security weaknesses identified during GAO's review was that FDIC did not fully implement other aspects of its program. For example, the corporation did not (1) include necessary information in procedures for granting access to a key financial application and (2) fully address the FDIC Office of the Inspector General's finding that the corporation did not always identify and report major security incidents in a timely manner. Until FDIC takes the necessary steps to address both new and previously reported control deficiencies, its sensitive financial information and resources will remain at increased risk of inadvertent or deliberate misuse, improper modification, unauthorized disclosure, or destruction. The combination of the continuing and new information security control deficiencies in access and configuration management controls, considered collectively, represent a significant deficiency in FDIC's internal control over financial reporting as of December 31, 2016.\n",
    "docs": [
      "Background FDIC was established by Congress to maintain the stability of and public  confidence in the nation\u2019s financial system by insuring deposits,  examining and supervising financial institutions, and resolving troubled  institutions. Congress created FDIC in 1933 in response to the  thousands of bank failures that had occurred throughout the late 1920s  and early 1930s. The Bank Insurance Fund and the Savings Association Insurance Fund  were established as FDIC responsibilities under the Financial Institutions  Reform, Recovery, and Enforcement Act of 1989, which sought to reform,  recapitalize, and consolidate the federal deposit insurance system. The  Bank Insurance Fund and the Savings Association Insurance Fund  merged into the Deposit Insurance Fund on February 8,",
      " 2006, as a result  of the passage of the Federal Deposit Insurance Reform Act of 2005. As  administrator of the Deposit Insurance Fund, FDIC insures the deposits of  banks and savings associations (insured depository institutions). In  cooperation with other federal and state agencies, the FDIC promotes the  safety and soundness of insured depository institutions by identifying,  monitoring, and addressing risks to the Deposit Insurance Fund. FDIC is also the administrator of the Federal Savings and Loan Insurance  Corporation Resolution Fund. This fund was created to close out the  business of the former Federal Savings and Loan Insurance Corporation  and liquidate the assets and liabilities transferred from the former  Resolution Trust Corporation.",
      " FDIC Relies on Computer  Systems to Support Its  Mission and Financial  Reporting FDIC relies extensively on computerized systems to support its mission,  including financial operations, and to store the sensitive information that it  collects. The corporation uses local and wide area networks to  interconnect its systems. To support its financial management functions, FDIC uses, among other  things, the following information technology (IT) resources: a corporate-wide system that functions as a unified set of financial  and payroll systems that are managed and operated in an integrated  fashion; a system to calculate and collect FDIC deposit insurance premiums  and Financing Corporation interest amounts from insured institutions;",
      " a Web-based application that provides full functionality to support  franchise marketing, asset marketing, and asset management; an application and Web portal to provide acquiring institutions with a  secure method for submitting required data files to FDIC; computer programs used to derive the corporation\u2019s estimate of  losses from shared loss agreements; a system to request access to and receive permission for the  computer applications and resources available to its employees,  contractors, and other authorized personnel; and a primary receivership and subsidiary financial processing and  reporting system. Cyber Threats  Facing Federal  Systems Continue to Evolve The federal government has seen a marked increase in the number of  information security incidents affecting the integrity,",
      " confidentiality, and  availability  of government information, systems, and services. Without  proper safeguards, computer systems are vulnerable to individuals and  groups with malicious intentions who can intrude and use their access to  obtain sensitive information, commit fraud and identity theft, disrupt  operations, or launch attacks against other computer systems and  networks. Cyber-based threats to information systems and cyber-related  critical infrastructure can come from sources internal and external to the  organization. External threats include the ever-growing number of cyber- based attacks that can come from a variety of sources such as  individuals, groups, and countries who wish to do harm to an  organization\u2019s systems.",
      " Internal threats include errors or mistakes, as well as fraudulent or malevolent acts by employees or contractors working  within an organization. Federal Law and Guidance  Provide a Framework for  Protecting FDIC\u2019s Federal  Information  and Systems Under the Federal Information Security Modernization Act of 2014  (FISMA), the Chairman of FDIC is responsible for, among other things,  (1) providing information security protections commensurate with the risk  and magnitude of the harm resulting from unauthorized access, use,  disclosure, disruption, modification, or destruction of the agency\u2019s  information systems and information; (2) ensuring that senior agency  officials provide information security for the information and information  systems that support the operations and assets under their control;",
      " and  (3) delegating to the corporation\u2019s Chief Information Officer (CIO) the  authority to ensure compliance with the requirements imposed on the  agency under FISMA. FISMA  states that the CIO is responsible for developing and maintaining  a corporate-wide information security program and for developing and  maintaining information security policies, procedures, and control  techniques that address all applicable requirements. FISMA  also states  that the CIO is to designate a senior agency information security officer to  carry out the CIO\u2019s responsibilities for information security under the law.  In most federal organizations, this official is referred to as the Chief  Information Security Officer.",
      " At FDIC, the CIO is responsible for, among other things, (1) establishing  the information security risk management program and ensuring that it is  properly implemented; (2) establishing the overall strategy for how the  corporation frames, assesses, responds to, and monitors information  security risks; and (3) establishing and promulgating agency-wide  information security risk awareness programs and practices. The  responsibilities of the FDIC Chief Information Security Officer include,  among other things, (1) overseeing the corporation\u2019s information  technology security risk management program; (2) providing information  security standards, control frameworks, security policy,",
      " best practices,  and security architecture oversight; (3) ensuring appropriate staffing and support of all information security positions that support the risk  management program; and (4) managing and maintaining the continuous  monitoring program. FDIC Continues to  Implement  Controls,  but Collective  Weaknesses Require  Management  Attention For calendar years 2016 and 2015, FDIC implemented numerous  information security controls intended to protect its key financial systems.  In addition, the corporation addressed 15 of 21 recommendations to  mitigate control weaknesses that we had previously identified in our  reports in 2013, 2014, 2015,",
      " and 2016. Nevertheless, weaknesses  remained in FDIC\u2019s implementation of access, configuration  management, and information security program controls that threaten the  confidentiality, integrity, and availability  of its financial systems and  information. As we have previously reported, the collective effect of weaknesses in  access and configuration management controls, both new and unresolved  from previous audits, contributed to our determination that FDIC had a  significant deficiency in internal control over financial reporting as of  December 31, 2016. Access Control  Weaknesses Increased  the Risk of Inappropriate  Data Access An agency can better protect the resources that support its critical  operations and assets from unauthorized access,",
      " disclosure,  modification, or loss by designing and implementing controls for  protecting information system boundaries, identifying  and authenticating  users, restricting user access to only what has been authorized,  encrypting sensitive data, and auditing and monitoring systems to detect  potentially malicious activity, among other actions. Although FDIC had  implemented numerous controls in these areas, weaknesses  nevertheless continued to challenge the corporation in ensuring the  confidentiality, integrity, and availability  of its information and information  systems. Financial Systems Were Not  Sufficiently  Isolated Boundary protection controls are intended to restrict logical access into  and out of networks and control connectivity to and from network-",
      " connected devices. Any connections to the Internet or to other external  and internal networks or information systems should occur through  controlled interfaces (for example, gateways, routers, switches, and  firewalls). In addition, networks should be appropriately configured to  adequately protect access paths between systems; this can be  accomplished through the use of access control lists and firewalls. National Institute of Standards and Technology (NIST) guidance  recommends that organizations employ boundary protection mechanisms  to separate organization-defined  information system components  supporting organization-defined missions and/or business functions. Such  isolation limits unauthorized information flows among system components  and also provides the opportunity to deploy greater levels of protection for  selected components.",
      " Consistent with NIST guidance, Office of  Management and Budget Circular A-130 requires agencies to isolate  sensitive or critical information resources (e.g., information systems,  system components, applications, databases, and information) into  separate security domains with appropriate levels of protection based on  the sensitivity or criticality of those resources. FDIC did not implement sufficient internal boundary protection controls on  its network to isolate financial systems from other parts of its network.  Although the corporation partially isolated financial systems from other  parts of the environment using virtual local area networks, it did not  always implement controls on network devices to prevent unauthorized  users and systems from communicating with the financial systems.",
      " According to FDIC, a plan to isolate sensitive systems had been made,  but implementation of the plan had been delayed due to other competing  priorities. Until it appropriately isolates its financial systems, FDIC faces  increased risk that unauthorized or malicious attempts to communicate  with its financial systems could go undetected. FDIC Did Not Adequately  Ensure Accountability  for the  Use of A Key Privileged  Account Identification is the process of distinguishing one user from all others,  usually through user identifications (ID). These are important because  they are the means by which specific access privileges are assigned and  recognized by the computer.",
      " However, because the confidentiality of a  user ID is typically not protected, other means of authenticating users\u2014 that is, determining whether individuals are who they say they are\u2014are  typically implemented. The combination of identification and  authentication\u2014such as user account-password combinations\u2014provides  the basis for establishing accountability and for controlling access to the  system. NIST SP 800-53, revision 4 recommends that agency information  systems uniquely identify and authenticate organizational users or  processes acting on behalf of organizational users. FDIC did not implement sufficient controls to ensure that users would be  held accountable for the use of a key privileged account.",
      " Although the  corporation employed a software tool to control access to privileged  accounts, it did not use the tool to control access to a privileged account  that was used by multiple engineers to manage the corporation\u2019s virtual  environment. As a result, FDIC\u2019s ability to attribute authorized, as well as  unauthorized, system activity to specific individuals could be diminished. Authorization  Controls Were  Improved,  but More Consistent  Implementation  is Needed Authorization is the process of granting or denying access rights and  privileges to a protected resource, such as a network, system,  application, function, or file. A key component of granting or denying  access rights is the concept of \u201cleast privilege,\u201d which refers to granting a  user only the access rights and permissions needed to perform official  duties.",
      " To restrict a legitimate user\u2019s access to only those programs and files  needed, organizations establish user access rights: allowable actions that  can be assigned to a user or to groups of users. File and directory  permissions are rules that are associated with a particular file or directory,  regulating which users can access it\u2014and the extent of their access  rights. To avoid unintentionally  giving a user unnecessary access to  sensitive files and directories, an organization should give careful  consideration to its assignment of rights and permissions. NIST SP 800-53, revision 4 recommends that organizations employ the  principle of least privilege by allowing only authorized users (or processes  acting on behalf of users)",
      " access permission that is necessary to  accomplish assigned tasks in accordance with organizational missions  and business functions. NIST also recommends periodic reviews of user  accounts for compliance with account management requirements. In  addition, FDIC policy requires administrators to use designated  administrator accounts when conducting administrative tasks. FDIC policy  also requires removal of user permissions if the job responsibilities of the  user change, if the user transfers to a different organization, or the user  no longer requires access for any other reason. Further, the policy  requires that access settings be reviewed periodically to ensure that they  remain consistent with existing authorizations and current business  needs. During 2016,",
      " FDIC improved controls for authorizing users\u2019 access by  addressing all nine of the weaknesses pertaining to authorization that we  had previously identified and that were still unresolved as of December  31, 2015. For example, FDIC implemented processes for  reviewing individuals with access to its data centers; ensuring that users of a key financial application do not conduct  access reviews of their own accounts; and  removing users\u2019 access to another financial application in a timely  manner. However, while it addressed these weaknesses from prior years, the  corporation did not always consistently implement authorization controls.  Specifically, FDIC database administrators for one database  management system did not use designated administrative accounts  when performing administrative tasks on certain databases.",
      " Additionally,  although the corporation had a process for conducting periodic reviews of  access settings on mainframe accounts, it did not include all mainframe  accounts in the access review process. Further, about one-fifth of the  user accounts we reviewed on a key financial application were granted  additional privileges that had not been authorized by the users\u2019  supervisors. This occurred because the official granting the access had  institutional knowledge of the privileges that the users would need, and  because FDIC\u2019s procedures for granting access to the application did not  include responsibilities and procedures for ensuring that the level of  access provided had been approved by the users\u2019 supervisor.",
      " As a result,  these systems are more vulnerable to unauthorized access and  modification of data. FDIC Did Not Employ Strong  Encryption  on Connections  to  Sensitive Mainframe  Resources Cryptography controls can be used to help protect the integrity and  confidentiality of data and computer programs by rendering data  unintelligible  to unauthorized users and/or protecting the integrity of  transmitted or stored data. Cryptography involves the use of  mathematical functions called algorithms and strings of seemingly  random bits called keys. Among other things, the algorithms and keys are  used to encrypt a message or file so that it is unintelligible  to those who  do not have the secret key needed to decrypt it,",
      " thus keeping the  contents of the message or file confidential. NIST SP 800-53, revision 4 recommends that organizations employ encryption to protect information  from unauthorized disclosure and modification during transmission. The  NIST standard for an encryption algorithm is Federal Information  Processing Standards Publication (FIPS Pub.) 140-2. FDIC had not completed actions to implement our prior recommendation  to use FIPS-compliant encryption for all mainframe connections.  Although FDIC officials stated that they initially intended to implement a  tool to enable mainframe encryption in 2016, the corporation determined  that the tool would not encrypt all of the information within its planned  scope.",
      " FDIC officials from the Division of Information Technology stated  that the corporation is continuing to consider feasible options for  encrypting mainframe connections. In the meantime, sensitive data\u2014 such as user IDs and passwords\u2014continue to be transmitted over the  network in clear text, exposing them to potential compromise. FDIC Did Not Scan All Servers  for Vulnerabilities or  Sufficiently  Monitor Changes to  Critical Files Audit and monitoring involves the regular collection, review, and analysis  of auditable events for indications of inappropriate or unusual activity, and  the appropriate investigation and reporting of such activity. Automated  mechanisms may be used to integrate audit monitoring,",
      " analysis, and  reporting into an overall process for investigation and response to  suspicious activities. Audit and monitoring controls can help security  professionals routinely assess computer security, perform investigations  during and after an attack, and even recognize an ongoing attack. NIST SP 800-53, revision 4 states that organizations should review and  analyze information system audit records for indications of inappropriate  or unusual activity and report the findings to designated agency  personnel. Additionally,  NIST states that information systems should  produce audit records that establish the type of event, when the event  occurred, and the identity of any individuals or subjects associated with  the event,",
      " among other things. FDIC improved its audit and monitoring controls by implementing four of  the five recommendations pertaining to audit and monitoring that we had  previously identified and that were still unresolved as of December 31,  2015. For example, the corporation had ensured that data on successful logins was being captured for each of  its database systems for investigation of potential security incidents;  implemented a centralized audit monitoring capability for its  databases;  improved the logging and monitoring process for several key systems;  and documented all critical files on key servers that required real-time  monitoring. However, other weaknesses existed in FDIC\u2019s implementation of audit  and monitoring controls.",
      " Specifically: FDIC had not performed vulnerability  scans of all servers in its IT  environment. In its November 2016 report on the effectiveness of the  corporation\u2019s information security program in accordance with the  requirements of FISMA,  the FDIC Office of Inspector General (OIG)  reported that, at the time of its audit, FDIC was not performing  vulnerability  scans for more than 900 production servers within one of  its general support systems. In addition, we found that FDIC had not  scanned several production servers in another of its general support  systems during the 3-month time period (July,",
      " August, and September  2016) that we reviewed. According to FDIC officials, these conditions occurred because the  corporation did not have an inventory of network assets that included  all servers and because its legacy scanning and discovery tool had  failed to identify all servers. The officials added that the scanning and  discovery tool had since been replaced. Without regularly scanning all  servers, FDIC cannot reasonably be assured that vulnerabilities in its  servers are identified and corrected in a timely manner, increasing the  risk that its systems and information may be compromised. FDIC had not completed actions to address our prior year  recommendation to ensure that changes made to critical files on  certain key servers are adequately monitored.",
      " Although the  corporation specified which directories on the servers were to be  monitored, the logs that were generated did not provide sufficient  detail to identify the individuals making changes. According to officials in FDIC\u2019s Division of Information Technology,  the corporation plans to implement a new solution in 2017 to enable  security personnel to identify users making file system changes. Until  FDIC fully addresses this recommendation by ensuring that users  making changes to critical files are identified and logged, increased  risk continues to exist that an unauthorized individual could  inappropriately modify these files without being identified. FDIC Did Not Fully  Implement Configuration  Management Controls In addition to access controls,",
      " agencies should implement policies,  procedures, and techniques for managing the configuration of information  systems. Configuration management controls are intended to prevent  unauthorized changes to information system resources (for example,  software programs and hardware configurations) and to provide  reasonable assurance that systems are configured and operating  securely and as intended. NIST SP 800-53, revision 4 recommends,  among other things, that agencies develop and document an inventory of  information system components that accurately reflects the current  system and includes all components within the system\u2019s authorization  boundary; establish a baseline configuration for the information system  and its constituent components; and identify and correct information  system flaws,",
      " including installing security relevant software updates within  a defined time period of their release. Consistent with NIST guidelines, FDIC policy states that mandatory  configuration settings must be established and documented for IT  products employed within the information system using information  system-defined security configuration checklists. The policy also states  that applicable vendor-released software patches designed to address  security vulnerabilities are to be implemented in accordance with the CIO  organization\u2019s security patching schedule. Nevertheless, FDIC had not consistently implemented configuration  management controls. For example, although the corporation used  multiple tools to track and validate its IT assets, it had not established a  single,",
      " authoritative,  accurate listing of all IT assets in its environment.  This occurred because FDIC had not established a process to reasonably  assure that a complete, accurate inventory was developed and  maintained. Additionally,  although the corporation had defined baseline  configuration settings for its information systems and had conducted  configuration scans of its systems, it had not yet fully implemented  processes for verifying that configurations are consistently applied.  Further, although FDIC had applied patches to certain third-party  applications supporting financial processing and had made significant  progress in identifying and tracking vulnerabilities related to third-party  software, it had not yet fully implemented processes to ensure that assets  that require patching are identified correctly.",
      " Without establishing a reliable, authoritative listing of its IT assets and  documenting, implementing, and monitoring security configurations, FDIC  has reduced assurance that its information supporting financial  processing is securely configured. Additionally,  unless known  vulnerabilities in FDIC\u2019s systems and applications are patched, increased  risk exists that they could be exploited, potentially exposing the  corporation\u2019s financial systems and information to unauthorized access or  modification. FDIC Developed and  Documented Elements of  Its Corporate Information  Security Program, but  Shortcomings Still Existed An entitywide information security management program is the foundation  of a security control structure and a reflection of senior management\u2019s  commitment to addressing security risks.",
      " The security management  program should establish a framework and continuous cycle of activity for  assessing risk, developing and implementing effective security  procedures, and monitoring the effectiveness of these procedures.  Without a well-designed program, security controls may be inadequate;  responsibilities may be unclear, misunderstood, or improperly  implemented; and controls may be inconsistently applied. FISMA  requires each agency to develop, document, and implement an  information security program to provide security for the information and  information systems that support the agency\u2019s operations and assets,  including those provided or managed by another agency, contractor, or  other organization on its behalf. Agency programs are to include,",
      " among  other things, the following elements: periodic assessments of risk, including the magnitude of harm that  could result from the unauthorized access, use, disclosure, disruption,  modification, or destruction of information and information systems  that support the operations and assets of the organization; plans and procedures to ensure continuity of operations for  information systems that support the operations and assets of the  agency; policies and procedures that are based on risk assessments, cost- effectively reduce information security risks to an acceptable level,  and ensure that information security is addressed throughout the life  cycle of each organizational information system; periodic testing and evaluation of the effectiveness of information  security policies,",
      " procedures, practices, and security controls to be  performed with a frequency depending on risk, but no less than  annually; a process for planning, implementing, evaluating, and documenting  remedial actions to address any deficiencies in the information  security policies, procedures, and practices of the organization; and procedures for detecting, reporting, and responding to security  incidents. In addition, FISMA  requires the head of each federal agency to ensure  that information security management processes are integrated with  agency strategic and operational planning processes. FDIC had developed, documented, and implemented many elements of  its corporate information security program. For example, it had defined security categories for the general support systems we  reviewed based on risk using NIST guidance,",
      " assessed the risk from  control deficiencies identified during security control tests, and  ensured that the general support systems we reviewed were  authorized to operate; and conducted a disaster recovery test of its general support systems and  mission-critical applications. However, FDIC had not fully or consistently implemented aspects of its  information security program, which was an underlying reason for many   of the information security weaknesses identified during our review.  Specifically, FDIC had not  included all necessary information in procedures for granting access  to a key financial application;  fully addressed the FDIC OIG\u2019s finding that security control  assessments of outsourced service providers had not been completed  in a timely manner;",
      "  fully addressed key previously identified weaknesses related to  establishing agencywide configuration baselines and monitoring  changes to critical server files; and completed actions to address the FDIC OIG\u2019s finding that the  corporation had not ensured that major security incidents are  identified and reported in a timely manner. In addition, in November 2016, the FDIC OIG reported that the  corporation had not yet developed and documented an up-to-date  information security strategic plan or completed actions to address  weaknesses in its Information Security Managers program. These  shortcomings are discussed in more detail in the following section. FDIC Developed Many  Security Policies, but A Key  Procedure Was Lacking A key element of an effective information security program is to develop,",
      "  document, and implement risk-based policies, procedures, and technical  standards that govern the security over an agency\u2019s computing  environment. Information security policy is essential to establishing roles,  responsibilities, and requirements necessary for implementing an  information security program. The supporting procedures provide the  information and guidance on implementing the policies. According to  NIST SP 800-53, revision 4, organizations should develop and document  procedures to facilitate the implementation of access and configuration  management policies and associated controls. Although FDIC developed and documented many information security  policies and procedures that were consistent with the NIST Risk  Management Framework, its procedure for granting users access to a  key financial application did not include responsibilities and steps for  ensuring that the level of access provided had been approved by the users\u2019 supervisor.",
      " As a result, the official granting access to the  application\u2014who had institutional knowledge of the privileges that the  users would need\u2014granted additional privileges to some users for which  they had not been previously approved. Until it updates its procedure to  include these responsibilities and steps, FDIC will continue to face  increased risk that users may be granted access to privileges in the  application for which they have not been approved. FDIC Assessed Security  Controls,  but Outsourced  Service Providers Were Not  Always Assessed Timely A key element of an information security program is to test and evaluate  policies, procedures, and controls to determine whether they are effective  and operating as intended.",
      " Security control testing should include  management, operational, and technical controls for every system  identified in the agency\u2019s required inventory of major systems. Although  control tests and evaluations may encourage compliance with security  policies, the full benefits are not achieved unless the results are used to  improve security. FISMA  requires that the frequency of tests and  evaluations of management, operational, and technical controls be based  on risks and occur no less than annually. The Office of Management and Budget (OMB) directs agencies to meet  their FISMA-required  controls testing by drawing on security control  assessment results that include, but are not limited to,",
      " continuous  monitoring activities. According to NIST SP 800-53, revision 4, continuous  monitoring programs facilitate ongoing awareness of threats,  vulnerabilities, and information security to support organizational risk  management decisions. NIST also recommends that organizations  monitor security control compliance by external service providers on an  ongoing basis. FDIC developed a continuous control assessment methodology that  defined the controls tested for each information system and the frequency  that each control is to be tested. In addition, the corporation tested the  effectiveness of the security controls for the three general support  systems we reviewed in accordance with the methodology. However, the FDIC OIG has previously reported weaknesses in FDIC\u2019s  assessments of its outsourced service providers.",
      " Specifically, in October  2015, it reported that the corporation had not always ensured that security  assessments of outsourced service providers were completed in a timely  manner. In November 2016, the OIG reported that FDIC had made  meaningful progress towards completing timely assessments of its  outsourced service providers, but noted that continued management  attention was warranted in this area to ensure outstanding assessments  are completed timely. FDIC Resolved Many  Previously  Identified  Weaknesses, but Key  Weaknesses Remain When security weaknesses are identified, the related risks should be  assessed, appropriate corrective or remediation actions should be taken,",
      "  and follow-up monitoring should be performed to make certain that  corrective actions are effective. FISMA  specifically requires that  agencywide information security programs include a process for planning,  implementing, evaluating, and documenting remedial actions to address  any deficiencies in the information security policies, procedures, and  practices of the agency. NIST SP 800-53, revision 4 recommends that organizations develop a  plan of action and milestones (POA&M) for information systems to  document the planned remedial actions to correct weaknesses or  deficiencies identified during security control assessments. A POA&M  should also be updated based on the findings from the security controls  assessment,",
      " security impact analysis, and continuous monitoring  activities. FDIC documented POA&Ms for weaknesses identified during internal  control assessments and implemented an effective process for tracking  and mitigating identified weaknesses for each of the systems that we  reviewed. In addition, as of December 31, 2016, FDIC had addressed 15  of the 21 previously reported information system weaknesses that were  unresolved at the end of our prior audit. For example, FDIC had  improved controls for authorizing users\u2019 access to financial applications  and for logging and monitoring financial systems to detect potentially  malicious activity. However, six previously identified weaknesses  remained unresolved.",
      " Until it completes actions to address previously  identified weaknesses, FDIC will continue to face increased risk that its  systems may not be adequately or consistently protected against  unauthorized access to systems or data. Appendix II details the status of  weaknesses that were unaddressed as of December 31, 2015 or were  initially reported in 2016. Shortcomings Existed in  FDIC\u2019s Incident  Response  Process Comprehensive monitoring and incident response controls are necessary  for rapidly detecting incidents, minimizing loss and destruction, mitigating  the weaknesses that were exploited, and restoring computing services.  While strong controls may not prevent all incidents, agencies can reduce  the risks associated with these events by detecting and promptly  responding before significant damage is done.",
      " FISMA  requires federal  agencies to develop and implement procedures for detecting, reporting,  and responding to security incidents. NIST SP 800-53, revision 4 further  recommends that agencies develop, document, and disseminate  procedures to facilitate the implementation of the incident response policy  and associated incident response controls. FDIC developed and documented information security policies and  procedures on incident response. For example, its policy on reporting  computer security incidents states that the FDIC Computer Security  Incident Response Team is responsible for evaluating the seriousness of  computer security incidents and taking appropriate corrective actions,  including notifying FDIC senior management, the OIG,",
      " and other outside  entities, when appropriate. Nevertheless, shortcomings existed in FDIC\u2019s implementation of its  policies. Specifically, FDIC did not provide reasonable assurance that  \u201cmajor incidents,\u201d as defined by OMB guidance, were identified and  reported in a timely manner. Specifically, the OIG reported in July 2016  that FDIC\u2019s incident response policies, procedures, and guidelines did not  address major incidents. In addition, the large volume of potential security  violations identified by its Data Loss Prevention tool, together with limited  resources devoted to reviewing potential violations, hindered meaningful  analysis of the information and FDIC\u2019s ability to identify all security  incidents,",
      " including major ones. Among other things, the OIG  recommended that FDIC (1) revise its incident response policies,  procedures, and guidelines to address major incidents; (2) ensure that  these revisions include criteria for determining whether an incident is  major, consistent with FISMA  and Office of Management and Budget  guidance; and (3) review the current implementation of the Data Loss  Prevention tool to determine how it can be better leveraged to safeguard  sensitive FDIC information. In November 2016, the FDIC OIG reported that, in response to these  findings, the corporation was working to improve its incident response  capabilities by developing an overarching incident response program  guide,",
      " hiring an incident response coordinator, implementing a new  incident tracking system, updating incident response policies and  procedures, and performing a comprehensive assessment of the FDIC\u2019s  information security and privacy programs. If fully implemented, these  actions could improve FDIC\u2019s ability to identify and address security  incidents, including major incidents. FDIC Did Not Complete Key  Information  Security Strategic  Management  Activities According to NIST SP 800-39, effective risk management requires  organizations such as FDIC to operate in highly complex, interconnected  environments using state-of-the-art and legacy information systems\u2014 systems that organizations depend on to accomplish their missions and to  conduct important business-related functions.",
      " The complex relationships  among missions, mission/business processes, and the information  systems supporting those missions and processes require an integrated,  organization-wide view for managing risk. Effective management of information security risk is critical to the success  of organizations in achieving their strategic goals and objectives. NIST SP  800-100 states that agencies should have a strategic plan for information  security that identifies goals and objectives related to the agency\u2019s  mission, specifies a plan for achieving those goals, and establishes short-  and mid-term performance targets and measures that allow the agency to  track, manage, and monitor its progress toward those goals and  objectives.",
      " In addition, according to NIST SP 800-39, agencies should  establish roles and responsibilities for managing information security risk. However, FDIC had not fully implemented key activities for managing and  overseeing information security risk across the organization. Specifically:  In November 2016, the FDIC OIG reported that FDIC\u2019s information  security strategic plan was not up-to-date. Specifically, although the  corporation had an information security strategic plan, this plan had  expired in 2015 and did not fully reflect OMB\u2019s cybersecurity priorities  or the corporation\u2019s strategies. Without an up-to-date strategic plan,  ongoing and planned IT initiatives may not be linked to the  corporation\u2019s long-term security and business goals and priorities.",
      " FDIC had not completed actions to address gaps in how the roles and  responsibilities of its Information Security Managers (ISM) are defined  and carried out. In October 2015, the FDIC OIG reported that the  duties and roles of the ISMs in addressing information security  requirements and risks had evolved since the ISM program was  established. It also reported that FDIC had not completed a recent  comprehensive assessment to determine whether the skills, training,  oversight, and resource allocations pertaining to the ISMs enabled  them to effectively carry out their increased responsibilities and  address security risks within their divisions and offices. In November  2016,",
      " the OIG reported that FDIC had conducted an assessment of its  ISM program, which identified gaps in areas such as available  resources, training, and performance measurement. The OIG also  reported that FDIC plans to complete all actions to address these  gaps by 2018. Until then, however, increased risk exists that these  capability gaps could impact the effectiveness of the FDIC\u2019s  information security program. Conclusions FDIC had implemented and strengthened many information security  controls over its financial systems and information. For example, the  corporation had taken steps to improve controls for restricting user  access to only what has been authorized,",
      " auditing and monitoring  systems for potentially malicious activity, and applying patches to address  known software vulnerabilities by addressing many of the weaknesses  that we previously reported. However, management attention is needed  to address new and previously identified deficiencies in access controls\u2014 including boundary protection, identification and authentication,  authorization, cryptography, and audit and monitoring controls\u2014and in  configuration management controls. These deficiencies, considered  collectively, are the basis for our determination that FDIC had a significant  deficiency in internal control over financial reporting in its information  systems controls as of December 31, 2016. In addition, FDIC had developed, documented, and implemented many  elements of its corporate information security program.",
      " However, further  actions are needed to address shortcomings in the corporation\u2019s program,  such as ensuring that its procedure for granting access to a key financial  application includes key responsibilities and steps. Given the important role that information systems play in FDIC\u2019s internal  controls over financial reporting, it is vitally important that the corporation  address weaknesses in information security controls\u2014both old and  new\u2014as part of its ongoing efforts to mitigate the risks from cyber attacks  and to ensure the confidentiality, integrity, and availability  of its financial  and sensitive information. Continued and consistent management  commitment and attention to access, configuration management, and  security management controls will be essential to addressing existing  deficiencies and further improving FDIC\u2019s information system controls.",
      " Recommendations for  Executive Action To help improve the corporation\u2019s implementation of its information  security program, we recommend that the Chairman of FDIC direct the  Chief Information Officer to update the procedure for granting access to  the key financial application, to include responsibilities and steps for  ensuring that the access privileges granted have been approved by the  users\u2019 supervisor. In a separate report with limited distribution, we are also making six  recommendations to resolve shortcomings in FDIC\u2019s internal control over  financial reporting and help strengthen access and configuration  management controls over key financial information, systems, and  networks. Agency Comments  and Our Evaluation In written comments on a draft of this report (reprinted in appendix II),  FDIC concurred with our recommendation to improve its implementation  of its information security program and stated that corrective actions will  be completed by July 2017.",
      " FDIC also provided an attachment detailing  its actions to implement our recommendation. In addition to the aforementioned comments, FDIC provided technical  comments that we have addressed in our report as appropriate. In these  comments, the corporation expressed concern about one additional  recommendation to improve its information security program that we had  made in our draft report. Specifically, the draft report had included a  recommendation that FDIC develop, document, and implement  procedures for ensuring that configuration actions identified by its  Computer Security Incident Response Team are taken. In written and oral  comments, FDIC officials provided additional information about the  corporation\u2019s incident handling process in order to clarify that the  condition we identified did not pose a risk to the corporation\u2019s information  and systems.",
      " After our review of this information, we agree that the  condition does not pose a risk to the corporation and, accordingly,  removed the recommendation from our final report. We are sending copies of this report to interested congressional parties.  In addition, the report is available at no charge on the GAO website at  http://www.gao.gov. If you have any questions regarding this report, please contact Nick  Marinos at (202) 512-9342 or Dr. Nabajyoti Barkakati at (202) 512-4499.  We can also be reached by e-mail at marinosn@gao.gov and  barkakatin@gao.gov.",
      "  Key contributors to this report are listed in   appendix II. Appendix  I: Objective, Scope, and  Methodology The objective of this information security review was to determine the  effectiveness of the Federal Deposit Insurance Corporation\u2019s (FDIC)  controls in protecting the confidentiality, integrity, and availability  of its  financial systems and information. To do this, we identified and reviewed  FDIC information systems control policies and procedures, tested controls  over key financial applications, and held interviews with key security  representatives and management officials in order to determine whether  information security controls were in place, adequately designed, and  operating effectively. The review was conducted as part of our audit of the  financial statements of the two funds administered by FDIC:",
      " the Deposit  Insurance Fund and the Federal Savings and Loan Insurance Corporation  Resolution Fund. The scope of our audit included an examination of FDIC information  security policies, procedures, and controls over key financial systems in  order to (1) assess the effectiveness of corrective actions taken by FDIC  to address weaknesses we previously reported and (2) determine  whether any additional weaknesses existed. This work was performed in  support of our opinion on internal control over financial reporting as it  relates to our audits of the calendar years 2016 and 2015 financial  statements of the two funds administered by FDIC. The independent public accounting firm of Cotton & Company LLP tested  certain FDIC information systems controls,",
      " including the follow-up on the  status of FDIC\u2019s corrective actions during calendar year 2016 to address  open recommendations from our prior years\u2019 reports. We agreed on the  scope of the audit work, monitored the firm\u2019s progress, and reviewed the  related audit documentation to determine whether the firm\u2019s findings were  adequately supported. To determine whether controls over key financial systems and information  were effective, we considered the results of FDIC\u2019s actions to mitigate  previously-reported weaknesses that remained open as of December 31,  2015, and performed audit work at FDIC facilities in Arlington, Virginia.  We concentrated our evaluation primarily on the controls for systems and  applications associated with financial processing,",
      " such as the (1) New  Financial Environment; (2) Communication, Capability, Challenge, and  Control System; (3) Portfolio Investment Accounting; (4) Assessments  Information Management System; and (5) general support systems. Our  selection of the systems to evaluate was based on consideration of  systems that directly or indirectly support the processing of material  transactions that are reflected in the funds\u2019 financial statements. Our audit methodology was based on the Federal Information System  Controls Audit Manual, which contains guidance for reviewing  information system controls that affect the confidentiality, integrity, and  availability  of computerized information. Using standards and guidance from the National Institute of Standards  and Technology and the Office of Management and Budget,",
      " as well as  FDIC\u2019s policies and procedures, we evaluated controls by examining network diagrams and device configuration settings to  determine if intrusion detection and prevention systems were  monitoring the FDIC network for suspicious activity;  reviewing privileged accounts to verify that access to privileged  accounts was appropriately controlled and that accounts were not  shared among multiple users; analyzing user application authorizations to determine whether users  had more permissions than necessary to perform their assigned  functions;  reviewing administrative account settings to determine if privileged  accounts were used as required and if access to a privileged account  was appropriately controlled; assessing configuration settings to evaluate settings used to audit  inspecting vulnerability  scans for in-scope systems to determine  whether scans were conducted regularly and whether patches were  appropriately installed on affected systems.",
      " Using the requirements of the Federal Information Security Modernization  Act of 2014, which establishes elements for an agency-wide information  security program, we evaluated FDIC\u2019s implementation of its security  program by examining system authorization documentation for information on  FDIC\u2019s implementation of risk categorization and risk assessment  practices;  reviewing information security policies and procedures to determine  whether they were adequately documented and implemented; examining FDIC training records for information on general and  reviewing assessments of security controls to determine if they had  been completed as scheduled;  reviewing an FDIC Office of Inspector General (OIG) report for  information on the corporation\u2019s processes for assessing security  controls of outsourced service providers;",
      " examining remedial action plans to determine whether FDIC had  addressed identified vulnerabilities in a timely manner; examining two FDIC OIG reports for information on the corporation\u2019s  reviewing security event records to determine if security events were  tracked and resolved appropriately;  reviewing continuity of operations plans, contingency plans, and test  results to determine whether contingency planning controls were  appropriately implemented; and examining two FDIC OIG reports for information on the corporation\u2019s  information security strategic management activities. To determine the status of FDIC\u2019s actions to correct or mitigate previously  reported information security weaknesses, we reviewed prior GAO  reports to identify previously reported weaknesses,",
      " examined FDIC\u2019s  corrective action plans, and assessed the effectiveness of those actions. We conducted this audit in accordance with U.S. 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 provided a reasonable  basis for our findings and conclusions based on our audit objective. Appendix  II: Comments from the Federal  Deposit Insurance Corporation Appendix  III: GAO Contacts and Staff  Acknowledgments GAO Contacts Staff  Acknowledgments In addition to the individuals named above,",
      " Gregory Wilshusen (Director);  Gary Austin, Paul Foderaro, and Michael Hansen (Assistant Directors);  William Cook (Analyst in Charge); Wayne Emilien; Nancy Glover; Franklin  Jackson; Thomas J. Johnson; Jean Mathew; David Plocher; Dacia  Stewart; and Adam Vodraska made key contributions to this report.\n"
    ],
    "length": 9321,
    "hardness": null,
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  },
  {
    "id": 53,
    "question": null,
    "answer": "Department of Defense (DOD) fuel consumption varies from year to year in response to changes in mission and the tempo of operations. DOD may consume upwards of 1% of the petroleum products refined in the United States annually. Petroleum products purchased and consumed overseas may double DOD's consumption. The majority of DOD's bulk fuel purchases are for jet fuel, which has ranged as high as 101 million barrels annually in the past decade. The U.S. refining industry has been supplying 50% of the jet fuel demand. DOD has consumed as much as 145 million barrels in overall petroleum products annually. In FY2000, fuel costs represented 1.2% of the total DOD spending, but by FY2008 fuel costs had risen to 3.0%. Over the same time, total defense spending had more than doubled, but fuel costs increased nearly 500%. Prices paid for military specification JP-8 and JP-5 jet fuel have exceeded the price of commercial equivalent fuel. In a recent move to contain fuel costs, DOD has begun substituting commercial grade jet fuel for some of its purchases, and upgraded the fuel to military-specification.  Currently, 141 refineries operate in the United States. DOD's top four fuel suppliers operate a combined 31 refineries in the United States, which represents nearly 6 million barrels per day of crude oil distillation capacity. A typical U.S. refinery yields a limited supply of jet and diesel fuel depending on the type of crude oil processed. Gulf Coast (Texas and Louisiana) refineries yield up to 8% jet fuel. Generally, refineries are set up to run specific grades of crude oil, for example light sweet crude or heavy sour crude. Light sweet crude is particularly desirable as a feedstock for gasoline refining because its lighter-weight hydrocarbons make it easier to refine. Heavier crude oils require more complex processing than light crudes, and sour crudes require desulfurization. Changing crude oil supplies have consequently forced refineries to upgrade their processes (thus increase refinery complexity) to handle heavier sour crude oils. At the same time, the Environmental Protection Agency (EPA) has taken action to require lower sulfur content of diesel fuel, and has proposed a final rule that will require refineries to report their greenhouse gas emissions as a prelude to expected legislation that will limits emissions.  The Defense Energy Support Center (DESC), which falls under the Defense Logistics Agency, has the mission of purchasing fuel for all of DOD's services and agencies. In practice, DESC has typically awarded fuel contracts for lengths of one year, but there are other buying programs with longer contract periods. DESC uses fixed-price contracts with economic price adjustments. These adjustments provide for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. DESC has determined that supplies and related services are eligible for the multi-year contracting provisions under the Federal Acquisition Regulation, and has adopted contracting instructions for entering into multiyear contracts. Bulk petroleum contracts and direct delivery fuel contracts are likely to remain one-year contracts, however.  DESC bases contract delivery price on the lowest cost to the government; however, the hidden logistical cost born by operational commands moving the fuel to their area of operations may not be fully accounted. The acquisition process for new military capabilities now requires that DOD account for fuel logistics when evaluating lifecycle costs. \n",
    "docs": [
      "Background Department of Defense (DOD) fuel consumption varies from year to year in response to changes in mission and the tempo of operations. DOD may consume upwards of 1% of the petroleum products annually refined in the United States. Foreign purchased petroleum products may double DOD's consumption.  The Defense Energy Support Center (DESC), under the command of the Defense Logistics Agency (DLA), has the mission of purchasing fuel for all of DOD's services and agencies, both in the continental United States (CONUS) and outside (OCONUS). DESC's origins date back to World War II, when the Army-Navy Petroleum Board fell under the Department of the Interior.",
      " Its mission transferred to the War Department in 1945 and its designation changed to the Joint Army-Navy Purchasing Agency. In 1962, the agency became a part of the former Defense Supply Agency, now known as the Defense Logistics Agency (DLA). Designated the Defense Fuel Supply Center (DFSC) in 1964, it served as a single entity to purchase and manage the DOD's petroleum products and coal. In 1998, it was re-designated the Defense Energy Support Center with an expanded new mission to manage a comprehensive portfolio of energy products.  In practice, DESC typically awards fuel contracts based on the lowest cost to the point of delivery,",
      " typically for lengths of one year. DESC's fuel procurement categories include bulk petroleum products (JP-8, JP-5, and diesel fuel), ships' bunker fuel, into-plane (refueling at commercial airports), and post-camp-and-station (PC&S). Although DOD may represent the single largest consumer of petroleum products, its consumption primarily of JP-8, JP-5, and diesel fuel aligns more closely with the narrower market for middle-distillate fuels.  This report summarizes DOD's fuel purchases over the current decade (FY2000 through FY2008); and compares fuel spending to overall DOD spending.",
      " It also compares the prices that DOD pays for fuel to commercially equivalent fuel, and the quantities of DOD fuel purchases to the net production of U.S. refined petroleum products. To place DOD's fuel requirement in a larger perspective, the report discusses refining and refineries supplying DOD's jet fuel, and DESC's fuel procurement practices. The report concludes by discussing recent legislation and policies that affect fuel procurement. In the past, when crude oil and refined petroleum prices were high, Congress has looked at DOD's fuel demand as a means of stimulating private sector interest in producing alternative fuels. Recent legislation directs DOD to consider using alternative fuels to meet its needs,",
      " and to stimulate commercial interest in supplying the needs. Recent high fuel prices did stimulate DOD and private interest in producing alternative fuels from coal and oil shale, though no project has yet reached commercial operation. Legislation ensuring that federal agencies do not spend taxpayer dollars on new fuel sources that will exacerbate global warming now counters earlier policy objectives. Proposed rules that mandate greenhouse gas emission reporting may minimally affect refineries. Recently introduced legislation that would cap greenhouse gas emissions is likely to affect some refinery operations, if not the refining industry's responsiveness to DOD's fuel requirements.  Fuel Purchases DOD's fuel consumption varies from year to year in response to changes in mission and the tempo of operations.",
      " The majority of DESC's bulk fuel purchases are for JP-8 jet fuel, which has ranged from 60 to 74 million barrels annually over the past decade (the equivalent of 165,000 to 200,000 barrels per day). The Air Force and the Army represent the primary consumers of JP-8 fuel. The Navy consumes JP-5 jet fuel. All services to varying degrees consume diesel fuel. DESC's total fuel purchases peaked at 145.1 million barrels in FY2003, when U.S. forces invaded Iraq. JP-8 purchases peaked in FY2004 and have since been declining (as discussed further below). In FY2000,",
      " JP-8 represented almost 60% of overall DESC's overall purchases and by FY2008 only 46%.  Overall\u00a0DESC fuel expenditures grew from roughly $3.6 billion in FY2000 to nearly $18 billion by FY2008\u2014a nearly 500% increase. Actual volumes purchased had only increased by 30% over the same time. DESC petroleum product purchases, summarized by volume and total cost, appear in Table 1. DESC's purchases, however, do not necessarily correspond with DOD's actual consumption. DESC may draw fuel down from storage to supplement demand and may replenish fuel stores with purchases. DOD also maintains a fuel \"war reserve\"",
      " that it may draw down in contingencies.  While DOD's full consumption began leveling off after the Iraq war, fuel costs and average fuel prices continued increasing; in part, from increasing crude oil prices (which spiked to nearly $140 per barrel in the summer of 2008) and, in part, from increasing refining margins (discussed below). The average cost of all petroleum products purchased rose from $34.62 per barrel in FY2000 to over $133 per barrel in FY2008; an increase of nearly 370% (see Figure 1 ).  DOD Fuel Cost vs. Commercial Fuel Price Earlier, JP-",
      "8 and JP-5 jet fuels held a comparative price advantage over their commercial equivalent\u2014Jet A fuel. With commercial aviation's setback after September 11, 2001, and the Iraq invasion in 2003, the military jet fuel price-advantages reversed. Jet and diesel fuel prices appear in the graph of Figure 2 and the summary in Table 2. Note that as all fuel-prices increased, the margin between refiners' crude oil cost and refined product prices also increased; from an average of 15\u00a2/gallon in FY2000 to an average of 91\u00a2/gallon by FY2008.",
      "  DOD did respond when refiners offered commercial jet fuel at lower prices than military specification fuel. As shown in Table 1, DESC offset decreasing JP-8 purchases with increasing purchases of alternate jet fuels (commercial aviation specification fuels that can substitute for military specification). Diesel fuel purchases also picked up. DESC Fuel Cost vs. DOD Outlays Outlays represent cash payments made to liquidate the government's obligations in a fiscal year. The obligations may be incurred over a number of years as there is a time lag between budgeting funds (congressional appropriation), signing contracts and placing orders (obligations), receiving goods or services and making payments (liquidating obligations). Outlays,",
      " as used here, represent DOD's actual spending, rather than its authority to incur legally binding obligations or budget authority. From FY2000 through FY2007, total defense outlays increased 200% (in current dollars), while Operation and Maintenance (O&M) spending increased by 231% (see Table 3 ). Fuel costs increased 497% during the same period, owing in large part to rapidly escalating crude oil prices. Stated in other terms, fuel costs represented 1.2% of DOD's spending in FY2000, and more than doubled to 3% by FY2008.  Refining,",
      " Suppliers, and the Crude Oil Supply Crude Oil Supply The U.S. produces roughly one-third of the crude oil it consumes annually with the balance supplied by Canada, Saudi Arabia, Mexico, Venezuela, Nigeria, and other smaller producers ( Figure 3 ). A range of crude oils assays appears in Table 4. In the past, when U.S. crude oil production was higher than today, refineries could depend on steady supplies of light sweet (low sulfur) crude oil. The benchmark for this crude oil grade, West Texas Intermediate (WTI), is the reference for pricing of U.S. domestic crudes, as well as oil imports into the United States.",
      " With the diminishing supply of sweet crudes, refineries have increasingly turned to heavier sour crudes. Refining Crude oil contains natural components in the boiling range of gasoline, kerosene/jet fuel and diesel fuel as shown in Figure 4. These products separate out in a refinery's atmospheric distillation tower. The term \"straight-run\" applies to the product streams that condense during this initial refining process. Many refineries now process the residuum that remains after atmospheric distillation into gasoline and middle distillate range products using heat and pressure, hydrogen, and catalysts (hydrocracking and catalytic cracking in refining terms). Depending on their complexity,",
      " refineries may also produce kerosene/jet fuel and diesel fuel in this manner. As would be expected, specifications for jet fuel, particularly military grade, are more rigorous than for kerosene. Generally, refineries are set up to run specific grades of crude oil, for example light sweet or heavy sour. Light sweet crude is particularly desirable as a feedstock for gasoline refining because its lighter-weight hydrocarbons make it easier to refine. Heavier crude oils require more complex processing than light crudes, and sour crudes require a desulfurization.  Refineries may be set up as: Topping refineries separate crude oil into its constituent petroleum products simply by distillation,",
      " also referred to as atmospheric distillation. A topping refinery produces naphtha but no gasoline. Hydroskimming refineries are equipped with atmospheric distillation, naphtha reforming and necessary processes to treat for sulfur. More complex than a topping refinery, hydroskimmers run light sweet crude and produce gasoline. Cracking refineries add vacuum distillation and catalytic cracking to run light sour crude to produce light and middle distillates; Coking refineries are high conversion refineries that add coking/resid destruction (delayed coking process) to run medium/sour crude oil.  A refinery's atmospheric distillation capacity sets the limit of its crude oil processing (usually expressed as barrels per calendar day or barrels per stream day). Catalytic cracking,",
      " coking, and other conversion units, referred to as secondary processing units, add to a refinery's complexity and can actually increase the volume of its output. Relative size, however, can be measured using refinery complexity\u2014a concept developed by W.L. Nelson in the 1960s. The Nelson Complexity Index rates the proportion of secondary processes to primary distillation (topping) capacity. The index varies from about 2 for hydroskimming refineries to about 5 for cracking refineries, and over 9 for coking refineries. While the average index for U.S. refineries is 10, only 59 have coking capacity.",
      " A typical refinery yields a limited supply of jet and diesel fuel yield depending on the type of crude oil processed. Gulf Coast (Texas and Louisiana) refineries with an average complexity of 12 to 13 may yield up to 8% jet fuel, and over 30% diesel as shown in Figure 5.  Sulfur Regulations Changes in crude oil supplies have led some refineries to upgrade their processes (increasing their complexity) to handle heavier sour crude oils. At the same time, the Environmental Protection Agency (EPA) has taken action to reduce the sulfur content of diesel fuel. By the end of 2010,",
      " the sulfur content of all highway-use diesel fuel imported or produced in the United States will be limited to 15 parts-per-million (ppm) or 0.0015%; a fuel now termed \"ultra-low sulfur diesel\" (ULSD). The EPA regulations require measuring the sulfur content at the retail outlet, not the refinery. Petroleum product pipelines transport a variety of fuels; for example, a slug of gasoline followed by a slug of diesel fuel. To limit the additional sulfur picked up during pipeline transit, refiners are faced with producing even lower sulfur diesel fuel, or disposing of contaminated \"transmix\"\u2014the interface between the slug of diesel and a higher sulfur-content product that preceded the diesel in the pipeline\u2014by reprocessing.",
      "  In the late 1980s, DOD adopted the \"single battlefield fuel\" concept that envisioned using the same fuel for aircraft and ground equipment operating within a theater. DOD has steadily substituted JP-8 for diesel fuel in operating land-based equipment tactical vehicles and equipment. (This concept did not apply to naval operations or include carrier-based aircraft.) The quality of diesel fuel, particularly the sulfur content, varies significantly in other parts of the world. To minimize the length of the fuel supply chain to a theater of operation, the Army must rely on regionally supplied diesel fuel or JP-8, which can expose vehicles to fuel with elevated sulfur levels.",
      " The U.S Army has adopted the American Society of Testing and Materials (ASTM) standard MIL-DTL-83133E for JP-8 that limits the maximum allowable sulfur content to 3,000 ppm, though a content of 140 ppm is typical. The sulfur content of most kerosene is currently 400 ppm. EPA's \"Guidelines for National Security Exemptions of Motor Vehicle Engines \u2013 Guidelines for Tactical Vehicle Engines\" recognizes that tactical vehicles may need to operate on JP-8 or JP-5 fuel while in the United States to facilitate their readiness. EPA has not indicated that it will act on reducing the sulfur content of jet fuel.",
      " Greenhouse Gas Regulations In 2007, the Unites States Supreme Court ruled that EPA has the authority under the Clean Air Act to regulate carbon dioxide (CO 2 ) emissions from automobiles, and directed the EPA to conduct a thorough scientific review. After the ordered review, EPA issued a proposed finding, in April 2009, that greenhouse gases contribute to air pollution that may endanger public health or welfare. Though the finding pertained to automobile emissions, it has wide ranging implications. EPA recently proposed a Mandatory Reporting of Greenhouse Gases (GHGs) rule that would require petroleum refineries (among other industrial facilities) to report emissions from refining processes and all other sources located at the facility as defined in the rule.",
      " Petroleum refineries emit approximately 205 million metric tons CO 2 annually, which (according to the rule) represents approximately 3% of the U.S. GHG emissions. The cost of complying with the proposed could be minimal. However, the rule establishes the basis for future legislation and regulations that could cap GHG emissions from refineries as well as other industrial sources. Recently introduced bills (for example H.R. 2454 \u2500 The American Clean Energy and Security Act of 2009, which the House passed June 26, 2009) that would amend the Clean Air Act to establish a cap-and-trade system designed to reduce greenhouse gas emissions would cap emissions from refineries and allow trading of emissions permits (\"allowances\"). Over time,",
      " H.R. 2454's provisions would reduce the cap to 83%, forcing industries to reduce emissions by that amount or purchase allowances or offsets from others who would have reduced emissions more than required or who are not covered by the cap. U.S. Refiners Supplying DOD Fuel Currently, 142 refineries operate in the United States. The Energy Information Administration (EIA) reports their aggregate kerosene and jet fuel production (due to their overlapping boiling ranges) but does not break out production statistics by refinery. DESC does report refiners and suppliers that it awards contracts under its fuel solicitations. Between FY2003 and FY2008,",
      " DESC reported that its 4 top domestic suppliers included Shell, Valero Marketing and Supply Company, ExxonMobil, and BP Corporation ( Table 5 ).  Combined, the companies in Table 5 operate 31 refineries in the United States (shown in Table 6 ), and represent nearly 6 million barrels per day of crude capacity. Not all may supply jet fuel to DOD, however. This suite of refineries averages 10 as rated by the Nelson Complexity Index. Two-thirds have the coking capacity needed to refine medium sour crude. Between 2000 and 2009, the number of refineries operating in the United States declined from 155 to 141.",
      " However, the atmospheric crude oil distillation capacity increased from 17.8 million to 18.6 million barrels per stream day (bpsd). The 1 million bpsd increase is due in part to increased diesel fuel capacity (now 3.5 million bpd). The downstream charge capacity for kerosene/jet fuel has averaged slightly over 1 million barrels per stream day. The median capacity of all currently operating refineries is roughly 80,000 bpd, and the 70 some refineries above the median capacity make up 85% of overall U.S. refining capacity.  Refinery Jet Fuel Yield and Supply A typical refinery yields a limited supply of jet and diesel fuel depending on the type of crude oil processed.",
      " Gulf Coast refineries may yield up to 8% jet fuel, and over 30% diesel (see Figure 5 above). U.S. refineries produce roughly ten times more commercial jet fuel than military specification jet fuel, which has ranged from less than 50 to over 60 million barrels annually since 2000 (see Table 7 ).  Restating the data of Table 7 in percentages, military jet fuel production ranges from 9% to 11% of the U.S. net production of jet fuel, but makes up less than 1% of all U.S. refined petroleum products (see Table 8 ).  DESC's worldwide jet fuel purchases have exceeded the U.S.",
      " refining industry's jet fuel output in recent years (see Table 9 ). In some years, U.S. refineries supplied less than 50% of DESC's jet fuel purchases. That is, the current capacity of U.S. refineries does not meet all of DOD's demand for military specification jet fuel. To make up the disparity, DESC has increased its purchase of commercial jet fuels, such as Jet A, which it upgrades to military specification. More recently, this strategy has reduced DESC's spending on fuel, as commercial jet fuel has priced lower (see retail kero-jet price curve in Figure 2 ). The lack of U.S.",
      " refining capacity does not necessarily compromise DOD's fuel supply. A lengthy fuel supply chain that extends from the continental United States to forward operating areas (Iraq or Afghanistan, for example) is not desirable. Logistics demand that closer refineries supply the fuel. DESC makes up the balance of its purchases through contracts with foreign refineries and suppliers to support U.S. forces and installations outside the continental United States.  Fuel Acquisition Originally, DOD's authority to procure fuel extends from power originally granted to the Navy. Under 10 U.S.C. \u00a7 7229 (Purchase of Fuel), \"... the Secretary of the Navy may, in any manner he considers proper,",
      " buy the kind of fuel that is best adapted to the purpose for which it is to be used.\"  Section 7229 superseded 34 U.S.C. 580 \"which had been interpreted as authorizing the Armed Services Petroleum Purchasing Agency to negotiate contracts for the purchase of fuel, not only when acting as a procuring activity for the Navy, but also when filling the consolidated fuel requirements of the armed forces.\" However, DESC now relies on the general procurement authority under 10 U.S.C. 2304 (Contract: competition requirement), since this gives DOD the authority to buy almost any kind of supply or service. DESC awards contracts and purchases fuel in a one-step process under the Defense Working Capital Fund (DWCF). It internally transfers the fuel to DOD customers,",
      " which it refers to as \"sales.\" This operation permits the Department to take advantage of price breaks for large quantity purchases, and in most years provides the DOD customer a stabilized price for all products during that fiscal year. Acquisition Regulations The term \"acquisition,\" as defined by Title 41 (Public Contracts) U.S.C. Section 403, means the process of acquiring, with appropriated funds, by contract for purchase or lease, property or services that support the missions and goals of an executive agency. The term \"procurement\" includes all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout.",
      " Title 10 U.S.C. Chapter 137 \u2013 Procurement codifies general military laws governing the Armed Forces acquisition process. The primary document for federal agency acquisition regulations consists of the Federal Acquisition Regulation (FAR), as promulgated in Title 48 Code of Federal Regulations (CFR) \u2013 The Federal Acquisition Regulations System. The FAR System does not include internal agency guidance, however. DOD has promulgated the Defense Acquisition Regulation System (DFARS) in 48 CFR Parts 201 through 299.  Multiyear Contracting Authority In practice, DESC has typically awarded one-year bulk-fuel contracts and multi-year direct delivery fuel contracts.",
      " DESC uses fixed-price contracts with an economic price adjustment that provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies. Generally, these types of contracts use the clauses at FAR 52.216\u20132, Economic Price Adjustment\u2014Standard Supplies. DESC uses economic price adjustment provisions in contracts when general economic factors make the estimation of future costs too unpredictable, as is typically the case for refined petroleum products. DESC has determined supplies and related services are eligible for the multi-year contracting provisions under FAR17.105-1(b) and DFARS 217.170(a) and 217.172(b). DESC adopted contracting instructions for entering into multiyear contracts for bulk petroleum,",
      " ships' bunker, into-plane, and post-camp-and-station for the interim period of October 1, 2008, through September 30, 2009. DOD and the military departments are authorized to enter initial five-year contracts for storage, handling, or distribution of liquid fuels or natural gas under 10 U.S.C \u00a72922. These contracts may contain options for up to three five-year renewals, but not for more than a total of twenty years.  \"Multiyear contract\" means a contract for the purchase of supplies or services for more than one, but not more than five, program years. A multiyear contract may provide that performance under the contract during the second and subsequent years of the contract is contingent upon the appropriation of funds,",
      " and (if it does so provide) may provide for a cancellation payment to the contractor if Congress does not appropriate funds. The key difference between a multiyear contract and a multiple year contract is that multiyear contracts buy more than one year's requirement (of a product or service) without establishing and having to exercise an option for each program year after the first, whereas multiple year contracts have a term of more than one year regardless of fiscal year funding.  Multiyear contract authority for supplies derives from the general procurement statutes for acquisition of property under 10 U.S.C. 2306b (Multiyear contracts: acquisition of property). DOD agencies,",
      " as regulated under 48 CFR 17.172 (Multiyear Contract for Supplies), may enter into multiyear contracts for supplies if the use of such contracts will promote national security.  DOD may enter into a multiyear contract for supplies if the contract will result in substantial savings of the total estimated costs of carrying out the program through annual contracts (48 CFR 17.105-Uses). If Congress does not appropriate funds to support the succeeding years' requirements, the agency must cancel the contract. Multiyear contracting is encouraged in order to take advantage of lower costs, among other objectives under 48 CFR 17.105-2 (Objectives). A multiyear contract for supplies,",
      " in addition to the conditions listed in FAR 17.105-1(b), can be entered into if the contract will promote the national security of the United States (10 U.S.C. \u00a7 2306b (a) (6)) and promulgated in 48 CFR 217.172 - Multiyear contracts for supplies). The multiyear contract cannot exceed $500 million (when entered into or when extended) until the Secretary of Defense identifies the contract and any extension in a report submitted to the congressional defense committees. Acquisition of Alternative Fuels DOD is authorized to procure fuel derived from coal, oil shale, and tar sands under 10 U.S.C.",
      " \u00a7 2922d. This also includes a direct authority for multi-year contracts. Contracts for procurement of these fuels \"may be for one or more years at the election of the Secretary of Defense.\" The Secretary of Defense has broad waiver authority over acquisition of alternative fuels. If the Secretary determines that market conditions will adversely affect DOD's acquisition for a certain defined fuel source, the Secretary may waive any provision of law prescribing the formation of contracts, prescribing terms and conditions to be included in contracts, or regulating the performance of contracts. The term \"defined fuel source\" means petroleum (which includes natural or synthetic crude, blends of natural or synthetic crude,",
      " and products refined or derived from natural or synthetic crude or from such blends), natural gas, coal, and coke. The five-year limit on multi-year contracts would be a \"term and condition\" which could be waived upon the requisite finding of the Secretary. DESC has not determined whether it could or would want to waive statutory limits on multiyear contracts, as it is not clear to DESC that either DDO or Congress would agree with exercising the waiver authority for this purpose. DESC has not wanted to take the chance of jeopardizing the delegation or losing the sales authority granted under 10 U.S.C. \u00a7 2922e by taking this position.",
      " Fully Burdened Cost of Fuel DESC bases contract delivery price on the \"lowest laid down cost\" to the government. A typical delivery point, a Defense Fuel Supply Point (government owned or leased tank farms), redistributes fuel to bases and installations. DESC levels the price of fuel for all DOD's \"customers\" and includes a surcharge for its operating costs. While DESC's contract may specify the final destination, an additional cost may be incurred by the operational command that tactically delivers the fuel forward \u2500 for example, air-to-air refueling, underway replenishment, or ground transport. In the past, DOD had not factored these hidden costs into fuel costs.",
      " The Duncan Hunter National Defense Authorization Act for FY2009 ( P.L. 110-417 ) now requires that analyses and force planning processes consider the requirements for, and vulnerability of, fuel logistics. By making fuel logistics part of the acquisition processes, new military capabilities must take a life-cycle cost analysis into account that includes the fully burdened cost of fuel. The act also directs the appointment of a director responsible for the oversight of energy required for training, moving, and sustaining military forces and weapons platforms for military operations.  Policy Considerations Over the current decade, which saw an unprecedented spike in crude oil prices, DOD experienced a 500%",
      " increase in the cost of fuel cost (dollars per barrel). The concern over declining worldwide crude oil production had preceded rising fuel costs also for several years. In 2006, due to increasing fuel costs and military operations in Iraq and Afghanistan, the Air Force had to reduce funding available for flying hours used to train Air Combat Command aircrews.  Fuel costs have represented as much as 3% of DOD's spending and over 7% of the Operation and Maintenance budget in the past decade. In comparison, the airline industry's major operating costs are fuel. However, the airline industry has the option during periods of high fuel cost of passing the costs on to customers,",
      " adjusting flight schedules, withholding stock dividends, or even declaring insolvency. Unlike the airlines, DOD's only recourse has been to request supplemental appropriations to pay for the increased costs and supplies. For example, DOD identified $0.5 billion in the FY2007 Emergency Supplemental Request for increases in baseline fuel costs resulting from higher market costs in the first half of FY2007. DOD has looked at several options to limit its vulnerability to fuel price swings and supply shortages. These include \"fuel hedging,\" multi-year contracting, and alternate fuels. In particular, increasing purchases of more widely available commercial Jet A fuel have not only reduced DOD's fuel costs but have expanded the range of supplies \u2500 an arguable goal for an alternative fuel.",
      " DESC's \"business model\" provides the flexibility needed to meet changing operational requirements from year-to-year. As noted above, DESC uses fixed-price contracts that include an economic price adjustment clause that provides for upward and downward price revisions. DESC has designed this contract provision to take advantage of swings in fuel prices, which ultimately reflect crude oil prices. If prices decline, DESC's costs decline. If prices rise, the economic clause adjusts the price that DESC would pay to the going market rate. This limits DESC's risk in holding contracts for fuel priced above the going market rate, but does not hold down costs during rapidly escalating prices. (DESC will pay higher prices,",
      " but look for the best offer.)  A practice used in the airline industry makes use of various \"hedging\" strategies to minimize the risk of future jet fuel price increases. A simple hedge involves buying \"futures\" contracts to lock in prices. For example, when crude oil prices peaked at nearly $147 per barrel in the summer of 2008, Southwest Airlines reportedly had managed earlier to hedge its fuel at $51/barrel. In 2004, the Defense Business Board convened the Fuel Hedging Task Group to examine potential ways of reducing DOD's exposure to fuel price volatility by hedging in commercial markets. Although the Board Task Group concluded that DOD could feasibly hedge its fuel purchases,",
      " it gave broader support to engaging in \"no-market\" hedging through the Department of the Interior's Mineral Management Service. During crude oil price spikes, additional Interior Department oil could apply lease revenues to offset increasing DOD fuel costs. The Group concluded that DOD could request that the Office of Management and Budget (OMB) seek legislative authority to transfer funds from Interior to Defense, or vice versa; depending on which Department benefits from unanticipated price changes. However, Interior derives the bulk of its revenues from Outer Continental Shelf (OCS) leases, and Congress has already statutorily allocated those revenues among various government accounts, including coastal states. Furthermore,",
      " OCS lessees pay royalties-in-kind, in the form of oil delivered to the Strategic Petroleum Reserve (SPR). Congress created the SPR as a response to the 1970s Arab oil embargo to prevent a reoccurrence of supply disruptions. When filled to its 727 million barrel capacity, the SPR represents roughly 70 days of imported supply. A drawdown of the SPR under the Energy Policy and Conservation Act (EPCA \u2013 P.L. 94-163 ) can take the form of a sale to the highest bidder (42 U.S.C. \u00a7 6241), or an exchange (the company receiving the oil must later replace it with a comparably valued volume). During the opening days of the 1991 Persian Gulf War,",
      " President George H.W. Bush's drawdown authorization precipitated a rapid crude oil price decline.  The Government Accountability Office (GAO) reported that in 2006, 40% of the crude oil refined in U.S. refineries was heavier than that stored in the SPR. Refineries that process heavy oil cannot operate at normal capacity if they run lighter oils. The types of oil currently stored in the SPR would not be fully compatible with 36 of the 74 refineries considered vulnerable to supply disruptions. GAO cited a DOE estimate that U.S. refining throughput would decrease by 735,000 barrels per day (or 5%) if the 36 refineries had to use SPR oil\u2014a substantial reduction in the SPR's effectiveness during an oil disruption,",
      " especially if the disruption involved heavy oil.  The SPR does not have a defined role in mitigating a DOD fuel supply disruption. Presumably, a refinery under contract to supply DOD would have the option of bidding on a drawdown sale. A typical refinery yields only 8% jet fuel on average. That is, for every gallon of jet fuel a refinery yields, it also produces roughly 11.5 gallons of other petroleum products (gasoline, diesel). This operational limitation on producing jet fuel limits the SPR's role during a supply disruption, if the only objective is supporting DOD's requirement.  As a final recourse,",
      " DOD may look to an alternative or replacement for crude oil, as provided in the 2005 Energy Policy Act. However, the Energy Independence and Security Act of 2007 ( P.L. 110-140 ) prohibits federal agencies from procuring alternative or synthetic fuels, unless contract provisions stipulate that life-cycle greenhouse gas emissions do not exceed equivalent conventional fuel emissions produced from conventional petroleum sources. The provision was included to ensure that federal agencies are not spending taxpayer dollars on new fuel sources that will exacerbate global warming\u2014a response to proposals under Air Force consideration to develop coal-to-liquid (CTL) fuels. The Air Force has since abandoned plans to attract private investment in a CTL fuel plant to supply Malmstrom Air Force Base,",
      " Montana, but DESC is interested in pursuing a pilot program for synthetic fuels to support DOD JP-8 fuel requirements in Alaska. Although crude oil prices have precipitously declined, as of late, the reoccurrence of crude oil supply shortages and price spikes may be inevitable. Both policy and economics keep fossil-based alternatives out-of-reach for now. Confronted with the same realities facing all energy consumers, DOD is shifting its thinking toward efficiency. DOD might better inform Congress by reporting on the fully burdened cost of fuel for military operations and contingencies.  Another potential concern for Congress may be the refining sector's lack of responsiveness to DOD's procurement announcements when periods of high petroleum prices make the demands of commercial-sector more profitable.",
      " In response to proposed greenhouse gas emission caps, refinery operators may question whether the value of emission credits outweighs the continued operation of marginally profitable refineries. In the long term, Congress may be concerned whether some operators may shut down their refineries and if such actions might reduce the number of defense fuel suppliers.  For Further Reading For background on alternative fuel sources, see  CRS Report RL34133, Fischer-Tropsch Fuels from Coal, Natural Gas, and Biomass: Background and Policy. CRS Report RL33359, Oil Shale: History, Incentives, and Policy. For background information on greenhouse gas legislation and the cap-and-trade system,",
      " see  CRS Report R40643, Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House of Representative. Appendix. Terms Avgas (aviation gasoline) is a high octane fuel used in light aircraft powered by reciprocating spark-ignition engines.  Crude Oil Classification DFM (diesel fuel marine) has been used in all shipboard propulsion plants (diesel, gas turbine, and steam-boiler) since 1975. Its NATO equivalent is F-76. DF2 (No. 2 diesel fuel) is the primary fuel for ground mobility vehicles. FSII stands for Fuel Systems Icing Inhibitor FOB (free on board)",
      " is a trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship's rail. When used in trade terms, the word \"free\" means the seller has an obligation to deliver goods to a named place for transfer to a carrier. Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery and payment, when the risk of loss shifts from the seller to the buyer, as well as who pays the costs of freight and insurance. Jet A-1 (JA1) is a civilian-aviation kerosene-based turbine fuel adopted by international commercial aviation.",
      " Its ASTM specification is D16555 (Jet A-1), and identified by NATO as F-35. Jet A, normally available in the United States has the same flash point (100 \"F) as JET A-1 but a higher freeze point. Jet A (JA) is civilian-aviation kerosene type of jet fuel (similar to JA-1), produced to an ASTM specification and normally only available in the United States. It has the same flash point as Jet A-1 but a higher freeze point maximum (-40\u00b0C). It is supplied under ASTM D1655 (Jet A) specification. Jet B is a distillate covering the naphtha and kerosene fractions.",
      " It can be used as an alternative to Jet A-1 but because it is more difficult to handle (higher flammability), there is only significant demand in very cold climates where its better cold weather performance is important. It is supplied in Canada under Canadian Specification is CAN/CGSB 3.23. JP-4 (JP for \"jet propellant\") is the military equivalent of Jet B with the addition of corrosion inhibitor and anti-icing additives; it meets the requirements of the U.S. Military Specification MIL-DTL-5624U Grade JP-4. (As of January 5, 2004, JP-4 and 5 meet the same U.S.",
      " Military Specification). JP-4 also meets the requirements of the British Specification DEF STAN 91-88 AVTAG/FSII (formerly DERD 2454). Its NATO Code is F-40. JP-5 is a fuel developed for use in military aircraft stationed aboard aircraft carriers where the risk of fire is a great concern, particularly in the confined spaces of the hanger deck. It is kerosene-based, and has a relatively higher flash-point (140 \"F) than other aviation turbine fuels (Jet A-1 and JP-8). Its specification is MIL-DTL-5624 U. Its NATO code is F-",
      "44. JP-5 is also suitable for use as ship turbine fuel.  JP-8 is the military equivalent of Jet A-1 but with corrosion inhibitors and icing inhibitors. The Air Force switched to JP-8 in 1996 out of concerns for safety and combat survivability. It is a less flammable and a less hazardous fuel than the previously used naphtha-based JP-4. (The Alaska Air Guard still relies on JP-4 for its cold-climate properties.) Though JP-8 contains less benzene (a carcinogen) and less n-hexane (a neurotoxin) than JP-4,",
      " it has as stronger smell and is oily to the touch, whereas JP-4 is more solvent-like. Its ASTM specification is MIL-DTL-83133, and is identified by NATIO as F-34. JP-8+100 includes an additive that increases thermal stability. JP-8 has also been adopted for use in diesel-powered tactical ground vehicles. Middle Distillate range fuels include kerosene, jet fuel, and diesel fuel. Military installation means a base, camp, post, station, yard, center, or other activity under the jurisdiction of the Secretary of a military department or, in the case of an activity in a foreign country,",
      " under the operational control of the Secretary of a military department or the Secretary of Defense (10 U.S.C. 2801(c)(2)). Mogas (motor gasoline) is the primary fuel for non-tactical ground vehicles. Multiyear contracting is a special contracting method to acquire known requirements in quantities and total cost not over planned requirements for up to five years unless otherwise authorized by statute, even though the total funds ultimately to be obligated may not be available at the time of contract award (48 CFR 17.104 General). This method may be used in sealed bidding or contracting by negotiation. Agency funding of multiyear contracts must conform to OMB Circulars A-",
      "11 (Preparation and Submission of Budget Estimates) and A-34 (Instructions on Budget Execution).  Naphtha is a petroleum distillate with a boiling range between gasoline and heavier benzene. It is used as a feedstock in gasoline production where it is catalytically reformed from a lower to a higher octane product termed reformate. \n"
    ],
    "length": 8278,
    "hardness": null,
    "role": null
  },
  {
    "id": 54,
    "question": null,
    "answer": "By some measures, the United States spent over $50 billion on new construction, additions, and alterations in public elementary and secondary schools and public and private postsecondary institutions in 2012. Although state and local governments are traditionally responsible for the majority of facilities in public K-12 schools and postsecondary institutions, the federal government also provides some direct and indirect support for school infrastructure. Facilities at private institutions are funded primarily by donations, tuition, private foundations, endowments, and governments. The largest federal contributions are indirect\u2014the forgone revenue attributable to the exemption of interest on state and local governmental bonds used for school construction, modernization, renovation, and repair; and other tax credits. Federal direct support for school infrastructure is provided through loans and grants to K-12 schools serving certain populations or K-12 schools with specific needs. For example, there are grant programs for schools with a high population of students who are Alaska Natives, Native Hawaiians, Indians, children of military parents, individuals with disabilities, or deaf. Funding is also available to schools affected by natural disasters or located in rural areas. And there are programs to encourage the development of charter schools. Although the Department of Education administers several of the grant programs funding facilities at elementary and secondary schools, other agencies, such as the Department of the Interior and the Department of Defense, also administer programs. At the postsecondary level, there are several programs to support institutions of higher education that serve large low-income or minority populations and to support research facilities. The allowable uses of funds in the programs authorized primarily by Titles III and V of the Higher Education Act of 1965, as amended, and administered by the U.S. Department of Education variously include construction, maintenance, renovation, and improvement of instructional facilities and acquisition of land on which to construct instructional facilities. In addition, there are programs administered by other agencies, such as the National Endowment for the Humanities and the U.S. Department of Commerce, that support postsecondary research facilities, facility renovations at minority-serving postsecondary institutions, telecommunications, disaster relief at postsecondary institutions, and other uses. This report provides a short description of federal allowances and programs that provide support for the construction or renovation of educational facilities. The allowances and programs are organized by the agency that administers or regulates the program. Appropriations and budget authorities are included for FY2014 and FY2015 or the most recent year available. These programs exist in various forms and responsibility for their administration is spread across many agencies; thus, the list of programs presented should not be considered a fully exhaustive list of all federally funded programs that support school facilities and infrastructure at least in part.\n",
    "docs": [
      "Introduction According to the U.S. Department of Education (ED) data for FY2012, the most recent data available, public elementary and secondary education and other related programs spent $36.8 billion on construction and $3.3 billion on land and existing structures. According to College Planning & Management, U.S. colleges and universities completed $12.0 billion worth of new construction, additions, and retrofits in 2014. School construction and renovation have traditionally been considered to be state and local responsibilities. Nonetheless, the federal government has established a role in financing school construction and renovation. The federal government provides both indirect support for school construction (mainly by exempting from federal income taxation the interest on state and local government bonds used to finance school construction and renovation)",
      " and direct support via grants and loans for unique schools and populations. This report examines estimates of school infrastructure needs and discusses the federal role in financing both K-12 public school infrastructure and public and private higher education facilities. School Infrastructure: Current Conditions and\u00a0Needs National data on the condition of school infrastructure and the need for infrastructure investment are extremely limited, outdated, and difficult to assess in part because of the wide variation of potential assumptions and definitions regarding both conditions and needs. In addition, there is substantial complexity associated with gathering and compiling data for which there is currently no central repository.  Studies of K-12 School Facilities At present, there is no ongoing federal collection of data on the conditions of schools.",
      " However, in response to concerns about the physical condition of schools and a congressional mandate, ED issued a one-time study in 2000 that contained estimates of the costs of needed modernizations, renovations, and repairs to K-12 public school buildings and/or building features. In 2000, ED estimated the cost of bringing K-12 school facilities into good condition in 1999 at $127 billion. ED more recently followed the 2000 report with a 2014 report. The estimated cost of repairs, renovations, and modernization required to bring 2012-2013 public school facilities into good condition was approximately $197 billion or $4.",
      "5 million per school.  School infrastructure needs are affected not only by the age and physical condition of a school, but also by shifts in the student population or changes in school policies and by changes in expectations, technology, and school instructional practices. For example, implementing smaller class sizes may require additional floor space and walls. The introduction of computers and the need for Internet access may require rewiring classrooms. Increased science curriculum requirements may require new or additional laboratory facilities. Postsecondary Facilities  Land and facilities are major tangible assets of postsecondary education institutions. Appropriate facilities are required to support increases in enrollment and changes in technological expectations. Aside from the need for new facilities,",
      " regular maintenance and renovation of the facilities are required for institutions to fulfill their research, educational, and other missions. One estimate suggests that facilities at research universities require an endowment equal to the cost of construction to maintain the facilities over their lifetime. According to the National Science Foundation's (NSF's) biennial study of science and engineering research facilities at colleges and universities, 20% of research space required renovation or replacement in FY2011 while 19% required renovation or replacement in FY2013. The costs for new construction, repair, and renovation of science and engineering research space in academic institutions started in FY2010 or FY2011 were $9.",
      "9 billion and in FY2014 or FY2015 were $10.5 billion, and the costs of deferred projects increased from $21.3 billion in FY2011 to $22.0 billion in FY2015.  National Clearinghouse for Public Educational Facilities ED has, since 1997, provided support to an Educational Facilities Clearinghouse. The clearinghouse is an informational resource on planning, designing, funding, building, improving, and maintaining safe, healthy, high-performance schools from nursery to higher education. The clearinghouse does not, however, collect or evaluate data. In the FY2015 appropriations conference agreement, Congress included funding of $1 million for the Educational Facilities Clearinghouse within the Department of Education,",
      " Fund for the Improvement of Education account. History of Federal Assistance for Educational\u00a0Facilities This section describes the historical role of the federal government in the renovation and construction of school facilities.  Federal Tax Treatment of State and Local Bonds The Revenue Act of 1913 (38 Stat. 114) excluded from federal income tax the interest income earned by holders of state and local government debt obligations. This exclusion has been retained through subsequent revisions of the Internal Revenue Code. Almost all state and local governments sell bonds to finance public projects and certain qualified private activities. Bonds issued for certain purposes are tax-exempt because the interest payments are not included in the bondholder's (purchaser's)",
      " federal taxable income. This exemption allows these bonds to be issued at lower interest rates but still provide competitive returns. State and local governments may also issue tax credit bonds, which allow the holder to claim a federal tax credit equal to a percentage of the bond's par value (face value) for a limited number of years. Meanwhile, issuers of tax credit bonds typically pay no interest to bondholders. Thus, tax credit bonds can deliver a larger federal subsidy to the issuing state or local government than tax-exempt bonds.  Elementary and Secondary Schools As far back as the Great Depression, the federal government provided funding to support K-12 school infrastructure.",
      " The Works Progress Administration financed 4,383 new schools and renovated thousands of additional schools between 1935 and 1940. In 1950, a program was enacted to inventory state school construction needs and Impact Aid programs. Impact Aid programs were enacted under P.L. 81-815, P.L. 81-874, and P.L. 81-875 to fund school construction in federally affected areas, areas affected by federal activities, and facilities damaged by major disasters. From FY1989 through FY2001, in response to Supreme Court rulings regarding the provision of equitable services to private school students, local educational agencies (LEAs)",
      " received federal assistance for capital expenses, including mobile educational units (20 U.S.C. \u00a77279 et seq.). Attempts to increase federal assistance for needed improvements to school infrastructure continued in the 1990s. The Education Infrastructure Act of 1994 was enacted as Title XII of the Elementary and Secondary Education Act by the Improving America's Schools Act of 1994 ( P.L. 103-382 ) to provide direct federal assistance for the renovation and construction of public elementary and secondary schools, among other things. The program was never funded.  The Federal Emergency Management Administration (FEMA) has administered the disaster assistance program since 1992.",
      " In response to specific natural disasters, Congress has enacted additional legislation to create temporary programs to meet the needs of students, schools, LEAs, and states, including modernizing, renovating, or repairing school buildings. The Consolidated Appropriations Act for FY2001 ( P.L. 106-554 ) appropriated $1.2 billion in FY2001 for school renovation and repair, activities under part B of the Individuals with Disabilities Education Act (20 U.S.C. \u00a71411 et seq.), and technology activities. Over 75% of the $1.2 billion was designated for school facilities and ensured distribution to LEAs in the outlying areas,",
      " LEAs enrolling significant numbers of children connected to federal lands or low-rent public housing, high poverty LEAs, and rural LEAs. The program was not permanently authorized and did not receive funding in subsequent years. Most recently, in 2009, Congress provided a one-time appropriation that could be used for renovation and construction. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) authorized a $54 billion State Fiscal Stabilization Fund (SFSF). States were required to use at least 81.8% of their share of the SFSF to restore support of public elementary,",
      " secondary, and postsecondary schools, and, as applicable, early childhood education programs and services. Among the allowable uses of restoration funds were modernization, renovation, or repair of public school facilities. States were required to use the remaining 18.2% of their share of the SFSF for education, public safety, and other government services, which may include modernization, renovation, or repair of public school and public or private college facilities, depending on the criteria that the governor used to allocate the funds. ED issued guidance specifically allowing the SFSF to be used for K-12 construction but not construction of IHEs. Postsecondary Facilities Federal support for higher education facilities also has a long history.",
      " Since the 1857 Act to incorporate the Columbian Institution for the Instruction of the Deaf and Dumb, and the Blind (later renamed Gallaudet University), Congress has appropriated funds for construction and operation of the university. In 1928, Congress authorized the appropriation of funds for Howard University to aid in its construction, development, improvement, and maintenance. In 1965, the National Technical Institute for the Deaf Act (P.L. 89-36) established the National Technical Institute for the Deaf and authorized the appropriation of funds for its operation and construction. Congress authorized several loan or interest subsidy grant programs to help finance the construction,",
      " reconstruction, and renovation of housing, academic, and other educational facilities. The College Housing Loan program (Title IV of the Housing Act of 1950; 64 Stat. 77) was intended to alleviate housing shortages on college campuses that resulted from increased enrollments. The Higher Education Facilities Act of 1963 (P.L. 88-204) authorized Loans for Construction of Academic Facilities. A revolving loan fund was established to make higher education academic facilities loans by P.L. 89-429. The Education Amendments of 1972 (P.L. 92-318) established annual interest grants to reduce borrowing costs and academic facilities loan insurance to assist private nonprofit entities in procuring loans for the construction,",
      " reconstruction, and renovation of academic facilities.  The Public Health Service Act, as amended by the Health Professions Educational Assistance Act of 1963 (P.L. 88-129), authorized grants for the construction, rehabilitation, and replacement of teaching facilities for health personnel and schools of nursing. Authorization for the construction, rehabilitation, and replacement of teaching facilities for allied health professionals was added by the Allied Health Professions Personnel Training Act of 1966 (P.L. 89-751) and repealed by the Health Professions Educational Assistance Act of 1976 ( P.L. 94-484 ). Loan guaranties and interest subsidies were authorized in 1971 for the construction,",
      " rehabilitation, and replacement of teaching facilities for health personnel and schools of nursing. The Nurse Education Amendments of 1985 ( P.L. 99-92 ) repealed the program of support for nursing school facilities, and the Health Professions Education Extension Amendments of 1992 ( P.L. 102-408 ) repealed federal support of teaching facilities for health personnel. General U.S. Department of Education administered-facilities grant programs were authorized beginning in 1963. The Higher Education Facilities Act of 1963 (P.L. 88-204) authorized Grants for the Construction of Undergraduate Academic Facilities (Title VII-A of HEA), Grants for the Construction of Graduate Academic Facilities (Title VII-B of the HEA), and Construction Assistance for Public Higher Education Facilities in Major Disaster Areas (Title VII-D of the HEA). The programs were intended to increase the enrollment capacity of institutions of higher education (IHEs). If,",
      " within 20 years of its completion, an academic facility constructed with funds from the grant program for undergraduate academic facilities or for graduate academic facilities ceased to be controlled by a public or nonprofit institution or ceased to be used as an academic facility, the federal government is required to recover a proportionate share of the grant.  The Education Amendments of 1972 (P.L. 92-318) authorized the Establishment and Expansion of Community Colleges program. Funds from the community college program encouraged states to prepare a statewide plan for the expansion and improvement of postsecondary education programs in community colleges. Funds could be used to remodel or renovate existing facilities, to equip new and existing facilities,",
      " or to lease facilities.  The Education Amendments of 1976 ( P.L. 94-482 ) amended the programs to provide for reconstruction, renovation, and modernization of existing facilities and authorized a new Reconstruction and Renovation grant program to reduce energy consumption and to make facilities accessible to the physically disabled.  The Education Amendments of 1980 ( P.L. 96-374 ) repealed three of the then-existing facilities programs: the Reconstruction and Renovation grant program, Construction Assistance for Public Higher Education Facilities in Major Disaster Areas, and the Establishment and Expansion of Community Colleges program. The 1980 Amendments also enabled undergraduate and graduate postsecondary institutions to use grant funds to economize on the use of energy resources,",
      " to make facilities accessible to the physically disabled, to improve research facilities, and to eliminate asbestos hazards.  The Higher Education Amendments of 1986 ( P.L. 99-498 ) expanded the HEA Title VII programs to include, as authorized uses of funds, the acquisition and maintenance of special research and instructional instrumentation and equipment, compliance with federal hazardous waste disposal requirements, more efficient use of energy sources, advanced skill training programs, and preservation of significant architecture. The Higher Education Amendments of 1986 also authorized the establishment of the College Construction Loan Insurance Association (also known as Connie Lee) as a private, for-profit corporation. Connie Lee succeeded the Academic Facilities Loan Insurance program.",
      " The function of Connie Lee was to guarantee, insure, and reinsure bonds, debentures, notes, evidences of debt, loans, and interests therein, the proceeds of which were to be used for an education facilities purpose; guarantee and insure leases of personal, real, or mixed property to be used for an education facilities purpose; and issue letters of credit and undertake obligations and commitments as Connie Lee deemed necessary. Congress was concerned that deteriorating facilities would affect the quality of higher education and that financially sound postsecondary institutions whose debt was not investment grade did not have the necessary access to long-term capital. Both the U.S. Department of Education and the Student Loan Marketing Association (also known as Sallie Mae)",
      " became significant shareholders of Connie Lee. The 1986 Amendments also authorized Sallie Mae (20 U.S.C. \u00a71087-2) to directly or indirectly finance higher education academic facilities. Connie Lee and Sallie Mae were eventually privatized under the Omnibus Consolidated Appropriations Act, 1997 ( P.L. 104-208 ). There were several explanations for privatizing Connie Lee: The federal government's share in Connie Lee was declining. Other investors and insurers were providing loans for higher education facilities as a result of the federal government's success. The statutory language authorizing Connie Lee prevented it from expanding its market.",
      " General federal policy encouraged the downsizing and privatizing of previous government operations, as appropriate. Partial federal ownership of Connie Lee provided the impression that the federal government would be liable in case of Connie Lee's financial difficulties. In the late 1980s, the Administration also requested no new monies for the higher education facilities programs except what would be necessary to service previous obligations. The reasons given were that federal support of higher education facilities was inappropriate; the programs displaced the traditional role of state and local governments and private enterprise; the programs were duplicative and complicated; and the programs were too costly. Academic Facilities Construction Grants were last funded in FY1986.",
      "  The Higher Education Amendments of 1992 ( P.L. 102-325 ) replaced then-existing grant and loan programs with new programs, which were never funded. The repealed loan programs have not made any new loans since FY1993, but loan collections, property dispositions, and the resolution of defaulted loans may continue through FY2030. The 1992 Amendments also authorized the Historically Black College and University Capital Financing program (see section below) to provide Historically Black Colleges and Universities (HBCUs) with access to low-cost capital.  Federal Programs that Provide Funding for Educational Facilities  Federal support for school construction and renovation is provided through various allowances and programs.",
      " Most allowances and programs provide categorical aid for targeted policy objectives. Several allowances provide federal tax exemptions or credits on state and local government bonds. Several programs provide support through grants, loans, or loan guarantees. Eligible entities may be states, local governments, local educational agencies, postsecondary institutions, or other entities. The programs described below, although not an exhaustive list of all programs that may support construction or renovation of educational facilities, are organized by federal agency. The appropriations described reflect total program appropriations, and therefore, may not reflect expenditures for school facilities depending on the other uses of program funds. Department of Education Alaska Native K-12 and Community Education The Alaska Native Educational Equity,",
      " Support, and Assistance Act (Title VII-C of the Elementary and Secondary Education Act of 1965 (ESEA), as amended) provides competitive grants to Alaska Native and other organizations to meet the unique educational needs of Alaska Natives and to support supplemental education programs to benefit Alaska Natives. The appropriations acts of FY2010-FY2015 authorized construction as an allowable use of funds. The FY2014 and FY2015 appropriations are each $31 million.  Charter School Facilities  ED administers two programs that provide facilities support to elementary and secondary charter schools. The State Charter Schools Facilities Incentive Grants (Title V, Part B,",
      " Subpart 1 of the ESEA), also known as the Per-Pupil Facilities Aid Programs, are competitive grants awarded to states that have per-pupil charter school facilities aid programs specified in state law, and that annually provide financing on a per-pupil basis for charter school facilities. The program assists charter schools in meeting school facility costs. Since FY2006, California, the District of Columbia, Indiana, Minnesota, and Utah have variously received Per-Pupil Facilities Aid.  The second program, Credit Enhancement for Charter School Facilities (Title V, Part B, Subpart 2 of the ESEA), is intended to improve access to capital markets for the financing of charter school facilities.",
      " Funds are awarded on a competitive basis to public and nonprofit entities to leverage nonfederal funds that help charter schools obtain school facilities through purchase, lease, renovation, or construction.  Funds are allocated to the State Charter Schools Facilities Incentive Grants program and the Credit Enhancement for Charter School Facilities program from the Charter Schools program according to appropriations acts. The Charter Schools program supports planning, design, and initial implementation of charter schools. The Charter Schools' appropriation for FY2014 was $248 million, and for FY2015 it was $253 million. In FY2014, ED allocated $11 million to the Incentive Grants program and $12 million to the Credit Enhancement program.",
      " In FY2015, ED allocated $9 million to the Incentive Grants program and $14 million to the Credit Enhancement program. Child Care Means Parents in School Program  The Child Care Means Parents in School Program (20 U.S.C. \u00a71070e) supports the participation of low-income parents in postsecondary education through the provision of campus-based child care services. Funds may be used to provide child care and early childhood development services to enable low-income students to pursue postsecondary education. Funds may also be used for minor renovation or repair of facilities to meet applicable state or local health or safety requirements; funds may not be used for new construction.",
      " The appropriations were $15 million in each of FY2014 and FY2015. Disaster Relief  Congress has appropriated funding for a specific function following a disaster. Following Hurricane Katrina and Hurricane Rita in 2005, aid for K-12 and higher education facilities' construction and repair was provided to affected areas. Historically Black College and University Capital Financing Program  The Historically Black College and University Capital Financing Program (HEA Title III, Part D) provides low-cost capital (loans) to finance improvements to the infrastructure of the nation's historically Black colleges and universities (HBCUs). The Secretary of Education provides financial insurance to guarantee the full payment of principal and interest on qualified bonds issued by a designated bonding authority (DBA). The DBA uses the majority of the bond proceeds to issue loans to HBCUs.",
      " HBCUs may use the loans to finance or refinance the repair, renovation, and construction of classrooms, libraries, laboratories, dormitories, instructional equipment, and research instrumentation. The loan and interest volume cap is $1.1 billion according to statutory provisions; however, the appropriations acts of FY2012-FY2015 allow the Secretary to disregard the limitation. The appropriations acts permit the Secretary to guarantee loans of up to $304 million in each of FY2014 and FY2015. The new loan subsidy costs appropriations for FY2014 and FY2015 are both $19 million. Howard University  Howard University is a private doctorate-granting,",
      " research university. It was chartered by Congress in 1867 to educate African Americans. The Federal Support for Howard University program provides partial support for construction, development, improvement, endowment, and maintenance of the university and the Howard University Hospital. Howard University has discretion in allocating funds for its academic, research, and endowment programs, and for its construction activities. The appropriations for Howard University and the Howard University Hospital were $222 million in each of FY2014 and FY2015. Impact Aid Programs The Impact Aid program (Title VIII of ESEA) provides funding to certain LEAs to compensate them for lost revenue as a result of federal activities.",
      " There are several types of Impact Aid payments: payments relating to federal acquisition of real property, payments for federally connected children, and payments for construction and maintenance of school facilities. While the non-construction-related funds are usually used by LEAs for general operating expenses, the payments may also be used for capital expenditures. Impact Aid received an appropriation of $1.3 billion in each of FY2014 and FY2015.  Individuals with Disabilities Education Act  The Individuals with Disabilities Education Act (IDEA; 20 U.S.C. \u00a71400 et seq.) provides funds to states for the education of children with disabilities. IDEA contains four main provisions:",
      "  Part B authorizes two state grants programs for mainly school-aged children with disabilities and the preschool program; Part C authorizes the state grants program for infants and toddlers with disabilities; Part D authorizes various national programs and grants; and Title II creates the National Center for Special Education Research. In addition to various requirements and with the permission of the Secretary of Education, Part B funds may be used for the acquisition of appropriate equipment, the construction of new K-12 facilities, and the alteration of existing facilities. The appropriations for Part B in FY2014 and FY2015 were each $11.5 billion. Low-Income and Minority-Serving Institutions of Higher Education Several programs authorized under Title III-A,",
      " Title III-B, Title III-F, Title V, Title VII-A-4, and Title VIII-AA of HEA provide grants to certain eligible public and private nonprofit institutions of higher education (IHEs) for activities such as the purchase of equipment, faculty development, curriculum development, tutoring, endowment development, and administrative improvements. Although institutional eligibility criteria differ for each of the nine programs, eligible IHEs must generally enroll a high proportion of needy students and have lower than average educational and general expenditures. Many of the programs also require eligible IHEs to enroll a higher than average proportion of minority students. To varying extents, the nine programs allow construction,",
      " maintenance, renovation, improvement of instructional facilities, or the acquisition of land on which to construct instructional or campus facilities. The appropriations for all of the programs were $521 million for FY2014 and $530 million for FY2015. Additional mandatory appropriations of $258 million in FY2014 and $236 million in FY2015 were provided by the SAFRA Act ( P.L. 111-152 ). Native Hawaiian K-12 and Community Education The Native Hawaiian Education Act (ESEA, Title VII-B) provides competitive grants to Native Hawaiian and other organizations to develop, supplement, and expand innovative education programs to assist Native Hawaiians. The act also authorizes the Native Hawaiian Education Council and seven island councils.",
      " The appropriations acts of FY2012-FY2015 contained provisions allowing a portion of the appropriation to be used for elementary and secondary school construction, renovation, and modernization of a facility run by the Department of Education of the State of Hawaii that served a predominantly Native Hawaiian student body. The FY2014 and FY2015 appropriation levels were each $32 million. Schools for the Deaf Gallaudet University offers traditional undergraduate and graduate programs, continuing education, and programs in fields related to deafness for students who are deaf and those who are not. Gallaudet University operates the Laurent Clerc National Deaf Education Center, which includes the Kendall Demonstration Elementary School and the Model Secondary School for the Deaf.",
      " The Kendall Demonstration Elementary School provides an elementary school for children who are deaf, and the Model Secondary School for the Deaf provides secondary education programs for students who are deaf. The Gallaudet University program (20 U.S.C. \u00a74301 et seq.) provides general support for the institutions. Funds may also be used for the construction and maintenance of facilities at those institutions. The appropriations for Gallaudet University were $119 million in FY2014 and $120 million in FY2015.  The National Technical Institute for the Deaf (NTID) is a technical college for students who are deaf or hard of hearing. NTID was established by Congress in 1965 and became a college within the Rochester Institute of Technology,",
      " a private university, in 1968. Statutory authorization (20 U.S.C. \u00a74331 et seq.) is provided to support the operation, including construction and equipping, of NTID. The appropriations were $66 million for FY2014 and $67 million for FY2015.  Internal Revenue Code (Department of the Treasury) Public Purpose Tax Exempt Bonds The federal government exempts interest income earned on bonds issued by state, local, and tribal governments for a \"public\" purpose from federal income tax (26 U.S.C. \u00a7103). Bonds are considered to be for a public purpose if they satisfy either of two criteria:",
      " less than 10% of the proceeds are used directly or indirectly by a non-governmental entity, or less than 10% of the bond proceeds are secured directly or indirectly by property used in a trade or business. Examples of public projects include elementary, secondary, and postsecondary schools; public buildings; and roads. The tax exemption lowers the cost of capital for state and local governments. There is no bond volume cap on state and local government bonds. Tax Credit Bonds Tax Credit Bonds (TCBs) are a type of bond that offers the investor a federal tax credit or the issuer a direct payment. Congress has authorized various tax credit bonds that,",
      " among other purposes, may be used for the construction or modernization of school facilities. Eligible entities could issue bonds under two authorities in 2012 and 2013. Qualified Energy Conservation Bonds (QECBs; 26 U.S.C. \u00a754D) may be used to reduce energy consumption at least 20% in publicly owned buildings, including K-12 schools and IHEs, or to support research in specific areas through expenditures on research facilities and research grants. There is no statutory deadline for eligible public entities to issue the national bond volume cap for QECBs of $3.2 billion. The U.S. Department of the Treasury (Treasury)",
      " allocated the funds to states, the District of Columbia, and U.S. possessions. States are required to reallocate a portion of their allocation to large local governments, including Indian tribal governments. Qualified zone academy debt instruments, also referred to as Qualified Zone Academy Bonds (QZABs; 26 U.S.C. \u00a754E) may be used by state and local governments for elementary and secondary school renovation, equipment, teacher training, and course materials. Allowable activities exclude construction. To be eligible to receive the proceeds from QZABs, a school must  be a public school providing education or training below the postsecondary level;",
      " be located in empowerment zones or enterprise communities, or have 35% or more of students qualified for free or reduced price lunches under the federal school lunch program; cooperate with business to enhance the curriculum, increase graduation and employment rates, and prepare students for college and the workforce; receive a dollar or in-kind match from private business entities equal to 10% of the issued bond; and have a comprehensive education plan approved by the LEA. The national bond volume cap for QZABs is $400 million for each of CY2012 and CY2013. Unused credit capacity can be carried forward for up to two years. Qualified School Construction Bonds (QSCBs;",
      " 26 U.S.C. \u00a754F) made bond proceeds available for the construction, rehabilitation, or repair of, or the acquisition of land for, a public school facility, including charter schools but excluding postsecondary facilities, but the authority to issue QSCBs expired at the end of calendar year 2010. However, Treasury also allocated $200 million in each of 2009 and 2010 to the U.S. Department of the Interior for Indian tribal governments to construct or repair BIE-funded schools. These allocations remain available for issuance. Qualified Public Educational Facilities (Private Activity Bonds) State and local governments may issue bonds that are exempt from federal taxation to finance certain qualified private activities,",
      " including qualified public educational facilities (26 U.S.C. \u00a7142). Indian tribal governments generally cannot issue tax-exempt private activity bonds. Private activity bonds benefit state and local governments because the bond buyer is willing to accept a lower interest rate because the interest income is not subject to federal income taxes. A qualified public educational facility is a public elementary or secondary school facility (including a stadium) constructed, rehabilitated, refurbished, or equipped through a public-private partnership agreement. Bonds issued for qualified educational facilities are not counted against a state's private-activity volume cap. However, the qualified public educational facility bonds have their own volume capacity limit equal to the greater of $10 multiplied by the state population or $5 million.",
      " Department of Agriculture Hispanic-Serving Institutions Education Grants Program  The Hispanic-Serving Institutions Education Grants Program (7 U.S.C. \u00a73241) supports the ability of Hispanic-serving IHEs to attract, retain, and graduate students pursuing careers in the food and agricultural sciences and natural resources. Although funds may not be used to acquire or construct facilities, minor alterations, renovations, or repairs necessary and incidental to the major purpose for which a grant is issued may be allowed with prior approval. The appropriations were $9 million in each of FY2014 and FY2015. Land-Grant Colleges Land-grant colleges were created in 1862 by the Morrill Act in each state as public IHEs to teach the \"agricultural and mechanical arts.\" In 1890,",
      " Congress extended the designation to certain HBCUs, known as the 1890 institutions, and again in 1994 to certain tribal colleges, known as the 1994 institutions. Federal funds provide a major source of funding for public research and extension activities at land-grant institutions, including the 1862, 1890, and 1994 land-grant institutions. Six of the programs for land-grant colleges allow construction or renovation of facilities at the institutions.  The Hatch Act of 1887 (7 U.S.C. \u00a7301 et seq.), as amended, supports agricultural research and educational activities at the 1862 land-grant colleges.",
      " Funds may be used for the purchase and rental of land and the construction, acquisition, alteration, or repair of buildings necessary for conducting research. Appropriations for the Hatch Act were $244 million in each of FY2014 and FY2015. The Payments to 1890 Land-Grant Colleges and Tuskegee University program (Section 1445 of the National Agricultural Research, Extension, and Teaching Policy Act of 1977, as amended), also known as the Evans-Allen Research program, allows the purchase and rental of land and the construction, acquisition, alteration, or repair of buildings necessary for conducting agricultural research, among other activities.",
      " Funds are allocated by formula. The appropriations were $44 million in each of FY2014 and FY2015. The 1890 Facilities Grants program (7 U.S.C. \u00a73222b) provides funds to 1890 land-grant institutions, including Tuskegee University and West Virginia State University, for the acquisition and improvement of agricultural and food sciences facilities and equipment, including libraries. The appropriations were $20 million in each of FY2014 and FY2015. The Tribal Colleges Endowment Fund (7 U.S.C. \u00a7301 note.) enhances education in agricultural sciences and related disciplines for Native Americans by building educational capacity at tribal colleges in the areas of curricula design and materials development,",
      " faculty development and preparation for teaching, instruction delivery systems, experiential learning, equipment and instrumentation for teaching, and student recruitment and retention. It also funds facility renovation, repair, construction, and maintenance in support of these efforts. At the end of each fiscal year, the earned interest income from the endowment fund is distributed to tribal colleges according to a statutory formula. The appropriations were $12 million in each of FY2014 and FY2015. The Tribal Colleges Education Equity Program (7 U.S.C. 301 note and 7 U.S.C. 7601 note) supports the institutional capacity of the 1994 institutions to enhance educational opportunities for Native Americans in the food and agricultural sciences.",
      " Although funds may not be used to acquire or construct facilities, minor alterations, renovations, or repairs necessary and incidental to the major purpose for which a grant is issued may be allowed with prior approval. The appropriations were $3 million in each of FY2014 and FY2015. The Tribal Colleges Extension Program, also known as Extension Services at 1994 Institutions (7 U.S.C. 301 note; 7 U.S.C. 7601; 7 U.S.C. 341 et seq.), supports the capacity of the 1994 institutions to provide culturally relevant extension education programs to the public. Although funds may not be used to acquire or construct facilities,",
      " minor improvements, alterations, renovations, or repairs to land, buildings, or equipment necessary and incidental to the major purpose for which a grant is issued may be allowed with prior approval. The appropriations were $4 million in each of FY2014 and FY2015. Rural Communities  The USDA Community Facilities Loans and Grants program (Section 306(a)(1) of the Consolidated Farm and Rural Development Act of 1972) provides direct loans, guaranteed/insured loans, and project grants for the construction, enlargement, extension, or other improvement of community facilities providing essential services to rural residents. Community facilities include child care facilities and K-",
      "12 and postsecondary education facilities. State and local governments, political and quasi-political subdivisions of states and associations, federally recognized Indian tribes, and nonprofit organizations may apply. Loan authorization levels are $1.5 billion for direct loans with a subsidy level of $0 in FY2014. For guaranteed loans, authorization levels are $60 million with a subsidy level of $5 million. In FY2013, loan authorization levels were $2.2 billion for direct loans and $57 million for guaranteed loans, with a subsidy level of $4 million in FY2014. The grants appropriations were estimated at $13 million in FY2014 and $17 million in FY2015.",
      " Secure Rural Schools Payments The Secure Rural Schools (SRS) Payments compensate counties for the tax-exempt status of federal lands with national forest lands and with certain Bureau of Land Management (BLM) lands in Oregon. Funds are allocated to states by formula and passed through to local governmental entities for use at the county level (but not necessarily to county governments). The Forest Service payments can be spent only on roads and schools in the counties where the national forests are located. State law dictates which road and school programs are financed with the payments, and the state laws differ widely, generally ranging from 30% to 100% for school programs, with a few states providing substantial local discretion on the split.",
      " The Bureau of Land Management payments are available for any local governmental purpose. The FY2014 SRS payment, made in FY2015, was $281 million. Department of Commerce Public Works and Economic Development  The Economic Development Administration administers the Public Works and Economic Development Facilities Program (42 U.S.C. \u00a73141) as one of its Economic Development Assistance Programs. The competitive grant program awards grants to fund public works investments to support the construction or rehabilitation of essential public infrastructure and facilities (e.g. schools) necessary to generate or retain private sector jobs and investments, attract private sector capital, and promote regional competitiveness. Indian tribes and nonprofit IHEs are eligible to apply for grants.",
      " The area to be impacted by the project must meet certain criteria of economic distress. The Economic Development Administration allocated $96 million to the program in FY2014 and $99 million in FY2015. University Research Facilities  The federal government appropriates funds for the construction and improvement of buildings and facilities occupied or used by the National Institute of Standards and Technology (NIST) (15 U.S.C. \u00a7278c-278e) and for other congressionally directed projects. Most of these congressionally directed projects are university research facilities. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) created a new competitive construction grant program for the construction of new research science buildings or their expansion.",
      " A research science building is a building or facility whose purpose is to conduct scientific research, including laboratories, test facilities, measurement facilities, research computing facilities, and observatories. IHEs and nonprofit organizations are eligible for the competitive grants. The appropriation for Construction of Research Facilities was $56 million in FY2014 and $50 million in FY2015. Department of Defense Impact Aid Program The Department of Defense Impact Aid program provides funds to LEAs that enroll military-connected children. In recent years, Congress has provided funds through the DOD authorization and appropriation acts to LEAs serving military children. DOD awards funding under three subprograms. The Impact Aid Supplemental program supports LEAs serving significant numbers of military dependent students and allows payments to be used without restriction.",
      " The Impact Aid for Large Scale Rebasing (BRAC) program supports LEAs with enrollment changes due to base closures. The Impact Aid for Children with Severe Disabilities program supports LEAs serving children with severe disabilities as reimbursement for eligible costs incurred in providing such children a free and appropriate education (FAPE). For FY2014, $40 million was appropriated to the Supplemental program, and $5 million was appropriated for children with severe disabilities. For FY2015, $25 million and $5 million were appropriated, respectively, for these activities. No appropriations have been made as a result of base closures in recent years. Public School Facilities  In recent years,",
      " Congress has provided funds in DOD appropriations acts to construct, renovate, repair, or expand elementary and secondary public schools located on military installations in order to address capacity or facility condition deficiencies at such schools. FY2015 funds required a state or local match equal to not less than 20% of the total project cost. The FY2015 appropriation was $175 million. Department of Defense Education Activity (DODEA) The Department of Defense operates schools for the children of military members stationed in the United States and abroad. Major construction and replacement projects are funded through the Defense-wide military construction appropriations.  Higher Education The Department of Defense and service branches operate several institutions of higher education,",
      " including the service academies and the Uniformed Services University of the Health Sciences. Defense appropriations support operations, maintenance, and facilities. Department of Energy  State Energy Program  The State Energy Program (SEP), established in 1996, provides grants to states and territories to address their energy priorities and to adopt emerging renewable energy and energy efficiency technologies. Each state is required to develop a state energy conservation plan. Funding may be used for a wide variety of energy efficiency and renewable energy initiatives. The appropriations for each of FY2014 and FY2015 were $50 million.  Department of Health and Human Services Head Start  Head Start (42 U.S.C 9801 et seq.) is a federal program that has provided comprehensive early childhood development services to low-income children since 1965.",
      " Head Start is administered by the Administration for Children and Families (ACF). Federal Head Start funds are provided directly to local grantees rather than through states. Programs are locally designed and are administered by a network of roughly 1,600 public and private nonprofit and for-profit agencies. In certain circumstances, grantees may apply to use funds to purchase, construct, or make major renovations to a Head Start facility. The FY2014 and FY2015 appropriations were each $9 billion. Department of the Interior (DOI) Elementary and Secondary Schools for Native Americans The Bureau of Indian Affairs (BIA) funds construction activities for Bureau of Indian Education (BIE)",
      " schools and school facilities (25 U.S.C. \u00a713, \u00a7450, \u00a7631(2), \u00a7631(12), \u00a7631(14), \u00a72005(b), and \u00a72503(b)). There are 183 BIE-funded elementary and secondary schools and dormitories in 23 states. The construction activities supported by the BIA include new school facilities, employee and student housing, and facilities improvement and repair. The FY2014 and FY2015 appropriations for education construction were $55 million and $75 million, respectively. Historic Preservation The Historic Preservation Fund (HPF) was established under the National Historic Preservation Act and Omnibus Public Land Management Act of 2009 (16 U.S.C \u00a7470 et seq.) to protect significant cultural and historic resources.",
      " HPF eligible preservation projects include survey and inventory activities, National Register nominations, preservation education, architectural planning, historic structure reports, community preservation plans, and building repairs. The program provides matching grants to state and tribal historic preservation offices (SHPOs/THPOs). The National Park Service administers the grant programs. The programs received $56 million in each of FY2014 and FY2015.  Payments in Lieu of Taxes (PILT) Although federal law authorizes various programs to compensate local governments for reductions to their property tax bases due to the presence of most federally owned land, the most widely applicable program applies to many types of federally owned land,",
      " and is called \"Payments in Lieu of Taxes,\" or PILT. The payments are authorized by the Payment for Entitlement Land ( P.L. 97-258 ), as amended (31 U.S.C. \u00a76901-6907). The authorized level of PILT payments is calculated under a complex formula. PILT payments are offset by the prior year's payments under several laws, including the Secure Rural Schools (SRS) program for certain lands under the jurisdiction of the Forest Service. Payments made under the law may be used for any governmental purpose, including school facilities. The FY2014 and FY2015 appropriations were $437 million and $405 million,",
      " respectively. Postsecondary Schools for Native Americans The Tribally Controlled Colleges or Universities Assistance Act ( P.L. 95-471 ), as amended; the Navajo Community College Act (25 U.S.C. 640c-3), as amended; and the Snyder Act (25 U.S.C. \u00a713), as amended, provide grants for the operation and improvement of tribally controlled colleges and universities and two BIE institutions of higher education to ensure continued and expanded educational opportunities for Indian students and to allow for the improvement and expansion of the physical resources of such institutions. The postsecondary education programs, which also fund postsecondary scholarships, received $132 million in FY2014 appropriations and $134 million in FY2015 appropriations.",
      " Federal Emergency Management Agency (Department of Homeland Security) Public Assistance The Public Assistance Grant Program (PA Program) is administered by the Federal Emergency Management Agency (FEMA) and combines the authorities of multiple sections of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288, as amended, the Stafford Act). Grants from the PA Program are only available in states and communities that have received a major or emergency disaster declaration through the Stafford Act. Grants may be awarded for a variety of eligible types of assistance, including debris removal, emergency protective measures, or the repair and replacement of damaged buildings and facilities. The primary grantee for all PA grants is the state or tribal government designated by a disaster declaration,",
      " but applicants (or subgrantees) can be many types of local governmental entities and private nonprofits, ranging from police departments to homeless shelters, public utilities, civic buildings, etc. Eligible applicants under the PA Program include public and private nonprofit schools and IHEs. School facilities of a church or other religious institution are also generally eligible for grant assistance, so long as the primary purpose of the damaged facilities is for secular education. Eligible applicants can also apply for grants to replace certain damaged school supplies and equipment, including the possible repair and replacement of advanced laboratory and research equipment for IHEs. Because of the wide range of eligible uses and applicant types in the PA Program,",
      " it is difficult to assess through publically available information how much money has been spent exclusively for the repair and reconstruction of school facilities. Hazard Mitigation  The Hazard Mitigation Grant Program (HMGP; 42 U.S.C. \u00a75170c) provides grants to states and local governments, including school districts; tribal governments; and certain private nonprofit organizations, including IHEs, to implement long-term hazard mitigation measures after a major disaster declaration. While presidential declarations for major disasters specify the designated counties for certain forms of assistance, almost all declarations permit hazard mitigation funds to be used statewide. Allowable activities include acquisition of real property and retrofitting structures and facilities to minimize damages from high winds,",
      " earthquakes, floods, wildfires, or other natural hazards. Examples of allowable projects are community safe rooms in schools, dry floodproofing schools, and wildfire mitigation in schools. In FY2012, FEMA awarded $812 million under HMGP as a whole, and in FY2013 FEMA awarded $472 million. Amounts for HMGP are derived from a percentage of total disaster spending (usually in the range of 15%) that is then cost-shared on a 75% federal/25% state and local basis. FY2014 and FY2015 data are not available because they are subject to considerable modification as the recovery from major disasters advances and more projects are approved or have their obligations revised.",
      "  Institute of American Indian and Alaska Native Culture and Arts\u00a0Development The Institute of American Indian and Alaska Native Culture and Arts Development is a federally chartered independent nonprofit educational institution (20 U.S.C., Chapter 56) that serves as a multi-tribal center of higher education for Native Americans and is dedicated to the study, creative application, preservation, and care of Indian arts and culture. Appropriations may be used for the institution's operation. In addition, a portion of funds may be deposited in a trust account for capital improvements, including the expenses associated with site selection and preparation, site planning and architectural design and planning, new construction,",
      " materials and equipment procurement, renovation, alteration, repair, and other building and expansion costs of the institute. The institute received approximately $9 million in each of FY2014 and FY2015. National Endowment for the Humanities (NEH) The Office of Challenge Grants (National Foundation on the Arts and the Humanities Act; 20 U.S.C \u00a7951) strengthens humanities education by supporting long-term institutional development. Funds may be used to purchase equipment, upgrade technology, renovate or construct facilities, add library or museum collections, provide staffing, provide educational programming, and increase or establish endowments. Nonprofit organizations such as museums, tribal centers,",
      " libraries, colleges and universities, scholarly research organizations, state humanities councils, public radio and television stations, and historical societies and historic sites are eligible to receive grants. The program received $8 million in FY2014 and $9 million in FY2015. Selected Acronyms Used in This Report ARRA: The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) BIE: Bureau of Indian Education ED: U.S. Department of Education ESEA: Elementary and Secondary Education Act FEMA: Federal Emergency Management Administration HBCU: Historically Black Colleges and Universities HEA: Higher Education Act IHE:",
      " Institution of Higher Education K-12: Kindergarten through grade 12 LEA: Local Educational Agency P.L.: Public Law QECB: Qualified Energy Conservation Bond QSCB: Qualified School Construction Bond QZAB: Qualified Zone Academy Bond U.S.C.: United States Code\n"
    ],
    "length": 10123,
    "hardness": null,
    "role": null
  },
  {
    "id": 55,
    "question": null,
    "answer": "As people age, their physical, visual, and cognitive abilities may decline, making it more difficult for them to drive safely. Older drivers are also more likely to suffer injuries or die in crashes than drivers in other age groups. These safety issues will increase in significance because older adults represent the fastest-growing U.S. population segment. GAO examined (1) what the federal government has done to promote practices to make roads safer for older drivers and the extent to which states have implemented those practices, (2) the extent to which states assess the fitness of older drivers and what support the federal government has provided, and (3) what initiatives selected states have implemented to improve the safety of older drivers. To conduct this study, GAO surveyed 51 state departments of transportation (DOT), visited six states, and interviewed federal transportation officials. The Federal Highway Administration (FHWA) has recommended practices--such as using larger letters on signs--targeted to making roadways easier for older drivers to navigate. FHWA also provides funding that states may use for projects that address older driver safety. States have, to varying degrees, adopted FHWA's recommended practices. For example, 24 states reported including about half or more of FHWA's practices in state design guides, while the majority of states reported implementing certain FHWA practices in roadway construction, operations, and maintenance activities. States generally do not place high priority on projects that specifically address older driver safety but try to include practices that benefit older drivers in all projects. More than half of the states have implemented licensing requirements for older drivers that are more stringent than requirements for younger drivers, but states' assessment practices are not comprehensive. For example, these practices primarily involve more frequent or in-person renewals and mandatory vision screening but do not generally include assessments of physical and cognitive functions. While requirements for in-person license renewals generally appear to correspond with lower crash rates for drivers over age 85, the validity of other assessment tools is less clear. The National Highway Traffic Safety Administration (NHTSA) is sponsoring research and other initiatives to develop and assist states in implementing more comprehensive driver fitness assessment practices. Five of the six states GAO visited have implemented coordination groups to assemble a broad range of stakeholders to develop strategies and foster efforts to improve older driver safety in areas of strategic planning, education and awareness, licensing and driver fitness assessment, roadway engineering, and data analysis. However, knowledge sharing among states on older driver safety initiatives is limited, and officials said states could benefit from knowledge of other states' initiatives.\n",
    "docs": [
      "Background Driving is a complex task that depends on visual, cognitive, and physical  functions that enable a person to  see traffic and road conditions;  recognize what is seen, process the information, and decide how to   physically act to control the vehicle. Although the aging process affects people at different rates and in different  ways, functional declines associated with aging can affect driving ability.  For example, vision declines may reduce the ability to see other vehicles,  traffic signals, signs, lane markings, and pedestrians; cognitive declines  may reduce the ability to recognize traffic conditions, remember  destinations, and make appropriate decisions in operating the vehicle; and  physical declines may reduce the ability to perform movements required to  control the vehicle.",
      " A particular concern is older drivers with dementia, often as a result of  illnesses such as Alzheimer\u2019s disease. Dementia impairs cognitive and  sensory functions causing disorientation, potentially leading to dangerous  driving practices. Age is the most significant risk factor for developing  dementia\u2014approximately 12 percent of those aged 65 to 84 are likely to  develop the condition while over 47 percent of those aged 85 and older are  likely to be afflicted. For drivers with the condition, the risk of being  involved in a crash is two to eight times greater than for those with no  cognitive impairment. However, some drivers with dementia,",
      " particularly  in the early stages, may still be capable of driving safely. Older drivers experience fewer fatal crashes per licensed driver compared  with drivers in younger age groups; however, on the basis of miles driven,  older drivers have a comparatively higher involvement in fatal crashes.  Over the past decade, the rate of older driver involvement in fatal crashes,  measured on the basis of licensed drivers, has decreased and, overall, older  drivers have a lower rate of fatal crashes than drivers in younger age  groups (see fig. 1). Older drivers\u2019 fatal crash rate per licensed driver is  lower than corresponding rates for drivers in younger age groups,",
      " in part,  because older drivers drive fewer miles per year than younger drivers, may  hold licenses even though they no longer drive, and may avoid driving  during times and under conditions when crashes tend to occur, such as  during rush hour or at night. However, on the basis of miles traveled, older  drivers who are involved in a crash are more likely to suffer fatal injuries  than are drivers in younger age groups who are involved in crashes. As  shown in figure 2, drivers aged 65 to 74 are more likely to be involved in a  fatal crash than all but the youngest drivers (aged 16 to 24), and drivers  aged 75 and older are more likely than drivers in all other age groups to be  involved in a fatal crash.",
      " Older drivers will be increasingly exposed to crash risks because older  adults are the fastest-growing segment of the U.S. population, and future  generations of older drivers are expected to drive more miles per year and  at older ages compared with the current older-driver cohort. The U.S.  Census Bureau projects that the population of adults aged 65 and older will  more than double, from 35.1 million people (12.4 percent of total  population) in 2000 to 86.7 million people (20.7 percent of total population)  in 2050 (see fig. 3). Intersections pose a particular safety problem for older drivers.",
      " Navigating  through intersections requires the ability to make rapid decisions, react  quickly, and accurately judge speed and distance. As these abilities can  diminish through aging, older drivers have more difficulties at intersections  and are more likely to be involved in a fatal crash at these locations.  Research shows that 37 percent of traffic-related fatalities involving drivers  aged 65 and older occur at intersections compared with 18 percent for  drivers aged 26 to 64. Figure 4 illustrates how fatalities at intersections  represent an increasing proportion of all traffic fatalities as drivers age. DOT\u2014through FHWA and NHTSA\u2014has a role in promoting older driver  safety,",
      " although states are directly responsible for operating their roadways  and establishing driver licensing requirements. FHWA focuses on roadway  engineering and has established guidelines for designers to use in  developing engineering enhancements to roadways to accommodate the  declining functional capabilities of older drivers. NHTSA focuses on  reducing traffic-related injuries and fatalities among older people by  promoting, in conjunction with nongovernmental organizations, research,  education, and programs aimed at identifying older drivers with functional  limitations that impair driving performance. NHTSA has developed several  guides, brochures, and booklets for use by the medical community, law  enforcement officials, older drivers\u2019 family members,",
      " and older drivers  themselves that provide guidance on what actions can be taken to improve  older drivers\u2019 capabilities or to compensate for lost capabilities.  Additionally, NIA supports research related to older driver safety through  administering grants designed to examine, among other issues, how  impairments in sensory and cognitive functions impact driving ability. These federal initiatives support state efforts to make roads safer for older  drivers and establish assessment practices to evaluate the fitness of older  drivers. The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A  Legacy for Users (SAFETEA-LU), signed into law in August 2005,  establishes a framework for federal investment in transportation and has  specific provisions for older driver safety.",
      " SAFETEA-LU authorizes $193.1  billion in Federal-Aid Highway Program funds to be distributed through  FHWA for states to implement road preservation, improvement, and  construction projects, some of which may include improvements for older  drivers. SAFETEA-LU also directs DOT to carry out a program to improve  traffic signs and pavement markings to accommodate older drivers. To  fulfill these requirements, FHWA has updated or plans to update its  guidebooks on highway design for older drivers, plans to conduct  workshops on designing roads for older drivers that will be available to  state practitioners, and has added a senior mobility series to its bimonthly  magazine that highlights advances and innovations in highway/",
      "traffic  research and technology. Additionally, SAFTEA-LU authorizes NHTSA to  spend $1.7 million per year (during fiscal years 2006 through 2009) in  establishing a comprehensive research and demonstration program to  improve traffic safety for older drivers. FHWA Has  Recommended  Practices and Made  Funding Available to  Make Roads Safer for  Older Drivers, but  States Generally Give  Higher Priority to  Other Safety Issues FHWA has recommended practices for designing and operating roadways  to make them safer for older drivers and administers SAFETEA-LU funds  that states\u2014which own and operate most roadways under state or local  government authority\u2014may use for road maintenance or construction  projects to improve roads for older drivers.",
      " To varying degrees, states are  implementing FHWA\u2019s older driver practices and developing plans and  programs that consider older drivers\u2019 needs. However, responses to our  survey indicated that other safety issues\u2014such as railway and highway  intersections and roadside hazard elimination\u2014are of greater concern to  states, and states generally place a higher priority on projects that address  these issues rather than projects targeted only towards older drivers. FHWA Has Recommended  Road Design and Operating  Practices and Funds  Programs to Improve Older  Driver Safety FHWA has issued guidelines and recommendations to states on practices  that are intended to make roads safer for older drivers, such as the  Highway Design Handbook for Older Drivers and Pedestrians.",
      " The  practices emphasize cost-effective construction and maintenance  measures involving both the physical layout of the roadway and use of  traffic control devices such as signs, pavement markings, and traffic  signals. The practices are specifically designed to improve conditions at  sites\u2014intersections, interchanges, curved roads, construction work zones,  and railroad crossings\u2014known to be unsafe for older drivers. While these  practices are designed to address older drivers\u2019 needs, implementation of  these practices can make roads safer for all drivers. Intersections\u2014Recognizing that intersections are particularly  problematic for older drivers, FHWA\u2019s top priority in its Highway  Design Handbook for Older Drivers and Pedestrians is intersection  improvements.",
      " Practices to improve older drivers\u2019 ability to navigate  intersections include using bigger signs with larger lettering to identify  street names, consistent placement of lane use signs and arrow  pavement markings, aligning lanes to improve drivers\u2019 ability to see  oncoming traffic, and using reflective markers on medians and island  curbs at intersections to make them easier to see at night. See figures 5  through 8 for these and additional intersection improvement practices. Interchanges\u2014Practices to aid older drivers at interchanges include  using signs and pavement markings to better identify right and wrong  directions of travel and configuring on-ramps to provide a longer  distance for accelerating and merging into traffic.",
      " See figure 9 for these  and additional interchange improvement practices. Road curves\u2014Practices to assist older drivers on curves include using  signs and reflective markers\u2014especially on tight curves\u2014to clearly  delineate the path of the road. See figure 10 for these and additional  curve improvement practices. Construction work zones\u2014Practices to improve older driver safety in  construction work zones include increasing the length of time messages  are visible on changeable message signs; providing easily discernable  barriers between opposing traffic lanes in crossovers; using properly  sized devices (cones and drums) to delineate temporary lanes; and  installing temporary reflective pavement markers to make lanes easier  to navigate at night.",
      " Railroad crossings\u2014Practices to help older drivers are aimed at  making the railroad crossing more conspicuous by using reflective  materials on the front and back of railroad crossing signs and  delineating the approach to the crossing with reflective posts. See figure  11 for these and additional railroad crossing improvement practices. FHWA is continuing to research and develop practices to make roads safer  for older drivers. FHWA also promotes the implementation of these  practices by sponsoring studies and demonstration projects, updating its  Highway Design Handbook for Older Drivers and Pedestrians, and  training state and local transportation officials. For example, FHWA is  supporting a research study\u2014to be conducted over the next 3 to 5 years\u2014 on the effectiveness of selected low-cost road improvements in reducing  the number and severity of crashes for all drivers.",
      " With the findings of this  and other studies, FHWA plans to update its guidelines to refine existing or  recommend new practices in improving older driver safety. In addition,  FHWA is considering changes to its MUTCD\u2014to be published in 2009\u2014that  will enhance older driver safety by updating standards related to sign  legibility and traffic signal visibility. Under SAFETEA-LU, FHWA provides funding that states may use to  implement highway maintenance or construction projects that can enhance  older driver safety. However, because projects to enhance older driver  safety can be developed under several different SAFETEA-LU programs, it  is difficult to determine the amount of federal funding dedicated to  highway improvements for older drivers.",
      " While older driver safety is  generally not the primary focus of projects funded through SAFETEA-LU  programs, improvements made to roads may incorporate elements of  FHWA\u2019s older driver safety practices. For example, under SAFETEA-LU\u2019s  Highway Safety Improvement Program (HSIP), states submit a Strategic  Highway Safety Plan (SHSP) after reviewing crash and other data and  determining what areas need to be emphasized when making safety  improvements. If older driver safety is found to be an area of emphasis, a  state may develop projects to be funded under the HSIP that provide, for  example, improved traffic signs,",
      " pavement markings, and road layouts  consistent with practices listed in FHWA\u2019s Highway Design Handbook for  Older Drivers and Pedestrians. Some States Have  Implemented FHWA\u2019s  Recommended Practices  and Considered Older  Drivers in Highway Safety  Plans and Programs, but  Other Safety Issues  Generally Receive Greater  Priority State DOTs have, to varying degrees, incorporated FHWA\u2019s older driver  safety practices into their design standards; implemented the practices in  construction, operations, and maintenance activities; trained technical  staff in applying the practices; and coordinated with local agencies to  promote the use of the practices. The states\u2019 responses to our survey  indicate the range in states\u2019 efforts.",
      " Design standards. Nearly half of the states have incorporated about half or  more of FHWA\u2019s practices into their design standards, as follows: 24 state DOTs reported including about half, most, almost all, or all of  the recommendations.  20 reported including some of the recommendations.   6 reported including few or none of the recommendations. Construction, operations, and maintenance activities. Even though most  state DOTs have not incorporated all FHWA practices into their design  standards, the majority of states have implemented some FHWA practices  in construction, operations, and maintenance activities, particularly in the  areas of intersections and work zones (see table 1). Training.",
      " Nearly one-fourth of state DOTs have provided training on  FHWA practices to half or more of their technical staff, as follows:   12 state DOTs reported having trained about half, most, almost all, or all  of their technical staff.  32 have trained some of their technical staff.   7 have trained few or none of their technical staff. Coordination with local agencies. Because state transportation agencies  do not own local roads\u2014which may account for the majority of roads in a  state\u2014coordination with local governments is important in promoting  older driver safety in the design, operation, and maintenance of local roads.",
      "  The states reported using a variety of methods in their work with local  governments to improve older driver safety (see table 2). States also varied in their efforts to consult stakeholders on older driver  issues in developing highway safety plans (defined in the state SHSP) and  lists of projects in their Statewide Transportation Improvement Programs  (STIP). According to our survey, 27 of the 51 state DOTs have established  older driver safety as a component of their SHSPs, and our survey indicated  that, in developing their SHSPs, these states were more likely to consult  with stakeholders concerned about older driver safety than were states  that did not include an older driver component in their plans.",
      " Obtaining  input from stakeholders concerned about older driver safety\u2014from both  governmental and nongovernmental organizations\u2014is important because  they can contribute additional information, and can sometimes provide  resources, to address older driver safety issues. For example, elderly  mobility was identified by the Michigan State Safety Commission to be an  emerging issue and, in February 1998, funded the Southeast Michigan  Council of Governments (SEMCOG) to convene a statewide,  interdisciplinary Elderly Mobility and Safety Task Force. SEMCOG  coordinated with various stakeholder groups\u2014Michigan DOT, Michigan  Department of State, Michigan Office of Highway Safety Planning,",
      "  Michigan Department of Community Health, Office of Services to the  Aging, University of Michigan Transportation Research Institute, agencies  on aging, and AAA Michigan among others\u2014in developing a statewide plan  to address older driver safety and mobility issues. This plan\u2014which  outlines recommendations in the areas of traffic engineering, alternative  transportation, housing and land use, health and medicine, licensing, and  education and awareness\u2014forms the basis for the strategy defined in  Michigan\u2019s SHSP to address older drivers\u2019 mobility and safety. Even though 27 state DOTs have reported establishing older driver safety  as a component of their SHSPs, only 4 state DOTs reported including older  driver safety improvement projects in their fiscal year 2007 STIPs.",
      "  However, state STIPs may contain projects that will benefit older drivers.  For example, 49 state DOTs reported including funding for intersection  improvements in their STIPs. Because drivers are increasingly more likely  to be involved in an intersection crash as they age, older drivers, in  particular, should benefit from states\u2019 investments in intersection safety  projects, which generally provide improved signage, traffic signals,  turning lanes, and other features consistent with FHWA\u2019s older driver safety  practices. Although older driver safety could become a more pressing need in the  future as the population of older drivers increases, states are applying their  resources to areas that pose greater safety concerns.",
      " In response to a  question in our survey about the extent to which resources\u2014defined to  include staff hours and funds spent on research, professional services, and  construction contracts\u2014were invested in different types of safety projects,  many state DOTs indicated that they apply resources to a great or very  great extent to safety projects other than those concerning older driver  safety (see table 3). Survey responses indicated that resource constraints  are a significant contributing factor to limiting states\u2019 implementation of  FHWA\u2019s older driver safety practices and development of strategic plans  and programs that consider older driver concerns. More than Half of  States Have  Implemented Some  Assessment Practices  for Older Drivers,",
      " and  NHTSA Is Sponsoring  Research to Develop  More Comprehensive  Assessments More than half of state licensing agencies have implemented assessment  practices to support licensing requirements for older drivers that are more  stringent than requirements for younger drivers. These requirements\u2014 established under state licensing procedures\u2014generally involve more  frequent renewals (16 states), mandatory vision screening (10 states), in- person renewals (5 states) and mandatory road tests (2 states). However,  assessment of driver fitness in all states is not comprehensive because  cognitive and physical functions are generally not evaluated to the same  extent as visual function. Furthermore, the effectiveness of assessment  practices used by states is largely unknown.",
      " Recognizing the need for  better assessment tools, NHTSA is developing more comprehensive  practices to assess driver fitness and intends to provide technical  assistance to states in implementing these practices. Over Half of the States Have  More Stringent Licensing  Requirements for Older  Drivers, but Assessment  Practices Are Not  Comprehensive Over half of the states have procedures that establish licensing  requirements for older drivers that are more stringent than requirements  for younger drivers. These requirements generally include more frequent  license renewal, mandatory vision screening, in-person renewals, and  mandatory road tests. In addition, states may also consider input from  medical advisory boards, physician reports,",
      " and third-party referrals in  assessing driver fitness and making licensing decisions. (See fig. 12 and  app. II for additional details.) Accelerated renewal\u2014Sixteen states have accelerated renewal cycles  for older drivers that require drivers older than a specific age to renew  their licenses more frequently. Colorado, for example, normally requires  drivers to renew their licenses every 10 years, but drivers aged 61 and  older must renew their licenses every 5 years. Vision screening\u2014Ten states require older drivers to undergo vision  assessments, conducted by either the Department of Motor Vehicles or  their doctor, as part of the license renewal process.",
      " These assessments  generally test for visual acuity or sharpness of vision. For example, the  average age for mandatory vision screening is 62, with some states  beginning this screening as early as age 40 (Maine and Maryland) and  other states beginning as late as age 80 (Florida and Virginia). In-person renewal\u2014Five states\u2014Alaska, Arizona, California, Colorado,  and Louisiana\u2014that otherwise allow license renewal by mail require  older drivers to renew their licenses in person. Arizona, California, and  Louisiana do not permit mail renewal for drivers aged 70 and older.  Alaska does not allow mail renewal for drivers aged 69 and older,",
      " while  Colorado requires in-person renewal for those over age 61. Road test\u2014Two states, New Hampshire and Illinois, require older  drivers to pass road examinations upon reaching 75 years and at all  subsequent renewals. In addition, states have adopted other practices to assist licensing agencies  in assessing driver fitness and identifying older drivers whose driving  fitness may need to be reevaluated. Medical Advisory Boards\u2014Thirty-five states and the District of  Columbia rely on Medical Advisory Boards (MAB) to assist licensing  agencies in evaluating people with medical conditions or functional  limitations that may affect their ability to drive. A MAB may be  organizationally placed within a state\u2019s transportation,",
      " public safety, or  motor vehicle department. Board members\u2014practicing physicians or  health care professionals\u2014are typically nominated or appointed by the  state medical association, motor vehicle administrator, or governor\u2019s  office. Some MABs review individual cases typically compiled by case  workers who collect and review medical and other evidence such as  accident reports that is used to make a determination about a person\u2019s  fitness to drive. The volume of cases reviewed by MABs varies greatly  across states. For example, seven state MABs review more than 1,000  cases annually, while another seven MABs review fewer than 10 cases  annually.",
      " Physician reports\u2014While all states accept reports of potentially unsafe  drivers from physicians, nine states require physicians to report physical  conditions that might impair driving skills. For example, California  specifically requires doctors to report a diagnosis of Alzheimer\u2019s disease  or related disorders, including dementia, while Delaware, New Jersey,  and Nevada require physicians to report cases of epilepsy and those  involving a person\u2019s loss of consciousness. However, not all states  assure physicians that such reports will be kept confidential, so  physicians may choose not to report patients if they fear retribution in  the form of a lawsuit or loss of the patient\u2019s business. Third-party referrals\u2014In addition to reports from physicians,",
      " all states  accept third-party referrals of concerns about drivers of any age. Upon  receipt of the referral, the licensing agency may choose to contact the  driver in question to assess the person\u2019s fitness to drive. A recent survey  of state licensing agencies found that nearly three-fourths of all referrals  came from law enforcement officials (37 percent) and physicians or  other medical professionals (35 percent). About 13 percent of all  referrals came from drivers\u2019 families or friends, and 15 percent came  from crash and violation record checks, courts, self-reports, and other  sources. However, the assessment practices that state licensing agencies use to  evaluate driver fitness are not comprehensive.",
      " For example, our review of  state assessment practices indicates that all states screen for vision, but we  did not find a state with screening tools to evaluate physical and cognitive  functions. Furthermore, the validity of assessment practices used by  states is largely unknown. While research indicates that in-person license  renewal is associated with lower crash rates\u2014particularly for those aged  85 and older\u2014other assessment practices, such as vision screening, road  tests, and more frequent license renewal cycles, are not always associated  with lower older driver fatality rates. According to NHTSA, there is  insufficient evidence on the validity and reliability of any driving  assessment or screening tool.",
      " Thus, states may have difficulty discerning  which tools to implement. NHTSA Is Developing More  Comprehensive Practices to  Assess Driver Fitness NHTSA, supported by the NIA and by partner nongovernmental  organizations, has promoted research and development of mechanisms to  assist licensing agencies and other stakeholders\u2014medical providers, law  enforcement officers, social service providers, family members\u2014in better  identifying medically at-risk individuals; assessing their driving fitness  through a comprehensive evaluation of visual, physical, and cognitive  functions; and enabling their driving for as long as safely possible. In the  case of older drivers, NHTSA recognizes that only a fraction of older  drivers are at increased risk of being involved in an accident and focuses its  efforts on providing appropriate research-based materials and information  to the broad range of stakeholders who can identify and influence the  behavior of at-risk drivers.",
      " Initiatives undertaken by NHTSA and its  partner organizations include:   Model Driver Screening and Evaluation Program. Initially developed  by NHTSA in partnership with AAMVA and supported with researchers  funded by NIA\u2014the program provides a framework for driver referral,  screening assessment, counseling, and licensing actions. The guidance  is based on research that relates an individual\u2019s functional abilities to  driving performance and reflects the results of a comprehensive  research project carried out in cooperation with the Maryland Motor  Vehicle Administration. Recent research supported under this program  and with NIA grants evaluated a range of screenings related to visual,  physical, and cognitive functions that could be completed at a licensing  agency and may effectively identify drivers at an increased risk of being  involved in a crash.",
      " Physician\u2019s Guide to Assessing and Counseling Older Drivers. Developed by the American Medical Association to raise awareness  among physicians, the guide cites relevant literature and expert views  (as of May 2003) to assist physicians in judging patients\u2019 fitness to drive.  The guide is based on NHTSA\u2019s earlier work with the Association for the  Advancement of Automotive Medicine. This work\u2014a detailed literature  review\u2014summarized knowledge about various categories of medical  conditions, their prevalence, and their potential impact on driving  ability. Countermeasures That Work: A Highway Safety Countermeasure  Guide for State Highway Safety Offices. Developed with the Governors  Highway Safety Association,",
      " this publication describes current  initiatives in the areas of communications and outreach, licensing, and  law enforcement\u2014and the associated effectiveness, use, cost, and time  required for implementation\u2014that state agencies might consider for  improving older driver safety. NHTSA Web site. NHTSA maintains an older driver Web site with  content for drivers, caregivers, licensing administrators, and other  stakeholders to help older drivers remain safe. NIA research. NIA is supporting research on several fronts in studying  risk factors for older drivers and in developing new tools for driver  training and driver fitness assessment. A computer-based training tool is being developed to help older  drivers improve the speed with which they process visual  information.",
      " This tool is a self-administered interactive variation of  validated training techniques that have been shown to improve visual  processing speed. The tool is being designed as a cost-effective  mechanism that can be broadly implemented, at social service  organizations, for example, and made accessible to older drivers. Driving simulators are being studied as a means of testing driving  ability and retraining drivers in a manner that is more reliable and  consistent than on-road testing. Virtual reality driving simulation is a  potentially viable means of testing that could more accurately  identify cognitive and motor impairments than could on-road tests  that are comparatively less safe and more subjective.",
      " Research is ongoing to evaluate the impacts of hearing loss on  cognitive functions in situations, such as driving, that require  multitasking. Results of the research may provide insights into what  level of auditory processing is needed for safe driving and may lead  to development of future auditory screening tools. Studies that combine a battery of cognitive function and road/driving  simulator tests are being conducted to learn how age-related changes  lead to hazardous driving.  Results of these studies may prove useful  in developing screening tests to identify functionally-impaired  drivers\u2014particularly those with dementia\u2014who are at risk of being  involved in a crash and may be unfit to drive.",
      " NHTSA is also developing guidelines to assist states in implementing  assessment practices. To date, NHTSA\u2019s research and model programs have  had limited impact on state licensing practices. For example, according to  NHTSA, no state has implemented the guidelines outlined in its Model  Driver Screening and Evaluation Program. Furthermore, there is  insufficient evidence on the validity and reliability of driving assessments,  so states may have difficulty discerning which assessments to implement.  To assist states in implementing assessment practices, NHTSA, as  authorized under SAFETEA-LU section 2017, developed a plan to, among  other things,",
      " (1) provide information and guidelines to people (medical  providers, licensing personnel, law enforcement officers) who can  influence older drivers and (2) improve the scientific basis for licensing  decisions. In its plan NHTSA notes that the most important work on older  driver safety that needs to occur in the next 5 years is refining screening  and assessment tools and getting them into the hands of the users who  need them. As an element of its plan, NHTSA is cooperating with AAMVA to  create a Medical Review Task Force that will identify areas where  standards of practice to assess the driving of at-risk individuals are possible  and develop strategies for implementing guidelines that states can use in  choosing which practices to adopt.",
      " The task force will\u2014in areas such as  vision and cognition\u2014define existing practices used by states and identify  gaps in research to encourage consensus on standards. NHTSA officials  said that work is currently under way to develop neurological guidelines\u2014 which will cover issues related to cognitive assessments\u2014and anticipate  that the task force will report its findings in 2008. Selected States Have  Implemented  Coordinating Groups  and Other Initiatives to  Promote Older Driver  Safety Of the six states we visited, five\u2014California, Florida, Iowa, Maryland, and  Michigan\u2014 have active multidisciplinary coordination groups that may  include government,",
      " medical, academic, and social service representatives,  among others, to develop strategies and implement efforts to improve older  driver safety. Each of these states identified its coordination group as a  key initiative in improving older driver safety. As shown in table 4, the  coordinating groups originated in different ways and vary in size and  structure. For example, Florida\u2019s At-Risk Driver Council was formally  established under state legislation while Maryland\u2019s group functions on an  ad hoc basis with no statutory authority. The approaches taken by these  groups in addressing older driver safety issues vary as well. For example,  California\u2019s large task force broadly reaches several state agencies and  partner organizations,",
      " and the task force leaders oversee the activity of  eight work groups in implementing multiple action items to improve older  driver safety. In contrast, Iowa\u2019s Older Driver Target Area Team is a smaller  group that operates through informal partnerships among member  agencies and is currently providing consulting services to the Iowa  Department of Transportation on the implementation of older driver  strategies identified in Iowa\u2019s Comprehensive Highway Safety Plan. Members of the coordination groups we spoke with said that their state  could benefit from information about other states\u2019 practices. For example,  coordinating group members told us that sharing information about leading  road design and licensing practices, legislative initiatives, research efforts,",
      "  and model training programs that affect older drivers could support  decisions about whether to implement new practices. Furthermore, group  members said that identifying the research basis for practices could help  them assess the benefits to be derived from implementing a particular  practice. While some mechanisms exist to facilitate information exchanges  on some topics, such as driver fitness assessment and licensing through  AAMVA\u2019s Web site, there is no mechanism for states to share information  on the broad range of efforts related to older driver safety. In addition to coordinating groups, the six states have ongoing efforts to  improve older driver safety in the areas of strategic planning, education  and awareness,",
      " licensing and driver fitness assessment, engineering, and  data analysis. The following examples highlight specific initiatives and  leading practices in each of these categories. Strategic planning\u2014Planning documents establish recommended actions  and provide guidance to stakeholders on ways to improve older driver  safety. The Michigan Senior Mobility Action Plan, issued in November 2006,  builds upon the state\u2019s 1999 plan (Elderly Mobility & Safety\u2014The  Michigan Approach) and outlines additional strategies, discusses  accomplishments, and sets action plans in the areas of planning,  research, education and awareness, engineering countermeasures,  alternative transportation, housing and land use,",
      " and licensing designed  to (1) reduce the number and severity of crashes involving older drivers  and pedestrians, (2) increase the scope and effectiveness of alternative  transportation options available to older people, (3) assist older people  in maintaining mobility safely for as long as possible, and (4) plan for a  day when driving may no longer be possible. In implementing this plan,  officials are exploring the development of a community-based resource  center that seniors can use to find information on mobility at a local  level. Traffic Safety among Older Adults: Recommendations for  California\u2014developed through a grant from California\u2019s Office of  Traffic Safety and published in August 2002\u2014offers a comprehensive set  of recommendations and provides guidance to help agencies and  communities reduce traffic-related injuries and fatalities to older adults.",
      "  The Older Californian Traffic Safety Task Force was subsequently  established to coordinate the implementation of the report\u2019s  recommendations. Education/awareness\u2014Education and public awareness initiatives enable  outreach to stakeholders interested in promoting older driver safety. Florida GrandDriver\u00ae\u2014based on a program developed by AAMVA\u2014 takes a multifaceted approach to public outreach through actions such  as providing Web-based information related to driver safety courses and  alternative transportation; training medical, social service and  transportation professionals; offering safety talks at senior centers; and  sponsoring CarFit events. According to the Florida Department of  Highway Safety and Motor Vehicles, a total of 75 training programs and  outreach events were conducted under the GrandDriver program  between 2000 and 2006.",
      " California\u2014through its Older Californian Traffic Safety Task Force\u2014 annually holds a \u201cSenior Safe Mobility Summit\u201d that brings subject- matter experts and recognized leaders together to discuss issues and  heighten public understanding of long-term commitments needed to  help older adults drive safely longer. Assessment/licensing\u2014Assessment and licensing initiatives are concerned  with developing better means for stakeholders\u2014license administrators,  medical professionals, law enforcement officers, family members\u2014to  determine driver fitness and provide remedial assistance to help older  people remain safe while driving. California\u2019s Department of Motor Vehicles is continuing to develop a  progressive \u201cthree-tier\u201d system for determining drivers\u2019 wellness\u2014 through nondriving assessments in the first two tiers\u2014and estimating  driving fitness in a third-tier road test designed to assess the driver\u2019s  ability to compensate for driving-relevant functional limitations identified in the first two tiers.",
      " The system, currently being tested at  limited locations, is being developed to keep people driving safely for as  long as possible by providing a basis for a conditional licensing program  that can aid drivers in improving their driving-relevant functioning and  in adequately compensating for their limitations. Oregon requires physicians and other designated medical providers to  report drivers with severe and uncontrollable cognitive or functional  impairments that affect the person\u2019s ability to drive safely. Oregon  Driver and Motor Vehicle Services (ODMVS) evaluates each report and  determines if immediate suspension of driving privileges is necessary. A  person whose driving privileges have been suspended needs to obtain  medical clearance and pass ODMVS vision,",
      " knowledge, and road tests in  order to have his or her driving privileges reinstated. In cases where  driving privileges are not immediately suspended, people will normally  be given between 30 and 60 days to pass ODMVS tests or provide  medical evidence indicating that the reported condition does not  present a risk to their safe driving. Maryland was the first state to establish a Medical Advisory Board  (MAB)\u2014created by state legislation in 1947\u2014which is currently one of  the most active boards in the United States. Maryland\u2019s MAB manages  approximately 6000 cases per year\u2014most involving older drivers.  Drivers are referred from a number of sources\u2014including physicians,",
      "  law enforcement officers, friends, and relatives\u2014and the MAB reviews  screening results, physician reports, and driving records among other  information to determine driving fitness. The MAB\u2019s opinion is then  considered by Maryland\u2019s Motor Vehicle Administration in making  licensing decisions. The Iowa Department of Motor Vehicles can issue older drivers  restricted licenses that limit driving to daylight hours, specific  geographic areas, or low-speed roads. Restricted licensing, also referred  to as \u201cgraduated de-licensing,\u201d seeks to preserve the driver\u2019s mobility  while protecting the health of the driver, passengers, and others on the  road by limiting driving to low risk situations.",
      " About 9,000 older drivers  in Iowa have restricted licenses. Iowa license examiners may travel to  test older drivers in their home towns, where they feel most comfortable  driving. Engineering\u2014Road design elements such as those recommended by  FHWA are implemented to provide a driving environment that  accommodates older drivers\u2019 needs. A demonstration program in Michigan, funded through state, county,  and local government agencies, along with AAA Michigan, made low- cost improvements at over 300 high-risk, urban, signalized intersections  in the Detroit area. An evaluation of 30 of these intersections indicated  that the injury rate for older drivers was reduced by more than twice as  much as for drivers aged 25 to 64 years.",
      " The next phase of the program  is development of a municipal tool kit for intersection safety, for use by  municipal leaders and planners, to provide a template for implementing  needed changes within their jurisdictions. The Iowa Department of Transportation (IDOT) has undertaken several  initiatives in road operations, maintenance, and new construction to  enhance the driving environment for older drivers. Among its several  initiatives, IDOT is  using more durable pavement markings on selected roads and  servicing all pavement markings on a performance-based schedule to  maintain their brightness, adding paved shoulders with the edge line painted in a shoulder  rumble strip to increase visibility and alert drivers when their  vehicles stray from the travel lane,",
      "  converting 4-lane undivided roads to 3-lane roads with a dedicated  left-turn lane to simplify turning movements, encouraging the use of more dedicated left turn indications (arrows)  on traffic signals on high-speed roads,  installing larger street name signs,  replacing warning signs with ones that have a fluorescent yellow  background to increase visibility,   converting to Clearview fonts on Interstate signs for increased sign   demonstrating older driver and pedestrian-friendly enhancements on  a roadway corridor in Des Moines, and   promoting local implementation of roadway improvements to benefit  older drivers by providing training to city and county engineers and  planners. The Transportation Safety Work Group of the Older Californian Traffic  Safety Task Force provided engineering support in updating California\u2019s  highway design and traffic control manuals to incorporate FHWA\u2019s  recommended practices for making travel safer and easier for older  drivers.",
      " Technical experts from the work group coordinated with the  Caltrans design office in reviewing the Caltrans Highway Design  Manual and updating elements related to older driver safety.  Additionally, the work group managed an expedited process to have the  California Traffic Control Devices Committee consider and approve  modifications to signing and pavement marking standards in the  California Manual on Uniform Traffic Control Devices that benefit  older drivers. Data analysis\u2014Developing tools to accurately capture accident data  enables trends to be identified and resources to be directed to remediating  problems. Iowa has a comprehensive data system that connects information from  multiple sources, including law enforcement records (crash reports,",
      "  traffic citations, truck inspection records) and driver license and  registration databases, and can be easily accessed. For example, the  system allows law enforcement officers to electronically access a  person\u2019s driving record and license information at a crash scene and  enter their crash reports into the data system on-scene. Data captured  through this process\u2014including the location of all crashes\u2014is less  prone to error and can be geographically referenced to identify safety  issues. In the case of older driver safety, several universities are utilizing  Iowa crash data in research efforts. For example, University of Northern  Iowa researchers utilized crash data and geospatial analysis to  demonstrate how older driver crash locations could be identified and  how roadway elements could be subsequently modified to improve  safety for older drivers.",
      " University of Iowa researchers have used the  data in behavioral research to study actions of older drivers and learn  where changes in roadway geometrics, signing, or other roadway  elements could assist older drivers with their driving tasks. Also, Iowa  State University\u2019s Center for Transportation Research and Education  (CTRE) has used the data to study a number of older driver crash  characteristics and supports other older driver data analysis research  projects with the Iowa Traffic Safety Data Service. Florida is developing a Mature Driver Database (MDDB) that will collect  several types of data\u2014vision renewal data, crash data, medical review  data\u2014to be accessible through the Department of Highway Safety and  Motor Vehicles (DHSMV)",
      " Web site. According to DHSMV officials, this  database is intended to be used across agencies to facilitate strategic  planning. DHSMV may use the database, for example, to track driver  performance on screenings and analyze the effectiveness of screening  methods. Planned MDDB enhancements include providing links to  additional data sources such as census and insurance databases. Conclusion Older driver safety is not a high-priority issue in most states and, therefore,  receives fewer resources than other safety concerns. However, the aging of  the American population suggests that older driver safety issues will  become more prominent in the future. Some states\u2014with federal  support\u2014have adopted practices to improve the driving environment for  older road users and have implemented assessment practices to support  licensing requirements for older drivers that are more stringent than  requirements for younger drivers.",
      " However, information on the  effectiveness of these practices is limited, and states have been reluctant to  commit resources to initiatives whose effectiveness has not been clearly  demonstrated. Some states have also implemented additional initiatives to  improve older driver safety, such as establishing coordination groups  involving a broad range of stakeholders and developing initiatives in the  areas of strategic planning, education and outreach, assessment and  licensing practices, engineering, and data analysis. NHTSA and FHWA also  have important roles to play in promoting older driver safety, including  conducting and supporting research on standards for the driving  environment and on driver fitness assessment. While states hold differing  views on the importance of older driver safety and have adopted varying  practices to address older driver safety issues,",
      " it is clear that there are  steps that states can take to prepare for the anticipated increase in the  older driver population and simultaneously improve safety for all drivers.  However, state resources are limited, so information on other states\u2019  initiatives or federal efforts to develop standards for the driving  environment and on driver fitness assessment practices could assist states  in implementing improvements for older driver safety. Recommendation for  Executive Action To help states prepare for the substantial increase in the number of older  drivers in the coming years, we recommend that the Secretary of  Transportation direct the FHWA and NHTSA Administrators to implement  a mechanism that would allow states to share information on leading  practices for enhancing the safety of older drivers.",
      " This mechanism could  also include information on other initiatives and guidance, such as FHWA\u2019s  research on the effectiveness of road design practices and NHTSA\u2019s  research on the effectiveness of driver fitness assessment practices. Agency Comments and  Our Evaluation We provided a draft of this report to the Department of Health and Human  Services and to the Department of Transportation for review and comment.  The Department of Health and Human Services agreed with the report and  offered technical suggestions which we have incorporated, as appropriate.  (See app. III for the Department of Health and Human Services\u2019 written  comments.) The Department of Transportation did not offer overall  comments on the report or its recommendation.",
      " The department did offer  several technical comments, which we incorporated where appropriate. We are sending copies of this report to interested congressional  committees. We are also sending copies of this report to the Secretary of  Transportation and the Secretary of Health and Human Services. We also  will make copies available to others upon request. In addition, the report  will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me  at (202) 512-2834 or siggerudk@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 who made major contributions to this report are  listed in appendix IV. Objectives, Scope, and Methodology This report addresses (1) what the federal government has done to  promote practices to make roads safer for older drivers and the extent to  which states have implemented those practices, (2) the extent to which  states assess the fitness of older drivers and what support the federal  government has provided, and (3) what initiatives selected states have  implemented to improve the safety of older drivers. To determine what the federal government has done to promote practices  to make roads safer for older drivers, we interviewed officials from the  Federal Highway Administration (FHWA)",
      " within the U.S. Department of  Transportation (DOT) and the American Association of State and Highway  Transportation Officials (AASHTO) and reviewed manuals and other  documentation to determine what road design standards and guidelines  have been established, the basis for their establishment, and how they have  been promoted. We also reviewed research and interviewed a  representative of the National Cooperative Highway Research Program  (NCHRP) to gain perspective on federal initiatives to improve the driving  environment for older drivers. Finally, to determine trends in accidents  involving older drivers, we reviewed and analyzed crash data from the U.S.  DOT\u2019s Fatality Analysis Reporting System database and General Estimates  System database.",
      " To obtain information on the extent to which states are implementing these  practices, we surveyed and received responses from DOTs in each of the 50  states and the District of Columbia. We consulted with NCHRP, FHWA, and  AASHTO in developing the survey. The survey was conducted from the end  of September 2006 through mid-January 2007. During this time period, we  sent two waves of follow-up questionnaires to nonrespondents in addition  to the initial mailing. We also made phone calls and sent e-mails to a few  states to remind them to return the questionnaire. We surveyed state DOTs  to learn the extent to which they have incorporated federal government  recommendations on road design elements into their own design guides  and implemented selected recommendations in their construction,",
      "  operations, and maintenance activities. We also identified reasons for state  DOTs rejecting recommendations and determined the proportion of  practitioners that were trained in each state to implement  recommendations. In addition, we asked state DOTs to evaluate the extent  to which they have developed plans (defined in Strategic Highway Safety  Plans) and programmed projects (listed in Statewide Transportation  Improvement Programs) for older driver safety as provided for by  SAFETEA-LU legislation. Before fielding the questionnaire, we reviewed the Safe, Accountable,  Flexible, Efficient Transportation Equity Act: A Legacy for Users  (SAFETEA-LU) and prior highway legislation to identify the framework for  states to develop and implement older driver safety programs.",
      " Additionally,  we conducted separate in-person pretests with officials from three state  DOTs and revised our instrument as a result of the information obtained  during those pretests. We took steps in developing the questionnaire and in  collecting and analyzing the data to minimize errors that could occur  during those stages of the survey process. A copy of the questionnaire and  detailed survey results are available at www.gao.gov/cgi-bin/getrpt?GAO- 07-517SP. To determine the extent to which states assess the fitness of older drivers  and what support the federal government has provided, we interviewed  officials and reviewed relevant documents from the National Highway  Traffic Safety Administration within the U.S.",
      " DOT, the National Institute on  Aging and the Administration on Aging within the U.S. Department of  Health and Human Services, and the American Association of Motor  Vehicle Administrators\u2014a nongovernmental organization that represents  state driver licensing agencies. We determined the extent to which the  guidelines and model programs of these agencies addressed the visual,  physical, and cognitive deficits that may afflict older drivers. We also  reviewed federal, state, and nongovernmental Web sites that contained  information on states\u2019 older driver licensing practices and analyzed their  content so that we could compare practices across states. To obtain  information on the activities of partner nongovernmental organizations in  researching and promoting practices to assess older driver fitness,",
      " among  other initiatives, we interviewed officials from AAA, AARP, the Insurance  Institute for Highway Safety, and the Governors Highway Safety  Association. To learn of states\u2019 legislative initiatives concerning driver  fitness assessment and licensing, we interviewed a representative of the  National Conference of State Legislatures. We also interviewed officials  from departments of motor vehicles in select states to report on their  efforts in developing, implementing, and evaluating older driver screening  and licensing programs. To obtain information on initiatives that selected states have implemented,  we conducted case studies in six states\u2014California, Florida, Iowa,  Maryland, Michigan, and Oregon\u2014that transportation experts identified as  progressive in their efforts to improve older driver safety.",
      " We chose our  case study states based on input from an NCHRP report highlighting states  with leading practices in the areas of:  education/awareness,  assessment/licensing, engineering, agency coordination, strategic planning  and data analysis. We compared practices across the six states to identify  common themes. We also identified and determined, to the extent possible,  key practices based on our analysis. The scope of our work focused on older driver safety. Prior GAO work  addressed the associated issue of senior mobility for those who do not  drive. We conducted our review from April 2006 through April 2007 in  accordance with generally accepted government auditing standards.",
      " We  requested official comments on this report from the U.S. Department of  Transportation and the U.S. Department of Health and Human Services. States\u2019 Licensing Requirements for Older  Drivers Tables 5 through 7 list older driver licensing requirements in effect in  certain states. Comments from Department of Health and  Human Services GAO Contact and Staff Acknowledgments GAO Contact Staff  Acknowledgments In addition to the individual named above, Sara Vermillion, Assistant  Director; Michael Armes; Sandra DePaulis; Elizabeth Eisenstadt; Joel  Grossman; Bert Japikse; Leslie Locke; Megan Millenky; Joshua Ormond;",
      "  and Beverly Ross made key contributions to this report.\n"
    ],
    "length": 10468,
    "hardness": null,
    "role": null
  },
  {
    "id": 56,
    "question": null,
    "answer": "Federal agencies must have the capacity to serve the public during disruptions to normal operations. This depends, in part, on continuity efforts that help agencies marshal, manage, and maintain their most important asset--their people, or human capital. GAO identified the human capital considerations relevant to federal continuity efforts; described efforts by the Federal Emergency Management Agency (FEMA) and the Office of Personnel Management (OPM) to address these considerations relevant to continuity of operations (COOP); and described the role Federal Executive Boards (FEB) play in coordinating such efforts outside Washington, D.C. According to recognized experts from the private and public sectors, continuity efforts should give priority to the immediate aftermath of a crisis--securing the safety of all employees and addressing the needs of employees who perform essential operations. However, experts noted that additional human capital considerations, especially those associated with the majority of an organization's employees who would be needed to resume all other operations, are also crucial and have not been well developed by many public and private sector organizations. To more fully address human capital considerations, experts identified two human capital principles that should guide all continuity efforts--demonstrating sensitivity to individual employee needs and maximizing the contributions of all employees--and six key organizational actions designed to enhance continuity efforts. FEMA and OPM have exhibited leadership in addressing human capital considerations relevant to COOP, but opportunities to improve exist. For example, while both agencies have issued guidance that addresses securing the safety of all employees and responding to the needs of personnel performing essential operations, neither agency's guidance addresses human capital considerations related to resuming broader agency operations. Although not specifically tasked with coordinating emergency preparedness efforts, including COOP, FEBs are uniquely positioned to do so, given their general responsibility for improving coordination among federal activities in areas outside of Washington, D.C. While some FEBs already play an active role in coordinating such efforts, the current context in which FEBs operate, including the lack of a clearly defined role and varying capacities among FEBs, could lead to inconsistent levels of preparedness across the nation.\n",
    "docs": [
      "Background The policy of the U.S. government is to have in place a comprehensive and  effective program to ensure continuity of essential federal functions under all circumstances.  COOP planning is an effort conducted by individual  agencies to fulfill that policy and assure that the capability exists to  continue essential agency functions across a wide range of potential  emergencies.  COOP has been closely associated with continuity of  government programs, which are meant to ensure the survival of our  constitutional form of government.  COOP was first conceived during the  Cold War to ensure that the U.S. government would be able to continue to  function in case of a nuclear war.",
      "  However, in the wake of the demise of  the Soviet Union and the reduced threat of nuclear attack in the early  1990s, COOP planning languished. Following the World Trade Center bombing in 1993 and the Oklahoma City  bombing in 1995, COOP as a program was given renewed attention based  on the recognition of emerging threats and the need to continue essential  functions of the federal government in an all-hazards environment, which  includes acts of nature, accidents, technological emergencies, and  incidents related to military or terrorist attacks.  A series of Presidential  Decision Directives (PDD)",
      " was issued that began to link programs for  terrorism, critical infrastructure protection, and COOP.  In addition, as we  approached the turn of the century, federal agencies also dealt with the  Year 2000 computer problem by developing business continuity and  contingency plans to ensure program delivery in the event of a technology  failure or malfunction.  Federal COOP efforts have evolved by building  upon the planning for each of these events that focused on protecting  critical infrastructure, both physical systems and cyber-based systems.  The  events of September 11, 2001, highlighted in dramatic fashion the  vulnerabilities agencies face in each of these areas and focused new  attention on the effects such events have on agencies\u2019 most important  assets\u2014their people,",
      " or human capital. FEMA, the General Services Administration (GSA), and OPM are the three  agencies that have the most direct impact on individual agency efforts to  develop viable COOP capabilities.  PDD 67, which outlined individual  agency responsibilities for COOP, identified FEMA as the executive agent  for federal COOP planning.  As executive agent, FEMA has the  responsibility for formulating guidance, facilitating interagency  coordination, and assessing the status of COOP capability across the  federal executive branch.  PDD 67 also required GSA to work with FEMA in  providing COOP training for federal agencies and to assist agencies in  acquiring alternate facilities.",
      "  In addition, the Federal Management  Regulation requires GSA to lead federal Occupant Emergency Program  (OEP) efforts, which are short-term emergency response programs that  establish procedures for safeguarding lives and property during  emergencies in particular facilities.  As the President\u2019s agent and advisor  for human capital matters, OPM has been actively involved in federal  emergency preparedness efforts.  OPM has issued a series of emergency  preparedness guides for federal managers, employees, and their families;  issued a number of memorandums relating to planning, preparedness, and  the flexibilities available to agencies in emergency situations; and held  emergency planning and preparedness forums to help agencies select  emergency personnel.",
      "  In addition, FEMA, GSA, and OPM collaborate to  implement the Federal Workforce Release Decision and Notification  Protocol when emergency situations occur in the Washington, D.C., area. Human Capital  Considerations Are  Relevant to Continuity  Planning and  Implementation Efforts The current literature indicates, and experts that we consulted confirmed,  that the immediate response to a crisis should give priority to securing the  safety of all employees and addressing the needs of employees who  perform or directly support essential operations.  For example, the  standard for emergency management and business continuity, which was  developed by the National Fire Protection Association and endorsed by  FEMA,",
      " recommends that organizations include the following priorities in  their continuity program: ensuring the safety and health of employees,  establishing critical functions and processes, and identifying essential  representatives. Consequently, the experts said that these priorities have received most of  the human capital attention in continuity efforts for both the private and  public sectors, including federal agencies.  Appropriately, organizations  focus on minimizing the loss of life and injuries, which is key to all other  recovery efforts.  Such efforts commonly include first aid training,  evacuation plans and drills, and dismissal policies.  Organizations also  focus on identifying the core group of employees that will establish and  maintain essential operations as dictated by an organization\u2019s mission.",
      "   Organizations, for example, commonly identify leadership structures to  manage crisis response.  Even so, experts noted that organizations vary  widely in their effectiveness in addressing these priorities. The continuity process, however, extends beyond the goals of life safety  and the performance of essential operations.  The experts identified a  number of human capital considerations beyond these goals that are not  well addressed.  For example, the priorities discussed above do not address  human capital considerations for employees who are not involved in  providing essential functions.  Such employees would be associated with  efforts to fully resume all other operations and represent the majority of an  organization. The experts identified two principles that should guide actions to more  fully address human capital considerations applicable to all continuity  planning and implementation efforts.",
      "  The first is recognizing and  remaining sensitive to employees\u2019 personal needs during emergencies  when shaping the appropriate organizational expectations of employees.   The emergency event that activates continuity plans may also cause  emergency events in the personal lives of individual employees.  Similar to  an organization placing its highest priority on the safety and well-being of  its employees, employees may have high-priority responsibilities to others.   These personal responsibilities may limit employees\u2019 ability to contribute  to mission accomplishment until these other obligations are satisfied. The second principle experts identified is maximizing the contributions of  all employees, whether in providing essential operations or resuming full  services.  This should be done within the limits of an employee\u2019s ability to  contribute given the situation,",
      " as described in principle one, and within the  limits of the organization to use those contributions effectively.  According  to the experts, the experience of organizations during emergencies has  been that employees remain motivated to contribute to organizational  results, which is increasingly felt the longer the emergency continues.   Enabling employees to contribute promotes more effective delivery of  essential operations and more rapid resumption of full operations.  In  addition, in extreme disruptions of employees\u2019 personal circumstances,  providing purposeful activities helps avoid the debilitating affects of a  disruption on employees, including job-related anxiety and post\u2013traumatic  stress disorder. The experts we interviewed also identified six organizational actions to  enhance continuity planning and implementation efforts,",
      " listed in figure 1. Each of these actions is described in more detail below. Our past work has shown that the demonstrated commitment of top  leaders is perhaps the single most important element of successful change  management and transformation efforts.  Effective continuity efforts have  the visible support and commitment of their organization\u2019s top leadership.   According to the experts, traditional continuity planning focuses on the  operations side of recovery and often overlooks human capital  considerations.  As such, it is important for top leadership to ensure that  the appropriate balance is achieved in considering physical infrastructure,  technology, and human capital.  In providing leadership prior to the  emergency,",
      " leaders demonstrate their commitment to human capital by  establishing plans that value the organization\u2019s intention to manage  employees with sensitivity to their individual circumstances, recover  essential operations on a priority basis, and resume other operations as  quickly as possible. Organizational leaders show commitment to continuity planning by  allocating resources and setting policies that effectively meet the  organization\u2019s continuity needs.  The experts told us that committed  leaders provide sufficient funding and staff to conduct planning and  preparation efforts effectively.  While the resources needed vary from  location to location within an organization, the experts said that  organizations should have enough resources available to develop effective  plans, test critical systems,",
      " train all staff, and conduct simulation exercises.   Committed top leadership also ensures that clear policies and procedures  are in place for all aspects of continuity to ensure that quick and effective  decisions are made during times of emergencies.  Those policies and  procedures should be fair, shared with employees and their representatives  in advance of an emergency, and able to be consistently applied to all  employees.  Experts and union leaders we met with agree that the  cooperation and input from all components within the organization,  including employees and their representatives, is important in developing  these policies. Following a disruption to normal operations, top leadership sets the  direction and pace of organizational recovery.",
      "  According to the experts,  top leadership sets direction by providing the legitimate and identifiable  voice of the organization for employees to rally around during tumultuous  times.  An expert from Marsh & McLennan Companies, Inc., a company that  lost over 350 people in the World Trade Center on September 11, 2001,  noted that in the aftermath of an emergency there is a fundamental need for  a strong, visible leader to provide constant reassurance.  The expert added  that \u201cemployees need to know that someone is in control, even if the  leaders do not know all the answers.\u201d  In addition,",
      " top leaders set the pace  of organizational recovery by providing leadership to both the management  team leading recovery of essential operations and the management team  leading the resumption of all other operations. As we have previously reported, effective organizations integrate human  capital approaches as strategies for accomplishing their mission and  programmatic goals.  According to the experts, strategic decisions made to  improve day-to-day operations, including human capital approaches, and  those made to build continuity readiness are not exclusive of one another  and may have synergies.  For example, early in 2001, GAO made the  business decision to supply all of its analysts with laptop computers for  financial reasons and to provide employees with flexibility in carrying out  their work.",
      "  That business decision, however, also contributed to our ability  to quickly adapt to unforeseeable circumstances in October 2001.  In  response to the release of anthrax bacteria on Capitol Hill, we opened our  doors to the 435 members of the House of Representatives and selected  members of their staffs.  Over 1,000 GAO employees were immediately able  to make use of their laptops to work from alternate locations.   Consequently, we minimized the disruption to our operations and assisted  the House of Representatives in continuing its operations.  To take  advantage of such synergies, the experts said that decisions regarding  continuity efforts should be integrated with broader business decision  making.",
      " The integration of continuity planning with broader decision making helps  to ensure that the direction of all efforts is consistent and provides mutual  benefits.  In a limited resource environment, consideration of how  continuity investments benefit other program efforts also helps to  strengthen the business case for human capital investments that are meant  to improve continuity capabilities, day-to-day operations, or both. The importance of communication cannot be overstated.  According to the  experts, two-way communication with employees, their representatives,  and other stakeholders is key to building relationships and partnerships  that can facilitate organizational recovery efforts.  We have also previously  reported that communication is most effective when done early,",
      " clearly,  often, and is downward, upward, and lateral.  According to a senior  National Treasury Employees Union (NTEU) official, the union was able to  capitalize on ongoing two-way communications with the Internal Revenue  Service\u2019s (IRS) regional leadership to provide members with information  following the September 11, 2001, attacks.  For example, during the  recovery efforts, the union provided supplementary channels for  communicating with employees, including daily joint messages from the  IRS Regional Director and the NTEU Chapter President.  In addition, when  the local New York office reopened on September 20,",
      " 2001, both the NTEU  National President and the IRS Commissioner greeted employees at the  door.  From the union\u2019s perspective, communication efforts such as these  helped to provide reassurance and support as well as to maintain employee  trust. According to experts, roles, responsibilities, and performance expectations  must be communicated to all employees, and their representatives, prior to  a disruption to promote the efficient and effective use of all of an  organization\u2019s human capital assets.  Early communication enables  employees to assess and communicate to the organization any personal  circumstances that may limit their ability to carry out those roles.  The  experts and union officials whom we spoke with agreed that in some cases,",
      "  more formal communication vehicles, such as memorandums of  understanding or addenda to collective bargaining agreements, may be  necessary to negotiate changes or clarify roles and responsibilities in  continuity plans. Because effective emergency two-way communication depends greatly on  technology, alternate and redundant communication infrastructures are  necessary.  In addition to technological vulnerabilities that can render  different methods of communication useless, people frequently do not  remain tied to the contact number or location listed in emergency records.   To address these challenges, Macy\u2019s West, for example, has built an  alternate emergency communication system that serves as an employee  message retrieval system.  The system,",
      " which is based outside of the region  in case the local phone networks are overloaded, allows (1) the leadership  of Macy\u2019s West to leave messages with instructions for employees,  (2) family members to leave messages for employees, and (3) employees to  leave messages for their loved ones. Our past work has shown that organizations should consider making  targeted investments in human capital approaches, such as training and  development.  According to the experts, training and development  programs related to continuity efforts can help to raise awareness among  all employees.  The Social Security Administration (SSA), for example, has  developed a video-training course to provide an overview of COOP,",
      " which  includes an introduction from the Commissioner explaining why COOP is  so important, a discussion of SSA\u2019s critical workloads and how they would  be processed during a disruption, and references to federal guides and  information.  The experts noted that less formal approaches, such as  continuity planning awareness weeks, could also help to raise awareness. Our recent work has indicated that training and development programs  build skills and competencies that enable employees to fill new roles and  work in different ways, which helps to build organizational flexibility.   According to experts, the training and development goals for employees  assigned to the team that performs essential operations differ from those  for the employees assigned to the team that is responsible for resuming all  other organizational operations.",
      "  The goal for the team that performs  essential operations is to achieve \u201ccritical depth,\u201d which occurs when an  adequate number of employees are available to staff each critical function,  in the event that a member of the team expected to perform that function is  unavailable.  Organizations can build critical depth in various ways,  including using exercises that simulate an emergency to train backup  employees alongside employees who have primary responsibility for an  essential operation, or allowing backup employees to perform the  operation while the primary employees oversee and critique their  performance.  In addition, critical depth can be built through succession  planning.  To be effective for this purpose,",
      " however, the scope of  succession planning is extended to recognize that there is no time to  develop successors in an emergency and incrementally increase levels of  authority as an individual matures in a position.  Therefore, organizations  may have to plan to use predecessors to a position, including retirees, as  successors. With regard to the team that is responsible for resuming all other  organizational operations, experts said that the training and development  goal is to build sufficient breadth to enable members to contribute to  resumption efforts in a variety of ways.  For example, development  programs requiring employees to rotate within an organization to learn a  variety of positions,",
      " potentially at a variety of locations, contribute to  critical breadth.  We have previously reported that developmental  assignments place employees in new roles or unfamiliar job environments  in order to strengthen skills and competencies and broaden their  experience. Effective training and development initiatives also help to foster a culture  that is characterized by flexible employees who are empowered to make  effective decisions independently.  According to experts, such a culture is  often critical to agency recovery and resumption efforts.  Experts from  Marsh & McLennan Companies, Inc., reported that effective decision- making abilities could be developed through formal training about the  parameters in which employees are empowered to make decisions and on-",
      " the-job experiences demonstrating how employees can exercise authority  in making decisions that manage, rather than avoid, risk and are focused on  achieving results. The events of September 11, 2001, give ample evidence of the dedication  and flexibility of federal, state, and local government employees in  providing services to the American public.  Disruption of normal  operations challenges an organization to use this dedication and flexibility  to its advantage, especially with regard to employees associated with the  resumption of all operations that are not considered essential.  According  to the experts, organizations may use approaches such as telework and  geographic dispersion, which includes regional structure,",
      " to increase the  ways in which employees may contribute.  As OPM guidance has  underscored and presenters at a recent conference held by the  International Telework Association and Council noted, telework is an  important and viable option for federal agencies in COOP planning and  implementation efforts, especially as the duration of the emergency event  is extended.  However, to make effective use of telework, experts told us  that organizations should identify those employees who are expected to  telework during a disruption and communicate that expectation to them in  advance.  In addition, organizations should provide teleworkers with  adequate support in terms of tools,",
      " training, and guidance. Geographic  dispersion can also provide a way for employees associated with  resumption activities to continue their normal functions albeit at or  through other locations.  For example, SSA recognizes that its field  structure enables the agency to make use of both multiple locations and  telework in providing its employees ways to contribute because most field  functions can be transferred fairly easily from one location to another in  the same region or performed remotely with laptop computers.  Based on  these efforts, SSA does not envision a scenario in which its field employees  would not contribute to their normal functions for more than 72 hours. Employees demonstrate their flexibility by a willingness to contribute to  the organization in roles that may be unusual.",
      "  According to the experts,  flexible employees contribute as best they can usually in the following  sequence: (1) providing support to the team performing essential  operations, if needed; (2) continuing to contribute to their normal mission- related functions; (3) performing an alternate contribution for their  organization; or if none of these can be accomplished, (4) volunteering in  their communities as a direct form of public service.  Federal employees  may have additional opportunities to contribute to not only their own  agencies\u2019 operations but also other agencies\u2019 operations in serving the  American people.  In addition, a recent memorandum from OPM recognizes  the value of federal employees contributing to the general public through  community volunteer service in the range of alternative contributions.",
      " Employees associated with providing essential operations may be working  under unusual pressures for extended periods of time, and organizations  need to consider ways to sustain these efforts.  The experts recommend  that if the circumstances of the emergency continue long enough to raise  concerns about burnout, organizations consider providing opportunities  for working in shifts; rotating assignments among team members;  providing relief through the use of qualified employees associated with  resumption activities; reemploying retirees; or utilizing employees from  stakeholder or networked organizations, such as suppliers or contractors. According to the experts, the ability of organizations to match staffing  requirements with available skills and abilities could be enhanced through  various initiatives,",
      " such as job banks, skill profile databases, and pre- arranged partnerships with other organizations or community service  organizations.  For example, job banks that detail additional jobs that may  be required during an emergency but are not considered essential could  allow employees to preselect alternate contributions that they would be  able to perform.  In the federal government, agencies could establish their  own job banks; form interagency partnerships that link the potential needs  of several agencies; and create a cache for volunteer opportunities,  possibly tied to the Citizen Corps.  Organizations with databases that  collect employee knowledge, skills, and abilities (KSA)\u2014even those KSAs  outside the scope of an employee\u2019s normal functions\u2014may complement  the job banks by allowing organizations to match available KSAs with the  unmet needs of the organization.",
      " An evaluation process that explicitly identifies and disseminates lessons  learned during disruptions, or simulations of disruptions, promotes  learning among all of an organization\u2019s human capital assets and helps to  improve organizational performance.  An organization that is committed to  learning has an inclusive and supportive process and a framework designed  prior to a disruption to gather important data.  According to experts,  organizations committed to learning will ensure that those employees who  are key to the recovery and resumption efforts are involved in the formal  evaluation process in a timely manner and will seek the input from as many  other employees as possible.  Such an inclusive environment will enable  the organization to discover valuable lessons learned by employees in  unusual circumstances.",
      "  In addition, conducting evaluations in a \u201cno- blame,\u201d nonattribution atmosphere and taking organizational ownership of  any problems that might be identified increases the openness with which  participants are willing to share their experiences.  To encourage such an  environment, FEMA officials told us that the agency\u2019s Office of National  Security Coordination has recently implemented a reporting system that  allows any employee to identify lessons learned anonymously during an  emergency, instead of waiting for the formal review process. Our past work has shown that human capital approaches are best designed  and implemented based on data-driven decisions.  According to experts,  having a framework prior to a disruption helps to gather data important to  evaluating the effectiveness of human capital approaches during a  disruption.",
      "  Some measures that they suggested include number of  employees contributing to mission-related outcomes each day; degree of  contribution (e.g., part time or full time); location of employee when  contributing (e.g., at alternate facility or home); type of contribution (e.g.,  performing same function, performing an alternate function within the  department, working with another department, or volunteering); or  obstacles to contribution (e.g., organizational or personal). Once identified, it is important for the lessons learned during the  evaluation to be made explicit and then widely disseminated.  According to  experts, the manner and formality of documentation and dissemination,",
      "  however, depend on the situation or needs of the organization (e.g., after- action reports, detailed analyses, executive summaries, video tapes, CDs,  or Web-based reports).  There are unique opportunities in the federal  government for agencies to share explicit lessons learned both internally  and with other federal agencies and stakeholders.  For example, following  the September 11, 2001, attacks, senior Department of Housing and Urban  Development officials asked the New York Acting Regional Director to  recount her experiences and lessons learned in front of a video camera.   The accounts were edited down into a 30-minute video entitled Thinking  the Unthinkable:",
      " Preparing for Disaster.  That video has been used within  the department as a training aid and has been shared with over 50 federal  agencies with the help of the Washington, D.C.\u2013based interagency COOP  Working Group (CWG) and the FEBs in cities across the United States.  In  Canada, Emergency Management Alberta (EMA) employs a centralized  Disruption Incident Reporting System for all government agencies, which  is accessible via the Internet, to obtain timely and accurate reporting of all  disruptions and \u201cmost importantly, ensure lessons learned can be  documented for follow-up.\u201d  EMA has also created a Lessons Learned  Warehouse Web site to share continuity lessons learned in all aspects of  crisis management.",
      " FEMA and OPM Have  Exhibited Leadership  in Addressing Human  Capital Considerations  Relevant to COOP As we stated earlier, the human capital considerations related to life safety  and the needs of personnel performing essential operations have largely  been addressed in continuity efforts.  In the federal government, FEMA has  issued guidance that has addressed these considerations and has  recognized the opportunity to more fully address human capital  considerations in its guidance.  In addition, OPM has issued federal  emergency preparedness guidance relevant to COOP that also addresses  these considerations and is working with FEMA to more fully address  human capital considerations in federal guidance.",
      " FEMA Issued Guidance  That Addresses Human  Capital Considerations, but  Recognizes Opportunity to  Do More As executive agent for federal COOP planning, FEMA issued FPC 65 in July  1999 as the primary guidance for agencies developing viable COOP plans.   According to FPC 65, the purpose of COOP planning is to facilitate the  performance of agency essential functions for up to 30 days during any  emergency or situation that may disrupt normal operations.  The five  objectives of a viable COOP plan listed in FPC 65 are (1) ensuring the  continuous performance of an agency\u2019s essential functions during an  emergency;",
      " (2) protecting essential facilities, equipment, records, and  other assets; (3) reducing or mitigating disruptions to operations;   (4) reducing loss of life, minimizing damage and losses; and (5) achieving a  timely and orderly recovery from an emergency and resumption of full  service to customers. The guidance subsequently limits a COOP event to one that significantly  affects the facilities of an organization and requires the establishment of  essential operations at an alternate location.  Therefore, as FEMA  recognizes, the guidance does not apply to significant disruptions that  leave facilities intact, such as a severe acute respiratory syndrome (SARS)",
      "  outbreak that could lead a large number of employees to avoid congested  areas, including their workplaces.  Although a people-only event such as  SARS would significantly disrupt normal operations, the current COOP  guidance would not apply because facilities would remain available.  FPC  65 also indicates that the guidance is for use at all levels and locations of  federal agencies.  FEMA officials acknowledge, however, that the priority  of COOP planning to date has been focused on agency headquarters  located in the Washington, D.C., area. Given the purpose of COOP and the nature of its objectives, the human  capital considerations FEMA included in the guidance primarily relate to  life safety for all employees and addressing the needs of employees  performing essential operations.",
      "  For example, the guidance states that one  of the objectives of COOP is \u201creducing loss of life, minimizing damage and  losses.\u201d  It also refers to the legal requirement that each agency develop a  viable OEP, which is a short-term emergency response program that  establishes procedures for safeguarding lives and property during  emergencies in particular facilities.  FPC 65 more broadly defines life  safety by including a statement related to the need to consider the health  and emotional well-being of employees on the essential operations team.   Also, with respect to employees who perform essential functions, the  guidance directs agencies to designate an emergency team,",
      " delegate  authority, establish orders of succession, develop communication plans,  develop training programs, and provide for accountability. FEMA officials we spoke with recognized that there is a need to go beyond  the human capital considerations that have already been addressed within  federal COOP guidance in order to achieve the full range of COOP  objectives.  Specifically, FEMA officials agreed that it was particularly  important to deal with the human capital considerations inherent to the  resumption activities needed to fully recover from an emergency.  To that  end, FEMA has taken several steps to more fully address these  considerations.  FEMA has worked with a subcommittee of the interagency  CWG\u2014a Washington,",
      " D.C.\u2013based group that meets monthly to discuss  issues related to COOP\u2014to rewrite the federal COOP guidance.  The  agency has requested OPM\u2019s assistance in incorporating these  considerations into the new federal COOP guidance.  FEMA has also  worked in cooperation with us as we developed this report.  As a result,  FEMA officials told us that the draft guidance would include an augmented  discussion of human capital considerations. OPM Has Also Exhibited  Leadership in Addressing  Human Capital  Considerations Related to  Emergency Preparedness OPM has also recognized the value of human capital in COOP and other  emergency preparedness efforts.",
      "  In a memorandum to the heads of  executive departments and agencies, for example, the Director of OPM  stated that \u201cthe American people expect us to continue essential  government services without undue interruption, no matter the  contingency, and Federal agencies must have the human resources to  accomplish their missions, even under the most extreme of  circumstances.\u201d  To this end, OPM has established the Emergency  Preparedness subcommittee of the Chief Human Capital Officers Council  that is tasked with recommending policy changes, legislative changes, or  other strategies for moving the issue forward.  In addition, OPM has  initiated several efforts to help agencies address human capital  considerations in emergency preparedness related to life safety and the  needs of personnel performing essential operations,",
      " as well as to recognize  the role that employee organizations and unions could play in supporting  those efforts.  These initiatives are important first steps; however, they do  not fully address human capital considerations related to the resumption of  all agency operations that are not considered essential. With regard to providing for the safety of all employees, OPM has issued  four preparedness guides to educate federal employees, managers, and  their families on how to protect themselves from a potential biological,  chemical, or radiological release, whether accidental or intentional.  The  guides also spell out the responsibilities of the federal government and  individual agencies to protect employees in the event of an emergency.",
      "  In  addition to the guides, OPM has addressed safety issues by revising the  Washington, D.C., area emergency dismissal protocols for federal  employees and contractors, in conjunction with FEMA and GSA; issuing  memorandums to all agency heads detailing the \u201cminimum obligations\u201d  agencies have to secure the safety of federal workers; issuing two  emergency preparedness surveys through which federal agencies could  report on their progress in ensuring the safety of their employees; and  highlighting the role that Employee Assistance Programs can play in  responding to employee needs in emergency situations. Related to providing for the needs of employees performing or supporting  essential operations,",
      " OPM has led two forums focusing on emergency  employee designations and the flexibilities that are available to agencies in  emergency situations.  OPM has also issued a series of memorandums  outlining the existing human resource management flexibilities that  agencies might employ in emergency situations.  Other human capital  flexibilities that are available to agencies in nonemergency situations, such  as telecommuting, job sharing, and flexible scheduling, might provide  additional assistance during emergency situations and are detailed in  OPM\u2019s handbook, Human Resources Flexibilities and Authorities in the  Federal Government.  (See app. II for a list of human resource flexibilities  that agencies may use to respond to emergency situations.) In addition to initiating efforts to address several human capital  considerations,",
      " OPM has highlighted the need to work with and through  employee organizations and unions in developing and executing emergency  management strategies.  For example, OPM has held meetings with federal  labor union leaders and employee associations to discuss relevant  employee safety issues and has specifically encouraged agencies to work  with and share information on preparedness efforts with applicable  employee organizations and unions.  Senior union officials whom we spoke  with from the American Federation of Government Employees and NTEU  agreed that it is important for unions to be involved throughout COOP  planning and implementation efforts.  These officials also stated that  unions could be resources for agencies in communicating with employees,",
      "  both before and during an emergency, as well as in engaging employees in  recovery and resumption efforts. FEBs Have  Opportunities to  Coordinate Regional  Emergency Planning  Efforts, Including  COOP, in Major  Metropolitan Areas Although FEMA heads the interagency CWG to help coordinate COOP  efforts in the Washington, D.C., area, the efforts of this group do not apply  to the over 80 percent of federal employees who work outside of this area.   While not specifically tasked with coordinating COOP efforts, FEBs are  generally responsible for improving coordination among federal activities  and programs in major metropolitan areas outside of Washington,",
      " D.C.   Under the direction of OPM, FEBs support and promote national initiatives  of the President and the administration and respond to the local needs of  federal agencies and the community.  OPM officials have recognized that  FEBs can add value to regional emergency preparedness efforts, including  COOP, as vehicles for communication, coordination, and capacity building.   To make use of these capabilities, OPM has provided FEBs with relevant  emergency preparedness materials, encouraged FEBs to focus on  preparedness issues in their regions, requested that FEBs test their  emergency communication plans, and encouraged FEBs to inform OPM of  any emergency-related events affecting federal employees in the regions.",
      " The FEBs that we visited are already playing active roles in regional  emergency preparedness and COOP efforts.  For example, the Chicago  FEB has established committees to deal with Disaster Recovery Planning  and Emergency Release; surveyed its member agencies to determine the  status of COOP planning in the region; sponsored a series of seminars, in  conjunction with GSA and FEMA, on topics related to COOP, sheltering in  place, and national security; participated in regional exercises, such as  TOPOFF 2; and sponsored a COOP exercise to provide agencies with a  forum for validating their COOP plans,",
      " policies, and procedures.  The  Cleveland FEB has established an emergency preparedness committee to  promote awareness and preparation, developed an Employee Emergency  Contingency Handbook that provides basic actions to respond to  emergencies that may be encountered by federal employees, and helped to  make training available to all federal agencies.  The Philadelphia FEB has  held several COOP workshops for agencies and regularly shares relevant  information with agency officials via e-mail.  In addition, these FEBs play a  role in developing and activating dismissal and closure procedures for  federal agencies located in their particular regions. Although both OPM officials and the FEB officials whom we spoke with  recognized that FEBs can add value in coordinating emergency  preparedness efforts,",
      " including COOP, and that such a role is a natural  outgrowth of general FEB activities, a specific role and responsibilities  have not been defined.  In addition, the current structure in which FEBs  operate results in differing capacities of FEBs across the nation.  For  example, each agency\u2019s participation in FEB activities is voluntary.   Consequently, FEBs can only make recommendations to agencies, without  the ability to require agency compliance.  Also, FEBs rely on host agencies  for funding, which results in variable funding and staffing from year to year  and across FEBs.  OPM has recognized that the roles and capacities of  FEBs vary across the nation and has established an internal working group  to study the strengths and weaknesses of FEBs and develop  recommendations for improving their capacity to coordinate in regions  outside of Washington,",
      " D.C.  According to OPM, such efforts in regard to  local emergency preparedness and response will include improving  dissemination of information and facilitation of COOP training and tabletop  exercises; addressing the implications for strategic human capital  management in continuing the operations of the federal government (e.g.,  alternate work schedules, remote work sites, and telecommuting  capabilities); and developing strategies to better leverage the network of  FEBs to help departments and agencies implement their initiatives. Conclusions More fully addressing human capital considerations in emergency  preparedness guidance, including COOP, could improve agency response  capabilities to large-scale COOP emergencies or situations;",
      " could help  minimize the impact of more common, yet less catastrophic disruptions  (e.g., snowstorms and short-term power outages); and is consistent with  building a more flexible workforce, which would enhance ongoing efforts  across the federal government to create more responsive human capital  management systems.  As FEMA works to update its federal COOP  guidance and OPM continues to issue emergency preparedness guidance  relevant to COOP, several areas require attention to more fully address  human capital considerations relevant to COOP. By limiting COOP to situations that necessitate moving to an alternate  facility, agencies are left without guidance for situations in which an  agency\u2019s physical infrastructure is unharmed,",
      " but its employees are  unavailable or unable to come to work for an extended period of time.   While facilities and technology would not be affected by such situations,  the unavailability of people to contribute to mission-related outcomes  could cause a significant disruption to normal operations. Emergency guidance, including COOP, generally does not extend beyond  consideration of life safety and the needs of employees performing  essential operations.  Therefore, the guidance excludes most agency  employees\u2014those who would be associated with resuming all other  operations. FEBs are uniquely situated to improve coordination of emergency  preparedness efforts, including COOP, in areas outside of Washington,",
      " D.C.   However, the context in which FEBs currently operate, including the lack  of a clearly defined role in emergency preparedness efforts, including  COOP, and varying capacities among FEBs, could lead to inconsistent  levels of preparedness across the nation. Recommendations for  Executive Action We recommend that the Secretary of Homeland Security direct the Under  Secretary for Emergency Preparedness and Response to take the following  two actions:  Expand the definition of a COOP event in federal guidance to recognize  that severe emergencies requiring COOP implementation can include  people-only events. Complete efforts to revise federal COOP guidance to more fully address  human capital considerations by incorporating the six organizational  actions identified in this report.",
      " We recommend that the Director of OPM take the following two actions:  Develop and provide additional emergency preparedness guidance to  more fully address human capital considerations by incorporating the  six organizational actions identified in this report. Determine the desired role for FEBs to play in improving coordination  of emergency preparedness efforts, including COOP, and identify and  address FEB capacity issues to meet that role.  It would be appropriate  for FEBs to be formally incorporated into federal emergency  preparedness guidance, including COOP guidance, for areas outside of  Washington, D.C. Agency Comments and  Our Evaluation We provided the Secretary of Homeland Security and the Director of OPM a  draft of this report for review and comment.",
      "  We received written  comments from the Under Secretary of Emergency Preparedness and  Response on behalf of FEMA and the Department of Homeland Security,  which are reprinted in appendix III.  In his comments, the Under Secretary  stated that the draft accurately addressed human capital considerations  relevant to COOP guidance and coordination and noted that DHS and  FEMA will continue to work with OPM and other federal partners to  improve the federal government\u2019s COOP plan by incorporating our  recommendations in its federal COOP guidance.  In addition, he stated that  FEMA would expand its efforts with its regional offices and FEBs to  improve coordination of COOP programs at the regional level.",
      " The Director of OPM also provided written comments, which are reprinted  in appendix IV.  In her comments, the Director noted her appreciation for  our acknowledgement of the agency\u2019s leadership role in addressing human  capital considerations relevant to COOP planning.  However, the Director  of OPM stated that the agency has already carried out our recommendation  to more fully address human capital considerations in emergency  preparedness guidance, including COOP, by incorporating the key actions  identified in the report.  The Director provided numerous examples of  actions OPM has taken to support emergency preparedness efforts, all of  which she noted were influenced by the agency\u2019s human capital  framework.",
      "  In addition, the Director also attached an enclosure to the  agency comments that contain examples of OPM\u2019s internal COOP-related  efforts that she believes would be helpful to federal agencies. Most of the examples of emergency preparedness guidance that the  Director of OPM provided were included in the draft report and deal largely  with the human capital considerations related to life safety and the needs  of personnel performing essential operations.  While such initiatives are  important first steps, there remain opportunities to improve OPM\u2019s  emergency preparedness guidance to include a fuller range of human  capital considerations, particularly related to the resumption of all agency  operations that are not considered essential.",
      "  As such, our assessment of  OPM\u2019s guidance and our recommendation for the agency to develop and  provide additional emergency preparedness guidance that incorporates the  key actions identified in the report remain unchanged. With regard to our second recommendation for OPM to determine the  desired role of FEBs in improving coordination of emergency preparedness  efforts, including COOP, and address any resulting capacity issues, the  Director of OPM stated that the leadership role the agency plays with  respect to FEBs was not sufficiently developed in the report and she  provided examples of OPM\u2019s support for the FEB\u2019s efforts.  Most of the  supporting examples that the Director provided were included in the draft  report.",
      "  Moreover, the additional examples generally do not address our  larger point that the role of FEBs in coordinating emergency preparedness  efforts, including COOP, needs to be clearly defined.  As such, we maintain  our conclusion that the context in which FEBs currently operate, including  the lack of a clearly defined role in emergency preparedness efforts and the  varying capacities among FEBs, could lead to inconsistent levels of  preparedness across the nation. The Director of OPM suggested several clarifications to the report, which  we considered and incorporated where appropriate.  For example, she  suggested both technical and substantive changes to a footnote describing  Federal Executive Associations (FEA)",
      " and Federal Executive Councils  (FEC).  While we made technical changes in response to these comments,  our work does not allow us to categorically exclude all FEAs and FECs as  viable options for the coordination of emergency preparedness activities,  as the Director suggested in her response.  Instead, we recognize that any  guidance provided to FEBs would likely be beneficial to FEAs and FECs  despite their differences.  The Director also provided additional details  describing OPM\u2019s internal working group that is studying the strengths and  weaknesses of FEBs, and we have incorporated these details into the  report.",
      " We are sending copies of this report to the Ranking Minority Member,  Subcommittee on Oversight of Government Management, the Federal  Workforce, and the District of Columbia, Senate Committee on  Governmental Affairs; the Chairman and Ranking Minority Member, House  Committee on Government Reform; the Chairman and Ranking Minority  Member, Subcommittee on Homeland Security, House Committee on  Appropriations; the Chairman and Ranking Minority Member,  Subcommittee on National Security, Emerging Threats, and International  Relations, House Committee on Government Reform; and other interested  congressional parties.  We will also send copies to the Secretary of  Homeland Security, the Under Secretary of Emergency Preparedness and  Response and the Director of OPM.",
      "  This report will also be available at no  charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions concerning this report, please  contact me or William Doherty on (202) 512-6806.  Key contributors to this  report include Kevin J. Conway, Tiffany Tanner, Thomas Beall, Amy Choi,  Amy Rosewarne, John Smale, and Michael Volpe. Objectives, Scope, and Methodology The objectives of this report were to  identify the human capital considerations that are relevant to federal  agencies\u2019 continuity planning and implementation efforts;",
      "   describe the continuity of operations (COOP) guidance provided by the  Federal Emergency Management Agency (FEMA) and emergency  preparedness guidance and activities of the Office of Personnel  Management (OPM) to address human capital considerations relevant  to COOP; and  describe the role Federal Executive Boards (FEB) play, relevant to  COOP, in coordinating efforts outside of the Washington, D.C., area. To address human capital considerations that are relevant to continuity  planning and implementation efforts, we reviewed relevant literature, such  as industry journals, federal guidance, and codes of standards on  disaster/emergency management and continuity programs.",
      "  Because the  available literature was limited in its attention to human capital, we based  our work primarily on semistructured interviews with experts from private  sector businesses, federal government agencies, and public institutions.   We first reviewed industry journals, magazines, and Web sites; queried state  and international auditors; attended a national business continuity  conference; and sought input from the National Academy of Public  Administration (NAPA), the Private Sector Council (PSC), and FEMA to  identify individuals or organizations with the relevant knowledge needed to  address our first objective.  We selected individuals or organizations that  had one or more of the following characteristics:",
      " (1) experience  responding to, recovering from, and resuming business activities following  an emergency, from which human capital lessons may have been drawn;   (2) experience incorporating human capital considerations into their  organization\u2019s continuity planning efforts; (3) specific human capital  expertise that could be applied to continuity planning and implementation  efforts; and (4) specific continuity expertise that is broad enough to  identify those critical areas that require human capital attention.  When an  organization was selected, we then contacted the organization to identify  the specific individuals who had the relevant expertise. On the basis of these characteristics and the input from NAPA,",
      " PSC, and  FEMA, we selected organizations or individuals within organizations to  obtain a diversity of views from both the public and private sector.   Individuals from a total of 15 organizations, in addition to FEMA, provided  their expertise in addressing our objective.  The organizations include five  federal agencies\u2014the Centers for Disease Control and Prevention, the  Department of Housing and Urban Development, the Department of  Veterans Affairs, the General Services Administration, and the Social  Security Administration; five private sector businesses\u2014the Gillette  Company, Lockheed Martin Corporation, Macy\u2019s West, Marsh & McLennan  Companies, Inc., and Science Applications International Corporation;",
      " and  five public institutions\u2014the Business Continuity Institute, the Disaster  Recovery Institute International, Emergency Management Alberta  (Canada), Clark-Atlanta University, and the University of Tasmania  (Australia). We then conducted three cycles of work to identify the human capital  considerations that are relevant to continuity, with each subsequent cycle  building upon the information gathered in previous cycles.  We adopted this  approach because our initial conversations with experts indicated that a  common perspective of the continuity process could help structure and  focus our subsequent interviews with experts about the relevant human  capital considerations.  Cycle one involved conducting semistructured  interviews with experts from FEMA and 5 of the 15 organizations.",
      "  We  asked each to describe a view of the entire continuity process from a  human capital perspective.  We used those descriptions to synthesize a  framework that we then shared with each of the first cycle experts for  comment.  The experts generally agreed with the content of the framework  and agreed that it would be useful in focusing subsequent interviews about  human capital considerations.  In the second cycle, we used this  framework as a reference when conducting in-depth, semistructured  interviews with experts from all 15 organizations and FEMA about the  human capital considerations relevant to continuity.  For the third cycle,  we held a 1-day working group,",
      " in cooperation with FEMA, to more fully  discuss the human capital considerations previously identified in cycles  one and two.  The interactive nature of the working group, which included  a cross-section of the experts and additional representatives from GAO,  helped to ensure that we had adequately captured the key considerations  relevant to continuity.  As a final check, we provided all of the experts with  a summary document that included the statements used throughout this  report and attributed to the experts.  We asked the experts to review the  statements for fundamental disagreement or fatal flaws.  Almost all experts  responded and generally agreed with our treatment of these issues.",
      " To supplement information we received in the three cycles, we held  additional interviews with officials from OPM; representatives from the  Chicago, Cleveland, and Philadelphia FEBs; and representatives from the  National Treasury Employees Union (NTEU) and the American Federation  of Government Employees (AFGE).  We spoke with representatives of the  FEBs because the FEBs\u2019 role as coordinative bodies in regions across the  nation gives them a unique view of federal emergency preparedness efforts  outside of the Washington, D.C., area.  We spoke with representatives from  NTEU and AFGE because unions can play a key role in addressing human  capital considerations.",
      " To describe the COOP guidance provided by FEMA and emergency  preparedness guidance and activities of OPM to address human capital  considerations relevant to COOP, we interviewed officials from both  agencies.  In addition, we reviewed and analyzed relevant documents.  For  example, we reviewed Federal Preparedness Circular 65, the primary  guidance for federal executive branch COOP, to identify the human capital  considerations that are included in federal COOP guidance.  We also  reviewed OPM publications, including four emergency preparedness  guides and a series of memorandums that list available agency flexibilities  in times of emergencies. To describe the role FEBs play,",
      " relevant to COOP, in coordinating efforts  outside of the Washington, D.C., area, we held interviews with officials  from OPM with responsibility for FEBs nationwide and representatives  from the three FEBs discussed above. We conducted our work from February 2003 through December 2003 in  accordance with generally accepted government auditing standards. Emergency Human Capital Flexibilities Listed  in OPM Emergency Memorandums OPM has issued a series of memorandums outlining the existing human  resources management flexibilities that executive departments and  agencies might employ in emergency situations with and without OPM  approval.  Other human capital flexibilities and programs,",
      " such as those  detailed in OPM\u2019s handbook, Human Resources Flexibilities and  Authorities in the Federal Government, that are available to agencies in  nonemergency situations may also provide additional assistance in  responding to and recovering from COOP emergencies.  For additional  information on these flexibilities, OPM has advised that agency chief  human capital officers, human resources (HR) directors, or both should  contact their assigned OPM human capital officer.  Employees are advised  to contact their agency HR offices for assistance. A compilation of the emergency flexibilities outlined by OPM in its  emergency guidance memorandums appears below. Leave Excused Absence Agencies have the discretion,",
      " without OPM approval, to grant excused  absence to employees who are prevented from reporting to work because  of an emergency.  The authority to grant excused absence also applies to  employees who are needed for emergency law enforcement, relief, or  recovery efforts authorized by federal, state, or local officials having  appropriate jurisdiction and whose participation in such activities has been  approved by the employing agency.  Military leave under 5 U.S.C. \u00a7 6323(b)  is appropriate for federal employee members of the National Guard or  Reserves who are called up to assist in an emergency. Emergency Leave Transfer  Program Subject to approval by the President,",
      " OPM may establish an emergency  leave transfer program, which is separate from the federal leave-sharing  program, to assist employees affected by an emergency or major disaster.   Under 5 U.S.C. \u00a7 6391, the emergency leave transfer program would permit  employees in an executive agency to donate unused annual leave for  transfer to employees of the same or other agencies who have been  adversely affected by an emergency and who need additional time off work  without having to use their own paid leave.  If agencies believe there is a  need to establish an emergency leave transfer program to assist employees  affected by an emergency, they are to contact their OPM human capital  officer.",
      " Pay Premium Pay for Employees  Performing Emergency  Overtime Work In certain emergency or mission-critical situations, agencies have the  discretion, without OPM approval, to apply an annual premium pay cap  instead of a biweekly premium pay cap, subject to the conditions set forth  in 5 U.S.C. \u00a7 5547(b) and 5 C.F.R. \u00a7 550.106.  In this regard, the agency head,  his or her designee, or OPM may determine that an emergency exists.   Agencies have the discretion, without OPM approval, to apply an annual  cap to certain types of premium pay for any pay period for (1)",
      " employees  performing work in connection with an emergency, including work  performed in the aftermath of such an emergency, or (2) employees  performing work critical to the mission of the agency.  Such employees  may receive premium pay under these conditions only to the extent that the  aggregate of basic pay and premium pay for the calendar year does not  exceed the greater of the annual rate for (1) General Schedule (GS)\u201315 step  10 (including any applicable special salary rate or locality rate of pay, or   (2) level V of the Executive Schedule. Furlough In some emergency situations, agencies have the discretion,",
      " without OPM  approval, to furlough employees, that is, to place them in a temporary  status without duties and pay for nondisciplinary reasons.  Under 5   C.F.R. \u00a7 752.404(d)(2), agencies are relieved of the requirement to provide  employees advanced notice and an opportunity to respond when the  furlough is based on \u201cunforeseeable circumstances,\u201d such as a sudden  breakdown in equipment, an act of nature, or a sudden emergency  requiring the agency to immediately curtail activities. Benefits Workers\u2019 Compensation  Benefits Workers\u2019 compensation benefits are available when federal employees are  injured or killed while on duty.",
      "  The Department of Labor may establish  special procedures to provide direct assistance to affected employees and  their families. Expedited Processing of  Retirement and Life  Insurance Benefits To assist agencies in responding to employee needs during and after an  emergency situation, OPM may establish special expedited arrangements  for processing disability retirement applications; survivor benefits; and  payments under the Federal Employees Group Life Insurance Program,  currently administered by the Metropolitan Life Insurance Company. Death Gratuity Under Section 651 of Pub. L. No. 104-208 (Omnibus Consolidated  Appropriations Act, 1997), 5 U.S.C. \u00a7 8133 note,",
      " agencies have the authority,  without OPM approval, to pay up to $10,000 to the personal representative  of a civilian employee who dies in the line of duty. Telework Agencies have the discretion, without OPM approval, to approve  telecommuting arrangements and alternative work sites to accommodate  emergency situations.  According to OPM, one of the major benefits of the  telework program is the ability of telework employees to continue working  at their alternative work sites during a disruption to operations.  In  recognition of the growing importance of teleworkers in the continuity of  agency operations, OPM states that agencies may wish to modify their  current policies concerning teleworkers and emergency closures.",
      "   Agencies may also wish to require that some or all of their teleworkers  continue to work at their alternative work sites on their telework day  during emergency situations when the agency is closed.  Although agencies  would not have to designate a teleworker as an emergency employee, OPM  states that any requirement that a telework employee continue to work if  the agency closes on his or her telework day should be included in the  employee's formal or informal telework agreement. Emergency Hiring  Flexibilities Emergency Critical Hiring Under 5 C.F.R. \u00a7 213.3102(i)(2), agencies have the discretion, without OPM  approval,",
      " to fill positions for which an emergency or critical hiring need  exists; however, initial excepted appointments under this authority may not  exceed 30 days and may be extended only for an additional 30 days.  Such  an extension may be made only if the appointee\u2019s continued employment  would be essential to the agency\u2019s operations. Under 5 C.F.R. \u00a7 213.3102(i)(3), OPM may also grant agencies the authority  to temporarily appoint individuals to the excepted service in positions for  which OPM has determined that examination is impracticable (e.g.,  because of the time involved).  For example,",
      " in the aftermath of the  September 11, 2001, attacks, OPM granted agencies authority to fill  positions affected by or that needed to deal with the attacks for up to 1  year, and later extended that authority. When OPM grants agencies the authority to appoint individuals under 5  C.F.R. \u00a7 213.3102, agencies, not OPM, are responsible for establishing the  qualifications that an individual must have to fill the position.  In addition,  in accordance with 5 C.F.R. pt. 330, agencies are not required to comply  with the regulations regarding the Career Transition Assistance Plan  (CTAP), Reemployment Priority List (RPL), and Interagency CTAP (ICTAP)",
      "  because these regulations do not apply to excepted appointments. Agencies have the discretion, without OPM approval, to use the authority  granted by OPM under 5 C.F.R. \u00a7 213.3102 to fill senior-level positions, as  well as positions at lower levels.  Under appropriate circumstances, OPM  may also authorize agencies to use a senior-level position allocation to  appoint an individual under this section (5 C.F.R. \u00a7 319.104). Direct-Hire Authority Agencies have the authority to appoint candidates directly when OPM  determines there is a critical hiring need, or a shortage of candidates, for  particular occupations,",
      " grades (or equivalent), geographic locations, or  some combination of the three.  This authority can be governmentwide or  limited to one or more specific agencies depending on the circumstances. OPM has granted governmentwide direct-hire authority for GS-0602  Medical Officers, GS-0610 and GS-0620 Nurses, GS-0647 Diagnostic  Radiologic Technicians, and GS-0660 Pharmacists, at all grade levels and all  locations, and for GS-2210 Information Technology Specialists  (Information Security) positions at GS-9 and above, at all locations, in  support of governmentwide efforts to carry out the requirements of the  Government Information Security Reform Act and the Federal Information  Security Management Act.",
      "  OPM also approved a direct-hire authority that  permits agencies to immediately appoint individuals with fluency in Arabic  or other Middle Eastern languages to positions in support of the  reconstruction efforts in Iraq. Agencies have the discretion, without OPM approval, to give individuals in  the categories, occupations and specialties, and grades listed above  competitive service career, career-conditional, term, temporary, emergency  indefinite, or overseas limited appointments, as appropriate.  In all cases,  agencies must adhere to public notice requirements in 5 U.S.C. \u00a7\u00a7 3327 and  3330 and ICTAP requirements. If agencies believe they have one or more occupations for which an agency-",
      " specific direct-hire authority may be appropriate in support of emergency  relief and recovery efforts, they are to contact their OPM human capital  officer. Senior Executive Service  Limited Emergency  Appointments To meet a bona fide, unanticipated, urgent need, agencies have the  authority under 5 C.F.R. \u00a7 317.601 to make Senior Executive Service limited  emergency appointments of career employees, without OPM approval.   OPM approval is required to appoint individuals who are not current career  employees and OPM cannot delegate this authority; however, OPM will  process such requests on a priority basis and will also consider temporary  position allocations for agencies that identify the need as essential to deal  with the emergency.",
      " Reemploying Retirees Agencies have the discretion, without OPM approval, to employ retirees to  deal with an emergency, to replace employees called to active duty military  service, or both.  Agencies may immediately offer reemployment to retirees  under any applicable appointing authority.  However, generally, dual  compensation restrictions (e.g., 5 U.S.C. \u00a7\u00a7 8344 and 8468) require agencies  to reduce the pay of a federal civil service retiree by the amount of his or  her annuity.  For details, see the CSRS and FERS Handbook for Personnel  and Payroll Offices,",
      " Chapter 100 \u2013 Reemployed Annuitants. OPM may waive these dual compensation restrictions and, upon request,  may also delegate such authority to an agency head or designee to deal  with emergency staffing requirements.  See 5 C.F.R. pt. 553 for details.  Dual  compensation waivers cannot be approved retroactively.  However,  according to OPM guidance, annuitants who agree to work under salary  offset pending a dual compensation waiver may be recognized for their  special service by the agency through an individual cash award. Reemploying Voluntary  Separation Incentive  Payment Recipients Ordinarily,",
      " employees who resign or retire upon acceptance of a voluntary  separation incentive payment (VSIP) (or buyout) can be reemployed only if  they agree to repay the amount of that payment.  However, upon agency\u2019s  request, OPM may waive the repayment requirement if the individual\u2019s  reemployment is necessary to deal with the emergency situation.  (See 5  C.F.R. \u00a7 576.203(a)(1).)  Persons being considered for VSIP repayment  waivers must be the only qualified applicants available for the positions  and possess expertise and special qualifications to replace persons lost or  otherwise unavailable.  Waivers may be limited by the agency\u2019s specific  statutory VSIP authority.",
      " Other Emergency Hiring  Flexibilities Under 5 C.F.R. pt. 300, subpart E, agencies have the discretion, without  OPM approval, to contract with private sector temporary employment  firms for services to meet their emergency staffing needs.  These contracts  may be for 120 days and may be extended for an additional 120 days,  subject to displaced employee procedures. Agencies have the discretion, without OPM approval, to make competitive  service appointments of 120 days or less without regard to CTAP, ICTAP, or  RPL eligibles.  These programs do not apply to such appointments.  See 5  C.F.R., pt.",
      " 330, Subparts F and G for CTAP/ICTAP conditions and 5 C.F.R. \u00a7  330.207(d) for RPL conditions. Agencies have the discretion, without OPM approval, to appoint current  and former employees from RPL to temporary, term, or permanent  competitive service appointments.  Conversely, agencies may make  exceptions to the RPL provisions to appoint others under 5 C.F.R.  330.207(d). Comments from the Federal Emergency  Management Agency Comments from the Office of Personnel  Management GAO\u2019s Mission The General Accounting Office, the audit, evaluation and investigative arm of  Congress,",
      " exists to support Congress in meeting its constitutional responsibilities  and to help improve the performance and accountability of the federal government  for the American people. GAO examines the use of public funds; evaluates federal  programs and policies; and provides analyses, recommendations, and other  assistance to help Congress make informed oversight, policy, and funding  decisions. GAO\u2019s commitment to good government is reflected in its core values of  accountability, integrity, and reliability. Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost is  through the Internet. GAO\u2019s Web site (www.gao.gov)",
      " contains abstracts and full- text files of current reports and testimony and an expanding archive of older  products. The Web site features a search engine to help you locate documents  using key words and phrases. You can print these documents in their entirety,  including charts and other graphics. Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as \u201cToday\u2019s Reports,\u201d on its Web site  daily. The list contains links to the full-text document files. To have GAO e-mail this  list to you every afternoon, go to www.gao.gov and select \u201cSubscribe to   e-mail alerts\u201d under the \u201cOrder GAO Products\u201d heading.",
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    ],
    "length": 13677,
    "hardness": null,
    "role": null
  },
  {
    "id": 57,
    "question": null,
    "answer": "A 2013 rifle attack on a critical electric power substation in Metcalf, CA, marked a turning point for the U.S. electric power sector. The attack prompted utilities across the country to reevaluate and restructure their physical security programs. It also set in motion proceedings in Congress and at the Federal Energy Regulatory Commission (FERC) which resulted in a new mandatory Physical Security Reliability Standard (CIP-014) for bulk power asset owners promulgated by the North American Electric Reliability Corporation (NERC) in 2015. In the three years since FERC approved this new standard, security risks to the power grid have become an even greater concern in the electric utility industry. Reflecting these ongoing security concerns, legislative proposals in the 115th Congress include provisions directed at power grid physical security. Congress also continues its oversight of grid security and implementation of NERC's security standards. Three entities play key roles in standards oversight and support of implementation for bulk power physical security. NERC and FERC oversee implementation of the CIP-014 standards, while the Department of Energy plays a supporting role in helping bulk power asset owners to protect their critical infrastructure. The detailed findings of NERC's compliance activities are not publicly disclosed due to their confidential nature. However, NERC has stated that the utility industry is making progress towards effective implementation of the CIP-014 standard and NERC has been \"encouraged\" by grid security measures put in place so far. NERC compliance audits as of February 2018 have uncovered no major failures to date.  In addition to compliance with NERC's standards, there have been other observable changes within the electricity sector reflecting greater emphasis on bulk power physical security. These changes include realignment in corporate structure to support physical security, incorporating physical security in transmission planning, new security products and services, utility capital investment in physical security, and utility participation in voluntary security programs. While public information about such changes is limited, it suggests they may be significant and widespread. Although the electric power sector seems to be moving in the overall direction of greater physical security for critical assets, many measures have yet to be implemented and the process of corporate realignment around physical security is still underway. NERC's CIP-014 standards have been promulgated recently, and bulk power asset owners have largely begun enhancing physical security under the standard over the last two years. Therefore, although it is probably accurate to conclude that, based on the objectives of the CIP-014 standards, the U.S. electric grid is more physically secure than it was five years ago, it has not necessarily reached the level of physical security needed based on the sector's own assessments of risk. Bulk power security remains a work in progress. Congress continues to be concerned about the current state of electric grid physical security. Among many specific issues of potential interest, Congress may focus on several with policy significance: security implementation oversight, cost recovery, hardening vs. resilience, and the quality of threat information. As CIP-014 implementation and other physical security initiatives proceed, Congress also may seek to maintain its focus on the power sector's overall progress, not only on short term compliance with NERC's security standards, but also on structural changes supporting physical security as a priority far into the future.\n",
    "docs": [
      "Introduction Securing the electric power grid is among the highest priorities for critical infrastructure protection in the United States. In the past, power grid facilities have had varying degrees of access control and surveillance depending upon the facility type and location. These measures were largely focused on public safety (reflecting liability concerns) and preventing vandalism and theft. More recently, federal agencies, Congress, and the utility industry have focused greater attention on the vulnerability of the power grid, especially the high voltage transmission (bulk power) system, to terrorist attacks which could cause widespread, extended blackouts. Until 2013, the emphasis of analysts and policymakers was on power grid cybersecurity\u2014protecting the computer controls and communication systems used to operate the grid.",
      " However, a 2013 rifle attack on an electric transmission substation in Metcalf, CA, shifted more attention to the physical security of power grid critical assets. In response to the Metcalf attack, as well as other grid incidents and findings from utility security exercises, Congress passed new legislation to strengthen power grid physical security and to facilitate recovery in the event of a successful attack. Congress also sought stronger physical security standards from the Federal Energy Regulatory Commission (FERC) under the commission's existing statutory authority to regulate the reliability of the bulk power system. FERC, in turn, ordered the North American Electric Reliability Corporation (NERC)\u2014the not-for-profit organization responsible for ensuring grid reliability\u2014to promulgate new requirements for the physical security of bulk power critical infrastructure.",
      " After consultation within the utility industry, NERC proposed new physical security standards in May 2014. FERC approved them, with minor changes, the following November. Since 2014, security risks to the power grid have become an even greater concern in the electric utility industry. Addressing them has remained a concern of Congress. An emphasis on physical risk to the power grid was underscored in September 2016 by another successful rifle attack on a transformer substation\u2014in Utah. Reflecting ongoing security concerns, legislative proposals in the 115 th Congress include provisions directed at power grid physical security. Congress also continues its oversight of FERC's grid security activities and the implementation of NERC's physical security standards.",
      " This report examines changes to the physical security of the electric power grid since the promulgation of NERC's physical security standards. The report discusses the current risk environment for the bulk power system. It summarizes the key requirements of NERC's security standards, including its applicability to specific assets, implementation deadlines, and oversight. The report reviews observable changes in the utility sector related to physical security. It concludes with an overview of proposed legislation and a discussion of policy issues for Congress. This report focuses primarily on physical security efforts to prevent successful physical attacks on the bulk power system. For analysis of issues specifically related to power grid cyberattacks and cybersecurity,",
      " see CRS Report R43989, Cybersecurity Issues for the Bulk Power System, by Richard J. Campbell. This report also does not address issues related to security incident recovery or restoration, except in the context of preventive physical security.  Power Grid Threat Environment Grid security analysts and policymakers have long been aware of physical risks to bulk power critical infrastructure, especially to high voltage (HV) transformer stations and substations, which serve as key nodes within the electric transmission system. The 2013 Metcalf attack, in which an unknown perpetrator firing a.30 caliber rifle disabled a critical 500 kilovolt (kV) transformer substation,",
      " demonstrated that such facilities face real and potentially sophisticated threats. The September 2016 rifle attack on a 69 kV transformer substation in Utah\u2014which reportedly left 13,000 rural customers without power for up to eight hours\u2014showed that similar incidents could occur almost anywhere on the grid. A successful cyberattack on Ukraine's power grid in 2015, which was reportedly attributed to Russian hackers, showed that foreign entities could view power grids as attractive targets. A 2017 report from the National Academy of Sciences concludes: \"While to date there have been only minor attacks on the power system in the United States, large-scale physical destruction of key parts of the power system by terrorists is a real danger.",
      " Some physical attacks could cause disruption in system operations that last for weeks or months.\" The persistent threat environment has been changing the perception of physical threats among power grid owners and operators. For example, surveys of electric utility employees show that their physical (and cyber) security concerns are growing. Exelon Corporation, one of the nation's largest utility holding companies, stated in its 2016 annual report Threat sources continue to seek to exploit potential vulnerabilities in the electric\u2026utility industry associated with protection of sensitive and confidential information, grid infrastructure and other energy infrastructures, and such attacks and disruptions, both physical and cyber, are becoming increasingly sophisticated and dynamic.\u2026The risk of these system-related events and security breaches occurring continues to intensify.\u2026 Xcel Energy,",
      " another major utility owner, likewise states in its 2016 annual report Our generation plants, fuel storage facilities, transmission and distribution facilities and information systems may be targets of terrorist activities\u2026 The potential for terrorism has subjected our operations to increased risks and could have a material effect on our business. Accordingly, electricity sector-wide security exercises conducted by NERC have simulated attacks on power grid critical assets combining both cyber and physical dimensions. These exercises are further discussed later in this report. NERC's Physical Security Standards On March 7, 2014, FERC ordered NERC to submit proposed reliability standards requiring transmission owners meeting certain criteria \"to take steps or demonstrate that they have taken steps to address physical security risks and vulnerabilities related to the reliable operation\"",
      " of the power grid. In its order FERC stated that physical security standards were necessary because \"the current Reliability Standards do not specifically require entities to take steps to reasonably protect against physical security attacks.\" According to the FERC order, the new reliability standards were to require transmission owners or operators to perform a risk assessment of their systems to identify \"critical facilities,\" evaluate the potential threats and vulnerabilities to those identified facilities, and develop and implement a security plan designed to protect against physical attacks on those identified critical facilities. The order required that each of these steps be verified by NERC or another third party qualified to review them. On May 23,",
      " 2014, NERC filed with FERC its proposal for mandatory physical security standards. On November 20, 2014, FERC approved the proposed standard, with minor changes, as NERC's new Physical Security Reliability Standard (CIP-014-1). Following publication in the Federal Register, FERC's order approving the standard became effective on January 26, 2015. FERC approved a revised version of the standard (CIP-014-2) on July 14, 2015. Required compliance for the standard began on October 1, 2015 with completion of the final parts required by November 24,",
      " 2016 for all applicable entities. Physical Security Standard Requirements The stated purpose of NERC's physical security reliability standard is \"to identify and protect transmission stations and transmission substations, and their associated primary control centers, that if rendered inoperable or damaged as a result of a physical attack could result in instability, uncontrolled separation, or cascading within an interconnection.\" It applies to transmission owners with assets operating at 500 kV or higher as well as owners with substations operating between 200 kV and 499 kV if they meet certain interconnection or load-carrying criteria. The standard, generally referred to as \"CIP-",
      "014,\" consists of six principal requirements (R1-R6), summarized as follows:  R1. Risk assessments by transmission owners to identify critical transmission facilities; R2. Independent third party verification of risk assessments conducted under R1; R3. Requirement for transmission owners with critical facilities identified under R1 but not under their operational control to notify the transmission operator of these facilities; R4. Mandatory threat and vulnerability assessments for critical facilities conducted by transmission owners and operators; R5. Development, documentation, and implementation of physical security plans to protect critical facilities; and R6. Independent third party review of the threat and vulnerability assessments performed under R4 and security plans developed under R5.",
      " The standard also lays out a process for compliance monitoring and assessment including audits, self-certifications, spot checking, violation investigations, self-reporting, and handling complaints. The new standard is enforced by NERC or another Regional Entity under a penalty review policy for mandatory reliability standards approved by FERC subject to the Commission's enforcement authority and oversight under the Energy Policy Act of 2005 ( P.L. 109-58 ). Monitoring of compliance with the standard is further discussed below. Federal Oversight and Support Three entities play key roles in standards oversight and implementation support for bulk power physical security. NERC and FERC directly oversee implementation of the CIP-",
      "014 standards, while the Department of Energy (DOE) plays a supporting role in helping bulk power asset owners to protect their critical assets. NERC's Implementation Oversight As stated above, with oversight by FERC, NERC has the authority to develop, oversee, and enforce implementation of the CIP-014 physical security standard. NERC carries out these functions together with the eight Regional Entities (e.g., Midwest Reliability Organization) with which NERC has agreements to delegate its authority to monitor and enforce reliability standards compliance. Collectively, NERC and the Regional Entities comprise the Electric Reliability Organization (ERO) Enterprise. In general, NERC employs a risk-based framework to monitor compliance of all its grid reliability standards on the belief that monitoring and enforcement must be \"right-sized\"",
      " based on considerations including risk factors and management practices related to detecting, assessing, mitigating, and reporting of noncompliance. As reliability risk is not the same for all registered entities, the Framework examines [bulk power system] risk of registered entities both collectively and individually, to determine the most appropriate [Compliance Monitoring and Enforcement Program] tool to use when monitoring a registered entity's compliance with NERC Reliability Standards. The Framework also promotes an examination into how registered entities operate and tailor compliance monitoring focus to areas that pose the greatest risk to [bulk power system] reliability. NERC's approach offers flexibility in both the frequency and type of compliance monitoring (e.g., offsite or onsite audits,",
      " spot checks, or self-certifications) applied to an entity under a particular standard based on its particular level of reliability risk. To support its compliance approach, NERC may conduct various activities, such as publishing guidance documents, providing training, and conducting outreach, \"to promote transparency and confidence\" in the utility industry's implementation of a standard. In monitoring compliance of the CIP-014 standard, NERC's focus in 2015 and 2016 was on the standards' requirements to identify critical transmission stations and substations (Requirements R1 and R2), ensuring that this identification was \"appropriate and risk-informed.\" NERC required covered entities to self-certify with respect to:",
      " risk-assessment, identifying critical assets, and third party verification. NERC also conducted voluntary outreach through on-site visits with 19 covered entities to discuss security measures and CIP-014 implementation challenges. In cases where there have been discrepancies between utility-generated critical asset lists and critical assets identified by the independent third parties, NERC has required the covered entities to provide further information and explanation to address the discrepancy. NERC has also been conducting audits of entities which have identified more, or fewer, critical substations as a percentage of all their substations than is typical. The detailed findings of NERC's compliance activities are not publically disclosed due to the confidential nature of security information.",
      " However, NERC stated that, based on observations in 2016, the utility industry was \"making progress towards effective implementation of and compliance with CIP-014-2.\" A NERC presentation about its voluntary and informal site visits reported \"remarkable progress\" on physical security among 19 asset owners visited as of February 2016. In 2017, NERC increased its focus on the scope of utility security plans (R5), including their timelines for implementing security measures and the utility industry's overall progress in implementing CIP-014. The ERO Enterprise has prioritized auditing the quality of covered entities' risk management plans.",
      " In the second quarter of 2017, compliance audit staff were provided with guidance and training on bulk power physical security best practices as a reference for evaluating the physical security measures implemented by the covered entities.  The ERO Enterprise expects to complete audits of the largest entities within three years of the effective date of CIP-014. As of February 2018, NERC had conducted compliance audits of approximately 45% of the covered entities with critical transmission stations and substations as defined under CIP-014. NERC had also audited over 30% of entities that did not identify critical assets after applying the CIP-014 criteria (under R1). NERC staff expects to have audited approximately 70%",
      " of the entities with CIP-014 critical assets by the end of 2018. According to its stated schedule, NERC would audit the remaining entities in 2019. Subsequent monitoring and enforcement will focus more heavily on implementation of measures in the grid security plans. According to NERC, the audits completed to date have not uncovered any major compliance failures, and NERC has been \"encouraged\" by security measures that utilities have put in place so far. NERC has found no serious risk violations of the CIP-014 standard. Of 19 noncompliance issues identified, 8 were found to be \"minimal\"",
      " or \"moderate\" risk, with 2 warranting a financial penalty. The remaining 11 noncompliance issues are under review. Electricity Information Sharing and Analysis Center In addition to its standards activities, NERC also supports security of the electric power sector as the operator of the Electricity Information Sharing and Analysis Center (E-ISAC). Established in 1998, the E-ISAC is the electricity sector's primary communications channel for security-related information, situational awareness, incident management, and coordination. Among its key responsibilities, the E-ISAC gathers and analyzes security data, shares it with stakeholders, and communicates security risk mitigation strategies. Bulk power entities are required to report physical security events to the E-ISAC under NERC's Event Reporting Reliability Standard (EOP-",
      "004), which was approved by FERC in 2013 and revised in 2015. Although operated by NERC, the E-ISAC is independent and organizationally separate from NERC's standards enforcement functions; information shared by utilities with the E-ISAC is not passed on to NERC compliance staff. Nonetheless, the E-ISAC has played a role in facilitating industry understanding of physical security best practices. For example, the E-ISAC has added significant physical security threats and tactics to the NERC's biennial GridEx security exercises (discussed later in this report). In 2015,the E-ISAC also established a Physical Security Advisory Group,",
      " which includes industry physical security professionals, outside experts, and representatives from DOE and the Department of Homeland Security (DHS), to assist in the analysis of physical security threats and advise asset owners on physical threat mitigation. Through these efforts, the E-ISAC developed and ratified a design basis threat for the electric sector in December 2015. The E-ISAC also has hosted two threat workshops, with plans for more. Thus, while the E-ISAC has had no role in enforcing the CIP-014 standards, the security risk and mitigation information it develops and promulgates support the activities of bulk power asset owners complying with the standards. FERC Oversight As the agency with general statutory authority over grid reliability,",
      " and the agency which ordered and approved NERC's CIP-014 standard, the Federal Energy Regulatory Commission also oversees implementation of the standard. In carrying out this oversight, FERC relies primarily on annual compliance reporting by NERC. However the commission also conducts some independent compliance activities, and it also conducts some compliance activities in cooperation with NERC. For example, during the initial rollout of the CIP-014 standard in 2016, FERC staff coordinated with NERC staff in support of on-site visits to the covered entities discussed above. In its order approving CIP-014-01, the commission stated that NERC staff would submit to both the NERC Board of Trustees and FERC a report following implementation of requirements R1,",
      " R2, and R3 about the scope, number, and characteristics of facilities identified as critical. The order stated that Based on the results reported by NERC, we expect Commission staff to audit a representative number of applicable entities to ensure compliance with Reliability Standard CIP-014-1. Depending on the audit findings, the Commission will determine if there is a need for any further action by the Commission including, but not limited to, directing NERC to develop modifications to Reliability Standard CIP-014-1 to provide greater specificity to the methodology for determining critical facilities. As of November 2, 2017, FERC had completed two audits of critical assets identified by covered entities (R1)",
      " and was in the process of conducting a third. These audits have involved technical review of utility regulatory documents by FERC engineers. According to FERC staff, the initial audits identified one issue of concern related to the interpretation of specific language in the standard regarding asset criticality. In addition to NERC's annual reports, FERC receives from NERC periodic Notices of Penalty (NOP) to regulated entities for reliability standards violations. As of November 30, 2017, FERC received NOPs for two violations (apparently at the same utility) of the CIP-014 standard. DOE Initiatives Presidential Decision Directive 63 (PDD-",
      "63), issued during the Clinton Administration in 1998, established national policy for critical infrastructure protection from both physical and cyber threats. PDD-63 established 15 critical infrastructure sectors. The Department of Energy was assigned responsibility for (1) the electric power, and (2) the oil and natural gas production and storage sectors. The George W. Bush Administration built on the work of PDD-63, superseding it in 2003 with Homeland Security Presidential Directive 7 (HSPD-7) on \"Critical Infrastructure Identification, Prioritization, and Protection.\" HSPD-7 again assigned to DOE (as a Sector-Specific Agency)",
      " responsibility for the energy sector\u2014including electric power\u2014as well as responsibility for being the federal coordinator for all critical infrastructure protection efforts. The Obama Administration superseded HSPD-7 with Presidential Policy Directive 21 (PPD-21) on \"Critical Infrastructure Security and Resilience\" in 2013. PPD-21 retained the Sector-Specific Agencies (SSAs) from HSPD-7, with DOE continuing as the SSA for the energy sector. Thus, DOE has had a supportive role in helping utilities to protect bulk power critical assets over the last two decades. Until recently, DOE's power grid security activities were led by its Office of Electricity Delivery and Energy Reliability (OE)",
      " within the Office of the Under Secretary for Science and Energy. A 2008 OE report stated that \"OE's mission is to advance technology\u2014in partnership with industry, government, academia, and the public\u2014to meet America's need for a reliable, efficient, and resilient electric power grid.\" Although the office was primarily focused on grid cybersecurity, it did conduct activities related to power grid physical security, including analysis of large power transformer security, a substation security awareness campaign, and efforts to support and coordinate research and development for physical security. On February 14, 2018, DOE announced that the Secretary of Energy was establishing a new Office of Cybersecurity,",
      " Energy Security, and Emergency Response (CESER) to be led by an Assistant Secretary with responsibilities to help protect energy infrastructure from \"from cyber threats, physical attack and natural disaster.\" How this reorganization will affect DOE's activities in bulk power physical security remains to be seen. Observed Changes in Bulk Power Physical Security Most grid security analysts consider the 2013 Metcalf substation attack to have been the \"wake up call\" which both changed electric sector attitudes toward grid physical security and motivated the promulgation of NERC's physical security regulations. Since that time, there have been a number of apparent changes within the electricity sector related to increasing bulk power physical security.",
      " It is not clear whether these changes have been driven more by changes in utility perceptions of grid threats or by NERC's mandatory security standards. Furthermore, there is currently no comprehensive accounting of changes in physical security throughout the sector. Nonetheless, anecdotal information in the public domain suggests that such changes may be significant and widespread. They are discussed in the following sections. Corporate Structure Supporting Physical Security One criticism that arose in the wake of the Metcalf attack was that physical security management at Pacific Gas and Electric Company (PG&E, the Metcalf substation's owner) and at other utilities was not a centrally organized or well-supported function in corporate management.",
      " This lack of support limited the influence of security managers in corporate planning and financial decisions. However, it appears that many utilities have been reconfiguring and elevating physical security functions within their corporate structures. For example, owners of transmission assets such as PG&E, American Electric Power, and Xcel Energy have appointed Chief Security Officers at senior levels responsible for managing both physical and cyber security risks company-wide. The senior security professional, typically at the vice president or director level, now has direct access to the [Chief Executive Officer] and company boards of trustees, often to supply situational awareness of physical and cybersecurity issues.\u2026 The electricity industry is quickly moving away from security as an \"addition duty\".\u2026 [M]",
      "ost utilities today have dedicated security departments committed to the protection of company assets and personnel. Utilities are also centralizing and bolstering their physical security capabilities at the operational level. Between 2014 and 2017, for example, Xcel Energy consolidated and grew its staffing for the \"Chief Security Officer class of services\" from 47 to 63 employees. According to the company's regulatory filings the increase in average staffing levels... was due to the need to correct a lack of resources to ensure adequate headcount to provide essential cyber and physical Enterprise Security services for Xcel Energy\u2026. This increase in staffing demonstrates the emerging need that led to a stand-alone organization (i.e., the Chief Security Officer)",
      " to focus on Cyber Operations, Enterprise Resilience, Physical Security and Security Governance. Likewise, in response to the Metcalf attack, Dominion Energy established \"a true cross-functional team with more than 100 people representing the entire Dominion organization,\" to develop and implement a more comprehensive substation security program. Such efforts appear to extend to major publicly owned utilities as well. For example, according to the head of the Western Area Power Administration (WAPA), one of four federal power marketing administrations, WAPA's approach to physical security... began in 2013 with the consolidation of our Office of Security and Emergency Management across our five regions and the implementation of a sophisticated risk-based program in analyzing the threats and vulnerabilities to our substations.",
      " The Tennessee Valley Authority (TVA), which operates federally owned hydroelectric and nuclear generation and associated transmission assets, recently closed a job posting for eight entry-level Inspectors, each to be \"trained as a physical security specialist\" to provide \"comprehensive security services, including assessments of facilities to identify credible threats, and implementation and testing of countermeasures to mitigate risks.\" Some transmission owners are also specifically increasing their in-house intelligence capabilities in physical security, including recent postings for positions such as \"Security Intelligence Specialist\" and \"Director\u2014Corp Security Info & Intelligence.\" While the examples above are anecdotal, they would be consistent with what may be a trend among key grid owners to make physical security a better-",
      "organized and more influential corporate function. Not all utilities may be implementing such organizational changes, however. Physical Security in Long-Term Transmission Planning Since NERC promulgated the CIP-014 standards, some utilities have begun to put a greater emphasis on bulk power physical security as a design consideration in long-term transmission system planning. This approach aligns with the California Public Utilities Commission's recommendation in its 2018 report that, \"there should be an emphasis on incorporating a menu of physical security strategies [into] any substation from the time of its inception.\" For example, Public Service Enterprise Group's transmission planning criteria for its Long Island system in New York discusses the use of power system simulation tools for \"various transmission system security and reliability studies.\" Commonwealth Edison's transmission planning criteria includes a separate section on \"security criteria\"",
      " for system design which considers \"severe low probability outage combinations\" and seeks \"to avoid cascading outages, instability, or widespread blackout.\" Such criteria could apply to both natural and man-made outages, but they are consistent with, and readily applied to, design considerations for enhanced physical security. American Electric Power (AEP) also has incorporated asset criticality as a design criterion in its transmission planning.  As a result of the revised NERC CIP standards, AEP now classifies all of its bulk electric system facilities based on the critical nature of the equipment to determine the level of security needed. This approach allows us to design security controls directly into new infrastructure from the start,",
      " building the costs into capital projects as needed. It also allows us to be more proactive with new and existing infrastructure while balancing risks with mitigation solutions. In its plans for a 2018 reliability-related upgrade at one its substations, Vermont Electric Power Company states that it \"will also take the opportunity to make improvements to the physical security\" of the substation. According to NERC officials, based on security criteria, some utilities also have begun to consider new transmission interconnections not only to increase line capacity for bulk power flows, but also to reduce the criticality of particular transformer substations in congested areas by providing more transmission paths around them.",
      " New Security Products and Services As utilities have devoted greater organizational and financial resources towards power grid physical security, industry vendors have been offering more physical security products and services to meet sector demand. As one utility services company has observed, \"we can expect plenty of innovation as manufacturers see new markets due to the new standards for physical security of critical substations.\" These offerings range from analytical services for security planning to physical products to harden physical assets. A comprehensive survey of such offerings is beyond the scope of this report, but the following examples illustrate the kinds of products now commercially available in the bulk power physical security market. Security Program Planning and Implementation. Engineering and security consulting firms have developed customizable programs specifically for power grid physical security review,",
      " planning, analysis, and implementation in compliance with the CIP-014 standards and utility-specific requirements. Anti-Intrusion Products. Vendors have been marketing existing intrusion-related products specifically for use at bulk power critical facilities. These products include visual, acoustic, thermal radar, and electromagnetic systems for facility monitoring, intrusion detection, and response. Hardened Transformers and Components. At least two major manufacturers have been marketing bulk power transformers with integrated ballistic shielding, or customizable plates to shield existing transformers. Smaller manufacturers have also begun marketing hardened transformer components, such as composite bushings, for new and retrofit substation applications. Substation Perimeter S hielding.",
      " A number of vendors have been marketing perimeter fencing and wall products specifically for visual and physical shielding of bulk power substations. Most of these products are designed specifically to protect against rifle attacks such as the Metcalf attack. Although new physical security products and services are being marketed in the utility sector, there is no comprehensive source of data about their sales to bulk power asset owners. Simply because vendors are marketing products does not mean that many utilities are buying them. For example, as of October 2017, Siemens Corp. had announced only one commercial order for its new transformer ballistic shielding retrofit product. Thus, the overall impact of such offerings on the sector cannot be qualified reliably.",
      " Additional discussion of physical security spending is in the following section. Capital Investment in Physical Security Major changes in power grid operational expenses and capital investment are generally slow to occur. In privately owned utilities, significant changes in spending and plans for new capital projects may need to go through a number of rigorous screens, including power network modeling, a corporate capital allocation process, a regulatory approval process, and a procurement process. Publicly owned utilities may need approval from cooperative boards, or municipal or federal officials. This combination of requirements can take years to complete. Consequently, many significant operating expenditures or capital investments for physical security identified in security plans under CIP-014 may still be working their way through utility budgets and implementation.",
      " For example, in a 2016 rate filing, Southern California Edison stated that it planned to make physical security improvements at approximately 24 facilities in 2015-2017 and proposed to upgrade 8 substations per year from 2016 through 2020. Likewise, in its 2016 annual report, Dominion Resources' timeline for power grid capital investment in \"Physical Security\" runs to 2021. Notwithstanding the potential length of time it may take for some security projects to be approved and implemented, there are indications in the public record that bulk power asset owners have already been spending more on new physical security measures. In its December 2016 report,",
      " the Edison Electric Institute stated that \"primary factors driving transmission investment between 2015 and 2019\" included \"system hardening and resiliency to minimize adverse catastrophic events\" and \"improvements to comply with evolving transmission reliability and security compliance standards.\" In its January 2018 white paper, the California Public Utilities Commission (CPUC) reports that investor-owned utilities under its jurisdiction \"already... have sought approval for tens of millions of dollars in General Rate Case funding to ensure physical security.\" The following examples illustrate the types of physical security projects and recent spending in publicly available sources. In 2017, the Bonneville Power Administration announced stand\u2013alone plans to install security fencing at two high-voltage substations in compliance with NERC's security standards and to \"protect critical assets from theft,",
      " vandalism, and terrorism.\" In 2017, PPL Electric Utilities reportedly filed for regulatory approval for a $450,000 expenditure to reconfigure a 500 kV substation in compliance with NERC's CIP-014 physical security standard. In 2017 regulatory filings, Vectren (Indiana) described plans to invest $2.9 million for physical security upgrades at critical substations, including enhanced fencing, access control, video surveillance, and perimeter motion detection. According to the Western Area Power Administration, its expenses for physical security \"nearly tripled\" between 2013 and 2017. Utility Participation in Voluntary Security Programs Although the CIP-",
      "014 mandatory physical security standards have only been in effect since 2014, bulk power asset owners have had earlier opportunities to participate in voluntary security initiatives administered by NERC and DHS. Utility participation in these voluntary programs is another indication of overall efforts in the sector to improve critical asset physical security. NERC Grid Security Exercises In 2011, NERC conducted GridEx, the first of an ongoing series of biennial electric sector-wide grid security exercises. The 2011 exercise assessed the readiness of utilities to respond to a cyberattack, strengthened their crisis response, and provided input for internal security program improvements. Although the exercise was focused on a cyberattack,",
      " it did involve physical incursions into power grid substations as well as aspects of grid monitoring and recovery that would be relevant to an attack on critical transformers. After the Metcalf attack in 2013, NERC conducted a second, more expansive grid security exercise, GridEx II. The exercise scenario included a cyberattack on the grid coupled with a coordinated physical attack against a subset of transmission and generation assets\u2014including critical transformer substations. NERC conducted GridEx III in 2015, again including a baseline scenario with cyber and physical attacks, but also with an option for participants to customize the baseline scenario to meet local objectives. NERC conducted its most recent exercises,",
      " GridEx IV, in November 2017. According to NERC, one indication of progress in bulk power grid security is increasing participation by electricity sector entities in its GridEx exercises. The number of utilities participating in GridEx rose from 49 in 2011 to 166 in 2015. NERC has not yet released participation details for GridEx IV, but the DOE reported that the latest exercise had more participants than in 2015. DHS Critical Infrastructure Surveys The Department of Homeland Security's Protective Security Coordination Division conducts voluntary field assessments of critical infrastructure to identify vulnerabilities, interdependencies, capabilities, and cascading effects of potential terrorist attacks.",
      " As part of these efforts, DHS Protective Security Advisors offer voluntary, web-based security surveys of critical facility security using the agency's Infrastructure Survey Tool developed in 2008. The key goals of the surveys are to identify facilities' physical security and security management, identify security gaps, create facility protective and resilience measures indices that can be compared to similar facilities, and track progress toward improving security. According to DHS officials, of more than 6,000 surveys completed since the program began, over 600 have been conducted on electric power facilities\u2014although the timing of these surveys and the specific types of power facilities involved are not reported. Legislative Proposals in the 115th Congress Given the relatively recent promulgation of NERC's new physical security standards,",
      " bulk power physical security has not been a major legislative focus in the 115 th Congress. Nonetheless, several bills include provisions intended to enhance bulk power physical security\u2014primarily by establishing new DOE grid security programs rather than by imposing new requirements on FERC or on bulk power asset owners directly. The relevant provisions of these bills, and a related resolution, are summarized below. The Enhancing Grid Security T hrough Public-Private Partnerships Act ( H.R. 5240 ) would require DOE to establish a program to facilitate public-private partnerships for electric utility physical security and cybersecurity, among other provisions. Program activities would support voluntary implementation of maturity models,",
      " self-assessment, and security auditing; sharing of best practices and data collection in the electric sector; and training and technical assistance to utilities (\u00a72(a)). The Energy Emergency Leadership Act ( H.R. 5174 ) would amend the Department of Energy Organization Act to include \"energy emergency and energy security\" to the functions assigned to Assistant Secretaries. These functions would include responsibilities with respect to emerging threats, supply, and emergency planning, among others. They would also include \"provision of technical assistance, support, and response capabilities with respect to energy security threats, risks, and incidents\" (\u00a72). The Energy and Natural Resources Act of 2017 ( S.",
      " 1460 ) would require DOE to develop an advanced energy security program to secure energy networks, including electric transmission and delivery. Eligible activities would include developing \"capabilities to identify vulnerabilities and critical components that pose major risks to grid security if destroyed or impaired,\" modeling national level impacts from human-made events, developing a physical security maturity model, conducting grid security exercises, conducting research on critical asset hardening, and other related measures (\u00a72002(e)). The Leading Infrastructure for Tomorrow's America Act ( H.R. 2479 ) would establish a grant program administered by DOE \"to enhance energy security through measures for electricity delivery infrastructure hardening and enhanced resilience and reliability\"",
      " (\u00a731101(a)). The Advancing Grid Storage Act of 2017 ( S. 1851 ) would establish a competitive grant program for pilot energy storage systems administered by DOE with one objective being to \"improve the security of critical infrastructure and emergency response systems\" in the electric grid (\u00a75(a)(4)(A)). The Grid Cybersecurity Research and Development Act ( H.R. 4120 ) would require DOE, together with bulk power asset owners, and in collaboration with the National Laboratories, to \"utilize a range of methods, including voluntary vulnerability testing and red team-blue team exercises, to identify vulnerabilities in physical and cyber systems\"",
      " (\u00a76(a)). The Flexible Grid Infrastructure Act of 2017 ( S. 1875 ) would require DOE to: develop model standards for the electric distribution grid, in part to improve security with respect to physical threats (\u00a75(d)(1)), evaluate whether new performance standards and testing procedures are needed to ensure electrical equipment resilience in the face physical threats (\u00a75(d)(2)), and submit to Congress methods and guidelines for calculating the costs and benefits of investments in resilience and security solutions for the electric grid (\u00a75(e)(1)). House Resolution 334 states that it should be the policy of the United States to, among other things,",
      " \"bolster the reliability, affordability, diversity, efficiency, security, and resiliency of domestic energy supplies, through advanced grid technologies,\" and to promote advanced grid tools \"to increase data security, physical security, and cybersecurity awareness and protection.\" Policy Issues for Congress Although NERC's CIP-014 standards have been promulgated, and bulk power asset owners have begun enhancing physical security, Congress continues to be concerned about the current state of electric grid physical security. Among many issues of potential interest, Congress may focus on several with overarching policy significance: security implementation oversight, cost recovery, hardening vs. resilience, and the quality of threat information.",
      " Oversight of Physical Security Implementation Although FERC's statutory authority for grid reliability and NERC's reliability standards both include provisions for oversight and enforcement, congressional oversight of physical security implementation may be a challenge for several reasons. First and foremost, information about physical security measures is inherently sensitive and there are both statutory and regulatory restrictions on its disclosure. Therefore, the level of security-related information that utilities are willing or able to provide outside the CIP-014 third-party review process or NERC compliance audits is more limited than reports about, say, general reliability or safety. NERC is not compiling a centralized database of critical assets or security measures implemented by the utilities subject to its physical security standard.",
      " Moreover, while NERC may provide security information to FERC, the security-related information NERC can provide in public reports is limited and typically redacted. Therefore, although information about CIP-014 implementation exists among the utilities and independent third parties (operating within the standard), and is provided at some level of specificity to NERC, that information may not be as useful or visible as it could be to Congress or other outside entities. Another oversight challenge arises because NERC's CIP-014 standards are not prescriptive; bulk power asset owners have considerable discretion in the nature and timing of the physical security measures they may include in their physical security plans.",
      " NERC viewed such flexibility as necessary for its standard due to the unique characteristics of each utility's bulk power system and the risks it faces. However, this flexibility also may make it more difficult to develop useful metrics for CIP-014 implementation and comparing implementation among asset owners. NERC's standards for power grid physical security may ensure considerable consistency in the process utilities must undertake to identify critical substations and develop plans to secure them. However, they may not ensure consistency among the various security plans nor in the specific measures the individual asset owners will choose to implement to reduce the risk of intentional attacks. For example, ballistic shielding at critical substations may be an appropriate and sufficient protective measure for some utility assets,",
      " say, in open and rural areas, but not necessarily in more urban areas. Even when detailed company-specific information about physical security measures is available, it might be difficult to develop reliable metrics to evaluate it. Metrics are an important tool NERC uses to evaluate utility performance in the context of power grid reliability. However, officials at EEI have stated that measuring the adequacy of grid security for a diverse set of asset owners under changing risk circumstances poses significant problems. \"Security metrics (for both cyber and physical security) have consistently been a challenge due evolving threats and vulnerabilities. If you build an eight-foot fence, the attacker just needs to bring a nine-foot ladder.\" NERC is actively engaged in efforts to develop bulk power system security metrics in which it has likewise encountered \"challenges associated with developing relevant and useful security metrics that rely on data willingly and ably provided by individual entities.\" Congress may judge the effectiveness of the CIP-",
      "014 physical security standards as best it can based on reports and testimony from NERC and FERC as well as information from the assets owners themselves. However, due to the issues above, if Congress decides the information as currently structured is insufficient to draw reliable conclusions about the status of bulk power physical security as a whole, it may revisit how the responsible agencies collect, measure, and report it. Congress may also consider additional avenues for reviewing this information, for example, through classified briefings or specifically requested studies or reports. Also, as FERC continues to implement its policy of regulating physical security of the power grid, Congress may examine whether company-specific security initiatives appropriately reflect the risk profiles of their particular assets,",
      " and whether additional security measures across the grid overall uniformly reflect terrorism risk from a national perspective. Financial Requirements and Cost Recovery Two of the barriers to physical security investment among utilities prior to the Metcalf attack were competition for limited capital investment resources and justifying security spending to corporate boards and utility rate regulators. NERC regulatory requirements for physical security make it easier for security managers to justify related operating and capital expenditures to corporate leadership, and to seek cost recovery for such expenditures through regulated rates. However, even where regulators have been supportive of cost recovery for physical security investments in general, they have faced challenges gauging the prudence of specific security investments because they are hard to evaluate on a traditional benefit-cost basis.",
      " As a 2006 report from the Electric Power Research Institute states,  Security measures, in themselves, are cost items, with no direct monetary return. The benefits are in the avoided costs of potential attacks whose probability is generally not known. This makes cost-justification very difficult. Note that cost-justification requires not only the approval of utility management, but also of FERC and potentially state public utility commissions which regulate the rates grid owners may charge for electric transmission and distribution service. Regulators are responsible for ensuring that electricity rates are just and reasonable. They must be convinced that any new grid security capital costs and expenses are necessary and prudent before they will allow them to be passed through to ratepayers.",
      " However, corporate financial processes differ from utility to utility, and utility rate regulation differs from jurisdiction to jurisdiction, so investment and cost recovery for physical security is not uniform across the electricity sector and remains a work in progress. As implementation of new physical security plans under CIP-014 continues, Congress may examine whether the overall level of investment appropriately reflects the level of security risk facing the bulk power system, and whether any cost-recovery barriers are preventing assets owners from making investments necessary to secure the grid. Hardening vs. Resilience There are two fundamental approaches to reducing the risk of a successful physical attack on the electric grid. The first approach,",
      " which is the principal approach of NERC's CIP-014 standards, is to prevent attacks by monitoring critical facilities to identify would-be attackers before they attempt an attack, preventing attacker access to critical assets, and otherwise hardening facilities to make them more physically secure to protect against attack and equipment failure. The second approach is to make the broader power system more \"resilient\" to a successful attack on particular assets through an enhanced ability to manage loads, reroute power flows, and access other sources of generation to reduce the potential of blackouts even if critical assets are disabled. Initiatives such as the spare transformer program administered by the Edison Electric Institute (EEI,",
      " the electric utility trade association), and a proposed federal Strategic Transformer Reserve, which can accelerate replacement of critical transformers if they are damaged, may contribute to the power grid's ability to sustain a terrorist attack without widespread grid failure. Thus, while hardening is aimed more at reducing the likelihood of a successful attack, resilience aims at reducing potential consequence; doing either reduces overall security risk. Measures to harden critical facilities and measures to increase system resilience are not exclusive of one another. In fact, they can be complementary in reducing overall security risk. However, they may involve different approaches to power grid operation and design, and they may involve different, competing types of investment (e.g., transformer shielding vs.",
      " transmission network sensors). Balancing the two approaches to most efficiently achieve a desired level of physical security is a challenge for utilities with limited capital budgets. The CPUC stated that \"determining appropriate security measures or approaches to ensuring resiliency\" was one of three \"major issues\" in its power grid physical security proceedings. As Congress continues its oversight of bulk power physical security regulation, it may consider whether the electric power sector as a whole is striking an appropriate balance between these two approaches. Threat Information The utility industry's physical security risk assessments rely upon threat information from the federal government, among other sources. The quality of this threat information is a key determinant of what bulk power asset owners need to be protecting against and what security measures to take.",
      " Incomplete or ambiguous threat information may lead to inconsistency in physical security among grid owners, inefficient spending of limited security resources at facilities (e.g., that may not really be under threat), or deployment of security measures against the wrong threat. As discussed earlier in this report, the E-ISAC plays a valuable role in identifying and analyzing physical security risk, and disseminating information about those risks to bulk power asset owners. Independent third-party verification of risk assessments under the CIP-014 standards, together with NERC compliance audits, are two additional means of helping to ensure greater consistency of threat information among utilities. Nonetheless, a changing threat environment continues to pose challenges for physical security planning and investment.",
      " As NERC stated in a recent compliance report, \"the security threat landscape is constantly changing and requires adaptation and information sharing on how best to address these issues in an effective and efficient manner.\" Concerns about the quality and specificity of federal threat information have long been an issue across all critical infrastructure sectors. Threat information continues to be an uncertainty in the case of power grid physical security. For example, although there is wide consensus that the Metcalf attack was extremely alarming, some industry analysts have opined that FERC's physical security order nonetheless may have been an \"overreaction\" to Metcalf. By contrast, former DHS Secretary Michael Chertoff has predicted that \"the sophistication and resulting damage of the Metcalf attack will... be exceeded\"",
      " in a future attack. Still others have expressed concern that FERC's physical security concerns may be too heavily focused on another Metcalf-type scenario\u2014the last threat\u2014rather than a wider range of potential future threats. As discussed earlier, there is widespread belief that bulk power critical assets are vulnerable to physical attack, that such an attack potentially could have catastrophic consequences, and that the risks of such attacks are growing. But the exact nature of such potential attacks and the capability of perpetrators to successfully execute them are uncertain. Consequently, despite the technical arguments, with limited information about potential targets and attacker capabilities, the true vulnerability of the grid remains an open\u2014and evolving\u2014question.",
      " As Congress seeks to establish the best policies to address bulk power physical security, it may examine how federal and electric sector threat information is developed and used by critical asset owners, and how limitations and uncertainty of this information may affect physical security of the electric grid. Conclusion The 2013 attack on the Metcalf transformer substation marked a turning point for the U.S. electric power sector. The attack prompted utilities across the country to reevaluate and restructure their physical security programs. It also set in motion proceedings in Congress and at FERC which resulted in the promulgation of NERC's CIP-014 mandatory physical security standards in 2015.",
      " Based on discussions with FERC and NERC staff about utility compliance, as well as a review of public information about the activities of bulk power asset owners (and the vendors supplying them), there appear to be physical security improvements underway among owners of bulk power critical assets. The public record is too anecdotal to assert conclusively that these changes are occurring uniformly and at every relevant utility, but NERC's summary compliance reports so far have been positive, especially for such a new standard. As NERC concluded in its State of Reliability 2017 report  What NERC can measure is that no major cyber- and few physical-related load losses have happened to date;",
      " that extremely low numbers of incidents have occurred on the operating side, and that attention to security performance has been excellent on the corporate side. Although the electric power sector seems to be moving in the direction of more extensive physical security, many measures have yet to be implemented and the process of corporate realignment around physical security is still underway. As the CPUC has stated,  It appears that the North American electric industry is in intermediate stages of fully harnessing the potential of security technologies and staff expertise, and integrating security and risk assessment values into the utility culture such that utility physical security ultimately is prioritized on par with safety and reliability. Therefore, although it is probably accurate to conclude that,",
      " based on the objectives of the CIP-014 standards, the U.S. electric grid is more physically secure than it was five years ago, it has not necessarily reached the level of physical security needed based on the sector's own assessments of risk. Bulk power physical security remains a work in progress. As CIP-014 implementation and other physical security initiatives proceed, Congress may seek to maintain its focus on the power sector's overall progress, not only on short term compliance with NERC's security standards, but also on structural changes supporting physical security as a priority far into the future.\n"
    ],
    "length": 10205,
    "hardness": null,
    "role": null
  },
  {
    "id": 58,
    "question": null,
    "answer": "The U.S. Agency for International Development (USAID) and the Department of Defense (DOD) award direct assistance to Afghanistan, using bilateral agreements and multilateral trust funds that provide funds through the Afghan national budget. GAO assessed (1) the extent to which the United States, through USAID and DOD, has increased direct assistance, (2) USAID and DOD steps to ensure accountability for bilateral direct assistance, and (3) USAID and DOD steps to ensure accountability for direct assistance via multilateral trust funds for Afghanistan. GAO reviewed USAID, DOD, and multilateral documents and met with U.S. officials and staffs of multilateral trust funds in Washington, D.C., and Afghanistan. The United States more than tripled its awards of direct assistance to Afghanistan in fiscal year 2010 compared with fiscal year 2009. USAID awards of direct assistance grew from over $470 million in fiscal year 2009 to over $1.4 billion in fiscal year 2010. USAID awarded $1.3 billion to the World Bank-administered Afghanistan Reconstruction Trust Fund (ARTF) in fiscal year 2010, of which the bank has received $265 million as of July 2011. DOD direct assistance to two ministries grew from about $195 million in fiscal year 2009 to about $576 million in fiscal year 2010, including contributions to fund police salaries through the United Nations Development Program-administered (UNDP) Law and Order Trust Fund for Afghanistan (LOTFA). USAID and DOD have taken steps to help ensure the accountability of their bilateral direct assistance to Afghan ministries, but USAID has not required risk assessments in all cases before awarding these funds. For example, USAID did not complete preaward risk assessments in two of the eight cases GAO identified. Although current USAID policy does not require preaward risk assessments in all cases, these two awards were made after the USAID Administrator's July 2010 commitment to Congress that USAID would not proceed with direct assistance to an Afghan public institution before assessing its capabilities. In these two cases, USAID awarded $46 million to institutions whose financial management capacity were later assessed as \"high risk.\" USAID has established various financial and other controls in its bilateral direct assistance agreements, such as requiring separate bank accounts and audits of the funds. USAID has generally complied with these controls, but GAO identified instances in which it did not. For example, in only 3 of 19 cases did USAID document that it had approved one ministry's prefinancing contract documents. DOD personnel in Afghanistan assess the risk of providing funds to two security ministries through quarterly reviews of each ministry's capacity. DOD officials also review records of ministry expenditures to assess whether ministries have used funds as intended. DOD established formal risk assessment procedures in June 2011, following GAO discussions with DOD about initial findings. USAID and DOD generally rely on the World Bank and UNDP to ensure accountability over U.S. direct assistance provided multilaterally through ARTF and LOTFA, but USAID has not consistently complied with its risk assessment policies in awarding funds to ARTF. During GAO's review, DOD established procedures in June 2011 requiring that it assess risks before contributing funds to LOTFA. The World Bank and UNDP use ARTF and LOTFA monitoring agents to help ensure that ministries use contributions as intended. However, security conditions and weaknesses in Afghan ministries pose challenges to their oversight. For example, the ARTF monitoring agent recently resigned due to security concerns. The World Bank is now seeking a new monitoring agent and does not anticipate a gap in monitoring. In addition, weaknesses in the Ministry of Interior's systems for paying wages to police challenge UNDP efforts to ensure that the ministry is using LOTFA funds as intended.\n",
    "docs": [
      "Background Decades of conflict have left Afghanistan a poor nation with high illiteracy,  weak government institutions, and a high level of corruption. According to  Transparency International\u2019s index of perceived corruption, Afghanistan is  tied with Burma as the world\u2019s second most corrupt nation. The United  States has allocated about $56 billion for fiscal years 2002 to 2010 to  reconstruct Afghanistan, as shown in table 1. The United States  allocated nearly half of these funds\u2014about $27 billion\u2014in fiscal years  2009 and 2010 alone. For fiscal year 2011, DOD has allocated more than  $12.",
      "6 billion in additional funds for Afghan reconstruction. While the  allocation of fiscal year 2011 State and USAID funds for Afghanistan had  not been finalized as of June 2011, State\u2019s fiscal year 2011 budget  request included more than $5 billion for Afghan international affairs  programs and operations. In 2009, the executive branch adopted the Integrated Civilian-Military  Campaign Plan to guide U.S. reconstruction activities in Afghanistan.  The plan, which is currently being updated, categorizes reconstruction  activities in terms of three overarching lines of effort\u2014development,  governance, and security. State officials have informed us that U.S.",
      "  agencies do not track Afghan reconstruction funds by the lines of effort. U.S. agencies have used various means to implement Afghan  reconstruction projects with these funds. In some cases, they have hired  contractors and nongovernment organizations. In other cases, U.S.  reconstruction funds have been provided directly to the Afghan  government\u2019s national budget to be used by Afghan ministries and other  government entities. In 2010, the United States announced plans to increase direct assistance  to Afghanistan. In January 2010, the Secretary of State announced that  the United States would increase direct assistance to the Afghan  government to help Afghan ministries and other government entities build  their capacity to manage funds.",
      " At two international conferences in 2010,  the United States and other donors pledged to provide half or more of  their development aid in the form of direct assistance to the Afghan  government within 2 years, contingent on Afghan actions to reduce  corruption and strengthen public financial management capacity. In  February 2011, DOD formally authorized direct contributions of DOD  funds to two Afghan security ministries to build their capacity and support  Afghan security forces. USAID awards direct assistance to Afghanistan through two means. It  awards direct assistance to several Afghan government entities through  bilateral agreements overseen by its mission in Afghanistan. These  entities include the Independent Directorate for Local Governance and  the ministries of Agriculture,",
      " Irrigation, and Livestock; Communications  and Information Technology; Finance; Public Health; and Transport and  Civil Aviation. Some of the bilateral agreements finance Afghan  government procurement of goods and services, while others fund a  range of other government expenses and activities, including operating  costs, salaries, agricultural development programs, and infrastructure  projects. USAID also provides direct assistance by awarding funds to the  multilateral World Bank-administered Afghanistan Reconstruction Trust  Fund (ARTF). ARTF was established in 2002 as a vehicle for donors to  pool resources and coordinate support for Afghanistan\u2019s reconstruction.  As of April 2011,",
      " 32 donors had contributed about $4.3 billion to ARTF.  ARTF provides these funds through the Afghan government national  budget to finance the government\u2019s recurrent operating costs (e.g., wages  for civil servants, operations and maintenance costs) and national  development programs. DOD provides direct assistance bilaterally to Afghanistan\u2019s Ministry of  Defense (MOD) and Ministry of Interior (MOI) through contributions of  funds overseen by DOD\u2019s Combined Security Transition Command\u2013 Afghanistan (CSTC-A). According to DOD guidance, these contributions  are used to procure food, salaries, goods, services, and minor  construction in direct support of the Afghan National Army (ANA)",
      " and the  Afghan National Police (ANP). CSTC-A also contributes funds to the  multilateral UNDP-administered Law and Order Trust Fund for  Afghanistan (LOTFA), which receives contributions from several donor  nations. Most LOTFA funds are used to provide salaries to ANP  personnel. The United States  More Than Tripled Its  Awards of Direct  Assistance to  Afghanistan in 2010  through USAID and  DOD The United States more than tripled its awards and contributions of  USAID and DOD direct assistance funds to the Afghan government in  fiscal year 2010 compared with fiscal year 2009 (see fig.",
      " 1). In fiscal year 2010, most of the direct assistance funds (about 71 percent)  were awarded by USAID for activities related to development and  governance, either bilaterally (about 6 percent) or through preferenced  contributions to ARTF (about 65 percent), as shown in figure 2. For  example, USAID has contributed funding to a community development  and local governance program that is being implemented in all of  Afghanistan\u2019s 34 provinces through ARTF. The remainder was  contributed by DOD for security assistance, either bilaterally to MOD and  MOI or through LOTFA.",
      " As shown in table 2, USAID awards of direct assistance to Afghanistan  increased from over $470 million in fiscal year 2009 to more than $1.4  billion in fiscal year 2010. These awards included a $1.3 billion grant to  ARTF, more than triple what it awarded to ARTF in 2009. USAID may  obligate and disburse funds awarded to an Afghan entity or trust fund  over multiple years, depending on the agreement\u2019s terms. DOD direct assistance to MOD and MOI, including contributions to  LOTFA, grew from about $195 million in fiscal year 2009 to about $576  million in fiscal year 2010.",
      " DOD contributions to LOTFA more than  doubled from about $68 million in fiscal year 2009 to about $149 million in  fiscal year 2010. USAID and DOD Have  Taken Steps to Help  Ensure Accountability  over Bilateral Direct  Assistance, but  USAID Has Not  Required Risks to Be  Assessed in Advance  in All Cases Risk assessments and internal controls to mitigate identified risks are key  elements of an internal control framework to provide reasonable assurance  that agency assets are safeguarded against fraud, waste, abuse, and  mismanagement. USAID conducted preaward risk assessments in most  cases.",
      " However, we found that USAID\u2019s policies for assessing direct  assistance risks do not require preaward risk assessments in all cases.  USAID has not updated its policies to reflect the USAID Administrator\u2019s July  2010 commitment to Congress that USAID would assess all Afghan public  institutions before providing them with direct assistance. We found that in  August 2010 and January 2011, USAID did not complete preaward risk  assessments before awarding funds to two Afghan government entities.  USAID has established various financial and other controls in its bilateral  direct assistance agreements with ministries that go beyond what is required  by its policies.",
      " However, it has not always ensured compliance with those  controls. DOD personnel in Afghanistan have assessed the risk of providing  funds to MOD and MOI through quarterly reviews of each ministry\u2019s capacity.  DOD established formal procedures on risk assessment for Afghan direct  assistance in June 2011 after we informed DOD officials that DOD lacked  such procedures. DOD officials also stated that they review records of MOD  and MOI expenditures to assess whether funds have been used as intended,  as required by DOD policies established in February 2011. USAID Has Conducted  Preaward Risk  Assessments in   Most Cases USAID mission staff have complied with USAID risk assessment policies  for awarding bilateral direct assistance funds to finance Afghan  procurement activities under what USAID refers to as a host country  contract.",
      " USAID policies, as outlined in its Automated Directives System  (ADS), require USAID staff to conduct a preaward risk assessment for a  host government entity if the entity is to use the award to procure goods  and services. Specifically, staff are required under ADS to (1) assess  the entity\u2019s procurement system and (2) obtain the Mission Director\u2019s  certification of the entity\u2019s capability to undertake the procurement. Of  USAID\u2019s eight bilateral direct assistance agreements, we identified two  involving the financing of Afghan procurement activities. In both cases,  we found that USAID mission staff, in compliance with ADS, had (1)",
      "  assessed the financial and procurement management capabilities of the  Afghan recipients (the Ministry of Communications and Information  Technology and the Ministry of Public Health) before awarding funds (see  table 3) and (2) obtained the required certifications. Of six bilateral direct assistance agreements that did not involve financing  Afghan government procurement activities, we found that USAID had  completed such assessments before awarding funds in four cases (see  table 3). Although USAID did not conduct preaward assessments in two  cases, it was in compliance with its risk assessment policies. Those  policies state that USAID staff \u201cshould\u201d assess the capacity (e.g., financial  management,",
      " procurement, and personnel management capacity) of  prospective recipients in cases that do not involve financing Afghan  government procurement activities. USAID has not updated its risk assessment policies to reflect its  Administrator\u2019s commitment that USAID would assess the capabilities of  Afghan government recipients in all cases before awarding them direct  assistance funds. On July 28, 2010, USAID\u2019s Administrator responded to  concerns expressed by Members of the House Appropriations  Committee\u2019s Subcommittee on State, Foreign Operations, and Related  Programs regarding corruption and weak government capacity in  Afghanistan by committing that USAID would not proceed with direct  assistance to an Afghan public institution until USAID had ensured that  the institution had an accountable organizational structure and sound  financial management capabilities and met USAID standards.",
      " State\u2019s  Office of the Special Representative for Afghanistan and Pakistan made a  similar commitment in January 2010, when it stated that \u201cto receive direct  assistance, Afghan ministries must be certified as having improved  accountability and transparency.\u201d However, we found that current  USAID policy for direct assistance not involving the financing of Afghan  government procurement activities does not require USAID to assess a  prospective recipient\u2019s capacity to implement a proposed activity. We also found that following the Administrator\u2019s July 2010 commitment,  USAID awarded direct assistance funds to two Afghan government  recipients before completing risk assessments. As shown in table 3,  USAID signed a $40 million agreement with the Independent Directorate  for Local Governance in August 2010,",
      " 5 months before completing an  assessment of that entity. It also signed a $6 million bilateral direct  assistance agreement with the Ministry of Transport and Civil Aviation in  January 2011, 2 months before completing an assessment of the  ministry. The completed risk assessments identified areas of high risk in  both entities. For example, the Ministry of Transport and Civil Aviation  was assessed as \u201chigh risk\u201d in the four core function areas covered by the  assessment\u2014control environment, financial management and  accounting, compliance with applicable laws and regulations, and  accountability environment. Similarly, the Independent Directorate for  Local Governance was assessed as \u201chigh risk\u201d in 5 of 14 areas covered,",
      "  including financial management and procurement. USAID officials told us  that USAID awarded these funds before completing the risk assessments  because the projects were urgently needed. USAID Has Established  Controls in Its Bilateral  Direct Assistance  Agreements but Has Not  Always Ensured  Compliance USAID has established various financial and other controls in its bilateral  direct assistance agreements, although USAID policies do not establish  minimum standard conditions for such agreements, according to USAID  officials. Shown in table 4 are selected examples of financial controls  USAID has established within its bilateral direct assistance agreements.  USAID also required Afghan government recipients to provide  documentation demonstrating their compliance with the selected controls.",
      "  As shown in table 4, in each applicable case, USAID ensured compliance  with the selected controls. In two cases, USAID also hired contractors to help control risks identified  in preaward assessments. For example, USAID\u2019s assessment of the  Ministry of Agriculture, Irrigation, and Livestock (MAIL) determined that  MAIL would not be able to independently manage and account for direct  assistance funds. As a result, USAID awarded a $49.1 million contract to  a U.S.-based firm to establish a unit to manage a USAID-funded  agriculture development fund, to transition that unit to local control within  4 years,",
      " and to provide technical assistance. Similarly, USAID\u2019s October  2007 assessment of the Ministry of Public Health noted concerns that the  ministry would continue needing technical assistance to effectively and  efficiently manage donor funds. As a result, USAID amended an existing  contract to an international nonprofit organization to improve the capacity  of the ministry at the central level and in target provinces. USAID has also established procurement-specific controls in its bilateral  direct assistance agreements with the Ministry of Communications and  Information Technology and the Ministry of Public Health. These  agreements provide funds to Afghan ministries to enter into contracts for  goods and services and require USAID to monitor and approve certain  steps of the procurement process for contracts over $250,",
      "000, as  applicable. While USAID generally complied with this requirement, USAID mission  officials could not provide us with documentation showing that USAID had  done so in all cases, as shown in table 5. Specifically, USAID mission  officials either did not approve or document that they had approved prior  to execution any of 6 contracts that the Ministry of Communications and  Information Technology entered into (in table 5, see step 7 of the  procurement process). In addition, USAID mission officials told us that  USAID did not approve any of the ministry\u2019s 6 prefinancing contract  documents (step 8 of the procurement process). USAID stated that no  clearance or approval was provided because the final signed documents  did not need concurrence.",
      " Similarly, USAID documented only three  instances in which it had approved any of the Ministry of Public Health\u2019s  19 prefinancing contract documents. USAID also did not conduct follow- up reviews of the ministry to ensure its compliance with USAID  contracting and financial management requirements, as called for in the  assistance agreement. USAID has taken steps to ensure that bilateral direct assistance awards  are audited. USAID policy requires audits of recipients, including host  government entities, that expend $300,000 or more in USAID awards  during a fiscal year. USAID has asserted its right to audit Afghan recipient  use of funds in all of its bilateral direct assistance agreements,",
      " including  those involving procurement. According to USAID mission officials,  USAID has contracted with audit firms to initiate audits of three Afghan  ministries (the Ministries of Finance, Communications and Information  Technology, and Public Health) that disbursed a total of $28.8 million in  USAID awards in fiscal year 2010. DOD Has Taken Steps to  Help Ensure  Accountability and  Recently Established  Procedures Requiring Risk  Assessments CSTC-A has recently established procedures that require CSTC-A  personnel to assess the risks of direct assistance in advance of providing  funds to Afghan ministries. On June 12, 2011,",
      " CSTC-A established  standard operating procedures for direct assistance, as required under  DOD guidance issued on February 4, 2011. The CSTC-A procedures  identify risk assessment as the first of four steps CSTC-A personnel must  take before the direct contribution of the funds. CSTC-A adopted these  procedures after we informed DOD officials that DOD lacked risk  assessment guidance for bilateral direct assistance. The CSTC-A procedures specify that the primary method CSTC-A is to  use to assess risks is the Ministerial Development Board. The board  oversees CSTC-A efforts to develop the capacity of MOD and MOI.",
      "  CSTC-A officials informed us in January and February 2011 that CSTC-A  has been using this method to assess the capacity of MOD and MOI in  connection with direct assistance. They stated that CSTC-A advisers  embedded in MOD and MOI participate in quarterly assessments of MOD  and MOI progress toward meeting defined capability objectives. For  example, CSTC-A assesses MOI development in 26 different areas,  including finance and budget, procurement, and personnel management.  The assessments focus on the extent to which the ministries are capable  of achieving the objectives and identify specific strengths and  weaknesses. For example,",
      " in April 2011, CSTC-A assessed the MOD  budget and finance section responsible for ANA pay support operations.  CSTC-A determined that its strengths included experienced staff and a  willingness to tackle corruption and its weakness was a lack of budget  authority. DOD\u2019s February 4, 2011, guidance requires CSTC-A to establish  financial controls for its contributions to MOD and MOI.  \uf0b7  The guidance specifically requires CSTC-A to conduct quarterly  reconciliations of CSTC-A advance payments to MOD and MOI  against records of MOD and MOI expenditures. CSTC-A officials  informed us that CSTC-A reconciles CSTC-A advance contributions  against MOD and MOI expenditure data drawn from the Ministry of  Finance (MOF)",
      " Afghan Financial Management Information System  and has adjusted future contributions accordingly. DOD officials  acknowledged the reconciliation process does not address the extent  to which aggregated line items from the system may contain  inaccurate ANA and ANP payroll data.  \uf0b7  The guidance also requires CSTC-A to monitor MOD and MOI use of  the contributed funds down to the subcontractor level. CSTC-A  officials informed us that they would be unable to monitor MOD and  MOI subcontractors, as called for in the DOD guidance. They stated  that the risk of sending personnel to vet MOD and MOI subcontractors  in certain regions of Afghanistan was too great.",
      " In addition, CSTC-A advisers monitor MOD and MOI use of U.S. funds,  according to CSTC-A officials. CSTC-A informed us that it has embedded  about 500 advisers in MOD and MOI, including 6 in MOD financial offices  and 13 in MOI finance and budget offices. Also, CSTC-A personnel  participate in internal control teams that review ANA pay processes in a  different ANA corps every month. USAID Has Not  Consistently Assessed  Risks of  Contributions to  ARTF, While DOD Has  Recently Established  Risk Assessment  Guidance for LOTFA USAID and DOD generally rely on the World Bank and UNDP to ensure  accountability over U.S.",
      " direct assistance provided multilaterally through  ARTF and LOTFA. USAID, however, has not consistently complied with  its multilateral trust fund risk assessment policies in awarding funds to  ARTF. For example, in March 2010, USAID did not conduct a risk  assessment before awarding an additional $1.3 billion to the World Bank  for ARTF. During our review, DOD established procedures in June 2011  requiring that it assess risks before contributing funds to LOTFA. World  Bank and UNDP controls over ARTF and LOTFA funds include the use of  hired monitoring agents to help ensure that ministries use donor  contributions as intended.",
      " However, these controls face challenges posed  by security conditions and by weaknesses in Afghan ministries. For  example, the ARTF monitoring agent resigned in June 2011 due to  security concerns, while weaknesses in MOI\u2019s systems for paying wages  to Afghan police challenge UNDP efforts to ensure that MOI is using  LOTFA funds as intended. USAID Has Not  Consistently Assessed the  Risk of Relying on the  World Bank for Ensuring  the Accountability of Its  ARTF Contributions USAID has not consistently followed its own policies for assessing the  risk associated with its awards to the World Bank for ARTF,",
      " which have  increased from $5 million in 2002 to a total of more than $2 billion. When  the grant agreement and subsequent modifications between the World  Bank and USAID were signed, USAID policies on grants to public  international organizations (PIO), such as the World Bank, called for  preaward determinations that the PIO was a responsible grantee. This  requirement applied to both the original grant and to any subsequent  modification of the grant that significantly increased the amount of the  award. Under USAID policy, the preaward determination should have  addressed factors such as whether the grantee\u2019s program was an  effective and efficient way to achieve a USAID objective and whether  there were any reasons to consider the grantee to be \u201cnot responsible.\u201d USAID could not provide us with a preaward responsibility determination  of the World Bank prior to awarding ARTF an initial grant of $5 million in  2002.",
      " While USAID did not follow its policies to complete a preaward  determination for its initial $5 million grant, it determined, after it signed  the agreement, that (1) ARTF had a comprehensive system in place for  managing the funds and (2) the World Bank had a long history in  managing multidonor pooled funding mechanisms, in an approved 2002  memorandum requesting a deviation from incorporating its then- mandatory standard provisions into its ARTF grant agreement. However,  USAID did not conduct preaward determinations for 16 of the 21  subsequent modifications to the grant. For the instance in which USAID  increased the value of the award by $1.",
      "3 billion in March 2010, USAID  provided us with an unsigned and undated memorandum that applied to a  $15 million obligation. For the 5 preaward responsibility determinations  that were conducted, USAID documentation stated that the World Bank  was a responsible grantee but did not document the analysis used to  support the determinations. In April 2011, in response to GAO recommendations and our follow-up  meetings, USAID revised and expanded its guidance on how to conduct  preaward determinations for all PIOs. The revised guidance continues to  require the USAID officer in charge of the agreement to document  preaward responsibility determinations for PIOs.",
      " Under the new  guidance, a group of USAID headquarters officials will first place the  PIO, such as the World Bank, into one of three categories, based on  USAID\u2019s experience with the PIO and its determination of the PIO\u2019s level  of responsibility. The revised guidance requires USAID to consider  several factors in determining a PIO\u2019s level of responsibility, including the  quality of its past performance, its most recent audited financial  statements, and any other information to fully assess whether it has the  necessary management competence to plan and carry out the intended  activity. After a responsibility determination has been made, the USAID  officer in charge of the agreement must still document the determination  before making an award.",
      " USAID\u2019s policy is to generally rely on a PIO\u2019s financial management,  procurement, and audit policies and procedures. The World Bank has  established financial controls over donor contributions to ARTF. For  example, the World Bank hired a monitoring agent responsible for  monitoring the eligibility of salaries and other recurrent expenditures that  the Afghan government submits for reimbursement against ARTF  criteria. According to the World Bank, it conducts advance reviews of  ARTF development procurement contracts. The amount of prior review of  Afghan government procurement by the bank varies according to the  method of selection or procurement, the type of good or service being  procured,",
      " and the bank\u2019s assessment of project risk, according to the  bank. The World Bank also reports that it assesses projects semi- annually as part of regular World Bank supervision as per World Bank  policies, procedures and guidelines based in part on project visits. Also,  the bank informed us that it manages and administers ARTF according to  a set of World Bank global policies and procedures. ARTF is part of a  single audit of all trust funds administered by the bank, and includes both  an annual management assertion over internal controls surrounding the  preparation of trust fund financial reports and a combined financial  statement for all modified cash basis trust funds.",
      " Also, the Afghan government\u2019s external audit agency, the Control and  Audit Office (CAO), conducts annual audits of ARTF-financed projects  with the technical assistance of a firm of international accountants that  are funded by the World Bank. As part of its supervision of ARTF- financed activities, a World Bank financial management team reviews the  CAO audit reports, discusses its observations with government  counterparts, and follows up to ensure resolution of any outstanding  issues. Following the government\u2019s annual submission of CAO audit  reports to the World Bank, the bank sends a letter to the donors  summarizing the timeliness and results of the CAO\u2019s annual audits.",
      " The  CAO\u2019s audits of 16 ARTF development projects for the Afghan fiscal year  that began in March 2009 had 16 unqualified (or \u201cclean\u201d) results. The  World Bank shares CAO audit and monitoring agent reports with donors  when requested. World Bank financial controls over ARTF face challenges posed by  oversight entities\u2019 limited movement in Afghanistan\u2019s high-threat  environment and the limited capacity of Afghan ministries to meet agreed- upon procurement and financial management standards, as shown in  these examples.  \uf0b7  Security conditions prevented CAO auditors from visiting most of the  provinces where ARTF funds were being spent.",
      " They were able to  conduct audit tests in 10 of Afghanistan\u2019s 34 provinces from March  2009 to March 2010 and issued a qualified opinion of the financial  statements of ARTF\u2019s salary and other recurrent expenditures as a  result.  \uf0b7  According to the Department of the Treasury (Treasury), the ARTF  monitoring agent recently resigned from its contract with the World  Bank due to security concerns. USAID stated in July 2011 that the  monitoring agent informed the bank in May 2011 that its contract  should not be extended due to security concerns. The World Bank  reports that it is seeking a new monitoring agent,",
      " has received many  expressions of interest, and does not anticipate a gap in monitoring.    \uf0b7  Previously, security concerns prevented the ARTF monitoring agent  from physically verifying ARTF salary and other recurrent  expenditures outside of Kabul province from March 2009 through  March 2010. The World Bank had required the monitoring agent or  its subcontractor to visit sites in at least 12 provinces to verify  expenditures made during the Afghan fiscal year that began in March  2010.  \uf0b7  The CAO lacks qualified auditors and faces other capacity restraints,  according to the Special Inspector General for Afghanistan  Reconstruction (SIGAR)",
      " and USAID. However, it uses international  advisers and contracted auditors, funded by the World Bank, to help  ensure that its audits of ARTF comply with international auditing  standards. The World Bank recently reported that the overall  timeliness of the CAO audits have been improving since 2006.  \uf0b7  The World Bank and donors have expressed concern over the level of  ineligible expenditures submitted by the Afghan government for  reimbursement. While ineligible expenditures are not reimbursed,  the bank considers the level of ineligible expenditures to be an  indicator of weaknesses in the Afghan government\u2019s ability to meet  agreed-upon procurement and financial management standards.",
      " The  ARTF monitoring agent has questioned whether Afghan government  civil servants have the experience and knowledge necessary to  perform transactions in a manner eligible for reimbursement and  whether ministries\u2019 internal procedures fully reflect Afghan  government laws and regulations. Partly as a result of recommendations from a 2008 independent  evaluation of ARTF by a Norwegian-based firm and discussions with  donors, the World Bank is currently seeking to revise its 2002 grant  agreements with donors to reflect its efforts to strengthen ARTF  governance. According to the World Bank, the recommended changes  include clarifying and strengthening donors\u2019 oversight roles and  responsibilities over ARTF.",
      " In response to our inquiries, the World Bank  stated in April 2011 that it is considering incorporating its current standard  provisions, applicable to multidonor trust funds, in the amended grant  agreements with donors. These provisions would allow donor countries  greater access to accounting and financial records and information.  Under the current agreement with all donors, the World Bank provides  donors with periodic reports, such as quarterly status reports, and an  annual management assertion together with an attestation from the  bank\u2019s external auditors on the satisfactory performance of the bank\u2019s  procedures and controls. CSTC-A Has Recently  Established Procedures  Requiring That It Assess  Risks Associated with  Contributions to LOTFA During our review on June 12,",
      " 2011, CSTC-A issued new procedures for  direct assistance that require CSTC-A to conduct precontribution risk  assessments before contributing funds to LOTFA. CSTC-A staff had  previously informed us in February 2011 that CSTC-A had not assessed  the risks of providing funds to LOTFA. Instead, CSTC-A had regularly  assessed the capabilities and weaknesses of MOI. For example, CSTC-A  assessed MOI\u2019s finance and budget section in March 2011 and  determined that while the section\u2019s strengths included a responsiveness  to pay issues, its weaknesses included a lack of well-trained staff and an  unwillingness to change.",
      " CSTC-A generally relies on UNDP\u2019s financial controls to ensure the  accountability of funds it has contributed to LOTFA. CSTC-A contribution  letters to LOTFA request that UNDP provide CSTC-A with quarterly  reports, which UNDP posts on its Web site. CSTC-A officials informed  us that CSTC-A reconciles its contributions to LOTFA annually. UNDP\u2019s  LOTFA project manager in Kabul informed us that UNDP makes copies of  audits of LOTFA available upon request. CSTC-A officials told us they  have not requested LOTFA audits. UNDP has established financial controls over the funds it provides to MOI  for ANP expenses.",
      " It has stated that it reconciles its contributions with  MOF records of MOI expenses on a quarterly and annual basis. UNDP  recently reported that it deducted $17.6 million from its contribution to  MOI as a result of ineligible expenses identified during its annual  reconciliation for March 2009 through March 2010. UNDP has also hired  a monitoring agent to review and monitor ANP remunerations and  generate independent reports. UNDP staff told us that the LOTFA  monitoring agent has offices in all regional police zones, which cover all  of Afghanistan\u2019s provinces. UNDP has reported that the monitoring agent  operates in all ANP zones and conducts sample verifications of 30  percent of the total number of police.",
      " Similar to the World Bank\u2019s controls over ARTF, UNDP\u2019s financial  controls over LOTFA face challenges stemming from Afghanistan\u2019s  security environment. SIGAR reported in April 2011 that security issues  had impaired efforts by LOTFA\u2019s monitoring agent to (1) recruit staff in a  high-threat province and (2) travel in 7 of Afghanistan\u2019s 34 provinces for  half of 2010. SIGAR also reported that security concerns had delayed  LOTFA\u2019s reconciliation of 2009 salaries. UNDP officials also told us that  security concerns had restricted UNDP movements in Afghanistan. UNDP\u2019s financial controls also face challenges stemming from MOI\u2019s  institutional weaknesses.",
      " UNDP has reported that MOI\u2019s \u201cinsufficient  ownership and capacity development\u201d remains one of LOTFA\u2019s risks and  that it has taken steps to mitigate this risk. Some problems that have  been identified with MOI include the following:  In 2009, we reported that MOI did not have an accurate staffing  roster, according to CSTC-A, and that the number of ANP personnel  was unclear. We found that uncooperative ANP commanders were  impeding State and MOI efforts to implement a new ANP identification  card system to positively identify all police for pay purposes,  according to State officials.",
      " According to State officials, these  commanders were preventing State and MOI from determining the  status of nearly 30,000 individuals whose names had been submitted  to receive ANP identification cards. We recommended that DOD and  State consider provisioning future U.S. contributions to LOTFA to  reflect the extent to which U.S. agencies had validated the status of  MOI and ANP personnel to help ensure that the United States was not  funding salaries of unverified personnel. In 2011, SIGAR reported that MOI\u2019s payroll system provides little  assurance that MOI is paying only working ANP personnel or that  LOTFA funds are reimbursing only eligible ANP costs.",
      " MOI is also  unable to pay all police through relatively secure systems. We have  previously reported concerns regarding MOI pay systems. UNDP  and CSTC-A have worked with MOI to develop electronic systems to  reduce opportunities for skimming and corruption. One such system  transfers funds directly into individual bank accounts established by  individual Afghan police. Although progress has been made in  establishing these systems, more than 20 percent of ANP staff are still  paid using manual cash systems that are more vulnerable to abuse. Conclusion The recent tripling of U.S. direct assistance awards to Afghan government  entities, coupled with the vulnerability of this assistance to waste,",
      " fraud,  and abuse in the uncertain Afghan environment, makes it essential that  U.S. agencies assess risks before awarding funds and implement  controls to safeguard those funds. Direct assistance to the Afghan  government involves considerable risk given the extent of corruption, the  weak institutional capacity of the Afghan government to manage finances,  the volatile and high-threat security environment, and that the U.S. funds  may be obligated months or years after they are awarded. Because  conflict in many parts of Afghanistan poses significant challenges to  efforts to ensure that funds are used as intended, the level of risk in  Afghanistan warrants, to the extent feasible,",
      " sound internal controls and  oversight over the billions of dollars that the U.S. government has  invested in Afghanistan. Although risk assessment is a key component of  internal controls, current USAID policy does not require preaward risk  assessments of all Afghan government recipients of U.S. direct  assistance funds. To safeguard U.S. direct assistance funds, it is  important that (1) the USAID Administrator follow through on his July  2010 commitment to Congress to assess risks associated with each  Afghan government entity before awarding funds, (2) USAID consistently  implement controls it establishes in bilateral direct assistance  agreements, and (3)",
      " USAID consistently adhere to its risk assessment  policies for multilateral trust funds in awarding funds to ARTF. Recommendations for  Executive Action We recommend that the Administrator of USAID take the following three  actions:  \uf0b7  Establish and implement policy requiring USAID to complete risk  assessments before awarding bilateral direct assistance funds to  Afghan government entities in all cases.  \uf0b7  Take additional steps to help ensure that USAID consistently  implements controls established in its bilateral direct assistance  agreements with Afghan government entities, such as requiring the  retention of documentation of actions taken.  \uf0b7  Ensure USAID adherence with its policies for assessing risks  associated with multilateral trust funds in awarding funds to ARTF.",
      " Agency Comments  and Our Evaluation We provided a draft of this report for comment to the Administrator of  USAID, and to the Secretaries of Defense, State, and the Treasury.  Defense, State, and the Treasury declined to provide comments.  Treasury provided us with technical comments, which we incorporated in  this report as appropriate. The World Bank and UNDP provided us with  technical comments on the portions of the draft report that we provided  them describing ARTF and LOTFA. We have incorporated these technical  comments in this report as appropriate. USAID provided written comments on a draft of our report, which are  reprinted in appendix II.",
      " With regard to our recommendation that USAID establish and implement  policies requiring USAID staff to complete risk assessments before  awarding bilateral direct assistance funds to Afghan government entities  in all cases, USAID stated that its existing policies and procedures in ADS  already include requirements for risk assessment for each form of  government-to-government assistance mechanism. USAID noted that for  host country contracts, ADS requires an advance assessment of a host  government\u2019s procurement systems (ADS 305). USAID also stated that  for cash transfer agreements, ADS requires an analysis of a host  government\u2019s ability to comply with the agreements. USAID further stated  that its general activity planning guidance contains a recommendation  that USAID offices should consider the capacity of potential partners to  implement planned functions (ADS 201). Although USAID policy in ADS includes some form of risk assessment for  the funding mechanisms in use in Afghanistan,",
      " it does not require that a  risk assessment be conducted in all cases. Specifically, ADS 305\u2019s  requirement for preaward assessment of host country contracts did not  apply to six of the eight bilateral direct assistance cases we identified,  because these six cases do not involve procurement. Further, according  to the USAID comptroller, these six cases were not cash transfer  agreements. As a result, these six cases fall under USAID\u2019s general  activity planning guidance (ADS 201), which recommends\u2014but does not  require--that USAID offices assess the capacity of potential partners in  advance. As noted in this report, the lack of specific requirement resulted  in USAID making awards in two cases prior to completing a risk  assessment.",
      " Therefore, we retained our recommendation that USAID  establish and implement policies requiring preaward risk assessments in  all cases in Afghanistan. USAID also commented that it has taken additional steps to ensure that,  going forward, risk assessments are completed in advance for each type  of funding mechanism, in line with the Administrator\u2019s July 2010  statement to Congress. Further, these steps are being undertaken \u201cin  light of\u201d the Department of State\u2019s July 14, 2011, certification to Congress  that the U.S. and Afghan governments have established mechanisms  within each implementing agency to ensure that certain fiscal year 2010  funds will be used as intended.",
      " On July 14, 2011, State did make this  certification to Congress. However, the certification applies only to certain  fiscal year 2010 funds, underscoring the need for USAID to establish a  requirement for preaward assessments in Afghanistan in all cases in its  policies and procedures. With regard to our recommendation that USAID take additional steps to  help ensure that it consistently implements controls established in its  bilateral direct assistance agreements with Afghan government entities,  USAID agreed to take such steps concerning its host country agreements  with Afghan government entities. In doing so, USAID noted that USAID  policy is to be as sparing in exercising its prior approval rights as sound  management permits.",
      " With regard to our recommendation that it adhere to its policies for  assessing risks associated with multilateral trust funds in awarding funds  to ARTF, USAID acknowledged that it had not always prepared or  adequately documented its determinations for several ARTF grant  amendments. USAID stated that it will follow its new procedures for such  determinations, which it revised in April 2011. USAID also provided us with technical comments, which we have  incorporated as appropriate. We are sending copies of this report to the appropriate congressional  committees; the Secretaries of Defense, State, and the Treasury; the  Administrator of USAID;",
      " and other interested parties. The report also is  available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact  me at (202) 512-7331 or johnsoncm@gao.gov. Contact points for our  Offices of Public Affairs and Congressional Relations may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III. Appendix I: Objectives, Scope, and  Methodology This report assesses (1) the extent to which the U.S.",
      " Agency for  International Development (USAID) and the Department of Defense  (DOD) have increased direct assistance, (2) USAID\u2019s and DOD\u2019s steps to  ensure accountability for bilateral direct assistance, and (3) USAID\u2019s and  DOD\u2019s steps to ensure accountability for multilateral direct assistance. To identify the extent to which USAID and DOD had increased their direct  assistance, we first met with officials from the Department of State and  USAID to define the scope of the term \u201cdirect assistance\u201d for the purpose  of this review. We then adopted USAID\u2019s definition of direct assistance  (or \u201con-budget\u201d assistance)",
      " as U.S. funds provided through the Afghan  government national budget for use by Afghan ministries or other  government entities. This definition is consistent with guidance and  procedures developed by the Office of the Under Secretary of Defense  (Comptroller) and DOD\u2019s Combined Security Transition Command- Afghanistan (CSTC-A). We focused on fiscal year 2009 and fiscal year  2010 to identify funding developments tied to the President\u2019s 2009  announcement of a new U.S. strategy for Afghanistan and subsequent  pledges concerning direct assistance to the Afghan government.  \uf0b7  To identify the extent to which USAID had increased its direct  assistance,",
      " we obtained financial information from USAID\u2019s mission in  Kabul, Afghanistan. This information included USAID quarterly  financial reports and USAID direct assistance agreements with  Afghan government entities and the World Bank (including any  modifications to the agreements). We used this information to identify  the value of the direct assistance USAID awarded in fiscal years 2009  and 2010. For the value of each award, we used what USAID refers to  as the \u201ctotal estimated contribution\u201d that it has committed to provide,  subject to the availability of funds, in signing a direct assistance  agreement. For the date, we used each agreement\u2019s signature date,",
      "  in keeping with USAID\u2019s use of the signature date as the effective  date of the funded activity. We used the signature dates to allocate  each award\u2019s value to either fiscal year 2009 or fiscal year 2010. In  using this data in the report, we noted that once it has awarded funds  on a specific date, USAID may obligate and disburse those funds over  multiple years, depending on the terms of the agreement. We  assessed these data to be sufficiently reliable for our purposes.  \uf0b7  To identify the extent to which DOD had increased its direct  assistance, we obtained financial information from DOD\u2019s Office of the  Under Secretary of Defense (Comptroller). This information included  funds contributed to the Afghan Ministry of Defense (MOD)",
      " and the  Afghan Ministry of Interior (MOI) by CSTC-A and the Defense Security  Cooperation Agency. According to the Office of the Under Secretary  of Defense (Comptroller), each DOD contribution to MOD, MOI, and  the Law and Order Trust Fund for Afghanistan (LOTFA) was awarded,  obligated, and disbursed in close succession. We allocated each  contribution\u2019s value to the fiscal year in which the contribution was  made. We assessed these data to be sufficiently reliable for our  purposes. To assess steps taken by USAID and DOD to help ensure the  accountability of their bilateral direct assistance to Afghan ministries and  other government entities,",
      " we reviewed the policies and practices the  agencies use to assess risks associated with direct assistance and to  establish control mechanisms over the use of direct assistance funds.  \uf0b7  Our assessments were based on criteria drawn from GAO\u2019s  Standards for Internal Control in the Federal Government. Standards  for Internal Control in the Federal Government, issued pursuant to the  requirements of the Federal Managers\u2019 Financial Integrity Act of 1982,  provides the overall framework for establishing and implementing  internal control in the federal government. Minimum internal control  standards for providing reasonable assurance that agency assets will  be safeguarded against fraud, waste, abuse, and mismanagement  include risk assessment and control activities.",
      " Standards for Internal  Control in the Federal Government defines risk assessment and  control activities as key elements of an internal control framework.  Risk assessment includes identifying internal and external risks an  organization faces and their potential effect. Control activities are the  policies and procedures (such as approvals, reconciliations, and  reviews) agencies implement to mitigate identified risks and are  essential for accountability of government resources.  \uf0b7  To evaluate relevant USAID policies and practices against these  criteria, we reviewed information from both headquarters and the  USAID mission in Afghanistan. We reviewed USAID agencywide  policies for awarding bilateral direct assistance funds to host  government entities,",
      " as outlined in (1) USAID\u2019s Automated Directives  System (ADS) and (2) interim guidance USAID provided to its  mission on the use of direct assistance. We reviewed bilateral direct  assistance program information from the USAID mission in  Afghanistan, including preaward assessment procedures and reports,  training material, direct assistance agreements, compliance  documentation, approval memorandums, memorandums of  understanding, and mission orders. To identify USAID controls  established over the use of direct assistance funds and determine  whether USAID ensured compliance with its controls, we (1) reviewed  all USAID bilateral direct assistance agreements,",
      " (2) identified the  controls USAID established in each agreement, and (3) reviewed  documentation USAID provided to us to demonstrate it had ensured  compliance with its controls. We limited our analysis to controls  triggered per the terms of each agreement before February 15, 2011.  We also reviewed information from the USAID Office of Inspector  General in Afghanistan regarding the mission\u2019s preaward assessment  process. We interviewed USAID officials in Washington, D.C., and in  Kabul, Afghanistan.  \uf0b7  To assess DOD policies and practices, we reviewed information from  the Office of the Undersecretary of Defense (Comptroller)",
      " and CSTC- A. This information included the Under Secretary\u2019s February 4, 2011,  Interim Guidance on Afghanistan Security Forces Fund (ASFF)  Contributions to the Government of the Islamic Republic of  Afghanistan (GIRoA), CSTC-A\u2019s standard operating procedures for  direct contributions, DOD contribution letters to MOD and MOI, and  DOD assessments of the strengths and weaknesses of these  ministries. We also interviewed DOD officials in Washington, D.C.,  and Kabul. To assess steps taken by USAID and DOD to help ensure the  accountability of their direct assistance to Afghan ministries through  multilateral trust funds,",
      " we reviewed the policies and practices the  agencies use to assess risks associated with direct assistance and to  establish control mechanisms over the use of direct assistance funds.  \uf0b7  Our assessments were again based on criteria drawn from GAO\u2019s  Standards for Internal Control in the Federal Government, which  defines risk assessment and control activities as key elements of an  internal control framework.  \uf0b7  To evaluate relevant USAID policies and practices regarding  multilateral trust funds against these criteria, we reviewed USAID  agencywide policies for awarding direct assistance to multilateral trust  funds such as the World Bank-administered Afghanistan  Reconstruction Trust Fund (ARTF), as outlined in USAID\u2019s Automated  Directives System.",
      " We also reviewed ARTF-related program and  budget documents from the USAID mission in Afghanistan, including  USAID\u2019s 2002 grant agreement with ARTF and modifications to the  agreement. We also met with officials of the Department of the  Treasury to coordinate our work regarding the World Bank. We  reviewed World Bank documents concerning ARTF and interviewed  USAID and World Bank officials in Washington, D.C., and in Kabul.  \uf0b7  To assess DOD policies and practices regarding multilateral trust  funds against these criteria, we reviewed information from the Office  of the Undersecretary of Defense (Comptroller) and CSTC-A.",
      " This  information included the Under Secretary\u2019s February 4, 2011, Interim  Guidance on Afghanistan Security Forces Fund (ASFF) Contributions  to the Government of the Islamic Republic of Afghanistan (GIRoA)  and CSTC-A\u2019s standard operating procedures for direct contributions.  We also reviewed United Nations Development Program (UNDP)  documents and reports concerning the Law and Order Trust Fund for  Afghanistan and interviewed DOD officials in Washington, D.C., and  in Kabul, as well as UNDP officials in Kabul. Appendix II: Comments from the U.S. Agency  for International Development Appendix III: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments Major contributors to this report were Tetsuo Miyabara,",
      " Assistant Director;  Emily Gupta; Bruce Kutnick; Esther Toledo; and Pierre Toureille. Ashley  Alley, Pedro Almoguera, Diana Blumenfeld, Jeffrey Baldwin-Bott,  Gergana Danailova-Trainor, Martin De Alteriis, Karen Deans, Christopher  Mulkins, Mona Sehgal, and Eddie Uyekawa also provided technical  assistance.\n"
    ],
    "length": 10371,
    "hardness": null,
    "role": null
  },
  {
    "id": 59,
    "question": null,
    "answer": "Radioactive waste is a byproduct of nuclear weapons production, commercial nuclear power generation, and the naval reactor program. Waste byproducts also result from radioisotopes used for scientific, medical, and industrial purposes. The legislative definitions adopted for radioactive wastes, for the most part, refer to the processes that generated the wastes. Thus, waste disposal policies have tended to link the processes to uniquely tailored disposal solutions. Consequently, the origin of the waste, rather than its radiologic characteristics, often determines its fate. Plutonium and enriched uranium-235 were first produced by the Manhattan Project during World War II. These materials were later defined by the Atomic Energy Act of 1954 as special nuclear materials, along with other materials that the former Atomic Energy Commission (AEC) determined were capable of releasing energy through nuclear fission. Reprocessing of irradiated nuclear fuel to extract special nuclear material generated highly radioactive liquid and solid byproducts. The Nuclear Waste Policy Act of 1982 (NWPA) defined irradiated fuel as spent nuclear fuel, and the byproducts as high-level waste. Uranium ore processing technologically enhanced naturally occurring radioactive material and left behind uranium mill tailings. The fabrication of nuclear weapons generated transuranic waste. Both commercial and naval reactors continue to generate spent fuel. High-level waste generation has ceased in the United States, as irradiated fuel is no longer reprocessed. The routine operation and maintenance of nuclear reactors, however, continues to generate low-level radioactive waste, as do medical procedures using radioactive isotopes. The NWPA provides for the permanent disposal of spent nuclear fuel and high-level radioactive waste in a deep geologic repository. The repository is to be constructed and operated by the Department of Energy (DOE) under the Nuclear Regulatory Commission's (NRC) licensing authority. Yucca Mountain, in Nevada, is the candidate site for the nation's first repository. The NRC and the Environmental Protection Agency (EPA) share regulatory authority for radioactive waste disposal. However, these regulatory agencies have yet to adopt uniform radiation protection standards for disposal sites. The NRC's jurisdiction, however, does not extend to DOE's management of defense-related waste at DOE facilities other than Yucca Mountain. Radioactive waste classification continues to raise issues for policymakers. Most recently, DOE policy on managing the residue in high-level waste storage tanks proved controversial enough that Congress amended the definition of high-level waste. The disposition of waste with characteristics left undefined by statute can be decided by an NRC administrative ruling. The case for low-activity waste promises to provoke similar controversy. This report will be updated as new radioactive waste classification issues arise.\n",
    "docs": [
      "Background Radioactive waste is a byproduct of nuclear weapons production, commercial nuclear power generation, and the naval reactor program. Waste byproducts also result from radioisotopes used for scientific, medical, and industrial purposes. Waste classification policies have tended to link the processes that generate the waste to uniquely tailored disposal solutions. Consequently, the origin of the waste, rather than its radiologic characteristics, often determines its fate. Congress recently renewed its interest in radioactive waste classification when a Department of Energy (DOE) order regarding the disposition of high-level waste storage tank residue was legally challenged. As a result, Congress amended the statutory definition of high-level waste to exclude such residue.",
      " The classification of other radioactive wastes continues to remain an aspect of disposal policy. The Atomic Energy Act of 1946 (P.L. 79-585) defined fissionable materials to include plutonium, uranium-235, and other materials that the Atomic Energy Commission (AEC) determined to be capable of releasing substantial quantities of energy through nuclear fission. Source material included any uranium, thorium, or beryllium containing ore essential to producing fissionable material, and byproduct material remaining after the fissionable material's production. In the amended Atomic Energy Act of 1954 (P.L. 83-703), the term special nuclear material superseded fissionable material and included uranium enriched in isotope 233,",
      " material the AEC determined to be special nuclear material, or any artificially enriched material. As the exclusive producer, the AEC originally retained title to all fissionable material for national security reasons. In the 1954 amended Act, Congress authorized the AEC to license commercial reactors, and ease restrictions on private companies using special nuclear material. Section 183 (Terms of Licenses) of the Act, however, kept government title to all special nuclear material utilized or produced by the licensed facilities in the United States. In 1964, the AEC was authorized to issue commercial licenses to possess special nuclear material subject to specific licensing conditions (P.L.",
      " 88-489). Although the Atomic Energy Act referred to transuranic waste (material contaminated with elements in atomic number greater than uranium), radioactive waste was not defined by statute until the 1980s. High-level waste and spent nuclear fuel were defined by the Nuclear Waste Policy Act (NWPA) of 1982 (42 U.S.C. 10101). Spent nuclear fuel is the highly radioactive fuel rods withdrawn from nuclear reactors. High-level waste refers to the byproduct of reprocessing irradiated fuel to remove plutonium and uranium. Low-level radioactive waste was defined by the Low-Level Radioactive Waste Policy Act of 1980 ( P.L.",
      " 95-573 ) as radioactive material that is not high-level radioactive waste, spent nuclear fuel, or byproduct material, and radioactive material that the Nuclear Regulatory Commission (NRC) classifies as low-level radioactive waste consistent with existing law. Measurement of Radioactivity and Hazards of Radiation The measurement of radioactivity and the hazards of radiation are, in themselves, complex subjects. A discussion of radioactive waste would be incomplete without reference to some basic terms and concepts. Radioactive elements decay over time. The process of radioactive decay transforms an atom to more a stable element through the release of radiation\u2014 alpha particles (two protons and two neutrons), charged beta particles (positive or negative electrons), or gamma rays (electromagnetic radiation). Radioactivity is expressed in units of curies \u2014the equivalent of 37 billion (37 x 10 9 ) atoms disintegrating per second.",
      " The rate of radioactive decay is expressed as half-life \u2014the time it takes for half the atoms in a given amount of radioactive material to disintegrate. Radioactive elements with shorter half-lives therefore decay more quickly. The term for the absorption of radiation by living organisms is dose. The United States uses the Roentgen Equivalent Man (rem) as the unit of equivalent dose in humans. Rem relates the absorbed dose in human tissue to the effective biological damage of the radiation. Not all radiation has the same biological effect, even for the same amount of absorbed dose, as some forms of radiation are more efficient than others in transferring their energy to living cells.",
      " In 1977, the International Commission on Radiation Protection (ICRP) concluded that an individual's mortality risk factor from radiation-induced cancers was about 1 x10 -4 from an exposure of one rem dose (one lifetime chance out of 10,000 for developing fatal cancer per rem), and recommended that members of the public should not receive annual exposures exceeding 500 millirem. The exposure limit is made up of all sources of ionizing radiation that an individual might be exposed to annually, which includes natural background and artificial radiation. An individual in the United States receives an average annual effective dose equivalent to 360 millirem, as shown in Table 1.",
      " The ICRP revised its conclusion on risk factors in 1990, and recommended that the annual limit for effective dose be reduced to 100 millirem. This limit is equivalent to natural background radiation exclusive of radon. ICRP qualified the recommendation with data showing that even at a continued exposure of 500 millirem, the change in age-specific mortality rate is very small\u2014less than 4.5% for females, less than 2.5% for males older than 50 years, and even less for males under age 50. The radiation protection standards for NRC activities licensed under 10 C.F.R.",
      " Part 20 are based on a radiation dose limit of 100 millirem, excluding contributions from background radiation and medical procedures. Unlike the NRC's dose-based approach to acceptable hazard level, the Environmental Protection Agency (EPA) uses a risk-based approach that relies on the \"linear, no-threshold\" model of low-level radiation effects. In the EPA model, risk is extrapolated as a straight line from the high-dose exposure for Hiroshima and Nagasaki atomic bomb survivors down to zero radiation exposure. Thus, the EPA model attributes risk to natural background levels of radiation. For illustrative purposes, EPA considers a 1-in-",
      "10,000 risk that an individual will develop cancer to be excessive, and has set a goal of 1-in-a- million risk in cleanup of chemically contaminated sites. The Government Accountability Office (GAO) has concluded that the low-level radiation protection standards administered by EPA and NRC do not have a conclusive scientific basis, as evidence of the effects of low-level radiation is lacking. Comparative Range of Radioactivity The comparative range in radioactivity of various wastes and materials is presented in Figure 1. Radioactivity is typically expressed in terms of \"curies/ gram\" for soil-like materials as well as radioactive materials that are homogeneous in nature.",
      " However, because the inventories of some radioactive wastes are tracked in terms of \"curies/cubic-meter,\" that unit of measure has been used here. The lowest end of the scale (at the bottom of the figure) is represented by soils of the United States\u2014the source of natural background radiation. Radioactivity ranging from 3 to 40 microcuries/cubic-meter may be attributed to potassium, thorium and uranium in soils. Phosphogypsum mining waste is the byproduct of ore processing that \"technologically enhanced naturally occurring radioactive material\" (uranium) at higher levels than natural background (thus the term\u2014TENORM), and may range from 6.",
      "5 to 45 microcuries/cubic-meter. Uranium mill tailings (referred to as 11e.(2) byproduct material) range from 97 to 750 microcuries/cubic-meter at various sites (Appendix, Table A-1 ). On average, low-level waste ranges from 6.7 to 20 curies/cubic-meter based on the inventory of disposal facilities (Appendix, Table A-2 ); a lower limit is left undefined by regulation, but an upper limit is set at 7,000 curies/cubic-meter based on specific constituents. Transuranic waste ranges between from 47 to 147 curies/cubic-meter based on the Waste Isolation Pilot Plant inventory.",
      " The vitrified high-level waste processed by the Savannah River Site ranges from 6,700 to 250,000 curies/cubic-meter. Finally, spent fuel aged 10 to 100 years would range from 105,000 to 2.7 million curies/cubic-meter (Appendix, Table A-3 ). These comparisons are for illustrative purposes only, as the radioactive constituents among the examples are different. Definitions of various radioactive wastes are summarized in Table 2 along with applicable legislative provisions. More detailed descriptions of the wastes and the processes that generate the wastes are provided further below. Spent Nuclear Fuel Currently, 104 commercial nuclear power reactors are licensed by the NRC to operate in 31 states.",
      " These reactors are refueled on a frequency of 12 to 24 months. A generic Westinghouse-designed 1,000-megawatt pressurized-water reactor (PWR) operates with 100 metric tons of nuclear fuel. During refueling, approximately one-third of the fuel (spent nuclear fuel) is replaced. The spent fuel is moved to a storage pool adjacent to the reactor for thermal cooling and decay of short-lived radionuclides. Due to the limited storage pool capacity at some commercial reactors, some cooled spent fuel has been moved to dry storage casks. The NRC has licensed 30 independent spent fuel storage installations (ISFSI)",
      "for dry casks in 23 states. Fuel debris from the 1979 Three Mile Island reactor accident has been moved to interim storage at the Idaho National Laboratory (INL). General Electric Company (GE) operates an independent spent fuel storage installation (Morris Operation) in Morris Illinois. A group of eight electric utility companies has partnered as Private Fuel Storage, LLC with the Skull Valley Band of Goshute Indians, and applied for an NRC license to build and operate a temporary facility to store commercial spent nuclear fuel on the Indian reservation in Skull Valley, Utah. DOE spent fuel originated from nuclear weapons production, the naval reactor program, and both domestic and foreign research reactor programs.",
      " DOE spent fuel remains in interim storage at federal sites in Savannah River, South Carolina; Hanford, Washington; INL; and Fort St. Vrain, Colorado. In contrast to commercial reactors, naval reactors can operate without refueling for up to 20 years. As of 2003, 103 naval reactors were in operation, and nearly as many have been decommissioned from service. Approximately 65 metric tons heavy metal (MTHM) of spent-fuel have been removed from the naval reactors. Until 1992, naval spent fuel had been reprocessed for weapons production, and since then has been transferred to INL for interim storage.",
      " The planned Yucca Mountain repository is scheduled to receive 63,000 MTHM commercial spent nuclear fuel, and 2,333 MTHM of DOE spent-fuel. The NWPA prohibits disposing of more than the equivalent of 70,000 MTHM in the first repository until a second is constructed. The Energy Information Administration reported an aggregate total 47,023.4 MTHM discharged from commercial rectors over the period of 1968 to 2002. Of the total, 46,268 MTHM is stored at reactor sites, and the balance of 755.4 MTHM is in stored away from reactor sites.",
      " CRS obtained and compiled raw data from EIA on spent fuel discharged by commercial reactor operators to the end of 2002, and data on spent fuel stored at the DOE national laboratory and defense sites (as of 2003 year-end). A combined total of 49,333 MTHM had been discharged by commercial- and defense-related activities at the end of 2002. Commercial reactor storage pools accounted for 41,564 MTHM, and ISFSIs accounted for 5,294 MTHM. The balance was made up by 2,475 MTHM of federal spent fuel stored at national laboratories, defense sites,",
      " and university research reactors. CRS's figures differ from EIA's in several respects: EIA compiles only commercial spent fuel data, combines data on reactor storage pool and dry storage at the reactor facility site, and identifies non-reactor site spent fuel as \"away from reactor site\" storage. The data are geographically presented in Figure 2 and summarized in Table 3. At the end of 1998, EIA reported 38,418 MTHM of spent fuel discharged. Based on 47,023 MTHM discharged at the end of 2002, CRS estimates that commercial reactor facilities discharge an average 2152 MTHM of spent fuel annually.",
      " On that basis, CRS estimates 53,637 MTHM of spent fuel had been discharged at the end of 2004. High-Level Radioactive Waste NWPA defines high-level waste as \"liquid waste produced directly in reprocessing and any solid material derived from such liquid waste that contains fission products in sufficient concentrations,\" and \"other highly radioactive material\" that NRC determines requires permanent isolation. Most of the United States' high-level waste inventory was generated by DOE (and former AEC) nuclear weapons programs at the Hanford, INL, and Savannah River Sites. A limited quantity of high-level waste was generated by commercial spent fuel reprocessing at the West Valley Demonstration Project in New York.",
      " Over concern that reprocessing contributed to the proliferation of nuclear weapons, President Carter terminated federal support for commercial reprocessing in 1977. For further information on reprocessing policy, refer to CRS Report RS22542, Nuclear Fuel Reprocessing: U.S. Policy Development, by [author name scrubbed]. Weapons-production reactor fuel, and naval reactor spent fuel were processed to remove special nuclear material (plutonium and enriched uranium). Reprocessing generated highly radioactive, acidic liquid wastes that generated heat. Weapons-related spent fuel reprocessing stopped in 1992, ending high-level waste generation in the United States. The wastes that were previously generated continue to be stored at Hanford,",
      " INL, and Savannah River, where they will eventually be processed into a more stable form for disposal in a deep geologic repository. The Hanford Site generated approximately 53 million gallons of high-level radioactive and chemical waste now stored in 177 underground carbon-steel tanks. Some strontium and cesium had been separated out and encapsulated as radioactive source material, then commercially leased for various uses. The Savannah River Site generated about 36 million gallons of high-level waste that it stored in 53 underground carbon-steel tanks. Both the Hanford and Savannah River Sites had to neutralize the liquid's acidity with caustic soda or sodium nitrate to condition it for storage in the carbon-",
      "steel tanks. (The neutralization reaction formed a precipitate which collected as a sludge on the tank bottom; see the discussion of waste-incidental-to-reprocessing below.) Savannah River has constructed and begun operating a defense-waste processing facility that converts high-level waste to a vitrified (glass) waste-form. The vitrified waste is poured into canisters and stored on site until eventual disposal in a deep geologic repository. A salt-stone byproduct will be permanently disposed of on site. Hanford has plans for a similar processing facility. INL generated approximately 300,000 gallons of high-level waste through 1992 by reprocessing naval reactor spent fuel,",
      " and sodium-bearing waste from cleaning contaminated facilities and equipment. The liquid waste had originally been stored in 11 stainless steel underground tanks. All of the liquid high-level waste has been removed from five of the 11 tanks and thermally converted to granular (calcine) solids. Further treatment is planned, and INL is also planning a waste processing facility similar to Savannah River's vitrification plant. West Valley's high-level waste has been vitrified and removed from the site. The vitrification process thermally converts waste materials into a borosilicate glass-like substance that chemically bonds the radionuclides. The vitrification plant is being decommissioned.",
      " The Hanford Site and INL are planning similar vitrification plants. High-level waste is also considered a mixed waste because of the chemically hazardous substances it contains, which makes it subject to the environmental regulations under the Resource Conservation and Recovery Act (RCRA). Waste Incidental to Reprocessing DOE policy in Order 435.1 refers to waste incidental to reprocessing in reclassifying a waste stream that would otherwise be considered high-level due to its source or concentration. DOE's Implementation Guide to the Order states that \"DOE Manual 435.1-1 is not intended to create, or support the creation of, a new waste type entitled incidental waste.\" The waste stream typically results from reprocessing spent fuel.",
      " DOE has determined that under its regulatory authority the incidental-to-processing waste stream can be managed according to DOE requirements for transuranic or low-level waste, if specific criteria are met. The DOE evaluation process for managing spent-fuel reprocessing wastes considers whether (1) the \"wastes are the result of reprocessing plant operations such as contaminated job wastes including laboratory items such as clothing, tools and equipment,\" and (2) key radionuclides have been removed in order to permit downgrading the classification to either low-level waste or transuranic waste. Evaluation process wastes include large volumes of low-activity liquid wastes (separated from high-level waste streams), a grout or salt-stone solid form,",
      " and high-level waste residues remaining in storage tanks. DOE's evaluation process at the Savannah River Site resulted in capping the residue left in high-level waste storage tanks with cement grout. Public comments on the draft of Order 435.1 expressed the concern that potentially applicable laws do not define or recognize the principle of \"incidental waste,\" or exempt high-level waste that is \"incidental\" to DOE waste management activities from potential NRC licensing authority. In 2003, the Natural Resources Defense Council (NRDC) challenged DOE's evaluation process for Savannah River as scientifically indefensible, since no mixing occurred to dilute the residue's activity when capping it with grout.",
      " DOE countered that through the waste-incidental-to-reprocessing requirements of Order 435.1, key radionuclides have been removed from the tanks, and the stabilized residual waste does not exceed Class C low-level radioactive waste restrictions for shallow land burial. Removing the residual waste would be costly and expose workers to radiologic risks, according to DOE. In NRDC v. Abraham, the Federal District Court in Idaho ruled in 2003 that DOE violated the NWPA by managing wastes through the evaluation process in Order 435.1. The Energy Secretary later asked the Congress for legislation clarifying DOE authority in determinations on waste-incidental-to-reprocessing at Hanford,",
      " Savannah River, and INL. On November 5, 2004, the U.S. Court of Appeals for the Ninth Circuit vacated the district court's judgment and remanded the case with a direction to dismiss the action. Section 3116 (Defense Site Acceleration Completion) in the Ronald W. Reagan Defense Authorization Act of FY2005 ( P.L. 108-375 ) specified that the definition of the term \"high-level radioactive waste\" excludes radioactive waste from reprocessed spent fuel if (1) the Energy Secretary in consultation with the NRC determines the waste has had highly radioactive radionuclides removed to the maximum extent practical,",
      " and (2) the waste does not exceed concentration limits for Class C low-level waste. As a result of the Act, NRC expects to review an increased number of waste determinations. As guidance to its staff, NRC developed a draft Standard Review Plan (NUREG-1854). Section 3117 of the Act (Treatment of Waste Material) authorizes $350 million for DOE's High Level Waste Proposal to accelerate the cleanup schedule for the Hanford, Savannah River, and INL. For further information on this subject, refer to CRS Report RS21988, Radioactive Tank Waste from the Past\u00a0Production of Nuclear Weapons:",
      " Background\u00a0and Issues for Congress, by [author name scrubbed] and [author name scrubbed]. Transuranic Waste The Atomic Energy Act (42 U.S.C. 2014) defines transuranic (TRU) waste as material contaminated with elements having atomic numbers greater than uranium (92 protons) in concentrations greater than 10 nanocuries/gram. The DOE (with other federal agencies) revised the minimum radioactivity defining transuranic waste from 10 nanocuries/gram to greater than 100 nanocuries/gram in 1984. Transuranic elements are artificially created in a reactor by irradiating uranium.",
      " These elements include neptunium, plutonium, americium, and curium. Many emit alpha particles and have long half-lives. Americium has commercial use in smoke detectors, and plutonium produces fission energy in commercial power reactors. Transuranic waste is generated almost entirely by DOE (and former AEC) defense-related weapons programs. The waste stream results from reprocessing irradiated fuel to remove plutonium-239 or other transuranic elements, and from fabricating nuclear weapons and plutonium-bearing reactor fuel. The waste may consist of plutonium-contaminated debris (such as worker clothing, tools, and equipment), sludge or liquid from reprocessing,",
      " or cuttings and scraps from machining plutonium. In 1970, the former AEC determined that the long half-life and alpha emissions associated with transuranic waste posed special disposal problems. This prompted the decision to stop the practice of burying TRU waste in shallow landfills as a low-level waste. DOE distinguishes \"retrievably stored\" transuranic waste from \"newly generated\" waste. Waste buried prior to 1970 is considered irretrievable and will remain buried in place. Since 1970, transuranic waste has been packaged (e.g., metal drums, wood or metal boxes) and retrievably stored in above-ground facilities such as earth-mounded berms,",
      " concrete culverts, buildings, and outdoor storage pads. Waste that has been retrieved or will be retrieved, and then repackaged for transportation and disposal, is classed as newly generated waste. The Department of Energy National Security and Military Applications of Nuclear Energy Authorization Act of 1980 ( P.L. 96-164 ) directed the Energy Secretary to consult and cooperate with New Mexico in demonstrating the safe disposal of defense radioactive wastes. The Waste Isolation Pilot Plant Land Withdrawal Act ( P.L. 102-579 as amended by P.L. 104-211 ) limited disposal acceptance to transuranic waste with a half-life greater than 20 years and radioactivity greater than 100 nanocuries/",
      "gram. The WIPP Act further defined transuranic waste in terms of \"contact-handled transuranic waste\" having a surface dose less than 200 millirem per hour, and \"remote-handled transuranic waste\" having a surface dose rate greater than 200 millirem/hour. The WIPP facility (near Carlsbad, New Mexico) began accepting transuranic waste in 1999 but was restricted by the New Mexico Environment Department to accepting contact-handled waste only. In October 2006, New Mexico revised WIPP's permit to allow remote-handled waste. The Resource Conservation and Recovery Act of 1976 (42 U.S.C.",
      " 6901) imposed additional disposal requirements on transuranic waste mixed with hazardous constituents. Mixed radioactive and hazardous waste is a separate classification discussed further below. The Energy and Water Development Appropriations Act for 2005 ( P.L. 108-447 ) and appropriation acts for some prior years precluded the WIPP facility from disposing of transuranic waste containing plutonium in excess of 20%, as determined by weight. Surplus Weapons-Usable Plutonium The Atomic Energy defined \"special nuclear material\" as plutonium, uranium enriched in isotopes 233 or 235, and any other material the NRC determined as special nuclear material.",
      " Special nuclear material is important in weapons programs and as such has strict licensing and handling controls. Under President Clinton's 1993 Nonproliferation and Export Control Policy, 55 tons of weapons-usable plutonium was declared surplus to national security needs. DOE plans to use surplus plutonium in mixed oxide fuel for commercial power reactors. Plutonium not suitable for mixed oxide fuel fabrication is destined for repository disposal. The special facility constructed to reprocess the surplus would generate transuranic waste and low-level radioactive waste streams. Spent mixed oxide fuel would be disposed of in the same manner as conventional commercial spent fuel in an NRC-",
      "licensed deep geologic repository. Low-Level Radioactive Waste The Low-Level Radioactive Waste Policy of 1980 ( P.L. 96-573 ) defined \"low-level radioactive waste\" as radioactive material that is not high-level radioactive waste, spent nuclear fuel, or byproduct material, and radioactive material that the Nuclear Regulatory Commission (NRC) classifies as low-level radioactive waste consistent with existing law. Low-level waste is classified as A, B, C, or Greater than Class C in 10 C.F.R. 61.55\u2014Waste Classification. These classes are described further below. Commercial low-level waste is disposed of in facilities licensed under NRC regulation,",
      " or NRC-compatible regulations of \"agreement states.\" Low-level radioactive waste is generated by nuclear power plants, manufacturing and other industries, medical institutions, universities, and government activities. Much of the nuclear power plant waste comes from processes that control radio-contaminants in reactor cooling water. These processes produce wet wastes such as filter sludge, ion-exchange resins, evaporator bottoms, and dry wastes. Institutions such as hospitals, medical schools, research facilities, and universities generate wastes of significantly differing characteristics. Industrial generators produce and distribute radionuclides, and use radioisotopes for instruments and manufacturing processes. The General Accounting Office (now Government Accountability Office)",
      " reported that of the 12 million cubic feet of low-level waste disposed of in 2003, 99% constituted Class A. The NRC classifies low-level waste using two tables: one for long-lived radionuclides, and one for short-lived. Long-lived and short-lived refer to the length of time for radioactive decay. For regulatory purposes, the dividing line between short-lived and long-lived is a half-life of 100 years. The radionuclides included as long-lived are: carbon-14, nickel-59, niobium-94, technetium-99, iodine-129,",
      " plutonium-241, and curium-242. The group \"alpha emitting transuranic nuclides with half-lives greater than 5 years\" is included in the long-lived table, as various isotopes of the group may have half-lives in the range of hundreds-of-thousand of years. The short-lived radionuclide table includes tritium (hydrogen-3), cobalt-60, nickel-63, strontium-90, and cesium-137. A group of unspecified \"nuclides with half-lives less than 5 years\" is included as short-lived. Low-level waste generated by nuclear power plants results from the fission of uranium fuel,",
      " or the activation of the reactor components from neutrons released during fission. Trace amounts of uranium left on fuel rod surfaces during manufacturing are partly responsible for the fission products in the reactor cooling water. Tritium (H-3) occasionally results from uranium fission, and from reactor cooling water using boron as a soluble control absorber. The radionuclides carbon-14, nickel-53, nickel-59, and niobium-94 are created when stainless steel reactor components absorb neutrons. The radionuclides strontium-90, technetium-99, and cesium-137 are fission products of irradiated uranium fuel.",
      " The transuranic radionuclides are neutron-activation products of irradiated uranium fuel. Iodine-129 is found in radioactive wastes from defense-related government facilities and nuclear fuel cycle facilities; if released into the environment, its water solubility allows its uptake by humans, where it concentrates in the thyroid gland. Some of the short-lived radionuclides have specific industrial or institutional applications. These include cobalt-60, strontium-90, and cesium-137. Cobalt-60 is used in sealed sources for cancer radiotherapy and sterilization of medical products; its intense emission of high-energy gamma radiation makes it an external hazard,",
      " as well as an internal hazard when ingested. Strontium-90 is used in sealed sources for cancer radiotherapy, in luminous signs, in nuclear batteries, and in industrial gauging. Due to strontium's chemical similarity to calcium, it can readily be taken up by plants and animals, and is introduced into the human food supply through milk. Cesium-137 also is used in sealed sources for cancer radiotherapy, and due to its similarity to potassium can be taken up by living organisms. Low-level waste classification ultimately determines whether waste is acceptable for shallow land burial in an NRC- or state-licensed facility.",
      " The four waste classes identified by 10 C.F.R. Section 61.55 on the basis of radionuclide concentration limits are: Class A: waste containing the lowest concentration of short-lived and long-lived radionuclides. Examples include personal protective clothing, instruments, tools, and some medical wastes. Also, waste containing any other radionuclides left unspecified by 10 C.F.R. 61.55 is classified as A. Class B: an intermediate waste classification that primarily applies to waste containing either short-lived radionuclides exclusively, or a mixture of short-lived and long-lived radionuclides in which the long-lived concentration is less than 10%",
      " of the Class C concentration limit for long-lived radionuclides. Class C: wastes containing long-lived or short-lived radionuclides (or mixtures of both) at the highest concentration limit suitable for shallow land burial. Examples include ion exchange resins and filter materials used to treat reactor cooling water, and activated metals (metal exposed to a neutron flux\u2014irradiation\u2014that creates a radioactive isotope from the original metal). Greater than Class C (GTCC): waste generally not acceptable for near-surface disposal. Greater than Class C wastes from nuclear power plants include irradiated metal components from reactors such as core shrouds,",
      " support plates, and core barrels, as well as filters and resins from reactor operations and decommissioning. The physical form, characteristics, and waste stability requirements are summarized in Table 4. Class A, B, and C wastes are candidates for near-surface disposal. The concept for near-surface disposal is: a system composed of the waste form, a trenched excavation, engineered barriers, and natural site characteristics. Through complex computer models, the licensee must demonstrate that the site and engineered features comply with the performance objectives in 10 C.F.R. Part 61. Generally Class A and B wastes are buried no greater than 30 meters (~100 feet). Class C waste must be buried at a greater depth to prevent an intruder from disturbing the waste after institutional controls have lapsed.",
      " The operation of a disposal facility was originally foreseen to last 20 to 40 years, after which it would be closed for stabilization period of 1 to 2 years, observed and maintained for 5 to 15 years, then transferred to active institutional control for 100 years. At the time of licensing, funds had to be guaranteed by the state or licensee for the facility's long term care after closure. At present, no disposal facility exists for Greater than Class C Waste, though the DOE is in the initial phase of a process to identify disposal options. The Senate Committee on Energy and Natural Resources conducted a hearing in September 2004 to consider the potential shortage of low-level waste disposal sites.",
      " The GAO had concluded in a 2004 report that no shortfall in disposal capacity appeared imminent, although the national low-level waste database that would be used to estimate the adequacy of future capacity was inaccurate. The GAO recommended that the DOE stop reporting the database information, and added that Congress may wish to consider directing the Nuclear Regulatory Commission to report when the disposal capacity situation changes enough to warrant congressional evaluation. Provisions for State Disposal Compacts In enacting the Low-Level Radioactive Waste Policy Act of 1980, Congress also established the policy that each state take responsibility for disposing of low-level radioactive waste generated within its borders. To accomplish this,",
      " states may enter into compacts. Section 102 of the 1986 amendments to the Act provided that each state, either by itself or in cooperation with other states, be responsible for disposing of low-level radioactive wastes generated within the state. Low-Level Waste Classification Tables The NRC created two tables in 10 C.F.R 61.55 for classifying low-level waste on the basis of radionuclide concentration limits. Table 1 of the regulation applies to long-lived radionuclides, and Table 2 applies to short-lived (included as Figures A-1 and A-2 in the Appendix of this report). The concentration limits are expressed in units of \"curies/cubic meter\"",
      " or \"nanocuries/gram\" (the latter unit applying exclusively to the alpha-emitting transuranic radionuclides). Figures 3 through 6 represent an illustrative guide to interpreting Tables 1 and 2; they are not intended, however, for actual waste classification purposes. The figures break down Tables 1 and 2 by long-lived, transuranic, short-lived and mixed long- and short-lived radionuclides. In the case of mixed radionuclides, the \"sum-of-the-fractions\" rule must be applied. Sum-of-the-Fractions Rule. Waste containing a mixture of radionuclides must be classified by applying the sum-of-the fractions rule.",
      " In the case of short-lived radionuclides\u2014for each radionuclide in the mixture, calculate the fraction: radionuclide-concentration lowest-concentration - limit then calculate the fractions' sum. If the sum-of-the-fractions is less than 1, the waste class is Class A. If the sum of the fractions is greater than 1, recompute each fraction using the upper concentration limits. If the fraction sum is less than 1, the waste is Class C; if greater than 1 then it is Greater than Class C. In the case of long-lived radionuclides, sum the fractions of each radionuclide concentration divided by the Column 1 concentration limits.",
      " If the resulting fraction sum is less than 1, the waste is Class A. If the fraction sum is greater than 1, recompute the fractions by applying the Column 2 concentration limits. If the sum is less than 1, the waste is Class B. If the sum is greater than 1, recompute again using the Column 3 limits. For example, consider a waste containing concentrations of long-lived radionuclides Sr-90 at 50 Ci/m 3 and Cs-137 at 22 Ci/m 3. Since the concentrations each exceed the values in Column 1 (0.04 and 1.",
      "0 respectively) of Chart 3 (Table 2 of Section 61.55), they must be compared to the concentration limits of Column 2. For Sr-90, the fraction 50/150 equals 0.33, for Cs-137 the fraction 22/44 equals 0.5. The resulting sum of the fractions (0.33 + 0.5) equals 0.83. Since the sum is less than 1.0, the waste is Class B. Mixed Low-Level Radioactive and Hazardous Waste Mixed waste contains both concentrations of radioactive materials that satisfy the definition of low-level radioactive waste in the Low-Level Radioactive Waste Policy Act,",
      " and hazardous chemicals regulated under the Resource Conservation and Recovery Act (RCRA, 42 U.S.C. 6901). In general, facilities that manage mixed waste are subject to RCRA Subtitle C (Hazardous Waste) requirements for hazardous waste implemented by EPA (40 C.F.R. 124 and 260-270) or to comparable regulations implemented by states or territories that are authorized to implement RCRA mixed waste authority. The RCRA Subtitle C program was primarily developed for the states' implementation with oversight by EPA. Depleted Uranium Naturally occurring source material uranium contains uranium isotopes in the approximate proportions of: U-",
      "238 (99.3%), U-235 (0.7%), and U-234 (trace amount) by weight. Source material uranium is radioactive, U-235 contributing 2.2% of the activity, U-238 48.6%, and U-234 49.2%. Depleted uranium is defined in 10 CFR 40.4 (Domestic Licensing of Source Material) as \"the source material uranium in which the isotope U-235 is less than 0.711 % of the total uranium present.\" It is a mixture of isotopes U-234, U-235, and U-",
      "238 having an activity less than that of natural uranium. Most of the DOE depleted uranium hexafluoride inventory has between 0.2% and 0.4% U-235 by weight. The former AEC began operating uranium enrichment plants in 1945 to produce U-235 enriched fuel for national defense and civilian nuclear reactors. Most commercial light-water reactors use uranium enriched 2%-5% with U-235. As part of that enrichment process, uranium ore was converted to uranium hexafluoride (UF6) gas to facilitate U-235's separation, depleting the source material uranium of its U-",
      "235 isotope. DOE's inventory of depleted uranium hexafluoride (DUF6) is approximately 700,000 metric tons. The DUF6 is stored in metal cylinders at the three enrichment plant sites: Paducah, KY; Portsmouth, OH; and Oak Ridge, TN. As part of DOE's DUF6 Management Program, Oak Ridge National Laboratory (ORNL) conducted an assessment of converting the DUF6 to one of four stable forms: metallic (DU), tetrafluoride (DUF4), dioxide (DUO2) and triuranium octaoxide (DU3O8). ORNL considers the characteristics of the four forms suitable for disposal as low-level radioactive waste.",
      " The DU metal form has commercial and military uses (aircraft counterweights, shielding, armor, and munitions). DOE has considered the environmental impacts, benefits, costs, and institutional and programmatic needs associated with managing its DUF6 inventory. In the 1999 Record of Decision for Long Term Management and Use of Depleted Uranium Hexafluoride, DOE decided to convert the DUF6 to depleted uranium oxide, depleted uranium metal, or a combination of both. The depleted uranium oxide would be stored for potential future uses or disposal as necessary. Conversion to depleted uranium metal would be performed only when uses for the converted material were identified.",
      " DOE stated that it did not believe that long-term storage as depleted uranium metal and disposal as depleted uranium metal were reasonable alternatives. DOE has selected Uranium Disposition Services to design, build and operate facilities in Paducah and Portsmouth to convert the DUF6. DOE has effectively declared DUF6 a resource in the record of decision, anticipating its conversion to non-reactive depleted uranium oxide. Making the material nonreactive is intended to eliminate the RCRA criteria that otherwise would place it in a Mixed Waste class. Technologically Enhanced Naturally Occurring Radioactive Material Technologically Enhanced Naturally Occurring Radioactive Material (TENORM) is a byproduct of processing mineral ores containing naturally occurring radionuclides.",
      " These include uranium, phosphate, aluminum, copper, gold, silver, titanium, zircon and rare earth ores. The ore beneficiation process concentrates the radionuclides above their naturally occurring concentrations. Some TENORM may be found in certain consumer products, as well as fly ash from coal-fired power plants. Activities such as treating drinking water also produce TENORM. Surface and groundwater reservoirs may contain small amounts of naturally occurring radionuclides (uranium, radium, thorium, and potassium; i.e., NORM). In areas where concentrations of radium are high in underlying bedrock, groundwater typically has relatively high radium content.",
      " Water treatment/filtration plants may remove and concentrate NORM in a plant's filters, tanks, and pipes. The result is technologically concentrated NORM (thus TENORM) in the form of filtrate and tank/pipe scale. Radium-226, a decay product of uranium and thorium soluble in water, is a particular concern because of the radiologic threat it poses. Public exposure to TENORM is subject to federal regulatory control. At Congress's request in 1997, the EPA arranged for the National Academy of Sciences (NAS) to study the basis for EPA's regulatory guidance on naturally occurring radioactive material. The NAS study defined technologically enhanced radioactive material (TENORM)",
      " as \"any naturally occurring material not subject to regulation under the Atomic Energy Act whose radionuclide concentrations or potential for human exposure have been increased above levels encountered in the natural state by human activities.\" The NAS completed its study in 1999. The most important radionuclides identified by the study include the long-lived naturally occurring isotopes of radium, thorium, uranium, and their radiologically important decay products. Radium is of particular concern because it decays to form radioactive radon gas, a carcinogen contributing to lung cancer. NAS noted that federal regulation of TENORM is fragmentary. Neither the EPA nor any other federal agency with responsibility for regulating radiation exposure has developed standards applicable to all exposure situations that involve naturally occurring radioactive material.",
      " The EPA submitted its own report on implementing the NAS recommendations to Congress the following year, along with plans to revise its TENORM guidance documents. According to its website, the EPA has used its authority under a number of existing environmental laws to regulate some sources of TENORM, including the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Energy Policy Act Provisions for NORM The Energy Policy Act of 2005 contains a provision in Section 651 that amends the Atomic Energy Act's section 11(e) definition of \"byproduct material\"",
      " to exclude \"any discrete source of naturally occurring radioactive material [NORM], other than source material\" that the NRC, in consultation with the EPA, Department of Energy, and Department of Homeland Security, determines would pose a threat similar to the threat posed by a discrete source of radium-226. The Energy Policy Act also made clear that byproduct material as defined in paragraphs (3) and (4) of section 11(e) is not to be considered low-level radioactive waste for the purpose of disposal under the Low-Level Radioactive Waste Policy Act and \"carrying out a compact\" under the authorization of 42 U.S.C.",
      " sections 2021(b) et seq. (permitting NRC agreements with states to discontinue its regulatory authority over byproduct, source, and special nuclear materials.) The Nuclear Regulatory Commission (NRC) proposes to amend its regulations to include jurisdiction over certain radium sources, accelerator-produced radioactive materials (referred to as NARM). The proposed rule does not suggest any discrete source of NARM nor criteria for making such a determination. It does note that EPAct gives the NRC authority over discrete sources of radium-226 but not over diffuse sources of radium-226 as it occurs in nature or over other processes where radium-",
      "226 may be unintentionally concentrated. The specific example of \"residuals from treatment of water to meet drinking water standards\" is given as a diffuse source. Recently, the Rocky Mountain Low-Level Radioactive Waste Compact's authority to dispose of NORM and TENORM has been called into question over the assertion that its jurisdiction violates the Commerce Clause of the U.S. Constitution. Congress gave its consent to the Rocky Mountain Low-Level Radioactive Waste Compact, consisting originally of the states of Arizona, Colorado, Nevada, New Mexico, Utah, and Wyoming. Arizona, Utah, and Wyoming later withdrew from the Compact, leaving Colorado, Nevada, and New Mexico as remaining Compact members.",
      " The Rocky Mountain Compact defines low-level waste as specifically excluding radioactive waste generated by defense activities, high-level waste (from spent nuclear fuel reprocessing), transuranic waste (produced from nuclear weapons fabrication), 11e(2) byproduct material, and mining process-related wastes. However, under Article VII(d) of the Compact, both the Compact's board and the host state may authorize management of any radioactive waste other than low-level wastes upon consideration of various factors, such as the existence of transuranic elements. A review of the legislative history of the Rocky Mountain Compact did not appear to reveal the intent of Congress with respect to the specific responsibility of the states concerning NRC-defined A,",
      " B, and C class wastes. A statement in the legislative history of the Southeast Interstate Compact, however, may provide an indication of Congress's intent: The definition of low-level waste in the compact may vary, but the compact provides for adjustments and flexibility under its own procedures adequate to allow the compact to handle waste for which the states are responsible. On the basis of the Compact's Article VII and the language of H.Rept. 99-317, quoted above, that accompanied H.R. 1267, it might be argued that the Compact's jurisdiction extends to TENORM when for disposal purposes TENORM meets the criteria of Class A,",
      " B, or C low-level radioactive waste. Thus, the Compact's authority to dispose of low-level radioactive waste would appear restricted by the Energy Policy Act of 2005. TENORM that poses a threat similar to the threat posed by a discrete source of radium-226 would arguably be outside the jurisdiction of the Compact. A diffuse source of radium-226 (i.e., TENORM ) that does not pose a similar threat, however, would appear to remain within the jurisdiction of the Compact's Article VII(d) provision. Uranium Mill Tailings Uranium and thorium mill tailings are the waste byproducts of ore processed primarily for its source material (i.e., uranium or thorium)",
      " content (10 C.F.R. 40.4). The tailings contain radioactive uranium decay products and heavy metals. Mined ores are defined as source material when containing 0.05 % or more by weight of uranium or thorium (10 C.F.R. 20.1003). Byproduct material does not include underground ore bodies depleted by solution extraction. Tailings or waste produced by the extraction or concentration of uranium or thorium is defined under Section 11e.(2) of the Atomic Energy Act as amended by Title II of the Uranium Mill Tailings Radiation Control Act of 1978 (UMTRCA, 42 U.S.C.",
      " 7901), and is simply referred to as 11e.(2) byproduct material. UMTRCA provided for stabilization and disposal of tailings to mitigate the hazard of radon diffusion into the environment, and other hazards. Radon is a daughter-product of uranium/thorium radioactive decay. The NRC regulates the siting and design of tailings impoundments, disposal of tailings or wastes, decommissioning of land and structures, groundwater protection standards, testing of the radon emission rate from the impoundment cover, monitoring programs, airborne effluent and offsite exposure limits, inspection of retention systems, financial surety requirements for decommissioning and long-term surveillance and control of the tailings impoundment,",
      " and eventual government ownership of pre-1978 tailings sites under an NRC general license. Waste Disposal Policy Issues The AEC first acknowledged the problem of waste disposal in 1955. Concerned over the hazard of radioactive waste, the AEC awarded a contract to the National Academy of Sciences to conduct research on methods to dispose of radioactive waste in geologic media and recommend disposal options within the continental limits of the United States. The Academy's suggestion, at that time, was that disposal in cavities mined out in salt beds or salt domes offered the most practical and immediate solution. In the mid-1960s, the AEC conducted engineering tests on disposing spent fuel in a salt mine near Lyons,",
      " Kansas. After developing conceptual repository designs for the mine, AEC abandoned the Lyons project in 1972 due to technical difficulties. The AEC went on to identify another site in a salt deposit and announced plans for a retrievable surface storage program as an interim measure until a repository could be developed, but the plan was later abandoned. In the 1970s, the Energy Research and Development Administration (ERDA), and later the Department of Energy (DOE), began a program of screening various geologic media for a repository (including salt deposits), and the federal sites of the Hanford Reservation and Nevada Test Site. The national problem created by accumulating spent nuclear fuel and radioactive waste prompted Congress to pass the Nuclear Waste Policy Act of 1982 (NWPA). The potential risks to public health and safety required environmentally acceptable waste disposal solutions,",
      " and the Act provided for developing repositories to dispose of high-level radioactive waste and spent nuclear fuel. Under the Act, the Department of Energy will assume title to any high-level radioactive waste or spent nuclear fuel accepted for a disposal in a repository constructed under the Act (42 U.S.C. 10131). In 2002, the President recommended approval of the Yucca Mountain repository site in Nevada. In a recent district court ruling, however, EPA's 10,000-year safety standard on radiation containment at the site was found to be inconsistent with the congressionally mandated recommendations of the National Academy of Sciences. Depending upon successful resolution of the matter and the NRC's granting a license,",
      " the repository could begin to accept high-level waste and spent nuclear fuel in the next decade. The Energy Department intends to submit a license application for Yucca Mountain in mid-2008. The controversy over DOE waste incidental to reprocessing appears to have been resolved by redefining high-level radioactive wastes as excluding the residue in high-level waste storage-tanks. However, Congress has requested the National Research Council to study DOE's plans to manage the residual tank waste and report on the adequacy of the plans ( P.L. 108-375 ). The DOE also operates the Waste Isolation Pilot Plant in New Mexico to dispose of the transuranic waste generated by the weapons program.",
      " New Mexico's Governor, concerned that waste incidental to reprocessing could end up at WIPP, ordered the state's Department of Environmental Management to amend WIPP's hazardous waste permit so that only waste listed on DOE's Transuranic Waste Baseline Report is explicitly permitted for disposal at WIPP. When Congress passed the Low-Level Radioactive Waste Policy Act in 1980, three states\u2014Nevada, South Carolina, and Washington\u2014hosted disposal sites for commercially generated low-level waste. The Act encouraged the formation of multi-state compacts in which one state would host a disposal facility for the member states. The new facilities were to begin operation in by the end of 1985.",
      " When it became clear that the deadline would not be met, Congress extended the deadline to the end of 1992 in the amended Act of 1986 ( P.L. 99-240 ). Since then, a new commercial site has been licensed in Utah, and the Nevada site has closed. Much of the low-level waste disposed of as Class A consists of debris, rubble, and contaminated soil from decommissioning DOE and commercial nuclear facilities that contain relatively little radioactivity. These decommissioning wastes make up much larger volumes than low-level waste generated by operating nuclear facilities. The term \"low-activity\" has been used in describing the waste,",
      " although it lacks regulatory or statutory meaning. The National Research Council, in its interim report Improving the Regulation and Management of Low-Level Radioactive Wastes found that the current system of regulating low-activity waste lacked overall consistency. As a consequence, waste streams having similar physical, chemical, and radiological characteristics may be regulated by different authorities and managed in disparate ways. In an Advance Notice of Proposed Rulemaking (ANPR), the EPA proposed analyzing the feasibility of disposing of certain low-activity radioactive wastes in the RCRA Subtitle C (hazardous waste) landfills, provided that legal and regulatory issues can be resolved. The NRC,",
      " in collaboration with the state of Michigan, recently permitted certain very low-activity wastes from decommissioning of the Big Rock Point nuclear power plant to be sent to a RCRA Subtitle D (solid waste) landfill, and other states have also determined that solid waste landfills offer sufficient protection for low-activity waste. In a recent decision, however, the NRC rejected a staff proposal to permanently allow disposal of low-activity waste in solid waste landfills. If found to be acceptable, disposing of low-activity waste at RCRA C and D landfills could alleviate the future capacity constraints at the three operating low-level waste facilities. Radioactive waste classification continues to raises issues for policymakers.",
      " Radioactive waste generation, storage, transportation, and disposal leave little of the national geography unaffected. The weapons facilities that processed and stored radioactive waste have left a lasting and expensive environmental legacy that the DOE is attempting to remedy by accelerating the cleanup of those contaminated sites. The standards for public exposure to low-level radiation from the repository or cleanup of the weapons facilities have not been reconciled by EPA and NRC. The lower limit on what may be classified as radioactive waste is undefined, and both EPA and NRC jurisdiction overlap on disposal of this waste stream. Glossary Appendix. \n"
    ],
    "length": 11238,
    "hardness": null,
    "role": null
  },
  {
    "id": 60,
    "question": null,
    "answer": "The United States has long advocated for strong oversight of the United Nations (UN). In 2005, GAO raised long-standing concerns that the ability of the UN's Office of Internal Oversight Services (OIOS) to carry out its mandate was constrained in scope and authority, and in 2006, GAO found that funding arrangements impeded OIOS's ability to operate independently. The U.S. Mission to the UN also expressed concern that OIOS's independence is limited in that it cannot make final hiring decisions for senior staff. In response to such concerns, the UN General Assembly in 2006 created an Independent Audit Advisory Committee (IAAC). GAO was asked to examine actions taken to address (1) impediments to OIOS's ability to provide independent oversight and (2) staffing issues that may have hindered its performance. GAO assessed OIOS's independence based on internationally recognized auditing standards, analyzed OIOS and other UN documents and data, and interviewed agency officials. The UN has taken worthwhile steps to enhance OIOS's independence, but certain UN funding and oversight arrangements continue to impede OIOS's ability to provide independent oversight. The General Assembly has supported OIOS's independence by creating the IAAC, which reviews OIOS's budgets and work plans for audits of the Secretariat and peacekeeping missions, and by recommending that OIOS base its planning and budget requests on risk in accordance with standards of the Institute of Internal Auditors (IIA). The General Assembly also clarified the role OIOS plays in internal oversight of funds and programs by adopting a resolution that reaffirmed the prerogatives of separately administered funds and programs to decide their own oversight mechanisms and relationship with OIOS. However, an independent review found that the arrangements for funding OIOS audits of those entities that choose to utilize its audit services do not meet IIA standards for independence. OIOS also remains constrained in its ability to issue consolidated audit reports for joint UN activities that include entities over which it does not have oversight authority, even when directed to do so by the General Assembly. High vacancy rates for authorized positions have hindered OIOS's ability to provide sufficient oversight, but the UN and OIOS are taking steps to address this issue. As of July 2011, 19 percent of OIOS staff positions were unfilled, and 30 percent were vacant for investigations of peacekeeping activities--the most challenging positions to fill. The UN's external auditor found that OIOS's staffing shortages hampered its Internal Audit Division's completion of its work plans. The UN and OIOS have made filling vacant positions a priority, and OIOS has hired 82 staff members since the start of the term of the new Under-Secretary-General for Internal Oversight Services in September 2010. The IAAC also expressed concern that vacancies at the senior management level would make it difficult for OIOS to accomplish its work. In August 2011, OIOS filled two director-level positions that had been vacant for more than a year. Further, the Under-Secretary-General has begun an initiative to strengthen OIOS's management and coordination and has requested an additional staff position for her front office. The Secretary-General has concurred with this request.\n",
    "docs": [
      "Background Internal Oversight in the  UN System The UN system includes the General Assembly, the Secretariat,  peacekeeping missions throughout the world, and separately  administered funds, programs, and specialized agencies that have their  own governing bodies. The General Assembly established the  separately administered funds and programs with responsibility for  particular issues, such as children (United Nations Children\u2019s Fund) or the  environment (United Nations Environment Program), that are funded  mainly by voluntary contributions. While separately administered, these  entities are under the authority of the Secretary-General, who appoints  the heads of each entity, but they have their own governing bodies  instead of being governed by the General Assembly.",
      " In contrast, the  heads of the specialized agencies are elected by their own governing  bodies, and these autonomous agencies do not fall under the authority of  the Secretary-General and therefore are not within OIOS\u2019s purview. OIOS is part of the Secretariat and is under the authority of the Secretary- General, who reports to the General Assembly. According to its mandate,  OIOS\u2019s purpose is \u201cto assist the Secretary-General in fulfilling his internal  oversight responsibilities in respect of the resources and staff of the  Organisation,\u201d and OIOS\u2019s chief executive, the Under-Secretary- General for Internal Oversight Services, reports directly to the General  Assembly.",
      " The Secretary-General has therefore stated that OIOS is  mandated to provide oversight only of activities that fall under the  Secretary-General\u2019s authority. These include activities of the Secretariat  in New York, Geneva, Nairobi, and Vienna; the UN\u2019s five regional  commissions; peacekeeping missions and humanitarian operations; funds  and programs administered separately under the authority of the  Secretary-General (including the Office of the United Nations High  Commissioner for Refugees, the United Nations Environment Program,  the United Nations Human Settlements Program, and the Office of the  United Nations High Commissioner for Human Rights); and other entities  that have requested OIOS services such as the United Nations  Convention to Combat Desertification and the United Nations Framework  Convention on Climate Change.",
      " In addition to the OIOS mandate, the  Financial Regulations and Rules of the United Nations designate OIOS as  the financial management internal auditor for the UN. OIOS\u2019s Organizational  Structure OIOS\u2019s Three Divisions OIOS is composed of the Office of the Under-Secretary-General, an  Executive Office, and three divisions, namely, Internal Audit,  Investigations, and Inspection and Evaluation. Figure 1 provides the  number and location of staff for each of these divisions as of September  2011. Appendix II provides additional information on OIOS\u2019s locations and  staffing. The Internal Audit Division provides  assurance and advice designed to improve and  add value to the UN\u2019s operations.",
      " Internal audits  bring a systematic approach to evaluating and  improving the effectiveness of risk management,  control, and governance processes. The Inspection and Evaluation Division  assists UN intergovernmental bodies and  program managers in assessing the relevance,  efficiency, effectiveness, and impact of UN  Secretariat programs. The division\u2019s role is  twofold: to help assure that these programs  follow their mandates and to foster institutional  learning and improvement through reflection by  program officials and UN member states on  performance and results. OIOS Funding The majority of OIOS funding comes from two budgets approved by the  General Assembly: one for normal, recurrent activities such as the core  functions of the Secretariat (regular budget), and the other for  peacekeeping activities (peacekeeping account). Both the regular and  peacekeeping budgets are financed largely through assessed  contributions from member states.",
      " A small portion of the peacekeeping  account, the peacekeeping support account, provides funds for OIOS to  conduct audits, investigations, inspections, and evaluations of  peacekeeping activities. In addition to funding from the regular budget and peacekeeping account,  OIOS receives funds from \u201cextrabudgetary\u201d sources. These are voluntary  contributions from member states that pay for the activities of UN funds,  programs, and other entities. The United States contributes a fixed  percentage to the regular budget, which was 25 percent prior to 2000 and  22 percent thereafter, and which funds the UN Secretariat and its various  activities and functions,",
      " including OIOS (shown in figs. 2 and 3,  respectively). For example, the United States contributed about $1.2 billion  to the UN Secretariat regular budget in the current biennium (2010-2011).  The United States also contributes annually to peacekeeping operations  and to extrabudgetary items. For example, in 2010, the United States  contributed about $2.6 billion to peacekeeping operations (about 27.3  percent of the total peacekeeping budget) and about $4.4 billion to other  UN activities, including those funded through extrabudgetary sources.",
      " As shown in figure 4, OIOS funding from all three sources\u2014regular  budget, peacekeeping, and extrabudgetary\u2014has generally increased  over time. The peacekeeping portion has been the fastest growing  component over the last 10 years due to the rapid rise in peacekeeping  activities around the world, while the regular and extrabudgetary portions  have grown more slowly. OIOS\u2019s total appropriations for the 2010-2011  biennium were over $100 million, approximately five times what they were  when OIOS was established in 1994. OIOS\u2019s authorized staffing levels have also increased,",
      " due in part to the  expansion of UN peacekeeping activities (see fig. 11 in app. II). We have  previously reported that OIOS has had difficulty filling its authorized staff  positions. IAAC Role in Internal  Oversight The UN General Assembly strengthened internal oversight of the  Secretariat and peacekeeping missions by creating the IAAC, which is  responsible for advising the General Assembly on the scope, results, and  effectiveness of audit and other oversight functions, especially OIOS. The  IAAC is also responsible for advising the General Assembly on measures  to ensure management\u2019s compliance with audit and other oversight  recommendations, as well as with various risk management,",
      " internal  control, operational, and accounting and disclosure issues. The  committee examines OIOS\u2019s work plans, taking into account the work  plans of other UN oversight bodies, reviews OIOS\u2019s proposed budget,  and makes recommendations to the General Assembly through the  Advisory Committee on Administrative and Budgetary Questions. (See  app. III for a timeline showing the preparation, approval, and execution of  OIOS\u2019s regular budget and the IAAC\u2019s role in that process.) The  committee also advises the General Assembly on the quality and overall  effectiveness of risk management procedures, on deficiencies in the  internal control framework of the UN, and on steps to increase and  facilitate cooperation among UN oversight bodies.",
      " The General Assembly in 2007 appointed three members to serve a 3- year term and two members to serve a 4-year term on the IAAC, all  beginning on January 1, 2008; the committee, which generally meets four  times a year, held its first session in February 2008. It has issued 11  reports, including one on vacant positions at OIOS. The IAAC held its  15th session in July 2011, during which it discussed with the Under- Secretary-General for Internal Oversight Services a wide range of issues,  including funding arrangements, risk assessments conducted,",
      " value  provided by OIOS, and performance audits. In addition, the committee  covered standard agenda items with OIOS, such as relationships with  management, high risks identified by OIOS, coordination with various  oversight bodies, implementation of oversight recommendations, and  OIOS staff vacancies. The committee is scheduled to hold its next  meeting in December 2011. The U.S. Mission to the UN strongly supported the establishment of the  IAAC and has also supported other initiatives to improve transparency  and accountability in the UN system. For example, it has endorsed a new  UN effort to consolidate the management of all financial, human,",
      " and  physical resources, including for peacekeeping and field missions, under  one integrated information management system. OIOS Role Clarified  and Independence  Strengthened, but  Some Funding and  Oversight Issues  Remain The UN General Assembly is addressing some previously identified  impediments to OIOS\u2019s ability to provide independent oversight, but  certain UN funding arrangements and oversight relationships continue to  limit the independence and authority of OIOS. In January 2003, the  General Assembly reaffirmed the prerogatives of separately administered  funds and programs to decide their own oversight mechanisms and their  relationship with OIOS. The UN Secretariat\u2019s Office of Legal Affairs stated  that this action clarified the role OIOS plays in the internal oversight of  separately administered funds and programs,",
      " with these entities deciding  their own oversight mechanisms and their relationship with OIOS. An  independent review of UN oversight commissioned by the Secretary- General noted, however, that the arrangements used to fund OIOS\u2019s  audits of those separately administered entities that choose to utilize its  audit services do not meet Institute of Internal Auditors (IIA) standards for  independence. OIOS also reported that it is not able to issue  consolidated audit reports for joint UN activities that included entities over  which OIOS does not have oversight authority, even when directed to do  so by the General Assembly. The General Assembly Has  Clarified OIOS\u2019s Role in  Internal Oversight of  Funds and Programs The General Assembly has addressed OIOS\u2019s oversight authority several  times since the creation of the office (see app.",
      " IV), and the new Under- Secretary-General for Internal Oversight Services requested a legal  opinion from the UN Secretariat\u2019s Office of Legal Affairs regarding OIOS\u2019s  oversight responsibility for funds and programs.  OIOS\u2019s founding  mandate states that OIOS\u2019s purpose is to assist the Secretary-General in  fulfilling his internal oversight responsibilities with respect to the resources  and staff of the organization. The Secretary-General has stated that the  resources and staff of the organization include separately administered  organs. The General Assembly also stated that OIOS has the authority to  initiate, carry out, and report on any action that it considers necessary to  fulfill its responsibilities with regard to monitoring,",
      " internal audit,  inspection and evaluation, and investigations.  In January 2003, the  General Assembly adopted a resolution that reaffirmed the prerogatives  of separately administered funds and programs to decide their own  oversight mechanisms and their relationship with OIOS. In May 2011, in  response to her request, the UN\u2019s Office of Legal Affairs issued a  memorandum to the Under-Secretary-General stating that the General  Assembly, through the 2003 resolution, clarified OIOS\u2019s jurisdiction over  the funds and programs, which suggested that the involvement of OIOS  in their internal oversight functions is contingent on the consent of the  funds and programs.",
      " According to OIOS\u2019s website and audit manual, OIOS provides internal  oversight to UN organizations that are under the direct authority of the  Secretary-General, including departments and offices within the  Secretariat and peacekeeping missions and related offices, and to funds,  programs, and other organizations under the authority of the Secretary- General, but administered separately, that have requested OIOS\u2019s audit  services (see fig. 5). The amounts these organizations pay for internal  oversight are based on negotiated fees for services, sometimes defined in  a memorandum of understanding (MOU). Some UN funds and programs,  including, for example, the United Nations Development Program and the  World Food Program,",
      " have their own internal oversight offices, which they  use to oversee their activities instead of using the services of OIOS.  Others, such as the International Trade Center and the Office of the  United Nations High Commissioner for Human Rights, have partial or no  internal audit capacity. Funds or programs with their own internal  oversight capacity may also use certain OIOS services, for example, if  they determine that they need outside experts to conduct a sensitive  investigation. (App. V provides a more detailed listing of UN  organizations, their relationship with OIOS, and their oversight capacity.)  According to OIOS, as of September 2011,",
      " it provided oversight to a  number of separately administered entities, including seven funds and  programs that have partial or no internal oversight capacity. The Under- Secretary-General for Internal Oversight Services told us that she is  conducting a review of all separately administered entities under the  authority of the Secretary-General to determine their internal oversight  capacities, which conforms with her mandate to support the Secretary- General in his oversight responsibilities. The UN General Assembly has supported OIOS\u2019s independence in audits  of organizations within the Secretariat and peacekeeping missions by  creating the Independent Audit Advisory Committee (IAAC), which  reviews OIOS\u2019s audit plans and budget requests,",
      " and compares them to  the Secretary-General\u2019s proposed budgets for oversight to ensure that  they reflect the resources OIOS needs to audit identified risks. In a July  2006 report to the General Assembly, OIOS noted that a main obstacle to  the independence of its audits was that it was responsible for auditing  departments in the Secretariat, such as the Department of Management,  which reviews its budget. While OIOS did not report any specific  examples of budget restrictions that had been imposed, the IAAC  mitigates the potential impairment to OIOS\u2019s independence caused by its  dependence on funding from entities it audits by making  recommendations that would ensure that OIOS has sufficient resources,",
      "  and keeping the General Assembly apprised of issues related to OIOS\u2019s  operational independence. The IAAC became operational in 2008 and  serves some of the functions of an independent audit committee, which  the IIA considers critical to ensuring strong and effective processes  related to independence, internal control, risk management, compliance,  ethics, and financial disclosure. The IAAC advises the General Assembly in accordance with terms of  reference adopted by the General Assembly in 2007. The IAAC reviews a  proposed budget for internal oversight prepared by the Secretary-General  and compares that to the resources requested by OIOS. The IAAC then  provides independent comments directly to the budget committee of the  General Assembly on the resources OIOS will need (see app.",
      " III for a  timeline showing the preparation, approval, and execution of OIOS\u2019s  regular budget). An IAAC official reported that, while part of its function is  to ensure OIOS\u2019s independence, the committee does not automatically  take OIOS\u2019s side in disputes over resources with the Secretary-General. In some instances, the IAAC has advised the General Assembly that  OIOS needed more resources and independence; in others, it has  advised that OIOS resources were sufficient or excessive. Managing the internal audit activity:  The chief     audit executive must effectively manage the     internal audit activity to ensure it adds value to     the organization.",
      " Risk management:  The internal audit activity     must evaluate the effectiveness and contribute     to the improvement of risk management     processes. Definition of risk management:  A process to     identify, assess, manage, and control potential     events or situations to provide reasonable     assurance regarding the achievement of the     organization\u2019s objectives. The UN also strengthened OIOS\u2019s independence by supporting its efforts  to improve its risk-based planning and budgeting process in accordance  with IIA standards, but OIOS is still working to improve its risk  assessments in response to IAAC concerns. As part of the outcome of a  2005 World Summit gathering at the UN,",
      " the General Assembly  requested that the Secretary-General submit an independent external  evaluation of the auditing and oversight system of the UN, with  recommendations for improving these processes. The external review  commissioned by the Secretary-General recommended that OIOS  improve its annual risk-assessment methodology, and specified several  improvements, including building an inventory of risks in consultation with  its clients, and ranking the risk of each item in OIOS\u2019s audit universe. As  the Secretary-General reported, in addition to ensuring that oversight  resources are prioritized for high-risk areas, a risk-based approach also  provides the General Assembly with a basis for determining the level of  risk it is willing to accept for the organization.",
      " In its 2006 report to the  General Assembly, OIOS committed to having fully risk-based work plans  by 2008. OIOS was able to meet this schedule, completing risk  assessments of approximately 90 percent of its clients from July 2007 to  September 2008. An OIOS official also reported that its separately  administered, extrabudgetary clients were included in its risk  assessments. In 2008, its first year of operation, the IAAC reported that OIOS\u2019s risk- assessment methodology provided a reasonable basis for establishing  preliminary work plans. However, in 2009, the IAAC reported that OIOS\u2019s  risk assessments were not practical for determining OIOS\u2019s resource  requirements because they did not take into account its clients\u2019 efforts to  mitigate these risks and therefore gave an inflated estimate of risks and  oversight needs.",
      " The IAAC recommended that OIOS modify its risk  assessments to include the effect of controls that its clients have already  put in place, and in February 2011, OIOS officials reported that they are  working to change OIOS\u2019s methodology in accordance with the  recommendations. The Secretary-General found that OIOS\u2019s funding arrangements with  separately administered organizations do not meet IIA standards for  independence because OIOS must negotiate oversight agreements with  these organizations without an independent review to ensure that the  oversight resources provided are sufficient. These negotiations include  discussions of the number and level of staff and resources that will be  used for an audit based on an amount of funding that the individual fund  or program is able to provide OIOS.",
      " The IAAC mitigates this potential  impediment to OIOS\u2019s independence within the Secretariat and  peacekeeping missions; however, the IAAC Chairman stated that  although the IAAC reviews OIOS\u2019s budget requests for separately  administered organizations, it does not have the authority to work with the  governing bodies of these entities to resolve funding issues, and thus  potential impediments to OIOS\u2019s ability to provide independent oversight  remain. Threats to independence must be managed at     the individual auditor, engagement, functional,     and organizational levels. OIOS officials stated that some of these clients have provided limited  audit resources to assist OIOS in its efforts.",
      " OIOS officials emphasized  that these resource limitations have not impeded the office\u2019s audit  activities because improvements to risk-based planning have allowed it to  better prioritize audit work and manage resources more effectively and  economically. However, OIOS officials reported that several smaller  entities that have adopted the UN financial regulations and rules (and  therefore fall under OIOS\u2019s audit authority for financial management  audits) have not provided OIOS with resources for conducting audits.  These entities include the United Nations Convention to Combat  Desertification, the United Nations Interregional Crime and Justice  Research Institute, the United Nations Institute for Training and  Research, the United Nations Research Institute for Social Development,",
      "  the United Nations System Staff College, and the United Nations  University. Compounding the potential for limitations to OIOS\u2019s ability to provide  independent oversight, developing oversight relationships on a case-by- case basis has also created inconsistent funding arrangements, and the  IAAC has recommended that these funding arrangements be revised.  OIOS has MOUs formalizing its relationships with only seven of the  separately administered entities it lists as clients (see table 1). These  MOUs describe OIOS\u2019s oversight activities and resources, but the IAAC  does not review the MOUs and they do not necessarily ensure  independent oversight. OIOS has not established formal MOUs with its  other separately administered clients,",
      " including three funds and  programs\u2014the United Nations Environment Program, the United Nations  Human Settlements Program, and the United Nations Conference on  Trade and Development. In its report pending with the Secretariat, the  IAAC is recommending that the General Assembly reconsider OIOS\u2019s  current funding arrangements with separately administered entities. Since OIOS does not have oversight authority over all separately  administered UN entities, it may not be able to provide sufficient oversight  of crosscutting activities undertaken jointly by multiple UN entities even  when it is directed to do so by the General Assembly. UN humanitarian,  reconstruction, and development program activities can involve multiple  entities not covered by OIOS\u2019s existing mandate,",
      " which have their own  internal oversight offices. For example, the United Nations Development  Group Iraq Trust Fund has 22 separate participating UN organizations,  and some of these entities also have their own internal oversight capacity.  In August 2006, an external review commissioned by the Secretary- General found that OIOS could not fully assess risks in joint activities  involving entities not covered in its mandate, and it recommended that  OIOS be given audit authority over joint activities that include entities  within its mandate, with support from other audit organizations. In 2007,  OIOS and other internal audit offices in the UN system adopted a  framework for auditing multi-donor trust funds,",
      " in part to address this  issue. The framework established that a summary report of all internal  audit work would be prepared after the completion of the individual audits,  and OIOS officials stated that OIOS has subsequently participated in a  summary report of a joint audit of the Common Humanitarian Fund for  Sudan that was issued by the United Nations Development Program. While OIOS is not responsible for coordinating the internal oversight of all  joint activities, the General Assembly has previously directed it to prepare  the consolidated report of the audit and investigative reviews undertaken  by other UN organizations. However, in December of 2006, OIOS  reported that it had been unable to issue a consolidated report on the  audits of tsunami relief efforts,",
      " as directed by the General Assembly,  because the internal auditors of funds, programs, and specialized  agencies were unable to share their audit reports with OIOS. In 2010,  OIOS reemphasized its recommendation that the Secretary-General, in  collaboration with the heads of funds, programs, and specialized  agencies, specify in a single policy document the applicable rules and  regulations, coordination mechanisms, and reporting systems for  oversight of interagency activities. OIOS officials noted in the summer of  2011 that it still would not be possible for OIOS to issue a consolidated  audit report because funds and programs,",
      " and specialized agencies  cannot share their audit reports. Staffing Shortages  Have Hindered OIOS  Performance, but  Efforts Are Under  Way to Address Them High vacancy rates for authorized positions, for both rank-and-file and  senior staff, have historically hindered OIOS\u2019s ability to provide sufficient  oversight. In addition, the Under-Secretary-General for Internal  Oversight Services reported that she has insufficient staff in the Office of  the Under-Secretary-General to manage OIOS\u2019s operations. The UN  Secretariat and OIOS are taking steps to address these staffing issues.  OIOS has had staffing shortages in its three divisions,",
      " and the UN\u2019s  external auditors (the Board of Auditors) found that these shortages  hampered the Internal Audit Division\u2019s completion of its work plans. The  UN Secretariat and OIOS have prioritized filling vacant positions,  particularly since the start of the new Under-Secretary-General\u2019s term in  2010. The IAAC also expressed concern that vacancies at the senior  management level would make it difficult for OIOS to accomplish its work,  but OIOS has recently filled the two director-level positions that had been  vacant for more than a year. Further, the Under-Secretary-General has  begun an initiative within OIOS to strengthen OIOS\u2019s management and  coordination;",
      " this involves a comprehensive review of the office\u2019s  responsibilities and capabilities, and may result in requests for additional  management resources. To facilitate this effort, the Under-Secretary- General has requested staff and additional consultant positions through  the end of 2011, and the Secretary-General has concurred with this  request. Staffing Shortages Have  Constrained OIOS\u2019s  Oversight Capabilities Since our last report on OIOS in 2006, OIOS has had staffing shortages  due to authorized but unfilled positions that have limited the office\u2019s ability  to provide sufficient oversight. (See app. VI for the status of our 2006  recommendations.) According to the UN Office of Human Resources  Management,",
      " OIOS\u2019s vacancy rate for professional service staff was 21  percent, as of September 2010, an increase from the period between  2006 and 2009 when rates were between 12 and 17 percent. As of the  end of July 2011, OIOS data indicated that 19 percent of its approved  staff positions were unfilled and that, as shown in figure 6, the vacancy  rates were highest in the Internal Audit and Investigations Divisions, with  the highest rate (30 percent) for investigations of peacekeeping activities.  According to the Board of Auditors, staffing shortages hampered the  Internal Audit Division\u2019s completion of its planned audits in 2008 and  2009.",
      " In 2009 and again in 2010, the IAAC also expressed concern that  the high rate of unfilled positions in OIOS would make it difficult for OIOS  to accomplish its work. The Under-Secretary-General for Internal  Oversight Services noted that this is because OIOS is required to submit  a work plan based on 100 percent of its authorized positions, rather than  filled positions. She further stated that OIOS should be allowed to submit  a work plan based on anticipated staffing shortages. As reasons for high vacancy rates, OIOS officials cited complexities in the  hiring process, difficulty filling oversight positions in peacekeeping  missions,",
      " and a new online system for human resources management  that was unfamiliar to OIOS staff. OIOS officials stated that the human  resource policies of the Secretariat require that vacancies be posted  individually, preventing OIOS from conducting a single hiring process for  multiple positions, and that this requirement makes reducing the vacancy  rate more difficult. Compounding this problem, OIOS officials added that  when a high-level position becomes vacant, it is often filled internally,  which creates a new vacancy at a lower level. Thus, the filling of one  position can result in the creation of a new vacancy, which requires  another extended recruitment period.",
      " OIOS officials also stated that it is  difficult to fill vacant positions in peacekeeping missions due to  challenging working and living conditions. According to a high-level official  in the Investigations Division, OIOS staff in peacekeeping missions feel  isolated by their remote locations and by the fact that they are seen as  outsiders by the peacekeeping staff. Finally, OIOS officials said the  Secretariat had difficulty implementing the new online human resources  recruitment tool, and that this contributed to delays in filling vacancies in  the most recent biennium. UN Office of Human Resources Management  officials confirmed that there had been some technical problems with the  rollout of the new system and that vacancy rates had increased  systemwide.",
      " The UN and OIOS have made reducing staffing shortages a priority. The  new Under-Secretary-General for Internal Oversight Services stated that  she has hired 82 new staff since the beginning of her term in September  2010 and has received clearance to bring in consultants to work on  recruitment through December 2011. The Under-Secretary-General noted  that the UN financial regulations and rules do not provide her the flexibility  to redeploy funds to hire consultants, as may be necessary.  To reduce  the number of unfilled positions, the Under-Secretary-General requested  an exemption from Secretariat hiring policies in order to conduct mass  recruitment to identify qualified candidates.",
      " She said that a key to this  effort would be the ability to interview and prequalify candidates at the  appropriate level in order to be able to fill multiple vacancies at once. She  reported that she did not have to use the exemption because, in the final  analysis, she was able to work within current policies to permit selection  of prequalified candidates more expeditiously. Officials from the UN Office of Human Resources Management stated  that in April 2010, the UN revised its recruitment policy to expedite the  process for departments with high vacancy rates. The revised policy  allows department managers (including the Under-Secretary-General for  Internal Oversight Services)",
      " to place qualified candidates that are not  selected for a particular position onto a roster, which they or other  department managers can then use to fill similar vacancies without  repeating the full recruitment process. The new policy provides the Office  of Human Resources Management with incremental resources to fully  verify credentials and references of rostered candidates (with their  permission), rather than waiting until they have been selected for a  position to complete this verification process, as this can delay their  placement for up to 6 months. This revision is expected to expedite future  placement of prequalified candidates. OIOS also reported that the  difficulties with the online human resources recruitment tool are being  resolved,",
      " and that the office expects vacancy rates to decline over the  next year. Prolonged Vacancies at  Director Level Resolved,  but Underlying Weakness  in Hiring Process Remains OIOS had prolonged vacancies at the director level in two of its three  divisions, one of which persisted for 5 years, but both positions have now  been filled. In its 2008-2009 report, the IAAC expressed concern that  these vacancies would make it difficult for OIOS to accomplish its work.  Vacancies at the director level differ from other vacancies because OIOS  cannot fill director-level vacancies without the approval of the Secretary-",
      " General, in accordance with a Secretariat-wide human resources policy.  According to this policy, the head of a department or office must submit at  least three candidates\u2014one of which must be a woman\u2014to the  Secretary-General, who ultimately decides which candidate to appoint.  This process was a point of contention between the previous Under- Secretary-General and the Secretary-General and resulted in prolonged  vacancies at the director level in two of OIOS\u2019s three divisions. In 2009,  the IAAC proposed a definition of operational independence for OIOS that  includes the ability to select staff for appointment and promotion, and the  General Assembly will consider this proposal during its 66th session  starting in September 2011.",
      " However, the new Under-Secretary-General  was able to nominate candidates in accordance with the Secretariat\u2019s  policy. She stated that the process was not overly restrictive and that it  was appropriate for an internal auditor to follow the policies of the  Secretariat. In the spring of 2011, the Secretary-General approved the  candidates she had recommended to fill both the Director of  Investigations and the Director of Inspection and Evaluation positions,  who assumed their positions in August 2011. Under-Secretary-General  for Internal Oversight  Services Has Reported a  Need for More Staff to  Assist Her in Managing  OIOS Since assuming her position in September 2010,",
      " the new Under- Secretary-General for Internal Oversight Services stated that she has not  had the ability to sufficiently oversee OIOS activities because the Office of  the Under-Secretary-General is under resourced. She said she has made  reviewing all of OIOS\u2019s reports prior to release a priority for quality  control, and that OIOS issues about 300 reports per year.  In 2011, the  Office of the Under-Secretary-General has been reviewing all reports  before they are released, but this has strained available resources. This  office is authorized seven staff, including the Under-Secretary-General,  and all of these positions are currently filled.",
      " In May 2011, the IAAC  endorsed a new Assistant Secretary-General position, which OIOS had  included in its budget submission. OIOS reported that it will request  additional staff as needed after completing a comprehensive review of  OIOS\u2019s responsibilities and capabilities. The Under-Secretary-General  also stated that additional management staff could improve collaboration  between the divisions to better share information on risk assessments  and internal control shortfalls\u2014such as risk of fraud identified by the  Internal Audit Division, or systemic control weaknesses found by the  Investigations Division\u2014and is developing a team to identify potential  areas for collaboration among OIOS divisions.",
      " Conclusions The United States and other member states have long advocated a wide  range of UN management reforms that have included a call for greater  transparency and accountability throughout the UN system. As part of its  efforts to advance UN reforms, the U.S. Mission to the UN has included  among its priorities strengthening the UN\u2019s main internal oversight body\u2014 OIOS\u2014to better identify, obtain, and deploy the resources needed to  ensure that the billions in U.S. and international contributions are spent  wisely and that UN programs are managed effectively. Although OIOS  plays a vital role in improving the UN\u2019s effectiveness, OIOS\u2019s ability to  provide sufficient oversight of UN entities under the authority of the  Secretary-General is limited due to impediments to its operational  independence in providing full oversight of funds and programs and high  rates of unfilled staff positions.",
      " The UN General Assembly has taken steps to help strengthen OIOS\u2014 most notably, by creating the IAAC to review OIOS\u2019s budgets and work  plans for audits of entities within the Secretariat and peacekeeping  missions to ensure that OIOS resources are sufficient to address risks in  the UN. However, in order to provide essential internal oversight services,  OIOS still has to negotiate individual agreements with funds, programs,  and other clients under the authority of the Secretary-General but  administered separately and funded with extrabudgetary resources. This  practice may unduly limit the scope of OIOS\u2019s oversight. As the United  States and other member states place new demands for fiscal discipline  and cost-effective management on the UN and the myriad funds and  programs under it,",
      " strengthening OIOS oversight will help the UN be  more responsive to these demands. Improvements in these areas can  help OIOS address some of the difficulties it faces in effectively carrying  out its mandate. Recommendation for  Executive Action We recommend that the Secretary of State and the Permanent  Representative of the United States to the United Nations work with the  General Assembly and member states to address remaining impediments  to OIOS\u2019s ability to provide independent oversight resulting from its  relationships with certain UN funds and programs and other clients. Agency Comments  and Our Evaluation OIOS and State provided written comments on a draft of this report. We  have reprinted their comments in appendixes VII and VIII,",
      " respectively.  These agencies also provided technical comments and updated  information, which we have incorporated throughout this report, as  appropriate. OIOS agreed with the overall conclusion of the report that progress has  been made in addressing independence and staffing issues and that  further actions are needed in some areas. OIOS stated that it has  developed a comprehensive plan to address the issues we identified and  is currently working to systematically examine options and implications for  their resolution within the scope of OIOS\u2019s authority and responsibility as  mandated by the General Assembly. OIOS also stated that the report  fairly reflected its efforts and current views and noted that the efforts  invested by GAO,",
      " OIOS, and others have contributed to the usefulness of  the reported results. State endorsed most of our main findings and conclusions, noting that it  agreed that OIOS\u2019s budgetary and operational independence could be  strengthened further. State also accepted our recommendation that  impediments to OIOS\u2019s ability to provide independent oversight be  addressed. However, State appears to have misinterpreted our  discussion of OIOS oversight authority over the separately administered  UN funds and programs that have opted to use OIOS as their internal  auditor. State attributed to GAO the assertion that OIOS\u2019s involvement in  the internal oversight of funds and programs is contingent on the consent  of the funds and programs.",
      " This interpretation was made instead by the  UN Secretariat\u2019s Office of Legal Affairs. We have added language to  make this distinction clearer. As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution of it until 30 days from  the report date. At that time, we will send copies of this report to  appropriate congressional committees, the Secretary of State, and the  Permanent Representative of the United States to the United Nations.  This report will be available at no charge on the GAO website at  http://www.gao.gov. If you or your staff members have any questions about this report,",
      " please  contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix IX. Appendix I: Objectives, Scope, and  Methodology Our objectives were to examine actions being taken to address (1)  impediments to OIOS\u2019s ability to provide independent oversight and (2)  staffing issues that may have hindered its performance. To address our objectives, we reviewed relevant United Nations (UN) and  Office of Internal Oversight Services (OIOS)",
      " reports, policies and  procedures manuals, and other documents, as well as internationally  recognized standards such as those of the Institute of Internal Auditors  (IIA). We met with Department of State (State) officials in Washington,  D.C., and officials in New York from the U.S. Mission to the UN. In New  York, we also met with the Under-Secretary-General for Internal  Oversight Services, OIOS management officials and staff in each of the  Office\u2019s divisions (the Internal Audit Division, the Investigations Division,  and the Inspection and Evaluation Division), and with staff from the Office  of the Under-Secretary-General.",
      "  In addition, we met with representatives  of UN Secretariat departments and UN funds and programs, and the  members of the UN Board of Auditors, which carries out external audits of  the accounts of the UN organization and the funds and programs that are  under the authority of the Secretary-General. Through in-person  interviews, videoconference, and teleconference, we spoke with senior  OIOS audit and investigations officials based in Geneva and Vienna; with  the Independent Audit Advisory Committee (IAAC) Chairman in  Washington, D.C.; and with an official from the UN\u2019s Joint Inspection Unit  in Geneva, which conducts evaluations and inspections of the UN  system.",
      " To assess the reliability of UN and OIOS funding and staffing data, we  reviewed the office\u2019s budget reports for fiscal biennia 1994-1995 through  2010-2011 and vetted the data with relevant OIOS and UN budget  officials and interviewed an international relations specialist at the  Congressional Research Service who reports on U.S. contributions to the  UN; however, we did not independently verify the underlying source data.  We determined that UN and OIOS budget data were sufficiently reliable  to present trends of the regular, peacekeeping, and extrabudgetary  appropriations for the biennia 1994-",
      "1995 through 2010-2011.  We used  staffing data provided by OIOS, which we determined were reliable for  our purposes of presenting staffing levels as of July 31, 2011. To assess OIOS\u2019s consistency with key international auditing standards,  we reviewed relevant internationally accepted standards for oversight  such as the International Standards for the Professional Practice of  Internal Auditing issued by the IIA, which OIOS adopted in 2002. The IIA  standards apply to internal audit activities\u2014not to investigations,  inspections, or evaluation activities. However, we applied these standards  OIOS-wide, as appropriate.",
      "   We also reviewed the International  Standards of Supreme Audit Institutions issued by the International  Organization of Supreme Audit Institutions, as well as guidelines for  oversight such as the Uniform Guidelines for Investigations issued by the  Conference of International Investigators, and the Norms for Evaluation in  the UN System issued by the United Nations Evaluation Group.  Finally,  we examined documentation for OIOS\u2019s risk-based planning methodology  and annual work plans, recommendations tracking, and ethics practices. We conducted our work from October 2010 to September 2011 in  accordance with generally accepted U.S. government auditing standards.  Those standards require that we plan and perform our work to obtain  sufficient,",
      " appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our objectives. We believe that the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our objectives. Appendix II: OIOS\u2019s Locations and Staffing Figure 7 displays the locations of OIOS staff, as of September 2011,  including the UN\u2019s peacekeeping missions. The Internal Audit Division is by far the largest OIOS division, comprising  57 percent of the office\u2019s authorized staff; the Investigations Division is  second in size, at 29 percent (see fig. 8). More staff positions are tied to oversight of peacekeeping activities (47  percent overall,",
      " or 153 of 327) than activities funded by the regular  budget (37 percent, or 121 of 327) or extrabudgetary sources (16 percent,  or 53 of 327). The Internal Audit Division is the only division with a  significant number of staff positions financed by extrabudgetary sources  (26 percent, or 49 of 186). (See fig. 9.) OIOS\u2019s authorized staff positions have increased slightly (by 12 percent,  or 34 new positions) from 5 years ago, largely due to a 30-percent  increase (43 new positions) in Internal Audit Division positions,",
      " whereas  the positions in the Investigations Division dropped by 15 percent (17  positions). (See fig. 10.) Total authorized staff positions have generally increased over the past  nine UN fiscal biennium budget cycles, from 1994-1995 through 2010- 2011, growing from just over 100 positions in 1994-1995 to over 300 in  2010-2011, due largely to an increase in authorized positions for  overseeing the UN\u2019s expanding peacekeeping activities around the world  (see figs. 11 and 12). Appendix III: Timeline for the Preparation,",
      "  Approval, and Execution of OIOS\u2019s Regular  Budget Figure 13 is a timeline showing the process of preparing, approving, and  executing OIOS\u2019s regular budget. As shown in this figure, we have  updated this timeline since our 2006 report to reflect IAAC\u2019s creation and  its role in that budget process. Appendix IV: UN Resolutions and  Administrative Issuances Affecting OIOS Table 2 lists the UN resolutions and administrative issuances affecting  OIOS, including its establishment in 1994, a 2003 resolution reaffirming  the prerogative of the funds and programs to decide on their own  oversight mechanisms and their relationship with OIOS,",
      " and the 2006  resolution establishing the IAAC. Appendix V: UN Organizations, Their  Relationship with OIOS, and Their Oversight  Capacity Table 3 lists the organizations that comprise the UN system and  information about their relationship with OIOS and their internal oversight  capacity. Appendix VI: Status of Recommendations  from Our 2006 Report Our 2006 report made seven recommendations to State and the U.S.  Mission to the UN\u2014of these, we closed three recommendations as  implemented and four as not implemented. (GAO practice is to close out  all recommendations within a 4-year period.) Table 4 summarizes the  status of each of our recommendations as of July 31,",
      " 2011\u2014including the  three recommendations that were implemented within the GAO 4-year  time frame, and four that have not been fully implemented, but actions  have been taken. Appendix VII: Comments from the Office of  Internal Oversight Services Appendix VIII: Comments from the  Department of State GAO Comment We believe that State misinterpreted our discussion of OIOS oversight  authority over the separately administered UN funds and programs that  have opted to use OIOS as their internal auditor. Our report did not  conclude that OIOS may only exercise oversight authority over those  separately administered UN funds and programs that have opted to use  OIOS as their internal auditor;",
      " we reported that this was the interpretation  of the UN Secretariat\u2019s Office of Legal Affairs. We have added language  in the report to make this distinction clearer. Appendix IX: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the individual named above, Joy Labez, Assistant Director;  Kay Halpern; Jeremy Conley; David Dayton; Etana Finkler; Jack  Hufnagle; Marya Link; Grace Lui; and Steven Putansu made key  contributions to this report. Other contributors to this report include  Kirsten Lauber, Jeremy Sebest,",
      " Barbara Shields, and Phillip J. Thomas. Glossary This glossary of abbreviations and acronyms contains the full names of  the United Nations entities referred to in figure 5 and tables 1 and 3. WB Group Related GAO Products United Nations Organizations: Oversight and Accountability Could Be  Strengthened by Further Instituting International Best Practices.  GAO-07-597. Washington, D.C.: June 18, 2007. United Nations: Management Reforms Progressing Slowly with Many  Awaiting General Assembly Review. GAO-07-14. Washington, D.C.:  October 5,",
      " 2006. United Nations: Weaknesses in Internal Oversight and Procurement  Could Affect the Effective Implementation of the Planned Renovation.  GAO-06-877T. Washington, D.C.: June 20, 2006. United Nations: Oil for Food Program Provides Lessons for Future  Sanctions and Ongoing Reform. GAO-06-711T. Washington, D.C.:   May 2, 2006. United Nations: Internal Oversight and Procurement Controls and  Processes Need Strengthening. GAO-06-701T. Washington, D.C.:  April 27, 2006.",
      " United Nations: Funding Arrangements Impede Independence of Internal  Auditors. GAO-06-575. Washington, D.C.: April 25, 2006. United Nations: Lessons Learned from Oil for Food Program Indicate the  Need to Strengthen UN Internal Controls and Oversight. GAO-06-330.  Washington, D.C.: April 25, 2006. United Nations: Procurement Internal Controls Are Weak. GAO-06-577.  Washington, D.C., April 25, 2006. United Nations: Preliminary Observations on Internal Oversight and  Procurement Practices. GAO-",
      "06-226T. Washington, D.C.:   October 31, 2005. United Nations: Sustained Oversight Is Needed for Reforms to Achieve  Lasting Results. GAO-05-392T. Washington, D.C.: March 2, 2005. United Nations: Oil for Food Program Audits. GAO-05-346T. Washington,  D.C.: February 15, 2005.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 61,
    "question": null,
    "answer": "South Korea is a major economic partner for the United States. In 2006, trade between the two countries surpassed $75 billion, making South Korea the United States' seventh-largest trading partner\u2014ahead of France and Italy\u2014and its seventh-largest export market. In 2006, the U.S. was Korea's third-largest trading partner, second-largest export market, and its second-largest supplier of foreign direct investment (FDI). Bilateral economic relations have advanced to the point that the two sides in February 2006 announced their intention to negotiate a bilateral free trade agreement (FTA), which they hope to complete in 2007. If an agreement is reached, it would be the United States' largest FTA since the completion of the North American Free Trade Agreement. To go into effect, FTAs must be approved by Congress and the Korean National Assembly. The FTA negotiation and ratification processes are likely to politicize bilateral trade disputes and produce spillovers between the economic and strategic aspects of the relationship, particularly if there are dramatic developments in the crisis over North Korea's nuclear weapons program. Increased U.S.-South Korean economic interaction has been accompanied by numerous disagreements over trade and economic policies. The intensity of the disputes has diminished considerably since the late 1980s and early 1990s, in part because South Korea has enacted a set of sweeping market-oriented reforms as a quid pro quo for receiving a $58 billion package from the International Monetary Fund (IMF) following the near collapse of the South Korean economy in 1997. In recent years, the United States and South Korea appear to have become more adept at managing their trade disputes, so that they tend to be less acrimonious than they were in the 1980s and 1990s. This is due in part to the quarterly, working-level bilateral trade meetings that have been held since early 2001. Strategic factors, including South Korea's increased economic integration with North Korea, have become issues on the bilateral U.S.-South Korea economic front. In the FTA talks, South Korean officials are attempting to secure preferential tariff treatment for goods made by South Korean firms in the Kaesong industrial zone, located inside North Korea. In 2003, China surpassed the United States as South Korea's largest trading partner. Many South Korean exports to China are believed to be intermediate goods that are incorporated into products sent to the United States. This report summarizes the main issues in U.S.-South Korean economic relations, including South Korea's economic prospects and economic reforms, and major bilateral economic disputes. Details of the Korea-U.S. Free Trade Agreement (KORUS FTA) talks are left to CRS Report RL33435, The Proposed South Korea-U.S. Free Trade Agreement (KORUS FTA), by William Cooper and Mark Manyin. This report will be updated periodically.\n",
    "docs": [
      "Overview of U.S.-South Korean Economic Relations Relative Economic Importance Since 2000, South Korea has been the United States' seventh-largest trading partner, ahead of Western European countries like France and Italy. Trade flows in 2006 exceeded $75 billion, an all-time high for U.S.-Korea bilateral trade; South Korea was the United States' seventh largest export market and its seventh largest source of imports. (See Table 1 and Table 2.) For some western states and U.S. sectors, the South Korean market is even more important. Major U.S. exports to South Korea include semiconductors, machinery (particularly semiconductor production machinery), aircraft,",
      " and agricultural products. South Korea is among United States' largest markets for agricultural products and beef. U.S. exports for 2006 registered an all-time high, over $30 billion, in part due to the weakening value of the U.S. dollar, which fell by over 5% against the Korean won in 2006. The export growth occurred despite the continued South Korean ban on U.S. beef shipments. South Korea is far more dependent economically on the United States than the United States is on South Korea. In 2006, the United States was Korea's third-largest trading partner, second-largest export market, third-largest source of imports,",
      " and its second-largest supplier of foreign direct investment. However, the United States' relative economic importance to South Korea is decreasing. In 2003, China for the first time displaced the United States from its perennial place as South Korea's number one trading partner. In 2005, Japan overtook the United States to become South Korea's second-largest trade partner. Diminishing Friction over Trade Disputes The bilateral economic relationship has been accompanied by numerous disagreements over trade policies. The intensity of the disputes has diminished considerably since the late 1980s and early 1990s, in large measure because South Korea has enacted a set of sweeping market-oriented reforms as a quid pro quo for receiving a $58 billion package from the International Monetary Fund (IMF)",
      " following the near collapse of the South Korean economy in 1997. In particular, as a result of the reforms, South Korea has opened its doors to foreign investors, ushering in billions of dollars of foreign portfolio and foreign direct investment (FDI). The result is that foreign companies, including U.S. firms, now are significant shareholders in many prominent industrial conglomerates ( chaebol ), own an estimated 40% of the value of the shares traded on South Korea's stock exchange, and at one point owned about one-third of the Korean banking industry. After his election to one five-year term in 2002, South Korean President Roh Moo-hyun said that more extensive reforms were needed to help accomplish his goals of raising per capita gross domestic product (GDP)",
      " to $20,000 and of transforming South Korea into a major economic hub in Northeast Asia. In essence, for nearly a decade, most U.S. trade-related complaints are echoed by voices within the South Korean establishment. The United States and South Korea appear to have become more adept at managing their trade disputes, so that they tend to be less acrimonious than they were in the 1980s and 1990s. This may be partly due to the quarterly, working-level \"trade action agenda\" trade meetings that were initiated in early 2001. Both sides credit the meetings, which appear to be unique to the U.S.-South Korean trade relationship,",
      " with creating a more constructive dialogue by serving as \"action-forcing\" events. The KORUS FTA Negotiations2 U.S.-ROK economic relations advanced to the point that the two sides on February 2, 2006, announced their intent to launch negotiations to form a bilateral free trade agreement (FTA). South Korea and the United States have completed six rounds of negotiations and were, as of February 12, in the midst of the seventh round, which began in Washington on February 11 and was scheduled to end on February 14, 2007. The two sides have reported progress in some areas such as industrial tariffs,",
      " customs administration, anti-corruption measures, and foreign investment, but sharp differences remain over trade in autos, pharmaceuticals, and agricultural products and over antidumping procedures. Both sides are still aiming to complete the negotiation before the end of March to comply with TPA deadlines. If an agreement is reached, it would be the United States' largest FTA since the North American Free Trade Agreement (NAFTA). To go into effect, FTAs must be approved by Congress. The U.S.-South Korea FTA (KORUS FTA) negotiations are being conducted under the trade promotion authority (TPA) that the Congress granted to the President under the Bipartisan Trade Promotion Act (TPA)",
      " of 2002 ( P.L. 107-210 ). The President's TPA is scheduled to expire on July\u00a01, 2007; that is, an agreement must be signed before July 1, 2007, if it is to receive expedited congressional consideration under that authority. In addition, the TPA requires a 90-day presidential notification to Congress of intent to sign the agreement; therefore, the KORUS FTA would have to be completed before April 2, 2007. The decision to launch the FTA is regarded by some as a high-risk, high reward move by both governments. The economic side of the U.S.-ROK relationship has been a source of strength and stability in recent years,",
      " even as the diplomatic and military sides have been frayed by differences between Seoul and Washington over how best to deal with North Korea and how to adapt the U.S. troop presence in Korea. The launch of the FTA talks has brought to the surface a number of long-standing, deep-seated differences in trade and investment relations that remained below the surface for years. If South Korean and U.S. negotiators can successfully address them, the relationship would strengthen. If not, and the negotiations fail, the bilateral relationship could be seriously harmed for some time as failure may be a sign of the lack of trust. South Korea's Economy The 1997 Financial Crisis and IMF-Directed Reforms South Korea's 1997 financial crisis was a seminal event in the country's history.",
      " During the autumn of 1997\u2014spurred in part by the bankruptcy of six of the country's top thirty industrial conglomerates ( chaebol ) and a sharp increase in repayments required on short-term foreign debt\u2014investors lost confidence in the economy and capital fled the country. The Korean won lost half its value in the space of a few days, tumbling from 900 to 1900 won to the dollar. In a futile attempt to prop up the currency, the government's foreign currency reserves dropped to $4 billion, an amount insufficient to carry the country through another day. In December 1997, barely a year after joining the Organization for Economic Cooperation and Development (OECD), Seoul turned to the IMF for economic assistance.",
      " At virtually the same time, South Koreans elected longtime democracy activist Kim Dae Jung to the presidency, the first time since the early 1960s that an opposition leader had won the country's highest office. After negotiating for weeks over the details, on December 4, 1997, South Korea and the IMF agreed to a $58 billion support package. In return, Seoul agreed to tighten its fiscal and monetary policies and engage in far-reaching, market-oriented reforms of its financial and corporate sectors and of its labor market policies. South Korea also agreed to open its economy further to foreign goods and investors. The newly-elected Kim government adopted most of the structural reforms as its own.",
      " Following the financial crisis, South Korea entered into a severe recession. In 1998, gross domestic product (GDP) contracted by 6.7% and unemployment nearly quadrupled, rising to 7.6% in 1998. The slowdown generated substantial anti-IMF and anti-American sentiment among many South Koreans. Economic Events from 1999-2006 The economy rebounded in 1999 and 2000, growing by over 10% and 9%, respectively, and enabling the South Korean government to rapidly retire many of the debts it incurred in 1997. In 2001, however,",
      " growth slowed considerably, dragged down by a combination of internal and external developments, including a decline in consumer and business confidence, the bursting of Korea's stock market bubble, rising oil prices, and a sharp falloff in exports to the United States and Japan, which entered economic downturns of their own. The government responded by lowering interest rates, unveiling an economic stimulus package, and easing the rules on the use of credit cards. These measures boosted consumer spending, which helped to double the growth rate from 3.1% in 2001 to 6.3% in 2002. Growth also was boosted by rapid economic integration with China.",
      " Domestic investment, however, remained low. In 2003, overuse of personal credit cards led to the near-collapse of many financial firms and a sharp slowdown in economic growth, which fell back to 3.1%. Until the late 1990s, the consumer sector of the economy had been largely untapped, with Korean lenders focusing on the corporate sector. Thus, when the government liberalized financial regulations and forced Korea's giant conglomerates to curtail their borrowing in the aftermath of the 1997 crisis, banks and other financial institutions turned to consumers\u2014at times recklessly\u2014as a new source of profit. The number of credit card holders behind in their payments increased sharply,",
      " with an estimated 8% of the population in default in March 2004. In 2003 and 2004, all eight of Korea's specialized credit-card issuers registered massive losses that collectively were more than double their assets. In most cases, insolvency was avoided only through bailouts and takeovers by affiliated members of the companies' respective chaebol groupings. Most of these moves appear to have been engineered, regulatorally enabled, and/or encouraged by the government, which feared a collapse of the financial system if the firms were allowed to fail. The government responded to the household debt crisis by tightening restrictions on credit card use and issuance,",
      " and by initiating a refinancing and forgiveness program for individual debtors. For 2004, South Korea's economy grew by 4.6%, below the 6% growth rate the government had expected. Much of the growth was driven by a surge in exports\u2014particularly to China\u2014which rose by over 30% from 2003. A sharp rise in oil prices (South Korea imports all of its oil) and lackluster domestic demand contributed to the slower-than-expected growth rate. In 2005, economic growth slowed to around 4%, due in part to a slowdown in export growth early in the year. The government responded by unveiling a $6.",
      "5 billion fiscal stimulus policy. Beginning in the late spring, South Korean domestic production and demand began to increase, indicating an improvement in the credit card problem; despite rising energy prices, private spending rose by 3.2% in 2005, compared to a 0.5% contraction the year before. Toward the end of the year, the South Korean stock market and the won sharply appreciated in value, the latter against both the U.S. dollar and the Japanese yen. Despite this trend, South Korean exports continued to rise, albeit at a slower rate; exports rose by just over 12% in 2005, compared with\u00a0a\u00a031%",
      " growth rate in 2004. South Korea's merchandise trade surplus in 2005 was about $23\u00a0billion. In 2006, South Korea's economic growth increased to an estimated 5%. Significantly, the rebound appeared to be more balanced than in previous years, when rising exports had been the primary driver of South Korea's economic growth; for most of 2006, private consumption continued its upward trajectory, though its rate of growth dipped in the final months of the year. While exports were up, rising energy imports caused the merchandise trade surplus to decline considerably. South Korea's soaring housing prices\u2014particularly in the greater Seoul area,",
      " where around 40% of the population lives\u2014became a dominant political issue in 2006, exacerbating concerns about increasing economic inequality. The issue is likely to figure prominently in the run-up to the December 2007 presidential election. The government has taken a number of steps designed to rein in real estate speculation, leading some to fear that more government action could cause the housing sector to experience a hard landing in 2007. Economic Reforms Financial Sector and Chaebol Reforms Assessing Korea's economic reforms to date depends on one's perspective. If the point of comparison is the Korean economy in 1997, then the government's progress has been impressive.",
      " South Korea's economy today is far more transparent, open to foreign investors, and efficient than it was seven years ago. Progress has been particularly notable in opening the country to foreign direct investment (see below) and in reforming the financial sector. In the years following the crisis, the government spent about $140 billion to bail out ailing banks and mutual funds. This amount is approximately 25%-30% of the country's GDP, nearly twice the level required to save Mexico's financial system during its crisis in 1995. Notably, predictions that the government would have to spend substantially more funds have not come to pass, and Korea's banking sector as a whole has returned to profitability.",
      " By the end of 2001, non-performing loans (loans which are unlikely to be repaid) had fallen to 2.4% of total loans, compared with 16.4% in 1998. (In 2001, the percentage of non-performing loans for large banks in the United States was 1.5%.) The Roh government has accelerated South Korea's efforts to re-privatize the banks that were nationalized in the aftermath of the 1997 crisis. By 2000, the nationalization program had brought about one-third of the banking industry's assets into government hands,",
      " and state ownership of the banking sector formed the crux of a major trade dispute with the United States and European Union, in which state-owned and state-controlled banks were accused of illegally subsidizing Hynix Semiconductor Inc., the world's third-largest producer of dynamic random access memory (DRAM) semiconductor chips. By the spring of 2004, however, sales of many of formerly state-owned banks had given foreign companies collectively a major stake in South Korea's financial sector, notwithstanding occasional statements by Korean politicians expressing misgivings about excessive non-Korean ownership. By 2005, foreigners owned about one-third of the assets in the Korean banking sector,",
      " including majority stakes in four of Korea's eight nation-wide banks. In March 2004, Korea's Financial Supervisory Commission approved a $1.7 billion bid from Citigroup for a controlling stake in KorAm, Korea's seventh-largest bank. Through 2006, the Korean banking sector continued to be increasingly profitable. If the yardstick used to assess South Korea's reforms is the U.S. economy, however, it becomes clear that Seoul has far to go if it is to make the economy truly responsive to market-oriented pressures and incentives. Progress has been particularly difficult in the government's attempts to pressure the chaebol to correct the problems revealed by the 1997 crisis,",
      " including excessively high debt levels, a heavy reliance on short-term debt, the lack of transparency, weak corporate governance, and corporate structures dominated by individual families rather than professional business managers. Although two of the largest chaebol \u2014Daewoo and Hyundai\u2014have been dismantled and debt-equity ratios for most of the top conglomerates have been reduced, corporate governance and cross-shareholdings within chaebol groupings remain major problems. The bailouts of struggling credit card affiliates in 2003 and 2004 seemed to many to indicate that the chaebol had not reformed their past practices of forcing their profitable enterprises to rescue failing ones.",
      " Also in 2003, a massive accounting scandal at SK Global, the trading unit of the country's fourth-largest chaebol, SK Group, revealed similar structural problems. Additionally, the reckless credit card lending activities of Korean credit card firms in 2003 and 2004 exposed the continued weaknesses in risk management and due diligence by Korean financial interests. One of the government's responses has been to accelerate plans to further restructure the financial industry by passing new laws allowing the consolidation of banking, insurance, asset management, and brokerage services. Some critics, however, worry that this cross-sectoral consolidation will accentuate the problem of cross-shareholding within chaebol groupings.",
      " Also, bailouts of the two largest credit card companies, LG Card and Samsung Card, in 2003, have raised fears that the \"too big to fail\" dynamic continues to persist in South Korea. Foreign Direct Investment Reforms As part of its commitment to the IMF in December 1997, Seoul pledged to eliminate most restrictions on foreign firms' long-term investments in local subsidiaries and controlling interests in local companies. The government of President Kim Dae Jung, who was elected during the nadir of Korea's financial crisis, moved aggressively to liberalize Korea's foreign investment regime. Partly as a response to Kim's reforms, and partly in response to the lower prices of Korean assets following the 1997 crisis,",
      " FDI flows increased markedly, soaring from $3.2 billion in 1996 to a peak of $15.7 billion in 2000. FDI fell off significantly from 2001-2003, before rising to $12.8 billion in 2004, the same year President Roh Moo-hyun's government began a policy of boosting FDI as a source of domestic growth. Since the 1997 crisis, FDI commitments by U.S. companies have totaled nearly $20 billion. (See Figure 2.) A number of high-profile Korean companies have been taken over by foreign interests, notably General Motors'",
      " purchase of Daewoo Motors in 2002. Citigroup's $2.4 billion purchase of KorAm Bank in March 2004 was the largest foreign direct investment in Korean history and Citigroup's largest investment outside North America. The Daewoo Motors Case Despite the increased openness to foreign ownership, a number of high-profile acquisitions by foreign companies have been either delayed or cancelled, due to nationalistic objections to the sale, disagreements over the sales price, and/or the discovery of previously undisclosed debts owed by the target Korean company. These delaying actions often have backfired, resulting in far lower eventual sale prices. A case in point was the protracted sale of Daewoo Motors.",
      " In June 2000, Daewoo Motor's creditors, many of them government-owned or controlled, reached a tentative agreement with Ford, which bid nearly $7 billion for the company. Negotiations became difficult, and after discovering billions of dollars in previously hidden liabilities (and taking a large loss from the Firestone tire recall), Ford withdrew its offer. General Motors, which initially had bid $4 billion, remained the only viable suitor. Negotiations with creditors and the government dragged on for over a year and a half, however. Finally, in May 2002, GM and Daewoo's creditors signed an agreement, by which GM acquired a controlling stake in Daewoo Motors for $400 million.",
      " Thus far, the GM-Daewoo partnership has been hailed as a success story. The combined company has become a global production base for GM; GM-Daewoo's sales have quadrupled since the purchase, making the affiliate one of GM's most profitable. Sales have been particularly strong in China, and GM has chosen to house its global mini and small car development teams in the Korean company. The Newbridge Capital Case Many Koreans, however, have reacted with alarm to foreign investment and there has been growing discussion of restricting the takeover of Korean companies by foreigners. For instance, when Newbridge Capital sold its 50% stake in Korea First Bank in early 2005 at a high profit,",
      " it was accused of being a \"foreign exploiter.\" The South Korean government attempted to limit or eliminate an investment treaty with Malaysia, Newbridge's home, that allowed the company to avoid paying Korean taxes on its gains. Newbridge bought Korea First Bank in 1999 and is credited in many circles with turning around the bank's fortunes. Part of the Korean government's apparent ambivalence to foreign investment, particularly in the financial sector, is that foreign multinationals often are more resistant to government pressure. Newbridge, for instance, reportedly resisted efforts by the South Korea's Financial Supervisory Commission to advance loans to two failing companies, Hynix and LG Credit.",
      " The Lone Star Case In 2006, the government's moves against Lone Star, a Texas-based private equity fund, again raised fears among foreign businesspeople that high-profile investments remain vulnerable to politically-charged investigations. Earlier in the year, Lone Star announced a preliminary agreement to sell its controlling stake in the Korea Exchange Bank (KEB), Korea's fifth largest, to the country's largest bank, Kookmin Bank, for $7.4 billion. Lone Star purchased KEB in 2003 for $1.2 billion. Shortly after the announcement, which sparked an outcry against foreign \"predators\" in South Korea, South Korean prosecutors launched an investigation of the 2003 purchase arguing that the sale price was set too low by KEB and the government,",
      " which managed the sale. Separately, prosecutors also have issued arrest warrants for Lone Star executives for alleged illegalities stemming from a number of Lone Star's transactions after it took control of KEB. Korean authorities reportedly are seeking the extradition from the United States of two Lone Star officials. The combination of the two sets of investigations has stalled Lone Star's sale of KEB to Kookmin. South Korea's Increased Economic Integration with China As mentioned earlier, in 2003 China surpassed the United States as South Korea's number one trading partner (see Figure 3 ). South Korea has run trade surpluses with China for a number of years,",
      " in contrast to the increasingly large trade deficits it has run with Japan (see Figure 4 ). For several years, China has also been the number one destination for South Korean overseas direct investment, by a large margin. Many South Korean exports to China are intermediate goods used in the production of finished goods that ultimately are exported from China to other countries, including the United States. A growing number of Koreans are studying the Chinese language and traveling to China, and public opinion polls show that a growing number of Koreans have favorable views of China. These developments, combined with a sharp decline in favorable views of the United States, have led many American observers to worry that Chinese influence over South Korean policy is likely to rise in the future,",
      " at the expense of the United States. Many South Koreans, however, have ambivalent views of China's growing economic importance. Increased imports from China has increased competitive pressure on South Korean farmers and manufacturers. The increased competitiveness of many Chinese manufacturers has caused some consternation in some South Korean firms, pushing them to search overseas for lower-cost production bases. There are also concerns that jobs, particularly in the manufacturing sector, will be lost to Chinese workers as South Korean foreign direct investment in China increases. Improved Inter-Korean Economic Relations In the past three years, South Korea has emerged as North Korea's second-most important economic partner, after China. Inter-Korean trade has more than doubled since 2000,",
      " to over $1.3 billion in 2006 (see Figure 5 ). For the past two years, about 40% of this trade (approximately $550 million in 2006) was conducted on a commercial basis. The rest is associated with inter-Korean cooperation projects ($370 million, or 27% of bilateral trade, in 2006) and non-commercial transactions such as humanitarian assistance projects (about $420 million, or 30%, in 2006). Overall, South Korea runs a trade surplus with North Korea, though if only commercial transactions are considered, Seoul runs a deficit. From 1994-2006,",
      " Korea provided over $3 billion worth of economic and humanitarian aid to North Korea, most of which has come since the June 2000 summit between North Korean leader Kim Jong-il and then-South Korean President Kim Dae Jung. Since the summit, the two Koreas have reconnected inter-Korean roads, are close to reconnecting two rail lines, have expanded a tourism site in Mt. Kumgang (North Korea), and have completed construction of a pilot industrial zone in Kaesong (North Korea) for South Korean companies to erect factories using North Korean labor. Kaesong is 40 miles north of Seoul, just across the demilitarized zone separating the two countries.",
      " By the end of 2006, a pilot site at the Kaesong industrial complex (KIC) had expanded to include 15 South Korean firms employing over 10,000 North Korean workers. Following North Korea's missile tests in July 2006 and nuclear test in October 2006, the South Korean government announced some restrictions on its economic cooperation projects with the North, including the suspension of new applications from South Korean firms seeking to invest in the second phase of the KIC. In January 2007, the South Korean Unification Minister announced that an additional 40 firms, which had been selected prior to the suspension, would open operations in Kaesong in 2007.",
      " Additionally, as part of the six-party talks on North Korea's nuclear weapons programs, Seoul has proposed sending large amounts of electricity to North Korea, in exchange for concessions from Pyongyang. Some analysts worry that improved inter-Korean economic relations are undermining the Bush Administration's policy of constricting the inflows of foreign currency that are thought to go to the North Korean elite, providing a critical base of support for North Korean leader Kim Jong-il. Alternatively, coordinated U.S. and South Korean policies could use economic leverage to pressure North Korea. In broad terms, the Bush Administration has stated that it supports South Korea's economic engagement with North Korea, including the Kaesong industrial zone.",
      " In 2004 and 2005, the United States approved several export controls clearances that were required by U.S. law for South Korean firms to bring items\u2014such as computer and telecommunications equipment\u2014to Kaesong. Since the KIC opened, it has been South Korean policy to request that its FTA partners allow exports from Kaesong to be considered as \"Made in Korea\" (meaning South Korea), thereby enabling these products to receive the preferential status conferred by the FTA. The United States has refused to consider Kaesong as part of the KORUS FTA. Two important issues for the United States in considering South Korea's demand are the conditions for North Korean workers and the income the KIC provides for the North Korean government.",
      " Some U.S. labor and human rights advocates have argued that North Korean workers in Kaesong are being exploited. South Korean officials, as well as other analysts, counter by saying that conditions\u2014including wage conditions\u2014at Kaesong are far better than those in the rest of North Korea. The North Korean government derives hard currency from several sources in the KIC project, including leasing fees and surcharges levied on North Korean workers' wages, which are paid to an arm of the North Korean government agency before being passed on to employees (in the form of North Korean won ). To date, according to information provided by the South Korean government, these streams likely total less than $20 million in hard currency.",
      " However, if the South Korean government realizes its most ambitious goals for the Kaesong project, by the middle of the next decade the North Korean government would likely derive hundreds of millions of dollars annually from tax revenues and its slice of North Korean workers' wages, assuming the KIC's current tax and wage structures remain in place. Some South Koreans caution that the uncertainties over the future course of the KIC project make such projections highly speculative. Major U.S. Trade Disputes with South Korea Given the disparities in size and economic dependence, it is not surprising that the United States typically sets the agenda of U.S.-ROK trade talks.",
      " Since the 1997 financial crisis, these complaints have tended to be directed at regulations promulgated by \"domestic\" ministries, such as the Ministry of Health and Welfare, the Korean Food and Drug Administration, and the Ministry of Environment, that traditionally have had little contact with foreign governments or firms. One element of the U.S. strategy toward Korea appears to be attempting to raise the pressure on these ministries by pushing for the Korean Cabinet to focus on the issue. In general, U.S. exporters and trade negotiators identify the lack of transparency of Korea's trading and regulatory systems as the most significant barriers to trade with Korea, in almost every major product sector.",
      " In 2004, the transparency issue became a stand-alone item in the quarterly trade action agenda meetings. Many U.S. government officials also complain that Seoul continues to use government regulations and standard-setting powers to discriminate against foreign firms in politically sensitive industries, such as automobiles and telecommunications. Another major cross-sectoral complaint is that restrictions in the Korean labor market, such as mandatory severance pay, raise the cost of investing and doing business. Finally, the United States and other countries have pressed South Korea to open further its agricultural market, which is among the most closed in the OECD. Below are brief descriptions of several major sector-specific disputes between the U.S.",
      " and South Korea. In cases where an issue is a significant subject of the KORUS FTA talks, that fact is mentioned, but more detailed discussion is left to CRS Report RL33435, The Proposed South Korea-U.S. Free Trade Agreement. Major Agriculture Issues Despite South Korea's place as one of the top destinations for U.S. agricultural exports, U.S. government and agricultural industry officials contend that Seoul retains a number of tariff and non-tariff barriers that have stunted U.S. bilateral exports. South Korean agricultural tariffs are particularly high compared to the United States and most OECD members; according to USTR, South Korea's average applied agricultural tariffs are 52%, more than four times the U.S.'s average.",
      " The completion of a comprehensive FTA therefore is to dramatically expand U.S. agricultural exporters' access to the Korean market; by one estimate, U.S. agricultural exports will increase by more than 200% within four years after a hypothetical FTA is implemented. South Korea's farmers, while shrinking in terms of population and contribution to GDP, remain a politically powerful force in South Korea. At the February 2006 launch of the FTA, ROK Hyun-chong Kim said Seoul plans to spend over $100 million in adjustment assistance to South Korean farmers over the coming decade. At one point during the FTA talks, Korea reportedly requested that a total of 284 agricultural tariff lines be excluded from market access commitments.",
      " In recent years, the number and intensity of agricultural disputes on the U.S. trade agenda with South Korea appear to have diminished, as manufacturing and service sector issues have been emphasized. Two of the most contentious agricultural trade disputes over the past two years have involved beef and rice. South Korea's Beef Ban A major political trade issue on the bilateral agenda is South Korea's ban on imports of U.S. beef, which the South Korean government essentially re-imposed in late December 2006 after partially lifting it earlier that year. The issue originated in December 2003, when South Korea (along with Japan and other countries) banned all U.S.",
      " beef imports after the United States reported the discovery of a cow with bovine spongiform encephalopathy (BSE or \"mad cow disease\"). South Korea formerly was the third-largest foreign buyer of U.S. beef; the United States exported nearly $800 million worth of beef to South Korea in 2003. Throughout 2004, USTR official said that FTA negotiations were unlikely to begin with South Korea while the ban was in place. During bilateral talks in January 2006, South Korea agreed to partially lift its ban \"toward the end of March\" 2006 by allowing imports of U.S. boneless beef from cattle less than 30 months old.",
      " Boneless beef constituted about half of U.S. bilateral beef exports in 2003. Korea did not announce it would start resuming imports of boneless beef from the United States until September 2006. Then, when the first three shipments of U.S. beef arrived in South Korea in December 2006, South Korean meat inspectors prohibited the entry after they found bone fragments. A senior official from the Korean Agricultural Ministry stated that U.S. and Korean negotiators were unable to come up with a mutually acceptable definition of \"boneless beef,\" among other issues, and therefore had failed to resolve the dispute as of February 12, 2007.",
      " U.S. officials and beef producers have argued that the fragments are so small as not to be a potential cause of mad cow. A number of Members of Congress have called for the suspension of the KORUS FTA negotiations until the matter is resolved or have indicated they would not approve an FTA with Korea as long as it continued to stop U.S. beef imports. Rice The South Korean government controls the purchase, distribution, and end-use of all imported rice. During the Uruguay Round of multilateral trade negotiations (1986-1993), South Korea was granted a 10-year grace period before opening its rice market to imports. In return for receiving this concession,",
      " South Korea agreed to allow minimum access for rice through the use of quotas. The grace period ended on the last day of 2004. Prior to that date, South Korea notified the WTO that it wished to extend the minimum access quota system rather than convert to tariffs. Under the Uruguay Round agreement, Seoul could do this only if it obtained the consent of other WTO members, which could demand concessions to expand their quota. The United States availed itself of this right, and on December 30, 2004, U.S. and South Korean officials announced an agreement, under which Korea will double the amount of rice it imports over the next 10 years,",
      " provide guaranteed access for 50,000 MT of U.S. rice each year, and make imported rice available directly to Korean consumers. In November 2005, after months of delay and acrimonious debate, the Korean National Assembly ratified the rice deal. China and Thailand, two other parties to the rice negotiations, reportedly wished to see an end of the quota system in favor of tariffication, which presumably would be more advantageous to lower-cost rice producers such as themselves. In 2006, U.S. exporters sold over 60,000 metric tons to South Korea. In the KORUS FTA negotiations, the United States is pressing South Korea to open its markets on rice,",
      " a position that the South Korean negotiators have strongly resisted. Other Issues Automotive Trade31 Automotive trade is perennial issue in trade talks between the United States and South Korea, the world's fourth-largest producer of automobiles. For years, U.S. officials have argued that Korean tax and \"Korea unique\" certification practices discriminate against imports. According to press reports and conversations with the author, throughout 2005, U.S. officials included automobiles as one of the major outstanding bilateral issues on which progress would be needed before the United States would agree to launch an FTA. In announcing the intent to launch talks, Portman alluded to the South Korean Ministry of the Environment's decision in the fall of 2005 to grant auto makers with a low share of the Korean market an exemption,",
      " until 2009, from Korea's regulations on ultra-low emissions. Previously, the regulations would have applied in January 2007. South Korean government officials say that changes made in the auto sector were unrelated to the negotiations over launching an FTA. South Korean imports of foreign automobiles totaled around 37,000 in 2006\u2014including about 6,500 U.S. vehicles\u2014just over 4% of the South Korean market, up from less than 0.5% five years earlier (see Table 3 ). Most of the foreign cars sold in South Korea are luxury models, though in 2006 Japanese manufacturer Honda began to have some success marketing its Accord and CR-V models.",
      " In contrast, South Korean auto manufacturers sold nearly 750,000 cars to the United States in 2006, capturing over 4% of the U.S. market. Almost all of these vehicles were produced by Hyundai Motors, including vehicles produced by its subsidiary Kia, formerly Korea's second-largest independent manufacturer. One significant change in 2006 was that over one-quarter of the \"Korean\" cars sold in the United States were produced at Hyundai's plant in Montgomery, Alabama (see Table 4 ). In 2006, the United States ran a trade deficit with South Korea in auto parts shipments of over $1.7 billion,",
      " up from a deficit of nearly $1.4 billion in 2005. Between those two years, U.S. parts\u00a0exports essentially remained stagnant, registering $515 million to $517 million in 2005 and 2006, respectively. For years, USTR has pushed South Korea to lower its 8% tariff, which is more than three times the U.S. level of 2.5% on imported cars. Moreover, the United States continues to protest that South Korea's tariff, tax and regulatory structure unfairly penalize automobiles with larger-sized engines. Specifically, the Bush Administration has called on Korea to move from engine displacement taxation to a value-based taxation system,",
      " because the former assesses higher taxes on larger vehicles. Periodically, some Members of Congress have introduced legislation calling on South Korea to end the practices that impede foreign market access and requesting various U.S. executive agencies to monitor Korea's progress on this issue. Two initiatives were H.Con.Res. 144 and S.Con.Res. 43, introduced in the 107 th Congress, in May 2001. For much of the post-Korean War era, South Korea's market was closed to the import of automobiles. It banned all automobile imports prior to 1989, and the ban on importation of automobiles from Japan was eliminated only in 1999.",
      " Gradually, the industry has opened up to foreign investment, though almost all cars sold in Korea are still locally produced. In its October 1997 Super 301 report to Congress, the Clinton Administration designated Korea as a \"Priority Foreign Country\" for its barriers to foreign motor vehicles. USTR subsequently initiated an investigation under Section 301 of the U.S. Trade Act of 1974, as amended, and issued a call for bilateral consultations to provide fair market access for foreign autos in Korea. In 1998, the United States and South Korea signed a Memorandum of Understanding (MOU) on foreign access to Korea's auto market,",
      " which led the USTR to terminate the Section 301 investigation. Under the MOU, Seoul agreed to reduce its tariffs on motor vehicles from 80% to 8%, proactively address instances of anti-import activity in Korea, lower or eliminate many automobile taxes, create a new financing system to make it easier to purchase automobiles, and streamline its standards and certification procedures. Many of these steps\u2014including lowering tariffs\u2014have been implemented. Furthermore, Seoul has largely abandoned its policy of allowing only Korean-owned auto companies to operate in South Korea. With Hyundai's purchase of Kia, Korea's second-largest producer, there is now only one Korean-owned motor vehicle manufacturer left,",
      " although it is dominant in the home market. In 2002, General Motors purchased the Daewoo Motor Company from the bankrupt Daewoo conglomerate. Two other smaller vehicle producers, Samsung and Ssangyong, have also come under the control of foreign investors. Meanwhile, Korea's top automotive manufacturer has renewed an earlier effort to build cars in North America, as well as to import them. In May 2005, Hyundai Motors opened a new $1.1 billion plant in Montgomery, Alabama. In 2006, the new plant produced nearly 200,000 cars that were sold in the United States, over 40%",
      " of Hyundai's total sales in this country. (See Table 4.) The facility is expected to produce 300,000 vehicles annually and will employ approximately 2,000 workers. The plant's suppliers are expected to employ approximately 5,500 workers. In Korea, Hyundai Motor experienced significant legal and labor troubles in 2006. In January 2007, South Korean regulators levied a $24 million fine on the company for violating competition rules. Its chairman, Chung Mong-koo, is on bail facing corruption charges. And, in 2006, Hyundai Motor union members staged walkouts on 32 days last year,",
      " incurring production losses of 115,683 units. Hyundai's legal troubles have cast a cloud over the construction of a new plant in West Point, Georgia, by Kia Motors. Groundbreaking on the plant was held in October 2006. Production is due to begin in 2009. Pharmaceuticals Pharmaceutical trade has been one of the most contentious issues in the KORUS FTA talks. Korea is ranked in the world's top 15 pharmaceutical markets, with annual sales in the $4 billion range. In 2001, imports comprised approximately 30% of the total market, compared with an average of 50%-70% for other countries that do not have a significant research-based domestic industry.",
      " Korea's expenditures on pharmaceutical products is about $115 per person per year, less than half the $240 average for OECD countries. The country has a nationalized health insurance system, which began to experience a negative cash flow in 1995. For years, the U.S. government has complained that a number of Korea's pharmaceutical policies are designed to protect the domestic Korean industry, which predominantly produces generic drugs. Criticisms have mounted since 2001, when the Korean government implemented a series of emergency measures to fill the national health insurance fund's mounting deficit, estimated at the time to be over 4 trillion won ($3.3 billion). Recent complaints include the lack of transparency of the Korean Ministry of Health and Welfare,",
      " particularly the Ministry's allegedly poor record on consulting with and notifying companies about regulatory changes; the reimbursement scheme of the health insurance system, which allegedly gives price incentives for doctors to prescribe and patients to use Korean-made products; poor protection of intellectual property rights for medical patents; and the discriminatory nature of Seoul's requirements that foreign drugs must be retested on Koreans living in Korea, rather than on other ethnic Asians, as the United States has insisted. In a sign of pharmaceuticals' growing importance on the bilateral trade agenda, in January 2002, the two sides established a bilateral private sector health care reform working group. Both sides cited progress in 2005 in managing some of the most persistent disagreements\u2014for instance,",
      " South Korea agreed to consult with the multinational pharmaceutical industry (as well as the domestic industry) in setting up an independent mechanism under which pricing and reimbursement decisions could be appealed\u2014though there are conflicting reports about details of some of the negotiations. According to press reports and conversations with the author, throughout 2005, U.S. officials included pharmaceutical regulations as one of the major outstanding bilateral issues on which progress would be needed before the United States would agree to launch an FTA. South Korean government officials say that changes made in the pharmaceuticals sector were unrelated to the negotiations over launching an FTA. South Korea's \"Screen Quotas\" Since 1966,",
      " South Korea has sought to protect its domestic film industry by mandating that movie theaters devote at least 146 days per year (or 40% of the calendar year) to showing domestic films. The issue was a major reason the United States and South Korea were unable to finalize negotiations over a bilateral investment treaty (BIT), which were initiated in the late 1990s but were suspended in 1999. Each country's motion picture industry has significant political clout; during South Korea's 2002 presidential elections, Roh was backed by several prominent South Korean actors. Nonetheless, for years Roh's administration pledged that it would reduce, if not eliminate,",
      " the quotas. For U.S. trade officials, the issue became a symbol of the Roh government's ability and capacity to make the difficult political concessions that would also come in FTA negotiations. On January 26, 2006, the day after the beef ban was partially lifted, South Korea's Prime Minister announced that the screen quotas would be cut in half, to 73 days a year. The following week, the two countries announced their intent to launch FTA talks. The growing popularity\u2014both in South Korea and abroad\u2014of South Korean films undoubtedly made Roh's concession more palatable. South Korea's Alleged Currency Manipulation In recent years,",
      " South Korea has been criticized for intervening in foreign currency markets by purchasing U.S. dollar assets to artificially lower the value of the Korean won against the U.S. dollar in order to boost exports. As of the end of November 2006, South Korea was the fourth largest foreign holder of U.S. treasury securities, holding $67.7 billion, an amount that essentially is unchanged from 2005. As Figure 4 shows, the won generally has been appreciating against the dollar since 2001. The won's rise was particularly marked in late 2005 and early 2006, when it reached levels not seen since before the 1997 financial crisis.",
      " During the same period, the won has risen even more precipitously against the Japanese yen. This is particularly worrisome to many Korean exporters because they compete directly against more Japanese than U.S. companies and because many Korean manufacturers rely upon imports of intermediate goods from Japan. Since the won began its gradual ascent in 2001, South Korean authorities have intervened episodically to slow the won's rise, though the scale of the intervention has been far less than Japan and China's. The United States made currency intervention a major issue at the Asia Pacific Economic Cooperation (APEC) Finance Ministers and G-7 Finance Ministers meetings in September 2003.",
      " Shortly thereafter, South Korea appeared to ease off large-scale interventionist policies; South Korean government officials say that since early 2004, they have engaged in only minor intervention to \"smooth\" excessive currency volatility. In response to the won's spike since late 2005, although some Korean officials have said that their currency is overvalued, they did not appear to intervene in currency markets in a large-scale way until late 2006. Indeed, in February 2006, South Korean Finance Ministry officials said they would like to loosen restrictions on won -denominated transactions overseas in order to make the won more widely traded. By December of the same year,",
      " however, there were signs that the Bank of Korea resumed its intervention, and a deputy finance minister, Kim Sung-jin, reportedly stated that \"to stabilise the economy, it is essential to maintain the currency at a certain level and the government will make its best efforts to achieve that... if the government consults with the central bank and intervenes in the currency market, our resources are unlimited.\" In the future, the U.S. dollar and the market for U.S. Treasury securities could be affected by the South Korean government's launch of the Korean Investment Corporation (KIC) to manage a portion of South Korea's foreign exchange reserves,",
      " in July 2005. The KIC initially is managing $20 billion, and is expected to eventually manage $100 billion by 2012. The stated goals of the program are to invest South Korean foreign currency holdings more effectively. The program also aims to boost President Roh Moo-hyun's efforts to turn Korea into a major financial and commercial hub in Northeast Asia by helping boost Korea's asset management industry. Some members of Congress have criticized Korea's currency policy. A \"Fair Currency Act\" (Lieberman) was introduced in Senate the last two Congresses ( S. 377 in the 109 th Congress and S. 1592 in the 108 th Congress). If passed,",
      " they would require the U.S. government to monitor and take action against specific countries, including South Korea, that are \"engaged most egregiously in currency manipulation.\" Intellectual Property Rights Issues Bilateral tensions often have arisen over U.S. allegations that Korea does not sufficiently protect intellectual property rights (IPRs). Since becoming a signatory to the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) in 1994, USTR has moved Korea back and forth between the Special 301 \"priority watch list\" and the \"watch list.\" In 2005, USTR downgraded Korea to the \"watch list\"",
      " because of \"significant steps\" Seoul had taken to strengthen its IPR regime. USTR has cited South Korea's increased protection for recordings transmitted over the internet and the launch in May 2004 of a \"Pan-Government Comprehensive Plan For IPR Protection\" headed by a Han Duk-soo, a prominent official who has a Cabinet portfolio to promote the initiative. In 2006, USTR kept Korea on the \"watch list,\" though it commended Korea's established of a Copyright Protection Center, as well as a Standing Inspection Team to increase enforcement against the institutions using illegal software. USTR also lists several items, such as copyright protection and DVD piracy,",
      " on which it would like to see Korea make additional progress. Telecommunications In recent years, telecommunications has emerged as one of the most contentious trade issues between the United States and South Korea. With one of the world's highest rates of Internet usage, South Korea is often used as a market for telecommunications companies to test cutting-edge wireless products and technologies. The Roh government has designated next-generation mobile communications as one of ten \"new growth engines\" that will help Korea reach President Roh's 2003 goal of nearly doubling per capita GDP to $20,000 by the end of the decade. Perhaps to this end, the Korean government has attempted to set mandatory,",
      " single-technology standards for wireless telecommunications services. These efforts led USTR in April 2004 to name South Korea as a \"key country of concern\" in its annual report under Section 1377, which requires USTR to assess U.S. trading partners' compliance with international telecommunication agreements. Specifically, for two years, USTR negotiated with the South Korean government over the Ministry of Information and Communication's (MoIC) plan to require all cell phone services to use only the so-called wireless Internet platform for interoperability (WIPI) for downloading information from the Internet. WIPI is a new platform developed by a Korean association funded by Electronics and Telecommunications Research Institute (ETRI), a government-funded institute.",
      " The requirement would have excluded users and developers of other operability platforms, such as the platform developed by San Diego-based Qualcomm, which is used by a leading Korean cellular service provider. In April 2004, Seoul and Washington announced they had reached a compromise that allows MoIC to implement WIPI, but also permits cellular phones to be made compatible with other standards. A similar dispute is over MoIC's issuance of a mandatory standard\u2014to be located in the 2.3 gigahertz (GHz) bandwidth spectrum\u2014for a new portable broadband Internet system used to transmit information from the Internet to laptops and other wireless equipment. USTR and U.S.",
      " companies charged that, under the influence of ETRI, the original, domestically-designed standard was designed to deliberately exclude foreign companies in favor of Samsung. In June 2004, the Korean government announced that all license holders would have to use one of the several technologies compatible with a standard designed by the International Institute of Electrical and Electronics Engineers. USTR has criticized the decision as excluding companies that have developed other systems. USTR also has asked the Korean government to revise its restrictions on foreign ownership in the telecommunications sector. Steel52 From 1998 through 2003, South Korean steel exports to the United States were one of the most politically charged items on the bilateral economic agenda,",
      " particularly since the 1997 Asian financial crisis. From 1997 to 1998, Korean shipments of steel to the U.S. nearly doubled, vaulting South Korea into the top five U.S. sources of steel imports. In 2003, imports from South Korea declined below pre-crisis levels, helping to defuse the issue. In the preceding five years, a number of anti-dumping cases were initiated against South Korean exporters, and Presidents Clinton and Bush each granted safeguard relief (under Section 201 of the Trade Act of 1974) for U.S. steel producers. Korea and other countries challenged both Section 201 actions at the World Trade Organization,",
      " which ultimately ruled that the actions were inconsistent with global trading rules. In December 2003, President Bush terminated the safeguard tariffs he had established in March 2002. In 2000, Korea also won a major WTO case involving anti-dumping duties the United States imposed against Korean exports of stainless steel plate in coils and stainless steel sheet and strip. Korea remains one of the leading exporters of steel to the United States by volume, at about 1.5 million metric tons annually in 2004-2005, but is now well behind the three leading Western Hemisphere suppliers (Canada, Mexico, Brazil), as well as China. The rise in steel prices since 2003 has to some extent defused this issue.",
      " Assistance to Hynix Semiconductor In 2001, a major trade dispute erupted between the United States and South Korea over allegations that the Seoul government was propping up Hynix Semiconductor, presently the world's third-largest producer of dynamic random access memory (DRAM) semiconductor chips. In 2001 and 2002, Hynix's leading creditors\u2014most of which were owned by the Korean government\u2014orchestrated a series of rescue packages that kept Hynix in business by enabling it to restructure its 8.6 trillion won (over $7 billion) in debt. In the United States, Micron Technology, the Idaho-based second largest producer of DRAMs,",
      " led a campaign against the support packages, arguing that they amounted to government-sponsored bailouts that allow Hynix to export at low prices and that they were a prime cause of the drastic plunge in global chip prices in 2001 and 2002. Micron, the last U.S.-based DRAM producer, eventually filed a countervailing duty case, which it won, resulting in a 44% punitive tariff being assessed against Hynix's exports to the United States. In a similar case, the European Union imposed a 34% countervailing duty against Hynix. Korea challenged both rulings in the WTO. A WTO panel was formed and in February 2005 ruled that the United States had failed to \"properly demonstrate\"",
      " that the Korean government had subsidized Hynix. The United States appealed in June 2005, the WTO's Appellate Body reversed the ruling, in part by using a definition of what government actions constitute a subsidy that is broader than the definition used by the panel. Because Appellate Body decisions cannot be appealed, the United States' punitive tariffs will remain in place. Meanwhile, Hynix appears to have undergone a turnaround. It sold many of its non-semiconductor assets, introduced a program to upgrade its efficiency, completed its debt-workout program (in 2005, a year ahead of schedule), and in 2006 was the world's third-largest chipmaker by sales.",
      " South Korea's Performance in the Doha Development Agenda In the current round of multilateral trade talks, the Doha Development Agenda, USTR officials consistently have praised South Korea for attempting to bridge the differences between the developed and developing countries, particularly on non-agricultural market access issues such as industrial tariffs and services. Seoul also has been criticized consistently for resisting agricultural liberalization in the negotiations. Korea's tariffs on agricultural products, except rice, average 66%, compared with a 7.5% average for tariffs on industrial products. Korea's Complaints Against U.S. Anti-Dumping and CVD Practices For over a decade, South Korea has chafed at the United States'",
      " use of anti-dumping and countervailing duty (CVD) laws to raise tariffs on Korean exports. According to one study, in July 2000 the five CVD and 18 anti-dumping orders against South Korean exports covered approximately $2.5 billion, or over 7%, of U.S. imports from South Korea in 1999. Moreover, these tariff hikes have tended to be concentrated in a handful of Korean industries\u2014semiconductors, steel, televisions, and telecommunications equipment\u2014that have considerable political influence in Seoul. During the Uruguay Round (1986-1993) of the General Agreement on Tariffs and Trade (GATT,",
      " the WTO's predecessor organization), Korea was one of several countries demanding revisions to global anti-dumping rules, changes the United States opposed because of concerns that they would constrain U.S. anti-dumping investigators. South Korea, joined most prominently by Japan, has taken up this issue again in the Doha Development Agenda talks, against U.S. opposition, and has made it a priority issue in the KORUS FTA talks. In recent years, Seoul has become more assertive in using the WTO to challenge United States' trade practices. In 1999 and 2000, Seoul took the U.S. to the WTO over allegedly discriminatory U.S.",
      " anti-dumping duties placed on Korean exports of steel and semiconductors. Korea won both of the steel cases it initiated. U.S. Visa Policies South Koreans' complaints about U.S. visa policies tend to fall into two categories. First, some Korean government officials, Korean businesses, the American Chamber of Commerce in Korea, and Korean-Americans have questioned why South Korea is not a participant in the U.S. Visa Waiver Permanent Program, under which foreigners traveling from certain countries are permitted to travel to the United States for up to ninety days without having the immigration documents normally required for entry. Although South Korea's status in the U.S.",
      " Visa Waiver Program (VWP) is not formally part of the FTA negotiations, it is a priority the South Korean government is pursuing with the United States. Any changes made by the United States in this area are likely to play a political role in selling the agreement in Seoul. Among the statutory requirements for countries to participate in the U.S. visa waiver program is that the country must have a low nonimmigrant visa refusal rate for two years\u2014averaging no more than 2% over both years and not exceeding 2.5% in any one year. According to State Department officials, South Korea's visa refusal rates have consistently been over this threshold.",
      " The FY2004 rate was 3.6% and according to one report, in early 2005 the rate again was below 4%. Meeting the refusal rate is not the only requirement. A country's participation in the VWP must also be deemed to be in the economic, law enforcement, and security interests of the United States. Since the late 1990s, no country has been added to the VWP, an indication of the difficulty in meeting the participation requirements. For South Korea to become a participant would likely require significant attention from the White House. During his November 2005 summit with President Roh in South Korea,",
      " President Bush announced that the United States would work with Seoul to develop a \"roadmap to assist Korea in meeting the requirements for membership\" in the visa waiver program, a move that has been supported by a number of groups in the United States. H.R. 4304, introduced in November 2005 by Representative James Moran, would designate South Korea as a program country under the VWP. The second category of complaints is lodged against U.S. visa policies implemented since the September 2001 terrorist attacks on the United States, particularly requirements for mandatory interviews, fingerprinting, and greater scrutiny of business travelers for possible technology transfer risks. Like citizens of many other countries,",
      " Koreans particularly have objected to the fingerprinting, which some Koreans have likened to requirements imposed upon them during Japan's thirty-five-year occupation of the Korean Peninsula in the first half of the 20 th Century. South Korea also has encouraged the United States to open its domestic market to services delivered by so-called mode-4 delivery, that is by the temporary movement of South Korean service providers and their workers to the United States. Legislation in the 109th and 110th Congresses 109th Congress S. 3830 (Stabenow). The South Korean Fair Trade Act. Declared that the duty in effect on July 31,",
      " 2006, on cars and motor vehicles imported from South Korea shall remain in effect until 15 days after the date the Secretary of Commerce certifies to Congress that at least 20% of the total number of cars and motor vehicles sold in South Korea each year are made in a country other than South Korea. Introduced August 3, 2006; referred to Senate Finance Committee. S. 377 (Lieberman). The Fair Currency Enforcement Act of 2005. Required the U.S. government to monitor and take action against specific countries, including South Korea, that are \"engaged most egregiously in currency manipulation.\" Introduced February 15,",
      " 2005; referred to Senate Finance Committee. H.R. 4304 (Moran). Designated the Republic of Korea as a program country under the visa waiver program. Introduced November 10, 2005; referred to House Judiciary Subcommittee on Immigration, Border Security, and Claims. 110th Congress No bills have been introduced in the 110 th Congress.\n"
    ],
    "length": 12785,
    "hardness": null,
    "role": null
  },
  {
    "id": 62,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed: (1) the growth of skilled nursing facility (SNF) costs and SNF use in relation to hospital use; (2) the characteristics of Medicare SNF patients and the types of services they receive in SNFs being paid higher than normal amounts compared to other SNFs, as well as whether patients in such facilities receive appropriate care; and (3) whether the Health Care Financing Administration's (HCFA) process for assessing requests for higher payments ensures that only SNFs furnishing atypical services are granted exceptions. GAO found that: (1) SNF use has increased since 1983 when the Medicare hospital prospective payment system (PPS), which pays a predetermined amount per hospital discharge, was introduced and gave hospitals a financial incentive to shorten lengths of stay; (2) the average length of hospital stay for Medicare patients has decreased from 10 days in 1983 to 7.1 days in 1995, indicating that, as expected, some substitution of SNF care for hospital care has occurred; (3) the average length of hospital stay decreased more for those Medicare patients whose diagnoses were more likely to lead to a SNF admission, such as hip fractures, than for Medicare patients as a whole; (4) considering patients with these types of diagnoses, hospitals with SNF units saw larger decreases in the average patient length of stay than did hospitals without SNF units; (5) the increasing number of SNFs granted routine cost limit (RCL) exceptions and the resulting additional payments, almost $100 million in fiscal year 1995, has contributed to the growth in Medicare SNF costs; (6) contrary to expectation, GAO did not find that SNFs with exceptions had a higher proportion of patients requiring complex care than SNFs without exceptions; (7) patients identified as requiring complex care by the medical records GAO reviewed, and who reside in SNFs granted exceptions, were generally provided appropriate care; (8) HCFA's review process for RCL exception requests does not ensure that SNFs actually provide atypical services to their Medicare patients; (9) HCFA's exception screening benchmarks basically take into account only whether requesting SNFs treat a higher than average proportion of Medicare patients; and (10) the patient-specific information obtained from requesting SNFs is generally not used to assess whether the Medicare beneficiaries need or receive atypical services.\n",
    "docs": [
      "Introduction Skilled nursing facilities (SNF) provide care for people who no longer require a hospital level of care but need a higher level of medical services than what could be provided in the home. Medicare\u2019s payments for SNF services have grown from $456 million in fiscal year 1983 to an estimated $10.8 billion in fiscal year 1996. During this same period, the number of SNFs requesting and being granted payments for routine services higher than those normally allowed has also grown. The main reason cited by the SNF industry for the requests for higher rates is that some SNFs are caring for more complex and costly patients and,",
      " therefore, higher payments are justified. Medicare and SNFs Medicare, authorized by title XVIII of the Social Security Act, is a federal health insurance program that covers almost all citizens 65 years of age or older and certain disabled people. About 38 million individuals are covered. The program has two parts. Part A, financed by payroll taxes, covers inpatient services in hospitals and SNFs as well as home health and hospice care. Part B, a voluntary program financed by enrollee premiums and general revenues, covers physician services and a wide range of other services such as laboratory tests and medical equipment used in the home. Medicare is administered by the Health Care Financing Administration (HCFA)",
      " within the Department of Health and Human Services (HHS). To qualify for SNF services, a Medicare beneficiary must have been hospitalized for 3 or more days, be admitted to the SNF on a medical professional\u2019s order for a condition related to the hospitalization, and need daily skilled nursing or therapy services. When the beneficiary meets these conditions, Medicare covers all necessary services, including room and board, nursing care, and ancillary services such as drugs, laboratory tests, and physical therapy. Medicare pays the full amount for the first 20 days. For the 21st through the 100th day of covered care, the beneficiary pays coinsurance of up to $92 per day (in 1996), and Medicare pays the remainder.",
      " Medicare coverage ends after the 100th day. To be eligible to receive payment under the Medicare program, SNFs must meet a set of 15 requirements, each of which consists of a number of elements. These requirements are designed to ensure that the SNF is capable of providing quality care to patients in a safe environment and cover such areas as fire safety, cleanliness, nursing staff, and medical records. HCFA contracts with state health agencies to survey nonstate-owned SNFs to determine whether they meet the requirements, a process known as survey and certification. A team of health and safety professionals annually inspects the facility and reviews the care furnished to patients.",
      " The state team recommends to HCFA whether to certify the facility for participation, and HCFA makes the final decision. Medicare SNF Payment Method Medicare pays SNFs on the basis of reasonable costs, which Medicare defines as those costs that are appropriate, necessary, and related to patient care. The program has a set of cost reimbursement principles that are used to determine whether claimed costs meet the definition of reasonable costs. SNFs submit cost reports to Medicare annually that are the basis for determining the facilities\u2019 reasonable costs. HCFA contracts with insurance companies such as Blue Cross and Blue Shield plans and Mutual of Omaha to process part A claims. These contractors are called intermediaries,",
      " and their functions for SNFs include paying claims, reviewing the necessity of care, and auditing cost reports. The intermediaries pay SNFs during the year on the basis of interim rates, which are designed to closely approximate reasonable costs. After reviewing, and perhaps auditing, a SNF\u2019s cost report, the intermediary makes a final settlement, either paying any underpayment or recovering any overpayment. Under authority granted by section 223 of the Social Security Amendments of 1972, HCFA has established a limit on the amount of costs for routine services (room, board, general nursing, and administration costs) Medicare will recognize as reasonable. This routine cost limit (RCL)",
      " is set separately for freestanding urban, freestanding rural, hospital-based urban, and hospital-based rural SNFs. For freestanding SNFs the RCL is set at 112 percent of mean routine costs. Cost limits for hospital-based SNFs are set at the limit for freestanding SNFs plus 50 percent of the difference between the freestanding limit and 112 percent of mean routine costs of hospital-based SNFs. In 1996, this resulted in the RCL for urban hospital-based SNFs being about $39 per day higher than that for urban freestanding SNFs and about $26 per day higher for rural hospital-based versus rural freestanding SNFs.",
      " The RCL is adjusted for differences in wage rates across geographic areas. Exemptions and Exceptions to RCL During SNFs\u2019 first 3 years of operation, they can receive new provider exemptions from RCLs. The exemptions can last as long as 3 years and 11 months depending on when during the SNF\u2019s cost-reporting year the exemption becomes effective. The reason for the exemption is that new providers often have higher than usual costs as they hire staff and gradually increase their occupancy rates. During the exemption period, SNFs are paid their full reasonable costs whether or not those costs exceed their RCLs. Any SNF that is not exempt from the RCL can request an exception if its routine costs exceed its limit.",
      " While there are five circumstances for exceptions, about 98 percent of exception requests are for the atypical services criterion. As defined by regulation (42 C.F.R. 413.30), atypical services are items or services furnished because of the special needs of the Medicare patients treated and necessary in the efficient delivery of needed health care. For example, a common claim by SNFs seeking exceptions for atypical services is that they have high nursing care costs. Regulations governing exemptions and exceptions were in existence when RCLs were first established in 1979. In 1994, HCFA issued Transmittal 378, the agency\u2019s first written guidelines on the exception process.",
      " Transmittal 378 established comparative data for the four groups of SNFs for which RCLs are established, required SNFs to submit patient-specific data such as patient diagnosis, and imposed time deadlines on the intermediary and HCFA to handle exception requests. To obtain an exception, a SNF must submit a written request to the intermediary responsible for paying the SNF\u2019s claims. The intermediary reviews the request using Transmittal 378 guidelines and sends the exception request and its recommendation to HCFA. The intermediary\u2019s recommendation can be to approve the requested rate, approve at a lower rate, or deny the request. HCFA reviews the request and the intermediary\u2019s recommendation and makes the final decision.",
      " (See app. I for a detailed description of the exception process). Objectives, Scope, and Methodology The Ranking Minority Member of the Senate Special Committee on Aging asked us to describe how Medicare\u2019s SNF costs and usage have grown in relation to hospital use and to assess whether Medicare\u2019s process for deciding whether SNFs warrant higher rates discriminates between SNFs that treat more complex cases and those that have high costs but do not treat more complex cases. He also asked us to ascertain whether there were differences between the Medicare patients treated by facilities that received higher rates and those that did not. To respond to this request, we addressed the following questions:",
      " How have SNF costs and use grown in relation to hospital use? How do Medicare patients in SNFs granted exceptions compare with Medicare patients in SNFs that have not received exceptions, including whether patients in SNFs granted exceptions need more intense or complex care? How do services provided by SNFs granted exceptions compare with services provided by SNFs that have not received exceptions (for example, nurse staffing levels, physician coverage, and therapy services)? Do patients in SNFs granted exceptions receive appropriate care? What information does HCFA gather to assess RCL exception requests, and does its process ensure that SNFs are furnishing atypical services before granting RCL exceptions?",
      " To identify growth in SNF use and its relation to hospital use, we obtained and analyzed HCFA data on Medicare beneficiary use of services in both settings. We also reviewed a number of studies and reports related to this area. To assess whether hospital length of stay was different when hospitals have SNF units, we examined changes in length of stay between fiscal years 1991 and 1994 for all Medicare patients and for 12 diagnoses that are likely to result in posthospital care. (See app. II for a description of the 12 diagnosis-related groups.) To address whether HCFA\u2019s RCL exception process ensures that SNFs granted exceptions actually furnish atypical services,",
      " we reviewed HCFA\u2019s statutory authority and responsibilities for establishing and administering Medicare\u2019s SNF RCL exception process and HCFA\u2019s regulations and guidance to intermediaries for reviewing exception requests filed by SNFs. In particular, we reviewed the current SNF exception request review process that was set out in HCFA\u2019s Transmittal 378 instructions issued in July 1994. We also discussed the SNF exception process with HCFA officials in the Bureau of Policy Development. We visited 10 intermediaries to determine the SNF exception request review process employed by each and verify that their reviews complied with the guidance laid out in Transmittal 378 and subsequent written correspondence.",
      " In November 1995, HCFA provided us with a database that contained information on 1,379 approved exception requests. The 10 intermediaries processed 789, or 57 percent, of these exceptions. The intermediaries we visited included five that processed more than 50 exception requests, two that processed fewer than 20 requests, and three participating in HCFA\u2019s experiment giving final approval authority to intermediaries. Two of the five selected high volume intermediaries also participated in the pilot project. To answer the questions about SNF patient characteristics and facility services, we analyzed (1) a compilation of HCFA-required resident assessment data (known as the Minimum Data Set (MDS)) about each nursing home resident in Maine,",
      " Missouri, Ohio, and Washington for calendar year 1994 and (2) Medicare claims file data for 1992 and 1994. In addition, for Maine and Ohio, we applied a HCFA method for classifying nursing home patients into homogenous groups according to common health characteristics and the amount and type of resources they use. To provide additional information on patient and facility characteristics, we visited five SNFs that had received exceptions in the past and continue to apply for exceptions. We chose these SNFs, located in California, Illinois, Indiana, Massachusetts, and Washington, with input from state officials and local nursing home ombudsmen.",
      " To assess whether the care Medicare beneficiaries received in SNFs granted exceptions was appropriate, we asked officials in the SNFs we visited to identify a universe of their Medicare patients who they believed needed or likely needed more intense or complex care. We then randomly selected 20 of these patients\u2019 records from each facility that were sent to the peer review organization (PRO) located in the SNF\u2019s state, where they were reviewed by registered nurses and physicians using HCFA evaluation guidelines for quality and appropriateness of care. We also asked the reviewers to judge the intensity and complexity of care needed by the patients. We did not independently examine the internal and automated data processing controls for automated systems from which we obtained data used in our analyses.",
      " HCFA subjects its data to periodic reviews and examinations and relies on the data obtained from these systems as evidence of Medicare-covered services and expenditures and to support its management and budgetary decisions. We did however, assess the reliability of the data by testing multiple data elements to confirm their expected relationships to one another, and individual data elements for specific attributes. The state-specific data we analyzed and the information from the site visits cannot be projected to the nation as a whole. (See app. III for a more detailed discussion of the methodology for analyzing patient characteristics, services provided, and appropriateness of care.) With this exception, we conducted our review from July 1995 to September 1996 in accordance with generally accepted government auditing standards.",
      " SNF Use Increased as Hospital Length of Stay Decreased The average length of hospital stay for Medicare patients has gone down since the prospective payment system (PPS) was introduced in 1983. At the same time, SNF use has gone up, indicating that some substitution of SNF care for hospital care has occurred under PPS. Average length of hospital stay has decreased more for those patients whose diagnoses are more likely to lead to a SNF admission. Moreover, for patients with these diagnoses, hospitals with a SNF unit saw even larger decreases in average length of stay than hospitals without a SNF unit. Changes in Hospital and SNF Use Before Medicare introduced its hospital PPS in fiscal year 1984,",
      " hospitals could maximize their Medicare revenues by keeping beneficiaries in the hospital as long as possible. Each additional day of hospital stay meant more reimbursement. PPS changed financial incentives for hospitals by paying them a fixed amount per discharge that differs on the basis of the patient\u2019s diagnosis. This encouraged hospitals to be more efficient and to control costs. One way for hospitals to control costs is to reduce the average length of patient stay, and one way to reduce the length of stay is to transfer patients to SNFs as soon as medically appropriate. As a result, it was expected that SNF use would increase after PPS. Table 2.1 shows for fiscal years 1983 through 1995 the number of discharges from hospitals and admissions to SNFs along with the average length of stay in each setting.",
      " Hospital average length of stay decreased by about 29 percent, and discharges per 1,000 beneficiaries also decreased by about 24 percent. The reduction in discharges per 1,000 beneficiaries can be explained in large part by the substitution of ambulatory and outpatient surgery for inpatient surgery. For example, in 1981, the base year for PPS, about 332,000 Medicare discharges were for cataract surgery, accounting for over 1 million days of care. Today, almost all cataract surgery is done on an outpatient basis. Even though the complexity of hospital cases, as measured by the mean hospital case mix index,",
      " has increased on average by almost 28 percent since PPS began, average length of stay has gone down. Some of the decrease can probably be explained by the substitution of SNF care for what would in the past have been the last few days of hospital care. Beneficiary use of SNF services has increased from 10 admissions per 1,000 beneficiaries in 1983 to 42 per 1,000 based on preliminary data for 1995, and the percentage of hospital discharges resulting in SNF admissions has increased from 2.7 percent to 13.3 percent. PPS\u2019 effect on SNF use was initially smaller than expected and sometimes contrary to expectations.",
      " Medicare SNF admissions increased from 309,000 in 1983 to 353,000 in 1985. During the same period, Medicare SNF payments increased 5 percent, from $456 million to $480 million. However, between 1985 and 1987, this trend reversed. Medicare SNF admissions fell to 327,000, a 7 percent decline. Any PPS effect on Medicare SNF utilization was offset by intensified utilization review by Medicare intermediaries. Several events occurred in the late 1980s that resulted in increased SNF usage. In 1988, HCFA implemented revised SNF coverage guidelines in response to a lawsuit (Fox v.",
      " Bowen, 1987). The intent of these new guidelines was to make it easier for beneficiaries to obtain SNF coverage and to increase the consistency of coverage determinations. Enactment of the Medicare Catastrophic Coverage Act in 1988 also had a major effect by increasing coverage and reducing beneficiary cost sharing. These changes provided a strong incentive for providers to become certified as Medicare SNFs. Over 1,600 new SNFs and nearly 75,000 new beds were certified between December 1988 and December 1990. The combined effects of increased coverage and increased provider resources produced rapid growth in the use of the Medicare SNF benefit during calendar year 1989,",
      " the only year the catastrophic coverage provisions were fully in effect. Covered days of care more than doubled over the previous year, from 11.8 million to 28.6 million, while program payments increased from about $1 billion to $2.8 billion. With the repeal of the Medicare Catastrophic Coverage Act in 1989, the SNF benefit structure returned to that in effect in 1988 after settlement of the lawsuit. This, as expected, produced a drop in utilization and payments for Medicare SNF services in 1990. However, SNF utilization and payments remained well above pre-1989 levels, and by 1992 had surpassed the 1989 level.",
      " Length of Stay Declines Were Larger for Diagnoses Often Requiring Postacute Care In 1991 the average length of stay for Medicare patients in PPS hospitals was 7.9 days. It fell to 6.9 days in 1994, a decrease of 12.9 percent. However, we found that for 12 diagnosis-related groups (DRG) that are likely to require posthospital-care services, the declines in length of stay were larger. As shown in table 2.2, the change in length of stay between 1991 and 1994 for these 12 DRGs ranged from 16.",
      "7 percent to over 27 percent. As shown in table 2.3, the average length of stay in PPS hospitals with SNFs was shorter than the average length of stay in PPS hospitals that did not have a SNF unit for all but 1 of the 12 DRGs included in our analysis. Lengths of stay ranged from 4 percent to almost 14 percent shorter in hospitals with SNF units. For the 12 DRGs analyzed, about 248,000 Medicare beneficiaries were discharged to a SNF from a PPS hospital during fiscal year 1994. This represented about 23 percent of discharges from PPS hospitals for these DRGs.",
      " As shown in table 2.4, for beneficiaries discharged to a SNF, the average length of stay for hospitals with SNFs was less than that for hospitals without SNFs for each of the 12 DRGs. The differences ranged from 0.3 to 2.7 days. Patients and Services Appear Similar in SNFs With and Without Exceptions Because SNFs with exceptions are supposed to be furnishing atypical services, they might be expected to have a higher proportion of patients requiring more nursing assistance or more complex care than SNFs without exceptions. However, in the four states we studied, we found no substantive differences between the characteristics of,",
      " and services received by, Medicare patients residing in SNFs granted exceptions and those in SNFs that did not receive exceptions. For example, we found no substantive differences in patients\u2019 ability to perform activities of daily living (ADL), the types of patient diagnoses, or the frequency with which certain types of treatments and therapies were administered. PRO reviewers found that patients in the five SNFs with exceptions that we visited generally received appropriate care\u2014that is, the right care at the right time. They did find instances in which inappropriate care had been furnished in several of the SNFs granted exceptions. However, except for one case, no adverse outcomes resulted. Despite Different SNF Payment Rates,",
      " Patient Characteristics Appear Similar Between the Two Groups Although HCFA intends that exceptions be granted only to SNFs that care for patients requiring atypical services, when comparing SNFs with exceptions and those without, we found little difference in either the Medicare patients themselves or the services they were provided. For example, we found no substantive difference between the two groups of SNFs in terms of (1) patients\u2019 ability to perform activities of daily living, (2) patients\u2019 diagnoses, (3) patients\u2019 cognitive status, or (4) patients\u2019 prior nursing home stays. Patients in Both Groups Were Similar in Several Characteristics We Examined When comparing data about the characteristics of residents in SNFs that received exceptions and SNFs that did not,",
      " we found that facilities in both groups care for some Medicare patients who required complex care. However, we found no substantive differences between these groups of facilities in a number of areas that may reflect the overall complexity of patient care needs. (See app. IV for the results of certain patient characteristics we analyzed.) Furthermore, during their review of medical records of a sample of patients in the five SNFs with exceptions we visited, PRO reviewers found that a majority of patients in three SNFs sampled did not need complex or intense care, while half of the patients sampled in the other two SNFs did require more complex or intense care. Activities of Daily Living We analyzed ADLs because they are a measure of patient need and the facility resources required to meet those needs.",
      " Lower ADL scores indicate patients with relatively fewer needs for assistance compared with patients with higher ADL scores. In each of the states we studied, according to the MDS data, patients in SNFs with exceptions and those in SNFs without exceptions had, on average, similar abilities to perform ADLs. For example, as figure 3.1 shows, patients in both groups of SNFs in Missouri had ADL scores of about 12, on average. Missouri SNFs with exceptions\u2019 individual facility ADL scores ranged from 8 to 12. Missouri SNFs without exceptions had a median ADL score of 12, with 10 percent of the SNFs with exceptions having ADL scores of 10 or lower and 10 percent having ADL scores of 14 and higher.",
      " (See app. IV for information about patient ADLs in the other three states we analyzed.) To obtain information about diagnoses, we analyzed 1992 and 1994 data from HCFA\u2019s Medicare provider analysis and review (MEDPAR) database, classifying the SNF patients into DRGs using software developed for HCFA for hospital prospective payment. We found few differences between the two groups of SNFs. For example, in 1994 the most common DRG for patients in both groups of Ohio SNFs was fractures of the hip and pelvis. Table 3.1 shows, for each group of Ohio SNFs, the five most common DRGs.",
      " (DRG information for the other three states, and for the nation as a whole, is in app. IV.) Higher nursing costs as a result of providing atypical services are the foremost reason HCFA cites in granting exceptions. As a result, it might be expected that patients in SNFs granted an exception would need\u2014and the SNF would provide\u2014more nursing care. To obtain additional information about patients\u2019 need for nursing care in SNFs with and without RCL exceptions in Maine and Ohio, we estimated the nursing resources patients require. We used HCFA\u2019s Resource Utilization Group, version III (RUG-III) model, a model for sorting nursing home residents into like groups according to common health characteristics and the amount and type of resources they use,",
      " to evaluate each patient\u2019s nursing resource need. RUG-III considers patient characteristics, such as whether the patient is in a coma or has pneumonia, as well as services provided to the patient, such as kidney dialysis or physical therapy, and assigns the patient to 1 of 44 categories depending on the nursing resources that patient requires. Each category has a number, or score, associated with it, providing a relative measure of resource use compared with other categories. For example, a patient who has complex health problems requiring more nursing care would be placed in a higher category, and given a higher score, signifying more resources required, than a patient who has simpler health problems and requires less nursing care.",
      " When we analyzed the results of the RUG-III estimates, we observed that in Ohio, the distribution of Medicare patients among the categories was similar in SNFs with exceptions and in SNFs without. And, unexpectedly, in Maine the SNFs with exceptions had patients requiring fewer nursing resources when compared with patients in SNFs without exceptions. (See app. IV for additional information regarding the results of the RUG-III analysis.) In addition to calculating RUG-III scores for each patient, we used the results of the RUG-III patient analysis to calculate each facility\u2019s case-mix index score\u2014the average amount of nursing resources required to care for the facility\u2019s overall patient population.",
      " In both Maine and Ohio, we found the case-mix scores to be similar when comparing each state\u2019s SNFs with exceptions with its SNFs without exceptions. For example, as figure 3.2 shows, the two groups of SNFs in Maine had case-mix scores of approximately 1.3, indicating that the SNFs\u2019 patients had generally similar nursing resource needs. Similarly, figure 3.3 shows that the two groups of Ohio SNFs had case-mix scores of about 1.4, indicating similar nursing resource needs among their patients. Both the RUG-III individual patient analysis and case-mix index scores indicate that there were patients in both SNFs with exceptions and SNFs without exceptions that required intense or complex care.",
      " For example, in Ohio, 1.1 percent of patients in SNFs with exceptions and 1.4 percent of patients in SNFs without exceptions were determined to need the highest category of nursing resource use. And, also in Ohio, there were a few SNFs in both groups\u2014one SNF with an exception and several SNFs without exceptions\u2014with overall case-mix index scores of 1.6 and higher, indicating a relatively larger proportion of patients with high nursing resource needs in these SNFs. Other Patient Characteristics MDS data also showed no substantive differences in patients\u2019 cognitive status, a measure of the patients\u2019 ability to make decisions about the tasks or activities of daily living,",
      " such as choosing items of clothing or determining mealtimes. Nor did the data show any substantive difference between SNFs with and without exceptions in the number of patients with a prior stay in a nursing home or other residential facility, a measure that may indicate those patients with a history of poor health. In each of the four states we studied, patients in both groups of SNFs were similar when measured across both of these elements. (See app. IV for additional information regarding these and other patient characteristics we analyzed.) PRO Reviews We asked the PROs, as part of their medical record review, to evaluate the health care needs of a sample of 20 patients identified as having or likely having complex care needs by SNF staff in each of the five SNFs with exceptions we visited.",
      " The PRO evaluations were based on a five-point scale, with one representing the needs of a typical skilled nursing facility patient and five being the needs of a typical acute-care hospital patient. In three SNFs, all or almost all of the patients reviewed were judged to have the health care needs of a typical SNF patient, and, in fact, several patients in two of these SNFs were judged not to require SNF care at all. In the two remaining SNFs, half the patients reviewed were judged to have needs greater than those of a typical SNF patient. Services Provided to Patients Appear Similar Between the Two Groups SNFs with exceptions receive that status because they have documented to HCFA\u2019s satisfaction that they furnish patients atypical services.",
      " However, in the four states we studied, we found that the percentage of patients receiving certain special treatments, such as ventilator care, and certain therapies, such as physical therapy, was generally similar in SNFs with exceptions and SNFs without. Furthermore, the typical amount of therapy given to the patients in each group of SNFs was generally similar. During our five site visits to SNFs with exceptions, we found that staffing of nursing and therapy services as well as physician coverage varied. Facilities in Both Groups Provided Similar Services We analyzed MDS data about special treatments and therapies, items that could be indicative of different levels of SNF resource use.",
      " Generally, we found no substantive differences in the type and intensity of these services in SNFs with exceptions and in those without. (See app. IV for the results of certain facility service characteristics we analyzed.) Special Treatments The percentage of patients receiving certain treatments and procedures, such as suctioning and ventilator care, appeared similar in both groups of facilities. For example, as figure 3.4 shows, generally less than 5 percent of patients in each group of Ohio SNFs received suctioning. (See app. IV for additional information regarding special treatments.) The percentage of patients receiving therapies, such as speech, occupational, and physical therapy,",
      " appeared similar in both groups of facilities in all four states. For example, as figure 3.5 shows, generally less than 20 percent of patients in each group of Maine SNFs received speech therapy. Likewise, the number of days of therapy patients received appeared similar. As shown in figure 3.6, patients in each group of Washington SNFs received about 10 days of therapy, on average. We also analyzed Maine and Ohio data regarding minutes of therapy provided and generally found no differences between the two groups. (See app. IV for additional information regarding therapies. Also, see app. IV for a listing of other variables analyzed.) Other Characteristics MDS,",
      " MEDPAR, and other nationally available databases did not contain information about staffing, training, and other areas you were interested in, such as nursing care, therapy services, and physician coverage. Therefore, to provide information about these issues, we can only describe our observations during our site visits to five SNFs with exceptions. These observations cannot be assumed to be representative of SNFs in general. Nursing Care According to officials at the SNFs we visited, SNFs attempt to staff according to the complexity or intensity of the patients\u2019 needs. For example, patients with more complex needs require more licensed nursing care; thus, a higher licensed-nurse-to-patient ratio is desirable.",
      " Patients with less complex needs might allow SNFs to staff with more certified nurse assistants and fewer licensed nurses. However, other factors, such as financial constraints or inability to recruit qualified personnel, may influence staffing ratios. Licensed-nurse-to-patient staffing ratios reported by SNF officials varied considerably among the five SNFs we visited. For example, daytime licensed-nurse-to-patient ratios ranged from 1:6 to 1:15; nighttime licensed nursing ratios ranged from 1:18 to 1:31. (See app. IV for information on nurse staffing levels.) The SNF with the lowest daytime licensed-nurse-to-patient staffing ratio,",
      " according to officials at the SNF, had adopted a system under which registered nurses performed most patient care tasks because the SNF had difficulty finding and retaining qualified nurse aides. Officials at most of the SNFs we visited said they preferred to have nurses with hospital experience on their staff to care for patients with complex medical needs. Hospital acute-care experience\u2014as opposed to only long-term care experience\u2014gives nurses the requisite skill and training to provide appropriate care to patients with complex needs, according to these officials. We did not determine the number of nurses with acute-care experience at each SNF we visited. However, many of the nursing staff at one SNF\u2014which had a predominantly orthopedic patient population\u2014had acute-care experience,",
      " and several of the nursing staff at this SNF were in the process of securing recognition as certified registered rehabilitation nurses. We also found that most of the SNFs had established on-the-job training programs for their nursing staffs to maintain and increase their skills. Therapy Staff All the SNFs we visited provided physical, occupational, and speech therapies, and three of them also performed respiratory therapy. As estimated by SNF officials, the percentage of Medicare patients in each SNF receiving therapy varied widely, from a low of 40 percent in one SNF to almost 90 percent in another. SNFs attempt to provide the number and type of therapists\u2014such as physical or occupational therapists\u2014appropriate to their patients\u2019 needs.",
      " The SNFs we visited predominantly contracted with outside vendors for therapists and therapy aides, with only one facility using mostly in-house staff. Following is an example of how one SNF uses therapy services to meet its patients\u2019 needs. Therapy services in this SNF are available 7 days a week, but not all patients receive therapy on weekends. Most patients receive at least 1 hour of physical therapy and 1 hour of occupational therapy each day, as well as participate in an exercise group. On average, complex care patients receive about 2-1/2 hours of total therapy per day. All patients are screened for speech therapy. Physician Coverage According to experts,",
      " aside from physicians acting in administrative capacities as medical directors, SNFs generally do not have physicians on staff. As in hospitals, SNF patients have their own attending physicians who direct their care. However, unlike hospital patients, most SNF patients\u2019 conditions generally do not require a daily physician visit. As a result, physicians often rely on SNFs\u2019 nursing staffs to keep them informed of the patients\u2019 conditions. One SNF we visited arranged for more physician coverage through an agreement with nearby hospitals under which the hospitals provided physicians to follow up on SNF patients, seeing them two or three times a week. In three of the five SNFs we visited,",
      " some staff expressed concern that physicians did not visit their patients as frequently as they should, particularly the sicker patients. One SNF medical director expressed concern that physicians were relying on nurses to notify them of their patients\u2019 conditions rather than visiting the patient, which she believed may be inappropriate for sicker patients. At another SNF we visited, a staff person indicated that some attending physicians failed to visit their SNF patients in person or oversee their care at the facility. PRO Review Found Care to Be Generally Appropriate PRO physician reviewers found that the services provided at the five SNFs with exceptions we visited were almost always appropriate to the patients\u2019 needs for those cases reviewed.",
      " However, several problems with quality of care, such as errors in administering medication and delays in contacting physicians when problems arose, were identified during the review of medical records collected at the SNFs we visited. Except for one patient who required hospital outpatient treatment as a result of a quality problem the PROs identified, no other adverse outcomes resulted from the problems noted. In reviewing the medical records of 100 SNF patients (20 patients at each facility) identified by SNF staff as needing complex care, the PROs found the following quality problems:five instances of medication errors; three instances of delays in contacting a physician upon change in patient\u2019s condition;",
      " two instances of not notifying a physician upon a change in a patient\u2019s condition; two instances of falls, indicating a failure to develop a system to assess patients with an increased risk of falling and to implement preventive measures; and one instance of failure to provide necessary treatment. Furthermore, the PROs noted 55 instances in which documentation of the patient\u2019s condition or progress was inadequate or inconsistent. Generally, reviewers assume that care not documented was not furnished. Following are some specific examples of problems identified by the PROs. For one SNF, failure to follow medically prescribed procedures resulted in a complication. Physician orders instructed SNF staff to irrigate on a weekly basis a patient\u2019s central venous catheter.",
      " The PRO reviewers found that this procedure was not followed. As a result, problems with the catheter developed, and the patient was sent to the hospital for outpatient care. At another facility a patient was given twice the ordered dosage of medication for at least a week before the error was noticed and the physician notified. In yet another facility, the issue of physician notification was raised after abnormal laboratory test results were returned but the physician was not informed until 3 days later. Standards for Evaluating Requests for RCL Exceptions Are Inadequate The number of SNFs granted exceptions to routine cost limits (RCL) is growing rapidly, with exception approvals increasing from 184 to 552 from fiscal year 1993 to fiscal year 1995.",
      " The extra payments associated with these approvals also increased from $35 million in fiscal year 1993 to $98 million in fiscal year 1995. However, HCFA\u2019s exception review process is not adequate for discerning SNFs that have higher costs because they furnish atypical services, and thereby qualify for an exception, from SNFs that have higher costs for other reasons, such as inefficiency. The primary reasons for this situation are that benchmarks used to screen for exception eligibility rely almost entirely on a SNF\u2019s proportion of Medicare patients, and patient-specific information submitted by SNFs on Medicare patients is not used. In effect, if a nursing home can demonstrate it has a higher than average proportion of Medicare patients and high costs,",
      " it can receive an exception to the RCL, which in turn defeats the cost-control incentives of RCLs. Number of SNFs With Exceptions Is Growing From the time RCLs were first established in 1979 through fiscal year 1992, a total of only 80 exceptions were granted. More than twice as many were granted in fiscal year 1993 alone, and more than 550 were granted in fiscal year 1995 (see table 4.1). Moreover, HCFA and industry officials expect that the number of exception requests and approvals is likely to continue to grow, and data in table 4.1 covering part of fiscal year 1996 suggest this will happen.",
      " Although data for fiscal year 1996 are based on part of the year, these data indicate a continued increase in approvals. During approximately the first 10 months of fiscal year 1996, HCFA approved 417 exceptions, which would be worth about $70 million to the SNFs. In addition, the six intermediaries with final approval authority approved 190 exceptions during the first 9 months of fiscal year 1996, which were worth about $29 million to the SNFs. If these trends continue, approved exceptions by all intermediaries during fiscal year 1996 could total about 750 and cost the Medicare program about $120 million.",
      " Besides the fact that SNFs that receive exceptions in one year are likely to continue receiving exceptions, another factor that could continue the trend to more exceptions in the future is the number of exemptions to RCLs currently in effect. Historically, over 20 percent of SNFs with new provider exemptions received exceptions after their exemption period ended. As of September 30, 1995, 2,422 SNFs had obtained exemptions from RCLs since 1979. More than 80 percent of the 2,422 exemptions were approved after fiscal year 1989, with 35 percent of the exemptions (846) approved during fiscal years 1994 and 1995.",
      " Thus, over the next few years, a substantial number of SNFs will be completing their RCL exemption periods and likely will be requesting exceptions. Exception Benchmarks Not Related to Atypical Services The first step a SNF must take to gain an exception to the RCL is to demonstrate that it meets at least one of three benchmarks established by HCFA. The benchmarks are as follows: The SNF has a shorter length of stay than the average of its peer group. Shorter lengths of stay can indicate, for example, that services are furnished more intensively so patients can be released sooner. The SNF has higher average ancillary costs per day than its peer group.",
      " Higher ancillary costs can indicate, for example, that the SNF treats a higher proportion of patients needing rehabilitation services or drug infusion therapy. The SNF treats a higher proportion of Medicare patients than its peer group. As the ratio of Medicare to total patients rises, SNF costs can grow because Medicare patients generally have more acute conditions in need of more health services than other patients, who often need more long-term and custodial care. Benchmarks are set on the basis of the average value of four peer groups\u2014rural and urban groups for both hospital-based and freestanding facilities. In establishing the peer group averages, HCFA officials told us they used data on all patients (in Medicare-certified units)",
      " in the SNFs, not just Medicare patients, because Medicare\u2019s cost reimbursement method is designed to pay on the basis of average costs of all patients in a SNF for routine services, up to the RCL. However, Medicare patients are different from other nursing home patients. Medicare patients are admitted because they have been discharged from a hospital but need continued care because of the acute condition that resulted in the hospitalization. Other patients need long-term care for chronic conditions, which involves more custodial-type care. In effect, for most SNFs, the three benchmarks all depend on the same factor\u2014the percentage of a SNF\u2019s patients who are Medicare beneficiaries.",
      " Therefore, treating a higher proportion of Medicare patients will usually get a SNF past the benchmarks, but this does not mean the patients require atypical services. The next and final stage of the process as it operates only requires a SNF to demonstrate that its costs are higher than its peer group. The process does not require a SNF to demonstrate that its costs are high because atypical services are needed and furnished. Therefore, SNFs that are simply inefficient in their operations can gain RCL exceptions. Tables 4.2, 4.3, and 4.4 give the benchmarks and actual Medicare averages for length of stay, ancillary costs,",
      " and portion of Medicare-covered days, respectively. Table 4.2 contains the peer group benchmarks for average length of stay and the actual average for Medicare-covered SNF patients in fiscal year 1994. The average length of stay of Medicare patients is so much less than the benchmark that it is unlikely this benchmark can distinguish facilities that provide atypical services to Medicare beneficiaries from facilities that do not. Furthermore, each of the four peer group benchmark values exceed the maximum Medicare benefit of 100 days. Table 4.3 presents a similar comparison for ancillary costs. The actual peer group ancillary costs are so much larger than the benchmarks that ancillary costs also are unlikely to be a good indicator of whether a SNF provides atypical services to Medicare patients.",
      " The actual average costs range from 2.3 to 4.4 times the benchmarks. A primary reason for these differences in costs is that Medicare patients are different from most other patients in nursing homes. Medicare patients typically have been recently discharged from hospitals after treatment for acute conditions. The majority of non-Medicare patients in nursing homes are Medicaid patients with chronic conditions and long-term and custodial care needs. Thus, basing a benchmark on the ancillary costs for all patients produces a benchmark that does not adequately distinguish facilities that do provide atypical services to Medicare patients from those that do not. A comparison based on the third benchmark, proportion of Medicare patients,",
      " is shown in table 4.4. This benchmark is of little or no value in identifying facilities that provide atypical services. For example, in fiscal year 1994, Medicare patients made up about 36 percent of the patients in hospital-based urban nursing homes. If a nursing home had a Medicare population of, say, 60 percent (above the benchmark), this merely indicates that the nursing home had an atypical population mix, not that it was providing atypical services. A nursing home could have a low proportion of Medicare patients and provide atypical services to every one of its Medicare patients. Furthermore, the benchmarks are out of date.",
      " The benchmarks were computed from data spanning the periods October 31, 1988, through September 30, 1989, for hospital-based facilities and June 30, 1989, through May 31, 1990, for freestanding facilities. For each type of facility, the base data included substantial time under the Medicare Catastrophic Coverage Act of 1988 coverage criteria, which, as discussed, substantially liberalized Medicare coverage criteria for SNFs. The benchmarks, then, were computed on data representing an atypical year in the number and type of Medicare patients who were admitted to SNFs. Patient-Specific Information Not Used Data describing patient characteristics submitted as part of an exception request generally are not used in the exception review process.",
      " Transmittal 378 requires SNFs to submit patient data, showing patients\u2019 diagnoses and ability to perform ADLs, for a random sample of all patients treated at their facilities. Although Transmittal 378 requires a random sample, HCFA officials told us that they have verbally communicated to various intermediary and SNF officials that they expect the SNF to submit clinical data for all patients treated during the year for which an exception is requested. None of the intermediaries we visited knew of HCFA\u2019s expectation. Transmittal 378 says the intermediary should use the patient-specific data to determine whether the nursing staff level of a SNF is excessive,",
      " and if so, the intermediary should adjust the SNF\u2019s costs before comparing the costs to the peer group. A HCFA official told us that HCFA expects the intermediaries to follow the instructions in Transmittal 378 and evaluate whether the nursing staff level of a SNF is excessive. He told us that HCFA expected the intermediaries\u2019 professional health staff to make decisions on excessive staffing levels, although HCFA has provided no specific criteria to judge whether nursing staff levels are excessive. Although 3 of the 10 intermediaries visited told us that they used patient-specific data in their review of exception requests, none of the 10 had ever referred a request to its professional health staff for an opinion on the appropriateness of nursing staff levels.",
      " Officials at two of the three intermediaries using patient-specific data told us that HCFA had verbally told them to verify that the ADL scores of the applicant\u2019s patients are higher than the ADL scores presented in a 1985 national survey of nursing home populations. An intermediary official told us that higher ADL scores indicate a need for additional nursing personnel. An official at a third intermediary we visited told us that, although the intermediary received no guidance from HCFA, it requires a SNF applying for exception to clarify its ADL data by interpreting in writing how its ADL data demonstrate that the SNF is providing atypical services. HCFA\u2019s Transmittal 378 also requires SNFs to submit a listing of the discharge destination for all patients.",
      " Officials for all 10 intermediaries we visited told us they verify that this information is submitted, but because HCFA has not provided any criteria to determine its significance, they do not use this information when reviewing an exception request. HCFA officials told us the discharge data should show a large number of patients going home if the SNF is atypical. However, they told us that there are no plans to establish a benchmark for discharge data because setting such a benchmark for the number or percentage of patients discharged to their homes would be difficult. Conclusions, Recommendation, and Agency Comments The use of SNF services by Medicare beneficiaries and Medicare\u2019s payments for these services have grown dramatically during the 1990s.",
      " One reason for this growth is that Medicare guidelines for when SNF services are covered were liberalized in 1988 in response to a court decision. Another reason is that some substitution of SNF care has occurred for what in the past would have been the last few days of hospital care. This was an expected result of Medicare\u2019s hospital PPS. The number of SNFs requesting exceptions to the RCL has grown rapidly and is expected to continue to grow. Over 500 requests were processed and approved in 1995, and as many as 750 may be processed in 1996. Almost all exception requests claim that routine costs are higher than the RCL because the SNF provides atypical services.",
      " However, HCFA\u2019s current screening benchmarks for exception requests are unlikely to differentiate between SNFs that provide atypical services and those that do not. Moreover, the patient-specific information submitted with exception requests is not used to evaluate them. Thus, if a SNF can show that its costs are higher than the RCL, it will receive an exception without demonstrating that it does, in fact, furnish atypical services. Our analysis of four states\u2019 Medicare patients in SNFs with and without exceptions found virtually the same ADL scores for patients in both groups of SNFs; no substantive differences in the patients\u2019 diagnoses; RUG-III scores that indicated a need for the same level of nursing resources to treat both groups of patients;",
      " and similar amounts of therapy and special treatments. Moreover, despite the fact that SNFs with exceptions were expected to have sicker patients, PRO review of 100 patients identified as requiring complex care by staff in the SNFs we visited showed that all or almost all patients in three of five SNFs were typical SNF patients. Only half of the selected patients in the other two SNFs needed complex care. PRO review did find that services furnished to the selected patients were almost always appropriate to patients\u2019 needs. Weaknesses in HCFA\u2019s exception request review process make it unlikely that it limits exception approvals to SNFs furnishing atypical routine services and likely that SNFs will receive approval for merely showing higher than normal costs.",
      " Our analyses of SNF patient characteristics also showed no significant difference between patients in SNFs with and without RCL exceptions, giving further evidence that HCFA\u2019s review process is not working as intended. Recommendation The Secretary of HHS should direct the Administrator of HCFA to revise the SNF exception to the RCL review process so that it can differentiate between SNFs that furnish atypical routine services to Medicare patients and SNFs that merely have higher than normal costs. Looking at factors that reflect Medicare patients rather than all SNF patients occupying Medicare-certified beds might be one way to do so. Using patient-specific data, some of which are currently submitted but not used,",
      " might be another way. Agency Comments and Our Evaluation In commenting on a draft of this report, HHS generally agreed with our recommendation to revise the exception review process to enable HCFA to better differentiate between SNFs that furnish atypical services and those that merely have higher costs. Specifically, HHS concurred with our suggestion to expand the use of patient-specific data in the review process. HHS said that HCFA\u2019s ongoing SNF payment method demonstration project using the RUG-III classification system will provide the data necessary to cost-out atypical services and items and begin to integrate patient-specific data into the exception process. However, HHS disagreed with our suggestion that looking at factors that pertain to Medicare patients rather than all SNF patients might be one way to enhance the exception review process.",
      " HHS said this suggestion failed to take into account the fact that Medicare patients are often the most resource-intensive patients a SNF treats and that the proportion of Medicare patients in a SNF is a valid indicator of case mix. HHS added that the RCLs are based on the average cost of all patients and that use of data on only Medicare patients would be inappropriate. We discuss in the report the differences between Medicare and other SNF patients and the rationale for using data on all patients in establishing the benchmarks used in evaluating exception requests. We did not recommend that HCFA substitute data on only Medicare patients for the current benchmark. Rather, we recommended that HCFA look at such data as one way to revise the process and give exception request reviewers additional data upon which to base decisions.",
      " We envision that the data could be a useful supplement to the existing process to help differentiate between SNFs furnishing atypical services and those that merely have higher costs. For this reason, we do not believe that our suggestion would be inconsistent with Medicare\u2019s principles of cost reimbursement. HHS also disagreed with our suggestion to look at data on only Medicare patients because the suggestion was derived from what HHS considers to be a methodological flaw in our analysis of SNF patients. HHS considers the methodology flawed because it compared only Medicare patients in SNFs with exceptions with Medicare patients in SNFs without exceptions, which does not consider HCFA\u2019s proxy for case mix\u2014the facility\u2019s percentage of Medicare patients.",
      " First, our suggestion was based primarily on our review of HCFA\u2019s exception process discussed in chapter 4. We found that in general the only factor that affected a determination of whether a facility met the atypical services criterion was its proportion of Medicare patients, but a higher than average proportion in itself does not mean a SNF furnishes atypical services. Thus, we recommended that the review process be revised and suggested several types of information that might be useful to differentiate SNFs that furnish atypical services from those that merely have higher than normal costs. Second, as stated in chapter 1\u2019s scope and methodology section, our analysis of SNF patients was designed to answer questions about the characteristics of and services received by Medicare patients in facilities with and without RCL exceptions.",
      " The analysis is valid for these purposes. Moreover, we would expect that at least some differences between patients in the two SNF groups would be shown by such an analysis, and the fact that no differences emerged lends additional support to our suggestion to look at using Medicare-only data during the exception review process. HHS also noted that, in concert with the Congress, it is working on development of a PPS for SNFs that is expected to be sensitive to a facility\u2019s case mix. HHS believes that such a payment method would eliminate the need for an exception process. A SNF PPS that is sensitive to case mix might lessen the need for an exception process,",
      " but we suspect that some exception-type process would remain either for individual cases or facilities. Prospective payment methods generally retain such features. For example, Medicare\u2019s inpatient hospital PPS provides for paying sole community hospitals differently because of their special circumstances and provides a way for hospitals to receive additional payments for outlier cases that are extremely costly.\n"
    ],
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  },
  {
    "id": 63,
    "question": null,
    "answer": "The CLEAN Energy Act of 2007 (H.R. 6) was introduced by the House Democratic leadership to revise certain tax and royalty policies for oil and natural gas and to use the resulting revenue to support a reserve for energy efficiency and renewable energy. Title I proposes to repeal certain oil and natural gas tax subsidies, and use the resulting revenue stream to support the reserve. The Congressional Budget Office (CBO) estimates that Title I would repeal about $7.7 billion in oil and gas tax subsidies over the 10-year period from 2008 through 2017. In House floor debate, opponents argued that the cut in oil and natural gas subsidies would dampen production, cause job losses, and lead to higher prices for gasoline and other fuels. Proponents counterargued that record profits show that the oil and natural gas subsidies were not needed. The bill passed the House on January 18 by a vote of 264-123. This report presents a detailed review of oil and gas tax subsidies, including those targeted for repeal by H.R. 6. The Energy Policy Act of 2005 (EPACT05, P.L. 109-58) included several oil and gas tax incentives, providing about $2.6 billion of tax cuts for the oil and gas industry. In addition, EPACT05 provided for $2.9 billion of tax increases on the oil and gas industry, for a net tax increase on the industry of nearly $300 million over 11 years. Energy tax increases comprise the oil spill liability tax and the Leaking Underground Storage Tank financing rate, both of which are imposed on oil refineries. If these taxes are subtracted from the tax subsidies, the oil and gas refinery and distribution sector received a net tax increase of $1,356 million ($2,857 million minus $1,501 million). EPACT05 was approved and signed into law at a time of very high petroleum and natural gas prices and record oil industry profits. The House approved the conference report on July 28, 2005, and the Senate on July 29, 2005, clearing it for the President's signature on August 8 (P.L. 109-58). However, the tax sections originated in the106th Congress, with its effort in 1999 to help the ailing domestic oil and gas producing industry, particularly small producers, deal with depressed oil prices. Subsequent price spikes prompted concern about insufficient domestic energy production capacity and supply. All the early bills appeared to be weighted more toward stimulating the supply of conventional fuels, including capital investment incentives to stimulate production and transportation of oil and gas. In addition to the tax subsidies enacted under EPACT05, the U.S. oil and gas industry qualifies for several other targeted tax subsidies (FY2006 revenue loss estimates appear in parenthesis): (1) percentage depletion allowance ($1 billion); (2) expensing of intangible drilling costs for successful wells and non-geological and geophysical costs for dry holes, including the exemption from the passive loss limitation rules that apply to all other industries ($1.1 billion); (3) a tax credit for small refiners of low-sulfur diesel fuel that complies with Environmental Protection Agency (EPA) sulfur regulations ($ 50 million); (4) the enhanced oil recovery tax credit ($0); and (5) marginal oil and gas production tax credits ($0).\n",
    "docs": [
      "Action in the 110th Congress The CLEAN Energy Act of 2007 ( H.R. 6 ) was introduced by the House Democratic leadership to revise certain tax and royalty policies for oil and natural gas and to use the resulting revenue to support a reserve for energy efficiency and renewable energy. The bill is one of several introduced on behalf of the Democratic leadership in the House as part of its \"100 hours\" package of legislative initiatives conducted early in the 110 th Congress. Title I proposes to repeal certain oil and natural gas tax subsidies, and use the resulting revenue stream to support the reserve. According to the Congressional Budget Office (CBO), the provisions in Title I would make about $7.",
      "7 billion available for the reserve over the 10-year period from 2008 through 2017. H.R. 6 came to the House floor for debate on January 18, 2007. In the floor debate, opponents argued that the reduction in oil and natural gas incentives would dampen production, cause job losses, and lead to higher prices for gasoline and other fuels. Opponents also complained that the proposal for the Reserve does not identify specific policies and programs that would receive funding. Proponents of the bill counterargued that record profits show that the oil and natural gas incentives were not needed. They also contended that the language that would create the Reserve would allow it to be used to support a variety of research and development (R&D), deployment,",
      " tax incentives, and other measures for renewables and energy efficiency, and that the specifics would evolve as legislative proposals come forth to draw resources from the Reserve. The bill passed the House on January 18 by a vote of 264-123. Background The Energy Policy Act of 2005 ( P.L. 109-58 ), enacted on August 8, 2005, expanded some of the existing tax subsidies for the oil and gas industry and created several new ones. The oil and gas tax incentives in EPACT05 were added on top of several existing special tax subsidies for oil and gas. The industry also benefits from provisions of current tax law that are not strictly tax subsidies (or tax expenditures)",
      " but that nevertheless provide advantages for and reduce effective tax rates of the oil and gas industry. The remainder of this report discusses these tax provisions in detail. The first section, below, discusses the origin and evolution of the oil and gas tax subsidies that were incorporated into the 2005 act. The second section summarizes each of the oil and gas tax subsidy provisions in the 2005 energy act and reports its corresponding revenue loss estimate. Section three describes other oil and gas tax subsidies, those that existed before EPACT05 and were generally not affected by it. The final section describes several tax provisions that benefit the oil and gas industry; these are not tax subsidies per se\u2014they are not considered to be tax expenditures\u2014but are deemed by some observers to confer excessive (or unfair)",
      " benefits for the industry. Policy Context and Analysis Tax incentives for oil and gas supply have historically been an integral (if not the primary) component of the nation's energy policy. The domestic oil and gas industry was granted three tax code preferences, or subsidies: (1) expensing of intangible drilling costs (IDCs) and dry hole costs, introduced in 1916; (2) the percentage depletion allowance, first enacted in 1926 (coal was added in 1932); and (3) capital gains treatment of the sale of oil and gas properties. These tax subsidies reduced marginal effective tax rates in the oil and gas industries,",
      " reduced production costs, and increased investments in locating reserves (increased exploration). They also led to more profitable production, some acceleration of oil and gas production, and more rapid depletion of energy resources than would otherwise occur. Partially in response to tax incentives, but also due to the low cost of discovering and developing the huge new resource base, there were discoveries during the 1930s of vast reserves in Texas, which led to a period of overproduction of oil and gas and concomitant declines in prices, which led to demand to prorationing under the Texas Railroad Commission. Beginning in the 1970s and through much of the 1990s,",
      " energy tax policy shifted away from fossil fuel supply and moved toward energy conservation through both energy efficiency and the development of alternative and renewable fuels. However, rising and repeated spikes in petroleum prices that began around 2000 and were repeated over the next six years (combined with high and spiking natural gas prices, an electricity crisis, and blackouts) caused policymakers to focus on increasing energy production and supply of many diverse energy sources, including oil and gas. The tax incentives for the oil and gas industry in the EPACT05 originated in the106 th Congress's effort in 1999 to help the ailing domestic oil and gas producing industry, particularly small producers,",
      " deal with depressed oil prices. This situation fostered proposals for economic relief through the tax code, particularly for small independent drillers and producers. Proposals focused mainly on production tax credits for marginal or stripper well oil, but they also included carry-back provisions for net operating losses, and other fossil fuel supply provisions. Subsequent comprehensive energy policy legislation, including H.R. 4 in the107 th Congress, proposed an expanded list of oil and gas tax incentives. The energy tax breaks in this bill (the Securing America's Future Energy Act of 2001, as approved by the House on August 1, 2001) were larger in terms of tax revenue loss than any other comprehensive energy policy legislation proposed during this period.",
      " They also were larger than those proposed in EPACT05: $33.5 billion of energy tax cuts, compared with the $14.5 billion loss eventually enacted under P.L. 109-58. Interest in incentives and subsidies was boosted by the belief that much of the crisis was caused by insufficient domestic production capacity and supply. All the early bills appeared to be weighted more toward stimulating the supply of conventional fuels, including capital investment incentives to stimulate production and transportation of oil and gas. These proposals were further repackaged and expanded into the first broadly based energy bills and comprehensive energy policy legislation, such as H.R. 6 in the 109 th,",
      " that evolved further and ultimately became EPACT05. The House approved the conference report on July 28, 2005, and the Senate on July 29, 2005, clearing it for the President's signature on August 8 ( P.L. 109-58 ). The 2005 act became law at a time of very high prices for crude oil, petroleum products, and natural gas, and record oil and gas industry profits. This engendered the enmity of the general public and congressional proposals to (1) revoke the incentives enacted under the 2005 act; (2) repeal or pare back the historical,",
      " but extant, tax subsidies and other tax advantages; and (3) impose sizeable new taxes on the industry such as a windfall profit tax. Public and congressional outcry did lead to a paring back of one of the tax subsidies liberalized in the 2005 act: two-year amortization, rather than capitalization, of geological and geophysical (G&G) activity costs, including those associated with abandoned wells (dry holes). This exploration subsidy was the largest upstream tax subsidy (as opposed to a \"downstream\" or a refinery subsidy), in terms of federal revenue loss, enacted under the 2005 act, although it was and still is a relatively small tax subsidy.",
      " The Tax Increase Prevention and Reconciliation Act ( P.L. 109-222 ), signed into law in May 2006, reduced the value of the subsidy by raising the amortization period for major integrated oil companies from two years to five years, still faster than the capitalization treatment before the 2005 act, but slower than the treatment under that act. Independent (nonintegrated) oil companies may continue to amortize all G&G costs over two years. This relatively minor cutback has not muted the calls for rolling back oil and gas tax subsidies, as petroleum prices (and industry profits) remain somewhat high, particularly those of the biggest oil and gas companies.",
      " On September 1, 2006, the House Democratic leadership reportedly sent a letter to the House Speaker proposing a rollback of all of the 2005 energy act tax subsidies. On October 25, 2006, then-House Democratic Leader Nancy Pelosi, urged the Congress to repeal those tax breaks. Many bills were introduced in the 109 th Congress to pare back or repeal the oil and gas industry tax subsidies and other loopholes. Many of the bills focused on the oil and gas exploration and development (E&D) subsidy\u2014expensing of intangible drilling costs (IDCs). This subsidy, which has been in existence since the early days of the income tax,",
      " is available to integrated and independent oil and gas companies, both large and small alike. It is an exploration and development incentive, which allows the immediate tax write-off of what economically are capital costs, that is, the costs of creating a capital asset (the oil and gas well). On September 18, 2006, Senators Wyden and Bennett introduced a bill ( S. 3908 ) to give consumers a discount on the purchase of more fuel efficient vehicles that would have been paid for by reducing the IDCs deduction for major integrated oil companies. Comprehensive energy legislation ( S. 2829 ) unveiled by Senate Democrats on May 17,",
      " 2006, would have not only eliminated expensing of IDCs, but would have also reduced several other tax benefits (or loopholes) to the oil and gas industry (such the foreign tax credits). The latter are not subsidies (or tax expenditures) in the strict sense of special tax measures unavailable generally, but as discussed below, some consider these unnecessary tax benefits nonetheless. H.R. 5234 focused on repealing three of the seven fossil fuel tax provisions in the 2005 act: temporary expensing of equipment costs for crude oil refining, the small refiner exception to percentage depletion, and the amortization of geological and geophysical (G&",
      "G) costs. H.R. 5218 would have denied oil and gas companies the new domestic manufacturing deduction under IRC \u00a7 199. There is speculation that in the 110 th Congress, the Democratic leadership in both the House and Senate will begin to examine these breaks more closely, particularly because many of their legislative priorities (such as cutting back the increasingly heavy burden of the alternative minimum tax) will have to be paid for. Oil and Gas Tax Provisions in EPACT05 and their Revenue Effects EPACT05 included a plethora of spending, tax, and deregulatory incentives to stimulate the production of conventional and unconventional oil and natural gas, such as gas from Alaska,",
      " deep water oil and gas in the outer continental shelf, and oil from marginal wells or private and federal lands. These incentives include tax breaks, royalty relief, streamlined permitting procedures, and other measures. The tax incentives include approximately $14.5 billion over 11 years of incentives to both stimulate domestic production and distribution of fossil fuels and reduce the demand for these fuels through energy efficiency and production of alternative and renewable fuels. Title XIII, subtitle B, of EPACT05 includes the tax incentives for fossil fuel supply\u2014for production, transportation, and distribution\u2014of oil and gas, as well as capital incentives for expanded refinery capacity. The subtitle does not include coal supply incentives,",
      " which are subsumed in the electricity infrastructure subtitle. Although many of the oil and gas tax incentives in EPACT05 are production tax credits and other such \"upstream\" production incentives, some are capital incentives for natural gas infrastructure (accelerated depreciation of natural gas pipelines). In total, the tax incentives alone are worth about $2.6 billion over 11 years to the industry (an average of about $250 million a year in tax breaks). Subtitle B, thus, applies specifically to the oil and gas industry, including the refinery industry, for increased supply incentives. Tax incentives are provided\u2014again mostly by liberalization of existing tax code provisions.",
      " The incentives are both production incentives (i.e., tax benefits are based on quantities of oil and gas) and capital incentives (i.e., tax benefits are based on magnitude of capital investment, such as pipelines). Both unconventional and conventional oil and gas supply are targeted for tax cuts. Amortization of Geological and Geophysical Expenditures Firms engaged in the exploration and development (E&D) of oil and gas incur a variety of costs prior to actual extraction. The tax treatment of these \"upstream\" E&D costs differs depending on the specific type of activity and depending on whether they are incurred by an integrated or nonintegrated (i.e., independent)",
      " producer. An independent producer is defined by Internal Revenue Code (IRC) \u00a7 613A(d), as described below. E&D costs may be generally categorized as four types. First, there are the geological and geophysical costs (G&G). These are exploratory costs (such as for seismic surveys) associated with determining the precise location and potential size of a mineral deposit. A second type of cost is the mineral acquisition or lease rights expenses\u2014the costs of buying or leasing the land under which deposits are thought to exist\u2014such as lease bonuses. If a property is considered prospective for containing economically recoverable deposits of oil or gas, the firm drills exploratory (and,",
      " if successful, subsequently development) wells to ascertain the magnitude of the deposits. These activities have associated various types of drilling costs. Tangible drilling costs, the third type of E&D costs, are amounts paid for tangible drilling and nondrilling equipment such as drilling rigs, casings, valves, pipelines, and other tangible machinery and equipment that have a salvage value. Finally, there are intangible drilling costs, or IDCs as they are frequently called. IDCs are amounts paid by the lease operator for fuel, labor, repairs to drilling equipment, materials, hauling, and supplies. They are expenditures incident to and necessary for the drilling of wells and preparing a site for production of oil and gas.",
      " For example, roads may have to be constructed to move in derricks and other types of drilling equipment; often a camp may have to be built with residences to house employees. The power for the equipment and the water supplies are also IDCs. IDCs also may include the cost to operators of any exploratory drilling or development work done by contractors under any form of contract, including a turnkey contract. In general, as noted above, prior to EPACT05, all four types of costs\u2014G&G costs, mineral rights, tangible equipment, and intangible drilling costs\u2014associated with a dry hole were expensable (i.e., deductible in the year in which the well was determined to be dry). Under the 2005 act,",
      " both integrated and independent producers were required to amortize the G&G component of the dry hole costs over two years. This reduced the incentive for G&Gs associated with a dry hole but increased the incentive for G&Gs associated with most successful wells. This provision became effective for G&G amounts paid or incurred in taxable years beginning after the date of enactment. Two-year amortization of G&G costs is still allowed for independent producers, but as a result of a provision in the Tax Increase Prevention and Reconciliation Act ( P.L. 109-222, enacted in May 2006), integrated producers must now amortize such costs over five years.",
      " Amortization means that the costs are deducted evenly\u2014the same absolute dollars are taken as deductions every year over a specified period of time, in this case two or five years. It is also called straight-line depreciation. Determination of Independent Producer Status for Purposes of the Oil Depletion Deduction Firms that extract oil, gas, or other minerals are permitted a deduction to recover their capital investment in a mineral reserve, which depreciates due to physical and economic depletion or exhaustion as the mineral is recovered (IRC \u00a7 611). Depletion, like depreciation, is a form of capital recovery: an asset, the mineral reserve itself, is being expended to produce income.",
      " Under the income tax, such a loss in value or cost is deductible. There are two methods of calculating this deduction: cost depletion and percentage depletion. Cost depletion allows for the recovery of the actual capital investment\u2014the costs of discovering, purchasing, and developing a mineral reserve. Each year, and over the period during which the reserve produces income, the taxpayer deducts a portion of the adjusted basis (original capital investment less previous deductions) equal to the fraction of the estimated remaining recoverable reserves that have been extracted and sold. Under this method, the total deductions cannot exceed the original capital investment. Under percentage depletion, the deduction for recovery of capital investment is a fixed percentage as set by law of the \"gross income\"",
      " (i.e., revenue) from the sale of the mineral. Under this method, total deductions typically exceed, despite the limitations, the capital invested to acquire and develop the reserve. IRC \u00a7 613 states that mineral producers must claim the higher of cost or percentage depletion. The percentage depletion rate for oil and gas is 15% and is limited to average daily production of 1,000 barrels of oil, or its equivalent in gas. For producers of both oil and gas, the limit applies on a combined basis. For example, an oil-producing company with 2006 oil production of 100,000 barrels and natural gas production of 1.",
      "2 billion cubic feet (the statutory equivalent of 200,000 barrels of oil) has average daily production of 821.92 barrels (300,000 \u00f7 365 days). Percentage depletion is not available to integrated major oil companies; it is available only for independent producers and royalty owners. Beginning in 1990, the percentage depletion rate was raised on production from marginal wells\u2014oil from stripper wells (those producing no more than 15 barrels per day, on average) and heavy oil. This rate starts at 15% and increases by one percentage point for each whole $1 that the reference price of oil for the previous calendar year is less than $20 per barrel (subject to a maximum rate of 25%). This higher rate is also limited to independent producers and royalty owners,",
      " and for up to 1,000 barrels, determined as before on a combined basis (including non-marginal production). Small independents operate nearly 400,000 small stripper wells in about 28 states, about 78% of the nearly 510,000 producing wells in the United States. Output from stripper wells represented about 16% of total domestic production (about 850,000 barrels per day) in the United States in 2004. The percentage depletion deduction is limited to 65% of the taxable income from all properties for each producer. A second limitation, the 100% net-income limitation, which applied to each individual property rather than to all the properties,",
      " was retroactively suspended for oil and gas production from marginal wells by the Working Families Tax Relief Act of 2004 ( P.L. 108-311 ) through December 31, 2005. The 100% net-income limitation also had been suspended from 1998 to 2003. The difference between percentage depletion and cost depletion is considered a subsidy. It was once a tax preference item for purposes of the alternative minimum tax, but this was repealed by the Energy Policy Act of 1992 ( P.L. 102-486 ). The percentage depletion allowance is available for other types of fuel minerals, at rates ranging from 10%",
      " (coal, lignite) to 22% (uranium), and for mined hard rock minerals. The rate for regulated natural gas and gas sold under a fixed contract is 22%; the rate for geo-pressurized methane gas is 10%. Oil shale and geothermal deposits qualify for a 15% allowance. The net-income limitation to percentage depletion for coal and other fuels is 50%, compared with 100% for oil and gas. Under code section 291, percentage depletion on coal mined by corporations is reduced by 20% of the excess of percentage over cost depletion. For purposes of percentage depletion, before EPACT05,",
      " an independent oil producer was one that, on any given day, (1) did not refine more than 50,000 barrels of oil and (2) did not have a retail operation grossing more than $5 million a year (IRC \u00a7 613A[d]). EPACT05 raised the 50,000 barrel daily limit to 75,000. In addition, the act changed the refinery limitation from actual daily production to average daily production for the taxable year. Accordingly, the average daily refinery runs for the taxable year may not exceed 75,000 barrels. For this purpose, the taxpayer would calculate average daily refinery runs by dividing total refinery runs for the taxable year by the total number of days in the taxable year.",
      " This is effective for taxable years ending after the date of enactment. Natural Gas Distribution Lines Treated as 15-Year Property For purposes of determining the depreciation deduction, EPACT05 established a 15-year recovery period for natural gas distribution lines. Prior to this amendment, natural gas distribution lines were assigned a 20-year recovery period. This provisions is effective for property, the original use of which begins with the taxpayer after April 11, 2005, which is placed in service after April 11, 2005, and before January 1, 2011, and does not apply to property subject to a binding contract on or before April 11,",
      " 2005. Temporary Expensing for Equipment Used in Oil Refining Before the enactment of EPACT05, depreciation rules (the Modified Accelerated Cost Recovery System, MACRS) required oil refinery assets to be depreciated over 10 years using the double declining balance method. Under the 2005 act, refineries are allowed to irrevocably elect to expense 50% of the cost of qualified refinery property, with no limitation on the amount of the deduction. This provision was enacted to increase investments in existing refineries so as to increase petroleum product output and reduce prices. The expensing deduction is allowed in the taxable year in which the refinery is placed in service.",
      " The remaining 50% of the cost remains eligible for regular cost recovery provisions. To qualify for the deduction (1) original use of the property must commence with the taxpayer; (2)(a) construction must be pursuant to a binding construction contract entered into after June 14, 2005, and before January 1, 2008, (b) in the case of self-constructed property, construction began after June 14, 2005, and before January 1, 2008, or (c) the refinery is placed in service before January 1, 2008; (3) the property must be placed in service before January 1,",
      " 2012; (4) the property must meet certain production capacity requirements if it is an addition to an existing refinery; and (5) the property must meet all applicable environmental laws when placed in service. Certain types of refineries, including asphalt plants, are not eligible for the deduction, and there is a special rule for sale-leasebacks of qualifying refineries. If the owner of the refinery is a cooperative, it may elect to allocate all or a part of the deduction to the cooperative owners, allocated on the basis of ownership interests. This provision is effective for qualifying refineries placed in service after date of enactment (i.e., it became effective on August 9,",
      " 2005). Arbitrage Rules Not To Apply to Prepayments for Natural Gas EPACT05 creates a safe harbor exception to the general rule that tax-exempt, bond-financed prepayments violate the tax code's arbitrage restrictions. The term investment-type property does not include a prepayment under a qualified natural gas supply contract. The act also provides that such prepayments are not treated as private loans for purposes of the private business tests. Thus, a prepayment financed with tax-exempt bond proceeds for the purpose of obtaining a supply of natural gas for service area customers of a governmental utility would not be treated as the acquisition of investment-type property.",
      " The safe harbor provisions do not apply if the utility engages in intentional acts to render (1) the volume of natural gas covered by the prepayment to be in excess of that needed for retail natural gas consumption and (2) the amount of natural gas that is needed to fuel transportation of the natural gas to the governmental utility. This provision is effective for obligations issued after date of enactment. Natural Gas Gathering Lines Treated as Seven-Year Property Under tax law prior to the enactment of EPACT05, the recovery period for natural gas gathering lines could be either 7 or 15 years, depending on whether they were classified as production or transportation equipment.",
      " Several court cases reflected the ambiguous tax treatment. Natural gas pipelines had a recovery period of 15 years, whereas natural gas distribution lines had a recovery period of 20 years (which, as noted above, was reduced to 15 years). EPACT05 assigned natural gas gathering lines a seven-year recovery period for MACRS depreciation deductions. EPACT05 defined a natural gas gathering line as the pipe, equipment, and appurtenances determined to be a gathering line by the Federal Energy Regulatory Commission (FERC) or used to deliver natural gas from the well-head or common point to the point at which the gas first reaches (1) a gas processing plant,",
      " (2) an interconnection with an interstate transmission line, (3) an interconnection with an intrastate transmission pipeline, or (4) a direct connection with a local distribution company, a gas storage facility, or an industrial consumer. Also, the act requires that the original use of the property begin with the taxpayer. This provision became effective for property placed in service after April 11, 2005, excluding property with respect to which the taxpayer or related party had a binding acquisition contract on or before April 11, 2005. Pass Through to Owners of Deduction for Capital Costs Incurred by Small Refiner Cooperatives in Complying with EPA Sulfur Regulations IRC \u00a7 45H allows a small refiner to claim a tax credit for the production of low-sulfur diesel fuel that is in compliance with Environmental Protection Agency (EPA)",
      " sulfur regulations (the Highway Diesel Fuel Sulfur Control Requirements). The credit is $2.10 per barrel of low-sulfur diesel fuel produced; it is limited to 25% of the capital costs incurred by the refiner to produce the low-sulfur diesel fuel. The 25% limit is phased out proportionately as a refiner's capacity increases from 155,000 to 205,000 barrels per day. Section 179B allows a small refiner to also claim a current year tax deduction (i.e., expensing), in lieu of depreciation, for up to 75% of the capital costs incurred in producing low-sulfur diesel fuel that is in compliance with EPA sulfur regulations.",
      " This incentive is also prorated for refining capacity between 155,000 and 205,000 barrels per day. The taxpayer's basis in the property that receives the exemption is reduced by the amount of the production tax credit. In the case of a refinery organized as a cooperative, both the credit and the expensing deduction may be passed through to patrons. For both incentives, a small business refiner is a taxpayer who (1) is in the business of refining petroleum products, (2) employs not more than 1,500 employees directly in refining, and (3) has less than 205,000 barrels per day (averaged over the year)",
      " of total refining capacity. The incentives took effect retroactively beginning on January 1, 2003. EPACT05 provided that cooperative refineries that qualify for \u00a7 179B expensing of capital costs incurred in complying with EPA sulfur regulations could elect to allocate all or part of the deduction to their owners, determined on the basis of their ownership interests. The election is made on an annual basis and is irrevocable once made. The provision became effective as if included in \u00a7 338(a) of the American Jobs Creation Act of 2004, which introduced the tax credit. Modification and Extension of Credit for Producing Fuel from a Nonconventional Source for Facilities Producing Coke or Coke Gas19 Section 45K of the Internal Revenue Code (IRC)",
      " provides for a production tax credit of $3 per barrel of oil-equivalent (in 1979 dollars) for certain types of liquid, gaseous, and solid fuels produced from selected types of alternative energy sources (so-called \"non-conventional fuels\") and sold to unrelated parties. The full credit is available if oil prices fall below $23.50 per barrel (in 1979 dollars); the credit is phased out as oil prices rise above $23.50 (in 1979 dollars) over a $6 range (i.e., the inflation-adjusted $23.50 plus $6). Both the credit and the phase-out ranges are adjusted for inflation (multiplied by an inflation adjustment factor)",
      " since 1979. With an inflation adjustment factor of 2.264 (meaning that prices, as measured by the Gross Domestic Product deflator, have more than doubled since 1979), the credit for 2005 production was $6.79 per barrel of oil equivalent, which is the amount of the qualifying fuel that has a British Thermal Unit (Btu) content of 5.8 million. The credit for gaseous fuels was $1.23 per thousand cubic feet (mcf). The credit for tight sands gas is not indexed to inflation; it is fixed at the 1979 level of $3 per barrel of oil equivalent (about $0.",
      "50 per mcf). In 2005, the reference price of oil, which was $50.76 per barrel, still below the inflation adjustment phase-out threshold oil price of $53.20 for 2005 ($23.50 multiplied by 2.264), the full credit of $6.56 per barrel of equivalent was available for qualifying fuels. Qualifying fuels include synthetic fuels (liquid, gaseous, and solid) produced from coal, and gas produced from either geopressurized brine, Devonian shale, tight formations, or biomass. To qualify for the credit, synthetic fuels from coal must undergo a significant chemical transformation,",
      " defined as a measurable and reproducible change in the chemical bonding of the initial components. In most cases, producers apply a liquid bonding agent to the coal or coal waste (coal fines), such as diesel fuel emulsions, pine tar, or latex, to produce a solid synthetic fuel. The coke made from coal and used as a feedstock, or raw material, in steel-making operations also qualifies as a synthetic fuel, as does the breeze (small pieces of coke) and the coke gas (produced during the coking process). Depending on the precise Btu content of these synfuels, the \u00a7 45K tax credit could be as high as $26 per ton or more,",
      " which is a significant fraction of the market price of coal. Qualifying fuels must be produced within the United States. The credit for coke and coke gas is also $3 per barrel of oil equivalent and is also adjusted for inflation, but the credit is set to a base year of 2004, making the nominal unadjusted tax credit less than for other fuels. The section 45K credit for gas produced from biomass, and synthetic fuels produced from coal or lignite, is available through December 31, 2007, provided that the production facility was placed in service before July 1, 1998, pursuant to a binding contract entered into before January 1,",
      " 1997. The credit for coke and coke gas is available through December 31, 2009, for plants placed in service before January 1, 1992, and after June 30, 1998. The section 45K credit used to apply to oil produced from shale or tar sands, and coalbed methane (a colorless and odorless natural gas that permeates coal seams and that is virtually identical to conventional natural gas). However, the credit for these fuels terminated on December 31, 2002 (and the facilities had to have been placed in service, or wells drilled, by December 31,",
      " 1992). The section 45K credit is part of the general business credit. It is not claimed separately; it is added together with several other business credits and is also subject to the limitations of that credit. The section 45K credit is offset (or reduced) by certain other types of government subsidies that a taxpayer may benefit from: government grants, subsidized or tax-exempt financing, energy investment credits, and the enhanced oil recovery tax credit that may be claimed with respect to such projects. Finally, the credit is nonrefundable and cannot be used to offset a taxpayer's alternative minimum tax liability. Any unused section 45K credits generally may not be carried forward or back to another taxable year.",
      " (However, under the minimum tax section 53, a taxpayer receives a credit for prior-year minimum tax liability to the extent that a section 45K credit is disallowed as a result of the operation of the alternative minimum tax.) The Energy Policy Act of 2005 made several amendments to the section 45K tax credit. First, the credit's provisions were moved from \u00a7 29 of the tax code to new \u00a7 45K. Before this, this credit was commonly known as the \"section 29 credit.\" Second, the credit was made available for qualified facilities that produce coke or coke gas that were placed in service before January 1,",
      " 1993, or after June 30, 1998, and before January 1, 2010. Coke and coke gas produced and sold during the period beginning on the later of January 1, 2006, or the date the facility is placed in service, and ending on the date which is four years after such period begins, are eligible for the production credit, but at a reduced rate and only for a limited quantity of fuel. The tax credit for coke and coke gas is $3.00 per barrel of oil equivalent, but the credit is indexed for inflation starting with a 2004 base year, compared with a 1979 base year for other fuels.",
      " A facility producing coke or coke gas and receiving a tax credit under the previous \u00a7 29 rules is not eligible to claim the credit under the new section 45K. The new provision also requires that the amount of credit-eligible coke produced not exceed an average barrel-of-oil equivalent of 4,000 barrels per day. Third, the 2005 act provided that with respect to the IRS moratorium on taxpayer-specific guidance concerning the credit, the IRS should consider issuing rulings and guidance on an expedited basis to those taxpayers who had pending ruling requests at the time that the IRS implemented the moratorium. Finally, the 2005 legislation made the general business limitations applicable to the tax credit.",
      " Any unused credits can be carried back one year and forward 20 years, except that the credit cannot be carried back to a taxable year ending before January 1, 2006. These new rules were made effective for fuel produced and sold after December 31, 2005, in taxable years ending after that date. Revenue Effects  Table 1 shows the revenue effects of the tax provisions in EPACT05, organized by type of incentive. These are the original revenue effects estimated for EPACT05, signed into law on August 8, 2005, by the Joint Committee on Taxation (JCT). Because of changes to energy prices,",
      " energy markets, and general economic conditions, revenue loss estimates of the same provisions calculated today would most likely differ from those original estimates. JCT's estimated revenue losses were projected over an 11-year time frame, from FY2005 to FY2015. The total revenue losses are reported in two ways: the absolute dollar value of tax cuts over 11 years, and the percentage distribution of total revenue losses by type of incentive. Each of the seven tax subsidies for the oil and gas industry are shown separately, as well as the aggregate for upstream (exploration, development, and production) operations and downstream operations (refining and transportation/distribution). Also,",
      " for perspective, the oil and gas tax revenue losses are compared with those for other industries and with the tax subsidies for energy efficiency and alternative/renewable fuels. The JCT estimates that the 2005 act provides about $2.6 billion in tax cuts for the oil and gas industry as a whole over 11 years, comprising about $1.1 billion for upstream operations and $1.5 billion for downstream, or refining and distribution, operations. For energy conservation and efficiency, the 2005 act provides about $1.3 billion, including a deduction for energy-efficient commercial property, fuel cells, and micro-turbines.",
      " Renewables incentives include a two-year extension of the tax code \u00a7 45 credit, renewable energy bonds, and business credits for solar. The total renewable tax subsidies in EPACT05 were about $4.5 billion. Although the above oil and gas tax subsidies may not be justified based on economic theory, and considering the high oil and gas prices over much of the policy period, they are not large when measured relative to the industries' gross product, which measures in the hundreds of billions of dollars. Another misconception is that industry was the beneficiary of many and significant tax breaks before these provisions were enacted. The industry did benefit historically from significant tax subsidies;",
      " however, most of these had been either eliminated or pared back since the 1970s. Tax Increases Subtitle F of EPACT05 describes the four tax increases or revenue offsets. Two of the tax increases\u2014modification of the \u00a7 197 amortization, and an increase in the excise taxes on tires\u2014are negligible, raising taxes by just under an estimated $200 million over 11 years. However, the other two are sizeable tax increases for the oil and gas industry: reinstatement of the Oil Spill Liability Trust Fund and extension of the Leaking Underground Storage Tank (LUST) trust fund rate, which would be expanded to all fuels.",
      " The total oil and gas industry tax increases are roughly $2.8 billion over 11 years, for a net increase in taxes on the industry of about $200 million, according to the JCT estimates. However, because the oil spill liability tax and the Leaking Underground Storage Tank financing taxes are excise taxes on oil and petroleum products, and are imposed on oil refineries, the net effect of the 2005 act on the oil and gas refinery sector was a tax increase of about $1.3 billion over 11 years. Other Oil and Gas Tax Subsidies The Energy Policy Act of 2005 expanded some (but not all)",
      " of the preexisting tax subsidies for oil and gas and introduced several new ones. Thus, some of the recent proposals to roll back tax subsidies to oil and gas focus on the subsidies that were in effect before the 2005 act, and which continue be in effect. Other Oil and Gas Tax Subsidies A list of the preexisting federal tax subsidies (incentives) available for the U.S. oil and gas industry\u2014those in effect before EPACT05 and still in effect today\u2014(and their corresponding revenue loss estimates) appears in Table 2. The corresponding revenue losses, as estimated by the JCT in its latest tax expenditures compendium,",
      " appear in the last column. Note that the table defines tax subsidies or incentives targeted for the oil and gas industry as those that are due to provisions in the tax law that apply only to this industry and not to others. General Tax Provisions that May Benefit the Oil and Gas Industry This discussion has so far excluded current-law tax provisions and incentives that may apply to non-oil and gas businesses but that may also confer tax benefits to the oil and gas industry. There are numerous such provisions in the tax code, which some have called loopholes\u2014they are not strictly considered to be tax expenditures. A complete listing of them is beyond the scope of this report;",
      " however, four examples, which have been under discussion as possible revenue raisers, follow to illustrate the point. For example, the current system of depreciation generally allows the writeoff of equipment and structures somewhat faster than would be the case under both general accounting principles and economic theory; the JCT treats the excess of depreciation deductions over the alternative depreciation system as a tax subsidy (or tax expenditure). In FY2006, the JCT estimates that the aggregate economy-wide revenue loss from this accelerated depreciation deduction (including the expensing under IRC \u00a7 179) is $6.7 billion. A certain, but unknown, fraction of this revenue loss or tax benefit accrues to the domestic oil and gas industry,",
      " but separate estimates are unavailable. A second example is the deduction for domestic production (or manufacturing) activities under IRC \u00a7 199, which, as noted above is the target of H.R. 5218 (109 th Congress). Enacted under the American Jobs Creation Act of 2004 ( P.L. 108-357, also known as the JOBS bill), the domestic production deduction (IRC \u00a7 199) generally allows taxpayers to receive a deduction based on qualified production activities income resulting from domestic production. The deduction is 3% of income for 2006, rising to 6% between 2007 and 2009,",
      " and 9% thereafter; it is subject to a limit of 50% of the wages paid that are allocable to domestic production during the taxable year. The revenue impact of this provision is anticipated by the JCT to be a loss of $4.8 billion of federal revenue in FY2007, and $76 billion over the first 10 years of its life. A certain (as yet unknown) fraction of the tax benefits from the deduction will accrue to the domestic oil and gas industry. The deduction applies to oil and gas or any primary product thereof, provided that such product was \"manufactured, produced, or extracted in whole or in significant part in the United States.\" Recently,",
      " the JCT estimated the revenues that would be gained by repealing this deduction for the domestic oil and gas industry at about $0.2 billion in FY2007, and about $2 billion from FY2007-FY2012. A third example concerns the \"last-in/first-out\" (LIFO) system of inventory accounting under IRC \u00a7 472. This method values the goods sold as the most recent inventory purchase. During a period of rising prices, this method of inventory accounting increases production costs and reduces taxable income and tax liabilities. A provision in the Senate version of H.R. 4297 (109 th Congress) would have eliminated a portion of the tax benefits from LIFO inventory accounting for major integrated oil companies with gross receipts in excess of $1 billion.",
      " Under threat of presidential veto, this provision, which would have increased taxes on such companies by an estimated $3.5 billion in FY2006, was deleted from the final law, the Tax Increase Prevention and Reconciliation Act of 2006 ( P.L. 109-222 ). A fourth example is the foreign tax credit, which is a federal tax credit against U.S. tax liabilities for income taxes paid to foreign countries. This section of the tax code is intended to prevent the double taxation of foreign source income (income earned abroad by U.S. residents and corporations). However, many countries in which domestic U.S. oil companies conduct business (either through branches or foreign subsidiaries)",
      " impose levies that are not strictly considered to be creditable income taxes, which may have the effect of going beyond prevention of double taxation of foreign source income\u2014it may actually lead to a reduction of taxes on domestic source income. A provision in the Senate version of H.R. 4297 (109 th Congress) would have denied the foreign tax credit, under certain conditions, for major integrated oil companies with gross receipts in excess of $1 billion. The foreign tax credit would have been denied in the event that the foreign levy was assessed in exchange for an economic benefit provided by the foreign jurisdiction to the domestic oil company and if the foreign jurisdiction did not generally impose an income tax.",
      " This provision, which would have increased taxes on such companies by an estimated $0.8 billion over the 10-year period from FY2006 to FY2015, was deleted from the final law, the Tax Increase Prevention and Reconciliation Act of 2006 ( P.L. 109-222 ). Finally, Table 2 excludes targeted taxes that impose special tax liabilities on the domestic oil and gas industry\u2014taxes that are not imposed on other industries. These would include taxes such as the motor fuels excise taxes (e.g., the 18.4\u00a2 per gallon tax on gasoline, the 24.4\u00a2 per gallon tax on diesel)",
      " and the oil spill liability trust fund excise tax, which imposes a $0.05 per barrel tax on every barrel of crude oil refined domestically. These taxes are imposed on refiners, although under normal (and stable) market conditions they are shifted forward (or passed through the distribution and retailing chain) and largely paid by consumers. The motor fuels excise taxes (including the Leaking Underground Storage Tank Trust Fund Tax) represent a tax liability\u2014the amount of revenues collected by the federal government\u2014of about $36 billion in FY2006; revenues collected from the oil spill liability excise tax are estimated by the JCT at $0.",
      "150 billion.\n"
    ],
    "length": 9423,
    "hardness": null,
    "role": null
  },
  {
    "id": 64,
    "question": null,
    "answer": "GAO has identified the Department of Defense's (DOD) management of its inventory as a high-risk area since 1990 due to ineffective and inefficient inventory systems and practices. Management of inventory acquisition lead times is important in maintaining cost-effective inventories, budgeting, and having material available when needed, as lead times are DOD's best estimate of when an item will be received. Under the Comptroller General's authority to conduct evaluations on his own initiative, GAO analyzed the extent to which (1) DOD's estimated lead times varied from actual lead times, and (2) current management actions and initiatives have reduced lead times as compared to past years. To address these objectives, GAO computed the difference between the components' actual and estimated lead times, and compared component initiatives to reduce lead times for 1994-2002 to 2002-2005. The military components' estimated lead times to acquire spare parts varied considerably from the actual lead times experienced. The effect of the lead time underestimates was almost $12 billion in spare parts arriving more than 90 days later than anticipated, which could negatively affect readiness rates because units may not have needed inventory. If orders had been placed earlier, readiness rates could potentially have been improved. While having spare parts arrive earlier than estimated could potentially improve readiness, the effect of lead time overestimates resulted in obligating almost $2 billion more than 90 days earlier than necessary. The Army underestimated lead times, the Defense Logistics Agency (DLA) overestimated lead times, and the Air Force and Navy both overestimated and underestimated lead times. The variances were due to problems such as miscoding late deliveries as not representative of future delivery times, lack of recorded lead time data, data input errors, estimates that did not reflect improvements made in actual lead times, and the use of standard default data instead of other data that may have been obtainable. Absent actions to address these problems, lead time estimates will continue to vary from actual lead times and will contribute to inefficient use of funds and potential shortages or excesses. The Under Secretary of Defense for Acquisition, Technology, and Logistics (USD (AT&L)) and the components' actions and initiatives to reduce lead times from 2002 to 2005 were less effective overall than previous efforts from 1994 to 2002. From 2002 to 2005, DOD-wide lead times were reduced by an average of 0.9 percent annually as compared to an average reduction of 5.6 percent annually from 1994 to 2002, potentially leading to an additional $2.7 billion in lead time requirements, tying up money that could have been obligated for other needs. The higher rate of reduction from 1994 to 2002 can be attributed to three areas of focus: streamlining internal administrative processes, oversight from USD (AT&L), and developing strategic relationships with suppliers. However, from 2002 to 2005, USD (AT&L) no longer provided active oversight such as establishing lead time reduction goals, reporting metrics, reporting the impact of specific initiatives, or estimating the financial impact of reduced lead times, as had been done previously. Until steps are taken to renew management focus on reducing lead times, the components may continue to experience spare parts shortages and increased inventory levels to cover lead times.\n",
    "docs": [
      "Background The basic challenge of inventory management is having the proper amount  of items on hand when required\u2014neither too much nor too little. If  inventory levels are too low, DOD and its components may experience  supply shortages and be unable to satisfy customer demands. This could  result in DOD undertaking costly and often wasteful efforts to recover  from being out of stock. If inventory levels are too high, money is invested  on items that may never be used. Additionally, a series of unnecessary  expenditures is incurred for more warehouses, transportation, and  personnel; storage and distribution facilities become more crowded;  maintenance workloads may increase;",
      " and inventory excesses are  generated which eventually may have to be disposed of, perhaps at a  severe financial loss. Inventory levels are influenced by the amount of time between the  initiation of a procurement action and the receipt of the item into the  supply system. This time frame is known as acquisition lead time, and it  consists of two parts: administrative and production lead times.  Administrative lead time is the time interval from the initiation of a  procurement action to the contract award, while the production lead time  is the interval from the contract award to delivery of the items. Since  acquisition lead times are the components\u2019 estimates as to when an item  will arrive,",
      " varying from that expectation results in consequences when  items arrive too early or too late. To promote accuracy and completeness in the management of acquisition  lead times, having appropriate policies, procedures, and instructions is an  important component of an agency\u2019s internal control framework. As  discussed in GAO\u2019s Internal Control Standards guidance, we identified that  other important activities related to information processing systems,  performance measures and indicators, and the recording and classification  of transactions and events are also necessary. Inventory management and  oversight is the shared responsibility between the USD (AT&L) and the  military components. USD (AT&L) has overall responsibility for the  development of acquisition policies for monitoring the overall  effectiveness and efficiency of the DOD acquisition system.",
      " The  components are responsible for implementing the materiel management  policies and activities. The DOD Supply Chain Materiel Management  Regulation states that the military components should aggressively pursue  the lowest possible acquisition lead times, and in coming up with lead time  estimates, they may use contractor information, historical information  from representative procurements, technical documentation, or the best  judgment of acquisition personnel. It also establishes for the military  components overarching guiding principles, assigns responsibility, defines,  and provides guidelines for developing acquisition lead time, and states  that they should identify and track deviations from normal historical or  projected patterns in such areas as demand, stock levels,",
      " and lead times. The military components have an inventory management agency that  purchases and delivers items and services to the warfighter. The primary  inventory agencies that provide this support to the warfighter are (1) the  U.S. Air Force Materiel Command, (2) the U.S. Army Materiel Command,  (3) the Defense Logistics Agency, and (4) the Naval Inventory Control  Point. Table 1 shows the primary logistics agencies and their inventory  management centers. To implement DOD\u2019s acquisition lead time policy, each of the military  components developed their own procedures for managing acquisition  lead times, and as such,",
      " each used slightly different methodologies to  calculate their estimated administrative lead time and production lead  time values. Actual Lead Times  Varied Considerably  from Estimated Lead  Times for All  Components The military components\u2019 acquisition lead time estimates to acquire spare  and repair parts varied considerably from the actual lead times  experienced. More specifically, estimated lead times for all of the  components rarely approximated actual lead times, with only 5 percent of  the deliveries we reviewed having actual acquisition lead times that were  within 1 week of the estimated lead time. While each of the military  components had instances of both underestimated and overestimated lead  times,",
      " the Army\u2019s acquisition lead time estimates were generally  understated, while DLA\u2019s estimates were generally overstated. The Air  Force\u2019s and the Navy\u2019s estimates were both overstated and understated. Acquisition Lead Time  Estimates for All  Components Rarely  Approximated Actual Lead  Times For the more than one million spare part deliveries we reviewed, the  military components\u2019 estimated acquisition lead times rarely approximated  the actual lead times and were generally either understated or overstated.  DOD\u2019s Supply Chain Materiel Management Regulation provides guidance  for developing materiel requirements based on customer expectations  while minimizing the investment in inventories.",
      " In addition, accurate lead  time estimates are critically important in enabling the military components  to have the proper amount of inventory on hand. However, as table 2  shows, 5 percent of the deliveries, totaling about $700 million, had actual  acquisition lead times that were within a week of the estimate. The  combined value of the lead time underestimates for all the components  resulted in slightly over $12 billion in spare and repair parts arriving more  than 90 days later than expected, which may have negatively affected  equipment readiness and overall rates because units may not have had the  necessary inventory to support and sustain ongoing military operations.",
      " If  lead time estimates had been more accurate, orders could have been  placed and funds obligated earlier, and in some instances readiness rates  could potentially have been improved. Further, the combined value of the  lead time overestimates resulted in the military components obligating  almost $2 billion more than 90 days earlier than necessary, which could  add to excess on-hand inventories, although spare parts that come in early  could potentially improve readiness. We reviewed the two parts of acquisition lead time, administrative lead  time and production lead time, and found that each of the military  components more accurately estimated the administrative portion than the  production portion.",
      " However, for administrative lead time, the military  components\u2019 estimates fell within the 1-week range only about 20 percent  of the time while production lead time estimates matched the actual  production lead times within the 1-week range just over 10 percent of the  time. Officials explained that the accuracy of their administrative lead time  estimates was better than their production lead time estimates because  they have more management control over their internal processes than  over external contractor practices. Officials stated that variability always  exists when generating lead time estimates, but they agreed that improved  and more reliable lead time estimates can contribute to lower levels of  inventory.",
      " They also stated that understated lead time estimates can result  in backorders or part shortages which may impact a unit\u2019s readiness if the  needed spare parts are not available when expected, and overstated  estimates result in prematurely obligating funds that could have been used  for other military needs and can unnecessarily increase inventory levels  and associated costs. Army Tended to  Underestimate Lead Time  Estimates The Army tended to underestimate their acquisition lead times and receive  items later than expected. Of the 9,380 Army deliveries we reviewed, more  than 58 percent of their actual acquisition lead times were more than 90  days longer than their estimated lead times.",
      " This represented about $10.6  billion worth of inventory arriving later than expected. Additionally,  almost 12 percent had actual acquisition lead times that were more than 90  days shorter than their estimated lead times and that resulted in about  $900 million of premature obligations, as shown in table 3. The variances between the Army\u2019s actual and estimated lead times  occurred, in part, because of miscoding of late deliveries as not  representative of future delivery times, lack of accurate lead time data in  one of its computer systems, and data input errors. Of the data we  examined, most of the underestimates occurred within the Army Aviation  and Missile Life Cycle Management Command within the Army Materiel  Command.",
      " This command develops, acquires, fields, and sustains aviation,  missile, and unmanned vehicle systems. When this command cannot  obtain items, such as landing gear, helicopter blades, and aircraft access  doors in accordance with expectations, it can have immediate and serious  ramifications on the operational readiness of many units. We found  production lead times in 3,863 orders, for items valued at $10.3 billion of  the $10.6 billion we analyzed, where the actual lead times were more than  90 days later than the estimated lead times. According to our analyses of  the command\u2019s deliveries received in fiscal year 2005,",
      " nearly 63 percent  arrived more than 90 days later than expected. Army officials stated that  some of the variances between actual and estimated lead times occurred  because some actual lead times were miscoded as nonrepresentative by  the command\u2019s acquisition personnel, who initially believed that certain  delivery delays would be short-lived and were not representative of future  deliveries. Once Army officials realized the delays were not short-lived,  they said that item managers made some adjustments for particular  affected items. Army guidance states that lead times should be computed  using the most recent representative procurement. However, it does not  give clear guidance on when to decide if continuing late contractor  deliveries should be considered representative,",
      " and any adjustments made  to particular affected items would not prevent similar situations from  occurring in the future. As a result, actual lead times can be miscoded and  excluded from lead time updates, which makes subsequent estimates  inaccurate. Army officials acknowledged that this command has experienced a  problem in meeting supply demands for several years, especially after  Operation Iraqi Freedom began, because of the surge in demand for their  items. The high demand depleted much of the Army\u2019s on-hand supply of  inventory more quickly than anticipated and replacing the items was  difficult since many aviation-related items had long lead times for  replacement. At the same time,",
      " the Army was unable to order some items  as quickly as needed because it lacked sufficient available funds to  obligate and process orders. However, Army officials stated that many  manufacturers were operating at their highest capacity and placing orders  more quickly would not have resulted in the companies actually producing  the additional items any faster. Officials from the U.S. Army TACOM Life Cycle Management Command in  Warren, Michigan made similar statements to explain the lateness of some  of their deliveries. They agreed that they had experienced delays in getting  items from certain contractors due to the high level of demand. They also  acknowledged budgetary constraints during the years of our sample that  resulted in hiring freezes and other personnel challenges that added to  their workload and hindered their ability to process contracts and orders  and to periodically review,",
      " validate, and make corrections to any  inaccurately recorded lead time estimates. Army officials also attributed inaccuracies in lead times to input errors  that item managers were unable to detect and correct. At the Army\u2019s  Communications-Electronics Life Cycle Management Command, lead time  data are not automatically maintained or updated in the Logistics  Modernization Program, which was designed to improve Army  maintenance logistical and financial operations, and officials had to  manually input the data from the command\u2019s older computer system.  However, according to Army officials, the heavy workloads of item  managers have not allowed them to validate these data to detect and  correct any lead time data input errors.",
      " Absent actions by the Army, across each of its Life Cycle Management  Commands, to determine when deliveries are representative and should be  used to update lead time values, maintain and update lead time data in its  new computer system, and validate data input to detect and correct errors,  late deliveries and parts shortages will likely continue. DLA Tended to  Overestimate Lead Time  Estimates DLA tended to overestimate its acquisition lead times and receive items  sooner than expected. Of the 1,031,779 DLA deliveries we reviewed,  almost 40 percent had actual acquisition lead times that were more than 90  days shorter than their estimated lead times.",
      " This resulted in about $568  million being obligated earlier than necessary and inventory arriving  earlier than expected. Conversely, only about 3 percent of DLA\u2019s deliveries  had actual acquisition lead times that were more than 90 days longer than  their estimated lead times, totaling approximately $319 million, as shown  in table 4. DLA manages almost every consumable item the military services need to  operate, and according to officials, many of these items have been placed  on long-term contracts, thus allowing faster order processing. Since the  deliveries from the contractors were also faster, there have been reduced  overall acquisition lead times.",
      " Even though DLA uses a methodology for  computing and maintaining lead time estimates that is more heavily  weighted toward the recent actual lead times than the existing ones on  file, the process did not compute revised estimates that accurately  reflected the rapid improvements being made through their lead time  initiatives. Additionally, DLA officials stated that they emphasized  business practices that encouraged earlier deliveries as opposed to later  ones. They went on to state that the storage and handling costs were  minimal, although we were unable to confirm this statement, and being  able to meet customers\u2019 needs by having the necessary items on hand was  most important to them. With the emphasis on meeting or beating the  estimated lead times,",
      " there is reduced incentive for DLA to adjust its lead  times to more precisely reflect actual lead times experienced. Absent  actions by DLA to review and revise the methodology and inputs it uses in  calculating lead time estimates so that the estimates more precisely reflect  its actual experiences, DLA will continue to obligate funds earlier than  necessary and have early delivery of items. Air Force Tended to  Underestimate and  Overestimate Lead Time  Estimates The Air Force tended to both underestimate and overestimate its  acquisition lead times, receiving a significant amount of items both sooner  and later than expected. Of the 18,335 Air Force deliveries we reviewed,",
      "  more than 42 percent had actual acquisition lead times that were more  than 90 days longer than estimated. This resulted in about $528 million  worth of inventory that arrived later than estimated. At the same time,  about 24 percent had actual acquisition lead times that were more than 90  days shorter than estimated, which resulted in about $272 million of  premature obligations, as shown in table 5. A sample of 30 Air Force deliveries selected from the ones with the  greatest variances between actual and estimated lead times provided an  explanation for some of these variances. In over half of the sampled late  deliveries,",
      " the item managers at the air logistics centers had used their  standard default lead time values for the estimates. It is the Air Force\u2019s  standard procedure to use the standard default administrative lead time  value for spare parts that have not been bought in more than 5 years, but  Air Force guidance does not direct the use of default production lead  times for spare parts that have not been purchased for more than 5 years.  However, many items we reviewed used the standard default production  lead time value because, according to officials, it was an easy estimate for  item managers to use given their workload. In these cases, the default  values greatly understated the actual lead times and resulted in later  arrivals of deliveries to the air logistics centers,",
      " which may have negatively  impacted their operational units\u2019 mission readiness if those items had not  been available when needed. Officials said that these default values may  not be the best information available, and there might be other  information obtained or generated for use in place of the default values.  One possibility might be contacting the supplier to determine the current  lead time. They noted that the use of these default values could also be an  explanation for the overstated lead times as well as the understated lead  times. Absent actions by the Air Force to review and validate its default  lead time estimates and consider other options for better lead time data,",
      "  mostly for infrequent buys, parts shortages or early obligation of funds will  likely continue. Navy Tended to  Underestimate and  Overestimate Lead Time  Estimates The Navy tended to both underestimate and overestimate its acquisition  lead times, receiving a significant amount of items both sooner and later  than expected. Of the 19,304 Navy deliveries we reviewed, just over 39  percent had actual acquisition lead times that were more than 90 days  shorter than estimated. As a result, about $165 million worth of inventory  arrived earlier than expected and the funds for this inventory were  obligated prematurely. In addition, about 28 percent had actual lead times  that exceeded their estimates by more than 90 days,",
      " which resulted in  almost $561 million of items arriving later than anticipated, as shown in  table 6. Navy officials stated that they believe these variances are acceptable and  reasonable due to the variability in generating lead times, especially for  ship parts that are bought infrequently. They said that updating the lead  time estimates more often would not make the forecasts more accurate  because there are not enough observations per item to update more often.  We did not evaluate whether more frequent updating of the lead time  estimates would improve their accuracy. However, some of the variances  between the Navy\u2019s actual and estimated lead times occurred because of  data input errors.",
      " We found input errors in a sample of 30 Navy deliveries  selected from the ones with the greatest variances between the estimated  and actual lead times that affected the estimates\u2019 accuracy. For example,  in two cases, the lead time estimates were incorrectly loaded into the  ordering system used by the inventory control points at 10 times longer  than what the correct estimates should have been, and the error was not  detected. Also, many of the excessive estimated lead times of the sample  items we reviewed could not be explained by Navy officials, who stated  there were conflicting lead time data within their records. Until the Navy  addresses these concerns by reviewing and validating its lead time data  and correcting errors,",
      " either parts shortages or early obligation of funds  are likely to continue. Management Actions  and Initiatives to  Reduce Lead Times  from 2002 to 2005  Less Effective than  Previous Initiatives  from 1994 to 2002 USD (AT&L) and the military components\u2019 management actions and  initiatives to reduce lead times from 2002 to 2005 were less effective  overall than previous initiatives from 1994 to 2002. Progress in reducing  lead times varied greatly by service from 2002 to 2005, with DLA and the  Air Force reducing their lead times by about 3.",
      "3 and 4.1 percent annually  respectively, while the Navy\u2019s lead times remained the same, and the Army  experienced an increase in lead times by 0.3 percent annually. Of the  various management actions and initiatives taken by the services from  2002 to 2005, some were new and some were continuations of previous  initiatives, with each service pursuing varying combinations of initiatives.  For example, initiatives to streamline administrative processes were  implemented by all military components from 1994 to 2002 and from 2002  to 2005, with DLA and the Air Force more aggressively implementing new  initiatives from 2002 to 2005 than did the Army and Navy.",
      " In addition, from  1994 to 2002, enhanced USD (AT&L) oversight contributed to the rapid  pace of lead time reduction; however, from 2002 to 2005, USD (AT&L) no  longer continued to monitor progress made by the components in  reducing lead times, and all components experienced reduced  management oversight. Moreover, while new initiatives to improve  contracting practices were implemented by all military components from  1994 to 2002 and were continued by all components from 2002 to 2005,  from 2002 to 2005 DLA and the Air Force began new initiatives to  strategically manage relationships with suppliers,",
      " while the Army and  Navy did not. The military components could have decreased inventory  requirements and saved money if more aggressive lead time reductions  had been realized from 2002 to 2005 as they had been from 1994 to 2002. Slower Rate of Reductions  in Lead Times from 2002- 2005 than from 1994-2002 USD (AT&L) and the components\u2019 management actions and initiatives to  reduce lead times from 2002 to 2005 resulted in a slower rate of reduction  in DOD-wide lead times of an average of 0.9 percent annually as compared  to an average reduction of 5.",
      "6 percent annually from 1994 to 2002. The  DOD Supply Chain Materiel Management Regulation gives general  guidance stating that the military components should aggressively pursue  the lowest possible acquisition lead times. As shown in table 7, progress in  reducing lead times varied by military component from 2002 to 2005. The  Army experienced an average annual lead time increase of 0.3 percent per  year from 2002 to 2005, as compared to an average yearly reduction of 9.7  percent from 1994 to 2002, in part due to higher demands and supplier  capacity issues.",
      " The Navy\u2019s lead times were unchanged from 2002 to 2005,  after decreasing by 2.8 percent from 1994 to 2002. The Air Force reduced  its lead times from 2002 to 2005, but at a lower rate than it did from 1994 to  2002. The Air Force reduced its acquisition lead times by an average of 4.1  percent per year from 2002 to 2005, compared to an average yearly  reduction of 4.5 percent from 1994 to 2002. Similarly, DLA\u2019s acquisition  lead times also decreased at a lower rate from 2002 to 2005 than from 1994  to 2002,",
      " being reduced by an average of 3.3 percent per year in the former  as compared to 6.2 percent per year in the latter. Military Components  Pursued Various Initiatives  to Reduce Lead Times with  Varying Results Each of the military components pursued various initiatives to reduce  acquisition lead times during both the 1994-2002 and 2002-2005 time  periods with varying results. The progress of the military components in  reducing lead times varied because each pursued different combinations  of new and continued initiatives and management actions. These  initiatives and actions generally fell into three areas of focus: streamlining  internal administrative processes,",
      " improving oversight, and developing  relationships with suppliers, as shown in table 8. DLA began a number of new initiatives and took several management  actions from 2002 to 2005 that have helped it reduce lead times, and it also  continued several initiatives that it had instituted from 1994 to 2002. This  combination of continued and new initiatives enabled DLA to reduce its  average lead time to 159 days. The Air Force also began a number of new  initiatives and took several management actions to reduce lead times from  2002 to 2005, while continuing several initiatives that it had instituted from  1994 to 2002.",
      " This combination of continued and new initiatives enabled  the Air Force to reduce its average lead time from 430 to 379 days from  2002 to 2005. Conversely, although individual Army components began  some new initiatives to reduce lead times, the Army began no new  componentwide initiatives to reduce lead times from 2002 to 2005.  Furthermore, the Army has placed less effort in continuing new initiatives,  which, combined with higher demands and supplier capacity issues, has  resulted in the Army\u2019s average lead time increasing from 305 to 308 days  from 2002 to 2005. Likewise,",
      " the Navy also did not begin any new  componentwide initiatives to reduce lead times from 2002 to 2005,  resulting in lead times holding steady at 416 days from 2002 to 2005. Initiatives to Streamline  Administrative Processes  Implemented by All  Components Initiatives to streamline administrative processes were implemented or  continued by all military components from 1994 to 2002 and from 2002 to  2005, with DLA and the Air Force more aggressively implementing new  initiatives from 2002 to 2005 than did the Army and Navy. All components  are working to design new information technology systems that could  potentially improve administrative lead times.",
      " For example, DLA has just  transitioned to its newly implemented information technology system,  which officials said will help reduce process times for a number of  transactions, shaving days off of administrative lead time. The components  are also working on noninformation technology solutions. For example,  Air Force officials recently said that they completed an initiative to reduce  clutter on work desks, which involved redesigning all workspaces so that  if an employee is absent, another employee can find any needed document  in the absent employee\u2019s desk within 5 minutes. They attributed this  initiative to preventing bottlenecks that could occur if employees had to  search for needed documents and information,",
      " potentially delaying the  acquisition of items. The Army\u2019s information technology initiative has only  been implemented at one of its Life Cycle Management Commands and the  Navy\u2019s is still in the planning stages. One particular initiative that officials cited as having been effective in  reducing administrative lead times for the Air Force and Army over the  last decade has been the entering of technical data into the inventory  control computer systems for items in stock before a need arises to order  them again. According to officials, from 1994 to 2002, the Army in  particular made significant progress in reducing lead times because of the  entering of technical specification data.",
      " Before technical data for items  were entered into computers, engineers often had to delay the acquisition  process while they prepared technical drawings and wrote technical  specifications. These delays ranged from days to several months. By  determining technical specifications before there was a need for an item  and saving these data in the computer system, officials were able to  greatly reduce administrative lead times. They said that already having  them in the system helped reduce lead times even when the technical  specifications subsequently needed changing; however, they added that  they have not completed entering technical specifications for all items.  Although Army engineers have reduced workloads during certain periods  of time when they have fewer orders to process,",
      " there are no efforts  underway to enter technical specification data during these periods. An  Army official indicated they were not entering technical specifications for  items where the lead time savings would typically be fewer than 2 weeks,  because such savings are not considered significant by Army officials.  Army officials, however, made this determination without using any  metrics or measures to determine the actual savings or cost of entering  technical specifications for items with savings of fewer than 2 weeks. USD (AT&L) No Longer  Provided Oversight and  Guidance on Lead Times  from 2002 to 2005 From 1994 to 2002,",
      " enhanced USD (AT&L) oversight and guidance  contributed to the rapid pace of lead time reduction; however, from 2002  to 2005, USD (AT&L) no longer continued to monitor progress made by  the components in reducing lead times, and all components experienced  reduced management oversight. In 1994, we reported that USD (AT&L)  was unaware of the lack of progress made in reducing lead times from  1990 to 1994 because of the absence of adequate oversight information.  We also indicated that the data reported by military components did not  include historical trends to indicate changes in lead time days before and  after the lead time reduction initiatives were begun.",
      " Likewise, we reported  that the statistics at that time were not comprehensive enough to tie  specific initiatives to the lead time reductions experienced for individual  initiatives. At the time, however, USD (AT&L) was able to provide a  general estimate of the financial benefit of lead time reductions,  determining that for each day that the DOD-wide average lead time is  reduced, a procurement savings of $10 million can be realized. If the  financial benefits of lead time reductions are the same in 2005 as they  were in 1994, the value of the savings in 2005 dollars would be $12.",
      "5  million per day. On November 23, 1994, USD (AT&L) issued a memorandum to its  components emphasizing the importance of fully implementing its  guidance on reducing acquisition lead times. On March 8, 1995, according  to DOD officials, components were challenged to reduce business process  cycle times by at least 50 percent over the next 5 years (from 1995 to  2000). According to DOD officials, guidance and oversight were then  applied to acquisition lead times through the budget process. However, by  2002, USD (AT&L) officials said they no longer provided active oversight  on acquisition lead time or monitored the progress made by the  components in reducing lead times,",
      " because management focus shifted  from reducing lead times to improving performance on more broad  metrics such as backorders. They added that they continued to monitor  other broad metrics from 2002 to 2005 and did not establish lead time  reduction goals or require standardized reporting of metrics designed to  measure reductions in lead times. In addition, with the exception of DLA\u2019s  Strategic Material Sourcing initiative, USD (AT&L) and component  officials said they did not collect data, establish metrics, or measure and  report the impact and costs of any specific initiative on lead times.  Without this information, USD (AT&L)",
      " and the components were unable  to provide effective oversight on lead time reduction efforts. Furthermore,  from 2002 to 2005, USD (AT&L) officials said they no longer measured the  financial impact of lead time reductions on inventories. USD (AT&L) and  the components thus have been unable to determine the relative value of  pursuing lead time reductions when determining the best use of their  resources. The inability to determine the financial impact on inventories of  lead time reductions and the projected time saved from the proposed  initiatives impedes the ability of decision makers to make informed  choices as to which initiatives to implement.",
      " According to officials, without active USD (AT&L) oversight, all  components experienced reduced management oversight from 2002 to  2005. Officials from the military components indicated that, because less  emphasis was placed on lead times by USD (AT&L), less emphasis was  placed on lead times at the component level. These officials said that  component managers tend to place enhanced management focus on what  they are held accountable for by USD (AT&L). Component officials  suggested that renewed emphasis on lead time reduction by USD (AT&L),  including the setting of lead time reduction goals, could increase the  components\u2019 management focus on reducing lead times.",
      " Until USD  (AT&L) takes steps to exercise oversight as it did from 1994 to 2002, such  as reemphasizing guidance, establishing lead time reduction goals,  collecting data and establishing metrics to measure progress toward  meeting lead time reduction goals, measuring and reporting on the results  of individual initiatives, and measuring the financial impact of lead time  reductions, the components and USD (AT&L) will not have available the  information needed to effectively manage and provide oversight of lead  times, hampering their ability to reduce lead times. Further, without this  information, USD (AT&L)",
      " and the components will not be able to  prioritize or reevaluate lead time reduction initiatives, determine the  relative importance of lead time reduction when making contracting  decisions, or determine the cost-effectiveness of lead time reduction  efforts. Subsequent to September 2005, Air Force and DLA officials said they  began planning and implementing new efforts to improve oversight,  including setting lead time reduction goals, holding managers accountable  for lead times, tracking lead times to ensure that goals were met, and  regularly reporting lead times to managers. In addition, a new metric is  also currently under development by DLA, called attainment to plan,",
      "  which measures the ability of item supply planners to have material  available when needed. DLA officials stated that they anticipate increased  focus on lead times will improve performance of this metric. Moreover,  USD (AT&L) officials stated they were working with the military  components to define a DOD-wide lead time metric. They also stated in  August 2006 that they were in the process of awarding a contract to a  private company to evaluate if USD (AT&L) oversight of lead times would  be worthwhile and stated that they currently were providing no oversight.  USD (AT&L) officials indicated that increases in lead times could lead to  increases in backorders,",
      " and said that they provide oversight on  backorders. Initiatives to Develop  Relationships with  Suppliers Implemented by  Components Initiatives to develop relationships with suppliers were implemented by all  of the military components from 1994 to 2002. All military components  implemented initiatives to improve contracting practices from 1994 to  2002 and continued them from 2002 to 2005. For example, each  component used initiatives to increase use of long-term contracts to  reduce lead times. According to Navy officials, one example of a  successful initiative begun in the late 1990s was the Navy\u2019s practice of  considering lead times as criteria in contract awards for spare parts.",
      "  Whenever issuing a new contract for spare parts, they said that the Navy  sets as a criterion for the bid a 25 percent reduction in the item\u2019s  production lead time, and by adding this as a factor, the Navy is able to  encourage suppliers to reduce lead times. In addition to continuing these prior initiatives, from 2002 to 2005 the DLA  and the Air Force began new initiatives to strategically develop  relationships with suppliers. According to DLA and Air Force officials,  these new initiatives not only helped reduce lead times by allowing for  streamlined and simplified purchasing of items on long-term contracts, but  also (1)",
      " allow for increased information sharing with suppliers, (2) enable  components to leverage their buying power, and (3) empower components  to strategically target key items to ensure their availability. For example, according to DLA officials, their Strategic Material Sourcing  initiative is intended to improve procurement for 3.6 million items  designated as critical. Items are designated as critical based on a series of  factors, then are grouped into categories, with different acquisition  strategies being used for different categories of items. Of the 3.6 million  items marked as critical, 390,000 were identified for placement on  contracts strategically designed to leverage DLA\u2019s market power to  improve sourcing for these items.",
      " By forming alliances with producers of  these items, DLA officials told us they have been able to reduce lead times  by taking advantage of DLA\u2019s buying power and by negotiating contracts  that ensure supply availability in otherwise volatile markets. As of August  2006, one-half of these targeted items were already on strategic long-term  contracts. According to officials, this initiative has thus far generated $247  million in gross savings with over $64 million generated in 2005 alone,  while costing only $5.6 million to implement. These savings do not include  savings from reduced storage costs, nor do they include the future savings  expected as the program continues.",
      " This initiative is also unique in that  DLA officials said they are using metrics to measure and report the  effectiveness of the initiative, thereby improving accountability. An  example identified by Air Force officials is the purchase supply chain  management initiative. One of many parts of this initiative aimed at  reducing lead times is the use of Commodity Councils to help improve  acquisition of select items. Commodity Councils are groups of experts in  particular commodity groupings who work together to improve acquisition  of these items. They do so through commodity management, which is the  process of developing a systematic approach to the entire usage cycle for a  group of items.",
      " In addition, USD (AT&L) is in the process of implementing  a new initiative to improve commodity management DOD-wide. This new  initiative seeks to emulate the successes of commodity management  programs run by DLA and the Air Force across DOD. In contrast, the Army and the Navy, while continuing old initiatives, have  not developed new initiatives to develop strategic relationships with  suppliers for critical items. Army and Navy officials indicated that they are  content with the lead time reductions experienced and stated that new  initiatives were not undertaken because of a lack of USD (AT&L) focus  and oversight on lead time reduction.",
      " Officials cited ongoing military  operations as one of the primary factors diverting attention away from  reducing lead times. While the Army and Navy continue to benefit from the  lead time reductions generated from past initiatives, until these two  components begin initiatives to develop strategic relationships with  suppliers, they may be unable to realize the potential benefits from  improved supplier relationships and may continue to experience lower  rates of lead time reductions than DLA and the Air Force. More Aggressive Lead  Time Reductions Could  Have Resulted in  Decreases in Inventory  Requirements and  Monetary Savings The military components could have decreased inventory requirements  and saved money if more aggressive lead time reductions had been  realized from 2002 to 2005,",
      " as they had from 1994 to 2002. DOD budget  documents indicate that inventory requirements to cover lead times  increased from $15.6 billion in 2002 to $19.9 billion in 2005. According to  officials, the primary reason for the increase in inventory has been  increased demand due to recent military operations. As a result, even as  lead times were reduced by an average of 0.9 percent a year from 2002 to  2005, requirements to cover lead times rose. If the military components  had been able to continue reducing lead times by an average of 5.",
      "6 percent  a year, as they did from 1994 to 2002, the military components\u2019 lead time  inventory requirements would only have risen to $17.2 billion, rather than  to $19.9 billion, as shown in figure 1. The additional lead time  requirements potentially tied up $2.7 billion that could have been obligated  for other needs. In addition to the potential savings associated with decreased inventory  requirements, if the military components had been able to continue  reducing their lead times at 5.6 percent per year, it would have led to a  significant savings from a reduced need to maintain \u201csafety\u201d inventory,",
      "  which is the amount of inventory the military components maintain on- hand to cover supply and demand fluctuations. This level is determined by  a formula that includes a number of factors, including lead times.  Reductions in lead times can significantly impact safety inventories  needed. Due to reduced USD (AT&L) oversight of lead times, we were  unable to determine how reducing lead times would financially impact  procurement costs for safety inventories. However, in 1994 we reported  that if the components could reduce their overall lead times by 25 percent  by 2000, it would lead to a procurement savings of about $910 million.",
      "  Until USD (AT&L) and the components take steps to renew their focus on  reducing lead times by aggressively continuing prior initiatives and  implementing successful new initiatives, the components may continue to  experience spare parts shortages and may spend significantly more money  to purchase additional inventory. Conclusions Acquisition lead times are the military components\u2019 estimates as to when  items will arrive, and varying from that expectation increases the  likelihood that the right supplies will not be at the right place at the right  time. When the components understate their lead time estimates, material  shortages and reduced readiness can occur. Without more accurate lead  time estimates, the components will not place orders and obligate funds as  early as necessary,",
      " and they may miss opportunities to potentially improve  readiness rates. Conversely, overstated and lengthy acquisition lead time  estimates can cause early obligation of funds as well as increases in on- hand inventories, although spare parts that come in early could potentially  improve readiness. Until the Army reviews and evaluates when deliveries  are representative and should be used to update lead time values,  maintains lead time data in each of its computer systems, and validates  data input, later than expected deliveries and potential parts shortages will  likely occur. In addition, absent actions by DLA to review and revise the  methodology and inputs it uses to compute lead time estimates,",
      " DLA will  continue to obligate funds earlier than necessary and have early delivery  of items. Moreover, without taking steps to review and validate default  lead time estimates and consider other options for obtaining better lead  time data, the Air Force will continue to experience early obligation of  funds and potential parts shortages. Finally, until the Navy reviews and  validates its lead time data and corrects errors, parts shortages and early  obligation of funds are likely to continue. Absent actions by all of the  military components to address these problems and institute corrective  procedures, their acquisition lead time estimates will continue to vary  greatly from their actual lead times.",
      " The military components have also slowed their efforts to reduce  acquisition lead times as compared to earlier years. Their current lead time  reduction rate may not be significant enough to offset the costs of growing  requirements. Until USD (AT&L) and the military components take steps  to renew their focus on reducing lead times by continuing prior initiatives  and implementing successful new initiatives to streamline administrative  processes, improve oversight, and develop strategic relationships with  suppliers, they will be unable to significantly reduce lead times as they  were able to do in the past. As a result, the military components may  potentially spend hundreds of millions of dollars to purchase additional  inventory.",
      " Increased emphasis on improved lead time estimates and  overall lead time reductions will improve the military components\u2019 ability  to efficiently use available resources. Recommendations for  Executive Action To improve the military components\u2019 accuracy in setting acquisition lead  time values, we recommend that the Secretary of Defense take the  following six actions.  1.  Direct the Secretary of the Army to have the Commanding General,  Army Materiel Command, direct the Aviation and Missile Life Cycle  Management Command to establish clear guidelines for item managers  to know when to review and how to determine whether deliveries  should be considered representative and thus used to update lead  times.  2.",
      "  Direct the Secretary of the Army to have the Commanding General,  Army Materiel Command, direct the Life Cycle Management  Commands to reemphasize the importance of periodically reviewing  and validating their recorded lead time data to detect and correct data  input errors and other inaccurate information.  3.  Direct the Secretary of the Army to have the Commanding General,  Army Materiel Command, direct Communications-Electronics Life  Cycle Management Command to maintain and update automated lead  time data within its Logistics Modernization Program computer  system.  4.  Direct the Director of DLA to have its supply centers review the  methodology and inputs used to compute its lead time estimates and  revise them to incorporate recent improvements in DLA actual lead  times.",
      "   5.  Direct the Secretary of the Air Force to have the Commander, Air  Force Materiel Command, direct its air logistic centers to use better  sources of lead time information, such as supplier estimates, if  available, rather than default values for items that have not been  ordered in the last 5 years.  6.  Direct the Secretary of the Navy to direct the Commander, Naval  Inventory Control Point, to reemphasize the importance of having its  inventory control points periodically review and validate their  recorded lead time data to detect and correct data input errors or  other inaccurate information. To strengthen DOD\u2019s and the military components\u2019 management of  acquisition lead times,",
      " we recommend that the Secretary of Defense direct  the Under Secretary of Defense for Acquisition, Technology, and Logistics  to take the following five actions.  1.  Establish component lead time reduction goals over a 5-year period  from October 2007-2012.  2.  Develop metrics to measure components\u2019 progress toward meeting  lead time reduction goals and require the periodic reporting of these  metrics.  3.  Develop a general estimate of the financial impact of lead time  reductions, and use that as a metric to help components weigh the  importance of lead time reductions.  4.  Direct the components to collect data,",
      " establish metrics, and measure  and report the impact of individual lead time reduction initiatives, to  include the cost of each initiative and its estimated cost savings.   5.  Work closely with the Army and Navy to develop joint strategic  relationships with suppliers that would be beneficial in reducing lead  times. Agency Comments  and Our Evaluation In written comments on a draft of this report, DOD concurred with eight,  partially concurred with one, and did not concur with two of our  recommendations. For the eight recommendations with which DOD  concurred, the department identified actions and plans that are being  taken to implement these recommendations.",
      " We agree that most of the  identified actions are responsive and reasonable to address our concerns,  although in several cases the final actions may not be completely  implemented for several years. However, some of the department\u2019s  comments did not appear to address our concerns. More specifically, for  one of the recommendations with which DOD concurred, we do not  believe that its comments address our recommendation that the Army  maintain and update automated lead time data within its Logistics  Modernization Program computer system. In its comments, DOD said that  this computer system does not provide automatic updates of data for  calculation but it does have information needed to make decisions for  manual implementation.",
      " As stated in our report, manual input errors have  contributed to inaccuracies in lead times, and we believe these  inaccuracies will continue if the department relies on manual  implementation. We continue to believe that automated updates and  maintenance of lead time data are needed to improve the accuracy of lead  time estimates. Further, DOD stated in its comments that it already had  actions underway to address our recommendation to develop metrics to  measure progress toward meeting lead time reduction goals. However, the  contract for reviewing lead times is not to be awarded until later in fiscal  year 2007. Since this effort was not underway at the time of our review,",
      " we  believe that it is important to recommend that this effort be pursued until  fully implemented. DOD partially concurred with our recommendation that the Under  Secretary of Defense for Acquisition, Technology, and Logistics develop a  general estimate of the financial impact of lead time reductions, and use  that as a metric to help components weigh the importance of lead time  reductions. DOD stated that to the extent that financial impact can be  estimated, it will be one of the elements considered in a review DOD  expects to conclude in 2008. DOD further stated that the challenge in  estimating the financial impact of lead time reductions was that there are  many other variables,",
      " and the effect of individual variables on lead time  estimates cannot be separately identified. We recognize that the Office of  the Under Secretary of Defense for Acquisition, Technology, and Logistics  has concerns about its ability to estimate the financial impact of lead time  reductions, but note that it was able to provide an estimate of $10 million  in financial impact for each day that lead time was reduced when we  published our 1994 report. Moreover, during our review, TACOM officials  informed us that they have the ability to simulate the impact of reductions  in lead times using their requirements determination process system on an  item-by-item basis.",
      " The potential savings generated from the simulations  could be helpful in estimating the savings from lead time reduction  initiatives. We further note that the inability to determine the financial  impact of lead time reductions does not provide the needed incentives for  the components to reduce lead times and impedes the ability of decision  makers to make informed choices as to which initiatives to implement.  Therefore, we continue to believe that the recommendation to the Under  Secretary of Defense for Acquisition, Technology, and Logistics is valid. In addition, DOD did not concur with our recommendation to DLA to have  the supply centers review the methodology and inputs used to compute its  lead time estimates and revise them to incorporate recent improvements  in DLA actual lead times.",
      " DOD stated that our review used data primarily  from DLA\u2019s legacy system from 2002 to 2005, which was prior to DLA\u2019s  implementation of its new computer system called Business Systems  Modernization, and stated that consequently the benefits of this new  system and processes were not taken into account in our review. While we  agree that the implementation of this new computer system should  provide DLA with more tools to manage acquisition lead times, according  to DLA\u2019s Cross-Process Policy Memorandum 06-001 dated June 1, 2006, the  basic methodology for automatic adjustments to both administrative and  production lead times remains the same in the new system as under the  legacy system (i.e., each is calculated as a weighted average based on one-",
      " third of the existing lead time of record and two-thirds of the actual or  new lead time for the current award). Calculating the lead times in the  same manner but recording the values in a newly implemented computer  system will not improve the accuracy of the lead time estimates.  Therefore, we continue to believe that the recommendation to DLA is  valid. Moreover, DOD did not concur with our recommendation that the Under  Secretary of Defense for Acquisition, Technology, and Logistics work  closely with the Army and Navy to develop joint strategic relationships  with suppliers that would be beneficial in reducing lead times. The  department stated that it is actively pursuing a joint strategy to develop  strategic relationships,",
      " and that to instruct the services to develop  strategic relationships separately with these suppliers would lead to a  duplication of effort and dissipate the department\u2019s leverage. We believe  that DOD misunderstood our recommendation. The joint strategy initiative  that DOD is actively pursuing, according to documentation provided by  DOD, is focused on commodity management, not on developing strategic  relationships to reduce lead times. Our recommendation calls for the  Under Secretary of Defense for Acquisition, Technology, and Logistics to  work closely with the Army and Navy to move beyond simply managing  the acquisition of individual parts, and to form strategic partnerships with  key suppliers for ranges of items in situations where it would be possible  to leverage these relationships to reduce lead times.",
      " Documentation from  DOD further states that DOD\u2019s commodity management plan  acknowledges that service initiatives will produce improvements, and that  it respects those initiatives. Our recommendation, for the Under Secretary  of Defense for Acquisition, Technology, and Logistics to work closely with  the Army and Navy to develop similar initiatives to those already  underway by DLA and the Air Force, is not duplicative of ongoing efforts,  but would complement them. Until the Army and the Navy begin initiatives  to develop strategic relationships with suppliers, they may be unable to  realize the potential benefits from improved supplier relationships and  may continue to experience lower rates of lead time reductions than DLA  and the Air Force.",
      " Therefore, we continue to believe that the  recommendation to the Under Secretary of Defense for Acquisition,  Technology, and Logistics is valid. The department\u2019s comments are reprinted in appendix II. We are sending copies of this report to the Chairmen and Ranking  Minority Members of the Senate Committee on Armed Services; the  Subcommittee on Readiness and Management Support, Senate Committee  on Armed Services; the Subcommittee on Defense, Senate Committee on  Appropriations; the House Committee on Armed Services; the  Subcommittee on Readiness, House Committee on Armed Services; and  the Ranking Minority Member, Subcommittee on Defense, House  Committee on Appropriations.",
      " We are also sending copies to the Secretary  of Defense; the Secretaries of the Army, Navy, and Air Force; the Director  of DLA; and the Under Secretary of Defense for Acquisition, Technology,  and Logistics. Copies will be made available to others upon request.  Should you or your staff have any questions concerning this report, please  contact William M. Solis, Director, at (202) 512-8365 or solisw@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Key contributors to  this report are listed in appendix III.",
      " Appendix I: Scope and Methodology To address our objectives, we reviewed relevant documents, guidance,  reports, and other information, as available, which related to acquisition  lead times for class IX spare parts and any initiatives the Department of  Defense (DOD) or the military components were undertaking in this area.  We also interviewed cognizant officials within the Office of the Under  Secretary of Defense (Acquisition, Technology, and Logistics); the Defense  Logistics Agency Headquarters; the Army Materiel Command  Headquarters; Headquarters Air Force, the Deputy Chief of Staff,  Installations, and Logistics, Inventory Management and Stockage Branch;",
      "   and the Naval Supply Systems Command, Naval Inventory Control Point- Mechanicsburg, Pennsylvania. We also performed additional work at the  Air Force Materiel Command Headquarters at Wright-Patterson Air Force  Base, Ohio, had discussions with officials at the U.S. Army Tank  Automotive and Armaments (TACOM) Life Cycle Management Command  in Warren, Michigan, and obtained data from U.S. Army Communications- Electronics Life Cycle Management Command, U.S. Army Aviation and  Missile Life Cycle Management Command, and the Naval Inventory  Control Point-Philadelphia, Pennsylvania. To examine the extent to which the military components\u2019 estimated lead  times varied from actual lead times,",
      " we obtained and reviewed  information from each military component concerning any relevant  policies, procedures, regulations, instructions, or memorandums about  acquisition lead time development, maintenance, or management. We also  obtained information regarding the processes used by the military  components in generating their acquisition lead times from discussions  with cognizant officials. To test the accuracy of the military components in  estimating the acquisition lead times and the related actual arrival of items  ordered, we requested that each military component provide us with a  data file that contained the following information for class IX spare parts  they each received between October 1, 2004, and September 30,",
      " 2005: date ordered, ordered from what company, quantity ordered, date delivered, quantity delivered, where delivered, purchase order number or some other financial related reference, cost per item,  item name,  item NSN,  total cost of order,  forecasted/on-file administrative lead time for item at time of  order,  forecasted/on-file production lead time for item at time of order,  and overall acquisition lead time for item. For DLA and the Air Force, we obtained data that covered deliveries to all  three of their supply centers and Air Logistic Centers, respectively. In  regard to the Army,",
      " we obtained data from three Life Cycle Management  Commands: TACOM, Communications-Electronic, and Aviation and  Missile. We also obtained data from the Naval Inventory Control Points  that are located in Mechanicsburg, Pennsylvania and Philadelphia,  Pennsylvania. We compared the forecasted/on-file estimated lead times for  each delivery with the actual lead times experienced, and then grouped  the variances into five different categories. The categories were the actual  lead time (1) was within plus or minus 1 week from the estimated lead  time, (2) was greater than 1 week to less than 90 days earlier than the  estimated lead time,",
      " (3) was 90 or more days earlier than the estimated  lead time, (4) was greater than 1 week to less than 90 days later than the  estimated lead time; and, (5) was 90 or more days later the estimated lead  time. For all of the records in each category, we calculated the percent of  records in each category as compared to the total number of records  reviewed and also calculated their dollar value. We took steps to ensure  the reliability of the data we used in our review. We provided a list of  specific data elements to the Army, Navy, Air Force,",
      " and DLA officials. The  military components returned the requested information to us. To assess  the reliability of these data, we reviewed the data for obvious  inconsistency and completeness errors. In addition, we worked with  agency officials to identify any data problems. When we found  discrepancies (such as nonpopulated fields or data discrepancies), we  brought them to the officials\u2019 attention and worked with them to correct  the errors. In addition, we sent an electronic questionnaire with questions  regarding our use of the data and followed up on issues we believed were  pertinent regarding the reliability of the data. Based on these efforts, we  determined that the data were sufficiently reliable for the purposes of our  report.",
      " To examine the extent to which military components\u2019 current management  actions, initiatives, and other programs have reduced lead times and  affected inventory and budget requirements, we obtained and reviewed  information from each military component concerning any relevant  policies, procedures, regulations, instructions, or memorandums regarding  efforts, policies, actions, or initiatives to reduce lead times. We also  interviewed officials within the Office of the Under Secretary of Defense  (Acquisition, Technology, and Logistics); the Defense Logistics Agency  Headquarters; the Army Materiel Command Headquarters; Headquarters  Air Force, The Deputy Chief of Staff, Installations, and Logistics, Inventory  Management and Stockage Branch;",
      " and Naval Supply Systems Command,  Naval Inventory Control Point-Mechanicsburg, Pennsylvania. We also  performed additional work at the Air Force Materiel Command  Headquarters at Wright-Patterson Air Force Base, Ohio and had  discussions with officials at the U.S. Army TACOM Life Cycle Management  Command in Warren, Michigan. We further examined budget stratification  data from the Army, Navy, Air Force, and the Defense Logistics Agency.  Using that budget stratification data, we reviewed all items present in the  September 30 budget stratification reports for both 2002 and 2005 to  determine the changes in average acquisition lead time for those items.",
      " We  were unable to obtain budget stratification data for the components for  1994, and thus simply reported the results of our 1994 GAO report  evaluating overall lead times for each component. Additionally, we  requested and analyzed the summary budget stratification reports for all  components for September 2002 through September 2005 to determine any  changes in average acquisition lead time and budget requirements from  2002 to 2005. Based on our efforts, we determined that the data were  sufficiently reliable for the purposes of our report. We conducted our work from November 2005 through November 2006 in  accordance with generally accepted government auditing standards.",
      " Appendix II: Comments from the Department  of Defense Appendix III: GAO Contact and Staff  Acknowledgments GAO Contact Acknowledgments In addition to the contact listed above, Lawson Gist, Jr., Assistant Director,  Rebecca Beale, Christopher Miller, Terry Richardson, Grant Mallie,  Catherine Hurley, Minette Richardson, Nancy Hess, Art James, Renee  Brown, Gayle Fischer, Kenneth Patton, and Nicole Harms made key  contributions to this report.\n"
    ],
    "length": 12491,
    "hardness": null,
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  },
  {
    "id": 65,
    "question": null,
    "answer": "In 2009, GAO reported on challenges that State faced in filling its increasing overseas staffing needs with sufficiently experienced personnel and noted that persistent Foreign Service staffing and experience gaps put diplomatic readiness at risk. State is currently undertaking a new hiring plan, known as \u0093Diplomacy 3.0,\u0094 to increase the size of the Foreign Service by 25 percent to close staffing gaps and respond to new diplomatic priorities. However, fiscal constraints are likely to delay the plan\u0092s full implementation well beyond its intended target for completion in 2013. In addition, State\u0092s first Quadrennial Diplomacy and Development Review highlighted the need to find ways to close overseas gaps. GAO was asked to assess (1) the extent to which State\u0092s overseas midlevel experience gaps in the Foreign Service have changed since 2008 and (2) State\u0092s efforts to address these gaps. GAO analyzed State\u0092s personnel data; reviewed key planning documents, including the Five Year Workforce Plan; and interviewed State officials in Washington, D.C., and at selected posts. The Department of State (State) faces persistent experience gaps in overseas Foreign Service positions, particularly at the midlevels, and these gaps have not diminished since 2008. In fiscal years 2009 and 2010, State increased the size of the Foreign Service by 17 percent. However, these new hires will not have the experience to reach midlevels until fiscal years 2014 and 2015. GAO found that 28 percent of overseas Foreign Service positions were either vacant or filled by upstretch candidates\u0097officers serving in positions above their grade\u0097as of October 2011, a percentage that has not changed since 2008. Midlevel positions represent the largest share of these gaps. According to State officials, the gaps have not diminished because State increased the total number of overseas positions in response to increased needs and emerging priorities. State officials noted the department takes special measures to fill high-priority positions, including those in Afghanistan, Iraq, and Pakistan. State has taken steps to increase its reliance on Civil Service employees and retirees, as well as expand mentoring, to help address midlevel experience gaps overseas; however, State lacks a strategy to guide these efforts. State is currently implementing a pilot program to expand overseas assignments for Civil Service employees. Efforts to expand the limited number of these assignments must overcome some key challenges, such as addressing new gaps when Civil Service employees leave their headquarters positions and identifying qualified Civil Service applicants to fill overseas vacancies. State also hires retirees on a limited basis for both full-time and short-term positions. For example, State used limited congressional authority to offer dual compensation waivers to hire 57 retirees in 2011. As a step toward mitigating experience gaps overseas, State began a pilot program offering workshops that include mentoring for first-time supervisors. State acknowledges the need to close midlevel Foreign Service gaps, but it has not developed a strategy to help ensure that the department is taking full advantage of available human capital flexibilities and evaluating the success of its efforts to address these gaps.\n",
    "docs": [
      "Background State is the lead agency responsible for implementing American foreign  policy and representing the United States abroad. It staffs over 270  embassies, consulates, and other posts worldwide. Figure 1 shows the  number and share of State\u2019s Foreign Service, Civil Service, and Locally  Employed staff. According to State, about two-thirds of the Foreign  Service serves overseas at a given point in time, whereas almost all Civil  Service employees serve domestically. Locally Employed staff serve  overseas. Foreign Service employees serving abroad fall into two broad  categories\u2014generalists and specialists. Generalists help formulate and  implement the foreign policy of the United States and are grouped into  five career tracks:",
      " consular, economic, management, political, and public  diplomacy. Specialists serve in 18 different skill groups to support  overseas posts worldwide or in Washington, D.C. These skill groups are  grouped into eight major categories: Administration, Construction  Engineering, Facility Management, Information Technology, International  Information and English Language Programs, Medical and Health, Office  Management, and Security. State typically hires Foreign Service employees at the entry level. Among  Foreign Service generalists, the entry-level consists of three position  grades\u201406, 05, and 04. Midlevel positions include grades 03, 02, and  01,",
      " and senior-level positions include career minister, minister counselor,  and counselor positions. Officers compete annually for promotion to the  next higher grade. It typically takes about 4 to 5 years for an officer to  move through the entry-level grades to a midlevel grade. The levels  associated with Foreign Service specialist position grades vary across  specialist function. For example, a senior-level office management  specialist position is a 04 grade, whereas a senior-level medical  technician position is a 02 grade. State requires its Foreign Service employees to be available for service  anywhere in the world and reserves the ability to direct officers to any of  its posts overseas or to its Washington headquarters.",
      " However, the  department does not generally use this authority, preferring other means  of filling high-priority positions, according to State officials. The process of  assigning Foreign Service employees to their positions typically begins  when they receive a list of upcoming vacancies for which they may  compete. Foreign Service employees then submit a list of positions for  which they want to be considered, or \u201cbids,\u201d to the Office of Career  Development and Assignments and consult with their career development  officer. The process varies depending on an officer\u2019s grade and functional  specialty, and State uses a variety of incentives to encourage Foreign  Service employees to bid on hardship posts,",
      " including the high-priority  posts in AIP countries. Five Year Workforce Plan State has a Five Year Workforce Plan, which it updates annually. This  document describes State\u2019s strategic workforce planning process, which  includes the following five elements: Establish strategic alignment: links human resources to strategic  goals. Identify gaps by analysis of requirements and talent pool: compares  estimated staffing requirements to projected workforce levels to  identify workforce gaps and strength. Develop management plans: develop plans related to recruitment,  hiring, promotion, training, and career development. Implement management plans: implement plans related to  recruitment, hiring, promotion, training, and career development.",
      " Evaluate strategies: evaluate plans, strategies, programs, and  initiatives. Overseas Staffing Model State uses an Overseas Staffing Model, which it updates every 2 years,  to ensure that the department\u2019s personnel resources are aligned with its  strategic priorities and foreign policy objectives. The model uses a variety  of inputs\u2014such as the priority level of overseas posts, visa processing  requirements, and security needs\u2014to estimate the required Foreign  Service staffing levels at each overseas location. The model includes  seven categories of embassies based primarily on the level and type of  work required to pursue the U.S. government\u2019s diplomatic relations with  the host country.",
      " For example, the lowest-level category includes special- purpose small embassies with limited requirements for advocacy, liaison,  and coordination in the host country\u2019s capital. The highest-level category  includes the largest, most comprehensive full-service posts where the  host country\u2019s regional and global role requires extensive U.S. personnel  resources. Recent Hiring Initiatives State has sought to rebuild the size of its Foreign Service after a period of  hiring below attrition levels during the 1990s that contributed to staffing  gaps overseas and endangered diplomatic readiness, according to the  department. To address these gaps, State implemented the \u201cDiplomatic  Readiness Initiative,\u201d which resulted in hiring over 1,",
      "000 new employees  above attrition from 2002 to 2004. However, as we previously reported,  most of this increase was absorbed by the demand for personnel in  Afghanistan and Iraq. In 2009, State began another hiring effort called  Diplomacy 3.0 to increase its Foreign Service workforce by 25 percent by  2013. However, due to emerging budgetary constraints, State now  anticipates this goal will not be met until 2023. Findings from 2009 GAO  Report on Staffing  Hardship Posts In 2009, we reported that State faced persistent staffing and experience  gaps at overseas posts,",
      " particularly at the midlevel. The report\u2019s analysis  of State\u2019s personnel data, as of September 2008, found that posts with  the greatest hardship levels had higher vacancy rates than posts with no  or low hardship levels. Posts with the greatest hardship also were more  likely to fill positions through \u201cupstretch\u201d assignments\u2014assignments in  which the position\u2019s grade is at least one grade higher than that of the  officer assigned to it. The report also found that these staffing and  experience gaps can compromise posts\u2019 diplomatic readiness in a variety  of ways. For example, gaps can lead to decreased reporting coverage;  loss of institutional knowledge;",
      " and increased supervisory requirements  for senior staff, detracting from other critical diplomatic responsibilities. In addition, we reported on a variety of measures and incentives that  State used to help ensure that Foreign Service employees bid on  hardship posts. These ranged from monetary benefits to changes in  service and bidding requirements. In response to our recommendation,  State evaluated these measures and incentives in 2011. According to  State officials, this evaluation found that officers used the entire range of  incentives available\u2014financial and nonfinancial\u2014based on preferences  and priorities and that career stage and family status were key to affecting  the officers\u2019 decisions. Even with Increased  Hiring,",
      " State Faces  Persistent Midlevel  Experience Gaps  Overseas State increased the size of the Foreign Service by about 17 percent in  fiscal years 2009 and 2010, but overseas experience gaps\u2014the  percentage of positions that are vacant or filled with upstretch  assignments\u2014have not declined since 2008 because State increased the  total number of overseas positions in response to increased needs and  emerging diplomatic priorities. These gaps are largest at the midlevels  and in hardship posts. According to State officials, the department takes  special measures to fill high-priority positions. State Increased Hiring  under Diplomacy 3.",
      "0 but  Revised Its Targets for  Future Years State made substantial progress in fiscal years 2009 and 2010 toward the  Diplomacy 3.0 goal of increasing the size of the Foreign Service by 25  percent by 2013. In those years, State hired about 1,900 Foreign Service  employees above attrition, increasing the total size of the Foreign Service  by about 17 percent, or over two-thirds of its total 5-year goal. According  to State, in addition to expanding overseas staffing, the increase in hiring  allowed the department to double the size of the training complement,  which provides flexibility to enroll Foreign Service employees in language  courses\u2014some of which require up to 2 years of training\u2014without  increasing the size of overseas gaps.",
      " However, due to budget constraints, hiring has slowed significantly, and  State only added 38 new Foreign Service positions above attrition in fiscal  year 2011. In that year, it also modified its hiring projections to reflect a  downward revision of future budget estimates for fiscal year 2012 and  beyond. State now projects it will add 150 new Foreign Service positions  above attrition in fiscal year 2012 and 82 new Foreign Service positions  above attrition in each of the following 6 years. As a result, State revised  its estimate for when it will complete the Diplomacy 3.0 hiring initiative.",
      " In  April 2011, State estimated it would complete the increased hiring called  for in Diplomacy 3.0 in fiscal year 2018; however, State now estimates it  will not complete the hiring initiative until fiscal year 2023. State officials  noted that these estimates may be revised again based on future budget  environments. Experience Gaps at  Overseas Posts Have Not  Declined Our analysis of State staffing data shows that State faces experience  gaps in over one-quarter of Foreign Service positions at overseas posts,  a proportion that has not changed since 2008. The largest gaps are in  midlevel positions,",
      " while hardship posts and some position categories,  such as Office Management Specialist positions, also have large gaps. According to our analysis of State staffing data as of October 31, 2011,  State faces experience gaps in 28 percent of overseas Foreign Service  positions. Specifically, 14 percent of overseas Foreign Service positions  are vacant and an additional 14 percent of positions are filled through  upstretch assignments. Both percentages, as well as the total percentage  of positions facing experience gaps, are unchanged since 2008. Our analysis indicates that State has not met its goal for reducing the  overseas vacancy rate. In its fiscal year 2013 Bureau Strategic and  Resource Plan (BSRP), State\u2019s Bureau of Human Resources established  a goal of reducing the vacancy rate for overseas positions to 8 percent by  the end of fiscal year 2011.",
      " However, we found that State had an  overseas vacancy rate of 14 percent 1 month after the end of that fiscal  year.  Further, our comparison of data from 2008 and 2011 shows that,  while the number of officers serving overseas increased following the  Diplomacy 3.0 hiring surge, the number of authorized positions overseas  has also increased. Consequently, the overall vacancy rates have not  declined. In 2008, approximately 7,000 of about 8,100 total Foreign  Service positions were filled. Comparatively, in 2011, nearly 7,800  Foreign Service positions were filled\u2014or 11 percent more positions than  in 2008\u2014but the total number of positions increased to over 9,",
      "000,  resulting in the same vacancy rate. The BSRP also set overseas vacancy rate targets of 10 percent in 2010 and 6 percent in  2012. The BSRP stated that the department did not meet its 2010 target with an actual  vacancy rate of 16.7 percent. does not consider an entry-level officer in a ceded position to be in an  upstretch assignment. However, officials at overseas posts and in  regional bureaus noted that these positions may still suffer from  experience gaps. Figure 2 shows that the number of authorized positions  and Foreign Service employees serving overseas has increased,",
      " but the  proportion of positions with experience gaps has not changed. State officials noted that AIP posts\u2014State\u2019s highest-priority posts\u2014account  for much of the increase in new positions. As figure 3 shows, regionally, the  largest share of new positions is in the Bureau of South and Central Asian  Affairs, primarily because of increases in Afghanistan and Pakistan, and  the majority of new positions are in a small number of countries where  State has high levels of engagement. Specifically, about 40 percent of all  new positions are in AIP countries and an additional 20 percent are in 5  other countries:",
      " Mexico, Brazil, China, India, and Russia. State officials  noted that this distribution of new positions reflects the department\u2019s  changing foreign policy priorities. For example, positions were added in  Brazil and China in response to presidential directives to expand consular  capacity in those countries. According to State officials, the department has  also created positions to address emerging diplomatic priorities, such as  climate change and global health. Additionally, State officials noted that  most Foreign Service employees hired in fiscal year 2010 would not have  been placed in overseas assignments as of October 31, 2011, when we  acquired staffing data. State anticipates that overall vacancy rates will drop  to approximately 9 percent as officers hired in recent years are fully  deployed by the end of 2012.",
      " Although State intended to eliminate gaps in midlevel Foreign Service  positions by the end of fiscal year 2012, these gaps have only diminished  slightly since 2008. Specifically, experience gaps currently exist in about  26 percent of midlevel Foreign Service positions\u2014only 2 percent lower  than in 2008. About 60 percent of all vacancies and upstretch  assignments are in midlevel positions because they make up the largest  share of all overseas positions. Figure 4 shows the numbers and  percentages of positions filled at grade, filled with upstretch assignments,  and vacant for the various position levels. State has acknowledged that midlevel gaps are a persistent problem.",
      "  State has faced midlevel gaps for years and, according to the August  2011 Five Year Workforce Plan, the midlevel gap grew from 2010 to  2011. According to State officials, midlevel gaps have grown in recent  years because most of the new positions created under Diplomacy 3.0  were midlevel positions and State only hires entry-level Foreign Service  employees. In prior reports, we found that midlevel experience gaps  compromise diplomatic readiness, and State officials confirmed that these  gaps continue to impact overseas operations. State officials noted that midlevel gaps will decrease as recent hires are  promoted.",
      " According to State\u2019s Five Year Workforce Plan, officers hired in  fiscal years 2009 and 2010 under the first wave of Diplomacy 3.0 hiring  will begin to be eligible for promotion to the midlevels in fiscal years 2014  or 2015. In recent years, State has accelerated the average time it takes  for officers to be promoted into the midlevels, in part to fill gaps. However,  officials from State\u2019s regional bureaus and AFSA expressed concerns that  this creates a different form of experience gap, as some officers may be  promoted before they are fully prepared to assume new responsibilities.",
      " Our analysis shows that a post\u2019s hardship level continues to be one of the  most significant factors for predicting whether a position is filled, remains  vacant, or is filled with an upstretch assignment. We found that over 35  percent of all positions in posts of greatest hardship are vacant or filled  with upstretch assignments compared to about 22 percent for posts with  low or no hardship differentials. Further, our analysis of the likelihood of  positions being vacant or filled with an upstretch assignment shows that\u2014 controlling for other factors, such as a position\u2019s level, type, or regional  location\u2014a post\u2019s hardship level is one of the most consistent factors for  predicting where experience gaps will occur.",
      " Specifically, we found that  positions in posts of greatest hardship are 44 percent more likely to be  vacant than positions at posts with low or no hardship differentials.  Additionally, when positions are filled, posts of greatest hardship are 81  percent more likely to use an upstretch candidate than posts with low or  no hardship differentials. This is consistent with our findings in prior work,  which found that hardship posts faced larger gaps than posts with low or  no hardship differential. Appendix II describes our analysis of the  likelihood of various positions being vacant or filled with an upstretch  assignment in further detail. We found no significant difference between the rates at which generalist  and specialist positions are filled.",
      " However, the likelihood of generalist  positions being filled with upstretch assignments is somewhat higher than  for specialist positions. We also found that there are differences in  vacancy and upstretch rates for specific functions within both the  generalist and specialist fields and that some position categories are  more difficult to fill. Among generalists, the consular section has the largest gaps, in terms of  the total number of positions that are vacant or filled with upstretch  assignments, because it is the largest generalist section. According to our  analysis, about 170 consular positions were vacant as of October 31,  2011,",
      " and about 250 consular positions were filled with upstretch  assignments. State officials noted that demand is high for entry-level  consular officers to adjudicate visas, particularly in countries that have  seen dramatic increases in demand for visas in recent years. In  addition, the Public Diplomacy section has a relatively high upstretch rate,  with nearly one-quarter of all Public Diplomacy positions filled with  upstretch assignments. State officials noted that gaps within the Public  Diplomacy section, particularly at the midlevels, have persisted since the  late 1990s, when the U.S. Information Agency\u2014which had responsibility  for public diplomacy\u2014was integrated into State.",
      " Figure 5 shows the  proportion of positions that are filled at grade or better, filled with  upstretch assignments, or are vacant for generalist positions. Within specialist skill groups, Office Management Specialist (OMS)  positions have the largest overall gaps, both in terms of the number of  positions and the relative percentage of the gap. Over one-third of all  OMS positions, or nearly 300 positions, are either vacant or filled with  upstretch assignments. Regional bureau and post officials cited OMS  positions as being among the most difficult to fill. For example, officials in  Brazil noted that both the embassy in Brasilia and the consulate in Sao  Paulo had OMS positions that were vacant for 2 years.",
      " Security specialist  skill groups also face substantial gaps. The Security Technician and  Security Engineer fields have fewer positions than some of the larger  specialist fields, but about 30 percent of positions in both fields are vacant  or filled with upstretch assignments. Further, security officers have one of  the highest vacancy rates among specialist fields, with about 17 percent  of those positions unfilled. Figure 6 shows the proportion of positions that  are filled at grade, filled with upstretch assignments, or vacant for the 10  largest specialist skill groups. According to State officials, the department takes a number of steps to  help fill high-priority positions.",
      " State staggers the assignments process  over several months and seeks bids for high-priority areas\u2014including  Chiefs of Mission, Deputy Chiefs of Mission, and positions in AIP\u2014before  the regular bid cycle. Officials noted that in the most recent cycle for  assignments starting in the summer of 2012, State filled about three- quarters of all positions in AIP posts before the regular bid round began. Regional bureau officials noted that this should have a positive effect on  staffing elsewhere because it limits the number of people pulled from  other assignments. State continues to fill AIP positions year-round and  often uses people from other posts on temporary assignments in AIP  posts.",
      " According to State, as of February 2012, approximately 91 percent  of AIP positions were filled. State also holds an \u201curgent vacancies\u201d bid  round in the spring to fill positions that were not filled in earlier cycles. State uses a decentralized process for prioritizing and filling overseas  positions, which officials stated helps ensure important positions are filled.  While AIP posts are the only official department priority for staffing, State  officials said regional bureaus informally set their own priorities by  determining which of the positions within the bureau that are up for bid are  most critical and actively recruiting candidates for those positions. Officials  from State\u2019s Office of Career Development and Assignments stated that  the regional bureaus are in the best position to assess the needs across  posts and prioritize positions accordingly.",
      " Regional bureau officials stated  that, in order to minimize the impact of experience gaps, they will consider  factors such as the size of the post or the availability of upper-level support  in addition to the needs of the position itself when determining whether a  position can remain vacant or be filled through an upstretch assignment.  For example, officials stated they may prefer to fill a single position in a  small, difficult-to-fill post ahead of multiple positions in a much larger post.  Similarly, they may be more likely to allow an upstretch assignment for a  lower midlevel position in a large post because larger posts are likely to  have more layers of upper management support.",
      " As we reported in 2009, State has created a wide range of measures and  financial and nonfinancial incentives to encourage officers to bid on  assignments at hardship posts. For example, Foreign Service employees  may receive favorable consideration for promotion for service in hardship  posts. Additionally, State uses Fair Share bidding rules, which require  employees who have not served in a hardship location within the last 8  years to bid on at least three positions in hardship posts. Officials in the  bureaus of Near Eastern Affairs and South and Central Asian Affairs  stated that they regularly collect feedback on the impact of incentives in  encouraging officers to bid on positions in AIP posts.",
      " One official noted  that, in addition to financial incentives, nonfinancial incentives, such as  additional opportunities or the feeling that they are doing something  important, often help to attract bidders. According to State officials,  through this system of incentives and bidding rules, State has always  been able to find volunteers to fill critical needs. While the department has  the authority to direct Foreign Service employees to specific assignments  if it does not have adequate bidders for a position, according to State  officials, the department has not used these directed assignments\u2014 outside of assigning Foreign Service employees in their first or second  rotation. State officials noted that use of directed assignments could  potentially result in a less motivated or productive workforce.",
      " State Has Taken Steps  to Address Midlevel  Experience Gaps  Overseas but Has Not  Included These Steps  in Its Workforce Plan State has taken steps to implement goals highlighted in the QDDR to  increase its reliance on Civil Service employees and retirees, and expand  mentoring to help address midlevel experience gaps overseas. To  expand the limited number of Civil Service employees filling overseas  positions, State began a pilot program to offer additional opportunities for  overseas assignments and eased requirements for conversions from Civil  Service to Foreign Service. State also hires retirees on a limited basis to  help fill gaps overseas. In addition, State began a pilot program offering a  workshop with mentoring for first-time supervisors overseas.",
      " However,  State\u2019s Five Year Workforce Plan does not include a specific strategy to  guide efforts to address midlevel gaps. State Has Taken Steps to  Expand the Use of Civil  Service Employees in  Midlevel Overseas  Positions State\u2019s first QDDR, released in 2010, highlighted the goal of expanding  the use of Civil Service employees to help close the midlevel experience  gap. The QDDR noted that State has a base of Civil Service employees  with significant experience and called for increasing opportunities for Civil  Service employees to fill overseas Foreign Service assignments and  increasing the number of Civil Service conversions to the Foreign  Service.",
      " A February 2011 report by the American Academy of Diplomacy  and the Stimson Center also recommended expanded use of Civil  Service employees to fill midlevel gaps.conducted a survey of its Civil Service employees and found a high level  of interest in serving overseas. About 75 percent of respondents  expressed interest in serving in some type of overseas assignment in  their careers and about 25 percent expressed interest in eventually  converting to Foreign Service, according to State officials. As a first step, State recently  The extent to which State currently draws on its pool of Civil Service  employees for overseas assignments is limited. From fiscal years 2009  through 2011,",
      " State placed 159 Civil Service employees in overseas  Foreign Service positions in temporary assignments. These are known as  \u201cLimited Non-Career Appointments\u201d (LNA). According to State officials,  many of these assignments fill midlevel positions. State\u2019s human capital  rules enable Civil Service employees (and other non-Foreign Service  employees) to serve as LNAs, normally for up to 5 years. duration of these assignments typically ranges from 1 to 3 years,  according to State officials. Many of these LNA assignments are for positions that the department has  identified as \u201chard-to-fill,\u201d meaning they lack sufficient qualified bidders  from among the ranks of the Foreign Service.",
      " In an announcement to the  department each May, State identifies hard-to-fill positions for which Civil  Service employees may apply. Most of these positions are at the midlevel. State listed 36 hard-to-fill positions in 2009, 74 in 2010, and 55  in 2011. Other common types of overseas LNA assignments for Civil  Service employees include positions in AIP countries, developmental  opportunities, and positions requiring specific expertise. Rules governing LNAs are covered in the Foreign Affairs Manual (3 FAM 2290) and  federal law (22 U.S.C. \u00a7\u00a7 3943, 3949). positions Civil Service employees leave behind.",
      " Affected bureaus must  guarantee that applicants will be placed into permanent Civil Service  positions within the same bureau when they return from their overseas  assignments. This requirement creates some reluctance on the part of  bureaus to approve applications for overseas assignments, according to  State officials. In addition, department officials noted that Civil Service  employees have concerns about losing future opportunities for desirable  Civil Service positions while serving overseas. Another challenge is that  State cannot always identify a sufficient number of qualified Civil Service  employees to apply for the overseas vacancies it seeks to fill. State  officials noted that hard-to-fill positions are typically not in the more  desirable locations,",
      " which they said contributes to limited interest among  qualified Civil Servants. In addition, it can often be difficult to match Civil  Service employees\u2019 qualifications with the needs of the open positions. The Human Resources Bureau began a pilot program in November 2011  to expand opportunities for Civil Service employees to serve in overseas  positions. It was intended to support goals highlighted in the QDDR to  enhance career development for midlevel Civil Service employees and  ease Foreign Service midlevel staffing gaps. The department identified 11  overseas positions at various posts to which qualified Civil Service  employees could apply. Most of these assignments are for midlevel  positions.",
      " The assignments in the pilot differ from the hard-to-fill  assignments in two key ways. First, these are not positions that Foreign  Service bidders initially passed over. Second, the re-employment rules  are more flexible, according to Human Resources Bureau officials;  affected bureaus do not have to hold a position for the Civil Service  employees who participate in the pilot. Instead, returning Civil Service  employees can be placed in a bureau different from the one they vacated. According to State officials, the department has agreed with AFSA to limit  the total to about 20 assignments at any one time during the pilot to  ensure that the program does not limit career development opportunities  for Foreign Service employees.",
      " The officials noted that Foreign Service  employees operate in an \u201cup-or-out\u201d personnel system, which requires  them to have sufficient experience and responsibilities to progress in their  careers. In addition, efforts to increase the number of Civil Service  assignments to Foreign Service positions must be consistent with State\u2019s  human capital rules, which state that the department\u2019s goal is to fill  Foreign Service positions with Foreign Service employees except under  special circumstances. The overseas positions in the pilot program  continue to be designated as Foreign Service positions and can be filled  by Foreign Service employees after the Civil Service employees complete  their assignments. Human Resources Bureau officials stated that they expect this pilot  program to help the department assess its ability to identify overseas  positions that match the skills and experience of potential Civil Service  applicants.",
      " It will also identify potential staffing impacts on affected  bureaus and posts, as well as career development needs of the Foreign  Service. However, according to the officials, the department has not  finalized plans for evaluating the results of the pilot program. They also  noted that it will be more than 2 years before the first set of assignments  is completed and they can begin to survey participants and stakeholders  to assess results of the pilot program. State\u2019s QDDR also included a goal of expanding opportunities for Civil  Service employees to convert to the Foreign Service to help fill  experience gaps overseas. The QDDR stated that, while all State  personnel can apply to enter the Foreign Service through the traditional  selection process,",
      " it is in the department\u2019s interest to offer more and  quicker pathways for qualified and interested Civil Service employees to  join the Foreign Service. However, State\u2019s Foreign Service Conversion  Program has strict eligibility requirements, which limit the number of  conversions. The program\u2019s application and review process resulted in  only three Civil Service applicants recommended for conversion in 2010  and four in 2011. State only opens positions for conversion that it projects to be in deficit or  otherwise approved by the Director General and lists them in an annual  cable that it circulates throughout the department. The department  convenes a review panel to confirm that applicants meet minimum  qualifications,",
      " which include 24 months in Foreign Service positions  abroad out of the previous 6 years; and 30 months of service\u2014 domestically or overseas\u2014in the desired skill code in the previous 6  years. The panel then determines if applicants have the skills and  experience necessary to perform successfully in the positions for which  they are applying. Applicants offered an opportunity to convert based on  the panel review must then submit a proctored writing sample, which  must earn a passing grade from the Foreign Service Board of Examiners  to be recommended for conversion. According to Human Resources Bureau officials, in 2011, State identified  88 Foreign Service generalist positions as open for conversion from Civil  Service,",
      " as well as Foreign Service generalist and specialist. Twenty-six  Civil Service applicants applied. Ultimately, the process resulted in seven  applicants given the opportunity to convert and four of the seven passing  the writing test requirement. Table 1 shows the number of applicants who  qualified at key stages in the process in 2010 and 2011. Human Resources Bureau officials noted that in 2011, the department  sought to ease the qualification requirements somewhat, including  reducing the number of months served overseas from 30 months to 24  months; however, the number of qualified applicants actually dropped  from 30 in 2010 to 26 in 2011.",
      " Beginning in 2012, the assessment  process will include a structured interview, along with the writing test, to  give candidates an additional means of demonstrating their skills and  competencies. State Hires Retirees for  Both Full-Time and  Temporary Overseas  Assignments, but Their  Use Is Limited Retirees can fill key roles at overseas posts, bringing with them a high  level of skills and experience, according to State officials. The department  has limited authority to hire retirees for full-time positions and also for  temporary assignments. State\u2019s QDDR noted that the department should  draw on its pool of retirees to help address its overseas midlevel gap.",
      " In  addition, the Stimson Center and American Academy of Diplomacy report  also recommended that State increase reliance on retirees. State hires retired Foreign Service and Civil Service employees to work  full-time with waivers from federal dual compensation rules, under certain  circumstances, to help fill workforce gaps overseas. In calendar year  2011, State approved 57 dual compensation waivers for 35 Foreign  Service retirees and 22 Civil Service retirees for overseas assignments.  Federal law requires that payment of a retiree\u2019s annuity terminates on the  date of re-employment except under circumstances in which State has  the authority to grant a dual compensation waiver.",
      " These circumstances  include staffing needs in AIP countries and emergency situations  involving a direct threat to life or property, or other unusual  circumstances. State officials stated that they would make greater use of dual  compensation waivers to draw from the pool of retirees to fill experience  gaps if their legal authority were expanded. However, other than State\u2019s  Office of Inspector General, the department has not formally sought  expanded congressional authority to offer waivers to hire Foreign Service  retirees. The Office of Inspector General is seeking separate  congressional authority for additional dual compensation waivers to help  meet its staffing needs, including filling positions at its overseas posts in  hardship locations,",
      " such as Amman, Jordan; Cairo, Egypt; and Kabul,  Afghanistan. State hires many more Foreign Service retirees for temporary, part-time  work than it does for full-time assignments. These retirees work on a  \u201cWhen Actually Employed\u201d schedule and are commonly referred to as  \u201cWAEs.\u201d WAEs do not fill vacant positions overseas but are an important  means of addressing workforce gaps, according to State officials. For  example, posts often rely on WAEs to fill staffing gaps during summer  rotations of Foreign Service employees, according to State officials.  Officials also noted that WAEs can be particularly helpful when short-term  needs arise requiring special skills and expertise,",
      " such as helping posts  prepare for a presidential visit or evacuating an embassy during a crisis.  Newer staff also can benefit from the experience and expertise that  WAEs share during their assignments. Federal rules, and high salary and travel costs, limit the extent to which  State uses WAEs. State bureaus typically hire them for short assignments  of 1 to 3 months. Federal law enables Foreign Service retirees to earn a  salary while continuing to receive their retirement annuity as long as their  total earnings do not exceed the greater of an amount equal to the basic  pay they earned when they retired or the highest annual rate of basic pay  for full-time employment in the position for which they have been re-",
      " employed. This limits the amount of time they can work in a calendar  year. According to State officials, WAEs also have a cap of 1,040 hours of  employment per calendar year. In addition to rules in federal statute that  limit their use, WAEs are also a relatively expensive option because of  their high salaries and travel costs, according to State officials from the  geographic bureaus and the Bureau of Consular Affairs\u2014the primary  users of WAEs. Table 2 shows the number of WAE appointments these  bureaus used in 2011 and the average duration of each appointment.  Individual bureaus maintain their own lists of retirees and hire them as  WAEs from their own budgets.",
      " State has no initiatives currently under  way to expand its use of WAEs. As part of its effort to address Foreign Service experience gaps, State\u2019s  QDDR included the goal of expanding existing mentoring programs and  piloting a new mentoring program for first-time supervisors. State  currently offers mentoring for entry-level Foreign Service employees and  situational mentoring, which offers advice for any State employee on a  specific activity or issue. In addition, State officials noted that less  experienced Foreign Service employees are increasingly being asked to  fill supervisory roles earlier in their careers than in the past, which raises  the need for targeting this group for additional mentoring.",
      " In September 2011, the Human Resources Bureau began a pilot program  offering training workshops designed to improve the skills of first-time  supervisors overseas. Mentoring, both at and following the training, is a  key component of the pilot workshops, according to bureau officials. The  pilot involved two 5-day workshops\u2014one in Fort Lauderdale, Florida, and  another in Frankfurt, Germany, delivered to a total of 49 first-time  supervisors from three of the department\u2019s geographic regions. The  workshops focused on performance management and basic leadership  skills. Retirees served as class mentors and established relationships  with the participants at the sessions.",
      " The mentors are expected to follow  up with the attendees for 1 year, with the possibility to travel to their  overseas posts, if warranted. According to Human Resources Bureau officials, the program included  follow-up surveys of attendees and their supervisors to assess the  usefulness of the workshops in improving participants\u2019 management style  and skills. The officials noted that the response among the participants  and their supervisors has been positive. State plans to conduct two more  sessions in September 2012 for first-time supervisors from the  department\u2019s other three geographic regions. State officials noted that the  pilot needs to be completed before they can determine the effectiveness  of the program.",
      " A potential constraint is the cost of sending officers to  these workshops. State Has Not Developed a  Strategy to Address  Midlevel Gaps Although State has undertaken efforts to carry out QDDR goals to  address midlevel gaps, the department has not developed a strategic  approach to guide these efforts. We have found in prior work that  developing a strategy to address staffing gaps and evaluating its success  contribute to effective workforce plans. State\u2019s Five Year Workforce  Plan outlines its human capital strategies; however, the plan lacks a  specific strategy for addressing midlevel experience gaps. In our prior  work, we developed a workforce planning model that suggests that,",
      " when  considering a strategy to address workforce gaps, agencies consider the  full range of flexibilities available under current authorities, as well as  flexibilities that might require additional legislation before they can be  adopted. State\u2019s efforts to draw on its pool of retirees and Civil Service  employees to fill midlevel gaps are examples of the use of such  flexibilities; however, it is not clear that State has developed a strategy to  take full advantage of its authority to use them. In addition, our workforce planning model suggests that, to evaluate  human capital strategies, agencies develop performance measures that  can be used to gauge progress toward reaching human capital goals.",
      "  State\u2019s Five Year Workforce Plan does not indicate how it will evaluate  efforts under way to address midlevel gaps. State plans to assess its two  pilot programs, but it has not developed performance measures to gauge  the potential impact of these efforts on midlevel gaps. Conclusions State faces persistent Foreign Service experience gaps at overseas  posts, particularly at the midlevels, and these gaps put its diplomatic  readiness at risk. State has traditionally relied on hiring new Foreign  Service employees to fill overseas gaps and significantly increased hiring  in fiscal years 2009 and 2010. However, those new hires will not be  eligible for promotion to the midlevels until at least fiscal year 2014 and  projections for future annual hiring increases have been reduced due to  budgetary constraints.",
      " As a result, State likely will continue to face  staffing and experience gaps for the foreseeable future. These gaps will  continue to affect diplomatic readiness as positions remain unfilled or are  staffed by Foreign Service employees whose experience does not match  the position requirements. In the meantime, State has taken steps to  implement goals highlighted in the QDDR to address midlevel overseas  gaps, including developing pilot programs for increasing the use of Civil  Service employees overseas and providing new workshops with  mentoring for first-time supervisors overseas. Although these efforts are  currently small in relation to the size of the overall gaps, their impact and  the extent to which they can be expanded in the future have yet to be  analyzed by State and are,",
      " therefore, unclear. Since State has not  developed a specific strategy for addressing midlevel gaps, it can neither  fully assess the success of its efforts to close these gaps nor determine  the optimal course of action for enhancing diplomatic readiness. Recommendation for  Executive Action To help guide State\u2019s efforts to address midlevel gaps in the Foreign  Service, we recommend that the Secretary of State direct the Bureau of  Human Resources to update its Five Year Workforce Plan to include a  strategy to address these gaps and a plan to evaluate the success of this  strategy. Agency Comments We provided a draft of this report to State for comment.  In its written  comments,",
      " reproduced in appendix III, State agreed with our  recommendation. State also provided technical comments, which we  incorporated throughout the report, 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\u2019s date. At that time, we will send copies to the Secretary of State  and other interested congressional committees. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact  me at (202) 512-",
      "8980 or courtsm@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 who made key contributions to this report  are listed in appendix IV. Appendix I: Objectives, Scope, and  Methodology In this report, we assess: (1) the extent to which the Department of  State\u2019s (State) overseas midlevel Foreign Service experience gaps have  changed since 2008 and (2) State\u2019s efforts to address these gaps. To assess the extent of the State\u2019s overseas midlevel Foreign Service  experience gaps and how these gaps have changed since 2008,",
      " we  reviewed GAO and State Office of Inspector General  reports, as well  as State workforce planning and budget documents and its Diplomacy  3.0 initiative;  collected and analyzed staffing data on all overseas Foreign Service  positions from State\u2019s Global Employees Management System  (GEMS) as of September 30, 2008, and October 31, 2011; and  interviewed officials in State\u2019s Bureau of Human Resources, Bureau  of Consular Affairs, and six regional bureaus regarding overseas  experience gaps. To determine the extent of overseas Foreign Service experience gaps,  we analyzed State staffing data. We compared the number of positions  that were vacant,",
      " filled with upstretch assignments, and filled at grade or  higher with the total number of authorized overseas positions. We did not  validate whether the total number of authorized overseas positions was  appropriate or met State\u2019s needs. We calculated total vacancy and  upstretch rates across all overseas Foreign Service positions for both the  2008 and 2011 data. We also calculated vacancy and upstretch rates for  both data sets by each of the following characteristics: level (i.e., entry-,  mid-, or senior-level); type (i.e., generalist or specialist); and function  (e.g., consular or information management). For 2011 data only,",
      " we  supplemented the GEMS data with additional State data on hardship  differentials and embassy and nonembassy rankings from State\u2019s  Overseas Staffing Models and also calculated vacancy and upstretch  rates by each of these characteristics. To calculate vacancy rates, we divided the total number of positions by  the number of vacant positions. To calculate upstretch rates, we divided  the total number of positions by the number of upstretch assignments. We  considered any assignment in which the grade of incumbent was at least  one grade lower than that of the position as an upstretch assignment, with  one exception: According to State officials, tenured Foreign Service  generalists with a position grade of 04 are not considered in an upstretch  assignment if they encumber a position with an 03 grade because  tenured 04 grade officers are expected to fill positions with an 03 grade,",
      " if  possible. We, therefore, did not consider tenured 04 grade officers to be  in an upstretch assignment when they filled positions graded as 03. We  considered senior-level positions at the Career Minister, Minister  Counselor, and Counselor level to be of a comparable grade and,  therefore, did not consider officers with any of these grades to be in an  upstretch assignment. According to State officials, the department does  not consider any employee in an entry-level position to be in an upstretch  assignment. However, for the purposes of our analysis, we defined any  assignment in which the position\u2019s grade is higher than the incumbent\u2019s  grade to be an upstretch assignment.",
      " Therefore, because State assigns  different grades to positions within the entry levels, we considered entry- level assignments where a position\u2019s grade was higher than the  employee\u2019s grade to be upstretch assignments. We eliminated a small number of positions from our analysis of each data  set because we could not clearly or completely identify where the  positions were located. We also eliminated 57 Security Protective  Specialist positions from the 2011 data because, according to State  officials, it was a new job category and was not intended for permanent  Foreign Service Officers, but rather employees hired under short-term  limited noncareer appointments. In total, we did not use 88 positions,",
      " or  about 1 percent of the total, from the September 30, 2008, data and 207  positions, or about 2 percent of the total, from the October 31, 2011, data,  which we determined did not substantially affect our findings. We also conducted an analysis of the likelihood of overseas positions  being vacant or filled through upstretch assignments based on the various  characteristics described above. For a detailed discussion of the  methodology and results of that analysis, see appendix II. We obtained staffing and position data from State\u2019s GEMS database.  Since we have previously checked the reliability of this database,",
      " we  inquired if State had made any major changes to the database since our  2009 report. State indicated that it had not made major changes to the  system. We also tested the data for completeness, confirmed the general  accuracy of the data with select overseas posts, and interviewed  knowledgeable officials from the Office of Resource Management and  Organizational Analysis concerning the reliability of the data. Data from  Afghanistan, Iraq, and Pakistan (AIP) posts often show higher vacancy  rates than actually exist at the post; however, it does so because State  relies heavily on short-term assignments to fill positions in these  locations.",
      " These short-term assignments do not show up in GEMS, and  the position, therefore, appears vacant. Positions in GEMS represent a  need for full-time, permanent Foreign Service employees, and, therefore,  we determined that the GEMS data accurately reflect State\u2019s ability to fill  positions in these locations with full-time, permanent Foreign Service  employees. Additionally, because State often pulls staff from other  overseas assignments to fill short-term temporary assignments in AIP  countries, the vacancy rate for all overseas positions is most accurately  captured when all posts are included. Therefore, based on our analysis of  the data and discussions with the officials,",
      " we determined the data to be  sufficiently reliable for our purposes. However, when referring specifically  to vacancy rates in AIP countries, we reference other State sources,  which include positions filled through both permanent and temporary  assignments. To assess State\u2019s approach to addressing midlevel Foreign Service gaps  through expanded use of Civil Service employees, retirees, and  mentoring, we  reviewed GAO and State Office of Inspector General  reports;  reviewed relevant State documents, such as State\u2019s Quadrennial  Diplomacy and Development Review (QDDR), State\u2019s Five Year  Workforce Plan, and the Bureau of Human Resources\u2019 Bureau  Strategic and Resource Plan;",
      "  reviewed federal laws, policies, and regulations governing Limited  Non-Career Appointments (LNA) of Civil Service Employees,  conversion from Civil Service to Foreign Service, and hiring of retired  Foreign Service and Civil Service annuitants; and  interviewed officials in State\u2019s Bureau of Human Resources, Bureau  of Consular Affairs, and six regional bureaus, the American Foreign  Service Association, and the American Academy of Diplomacy  regarding overseas experience gaps and the potential to address  gaps through the use of Civil Service, retirees, and mentoring. We collected and analyzed data on the retirees hired with dual  compensation waivers in calendar year 2011.",
      " We also collected and  analyzed data on the use of retirees hired for temporary, short-term  assignments, referred to as \u201cWhen Actually Employed\u201d (WAE) in fiscal  year 2011 from each of the six regional bureaus and the Bureau of  Consular Affairs. We analyzed that data based on the number of  assignments made, rather than the number of retirees used, as State  officials noted that some individuals may be used in multiple assignments.  In addition, we collected and analyzed data on overseas LNA  assignments of Civil Service employees for fiscal years 2009 through  2011 from State\u2019s Bureau of Human Resources.",
      " Because these  assignments may be for multiple years, the number of assignments made  does not necessarily reflect the number of Civil Service employees  serving overseas at any one time. We also collected data on the results of  State\u2019s 2010 and 2011 Foreign Service Conversion Program, including  the number of positions available, the number of Civil Service applicants,  and the number offered conversion opportunities. We found the data on  the use of retirees and Civil Service employees overseas to be sufficiently  reliable for our purposes. We focused only on efforts related to expanding  the use of Civil Service employees, retirees, and mentoring because they  were highlighted in State\u2019s QDDR as key means of addressing overseas  midlevel gaps.",
      " To supplement our other analysis, we met with officials in Amman,  Jordan; Kyiv, Ukraine; New Delhi, India; Santo Domingo, Dominican  Republic; and Sao Paulo and Brasilia, Brazil, to obtain firsthand  knowledge about experience gaps and use of Civil Service, retirees, and  mentoring at overseas posts. We conducted this work in conjunction with  a separate study on visa fraud and selected posts that met criteria  established for both studies, including the size of staffing gaps and the  level of visa fraud. We conducted this performance audit from June 2011 to June 2012 in  accordance with generally accepted government auditing standards.",
      "  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix II: Analysis of Factors Associated  with Vacancies and Upstretch Assignments In this appendix, we describe the methods we used to determine what  factors were related to whether positions at the State Department were  vacant as of October 2011 and those that were filled by upstretch  assignments\u2014employees whose grades were lower than the grades of  the positions filled.",
      " We first considered a set of bivariate tables (or two- way cross-classifications) that indicated what percentage of positions  were filled and left vacant, across categories that reflected  the level of the position (entry level, midlevel, and upper level);  the hardship category associated with the position (least, medium,  and greatest);  the type of position (generalist versus specialist);  the Overseas Staffing Model ranking and type of post where the  position was located (embassies ranked 1 or 2 were combined and  contrasted with embassies ranked 3, 3+, 4, 5,",
      " 5+, and nonembassies  of any rank);  region (Africa, East Asia and the Pacific, Europe and Eurasia, Near  East, South and Central Asia, and Western Hemisphere); and whether the position was in Afghanistan, Iraq, or Pakistan (collectively  referred to as AIP) or elsewhere (non-AIP). We then calculated odds and odds ratios from the observed percentages  in these tables, which allowed us to summarize the differences in the  likelihoods of positions remaining vacant across the different types of  positions, and conducted a series of bivariate and multivariate regression  analyses to estimate the significance of those differences when we  considered each of these six factors one at a time,",
      " when we considered  five of them simultaneously (all but AIP), and finally when we considered  all six of them simultaneously. Finally, we conducted parallel analyses  that involved looking at the same types of two-way tables and estimating  the same bivariate and multivariate regression models to determine,  among those positions that were filled, whether they were filled by  upstretch assignments as opposed to officers at or above grade. We  describe these analyses as follows. The first three columns of numbers in table 3 show the percentage of  positions that were filled and vacant across the categories of the six  factors just described, and the numbers of positions in each category on  which those percentages were based.",
      " A slightly smaller percentage of  upper-level positions than entry-level positions were vacant (12.6 percent  versus 14.9 percent), and a much larger percentage of the positions in  the greatest hardship category (20.5 percent) than in the least hardship  category (10.4 percent) were left vacant. While there was little difference  between generalist positions and specialist positions, there were some  sizable differences across different posts with different rankings, with  positions in the highest-ranked embassies (20.9 percent) and in  nonembassies (16.4 percent) showing the highest percentages of  vacancies.",
      " Higher percentages of positions in the Near East (22.3  percent) and South and Central Asia (24.2 percent) were left vacant  compared with other regions, and positions in AIP countries were much  more likely to be vacant than those in non-AIP locations (39.5 percent vs.  11.4 percent). In the last two columns of table 3, we show the odds on positions being  vacant, and odds ratios that indicate the proportional differences in those  odds across the different categories of positions. The odds on positions  being vacant are calculated by dividing the percentage of positions that  are vacant by the percentages that are filled,",
      " within each of the categories  of the different positions. For entry-level positions, for example, we divide  14.9 by 85.1 to obtain 0.18, which indicates that 0.18 positions were  vacant for every one that was filled or, alternatively, that 18 were vacant  for every 100 that were filled. Similar calculations for midlevel and upper- level positions yield slightly smaller odds (equal to 0.17 and 0.14,  respectively), and odds that differ quite substantially across other  categories of positions, such as those with the greatest hardship (0.26)  versus least hardship (0.",
      "12), and those in South and Central Asia (0.32)  versus the Western Hemisphere (0.13). The odds ratios in the final column of table 3 indicate the proportional  differences in the odds of positions remaining vacant across the  categories of each of the position characteristics. To estimate these odds  ratios, we choose one category of each characteristic as the referent  category (indicated by REF in the table), and divide the odds for the other  categories by the odds for the referent category. For example, we chose  midlevel positions as the referent category with respect to position level,  divided 0.",
      "18 and 0.14 by 0.17, and the resultant odds ratios indicate that  entry-level positions had slightly higher odds of remaining vacant than  midlevel positions, by a factor of 1.04, while upper-level positions had  slightly lower odds than midlevel positions of remaining vacant, by a  factor of 0.86. Similar calculations using the different categories of the  other position characteristics reveal that positions with greatest and  medium hardship were more likely to be vacant than those with least  hardship, by factors of 2.22 and 1.36, respectively, while specialist  positions had only slightly higher odds than generalist positions of  remaining vacant,",
      " by a factor of 1.07. Also, all of the lower-ranked  embassies had roughly half or less than half the odds of embassies  ranked 5+ of remaining vacant, and nonembassies had odds that were  lower than the highest-ranked embassies by a factor of 0.74. Finally,  positions in Africa had lower odds on remaining vacant than positions in  the Western Hemisphere (by a factor of 0.78), positions in East Asia and  the Pacific and in Europe had odds that were very similar, and positions  in the Near East and South and Central Asia had higher odds on  remaining vacant than positions in the Western Hemisphere,",
      " by factors of  2.25 and 2.51, respectively. As the final multivariate model in table 4  shows, some of these regional differences were because AIP countries  were more than five times as likely as those in other areas to be vacant. Odds ratios identical to those just discussed, apart from slight rounding  error, are shown in the first column of table 4. The unadjusted odds ratios  in the first column of table 4, however, were estimated using a series of  bivariate logistic regression models, which allow us to test whether the  different contrasts specified by the various odds ratios are significantly  different than 1.",
      " Significant odds ratios are bolded in the table, and we  can see the unadjusted ratios reflecting the differences in the odds on  positions remaining vacant across position level categories and between  generalist and specialist positions are not significant; in addition, the  differences between positions in the East Asia and Pacific region, Europe,  and the Western hemisphere are not significant. All of the other  unadjusted (or bivariate) odds ratios are significant, though our judgment  about both the size and significance of these differences is only tentative  since they are unadjusted and fail to take into account that the different  position characteristics\u2014for example, hardship level and region\u2014may be  related to one another and,",
      " as such, the estimated unadjusted effect of  one characteristic may be accounted for by the effect of another. In the middle column of the table, we show the results of re-estimating  these odds ratios using a multivariate model that estimates the effects on  positions remaining vacant of all of these factors simultaneously, except for  the AIP indicator. Under this model, most of the effects remain significant,  though the difference between nonembassy positions and embassy  positions is diminished and insignificant, and the difference between entry- level and midlevel positions increases and becomes significant. In the final column, we show the results of re-",
      "estimating these odds ratios  using a multivariate model that estimates the effects of all six factors  simultaneously, including the war zone indicator. As can be seen, the  adjusted difference between AIP and non-AIP positions is sizable (OR =  4.12), and allowing for that difference accounts for all of the differences  between embassies of different ranks and nonembassies, and most of the  differences between regions (the exception being the difference between  positions in Africa and the Western Hemisphere). In summary, when all  factors are considered simultaneously and the associations between  characteristics are taken into account, the differences that are statistically  significant are as follows:",
      " entry-level positions have higher odds of remaining vacant than  midlevel positions, by a factor of 1.36; positions in the greatest hardship and medium hardship categories  are more likely than those in the least hardship category to remain  vacant, by factors of 1.44 and 1.22, respectively; positions in Africa are less likely to remain vacant than those in the  Western hemisphere, by a factor of 0.67; and AIP positions are slightly more than four times as likely to remain  vacant as non-AIP positions. Table 5 shows similar bivariate results in which these six characteristics  are cross-classified by whether the position was filled by employees  whose grades were lower than the grades of the position they filled,",
      " and  table 6 shows the significant and insignificant odds ratios from bivariate  and multivariate models used to estimate the effects of those  characteristics on this outcome. While there is no need to labor over a  discussion of all of the percentages and odds and odds ratios in table 5,  which show the unadjusted and sometimes sizable differences across  categories of position in the likelihood of being filled by a lower-graded  employee, they are there for the reader to see. Our bottom-line findings,  from the multivariate model coefficients in the final column of table 6 in  which all position characteristics are considered simultaneously and the  effect of each is estimated net of the others,",
      " are as follows: Upper-level positions are more than twice as likely as midlevel  positions to be filled by upstretch assignments. Positions in the greatest hardship and medium hardship categories  are more likely than those in the least hardship category to be filled by  lower-level employees, by factors of 1.81 and 1.47, respectively. Specialist positions are less likely than generalist positions to be filled  by employees whose grades are lower than the positions, by a factor  of 0.75. Positions in East Asia and the Pacific and Europe are less likely to be  filled by upstretch assignments than those in the Western  hemisphere,",
      " by factors of 0.80 and 0.72, respectively. The lowest-ranked embassies (ranks 1 and 2) are only about half as  likely as the embassies ranked 5+ to be filled by upstretch  assignments, while embassies with other ranks and nonembasssies  are not significantly different from embassies ranked 5+. AIP positions are half as likely to be filled by upstretch assignments as  non-AIP positions. Appendix III: Comments from the  Department of State Appendix IV: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the contact named above,",
      " Anthony Moran, Assistant  Director; Howard Cott; Kara Marshall; Grant Mallie; Doug Sloane; Martin  De Alteriis; Karen Deans; and Grace Lui provided significant contributions  to the work.\n"
    ],
    "length": 13037,
    "hardness": null,
    "role": null
  },
  {
    "id": 66,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed the National Aeronautics and Space Administration's (NASA) plans for funding its Earth Observing System (EOS) and developing EOS-related basic research, focusing on: (1) the current number of EOS science investigations; (2) researchers' views on whether changes to EOS have adversely affected their ability to carry out their interdisciplinary earth sciences investigations; and (3) the Earth System Science Pathfinder program and its potential impact on future EOS investigations. GAO found that: (1) NASA funds 29 interdisciplinary science investigations that use data from EOS instruments in more than one earth science discipline; (2) to expand the EOS research community, NASA plans to maintain an open data access policy, add investigations, reevaluate current science investigations, and recruit new investigators; (3) most EOS interdisciplinary scientists believe that EOS budgetary reductions have little or no effect on their work; and (4) NASA plans to use anticipated savings resulting from improved technology to fund more investigations and request a total of $200 million over the next 4 fiscal years for its Earth System Science Pathfinder program.\n",
    "docs": [
      "Background EOS is the centerpiece of NASA\u2019s Mission to Planet Earth, whose overall goal is to understand the total earth system (air, water, land, life, and their interactions) and the effects of natural and human-induced changes on the global environment. EOS has three major components: (1) a constellation of satellites designed to collect at least 15 years of key climate-related data; (2) a data and information system designed to operate the satellites and process, archive, and distribute the data; and (3) teams of scientists who develop algorithms for converting sensor data into useful information and conduct basic research using the information. The satellites, and data and information system,",
      " which will absorb most of the program\u2019s funding, provide the researchers with measurements that will enable them to address established research priorities. EOS is designed to make 24 types of long-term measurements of solar irradiance and the earth\u2019s atmosphere, land cover, ice sheets, and oceans from orbiting spacecraft. By 2002, when the full constellation will be in orbit, EOS will be generating data from 25 instruments on at least  10 spacecraft. Over the 20-year EOS data-collection phase, about  80 instruments will be launched on more than 30 satellites. As currently planned, the last EOS satellite will cease operations in 2020.",
      " EOS measurements will support researchers\u2019 efforts to address Mission to Planet Earth\u2019s research priorities: (1) determine the causes and consequences of changes in atmospheric ozone; (2) improve seasonal-to-interannual climate prediction; (3) determine the mechanisms of long-term climate variability; (4) document changes in land cover, biodiversity, and global productivity; and (5) understand earth processes that can lead to natural disasters and develop risk assessment capabilities for vulnerable regions. Mission to Planet Earth is NASA\u2019s contribution to the governmentwide U.S. Global Change Research Program. An important goal of these interconnected efforts is to improve the predictive capability of numerical earth system models,",
      " especially global climate models that investigate and predict the general circulation of the atmosphere and ocean. NASA has identified a potentially large and diverse \u201cuser community\u201d for EOS-related information. Members of this community could be, for example, educators, businessmen, and public policymakers. The focus of our analysis, however, is the EOS basic research community, by which we mean NASA\u2019s currently funded EOS interdisciplinary science and instrument investigations. In our June 1995 report, we estimated that funding requirements of the EOS baseline program would total about $33 billion for fiscal years 1991 to 2022. This estimate was developed for the program described in NASA\u2019s 1995 EOS reference handbook and included costs for satellites,",
      " launch services, data systems, science, construction of facilities, and civil service personnel. However, NASA later recognized that this program was not affordable in an environment of declining budgets and began studying ways to cut costs by using advanced technology and increasing collaboration with other agencies, international partners, and the commercial sector. NASA intended to use these future savings to fund more science under EOS and to reduce the program\u2019s total cost. Over the past several years, the Congress has progressively reduced NASA\u2019s planned spending on EOS for fiscal years 1990 to 2000 from $17 billion to $7.25 billion. In response, NASA changed EOS in 1991 and 1992 from a complete earth system measuring program that would have supported a wide array of global change investigations to a measurement program that will primarily support investigations of global changes to the earth\u2019s climate.",
      " For example, NASA dropped the measurement of upper atmospheric chemistry and solid earth processes. Other changes followed in order to further adjust EOS to its progressively lower budget profile through 2000. NASA officials stated the current planned spending for EOS through 2000 is about $6.8 billion. The administration\u2019s fiscal year 1997 request for Mission to Planet Earth is $1.402 billion, of which $846.8 million is for development of EOS\u2019 data and information system, spacecraft, instruments, and algorithms. NASA\u2019s request includes $47.5 million for EOS interdisciplinary science. According to NASA\u2019s 5-year plan based on its fiscal year 1996 budget submission,",
      " NASA intends to increase spending on EOS interdisciplinary science to $73.2 million per year in fiscal year 2000. NASA\u2019s Strategy for Developing EOS\u2019 Basic Research Community Like EOS-related space systems and information systems, the development of the EOS basic research community that will conduct interdisciplinary global climate change research requires planning. The current number of EOS investigations funded by NASA is relatively small, and NASA recognizes that it needs to increase their number, broaden the membership of EOS science teams, and take other steps to develop and sustain an EOS-era research community. NASA\u2019s strategy for developing the EOS research community is partly based on increased funding. In 1995,",
      " it began efforts to fund additional investigations and to reevaluate the current investigations. NASA\u2019s ability to add more investigations is uncertain within its expected future budgets, especially if it must depend on savings from improved technology and increased collaboration with others. Current Number of EOS Investigations Is Relatively Small The EOS program is currently funding 29 interdisciplinary science investigations that were selected in 1989 and 1990 to use data from EOS instruments in more than one earth science discipline, such as geology, oceanography, meteorology, and climatology. Scientists associated with these investigations serve as members of the Investigator Working Group, developing detailed science plans and assisting NASA in optimizing the scientific return of the EOS mission.",
      " Currently, these 29 investigations are led by 31 interdisciplinary principal investigators (2 of the interdisciplinary science investigations have coprincipal investigators). There are 354 coinvestigators associated with the 29 interdisciplinary science investigations, as well as 20 instrument principal investigators/team leaders and 197 other instrument team members. The number of EOS investigations is relatively small when compared with (1) the number of currently funded investigations associated with two pre-EOS missions\u2014the Upper Atmosphere Research Satellite (UARS) and the U.S.-French Oceanography Satellite Ocean Topography Experiment (TOPEX/Poseidon)\u2014to their EOS-era counterparts and (2) the ratio of the number of investigations to the raw data acquisition rate expected from instruments on EOS spacecraft to the number of investigations and raw data acquisition rates of UARS and TOPEX.",
      " The comparison is based on the following EOS spacecraft and instruments: AM; PM; Chemistry mission (CHEM); Landsat-7; Radar ALT; Laser ALT; Stratospheric Aerosol and Gas Experiment (SAGE) III on space station; and Solar Stellar Irradiance Comparison Experiment (SOLSTICE), Active Cavity Radiometer Irradiance Monitor (ACRIM), and Clouds and Earth\u2019s Radiant Energy System (CERES) on flights of opportunity. The data rates of the EOS spacecraft and UARS/TOPEX are not strictly comparable because the instruments on the latter satellites do not directly observe the Earth.",
      " Imaging instruments are more data intensive than nonimaging instruments. However, data rate comparisons can serve as a rough indicator of the magnitude of potential research opportunities afforded by EOS and two pre-EOS-era missions. The National Aeronautics and Space Administration (NASA) used similar comparisons in its 1993 and 1995 editions of the EOS reference handbook. In the 1995 edition, NASA graphically compared the combined data rates of EOS-era satellites with the combined data rates of numerous pre-EOS-era (including UARS and TOPEX) and foreign satellites to demonstrate that the magnitude of potential research opportunities for EOS is much greater than for other combinations of Earth-sensing satellites.",
      " In its handbooks, NASA depicted the data streams flowing from the two groups of satellites to \u201c10,000 users\u201d in the 1993 edition and a more vaguely defined \u201cuser community\u201d in the 1995 edition. In place of the broadly defined \u201cusers\u201d and user community, we used the actual number of currently funded EOS, UARS, and TOPEX investigations to illustrate (1) that the magnitude of potential EOS basic research opportunities is much greater than those afforded by UARS and TOPEX (as indicated by their respective data rates) and (2) that the number of currently funded EOS investigations is small compared to the number of currently funded UARS and TOPEX investigations.",
      " UARS, launched in September 1991, consists of 10 instruments that are measuring the composition and temperature of the upper atmosphere, atmospheric winds, and energy from the sun. The UARS science investigations are led by 22 teams. NASA broadened the UARS science investigations in 1994 by selecting 40 additional teams led by \u201cguest\u201d investigators. It is also funding correlative measurement investigations led by 38 teams to develop an independent database to validate and complement measurements made by UARS\u2019 instruments. In the EOS era, solar energy and atmospheric chemistry measurements will be made principally by the ACRIM, SAGE, and SOLSTICE instruments and the CHEM spacecraft.",
      " Currently, only 12 instrument and interdisciplinary science investigations are associated with these instruments and the CHEM spacecraft. In contrast, UARS supports research conducted by  62 instrument and science teams. TOPEX was launched in August 1992 to study the circulation of the world\u2019s oceans. The primary instrument is an altimeter that measures the height of the satellite above the ocean, wind speed, and wave height. NASA and its French partner, Centre National d\u2019Etudes Spatiales, selected 38 science investigations. The 38 TOPEX-related science teams have about 200 members, and NASA plans to solicit additional investigations. In the EOS era,",
      " the follow-on mission to TOPEX is Radar-ALT. An instrument team has not yet been selected, but only 7 of the 29 interdisciplinary science investigations currently plan to use Radar-ALT data. There is a large difference between the number of (1) currently funded EOS investigations and the expected volume of data from EOS and (2) the currently funded UARS and TOPEX investigations and volume of data of these two pre-EOS missions. The combined number of the UARS and TOPEX science investigations is a little larger than the current number of EOS investigations, even though EOS\u2019 data rate (our indicator of the magnitude of potential research opportunities)",
      " is close to 1,000 times greater than the combined data rate of UARS and TOPEX. EOS will provide up to 42 million bits of data per second to 49 interdisciplinary science and instrument investigations. The corresponding ratio for UARS and TOPEX is a total of 48 thousand bits of data per second to 60 investigations. NASA\u2019s Strategy to Expand EOS Research Community The National Research Council\u2019s Board on Sustainable Development reviewed the U.S. Global Change Research Program, Mission to Planet Earth, and EOS in 1995 and stated that one of the \u201cfundamental guiding principles\u201d of the U.S. Global Change Research Program is an \u201copen and accessible program\u201d that will \u201cencourage broad participation\u201d by the government,",
      " academic, and private sectors. Some NASA officials and EOS investigators are concerned that the Earth sciences research community perceives EOS\u2019 science teams as a \u201cclosed shop,\u201d whereby membership on a current team is a precondition for conducting future EOS-related research. To counter this perception, NASA\u2019s current strategy to expand the EOS research community involves (1) an open data access policy and (2) efforts to broaden and change the current community by adding investigations, reevaluating the current science investigations, and recruiting new investigators. EOS Data Policy A vital part of the EOS data policy is that EOS data will be available to everyone: there will be no period of exclusive access for funded investigators.",
      " This has not always been NASA\u2019s policy. On some past Earth observing missions, funded investigators had exclusive use of the data for an extended period of time. For example, the original investigators associated with the Upper Atmosphere Research Satellite had exclusive access to the first year\u2019s data for up to 2 years. EOS data users as a rule will not be charged more than the cost of distributing data to them. The data policy contemplates a variety of potential user groups, not all of whom will be engaged in basic research. In 1995, NASA sponsored a conference to better define the user groups. The conferees identified 12 potential user groups,",
      " of which only 3 were primarily composed of scientists. The others included commercial users, resource planners, and educational groups. NASA officials stated that about 10,000 Earth scientists might use EOS-related data. Even with the large size of this potential research community and the open-access data policy, the sufficiency of EOS investigations might appear to be the least of NASA\u2019s problems. Even though 10,000 Earth scientists may be potential users of EOS data, they still need to be funded to conduct basic research. According to NASA officials, as a general rule, for this type of work, scientists analyze data when they are paid to do so.",
      " We sought to confirm this observation by reviewing the authorship of  172 journal articles about 2 pre-EOS-era satellites\u2014UARS and TOPEX/Poseidon. Our review showed that publicly funded investigators wrote all but 10 of the articles. We reviewed the authorship of UARS and TOPEX articles published in scientific journals from the approximate dates of launch through May 1995; these articles were selected from a database consisting of about 4,500 periodicals. The principal investigators wrote 123 (72 percent) of the 172 articles. In addition, we identified two other kinds of investigators probably associated with the principal investigators and/or government funded\u2014that is,",
      " investigators associated with the principal investigator\u2019s institution (most often a university or government agency) or another government agency. These \u201cassociate\u201d investigators wrote 39 (23 percent) of the journal articles. Not all people who get Earth sciences data use it to do basic research. For example, from January through May 1995, NASA\u2019s Jet Propulsion Laboratory sent 55,521 TOPEX-related data files to 28,495 requesters through the Internet. This figure does not necessarily represent separate requesters. The laboratory does not know how these requesters use TOPEX data, but according to a laboratory official, data accessed through the Internet is generally not sufficient for doing basic research.",
      " Investigators want less processed data for this type of research. Adding Investigations NASA originally solicited proposals for EOS interdisciplinary science and instrument investigations in January 1988. The solicitation noted that NASA planned to fund 10 to 20 science investigations, with other selections possible before the launch of the first EOS platform, then scheduled for late 1995. NASA received 458 proposals in response to its solicitation, including about 250 for interdisciplinary science investigations. As previously noted, 29 interdisciplinary science and 20 instrument investigations are being funded by NASA and its international partners. The lifetime of the science investigations was to extend for 4 years beyond the launch of the first satellite,",
      " or until 1999. In other words, NASA intended to add to this first group of investigations over a 10-year period (1989 to 1999). However, at a minimum, the lifetime of this first group of investigations has been extended to 13 years (1989 to 2002, including 4 years beyond AM-1\u2019s 1998 launch date). NASA\u2019s plan to supplement the first group of science investigations with a second group within 6 years was not too optimistic given its funding expectations at that time. NASA\u2019s EOS mission planning (1982-87) took place during a time of expanding resources.",
      " During the 1980s, NASA\u2019s funding increased each year, essentially doubling from about $5 billion to $10 billion between fiscal years 1981 and 1989. NASA has recognized that more EOS investigations are needed, and last year it took a first step to add more. NASA solicited proposals in September 1995 to address, among other things, specific interdisciplinary science issues that are not well covered by existing NASA-funded investigations. It received 134 interdisciplinary science proposals and hopes to add 20 to 25 investigations with grants of about $250,000 to $400,000 per year for a period of up to 3 years.",
      " NASA is funding the interdisciplinary science part of the September 1995 solicitation with a $9-million \u201cfunding wedge\u201d created, in part, from reductions in the previously planned funding levels for some existing EOS investigations. According to a NASA official, no new money will be used to fund these investigators. It remains to be seen if NASA\u2019s ability to generate future savings in the program will become a major factor in increasing the number of EOS investigations. Reevaluating Investigations Although potentially useful over the longer term, these grants will not immediately increase the number of EOS investigations in the near term because the announcement largely precludes investigators from analyzing data from the first EOS mission,",
      " AM-1, which is now scheduled for launch in 1998. Instead, NASA is asking for proposals on interdisciplinary research that primarily uses existing data sets from past satellite missions and field experiments.The nature and membership of the EOS science teams has largely remained unchanged for 6 years. According to NASA officials, this longevity has created a perception among some Earth scientists that currently funded investigators constitute a \u201cclosed shop.\u201d NASA attempted to correct this perception by conducting an internal program review in 1992 and 1993 and an external peer review in 1995 and 1996. The review by EOS investigators\u2019 peers in the Earth sciences research community is not yet finished,",
      " but it could lead to the possible deselection and recompetition of some EOS interdisciplinary science teams. NASA opted for the peer review, rather than have all the current investigations reevaluated as part of a new solicitation for proposals. NASA\u2019s 1992-93 program review found weaknesses in many interdisciplinary science teams. The reviewers generally found that only 30 percent of 23 investigations could be rated \u201csuccessful\u201d in terms of science-related assessment measures. They also noted that \u201cmost teams need work in documenting their scientific progress, plans, and the policy relevance of their research to the Earth Science community, as well as to NASA.\u201d The reviewers specifically noted that 67 percent (of 24 teams)",
      " had poor management plans, 61 percent (of 23 teams) had a less than satisfactory publication record, and 57 percent (of 23 teams) needed to improve their contacts with the EOS instrument teams. The review concluded that \u201cfor most teams, the biggest factor hindering their success is their lack of a good management plan\u2014teams that do not have their own house in order will not benefit from increased collaborations\u201d with other interdisciplinary and instrument teams. In October 1994, the Science Executive Committee of the EOS Investigator Working Group endorsed the need for a peer review and possible turnover of teams, if this would enhance the quality of EOS investigations.",
      " The Committee, however, rejected the idea that the existing investigations should be evaluated through a new competition. It noted that a new competition could cause a loss of credibility with EOS supporters and that many interdisciplinary science teams had committed themselves \u201cfar beyond\u201d just their science tasks. In contrast, NASA struck a different balance between continuity and change in the pre-EOS-era U.S.-Japan Tropical Rainfall Measuring Mission. The goal of the spacecraft\u2019s three principal instruments is to measure rainfall more accurately than before, particularly over the tropical oceans. The science of a long-term investigatory group was reevaluated after 3 years by holding a new funding competition for this program.",
      " NASA and Japan\u2019s National Space Development Agency first solicited research proposals in 1990 for a possible launch in 1994. Both agencies selected a total of 35 investigators. The two space agencies in October 1993 again solicited research proposals for a launch now scheduled for 1997. The space agencies selected 27 of the original investigators and added 12 new investigators to the science team. Recruiting New Investigators The long-term growth of the EOS research community depends, in part, on NASA\u2019s ability to recruit graduate students and newly graduated Earth scientists to use remotely sensed data. NASA supports prospective researchers in the Earth sciences through the graduate student Global Change Fellowship program.",
      " Successful candidates can be funded for up to 3 years, at $20,000 per year, primarily for tuition support and living expenses. NASA supported 112 fellowships for the 1993-94 academic year. In September 1995, NASA also established a new investigator program as part of Mission to Planet Earth and solicited proposals for 10 to 15 interdisciplinary investigations from recent Ph.D. recipients. The proposed investigations must be based on data from existing satellite missions. NASA received 65 proposals in response to this solicitation. Most EOS Interdisciplinary Scientists Say Their Planned Work Is Not Severely Affected by Budgetary Turbulence while some of the multi-year reductions may be accomplished without serious effect on the program,",
      " it must be stated that the achievement of several essential elements (e.g., continuity of observations for 15 years) of the program are now at significantly greater risk. Despite this apprehension, most interdisciplinary science investigators have experienced or expect little or no effect of budgetary turbulence on their own research. In the 1992-93 program review, NASA\u2019s investigators were generally optimistic that they could withstand EOS\u2019 continuing budgetary turbulence. In 1995, investigators reaffirmed this optimism. Investigators\u2019 Perception of Program Changes in 1992 and 1993 As part of the 1992-93 program review, NASA asked EOS\u2019 interdisciplinary science principal investigators to evaluate the effect changes to EOS would have on their work.",
      " The reviewers classified the 23 responding investigators\u2019 remarks as follows: no effect (11 investigators, 48 percent); minor effect (8 investigators, 35 percent); and major effect (4 investigators, 17 percent). The program review followed the cancellation of three major EOS instruments over several years: Laser Atmospheric Wind Sounder (observation of lower atmospheric winds); High-Resolution Imaging Spectrometer (identification of surface composition); and Synthetic Aperture Radar (high-resolution global measurements of the Earth\u2019s surface). Whether scientists planned to use a canceled instrument was a major part of how they perceived the impact on their work. Some investigators also cited changes to their ongoing research resulting from little or no growth in most of their fiscal year 1994 budgets.",
      " According to a NASA official, only seven investigations received as much as a 10-percent increase in their 1994 budget above the amount for fiscal year 1992. One investigator, citing a flat budget for 1994, said that as a result, coinvestigators could not give full attention to EOS-related research and that it was \u201cdifficult for us to contemplate an accelerated or broadened attack on the global change problems we are addressing.\u201d Another investigator noted that such a budget meant that \u201csome research tasks have to be trimmed\u201d and would not \u201callow much flexibility in terms of new ideas and initiatives.\u201d Investigators\u2019 Perception of Program Changes in 1995 In 1995,",
      " NASA again asked the interdisciplinary science principal investigators to assess how changes over the previous 3 years to the EOS program had affected their future and ongoing research. The scientists cited the same mix of concerns as they had previously\u2014namely, the loss of several instruments and lack of growth in their funding. One investigator noted that a 20-percent budget reduction in 1994 \u201cdecimated our attempts to carry out field studies in collaboration with  team members.\u201d His view, however, was unique. Most investigators reported that the changes had so far created only relatively minor problems that could be adequately resolved. A NASA official told us that a reason for investigators\u2019 optimism is that NASA officials consciously tried to minimize the impact of budget reductions on EOS-related science.",
      " New Earth System Science Pathfinder Program: Implications for EOS Science Funding Starting in 1996, NASA plans to solicit additional Earth science research through a new Earth System Science Pathfinder program. This effort will be based on data sets collected by new satellite missions. According to NASA officials, the Pathfinder program is intended to develop quick turnaround, low-cost space missions for high priority Earth sciences research not being addressed by current programs, including EOS, thus providing an opportunity to accommodate new science priorities and to increase scientific participation in Mission to Planet Earth. The administration is requesting $20 million for Pathfinder in fiscal year 1997 and plans to request $30 million, $75 million,",
      " and $75 million for fiscal years 1998, 1999, and 2000, respectively\u2014a total of $200 million over the next 4 fiscal years. After then, NASA plans to offset Pathfinder\u2019s funding requirements with reductions generated from the introduction of lower cost technology into future Mission to Planet Earth-related research. Pathfinder\u2019s goal is to launch one mission every year, starting in 1999. NASA estimates the life-cycle cost of each mission would not exceed $120 million and would include the cost of the launch vehicle, civil service labor, investigator support, and 2 years of spacecraft operations.However, NASA has not demonstrated that the potential value of Pathfinder\u2019s science would exceed the potential value of additional EOS-related science,",
      " if savings allocated to Pathfinder were allocated to EOS science. Agency Comments and Our Evaluation NASA criticized our analysis and conclusions. NASA stated that our draft report underestimated the size of the EOS research community and the abilities of EOS investigators to process the large amount of data expected from EOS. We do not agree with NASA\u2019 s description of our report\u2019s focus and scope. Our objective was not to estimate the size of the EOS research or broader user communities, or to assess the abilities of current researchers to handle the large amount of data expected from EOS. Rather, our objective was to assess NASA\u2019s plans for developing its basic research community, with specific focus on the number of currently funded EOS investigations.",
      " This issue is the basis for the majority of NASA\u2019s concerns. To address NASA\u2019s point, we revised our final report to clarify the specific focus and scope of our work. NASA said that our analysis of the number of EOS investigations did not consider the broader user community. Although NASA\u2019s statement is correct, it was not the objective of our work to analyze the broader user community. We focused on comparing the number of NASA\u2019s currently funded EOS-related investigations with the number of funded investigations associated with two pre-EOS-era missions. This comparison constituted our analytic framework and formed the basis of our conclusion that the magnitude of potential basic research opportunities afforded by EOS is much greater than those afforded by UARS and TOPEX,",
      " but the number of currently funded EOS investigations is relatively small compared to the number of investigations funded under the two pre-EOS-era missions. Our conclusion is consistent with NASA\u2019s desire, as expressed in its comments on our draft report, \u201cto expand the size of the direct EOS community,\u201d and its actions during the course of our review to increase the number of EOS investigations in a budget-constrained environment. NASA\u2019s comments also addressed our concern about its ability to increase the number of EOS investigations based on savings from EOS and other parts of Mission to Planet Earth. NASA stated that it has already made changes to lower EOS\u2019 costs and that it will be able to decrease costs further while improving overall capability and maintaining data continuity.",
      " We have not evaluated NASA\u2019s claims in this regard. In our draft report, we recommended that the NASA Administrator provide the Congress with an assessment of Pathfinder\u2019s potential impact on NASA\u2019s strategy for Earth system science research, including a determination that the potential value of Pathfinder\u2019s investigations is expected to exceed the potential value of additional EOS investigations. NASA generally agreed with this recommendation, stating that it would provide a strategic assessment of Pathfinder. NASA also said it planned to proceed with the Pathfinder missions on the basis of already having analyzed the tradeoffs and having had its approach validated by outside review groups. The concern that prompted our recommendation in the draft report was the availability of adequate funding for EOS basic research given NASA\u2019s funding strategy.",
      " That continues to be our concern and, in view of NASA\u2019s position, we are changing our recommendation to the NASA Administrator to a matter for congressional consideration. Our purpose in making this change is to alert the Congress to the need to address the EOS funding issue before substantial funding commitments are made to the new Pathfinder program. NASA\u2019s comments are in appendix V. Matter for Congressional Consideration In judging the extent to which it should support the proposed Earth System Science Pathfinder program, the Congress may wish to have NASA demonstrate that the potential value of Pathfinder investigations will exceed the potential value of additional EOS investigations that could be obtained with the same resources. Scope and Methodology To accomplish our objectives,",
      " we obtained documents related to EOS\u2019 science program from and interviewed officials at NASA headquarters in Washington, D.C.; NASA\u2019s Goddard Space Flight Center, Greenbelt, Maryland; and at the Jet Propulsion Laboratory, Pasadena, California. We attended the EOS Investigators Working Group meeting in June 1995 in Santa Fe, New Mexico, and the Payload Panel meeting in November 1995 in Annapolis, Maryland. In analyzing the development of the EOS research community, we reviewed information on pre-EOS Earth science ground- and space-based research, as well as EOS\u2019 interdisciplinary science research. In analyzing the authorship of articles related to UARS and TOPEX/Poseidon,",
      " we used \u201cScisearch,\u201d an international, multidisciplinary index to science literature. Scisearch indexes articles from approximately 4,500 scientific and technical journals. We used the scientists\u2019 progress reports for 1992 to 1993, and 1995 to assess whether changes to EOS have adversely affected EOS\u2019 interdisciplinary research. We performed our work between February 1995 and February 1996 in accordance with generally accepted government auditing standards. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of the report until 30 days from its issue date. At that time, we will send copies to other appropriate congressional committees;",
      " the NASA Administrator; and the Director, Office of Management and Budget. We will also make copies available to other interested parties upon request. Please contact me on (202) 512-8412 if you or your staff have any questions concerning this report. Major contributors to this report were Brad Hathaway, Frank Degnan, Thomas Mills, Richard Eiserman, and Richard Irving. Twenty-Four Earth Observing System Measurement Sets The National Aeronautics and Space Administration (NASA) considers the following measurement sets to be critical to preserving the Earth system science approach of the Earth Observing System (EOS) and important to making environmental policy decisions.",
      " The information in appendixes I-IV was derived from NASA sources. Atmosphere Measurements Cloud Properties The formation, dissipation, and radiative properties of clouds influence the atmosphere\u2019s response to greenhouse forcing (i.e., mechanisms that promote the greenhouse effect). The net effect of cloud forcing and feedback determines the energy budget of Earth and its cozy temperature, which supports life. Radiative Energy Fluxes Earth\u2019s radiation budget drives the biological and physical processes of the atmosphere, land, and ocean, which in turn affect water resources, agriculture, and food production. Precipitation There is a net outflow of atmospheric moisture from the tropics to the higher latitudes.",
      " This redistribution is accomplished through evaporation and precipitation, which determine the freshwater resources for agricultural and industrial development. Tropospheric Chemistry Tropospheric chemistry is linked to the circulation of Earth\u2019s water (the \u201chydrologic cycle\u201d), the ecosystem, and transformations of greenhouse gases in the atmosphere, thus determining the oxidizing capacity of the atmosphere for cleansing pollutants. Stratospheric Chemistry Stratospheric chemistry measurements involve chemical reactions, interactions between the sun and the atmosphere, and the sources and sinks of gases, such as ozone, that are critical to Earth\u2019s radiation balance. Aerosol Properties An aerosol is a fine solid or liquid particle suspended in gas,",
      " such as the atmosphere. Aerosols affect the climate through their radiative properties by serving as nuclei for the condensation of clouds. Aerosols tend to cool Earth\u2019s atmosphere, thus offsetting some of the warming effects of greenhouse gases. Atmospheric Temperature Along with atmospheric humidity, atmospheric temperature is used in short-term weather prediction and long-term climate monitoring. Improved measurement accuracy, precision, and spatial and temporal coverage will enhance weather prediction skills beyond current limits and reduce weather prediction \u201cbusts,\u201d or failures. Atmospheric Humidity See \u201cAtmospheric Temperature.\u201d Lightning Lightning measurements will include the distribution and variability of both cloud-to-cloud and cloud-to-ground lightning.",
      " Electrical discharge contributes to the formation and dissipation of certain trace gases in the atmosphere. Solar Radiation Measurements Total Solar Irradiance Sustained changes in the total radiation output from the sun could contribute to significant climate changes on Earth over time. Solar radiation is the main source of energy for biological activities on Earth. Ultraviolet Spectral Irradiance Out of the entire spectrum of radiation that Earth receives from the sun, the ultraviolet portion is the dominant energy source for the Earth\u2019s atmosphere. Small changes in the radiation field have an important effect on atmospheric temperature, chemistry, structure, and dynamics. Excess ultraviolet energy on the Earth\u2019s surface is harmful to living organisms.",
      " Land Measurements Land Cover and Land Use Change Land use includes monitoring crops for efficient irrigation and pest control, public lands for good stewardship, and urban areas for development. Some changes in land use, such as deforestation and biomass burning, reduce the standing stock of vegetation, release carbon dioxide into the atmosphere, and reduce the capacity for the removal of carbon dioxide from the atmosphere. Vegetation Dynamics Terrestrial vegetation absorbs atmospheric carbon dioxide by photosynthesis to offset its greenhouse warming effect. Surface Temperature Terrestrial surface temperature controls the formation and distribution of atmospheric water vapor and also contributes to the determination of cloud amount. In addition, surface temperatures control the biological activity and health of agricultural fields,",
      " forests, and other natural ecosystems. Fire Occurrence Biomass burning releases carbon dioxide into the atmosphere and also increases concentrations of other harmful gases, such as carbon monoxide and nitrogen oxides. Land cover monitoring can be used to assess potential fire hazards and monitor fire recovery in natural ecosystems. Volcanic Effects The volcanic ejection of aerosols and particulates into the atmosphere can increase precipitation and ozone destruction and cause the lowering of global temperatures. Volcanic activities also contribute to the formation of continents. Surface Wetness Surface wetness controls the availability of fresh water resources for agricultural and industrial activities. Ocean Measurements Surface Temperature Sea surface temperature measurements are important to understanding heat exchange between the ocean and the atmosphere.",
      " Such an understanding will contribute to the development of accurate general circulation models, which enhance our understanding of seasonal and interannual climate variations that contribute to hurricanes, floods, and other natural hazards. Phytoplankton and Dissolved Organic Matter Planktonic marine organisms and dissolved organic matter play a major role in the carbon cycle, as they incorporate, or \u201cfix,\u201d about as much carbon as land plants. This contributes to removing carbon dioxide from the atmosphere and to offsetting the greenhouse effect. Surface Wind Fields Surface winds over the oceans contribute to ocean circulation and the interaction between the air and sea, which affect short-term and long-term climate variations.",
      " Ocean Surface Topography Sea height and ocean circulation are related. Ocean circulation transports water, heat, salt, and chemicals around the planet. Accurate information about these circulation patterns should contribute to understanding the oceans\u2019 impact on weather, climate, and marine life, and thus the fisheries industry and other maritime commerce. Cryosphere Measurements Ice Sheet Topography and Ice Volume Change Measurements of the polar ice caps, including ice sheet elevation and ice volume, will determine the contribution of the ice sheets to sea-level variation. These data will also contribute to understanding the role of the polar ice caps in Earth\u2019s freshwater and energy budgets, as well as climate fluctuations. Sea Ice Measurements of the extent and thickness of sea ice will help determine atmospheric warming.",
      " Sea ice measurements will also be useful to operational ice forecasting centers, thus affecting maritime commerce. Snow Cover Snow cover, extent, and duration determine fresh water resources, especially in Alpine regions of the world. EOS Satellite Missions, Instruments, and Measurements Active Cavity Radiometer Irradiance Monitor (ACRIM) monitors the variability of total solar irradiance. Atmospheric Infrared Sounder (AIRS) measures atmospheric temperature and humidity. AMSR (Japan) Advanced Microwave Scanning Radiometer (AMSR) observes atmospheric and oceanic water vapor profiles and determines precipitation, water vapor distribution, cloud water, sea surface temperature, sea ice, and sea surface wind speed.",
      " Advanced Microwave Sounding Unit (AMSU) measures atmospheric temperature. ASTER (Japan) Advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER) provides high spatial resolution images of the land surface, water, ice, and clouds. Clouds and the Earth\u2019s Radiant Energy System (CERES) measures Earth\u2019s radiation budget and atmospheric radiation. DFA (France) Dual Frequency Altimeter (DFA) maps the topography of the sea surface and its impact on ocean circulation. Earth Observing Scanning Polarimeter (EOSP) globally maps radiance and linear polarization of reflected and scattered sunlight to measure atmospheric aerosols.",
      " Enhanced Thematic Mapper Plus (ETM+) provides high spatial resolution images of the land surface, water, ice, and clouds. Geoscience Laser Altimeter System (GLAS) measures ice sheet topography, cloud heights, and aerosol vertical structure. HIRDLS (UK-US) High-Resolution Dynamics Limb Sounder (HIRDLS) observes gases and aerosols in the troposphere, stratosphere, and mesosphere to assess their role in the global climate system. Landsat Advanced Technology Instrument (LATI) provides high spatial resolution images of the land surface, water, ice, and clouds beyond Landsat ETM+. Lightning Imaging Sensor (LIS)",
      " measures the distribution and variability of lightning. Microwave Humidity Sounder (MHS) provides atmospheric water vapor profiles. Multi-Angle Imaging Spectroradiometer (MISR) measures the top-of-the-atmosphere, cloud, and surface angular reflectance. Microwave Limb Sounder (MLS) measures chemistry from the upper troposphere to the lower thermosphere. (continued) Moderate-Resolution Imaging Spectroradiometer (MODIS) studies biological and physical processes in the atmosphere, the oceans, and on land. MOPITT (Canada) Measurements of Pollution in the Troposphere (MOPITT) measures upwelling radiance to produce tropospheric carbon monoxide profiles and total column methane.",
      " Microwave Radiometer (MR) provides atmospheric water vapor measurements for DFA. ODUS (Japan) Ozone Dynamics Ultraviolet Spectrometer (ODUS) measures total column ozone. Stratospheric Aerosol and Gas Experiment III (SAGE III) provides profiles of aerosols, ozone, and trace gases in the mesosphere, stratosphere, and troposphere. Provides all-weather measurements of ocean surface wind speed and direction. Solar Stellar Irradiance Comparison Experiment (SOLSTICE) measures full-disk solar ultraviolet irradiance. Tropospheric Emission Spectrometer (TES) provides profiles of all infrared active species from Earth\u2019s surface to the lower stratosphere.",
      " Mission continues Landsat land-imaging satellite series. Future Landsat-type instrument is planned for AM-2 and AM-3. Morning equator-crossing mission (AM series) will study clouds, aerosols, and radiation balance; the terrestrial ecosystem; land use; soils; terrestrial energy/moisture; tropospheric chemical composition; volcanoes; and ocean productivity. ASTER and MOPITT will be on AM-1 only. EOSP and LATI will be on AM-2 and AM-3 only. Afternoon equator-crossing mission (PM series) will study cloud formation, precipitation, and radiative properties;",
      " air-sea fluxes of energy and moisture; sea-ice extent; and ocean primary productivity. The PM series will carry prototypes of future operational weather satellite instruments. Chemistry mission (CHEM series) will study atmospheric chemical composition; chemistry-climate interactions; and air-sea exchange of chemicals and energy. ODUS will be on CHEM-1 only. A later CHEM flight may include  SAGE III. Laser altimeter mission (LaserALT series) will study ice sheet mass balance. Radar altimeter mission (RadarALT series) will study ocean circulation. RadarALT is a joint mission with France. SAGE III instrument carried on International Space Station (ISS)",
      " and Russian Meteor satellite will study distribution of aerosols, ozone profiles, and greenhouse gases in the lower stratosphere. Tropical Rainfall Measuring Mission (TRMM) will study precipitation and Earth radiation budget in the tropics and high latitudes. TRMM is a joint mission with Japan. Japanese Advanced Earth Observing System II (ADEOS II) satellite carrying NASA scatterometer instrument will study ocean surface wind vectors. Mission will monitor the variability of total solar irradiance and is currently planned to fly on a series of small satellites. Mission will study Earth\u2019s radiation budget and atmospheric radiation. Mission will study full-disk solar ultraviolet irradiance.",
      " EOS Instrument Flight Schedule Through 2009 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Timeline bars denote periods during which at least one copy of the indicated instrument is in orbit. EOS Science Objectives and Interdisciplinary Investigations EOS science objectives are listed below, along with the interdisciplinary investigations designed to address them. These investigations are intended to cross discipline boundaries, and therefore, address more than one science objective. The Water and Energy Cycles objective covers the formation, dissipation, and radiative properties of clouds,",
      " which influence the atmosphere\u2019s response to greenhouse forcing. In addition, Water and Energy Cycles include large-scale hydrology and moisture processes, such as precipitation and evaporation. National Center for Atmospheric Research Project to Interface Modeling on Global and Regional Scales With EOS Observations. This investigation is intended to use surface and atmospheric data sources to improve climate models and their predictions of global change. Components of climate models to be addressed include surface-atmosphere interactions, the hydrologic cycle, global energy balance, cloud and aerosol radiative fields, and atmospheric chemical cycles. Climate Processes Over the Oceans. Climate is strongly influenced by the amount and distribution of water vapor,",
      " liquid water, and ice suspended in the atmosphere. This atmospheric water, and the climate over land areas, is largely controlled by processes occurring over the oceans. This investigation will improve modeling of both the atmosphere and its interactions with the ocean. It will address the roles of circulation, clouds, radiation, water vapor, and precipitation in climate change as well as the role of ocean-atmosphere interactions in the energy and water cycles. Hydrologic Processes and Climate Interdisciplinary Investigation. The global water and energy cycles link the atmosphere, land, and ocean. In addition, water supports life and plays a crucial role in climate regulation. This investigation is to enhance our understanding of the physical processes that affect these cycles.",
      " The Processing, Evaluation, and Impact on Numerical Weather Prediction of AIRS, AMSU, and MODIS Data in the Tropics and Southern Hemisphere. This investigation involves the development of algorithms and techniques to improve atmospheric science, specifically numerical weather prediction models, using three EOS instruments. Investigation of the Atmosphere-Ocean-Land System Related to Climate Processes. The atmosphere, ocean, and land interact with each other through the exchanges of heat energy, momentum, and water substance. These interactions influence climate. This investigation will examine the atmosphere-ocean-land system by pursuing seven supporting studies that will involve both observations and modeling. The Development and Use of a Four-Dimensional Atmospheric-Ocean-Land Data Assimilation System for EOS.",
      " This investigation will incorporate all available data, from a variety of sources, into a single model of the Earth system. This model can then be used to project the Earth system beyond the range of actual observations, estimate expected values of observations to assess instrument quality, provide products for environmental studies, and supplement observations by estimating quantities that are difficult or impossible to observe. An Interdisciplinary Investigation of Clouds and the Earth\u2019s Radiant Energy System: Analysis. This investigation will examine the role of clouds and radiative energy balance in the climate system. Studies include cloud feedback mechanisms that can greatly modify the response of the climate system to increased greenhouse gases. The Oceans objective covers the exchange of energy,",
      " water, and chemicals between the ocean and atmosphere, and between the upper layers of the ocean and the deep ocean. Coupled Atmosphere-Ocean Processes and Primary Production in the Southern Oceans. The southern ocean plays an important role in both the carbon cycle and heat exchange between the ocean and atmosphere. This investigation will focus on developing predictive models so we can better understand the effects of changes in the physical forcing of the ocean  (e.g., small shifts in the location of westerly wind systems may affect ocean processes). Biogeochemical Fluxes at the Ocean/Atmosphere Interface. Solar radiation impinging on the oceans creates chemical,",
      " physical, and biological effects. One result is the creation of gases, such as carbon dioxide, dimethyl-sulfide, and carbon monoxide, which are then circulated by wind and water. This investigation will develop models to better understand these gases and the influence of oceanic processes upon them. Interdisciplinary Studies of the Relationships Between Climate, Ocean Circulation, Biological Processes, and Renewable Marine Resources. This investigation will study (1) the ocean\u2019s role in climate change, particularly in the Australian region; (2) the influence of the carbon cycle in Australia\u2019s waters on the global carbon cycle; and (3) changes in Australian oceanography and the implications for marine ecosystems,",
      " including commercial fisheries. The Role of Air-Sea Exchanges and Ocean Circulation in Climate Variability. Exchanges of water, momentum, and heat at the interface of the ocean and atmosphere drive the transport and change the storage of heat, water, and greenhouse gases, thus moderating the world\u2019s climate. This investigation will study these exchanges and ocean circulation in order to improve our understanding of natural global changes and enable us to discern human-induced effects. Polar Exchange at the Sea Surface: the Interaction of Ocean, Ice, and Atmosphere. This is an investigation of energy exchanges in Earth\u2019s polar regions, both at the atmosphere-ice-ocean interface and lower latitudes.",
      " It will study the role these processes play in global oceanic and atmospheric circulation and help improve our understanding of whether polar regions show any sign of climate change. Middle and High Latitude Oceanic Variability Study. This investigation will examine the variability of the atmosphere\u2019s influence on the oceans, the effect on the oceanic response, and the resulting effect on biological productivity in the oceans. The study will focus on the mid- to high-latitude regions of the oceans. It will examine changes in the surface fluxes of momentum, heat, water, and radiation, as well as the variability of ocean circulation and biological activity. Earth System Dynamics: the Determination and Interpretation of the Global Angular Momentum Budget Using EOS.",
      " Momentum and mass transport among the atmosphere, oceans, and solid Earth produce changes in the planet\u2019s rotation and gravity field. Predictions of these changes based on the mass and motion of air and water can be compared with observations to improve models of the interactions of the oceans, atmosphere, and solid Earth. This investigation will examine these interactions as represented by the exchange of angular momentum, mass, and energy among these components. The Chemistry of the Troposphere and Lower Stratosphere objective includes links to the hydrologic cycle and ecosystems, transformations of greenhouse gases in the atmosphere, and interactions inducing climate change. Interannual Variability of the Global Carbon,",
      " Energy, and Hydrologic Cycles. Analysis of the carbon, energy, and water cycles may increase the predictability of climate change. The goals of this investigation are to (1) understand contemporary climate variability and trends and (2) contribute to our ability to predict the impact of human activities on the climate. Changes in Biogeochemical Cycles. Models of biogeochemical cycles can be used to project the interactions of atmospheric composition, climate, terrestrial and aquatic ecosystems, ocean circulation and sea level, and human-induced effects. This investigation will develop models and databases to describe the dynamics of water, carbon, nitrogen, and trace gases over seasonal-to-century time scales.",
      " The Land Surface Hydrology and Ecosystem Processes objective covers sources and sinks of greenhouse gases, the exchange of moisture and energy between the land surface and atmosphere, and changes in land cover. Investigations in this category could result in improved estimates of runoff over the land surface and into the oceans. Global Water Cycle: Extension Across the Earth Sciences. The global water cycle stimulates, regulates, and responds to the other components of the Earth system on regional and global scales. This investigation is aimed at developing a hierarchy of models, using EOS data, that will contribute to our understanding of cloud cover and radiative transfer, as well as energy and moisture changes at the interface of the atmosphere with the oceans,",
      " cryosphere, and land surface. These models will contribute to the prediction of changes in water balance and climate. Long-Term Monitoring of the Amazon Ecosystems Through EOS: From Patterns to Processes. Natural and human-induced changes in the Amazon are expected to disrupt regional vegetation distributions, alter the physical and chemical characteristics of the continental river system, and change regional hydroclimatology, possibly influencing global climate patterns. The aim of this investigation is to understand the circulation of water, sediment, and nutrients through the basin. Northern Biosphere Observation and Modeling Experiment. Natural and human-induced climate changes in the northern latitudes will affect terrestrial ecosystems, and feedbacks from these changing systems will influence the climate.",
      " The goal of this study is to better understand the relationship between the climate and northern ecosystems over a range of spatial scales. Hydrology, Hydrochemical Modeling, and Remote Sensing in Seasonally Snow-Covered Alpine Drainage Basins. Seasonally snow-covered Alpine regions are important to the hydrologic cycle, as they are a major source of water for runoff, ground water recharge, and agriculture. This investigation will monitor conditions in Alpine basins and develop models to better understand the cycling of water, chemicals, and nutrients in these areas. Climate, Erosion, and Tectonics in Mountain Systems. In mountain belts, climatic and tectonic processes produce Earth\u2019s highest rates of weathering and erosion.",
      " Alpine regions are important to downstream hydrology, providing both inorganic and organic material to lowland areas. This investigation will observe the effects of climate changes on Alpine land processes and develop models to improve our understanding of these interactions. The Hydrologic Cycle and Climatic Processes in Arid and Semiarid Lands. Knowledge of the hydrologic cycle will help scientists predict the effects of natural and human-induced climate change. This investigation will study the hydrologic cycle and climatic processes in arid and semiarid lands, where agricultural productivity is especially sensitive to changes in the cycle. Using Multi-Sensor Data to Model Factors Limiting Carbon Balance in Global Arid and Semiarid Land.",
      " This investigation will address the role of arid and semiarid lands in processes affecting the global environment, such as the production and consumption of trace gases. It will also examine the vulnerability of these lands to climate change in terms of productivity and soil quality, and develop predictive models of ecosystem function for dry lands. Biosphere-Atmosphere Interactions. This investigation is to improve our understanding of the role of the terrestrial biosphere in global change. It will cover short-term interactions between the land and atmosphere, such as biophysics, as well as long-term interactions, such as ecology and human-induced impacts. The goal of the investigation is to understand and predict the response of the biosphere-atmosphere system to global change,",
      " specifically to the increase in atmospheric carbon dioxide. Glaciers and Polar Ice Sheet measurements could contribute to predictions of sea level and global water balance. Use of the Cryospheric System to Monitor Global Change in Canada. The cryosphere is an important component of the global climate system, and better understanding of cryospheric processes may improve global climate models. This investigation seeks to understand cryospheric variations, develop models that will improve our knowledge of the role of the cryosphere in the climate system, and use various cryospheric data sets to support climate monitoring and model development. The Chemistry of the Middle and Upper Stratosphere objective includes chemical reactions,",
      " solar-atmosphere relations, and sources and sinks of radiatively important gases. Observational and Modeling Studies of Radiative, Chemical, and Dynamical Interactions on the Earth\u2019s Atmosphere. Understanding the circulation, transformations, and sources and sinks of gases, such as carbon dioxide, water vapor, ozone, and chlorofluorocarbons, is important in dealing with the issues of global warming, ozone depletion, and the coupling of atmospheric chemistry and climate. This investigation seeks to improve our understanding of the fundamental processes influencing these gases in the atmosphere and contribute to the development of a predictive capability for global change studies. Chemical, Dynamical,",
      " and Radiative Interactions Through the Middle Atmosphere and Thermosphere. Carbon dioxide and ozone play important radiative roles in the middle atmosphere. Ozone absorbs ultraviolet radiation, heating the middle atmosphere and shielding the biosphere from dangerous ultraviolet dosages. The interactions of other gases, as well as temperature and middle atmosphere circulation, affect ozone. This investigation will improve our understanding of interactions in the middle atmosphere and our ability to predict long-term atmospheric trends. Investigation of the Chemical and Dynamical Changes in the Stratosphere. Chemical changes in the atmosphere are occurring largely as a result of changes in the surface emission of trace gases. This investigation will focus on the response of ozone to trace gas changes,",
      " isolating natural from human-induced changes to determine their effects on ozone and to assess radiative and dynamical feedbacks. The Solid Earth objective deals with volcanoes and their role in climate change. A Global Assessment of Active Volcanism, Volcanic Hazards, and Volcanic Inputs to the Atmosphere from EOS. The injection of material from volcanoes into the atmosphere can affect the local or hemispheric climate. This investigation will improve our understanding of the processes behind volcanic eruptions; study the injection of sulfur dioxide, water vapor, carbon dioxide, and other gases into the atmosphere; and place eruptions into the context of the regional tectonic setting of the volcano.",
      " Comments From the National Aeronautics and Space Administration The following are GAO\u2019s comments on NASA\u2019s letter dated May 17, 1996. GAO Comments Investigations to begin in 1996 cannot depend solely on data from EOS instruments because the earliest launch dates are planned for 1997 (for ) and 1998 (for EOS-AM-1). Instead, research plans should be based on use of existing data sets... or expected data from relevant near-term (1996-1997) satellite missions and field experiments. 8. Our draft report discussed the 1995-96 peer review, noting that the review could lead to possible deselection and recompetition of some EOS science teams.",
      " 9. We incorporated the amount of funds involved in the program into the report\u2019s text. 10. We included NASA\u2019s current estimate of planned EOS spending through fiscal year 2000 in the report\u2019s text. 11. We revised our report to include NASA\u2019s comments about lower program baseline costs and its confidence that it will decrease costs further. 12. We deleted the material NASA is referring to. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary.",
      " VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (301) 258-4066, or TDD (301) 413-",
      "0006. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 67,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO provided information on Border Patrol hiring, focusing on: (1) the Immigration and Naturalization Service's (INS) ability to meet its 5-year goal to increase the Border Patrol's onboard strength by 1,000 agents each year from fiscal years (FY) 1997 through 2001; (2) INS' efforts to improve its recruiting efforts and hiring process; (3) changes in the years of experience and level of supervision of Border Patrol agents during INS' increased hiring; and (4) the ability of INS' basic training program to support the pace at which Border Patrol agents have been hired, including whether the Border Patrol Academy anticipates having the capacity to meet future growth. GAO noted that: (1) INS' recruitment program yielded a net increase of 1,002 Border Patrol agents in FY 1997 and a net increase of 1,035 agents in FY 1998 after accounting for attrition; (2) although INS succeeded in increasing the Border Patrol's onboard strength by 1,000 agents each year, it saw a net increase of only 369 agents in FY 1999 because it was unable to recruit enough qualified applicants and retain them through the hiring process; (3) for the 3-year period ending September 30, 1999, INS experienced a net hiring shortfall of 594 agents; (4) INS has had difficulties attracting and retaining qualified applicants; (5) few individuals who apply to the Border Patrol successfully complete the application process; (6) some fail to pass the rigorous entry examination, medical examination, or background investigation, while others withdraw from the process; (7) in FY 1999, failure and drop-out rates were higher than in the past; (8) to address its hiring problems, INS has redirected $2.2 million to enhance its recruitment program, which includes: (a) initiatives to increase Border Patrol agents' involvement in recruitment and fine-tuning INS' hiring process; (b) surveying applicants for reasons why they register for the written examination but do not report for testing to find out their reasons for not reporting, as well as those who do report for testing for their views on the initial part of the hiring process; and (c) asking applicants their reasons for declining Border Patrol job offers; (9) however, INS does not have plans to survey applicants who voluntarily withdraw at other stages later in the process; (10) as hiring has increased, the average experience level of Border Patrol agents has declined agencywide, as well as along the southwest border; (11) the percentage of agents along the southwest border with 2 years of experience or less almost tripled--from 14 percent to 39 percent--between FY 1994 and FY 1998; (12) during the same period, 7 southwest border sectors experienced some increase in the average number of nonsupervisory agents assigned to each supervisory agent; (13) the Tucson sector experienced the greatest increase, with its ratio of nonsupervisory agents to one supervisory agent rising from 8 to 1 in FY 1994 to about 11 to 1 in FY 1998; and (14) by relying on a temporary training facility in Charleston, South Carolina since 1996, the Border Patrol Academy has been able to provide newly hired agents with required training and, according to a Border Patrol official, is prepared to meet the training needs associated with future growth.\n",
    "docs": [
      "Background The Border Patrol is the mobile, uniformed, enforcement arm of INS. Its mission is to detect and prevent the smuggling and illegal entry of undocumented aliens into the United States and to apprehend persons found in the United States in violation of immigration laws. With the increase in drug smuggling operations, the Border Patrol has become the primary drug interdiction agency along United States land borders between ports-of-entry. Border Patrol agents perform their duties near and along about 8,000 miles of United States boundaries by land, sea, and air. The Border Patrol is divided into 21 sectors, 9 of which are along the southwest border. Sectors are further subdivided into stations.",
      " To stem the growing flow of illegal entry into the country, the Attorney General announced in 1994 a five-part strategy that included strengthening border enforcement. To support this strategy, the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, among other things, required that the Attorney General increase the onboard strength of Border Patrol agents by not less than 1,000 each year for fiscal years 1997 through 2001. Deployment of new agents to particular sectors along the southwest border has generally corresponded with INS\u2019 implementation of its border strategy. However, because the strategy was designed to allow for flexibility in responding to unexpected changes in the flow of illegal immigration,",
      " some sectors have received additional agents before the strategy was implemented in their sectors. With increased hiring, the Border Patrol has experienced dramatic growth in recent years. From the end of fiscal year 1994 to the end of fiscal year 1999, the size of the Border Patrol nearly doubled\u2014from 4,226 to 8,351. INS uses a variety of approaches to attract applicants to the Border Patrol, including advertising in magazines and newspapers, on the Internet, in movie theaters, and on billboards; targeting key colleges and universities with degree programs in law enforcement, criminal justice, and police science; attending recruitment events; and visiting military bases to recruit departing military personnel.",
      " Although INS has recruited in different parts of the country, it is now focusing its efforts on locations near the southwest border. Those applying to be Border Patrol agents must initially complete a self- screening questionnaire for basic eligibility (i.e., age, education, and citizenship), after which they must successfully complete a multistep hiring process. This process is comprised of a written examination, which includes a Spanish test or an artificial language test designed to measure an applicant\u2019s ability to learn a foreign language (e.g., Spanish); a structured interview with a panel of Border Patrol agents; a medical examination; a drug screening; and a full background investigation. Scope and Methodology To determine if INS is on track in meeting its hiring goals,",
      " we analyzed hiring and attrition data from INS\u2019 Budget Office. We met with Human Resources officials to discuss INS\u2019 latest hiring shortfall projections. Texas\u2014Del Rio, Laredo, and McAllen. Under phase III, INS plans to deploy agents to El Centro, CA, Yuma, AZ, and Marfa, TX. help put INS\u2019 processes and experiences into perspective, we obtained recruiting and hiring information from seven other law enforcement agencies. To provide information on how levels of experience and supervision of Border Patrol agents changed during INS\u2019 hiring build-up, we analyzed INS budget data and compared fiscal year 1994 data (before the hiring build-up began)",
      " to fiscal year 1998 data (2 years after the start of the hiring mandate). To analyze experience, we used data on Border Patrol agents\u2019 years of service with INS because INS does not maintain data on agents\u2019 length of service with the Border Patrol. However, agency officials told us that most Border Patrol agents begin their INS careers with the Border Patrol, and it is unusual for other INS personnel to transfer into the Border Patrol. To provide information on supervision, we analyzed changes in the ratio of nonsupervisory agents (GS-5 through GS-11) to first-line supervisory agents (GS-12). Such an analysis provides an indication of how supervision may have changed as more agents have been hired,",
      " although it may not provide a complete picture of supervision. INS does not centrally maintain data that would enable us to determine the grade or experience of agents who are actually assigned to work with new agents. To provide information on whether the Border Patrol Academy has kept pace with increased hiring and has the capacity to meet the basic training needs associated with future growth, we visited the Border Patrol Academy and FLETC in Glynco, Georgia, and the Border Patrol\u2019s temporary training facility in Charleston, South Carolina. We met with the Chief of the Border Patrol Academy, instructors, database managers, and FLETC officials. We analyzed Academy databases containing demographic profiles of newly hired agents,",
      " final grades, and instructor data. In addition, we reviewed Border Patrol training projections and renovation plans for the Charleston facility and FLETC. We discussed the Charleston facility plans with INS and Border Patrol officials, and we discussed FLETC plans with Treasury officials. To verify the consistency of Border Patrol Academy data, we performed reliability checks on the Academy\u2019s demographic profile, final grade, and instructor databases. We verified that the data entry was complete and that data had not been duplicated. Academy database managers told us that they verify the data entry of all grade data, and that demographic profile data are electronically scanned from trainee-completed answer sheets. We did not verify the accuracy of the grade or instructor data with Academy class records.",
      " We conducted our work at INS Headquarters; its training facilities in Glynco, Georgia, and Charleston, South Carolina; and two hiring sessions in San Diego, California, and El Paso, Texas, from September 1998 to September 1999 in accordance with generally accepted government auditing standards. The Department of Justice provided technical comments on a draft of this report, which we incorporated where appropriate. INS Did Not Meet Its Fiscal Year 1999 Border Patrol Hiring Goal INS was able to increase the onboard strength of the Border Patrol by more than 1,000 agents in the first 2 years of its 5-year hiring goal, but in the third year (fiscal year 1999)",
      " it was only able to increase its onboard strength by 369 agents. This resulted in a net shortfall of 594 agents for the 3-year period ending September 30, 1999. Because of attrition, INS would have had to hire 1,757 agents in fiscal year 1999 to meet that year\u2019s hiring goal. As shown in table 1, to account for attrition, INS has had to hire far more than 1,000 agents in each year to meet its hiring goal. During fiscal year 1997, the first year of its goal to increase the Border Patrol\u2019s onboard strength by 1,",
      "000 agents, INS actually hired 1,726 agents, which resulted in a net increase of 1,002 agents. In fiscal year 1998, it hired 1,919 agents for a net increase of 1,035. In fiscal year 1999, INS hired 1,126 agents, but because 757 agents left the Border Patrol during the year, the size of the Border Patrol only increased by 369 agents. The Border Patrol\u2019s 9-percent attrition rate for fiscal year 1999 was actually lower than the 13 percent INS originally anticipated. According to an INS official, during fiscal year 1999,",
      " some Border Patrol agents applied for, and were accepted to, other INS positions. However, in August 1999, an INS official told us that due to funding difficulties, INS would not be transferring these agents until fiscal year 2000. Had the agents transferred as planned, INS would have faced an even larger shortfall of about 900 Border Patrol agents in fiscal year 1999. The attrition rate among Border Patrol agents rose fairly steadily from fiscal year 1994 through fiscal year 1998, which increased the total number of agents INS needed to hire each year to meet its mandate. As shown in table 1, the annual attrition rate for Border Patrol agents was 5 percent in fiscal year 1994,",
      " but by 1998, the rate had risen to 13 percent. Although INS maintains data on categories of attrition, such as retirement and termination, it has limited information on why agents leave the Border Patrol. However, its data do show that in fiscal years 1994 through 1998, almost half of the agents who left the Border Patrol left within their first 10 months of service. Since fiscal year 1996, about one-third of the Border Patrol\u2019s attrition occurred during the initial 19-week training period at the Border Patrol Academy. Appendix I contains additional hiring and attrition data, as well as demographic information on newly hired agents.",
      " INS Cites Recruiting and Hiring Problems and Is Making Changes A major goal of INS\u2019 National Recruitment Program, which was established in 1996, has been to generate enough qualified applicants to meet INS\u2019 hiring goal. The program\u2019s efforts have included tracking advertising sources that generated the greatest applicant response and identifying key schools at which it had past success hiring Border Patrol agents. In the first 2 fiscal years of the program, INS met its hiring goal. However, by November 1998, INS foresaw difficulties in meeting its fiscal year 1999 goal and was projecting a hiring shortfall. Much of the problem was INS\u2019 inability to attract sufficient numbers of eligible applicants and retain qualified recruits through the hiring process.",
      " INS has been initiating actions to improve both its recruiting efforts and hiring process. INS Was Not Able to Attract Enough Eligible Applicants and Retain Enough Qualified Recruits Difficulties finding eligible applicants and the high occurrence of applicants failing or dropping out of the hiring process resulted in INS not being able to meet its fiscal year 1999 hiring goal. Officials believe that the country\u2019s strong economy and job market have contributed significantly to the agency\u2019s hiring troubles. INS officials estimate that, historically, INS has hired about 4 percent of eligible applicants, but it hired only an estimated 2 percent in fiscal year 1999. Thus, officials estimated that INS would have needed to attract about 75,",
      "000 eligible applicants\u2014far more than in the past\u2014to meet the agency\u2019s fiscal year 1999 goal. Being able to hire only a small percentage of applicants has clearly contributed to INS\u2019 hiring difficulties, but based on our discussions with other law enforcement agencies, this situation is not unique to the Border Patrol. For example, the Los Angeles Police Department typically hires about 5 percent of its applicants, the Texas Department of Public Safety about 3 percent of its State Trooper applicants, and the U.S. Coast Guard about 1 percent of its applicants, according to officials of these organizations. The U.S. Customs Service only hired 1 percent of its applicants for inspector positions in fiscal year 1999,",
      " although 2 percent of the applicants who applied were qualified to be hired. A small percentage of Border Patrol applicants were hired because most failed the written or physical examination, the interview, or the background investigation, or they voluntarily dropped out of the hiring process. However, INS knows little about why some applicants chose to withdraw from the process. The size of the Border Patrol\u2019s applicant pool declines with each stage of the hiring process, but losses are particularly heavy in its early stages. However, in fiscal year 1999, applicant losses were higher throughout the entire process. INS officials estimated that in fiscal year 1996, about half of those who were scheduled to take the written examination actually showed up for the test,",
      " and in fiscal years 1997 and 1998, about 60 percent of those scheduled did not report for testing. In contrast, INS estimated about 75 percent of applicants who were scheduled did not report for the written examination in fiscal year 1999. According to an OPM official, a 50- percent no-show rate for initial written testing has been considered typical among government agencies. INS officials do not know why INS\u2019 fiscal year 1999 no-show rate increased. Furthermore, many Border Patrol applicants failed a step of the hiring process in recent years, and this was also true in fiscal year 1999. INS estimated about 72 percent of those who took the written test in fiscal year 1999 failed it,",
      " and according to an INS official, failure rates were even higher in the last quarter of the year. In addition, a greater percentage of applicants failed the background investigation in fiscal year 1999. INS estimated that about 15 percent failed the investigation in fiscal year 1998. However, it estimated about 40 percent of applicants failed it in fiscal year 1999. According to an INS official, the more stringent security requirements instituted in May 1998 have increased the background investigation failure rate. INS instituted the tighter requirements to address security concerns. INS officials cite other aspects of the hiring process that may have also contributed to INS\u2019 hiring difficulties.",
      " However, their identification of these contributing factors is largely based on anecdotal information from their program staff, and not on any systematic data collection effort. Officials believe that the length of the standard hiring process\u2014-typically 6 months to 1 year\u2014may be a factor in the agency\u2019s inability to hire a greater percentage of Border Patrol applicants. Although most of the other law enforcement agencies we contacted had hiring processes that fell within the range of 5 months to 1 year, recent recruiting literature point out that recruiters are shortening their hiring processes to avoid losing qualified applicants. Other aspects of the hiring process that INS officials believe may have contributed to hiring problems include the out-of-pocket costs applicants incur during the hiring process and in reporting for duty,",
      " and a lack of flexibility regarding location and start dates for newly hired agents. Appendix II contains additional information on these and other factors that may contribute to INS\u2019 problems attracting and hiring applicants. INS Is Taking Steps to Address Recruiting and Hiring Problems To improve its ability to identify and recruit applicants, INS has redirected $2.2 million to enhance its recruiting and hiring initiatives and said it is prepared to redirect additional funds, if needed. However, INS developed these initiatives without adequate data on why it had been unable to retain and hire more Border Patrol applicants. Rather, INS officials said that, in an effort to meet INS\u2019 fiscal year 1999 hiring goal,",
      " they based most of their initiatives on their review of the hiring process and past recruitment experiences. Recruiting Initiatives INS\u2019 recruiting initiatives include training more than 200 Border Patrol agents to serve as local recruiters and establishing a recruitment coordinator for each Border Patrol sector as part of INS\u2019 overall strategy to increase sector involvement in recruiting and attract more viable recruits. According to an INS official, these recruiting efforts have attracted more applicants, but a greater proportion of recent applicants has been failing the written examination. INS is also considering additional actions that may help recruitment, such as providing hiring bonuses for recruits, and the possibility of raising the full performance level for Border Patrol agents from GS-",
      "9 to GS-11. According to INS officials, about 30 percent of the nonsupervisory agents are at the GS-11 level. INS officials believe the current classification standard could support an across-the-board increase to the GS-11 level, but recognize that sufficient GS-11 work must exist and be organized and assigned in a manner that would support the GS-11 level. These changes are being considered as part of a broader effort to bring parity to all INS law enforcement positions, as well as achieve parity with law enforcement positions in other federal agencies. Agency officials hope that raising the full performance level will also make joining the Border Patrol more attractive.",
      " Hiring Initiatives Many of INS\u2019 hiring initiatives are geared toward reducing the time it takes to hire an agent, although INS does not have systematic data that confirm its lengthy process has contributed to its hiring difficulties. In addition, to better understand why so many applicants who sign up for the written examination never report for testing, INS plans to conduct telephone surveys of those applicants as part of its hiring initiatives. INS also plans to survey applicants who took the written examination to obtain feedback on the initial steps of its application process. Since April 1999, INS has been asking applicants their reasons for declining offers to join the Border Patrol. However, INS does not have plans to collect data on why it is losing applicants at other stages later in the hiring process.",
      " Losing applicants at the later stages is costly to INS because it has already committed Border Patrol agents\u2019 time to conduct interviews, and it has spent about $500 on each medical examination and drug screening, and another $3,000 on each background investigation. (See app. II for additional information on INS\u2019 recruiting and hiring initiatives.) Agents\u2019 Average Years of Experience Declined and Average Number of Agents Per Supervisor Increased As a result of the increased hiring of Border Patrol agents in recent years, the average years of experience among all Border Patrol agents has declined. This is true among agents assigned to all nine sectors of the southwest border. For example, between fiscal years 1994 and 1998,",
      " the percentage of agents stationed along the southwest border with 2 years of experience or less almost tripled, from 14 percent to 39 percent, and the percentage of agents with 3 years of experience or less more than doubled, from 26 percent to 54 percent. With increased hiring, the average number of nonsupervisory agents (GS-5 through GS-11) assigned to each GS-12 supervisory agent has increased in seven of the nine southwest border sectors. For example, in Arizona\u2019s Tucson sector, which experienced the greatest increase, the ratio of nonsupervisory agents to each supervisory agent rose from 8 to 1 in fiscal year 1994 to about 11 to 1 in fiscal year 1998.",
      " In Texas\u2019 Marfa sector, which had the lowest ratio of nonsupervisory agents to one supervisory agent, this ratio remained at about 6 to 1 over the same period. INS requires that supervisors in the field supervise at least eight subordinate Border Patrol agents. Agencywide, from fiscal year 1994 to fiscal year 1998, the ratio of nonsupervisory agents to one supervisory agent increased from 7 to 1 to 8 to1. Comparing the ratio of nonsupervisory agents to one supervisory agent from fiscal year 1994 to fiscal year 1998 may provide an indication of how supervision may have changed with increased hiring.",
      " However, this analysis may not provide a complete picture of supervision within the Border Patrol. New agents may be assigned to work with GS-9 or GS-11 Field Training Officers who have received special training, or with other nonsupervisory agents. However, even though these agents provide guidance to new agents, they are not officially classified as supervisors. Furthermore, according to Border Patrol officials, new agents may be assigned to work with other nonsupervisory agents who are not Field Training Officers. Because of a lack of data regarding agents who are assigned to work with new agents, and because sectors differ in how they assign new agents, we were unable to measure the level of experience of agents who work with new agents or analyze changes over time.",
      " See appendix III for additional analyses comparing grade level and years of service of all Border Patrol agents and those assigned to southwest border sectors, for fiscal years 1994 and 1998. Appendix IV contains a map highlighting the Border Patrol\u2019s southwest border sectors. Training Capacity Has Kept Pace With Hiring In anticipation of increased hiring, INS opened a temporary training facility in Charleston, South Carolina, to supplement the existing Border Patrol Training Academy, located at FLETC in Glynco, Georgia. Between these two facilities, the Border Patrol Academy has had the capacity to meet the basic training needs associated with its hiring goal. In fact, because INS was unable to maintain its hiring levels in fiscal year 1999,",
      " the Academy has had more than enough capacity. The Academy cancelled 10 training sessions in fiscal year 1999 because fewer agents were hired than planned. Furthermore, none of the 28 sessions it conducted were filled to capacity. As of October 1999, the Academy was planning to train about 1,900 new agents in fiscal year 2000, although it may revise this estimate as the year progresses depending on the number of agents INS is able to hire.According to a Border Patrol official, this training projection should allow the Academy to train new agents hired in fiscal year 2000, any additional agents who must be hired to replace those who leave the Border Patrol during that year,",
      " and about 600 agents who must be hired if INS is to make up for the fiscal year 1999 hiring shortfall. INS has renovated parts of the Charleston facility to make it useable for training, and more renovations are planned. Both INS and FLETC officials have reaffirmed their commitment that Charleston should serve as a temporary facility and that FLETC should provide all INS training as soon as it has the capacity to do so. Renovations and expansions at FLETC are also planned. However, the agencies have come to different conclusions about when the Charleston facility can be closed. FLETC\u2019s position is premised on when it will have the capacity to absorb the Border Patrol training that is currently held at the Charleston facility.",
      " However, INS believes the facility cannot be closed until FLETC can accommodate all of INS\u2019 training needs, including any that might arise in the future. Appendix V contains additional information on the capacity of the Border Patrol Academy, instructors, and trainees\u2019 class grades. It also contains more information on the future of the Charleston facility. Conclusions INS has initiatives under way and is considering taking additional actions to attract more Border Patrol applicants and improve its hiring process. The overall effectiveness of these measures cannot be assessed until INS has fully implemented them. However, even if INS is able to increase the number of applicants, shorten the hiring process, or upgrade the full performance level of agents,",
      " experience indicates that these actions alone may not ensure that INS can compensate for the hiring shortfall that has occurred and meet any future hiring goals that are established. Too many Border Patrol applicants may still be unable to pass the steps necessary to be hired, or may not maintain their initial interest in the Border Patrol throughout the hiring process. In the face of these challenges, INS is continuing to explore its options. When faced with an impending hiring shortfall for fiscal year 1999, INS officials expanded their recruiting and hiring efforts in an attempt to meet INS\u2019 hiring goal. However, because INS had limited information on why applicants withdrew from the hiring process, it may or may not be addressing all the causes for the shortfall.",
      " INS plans to survey applicants who do and do not show up to take the written examination as one step toward helping the agency understand more about its recruiting and hiring problems. At that early written examination stage of the hiring process, INS has spent relatively few funds on any one applicant. As an applicant moves further along in the hiring process, INS invests more of its resources, including making Border Patrol agents available to interview the applicant, and spending $3,000 for a background investigation and almost $500 for a medical examination and drug screening. In addition to surveying those applicants who do not show up for the written test and collecting information from those who decline a job offer,",
      " INS could find it informative and cost-effective to learn why some applicants drop out at other stages later in the hiring process. For example, INS could survey applicants, or a sample of applicants, who voluntarily withdraw from the process after passing the interview or the background investigation. Recommendation We recommend that the INS Commissioner broaden the agency\u2019s plans to survey applicants who register for the written examination by also collecting data on why applicants are withdrawing at other key junctures later in the hiring process. Agency Comments and Our Evaluation On November 22, 1999, we met with representatives of the Department of Justice, including INS\u2019 Assistant Commissioner for Human Resources and Development,",
      " to obtain comments on a draft of this report. They generally agreed with our report and provided technical comments, which we incorporated where appropriate. With respect to our recommendation, they agreed that obtaining additional information on why applicants are withdrawing at other key junctures later in the hiring process would be beneficial. They plan to evaluate the feasibility of implementing the recommendation. Copies of this report are being sent to Senator Orrin G. Hatch and Senator Patrick J. Leahy, Chairman and Ranking Minority Member of the Senate Committee on the Judiciary; Representative Henry J. Hyde and Representative John Conyers, Jr., Chairman and Ranking Minority Member of the House Committee on the Judiciary;",
      " and Representative Lamar S. Smith and Representative Sheila Jackson Lee, Chairman and Ranking Minority Member of the House Subcommittee on Immigration and Claims. We will also send copies of this report to the Honorable Janet Reno, the Attorney General; the Honorable Doris Meissner, Commissioner, Immigration and Naturalization Service; the Honorable Lawrence H. Summers, Secretary of the Treasury; and the Honorable Jacob J. Lew, Director, Office of Management and Budget. We will also make copies available to others upon request. The major contributors to this report are acknowledged in appendix VI. If you or your staff have any questions concerning this report, please contact me or James M.",
      " Blume, Assistant Director, on (202) 512-8777. Border Patrol Hiring and Attrition Information and Demographic Profile of New Agents This appendix provides an overview, by month, of Border Patrol hiring and attrition in fiscal year 1999; attrition information for fiscal years 1994 through 1998; and a demographic profile of new agents hired from fiscal years 1994 through 1998. The demographic information covers agents\u2019 age, sex, race, prior military and/or law enforcement training experience, and education level. Fiscal Year 1999 Monthly Hiring and Attrition Data The rate at which INS hired Border Patrol agents fluctuated throughout fiscal year 1999.",
      " Table I.1 provides a monthly accounting of hiring and attrition for the year. As the table shows, the number of agents leaving the agency was greater in some months than the number of agents hired. Table I.1: Border Patrol Hiring and Attrition Data, by Month, FY 1999 Nov. Dec. Jan. Feb. Mar. Apr. Jun. Jul. Aug. Sept. 8,017 (28) 8,010 (71) 8,029 (9) Border Patrol Attrition Border Patrol annual attrition rates increased from 6 percent in fiscal year 1990 to 9 percent in fiscal year 1999,",
      " with some fluctuation in the years between. In fiscal years 1996, 1997, and 1998, attrition rates reached 11 percent, 12 percent, and 13 percent, respectively. As shown in table I.2, close to half of the agents who left the Border Patrol between fiscal years 1994 and 1998 left by the end of their post-Academy training\u2014the period that follows 19 weeks of basic training and concludes 10 months after being hired. Note 1: Academy and post-Academy data provided by the Border Patrol Academy. Total attrition data provided by INS\u2019 Budget Office.",
      " GAO calculated the number and percentage of the remaining (\u201cAll other\u201d) agents who separated from the Border Patrol. Fiscal year 1999 data were unavailable at the time of our review. Percentages are rounded to the nearest whole number. Note 2: Percentages may not total to 100 due to rounding. Post-Academy training takes place after agents are assigned to the field. Once a week, agents participate in Spanish and law classes that they must pass to stay with the Border Patrol. Demographic Profile of New Border Patrol Agents Demographic profiles of new Border Patrol agents have remained fairly constant during this period of increased hiring, as shown in table I.",
      "3. Among the changes that did occur from fiscal years 1994 through 1998 was a decline in the percentage of newly hired Hispanic agents. FY 1994 (n=461) FY 1995 (n=1,005) FY 1996 (n=1,474) FY 1997 (n=1,656) FY 1998 (n=1,901) Age (average) Sex (percent) Race (percent) Asian/Pacific Islander BlackHispanic Native American WhiteOther Note 1:  Fiscal year 1999 data were unavailable at the time of our review. Percentages are rounded to the nearest whole number.",
      " Note 2: Percentages may not total to 100 due to rounding. As shown in table I.4, the percentages of new agents who had prior military and/or law enforcement training experience declined between fiscal years 1994 and 1995. However, since then, the percentages have remained fairly constant. FY 1994 (percent) (n=461) FY 1995 (percent) (n=1,005) FY 1996 (percent) (n=1,474) FY 1997 (percent) (n=1,656) FY 1998 (percent) (n=1,",
      "901) Table I.5 shows the education level of new Border Patrol agents hired from fiscal years 1994 through 1998. One notable change in the education profile of new agents was an increase in the percentage of agents who had a bachelor\u2019s degree when hired. FY 1998 (percent) (n=1,901) 2% 10 2 34 8 38 4 2 Note 1: The following numbers of records were missing in each year: one in fiscal years 1994 and 1996 (0.22 percent and 0.07 percent, respectively, of the totals); five in fiscal year 1997 (0.",
      "30 percent of the total); and three in fiscal year 1998 (0.16 percent of the total). Fiscal year 1999 data were unavailable at the time of our review. Percentages are rounded to the nearest whole number. Note 2: Percentages may not total to 100 due to rounding. INS\u2019 Recruiting Efforts and Hiring Process This appendix provides an overview of INS\u2019 recruitment program, a summary of difficulties INS has faced in trying to meet its hiring goals, and a summary of new initiatives INS is implementing to improve its ability to recruit and hire agents. Overview of Recruiting Program Since 1996, Border Patrol recruiting efforts have been centralized in INS\u2019 National Recruitment Program.",
      " One of the program\u2019s major goals is to generate enough qualified recruits to reach INS\u2019 hiring goals. INS\u2019 national recruitment program includes a variety of activities: Advertising through a variety of mediums, including magazines, newspapers, the Internet, movie theaters, and billboards. Targeting key colleges and universities that have substantial numbers of students graduating with degrees in law enforcement, criminal justice, and police science. Attending recruiting events, such as job fairs and law enforcement officer conferences. Visiting military bases to recruit departing military personnel who have an interest in law enforcement. In addition, to increase the diversity of the Border Patrol\u2019s workforce, INS\u2019 national recruitment program and equal employment opportunity staff work with Border Patrol sectors.",
      " Headquarters staff and Border Patrol agents work with interest groups at the local level and participate in conferences, job fairs, and other career events in an effort to attract female and minority applicants. In the past, INS has had success recruiting Border Patrol agents from areas near the southwest border. In fiscal year 1998, INS focused its recruiting efforts on the central and eastern part of the country because it believed it might have exhausted the applicant pool in the southwest. However, recruiting in these other areas was not as successful as INS had hoped. As a result, in fiscal year 1999, INS once again focused its recruiting efforts on locations near the southwest border.",
      " Recruiting and Hiring Problems INS officials believe a number of factors exist that contribute to INS\u2019 difficulties in recruiting and hiring Border Patrol agents. Although not all are unique to the Border Patrol, they nevertheless present recruiting and hiring challenges, such as difficulty attracting enough eligible applicants, high failure and withdrawal rates during the hiring process, lengthy hiring process, expenses applicants incur, and little flexibility in assigned location and start date. INS does not have data on the extent to which the last three factors affect its recruiting and hiring efforts. Difficulty Attracting Enough Eligible Applicants INS must attract far more Border Patrol applicants than it intends to hire because most applicants either do not pass all of the required hiring steps or drop out during the process.",
      " However, attracting enough eligible applicants has been difficult. INS officials have pointed to the country\u2019s strong economy and job market as a major reason for INS\u2019 hiring problems. They believe the Border Patrol is competing with private and public employers who can offer jobs in better locations and/or with better pay. As shown in table II.1, the number of Border Patrol applicants increased each year through fiscal year 1999, although the number of agents INS hired increased only through fiscal year 1998. INS officials provided data on the number of eligible applicants they attracted each year and the number of agents they hired each year, but they did not have data on the number of each year\u2019s applicant pool that was hired in that same year.",
      " However, using the data in table II.1, we estimated that, in fiscal year 1999, INS hired about 2 percent of its eligible applicants, compared to 4 to 5 percent in prior years. Although these percentages are estimates, they nevertheless provide an indication of INS\u2019 need to attract an increasing number of applicants each year. According to an INS official, the agency would have needed to attract about 75,000 eligible applicants in fiscal year 1999 if it was to meet its goal to increase the Border Patrol\u2019s onboard strength by 1,000 agents. High Failure and Withdrawal Rates The vast majority of applicants are not being hired as Border Patrol agents\u2014they either fail one of the steps in the hiring process,",
      " or they choose to withdraw. Although this is not unique to the Border Patrol and other law enforcement agencies also hire few of their applicants, high dropout rates have made it difficult for INS to meet its hiring goals. To identify trends in the hiring process and to estimate the number of eligible applicants it would need to attract to increase the onboard strength by 1,000 agents each year, INS developed estimated dropout and failure rates for recent years. According to INS\u2019 estimates: Seventy-five percent of eligible applicants did not show up for the written examination in fiscal year 1999. The percentage of applicants who did not report for testing increased most years since fiscal year 1996,",
      " when INS estimated that 54 percent of eligible applicants did not show up for the written examination. Thirty percent of applicants who passed the written examination in fiscal year 1999 did not return for their interview. In fiscal year 1998, 43 percent did not return for their interview; in fiscal years 1996 and 1997, about half the applicants did not return. Forty percent of applicants who passed the interview in fiscal year 1999 failed their background investigation. In fiscal year 1998, 15 percent of applicants failed the investigation. Sixteen percent of applicants who passed the background investigation in fiscal year 1999 failed or did not show up for the medical examination.",
      " In fiscal year 1998, 18 percent failed or did not show up for the examination. Six percent of those who received a final offer in fiscal year 1999 declined it. In fiscal year 1998, 10 percent declined a final offer. Lengthy Hiring Process According to an INS hiring official, it has typically taken 6 months to 1 year to hire a Border Patrol agent under INS\u2019 standard hiring process. Other law enforcement agencies have a similarly long hiring process, but because Border Patrol\u2019s full performance salary level is low compared to some agencies, INS officials believe its applicants may not be willing to wait 6 months to a year for a Border Patrol job offer.",
      " Under the standard hiring process, most steps or tests occur sequentially, with various amounts of time elapsing between each. According to an INS official, scheduling the interview and completing the background investigation when suitability issues arise are the main factors affecting the time it takes to hire an agent. Other factors that can increase the time it takes are health issues or a lack of sufficient information provided by the applicant. Prior to November 1998, INS\u2019 Special Examining Unit oversaw the agency\u2019s hiring functions. However, this unit did not closely monitor the time it took to move an applicant through each stage of the hiring process. Without appropriate monitoring of the hiring process,",
      " INS was limited in its ability to identify potential inefficiencies and, thus, the process was longer than necessary. For example, INS officials told us that under INS\u2019 contract with OPM to schedule and provide the written examination, OPM must offer the examination within 5 weeks of an applicant\u2019s registration. However, according to an INS official, the Special Examining Unit was not monitoring this step, and OPM was taking 6 weeks or more to provide written testing. In addition, the Special Examining Unit would rely on INS\u2019 three administrative centers to schedule applicant interviews, and the centers, in turn, would either schedule the interviews themselves,",
      " or turn the task over to the sectors. According to an INS official, this scheduling process was averaging 8 weeks or more. INS officials said that the lack of central oversight allowed for chronic delays that significantly added to the total time it took to hire an agent. INS also experienced delays in scheduling preemployment medical examinations for applicants. INS relies on an outside contractor for applicants\u2019 medical examinations. However, according to one INS official, the contractor was slow in assigning applicants to clinics and did not have a tracking system in place to identify delays. In some cases, it was taking 90 days from the time applicants passed their interview to the time they received the results of their medical examination.",
      " According to an INS official, at INS\u2019 insistence, the contractor has since established a self- monitoring system to avoid delays and identify situations requiring special attention. Expedited Hiring Session In an attempt to shorten the hiring process and attract a greater number of applicants, INS began conducting expedited hiring sessions in fiscal year 1996. These expedited sessions, which INS offered in addition to the standard hiring process, were scheduled periodically in higher-activity locations. They allowed applicants to complete the written examination, interview, medical examination, drug screening, and fingerprinting over the course of 2 days. In fiscal year 1997, INS began arranging for media attention in the areas where expedited sessions would be held to heighten awareness of the Border Patrol and increase the number of potential applicants.",
      " Initially, this strategy was fairly successful both in expediting the hiring process\u2014typically 2 to 3 months were saved\u2014and increasing the number of agents hired. In fiscal year 1997, 24 percent of all agents hired were processed through expedited hiring sessions, and 4 percent of those who registered for the expedited sessions were hired. But subsequently, these sessions produced lower-than-expected turnouts and diminished results. In fiscal year 1998, only 10 percent of all agents hired resulted from the expedited process and 2 percent of those who registered for the expedited sessions were hired, according to INS estimates. According to an INS official,",
      " the expedited hiring sessions in fiscal year 1999 also produced disappointing turnouts and results. Because of poor results and the substantial costs associated with administering the expedited sessions, INS decided to discontinue them. INS officials did not know why the expedited hiring sessions held in fiscal years 1998 and 1999 yielded disappointing results. INS held its last such session in May 1999. Table II.2 shows the results, as of July 14, 1999, of the last three expedited hiring sessions INS held. As the expedited hiring process typically takes 3 to 9 months, additional agents may be hired from these sessions.",
      " Tucson Jan. 1999 2,900 (100%) New York Mar. 1999 1,553 (100%) San Diego May 1999 1,430 (100%) Scheduled for expedited hiring sessions Took written examination Passed written examination Passed interview Still being processed Security/medical issues Accepted final offer Hired497 (17%) 143 (5%) 136 (5%) 81 (3%) 64 (2%) 14 (< 1%) 32 (1%) 235 (15%) 63 (4%) 54 (3%) 43 (3%) 38 (2%) 4 (< 1%) 7 (< 1%) Expenses Applicants Incur INS believes the expenses that applicants incur during the hiring process serve as a deterrent and,",
      " thus, have contributed to the agency\u2019s hiring difficulties. According to INS, Border Patrol applicants can spend up to $1,500 of their own money travelling to the written examination site and the interview site, and reporting for duty. Recruits must get to their duty station at their own expense, and once there, typically incur the cost of several nights at a hotel before going to the Border Patrol Academy. Little Flexibility in Assigned Location and Start Date INS officials believe that INS\u2019 lack of flexibility in assigning location and start date may have contributed to some applicants turning down Border Patrol offers in the past. They explained that INS provided newly hired agents with little choice in the location to which they were assigned,",
      " and provided short notice for new agents to report for duty. Traditionally, INS offered newly hired Border Patrol agents little choice in their first duty station, in part, because the Border Patrol wanted new agents assigned to stations outside their home state. According to a 1989 INS study, new agents were not assigned to their home state out of concern that those agents might be more susceptible to bribery and corruption. However, neither INS nor the Border Patrol had data to support this conclusion, and the study strongly recommended that the practice be eliminated. According to a Border Patrol Academy official, as hiring problems developed and filling training classes became a problem, INS began giving newly hired agents relatively little time to report for duty and training.",
      " Officials told us they believed that providing short notice might have been a factor in Border Patrol recruits turning down job offers. The Border Patrol Academy conducted a survey of 10 training classes that took place in fiscal year 1998 and found that new hires received an average of 14 days\u2019 notice to report for duty. The average notice time for new hires in one of the 10 classes was 7 days, and 1 agent said he received as little as 1 day\u2019s notice. Traditionally, INS had tried to give new hires 30 days\u2019 notice to make necessary personal arrangements. Agency officials told us that 30 days\u2019 notice seems appropriate,",
      " since agents must report for a 19-week training program in either Georgia or South Carolina within the first days of coming on duty, and training is typically followed by relocation. New Recruiting and Hiring Initiatives In the face of INS\u2019 hiring difficulties, the INS Commissioner convened a working group in January 1999 to review INS\u2019 recruiting plan and hiring process. The group made changes to both processes and has plans for further short- and long-term changes that it expects will improve INS\u2019 ability to recruit and hire Border Patrol agents. The Commissioner has redirected $2.2 million to implementing these initiatives and is willing to redirect more funds if needed.",
      " The $2.2 million became available after INS cancelled 10 fiscal year 1999 training classes due to insufficient numbers of new hires. The following new recruiting initiatives are intended to increase Border Patrol sectors\u2019 involvement in the recruiting process and increase the number of people interested in the Border Patrol: training over 200 Border Patrol agents as recruiters, establishing recruitment coordinators in each sector, establishing a toll-free job information line, and considering future recruiting bonuses. Most of the following hiring initiatives are intended to reduce the time of the entire hiring process, from the time the applicant signs up to take the written examination, to the time INS makes the applicant a final job offer:",
      " conducting written tests sooner, scheduling interviews centrally, monitoring the scheduling of medical examinations, offering \u201ccompressed testing\u201d at six locations, surveying applicants who did and did not show up for the written test, allowing more choice in job locations among the southwest border sectors, allowing more flexibility in start dates. Recruiting Initiatives The working group developed a series of recruiting initiatives aimed at increasing local outreach and heightening local awareness of the Border Patrol. Even before INS developed these new initiatives, it had significantly increased the number of activities in which its National Recruitment Program was involved during fiscal year 1999. One of the major new initiatives involves using Border Patrol agents as recruiters.",
      " INS contracted with the same firm that trains U.S. Marine Corps recruiters to train Border Patrol agents as recruiters. In June and July 1999, the contractor provided such training to more than 200 Border Patrol agents. INS also established recruitment coordinators for each Border Patrol sector, who have developed local recruiting plans for the Border Patrol recruiters to implement. These local plans include universities, colleges, and community colleges; military bases and facilities; and local events. According to an INS official, these plans involve increased emphasis at the local level, including more recruiting at community colleges. In May 1999, INS established a toll-free job information line for potential Border Patrol applicants.",
      " The information line provides the caller with the following information: how to apply, answers to frequently asked questions, duties and qualifications, physical requirements, and an overview of the hiring process. According to an October 1999 INS report, the toll-free line was averaging more than 2,000 calls per week. As part of its initiatives, INS officials are also considering providing recruiting bonuses. Such a bonus would take the form of a \u201csigning bonus\u201d for newly hired agents. Hiring Initiatives INS officials have begun implementing a set of hiring initiatives aimed at retaining more applicants through the hiring process so that, in the end, they hire a greater percentage of applicants.",
      " Several of the initiatives are focused on reducing the time it takes for an applicant to move through the hiring process because officials believe the length of the process has hurt INS\u2019 ability to hire more Border Patrol agents. INS\u2019 transfer of Border Patrol hiring functions to its National Hiring Center in Twin Cities, Minnesota, in early fiscal year 1999, has improved monitoring of the hiring process. The hiring initiatives include a goal to reduce INS\u2019 overall standard hiring process\u2014from the point an applicant is scheduled for the written examination through the Telephone Application Processing System to the point an applicant receives a final job offer\u2014by at least 1 to 2 months. Thus,",
      " an applicant could move through the hiring process in 4 to 5 months if no issues complicate the applicant\u2019s medical examination or background investigation. One focus of INS\u2019 initiatives has been to shorten the time from when an applicant is first scheduled for the written examination through the Telephone Application Processing System to the time the applicant takes the examination. INS\u2019 National Hiring Center has been tracking OPM\u2019s efforts and working with OPM to shorten this step by at least 1 week. INS also expects to reduce the hiring process by 1 to 4 weeks through the centralized scheduling of applicant interviews. Under the new initiatives, INS\u2019 National Hiring Center is working directly with the sectors to schedule interviews,",
      " thus eliminating INS administrative centers from the process. The National Hiring Center has begun monitoring the time it takes sectors to schedule interviews and is producing internal reports that identify sectors that are lagging behind. The National Hiring Center is now also involved in the process of referring applicants to INS medical contractors for the required medical examination. With the center\u2019s involvement, and its electronic tracking of this step, officials anticipate they can cut in half\u2014from 90 to 45 days\u2014the time between an applicant passing the interview and receiving the medical examination results. In addition to its standard hiring process, INS is now offering \u201ccompressed testing\u201d to reduce the time it takes to hire an agent.",
      " INS is conducting compressed testing at six locations, five of which are near the southwest border, that collectively account for more than half of the past Border Patrol applicants. Compressed testing will allow the written examination and interview to take place, independent of each other, at these locations at 2-week intervals. Officials hope that compressed testing will reduce the entire hiring process to 3 to 4 months in cases where no issues complicate the applicant\u2019s medical examination or background investigation. In a further effort to improve hiring, INS has contracted with a firm to conduct telephone surveys of applicants who take the written examination, as well as those who are scheduled to take the written examination,",
      " but do not report for testing. The survey of applicants who take the examination will obtain feedback on the initial part of the application process, such as the amount of time that passed between applying to take the written examination and taking the examination. The survey of applicants who do not report for testing will ask for the applicants\u2019 reasons for not reporting. Officials hope these efforts will help them improve the hiring process and increase their understanding about why potential recruits seem to lose interest before the hiring process really begins. As of September 1999, the development of the two surveys was well under way. Hiring initiatives also include allowing recruits a choice of location among the southwest border sectors to which they can be assigned in the hope that more recruits will accept job offers.",
      " INS has taken the position that the Border Patrol needs to be more flexible on this matter if hiring is to improve, and it is asking recruits to identify two preferences out of four general geographic locations along the southwest border. Even before the new initiatives, the Border Patrol agreed to begin allowing more flexibility, and this has increased under the new initiatives. Although new agents are not assigned to their home station, they can now be assigned to their home state or home sector. As previously discussed, INS officials recognize that providing recruits with little notice to report for training may have contributed to job declinations or resignations during basic training. INS officials have the goal of providing recruits with 30 days\u2019 notice to report for duty.",
      " According to a National Hiring Center official, this goal is not always achieved, but staff work directly with recruits to arrange as much notice as possible and find a mutually acceptable reporting date. Changes in Agents\u2019 Years of Experience and Ratio of Agents to Supervisor This appendix provides information on how the general composition of the Border Patrol has changed as it has increased in size. As the relative number of agents within each grade level has changed, so too has the average level of experience among agents. The average years of service among agents has declined both agencywide and in the sectors along the southwest border. Also affected by the Border Patrol\u2019s rapid growth has been the average number of nonsupervisory agents assigned to each GS-",
      "12 supervisory agent. Border Patrol Growth Led to Shifts in Grade- Level Composition Between fiscal years 1994 and 1998, the size of the Border Patrol increased dramatically, causing a considerable shift in agents\u2019 average years of experience, both agencywide and along the southwest border. At the start of fiscal year 1999, 92 percent of all Border Patrol agents were assigned to the nine sectors along the southwest border. (See app. IV for a map showing the southwest border sectors.) Table III.1 provides data on how the number and percentage of agents at each grade level in the southwest border sectors changed from fiscal year 1994 to fiscal year 1998.",
      " Almost all of the nine sectors experienced notable increases in the number of agents onboard between these years, with one sector\u2014Tucson\u2014more than tripling the size of its workforce. More significantly, because all new agents are deployed to the southwest border after completing basic training, the relative number of GS-5 and GS-7 agents in these sectors increased dramatically. Agents\u2019 Average Years of Experience Declined Agencywide, the percentage of relatively inexperienced Border Patrol agents increased significantly between fiscal year 1994 and fiscal year 1998. As shown in table III.2, the percentage of agents with 2 years or less experience almost tripled agencywide,",
      " from 12 percent to 35 percent. In contrast, the percentage of agents with 5 or more years of service declined, from 74 percent of all agents to 40 percent. Table III.3 shows changes in the level of experience of agents assigned to the southwest border. For example, between fiscal year 1994 and fiscal year 1998, the percentage of agents with 3 years of service or less more than doubled, from 26 percent to 54 percent. In contrast, the percentage of agents with 5 or more years of experience declined, from 70 percent in fiscal year 1994 to 36 percent in fiscal year 1998.",
      " As table III.4 demonstrates, between fiscal year 1994 and fiscal year 1998, all nine of the southwest border sectors saw increases in the percentage of relatively inexperienced agents, with some sectors experiencing dramatic increases. For example, in fiscal year 1994, 2 percent of the agents at the El Centro sector had 2 years of experience or less but, by fiscal year 1998, 59 percent of the agents had 2 years of experience or less. The McAllen sector also experienced dramatic increases\u2014only 1 percent of its agents in fiscal year 1994 had 2 years of experience or less but,",
      " by fiscal year 1998, 54 percent of its agents had 2 years of experience or less. The percentage of agents in the Tucson sector with 3 years of experience or less increased from 18 percent in fiscal year 1994 to 64 percent by fiscal year 1998. Average Number of Agents Per Supervisor Increased As a result of the increased hiring of Border Patrol agents, the ratio of nonsupervisory agents (GS-5 through GS-11) to one GS-12 supervisory agent increased across the Border Patrol\u2014from 7 to 1 in fiscal year 1994 to 8 to 1 in fiscal year 1998.",
      " The ratio of nonsupervisory agents assigned to one supervisory agent also increased among the southwest border sectors, from 8 to 1 to 9.2 to 1. Almost all of the nine southwest border sectors saw the span of supervision increase. As table III.5 illustrates, this increase varied among the sectors. At one extreme, in the Tucson sector, the ratio of nonsupervisory agents to one supervisory agent increased from 8 to 1 to 11.2 to 1. In contrast, in the El Paso sector, the ratio of nonsupervisory agents to one supervisory agent decreased between these years,",
      " from 9.5 to 1 to 8.4 to 1. Map of Border Patrol Sectors Along the Southwest Border New Border Patrol agents are sent to the Border Patrol Academy for a 19- week basic training program within days of reporting for duty at their assigned sectors. The basic training program covers six subject areas: (1) Spanish, (2) law, (3) operations, (4) physical training, (5) firearms, and (6) driver training, and agents must pass all subjects to graduate. As shown in table V.1, the number of agents who received basic training has grown substantially since fiscal year 1994.",
      " Table V.1: Border Patrol Agents Receiving Basic Training, FYs 1994 Through 1999  (number) (percent) (number) (percent) Fiscal year 1999 data reflect only classes that had graduated as of September 30, 1999. Table V.I also shows the number and percentage of agents who did not graduate each year. Agents who do not graduate are those who (1) fail to receive a passing grade of 70 percent in any subject area and are, thus, terminated; (2) are injured during training and receive COP; or (3) resign. The Academy has developed a training projection for fiscal years 2001 through 2005 for planning purposes.",
      " Table V.2 highlights the Academy\u2019s 5- year training projection, which calls for a gradually increasing number of new agents each fiscal year. Academy Instructors The Academy relies on both permanent and detailed instructors to provide basic training. Detailed instructors are Border Patrol agents\u2014GS-9 or above\u2014who are recruited from the field to work as instructors on a temporary basis\u2014usually for 1 or 2 of the 19-week sessions. Table V.3 shows the number of Border Patrol instructors assigned to the Academy for fiscal years 1994 through 1998. As the number of trainees has increased, the Academy has increasingly relied on detailed instructors.",
      " In fiscal year 1995, the Academy more than quadrupled the number of detailed instructors onboard. In fiscal year 1998, more than 75 percent of instructors who taught at the Academy were detailed from the field. Because the Academy could not provide us with data on all its detailed instructors, these percentages actually underrepresent the Academy\u2019s reliance on detailed instructors. Basic Training Grades Trainees\u2019 overall grade averages have remained relatively constant since fiscal year 1994, as shown in table V.4, despite the large influx of trainees and detailed instructors. FY 1994(percent) FY 1995(percent) FY 1996 (percent)",
      " FY 1997 (percent) FY 1998 (percent) Charleston Facility As a Temporary Training Site In fiscal year 1996, INS expanded its existing Border Patrol training capacity by opening a temporary, satellite training facility at a former naval station in Charleston, South Carolina. To make the facility suitable for training, INS spent more than $5 million constructing new firing and driving ranges and reconfiguring existing structures into classrooms and dormitories, as well as a fitness center. In fiscal years 1998 and 1999, INS received about $16 million for additional facility renovations, including the consolidation of management, instructor, and administrative offices into a single building,",
      " and the development of an \u201cafter-hours\u201d study facility and an athletic center. INS and FLETC officials have different views on how long the Charleston facility will need to remain open to provide training. When INS began using the facility in fiscal year 1996, it anticipated closing the Charleston facility once FLETC had the capacity to accommodate all of INS\u2019 training needs. At that time, both FLETC and INS expected the facility to operate for about 3 years. However, in April 1999, FLETC indicated that it would not be ready to assume the Charleston facility\u2019s training load until fiscal year 2001.",
      " In October 1999, a FLETC official told us that FLETC had readjusted its April 1999 estimate to the end of fiscal year 2004, or earlier if Border Patrol hiring is less than expected or if funds are appropriated sooner. He explained that the agency\u2019s estimate is based on its ability to reabsorb all Border Patrol training currently held at the Charleston facility. In October 1999, an INS official told us that INS expected the Charleston facility could be closed sometime between fiscal years 2004 and 2006. INS\u2019 estimate is premised on FLETC\u2019s ability to accommodate all of INS\u2019 training needs,",
      " which are dependent on INS\u2019 future hiring requirements and its ability to meet those requirements. GAO Contacts and Staff Acknowledgments GAO Contacts Acknowledgments Lori A. Weiss Barbara A. Guffy Jennifer Y. Kim Marianne C. Cantwell David P. Alexander Michelle A. Sager The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent.",
      " U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days,",
      " please call (202) 512-6000 using a touch- tone phone. A recorded menu will provide information on how to obtain these lists.\n"
    ],
    "length": 12501,
    "hardness": null,
    "role": null
  },
  {
    "id": 68,
    "question": null,
    "answer": "Increasing militant activity in western Pakistan poses three key national security threats: an increased potential for major attacks against the United States itself; a growing threat to Pakistani stability; and a hindrance of U.S. efforts to stabilize Afghanistan. This report will be updated as events warrant. A U.S.-Pakistan relationship marked by periods of both cooperation and discord was transformed by the September 2001 terrorist attacks on the United States and the ensuing enlistment of Pakistan as a key ally in U.S.-led counterterrorism efforts. Top U.S. officials have praised Pakistan for its ongoing cooperation, although long-held doubts exist about Islamabad's commitment to some core U.S. interests. Pakistan is identified as a base for terrorist groups and their supporters operating in Kashmir, India, and Afghanistan. Since 2003, Pakistan's army has conducted unprecedented and largely ineffectual counterterrorism operations in the country's Federally Administered Tribal Areas (FATA) bordering Afghanistan, where Al Qaeda operatives and pro-Taliban insurgents are said to enjoy \"safe haven.\" Militant groups have only grown stronger and more aggressive in 2008. Islamabad's new civilian-led government vows to combat militancy in the FATA through a combination of military force, negotiation with \"reconcilable\" elements, and economic development. The Pakistani military has in late 2008 undertaken major operations aimed at neutralizing armed extremism in the Bajaur agency, and the government is equipping local tribal militias in several FATA agencies with the hope that these can supplement efforts to bring the region under more effective state writ. The upsurge of militant activity on the Pakistan side of the border is harming the U.S.-led stabilization mission in Afghanistan, by all accounts. U.S. commanders in Afghanistan attribute much of the deterioration in security conditions in the south and east over the past year to increased militant infiltration from Pakistan. U.S. policymakers are putting in place a series of steps to try to address the deficiencies of the Afghan government and other causes of support for Afghan Taliban militants, but they are also undertaking substantial new security measures to stop the infiltration. A key, according to U.S. commanders, is to reduce militant infiltration into Afghanistan from Pakistan. To do so, U.S. General David McKiernan, the overall commander in Afghanistan, is \"redefining\" the Afghan battlefield to include the Pakistan border regions, and U.S. forces are becoming somewhat more aggressive in trying to disrupt, from the Afghan side of the border, militant operational preparations and encampments on the Pakistani side of the border. At the same time, Gen. McKiernan and other U.S. commanders are trying to rebuild a stalled Afghanistan-Pakistan-U.S./NATO military coordination process, building intelligence and information sharing centers, and attempting to build greater trust among the senior ranks of the Pakistani military.\n",
    "docs": [
      "Threat Assessment The instability in western Pakistan has broad implications for international terrorism, for Pakistani stability, and for U.S. efforts to stabilize Afghanistan. From the State Department's Country Reports on Terrorism 2007 (released April 2008): The United States remained concerned that the Federally Administered Tribal Areas (FATA) of Pakistan were being used as a safe haven for Al Qaeda terrorists, Afghan insurgents, and other extremists.... Extremists led by Baitullah Mehsud and other Al Qaeda-related extremists re-exerted their hold in areas of South Waziristan.... Extremists have also gained footholds in the settled areas bordering the FATA.",
      " The report noted that the trend and sophistication of suicide bombings grew in Pakistan during 2007, when there was more than twice as many such attacks (at least 45) as in the previous five years combined. Rates of such bombings have only increased in 2008. CIA Director Hayden said in March 2008 that the situation on the Pakistan-Afghanistan border \"presents a clear and present danger to Afghanistan, to Pakistan, and to the West in general, and to the United States in particular.\" He agreed with other top U.S. officials who believe that possible future terrorist attacks on the U.S. homeland likely would originate from that region.",
      " The International Terrorism Threat The State Department report on international terrorism for 2007 said that Al Qaeda remained the greatest terrorist threat to the United States and its partners in 2007. The two most notable Al Qaeda leaders at large, and believed in Pakistan, are Osama bin Laden and his close ally, Ayman al-Zawahri. They have apparently been there since December 2001, when U.S. Special Operations Forces and CIA officers reportedly narrowed Osama bin Laden's location to the Tora Bora mountains in Afghanistan's Nangarhar Province (30 miles west of the Khyber Pass), but the Afghan militia fighters who were the bulk of the fighting force did not prevent his escape.",
      " Associated with Al Qaeda leaders in this region are affiliated groups and their leaders, such as the Islamic Movement of Uzbekistan (IMU) and its leader, Tahir Yuldashev. Chechen Islamist radicals are also reportedly part of the Al Qaeda militant contingent, and U.S. commanders say some have been captured in 2008 on the Afghanistan battlefield. A purported U.S.-led strike reportedly missed Zawahri by a few hours in the village of Damadola, Pakistan, in January 2006, suggesting that the United States and Pakistan have some intelligence on his movements. A strike in late January 2008, in an area near Damadola,",
      " killed Abu Laith al-Libi, a reported senior Al Qaeda figure who purportedly masterminded, among other operations, the bombing at Bagram Air Base in February 2007 when Vice President Cheney was visiting. In August 2008, an airstrike was confirmed to have killed Al Qaeda chemical weapons expert Abu Khabab al-Masri. Prior to 2007, the United States had praised the government of then-President Pervez Musharraf for Pakistani accomplishments against Al Qaeda, including the arrest of over 700 Al Qaeda figures, some of them senior, since the September 11 attacks. After the attacks, Pakistan provided the United States with access to Pakistani airspace,",
      " some ports, and some airfields for Operation Enduring Freedom. Others say Musharraf acted against Al Qaeda only when it threatened him directly; for example, after the December 2003 assassination attempts against him by that organization. The U.S. shifted toward a more critical position following a New York Times report (February 19, 2007) that Al Qaeda had re-established some small Al Qaeda terrorist training camps in Pakistan, near the Afghan border. The Threat to Afghanistan's Stability According to the Pentagon, the existence of militant sanctuaries inside Pakistan's FATA represents \"the greatest challenge to long-term security within Afghanistan.\" The commander of U.S.",
      " and NATO forces in Afghanistan, General David McKiernan, and his aides, assert that Pakistan's western tribal regions provide the main pool for recruiting insurgents who fight in Afghanistan, and that infiltration from Afghanistan has caused a 30% increase in number of militant attacks in eastern Afghanistan over the past year. Another senior U.S. military officer estimated that militant infiltration from Pakistan now accounts for about one-third of the attacks on coalition troops in Afghanistan. Most analysts appear to agree that, so long as Taliban forces enjoy \"sanctuary\" in Pakistan, their Afghan insurgency will persist. U.S. leaders\u2014both civilian and military\u2014now call for a more comprehensive strategy for fighting the war in Afghanistan,",
      " one that will encompass Pakistan's tribal regions. The Chairman of the U.S. Joint Chiefs of Staff, Adm. Mike Mullen, sees the two countries as \"inextricably linked in a common insurgency\" and has directed that maps of the Afghan \"battle space\" include the tribal areas of western Pakistan. Afghan Militant Groups in the Border Area The following major Afghan militant organizations apparently have a measure of safehaven in Pakistan: The original Taliban leadership of Mullah Mohammad Omar. His purported associates include Mullah Bradar and several official spokespersons, including Qari Yusuf Ahmadi and Zabiullah Mujahid. This group\u2014referred to as the \"Qandahari clique\"",
      " or \"Quetta Shura\"\u2014operates not from Pakistan's tribal areas, but from populated areas in and around the Baluchistan provincial capital of Quetta. Its fighters are most active in the southern provinces of Afghanistan, including Qandahar, Helmand, and Uruzgan. Many analysts believe that Pakistan's intelligence services know the whereabouts of these Afghan Taliban leaders but do not arrest them as part of a hedge strategy in the region. Another major insurgent faction is the faction of Hizb-e-Islami (Islamic Party) led by former mujahedin leader Gulbuddin Hikmatyar. His fighters operate in Kunar and Nuristan provinces,",
      " northeast of Kabul. His group was a major recipient of U.S. funds during the U.S.-supported mujahedin war against the Soviet occupation of Afghanistan, and in that capacity Hikmatyar was received by President Reagan in 1985. On February 19, 2003, the U.S. government formally designated Hikmatyar as a \"Specially Designated Global Terrorist,\" under the authority of Executive Order 13224, subjecting it to financial and other U.S. sanctions. (It is not formally designated as a \"Foreign Terrorist Organization.\") On July 19, 2007, Hikmatyar expressed a willingness to discuss a cease-fire with the Karzai government,",
      " although no firm reconciliation talks were held. In 2008, he has again discussed possible reconciliation, only later to issue statements suggesting he will continue his fight. Another major militant faction is led by Jalaludin Haqqani and his eldest son, Sirajuddin Haqqani. The elder Haqqani served as Minister of Tribal Affairs in the Taliban regime of 1996-2001, is believed closer to Al Qaeda than to the ousted Taliban leadership in part because one of his wives is purportedly Arab. The group is active around Khost Province. Haqqani property inside Pakistan has been repeatedly targeted in September and October 2008 by U.S.",
      " strikes. For their part, Pakistani officials more openly contend that the cause of the security deterioration has its roots in the inability of the Kabul government to effectively extend its writ, in its corruption, and in the lack of sufficient Afghan and Western military forces to defeat the Taliban insurgents. This view is supported by some independent analyses. Pakistani leaders insist that Afghan stability is a vital Pakistani interest. They ask interested partners to enhance their own efforts to control the border region by undertaking an expansion of military deployments and checkposts on the Afghan side of the border, by engaging more robust intelligence sharing, and by continuing to supply the counterinsurgency equipment requested by Pakistan.",
      " Islamabad touts the expected effectiveness of sophisticated technologies such as biometric scanners in reducing illicit cross-border movements, but analysts are pessimistic that such measures can prevent all militant infiltration. Attacks on U.S./NATO Supply Lines Militants in Pakistan increasingly seek to undermine the U.S.-led mission in Afghanistan by choking off supply lines. Roughly three-quarters of supplies for U.S. troops in Afghanistan move either through or over Pakistan. Taliban efforts to interdict NATO supplies as they cross through Pakistan to Afghanistan have included a March 2008 attack that left 25 fuel trucks destroyed and a November 2008 raid when at least a dozen trucks carrying Humvees and other supplies were hijacked at the Khyber Pass.",
      " Despite an upsurge in reported interdiction incidents, U.S. officials say only about 1% of the cargo moving from the Karachi port into Afghanistan is being lost. After a U.S. special forces raid in the FATA in early September 2008, Pakistani officials apparently closed the crucial Torkham highway in response. The land route was opened less than one day later, but the episode illuminated how important Pakistan's cooperation is to sustaining multilateral military efforts to the west. Pentagon officials have studied alternative routes in case further instability in Pakistan disrupts supply lines. The Russian government agreed to allow non-lethal NATO supplies to Afghanistan to cross Russian territory,",
      " but declines to allow passage of troops as sought by NATO. Uzbekistan also has expressed a willingness to accommodate the flow of U.S. supplies, although in exchange for improved U.S. relations, which took a downturn following the April 2005 Uzbek crackdown on demonstrators in its city of Andijon. A Pentagon official has said the U.S. military was increasing its tests of alternative supply routes. The Threat to Pakistan and Islamabad's Responses The Tehrik-i-Taliban Pakistan (TTP)\u2014widely identified as the leading anti-government militant group in Pakistan\u2014emerged as a coherent grouping in late 2007 under Baitullah Mehsud's leadership.",
      " This \"Pakistani Taliban\" is said to have representatives from each of Pakistan's seven tribal agencies, as well as from many of the \"settled\" districts abutting the FATA. There appears to be no reliable evidence that the TTP receives funding from external states. The group's principal aims are threefold: uniting disparate pro-Taliban groups active in the FATA and NWFP; assisting the Afghan Taliban in its conflict across the international frontier; and establishing a Taliban-style state in Pakistan and perhaps beyond. As an umbrella group, the TTP is home to tribes and sub-tribes, some with long-held mutual antagonism.",
      " It thus suffers from factionalism. Mehsud himself is believed to command some 5,000 militants. His North Waziristan-based deputy is Hafiz Gul Bahadur; Bajaur's Maulana Faqir Muhammad is said to be third in command. The Islamabad government formally banned the TTP in August 2008 due to its alleged involvement in a series of domestic suicide attacks. The move allowed for the freezing of all TTP bank accounts and other assets and for the interdiction of printed and visual propaganda materials. The NWFP governor has claimed Mehsud oversees an annual budget of up to $45 million devoted to perpetuating regional militancy.",
      " Most of this amount is thought to be raised through narcotics trafficking, although pro-Taliban militants also sustain themselves by demanding fees and taxes from profitable regional businesses such as marble quarries. The apparent impunity with which Mehsud is able to act has caused serious alarm in Washington, where officials worry that his power and influence are only growing. In addition to the TTP, several other Islamist militant groups are active in the region. These include the Tehreek-e-Nafaz-e-Shariat-e-Mohammadi (TNSM) of radical cleric Maulana Fazlullah and up to 5,000 of his armed followers who seek to impose Sharia law in Bajaur,",
      " as well as in neighboring NWFP districts; a South Waziristan militia led by Mehsud rival Maulvi Nazir, which reportedly has won Pakistan government support in combating Uzbek militants; and a Khyber agency militia led by Mangal Bagh, which battled government forces in mid-2008. Internal Military Operations To combat the militants, the Pakistan army has deployed upwards of 100,000 regular and paramilitary troops in western Pakistan in response to the surge in militancy there. Their militant foes appear to be employing heavy weapons in more aggressive tactics, making frontal attacks on army outposts instead of the hit-and-run skirmishes of the past.",
      " The army also has suffered from a raft of suicide bomb attacks and the kidnaping of hundreds of its soldiers. Such setbacks damaged the army's morale and caused some to question the organization's loyalties and capabilities. Months-long battles with militants have concentrated on three fronts: the Swat valley, and the Bajaur and South Waziristan tribal agencies (see Figure 1 ). Taliban forces may also have opened a new front in the Upper Dir valley of the NWFP, where one report says a new militant \"headquarters\" has been established. Pakistan has sent major regular army units to replace Frontier Corps soldiers in some areas near the Afghan border and has deployed elite,",
      " U.S.-trained and equipped Special Services Group commandos to the tribal areas. Heavy fighting between government security forces and religious militants flared in the FATA in 2008. Shortly after Bhutto's December 2007 assassination the Pakistan army undertook a major operation against militants in the South Waziristan agency assumed loyal to Baitullah Mehsud. Sometimes fierce combat continued in that area throughout the year. According to one report, nearly half of the estimated 450,000 residents of the Mehsud territories were driven from their homes by the fighting and live in makeshift camps. Pakistani ground troops have undertaken operations against militants in the Bajaur agency beginning in early August.",
      " The ongoing battle has been called especially important as a critical test of both the Pakistani military's capabilities and intentions with regard to combating militancy, and it has been welcomed by Defense Secretary Gates as a reflection of the new Islamabad government's willingness to fight. Some 8,000 Pakistani troops are being backed by helicopter gunships and ground attack jets. The Frontier Corps' top officer has estimated that militant forces in Bajaur number about 2,000, including foreigners. Battles include a series of engagements at the strategic Kohat tunnel, a key link in the U.S. military supply chain running from Karachi to Afghanistan. The fighting apparently has attracted militants from neighboring regions and these reinforced insurgents have been able to put up surprisingly strong resistance\u2014complete with sophisticated tactics,",
      " weapons, and communications systems\u2014and reportedly make use of an elaborate network of tunnels in which they stockpile weapons and ammunition. Still, Pakistani military officials report having killed more than 1,500 militants in the Bajaur fighting to date. The army general leading the campaign believes that more than half of the militancy being seen in Pakistan would end if his troops are able to win the battle of Bajaur. Subsequent terrorist attacks in other parts of western Pakistan have been tentatively linked to the Bajaur fighting. The Pakistani military effort in Bajaur has included airstrikes on residential areas occupied by suspected militants who may be using civilians as human shields.",
      " The use of fixed-wing aircraft continues and reportedly has killed some women and children along with scores of militants. The strife is causing a serious humanitarian crisis. In August, the U.S. government provided emergency assistance to displaced families. The United Nations estimates that hundreds of thousands of civilians have fled from Bajaur, with about 20,000 of these moving into Afghanistan. International human rights groups have called for international assistance to both Pakistani and Afghan civilians adversely affected by the fighting. Questions remain about the loyalty and commitment of the Pakistani military. Pakistan's mixed record on battling Islamist extremism includes an ongoing apparent tolerance of Taliban elements operating from its territory. Reports continue to indicate that elements of Pakistan's major intelligence agency and military forces aid the Taliban and other extremists forces as a matter of policy.",
      " Such support may even include providing training and fire support for Taliban offensives. Other reports indicate that U.S. military personnel are unable to count on the Pakistani military for battlefield support and do not trust Pakistan's Frontier Corps, whom some say are active facilitators of militant infiltration into Afghanistan. At least one senior U.S. Senator, Armed Services Committee Chairman Carl Levin, has questioned the wisdom of providing U.S. aid to a group that is ineffective, at best, and may even be providing support to \"terrorists.\" Tribal Militias Autumn 2008 saw an increase in the number of lashkars \u2014tribal militias\u2014being formed in the FATA.",
      " These private armies may represent a growing popular resistance to Islamist militancy in the region, not unlike that seen in Iraq's \"Sunni Awakening.\" A potential effort to bolster the capabilities of tribal leaders near the Afghan border would target that region's Al Qaeda elements and be similar to U.S. efforts in Iraq's Anbar province. Employing this strategy in Pakistan presents new difficulties, however, including the fact that the Pakistani Taliban is not alien to the tribal regions but is comprised of the tribals' ethnolinguistic brethren. Still, with pro-government tribals being killed by Islamist extremists almost daily in western Pakistan, tribal leaders may be increasingly alienated by the violence and so more receptive to cooperation with the Pakistan military.",
      " The Pakistan army reportedly backs these militias and the NWFP governor expresses hope that they will turn the tide against Taliban insurgents. Islamabad reportedly plans to provide small arms to these anti-Taliban tribal militias, which are said to number some 14,000 men in Bajaur and another 11,000 more in neighboring Orakzai and Dir. No U.S. government funds are to be involved. Some reporting indicates that, to date, the lashkars have proven ineffective against better-armed and more motivated Taliban fighters. Intimidation tactics and the targeted killings of pro-government tribal leaders continue to take a toll, and Islamabad's military and political support for the tribal efforts is said to be \"episodic\"",
      " and \"unsustained.\" Some analysts worry that, by employing lashkars to meet its goals in the FATA, the Islamabad government risks sparking an all-out war in the region. Complicating Factors in Achieving U.S. Goals Pakistan's Strategic Vision Three full-scale wars and a constant state of military preparedness on both sides of their mutual border have marked six decades of bitter rivalry between Pakistan and India. The acrimonious partition of British India into two successor states in 1947 and the unresolved issue of Kashmiri sovereignty have been major sources of tension. Both countries have built large defense establishments at significant cost to economic and social development.",
      " The conflict dynamics have colored the perspectives of Islamabad's strategic planners throughout Pakistani existence. Pakistani leaders have long sought access to Central Asia and \"strategic depth\" with regard to India through friendly relations with neighboring Afghanistan to the west. Such policy contributed to President-General Zia ul-Haq's support for Afghan mujahideen \"freedom fighters\" who were battling Soviet invaders during the 1980s and to Islamabad's later support for the Afghan Taliban regime from 1996 to 2001. British colonialists had purposely divided the ethnic Pashtun tribes inhabiting the mountainous northwestern reaches of their South Asian empire with the 1893 \"Durand Line.\" This porous,",
      " 1,600-mile border is not accepted by Afghan leaders, who have at times fanned Pashtun nationalism to the dismay of Pakistanis. Pakistan is wary of signs that India is pursuing a policy of \"strategic encirclement,\" taking note of New Delhi's past support for Tajik and Uzbek militias which comprised the Afghan Northern Alliance, and the post-2001 opening of several Indian consulates in Afghanistan. More fundamental, perhaps, even than regime type in Islamabad is the Pakistani geopolitical perspective focused on India as the primary threat and on Afghanistan as an arena of security competition between Islamabad and New Delhi. In the conception of one long-time analyst,",
      " \"Pakistan's grand strategy, with an emphasis on balancing against Afghanistan and India, will continue to limit cooperation in the war on terrorism, regardless of whether elected civilian leaders retain power or the military intervenes again.\" Xenophobia and Anti-American Sentiment The tribes of western Pakistan and eastern Afghanistan are notoriously adverse to interference from foreign elements, be they British colonialists and Soviet invaders of the past, or Westerners and even non-Pashtun Pakistanis today (a large percentage of Pakistan's military forces are ethnic Punjabis with little or no linguistic or cultural familiarity with their Pashtun countrymen). Anti-American sentiments are widespread throughout Pakistan and a significant segment of the populace has viewed years of U.S.",
      " support for President Musharraf and the Pakistani military as an impediment to, rather than facilitator of, the process of democratization and development there. Underlying the anti-American sentiment is a pervasive, but perhaps malleable perception that the United States is fighting a war against Islam. Opinion surveys in Pakistan have found strong support for an Islamabad government emphasis on negotiated resolutions to the militancy problem. They also show scant support for unilateral U.S. military action on Pakistani territory. Pakistan's Islamist political parties are notable for expressions of anti-American sentiment, at times calling for \"jihad\" against the existential threat to Pakistani sovereignty they believe alliance with Washington entails.",
      " Some observers identify a causal link between the poor state of Pakistan's public education system and the persistence of xenophobia and religious extremism in that country. Anti-American sentiment is not limited to Islamic groups, however. Many across the spectrum of Pakistani society express anger at U.S. global foreign policy, in particular when such policy is perceived to be unfriendly or hostile to the Muslim world (as in, for example, Palestine and Iraq). Weak Government Writ in the FATA Pakistan's rugged, mountainous FATA region includes seven ethnic Pashtun tribal agencies traditionally beyond the full writ of the Pakistani state. The FATA is home to some 3.",
      "5 million people living in an area slightly larger than the state of Maryland. The inhabitants are legendarily formidable fighters and were never subjugated by British colonialists. The British established a khassadar (tribal police) system which provided the indigenous tribes with a large degree of autonomy under maliks \u2014local tribal leaders. This system provided the model through which the new state of Pakistan has administered the region since 1947. Today, the Pashtun governor of Pakistan's North West Frontier Province, Owais Ahmed Ghani, is the FATA's top executive, reporting directly to President Zardari. He and his \"political agents\"",
      " in each of the agencies ostensibly have full political authority, but this has been eroded in recent years as both military and Islamist influence has grown. Ghani, who took office in January 2008, gained a reputation for taking a hardline toward militancy during his tenure as Baluchistan governor from 2003 to 2008. Under the Pakistani Constitution, the FATA is included among the \"territories\" of Pakistan and is represented in the National Assembly and the Senate, but remains under the direct executive authority of the President. The FATA continues to be administered under the 1901 Frontier Crimes Regulation (FCR) laws,",
      " which give sweeping powers to political agents and provides for collective punishment system that has come under fire from human rights groups. Civil and criminal FCR judgments are made by jirgas (tribal councils). Laws passed by Pakistan's National Assembly do not apply to the FATA unless so ordered by the President. According to the FATA Secretariat, \"Interference in local matters is kept to a minimum.\" Adult franchise was introduced in the FATA only in 1996, and political parties and civil society organizations are still restricted from operating there. Efforts are underway to rescind or reform the FCR, and the civilian government seated in Islamabad in 2008 has vowed to work to bring the FATA under the more effective writ of the state.",
      " The U.S. government supports Islamabad's \"Frontier Strategy\" of better integrating the FATA into the mainstream of Pakistan's political and economic system. Many analysts insist that only through this course can the FATA's militancy problem be resolved. U.S. Policy U.S. policy in the FATA seeks to combine better coordinated U.S. and Pakistani military efforts to neutralize militant threats in the short term with economic development initiatives meant to reduce extremism in Pakistan over the longer-term. Congressional analysts have identified serious shortcomings in the Bush Administration's FATA policy: In April 2008, the Government Accountability Office issued a report in response to congressional requests for an assessment of progress in meeting U.S.",
      " national security goals related to counterterrorism efforts in Pakistan's FATA. Their investigation found that, \"The United States has not met its national security goals to destroy terrorist threats and close safe haven in Pakistan's FATA,\" and, \"No comprehensive plan for meeting U.S. national security goals in the FATA has been developed.\" House Foreign Affairs Committee Chairman Representative Howard Berman called the conclusions \"appalling.\" Increasing U.S.-Pakistan Cooperation and Coordination In late 2008, U.S. officials have indicated that they are seeing greater Pakistani cooperation. In February 2008, Pakistan stopped attending meetings of the Tripartite Commission under which NATO,",
      " Afghan, and Pakistani forces meet regularly on both sides of the border. However, according to General McKiernan on November 18, 2008, the meetings resumed in June 2008 and three have been held since then, with another planned in December 2008. Gen. McKiernan, Pakistan's Chief of Staff Ashfaq Pervez Kayani, and Afghan Chief of Staff Bismillah Khan represent their respective forces in that commission. In April 2008, in an extension of the commission's work, the three forces agreed to set up five \"border coordination centers\"\u2014which will include networks of radar nodes to give liaison officers a common view of the border area.",
      " These centers build on an agreement in May 2007 to share intelligence on extremists' movements. Only one has been established to date, at the Torkham border crossing. According to U.S. Army chief of staff Gen. George Casey in November 2008, cooperation is continuing to improve with meetings between U.S. and Pakistani commanders once a week. Also, U.S. commanders have praised October 2008 Pakistani military moves against militant enclaves in the tribal areas, and U.S. and Pakistani forces are jointly waging the \"Operation Lionheart\" offensive against militants on both sides of the border, north of the Khyber Pass.",
      " In addition, Afghanistan-Pakistan relations are improving since Musharraf's August 2008 resignation. Karzai attended the September inauguration of President Asif Ali Zardari, widower of slain former Prime Minister Benazir Bhutto. The \"peace jirga\" process\u2014a series of meetings of notables on each side of the border, which was agreed at a September 2006 dinner hosted by President Bush for Karzai and Musharraf\u2014has resumed. The first jirga, in which 700 Pakistani and Afghan tribal elders participated, was held in Kabul in August 2007. Another was held in the improving climate of Afghanistan-Pakistan relations during October 2008;",
      " the Afghan side was headed by former Foreign Minister Dr. Abdullah. It resulted in a declaration to endorse efforts to try to engage militants in both Afghanistan and Pakistan to bring them into the political process and abandon violence. Increased Direct U.S. Military Action Although U.S.-Pakistan military cooperation is improving in late 2008, U.S. officials are increasingly employing new tactics to combat militant concentrations in Pakistan without directly violating Pakistan's limitations on the U.S. ability to operate \"on the ground\" in Pakistan. Pakistani political leaders across the spectrum publicly oppose any presence of U.S. combat forces in Pakistan, and a reported Defense Department plan to send small numbers of U.S.",
      " troops into the border areas was said to be \"on hold\" because of potential backlash from Pakistan. This purported U.S. plan was said to be a focus of discussions between Joint Chiefs Chairman Mullen and Kayani aboard the aircraft carrier U.S.S. Lincoln on August 26, 2008, although the results of the discussions are not publicly known. On September 3, 2008, one week after the meeting, as a possible indication that at least some aspects of the U.S. plan were going forward, U.S. helicopter-borne forces reportedly crossed the border to raid a suspected militant encampment, drawing criticism from Pakistan.",
      " However, there still does not appear to be U.S. consideration of longer term \"boots on the ground\" in Pakistan. U.S. forces in Afghanistan now acknowledge that they shell purported Taliban positions on the Pakistani side of the border, and do some \"hot pursuit\" a few kilometers over the border into Pakistan. Aerial Drone Attacks Since well before the September 3 incursion, U.S. military forces have been directing increased U.S. firepower against militants in Pakistan. Missile strikes in Pakistan launched by armed, unmanned American Predator aircraft have been a controversial, but sometimes effective tactic against Islamist militants in remote regions of western Pakistan. Pakistani press reports suggest that such drones \"violate Pakistani airspace\"",
      " on a daily basis. By some accounts, U.S. officials reached a quiet January understanding with President Musharraf to allow for increased employment of U.S. aerial surveillance and Predator strikes on Pakistani territory. Musharraf's successor, President Asif Zardari, may even have struck a secret accord with U.S. officials involving better bilateral coordination for Predator attacks and a jointly approved target list. Neither Washington nor Islamabad offers official confirmation of Predator strikes on Pakistani territory; there are conflicting reports on the question of the Pakistani government's alleged tacit permission for such operations. Three Predators are said to be deployed at a secret Pakistani airbase and can be launched without specific permission from the Islamabad government (Pakistan officially denies the existence of any such bases). Pentagon officials eager to increase the use of armed drones in Pakistan reportedly meet resistance from State Department diplomats who fear that Pakistani resentments built up in response to sovereignty violations and to the deaths of civilians are harmful to U.S.",
      " interests, outweighing potential gains. A flurry of suspected Predator drone attacks on Pakistani territory in the latter months of 2008 suggests a shift in tactics in the effort to neutralize Al Qaeda and other Islamist militants in the border region. As of later November, at least 20 suspected Predator attacks had been made on Pakistani territory since July, compared with only three reported during all of 2007. Such strikes have killed more than 100 people, including numerous suspected foreign and indigenous fighters, but also women and children. The new Commander of the U.S. Central Command, Gen. David Petraeus, claims that such attacks in western Pakistan are \"extremely important\"",
      " and have killed three top extremist leaders in that region. Officially, Pakistan's Foreign Ministry calls Predator attacks \"destabilizing\" developments that are \"helping the terrorists.\" Strident Pakistani government reaction has included summoning the U.S. Ambassador to lodge strong protest, and condemnation of missile attacks that Islamabad believes \"undermine public support for the government's counterterrorism efforts\" and should be \"stopped immediately.\" During his first visit to Pakistan as Centcom chief in early November, Gen. Petraeus reportedly was met with a single overriding message from Pakistani interlocutors: cross-border U.S. military strikes in the FATA are counterproductive.",
      " Pakistan's defense minister warned Gen. Petraeus that the strikes were creating \"bad blood\" and contribute to anti-American outrage among ordinary Pakistanis. In November 2008, Pakistan's Army Chief, Gen. Ashfaq Pervez Kayani, called for a full halt to Predator strikes, and President Zardari has called on President-elect Obama to re-assess the Bush Administration policy of employing aerial attacks on Pakistani territory. Military Capacity Building in Pakistan Some reports indicate that U.S. military assistance to Pakistan has failed to effectively bolster the paramilitary forces battling Islamist militants in western Pakistan. Such forces are said to be underfunded, poorly trained,",
      " and \"overwhelmingly outgunned.\" However, a July 2008 Pentagon-funded assessment found that Section 1206 \"Global Train and Equip\" funding\u2014which supplements security assistance programs overseen by the State Department\u2014is important for providing urgently needed military assistance to Pakistan, and that the counterinsurgency capabilities of Pakistani special operations forces are measurably improved by the training and equipment that come through such funding. Security-Related Equipment Major government-to-government arms sales and grants to Pakistan since 2001 have included items useful for counterterrorism operations, along with a number of \"big ticket\" platforms more suited to conventional warfare. The United States has provided Pakistan with nearly $1.",
      "6 billion in Foreign Military Financing (FMF) since 2001, with a \"base program\" of $300 million per year beginning in FY2005. These funds are used to purchase U.S. military equipment. Defense supplies to Pakistan relevant to counterinsurgency missions have included more than 5,600 military radio sets; six C-130E transport aircraft; 20 AH-1F Cobra attack helicopters; 26 Bell 412 transport helicopters; night-vision equipment; and protective vests. The Defense Department also has characterized transferred F-16 combat aircraft, P-3C maritime patrol aircraft, and TOW anti-",
      "armor missiles as having significant anti-terrorism applications. In fact, the State Department claims that, since 2005, FMF funds have been \"solely for counterterrorism efforts, broadly defined.\" Such claims elicit skepticism from some observers. Other security-related U.S. assistance programs for Pakistan are said to be aimed especially at bolstering Islamabad's police and border security efforts, and have included U.S.-funded road-building projects in the NWFP and FATA. Security-Related Training The Bush Administration has launched an initiative to strengthen the capacity of Pakistan's Frontier Corps (FC), an 80,000-man paramilitary force overseen by the Pakistani Interior Ministry.",
      " The FC has primary responsibility for border security in the NWFP and Baluchistan provinces. Some $400 million in U.S. aid is slated to go toward training and equipping FC troops by mid-2010, as well as to increase the involvement of the U.S. Special Operations Command in assisting with Pakistani counterterrorism efforts. Some two dozen U.S. trainers began work in October 2008. Fewer than 100 Americans reportedly have been engaged in training Pakistan's elite Special Service Group commandos with a goal of doubling that force's size to 5,000. The United States also has undertaken to train and equip new Pakistan Army Air Assault units that can move quickly to find and target terrorist elements.",
      " Some in Congress have expressed doubts about the loyalties of locally-recruited, Pashtun FC troops, some of whom may retain pro-Taliban sympathies. Coalition Support Funds Congress has appropriated billions of dollars to reimburse Pakistan and other nations for their operational and logistical support of U.S.-led counterterrorism operations. These \"coalition support funds\" (CSF) account for the bulk of U.S. financial transfers to Pakistan since 2001. More than $9 billion has been appropriated or authorized for FY2002-FY2009 Pentagon spending for CSF for \"key cooperating nations.\" Pentagon documents show that disbursements to Islamabad\u2014at some $6.",
      "7 billion or an average of $79 million per month since 2001\u2014account for roughly 80% of these funds. The amount is equal to about one-quarter of Pakistan's total military expenditures. According to Secretary of Defense Gates, CSF payments have been used to support scores of Pakistani army operations and help to keep some 100,000 Pakistani troops in the field in northwest Pakistan by paying for food, clothing, and housing. They also compensate Islamabad for ongoing coalition usage of Pakistani airfields and seaports. Concerns have grown in Congress and among independent analysts that standard accounting procedures were not employed in overseeing these large disbursements from the U.S.",
      " Treasury. The State Department claims that Pakistan's requests for CSF reimbursements are carefully vetted by several executive branch agencies, must be approved by the Secretary of Defense, and ultimately can be withheld through specific congressional action. However, a large proportion of CSF funds may have been lost to waste and mismanagement, given a dearth of adequate controls and oversight. Senior Pentagon officials reportedly have taken steps to overhaul the process through which reimbursements and other military aid is provided to Pakistan. The National Defense Authorization Act for FY2008 ( P.L. 110-181 ) for the first time required the Secretary of Defense to submit to Congress itemized descriptions of coalition support reimbursements to Pakistan.",
      " The Government Accountability Office (GAO) was tasked to address oversight of coalition support funds that go to Pakistan. A report issued in June 2008 found that, until about one year before, only a small fraction of Pakistani requests were disallowed or deferred. In March 2007, the value of rejected requests spiked considerably, although it still represented one-quarter or less of the total. The apparent increased scrutiny corresponds with the arrival in Islamabad of a new U.S. Defense Representative, an army officer who reportedly has played a greater role in the oversight process. GAO concluded that increased oversight and accountability was needed over Pakistan's reimbursement claims for coalition support funds.",
      " U.S. Development Assistance for Western Pakistan Since the 2001 renewal of large overt U.S. assistance packages and reimbursements for militarized counterterrorism efforts, a total of about $12 billion in U.S. funds went to Pakistan from FY2002-FY2008. The majority of this was delivered in the form of coalition support reimbursements; another $3.1 billion was for economic purposes and nearly $2.2 billion for security-related programs. According to the State Department, U.S. assistance to Pakistan is meant primarily to maintain that country's ongoing support for U.S.-led counterterrorism efforts. FATA Development Plan Pakistan's tribal areas are remote,",
      " isolated, poor, and very traditional in cultural practices. The social and economic privation of the inhabitants is seen to make the region a particularly attractive breeding ground for violent extremists. The U.S.-assisted development initiative for the FATA, launched in 2003, seeks to improve the quality of education, develop healthcare services, and increase opportunities for economic growth and micro-enterprise specifically in Pakistan's western tribal regions. A senior USAID official estimated that, for FY2001-FY2007, about 6% of U.S. economic aid to Pakistan has been allocated for projects in the FATA. The Bush Administration urges Congress to continue funding a proposed five-year,",
      " $750 million aid plan for the FATA initiated in FY2007. The plan will support Islamabad's own ten-year, $2 billion Sustainable Development effort there. Skepticism has arisen about the potential for the new policy of significantly boosted funding to be effective. Corruption is endemic in the tribal region and security circumstances are so poor that Western nongovernmental contractors find it extremely difficult to operate there. Moreover, as much as half of the allocated funds likely will be devoted to administrative costs. Islamabad is insisting that implementation is carried out wholly by Pakistani civil and military authorities and that U.S. aid, while welcomed, must come with no strings attached.",
      " Reconstruction Opportunity Zones The related establishment of Reconstruction Opportunity Zones (ROZs) that could facilitate further development in the FATA (and neighboring Afghanistan), an initiative of President Bush during his March 2006 visit to Pakistan, ran into political obstacles in Congress and is yet to be finalized. The ROZ program would provide duty-free access into the U.S. market for certain goods produced in approved areas and potentially create significant employment opportunities. While observers are widely approving of the ROZ plan in principle, many question whether there currently are any products with meaningful export value produced in the FATA. One senior analyst suggests that the need for capital and infrastructure improvements outweighs the need for tariff reductions.",
      " A Pakistani commentator has argued that an extremely poor law and order situation in the region will preclude any meaningful investment or industrialization in the foreseeable future. In March 2008, more than two years after the initiative was announced, S. 2776, which would provide duty-free treatment for certain goods from designated ROZs in Afghanistan and Pakistan, was introduced in the Senate. A related bill, H.R. 6387, was referred to House subcommittee four months later. Neither bill has emerged from committee to date.\n"
    ],
    "length": 8429,
    "hardness": null,
    "role": null
  },
  {
    "id": 69,
    "question": null,
    "answer": "A growing number of older Americans are choosing continuing care retirement communities (CCRC) to help ensure that their finances in retirement will cover the cost of housing and care they may require. However, recent economic conditions have placed financial stress on some CCRCs. GAO was asked to (1) describe how CCRCs operate and the risks they face, (2) describe how state laws address these risks, (3) describe risks that CCRC residents face, and (4) describe how state laws address these risks. To review these areas, GAO analyzed state statutory provisions pertaining to CCRCs with respect to financial oversight and consumer protection, met with selected state regulators, and interviewed CCRC providers, resident's associations, and consumer groups. While GAO is not recommending specific action at this time, the potential risks to CCRC residents--as well as the potential for this industry to grow--highlight the importance of states being vigilant in their efforts to help ensure adequate consumer protections for residents. GAO provided a draft copy of this report to the Department of Health and Human Services and the National Association of Insurance Commissioners for review, but neither commented on the draft. CCRCs can benefit older Americans by allowing them to move among and through independent living, assisted living, and skilled nursing care in one community. They offer a range of contract types and fees that are designed to provide long-term care and transfer different degrees of the risk of future cost increases from the resident to the CCRC. Developing CCRCs can be a lengthy, complex process that requires significant long-term financing and accurate revenue and cost projections. Once operational, risks to long-term viability include declining occupancy and unexpected cost increases. While few CCRCs have failed, challenging economic and real estate market conditions have negatively affected some CCRCs' occupancy and financial condition. Seven of the eight states GAO reviewed had CCRC-specific regulations, and these states varied in the extent to which they helped ensure that CCRCs addressed risks to their long-term viability. For example, while each licensed and required periodic financial information from CCRCs, only four either examined trended financial data or required periodic actuarial reviews. The lack of a long-term focus creates a potential mismatch with residents' concerns over their CCRCs' long-term viability. CCRC bondholders and rating agencies, which focus on long-term viability, often place requirements on CCRCs that go beyond those used by states in their licensing and oversight activities. Regulators and CCRC providers GAO spoke with generally believed that current regulations were adequate, but some consumer groups felt more comprehensive oversight was needed. While CCRCs offer long-term residence and care in the same community, residents can still face considerable risk. For example, CCRC financial difficulties can lead to unexpected increases in residents' monthly fees. And while CCRC bankruptcies or closures have been relatively rare, and residents have generally not been forced to leave in such cases, should a CCRC failure occur, it could cause residents to lose all or part of their entrance fee. Residents can also become dissatisfied if CCRC policies or operations fall short of residents' expectations or there is a change in arrangements thought to be contractually guaranteed, such as charging residents for services that were previously free. Most of the states GAO reviewed take steps to protect the interests of CCRC residents, such as requiring the escrow of entrance fees and mandating certain disclosures. For example, a number require contracts to be readable, but not all review the content of contracts even though some industry participants questioned residents' ability to fully understand them. Also, not all require disclosure of policies likely to have a significant impact on residents' satisfaction, such as policies for moving between levels of care. According to an industry study, 12 states do not have CCRC-specific regulations, meaning an entity in 1 state may be subject to such regulations while a similar entity in another state may not, and consumers in some states may not receive the same protections as those in others. In contrast, some CCRCs voluntarily exceed disclosures and protections required by state regulations.\n",
    "docs": [
      "Background CCRCs are one of a number of options older Americans may choose to  meet housing and other daily needs and especially to receive long-term  care, which Medicare and private health insurance typically do not cover  and which can be extremely costly. Older Americans may use a number of  options to pay for their short- and long-term care as they age, including  relying on savings or investments, purchasing long-term care insurance or  annuities, entering into a reverse mortgage, or relying on government- financed programs such as Medicare and Medicaid. For CCRCs  specifically, many use the proceeds from the sale of their homes and any  retirement assets to pay for the housing and care arrangements.",
      " CCRCs are generally residential facilities established in a campus-like  setting that provide access for older Americans to three levels of housing  and care: independent homes or apartments where residents live much as  they did in their own homes; assisted living, which provides help with the  daily tasks of living; and skilled nursing care for those with greater  physical needs. Most residents must be able to live independently when  they enter into a contract with a CCRC, with the intent of moving through  the three levels of care as their needs change. According to industry sources, the CCRC model has existed for over 100  years, starting with religious and fraternal organizations that provided care  for older Americans who turned over their homes and assets to those  organizations.",
      " As of July 2009, some 1,861 individual CCRCs existed in the  United States, most of them nonprofit organizations. Over the last 2  decades, the CCRC industry has grown and diversified, with religious,  fraternal, nonprofit, and for-profit entities operating CCRCs of various  sizes that have different structures, residential and care choices, and  payment options. CCRCs are primarily regulated by states rather than by the federal  government. State CCRC regulation developed over time and in some  instances grew out of the need to address financial and consumer  protection issues, including insolvency, which arose in the CCRC industry  in the 1970s and 1980s.",
      " States generally license CCRC providers, monitor  and oversee their financial condition, and have regulatory provisions  designed to inform and protect consumers. The U.S. Department of Health  and Human Services (HHS) provides oversight of nursing facilities that are  commonly part of CCRCs, but this oversight focuses on the quality of care  and safety of residents in those facilities that receive payments under the  Medicare and Medicaid programs. While states primarily regulate CCRCs, Congress has considered proposals  to introduce greater federal oversight. For example, in 1977  Representatives William Cohen and Gladys Spellman introduced a bill that  would provide federal oversight of certain continuing care institutions that  received Medicare or Medicaid payments or were constructed with federal  assistance.",
      " The bill proposed, among other things, requiring that CCRC  contracts clearly explain all charges and that CCRCs provide full financial  disclosures, maintain sufficient financial reserves, and undergo an annual  audit. While the bill did not pass, one industry source noted that several  states at the time were developing or refining their own CCRC regulation. CCRCs Can Help  Ensure That Older  Americans Have  Long-Term Care, but  Face Financial and  Operational Risks CCRCs Can Provide Older  Americans with Ongoing  Housing and Health Care  Services CCRCs offer older Americans a range of housing and health care options  that include independent living,",
      " assisted living, and skilled nursing units all  within the same community. CCRCs generally offer independent living  units such as apartments, cottages, town homes, or small single-family  homes for incoming residents who are relatively healthy and self- sufficient. They also provide residents opportunities to arrange for certain  convenience services, including meals, housekeeping, and laundry and  provide amenities such as fitness centers, libraries, health clinics, and  emergency services. While residents may move back and forth among the  levels of care to meet changing health needs, residents generally move to a  CCRC\u2019s assisted living facility when they need assistance with specific  activities of daily living,",
      " including eating, dressing, and bathing. CCRCs\u2019  assisted living units are usually located separately from the independent  living units and skilled nursing facilities. If a resident needs 24-hour  monitoring, assistance, and care, CCRCs can offer skilled nursing care that  includes supervision by nurses or other medical staff. CCRCs typically offer one of three general types of contracts that involve  different combinations of entrance and monthly fee payments. Some  CCRCs may offer residents a choice of the following contract types, while  others may choose to offer only one. Type A, extensive or Life Care contracts, include housing, residential  services,",
      " and amenities\u2014including unlimited use of health care services\u2014 at little or no increase in monthly fees as a resident moves from  independent living to assisted living, and, if needed, to nursing care. Type  A contracts generally feature substantial entrance fees but may be  attractive because monthly payments do not increase substantially as  residents move through the different levels of care. As a result, CCRCs  absorb the risk of any increases in the cost of providing health and long- term care to residents with these contracts. Type B, or modified contracts, often have lower monthly fees than Type A  contracts, and include the same housing and residential amenities as Type  A contracts.",
      " However, only some health care services are included in the  initial monthly fee. When a resident\u2019s needs exceed those services, the fees  increase to market rates. For example, a resident may receive 30, 60, or 90  days of assisted living or nursing care without an increased charge.  Thereafter, residents would pay the market daily rate or a discounted daily  rate\u2014as determined by the CCRC\u2014for all assisted living or nursing care  required and face the risk of having to pay high costs for needed care. Type C, or fee-for-service contracts, include the same housing, residential  services, and amenities as Type A and B arrangements but require  residents to pay market rates for all health-related services on an as-",
      " needed basis. Type C contracts may involve lower entrance and monthly  fees while a resident resides in independent living, but the risk of higher  long-term care expenses rests with the resident. Some CCRCs offer a fourth type of contract, Type D or rental agreements,  which generally require no entrance fee but guarantee access to CCRC  services and health care. Type D contracts are essentially pay-as-you-go:  CCRCs charge monthly fees of residents based on the size of the living unit  and the services and care provided. According to CCRC providers, prospective residents are generally  screened to determine their general health status in order to determine the  best living situation.",
      " Prospective residents must also submit detailed  financial information that includes income and tax records to ensure that  they can pay CCRC fees over time. Industry participants noted that entry  fees\u2014typically made as a large lump-sum payment\u2014can represent a  substantial portion, if not all, of potential residents\u2019 assets. Residents  must also be able to pay monthly fees, which typically cover housing and  convenience services associated with housing and are based on the type of  contract, size of the living unit, and level of care provided. As we have  seen, these fees may also include all or some health care services. CCRCs  use a variety of techniques to determine fees,",
      " including actuarial studies  and financial analyses. For example, one CCRC we reviewed uses  actuarial studies with mortality and morbidity tables to assess the likely  inflow, outflow, and turnover of the CCRC occupants. Other CCRCs use  some combination of resident statistics, Medicare and Medicaid  reimbursement rates, marketing needs, and operating costs. Table 1  provides information on the range of entrance and monthly fee costs for  the eight CCRCs we reviewed and illustrates how\u2014depending on contract  type\u2014costs may change for consumers as they move among the  independent, assisted, and skilled nursing living units.",
      " Establishing a CCRC Is a  Complex Process That  Involves Several Risks According to industry participants, building and operating a CCRC is a  complex process that typically begins with an initial planning phase.  During this phase, the company assembles a development team, makes  financial projections, assesses market demand, and determines the kinds  of housing and services to be offered. Initial and longer-term planning  also entails assessing funding sources and seeking funding commitments  from investors and lenders, particularly construction loans and state tax- exempt bond proceeds, where applicable. During the developmental  phase, developers will presell units to begin building capital to fund  construction of CCRC housing and other facilities and begin constructio structio n.",
      "  n.  Once the initial phases of construction are complete, CCRC providers have Once the initial phases of construction are complete, CCRC providers have move-in periods for new residents, continue marketing efforts to build  move-in periods for new residents, continue marketing efforts to build  toward full occupancy, complete construction, and begin making long toward full occupancy, complete construction, and begin making long - - term debt service payments (fig. 1).  term debt service payments (fig. 1). CCRCs, like other businesses, face a number of risks during the start-up  phase. First, actual construction costs and consumer demand may not  match developers\u2019 forecasts.",
      " To attract financing from lenders and ensure  adequate underwriting for CCRC projects, developers need to generate  sufficient pre-sales and deposits prior to construction to show a tangible  commitment from prospective residents. In addition, facilities in the start- up stage need to reach full occupancy as quickly as possible in order to  generate income that will not only cover operational costs once built but  also help pay down construction loans. As a result, accurate projections of  future revenues and costs are important as a CCRC becomes operational. Second, entrance fees and monthly fees may ultimately prove to be  inadequate to cover the CCRC\u2019s costs. CCRCs generally have to keep  prices low enough to attract residents and stay competitive but high  enough to meet short-",
      " and long-term costs. Determining appropriate fees  can, in itself, be a complex process because it involves projecting a  number of variables into the future, including occupancy levels, mortality  rates, medical and labor costs, and capital improvement costs. For this  reason, many CCRCs use actuarial consultants to help in these  determinations. CCRCs that set fees too low may have to significantly  raise entrance and other fees to meet the costs of care and future capital  improvements. Fee increases can take the form of larger-than-projected  monthly fees for assisted living or nursing care and fees on other  miscellaneous services,",
      " both of which can affect residents\u2019 long-term  ability to pay and the competitive position of the CCRC in the  marketplace. CCRCs may face other financial risks, including unforeseen events that  lead to higher-than-expected costs. For example, many nonprofit CCRCs  rely on property tax exemptions when estimating CCRC costs and  developing CCRC projects. According to industry associations and a state  regulator, however, difficult economic times are causing some  municipalities to look for new sources of revenue, and some may be  reevaluating property tax exemptions previously granted to CCRCs. Loss  of these exemptions can be very costly;",
      " for example, industry participants  attributed one recent CCRC failure in Pennsylvania in part to the loss of its  property tax exemption. Established CCRCs Face  Risks from Low  Occupancy Levels and  Challenging Market  Conditions Erickon Retirement Commnitieas one of  the lrget CCRC developer. Typiclly it built  lrge non-profit CCRC fcilitie, ech with  1,500 to 2,000 nit, for middle-income  reident. Erickon eablihed  contrction  firm to build CCRC nd gement  compny to help operte itcilitie.",
      " Another  prt of Erickon\u2019 CCRC business model  generlly involved leasing the lnd nd  fcilitie it developed to epte indepen- dent, non-profit CCRC, which it creted.  Thee non-profit wold then often eventually  end p prchasing the CCRC fcilitie. A of  Feuary 2010, Erickon hd developed 1  CCRC tht provided home nd ervice to  pproximtely 22,000 reident. resident vacates a unit. These refunds represent substantial financial  obligations that CCRCs must meet and can significantly affect operations  because fees are used to maintain a certain level of liquidity,",
      " or cash on  hand. CCRC officials said that refunds were usually contingent on having a  new resident move into the vacated unit and that a recent reduction in  occupancy levels has meant former residents and their families have had  to wait longer for refunds. For example, some CCRC officials noted that  due to real estate market and other factors, refunds are taking several  months longer than during stronger market conditions. Erickon, however, filed for bankrptcy in  2009. Like mny CCRC, Erickon used  contrction lo nd other finncing  intrment to meet the coniderable cot of  building CCRC fcilitie nd redy them for  occncy y older Americ.",
      " According to  Erickon offici, er of condition  contributed to their finncil chllenge nd  bankrptcy filing. Declining economic nd rel  ete condition lowed the demnd for nd  prchase of CCRC nit nd chllenged  Erickon\u2019 ability to re revene needed to  develop CCRC. Simltneously, tightening  credit mrket redced or eliminted  Erickon\u2019 ability to ccess new rce of  cpitl or to retrctre or refinnce exiting  lorrngement. Thee condition  prevented Erickon from meeting deervice  nd other CCRC expen nd led to it  bankrptcy filing.",
      " Ultimtely, Erickon  emerged from bankrptcy with  new owner,  Redwood LLC, in My 2010. Depite the  ownerhip chnge, Erickon offici do not  expect ny CCRC reident\u2019 contrct or  living condition to e impcted, as thoe  contrct were with the CCRC themelve,  which were not prt of the bankrptcy filing. CCRCs also face risks from external economic factors that are out of their  control and could adversely affect occupancy levels and financial  condition. First, slow real estate markets, such as those of the last several  years,",
      " can make it very difficult for older Americans to sell their homes to  pay CCRC entrance fees. As a result, according to CCRC providers,  occupancy levels at many CCRCs have fallen over the past several years.  In addition, because older Americans may be staying in their homes longer  and thus moving into CCRCs at a higher age, residents may spend less time  in independent living units than they had in the past. This can negatively  affect CCRCs\u2019 long-term financial condition because residents in  independent living may help subsidize those living in assisted living or  nursing care. Second, declining equity and credit markets,",
      " which have also  been a feature of the recent financial crisis, can also affect occupancy and  financial condition. During the development phase, CCRCs often depend  on access to credit in order to complete construction, and reduced access  to funds can be problematic. For example, CCRC and state regulatory  officials suggested that tightening credit and real estate markets,  combined with Erickson Retirement Communities\u2019 reliance on borrowed  funds, were the primary financial challenges that resulted in Erickson\u2019s  2009 filing for bankruptcy protection (see sidebar on Erickson Retirement  Communities). In addition, occupancy can depend on CCRCs\u2019 ability to  remain attractive to new residents by maintaining and upgrading their  facilities.",
      " While the ability to maintain and upgrade facilities depends in  part on long-range planning, it can also depend on access to credit. CCRC  officials said that over the last several years the availability of both state  financing and commercial bank financing had diminished due to tightened  credit markets. Although few CCRCs have closed or declared bankruptcy over the last 20  years, recent economic conditions have negatively affected the financial  condition of many facilities and highlighted some of the risks that they  face. One rating firm, which produces an annual industry outlook for  CCRCs, said the outlook for CCRCs in 2009 and into 2010 is negative  because of their declining liquidity and other financial ratios,",
      " tightening  financial markets, and difficult real estate markets. The firm also noted,  however, that the negative effect of the slow real estate market and falling  occupancy levels could be softened somewhat by some favorable factors,  including strong demand for entrance into CCRCs, effective management  practices, and favorable labor costs. States We Reviewed  Varied in the Extent  to Which They  Ensured CCRCs  Address Risks to  Their Financial  Viability States We Reviewed  Generally Used Similar  Licensing Requirements,  but Some Required More  Information Than Others To help ensure that CCRCs address the risks they face during their start-up  period,",
      " seven of the eight states we reviewed used a similar application  and licensing process. For example, these seven states required CCRC  providers to submit detailed financial information on CCRC projects for  review by regulators. Most states we reviewed also required financial  feasibility studies as part of the licensing process. These studies included  projected income and expense information, alternative pricing structures,  and, for CCRCs planning to charge entrance fees, estimates of the CCRCs\u2019  ability to resell its units that are based on actuarial assumptions. Among the states we reviewed that license CCRCs, some required more  information from CCRCs than others.",
      " For example, California, Florida,  and New York required CCRCs to conduct and provide a market study as  part of its application for licensing, while others\u2014Illinois, Pennsylvania,  and Wisconsin\u2014did not. Such studies can include descriptions of the  market area and targeted consumers as well as projections of how long it  might take the CCRC to reach a stable occupancy level. Pennsylvania  required CCRCs to provide a market study only if one was being  conducted to help obtain project financing. One state we reviewed\u2014New  York\u2014required CCRC providers that offer Type A or B contracts to  conduct an actuarial study during the licensing process to help project  long-term expenses and revenues and help regulators assess financial  viability over time.",
      " States We Reviewed Varied  in Their Efforts to Ensure  That CCRCs Addressed  Risks to Their Operations,  with Some Focusing More  on Long-Term Viability  Than Others To help ensure that CCRCs addressed risks to their operations, states we  reviewed generally required that CCRCs periodically submit financial  information, but the type of information required and what they did with it  varied. Of the states we reviewed that license and oversee CCRCs, most  required CCRCs to submit audited financial statements each year to  demonstrate their basic financial health, including balance sheet, income,  and cash flow information.",
      " These statements generally reflect financial  performance for the past year and provide a financial snapshot of a point  in time, and are not assessments of longer-term financial trends or  financial stability. To help ensure that CCRCs addressed risks to their long-term viability, a  few states we reviewed required periodic actuarial studies, but the others  did not. In particular, California, New York, and Texas required periodic  actuarial studies, but only for CCRCs that offered contracts which incur  long-term liabilities by guaranteeing health care services over the long  term. One state we reviewed\u2014Florida\u2014did not require periodic actuarial  studies but did analyze financial trend and projection data to help track  the direction of the financial condition of CCRCs over time.",
      " Florida  regulators said that they maintained a spreadsheet containing financial  information on CCRCs dating back over a decade and used the data to  develop financial trend information on each CCRC, including trends of  ratios related to CCRCs\u2019 revenues and expenses. Florida officials said that  since CCRCs generally do not go from stable 1 year to financially  distressed the next, their trend data enabled them to identify early on  CCRCs that might be in trouble. According to industry participants, actuarial studies can help in  quantifying long-term liabilities and planning for ways to meet them. For  example, some said that the studies can provide CCRC management with  the information needed to make appropriate plans to meet future liabilities  and contractual obligations and to set appropriate prices for short-",
      " and  long-term housing and care options. In addition, some noted that actuarial  studies can help regulators identify potential threats to CCRCs\u2019 long-term  viability. For example, New York officials noted that requiring an actuarial  study from CCRCs every 3 years provided 10-year cash flow projections  and CCRC information on actuarial assets and liabilities that were critical  to understanding long-term viability. According to industry participants,  only an actuarial study incorporates mortality, morbidity, and other  information unique to a CCRC to help it anticipate and make plans to  address risks to its long-term viability,",
      " such as lower-than-expected  occupancy levels and higher-than-expected costs. Without actuarial  studies, they said, a CCRC may appear financially stable in the short term  yet still face threats to its long-term viability. To help ensure that CCRCs have funds available to pay for expenses such  as debt service and operations, most of the states we reviewed also  required CCRC providers to maintain some minimum level of financial  reserves. According to state regulators, the primary purpose of reserve  requirements is to ensure enough time for a financially distressed CCRC to  reorganize or restructure financing while keeping the CCRC operational  for its residents.",
      " For example, these reserves could be used to help make  debt service principal and interest payments, pay for operating expenses,  or assist with difficult economic times or other types of contingencies.  Reserve requirements in the states we reviewed were typically expressed  in terms of total debt service payments for a time period ranging from 6  months in Illinois to 1 year in states such as California, Florida, New York,  Pennsylvania, and Texas. Some states also required a reserve for operating  costs that ranged from 2-\u00bd months to 1 year. New York, by comparison,  required debt service and operating cost reserves along with an additional  reserve for CCRC facility repairs and replacement.",
      " One state\u2014 Wisconsin\u2014did not have reserve requirements. Wisconsin state officials  said that their statutory authority generally focused on the content of  CCRC resident contracts. While these reserve requirements can provide a  CCRC with enough time to work to improve financial conditions, several  industry participants said that reserves are not intended to ensure viability  over the long term. In addition, one industry official said that CCRCs  experiencing financial difficulties are often purchased by other CCRCs. Finally, though most states required CCRCs to submit financial  information, not all states we reviewed did financial examinations.  According to regulatory officials, California, Florida,",
      " Illinois, New York,  Pennsylvania, Texas, and Wisconsin all had the regulatory authority to  financially examine CCRCs to assess financial condition or viability, but  only Florida, New York, and Pennsylvania had conducted examinations.  Some states also said that they maintained ongoing communication with  CCRC management, particularly when regulators had any questions or  needed clarification on financial documents under review. These state  regulators said that the informal communication channels helped them to  understand CCRC operations better than they would if they relied on  periodically reported information alone. Industry Information  Suggests Most States  Regulate CCRCs and Do  So with Various State  Departments,",
      " but Some  Have No CCRC-Specific  Regulations While we did not survey all 50 states as part of our review, according to  one industry study, 38 states have some level of regulation specifically  addressing CCRCs, while 12 states plus the District of Columbia do not.  Among the 38 states that have CCRC-specific regulation, CCRCs are  overseen by a variety of state departments. Some states oversee CCRCs  through departments that concentrate on insurance, financial services, or  banking. Other states regulate CCRCs through departments of social  services, aging or elder services, or community affairs.",
      " Figure 2 provides  information as of 2009 on the states that specifically regulate CCRCs, the  type of department with oversight responsibility, and the number of  CCRCs in each state. In addition, all nursing homes\u2014including those that  are part of a CCRC\u2014are subject to federal oversight if they participate in  Medicare or Medicaid programs. Because some states do not appear to  have CCRC-specific regulations, an entity in one state might be licensed  and regulated as a CCRC while a similar entity in another state may not.  While we did not review laws and regulations in the states that did not  appear to have specific CCRC regulations,",
      " to the extent that states do not  license CCRCs and oversee their contracts, residents in those states may  not receive the same protections as CCRC residents in states with such  regulations. One of the eight states we reviewed\u2014Ohio\u2014did not  specifically license or regulate CCRCs. However, an industry official from  Ohio said the separate components of CCRCs operating within that state  are generally regulated as if they were stand-alone entities. For example,  Ohio\u2019s Department of Health regulates assisted living and nursing home  facilities. In prior work that also looked at the regulation of financial  contracts across states, we have pointed out the importance of ensuring  that consumers entering similar contracts receive similar regulatory  protections across states.",
      " That work, which was designed to provide  insights for the development of a federal financial services regulatory  framework, also highlighted the importance of, among other things,  providing consistent consumer protections in similar situations and  ensuring consumers receive useful information and disclosures. In a  recent report looking at regulation of the insurance industry, a function  carried out by the states, we pointed out the importance of state regulation  supporting the goals of this framework. Debt-Related  Requirements and  Accreditation Standards  Generally Exceed Those of  State Regulators and Often  Focus on Long-Term  Viability When CCRCs obtain financing through debt instruments such as loans or  bonds,",
      " creditors and bondholders often impose financial requirements and  standards that are designed to ensure that CCRCs can repay the borrowed  funds. For example, state regulators and industry participants said states  and lenders require CCRCs to maintain levels of reserves that are intended  to give the facilities enough time to meet financial challenges such as  refinancing or restructuring debt. According to regulators and industry  officials, lender and bondholder reserve requirements generally exceed  those of state regulators. As noted earlier, most states we reviewed have  reserve requirements that focus on a short period such as 6 months or a  year. But a CCRC provider noted that lender and bondholder requirements  are generally more stringent and may require reserve levels twice as high.",
      "  In addition, bondholders may conduct analyses that appear to go beyond  those used by states. For example, according to one company that  facilitates financing for CCRCs, bondholders might require quarterly  financial statements as well as annual statements. In addition, some nonprofit CCRCs that obtain state-based financing  choose to be assessed by rating firms to help determine their ability to  repay long-term debt. We reviewed one rating firm\u2019s guidelines, which  contain many quantitative and qualitative variables to assess CCRCs\u2019  credit quality and financial solvency. The guidelines include financial ratio  analysis, trend analysis of financial ratios, review of cash flow statements,",
      "  and the use of recent actuarial studies for CCRCs offering Type A  contracts as well as certain qualitative factors\u2014such as strength of  management and governance\u2014to make assessments about long-term  viability. Officials from the rating firm noted that their metrics were more  focused on CCRCs\u2019 ability to pay on their bond obligations over the long  term. Some CCRCs may also choose to become accredited by an independent  organization. As of April 2010, 300 CCRCs had become accredited by the  Continuing Care Accreditation Commission (CCAC), according to a  commission official. Accreditation involves an initial review that assesses  CCRCs on an extensive set of standards.",
      " For example, the financial  aspects of the accreditation process include analyses of many financial  ratios, including profitability, liquidity, and capital structure, to assess a  CCRC\u2019s financial solvency, identify trends, and compare them to industry  benchmarks. While accreditation standards do not require periodic  actuarial studies, according to CCAC officials CCRCs are expected to use  actuarial and other information to appropriately set their fees. Two CCRC  providers and accreditation officials suggested CCAC\u2019s standards  represent best practices and guidelines for CCRCs and they help to assess  short- and long-term financial stability. Regulators and Industry  Participants Held Different  Views on the Effectiveness  of State Financial  Oversight of CCRCs State regulators from the eight states we reviewed generally reported that  their regulations and regulatory efforts were adequate to properly oversee  the financial condition of CCRCs.",
      " Some suggested that the small number  of CCRCs that were financially distressed, insolvent, or had filed for  bankruptcy pointed to the adequacy of state regulatory oversight. In  addition, officials from one state noted that they periodically review  audited financial statements and other required information, and have the  authority to do on-site inspections of CCRCs\u2019 books and records.  However, they noted that audited financial statements generally do not  contain information that would cause further review through inspection.  One state agency had broader statutory authority but an official there said  that financially regulating CCRCs was not their central mission. Another  state official commented that they lacked the staffing resources to do  more than review audited financial statements.",
      " Officials from one residents\u2019 association we spoke to expressed concerns  about the overall financial condition of CCRCs and how it affects their  housing and care, while another believed regulatory requirements were  generally adequate. Residents\u2019 association officials who expressed  concerns said regulators needed to provide more overall financial  oversight to compensate for the short-term focus that most CCRCs have  on their financial solvency. They said that most CCRCs tended to  emphasize the availability of liquid assets to cover operating costs such as  debt servicing as the most significant indicator of financial health. The  officials noted that this approach emphasized short-term liquidity and  current asset and liability information and did not sufficiently consider  long-term liquidity,",
      " liabilities, capital planning, and budgeting. Another  state residents\u2019 association official provided a different view and said that  its state statute established strict financial requirements that helped  discourage speculative CCRC operators from entering the market and  encouraged long-term stability in the state\u2019s CCRC market. CCRC providers did not convey strong positive or negative views about  the strength or effectiveness of CCRC regulation but did provide various  insights. One CCRC provider said that the extent and effectiveness of  regulators\u2019 financial oversight of CCRCs varied from state to state but  noted that for oversight to be effective, states would need specific  expertise. The provider also felt that state agencies that had devoted few  resources to CCRC oversight might lack the requisite expertise.",
      " Another  CCRC provider said its state regulator required each provider to annually  submit a report containing a number of financial indicators and expressed  hope that the regulator would use the data to create a database to monitor  financial trends. The provider said that the statutes were adequate, noting  that few CCRCs had failed in their state. By contrast, actuaries GAO spoke  with said that, overall, only a few states nationwide were appropriately  using actuarial studies to assess CCRC providers and that many states  were using very little actuarial information for financial oversight.  Actuaries said this situation reflected the wide variety of state laws and  regulations on CCRCs and noted that states that did not require actuarial  studies could have a difficult time assessing the adequacy of CCRCs\u2019 short-",
      "  and long-term pricing structures and long-term financial position. CCRC Residents Face  Many Major Financial  and Other Risks CCRC Residents Face a  Number of Financial Risks Although CCRCs offer older Americans the benefit of long-term residence  and care in a single community, residents face a number of financial risks  in the course of their relationship with their CCRC. For example, residents  could lose the refundable portion of their entrance fees\u2014which may  amount to hundreds of thousand of dollars or more\u2014if a CCRC  encountered financial difficulties. According to state officials in two states  and a CCRC expert, residents are at a disadvantage because any claim they  have on a CCRC that is forced into bankruptcy is subordinate to the claims  of secured creditors,",
      " such as tax-exempt bondholders and mortgage  lenders. As a result, residents are grouped with all other unsecured  creditors, which generally include everyone who does business with the  CCRC, for recouping any financial losses in the case of CCRC financial  distress. We identified no national data that would reflect the incidence of such  losses, and several state officials believed that they are rare. For example,  a California official told us that there had been at least two situations in  the 1990s in which California residents had nearly lost their entrance fees  but that these situations had been resolved in the residents\u2019 favor.",
      "  However, Pennsylvania officials told us about a financially insolvent CCRC  in Pennsylvania whose residents lost the refundable portion of their  entrance fees in 2009 when the facility was sold to a new operator.  According to the officials, the CCRC became financially distressed and  filed for bankruptcy after it lost its tax-exempt status and became liable  for substantial state and local taxes. As part of the negotiations to fulfill  residents\u2019 contracts and maintain services under the new owner, residents  relinquished the refundable portion of their entrance fees. The state  officials noted that this concession had limited residents\u2019 ability to move  to another CCRC,",
      " since they would no longer receive a portion of their  entrance fee to pay the entrance fee at the new facility. In addition,  residents\u2019 heirs were deprived of the refundable portion of the entrance  fee. Residents can also face greater-than-expected increases in monthly and  other fees that can erode their existing assets or make the CCRC  unaffordable to them. Officials of CCRCs, an expert, and resident  advocates told us that CCRC residents were at risk of having to pay  monthly fees that rise beyond their ability to pay. According to some state  and CCRC officials we contacted, CCRCs in financial distress may need to  increase monthly fees beyond the typical yearly increase outlined in the  contract.",
      " Such increases can occur for a number of reasons\u2014for example,  to continue to operate when occupancy rates drop, to make necessary or  deferred physical improvements, cover unplanned increases in operational  expenses such as rising labor costs, or to keep the facility competitive in  order to attract new residents. Residents may be living on a fixed income and may not be able to afford  these increases, especially over an extended period. CCRC providers in  Florida and Wisconsin said that they had had residents who exhausted  their assets earlier than planned because of monthly fee increases.  According to CCRC operators, residents are not generally at risk of being  required to leave a CCRC when they exhaust their assets but instead use  the refundable portion of their entrance fee,",
      " if there is one, to cover  monthly costs. When these funds are gone, the CCRC uses charitable  funds, voluntarily contributed by other CCRC residents, to support the  residents. CCRC residents also face the risk of losing their residence and familiar  surroundings in the event of a CCRC closure. According to CCRC and  elder care experts, closures occur for a number of reasons, including  bankruptcy or an operator\u2019s decision to consolidate multiple CCRCs and  close less profitable locations. Although state officials and other CCRC  experts indicated that such events are rare, they have happened. For  example, a residents\u2019 advocate and state regulators told us that in 2007,",
      " a  CCRC in California that had lost $11 million over 10 years closed due to  consistently low occupancy rates. Several residents were dissatisfied with  the CCRC\u2019s handling of their contracts and resisted the proposed transfer  to an alternate facility, and filed a lawsuit against the facility. Ultimately,  they were removed from their residence when the CCRC closed.  According to CCRC and elder care experts, residents who must move  when their CCRC closes face the risk of trauma during and after the  transfer to a new CCRC facility. One resident advocacy group told us that  a forced move can be very disruptive to members of a CCRC population,",
      " in  some cases with consequences for their physical and emotional well- being. Residents also Face Other  Risks Related to CCRC  Operations Residents may not be satisfied initially\u2014or over the long term\u2014with the  CCRC into which they have moved and may have limited financial and  other recourse. For example, dissatisfied residents may have limited  ability to move out. According to an expert on CCRCs, some residents may  experience \u201cbuyer\u2019s remorse\u201d after entering a CCRC if the community,  services, or other aspects of the CCRC do not match their initial  perceptions. These advocates told us that residents were often focused on  certain elements of care and housing,",
      " such as amenities and culture, when  choosing a CCRC and might not, for example, pay enough attention to  financial information that could affect them. Residents who wish to move,  for instance, may find that the contractually designated rescission period  has ended and that moving will result in significant fines or reductions to  the refundable portion of their entrance fee. But these financial losses can  limit their choice of other long-term care options that require a similar  investment. Residents also face the risk of being transferred involuntarily  from one level of care to another or of not being able to obtain on-site  assisted living or nursing care when needed.",
      " Policies regarding admission  and discharge from different levels of care can be subject to state law, but  this decision can be a point of contention as well. One 2009 study states  that relocation within a CCRC and between levels of health care is one of  the most stressful events older adults face because it threatens their  autonomy\u2014that is, their ability to make decisions for themselves.  Individuals representing various parts of the CCRC community told us that  the transfer from one level of care to another is often regulated by state  law and that, while residents may disagree with the decision to transfer,  the CCRC, in some cases must move them over their objections.",
      " CCRC  residents generally enjoy continuous residency in the same community  regardless of the level of care. However, state regulators and resident  advocates told us that while many CCRCs without space in assisted living  or skilled nursing guarantee space to residents in a nearby facility for no  additional cost, residents can face additional stress due to the transfer  outside of their contracted community. Residents\u2019 dissatisfaction with CCRC management, policies, or services  can grow out of a lack of full understanding of contracts and related  disclosure documents or may result from ambiguities in the contract,  according to representatives of CCRC management and resident  organizations. Although state officials told us that many CCRC residents  are highly affluent and educated consumers,",
      " others noted that some  consumers do not understand the contractual provisions or disclosures.  Further, experts and resident advocacy groups said that the contracts are  very lengthy and detailed, containing terms that are difficult to understand  and potential ambiguities, and they noted that some residents might not  fully understand their rights and responsibilities or the obligations of the  CCRC. Finally, a statewide resident\u2019s association in Florida noted that  some residents have become unhappy with service or policy changes  made through the residents\u2019 handbook that they believed were  contractually guaranteed. CCRC contracts and the residents\u2019 handbook are  different documents and some residents do not fully appreciate the  difference until an issue arises.",
      " Further, some CCRCs may impose  additional fees during times of financial hardship. According to Florida  CCRC operators, for example, CCRCs may impose fees on services that  were previously free, such as transportation to activities in the local  community. State Laws Designed  to Protect Residents  Vary, and Some States  Do Not Mandate Key  Disclosures or  Contract Provisions Regulating Contract  Content and Clarity According to a CCRC industry study, of the 38 states that have some level  of regulation specifically addressing CCRCs, 34 states collect and review  the standard form contract that the CCRC enters into with residents.",
      "  Based on our analysis of CCRC industry data, about four out of every five  CCRCs are located in states that collect and review these contracts. The  industry summary also indicates that, of the 38 states with CCRC-specific  licensure laws, 30 require that CCRC contracts include a provision that  confers on residents a \u201ccooling off\u201d period in which the resident has the  right to cancel a contract and receive a full refund of the entrance fees,  less certain costs. The prescribed periods during which such cancellation  rights may be exercised range from prior to occupancy to as long as 1 year  after occupancy,",
      " and they allow residents to cancel the contract without  penalty or forfeiture of previously paid funds. Of the eight states we reviewed, seven require that CCRC license  applicants, as part of the licensure process, submit a copy of the contract  form to be entered into with residents. In some of those states the contract  form must be approved by the state. A few of the states we reviewed  required that the contract be legible or written in clear and understandable  language. Regulators from New York, Pennsylvania, and Wisconsin said  that they review the contract for understandable language. Seven of the  state laws we reviewed also require CCRC contracts to provide for a  minimum time period in which a resident has the right to cancel the CCRC  contract without forfeiting their paid entrance fees.",
      " Such cancellation  periods vary across these seven states from 7 days after signing the  contract to 90 days after occupancy. States we reviewed varied in how they collected and reviewed the  contract. For example, officials in Wisconsin told us that they played an  active role in ensuring that the contract contained the items required by  law and met readability criteria. In some states, such as Pennsylvania, staff  uses checklists or other tools to ensure that the content meets state  requirements and readability standards. Officials in Wisconsin told us that  contract reviews there were less structured and that staff generally used  their own judgment to decide whether contracts were deceptive,",
      "  incomplete, or obscure. States can also levy significant penalties if they  find that a CCRC uses a contract that has not been reviewed and approved  by the state. For example, California officials told us that if they found that  a resident had an unapproved contract, the provider would be required to  return all entrance and monthly fees (in total, including the costs incurred  for services) to the resident. The state can also revoke the CCRC\u2019s  certificate of authority, rendering the facility unable to accept entrance  fees or offer new contracts. Protecting CCRC  Residents\u2019 Fees and  Deposits Some states directly protect the financial interests of residents by (1)",
      "  establishing requirements for fees and deposits to be escrowed, (2)  addressing criteria for monthly fee increases, or (3) placing liens on CCRC  assets on behalf of residents or confer a preferred status on resident  claims on such assets in the event of liquidation. As table 2 shows,  escrow requirements varied among the eight states we reviewed but in  general mandated setting aside some portion of the down payment or  entrance fee for all units in a CCRC. The portion of down payments or  entrance fees required to be set aside in an escrow account varied among  the eight states we reviewed.",
      " Escrow requirements are aimed at ensuring  the stability of a CCRC during start-up and construction and its ability to  provide the services set out in the contract with residents. Six of the states  we reviewed required that CCRCs escrow some portion of consumer  deposits or entrance fees it received and such funds are not released to the  CCRC until ascertainment of certain benchmarks, such as a certain  percentage of construction completed or long-term financing committed. Some of the states we reviewed addressed increases in CCRCs\u2019 monthly  fees or required CCRCs to justify increases to residents. As table 2 shows,  Florida requires CCRC providers that raise monthly maintenance fees  above the consumer price index to provide an explanation for the increase  to CCRC residents.",
      " In California, regulators address fee increases by  requiring CCRCs to include in every continuing care contract a provision  that states that changes in monthly care fees shall be based on projected  costs, prior year per capita costs, and economic indicators. New York law  provides that monthly fee increases beyond the previously approved rating  methodology must again be approved by the Superintendent of Insurance. According to the industry summary, 12 out of 38 states that license CCRCs  have the authority to place a lien or another form of protection, such as a  surety bond or preferred claim, to ensure that residents have some  financial recourse if a CCRC enters bankruptcy.",
      " Of the eight states that  GAO reviewed in more detail, the regulators of five indicated that they  place a lien for the benefit of the residents, or that the residents have a  preferred claim on the assets of the CCRC facility in the event of  liquidation. In Texas, for example, a lien attaches to facilities and assets of  the CCRC provider when a resident moves into a facility. In Pennsylvania,  the regulating department has the option of filing a lien on property or  assets of a provider or facility to secure the obligations under CCRC  contracts. According to one expert and some regulators, preferred claims  and liens offer limited protection;",
      " however, as such claims are generally  subordinate to those of all other secured creditors, such as bondholders  and commercial lenders. Further, some of the states we reviewed required CCRCs to communicate  with regulators and residents before a potential closure in order to reduce  the financial and other impacts on residents. In California, CCRCs that are  slated to close must submit plans to regulators that generally address  refunds and include a time frame for transferring displaced residents to  other facilities.  In Florida, if a CCRC ceases to operate due to liquidation  or pending liquidation, regulators use the unencumbered assets of the  CCRC to provide relocation and other assistance to displaced residents.",
      " Disclosing CCRCs\u2019  Financial Condition to  Consumers States may also require that CCRCs disclose information pertaining to the  financial condition of the CCRC. According to the regulatory history and  literature we reviewed, requiring the disclosure of information about the  past, present, and projected future financial conditions of CCRCs allows  current and prospective residents to make informed decisions before  entering a facility. Among states we reviewed that had such a requirement,  we found that the format, extent, detail, and timing of these disclosures  varied considerably. For example, Illinois state law simply requires that a  CCRC provide residents with a statement that reflects the provider\u2019s  financial condition and that,",
      " at a minimum, includes disclosure of short- term assets and liabilities. On the other hand, the Florida statute requires  CCRCs to file an annual report in such form as the regulating entity  prescribes, and such statement must include, at a minimum, an audited  balance sheet, a statement of income and expenses, and a statement of  changes in cash flow, as well as a list of reserve assets. The extent of additional disclosure requirements also varied across the  states we reviewed. As table 3 indicates, disclosures can include  information with significant financial implications to residents, such as fee  schedules, a history of fee increases,",
      " refund policies, and the status of  residents\u2019 claim on the assets and facility of a CCRC in case of bankruptcy  or insolvency. For example, California requires CCRCs to provide  residents with a history of fee increases over the past 5 years. California,  Florida, and New York require that residents receive advance notice of any  increases or changes to monthly fees. California and Wisconsin require  CCRCs to disclose to residents that any claims they have against the CCRC  in the event of its liquidation may be subordinate to secured creditors,  such as mortgage lenders. Statutory provisions regarding the delivery and timing of disclosures to  prospective residents also varied among the states we reviewed.",
      " For  example, while the states we reviewed required providers to disclose  financial information to prospective residents prior to signing the CCRC  contract, five states we reviewed also required that such information be  subsequently disclosed periodically to residents. Exactly where and how  the information must be disclosed can vary as well. For example, some  states require that financial information be posted in public areas of the  CCRC, others require providers to convene periodic meetings with  residents to discuss the financial condition of the facility, and still others  that financial information is made available to residents upon request. A  New York state official said the state posts the results of any CCRC  examinations on a Web site so that consumers can access the information  and compare results across CCRCs.",
      " Some of the states we reviewed performed on-site audits and  examinations of CCRCs on a periodic basis to help ensure consumer  protections, including the disclosure of important financial information.  The states we reviewed generally have discretionary authority to conduct  on-site audits or examinations, but some are required to conducted  periodic audit or examinations. For example, the Florida regulatory  authority is required to conduct on-site examinations at least once every 3  years and may visit more frequently if regulators receive complaints from  residents. Such on-site exams may include inspections of financial  information, contracts, and disclosures and conversations with staff,  management, and residents.",
      " Other states said that they had the authority  to conduct on-site investigations but had not done so. For example,  regulators in Texas said that they have not yet faced an issue with a CCRC  that would compel them to conduct an examination or investigation, but  historically have exercised other regulatory authority over CCRCs for  financial oversight. Regulatory officials told us that the state had relied on  documents submitted by CCRCs and has called CCRC management on an  informal basis to obtain additional information or clarification when  necessary. Disclosing Nonfinancial  Policies and Practices Other requirements mandate disclosure of policies that may have  important implications for the length and quality of residents\u2019 stay at their  CCRC.",
      " Some states we reviewed required that CCRCs explicitly disclose  policies regarding (1) the conditions under which a resident could remain  in the event the resident experiences financial difficulties, and (2)  conditions under which residents would be required to move to a higher  level of care. For example, Pennsylvania requires that each CCRC contract  describe the circumstances under which a resident may remain at the  facility in the event the resident has financial difficulties. California  specifically mandates that CCRCs offering life care contracts subsidize  residents who are unable to pay their monthly or other fees, provided the  financial need of the resident does not arise from the resident\u2019s own action  to divest of his or her assets.",
      " Seven of the states we reviewed also have specific, nonfinancial provisions  that must be contained in the residential contract or disclosure statement,  but these provisions varied, as shown in table 4. For instance, some states  not only require disclosure of certain policies, but specifically prescribe  minimum procedures that CCRCs must follow while other states require  that certain policies be disclosed to residents but do not prescribe the  substance of those policies. For example, in addition to requiring that the  resident contract describe the procedures and conditions under which a  resident may be transferred from a designated living unit, the applicable  California statute prescribes minimum transfer procedures.",
      " These policies  must be disclosed at the time that the contract is signed in an effort to  ensure that residents understand how they will move through the  continuum of care. Florida and New York also require that residents be  advised of policies for transferring residents among the levels of care but  do not specifically set those policies. According to an expert, such policies  have been a point of friction between residents and CCRC management.  As table 4 indicates, some of the states we reviewed did not have such  certain disclosure requirements. Other Regulatory  Protections Some state regulations are aimed at ensuring that residents can  communicate their concerns to management and receive ongoing financial  and nonfinancial information concerning a CCRC by forming residents\u2019  councils and creating a residents\u2019 bill of rights.",
      " Six of the states that we  reviewed required that residents of a CCRC be allowed and encouraged to  form groups in order to communicate with management, including Ohio  which has no other CCRC specific law. CCRC management coordinates  with representatives from the resident groups to communicate information  on the facility\u2019s financial condition, fee increases, policy changes, and  other issues. In Florida and California, for example, the resident councils  are the designated recipients of mandated disclosures such as reports on  the CCRCs financial condition, and fee structure. Two states we reviewed  prescribed a statutory residents\u2019 bill of rights and required CCRCs provide  a copy of such rights to residents prior to their occupancy.",
      " Finally, some of the state regulators we interviewed indicated that they  require CCRCs to provide marketing and advertising materials for  approval. One regulator we spoke with commented that claims or  incidents of false advertising were rare to nonexistent. Residents had not  highlighted this issue as a major concern for consumers. Opinions Differed on the  Effectiveness and  Adequacy of State  Regulations Based on our interviews with state officials, we found no assessments of  the effectiveness of state regulations in protecting consumers at either the  national level or the state level, and state officials, resident advocates, and  experts expressed a wide range of opinions on the adequacy of state law  to protect consumers.",
      " First, state officials and others noted the  importance of certain CCRC law provisions. For example, regulatory  officials in Florida said that requiring CCRCs to provide financial  information publicly through a state was necessary, because without such  information residents would be unable to compare in-state CCRCs in a  uniform manner and regulators would be unable to ensure that residents  had enough information to make an informed choice of facilities. Members  of a national association of CCRC residents expressed concern  that some state laws might not address the terms of the residency  contract, including the refundable portion of the entrance fee and  residents\u2019 rights within the contract,",
      " such as the ability to renegotiate fees  in the event of a CCRC sale due to financial insolvency. Additionally,  members of this association expressed concern that CCRCs in financial  difficulties might not notify residents if states did not require CCRCs to  provide disclosures regarding CCRCs\u2019 financial condition. Seven of the  eight states we contacted did have a CCRC law that required such  disclosure, but one\u2014Ohio\u2014did not. Other experts and resident advocates we interviewed pointed out possible  further improvements to state laws. For example, a law professor with  expertise on the Pennsylvania law told us that states should take a greater  role in facilitating the ability of prospective residents to access  information about CCRCs for purposes of making meaningful  comparisons.",
      " For example, states could publish information about the  financial and operating conditions of CCRCs in a statewide database so  that CCRC residents could make comparisons across the statewide  industry. The law professor advocates that states could publish  information about (1) the numbers and types of complaints about CCRCs,  (2) comparative information on entrance fees and monthly fees, and (3)  instances of the state requiring a CCRC provider to give revised financial  projections. Similarly, representatives of two statewide resident\u2019s groups  said that residents would like to see states require that CCRCs provide  disclosures on their financial condition along with an extensive,",
      "  understandable explanation of the disclosure. Finally, although state laws differ significantly in breadth and detail, it is  not clear that CCRC residents in states with less stringent requirements  are necessarily at greater risk than residents in heavily regulated states. In  one state, regulators told us that despite extensive CCRC regulation, a  CCRC bankruptcy cost residents the refundable portion of their entrance  fees. In another state, regulators said that, while the CCRC law is not as  extensive as in other states, they are not aware of any CCRCs that have  faced bankruptcies or failures. In part, protection may come from the  CCRCs themselves.",
      " In our contacts with CCRCs, we found that some took  steps that went well beyond what the state law required. The Illinois  statute, for instance, requires comparatively fewer disclosures than other  states, such as California and Florida, and, according to an Illinois  regulatory official, does not mandate that CCRCs provide financial  information on an ongoing basis. Nonetheless, officials from CCRCs in  Wisconsin and Illinois told us that they provided additional disclosures,  beyond what is required by state law. Representatives from one CCRC told  us that they offered prospective residents a lengthy \u201cdiscovery phase\u201d so  that residents were not unpleasantly surprised after signing the contract or  moving in.",
      " In this discovery phase, prospective residents discussed their  expectations with staff, had a meal at the CCRC, and visited with current  residents and staff. The CCRC had also established a residents\u2019 finance  committee that received ongoing budget and other financial information  and gave residents a vehicle for communicating with management. Finally,  the CCRC provided a quarterly operating budget to each resident and  made other financial information available upon request. CCRC officials in  several other states, including California and Pennsylvania, told us they  exceed statutory requirements. Nonetheless, because we visited only  seven CCRCs in the course of our work, we do not know how widespread  such actions are.",
      " Concluding  Observations CCRCs can help ensure that older Americans have access to housing and  health care in a single community as they age. However, entering a CCRC  often means committing a large portion of one\u2019s assets, and while CCRC  bankruptcies have been rare, and few residents have lost their housing or  their entrance fees, a CCRC failure could put residents in a difficult  financial situation. As a result, residents have a strong interest in fully  understanding the long\u2013term viability of their CCRC and their contract  with it. However, resident contracts and CCRC finances are often  complex, and prospective residents may find it challenging to evaluate the  risks they face or the likelihood that a particular CCRC has done sufficient  long-range financial and operational planning.",
      " Such difficulties, coupled  with the stress that recent economic events have placed on CCRC  finances, underscore the importance of regulators being vigilant in their  efforts to monitor CCRCs\u2019 long-term viability and protect consumers. CCRCs as entities are not regulated by the federal government, and,  according to an industry study, 12 states do not appear to have CCRC- specific regulations. As a result, an entity that might be licensed and  regulated as a CCRC in some states may not be in others, and resident  contracts that might receive regulatory scrutiny in some states may not in  others. In other work looking at the regulation of financial contracts  across states,",
      " we have pointed out the importance of ensuring that citizens  entering similar contracts receive similar regulatory protections across  states. Because there is no federal regulator for CCRCs, we are not making  a recommendation for specific action. However, the potential risks to  residents that result from committing a considerable amount of money to  a CCRC highlight the importance of states being vigilant in their efforts to  help ensure that CCRC residents\u2019 long-term interests are adequately  protected. Such efforts will only become more important as the number of  older Americans requiring assisted living and nursing home care increases. NAIC and HHS  Comments and Our  Evaluation We provided a draft of the report to the Department of Health and Human  Services and the National Association of Insurance Commissioners,",
      " but  neither commented on the draft. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to interested  congressional committees, the Chief Executive Officer of the National  Association of Insurance Commissioners, the Secretary of the U.S.  Department of Health and Human Services, and others. In addition, the  report will be available at no charge on GAO\u2019s Web site at  http://www.gao.gov. If you or your staff has any questions regarding this report, please contact  us at (202)",
      " 512-7022 or cackleya@gao.gov or (202) 512-5491 or  bovbjergb@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 major contributions to this report are listed in  appendix II. Appendix I: Objectives, Scope, and  Methodology To address concerns about the risks and regulation of CCRCs, we have  been asked to (1) describe how CCRCs operate and what financial risks  are associated with their operation and establishment, (2)",
      " describe how  state laws address these risks and identifies what is known about how  adequately they protect CCRCs\u2019 financial condition, (3) describe risks that  CCRC residents face; and (4) describe how state laws address these risks  and identifies what is known about their adequacy. To describe how CCRCs are established and operated, methods CCRCs  use for initial financing and on-going operations, and what initial and on- going risks CCRCs may experience, we interviewed CCRC providers,  CCRC industry associations\u2014including the American Association for  Homes and Services for the Aging (AAHSA), American Seniors Housing  Association (ASHA), National Association of Insurance Commissioners  (NAIC), and National Center for Assisted Living (NCAL)\u2014and two  attorneys who specialize in housing and health care for older Americans.",
      "  In addition, we met with officials from eight CCRC facilities. We selected  these providers based on the providers\u2019 geographic diversity, facility size,  non-profit or for-profit status, type of contracts offered, and income or  market segment served. We also met with state CCRC regulators from  eight states\u2014California, Florida, Illinois, New York, Ohio, Pennsylvania,  Texas, and Wisconsin. We selected these states due to the states\u2019  geographic diversity, CCRC population size, and type of state regulatory  department with CCRC oversight responsibility. Because we judgmentally  selected the states and CCRCs we reviewed,",
      " we cannot generalize  information we obtained to other states or CCRCs. In addition, we  reviewed literature and academic articles by experts in the senior living  industry. To describe what state laws exist to ensure CCRCs\u2019 financial stability, and  what is known about how adequately they protect CCRCs financial  condition, in the eight states we selected we reviewed and analyzed state  CCRC laws that govern the financial aspects of CCRC licensing and  periodic state oversight, and met with selected state regulatory officials. In  addition, we met with industry associations, CCRC providers, and two  attorneys who specialized in housing and health care for older Americans.",
      "  We also met with two actuaries, two actuarial industry associations, and  members of CCRC residents\u2019 associations that work with CCRC  management on behalf of older Americans who reside in CCRCs. To describe what risks CCRC consumers face, as well as what state laws  exist to protect consumers from financial and other risks, and what is  known about how adequately they protect consumers, in the states we  selected we reviewed and analyzed state laws pertaining to specifically to  CCRCs that are designed to inform and protect consumers, and met with  selected state regulatory officials. We also reviewed summary information  on laws and regulations across all states that was compiled by an industry  association.",
      " We also reviewed examples of CCRC disclosures and other  information provided by CCRCs in states we reviewed. In addition, we met  with industry associations, CCRC providers, and two attorneys who  specialize in housing and health care for older Americans. In addition, we  met with members of CCRC residents\u2019 associations that work with CCRC  management on behalf of older Americans who reside in CCRCs. We conducted this performance audit from June 2009 to June 2010 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: GAO Contacts and Staff  Acknowledgments Staff  Acknowledgments In addition to the contacts named above, Patrick Ward (Assistant  Director), Clarita Mrena (Assistant Director), Joe Applebaum, Emily  Chalmers, Erin Cohen, Andrew Curry, Mike Hartnett, Marc Molino, Walter  Ochinko, Angela Pun, and Steve Ruszczyk made key contributions to this  report.\n"
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    "id": 70,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO assessed: (1) the way in which the 1996 Federal Agriculture Improvement and Reform Act (FAIR) will likely affect U.S. agricultural exports; and (2) the continued relevance of U.S. agricultural export assistance programs. GAO noted that: (1) agricultural experts generally expect that FAIR's domestic policy reforms will modestly contribute to increased U.S. agricultural exports; (2) the extent to which FAIR's domestic reforms increase exports is dependent on the degree to which farmers add additional land to production and use FAIR's planting flexibility to respond to international and domestic market conditions; (3) much of the forecasted growth in U.S. agricultural exports is expected to come from: (a) the anticipated rise in income levels in East and Southeast Asian nations and other regions; and (b) the liberalization of agricultural markets brought about by the 1994 Uruguay Round trade agreements, which brought agriculture under multilateral disciplines for the first time, and by unilateral policy changes of other nations; (4) FAIR's domestic policy reforms remove a primary benefit associated with most U.S. export assistance programs--the exporting of surplus stocks generated by domestic price supports; (5) nevertheless, program proponents maintain that U.S. agricultural export assistance programs have continued relevance because they benefit the overall U.S. economy, benefit the U.S. agricultural sector, counter competitor nations' agricultural export programs, and promote U.S. trade negotiating objectives; (6) program performance under past conditions may not always be helpful in predicting future program relevance because of changing conditions in the global trading environment, such as Uruguay Round trade liberalization, or the potential for commodity supply and price volatility; and (7) nevertheless, using applicable economic research and expert opinion, GAO's review provides an indication of these programs' future contribution in four key areas: (a) with regard to the U.S. economy, no conclusive evidence exists that these programs have measurably expanded aggregate employment and output or reduced the trade and budget deficits; (b) concerning the U.S. agricultural sector, while U.S. agricultural export assistance programs may provide some income and employment benefits to the sector, there is limited evidence of these benefits; (c) regarding competitor nations' programs, the lack of transparency in these nations' agricultural export assistance efforts makes it difficult to conclusively determine how effectively U.S. export programs counter these foreign practices; and (d) concerning U.S. trade negotiating objectives, there are widely divergent views about the amount of leverage these programs provided in the past.\n",
    "docs": [
      "Background Agriculture is an important component of U.S. trade. Agricultural exports accounted for $60 billion, or 7 percent, of all U.S. exports (merchandise and service) in fiscal year 1996, while agricultural imports accounted for $32.4 billion, or 3.4 percent, of all U.S. imports. The agricultural sector consistently generates an annual trade surplus, which in fiscal year 1996 was $27.4 billion, according to the U.S. Department of Agriculture (USDA). In addition, the financial well-being of the U.S. agricultural sector has become increasingly linked to its export opportunities.",
      " Exports represent about 20 percent, by value, of U.S. agricultural production and the equivalent of one-third of total harvested U.S. acreage. For example, in 1996, 57 percent of the U.S. wheat crop was shipped overseas, as well as 47 percent of the rice and 43 percent of the cotton crop. U.S. agricultural exports also contribute to U.S. employment. According to the Economic Research Service (ERS) of USDA, $55.8 billion in agricultural exports in 1995 supported about 950,000 jobs in the United States, with 365,300 of those jobs occurring in the farm sector and 584,",
      "700 occurring in the nonfarm sector. The total jobs supported represent less than 1 percent of U.S. civilian employment, but the farm sector jobs supported by exports represent about 15.5 percent of the sector\u2019s total employment. The U.S. government has actively sought to expand U.S. agricultural exports through negotiations to reduce foreign trade barriers and through subsidies, market promotion, food aid, and loan guarantees. From 1985 to 1996, the U.S. government has spent $9 billion on export subsidies, $2.3 billion on market promotion, and $7.8 billion on food aid and has guaranteed $53.",
      "1 billion in export loans (all in constant fiscal year 1996 dollars). Between fiscal years 1980 and 1997, the U.S. government paid out approximately $2.1 billion in export credit guarantee claims against these loans because of loan repayments that were in default and have not been rescheduled. Between 1989 and 1993, about 20 percent by value of U.S. agricultural exports received some government assistance. USDA has four types of agricultural export assistance programs. All share the objective of increasing U.S. agricultural exports. And two\u2014export subsidies and market promotion programs\u2014are intended to directly counter competitor agricultural export assistance.",
      " Prior to FAIR, most of these programs also helped the U.S. government in a budgetary sense by (1) reducing government-held stocks of surplus grain generated by U.S. domestic agricultural programs and (2) helping to offset the cost of U.S. domestic agricultural price supports. Successive farm bills and market conditions have reduced expenditures for U.S. agricultural export assistance programs. For example, total funding for these programs has decreased from $2.1 billion in fiscal year 1992 to $792 million in fiscal year 1996. The four types of programs include the following:(1)Export subsidy programs that lower the price of U.S.",
      " commodities on the world market: the Export Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP). EEP expenditures for fiscal year 1996 were $5 million. Due to high market prices in 1996, EEP\u2019s authorized program level of $350 million was not fully utilized. DEIP expenditures for fiscal year 1996 were $20 million. (2)Export credit programs that offer short- and intermediate-term loan guarantees to lower the cost of borrowing for importing countries to purchase U.S. agricultural exports: the Export Credit Guarantee program (the General Sales Manager (GSM)-102) and the Intermediate Export Credit Guarantee program (GSM-",
      "103). These were jointly authorized to expend not less than a total of $5.5 billion in guarantees and, in fiscal year 1996, actually guaranteed exports valued at $3.1 billion and $151 million, respectively.(3)Export promotion programs that attempt to develop, maintain, and expand foreign markets for U.S. agricultural products through funding for advertising and other market promotion: the Foreign Market Development Program (FMDP\u2014also known as the Cooperator Program) and the Market Access Program (MAP). A program level of up to $34 million and $90 million, respectively, was approved for these programs for fiscal year 1996.(4)",
      "Food aid programs that provide U.S. agricultural commodities to developing countries through either concessional loans that offer long-term credit with below-market interest rates, such as the Public  Law 480 title I concessional sales program, or grants for market development purposes, such as the Food for Progress grant program. These programs had expenditures of $219 million and $107.7 million, respectively, for fiscal year 1996. Farm legislation of 1985 and 1990 brought about market-oriented reforms in domestic agricultural policy. These reforms helped reduce the market-distorting impact of government-established price supports and diminished government holding of surplus stocks. The 1996 FAIR Act expands on market-oriented provisions of previous legislation and for many commodities ends the tying of direct farm income support to production decisions.",
      " FAIR is also consistent with U.S. commitments to the Uruguay Round Agreement on Agriculture, which reduces domestic and export agricultural assistance worldwide. While the act provides government income support payments to farmers through 2002, these payments are now largely independent from farmers\u2019 planting decisions.With the new flexibility, producers\u2019 planting decisions are to be increasingly driven by market conditions (domestic and international) rather than by government programs. Concurrent with these changes, the 1996 FAIR act reauthorized all four types of export assistance programs, with some operational modifications aimed at making the programs more focused on market development. Two changes that FAIR made to the export programs,",
      " which USDA officials state will increase program flexibility, were to authorize (1) the GSM program to provide credit to private importers in qualified nations and (2) title I concessional loans to private entities in addition to foreign governments. They believe these provisions are responsive to changes in the global trading environment. For example, a trend in some nations in Latin America, Asia, and Europe is toward less government control of markets and a greater reliance on the private sector. Finally, the Uruguay Round Agreement on Agriculture permits the continued use of export subsidies (though reduced from historical levels) and other forms of agricultural export assistance, such as market development and promotion efforts,",
      " export credit guarantees, and concessional loans to developing countries. And, our competitors continue to use Uruguay Round allowable agricultural export assistance. For instance, in fiscal year 1996, USDA estimated that the European Union (EU)spent over $9 billion on agricultural export subsidies, as compared to the $792 million the United States spent on all export assistance in that same year. Thus, world agricultural trade remains greatly influenced by government policies and programs. While FAIR May Modestly Increase U.S. Exports, International Factors Are More Important Agricultural experts predict that FAIR\u2019s domestic policy reforms will likely help expand U.S. agricultural exports, though minimally.",
      " Other factors, such as expanding worldwide markets and the appeal of many U.S. agricultural products, are expected to increase U.S. exports independent of FAIR. FAIR May Modestly Increase U.S. Agricultural Exports The extent to which FAIR\u2019s domestic policy reforms may modestly increase exports is dependent on the degree to which farmers\u2014who were previously constrained by pre-FAIR policies that restricted acreage and planting decisions\u2014add additional land to production and use FAIR\u2019s planting flexibility to respond to international and domestic market conditions. For example, according to USDA, FAIR\u2019s elimination of the Acreage Reduction Program (ARP)\u2014that set aside or allowed land to lie fallow\u2014will permit more land to be available for cultivation and thus more crops for export.",
      " In addition, FAIR\u2019s suspension of the Farmer Owned Reserve Program (FOR) benefits the price competitiveness of U.S. agricultural exports by no longer limiting sales in times of large supply. FAIR\u2019s reforms are a continuation of the market-oriented reforms of domestic agricultural policy that have been underway since the 1985 and 1990 farm legislation. These changes had already reduced the market-distorting impact of a complex system of government-established price supports. In addition, they diminished the government\u2019s holding of stocks, which had limited the private sector\u2019s ability to respond to changing market demand. For example, prior to the 1985 and 1990 farm legislation,",
      " the U.S. government held sizable stocks of grains, which made it a major player in the supply management of these commodities. According to USDA, FAIR\u2019s changes to domestic agricultural policy\u2014such as the use of production flexibility payments, the elimination of ARP, and the suspension of FOR\u2014increase the ability of farmers to choose which crops to plant and the amount of land to be cultivated while still allowing them to receive income support. Therefore, FAIR encourages farmers to react more quickly to market signals with regard to planting decisions and the amount of land to cultivate. Thus, FAIR should allow farmers to respond more rapidly to price changes in the international and domestic markets.",
      " Agricultural experts state that with this increased flexibility, farmers should be able to export more of their production, capitalizing on the considerable comparative advantages U.S. agriculture derives from substantial land resources, advanced transportation and information systems, and ongoing agricultural research. For example, currently there is strong domestic and international demand for soybeans. Due to the flexibility FAIR provides, farmers have been able to respond to this increased demand by switching from planting other crops to cultivating soybeans. As a result, USDA states that 1997 soybean plantings are the highest since 1982. In the past, farmers would have had more difficulty in quickly responding to this increase in demand.",
      " This is because prior to FAIR, in order to receive government deficiency payments, farmers had to contract with the U.S. government concerning the crops they would plant; this, in turn, locked them into certain crop cultivation patterns. However, also under FAIR, with increased production flexibility by farmers and reduced supply management by government, commodity price volatility is expected to increase. As a result, according to USDA, farmers face greater risk of income volatility, due to these fluctuations in commodity prices. Favorable International Market Conditions: Primary Reason U.S. Exports Are Expected to Increase Notwithstanding unforeseen negative weather conditions or political instability, future increases in U.S.",
      " agricultural exports are expected to be largely driven by changes in worldwide supply and demand as well as by the ongoing liberalization of global agricultural trade. According to USDA\u2019s baseline projections, between 1997 and 2005 U.S. agricultural exports will increase by 44 percent, from $55.5 billion to $79.7 billion. This growth is expected to be largely due to (1) increased demand in East and Southeast Asian nations and in other regions and (2) market opening brought about by Uruguay Round agreements and associated reforms of other nations\u2019 agricultural programs. These changes in agricultural markets represent opportunities to U.S. agricultural competitors as well as to the United States.",
      " USDA baseline projections and other forecasts take into account how competitor nations respond to these opportunities. Rising income levels in East and Southeast Asian nations, and in Latin America, the Middle East, and North Africa, are anticipated to result in improved diets and a greater demand for imports of grains, fruits, vegetables, and meat. China could play a key role in this increased demand for both bulk and high-value agricultural commodities, particularly as its urban middle class expands and incomes grow. Recent increases in U.S. agricultural exports have been largely driven by Asian demand, and agricultural forecasters say that this trend will likely continue. For example, agricultural researchers expect the following to occur:",
      " Between 1997 and 2005, East and Southeast Asian nations\u2019 gross domestic product (GDP) is expected to expand at a robust 7 percent per year, with China leading at about 8.5 percent, according to the USDA\u2019s ERS. See figure 1 for a comparison of forecasted average East and Southeast Asian real GDP growth rates with other regions and country categories, 1990-2005. Between 1997 and 2005, strong growth in demand for feed grains and food products in the East and Southeast Asian nations\u2014particularly in China\u2014is predicted to fuel much of the growth expected in U.S.",
      " agricultural exports, according to the Food and Agricultural Policy Research Institute (FAPRI). Demand for U.S. HVPs such as meat, fruits, vegetables, and prepared foods will rise, according to ERS. While most U.S. HVPs are exported to developed countries such as Canada, the EU, and Japan, these goods are increasingly flowing into the rapidly growing economies of East and Southeast Asia. Further influences expected to increase U.S. exports and global agricultural trade are (1) the market openings created by the Uruguay Round\u2019s agricultural provisions and (2) other related reforms in foreign countries\u2019 agricultural policies. The Uruguay Round agreements contain commitments by WTO members countries to open up\u2014at least to some degree\u2014their agricultural markets,",
      " many for the first time. Countries are doing so by reducing several important agricultural trade barriers, including import restrictions and tariffs, export subsidies, and domestic support programs. The Uruguay Round agreements also set forth rules on the use of sanitary and phytosanitary (SPS) measures that directly or indirectly affect international trade. For example, SPS measures that restrict imports must generally be based on scientific principles. Several WTO members, including the United States, have invoked dispute settlement procedures regarding four SPS measures that appear to lack a scientific basis. These SPS rules are intended to make it more difficult for countries to rely on unjustified SPS measures as a way to protect their markets from imports.",
      " Other Uruguay Round provisions mandate conversion of most nontariff barriers (NTB), such as import licensing requirements, to tariffs. These measures were aimed at making trade barriers more transparent and thus facilitating world agricultural trade by encouraging a freer trade environment. In addition to Uruguay Round and bilateral trade liberalization (such as the U.S.-Japan beef and citrus agreement), unilateral policy changes have also significantly liberalized the world trading environment. Specifically, newly privatized markets are emerging from the collapse of the socialist economies in the former Soviet Union and Eastern Europe. Moreover, long-held policies of self-sufficiency, protectionism, and government control of markets are being challenged,",
      " reformed, or dismantled in Latin America, Asia, and Europe. For example, Argentina has gone a long way toward reforming its agricultural sector since the 1990s. These reforms include the privatizing of export facilities (thus reducing port handling costs) and the scrapping of major state-owned marketing boards for grains, meats, and sugar. While difficult to quantify, these unilateral policy changes in other nations are also expected to increase world agricultural trade, according to USDA. Evidence Is Mixed Regarding the Continued Relevance of U.S. Export Assistance Programs Overall, we found that the evidence is mixed regarding the continued relevance of U.S. agricultural export assistance programs.",
      " While FAIR\u2019s domestic policy reforms remove a primary benefit associated with most U.S. export assistance programs\u2014the exporting of surplus stocks generated by domestic price supports\u2014USDA and some industry officials state that these programs continue to have relevance. However, others disagree. To address this issue, we reviewed the evidence regarding the extent to which the programs benefit the overall U.S. economy, benefit the U.S. agricultural sector and specific U.S. commodities, counter competitor nations\u2019 agricultural export programs, and promote U.S. trade negotiating objectives. One challenge in assessing these programs\u2019 continued relevance is that the evidence, for example, on whether they benefit the U.S.",
      " agricultural sector is limited largely to research on how these programs have functioned in the past and to the past experiences of program participants. Program performance under past conditions may not always be helpful in predicting future program contributions. For example, EEP was created in the mid-1980s during a period of large grain stocks and low prices. According to ERS, the program is less effective under changed market conditions of higher world prices and tighter stocks. Another challenge is the difficulty in generalizing across these export programs regarding their continued relevance, as they each have multiple objectives and support various commodities and export markets. Nevertheless, we identified applicable economic research and principles as well as expert opinion that provide an indication of the future contributions of these programs in the four key areas previously outlined.",
      " No Conclusive Evidence That USDA Export Programs Measurably Benefit the Overall U.S. Economy Program proponents, including many industry groups and USDA, say that the United States receives macroeconomic benefits from export assistance programs. Program proponents state that agricultural export assistance programs expand total U.S. output and employment through additional exports, reduce the size of the U.S. trade and federal budget deficits, and contribute to overall economic efficiency. Some USDA officials state that these programs were not necessarily intended to provide macroeconomic benefits, but rather they are to redistribute resources to the rural economy. However, a 1995 USDA study concluded that MAP has macroeconomic benefits because it increases the level of overall economic activity and employment through expanded U.S.",
      " exports. The study states that this expansion of new economic activity and employment is sufficient for MAP to more than fully pay for itself through increased tax revenue, thus contributing to reducing the budget deficit. Our analysis and review of economic studies, however, found no conclusive evidence that these programs have provided net benefits to the aggregate economy. Government export programs largely reallocate production, employment, and income among sectors. The potential for export programs to affect overall U.S. output, employment, and the trade and budget balances is limited to particular circumstances, such as in cases where markets do not operate efficiently. Moreover, economic research suggests that the federal government\u2019s ability to influence short-run U.S.",
      " output and employment levels comes primarily through making changes in either fiscal policy, such as overall levels of government expenditures and taxation, or Federal Reserve monetary policy. Effect on Output, Employment, and Budget Deficits Government export subsidy, promotion, and loan guarantee programs largely reallocate production, employment, and income between sectors, a reallocation that occurs when an economy is near or at full employment, but some of these reallocations may also occur when resources are unemployed. In general, subsidizing one sector is the equivalent of taxing other sectors. Export subsidies can raise prices for domestic consumption, change the cost of domestic resources and the composition of resource usage, alter the composition of trade,",
      " and may sometimes change the level of total trade. Government support for a specific sector generally implies reduced government spending in other areas. Agricultural export assistance may also change the location of economic activity, sustaining rural economic activity that would not occur in its absence. Because these programs potentially reallocate resources, changes in these programs, including reductions in funding or elimination, may result in employment and business dislocation if the subsidized sector contracts. With respect to the argument that export programs can stimulate the economy and raise output and employment, changes in government fiscal policy may accomplish this in the short term, if the economy is operating at less than full employment. These policy changes have historically included tax cuts or increased deficit-financed government spending such as on employment or infrastructure programs.",
      " Even when agricultural resources are underemployed, if the government chooses to promote exports to foreign consumers rather than to increase domestic spending, U.S. producers may divert some of their output from the domestic to the foreign market. This could, however, raise domestic prices, thus making domestic consumers worse off. Even if the government could stimulate overall demand by supporting export assistance programs, an increase in output and employment would still not be assured, as the Federal Reserve could choose to offset any expansion that it views as inflationary by raising interest rates. Because export programs are unlikely to expand the overall economy when it is at or near full employment, they cannot generally increase tax revenues or lower budget deficits.",
      " We, and others, have concluded that a major reduction in the budget deficit would yield long-term macroeconomic benefits for the U.S. economy. Any program analysis that assumes that the resources involved in a U.S. government export program would otherwise be unemployed may show employment expansion and hence tax revenue gains. For example, USDA\u2019s 1995 MAP study claims such impacts, by assuming the resources would otherwise be unemployed. This assumption leads to a conclusion that the program has resulted in increased tax revenues. This methodology does not comply with Office of Management and Budget cost-benefit guidance, which instructs agencies to treat resources as if they were likely to be fully employed.",
      " If export promotion programs impact economic efficiency, they can potentially affect output, employment, and tax receipts over the longer run. In principle, the right kind of government intervention may improve economic efficiency if \u201cmarket failures\u201d exist. Examples of market failures include cases where costs and benefits are not \u201cinternalized\u201d by firms and consumers, market participants have asymmetric information, or a market participant has market or monopoly power. For instance, some economists have argued that a targeted government industrial policy of trade promotion (or protection) could increase national income. The cases are quite specific, however, and apply to industries with \u201cexternal\u201d economies that involve the spillover of knowledge between firms or economies of scale.",
      " While these intervention benefits have been recognized in principle, economists are generally cautious about their policy usefulness and application. Typically, these rationales have been associated with high-tech industries such as aircraft and semiconductors, not with food processing or agriculture. Increasingly, USDA argues that the export assistance programs can address market failures in agricultural or credit markets but acknowledges it is difficult to quantify this in most cases. ERS reports that, while claims of market failure must be carefully scrutinized, agricultural commodity market failures could include poorly developed credit markets in developing countries or the lack of broadly available information on a new or emerging market. There is no assurance, however,",
      " that export subsidy, promotion, or guarantee programs correct these failures. On the other hand, if government intervention creates distortions that reduce efficiency, then output, employment, and tax revenue may fall. In summary, we found no evidence that the export assistance programs enhanced economic efficiency. USDA is conducting an assessment of export program impacts at the direction of the Trade Promotion Coordinating Committee (TPCC).  USDA reports that the results will show that U.S. agricultural export assistance programs benefit national welfare by addressing market failures, but USDA and OMB declined to share their current draft report with us. Earlier we had received an ERS briefing on the preliminary estimates of these programs\u2019 impacts.",
      " USDA officials state that the final TPCC report will show different conclusions concerning program impact than the preliminary estimates. Effect on Trade Deficit Most research by economists has concluded that the overall U.S. trade balance is determined largely by U.S. macroeconomic conditions such as the amount of domestic savings and investment, exchange rates, and the size of the government budget deficit, not by trade policy. No conclusive evidence exists to support the assertion that U.S. agricultural export assistance programs influence the size of the U.S. trade deficit. When the United States is spending more on goods and services than its total income, the nation is borrowing from the rest of the world.",
      " This net borrowing, or current account deficit, is equal to the government budget deficit plus the difference between private sector investment and savings.According to the President\u2019s Council of Economic Advisers, the government can contribute to reducing the current account and trade deficits through macroeconomic policy measures such as eliminating the federal budget deficit. These policy measures can narrow the gap between U.S. savings and U.S. investment. However, U.S. trade policies may not change the overall trade balance, but they can alter the composition and the overall levels of U.S. trade. For example, increases in agricultural exports could lead to a reduction in some other export or to increased imports.",
      " Thus, successful export promotion can benefit the targeted product but at the expense of nontargeted exports or import-competing domestic producers. U.S. Export Programs Have Provided Small Global Increases in U.S. Agricultural Exports USDA officials and others state that U.S. agricultural export assistance programs increase the exports of specific U.S. commodities and overall farm sector income and employment. However, we found few studies that support the position that these programs increase farm income and employment for the sector as a whole. Regarding U.S. exports, we found that there have been some instances of increased exports to specific markets from commodities supported by these programs, but the additional exports that these programs have provided worldwide have been relatively small.",
      " An adverse effect of these programs has been that at times they have also caused a small decrease in exports of other competing, unassisted, U.S. commodities. It must be noted that it is difficult to assess these programs\u2019 impact on the U.S. agricultural sector. This is because (1) past evaluations of these programs have narrowly focused on an individual U.S. export program, commodity, or foreign market and not on the overall impact of these programs on the agricultural sector as a whole; and (2) these programs\u2019 impact on U.S. agricultural exports worldwide cannot be easily isolated from other policies and economic conditions that help increase U.S.",
      " agricultural exports. The latter includes lower U.S. interest rates, other U.S. government assistance, depreciation of the U.S. dollar against competitors\u2019 currencies, agricultural commodity production shortfalls in major markets overseas, the liberalization in agricultural markets brought about by the Uruguay Round, and the growing trend in agricultural market reforms around the world. Export Assistance Programs Have Increased U.S. Agricultural Exports to Targeted Markets but Have Had Limited Impact Globally USDA officials and others state that U.S. agricultural export assistance programs have resulted in exports above and beyond what would have occurred without the programs. However, demonstrating that additional exports result from these programs is difficult to prove because of the myriad factors that affect import decisions.",
      " We found evidence that U.S. export programs have resulted in some increased U.S. agricultural exports to targeted, specific markets, but the additional exports that these programs have provided worldwide have been relatively small. Another effect of these programs, according to some private officials, has been that, at times, they have also caused a small decrease in exports of competing, unassisted, U.S. commodities. EEP: Regarding EEP, prior studies have concluded that only a portion of EEP-supported wheat exports were exports above and beyond the level that would have occurred without the subsidy. The estimates of the value of U.S. wheat exports resulting from every dollar of EEP assistance (1986-",
      "88) ranged from 2 to 30 cents of additional wheat exports, depending on the assumptions made about global export market conditions and other variables. More recently, FAPRI estimates that if EEP is utilized, the value of additional U.S. wheat exports resulting from every dollar of EEP assistance (1997-2004) would range from 10 to 15 cents. ERS reports that its estimates of EEP\u2019s trade impact depend on market conditions and the program\u2019s scope (that is, how many foreign markets it is operating in) but states that the program becomes less effective under conditions when food stocks are tight and world prices are high.",
      " Such conditions existed during 1996, and the program was not used. And ERS forecasts that tight market conditions are likely to continue through 2005. Research has shown that EEP can increase wheat exports to specific targeted markets. Increased EEP wheat exports to the Soviet Union and China are often cited by USDA as examples of the program\u2019s effectiveness in bolstering U.S. exports. For instance, in January 1987, China was offered wheat for the first time under EEP. Sales increased from less than 1 million metric tons in 1985 to about 7.2 million metric tons in 1988. As of May 1990,",
      " China had bought over 15 million metric tons of wheat, making it the second largest wheat importer under the program, after the Soviet Union. However, while EEP has increased U.S. exports to individual markets, it has not historically increased U.S. world market share, particularly for bulk commodities where the United States is a leading world exporter. For example, with wheat\u2014where the United States is the largest exporter\u2014EEP has not significantly increased U.S. export market share but rather has only lowered the price available to foreign consumers. The primary reason cited by agricultural trade researchers for the relatively small additional U.S. exports that these programs\u2014particularly EEP and GSM-",
      "102\u2014provide worldwide is that U.S. export programs\u2019 increased exports to specific markets are often offset by lost U.S. sales in other nonassisted markets. Specifically, competing suppliers may respond to U.S. competition in countries that benefit from GSM-102 or EEP by concentrating their efforts in other countries and displacing potential U.S. sales in these other countries. Thus, while U.S. exports may increase in particular markets targeted by U.S. export programs, the overall effect on U.S. exports worldwide is small. If displacement occurs, the programs may merely reroute trade flows and do not necessarily increase U.S. agricultural exports.",
      " Some studies have found, and industry officials have argued, that EEP at times has done more to displace unassisted U.S. agricultural exports than it has to promote U.S. agricultural exports in general. Specifically, industry officials state that the concentration of EEP on wheat exports has at times had the effect of reducing the market opportunities of other commodities such as corn and soybeans that are broad substitutes for wheat in use and production. But since the impact of EEP globally is not dramatic, the displacement effect is also limited. Another concern expressed by some industry officials about EEP is that in countries where soil and growing conditions allow flexible production of commodities,",
      " reduced prices due to EEP wheat exports can induce increased production of alternate crops to wheat (such as corn, canola, and soybeans). This can, in turn, reduce the competitive position of U.S. producers of these alternate crops. MAP: Regarding MAP, USDA officials report that program spending has resulted in additional agricultural exports. They identified numerous studies that conclude that in most cases, MAP subsidies increase U.S. sales of a commodity in a targeted market. For example, one study found that each dollar of MAP funds to promote apples in Singapore and the United Kingdom resulted in over $20 of additional apple exports. Another study explored the long-term impact of in-shell walnut promotion in Japan and found that a dollar of MAP promotion would,",
      " over 40 years, increase U.S. walnut exports by $5.30. Worldwide walnut promotion was evaluated in another study, which found that while each dollar spent on MAP promotion increased walnut exports by $1.42 over the long-run, it actually reduced the exports of eight other horticultural exports by $3.57 (thus reducing U.S. agricultural exports worldwide by $2.15). In some instances, studies of MAP\u2019s impact on specific commodities reach different conclusions. For example, a study of exports of U.S. meat products to Japan concluded that USDA market promotion from 1973-91 only resulted in a statistically significant increase in U.S.",
      " market share for beef offals but not for beef or pork meat. A second study of Japan\u2019s meat markets, using a different methodology and time period (1973-94), concluded that USDA-funded beef advertising and promotion expenditures had a significant positive influence on Japanese demand for U.S. beef but could not demonstrate that U.S. pork or poultry advertising and promotion expenditures had any effect on the demand for U.S. pork or poultry products. These inconsistent results for beef demonstrate the problem of verifying whether U.S. export promotion programs expand exports. Similarly, another study found that while almond exports increased in Japan, Taiwan, and Hong Kong due to MAP spending,",
      " MAP subsidies for almonds had no significant effect on exports in South Korea and Singapore. The studies evaluating various MAP projects provide limited information for assessing the program. While the studies do present many cases where government-funded advertising may have increased U.S. exports to targeted markets, they fail to show that MAP expenditures were above and beyond private sector promotion that might have occurred in the absence of MAP. Most of the studies describe the exports resulting from promotion as the \u201creturns\u201d for the subsidy, but these studies fail to deduct any of the costs involved in the production or distribution of the additional commodity being exported. One study noted that this approach assumes the cost of producing and exporting an additional unit of output is zero and that thus,",
      " the calculated returns are \u201cgross\u201d returns and not \u201cnet\u201d returns to investment. Additional cost information is required to determine whether a specific MAP promotion effort results in a net return to investment for the private or public sectors. Further, the MAP studies generally exclude factors that could permit program administrators to assure a positive net impact from MAP expenditures. These factors include the levels of private expenditures for promotion, government promotion by competitor nations, changes in domestic and foreign supply conditions, and trade liberalization brought about by reductions in tariffs and other trade barriers. Evaluations of MAP projects that ignore increased trade liberalization may overestimate MAP\u2019s contribution to increased U.S.",
      " exports. Moreover, little of the research considers whether an increase in producers\u2019 profits due to MAP-supported exports is sustainable, since producers may increase supply and thus reduce long-term profits. Nor does the research make an assessment of MAP\u2019s benefits and costs to U.S. taxpayers, including the impact of increased exports on U.S. domestic prices. Lastly, the available studies do not assess whether MAP expenditures are justified due to a market failure or what the appropriate government responsibility is regarding export promotion. Title I: Concerning title I food aid, the assistance it provides can in theory contribute to market development if the program creates preferences for U.S. products that remain after the concessional sales have been discontinued and,",
      " thus, can result in a greater U.S. share of a given country\u2019s commercial market (that is, increased U.S. exports). However, it is difficult to develop product loyalty and secure commercial market share when title I commodities, which are typically bulk and semiprocessed agricultural goods, can easily be replaced by or substituted with products from other nations. In the short term, title I allows the United States to move commodities and possibly keep a market presence that it otherwise might not have been able to maintain. However, historically, the concessional sales made possible by title I do not necessarily translate in the long term into increased commercial market share or additional exports.",
      " Limited Evidence Exists That U.S. Export Programs Impact Agricultural Sector Overall Income or Employment We found few studies that support the position that U.S. agricultural export assistance programs increase income or employment for the farm sector as a whole. The ability of export programs to affect U.S. agricultural sector income and employment is constrained by the limited and selective nature of these programs. That is, export programs only affect a small portion of U.S. agricultural exports. For example, the U.S. government spent approximately $792 million on these programs in fiscal year 1996,while U.S. agricultural exports for the same period were $60 billion. In addition,",
      " 80 percent of U.S. agricultural exports, between fiscal year 1989 and 1993, received no government assistance. These export programs focus primarily on bulk commodities, rather than HVPs, which represent the largest segment of forecasted increases in world agricultural trade. Thus, some components of the sector, such as bulk commodity producers, may receive some income and employment benefits. USDA believes that if these programs were reduced or eliminated, some bulk commodity producers\u2014particularly wheat farmers\u2014would most likely experience some diminished income and employment as a result. For example, an ERS study estimated that if EEP expenditures of $938 million were eliminated in 1993,",
      " the U.S. grain sector would lose $538 million in income and 3,100 jobs. The analysis found that eliminating EEP would also have increased overall domestic welfare (including benefits to both producers and consumers) by $325 million and did so under all market conditions analyzed. Moreover, the study stated that export subsidies amount to an income transfer from U.S. households to producers and lead to a decline in domestic welfare. One reason U.S. agricultural export assistance programs\u2019 impact on farmers\u2019 income is limited is because some farmers derive a majority of their income from employment off the farm. And this off-farm employment is increasingly determined by national economic growth rates and nonfarm employment opportunities.",
      " According to USDA data, over  85 percent of farm household income comes from off-farm employment and income. While there are currently about 2.1 million farms in the United States, USDA classifies only about 550,000 as commercial farms.And it is these farms that are most affected by U.S. agricultural export assistance programs. Some studies have concluded that using U.S. agricultural export programs to transfer income to the agricultural sector is not the most cost-effective method for doing so. In 1994, we reported that the income of wheat farmers would have increased about 21 percent more if additional federal dollars had been spent on higher commodity target prices rather than on EEP.",
      " Uncertainty Exists Whether U.S. Export Programs Counter Competitor Nations\u2019 Programs Some U.S. government officials and private sector representatives state that U.S. agricultural export assistance programs are valuable because they counter competitor nations\u2019 export programs and thus \u201clevel the playing field\u201d between our exporters and competitor exporters who benefit from their own nation\u2019s programs. USDA officials argue that U.S. programs (1) protect the income of the agricultural sector from the impact of foreign export subsidies, (2) level the playing field by helping U.S. companies compete against specific foreign competitors\u2019 subsidized sales and other export assistance, and (3) increase the cost of foreign competitors\u2019 agricultural subsidies to their governments.",
      " We found that because of the lack of transparency in other competitor nations\u2019 export assistance efforts, it is difficult to verify how effectively U.S. export programs counter these foreign practices. We also observed that some U.S. export programs are no longer used only to counter specific competitor actions but rather have been broadened to assist U.S. agricultural exports in general. In addition, several economic studies indicate that our competitors find U.S. export subsidies relatively inexpensive to offset. USDA states that EEP has provided some income protection to the U.S. agricultural sector from foreign export subsidies. Specifically, because foreign nations subsidize their sales, subsidies such as EEP provide an income transfer to U.S.",
      " farmers that protects them from absorbing the lower world sales price. Under previous farm legislation, deficiency payments to farmers insulated farmers\u2019 income from decreases in U.S. domestic market prices. So EEP had a limited impact on the income of farmers participating in U.S. domestic commodity support programs. For farmers not participating in these commodity support programs, however, a slightly higher domestic price due to modest increases in export demand for some EEP-supported U.S. commodities may have countered the income reduction due to foreign export subsidies. We could not identify convincing evidence on the degree to which U.S. export programs have effectively matched U.S. competitors\u2019 agricultural export programs and,",
      " thus, have leveled the playing field. By program design, GSM and title I are not specifically used to counter competitor nations\u2019 efforts to assist exports. With respect to EEP and MAP, the evidence is inconclusive. This is due in part to changes in U.S. laws governing these programs and to limited data on foreign governments\u2019 and private entities\u2019 export assistance activities. For example, EEP previously was intended to discourage unfair trade practices such as competitor nations\u2019 use of agricultural export subsidies. However, U.S. implementing legislation for the Uruguay Round agreements states that the program\u2019s use is not limited solely to countering unfair trade practices. MAP was previously required to counter unfair trade practices,",
      " such as the use of subsidies,but U.S. implementing legislation for the Uruguay Round agreements removed this requirement. According to USDA officials, though changed in law, operationally EEP is still used largely to counter unfair trade practices. USDA reports that U.S. competitors are willing to incur large expenses to support their agricultural exports and, thus, reasons that to remain competitive and to protect the incomes of U.S. producers, the United States must do likewise. According to USDA, the EU in fiscal year 1996 spent about $9 billion on export subsidies. Agricultural exporting nations, such as Australia, Canada, and New Zealand, provide less government support for export assistance.",
      " However, they sell some of their agricultural exports, including wheat and dairy products, through state trading enterprises (STE). Some USDA and private sector officials believe that STEs give these countries advantages over U.S. exporters because of their ability to charge nontransparent and different prices in different markets.Thus, they state that U.S. programs are needed to offset foreign government subsidies, these marketing organizations, and other competitor nations\u2019 actions. With the lack of transparency in STEs and other export assistance efforts by competitor nations, it is difficult to verify that USDA activities directly target foreign practices. Specifically, without better data on how competitor nations\u2019 agricultural export assistance programs are funded,",
      " to what markets and commodities they are targeted, and how effective they are in increasing agricultural exports, it is uncertain how well U.S. export programs match and counter these efforts. Some studies have stated that competitors find U.S. export subsidies relatively inexpensive to offset. For example, one researcher concluded that it is unlikely that EEP can cause the level of EU export subsidies to rise by more than 4 percent. The researcher also estimated that for every additional dollar the U.S. government spent exporting wheat under EEP, the EU had to spend only about 23 cents more on its own wheat and coarse grain export subsidies to offset EEP\u2019s impact.",
      " Further, the Australian Bureau of Agricultural and Resources Economics similarly calculated that the cost to the EU of offsetting EEP was equal to only about 1.5 percent of the total EU agriculture budget for 1987 or 1988. Another study noted that the increased cost of EU export subsidies from U.S. export subsidies appeared to be small. Industry officials were divided in their assessment of how significantly U.S. export assistance programs have increased the cost of EU agricultural export assistance programs. U.S. export assistance programs may in the short term increase market share and, thus, may help U.S. companies compete when these programs encourage importers to choose U.S.",
      " goods over those of competitors. For example, the availability of credit under the GSM-102 program or the market development effects of MAP and title I may influence importers to choose U.S. commodities. However, these programs are unlikely to have a sustained long-term impact, because competitors\u2019 own agricultural export assistance programs may counteract them (that is, offer better price or credit), and because there is no assurance that markets developed with U.S. export programs can be sustained without the continued use of these programs. Finally, some studies of U.S. agricultural export assistance programs have noted that countering foreign competitors\u2019 market-distorting practices with subsidies leads to lower prices and reduced market returns for producers in all countries.",
      " Several industry officials concurred with this observation. Also, export assistance programs such as EEP and credit guarantees may transfer many of the programs\u2019 benefits to foreign consumers instead of to U.S. producers by lowering the cost of importing U.S. agricultural commodities. For example, a study on EEP has estimated that roughly 40 percent of the subsidy value has gone directly to foreign consumers or governments. Divergent Views Exist on Whether U.S. Export Programs Promote U.S. Trade Negotiating Objectives U.S. government officials and some private sector representatives argue that U.S. agricultural export assistance programs may provide negotiating leverage for the 1999 WTO agricultural trade talks.",
      " U.S. objectives for these negotiations will be to further liberalize global agricultural trade (that is, to further reduce tariffs and NTBs). The United States seeks further liberalization because global agricultural trade remains one of the most protected areas of world trade in terms of high tariffs and other trade barriers, such as tariff-rate quotas (TRQ). Many of these trade barriers remain permissible under the WTO. These officials state that the United States should not unilaterally eliminate these programs before 1999 because doing so would force the United States to come to the negotiating table with a much-reduced set of items for negotiation. Some public and private sector officials,",
      " however, challenge the idea that these programs provide leverage. They question the leverage that these programs provided during the Uruguay Round agricultural negotiations and believe that other factors, such as internal pressure on the EU to further reform its agricultural policies, rather than U.S. agricultural export assistance programs, will have a greater impact on the success of the 1999 talks. Program supporters state that the use or threatened use of these export programs was helpful in achieving the Uruguay Round\u2019s goal of agricultural liberalization. A former U.S. agricultural trade negotiator states that EEP helped pressure subsidizing competitors, particularly the EU, to come to the negotiating table and agree to reduce the use of subsidies.",
      " Program supporters reason that these programs could provide negotiating leverage for the 1999 WTO agricultural negotiations and thus give the United States leverage in negotiating reductions in tariffs, agricultural subsidies, and the types of trade barriers that have grown in importance since the Uruguay Round, such as STEs, SPS barriers, and TRQs. USDA states that these assistance programs have also been valuable in negotiations to open up specific foreign markets. For example, USDA reports that in Japan, MAP efforts helped persuade consumers to question quotas on imported U.S. beef. This contributed to the 1984 market-opening talks for foreign meat products that were being negotiated between Japan and the United States.",
      " USDA officials state that in order for U.S. agricultural export assistance programs to provide leverage, they must be consistently funded. For example, some U.S. food exporters cited EEP\u2019s peaks and valleys of funding over the last 5 years, and the fact that it was basically not used in fiscal year 1996, as weakening its potential leverage in future trade negotiations. USDA officials and these exporters believe that even though trade negotiations are very complex, with many dynamic interacting factors and that it is hard to quantify each program\u2019s potential negotiating contribution, the United States should not unilaterally eliminate any of these programs before the 1999 talks.",
      " They state that if we eliminate these programs, we then come to the negotiating table with a much-reduced set of items for negotiation. USDA reports its goal for the 1999 WTO negotiations is to further liberalize global agricultural trade. One difficulty in assessing arguments for retaining U.S. agricultural export assistance programs based on the past negotiating leverage they have provided is that while these arguments are difficult to refute, they cannot be demonstrated empirically, much less evaluated by comparing costs to benefits. Instead, these arguments rely heavily on anecdotal examples and personal experience. Some public and private sector officials challenge the assertion that these programs provide leverage and their achievements in multilateral and bilateral negotiations.",
      " Specifically, they question the notion that EEP subsidies were instrumental in bringing the EU to the table in the Uruguay Round negotiations. For example, some of these officials report that EEP caused problems for the United States in gaining consensus with nonsubsidizing agricultural exporting nations during the Uruguay Round negotiations. They state that this may have limited the U.S. ability to negotiate further EU concessions in agriculture.Further, some public and private sector officials believe that other U.S. efforts, such as the use or threatened use of 301 trade sanctions, rather than EEP, were key in bringing competitor nations to the negotiations. Similarly, they question the effectiveness of a MAP-financed advertising campaign in creating domestic political pressure to open Japan\u2019s markets to foreign beef products.",
      " Rather, they cite U.S. diplomatic negotiating efforts; the threatened use of 301 trade sanctions; the fact that the United States had requested a GATT investigation regarding Japanese beef quotas;and the efforts of other meat exporting nations, such as Australia, as being keys to opening this market. Looking forward to the 1999 WTO negotiations, some private sector officials note that many of the trade barriers currently of interest, such as SPS measures, high tariffs, and TRQs, are problems in importing nations. Consequently, they question whether U.S. export assistance programs, which were not intended to address these types of barriers, will be useful in the WTO talks in gaining access to markets restricted by these barriers.",
      " For example, to the extent that some of these programs\u2019 subsidies are transferred to consumers in importing nations, these nations may not want to support the United States in giving up the programs through trade negotiations. Further, some public and private sector officials believe that the EU\u2014which in fiscal year 1996 spent over $9.1 billion on agricultural export subsidies alone\u2014will probably be the biggest factor in deciding whether or not the 1999 talks are a success. They believe that EU budgetary pressures, not U.S. agricultural export assistance programs, will provide the greatest incentive for the EU to continue to reform its agricultural domestic and export policies and thus help further liberalize global agricultural trade.",
      " Specifically, the cost of extending these EU domestic and export policies to the upcoming new EU members such as Poland, Hungary, and the Czech Republic (all of whom have sizable and protected agricultural sectors) is considerable. In fiscal year 1996, the EU spent about $52.3 billion, or 47 percent of its budget, on domestic agricultural and export assistance programs. These officials question whether the EU will be able to extend this same level of support to the new members. Conclusion The evidence suggests that while FAIR\u2019s domestic policy reforms will modestly help boost U.S. agricultural exports, other factors such as the ongoing liberalization of global agricultural trade and increased world demand,",
      " are expected to increase U.S. exports independent of FAIR. In fact, forecasts project growth in U.S. agricultural exports well beyond the record $60 billion in 1996. While FAIR\u2019s domestic policy reforms removed a primary benefit associated with most U.S. export assistance programs\u2014the exporting of surplus stocks generated by domestic price supports\u2014program proponents state that U.S. agricultural export assistance programs continue to have relevance because they benefit the overall U.S. economy, benefit the agriculture sector and/or specific commodities, counter competitor nations\u2019 agricultural export assistance programs, provide leverage to support U.S. trade negotiating objectives. The evidence we found is mixed regarding the contributions of U.S.",
      " agriculture export programs in these four areas. We found no conclusive support that the programs benefit the U.S. economy as a whole, through either expanded aggregate employment or output, or reduced trade or budget deficits. Regarding benefits to the U.S. agriculture sector, there is substantial research that concludes that these programs only modestly increase exports above and beyond what is likely to occur in their absence. More substantial benefits to the U.S. agricultural sector may come from these programs\u2019 contributions to countering foreign competitor export assistance and providing leverage for trade negotiations. While we recognize substantial barriers continue to confront U.S. agricultural exporters around the globe, the effectiveness of existing programs to \u201clevel the playing field\u201d by targeting trade barriers and competitor programs or by providing negotiating leverage remains uncertain.",
      " Without better data on the size, nature, and effectiveness of competitors\u2019 export assistance programs and unfair trade barriers, it remains unclear how much the U.S. agricultural export programs contribute to countering these competitors\u2019 efforts or provide negotiating leverage. Matter for Congressional Consideration Given the mixed evidence concerning the continued relevance of U.S. agricultural export assistance programs, their decreased funding levels, and the trend toward increased liberalization of global agricultural trade from which the U.S. agricultural sector is likely to benefit with or without further government support, the Congress may wish to reassess the continued viability and/or focus of the programs the next time these programs are reviewed. To support such an assessment,",
      " the Congress may wish to direct USDA to develop more systematic information on the potential strategic value of U.S. export assistance programs\u2014for example, in countering competitor nations\u2019 agricultural export programs or in providing negotiating leverage. Specifically, the Congress may direct USDA to develop more systematic information on (1) competitors\u2019 programs and negotiating objectives and (2) how effective each U.S. agricultural export assistance program is in furthering U.S. interests. Once this information is in hand, the Congress may wish to refocus the thrust of the programs. Scope and Methodology To assess how FAIR may affect U.S. competitiveness in world agricultural markets, we analyzed and synthesized the results of three tasks.",
      " First, to gain an understanding of the act\u2019s impact, we conducted interviews with a wide range of U.S. and competitor nation agricultural experts. Second, to corroborate these opinions and to obtain data on FAIR\u2019s impact, we analyzed available studies and reports authored by some of these experts. Third, to obtain insights into the assumptions and variables that affect global agricultural trade, we reviewed and discussed the economic modeling results of USDA\u2019s ERS and FAPRI in Ames, Iowa. To examine the continued relevance of U.S. agricultural export assistance programs, we performed three tasks. First, to understand the history, mission, and effectiveness of these programs,",
      " we drew upon our prior work in this area. Second, to develop a method for organizing the evidence regarding these programs\u2019 relevance, we took the benefits proponents state these programs provide and, in consultation with agricultural experts, constructed a framework that consists of four basic categories of potential program impact (for example, do these programs benefit the U.S. economy?). Third, to obtain evidence on the continued relevance of these programs, we interviewed government officials, agricultural trade experts, and officials of the organizations previously mentioned and gathered applicable research, empirical evidence, and other information on the impact of these programs. Finally, we synthesized all the information to present the best evidence available on the continued relevance of U.S.",
      " export programs in furthering the four categories of impact. While we have worked to provide the best evidence available, we acknowledge that determining program relevance is difficult because many of the domestic and international conditions under which past observations of and research on these programs have been based have changed; thus, any assessment of the future relevance of these programs needs to be tempered with this understanding. Lastly, we had a draft of this report peer reviewed for accuracy and objectivity by several public and private sector economists and agricultural experts. We performed our review from June 1996 to May 1997 in accordance with generally accepted government auditing standards. Agency Comments and Our Evaluation We provided a draft of this report to USDA for review and comment.",
      " We met with officials of the Department, including FAS\u2019 Associate Administrator and ERS\u2019 Deputy Director, and other senior management officials representing FAS\u2019 various export assistance programs. These officials agreed in principle to the report\u2019s conclusions and matter for congressional consideration. They also stated that the report provided insights into the complexity of isolating the impact of U.S. agricultural export assistance programs on U.S. agricultural exports, separate from the wide range of other variables that affect these exports. They acknowledged that market forces, not these federal programs, were the greatest factor in increasing U.S. agricultural exports. However, FAS officials felt that the report was too negative about the programs and that the assumptions used preordained the outcome of our analysis.",
      " In particular, FAS officials stated that our focus on the macroeconomic impact of U.S. agricultural export assistance programs\u2014including the assumption of full employment\u2014imposed an unreasonably high standard that these programs should have a positive impact on the overall U.S. economy. They questioned whether this standard could be met by any federally funded program. Several senior FAS program managers added that U.S. agricultural export assistance programs were in fact designed to redistribute economic resources from other sectors of the U.S. economy to agriculture. FAS officials also felt that our presentation of studies regarding MAP\u2019s impact was selective and unbalanced. In response to USDA\u2019s comments,",
      " we have expanded our discussion of MAP\u2019s impact to include five additional studies of the program. Though this expanded the number of countries and commodities targeted by MAP that we discuss, it did not alter our conclusions. In addition, while demonstrating a macroeconomic benefit is a high standard for any federal program, the requester was specifically interested in whether U.S. agriculture export assistance programs benefit the national economy, a claim that USDA has made in the past. Moreover, beyond the review of these programs\u2019 potential macroeconomic effects, we also reviewed their impact on the agricultural sector and specific commodities, on countering competitor export assistance programs, and on providing negotiating leverage.",
      " Regarding our use of the full employment assumption, our analysis of USDA programs\u2019 macroeconomic impact did consider the programs\u2019 effectiveness under conditions of less than full employment, as well as full employment. However, under either condition there was no evidence that these programs provide macroeconomic benefits. In addition, it should be noted that (1) our analysis of macroeconomic impact under conditions of full employment is consistent with OMB guidance and (2) comments on our draft report from several public and private sector economists and agricultural experts indicated no disagreement with our methodology or analysis. Moreover, the consensus of these reviewers was that the report was accurate and balanced. USDA officials suggested a number of technical revisions to our draft.",
      " We have incorporated them into the report where appropriate. As arranged with your office, we will send copies of this report to the Senate and House Agriculture Committees, other interested congressional committees, the Secretary of Agriculture, and other interested parties. We will also make copies available to others on request. Major contributors to this report are listed in appendix II. Please call me on (202) 512-8984, if you or your staff have any questions about this report. Funding for U.S. Agricultural Export Assistance Programs This appendix presents detailed information about the U.S. Department of Agriculture\u2019s (USDA) four export assistance programs. These include export subsidy programs,",
      " export credit guarantee programs, market development and promotion programs, and food aid programs. Export Subsidy Programs These programs are intended to help U.S. commodities become more price competitive on the world market. In the past, these programs have included the Export Enhancement Program (EEP), the Dairy Export Incentive Program (DEIP), the Sunflowerseed Oil Assistance Program (SOAP), and the Cottonseed Oil Assistance Program (COAP). EEP has been the largest of these programs in terms of government funding and, according to USDA, has been used to pressure foreign nations to reduce trade barriers and eliminate trade-distorting practices. During 1996,",
      " EEP was not fully utilized due to market conditions\u2014tight supply and high international demand\u2014that did not warrant its use. The Federal Agriculture Improvement and Reform (FAIR) Act of 1996 did not reauthorize the SOAP and COAP programs. See figure I.1 for expenditures on all export subsidy programs in fiscal years 1985-98. Figure I.1: Export Subsidy Programs\u2019 Expenditures, Fiscal Year 1985-98 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Estimated fiscal year 1997-",
      "98 program levels. Export Credit Guarantee Programs The export credit guarantee programs are intended to develop, expand, or maintain U.S. agricultural markets overseas by facilitating access to export credit for countries that do not have adequate commercial credit available. These programs encourage U.S. lenders to extend credit to foreign importers to purchase U.S. agricultural commodities. USDA has two types of export credit guarantee programs, also known as the General Sales Manager (GSM) programs. The GSM-102 program offers short-term commercial credit guarantees for periods of up to 3 years. The second program, known as GSM-103, offers intermediate-term loan guarantees and repayment periods of 3 to 10 years.",
      " The GSM export credit guarantee programs are funded under the auspices of USDA\u2019s Commodity Credit Corporation. In fiscal year 1996, these programs provided credit guarantees on agricultural exports valued at $3.2 billion. The FAIR Act established that not less than $5.5 billion was to be made available annually for credit guarantees through 2002. The act allows greater flexibility in terms of how much is made available for each program. The act also allows credit guarantees on high-value products (HVP) with at least 90 percent U.S. content by weight. See figure I.2 for assisted sales amounts for fiscal year 1985-",
      "98 export credit guarantees. Figure I.2: Export Credit Guarantee Program Assisted Sales, Fiscal Year 1985-98 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Estimated fiscal year 1997-98 program levels. Market Development and Promotion Programs These programs are intended to develop, maintain, and expand foreign markets for U.S. agricultural products through subsidies for advertising and market promotion. In the 1950s, the federal government created several market development and export promotion programs.",
      " Today, FAS is responsible for (1) the Foreign Market Development Program (FMDP) and (2) the Market Access Program (MAP). These programs provide funds to commercial firms and not-for-profit organizations to promote U.S. agricultural commodities in foreign markets. FMDP (also known as the Cooperator Program) is intended to help develop export markets and promote U.S. agricultural commodities\u2014typically for bulk, or generic, products. MAP, on the other hand, is used primarily to assist in developing markets for high-value or processed products. In 1996, FMDP contributions by the U.S. government were capped at $34 million.",
      " The FAIR Act capped funding authority for MAP at $90 million for each fiscal year from 1996 to 2002. See figure I.3 for expenditures on market development and promotion programs in Fiscal Year 1985-98. Figure I.3: Market Development and Promotion Program Expenditures, Fiscal Year 1985-98 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Estimated fiscal year 1997-98 program levels. Public Law 480 Title I-Food Aid The Public Law 480 food aid program is intended to enhance the food security of developing countries through the use of agricultural commodities and local currencies to (1)",
      " combat world hunger and malnutrition and their causes; (2) promote sustainable economic development, including agricultural development; (3) expand international trade; (4) develop and expand export markets for U.S. agricultural commodities; and (5) encourage the growth of private enterprise and democratic participation in developing countries. In fiscal year 1996, USDA reported that this program resulted in the export of approximately $370 million, or 1.2 million metric tons, of U.S. commodities. The FAIR Act extends the authority of the United States to enter into new Public Law 480 agreements through 2002. Further, it authorizes,",
      " for the first time, Public Law 480 title I agreements with private entities. The act also modifies repayment terms for title I credit, including elimination of the 10-year minimum repayment period and reduction of the maximum grace period from 7 to 5 years. See figure I.4 for Public Law 480 expenditures for fiscal year 1985-98. Figure I.4: Public Law 480 Title I-Food Aid Expenditures, Fiscal Year 1985-98 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Estimated fiscal year 1997-",
      "98 program levels. Major Contributors to This Report National Security and International Affairs Division, Washington, D.C. Office of the General Counsel, Washington, D.C. Office of the Chief Economist, Washington, D.C. San Francisco Field Office Related GAO Products Addressing the Deficit: Budgetary Implications of Selected GAO Work for Fiscal Year 1998 (GAO/OCG-97-2, Mar. 14, 1997). Export-Import Bank: Reauthorization Issues (GAO/T-NSIAD-97-147, Apr. 29, 1997). Canada, Australia, and New Zealand:",
      " Potential Ability of Agricultural State Trading Enterprises to Distort Trade (GAO/NSIAD-96-94, June 24, 1996). Farm Bill Export Options (GAO/GGD-96-39R, Dec. 15, 1995). U.S. Department of Agriculture: Foreign Agricultural Service Could Benefit From Better Strategic Planning (GAO/GGD-95-225, Sept. 28, 1995). State Trading Enterprises: Compliance with the General Agreement on Tariffs and Trade (GAO/GGD-95-208, Aug. 30, 1995). Food Aid: Competing Goals and Requirements Hinder Title I Program Results (GAO/GGD-",
      "95-68, June 26, 1995). Agricultural Trade: Competitor Countries\u2019 Foreign Market Development Programs (GAO/T-GGD-95-184, June 14, 1995). Export Promotion: Rationales for and Against Government Programs and Expenditures (GAO/T-GGD-95-169, May 23, 1995). Former Soviet Union: Creditworthiness of Successor States and U.S. Export Credit Guarantees (GAO/GGD-95-60, Feb. 24, 1995). Agricultural Trade: Five Countries\u2019 Foreign Market Development for High-Value Products (GAO/GGD-",
      "95-12, Dec. 14, 1994). Cargo Preference Requirements: Objectives Not Significantly Advanced When Used in U.S. Food Aid Programs (GAO/GGD-94-215, Sept. 29, 1994). International Trade: Impact of the Uruguay Round Agreement on the Export Enhancement Program (GAO/GGD-94-180BR, Aug. 5, 1994). Public Law 480 Title I: Economic and Market Development Objectives Not Met (GAO/T-GGD-94-191, Aug. 3, 1994). General Agreement on Tariffs and Trade: Uruguay Round Final Act Should Produce Overall U.S.",
      " Economic Gains (GAO/GGD-94-83A&B, July 29, 1994). High-Value Product Exports: Good Potential Exists for More Trade With Taiwan, Malaysia, and Indonesia (GAO/GGD-94-52, Nov. 19, 1993). U.S. Department of Agriculture: Issues Related to the Export Credit Guarantee Programs (GAO/T-GGD-93-28, May 6, 1993). Loan Guarantees: Export Credit Guarantee Programs\u2019 Costs Are High (GAO/GGD-93-45, Dec. 22, 1992). The first copy of each GAO report and testimony is free.",
      " Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC  20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202)",
      " 512-6000  or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
    "length": 14079,
    "hardness": null,
    "role": null
  },
  {
    "id": 71,
    "question": null,
    "answer": "Federal welfare legislation passed in 1996 placed a greater emphasis on helping low-income families end dependence on government benefits by promoting job preparation and work. To reach this goal, the legislation gave states greater flexibility to design programs that use federal funds to subsidize child care for low-income families. Under the Child Care and Development Fund, this flexibility includes the freedom to largely determine which low-income families are eligible to receive child care subsidies. These maximum rates consist of two parts--a state subsidy and family co-payment. States also establish maximum reimbursement rates for child care. States reported considering market rate survey and budget and policy goals in setting maximum reimbursement rates. All states reported conducting market rate surveys in the past 2 years that obtained data on providers' fees, but 10 states reported that they did not base the reimbursement rates for child care providers on their most recent market rate surveys. In the nine communities visited, GAO calculated that hypothetical families' access to child care centers and family home providers varied widely as a result of the different subsidies and family co-payments established by each state.\n",
    "docs": [
      "Background Welfare reform legislation, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), eliminated the federal entitlement to cash assistance under the Aid to Families with Dependent Children (AFDC) program and replaced it with a program of block grants to states known as the Temporary Assistance for Needy Families (TANF) program. At the same time, Congress amended the Child Care and Development Block Grant Act of 1990, and required HHS to consolidate federal child care funds and administer them as a unified program. HHS named this program the Child Care and Development Fund. The intent of CCDF is to support state-administered child care programs for both families receiving public assistance and low-income working families not receiving public assistance.",
      " Since welfare reform, federal expenditures for CCDF have increased significantly from $2.1 billion in fiscal year 1996 to $5.3 billion in fiscal year 2000. In fiscal year 2002, about $4.8 billion was appropriated for CCDF. States also contributed to CCDF, and their funding for this program has nearly doubled from about $1.0 billion in fiscal year 1996 to $1.9 billion in fiscal year 2000. The average number of children who received subsidized child care each month also increased from about 1.2 million in fiscal year 1996 to 1.",
      "7 million in fiscal year 2000. States receive CCDF funds from potentially four funding streams. Each state\u2019s annual federal allocation consists of separate discretionary, mandatory, and matching funds. A state does not have to obligate or spend any state funds to receive the discretionary and mandatory funds.However, to receive federal matching funds\u2014and thus its full CCDF allocation\u2014a state must maintain its program spending at a specified level, referred to as a state\u2019s maintenance of effort, and spend additional state funds above that level. In addition to consolidating federal funds, PRWORA significantly changed federal child care policy by giving states maximum flexibility to design child care programs for low-income families.",
      " States have broad discretion to establish subsidy amounts, family co-payments, and eligibility limits. States set maximum reimbursement rates that consist of two parts\u2014the state subsidy paid directly to a provider and the co-payment the family pays to a provider. These co-payments vary according to family income and size, and the amount of the state subsidy declines as the family co- payment rises. Co-payments can be waived for any eligible family whose income is at or below the federal poverty threshold, including those in the TANF program, and for children in protective services on a case-by-case basis. As of March 2001, 23 states waived co-payments for TANF families engaged in TANF or other work activities.",
      " According to federal law, states can set income eligibility limits up to 85 percent of the state median income (in 2000, this limit ranged from a low of $24,694 for West Virginia households to a high of $43,941 in Maryland), but most states set eligibility limits below that level. In the three states we visited, Oregon reported setting its income eligibility limit at 70 percent of the state median income, Maryland at 50 percent, and Illinois at 43 percent. States are not required to provide assistance to all families that fall within state-established eligibility guidelines, but they are required to give priority to children in very low-income families and to children with special needs.",
      " The program serves children up to age 13, but HHS allows states to provide child care services to children with special needs up to age 19. CCDF subsidies can be used to obtain child care from various types of providers such as child care centers and family homes. Child care centers, group homes, and family homes are most often regulated but some are legally exempt depending on the state. Table 1 provides descriptions of the types of child care providers generally used by subsidized families. States must provide subsidies through vouchers, but some states also made child care available from providers who have contracts with them.Two of the three states we visited made this option available to subsidized families.",
      " Illinois had contracts with some child care centers to serve children of subsidized families. As of June 2000, Illinois reported that contracted facilities served about 12 percent of the total number of children in the state\u2019s subsidized child care program. Oregon contracted with child care providers primarily to serve children from targeted, at-risk families. Periodically, states adjust their reimbursement rates, co-payment levels, and income eligibility limits. These policy decisions can affect families\u2019 access to child care providers. For example, if states set reimbursement rates too low, some providers might choose not to serve children of subsidized families. On the other hand, if states set reimbursement rates too high,",
      " some providers might replace children of nonsubsidized families with those of subsidized families. Co-payment levels are also important. For example, in Oregon, one study indicated that, in some cases, a family\u2019s economic position worsened as a parent moved from a job paying $6 per hour to one paying $8 per hour because increases in the family\u2019s earnings were more than offset by decreases in child care and other subsidies. HHS is charged with providing oversight, technical assistance and guidance to states, which have responsibility for administering CCDF programs. HHS requires states to submit biennial state CCDF plans that include, among other things, certification that within the past 2 years they performed a market rate survey.",
      " A market rate survey is a tool to be used by states to obtain information about providers, including the fees they charge, the type of child care they provide, the age groups of the children they serve, and where they are located. Although states are required to conduct market rate surveys every 2 years and consider the results, they are not compelled to use them in setting child care reimbursement rates. States are also required to certify that they met the equal access provision, a part of the federal law that requires states to set rates that are sufficient to provide access to child care services for eligible families that are comparable to those of families that do not receive subsidies.",
      " While HHS reviews and approves CCDF state plans, states have substantial discretion in determining the basis on which they will certify to HHS that they meet the equal access provision. HHS has authority to sanction states if they do not substantially comply with the law, but HHS officials told us that these sanctions have never been used. HHS provided guidance indicating that co-payment levels at no more than 10 percent of family income could be considered affordable and reimbursement rates set at least at the 75th percentile of providers\u2019 fees can be presumed to provide equal access. In this case, the maximum rate paid by the state and the family would be equal to or greater than the fees charged by 75 percent of providers or for 75 percent of providers\u2019 slots.",
      " However, states are free to set co-payments and reimbursement rates at other levels. Most States Reported Considering Market Rate Survey Results, but Also Considered Budgets and Other Factors in Setting Child Care Reimbursement Rates States used the results of market rate surveys to help set child care reimbursement rates, but also reported considering other factors such as budgets in rate setting. Consistent with HHS guidance, 40 states reported that the survey results were an important consideration when setting reimbursement rates. However, 10 states did not use their most recent surveys in setting current reimbursement rates. States establish different rate schedules for geographical areas and different age groups of children.",
      " To establish their rates, states often set maximum reimbursement rates at a percentile of the distribution of providers\u2019 fees. However, in setting their child care reimbursement rates, many states considered their budgets and other policy goals. Thirty-two states reported that their current budgets were of great importance when setting reimbursement rates. Other factors that states considered important in setting their rates included achieving policy goals such as expanding eligibility, improving child care quality, and increasing the supply of certain types of child care providers. Most States Reported Considering Market Rate Survey Results in Setting Rates Most states reported using their current market rate survey results to help set reimbursement rates; some states reported that they referred to less current survey information.",
      " Forty states reported that the results of their most recent market rate survey were very important in determining their current child care reimbursement rates. However, while 10 states reported that they had completed current market rate surveys as required by regulations, they used less current market rate survey results to set their rates. The market rate surveys they used were not completed within 2 years of their approved fiscal year 2001 CCDF plans. Of these, 3 states (Michigan, North Dakota, and West Virginia) considered 1999 market rate survey results, 5 states (Arizona, District of Columbia, Illinois, Iowa, and North Carolina) reported considering results from 1998 market rate surveys,",
      " 1 state (New Hampshire) considered results from 1994, and 1 state (Missouri) considered market rate survey results from 1991 and 1996. States reported that their market rate survey results primarily included data on providers\u2019 fees from regulated child care center, family home, and group home providers. For example, 48 states surveyed regulated child care centers and 47 states surveyed regulated family home providers. In contrast, 24 states surveyed unregulated providers. Of these, 15 states reported that they obtained information about child care fees from relatives and/or other unregulated providers, such as religious-affiliated child care providers.",
      " (See fig. 2 for the types of providers that states indicated were included in their market rate surveys.) After an examination of those fees, state officials decided whether and how to divide the state into regions based on variations in providers\u2019 fees. State officials may use a variety of methods for dividing the state into regions. As shown in figure 3, 18 states reported setting rates for multicounty regions, and 16 states set rates based on political boundaries, such as counties or municipalities. Illinois and Maryland, two of the states we visited, established reimbursement rate schedules that combined areas into multicounty regions. These regions generally consisted of counties that were not necessarily contiguous to one another but were designed to capture providers who charged similar fees.",
      " Oregon, the third state we visited, grouped zip codes with comparable providers\u2019 fees into three reimbursement rate areas. Conversely, 14 states reported that they did not pay different reimbursement rates to providers based on their location. In some cases, officials reported they did not divide the state into regions because there was little variation in fees across the state. Most states also reported setting distinct child care reimbursement rates based on the age group of the child needing care. The states we visited, for example, had differing rates for infants and school aged children. In addition, separate rates were often used for child care providers who accepted special needs children, exceeded quality standards,",
      " or offered evening and/or weekend care. For example, 24 states reported that they had distinct child care reimbursement rates for providers whose care exceeded state quality standards. In setting their reimbursement rates, most states ranked providers\u2019 fees by type and location of care from highest to lowest, and set maximum reimbursement rates at a percentile of these fees. HHS suggested that states set their maximum child care reimbursement rate at least at the 75th percentile based on the most recent market rate survey results. In responding to our survey, 21 states indicated that they did so. An additional 7 states indicated that they set rates at least at the 75th percentile but used a more dated survey.",
      " States Reported Their Budget and Policy Goals Were Also Considered in Rate Setting While states most often reported that market rate survey results were very important in setting child care reimbursement rates, they also reported that their state budget and policy goals were important factors considered when setting rates. For example, 32 states reported that the amount of their current budget was of great importance when setting child care reimbursement rates. Budgets are important because they establish a financial framework for developing programs and policy goals. State budget processes and their contributions to CCDF affect the amount of money that states choose to spend on child care. During the budget process, trade-offs occur when state decision makers must balance policy goals and program needs against available resources.",
      " One potential result of such trade-offs could be that as resources available for child care programs become constrained, more states might be reluctant to adjust their maximum reimbursement rates in line with recent market rate surveys. However, in our survey, child care officials in 27 states indicated that they expected their child care budgets to remain the same, and child care officials in 11 states expected their child budgets to increase in the next fiscal year. Some state officials told us they used income limits and family co-payments to manage child care program expenditures and to target child care subsidies. Under CCDF, states are permitted to set income eligibility limits to include families whose incomes are up to 85 percent of the state median income (SMI), but most states set their limits below the allowable federal level.",
      " They may do so to accommodate state budgetary constraints, to target poorer families, or both. In our survey, states reported setting income eligibility limits that ranged from 42 percent of the SMI (in Missouri) to 105 percent of the SMI (in Pennsylvania). States also varied co-payments to accommodate their budgets and to target certain families. In Oregon, for example, as our hypothetical family\u2019s income increased from 75 percent to 150 percent of the federal poverty threshold, required co-payments increased from 6 percent to 18 percent of monthly income. States also considered other child care policy goals in setting their reimbursement rates.",
      " Thirty-eight states reported that they used reimbursement rates to encourage child care providers to achieve specific results such as expanding eligibility and improving child care quality. Specifically, 29 states reported that they used reimbursement rates to encourage providers to increase staff education or training, 26 states used rates to encourage providers to make general improvements in quality, 20 states used rates to encourage providers to increase access to their facilities for special needs children, and 18 states reported using reimbursement rates to encourage improvements in providers\u2019 facilities that promote children\u2019s health and safety. In some states, providers received higher reimbursement rates for achieving these results. The three states we visited used reimbursement rates in different ways in pursuit of specific policy goals within their child care programs.",
      " For example, Illinois encouraged child care centers to increase the number of child care slots available to low-income families with infants and toddlers by paying up to an additional 10 percent to center providers who served a large number of subsidized children 2 years old or younger. For fiscal year 2000, the state reported that an additional 390 slots for subsidized infants and toddlers were added as a result of this initiative. Illinois also implemented a statewide initiative that paid providers an additional subsidy amount to care for children with disabilities. Based on receiving the increased subsidies, providers were expected to purchase adaptive equipment and obtain specialized training to improve the care they gave these children.",
      " In Maryland, a tiered reimbursement rate program\u2014paying different rates to child care providers based on program accreditation, staff credentialing, continued training, staff compensation, and other achievements\u2014was established to improve the qualifications of the child care workforce, encourage parent involvement, and promote a high level of program quality. Few states reported having evaluated the effects of such uses of reimbursement rates. In Selected Communities, Different Subsidies and Co-Payments Resulted in Varied Access to Child Care for Low-Income Families In the nine communities we visited, we calculated that the maximum reimbursement rates afforded hypothetical 2-person families widely different levels of access to child care providers who accepted the subsidy.",
      " The state reimbursement rates, which consist of the states\u2019 subsidies and families\u2019 co-payments, allowed hypothetical families, for example, to purchase care from 6 percent to 71 percent of family home providers who accepted the subsidy in these nine communities. Families generally could afford child care from a greater percentage of providers in urban communities than suburban and rural communities. In all three states, the states\u2019 subsidies decreased as families\u2019 incomes increased; this sometimes resulted in steep increases in family co-payments. These required co-payments ranged from 1 percent to 18 percent of a hypothetical family\u2019s income, varying by the level of income. However,",
      " reimbursement rates may not strictly limit families\u2019 choices among child care providers. State officials reported that families were sometimes able to make financial arrangements with formal, regulated providers whose fees exceeded state reimbursement rates. In addition, families could obtain care they needed or wanted from informal providers who were generally reimbursed at lower rates than states paid formal, regulated providers. State officials were unable to provide information on how often these circumstances occurred. Affordability of Specific Types of Child Care Varied Widely as a Result of Subsidies and Co-payments in Nine Communities The affordability of child care for hypothetical families of two (consisting of a parent and 2-year-old)",
      " varied as a result of different subsidies and co-payments in nine selected communities. Moreover, the choice that rates afforded families among available providers was generally greater in urban communities than in suburban and rural communities. The only exception was among family home providers in Maryland, where families were able to afford a greater portion of this type of care in suburban and rural communities. Illinois We visited three communities in Illinois\u2014one urban, one suburban, and one rural. Table 2 shows the characteristics of Chicago, DuPage County, and DeKalb County. While Illinois set the same reimbursement rate for child care centers for these three communities, the extent to which the rates afforded choice among family home providers and child care centers varied widely,",
      " resulting sometimes in large differences between prevailing local fees and maximum reimbursement rates. For example, of those family home providers who accepted child care subsidies, 6 percent to 71 percent had fees that were within (i.e., equal to or less than) the maximum reimbursement rate. Of those child care centers that accepted subsidies, 30 percent to 100 percent had fees within the rate. Moreover, to provide our hypothetical low-income families with greater access to family home providers in DuPage County would require a significant increase in the state\u2019s maximum reimbursement rate. Specifically, to allow families access to approximately 50 percent of the family home providers, the maximum reimbursement rate would need to be raised 39 percent from $466 to $650,",
      " a monthly increase of $184. See table 3 for comparisons of providers\u2019 fees, reimbursement rates, and percent of providers accepting subsidies who charged fees within the reimbursement rate in three Illinois communities. We visited three communities in Maryland\u2014one urban, one suburban, and one rural. Table 4 shows the characteristics of Baltimore, Montgomery County, and Wicomico County. Across the three Maryland communities, the reimbursement rates afforded our hypothetical families varied access to family home providers and child care centers. As shown in table 5, of those family home providers who accepted child care subsidies, 45 percent to 64 percent had fees that were within the maximum reimbursement rate.",
      " The percent of participating child care centers that had fees within the rate varied\u2014from 37 percent to 68 percent. In contrast to Illinois, providing low-income families with greater access to subsidized child care in Maryland would generally require smaller increases in the states\u2019 maximum reimbursement rates. For example, to allow families access to approximately 50 percent of the child care centers in Wicomico County, would require raising the maximum reimbursement rate 5 percent from $358 to $375, a monthly increase of $17. See table 5 for comparisons of providers\u2019 fees, reimbursement rates, and percent of providers accepting subsidies who charged fees within the reimbursement rate in three Maryland communities.",
      " We visited three communities in Oregon\u2014one urban, one suburban, and one rural. Table 6 shows the characteristics of Portland, Washington County, and Linn County. In Oregon, hypothetical families\u2019 access to providers varied slightly and was limited. For example, of those family home providers who accepted child care subsidies, 10 percent to 24 percent had fees that were within the maximum reimbursement rate. Of those child care centers participating, 0 percent to 17 percent had fees within the rate. See table 7 for comparisons of providers\u2019 fees, reimbursement rates, and percent of providers accepting subsidies who charged fees within the reimbursement rate in three Oregon communities.",
      " Most Providers Expressed Willingness to Accept Child Care Subsidies In the nine communities we visited, most child care providers indicated to local resource and referral offices a willingness to accept subsidized children; center providers reported a willingness to accept subsidized children more often than family home providers. As shown in table 8, 85 percent to 100 percent of child care centers reported a willingness to accept subsidies compared with 47 percent to 97 percent of family home providers across the nine communities. State officials considered the percent of child care providers who were willing to participate in subsidized child care programs an important measure of access. Results from our national survey also showed that the providers\u2019 participation rates varied.",
      " In our survey, states estimated that the proportion of licensed child care providers who participated in their subsidized programs ranged from 23 percent to 90 percent, with a median of 69 percent. However, even though provider participation was generally high, local child care resource and referral staff told us that some providers limited the number of subsidized children they accepted at any one time and others may have required parents to pay the difference between the reimbursement rates and providers\u2019 fees. (This last point is discussed in greater detail later in the report.) Families Faced Larger Co-payments as Their Incomes Increased Although maximum reimbursement rates were the same for all subsidized families within a community,",
      " a family\u2019s share of this rate, or co-payment, increased as family income increased. For example, for a family of two in Linn County, Oregon, earning $1,017 a month (100 percent of the federal poverty threshold) the maximum reimbursement rate for family home care was $340\u2014comprised of an $85 required family co-payment and a state subsidy of $255. As the family\u2019s income increased to $1,526 a month (150 percent of the federal poverty threshold), its required co-payment rose to $271, and the state subsidy declined to $69. The relationships among co-payments, state subsidies,",
      " and income for a family of two in Linn County, Oregon, using family home care are illustrated in figure 4. Required co-payments resulted in families paying from 1 percent to 18 percent of their income for child care across the nine communities. Oregon, which had a statewide co-payment schedule, required our hypothetical families to make the highest co-payments of the three states we visited. Regardless of where they lived, subsidized families with monthly earnings of $1,526 paid 18 percent of their income for child care. Maryland, which varied co-payment amounts by region, required families in Montgomery County to pay higher co-payments than those in Baltimore and Wicomico County.",
      " In Illinois, which also has a statewide co-payment schedule, the co-payments in every community were less than 10 percent of family income at 150 percent of the federal poverty threshold. See table 9 for monthly income, family co-payment, and co-payments as a percent of income in the nine communities. While co-payments can be considered as a percentage of family income, they can also be considered as a percentage of the total reimbursement rate; this provides some sense of the portion of the total fee borne by the family and, to some extent, the benefit of participation in the subsidy program. When considered in this way, a family\u2019s co-payment represented from 2 percent to 80 percent of the reimbursement rate;",
      " Oregon families paid the largest share of the reimbursement rate. For example, in rural Linn County, families who earned 150 percent of the federal poverty threshold were responsible for a monthly co-payment of $271, which represented 80 percent of the reimbursement rate for a family home provider. This share was significantly larger than that paid by similar families in the rural communities of DeKalb County, Illinois, and Wicomico County, Maryland, who were responsible for paying 32 percent of the reimbursement rate for family home providers. In addition, in Oregon and Illinois, rural families paid a larger share of the reimbursement rate than families in urban and suburban communities (see table 10). Families at the lowest income levels in each community paid a relatively small share of the total reimbursement rate.",
      " According to State and Local Officials, Reimbursement Rates May Not Necessarily Limit the Child Care Available to Families Even though our analysis showed that some reimbursement rates did not afford hypothetical families much choice among specific types of child care, state and local officials noted that actual families\u2019 child care options may not be strictly limited by the reimbursement rates. In all three states we visited, families could choose providers whose fees exceeded the state-established reimbursement rates\u2014by paying the co-payment and the difference between the providers\u2019 fees and the reimbursement rates. Families were responsible for these additional payments, and states were generally not part of these financial arrangements with child care providers. State officials could not provide data on how often this occurred.",
      " In other instances, state and local officials told us they believed that some regulated providers subsidized the state child care program by accepting maximum reimbursement rates as full payment\u2014even though the rates were less than the fees charged nonsubsidized families. These officials said that some providers were willing to do so because there was more certainty in receiving state subsidies than private payments from nonsubsidized families. They also told us that some child care providers may build a loyal customer base by accepting reimbursement rates as full payment until families can afford to pay the extra amount. Again, state officials could not provide data on how often this occurred or what adjustments providers made, if any,",
      " to accommodate any such foregone revenues. Consistent with federal law, all three state child care programs also allowed subsidized families to use informal child care providers (i.e., unregulated, legally operating providers) in addition to formal, regulated providers. Subsidized families in the three states we visited varied in how frequently they chose this option. States estimated that 25 percent of subsidized families in Maryland, 57 percent in Illinois, and 60 percent in Oregon relied on informal care providers. In our survey, state officials reported that families chose informal providers for many different reasons including convenience, flexibility in hours, and lower costs. State and local officials mentioned that some informal child care providers were willing to forego co-payments because they were aware of the families\u2019 financial circumstances.",
      " They could not provide data on how often this occurred. States We Visited Generally Reimbursed Informal Providers at Lower Rates While subsidized families could choose informal child care arrangements, the states we visited generally set lower reimbursement rates for these providers. For example, table 11 shows that informal providers in Baltimore received a maximum reimbursement rate of $215 which was about half of the $429 received by family home providers. See appendix II for information about the reimbursement rates and family co-payments for informal providers in the other eight communities we visited. Nonetheless, states varied considerably in the distinction drawn between rates paid to informal providers and those paid to formal, regulated family home providers.",
      " In Oregon, the rates were quite close; in Illinois and Maryland, they were much further apart. States made these different choices with regard to reimbursement rates despite the lack of information they reported having on informal providers\u2019 fees or the relationship between the rates and the supply of such care. In the three states we visited, variations in the use of informal child care providers appeared to be influenced by state policies. Illinois and Oregon reported almost the same percentage of families selecting informal providers (57 percent and 60 percent, respectively). Yet, Illinois\u2019 maximum reimbursement rates for informal providers was only about half as high as established for regulated family homes, while Oregon\u2019s maximum reimbursement rate for informal providers was nearly the same as for regulated family homes.",
      " Moreover, like Illinois, Maryland established maximum reimbursement rates for informal providers that were about half those for regulated family home providers, but reported a much smaller portion of subsidized families (25 percent) selecting informal child care providers. However, in Illinois, informal providers may provide full-time child care in the child\u2019s home or in their own home. In Maryland, only relatives may provide full-time child care in their own homes without seeking state licensure, and non-related, informal providers can provide such services only in the child\u2019s home. These policy differences may affect informal providers\u2019 willingness to participate in the states\u2019 subsidized child care programs. Also, according to a Maryland state official,",
      " reimbursement rates for formal providers were increased, in part, as an incentive for informal providers to become licensed. Concluding Observations In the 6 years since passage of PRWORA and the creation of the CCDF, states have exercised broad flexibility in designing child care subsidy programs to support parents\u2019 workforce participation by enhancing their access to affordable child care. In doing so, states have made varied choices regarding which families will be eligible for child care subsidies, how much those families must pay for child care, and how much the state will supplement these payments to offer choice among additional providers. States\u2019 decisions on these issues involve trade-offs and may have unintended as well as intended effects.",
      " For example, in the three states we visited, income eligibility standards varied from just over 40 percent to 70 percent of the state median income. However, the state with the highest eligibility standard, perhaps as a consequence, generally offered the lowest reimbursement rates. Similarly, based on our analysis of nine communities in 3 states, we observed that states were setting reimbursement rates in ways that had widely different implications for the number and type of child care providers from which a hypothetical family could choose, even across different communities within the state. In Illinois, the same maximum reimbursement rates were established for child care providers in Chicago and neighboring DuPage County, perhaps due to concerns for compensating providers equitably across political boundaries.",
      " However, the markedly different prices charged by providers in different localities made for very large differences in the selection that these rates afforded eligible families. Finally, the issue of selection or usage is more complex than reimbursement rates alone; states\u2019 policies such as licensing provisions are also important because they affect parents\u2019 choices and the supply of child care providers. Agency Comments The Department of Health and Human Services provided written comments on a draft of this report. These comments are reprinted in appendix III. HHS took no issue with our principle findings and indicated that the report raises important questions about information that would be helpful on the potential effects of reimbursement rates on families and other aspects of the child care market.",
      " In this connection, HHS cited studies it funds\u2014through the CCDF set aside for research, demonstration, and evaluation\u2014and its efforts to encourage states to study the relationship between state policies (including those related to child care subsidies) and the interrelationship between state policy and child care markets. HHS also provided technical comments, which we incorporated as appropriate. As requested, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after the date of this letter. At that time we will send copies of this report to the Secretary of Health and Human Services, appropriate congressional committees, and other interested parties.",
      " In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me on (202) 512-7215. Other staff who contributed to this report are listed in appendix IV. Appendix I: Scope and Methodology GAO Survey of State Child Care Officials To describe how states set reimbursement rates, we conducted a mail survey of the state child care officials in 50 states and the District of Columbia, of which 49 responded for an overall response rate of 96 percent. The survey included questions on market rate surveys and other factors that states may have considered in setting rates.",
      " While we asked state child care administrators to assess the importance of various factors in setting reimbursement rates, we did not independently verify their assessments by, for example, comparing historical data on these factors with actual state decisions. In addition to gathering this information through our survey, we interviewed state child care program officials in Illinois, Maryland, and Oregon to learn how they set reimbursement rates. We also interviewed consultants who assisted state program officials with analyzing their market rate survey results. Case Studies in Nine Communities across Three States In selecting the states for our field work, we sought to include states that had (1) child care resource and referral (CCR&R) networks with comprehensive data on providers and the fees they charged;",
      " (2) model market rate surveys; (3) varying income eligibility limits, reimbursement rates, and co-payment fees; (4) different utilization patterns for informal child care providers; and (5) some geographic diversity. We visited three states and met with officials of state, local, and community-based organizations in three locations in each state\u2014one urban, one suburban, and one rural. Our field work was performed in Chicago, DuPage County, and DeKalb County, Illinois; Baltimore, Montgomery County, and Wicomico County, Maryland; and Portland, Washington County, and Linn County, Oregon. To determine the extent to which reimbursement rates were likely to afford hypothetical families access to specific types of child care providers,",
      " we obtained data on providers\u2019 fees for full-time care from CCR&R network databases in each of the three states we visited. The local CCR&R offices in each of the communities we visited collected actual information on providers\u2019 fees. The local CCR&R offices submitted the information about these fees to their networks that compiled this information throughout the state. CCR&R networks supplied us with provider fee data for each of the nine communities we visited. CCR&R databases were relied on because the data on providers\u2019 fees were readily available and current. While we did not conduct tests for accuracy or reliability of the CCR&R databases, state officials and CCR&R staff expressed confidence in the accuracy and comprehensiveness of the data.",
      " In calculating the percentage of providers who had fees that were equal to or less than the state-established reimbursement rates, we included those providers who indicated a willingness to accept Child Care and Development Fund (CCDF) funded subsidies. This information was self- reported by most child care providers. In instances where providers did not report whether they accepted the state\u2019s subsidy or indicate a willingness to accept the subsidy, they were included in the total number of providers in a community but were not counted as accepting the subsidy. Since Illinois provider fees were reported as a weekly rate and reimbursement rates were set on a daily basis, both sets of numbers were converted to reflect monthly provider fees and monthly reimbursement rates.",
      " Using a multiplying factor of 4.33, representing the average number of weeks in a month, we converted providers\u2019 fees from a weekly to monthly basis. Using a multiplying factor of 21.65, representing the average number of work days in a month, we converted daily reimbursement rates to monthly rates. Because Maryland provider fees were reported as a weekly rate and reimbursement rates were set on a monthly basis, we converted the provider fees so we could compare them with the state-established reimbursement rates. Using a multiplying factor of 4.33, representing the average number of weeks in a month, we converted providers\u2019 fees from a weekly to monthly basis.",
      " Oregon provider fee data were also reported in different time increments than the state-established reimbursement rates; however, we did not convert these fee data to a single common unit. Providers reported their fees in hourly, daily, weekly, or monthly increments; the state established hourly and monthly rates. Oregon consultants advised us not to convert provider fee data because providers who charged in different time increments may operate differently. The consultants suggested that providers who usually charge in less than monthly increments might offer slight discounts to families who use their services for a month or longer. As a consequence, we directly compared providers\u2019 fees reported in hours and months to the state\u2019s hourly and monthly reimbursement rates.",
      " For providers\u2019 fees reported in days or weeks, we divided monthly reimbursement rates by 21 (slightly less than the average number of work days in a month to account for a discount) to determine daily rates. In addition, we multiplied these calculated daily rates by 5 to determine weekly rates. We discussed this approach with the consultant who conducted market rate studies for the state. Because of the complexity of converting data on providers\u2019 fees, we did not calculate a median monthly provider fee for the three communities we visited in Oregon. In determining hypothetical families\u2019 access to the nine communities across three states, in one case, we limited the scope of our analysis.",
      " To prevent geographical differences in income from limiting the usefulness of our analysis and because of the much larger size of the city of Chicago, we included only that area of Chicago that had a lower average median income. We selected the lower-income area based on preliminary analysis that showed a high percentage of providers in the area indicated a willingness to accept subsidies. Although some higher-income areas are covered and some lower-income areas excluded, for ease of analysis we included all contiguous zip codes south of the Chicago central business district. Since family co-payments vary by such factors as family income and family size, and the fees that providers charge also vary depending on a child\u2019s age and the type of child care,",
      " we used a hypothetical two-person family (consisting of a parent and 2-year-old child) in our analysis. This family size was selected after reviewing fiscal year 1999 Temporary Assistance to Needy Children (TANF) recipient data that showed that most single parent families have one child, and most TANF cases that include adults have only one parent. The age of the hypothetical child was selected after reviewing CCDF recipient data on the ages of children served. To determine the percent of family income that would be spent for co- payments in the three states, we varied family income from 75 percent of the federal poverty threshold to 150 percent of the federal poverty threshold.",
      " We used the same procedure in determining the percent of the reimbursement rates represented by a family\u2019s required co-payment. Other Related Activities At the federal level, we interviewed officials at the Department of Health and Human Services in Washington, D.C., and regional offices in Chicago, Illinois, and Philadelphia, Pennsylvania. We reviewed documents concerning CCDF legislation, HHS rules and regulations, HHS data and reports on access for low-income families, and obtained copies of states\u2019 CCDF plans for fiscal years 2002-2003 that contained the states\u2019 co-payment fee structures, and generally included information about market rate survey results and reimbursement rates. We also interviewed child care policy experts and reviewed current literature on subsidized child care.",
      " Appendix II: Reimbursement Rates for Informal Child Care Providers in the Remaining Eight Communities For the three states we visited, we obtained data on family monthly co-payments and reimbursement rates for informal providers. These states generally did not collect information on the fees charged by informal providers. Moreover, local CCR&R offices generally did not collect information on informal child care providers or include them in their databases. As shown in tables 12 to 16, each of the three states we visited paid rates that were lower for informal care than for other types of care. States made different choices regarding such rates despite the lack of information on informal providers\u2019 fees,",
      " or the effect of established rates on the supply of such care. See tables 12 to 16 for reimbursement rates and family co-payments for informal providers in eight communities we visited. Information on Baltimore, Maryland, is shown in table 11. Appendix III: Comments from the Department of Health and Human Services Appendix IV: GAO Contacts and Staff Acknowledgments GAO Contacts Staff Acknowledgments The following people also made important contributions to this report: Danielle T. Jones; R. Scott McNabb; Cynthia Decker; Patrick diBattista; Joel Grossman; Elsie Picyk; Bill Keller; and Daniel Schwimer.",
      " Related GAO Products Child Care: States Have Undertaken a Variety of Quality Improvement Initiatives, but More Evaluations of Effectiveness Are Needed. GAO-02-897. Washington, D.C.: September 6, 2002. Early Childhood Programs: The Use of Impact Evaluations to Assess Program Effects. GAO-01-542. Washington, D.C.: April 16, 2001. Child Care: States Increased Spending on Low-Income Families. GAO-01-293. Washington, D.C.: February 2, 2001. Child Care: How Do Military and Civilian Center Costs Compare?",
      " GAO/HEHS-00-7. Washington, D.C.: October 14, 1999. Child Care: Use of Standards to Ensure High Quality Care. GAO/HEHS-98-223R. Washington, D.C.: July 31, 1998. Welfare Reform: States\u2019 Efforts to Expand Child Care Programs. GAO/HEHS-98-27. Washington, D.C.: January 13, 1998. Welfare Reform: Implications of Increased Work Participation for Child Care. GAO/HEHS-97-75. Washington, D.C.: May 1997.\n"
    ],
    "length": 8441,
    "hardness": null,
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  },
  {
    "id": 72,
    "question": null,
    "answer": "GAO is required by law to audit the consolidated financial statements of the U.S. government. Timely, accurate, and useful financial information is essential for making informed operating decisions day to day, managing the federal government's operations more efficiently and effectively, meeting the goals of federal financial management reform legislation, supporting results-oriented management approaches, and ensuring accountability on an ongoing basis. The importance of such information is heightened by the unprecedented demographic challenge of an aging population. Federal spending on the elderly, health care, and new homeland security and defense commitments increases the need to look at competing claims on the budget and at new priorities. Over the past year, the Principals of the Joint Financial Management Improvement Program continued efforts to accelerate progress in financial management reform. Also, President Bush has implemented the President's Management Agenda to provide direction to, and closely monitor, management reform across government, which encompasses improved financial management performance. To effectively implement federal financial management reform, sustained leadership and oversight are essential. As in the 5 previous fiscal years, the federal government continues to have a  significant number of material weaknesses related to financial systems, fundamental recordkeeping and financial reporting, and incomplete documentation. Several of these material weaknesses resulted in conditions that continued to prevent us from expressing an opinion on the U.S. government's consolidated financial statements for the fiscal years ended September 30, 2002 and 2001. Three major impediments to an opinion on the consolidated financial statements are (1) serious financial management problems at DOD, (2) the federal government's inability to fully account for and reconcile billions of dollars of transactions between federal entities, and (3) the federal government's inability to properly prepare the consolidated financial statements. Federal agencies have continued to make progress in obtaining unqualified audit opinions--21 of 24 Chief Financial Officers (CFO) Act agencies for fiscal year 2002, up from 6 for fiscal year 1996. Irrespective of the unqualified opinions, many federal agencies do not have timely, accurate, and useful financial information and sound controls with which to make informed decisions and to ensure accountability on an ongoing basis. Building on the success achieved in obtaining unqualified audit opinions, federal agency management must continue to work toward fully resolving the pervasive and generally long-standing material weaknesses that have been reported for the past 6 fiscal years. The President's Management Agenda stated that without sound internal control and accurate and timely financial information, it is not possible to accomplish the President's agenda to secure the best performance and highest measure of accountability for the American people.\n",
    "docs": [
      "Meeting Tomorrow\u2019s  Fiscal Needs The requirement for timely, accurate, and useful financial and performance  management information is greater than ever.  The long-term fiscal  pressures created by the retirement of the baby boom generation and new  homeland security and defense commitments, including the ongoing  Operation Iraqi Freedom, sharpen the need to look at competing claims on  federal budgetary resources and new priorities.  In previous testimony, I  noted that it should be the norm to reconsider the relevance or \u201cfit \u201d of any  federal program or activity in today\u2019s world and for the future.  Such a  fundamental review is necessary both to increase fiscal flexibility and to  make government fit the modern world.",
      "  Stated differently, there is a need  to consider what the proper role of the federal government will be in the  21st century and how the government should do business in the future.   The budget and performance integration initiative undertaken as part of the  President\u2019s Management Agenda should help provide information for use in  conducting such reviews.  OMB\u2019s Program Assessment Rating Tool (PART)  represents a step toward more structured involvement of program and  performance analysis in the budget.  PART includes general questions on  (1) program purpose and design, (2) strategic planning, (3) program  management, and (4)",
      " program results.  It also includes a set of more  specific questions that vary according to the type of delivery mechanism or  approach the program uses. As we look ahead, the federal government faces an unprecedented  demographic challenge.  A nation that has prided itself on its youth will  become older.  Between now and 2035, the number of people who are 65  years old or over will double.  As the share of the population over 65  climbs, federal spending on the elderly will absorb larger and ultimately  unsustainable shares of the federal budget.  Federal spending on health and  entitlement programs for the elderly is expected to surge as people live  longer and spend more time in retirement.",
      "  In addition, advances in medical  technology are likely to keep pushing up the cost of providing health care.   Moreover, the baby boomers will have left behind fewer workers to support  them in retirement, prompting a slower rate of economic growth from  which to finance these higher costs.  Absent substantive reform of related  entitlement programs and/or dramatic changes in tax or discretionary  spending policies, we will face large, escalating, and persistent deficits. These trends have widespread implications for our society, our economy,  and the federal budget. On March 17, 2003, the Trustees of the Social Security and Medicare trust  funds reported on the current and projected status of these programs over  the next 75 years.",
      "  The Trustees report that the fundamentals of the  financial status of both Social Security and Medicare remain highly  problematic.  However, they stated that Medicare faces financial difficulties  that are more severe than those confronting Social Security because costs  of the Medicare program are projected to rise faster than costs of the Social  Security program.  The projections show a 20 percent increase to about  $6.2 trillion over the prior year in the Present Value of Resources Needed  Over the 75-Year Projection Period for Federal Hospital Insurance  (Medicare Part A), while the Social Security projection showed an 8  percent increase to about $4.9 trillion.",
      "  Once again, the Trustees state that  action to address the financial difficulties facing Social Security and  Medicare must be taken in a timely manner and that the sooner these  financial challenges are addressed, the more varied and less disruptive the  solutions can be. Early action to change these programs would yield the highest fiscal  dividends for the federal budget and would provide a longer period for  prospective beneficiaries to make adjustments in their own planning.   Waiting to take action entails risks.  First, we lose an important window  where today\u2019s relatively large workforce can increase saving and enhance  productivity, two elements critical to growing the future economy.  Second,",
      "  we lose the opportunity to reduce the burden of interest in the federal  budget, thereby creating a legacy of higher debt as well as elderly  entitlement spending for the relatively smaller workforce of the future.   Third, and most critically, we risk losing the opportunity to phase in  changes gradually so that all can make the adjustments needed in private  and public plans to accommodate this historic shift. We prepare long-term budget simulations that seek to illustrate the likely  fiscal consequences of the coming demographic tidal wave and rising  health care costs.  Our latest long-term budget simulations reinforce the  need for change in the major cost drivers\u2014Social Security and health care  programs.",
      "  As shown in figure 1, by midcentury, absent reform of these  entitlement programs, projected federal revenues may be adequate to pay  little beyond interest on the debt and Social Security benefits.  Further, the  shift from surplus to deficit means that the nation will move into the future  in a weaker fiscal position than was previously the case. Although the need for structural change in Social Security is widely  recognized, this change would not be sufficient to overcome the long-term  fiscal challenges confronting the nation.  For example, the long-term fiscal  imbalance would not come close to being eliminated even if Social Security  benefits were to be limited to currently projected trust fund revenues,",
      "  because Medicare and Medicaid\u2014spending for which is driven by both  demographics and rising health care costs\u2014present an even greater  problem. While addressing the challenges of Social Security and Medicare is key to  ensuring future fiscal flexibility, a fundamental review of major programs,  policies, and operations can create much-needed fiscal flexibility to  address emerging needs.  As I have stated previously, it is healthy for the  nation periodically to review and update its programs, activities, and  priorities.  Many federal programs and policies were designed years ago to  respond to earlier challenges.  Ultimately, the federal government should  strive to hand to the next generation the legacy of a government that is  effective and relevant to a changing society\u2014a government that is as free  as possible of outmoded commitments and operations that can  inappropriately encumber the future.",
      " A reexamination of existing programs and policies could help weed out  items that have proven to be outdated or persistently ineffective or  alternatively could prompt us to update and modernize activities through  such actions as improving program targeting and efficiency, consolidation,  or reengineering of processes and operations.  Such a review should not be  limited to only spending programs but should include the full range of tools  of governance that the federal government uses to address national  objectives.  These tools include loans and loan guarantees, tax  expenditures, and regulations. In the last decade the Congress put in place a series of laws designed to  improve information about cost and performance.",
      "  This framework and the  information it provides can help structure and inform the debate about  what the federal government should do.  In addition, GAO has identified a  number of areas warranting reconsideration based on program  performance, targeting, and costs. The events of the past few years have served to highlight the benefits of  fiscal flexibility.  Addressing the long-term drivers in the budget is essential  to preserving any flexibility in the long term.  In the nearer term, a  fundamental review of existing programs and policies can also create  much-needed fiscal flexibility.  In this regard, the federal government must  determine how best to address the necessary structural challenges in a  reasonably timely manner in order to identify specific actions that need to  be taken.",
      "  As steward of the nation\u2019s future, the federal government must  begin to prepare for tomorrow. Need for New Metrics and  Mechanisms Today\u2019s budget decisions shape, in part, the choices and resources  available to future decision makers and taxpayers.  Accordingly, today\u2019s  budget decisions involve tradeoffs between meeting current needs and  fulfilling stewardship responsibilities.  The government undertakes a wide  range of responsibilities, programs, and activities that may call for future  spending or create an expectation for such spending.  Figure 2 illustrates  some of these claims on future federal resources. A better understanding and more transparency about these \u201cfiscal  exposures\u201d is needed.",
      "  The budget needs to employ new metrics and  measures and processes\u2014relying more on long-term estimates and present  value concepts in making resource allocation decisions.  Neither current  budget reporting nor financial statements are designed to promote the  recognition and explicit consideration of all of these exposures. Our  nation\u2019s fiscal exposures cover a wide range:  from explicit liabilities to  implicit promises embedded in current policy or public expectations.   Some, like accounts payable and loan guarantees, are included in both the  budget and financial statements and some are not.  Others, such as liability  for environmental cleanup, are reported in the financial statements, but  only a single year\u2019s figures are in the budget.",
      "  Some implicit exposures,  such as future Social Security and Medicare benefits, are not included in  the budget or reported as liabilities in the financial statements but are  captured in long-range budget projections.  Other implicit exposures, such  as the risk assumed by insurance programs, may not be captured in either  budget or financial reporting. The failure to understand and address these fiscal exposures can have  significant consequences, encumbering future budgets and reducing fiscal  flexibility.  Further, the failure to capture the long-term costs of a proposal  or decision limits the Congress\u2019s ability to control fiscal exposures at the  time it is being asked to make the decision.",
      " As the figure makes clear, there is wide diversity in the nature of these  fiscal exposures.  This diversity suggests that it would be most useful to  look at different types of fiscal exposures and tailor metrics and changes to  address each type.   We recently recommended that OMB report annually  on fiscal exposures, including a concise list and description and cost  estimates where possible.   We also recommended that, where possible,  OMB report the estimated costs associated with certain exposures as a new  budget concept\u2014\u201cexposure level\u201d\u2014as a notational item in the President\u2019s  budget.   These two steps would help alert both the public and policy  makers about the long-term implications of programs,",
      " policies and  activities. It is important to recognize that for trust funds, greater transparency and  fuller disclosure means going beyond trust fund balances or solvency  measures. For federal trust funds the balances do not provide meaningful  information about program sustainability.  These balances do not increase  the government\u2019s ability to meet long-term commitments.  Nor do they  necessarily represent the full future cost of existing promises. For example,  the projected exhaustion date of the Hospital Insurance (HI) Trust Fund is  a commonly used indicator of HI\u2019s financial condition.  Under the Trustees\u2019  2003 intermediate estimates, the HI Trust Fund is projected to exhaust its  assets in 2026.",
      "  Long before that, however, HI\u2019s program outlays will exceed  program tax revenues.  Under the Trustees\u2019 2003 intermediate estimates,  this will begin in 2013.  To finance program cash deficits, HI will need to  draw on the special-issue Treasury securities acquired during the years of  cash surpluses.  For HI to \u201credeem\u201d its securities, the government will need  to obtain cash through some combination of increased taxes, spending  cuts, and/or increased borrowing from the public (or, if the unified budget  is in surplus, less debt reduction than would otherwise have been the case).    HI\u2019s negative cash flow will place increased pressure on the federal budget  to raise the resources necessary to meet the program\u2019s ongoing costs.",
      " Ultimately, the critical question is not how much a trust fund has in assets,  but whether the government as a whole and the economy can afford the  promised benefits now and in the future and at what cost to other claims on  available resources.  Extending a trust fund\u2019s solvency without reforms to  make the underlying program more sustainable can create a false sense of  security and delay needed reform.  Because the balances can be  misleading, we need to reconsider how trust funds, and the nonmarketable  federal government securities contained therein, are treated in both the  budget and the federal government\u2019s financial statements. Today the Congress and President Bush face the challenge of sorting out  these many claims on the federal budget without the budget enforcement  mechanisms or fiscal benchmarks that guided the federal government  through the years of deficit reduction.",
      "  However, it is still the case that the  federal government needs a decision-making framework that permits it to  evaluate choices against both today\u2019s needs and the longer-term fiscal  future that will be handed to future generations.  More complete, visible,  and transparent reporting of fiscal exposures can better position decision  makers to do this. Highlights of Major  Issues Relating to the  U.S. Government\u2019s  Consolidated Financial  Statements for Fiscal  Years 2002 and 2001 As I mentioned earlier, as has been the case for the past 5 fiscal years, the  federal government continues to have a significant number of material  weaknesses related to financial systems,",
      " fundamental recordkeeping and  financial reporting, and incomplete documentation.  Several of these  material weaknesses (referred to hereafter as material deficiencies)  resulted in conditions that continued to prevent us from expressing an  opinion on the U.S. government\u2019s consolidated financial statements for the  fiscal years ended September 30, 2002 and 2001.  There may also be  additional issues that could affect the consolidated financial statements  that have not been identified. Major challenges include the federal government\u2019s inability to  properly account for and report property, plant, and equipment and  inventories and related property, primarily at the Department of Defense  (DOD);  reasonably estimate or adequately support amounts reported for certain  liabilities,",
      " such as environmental and disposal liabilities and related  costs at DOD, and ensure complete and proper reporting for  commitments and contingencies;  support major portions of the total net cost of government operations,  most notably related to DOD, and ensure that all disbursements are  properly recorded;  fully account for and reconcile intragovernmental activity and balances;   properly prepare the federal government\u2019s financial statements,  including fully ensuring that the information in the consolidated  financial statements is consistent with the underlying agency financial  statements, balancing the statements, adequately reconciling the results  of operations to budget results, and eliminating transactions between  governmental entities.",
      " In addition, we identified material weaknesses in internal control related to  loans receivable and loan guarantee liabilities, improper payments, tax  collection activities, and information security. I would now like to discuss in more detail the material deficiencies  identified by our work. Property, Plant, and  Equipment and Inventories  and Related Property The federal government could not satisfactorily determine that all such  assets were included in the consolidated financial statements, verify that  certain reported assets actually exist, or substantiate the amounts at which  they were valued.  A significant portion of the property, plant, and  equipment and the vast majority of inventories and related property are the  responsibility of DOD.",
      "  DOD did not maintain adequate systems or have  sufficient records to provide reliable information on these assets.  Other  agencies, most notably NASA, reported continued weaknesses in internal  control procedures and processes related to property, plant, and  equipment. Liabilities and  Commitments and  Contingencies The federal government could not reasonably estimate or adequately  support amounts reported for certain liabilities.  For example, the federal  government was not able to reliably estimate key components of DOD\u2019s  environmental and disposal liabilities and could not support its estimate of  military postretirement health benefits liabilities included in federal  employee and veteran benefits payable.  Further,",
      " the federal government  could not determine whether commitments and contingencies, including  those related to treaties and other agreements entered into to further the  U.S. government\u2019s interest, were complete and properly reported. Cost of Government  Operations and  Disbursement Activity The previously discussed material deficiencies in reporting assets and  liabilities, material deficiencies in financial statement preparation, as  discussed below, and the lack of adequate disbursement reconciliations at  certain federal agencies affect reported net costs. As a result, the federal  government was unable to support significant portions of the total net cost  of government operations, most notably related to DOD.  As it relates to  disbursement reconciliations,",
      " some federal agencies did not adequately  reconcile disbursements to Treasury\u2019s records of disbursements, which is  intended to be a key control to detect and correct errors and other  misstatements in financial records in a timely manner. We have seen  progress in this area over the past 6 years.  However, for fiscal years 2002  and 2001 there were unsupported adjustments and unreconciled  differences between federal agencies\u2019 and Treasury\u2019s records of  disbursements totaling billions of dollars. Accounting for and  Reconciliation of  Intragovernmental Activity  and Balances OMB and Treasury require CFO Act agencies to reconcile selected  intragovernmental activity and balances with their \u201ctrading partners\u201d and  to report on the extent and results of intragovernmental activity and  balances reconciliation efforts.",
      "  However, a substantial number of the CFO  Act agencies did not fully perform such reconciliations for fiscal years 2002  and 2001.  For both of these years, amounts reported for federal agency  trading partners for certain intragovernmental accounts were significantly  out of balance.  I will discuss these issues further later in this testimony, as  well as certain related corrective actions being taken. Preparation of Consolidated  Financial Statements The federal government did not have adequate systems, controls, and  procedures to properly prepare its consolidated financial statements.   Specifically, we identified problems with compiling the consolidated  financial statements, such as adequately ensuring that the information for  each federal agency that was included in the consolidated financial  statements was consistent with the underlying agency financial statements.",
      "   In addition, we identified problems with the elimination of  intragovernmental activity and balances.  Later in this testimony, these  matters are discussed further, along with certain corrective actions being  taken.  Also, disclosure of certain financial information was not presented  in the consolidated financial statements in conformity with U.S. generally  accepted accounting principles. Ineffective Internal Control In addition to the material deficiencies noted above, we found four other  material weaknesses in internal control as of September 30, 2002:  (1)  several federal agencies continue to have significant deficiencies in the  processes and procedures used to estimate the costs of their lending  programs and value their loan receivables;",
      " (2) most federal agencies have  not estimated or reported the magnitude of improper payments in their  programs; (3) material internal control weaknesses and systems  deficiencies continue to affect the federal government\u2019s ability to  effectively manage its tax collection activities; and (4) federal agencies  have not yet institutionalized comprehensive information security  management programs. Loans Receivable and Loan  Guarantee Liabilities Prior to fiscal year 2001, we cited accounting for loans receivable and loan  guarantee liabilities as a material deficiency contributing to our disclaimer  of opinion because certain key federal credit agencies could not reliably  estimate the costs of their lending programs or determine the net loan  amounts expected to be collected.",
      "  In fiscal year 2001, due to significant  improvements at USDA, we removed this area from the list of issues  contributing to our disclaimer.  Nevertheless, several federal agencies  continue to have significant deficiencies in the processes and procedures  used to estimate the costs of their lending programs and value their loan  receivables. In a recent report on SBA's loan asset sale program, we reviewed SBA\u2019s  budgeting and accounting for loan sales and found that SBA incorrectly  calculated the accounting losses on the loan sales and lacked reliable  financial data to determine the overall financial impact of the sales.   Further, because SBA did not analyze the effect of loan sales on its  remaining portfolio,",
      " its reestimates of loan program costs for the budget  and financial statements may contain significant errors. In addition, SBA  could not explain significant declines in its loss allowance account for  disaster loans. SBA\u2019s inspector general and its independent auditor agreed  with our findings, and the independent auditor withdrew its unqualified  audit opinions on SBA\u2019s fiscal years 2001 and 2000 financial statements.   Until SBA corrects these errors and determines the cause of the precipitous  decline in the loss allowance account for disaster loans, SBA\u2019s financial  statements cannot be relied upon. Further, the reliability of current and  future subsidy cost estimates will remain unknown.",
      " These errors and the  lack of key analyses also mean that congressional decision makers are not  receiving accurate financial data to make informed decisions about SBA\u2019s  budget and the level of appropriations the agency should receive. In addition, we again noted that certain other federal credit agencies  continue to require significant adjustments to the estimates of program  costs, net loan amounts to be collected, and related notes.  Auditors for  these agencies reported related material internal control weaknesses. Improper Payments Across the federal government, improper payments occur in a variety of  programs and activities, including those related to health care, contract  management, federal financial assistance, and tax refunds.",
      " Many  improper payments occur in federal programs that are administered by  entities other than the federal government.  In general, improper payments  often result from a lack of or an inadequate system of internal controls.   While estimates of improper payments disclosed in federal agency financial  statements totaled approximately $20 billion for both fiscal years 2002 and  2001, the federal government did not estimate the full extent of improper  payments.  The President\u2019s Management Agenda includes addressing  erroneous payments (a term we consider synonymous with improper  payments) as one of the key elements for improving financial performance. The Department of Health and Human Services (HHS)",
      " has been reporting a  national estimate of improper Medicare fee-for-service payments as part of  its annual financial statements since fiscal year 1996.  In fiscal year 2002,  HHS reported estimated improper Medicare fee-for-service payments of  approximately $13.3 billion, or about 6.3 percent of such benefits.  HHS\u2019s  Centers for Medicare and Medicaid Services (CMS) has initiated projects to  improve the precision of Medicare fee-for-service improper payment  estimates and aid in the development of corrective actions to reduce  improper payment losses.  For example, CMS developed a comprehensive  error-testing program that will produce contractor-, provider-, and benefit-",
      " specific error rates.  These error rates can be aggregated to add greater  precision to the national Medicare fee-for-service error rate estimates. However, most federal agencies have not estimated or reported the  magnitude of improper payments in their programs and comprehensively  addressed this issue in their annual performance plans under the  Government Performance and Results Act (GPRA) of 1993.  For example,  IRS follows up on only a portion of the suspicious Earned Income Tax  Credit (EITC) claims it identifies, although the EITC has historically been  vulnerable to high rates of invalid claims.  In February 2002,",
      " IRS estimated  that taxpayers filed returns for tax year 1999 claiming at least $8.5 billion in  invalid EITCs, of which only $1.2 billion (14 percent) either was recovered  or was expected to be recovered through compliance efforts.  Although the  full extent of refunds resulting from invalid EITCs is unknown, IRS has not  routinely estimated the potential magnitude of invalid refunds and has not  disclosed an annual estimate of improper payments in its financial reports.   As a result, the amount of improper payments included in the almost $28  billion IRS disbursed for EITCs for fiscal year 2002 is unknown.",
      " Without systematically measuring the extent of improper payments, federal  agency management cannot determine (1) whether problems exist that  merit agency action, (2) what mitigation strategies are appropriate and the  amount to invest in them, and (3) whether efforts implemented to reduce  improper payments are successful.  OMB, which has shown leadership in  this area, now requires annual submissions on improper payments from 15  federal agencies.  Specifically, OMB requires actual and projected  information on erroneous payment rates and the status of actions taken to  reduce improper payments.  Further, the Improper Payments Information  Act of 2002 requires federal agencies to (1)",
      " annually review programs and  activities that they administer to identify those that may be susceptible to  significant improper payments, (2) estimate improper payments in  susceptible programs and activities, and (3) provide reports to the  Congress that include such information as the status of actions to reduce  improper payments for programs and activities with estimated improper  payments of $10 million or more. Tax Collection Activities Material internal control weaknesses and systems deficiencies continue to  affect the federal government\u2019s ability to effectively manage its tax  collection activities.  This situation continues to result in the need for  extensive, costly, and time-consuming ad hoc programming and analyses,  as well as material audit adjustments,",
      " to prepare basic financial  information.  As further discussed later in this testimony, this approach  cannot be used to prepare such information on a timely, routine basis to  assist in ongoing decision making.  Additionally, the severity of the system  deficiencies that give rise to the need to resort to such procedures for  financial reporting purposes, as well as deficient physical safeguards, result  in burden on taxpayers and lost revenue. The lack of appropriate subsidiary systems to track the status of taxpayer  accounts and material weaknesses in financial reporting affect the  government\u2019s ability to make informed decisions about collection efforts.   Due to errors and delays in recording activity in taxpayer accounts,",
      "  taxpayers were not always being credited for payments made on their tax  liabilities.  In addition, the federal government did not always follow up on  potential unreported or underreported taxes and did not always pursue  collection efforts against taxpayers owing taxes to the federal government.   This could result in billions of dollars not being collected and adversely  affect future compliance. The federal government continues to be vulnerable to lost tax revenue due  to weaknesses in controls intended to maximize the government\u2019s ability to  collect what is owed and to minimize the risk of payment of improper  refunds. The federal government identifies billions of dollars of potentially  underreported taxes and improper refunds each year.",
      "  However, due in  large part to perceived resource constraints, the federal government  selects only a portion of the questionable cases it identifies for follow-up  investigation and action.  In addition, the federal government often does  not initiate follow-up on the cases it selects until months after the related  tax returns have been filed and any related refunds disbursed, affecting its  chances of collecting amounts due on these cases.  Consequently, the  federal government is exposed to potentially significant losses from  reduced revenue and disbursements of improper refunds.  Finally,  continued weaknesses in physical controls over cash, checks, and sensitive  data received from taxpayers increase both the federal government\u2019s and  the taxpayers\u2019 exposure to losses and increases the risk of taxpayers  becoming victims of crimes committed through identity fraud.",
      " IRS senior management continues to be committed to addressing many of  these operational and financial management issues and has made a number  of improvements to address some of these weaknesses.  Successful  implementation of long-term efforts to resolve these serious problems will  require the continued commitment of IRS management as well as  substantial resources and expertise. Information Security  Weaknesses GAO has reported information security over computerized operations as a  governmentwide high-risk area since February 1997.  Information security  weaknesses are placing enormous amounts of federal government assets at  risk of inadvertent or deliberate misuse, financial information at risk of  unauthorized modification or destruction, sensitive information at risk of  inappropriate disclosure,",
      " and critical operations at risk of disruption.  The  federal government is not in a position to estimate the full magnitude of  actual damage and loss resulting from federal information security  weaknesses because it is likely that many such incidents are either not  detected or not reported.  Although progress has been made, federal  agencies have not yet institutionalized comprehensive security  management programs, which are critical to resolving information security  problems and managing information security risk on an ongoing basis. The information security weaknesses continue to cover the full range of  information security controls.  For example, access controls were not  effective in limiting or detecting inappropriate access to information  resources,",
      " such as ensuring that only authorized individuals can read, alter,  or delete data.  In addition, software change controls were ineffective in  ensuring that only properly authorized and tested software programs were  implemented.  Further, duties were not appropriately segregated to reduce  the risk that one individual could conduct unauthorized transactions  without being detected.  Finally, sensitive operating system software was  not adequately controlled, and adequate steps had not been taken to ensure  continuity of operations. Through the recently enacted Federal Information Security Management  Act of 2002 (FISMA), the Congress has continued its efforts to improve  federal information security by permanently authorizing and strengthening  the information security program,",
      " evaluation, and reporting requirements  established by federal government information security reform  legislation.  This information security reform legislation has been a  significant step in improving federal agencies\u2019 information security  programs and addressing their serious, pervasive information security  weaknesses, and, among other benefits, has increased management  attention to and accountability for information security.  FISMA will further  strengthen federal information security by requiring the National Institute  of Standards and Technology to develop mandatory minimum information  security requirements. The administration has also taken actions to improve information security.   For example, OMB created an annual reporting process that includes  federal agency preparation of corrective action plans to track progress in  correcting identified weaknesses.",
      "  Further, in February 2003, the President  issued the National Strategy to Secure Cyberspace, which sets national  priorities for reducing threats from and vulnerabilities to cyberattacks and  improving the nation\u2019s response to cyberincidents. Providing Sustained  Leadership and  Oversight for Effective  Implementation of  Financial Management  Reform Over the past year, the JFMIP Principals continued our efforts, begun in  August 2001, to accelerate progress in financial management reform.  This  involved our personal commitment to provide the leadership necessary to  address pressing governmentwide financial management issues.  Also,  President Bush has implemented the President\u2019s Management Agenda to  provide direction to,",
      " and to closely monitor, management reform across  government, which encompasses improved financial performance.  Actions  such as these are important elements of ensuring the government\u2019s full and  effective implementation of the federal financial management reforms  enacted by the Congress. The JFMIP Principals\u2019  Initiative Since August 2001, the JFMIP Principals have established an excellent  working relationship, a basis for action, and a sense of urgency through  which significant and meaningful progress can be achieved.  In fiscal year  2002, JFMIP Principals continued the series of regular, deliberative  meetings that focused on key financial management reform issues such as  defining success measures for financial management performance that  go far beyond an unqualified audit opinion on financial statements and  include measures such as financial management systems that routinely  provide timely,",
      " reliable, and useful financial information and no material  internal control weaknesses or material noncompliance with laws and  regulations and Federal Financial Management Improvement Act of  1996 (FFMIA) requirements; restructuring the Federal Accounting Standards Advisory Board\u2019s  (FASAB) composition to enhance the independence of the Board and  increase public involvement in setting standards for federal financial  accounting and reporting;  significantly accelerating financial statement reporting to improve  timeliness for decision making and to discourage costly efforts designed  to obtain unqualified opinions on financial statements without  addressing underlying systems challenges;  establishing audit advisory committees for selected major federal   addressing difficult accounting and reporting issues,",
      " including  impediments to an audit opinion on the U.S. government's consolidated  financial statements and reporting updated social insurance financial  information in the U.S. government\u2019s consolidated financial statements. Continued personal involvement of the JFMIP Principals is critical to the  full and successful implementation of federal financial management reform  and to providing greater transparency and accountability in managing  federal programs and financial resources.  At the end of fiscal year 2002, I  ended my 2-year term as Chair of the JFMIP Principals, and the Chair  rotated to Office of Management and Budget Director Daniels.  I look  forward to working with the new Chair,",
      " Treasury Secretary Snow, and  Office of Personnel Management Director James in the upcoming months  to continue this important dialogue and build on the strong working  relationships that we have established. The President\u2019s  Management Agenda President Bush has established an agenda for improving the management  and performance of the federal government that targets the most apparent  deficiencies where the opportunity to improve performance is the greatest.   It is no accident that the President\u2019s Management Agenda has a strong  correlation to GAO\u2019s high-risk list.  This is just one example of how GAO  and OMB have worked constructively to identify key issues deserving  increased attention throughout government.  As stated in the President\u2019s  Management Agenda\u2014and we wholeheartedly agree\u2014there are few items  more urgent than ensuring that the federal government is well run and  results-oriented.",
      " The President\u2019s Management Agenda, which is a starting point for  management reform, includes improved financial management  performance as one of the five governmentwide management goals.  Other  governmentwide initiatives of the President\u2019s Management Agenda include  strategic management of human capital, competitive sourcing, expanded  electronic government, and budget and performance integration. In particular, the improved financial management performance initiative is  aimed at ensuring that federal financial systems produce accurate and  timely information to support operating, budget, and policy decisions.   Also, this initiative focuses special attention on addressing erroneous  payments, credit card abuse in the federal government, and asset  management, areas for which we have reported problems and challenges.",
      " Under the improved financial management performance initiative, agencies  are expected to improve the timeliness, enhance the usefulness, and ensure  the reliability of financial information.  The expected result is integrated  financial and performance management systems that routinely produce  information that is (1) timely, to measure and effect performance  immediately, (2) useful, to make more informed operational and investing  decisions, and (3) reliable, to ensure consistent and comparable trend  analysis over time and to facilitate better performance measurement and  decision making.  This result is a key to successfully achieving the goals set  out by the Congress in the CFO Act and other federal financial management  reform legislation.",
      " Central to effectively addressing the federal government\u2019s management  problems and providing a solid base for successful transformation efforts is  recognition that the five governmentwide initiatives cannot be addressed in  an isolated or piecemeal fashion from other major management challenges  and high risks facing federal agencies.  Rather, these efforts are mutually  reinforcing and must be addressed in an integrated way to ensure that they  drive a broader transformation of the cultures of federal agencies. The Executive Branch  Management Scorecard The administration is using the Executive Branch Management Scorecard  to highlight federal agencies\u2019 progress in achieving management and  performance improvements embodied in the President\u2019s Management  Agenda.  The Executive Branch Management Scorecard grades selected  federal agencies\u2019 performance regarding the five governmentwide  initiatives by using broad standards and a red-yellow-green coding system  to indicate the level at which agencies are meeting the standards.",
      " In the financial management area, while recognizing the importance of  achieving an unqualified opinion from auditors on financial statements, the  scorecard focuses on the fundamental and systemic issues that must be  addressed in order to generate timely, accurate, and useful financial  information. The scorecard also measures whether agencies have any  material internal control weaknesses or material noncompliances with  laws and regulations, and whether agencies meet FFMIA requirements.   The December 31, 2002, scorecard\u2019s results show dramatically the extent of  work remaining across government to improve financial and other  management areas.  For financial performance, most of the selected federal  agencies were scored in the red category.",
      "  This is not surprising,  considering the well-recognized need to transform financial management  and other business processes at federal agencies such as DOD, the results  of our analyses under FFMIA, and the various financial management  operations we have designated as high risk.  Some of the selected  agencies improved their scores from the initial baseline evaluation as of  September 30, 2001; however, other agencies\u2019 scores declined, reflecting  increased challenges. The focus that the administration\u2019s scorecard approach brings to improving  management and performance, including financial management  performance, is certainly a step in the right direction.  The value of the  scorecard is not in the scoring per se,",
      " but in the degree to which scores  lead to sustained focus and demonstrable improvements.  This will depend  on continued efforts to assess progress and maintain accountability to  ensure that agencies are able to, in fact, improve their performance.  It will  be important that there be continuous rigor in the scoring process in order  for this approach to be credible and effective in providing the proper  incentives that produce lasting results.  Also, it is important to recognize  that many of the challenges the federal government faces, such as  improving financial management, are long-standing and complex, and will  require sustained attention. Building on the  Success of Unqualified  Audit Opinions Building on the success that has been achieved in obtaining unqualified  audit opinions,",
      " federal agency management must continue to work toward  fully resolving the pervasive and generally long-standing material  weaknesses that have been reported for the past 6 fiscal years. The  underlying causes of these issues are significant financial management  systems weaknesses, problems with fundamental recordkeeping and  financial reporting, incomplete documentation, and weak internal control.   In identifying improved financial management performance as one of its  five governmentwide initiatives, the President\u2019s Management Agenda  stated that a clean (unqualified) financial audit opinion is a basic  prescription for any well-managed organization. It recognized that \u201cmost  federal agencies that obtain clean audits only do so after making  extraordinary,",
      " labor-intensive assaults on financial records.\u201d Further, the  President\u2019s Management Agenda stated that without sound internal control  and accurate and timely financial information, it is not possible to  accomplish the President\u2019s agenda to secure the best performance and  highest measure of accountability for the American people. Irrespective of the unqualified opinions on their financial statements, many  federal agencies do not have timely, accurate, and useful financial  information and sound controls with which to make informed decisions  and to ensure accountability on an ongoing basis.  While federal agencies  have continued to make progress in obtaining unqualified audit opinions on  annual financial statements, many of these opinions were obtained by  expending significant resources on extensive ad hoc procedures and  making billions of dollars in adjustments to derive the financial statements  months after the end of a fiscal year.",
      "  Several examples follow.  The need  for such resource-intensive procedures primarily results from inadequate  financial management systems. After receiving a disclaimer of opinion for fiscal year 2001, NASA was  able to produce auditable financial statements for fiscal year 2002;  however, the auditors reported that significant weaknesses still existed  in NASA\u2019s internal controls related to accounting for the International  Space Station and for equipment and materials held by contractors.   Because of these control weaknesses, the auditors found numerous  errors in property records and had to significantly expand the scope of  their testing.  To correct auditor-identified errors, NASA had to make  about $11 billion of adjustments to its records.",
      "  The auditors also  identified a material weakness related to NASA\u2019s process for preparing  its financial statements and performance and accountability report. Deficiencies included errors made in recording significant adjustments  to the statements and reports.  Auditors attributed the errors to  insufficient resources to address the volume of work needed to compile  the financial statements, lack of an integrated financial management  system, lack of understanding by NASA staff of new federal reporting  requirements, and lack of quality controls over financial reporting. After 8 consecutive years of disclaimers of opinion, USDA received an  unqualified opinion on its fiscal year 2002 financial statements.  While  we consider this a positive step toward achieving financial  accountability,",
      " it took extraordinary efforts outside the normal business  processes by the department and its auditors, particularly at the Forest  Service.   The USDA Office of Inspector General\u2019s transmittal letter for  the fiscal year 2002 Forest Service audit report stated that \u201cthe Forest  Service does not yet operate as an effective, sustainable, and  accountable financial management organization.  The fiscal year 2002  ending account balances were primarily derived from a 2-year audit  effort on beginning balances and numerous statistical samples of fiscal  year 2002 transactions.  As a result of these efforts, multiple adjustments  were processed to the general ledger and/or subsidiary ledgers.",
      "  For  example, the financial statement line item General Property, Plant and  Equipment, Net, was reduced by over $1 billion based on audit coverage.   The achievement of an unqualified opinion, therefore, did not  necessarily result from improvement in underlying financial  management systems, but rather as an extensive ad hoc effort.\u201d  If USDA  is to achieve and sustain financial accountability, it must fundamentally  improve its underlying internal controls, financial management systems,  and operations to allow for the routine production of accurate, relevant,  and timely data to support program management. Our unqualified opinions on IRS\u2019s fiscal years 2002 and 2001 financial  statements were made possible by the extraordinary efforts of IRS  senior management and staff to develop processes to compensate for  serious internal control and systems deficiencies.",
      "  As noted earlier in  this testimony, IRS made significant progress during fiscal year 2002.   Nonetheless, it continued to require costly, resource-intensive  processes; statistical projections; external contractors; substantial  adjustments; and monumental human efforts to derive reliable year-end  balances for its financial statements. For example, IRS still does not  have a detailed record, or subsidiary ledger, for taxes receivable to allow  it to track and manage amounts due from taxpayers.  To enable it to  report a reliable taxes receivable balance in the absence of a subsidiary  ledger, IRS has, for the last 6 years, relied on a complex statistical  sampling approach that requires substantial human and financial  resources to conduct,",
      " takes months to complete, and yields tens of  billions of dollars of adjustments.  Similarly, while progress has been  made, IRS does not have an integrated property management system  that appropriately records property and equipment additions and  disposals as they occur and links costs on the accounting records to the  property records. It will be increasingly difficult for federal agencies to continue to rely on  significant costly and time-intensive manual efforts to achieve or maintain  unqualified opinions until automated, integrated processes and systems are  implemented that readily produce the necessary information.  As a result,  many federal agencies must accelerate their efforts to improve underlying  financial management systems and controls,",
      " which is consistent with  reaching the financial management success measures envisioned by the  JFMIP Principals and called for by the President\u2019s Management Agenda. FFMIA requires auditors, as part of CFO Act agencies\u2019 financial statement  audits, to report whether agencies\u2019 financial management systems  substantially comply with (1) federal financial management systems  requirements, (2) applicable federal accounting standards (U.S. generally  accepted accounting principles), and (3) the federal government\u2019s Standard  General Ledger (SGL) at the transaction level.  For fiscal year 2002,  auditors for 19 CFO Act agencies reported that the agencies\u2019 financial  management systems did not comply substantially with one or more of  these three FFMIA requirements.",
      "  For the remaining 5 CFO Act agencies,  auditors provided negative assurance, meaning that nothing came to their  attention indicating that these agencies\u2019 financial management systems did  not substantially meet FFMIA requirements. The auditors for these 5  agencies did not definitively state whether these agencies\u2019 systems  substantially complied with FFMIA requirements, as is required under the  statute.  Meeting the requirements of FFMIA has presented long-standing,  significant challenges.  These challenges will be resolved only through  time, investment, and sustained emphasis on correcting deficiencies in  federal financial management systems.  GAO plans to report to the  Congress by October 1,",
      " 2003, on CFO Act agencies\u2019 FFMIA implementation  for fiscal year 2002, as required by the act. While federal agencies continue to make progress in addressing  weaknesses in their financial management systems, the serious  shortcomings reported for these systems result in the lack of reliable  financial information needed for making operating decisions day to day,  managing the federal government\u2019s operations more efficiently and  effectively, measuring program performance, executing the budget,  maintaining accountability, and preparing financial statements. For example, federal agency financial management systems are required to  produce information on the full cost of programs and projects.  This is not a  new expectation\u2014the requirement for managerial cost information has  been in place for more than a decade,",
      " since 1990 under the CFO Act and  since 1998 stemming from applicable accounting standards.  Currently,  some federal agencies are only able to provide cost accounting information  at the end of the fiscal year through periodic cost surveys.  Some federal  agencies, such as the Department of the Interior\u2019s Bureau of Land  Management, are experimenting with methods of accumulating and  assigning costs to obtain the managerial cost information needed to  enhance programs, improve processes, establish fees, develop budgets,  prepare financial reports, and report on performance. Having such  financial information is the goal of FFMIA and the CFO Act, necessary for  implementing GPRA,",
      " and critical to the transition to a more results- oriented federal government as envisioned in the President\u2019s Management  Agenda. To remedy financial management systems weaknesses and carry out the  President\u2019s Management Agenda for improving financial management,  OMB, and the CFO Act agencies will need to aggressively and rigorously  collaborate. Our work to identify financial management best practices in  world-class organizations has identified key factors for successfully  modernizing financial systems, including (1) reengineering business  processes in conjunction with implementing new technology, (2)  developing systems that support the partnership between finance and  operations, and (3) translating financial data into meaningful data.",
      "  We  identified other financial management best practices as well, such as   (1) providing clear, strong executive leadership, (2) making financial  management an entitywide priority, and (3) building a culture of control  and accountability. The size and complexity of many federal agencies and the discipline  needed to overhaul or replace their financial management systems present  a significant challenge\u2014not simply a challenge to overcome a technical  glitch, but a demanding management challenge that requires attention from  the highest levels of the federal government along with sufficient human  capital resources to effect lasting change.  This will be a particular  challenge at the new Department of Homeland Security (DHS), where  federal agencies,",
      " many of which have ongoing challenges in their systems,  processes, or internal controls over financial information, are becoming  part of the new department. DHS, along with other federal agencies, has a  stewardship obligation to prevent fraud, waste, and abuse, to use tax  dollars appropriately, and to ensure financial accountability to the  President, the Congress, and the American people. In addition to  addressing incoming agencies\u2019 challenges, DHS will need to focus on  building future systems as part of its enterprise architecture approach to  ensure an overarching framework for the agency\u2019s integrated financial  management processes.  Plans must be developed and implemented to  bridge the many financial environments in which incoming agencies  currently operate to an integrated DHS system.",
      " We recognize that it will take time, investment, and sustained emphasis on  correcting deficiencies to improve federal financial management systems  at DHS and other federal agencies to the level required by FFMIA.  The  JFMIP Principals\u2019 leadership, commitment, and oversight will be important  to provide the needed impetus to meet this challenge. Addressing Major  Impediments to an  Opinion on  Consolidated Financial  Statements As I mentioned earlier, for the past 6 fiscal years, the federal government  has been required to prepare, and have audited, consolidated financial  statements.  Successfully meeting this requirement is tightly linked to the  requirement for the 24 CFO Act agencies to also have audited financial  statements.",
      "  This has stimulated extensive cooperative efforts and  considerable attention by agency chief financial officers, inspectors  general, Treasury and OMB officials, and GAO.  With the benefit of several  years\u2019 experience by the federal government in having the required  financial statements subjected to audit, the time has come to focus even  more intensified attention on the most serious obstacles to achieving an  opinion on the U.S. government\u2019s consolidated financial statements.  In this  regard, the JFMIP Principals have discussed plans and strategies for  addressing impediments to an opinion on the U.S. government\u2019s  consolidated financial statements.  Three major impediments to an opinion  on the consolidated financial statements are (1)",
      " serious financial  management problems at DOD, (2) the federal government\u2019s inability to  fully account for and reconcile billions of dollars of transactions between  federal entities, and (3) the federal government\u2019s inability to properly  prepare the consolidated financial statements. Reforming Financial  Management at DOD Essential to achieving an opinion on the consolidated financial statements  is resolution of the serious financial management problems at DOD, which  we have designated as high risk since 1995.  In accordance with provisions  of the National Defense Authorization Act for fiscal year 2002, DOD  reported that the department\u2019s financial management systems were not  able to provide adequate evidence supporting material amounts in its fiscal  year 2002 financial statements.",
      "  DOD asserted that it is unable to comply  with applicable financial reporting requirements for (1) property, plant, and  equipment, (2) inventory and operating materials and supplies, (3) military  retirement health care actuarial liability, (4) environmental liabilities, (5)  intragovernmental eliminations and related accounting adjustments, and  (6) cost accounting by suborganization/responsibility segment and major  program.  Based largely on DOD\u2019s assertion, the DOD inspector general  again disclaimed an opinion on DOD\u2019s financial statements for fiscal year  2002 as it had for the previous 6 fiscal years.",
      " To date, none of the military services or major DOD components has  passed the test of an independent financial audit because of pervasive  weaknesses in DOD\u2019s financial management systems, operations, and  internal control, including an inability to compile financial statements that  comply with generally accepted accounting principles.  The department  has made progress in a number of areas but is far from solving a range of  serious financial management problems.  Their resolution, however, is key  to having auditable consolidated financial statements because DOD had  budget authority of $385 billion for fiscal year 2002, or about 18 percent of  the entire federal budget;",
      " is accountable for a vast amount of government  assets worldwide; and incurs a substantial amount of the reported  liabilities. DOD\u2019s financial management deficiencies adversely affect not only the  department\u2019s ability to prepare auditable financial statements, but also its  ability to control costs, ensure basic accountability, anticipate future costs  and claims on the budget (such as for health care, weapons systems, and  environmental liabilities), measure performance, maintain control of funds,  prevent fraud, and address pressing management issues.  For example, we  recently reported on fundamental flaws in DOD\u2019s systems, processes, and  overall internal control environment, such as those related to  pervasive purchase and travel card breakdowns that resulted in  numerous instances of potentially fraudulent,",
      " improper, and abusive  transactions and increased DOD\u2019s vulnerability to theft and misuse of  government property;  adjustments to DOD\u2019s closed appropriations that resulted in about $615  million in adjustments that should not have been made, including $146  million that were illegal; and  accountability over critical items, such as chemical and biological  protective garments, that resulted in DOD\u2019s excessing and selling  unused garment sets for about $3 each, while simultaneously procuring  hundreds of thousands of similar garment sets for over $200 per set. As discussed in our recent reporting on the management challenges  facing the government, overhauling DOD\u2019s financial management  operations represents a major challenge that goes far beyond financial  accounting to the very fiber of the department\u2019s range of business  operations and management culture.",
      " In prior years, DOD expended  significant resources and made material amounts of adjustments to derive  its financial statements. However, such statements were determined to be  unauditable. In this regard, as previously mentioned, section 1008 of the  National Defense Authorization Act for fiscal year 2002 provides a  framework for redirecting the department\u2019s resources from the preparation  and audit of financial statements to improving DOD\u2019s financial  management systems and financial management policies, procedures, and  internal controls.  Administrations over the past 12 years have attempted to  address these problems in various ways but have largely been unsuccessful  despite good intentions and significant effort.",
      " As we testified in March 2002 and highlighted in our more recent reports,  four underlying causes of problems have impeded past reform efforts at  DOD:   The lack of accountability and sustained top-level leadership hinders  DOD\u2019s ability to meet its performance goals.  Major improvement  initiatives must have the direct, active support and involvement of  the Secretary and Deputy Secretary of Defense to ensure that daily  activities throughout the department remain focused on achieving  shared, agencywide outcomes and success.  Furthermore, sustaining  commitment by top leadership to performance goals is a particular  challenge for DOD because the average tenure of DOD\u2019s top political  appointees is only 1.",
      "7 years.  Based on our survey of best practices of  world-class financial management organizations, it is clear that  strong executive leadership is essential to (1) making financial  management an entitywide priority, (2) redefining the role of finance,  (3) providing meaningful information to decision makers, and (4)  building a team of people that delivers results. Cultural resistance to change and stovepiped operations have  impeded DOD\u2019s ability to implement broad-based management  reforms.  We found that the effectiveness of the Defense Management  Council, established in 1997, was impaired because members were  not able to put aside their particular military services\u2019 or DOD  agencies\u2019 interests to focus on departmentwide approaches.",
      "  DOD\u2019s  stovepiped approach is most evident in its current financial  management systems environment, which DOD recently estimated to  include 1,800 systems and system development projects\u2014many of  which were developed in piecemeal fashion and evolved to  accommodate different organizations, each with its own policies and  procedures. Lack of clear, linked goals and performance measures impedes  DOD\u2019s ability to attain strategic goals with the risk that units are  operating autonomously, rather than collectively.  In our assessment  of DOD\u2019s fiscal year 2000 Financial Management Improvement  Plan\u2014its most recent plan\u2014we found that it presented the military  services\u2019 and DOD components\u2019 individual improvement initiatives  but did not clearly articulate how their individual efforts would result  in a collective,",
      " integrated DOD-wide approach to financial  management improvement.  In addition, the plan did not include  performance measures to assess DOD\u2019s progress in resolving  financial management problems.  Furthermore, while DOD plans to  invest billions of dollars in modernizing its financial management  systems, it is in the initial stages of developing an overall blueprint,  or enterprise architecture, to guide and direct these investments. Lack of incentives to change existing \u201cbusiness-as-usual\u201d processes,  systems, and structures contributes to DOD\u2019s inability to carry out  needed fundamental reform.   Traditionally, DOD has focused more  on justifying its need for more funding and moving programs and  operations through the process than on achieving better program  outcomes.",
      "  It does not (1) reward behaviors that contribute to DOD- wide and congressional goals, (2) develop motivational incentives for  decision makers to guide them toward better program outcomes, or  (3) provide congressional focus on more results-oriented and  resource allocation decisions. On September 10, 2001, Secretary of Defense Rumsfeld recognized the far- reaching nature of DOD\u2019s financial management problems and announced a  broad, top-priority initiative intended to \u201ctransform the way the department  works and what it works on.\u201d  This new broad-based business  transformation initiative, led by DOD\u2019s Senior Executive Council and the  Business Initiative Council,",
      " incorporates a number of defense reform  initiatives begun under previous administrations but also encompasses  additional fundamental business reform proposals.  In announcing his  initiative, Secretary Rumsfeld recognized that transformation would be  difficult and expected the needed changes would take 8 or more years to  complete.  The Secretary\u2019s initiative is consistent with the findings of an  independent study he commissioned that concluded that DOD would have  to undergo \u201ca radical financial management transformation\u201d and that it  would take more than a decade to achieve.  Secretary Rumsfeld recently  included improving DOD\u2019s financial management as one of his top 10  priorities, and DOD has already taken a number of actions intended to  address its serious financial management problems.",
      " In addition, as I  previously mentioned, DOD has a major effort under way to develop a DOD  enterprise architecture that is intended to prescribe a blueprint for  operational and technological changes in its financial and related business  systems operations.  While DOD has a long way to go, its efforts over the  past year represent important progress.  The level of top leadership that  has been brought to bear on this challenge will have to be sustained with a  goal of achieving lasting improvement that truly transforms DOD\u2019s business  systems and operations and enables the department to meet the mandate of  the CFO Act and achieve the President\u2019s Management Agenda\u2019s goal of  improved financial management performance.",
      " Addressing  Intragovernmental  Transactions OMB and Treasury require CFO Act agencies to reconcile selected  intragovernmental activity and balances with their \u201ctrading partners\u201d and  to report on the extent and results of intragovernmental activity and  balances reconciliation efforts.  The inspectors general reviewed these  reports and communicated the results of their reviews to OMB, Treasury,  and GAO. A substantial number of the CFO Act agencies did not fully  perform the required reconciliations for fiscal years 2002 and 2001, citing  reasons such as (1) trading partners not providing needed data, (2)",
      "  limitations and incompatibility of agency and trading partner systems, and  (3) human resource issues.  For both of these years, amounts reported for  federal agency trading partners for certain intragovernmental accounts  were significantly out of balance.  In addition, significant differences in  other intragovernmental accounts, primarily related to appropriations, will  need to be resolved. As we reported last year, the heart of the intragovernmental transactions  issue is that the federal government lacked clearly articulated business  rules for these transactions so that they would be handled consistently by  agencies. To address certain issues that contributed to the out of balance  condition for intragovernmental activity and balances,",
      " OMB has  established a set of standard business rules for governmentwide  transactions among trading partners and is requiring quarterly  reconciliations of intragovernmental activity and balances beginning in  fiscal year 2003.  For example, in accordance with one of the business  rules, beginning in fiscal year 2003 for intragovernmental investments with  Treasury\u2019s Bureau of the Public Debt (BPD), BPD and trading partner  agencies are required to use the same method for recording amortization  on market-based notes, bonds, and zero coupon securities.  In the past,  differences in the amortization methods being used have caused out of  balance conditions for related intragovernmental activity and balances.",
      "   Resolving the intragovernmental transactions problem remains a difficult  challenge and will require a commitment by the CFO Act agencies and  continued strong leadership by OMB. Preparing the Consolidated  Financial Statements The federal government did not have adequate systems, controls, and  procedures to properly prepare its consolidated financial statements, as  described below. Also, disclosure of certain financial information was not  presented in the consolidated financial statements in conformity with U.S.  generally accepted accounting principles. Consolidated Financial  Statement Compilation Due to the current financial statement compilation process, the federal  government could not adequately ensure that the information for each  federal agency included in the consolidated financial statements was  consistent with the underlying agency financial statements.",
      "  This process  also requires significant human and financial resources and does not  adequately leverage the existing work and work products resulting from  federal agencies\u2019 audited financial statements.  The problems are further  compounded by the need for broad changes in the structure of the  government\u2019s SGL accounts and the process for maintaining the SGL. The net position reported in the consolidated financial statements is  derived by subtracting liabilities from assets, rather than through balanced  accounting entries.  To make the fiscal years 2002 and 2001 consolidated  financial statements balance, Treasury recorded a net $17.1 billion and  $17.3 billion decrease to net operating cost,",
      " respectively, on the Statement  of Operations and Changes in Net Position, which it labeled unreconciled  transactions.  An additional net $12.5 billion and $3.9 billion of  unreconciled transactions were improperly recorded in net cost for fiscal  years 2002 and 2001, respectively.  Treasury attributes these net  unreconciled transaction amounts primarily to the federal government\u2019s  inability to properly identify and eliminate transactions between  governmental entities, federal agency adjustments that affected net  position, and other errors. Treasury was unable to adequately identify and  explain the gross components of such amounts. Unreconciled transactions  also may exist because the federal government does not have effective  controls over reconciling net position.",
      " The federal government did not have an adequate process to reconcile the  operating results, which for fiscal year 2002 showed a net operating cost of  $364.9 billion, to the budget results, which for the same period showed a  unified budget deficit of $157.7 billion. Treasury is currently developing a new system and procedures to prepare  the consolidated financial statements beginning with fiscal year 2004.   These actions are intended to, among other things, directly link information  from federal agencies\u2019 audited financial statements to amounts reported in  the consolidated financial statements and facilitate the reconciliation of net  position. Resolving the consolidated financial statement compilation  process issues will require continued strong leadership by Treasury  management.",
      " Elimination of  Intragovernmental Activity and  Balances from the Consolidated  Financial Statements Consolidated financial statements are intended to present the results of  operations and financial position of the components that make up a  reporting entity as if the entity were a single enterprise.  When preparing  the consolidated financial statements, the preparer must eliminate  intragovernmental activity and balances between the federal agencies.   Because of federal agencies\u2019 problems in handling their intragovernmental  transactions, Treasury\u2019s ability to eliminate these transactions is impaired.   Significant differences reported in intragovernmental accounts, as noted  above, have been identified.",
      "  To help federal agencies better perform their  reconciliations, Treasury recently began providing agencies with detailed  trading partner information.  Intragovernmental activity and balances are  \u201cdropped\u201d or \u201coffset\u201d in the preparation of the consolidated financial  statements rather than eliminated through balanced accounting entries.   This contributes to the federal government\u2019s inability to determine the  impact of these differences on amounts reported in the consolidated  financial statements.  The continued strong leadership of Treasury will be  important to resolving the issues surrounding the elimination of  intragovernmental activity and balances from the consolidated financial  statements. Protecting the Public  Interest Two audit matters have come to the fore and are key to protecting the  public interest.",
      "  One matter involves auditors\u2019 responsibilities for reporting  on internal control, and the other concerns auditor independence. Auditors\u2019 Responsibilities  for Reporting on Internal  Control We have long believed that auditors have an important responsibility to  provide an opinion on the effectiveness of internal control over financial  reporting and compliance with laws and regulations.  Currently, this is not  required by American Institute of Certified Public Accountants (AICPA)  auditing standards or by OMB in its guidance to auditors conducting  federal agency financial statement audits. For financial statements audits that we conduct\u2014which include the U.S.  government\u2019s consolidated financial statements, the financial statements of  the IRS,",
      " the Schedules of Federal Debt managed by the Bureau of the  Public Debt, and the financial statements of the Federal Deposit Insurance  Corporation Funds and numerous small entities\u2019 operations and funds\u2014we  issue a separate opinion on the effectiveness of internal control over  financial reporting and compliance with laws and regulations. For years we have provided opinions on internal control effectiveness  because of the importance of internal control to protecting the public\u2019s  interest.  Our reports have engendered major improvements in internal  control.  As you might expect, as part of the annual audit of our own  financial statements, we practice what we recommend to others and  contract with an independent public accounting firm for both an opinion on  our financial statements and an opinion on the effectiveness of our internal  control over financial reporting and compliance with laws and regulations.",
      " Although OMB requires testing of these internal controls, auditors are not  required to provide an opinion on internal control effectiveness.  However,  we found that 3 of the 24 CFO Act agency auditors (those for the General  Services Administration, SSA, and the Nuclear Regulatory Commission)  provided an opinion on the effectiveness of internal control as of  September 30, 2002.  Our hope is that all CFO Act agencies and the new  DHS will follow suit in future years.  In this regard, last year, in response to  major breakdowns in corporate accountability, auditing, and corporate  governance in the private sector,",
      " the Congress passed the Sarbanes-Oxley  Act of 2002 to, among other things, improve quality and transparency in  financial reporting and independent audits of publicly traded companies  (\u201cissuers\u201d).  In the area of internal control reporting, issuers are required to  establish and maintain adequate internal control structure and procedures  for financial reporting and include in the annual report a statement of  management\u2019s responsibility for and management\u2019s assessment of the  effectiveness of those controls and procedures.  In addition, an issuer\u2019s  auditor is required to attest to, and report on, the assessment made by the  management of the issuer on the effectiveness of internal control over  financial reporting.",
      "  In other words, an issuer\u2019s auditor will provide an  attestation, or opinion, on management\u2019s assertions about the effectiveness  of internal controls over financial reporting.   \u201cInternal controls and procedures for financial reporting\u201d is generally  defined as controls that pertain to the preparation of external financial  statements that are fairly presented in conformity with generally accepted  accounting principles.  Specifically, controls over financial reporting  include the objectives of ensuring that transactions are properly recorded,  processed, and summarized to permit the preparation of financial  statements in conformity generally accepted accounting principles. GAO strongly believes that auditor reporting on internal control is a critical  component of monitoring the effectiveness of an organization\u2019s internal  control and accountability.",
      "  By giving assurance about internal control,  auditors of federal financial statements can better serve their clients and  other financial statements users and better protect the public interest by  having a greater role in providing assurances of the effectiveness of  internal control in deterring fraudulent financial reporting, protecting  assets, and providing an early warning of internal control weaknesses. Auditor Independence and  Government Auditing  Standards The independence of auditors\u2014both in fact and appearance\u2014is critical to  the credibility of financial reporting.  Auditors have the capability of  performing a range of valuable services for their clients, and providing  certain nonaudit services can ultimately be beneficial to federal entities.",
      "   However, in some circumstances, it is not appropriate for auditors to  perform both audit and certain nonaudit services for the same client.  In  these circumstances, the auditor, the client, or both will have to make a  choice as to which of these services the auditor will provide. These concepts, which I continue to strongly believe are in the public  interest, were reflected in the revisions to auditor independence  requirements for government audits, which GAO issued last year as part  of Government Auditing Standards.  The standard, among other things,  strengthens the rules associated with providing nonaudit services and  includes a principle-based approach to addressing this issue,",
      " supplemented  with certain safeguards.  The two overarching principles in the standard for  nonaudit services are that   auditors should not perform management functions or make   auditors should not audit their own work or provide nonaudit services  in situations where the amounts or services involved are significant or  material to the subject matter of the audit. In making judgments on independence under Government Auditing  Standards and applying the independence standard\u2019s principles and  safeguards, audit organizations should take a \u201csubstance over form\u201d  approach and consider the nature and significance of the services provided  to the audited entity\u2014the facts and circumstances.  Before an audit  organization agrees to perform nonaudit services,",
      " it should carefully  consider the need to avoid situations that could lead reasonable third  parties with knowledge of the facts and circumstances to conclude that the  auditor is not able to maintain independence in conducting audits.  It is  imperative that auditors always be viewed as independent in fact and  appearance. Understandably, GAO received many inquiries about the new independence  standard due to its significant effect on auditors in connection with audits  of those who are required to use or have adopted the use of Government  Auditing Standards.  Working with the Comptroller General\u2019s Advisory  Council on Government Auditing Standards and other interested parties,  we issued further guidance in the form of questions and answers related to  the independence standard\u2019s implementation time frame,",
      " underlying  concepts, and application in specific nonaudit circumstances. The independence standard and the recently issued question and answer  document are the initial steps in GAO\u2019s continuing efforts to enhance  Government Auditing Standards and educate auditors on revisions to  these standards and on implementation issues surrounding the  independence standard.  Within the next several months, GAO will issue  revisions to Government Auditing Standards to help ensure that the  standards continue to meet the needs of the audit community and the  public it serves.  The revision will expand and change (1) the types of  audits and services that can be performed under the standards and (2)",
      " the  application of the standards, where relevant, to be consistent with the  various types of audits.  Changes are also being made to enhance the  understandability of the standards.  To educate the audit community about  the revised standards as well as the independence standard, GAO  continues to provide many presentations to government auditors and  private practitioners, in addition to answering hundreds of questions  regarding implementation issues. Closing Comments Our report on the U.S. government\u2019s consolidated financial statements for  fiscal years 2002 and 2001 highlights the need to continue addressing the  government\u2019s serious financial management weaknesses.  Looking beyond  current progress by federal agencies in attaining unqualified opinions on  financial statements,",
      " it will be essential for the federal government to begin  moving away from the extraordinary efforts many federal agencies  continue to use to prepare financial statements and toward giving  prominence to strengthening the government\u2019s financial systems, reporting,  and controls.  This approach becomes even more critical as the federal  government progresses to an accelerated financial statement reporting  time frame, and it is the only way the government can meet the end goal of  making timely, accurate, and useful financial information routinely  available to the Congress, other policymakers, and the American public. The requirement for timely, accurate, and useful financial and performance  management information is greater than ever,",
      " as the Congress and the  administration prepare to meet tomorrow\u2019s fiscal challenges.  This type of  financial information is central to managing the federal government\u2019s  operations more efficiently, effectively, and economically and in supporting  GPRA.  Moreover, meaningful financial and performance information can  form the basis for reconsidering the relevance or \u201cfit\u201d of any federal  program or activity in today\u2019s world and for the future. In closing Mr. Chairman, I want to underscore the importance of the  additional impetus provided by President Bush through his President\u2019s  Management Agenda and the Executive Branch Management Scorecard for  coming to grips with federal financial management problems,",
      " indeed  management problems across the board. Regarding DOD in particular,  Secretary of Defense Rumsfeld\u2019s vision and approach for transforming the  department\u2019s full range of business processes is serious and encouraging.   These efforts will be key to fulfilling the President\u2019s Management Agenda  and addressing the largest obstacle to an opinion on the U.S. government\u2019s  consolidated financial statements.  The cooperative efforts spearheaded by  the JFMIP Principals have been most encouraging in developing the short-  and long-term strategies and plans necessary to address many of the  problems I have discussed this morning.  In addition, GAO has probably  never had a better working relationship with OMB and cabinet level and  other key officials on a range of \u201cgood government issues\u201d that are of  critical importance and are inherently non-partisan in nature.",
      "  While these  and other factors provide an enhanced likelihood for success, in the end it  is results that count. Finally, I want to reiterate the value of sustained congressional interest in  these issues, as demonstrated by this hearing and those the former  Subcommittee on Government Efficiency, Financial Management, and  Intergovernmental Relations held over the past several years to oversee  financial management reform.  It will also be key that the appropriations,  budget, authorizing, and oversight committees hold agency top leadership  accountable for resolving these problems and that they support  improvement efforts. Contacts For further information regarding this testimony, please contact Jeffrey C.",
      "  Steinhoff, Managing Director, and Gary T. Engel, Director, Financial  Management and Assurance, at (202) 512-2600. CFO Act Agencies: Fiscal Year 2002 Audit  Results, Principal Auditors, and Number of  Other Audit Contractors R. Navarro & Associates, Inc.\n"
    ],
    "length": 15593,
    "hardness": null,
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  },
  {
    "id": 73,
    "question": null,
    "answer": "Although the U.S. food supply is generally considered safe, foodborne illness remains a common, costly, yet largely preventable public health problem. The safety and quality of food involves 16 federal agencies. For more than 4 decades, GAO has reported on the fragmented federal food safety oversight system. Because of potential risks to the economy and to public health and safety, food safety has remained on GAO's list of high-risk areas since 2007. GAO was asked to examine efforts toward and options for addressing fragmentation in the federal food safety oversight system. This report (1) describes the actions HHS, USDA, and OMB have taken since 2014 to address fragmentation and evaluates the extent to which these agencies have addressed two prior GAO recommendations for government-wide planning and (2) assesses actions that food safety and other experts suggest are needed to improve the federal food safety oversight system. GAO convened an expert meeting, reviewed agency documents, and interviewed agency officials. Since 2014, the Department of Health and Human Services' (HHS) Food and Drug Administration (FDA) and the U.S. Department of Agriculture's (USDA) Food Safety and Inspection Service (FSIS), the federal agencies with primary responsibility for food safety oversight, have taken some actions to address fragmentation in the federal food safety oversight system, and HHS has updated its strategic plan to address interagency coordination on food safety. However, USDA has not yet fully implemented GAO's December 2014 recommendation that it describe interagency collaboration on food safety in its strategic and performance planning documents. In addition, the Office of Management and Budget (OMB) has not addressed GAO's March 2011 recommendation to develop a government-wide plan for the federal food safety oversight system. At a 2-day meeting GAO hosted in June 2016, 19 food safety and other experts agreed that there is a compelling need to develop a national strategy to address ongoing fragmentation and improve the federal food safety oversight system. This is consistent with a prior GAO finding that complex interagency and intergovernmental efforts can benefit from developing a national strategy. The experts identified the following key elements of such a strategy: Purpose: The starting point for a national strategy includes defining the problem, developing a mission statement, and identifying goals. Leadership: The national strategy should establish sustained leadership at the highest level of the administration with authority to implement the strategy and be accountable for its progress. The strategy also needs to identify roles and responsibilities and involve all stakeholders. Resources: The national strategy should identify staffing and funding requirements and the sources of funding for its implementation. Monitoring: The national strategy should establish milestones that specify time frames, baselines, and metrics to monitor progress. The strategy should be sufficiently flexible to incorporate changes identified through monitoring and evaluation of progress. Actions: In addition to long-term actions, the national strategy should include short-term actions to gain traction in improving the food safety system. Actions should focus on preventing, rather than reacting to, outbreaks of foodborne illnesses. These elements are consistent with characteristics GAO has previously identified as desirable in national strategies. Past efforts to develop high-level strategic planning for food safety have depended on leadership from the Executive Office of the President (EOP). By developing a national strategy to guide the federal food safety oversight system and address ongoing fragmentation, the EOP, in consultation with relevant federal agencies and other stakeholders, could provide a framework for making organizational and resource decisions. Among other things, such a strategy also could provide a framework for addressing GAO's recommendation for a government-wide plan and for removing food safety oversight from GAO's High-Risk List.\n",
    "docs": [
      "Background This section discusses the federal oversight of food safety, past reviews  of the federal food safety oversight system, and the status of federal  efforts to address criteria for removing oversight of food safety from our  High-Risk List. Federal Oversight of Food  Safety Of the 16 federal agencies that collectively administer at least 30 federal  laws governing food safety and quality, FDA and FSIS have primary  responsibility for food safety oversight. Table 1 summarizes the food  safety responsibilities of all 16 agencies. As we said earlier, for more than 4 decades, we have reported on the  fragmented nature of federal food safety oversight. For example,",
      " in our  past work, we described how FDA is generally responsible for ensuring  that eggs in their shells (referred to as shell eggs) are safe, wholesome,  and properly labeled; FSIS is responsible for the safety of eggs  processed into egg products; USDA\u2019s Agricultural Marketing Service  (AMS) sets quality and grade standards for shell eggs, such as Grade A;  USDA\u2019s Animal and Plant Health Inspection Service (APHIS) manages  the program that helps ensure laying hens are free from Salmonella at  birth; and FDA oversees the safety of the feed that hens eat. In addition,  we reported that FDA has primary responsibility for regulating  manufacturers of frozen cheese pizzas,",
      " FSIS has primary responsibility  for regulating manufacturers of frozen pizzas with meat, and multiple  additional federal agencies play roles in regulating the components of  either type of pizza. Similarly, we have noted that FSIS inspects  manufacturers of packaged open-face meat or poultry sandwiches (i.e.,  those with one slice of bread), but FDA inspects manufacturers of  packaged closed-face meat or poultry sandwiches (i.e., those with two  slices of bread). However, establishments producing closed-faced meat  or poultry sandwiches intended for export to Canada can be inspected for  Hazard Analysis and Critical Control Point (HACCP) compliance by FSIS  under a voluntary inspection program,",
      " and samples collected by FSIS will  be tested for certain pathogens by AMS. Past Reviews of the  Federal Food Safety  Oversight System In an August 1998 report, the National Academies concluded that the  fragmented federal food safety oversight system was not well-equipped to  meet emerging challenges. In response to the academies\u2019 report, the  President established a Council on Food Safety later that year and  charged it with developing a comprehensive strategic plan for federal food  safety activities, among other things. The council\u2019s Food Safety Strategic  Plan, released on January 19, 2001, recognized the need for a  comprehensive food safety statute and concluded that the organizational  structure of the food safety system makes it more difficult to achieve  future improvements in efficiency,",
      " efficacy, and allocation of resources  based on risk. In October 2001, we recommended that USDA, HHS, and  the Assistant to the President for Science and Technology, as joint chairs  of the President\u2019s Council on Food Safety, reconvene the council, which  had disbanded earlier that year, to facilitate interagency coordination on  food safety regulation and programs. In our prior work, we have also identified options for reducing  fragmentation and overlap in food safety oversight, including alternative  organizational structures. These options include establishing a single food  safety agency, a food safety inspection agency, a data collection and  risk analysis center,",
      " and a coordination mechanism led by a central  chair. We also suggested that Congress might wish to assess the need  for comprehensive, uniform, risk-based food safety legislation or to  amend FDA\u2019s and USDA\u2019s existing authorities. (For descriptions of  selected options, see app. II.) When we added the federal oversight of food safety to our list of high-risk  areas in January 2007, we found that a challenge for the 21st century  was to find a way for federal agencies with food safety responsibilities to  integrate the myriad food safety programs and strategically manage their  portfolios to promote the safety and integrity of the nation\u2019s food supply.",
      "  We noted that we had detailed problems with the fragmented federal food  safety oversight system and had found that the system had caused  inconsistent oversight, ineffective coordination, and inefficient use of  resources. We stated that Congress and the executive branch could and  should create the environment needed to look across the activities of  individual programs within specific agencies and toward the goals that the  federal government is trying to achieve. To that end, in the January 2007  High-Risk Update, we reported that we had recommended that a  mechanism be put in place to facilitate interagency coordination on food  safety regulations and programs. We also suggested that Congress and  the executive branch work together to develop a government-wide  performance plan for food safety.",
      " A number of actions have been taken since we added federal oversight of  food safety to our High-Risk List in 2007. In March 2009, the President  established the Food Safety Working Group (FSWG) to coordinate  federal efforts and develop goals to make food safer. In January 2011,  the FDA Food Safety Modernization Act (FSMA) was enacted,  representing the largest expansion and overhaul of U.S. food safety  authorities since the 1930s. Also in January 2011, the statutory  framework for performance management in the federal government,  originally set out in the Government Performance and Results Act of 1993  (GPRA), was updated by the GPRA Modernization Act of 2010  (GPRAMA). GPRAMA adds new requirements for addressing  crosscutting efforts in federal strategic and performance planning that  help drive collaboration and address fragmentation.",
      " For example,  GPRAMA requires agencies\u2019 strategic plans and performance plans to  contain a description of how the agencies are working with other agencies  to achieve their goals and objectives. GPRAMA requirements apply at the  departmental or agency level, not to organizational components. In March 2011, we recommended that OMB, in consultation with the  federal agencies having food safety responsibilities, develop an annually  updated government-wide performance plan for food safety. We stated  that a performance plan offers a framework to help ensure agencies\u2019  goals are complementary and mutually reinforcing and to help provide a  comprehensive picture of the federal government\u2019s performance on food  safety.",
      " Furthermore, we stated that such a plan could assist decision  makers in balancing trade-offs and comparing performance when  resource allocation and restructuring decisions are made. In December  2014, because OMB had not taken action to develop a government-wide  performance plan for food safety and the FSWG was no longer meeting,  we suggested matters for Congress to consider, including (1) directing  OMB to develop a government-wide performance plan for food safety that  includes results-oriented goals and performance measures and a  discussion of strategies and resources and (2) formalizing the FSWG  through statute to help ensure sustained leadership across food safety  agencies over time.",
      " Congress has not taken action. We found that FDA and FSIS were involved in numerous mechanisms to  facilitate interagency coordination on food safety; however, the  mechanisms focused on specific issues and none provided for broad- based, centralized collaboration. As of September 2016, federal oversight  of food safety remained on our High-Risk List. Table 2 shows nine  selected collaborative mechanisms involving FDA and FSIS, as reported  in December 2014. Status of Federal Efforts to  Address Criteria for  Removing Oversight of  Food Safety from Our  High-Risk List We have identified five criteria, all of which must be fully met for an area  to be removed from our High-Risk List.",
      " In our February 2015 High-Risk  Update, we found that for federal oversight of food safety, three of the  criteria had been partially met, and two had not been met (see table 3). Our assessment of whether the criteria were met focused largely on  efforts Congress and the executive branch had made toward developing  a government-wide performance plan for food safety and establishing a  centralized mechanism for broad-based collaboration, such as the  FSWG. In our February 2015 High-Risk Update, we noted that, with the  enactment of GPRAMA in January 2011, Congress and the executive  branch demonstrated leadership commitment to improving collaboration  across the federal government.",
      " We also noted that HHS and USDA had  taken steps toward our December 2014 recommendation to implement  GPRAMA\u2019s crosscutting requirements for their food safety efforts but  could more fully address crosscutting food safety efforts in their individual  strategic and performance planning documents and thereby provide  building blocks toward implementing our March 2011 recommendation  that OMB develop a government-wide performance plan on food safety.  However, as of February 2015, OMB had not taken action on our  recommendation to develop such a plan. In addition, we noted that the  President had demonstrated leadership commitment and progress by  establishing the FSWG to coordinate federal efforts and develop goals to  make food safer.",
      " However, as of February 2015, the working group was  no longer meeting, and nothing had taken its place. Federal food safety  agencies also have the capacity to participate in a centralized,  collaborative mechanism on food safety\u2014like the FSWG\u2014but  congressional action would be required to formalize such a mechanism  through statute. HHS and USDA Have  Taken Some Actions  Since 2014 to  Address  Fragmentation, but  USDA and OMB  Have Not Fully  Addressed the Need  for Government-Wide  Planning HHS and USDA have taken some actions since 2014 to address  fragmentation in the federal food safety oversight system,",
      " and OMB has  focused on implementing FSMA, but USDA\u2019s and OMB\u2019s actions have not  fully addressed our two recommendations for government-wide planning.  Since 2014, HHS and USDA have continued and expanded collaboration  on specific food safety issues, and HHS has updated its strategic plan to  address interagency coordination on food safety. OMB has focused its  efforts on working with agencies to facilitate implementation of FSMA.  The facilitation, collaboration, and updates are positive steps, but USDA\u2019s  and OMB\u2019s actions do not fully address our two recommendations for  government-wide planning. Since 2014,",
      " HHS and  USDA Have Enhanced  Collaboration, and HHS  Has Updated Its Strategic  Plan to Address  Crosscutting Food Safety  Issues The two agencies with primary responsibility for food safety within HHS  and USDA\u2014FDA and FSIS, respectively\u2014continue to use the nine  collaborative mechanisms that we reported on in December 2014, all of  which focus on specific issues. For example, FDA and FSIS continue to  collaborate with CDC through the Interagency Food Safety Analytics  Collaboration to improve estimates of the most common sources of  foodborne illnesses. According to CDC\u2019s website, the three agencies  teamed up to create this collaboration.",
      " Its goal is to improve coordination  of federal food safety analytic efforts and address crosscutting priorities  for food safety data collection, analysis, and use. FSIS and FDA also  serve as the co-lead organizations for the food safety topic area under  Healthy People 2020, a national health promotion and disease prevention  initiative that provides 10-year national objectives for improving the health  of all Americans and includes 42 topic areas. The food safety topic area  has six objectives related to the goal of reducing foodborne illnesses in  the United States, such as reducing infections caused by key pathogens  transmitted commonly through food and increasing the proportion of  consumers who follow key food safety practices.",
      " According to USDA  officials, Healthy People 2020 informs their agency goals and their work  with CDC and FDA. In addition, over the past 2 years, FDA and FSIS have developed one  new collaborative mechanism, according to FDA and FSIS officials. The  mechanism, called the Interagency Collaboration on Genomics and Food  Safety (Gen-FS), also includes CDC and the National Institutes of Health  (NIH). Gen-FS focuses on sequencing the complete DNA of pathogens  for surveillance, detection and investigation of outbreaks, and antibiotic  resistance for pathogens causing intestinal illnesses transmitted by food  and other routes, according to FSIS officials.",
      " The Gen-FS steering  committee meets monthly to discuss harmonization of training, laboratory  methodologies, and data access and analysis, according to FDA officials. Furthermore, FDA officials said that implementing FSMA has been the  agency\u2019s major food safety focus over the past 2 years, and FDA is  partnering with nongovernmental stakeholders, state and local  governments, and federal agencies to ensure FSMA\u2019s successful  implementation. Under FSMA, FDA is responsible for more than 50  regulations, guidelines, and studies. This includes seven foundational  rules. Table 4 provides additional information on the foundational rules. For example, FDA issued the final FSMA rule on produce,",
      " one of the  foundational FSMA rules, in November 2015. The rule establishes  science-based minimum standards for the safe growing, harvesting,  packing, and holding of produce, meaning fruits and vegetables grown for  human consumption. To develop the rule, which went into effect on  January 26, 2016, FDA officials said they worked directly with farmers,  which required a significant amount of collaboration with USDA and the  states. In addition, these officials said they worked with the  Environmental Protection Agency (EPA) on water quality and safety  aspects of the produce rule, with the Department of Homeland Security  on the intentional adulteration rule,",
      " and with the Department of  Transportation on the sanitary transportation rule. Furthermore, in May  2016, we found that FDA had taken numerous steps to ensure  meaningful and timely input from nonfederal officials during development  of the FSMA-mandated rules on produce, human food, and animal food  but did not fully meet its tribal consultation responsibilities. OMB staff told us that their main food safety-related focus since 2014 has  been on meeting with agencies to oversee FSMA implementation. OMB  staff stated that they meet with FDA and FSIS officials via conference  calls on a regular basis to discuss the implementation of FSMA,",
      " as well  as the agencies\u2019 budgets, regulations, and food safety issues more  broadly. These meetings occur at times separately and at times with both  FDA and FSIS officials present, according to OMB staff. These staff also  said that they work on an agency-specific basis, helping agencies  develop agency-specific performance plans, talking to agencies about  how to improve performance, and working with agencies to collaborate on  FSMA implementation. In December 2014, we found that HHS and USDA did not fully address  crosscutting food safety efforts in their individual strategic and  performance planning documents and that doing so could help provide a  comprehensive picture of the federal government\u2019s performance on food  safety.",
      " We recommended that both HHS and USDA more fully describe  how they are working with other agencies to achieve food-safety-related  goals in their strategic and performance planning documents, as required  by GPRAMA, and the agencies agreed with our recommendation. Since  then, in taking steps to update its strategic and performance planning  documents to better address crosscutting food safety efforts, HHS  implemented our recommendation. Specifically, in February 2015, HHS  updated its strategic plan to more fully describe how it is working with  other agencies to achieve its food-safety-related goals and objectives.  Among other things, HHS described its collaboration with USDA,",
      " EPA,  and others through collaborative mechanisms such as the National  Antimicrobial Resistance Monitoring System, the Partnership for Food  Protection (PFP), and the Food Emergency Response Network.  However, USDA has not fully implemented our recommendation,  although it has taken some steps toward doing so. For example, FSIS  included more information on crosscutting food safety efforts in its fiscal  year 2017-2021 strategic plan and in its draft fiscal year 2017 annual plan  than it did in its prior strategic and annual plans. In its fiscal year 2017- 2021 strategic plan, it included a list of collaborations,",
      " and the draft fiscal  year 2017 annual plan includes a section on enhancing collaboration with  partners. In addition, FSIS officials told us that FSIS is partnering with  CDC, FDA, and NIH on the HHS agency priority goal to reduce foodborne  illness caused by Listeria. The priority goal includes (1) sequencing the  complete DNA of Listeria strains to improve the detection and  investigation of Listeria outbreaks and (2) FDA and FSIS jointly reporting  on their activities to reduce Listeria at various points across the food  supply chain. USDA plans to include information on interagency  collaboration in its next strategic plan,",
      " according to USDA officials. OMB\u2019s Efforts Since 2014  Do Not Address Our  Recommendation for a  Government-Wide Plan As noted above, HHS\u2019s and USDA\u2019s efforts since 2014 are positive steps  toward government-wide planning, but OMB has not addressed our  recommendation for a government-wide plan for the federal food safety  oversight system. Without an annually updated government-wide  performance plan for food safety that includes results-oriented goals,  performance measures, and a discussion of strategies and resources,  which we recommended to OMB in March 2011, Congress, program  managers, and other decision makers are hampered in their ability to  identify agencies and programs addressing similar missions and to set  priorities,",
      " allocate resources, and restructure federal efforts, as needed,  to achieve long-term goals. Also, without such a plan, federal food  safety efforts are not clear and transparent to the public. OMB staff told us that they were not aware of any current plans to  develop a government-wide performance plan for food safety. OMB staff  said that OMB works on an agency-specific basis, providing input on  agencies\u2019 performance plans and offering suggestions on how to improve  performance. However, agencies\u2019 individual performance plans alone do  not provide the integrated perspective on federal food safety performance  necessary to guide congressional and executive-branch decision making  and inform the public about what federal agencies are doing to ensure  food safety.",
      " A government-wide performance plan would provide a  coordinated action plan for food safety and a plan for monitoring and  measuring agencies\u2019 activities. We continue to believe that a government- wide plan is important for federal food safety oversight efforts. Food Safety and  Other Experts  Suggested That a  National Strategy Is  Needed to Improve  the Federal Food  Safety Oversight  System Food safety and government performance experts identified the  development and implementation of a national strategy for food safety as  a first step toward improving the federal food safety oversight system.  Experts identified examples of negative effects that continue to occur as a  result of fragmentation in the federal food safety oversight system.",
      " These  experts agreed that there is a compelling need to develop a national  strategy to provide a framework for strengthening that system and  addressing fragmentation and described five key elements that should be  included in such a strategy. Developing a national strategy for food safety  oversight could also provide a framework for addressing our March 2011  recommendation for a government-wide plan, our December 2014  matters for Congress to consider for leadership and planning, and criteria  for removing federal food safety oversight from the High-Risk List. Food Safety and  Government Performance  Experts Cited Negative  Effects of Fragmentation in  the Federal Food Safety  Oversight System During the 2-day meeting we hosted with the assistance of the National  Academies,",
      " food safety and government performance experts cited  examples of the negative effects that continue to occur as a result of  fragmentation in the federal food safety oversight system. These  examples further illustrate negative effects we have highlighted in our  past work, including our 2015 High-Risk Update. For example, experts  noted that FDA and FSIS have different statutory authorities. One expert  noted that the two agencies\u2019 statutory authorities result in two  fundamentally different approaches to inspections. FDA\u2019s authority  requires a risk-based approach, in which inspection rates vary depending  on the level of risk associated with a food product. FSIS\u2019s authority, in  contrast,",
      " directs the agency to examine the carcasses and parts of  covered animal species and all processed food products before they  enter the food supply. Because of these differences, an expert raised  questions about the proper allocation of resources based on risk. Commenting on the food safety system more broadly, several experts  noted that the allocation of resources is not necessarily connected to the  risk of foodborne illness. For example, one expert noted that at the  federal level, FSIS and FDA receive close to the same amount of funding  for food safety oversight but that FSIS is responsible for the safety of 20  percent of the food supply,",
      " and FDA is responsible for ensuring the safety  of 80 percent of it. Furthermore, because FSIS must meet continuous  inspection requirements, it may be allocating too many resources to  inspecting low-risk food processing facilities that produce foods that do  not pose substantial threats to public health, according to another  expert. For example, the expert highlighted the differences in resource  allocation by comparing inspection rates at facilities producing cheese  and pepperoni pizzas. A production line at the facility producing cheese  pizza, which is regulated by FDA, may be inspected once every 5 years.  On the other hand, a production line producing pepperoni pizza,",
      " which is  regulated by FSIS, is inspected daily. The expert said the risk of  foodborne pathogens related to both types of pizza is low because the  pizzas are cooked. While raw meat is a high-risk food, meat that is  thoroughly cooked, such as pepperoni on pizza, does not pose the same  level of risk because the process of cooking eliminates existing  pathogens. Experts Agreed That  There Is a Compelling  Need to Develop a  National Food Safety  Strategy and Identified Its  Key Elements The 19 experts attending our 2-day meeting agreed that there is a  compelling need to develop a national strategy to provide a framework for  strengthening the federal food safety oversight system and addressing  fragmentation.",
      " The experts identified and described five key elements  that should be included in a national strategy for food safety oversight.  These five key elements follow. Purpose: The starting point for developing a national strategy  includes defining the problem, developing a mission statement, and  identifying goals. Leadership: The national strategy should establish sustained  leadership to achieve progress in food safety oversight. The  leadership should reside at the highest level of the administration and  needs to have authority to implement the national strategy and be  accountable for its progress. The strategy also needs to identify roles  and responsibilities for implementing the national strategy and involve  all stakeholders, including federal, tribal,",
      " state, and local government  agencies; industry; consumer groups; academia; and key  congressional committees. Resources: The national strategy should identify staffing and funding  requirements and the sources of funding for implementing the  strategy. Monitoring: The national strategy should establish milestones that  specify time frames, baselines, and metrics to monitor progress. The  national strategy should be sufficiently flexible to incorporate changes  identified through monitoring and evaluation of progress. Actions: In addition to long-term actions, the national strategy should  include short-term actions, such as improving training for food safety  officials, to gain traction on improving the food safety system. Actions  should focus on preventing,",
      " rather than reacting to, outbreaks of  foodborne illnesses. For example, several experts mentioned  modifying the statutes that FSIS implements, such as the Federal  Meat Inspection Act and the Poultry Improvement Act, to align the  authorities of USDA with the Federal Food, Drug, and Cosmetic Act,  as amended by FSMA, which outlines FDA\u2019s responsibilities. This  could help ensure a consistent approach across food commodities.  See appendix III for a list of actions identified by the experts that could  be considered for inclusion in a national strategy for food safety  oversight. The experts\u2019 call for a national strategy for food safety oversight is  consistent with our past work on national strategies.",
      " We found that  complex interagency and intergovernmental efforts, which could include  food safety, can benefit from developing a national strategy and  establishing a focal point with sufficient time, responsibility, authority and  resources to lead the effort. For example, in August 2007, we reported  on another area involving significant coordination and collaboration  across all levels of government, as well as the private sector: preparing  for and responding to an influenza pandemic. We found that, as part of  its efforts to address the potential threat of an influenza pandemic, the  executive branch had developed a National Strategy for Pandemic  Influenza and an associated implementation plan and had started working  toward completing the plan\u2019s action items.",
      " In February 2004, we reported  that national strategies themselves are not endpoints, but rather, starting  points, and, as with any strategic planning effort, implementation is the  key. The five key elements of a national strategy identified by the experts are  also consistent with characteristics we have identified as desirable in a  national strategy. In our February 2004 report, we found that national  strategies are not required, either by executive or legislative mandate, to  address a single, consistent set of characteristics. However, on the  basis of a review of numerous sources, we identified six desirable  characteristics to aid responsible parties in further developing and  implementing national strategies.",
      " Table 5 lists and describes the six  desirable characteristics and shows how the elements of a national  strategy for food safety oversight identified by experts align with the six  desirable characteristics. Although the experts did not specify which entity should lead the national  strategy, past efforts to develop high-level strategic planning for food  safety have depended on leadership from entities within the Executive  Office of the President (EOP), such as the Domestic Policy Council  (DPC), the Office of Science and Technology Policy (OSTP), and OMB.  For example, the President\u2019s Council on Food Safety was co-chaired by  OSTP, along with HHS and USDA,",
      " and involved staff and officials from  OMB and the DPC among others. Similarly, the FSWG was led by USDA  and HHS and was convened by the DPC. OMB staff and FDA officials  stated that a national strategy for improving food safety could be  beneficial. However, FDA officials cautioned that timing would be an  important consideration given that FDA is focused on FSMA  implementation. FSIS officials said that they would defer to OMB  regarding questions on the potential benefit of a national strategy for food  safety. OMB staff said that OMB relies on direction from the  administration to determine national priorities. Entities within the EOP also play a leadership role in other ongoing  strategies that require cross-agency collaboration.",
      " For example, since  December 2013, OSTP and the National Security Council have led a  multi-agency effort, including HHS and USDA, to develop the National  Strategy for Combating Antibiotic-Resistant Bacteria, with a goal of  preventing, detecting, and controlling outbreaks of antibiotic-resistant  pathogens. In addition, OMB has established a cross-agency priority  goal of improving science, technology, engineering, and mathematics  education. Since May 2013, OSTP has taken a lead role, along with the  National Science Foundation, in working with multiple agencies to  implement a 5-year strategic plan.",
      " By developing a national strategy to  guide the nation\u2019s efforts to improve the federal food safety oversight  system and address ongoing fragmentation, the appropriate entities  within the EOP, in consultation with relevant federal agencies and other  stakeholders, could provide a comprehensive framework for considering  organizational changes and making resource decisions. A National Strategy Could  Provide a Framework for  Addressing Our  Recommendation for a  Government-Wide Plan,  Our Matters for Congress  to Consider for Leadership  and Planning, and Criteria  for Removing Federal  Food Safety Oversight  from Our High-Risk List Developing a national strategy for food safety oversight, as suggested by  the experts,",
      " could provide a framework for addressing our March 2011  recommendation for a government-wide plan and our December 2014  matters for congressional consideration for leadership and government- wide planning. As we mentioned previously, we have found that complex  interagency and intergovernmental efforts can benefit from developing a  national strategy and establishing a focal point with sufficient time,  responsibility, authority, and resources to lead the effort. The national  strategy, as described by the experts and possessing the desirable  characteristics described in our past work, could fulfill the intent behind  our March 2011 recommendation for OMB to develop a government-wide  performance plan for food safety.",
      " Such a strategy could include all of  the elements of a government-wide performance plan for federal food  safety oversight, such as government-wide goals and performance  indicators. In addition to addressing our recommendation for a  government-wide plan, to the extent that a national strategy for food  safety oversight establishes sustained leadership for the issue, it could  fulfill the intent behind our December 2014 matter for Congress to  consider formalizing the FSWG through statute to help ensure sustained  leadership across food safety agencies over time. In addition, developing and implementing a national strategy could  provide a framework for addressing the five criteria for removing federal  food safety oversight from our High-Risk List.",
      " As discussed previously,  experts agreed that a national strategy should include sustained  leadership, which could address the criterion for leadership commitment.  In addition, the national strategy, by including information on resource  requirements, actions, and milestones and metrics to monitor progress,  could also meet our criteria for capacity, an action plan, and monitoring,  respectively. Finally, depending on its contents, a national strategy could  demonstrate progress in implementing corrective measures, the final  criterion for removing federal food safety oversight from our High-Risk  List. Conclusions Since 2014, the primary federal agencies responsible for ensuring a safe  food supply\u2014FDA and FSIS\u2014have taken actions to address  fragmentation in the federal food safety oversight system.",
      " However, food  safety and government performance experts who participated in the  meeting we convened cited examples of the negative effects that  continue to occur as a result of fragmentation in the federal food safety  oversight system and generally agreed that there is a need for a national  food safety strategy. These examples further illustrate negative effects  that we have highlighted in our past work. The experts identified five key  elements that should be included in such a strategy: stating the purpose,  establishing sustained leadership, identifying resource requirements,  monitoring progress, and including actions for gaining traction. These  elements are consistent with characteristics that we have identified as  desirable in a national strategy.",
      " By developing a national strategy to guide  the nation\u2019s efforts to improve the federal food safety oversight system  and address ongoing fragmentation, the appropriate entities within the  EOP, in consultation with relevant federal agencies and other  stakeholders, could provide a comprehensive framework for considering  organizational changes and making resource decisions. Experts identified  the following stakeholders as key contributors to a national strategy for  food safety: federal, tribal, state, and local government agencies; industry;  consumer groups; academia; and key congressional committees. Such a  national strategy also could provide a framework for addressing our  recommendation for a government-wide plan, our matters for Congress to  consider for leadership and planning,",
      " and criteria for removing federal  food safety oversight from our High-Risk List. Recommendation for  Executive Action To guide the nation\u2019s efforts to improve the federal food safety oversight  system and address ongoing fragmentation, we recommend that the  appropriate entities within the EOP, in consultation with relevant federal  agencies and other stakeholders, develop a national strategy that states  the purpose of the strategy, establishes high-level sustained leadership,  identifies resource requirements, monitors progress, and identifies short-  and long-term actions to improve the food safety oversight system. Agency Comments  and Our Evaluation We provided a draft of this report to HHS, USDA, OMB,",
      " and DPC for their  review and comment. In written comments, HHS did not comment on our  recommendation to the EOP. USDA disagreed with the need for a  national strategy but cited factors to consider should changes be  proposed. USDA also discussed several points related to the report\u2019s  findings. HHS\u2019s and USDA\u2019s written comments are reproduced in  appendixes IV and V, respectively. In addition, HHS and USDA provided  technical corrections, which we incorporated as appropriate. Also,  according to an e-mail from the Special Assistant to the President of the  EOP, OMB and DPC did not have comments on the draft report.",
      " To guide the nation\u2019s efforts to improve the federal food safety oversight  system and address ongoing fragmentation, we recommended that the  appropriate entities within the EOP, in consultation with relevant federal  agencies and other stakeholders, develop a national strategy that states  the purpose of the strategy, established high-level sustained leadership,  identifies resource requirements, monitors progress, and identifies short-  and long-term actions to improve the food safety oversight system. USDA  stated that it is not yet convinced that developing and implementing a  national strategy would result in significantly different outcomes in  protecting public health by preventing foodborne illness with its partners.  However, USDA also noted that,",
      " should major changes to the federal  food safety system be proposed, it is imperative that they are data-driven,  well-designed, collaborative, and ultimately, continue to enable the United  States to have the safest food supply in the world. Even with USDA\u2019s  reservations, we continue to believe that a national strategy would  provide a comprehensive framework for considering organizational  changes and resource decisions to improve the federal food safety  oversight system. USDA made a number of other comments related to the report\u2019s findings.  First, USDA stated the report does not appear to explain or acknowledge  the depth and breadth of key federal agency efforts and activities to work  together within the bounds of existing statutory authorities,",
      " particularly  across FSIS, FDA, CDC, and other federal food safety partners. In  addition, USDA said that the report appears to significantly underestimate  the complexity of modifying statutes that FSIS and FDA currently  implement with the intent of better alignment. Related to acknowledging  the depth and breadth of key federal efforts and activities, in our  December 2014 report, we identified and described numerous  collaborative mechanisms involving FDA and FSIS to highlight these  positive efforts, and for this report, we requested information on any  additional collaborative mechanisms developed since 2014, which we  included. However, we found and continue to believe that these  mechanisms focus on specific issues and do not provide for broad-based,",
      "  centralized collaboration that would allow FDA, FSIS, and other agencies  to look across their individual food safety programs and determine how  they all contribute to federal food safety goals. Related to underestimating  the complexity of modifying statutes that FSIS and FDA currently  implement, we discuss modifying statutes as an example of the numerous  actions that experts identified could be considered for inclusion in a  national strategy for food safety oversight. We envision that ultimately it  will be up to the stakeholders participating in such a strategy to decide  which actions to pursue. Second, USDA stated that FSIS continues to strongly disagree with the  draft report in that it undervalues and diminishes the many collaborative  mechanisms that are in place among FSIS and FDA,",
      " as well as with CDC  and other federal and non-federal food safety and public health partners.  In addition, FSIS said that the characterizations of all collaborations as  \u201cnarrow\u201d and \u201cspecific,\u201d and the implication that broad-based collaboration  does not occur through FSIS\u2019s deeply integrated engagement, is  inaccurate. Further, USDA stated that the implication that the  collaborations are not well-targeted or sufficient appears to reflect a lack  of understanding of how agencies with food safety/public health  responsibilities operate in sync with each other. USDA also stated that  FSIS\u2019s activities with FDA, CDC, and other food safety partners are  strategic,",
      " highly outcome- and mission-driven, and fully address the  GPRAMA crosscutting requirements for federal strategic and  performance planning that help drive collaboration and address  fragmentation. USDA stated that it is important to note that we did not  present or provide any evidence for any area where sufficient  collaboration does not occur. As we said earlier, we found and continue to  believe that these collaborative mechanisms focus on specific issues and  do not provide for broad-based, centralized collaboration that would allow  FDA, FSIS, and other agencies to look across their individual food safety  programs and determine how they all contribute to federal food safety  goals.",
      " Third, USDA stated that it appreciated that our report attempts to  recognize new collaborations since 2014; however, it does not include  three of four new collaborations on which FSIS provided testimonial or  written information to us\u2014the HHS agency priority goal for foodborne  Listeria monocytogenes illnesses interagency effort, PFP, and the One  Health Initiative. Related to the HHS agency priority goal, in the report, we  stated that FSIS officials told us that FSIS is partnering with CDC, FDA,  and NIH on the HHS agency priority goal to reduce foodborne illness  caused by Listeria.",
      " PFP and the One Health Initiative were established  prior to 2014; however, in the report, we did discuss PFP in the context of  presenting examples of collaborative mechanisms involving FDA and  FSIS that we reported on in December 2014 and collaborative  mechanisms described by HHS in its updated strategic plan. Fourth, USDA stated that our report indicates that USDA has not fully  implemented our prior recommendation to address crosscutting food  safety efforts in its strategic and performance planning documents,  because USDA, at the department level, did not alter its just-published  fiscal year 2014-2018 strategic plan to mention food safety collaboration  across USDA\u2019s large,",
      " broad, multi-agency portfolio. USDA stated that  FSIS believes our continued focus on USDA not editing and reissuing its  departmental strategic plan to include such reference to be misplaced.  Further, USDA stated that food safety collaboration is addressed in the  USDA fiscal year 2014-2018 strategic plan\u2019s key food safety illness  indicator, which directly reflects FSIS\u2019s broad, long-standing collaborative  activity with FDA and CDC associated with Healthy People, and in FSIS\u2019s  fiscal year 2011-2016 and fiscal year 2017-2021 strategic plans. In our  December 2014 report,",
      " we stated that GPRAMA requires agencies to  include in their strategic plan a description of how they are working with  other agencies to achieve their goals and objectives. In addition, we  stated that GPRAMA does not apply to organizational components of  agencies. Instead, agencies are expected to work with their components  to implement GPRAMA requirements in a manner that is most useful to  the whole organization. In December 2014, we found several relevant  crosscutting efforts that were not identified in USDA\u2019s fiscal year 2014- 2018 strategic plan, and recommended that USDA more fully describe in  its strategic and performance planning documents how it is working with  other agencies to achieve its food-safety-related goals and objectives.",
      " In  December 2014, USDA concurred with our recommendation, and USDA  plans to include information on interagency collaboration in its next  strategic plan, according to USDA officials. Fifth, USDA stated that it is concerned about the implication that many of  the possible actions to include in a national strategy do not require  congressional approval and can be taken by executive branch agencies  without such approval; USDA stated that they cannot. In addition, USDA  stated that while the recommendation for executive action is quite  general, the specifics, as outlined in appendix III of our report, appear far  too prescriptive for us to typically recommend, and place disproportionate  value on expert opinion rather than on data-driven analysis.",
      " Further,  USDA stated that we appear to place importance on expert opinions,  including citing many statements that were factually incorrect or  misrepresented in a prior draft, and some of whose testimonial  statements we removed. This included statements that implicitly  supported assertions that FDA\u2019s statutory authorities could be appropriate  to apply to the products that FSIS regulates. USDA stated that no data,  study, or evidence supports this approach as being more protective of  public health and prevention of foodborne illness. USDA also stated that it  continues to be concerned about our selective and dominant use of  expert opinion studies to support its findings. In addition,",
      " USDA stated  that we cite certain prior studies and panels from 1998, 2001, and more  recently, yet other studies, such as one in 2002 by a White House- established Policy Coordinating Committee, concluded that the goals of  the Administration were better advanced through enhanced interagency  coordination rather than through, for example, the development of  legislation to create a single food safety agency. Related to USDA\u2019s  concerns about the actions listed in appendix III requiring congressional  approval and appearing too prescriptive, the purpose of the appendix was  to present a list of actions identified by the experts that could be  considered for inclusion in a national strategy for food safety.",
      " As we  stated earlier, we envision that ultimately it will be up to the stakeholders  participating in such a strategy to decide which actions to pursue. Related  to USDA\u2019s concern about the apparent importance we place on expert  opinions and our use of expert opinion studies to support our findings, we  selected food safety and government performance experts on the basis of  the relevance of their knowledge; their prominence in the public discourse  on food safety issues; and their diversity of experience working in food  safety, such as through prior experience working at senior levels for FDA,  CDC, or USDA or current experience working for the food industry. We  took steps to confirm the accuracy of information the experts provided  before including it in our final product.",
      " Related to USDA\u2019s concern about  the development of legislation to create a single food safety agency, we  discuss this option in an appendix in which we list a number of options we  have identified in our past work to improve the federal food safety  oversight. Sixth, USDA stated that in prior reports, we have written that programs  are put on the High-Risk List because of their vulnerabilities to fraud,  waste, abuse, or mismanagement, or are most in need of transformation  to address economy, efficiency, or effectiveness challenges. Given this  standard, USDA said that it continues to assert that food safety should no  longer be listed as high risk.",
      " We have identified five criteria, all of which  must be fully met for an area to be removed from our High-Risk List. In  our February 2015 High-Risk Update, we found that for federal oversight  of food safety, three of the criteria had been partially met, and two had not  been met. Our assessment of whether the criteria were met focused  largely on efforts Congress and the executive branch had made toward  developing a government-wide performance plan for food safety and  establishing a centralized mechanism for broad-based collaboration, such  as the FSWG. However, we found that USDA\u2019s and OMB\u2019s actions since  2014 have not fully addressed the need for government-wide planning.",
      " In  addition, we acknowledge that congressional action would be required to  formalize in statute a centralized, collaborative mechanism on food  safety, like the FSWG; however, federal food safety agencies do have the  capacity to participate in such a mechanism. We believe that a national  strategy for food safety could provide a framework for addressing the five  criteria for removing federal food safety oversight from our High-Risk List. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees;",
      " the Secretary of Health and Human Services;  the Secretary of Agriculture; the Director, Office of Management and  Budget; and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions regarding this report,  please contact me at (202) 512-3841 or morriss@gao.gov. Contact points  for our Offices of Congressional Relations and Public Affairs may be  found on the last page of this report. Key contributors to this report are  listed in appendix VI. Appendix I: Participants in the June 9-",
      "10,  2016, Meeting of Experts On June 9 and 10, 2016, with the assistance of the National Academies  of Sciences, Engineering, and Medicine, we convened a 2-day meeting of  food safety and government performance experts to discuss  fragmentation in the U.S. federal food safety oversight system and  suggest actions to improve that system. Table 6 lists the experts who  participated in the meeting, along with their affiliations. We selected food  safety and government performance experts on the basis of the relevance  of their knowledge; their prominence in the public discourse on food  safety issues; and their diversity of experience working in food safety,",
      "  such as through prior experience working on food safety at senior levels  in the federal government as well as through current work in food-related  industries, nongovernmental research organizations, state agencies,  foreign food safety agencies, academia, and advocacy groups. Appendix II: Options GAO Has Identified to  Improve the Federal Food Safety Oversight  System In our previous work, we have identified several options to improve the  federal food safety oversight system. These options include establishing a  coordination mechanism led by a central chair, a food safety inspection  agency, a data collection and risk analysis center, and a single food  safety agency and are described in table 7.",
      " Appendix III: Actions Identified by Experts to  Consider Including in a National Strategy to  Improve Food Safety Oversight During the 2-day meeting we convened with the assistance of the  National Academies of Sciences, Engineering, and Medicine, experts  identified a number of actions to consider including in a national strategy  to improve food safety oversight. At least 10 of the 19 experts agreed that  each of these actions described in table 8 could be appropriate to  consider for inclusion in a national strategy, but not all of the experts  agreed that every identified action should be considered. We are not  endorsing any of these actions. These actions were identified by experts  for consideration.",
      " Appendix IV: Comments from the  Department of Health and Human Services Appendix V: Comments from the U.S.  Department of Agriculture Appendix VI: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the contact named above, Anne K. Johnson (Assistant  Director), Kevin Bray, Candace Carpenter, Stephen Cleary, Michelle  Duren, Ellen Fried, Kirsten Lauber, Benjamin T. Licht, Marya Link, Rekha  Vaitla, Walter Vance, and Sarah Veale made key contributions to this  report.\n"
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  {
    "id": 74,
    "question": null,
    "answer": "DOE recently reported that nuclear waste is leaking from two of its underground storage tanks (T-111 and AY-102) at Hanford and that water was intruding into AY-102 and other tanks. Also, DOE has been experiencing delays in the construction of the WTP, a collection of facilities that are to treat the tank waste for disposal. These recently reported leaks and intrusions, combined with construction delays, have raised questions among regulators, the public, and Congress about the risks posed by continuing to store waste in the aging tanks. GAO was asked to report on the tank waste cleanup program. This report examines: (1) the condition of the tanks, (2) actions DOE has taken or planned to respond to the recent tank leaks and water intrusions, and (3) the extent to which DOE's tank management plans consider the condition of the tanks and the delays in completing construction of the WTP. GAO obtained and reviewed relevant reports concerning the leaks, the status of the tanks, and the volumes of waste and available space in the tanks. GAO toured the site and interviewed DOE officials and responsible contractors. From 2012 to 2014, the Department of Energy (DOE) assessed the physical condition of the 177 storage tanks at its Hanford, Washington, site in which it stores about 56 million gallons of nuclear waste and found them to be in worse condition than it assumed in 2011 when developing its schedule for emptying the tanks. For the 149 single-shell tanks (SST), DOE previously pumped nearly all of the liquid waste out of the SSTs into the 28 newer double-shell tanks (DST) to reduce the likelihood of leaks. However, after detecting water intruding into several SSTs, DOE reexamined them all and found that water was intruding into at least 14 SSTs and that 1 of them (T-111) had been actively leaking into the ground since about 2010 at a rate of about 640 gallons annually. Regarding the DSTs, in 2012, DOE discovered a leak from the primary shell in tank AY-102. DOE determined that the leak was likely caused by construction flaws and corrosion in the bottom of the tank. DOE found that 12 DSTs have similar construction flaws but has not determined the extent to which the other 27 DSTs are subject to the same corrosion that likely contributed to the leak in AY-102. In response to the waste leaks and water intrusion, DOE has taken or planned several actions. For SSTs, DOE conducted additional tank inspections and temporarily increased the frequency of monitoring the tank waste levels from annually or quarterly to monthly. In addition, after finding flaws in its methods to monitor for leaks and intrusions, DOE modified its methods, which it believes may lead to more effective monitoring. For DSTs, DOE increased the frequency (from every 5 to 7 years to every 3 years) and scope of its tank inspections and convened a panel of experts to evaluate existing tank monitoring and inspection procedures. DOE also plans an independent assessment of the integrity of the DSTs (scheduled to be completed no later than 2016). DOE's current schedule for managing the tank waste does not consider the worsening conditions of the tanks or the delays in the construction of the Waste Treatment and Immobilization Plant (WTP), a facility being constructed to treat the waste and prepare it for final, long-term disposal. First, the leak in AY-102 combined with planned waste transfers from SSTs has reduced the available DST tank storage capacity. Future leaks and intrusions, which become more likely as the tanks' condition worsens, would place additional demands on the already limited DST storage space, and it is unclear how DOE would respond. According to DOE, recent efforts to evaporate some of the water from the waste have already freed up 750,000 gallons of DST space. Second, in March 2014, DOE announced further delays in the construction of the WTP and that these delays will affect the schedule for removing waste from the tanks. However, DOE has not estimated the impact of the WTP delays on its schedule to remove the waste from the tanks. As a result, DOE cannot estimate how long the waste will remain in the aging tanks. Also, DOE officials and members of a 2014 expert panel convened to examine the integrity of the DSTs have said that corrosion is a threat to DST integrity, and, according to the panel, that there are deficiencies in DOE's understanding of corrosion in all of the DSTs. DOE lacks information about the extent to which the other 27 DSTs may also be susceptible to corrosion similar to AY-102. Without determining the extent to which the factors that contributed to the leak in AY-102 were similar to the other 27 DSTs, DOE cannot be sure how long its DSTs can safely store waste.\n",
    "docs": [
      "Background From 1944 through 1988, the production of plutonium at Hanford  generated about 525 million gallons of radioactive and hazardous waste.  Some of the waste was dumped directly into the soil, some was encased  in drums or other containers and buried, and some was stored on-site,  underground in 149 SSTs and 28 DSTs. This section describes the  history of the Hanford tanks, the contents of the tanks, and tank  regulations and oversight. History of Hanford Tanks The first underground storage tanks at Hanford were SSTs and were built  from the 1940s through the mid-",
      "1960s. The SSTs consist of an outer  concrete wall lined with one layer of carbon steel and were built with a  design life of approximately 25 years. While a tank\u2019s design life is not a  firm deadline beyond which a tank is no longer viable, site engineers at  the time considered design life a reasonable estimate of how long a tank  could be expected to effectively contain radioactive and hazardous waste.  In the 1940s and 1950s, site contractors did not regard the tanks as a  permanent solution to the waste produced at Hanford and viewed tank  failures as inevitable. It was assumed that as the tanks failed,",
      " new tanks  would be constructed to store the waste until a more permanent disposal  solution could be developed. Beginning in the 1960s, DOE began reporting that some of the SSTs  were leaking waste, and DOE estimates that as many as 61 SSTs may  have leaked a total of over 1 million gallons of waste into the ground.  After DOE discovered leaks in some of the SSTs, a new tank design  using two carbon-steel shells (referred to as DSTs) was adopted. From  1968 through 1986, DOE built 28 DSTs, each with a storage capacity of 1  million gallons or more and each with a design life ranging from 20 to 50  years.",
      " (See apps. I - III for design life data for each tank.) The primary  design difference between Hanford\u2019s single- and double-shell  underground waste storage tanks\u2014a second carbon-steel lining, or shell,  within the outer concrete housing to provide secondary containment of  the waste\u2014improved DOE\u2019s ability to monitor and assess the tanks\u2019  integrity and contents. As shown in figure 1, the two shells in the DSTs  are separated by about 3 feet of space, or annulus, which enables  workers to use remote leak detection sensors and remotely operated  cameras to see between the inner and outer shells,",
      " thereby making it  possible to find signs of corrosion or leaks before waste breaches the  outer shell and leaches outside the tank structure. Beginning in the 1970s, to minimize the risks of leaking tanks, DOE  began transferring much of the liquid waste from the SSTs to the DSTs.  This process consisted of removing (1) the liquid (more mobile) waste first  and then (2) the rest of the waste from the SSTs, thereby effectively  emptying the SSTs. The first part of this process\u2014removing liquid waste  from the SSTs and transferring it to DSTs\u2014is referred to as interim  stabilization and was largely completed by 2005.",
      " The interim stabilization  for each tank was considered complete, and DOE could stop pumping  liquid waste, when DOE and Ecology agreed that the following criteria  were metless than 5,000 gallons of free standing liquid waste remained,  less than 50,000 gallons of drainable liquid waste (liquid waste  interspersed within the solid waste) remained, and pumping was no longer effective. The second part of the process\u2014removing the remaining waste from the  SSTs and transferring it to DSTs\u2014began in 2003 and is still under way.  This work is governed by two main compliance agreements: (1)",
      " the 1989  Hanford Federal Facility Agreement and Consent Order, or Tri-Party  Agreement (TPA), an agreement between DOE, Ecology, and the  Environmental Protection Agency and (2) a 2010 consent decree. Under  the consent decree, DOE is required to retrieve waste from 19 tanks  (transferring the waste to DSTs) and begin operating the WTP and  treating waste by 2022. The TPA requires DOE to retrieve the waste from  all of the SSTs by no later than 2040 and to have all waste retrieved from  all DSTs and treated by 2047.",
      " As of July 2014, DOE had completed the  retrieval and transfer of waste from 12 of the SSTs into DSTs. In addition to concerns about tank leaks, DOE is also monitoring tanks for  water intrusion from rain and melting snow that can enter the  underground tanks through the piping connected to them. Water  intrusions can increase the consequences of waste leaks and also mask  tank leaks, as waste levels in the tanks could remain the same even as  waste was leaking into the ground. According to DOE documented  reviews of the tanks, DOE has been aware of water intrusions in some  SSTs since the 1980s and has detected intrusions into the annulus of  some DSTs since the 1990s.",
      " Contents of the Tanks The waste stored in the tanks at Hanford generally sits in layers and  comes in a variety of forms, depending on its physical and chemical  properties. The waste in the tanks takes the following three main forms,  which are illustrated in figure 2: Supernate. Above or between the denser layers may be liquids  composed of water and dissolved salts that are called supernate.  Supernate comprises 21.4 million gallons of the waste in the Hanford  tanks and about 24 percent of the radioactivity. Saltcake. Above the sludge may be water-soluble components, such  as sodium salts,",
      " that crystallize or solidify out of the waste solution to  form a moist sandlike material called saltcake. Saltcake comprises 24  million gallons of the waste in the Hanford tanks and about 20 percent  of the radioactivity. Sludge. The denser, water-insoluble components of the waste  generally settle to the bottom of the tank to form a thick layer known  as sludge, which has the consistency of peanut butter. Although  sludge makes up the smallest portion of waste in the Hanford tanks  (10.7 million gallons), it comprises over half (56 percent) of the total  radioactivity in the tank waste.",
      " The tanks contain a complex mix of radioactive and hazardous waste in  both liquid and solid form. About 46 different radioactive elements\u2014by- products of chemically separating plutonium from uranium for use in  nuclear weapons\u2014represent the majority of the radioactivity currently in  the tanks. Some of these elements lose most of their radioactivity in a  relatively short time, while others will remain radioactive for millions of  years. The rate of radioactive decay is measured in half-lives, that is, the  time required for half the unstable atoms in a radioactive substance to  disintegrate, or decay, and release their radiation. The half-lives of  radioactive tank constituents differ widely.",
      " The vast majority (98 percent)  of the radioactivity of the tank waste comes from two elements, strontium- 90 and cesium-137, which have half-lives of about 29 and 30 years,  respectively. The remaining radioactive elements, which account for  about 2 percent of the waste\u2019s total radioactivity, have much longer half- lives. For example, the half-life of technetium-99 is 213,000 years, and  that of iodine-129 is 15.7 million years. The hazardous wastes in the tanks include various metal hydroxides,  oxides,",
      " and carbonates. Some of the chemicals\u2014including acids, caustic  sodas, solvents, and toxic heavy metals, such as chromium\u2014came from  chemically reprocessing spent nuclear fuel to extract weapons-grade  plutonium. Altogether, about 240,000 tons of chemicals were added to the  tanks from the 1940s to the mid-1980s. A majority of the chemicals were  added to neutralize acids in the waste. Other chemicals, such as solvents  and several organic compounds, were added during various waste  extraction operations to help recover selected radioactive elements  (uranium, cesium,",
      " and strontium) for reuse. These hazardous chemicals  are dangerous to human health, and they can remain dangerous for  thousands of years. Tank Regulations   and Oversight DOE\u2019s storage of waste at Hanford is governed by federal and  Washington State laws and regulations. DOE\u2019s tank waste cleanup  program at Hanford is governed by, among other things, the Resource  Conservation and Recovery Act of 1976, as amended (RCRA), as  implemented by Washington under its Hazardous Waste Management  Act, and the Atomic Energy Act of 1954. RCRA governs the treatment,  storage, and disposal of hazardous waste and the non-radioactive  hazardous waste component of mixed waste.",
      " The tank waste at Hanford  is considered mixed waste because it contains both chemically hazardous   For the chemically hazardous waste in  and certain radioactive materials.the tanks, as shown in figure 3, RCRA establishes the following three key  requirements (subject to certain limited exceptions): Tank integrity. Under RCRA, tanks must have secondary  containment\u2014that is, a second shell\u2014and an integrity assessment  must be conducted by a qualified professional engineer to assess  whether the tanks are fit for use. Leak detection. RCRA requires a leak detection system to be in  place for each tank that will detect the failure of either the primary and  secondary containment structure or any release of hazardous waste  in the secondary containment system within 24 hours,",
      " or at the  earliest practicable time. Data gathered from monitoring and leak  detection equipment must be inspected at least once each operating  day to ensure that the tank system is being operated according to its  design. Leak response. Within 24 hours after detection of a leak or, if the  owner or operator demonstrates that that is not possible, at the  earliest practicable time, RCRA requires the tank owner, among other  things, to remove as much of the hazardous waste or accumulated  liquid as is necessary to prevent further release of hazardous waste to  the environment and allow inspection and repair or closure of the tank  system to be performed.",
      " If the release was to a secondary  containment system, all released materials must be removed within  24 hours or in as timely a manner as is possible to prevent harm to  human health and the environment. To address these RCRA requirements, DOE conducts a variety of  assessments and monitoring activities. Regarding tank integrity, DOE  conducted integrity assessments for the SSTs in 2002 and the DSTs in  2006. To address the leak detection monitoring requirement, for the  DSTs, DOE has one waste level monitor installed inside the primary tank  space and three waste level monitors in the annulus. These monitors  collect waste level data on a daily basis.",
      " For the SSTs, because they  were built decades before the enactment of RCRA, they do not have  secondary containment. As such, DOE has determined that the SSTs  cannot readily be made compliant with current regulations and these  tanks were determined to be \u201cunfit for use.\u201d Under RCRA, unfit for use  tanks are no longer allowed to store waste and must generally be closed.  DOE plans to ultimately close the tank farms in accordance with tank farm  closure permits to be issued by Ecology. In the meantime, DOE monitors  the SSTs under modified operating procedures, including modified leak   Under  detection and monitoring requirements as agreed with Ecology.these modified procedures and additional DOE operating specifications,",
      "  the majority of the SSTs are required to be monitored weekly, quarterly,  or annually for leaks and intrusions depending on DOE\u2019s knowledge of  the condition of the tanks and the type and amount of waste inside them.  In 2009, DOE developed an emergency pumping guide outlining  procedures for responding to leaks in DSTs, to implement the RCRA  requirement that the tank system owner/operator must within 24 hours  after detection of the leak or, at the earliest practicable time, remove as  much waste as necessary to prevent further releases. Condition of Tanks Is  Worse than Assumed  under DOE\u2019s Current  Schedule for  Retrieving Tank  Waste DOE\u2019s recent assessments of the SSTs and DSTs determined that they  are in worse condition than DOE had assumed when developing its 2011  System Plan schedule for emptying the tanks.series of assessments in 2013 and 2014,",
      " DOE concluded that water is  intruding into at least 14 SSTs and that at least 1, T-111, is actively  leaking. For DSTs, DOE concluded in 2012 that waste was leaking from  the primary shell in tank AY-102 and subsequently found that 12 other  DSTs have construction flaws similar to those that contributed to the leak  in AY-102. According to recent DOE reviews of the tank, water has  intruded into the space between the inner and outer shells of tank AY-102  and another tank nearby. Condition of SSTs Is  Worse Than Previously  Assumed,",
      " with 1 Leaking  and Water Infiltrating at  Least 14 In 2013 and 2014, DOE completed assessments of the SSTs and found  that they are in worse condition than had been previously believed. As of  2005, DOE and Ecology agreed that the interim stabilization process had  reduced the risk of leaks in SSTs, which led DOE, with concurrence from  Ecology, to reduce the required frequency of monitoring from daily to  quarterly or annually depending on the condition of the tank and the  amount of liquid waste inside. However, concerns about historical water  intrusions led DOE to reexamine all 149 SSTs in 2011 to determine the  extent of the intrusions.",
      " This reexamination, which concluded in 2014,  confirmed that water was intruding into at least 14 tanks and that the  intrusions were adding from less than 10 to more than 2,000 gallons of  water annually to each tank. According to a DOE report on intrusions,  water intrusion creates additional liquid waste in the tanks as the new  water becomes contaminated by the waste in the tanks. Furthermore,  water intrusions can affect the level of tank waste, making it difficult to  ensure that a tank is not leaking. Officials on an expert panel, convened  by DOE in 2009 to assess the condition of the SSTs,",
      " concluded in August  2014 that significant amounts of drainable liquid still remain in the SSTs  and removing that liquid and preventing future water intrusions should be  a high priority. In addition to increasing waste levels in several tanks, DOE found in 2013  that waste levels appeared to be decreasing in several tanks and  subsequently confirmed that at least one SST, tank T-111, was actively   DOE\u2019s report on the tank leak indicates  leaking waste into the ground.that the leak likely began in 2010. According to DOE officials, waste is  leaking at a rate of approximately 640 gallons annually, and DOE  continues to monitor the leak in tank T-",
      "111. DOE has also confirmed that  T-111 is one of the SSTs experiencing intrusions. Though the tank is  leaking, according to DOE officials, DOE is not required by regulation to  remove the liquid waste from T-111 because the amount of liquid waste in  the tank does not exceed the interim stabilization criteria and because  there are no current requirements to reestablish compliance with interim  stabilization criteria if conditions in a tank change. Condition of DSTs Is  Worse Than Previously  Assumed, with 12 Tanks  Having Flaws Similar to  the Leaking Tank and  Water Infiltrating at Least   2 Tanks Regarding DSTs,",
      " prior to the discovery of the leak in AY-102 in 2012,  DOE had assumed that all DSTs were sound for storing waste. In 2006,  all 28 DSTs were examined by a qualified professional engineer, as  required under RCRA, and deemed fit for use. In a 2010 report on the  integrity of the DSTs, DOE reaffirmed their fitness for continuing to store  waste. However, after the 2012 leak was discovered, in March 2014,  DOE reported the discovery of a second accumulation of waste in a  different location in the annulus of tank AY-",
      "102. As of August 2014, DOE  reported that more than 35 gallons of waste had leaked from the primary  shell of AY-102 into the annulus at a rate of about 3 gallons per month.  To date, no waste has been detected outside of the secondary tank shell,  according to DOE officials. DOE is still investigating the factors that caused the AY-102 leak and the  extent to which other DSTs may be susceptible to the same factors. DOE  reported in October 2012 that tank construction flaws and corrosion in the  bottom of the tank stemming from the type of waste and the sequence in  which it was loaded into the tank AY-",
      "102 were the likely causes for the   According to a 2014 expert panel reviewing the leak,  leak in AY-102.corrosion was among the likely causes of the leak. The panelists  concluded that the corrosion likely occurred as a result of water collecting  under the tank before it was fully enclosed and during a 6-year outage of  the ventilation system in the annulus from 1991-1997, rather than as a  result of the waste loading sequence. Beginning in 2013, DOE examined  the other 27 DSTs to determine the extent to which they had construction  flaws similar to AY-",
      "102. In a series of reports issued between July 2013  and February 2014, DOE reported that at least 12 of the other 27 DSTs  have similar construction flaws. However, DOE has not yet assessed the  extent to which the factors that led to corrosion that may have caused the  leak in AY-102 are also present in the remaining 27 DSTs. DOE also determined in 2012 that water was likely intruding into the  annulus of at least 2 DSTs, including the leaking tank AY-102. This is not  the first time DOE has detected intrusions in the DSTs.",
      " In 1991, DOE first  reported unexplained moisture in DSTs AY-101 and AY-102, the oldest  DSTs on the site. Since then, DOE has periodically monitored and  reviewed the status of this moisture, concluding in 2001 that water  intrusions through corroded tank equipment were the likely cause. After  removing some of the suspected connections and further inspecting the  two tanks with video cameras, DOE concluded in 2009 that the water  intrusions had stopped. However, routine inspections of the tanks in 2012  revealed that water may still be seeping into the annulus of both tanks.",
      "  According to DOE officials, an investigation into this issue is ongoing. In  the 2011 System Plan, DOE stated that the DSTs play an integral role in  the tank waste cleanup effort. DOE Has Taken and  Planned Several  Actions to Respond  to Recent Leaks and  Intrusions, Including  Modifying Its Tank  Monitoring and  Inspection  Procedures Following the discovery of the leaks in tanks T-111 and AY-102, and  water intrusions in some SSTs, DOE has undertaken or planned several  actions. For the SSTs, DOE has, among other things, performed  additional inspections and temporarily increased the frequency of  monitoring the tank waste levels from annually or quarterly to monthly.",
      "  For the DSTs, DOE has conducted additional inspections, modified its  inspection procedures, convened an expert panel to examine its DST leak  detection process, and developed a pumping plan for AY-102. For SSTs, DOE Has  Conducted Additional  Inspections and Modified  Its Tank Monitoring  Procedures In response to the leak in tank T-111 and intrusions in other SSTs, DOE  has taken several actions, including the following:  Increased monitoring and conducted additional inspections. In  2012, when the leak was initially discovered in T-111, DOE increased  the leak detection monitoring for the tank from annually to weekly.",
      " In  addition, for 19 other SSTs that were under review for decreasing  liquid levels, DOE increased the leak monitoring frequency from  annually or quarterly (depending on the tank) to monthly. DOE  maintained weekly leak detection monitoring for T-111, but in April  2014 went to monthly monitoring. According to a DOE official, the  monthly monitoring was deemed sufficient to understand the  relationship between the intrusion and the leak and the monitors are  always in place and data are collected more frequently than the  monthly requirement. Additionally, monitoring procedures for the other  SSTs have since returned to their normal frequency of annual  monitoring for intrusions only.",
      " For the 14 SSTs with confirmed  intrusions and the 5 that do not meet interim stabilization criteria, DOE  has placed them on a quarterly monitoring regime. DOE also  performed additional inspections of the tanks with decreasing liquid  levels but, after further analysis, concluded that none of those tanks  were likely leaking. Modified waste analysis procedures. As noted above, as part of its  reexamination of SST waste levels, DOE discovered flaws in its  methods for reviewing data on SST tank waste levels that it uses to  monitor the tanks for leaks and intrusions. DOE officials determined  that their method for reviewing tank waste data was flawed and  masked increases and decreases in the waste levels in the SSTs that  may have been due to water intrusions and leaks.",
      " In response, DOE  modified its waste level monitoring methodology and procedures for  analyzing waste data. For example, in 2013, DOE established a  systems engineering group responsible for monitoring waste levels in  all tanks. DOE is also developing training based on the modified  waste level monitoring methodology, including guidance on tank  waste data interpretation, trend analysis, documentation  requirements, and review and approval procedures for changes in  waste levels. For DSTs, DOE Has  Conducted Additional  Inspections, Convened  an Expert Panel, and  Developed a Pumping  Plan for AY-102 Following the discovery of the leak in AY-",
      "102, DOE has taken or planned  several actions including the following: Conducted additional inspections and modified inspection  procedures. Following the discovery of the leak in AY-102, DOE  performed video inspections of the annulus of 6 of the 12 DSTs with  construction histories similar to AY-102. The video inspections, which  according to a DOE official in the past only examined a portion of the  annulus, examined between 95 and 100 percent of the annulus in  each of the tanks.continue these full video inspections for the remaining 21 DSTs over  the next several years. In addition,",
      " in April 2014, DOE formally  modified its inspection procedures by shortening the time between  inspections from every 5 to 7 years to every 3 years. In addition, in  June 2014, DOE began soliciting proposals to award a contract for  another independent assessment of the integrity of the DSTs to be  completed in 2016. According to DOE officials, DOE plans to Convened expert panel. DOE convened an expert panel to review its  DST leak detection procedures and make recommendations for  improvement. This panel met three times and developed preliminary  findings and suggested program improvements. One of the  preliminary findings was that additional DST leaks cannot be ruled out  given current DST integrity program limitations and the extended  schedule for the construction and operation of the WTP.",
      " During the  panel\u2019s most recent meeting in August 2014, members of the panel  said that more analysis needs to be done to understand the factors  that led to the leak in AY-102 and the extent to which the other DSTs  are susceptible to similar factors. Developed AY-102 pumping plan. If a leak is detected, RCRA  requirements call for the hazardous waste or accumulated liquid to be  retrieved from the tank to the extent necessary to prevent further  releases within 24 hours or as soon as practicable and to allow  inspection and repair. In addition, DOE\u2019s emergency pumping guide  outlines steps to \u201cimmediately\u201d remove waste from a leaking DST.",
      "  DOE officials stated that this guide did not anticipate a leak from the  bottom of the primary shell of a tank such as the one occurring in AY- 102. Instead, DOE proposed that the waste not be retrieved until at  least 2016, maintaining that that was as soon as it could practicably  retrieve the waste due to concerns that doing so would cause the  temperature of the tank to rise to dangerous levels without liquid  waste to act as a cooling agent. In addition, DOE noted in its plan that  it needed to procure and install additional equipment in order to pump  waste out of the tank. In response to DOE\u2019s submitted plan,",
      " Ecology  issued an administrative order to compel DOE to begin pumping  waste out of AY-102 by September 1, 2014, and retrieve enough  waste to allow for an inspection to determine the cause of the leaks  no later than December 1, 2016. The two sides reached a settlement  agreement in September 2014, under which DOE is to begin pumping  the waste out of AY-102 no later than March 2016 and to have the  waste removed by March 2017\u2014over 5 years after the leak was first  discovered. DOE\u2019s Current Waste  Retrieval Schedule  Does Not Account for  the Worsening  Condition of the  Tanks or WTP Delays DOE\u2019s current schedule for retrieving the waste from the tanks  (developed in 2011), which includes transferring waste from SSTs to  DSTs and treating the waste in the DSTs,",
      " does not take into account the  worsening conditions of the tanks or the delays in the construction of the  WTP. The leak in AY-102 combined with planned waste transfers has  reduced the available DST space, and DOE\u2019s plans to create additional  space remain uncertain. Future leaks and intrusions, which become more  likely as the tanks\u2019 conditions worsen, would place additional demands on  the limited available DST space, and it is unclear how DOE would  respond. According to DOE, recent efforts to evaporate some of the water  from the waste have already freed up 750,000 gallons of DST space. In  addition,",
      " in March 2014, DOE announced that it plans to indefinitely delay  construction of the key WTP facilities needed to retrieve and treat tank  waste for disposal until technical issues are resolved. As a result, it is  unclear how long waste will remain in the tanks. However, without an  analysis of the extent to which the factors which may have led to the leak  in AY-102 are present in the other DSTs, DOE cannot be sure how long  its DSTs will be able to safely store the waste. DOE\u2019s Retrieval Schedule  Does Not Account for the  Worsening Condition of  Tanks and Growing  Demand on the Limited  DST Space The free space available in the DSTs is currently limited,",
      " and operational  requirements and planned transfers from the SSTs constrain DOE\u2019s  ability to respond to future emergencies, such as leaks. As shown in  figure 4, SSTs hold a total of about 29 million gallons of waste and, as  noted above, have been deemed \u201cunfit for use\u201d under RCRA and  therefore cannot be used for storing additional waste. The DSTs  currently hold a total of about 27 million gallons of waste, leaving about  5.3 million gallons of available space for waste to be transferred from  other tanks. However, DOE policy and planned waste transfers further reduce the  amount of space available.",
      " As shown in figure 5, about 2.5 million gallons  of the 5.3 million gallons of empty space is reserved by DOE for safety  purposes, for emergency space if necessary, and to enable DOE to more  easily transfer waste among tanks. In addition, planned waste transfers  from SSTs (about 1.8 million gallons) and AY-102 (about 800,000  gallons) will further reduce available DST space (see fig. 5). Specifically,  DOE plans to first empty an additional 15 SSTs, containing a total of  approximately 1.8 million gallons of waste,",
      " into DSTs by 2022. Second,  DOE plans to pump all of the approximately 800,000 gallons of waste in  AY-102 into other DSTs no early than 2016. As a result of these planned  transfers and operational requirements, about 200,000 gallons of storage  space is actually available in the DSTs. DOE officials said that they plan  to restart an evaporator facility at Hanford that could reduce the overall  amount of waste in the tanks and result in 3 million gallons of additional  DST space. This facility, which began operating in 1973 and was  designed to operate for 25 years,",
      " has not operated since 2010 and was  only recently restarted by DOE. According to DOE officials, since  restarting the evaporator in September 2014, DOE has reduced the waste  volume by over 750,000 gallons. In addition to these scheduled waste transfers, future leaks and  intrusions, which become more likely as the tanks\u2019 condition worsens,  would require DOE to pump more waste and place additional demands  on the limited remaining DST space. Both DOE and Ecology have  reported that leaving waste in the tanks past their design life increases  the risk of leaks over time. Similarly, the panel of experts that DOE  convened to review the AY-",
      "102 leak concluded in May 2014 that, given  the extended time frames for the cleanup mission and the growing  concerns about the integrity of the tanks, additional leaks cannot be ruled  out. Such leaks and intrusions could place further demands on the  available space in the DSTs because when leaks occur, DOE is required  by RCRA and associated tank monitoring and pumping requirements, as  described below, to pump hazardous waste from these tanks into the  already limited space available in the nonleaking DSTs. For example, if a  leak is detected in a SST that exceeds interim stabilization criteria (i.e., it  has more than 5,",
      "000 gallons of freestanding liquid or 50,000 gallons of  drainable liquid waste), DOE is then required by modified leak detection  and monitoring requirements as agreed with Ecology to install emergency  pumping equipment and begin pumping the liquid waste out of the tank as  soon as practicable. At least five SSTs currently fall into this category  because they have exceeded the amount of liquid waste allowed under  interim stabilization (likely as a result of water intrusion, according to DOE  officials). Similarly, if another DST begins to leak, DOE is required by  RCRA to remove the hazardous waste or accumulated liquid from the  tank to the extent necessary to prevent further releases within 24 hours or  as soon as practicable.",
      " The only RCRA compliant alternative currently  available for storing this retrieved waste is into the limited space available  in the nonleaking DSTs. According to the DOE official responsible for  managing Hanford\u2019s tank operations, given the current constraints on  available DST space, if another DST was to fail before additional DST  space is available, DOE would have nowhere to move the waste.  However, according to DOE officials, DOE currently has no plans to build  new tanks and estimates that it would take about 8 years before the new  tanks would be available to receive waste. DOE\u2019s Retrieval Schedule  Does Not Account for  Recently Acknowledged  WTP Delays,",
      " and the  Extent to Which the Tanks  Can Continue to Safely  Store Waste Is Unknown In March 2014, DOE reported that unresolved technical issues could  prevent the WTP from operating safely as currently designed. Under the  existing TPA and consent decree, DOE is required to begin operating the  WTP and treating waste in 2022, to have retrieved all waste from the  SSTs by 2040, and to have all waste retrieved from all DSTs and treated  by 2047. DOE reported in March 2014 that, until the technical  uncertainties are resolved, it is not possible to predict when the WTP will  be completed.",
      " In addition, DOE has proposed building at least two new  waste processing facilities to allow waste treatment to begin while it is  resolving the WTP\u2019s technical uncertainties. One of the two facilities  would, if constructed, treat some of the low-activity waste in the tanks.  According to DOE officials, this facility would be operational no later than  December 2022 and would make available about 1.3 million gallons of  DST space after the first 3 years of operation. DOE has not estimated the impact of the WTP delay on its tank  management plans, but delays in the schedule to retrieve waste from the  SSTs are already occurring.",
      " Before its decision to delay the WTP, in a  series of letters to Ecology from November 2011 to September 2014,  DOE stated that it would likely miss the scheduled milestones in the  consent decree, including milestones for completing the WTP and  emptying waste from the SSTs. DOE further reported in March 2014  that delays in the WTP will affect the schedule for retrieving waste from  the tanks but that, until the technology it is developing to treat the tank  waste in the WTP can be demonstrated to work as intended, it is  impossible to estimate what the impact will be on the retrieval of waste  from the tanks.",
      " DOE cannot reliably update its scheduled deadlines for  retrieving waste from tanks without considering the impact of the WTP  delay. The technical challenges at WTP and the continued uncertainty about the  schedule for retrieving and treating the waste mean that the overall  cleanup mission will continue to depend on the integrity of the DSTs.  However, the extent to which the DSTs can continue to safely store waste  is unknown. In the 2011 System Plan, DOE stated that the DSTs play an  integral role in the tank waste cleanup effort. members of DOE\u2019s 2014 expert panel, convened to examine the integrity  of the DSTs,",
      " have stated that corrosion is a threat to DST integrity, and  the expert panel also highlighted deficiencies in DOE\u2019s understanding of  corrosion in all of the DSTs. The panel officials concluded in August 2014  that more work needs to be done to better understand the factors that led  to the corrosion in AY-102. However, as noted previously, DOE has not  examined the other DSTs for the same corrosion factors that may have  lead to corrosion in AY-102 and therefore lacks information about the  extent to which the other 27 DSTs may also be susceptible to similar  corrosion. As a result, DOE lacks assurance that these tanks will be  available for use through the end of the cleanup mission,",
      " as DOE\u2019s 2011  System Plan contemplates, and cannot reliably update its schedule for  emptying the SSTs. In 2001, DOE established a DST Integrity Program to implement controls and  inspections to ensure that the DSTs will be available for use through the end of the  cleanup mission. All of the SSTs and DSTs will be well beyond their design life before they  are emptied. Of the 137 SSTs that are still storing waste, all are currently  decades beyond their design life, and all but 13 of them would be at least  40 years beyond their design life before being emptied under DOE\u2019s  existing schedule for emptying the tanks.",
      " While the design life of the  DSTs varies, 4 of the 28 DSTs are already past their design life, and  under the current TPA milestones, all DSTs are expected to be well  beyond their design life by the time they are scheduled to be emptied.  (See app. I and III for design life data for each SST and app. II for design  life data for each DST. Figure 6, an interactive figure in appendix I, shows  a timeline of all Hanford SSTs. Appendix III, table 1, is the noninteractive,  printable version of figure 6.) DOE does not have plans to construct additional storage to address its  long-term storage needs and the risks presented by the aging tanks.",
      " DOE  has looked at options for building new tanks to address the constraints on  DST space if the cleanup mission were to take significantly longer than  currently planned. DOE has developed a rough estimate of the time and  cost that would be required to build additional tanks. Specifically, in 2011,  Ecology asked DOE to include the option of building new tanks in an  update to its System Plan. In response, DOE developed a rough estimate  for how much it would cost to build 8 additional storage tanks, if  necessary. DOE estimated that doing so would cost about $800 million  and would take about 8 years to complete.",
      " According to the System Plan,  this was a rough order of magnitude estimate and a more detailed  estimate would be required before a decision to build new tanks could be  considered. In 2012, DOE issued its final EIS for Hanford, which included  discussion of several tank waste cleanup alternatives that would have  involved building additional DSTs as part of the response to delayed  cleanup schedules. Conclusions DOE has recently taken and has plans for taking additional steps to  improve its tank monitoring and inspection procedures at Hanford and is  in the process of reassessing the integrity of the DSTs at the site. However, these steps do not address the longer-term concerns about  leaving waste in the aging tanks indefinitely.",
      " Specifically, DOE lacks  specific information about the condition of the DSTs, including whether  the factors that may have led to corrosion contributed to the leak in AY- 102 may affect other tanks which are already many years beyond their  design life. Given the current condition of the tanks, it is unclear how long  they can safely store the waste. Moreover, following the leak in AY-102,  available DST space\u2014which is essential to DOE\u2019s tank management  plans\u2014is increasingly limited, constraining DOE\u2019s ability to respond to  potential future leaks and protect human health and the environment. It is  unclear, however, whether DOE has enough DST space available to  address current and future waste transfers.",
      " As we mentioned earlier,  DOE officials responsible for managing Hanford\u2019s tank operations said  that given the current constraints on available DST space, if another DST  was to fail, DOE may have nowhere to move the waste. Additional space,  either from treating waste or building new tanks, is still at least 8 years  away assuming DOE\u2019s schedule estimates for these projects are  accurate, although DOE has begun recently to free up some DST space  by restarting its evaporator facility. Notably, responding to tank leaks can  take many years even when there is available DST space, as the leak in  AY-102 illustrates.",
      " By developing a more a detailed and up-to-date  schedule estimate for emptying the tanks, DOE will be in a better position  to consider its waste storage needs and need for new tanks. As the tanks  age, there will be a continued and increasing risk of tank failure that can  only be permanently addressed by emptying the existing SSTs and DSTs.  Given the long-standing technical problems facing the WTP, it is highly  uncertain when waste treatment operations could begin to create  significant available space in the DSTs. However, creating capacity to  move some of this waste to RCRA-compliant tanks would allow DOE to  respond to future leaks and ensure it has sufficient space for treatment  operations once WTP is completed.",
      " Recommendations for  Executive Action To ensure that DOE\u2019s long-term plans for storing waste in the existing  SSTs and DSTs at Hanford consider the condition of the tanks and the  WTP construction delay, we recommend that the Secretary of Energy  take the following three actions: Assess the extent to which the factors that may have led to corrosion  in AY-102 are present in any of the other 27 DSTs. Update the schedule for retrieving waste from the tanks, taking into  the impact of the delays in the WTP,  the risks associated with continuing to store waste in aging tanks,  and an analysis of available DST space.",
      " Assess the alternatives for creating new RCRA-compliant tank space  for the waste from the SSTs, including building new DSTs. Agency Comments  and Our Evaluation We provided DOE with a draft of this report for its review and comment. In  its written comments, reproduced in appendix IV, DOE agreed with the  report and its recommendations. DOE also provided technical comments  that were 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 of this report to the  appropriate congressional committees;",
      " the Secretary of Energy; the  Director, Office of Management and Budget; and other interested parties.  In addition, this report will be available at no charge on the GAO website  at http://www.gao.gov. If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or trimbled@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 who made major contributions to  this report are listed in appendix V. Appendix I: Timeline of Hanford Single-",
      " shell Tanks Online, roll your mouse over each year in the figure for additional information. For a printable version, see appendix III, page 30. Appendix II: Timeline of Hanford Double- Shell Tanks Figure 7 shows design life data for double-shell tanks. Appendix III: Age and Retrieval Schedule for  Hanford Single-Shell Tanks (Corresponds to  Fig. 6) Appendix III: Age and Retrieval Schedule for  Hanford Single-Shell Tanks (Corresponds to  Fig. 6) Table 1 lists information contained in interactive figure 6. Appendix IV: Comments from the  Department of Energy Appendix V:",
      " GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the individual named above, Dan Feehan, Assistant  Director; Mark Braza; John Delicath; Scott Fletcher; Rich Johnson; Jeff  Larson; Armetha Liles; and Kyle Stetler made key contributions to this  report.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 75,
    "question": null,
    "answer": "Defense science and technology (Defense S&T) is a term that describes a subset of Department of Defense (DOD) research, development, testing, and evaluation (RDT&E) activities. The Defense S&T budget is the aggregate of funding provided for the three earliest stages of DOD RDT&E: basic research, applied research, and advanced technology development. Defense S&T is of particular interest to Congress due to its perceived value in supporting technological advantage and its importance to key private sector and academic stakeholders. Advocates of strong and sustained Defense S&T funding assert that Defense S&T funding plays important and unique roles in the DOD innovation system, supporting medium-term, evolutionary technologies and incremental innovation that help improve existing products and systems, as well as longer-term, revolutionary technologies providing U.S. technological dominance, deterring conflict, and, when necessary, defeating adversaries. Both evolutionary and revolutionary technologies are viewed by most warfighters and policymakers as central to U.S. national security as well as to the lives of those serving in uniform. In FY2017, Defense S&T was $13.4 billion, nearly six times the FY1978 level of $2.3 billion. Most growth occurred from FY1978 to FY2006, at a compound annual growth rate (CAGR) of 6.4%. From FY2006 to FY2017, growth was slower (0.1% CAGR). Most of the growth and volatility was in advanced technology development. In FY2017 constant dollars, Defense S&T funding peaked at $16.2 billion in FY2005 and declined by $2.8 billion through FY2017.  In FY2016, basic research accounted for $2.2 billion of the Defense S&T total. The Navy accounted for the largest share of DOD basic research (29.2%), followed by the Defense-Wide agencies (27.6%), Air Force (23.0%), and Army (20.3%). Universities and colleges performed nearly half ($1.1 billion, 48.8%) of DOD basic research in FY2016; DOD and other intramural federal laboratories performed 22.9%; industry, 18.2%; other nonprofits, 7.5%; federally funded research and development centers (FFRDCs), 0.7%; and others, 2.0%.  A number of recommendations have been put forth by various organizations regarding the appropriate level of funding for Defense S&T and DOD basic research, as well as the level of funding for investments in research supporting potentially revolutionary advancements.  A 1998 Defense Science Board (DSB) report recommended setting Defense S&T at 3.4% of total DOD funding. In 2001, the Quadrennial Defense Review recommended that 3.0% of total DOD funding be directed toward Defense S&T. In FY1996, Defense S&T was at the 3.0% level. It subsequently fell to 1.7% in FY2011 and has since risen to 2.2%. An alternative approach recommended by the DSB in 1998 was to set Defense S&T at a percentage of DOD RDT&E, similar to the industry ratio of research funding to total R&D funding (which it calculated for the pharmaceutical industry as 24%). In 2015, the Coalition for National Security Research (CNSR), a coalition of industry, universities, and associations, recommended a target of 20%. At the time of the DSB report, S&T's share of DOD RDT&E was approximately 21%. After rising to 21.5% in FY2000, Defense S&T's share fell to 15.2% in FY2011, and then rose to 17.9% in FY2016. With respect to DOD basic research, the Council on Competitiveness (2004) and the CNSR (2015) recommended a target of at least 20% of Defense S&T. As a share of Defense S&T, basic research declined from 14.6% in FY1996 to 11.0% in FY2006, then began a steady rise to 18.4% in FY2015. In FY2016, basic research's share of Defense S&T was 17.4%. In its 1998 report, the DSB recommended that one-third of Defense S&T be devoted to research targeted toward revolutionary technological advancements. The Defense Advanced Research Projects Agency (DARPA) has been the lead DOD agency focused on revolutionary R&D. In FY2017, DARPA accounted for 21.6% of Defense S&T.\n",
    "docs": [
      "What Is Defense Science and Technology? Congress provides appropriations to DOD for RDT&E activities conducted in support of its mission requirements. DOD's Financial Management Regulation (DOD 7000.14-R) provides a taxonomy for requesting, tracking, and accounting for federal investments in RDT&E based on the character of work performed. DOD budget justifications and congressional appropriations reports and explanatory statements typically employ this taxonomy, which consists of seven budget activity codes (6.1 through 6.7) and a description (as shown in Table 1 ). Defense Science and Technology is a subset of DOD RDT&E appropriations that includes funding for basic research (6.",
      "1), applied research (6.2), and advanced technology development (6.3)\u2014the earliest stages of the RDT&E process.  DOD defines these budget activities in the following manner:  Basic research [Budget Activity Code 6.1] is systematic study directed toward greater knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products in mind. It includes all scientific study and experimentation directed toward increasing fundamental knowledge and understanding in those fields of the physical, engineering, environmental, and life sciences related to long-term national security needs. It is farsighted high payoff research that provides the basis for technological progress.",
      " Basic research may lead to: (a) subsequent applied research and advanced technology developments in Defense-related technologies, and (b) new and improved military functional capabilities in areas such as communications, detection, tracking, surveillance, propulsion, mobility, guidance and control, navigation, energy conversion, materials and structures, and personnel support.  Applied research [Budget Activity Code 6.2] is systematic study to understand the means to meet a recognized and specific need. It is a systematic expansion and application of knowledge to develop useful materials, devices, an d systems or methods. It may be oriented, ultimately, toward the design, development, and improvement of prototypes and new processes to meet general mission area requirements.",
      " Applied research may translate promising basic research into solutions for broadly defined military needs, short of system development. This type of effort may vary from systematic mission-directed research beyond that in Budget Activity 1 [basic research] to sophisticated breadboard hardware, study, programming and planning efforts that establish the initial feasibility and practicality of proposed solutions to technological challenges. It includes studies, investigations, and non-system specific technology efforts. The dominant characteristic is that applied research is directed toward general military needs with a view toward developing and evaluating the feasibility and practicality of proposed solutions and determining their parameters. Applied research precedes system specific technology investigations or development. Advanced Technology Development,",
      " [Budget Activity Code 6.3] includes development of subsystems and components and efforts to integrate subsystems and components into system prototypes for field experiments and/or tests in a simulated environment. Budget Activity 3 includes concept and technology demonstrations of components and subsystems or system models. The models may be form, fit, and function prototypes or scaled models that serve the same demonstration purpose. The results of this type of effort are proof of technological feasibility and assessment of subsystem and component operability and producibility rather than the development of hardware for service use. Projects in this category have a direct relevance to identified military needs. Advanced Technology Development demonstrates the general military utility or cost reduction potential of technology when applied to different types of military equipment or techniques\u2026.Projects in this category do not necessarily lead to subsequent development or procurement phases,",
      " but should have the goal of moving out of Science and Technology (S&T) and into the acquisition process within the Future Years Defense Program (FYDP). Upon successful completion of projects that have military utility, the technology should be available for transition. Perspectives on the Roles and Value of Defense S&T Defense S&T is of particular interest and importance to Congress due to its perceived value in supporting military competitive advantage. Defense S&T is also of interest to key stakeholders in the private sector and academia. For example, advocates of strong and sustained Defense S&T funding assert that this funding plays important and unique roles in the DOD innovation system. The scientific and technological insights that emerge from Defense S&T funding\u2014often referred to as the nation's \"seed corn\"\u2014are seen by many as the critical body of knowledge available to DOD and the industrial base for future defense technology development.",
      " Defense S&T supports both medium -term, evolutionary technologies and incremental innovation s to help improve existing products and systems; and longer-term, revolutionary technologies to support U.S. technological dominance, deter conflict, and defeat adversaries.  These technologies\u2014both evolutionary and revolutionary\u2014are seen by most warfighters and policymakers as central to U.S. national security as well as to the lives of those serving in uniform in the medium and long term. In contrast, most of the balance of DOD RDT&E is focused on near-term applications. Budget activity 6.4, Advanced Component Development and Prototypes, efforts are directed toward the evaluation of integrated technologies and prototype systems in realistic operating environments,",
      " not just in controlled laboratory environments. Funding in this budget activity seeks to expedite technology transition from the laboratory to operational use. Budget activity 6.5, System Development and Demonstration, is engineering and manufacturing development tasks aimed at meeting validated requirements prior to full-rate production. At this stage, prototype performance is near or at planned operational system levels. Budget activity 6.7, Operational Systems Development, is focused on development efforts to upgrade systems that have been fielded or have received approval for full rate production and anticipate production funding in the current or subsequent fiscal year. Budget activity 6.6, RDT&E Management Support, includes management support for RDT&E efforts and funds to sustain and/or modernize the installations required for general research.",
      " Accordingly, BA 6.6 funding supports RDT&E activities in each of the other budget activities. From FY2007 to FY2017, Defense S&T averaged 17.1%, approximately one-sixth, of total Defense RDT&E (ranging from 15% to 19% during these years). Historical funding levels and recent trends are discussed in more detail in the following section of this report. According to the National Academies' 2007 report Rising Above the Gathering Storm : Keeping a technological edge over adversaries of the United States has long been a key component of our national security strategy. US preeminence in science and technology is considered essential to achieving that goal.",
      " The report further emphasizes the importance of DOD basic research, asserting that The importance of DOD basic research is illustrated by its products\u2014in defense areas these include night vision; stealth technology; near-real-time delivery of battlefield information; navigation, communication, and weather satellites; and precision munitions. DOD investments in basic research are also considered vital to maintaining university research, the education of scientists and engineers, and the preservation of teaching capacity in key scientific and engineering fields. Proponents of these investments assert that it is essential to ensure steady funding to these fields to ensure stability for professors, researchers, and academic programs. Uneven funding patterns, some assert,",
      " can create uncertainty (in positions, salary, equipment, and programs, for example) that may drive out some of the best scientists and engineers and discourage the most capable students from pursuing degrees and research in these disciplines, resulting in adverse impacts on future innovation in fields key to national security.  Some analysts express concern that, in times of tightly constrained budgets, Defense S&T may be an easy target for budget cuts. Cuts to Defense S&T might produce few short-term consequences to national defense, as the benefits of these investments tend to be realized in the medium to long term. However, the neglect of these earlier-stage research and development activities could have serious medium-",
      " and long-term consequences, depriving the U.S. defense sector of the critical underpinnings necessary for maintaining technological superiority and global dominance in the future.  Former Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall noted the following: R&D is not a variable cost. R&D drives our rate of modernization. It has nothing to do with the size of the force structure. So, when you cut R&D, you are cutting your ability to modernize on a certain time scale, period\u2014no matter how big your force structure is... [T]he investments we're making now in technology are going to give us the forces that we're going to have in the future.",
      " The forces we have now came out of investments that were made, to some extent, in the 80s and 90s\u2026if you give up the time it takes for lead time to get\u2026a capability, you are not going to get that back. Alan R. Shaffer, Principal Deputy, Assistant Secretary of Defense for Defense Research and Engineering, underscored this point, stating the following: If we don't do the research and development for a new system then the number of systems of that type we will have is zero. It is not variable. Such cuts may also result in lasting damage to important segments of the U.S.",
      " R&D infrastructure\u2014researchers, professors, academic programs, student interest, equipment, infrastructure, etc.\u2014in defense-critical fields, even if funding were to be later restored. Such effects could not only diminish U.S. innovative capacity, but result in the transfer of knowledge and loss of people, capabilities, and leadership to other nations. According to a 2012 Defense Science Board report on DOD basic research The DOD basic research program has supported a large fraction of revolutionary research in the physical sciences. Without DOD support, these U.S.-based research communities would find it more difficult to expand knowledge, collaborate, publish, and meet.",
      " Without adequate U.S. support, these centers of knowledge will drift to other countries. While there is little direct opposition to Defense S&T spending in its own right, there is intense competition for available dollars in the appropriations process. This competition has been made more acute under congressionally enacted budget control provisions. Congressional acts establish and provide enforcement mechanisms for separate spending caps for defense and nondefense spending. These independent budget caps essentially fence off certain funds from being used for defense purposes by those who would prioritize such defense spending over certain nondefense activities. Increases in the defense and nondefense budget caps for FY2018 and FY2019 included in the Bipartisan Budget Act of 2018 ( P.L.",
      " 115-123 ) may ease the resource competition in these fiscal years, but not eliminate it. With the spending caps has come greater competition for available dollars within the defense portion of the budget (for example, between RDT&E and procurement), and among the various RDT&E budget activities and program elements (for example, between Defense S&T and the rest of the defense RDT&E budget activities). With members of the U.S. Armed Forces currently engaged in combat and others facing potentially imminent threats in other locations around the world, some may believe it is appropriate to prioritize defense spending to support immediate operational needs and contingency preparations of the military over activities whose payoff is likely to be realized only in the longer term.",
      " In addition, some have questioned the effectiveness of defense investments in R&D. For example, a 2012 article published by the Center for American Progress (CAP), a public policy research and advocacy organization, notes that the technological superiority of the United States did not initially provide an effective defense for U.S. troops against low-tech improvised explosive devices (IEDs) in Iraq and Afghanistan. The article also asserts that many high-priced major weapons systems\u2014such as President Reagan's missile defense program\u2014have failed to deliver on their promised capabilities due to scientific and engineering shortcomings. Further, the article notes that commercial technology development is now outstripping defense technology due to the \"strength of capitalism\"\u2014including large markets,",
      " consumer demand, and competitive challenges\u2014suggesting the potential benefits of pursuing a technology acquisition strategy based more heavily on off-the-shelf technologies or the repurposing of those technologies to meet defense needs. The article treats basic research less harshly than other Defense RDT&E activities, which CAP describes as \"the kind of boondoggle R&D spending the Pentagon engages in at the applied and developmental level.\" Historical Defense S&T Funding and Recent Trends Defense S&T has grown substantially in current dollars (unadjusted for changes in buying power) over the past four decades, from $2.3 billion in FY1978 to $13.4 billion in FY2017.",
      " This growth is illustrated in Figure 1, which shows this growth by its component budget activities. During the FY1978-FY2017 period, Defense S&T grew at a compound annual growth rate (CAGR) of 4.6%. Most of this growth occurred between FY1978 and FY2006 (6.4% CAGR); from FY2006 to FY2017 Defense S&T grew at a pace of 0.1% CAGR, though the period was punctuated by periods of growth and contraction. The funding trends for each of the component budget activities (6.1-6.3) during the FY1978-FY2017 period were different.",
      "  B asic research (6.1) funding grew at 4.4% CAGR from FY1978 to FY2017, approximately the same pace as overall Defense S&T funding (4.7% CAGR), but the growth was steadier, with fewer periods of substantial decrease. Applied research (6.2) funding grew steadily from FY1978 to FY2017, in general, but at a slightly slower rate (3.5% CAGR) than overall Defense S&T and basic research funding. Similar to overall Defense S&T, most of the growth in applied research occurred between FY1978 and FY2006 (4.",
      "8% CAGR); from FY2006 to FY2017 applied research grew at a slower pace of 0.3% CAGR. Advanced t echnology d evelopment (6.3) funding experienced periods of growth and decline from FY1978 to FY2017. From FY1978 to FY1993, advanced technology development grew at a rate of 14.4% CAGR. From FY1993 to FY1999, funding declined at a rate of 3.0% CAGR. Funding grew at a rate of 10.3% CAGR from FY1999 to FY2006, and then fell again from FY2006 to FY2013 at a rate of 4.",
      "9% CAGR. Most recently, funding for advanced technology development has grown at a rate of 5.9% CAGR from FY2013 to FY2017.   Figure 2 illustrates Defense S&T by budget activity in constant FY2017 dollars. This figure provides an illustration of Defense S&T funding levels from FY1978 to FY2017 in terms of the purchasing power of these funds.  Defense S&T grew by nearly 90% in constant dollars between FY1978 and FY2017. Despite the increase, there were periods of decline. Between FY1993 and FY1999, funding decreased at a rate of 4.",
      "0% CAGR. Funding rebounded between FY1999 and FY2005 (when Defense S&T funding reached its peak in constant dollars for the FY1978-FY2017 period), growing by 7.1% CAGR. This growth period was followed by another period of decline through FY2013 (4.0% CAGR). From FY2013 to FY2017, Defense S&T grew at a rate of 3.5% CAGR.  Basic research funding grew, with some ups and downs, at a rate of 1.4% CAGR, during the FY1978-FY2017 period.",
      " From FY1993 to FY1998, funding fell by nearly 30%, then recovered, surpassing its FY1993 level in FY2012. Funding then rose an additional 1.4% between FY2012 and FY2017. Applied research funding was essentially flat through FY1998, then grew steadily through FY2005 (5.1% CAGR) and remained flat again through FY2007. Funding fell by 24% from FY2007 to FY2013, declining at a rate of 4.5% CAGR. Funding recovered between FY2013 and FY2017, rising by 13.",
      "4%, at a rate of 3.2% CAGR. The largest swings in Defense S&T resulted from changes in the advanced t echnology d evelopment funding component. Advanced technology development funding nearly quadrupled in constant dollars from FY1978 to FY1993. From FY1993 through FY1999, it fell by 25%, before rising again to its constant dollar peak in FY2005. Between FY2005 and FY2013, advanced technology development fell by 39%, and then recovered somewhat between FY2013 and FY2017 (up 19%). DOD Basic Research Funding  In FY2016,",
      " DOD spent an estimated $2.3 billion on basic research. The following sections describe the composition of DOD basic research funding by organizational component and the composition of performers of the research by organizational component. DOD Basic Research Funding by Organizational Component The Department of Defense funds basic research activities through the Army, Navy, Air Force, and Defense-Wide (D-W) agencies. Figure 3 illustrates the composition of that funding based on FY2016 obligations. Funding was broadly distributed, with each of the services and Defense-Wide agencies accounting for 20%-30% of total DOD basic research funding. The Navy accounted for the largest share (29.",
      "2%) of DOD basic research, followed by the Defense-Wide agencies (27.3%), the Air Force (23.4%), and the Army (20.1%). The Defense Advanced Research Projects Agency (DARPA) is the largest funder of basic research among the D-W agencies, accounting for 17.9% of total DOD RDT&E. Basic Research of DOD Components by Performing Sector  Figure 4 illustrates the share of total DOD basic research by performing sector. Universities and colleges performed nearly half ($1.1 billion, 48.8%) of DOD basic research in FY2016.",
      " Nearly another quarter of DOD basic research was performed by intramural performers ($533 million, 22.9%). Industry performed 18.2% ($423 million) of DOD basic research; other nonprofits 7.5% ($174 million); and all other performers 1.7% ($61 million).  Figure 5 illustrates the composition of DOD components' basic research by performing sector. As the charts show, the components' degree of reliance on performing sectors varies. In FY2016 All components relied heavily on universities and colleges, especially the other defense agencies (59.2%). Reliance on industry varied widely,",
      " from 40.6% (DARPA) to 5.0% (Navy). The components' reliance on intramural performers also varied, from 5.2% (DARPA) to 32.7% (Navy). Other nonprofits are significant performers for the Air Force (14.3%) and DARPA (13.2%), but barely used by the Army (0.1%) and other defense agencies (1.3%). Program Elements in DOD Basic Research According to DOD,  The program element is the primary data element in the Future Years Defense Program (FYDP) and normally the smallest aggregation of resources used by the Office of the Secretary of Defense [OSD]",
      " for analysis. It generally represents a collection of functional or organizational entities and their related resources. PEs are designed and quantified to be comprehensive and mutually exclusive. As the building blocks of the programming and budgeting system, PEs are continually reviewed to maintain proper visibility into the multitude of defense programs. DOD RDT&E is generally requested and funded under specified program elements (PEs). Each program element is associated with a seven character number and an alphanumeric suffix which, in part, indicate the budget activity code and the DOD department or agency receiving the funds. Table 2 identifies each of the basic research PEs for the services and Defense-Wide agencies,",
      " their FY2017 enacted funding levels, and their share of each component's basic research funding. DOD basic research has some program elements that are continuing efforts (that is, they continue across multiple fiscal years). In addition, some of the PEs are common to one or more of the services or Defense-Wide agencies.  The following section provides descriptions of these PEs, as well as the other basic research PEs. The descriptions are drawn largely from the FY2018 budget justifications of the services and Defense-Wide agencies. Defense Research Sciences  The Defense Research Sciences programs conducted by the Army, Navy, Air Force, and DARPA comprise the largest component and the core of the DOD basic research program.",
      "  Army. The Army Defense Research Sciences PE supports the development of fundamental scientific knowledge intended to contribute to the sustainment of Army scientific and technological superiority in land warfighting capability and to solving military problems related to long-term national security needs, supports investigation of new concepts and technologies for the Army's future force, and seeks to provide the means to exploit scientific breakthroughs and avoid technological surprises. This PE fosters innovation in Army niche areas (e.g., lightweight armor, energetic materials, and night vision capability) and areas where there is no commercial investment due to limited markets (e.g., vaccines for tropical diseases). It also focuses university single investigator research on areas of high interest to the Army (e.g., high-density compact power and novel sensors). The in-house portion of the program relies on the Army's scientific talent and specialized facilities to transition knowledge and technology into appropriate developmental activities.",
      " The extramural program leverages the research efforts of other government agencies, academia, and industry. Navy. The Navy Defense Research Sciences PE supports development of new technological concepts for the maintenance of naval power and national security, and to prevent scientific surprise. The program seeks to exploit scientific breakthroughs and to provide options for new future naval capabilities and innovative naval prototypes. The basic research efforts include scientific study and experimentation directed toward increasing knowledge and understanding in national security-related aspects of physical, engineering, environmental, and life sciences. The program's investments include National Naval Responsibilities (NNRs) and the Basic Research Challenge Program. Air Force. The Air Force Defense Research Sciences PE funds extramural research activities in academia and industry along with in-house investigations performed in the Air Force Research Laboratory (AFRL). Funding supports fundamental broad-based scientific and engineering research in areas critical to Air Force weapon,",
      " sensor, and support systems. DARPA. The DARPA Defense Research Sciences PE seeks to provide the technical foundation for long-term national security enhancement through the discovery of new phenomena and the exploration of the potential of such phenomena for defense applications. It supports scientific study and experimentation that serves as the basis for more advanced knowledge and understanding in information, electronic, mathematical, computer, biological, and materials sciences. University Research Initiatives Army. The Army's University Research Initiatives (URI) PE supports several activities, including the Multidisciplinary University Research Initiative (MURI), the Defense University Research Instrumentation Program (DURIP), the Presidential Early Career Awards for Scientists and Engineers (PECASE)",
      " program, and the Army's contribution to the Minerva Research Initiative (MRI). The MURI program supports university-based basic research across a wide range of scientific and engineering disciplines pertinent to maintaining land combat technology superiority. Army MURI efforts involve teams of researchers investigating high-priority, transformational topics that intersect more than one traditional technical discipline. The MURI multidisciplinary approach seeks to accelerate research progress and to expedite the transition of research results into application. The DURIP program provides funds to acquire major research equipment to augment current research capabilities, or to devise new research capabilities, in support of Army transformational research. The PECASE program funds single-investigator research efforts performed by academic scientists and engineers early in their research careers.",
      " The Minerva Research Initiative is a university-based social science research program that seeks to improve DOD's basic understanding of the social, cultural, behavioral, and political forces that shape regions of the world of strategic importance to the United States. The program has three primary components: (1) a university-based social science basic research grant program; (2) the Research for Defense Education Faculty program for the professional military education institutions; and (3) a collaboration with the U.S. Institute of Peace to award research support to advanced graduate students and early career scholars working on security and peace. According to DOD The Minerva Research Initiative has a unique relationship between research and policy within DOD.",
      " As such, leadership across the department collaborate to identify and support basic social science research issues in need of attention and to integrate those research insights into the policy-making environment. In doing this, the leadership team closely works with the program managers within the Military Service Branches. Navy. The Navy's URI PE includes support for multidisciplinary basic research in a wide range of scientific and engineering disciplines to enable the U.S. Navy to maintain technological superiority, and for the acquisition of research instrumentation needed to maintain and improve the quality of university research important to the Navy. Navy MURI efforts are focused on high-priority topics and opportunities that intersect more than one traditional technical discipline.",
      " This program is intended to stimulate innovation, accelerate research progress, and expedite transition of research results into naval applications. The Navy DURIP program supports university research infrastructure deemed essential to high-quality, Navy-relevant research. The program complements other Navy research programs by supporting the purchase of high-cost research instrumentation that is necessary for the conduct of cutting-edge research. Navy URI funding also supports PECASE efforts focused on providing the knowledge base, scientific concepts, and technological advances needed for the maintenance of naval power and national security. Air Force. The Air Force's URI PE supports defense-related basic research across a wide range of scientific and engineering disciplines deemed relevant to maintaining U.S.",
      " military technological superiority. Research topics include transformational and high-priority technologies such as nanotechnology, sensor networks, intelligence information fusion, smart materials and structures, efficient energy and power conversion, and high-energy materials for propulsion and control. The program also seeks to enhance and promote the education of U.S. scientists and engineers in disciplines critical to maintaining, advancing, and enabling future U.S. defense technologies. The program also assists universities in acquiring the instrumentation capabilities needed to improve the quality of defense-related research and education. The Air Force asserts that a fundamental component of this program is recognition that future technologies and technology exploitations require highly coordinated and concerted multi-",
      " and interdisciplinary efforts. In-House Laboratory Independent Research The In-House Laboratory Independent Research (ILIR) PEs support basic research at Army and Navy laboratories, including six Army Materiel Command Research, Development, and Engineering Centers; six U.S. Army Medical Research and Materiel Command Laboratories; seven Corps of Engineers U.S. Army Engineer Research and Development Centers; the U.S. Space and Missile Defense Command Technical Center; and participating Naval Warfare Centers and Laboratories.  Army. Army ILIR efforts seek to catalyze major technology breakthroughs by providing laboratory directors flexibility in implementing novel research ideas, by nurturing promising young scientists and engineers, and by attracting and retaining top scientists and engineers.",
      " The ILIR program also provides a source of competitive funds for peer reviewed efforts at Army laboratories to stimulate high-quality, innovative research with significant opportunity for payoff to Army warfighting capability.  Navy. Navy ILIR efforts are selected by Naval Warfare Centers/Laboratories' commanding officers and technical directors near the start of each fiscal year through internal competition. Efforts typically last three years, and are generally designed to assess the promise of new lines of research. Successful efforts typically attract external, competitively awarded funding.  University and Industry Research Centers The Army University and Industry Research Centers PE seeks to foster university- and industry-based research to provide a scientific foundation for enabling technologies for future force capabilities.",
      " The work falls broadly into three categories:  Collaborative Technology Alliances/Collaborative Research Alliances (CTAs/CRAs). CTAs seek to leverage large investments by the commercial sector in basic research areas that are of interest to the Army. CTAs are industry-led partnerships between industry, academia, and the Army Research Laboratory (ARL) that seek \"to incorporate the practicality of industry, the expansion of the boundaries of knowledge from universities, and Army scientists to shape, mature, and transition technology relevant to the Army mission.\" CRAs are academia-led partnerships, which seek to leverage cutting-edge academic research.  University Centers of Excellence (COEs). University COEs seek to expand the frontiers of knowledge in research areas where the Army has enduring needs.",
      " COEs couple state-of-the-art research programs at academic institutions with broad-based graduate education programs to help increase the supply of scientists and engineers in automotive and rotary wing technology.  The Army University and Industry Research Centers program element also supports the Historically Black Colleges and Universities and Minority Institution (HBCU/MI) Centers of Excellence. University Affiliated Research Centers (UARCs). UARCs were established to advance new capabilities through sustained multidisciplinary efforts. The Institute for Soldier Nanotechnologies focuses on soldier protection by emphasizing revolutionary materials research for advanced soldier protection and survivability. The Institute for Collaborative Biotechnologies focuses on enabling network-centric technologies,",
      " and broadening the Army's use of biotechnology for the development of bio-inspired materials, sensors, and information processing. The Institute for Creative Technologies is a partnership with academia and the entertainment and gaming industries to leverage innovative research and concepts for training and simulation, in areas such as realistic immersion in synthetic environments, networked simulation, standards for interoperability, and tools for creating simulated environments.  Other DOD Basic Research PEs In addition to the program elements discussed above, there are seven other DOD basic research program elements (sponsoring agency noted after program name/abbreviation): High Energy Laser (HEL) Research Initiatives (Air Force)",
      " : This PE supports basic research aimed at developing fundamental scientific knowledge to support future DOD HEL systems. This program funds multidisciplinary research institutes to conduct research on laser and beam control technologies. In addition, this program supports educational grants to stimulate student interest in HELs. National Defense Education Program (NDEP, Defense-Wide : Office of the Secretary of Defense) : The NDEP supports a number of specific workforce development programs, including the Science, Mathematics, and Research for Transformation program, and the Military Child Pilot Program, that seek to improve the DOD workforce by increasing STEM proficiency in the nation's talent pool; shaping DOD as a STEM workplace of choice for scientists and engineers through public communications and outreach;",
      " leading the DOD STEM strategic efforts and coordinating STEM efforts in alignment with DOD workforce and mission requirements; and identifying approaches for innovative solutions in support of U.S. current and future defense challenges. Basic Research Initiatives ( D-W : OSD ) : The Basic Research Initiatives PE supports defense basic research through several activities. Strategic Support for Basic Research (SSBR) initiatives drive the direction of DOD basic research investments; coordinate and conduct oversight of DOD basic research programs; improve science and engineering workforce and public outreach; enhance university-industry collaboration; and engage with academic research community and international partners. The PE also supports the Minerva Research Initiative (discussed above)",
      " and the Vannevar Bush Faculty Fellowship Program, which supports research across a broad set of emerging scientific areas with transformative potential. Basic Operational Medical Research Science ( D-W : DARPA) : This PE supports basic research in medical-related information and technology leading to fundamental discoveries, tools, and applications critical to solving defense-related challenges. Efforts focus on identified medical gaps in warfighter care related to health monitoring and preventing the spread of infectious disease. The program uses information, computational modeling, and physical sciences to discover properties of biological systems that cross multiple scales of biological architecture and function, from the molecular and genetic level through cellular, tissue, organ, and whole organism levels.",
      " To enable in-theater, continuous analysis and treatment of warfighters, this project seeks to explore diagnostic and therapeutic approaches, including the use of bacterial predators as therapeutics against infections caused by antibiotic-resistant pathogens; developing techniques to enable rapid transient immunity for emerging pathogens; and identifying fundamental biological mechanisms that enable certain species to survive in harsh environments. Chemical a nd Biological Defense Program ( D-W : Nuclear, Chemical, and Biological Defense Program) : The Chemical and Biological Defense Program (CBDP) includes PEs in all seven RDT&E budget activities. The basic research-focused Chemical and Biological Defense Program PE supports theoretical and experimental research in life sciences\u2014focused on understanding living systems'",
      " response to biological or chemical agents, to support detection, diagnostics, protection, and medical treatment\u2014and physical sciences\u2014focused on investigation of physical and chemical properties and interactions to improve detection, diagnostics, protection, and decontamination. Defense Threat Reduction Agency (DTRA) University Strategic Partnership Basic Research ( D-W : DTRA) : The DTRA Basic Research PE funds research across physical, material, engineering, computational, and life sciences directed toward greater knowledge and understanding of the fundamental aspects of observable phenomena associated with weapons of mass destruction. This PE provides support for the discovery and development of basic knowledge by researchers in academia and research institutions in government and industry.",
      " Historically Black Colleges and Universities and Minority-Serving Institutions ( HBCU/MI, D-W : OSD) : The HBCU/MI PE provides support for Historically Black Colleges and Universities and Minority-Serving Institutions (HBCU/MI) programs in the fields of science and engineering deemed important to national defense. This PE provides support through grants, cooperative agreements, or contracts for research, education assistance, and instrumentation. Issues in Defense S&T Through the authorization and appropriations processes, Congress grapples with a wide variety of issues related to the magnitude, allocation, and strategic direction of DOD RDT&E, Defense S&T (a subset of RDT&E), and basic research (a subset of Defense S&T). These decisions play an important role in U.S.",
      " national security and economic strength, in the near term and longer term.  In practice, appropriations decisions are generally made about specific programs within the context of the available funding. The levels of RDT&E, S&T, and basic research funding are the result of many decisions made during DOD budget formulation and congressional appropriations, and in the end, are calculated on a post-facto basis. Nevertheless, an analysis of the kind that follows may be useful in assessing the big picture and in seeing funding trends in the context of a historical arc that may provide strategic insight and guidance. Among the ongoing questions lawmakers and policy analysts grapple with are the following:",
      "  What is the appropriate funding level for Defense S&T? What is the appropriate funding level for DOD basic research? Several approaches to addressing these questions are identified below, each with related data and analysis. What Is the Appropriate Funding Level for Defense S&T?  Congress and others have expressed concerns about the adequacy of funding for Defense S&T. As discussed earlier, the scientific and technological insights that emerge from this funding are seen by many as the pool of knowledge available to DOD and the industrial base for future defense technology development. For this reason, Defense S&T funding has sometimes been singled out for attention by Congress.  Approach:",
      " Defense S&T as a Share of Total DOD Funding A 1998 Defense Science Board (DSB) report suggested two conceptual frameworks for Defense S&T funding. The first approach, using industrial practice as a guide, proposed setting Defense S&T funding at 3.4% of total DOD funding:  The DOD S&T budget corresponds most closely to the research component of industrial R&D. Using 3.4% of revenue (typical of high-tech industries shown [elsewhere in the report]), the DOD S&T funding should be about $8.4 billion, which is a billion dollars greater than the FY98 S&T funding.",
      " Other organizations have proposed using the same metric, with 3% of total DOD funding as the level for S&T funding. A 2001 report based on the Quadrennial Defense Review (QDR), a legislatively mandated review by DOD of its strategies and priorities, called for \"a significant increase in funding for S&T programs to a level of three percent of DOD spending per year.\" In 2004, the Council on Competitiveness, a leadership organization of corporate chief executive officers, university presidents, labor leaders, and national laboratory directors, reiterated the 3% recommendation of the QDR.  Over the years,",
      " Congress has sought to address this perceived shortcoming in funding. The FY1999 defense authorization bill ( P.L. 105-261 ) expressed the sense of Congress that Defense S&T funding should be increased by 2% or more above the inflation rate each year from FY2000 to FY2008. Subsequently, the FY2000 defense authorization bill expressed the sense of Congress that  the Secretary of Defense has failed to comply with the funding objective for the Defense Science and Technology Program, especially the Air Force Science and Technology Program, as stated [P.L. 105-261], thus jeopardizing the stability of the defense technology base and increasing the risk of failure to maintain technological superiority in future weapon systems.",
      " The act further expressed the sense of Congress that the Secretary of Defense should increase Defense S&T, including the 6.1-6.3 programs within each military department, by 2% or more above the inflation rate each year from FY2001 to FY2009. In 2002, Congress embraced the DSB's recommendation and underlying rationale in the conference report accompanying the National Defense Authorization Act for Fiscal Year 2003: The conferees commend the Department of Defense commitment to a goal of three percent of the budget request for the defense science and technology program and progress toward this goal. The conferees also note the finding in the Defense Science Board report that successful high technology industries invest about 3.",
      "5 percent of sales in research (equivalent to the DOD S&T program) and the recommendation that S&T funding should be increased to ensure the continued long-term technical superiority of U.S. military forces in the 21 st Century. The conferees believe that the Department must continue to provide the necessary investments in research and technologies that ensure a strong, stable, and robust science and technology program for our Armed Forces. In 2009, the Senate-passed version of the National Defense Authorization Act for Fiscal Year 2010 ( S. 1390 ) included a provision (\u00a7217) stating it was the sense of Congress that the Secretary of Defense should increase Defense S&T by a percentage at least equal to inflation.",
      " Data and Analysis Following a period of strong growth in the early 2000s, Defense S&T funding reached $13.3 billion in FY2006, then declined to $11.0 billion in FY2013 before climbing to a peak of $14.0 billion in FY2017. (See Figure 6.) Growth in the amount of S&T funding that was sought in P.L. 105-261 (red line, Figure 6 ) was largely achieved, though appropriations fell somewhat short in FY2007 and FY2008. Viewed as a share of DOD total obligational authority (TOA), S&T declined from about 3.",
      "0% in the late 1990s to about 1.7% in 2011, then rebounded to about 2.3% in FY2017. (See Figure 7.)  Approach: DOD Science and Technology as a Share of DOD RDT&E The DSB's second proposed framework, also based on industrial practice, was to use the metric of Defense S&T as a share of DOD RDT&E: Another approach to this question is to note that the ratio of research funding to total R&D funding in high-technology industries, such as pharmaceuticals, is about 24%. When this percentage ratio is applied to the FY98 R&D funding of about $36 billion,",
      " the result is about $8.6 billion, well above the actual S&T funding. In 2015, the Coalition for National Security Research, a coalition of industry, universities, and associations, asserted that Defense S&T funding should be 20% of DOD RDT&E. Data and Analysis  Figure 8 illustrates Defense S&T's share of DOD RDT&E for FY1996-FY2016. At the time of the DSB report (1998), S&T's share of DOD RDT&E was approximately 20.7%. After rising to 21.5% in FY2000, the share fell to 15.",
      "2% in FY2011, and then recovered to 17.9% in FY2017. What Is the Appropriate Funding Level for DOD Basic Research?  Within the Defense S&T program, basic research is often singled out for additional attention, due in part to its perceived value in advancing breakthrough technologies and in part to the substantial role it plays in supporting university-based research in certain physical sciences and engineering disciplines. DOD describes basic research as \"farsighted high payoff research that provides the basis for technological progress.\" Basic research funding is seen by some as particularly vulnerable to budget cuts or reallocation to other priorities because of the generally long time it takes for basic research investments to result in tangible products and other outcomes (i.e., reductions in funding can be made with minimal short-term consequences)",
      " and to the uncertainty of the benefits that will be derived from the results of basic research.  Approach: DOD Basic Research as a Share of Defense S&T In 2004, the Council on Competitiveness asserted that DOD basic research should be at least 20% of Defense S&T. In 2015, the Coalition for National Security Research also recommended basic research account for 20% of Defense S&T. Data and Analysis DOD basic research funding grew steadily from FY1998 through FY2017, more than doubling in current dollars. (See Figure 9.) As a share of Defense S&T, basic research declined from 14.",
      "6% in FY1996 to 11.0% in FY2006, then began a steady rise to 18.4% in FY2015, its highest level in two decades. Basic research's share of Defense S&T fell in 2016 to 17.4% and in 2017 to 16.2%. (See Figure 10.)  Concluding Observations Defense S&T investments are highly complex and can be parsed in many ways. Some of these are highlighted in this report. Other ways of parsing RDT&E funding\u2014such as allocation by size of industrial performers\u2014may also be important for assessing the balance in allocation of DOD RDT&E resources to meet DOD objectives.",
      "  Among the many other factors that may affect the effectiveness of the performance of Defense S&T are organizational structures and relationships; management; workforce recruitment, training, and retention; and policies related to cooperative research and technology transfer. Defense S&T stakeholders have also asserted the importance of stability in funding streams. As Congress undertakes defense annual authorization and appropriations, it may wish to consider the issues raised in this report related to the magnitude and composition of funding for Defense S&T in the overall context of DOD RDT&E, as well as the other issues such as those identified above.\n"
    ],
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  },
  {
    "id": 76,
    "question": null,
    "answer": "In fiscal year 2009, the United States resettled close to 70,000 refugees fleeing persecution in their homelands. To assist in their transition to the United States and help them attain employment, the Department of Health and Human Services Office of Refugee Resettlement (ORR) provides temporary cash, medical, and other assistance through four different assistance programs. The economic downturn and an increase in refugee arrivals posed challenges to ORR's efforts to assist refugees and estimate program costs, resulting in fluctuating unobligated balances. Congress required GAO to examine (1) differences in ORR's refugee assistance programs and factors program providers consider when placing refugees in a particular program; (2) refugee employment outcomes and the effectiveness of different approaches to providing assistance; and (3) how ORR estimates program costs and how its estimates have affected the agency's unobligated balances. GAO met with federal and state officials, voluntary agency staff, and refugees; reviewed selected case files; analyzed ORR performance data for fiscal years 2007 through 2009; and reviewed and analyzed relevant federal laws, regulations, and budget documents. ORR supports several approaches to providing cash, medical assistance, and social services to refugees through its Matching Grant, Publicly Administered, Wilson/Fish, and Public Private Partnership programs. The Matching Grant program, which is administered and partially funded by private voluntary organizations, features several design elements that set it apart from ORR's other programs. For example, voluntary organizations select refugees for the Matching Grant program and those who participate have 4 to 6 months to find employment before their cash assistance ends. Most states also offer one of ORR's other programs: these programs enroll any eligible refugee, and participants have up to 8 months to find a job before their assistance ends. Three of ORR's programs--the Wilson/Fish, Public Private Partnership, and Matching Grant--were designed to give providers flexibility in developing innovative approaches to help refugees find employment and become self-sufficient. GAO observed providers using a number of different approaches, including offering refugees cash incentives for early employment, and these approaches varied within and among programs. Voluntary agencies told GAO that they consider several factors, such as the refugee's English language and employability skills, in deciding whether to enroll a refugee in the Matching Grant program or another ORR assistance program. ORR's four assistance programs showed some success in helping refugees obtain employment in fiscal year 2009, but the percentage of program participants who obtained employment declined in recent years and little is known about which approaches are most effective in improving the economic status of refugees. In fiscal year 2007, between 59 percent and 65 percent of refugees receiving cash assistance from ORR programs entered employment within 4 to 8 months. By fiscal year 2009, these rates decreased to between 31 percent and 52 percent, depending on the program. Little is known about the effectiveness of the different approaches providers use to improve employment outcomes for refugees, such as intensive case management and employment incentives, in part because of differences in the way programs are structured and the populations they serve and in part because of differences in the way program performance is measured. ORR's estimates of program costs have generally tracked actual obligations but challenges in estimating specific variables such as the number of eligible refugees and the cost of serving them have contributed to fluctuations in unobligated balances between fiscal years 1999 and 2009. ORR has a 3-year period in which to obligate its annual appropriations. From fiscal years 1999 to 2005, ORR used unexpired and unobligated prior year funds to obligate more than it was appropriated for those years, in part because of higher-than-expected increases in refugee arrivals and medical costs. As a result, its unobligated balances were reduced in most of these years and were gone by fiscal year 2005. However, from fiscal years 2006 to 2009, ORR obligated less than it was appropriated, which allowed the agency to carry over funds from one year to the next. As a result, its unobligated balances grew from $17 million in fiscal year 2006 to over $83 million in fiscal year 2009.\n",
    "docs": [
      "Background Data limitations stem from the fact that performance data are reported by multiple  agencies. the United States will admit for resettlement in a given year. The  presidential ceiling has decreased from about 90,000 in fiscal year 1999 to  80,000 in fiscal year 2009. However, the number of refugees actually  entering the United States has increased in recent years compared to the  relatively low numbers entering after the terrorist attacks of September 11,  2001. In the aftermath of those attacks, a review of refugee-related security  procedures was undertaken, refugee admissions were briefly suspended,  and enhanced security measures were implemented.",
      " As a result of these  and other factors, refugee admissions declined from 68,393 in fiscal year  2001 to 26,383 in fiscal year 2002 and 28,348 in fiscal year 2003. Admissions  have rebounded since, gradually increasing to 74,652 in fiscal year 2009. Refugee Resettlement and  Assistance Programs The Refugee Act of 1980 provided a systematic and permanent procedure  for admitting refugees to the United States and established comprehensive  and uniform provisions to resettle refugees as quickly as possible and to  encourage them to become self-sufficient. The Departments of State and  Homeland Security handle the first part of the resettlement process by  approving and processing refugees overseas.",
      " The Department of State then  partners with 10 national voluntary agencies to determine where in the  United States refugees will live. The national voluntary agencies consider a  variety of factors when determining where refugees will live, including  placing refugees where they may already have relatives and where the  national agencies have offices to meet the needs of the refugees. Voluntary  agencies use their network of some 350 affiliates to provide refugees with  initial placement services, including meeting refugees at the airport when  they first arrive in the United States and providing housing, food, clothing,  and other necessities for the first 30 to 90 days.  Also,",
      " during this time,  staff from local voluntary agencies help refugees apply for federal  assistance. After their initial month in the United States, many refugees are eligible for  temporary resettlement assistance from ORR. All states, except Wyoming,  administer an ORR-funded assistance program that provides up to 8  months of cash and medical assistance, as well as other social services,  and states have the flexibility to choose among three program delivery  models\u2014the Publicly Administered, Wilson/Fish, or Public Private  Partnership programs. These three delivery models were established  over a 20-year period and give states options in how they provide refugee  assistance:",
      "    Publicly Administered: Refugee resettlement assistance is provided  primarily through the Publicly Administered program. States are not  required to administer this program, but those that do generally model the  program after their Temporary Assistance for Needy Families (TANF)  programs. Wilson/Fish: In 1984, Congress authorized ORR to implement the  Wilson/Fish program, which gave states flexibility in how they provide  assistance to refugees, including whether to administer assistance  primarily through local voluntary agencies. One of the goals in developing  this program was to expand the number of states that offered a refugee  program so that an ORR-funded program could exist in every state that  resettles refugees.",
      " Public Private Partnership: In 2000, ORR established the Public Private  Partnership program, which promotes states\u2019 partnerships with voluntary  agencies to provide assistance, and gives states the flexibility to set  refugees\u2019 cash grants at levels higher than those authorized for the  Publicly Administered program. (See fig. 1 for the geographical  distribution of refugee assistance programs.) In addition, some refugees participate in the Matching Grant program,  which is only partially funded by ORR. According to ORR, this program is  administered by a network of national voluntary agencies, and is offered in  42 states and the District of Columbia.",
      " The Matching Grant program  provides refugees with cash and other assistance for 4 to 6 months with  the goal of helping them become self-sufficient without receiving cash  benefits from a public assistance program. Of the refugees who received  cash assistance from ORR in fiscal year 2009, just over 30 percent of them  participated in the privately administered Matching Grant program, while  most of the remaining percent participated in ORR\u2019s other assistance  programs. (See fig. 2.) All four programs fund cash and medical assistance as well as a broad  range of social services, including employment services, English language  instruction, case management,",
      " citizenship and naturalization preparation  services, and social adjustment services. Eligible refugees may also  receive other federal benefits, such as food assistance offered through the  United States Department of Agriculture\u2019s Supplemental Nutrition  Assistance Program (SNAP, formerly the Food Stamp Program). Figure 3  shows the assistance offered to refugees who participate in one of ORR\u2019s  resettlement programs. Not all refugees receive assistance through ORR-funded programs.  Refugees who are eligible for or receiving cash assistance from programs  outside of ORR, such as TANF or Supplemental Security Income (SSI), are  generally not eligible to receive cash assistance from ORR\u2019s Publicly  Administered,",
      " Wilson/Fish, or Public Private Partnership programs.  Refugees who are eligible for TANF but who are not receiving TANF  benefits may, however, receive cash assistance and other services offered  by the Matching Grant program. See figure 4 for the general path of  refugee resettlement in the United States. Performance Management In addition to helping newly arrived refugees adjust to their surroundings  and settle in the United States, the overall goal of ORR\u2019s assistance  programs is to help refugees attain self-sufficiency. Self-sufficiency is  defined in ORR\u2019s regulations as the refugee earning a total family income  at a level that enables a family unit to support itself without receiving a  cash assistance grant.",
      " ORR collects data on several employment-related  outcomes to assess program performance. As part of the Government  Performance and Results Act\u2019s requirement for agencies to produce  performance measures used to assess their progress toward meeting  performance goals, the Publicly Administered, Public Private Partnership,  and Wilson/Fish programs have six shared outcome measures. The  Matching Grant program has its own measures\u2014three of which are  directly related to the program\u2019s goal of helping refugees become  economically self-sufficient. Table 1 lists the performance measures for  the different types of refugee assistance programs. (For a description of  these measures, see app.",
      " III.) Program Funding Congress appropriates a fixed amount of funding each year to fund  refugee assistance programs. ORR distributes this funding among seven  budget activities\u2014each with a specific purpose. (See table 2.) ORR\u2019s largest budget activity, Transitional and Medical Services, primarily  supports refugees\u2019 cash and medical assistance offered through the  Publicly Administered, Wilson/Fish, and Public Private Partnership  programs as well as the federal contribution to the Matching Grant  program. ORR is authorized to fully reimburse program providers for the  cash and medical assistance they provide to refugees enrolled in the  Publicly Administered, Wilson/Fish,",
      " and Public Private Partnership  programs,even if the costs of serving all eligible refugees exceed ORR\u2019s  annual appropriation in a given fiscal year. The social services that state  and voluntary agencies provide to refugees enrolled in these programs,  such as employment services and case management, are primarily funded  through ORR\u2019s Social Services budget activity. ORR receives a fixed  amount of Social Services funds each fiscal year and allocates these funds  to states based on estimates of arriving refugees. These Social Services  funds do not increase within a given year if the number of refugees served  is greater than anticipated. Together Transitional and Medical Services  and Social Services funding accounted for more than half of ORR\u2019s total  appropriations in fiscal year 2009 (about $436 million,",
      " including  unobligated funds). Figure 5 shows the distribution of appropriations  across ORR\u2019s budget activities in fiscal year 2009. Design Elements  Differentiate ORR\u2019s  Programs, and  Program Placement  Depends on Refugees\u2019  Readiness to Work  and Other Factors Several Design Elements  Differentiate ORR\u2019s Four  Assistance Programs The Matching Grant program features several design elements that  distinguish it from assistance offered through the Publicly Administered,  Wilson/Fish, and Public Private Partnership programs. According to state  officials and voluntary agency staff, Matching Grant providers select the  refugees they want to participate in the program,",
      " and these refugees can  opt to participate in the Matching Grant program or may choose to apply  for and receive benefits from other programs if eligible. In contrast,  providers of the Publicly Administered, Wilson/Fish, or Public Private  Partnership programs enroll any eligible refugee. In interviews with  providers, we learned that refugees who find employment while  participating in the Matching Grant program may keep their earnings in  addition to their cash grant. However, refugees enrolled in ORR\u2019s other  programs have their cash assistance reduced or terminated as a result of  their employment earnings. In addition, according to ORR and providers,  funding for the Matching Grant program is tied to refugees\u2019 success in  finding employment while enrolled in the program\u2014that is,",
      " providers of  the Matching Grant program who do not demonstrate that refugees have  achieved specific employment-related outcomes may have their funding  reduced the following program year. In contrast, funding for the Publicly  Administered, Wilson/Fish, or Public Private Partnership programs is not  affected by refugees\u2019 employment outcomes, according to ORR officials.  (For more information on the Matching Grant program, see table 3.) The extent to which each of the four ORR programs allow state and  voluntary agencies the flexibility to develop or use various service delivery  approaches differs. In the two states we visited that offered the Publicly  Administered program,",
      " refugee assistance was modeled after the states\u2019  TANF programs. In these states, refugees generally received their cash and  medical benefits, employment assistance, and other social services from  multiple public and private agencies, such as county social service offices  and local community-based organizations, and typically met with several  caseworkers to receive these services. In comparison, the Wilson/Fish,  Public Private Partnership, and Matching Grant programs allow state and  voluntary agencies flexibility in developing approaches that are different  than those used in states\u2019 TANF programs and at the same time focus on  helping the refugee become economically self-sufficient. These  approaches varied within and among programs and examples we observed  included providers integrating their refugee services,",
      " providing intensive  case management, and offering employment incentives:  Service integration: Some providers we visited used a single government  or voluntary agency to provide cash assistance, employment counseling  and case management to refugees, often in one location, while other  providers referred refugees to multiple agencies for different services. For  example, a Public Private Partnership program in Texas used a single  agency to provide refugees with most services while a Public Private  Partnership in Minnesota utilized multiple service providers. Refugees  enrolled in Minnesota\u2019s Public Private Partnership program accessed their  cash assistance and case management from a local voluntary agency but  then often received other types of services, like employment counseling  and English language instruction,",
      " from a combination of other private,  nonprofit, and public agencies. Most of the Matching Grant and  Wilson/Fish programs we visited used a single agency to provide most  refugee services. Intensive case management: In some of the states we visited, ORR  programs provided refugees with intensive case management using a  single case manager to oversee most aspects of a refugee\u2019s case whereas  in other states, officials told us that providers spread responsibility for  managing a refugee\u2019s case between multiple case workers, often in  different agencies. Guidelines state that refugees enrolled in the Matching  Grant program be assigned a caseworker who provides intensive case  management.",
      " Intensive case management can encompass a wide range of  activities, including referring refugees to needed services, such as  transportation, child care, English classes, employment-readiness training,  and food and housing assistance; helping the refugee adapt to the new  culture; and facilitating interactions between clients and employers or  other service providers. In Florida, one voluntary agency case manager  who provided intensive case management to his clients drove refugees  enrolled in the Matching Grant program to and from work on their first  day of employment and checked in with the employers to help resolve any  employment-related issues that may have arisen. However, the extent to  which refugees receive intensive case management can vary by program.",
      "  The Public Private Partnership program does not receive dedicated  funding from ORR to specifically support case management activities,  and two providers of the Public Private Partnership program told us they  could not always provide intensive case management services to refugees. Incentives for early employment: In addition to the Matching Grant  program, the Wilson/Fish and Public Private Partnership programs allow  states or voluntary agencies to offer financial incentives to encourage  refugees to find employment quickly. While some providers may choose  not to offer incentives, all the Wilson/Fish and Public Private Partnership  providers we visited offered employment incentives to refugees. Providers  of the Wilson/Fish program in Massachusetts and San Diego County,",
      " for  example, offered refugees a cash bonus if they found full-time employment  within the first 4 months of arrival. The four programs differ in others ways as well. Table 3 outlines some of  the different characteristics of these programs. Providers Consider Several  Factors when Placing  Refugees in a Program,  including the Refugee\u2019s  Readiness to Work According to staff at voluntary agencies in four of the five states we  visited, enrollment in the Matching Grant program is based primarily,  though not necessarily exclusively, on the refugee\u2019s readiness to work\u2014 including his or her level of motivation, English skills, education or  previous work experience,",
      " and physical and mental health. Agency  officials from one state we visited explained that because the program  duration is shorter than the other three assistance programs, the Matching  Grant program is best suited to those who are likely to obtain employment  quickly. In addition, as funding for Matching Grant programs is based on  the performance of voluntary agencies in helping refugees achieve  employment-related outcomes, voluntary agency staff have an incentive to  select refugees to participate in the program who they think are most  likely to be successful in finding a job. Some voluntary agency officials we  spoke with said that refugees with high motivation to work and high levels  of English proficiency are more likely than those who do not have these  qualities to find employment.",
      " In some instances, the amount of cash assistance provided by refugee  assistance programs is another factor that can influence the placement of  refugees in particular programs. Because cash assistance levels under the  Publicly Administered, Public Private Partnership, and Wilson/Fish  programs are based on the benefits provided under a state\u2019s TANF  program, the amount of cash assistance provided to families can vary by  state and can be either higher or lower than the amounts available under  the Matching Grant program. Some voluntary agency officials in the states  we visited told us they encourage refugees to participate in the assistance  program that offers the greatest monetary benefit to the refugee.",
      " In two  states we visited, Massachusetts and Texas, voluntary agencies told us  they preferred to enroll refugee families with children in the Matching  Grant program because, based on the number of eligible members, the  family could receive a higher cash benefit in the first few months after  their arrival compared to what the family would receive from other  assistance programs. In those states, refugees without children would  receive more cash assistance overall from the Public Private Partnership  or Wilson/Fish programs than from the Matching Grant program. In addition, some voluntary agencies told us they select families who may  face relatively more obstacles than other refugees to participate in  programs that provide integrated services and intensive case management  because these families can benefit from these approaches.",
      " According to a  director at one voluntary agency, intensive case management and  integrated services tend to benefit refugees who might otherwise fall  through the cracks in a traditional assistance program that provides  assistance through multiple agencies and different case managers.  Voluntary agency staff in Minnesota told us that when possible, they  enrolled single-parent families who are ready to work into the Matching  Grant Program instead of the TANF program because they believe the  family will benefit from intensive case management and integrated  services. One voluntary agency manager explained that refugees enrolled  in the TANF program in Minnesota often have several case workers and  need to access multiple government and nonprofit agencies to receive the  type of services that are mostly offered through one voluntary agency  through the Matching Grant program.",
      " State policies can also determine whether refugee families with children  are placed in ORR refugee assistance programs or the state\u2019s TANF  program, which is generally available to eligible families with children.  While refugees who are eligible for or receiving cash assistance from  programs that are available to the general population\u2014such as SSI and  TANF\u2014are generally prohibited from receiving cash assistance from  Publicly Administered, Public Private Partnership, or Wilson/ Fish  programs, some states determine TANF eligibility in a way that allows  families with children\u2014who in other states would likely be eligible for  TANF\u2014to participate in an ORR-funded refugee assistance program.",
      " For  example, officials in Texas who administer the state\u2019s Public Private  Partnership program explained to us that refugees with children who  apply for TANF soon after they arrive in Texas are often ineligible due to  the income they receive during the initial resettlement process.   According to Texas officials, families who are ineligible for TANF may  participate in the state\u2019s Public Private Partnership, which offers higher  cash benefits than the state\u2019s TANF program. In contrast, officials in  Minnesota who also administer the Public Private Partnership program  told us that refugees\u2019 initial resettlement payments do not make families  ineligible for TANF in their state.",
      " As a result, many families with children  in Minnesota participate in TANF, not the state\u2019s Public Private  Partnership program. In addition, some states administering the Wilson/Fish program have the  flexibility to allow families who would otherwise be eligible for TANF to  participate in the Wilson/Fish program.  According to ORR, four out of 13  Wilson/Fish programs provided cash assistance to TANF-eligible refugees  in fiscal year 2010. Refugees\u2019  Employment  Outcomes Have  Declined Recently,  and Little Is Known  about the  Effectiveness of  Programs\u2019  Approaches Refugees\u2019 Employment  Declined in Recent Years Overall,",
      " fewer refugees found jobs within their first months in the United  States in fiscal year 2009 than they did in fiscal year 2007. Before the  economic recession, in fiscal year 2007, ORR\u2019s performance data show  that between 59 percent and 65 percent of all refugees receiving cash  assistance from ORR\u2019s four assistance programs entered employment  within 4 to 8 months of coming to the United States. By fiscal year 2009,  however, these employment rates decreased, ranging from 31 percent to  52 percent, depending on the program. (See fig. 6.) Several state officials and voluntary agency staff told us that refugees have  struggled to find and keep full-time jobs during the economic downturn.",
      "  Some explained that refugees today compared to 3 years ago have fewer  employment options because jobs that used to be relatively easy for  refugees to find, such as those in hospitality and construction sectors, are  now being filled by non-refugees who have more training or experience. We also heard that of the refugees who do find work, an increasing  number have only part-time or temporary jobs. For example, in reviewing  the case file of a single Somali man who resettled in Minneapolis, we  learned that he had found a part-time job, only to have his schedule  reduced to 1 day per week. As a result,",
      " he continues to look for other  work. Our analysis of ORR\u2019s performance data shows that fewer refugees  have been able to keep their jobs for at least 90 days in fiscal year 2009  than in fiscal year 2007. Specifically, in fiscal year 2007, the percentage of  refugees in the Publicly Administered, Wilson/Fish, and Public Private  Partnership programs who found work and kept their jobs for at least 90  days ranged from 77 percent to 84 percent, depending on the program. By  fiscal year 2009, these rates decreased somewhat to between 67 percent  and 80 percent.",
      " For more information, see appendix III. ORR\u2019s Programs Helped  Some Refugees Achieve  Positive Outcomes, but No  Single Program  Consistently Outperformed  the Others Performance data indicate that some refugees obtained employment while  enrolled in an ORR assistance program, but no single refugee assistance  program consistently outperformed the others across the various  performance measures in fiscal year 2009. In comparing the three ORR  programs that provide assistance for 8 months, we found, for example,  that the Public Private Partnership program performed relatively well at  helping refugees find jobs while the Wilson/Fish program had the most  positive outcomes related to job retention.",
      " Table 4 below shows the actual  measures for ORR\u2019s 8-month programs in fiscal year 2009. For more  information on ORR\u2019s performance measures, see appendix III. The Matching Grant 4-to-6-month assistance program, with its own set of  employment measures, performed well on some but not all of its measures  in fiscal year 2009. (See table 5.) Little Is Known about the  Relative Effectiveness of  Approaches Used by ORR  Assistance Programs in  Improving Refugees\u2019  Economic Status ORR performance data cannot be used to compare Matching Grant  program outcomes with the outcomes from the other three programs  because they do not share the same performance measures.",
      " While all four  refugee assistance programs have three measures in common, the  programs collect information for their common measures at different  points in time. For example, the Matching Grant program reports the  number of refugees who enter employment 4 months after the refugee  arrives in the United States, while providers of the other three programs  report entered employment rates for refugees receiving ORR-funded cash  assistance within 8 months of their arrival in the United States. Because the approaches states and voluntary agencies use to provide  assistance vary both within and between programs, ORR\u2019s performance  data provide little information on the relative effectiveness of specific  approaches. The Wilson/Fish,",
      " Public Private Partnership, and Matching  Grant programs were designed to allow providers to develop innovative  approaches that are different than those used in states\u2019 TANF programs,  including integrated services, intensive case management, and  employment incentives. Several providers we spoke with believe that the  approaches they use to provide assistance play an important role in  helping refugees find employment. One study published in 1999 (based on  data from 1992 through 1994) compared a Wilson/Fish and a Publicly  Administered program in San Diego and concluded that the Wilson/Fish  program with integrated services, personal and flexible system of service  delivery,",
      " and intensive support services helped refugees find employment  more quickly than the Publicly Administered program that provided  services through multiple agencies and case workers, but we found no  other studies that were published recently and have reliably assessed the  effectiveness of the various approaches used by refugee assistance  programs. In addition, the way these approaches are implemented varies  significantly both within and across programs. For example, in Texas, the  voluntary agencies that administer both the Matching Grant and the Public  Private Partnership programs told us that the way employment related  services are provided under the two programs is virtually  indistinguishable, whereas in Minnesota, the Matching Grant and Public  Private Partnership programs use two very different service delivery  approaches,",
      " according to voluntary agency staff. Because providers consider different factors when placing refugees in  assistance programs, it can be difficult to determine whether differences  in program performance are attributed to program approaches or to  differences in the populations served. For example, because refugee  families with children may face different challenges to employment than  refugees without children, a program that serves more families with  children could have different employment outcomes than one that serves  fewer. In one of our discussion groups, a single mother from Rwanda told  us that she was unable to find work when she first arrived in the United  States because she had to care for her children, the youngest being 6  weeks old at the time.",
      " Eventually, she found child care for her children  and found her first job after being in the United States for almost 4 years.  Additionally, several Matching Grant program administrators told us they  were more likely to enroll refugees who speak English fluently, as the  ability to speak English can greatly facilitate a refugee\u2019s chances of finding  employment. One provider in Florida explained that in Miami, despite the  fact that most refugees can get by outside the workplace speaking only  Spanish, most employers require that job applicants also speak English. A  refugee from Belarus told us that in his home country he was an  economist and a construction manager,",
      " but since arriving in Los Angeles  over a year ago with his wife and child he has been unable to find work.  He told us that he did not speak English when he arrived and believes that  this has been a significant barrier to employment. According to the results  of ORR\u2019s annual survey of refugees published in the agency\u2019s 2007 report  to Congress (the most recent published report), English proficiency was  one of the most important factors influencing the economic status of  refugees, with close to 90 percent of those who lacked earnings and  received cash assistance living in a household where no one could speak  English. Difficulties in  Projecting Certain  Program Costs Have  Contributed to  Fluctuations in ORR\u2019s  Unobligated Balances ORR considers a broad range of factors when estimating its program costs,",
      "  and these estimates for fiscal years 1999 through 2009 have generally  tracked actual program obligations in most but not all years. When  estimating program costs, ORR officials told us they consider several  factors, such as the projected inflation rate; participation rates; costs for  cash and medical assistance; administrative costs; and monitoring, data  collection, and evaluation costs, as well as the projected number of  specific refugee groups such as unaccompanied refugee minors. According  to our analysis, ORR\u2019s estimates of program costs have generally tracked  what the agency actually obligated. Between fiscal years 1999 and 2009,",
      "  ORR\u2019s estimates were, on average, within 6 percent of the agency\u2019s actual  obligations. (See fig. 7.) Despite its efforts to consider various factors when estimating program  costs, ORR has faced difficulties in estimating specific variables, such as  the number of refugees that will enter the country in a given year and the  share of those refugees who will be eligible for ORR assistance programs,  according to officials. ORR officials told us they use the presidential  ceiling of refugees that may enter the United States in a given year when  estimating the number of refugees they must serve. In fiscal year 2009,",
      " the  number of refugees that arrived in the United States was more than 90  percent of the maximum number of refugees the United States set as the  ceiling that year. However, this ceiling has not always been a good proxy  of the actual number of incoming refugees. For fiscal years 2002 through  2007, the number of refugees that arrived was, on average, about 40  percent lower than the presidential ceiling. (See fig. 8.) In addition to using  the refugee ceiling, ORR projects the number of refugee arrivals by using  historical arrival patterns, and in its fiscal year 2004 budget estimate,",
      "  ORR requested less than it did in the previous year because of the  decreasing number of refugee arrivals since September 11, 2001. Once ORR has refugee arrival estimates, the agency projects the number  of refugees who will likely participate in ORR-funded programs. The share  of refugees who are eligible for ORR-funded services varies from year to  year. For example, between fiscal years 2007 and 2009, the percentage of  all refugees who received cash assistance through ORR\u2019s assistance  programs fluctuated between 26 percent and 38 percent. ORR must also  estimate the average cost of providing cash assistance to refugees  participating in its assistance programs,",
      " which can vary significantly  depending on the distribution of refugees across the country. A refugee  living in Texas participating in the Public Private Partnership program, for  example, receives a cash assistance grant of about $200 per month,  whereas a refugee living in Massachusetts participating in the Wilson/Fish  program receives a cash assistance grant of about $428 per month.  Consequently, the amount ORR reimburses state and voluntary agencies  for the costs of providing cash assistance may change as refugee arrival  patterns shift. For example, in fiscal year 2009, 3,082 more refugees were  settled in Texas\u2014a low benefit state\u2014than in fiscal year 2008,",
      " while  Minnesota and Connecticut\u2014both high benefit states\u2014saw decreases in  their numbers of arrivals. ORR officials also told us that because they do  not play a role in deciding where refugees are geographically placed, the  agency is limited in its ability to estimate costs associated with refugee  arrival patterns. Uncertainty regarding the costs for medical expenses incurred by refugees  also affects ORR\u2019s ability to accurately estimate funding for the amount of  services it must provide. Since an increasing proportion of arriving  refugees need intensive medical care, refugees\u2019 medical costs on average  have increased over time, creating uncertainty for ORR in estimating these  expenses from year to year,",
      " according to officials. ORR officials indicated  that refugees admitted in recent years have more diverse medical  backgrounds than in the past, and that the number of refugees with  chronic mental and medical conditions has grown, due in part to increases  in refugee groups that have spent years living in refugee camps with  limited access to medical care and proper nutrition. Burmese refugees in  particular have lived for decades in refugee camps, according to ORR, and  have grown from 128 refugee arrivals in fiscal year 2002 to 18,275 arrivals  in fiscal year 2009, an increase from less than 1 percent to 24 percent of  the total population of arriving refugees.",
      " Partly because of this  demographic shift in the refugee arrival population, according to ORR  officials, the agency\u2019s cost for medical assistance more than doubled from  fiscal year 1999 through fiscal year 2009. ORR officials and voluntary  agency staff explained that detailed information about refugees\u2019 health  conditions are often not known prior to their arrival in the United States,  which contributes to uncertainty in medical costs. For example, one  voluntary agency director in Texas stated that medical information  provided on refugees prior to their arrival is minimal, and only describes  whether the client has a \u201cClass A\u201d condition, such as active tuberculosis,",
      "  or a \u201cClass B\u201d condition, such as hypertension, without specifying the  illness. Estimating the number of children ORR will likely serve as a result of the  William Wilberforce Trafficking Victims Protection Reauthorization Act of  2008 also created uncertainty in ORR\u2019s budget formulation in recent years,  according to ORR. Officials said they were uncertain about the impact this  Act would have on their budget due to a provision stipulating that victims  of trafficking and undocumented youths who are granted Special  Immigrant Juvenile status may receive care and placement services funded  by ORR instead of being returned to their home country.",
      " The Department  of Homeland Security provides ORR with estimates about asylees and  unaccompanied alien children who do not enter the United States through  the traditional resettlement channels. According to ORR officials, the  Department of Homeland Security estimated that the number of minors  receiving services from ORR in fiscal year 2009 would be approximately  12,000 to 14,000, but the overall number of Unaccompanied Alien Children  declined from 7,211 in fiscal year 2008 to 6,622 in fiscal year 2009. Difficulties in accurately estimating program costs have contributed to  fluctuations in ORR\u2019s unobligated balances at the end of each fiscal year.",
      "  For example, ORR officials said that they used the presidential ceiling of  70,000 to estimate the number of refugees they would likely serve during  fiscal years 2006 through 2007. However, refugee arrivals were  significantly lower those years, and consequently the agency\u2019s costs to  support newly arrived refugees were less than the amount it received in  appropriations. Additionally, in anticipation of the potential influx of 4,000  to 6,200 additional unaccompanied alien children as a result of the William  Wilberforce Trafficking Victims Protection Reauthorization Act of 2008,  ORR requested supplemental funding,",
      " which was appropriated in fiscal  year 2009. According to ORR, the Act requires that youth entering the  United States from neighboring countries be screened to determine if they  are victims of trafficking. ORR anticipated that these youth would be cared  for under the Unaccompanied Alien Children program while being  screened. However, ORR\u2019s Unaccompanied Alien Children program served  fewer children than anticipated, and at the end of fiscal year 2009, officials  said they carried over about $31 million of unobligated Unaccompanied  Alien Children funds and $52 million of unobligated supplementary funds.  In total,",
      " from fiscal years 2006 to 2009, ORR\u2019s unobligated balances grew  from $17 million to over $83 million. (See fig. 9.) Congress appropriates a certain amount of money to ORR each year to  fund its activities, and ORR has a 3-year period in which to obligate  funding for most of its budget activities\u2014so funds that have not expired  and are not yet obligated for a specific activity at the end of a fiscal year  can be used during the following 2 fiscal years. From fiscal years 1999 to  2005, ORR used prior years\u2019 unexpired and unobligated funds to allow it to  obligate more than it was appropriated in those years.",
      " For example, in  fiscal year 2005, ORR allocated $205 million of its appropriation to its  Transitional and Medical Services budget activity to reimburse states for  the costs of providing cash and medical assistance to refugees. When  states\u2019 costs exceeded this amount, ORR was able to cover the difference  between its expenses and its allocation by using funds from its  unobligated balances from prior years. By the end of fiscal year 2005, ORR  did not have any remaining unobligated balances. From fiscal years 2006  to 2009, however, ORR obligated less than it was appropriated and thus  was able to accumulate balances again.",
      " ORR officials told us they  prioritize their unobligated balances to supplement the program costs of  refugees who participate in the agency\u2019s Publicly Administered and Public  Private Partnership programs because they place an emphasis on these  programs in their funding decisions. Officials explained they do not typically use the agency\u2019s unobligated  balances to supplement funding for other activities, such as funds  dedicated to Social Services or the Wilson/Fish program. ORR\u2019s  reimbursements to state and voluntary agencies for activities other than  cash and medical assistance generally do not increase as the number of  newly arrived refugees increase. Officials told us,",
      " for example, that the  amount appropriated for Social Services has remained at approximately  $154 million from fiscal years 2006 to 2009, even though the number of  refugee arrivals increased by 81 percent. As a result, program providers  have strategies to prioritize the use of limited funds in serving refugees. To  ensure that new arrivals continued to receive needed services, refugee  coordinators from Texas and Los Angeles told us they provided  employment services to refugees for only about 1 year rather than the 5  years allowed in regulation. Similarly, ORR does not generally increase  funding for Wilson/Fish services during a given year.",
      " In fiscal years 2008  and 2009, the San Diego Wilson/Fish program experienced an unexpected  increase in refugees from 3,309 to 5,178. In fiscal year 2010, ORR directed  providers to begin transferring refugee families with children, who were  otherwise eligible for TANF but had been allowed to enroll in the  Wilson/Fish program, off of their Wilson/Fish program and into the TANF  program thereby transferring the costs of resettling these refugee families  to other programs. Conclusion ORR spends millions of dollars every year on assistance that is critical to  addressing the basic needs of refugees who are new to the United States.",
      "  State and voluntary agencies that administer ORR\u2019s programs vary in how  they provide assistance, and little is known about the effectiveness of the  approaches they use to help refugees become self-sufficient\u2014an overall  goal of all of ORR\u2019s programs. With refugees\u2019 employment outcomes  declining because of the recession and significant pressures on the federal  budget, it is important that program providers use approaches that have  been shown to be effective in helping refugees find employment that  enables them to live without cash assistance. ORR tracks the success of its  programs using performance measures, but these measures alone provide  little information about the relative effectiveness of the various  approaches providers use.",
      " It is only by looking more closely at the  individual approaches and controlling for other factors that may influence  employment outcomes that ORR can begin to identify and promote the  most successful strategies while at the same time make more effective and  efficient use of its resources. Recommendation for  Executive Action We recommend that the Secretary of Health and Human Services identify  effective approaches that state and voluntary agencies can use to help  refugees become employed and self-sufficient. To identify these  approaches, the Secretary may consider, for example, conducting a series  of rigorous evaluations of the programs and their approaches or  expanding information collected on the annual survey. Recommendations  from further study could be used by HHS or,",
      " if appropriate, by Congress,  to improve ORR\u2019s refugee resettlement programs. Agency Comments  and Our Evaluation We shared a draft of this report with HHS for review and comment. On  March 16, 2011, HHS provided written comments, which may be found in  appendix V, and technical comments, which we incorporated in the report  where appropriate. In its written comments, HHS confirmed several of our findings and agreed  with our recommendation to identify effective approaches to help refugees  become employed and self-sufficient. HHS indicated that it seeks to  highlight promising practices related to effective employment approaches  and cited two recently published studies that it sponsored as examples of  its efforts.",
      " While the two studies cited described different services states  and voluntary agencies use to assist refugees and one study even  compared employment outcomes of refugees living in two cities, neither of  the studies evaluated the effectiveness of the programs or the approaches  providers use in helping refugees become self-sufficient. In fact, as HHS  indicated, one study suggested future research should include such an  evaluation. The agency also emphasized that refugee resettlement in the  United States is intended to be a rescue and restore program, which not  only provides refugees with temporary cash, medical, and employment  assistance, but also promotes cultural orientation, civic engagement, and  other activities.",
      " GAO acknowledges that HHS has a broad mission to  provide refugees with critical resources to assist them in becoming  integrated members of society. Nonetheless, we focused our report on the  temporary assistance and employment services refugees receive within the  first 4 to 8 months after arriving in the United States because it is within  this amount of time that refugees are expected to find employment and  become self-sufficient. We are sending copies of this report to relevant congressional committees;  the Secretary of Health and Human Services, and other interested parties.  The report will also be available at no charge on the GAO Web site at  http://www.gao.gov.",
      " If you or your staff have any questions about this report, please contact me  at (202) 512-7215 or brownke@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix VI. Appendix I: Scope and Methodology To describe how the Office of Refugee Resettlement (ORR) refugee  assistance programs differ and the factors used to place refugees in a  program, we interviewed ORR officials and National Voluntary Agency  officials from all nine National Voluntary Agencies who help administer  ORR programs.",
      " We also interviewed state, county, and local voluntary  agency officials in five states, including California, Florida, Massachusetts,  Minnesota, and Texas and conducted discussion groups with refugees in  all but Massachusetts. We selected four states with a high concentration of  ORR refugee caseloads and one state with a relatively low concentration  of refugee cases. We also selected states with a range of average 2009  unemployment rates. States we selected were geographically diverse and  all offered Matching Grant programs. We also collected and reviewed  refugee case files from the government and voluntary agencies we visited,  so that we would have case files representing refugees with different  experiences.",
      " From the states we visited except California, we collected  copies of two complete case files chosen by the voluntary agency\u2014one  case file representing a refugee who participated in either the Publicly  Administered, Wilson/Fish, or Public Private Partnership; and one case file  representing a refugee who participated in a Matching Grant program.  The information we collected at these selected states does not allow us to  generalize to other states, refugees, or local voluntary agencies. We also  reviewed relevant federal laws and regulations. To describe refugee employment outcomes and the effectiveness of  different approaches to providing assistance, we collected, aggregated,  and analyzed performance data across all states for fiscal years 2007,",
      " 2008,  and 2009 by program\u2014Publicly Administered, Public Private Partnership,  and Wilson/Fish. To assess the reliability of the performance data, we  interviewed knowledgeable agency officials and reviewed official  documents. We compiled these data into a spreadsheet and only included  the performance outcomes of refugees who received cash assistance from  one of ORR\u2019s programs. Because this study focused primarily on the  refugees who received cash assistance from ORR\u2019s four assistance  programs, we did not include refugees who participated in the Temporary  Assistance for Needy Families (TANF) program. We also did not include  any data that represented refugees who were receiving ORR services but  not receiving refugee cash assistance.",
      " We also collected and analyzed  performance data for the Matching Grant program from the nine national  voluntary agencies for fiscal years 2007 through 2009. We analyzed these 3  years of performance data to gain insight on how refugee assistance  programs were performing most recently. While the performance data  have some limitations, we consider these data reliable and appropriate for  this engagement. We also conducted a literature review and found one  study that reliably addressed the effectiveness of approaches used by  providers to provide refugee assistance. To describe how ORR estimates program costs and how estimates affect  its unobligated balances, we interviewed officials from the Department of  Health and Human Services (HHS), Administration for Children and  Families (ACF), and ORR to determine how ORR formulates its budget.",
      "  We also reviewed and analyzed budget documents from fiscal years 1999  through 2009, including ORR budget justifications and annual reports to  Congress. We interviewed knowledgeable agency officials and reviewed  official documents to assess the data that ORR uses to estimate program  costs, and found the data to be sufficiently reliable. Analyzing budget  information from fiscal years 1999 to 2009 allowed us to identify trends in  ORR\u2019s obligations and unobligated balances. In addition, we spoke with  officials from the Departments of State and Homeland Security to obtain  information on how they develop budgets for their refugee programs and  what,",
      " if any, coordination occurs between these agencies and ORR to help  ORR formulate its budget. We conducted this performance audit from  December 2009 to March 2011 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 we obtained provides a  reasonable basis for our findings and conclusions. Appendix II: Profiles of States Visited Appendix II: Profiles of States Visited Benefit level per month   (1 adult/2 adults) Public Private Partnership  $250/$437  Public Private Partnership  $200/$300 for months 1-",
      "4  $187.50/$252 for months 5-8 , 2010, News  Release, Report Number USDL-10-021. 7.50 per month for months 5-. For two adults,  $00 per month for months 1-4 and $252 per month for months 5-. Appendix III: ORR Employment Outcomes Appendix III: ORR Employment Outcomes The unduplicated number of refugees who entered employment. The unduplicated number of refugees who entered full-time employment where health  benefits are offered within the first 6 months of employment. The average wage at placement for all refugees who entered full-time employment.",
      " The unduplicated number of refugees terminating cash assistance due to earnings from  employment. Job Retention at 90th Day of Employment  The unduplicated number of refugees who entered employment between July of the  previous calendar year through June of the current calendar year. This rate is a measure  of refugee\u2019s retention of employment\u2014not retention of a specific job. As long as the  refugee is employed in a job a quarter after the date he or she entered employment, it is  considered retention. The unduplicated number of refugees reducing cash assistance due to earnings from  employment. The unduplicated number of refugees who entered employment. The unduplicated number of refugees who entered full time employment where health  benefits are offered within the first 6 months of employment.",
      " The sum of the hourly wages for the unduplicated number of full-time job placements  divided by the total unduplicated number of individuals placed in full-time employment. This rate measures the self-sufficiency of refugees enrolled in the Matching Grant  program at the 120th day. Self-sufficiency means that the refugee or refugee family is  earning a total family income at a level that enables the family unit to support itself  without receipt of cash assistance. Refugees who receive non-cash assistance, such as  Supplemental Nutrition Assistance Program (SNAP) benefits or housing subsidies, are  considered to be self-sufficient by ORR if they have earnings and do not receive cash  assistance.",
      " Economic Self-Sufficiency Retention (180)  This refers to the individuals who were reported to be self-sufficient at the 120th day and  continued to be self-sufficient 60 days later. Refugees who receive non-cash assistance,  such as SNAP benefits or housing subsidies, are considered to be self-sufficient by ORR  if they have earnings and do not receive cash assistance. This rate measures the self-sufficiency of all refugees enrolled in the Matching Grant  program, including the status at 120 days and 180 days. Economic Self-Sufficiency (120) Economic Self-Sufficiency Retention (180)",
      " Economic Self-Sufficiency (Overall) Average Wage per Hour at Employment (full-time) Appendix IV: Refugee Vignettes from  Discussion Groups The following examples are from our four discussion groups held in  various parts of the country. Voluntary agencies convened the discussion  groups, selected the participants, and provided translators when  necessary. These examples are illustrations of refugees\u2019 experiences, and  are not indicative of any success or failure of ORR\u2019s programs. A single male from Iraq had job experiences as a shop owner, translator,  and sports trainer prior to arriving in the United States. His voluntary  agency provided him with assistance in finding an apartment and a job.",
      " He  currently works two jobs and makes enough money to make ends meet.  He hopes to begin a new career by taking training in massage therapy in  the near future. A married couple from Burma with two teenagers lived an agrarian life in  their native land, farming rice and vegetables for their own subsistence  and selling the rest. Caseworkers from a voluntary agency enabled them to  obtain medical care and Social Security cards, and fill out job applications.  Neither husband nor wife was literate in their native Burmese dialect and  found learning English difficult. He has found work in a factory and his  wife has qualified for SSI.",
      " With these sources of income they are able to  pay their bills and save some money. A man from Eritrea was a plant scientist in his native country and knew  some English. A voluntary agency helped him with enrolling in a nursing  assistant certification program and applying for a job. He aspires to  become a doctor. Married with two children, an Iranian physician with 15 years of medical  experience in his native land arrived in the United States wanting to  practice medicine. However, because of his limited English, he said it was  difficult to study for the U.S. Medical Licensing exam. A voluntary agency  helped him find a job as a medical assistant,",
      " but he did not keep that job.  In the future, he hopes to enhance his English skills so he can enter and  complete a physician\u2019s assistant program. Appendix V: Comments from the Department  of Health and Human Services Appendix VI: GAO Contact and Staff  Acknowledgments Staff  Acknowledgments In addition to the contact named above, Kathryn Larin, Assistant Director;  Danielle Giese and Cheri Harrington, Analysts-in-Charge; Richard Burkard;  David Chrisinger; Erin Cohen; Rajiv D\u2019Cruz; Mitchell Karpman; Carol  Henn; Brittni Milam;",
      " James Rebbe; Cynthia Saunders; Kathleen van  Gelder; Shana Wallace; and Daniel Webb made key contributions to this  report. Related GAO Products Displaced Iraqis: Integrated International Strategy Needed to  Reintegrate Iraq\u2019s Internally Displaced and Returning Refugees.   GAO-11-124. Washington, D.C.: December 2, 2010. Humanitarian Assistance: Status of North Korean Refugee Resettlement  and Asylum in the United States. GAO-10-691. Washington, D.C.: June 24,  2010. Iraq: Iraqi Refugees and Special Immigrant Visa Holders Face  Challenges Resettling in the United States and Obtaining U.S.",
      "  Government Employment. GAO-10-274. Washington, D.C.: March 9, 2010. Iraqi Refugee Assistance: Improvements Needed in Measuring Progress,  Assessing Needs, Tracking Funds, and Developing an International  Strategic Plan. GAO-09-120. Washington, D.C.: April 21, 2009. Refugee Resettlement: Unused Federal Funds in 1991 and 1992.  GAO/HRD-94-44. Washington, D.C.: December 7, 1993. Refugee Resettlement: Initial Reception and Placement Assistance.  GAO/NSIAD-",
      "93-193BR. Washington, D.C.: June 18, 1993. Refugee Resettlement: Federal Support to the States Has Declined.  GAO/HRD-91-51. Washington, D.C.: December 21, 1990. Soviet Refugees: Issues Affecting Domestic Resettlement.   GAO/HRD-90-106BR. Washington, D.C.: June 26, 1990. Refugee Program: Financial Accountability for Refugee Resettlement  Can Be Improved. GAO/NSIAD-89-92. Washington, D.C.: March 17,",
      " 1989. Refugee Programs: Status of Early Employment Demonstration Projects.  GAO/NSIAD-88-91. Washington, D.C.: February 3, 1988. Refugee Program: Initial Reception and Placement of New Arrivals  Should Be Improved. GAO/NSIAD-86-69. Washington, D.C.: April 7, 1986. Greater Emphasis on Early Employment and Better Monitoring Needed  in Indochinese Refugee Resettlement Program. GAO/HRD-83-15.  Washington, D.C.: March 1, 1983.\n"
    ],
    "length": 11122,
    "hardness": null,
    "role": null
  },
  {
    "id": 77,
    "question": null,
    "answer": "There have been long-standing questions about a lack of comprehensive and reliable information on consumer bankruptcies. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Bankruptcy Reform Act) required the federal judiciary's Administrative Office of the U.S. Courts (AOUSC) to collect and report certain additional bankruptcy statistics and required the U.S. Trustee Program, which oversees bankruptcy case administration, to develop uniform final reports that provide certain specified data about each case. GAO was asked to examine the (1) availability and accessibility of data from the personal bankruptcy system and (2) potential benefits and limitations of the new data requirements of the Bankruptcy Reform Act in addressing these issues. GAO examined bankruptcy data systems and obtained documentation and interviewed staff from AOUSC, bankruptcy courts, and the Trustee Program; groups representing consumers and creditors; data providers; and academic researchers and other stakeholders. There are limitations to the availability, accuracy, and accessibility of data on consumer bankruptcies. AOUSC publishes certain aggregate statistics related to the numbers of filings, but few data are available on the causes of bankruptcy and the characteristics of bankruptcy filers. Studies show that the information in the bankruptcy case files is not always accurate because much of it is self-reported by debtors who frequently make errors, although these data are sufficiently reliable for the purposes of initiating a bankruptcy case. Bankruptcy case files are publicly accessible through the Public Access to Court Electronic Records system, but not in a format that allows the data they hold to be easily extracted and used for research or analysis. Another system, the U.S. Party/Case Index, was designed for nationwide searches for individual cases; while it serves that purpose, its search parameters are limited and the output does not include much of the data held in the system. Several factors create challenges to expanding data on consumer bankruptcies--most notably, privacy and security concerns related to facilitating public access to the highly personal data contained in bankruptcy files. The federal judiciary also has noted that collection of demographic and other additional data is not its mission and would require further resources. Nonetheless, a range of bankruptcy stakeholders, including some judges, researchers, and U.S. Trustee Program staff, have suggested that the judiciary identify and implement practicable ways to improve public access to data that already exist in its data systems, which could facilitate scholarly research and the formulation of bankruptcy policy and legislation. While the data requirements of the Bankruptcy Reform Act are a step toward making more information on consumer bankruptcies available, their value is likely to be limited. The new annual statistics will provide some additional information that may be helpful in identifying differences in bankruptcy cases across judicial districts. In addition, the uniform final reports required by the act will standardize the data in the reports and assist the U.S. Trustee Program in overseeing case administration. However, for several reasons the statistics required under the act are likely to be of limited value. For example, many of the statistics are relatively narrow in scope and were not intended to provide certain key information, such as the causes of bankruptcy and the demographic characteristics of filers. Further, the AOUSC data are provided as aggregated statistics--rather than data on individual cases--which limits the extent to which they can be analyzed. As such, a variety of stakeholders in the bankruptcy process told us that the underlying case-level data used to generate the statistics could be useful if made publicly available as a data set. AOUSC currently has no plans to provide public access to these case-level data, in part, officials say, because they first need to identify and address privacy and security issues. GAO acknowledges the importance of those issues, but believes that better access to bankruptcy data already held in the judiciary's data systems--such as these case-level data--would allow external parties to assess the data's reliability and limitations and could facilitate empirical research and the formulation of bankruptcy policy.\n",
    "docs": [
      "Background Bankruptcy is a federal court procedure designed to help both individuals  and businesses eliminate debts they cannot fully repay as well as help  creditors receive some payment in an equitable manner. The filing of a  bankruptcy petition in most cases operates as an \u201cautomatic stay\u201d that  essentially prohibits most creditors from taking any action to attempt to  collect a debt pending the resolution of the bankruptcy proceeding.  Individuals usually file for bankruptcy under one of two chapters\u2014 Chapter 7 or 13\u2014of the Bankruptcy Code. Under Chapter 7, the filer\u2019s  eligible nonexempt assets are reduced to cash and distributed to creditors  in accordance with distribution priorities and procedures set out in the  Bankruptcy Code.",
      " Under Chapter 13, filers submit a repayment plan to the  court agreeing to pay part or all of their debts over time, usually 3 to 5  years. Upon the successful completion of both Chapter 7 and 13 cases, the  filer\u2019s personal liability for eligible debts is discharged at the end of the  bankruptcy process, and creditors may take no further action against the  individual to collect any unpaid portion of the debt. The U.S. bankruptcy system is complex and involves entities in both the  judicial and executive branches of government (see fig. 1). Within the judicial branch, 90 federal bankruptcy districts have  jurisdiction over bankruptcy cases.",
      " The Judicial Conference of the United  States (Judicial Conference) serves as the judiciary\u2019s principal policy- making body and recommends national policies and legislation on all  aspects of federal judicial administration. AOUSC is an agency within the  judicial branch and serves as the central support entity for federal courts,  including bankruptcy courts, providing a wide range of administrative,  legal, financial, management, and information technology functions. The  Director of AOUSC is supervised by the Judicial Conference. AOUSC has  developed and supports nationwide data systems to manage and maintain  information on bankruptcy cases, but these systems are largely operated,  managed,",
      " and maintained at the local courts. Within the executive branch, the Trustee Program, a component of the  Department of Justice, oversees the administration of most bankruptcy  cases. The program consists of the Executive Office for U.S. Trustees,  which provides general policy and legal guidance, oversees operations,  and handles administrative functions, as well as 95 field offices and 21 U.S.  Trustees\u2014federal officials charged with supervising the administration of  federal bankruptcy cases. The Trustee Program appoints and supervises  approximately 1,400 private trustees, who are not government employees,  to administer bankruptcy estates and distribute payments to creditors.",
      " To  document their administration of cases, private trustees file \u201cfinal reports\u201d  with the bankruptcy courts and submit them to the U.S. Trustees. The procedural aspects of the bankruptcy process are governed by the  Federal Rules of Bankruptcy Procedure (Bankruptcy Rules) and local  rules of each bankruptcy court. The Bankruptcy Rules contain a set of  official forms for use in bankruptcy cases. The document filed by the  debtor to open a bankruptcy case is known as the voluntary petition,  which the debtor may amend (make changes to) at any time before the  case is closed. Most debtors who file for bankruptcy use an attorney,",
      " but  some debtors represent themselves without the aid of an attorney and are  referred to as pro se debtors. Most documents associated with bankruptcy  cases are public records and, with certain exceptions, the information  contained in a bankruptcy file is publicly accessible. The Bankruptcy Reform Act was signed into law on April 20, 2005, and  most of its provisions became effective on October 17, 2005. The act made  substantial changes to the Bankruptcy Code, significantly changing  consumer bankruptcy practice. It also sought to address, at least in part,  long-standing concerns about perceived shortcomings of the bankruptcy  data system that had been identified by the National Bankruptcy Review  Commission and other parties.",
      " The act required the federal judiciary to  collect and report certain new aggregate statistics. It also required the  Attorney General (who delegated the authority to the Trustee Program) to  issue rules requiring that private trustees submit uniform final reports  containing prescribed information on individual bankruptcy cases. Limitations Exist to  the Availability,  Accuracy, and  Accessibility of  Information on  Consumer  Bankruptcies AOUSC publishes certain aggregate statistics related to the numbers of  bankruptcy filings. Documents within individual case files contain a range  of information, but few data exist on the causes of bankruptcy and the  characteristics of bankruptcy filers. There has been long-standing  recognition that much of the data in the bankruptcy system may not be  accurate\u2014largely because much of the data is self-reported by debtors in  the official bankruptcy forms\u2014although these data are sufficiently reliable  for the purposes of initiating a bankruptcy case.",
      " Several factors create  challenges to improving the bankruptcy data system. Most notably,  facilitating public access to data in bankruptcy files\u2014which can contain  highly personal information\u2014can raise privacy and security concerns. The  federal judiciary also has noted that collection of demographic or other  additional data is not its mission and would require added resources;  further, the judicial process may not be well suited to capturing certain  types of information, such as the reasons a consumer files for bankruptcy.  Bankruptcy case files are publicly accessible, but not in a format that  readily allows for compilation and analysis. The U.S. Party/Case Index was  designed to allow nationwide searches of individual bankruptcy cases,",
      " and  although it serves that function, its search parameters are limited and the  results do not include much of the data held by the system. Limited Information Is  Available on Some  Characteristics of  Consumer Bankruptcies The judiciary reports statistics on the number of bankruptcy filings and  collects a variety of financial information from individual filers in the  official bankruptcy forms. However, relatively little information is  available on the characteristics of people who file for bankruptcy, the  factors that contributed to their bankruptcy filings, or the outcomes of  their cases. Bankruptcy Statistics AOUSC generates monthly, quarterly, and annual statistics on the numbers  of bankruptcy filings.",
      " Prior to 2008, these tables were the only statistics  the judiciary released on bankruptcies. (The new statistics required under  the Bankruptcy Reform Act are discussed later in this report.) The filing  statistics include tables that show the number of bankruptcy cases filed  for either a 12-, 3-, or 1-month period, broken down by several factors:    status of case (commenced, terminated, and pending),    circumstance of filing (voluntary or involuntary),    nature of debt (including business or nonbusiness),    median time interval from filing the petition to disposition, and    adversary proceedings (commenced, terminated,",
      " and pending). Most of these tables include the data broken out by each judicial district as  well as by bankruptcy chapter; some of the tables include statistics by  individual bankruptcy court or county. AOUSC strives to publicly release  the quarterly and annual statistics 2 to 3 months after the close of each  quarter. Certain additional statistics used internally are not publicly  released, such as the number of cases assigned to each judge and numbers  of trials in bankruptcy courts. The judiciary generates these statistics largely to meet its statutory  requirements to produce statistical reports for Congress and the public on  the business transacted by the bankruptcy courts. Data on numbers of  bankruptcy filings help the judiciary determine the need for resources to  operate the courts,",
      " forecast future needs, and formulate the judiciary\u2019s  congressional budget requests. For example, data on the number of cases  opened (or filed) are one of the principal bases for determining the  number of bankruptcy judges that may be needed. The bankruptcy  statistics also receive wide attention outside of the judiciary. For example,  AOUSC\u2019s statistical tables on the numbers of bankruptcy filings are used  by financial analysts and other government agencies as a lagging economic  indicator and reported by the mass media as a measure of the financial  health of American consumers. Case Information The files of individual bankruptcy cases\u2014which are public documents\u2014 contain significant amounts of information.",
      " For example, the voluntary  petition used to initiate a consumer bankruptcy filing includes, among  other things, the debtor\u2019s name and address, the estimated number of  creditors, and the estimated amount of the debtor\u2019s assets and liabilities.  Other schedules and forms require the debtor to provide information on,  among other things: real property (real estate), personal property (such as  cash, stocks, bonds, and household items), secured debts (such as  mortgages and liens), unsecured debts (such as credit card debt and tax  obligations), monthly income, and itemized monthly expenses. Bankruptcy case files also include other information filed with the courts.",
      "  For example, the file may contain a Chapter 13 repayment plan, which  identifies specific creditors and the amount of their claims, the monthly  repayment amount, the interest rate that the debtor and creditors have  agreed on, and the duration of the repayment plan. Similarly, case files  may include reaffirmation agreements, including the amount and  characteristics of debt being reaffirmed. Bankruptcy case files also  include final reports submitted by the private trustees that can include  information on disbursements and repayments to creditors. Finally, the  file includes the case docket that serves as a chronological record of all  significant events that occur during the case,",
      " such as motions,  applications, and court orders. Although the official bankruptcy forms and case files include this  information, they nonetheless are limited in providing certain key  information that would help inform the nature and causes of consumer  bankruptcy. Bankruptcy files do not contain basic characteristics about  the debtor or the nature of the debtor\u2019s circumstances, such as the  following:    Demographic information. Filers are not asked to provide their age,  gender, marital status, education, occupation, race, or ethnicity in the  bankruptcy petition and thus this information typically is not available  from the case file. Reasons for the bankruptcy. The official bankruptcy forms do not ask for  the factors that led to the bankruptcy filing,",
      " such as job loss or divorce.  The forms also do not collect information on the specific source of debt,  such as medical bills, gambling losses, or damages from fire, theft, or  flood. Postbankruptcy outcomes. No component of the bankruptcy system  collects information once a discharge has been granted and a case is  closed. As a result, the bankruptcy system does not have data on such  things as the financial status of debtors subsequent to the discharge of  their debt, including the accumulation of new debt. As a result, the bankruptcy system provides limited information on who is  filing for bankruptcy, why they are filing,",
      " and the long-term results of  these bankruptcies\u2014all of which can be important in identifying economic  and social trends and understanding the impact that bankruptcy may have  on families and communities. While this information may be important for  public policy purposes, it is not collected as part of the bankruptcy  process primarily because it is not information needed by the judiciary or  Trustee Program to operate the bankruptcy system. To a limited extent, some nongovernmental entities collect information on  consumer bankruptcies. For example, since 1981, the Consumer  Bankruptcy Project, an ongoing research effort involving several  universities, has gathered information from bankruptcy filers through case  file reviews,",
      " surveys, and interviews on such things as educational levels,  housing, physical health, employment, and reasons for filing for  bankruptcy. The project has produced empirical studies of the  demographic and financial characteristics of consumer bankruptcy  debtors based on samples of Chapter 7 and Chapter 13 petitions filed in  1981, 1991, 2001, and 2007. In addition, the National Data Center, a  nonprofit organization, collects case and claims information directly from  Chapter 13 trustees, which it consolidates into a database that is used by  parties of interest, such as creditors, trustees, and debtors and their  attorneys.",
      " In the years leading to the enactment of the Bankruptcy Reform Act in  2005, there was significant debate among policymakers, creditors,  consumer advocates, and other stakeholders on the factors contributing to  the rising rate of consumer bankruptcy, including the relative roles of  illness, joblessness, and divorce. While some studies, such as those  produced by the Consumer Bankruptcy Project, have examined these  issues, it was widely acknowledged that not enough data were available  from the bankruptcy system and other sources to help fully inform these  discussions. Similarly, in recent work that GAO has conducted examining  the bankruptcy system, we have found that limitations in available data  have hindered our ability to answer questions of interest to congressional  requesters.",
      " For example, in October 2007, we reported that information  available from the bankruptcy system was not sufficient to allow us to  evaluate the impact of the Bankruptcy Reform Act on child support  obligations. Further, in our December 2007 report on debtors\u2019 use of  reaffirmation agreements, we examined a representative sample of  bankruptcy files in five bankruptcy courts, but were unable to do a  nationally representative sample because the necessary data needed to be  manually extracted from individual databases at the district level. Some Bankruptcy Data Are  Not Always Accurate There has been long-standing recognition that much of the data in the  bankruptcy system may not be accurate,",
      " largely because much of the data  is self-reported by debtors in the official bankruptcy forms. For example:    The report of the National Bankruptcy Review Commission noted  persistent problems with the accuracy of bankruptcy data, pointing out  that data extracted from the debtors\u2019 petitions and reported to AOUSC  often are inconsistent with other information contained in the same  debtors\u2019 schedules and statements of financial affairs. The Trustee Program\u2019s audits of Chapter 7 and Chapter 13 debtors in fiscal  year 2007 identified at least one material misstatement of income,  expenditures, or assets in 30 percent of the cases for which audit reports  were filed.",
      " A 1999 study of the consistency and completeness of 200 randomly  selected consumer bankruptcy cases in a Michigan district found \u201cerrors  and problems\u201d in 99 percent of the cases, with an average of three  mistakes per case. A 2002 study of 103 consumer asset cases in the same  district found that 41 percent of cases had assets that had not been  disclosed by debtors in their initial bankruptcy papers. A key reason why information in bankruptcy cases may be inaccurate is  that it is largely self-reported by the debtor. Filers and bankruptcy petition  preparers must attest, under penalty of perjury, that the information they  provide is correct and true.",
      " Nonetheless, as seen above, ample evidence  indicates that debtors filing a bankruptcy petition do not always  accurately estimate, for example, their debts, the value of their assets, and  other key information. The unreliability of self-reported data in  bankruptcy files is a result of several factors, according to AOUSC staff,  private trustees, and academic experts we spoke with. First, individuals  entering bankruptcy often have not kept good financial records, a fact that  may hinder their ability to provide accurate information. Second, some  portion of debtors file for bankruptcy without the assistance of an  attorney and their unfamiliarity with the process increases the likelihood  they will make errors on the forms.",
      " Third, there is little incentive for any  party to ensure that certain information is precisely accurate if that  information will not affect the outcome of the case. For example, in  Chapter 7 cases that involve no eligible assets to be distributed to  creditors, calculating the precise amount of a debtor\u2019s liabilities makes  little difference since all eligible debt will be discharged anyway. As such,  the impact of data in bankruptcy forms that is less than fully accurate  varies depending on how the information is being used. The data may be  problematic for the purposes of research or the collection of statistics, but  are still sufficiently reliable for the purposes of initiating a bankruptcy  case.",
      " In every consumer bankruptcy case, the private trustee submits to the  Trustee Program a \u201cfinal report\u201d that details the administration of the  estate. The Trustee Program reviews these reports and they are then filed  with the court. The information in these final reports is generally more  accurate than information in the petition and supporting forms, for two  primary reasons. First, the trustee has certain responsibilities to review  and verify some of the financial information submitted by the debtor.  Second, the final report is generated near the end of the bankruptcy  process, when more accurate information may be available, whereas the  petition is submitted by the debtor at the beginning of the process.",
      " At the  same time, the scope of the information contained in the trustee final  reports is limited\u2014largely to data related to disbursements and  repayments to creditors. Some parties have expressed concerns about the measurement of  consumer versus business bankruptcies. The Bankruptcy Code defines  consumer (nonbusiness) debt as that incurred by an individual primarily  for a personal, family, or household purpose. If the debtor is a  corporation or partnership, or if debt related to the operation of a business  predominates, AOUSC defines the nature of the debt as business. Debtors  self-report in the bankruptcy petition whether their debts are primarily  consumer or business debts,",
      " but such a determination can be ambiguous.  For example, certain debtors\u2014such as entrepreneurs, small businesses,  self-employed individuals, and independent contractors\u2014may have  difficulty determining the predominant nature of their debts if their  personal and business liabilities are closely intertwined. In the 2005 study,  \u201cThe Myth of the Disappearing Business Bankruptcy,\u201d the authors  concluded that AOUSC statistics significantly undercount the number of  business bankruptcies, which they said may lead policymakers and others  to draw inappropriate conclusions about trends in business successes and  failures and other important policy issues. AOUSC officials told us that  the appropriate definition of whether a debtor is a consumer or a business  is open to question,",
      " but that the classification used in their statistics\u2014the  predominant nature of the debt as reported by the debtor\u2014has a statutory  basis. Various Factors Affect the  Ability to Expand the Data  Available from the  Bankruptcy System The concerns that exist today about the data available from the  bankruptcy system have existed for decades. For example, interest in  more detailed, accurate, and reliable information was raised by both the  1973 and 1997 federal bankruptcy commissions. While opportunities may  exist to further expand and improve the data available from the  bankruptcy system, several factors create challenges to making such  improvements. Public accessibility must balance privacy and security concerns.",
      "  Bankruptcy files can contain personal information such as tax and  financial data or documents from creditors that may reveal such things as  a filer\u2019s medical circumstances or gambling history. In the past, accessing  bankruptcy records required physically retrieving files from a courthouse.  However, with the development of the Internet, personal information can  be readily and quickly accessed from anywhere in the world, raising  privacy concerns. Further, some consumer groups, bankruptcy attorneys,  and representatives of the judiciary have raised concerns that increasing  electronic access to bankruptcy data, such as through data-enabled forms,  could facilitate identity theft or the use of personal data to target  bankruptcy filers for potentially exploitative financial products or  services.",
      " In 2003 and 2007, bankruptcy rules were amended to restrict the  publicly accessible personal information in bankruptcy files. For  example, only the last four digits of a Social Security number are required  in the bankruptcy petition and bankruptcy filers may redact personal  identifiers, such as dates of birth and names of minors, from electronic or  paper filings made with the court. AOUSC officials told us that if  substantial additional bankruptcy information were to be made publicly  available, the privacy and security rules themselves might have to be  reconsidered to provide additional protections. Collection of demographic and other additional data is not the  judiciary\u2019s mission.",
      " The basic mission of the federal courts is to interpret  and apply the law to resolve disputes. AOUSC officials told us that while  the bankruptcy courts have certain statutory requirements to maintain an  accurate public record of case proceedings, they have no such  requirements, or any need, to collect demographic or financial data that  are unrelated to the operations of the courts. As such, the judiciary  historically has been reluctant to devote resources to collecting data solely  for research and policy purposes. Resources are limited. Improving the judiciary\u2019s data collection and  statistical infrastructure can require additional resources for such things  as equipment, staff, and training.",
      " AOUSC officials noted that their current  resources for information technology, data collection, and statistical  reporting were limited and would not be able to readily accommodate  additional responsibilities. Local courts\u2019 autonomy can hinder centralized data collection. All  bankruptcy courts are governed by certain national rules and requirements  and must report certain standard data to AOUSC. However, individual  courts also have a significant degree of autonomy to develop their own  local rules and requirements, and local practices and procedures vary.  Further, each individual district manages its own data systems and can  choose to track additional data according to its preferences. The  traditional autonomy of the 90 individual bankruptcy districts can create  challenges for AOUSC in ensuring that processes are followed uniformly  and data are collected in a consistent fashion.",
      " The bankruptcy process is not wellsuited to collecting certain types of  information. The factors that result in a bankruptcy\u2014a key public policy  issue\u2014are inherently hard to capture in a bankruptcy form. Bankruptcy  petitions include a list of creditors but do not necessarily provide insight  as to the source of the debt\u2014for example, credit card debt may derive  from medical expenses or from a costly vacation. Moreover, bankruptcy  often results from multiple factors that can be difficult to isolate (e.g., both  unemployment and poor financial management may be factors). Further,  because the courts\u2019 formal role generally ends once a case is closed, the  courts are not in a position to collect data about the long-term impact of  bankruptcies.",
      " As a result of these factors, the judicial process may not be  well-suited to collecting certain key information, which may instead best  be obtained, for example, by private parties conducting one-on-one  interviews with debtors. Collecting demographic data poses concerns. Key demographic  information about bankruptcy filers\u2014such as gender, age, and race\u2014is of  interest to policymakers and others, but may not be appropriate for  inclusion in official bankruptcy forms. Some worry, for example, that  formalized collection of this information could introduce the appearance  of bias or facilitate discrimination. Bankruptcy Data Are Not  Always Easily or Fully  Accessible The federal judiciary uses several major data systems to collect,",
      " manage,  and disseminate information about bankruptcies. The Case Management/Electronic Case Files (CM/ECF) system is used by  nearly all U.S. district, bankruptcy, and appellate courts to manage and  track cases. AOUSC requires all bankruptcy courts to maintain certain  uniform pieces of information in CM/ECF\u2014including debtor name and  case number, county, filing date, and disposition of the case\u2014but  individual bankruptcy courts can customize the system to facilitate its  functions under local rules and local practices and procedures. CM/ECF  permits bankruptcy participants, such as attorneys and trustees, to  electronically file documents with the court.",
      " The U.S. Party/Case Index is a nationwide locator for U.S. district,  bankruptcy, and appellate courts, which can be used by the public to  search for individual case filings, including bankruptcy filings. Certain  bankruptcy data are obtained from the courts\u2019 CM/ECF systems on a daily  basis, and the index allows searches based on case identifiers such as a  filer\u2019s name or Social Security number. The index can be used to search  all courts nationwide, or to search by judicial circuit, state, or district.  Bankruptcy court staff use the index to determine if an individual has filed  a bankruptcy petition in other judicial districts.",
      " Other parties, such as  attorneys and creditors, use the system to determine if an individual is  party to any judicial case. The Public Access to Court Electronic Records (PACER) system serves as  the portal through which the public can access, via the Internet, individual  courts\u2019 CM/ECF systems and the U.S. Party/Case Index. For any given  bankruptcy case, a user can retrieve the docket sheet and hyperlinks to  nearly all of the case\u2019s documents, including the petition and supporting  forms and schedules. Prior to about 2001, parties interested in obtaining  bankruptcy files typically needed to physically visit the court where a  debtor filed a petition and request hard copies of documents associated  with the case.",
      " In addition to case documents, PACER also allows a user to  retrieve case-related data from CM/ECF. Users of PACER are charged 8  cents a page. At the Trustee Program, the Automated Case Management System  functions as the internal case management system used by the agency to  carry out its responsibilities, including supervising the administration of  cases and private trustees. The system, which is not available to the  public, includes information on such things as case status and the names  of attorneys and the trustee assigned, as well as a history of case hearings,  reports, pleadings, appointments, and fees.",
      " Some of the information in the  system is obtained from individual courts\u2019 CM/ECF systems, while other  information is entered by the Trustee Program itself. Some nongovernmental entities also maintain information on consumer  bankruptcies that has been obtained from the courts. For example,  Automated Access to Court Electronic Records, a private company, uses  PACER to extract information from individual courts\u2019 CM/ECF systems  and, for a fee, repackages the data to meet the needs of lenders, attorneys,  researchers, and other clients. Information in Case Files Is Not  Easily Extracted The bankruptcy petitions, schedules,",
      " and other documents available via  PACER are provided in a PDF format that is essentially a snapshot image  of the document. Thus, the data cannot easily be electronically extracted  and transferred to another format for compilation and analysis. As a result,  examining the data contained in multiple bankruptcy cases can be time  consuming and costly. It involves\u2014for each individual bankruptcy case\u2014 locating and accessing the electronic case file in the relevant court\u2019s  CM/ECF system; identifying the document that contains the desired pieces  of information; and manually extracting the data into a database or  spreadsheet format. PACER\u2019s fee of 8 cents per page also can inhibit the  collection of information from a large number of cases.",
      " To facilitate the use of the data held in bankruptcy files, the judiciary and  the Trustee Program have been exploring for several years the use of  \u201cdata-enabled\u201d bankruptcy forms. Data-enabled forms contain embedded  data tags that are invisible to the user. The tags allow a computer system  to automatically extract the tagged data, as well as categorize it so that the  information can be compared and analyzed. In 2004, AOUSC and the  Trustee Program began discussions on using data-enabled forms for  bankruptcy filing documents, which would allow the data in those  documents to be more easily extracted. In September 2006,",
      " the Trustee  Program formally requested that the judiciary mandate data-enabled forms  through a required technical standard for certain documents filed  electronically in the bankruptcy courts. In March 2008, the judiciary  declined to mandate data-enabled forms, but said it was examining  alternatives that would still facilitate automated case review. The Trustee Program and other parties\u2014including some judges,  researchers, and private trustees\u2014have said that the use of data-enabled  forms would be beneficial for several reasons. First, data-enabled forms  would greatly reduce the number of hours the Trustee Program and other  parties devote to manual data entry. Second, it would allow for more  efficient collection of bankruptcy data,",
      " compilation of national bankruptcy  statistics, and analysis of the bankruptcy system. Third, they say, data- enabled forms would allow the Trustee Program to conduct its work more  effectively and efficiently. For example, a study prepared for the National  Institute of Justice\u2014the research, development, and evaluation agency of  the Department of Justice\u2014concluded that implementing data-enabled  forms would be an important step toward improving the Trustee  Program\u2019s ability to fight bankruptcy fraud and abuse by facilitating  statistical fraud detection. Similarly, the Trustee Program has noted that  data-enabled forms would allow it to more efficiently administer the  \u201cmeans test\u201d by allowing it to automatically sort cases by whether debtors  are above or below the applicable state median income.",
      " The judiciary has raised concerns about implementing data-enabled  bankruptcy forms. AOUSC officials have said the technology for data- enabled forms must be compatible with the current information system  and the electronic and hard copy documents should be identical to comply  with rules of court procedures and record-keeping standards. Further, the  judiciary, certain attorneys, and software vendors have raised potential  privacy and security concerns\u2014for example, that data-enabled forms  could make it easier to collect personal information and use it for  marketing or undesirable purposes. Finally, the judiciary also has  expressed concerns that developing and implementing the forms would  impose higher costs on the judiciary,",
      " attorneys, and debtors and  potentially could limit access to bankruptcy court. For example, pro se  debtors may not have access to the data-enabled bankruptcy software  needed to file a petition. In January 2008, the Judicial Conference\u2019s Advisory Committee on  Bankruptcy Rules established the Bankruptcy Forms Modernization  Project to review and revise the official bankruptcy forms. The project,  which is expected to last 5 to 7 years, is evaluating technologies that the  judiciary could adopt to facilitate the collection, analysis, and  dissemination of information collected via the forms. AOUSC officials told  us that while the project\u2019s ultimate recommendations will give priority to  the requirements of the judiciary,",
      " it also will take into consideration the  views and needs of external stakeholders, such as policymakers and  researchers. Broader Access to Existing  Nationwide Data Could Be  Beneficial Information about bankruptcy cases can be accessed by the public from  individual courts\u2019 CM/ECF data systems. For example, a user can search  for cases filed in a specific district within a certain time frame and then  generate a data file that contains up-to-date information on cases\u2014such as  date and chapter of filing, whether the case involves assets, and the  disposition of the case. There is no mechanism to conduct a single  nationwide search across all 90 districts\u2019 CM/",
      "ECF systems. Instead, to  conduct a nationwide search, a user must replicate the search in each  district\u2019s system. As a result, conducting large-scale studies of bankruptcy  cases nationwide can be difficult since the CM/ECF systems cannot readily  be used to generate a national sample of cases. The U.S. Party/Case Index, by contrast, can be used to search nationwide  for individual bankruptcy cases. To conduct a search, a name, Social  Security number, tax identification number, or case number must be  entered. However, the index does not allow a user to search using the  other data elements it maintains,",
      " such as chapter of filing or disposition of  the case. Further, not all of the data maintained in the index are made  publicly available in the search results. When a search is conducted in the  U.S. Party/Case Index, the results for a given bankruptcy case include the  name of the filer, the case number, and the chapter filed. However, the  results do not show other case information held in the system, such as key  dates and the disposition of the case. In addition, presently the U.S.  Party/Case Index provides the results of its searches as a text file rather  than a data set.",
      " As a result, the output the system provides cannot readily  be imported into a database for further sorting and analysis. A range of bankruptcy stakeholders, including some judges, researchers,  and Trustee Program staff, have suggested improving public access to data  that already exist in the judiciary\u2019s data systems. One possible mechanism  for doing so might be expanding the search and output capability of the  U.S. Party/Case Index, which could enhance the ability to assess and  understand the characteristics and outcomes of consumer bankruptcies.  For example, it could facilitate the ability to draw a nationwide sample of  cases, which is useful in gathering and analyzing real-time information that  is representative of the entire country rather than specific districts.",
      " It also  could facilitate further analysis of certain case dispositions\u2014for example,  one could identify Chapter 13 cases that were dismissed for failure to  make payments. Moreover, expanding public access to data held in the  system would be consistent with recommendations made by the 1997  National Bankruptcy Review Commission and section 604 of the  Bankruptcy Reform Act (discussed later in this report), both of which  called for a national policy of releasing the maximum amount of  bankruptcy data in a usable electronic form, albeit subject to appropriate  privacy safeguards. Further examination would be needed before it could be determined  whether expansion of the U.S.",
      " Party/Case Index would indeed be a  practicable and appropriate mechanism for facilitating public access to  real-time bankruptcy data. AOUSC staff noted that the index was designed  as a basic search mechanism for identifying if certain individuals are  parties to cases and was not intended to serve as a tool for providing a  range of data on individual cases. The staff told us that expanding the  output or search capability of the system would be technically feasible,  although it would involve network, database, and other infrastructure  costs. Moreover, as noted earlier, any measure to facilitate the availability  of bankruptcy data\u2014much of which is personal and sensitive\u2014also would  need to address appropriate privacy and security protections.",
      " The Inter-University Consortium for Political and Social Research  provides free public access via its Web site to case-level data on consumer  bankruptcies provided to it by the judiciary. Data sets include numerous  variables, such as case number, chapter, assets, liabilities, and case  disposition. However, one researcher noted that this resource is of limited  use because, among other things, the data are not always up to date and  can be inconsistent from year to year. In addition, variables for such things  as assets and liabilities are provided as ranges (e.g., $0 to $50,000) rather  than as specific values,",
      " limiting their usefulness. AOUSC officials told us  that implementation of the Bankruptcy Reform Act prevented them from  providing timely data to the Inter-University Consortium over the past few  years, but that they recently provided the consortium with bankruptcy  data through fiscal year 2007. They also noted that any inconsistencies in  the data are the result of changes in the law and the data extracted. These  led to changes in data fields and codes in those fields, and the code  translations are provided to the Consortium with the data sets. Bankruptcy Reform  Act\u2019s Data  Requirements Provide  Some Benefits, but  Several Factors Limit  the Usefulness of the  Data The Bankruptcy Reform Act required AOUSC to compile and report  certain statistics on consumer bankruptcy cases on an annual basis,",
      " and it  required the Trustee Program to require uniform forms for the final  reports submitted by private trustees at the end of each bankruptcy case.  These new data requirements will provide some additional information  that may be useful in understanding the characteristics and outcomes of  consumer bankruptcy cases and how such cases vary across different  regions of the country. However, the usefulness of these data is limited for  several reasons. For example, the annual statistics are aggregated, which  limits what the information conveys, and the scope of what is provided by  some of the specific data elements is relatively narrow. Despite these  limitations, many bankruptcy stakeholders believe it would be beneficial  for the judiciary to publicly release the raw,",
      " case-level data underlying the  statistics required by the Bankruptcy Reform Act. The Bankruptcy Reform  Act Requires Additional  Bankruptcy Statistics and  Uniform Final Reports The Bankruptcy Reform Act included new requirements that were  intended to improve the availability of information about consumer  bankruptcies. The data provisions of the act stemmed from the long- standing concern among policymakers about the need for more detailed  and reliable information about the bankruptcy system. In large part, the  provisions reflected recommendations and specific data needs identified  by the 1997 National Bankruptcy Review Commission. Required Annual Statistics The Bankruptcy Reform Act requires each bankruptcy court to collect  certain statistics for Chapter 7,",
      " Chapter 11, and Chapter 13 bankruptcy  cases filed by individuals with primarily consumer debts. The act also  requires the director of AOUSC to prescribe a standardized format for  these statistics, compile the statistics collected by the courts, make them  publicly available, and submit to Congress a report and analysis of this  information no later than July 1, 2008, and annually thereafter. The act  required each of these data elements to be reported in the aggregate and  by district, as well as itemized by chapter. As shown in table 1, the  required statistics provide information about a variety of characteristics  and outcomes of consumer bankruptcy cases.",
      " On June 23, 2008, AOUSC  issued its first annual statistical report to Congress, meeting its statutory  deadline. The report comprised a summary of findings, a discussion of the  methodology of data collection and the limitations of the data, and 21  tables presenting the required statistics, itemized by chapter and presented  in the aggregate and for each district. The data systems the judiciary had in place when the Bankruptcy Reform  Act was enacted did not capture all of the new data required for reporting  purposes, and those data systems were not capable of collecting and  reporting all such data. The judiciary undertook several major initiatives to  meet its new reporting responsibilities under the act.",
      " For example,  the official bankruptcy forms were modified to capture certain new data  elements needed to generate the new statistics;   new procedures were developed for bankruptcy courts to collect the  the electronic case management system, CM/ECF, was modified to capture  new data elements;   bankruptcy court staff received training on the modifications to the data  systems and procedures; and   a new statistical infrastructure was built to collect, store, and produce the  new statistics, and the new statistical tables were designed and developed. AOUSC officials said they struggled to implement these changes using  existing funding and staffing resources, noting that the judiciary received  no additional funding from Congress to meet the new statistical  requirements.",
      " They said that many other projects had to be deferred as  personnel and resources were diverted to meet the Bankruptcy Reform  Act\u2019s data requirements. As of December 2007, the judiciary estimated it  had spent $2.8 million to implement its statistical and reporting  responsibilities under the act. Uniform Final Reports The Bankruptcy Reform Act required the Attorney General\u2014who  delegated this responsibility to the Trustee Program\u2014to issue, within a  reasonable amount of time, rules requiring uniform forms for the final  reports that private trustees submit for each Chapter 7, Chapter 12, and  Chapter 13 case. The act indicated that the forms should be designed to  facilitate compilation of data and maximum possible public access,",
      " both  physical and electronic. It also indicated that in developing the forms, the  Attorney General shall strike a balance between the need for public  information, undue burden on the private trustees who must generate the  forms, and privacy concerns. Although trustees filed final reports prior to the Bankruptcy Reform Act to  document their administration of cases, there were more than 100  different versions of the reporting forms in use across the country,  according to the Trustee Program. Under the act, a uniform set of forms  must be used, and these forms must include certain prescribed data  elements, as shown in table 2. Some of these data elements had already  been provided in at least some trustees\u2019 final reports,",
      " while others are  new. In 2005, the Trustee Program began developing drafts of the uniform final  report forms after reviewing samples of the forms that were already being  used in various bankruptcy courts. The program sought feedback on the  draft forms from professional associations representing Chapter 7 and  Chapter 13 private trustees and from vendors of software used by these  trustees. On February 4, 2008, the Trustee Program issued a notice of  proposed rulemaking and publicly released drafts of the uniform forms for  Chapter 7 and Chapter 13 trustees\u2019 final reports. The Trustee Program  received approximately 70 comments from private trustees,",
      " attorneys, and  others on the proposed rule and draft forms. On October 7, 2008, the  program issued a final rule that will become effective on April 1, 2009, at  which time the trustees will be required to use the uniform forms for  submitting their final reports for each consumer bankruptcy case. The  final rule incorporated changes that reduce the burden on private trustees.  For example, final reports for Chapter 7 no-asset cases will not be  separate documents, but rather can be completed electronically as a  virtual entry form in the court\u2019s docket. Electronic Availability of Data Section 604 of the act does not impose any requirements but rather  expresses the \u201csense of Congress\u201d that:",
      "  the national policy of the United States should be that all public record  data maintained by bankruptcy clerks in electronic form should be  released in bulk to the public in a usable electronic form,  the bankruptcy data system should use a single set of data definitions and  forms to collect data nationwide, and   data for each bankruptcy case should be \u201caggregated in the same  electronic record.\u201d The statutory language reflects almost verbatim two recommendations of  the 1997 report of the National Bankruptcy Review Commission. That  report noted that the wealth of data generated by the bankruptcy system  should be available for systematic study by making it available to the  public electronically,",
      " to the extent practical. Bankruptcy stakeholders  have expressed varying interpretations of section 604. The Judicial  Conference\u2019s Committee on the Administration of the Bankruptcy System  noted in a March 2008 report that the judiciary already addresses many of  the issues raised in these provisions\u2014such as by providing public access  to court electronic records through PACER. At the same time, two  academic researchers we spoke with noted that case files available  through PACER files are largely PDF image files and expressed the  opinion that in accordance with section 604, the judiciary should expedite  efforts to make case-level data accessible in an extractable database  format that could be used more readily for compilation and analysis.",
      " The New Data  Requirements Will Provide  Some Additional  Information about  Consumer Bankruptcies The new annual statistics and the uniform final reports required under the  Bankruptcy Reform Act will provide some additional information that may  be useful in understanding the characteristics of consumer bankruptcy  cases and differences among such cases across the country. Annual Statistics The new annual statistics required by the Bankruptcy Reform Act provide  Congress, the judiciary, the Trustee Program, and the public with a variety  of new information on certain characteristics and outcomes of consumer  bankruptcy cases. Prior to 2008, the bankruptcy statistics produced by the  judiciary consisted primarily of information related to the numbers of  filings,",
      " as noted earlier. The new statistics provide, for the first time,  comprehensive statistics on certain aspects of consumer bankruptcies and  on the debtors themselves that may provide a better understanding of the  trends in, basis for, and impact of bankruptcy filings. While these data have significant limitations, some bankruptcy  stakeholders identified specific ways these new statistics might be  revealing or useful. For example, Trustee Program staff and two judges we  spoke with said that the statistics could be useful for identifying  differences across districts or regions of the country in the outcomes of  cases or the characteristics of bankruptcy filers, such as their assets,  liabilities,",
      " and income. In addition, an academic researcher noted that the  statistics could reveal differences in the legal process or local legal culture  in different districts. Similarly, Trustee Program staff noted that certain  data on Chapter 13 case outcomes\u2014such as the number of repeat filers,  cases dismissed, and cases in which a repayment plan was completed\u2014 could provide practical information on how Chapter 13 practices differ  across the country. The new statistics also will provide some useful information on the  average debtor\u2019s financial circumstances. For example, one researcher  noted that the statistics on median debtor income and expenses could  provide useful information about the profile of the typical filer.",
      " Another  researcher told us that the new statistics could be used to calculate debt- to-income ratios and track changes in these ratios over time to examine  changes in the typical profile of debtors. Further, comparisons of debtors\u2019  current monthly incomes with their average incomes in the previous 6  months could provide a better understanding of how their financial  situations changed in the period leading up to the bankruptcy filing. Some Trustee Program officials, judges, and bankruptcy court clerks said  that some of the new data also may be beneficial in conducting their  internal operations. For example, Trustee Program officials said these data  could potentially help assess the efficiency of its regional offices.",
      " In  addition, the four bankruptcy judges we spoke with said that the statistics  on the outcomes of Chapter 13 cases will provide useful information for  their administration of these types of cases. Uniform Final Reports The Trustee Program will require trustees filing the uniform final reports  for Chapter 13 cases and for Chapter 7 asset cases to use a \u201csmart form\u201d  that is data enabled. As discussed earlier, data entered into these data- enabled forms are \u201ctagged,\u201d and these tags are then available for  extraction and searching capability. This data-enabled format will  facilitate compilation and analysis of the information the forms include,  and it aligns with the sense of Congress expressed in section 604 that  bankruptcy data should be released in a usable electronic form.",
      " Staff from  a Trustee Program regional office told us that the data-enabled format  would make it easier for regional staff to compile the distribution statistics  on receipts and disbursements that they already generate for internal  program use. The format also might allow easy extraction of information  from large numbers of forms for research purposes that could inform  policy making. Some bankruptcy researchers we spoke with told us they  had not used trustees\u2019 final reports in the past but noted that the new data- enabled format of the trustees\u2019 reports would make the reports a potential  research tool. The use of a single set of standard forms should improve the consistency  of the data included in the reports.",
      " According to Trustee Program staff, the  uniform forms should facilitate any analysis that may be conducted,  particularly across districts. The Trustee Program staff said that the new  final reports also may aid their oversight of private trustees. For example,  comparisons of such things as administrative expenses and distributions  to creditors could be used to evaluate the efficiency and effectiveness of  trustees. Because the act requires the uniform final reports to include specific new  data elements, the reports will provide additional information about  consumer bankruptcy cases\u2014particularly for Chapter 7 no-asset cases,  whose final reports previously contained little to no data. In its rule, the  Trustee Program noted that the new reports will assist Congress in  compiling data to accurately analyze bankruptcy trends when making  policy decisions.",
      " Trustee Program staff we spoke with cited some specific  ways the data potentially could be used to inform policy making. For  example, the new final reports will include data on the amount of \u201cassets  exempted\u201d\u2014that is, those assets that are shielded from unsecured  creditors by fully or partially exempting them from the property of the  bankruptcy estate. This information could be used with data on  \u201cdistributions to claimants\u201d to show the effects of various exemption rules  on the availability of funds to make payments to creditors. (In some states,  bankruptcy filers have the option to use federal or state exemption rules.)  The data also could provide information on the relative effects of  bankruptcies on creditors through a comparison of the amount of  distributions to claimants with the amount of debt discharged.",
      " Several Factors Limit the  Usefulness of the New  Bankruptcy Data Our review found that although the data requirements of the act will  provide some additional information about consumer bankruptcies, their  usefulness is limited for several reasons. Content. The new data do not, nor were they intended to, provide  significant information about some of the characteristics of consumer  bankruptcies that are of key interest to policy makers\u2014most notably, the  reasons consumers filed for bankruptcy, the nature or source of the debts,  and the demographic characteristics of the filers. As noted earlier, this  type of information is very difficult to capture through the formal  bankruptcy system.",
      " Aggregation. The data reported by the judiciary are provided in the  aggregate as statistics\u2014rather than as case-level data\u2014limiting the value  of the information, according to some Trustee Program staff, researchers,  and judges we spoke with. Aggregated numbers do not allow researchers  and policy makers to drill down into the data to gain an understanding of  the bankruptcy system. For example, an academic researcher we spoke  with noted that \u201ctotal assets\u201d and \u201ctotal liabilities\u201d in the aggregate do not  provide a useful picture of the average debtor\u2019s financial situation. Narrow scope. The scope of what is provided by some of the specific data  elements is relatively narrow.",
      " For example, the act requires the judiciary  to report the number of cases in which creditors were \u201cfined for  misconduct.\u201d However, because courts may reprimand creditors in a  variety of ways, this statistic provides only a limited picture of sanctions  imposed against creditors in bankruptcy courts. Lack of specificity. Alternatively, some statistics are so broad in what is  included that the usefulness of the data is unclear. For example, the act  requires that the judiciary report \u201ctotal assets,\u201d but this does not  distinguish between net assets and assets with liens attached (such as a  home with a mortgage). Further, total assets includes assets that are  shielded from unsecured creditors,",
      " as defined by federal and state  exemption laws. As such, the statistic will not be an accurate indicator of  debtors\u2019 net worth or of the amount of equity that can actually be  liquidated and distributed to creditors. Accuracy. Much of the data in the new annual statistics is based on  information that debtors provide when submitting forms, schedules,  motions, and other court filings. As noted in AOUSC\u2019s statistical report,  self-reported data may be incomplete or inaccurate. For example, as  described earlier, debtors do not always correctly designate whether their  debts are primarily consumer versus business debt, and thus the new  statistics may include some business cases that have been incorrectly  designated as consumer cases.",
      " Similarly, certain data in the new trustee  final reports are derived from information provided by the debtor in the  bankruptcy forms. Definitional issues. Certain definitional issues may limit the usefulness of  some of the specific data elements in the statistical requirements and  uniform final reports. For example:   The Bankruptcy Reform Act requires reporting on \u201cthe aggregate  amount of debt discharged,\u201d but the definition provided in the act does  not, in fact, represent the amount of debt actually discharged in  bankruptcy, according to AOUSC officials and legal experts we spoke  with. In addition, included in this statistic are debts with enforceable  liens (such as mortgages on real property). As a result,",
      " the statistic  does not provide a true picture of the amount of debt eliminated in  consumer bankruptcies, which can be a useful macroeconomic  indicator. The act requires that uniform final reports include \u201cassets  abandoned\u201d\u2014assets that are not liquidated or distributed because they  are of little value or benefit or might be too burdensome. The Trustee  Program defines assets abandoned for no-asset Chapter 7 cases as the  current value of real and personal property on the debtor\u2019s schedules  less the total value of exemptions the debtor claimed. Under this  definition, the data could include assets secured by reaffirmed debts,  which are not actually abandoned.",
      " The act also requires the uniform final reports to include \u201cclaims  discharged without payment,\u201d which the Trustee Program defines for  Chapter 7 no-asset cases as the sum of the claims listed by debtors on  their official filing forms. Some private trustees have noted that not all  claims listed by the debtors are actually discharged without payment\u2014 for example, the value of reaffirmed debts and nondischargeable  categories of debt such as domestic support obligations and secured  claims. As a result, this data element may not provide meaningful  information on the amount of debts discharged without payments to  creditors in Chapter 7 no-asset cases.",
      " Trustee Program officials told us they believed their definitions strike the  best achievable balance between the reasonable need of the public for  information and the burden of reporting placed on trustees. With regard  to the definition of \u201cassets abandoned,\u201d they noted that requiring trustees  to determine which debts had been reaffirmed would cause additional  burden on trustees and delays in closing cases. With regard to \u201cclaims  discharged without payment,\u201d they noted that (1) trustees usually file a no- asset report before the expiration of a creditor\u2019s deadline for objecting to  the dischargeability of a debt, and (2) the Bankruptcy Code provides that  certain debts are not discharged regardless of how they are scheduled by  the debtor.",
      " As a result, program officials told us, their definition provides  information about the amount of claims that have been scheduled to be  discharged while allowing trustees to expeditiously close no-asset cases  without waiting for the objection deadline to pass and without requiring  the trustee to make an independent determination as to which of the debts  listed by the debtor are dischargeable. Releasing Case-Level Data  Used for Bankruptcy  Reform Act Statistics  Could Be Beneficial AOUSC currently has no plans to provide public access to the raw, case- level data used to generate the statistics required by the Bankruptcy  Reform Act. A variety of stakeholders in the bankruptcy process told us  that these case-level data would be useful\u2014despite their limitations\u2014if  made publicly available as a data set.",
      " For example, two researchers told us  that the case-level data would permit additional analyses, such as  determinations of statistically significant differences among groups of  debtors. The case-level data also would allow the creation of statistics  aggregated by categories other than state and judicial district, and also  would permit examination of the variability of debtors\u2019 income, assets, and  liabilities. A representative of a financial services trade association noted  that creditors could use the data to refine their risk models by analyzing  the characteristics of filers to determine the likelihood that particular  debtors will repay their debts. In addition, Trustee Program staff noted  that case-level data on the time elapsed between the filing and closing of  cases could be useful in comparing how quickly individual trustees  administer cases.",
      " Further, several bankruptcy judges we spoke with  suggested that case-level data could be useful, in particular, in  understanding the characteristics of Chapter 13 cases and the degree to  which they have successful outcomes. An AOUSC official noted that the data underlying the new statistics were  of uncertain quality and that it would therefore be imprudent to publicly  release these raw data until AOUSC has time to better analyze the  information. However, other stakeholders have noted that concerns about  the quality of the data underlying the statistics should not necessarily  prevent AOUSC from releasing it. Further, Trustee Program staff and a  researcher told us that access to the case-level data could enable external  parties to assess their reliability and limitations\u2014for example,",
      " by verifying  the data against the case files in PACER and removing erroneous data  values. Others have noted that, as a general principle, government  agencies should be as transparent as possible in releasing supporting data  for public examination and assessment of the quality of the statistics  drawn from them. AOUSC staff noted that there was no statutory requirement for releasing  the case-level data used to meet the statistical requirements of the  Bankruptcy Reform Act, and noted that doing so could raise privacy  concerns. However, providing public access to case-level data would be  consistent with section 604 of the act, which recommended as national  policy releasing in a usable form the electronic public record data held by  bankruptcy clerks.",
      " More broadly, the judiciary\u2019s 2008 strategic plan for  information technology recognizes external parties as major consumers of  court data and includes as one of its objectives easy access to appropriate  case-related information. The plan notes, however, the need to balance  data accessibility with privacy and security concerns, pointing out that  certain types of cases, categories of information, and specific documents  may require special protection from unlimited public access. Conclusions Long-standing questions have existed about the information available on  consumer bankruptcies. While statistics are published on the numbers of  filings, little information is available on the characteristics of individuals  who file for bankruptcy or the nature and outcomes of their cases.",
      " Much  of the information that is collected during the bankruptcy process is not  readily accessible by the public in a format that allows for the extraction,  compilation, and analysis of data across multiple cases. These  shortcomings limit the ability of scholars and other parties to gather and  analyze information that would be useful in assessing the bankruptcy  system. Congress is similarly limited in its ability to make bankruptcy  policy and formulate legislation based on empirical data rather than  anecdotal evidence. The data provisions of the Bankruptcy Reform Act were a useful step in  addressing this issue by increasing the amount of information available  and by facilitating, to some extent, its accessibility and uniformity.",
      " The  plans by the Trustee Program to use data-enabled \u201csmart forms\u201d for its  new final reports will enhance the utility of this new information. At the  same time, the value of certain annual statistics is likely to be limited, in  part because some of the data elements are narrow in scope and may not  provide a meaningful or comprehensive picture of the issues they address.  As further statistical reports are issued, the ultimate value and limitations  of the Bankruptcy Reform Act\u2019s data requirements will likely become  clearer, and Congress may find it beneficial to review whether particular  data elements required would benefit from modifications that would help  ensure they are providing information useful to policy makers in assessing  the consumer bankruptcy system.",
      " Progress has been made in recent years in making bankruptcy data more  available and accessible to various parties. However, a tension remains in  the extent to which the judiciary focuses bankruptcy data efforts solely on  internal requirements versus the needs or preferences of researchers and  policy makers. It is unclear whether it is the appropriate role of the  judicial system to collect certain kinds of additional information from the  bankruptcy process, such as the reasons people file for bankruptcy.  Nevertheless, policy makers and the public could be better served if the  judiciary took steps to further facilitate access to existing data already  collected and maintained in its systems. For example, one possible option  could be to expand the search and output capability of the U.S.",
      " Party/Case  Index to enable easier access to, and more productive use of, the full array  of data residing in this system. Similarly, despite the limitations of the  Bankruptcy Reform Act\u2019s statistics, publicly releasing the case-level data  used to generate these statistics could be a valuable resource in efforts to  further analyze and understand consumer bankruptcies. Implementation  of data-enabled forms by the judiciary also could be beneficial by allowing  more efficient use and analysis of information collected. Before such steps  could be taken, however, certain issues would need to be resolved\u2014such  as privacy and security concerns and the appropriate disclosure of data  limitations.",
      " Facilitating the public access and usability of data already held in the  judiciary\u2019s databases would be consistent with the recommendations of  the National Bankruptcy Review Commission and section 604 of the  Bankruptcy Reform Act, both of which called for a national policy of  releasing the maximum amount of bankruptcy data in a usable electronic  form. Policy makers need adequate information about the characteristics  and outcomes of bankruptcies to make sound and informed policy  choices. Better access to bankruptcy data already held in the judiciary\u2019s  data systems could facilitate scholarly research, the informed allocation of  bankruptcy resources, and the formulation of bankruptcy policy. Recommendation for  Executive Action To help provide additional information on consumer bankruptcies useful  to policy makers and others,",
      " we recommend that the Director of AOUSC  expeditiously identify and implement\u2014subject to appropriate privacy and  security safeguards\u2014measures to further improve public accessibility to  those bankruptcy data that AOUSC already maintains in its information  systems. For example, AOUSC might consider whether it would be  practical to expand the search and output capability of the U.S. Party/Case  Index. AOUSC also might explore appropriate options for releasing at least  some of the case-level data used to generate the Bankruptcy Reform Act  statistics. Agency Comments We provided a draft of this report to AOUSC and the Department of  Justice for comment.",
      " These agencies provided technical comments that  we incorporated as appropriate. In addition, AOUSC provided a written  response, which is reprinted in appendix II. In its comment letter, AOUSC said it would carefully consider GAO\u2019s  recommendation to identify and implement measures to further improve  public accessibility to bankruptcy data. The agency commented that the  judiciary already provides a high level of access to case records and  information and that over the past decade it has substantially increased  the amount of information it makes available to users of the bankruptcy  system. The agency also reiterated the need to balance access and privacy  interests in making decisions about widespread public disclosure and  dissemination of information in case files.",
      " AOUSC said that in January  2009, it will begin assessing potential enhancements to the federal  judiciary\u2019s electronic public access services and technical interfaces, and  will consider making additional existing data available through the U.S.  Party Case/Index, as we suggested. The agency also said it will assess  issues related to releasing case-level Bankruptcy Reform Act data and will  present its recommendation to the appropriate Judicial Conference  committees. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution of it until 30 days from  the date of this letter. We will then send copies of this report to the  Ranking Member of the Committee on the Judiciary,",
      " U.S. Senate; the  Ranking Member of the Committee on the Judiciary, House of  Representatives; the Director of the Administrative Office of the United  States Courts; the Attorney General; and other interested committees and  parties. The report also is available at no charge on the GAO Web site at  http://www.gao.gov. If you or your staffs have any questions concerning this report, please  contact me at (202) 512-6806 or jonesy@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 who made major contributions to this  report are listed in appendix III.",
      " Appendix I: Objectives, Scope, and  Methodology Our report objectives were to examine (1) the availability and accessibility  of data from the bankruptcy system and (2) the potential benefits and  limitations of the new data requirements of the Bankruptcy Abuse  Prevention and Consumer Protection Act of 2005 (Bankruptcy Reform  Act) in addressing these issues. This report focuses on consumer, or  personal, bankruptcies rather than business bankruptcies. To address both of the objectives, we gathered documentation from and  spoke with representatives of the U.S. Trustee Program\u2019s (Trustee  Program) Executive Office for U.S.",
      " Trustees, including units responsible  for information technology and the oversight of private trustees; two  Trustee Program regional offices; the Administrative Office of the United  States Courts (AOUSC); and selected individual bankruptcy courts,  including four bankruptcy judges and six bankruptcy clerks. We also  spoke with, and in some cases gathered documentation from,  representatives of the National Association of Bankruptcy Trustees and  National Association of Chapter 13 Trustees, two professional associations  representing Chapter 7 and Chapter 13 trustees, respectively; companies  that provide software for case management for private trustees and  bankruptcy filings for attorneys; the National Data Center and Automated  Access to Court Electronic Records,",
      " private organizations that provide  bankruptcy data for a fee; the National Association of Consumer  Bankruptcy Attorneys; the National Consumer Law Center; the American  Bankruptcy Institute; the Financial Services Roundtable; and academic  researchers who study the bankruptcy system and use the data that it  generates. In addition, we reviewed the strategic plans for information technology  developed by the Trustee Program and AOUSC. We also reviewed  correspondence between these two parties on the potential  implementation of data-enabled forms, and reviewed public comments  they received related to this issue. We also reviewed the meeting minutes  and other documentation of relevant committees and subcommittees of  the Judicial Conference of the United States related to bankruptcy data  and data-enabled forms.",
      " To address the first objective, we reviewed academic literature that has  used, studied, or commented on the information on consumer  bankruptcies available from the court system and the Trustee Program. In  addition, we reviewed our prior reports that have used bankruptcy data  and have identified some of the limitations of these data, including reports  related to child support enforcement and reaffirmation agreements.  Further, we reviewed materials produced by the National Bankruptcy  Review Commission. We also reviewed user guides, protocols, data  dictionaries, and other relevant information for the judiciary\u2019s major  bankruptcy data systems, including the Public Access to Court Electronic  Records system,",
      " U.S. Party/Case Index, and Case Management/Electronic  Case Files system. In addition, we reviewed the Official Bankruptcy Forms  and visited a bankruptcy court to observe how information from the forms  is inputted into the Case Management/Electronic Case Files system. To address the second objective, we reviewed relevant provisions of the  Bankruptcy Reform Act and some corresponding legislative history. We  also reviewed documentation on the judiciary\u2019s implementation of the new  statistical requirements of the act, which included a tracking report  developed by AOUSC to monitor its efforts to implement the act; minutes  from the Judicial Conference\u2019s Advisory Committee on Bankruptcy Rules;",
      "  changes to the Official Bankruptcy Forms; documents related to the  modifications made to the case management system to collect additional  data elements; training materials used to educate court staff on collecting  the new data; and documents on the initiation of the NewSTATS statistical  infrastructure. We also reviewed documentation on the Trustee Program\u2019s  implementation of new requirements related to uniform final reports,  including the agency\u2019s proposed and final rules related to these reports  and draft and final versions of the agency\u2019s report formats. In addition, we  reviewed public comment letters submitted to the Trustee Program in  response to the rulemaking and the draft reports.",
      " We also reviewed  correspondence between the Trustee Program and the judiciary related to  the addition of new data fields to the daily downloads the program  receives from AOUSC. We conducted this performance audit from June 2007 through December  2008 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: Comments from the  Administrative Office of the United States  Courts Appendix III:",
      " GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the contact named above, Jason Bromberg, Assistant  Director; Nicholas Alexander; Krista Breen Anderson; Anne A. Cangi;  Emily Chalmers; Wilfred Holloway; Angela Pun; and Omyra Ramsingh  made key contributions to this report.\n"
    ],
    "length": 14296,
    "hardness": null,
    "role": null
  },
  {
    "id": 78,
    "question": null,
    "answer": "The Small Business Administration (SBA) and the Rural Development offices of the U.S. Department of Agriculture both work in rural areas to foster economic development by promoting entrepreneurship and community development. This report discusses (1) the complementary nature of some SBA and Rural Development programs and the extent to which it provides a rationale for the agencies to collaborate, (2) past and current efforts by SBA and Rural Development to work together and with other agencies, and (3) opportunities for the agencies to improve their collaborative efforts. In completing its work, GAO analyzed agency documentation and prior reports on collaboration, conducted site visits at locations where SBA and Rural Development were working together, and interviewed agency and selected economic development officials. The complementary nature of some SBA loan programs and Rural Development business programs provides a rationale for the agencies to collaborate. SBA and Rural Development have similar economic development missions, and their programs provide financing for similar purposes, including start-up and expansion projects, equipment purchases, and working capital for small businesses. According to SBA and Rural Development officials currently involved in collaborative working relationships, working together allows the agencies to leverage the unique strengths of each other's programs, increase the number of financing options available to borrowers in rural areas, and ultimately better promote economic development in these areas. However, collaboration between SBA and Rural Development to date has been sporadic and mostly self-initiated by officials in field offices. GAO found that the extent of the collaborative efforts and use of formal agreements such as memorandums of understanding (MOU) varied across locations. The two agencies worked together frequently in a few locations, infrequently in others, and not at all in many locations. The SBA and Rural Development offices in North Dakota that GAO visited collaborated frequently and had formal agreements in place. Officials there established an MOU with other community development organizations to provide \"one-stop\" shopping assistance to borrowers at a single location. The SBA and Rural Development offices in Nebraska and New Mexico that GAO visited worked with each other less frequently and more informally, conducting community outreach sessions and holding periodic meetings and joint training sessions. But many other locations--about half of SBA and Rural Development's field offices--did not appear to be collaborating at all or to have an established framework to facilitate collaboration. Opportunities exist for SBA and Rural Development to improve their collaborative efforts. In an October 2005 report, GAO identified key practices that could help federal agencies enhance and sustain their collaborative efforts. In comparing SBA and Rural Development's efforts with these criteria, GAO found that the agencies could take steps to improve their efforts by implementing a more formal approach to encourage collaboration. This approach would provide the agencies with a mechanism that reflected several of GAO's key practices--to define and articulate a common outcome, agree on roles and responsibilities, monitor key progress and results, and reinforce accountability for collaborative efforts. With such an approach, SBA and Rural Development could more effectively leverage each other's unique strengths and help to improve small business opportunities in rural communities.\n",
    "docs": [
      "Background SBA is charged with providing support to the nation\u2019s small businesses,  including those in urban and rural areas. Its support takes several forms.  First, it ensures access to credit, primarily by guaranteeing loans through  various loan guarantee programs. Second, it provides entrepreneurial  assistance through partnerships with private entities that offer small  business counseling and technical assistance. Third, SBA administers  various small business development and procurement programs that are  designed to assist small and disadvantaged businesses in obtaining federal  contracts. Finally, SBA makes loans to businesses as well as individuals  trying to recover from major disasters. Although most SBA disaster loans  are processed at the SBA loan processing center in Sacramento,",
      "  California, SBA has a network of 68 field offices nationwide. SBA administers several business loan programs, including the Basic 7(a)  Loan Guaranty Program, 504/CDC Loan Program, 7(m) Micro Loan  Program, and the Small Business Investment Company (SBIC) Program.  Recently, it added the Small/Rural Lender Advantage Pilot Program, under  its 7(a) Program, specifically for small businesses in rural areas (see fig.  1). Appendix II provides a more detailed description of each program. In addition to its loan programs, SBA offers grant programs that support  nonprofit organizations.",
      " These grant programs are generally designed to  expand and enhance nonprofit organizations that provide small businesses  with management, technical, or financial assistance. For example, SBA\u2019s  Women\u2019s Business Development Center Program is an SBA grant program  available to private, nonprofit organizations to run women\u2019s business  centers. The program was established by the Women\u2019s Business  Ownership Act of 1988 after Congress found that existing assistance  programs for small business owners were not addressing women\u2019s needs.  The program, which specifically targets economically and socially  disadvantaged women, provides long-term training, counseling,  networking, and mentoring to women who own businesses or are potential  entrepreneurs.",
      " The program\u2019s ultimate goal is to add more well-trained  women entrepreneurs to the U.S. business community. Additionally, SBA\u2019s Small Business Development Center (SBDC) Program,  which was created by Congress in 1980, provides management and  technical assistance to individuals and small businesses. SBDC services  include, but are not limited to, assisting prospective and existing small  businesses with financial, marketing, production, organization,  engineering, and technical problems and feasibility studies. Each state and  U.S. territory has a lead organization that sponsors and manages the SBDC  program there. The lead organization coordinates program services  offered to small businesses through a network of centers and satellite  locations at colleges,",
      " universities, vocational schools, chambers of  commerce, and economic development corporations. Nationwide, 63 lead  SBDCs and more than 1,000 satellite locations have contracted to conduct  SBDC services. USDA\u2019s Rural Development is responsible for leading and coordinating  federal rural development assistance. Rural Development administers over  40 development programs for rural communities, most of which provide  assistance in the form of loans, loan guarantees, and grants, through a  network of 47 state offices and about 500 area or local field offices. Rural  Development has three agencies: Rural Housing Service (RHS), Rural  Utilities Service (RUS), and Rural Business and Cooperative Service  (RBS). RHS helps rural communities and individuals by providing loans,",
      "  grants, and technical assistance for housing and community facilities. It  provides funding for single-family homes; apartments for low-income  persons, the elderly, and farm laborers; and various community facilities  such as fire and police stations, hospitals, libraries, and schools. RUS is  responsible for administering electric, telecommunications, and water  programs that help finance the infrastructure necessary to improve the  quality of life and promote economic development in rural areas. RBS administers programs that provide business planning and financial  and technical assistance to rural businesses and cooperatives.  Specifically, RBS\u2019 guaranteed loans and other loan and grant programs  work in partnership with private sector and community-based  organizations to meet the business and credit needs of rural businesses.",
      "  Recipients of RBS\u2019 services include individuals, farmers, producers,  corporations, partnerships, public bodies, nonprofits, American Indian  tribes, and private companies. The primary business programs include the  Business and Industry (B&I) Guaranteed Loan Program, Intermediary  Relending Program (IRP), Rural Business Enterprise Grant Program  (RBEG), Rural Business Opportunity Grant Program (RBOG), Rural  Economic Development Loan and Grant Program (REDLG), and the  Renewable Energy Systems and Energy Efficiency Improvements  Guaranteed Loan and Grant Program (see fig. 2). Appendix II provides a  more detailed description of each program.",
      " Rural Development business programs are available in areas that meet the  program\u2019s definition of rural\u2014for example, for the B&I program, any area  other than a city or town with a population of 50,000 or less and the area  contiguous and adjacent to such a city or town. As a result, in general, only  individuals and businesses in identified areas with 50,000 or fewer people  are eligible for most of these programs. One exception is the Intermediary  Relending Program, which is available only to businesses in rural areas  with 25,000 or fewer people. The Complementary  Nature of Some SBA  and Rural  Development  Programs Provides a  Rationale for  Collaboration Some SBA loan programs and Rural Development business programs are  complementary,",
      " providing a rationale for the agencies to collaborate. Both  types of programs can fund start-up and expansion projects, equipment  purchases, and working capital to rural borrowers and, in some cases, the  eligibility requirements for the programs are comparable. However, the  various programs have different and sometimes unique strengths\u2014for  example, larger loan amounts, shorter processing times, or targeting of  different market segments. According to SBA and Rural Development  officials, collaborative efforts could allow each agency to leverage the  strengths of the other. For example, Rural Development can finance larger  projects than SBA and lend to nonprofit organizations, something SBA  cannot do.",
      " However, SBA can offer entrepreneurs a faster turnaround time  in loan processing. Similarly, officials noted that certain SBA and Rural  Development loan products complemented one another and were used  jointly to finance individual projects. To the extent that SBA\u2019s resource  partners are considered part of SBA\u2019s rural presence, both agencies have a  strong rural presence that provides another rationale for the agencies to  collaborate. Some SBA and Rural  Development Programs  Serve the Same Areas and  Groups, Offer Comparable  Products, and Have Similar  Eligibility Requirements SBA and Rural Development, which share a similar mission of increasing  economic opportunity and improving the quality of life for people in  underserved markets,",
      " including rural America, serve the same rural  geographic areas and communities and have some programs that offer  similar products to borrowers for comparable purposes. For example,  SBA\u2019s 504 Loan Program and Rural Development\u2019s Intermediary Relending  Program both offer economic development loans that can support the  growth of rural small businesses and help enhance rural communities  through business expansion and job creation. The 504 and Intermediary  Relending programs both also provide financing for the acquisition and  improvement of land, buildings and equipment, particularly when such  funding will help create or retain jobs. According to SBA, the gency provided  504  lon to the owner of  helth cre business  to prchas new $7.",
      "2 million hedquarter  building. Two Ntive Americter from  Lerton, North Crolin, launched the  business in 2000 nd were nmed the 2007  NtionSll Business Peron of the Yer.  When it firt opened, the helth cre businessd only one cell phone, two ptient, nd   certified ning assnt. Tody, ccording to  SBA, the business provide  rod rnge of  ervice, employing 301 profession nd  erving 760 ptientily, with nnuasale  over $9 million. Both agencies\u2019 loan and business programs are designed to help local  entrepreneurs start up or expand their businesses.",
      " For instance, SBA\u2019s  7(a) Loan Guaranty Program and Rural Development\u2019s Business and  Industry Guaranteed Loan Programs both provide financing that can be  used to establish a new business or to assist in the operation, acquisition,  or expansion of an existing business. Specifically, the 7(a) program  provides funding for business start-ups, expansion, equipment, working  capital, and real estate acquisition. Similarly, the Business and Industry  Guaranteed Loan Program provides funding for start-ups and expansion  purposes, including acquisition, inventory, real estate, working capital,  equipment, construction, and enlargement or modernization of rural  businesses.",
      " These programs are provided through loan guarantees that  limit the risk to lenders. Private lenders underwrite and service the loans  and make the decisions to approve or not approve loan requests, and SBA  and Rural Development decide whether to guarantee a portion of the  outstanding loan balance if the borrower defaults. According to USDA, the Stheast Iow  Regionl Plnning Commission ght  finncing for  revolving lon fnd to erve  De Moine, Henry, Lee, nd Losa contie  in Stheast Iow. In repone to thi  reqt, Rl Development, throgh it  Intermediry Relending Progrm,",
      " rded  the commission $600,000 to provide  low-interet lo to public nd nonprofit  orgniztion tht, in trn, wold relend thoe  fnd to support business nd commnity  development. A  result of the project,  ccording to USDA, 7 business were  assted, 200 jobs were creted, nd 259  jobs were saved. Further, both agencies offer programs that provide technical assistance to  eligible borrowers and, while SBA does not offer grants to start or grow a  business, it has resource partners, such as its SBDCs and Women\u2019s  Business Centers,",
      " which provide management and technical assistance to  prospective small business owners. Rural Development offers grant  programs that provide management and technical assistance to rural  borrowers. The Rural Business Enterprise Grant and Rural Business  Opportunity Grant programs provide technical assistance for business  development and to conduct economic planning in rural areas. In addition, some of the loan and business programs have similar eligibility  requirements. For example, in administering its Renewable Energy  Systems and Energy Efficiency Improvements Guaranteed Loan and Grant  Program, Rural Development relies on SBA\u2019s definition of eligible small  businesses, including sole proprietorships, partnerships, corporations, and  cooperatives. Borrowers must also meet SBA\u2019s small business standards  for the type of industry,",
      " number of employees, or annual revenue.  Moreover, some of SBA\u2019s and Rural Development\u2019s programs have  established comparable credit criteria for the borrower. SBA\u2019s 7(a) Loan  Guaranty, 504, and Mirco Loan programs and Rural Development\u2019s  Business and Industry Guaranteed Loan Program all use similar criteria  that are based on the type of project being funded and the borrower\u2019s  ability to meet normal commercial lending standards and provide a  personal guaranty, if necessary. SBA and Rural  Development Programs  Have Several Key  Differences SBA and Rural Development officials we spoke to stated there was little  overlap or duplication between the two agencies\u2019 loan and business  programs,",
      " in part because of several key differences. First, Rural  Development can finance larger projects than SBA. The maximum loan  amount for SBA\u2019s 7(a) loan is $2 million, compared with a maximum loan  amount for Rural Development\u2019s Business and Industry loan of $25  million. Second, the 7(a) and Business and Industry programs also offer  different loan guaranties. The maximum guaranty for 7(a) loans is 85  percent for loans up to $150,000 and 75 percent for loans over $150,000.  The maximum guaranty percentage for Business and Industry loans is 80  percent for loans up to $5 million,",
      " 70 percent for loans between $5 million  and $10 million, and 60 percent for loans of more than $10 million. Third,  the costs, fees, and loan terms differ for the two types of loans. For  example, SBA charges a guaranty fee of 2 percent for loans up to $150,000,  3 percent for loans between $150,000 and $700,000, and 3.5 percent for  loans up to $1 million. SBA also charges an additional quarter of a percent  of the guaranteed portion over $1 million. Rural Development charges an  initial guaranty fee not to exceed 2 percent of the guaranteed portion of  the loan.",
      " The maximum loan terms for SBA 7(a) loans are determined by  the following: (1) the shortest appropriate term, depending on the  borrower\u2019s ability to repay; (2) 10 years or less, unless it finances or  refinances real estate or equipment with a useful life exceeding 10 years;  and (3) a maximum of 25 years, including extensions. However, the  maximum loan terms for Rural Development\u2019s Business and Industry loans  are 7 years for working capital, 15 years for equipment, and 30 years for  real estate loans. Each program also offers some unique strengths.",
      " While Rural  Development\u2019s fees tend to be lower than SBA\u2019s, SBA usually processes its  loans faster. In general, the average processing time by SBA for SBA loans  is 5 to 7 business days and for Rural Development business programs 10 to  60 days, depending on the scope of the project and completeness of the  application. SBA can offer shorter turnaround in loan processing,  particularly for its 7(a) program (which sometimes takes as little as 2  business days), because of its various express loan options, preapproved  lenders, and consolidated loan processing center. Rural Development  makes credit and underwriting decisions itself rather than relying on  preapproved lenders,",
      " and its loans can take as long as 60 days to process.  Moreover, Rural Development has certain restrictions on the maximum  dollar amount of loans that can be approved by field offices\u2014typically  varying by state based on the loan approval authority. Therefore, Business  and Industry loans above a state\u2019s loan approval limit must be approved by  Rural Development headquarters officials, resulting in additional loan  processing times. While both agencies serve rural areas, their programs differ in the types of  entities they serve. SBA\u2019s loan programs only serve the for-profit sector,  focusing on individual entrepreneurs and small businesses. However,  Rural Development\u2019s business programs focus on individual entrepreneurs  and small and mid-size businesses,",
      " as well as nonprofits. Appendix III  further illustrates some of the similarities and differences between SBA\u2019s  and Rural Development\u2019s loan and business programs. Collaboration Allows SBA  and Rural Development to  Leverage Each Agency\u2019s  Strengths and Increase  Financing Options in Rural  Areas According to SBA and Rural Development officials who are engaged in  collaborative relationships, collaboration allows the agencies to leverage  the unique strengths of each agency\u2019s programs and increase the number  of financing options to better promote economic development. For  instance, SBA and USDA officials in North Dakota said that SBA\u2019s 504  program and Rural Development\u2019s Intermediary Relending programs were  frequently coupled in loan packages.",
      " In those cases, the 504 program  provided funding for land and buildings, and the Intermediary Relending  program provided funding for machinery, equipment, working capital, and  other uses. The officials estimated that about one of every four 504 loans  in rural communities in North Dakota with populations of less than 25,000  residents had been used jointly with Intermediary Relending loans to  finance individual projects. Examples of businesses in North Dakota that  have received joint financing from SBA and Rural Development include an  agricultural retail service that sells chemicals and fertilizer and employs 7  workers and a manufacturer of electric thermal storage heating equipment  that employs 140 workers.",
      " In each of these examples, the businesses used  SBA\u2019s 504 program to acquire a building and used the IRP program to  acquire machinery and equipment. Other officials with whom we spoke cited further rationale for the  agencies to collaborate. In one instance, a Rural Development official in  New Mexico noted that collaboration with SBA allowed him to tap into  SBA\u2019s preexisting constituency of banks, expanding the number of lenders  that could help provide Rural Development loans to potential borrowers.  Similarly, SBA officials in New Mexico said that collaboration with Rural  Development allowed SBA to provide additional assistance to small  businesses after Rural Development provided initial financing for a  community\u2019s infrastructure.",
      " The officials involved in the limited instances of collaboration that we  identified acknowledged that working together allowed both agencies to  coordinate the delivery of their loan and business programs to solve  specific credit needs. SBA and Rural Development officials in North  Dakota also told us that by collaborating they were able to provide  borrowers with more financing options than they could by acting alone,  thereby improving service to borrowers. Moreover, according to officials  in North Dakota and New Mexico, collaboration also created a synergistic  effect to better promote economic development in rural areas. Finally, while some consolidation has occurred over time, both agencies  have a strong presence in rural areas.",
      " Prior to its 1994 reorganization,  USDA had field staff in almost every rural county. Consistent with its  reorganization, and as we reported in September 2000, USDA closed or  consolidated about 1,500 county offices into USDA service centers and  transferred more than 600 Rural Development field positions to the St.  Louis Centralized Servicing Center. The number of Rural Development  offices across the nation is now closer to the number of SBA offices\u201447  Rural Development state offices and 68 SBA district offices (see fig.3). In addition to its state offices, Rural Development also has about 500 field  offices,",
      " including area, subarea, and other local offices in rural areas. SBA  officials we spoke to in headquarters believe that SBA has a similar  presence in rural communities because of its more than 950 SBDC  locations in the 50 states, U.S. territories, and the District of Columbia. In  contrast to SBA\u2019s view, Rural Development officials believe that the  presence of its 500 field offices in rural areas is unique because each office  is staffed by USDA employees. Although SBA\u2019s SBDCs may provide  services that differ from services provided by Rural Development field  offices, to the extent that SBDCs are considered part of SBA\u2019s rural  presence,",
      " both agencies have a strong rural presence that provides  another rationale for the agencies to collaborate. SBA and Rural  Development\u2019s  Collaborative Efforts  Have Been Sporadic Overall, in the areas where SBA and Rural Development were  collaborating, the efforts were sporadic, were initiated and administered at  local levels, and appeared to be dependent on established working  relationships among those involved. The results of a query by Rural  Development and SBA officials asking their offices whether collaborative  efforts were under way also indicated that such efforts were sporadic. We  found that the extent of the collaboration that was taking place and the  level of formality\u2014that is,",
      " the use of cooperative agreements, such as  MOUs and other mechanisms to collaborate\u2014varied across the agencies\u2019  field offices. For example, in North Dakota, SBA and Rural Development  collaborated frequently and on a relatively formal basis by communicating  at least weekly, hosting several joint lender training sessions yearly, and  establishing an MOU to deliver financing and technical assistance at one  location. In other states we visited, such as Nebraska and New Mexico,  SBA and Rural Development worked with each other less frequently and  on a more informal basis. In a number of other states, such as Arizona,  Colorado, and Georgia,",
      " no collaborative efforts appeared to be under way. Most of the Current  Collaborative Efforts  between SBA and Rural  Development Have Been  Initiated at the Local Level Federal agencies that are involved in collaborative efforts are generally  required by statute to collaborate, but no such specific requirement exists  for SBA and Rural Development. As a result, we found that most ongoing  collaborative efforts between the agencies had been initiated at the local  level and were based on established working relationships among the  involved individuals. For example, some SBA and Rural Development field  office officials at the three sites we visited told us that they frequently  collaborated with each other because they had held the same job  positions,",
      " within their respective agencies, and worked together for many  years and thus had established a rapport. Other officials told us that they  were involved in collaborative efforts because they had initiated the  efforts on their own or had prior experience in partnering with other  agencies and had chosen to continue similar efforts. SBA and Rural Development headquarters officials conducted a query of  their respective field office staff to determine the extent to which these  offices were involved in any formal or informal collaborative efforts. In  addition to information we obtained from the three locations we visited,  the query results showed that collaborative efforts developed sporadically  among a limited number of offices.",
      " For example, of SBA\u2019s 68 district  offices, only about half reported having ongoing collaborative efforts with  Rural Development. Similarly, only about half of Rural Development\u2019s 47  state offices reported having ongoing collaborative efforts. Of those Rural  Development offices that reported not having any ongoing efforts, a few  indicated that they had partnered with SBA in the past. Each agency\u2019s  query also showed that some SBA and Rural Development field offices  seemed to have good working relationships that had been established over  the years by the specific individuals involved. A Few SBA and Rural  Development Field Offices  Have Established Formal  Collaborative Efforts Our site visits and the results of the query of field offices identified a few  SBA and Rural Development offices,",
      " such as those in North Dakota, Ohio,  and Washington state that appeared to be collaborating frequently. These  offices used formal mechanisms such as MOUs to establish a framework  for their efforts. In North Dakota, for example, SBA and Rural  Development offices offered at least eight joint lender trainings each year  and held quarterly meetings. In addition, in North Dakota the agencies had  established an MOU that created the Entrepreneur Centers of North  Dakota (ECND), a single entity involving SBA, Rural Development, and  other state and local stakeholders. According to officials at the center,  the ECND provides \u201cone-stop\u201d access to a variety of products and services,",
      "  a concept that has been widely used by USDA in its service centers for  over 10 years and that was a cornerstone of the agency\u2019s reorganization  efforts. Through the ECND, a prospective small business borrower in North  Dakota can work with the five ECND partners to obtain financing and  technical assistance from any of the more than 15 programs that are  offered. ECND partners work with the borrower from the initial point of  contact and continue their assistance through the process of securing the  appropriate financing and may stay involved until a project is completed.  Borrowers can also work with \u201cresource partners,\u201d including SBA\u2019s SBDC  and the North Dakota Women\u2019s Business Center (i.e., Center for Women  and Technology)",
      " to obtain technical assistance in areas such as business  management, marketing, production, and the development of feasibility  studies. According to SBA and Rural Development officials in North  Dakota, the ECND is one of the best examples of teamwork and has  proven to be beneficial in helping to provide a high level of customer  service to rural borrowers. The SBA and Rural Development offices in Ohio also reported ongoing  collaborative efforts. The officials reported having an MOU, which was  established in the late 1990s, to guide various joint activities and to  promote the use of each other\u2019s programs in marketing and outreach  efforts.",
      " Under the MOU, which is still used today, the offices provide  referrals, conduct periodic meetings to update program information, and  engage in forums and joint lender training sessions to educate lenders on  their programs. The SBA and Rural Development offices in Washington  reported having annual forums to share updated program information.  They also said that they had sponsored three joint lender training sessions  and a regional lender conference to educate lenders on the various aspects  of their loan and business programs. The SBA and Rural Development  offices plan to conduct a series of joint lender workshops in 2008 and to  establish an MOU that will guide their efforts and cover advertising for the  workshops.",
      " SBA and Rural  Development Collaborated  Less Frequently,  Informally, or Not At All in  Many Locations The two agencies reported several other instances of collaboration, but  these were less extensive and formal than those in North Dakota, Ohio,  and Washington state. For example, Nebraska SBA and Rural  Development officials reported conducting joint lender training sessions  to educate loan officers on the agencies\u2019 various loan and business  programs and provide information on the technical resources that are  available to small businesses throughout the state. In New Mexico, SBA  and Rural Development officials reported conducting joint monthly  meetings and community outreach sessions, or \u201cAccess to Capital\u201d forums.",
      "  The forums are 1-day events during which Rural Development, SBA, and  SBDC officials and other local economic development professionals make  presentations on the various types of loan programs that are available to  small businesses. The forums\u2019 goal is to involve local economic and  political leaders in assisting small businesses in rural areas of the state and  to obtain their buy-in and support for SBA and Rural Development  programs. SBA and Rural Development officials in other locations reported that they  were involved in informal collaborative efforts. In Arkansas, Missouri, and  Virginia, these activities were based on referrals. According to officials in  these areas,",
      " SBA and Rural Development field personnel often refer  applicants in need of financing to each other\u2019s agency if the other agency\u2019s  programs seem better suited to the applicants\u2019 needs. SBA and Rural  Development offices in Massachusetts also reported that they had recently  sponsored a joint educational event on renewable energy and energy  efficiency grants and loans and had held meetings to exchange program  information. Additionally, in New Hampshire, Rhode Island, and Vermont,  the offices reported that they had informal relationships and generally  kept each other up to date on their respective programs. In many states, however, SBA and Rural Development do not appear to be  collaborating at all or to have formal or informal mechanisms to facilitate  collaboration.",
      " These states include, among others, Arizona, Colorado,  Georgia, Maine, North Carolina, Utah, and West Virginia. Because of this  lack of collaboration, SBA and Rural Development offices in these states  may be missing out on opportunities to work together to better serve  entrepreneurs and small businesses in their local communities. SBA and Rural  Development have  Collaborated with Each  Other and Other Agencies  in the Past SBA and Rural Development have collaborated in the past with each other  and with other agencies. Generally speaking, these efforts enabled the  agencies to achieve results that they could not have achieved acting alone.  For example,",
      " SBA and Rural Development collaborated with each other  under the RBIP. Section 6029 of the Farm Security and Rural Investment  Act of 2002 required USDA to establish the RBIP. The purpose of the  program was twofold: first, to promote economic development and create  jobs in rural areas by encouraging investments of venture capital to help  develop small rural businesses; and second, to establish a developmental  venture capital program to address the unmet equity investment needs of  small rural businesses. RBIP was modeled after SBA\u2019s Small Business Investment Company  program and its New Markets Venture Capital program, and Rural  Development was expected to draw upon the experience that SBA had  gained in administering these programs.",
      " Under an interagency agreement  required by the act, Rural Development had oversight responsibility for  RBIP, and SBA had the day-to-day responsibility for managing and  operating the program using its own staff, procedures, and forms.  According to both SBA and Rural Development officials, the success of  RBIP was limited due to a lack of funding, in part because the Deficit  Reduction Act of 2005 rescinded fiscal year 2007 and subsequent funding  for the program. Both agencies also encountered challenges during  planning and implementation. For instance, it took about 2 years from the  time that the law was enacted in 2002 to finalize and sign the operating  agreements,",
      " establish interim final rules, and announce funding  availability in 2004. Prior to the loss of funding in 2006, only one company  was able to raise the necessary capital (i.e., private equity matching  dollars) for full approval to become licensed as a rural business  investment company under RBIP. According to SBA and Rural Development officials, the agencies have also  collaborated with other agencies, and the results have reportedly been  beneficial for both SBA and USDA. For instance, both SBA and Rural  Development each collaborated with FCA to examine specialized lending  institutions. Specifically, SBA oversees small business lending companies  (SBLC), which are nondepository lending institutions licensed by SBA that  play a significant role in SBA\u2019s 7(a)",
      " Loan Guaranty Program. However,  SBLCs are not generally regulated or examined by financial institution  regulators. SBA entered into a contractual agreement with FCA in 1999  that tasked FCA with conducting safety and soundness examinations of  the SBLCs. Under the agreement, FCA would conduct examinations of  SBLCs on a full cost-recovery basis, and the agencies would have the  option to terminate or extend the agreement after 1 year. Rural  Development also collaborated with FCA under an Economy Act  agreement to conduct examinations of its nontraditional lenders (i.e.,  lenders that provide loans to borrowers that do not meet the traditional  credit criteria)",
      " that participate in Rural Development\u2019s B&I, Renewable  Energy Systems and Energy Efficiency Improvements, and Community  Facilities Guaranteed Loan Programs. Under the agreement, FCA  conducts, on a full cost-recovery basis, examinations of the lending  institutions\u2019 safety and soundness, lending practices, and regulatory  compliance. These agreements have allowed both SBA and Rural  Development to take advantage of FCA\u2019s expertise in examining  specialized financial institutions and offered FCA the opportunity to  broaden its experience through exposure to different lending  environments. Additionally, Rural Development and FEMA collaborated in providing  disaster assistance to Hurricane Katrina victims. Through this  collaborative effort,",
      " Rural Development assisted victims of Katrina by (1)  making multifamily rental units available nationwide; (2) providing grants  and loans for home repair and replacement; and (3) providing mortgage  relief through a foreclosure moratorium and mortgage payment  forbearance. Over the years, Rural Development\u2019s Housing and  Community Facilities Program and HUD have routinely collaborated with  each other to provide affordable housing assistance in rural communities,  and the working relationship still exists today. Rural Development and  HUD have together created a voucher program, modeled after HUD\u2019s  Housing Choice Voucher program that provides rental assistance to  families in rural areas. They have also developed cooperative agreements  for their multifamily housing assistance programs that allow tenants to use  HUD vouchers in USDA subsidized multifamily housing units.",
      " We were  told that each of the collaborative efforts allowed the agencies to establish  common approaches to working together, clarify priorities as well as roles  and responsibilities, and align their resources to accomplish common  outcomes. SBA and Rural  Development Could  Take Steps to  Establish a Formal  Approach to  Collaboration SBA and Rural Development have not had a lasting approach to guide  them in collaborating with one another more effectively. Our October 2005  report on key practices that can help enhance and sustain collaboration  among federal agencies identified a number of practices critical to  successful collaboration and identified other factors such as leadership,  trust, and organizational culture that are necessary elements of an  effective working relationship.",
      " In December 2000, SBA and Rural  Development entered into an MOU that provided an approach to  collaboration. The MOU incorporated three of the key practices we have  identified. The MOU expired in 2003 and SBA and Rural Development do  not appear to have implemented the MOU when it was active. The  ineffective implementation of the MOU has likely contributed to the  sporadic and limited amount of collaboration that is taking place between  the two agencies. SBA and Rural Development also do not have formal  incentives focused on collaboration and do not track the results or impact  of collaborative efforts. As a result,",
      " the agencies are unable to share  information on the benefits of working together and encourage additional  efforts to do so. Without a formal approach to encourage further  collaboration, the agencies will be less likely to fully leverage each other\u2019s  unique strengths to help improve small business opportunities and  encourage economic development in rural communities. SBA and Rural  Development Do Not Have  A Current Cooperative  Agreement to Facilitate  Collaboration In our October 2005 report, we identified eight key practices federal  agencies could undertake to enhance and sustain their collaborative  efforts. These practices included the following:    Define and articulate a common outcome\u2014to overcome significant  differences in agency cultures and established ways of doing business,",
      "  collaborating agencies must have a clear and compelling rationale to work  together. Establish mutually reinforcing or joint strategies\u2014to achieve a common  outcome, collaborating agencies need to establish strategies that work in  concert with those of their partners or are joint in nature. Identify and address needs by leveraging resources\u2014collaborating  agencies should identify the human, information technology, physical, and  financial resources needed to initiate or sustain their collaborative effort.  By assessing their relative strengths and limitations, agencies can look for  opportunities to address resource needs by leveraging each others\u2019  resources. Agree on agency roles and responsibilities\u2014collaborating agencies  should work together to define and agree on their respective roles and  responsibilities,",
      " including how the collaborative effort will be led. Establish compatible policies, procedures, and other means to operate  across agency boundaries\u2014to facilitate collaboration, agencies need to  address the compatibility of standards, policies, procedures, and data  systems that will be used in the collaborative effort. Develop mechanisms to monitor, evaluate, and report on results\u2014 agencies involved in collaborative efforts need to create the means to  monitor and evaluate their efforts to enable them to identify areas for  improvement. Reinforce agency accountability for collaborative efforts through agency  plans ands reports\u2014collaborating agencies should ensure that goals are  consistent and, as appropriate, program efforts are mutually reinforced  through tools such as strategic and annual performance plans;",
      " and   Reinforce individual accountability for collaborative efforts through  performance management systems\u2014collaborating agencies should use  their performance management systems to strengthen accountability for  results, specifically by placing greater emphasis on fostering the necessary  collaboration both within and across organizational boundaries to achieve  results. In comparing SBA and Rural Development\u2019s efforts to these key practices,  we found that the agencies have taken steps in the past that were  consistent with three of the key practices. In particular, the agencies  entered into a cooperative agreement\u2014an MOU\u2014in December 2000 that  (1) defined and articulated a common outcome; (2) reached agreement on  roles and responsibilities;",
      " and (3) established a mechanism to monitor,  evaluate, and report on results. Specifically, the MOU defined and articulated a common purpose,  including to better serve rural areas by coordinating the delivery of  programs; increase the number of small business loans guaranteed by both  agencies; and develop relationships with federal, state, county, and local  agencies, private organizations, and commercial and financial institutions  to facilitate and support the development of strong rural businesses. In  addition, the MOU described the respective roles and responsibilities each  agency would maintain in providing training on their programs, credit  analysis techniques, and processing and servicing policies.",
      " Finally, the  MOU stated that, at least annually, SBA\u2019s Associate Administrator for Field  Operations, SBA\u2019s Associate Administrator for Financial Assistance, and  Rural Development\u2019s Deputy Administrator for Business Programs, or  their designees, would monitor and evaluate the previous year\u2019s joint  activities and plan any future work. The MOU, signed in December 2000, was to become active on the date of  execution and remain in effect for 3 calendar years at which time the two  agencies had the option to extend it for an additional 2 years by written  agreement. SBA\u2019s Deputy Administrator and USDA\u2019s Undersecretary for  Rural Development signed the MOU and it expired in 2003.",
      " Both SBA and  Rural Development officials recently confirmed that the MOU was not  renewed. SBA and Rural  Development Do Not  Appear to Have  Implemented the  December 2000 MOU  When it Was Active Although SBA and Rural Development\u2019s December 2000 MOU contained  provisions that are consistent with some of our key practices as described  above, the agencies do not appear to have implemented the MOU when it  was active. Based on our analysis, there are two potential reasons for this  lack of implementation. First, SBA and Rural Development may not have implemented the 2000  MOU when it was active because of a lack of direction and focus from high  levels of each agency emphasizing the need for and importance of  collaboration.",
      " Rural Development officials confirmed that a change in  USDA administration occurred after the 2000 MOU was signed, and the  officials who signed the MOU were no longer in the positions they  occupied at the time of the signing. This explanation is consistent with  what others told us about barriers to more effective collaboration between  federal agencies. For example, a representative of a rural community  development organization with whom we spoke stated that the initial  momentum for some collaborative efforts may come from officials in  management level positions of a federal agency, but after the responsible  officials leave the agency, or a change in administration occurs, the  momentum for a collaborative effort may drop off and not be resumed by  the officials\u2019 successors.",
      " Second, the 2000 MOU may not have been fully implemented because  neither agency appeared to be actively monitoring the extent to which  collaboration was ongoing. For instance, when we began our work for this  review, we asked SBA and Rural Development officials in headquarters to  provide examples of formal or informal efforts the agencies have  undertaken to work together. The officials were not able to provide any  descriptions of such efforts and told us that ongoing collaborative efforts  were likely to be sporadic and occurred only as needed in the agencies\u2019  field offices. Because we could not obtain information on the extent and  nature of SBA and Rural Development\u2019s collaborative efforts,",
      " we asked  each agency to query its field offices to provide us with this information.  As discussed previously, based on the results of each agency\u2019s query, we  found a few locations where SBA and Rural Development are involved in  frequent and formal collaborative efforts, some locations where the  agencies are involved in informal efforts, and many locations where the  agencies appear not to be working together at all. SBA and Rural Development officials did not cite the December 2000 MOU  when we began work for this review and, for a period of months, the  agencies did not appear to be in agreement as to whether the MOU was  active.",
      " In March 2008, Rural Development officials informed us that they  were operating as though the MOU was active, even though it had expired.  However, when we asked about the December 2000 MOU during some of  our visits to locations where SBA and Rural Development were  collaborating, some officials in the locations were unfamiliar with it.  During the course of our review, neither SBA nor Rural Development  officials cited actions taken, past or present, in response to the provisions  contained in the MOU. Had SBA and Rural Development implemented the  MOU, the agencies would have had a framework to guide them and  improve upon their collaborative efforts.",
      " SBA and Rural  Development Lack  Incentives for  Collaboration and Do Not  Track the Results of  Collaborative Efforts Based on our analysis, we found that SBA and Rural Development field  offices do not have formal incentives to encourage collaboration and do  not track the results of their efforts. As mentioned, as we reported in our  2005 report, one of the key practices that can help agencies to enhance  and sustain their collaborative efforts involved ensuring that the agencies\u2019  goals are consistent and that their program efforts are mutually reinforced  through strategic and annual performance plans. Specifically, federal  programs contributing to the same or similar results should collaborate  and use their strategic and annual performance plans as tools to drive  their efforts to work together.",
      " Such plans can reinforce accountability for  the collaboration by establishing complementary goals and measures for  achieving results and aligning them with the goals and measures of the  collaborative efforts. SBA and Rural Development\u2019s performance goals  and measures do not focus on their efforts to work together  collaboratively. Specifically, in describing their performance goals for  district offices, SBA officials stated that each office has goals for technical  assistance, including activities such as training, marketing, and outreach.  The officials noted that each SBA district office also has goals and  measures for the number of loans to be made in underserved markets,  which may include rural areas.",
      " While these goals and measures focus on  participation in SBA\u2019s programs and may encourage offices to partner with  others, they do not focus specifically on collaboration with Rural  Development. Similarly, Rural Development\u2019s program performance  measures, particularly for the B&I program, do not focus on collaboration  with another agency. Rural Development\u2019s goals and measures focus on  employment opportunities (i.e., jobs created or saved) and community  economic benefits (i.e., value added to a community as a result of the  economic impact of Rural Development\u2019s programs). Both SBA and Rural  Development officials stated that performance goals and measures  focused on collaboration could provide an incentive to collaborate.",
      " Once  established, such goals and measures could provide both agencies a  mechanism to encourage interagency working relationships and reward  those efforts already occurring. Additionally, SBA and Rural Development officials at the three locations  we visited said that they are not currently tracking the results of some  collaborative efforts, such as the joint training of lenders and community  outreach sessions. The officials did view these collaborative efforts as  beneficial in increasing awareness of each agency\u2019s respective programs. According to Rural Development officials in New Mexico, while they are  satisfied with the attendance at their \u201cAccess to Capital\u201d forums targeted  at local economic and political leaders and lenders, they have not been  able to document a loan resulting from the forums.",
      " Rural Development  officials in Nebraska said that they have received phone calls from some  lenders after the lenders have attended a joint training session. In these  cases, according to the officials, Rural Development has been active in  meeting with lenders one-on-one to provide assistance. However, the  officials said that they could do a better job of proactively contacting the  lenders after the training to solicit feedback and determine if the lender  has initiated any new loans as a result of having attended the training  session. SBA and Rural Development officials stated that one way to document the  benefits of collaboration would be to prepare \u201csuccess stories\u201d of ventures  that SBA and Rural Development had jointly undertaken.",
      " The officials  further stated that because each agency already prepared success stories  that are based upon participation in their individual programs, this  practice could be used to document positive benefits stemming from  collaborative efforts between the two agencies. Moreover, the officials  said that those locations where SBA and Rural Development were not  currently working together were more likely to begin doing so if they were  made aware of specific, tangible benefits that could be realized through  collaboration. Conclusions The complementary nature of some SBA loan programs and Rural  Development business programs provides a rationale for the agencies to  collaborate. SBA and Rural Development officials engaged in collaborative  working relationships said that they have been able to work together to  offer rural borrowers more financing options and better services,",
      " as well  as to improve efforts to promote economic development in rural areas  when collaboration has occurred. However, SBA and Rural Development\u2019s  collaborative efforts to date have been sporadic and mostly self-initiated  by specific officials in each agency\u2019s field offices. Officials of each agency  worked together frequently in some locations and infrequently in others.  In many areas, SBA and Rural Development neither appear to be  collaborating at all nor have formal or informal mechanisms to guide their  collaboration. For SBA and Rural Development, working together to encourage  economic development in rural areas is not a new or novel concept. Both  agencies entered into earlier cooperative agreements to work  collaboratively.",
      " However, when comparing these past efforts with our  criteria for effective interagency collaboration, we found that the agencies  could take further steps to facilitate collaboration by establishing and  implementing a formal approach. Such an approach could help SBA and  Rural Development establish the guidance, direction, and incentive  structure needed to bring about a productive working relationship on a  more systematic basis. Our previous work in this area shows that adopting  key practices\u2014such as defining and articulating a common outcome;  specifying roles and responsibilities; establishing a mechanism to monitor,  evaluate, and report on results; and reinforcing agency accountability for  collaborative efforts\u2014can help federal agencies enhance and sustain their  collaborative efforts.",
      " One way SBA and Rural Development can adopt  these key practices is to enter into a written cooperative agreement and,  just as important, implement that agreement and take appropriate steps to  monitor and report on results. Moreover, by creating formal incentives,  such as performance goals and measures specifically focused on  collaboration or, similarly, preparing success stories to document the  benefits of their collaborative efforts, SBA and Rural Development can  share and publicize information that would help encourage the two  agencies to work together. Such an approach can help SBA and Rural  Development to effectively leverage each other\u2019s unique strengths to help  improve small business opportunities and promote economic development  in rural communities.",
      " Recommendations for  Executive Action To improve SBA and Rural Development\u2019s collaborative efforts, we  recommend that the Administrator of SBA and Secretary of Agriculture:  take steps to adopt a formal approach to encourage further collaboration  in support of common economic development goals in rural areas. Such  steps could include establishing and implementing a written agreement;  defining and articulating a common outcome for rural economic  development; specifying roles and responsibilities to ensure proper  coordination; establishing mechanisms to monitor, evaluate, and report on  results; and reinforcing accountability for collaborative efforts. Agency Comments We provided a copy of our draft report to the Acting Administrator of the  Small Business Administration and the Secretary of Agriculture for review  and comment.",
      " Both agencies provided technical comments, which we  incorporated into the final report where appropriate. We are sending copies of this report to other interested congressional  committees as well as the Administrator of the Small Business  Administration and the Secretary of Agriculture. We also will make copies  of this report available to others upon request. In addition, this report will  be available at no charge on the GAO Web site at http://www.gao.gov. Please contact me at (202) 512-8678 or ShearW@gao.gov if you or your  staff have any questions about this report. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report.",
      " Key contributors to this report are listed in appendix V. Appendix I: Scope and Methodology The Small Business Administration (SBA) programs in our scope   (see fig. 4) include the major business loan programs\u2014Basic 7(a) Loan  Guaranty, 504/Community Development Corporation Loan and the 7(m)  Micro Loan, as well as the Small Business Investment Company (SBIC)  and the Rural Lender Advantage Pilot programs. The Department of  Agriculture (USDA) Rural Development programs in our scope include the  primary business programs including the Business and Industry  Guaranteed Loan, Intermediary Relending,",
      " Rural Business Enterprise  Grant, Rural Business Opportunity Grant, Rural Economic Development  Loans and Grants, and the Renewable Energy Systems and Energy  Efficiency Improvements Guaranteed Loan and Grant programs. In this report, we define collaboration as any joint activity that is intended  to produce more public value than can be produced when the agencies act  alone. It can include interagency activities that others have previously  defined as cooperation, coordination, integration, or networking. To determine the extent to which SBA and Rural Development\u2019s primary  loan and business programs are complementary and to identify the  rationale for SBA and Rural Development to collaborate, we reviewed the  mission and structure of SBA and Rural Development offices.",
      " We reviewed  relevant agency documents and examined laws, regulations and policies  on each agency\u2019s loans, grants, and other business programs. We reviewed  eligibility requirements and the type of assistance (i.e., direct loan, loan  guaranty, grant, etc.), funding levels, and eligible use of program funds, as  well as information about each agency\u2019s loan processes and procedures,  participation requirements, number of awarded loans and grants, and loan  process times. We also interviewed agency officials on the similarities and  differences between the two agencies\u2019 primary loan and business  programs, and whether the similarities may have an effect on  collaboration.",
      " We reviewed our prior work on interagency collaboration  and key practices that can help enhance and sustain collaborative efforts.  We obtained input from SBA and USDA agency officials, SBA resource  partners, lenders, and nonprofit organizations involved in the rural  economic development process on the goals and common outcomes they  envision from increased collaboration between the SBA and Rural  Development. Also, using information collected on the mission and  structure of SBA and Rural Development offices, and the purpose, eligible  use, and terms/conditions of their primary business programs, we assessed  whether factors such as complementary mission or task, compatible  geographic location and organizational structure,",
      " common client base,  program overlap and duplication, or similarities and differences in  statutory authority, provide a rationale for the two agencies to work  together. As collaboration between SBA and USDA Rural Development is  not specifically required by law or regulation, we relied on established  practices and agency officials\u2019 and stakeholder views in examining the  rationale for why SBA and USDA should collaborate. To determine the types of collaborative efforts currently taking place and  that have taken place in the past between SBA and Rural Development, we  reviewed internal documents, such as memorandums of understanding  (MOU) and training documentation, showing ongoing and past  collaborative efforts between SBA and Rural Development.",
      " We requested  that both SBA and Rural Development conduct a query of their respective  district offices and state offices regarding all formal or informal efforts to  work collaboratively with the other agency. We received responses from  about half the SBA district offices and all of the Rural Development state  offices that either described the extent of their collaborative efforts with  the other agency, or reported that there were no collaborative efforts  ongoing. Of those SBA and Rural Development district and state offices  that reported they were working together, we selected three locations and  conducted site visits and interviews with knowledgeable staff at each  location to obtain a thorough understanding of ongoing collaborative  efforts.",
      " We selected the sites to visit based on the reported amount of  collaboration and degree of formality of the effort. We defined formality  by the presence of a written document, such as an MOU, that served as a  guide for collaborative efforts. The goal of our selection approach was to  obtain information on a range of collaborative efforts, from frequent and  formal to infrequent and informal. The locations that we selected and  visited were Lincoln, Nebraska; Bismarck, North Dakota; and  Albuquerque, New Mexico. For two of these locations, we also spoke with  lenders that have participated in both SBA and Rural Development  programs.",
      " To determine the types of collaborative efforts that have taken place  between SBA and other agencies, and Rural Development and other  agencies, we reviewed documentation describing the collaborative effort.  We examined the mechanisms (e.g., contractual work agreement, MOU or  other cooperative agreement, statutory provision, etc.) the agencies used  to collaborate. Additionally, we interviewed agency officials on their  knowledge of any past collaborative effort. To determine the opportunities to facilitate and remove barriers to more  effective collaboration between SBA and Rural Development, we reviewed  our prior work on key practices that can help enhance and sustain  collaboration and address barriers to more effective collaboration.",
      " We  also obtained the views and experience of agency officials, SBA resource  partners, lenders, and select nonprofit organizations, regarding rural  economic issues, and opportunities and barriers to more effective  collaboration. We used certain characteristics, such as personnel at both  agencies, budget, training, and management, to evaluate opportunities or  barriers to collaboration. We also assessed the potential that may be  present for Rural Development offices to help market SBA programs and  services by making information available through their field offices and  whether SBA can play a similar role for Rural Development programs.  Finally, we compared SBA and Rural Development\u2019s policies,",
      " practices,  and performance goals with key practices that can help federal agencies  enhance and sustain their collaborative efforts. We conducted this performance audit from October 2007 to September  2008, 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: Description of SBA\u2019s and USDA  Rural Developments\u2019 Primary Loan and  Business Programs Both SBA and USDA Rural Development have several loan and business  programs that provide funds to start or expand businesses in rural areas.",
      "  Through these programs, the two agencies work with individual  entrepreneurs, existing or start-up small businesses, state, local, and tribal  governments, as well as cooperatives and nonprofit agencies to increase  economic opportunity and improve the quality of life for people in rural  communities across the country. The following sections describe the primary SBA loan programs and Rural  Development business programs. SBA Loan Programs Basic 7(a) Loan Guaranty Program serves as the primary business loan  program to help qualified small businesses obtain financing. It can be used  for a variety of general business purposes including, working capital,  machinery and equipment, land and building (including purchase,",
      "  renovation, and new construction), leasehold improvements, and certain  debt refinancing. SBA sets the guidelines for the loans and backs the loan  with a guaranty, while lenders make the loans to the small businesses. SBA  offers multiple variations of the Basic 7(a) Loan Program to accommodate  targeted needs. For example, the Patriot Express Loan Program, which is  specifically geared toward veterans, members of the military community  and their spouses, and the Community Express Loan Program, which is  aimed at women, minorities, and veterans in underserved communities  who want to start or expand a small business, are both expedited versions  of the Basic 7(a)",
      " Loan Program.  504/Certified Development Company (CDC) Loan Program provides  long-term, fixed-rate financing to small businesses to acquire real estate,  machinery, or equipment for expansion or modernization. The 504/CDC  Loan Program cannot be used for working capital or inventory,  consolidating or repaying debt, or refinancing. Typically a 504/CDC project  includes a loan secured by a lien from a private-sector lender, a loan  secured by an additional lien from a certified development company  (CDC) (covering up to 40 percent of the total cost) and a contribution of at  least 10 percent equity from the borrower.",
      " CDCs are private, nonprofit  corporations set up to contribute to the economic development of their  communities or regions. The program is designed to enable small  businesses to create and retain jobs\u2014the CDC\u2019s portfolio must create or  retain one job for every $35,000 provided by the SBA.  7(m) Micro Loan Program provides short-term loans of up to $35,000 to  small businesses and not-for-profit child-care centers for working capital  or the purchase of inventory, supplies, furniture, fixtures, machinery, or  equipment. The average loan size is about $13,000, and proceeds can be  used for typical business purposes such as working capital,",
      " machinery and  equipment, inventory, and leasehold improvements. The proceeds cannot  be used to pay existing debts or to purchase real estate. Under this  program, SBA makes funds available to intermediaries (nonprofit  community-based organizations with experience in lending) that, in turn,  make the loan directly to the entrepreneur. The intermediary lenders also  provide entrepreneurs with management and technical assistance. SBIC Program provides venture capital to small independent businesses,  both new and already established. The structure of the program is unique  in that SBICs are privately owned and managed investment funds, licensed  and regulated by SBA, that use their own capital plus funds borrowed with  an SBA guarantee to make equity capital and long-term loans to qualifying  small businesses.",
      " In addition to investments and loans, SBICs also provide  management assistance to small businesses. Small/Rural Lender Advantage Pilot Program, a part of SBA\u2019s 7 (a) loan  program, is aimed at encouraging rural lenders to finance small businesses  by streamlining the application and approval processes. Specifically, the  Small/Rural Lender Advantage offers a simplified application form for  loans of $350,000 or less, the ability to apply online, expedited loan  processing, and limited documentation requirements. SBA will guarantee  85 percent of the loan amount for loans of $150,000 and less, and 75  percent of loans above $150,",
      "000. It is part of a broader initiative to boost  economies in areas that face unique challenges due to factors such as  declining population or high unemployment. The pilot program was  initiated and tested in SBA\u2019s Region VIII (North Dakota, South Dakota,  Colorado, Wyoming, Utah, and Montana) in January 2008. Following  enhancements to further streamline it, SBA is now extending the initiative  to Region V, which covers Illinois, Indiana, Michigan, Minnesota, Ohio, and  Wisconsin. SBA also plans to expand the initiative nationwide by the end  of fiscal year 2008. Rural Development  Loan and Grant  Programs Business and Industry (B&",
      "I) Guarantee Loan Program (often referred  to as the B&I program) provides financial assistance to rural businesses in  the form of a loan guarantee for up to 80 percent of the loan amount.  Borrowers work with a local lending agency (e.g., bank or credit union),  which in turn seeks a guarantee from Rural Development. A borrower may  be an individual; a cooperative organization, corporation, partnership, or  other legal entity organized on a profit or nonprofit basis; an American  Indian tribe or other federally recognized tribal group; or a public body  (i.e., town, community, state agency, and authority). Loan purposes must  be consistent with the purpose of the program,",
      " which is to improve,  develop, or finance business, industry, and employment and improve the  economic climate in rural communities. They include, but are not limited  to, the following:    business and industrial acquisitions under certain conditions;    business conversion, enlargement, repair, modernization, or development;    purchase and development of land, easements, buildings, or facilities; and    purchase of equipment, leasehold improvements, machinery, supplies, or  inventory or working capital. The total loan amount available to any one borrower under this program is  limited to $25 million. An exception to the limit for loans up to $40 million  may be granted for rural cooperative organizations that process value-",
      " added agricultural commodities. B&I loans are available to borrowers in  rural areas, which include all areas other than cities or towns of more than  50,000 people and the contiguous and adjacent urbanized area of such  cities or towns. The B&I Guaranteed Loan Program, with a fiscal year 2007  funding level of $953 million, is Rural Development\u2019s largest business  program. Intermediary Relending Program (IRP) finances business and economic  development activities that seek to create or retain jobs in disadvantaged  and remote communities. Under the IRP program, loans are provided to  local organizations (intermediary lenders)",
      " for the establishment of  revolving loan funds that provide loans to ultimate recipient borrowers.  The revolving loan funds are used to assist the borrower with financing  business facilities and community development projects. Projects must be  located in a rural area, which for this program excludes cities with a  population of 25,000 or more. Some examples of eligible projects are as  follows:    business and industrial acquisitions under certain conditions;    business construction, conversion, enlargement, and repair;    purchase and development of land, easements, rights-of-way, buildings, or  facilities;    purchase of equipment, leasehold improvements, machinery, and supplies;",
      "    start-up operating costs and working capital;  transportation services, and;   debt refinancing. Intermediary lenders may first borrow up to $2 million and then up to $1  million each time thereafter, not to exceed the total aggregate loan amount  of $15 million. An ultimate recipient borrower may borrow the lesser of  $250,000 or 75 percent of the total cost of the ultimate recipient\u2019s project  for which the loan is being made. Private nonprofit corporations, public  entities (i.e., towns, communities, state agencies, and authorities),  American Indian tribes or other federally recognized tribal groups, and  some cooperatives are eligible to intermediaries.",
      " Borrowers that are  generally eligible to apply for loans from intermediary lenders include  individuals, corporations or partnerships, trusts or other profit-oriented or  nonprofit organizations, and public entities. Rural Business Enterprise Grant Program (RBEG) provides grants to  public bodies, including American Indian tribes and other federally  recognized tribal groups, and private nonprofit corporations, to finance  and facilitate the development of small and emerging private businesses in  rural areas (i.e., any area other than a city or town that has a population of  greater than 50,000 and the urbanized area contiguous and adjacent to  such a city or town. Small and emerging private businesses are those that  will employ 50 or fewer new employees and have less than $1 million in  projected gross revenues.",
      " Grants may be used for    easements, and rights of way;    construction, conversion, or modernization of buildings, facilities,  machinery, roads, parking areas, utilities, and pollution control and  abatement;  loans for start-up operating costs and working capital; technical assistance for private business enterprises;  training, when necessary, in connection with technical assistance; and   production of television programs to provide information on issues of  importance to farmers and rural residents. There is no maximum level of grant funding under RBEG. However,  smaller projects are given higher priority. Rural Business Opportunity Grant Program provides grants to public  entities,",
      " nonprofit corporations, cooperatives, and American Indian tribes  and other federally recognized tribal groups for training, technical  assistance, and planning activities in rural areas (i.e., any area other than a  city or town that has a population of greater than 50,000, and the  urbanized area contiguous and adjacent to such a city or town). Grants  may be used to  identify and analyze business opportunities that will use local rural  materials or human resources; identify, train, and provide technical assistance to existing or prospective  rural entrepreneurs and managers;   establish business support centers;    conduct local community or multicounty economic development planning;",
      "    establish centers for training, technology, and trade; and    conduct leadership development training. The maximum grant for a project serving a single state is $50,000. The  maximum grant for a project serving two or more states is $150,000. Rural Economic Development Loan and Grant Program (REDLG)  provides funding to rural projects through local utility organizations.  Under the loan program, Rural Development provides zero interest loans  to lending utility organizations that, in turn, pass make loans to for-profit  or nonprofit businesses and public entities (i.e., ultimate recipient  borrowers), for projects that will create and retain employment in rural  areas.",
      " The ultimate recipient borrower must repay the lending utility  directly, and the lending utility is responsible for repayment to Rural  Development. Under the grant program, Rural Development provides  grant funds to local utility organizations, which may only use the funding  to establish revolving loan funds. Loans are made from the revolving loan  fund to projects that will create or retain jobs in rural areas. When the  revolving loan fund is terminated, the grant is then repaid to Rural  Development. Eligible project costs include    start-up venture costs, including working capital;    project feasibility studies and;    advanced telecommunications services and computer networks for  medical, educational,",
      " and job training services. The maximum loan and grant to any eligible recipient under the Rural  Economic Development Loan and Grant Program is established on an  annual basis. Renewable Energy Systems and Energy Efficiency Improvements  Guaranteed Loan and Grant Program (renamed Rural Energy for  America Program) provides loan guarantees and grants to eligible small  businesses, farmers, and ranchers to assist in developing renewable  energy systems and to make energy efficiency improvements. The types of  energy projects include biofuel, wind, solar, geothermal, and hydrogen- based projects. They must be located in a rural area (i.e., any area other  than cities or towns of greater than 50,",
      "000 population and the immediate  and adjacent urbanized areas of the cities or towns). Under the loan  program, borrowers work with local lenders in applying for a loan  guaranty up to 85 percent of the loan, depending on the amount of the  loan. The loan cannot exceed 50 percent of the project cost, and the  project must use commercially proven technology. The maximum loan  amount is $10 million per project, and the minimum is $5,000. Grants are  limited to a maximum of $500,000 and a minimum of $2,500 for renewable  energy systems, and a maximum of $250,",
      "000 and a minimum of $1,500 for  energy efficiency improvements. Eligible applicants are agricultural  producers or rural small businesses. Small businesses must meet SBA\u2019s  small business size standards. Appendix III: Comparison of SBA and Rural  Development Primary Business Loan and  Grant Programs Small  business, for  profit  corporation,  partnership,  or  proprietorship  that will  create and/or  retain jobs  through long- term  financing. Start-up and  existing micro  business that  can meet basic  lending  requirement.  Borrowers may  be required to  attend  meetings/classes  with technical  assistance  providers.",
      " including  individual,  cooperative,  corporation,  partnership, tribal  group,  government  entity, and  agency. Any legal  entity  including  individual,  public, and  private  organization,  government  entity, and  agency. Rural electric  cooperatives  and rural  telephone  cooperatives. Rural small  business,  individual,  agricultural  producer, or group  of agriculture  producers. Must  meet SBA\u2019s small  business size  standards. Through  CDCs, SBA  can fund up  to 40% of the  total project  costs, from  $50,",
      "000 to  $1,500,000,  or in certain  cases up to  $2,000,000. Maximum loan  amount is  $35,000. Development can  guarantee up to  $25 million. Maximum  loan amount  is $740,000. Maximum  renewable energy  grant is $500,000. Maximum  grant amount  is $300,000. 70%-$5 to $10  million  60%-over $10  million  No minimum loan. Intermediaries  can make  loans to  qualified  applicants for  up to 75% of  eligible  project.",
      "  Maximum  loan is  $250,000. Maximum energy  efficiency grant is  $250,000. Subject to  change  annually. Minimum for both  grants is $10,000. Maximum loan is  $10,000,000. Long-term  financing of  real estate  and  equipment. Working capital,  inventory, and  small equipment. working capital,  hard asset  acquisition, real  estate, equipment  and limited  refinancing. Up to  50% of loan. New and  existing  business,  equipment  purchase, or  lease and  working  capital. Business  start-up or  expansion  projects that  create rural  jobs.",
      " Grants  may only  establish a  revolving loan  fund. Purchase  equipment,  construction  energy audits,  feasibility studies,  business plans,  and  permit/professional  service fees. Renewable  Energy Systems  & Energy  Efficiency  Improvements  Guaranteed Loan  and Grant  Program  10\u201345 business  days. 10\u201360 business  days depending  on scope of  project. Subject to  in-state loan  approval limit. 10\u201345  business  days. 3 months to 1  year. Subject  to national  funding  competition. Subject to national  funding  competition.",
      " CDC  origination  fee of 2.25%  portion and .5% on bank  portion. Nominal fees to  cover costs of  loan closing. guaranty fee not  to exceed 2% of  guaranteed  portion of the loan  and.25% annual  renewal fee. 1% origination  fee of  intermediary  loan amount  plus closing  costs. Varies and is  negotiated  with  cooperatives. Typically, 1% of  guaranteed portion  of the loan and .125% annual  servicing fee. Available  anywhere. An  SBA program  administered  by a CDC.",
      "  Commercial  lender  required. Available  anywhere. A  direct loan from  an SBA  intermediary. rural areas with a  population of less  than 50,000.  Generally  negotiated  between the  commercial  lending institution  and the borrower. Available only  in rural areas  with a  population of  less than  25,000. Rural areas  with  populations of  2,500 or less  are given  priority. The  rural utility  cooperatives  provide loans  to small  businesses. Available only in  rural areas with a  population of less  than 50,",
      "000.  Requires 75%  minimum applicant  match for grants,  and 50%  maximum project  level for  guaranteed loans. Appendix IV: Recent Congressional Proposals  That May Require Collaboration between Rural  Development and Other Federal Agencies H.R. 6124, the Food, Conservation, and Energy Act of 2008, (the 2008 Farm  Bill) became law on June 18, 2008. The 2008 Farm Bill contains 15 titles  covering, among other things, support for commodity crops, horticulture  and livestock production, conservation, nutrition, trade and food aid,",
      "  agricultural research, farm credit, rural development, energy, forestry, and  other related programs. The 2008 Farm Bill guides most federal farm and  food policies through fiscal year 2012. Section 6028 of the 2008 Farm Bill requires the Secretary of Agriculture to  establish a new Rural Collaborative Investment Program to support  comprehensive regional investment strategies for achieving rural  competitiveness. The purpose of the program is to    provide rural areas with a flexible investment vehicle, allowing for local  control with federal oversight, assistance, and accountability;   provide rural areas with incentives and resources to develop and  implement comprehensive strategies for achieving regional  competitiveness,",
      " innovation, and prosperity; foster multisector collaborations that will optimize the asset-based  competitive advantages of rural regions, with particular emphasis on  innovation, entrepreneurship, and the creation of quality jobs; foster collaborations necessary to provide the professional technical  expertise, institutional capacity, and economies of scale that are essential  for the long-term competitiveness of rural regions; and   better use USDA and other federal, state, and local governmental  resources, and to leverage those resources with private, nonprofit, and  philanthropic investments, in order to achieve measurable community and  economic prosperity, growth, and sustainability. The Act also directed the Secretary to establish within USDA the National  Rural Investment Board.",
      " The Board\u2019s duties are to provide advice to  regional boards on issues, best practices, and emerging trends relating to  rural development; to provide advice to the Secretary and the National  Institute on Regional Rural Competitiveness and Entrepreneurship, also  created by the Act, on the development and execution of the program; and  to provide advice to the Secretary and subsequently review the design,  development, and execution of the National Rural Investment Plan. The  National Rural Investment Plan is expected to, among other things, create  a framework to encourage and support a more collaborative and targeted  rural investment portfolio in the United States; and cooperate with state  and local governments,",
      " organizations, and entities to create and enhance  the pool of resources committed to rural community and economic  development. Section 6028 of the 2008 Farm Bill is one of many actions taken by  Congress over the years to encourage the coordination of rural policies  and programs. It also further demonstrates Congress\u2019 commitment to  promoting rural entrepreneurship and community development through  collaboration across federal, state, and local agencies. A total of $135  million in funding has been authorized for the new program. Appendix V: GAO Contact and Staff  Acknowledgments Staff  Acknowledgments In addition to the individual named above, Paul Schmidt, Assistant  Director;",
      " Charles Adams; Michelle Bowsky; Tania Calhoun; Emily  Chalmers; Elizabeth Curda; Ronald Ito; Marc Molino; and Carl Ramirez  made key contributions to this report.\n"
    ],
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  },
  {
    "id": 79,
    "question": null,
    "answer": "For decades, the United States has tried to impede nuclear proliferation networks that provide equipment to nuclear weapons development programs in countries such as Pakistan and Iran. GAO was asked to examine U.S. efforts to counter nuclear proliferation networks, specifically the (1) status of U.S. efforts to strengthen multilateral controls, (2) impact of U.S. assistance to help other countries improve their legal and regulatory controls, and (3) impact of U.S. efforts to strengthen its enforcement activities. GAO's findings focused on seven countries where network activities reportedly occurred. The United States has advocated several multilateral actions to counter nuclear proliferation networks. Although multilateral bodies have adopted some U.S. proposals, they have not adopted others. For example, the United States negotiated passage of a United Nations Security Council resolution that obligated all member states to adopt laws and regulations prohibiting the proliferation of weapons of mass destruction. It also led the development of watch lists of nuclear technologies that are not formally controlled by states and formation of a multilateral unit intended to analyze covert nuclear trade activities. However, one multilateral body has not adopted two key U.S. proposals made in 2004 to commit its members to add new restrictions on exporting sensitive nuclear technologies. Also, one multilateral organization has not adopted a recommendation for member states to provide it with more export data that would allow it to better detect covert nuclear activities. The impact of U.S. bilateral assistance to strengthen countries' abilities to counter nuclear networks is uncertain because U.S. agencies do not consistently assess the results of this assistance. The impact of this assistance is difficult to determine because the Department of State did not evaluate either (1) the proliferation risk for all of the countries in which network activities are alleged to have occurred or (2) the results of its assistance efforts. Between 2003 and 2006, State and the Department of Energy provided about $9 million to improve the export controls of seven countries in which nuclear proliferation network activities reportedly occurred. State did not evaluate either (1) the proliferation risk for all of the countries in which network activities are alleged to have occurred or (2) the results of its assistance efforts. State did not perform risk analyses for 11 of the 56 countries in its program for those years and did not document the basis for each country's proliferation threat level or explain how the risk analyses were done. Of the six countries in our study to which State provided assistance, State performed risk analyses for five. Also, State did not conduct program assessments for about 60 percent of its participating countries and for two of the six countries in our study that received assistance. Moreover, while State's program assessments characterize a country's export control system and its weaknesses, they do not assess how U.S. training efforts contributed to correcting weaknesses. Relevant U.S. agencies are impaired from judging their progress in preventing nuclear networks because they cannot readily identify basic information on the number, nature, or details of all their enforcement activities involving nuclear proliferation. The U.S. government identified the prevention of nuclear proliferation as a high priority. U.S. agencies collect information, maintain lists of companies and individuals that they sanction, and maintain case files on investigations of suspected violations of U.S. law. However, most of these agencies cannot readily identify which enforcement activities involve nuclear proliferation as they cannot ensure that searching their case file databases for words, such as nuclear, would reveal all relevant cases.\n",
    "docs": [
      "Background Proliferation networks use commercial and business practices to obtain  materials, technology, and knowledge to further nuclear, chemical,  biological, and radiological programs. Nuclear proliferation networks seek  to circumvent national and international restrictions against procuring the  technologies necessary for developing nuclear weapons programs. These  networks exploit weak export control systems, procure dual-use goods  with both nuclear and common industrial uses, and employ deceptive  tactics such as front companies and falsified documents, according to the  Department of Energy. The A.Q. Khan network, established by the former head of Pakistan\u2019s  nuclear weapons program, supplied Pakistan with nuclear technology for  its national weapons program.",
      " However, it became a network that  provided nuclear technology to any state for profit. The development of  this network illustrates how determined proliferators can effectively  circumvent existing export controls to acquire sensitive nuclear-related  and dual-use technologies. According to Energy, the A.Q. Khan case  illustrates the scope and magnitude of the threat of nuclear networks\u2014 how both weak export control systems and system gaps allowed a  network to procure sensitive materials from states worldwide. The  network also highlighted the role that companies in several countries,  such as Malaysia, played in unwittingly facilitating sales as suppliers of  technology or points of transit. According to open-source reporting,",
      "  countries where A.Q. Khan proliferation network activities occurred  included Germany, Japan, Malaysia, the Netherlands, Pakistan, Republic of  Korea, Singapore, South Africa, Turkey, United Arab Emirates (UAE), and  United Kingdom. The multilateral nonproliferation regime, which, among other purposes,  attempts to counter nuclear networks, consists of the Non-Proliferation  Treaty (NPT), International Atomic Energy Agency (IAEA) inspection  regime, United Nations (UN) Security Council Resolution 1540, Nuclear  Suppliers Group (NSG), and the Proliferation Security Initiative (PSI). The  regime also includes multilateral and national assistance programs and  national export controls and laws.",
      " Entered into force on March 5, 1970, NPT obligates nuclear weapon states  not to transfer nuclear weapons or other nuclear explosive devices to any  recipient, and not to assist, encourage, or induce any nonnuclear weapon  state to manufacture or otherwise acquire nuclear weapons or other  nuclear explosive devices. Under the treaty, each nonnuclear weapon state  pledges not to receive, manufacture, or otherwise acquire nuclear  weapons or other nuclear explosive devices, and not to seek or receive  assistance in their manufacture. NPT also obliges each nonnuclear  weapon state to accept comprehensive international safeguards, including  inspection,",
      " through agreements negotiated with IAEA. The intent of these  safeguards is to deter and detect the diversion of nuclear material for  nuclear explosive purposes. Relevant U.S. assistance programs on export and border controls include  EXBS and INECP. State\u2019s EXBS program assists foreign governments in  strengthening their export controls by improving their legal and regulatory  frameworks, licensing processes, border control and other enforcement  capabilities, outreach to industry, and interagency coordination. The  mission of Energy\u2019s INECP is to prevent the proliferation of WMD and  WMD-related material, equipment, and technology by helping other  countries develop effective national export control systems.",
      " Total EXBS  funding for fiscal years 2003 through 2006 was about $175 million and for  INECP was about $30 million. Since the terrorist attacks of September 11, 2001, and the exposure of the  A.Q. Khan nuclear proliferation network, the President and U.S.  government agencies involved in national enforcement activities have  emphasized the importance of preventing WMD proliferation, including  nuclear proliferation. On a national level, the United States endeavors to  counter nuclear proliferation by enforcing laws that control the export of  materials\u2014including dual-use items\u2014that could be used to make a  nuclear weapon and by applying criminal or administrative penalties to  proliferators.",
      " The Departments of Commerce, Homeland Security, Justice,  State, and Treasury have responsibilities for enforcing various laws that  relate to nuclear proliferation. The U.S. government\u2019s control over the  export of defense nuclear and dual-use items is primarily divided between  two departments\u2014State and Commerce, respectively. Support for  enforcement activities comes primarily from Commerce, through its  Bureau of Industry and Security\u2019s Office of Export Enforcement; DHS,  through its Customs and Border Protection (CBP) and Immigration and  Customs Enforcement (ICE); and Justice, through the Federal Bureau of  Investigation (FBI) and the United States Attorneys Office. Export  enforcement involves inspecting items to be shipped,",
      " investigating  potential violations of export control laws, and punishing export control  violators. United States  Supported Several  Multilateral Efforts to  Address Nuclear  Networks, but Some  Proposals Have Not  Been Adopted The United States has initiated a range of multilateral efforts and  proposals to counter nuclear proliferation networks. Although multilateral  organizations have adopted some U.S. proposals that would help address  illicit nuclear proliferation networks, they have not adopted others. First,  the United States negotiated the passage of UN Security Council  Resolution 1540 that obligated all member states to adopt laws and  regulations prohibiting the proliferation of WMD.",
      " Second, the U.S.  government led NSG to conduct several activities aimed at combating  proliferation networks, including development of watch lists; however,  two U.S. proposals to NSG have not been adopted. Third, with U.S.  support, IAEA has taken several actions to address proliferation networks,  such as establishing a unit intended to analyze covert nuclear trade  activities. However, IAEA has not yet adopted a recommendation drafted  in June 2005 that calls on member states to provide IAEA with information  on their exports to improve the agency\u2019s ability to detect possible  clandestine nuclear activities. Finally, the U.S.",
      " government has led efforts  to establish the Proliferation Security Initiative (PSI). The United States  Negotiated Passage of UN  Resolution 1540 to Combat  WMD Proliferation The United States negotiated the passage of a UN Security Council  resolution that obligated all member states to adopt laws and regulations  prohibiting the proliferation of WMD. The UN Security Council adopted  Resolution 1540 in April 2004, obligating all member states to adopt laws  prohibiting proliferation of WMD as well as to maintain and enforce  adequate export controls. Under UN Security Council Resolution 1540, all  states have three primary obligations relating to nuclear,",
      " chemical, and  biological weapons, and their delivery systems. They are to (1) refrain  from providing support to nonstate actors seeking such items; (2) prohibit  nonstate actors from acquiring, using, and attempting to acquire and use  such items; and prohibiting nonstate actors from participating in, assisting,  or financing such activities; and (3) put in place and enforce effective  measures to control these items and related material to prevent their  proliferation. Member states have begun implementing its provisions by  submitting required reports on their export control laws to a committee  designated the 1540 committee. The committee also has been tasked with  identifying the assistance needs of countries and coordinating their  requests for assistance with offers from other countries.",
      " The United States Led NSG  to Carry Out Several  Activities to Help Combat  Proliferation Networks,  but Two U.S. Proposals  Are Not Yet Adopted The U.S. government led NSG in several activities to combat proliferation  networks, including the development of watch lists. However, NSG has not  adopted two U.S. proposals that would commit members to refrain from  exporting certain technologies to states that do not already have the  capability to use them and to countries that have not agreed to allow IAEA  additional rights to inspect any facilities suspected of covert nuclear  activities. NSG, established in 1975,",
      " is a multilateral export control regime with 45  participating governments. The purpose of NSG is to prevent the  proliferation of nuclear weapons through export controls of nuclear and  nuclear-related material, equipment, and technology, without hindering  international cooperation on peaceful uses of nuclear energy. NSG  periodically updates and strengthens its guidelines on how member states  should control and license sensitive technologies and maintain lists of the  technologies to be controlled. However, NSG, like other multilateral  export control regimes, is a consensus-based organization and depends on  the like-mindedness or cohesion of its members to be effective. NSG has undertaken several activities to help shut down proliferation  networks.",
      " For example, in May 2004, NSG noted its concern over the  discovery of a covert international proliferation trafficking network,  through which sensitive nuclear-related equipment had found its way to  Libya. To address this concern, the United States developed national  procurement watch lists for all supplier states as a means to help block  further procurement of nuclear-relevant items that are not formally  controlled by placement on export control lists. To slow down North  Korea\u2019s and Iran\u2019s work on their nuclear programs, the watch lists focus  on items of interest to those countries, according to Energy. The lists  include items that could be used to enrich uranium,",
      " reprocess spent  nuclear reactor fuel, and fabricate fuel for nuclear reactors. Both NSG  members and nonmembers use the lists. Through U.S. leadership, NSG also has conducted outreach to non-NSG  members, creating awareness of issues related to the supply of sensitive  technology, and pressing for adherence to NSG guidelines. For example,  NSG worked with existing international organizations, such as IAEA and  the UN Security Council Resolution 1540 committee, and with  nonmembers to help close gaps in the nonproliferation regime that  proliferation networks seek to exploit. NSG has not adopted two U.S.",
      " proposals announced by the President in  2004. The first proposal would commit members to not export certain  nuclear technology to states that do not have the capability to develop  material for nuclear fuel or nuclear weapons. Also, NSG has not adopted a  second proposal under which NSG members would refrain from providing  nuclear-related technologies to countries that have not agreed to allow  IAEA additional rights to inspect any facilities suspected of covert nuclear  activities. The President announced that NSG members should refuse to  sell enrichment and reprocessing equipment and technologies to any state  that does not already possess full-scale, functioning enrichment and  reprocessing plants.",
      " This step, according to the President, would prevent  new states from developing the means to produce fissile material for  nuclear bombs. State and Energy officials stated that the first proposal has not yet been  adopted within NSG because it favors states that already have enrichment  and reprocessing capability over those that do not. According to State  officials, states in the European Union (EU) are opposed to this proposal  because it violates EU internal free trade policies. However, we could not  independently determine why NSG has not adopted these proposals  because State did not facilitate our travel to meet with representatives of  NSG members in Vienna,",
      " Austria. NSG also has not yet adopted the second U.S. proposal announced in 2004  to restrict exports of nuclear-related technology to countries that have not  adopted IAEA\u2019s more stringent safeguards inspection agreements. In 2004,  the President proposed that by the next year, only states that have signed  the Additional Protocol would be allowed to import equipment for their  civilian nuclear programs. However, other countries have been hesitant to  implement the Additional Protocol for various reasons, including an  unwillingness to submit to intrusive inspections. The U.S. Government  Supported IAEA Actions  Against Proliferation  Networks, but IAEA Has  Not Yet Adopted a  Recommendation to Better  Detect Covert Nuclear  Activities The U.S.",
      " government supported IAEA\u2019s establishment of several activities  over the past several years to help combat nuclear proliferation trafficking  and network activities. However, IAEA has not yet adopted a  recommendation that calls for member states to provide it with export  data that would allow the agency to better detect covert nuclear activities. IAEA is responsible for inspecting civilian nuclear facilities worldwide to  ensure they are used exclusively for peaceful purposes. In 1997, IAEA  adopted a new arrangement, called the Additional Protocol, for existing  safeguards agreements under NPT that is designed to give IAEA a stronger  role and more effective tools for conducting worldwide inspections.",
      " IAEA established several activities supported by the Unites States to help  combat nuclear proliferation trafficking and network activities. These  included the following:    Nuclear Trade and Technology Analysis Unit. Following the revelations  about extensive covert networks procuring and supplying sensitive  nuclear technology, IAEA established a new unit in November 2004. It was  intended to help analyze patterns and trends in nuclear trade to identify  covert nuclear trade activities. Illicit Trafficking Database. IAEA established IAEA Illicit Trafficking  Database in 1995 to facilitate exchange of authoritative information on  incidents of illicit trafficking and other related unauthorized activities  involving nuclear and other radioactive materials among states.",
      " It contains  information, which has been confirmed by the states involved, about  incidents of illicit trafficking and related unauthorized activities involving  nuclear and other radioactive materials. Nuclear Security Fund. IAEA established a fund in March 2002 to support  its expanded nuclear security program, including developing international  standards and providing training and assistance to combat nuclear  smuggling. Through 2006, pledges from IAEA members totaled nearly $74  million, with about $34 million from the United States. IAEA has not yet implemented a draft recommendation that member  states provide it with relevant information on their exports so IAEA can  improve its ability to detect possible undeclared nuclear activities.",
      " Under  this recommendation, members would provide information on their  exports of specified equipment and nonnuclear material, procurement  enquiries, export denials, and relevant information from commercial  suppliers, according to State officials. However, there is no current  mandate to do this, according to State officials. U.S. Government Led  Efforts to Establish and  Gain Support for PSI The United States established and gained support for PSI, a U.S.-led effort  to work with other countries to interrupt the transfers of sensitive items to  proliferators. PSI is a global effort to stop trafficking of WMD, their delivery systems,  and related materials to and from states and nonstate actors of  proliferation concern worldwide.",
      " Launched by the President on May 31,  2003, PSI is a set of voluntary activities, not a formal treaty-based  organization, to stop proliferation-related shipments of WMD technologies.  PSI interdiction training exercises and other operational efforts are  intended to help participating states work together in a coordinated and  effective manner to stop, search, and seize shipments. In September 2003,  the countries participating in PSI at that time agreed to its statement of  interdiction principles. The statement identifies specific steps participants  can take to effectively interdict WMD-related trafficking and prevent  proliferation. As of July 2007,",
      " PSI participants conducted 28 exercises  (maritime, air, land, or combined) to practice interdictions, held 15  operational experts group meetings to discuss proliferation concerns and  plan future exercises, and hosted 4 workshops to acquaint industries with  PSI goals and principles. State lists several countries as PSI participants that open-source reporting  also names as locations of nuclear proliferation network activity. Listed  PSI participants are Germany, Japan, Singapore, Turkey, UAE, and United  Kingdom. PSI nonparticipants are Malaysia, Pakistan, Republic of Korea,  and South Africa. (See our September 2006 classified report on PSI.) Impact of U.S.",
      " Export  Control Assistance Is  Uncertain Because  Agencies Do Not  Consistently Assess  Programs The U.S. government has focused on bilateral export control assistance to  foreign countries to combat the sale of illicit nuclear-related technology  through proliferation networks. Three programs, operated by State,  Energy, and Defense provide this assistance. However, the impact of this  assistance is difficult to determine because State did not evaluate either  the proliferation risk for all of the countries in which network activities  are alleged to have occurred or the results of its assistance efforts. In  contrast, Energy performed risk analyses and program assessments for all  of its 45 participating countries.",
      " Although there were limitations in the  assessments of the programs, officials from Energy and State said that  some positive changes occurred as a result of U.S. export and border  control assistance. United States Provided  Export Control Assistance  to Address Nuclear  Networks To combat nuclear networks, State officials said they focused on  addressing export control problems in other countries. State\u2019s EXBS  assists foreign governments in strengthening their export controls by  improving their legal and regulatory frameworks, licensing processes,  border control and other enforcement capabilities, outreach to industry,  and interagency coordination. EXBS partners with a number of U.S.  agencies and the private sector to provide capacity-building training,",
      "  technical exchanges and workshops, regional conferences and seminars,  and inspection and interdiction equipment. For example, EXBS completed  an advanced workshop on regulations in July 2006 with Pakistani officials  and sponsored a forum on technical aspects of regulations in September  2006 through a private contractor. In Malaysia, EXBS sponsored a  workshop on legal aspects of regulations in August 2005 and another  workshop with Malaysian officials in Washington, D.C., on export  licensing in February 2007. Commerce conducted these workshops. In  addition, DHS stated that ICE is the primary law enforcement partner to  EXBS for training its counterpart agencies to investigate,",
      " conduct  surveillance and undercover operations, detect, and interdict unauthorized  transfers of WMD-related items. During 2007 and 2008, according to DHS,  ICE conducted or planned to conduct training in several countries where  A.Q. Khan network activities reportedly occurred, including Malaysia,  Pakistan, Singapore, Republic of Korea, Turkey, and UAE. Energy\u2019s INECP provides bilateral assistance to governments to prevent  the proliferation of WMD and WMD-related material, equipment, and  technology by working with governments worldwide to develop effective  national export control systems. INECP receives funding from and  collaborates with the EXBS and Homeland Security\u2019s CBP and also works  with other agencies such as the Coast Guard.",
      " For example, in Turkey,  INECP conducted training to help customs inspectors identify nuclear- related commodities in March 2004 and September 2005. INECP has  conducted similar training in Pakistan, Singapore, and Republic of Korea. In addition, DOD\u2019s International Counterproliferation Program (ICP)  offers equipment, training, and advice to help countries prevent and  counter WMD proliferation, including border control assistance. The  majority of ICP\u2019s programs have been in countries in the former Soviet  Union, the Balkans, and the Baltics, with total funding of about $29 million  for fiscal years 2003 through 2006.",
      " ICP provided about $86,000 for training  in Singapore in fiscal year 2006. Overall, the U.S. provided about $234 million dollars in export control  assistance to 66 countries between fiscal years 2003 and 2006 through  these three programs, with EXBS as the largest contributor to U.S. export  control assistance (see fig. 1). From fiscal years 2003 through 2006, the U.S. government provided about  $9 million, or 4 percent of the overall total, to seven countries in which  A.Q. Khan network activities reportedly occurred: Malaysia, Pakistan,",
      "  Republic of Korea, Singapore, South Africa, Turkey, and the UAE. From  fiscal years 2003 to 2006, EXBS provided about $7 million to six of these  countries, while INECP provided nearly $2 million to the seven countries  in our study. Turkey was the largest recipient of assistance among the  countries in our study, and Pakistan was the second largest (see fig. 2). Impact of U.S. Assistance  Is Difficult to Determine  Because U.S. Agencies Do  Not Consistently Assess  Their Programs Despite U.S. government efforts to provide bilateral assistance to  countries to help them improve their export control systems,",
      " it is difficult  to determine the impact of these programs because State did not  consistently conduct or document risk analyses as a basis for countries to  receive assistance and has not assessed the program performance.  Although Energy and State officials said they are unable to systematically  establish that their assistance has effected positive change in countries  that received U.S. assistance, they said some positive change occurred  during the period in which assistance was provided. State\u2019s Risk Analyses Are  Undocumented and Incomplete While both State\u2019s and Energy\u2019s assistance programs conduct risk analyses  on a country-by-country basis to prioritize assistance efforts, State did not  conduct one such analysis for each country in its program and did not  document the ones it conducted.",
      " The EXBS strategic plan indicates EXBS  prioritizes assistance in accordance with five proliferation threat  categories for which most, but not all, EXBS countries are assessed (see  table 1). The EXBS strategic plan, which provides guidance for EXBS, provided a  risk analysis summary for five of the six countries in our study to which it  provided assistance, but did not provide a risk assessment for one country.  The strategic plan indicated that two of the countries in our study are at  risk in all five categories, and a third country is at risk in all but category 1.  A fourth country is at risk in categories 2,",
      " 4, and 5, and a fifth country is at  risk in categories 3 and 5. State did not respond to our request for a risk  assessment for the sixth country. Overall, the EXBS strategic plan did not  provide a risk analysis for 11 of the 56 countries to which it provided  assistance between fiscal years 2003 and 2006. Furthermore, EXBS  officials could not provide us with documentation showing the basis for  which they determined the risk categories for the countries that appear in  the strategic report and said the risk analyses are not updated annually. INECP assesses country risk by measuring proliferation threat based on  the capacity of the recipient country to supply or be a conduit for WMD-",
      " related goods. The assessment also takes into consideration the  vulnerability of the recipient country\u2019s export control system to illicit  procurement. INECP places the countries receiving assistance into one of  four categories based on that countries\u2019 production capacity and export  control system (see table 2). All of the countries in our study to which INECP provided assistance fell  into category 2: having potentially weak export control systems and high  commodity production capacity. While we did not evaluate the  methodology that EXBS and INECP use to perform risk assessments or  prioritize their assistance, we observed that each INECP risk analysis we  reviewed was more thoroughly documented than the EXBS risk analyses.",
      "  For example, INECP provided us with country plans for each of the  countries in our scope, which document and identify the sources of  information used to determine the status of the country\u2019s export control  system and its potential to supply or be a conduit for nuclear-related  materials. In addition, an INECP official noted that one of the purposes of  the country plans is to document the data that inform their risk analyses. State Did Not Perform Many of  Its Program Assessments Despite U.S. government efforts to provide bilateral assistance to  countries to help them improve their export control systems, it is difficult  to determine the impact of these programs because State has not assessed  their performance.",
      " Specifically, State\u2019s EXBS has not performed annual  program assessments for all countries receiving EXBS assistance, as  required by program guidance, and has not received required data for  some assessments that were conducted. INECP also requires annual  program assessments, which it conducted for all of its 45 assistance  recipients for fiscal years 2003 through 2006. EXBS program assessments characterize features of a country\u2019s export  control system but do not evaluate the impact of U.S. training on the  country. EXBS guidance specifies that recipient countries should be  assessed using a revised assessment tool, which contains questions  intended to determine whether the country is committed to developing an  effective export control system and identify the weaknesses in the  country\u2019s current system.",
      " Categories in the EXBS assessment tool, which  was implemented by contractors, include an examination of various  aspects of the recipient country\u2019s dual-use and munitions licensing, the  country\u2019s ability to enforce its regulations, and a review of industry- government relations. In contrast, federal guidance for evaluating human  capital training calls for assessing the extent to which training and  development efforts contribute to improved performance and results. State contractors performed assessments in 2004 for only two of the six  countries in the scope of our review that received EXBS funding, Turkey  and UAE. According to a State official, these assessments were not useful  for State\u2019s purposes because the contractor provided the results of the  evaluations but not the data that EXBS officials said would be necessary  to measure the progress of these countries in improving their export  control systems.",
      " The official said the data were omitted because State did  not require them in the contract. Therefore, EXBS did not receive the  information it needed to construct a baseline against which to evaluate the  progress of these countries. State has contracted for future assessments to  be used as a baseline for determining countries\u2019 future progress. Overall,  State received assessments for 34 countries\u2014about 60 percent of the  countries that received EXBS funding between 2003 and 2006\u2014though  none of these contained baseline data, according to State officials. In  commenting on a draft of this report, State said that EXBS program  planning takes into account other information,",
      " including open source  information, diplomatic reporting from posts, intelligence community  products, and assessments and information from other U.S. government  agencies. As State commented, however, these and other information  sources are intended to substitute for the assessment tool only when State  determines it is infeasible or impractical to use it. INECP also produces country plans that serve as program assessments for  all of the 47 countries to which it provided assistance in this period. An  INECP official said that the country plans are updated on an annual basis  in order to track the history of assistance with each partner country and to  enforce a standard process for tracking and reviewing the combined  results of assistance efforts and of countries\u2019 independent efforts to  implement system reforms.",
      " INECP officials provided us with updated  annual assessments for all seven countries, which contain an analysis of  each country\u2019s export control system, and proposals for future assistance.  While we did not evaluate the quality of Energy\u2019s assessments, INECP has  updated assessments for all of its program participants, and the  assessments contain the baseline data necessary for measuring future  progress and are updated on an annual basis. In addition, we noted that  the INECP country plans we reviewed assess the country\u2019s progress in  improving its export control systems and contain recommendations for  future activities. Energy and State officials said they are unable to systematically establish  that their assistance has effected positive change in countries to which  they provided assistance,",
      " because actions such as changing laws and  implementing new regulations are undertaken by sovereign governments  and are not always directly attributable to assistance efforts. However,  officials from both programs said some positive change occurred during  this period. For example, officials from both EXBS and INECP cited some  improvements in assistance recipients\u2019 export controls that occurred after  training or other types of assistance were provided. In 2006, after  exchanges and consultations regarding licensing and regulations with  EXBS program officers, Pakistan strengthened its export controls by  further expanding its control lists, according to State officials. In addition,  officials reported that Malaysia, UAE,",
      " and Pakistan drafted export control  legislation during the period of EXBS engagement in each of these  countries. Pakistan passed its export control law in 2004. Furthermore, INECP officials reported that their engagement with  Singapore has led its government to amend its control list to adhere to all  the multilateral control lists, and INECP also helped Pakistan complete  adoption of the European Union control list. In addition, they said that the  Republic of Korea has reported that INECP training led to several high- level investigations of illegal transfers and greater industry awareness of  dual-use items. Agencies Cannot  Identify Information  to Assess Whether  Their Ability to  Combat Nuclear  Proliferation  Networks Has  Improved U.S.",
      " agencies engaged in export control enforcement activities are  impaired from judging their progress in preventing nuclear proliferation  networks because they cannot readily identify basic information on the  number, nature, or details of all their enforcement activities involving  nuclear proliferation. While facing this limitation, the U.S. government  since 2003 has made several changes to its policies and procedures related  to national enforcement activities that may strengthen its ability to prevent  nuclear proliferation networks. Agencies\u2019 Ability to Judge  Progress Against Nuclear  Proliferation Is Impaired  by Constraints on  Information U.S. agencies engaged in export control enforcement activities are  impaired from judging their progress in preventing nuclear proliferation  networks because they cannot readily identify basic information on the  number,",
      " nature, or details of all their enforcement activities involving  nuclear proliferation. Most of these agencies do not collect or store their  data in a manner that would allow them to reliably identify which of their  enforcement actions involved nuclear proliferation. This makes it difficult  for agencies to determine the level of resources expended in countering  nuclear proliferation networks, as well as the results obtained from these  efforts. Since 2005, Commerce and ICE have taken steps to facilitate more  reliable identification of their enforcement activities involving nuclear  proliferation. Most of the agencies engaged in export control enforcement activities\u2014 DHS, Justice, and Treasury\u2014could not readily produce reliable data  representing their respective agency\u2019s enforcement actions related to  nuclear proliferation.",
      " Enforcement data, such as data collected on  inspections, seizures, investigations, arrests, indictments, and penalties  applied, were often stored according to the law that had been violated or  by a category or code describing the item corresponding to the  enforcement action, such as the type of good seized. Consequently,  agencies compiling enforcement data related to nuclear proliferation often  depended on conducting searches of agency databases using key words  (e.g., \u201cnuclear\u201d) or key codes (e.g., the ICE code for dual-use items is \u201c06\u201d).  An accurate compilation of such data depends on several factors,  including (1) selecting appropriate key words or key codes for searching  the database,",
      " (2) use of appropriate words or codes to describe the nature  of the enforcement action when agency officials record it in the database,  and (3) mandatory completion of the data fields that would identify the  enforcement action as being related to nuclear proliferation. For example,  we asked agencies engaged in export control enforcement activities for  data on their activities related to nuclear proliferation, with the following  results:    CBP compiled data on enforcement activities (seizures) related to nuclear  proliferation by engaging in keyword searches of its database. However, a  CBP official noted there is not a specific category for dual-use seizures, so  these seizures would not be included in the statistics.",
      " Moreover, the  official stated that one would need to look beyond seizures, for example to  inspections, to get a complete picture of CBP activities conducted to  combat nuclear proliferation. However, CBP does not have data on  inspections conducted for nuclear or WMD proliferation purposes unless  the inspection led to a seizure of goods or involved nuclear material,  according to DHS officials. ICE performed a key-code search of its database to produce statistics on  closed investigations involving nuclear proliferation. An ICE official said  the statistics that ICE compiled likely undercounted the number of  investigations involving nuclear proliferation because there is not one  single code agents can use to represent nuclear proliferation cases.",
      " Rather,  there are multiple codes that represent nuclear proliferation, but agents  are not required to enter all of them. The ICE official concluded that it  would be difficult to correctly identify all nuclear proliferation-related ICE  investigations. In response to our request for enforcement statistics, FBI produced two  conflicting sets of statistics on open investigations related to nuclear  proliferation. One Bureau official noted that identifying enforcement  actions related to nuclear proliferation is not straightforward; rather, it  requires Bureau analysts to interpret information about the enforcement  action to judge whether it involves nuclear proliferation. In technical  comments on a draft of this report, Justice stated that FBI has a  classification which defines proliferation investigative activities.",
      " This  classification can be used to search the FBI\u2019s automated case system to  determine the exact number of investigative activities and obtain a report  on the nature and details of these activities, according to Justice. However,  two FBI officials told us that it is not possible to search the database to  identify all cases related to nuclear proliferation. Compiling data such as  the number of cases involving nuclear proliferation and deciding whether  cases are related to WMD or nuclear proliferation requires an  interpretation of the data. Finally, Justice (Executive Office for United States Attorneys) stated its  case management database could not sort cases according to nuclear  proliferation networks,",
      " nuclear proliferation, or WMD proliferation, due to  the way the data are stored, but can sort export enforcement data. Furthermore, some agencies that maintain lists of individuals and  companies that have violated export control laws or engaged in WMD  proliferation could not identify which parties were placed on the lists for  nuclear proliferation reasons. For example, Treasury, which maintains a  specially designated nationals list containing the individuals and entities  that have been designated under its Office of Foreign Assets Control\u2019s  (OFAC) various sanctions programs, reported it cannot identify all  entities that have been placed on the list for nuclear proliferation reasons.  Treasury officials said that they maintain records on the rationale for  placing an entity on the list,",
      " but do not necessarily denote the type of  WMD proliferation entities are engaged in or support. In addition,  Treasury confirmed that none of the entities publicly identified in relation  to the A.Q. Khan nuclear proliferation network appears on the specially  designated nationals list or in the Annex to Executive Order 13382.  Commerce stated that it does not maintain readily available information  that would allow it to identify individuals or entities placed on its denied  persons list for nuclear proliferation reasons. This list includes individuals  and entities that have been denied export privileges. In contrast, State  reported periodically to Congress that, between 2003 and 2006,",
      " it had  sanctioned foreign persons for engaging in nuclear proliferation activities  with Iran or Syria. Several agencies stated they use their enforcement data to make resource  allocation decisions. However, without enforcement data that accurately  reflect actions taken to prevent nuclear proliferation, agencies would not  be able to make informed resource decisions. Without the ability to  reliably identify their enforcement activities involving nuclear  proliferation, it is difficult for agencies to accurately track the amount of  time and resources expended in countering nuclear proliferation  networks, as well as the results obtained from these efforts. Most of these  agencies lack performance metrics for assessing the results obtained from  their efforts to prevent nuclear proliferation.",
      " In contrast, federal  standards for internal control state that management should have  procedures in place to create performance indicators, monitor results,  track achievements in relation to agency plans, and ensure adequate  communications with external stakeholders that may significantly impact  achieving the agency\u2019s goals. Since 2005, two agencies have taken steps to facilitate more reliable  identification of their enforcement activities involving nuclear  proliferation. In fiscal year 2005, Commerce began classifying enforcement  data to identify enforcement actions involving nuclear proliferation. In  June 2007, an ICE official proposed modifying ICE\u2019s case data collection  process to more precisely identify investigations involving nuclear  proliferation.",
      " Thus, the official stated, if implemented, this proposal would  allow ICE to better track its performance in combating nuclear  proliferation, as well as respond to congressional inquiries for information. Changes to Policies and  Procedures May  Strengthen U.S. Agencies\u2019  Ability to Combat Nuclear  Proliferation Networks Since 2003, the U.S. government has made several changes to the policies  and procedures governing national enforcement activities that may  strengthen agencies\u2019 ability to combat nuclear proliferation networks. On  a national level, the United States endeavors to counter nuclear  proliferation by enforcing laws that control the export of materials that  could be used to make a nuclear weapon,",
      " including dual-use items, and  applying criminal or administrative penalties to proliferators. Commerce,  DHS, Justice, State, and Treasury carry out these enforcement activities,  often in collaboration. Executive Order, New Law, and  Proposed Legislation Create  New Penalties and Enhance  Existing Penalties Two changes to policies and procedures governing national enforcement  activities created new penalties and increased existing penalties for export  control violations. In addition, draft legislation developed by the executive  branch is intended to further increase penalties and provide some new  authorities for one enforcement organization. First, Executive Order 13382, announced in 2005, created an additional  nonproliferation sanction program that allows Treasury and State to target  the assets of proliferators and those who assist them.",
      " Under the  executive order, Treasury and State designate individuals or entities that  are WMD proliferators, deny them access to the U.S. financial system, and  have all their property or interests in property blocked. Initially, the  sanction program applied to eight organizations in Iran, North Korea, and  Syria. As additional WMD proliferators are designated, they are added to  Treasury\u2019s specially designated nationals list, which contains the names of  individuals and entities that have been sanctioned under OFAC\u2019s various  sanctions programs. U.S. persons and entities are prohibited from  providing support to these proliferators and can be punished with criminal  or civil penalties if they are found to be in violation of this prohibition.",
      " The  executive order is designed to cut off support to proliferators from front  companies, financiers, logistical supporters, and suppliers. As of June 15,  2007, 43 persons or entities were on Treasury\u2019s specially designated  nationals list pursuant to the executive order. Second, the USA Patriot Improvement and Reauthorization Act of 2005  increased the maximum penalties that can be imposed on certain export  control violations from $10,000 to $50,000 per violation. Maximum prison  sentences increased from 10 years to 20 years. However, according to  Commerce statements, these increased penalties are not high enough to  deter violators or to provide incentives for violators to cooperate with law  enforcement.",
      " The Assistant Secretary of Commerce for Export  Enforcement recently noted that significantly increased penalty provisions  are needed. Third, the congress enacted a law that that increased penalties and the  executive branch drafted a legislative proposal intended to further  increase penalties and provide some new authorities for one enforcement  organization. The International Emergency Economic Powers  Enhancement Act was enacted into law on October 16, 2007, and  increased the civil and criminal penalties applicable to the violation of  OFAC sanctions. In addition, the executive branch drafted a legislative  proposal, the Export Enforcement Act of 2007, to revise and enhance the  Export Administration Act (EAA)",
      " and be in effect for 5 years after the  date of its enactment. The legislative proposal would increase penalties for  export control violations while enhancing Commerce\u2019s law enforcement  authorities to combat illicit exports of dual-use items. For example,  criminal penalty amounts in the proposal would be increased to $1,000,000  per violation or a fine and imprisonment for not more than 10 years, for  each violation by an individual, and $5,000,000 or up to 10 times the value  of the exports involved, whichever is greater, per violation by a person  other than an individual. The civil penalty amounts would be increased to  $500,",
      "000 for each violation of EAA or any regulation, license, or order  issued under that act. According to Commerce, the increased penalty  amounts would provide an enhanced deterrent effect. The proposal also  would provide Commerce\u2019s special agents with statutory overseas  investigative authority and expanded undercover authorities and expand  the list of criminal violations upon which a denial of export privileges may  be based. FBI Created a WMD  Directorate and WMD-Related  Initiatives but Provided No  Information on Impact of These  Changes In 2006, the FBI created a WMD directorate to support and consolidate  FBI\u2019s WMD components. The directorate was designed to prevent and  disrupt foreign nations or individuals from obtaining WMD capabilities and  technologies and using them against the United States,",
      " according to FBI  documents. In addition, FBI officials reported the initiation of several  initiatives designed to prevent WMD proliferation. These initiatives include  a program focused on dual-use nuclear technology, as well as country- specific WMD counterproliferation efforts in national labs and other U.S.  entities. However, FBI did not provide information on the impact of these  activities on FBI\u2019s ability to counter WMD and nuclear proliferation. In technical comments on a draft of this report, Justice stated that FBI has  information to provide but was not given the opportunity to do so. FBI\u2019s  WMD Directorate can provide information on this impact by providing  limited information on accomplishments and statistics on a number of  proliferation investigations and operations,",
      " according to Justice. However,  on June 15, 2007, we asked FBI officials about the impact of either the  establishment of the WMD directorate or the WMD initiatives on FBI\u2019s  ability to counter WMD and nuclear proliferation, but they provided no  answer nor would they meet with us to discuss related issues. In late June,  FBI provided us with a written response that included no specific  information that answered our request. Department of Justice Has  Made Initial Plans for  Improving Prosecution of  Export Control Violations To respond to the threat of nuclear proliferation, Justice is preparing a  national export enforcement initiative that department officials stated is  intended to improve the investigation and prosecution of persons and  corporations violating U.S.",
      " export control laws. The initiative follows the  2006 creation of the National Security Division within Justice to strengthen  the effectiveness of its national security efforts and, according to a Justice  official, to respond to the threat of WMD proliferation. As we have previously reported, U.S. Attorneys Offices have many  competing priorities, including prosecuting cases involving terrorism,  counterterrorism, and government contractor fraud, and the level of  interest and knowledge of export control laws varies among assistant U.S.  Attorneys. According to the U.S. Attorney General, one of the key  elements of the initiative will be to provide federal prosecutors with the  assistance,",
      " training, and expertise they need to undertake export control  prosecutions. For example, Justice held a national export control  conference in May 2007. The following month, Justice appointed its first  National Export Control Coordinator, who will be responsible for  coordinating with other U.S. agencies the enforcement of export controls  and development of training materials for prosecutors in an effort to  enhance their capacity and expertise. The impact of the export  enforcement initiative on Justice\u2019s ability to prosecute export control  cases is yet to be demonstrated as the initiative has just begun. Conclusion Although the U.S. government has announced that countering nuclear  proliferation and nuclear networks is a high priority,",
      " it lacks the necessary  information to assess the impact of its multiple efforts to do so. While U.S.  assistance to foreign governments to help them strengthen their laws and  regulations against nuclear proliferation networks has the potential for  positive impact, U.S. agencies are not sufficiently monitoring aid  recipients\u2019 actions to assess what U.S. assistance is accomplishing. State\u2019s  assistance program is not completing and documenting risk analyses or  program assessments, as required by program guidance. In addition, U.S.  government agencies that engage in enforcement activities to counter  nuclear proliferation networks are impaired from judging their progress in  this effort because they cannot readily identify basic information on the  number,",
      " nature, or details of their enforcement activities involving nuclear  proliferation. Without such information, agencies cannot identify what  their efforts are, assess how their efforts are working, or determine what  resources are necessary to improve their effectiveness. Developing such  information would be a necessary first step for U.S. agencies in beginning  to assess how well their efforts to combat nuclear proliferation networks  are working. As of October 2007, these agencies may not know whether  their capabilities for addressing the problem of nuclear proliferation  networks have improved. Recommendations for  Executive Action To help assess the impact of the U.S. response to the threat of nuclear  proliferation networks,",
      " we recommend that the Secretary of State take the  following two actions: (1) comply with its guidance to conduct periodic  assessments of proliferation risk and the export control system for each  country receiving EXBS funding and (2) document each risk analysis  conducted to evaluate the progress made in alleviating those risks. To help assess how U.S. government agencies that engage in export  control enforcement activities are accomplishing their stated goal of  combating nuclear proliferation, we recommend that the Secretaries of  Commerce, Homeland Security, and Treasury, and the U.S. Attorney  General individually direct that their respective agency\u2019s data collection  processes be modified to support the collection and analysis of data that  clearly identify when enforcement activities involve nuclear proliferation.",
      "  For example, each agency could consider    designating appropriate categories or codes for nuclear proliferation for  staff to use when recording information in the databases and   mandating completion of relevant data fields that would identify an  enforcement action as related to nuclear proliferation. Agency Comments  and Our Evaluation We provided copies of this report to Commerce, Defense, DHS, Energy,  Justice, State, and Treasury. Commerce, DHS, State, and Treasury  provided written comments. Justice provided us with technical comments  that we incorporated in the report, as appropriate. Defense and Energy did  not comment on the draft. In its comments on a draft of this report,",
      " Commerce stated, first, that the  report did not identify what it means by enforcement activities involving  nuclear proliferation. Second, Commerce stated that the report should  present the President\u2019s 2004 nonproliferation proposals to NSG exactly as  stated. Finally, Commerce stated that the recommendation to modify  relevant databases to support the collection and analysis of data that  clearly identify when enforcement activities involve nuclear proliferation  should not be directed to it because the report recognizes that it already  has this capability. Moreover, it said that Commerce officials could take  names from its denied persons list, which does not indicate the reason for  listing the name,",
      " and query the relevant database to identify whether the  name was listed for nuclear proliferation reasons. First, we did identify  what is meant by enforcement activities on page 8 of this report to include  inspecting items to be shipped, investigating potential violations of export  control laws, and punishing export control violators. We asked Commerce  officials to identify when such activities involved nuclear proliferation but  they indicated certain actions for which they could not. Second, we  shortened the description of the President\u2019s 2004 proposals for brevity and  clarity. Moreover, Commerce\u2019s description of the proposals does not  match the text of the proposals as originally presented in the President\u2019s  speech.",
      " Finally, while our report recognized that Commerce had  developed the capability that we recommend for its database, we included  Commerce in the recommendation because its various lists, such as the  denied persons list, cannot identify names included for nuclear  proliferation reasons. Commerce indicated to us that because the database  and denied persons list were not linked, providing such information would  have been difficult and require a case-by-case analysis. As a result,  Commerce did not provide us with this requested data. In its comments, DHS agreed with the substance of the report and  concurred with the overall recommendations. DHS described specific  actions that it took in September 2007 to identify seizures in the relevant  database that involve nuclear proliferation.",
      " It also described modifications  that it intends to make by the end of 2007 to identify examinations of cargo  involving nuclear proliferation issues. In commenting on a draft of this report, State partially concurred with our  recommendation that it should (1) comply with its guidance to conduct  periodic assessments of proliferation risk and the export control system  for each country receiving EXBS funding and (2) document each risk  analysis conducted to evaluate the progress made in alleviating those  risks. State commented that it recognizes the value of taking a more  standardized approach to assessing program countries on a regular basis  as a means of refining assistance efforts and evaluating progress.",
      "  Therefore, State said that it will set clear guidelines for when assessments  and reassessments should occur. State also said that it recognizes the  value in documenting in one place all risk analyses and the process by  which they are reached and will do so in a revised publication of its EXBS  program strategic plan. State disagreed with our finding that it did not conduct program  assessments for about 60 percent of its participating countries, asserting  that it conducted program assessments for all six of the countries in the  scope of our review that received EXBS funding. State said that it used  various means to assess its program other than its revised assessment tool  designed for this purpose.",
      " We reiterate our finding that State did not  conduct program assessments using its designated tool for two of the six  countries in our study that received EXBS assistance. More importantly,  these assessments do not evaluate the impact of U.S. training on the  country, as recommended by federal guidance for evaluating human  capital training. This guidance calls for assessing the extent to which  training and development efforts contribute to improved performance and  results. State also disagreed with our finding that it did not perform risk  analyses for 11 of the 56 countries in its program for fiscal years 2003  through 2006. It stated that the country risk assessment summary in its  program strategic plan included only those countries for which funds were  requested at the time the plan was prepared and the summary was never  intended as a comprehensive source of all risk analyses.",
      " However, the  State official responsible for EXBS did not provide this explanation and  said the risk summary does not change unless there is new information.  Furthermore, we found that this explanation of the risk assessment  summary is not consistent. At least one country was included in the  summary even though it received no EXBS funding throughout this period  and at least four other countries were not listed although they did receive  EXBS funding. Treasury did not comment on our recommendations. However, Treasury  stated that it can and does identify which entities have been designated for  nuclear proliferation reasons at the time of designation. However, this  statement misses our point.",
      " As our report stated, U.S. government  agencies that engage in enforcement activities to counter nuclear  proliferation networks are impaired from judging their progress in this  effort because they cannot readily identify basic information on the  number, nature, or details of their enforcement activities involving nuclear  proliferation. If Treasury cannot readily retrieve this information, then the  information is not useful for assessing the impact of its sanctions  specifically on nuclear proliferators. Despite its assertion, Treasury did not  provide us with a list of all listed entities designated for nuclear  proliferation reasons, as we had requested. In commenting on our finding  that Treasury did not designate any entities publicly identified with the  A.Q.",
      " Khan network, Treasury stated that its designation decisions involve  an interagency process that identifies, assesses, and prioritizes targets.  Therefore, it appears that Treasury did not designate any A.Q. Khan  network entities because an interagency process did not identify and  assess them as priority targets. We are sending copies of this report to interested congressional  committees and the Secretaries of Commerce, Defense, Energy, Homeland  Security, Justice, State, and Treasury. We will also make copies available  to others upon request. In addition, this report will be available at no  charge on the GAO Web site at http://gao.gov.",
      " If you or your staff have any questions concerning this report, please  contact me at (202) 512-8979 or at christoffj@gao.gov. Staff  acknowledgments are listed in appendix VI. Appendix I: Scope and Methodology To meet our objectives, we reviewed program documentation and  interviewed knowledgeable officials from key U.S. agencies: the  Departments of Commerce, Defense (DOD), Energy, Homeland Security  (DHS), Justice, State, and Treasury. To identify the status of U.S. efforts to strengthen multilateral controls to  counter nuclear proliferation networks, we reviewed program  documentation and interviewed knowledgeable officials from key U.S.",
      "  agencies: DOD, Energy, and State. We also met with acknowledged  nonproliferation experts to discuss U.S. proposals announced in 2004 and  their applicability to addressing nuclear proliferation networks. The  experts included two former Assistant Secretaries of State for  Nonproliferation and experts from the following institutions: Center for  Contemporary Conflict, National Security Affairs Department, Naval  Postgraduate School in Monterey, California; Center for International  Trade and Security at the University of Georgia, Athens, Georgia; Center  for Nonproliferation Studies at The Monterey Institute of International  Studies, Washington, D.C.; Center for Strategic and International Studies,",
      "  Washington, D.C.; Georgetown University, Edmund A. Walsh School of  Foreign Service, Washington, D.C.; Heritage Foundation, Washington,  D.C.; Nuclear Threat Initiative, Washington, D.C.; and Wisconsin Project  on Nuclear Arms Control, Washington, D.C. We tried to visit the U.S. Mission to the International Atomic Energy  Agency, officials of the International Atomic Energy Agency, and foreign  government representatives to the Nuclear Suppliers Group, all in Vienna,  Austria, to discuss various U.S. proposals and other efforts to strengthen  activities to combat nuclear proliferation networks. While State agreed  after months of negotiation to facilitate our proposed travel to Vienna,",
      " it  did not do so within any acceptable time frames. Furthermore, citing  diplomatic sensitivities, State proposed restrictions on which U.S. and  foreign officials we could meet and on what subjects we could discuss,  thus causing considerable delays in completing our work. To assess the impact of U.S. bilateral assistance to help other countries  improve their legal and regulatory controls against nuclear proliferation  networks, we reviewed program documentation and interviewed  knowledgeable officials from key U.S. agencies: DOD, Energy, and State.  To evaluate the amount of assistance provided overall and to the seven  countries associated with nuclear networks in our study (Malaysia,",
      "  Pakistan, Republic of Korea, Singapore, South Africa, Turkey, and United  Arab Emirates), we obtained and reviewed financial data from DOD,  Energy, and State, and interviewed agency officials about these data. We  determined that these data were sufficiently reliable for the purposes of  this report. Therefore, we reviewed program assessment documentation to  the extent that it was available in Washington, D.C. We interviewed  knowledgeable DOD, Energy, and State officials about the impact and  outcomes of these programs. We also contacted the embassies in  Washington, D.C., of the governments of Malaysia, Pakistan, Republic of  Korea,",
      " Singapore, South Africa, Turkey, and United Arab Emirates to  obtain their perspectives on U.S. assistance. However, only the  government of Singapore responded to our request for information. To assess the impact of U.S. efforts to strengthen its national enforcement  activities to combat nuclear proliferation networks, we reviewed  documentation and met with officials of the Departments of Commerce,  DHS, Justice, State, and Treasury in Washington, D.C. We also spoke by  phone with DHS/Immigration and Customs Enforcement attaches  stationed in Bern, Switzerland, and Vienna, Austria, regarding their roles in  enforcing U.S. export control laws for cases related to nuclear  proliferation.",
      " Also, we reviewed statistical data and descriptions of  enforcement cases from Commerce, DHS, and Justice, when available, to  try to determine how many cases involved nuclear proliferation and how  such information was used to assess agencies\u2019 activities. We also reviewed  data on Commerce, State, and Treasury sanctions against identified WMD  proliferators. The information on foreign law in this report does not reflect  our independent legal analysis, but is based on interviews and secondary  sources. We focused our review on countries that, according to open-source  reporting, are involved in the A.Q. Khan network. These include Malaysia,  Pakistan, Republic of Korea,",
      " Singapore, South Africa, Turkey, and Dubai in  UAE. We did not travel to these countries because State cited foreign  policy sensitivities of ongoing diplomatic discussions in these countries. It  is important to note that the level of cooperation State provided on this  review was erratic and resulted in a delay of several months in completing  our work. Nonetheless, with information available from other sources, we  were able to address the review\u2019s objectives.. For the purposes of this  report, we reviewed U.S. programs and activities that involved export  controls and their enforcement, as nuclear networks typically engage in  acts that violate or circumvent national and international export controls.",
      " We conducted our review from September 2006 through August 2007 in  accordance with generally accepted government auditing standards. Appendix II: Comments from the Department  of Commerce The following are GAO\u2019s comments on the Department of Commerce\u2019s  letter dated October 15, 2007. GAO Comments 1.  We agree with Commerce\u2019s statement that the draft report did not  identify what it means by \u201cenforcement activities involving nuclear  proliferation.\u201d First, we did identify what is meant by enforcement  activities on page 8 of this report to include inspecting items to be  shipped, investigating potential violations of export control laws,",
      " and  punishing export control violators. We asked Commerce officials to  identify when such activities involved nuclear proliferation but they  indicated certain actions for which they could not.  2.  We disagree with Commerce\u2019s comment that our description of the  President\u2019s proposal to the NSG was not clear. We had simplified and  shortened the proposals to make them clear and free from jargon.  3.  We disagree with Commerce\u2019s comment that our draft is true but  misleading in stating that Commerce does not maintain readily  available information that would allow it to identify individuals or  entities placed on its denied parties list for nuclear proliferation  reasons.",
      " Commerce said the purpose of this list is to readily identify  persons who are denied export privileges and it further explained that  its agents can query names from the list to determine the reason  individuals were denied export privileges. However, when we  requested that Commerce provide such a list, Commerce indicated that  it had not previously conducted such a review, did not maintain readily  available information, and it could not readily create a list of  individuals who have been denied export privileges for nuclear  proliferation reasons.  4.  In comments on a draft of this report, Commerce stated that the  recommendation to modify its data collection processes to clearly  identify when enforcement activities involve nuclear proliferation  should not be directed to it.",
      " Commerce stated that the report  recognized that it already has appropriate categories or codes for  nuclear proliferation staff to use when recording information in the  databases and already mandates completion of relevant data fields that  would identify an enforcement action as related to nuclear  proliferation. However, we directed the recommendation to Commerce  because its various lists, including the denied persons list, cannot  identify when names are listed for nuclear proliferation purposes.  Commerce acknowledged this deficiency when it was unable to  provide this type of information when we requested it. Appendix III: Comments from the  Department of Homeland Security Appendix IV: Comments from the  Department of State The following are GAO\u2019s comments on the Department of State\u2019s letter  dated October 17,",
      " 2007. GAO Comments 1.  We disagree with State\u2019s comment explaining why it did not conduct  program assessments for about 60 percent of its participating  countries. State said that it also relies on an interagency assessment of  a country at the early stages of engagement with the program and on a  variety of open source information, studies by nongovernmental  research organizations, and information from other U.S. agencies.  State did not indicate in its comments what percentage of contractor  program assessments have been completed and produced no  documentation of these other assessments. Moreover, in earlier  documents State explicitly informed us that the contractor assessment  tool is the current survey tool EXBS uses to provide a formal and full  assessment.",
      "  2.  We disagree with State\u2019s comments that it assesses program progress  despite the absence of a contractor assessment. State\u2019s EXBS strategic  plan, written responses to our questions, and discussions with the key  EXBS official who State designated to meet with us emphasized the  contractor program assessments as the tool to be used for a full  assessment of a country\u2019s progress, as well as for planning purposes  and establishing a baseline of a country\u2019s capabilities and needs. The  strategic plan describes the contractor\u2019s assessment tool as compiling  data and analysis from all sources to assist State to measure  performance broadly by evaluating progress made between  assessments.",
      " State\u2019s written response to us stated that EXBS tracks  the performance of the foreign government in its development of  strategic trade controls using the assessment tool.  3.  We agree with State\u2019s comment that its program planning takes into  account other information, including open source information,  diplomatic reporting from posts, intelligence community products, and  assessments and information from other U.S. government agencies. We  have added language to the report to reflect this.  4.  State commented that EXBS officials have access to and factor into  their planning process assessments by other U.S. agencies, such as  Energy\u2019s INECP which receives some EXBS funding.",
      " While we  commend such interagency collaboration, we note that any Energy  program assessments are relevant only to its training and courses  provided in support of EXBS, not to the EXBS program as a whole.  Furthermore, the evidence that State provided in its meetings with us,  its written response to our questions, and its EXBS strategic plan  discusses interagency coordination in planning, but not in assessing  the contributions made by the EXBS program to particular countries.  5.  We disagree with State\u2019s comment that risk analyses have been  conducted and documented for each country that received or is  receiving assistance under EXBS and that we based our findings solely  on the EXBS strategic plan.",
      " In addition to the strategic plan, we relied  on State\u2019s written response to questions we posed on the subject and  meetings with State EXBS officials. As we stated in our report, the  EXBS strategic plan did not identify a risk level for 11 of the 56  countries to which it provided assistance between fiscal years 2003  and 2006.  6.  We disagree with State\u2019s comment that our report was inconsistent  because it included information on EXBS assistance to six of the seven  countries where A.Q. Khan network activity was reported to have  occurred as well as other countries receiving EXBS assistance.",
      " We  included statistical information on the total number of EXBS program  assessments to place the data on the seven countries into an overall  perspective.  7.  We partially agree with State\u2019s comment that it would be more clear to  say that the EXBS country risk assessment summary did not include  two of the countries in which network activities are alleged to have  occurred. We cannot confirm State\u2019s assertion that a risk analysis was  done for one of these countries. State provided no documentation to  support this point.  8.  We disagree with State\u2019s comment that the absence of a country from  the risk summary table in the EXBS strategic plan does not mean a risk  analysis was not done.",
      " State provided no evidence that it had  conducted a risk analysis for this country, and the State official  designated to speak for the program said there was no documentation  for the analyses.  9.  We disagree with State\u2019s comment that State subsequently requested  and received missing program assessment data in December 2006 that  the contractor had not initially provided to support assessment results.  State provided no evidence to support this comment and it directly  contradicts information provided to us by the cognizant State official.  10. We disagree with State\u2019s comment that its EXBS program assessments  generally highlight the relationship between assistance efforts and  progress in specific countries.",
      " In a written response to our questions in  February 2007, State highlighted the difficulties in doing so. Also,  during the course of our review, State said that EXBS does not  systematically track information on changes to a country\u2019s laws for the  purpose of showing the effectiveness of the EXBS program because it  is difficult analytically to create a good design for doing so.  Nonetheless, State said in its comments on a draft of this report that  formal reassessments of countries are needed to more accurately and  regularly measure progress.  11. We disagree that State made a sincere and good faith effort to  cooperate with our review of nuclear proliferation networks.",
      " The level  of cooperation State provided on this review was erratic and resulted  in a delay of several months in completing our work. While State  agreed after months of negotiation to facilitate our proposed travel to  Vienna, it did not do so within any acceptable time frames and delayed  providing some requested documents for several months. Nonetheless,  with information available from other sources, we were able to  address the review\u2019s objectives.  12. These findings were not directed to State. The agencies to which they  were directed did not raise a concern about access to classified  information and none of these agencies disagreed with our  recommendation.  13.",
      " State commented that our draft should note that Pakistan passed its  export control law in 2004. We have added this language to the report.  14. We disagree with State\u2019s comment that referring to PSI as a  multilateral body ascribes a formality to the PSI that does not exist and  that the U.S. has never sought to create. Given our previous classified  report on PSI, we would not ascribe any more formality to PSI than  appropriate. We recognized that this lack of formality contributed to  management deficiencies in U.S. PSI activities, and congress legislated  in Public Law 110-",
      "53 that corrective action be taken.  15. We agree with State\u2019s statement that certain states or their  governments were not involved in proliferation network activities; only  private entities in these countries were reported to have been allegedly  involved in proliferation network activities in open sources. We  included clarifying language, accordingly.  16. We disagree with State\u2019s comment that we should report that more  than 80 countries are PSI participants. As we reported in an  unclassified section of our report on PSI, State did not provide us with  documentation to demonstrate any precise number of countries that  expressed support for PSI. Appendix V:",
      " Comments from the Department  of Treasury The following are GAO comments on the Department of Treasury\u2019s letter                    dated October 24, 2007. 1.  We disagree with Treasury\u2019s statement that because the scope of our  study covered countries where A.Q. Khan operated, it likely skewed the  results. The request for our review directly asked us to assess the U.S.                    government response to the A.Q. Khan network. Therefore, it was                    methodologically appropriate to focus on countries where such network                    activities reportedly occurred and would have been fruitless to focus a                     review of the U.S. response to nuclear networks on countries where                    such activity has not occurred.",
      "  2.  We disagree with Treasury\u2019s assertion that it is able to identify which of  its designations are related to nuclear proliferation and could similarly  identify any civil penalties imposed based on the violation of OFAC  sanctions. Treasury officials stated to us that they could not conduct a  keyword search to identify entities that had been designated for nuclear  proliferation reasons. One official emphasized that Treasury lacks the  ability to definitively identify whether a given entity was designated for  nuclear proliferation reasons. Treasury officials noted that they keep  records on the rationale for an entity\u2019s designation, but they do not  necessarily record what type of WMD proliferation the entity is involved  in,",
      " if any. Despite its assertion, Treasury could not readily retrieve this  information when we requested it and did not provide us with a  complete list of entities designated for nuclear proliferation reasons.  3.  Treasury\u2019s statement that it can and does identify which entities have  been designated for nuclear proliferation reasons at the time of  designation misses our point. It stated that entities or individuals  designated under Executive Order 13382 are listed on OFAC\u2019s web site  and specially designated nationals\u2019 list with the specific identification of  \u201cNPWMD.\u201d During our review, Treasury could not readily retrieve this  information specifically for nuclear proliferation designations.",
      "  4.  In commenting on our finding that Treasury did not designate entities  publicly identified with the A.Q. Khan network, Treasury stated that its  designation decisions involve an interagency process that identifies,  assesses, and prioritizes targets. Given the absence of these names,  Treasury\u2019s statement suggests that the interagency process did not  identify and assess entities of the A.Q. Khan network as priority targets.  5.  We agree with Treasury\u2019s comment on the footnote on OFAC\u2019s sanctions  programs and have added clarifying language, accordingly.  6.  We have modified the language in the draft to reflect Treasury\u2019s  comment.",
      "  7.  We have changed this language, accordingly.  8.  We believe that the language of our draft accurately reflects the meaning  of Treasury\u2019s proposed rewording in a more concise fashion. Thus, we  have not modified the language of our report.  9.  We have modified language in the report to reflect Treasury\u2019s updated  information on enactment of the International Emergency Economic  Powers Enhancement Act. Appendix VI: GAO Contact and Staff  Acknowledgments Staff  Acknowledgments Muriel J. Forster, Assistant Director; Jeffrey D. Phillips; Leah DeWolf;  Jennifer L.",
      " Young; Lynn Cothern; Mark B. Dowling; Mark C. Speight; and  Martin De Alteriis made key contributions to this report.\n"
    ],
    "length": 14765,
    "hardness": null,
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  },
  {
    "id": 80,
    "question": null,
    "answer": "In 1995, the United States banned exports to Iran of most U.S. goods without a Treasury Department license. In 2008, the U.S. media, citing U.S. government statistics, reported that U.S. firms were exporting numerous goods to Iran. The statistics are maintained by the Census Bureau and are based on data filed by exporters or their agents. The United States has also generally banned unlicensed transshipments of U.S. goods to Iran via other nations. In this report, GAO assesses the extent to which (1) U.S. trade statistics accurately depict exports to Iran, (2) Treasury licenses exports to Iran in accordance with the trade restrictions and provides licensing data to enforcement agencies and Congress, and (3) Iran obtains U.S. military and dual-use goods through transshipment. GAO analyzed Census export data, a randomly selected sample of Treasury export licenses, Treasury licensing information systems, and U.S. government transshipment data. It also interviewed relevant U.S. government officials. U.S. trade statistics for exports to Iran erroneously include goods that were not exported to Iran. While the statistics indicate that U.S. firms exported 278 types of goods to Iran from 2004 to 2008, 97 of these types of goods were instead exported to Ireland, Iraq, and other countries. The misidentification of Iran as the recipient resulted from errors in export data filings that Census did not detect or correct. As a result of our review, Census officials stated, Census has begun manually checking all new filings of exports to Iran and posting corrections to a Census Web page. While Treasury is licensing exports to Iran in accordance with export restrictions, it cannot provide complete and timely information about the licenses it has issued. Its paper-based licensing information systems cannot be searched to quickly identify licenses for exports of goods to Iran. For example, Treasury was unable to address a 2009 request from U.S. Customs and Border Protection (CBP) officials for complete and timely licensing data to support CBP inspectors at U.S. ports. Treasury's information systems weaken the ability of the government to assess compliance with Iran sanctions. Treasury plans to upgrade its licensing information system for agricultural and medical exports to Iran. However, the upgrade would not address its inability to readily identify licenses for other goods, including civilian items with potential military uses. A wide range of U.S. military and dual-use goods are illegally transshipped to Iran through the United Arab Emirates (UAE), Malaysia, Singapore, and other countries, according to U.S. officials. The Justice Department has prosecuted several individuals for efforts to transship military aircraft parts to Iran.\n",
    "docs": [
      "Background The U.S. government\u2019s official trade statistics are maintained by the U.S.  Census Bureau for use as economic indicators and measures of the U.S.  balance of trade with other countries. The statistics are based primarily on  data filed by exporters and their agents into the electronic Automated  Export System (AES) database. Census maintains the AES data on a  mainframe computer operated by the Department of Homeland Security\u2019s  U.S. Customs and Border Protection. While most filers enter data through  the Census Bureau\u2019s AESDirect or a related Census system, others have  developed their own software for this purpose. The data filed into AES  includes the recipient country.",
      " Until recently, filers of export data  designated the recipient country by choosing a two-letter international  standard country code. Data filers also designate the type of good being  exported from a list of more than 8,000 internationally harmonized  commodity codes. According to these statistics, the United States  exported worldwide nearly $1.3 trillion during 2008. U.S. exports to Iran are severely restricted by U.S. laws and regulations.  Before 1979, the United States enjoyed good relations with the Iranian  government and exported military equipment to Iran. However, U.S.- Iranian relations deteriorated sharply following the 1979 Iranian revolution  and the consequent seizure of U.S.",
      " embassy personnel. Iran\u2019s subsequent  efforts to enrich uranium and support international terrorism prompted  the United States to impose numerous sanctions on Iran, including a 1995  ban on almost all U.S. exports to that country. The current ban is  administered by the Office of Foreign Assets Control of the U.S.  Department of the Treasury, which is also responsible for licensing  financial transactions with Iran and imports from Iran. Under the ban, in  general, a U.S. person must obtain a Treasury license before exporting or  selling goods to Iran. Congress had already restricted exports to Iran by  prohibiting the export of dual-use goods (civilian goods with potential  military applications)",
      " to Iran. This prohibition can be waived by the  President if the President determines that doing so is essential to the  national interests of the United States. According to Treasury officials, Treasury policy is to generally deny  license applications for the export of U.S. goods to Iran, with the  exception of goods covered by the Trade Sanctions Reform and Export  Enhancement Act of 2000 (TSRA). TSRA requires the President to  terminate any unilateral agricultural or medical sanctions against a foreign  country or foreign entity. TSRA also states that the export of agricultural  commodities, medicine, or medical devices to a designated state sponsor  of terrorism,",
      " such as Iran, shall only be made pursuant to 1-year  licenses. As a result, Treasury licenses the export of agricultural goods,  medicines, and medical goods to Iran and other sanctioned countries.  Treasury has issued a growing number of licenses for agricultural and  medical exports to Iran following passage of TSRA, as shown in figure 1.  TSRA licenses may not be granted for exports to entities linked to  international terrorism, the proliferation of weapons of mass destruction,  or narcotics trafficking. The trade ban also generally prohibits exports of U.S. goods (including  dual-use items) to countries other than Iran without a Treasury license if  the exporter has reason to know the goods are specifically intended for  transshipment to Iran.",
      " Foreign firms are generally prohibited from  knowingly reexporting goods on Commerce\u2019s list of controlled dual use  goods to Iran even if those goods were originally legally exported from the  United States to a third country under a Commerce license. For example,  dual-use U.S. goods exported to countries other than Iran under a  Commerce license may not be subsequently transshipped to Iran without a  Treasury license if the exporter knew or had reason to know that such  goods were intended for Iran. The Departments of Commerce, Defense,  Homeland Security, Justice, and the Treasury investigate allegations of  illegal transshipment of U.S. goods to Iran.",
      " Exporters who knowingly ship  U.S. goods to Iran via other countries without a Treasury license are  subject to prosecution by the Department of Justice. Congress is  considering new sanctions that would restrict Iran\u2019s ability to import  goods from other countries. U.S. Export Statistics  for Iran Erroneously  Include Goods Not  Exported to Iran The U.S. government\u2019s official statistics for U.S. exports to Iran  erroneously include many types of goods that U.S. firms did not export to  Iran. The misidentification of Iran as the recipient country in the statistics  is the result of export data filing errors that Census did not detect or  correct.",
      " Census officials stated that, as a result of our review, Census has  begun manually checking new export filings reporting exports to Iran.  While Census policy is not to correct errors in the statistics that are older  than 1 year, it has begun posting Iran-related corrections on a separate  Web page. U.S. Export Statistics  Contain Numerous  Erroneous Entries for Iran U.S. export statistics erroneously indicate that U.S. exporters shipped 278  types of goods to Iran from 2004 to 2008. At our request, Census reviewed  its records and determined that more than a third (97) of these types of  goods had not been exported to Iran.",
      " As shown in table 1, the types of  goods erroneously included in the Iran export statistics include military  rifles exported to Iraq and aircraft parts exported to Ireland, Israel, and  Iraq. The remaining types of goods in the export statistics for Iran are  primarily agricultural, medical, humanitarian, or informational. The misidentification of Iran as the recipient country for these and other  exports was the result of errors made by filers of export data into the  Automated Export System. In checking its records at our request, Census  determined the addresses of the recipients to which the shipment were to  be delivered. It found many cases of \u201cimprobable\u201d addresses,",
      " such as  \u201cDublin, Iran.\u201d In these cases, exporters apparently mistook the two-letter  country code for Iran (\u201cIR\u201d) for the code for the actual recipient country.  For example, exporters shipping goods to Ireland might enter \u201cIR\u201d instead  of the correct code for Ireland (\u201cIE\u201d). Table 2 depicts the code for Iran and  the codes for several other recipient countries. Census Did Not Detect or  Correct Errors in Export  Data for Iran Census officials stated that they did not detect or correct all of the Iran- related errors in new exporter filings or in the export statistics for  previous years. The officials focused on detecting errors involving high-",
      " dollar value transactions because of the statistics\u2019 use in determining the  U.S. balance of trade rather than the sensitivity of the reported recipient  country. The officials stated that they did not focus on detecting errors in  the data for exports to Iran because the value of such exports was  relatively small. In 2008, the reported value of U.S. exports to Iran was  $683 million, while the total value of all U.S. exports worldwide was nearly  $1.3 trillion. Moreover, the officials stated, the policy of the Census  Bureau is not to make changes in trade statistics that are more than a year  old.",
      " For example, Census officials have not corrected an erroneous entry  in the statistics concerning the alleged export of rifles to Iran in 2004,  although they learned of the error in 2008. Census officials also stated that  Census is not involved in enforcing U.S. export controls on Iran. Although the dollar value of U.S. exports to Iran is small relative to the  value of all U.S. exports, the accuracy of the Census Bureau\u2019s Iran export  statistics is important. The nature and composition of the U.S. exports to  Iran is sensitive because the United States has severely restricted trade  with Iran as a state sponsor of terrorism.",
      " Also, other U.S. government  agencies use these statistics in connection with the trade with Iran. For  example, Commerce and Homeland Security enforcement officials use the  statistics as part of their enforcement targeting efforts. In addition,  officials from the Department of State stated that they employ these  statistics in defending U.S. trade policy with Iran in discussion with other  governments. Census Has Taken Action  in Response to Our Review In response to our review, Census officials have taken action to improve  the accuracy of statistics concerning current U.S. exports to Iran. Beginning in August 2009, Census officials began routine accuracy checks  of new filings of exports to Iran and other heavily sanctioned countries  (Cuba,",
      " North Korea, and Sudan), regardless of the dollar value of the  exports. Census officials stated that they are now checking recipient  addresses to verify that they match the reported country of destination  and are calling filers of export data to verify questionable entries. Although they have not formalized the process, Census officials have  stated that they intend to continue these accuracy checks. Census also clarified the country selection process in AESDirect, the filing  system used by most exporters to enter information into the Automated  Export System. Because exporters often apparently assumed that \u201cIR\u201d was  the code for other countries, Census has changed the data entry process to  include a pull-down menu that lists all the countries of the world by their  complete names.",
      " In June 2009, Census began posting an online list of corrections to Iran  export data. However, Census officials stated that they will continue  their policy of not correcting errors in the trade statistics older than 1  year. Census officials stated that it is too early to determine the extent to which  these recent efforts may improve the accuracy of U.S. statistics concerning  exports to Iran. Treasury Is Licensi Exports to Iran in  Accordance with  Trade Ban but Cannot  Provide Complete and  Timely Inform ation on  Its Licensing  Decisions Treasury is licensing exports to Iran in accordance with the trade ban but  cannot provide other agencies or Congress with complete and timely  licensing information.",
      " It is hindered by paper-based information systems  that cannot be searched to identify licenses for the export of goods to Ira As a result, Treasury has been unable to quickly respond to requests for  complete information on such licenses. Treasury is planning to upgrade it system for tracking licenses for agricultural and medical exports to Iran,  which are permitted by TSRA. However, the upgrade would not include  the small number of export licenses for other types of goods, such as dual- use civilian aviation equipment with potential military uses. Treasury Licenses for  Exports to Iran Are in  Accordance with the Trade  Ban Our review of a sample of TSRA licenses found no evidence that Treasury  has issued TSRA licenses for the export of goods other than those covered  by TSRA.",
      " We also found no evidence that TSRA licenses involved recipients  engaged in forbidden activities. We selected a random sample of 58 licenses  from 1,833 TSRA export licenses issued by Treasury between October 2006  and August 2009. The licenses selected authorized the export of more than  275 types of goods. None of the licenses in our sample authorized the export  of nonagricultural or nonmedical items. Also, none of the end users listed on  the licenses in our sample appeared on Treasury\u2019s Specially Designated  Nationals and Blocked Persons List, which contains individuals known to be  linked to international terrorism,",
      " the proliferation of weapons of mass  destruction, and narcotics trafficking. We also reviewed 34 non-TSRA licenses that Treasury issued between  January 2008 and July 2009. As shown in table 3, we found that all but one  of the licenses involved the return of human remains to Iran; official U.S.  government and law enforcement matters; educational, research, and  exchange programs; and media-related enterprises for broadcasting or  Internet connectivity. The remaining license involved the export of dual- use equipment to help ensure the safety of Iran\u2019s U.S.-built civilian  airliners. U.S. law prohibits the export of any dual-use item to Iran and  states that the President may waive the prohibition if doing so is essential  to the interests of the United States.",
      " The President has delegated the  authority to issue such waivers to the Secretary of State. We obtained a  list of waivers from the Department of State and confirmed that a waiver  had been issued for this dual-use export. Treasury Information  Systems Cannot Provide  Complete and Timely  Licensing Data to Other  Agencies and Congress Treasury cannot provide other agencies or Congress with complete and  timely information concerning the licenses it has issued. It cannot do so  because it relies on paper-based information systems that cannot be  searched to identify licenses for the export of goods to Iran. Treasury\u2019s  primary licensing information system for export licenses is based on  correspondence tracking software.",
      " According to a Treasury official  familiar with the system, it contains nonstandardized data for license  applications entered before 2007, relies on manual data entry, and requires  time-consuming case-by-case review by licensing officials to ensure its  reliability and suitability for release. Treasury\u2019s secondary information  system was created by TSRA licensing personnel to support the licensing  of exports of TSRA goods. In January 2009, an internal Treasury budget  request characterized the TSRA information system as a \u201clargely paper- based\u201d system that hinders \u201cthe speed, efficacy, reliability, and security of   licensing, enforcement and compliance activities.\u201d Treasury  officials must manually review all TSRA licensing data for Iran to identify  licenses that authorize the export of goods.",
      " Because the TSRA system is  not integrated with Treasury\u2019s primary licensing information system, TSRA  licensing officials must manually enter the same data into both systems. Treasury has been unable to consistently provide timely and complete  licensing information for Iran to other agencies and Congress. For  example, a Treasury official informed U.S. Customs and Border Protection  (CBP) officials in 2009 that Treasury\u2019s information systems could not  provide CBP with complete and timely information on licenses issued for  the export of goods to Iran. CBP officials stated that they had sought the  information to help CBP officers at U.S. ports quickly determine whether  goods slated for export to Iran had been properly licensed by Treasury.",
      "  CBP officers currently use a more time-consuming process to access  limited Treasury data through a third agency. Treasury officials stated in  January 2010 that their licensing information systems focus on the  exceptions that Treasury grants to the Iran trade embargo, rather than on  controls over the export of specific goods. Similarly, as of March 1, 2010, Treasury had yet to provide Congress with a  required biennial report on TSRA licenses issued to Iran from October 1,  2006 to September 30, 2008. Treasury officials noted that Treasury has  published quarterly reports that contain the number of TSRA licenses  issued during this period.",
      " However, the data in the quarterly reports were  not consistent with data that Treasury provided us during our review. A  TSRA official stated that Treasury could not resolve the inconsistencies in  a timely manner because of information system limitations. In addition,  Treasury required more than 2 months to provide GAO with adequate data  concerning its TSRA licenses. Treasury has begun work to upgrade its system for managing TSRA  licensing information. During our review, Treasury hired a contractor in  September 2009 to begin designing a system to better manage TSRA  licensing information. The stated goal of the project is to provide Treasury  with an integrated,",
      " largely paperless TSRA database that would allow it to  better collect and manage information, conduct analysis, improve  efficiency, provide U.S. law enforcement agencies with better information,  and improve the timeliness of reports to Congress. Treasury intends to  complete the upgrade by September 2010. Treasury officials informed us  that they gave priority to upgrading the TSRA database because of the  volume of licensing requests. However, the new TSRA system would not include licenses that Treasury  has issued for the export of goods that are not agricultural or medical in  nature, including dual-use civilian goods with potential military  applications. Congress has prohibited the export of any dual-use item to  Iran and has stated that the President may waive the prohibition if doing  so is essential to the interests of the United States.",
      " Treasury has had  difficulty in identifying licenses for dual-use items. For example, Treasury  officials informed a Defense Department Central Command (CENTCOM)  official in 2009 that they could not provide CENTCOM with a list of  Treasury licenses for the export of U.S. dual-use civilian aircraft parts to  Iran. According to the CENTCOM official\u2019s report, Treasury officials stated  they could not do so because of information system limitations. Similarly,  Treasury took more than 4 months to provide GAO with adequate data  concerning a dual-use export license and 33 other non-TSRA licenses  issued during the preceding 18 months (January 1,",
      " 2008-July 2009).  Treasury officials stated in December 2009 that Treasury had yet to  determine when it might upgrade its licensing information system for non- TSRA export licenses. In 2007, we identified the lack of data concerning U.S. trade sanctions as a  governmentwide problem affecting the U.S. government\u2019s ability to assess  the impact of the sanctions on Iran. Given Treasury\u2019s central role in  licensing exports to Iran, its inability to provide complete and timely  licensing information weakens government efforts to determine whether  dual-use and other goods exported to Iran have been properly licensed and  to assess compliance with the trade ban.",
      " Iran Is Obtaining  Illegal  Transshipments of  U.S. Military and  Dual-Use Goods  through Other  Countries According to U.S. officials, Iran is obtaining U.S. military and dual-use  goods that are being illegally transshipped by firms and individuals  through locations in numerous countries, including the United Arab  Emirates, Malaysia, and Singapore. The goods include components for  U.S.-built fighter aircraft, electronics, and specialized metals. To address  the problem, U.S. agencies have conducted undercover investigations to  detect Iranian procurement networks, prosecuted criminal cases against at  least 30 firms and individuals for transshipping or attempting to transship  goods to Iran,",
      " and provided export control training and support to the  United Arab Emirates and other countries. Wide Range of Military and  Dual-Use Goods Involved  in Iran Transshipment  Cases Firms and individuals have transshipped or attempted to transship a wide  range of U.S. military and dual-use goods to Iran, according to U.S.  officials. The Department of Justice reported in September 2009 that  individuals and firms were seeking to transship military components to  Iran. For example, the department listed nine major criminal prosecutions  between 2007 and September 2009 that involved transshipment of  components for Iran\u2019s U.S.-built fighter aircraft.",
      " These aircraft include the  F-14 fighter, a highly capable aircraft used by the U.S. Navy until 2006 (see  fig. 2); the F-4 fighter-bomber; and the F-5 fighter. The department also  reported efforts to transship parts for Iran\u2019s U.S.-built military helicopters,  military-grade night vision equipment, submachine guns, computers, and  specialized laboratory equipment. Immigration and Customs Enforcement  officials expressed concern regarding Iranian efforts to acquire through  transshipment electronic components for missiles, parts for Iran\u2019s U.S.- built Hawk anti-aircraft missiles, specialized steel, and pumps with nuclear  applications.",
      " Goods Are Transshipped  through Several Nations Firms and individuals have transshipped or attempted to transship goods  though intermediaries in several countries. A 2009 report by the Justice  Department cited 30 cases that involved the use of intermediaries in the  United Arab Emirates (UAE), Malaysia, Singapore, Thailand, Australia,  Canada, Colombia, Brazil, Austria, France, Germany, Luxembourg, The  Netherlands, and the United Kingdom. As shown in figure 3, the cases  involved efforts to ship the goods to Iran through the use of intermediaries  in these countries. More than 50 percent of the cases listed involved use of  intermediaries in the UAE for transshipment.",
      " About 20 percent involved  the use of Malaysia and Singapore. U.S. goods involved in these cases  included U.S. military aircraft components, laboratory equipment,  specialty alloy pipes, night vision goggles, and sensitive technologies sent  to Iranian missile and nuclear entities. U.S. officials stated that the UAE has taken steps to address the use of its  territory for transshipment. They noted that the UAE has increased  cooperation with U.S. enforcement entities and enacted new export  control legislation in 2007. According to the UAE government, the new law  addresses goods subject to import and export control procedures, bans  the export or re-export of strategic goods (including arms and military  hardware,",
      " chemical and biological materials, and dual-use items) without  a special license, and specifies penalties of imprisonment of up to a year  and fines totaling over $270,000. U.S. officials met with UAE officials in  June 2009 to discuss the implementation of the new law. Commerce  officials stated that the law contains the basic elements of an export  control regime to combat transshipment. However, some U.S. officials also  stated that individuals involved in illegal transshipment may shift their  operations to other nations, such as Malaysia and Singapore. Actions Are Being Taken  by U.S. Agencies to  Combat Transshipment U.S.",
      " enforcement officials stated that they pursue allegations of  transshipment. For example, Defense Criminal Investigative Services and  U.S. Immigration and Customs Enforcement officials stated they conduct  undercover investigations to detect efforts by Iranian procurement agents  to obtain U.S. goods in response to requests from Iran\u2019s military-industrial  establishment. To do so, procurement agents may seek to build long-term  relationships with suppliers by initially buying small quantities of  relatively-innocuous items before seeking more sensitive items. Defense  Criminal Investigative Services and U.S. Immigration and Customs  Enforcement officials stated that, in one case, a procurement agent with  ties to the Iranian military attempted to procure about 700 goods,",
      "  including aircraft parts and radar components. Most of the goods would  have required U.S. government licenses to be exported to their alleged  destination in the United Arab Emirates. The individual seeking the parts  typically identified himself as a United Arab Emirates businessman in  approaching U.S. firms, according to U.S. enforcement officials. The  individual provided false documents and attempted to convince the U.S.  firms that they did not need to obtain export licenses. U.S. law provides criminal penalties for the illegal transshipment of goods  to Iran. For example, violators of Treasury\u2019s Iranian Transactions  Regulations may receive sentences of up to 20 years imprisonment and  fines of up to $1 million.",
      " The Justice Department has reported that from  January 2007 to September 2009 it handled at least 30 criminal  prosecutions involving actual or attempted transshipments to Iran. Five  individuals convicted in connection with these cases received sentences of  imprisonment that ranged from 6 months to more than 5 years. The Commerce Department is responsible for licensing U.S. exports of  dual-use items to the UAE, as well as countries other than Iran. To help  detect illegal transshipments of U.S. dual-use goods, Commerce  enforcement personnel select a sample of previously shipped goods and  attempt to verify they are located and being used in accordance with  licensing conditions.",
      " U.S. agencies have provided export control assistance to countries that  have been used by intermediaries to transshipment goods to Iran. For  example, the UAE has received assistance provided by U.S. agencies,  including the Department of Homeland Security and the Department of  Energy. The Departments of Commerce and Justice have also worked with  the UAE in improving its controls over exports. Conclusions While the United States government has severely restricted U.S. exports to  Iran, it cannot readily determine the extent to which it has issued licenses  for such exports or the extent to which goods marked for Iran are leaving  U.S. ports. U.S.",
      " agencies should have complete, reliable, and timely  information concerning these matters to ensure the U.S. government is  implementing the ban on exports to Iran. While covert transshipments of  U.S. goods through third-party countries are inherently difficult to detect,  erroneous reports of overt shipments of U.S. goods to Iran have prompted  concerns that the United States is not abiding by its own export ban. The  Census Bureau has taken some steps to detect and correct errors in its  latest statistics, but the Treasury Department has yet to take action to  ensure that it can retrieve complete and timely data on which exports to  Iran it has licensed and which it has not.",
      " Recommendation for  Executive Action To help ensure that U.S. agencies have timely access to reliable data  concerning licensed U.S. exports to Iran, we recommend that the  Secretary of the Treasury ensure that the Department of the Treasury  develop the capability to provide other agencies and Congress with  complete and timely information concerning all licenses issued for the  export of goods to Iran. Agency Comments  and Our Evaluation Treasury provided written comments regarding a draft of our report,  which are reprinted in appendix III. With regard to our recommendation,  Treasury stated that it is already able to access, review, and share  information relating to TSRA licenses and that it \u201chopes\u201d to enhance its  abilities to process non-TSRA licensing information.",
      " It also indicated that  it plans to share licensing data with CBP in the future through the  Automated Commercial Environment (ACE) system. Treasury  acknowledged that its ability to search some parts of its current licensing  databases is limited and that its data systems could be improved. Treasury  also acknowledged that it \u201chas work to do\u201d before it can provide CBP with  the specific data CBP needs to validate licensed exports. While Treasury is  able to access and share licensing information, it cannot do so in a  complete and timely manner. As noted in our draft report, Treasury  required more than 2 months to provide us with complete licensing data  for agricultural and medical exports and more than 4 months to access  and share 34 recent export licenses for other types of goods,",
      " including a  dual-use good with potential military applications. The ACE system is still  in development and is not ready to receive Treasury\u2019s export data. We  therefore have not changed our recommendation that Treasury develop  the ability to provide complete and timely information regarding all export  licenses for Iran. Treasury also stated that, contrary to the notion that the administration of  the sanctions program had been weakened, nothing in our draft report  indicated that enforcement actions regarding exports to Iran, or the  implementation of the sanctions, had been impaired by incomplete and  untimely licensing data. Treasury\u2019s assertion is in contrast with a 2009  internal Treasury budget request,",
      " in which Treasury officials stated that  (1) Treasury\u2019s information processes were hampering \u201cthe speed, efficacy,  reliability and security\u201d of its enforcement and compliance activities and  (2) Treasury would be able to provide better information to law  enforcement agencies if it upgraded its TSRA information system. Also, as  noted in our report, limitations in Treasury\u2019s information systems  prevented it from responding to a request from U.S. Customs and Border  Protection officials for more complete and timely licensing information to  aid CBP agents at U.S. ports. Treasury also stated that it appreciated the report\u2019s finding that Treasury  is licensing the export of goods to Iran in accordance with the laws and  regulations imposing sanctions on Iran.",
      " However, it expressed concern  that our draft report title conveyed an impression that Treasury\u2019s  information systems were weakening the implementation of economic  sanctions against Iran. We therefore modified the title of our report to  clarify our message and reinforce our recommendation. The Department of Commerce provided formal written comments  concerning the Census Bureau\u2019s maintenance of U.S. export statistics.  Commerce\u2019s comments were technical in nature and did not address our  findings or recommendation. We have incorporated Commerce\u2019s  comments in our text as appropriate and reproduced them in appendix IV.  The other agencies cited in this report did not provide formal comments.  CBP, U.S.",
      " Immigration and Customs Enforcement, and Treasury provided  technical comments, which we incorporated as appropriate. We are sending copies of this report to the Departments of Commerce,  Defense, Energy, Homeland Security, Justice, State, and the Treasury, as  well as interested congressional committees. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov. If you or your staffs have any questions about this report, please contact  me at (202) 512-8979 or christoffj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report.",
      " Key contributors are listed in appendix V. Appendix I: Objectives, Scope, and  Methodology To assess the extent to which U.S. statistics accurately depict U.S. exports  to Iran, we analyzed the results of a Census Bureau review of records  regarding all types of goods reportedly shipped to Iran from 2004 through  2008 to determine the specific destinations of those goods. In reviewing its  records, Census checked the shipping address of the ultimate recipient for  each good. Based on the results of its review, Census provided us with the  actual country of destination and the total dollar value of each type of  good that was sent to a country other than Iran.",
      " We used that information  to adjust the data found in the U.S. export statistics. We also reviewed a  Census Web page listing corrections to U.S. export data concerning Iran to  corroborate the posted corrections with those that Census had provided to  us. We also met with Census officials to determine their methods and  policies for assuring the accuracy of the statistics. To assess the Treasury Department\u2019s licensing activities, we first reviewed  U.S. laws and regulations that established sanctions on U.S. exports to  Iran, including Treasury\u2019s Iranian Transaction Regulations. We then  reviewed a random sample of 58 licenses that were issued by Treasury to  exporters from October 2006 to August 2009.",
      " With this probability sample,  each member of the study population had a nonzero probability of being  included, and that probability could be computed for any member. The  random sample was taken from a list of 1,833 licenses provided to us by  Treasury. On the basis of the sample, we estimate no more than 5 percent  of the population contained errors, at a 95 percent confidence level,  which we judged to be sufficiently reliable for our review. In the digital  PDF copies of licenses we obtained, we verified that all licenses were for  agricultural goods, medicines, and medical devices allowed under TSRA  and the Iranian Transactions Regulations.",
      " We also looked at the intended  end users in the license to verify that none were sponsors of international  terrorism. The names of end users in the licenses were compared with a  search of Treasury\u2019s Specially Designated Nationals and Blocked Persons  list, which is maintained and updated daily on Treasury\u2019s Web site. For  non-TSRA goods, we reviewed all non-TSRA licenses provided by Treasury  for January 2008 to June 2009. For dual-use items, we verified that a  waiver had been obtained for the export of goods to Iran before a license  was granted. We also interviewed officials from the Departments of the  Treasury and State on their collaboration and joint decision-making for  licenses granted for export to Iran that required a presidential waiver.",
      " To  assess Treasury\u2019s ability to provide complete and timely licensing data to  other agencies and Congress, we obtained documents concerning  Treasury information systems, including contracting and budget  documents for a planned upgrade. We obtained a Treasury presentation on  the TSRA Database and Foreign Assets Control Database systems used to  store records of its licensing activities. We also obtained and reviewed all  of the mandated biennial and quarterly reports for TSRA on Treasury\u2019s  Web site. We compiled these reports into a comprehensive total of  licenses issued by Treasury and then compared it with the list Treasury  provided to us for the overlapping time periods. We also interviewed  relevant Treasury licensing,",
      " information technology, and enforcement  officials. We interviewed officials from the Departments of Commerce and  Homeland Security and other entities who use Treasury licensing  information. In addition, we requested detailed licensing data from  Treasury and monitored its ability to comply with our request. To review the extent to which U.S. goods are being illegally transshipped  to Iran, we obtained and analyzed lists of relevant criminal prosecutions  from the Department of Justice. We also discussed transshipment issues  with officials of the Departments of Commerce, Defense, Homeland  Security, Justice, and the Treasury; the Federal Bureau of Investigation;  and other government agencies. We relied on secondary sources for  descriptions of foreign laws.",
      " Appendix II: U.S. Legal Tools for Sanctioning  Foreign Companies That Transfer Sensitive  Technology The U.S. government has a number of legal tools to exert pressure on  foreign entities that transfer foreign sensitive technologies to Iran. These  tools allow the United States to penalize foreign entities by freezing their  U.S. properties, limiting their ability to trade with the United States,  prohibiting them from obtaining U.S. government procurement contracts,  or otherwise impairing their ability to work with U.S. entities. Some of  these tools are specifically focused on the transfer of technologies to Iran,  while others can be applied to a wider range of actions.",
      " The laws  presented below are discussed only in the context of non-U.S. entities  transferring sensitive non-U.S. technologies to Iran from outside the  United States. Please refer to the original text of the laws for the full  content. Executive Orders 13382,  12938, and 13094 These executive orders establish criteria for the application of sanctions  on foreign firms that provide sensitive technologies to Iran. The orders  draw their authority from the International Emergency Economic Powers  Act (IEEPA) and several other acts of Congress. Executive Order 13382 allows the Secretary of State or the Secretary of the  Treasury,",
      " in consultation with each other and other relevant agencies, to  freeze the assets of persons designated as being engaged in the  proliferation of weapons of mass destruction (WMD), as well as members  of their support networks. The order also states that frozen assets may  not be transferred, paid, exported, withdrawn or otherwise dealt in and  prohibits any transactions by a U.S. person or within the United States  taken to evade or avoid such prohibitions. Foreign persons can be  designated under the order if they have engaged, or attempted to engage,  in activities or transactions that have materially contributed to the  proliferation of (or pose a risk of doing so)",
      " WMD or WMD delivery  systems (such as missiles capable of delivering WMD). Such activities  include efforts by any person or country of proliferation concern to  manufacture, acquire, possess, develop, transport, transfer, or use WMD or  WMD delivery systems. Executive Order 12938 allows the Secretary of State to impose sanctions  against foreign persons if the Secretary has made a determination that  such persons have, on or after November 16, 1990, knowingly and  materially contributed to the efforts of any foreign country, project, or  entity to use, develop, produce, stockpile, or otherwise acquire chemical  or biological weapons.",
      " The United States government is prohibited from  procuring goods or services from a designated person or importing  products produced by a designated person, unless exempted from these  sanctions by the Secretaries of State and the Treasury for certain reasons,  such as U.S. military requirements or defense production needs. Executive Order 13094 expanded Executive Order 12938 to impose  sanctions when the Secretary of State determines that a foreign person on  or after November 16, 1990, has materially contributed or attempted to  contribute materially to the efforts of any foreign country, project, or  entity of proliferation concern to use, acquire, design,",
      " develop, produce, or  stockpile weapons of mass destruction or missiles capable of delivering  such weapons. The penalties that could be imposed under Executive  Order 12938 remained the same. Iran, North Korea, and  Syria Nonproliferation Act This act allows the President to sanction foreign persons with respect to  whom there is credible evidence indicating that such persons transferred  sensitive goods, services, or technology to Iran after a certain date. Under  the act, the President is required to report to the Senate Foreign Relations  Committee and the House Foreign Affairs Committee every 6 months  identifying foreign persons with respect to whom there is credible  evidence that such persons have,",
      " on or after January 1, 1999, transferred  goods, services, or technology listed in specified multilateral export  control lists to Iran. The act allows the President to impose a number of  measures to a foreign person appearing in the report, such as a ban of U.S.  government procurement from the designated person, a ban of U.S.  government arms sales to the foreign person, or the denial or suspension  of licenses to export dual-use items to the foreign person. Iran-Iraq Arms  Nonproliferation Act of  1992 This act requires the President to sanction persons who, by transferring  or retransferring goods or technology,",
      " \u201cknowingly and materially\u201d  contribute to Iran\u2019s efforts to acquire chemical, biological, or nuclear  weapons, or destabilizing numbers and types of advanced conventional  weapons. Mandatory sanctions under the act include (1) a ban on U.S.  government procurement from sanctioned persons and (2) a ban on  licenses for export to or by the foreign person. The sanctions are to be  imposed and last for 2 years, unless the President issues a waiver on the  basis that it is essential to U.S. national interests. The President is  required to report to the Senate Armed Services, Senate Foreign Relations,  House Armed Services,",
      " and House Foreign Affairs committees if the  President determines that a person has made a transfer subject to sanction  under the act. In the report, the President must identify the person,  provide details of the transfer, and describe the actions taken or to be  taken under the act. Iran Sanctions Act This act allows the President to sanction persons who provide Iran with  goods, technology, or services if they know that doing so would contribute  materially to Iran\u2019s ability to acquire or develop (1) chemical, biological, or  nuclear weapons or related technologies or (2) destabilizing numbers and  types of advanced conventional weapons. The act requires the President  to impose at least two of the following sanctions:",
      "    denying Export-Import Bank assistance for exporting to the foreign    banning licenses to export sensitive technologies to the sanctioned    banning U.S. financial institutions from loaning the sanctioned person  more than $10 million in a 1-year period;  if the sanctioned person is a financial institution, banning that institution  from dealing in U.S. debt instruments or serving as repositories for U.S.  government funds; and    banning U.S. Government procurement, as well as other sanctions that fall  under the powers of the International Emergency Economic Powers Act,  including IEEPA-derived executive orders. The President may waive these sanctions if the President determines that  doing so is important to the national interest of the United States.",
      " Nuclear Proliferation  Prevention Act of 1994 This act directs the President, with exceptions, to sanction persons if the  President determines in writing that such persons have \u201cmaterially and  with requisite knowledge\u201d contributed, through the transfer of certain  specified goods or technology, to the efforts of any individual, group, or  non-nuclear-weapon state to (1) acquire unsafeguarded special nuclear  material or (2) to use, develop, produce, stockpile, or otherwise acquire  any nuclear explosive device. The penalty is a ban on United States  government procurement from the sanctioned person lasting at least 1  year.",
      " The President may waive the penalty after the sanction has been  imposed for a year if the President determines, and certifies in writing to  Congress, that continuation would have a serious adverse effect on vital  United States interests. The act further requires the President to sanction  persons if the President determines in writing that a United States person  or a foreign person has (by providing financing) knowingly, materially, and  directly contributed or attempted to contribute to an individual, group, or  non-nuclear weapon state\u2019s (1) acquisition of unsafeguarded special  nuclear material or (2) the use, development, production, stockpiling,",
      " or  other acquisition of any nuclear explosive device. For at least 1 year,  sanctioned persons may not be primary dealers in U.S. government debt  instruments, serve as depositories of U.S. government funds, directly or  indirectly commence any line of business in the United States, or directly  or indirectly conduct new business from a new location in the United  States. The President may waive these sanctions after a year if the  President determines in writing, and certifies to Congress, that their  continuation would have a serious adverse effect on the on the safety and  soundness of the domestic or international financial system or on  domestic or international payments systems.",
      " Arms Export Control Act Portions of the Arms Export Control Act (AECA) require the President to  sanction foreign persons that the President has determined to have (1)  provided to certain countries missile equipment or technology or (2)  contributed to certain countries\u2019 acquisition of chemical or biological  weapons. Section 73 (22 U.S.C. \u00a7 2797b): Under this section, subject to exceptions,  the President shall impose sanctions when the president determines that a  foreign persons have knowingly exported, transferred, or otherwise  engaged in the trade of missile equipment or technology controlled under  the Missile Technology Control Regime (MTCR)",
      " that contributes to the  acquisition, design, development, or production of missiles in a country  that is not an MTCR adherent. The President shall also apply sanctions  when he has made a determination with respect to a foreign person under  section 2410b(b)(1) of Title 50, Appendix (discussed later). Depending on  the nature of the equipment and technology involved, sanctions could  include (1) denying the foreign persons U.S. government contracts related  to missile equipment or technology, (2) denying the foreign persons any  U.S. government contracts, (3) denying licenses for transfers of missile  equipment or technology controlled under the Arms Export Control Act to  the sanctioned persons,",
      " (4) denying licenses for the transfer of all items on  the United States Munitions List to the sanctioned persons, or (5)  prohibiting the importation of products produced by the sanctioned  persons into the United States. The President may waive these sanctions in  certain cases specified in the act. The President may also decide to apply a  waiver with respect to a product or service if the President certifies to  Congress that (1) the product or service is essential to the national  security of the United States and (2) such person is a sole source supplier  of the product or service, and an alternative is not available and cannot be  made available in a timely manner.",
      " Section 81 (22 U.S.C. \u00a7 2798): Under this section, the President is required  to sanction, subject to certain exceptions, foreign persons the President  determines to have knowingly and materially contributed, through the  export of certain goods or technology or any other transaction not already  subject to sanctions under the Export Administration Act, to the efforts of  certain foreign countries to use, develop, produce, stockpile, or otherwise  acquire chemical or biological weapons. The sanctions are a ban on U.S.  government procurement from the foreign person and a ban on imports  into the United States from the foreign person for at least 12 months.",
      " After  a year of imposing the sanctions, the President may waive the sanctions by  certifying to Congress that doing so is important to the national security  interests of the United States. Export Administration Act  Portions of this act require the President to sanction foreign persons that  are determined to have (1) provided to certain countries missile  equipment or technology or (2) contributed to certain countries\u2019  acquisition of chemical or biological weapons. Section 11B (50 app. U.S.C. \u00a7 2410b): Subject to certain exceptions, the  President shall impose sanctions when the President determines that a  foreign person has knowingly exported,",
      " transferred, or otherwise engaged  in the trade of any MTCR equipment or technology that contributes to the  design, development, or production of missiles in a non-MTCR country.  The section also calls for sanctions on persons who have conspired or  attempted to engage in or facilitated such export, transfer, or trade. The  President shall also impose sanctions under this act if the President makes  a determination with respect to a foreign person under section 73(a) of the  Arms Export Control Act (22 U.S.C. \u00a7 2797b(a)) (discussed above).  Depending on circumstances specified in this section,",
      " sanctions could  include a 2-year denial of specified licenses for the transfer to the  sanctioned person of AECA-controlled missile equipment or technology  and a 2-year ban on imports into the United States of products produced  by the foreign person. The President may waive these sanctions in certain  specified cases. Section 11C (50 app. U.S.C. \u00a7 2410c): This section requires the President to  impose sanctions, subject to certain exceptions, on foreign persons  determined to have \u201cknowingly and materially\u201d contributed to the efforts  of state sponsors of terrorism and certain other countries to use,  develop, or acquire chemical or biological weapons through certain  exports from a foreign country.",
      " The exported goods or technology must be  items that the United States would control under the Export  Administration Act if the items were of U.S. origin. Foreign persons are  subject to bans of at least 1 year on U.S. government procurement and on  imports into the United States from the foreign person. The President may  issue a waiver after 12 months by certifying to Congress that doing so is  important to the national security interests of the United States. Appendix III: Comments from the  Department of the Treasury The following are GAO\u2019s comments on the Department of the Treasury\u2019s  letter. GAO Comments 1.",
      "  Treasury\u2019s statement is in contrast with statements contained in a 2009  Treasury internal budget request. As cited in our draft report, the  request stated that OFAC\u2019s information processes were hampering \u201cthe  speed, efficacy, reliability and security\u201d of OFAC\u2019s \u201cenforcement and  compliance activities.\u201d Our draft report also noted that a Treasury  official had informed U.S. Customs and Border Protection officials that  Treasury\u2019s licensing information systems could not provide CBP with  more complete and timely Treasury licensing information. CBP  officials stated that they had asked for the information to help CBP  agents at U.S. ports validate licenses for exports to Iran.",
      "  However, for  the sake of clarity, we have modified the title of our report.   2.  While Treasury is able to access and share information on licenses for  medical and agricultural exports to Iran to some degree, it cannot do  so in a timely and complete manner. For example, Treasury required  more than 2 months to provide us with requested data on medical and  agricultural export licenses. It required more than 4 months to provide  us with 34 licenses for the export of other types of goods issued over  the preceding 18 months. These licenses included a license for the  export of aircraft equipment with potential military applications.",
      " 3.  ACE is a trade processing system that has been in development by  CPB since 2001. Intended to automate border processing, ACE is being  deployed in phases. As Treasury notes in its comments, ACE is not  ready to accept export data that would be of use to enforcement  agencies. 4.  As noted above, we have modified the title of our report for the sake of  clarity. Appendix IV: Comments from the  Department of Commerce The following is GAO\u2019s comment on the Department of Commerce\u2019s letter  dated February 24, 2010. GAO Comment The Bureau of Industry and Security\u2019s comments on pages 39 and 40 are  not directed at our draft report,",
      " but are instead directed at the preceding  comments, which were submitted by the Bureau of the Census. The  Bureau of Industry and Security and the Bureau of the Census are separate  bureaus within the Department of Commerce. Appendix V: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the contact named above, Tet Miyabara (Assistant Director),  Patrick Breiding, Joseph Clifton, Lynn Cothern, Etana Finkler, Grace Lui,  Lauren Membreno, and Pierre Toureille made key contributions to this  report. Martin De Alteriis and Justin Fisher provided technical assistance.\n"
    ],
    "length": 10309,
    "hardness": null,
    "role": null
  },
  {
    "id": 81,
    "question": null,
    "answer": "Reports of a mass casualty chemical weapons attack in the suburbs of Damascus are reshaping the long-running and contentious debate over possible U.S. intervention in Syria's bloody civil war. Obama Administration officials and some foreign governments report that on August 21, 2013, forces loyal to Syrian President Bashar al Asad attacked opposition-controlled areas in the suburbs of the capital with chemical weapons, killing hundreds of civilians, including women and children. The Syrian government has denied the accusations categorically and blames the opposition for the attack. United Nations inspectors who were in Syria to investigate other alleged chemical weapons attacks collected and are analyzing information related to the incident. Varying accounts suggest that several hundred to more than 1,000 people were killed from exposure to a poisonous gas, with symptoms consistent with exposure to the nerve agent sarin.  Possible punitive U.S. military action against the Asad regime is now the subject of intense debate, amid the broader ongoing discussion of U.S. policy toward the Syrian civil war and its regional consequences. The August 21 incident is the latest in a string of reported instances where Syrian forces appear to have used chemical weapons despite President Obama's prior statement that the transfer or use of chemical weapons is \"a red line\" that would \"change his calculus.\" The President and senior members of his Administration have argued that the United States has a national security interest in ensuring that \"when countries break international norms on chemical weapons they are held accountable.\" At the same time, President Obama still maintains that extensive, sustained U.S. military intervention to shape the outcome of Syria's civil conflict is undesirable. Prior to the August 21 incident, U.S. military leaders had outlined options to accomplish a range of U.S. objectives, while warning that U.S. military involvement \"cannot resolve the underlying and historic ethnic, religious and tribal issues that are fueling this conflict.\" Alternatives to military action also are under intense consideration. On September 10, Syrian officials responded to a Russian disarmament proposal by signaling their willingness \"to disclose the locations of chemical weapons, to stop producing them, and to reveal these locations to representatives of Russia, other states, and the United Nations\" with the goal of \"ending our possession of all chemical weapons.\" Members of the United Nations Security Council began discussing proposals to implement an international framework for such a disarmament initiative. Members of Congress have expressed a broad range of views on the question of an immediate U.S. military response and the proposed disarmament initiative. Some express support for military action and others express opposition or question how a military response would advance broader U.S. policy goals. Similarly, some Members seek to explore the potential of disarmament proposals and others warn that it may delay a forceful U.S. response or undermine U.S. policy with regard to Syria's civil war. For more than two years, many Members of Congress have debated the potential rewards and unintended consequences of deeper U.S. involvement in Syria. Some Members express concern that the Administration's policy of providing support to the fractured Syrian opposition could empower anti-American extremist groups, while others warn that failure to back moderate forces could prolong fighting and strengthen extremists.  As Members of Congress consider the merits of possible military intervention in Syria, they also are reengaging in long-standing discussions about the proper role for Congress in authorizing and funding U.S. military action abroad and the use of force in shaping global events or deterring dictatorships from committing atrocities. This report attempts to provide answers to a number of policy questions for lawmakers grappling with these short- and long-term issues.\n",
    "docs": [
      "Update as of September 12, 2013 The Syrian government's apparent acceptance of a Russian proposal for Syria to acknowledge its chemical weapons and place them under international control has recast the ongoing debates over how to respond to an August 21 chemical weapons attack and bring an end to the Syrian civil war. Other parties including Senator Richard Lugar had proposed a U.S.-Russian-facilitated disarmament initiative prior to the announcement. On September 10, Syrian officials signaled their willingness \"to disclose the locations of chemical weapons, to stop producing them, and to reveal these locations to representatives of Russia, other states, and the United Nations\"",
      " with the goal of \"ending our possession of all chemical weapons.\" On September 12, in an interview on Russian television, President Asad reportedly said that \"Syria is placing its chemical weapons under international control because of Russia. The U.S. threats did not influence the decision.\" President Asad also stated that his government will be sending documents \"in the next few days\" to the United Nations for joining the international convention that bans the use of chemical munitions. Speaking in a national address on September 10, President Barack Obama said:... over the last few days, we've seen some encouraging signs, in part because of the credible threat of U.S.",
      " military action, as well as constructive talks that I had with President Putin. The Russian government has indicated a willingness to join with the international community in pushing Assad to give up his chemical weapons. The Assad regime has now admitted that it has these weapons and even said they'd join the Chemical Weapons Convention, which prohibits their use. It's too early to tell whether this offer will succeed, and any agreement must verify that the Assad regime keeps its commitments, but this initiative has the potential to remove the threat of chemical weapons without the use of force, particularly because Russia is one of Assad's strongest allies. I have therefore asked the leaders of Congress to postpone a vote to authorize the use of force while we pursue this diplomatic path.",
      " I'm sending Secretary of State John Kerry to meet his Russian counterpart on Thursday, and I will continue my own discussions with President Putin. I've spoken to the leaders of two of our closest allies -- France and the United Kingdom -- and we will work together in consultation with Russia and China to put forward a resolution at the U.N. Security Council requiring Assad to give up his chemical weapons and to ultimately destroy them under international control. President Obama and senior members of his Administration continue to seek authorization from Congress for a limited use of military force against the Asad regime while exploring the potential for the establishment of international control over Syria's chemical weapons stockpiles and related elements of its chemical weapons program.",
      "  The governments of China, the United Kingdom, and France have responded favorably to the proposal, and, as of September 11, Russia had rejected a French plan for a binding United Nations Security Council resolution that could be enforced with military action. U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov are scheduled to meet in Geneva, Switzerland, on September 12 to discuss the proposal further. Some Syrian rebel leaders have rejected the proposal and characterized it as a delaying tactic while maintaining their calls for international assistance and punishment of the Syrian government.  Overview and Summary of Recent Developments On August 30, the Obama Administration presented intelligence analysis stating with \"high confidence\"",
      " that the Syrian government was responsible for an August 21 chemical weapons attack against civilians in rebel-held areas of the suburbs of Damascus. The Syrian government continues to categorically deny any responsibility for any chemical weapons attack.  President Obama called the Syrian government's reported use of chemical weapons \"an assault on human dignity\"\u00a0that \"presents a serious danger to our national security.\" He further requested that Congress authorize the use of force for military operations \"against Syrian regime targets\" to \"hold the Assad regime accountable for their use of chemical weapons, deter this kind of behavior, and degrade their capacity to carry it out.\" According to the President, such military operations would be \"limited in duration and scope\"",
      " and \"would not put boots on the ground.\"  In the wake of the Russian disarmament proposal, President Obama requested that lawmakers pause in their formal consideration of proposed legislation to authorize the use of force in Syria. Nevertheless, debate continues among Members of Congress about the pros and cons of proposed authorization approaches as well as the disarmament proposal now under discussion. President Obama has stated his view that \"the credible threat of U.S. military action\" contributed to the emergence of the disarmament initiative, and has underscored that he has \"ordered our military to maintain their current posture to keep the pressure on Assad and to be in a position to respond if diplomacy fails.\" A draft resolution authorizing the use of force submitted to Congress by the White House would authorize the President:",
      " to use the Armed Forces of the United States as he determines to be necessary and appropriate in connection with the use of chemical weapons or other weapons of mass destruction in the conflict in Syria in order to \u2013 (1) prevent or deter the use or proliferation (including the transfer to terrorist groups or other state or non-state actors), within, to or from Syria, of any weapons of mass destruction, including chemical or biological weapons or components of or materials used in such weapons; or (2) protect the United States and its allies and partners against the threat posed by such weapons. Lawmakers in the Senate and House are considering alternative authorization proposals, amid concerns that the Administration's proposed text may not sufficiently limit the scope or duration of any potential military response.",
      " Others reportedly are drafting proposals that would reflect the disarmament proposal under consideration and could seek to make an authorization for the use of U.S. military force contingent on the satisfaction of criteria related to the enforcement of a disarmament agreement.  On September 4, the Senate Foreign Relations Committee debated and adopted an alternative resolution authorizing the use of military force for specific purposes, including to deter further use of chemical weapons and to prevent the transfer to terrorist groups or other state or non-state actors within Syria of any weapons of mass destruction. The provision would limit the deployment of U.S. forces on the ground for \"combat operations\" but may not constrain the deployment of U.S.",
      " forces in Syria for other purposes. As of September 11, the House had not formally considered an alternative authorization proposal, although some Members had circulated draft proposals or introduced measures that would restrict the availability of funds for U.S. military operations or support for opposition groups in Syria.  In Syria, the brutal civil war continues, even as Syrian government forces were reported to be taking measures to prepare for potential U.S.-led military operations against them. President Bashar al Asad has stated that the United States and others accusing it of carrying out chemical weapons strikes have not presented any evidence to support their allegations, and he has warned that external military intervention in Syria's civil war risks igniting a regional conflict.",
      " U.S. military officials have confirmed that the Syrian government has taken steps to prepare for potential attacks, but as of September 10, Chairman of the Joint Chiefs of Staff General Martin Dempsey testified that \"The indications are, today, that [Syria's chemical weapons capability] does remain under the firm control of the regime.\" Syrian officials have requested that the United Nations Security Council act to prevent aggression against Syria.  Iran's Supreme Leader, Grand Ayatollah Ali Khamene'i, has said that a U.S. attack on Syria would be a \"disaster for the region.\" There have been similar statements from other senior Iranian leaders,",
      " but these leaders have not threatened that Iran itself would conduct any retaliation. Iranian Revolutionary Guard Commander Major General Mohammed Ali Jafari has stated that, \"The U.S. imagination about limited military intervention in Syria is merely an illusion, as reactions will be coming from beyond Syria's borders.\" Russian and Chinese officials remain opposed to the U.S. proposal for punitive military strikes, while the Arab League has modified its original position insisting on United Nations Security Council action to call for the Security Council and the international community to \"take the deterrent and necessary measures against the culprits of this crime for which the Syrian regime bears responsibility.\" The Arab League has welcomed the Russian disarmament proposal,",
      " but Arab League Secretary General Nabil al Arabi has emphasized that the group remains focused on punishment for the August 21 incident and international action to bring an end to the civil war.  United Kingdom leaders stated prior to the Russian proposal that they have no intention of seeking new authorization from Parliament to participate in any international military operation following Parliament's rejection of a measure to do so. French government officials have proposed measures to implement the Russian proposal and presented supporting intelligence on September 2 to French legislators concerning what they describe as \"the massive use of chemical agents\" by Syrian government forces. U.S. military assets remain in place in the vicinity of Syria.",
      " As of September 2, five guided missile destroyers were reported to be deployed in the eastern Mediterranean Sea: the USS Stout, USS Gravely, USS Mahan, USS Barry, and USS Ramage. The USS San Antonio, carrying forces from the 26th Marine Expeditionary Unit, and unspecified attack submarines also were reported to be nearby. The USS Kearsarge and the USS Nimitz aircraft carrier strike group were reported to be deploying westward toward the Red Sea. In announcing his decision that punitive military action was required on August 31, President Obama stated, \"I'm comfortable going forward without the approval of a United Nations Security Council that,",
      " so far, has been completely paralyzed and unwilling to hold Asad accountable.\" President Obama also said, \"I believe I have the authority to carry out this military action without specific congressional authorization.\" Assessment The war in Syria and the debate over possible punitive U.S. military action against the Asad regime for its alleged use of chemical weapons pose a uniquely challenging series of questions for policy makers. The overarching questions remain how to define, prioritize, and secure the core interests of the United States with regard to Syria's complex civil war. The immediate questions are whether and how best to respond to the apparent use of chemical weapons in Syria and how such a response might affect U.S.",
      " interests and standing regionally and globally. In weighing these questions, many Members of Congress and Administration officials are seeking both to protect concrete U.S. national security interests and to preserve abstract international security principles that may serve those interests.  A mass casualty chemical weapons attack in the Damascus suburbs on August 21 was the latest and most deadly of a string of reported instances where Syrian forces allegedly have used chemical weapons despite President Obama's prior statement that the transfer or use of chemical weapons is \"a red line\" that would \"change his calculus.\" The President and senior members of his Administration have argued that the United States has a national security interest in ensuring that \"when countries break international norms on chemical weapons they are held accountable.\" Administration officials and some observers believe that by failing to respond after setting out a so-called \"red line,\" the United States would risk not only undermining any international norms against the use of such weapons but would risk undermining its own credibility.",
      "  By his own account, President Obama believes that extensive, sustained U.S. military intervention to shape the outcome of Syria's civil conflict is undesirable. Instead, the Obama Administration has worked with Congress to increase U.S. assistance to non-radical elements of the opposition. In response to previous instances of alleged chemical weapons use, the Administration reportedly notified Congress in July 2012 of its intent to begin covert U.S. arming of select groups. On August 31, the President stated his conclusion that the United States should respond to alleged Syrian chemical weapons use with limited militarily strikes.  Administration officials have cited a number of reasons for their skepticism of direct military involvement to shift the balance of power in the underlying conflict,",
      " including fears of exacerbating the violence; inviting greater regional spillover or intervention; or opening a power vacuum that could benefit extremists. Other foreign policy priorities also have influenced the Administration's position, such as a desire to maintain limited international consensus on Iran's nuclear program and concern that sectarian and strategic competition in Syria could ignite a regional conflict and threaten U.S. allies and security interests. While condemning Asad as a thug and a murderer and aiding some of his adversaries, U.S. officials have continued to stress the need for a negotiated political solution to the conflict in the hopes of keeping the Syrian state intact, securing its chemical weapon stockpiles and borders,",
      " and combating extremist groups now active there.  Some critics have argued that the potential risks that even a limited military response could pose to these objectives outweigh the potential benefits to the United States of reasserting an international standard or being seen to have reliably followed through on a commitment to act. These arguments suggest that if a military strike makes the political solution desired by U.S. officials less likely, then the destabilizing conflict could continue or worsen. Similarly, this line of argument suggests that if military operations were to dramatically degrade remaining state authority\u2014whether intentionally or unintentionally\u2014then undesired outcomes with regard to terrorism, proliferation, or mass atrocities could occur.",
      " Still other critics of the Administration, including some Members of Congress, charge that U.S. hesitation to intervene militarily to protect Syrian civilians and/or help oust the Asad government has unnecessarily prolonged the fighting. Over time, these critics argue, the costs of inaction have grown intolerably as the humanitarian situation has deteriorated, violent extremist groups have seized the initiative, and Syria's neighbors, including several U.S. partners, have been overwhelmed by refugees and threatened with violence. Others have argued that by failing to halt the fighting in Syria, the United States and others are exacerbating already volatile Sunni-Shiite sectarian tensions throughout Middle East,",
      " thus posing risks to other strategically important countries. Finally, some critics argue that U.S. global credibility is being diminished by Asad's reluctance to step down or end abuses of civilians despite U.S. demands. The Russian disarmament proposal and Syria's reported acceptance of its basic terms have introduced even further complication to these debates. At present debate centers on the parameters of the proposal, the feasibility of implementation, the risks and rewards it poses relative to U.S. regional security and nonproliferation goals, and its implications for U.S. international leadership. Syrian opposition leaders' rejection of the proposal and their calls for punitive action and assistance in their struggle against the Asad regime may complicate U.S.",
      " relations with opposition groups moving forward. Reconciling immediate U.S. goals with regard to the August 21 incident, medium-term U.S. goals with regard to the conflict and Syria, and overarching goals related to weapons of mass destruction may prove challenging. Sorting through these competing perspectives and prescriptions now falls to Members of Congress as they consider the President's proposed course of action, his request that Congress authorize the use of force, the feasibility of international disarmament proposals for Syria, and the future of U.S. policy with regard to the conflict in Syria and its regional consequences. Summary of U.S. Intelligence on August 21 Incident  An unclassified summary of the U.S.",
      " intelligence community's assessment released by the White House concludes, among other things, that:  The United States Government assesses with high confidence that the Syrian government carried out a chemical weapons attack in the Damascus suburbs on August 21, 2013. A preliminary U.S. government assessment determined that 1,429 people were killed in the chemical weapons attack, including at least 426 children. The U.S. intelligence community has intelligence that leads it to assess that Syrian chemical weapons personnel\u2014including personnel assessed to be associated with the Syrian Scientific Studies and Research Center (SSRC), the entity responsible for Syria's chemical weapons program\u2014were preparing chemical munitions prior to the attack.",
      " The U.S. intelligence community assesses that the opposition has not used chemical weapons and the scenario in which the opposition executed the attack on August 21 is highly unlikely. Satellite detections corroborate that attacks from a regime-controlled area struck neighborhoods where the chemical attacks reportedly occurred\u2014including Kafr Batna, Jawbar, 'Ayn Tarma, Darayya, and Mu'addamiyah (see Figure 1 above). On September 1, Secretary of State John Kerry further stated that tests of blood and hair samples from Syrian first responders obtained by the United States indicated exposure to the nerve agent sarin.  United Nations weapons inspectors have departed Syria,",
      " and U.N. Secretary Ban Ki-moon has requested that the team \"expedite the mission's analysis of the samples and information it had obtained without jeopardizing the scientific timelines required for accurate analysis, and to report the results to him as soon as possible.\" Conflict Update  The August 21 incident occurred as the popular-uprising-turned-armed-rebellion in Syria is in its third year and has devolved into a bloody struggle of attrition between the government and a diverse array of opposition militias. Over the course of Syria's civil war, momentum has shifted between government and rebel forces. Support provided by Iran and Lebanese Hezbollah fighters appears to have helped the Asad regime wrest the initiative from the opposition near the city of Homs and to launch counteroffensives on the outskirts of the capital.",
      " The August 21 attack appears to have been part of a fierce and ongoing Syrian military bombardment of rebel-held eastern suburbs of Damascus.  Various opposition forces control areas of northwestern, eastern, and southern Syria (see Figure 2 below). In areas near the northern city of Aleppo, diverse rebel forces have announced limited tactical successes in recent weeks, including the fall of a key military air base. According to close observers of the conflict, some extremist militia groups are seeking to assert political and social control over some areas in which they operate, while they and others among the range of \"extraordinarily fractured\" militia groups continue to battle regime forces for contested areas.",
      " Reportedly, the Supreme Military Council (SMC), to which the United States has provided aid, \"is still far from a functioning rebel leadership.\" European press reporting contends that offensives by rebels in northern Syria and by foreign trained rebels in the vicinity of Damascus have caused serious alarm among regime leaders since mid-August. United Nations officials cite estimates that over 100,000 Syrians have been killed in the conflict. As many as 4.25 million Syrians have been displaced inside the country and more than 2 million Syrian refugees are in neighboring countries. The Syrian conflict and the humanitarian crisis it has created have deepened the economic and political challenges facing the region and exacerbated sectarian tensions and violence,",
      " particularly in Iraq and Lebanon. To date, the United States has provided over $1 billion in humanitarian aid in Syria and neighboring countries, with U.N. appeals seeking over $4 billion in assistance. President Obama called for Syrian President Bashar al Asad's resignation in August 2011, but, as noted above, the Obama Administration has rejected calls for more direct U.S. intervention in Syria. Nevertheless, the intensifying regional costs of the Syrian crisis and reports of chemical weapons use by Syrian government forces have placed increasing pressure on the Obama Administration to respond. Secretary Kerry has signaled that the Administration may seek to further augment U.S. support to some opposition elements in parallel with any limited military operations focused on chemical weapons.",
      " In the 113 th Congress, some Members have introduced proposed legislation that would authorize expanded assistance to the opposition. H.R. 1327, the Free Syria Act of 2013, would, among other things, authorize the President, under certain conditions and with various reporting and certification requirements, to supply nonlethal and/or lethal support to Syrian opposition groups. S. 960, the Syria Transition Support Act of 2013, would, among other things, authorize the President, notwithstanding any other provision of law that restricts assistance to Syria, to provide assistance, including defense articles, defense services, and training to vetted opposition forces.",
      " The Senate Foreign Relations Committee approved S. 960 as amended by a 15-3 vote in May 2013. Proposed Authorizations for the Use of Military Force Current debate focuses on the possible ramifications of an authorization for the use of military force with regard to Syria. Key subjects of debate include the purposes of any such authorization; potential location and targets of military force; the type of force that may be employed, including whether or not U.S. ground forces are authorized; the potential duration of military operations; and the resources available for such operations. Historical Perspective Legal scholars have continually compared and contrasted congressional authorizations of the use of force over time,",
      " and generally categorize them in terms of their relative limits on or permissiveness of executive authority and action. According to one study: The primary differences between limited and broad authorizations are as follows: In limited authorizations, Congress restricts the resources and methods of force that the President can employ, sometimes expressly restricts targets, identifies relatively narrow purposes for the use of force, and sometimes imposes time limits or procedural restrictions. In broad authorizations, Congress imposes few if any limits on resources or methods, does not restrict targets other than to identify an enemy, invokes relatively broad purposes, and generally imposes few if any timing or procedural restrictions. Some argue,",
      " however, that provisions attempting to circumscribe the President's ability to conduct military operations improperly interfere with the President's commander-in-chief powers under Article II of the Constitution. Past cases suggest that limits on appropriations may provide the most direct and effective means of asserting congressional control over military operations. For CRS analysis of these questions, see \" War Powers \" below and CRS Report R41989, Congressional Authority to Limit Military Operations, by [author name scrubbed], [author name scrubbed], and [author name scrubbed], and CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications,",
      " by [author name scrubbed] and [author name scrubbed]. Current Proposals and the Situation in Syria For a side-by-side comparison of three proposed resolutions to authorize the use of military force in Syria with commentary, see the Appendix. The following analysis is based on texts available as of September 6, 2013. As described above, a draft resolution authorizing the use of force submitted to Congress by the White House would authorize the President: to use the Armed Forces of the United States as he determines to be necessary and appropriate in connection with the use of chemical weapons or other weapons of mass destruction in the conflict in Syria in order to \u2013 (1)",
      " prevent or deter the use or proliferation (including the transfer to terrorist groups or other state or non-state actors), within, to or from Syria, of any weapons of mass destruction, including chemical or biological weapons or components of or materials used in such weapons; or (2) protect the United States and its allies and partners against the threat posed by such weapons. Alternate proposals are under consideration in both the Senate and House of Representatives. On September 4, the Senate Foreign Relations Committee debated and adopted, by a vote of 10-7 (with one \"present\") a resolution ( S.J.Res. 21 ) to authorize the President,",
      " subject to required certifications, to:  use the Armed Forces of the United States as the President determines to be necessary and appropriate in a limited and specified manner against legitimate military targets in Syria, only to\u2014 (1) respond to the use of weapons of mass destruction by the Government of Syria in the conflict in Syria;  (2) deter Syria's use of such weapons in order to protect the national security interests of the United States and to protect United States allies and partners against the use of such weapons;  (3) degrade Syria's capacity to use such weapons in the future; and  (4) prevent the transfer to terrorist groups or other state or non-state actors within Syria of any weapons of mass destruction.",
      " The Senate Foreign Relations Committee proposal states that it does not \"authorize the use of the United States Armed Forces on the ground in Syria for the purpose of combat operations.\" The resolution does not define \"combat operations.\" It remains unclear whether the resolution as reported by the committee would authorize members of the U.S. Armed Forces to operate on the ground in Syria in non-combatant (i.e., advisory, logistical, intelligence, or other enabling) roles to carry out the purposes specified in the resolution. As reported, the resolution includes a sunset clause of 60 days for the authorization, with provision for one 30-day extension. Representatives Chris Van Hollen and Gerald Connolly have circulated a draft authorization for the use of military force that would authorize the President \"to use the United States Armed Forces to prevent and deter the further use of chemical weapons in Syria or by Syria against any other group or country.\" The authorization would expire \"upon the conclusion of each military action conducted by the United States Armed Forces beginning after the initial military action conducted by the United States Armed Forces\"",
      " unless the President certifies to Congress in writing that the President finds \"with high confidence\" that Syria has used chemical weapons subsequent to the conclusion of \"the immediately preceding military action conducted by the United States Armed Forces.\" As of September 4, the draft proposal does not define \"military action.\" The authorization would expire completely after 60 days. With regard to Syria, matters for possible consideration may include whether or not allies of the Syrian government, such as Iran, Lebanese Hezbollah, or other non-state actors who may gain access to chemical or biological weapons or components, are intended as potential targets of U.S. military action and if so,",
      " what the implications of conflict with those actors might be. The costs and duration of any potential operation may be relevant, as well as the potential for retaliatory action by the Syrian government and its supporters that could threaten allies to whom the United States has made various security commitments, including Turkey, Jordan, and Israel.  Secretary of State Kerry also has discussed some hypothetical contingencies, including the prospect that U.S. forces may be required to act to secure Syria's stockpiles of chemical weapons. The Administration has not indicated in recent testimony whether such actions may require U.S. \"boots on the ground.\" In testimony before the Senate Foreign Relations Committee he said,",
      "  in the event Syria imploded, for instance, or in the event there was a threat of a chemical weapons cache falling into the hands of al-Nusra or someone else, and it was clearly in the interests of our allies and all of us -- the British, the French and others -- to prevent those weapons of mass destruction falling into the hands of the worst elements, I don't want to take off the table an option that might or might not be available to a president of the United States to secure our country. Congress also may wish to assess criteria for measuring the success of any specific planned action and how such action fits within broader U.S.",
      " regional and international policy goals; for example if limited strikes fail to deter or prevent the use or proliferation of chemical weapons in Syria, will the United States pursue continued or wider military action? Similarly, if the Syrian government refrains from further use of chemical weapons but continues indiscriminate attacks on rebel held areas using conventional weaponry, will a limited U.S. military action be deemed successful? What effect might strikes on Syrian military targets have on the current dynamics of the Syrian civil war and how might rebel groups, whether moderate or extremist, potentially exploit U.S. military action? Issues for Congress Chemical Weapons Issues18 On the night of August 21, an alleged chemical weapons attack killed hundreds in a neighborhood on the outskirts of Damascus.",
      " If confirmed, this would be the largest number of casualties from a chemical weapons attack in this conflict to date. The United States, the United Kingdom, and France have issued statements saying that the Syrian government used chemical weapons in the attack. The White House released a detailed intelligence assessment on August 30. As with past cases of alleged chemical weapons use in Syria this year, the Syrian government denied that it had conducted the attack and blamed opposition groups. Most experts observing the victims of the attack say that symptoms are consistent with the use of the nerve agent sarin, a type of chemical weapon in Syria's large arsenal.  The August 30,",
      " 2013, White House statement said that the U.S. intelligence community assesses that the Asad regime used a nerve agent in a \"large-scale coordinated rocket and artillery attack,\" which killed approximately 1,429 people. It also said that the opposition has not used chemical weapons. The U.S. government assesses that the Asad regime has used chemical weapons, including the nerve agent sarin, on a small scale against the opposition multiple times in the last year. These assessments say that the Syrian government has used chemical weapons \"primarily to gain the upper hand or break a stalemate in areas where it has struggled to seize and hold strategically valuable territory.\"  President Obama and other world leaders have said that the use of chemical weapons against the civilian population would be met with consequences,",
      " which could include the use of military force. In statements reacting to alleged chemical weapons incidents in Syria, U.S. officials have referred to several distinct reasons why the use of chemical weapons by the Syrian government raises fundamental concerns for the United States:  the unacceptability of any use of chemical weapons, given the large international consensus that views chemical weapons as having inherently malicious qualities; the targeting of a civilian population, especially in large numbers, regardless of the weapons employed; the potential for the proliferation of chemical weapons to other parties, such as those hostile to the United States; and the potential ramifications of escalated or expanded violence in Syria, including the loss of control of chemical weapons and/or their use on neighboring countries and U.S.",
      " interests in the region. These concerns are reflective of major trends in national security strategy from the past decade, including intervention on humanitarian grounds, preventing the proliferation of weapons of mass destruction to terrorists, and the upholding of international nonproliferation norms. What is the status of the United Nations chemical weapons inspectors report on Syria? A team of United Nations (U.N.) chemical weapons inspectors went to Syria to examine several sites where attacks were alleged to occur. The inspectors collected samples from the sites, including the site of the August 21 attack, and those samples are being studied. The team's mandate is not to assess who used the weapons,",
      " but rather to determine to the extent possible whether or not chemical weapons were used and what type. According to the U.N., the inspectors are to \"collect as many facts as possible and assess the nature of the extent of any attack using chemical weapons and its consequences.\" The determination of what chemical agents were used could also be used to draw conclusions on the source of the agents (i.e., weaponized sarin versus organo-phosphates from fertilizer or other chemicals). The inspectors were invited to Syria by the Syrian government, but they only arrived in the country on August 18\u2014just before the apparent August 21 attack\u2014after months of negotiating terms of access for the inspections.",
      " Press reports say the team will issue its report next week. Was it too late for U.N. investigators to collect evidence? Media reports have noted that the Syrian military continued to bomb the site of the August 21 attack with conventional weapons. While some physical evidence may have been destroyed at the site, blood and tissue samples from the victims themselves would help the inspectors determine what chemical agent was used. An August 27 United Kingdom joint intelligence committee assessment says, \"There is no immediate time limit over which environmental or physiological samples would have degraded beyond usefulness. However, the longer it takes inspectors to gain access to the affected sites, the more difficult it will be to establish the chain of evidence beyond a reasonable doubt.\" The U.N.",
      " inspectors were reportedly given access to the site and to victims of the attack. What evidence is used to determine CW use? White House statements have described the types of information that has gone into the intelligence assessments about the April 2013 use of sarin. Both the June and August 2013 intelligence assessments have said these sources of information included reporting about Syrian military attack planning and execution, descriptions of attacks, physiological symptoms consistent with exposure to chemical weapons agents, and analysis of physiological samples from multiple victims. Congress may wish to ask the Administration for information on the credibility of this evidence.  What countries have chemical weapons? What international norms exist against their use?",
      " The U.S. intelligence community cites Iran, North Korea, and Syria as having active chemical weapons programs. For decades, there has been a strong norm against the use of chemical weapons. For the past 25 years, no chemical weapons have been used in civil or cross-border warfare. Most countries that have had chemical weapons arsenals in the past have destroyed these weapons under the Chemical Weapons Convention (CWC), or are in the process of destroying them. The CWC addresses the destruction of existing stocks, prevention of proliferation to new states, and assistance to countries that are victims of an attack, but does not prescribe consequences for CW use. Syria is not a party to the CWC.",
      " When were chemical weapons last used on civilians? The Iraqi government used chemical weapons in an attack on Kurdish civilians in the town of Halabja, northern Iraq, on March 16, 1988, killing an estimated 5,000 people. This is considered the largest chemical attack against a civilian population since German atrocities during World War II. The United States did not respond militarily to the attack. Iraq also systematically used chemical weapons against Iran during the Iran-Iraq war in the 1980s without a U.S. or international military response.  What has the Obama Administration said about the importance of the August 21 case? As has been widely reported in the press and in public statements,",
      " the Obama Administration has emphasized that it believes this particular use of chemical weapons may necessitate a response of some kind. Echoing a similar statement he made in August 2012, President Obama stated in an interview on August 28, 2013, that \"I have no interest in any kind of open-ended conflict in Syria, but we do have to make sure that when countries break international norms on weapons like chemical weapons that could threaten us, that they are held accountable.\" The Administration has confirmed the use of the nerve agent sarin in incidents earlier this year; however, the August 21 attack killed civilians on a larger scale than in past incidents.",
      " The Administration has stated that it aims to deter future use of these weapons by Syria and others, as well as to prevent these weapons from being diverted to terrorists or used against U.S. interests or allies in the region. The Administration has also emphasized the norm against the use of chemical weapons. Secretary Kerry said in a speech on August 26 that \"all peoples and all nations who believe in the cause of our common humanity must stand up to assure that there is accountability for the use of chemical weapons so that it never happens again.\" These views were reiterated in more extensive remarks by the Secretary on August 30, discussed above. However, although media speculation about possible military action abounds,",
      " U.S. officials have not directly provided specifics on what kind of response might take place and how that response could prevent future use of chemical weapons in Syria or elsewhere.  Could the United States destroy Syria's chemical weapons stocks through military action? What would be needed to secure chemical weapons sites during an intervention? While it is possible that military strikes could render chemical weapons agents unusable, according to many observers, there would be considerable risk to nearby civilian populations if Syrian chemical weapons facilities were attacked in a military strike from the air. This is because nerve agents could be dispersed into the air in the course of any strike against these facilities. One major concern of the United States is the risk that chemical weapons would fall into the hands of terrorist groups if the Syrian military lost control of or diverted them.",
      " The scale of the CW stocks in Syria would present a great challenge for physical security. General Martin Dempsey, Chairman of the Joint Chiefs of Staff, wrote in a July letter to Congress that \"[t]housands of special operations forces and other ground forces would be needed to assault and secure critical sites.\" The operation would result in the \"control of some, but not all chemical weapons\" and \"would also help prevent their further proliferation into the hands of extremist groups,\" the letter said. U.S. military efforts to date have focused on bolstering security near Syria's borders with neighboring countries such as Jordan and Turkey, perhaps partly to help deter any transfer of chemical weapons out of Syria.",
      " What international legal instruments ban chemical weapons use? Chemical weapons have been banned under the Chemical Weapons Convention (CWC) since 1997. The CWC bans the development, production, transfer, stockpiling, and use of chemical and toxin weapons, mandates the destruction of all chemical weapons production facilities, and seeks to control the production and international transfer of the key chemical components of these weapons. The 189 member states may ask for assistance and protection if they are attacked with chemical weapons. The following countries are not parties to the CWC: Angola, Egypt, Israel, Myanmar, North Korea, South Sudan, and Syria.  The 1925 Geneva Protocol for the Prohibition of the Use in War of Asphyxiating,",
      " Poisonous or Other Gases, and of Bacteriological Methods of Warfare bans the use of chemical or biological agents in warfare against other states, but does not address the use of these weapons in internal conflicts. Syria did sign the Geneva Protocol. How would the international community take control of and destroy the Syrian chemical weapons stockpile? The Syrian government has reportedly accepted a proposal by Russia that it turn over all its chemical weapons to international control. The United Nations Security Council may discuss proposals to accomplish this goal. President Obama said on September 10 that any deal would have to ensure \"verifiable and enforceable destruction.\" Key issues would be verification,",
      " access, and security of international personnel. The Organization for the Prohibition of Chemical Weapons (OPCW) is the international agency that oversees the destruction of chemical weapons once a state has joined the Chemical Weapons Convention. Because Syria is not yet a party to that convention, it would either have to join the CWC or a separate disarmament mechanism may be set up directly by the U.N. Security Council, as happened with Iraq in 1991 (U.N. Security Council Resolution 687). This would most likely use the OPCW as an implementing organization for verification and dismantlement.  The United Nations and the OPCW have had experience successfully monitoring the destruction of chemical weapons in several countries.",
      " In most cases, the country would first declare its stocks and production facilities, and then destroy the weapons under international supervision. The inspectors would verify that the amounts declared were then destroyed. In the case of Syria, as with Iraq in the 1990s, the U.N. Security Council may also mandate that Syria give access to sites that have not been declared but are suspected of holding chemical weapons. However, because Syria is in the midst of civil war, there are many risk factors that have not been present in other cases. First, a top priority is securing the chemical weapons stocks themselves. Second, the inspectors would be at great physical risk without a ceasefire in place.",
      " The conflict also would limit access of inspectors to sites of suspicion. Third, destruction of chemical weapons is a time-consuming, expensive process with great need for safety precautions. Therefore, the initial stage may focus on securing the chemical weapons at predetermined locations or shipped out of the country for storage awaiting destruction. It is not clear who would be guarding this centralized storage locations if they were inside Syria.  In addition, due to the fear that the Assad regime is using the chemical weapons destruction proposal as a way to stave off military strikes, the United States and others may choose to set deadlines for certain steps.  What did the French government propose to the U.N.",
      " Security Council? On September 10, French Foreign Minister Laurent Fabius announced France's intention to present a U.N. Security Council Resolution that would call on the Asad government to dismantle its chemical weapons program. Fabius said the resolution would be proposed under the auspices of Chapter VII of the U.N. Charter, which would allow member states to use all possible means, including military action, to enforce it. Among other things, the resolution would (1) condemn the August 21 chemical weapons attack and punish the perpetrators of the attack in the international justice system; (2) demand that the Asad government's chemical weapons program be placed under international control and be dismantled,",
      " with mechanisms for inspection and monitoring; and (3) provide for \"extremely serious\" consequences for Syrian violation of its obligations under this agreement. Press reports say that the draft resolution France has presented to the U.N. Security Council would give Syria 15 days to issue a full declaration of its chemical weapons and facilities and open those facilities immediately to international inspectors. CRS has not independently verified the proposed draft text. The version described in press reports would also authorize measures under Chapter VII of the U.N. Charter if Syria does not comply. It would appear that the U.N. Secretary General would retain the lead role in inspecting chemical facilities in coordination with the Organization for the Prohibition of Chemical Weapons.",
      " This may be to avoid a possible delay while Syria took the necessary legal steps to accede to the Chemical Weapons Convention, which requires member states to declare and destroy their chemical weapons. As noted above, Russian officials reportedly have rejected elements of the French proposal and discussions are ongoing concerning the way forward. War Powers26 Any deployment of U.S. Armed Forces into the territory, airspace, or waters of Syria implicates generally the war powers vested in Congress under the Constitution, the foremost of which is the authority to declare war. What are the roles and responsibilities of Congress and the President pursuant to the provisions of the War Powers Resolution? The War Powers Resolution,",
      " as amended (WPR; P.L. 93-148 ), is intended to provide a process for congressional-executive branch cooperation and the assertion of congressional oversight and authority related to involving U.S. Armed Forces in armed conflict. The WPR requires the President to consult with Congress prior to introducing U.S. Armed Forces into hostilities or situations in which hostilities are imminent, and to report to the Speaker of the House of Representatives and the President pro tempore of the Senate within 48 hours of: introducing U.S. Armed Forces into current or imminent hostilities; deploying combat-equipped U.S. Armed Forces into a foreign country's territory,",
      " airspace, or waters; or increasing substantially the number of U.S. Armed Forces already located in a foreign country. Such report is required to include the reasons necessitating such actions, the President's authority to undertake such actions, and the estimated scope and duration of the hostilities or other involvement. Authority to use force, according to the WPR, is not to be inferred from other provisions of law or treaties unless those instruments specifically authorize the introduction of U.S. Armed Forces that has occurred in each circumstance. The WPR states that unless Congress enacts a declaration of war or statutory authorization for the use of force, or Congress cannot convene due to an attack on the United States,",
      " the President must withdraw U.S. Armed Forces 60 days after introducing them into current or imminent hostilities. The 60-day period begins the day the President was required to report to Congress on such introduction of U.S. Armed Forces. The President may extend the period by 30 days to safely withdraw U.S. Armed Forces from hostilities. Each President since the WPR's enactment has refused to concede that this withdrawal requirement is appropriate under the Constitution, presumably given its possible interference with the President's powers as commander-in-chief under Article II. The WPR provides for expedited consideration of legislative proposals to either authorize continuing the involvement of U.S.",
      " Armed Forces in hostilities through joint resolution, or to require a withdrawal of U.S. Armed Forces at any time after introduction of such forces through a concurrent resolution. The use of the concurrent resolution to require U.S. Armed Forces withdrawal is considered to be an example of a \"legislative veto,\" a mechanism that has been deemed unconstitutional by the Supreme Court when included in other legislation. What are some possible considerations if Congress takes up authorization for the use of military force against Syria? A congressional declaration of war against Syria is seen as unlikely, given historical practice since World War II. If Congress considers a proposal to statutorily authorize the use of force against Syria,",
      " it might consider provisions to specify the purpose of such authorization and the objectives of the use of military force, and to place limits on the scope and duration of such authorization. It is asserted generally that statutory authorizations place the President in a stronger position legally and politically to prosecute armed conflict.  Congress has included provisions limiting the use of funds for the military in defense authorization and appropriation acts, and could include them in an authorization for use of force in Syria. H.J.Res. 58, introduced on September 9, 2013, would state that:  No funds available to any United States Government department or agency may be used for the use of force in,",
      " or directed at, Syria by the United States Armed Forces unless a subsequent Act of Congress specifically authorizes such use of force or there is an attack or imminent attack on the United States, its territories or possessions, or the United States Armed Forces. Some argue, however, that any provisions attempting to circumscribe the President's ability to conduct military operations would improperly interfere with the President's commander-in-chief powers under Article II of the Constitution. In any case, if Congress does not otherwise act to limit appropriations that can be used to continue such military operations, constricting provisions in an authorization to use force will likely fail to limit the President's ability to continue any commenced military operations in Syria.",
      "  Cost and Budgetary Resources for Intervention27 Since the President's September 10, 2013, speech on Syria, congressional concerns have broadened to include the potential costs and funding sources that would be tapped to carry out either various U.S. military actions in Syria or to secure Syria's chemical weapons (CW) stockpiles and eliminate its CW capabilities. Speaker of the House John Boehner, for example, raised the question of whether the Administration plans to submit a supplemental appropriations request to Congress if \"the scope and duration of the potential military strikes exceed the initial planning\" in an August 28, 2013, letter to President Obama.",
      "  In testimony to the Senate Foreign Relations Committee on September 3, 2013, Secretary of State John Kerry said that President Obama is asking for authorization \"to degrade and deter Bashar al Asad's capacity to use chemical weapons,\" with no American boots on the ground; Secretary Hagel characterized the operation as \"limited in duration and scope... [and] tailored to respond to the use of chemical weapons.\" Details about specific military plans have not been made publicly available so estimating the cost is speculative at this point with some potential benchmarks based on the bombing of Libya in March 2011. In response to a question about whether members of the Arab League supporting U.S.",
      " operations would \"offset any of the costs,\" Secretary of State John Kerry said that some of the Arab countries have offered to \"bear costs and to assist... and to [possibly] carry that cost.\" In recent days, some observers have suggested that the cost of securing and destroying Syria's chemical weapons stocks and possibly deliver options could be substantial but there is considerable uncertainty about both the potential cost and the sharing of those costs.  The cost of any military intervention or to secure chemical weapons stocks could range widely depending on the type and length of U.S. military actions or role in providing force protection in chemical disarmament efforts, the participation and cost-sharing by U.S.",
      " allies, and Syrian and Syrian-allied responses. Funding sources could also vary depending not only on the amount required, but also the timing. Congressional participation in decision making on costs depends on whether the Administration (1) taps currently available funding for FY2013, which appears unlikely now; (2) uses appropriations provided in FY2014 if actions take place after October 1, 2013; or (3) requests reprogrammings of existing funds or supplemental appropriations. The availability of funds may also be affected by the timing as well as the scope of costs since it is now close to the last month of the FY2013,",
      " and the Department of Defense is closely tracking funds so as to implement required sequestration cuts.  What are the range and factors that would affect the potential cost of U.S. military intervention in Syria? In a July 19, 2013, response to a letter from Senators Levin and Inhofe, chair and ranking Member of the Senate Armed Services Committee, General Martin Dempsey, Chairman of the Joint Chiefs of Staff, outlined the costs of various military options but did not recommend any particular option since this is a presidential decision. According to his letter, costs could range from $500 million initially to train, advise, and assist opposition forces in a safe area outside Syria to \"as much as a billion dollars per month over the course of a year\"",
      " (up to $12 billion) to use military force to establish either a no-fly zone that would prevent the regime from using its military aircraft or a buffer zone to protect border areas next to Turkey or Jordan.  General Dempsey estimated the cost could be \"billions\" to conduct a major military campaign that appears to more extensive than the limited strike that the Administration was considering. He described that option as using \"lethal force to strike targets that enable the regime to conduct military operations, proliferate advanced weapons, and defend itself,\" by destroying military forces and units, air defense, military facilities, or headquarters. This range of options shows that the factors affecting cost include the scope of military operations (e.g., the numbers and types of forces used), and the length of the operation,",
      " which may, in turn, depend on Syrian and allied responses, as well as any participation or cost-sharing by allies.  In testimony before the House Foreign Affairs Committee on September 4, 2013, Secretary of Defense Chuck Hagel said that DOD provided a range of costs based on different options and that the current option (of a limited strike) \"would [cost] in the tens of millions of dollars, that kind of range.\" On September 4, 2013, two days later, Chief of Naval Operations Admiral Jonathan Greenert suggested that the naval costs of the Syrian operation are \"not extraordinary at this point,\" partly because many of the ships involved were already forward-deployed so that their costs would already be covered in the budget but that lengthening the deployment of the Nimitz carrier and replenishing Tomahawk missiles used,",
      " which cost about $1.5 million each, could add costs.  Some observers have questioned whether these informal estimates that costs of a strike would be minimal costs are realistic. The resolution authorizing the use of force in Syria, as revised and reported by the Senate Foreign Relations Committee, requires that the President report to Congress and the Senate Foreign Relations and the House Foreign Affairs on both the status of the operation, and the \"financial costs of operations to date ten days after initiation of military operations and every 20 days thereafter until completion.\" What are the range and factors that would affect the potential cost of disarming Syria's chemical weapons capability? In the July 19,",
      " 2013, letter, General Dempsey also estimated that destroying portions of Syria's chemical weapons stockpiles could require more than $1 billion a month because \"hundreds of aircraft, ships, submarines, and other enablers\" and \"thousands of special operations forces and other ground forces\" would be needed to secure critical sites. This estimate may have reflected a DOD study conducted and reported to the White House in late 2012, according to press reports, that estimated that a military effort to seize Syrian weapons stocks would require \"upwards of 75,000 troops.\" Recent press reports have repeated this 75,000 figure as suggesting that the costs of securing Syrian weapons stocks would be substantial.",
      "  This estimate of 75,000 U.S. troops does not appear to be an apt analogy because it assumes forcible entry by the United States. That scenario is very different from the international effort currently in the early stages of negotiation that is exploring a chemical disarmament effort that would be conducted with Syrian agreement under international auspices. The potential U.S. cost of such an effort would depend on Syria's agreement about who would participate in such an effort, which would provide force protection for inspectors, potential cost-sharing of inspection costs that could be conducted by a combination of government and contractor personnel, and the extent and length of the effort. While the potential costs of chemical disarmament could well be greater than a limited military strike,",
      " it is not possible at this stage to estimate those costs. What funding sources are available for U.S. military intervention in Syria? With the end of FY2013 fast approaching, it is unlikely that FY2013 funds will be tapped for either a limited military strike, temporarily off-the-table, or a chemical disarmament effort, a fact recently noted by Secretary of Defense Hagel. Funding sources would likely be FY2014 funds, reprogramming of available funds, or supplemental appropriations if expenses to conduct military intervention or chemically disarm Syria proved to be substantial. These options would be available for either a limited military strike or a chemical disarmament effort though the scope and timing of a chemical disarmament effort are unknown at this time.",
      "  According to Secretary of Defense Chuck Hagel, the United States now has \"moved assets in place,\" including four DDG-51 Arleigh Burke destroyers in the Mediterranean, that could meet \"whatever [military] option the president wishes to take.\" To the extent that DOD relies on U.S. military assets now or planned to be in-place to conduct military operations, the cost of deploying those ships (military personnel, fuel, spare parts) is presumably funded with FY2013 DOD appropriations for Military Personnel and Operation and Maintenance (O&M) that were provided in the FY2013 Consolidated and Continuing Appropriations Act ( P.L.",
      " 113-6 ). The deployment of the four destroyers to the Mediterranean in preparation for Syrian operations appears to be part of the Navy's planned peacetime presence mission, and for that reason would be funded within the Navy's base budget for regular activities rather than Overseas Contingency Operations (OCO) or Operation Enduring Freedom (OEF), which pays for incremental war costs primarily for the Afghan war.  Brief U.S. military operations to establish a no-fly zone conducted in Libya in 2011 relied almost exclusively on existing appropriations. DOD's estimated costs were about $800 million, including offsets or savings from lower peacetime flying hours during operations.",
      " The Administration also estimated that the short-lived Libyan operation would not have significant operational impacts on the Afghan or Iraq wars. The Administration did not request supplemental appropriations for Libyan operations, relying instead on available funds and existing inventories of munitions. There is no restriction that prevents the President from using available funds to conduct wartime operations. DOD transferred OCO funds originally appropriated for another purpose to replenish the inventory of missiles expended in that operation at a later date after receiving approval from the four congressional defense committees. However, possible U.S. military intervention in Syria could be significantly different from the 2011 Libyan operation. If the scope of operations and costs proved to be larger than the Libyan operation,",
      " the Department of Defense could face some difficulties in accommodating costs within its existing budget or by shifting funds among activities\u2014particularly in view of sequestration, which was not applicable in 2011. This could also be complicated because there is uncertainty about the enactment of FY2014 appropriations. If Congress enacts a Continuing Resolution for FY2014, that funding would be available for Syrian military operations by \"cash flowing,\" a term sometimes often used by budget officials that means using currently available funds that may have been intended for either peacetime or Overseas Contingency Operation (OCO) operations.  If the cost of military intervention in Syria proved to be larger than anticipated,",
      " DOD could shift funds from less urgent programs or activities by using reprogramming authority provided in DOD's annual authorization and appropriations acts. Moving funds from one appropriations account to another or, in some cases, from one type of activity to another requires the written approval of the four congressional defense committees. If the costs of the operation expanded further, the Administration might need to request supplemental appropriations, which would require full congressional approval. How might Congress limit funding for either a limited strike or a chemical disarmament effort? In addition to voting on any supplemental appropriations should they prove necessary, Congress can and has placed restrictions on the use of funds in any appropriations bill.",
      " Such restrictions can prohibit obligating (putting on contract or paying civilians) or expending (spending or outlays) funds and can be included in any appropriations act.  Past statutory language has included funding restrictions that apply: to all or only specific types of military operations (e.g., combat), or particular types of activities; after a particular date or passage of time, or are contingent on certain events taking place (e.g., negotiation of a cease-fire) or a presidential determination. Finally, funding prohibitions can be applied to the funds in a particular bill, all previous bills, or any appropriation act. Restrictions can also be placed in authorization acts.",
      "  Most recently, Representative Ted Poe introduced a resolution, H.J.Res. 58, that states that No funds available to any United States Government department or agency may be used for the use of force in, or directed at, Syria by the United States Armed Forces unless a subsequent Act of Congress specifically authorizes such use of force or there is an attack or imminent attack on the United States, its territories or possessions, or the United States Armed Forces. This amendment prohibiting the use of funds for a military actions would apply broadly\u2014to all enacted appropriations acts, past or FY2014 when enacted, with an exception should a congressional authorization be passed or in the case of a direct attack on the United States.",
      "  While the recently proposed Manchin-Heitkamp resolution ( S.J.Res. 22 ) does not directly include a funding restriction, it states that it is U.S. policy that the United States can consider using \"all elements of national power,\" (presumably referring to military action) only if the Syrian government does not sign and comply with the Chemical Weapons Convention within 45 days. This follows the pattern of prohibitions that are contingent on certain conditions and the passage of time.  How might the cost of Syrian military intervention or chemical disarmament efforts be affected by ongoing sequestration cuts in FY2013 or in FY2014 if sequestration again occurs?",
      "  Since current ship deployments in the Mediterranean are largely following current plans (with minor adjustments in schedule), ongoing sequestration cuts would not necessarily have an effect on the option of a limited military strike. In addition, the Administration's and DOD's policy has been to minimize effects on DOD's core readiness-related activities such as those deployments. The President also exempted military personnel accounts from sequestration for both FY2013 and FY2014.  The services have focused ongoing sequestration cuts on lower priority Operation & Maintenance (O&M) activities such as travel, conferences, non-training flying hours, facility upgrades, Information Technology,",
      " and depot maintenance. Although the services initially reduced some training activities to meet sequestration cuts, many of these cuts were later reversed as savings became available in other areas. At the same time, some Members of Congress and DOD spokesmen have raised concerns about readiness in later years from the current sequestration or from later cuts to the DOD budget in FY2014, which could be exacerbated by a lengthy Syrian intervention.  If Congress were to enact supplemental appropriations to cover the cost of Syrian military intervention or chemical disarmament efforts, and designated that funding as emergency, those monies would not be subject to the budget caps in the Budget Control Act (BCA). On the other hand,",
      " if Congress does not meet BCA caps, FY2014 sequestration cuts would be levied by the Office of Management and Budget (OMB) in early January 2014 and funds for any operations involving Syria would be part of the budgetary resources subject to those cuts. As in the case of Afghan war costs, however, DOD could choose to shield those costs from cuts by levying higher reductions on other operational activities. Military Planning48 As of September 6, U.S. military planning information is, in unclassified sources, largely speculative. Congress may, as the situation warrants, consider the following questions regarding its role in relation to U.S.",
      " and allied military plans: Which strategic objectives are proposed military operations designed to secure? How are the proposed operations tailored to meet those specific objectives? What targets would U.S. or allied military forces strike in Syria? Why? What would constitute success and how would that success advance broader U.S. policy objectives in Syria, in the region, and internationally? What would constitute failure and how might that affect U.S. objectives? Should an authorization for the use of military force be limited in terms of purpose, territory, potential targets, potential means, potential cost, or potential duration? Why or why not? Does the Administration believe that the draft authorization submitted to Congress would allow it to conduct military operations outside of Syria?",
      " Against non-state actors in Syria or elsewhere? Against the military forces of governments other than Syria? What U.S. forces and capabilities are currently able to engage targets in Syria? What potential coalition forces and capabilities are available? Which countries are willing to take part in military strikes? Which countries are willing to allow their territory, waters, and airspace to be used to facilitate proposed operations? With what conditions? How do the current prospects for international support impact the U.S. military mission in terms of risk, cost, feasibility, and likely duration? What force might the Syrian government bring to bear to resist or respond to a military operation against it? How might Syrian allies such as Russia,",
      " Iran, and non-state actors like Hezbollah respond to any U.S. military intervention? How might extremist groups seek to take advantage of any U.S. operations? How might opposition groups receiving U.S. support benefit or be put at risk by U.S. military operations? What are the \"known unknowns\" with regard to a potential U.S. military response to the alleged use of chemical weapons? Who are the most capable armed groups operating in Syria? What are their long-term political goals? Should proposed military operations be conducted in conjunction with an increase in direct support to armed or unarmed opposition groups? Why or why not? How can the United States best limit opportunities for violent extremist groups to take advantage of any proposed military strike?",
      " What threats to U.S. security and regional security might follow from these groups in the event of regime change? What have leaders in Israel, Jordan, Turkey, Egypt, Saudi Arabia, Iraq, Lebanon, the United Arab Emirates, and Qatar told the Administration regarding their individual views of the August 21 incident and the proposed U.S. response? How does the Administration envision assisting other countries in mitigating the impact of any potential retaliation or provocation? If the U.S. conducts military strike operations in Syria, what are the next steps that military forces would take? Is the U.S. military in a position to sustain military operations in the region?",
      " Given the impact of sequestration on U.S. military operations and maintenance, as well as the continued deployment of military assets in support of operations in Afghanistan and elsewhere, are U.S. forces fully prepared to undertake both planned and contingent military operations in Syria? Would the possible dedication of already constrained U.S. military and/or DOD-contracted commercial airlift and sealift to a Syrian contingency operation have an adverse impact on U.S. retrograde operations currently underway in Afghanistan? What are some military options reportedly under consideration?49 Several media reports indicate that the United States is considering a military strike against Syria in response to the regime's alleged use of chemical weapons against civilians on August 21.",
      " Numerous accounts suggest that the strategic goal of such a punitive strike would be to deter future chemical weapons use and degrade the Assad regime's capabilities to carry out future attacks. Some analysts question whether limited strikes can successfully accomplish the strategic objective of deterrence. For example, Chris Harmer, a senior naval analyst at the Institute for the Study of War, has argued that \"the Assad regime has shown an incredible capacity to endure pain and I don't think we have the stomach to deploy enough punitive action that would serve as a deterrent.\"  A report by the RAND Corporation outlined five broad possible missions for a Syrian attack using airpower. They included negating Syrian airpower;",
      " neutralizing Syrian air defenses; defending \"safe areas\" within Syria; enabling opposition forces to defeat the regime; and preventing the use of Syrian chemical weapons. These missions are in many ways complementary. The United States has developed munitions specifically designed to neutralize chemical weapons. Called \"agent defeat munitions,\" these devices use a large, high-temperature fireball to incinerate chemical agents. CRS has not yet been able to determine the number of such munitions currently in U.S. inventory. However, their potential use may be complicated by several factors:  First, the current generation of agent defeat munitions is believed to be deliverable only by aircraft,",
      " not cruise missiles; whether the United States would engage in air strikes without first suppressing Syrian air defenses is questionable. Second, due to their limited range of effects, agent defeat munitions require a precise knowledge of where the chemical weapons are stored. Syria is believed to have dispersed its chemical stocks in recent days. Third, a direct attack on chemical stocks raises the possibility of a collateral release of chemical agent. However, degrading Syria's capability to employ chemical weapons would not necessarily require strikes on the chemical stockpiles themselves. Potential U.S. attacks against the command and control network used to direct chemical use; the missiles, rocket launchers, and aircraft potentially used to deliver such weapons;",
      " and Syrian military command centers could all \"degrade\" Syria's CW capabilities without risking collateral release of chemical agents. \"Deterring\" further chemical use by Syria is a more complicated prospect, as it depends on understanding what could affect the Syrian command's calculations of gain vs. loss when considering whether to again employ chemical weapons. However, some strike options are viable and offer significant deterrent value. For example, a strike designed to degrade or disrupt Syria's air defense network could leave Syria exposed, with its leaders conscious of the potential for severe retaliation following any further CW use. Similarly, an attack to destroy the Syrian air force would reduce Syria's ability to deliver some types of chemical weapons,",
      " while also inhibiting its ability to defend against air attacks and to prosecute the civil war from the air. The Institute for the Study of War planned a notional strike to \"significantly degrade\" the Syrian air force. While not necessarily the U.S. plan, it gives a rough idea of the munitions required for such a strike. The plan required 133 Tomahawk Land Attack Missiles (TLAM), 24 Joint Stand-Off Weapons, and 24 Joint Air-to-Surface Standoff Missiles. The Tomahawks could be launched from surface ships or submarines in the Mediterranean; the other weapons would be delivered by aircraft.",
      " The benefit of using so-called \"stand-off weapons\" such as a TLAM fired from a destroyer is that the firing vessel can be stationed beyond the range of Syrian anti-ship missiles. U.S. aircraft, such as the B-2 and B-52 bombers, also can carry air-launched cruise missiles.  Other proposed military options, such as establishing no-fly zones inside or outside Syria, may require a more extensive and longer-term U.S. commitment. According to Chairman of the Joint Chiefs of Staff General Martin Dempsey, \"Lethal force would be required to defend the zones against air, missile, and ground attacks.... This would necessitate the establishment of a limited no-fly zone,",
      " with its associated resource requirements. Thousands of U.S. ground forces would be needed, even if positioned outside Syria, to support those physically defending the zones.\"  Operationally, Congress may wish to scrutinize the U.S. military's evaluation of the situation in evaluating a potential no-fly zone. In evaluating the situation, one may consider the nature and density of adversary air defenses, the quantity and quality of adversary air assets, geography, and availability of \"friendly\" assets. In evaluating adversaries, one may consider their strategy and tactics, their possible responses, their concept of operations, and their rules of engagement. If the United States and others were to conduct manned aerial strikes against Syria,",
      " the United States may employ its F-16 aircraft stationed in Jordan. Additionally, the Air Force's 39 th Air Base Wing is based at Incirlik air base in southern Turkey, and U.S. military action against Syria could originate from there, though it might require prior approval from Turkey's parliament. The United States may also have access to the British base at Akrotiri, Cyprus, where additional British military aircraft have been reportedly been deployed in recent days. If France were to take part in military action against Syria, it has access to an air base in the United Arab Emirates. U.S. Aid to the Opposition Arming the Syrian Opposition56  Secretary of Defense Hagel in a September 3,",
      " 2013, hearing before the Senate Foreign Relations Committee stated that the Administration is currently taking steps to provide arms to Syrian rebels under covert action authorities. On September 4, in a hearing before the House Foreign Affairs Committee, Secretary of State Kerry said, \"we have seen the president take steps in response to the initial attacks of chemical weapons to increase lethal aid to the opposition. That is now known.\" The statute concerning covert action thus shapes both how the Administration can intervene in Syria under those authorities and the way in which the Administration engages with Congress and the public about any intervention. What are the limits and extent of covert action authorities with respect to Syria?",
      " Covert action is defined in statute as \"an activity or activities of the United States Government to influence political, economic, or military conditions abroad, where it is intended that the role of the United States Government will not be apparent or acknowledged publicly.\" Section 503 of the National Security Act of 1947 authorizes the President to conduct covert action if that action is necessary to support identifiable foreign policy objectives of the United States and is important to the national security of the United States. The statute requires the President to write a \"finding\" that specifies the identifiable foreign policy objectives. The President must provide the finding to the congressional intelligence committees as soon as possible and before the initiation of the covert action.",
      " The President is not required to provide the finding to Members who are not on the intelligence committees.  The \"apparent or acknowledged\" language in the statute may limit what the Administration is willing to say publicly about its aid to the Syria opposition. The language also provides a vague limitation on the extent to which covert action authorities can be utilized to broaden support for the opposition or to take additional action in Syria beyond aid to the opposition. During past covert actions in other countries, the role of the U.S. government has sometimes become apparent or acknowledged in the course of public debate. This has not always proven to be a limiting factor regarding whether covert action authorities are applicable.",
      " Nonetheless, the broader the U.S. actions and the more those actions require an Administration to make a case to the American public, the more difficult it may become to justify activities under these authorities. What organizations may conduct covert action? Although covert action is generally the domain of the Central Intelligence Agency, the statute does not identify specific departments or agencies that may conduct covert action. Executive Order 12333, concerning United States Intelligence Activities, notes that, \"No agency except the Central Intelligence Agency (or the Armed Forces of the United States in time of war declared by the Congress or during any period covered by a report from the President to the Congress consistent with the War Powers Resolution,",
      " P.L. 93-148 ) may conduct any covert action activity unless the President determines that another agency is more likely to achieve a particular objective.\" Non-Lethal Aid to the Opposition and Economic Sanctions against the Regime61 The Administration's decision and the means otherwise available to provide material support to Syria's opposition\u2014in the form of humanitarian goods and services, non-lethal aid, or military assistance\u2014face obstacles from a robust U.S. economic sanctions regime maintained against Syria for decades. These sanctions were triggered by the Syrian government's support of international terrorism, poor human rights record, and weapons proliferation.  Considering the economic sanctions, can the United States currently provide foreign aid to the Syrian opposition?",
      " Laws authorizing U.S. foreign aid programs are constructed generally to provide assistance state-to-state, and Syria is explicitly prohibited from eligibility under current appropriations. The U.S. growing interest in supporting Syrian opposition forces is further complicated by international obligations that require the United States to control exports and identify end-users to meet standards relating to terrorism, regional stability, and weapons proliferation. The President, however, has authority, notwithstanding the restrictions, to provide humanitarian aid, fund emergency response efforts in neighboring states, contribute to multinational programs that are engaged in the international response to Syria's crisis, and reprogram assistance from other programs to those that address disasters or unanticipated events.",
      " Specific laws that the President can draw upon include: Section 2(c) of the Migration and Refugee Assistance Act of 1962 (22 U.S.C. 2601(c)) authorizes the President to respond to \"unexpected urgent refugee and migration needs\" if he determines it is important to U.S. national interests to do so. Section 451 of the Foreign Assistance Act of 1961 (22 U.S.C. 2261) authorizes the President to draw upon up to $25 million in foreign aid in a fiscal year to respond to \"unanticipated contingencies....\" Current foreign operations appropriations (at Section 7034(f)",
      " of P.L. 112-74, as continued and amended by P.L. 113-6 ) raises the Section 451 limit to $100 million for FY2013. Section 552(c) of the Foreign Assistance Act of 1961 (22 U.S.C. 2348a(c)) authorizes the President to provide peacekeeping operations funds (up to $15 million in funds and up to $425 million in commodities and services in a fiscal year) to respond to any \"unforeseen emergency\" if he finds it \"important to the national interests\" to do so. Section 614 of the Foreign Assistance Act of 1961 (22 U.S.C.",
      " 2364) authorizes the President to provide assistance \"without regard\" to any other restriction in that Act or other foreign aid- or military aid-related laws if he finds it \"important to the security interests of the United States\" to do so. He may make up to $250 million available, but not more than $50 million to one country, in a given fiscal year. In addition, section 202(a) of the Food for Peace Act (7 U.S.C. 1722(a)) authorizes the Administrator of the U.S. Agency for International Development to \"provide agricultural commodities to meet emergency food needs through governments and public or private agencies including intergovernmental organizations such as the World Food Program and other multilateral organizations....\"",
      " How has the Obama Administration been able to provide aid to Syria in recent years?63 Most U.S. foreign aid going to Syria is for humanitarian assistance. In FY2013, the United States is providing over $1 billion of humanitarian assistance and more than $250 million in non-humanitarian aid to the people of Syria to support the opposition. According to the Department of State, transfer authority for Overseas Contingency Operations provided within appropriations laws, and Section 451 of the Foreign Assistance Act of 1961, which authorizes the President to use up to $25 million in one fiscal year for unanticipated contingencies, has been and continues to be crucial for providing both humanitarian and non-humanitarian aid to Syria since 2011.",
      " Current foreign operations appropriations (at Section 7034(f) of P.L. 112-74, as continued and amended by P.L. 113-6 ) raises the Section 451 limit to $100 million for FY2013. The Obama Administration has acknowledged the funding challenges that the Syria crisis presents and worked with Congress to increase the balances in global humanitarian assistance accounts in the FY2013 final appropriations bill to better meet Syria related needs. However, the Administration has not identified specific additional Syria assistance funding requests in its FY2014 appropriations budget and all indications suggest that the Administration intends to continue to fund Syria opposition assistance efforts on an ad hoc basis by presenting reprogramming requests and emergency contingency notifications to Congress.",
      "  The Administration did request $580 million for a new Middle East and North Africa Incentive Fund (MENA IF) that would have provided a multiyear source of funding to respond to contingencies in Arab countries, including Syria, as needed. However, the House Appropriations Committee has declined to include funds for the Incentive Fund in its markup of H.R. 2855. Senate appropriators similarly declined to provide funds and authorities for MENA IF as requested by the Administration and has proposed a $575 million Complex Foreign Crises Fund to meet region wide assistance needs in their markup of S. 1372.  Who is involved with defining and implementing the U.S.",
      " sanctions regime? Congress enacts annual foreign operations appropriations, can amend restrictions stated in authorizations, and can enact legislation to incrementally or fully remove restrictions. The President can exercise any or all of the foreign aid authorities listed above. He also is authorized, under the National Emergencies Act (particularly 50 U.S.C. 1621) and the International Emergencies Economic Powers Act (particularly 50 U.S.C. 1702) to restrict all transactions any U.S. person or entity might enter into with Syria or designated individuals therein. The State Department oversees arms sales and transfers, visas, and U.S. Agency for International Development (USAID)",
      " programs. The Department of Commerce issues export licenses after taking into consideration a recipient country's compliance with international standards relating to terrorism, regional stability, and proliferation. The Department of the Treasury controls financial transactions relating to trade and economic engagement, and is also guided by those international standards. U.S. Humanitarian Response64 The ongoing conflict in Syria has created one of the most pressing humanitarian crises in the world. An estimated 6.8 million people in Syria, almost one-third of the population, have been affected by the conflict, including more than 4.2 million displaced inside Syria and more than 2 million Syrians displaced as refugees with 97%",
      " fleeing to countries in the immediate surrounding region, including Turkey, Lebanon, Jordan, Iraq, Egypt, and other parts of North Africa. The situation is fluid and continues to worsen, while humanitarian needs are immense and increase daily. The United States has a critical role and voice regarding humanitarian access in Syria, the pace of humanitarian developments and contingency planning, support to neighboring countries that are hosting refugees, and burden sharing among donors. How much humanitarian assistance has the United States provided to date? The United States is the largest donor of humanitarian assistance and is part of the massive, international humanitarian operation in parts of Syria and in neighboring countries. In FY2012 and to date in FY2013,",
      " the United States has allocated more than $1 billion to meet humanitarian needs using existing funding from global humanitarian accounts and some reprogrammed funding. U.S. humanitarian policy is guided by concerns about humanitarian access and protection within Syria; the large refugee flows out of the country that strain the resources of neighboring countries (and could negatively impact the overall stability of the region); and the potential for further escalation and protraction of the humanitarian emergency. The international humanitarian response is immense and complex, but struggles to keep pace with urgent developments that have risen above anticipated needs. Access within Syria is severely constrained by violence and restrictions imposed by the Syrian government on the operations of humanitarian organizations.",
      " Two U.N. emergency appeals, which identify a total of $4.4 billion in humanitarian needs, are less than 47% funded.  What have been some of the possible humanitarian policy considerations for Congress to date? What effect might military action have on the humanitarian crisis? As U.S. policy makers and the international community deliberate over what, if any, actions they can or should take on the Syria crisis, possible humanitarian policy considerations for Congress include (1) issues related to U.S. resources and determination of priorities, including other humanitarian or foreign aid concerns and domestic needs; (2) and the potential costs and benefits of labeling or \"branding\"",
      " of humanitarian aid delivered to Syria so that recipients and possibly other actors are aware of its American origins. It is unclear what effect military action may have on the humanitarian situation in Syria and in the region. Since mid-August refugee outflows have increased in anticipation of foreign military strikes and an intensification of fighting inside Syria. International Response The United Nations Security Council66 Under the United Nations (U.N.) Charter, the U.N. Security Council is the primary mechanism for addressing issues related to the maintenance of international peace and security. Decisions of the Council are binding on member states. Adoption of resolutions is the most prevalent method for Council decision-making.",
      " The Council has 15 members\u2014five permanent (China, France, Russia, the United Kingdom, and the United States, hereinafter \"P-5\") and 10 non-permanent (currently Argentina, Australia, Azerbaijan, Guatemala, Luxembourg, Morocco, Pakistan, Republic of Korea (South Korea), Rwanda, and Togo). Decisions on non-procedural or substantive matters require nine affirmative votes, including the concurring votes of the permanent members. Thus, a negative vote by any of the P-5 is a veto over adoption of a draft resolution. Few observers expect consensus on Syria to be reached among the P-5.",
      " Since the conflict began, both China and Russia have vetoed three draft Council resolutions addressing the conflict. The Council may meet to consider a proposal to enforce a chemical weapons disarmament agreement with Syria. What is the role of the Security Council in authorizing use of force?  Any Security Council decisions to authorize the use of force would likely be taken under Chapter VII of the U.N. Charter, entitled, \"Action with respect to Threats to the Peace, Breaches of the Peace, and Acts of Aggression.\" Article 42 of this Chapter authorizes the Council to take \"action by air, sea or land forces as may be necessary to maintain or restore international peace and security.\" Such actions might include a variety of military operations by the forces of U.N.",
      " member states, including but not limited to demonstrations and blockades. Russia69 Russia has provided consistent diplomatic and military support to the Asad regime in Syria during the civil war. Russia recognizes the Asad regime as the currently legitimate government of Syria and asserts a sovereign right to provide arms to the regime under existing arms sales contracts. Russia also has a lease on a naval docking facility at Tartus, Syria. Russia has vetoed three U.N. Security Council (UNSC) resolutions aimed at addressing the Syrian conflict on the grounds that they would have unduly interfered with the domestically involved parties' efforts to reach a peaceful political solution to the conflict.",
      " How has Russia reacted to the potential for a military response by the United States? In an interview on September 3, 2013, President Putin made four points:  He asserted that Russia will only be convinced to support a resolution in the UNSC authorizing retaliation against Syria for chemical weapons use against civilians if the evidence is compelling beyond a shadow of a doubt, particularly since faulty data had been presented by the United States in the past as grounds for U.S. action in Iraq, he alleged. He also raised the possibility that the rebels may have gassed civilians to trigger Western action against the Asad government. He underlined that only the UNSC may approve the legitimate use of force against a sovereign state,",
      " and that the use of force outside U.N. approval is aggression. He stressed that Russia was not defending the Asad regime, but was upholding the norms and principles of international law, and warned that if illegitimate force is used against the Asad regime, there is a danger that it might again be used \"against anybody and on any pretext.\" He reiterated that Russia is supplying arms under contracts with the legitimate government of Syria, so is not violating any international laws. He admitted that some components of the S-300 surface-to-air missile system had been delivered, but the delivery of remaining components had been suspended. He stressed that Russia would not become militarily involved in the Syrian conflict.",
      " Supporting President Putin's statement, the Russian Foreign Ministry the next day reported that a Russian investigation into an alleged March 2013 chemical attack in Syria had found evidence that the rebels had used the gas against civilians and the Syrian Army, and the Ministry suggested that evidence pointed to the rebels in the case of the August 21 attack. During his testimony on September 3, 2013, before the SFRC, Secretary Kerry raised the hope that Presidents Obama and Putin would discuss Syria during the G-20 summit in Russia, and that President Putin would have a \"change of heart\" on Syria. The Secretary stated that Russia and the United States were cooperating on efforts toward a negotiated settlement of the Syria conflict.",
      " On September 4-5, 2013, the Russian government rejected U.S. and Polish government statements that the former Soviet Union and Russian sources had assisted Iraq in developing chemical weapons, with Russian presidential administration head Sergey Ivanov terming such statements \"raving nonsense,\" since Russia is against the proliferation of weapons of mass destruction. The Russian presidential press secretary on September 5 urged that the international community wait for the U.N. inspectors to issue their report on whether chemical weapons have been used in Syria. He stated that, based on this report, a further investigation could then be undertaken to determine who used them. On September 5,",
      " 2013, Deputy Defense Minister Anatoliy Antonov warned that any U.S. military action against Syria threatened tourists in the eastern Mediterranean, as well as commercial ships, and raised concerns that a U.S. missile might hit a Russian warship. He also warned that support for Syrian rebels will at least indirectly boost Syrian terrorist groups that will later expand their operations elsewhere in the Middle East. The Foreign Ministry also warned that U.S. missiles could threaten nuclear contamination if they hit a Syrian research reactor. Presidential administration head Ivanov stated on September 5 that warships being sent to the Mediterranean Sea were intended for the possible evacuation of Russian citizens from Syria.",
      " Deputy Defense Minister Antonov stressed that the deployment of more warships to the Mediterranean was aimed to cover possible contingencies that could threaten Russia's national interests, and \"to hold back other forces which are ready to unleash hostilities,\" but that Russia did not intend to become involved in conflict. The deployment includes intelligence-gathering and anti-submarine warfare vessels, a missile cruiser, a destroyer, and landing craft. Leaders of the Russian Federal Assembly (legislature) have received support from Putin for a planned delegation trip to the United States to try to convince Congress not to approve the use of military force against the Syrian government. Why did Russia block a recent draft UNSC resolution on Syria?",
      "  On August 28, Russia (and China) blocked discussion in the UNSC of a possible resolution introduced by the United Kingdom condemning the August 21 gas attack in Syria and authorizing necessary measures\u2014including military action\u2014to protect civilians, with Foreign Minister Lavrov stating that any such resolution should await the findings of the mission of U.N. inspectors. He stressed that possible military action in Syria without UNSC authorization would violate international law and vitiate efforts to find a peaceful solution to the conflict, such as the planned Syrian government-rebel conference that was being organized by the United States and Russia prior to the gas attack. He also alleged that the chemical weapons attack may have been a provocation by the rebels,",
      " as Russia has asserted in previous cases, and warned that any Western military action could further destabilize the Middle East. China79 As one of the five veto-wielding permanent members of the United Nations Security Council, China's support or abstention is necessary for any Security Council actions related to the conflict in Syria. That would include any resolution to implement a Russian proposal that Syria put its chemical weapons under international control. China's Foreign Ministry spokesman has said that China welcomes and supports the Russian proposal, describing it as offering \"an important opportunity to ease the current tension and properly address the international community's concerns about Syria's chemical weapons.\"  China has consistently opposed outside military intervention in Syria in response to the August 21,",
      " 2013 chemical weapons attack. In a closed-door session of the Security Council on August 28, 2013, China joined Russia in blocking a resolution drafted by the U.K. government that would have authorized the use of force against the Syrian government. China has also spoken out against the possibility of the United States bypassing the United Nations and undertaking unilateral U.S. military action against the Asad regime. To do so, a Chinese Foreign Ministry spokesman said on September 12, 2013, \"goes against the international law and basic norms governing international relations and will add to turmoil in Syria and the region as a whole.\" What is Driving China's Syria Policy?",
      " China's opposition to outside military intervention in Syria is rooted in its long-standing policy of non-interference in the affairs of other sovereign nations. That policy is thought to be related to China's desire to head off any foreign intervention in its own affairs. China fears, for example, the possibility of calls for international intervention in response to future Chinese efforts to unite forcibly with Taiwan, or over China's treatment of its Tibetan and Uighur ethnic minority populations. The most notable occasion on which China strayed from the principle of non-interference was in March 2011, when China joined Russia in abstaining on a U.N. resolution authorizing military action against the Gaddafi regime in Libya,",
      " allowing the resolution to pass. Despite its abstention, just three days after the vote, Beijing criticized publicly military action authorized by the resolution. Many in China now see the Libya resolution as having been \"abused by the U.S. and NATO to pursue regime change.\" China's Syria policy also appears to be influenced by China's close relationship with Russia, with which it often coordinates on foreign policy. Unlike Russia, however, China has limited economic interests in Syria and, according to the Chinese government, only \"20-plus\" citizens in the country.  China says it has not taken sides in the Syrian civil war. According to China's Foreign Ministry,",
      " \"China has no selfish interests on the Syrian issue and has no intention to protect any party.\" China has in the past hosted visits from both Syrian government envoys and representatives of an opposition group, the Syrian National Coordination Committee for Democratic Change. A six-person delegation from another Syrian opposition group, the Syrian National Dialogue Forum, arrived in Beijing on September 10, 2013. Iran87 The Syrian regime's apparent chemical attack has created a major dilemma for Iran. Since the 1979 Islamic Revolution in Iran, Syria has been Iran's closest Arab ally, and, as discussed below, Iran has provided substantial resources to help the Asad regime combat the armed rebellion.",
      " Yet, perhaps in an effort to compel Iran to distance itself from the Asad regime, the international community has pointed out that Iran has long stressed that it is the foremost victim of chemical weapons use at the hands of Saddam Hussein's regime during the 1980-1988 Iran-Iraq war. United Nations investigations confirmed Iraqi chemical weapons against Iranian forces during that war, although it found that Iran has conducted some chemical attacks as well. Iran is a party to the Chemical Weapons Convention.  What are Iran's interests in Syria? Syria under the Asad regime is a linchpin of Iranian strategy in the region\u2014Iran takes advantage of Syria's geographical location and prominence in the Arab world to pressure Israel,",
      " the United States, and Sunni Arab states allied with the United States. The Asad regime and Iran are linked by similar sectarian identities that distinguish them from Sunni Muslims: the Asads come from the Alawite community whose religious beliefs are distantly derived from Shiism, which is the overwhelmingly dominant sect in Iran. Along with geopolitical and other factors, this bond helped Iran and Syria transcend the Arab-Persian differences that would tend to divide them, as well as the contrasts between the Islamist nature of Iran's regime and Asad's secular rule. The regime of Bashar al Asad's father, Hafez al Asad, provided support to Iran during the 1980-",
      "1988 Iran-Iraq war, even though Iraq and Syria are both Arab states and were led by leaders from the Baathist movement.  Syria's value to Iran increased in the early to mid-1980s, when Lebanese Shiite clerics of the pro-Iranian Lebanese Da'wa Party began to organize in 1982 into what later was unveiled in 1985 as Hezbollah. Hezbollah identified itself as a \"resistance\" movement to Israel. Under the Asads, Syria has been the main transit point for Iranian weapons shipments to Hezbollah. Both Iran and Syria have viewed Hezbollah as leverage against Israel to try to achieve their regional and territorial aims.",
      "  Syria has also been a base for some Iran-supported Palestinian militant groups that the United States has accused of committing acts of terrorism in attempts to undermine Israeli-Palestinian peace efforts and Israel's overall security. The State Department report on terrorism for 2012, released May 30, 2013, repeated previous years' reports' assertions that Iran provides funding, weapons, and training to Hamas, Palestine Islamic Jihad (PIJ), and the Popular Front for the Liberation of Palestine-General Command (PFLP-GC). However, Hamas and PIJ are Sunni Muslim movements, and Hamas, in particular, has sought to distance itself from the Asad regime and\u2014to some extent\u2014Iran.",
      "  How is Iran supporting Asad? To try to prevent Asad's downfall, Iran is supporting the Syrian regime, including with funds, weapons, and fighters. Iran says it bases that aid on a long-standing defense relationship with Syria. Iran reportedly has provided the Asad regime military advisers and personnel, including members of its Islamic Revolutionary Guard Corp-Qods Force (IRGC-QF), the unit of the IRGC that supports pro-Iranian movements abroad, as well as an unknown number of IRGC-Ground Forces (IRGC-GF). The IRGC-GF has not previously deployed outside Iran, and its apparent deployment in Syria suggests that Iran is sparing no effort to try to keep Asad in power.",
      "  Iran has also helped in the recruitment of irregular forces and external pro-Asad groups. Iran reportedly has helped Syria set up its own popular militia forces to relieve some of the burden on the manpower-strapped Syrian army. Iran also was reportedly instrumental in persuading Hezbollah to become directly involved in the conflict and in the deployment of Iraqi Shiite militias that have come to Syria to help Asad.  There is little dispute among experts and officials that Iran also is sending substantial quantities of arms to the Asad regime. It is not known from open sources the approximate dollar value of the Iranian arms deliveries, or the exact types or quantities of arms being shipped.",
      " It has not been reported that Iran has delivered any heavy weapons to Syria such as tanks or armored personnel carriers\u2014such weapons are not especially plentiful in Iran's own arsenal. Delivery of heavy arms to Syria appears to be beyond Iran's airlift capabilities. Since the start of 2013, Iran reportedly has increased the frequency of its resupply flights to Syria to at least one per day. The flights typically overfly Iraq en route to Syria, and U.S. officials, including Secretary of State John Kerry, have\u2014apparently without consistent success\u2014urged Iraqi officials to interdict the flights and inspect them for arms deliveries.  Iran has also provided non-military forms of support to Asad,",
      " largely to counter threats to the regime from civil unrest and economic distress. As early in the uprising as April 14, 2011, and on several occasions since, U.S. officials have said that Iran is providing Syria with equipment to suppress crowds and to monitor and block use of the Internet. Particularly during the early periods of the Syria uprising, Iran advised the Asad regime on how to use such equipment to track down dissenters. Iran also has provided funds to try to stabilize the Syrian economy. In May 2013, Iran extended a $4 billion line of credit to the Asad regime, and is considering additional credits.  How might a U.S.",
      " Strike affect Iran? How might Iran respond? Several major questions arise with respect to Iran and U.S. policy toward Iran, should the United States strike Iran's ally Syria. One major issue is whether Iran might conduct military attacks against Israel, U.S. forces in the region, or U.S. allies in the Persian Gulf. According to official U.S. reports and assessments, Iran has the conventional weapons and missile arsenal to strike such targets, were there a decision to do so.  Most experts believe that direct Iranian retaliation is unlikely. Iran's Supreme Leader, Grand Ayatollah Ali Khamene'i, has said that a U.S.",
      " attack on Syria would be a \"disaster for the region.\" There have been similar statements from other senior Iranian leaders but these leaders have not threatened that Iran itself would conduct any retaliation. There are no indications that Iran is positioning forces in the region to prepare for any retaliation. Iran also has a new president, Hassan Rouhani, a mid-ranking cleric, who has pledged to ease tensions with the international community\u2014a goal that would most likely be significantly set back were Iran to retaliate for any U.S. strike on Syria.  However, sources purportedly close to Iran's ally, Hezbollah (cited elsewhere in this report) have indicated that it might retaliate against Israel under certain circumstances.",
      " Additionally, Iran and Hezbollah have agents and cells in the Middle East, Europe, Latin America, Asia, and elsewhere that could conduct future acts of terrorism as a response to a U.S. attack on Syria. Such actions might have an element of deniability that Iran perceives could prevent any immediate U.S. retaliation.  Some experts believe that a U.S. strike on Syria might not cause Iranian retaliation, but could cause Iran to break off talks with the international community over its nuclear program. Talks have been conducted, without firm conclusions, since 2003, but international negotiators have become more optimistic for the prospects of the talks since Rouhani assumed Iran's presidency on August 4,",
      " 2013. Iran has not, to date, threatened to boycott a new round of talks if and when a date for them is set.  Others argue that a U.S. refusal to respond militarily to Asad's apparent use of chemical weapons could affect Iran's nuclear calculations. According to this argument, Iran might interpret a U.S. failure to act militarily as an indication that the Obama Administration might not enforce its stated policy of preventing Iran from acquiring a nuclear weapon, if Iran were to undertake an effort to produce a nuclear weapon.  European and NATO Perspectives95 The 28 member states of the European Union (EU) have said that there is strong evidence that the Asad regime is responsible for a chemical attack on August 21 and have called for a \"clear and strong\"",
      " international response. There is disagreement, however, on what form such a response should take, and widespread skepticism and reluctance on the question of possible offensive military action. Collective military operations against the Asad government through the North Atlantic Treaty Organization (NATO) or the EU therefore do not appear to be a possibility. European leaders have also emphasized the importance of working through the U.N., saying on September 7 that any further action against the Asad regime should not come before an expected preliminary U.N. report on the alleged chemical weapons attack.  According to the State Department, as of September 5, the following European countries had \"publicly and explicitly expressed support for U.S.",
      " military action,\" against Asad: Albania, Kosovo, Denmark, France, Poland, Romania, and Turkey. France appears to be the only European country considering participating in such military action, however, and has said it would not act alone. United Kingdom The UK government has been leading international pressure against the Asad regime in Syria. Alongside France, the UK has pushed for United Nations action, has been a leading voice in passing EU sanctions against the Asad regime, and successfully argued for lifting the EU arms embargo in order to assist opposition forces. Although it has not openly delivered weapons to the opposition, the UK has reportedly provided non-lethal equipment,",
      " humanitarian assistance, and some training. Following the report of chemical weapons attacks by Syrian forces on August 21, the UK's National Security Council \"decided unanimously that the use of chemical weapons by the Assad regime is unacceptable and that the world can not stand by in the face of that.\" The government's campaign to build a case for military action abruptly deflated, however, when the House of Commons voted on August 29 against UK participation in any prospective strikes on the Asad regime, and Prime Minister Cameron subsequently ruled it out. Prime Minister Cameron has since refuted suggestions that the government might go back to Parliament for a second vote on the use of force if circumstances in Syria change significantly,",
      " or following a vote by the U.S. Congress. Speculation about a potential second vote nevertheless continues, but as of early September, UK involvement is expected to consist primarily of intelligence support, diplomatic pressure, and increased humanitarian aid.  France100  Along with the UK, the French government has been leading international efforts to pressure the Asad regime. France was the first country to recognize the Syrian Opposition Coalition (SOC) as the \"sole legitimate representative of the Syrian people.\" Officials in Paris have said there is \"no doubt\" that Asad has used chemical weapons and have said that they favor military strikes against Asad in response. France reportedly has deployed an anti-aircraft frigate and other military assets off the Syrian coast in anticipation of such an operation.",
      " Officials in Paris have indicated, however, that French military action would come only in support of a U.S.-led operation. Since President Obama's announcement that he would seek congressional approval for U.S. military action, French President Fran\u00e7ois Hollande has faced growing public pressure to follow suit. The French parliament debated the merits of a possible intervention in early September, but has not held a vote on the issue and parliamentary approval for such action is not required. Nonetheless, in the view of some commentators, Hollande could become increasingly sensitive to public opposition to possible military intervention\u2014some opinion polls indicate that more than two-thirds of respondents in France are opposed. In what was perceived as an effort to build public and international support,",
      " on September 6, Hollande said he would not authorize military action before the release of an anticipated U.N. report on the use of chemical weapons in Syria. On September 10, French Foreign Minister Laurent Fabius announced France's intention to present a U.N. Security Council Resolution that would call on the Asad government to dismantle its chemical weapons program. Fabius said the resolution would be proposed under the auspices of Chapter VII of the U.N. Charter, which would allow member states to use all possible means, including military action, to enforce it. Among other things, the resolution would (1) condemn the August 21 chemical weapons attack and punish the perpetrators of the attack in the international justice system;",
      " (2) demand that the Asad government's chemical weapons program be placed under international control and be dismantled, with mechanisms for inspection and monitoring; and (3) provide for \"extremely serious\" consequences of Syrian violation of its obligations under this agreement. French officials reportedly have said they are willing to amend their resolution in response to Russian concerns. Germany104 The German government has strongly condemned the Asad regime, calling its alleged use of chemical weapons a \"horrific crime against humanity... that cannot go unpunished.\" Berlin is reportedly reluctant, however, to endorse a military response that is not authorized by the U.N. Security Council.",
      " Germany is also considered unlikely to participate in any military operation in Syria, even if under a U.N. or NATO mandate. Analysts note that the German government could be particularly sensitive to public opposition to potential offensive military action ahead of a federal election scheduled for September 22. The German government reportedly has agreed to allow 5,000 Syrian refugees to resettle in Germany by the end of the year. NATO What is NATO's role? At the request of NATO member state Turkey, since the beginning of 2013, NATO has carried out an air defense mission along Turkey's southeastern border with Syria, \"to augment Turkey's air defence capabilities in order to defend the population and territory of Turkey and contribute to the de-",
      "escalation of the crisis along the Alliance's border.\" NATO officials have emphasized that the deployment of six Patriot missile batteries \"is defensive only. It will in no way support a no-fly zone or any offensive operation.\" The United States, Germany, and the Netherlands are each operating two Patriot batteries, deployed to military bases near the population centers of Gaziantep, Karamanmaras, and Adana, respectively.  Some Members of Congress, as well as Air Force General Philip Breedlove, Supreme Allied Commander, Europe, and Commander of U.S. European Command (in his Senate confirmation hearing), have suggested that the Patriot batteries currently under NATO command could be used to support offensive military operations against Asad,",
      " including the possible establishment of a no-fly zone or a \"humanitarian corridor\" to protect civilians. Although the allies have uniformly condemned the Asad regime, NATO has not considered establishment of a no-fly zone and key allied officials have reiterated that the Patriot deployment is defensive only. Speaking on behalf of the allies on August 28, NATO Secretary General Anders Fogh Rasmussen called the use of chemical weapons, \"a clear breach of long-standing international norms and practice... that cannot go unanswered.\" However, there does not appear to be a consensus within the alliance on endorsing possible NATO-led offensive military operations against the Asad regime. Any NATO operation would require the unanimous backing of the member states,",
      " though not all would be obliged to participate.  European Union What is the European Union's role? The EU has been a leading voice alongside the United States in international condemnation of the Asad regime and its actions in Syria's armed conflict. With a stronger U.N. response blocked by Russia and China in the Security Council, the EU has moved ahead on the basis of unanimous agreement among its member states to impose extensive sanctions designed to put pressure on the regime. Like the United States, in December 2012 the EU recognized the National Coalition of Syrian Revolution and Opposition Forces as the sole legitimate representative of the Syrian people. After a British and French push to lift the EU arms embargo on Syria in order to arm opposition forces,",
      " the embargo was allowed to expire in May 2013 despite strong objections from a number of other EU countries. As a result, arms exports to the opposition could be authorized on a national, case-by-case basis, with safeguards intended to prevent misuse, although the EU member states agreed to refrain from such deliveries pending a review of the situation. Similar to NATO, there is no consensus among EU member states for military operations. In any case, analysts have had no expectations that any such operations would be conducted under an EU flag. At the G20 Summit held in St. Petersburg on September 5-6, European Council President Herman Van Rompuy reportedly stated that there is no military solution to the Syria conflict.",
      " Despite efforts led by France to gain backing for potential military action, this viewpoint was subsequently conveyed as the agreed position of the 28 member states by High Representative Catherine Ashton in a statement following an EU foreign ministers meeting on September 7.  Turkey Since late 2011, the government of Turkish Prime Minister Recep Tayyip Erdogan has been an active opponent of the Asad regime and has outspokenly advocated for U.N.-backed intervention. It has hosted Syrian refugees and opposition figures and\u2014reportedly\u2014helped funnel assistance to armed Syrian rebel groups. Following the apparent August 21 chemical weapons attack, Erdogan has indicated that Turkey would \"take part\"",
      " in any international coalition against Syria. On August 30, Erdogan was quoted as saying that any strike on Syria should not be a \"24 hours hit-and-run. What matters is stopping the bloodshed in Syria and weakening the regime to the point where it gives up.\" Notwithstanding Erdogan's stated preference for a broader military response than what U.S. officials appear to be contemplating, the nature and scope of potential Turkish involvement is unclear. Turkey maintains one of NATO's largest militaries, but political sensitivities and potential vulnerabilities vis-\u00e0-vis bordering countries and Kurdish communities in the region could constrain its direct participation in military operations. Asked what Turkey's role might be,",
      " as reports on September 8 indicated that it was bolstering its border defenses, Erdogan was quoted as saying, \"Whether it would be as an opposing force or supplying forces to provide logistical support, all this would be determined by circumstances.\" Turkey hosts U.S. and NATO military assets in various locations throughout the country, which could be among the targets of potential Syrian or Syrian-allied retaliation for a U.S.-led attack. Members of the opposition Republican People's Party (CHP), though condemning the possible use of chemical weapons in Syria, have warned of the risks of military intervention and insisted that Turkish law requires parliamentary approval of any use of Turkish territory by foreign troops to attack Syria.",
      " The Turkish parliament voted in 2003 against allowing the United States to invade Iraq from its Turkish border. Arab States117 Arab countries have staked differing positions on the Syrian civil war and have backed different rebel/political groups, perpetuating the divisiveness and disorganization of the armed and unarmed Syrian opposition. Until recently, Qatar had aggressively backed the Syrian Muslim Brotherhood in exile as well as various Islamist-oriented armed groups on the ground. There are some indications that the recent leadership transition in Qatar may result in a recalibration of Doha's former embrace of Islamist activists. Saudi Arabia, which also has backed its own militias, has been less supportive of more radical elements in the Syrian political and armed opposition.",
      " Private entities in the Arab Gulf states continue to provide material and political support to extremist groups operating in Syria. Egypt, where the military has returned to power after ousting a president who had hailed from the Muslim Brotherhood, may be even less inclined than Saudi Arabia to support Sunni Islamist Syrian rebels, though it has been preoccupied with internal issues throughout the war's duration.  What is the position of the Arab League? Publicly, many Arab states are hesitant to endorse a possible Western military intervention in Syria. Nevertheless, on August 27, the Arab League, which had already suspended Syria from its membership back in 2011, issued a joint statement on the apparent August 21 chemical weapons attack,",
      " stating that it held \"the Syrian regime responsible for this heinous crime.\" The statement also called on the United Nations Security Council to \"overcome the disagreements between its members'' [so it could] ''take the necessary deterring measures against the perpetrators of this crime.\" The Arab League has modified its original position insisting on U.N. Security Council action to call for the Security Council and the international community to \"take the deterrent and necessary measures against the culprits of this crime for which the Syrian regime bears responsibility.\" Israel and Its Concern for Potential Retaliation118 An important U.S. concern regarding possible military action against Syria is potential retaliation by Syria and its allies\u2014especially Iran and Lebanon-based Hezbollah,",
      " but also possibly Gaza-based militants such as Palestine Islamic Jihad \u2014against Israel. Possible threats of retaliation against other U.S. regional allies (including Turkey, Jordan, and Gulf Arab states) are linked to these countries' involvement in aiding the Syrian opposition and potentially serving as bases for U.S.-led military operations. Even though Israel has reportedly carried out limited strikes in Syria this year to prevent the transfer of weapons to Hezbollah, retaliatory threats against it appear to stem less from its recent involvement in the conflict than from historical and geopolitical animosities and probable desires among Syria and its allies to deter the United States from acting militarily\u2014given long-standing U.S.",
      " interests in Israel's security.  At least since the 1991 Persian Gulf War, U.S. regional military planning has taken into account the possibility of attacks on Israel and the potential for any Israeli response to trigger wider regional war. In the present case, U.S. consideration of this factor is seemingly being weighed alongside concerns about possible consequences for Israel (in connection with overarching questions about defense of U.S. allies and U.S. credibility) if either the United States does not respond to the Asad regime's apparent use of chemical weapons in Syria, or any response it makes is ineffective. In September 3 hearing testimony before the Senate Foreign Relations Committee regarding the possible use of U.S.",
      " military force in Syria, Secretary Kerry said: I can make it crystal clear to you that Israel will be less safe unless the United States takes this action. Iran and Hezbollah are two of the three biggest allies of Assad. And Iran and Hezbollah are the two single biggest enemies of Israel. So, if\u2014Iran and Hezbollah are advantaged by the United States not curbing Assad's use of chemical weapons, there is a much greater likelihood that at some point down the road, Hezbollah, who has been one of the principal reasons for a change in the situation on the ground, will have access to these weapons of mass destruction. Israeli Prime Minister Binyamin Netanyahu has said,",
      " \"Now the whole world is watching. Iran is watching and it wants to see what would be the reaction on the use of chemical weapons.\" Yet, some accounts indicate that Israeli officials \"have little desire to see [Asad] toppled,\" given what may follow, and are \"wary of creating any perception that they are meddling in either American politics or the civil war in neighboring Syria.\"  American Jewish and self-described \"pro-Israel\" organizations are participating in the public discourse on the question of U.S. intervention. According to a Washington Post article, \"groups such as the American Israel Public Affairs Committee and the Conference of Presidents of Major American Jewish Organizations called for bipartisan consensus [on September 3]",
      " around the use of force.\" J Street, another organization, issued an August 29 statement on its website that read, \"As President Obama and world leaders contemplate the appropriate course of action, we are cognizant that there are no easy or clear-cut solutions.\" What threats exist from Syria, Iran, Hezbollah, and Gaza-based militants regarding potential retaliation against Israel in the event of a U.S.-led strike on Syria? Syrian and Iranian officials have made statements indicating that Israel would be a target of retaliation in the event of a U.S.-led attack on Syria. General Mohammad Ali Jafari, chief of the Iranian Revolutionary Guard Corps (IRGC), was quoted as saying that an attack on Syria \"means the immediate destruction of Israel.\" In an August 28 Lebanese news report,",
      " a source supposedly close to Hezbollah was cited as saying that Hezbollah would probably not retaliate against Israel in the event of a limited U.S.-led strike, but would likely retaliate in the event of a \"large-scale Western strike\" that aims to \"change the balance of power in Syria.\" A source that supposedly liaises between Hezbollah and the Syrian military was cited as saying that a potential Hezbollah retaliation against Israel for a U.S. strike would take place from the Syrian city of Homs to \"keep Lebanon out of the war.\" An Israeli military spokesman has publicly stated that although Israel is preparing for the contingency of Syrian or Syrian-allied retaliation against Israel in response to a U.S.-led strike,",
      " the probability of retaliation is low. Israeli calculations that retaliation is possible but unlikely probably owe to a presumption that Israel's adversaries do not want to risk escalating and expanding the conflict beyond its current level and scope. What damage could retaliatory rocket or missile strikes do to Israel, and how prepared is Israel to defend itself? If one or more of them chose to retaliate, Syria, Iran, Hezbollah, and Gaza-based militants could threaten Israeli territory\u2014as indicated by the range maps (see below)\u2014with thousands of rockets and missiles of varying ranges, accuracies, and payloads (i.e., high-explosives or possible chemical warheads in the case of Syrian SCUDs). In addition to insisting that it would respond forcefully to any attack on its territory,",
      " and calling up reserve military units, Israel maintains multiple anti-rocket and anti-missile platforms largely through U.S. assistance and/or co-production: Iron Dome, Patriot, and Arrow II. Israel claims substantial success with Iron Dome in countering rockets with ranges under about 75 km. The Patriot and Arrow II systems are designed to intercept Syrian SCUD missiles (ranges of 300-500 km). Iranian SCUDs are not capable of reaching Israel. It is unclear whether\u2014and perhaps unlikely that\u2014Patriot or Arrow II systems are capable of intercepting very short-range Hezbollah tactical missiles that could reach central and southern Israel. Reports indicate that transportable Iron Dome batteries have been deployed to various locations throughout the country,",
      " including Jerusalem. Although the U.S.-Israel cooperative platform David's Sling has supposedly been tested successfully against short-range tactical missiles (40-300 km), this system is not expected to be operational until about 2014. It is possible that some David's Sling units may have been deployed recently, but its availability to counter missiles from Hezbollah is unknown. There are no systems currently deployed in Israel that are designed to intercept Iranian medium-range ballistic missiles (1,500-2,000 km). The Arrow III, which is designed to counter such missiles, had a successful test launch in 2013, but is not expected to be operational until about 2014-",
      "2015.  Israel is preparing additional measures on the home front to absorb a possible retaliatory strike. In previous instances\u20141991 during the Gulf War, 2006 against Hezbollah, and on two occasions (2008-2009 and November 2012) against Hamas and other Palestinian militants\u2014many Israelis took cover in bomb shelters and in safe rooms that are now routinely built into their residences. According to reports, approximately 50 Israeli civilians were directly killed by missile and rocket strikes during these three conflicts combined. There are concerns, however, that the more advanced missiles likely to be used in any retaliation from Iran, Syria, or Hezbollah could produce casualties and damage of a higher magnitude.",
      " In addition, a significant portion of the population may not have ready access to bomb shelters, and logistical complications and expense could delay full distribution of gas masks, which large numbers of Israelis are seeking in the event of a chemical weapons attack. Outlook Intense current speculation centers around the potential for punitive U.S.-led military strike on Syrian government forces and the Russian government's proposed disarmament plan for Syria. Action on either of these initiatives would have major implications for the ongoing conflict in Syria and the international crisis the conflict has created. Given stated U.S. objectives and fears of a deeper power vacuum in Syria, it appears unlikely that any U.S.",
      " actions in the immediate future would attempt to eliminate the Asad regime entirely. President Obama has said \"I have no interest in any kind of open-ended conflict in Syria,\" and, at present, U.S. officials hope to achieve a negotiated political settlement to establish a new government that can keep the Syrian state intact, secure its chemical weapon stockpiles, secure its borders, and prevent or combat terrorism.  The importance of the war in Syria for broader U.S. national security policy objectives may be linked more to its consequences for regional and global stability than to the details and outcome of the Syrian conflict itself. The civil war has sharpened divisions between the United States and some members of the European Union on the one hand and Russia and China on the other over competing concepts of how the international community should enforce peace and security and defend international norms.",
      " In the wake of the Libya conflict, the latter countries have continually opposed U.S. and European efforts to use the United Nations Security Council to endorse the protection of civilians in Syria. It remains to be seen whether the members of the Security Council will find a mutually acceptable formula for implementing the proposed disarmament initiative. The war also has raised concern that transnational terrorist groups modeled on Al Qaeda in Afghanistan-Pakistan may be resurgent in Syria and may gain access to advanced conventional weapons and weapons of mass destruction. Additionally, the Syrian government's alleged use of chemical weapons against its opponents and civilians is not only a serious development in the Syrian conflict but a potential precedent for other countries with possible chemical,",
      " biological, or nuclear programs. How the United States and others respond in the days and weeks ahead will most likely be watched closely in countries concerned with the potential for confrontation over similar programs in Iran and North Korea. The war in Syria also has been a major dividing line within the United States over competing visions of U.S. foreign policy. Some commentators continue to assert that the American public is \"war-weary,\" and that military intervention is inadvisable when public backing for expending \"blood and treasure\" on an operation of any duration and scope is uncertain. Others suggest that U.S. global leadership is needed more than ever to steer the country and its people away from what some see as isolationist tendencies.",
      "  Appendix. Analysis of Proposed Authorizations for the Use of Military Force as of September 6, 2013 The following analysis is based on the following texts available as of September 6, 2013: Administration Draft Proposal: CNN, Text of draft legislation submitted by Obama to Congress, August 31, 2013. S.J.Res. 21 : Available online from the Senate Foreign Relations Committee at http://www.foreign.senate.gov/imo/media/doc/S.%20J.%20Res.%2021.pdf Draft Proposal from Representatives Van Hollen and Connolly: Available at: http://www.lawfareblog.com/wp-content/uploads/",
      "2013/09/165278488-House-Van-Hollen-Connolly-Syria-Resolution.pdf \n"
    ],
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    "hardness": null,
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  },
  {
    "id": 82,
    "question": null,
    "answer": "This report provides background information on the institutional makeup and operations of the U.S. Agency for International Development (USAID), the leading international humanitarian and development arm of the U.S. government. The report then discusses in greater depth several aspects of the agency that might be of particular congressional interest.  In FY2015, USAID is responsible for more than $20 billion in appropriations, representing more than one-third of the International Affairs 150 budget function and more than half of total foreign assistance encompassed by the State, Foreign Operations appropriations and international food aid appropriated under the Agriculture appropriations.  USAID provides assistance to a range of countries\u2014125 in FY2013; however, of those, 23 received under $1 million, mostly small island nations or countries receiving one-time funds for humanitarian purposes. In FY2013, nearly 40% of funds attributable to countries and regions went to sub-Saharan Africa and more than 19% went to Afghanistan and Pakistan. Of funds attributable to a specific sector, 36% were for health programs and 19% for humanitarian efforts. USAID maintains more than 60 country and regional missions that design and manage a wide range of development projects, most intended to meet specific development objectives as formulated in a Country Development Cooperation Strategy. Most projects are implemented through some form of grant, cooperative agreement, or contract by one of thousands of potential development partners\u2014nonprofit private voluntary organizations and other non-governmental organizations, for-profit contractors, universities, international organizations, and foreign governments and civil society. Since 2010, under its USAID Forward agenda, the agency has undertaken numerous reforms to address challenges in budgeting, evaluation, human resources, use of the private sector, and the application of science and technology to development issues, among other concerns. Congress maintains broad interest in and authority over the budget, operations, and policies of the U.S. government's leading development agency, and over U.S. foreign policies generally. Issues of possible interest to Congress include the following, each of which is addressed more fully in the report: Accountability. Is the agency able to provide adequate accountability for taxpayers dollars and could efforts to increase accountability have negative implications for the agency?    Local Solutions. What are the benefits and challenges of moving agency resources through local governments and organizations?    Aid Implementers. What are some of the concerns regarding the largest cohort of aid implementers, U.S. contractors and grantees?    Relationship to Department of State. What has been the historic relationship of USAID, technically an independent agency, and the Department of State, and what impact has this relationship had on USAID operations? What is the outlook for the USAID-State relationship?    Role of Congress. In what ways can and does Congress affect the programs and operations of USAID?    Sustainability. How can USAID ensure that project efforts are maintained by local governments and organizations after its financial and technical support ends? USAID faces multiple challenges in the course of fulfilling its mission, including: Local Solutions. Providing assistance to local entities incurs the risk of loss of taxpayer dollars. Efforts to mitigate risk generally require more personnel and consequent funding to monitor local entities and build their capacities.  Sustainability. \"Country ownership\" and domestic resource mobilization efforts are two ways the agency has sought to address sustainability, but a clear path to sustainability remains a work in progress. Human Resources. The agency faces shortages of specific skill sets to meet the needs generated by efforts to work more closely with local government and private sector partners and to meet the needs of the Food Security Initiative.  Program Flexibility. Congressional funding mandates and a host of presidential initiatives are viewed by many observers as restricting the ability of USAID mission personnel to program project activities in accordance with development professional and partner country priorities.  Scaling-Up. Seeing successful ideas from pilot through to maturity and making them work at the country, region, and international level likely requires a long-term funding horizon, programming flexibility, and mechanisms to spread ideas throughout the agency\u2014each a challenge in itself. Security. Security concerns in non-permissive environments, such as South Sudan and Afghanistan, raise numerous obstacles to successful project implementation.\n",
    "docs": [
      "USAID Background Key Features of USAID Of the multiple agencies and departments of the U.S. government that engage in some form of international humanitarian and development work, USAID differs from the others in a variety of ways: Leading U.S. Development Agency. USAID is the largest provider of U.S. development aid. It employs thousands of development professionals with specializations in a wide range of sectors and geographic regions. It is the representative of the U.S. government on development issues throughout the world. Works in Numerous Countries. USAID funds activities in 125 countries (based on FY2013 obligations) and maintains an extensive field presence, with more than 60 standing bilateral country missions and regional offices that serve countries without mission representation.",
      " This physical presence allows the agency to formulate development strategies based on familiarity with local conditions, consult regularly with the local government and civil society, and closely monitor project progress. Works in Multiple Sectors. USAID works on a broad and varied range of humanitarian and development concerns, including microenterprise, health, agriculture, biodiversity, education, democracy and governance, economic infrastructure, energy, financial markets, trade capacity, trafficking in persons, women, disaster relief, and water. Activities in these fields are often supported by specific legislative authorities, and many of them are mandated annually by Congress in appropriations funding language. Works in the Poorest Countries. In order to meet the objectives of mitigating humanitarian disasters and addressing poverty,",
      " USAID works with the poorest of the poor countries. In FY2013, the most recent year for which data are available, USAID had programs in 31 of the 34 lowest-income countries, accounting for 44% of total country assistance. With corrupt and weak political and economic institutions, these countries are often challenging development partners.  Works in Conflict Countries. USAID is obligated to work in conflict or post-conflict countries, such as Iraq, Afghanistan, Pakistan, and Somalia. USAID programs in such locations often focus as much on establishing stability and delivering basic services as on long-term development. In the past decade, Department of Defense secretaries under administrations of both parties have argued the importance of USAID development programs in combatting national security threats.",
      " Serves Political/Strategic and U.S. Commercial Purposes. In addition to humanitarian and development objectives, USAID supports the political and strategic foreign policy goals of the State Department by providing assistance to strategically important countries\u2014for example, eastern Europe and the former Soviet Union after the fall of communism and Afghanistan today. USAID assists U.S. commercial interests by furthering the economic growth of developing countries and building these countries' capacity to participate in world trade. In most years, it has been the largest provider of trade capacity building assistance among U.S. aid agencies. Leads World in Humanitarian Aid. While most refugee aid is provided by the State Department through contributions to international organizations,",
      " USAID is the U.S. government's prime channel for disaster and food assistance and the most visible face of any U.S. humanitarian response.  Works Directly with Civil Society/Private Sector as Well as Governments. In addition to providing funding and technical expertise to governments, USAID directly funds international and local non-governmental organizations (NGOs) as well as other private sector entities. It also participates with U.S. businesses in hundreds of public-private partnerships. Largest and Leading Bilateral Donor. USAID is the world's largest provider of bilateral donor grant assistance. It alone represented about 14% of all Official Development Assistance (ODA)",
      " from all international donors in 2013. Historically, USAID led other donors in offering innovative ways to address challenges in the health, agriculture, microcredit, democracy promotion, environment, and private sector development fields.  Agency Roles, Strategy, and Programs USAID serves three key and overlapping roles in U.S. foreign policy. In addition to being the primary development agency of the U.S. government, USAID is a major implementer of humanitarian and political-strategic assistance.  Development assistance programs are designed chiefly to foster sustainable broad-based economic growth, good governance, and social welfare in developing countries. Where once they served as a counterpoint to communism,",
      " these programs are generally viewed as instrumental in building trade partners and future allies, preventing breeding grounds for terrorists, addressing a range of common international concerns, and exercising U.S. leadership abroad. Unlike development assistance programs, which are often viewed as long-term efforts that may have the effect of preventing future crises, humanitarian aid programs are devoted largely to the immediate alleviation of natural and man-made emergencies, and reflect the traditional charitable impulse of the American people, while also attempting to stifle a cause of instability. While largely indistinguishable from development aid programs, the primary purpose of political-strategic aid is to address special U.S. economic, political or security interests,",
      " such as the reconstruction of Iraq and Afghanistan or alternative agriculture programs in centers of illicit narcotics production.  These roles are wrapped up in USAID's mission statement, revised in January 2014: We partner to end extreme poverty and to promote resilient, democratic societies while advancing our security and prosperity. Mission statements change to reflect the times, and the new version, while more succinct than previous iterations, emphasizes several current aspects of USAID policy. \"Partnering,\" \"ending extreme poverty,\" and \"promoting resilience\" are current concerns in the development community. \"Partnering\" denotes the agency's growing effort to work with other bilateral and international donor agencies,",
      " the private sector, and foundations, as well as traditional recipient government and NGO entities. While the World Bank recently adopted the goal of \"ending extreme poverty,\" it has arguably long been among USAID's purposes\u2014the 1973 New Directions mandate (discussed below) made addressing basic human needs of the poor a key focus. \"Resilience\" refers to efforts to reduce a country's vulnerability to humanitarian and other crises. It is both a humanitarian and development assistance concern. The strategies that currently guide USAID policies can be found in five key documents.  1. The President's Policy Directive on Global Development (PPD-6)",
      " issued in September 2010, was the result of an interagency review led by the National Security Council. 2. The December 2010 Quadrennial Diplomacy and Development Review (QDDR) represents a parallel effort on the part of the State Department to address ways in which to make the two key diplomacy and development agencies more effective and, therefore, is more of an operational document. 3. The recently issued 2015 QDDR builds on its predecessor, with more modest initiatives. 4. The State/USAID joint Strategic Plan FY 2014-2017 focuses on five broad strategic goals of U.S.",
      " foreign policy and gives USAID a role in each. 5. The USAID Policy Framework 2011-2015 further actualizes the broader objectives of the previous documents. Together, the documents argue the importance of development in U.S. national security\u2014equal to diplomacy and defense, according to PPD-6\u2014with USAID as the lead development agency. The QDDR calls for reestablishing USAID as the world's premier development agency by focusing on six areas of perceived advantage\u2014the promotion of food security, health, climate change, economic growth, democracy and governance, and humanitarian assistance\u2014with the USAID Policy Framework adding a seventh,",
      " the prevention and response to conflict countries. Noting seven operational principles to be applied more systematically than in the past, the framework document states that USAID seeks to:  promote gender equality and female empowerment; apply science, technology, and innovation strategically; apply selectivity and focus; measure and evaluate impact; build in sustainability from the start; apply integrated approaches to development; and leverage \"solution holders\" and partner strategically. Many of these principles are brought to life in an agency reform program called USAID Forward, discussed in more detail below. But they are also apparent in the range of policy directives and guidance documents issued by the agency in the years since they were enumerated.",
      "  While Washington-based strategy and policy directives have an impact as they are dispersed to USAID field missions in countries around the world, it should be kept in mind that there can be a disconnect between policy and practice, especially as mission directors must work within the constraints and challenges of developing countries as well as the budget they are given.  Drivers of Agency Strategy and Programs In its first dozen years, the Foreign Assistance Act called for development in general terms only, Congress declaring the necessity of U.S. support for both economic growth and political democracy. The act did not specify in which sectors USAID should work or what project activities would be useful to achieve these objectives,",
      " and it only broadly and incompletely proposed methodologies for achieving development ends. As the agency addressed the specific developmental needs of individual countries, USAID launched projects in multiple development areas.  A change in emphasis by the agency to one type of aid or another or the adoption of a new operational approach during the past five decades has reflected specific country needs as well as a host of other intersecting factors. Periodic shifts in development theory and practice, the introduction of new technologies, and the evident success of an assistance initiative leading to its application elsewhere shape policy. Presidential initiatives and congressional mandates, often reflecting public interest, also shape policy. All of these elements inform current Administration and agency strategy.",
      " Evolving Development Theories. USAID's development professionals generally seek the most effective means to achieve development goals. Historically, the agency's choice of operational methodology and project emphasis has reflected aid theory of the moment. In its first decade, there was a particular emphasis in USAID programs on both the provision of economic infrastructure and the promotion of policy reform. Both followed from a top-down view of economic development current at the time\u2014that development emanated from government actions and that national wealth would trickle down to the poor. Operationally, the Development Loan Fund, a 1950s effort inherited by the agency, was designed for infrastructure support and,",
      " until ceding this role to the World Bank, was one of the main spigots for infrastructure credit support available to many developing countries. Until the mid-1970s, infrastructure loans accounted for the highest proportion of USAID assistance. Promotion of economic policy reform\u2014including policies fostering export promotion, realistic exchange rates, reform of public enterprises, the elimination of subsidies and price controls, tax reform, and private sector strengthening\u2014was a new element in development introduced by USAID and most evident in the aid programs in South Korea and Taiwan.  Support for both infrastructure and policy reform lost favor\u2014at least for some years\u2014when the focus on the government role in fostering a higher overall growth rate was rejected and a new bottom-up approach to development emphasizing \"growth with equity and basic human needs\"",
      " was adopted. The so-called New Directions strategy, embodied in the Foreign Assistance Act of 1973 ( P.L. 93-189, which amends the 1961 FAA), made it the purpose of U.S. development assistance to help the poor majority satisfy their basic human needs. Although revisions have been made over the years, the New Directions focus in U.S. development aid remains to a large extent intact.  The shift in emphasis signified by New Directions shaped the way USAID operates to this day. It led the agency to focus on projects benefitting the poor. It accelerated an ongoing transition from a loan to a grant agency,",
      " and from an agency building infrastructure to one providing technical expertise. Whereas assistance had been provided by Congress previously on a functional basis\u2014as grants or loans\u2014aid was now appropriated for specific sectors and emphasized sectors viewed as important to the rural poor, especially agriculture and nutrition, which went from an estimated 26% of aid in FY1973 to 54% in FY1975 and 61% in the proposed FY1976 budget. The inventory of USAID projects increased from about 1,550 projects in 1975 to over 2,000 in 1981 as a result of moving from capital-type projects to small, technical assistance projects.",
      " Some projects in higher-income developing countries (e.g., Uruguay, Brazil, Venezuela) were phased out to make room for more projects in lower-income countries (e.g., Bangladesh, Indonesia, Philippines). New programs were established in lower-income countries. The biggest change was in Africa, which went from 8 to 28 USAID missions from 1973 to 1980. Program planning practices still employed today, such as conducting social soundness and beneficiary analysis, were adopted to better focus on the poor majority, as was using a logical framework process to draw connections between project activities and objectives and the Country Development Strategy Statement, forerunner of the current Country Development Cooperation Strategy (discussed below).  Perhaps the most important consequence for USAID of New Directions was its acceleration of an ongoing shift from an agency \"having significant operational responsibilities to an agency which largely plans and finances projects which other groups implement,",
      " and the agency monitors and evaluates.\" This shift occurred because, in addition to new programs in lower-income countries, the new development approach required a different set of technical skills\u2014social scientists and rural development specialists instead of infrastructure engineers\u2014at the same time that budget cuts slashed the agency's U.S. direct hire workforce from 4,439, excluding Vietnam and Laos, to 3,672 between 1974 and 1977, a 17% reduction. The consequent difficulty in meeting technical requirements increased the need to turn to contractors and grantees. New Directions specifically called for increased use of Private Voluntary Organizations (PVOs)",
      " and other NGOs to carry out assistance programs.  Science and Technology. Support for scientific research and its dissemination as practical solutions to development problems has long characterized USAID and is recognized in the on-going reform initiatives that seek to re-vitalize the agency as a center for scientific research and innovation (see \"USAID Forward and Other Reform Efforts\" section below). For decades, USAID has been a major source of funds for the International Agricultural Research Centers and the agricultural research activities of land grant universities. In 2011 alone, the agency spent more than $192 million in health research. The measurable success of innovative practices, particularly in the health field,",
      " has encouraged large-scale spending on dissemination of these advances. It is arguably one of the reasons why the health sector has in recent years been the recipient of the highest proportion of the assistance budget. USAID played a key role in disseminating the new grains that characterized the green revolution of the 1960s and 1970s. Its do-it-yourself rice kits, containing seed, fertilizer, pesticides, and information on how these were to be used, effectively introduced the new high-yield grains to farmers, and its development loans supported developing country fertilizer purchases. In the 1980s, USAID was an early user of satellite data to forecast crop failures and identify mineral deposits and groundwater resources.",
      " Other innovations during the past several decades, (e.g., more efficient cook stoves, drip irrigation technologies, a rinderpest vaccine for African cattle, oral rehydration therapies, a measles vaccine, improved contraception, anti-malarial nets, and anti-retrovirals) were developed and/or widely disseminated with USAID support. The agency currently continues its long-supported research on a malaria vaccine, new tuberculosis drugs, and vitamin A deficiency, among others.  Presidential Priorities. Presidential initiatives have added new areas of emphasis. For instance, the Reagan Administration's Private Enterprise Initiative sought to shift the balance of USAID activities from a \"predominantly public sector,",
      " or government-to-government, focus to one that emphasizes market forces and active private indigenous productive sectors.\" Figures at the time suggested that private sector program funding rose from 4% of key accounts in 1982 (Development Assistance and Economic Support Fund) to as much as 13% in 1988. The GAO noted a shift in three USAID country programs (e.g., Jamaica, Kenya, and Senegal) it examined from an emphasis on government capacity building in 1978 to one focused on the private sector as an engine of growth in 1986. Private sector programs and approaches continue to be deployed decades later.  The George H.W.",
      " Bush Administration's President's Emergency Program for AIDS Relief (PEPFAR), supporting efforts to address the global AIDS epidemic, shifted significant funding into an already comparatively robust health sector. In addition to its existing agency-funded programs, USAID implements about three-fifths of the State Department-funded PEPFAR program. As a result, HIV/AIDS funding implemented by USAID leapt from $407 million in FY2003 to $3.8 billion in FY2010, representing roughly 17% of USAID's total budget in that year.  Three major Obama Administration aid initiatives\u2014on global health, food security, and climate change\u2014have shaped USAID's program.",
      " In particular, the Food Security Initiative boosted agriculture aid funding. A major component of the USAID program in the 1970s, agriculture aid had dwindled to insignificance by the 1990s. Between 2008 and 2012, funding obligations in the sector doubled. At the country level, presidential initiatives may be decisive in determining the composition and budget of mission programs\u2014in 2012, the three Obama initiatives reportedly represented an estimated 75% of Nepal's program funds. Congressional Priorities. As each Administration put its stamp on USAID's program, Congress made its own contribution, perhaps most importantly in the series of legislative authorizations of the 1960s and 1970s that led to and included the New Directions legislation noted above.",
      " In the absence of a broad aid authorization since 1985\u2014thereby leaving it to appropriators to largely shape the aid program in its annual foreign operations appropriations legislation\u2014Congress has continued to periodically authorize sector or regional programs representing a particular interest or concern. Among these are microfinance, water and sanitation, global health, and aid to Africa, eastern Europe, and the former Soviet Union. Although, in many cases, USAID's role in a sector preceded this interest, congressional support often has helped to solidify funding and shape strategy. A funding mandate or recommendation in appropriations legislation or committee report language is perhaps the most common expression of congressional program priorities.",
      " Over the years, Congress has directed funding levels for a range of sectors, to varying degrees of specificity. In the foreign aid portions of the FY2015 State, Foreign Operations appropriations legislation ( P.L. 113-235, Division J), Congress required or suggested (\"shall\" or \"should\") funding levels for health, the American Schools and Hospitals Abroad program, cooperative development, democracy promotion, basic and higher education, environmental protection, food security and agricultural development, microenterprise, trafficking in persons, and water and sanitation. These FY2015 recommendations amounted to about $12.5 billion\u2014most of which was expected to be implemented by USAID\u2014and,",
      " therefore, likely account for more than two-thirds of its program budget for the fiscal year.  Perhaps the most important role of Congress in determining the shape of USAID's programs is congressional control over the total USAID budget. The various elements of the budget are discussed below. USAID Budget The USAID annual budget is provided through multiple funding accounts. Each account has different rules and flexibilities established in authorization and appropriations language. Most USAID program and operational accounts are authorized specifically or broadly under the standing legislative authority of the Foreign Assistance Act of 1961. Authorization of funding levels, however, is time-limited and, in many cases,",
      " has not been renewed since the last comprehensive aid legislation in 1985, which provided funding levels for FY1986 and FY1987. A legislative requirement that foreign assistance program appropriations be authorized before the appropriation can be made is regularly waived, for example, as the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235, Division J, \u00a77022) did in the case of FY2015 unauthorized foreign aid program appropriations. Budget Accounts Almost all of USAID's funding is appropriated in the annual State, Foreign Operations appropriations legislation, except the P.L. 480 Title II food aid program,",
      " which is funded through the Agriculture appropriations. Some appropriations accounts that fund USAID programs are exclusive to sectors (e.g., health, democracy). Some accounts are exclusive to broad purposes (e.g., political/strategic, development, humanitarian). Some are exclusive to an aid methodology (e.g., development credit authority). And, in the past, some accounts have been exclusive to countries or regions (e.g., the Iraq Relief and Reconstruction Fund; Assistance to Europe, Eurasia and Central Asia; Development Fund for Africa).  Up until 2006, a number of appropriations accounts whose funding went entirely to USAID\u2014its \"core\" accounts\u2014were solely under the jurisdiction of the agency,",
      " while others from which only a portion of the total went to USAID were co-managed with the Department of State. In the latter case, the State Department set policy and country allocations and USAID implemented the program funding allocated to it. Since 2006, with the creation of what is now the Office of U.S. Foreign Assistance Resources in the State Department, all these accounts\u2014both \"core\" and shared\u2014are perhaps best described as jointly managed by State and USAID at the policy and allocation level, with USAID implementing funds allocated to it. Because the shared account totals can only be estimated, total USAID budget figures in Table 1 are also only estimates.",
      " Further, each year some funds\u2014contributions to a few international programs, such as the Global Fund to Fight AIDS, Tuberculosis, and Malaria and cash transfers to various governments\u2014merely pass through USAID. Because these \"transient\" funds may be quite large\u2014the Global Fund contribution, for instance, sometimes representing more than $1 billion\u2014the total USAID budget figure somewhat distorts the profile of funding available to it for implementing its own programs.  The agency's core program accounts include the following:  The USAID Global Health Programs account, currently one of two components of a broader Global Health Programs account\u2014the other owned by the Department of State\u2014supports programs focused on combating infectious diseases such as immunization and oral rehydration;",
      " HIV/AIDS; malaria; tuberculosis; maternal and child health; vulnerable children; and family planning and reproductive health. The Development Assistance (DA) account funds programs in agriculture, private sector development, microcredit, water and sanitation, education, environment, democracy, and governance, among others. The International Disaster Assistance (IDA) account, managed by the USAID Office of Foreign Disaster Assistance, aids nations struck by natural and man-made disasters and emergencies. Funding is flexible and less constrained by requirements than other accounts in order to support a rapid response. The Transition Initiatives account supports the activities of USAID's Office of Transition Initiatives (OTI), a program launched in 1994 to bridge the gap between disaster and development aid.",
      " It supports flexible, short-term assistance projects in countries that are moving from war to peace, civil conflict to national reconciliation, or where political instability has not yet erupted into violence and where conflict mitigation might prevent the outbreak of such violence. The Complex Crises Fund (CCF) is a standing pot of non-allocated funds that allows USAID to rapidly respond to emerging or unforeseen crises with projects aimed at the root causes of conflict or instability. In 2010, for example, the CCF provided agricultural assistance in time for the planting season to newly resettled Sri Lankans previously displaced by the civil war, and in 2014 to address unanticipated governance challenges in Ukraine.",
      " The Development Credit Authority (DCA) specifies an amount that may be transferred from other accounts to subsidize U.S. loan guarantees that assume a portion of the risk taken by private banks financing water and sanitation systems, microcredit and small enterprise development programs, and other development activities. The provision also directly appropriates administrative costs to run the credit program. P.L. 480 Title II, although funded through the Agriculture appropriations, it is managed by USAID. Also known as the Food for Peace program, P.L. 480 Title II provides U.S. agricultural commodities to meet both emergency and non-emergency food needs. Humanitarian food programs represent about 60%",
      " of funding and target mostly vulnerable populations in response to malnutrition, famine, natural disaster, civil strife, and other relief requirements. It is provided through multilateral organizations, such as the World Food Program, and to private voluntary organizations (PVOs). Non-emergency, developmental-purposed food is provided to PVOs and often \"monetized\" (i.e., sold in the recipient country with proceeds used to support development projects). In recent years, Congress has allowed a portion of this account to be provided in cash form, rather than food, which can then be used to purchase food on local markets. USAID also receives a portion of the following accounts:",
      " The Global Health-State component of the broader Global Health Programs account, managed by the Office of the Global AIDS Coordinator (OGAC) in the Department of State, is the largest source of funding for the President's Emergency Plan for AIDS Relief (PEPFAR). Programs funded from this account are implemented by USAID, the Department of Defense, the Centers for Disease Control and Prevention, and the Peace Corps, among others. USAID's share averages over 60% of this account's funding, although the amount may vary widely from year to year. The U.S. contribution to the Global Fund to Fight AIDS, Tuberculosis, and Malaria passes through USAID.",
      " The Economic Support Fund (ESF) uses economic assistance to advance U.S. political and strategic goals in countries of special importance to U.S. foreign policy. Key recipients in recent years include Afghanistan, Iraq, South Sudan, Egypt, Colombia, and Jordan. In most years, USAID receives over 90% of the funding. The Democracy Fund supports democratization programs run by the State Department and USAID. Congress directs a specific dollar portion of the funds in this account\u2014representing 46% in FY2014\u2014to USAID's Bureau for Democracy, Conflict, and Humanitarian Assistance. In addition to these accounts, USAID has,",
      " on occasion, received funding transfers from other agencies, most commonly the Millennium Challenge Corporation to implement the MCC's threshold programs.  Several accounts are exclusively for USAID administrative purposes, not programs, and remain solely under the agency's jurisdiction: The Operati ng Expenses (OE) account funds the operational costs of USAID, including salaries and benefits, overseas and Washington operations, staff training, security, and information technology maintenance and upgrades. As this account is often insufficient to cover administrative costs, in some cases Congress allows a portion of program costs to be used to support operations. The Capital Investment Fund, begun in FY2003, supports USAID modernization of information technology systems and the construction of facilities overseas.",
      " The Office of Inspector General account supports operational costs of the office, which conducts audits and investigations of USAID programs.   Table 1 shows appropriated amounts under each of these accounts. Although appropriated numbers are useful, because they are more recent and clearly show congressional action, this report often relies on estimated FY2013 obligations (amounts committed) for USAID-implemented activities because of the level of detail by country and account that is available for that year.  Budget Trends Based on an estimated appropriation total of $20.6 billion in FY2015, USAID activities make up more than half of total foreign assistance, traditionally defined as accounts under the foreign operations part of the State,",
      " Foreign Operations appropriations and international food aid appropriated under the Agriculture appropriations ( Figure 1 ). USAID manages more than one-third of the International Affairs 150 budget function in the federal budget. The agency's operations and programs represent about 0.7% of total federal budget authority. As might be expected, over five decades total agency funding has shifted variously, as have its individual account components. At discrete points, agency funding levels can be seen as a reflection of the general sentiment, both pro and con, toward all foreign\u2014including military\u2014aid, a reflection as well of Cold War strategy and the Global War on Terrorism, of humanitarian response,",
      " of the broader federal budget, and of specific congressional and Administration foreign policy aims.  The inconsistent quality of data prior to 2001 makes it difficult to track USAID-specific funding through its history, but an approximate calculation using constant dollars suggests that only since FY2009 have levels reached the heights that they did in the first years of USAID's existence ( Figure 2 ). High assistance levels in the early to mid-1960s were fueled in part by the agency's prominent role in the Alliance for Progress in Latin America and the Vietnam War (at its peak, USAID employed as many as 10,000 staff in that country alone). In the past decade,",
      " USAID funding levels have risen again, in large part due to spending on the health sector, especially HIV/AIDS; in response to a range of humanitarian emergencies, such as the Haiti earthquake and Ebola; in support of activities in Iraq, Afghanistan, and Pakistan; and more broadly as development assistance has been viewed as a mitigating factor in the war on terrorism. From FY2001 to FY2009, USAID's implemented funding more than doubled in real terms. In between its first and most recent decades, the agency's funding levels fell dramatically in the late 1960s and early 1970s, as broad support for development aid dwindled and programs in southeast Asia were ended.",
      " Funding levels were reconstituted by the policy and management reforms of New Directions. A significant spike in USAID's budget occurred in the mid-1980s during the Reagan Administration in conjunction with increases in total foreign aid and in support of famine assistance programs in Africa and development aid in Central America, a region of intense foreign policy interest at the time. A chief rationale for foreign aid collapsed with the fall of communism in eastern Europe and the former Soviet Union (1989 through 1992), despite a rise in assistance to those very regions. Amid broader congressional budget cutting in the post-1994 period, USAID budgets were substantially slashed.",
      " By FY2000, they reached the lowest level (in real terms) in agency history.  Aid Recipients Although it is common to discuss aid to a specific country, only a small percentage of USAID assistance\u20144% in FY2014\u2014actually goes directly to the governments of recipient countries. Most USAID funds go through U.S. partners\u2014universities, NGOs, and contractors\u2014although their efforts may directly assist a government's Ministry of Education or Health, for example, in providing educational and health programs to their public. U.S. assistance may also bypass government institutions and directly benefit farmers, civil society organizations, and other segments of the population.",
      " USAID provides assistance to a range of countries\u2014125 in FY2013. However, of those, 23 received under $1 million, mostly small island nations or countries receiving one-time funds for humanitarian purposes. The agency's chief beneficiaries (listed in Table 2 ) are mainly countries of special interest for political/strategic reasons, Afghanistan and Pakistan most prominently. Four countries are in the Near East\u2014Syria appearing for the first time on this list in FY2013, although funds allocated for Syria support refugees and displaced people rather than the Syrian government. Nine are sub-Saharan Africa countries of strategic importance and/or the subject of substantial HIV/AIDS assistance.",
      " One country absent from the list\u2014Israel\u2014which is regularly among the major recipients of total U.S. funding from all sources, now receives nearly all of its aid in the form of security assistance, which is not administered by USAID. As suggested by the country rankings, in FY2013, the lion's share\u2014nearly 40%\u2014of USAID funding attributable to countries or regions went to sub-Saharan Africa. Two countries in south Asia\u2014Afghanistan and Pakistan\u2014accounted for nearly one-fifth of total USAID country/regional assistance. Not counting those countries, the rest of Asia and the Pacific made up a little more than 8%",
      " of the USAID portfolio. Comparing regional USAID allocations with those of 10 years earlier ( Figure 3 ) illustrates the foreign policy drive behind the choice of aid beneficiaries. In FY2003, the Middle East/North Africa (MENA) region represented more than one-third of assistance, largely because of USAID's prominent role in Iraq reconstruction. By FY2013, the MENA's proportion has been cut nearly in half. In FY2003, Afghanistan and Pakistan's importance to U.S. strategic interests had only just begun, but even then accounted for about 6% of assistance. In FY2013, their share of total assistance had tripled and in dollar terms nearly quadrupled.",
      " By FY2003, at about 8%, the Europe/Eurasia program had begun to dramatically decline from its 1990s immediate post-communist levels; it represented 16% as recently as FY2001. In FY2013, it accounted for less than 3% of USAID programs. As an agency chiefly designed to support international development, USAID maintains programs in almost every low-income and lower-middle income country, with 44% going to low income and 41% to the lower-middle grouping in FY2013 ( Table 3 ). In contrast, in FY2012, the proportion to these two groups was 57%",
      " and 29%, respectively. About 15% of total USAID country funding is spread amongst a wide number of upper-middle income countries as well. Programs in high-income countries, although scanty, appear, as in the case of Ireland, to reflect specific U.S. political interests or are provided in response to natural disasters. The agency's focus on the most challenging political and social environments is further indicated by the proportion of country-specific assistance that goes to countries in crisis. The top 10 countries appearing in the 2014 Fragile States Index ranked by the Fund for Peace received 32% of total FY2013 USAID country-specific funding.",
      " Aid Program Sectors In part because its objectives are broad and its recipients are many, USAID conducts programs in nearly every humanitarian and development sector. Figure 4 shows the proportion of funding going to USAID-implemented activities in major sectors. As noted earlier, an emphasis on one sector or another may reflect Administration or congressional priorities, current development strategies, or a mix of these and other factors. Health. Since the early 1990s, health programs have consistently been the largest USAID assistance sector. Even as total USAID levels rose rapidly in the past 10 years on account of aid efforts in Iraq and Afghanistan, health funding has kept pace as a result of billions of dollars in transfers from the Department of State's PEPFAR program.",
      " In FY2013, USAID obligated about $5.7 billion for health activities, including water and sanitation. This amount represents more than one-third of total USAID sector spending. In FY2013, about 42% of the agency's total health budget went to sub-Saharan Africa. Humanitarian Programs. Historically, USAID's humanitarian programs, including disaster and food assistance, have varied widely from year to year, in response to the emergence of significant crises such as the Sahelian drought in the 1980s and the 2010 Haiti earthquake (the State Department also administers other humanitarian accounts). Overall, however, support for humanitarian aid has grown over time.",
      " In particular, USAID's International Disaster Assistance account, on a gradual upward trajectory for several decades, has remained high since more than doubling in FY2005 (to $1.2 billion) in response to the 2004 Indian Ocean earthquake and tsunami. In FY2013, humanitarian support delivered by USAID represented 19% of agency sector funding, a proportion likely to increase significantly when the FY2015 Ebola crisis funding is taken into account.  Agriculture. In FY2013, USAID obligated $1 billion, 6% of sector aid, for agriculture assistance. Agriculture was the largest single sector of USAID assistance until the 1990s,",
      " when it was supplanted by the health sector. In the late 1960s, agriculture spending represented about 24% of the agency's program, but rose to nearly half by the late 1970s, reflecting the agency's stress on rural development under the New Directions strategy. By FY2002, however, agriculture spending represented less than 3% of total sector aid. Support for agriculture aid has grown substantially in recent years with the Administration's Global Food Security Initiative. Agriculture programs include training of farmers, researching and introducing new technologies and materials to improve productivity, developing markets, and providing access to credit. The largest recipients were Afghanistan,",
      " Bangladesh, Colombia, Ethiopia, Ghana, Haiti, Mali, Pakistan, Tanzania, and Uganda, collectively about 54% of total agriculture aid.  Democracy and Governance. In FY2013, USAID obligated nearly $2 billion, about 13% of total sector aid, for programs supporting democracy and governance, including assistance for rule of law, anti-corruption, development of civil society, and the elections process. The largest beneficiaries of this aid were Afghanistan, Egypt, Iraq, Jordan, Pakistan, and South Sudan, together representing 66% of the total employed in this sector in FY2013. The bulk of democracy funding, as for these countries,",
      " is derived from the agency's portion of the ESF account. Economic Growth and Private Sector Development. Programs designed to increase economic growth include assisting access to credit for micro and small business, organization of business associations, encouragement of policy reforms to build a favorable business climate, and facilitating development of market chains. For those countries with sufficiently large aid programs, such as Afghanistan and Pakistan, a significant element of USAID's economic growth strategy is the provision of infrastructure, including such costly items as roads, power plants, and communications. Four countries made up 67% of this sector's obligated funds in FY2013\u2014Egypt, Afghanistan, Pakistan, and West Bank/Gaza.",
      " In FY2013, economic growth programs accounted for about 11% of USAID sector funding. If agriculture assistance, with its similar purpose, is included in this sector, economic growth efforts could also be said to represent roughly 17% of the USAID program.  Education. In FY2013, assistance to education accounted for 4% of USAID's programs. Reflecting the agency's main goals of improving reading skills and addressing school access for children in crisis and conflict countries, 83% of total funds went toward basic education in FY2013. Most of the remaining funds went toward post-secondary education in efforts to address workforce development.",
      " Five countries\u2014Afghanistan, Ethiopia, Lebanon, Liberia, and Pakistan\u2014represented more than a third (36%) of all education obligations in FY2013. Environment. In FY2013, environment programs represented about 3% of USAID sector assistance. Chief beneficiaries of environment protection programs, making up more than a third of funding in FY2013, were Colombia, Ecuador, Indonesia, Mexico, Peru, the Philippines, Sudan, Ukraine, and Vietnam. Programs included land rights management, protection of biodiversity, climate change mitigation, and efforts to end deforestation, among others. How USAID Delivers Assistance  The process in which USAID provides assistance encompasses thousands of individuals both within and outside the agency,",
      " undertaking a range of actions to ensure that funded activities\u2014projects\u2014are formulated, designed, implemented, monitored, and evaluated effectively. It is a complex process with multiple permutations; therefore, any brief description such as this one is greatly simplified. Mission and Headquarters Roles Organizationally, USAID is split into two pieces\u2014field missions and headquarters' bureaus and other offices\u2014each with their own key functions and personnel. In Washington, agency staff are composed of mostly U.S. direct-hire civil service; in the missions, staff are composed of U.S. direct-hire Foreign Service Officers (FSOs) and foreign national employees, most from the mission country.",
      " As of September 2014, USAID staff totaled 9,355, composed of 3,815 U.S. direct-hire staff\u20142,119 Foreign Service and 1,696 civil service\u2014and the remainder mostly foreign national personal service contractors (PSCs). Role of Country and Regional Missions. The USAID missions are perhaps the agency's most unique feature and are often said to be the heart of agency functions. They are the focal point of the agency's development role, while its humanitarian and research functions are largely centered at headquarters. USAID's relatively large-scale personnel presence in aid recipient countries\u2014about 70%",
      " of its current workforce\u2014long differentiated the agency from other donors, although many have emulated this model in recent decades.  The mission's role is to interface with the government and private sector, formulate a country development strategy, design projects, monitor those projects, and ensure both programmatic and financial accountability. A hands-on presence in each of these steps suggests a better understanding of local conditions, ready access to the host government and other aid recipients, and a greatly enhanced ability to follow project progress and make necessary amendments as priorities and circumstances change. A 1992 study of the mission presence, still relevant today, argues that the potential to influence the country program,",
      " to influence country policy reform, and to be accountable for the effectiveness of USAID financial resources are the fundamental justifications for the in-country presence. The same study pointed to possible negative sides of the mission presence\u2014\"heavy-handedness,\" excessive use of American expertise, physical insecurity, cost of maintaining a presence, and an inclination to \"perpetuate rather than to work to phase down U.S. presence and the role of USDH [U.S. direct hire] employees.\"  Currently, USAID supports more than 60 bilateral missions. Missions vary in size depending on factors such as the overall funding level of the country program, the range of programs and sectors addressed,",
      " the availability of educated foreign nationals, and the security situation. USAID programs in countries without missions are managed from regional missions, which also engage in an array of cross-border regional programs. At one time separately situated, most missions are now colocated with the U.S. embassy. Missions are largely staffed by U.S. FSOs and local nationals. USAID's FSOs are development professionals who mostly work abroad and function under similar administrative rules as State Department FSOs but modified by USAID. They usually specialize in a development sector or an administrative function, such as contracting or financial management. Depending on the country, FSOs generally spend two to four years in a country before rotating to the next posting.",
      "  Other U.S. citizens serving at the mission level may be personal service contractors performing specific non-managerial duties. On occasion, USAID civil servants based in Washington will take up temporary duties at the missions as will, more rarely, U.S. government employees of other agencies detailed to USAID. In 2014, foreign nationals represented 69% of the USAID overseas workforce. Foreign nationals, most from the recipient country, work in both program professional and administrative support capacities. Missions depend heavily on the foreign national workforce to achieve their objectives. Foreign nationals bring to their jobs a deeper knowledge of the language, culture, local politics,",
      " and the development environment than U.S. direct hires. Often serving for decades, while FSOs move in and out, foreign nationals also bring an invaluable institutional memory to mission operations. Role of Central Bureaus and Independent Offices. While the majority of agency program activity is conducted in the field through its missions, the Washington-based central bureaus and offices also play significant program roles. Currently, there are 12 bureaus and a handful of independent offices in USAID's headquarters in the Ronald Reagan Building ( Figure 5 ). Of these, seven are functional bureaus, four of which focus on technical sector issues such as health and food security,",
      " and three that address concerns such as management, policy development and evaluations, and public affairs. The remaining five are regional bureaus. Independent offices address specific matters such as human resources, budget, and security. The assistance programs for Afghanistan and Pakistan are backstopped through an independent office rather than by the regional bureau. A major role of the bureaus and offices is to provide policy, technical, and administrative support for the missions and to coordinate the allocation of financial, human, and other resources to the missions. Broad policy guidance (e.g., approved measures for meeting presidential and agency initiatives; sector technical guidance, such as best practices in water and sanitation aid;",
      " and aid process guidance, such as how to design projects and carry out evaluations) is developed at headquarters and disseminated to the missions. Expertise on the whole range of development sectors is available to mission personnel through the technical bureaus. If a mission is formulating an agricultural project, for instance, it can draw on the knowledge of subject experts in the Bureau for Food Security. Technical bureaus also manage grants and contracts that provide additional expertise to the missions as required. In recent years, regional bureaus have established their own technical offices, which, in the view of some, may duplicate existing expertise. Bureaus (and some independent offices)",
      " to varying degrees also take leadership roles in designing and implementing projects. This is especially the case where projects cross sectoral or regional lines. In the 1980s and 1990s, for example, a Microenterprise Office supported more \"cutting-edge\" projects and research into best practices than would occur at the mission level. In particular, it channeled funds directly to a range of microcredit specific NGOs, such as ACCION and Finca, helping them establish their expertise and success in this sector. It also led the way in encouraging the adoption of microfinance by commercial banks.  The most prominent example of headquarters-based project implementation is the Office of U.S.",
      " Foreign Disaster Assistance (OFDA) in the Bureau for Democracy, Conflict, and Humanitarian Assistance. It is the lead government agency for international disaster relief, providing direct assistance to address 52 emergencies in 40 countries in FY2013. It follows emerging disasters, pre-positions relief supplies, deploys response teams to evaluate needs and coordinate the U.S. government response, and helps local entities develop response capabilities for future disasters.  Similarly, the bureau's Office of Transition Initiatives (OTI), working in post-conflict environments, conducts its own rapid assessment of country needs. Using a flexible contracting mechanism that permits it to call on a range of expertise from multiple firms as needed,",
      " its personnel work closely with contractors to quickly award small grants\u2014averaging $30,000\u2014to address specific concerns. The short-term implementation time frame of these grants\u2014two to three months\u2014allows OTI to maintain a rolling analysis of impact and change strategy as required. As of early 2014, OTI was working in about a dozen countries, including Syria, Afghanistan, Yemen, Burma, and Kenya.  The Global Health Bureau also represents a large share of Washington-based program activity. The U.S. government's annual contributions to the Global Fund for AIDS, Tuberculosis, and Malaria and GAVI, go through the bureau and on to those multilateral programs;",
      " commodity purchases, such as for HIV anti-retroviral drugs, are procured through the bureau; and neglected tropical diseases and global health security programs are managed by the bureau, as they are both so narrowly focused that they require teams of specialists that mission public health specialists could not provide. Considerable research funding is supported through the Global Health Bureau; each year, USAID spends more than $200 million on health research activities. Program and Project Development Most USAID development projects are formulated and conducted at the country level through the missions. Over the years, the individual steps leading from broad agency policy through individual country-level program strategy, project design and implementation,",
      " and evaluation and monitoring have changed to varying degrees in form and detail. This \"program cycle\" in its current form is briefly described below. Whether the end result of this cycle\u2014the conglomeration of individual projects that make up a country program\u2014is more the product of Washington or the mission is hard to say. One factor is the periodic phases of centralization or decentralization of decisionmaking between headquarters and the field. A more recent factor is the role of the Department of State. Between 2006 and 2009, USAID budget, strategy, and policymaking responsibilities were removed entirely from USAID headquarters and transferred to the Department of State's Office of the Director of Foreign Assistance,",
      " with significant consequences for mission plans and procedures. USAID has since gradually regained some of these responsibilities, but not all of them. Whatever institutional mechanisms are in place, mission programs have always faced an array of budget requirements and legislative mandates and must fit within the mold of Administration program initiatives and strategies, currently including the QDDR and the USAID Framework, as described above. But the perspective and contribution of the mission is also always a vital component in the mix. The country strategy that is a key element of current program development is the product of considerable give-and-take between mission and headquarters. Country Development Cooperation Strategy. At the country level, each USAID mission formulates a five-year country strategy that addresses a wide range of factors specific to the country but also takes into account the broader external parameters emanating from Washington.",
      " A requirement launched in 2010, the Country Development Cooperation Strategy (CDCS) is the latest variant of a form of long-term development planning that stretches back to the early years of the agency. As of March 2015, 51 country missions and six regional missions had completed and received approval of their strategies. Six more are anticipated in 2015. At least six countries have been exempted from the CDCS requirement due to instability and other reasons. The CDCS seeks to identify and prioritize development objectives and program areas where the agency can have the maximum impact. A product of extensive research and discussion with government, civil society, and the private sector,",
      " the CDCS is based on a reasoned analysis that takes into account the development context, U.S. foreign policy interests, and the host government's own development plans.  In the CDCS, USAID missions employ a Results Framework (see \"Results Framework: The Case of Ghana\" text box below) to connect anticipated results for a given sector to the achievement of the overall Development Objectives and ultimately the CDCS goal. Missions are required to identify associated measurable indicators that would demonstrate the status of progress toward these goals and objectives.  The CDCS goal is defined as the highest-level impact to be advanced or achieved by USAID, the host country,",
      " civil society, and other development partners during the strategy timeframe. Indicators associated with this goal may, therefore, be promoted by actions other than those of USAID. A more precise reflection of USAID's program is encompassed by the Development Objectives (DOs) that each mission may adopt (limited to no more than four). DOs are defined as the most ambitious results that a USAID mission can materially affect and for which it is willing to be held accountable. Likely going into the calculation of which DOs are selected is a consideration of what funding resources are available, what ministries are most amenable to appropriate reform and programs, and the status of sector-related civil society,",
      " among other factors. Associated with each of these objectives are intermediate and sub-intermediate results, which together should be sufficient to achieve the DOs. Progress in both DOs and results are measurable by sets of performance indicators. USAID projects are designed to bring about the results that make up the Development Objectives in the CDCS. In theory, the mission's evidence-based analysis is supposed to lead logically to adoption of a set of development objectives that \"respond to country priorities\" and will have \"the greatest impact on a country's stability and prosperity.\" However, one USAID evaluation found frustration among mission staff that presidential initiatives and other funding priorities define the CDCS more than \"evidence and consultation.\" A USAID Office of Inspector General (OIG)",
      " audit suggested that the budget \"trumped local priorities\"\u2014some missions drafted their CDCS based on their expectation of available funding, whereas others were told by Washington to revise theirs to reflect budget realities. Even so, in the end, the audit found that mission development objectives were not always supported, because flexible funding\u2014money not designated for presidential initiatives and congressional mandates\u2014is often less than a quarter of available funds. Minimally, the CDCS is a methodology for thinking through the connections between desired ends\u2014even if pre-determined\u2014the steps to get there, and ways to gauge success. For the outside observer, the CDCS provides an initial basis for identifying what USAID intends to do in a country and how its intentions can be measured and eventually judged.",
      " One further objective of the CDCS process as well as USAID Forward, discussed below, was to focus agency efforts where the agency could do the most good. According to the agency, as a result of this reprioritization, between 2010 and 2014, USAID reduced the number of country program areas by 42%, phasing out food security and agriculture aid in 26 countries and health aid in 23. Project Design New projects\u2014defined by USAID as \"a set of executed interventions or activities, over an established timeframe and budget, identified through a design process that is intended to achieve a discrete development result by solving an associated problem\"\u2014are designed around the CDCS.",
      " They are formulated using a logical framework method where planned inputs produce outputs that lead clearly to outcomes, the project purpose corresponding to the CDCS \"results,\" and all contributing to the project goal\u2014the CDCS Development Objective. A project appraisal document (PAD) outlining these factors, as well as providing an implementation plan, budget, and monitoring and evaluation plan, forms the basis for a project.  Over the time it takes to develop a project from broad concept paper to the more analytical project appraisal document to final approval with a project authorization and corresponding funding (roughly estimated by USAID at four to six months), project designers must take into account a range of factors and agency requirements.",
      " Among these is the relationship of the proposed project to other U.S. government programs and strategies, to other donor programs, and to partner country and local \"stakeholder\" priorities and concerns. In particular, the possible roles of partner country and local entities in the implementation of the project need to be identified. Plans to monitor and evaluate the project must be thought out to establish what data will be required over the life of the project and how data will be collected. The project design process requires an analysis of how the project can be made sustainable in the long term as well as analyses of gender and environmental impacts.  Types of Aid and Aid Delivery Instruments USAID assistance takes multiple forms,",
      " most fundamentally as food, medical supplies, cash, expert advice, training, equipment such as computers, and economic infrastructure such as roads and power plants. Usually a USAID project will combine several of these inputs to best meet the desired end. For example, a basic education project might include production and distribution of student textbooks, training of teachers, and expert guidance to the Ministry of Education on curriculum design.  This assistance may be delivered in multiple ways, each of which has advantages or disadvantages in terms of the management burden on the agency and the degree of control the agency has over outcomes, among other factors. During the process of project design, consideration is given to which of these so-called implementation instruments\u2014in USAID parlance,",
      " acquisition referring to procurement contracts or assistance referring to grants\u2014might be best employed to carry out the project. A decision is made once the project design is finalized. USAID management documents list at least 32 different types of implementing mechanisms; the most important and common are discussed here: Grants. A grant supports the grantees' own program, to do the kinds of things it normally does, but that coincide as well with USAID's purpose. Because the grantee does not implement the program as an agent of the U.S. government, a grant requires relatively little oversight or management from USAID and can be implemented in places where the agency has limited access,",
      " such as in disaster or civil crisis locations. A disadvantage is that it requires less accountability to the agency than contracts or cooperative agreements. Both grants and cooperative agreements are generally provided to nonprofit organizations or educational institutions, but grants are also provided to international organizations and multidonor funds. In recent years, grants and cooperative agreements have represented about two-thirds of all USAID award funding. Cooperative Agreements. A cooperative agreement is a type of grant that supports the recipient's own program, but, in this case, the agency seeks to be more involved in the implementation and direction of the program. The increased role and oversight make it more time consuming for the agency to administer.",
      " In FY2013, cooperative agreements represented 46% of all grant assistance. Contracts. A contract is an agreement to provide specified goods and services, meeting USAID purposes where it intends to exercise a high degree of operational control. USAID is heavily involved from start to finish, and the contractor owes the agency a high degree of accountability. Contracts are explicit about purposes, with specific benchmarks to be met. Most contracts are awarded to for-profit firms. Host Country Contracts allow local governments to compete and manage contracts for specific purposes, such as infrastructure construction, following U.S. government procurement rules. They require that the government has sufficient management capacity. Government to Government Assistance (G2G). Under this form of project assistance,",
      " USAID directly finances local governments to deliver mutually agreed upon results (e.g., increased immunizations at health clinics, teachers trained in early grade reading methodologies). Accountability is a potential problem, so this assistance requires in-depth financial and other risk assessments and risk mitigation measures tracked during implementation. Non-Project G2G Assistance, more common in the past than currently, consists of various forms of budget and balance of payments support to partner governments. Sometimes U.S. funds are matched by the recipient with local currencies that may be used for development purposes. Often non-project assistance includes policy benchmarks. USAID is revising its \"non-project assistance\" guidance to reflect the current focus on outcomes-based assistance.",
      " Types of non-project G2G assistance include the following: Cash Transfers are made directly to governments. Most economic assistance to Israel up to the 1990s was provided as cash transfer general budget support. Commodity Import Programs (CIPs) provide U.S. currency tied to the import of U.S. goods. CIPs were a feature of aid to Egypt in the 1980s and 1990s. Sector Program Assistance is conditioned on achieving a specific set of policy reforms in one development sector. It was frequently offered to African countries in the 1980s. Public-Private Partnerships, also known as public-private collaboration agreements.",
      " Since 2001, under USAID's Global Development Alliance (GDA), more than 1,500 partnerships with the private sector have been formed to support mutually agreed upon goals with resources contributed by both parties. Loan Guarantees. As noted earlier, Development Credit Authority loan guarantees (assuming up to half of the loan risk) have been used to leverage private sector bank funds for development purposes. Under a separate program, the United States has guaranteed the full value of sovereign loans to Ukraine and Tunisia. Project Implementation and Oversight Project authorization sets into motion a sequence of activities that generally leads to a competitive selection process of project partners, project agreements with scopes of work,",
      " and ultimately obligation of funds, and launching of project implementation.  There is a large universe of potential \"development partners\"\u2014nonprofit private voluntary organizations (PVOs) and other NGOs, for-profit contractors, universities, foundations, other U.S. government agencies, international organizations, and similar entities in other countries ( Table 4 ). According to USAID, about 28% of FY2014 procurements went to U.S. nonprofits, not counting education institutions which represented 2%; 19% went to U.S. for-profits; and about 7% went to U.S. government agencies. Another 29% went to international public organizations (e.g., U.N.",
      " agencies), 4% went to other governments, and about 8% went to foreign nonprofit, educational, and for-profit entities. As these partners implement projects, the chief role of USAID is to maintain oversight, both of its financial resources and of project performance. A number of steps are taken throughout the project design and implementation process to monitor both. If a project is well-designed, it may already take into account potential risks and vulnerabilities that might derail effective performance or invite financial abuse. For instance, the project might include management training for local partners to improve their project management capacities or it might address sustainability concerns, thereby reducing a factor in project waste.",
      " Where higher risk is perceived, grants and contracts can be designed to provide payment in tranches only after specific actions are undertaken accompanied by appropriate documentation. In its procurement procedures, USAID follows its own AID Acquisition Regulations (AIDAR), based on the Federal Acquisition Regulations (FAR), which requires a determination of the qualifications of perspective contractors and grantees to ensure the likelihood of adequate performance and the preferred use of open competition to ensure the most qualified finalist at the most reasonable rate.  Each project or activity within a project may have a manager and/or a contracting officer or, in the case of grants and cooperative agreements, an agreement officer,",
      " responsible for oversight. These officers can follow project progress through regular written reports, usually required quarterly, from contractors and grantees, and through site visits and other, more frequent, contacts. Managers and contract officers also receive regular financial reports and vouchers with which they can track expenditures.  Annual financial audits of U.S. contractors are required and usually performed by the Defense Contract Audit Agency (DCAA). These focus on the overall financial status of the contractor rather than work being done in any one country. For U.S. nonprofits whose work exceeds certain federal funding levels, an annual financial audit is performed by public accounting firms approved by the Office of the USAID Inspector General (OIG).  In 2011,",
      " the agency stood up an agency-wide unit, the Contractor Compliance Task Force, to oversee contractor compliance with primary responsibility for processing suspension and debarment actions, managing partner corrective actions, and tracking partner compliance. Enforcement actions have reportedly increased notably since creation of the new unit. Special measures have been devised to capture instances of fraud or mismanagement in countries with especially high risk. In Afghanistan, for example, special measures include the following: prime contractors are required to undertake a specific proportion of the work and limits are put on the number of layers of subcontracts to make it easier to follow where the funding is going; many awards are limited to one year and smaller amounts;",
      " non-U.S. companies and key personnel are vetted to ensure that \"malign actors\" are not involved; electronic funds transfers are used instead of cash payments; third-party monitors are employed; more local audits and reviews of claims are conducted; more field staff are deployed; and more staff trained as \"on-site monitors.\"  Where funds are being provided directly to governments and local entities, an additional set of procedures has been adopted to address added risk of poor financial or project performance. These procedures to ensure accountability are discussed in the \"Selected USAID Issues\" section below. The OIG conducts audits to ensure that regular mission procedures and requirements meant to ensure accountability are carried out and are adequate to that purpose.",
      " Financial audits examine contractor and grantee financial statements and agreements. Performance audits look at project outputs and whether, if achieved, they meet the results intended. Since it would be unreasonably costly to conduct audits of every USAID award, the USAID IG chooses its subjects based on assessments of country risk, the amount of funding involved, subject interest, and other factors. Oversight is not intended solely to catch malfeasance or incompetence. If problems are identified during project implementation, mid-course corrections can be made to put the project on the right track. If necessary, an errant project can be terminated. To fully understand what progress has been made in achieving a project's desired ends,",
      " a formal independent evaluation is conducted, possibly at project mid-point, but certainly at project completion. Although the frequency and requirements for these have changed over the years (see the \"Evaluation\" section below), current agency policy strongly supports evaluations meant both to judge the effectiveness of a project and to gather lessons that might be applicable to future projects.  USAID Forward and Other Reform Efforts In 2010, USAID launched a series of reforms intended to reestablish the agency as a world leader in development, a reputation many observers believed had eroded from the late 1980s till then. During that period, USAID suffered what many saw as a number of setbacks that were interlinked and reinforced each other,",
      " including severe funding cutbacks and numerous mission closures in the mid-1990s; a long-term decline in both civil and foreign service staff; sharply reduced USAID independence by tying it more closely to the Department of State, both through legislative efforts and executive branch actions; increased reliance on contractors for program functions, establishment of rival U.S. aid agencies and funding accounts; consolidation of many administrative functions and locations with U.S. embassies; and loss of budget and policy planning functions.  Although some steps were taken to address growing concerns regarding agency capacities by USAID Administrator Henrietta Holzman-Fore (under President George W. Bush), Administrator Rajiv Shah (President Barack Obama)",
      " put reform front and center with the USAID Forward agenda. Many of USAID's programmatic and institutional reforms derive from a gathering of views from USAID mission directors in the first days of the administrator's term. Both the 2010 Presidential Policy Directive-6 and Quadrennial Diplomacy and Development Review (QDDR) recommended and enumerated various elements encompassed by these reforms. In all, the reforms represent one of the more significant changes to the agency since the \"basic human needs\" reforms of the 1970s. Reforms encompassed under the USAID Forward umbrella and other significant related agency changes are discussed below.",
      " Human Resources  Due to a decrease in staff numbers between 1990 and 2008, it is widely believed that USAID lost much of its technical and professional expertise and, consequently, contracted out much work that previously had been performed in-house. Historical data on USAID staffing is weak and often contradictory, but figures suggest that the long-term slide in staff numbers that began in the early 1970s accelerated substantially in the 1990s, exacerbated by budget cuts in mid-decade that led to the closing of missions and a severe reduction in force (RIF). According to USAID, direct hire staff numbers fell from 3,",
      "262 in FY1990 to a low of 1,947 in FY2000. Reported impacts on the USAID program included a disruption of regular monitoring and evaluation practices, an increased reliance on large-scale contracting, fewer staff-intensive small projects, and a substitution for hands-on direct hire management by scores of personal service contractors increasingly undertaking what many believe are inherently government functions.  Moreover, the agency's management capacity reportedly worsened in the 2000s as program responsibilities expanded exponentially in the health sector and in crisis countries, such as Afghanistan, Iraq, and Pakistan, with no comparable rise in operating expense funding. At the same time, a rise in retirements drained the agency of experienced personnel and institutional memory.",
      " As of September 2010, 27% of FSOs were projected to be eligible for retirement by September 2015, including more than 90% of FSO-1 and above, the most experienced levels of staff. To restore agency capabilities, the Bush Administration in 2008 launched its Development Leadership Initiative (DLI), with the objective of doubling the number of FSOs by 2012 (a 1,200 position increase); rebuilding a cadre of technical expertise in agriculture, education, engineering, and economics; and expanding language capabilities. By 2011, because of Operational Expense account funding cuts, hiring from the original projections of 300 new FSOs per year had slowed and delayed the DLI goal.",
      " Since then, the agency has put further growth on hold, not requesting additional FSO positions, but requesting funds that simply meet costs for the 820 DLI FSOs that were hired between 2008 and 2012. The annual USAID IG memo on management and performance challenges, issued in late 2014, notes that the agency continues to experience a shortage of experienced, highly skilled personnel, especially contracting staff. Among the consequences of the new hiring\u2014as of 2013, about half of USAID FSOs had less than five years on the job\u2014is an agency with new youthful energy but significantly increased training needs. An 8%",
      " decline in the FY2015 USAID Operational Expenses account from the FY2012 level may challenge the agency's ability to prepare its new staff and maintain the agency's capabilities.  Procurement and Local Solutions  Over many decades, USAID followed an implementation model that chiefly utilized U.S. organizations to deliver assistance. In recent years, many observers criticized this model as failing to build the development capacities of local, recipient country governments and organizations. In the 2000s, the United States joined other donors in making commitments at international conferences to support more \"country ownership\" of assistance.  Under its Implementation and Procurement Reform, USAID set a target of increasing funds provided directly through local systems (i.e., government,",
      " civil society and private sector)\u2014channeling 30% of total mission program assistance directly through local entities by FY2015. Aspects of this effort\u2014discussed in the \"Selected USAID Issues\" section below\u2014drew criticism from U.S. contractors and some NGOs and the attention of Members of Congress.  In spring 2013, USAID reframed the procurement reform in broader development terms. The Local Solutions reform focuses on all aspects of local systems, with sustainability as the driver of program thinking. The agency argues that its investments are best sustained in the long-term if development is locally owned, locally led, and locally resourced.",
      " Although the 30% quantitative target is now viewed as \"aspirational,\" USAID continues to monitor the agency's movement toward its direct financing of local systems. Excluding Afghanistan and Pakistan, from an FY2010 baseline of 9.6%, the FY2012 level is 9.9%, the FY2013 level is 12.3%, and FY2014 level is 15.1%. In terms of actual funding levels, assistance going to partner governments (excluding Afghanistan and Pakistan) and local organizations has risen by 32%, from $860 million to $1.1 billion between FY2010 and FY2014.",
      " Amounts going through local organizations (i.e., excluding government to government aid) rose substantially in this period\u2014from $383 million to $1.1 billion, a 176% increase. USAID has also sought reforms of its procurement processes to make them more efficient and cost-effective. An effort to increase competition and broaden the agency's partner base by increasing the number of awards to small business is discussed below. USAID has also taken steps to address the long-standing criticism of the amount of time it takes from the production of a contract statement of work to the time of an award. A goal was set of cutting the time by about 48%, from 513 days in FY2009 to 268 days.",
      " At the end of FY2013, the time had been cut by 17%.  In 2013, the agency sponsored an extensive study of its procurement processes. Although the Award Cost Efficiency Study (ACES) focused on maternal and child health projects, resulting recommendations made by a management consulting firm had wide application to the whole range of USAID procurement activities. Consequently, USAID, starting with a \"Framework for Action in 24 Countries\" launched in January 2014, is applying the recommendations in the health sector, with the expectation of shifting a third to half of its existing awards to make them more cost-effective and therefore save more lives.",
      " In addition, the agency has adopted numerous steps that aim to better define what awards should achieve and improve the process of selecting the type of procurement, the evaluation of costs, and the assessment of partner performance. Policy and Budget Management Capacity  In 2006, then Secretary of State Condoleezza Rice initiated a reorganization and reform of foreign aid management that, in effect, more deeply integrated USAID's policy and budget processes into those of the Department of State. Under this \"transformational development\" effort, USAID lost the policy formulation capacity that had formerly resided in the Bureau for Policy and Program Coordination (PPC)",
      " and much of its budget responsibilities and capacities to State Department entities, including a new Foreign Aid \"F\" Bureau. The relationship of USAID to the State Department and the consequent impact on foreign aid is discussed in the \"Selected USAID Issues\" section below. Under USAID Forward reforms, the agency's policy and programming capacity has been rebuilt to some degree by the establishment of a new USAID Bureau of Policy, Planning and Learning (PPL). At the field level, the most visible sign of the renewed capacity is the reformed Program Cycle, including the Country Development Cooperation Strategies (instead of the integrated State-USAID Operational Plans required by Secretary Rice's reform). The PPL Bureau has also been instrumental in releasing a series of sector strategies and policies to guide agency operations.",
      " To rebuild its budget capacity, USAID reestablished an Office of Budget and Resource Management in the Office of the Administrator. In June 2011, the agency developed its first comprehensive budget proposal since 2005. According to the agency, in 2012, it moved funds to its bureaus three months earlier than previously, \"allowing our missions to better manage and plan their programs.\" Some observers question whether the new budget office substantively restored fully autonomous budget decisions to USAID, noting that the \"F\" Bureau in State still must sign off on USAID's budget and USAID has not provided a comprehensive independent budget to Congress since FY2007.",
      " Evaluation Many observers believe that, for more than a decade, USAID neglected its evaluation processes and capacities. In 1995, coinciding with an environment of severe budget and personnel cuts, USAID changed its evaluation policy. Hereafter, a decision to evaluate was not a requirement but was to be \"driven primarily by management need.\" While the intention was to eliminate pro forma evaluations, it apparently did not have this effect. One analysis notes that evaluations entered into the agency's information system fell from 253 in 1995 to 104 in 1998. USAID itself reported 528 evaluations in 1994 with a drop to 79 in 2001.",
      " Whatever the number, the quality of the agency's evaluations, in the view of some, was suspect\u2014often a brief \"fly-in\" focused more on the achievement of inputs and outputs rather than impact or lessons learned. Since the early 2000s, there has been an increased emphasis among international donors and aid partner organizations on improved evaluation practices. In January 2005, USAID introduced an Initiative to Revitalize Evaluation at USAID, which included stepped up staff training, new guidance, and new requirements, such as for an annual evaluation plan and a designated evaluation officer at the mission level, but this effort ended with the State Department's transformational development effort.",
      " The USAID Forward reform goes much further. The new PPL Bureau established an Office for Learning, Evaluation, and Research\u2014the previous evaluation office having disappeared under transformational development. It issued a new evaluation policy in January 2011, establishing improved indicators of project progress, requiring more evaluations, and better measuring impacts. The agency is more regularly collecting baseline data that is expected to help it explain to what extent its aid interventions were responsible for any impact. It also committed 3% of major program funds to evaluation purposes. USAID now requires a performance evaluation for every major project, an evaluation that is to be conducted by independent third parties and released to the public.",
      " In FY2014, USAID completed 224 evaluations. Perhaps more important, according to USAID, evaluations are being put to intended use, not simply measuring success for accountability purposes, but as tools for learning and improvement. The agency claims that more than half of the 186 evaluations published between July 2011 and the end of 2012 led staff to make mid-course changes to programs and more than a third led to budgetary changes.  Science, Technology, and Innovation  As noted earlier, USAID has historically been a leader in applying science and technology (S&T) to development problems. Under the USAID Forward initiative,",
      " the agency has taken steps to invigorate its role in this area while adding a new emphasis on bringing S&T innovations \"to scale\"\u2014disseminating and applying new development solutions and ensuring they are adopted more broadly. This scaling-up has often been a problem for the agency, which generally has supported pilot projects\u2014testing and demonstrating a new technology or intervention at the mission level in perhaps one province\u2014but not had sufficient funds and the institutional leadership to either spread such projects more widely within a country or among multiple countries. While some innovations are so broadly applicable and revolutionary that they are rapidly adopted, a possibly large number of ideas never go beyond the pilot stage.",
      "  USAID is seeking to encourage new approaches to development and to foster dissemination of the most promising ones. In the past several years, it has established a range of programs to accomplish these ends and, in early 2014, combined many of them into a new U.S. Global Development Lab. At this time, it is too early to tell whether any innovations developed to date can be brought to scale and what might be the best methods for doing so, but the agency has made progress in identifying new technologies and approaches. Several of the Lab's programs establish collaborations within the scientific community to help it focus on specific development problems. The Partnerships for Enhanced Engagement in Research (PEER)",
      " supports developing country scientists working with counterparts in U.S. federal science agencies, including the National Science Foundation and National Institute of Health. The Global Research and Innovation Fellows Network sends U.S. scientists to developing countries to provide technical expertise in collaborative research. The Higher Education Solutions Network has established seven development \"labs\" in major U.S. universities, each addressing a problem, such as new technologies in health care delivery and prevention (at Duke University).  Two programs use competitions to attract a range of ideas, the best of which are awarded grants to further their development. Grand Challenges for Development (GCD) has sponsored six competitions to date focusing on how to save lives at birth,",
      " how to get all children reading, how to power agriculture through clean energy, how to make all voices count in governance, how to improve water sustainability for food security, and how to provide better care for patients with Ebola and stop the spread of the virus. The Pratt Pouch, a technology that prevents transmission of HIV/AIDS from mother to child, is one innovation from the Saving Lives at Birth Challenge, which is being refined and prepared for integration into health delivery systems.  Development Innovation Ventures (DIV) supports pilots, start-up and testing, and scale-up for innovative proposals submitted by the public that might ultimately assist millions of beneficiaries within 10 years.",
      " Since 2010, it has attracted more than 6,000 applications. Currently, for example, grant support is developing an inexpensive self-test for pre-eclampsia among pregnant women; evaluating effectiveness of a \"quick count\" photo method for reducing election fraud; and assisting in the deployment of a mobile platform for health organizations to disseminate health applications to the phones of community health workers. To date, the program has invested in more than 100 solutions in 17 sectors and 35 countries.  Private Sector Funding Based on the understanding that public aid resources will never be sufficient in themselves to achieve desired development ends, the agency's reform effort has emphasized leveraging contributions from private sector sources of funding.",
      " Greater attention has been channeled in recent years toward two programs launched under earlier Administrations, progress in each of which is measured in annual reporting on agency reforms. The Development Credit Authority leverages significant private sector capital by guaranteeing a portion of the risk of bank loans in support of development activities. Total funding for the program is limited by a ceiling placed by Congress on the amounts that can be put at risk. In FY2014, USAID obligated $25.7 million in support of $769 million in possible private sector loans. In recent years, USAID has sought to expand the program by deploying teams of investment field officers well versed in business to USAID missions.",
      "  The Global Development Alliance (GDA) program collaborates with companies and other private sector entities to plan, fund, and implement projects that support both development and business objectives. The agency's goal is to leverage private sector resources and expertise to achieve development objectives, as well as promote the long-term sustainability of programs. For example, USAID is working with several international coffee companies to fight coffee rust, which threatens to harm local economies and business supply chains. According to USAID, in FY2014, it provided about $95 million, while private sector organizations provided $250 million in support of public-private partnerships. Selected USAID Issues Some points of possible interest in the broad description of USAID operations above warrant a more thorough discussion.",
      " Almost any current aspect of the agency contains a complex history\u2014for more than 50 years the agency has been challenged by concerns regarding accountability, sustainability, project partners and the best way to do development, its place in the U.S. government, and the priorities of Congress. Each of these issues is highlighted below.  Financial and Performance Accountability Congress has long focused on executive branch accountability. In the case of USAID, some would say especially so, because its funds appear to flow to unfamiliar locations for not always well-understood purposes, and outcomes are at the mercy of unpredictable environments. However, while insufficient accountability can easily undermine congressional and public trust in the agency's mission,",
      " some steps to ensure accountability are viewed by many observers and development practitioners as preventing the agency from achieving its mission. Aspects of this dichotomy are discussed below.  Too Little Accountability? Public attention is occasionally drawn to examples of assistance failure\u2014the contractor who falsely bills the U.S. government, or the malaria nets that sat in storage instead of being distributed to those in need. As noted earlier, USAID supports multiple layers of financial and performance oversight to ensure that taxpayer dollars are not misused. Nonetheless, there are losses due to fraud, waste due to poor planning and execution, and indeterminate accounting of funds and project outputs due to incomplete recordkeeping and irregular project monitoring.",
      " In FY2014, the USAID Inspector General found $92 million in questioned costs, $71 million in funds recommended for better use, and $23 million in recoveries from investigations. A question for policymakers is whether the $186 million total amount should be considered a lot or a little.  Because USAID works in developing countries where there are inherent risks of corruption and instability conducive to abuse and misuse of funds, some critics assume that more waste occurs with foreign aid spending than with U.S. government domestic spending. Questioned, better use, and recovery amounts identified by the Inspector General do not all necessarily represent criminal or other misuse and fluctuate from year to year.",
      " In FY2014, $186 million represented 1.0% of USAID's appropriated funding in that year. By comparison, a similar calculation shows questioned costs and funds recommended for better use by all inspector generals across the federal government accounted for 1.5% of total U.S. budget authority in FY2013. Whether more or less risky than other U.S. government activities, the accountability risk in conducting USAID's business has to be weighed against assessments of how USAID's aid programs are meeting U.S. foreign policy objectives.  Countries of special foreign policy interest\u2014and therefore, recipients of generous portions of total aid\u2014often represent the highest proportion of identifiable waste and fraud,",
      " possibly because of the agency's lack of adequate monitoring capacity in these so-called \"non-permissive\" environments, and, in the case of Afghanistan and Pakistan, Administration and congressional pressure on USAID to spend a large amount of funds quickly and in every sector. As noted earlier, USAID's history in Afghanistan and Iraq has led it to take extra precautions to track these programs, but the learning curve has been steep, and some observers have wondered what, if anything, aid projects can accomplish in such places and under the circumstances in which USAID is working, despite a number of success stories in discrete sectors. To other observers, however, it may seem harsh to judge overall agency performance on the basis of these particular programs,",
      " and perhaps it should be anticipated at the beginning of such efforts that development aid in such environments brings less in project outputs and even less in eventual stability or development.  In more typical aid programs, the IG findings and other layers of monitoring and accountability give greater assurance that the correct number of dollars generally results in the correct quantity and quality of project outputs, whether they be schools or training programs. More problematic is ensuring broad development accountability\u2014drawing a connection between a project and actual long-term development impact. Although for decades USAID staff have designed projects with careful thought given the likely results, development aid in one sector and one province is but a small part of a country's broader growth,",
      " and it is often hard to argue the impact of any one project or that U.S. assistance, given the multiple intervening variables, is chiefly responsible for macro-development outcomes. Facing criticism in the 1980s and 1990s, especially after the fall of communism removed an important rationale for the aid program, the agency began to look for ways to measure and demonstrate success to a skeptical Congress. \"Managing for results,\" as it was called then, built on efforts begun by the Africa Bureau in the late 1980s that were adopted agency-wide after USAID offered itself as both a \"reinvention laboratory\" for Vice-President Gore's government reinvention initiative and a pilot in implementing the Government Performance and Results Act of 1993 (GPRA). Put succinctly,",
      " \"managing for results\" focused the aid program on the achievement of higher level strategic objectives and program outcomes rather than on the inputs and outputs of individual project activities. And it required the definition of strategic objectives and program outcomes in measurable terms\u2014identifying quantifiable indicators and setting targets to help evaluate progress. USAID Forward prioritizes a \"managing for results\" approach through its Program Cycle, including the new results framework in the CDCS described earlier. But quantification of anticipated results has brought with it its own concerns, as noted in the section below. Too Much Accountability? Some observers have argued that the various steps required to ensure financial and performance accountability may have had harmful effects on agency operations and program effectiveness.",
      " Former Administrator Andrew Natsios (George W. Bush Administration), in particular, has been an outspoken critic of management practices imposed by oversight bodies in the name of accountability. His views, echoed in the observations of USAID field staff and others, are a caution to policymakers. An over-emphasis on accountability, these aid practitioners and observers argue\u2014 Discourages risk taking. The response by USAID staff to the need to predict and measure results in the inherently risky environment of developing countries has arguably been an excess of caution and depressed innovation. Why take chances funding new partners and new approaches to development if you cannot be certain of achieving the desired,",
      " measurable results? While USAID Forward reforms seeking greater use of local systems, establishing an innovative development lab, and encouraging a \"culture of learning\" would indicate a greater acceptance of risk-taking in the agency, some argue that old habits and fear of failure and compliance police continue to trump risk. Determines where you invest assistance dollars. Health outcomes\u2014mortality rates, disease reduction\u2014are more easily quantifiable than those in other sectors and, so, may have benefitted accordingly. Projects whose development outcomes are not so easily measured\u2014scholarships, funding of local think tanks, writing of constitutions, institution building, and policy reform\u2014may have been neglected as a result.",
      " Favors short-term planning over long-term planning. Prior to the 1990s, according to Natsios, projects had a 10-year time frame. With the need to show immediate results, planners arguably think in terms of three to five years at most. Prevents local participation. Accountability regulations place a compliance burden on local entities, a problem which Local Solutions reform is seeking to change. Slows and makes more costly the project planning and implementation process. The need to measure progress can dominate the time of aid officers and add to project costs. Has been misinterpreted and misused by IGs. Natsios argues that, although measurable indicators are intended to help evaluate project progress and make improvements,",
      " they have been used by IGs to claim that programs are not working and should be shut down. He also notes that the project delays, missed deadlines, and inadequate paperwork, highlighted by many USAID IG and GAO reports in the past, were actually signs of poor institutions in developing countries, not of waste, fraud, and abuse. Is misplaced in war zones and other areas of high national security interest where the chief aims are political, aimed at winning hearts and minds, and not developmental. The same performance standards arguably should not be applied as the Defense and State Departments micro-manage the programs and USAID officers have little policy discretion in these circumstances.",
      "  \"Local Solutions\" and Procurement Reform As noted in the above discussion of USAID Forward reforms, a key element of USAID's procurement reform effort has been to provide more funds directly to host countries and local organizations implementing aid programs in order to foster country ownership, develop local capacities, and better sustain project efforts in the long-run. This reform has raised multiple overlapping concerns\u2014first, regarding possible impacts on U.S. contractors and grantees; second, regarding the methodology of achieving country ownership; and, third, regarding the ability of USAID to maintain appropriate standards of accountability. These concerns are discussed below.  U.S. Contractors and Grantees When first enunciated in 2010,",
      " one facet of the procurement reform in particular generated controversy and some opposition within the community of U.S. development contractors and grantees. That was the proposed effort to move 30% of contract and grant mission program funds through recipient country governments and private sector institutions by FY2015 (from the estimated 9.6% in FY2010).  To the extent that U.S. assistance flows directly to foreign governments and local entities, it is less likely to go to U.S. development program implementers, so it could be argued that any opposition by U.S. implementers was based on self-interest. However, critics of the reform suggested that it underestimated the value of U.S.",
      " contractors and grantees to the achievement of U.S. aid objectives. Many of these development organizations have global expertise in their fields that allows them to learn from their experience in one part of the world and bring that knowledge to bear in other parts. They have a demonstrated track record in their fields of specialization. As U.S. institutions, they represent U.S. values and interests abroad. And they are long-practiced in meeting the accountability requirements of USAID. A further potential benefit of employing U.S. contractors and grantees is that U.S. entities and their supporters, especially in the community of charitable organizations, generate constituent and,",
      " hence, congressional backing for foreign aid and reduce the resistance of \"buy America\" advocates. InterAction, an organization representing the community of U.S. humanitarian and development NGOs, argued that if capacity building is the goal of this reform, USAID's 30% objective should include U.S. NGO programs that build local capacity, as many U.S. NGOs have established counterpart organizations abroad through which they work. Others argued that the objective also failed to include sub-contracts and sub-grants by U.S. entities to local ones. If current sub-contracting to local organizations were included\u2014something USAID did not then track\u2014they said the 30%",
      " objective might have already been met. Further, a consortium of more than 70 for-profit development companies argued against \"the premise that more localization will necessarily result in better localization.\"  The development community itself appeared divided on this issue. Some NGOs, such as Oxfam, fully supported the 30% objective and argued that aid providers should be working themselves out of a job sooner rather than later. Supporters provided many anecdotal accounts from aid implementers negatively contrasting U.S. contractor overhead with local costs and fly-in technical assistance with locally bred knowledge. Both supporters and opponents brought their concerns to Members of Congress.  The controversies that arose when USAID announced the reform in 2010 appear to have diminished as USAID has become less insistent on meeting established targets by a specific date and more accommodating on the role of U.S.",
      " organizations. Some blame a poorly managed rollout of procurement reform, including a lack of consultation, for the negative reaction of some aid implementers. Whatever the arguments made by or on behalf of the roles of U.S. contractors and grantees, as USAID pointed out, even if the now-\"aspirational\" quantitative objective of the procurement reform is met, U.S. organizations would still be implementers of 70% of mission program funds.  Country Ownership USAID's \"local solutions\" effort follows from its original mandate and a long history of working closely with recipient governments and civil society. From the beginning of USAID, it has been a guiding policy to \"carry out programs of assistance... to the extent practicable in conjunction with local private or governmental participation.\" During the past decade,",
      " at a series of international conferences on aid effectiveness, donors, including the United States, recognized the principle that developing countries should design and manage their own development, a principle known as \"country ownership.\"  USAID believes that a key objective of development assistance is to strengthen the capacity of government and private sector entities to meet this end. In its \"local solutions\" reform, USAID argues that funneling aid funds through the host government and private sector\u2014in essence allowing them to run USAID programs\u2014may help to build their capacity and, at the same time, facilitate long-term program sustainability by virtue of ensuring host government and local society engagement.  The focus on local solutions is somewhat different from the historic role that USAID has played in building the institutional capacities of developing countries.",
      " From the 1960s, it placed U.S. technical experts in government ministries, trained bureaucrats in-place or through U.S. and other country degree programs, and supported the establishment of rural agricultural cooperatives, civil advocacy groups, business associations and other local organizations, among a wide range of related activities, many of which it continues today.  Although disputing the original reform metric and time frame, most in the development community of contractors and NGOs do not question the ultimate objective of \"country ownership.\" Rather, they disagree with the \"hows\" of achieving country ownership.  Some reject the basic premise that localization of aid, in the sense of being part of a USAID project,",
      " will reduce a recipient government's dependence on U.S. implementers, increase local ownership, enhance sustainability, and increase capacity. They suggest that asking local organizations to do what USAID wants\u2014rather than acting as partners by doing what the local organizations have found works in their country\u2014is misguided. Capacity building in this sense is to help local organizations undertake USAID projects and meet USAID financial and other requirements. Giving local organizations a larger role in project aid may create dependence on donor agency funding and practices while doing little to develop local organization institutional capacities. A related concern is that local NGOs whose budgets increase dramatically with USAID assistance might find themselves requiring a new organizational structure or may risk losing touch with their own grassroots support.",
      "  As noted in the previous section, some assert that many governments and local for-profit and nonprofit organizations are simply not ready to independently implement U.S. aid programs. If the chief objective is building capacity, these critics argue, then it should be recognized that the transfer of knowledge is as important as the transfer of funds, and how well development work is performed is more important than who does it. Fair and open competition, instead of limiting applicants to the host country, they argue, would ensure the best development outcome. U.S. contractors and grantees, with expertise and long experience, already conduct most of their work with local organizations and personnel.",
      " Under this line of thinking, if USAID wants to build capacity, it should dedicate more resources to developing the management capacity of local organizations, utilizing U.S. NGOs to accomplish this end. It is argued that the agency should also simplify its various application, management, and reporting requirements to better enable local organizations to implement programs successfully. But, in any case, many supporters of the concept of local ownership are concerned that funds not be greatly increased until these organizations are ready to use them effectively. However, others in the development community argue a completely contrary view. They assert that developing country organizations already have considerable capacities. A USAID-sponsored study found that over half the 325 organizations in nine countries examined could \"hold their own\"",
      " with any U.S. NGO or contractor. Oxfam has long argued the same. The study also suggests that fundamental USAID behavior may need to change for local ownership efforts to work. At USAID Missions, despite the call for reforms, staff are driven by old incentives and job descriptions. You get rewarded not for how many local organizations you have got to know but by how large a portfolio you manage. And getting out of the office to spend time getting to know local organizations at length and in depth is made hard by security concerns and by the pressure of paperwork, other duties and priorities. Thus the very behavioral traits that local organizations have told us they increasingly want \u2013 trusting relationships,",
      " regular communication, and longer term engagements, are not the behaviors that USAID is currently set up to encourage. USAID recognized this concern in part by attempting to incentivize its staff to work with local organizations. According to the agency, it has established local engagement as a work performance objective for about two-thirds of FSOs and foreign nationals. It remains to be seen whether factors such as restrictive security rules and scarce staff resources permit an enabling culture in USAID for localization. To ensure greater participation by local entities in USAID programs, the agency has sought to limit competition in favor of local organizations or to provide sole source awards. Likely due to U.S.",
      " NGO and contractor opposition, an element in the original reform plan that would have required missions to set aside $2 million for local NGOs was eliminated. Nonetheless, in the FY2012 State, Foreign Operations appropriations ( P.L. 112-74, \u00a77077), Congress supported an agency pilot effort to limit competition for awards under $5 million to local entities \"if doing so would result in cost savings, develop local capacity, or enable the USAID Administrator to initiate a program or activity in appreciably less time than if competition were not so limited.\"  While this effort suggests some congressional support for localization, language on the issue adopted in the FY2014 appropriations ( P.L.",
      " 113-76, \u00a77028) and maintained in FY2015 ( P.L. 113-235, \u00a77028) points to a possible constraint on USAID efforts. Although Congress continued the language permitting limited local procurement, it now allows limited competition for local entities only if a written documented assessment is made of the level of local capacity to \"effectively implement, manage, and account\" for programs, and if effective monitoring and evaluation systems are in place to ensure funds are used for their intended purpose and if fraud is unlikely. The issue of local accountability is discussed below. Localization and Accountability Perhaps the most challenging aspect of USAID's \"local solutions\"",
      " effort is the question of accountability. In an April 26, 2012, letter from the House Government Oversight and Reform Committee to USAID, Members particularly emphasized their concern over whether USAID is able to ensure that funds going to foreign governments and organizations are not subject to waste, fraud, or abuse. Such concerns were translated into Sections 7028, as noted above, and 7031 of the FY2015 State, Foreign Operations appropriations ( P.L. 113-235, Division J), both requiring assessments of partner capacity to implement aid programs. The broader interest in preventing waste or misuse of USAID funds is long-standing,",
      " but the widely accepted characterization of developing countries as corrupt and deficient in management capacity can make the risk of funneling funds directly through local entities seem outsized. USAID has in place regular processes to monitor both project performance and financial accountability. These apply to foreign entities as they do to U.S. ones. Furthermore, many contractors and NGOs already currently use local personnel and organizations to implement their programs as sub-contractors or sub-grantees or direct employees of these U.S. entities. However, because of the perceived risk in providing aid through governments and local organizations, USAID has taken a number of steps to launch its \"local solutions\"",
      " reform to ensure that concerns regarding country performance and accountability are addressed.  USAID has developed a method of appraising the capacity of partner governments to handle U.S. development funds\u2014a Public Financial Management Risk Assessment Framework (PFMRAF). As of March 2015, 35 countries had completed the stage-one rapid risk appraisal which seeks to identify broad fiduciary risks at the country level. Of these, 27 had entered the second stage in which gaps in a specific governmental entity's capacity are identified and measures to address them proposed. Based on this, along with other relevant assessments, the project design is completed, inclusive of the decision to provide direct government-to-government assistance.",
      "  PFMRAF can be applied only to those parts of the government relevant to a project\u2014the Ministry of Health and the Ministry of Finance, for example, in the case of a health project. Therefore, the quantity of stage-2 risk assessments outnumbers the total of countries; as of March 2015, 147 assessments had been performed or were on-going. Assessments are supposed to be updated every three years. While 2013 and 2014 USAID IG studies found a variety of weaknesses in implementation of the Risk Assessment Framework, in part associated with the speed of its adoption by the agency and the inexperience of mission personnel with conducting the assessments,",
      " a June 2015 GAO report noted that fiduciary risk assessments were conducted and risk mitigation plans formulated as required; risk mitigation measures, however, were not always incorporated into project planning. For local non-government entities, USAID assesses local capacity to perform adequately and identifies potential risk using a Non-U.S. Organization Pre-Award Survey. Mission contracting and financial officers work more closely with local organizations to help them meet agency accountability standards. A June 2013 USAID IG examination of Pre-Award Survey implementation found no weaknesses in a sample of conducted surveys. To diminish risk when working with partner governments, USAID now appears to more frequently employ financing mechanisms that allow the agency greater control over its funds and program results.",
      " The Fixed Amount Reimbursement Agreement (FARA) requires that a partner government complete specific project elements prior to USAID payment\u2014so, for instance, a school would be built to specifications, confirmed by USAID, and then reimbursed at the agreed fixed amount, regardless of actual cost to the host country. Similarly, with regard to local NGOs, a Fixed Obligation Grant (FOG) establishes milestones by which USAID can measure progress and provide funds. FOGs are particularly useful for local NGOs with limited experience working with USAID; they allow the agency to assist NGOs with compliance and help improve their internal procedures and policies to accommodate USAID requirements.",
      " A more flexible FOG mechanism has been established allowing more simplified eligibility and upfront payment or periodic advances to facilitate use of local NGOs. In special cases, such as Afghanistan, where corruption is widespread, but where a political and strategic impetus exists to direct assistance through the government\u2014donors agreed at the 2010 London Conference to funnel 50% of aid through the government\u2014USAID has followed different methods that still enable a degree of oversight. The Afghanistan Reconstruction Trust Fund moves assistance into government salaries or government-supported community development programs, and their uses are monitored by the World Bank, which administers the fund. USAID's own direct host country contracting in Afghanistan provides funds to USAID-vetted ministries\u2014funds for the health program move through a separate unit of the Afghan Ministry of Health to designated international NGOs implementing agreed health clinic assistance in assigned parts of the country;",
      " funds for other ministries are provided on a reimbursable basis for specific projects using separate bank accounts. While the Special Inspector General for Afghanistan Reconstruction (SIGAR) has pointed to vulnerabilities in USAID's Afghanistan risk mitigation measures and calls its failure to require ministries to implement better internal controls \"an unacceptable assumption of risk,\" nonetheless it says that USAID \"has done a better job of protecting direct assistance funds than other U.S. agencies, particularly the Department of Defense.\" Risk assessment and identification procedures may mitigate potential fraud or poor performance, but they cannot eliminate them entirely, just as the use of U.S. entities is not free of these concerns.",
      " A disadvantage unique to directing funds through local entities is that, in case of financial misuse, there are fewer legal remedies and none through U.S. courts. Governments, however, can be threatened with loss of further aid, and private organizations can be threatened with disbarment. Reform supporters argue that aid provided directly and transparently to governments gives local watchdog organizations the opportunity to root out corruption and strengthen democratic institutions. U.S. Aid Implementers The main implementers of USAID programs are U.S. for-profit and nonprofit non-governmental organizations, representing nearly 50% of assistance in FY2014. These two groups, respectively associated with the agency's contracting and grant/cooperative agreement award mechanisms,",
      " at times appear at odds with each other (and sometimes with themselves) and, making their concerns known to Congress, affect the way in which USAID conducts its business. Two issues illustrate this point\u2014efforts to reduce the role of large contractors and grantees and the choice between contracts and grants.  Large Implementers vs. Small  USAID's procurement reform efforts initially emphasized a goal to broaden the pool of aid implementers to include more U.S. small businesses and NGOs, and this move stirred opposition, particularly from the larger for-profit contractors who felt most affected. If the large contractors felt unduly targeted by the reform efforts,",
      " they may have been reacting to then-USAID Administrator Rajiv Shah's comment, \"This agency is no longer satisfied with writing big checks to big contractors and calling it development. There will still be a role for these contractors, just different than what it was in the past.\" Subsequently, in its FY2014 guidance on procurement reform, Senate appropriators supported the agency's effort to reach \"a wider range of partners and increase competition\" and urged USAID to \"reduce reliance on large, inflexible contracts.\"  Initially, USAID's reform effort sought to reduce agency reliance on a form of contracting that, since the 1990s,",
      " has appeared to give larger contractors, and to a lesser extent larger grantees, preferable treatment. With the steep decline in USAID staff during the 1990s, including contract officers, the agency found it increasingly difficult to provide adequate oversight of numerous small contracts and grants. As a result, it moved to award larger contracts to fewer implementers. In particular, the number of indefinite quantity contracts (IQCs) grew. IQCs\u2014recently renamed Indefinite Delivery/Indefinite Quantity (IDIQ) contracts\u2014are \"umbrella\" contracts, either confined to one sector or bundling diverse activities, provided to a firm or consortium of firms whose expertise can be drawn upon when needed with separate \"task orders.\" If a mission,",
      " for instance, required the services of an expert on microfinance, the agency-wide microfinance IQC was available to them. The advantages were speed, because the contracting mechanism was already in place, and practical efficiency, averting the necessity of having the limited number of USAID staff design and manage multiple individual contracts.  Although IQCs often designated a dollar value share for sub-grants and sub-contracts to other providers, the increase in IQCs was viewed by the smaller contractors and the nonprofit NGO community as reducing their role in USAID programs and giving a narrow set of contractors too much power. The congressionally mandated HELP Commission criticized the growing role of contractors,",
      " noting that between 1996 and 2005, the amount of aid going through the five largest contractors had grown from $57 million to $1.25 billion (it reached $2.2 billion in FY2012), the proportion of total contracts represented by these five going from 33.1% in 1996 to 46.7% in 2005. The commission recommended that the size, range of activity, and number of umbrella awards be limited. The U.S. NGO community, represented on the USAID Advisory Committee on Voluntary Foreign Aid, were especially critical of the growth of IQCs. Their use,",
      " in the committee's view, \"restricts the pool of expertise, resources, and ideas that USAID can draw upon for developmental solutions.\" In 2004, Congress inserted itself into one manifestation of this debate by requiring (in P.L. 108-484 ) that microenterprise assistance \"shall emphasize the use of implementing partner organizations,\" (i.e., the nonprofit PVO/NGOs whose share of this sector funding had dropped from 53% in 2000 to about 37% in 2005). The original language of this legislation would have excluded for-profit contractors entirely from microenterprise activity.  Some steps have been taken to decrease the number and dollar value of large contracts and increase awards to U.S.",
      " small business and NGOs. Large non-competed contracts over $25 million must be approved at higher levels in the agency than previously. The agency set up a Board for Acquisition and Assistance Reform to facilitate a move to smaller awards. According to USAID, between FY2010 and FY2014, the board reviewed 67 awards, valued at nearly $30 billion, restructuring 27 of them to increase the number of awards and the amount reserved for small business. Subsequently, amounts awarded for IQCs fell from $470 million in FY2012 to $64 million in FY2014. Amounts awarded to U.S. small business grew by 236%",
      " from $137 million in FY2010 to $461 million in FY2014. The board has since been discontinued and its activities integrated into the regular management review process. However, in a possible departure from the move to rein in IQCs, in March 2015, USAID awarded a $1 billion IQC to Tetra Tech Inc. to support USAID's water programs. Contracts vs Grants/Cooperative Agreements The divide between the chief implementers of USAID projects\u2014for-profits and nonprofits\u2014is also mirrored in a debate over the use of the procurement instruments they tend to represent\u2014contracts and grants/cooperative agreements. Under federal procurement regulations,",
      " a contract is supposed to be used to acquire services for the direct benefit or use of an agency, while a grant or cooperative agreement is to be used when the principal purpose of the relationship is to \"transfer a thing of value\" (i.e., fund) to the recipient to carry out a public purpose authorized by law. Overall, grants and cooperative agreements represented two-thirds of awards ($9 billion) and contracts one-third ($4.5 billion) in FY2013. This relationship is a turnaround from the period before about FY2007, when contracts predominated as a proportion of USAID awards.  In the context of this change in the relative position of contractors,",
      " USAID's procurement reform agenda generated new heat. In 2011, stung by a perceived insinuation by the media and nonprofits that for-profit firms are less capable or committed to achieving development goals than nonprofits, the Professional Services Council\u2014some of whose members formed a subsidiary Council of International Development Companies (CIDC) in the wake of USAID's procurement reform\u2014called on USAID to support a \"transparent and unbiased\" process for determining the best implementing mechanism for a particular project. They argued that it is detrimental to the agency's effort to build a modern development enterprise if some are \"hobbled by a presumption that one business model is superior to another\"",
      " and when the public focus is on \"reforms and accountability for contractors, without equal or greater attention to the performance, transparency and accountability of grantees.\"  Taking the view in a April 26, 2012, letter to the USAID Administrator that contracts \"are inherently more transparent and accountable,\" the Chairman and two colleagues on the House Committee on Oversight and Government Reform raised the concern that the agency's procurement reform meant an increased reliance on grant awards as a funding vehicle. They voiced a fear that grant oversight might increase the agency workload and result in more waste and fraud.  Arguing that NGO grantees use taxpayer dollars more effectively than contractors by providing an already existing long-term in-country presence and institutional knowledge,",
      " as well as mobilizing private resources to support their efforts, InterAction, the consortium of NGOs, expressed a somewhat opposite view from that of its for-profit counterpart. It noted \"USAID's apparently increasing preference of working through for-profit contractors rather than non-profit NGOs.\"  These views highlight distinctions between grants and contracts that to some observers may not be as sharp as suggested by their proponents and detractors. For instance, a 2006 USAID study argued that the perception that contracts better tie funds to results depends on the type of contract used. Fixed-price contracts require specific defined outputs, but because USAID works in an environment where many external factors may affect what can be done,",
      " the agency often employed cost-reimbursement and time-and-materials contracts where the objective is \"best effort.\" Most contracts, the report's USAID staff authors said, are no different than grants and cooperative agreements in ensuring achievement of results.  InterAction, meanwhile, has argued that assistance awards for the nonprofits they represent have for more than 10 years become increasingly prescriptive (i.e., more like contracts). They suggest that NGOs are treated as implementers, not partners with their own expertise in design, implementation, and monitoring of programs. USAID data show that cooperative agreements, which are more prescriptive than grants, have grown as a proportion of total procurement awards,",
      " from 22% in FY2003 to 46% in FY2013.  Contractors and grantees seem to agree on one thing. InterAction criticizes USAID guidelines on choosing implementing mechanisms, arguing that some grants should have been contracts and vice versa. They argue that USAID should clarify its guidance on implementing mechanisms and consistently follow it. In a series of letters to USAID in 2014, the CIDC similarly argued that federal regulations criteria for choosing between contract or grant has often not been met, asserting that USAID has chosen one or the other without clear rationales. More recently, in April 2015,",
      " the CIDC's parent body noted a Supreme Court decision not to review a decision by the U.S. Court of Appeals involving the Department of Housing and Urban Development that affirmed the need for agencies to adhere to federal procurement laws that draw sharp distinctions between grants and contracts. In 2014, a USAID-sponsored Award Cost Efficiency Study recommended ways to improve the efficiency of the procurement process. As part of its effort to implement those recommendations, a USAID team has been reviewing guidance on the different implementing mechanisms. Role of USAID Vis-\u00e0-Vis the State Department By noting both in the 2010 Presidential Policy Directive and 2010 QDDR,",
      " its commitment to \"rebuilding USAID as the U.S. government's lead development agency,\" the Obama Administration highlighted what many in the foreign aid community had long recognized\u2014that USAID's role in the U.S. government had been severely challenged in the recent past. Not only had multiple aid providers emerged\u2014nearly every U.S. government department had some foreign aid program of its own\u2014but the State Department itself had moved, in the view of many observers, to increasingly take possession of USAID policy and functions. The agency's weakened status within the U.S. government was said by many to have negatively affected its ability to meet its development objectives,",
      " coordinate assistance from other providers, determine the direction of its own resources to best advance development, and function administratively as an independent entity. Background: USAID's Role in the U.S. Government Through much of its history, USAID's autonomy and authority vis- \u00e0 -vis both the Department of State and other agencies has been regularly challenged and changed. At some point during every Administration in the past 50 years, there has been some rethinking of aid policy, which has led to shifts in USAID's institutional position for better or for worse.  In the beginning, the State Department was the lead agency on foreign aid policy, with the Foreign Assistance Act of 1961 clearly providing that \"under the direction of the President,",
      " the Secretary of State shall be responsible for the continuous supervision and general direction of... assistance programs.\" In 1961, the act, not mentioning an Agency for International Development, authorized the President to exercise its provisions through any agency he chose. President Kennedy issued Executive Order 10973 on November 3, 1961, delegating to the Secretary of State most functions conferred to the President under the FAA and directing the Secretary to establish \"an agency in the Department of State to be known as the Agency for International Development,\" which was subsequently carried out under State Department Delegation of Authority No. 104, also issued on November 3,",
      " 1961. The Secretary delegated to the new agency most of the development and humanitarian program functions authorized in the FAA.  The degree to which USAID felt the State Department's supervision and direction in its early years is not well documented. But USAID does appear to have functioned with considerable operational autonomy in its first 20 years. As a result of the 1973 New Directions legislation, USAID chaired a newly established Development Coordination Committee (DCC), an interagency organization to advise the President on assistance coordination issues, and chaired its subcommittee on bilateral aid as well, although it was thought at the time that these bodies had little impact on the agencies concerned.",
      " In September 1979, President Carter issued Executive Order 12163, to establish the International Development Cooperation Administration (IDCA), an independent agency within the executive branch that was given primary responsibility for establishing development assistance policy and the role of principal adviser to the President on these issues. According to the GAO, under the IDCA scheme, the State Department would now provide only broad policy advice and not specific recommendations on country programs. The IDCA Director was made chairman of the DCC, usurping the USAID Administrator.  In the end, IDCA had little power or prestige. It was constituted without key players in development assistance: the State Department,",
      " Treasury, and even the Peace Corps. The Reagan Administration diminished the role of IDCA and, thwarting the plan's original concept of an independent arbiter for development policy, appointed the USAID Administrator as the IDCA Director. The most enduring end result of this phase, therefore, was that USAID was removed from the jurisdiction of the Department of State and became a more autonomous entity.  In April 1997, in part to respond to congressional critics who wanted to radically restructure or abolish USAID, the Clinton Administration proposed a foreign affairs reorganization that included absorption of the functions of the Arms Control and Disarmament Agency and the U.S.",
      " Information Agency into the State Department. The agreement with Congress allowed USAID to remain a separate statutory agency with its own appropriation, but with the Administrator reporting to and under the direct authority and foreign policy guidance of the Secretary of State. Congress approved legislation authorizing this approach in the Foreign Affairs Reform and Restructuring Act of 1998, which was signed into law on October 21, 1998.  As required by the act, the President abolished IDCA through an amendment made to Executive Order 12163 (March 16, 1999). Under the order, functions vested in the President as they pertained to economic assistance were delegated by the President to the Secretary of State.",
      " Under a subsequent State Department Delegation of Authority No. 145 (as revised on March 31, 1999), the Secretary then delegated to the Administrator of USAID functions and authorities necessary to carry out USAID's mission. In other words, whereas previously USAID's authorities were delegated by the President, now they were to be delegated by the Secretary of State. The Delegation of Authority clearly noted the Secretary's role vis - a - vis USAID as follows: (c) In keeping with the United States Agency for International Development's status as a distinct agency and recognizing that the Administrator is under the Secretary's direct authority and foreign policy guidance,",
      " the Secretary shall review the United States Agency for International Development's strategic plan and annual performance plan, annual budget submission and appeals, and allocations and significant (in terms of policy or money) reprogramming of development and other economic assistance.  According to the Clinton Administration's Reorganization Plan and Report, submitted to Congress on December 30, 1998, the framework of relationships would be essentially the same as that which preceded the creation of IDCA. The Secretary would coordinate development and other economic assistance and would ensure coordination among U.S. agencies in carrying out foreign aid programs. In carrying out its functions, USAID would consult with State as appropriate.",
      " The reconfiguring and restating of USAID's position vis- \u00e0 -vis the Department of State in 1998 set the stage for actions taken by the Bush Administration beginning in 2006. In that year, Secretary of State Rice sought to increase coordination and integration of foreign aid programs into the foreign policy process by creating a new State Department position, Director of Foreign Assistance (DFA). A key feature of this initiative was the decision to give the new DFA the concurrent positions of USAID Administrator and a State Department position equivalent to that of a Deputy Secretary, reporting directly to the Secretary of State. This step was a controversial one in the foreign assistance community,",
      " with some arguing that it diminished the status of USAID by enhancing the programming and budget allocation role of the Department of State, while others argued conversely that it strengthened USAID by elevating its access to foreign policy decisionmaking, though many in the NGO community made the former argument. On the side of elevating its position, USAID, for the first time, chaired the International Development Policy Coordination Committee, one of 17 National Security Council entities that develop and manage cross-agency concerns. Also, under the Bush Administration, USAID saw its program responsibilities rise substantially, largely due to activities in national security conflicts such as Afghanistan and Iraq,",
      " likely raising its stature as a foreign policy principal.  On the other hand, USAID as an institution lost its budget and policy functions to this new DFA entity in the State Department. Its budget requests were made in conjunction with the State Department\u2014the last independent USAID congressional budget justification was issued for the FY2007 budget year. The reform uprooted the mission-based decisionmaking model, adopting a more centralized planning process\u2014the country assistance strategy (CAS)\u2014focused on broad objectives but which, according to GAO, lacked \"substantive content and details on how USAID is to achieve its objectives.\" Decisions on programming and any adjustments to those decisions in light of project experience were now made by a small staff in Washington.",
      " For several years during the transition from USAID's former country planning process, many noted that the reform added uncertainty to mission planning and implementation and made achieving any long-term agreements with host country governments difficult.  These changes occurred on the heels of other setbacks to USAID's role earlier in the Bush Administration. When the Administration proposed the establishment of two new and well-funded assistance programs in 2003\u2014PEPFAR and the MCC\u2014it chose to bypass USAID and house the former in an Office of the Global AIDS Coordinator in the Department of State and the latter as an independent entity. Only congressional pressure ensured that USAID would get a seat on the MCC Board of Directors,",
      " which had not been proposed originally by the Administration. Despite its lack of policy responsibility, USAID implements nearly two-thirds of PEPFAR's program. On top of these new competitors in the development field, the non-traditional aid providers in other parts of the U.S. government have expanded their activities in the past decade, in particular the Department of Health and Human Services, on disease programs, and the Department of Defense, in development (Iraq and Afghanistan) and humanitarian efforts. The erosion of support for the agency that had nearly led to its demise in the mid-1990s, the preference given alternative aid institutions in the early 2000s,",
      " and the absorption by the State Department of its powers a few years later had resulted from a combination of reinforcing factors building over the previous two decades. These included, in the 1980s and early 1990s, the loss of the anti-communist rationale for aid, blame for perceived aid failures, general anti-foreign aid rhetoric in Congress, and instances of waste highlighted by an \"antagonistic\" USAID Inspector General. Funding cuts in the mid-1990s led to staff reductions and decreased morale, and persistent negative impressions of an agency, broadly thought of as being \"multi-layered, bureaucratic, and slow to react,\" and \"slow,",
      " cumbersome, and unimaginative.\" Arguably, by 2007, the agency had reached its institutional low point. Current Status Under the Obama Administration, the fortunes and standing of USAID appear to have shifted again, although it remains to be seen to what degree. As noted, the PPD and 2010 QDDR both endorsed efforts to make USAID the lead development agency, the QDDR making it the lead agency of the presidential Feed the Future Initiative and giving it the lead role in a new Interagency Policy Committee on Global Development. The QDDR also endorsed USAID Forward reforms, among which were the restoration of the agency's policy and budget functions.",
      " The State Department's role in USAID's business was made somewhat less expansive and, reportedly, more informal. The Director of Foreign Assistance became the Director of the Office of U.S. Foreign Assistance Resources, still charged with directing the transformation of the U.S. government approach to foreign assistance, but with a less elevated rank. The State Department's country assistance strategy has been replaced with the agency-generated and mission-focused country development cooperation strategy.  However, although the 2010 QDDR called for the \"ultimate transition of leadership of the Global Health Initiative to USAID\" by end of FY2012 if USAID met 10 benchmarks, the Administration decided to leave Initiative leadership in the Department of State.",
      " In any case, the QDDR decision did not affect PEPFAR, which accounts for most of health funding. This was to be left with the Office of the Global AIDS Coordinator. Some question the extent to which USAID has regained its budget function\u2014USAID and State continue to provide a joint congressional budget request and issue a joint strategic plan, the most recent for the period FY2014 through FY2018. Further, no rescission has been made of the delegation of authority that established the Office of Foreign Assistance and gave it final say on budget allocations and related decisions. Although current personal relationships may provide USAID with some autonomy,",
      " there are no institutional assurances that the agency's \"independence\" will not be further challenged in the future. USAID and State at the Mission Level A recurrent concern of many who have observed the historic relations of these two agencies is that the development point of view of USAID is often supplanted by the diplomatic imperatives of the Department of State. An oft-cited supposition is that, given access to USAID funds, the embassy would be more likely to use funds to construct a bridge, which would lead to a ribbon-cutting ceremony, than for a less visible investment in education.  One manifestation of this tension between agencies is the International Cooperative Support Services (ICASS)",
      " program. Partly at the behest of the GAO, the State Department and USAID in 2005 launched a pilot project in four countries to cut overseas costs by consolidating administrative services at embassies and missions. ICASS has since been extended worldwide and includes other U.S. agencies stationed abroad. Duplicative systems such as warehouses, motor pools, housing, and procurement operations are targets. As ICASS has been instituted, control of these systems has largely devolved to the Department of State, and numerous complaints have ensued from USAID FSOs regarding the way in which ICASS has been managed and the excessive drain it has become on USAID's operating budget.",
      " The GAO noted, for example, that USAID officials cite the unavailability of ICASS motor pool vehicles for travel to distant project sites \"as a major impediment to achieving their mission.\" Mission staff argue that State personnel tend to stay in the capital and do not understand the necessity to travel outside for project-monitoring purposes.  Another issue arguably impinging on USAID's ability to operate effectively is the result of consolidation of staff salary systems. USAID foreign national staff are intensively used for program purposes and, but for restrictions on management duties, often take on roles indistinguishable from U.S. direct hire personnel. They are generally considered well educated and well qualified for their posts.",
      " State foreign nationals, in part for security reasons, are often not employed at higher levels. The consolidation of employment systems, however, has severely restricted the pay levels for USAID foreign nationals and is viewed by many as a force making it difficult for USAID to retain its foreign staff whose skills are most attractive to other donor agencies and the private sector.  Since the 1998 Kenya embassy bombing, security concerns have increasingly intruded on customary USAID operations. While no one disputes the importance of ensuring the security of U.S. personnel, a number of USAID staff have suggested that the interpretation of the threat, in the hands of State Department security personnel,",
      " is perhaps more stringently and widely applied than would be the case if it were up to USAID. For the past decade, USAID missions and other offices have been gradually consolidated into the increasingly security-centered and less centrally located U.S. embassy compounds. The result according to USAID staff has been isolation from the agency's clients\u2014local government and NGO personnel\u2014who previously had easier access to mission offices and with whom regular interaction has been an essential part of USAID's culture. The 2015 QDDR addresses the concern that measures to prevent physical risk might also interfere with the accomplishment of State Department and USAID objectives. It promises a review that will \"identify obstacles to our operations and programs,",
      " recommend ways to create additional policy flexibility where security is challenged, devise better options for operating in these environments, and maximize field input to inform high-level policy deliberations on complex crises.\" National Security Decision Directive 38, issued by President Reagan in 1982, gave the Chief of Mission, and ultimately the State Department, final say on the size and composition of agency staff at diplomatic missions abroad. To some observers, the State Department's ability to put caps on the number of USAID staff negatively affects agency operations. A recent example concerns the disposition of USAID staff in East Africa. State Department efforts to cut the number of U.S. staff in Kenya,",
      " ostensibly for security reasons, has led to a 40% reduction in USAID's East Africa regional mission office in Nairobi despite strong opposition by the agency. The regional office is responsible for programs that cross borders as well as in countries where there is no mission, including Burundi, Somalia, and Djibouti. USAID's localization efforts here as elsewhere entail more contracting officers and controllers to ensure that local organizations spend funds properly. The intensity of the interaction between these staff and local organizations requires that they be in close proximity. While the State Department wanted the regional staff to move outside the African continent entirely, USAID managed to get permission to disperse staff to various other African countries,",
      " including Ethiopia, South Africa, and Democratic Republic of Congo (DRC), as well as 13 destinations yet to be determined. Role and Impact of Congress on USAID As discussed earlier, Congress has several means to influence and direct the operations of USAID. It can authorize, appropriate, and provide oversight of USAID programs and funding. While it has not reauthorized funding since 1985 for many programs administered by USAID, it has on occasion added program language affecting USAID\u2014recently authorizing assistance to Ukraine ( P.L. 113-95, April 3, 2014), for example\u2014and still standing is the cumulative detail of program authorizations,",
      " most in the Foreign Assistance Act of 1961 and approved more than three decades ago. This language is sufficiently broad to permit any likely USAID activity. The annual appropriations legislation, accompanied by committee report language, and annual oversight hearings held by both authorizing and appropriations committees offer more regular vehicles for congressional comment and guidance to the agency.  The effect of this body of legislation has been to shape the agency's programs and operations, as is Congress' role; however, many development policy analysts and practitioners have noted some negative consequences. The most common critique raised is the impact of congressional directives, known more widely in the development community as earmarks,",
      " on USAID operations.  Though arguably diminished from the period when Congress would specify not only the sector but the country, and even at times the favored grantee, the requirement that USAID meet certain funding mandates can reduce mission flexibility in determining the best way to achieve development objectives and alignment of U.S. programs with country priorities. One sign of this and a regular occurrence at the end of a fiscal year is the announcement to USAID missions that additional funding is available in a specific sector if a mission can quickly put together a viable project. As a result, missions shoe-horn projects into country programs that otherwise would not be there, despite unmet funding requirements in sectors of existing activity less favored by Congress.",
      "  Some observers have remarked on Congress' focus on funding for health sector programs, such as HIV/AIDS prevention, which has dominated agency programs in some African countries and limited available funding for other possible activities. One Senate committee staff report quotes a U.S. official at the Tanzania embassy, for example, as saying \"USAID is turning into the U.S. Agency for Health.\"  Critics also argue that Congress has piled on too many legislative objectives. An effort to compile a list of goals and purposes in U.S. foreign assistance legislation found at least 85 that applied to USAID. In the run-up to New Directions, in 1972,",
      " USAID had envisioned a reformed program focus limited to several priority issues, with problems and projects in unrelated areas being phased down or eliminated, the purpose being to make USAID \"less of a general purpose assistance organization and more of a specialized agency\u2026where U.S. technical skill and experience can make a significant contribution.\" Although New Directions emphasized a handful of specific sectors, a narrowing of focus did not occur, as Congress continued to add objectives and sub-objectives. Later, periodic reform efforts, generated by Congress or outside groups, continued to criticize the layering of objectives and recommended they be cut back to provide greater flexibility to USAID. One aim of the USAID Forward reform effort has been to better focus efforts \"where the needs and potential impact are greatest.\" According to USAID,",
      " between 2010 and 2013, USAID reduced the total number of country program areas by 22%. But the preference for funding mandates likely limits the extent of such an effort. Including funding mandates, Congress, over the years, has approved a range of prohibitions and restrictions, procurement rules, limitations on types of funding, requisite administrative practices, and reporting requirements that have come to be known as \"barnacles.\" As early as 1970, a study group at USAID examined \"barnacles\" viewed as impeding agency operations and attempted to quantify the amount of time it took to implement them. Their conclusion: \"It is probably not an overstatement to suggest that perhaps as much manpower talent and energy are spent in insuring compliance with specifically-imposed restrictions as is spent in the execution of programs and projects.\" Although it no longer estimates time consumed,",
      " USAID produces a \"barnacles\" checklist annually.  One such legislative requirement\u2014that most P.L. 480 Title II food aid be acquired from U.S. producers and shipped on U.S.-flag vessels\u2014has been the subject of Administration-Congressional debate in recent years. Critics have long argued that this practice raises the cost and slows delivery of emergency relief. The 2014 farm bill ( P.L. 113-79 ) provided a measure of flexibility to USAID that allows it to provide some food in the form of cash-based assistance for local and regional commodity purchases nearer the site of a food crisis. Subsequent appropriations proposals have sought to further increase the agency's flexibility on how it delivers emergency aid,",
      " although Congress did not approve more ambitious food aid reforms proposed by the Administration. The limits on operational and program flexibility and the attention given by Congress to USAID operations at the project and country level have raised the question by some of whether Congress micro-manages USAID to a greater degree than other U.S. departments and agencies. That question is not easily answered, but one of the drivers of the Administration and Congress in creating the Millennium Challenge Corporation was to establish a program relatively free from such constraints.  Congress is sometimes held responsible for other impacts on USAID behavior that are viewed critically by some development proponents. Historically, USAID has been under pressure from Congress to obligate and disburse its funds as rapidly as possible.",
      " Unobligated funds could be tempting targets for other congressional priorities, and a slow disbursement rate was at times used as a reason for Congress not to approve higher USAID budgets. However, a rapid disbursement rate can run counter to efforts to provide funds through local governments and organizations, which may not have the absorptive capacity to spend quickly or to ensure proper accountability in circumstances of internal conflict and political instability, where it is preferable to provide funds in gradual tranches as their appropriate use is certified.  Further, observers believe that the lack of certainty regarding future funding\u2014past suggestions that Congress appropriate multiyear funding have gone unheeded\u2014prevents long-term planning.",
      " And some analysts suggest that the determination to demonstrate quickly to Congress results from aid funding has led to ever shorter project time frames when specialists argue sustainable development requires long-term engagement.  Finally, some observers place much responsibility on Congress for the reduction in USAID's staff and consequent decline of its capacity to design, administer, and monitor its programs during the period from the late 1980s until 2008. As the rare agency whose operating expenses are mostly separated out from program costs in appropriations accounts, USAID has been especially vulnerable to cuts on personnel and other administrative costs disproportionate to its program requirements. This, some have argued, is what occurred after 2001 as Congress greatly increased program funds while allowing the ratio of OE to programs\u2014a measure of the management burden imposed on personnel\u2014to widen.",
      " Budget cuts since FY2012 may, arguably, again be affecting administrative accounts unequally. Sustainability Ensuring sustainability\u2014where local systems (i.e., government, civil society and private sector), can produce and maintain a given set of development outcomes (e.g., an increase in literacy, a decrease in child mortality) beyond the life of the project\u2014has at times been more an aspiration than an achievement of USAID. The broad lack of capacity, technical and financial, that defines most developing countries is the greatest obstacle to sustainability, but so too, many argue, has been the failure to align agency projects with partner government interests and gain a shared commitment early on to project objectives.",
      " The USAID Inspector General has identified certain projects for which the prospect of sustainability appeared unpromising in recent years. Examples include a water and sanitation project in Lebanon that installed 33 water meters, which, at the time of an audit, were not working and the government had insufficient funds to repair or replace; a West Bank/Gaza project that constructed and renovated schools although the Palestinian Authority had had difficulty maintaining the already existing infrastructure; and a road construction project in South Sudan in which government representatives stopped attending meetings and did not take control of completed bridges. Many similar examples are to be found in Iraq (in the early 2000s) and Afghanistan,",
      " where USAID was directed by strategic foreign policy requirements to provide large amounts of infrastructure, among other assistance, in a short time frame regardless of recipient country capacity to maintain it. To address the issue in Afghanistan, the USAID Administrator issued \"sustainability guidance\" in June 2011, suggesting that USAID work should reflect Afghan government or civil society priorities, and, if recurrent costs were associated with the project, the USAID mission had to determine if the government or civil society had the interest and resources to maintain it. If a project was deemed not sustainable, a decision had to be made to modify, end, or postpone the project.",
      " In 2014 testimony, however, the SIGAR expressed the view that USAID may not have consistently adopted a realistic approach to the problem of sustainability in Afghanistan. Sustainability of U.S. assistance efforts was adopted in the 2010 QDDR as one of the main principles of an effective foreign assistance program. USAID issued new project design guidance in December 2011 requiring that sustainability objectives be incorporated into all project designs, and subsequent training programs and administrative directives have supported this policy. A now mandatory sustainability analysis, conducted as projects are developed, is intended to identify potential sustainability challenges a project might face, and perhaps lead agency staff to design interventions to mitigate them.",
      "  Through its \"local solutions\" initiative, USAID anticipates fostering sustainability by engaging all local systems involved in project efforts and outcomes. The agency directly addresses the lack of financial capacity that undermines the ability of governments to maintain roads, schools, and other development outcomes through domestic resource mobilization projects. These efforts help governments expand their tax base, reduce tax evasion, and find ways to raise revenue that may support development. These actions may reduce, if not eliminate, future situations as those described in the USAID IG report. Conclusion: Key Challenges Ahead for USAID  USAID, as with any public or private institution, faces multiple challenges in the process of fulfilling its mission.",
      " The peculiar environment in which it operates\u2014with multiple lines of authority, shifting priorities, uncertain budgets, unpredictable partners, and unstable settings\u2014has ensured a degree of difficulty in implementing its programs. Even as the agency addressed old challenges with the USAID Forward reforms, new ones have emerged. Among the current continuing and new challenges that observers have noted and that Congress may track closely are the following: Human Resources. Despite the increased numbers of USAID Foreign Service Officers in recent years, the agency may still face shortages of specific skill sets\u2014e.g., contract officers to meet the needs generated by aid localization efforts or specialists to implement policy initiatives, such as agriculturalists to manage the Feed the Future initiative.",
      " Unlike the State Department and DOD, which have larger staff pools, USAID faces a challenge finding sufficient personnel to go to critical priority countries (Afghanistan, Sudan) and unanticipated crisis countries (Haiti earthquake) without leaving detrimental vacancies elsewhere. Providing sufficient training to new personnel in view of declining operational budgets is another concern. A related issue is whether the agency can retain the new staff it has recruited in the past few years amid concerns about lack of language and skill training, lack of travel funding to monitor projects, and an environment that, some argue, continues to constrain initiative. Retaining quality foreign national staff in view of relatively low salaries and limited promotion opportunities also poses a challenge given the important role such staff traditionally play in mission operations.",
      " Scaling- U p. USAID innovations in development practice and science and technology, such as those nourished by the Global Development Lab, are often introduced in one or two countries and, within those countries, one or two provinces. The history of USAID is replete with pilot programs that were never fully developed and adopted by a larger population. Will agency efforts to \"scale-up\" Lab innovations succeed? Some observers have suggested that one necessary element is creating a longer time horizon for USAID projects and making funding available for follow-up projects to see new ideas through to maturity. Another factor for success is the extent to which knowledge of innovations in one place can be disseminated throughout the agency.",
      "  Evaluation. Under USAID Forward, the agency has given renewed attention to the number of independent evaluations it undertakes. A challenge for USAID is to improve the quality of evaluations\u2014including conducting more long-term outcome analysis\u2014and to ensure that evaluation results are used as \"lessons learned\" to make corrections for future programs. Local Solutions. As discussed earlier in this report, working with local governments and the private sector to implement development efforts requires a commitment of agency personnel and funds, the flexibility to use those funds in a way that reflects country priorities, and a long-term planning and implementation time frame aimed at developing local capacities, while at the same time ensuring that accountability standards are met.",
      "  Sustainability. Building \"country ownership\" is one USAID response to the challenge of sustaining development efforts beyond the life of USAID's interventions. Another is more resource mobilization efforts to develop a government's capacity to collect revenue to support development. A clear path to sustainability, however, remains a work in progress. Security. Lack of security for agency personnel overseas poses significant obstacles to successful project implementation. How to get past the security-centered structure that many U.S. embassies have become to regularly meet with government and civil society representatives in order to formulate suitable projects, and how to gain safe access to project locales for appropriate monitoring, are major concerns.",
      " Security concerns in so-called non-permissive environments, such as South Sudan, Afghanistan, Pakistan, and Yemen, pose considerably greater problems, including periodic evacuation of personnel, complications in finding contractors and grantees willing to undertake the risks of work in the field, and difficulty employing foreign national employees willing to undertake work under U.S. auspices. Program Flexibility. USAID staff face multiple imperatives, including objectives listed in the Foreign Assistance Act, congressional mandates, presidential initiatives, direction from State department diplomats, priorities of partner governments, and the influence of the international community. USAID, as an agency, is challenged to reconcile these varied views,",
      " yet remain sufficiently flexible to fashion a coherent development program in priority countries. \n"
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  },
  {
    "id": 83,
    "question": null,
    "answer": "An important goal of the Communications Act of 1934, as amended, is to ensure access to telecommunications services for all Americans. The Federal Communications Commission has made efforts to improve the historically low subscribership rates of Native Americans on tribal lands. In addition, Congress is considering legislation to establish a grant program to help tribes improve telecommunications services on their lands. This report discusses 1) the status of telecommunications subscribership for Native Americans living on tribal lands; 2) federal programs available for improving telecommunications on these lands; 3) barriers to improvements; and 4) how some tribes are addressing these barriers. Based on the 2000 decennial census, the telephone subscribership rate for Native American households on tribal lands was substantially below the national level of about 98 percent. Specifically, about 69 percent of Native American households on tribal lands in the lower 48 states and about 87 percent in Alaska Native villages had telephone service. While this data indicates some progress since 1990, changes since 2000 are not known. The U.S. Census Bureau is implementing a new survey that will provide annual telephone subscribership rates, though the results for all tribal lands will not be available until 2010. The status of Internet subscribership on tribal lands is unknown because no one collects this data at the tribal level. Without current subscribership data, it is difficult to assess progress or the impact of federal programs to improve telecommunications on tribal lands. The Rural Utilities Service and the FCC have several general programs to improve telecommunications in rural areas and make service affordable for low-income groups, which would include tribal lands. In addition, FCC created some programs targeted to tribal lands, including programs to provide discounts on the cost of telephone service to residents of tribal lands and financial incentives to encourage wireless providers to serve tribal lands. However, one of FCC's universal service fund programs that supports telecommunications services at libraries has legislatively based eligibility rules that preclude tribal libraries in at least two states from being eligible for this funding. FCC officials told GAO that it is unable to modify these eligibility rules because they are contained in statute and thus modifications would require legislative action by Congress. The barriers to improving telecommunications on tribal lands most often cited by tribal officials, service providers, and others GAO spoke with were the rural, rugged terrain of tribal lands and tribes' limited financial resources. These barriers increase the costs of deploying infrastructure and limit the ability of service providers to recover their costs, which can reduce providers' interest in investing in providing or improving service. Other barriers include the shortage of technically trained tribal members and providers' difficulty in obtaining rights of way to deploy their infrastructure on tribal lands. GAO found that to address the barriers of rural, rugged terrain and limited financial resources that can reduce providers' interest in investing on tribal lands, several tribes are moving toward owning or developing their own telecommunications systems, using federal grants, loans, or other assistance, and private-sector partnerships. Some are also focusing on wireless technologies, which can be less expensive to deploy over rural, rugged terrain. Two tribes are bringing in wireless carriers to compete with the wireline carrier on price and service. In addition, some tribes have developed ways to address the need for technical training, and one has worked to expedite the tribal decision-making process regarding rights-of-way approvals.\n",
    "docs": [
      "Background According to the 2000 Census, approximately 588,000 Native Americans  were residing on tribal lands. Tribal lands vary dramatically in size,  demographics, and location. They range in size from the Navajo Nation,  which consists of about 24,000 square miles, to some tribal land areas in  California comprising less than 1 square mile (see figure 1). Over 176,000  Native Americans live on the Navajo reservation, while other tribal lands  have fewer than 50 Native residents. The population on a majority of tribal  lands is predominantly Native American, but some tribal lands have a  significant percentage of nonNative Americans.",
      " In addition, while most  tribal lands are located in rural or remote locations, some are located near  metropolitan areas. Tribes are unique in being sovereign governments  within the United States. The federal government has recognized the  sovereign status of tribes since the founding of the United States. The U.S.  Constitution, treaties, and other federal government actions have  established tribal sovereignty. To help manage tribal affairs, tribes have  formed governments or subsidiaries of tribal governments that include  schools, housing, health, and other types of corporations. In addition, the  Bureau of Indian Affairs (BIA) in the Department of the Interior has a  fiduciary responsibility to tribes and assumes some management  responsibility for all land held in trust for the benefit of the individual  Native American or tribe.",
      " In Alaska, federal law directed the establishment of 12 for profit regional  corporations, 1 for each geographic region comprised of Natives having a  common heritage and sharing common interests, and over 200 native  villages. These corporations have become the vehicle for distributing land  and monetary benefits to Alaska Natives to provide a fair and just  settlement of aboriginal land claims in Alaska. The Native villages are  entities within the state that are recognized by BIA to receive services from  the federal government. The 12 regional corporations have corresponding  nonprofit arms that provide social services to the villages. Native American tribes are among the most economically distressed groups  in the United States.",
      " According to the 2000 Census, about 37 percent of  Native American households have incomes below the federal poverty  level\u2014more than double the rate for the U.S. population as a whole.  Residents of tribal lands often lack basic infrastructure, such as water and  sewer systems, and telecommunications services. According to tribal  officials and government agencies, conditions on tribal lands have made  successful economic development more difficult than in other parts of the  country. A study done for the federal government, based on research  gathered in 1999, found that the high cost and small markets associated  with investment in tribal lands deter business investment.",
      " The federal government has long acknowledged the difficulties of  providing basic services, such as electricity and telephone service, to rural  areas of the country. The concept of universal telephone service has its  origins in Section 1 of the Communications Act, which states that the  Federal Communications Commission was created \u201cfor the purpose of  regulating interstate and foreign commerce in communication by wire and  radio so as to make available, so far as possible, to all the people of the  United States a rapid, efficient, nationwide, and worldwide wire and radio  communication service with adequate facilities at reasonable charges\u2026.\u201d  The goal of universal service is to ensure that all U.S.",
      " residents have access  to quality telephone service regardless of their household income or  geographic location. The Telecommunications Act of 1996 reaffirmed the  commitment to universal service and expanded it to include not just  traditional telephone service but access to advanced telecommunications  services (such as high-speed Internet access) for schools, libraries, and  rural health care providers. A 1995 report by the Census Bureau based on 1990 census data noted that  about 47 percent of Native American households on tribal lands had  telephone service, compared to about 95 percent of households  nationally. In June 2000, the FCC Chairman noted that the Commission\u2019s  universal service policies \u201chad yielded a remarkable rate of telephone  subscribership,",
      " above 90 percent for the nation as a whole.\u201d However, he  also noted that telephone subscribership among the rural poor was roughly  20 percent lower than the rest of the nation, while Native Americans living  on tribal lands were only half as likely as other Americans to subscribe to  telephone service. In August 2000, FCC identified certain categories of  Americans, including Native Americans, who were having difficulty  obtaining access to advanced telecommunications services. Tribal Telephone  Subscribership Rate Is  Substantially Below  the National Level and  Internet  Subscribership Rate Is  Unknown According to data from the 2000 decennial census,",
      " the rate of telephone  subscribership for Native American households on tribal lands was  substantially below the national rate of 97.6 percent. While this data  indicates some progress since 1990, changes since then are unknown due  to a lack of more current data. Additionally, the rate of Internet  subscribership is unknown because no federal survey has been designed to  capture this information for tribal lands. Telephone Subscribership  for Native American  Households on Most Tribal  Lands Was Substantially  Below the National Rate in  2000 According to the 2000 decennial census, the telephone subscribership rate  for Native American households on tribal lands in the lower 48 states was  68.",
      "6 percent, while for Alaska Native Villages it was 87 percent\u2014both  substantially below the national rate of 97.6 percent. Figure 2 shows the  number of tribal lands within various percentile ranges of telephone  subscribership for Native American households, based on our analysis of  2000 decennial census data. We have separated Alaska Native tribal lands  from the tribal lands in the lower 48 states because telecommunications  infrastructure in Alaska differs from that of the lower 48 states due to  Alaska\u2019s weather and terrain. The data is shown for 198 tribal lands in the  lower 48 states and 131 tribal lands in Alaska.",
      " Tribal lands with fewer than  100 people are not included in the data available from the Census Bureau.  In these areas, there must be at least 100 people in a specific group,  including American Indian and Alaska Native tribal groupings, before data  will be shown. As figure 2 shows, there was considerable variation among tribes regarding  telephone subscribership rates, with some comparable or higher than the  national rate but most below it\u2014and many substantially so. We found, for  example, that the Kalispel tribal land in Washington had a telephone  subscribership rate of 100 percent, while the tribal lands of the Kickapoo  Traditional Tribe of Texas had a rate of 34 percent.",
      " To get a better  understanding of telephone subscribership rates by individual tribe and  population size, we reviewed data for the 25 tribal lands with the highest  number of Native American households. These 25 tribal lands represent  about 65 percent of all Native American households, as shown in Census  2000 data. The lands vary greatly in the number of Native American  households located on them (from about 46,000 for the Navajo Nation to  about 1,100 for Fort Berthold) and in geographic size, with the Navajo  Nation\u2019s lands comprising about 24,000 square miles and the Eastern Band  of Cherokee\u2019s land comprising about 83 square miles.",
      " As shown in figure 3, the Native American household telephone  subscribership rates for these most populous tribal lands were all below  the national rate of 97.6 percent. Nine of the 25 tribal lands, representing  about 44 percent of Native American households on tribal lands in the  lower 48 states, had telephone subscribership rates at a level below 78  percent\u2014which is about what the national rate was over 40 years ago when  the 1960 decennial census was taken. The subscribership rate for the most  populous tribal land\u2014the Navajo\u2014was only 38 percent. Because the 2000 decennial census is the most current data available on  telephone subscribership rates on tribal lands,",
      " it is not known whether  these rates have changed between 2000 and the present. To help improve  the accuracy of the next decennial census and collect demographic,  socioeconomic and housing data in a more timely way, the Census Bureau  developed the American Community Survey (ACS), which includes a  question on telephone service. In January 2005, the Census Bureau began  sending out the ACS questionnaire to households. Annual results will be  available for populations on all individual tribal lands by summer 2010, and  sooner for tribal lands with populations over 20,000. This schedule is based  on the time it will take to accumulate a large enough sample to produce  data for areas with populations as small as 600 people.",
      " No Federal Data Available  on Internet Subscribership  Rates For Tribal Lands The status of Internet subscribership on tribal lands is unknown because  no federal survey has been designed to track this information. Although the  Census Bureau and FCC currently collect some national data on Internet  subscribership, and FCC also collects some state level data, none of their  survey instruments are designed to estimate Internet subscribership on  tribal lands. In addition, officials of both agencies told us that to the best of  their knowledge, no other federal agency collects data on Internet  subscribership. Unlike telephone subscribership data, the 2000 decennial census did not  collect information on Internet subscribership,",
      " nor is the Census Bureau  currently collecting it on the ACS. The Census Bureau does collect some  national data on Internet subscribership through the Current Population  Survey (CPS). However, this monthly survey of households conducted by  the Census Bureau for the Bureau of Labor Statistics is designed primarily  to produce national and state estimates for characteristics of the labor  force. To obtain national and state estimates on Internet subscribership  rates, supplemental questions on Internet and computer use have been  added to the CPS questionnaire. According to a Department of Commerce  report, based on October 2003 CPS data, the Internet subscribership rate  for U.S.",
      " households was about 55 percent. However, Commerce  Department officials told us that the CPS sample cannot provide reliable  estimates of Internet subscribership on tribal lands because there are not  enough tribal land households in the sample to provide a reliable measure. FCC collects data on the deployment of advanced telecommunications  capability in the United States, but this data cannot be used to determine  Internet subscribership rates for tribal lands. Pursuant to section 706 of  the Telecommunications Act of 1996, FCC is required to conduct regular  inquiries concerning the availability of advanced telecommunications  capability for all Americans. To fulfill its mandate, FCC has issued four  reports,",
      " starting in January 1999, on the availability of advanced  telecommunications capability in the United States. To obtain data for  these reports, FCC requires service providers to report the total number of  high-speed lines (or wireless channels), broken down by type of  technology, for each state. For each of the technology subtotals, providers  also report additional detail concerning the percentage of lines that are  connected to residential users and a list of the zip codes where they have  at least one customer of high-speed service. Because the providers are not  required to report the total number of residential subscribers in each zip  code to whom they provide high-speed service,",
      " and because tribal lands do  not necessarily correspond to zip codes, this data cannot be used to  determine the number of residential Internet subscribers on tribal lands.  Finally, data on the availability of \u201cdial-up\u201d Internet access is not provided  in these reports for any areas in the country because it is not considered an  advanced telecommunications capability. The FCC has acknowledged that the zip code data present an elementary  view of where high-speed Internet service subscribers are located. In  particular, its data collection method does not fully describe some  segments of the population, such as Native Americans residing on tribal  lands. FCC has recognized that its section 706 data collection efforts in  rural and underserved areas need improvement to better fulfill Congress\u2019  mandate.",
      " Without current subscribership data, it is difficult to assess  progress or the impact of federal programs to improve telecommunications  on tribal lands. In a September 2004 letter to the Census Bureau, the FCC Chairman at that  time stated that in order to better implement section 706 of the  Telecommunications Act, FCC needs to know the rate of Internet  subscribership, and particularly, the rate of Internet subscribership in  smaller and more sparsely populated areas of the country, that would  include tribal lands. Given the limitations of the current Census Bureau and  FCC data collection efforts, FCC requested the Census Bureau add a  question to the ACS regarding Internet subscribership.",
      " The ACS is designed  to collect information for communities across the country, including small  geographic areas such as small towns, tribal lands, and rural areas. Both FCC and Census Bureau officials told us that if a question is added to  the ACS, it would provide Internet subscribership data for the nation and  smaller geographic areas. An FCC official also noted that a comparative  survey like the ACS, one that shows the differences of Internet  subscribership between tribal lands and other geographic areas, is far more  valuable than a survey that only collects Internet subscribership data on  tribal lands. Census Bureau officials mentioned to us, however, that there  are several methodological issues related to making changes to the ACS.",
      "  Because adding questions would lengthen the ACS and could result in a  reduced response rate, the Census Bureau\u2019s current practice is to add a  question to the ACS only if it is mandated by law. They told us that section  706 of the Telecommunications Act mandates that FCC, not the Census  Bureau, be responsible for collecting data on advanced  telecommunications. Therefore, Congress would need to pass legislation  mandating that the Census Bureau collect Internet subscribership data.  FCC officials told us that currently it is not clear whether FCC will pursue  collection of Internet subscribership data. Native Americans Can  Benefit from Several  General and  Tribal-Specific Federal  Programs to Improve  Telecommunications  Services The Department of Agriculture\u2019s Rural Utilities Service (RUS)",
      " and FCC are  responsible for several programs designed to improve the nation\u2019s  telecommunications infrastructure and make services affordable for all  consumers. RUS\u2019s programs focus on rural telecommunications  development, while FCC\u2019s universal service programs focus on providing  support for areas where the cost of providing service is high, as well as for  low-income consumers, schools, libraries, and rural health care facilities.  All of these general programs can benefit tribal lands and Native American  consumers. In addition, FCC has recognized the need to make special  efforts to improve tribal telecommunications by establishing additional  support programs specifically aimed at benefiting tribal lands and their  residents. Issues have arisen,",
      " however, over some aspects of how eligibility  for FCC\u2019s universal service programs is determined with regard to tribal  lands. General Programs Available  to Improve  Telecommunications  Services for Tribes Federal efforts to expand telephone service in underserved areas date back  to 1949 when the Rural Electrification Administration was authorized to  loan monies to furnish and improve the availability of telephone service in  rural areas throughout the United States. In 1994, RUS replaced the Rural  Electrification Administration. RUS programs provide support to improve  rural telecommunications infrastructure through grants, loans, and loan  guarantees. Eligible participants in the RUS grant,",
      " loan, and loan guarantee  programs include federally recognized tribes. The RUS grant, loan, and  loan guarantee programs can be used to improve telecommunications  infrastructure in rural areas, which include many of the tribal lands. Tables  1 and 2 provide a summary listing of these grant and loan programs and  eligible participants, along with recent funding levels. FCC also has several general programs to support improved  telecommunications services. FCC\u2019s universal service programs support  the longstanding goal of making communications services available \u201cso far  as possible, to all the people of the United States.\u201d The universal service  programs put in place in the 1980s focused on making telephone service  affordable for low-income consumers and areas where the cost of  providing service was high.",
      " The Telecommunications Act of 1996 extended  the scope of federal universal service support to make advanced  telecommunications services (such as high-speed Internet access)  available to eligible public and nonprofit elementary and secondary  schools, libraries, and nonprofit rural health care providers at discounted  rates. Universal service program operations are carried out by a  not-for-profit corporation, the Universal Service Administrative Company  (USAC), under FCC\u2019s rules and oversight. Table 3 lists key FCC universal  service programs and recent funding levels that could be used to improve  service on tribal lands in areas where the cost of providing service is high;  lower the cost of service to low-income individuals;",
      " and support  telecommunications services for local schools, libraries, and rural health  care centers. In addition to financial assistance, RUS and FCC\u2019s Wireless  Telecommunications Bureau established the VISION program in 2004 as a  joint policy initiative to provide technical assistance to improve the  provision of wireless broadband service in rural communities. VISION is  part of a larger Rural Wireless Outreach Initiative between RUS, FCC\u2019s  Wireless Telecommunications Bureau, and private industry, that is intended  to coordinate activities and information on financial and other assistance  regarding telecommunications opportunities for rural communities. The  program is designed to provide rural communities within the United States  and its territories with on-site regulatory,",
      " legal, engineering, and technical  assistance to identify barriers and solutions to providing wireless  broadband services to these communities. Thirteen tribal organizations  have applied for assistance from this program, though no awards had been  made as of October 2005. The General Services Administration\u2019s (GSA) Federal Technology Service  (FTS) 2001 contract provides telecommunications services to federal  agencies, the District of Columbia government, tribal governments, and  insular governments such as American Samoa, at discounted prices.  Several tribes, such as the Oneida Tribe of Indians of Wisconsin and the  Choctaw Nation of Oklahoma, have made use of the FTS 2001 contract to  improve the telecommunications infrastructure on their lands.",
      " FCC\u2019s Programs Targeted to  Tribal Lands and Residents Beginning in June 2000, FCC established additional support to improve  telecommunications infrastructure deployment and subscribership on  tribal lands. FCC took this step in recognition that Native American  communities have, on average, the lowest reported telephone  subscribership levels in the country. Enhanced Link-Up and Lifeline  Programs FCC\u2019s Enhanced Link-Up and Lifeline programs, which began in 2000,  provide additional discounts on the cost of telephone service for tribal and  nontribal residents of tribal lands who have incomes at or below 135  percent of the Federal Poverty Guidelines or who participate in one of  several federal assistance programs,",
      " such as food stamps or Medicaid.  Enhanced Link-Up provides qualified participants with one-time discounts  of up to 100 dollars on installation fees. Enhanced Lifeline provides  ongoing discounts on basic local telephone service that enable some  qualified participants to pay as little as 1 dollar a month. As with FCC\u2019s  other universal service programs, the service providers are reimbursed  from FCC\u2019s universal service fund for the discounts they give to the  programs\u2019 participants. Tables 4 and 5 list the number of Enhanced Link-Up  and Lifeline participants (both Native American and nonnative American  residents of tribal lands) and the amount of support distributed between  June 2000 and December 2004.",
      " At present, service providers file quarterly data forms with USAC that are  used in reimbursing them for the discounts they give to their subscribers  through the Link-Up and Lifeline programs. This data can be broken out by  state, but not by tribal land, because the reporting form does not ask  service providers to indicate the number of participants and amount of  funding by tribal land. State-level data, however, has limited use in  measuring the performance of these programs with respect to individual  tribal lands. Nearly all the states containing tribal lands have more than one  of them, as shown earlier in figure 1, so their data is a sum total of multiple  tribal lands.",
      " Moreover, some tribal lands extend across state lines. The  Navajo Nation\u2019s land, for instance, crosses the borders of Arizona, New  Mexico, and Utah; and the Standing Rock Sioux\u2019s tribal land crosses the  borders of North and South Dakota. Consequently, the participation and  funding data relevant to these tribal lands (and others like them) are split  among the data of multiple states. Because FCC does not have data on  program participation and funding by individual tribal land, some basic  questions cannot be answered: what percentage of residents of particular  tribal lands are benefiting from the programs and how have the  participation rates on individual tribal lands changed over time?",
      " At one point, FCC took steps to obtain more detailed program data. When  the Enhanced Link-Up and Lifeline programs were established in 2000, the  Commission directed one of its bureaus to revise, as necessary, the form  used by service providers for the general Link-Up and Lifeline programs  already in operation. In June 2003, FCC sought comment on changes to its  Lifeline program, including the collection of additional data, and made  revisions to the form. In December 2003, FCC received approval from the  Office of Management and Budget for the revised form, which included  requiring service providers to list the number of their Enhanced Lifeline  subscribers by individual tribal land.",
      " However, in spring 2004, some service  providers met with FCC officials to voice concerns that the collection of  such information would be difficult to implement into their billing systems,  but did not provide specific cost estimates for its implementation. In March  2005, FCC indefinitely suspended the use of the revised form due to these  concerns. Tribal Land Bidding Credit  Program FCC\u2019s Tribal Land Bidding Credit program is designed to provide incentives  for wireless providers to deploy wireless services across tribal lands. FCC  is authorized to auction radiofrequency spectrum to be used for the  provision of wireless services in the United States. Under the Tribal Land  Bidding Credit program,",
      " FCC reduces the cost of a radiofrequency  spectrum license to a winning bidder in a spectrum auction if the bidder  agrees to deploy facilities and provide telecommunications service to  qualifying tribal lands. The agreement includes constructing and operating  a wireless system that offers service to at least 75 percent of the population  of the tribal land area covered by the credit within 3 years of the grant of  the license. Tribal lands with telephone subscribership below 85 percent  are eligible for the program. The program began in 2000, with the first credits awarded in 2003. In total,  the program has awarded credits to six licensees who have pledged to  deploy facilities and provide telecommunications services to 10 tribal  lands.",
      " Most of the credits to date have been awarded to two licensees for  providing service on three tribal lands. Table 6 lists the dollar value of tribal  land bidding credits awarded through April 2005. At present, it is unclear what the program\u2019s long-term impact will be in  creating a significant incentive to deploy wireless service on tribal lands.  FCC has acknowledged that the program is underutilized by service  providers, attributing this to economic and technical factors. Several  industry and tribal stakeholders expressed concerns that the program has a  limited ability to improve service on tribal lands. These stakeholders stated  that the main problem with the program is that tribal land bidding credits  deal with the least expensive cost element of providing wireless service to  tribal lands:",
      " the spectrum license. In fact, they said that spectrum to serve  tribal lands can be acquired more economically through spectrum leasing  arrangements with other licensees than through the Tribal Land Bidding  Credit program. In their view, the main barrier to deploying wireless  service on tribal lands is the high cost of network infrastructure, such as  cellular towers. During 2006, FCC will have an opportunity to begin  reviewing the actual effect of the program. By then, licensees who received  Tribal Land Bidding Credits in 2003 are supposed to have met the  requirement to cover 75 percent of the tribal land area for which their  credit was awarded.",
      " Indian Telecommunications  Initiative In spring 2002, FCC established the Indian Telecommunications Initiative  (ITI) to provide assistance to improve telecommunications services on  tribal lands. The Initiative\u2019s strategic goals are to improve tribal lands\u2019  telephone subscribership rates, increase the telecommunications  infrastructure, and inform consumers about the financial support available  through federal programs, such as the universal service programs. ITI also  seeks to promote understanding, cooperation, and trust among tribes,  government agencies, and the telecommunications industry to address  telecommunications issues facing tribal lands. Since its inception, ITI has organized several informational workshops to  provide tribes and tribal organizations with information about federal  telecommunications programs such as Enhanced Lifeline and Link-Up.",
      " ITI  has also used these workshops to disseminate information about FCC rules  and policies that affect the deployment of telecommunications services on  tribal lands, such as cellular tower siting procedures. FCC senior officials  and other staff also attend and participate in a variety of meetings on  telecommunications issues with tribal officials. FCC has also distributed  educational materials to tribes and tribal organizations about its universal  service programs and other issues of interest. Some Issues Involving  Tribes Have Arisen with  Respect to Federal  Universal Service Programs The implementation of universal service programs is largely the joint  responsibility of federal and state government. However, the sovereign  status of tribes raises unique issues and concerns.",
      " Service providers, tribal  officials, and others have cited two specific areas of concern. One involves  FCC\u2019s process to determine whether the FCC has jurisdiction to designate  service providers as eligible to receive universal funds for serving tribal  lands. A second is related to the statutory limitations of tying the eligibility  for universal service funding under the E-rate program for tribal libraries to  state Library Services and Technology Act funds. Designation of Eligible  Telecommunications Carriers Some stakeholders we spoke with emphasized that deployment of services  on tribal lands, particularly by wireless carriers, might be improved if FCC  had a more timely process for determining its jurisdiction to designate a  provider wanting to serve tribal lands as an Eligible Telecommunications  Carrier (ETC). As defined by the Communications Act,",
      " service providers  must be designated as an ETC in order to participate in FCC\u2019s universal  service programs. The Act gives the individual states the primary  responsibility for designating ETCs. Initially, the Act made no provision for  cases where a service provider might not be subject to state jurisdiction,  such as those operating on tribal lands. In 1997, Congress amended the Act  by requiring FCC to determine a service provider\u2019s eligibility to receive  federal universal service funds in cases where a state lacks jurisdiction to  make an ETC determination. In response, FCC developed a process by  which a service provider seeking ETC status for serving a tribal land may  petition the Commission to determine whether the provider is subject to  the state commission\u2019s jurisdiction.",
      " If the FCC finds that the state does not  have jurisdiction, FCC can make the ETC determination. To date, FCC has received ten applications for ETC designations involving  tribal lands. Six of the applications were from tribally-owned wireline  service providers, and four were from non-tribally-owned wireless service  providers. FCC provided the tribally-owned wireline providers with ETC  status within a few months of their application. Two different non-tribally  owned wireless service providers petitioned FCC for ETC designation on  three separate tribal lands. As indicated in table 7, FCC granted one of  these three petitions in 10 months.",
      " Another was withdrawn by the provider  after more than three years with no FCC decision, while the third has been  pending at FCC for more than 3 years. FCC has noted that determining whether a state or FCC has ETC  jurisdiction regarding a tribal land is \u201ca legally complex and fact specific  inquiry, informed by the principles of tribal sovereignty, federal Indian law,  treaties, as well as state law.\u201d When we asked about the long timeframes  involved with the first and third items in table 7, FCC officials explained  that they must conduct a case-specific inquiry for each application to  determine whether the Commission has the authority to make an ETC  designation.",
      " In its 2001 Western Wireless decision, FCC noted that it would  resolve the Western Wireless ETC decision in light of the guidance  provided by the Supreme Court in Montana v. United States, 450 U.S. 544  (1981). This case sets out the guiding principle that Indian tribes lack  jurisdiction to regulate nonmembers on the reservation, but it recognized  two exceptions. Applying this framework to the service agreement  between the Oglala Sioux Tribe and Western Wireless, FCC granted  Western Wireless ETC status over its service to tribal members living  within the Pine Ridge reservation. FCC has not issued any further guidance on how it will make its ETC  decisions on tribal lands.",
      " FCC officials told us that the information needed  to make a determination may change from application to application. They  said that they try to complete these designations in a timely fashion, but  applicants may not provide sufficient information, and staff normally  dedicated to these issues may need to focus on other issues facing FCC. In  2000, FCC sought public comment on the creation of a 6-month timeline for  the resolution of jurisdictional issues surrounding an ETC designation on  tribal lands. However, in 2003 FCC formally decided against creating this  timeline because determining FCC\u2019s jurisdiction over ETC designation on  tribal lands \u201cis a legally complex inquiry that may require additional time to  fully address.\u201d Tribal Libraries\u2019 Eligibility for   E-rate Funding Some tribal officials we spoke with emphasized the importance of tribal  libraries as a means for members to have Internet access and expressed  concern about their difficulty in obtaining E-rate funding for their libraries.",
      "  Under current eligibility requirements, tribal libraries can apply for  universal service fund support through the E-rate program provided they  meet eligibility requirements. The Communications Act defines E-rate  eligible libraries as those eligible for assistance from a state library  administrative agency under the Library Services and Technology Act  (LSTA), which provides federal grant funds to support and develop library  services in the United States. LSTA has two types of library grants that  primarily relate to governmental entities: one for states and one for  federally recognized tribes and organizations that primarily serve and  represent Native Hawaiians.To be eligible for E-rate funds, a tribal library  must be eligible for state LSTA funds and not just tribal LSTA funds.",
      " The eligibility criterion has practical implications for tribal libraries.  Although we did not survey all the states on this issue, officials in two  states told us that their state laws preclude tribal libraries within their  states from being eligible to receive state LSTA funds, which has the effect  of making them ineligible to receive E-rate funds. Officials in Oklahoma  said that only county and city libraries are eligible for state funding such as  LSTA monies. Tribal libraries are not county or city libraries and therefore  not eligible for Oklahoma\u2019s state LSTA funds. One former tribal librarian in  Oklahoma told us that she did not apply for E-rate funding because the  state library administrative agency provided her with documentation  indicating that the tribe was not eligible for state LSTA funds.",
      " Montana  officials told us that their state law also has similar limitations regarding  tribal libraries\u2019 eligibility for state LSTA funds. The eligibility criterion also has practical implications for the E-rate  program. Libraries applying for LSTA funds must self-certify their  eligibility. As part of its integrity process, USAC requires a third party  verification of the eligibility requirement. Thus, USAC verifies a library\u2019s  eligibility for E-rate funds by asking state library administrative agencies to  provide written certification of a library\u2019s eligibility for state LSTA funds.  This process has prompted a number of comments from several of those  we interviewed. Some tribal and state library agency officials noted that the  current eligibility criterion infringes on tribal sovereignty by involving the  state in tribal library E-rate funding.",
      " One state librarian, for example,  expressed discomfort at being put in the position of acting on behalf of a  sovereign tribe and expressed the strong belief that eligibility for E-rate  funding should be a matter between the tribe and USAC, without  involvement by state government agencies. USAC officials told us that they  have received some E-rate applications from tribal libraries. In those  cases, a USAC board member successfully worked with the states in  question to obtain the certifications. However, USAC officials and the  USAC board member emphasized the time-consuming nature of these  resolution efforts. In fall 2002, FCC, USAC,",
      " and the Institute of Museum and Library Services  (IMLS) officials met to discuss possible remedies for this situation. These  discussions produced a consensus that a change to the E-rate eligibility  requirement for libraries defined in the Communications Act could  facilitate tribal libraries\u2019 eligibility for E-rate funding. These discussions  focused on a modification to the Act that would allow tribal libraries  eligible for funding from either a state library administrative agency or  tribal government under the LSTA to be eligible for funding under the  E-rate program. FCC officials told us that modifications to the Act would  require legislative action by the Congress, because such modifications  cannot be made by FCC through a Commission order or administrative  proceeding.",
      " Multiple Barriers Exist  to Improving  Telecommunications  on Tribal Lands Tribal and government officials, Native American groups, service  providers, and other entities we interviewed cited several barriers to  improving telecommunications on tribal lands. The two barriers most often  cited by officials of the tribes and Alaska regional native non-profit  organizations we interviewed were the rural location and rugged terrain of  tribal lands and tribes\u2019 limited financial resources. The third most often  cited barrier was a lack of technically trained tribal members to plan and  implement improvements in telecommunications. A fourth barrier cited by  tribal officials and other stakeholders is the complex and costly process of  obtaining rights-of-way for deploying telecommunications infrastructure  on tribal lands.",
      " Rural Location and Limited  Financial Resources Were  the Most Often Cited  Barriers The rural location and rugged terrain of most tribal lands and tribes\u2019 limited  financial resources were the barriers to improved telecommunications  most often cited by officials of tribes and Alaska Native Villages we  interviewed. These two barriers were also cited by representatives of  service providers and federal agencies. These two barriers are interrelated,  can deter providers from investing in infrastructure on tribal lands, and  contribute to the low levels of subscribership on many tribal lands. Tribal lands are mostly rural and characterized by large land areas, rugged  terrain such as mountains and canyons,",
      " low population density, and  geographic isolation from metropolitan areas. Figure 4, from the Pine Ridge  Indian Reservation in South Dakota, illustrates some of these  characteristics. Generally, these factors make the cost of building and maintaining the  infrastructure needed to provide service higher than they would be in  urban settings. For example, more cable per customer is required over  large, sparsely populated areas, and when those areas are mountainous, it  can be more difficult and costly to install the cable. The Rural Task Force,  formed by the Federal-State Joint Board on Universal Service,  documented the high costs of serving rural customers in a report issued in  January 2000,",
      " which stated that the average telecommunications  infrastructure cost per customer for rural providers was $5,000, while the  average infrastructure cost per customer for non-rural providers was  $3,000. Officials from 17 tribes and 11 Alaska regional native non-profit  organizations we interviewed told us that the rural location of their tribe is  a telecommunications barrier. Tribes\u2019 limited financial resources are also seen as a barrier to improving  telecommunications services on tribal lands. Many tribal lands\u2014including  some of those we visited such as the Navajo, the Mescalero Apache, the  Yakama and the Oglala Sioux\u2014have poverty rates more than twice the  national rate,",
      " as well as high unemployment rates. The 2000 U.S. Census  showed that the per capita income for residents on tribal lands was $9,200  in 1999, less than half the U.S. per capita income of $21,600. Officials of 33  of the 38 Native American entities we interviewed told us that lack of  financial resources was a barrier to improving telecommunications  services. Several of these tribal officials told us that their tribal  governments must use their tribes\u2019 limited financial resources on other  priorities such as water and sewer lines, housing, and public safety. In  addition, high levels of poverty on many tribal lands may also make it less  likely that tribal residents will subscribe to those telephone and Internet  services that are available,",
      " particularly when geographic barriers have  increased the costs of those services. For example, a Yakama Nation tribal  official told us that many residents cannot afford a computer or Internet  access; some cannot even afford telephone service. These two factors, the rural location of tribal lands (which increases the  cost of installing telecommunications infrastructure) and tribes\u2019 limited  financial resources (which can make it difficult for residents and tribal  governments to pay for services) can combine to deter service providers  from making investments in telecommunications on tribal lands. This lack  of investment can result in a lack of service, poor service quality, and little  or no competition.",
      " With regard to a lack of service, an official with the  Yakama Nation told us that while many tribal residents in the more heavily  populated areas have access to telephone service, the tribe\u2019s service  provider has not built additional infrastructure to reach less populated  areas and has no plans to do so in the near future. A representative of the  company that provides service to the Coeur d\u2019Alene tribe told us that  high-speed Internet was only available in certain areas of the Coeur d\u2019Alene  tribal land, that there were no immediate plans to expand the service area,  and that there were cost issues in providing service to the more remote and  less densely populated parts of the reservation.",
      " Another provider\u2019s  representative told us that providing digital subscriber lines (DSL) to  most parts of the Eastern Band of Cherokee\u2019s reservation would not be  profitable because the land is rugged and to connect many of those who  live out in remote rural areas would require an investment that would be  difficult to justify. With regard to service quality, of the 38 tribes and tribal  representatives we interviewed, 9 mentioned service quality as a barrier to  improved telecommunications. One tribe told us that their local provider  has no local service office and few technicians, so that the company may  take days to repair or respond to a problem. With regard to the lack of  competition,",
      " officers of 2 tribes told us that because there is only 1  provider, they have no choice but to pay the prices being charged for  services, even though they think the prices are too high. Lack of Technically-Trained  Tribal Members Can Impede  Planning and Was the Third  Most Commonly Cited  Barrier The third barrier most commonly cited by tribal representatives was the  lack of tribal members trained in or knowledgeable about  telecommunications technologies. Officials of 13 of the 38 Native American  tribes and tribal organizations we interviewed told us that lack of  telecommunications training and knowledge among tribal members is a  barrier to improving their telecommunications.",
      " Some of these officials said  they needed more technically trained members to plan and oversee the  implementation of telecommunications improvements, as well as to  manage existing systems. For example, one tribal official told us that he is  currently understaffed and is running a multi-tribe wireless network with  just one other person. Another tribal official told us that there is only one  tribal member with formal training in telecommunications and that the  tribe needs a well trained person to take charge of the tribe\u2019s  telecommunications needs. An official of the Coeur d\u2019Alene tribe, who has  technical training, told us that the tribe does not have a sufficient number  of technically knowledgeable staff members to develop and maintain  needed telecommunications systems.",
      " The same Coeur d\u2019Alene tribal official also told us that tribes without  technically trained staff would be at a disadvantage in negotiating with  service providers. This official added that having tribal members trained in  telecommunications was necessary to ensure that a tribe\u2019s planned  improvements included the equipment and technology the tribe wanted  and needed. In addition, one non-tribal stakeholder mentioned that a lack  of training prevented tribes from choosing appropriate technologies for  their specific needs. One industry stakeholder mentioned that tribes  needed a better understanding of the range and capacity of shared  spectrum wireless technology so they would not be disappointed by its  limitations.",
      " A 1995 Office of Technology Assessment study of  telecommunications on tribal lands stated that most Native American  reservations, villages, and communities would benefit from developing a  plan or vision of how telecommunications could best meet their  educational, health, economic development, and cultural needs. In 1999,  the Department of Commerce estimated that very few tribes had  telecommunications plans. Of the 38 tribes and tribal organizations we  interviewed, 14 told us they have some type of technology plan and 7 more  said they had a plan in development. Industry stakeholders also told us that having tribal staff knowledgeable in  telecommunications policies improves the process of deploying services on  tribal lands.",
      " One service provider told us that if tribes delegated  telecommunications decisions to a tribal governmental committee, the  company could provide service more effectively and efficiently. Instead,  when a company has to bring telecommunications decisions before the full  tribal council, the process can be very time consuming because the full  tribal council meets infrequently and telecommunications issues are often  not at the top of the agenda. Another provider told us that having staff  knowledgeable in telecommunications policies and procedures, such as  rights of way and contract issues, allows providers to more quickly and  effectively deploy services because time is not spent negotiating over  unfamiliar terms. Rights-of-Way Issues Were  Also Cited as a Barrier to  Improved  Telecommunications  Services on Tribal Lands According to several service providers and tribal officials,",
      " obtaining a  right-of-way through Indian lands is a time-consuming and expensive  process that can impede service providers\u2019 deployment of  telecommunications infrastructure. The right-of-way process on Indian  lands is more complex than the right-of-way process for non-Indian lands  because BIA must approve the application for a right-of-way across Indian  lands. BIA grants or approves actions affecting title on Indian lands, so all  service providers installing telecommunications infrastructure on Indian  lands must work with BIA or its contractor (realty service provider) to  obtain a right-of-way through Indian lands. To fulfill the requirements of  federal regulations for rights-of-way over Indian lands and obtain BIA  approval,",
      " service providers are required to take multiple steps and  coordinate with several entities during the application process. These steps  must be taken to obtain a right-of-way over individual Indian allotments as  well as tribal lands. Several of the steps involve the landowner, which could  be an individual landowner, multiple landowners, or the tribe, depending  on the status of the land. For example, the right-of-way process requires a)  written consent by the landowner to survey the land; b) an appraisal of the  land needed for the right-of-way; c) negotiations with the landowner to  discuss settlement terms;",
      " d) written approval by the landowner for the  right-of-way; and e) BIA approval of the right-of-way application. Service providers told us that a lack of clarity in federal regulations for  rights-of-way over Indian lands can also slow down the right-of-way  approval process. During the right-of-way approval process, BIA has a  responsibility to ensure that the right-of-way suits the purpose and size of  the equipment being installed on the land. However, federal regulations do  not have guidance or descriptions for advanced telecommunications  infrastructure, which would assist BIA in evaluating telecommunications  rights-of-way applications. According to a Department of the Interior  official,",
      " descriptions and guidance for advanced telecommunications  infrastructure are absent because the regulations were created prior to the  advent of modern telecommunications equipment. For example, the federal  regulations have guidance and descriptions for the size of the right-of-way  needed and voltage levels of electrical equipment that can be installed for  commercial purposes, but similar descriptions and guidance are not  available for advanced telecommunications rights-of-way. According to  service providers, this lack of clarity can cause grey areas for BIA when it  attempts to classify the type of advanced telecommunications  infrastructure the service provider intends to install and whether it is for  commercial or residential purposes. This adds time to the right-of-way  approval process because BIA has to determine if the regulations allow for  the installation of the applicant\u2019s infrastructure.",
      " A BIA official  acknowledged that portions of the federal regulations, including the  section on telecommunications infrastructure, are outdated. As a result,  BIA is currently revising the regulations to better apply to modern utility  technologies, including advanced telecommunications infrastructure, but  timeframes for completion of this work have not been established. As mentioned above, BIA requires that service providers obtain approval  from the individual landowner or the tribe for a right-of-way. Service  providers told us that obtaining landowner consent for a right-of-way  across an individual Indian allotment is time consuming and expensive,  which can delay or deter deployment of telecommunications infrastructure  on tribal lands.",
      " For example, one service provider told us that an individual  Indian allotment of land can have over 200 owners, and federal regulations  require the service provider to gain approval from a majority of them. The  official stated that the time and cost of this process is compounded by the  fact that a telecommunications service line often crosses multiple  allotments. In addition, if the service provider cannot obtain consent for  the right-of-way from the majority of landowners, the provider is forced to  install lines that go around the allotment, which is also expensive. Tribes Are Addressing  Barriers to Improved  Telecommunications in  Different Ways Several tribes are moving towards owning or developing part or all of their  own telecommunications systems to address the barriers of tribal lands\u2019  rural location and rugged terrain and tribes\u2019 limited financial resources,",
      "  which can deter service providers from investing in telecommunications on  tribal lands. These tribes are using federal grants, loans, or other  assistance, long-range planning, and private-sector partnerships to help  improve service on their lands. In addition, some tribes have addressed  these barriers by focusing on wireless technologies, which can be less  costly to deploy across large distances and rugged terrain. Some tribes are  addressing the shortage of technically-trained tribal members to plan and  implement improvements on tribal lands through mentoring and  partnerships with educational institutions. To help reduce the time and  expense required to obtain a right-of-way across tribal lands, one tribe is  developing a right-of-way policy to make the tribal approval process more  timely and efficient.",
      " Several Tribes Are Moving  Towards Developing Their  Own Telecommunications  Systems to Address Multiple  Barriers From our interviews of officials of 26 tribes and 12 Alaska regional native  non-profit organizations, we found that 22 are addressing the need to  improve their telecommunications services by developing or owning part  or all of their own local telecommunications network. Some of those we  spoke to told us that they were doing this because their provider was  unwilling to invest in improved telecommunications services, in part due to  the barriers of the tribe\u2019s rural location, rugged terrain, and limited  financial resources. An additional 10 tribes told us that they have  considered or are considering owning part or all of their  telecommunications systems.",
      " Four of the 6 tribes we visited are developing their own  telecommunications systems to address the lack of investment by  telecommunications companies. These tribes are addressing their limited  financial resources to fund telecommunications improvements by one of  three methods. Two of the 4 have obtained federal funds, another has  reduced its use of services from the current provider to help fund its own  system, and a fourth tribe has partnered with a local business also  adversely affected by poor telecommunications service. Two of these tribes  also told us that they have been able to provide better service and lower  prices than the incumbent provider because they are more concerned  about providing service than about making a profit.",
      " Coeur d\u2019Alene Tribe The Coeur d\u2019Alene Tribe in Idaho is using an RUS grant to overcome its  limited financial resources and develop its own high speed wireless  Internet system. Tribal officials told us that the wireline service provider  for the Coeur d\u2019Alene Tribe had not deployed the necessary equipment to  offer high speed Internet access to all residents on tribal lands because  deploying the equipment was not profitable. (An official of the service  provider told us that high speed Internet was only available in certain  areas, that there were no immediate plans to expand the service area, and  that there were cost issues in expanding service to the more remote and  less densely populated parts of the reservation.) The tribe applied for an  RUS Community Connect Broadband grant to purchase and deploy a  wireless system to provide high-speed Internet access to all residents of the  tribal land.",
      " This type of grant can be used for expenditures for a wide array  of infrastructure and related needs, including necessary equipment that  many tribal members cannot afford. For example, the grant allows for the  purchase of equipment required to connect households and businesses to  the wireless system, and for the construction of a community technology  center for training and Internet access. The grant is being used to fund 5  towers to ensure that the wireless system reaches all populated Coeur  d\u2019Alene lands, as well as fiber optic cable, technical staff, and operational  costs. The grant will make high-speed Internet access available to all  residents at the Community Technology Center,",
      " shown in figure 5, at no  cost, and high-speed Internet access to homes and businesses will be  available for purchase. The grant will also provide tribal members training  in computer use and maintenance. Tribal officials told us that after the first  2 years of operation, they expect to earn sufficient revenue from system  subscribers to fund needed maintenance and improvements. The Mescalero Apache in New Mexico used RUS loans to overcome  financial barriers and establish their own telecommunications company.  The tribe also borrowed equipment from an equipment manufacturer until  it was able to purchase its own. Tribal officials told us that their former  service provider had not invested adequate funds in the  telecommunications network on Mescalero Apache tribal lands to provide  high quality voice or data services.",
      " They added that, as a result, telephone  service was poor and high quality voice and data services, such as Internet  access, were not widely available. The Mescalero Apache Tribal  Government purchased the telecommunications network from the local  telephone company that had been providing service on the tribal land. The  tribe formed Mescalero Apache Telecommunications, Inc. (MATI) to  develop this network and directed the company to focus on providing  services to all Mescalero Apache lands and not just on maximizing profit.  MATI then rebuilt the system, putting in more than 1,000 miles of fiber-optic  cable and providing high-speed Internet access as well as local and long  distance telephone service.",
      " According to a MATI official, telephone and  high-speed Internet access, such as DSL, are now nearly universally  available within reservation boundaries. MATI has deployed various  high-speed Internet access services to tribal businesses and schools. Figure  6 shows the Mescalero Apache School computer lab which utilizes  MATI-provided Internet connectivity. The Yakama Nation in Washington established a long-range plan to  overcome its financial barriers by using funds saved over the past few years  through reduction of the tribal government\u2019s use of telecommunications  services from its provider. The tribe is using these savings to develop its  own telecommunications system to provide telephone and high-speed  Internet access.",
      " The tribe is also using monies from the negotiation of  utility rights-of-way. The tribal government made the decision to develop its  own telecommunications company several years ago, partly in response to  the increase in monthly telecommunications charges levied by the local  provider, which raised the tribe\u2019s annual cost from $275,000 to $325,000. At  that time, the tribe put together a long-range plan that required the tribe to  reduce its use of the current provider\u2019s services, and use the resulting  savings to develop its own system. A tribal official told us that long-range  financial planning and careful budgeting have been important to the tribe\u2019s  success and that infrastructure has been purchased or installed each year  based on what the tribe could afford.",
      " Since 1998, the tribe has used annual  savings from reduced telephone services and funds from other services to  establish a telecommunications company, and then purchase related  equipment. The tribe was able to purchase this fiber optic cable at 25  percent of its retail price and negotiated with a local contractor to install  the fiber at a price far below the market rate. The tribe plans to sell the  equipment necessary to connect to the new telecommunications system to  tribal members and tribal businesses. Eastern Band of Cherokee The Eastern Band of Cherokee in North Carolina overcame financial  barriers by partnering with another local business to build a fiber optic  cable network throughout and beyond its tribal lands to provide high-speed  Internet access and transport.",
      " The Eastern Band of Cherokee\u2019s tribal lands  are located in the Smokey Mountains and are geographically isolated from  major metropolitan areas that have Internet access points. As a result, it is  expensive to connect infrastructure in the area to the nearest high-speed  Internet access points. A tribal official told us that the tribe\u2019s service  provider did not expand or upgrade the telecommunications infrastructure  on tribal lands because the provider did not find the additional investment  in infrastructure to be profitable. (The provider representative told us that  providing DSL to most parts of the reservation would not be profitable as  the land is rugged and rural, and to connect many of those who live out in  remote rural areas would require an investment that would be difficult to  justify.) A tribal official told us that one example of the poor service quality  is an outage that occurred within the past year.",
      " All communications  services were unavailable for 48 hours in 6 counties because a cut was  made in the company\u2019s copper wire. Since the system has no backup  provision, there was no service until the cut was repaired. The Cherokee  told us their casino lost millions of dollars during the outage, and that the  loss for the region as a whole was estimated at $72 million. To improve  service and offer residents on tribal lands high-speed Internet access, the  tribe partnered with a local corporation that provides electronic income  tax filing services, and had also suffered financial loss from the recent  outage. Together, the tribe and the corporation are constructing a fiber  optic cable network,",
      " both on and off tribal lands. Figure 7 shows fiber  being deployed for this network. The Eastern Band of Cherokee and their  partner have formed a company that will act as both a wholesaler and a  retailer of telecommunications services. A company official told us that  because of the cost of putting in the fiber and the low density of the service  area, a private, for-profit company would never have made this level of  investment. Officials of the tribe and the company told us that the tribe will  use its ownership in these networks and future planned deployment of  cable and wireless infrastructure to ensure that all residents of tribal lands  can receive high-speed Internet,",
      " VoIP (Voice over Internet Protocol), and  other information and content applications at costs and quality levels  comparable to or better than metropolitan areas. Some Tribes Have Focused  on Wireless Technologies to  Address Barriers of Rural  Location and Rugged  Terrain and Limited  Financial Resources Several tribes we interviewed have focused their efforts on wireless  technologies to help address the barriers of tribal lands\u2019 rural, rugged  location and tribes\u2019 limited financial resources, with funding for these  efforts coming from both public and private sources. Service providers and  equipment manufacturers told us that wireless service is often less  expensive to deploy across large distances than wireline service because  wireless infrastructure,",
      " such as a tower, is less expensive to deploy than a  wireline infrastructure. Examples of tribes focusing on wireless technologies include the following:   Several tribes have deployed shared spectrum wireless networks to  provide high-speed Internet access. For example, the Southern  California Tribal Chairman\u2019s Association (SCTCA), a consortium of 17  federally recognized tribes, received a grant from a private foundation to  establish a wireless network, called the Tribal Digital Village Network  (TDVNet), to provide high-speed Internet access to all 17 tribes. SCTCA  tribes are located in Southern California in remote and hilly terrain and  scattered across 150 square miles.",
      " In addition to its low cost, TDVNet  utilizes shared spectrum technologies because the equipment can  operate on solar power. This is particularly important in remote areas  where electrical power may not be available. TDVNet staff are also  developing Voice over Internet Protocol (VoIP) capabilities to provide  telephone service over high-speed Internet access in those tribal  communities where the deployment of wireline service is cost  prohibitive. The Coeur d\u2019 Alene and the Washoe Tribe of Nevada and  California are deploying similar networks. Service provider officials in Alaska told us that satellite  telecommunications systems are the only telecommunications options  to provide telephone service for many Alaska Native Villages because  the vast distances from these areas to existing infrastructure make  wireline systems too expensive to install.",
      " A major Alaska service  provider is utilizing a combined satellite and shared spectrum wireless  network to extend high-speed Internet access to many Alaska Native  Villages. In addition, 2 tribes we visited addressed their need for improved  telecommunications services by encouraging wireless companies to  compete with wireline providers for customers on their lands. In both  cases, the wireless companies have obtained status as an ETC and are able  to obtain universal service funds, particularly the High Cost Fund and  Enhanced Lifeline and Enhanced Linkup, to profitably provide service in  these areas. Oglala Sioux The Oglala Sioux in South Dakota encouraged a wireless company to  provide service in the area in order to improve services and reduce the cost  of telephone service to the tribal land customers.",
      " According to tribal and  wireless service provider officials, the key to developing this solution was  the wireless provider\u2019s ability to use universal service funds to help  subsidize the costs of its network and offer discounted telephone service to  tribal land residents. To access universal service funds, the wireless  provider, with consent from the tribe, applied to FCC for ETC status, which  was granted in 2001, enabling the wireless provider to access universal  service funds. The tribe also worked with the provider to create an  expanded local calling area that included all areas of the reservation and  the town of Rapid City, South Dakota. According to a tribal official,",
      " the  addition of Rapid City, South Dakota, as part of the local calling area was  an important cost-saving measure for the tribe because a significant  number of Oglala Sioux live in the Rapid City area. According to tribal and service provider officials, this wireless service  allows tribal members to reach public safety services from nearly any  location on tribal lands. A tribal official said that this is particularly  important due to the tribe\u2019s large land area, remote location, and the  summer and winter weather extremes in the area. The tribal official also  told us that the wireless provider initially anticipated having about 300  customers on the Oglala Sioux\u2019s Pine Ridge Indian Reservation land,",
      " but  had about 4,000 customers within 1 year of offering service. Navajo Nation The Navajo government has encouraged 2 wireless providers to offer  services on Navajo lands in competition with wireline providers. The  Navajo Nation encourages providers to deploy wireless  telecommunications networks because providing wireline  telecommunications throughout the Navajo Nation is cost prohibitive due  to the tribe\u2019s large land area, which is about the size of West Virginia.  Census data indicate that residents on Navajo lands in Arizona, New  Mexico, and Utah are among the most economically distressed groups in  the United States. Tribal officials told us that competition is the best  method to lower prices and improve services.",
      " One wireless provider has  been able to access universal service funds to make service more  affordable. Officials from wireless companies told us that access to  universal service program funds combined with the use of less costly  wireless technologies provides a viable business case for entry onto Navajo  lands. Some Tribes Are Addressing  the Need for More  Technically-Trained Tribal  Members Through  Mentoring and Partnerships Some tribes we visited discussed ways they were developing technical  expertise in telecommunications, while others spoke of the importance of  the technical expertise they had, particularly in helping them plan for  telecommunications improvements. Addressing Need for More  Technically-Trained Tribal  Members Tribal,",
      " industry, and government stakeholders said that training in  telecommunications technologies provides tribal members with some of  the necessary skills to operate the tribes\u2019 own telecommunications  networks. Several tribal officials told us that having staff with the technical  expertise necessary to plan and manage telecommunications  improvements was critical to their efforts. However, less than half of the  tribal officials we interviewed told us that their tribes have developed  telecommunications plans or estimated the cost of planned improvements. One tribe that has taken steps to get needed technical training is the Coeur  d\u2019Alene Tribe. The tribe plans to provide two colleges with access to its  new high-speed Internet system in exchange for distance learning classes  and technical training.",
      " Similarly, the Yakama Nation has proposed to  connect a local university to its telecommunications system in exchange  for technical training for its staff. A Yakama official emphasized that having  trained staff to manage and maintain the telecommunications system once  it is operational is very important, and the tribe determined that this kind of  exchange with a local university would help provide the staff with the  necessary training. The Mescalero Apache Tribe has improved its technical capacity by hiring  technically trained staff, and has created a technical mentoring program.  MATI hired tribal and non-tribal members to operate its telephone  company. Although about half of MATI\u2019s staff consists of non-",
      "tribal  members, tribal officials expect to hire more tribal members as they  receive the necessary training. Many of the employees who are not tribal  members are experienced and technically proficient. MATI has created a  mentoring program partnering the experienced and technically trained  employees with newer employees. The goal is to create a self-sufficient  tribal staff with the knowledge to understand and operate a  telecommunications network. In addition, the company offers technical  consulting services to other tribes that are interested in providing their own  telecommunications network. MATI also hosts an annual telecommunications conference for tribes and  municipal governments to inform them about the basics of  telecommunications finance and technology.",
      " In addition, MATI has used its  technical expertise to explore new ways to deploy telecommunications  services. Figure 8 shows MATI\u2019s Voice over Internet Protocol service  platform that it utilizes as a means to send voice conversations over the  Internet. To address the current lack of computer and Internet knowledge among its  tribal members, the Coeur d\u2019Alene Tribe plans to provide training and  Internet access at the Community Technology Center as long as their  budget permits. Those attending training will be assisted by the recently  hired technical staff in repairing and refurbishing computers that belonged  to tribal offices, and will be allowed to keep the computers for home use  once the work is complete.",
      " The Yakama Nation and Eastern Band of  Cherokee also plan to train tribal members in computer and Internet use at  an existing tribal technology center. Using Technical Expertise for  Effective Planning Officials of several tribes told us that having staff with technical expertise  was critical to their efforts to plan their telecommunications. For example,  a tribal official of the Rincon Band of Luiseno Mission Indians of the  Rincon Reservation, told us that a tribal member with technical knowledge  determined the need for improved Internet access and identified the  appropriate technology (wireless broadband). He also identified a funding  opportunity to bring high-speed Internet access to 17 Southern California  tribes,",
      " most of which did not have Internet access because of geographic  barriers and prohibitive infrastructure costs. Officials of 14 of the 38 tribes and tribal organizations we interviewed told  us that they have developed a technology plan. An official of the Coeur  d\u2019Alene Tribe told us that plans are important to ensure that tribes have  selected technologies that are appropriate for their tribal needs and  geography. All 6 of the tribes we visited are taking actions to improve their  telecommunications based on plans they developed. Most of the tribal officials we interviewed told us that their tribes do not  have cost estimates for improving telecommunications. The Coeur d\u2019Alene  tribal official told us that determining the cost of new systems and making  plans to pay for these improvements is important.",
      " This official added that  plans should not only include information about how to finance the system,  but should also describe the means to pay for training of staff so they will  have the technical expertise required to maintain and manage the current  or proposed system. For example, Yakama Nation and Coeur d\u2019Alene tribal  officials stated that they designed telecommunications systems that will  produce revenue from customers sufficient to pay for improvements,  maintenance, and technically trained staff. One Tribe is Developing a  Right-of-Way Policy to Make  the Tribal Approval Process  More Timely and Efficient Navajo Nation officials and service providers told us that the Navajo  Nation\u2019s right-of-way approval process is time consuming and expensive,",
      "  which has delayed or deterred the deployment of telecommunications  infrastructure on Navajo land. For example, an official from one service  provider told us that this tribal approval process impedes service because  the timeline for obtaining tribal council approval varies for each  right-of-way application, tribal departments can differ on the goals and  price of the right-of-way, and it takes extra time for these departments to  reach consensus. A Navajo official agreed that their right-of-way processes  can delay deployment of telecommunications infrastructure and increase  its cost because timelines vary for each application. Another official told us  that a major reason for this slow process is that tribal entities involved in  Navajo\u2019s internal rights-of-way process have different opinions on the goals  and price of telecommunications rights-of-",
      "ways. For example, some tribal  officials expect high up-front rights-of-way fees based on their experiences  for granting rights-of-way for natural resources like coal, which would  typically produce a higher revenue stream than telecommunications. To address this issue, Navajo officials are developing an approach to  reduce the time and expense required to obtain tribal consent for a  telecommunications right-of-way across their land. The Navajo Nation  Telecommunications Regulatory Commission (NNTRC) has drafted a  policy to streamline tribal consent for telecommunications rights-of-way.  (Figure 9 shows the NNTRC\u2019s headquarters in Window Rock, Arizona.) One  of NNTRC\u2019s functions is to decrease the barriers service providers  encounter while deploying telecommunications infrastructure on the land.",
      "  Through information gathering sessions between commissioners and  service providers, the commission determined that the Navajo process for  the approval of telecommunications rights-of-way needed to be changed  because the deployment of telecommunications services was being  delayed. In order for NNTRC to make changes to the Navajo right-of-way  process, the Tribal Council first granted NNTRC full authority over  telecommunications issues, such as rights-of-way for telecommunications  infrastructure. To address the barriers service providers encounter with the Navajo  right-of-way process, NNTRC drafted a policy that grants NNTRC the sole  responsibility for providing tribal approval for a right-of-way.",
      " This would  allow \u201cone stop shopping\u201d for the service providers, who would no longer  have to coordinate with multiple tribal departments and offices. According  to a Navajo official, this policy is currently being reviewed for approval by  several of their tribal government departments. Following this approval  process, NNTRC intends to implement this policy. In addition, NNTRC officials stated that there is a more feasible price  structure for telecommunications rights-of-way that better reflects the  market value of telecommunications rights-of-way. This price structure  would include an upfront payment covering the market value of the land  plus an additional percent of future earnings from the equipment.",
      " The  officials told us that this type of arrangement would assist the service  provider\u2019s business case because the provider would have to release less  capital in the beginning of the project, while offering telecommunications  services to Navajo residents. Once the infrastructure begins to produce a  revenue stream and has a viable business case, the Navajo Nation would  receive a percentage of these funds for the life of the infrastructure. Conclusions Under the principles of universal service, as established by Congress, FCC  has recognized the need to promote telecommunications deployment and  subscribership on tribal lands. Despite improvements in both deployment  and subscribership of telecommunications services, as of 2000,",
      " Native  Americans on tribal lands still lag significantly behind the rest of the nation.  The underlying cause of this problem is difficult to determine because of a  paucity of current information about both deployment and subscribership  of telecommunications for Native Americans on tribal lands. Moreover, this  lack of adequate data makes it difficult for FCC and Congress to assess the  extent to which federal efforts designed to increase telecommunications  deployment and subscribership on these lands is succeeding. One difficulty we found relates to a statutory provision in the  Communications Act which precludes some tribal libraries from benefiting  from a universal service program. The current statutory provision does not  allow tribal libraries to obtain E-rate funding for libraries unless the tribal  library is eligible for assistance from a state library administrative agency  under LSTA.",
      " In at least two cases, tribes have not applied for E-rate funds  because their tribal libraries are not eligible for state LSTA funds. However,  FCC has stated that it cannot modify the eligibility criteria in the statute.  Clarifying this issue could help bring high-speed Internet access to more  residents of tribal lands through their tribal libraries. In reviewing how some tribes are addressing barriers to improving  telecommunications services on tribal lands, we found that tribes took a  variety of approaches for addressing these barriers, suggesting that  flexibility in planning and implementing telecommunications  improvements on tribal lands is important. Because circumstances vary  widely, we do not know the extent to which other tribes and Alaska Native  Villages may be able to benefit from the experiences of these six.",
      " However,  given that many tribes and Alaska Native Villages face similar barriers,  policy makers working to assist tribes and Alaska Native Villages in  improving telecommunications may want to consider the approaches  employed by these tribes. Matters for  Congressional  Consideration Congress should consider directing FCC to determine what additional data  is needed to help assess progress toward the goal of providing access to  telecommunications services, including high-speed Internet, for Native  Americans living on tribal lands; determine how this data should regularly  be collected; and report to Congress on its findings. To facilitate Internet access for tribal libraries, Congress should consider  amending the Communications Act of 1934 to allow libraries eligible for  Library Service and Technology Act funds provided by the Director of IMLS  to either a state library administrative agency or to a federally recognized  tribe to be eligible for funding under the E-rate program.",
      " Agency Comments We provided a draft of this report for comment to BIA, the Census Bureau,  NTIA,  FCC, General Services Administration, Institute of Museum and  Library Services, and RUS. BIA provided written comments, presented in  appendix IV, stating that BIA recognized the need to update its  rights-of-way regulations to include advanced telecommunications  infrastructure, and is working to include this in its trust related regulations.  BIA stated that it will issue a Rights-of-Way Handbook in March 2006, to  ensure consistent application of existing regulations. RUS and the General  Services Administration responded that they had no comments.",
      " The  Institute of Museum and Library Services provided written comments,  found in appendix V, stating that the report accurately reflected its  understanding of the relevant issues and concerns. NTIA offered technical  comments, as did the Census Bureau and FCC, which we have  incorporated where appropriate. In the draft report, we recommended that  the Chairman of the Federal Communications Commission direct FCC staff  to determine what additional data is needed to help assess progress toward  the goal of providing access to telecommunications services, including  high-speed Internet, to Native Americans living on tribal lands; determine  how this data should be regularly collected; and report to Congress on its  findings.",
      " In oral comments responding to our recommendation, FCC  agreed that additional data is needed to help assess progress toward the  goal of providing access to telecommunications services, including  high-speed Internet. However, FCC did not agree that it is the organization  best positioned to determine the data needed in this context, noting that  other federal agencies and departments possess expertise and more direct  authorization to determine whether and what economic and demographic  data are needed to support policy making. In view of FCC\u2019s disagreement  with our recommended action, we have made it a matter for Congressional  consideration. We continue to believe that FCC, as the agency responsible  under the Communications Act for the goal of making available,",
      " as far as  possible, telecommunications at reasonable charges to all Americans, is the  appropriate agency to determine what data is needed to advance the goal of  universal service and support related policy decisions\u2014especially for  Native Americans on tribal lands who continue to be disadvantaged in this  regard. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution of it until 30 days after  the date of this letter. At that time, we will send copies of this report to the  appropriate congressional committees, tribal organizations and  governments, Bureau of Indian Affairs, Census Bureau, Economic  Development Administration,",
      " Federal Communications Commission,  General Services Administration, Indian Health Service, Institute of  Museum and Library Services, National Science Foundation, National  Telecommunications and Information Administration, Rural Utilities  Service, Universal Service Administrative Company, and the Director of the  Office of Management and Budget. We will make copies available to others  upon request. In addition, this report will be available at no cost on the  GAO web site at http://www.gao.gov. If you have any questions about the  report, please contact me at (202) 512-2834 or goldsteinm@gao.gov.  Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report.",
      " GAO staff who contributed to  this report are listed in appendix VI. Scope and Methodology The objectives of this report were to determine: 1) the status of  telecommunications subscribership (telephone and Internet) for Native  Americans on tribal lands in the lower 48 states and Alaska; 2) federal  programs available for improving telecommunications services on tribal  lands; 3) the barriers that exist to improving telecommunications on tribal  lands; and 4) how some tribes have addressed these barriers. To respond to the objectives of this report, we gathered information from a  variety of sources. Specifically, we gathered information by (1)",
      " reviewing  material relevant to telecommunications on tribal lands from federal, state,  Native American, academic, non-profit, and private sources; (2)  interviewing federal and state regulatory agency officials; (3) interviewing  officials of national and regional Native American organizations; (4)  interviewing officials of telecommunications provider and equipment  manufacturer organizations; (5) conducting telephone interviews of tribal  officials on 26 tribal lands and 12 Alaska regional native non-profit  organizations; and (6) making site visits to six tribal lands. To provide information on the status of telecommunications subscribership  for Native Americans on tribal lands in Alaska and the lower 48 states,",
      " we  analyzed data from the 2000 decennial census. To determine telephone  subscribership, we used Census 2000 data product, American Indian and  Alaska Native Summary File. This summary file includes tabulations of the  population and housing data collected from a sample of the population  (within most Native American and Alaska Native areas, 1 in every 2  households). In these areas, there must be at least 100 people in a specific  group, including Native American and Alaska Native tribal groupings,  before data will be shown. In our analysis of this 2000 Census data we did  not include Native individuals or households located in Oklahoma Tribal  Statistical Areas (OTSA). OTSAs are statistical entities identified and  delineated by the Census in consultation with federally recognized Native  American tribes in Oklahoma that do not currently have a reservation,",
      " but  once had a reservation in that state. Boundaries of OTSAs are those of the  former reservations in Oklahoma, except where modified by agreements  with neighboring tribes for data presentation purposes. We also excluded  all other tribal lands in the Census 2000 data that were not federally  recognized. As a result of these exclusions and the Census reporting  threshold, the data show 198 lower 48 tribal lands and 131 Alaska Native  Villages for people who indicated their race, alone or in combination, as  American Indian and/or Alaska Native. We assessed the reliability of the  data from the Census Bureau by interviewing knowledgeable agency  officials about data collection methods,",
      " particularly those pertaining to  collection of data on tribal lands, reviewing existing documentation on  Census data, and conducting electronic testing of the data. We determined  that the data were sufficiently reliable for the purposes of this report. To determine the status of Internet subscribership on tribal lands, we spoke  to the Census Bureau about the Current Population Survey (CPS). The CPS  is a monthly survey of households conducted by the Census Bureau for the  Bureau of Labor Statistics, and is designed primarily to produce national  and state estimates for characteristics of the labor force. To obtain national  and state estimates on Internet subscribership rates, supplemental  questions on Internet and computer use have been added to the CPS  questionnaire.",
      " However, the CPS sample cannot provide reliable estimates  of Internet subscribership on tribal lands. To determine the availability of federal programs that improve  telecommunications on tribal lands, we interviewed agency officials from  the Federal Communications Commission (FCC), the Universal Service  Administrative Company (USAC), the Rural Utilities Service (RUS), the  National Telecommunications and Information Administration (NTIA), the  Bureau of Indian Affairs (BIA), the Economic Development Administration  (EDA), the Indian Health Service (IHS), the Institute of Museum and  Library Services (IMLS), the National Science Foundation (NSF) and the  General Services Administration (GSA). To determine the funding amounts  for these programs,",
      " we reviewed annual federal budget data and agency  documents. To learn about FCC programs targeted to tribal lands, we  interviewed tribal officials, FCC staff, and service providers. To learn the  amount of funds disbursed and number of program subscribers for  Enhanced Lifeline and Enhanced Linkup, we obtained information from  the Universal Service Administrative Company. To assess the reliability of  the FCC\u2019s data for the Enhanced Lifeline and Enhanced Linkup programs,  we interviewed agency officials knowledgeable about the data and the  systems that produced them. The FCC does not track this information by  tribal lands; however, we determined that the data were sufficiently reliable  to present the total amount of money disbursed by year and the total  number of subscribers to these programs by year.",
      " To assess the reliability of FCC\u2019s data on Tribal Land Bidding Credits, we  interviewed agency officials knowledgeable about the data and the systems  that produced them. We determined that the data were sufficiently reliable  for the purposes of our report. To learn what barriers exist to improve telecommunications services on  tribal lands, we analyzed information from various federal agencies, such  as the Census Bureau, FCC, the Department of Commerce, as well as  reports from a private foundation, the Benton Foundation and a national  tribal organization, the National Congress of American Indians. We  reviewed two previous studies of telecommunications technology on tribal  lands. We also reviewed testimony from hearings before the Senate  Committee on Indian Affairs and the House of Representatives Committee  on Financial Services and Committee on Resources.",
      " We conducted  interviews with national and regional tribal organizations, major local  service providers, selected wireless equipment manufacturers, and non- profit organizations that have contributed to improving  telecommunications on tribal lands. Finally, we conducted interviews with  officials of 26 tribes and 12 Alaska regional native nonprofit organizations. We selected officials of tribal lands for interviews by first separating the  Alaska Native Villages from the federally recognized reservations in the  lower 48 states because telecommunications infrastructure in Alaska  differs from that of the lower 48 due to Alaska\u2019s weather and terrain. To  learn about the barriers facing Alaska Native Villages and the efforts to  overcome them,",
      " we interviewed officials from 12 Alaska regional native  nonprofit organizations. To learn about the barriers facing tribes in the  lower 48 states, we interviewed tribal officials from a total of 26 of the  more than 300 tribal lands of the lower 48 states, selected by using  demographic and economic indicators from both 1990 and 2000 Census  data for natives and nonnatives, as well as information from various  reports, studies and testimonies on individual tribal efforts to improve  telecommunications. To select tribes in the lower 48 states to interview, we focused on the larger  and more populated tribal lands in the lower 48 states,",
      " using Census data to  select those tribes with populations over 100 persons and those tribal lands  larger than one square mile. We also excluded tribal lands for which there  was no 1990 Census data because without this data we could not identify  change in telephone subscribership rates from 1990 to 2000. We then  grouped the remaining tribal lands into 8 population categories, ranging in  size from over 30,000 to under 500. Having postulated that the major  barriers to increased telephone subscribership might be associated with  poverty, geographic isolation, and lack of technical skills, we used the 1990  and 2000 Census data to determine for each of these tribal lands the  percent of the population at or below the poverty level,",
      " the mileage of tribal  lands from the closest population center of over 15,000, the percent of  those over 25 without a high school diploma, and the change in telephone  subscribership rate from 1990 to 2000. We selected tribal lands from each  of the 8 population groups with a range of scores on the above described  criteria. Within the group of tribal lands that met the above criteria, we also  strove to select tribal lands, where possible, from different geographic  regions of the county. Using this methodology, we selected 21 tribal lands  for interview. We used data from the 1990 and 2000 decennial censuses\u2019  American Indian and Alaska Native summary file.",
      " In addition to the 21 tribal lands selected, we also selected five tribal lands  that had made efforts to improve telecommunications. We learned about  these tribes from our analysis of documents from FCC, a national tribal  organization, scholars and nonprofit organizations, as well as from our  interviews with tribes, tribal organizations, service providers and  equipment manufacturers. Tribes\u2019 efforts included establishing tribally  owned telecommunications companies, introducing new technologies to  provide Internet access, developing programs to provide technical training  for tribal members, and establishing a tribal regulatory agency to improve  telecommunications, including the rights-of-way processes on tribal land. The telephone interviews conducted with officials from these 26 tribal  lands and 12 Alaska regional native nonprofit organizations covered topics  such as which companies provide wireline and wireless telephone service  and Internet access on tribal lands;",
      " what factors contributed to any change  in telephone subscribership rates from 1990 to 2000 (as derived from  Census data); any barriers tribes faced in improving telecommunications  services on tribal lands; how those barriers had been addressed; tribes\u2019  experience with applying for various federal programs and with providers  seeking Eligible Telecommunications Carrier status or applying for Tribal  Lands Bidding Credits. Based on our analysis of the compiled research and interviews, we  determined that tribes faced barriers in one or more of the following four  categories: financial, geographic, technical, or rights-of-way. From our  interviews, we identified 11 tribes as potential candidates for site visits  because they were confronting one or more of these four barriers,",
      " had  made progress in improving telecommunications services on their lands,  and as a group, represented a range of population and tribal land sizes, as  well as geographic locations. We then selected 6 of these tribes for site  visits, assuring that, as a group, they represented all of the identified  barriers and were located in different geographic regions of the lower 48  states. In addition to interviewing tribal officials at the six sites we visited,  we also interviewed officials of some of the companies that provided  telecommunications service to those sites regarding their views about the  barriers to improving telecommunications services on tribal lands. We conducted our audit work from August 2004 through December 2005 in  Washington,",
      " D.C., and at the Coeur D'Alene Tribe of the Coeur D'Alene  Reservation, Idaho; Confederated Tribes and Bands of the Yakama Nation,  Washington; Eastern Band of Cherokee Indians of North Carolina; Oglala  Sioux Tribe of the Pine Ridge Reservation, South Dakota; Mescalero  Apache Tribe of the Mescalero Reservation, New Mexico; and Navajo  Nation in Arizona, New Mexico, and Utah. Our work was conducted in  accordance with generally accepted government auditing standards. List of Tribes, Alaska Regional Native  Nonprofit Organizations, and Other Groups  Interviewed Northern Cheyenne Tribe of the Northern Cheyenne Indian Reservation Oglala Sioux Tribe of the Pine Ridge Reservation Paiute-Shoshone Indians of the Bishop Community of the Bishop Colony Rincon Band of Luiseno Mission Indians of the Rincon Reservation San Carlos Apache Tribe of the San Carlos Reservation Three Affiliated Tribes of the Fort Berthold Reservation White Mountain Apache Tribe of the Fort Apache Reservation B.",
      " Alaska Regional Native Non-Profit Organizations Alaska Communications Systems Group Inc. American Indian Higher Education Consortium Cheyenne River Sioux Tribe Telephone Authority Mescalero Apache Telecommunications, Inc. National Indian Telecommunications Institute Organization for the Promotion and Advancement of Small Telecommunications Companies San Carlos Apache Telecommunications Utility, Inc. We visited six tribes\u2014the Coeur d\u2019Alene of Idaho, the Yakama of  Washington, the Eastern Band of Cherokee of North Carolina, the  Mescalero Apache of New Mexico, the Oglala Sioux of South Dakota, and  the Navajo of Arizona, New Mexico, and Utah\u2014to determine how they  approached their particular barriers to improving their  telecommunications services.",
      " These tribes vary in size, geography, and  other characteristics. In addition, we discussed approaches to overcoming  barriers with officials of other tribes, service providers, and other entities,  and found that tribes use numerous approaches to overcome the barriers  they face. The approaches taken by a tribe often address more than one  barrier. The Coeur d\u2019Alene Tribe  Developed a System to  Provide High-Speed Internet  Access for Tribal Residents  Using an RUS Grant The Coeur d\u2019Alene, whose tribal lands cover 523 square miles in northern  Idaho, used an overall strategy of developing the tribe\u2019s own system to  provide high-speed Internet access for tribal members.",
      " Within this  telecommunications strategy, the tribe\u2019s particular approaches included  applying for and obtaining an RUS grant, negotiating for rights-of-ways, and  developing technical expertise. Background The Coeur d\u2019Alene\u2019s tribal lands are located about 27 miles from Coeur  d\u2019Alene, Idaho, the nearest population center of 15,000 or more inhabitants.  According to the 2000 Census, 1,303 Native Americans were living on the  Coeur d\u2019Alene lands. The estimated per capita income for Native  Americans on Coeur d\u2019Alene lands was $10,267, or less than half the  national estimate of $21,",
      "587, while the poverty level was 28 percent, 15.6  percent above the national estimate of 12.4 percent. The unemployment  level was 18 percent, or 12.2 percent above the national unemployment  level of 5.8 percent. Barriers According to tribal officials, the tribe\u2019s major barriers to improved  telecommunications services included the following: Financial: Many tribal residents are poor and a tribal official said many  cannot afford high-speed Internet service. This official told us that the  Coeur d\u2019 Alene face an underemployment problem, as many people are  employed but are paid low wages and have little money to spend on  communications services.",
      " This official also told us that in addition, the  tribe itself does not have the funds to pay for telecommunications  equipment and services for its residents. Geographic: Service providers have not expanded the telecommunications  infrastructure across the tribe\u2019s lands or upgraded the infrastructure to  provide high-speed Internet access, partly because the large land area  consisting of hilly and mountainous terrain makes expansion of the  infrastructure expensive. According to a Coeur d\u2019Alene tribal official,  service providers determined that the cost of infrastructure expansion or  improvement was too great to offer service to a limited number of tribal  land residents, many of whom could not afford high speed Internet access.",
      " Lack of tribal technical capacity: A tribal official told us that the tribe does  not have a sufficient number of technically knowledgeable staff members  to develop and maintain needed telecommunications systems. Rights-of-way: This became an issue for the tribe after it decided to put up  its own wireless system. Tribal officials told us that they could not afford to  pay the prices asked by some landowners and residents within reservation  boundaries for rights-of-way to locate equipment on their land. Approaches To obtain better telecommunications services, the tribe decided to develop  its own telecommunications system that would offer high-speed Internet  access to all residents. One of the tribal members who had received  technical training and was knowledgeable about high-speed Internet access  determined that such access was possible at affordable rates and that the  tribe\u2019s large and rugged land area made a wireless system the least  expensive choice.",
      " According to a tribal official, high-speed Internet access  will improve access to business and educational opportunities,  telemedicine services, and better enable the tribe to preserve its language  and history. Since the tribe did not have sufficient funds to develop a  telecommunications system on its own, the technically trained tribal  member applied for an RUS Community Connect grant. This type of grant  can be used for expenditures for a wide array of infrastructure and related  needs, such as household and business connection equipment as well as  the construction of a community technology center. In May 2003, the tribe  was awarded a $2.8 million grant that will be used to pay for five towers,",
      "  fiber optic cable, equipment to send and receive wireless signals for all  tribal households and businesses, technical staff to deploy and operate the  system for 3 years, operational costs, and the community technology  center. As of July 2005, the system was complete and operating. The  technically trained tribe member is now managing the system. Once the tribe received the grant, it had to overcome the barriers of 1)  obtaining rights-of-way in order to locate equipment and 2) developing a  technically knowledgeable staff to eventually operate the planned system.  Rather than paying for rights-of-way across private land, the tribe acquired  the rights-of-way they needed for access roads and equipment in exchange  for connections to the system.",
      " To address the current lack of technical  knowledge among tribal residents, the tribe is working with two local  colleges to increase its technical knowledge. The tribe is offering the  college access to its new broadband system in exchange for distance  learning classes and technical training. The tribe has also made plans to  receive technical training from the Mescalero Apache Tribe, which owns its  own system and provides training in telecommunications. In addition, to  increase interest among tribal members in Internet access and computer  usage, the tribal government plans to provide tribal members with training  and Internet access at the tribe\u2019s community technology center for as long  as its budget will allow.",
      " Those attending training will be assisted by the  recently hired technical staff in repairing and refurbishing computers that  belong to the tribe and are no longer needed. They will be allowed to keep  the computers for home use once the work is complete. Services are being offered for free for 2 years to the Benewah Medical  Center, local libraries, fire and police departments on tribal land, as well as  tribal and local public schools. The system will also make telemedicine  services available so that those who are uninsured or underinsured can  obtain the expertise of physicians not located on tribal lands. In addition,  tribal members and non-",
      "tribal members will have high-speed Internet  access at the community center at no cost. However, there will be a fee for  high-speed Internet access to homes for tribal and non-tribal members  living within reservation boundaries. Tribal officials told us that, after the  first 2 years of operation, they expect to earn sufficient revenue from  subscribers within tribal boundaries to fund needed maintenance and  improvements, as well as offset the costs of operating the Community  Technology Center. Additionally, tribal officials told us that they are planning to purchase a  local cable company to acquire the company\u2019s lines and the rights-of-way  that the company has negotiated across land within reservation  boundaries.",
      " The tribe is hoping to use revenue from the broadband Internet  system to provide broadband through cable services to current and future  customers. Tribal officials expect the broadband services to attract  businesses and are planning to provide technical support to new  businesses on tribal lands, such as writing software. The Yakama Nation Is  Developing a Wireless  Telephone System and High- Speed Internet over Cable  Using Financial Planning to  Help Deploy Infrastructure The Yakama Nation, whose lands encompass 2,153 square miles in south  central Washington, is developing its own telecommunications system that  will offer wireless telephone and high-speed Internet access to all tribal  land residents. The tribe has developed a long-range plan to finance  development through savings accumulated over several years,",
      " mainly by  reducing the amount of services purchased from the incumbent  telecommunications provider and negotiating rights-of-way for  telecommunications infrastructure. Background The Yakama Nation\u2019s tribal lands are located about 24 miles from Yakima,  Washington, the nearest population center of 15,000 or more inhabitants.  According to the 2000 Census, 31,646 residents were living on Yakama  tribal lands, 7,756 of them being Native Americans. Estimated per capita  income for Native Americans on Yakama lands was $8,816 or less than half  the national estimate of $21,587, while the poverty level was 31 percent,",
      "  18.6 percent above the national estimate of 12.4 percent. Unemployment  levels were 23 percent, or 17.2 percent above the national unemployment  level of 5.8 percent. Barriers According to the tribal official with whom we spoke, the tribe\u2019s major  barriers to improved telecommunications services included the following: Financial: According to the tribal official, in the past few years, the tribe\u2019s  main industry, timber, has not done well, and unemployment rates and  poverty have been above the national average. Many residents cannot  afford telephone service and some of those who are not connected cannot  afford the installation cost to become connected to the current  infrastructure.",
      " The tribal official told us that many tribal members cannot  afford a computer or Internet access, and the Internet access that is  available is mostly low-speed dial-up service. The tribal official also said  that the in the past few years, the local service provider had raised its  recurring monthly charges, resulting in an annual bill to the tribe of  $325,000, an increase of $50,000 in annual costs, which was difficult for the  tribal government to afford. Geographic: While many tribal residents in the more heavily populated  areas have access to telephone service, the tribal official told us that the  tribe\u2019s service provider has not built additional infrastructure to reach less  populated areas and has no plans to do so in the near future.",
      " In addition,  the tribal member told us that the service provider had established calling  zones that make calls from one part of the reservation to another long  distance. This has increased the cost of telephone service for both  residents and the tribal government. Lack of Tribal Technical Capacity: The tribal official stated that the tribe  does not have a sufficient number of technically knowledgeable tribal  members to develop and maintain needed telecommunications systems. Approaches The Yakama Nation is addressing these barriers by developing its own  telecommunications system that will provide wireless telephone service  and high-speed Internet access to the tribal government and the community  at large. The tribal official told us that seven years ago,",
      " the tribe determined  that it could improve telecommunications services by forming its own  company, offering telecommunications services to tribal residents and  tribal businesses as well as other homes and businesses, both on and off  tribal lands. This official also said the tribe has developed a business plan  to receive its license from the state of Washington to operate as a  competitive local exchange carrier, allowing it to sell its services. The tribal  official told us the system will improve education by providing high-speed  Internet access to tribal schools and offer residents greater access to jobs  and business opportunities. The tribal official also told us that although the  system is not yet complete,",
      " the Yakama Tribal Government buildings are  now connected to each other through a Local Area Network (LAN) and  have high-speed Internet access. This level of service has reduced the fees  the tribe pays to the local service provider, allowing the tribe to increase  the funding available for developing its own telephone telecommunications  system. To overcome the funding barrier, the tribe put together a long-range plan  that required the tribe to reduce its use of the current provider\u2019s services  and then use the savings to develop its own system. Since 1998, the tribe  has used annual savings from reduced telephone services and funds from  other services to establish a telecommunications company and then  purchase needed equipment.",
      " The technically trained tribal member who  headed the planning and development of this system told us that because of  the downturn in the telecommunications sector in the past few years and  the long-range plans the tribe had made, the tribe was able to purchase  surplus fiber at 25 percent of its retail price. In addition, the tribe was also  able to negotiate with a local contractor for installation of the fiber at a  price far below market rates. The tribal official told us that long-range  financial planning and careful budgeting have been important to the tribe\u2019s  success and that infrastructure has been purchased or installed each year  based on what the tribe could afford.",
      " The tribe is addressing its lack of technical capacity in a number of ways.  The tribe has proposed to connect a local university to its  telecommunications system in exchange for technical training. In addition,  the tribe plans to train residents in computer and Internet use at an existing  tribal technology center. The tribal official emphasized that determining  how the tribe could afford the cost of trained staff to manage and maintain  the system once it is operational was a very important part of their  planning. The tribe determined that the system could produce revenue to  pay for technically trained staff and necessary maintenance by offering  wireless telephone and high-speed Internet access to areas adjacent to  tribal lands.",
      " The tribe plans to erect additional towers; offer homes and businesses the  opportunity to purchase equipment to connect to the system; and connect  the tribally-owned system to the public switched network. The tribal  official told us that several locations are available to connect to the public  switched network and they will select the location that offers the tribe the  best price. The tribal official estimates that the system will be complete in 1  to 2 years. Eastern Band of Cherokee  Partnered with Local  Business to Install, Own and  Operate  Telecommunications  Networks for High-Capacity  Transmission Services The Eastern Band of Cherokee,",
      " whose tribal lands cover about 82 square  miles in the Smoky Mountains of western North Carolina, has improved  telecommunications infrastructure and services, particularly high-capacity  transmission and Internet-based services, by deploying two fiber networks  -- a tribally-owned fiber-optic ring within the reservation area, and a jointly- owned fiber optic network in three states. To build these networks, Eastern  Band of Cherokee partnered with a local business, provided part of the  funding, and is applying for a USDA RUS loan jointly with their partner  company. Background The Eastern Band of Cherokee\u2019s tribal lands are located about 33 miles  from Asheville, North Carolina,",
      " the nearest population center of 50,000 or  more inhabitants. According to the 2000 Census, there were 6,132 Native  Americans living on Eastern Band of Cherokee\u2019s tribal land. The estimated  per capita income for Native Americans on Eastern Band of Cherokee  lands was $12,248, somewhat more than half the national estimate of  $21,587, while the poverty level was 24 percent, 11.6 percent above the  national estimate of 12.4 percent. The unemployment level was 9 percent,  or 3.2 percent above the national unemployment level of 5.8 percent.",
      " Barrier Tribal officials told us that the major barrier to improved  telecommunication services the Eastern Band of Cherokee faced was: Geographic: Tribal lands are geographically isolated by the Smokey  Mountains and there is low population density in the area. According to a  tribal telecommunications company official, prices for fiber-optic  transmission networks and high-speed Internet access points are many  times higher than in major metropolitan areas, where such connections are  plentiful and competitively priced. A major contributor to the high cost of  service is the transmission of data. This official said that voice, data, and  Internet traffic from this rural mountain community must be hauled long  distances for aggregation and connection to the national backbones of  telecommunications and Internet service providers.",
      " The carriage provided  by the local telephone company is priced at rates that are distance  sensitive, making them some of the highest in the state. However,  according to a tribal official, despite the local provider\u2019s prices, the  provider\u2019s current telecommunications infrastructure on Eastern Band of  Cherokee\u2019s tribal lands is out of date and malfunctions frequently, causing  interruptions in service. Approach To improve access to fiber-optic infrastructure and to lower the cost of  transmission for Internet service providers, as well as for schools,  hospitals, rural clinics, government agencies and residents on tribal lands,  the tribe constructed two fiber-optic networks. The first is a network that  provides access within the reservation;",
      " the second is a network that  provides an interconnecting network through parts of three states and is  referred to as a middle-mile network. According to one of the tribal  telecommunications company officials we interviewed, the middle-mile  network is a very high-capacity network that can move large amounts of  information at high speeds with plenty of capacity for future growth. This  official told us that to deploy this middle-mile network, the tribe partnered  with a private firm, one of the largest electronic tax filers in the United  States and one of the largest employers in the region after the tribe.  Together, they formed a joint venture company to construct,",
      " own, and  operate the network. The company official also told us that the joint venture company leases dark fiber  and also operates as a certificated  competitive local exchange carrier and interexchange carrier in three  states. The networks support very high capacities for real-time, interactive  applications such as three-dimensional modeling and simulation. The  company also offers open access to its dark fiber on short-term and long- term leases (up to 20 years) to any requesting entity and sells its fiber and  services at rates pegged to the wholesale rates being charged in large  metropolitan areas. The company official stated that system deployment began in September,",
      "  2003, with completion expected by the end of 2005 and will consist of about  257 miles of underground fiber optic cable. A tribal official told us the tribe  wanted to help attract new businesses to the area as well as help existing  companies modernize and expand. Of equal importance to the tribe are  improvements and enhancements in government services, health care and  education, and residential Internet access. A telecommunications company  official told us the joint venture has already begun providing wide-area data  and Internet transmission services for a four-site hospital system in the  area, greatly reducing the hospital system\u2019s costs and providing throughput  speeds of only 6 seconds for transmission of x-ray images between sites.",
      " Officials of the tribe and the company told us that the tribe will use its  ownership in these networks and future planned deployment of cable and  wireless infrastructure to ensure that all residents of tribal lands can  receive high-speed Internet, VoIP (Voice over Internet Protocol), and other  information and content applications at costs and quality levels  comparable to or better than metropolitan areas. The tribe is currently  planning facilities and programs for computer training laboratories for  tribal members to learn about computers, networks, and the Internet, and  is also planning for workforce retraining programs. The Mescalero Apache  Purchased the Local  Telecommunications  Company and Improved  Services Using RUS Loans The Mescalero Apache reservation covers 719 square miles and is located  in south eastern New Mexico.",
      " The Mescalero Apache addressed their  telecommunications issues by purchasing the local telephone company  with the help of RUS loans and developing initiatives to improve the tribe\u2019s  technical capacity to provide telephone service and high-speed Internet  access. Background According to the 2000 Census, there were 2,932 Native American residents  living on Mescalero Apache land. The estimated per capita income for  Native American residents was $7,417, slightly more than one-third the  national estimate of $21,587, while the level of poverty was 37 percent,   24.6 percent above the national estimate of 12.4 percent.",
      " The  unemployment level was 17 percent, 11.2 percent above the national  unemployment level of 5.8 percent. Barriers According to tribal officials, before the Mescalero Apache purchased the  local telecommunications company, the tribes\u2019 major barriers to improving  telecommunications service included the following:  Geographic: The size of the reservation makes the deployment of wireline  infrastructure expensive and the small number of tribal residents limits the  ability of the service providers to recoup their investment. Tribal officials  told us that the former local service provider was unwilling to upgrade the  telecommunications network on the Mescalero Apache reservation to  provide high-quality voice or data services.",
      " Lack of Tribal Technical Capacity: In 1995, the tribal Council passed a  resolution stating the tribe\u2019s intention to purchase the former telephone  service provider\u2019s network. However, the tribe did not have a sufficient  base of technically knowledgeable tribal members to operate the former  provider\u2019s telephone network. Approaches To overcome these barriers, the tribal government purchased the former  wireline service provider\u2019s network on the reservation. The tribal  government then formed the company, Mescalero Apache  Telecommunications, Inc. (MATI), to develop this network to provide  higher quality telecommunications services than previously available. MATI  then rebuilt the network by installing more than 1,",
      "000 route miles of fiber  optic cable to provide high-speed Internet access as well as local and long  distance telephone service. According to a MATI official, telephone and  high-speed Internet access are now nearly universally available within the  reservation and Gigabit Ethernet, which is nearly 1,000 times faster than  DSL, has been deployed to the Mescalero casino. In addition, this MATI  official told us that the number of residential telephone subscribers on the  Mescalero Apache tribal lands has increased from 10 per cent to 97 percent  since these improvements were made to the network. To address the geographic issue,",
      " the MATI official said that the tribal  government instructed MATI to focus on providing services to the  reservation rather than maximizing profit, which could limit investment in  services. Additionally, MATI utilizes various approaches to improve its technical  capacity to offer higher quality services. Specifically, it developed strategic  relationships and training to improve the staff\u2019s technical capabilities to  operate telecommunications technologies. For example, the MATI official  told us that when MATI was starting to provide service, MATI was able to  borrow a switch from a manufacturer. Currently, MATI has an agreement  with a VoIP equipment manufacturer to deliver voice calls over the  Internet.",
      " This agreement has allowed MATI to begin to deploy this  technology to customers outside the reservation over a shared spectrum  wireless network. The MATI official said that this relationship has also  allowed MATI to train their personnel on the use of this equipment. The MATI official also told us that MATI created a technical mentoring  program to build tribal telecommunications capacity. Although about half  of MATI\u2019s staff consists of non-tribal members, tribal officials expect to hire  more tribal members as they receive technical training and non-tribal  members retire. Newer tribal staff are paired with experienced non-tribal  staff for the purpose of learning telecommunications technologies.",
      " The  MATI official said that the goal is to create a self-sufficient tribal knowledge  base to understand and operate the telecommunications network. This  official said that MATI\u2019s development of its technical capabilities has also  allowed it to offer technical consulting services to other tribes that are  interested in providing their own telecommunications network. For  example, Coeur d\u2019Alene tribal officials told us that they plan to use MATI  staff to train some of their telecommunications staff and increase the  tribe\u2019s technical capacity to operate a telecommunications network. The  MATI official also told us that MATI hosts an annual telecommunications  conference for tribes and municipal governments to inform them about the  basics of telecommunications finance and technology.",
      " The Oglala Sioux Partnered  With a Wireless Provider to  Create Competition and  Increase Telephone  Subscribership Oglala Sioux lands cover approximately 3,150 square miles and are located  in southwestern South Dakota. To improve telecommunications services  on their tribal lands, the Oglala Sioux partnered with Western Wireless  Corporation (now merged with Alltel), a wireless service provider, to offer  wireless phone service on their lands in competition with the wireline  provider. According to tribal and Western Wireless officials, access to the  Universal Service High Cost Fund and Enhanced Link-Up and Lifeline  programs allows Western Wireless to recover some infrastructure  deployment costs and offer discounted telephone service to residents of  the Oglala Sioux\u2019s Pine Ridge Indian Reservation.",
      " Background The Oglala Sioux tribal lands are located in southwestern South Dakota,  about 80 miles south of Rapid City, South Dakota, the nearest population  center of 50,000 or more inhabitants. According to the 2000 Census, 14,334  Native Americans were living on these tribal lands. The estimated per  capita income for Native Americans was $5,624, slightly more than one- quarter the national estimate of $21,587, while the poverty level was 55  percent, more than 40 percent above the national estimate of 12.4 percent.  The unemployment level was 37 percent,",
      " or 32.2 percent above the national  unemployment level of 5.8 percent. Barriers According to tribal and industry officials, the tribe\u2019s major barriers to  improved telecommunications services included the following: Financial: According to a tribal official, tribal members have limited  financial resources to purchase telecommunications services. Census data  indicate that the Pine Ridge Indian Reservation is one of the most  economically distressed tribal lands in the United States. Over one half the  population falls below the federal poverty line while unemployment is  more than six times the national estimate. Geographic: The Pine Ridge Indian Reservation is geographically isolated  and has a low population density,",
      " which according to the tribal official, has  limited the number of companies interested in providing  telecommunications services. According to the 2000 Census,  approximately 14,000 Oglala Sioux were living on the 3,150 square mile  reservation, an area about one and half times the size of Delaware. The  tribal official also told us that geographic isolation of the Pine Ridge Indian  Reservation also meant that it was difficult for tribal members to reach  public safety services when traveling through remote areas of the  reservation. Approaches To overcome these barriers, the Oglala Sioux partnered with a wireless  service provider to offer wireless phone service to residents of the Pine  Ridge Indian Reservation.",
      " The Oglala Sioux Tribe and the wireless provider  signed a service agreement to formalize this partnership. The agreement  defined the provider\u2019s responsibilities to provide wireless phone service  and the tribe\u2019s responsibilities and rights to advertise the service and  receive leasing fees for the wireless towers on its land. According to a tribal official and provider officials, the key to deploying  wireless service on the Pine Ridge reservation was the provider\u2019s ability to  access federal universal service funds to subsidize its network costs (High  Cost fund) and offer discounted telephone service (Enhanced Link-Up and  Lifeline). In order to access these funds, the provider,",
      " with consent from  the Oglala Sioux Tribe, applied for and received an eligible  telecommunications carrier (ETC) designation from FCC in 2001. This  enabled the provider to access High Cost funds as well as the Enhanced  Link-Up and Lifeline programs, which lower the costs of telephone service  for low-income customers. The provider deployed several towers in diverse areas of the reservation to  provide wide-spread coverage. The tribe also worked with the provider to  create an expanded local calling area for its customers that included all  areas of the reservation as well as Rapid City, South Dakota. According to a  tribal official,",
      " the addition of Rapid City as part of the local calling area was  an important cost-saving measure for the tribe because a significant  number of Oglala Sioux live in the Rapid City area. A tribal official told us that wireless telephone service has improved public  safety and the general quality of telecommunications service on the Pine  Ridge reservation. According to tribal and provider officials, tribal  members can reach public safety services, such as 911, from nearly any  location on the reservation. According to a tribal official, this is particularly  important due to the summer and winter temperature extremes on the  reservation. The wireline service provider officials also noted that the  wireless provider\u2019s presence as a competitor has helped to sharpen their  focus on providing high-quality services.",
      " A tribal official told us that the  wireless provider initially anticipated having about 300 customers on  Oglala Sioux tribal lands, but had about 4,000 customers within 1 year of  offering service. The Navajo Nation is  Addressing  Telecommunications  Barriers by Streamlining  Tribal Government  Processes, Encouraging  Competition, and  Emphasizing Wireless  Technologies The Navajo Nation is the largest federally recognized tribe and tribal land in  the United States. According to the 2000 Census, the Navajo Nation covers  over 24,000 square miles, an area roughly the size of West Virginia,",
      " and  extends into the states of Arizona, New Mexico and Utah. To improve  telecommunications on their lands, the Navajo are streamlining the tribal  rights-of-way process to aid service providers; encouraging competition in  order to improve prices and service quality; and emphasizing wireless  technologies better suited to the geography of the tribal land. Background The Navajo Nation\u2019s tribal lands are not located near any major  metropolitan area. According to the 2000 Census, 176,256 Native  Americans were living on Navajo tribal lands. The estimated per capita  income for Native Americans on Navajo lands was $6,801, less than one-",
      " third the national estimate of $21,587, while the poverty level was 44  percent, 31.6 percent above the national estimate of 12.4 percent. The  unemployment level was 26 percent, or 21.2 percent above the national  unemployment level of 5.8 percent. Several telecommunications providers, both wireline and wireless, serve  the Navajo Nation; however, not all areas within the reservation have  access to voice or data service. Two providers provide high-speed Internet  connectivity on parts of the reservation. One of them offers DSL to  households at various places on the reservation. However,",
      " an official from  this company noted that DSL works best if deployed within 15,000 feet of  the central office, while many residents live beyond the 15,000-foot limit.  The other provider offers high-speed Internet connections through satellite  at 110 Navajo Nation chapter houses. However, one tribal official told us  that the tribal chapter house connections are not financially sustainable in  the long term. All three states (Arizona, New Mexico, and Utah) granted a  library designation to the 110 chapter houses, and all chapter houses were  approved by USAC for library E-rate funds. This official also stated that the  tribe uses E-rate funds to pay for about 85 percent of the annual $3 million  cost for satellite connectivity.",
      " However, the official told us that the tribe  must pay the remaining 15 percent of the cost, or about $450,000, and that  Navajo officials consider this amount to be a high cost. Barriers According to tribal officials, the tribe\u2019s major barriers to improving  telecommunications services include the following: Geographic: Geographic isolation has increased the cost of providing  service on Navajo lands and limited the number of companies interested in  providing telecommunications services. The distances needed to connect  communities and homes with copper wires or fiber optic cable make  wireline telecommunications systems expensive. For example, the tribe  estimated in 1999 that it cost about $5,",
      "000 to connect a new wireline  subscriber. The installation of wireless infrastructure is also expensive due  to the vast network of towers and power access needed to relay signals  around the rugged landscape. Service providers have told us the cost of  deploying telecommunications infrastructure on Navajo lands impedes the  provision of services. Rights-of-way: According to tribal officials, several factors combine to  make obtaining rights-of-way across Navajo trust lands difficult, and serve  as deterrents to extending and improving the tribe\u2019s telecommunications  infrastructure. Both service provider and tribal officials told us that the  tribal government\u2019s process for approving rights-of-way across trust lands  is time-consuming and expensive.",
      " In addition, tribal officials told us that  obtaining approval of rights-of-way from BIA across Indian allotments  within tribal boundaries can also be very time-consuming and expensive  because ownership of these lands has been divided among a large number  of heirs, and at least 51 percent of the heirs must approve any change in the  status of the land. In some cases, the location of many of these heirs is  unknown. Approaches To address these barriers and improve telecommunications services on the  reservation, tribal leaders formed the Navajo Nation Telecommunications  Regulatory Commission (NNTRC). The Navajo Nation requires service  providers to supply the NNTRC with information about their intended  service areas,",
      " service offerings, and network buildout plans. This  information allows the NNTRC to review providers\u2019 plans for providing  services and then holds them accountable for fulfilling those plans. The  NNTRC encourages providers to attend hearings to comment on the  barriers they encounter to providing telecommunications services. As a  result, the NNTRC works with the service providers to reduce or remove  barriers. The NNTRC is addressing geographic barriers by encouraging providers to  deploy wireless telecommunications systems that are more appropriate for  the Nation\u2019s large geographic area. NNTRC is also addressing the cost of  services on the Navajo Nation by encouraging multiple providers to offer  services,",
      " thus creating competition. NNTRC officials told us that  competition is the best method to lower prices and improve services.  Currently, NNTRC works with wireless companies to encourage them to  extend their service throughout the Navajo Nation. Officials from wireless  companies serving and seeking to serve the Navajo Nation told us that  access to universal service program funds combined with their use of less  costly wireless technologies provides a viable business case for their entry  onto Navajo lands. Tribal officials told us that the NNTRC drafted a rights-of-way policy that  includes new procedures to make the tribe\u2019s process for approving rights- of-way more efficient and timely for service providers.",
      " According to a  Navajo official, this policy is currently being reviewed for approval by  several of their tribal government departments. Following this approval  process, NNTRC intends to implement this policy. Comments from the Department of the  Interior, Bureau of Indian Affairs Comments from the Institute of Museum and  Library Services GAO Contact and Staff Acknowledgments GAO Contact Acknowledgments In addition to the contact named above, Carol Anderson-Guthrie and John  Finedore, Assistant Directors; Edda Emmanuelli-Perez, Michele Fejfar,  Logan Kleier, Michael Mgebroff, John Mingus,",
      " Mindi Weisenbloom,  Alwynne Wilbur, Carrie Wilks, and Nancy Zearfoss made key contributions  to this report.\n"
    ],
    "length": 25468,
    "hardness": null,
    "role": null
  },
  {
    "id": 84,
    "question": null,
    "answer": "This report provides an overview of the elements of federal criminal money laundering statutes and the sanctions imposed for their violation. The most prominent is 18 U.S.C. \u00a7 1956. Section 1956 outlaws four kinds of money laundering\u2014promotional, concealment, structuring, and tax evasion laundering of the proceeds generated by designated federal, state, and foreign underlying crimes (predicate offenses)\u2014committed or attempted under one or more of three jurisdictional conditions (i.e., laundering involving certain financial transactions, laundering involving international transfers, and stings). Its companion, 18 U.S.C. \u00a7 1957, prohibits depositing or spending more than $10,000 of the proceeds from a predicate offense. Section 1956 violations are punishable by imprisonment for not more than 20 years. Section 1957 carries a maximum penalty of imprisonment for 10 years. Property involved in either case is subject to confiscation. Misconduct that implicates either offense may implicate other federal criminal statutes as well. Federal racketeer influenced and corrupt organization (RICO) provisions outlaw acquiring or conducting the affairs of an enterprise (whose activities affect interstate or foreign commerce) through the patterned commission of a series of underlying federal or state crimes. RICO violations are also 20-year felonies.  The Section 1956 predicate offense list automatically includes every RICO predicate offense, including each \"federal crime of terrorism.\"  A second related statute, the Travel Act (18 U.S.C. \u00a7 1952), punishes interstate or foreign travel, or the use of interstate or foreign facilities, conducted with the intent to distribute the proceeds of a more modest list of predicate offenses or to promote or carry on such offenses when an overt act is committed in furtherance of that intent. Such misconduct is punishable by imprisonment for not more than five years. Other federal statutes proscribe, with varying sanctions, bulk cash smuggling, layering bank deposits to avoid reporting requirements, failure to comply with federal anti-money laundering provisions, or conducting an unlawful money transmission business. Section 1956's ban on attempted international transportation of tainted proceeds for the purpose of concealing their ownership, source, nature, or ultimate location is limited to instances where concealment is a purpose rather than an attribute of the transportation (simple smuggling is not proscribed as such), as the Supreme Court explained in Cuellar v. United States, 553 U.S. 550 (2008). In a second case, the Court held that the \"proceeds\" of a predicate offense often referred to the profits rather than the gross receipts realized from the offense. United States v. Santos, 553 U.S. 507 (2008). Congress responded by defining \"proceeds\" for money laundering purposes as the property obtained or retained as a consequence of a predicate offense, including gross receipts. P.L. 111-21, 123 Stat. 1618 (2009) (S. 386) (111th Cong.).  The text of the statutes discussed, citations of state money laundering and money transmission statutes, and a list federal predicate offenses with their accompanying maximum terms of imprisonment appear at the end of the report. This report appears in abridged form, without footnotes, full citations, or appendixes, as CRS Report RS22401, Money Laundering: An Abridged Overview of 18 U.S.C. \u00a7 1956 and Related Federal Criminal Law.  Related CRS Reports include CRS Report R44776, Anti-Money Laundering: An Overview for Congress, by [author name scrubbed] and [author name scrubbed], and CRS Legal Sidebar WSLG1127, Anti-Terrorist/Anti-Money Laundering Information-Sharing by Financial Institutions Under FinCEN's Regulations, by [author name scrubbed] (available to congressional clients upon request).\n",
    "docs": [
      "Introduction Money laundering is commonly understood as the process of cleansing the taint from the proceeds of crime. In federal criminal law, however, it is more. In the principal federal criminal money laundering statutes, 18 U.S.C. \u00a7\u00a7 1956 and 1957, and to varying degrees in several other federal criminal statutes, money laundering involves the flow of resources to and from several hundred other federal, state, and foreign crimes. It consists of: engaging in a financial transaction involving the proceeds of certain crimes in order to conceal the nature, source, or ownership of proceeds they produced; engaging in a financial transaction involving the proceeds of certain crimes in order to promote further offenses;",
      " transporting funds generated by certain criminal activities into, out of, or through the United States in order to promote further criminal activities, or to conceal the nature, source, or ownership of the criminal proceeds, or to evade reporting requirements; engaging in a financial transaction involving criminal proceeds in order to evade taxes on the income produced by the illicit activity; structuring financial transactions in order to evade reporting requirements; spending more than $10,000 of the proceeds of certain criminal activities; traveling in, or use of the facilities of, interstate or foreign commerce in order to distribute the proceeds of certain criminal activities; traveling in, or use of the facilities of,",
      " interstate or foreign commerce in order to promote certain criminal activities; transmitting the proceeds of, or funds to promote, criminal activity in the course of a money transmitting business; transmitting funds in the course of an unlawful money transmitting business; smuggling unreported cash across a U.S. border; or failing to comply with the Department of the Treasury's anti-money laundering provisions. Money laundering in some forms is severely punished, sometimes more severely than the underlying crime with which it is associated. The penalties frequently include not only long prison terms, but the confiscation of the property laundered, involved in the laundering, or traceable to the laundering. The following is an overview of the elements and other legal attributes and consequences of a violation of Sections 1956 and 1957,",
      " as well as selected related federal criminal statutes. 18 U.S.C. \u00a7 1956 Section 1956 outlaws four kinds of laundering\u2014promotional, concealment, structuring, and tax evasion\u2014committed or attempted under one or more of three jurisdictional conditions (i.e., laundering involving certain financial transactions, laundering involving international transfers, and stings). More precisely, Section 1956(a)(1) outlaws financial transactions involving the proceeds of other certain crimes\u2014predicate offenses referred to as \"specified unlawful activities\" (sometimes known as SUA)\u2014committed or attempted (1) with the intent to promote further predicate offenses;",
      " (2) with the intent to evade taxation; (3) knowing the transaction is designed to conceal laundering of the proceeds; or (4) knowing the transaction is designed to avoid anti-laundering reporting requirements. Section 1956(a)(2) outlaws the international transportation or transmission (or attempted transportation or transmission) of funds (1) with the intent to promote a predicate offense; (2) knowing that the purpose is to conceal laundering of the funds and knowing that the funds are the proceeds of a predicate offense; or (3) knowing that the purpose is to avoid reporting requirements and knowing that the funds are the proceeds of a predicate offense.",
      " Section 1956(a)(3) covers undercover investigations (\"stings\"). It outlaws financial transactions (or attempted transactions) that the defendant believes involve the proceeds of a predicate offense and that are intended to (1) promote a predicate offense, (2) conceal the source or ownership of the proceeds, or (3) avoid reporting requirements. Promotion Financial Transactions Of the three promotional offenses, only the Section 1956(a)(1)(A)(i) financial transaction offense requires use of the proceeds of a predicate offense to promote a predicate offense; the Section 1956 international and sting offenses require only a purpose to promote a predicate offense regardless of the source of the proceeds.",
      " Section 1956(a)(1)(A)(i) applies to anyone who: 1. knowing A. that the property involved in a financial transaction,  B. represents the proceeds of some form of unlawful activity, 2. A. conducts or B. attempts to conduct such a financial transaction 3. which in fact involves the proceeds of specified unlawful activity 4. with the intent to promote the carrying on of specified unlawful activity. The knowledge element is the subject of a specific definition which allows a conviction without the necessity of proving that the defendant knew the exact particulars of the underlying offense or even its nature; it is enough that he knew that the property came from some sort of criminal activity and that the property in fact constitutes the proceeds of a predicate offense.",
      " The knowledge element cannot be negated by turning a blind eye to reality. Here and throughout Section 1956, knowledge may be inferred from facts indicating that criminal activity is particularly likely. Throughout Section 1956, a defendant \"conducts\" a financial transaction when he initiates, concludes, or participates in initiating, or concluding a transaction. The \"financial transaction\" element has two obvious components. It must be a transaction and it must be financial. Both components are defined by statute. Qualifying \"transactions\" may take virtually any shape that involves the disposition of something constituting the proceeds of an underlying crime, including a disposition as informal as handing cash over to someone else.",
      " The \"financial\" component supplies the jurisdiction foundation for a Section 1956(a)(1)(A)(ii) crime and each of the other crimes in Section 1956(a)(1). Qualifying transactions must either involve the movement of funds in a manner that affects interstate or foreign commerce or involve a financial institution engaged in, or whose activities affect, interstate or foreign commerce. In either case, the effect on interstate or foreign commerce need be no more than minimal to satisfy the jurisdictional requirement.  The majority of Section 1956's crimes are related in one way or another to the commission or purported commission of at least one of a list of predicate offenses (\"specified unlawful activities\"). And so it is the financial transaction promotional offense.",
      " The proscribed transaction must involve the proceeds of a predicate offense and be designed to promote a predicate offense. The predicate offenses come in three varieties: state crimes, foreign crimes, and federal crimes. The list of state crimes is relatively short and consists of any state crime that is a RICO predicate offense, that is, \"any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in section 102 of the Controlled Substances Act), which is chargeable under state law and punishable by imprisonment for more than one year.\" The list of foreign crimes recognized as Section 1956 predicate offenses is more extensive than the list of state crimes,",
      " and covers among other things extraditable offenses, although crimes under the laws of other countries qualify as predicate offenses only if the financial transaction occurs in this country in whole or in part. The list of federal predicate offenses is considerably longer if for no other reason than that the some qualifying offenses are specifically named and others qualify by cross-reference to the voluminous RICO predicate offense list. The crimes listed by name as predicates include offenses such as interstate kidnapping, theft of funds from federally supported programs, and bank robbery. RICO predicates also name bribery, mail fraud, and wire fraud as predicates. Moreover, the RICO predicate offense list encompasses by cross-reference the federal crimes of terrorism cataloged in 18 U.S.C.",
      " \u00a7 2333b(g)(5)(B).  As for the promotional element, some of the lower courts have concluded that it \"may be met by transactions that promote the continued prosperity of the underlying offense.\" One circuit has declared, however, that \"the 'promotion' element of money laundering promotion cannot be met simply by demonstrating that the unlawfully earned monies were used to promote the continued functioning of an 'otherwise legitimate business enterprise.' For instance, paying the bills (payroll, rent, taxes) of a health care provider or a car dealership, even one engaged in frequent acts of fraud, may not suffice to support the promotion element.\" The \"proceeds\"",
      " in the proceeds element of the offense is defined to consist of \"any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity.\"  The definition answers both the profits v. gross receipts question and several others as well. It makes it clear, for example, that the term includes proceeds from a lawful source, retained through the commission of a predicate offense. It does not necessarily invalidate, however, that line of lower court decisions which held that proceeds must be \"derived from an already competed offense, or a completed phase of an ongoing offense, before they can be laundered.\"  International Transmission or Transportation The international promotional offense,",
      " Section 1956(a)(2)(A), applies to anyone who: 1. A. transports, transmits, or transfers, or B. attempts to transport, transmit, or transfer 2. a monetary instrument or funds 3. A. from a place in the U.S. to or through a place outside the U.S. or B. to a place in the U.S. from or through a place outside the U.S. 4. with the intent to promote the carrying on of specified unlawful activity. \"Monetary instruments\" is a term defined broadly to include cash, checks, securities, and the like.",
      " Since Section 1952(a)(2)(A) proscribes both transportation and attempted transportation, prosecution may be had even though no funds were in fact transported internationally, as long as the government proves a substantial step towards international transportation. The section does not demand that the transported funds flow from a predicate offense or from any other unlawful source; all that is required is that the offender intends to use them to promote a predicate offense. Where the international promotional offense shares common elements with other Section 1956 offenses, they are comparably construed. Thus, similar \"intent to promote\" elements impose the same requirements of proof upon the government regardless of whether the offense charged is a Section 1956(a)(1)(A)(i)",
      " financial transaction promotional offense or a Section 1956(a)(2)(A) international transfer promotional offense. The statutory list of state, federal, and foreign predicate offenses (specified unlawful activities) applies to a Section 1956(a)(2)(A) offense as it does for all but one of the Section 1956 offenses. Stings The final promotional money laundering offense, Section 1956(a)(3)(A), is a variation of the financial transaction offense, created to cover situations in which law enforcement officials acting undercover have duped the offender into believing the agent is using the proceeds from a criminal source to promote a predicate offense when in fact he is not.",
      " The offense occurs when an offender: 1. with the intent to promote the carrying on of specific unlawful activity 2. A. conducts or B. attempts to conduct 3. a financial transaction 4. involving property represented to be A. the proceeds of specific unlawful activity or B. property used to conduct or facilitate specified unlawful activity. The generous statutory definition of \"financial transactions,\" which embodies a \"sale.... transfer, delivery, or other disposition\" involving a monetary instrument or the use of a financial institution, applies with equal force here and throughout Section 1956. The \"representations\" alluded to are confined to those \"made by a law enforcement officer or by another person at the direction of,",
      " or with the approval of, a federal official authorized to investigate or prosecute violations of this section.\" In sting prosecutions under other 1956 sections, the courts have held that the representation need not be explicit; it is enough that a reasonable person would infer from the circumstances that funds to be laundered were the proceeds of a predicate offense. The same construction applies to here. The qualifying state, federal, and foreign predicate offenses are the same for all the Section 1956 offenses including the Section 1956(a)(3)(A) promotional stings offenses. Prosecution of Section 1956(a)(3) sting offenses might seem to invite entrapment defense claims.",
      " As a general rule, \"[w]here the government has induced an individual to break the law and the defense of entrapment is at issue... the prosecution must prove beyond reasonable doubt that the defendant was predisposed to commit the criminal act prior to first being approached by government agents.\" Evidence of a defendant's predisposition may include \"(1) the character or reputation of the defendant; (2) whether the government made the initial suggestion of criminal activity; (3) whether the defendant engaged in the activity for profit; (4) whether the defendant showed any reluctance; and (5) the nature of the government's inducement.\" The defense,",
      " however, does not appear to have enjoyed a great deal of success in Section 1956(a)(3) cases. Concealment Like promotional money laundering, concealment money laundering comes in three varieties; concealment associated with a financial transaction, concealment associated with foreign transportation or transmission, and concealment associated with a sting. Financial Transactions Concealment in violation of Section 1956(a)(1)(B)(i) occurs when anyone: 1. knowing A. that the property involved in a financial transaction B. represents the proceeds of some form of unlawful activity, 2. A. conducts or B. attempts to conduct such a financial transaction 3.",
      " which in fact involves the proceeds of specified unlawful activity 4. knowing that the transaction is designed in whole or in part to conceal or disguise the nature, location, the source, the ownership, or the control of the proceeds of specified unlawful activity. The concealment offense tracks the promotion offense closely and shares several common elements with the other offenses in Section 1956. Thus, the defendant must have known that the transaction, designed to conceal, involved crime-tainted proceeds, but need not have known the precise offense or its specifics. Gross receipts of a predicate offense may serve as qualifying \"proceeds,\" for concealment as well as for promotional offenses.",
      " The actions that amount to \"conduct[ing] or attempt[ing] to conduct\" a proscribed transaction\u2014for either concealment or promotional purposes\u2014\"include[] initiating, concluding, participating in initiating, or concluding a transaction.\" The broad definition of \"financial transaction\" found in Section 1956(c)(4) (\"sale.... transfer, delivery, or other disposition\" involving a monetary instrument or a financial institution) applies throughout the section. As with the promotion offenses, the government must show more than a financial transaction; proof that the defendant spent tainted funds, without more will not do.  The concealment offense requires \"a design\" to conceal.",
      " It is the purpose of the scheme and not its effect that the element condemns. A financial transaction that offers neither the accused nor the property involved any apparent enhanced secrecy protection cannot be said to satisfy the intention to conceal element of the offense. The fact the defendant made no effort to conceal his identity is no defense, however, when the transactions were intended to conceal the nature, location, or origin of the property involved.  As a general matter, \"[e]vidence that may be considered when determining whether a transaction was designed to conceal includes: [deceptive] statements by a defendant probative of intent to conceal; unusual secrecy surrounding the transactions;",
      " structuring the transaction to avoid attention; depositing illegal profits in the bank account of a legitimate business; highly irregular features of the transaction; using third parties to conceal the real owner; a series of unusual financial moves cumulating in the transaction; and expert testimony on practices of criminals.\" Although the government need not always prove that a transaction was designed to create the appearance of legitimate wealth, efforts to create such an appearance often signal a money laundering violation. International Transportation or Transmission The international concealment offense of Section 1956(a)(2)(B)(i) penalizes anyone who: 1. A. transports, transmits, or transfers,",
      " or B. attempts to transport, transmit, or transfer 2. a monetary instrument or funds 3. A. from a place in the U.S. to or through a place outside the U.S. or B. to a place in the U.S. from or through a place outside the U.S. 4. knowing they came from some form of unlawful activity, and 5. knowing the transportation, transmission, or transfer is designed to conceal or disguise A. the nature, B. location, C. source, D. ownership, or E. control of 6. the proceeds of a specified unlawful activity. The standard definitions and construction apply to several of the elements of Section 1956(a)(2)(B)'s international concealment offense.",
      " It is the deceptive laundering of the proceeds of state, federal, and foreign predicate offenses that the section proscribes, but only when the proceeds come in the form of \"a monetary instrument or funds.\" There is no consensus over whether the international money laundering proscriptions of Section 1956(a)(2)(B) reach international transactions that consist of a series of related transfers when the deceptive or evasive transfer in the series is committed entirely either before or after the international transfer. The Supreme Court, however, has made it clear that the concealment proscribed refers to the purpose for the transportation, not its method. The Court in Regalado Cuellar held that evidence that the defendant attempted to smuggle cash out of the United States was insufficient to support a prosecution for violation of Section 1956(a)(2)(B)(i), absent evidence of a design to conceal the ownership,",
      " source, nature, or ultimate location of the funds. It made it equally clear, however, that violations are not limited to those instances where the government can establish that the transportation was intended to create the appearance of legitimate wealth. A drafting quirk raises some question concerning the first knowledge element of the Section 1956(a)(2)(B) international transfer offense (\"knowing that the \u2026 funds involved \u2026 some form of unlawful activity\"). Elsewhere, the statute uses the phrase \"knowing that the property in a financial transaction.\" The statute then goes on to say that the phrase \"knowing that the property in a financial transaction\" means that the defendant need not know that \"unlawful activity\"",
      " which generates the laundered proceeds constitutes a money laundering predicate offense; it is enough that he knows that a state, federal, or foreign offense generates the proceeds. The statute provides no comparable caveat for the phrase, \"knowing that the \u2026 funds involve\u2026\" Nevertheless, at least one court has held that the same caveat applies to Section 1956(a)(2)(B) international offenses notwithstanding the differences in terminology. Stings The sting concealment offense in Section 1956(a)(3)(B) is much like the promotional sting offense and occurs when an offender: 1. with the intent to conceal or disguise A. the nature,",
      " B. location, C. source, D. ownership, or E. control of 2. property believed to be the proceeds of a specified unlawful activity 3. A. conducts or B. attempts to conduct a financial transaction 4. involving property represented to be A. the proceeds of specific unlawful activity or B. property used to conduct or facilitate specified unlawful activity. For purposes of the concealment element of Section 1956(a)(3)(B), exchanging small bills for larger ones may evidence an intent to conceal the location of the proceeds of a predicate offense since a large bill is more easily concealed than the small bills representing an equal amount.",
      " Other indicia of an intent to conceal include (1) \"unusual secrecy surrounding the transaction,\" (2) \"structuring the transactions to avoid attention,\" (3) \"depositing illegal funds with a legitimate enterprise,\" (4) \"highly irregular features of the transaction,\" (5) \"using third parties to conceal the real owner of the funds,\" and (6) \"unusual financial moves.\" The sting proscriptions are based on a belief rather than knowledge that the proceeds involved are those of a predicate offense. Nevertheless, a defendant is still not free to turn a blind eye to representations that the proceeds have a predicate offense taint.",
      " The \"financial transaction\" element of the offense demands, as in other Section 1956 offenses, either a transaction that affects interstate or foreign commerce or a transaction involving the use of a financial institution engaged in or whose activities affect interstate or foreign commerce. To satisfy the \"financial institution\" prong of the \"financial transaction\" element of the offense, the government need only establish that the transaction involved \"the use of a financial institution\" with an interstate or foreign commerce nexus, not that the institution was itself an integral or essential part of the transaction. To satisfy the \"transaction\" prong, the government need only establish a minimal effect on interstate commerce.",
      " The representational element does not require undercover agents to have told the defendant in so many words that the transaction involves the proceeds of a predicate offense; it is enough that they \"made the defendant aware of circumstances from which a reasonable person would infer that the property was [the proceeds of a predicate offense].\" Evading Reporting Requirements (Smurfing) Early anti-money laundering efforts sought to enlist the assistance of financial institutions. They were to report large cash transactions to the government. To avoid disclosure of their activities, money launderers sent forth a swarm of subordinates (\"smurfs\") who scurried from bank to bank where they engaged in layered or structured transactions so that no single transaction exceeded the threshold amount of the financial institution's reporting requirements.",
      " There are three anti-structuring Section 1956 offenses: one involving financial institutions; one involving international transactions; and one involving stings. The volume of case law, however, suggests that structuring prosecutions are more often brought under 31 U.S.C. \u00a7 5324, discussed infra. Financial Transactions The most common of the structuring offenses is that which involves a financial transaction, Section 1956(a)(1)(B)(ii), which forbids: 1. knowing A. that the property involved in a financial transaction, B. represents the proceeds of some form of unlawful activity, 2. A. conducts or B.",
      " attempts to conduct such a financial transaction 3. which in fact involves the proceeds of specified unlawful activity 4. with the intent to avoid a state or federal transaction reporting requirement. Implicit in the intent element is the obligation of the government to establish that the defendant knew of the reporting requirements. Section 1956's definitions apply to each offense, including the Section 1956(a)(1)(B)(ii) structuring offense. The phrase \"knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity\" means that the offender must know that the proceeds are derived from some violation of state, federal,",
      " or foreign law, but need not know they come from a predicate offense. \"Conducts\" includes the initiation or participation in a transaction. The required \"financial transaction\" is any disposition that either affects interstate or foreign commerce or involves either a financial institution engaged in, or whose activities affect, interstate or foreign commerce. The \"specified unlawful activities\" that must in fact have produced the proceeds involved in the transaction are the same state, federal, and foreign predicate offenses that trigger liability for other offenses in Section 1956. International Transportation or Transmission The international smurfing offense of Section 1956(a)(2)(B)(ii) is unusual in that it does not require the presence of proceeds of a predicate offense,",
      " as long as the funds are proceeds of some criminal offense. It penalizes anyone who: 1. A. transports, transmits, or transfers, or B. attempts to transport, transmit, or transfer 2. a monetary instrument or funds 3. A. from a place in the U.S. to or through a place outside the U.S. or B. to a place in the U.S. from or through a place outside the U.S. 4. knowing they represent the proceeds from some form of unlawful activity, and 5. knowing the transportation, transmission, or transfer is designed to avoid a state or federal transaction reporting requirement.",
      " The unlawful activity that generates the proceeds that are the subject of the offense apparently is any felonious violation of state, federal, or foreign law and need not be a predicate offense. Stings The sting structuring provision, in contrast, has a predicate offense element: 1. with the intent to avoid a state or federal transaction reporting requirement 2. A. conducts or B. attempts to conduct 3. a financial transaction 4. involving property represented to be A. the proceeds of specific unlawful activity or B. property used to conduct or facilitate specified unlawful activity. The representation element may be satisfied by \"hints\" from undercover officers that the property involved in the transaction comes from a predicate offense;",
      " the officers need not have said so in so many words. Tax Evasion The tax evasion money laundering offense must be tethered to a financial transaction, 18 U.S.C. 1956(a)(1)(A)(ii); there is no international or undercover counterpart. Financial Transactions Money laundering for tax evasion purposes occurs whenever a person: 1. knowing A. that the property involved in a financial transaction, B. represents the proceeds of some form of unlawful activity, 2. A. conducts or B. attempts to conduct such a financial transaction 3. which in fact involves the proceeds of specified unlawful activity 4. with the intent to engage in conduct in violation of 26 U.S.C.",
      " 7201 (attempt to evade or defeat tax) or 7206 (tax fraud or false tax statements). A tax evasion, laundering prosecution requires the government to show that the defendant acted intentionally rather than inadvertently, but not that the defendant knew that his conduct violated the tax laws. Conspiracy, Attempt, Aiding and Abetting Each of the 10 criminal proscriptions found in Section 1956 outlaws both the completed offense and the attempt to commit it. Attempt eliminates the need to proof each of the elements of the underlying offense. It requires no more than intent to violate the underlying offense and a \"substantial step\" towards that end.",
      " Conspiracy to commit a federal crime is a separate federal offense punishable by imprisonment for not more than five years. In addition, Section 1956(h) declares that \"[a]ny person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy.\" A casual reading might indicate that Section 1956(h) simply changes the penalty to match the other penalties for violating Section 1956. Section 1956(h), however, creates a separate crime. The distinction matters because violation of the general conspiracy statute is not complete until one of the conspirators commits an overt act in furtherance of the scheme.",
      " Section 1956(h) has no such overt act requirement. Conspiracy to violate Section 1956 carries with it the prospect of liability for any foreseeable offenses committed by co-conspirators in furtherance of the scheme. The confluence of the language of Section 1956(h) and that of the substantive offenses in Section 1956, each of which contains an attempt component, raises the curious possibility of a prosecution of conspiracy to attempt a violation of one of the substantive offenses. Although the case law is sparse, the courts appear to have acknowledged that \"conspiracy to attempt\" may constitute an indictable offense both as a general matter and in the case of Section 1956.",
      " The cases, however, do not discuss the offense's precise elements. Attempt ordinarily requires proof of an intent to commit the underlying offense and a substantial step towards that objective; conspiracy to attempt, whether in the absence of an overt act requirement or not, presumably requires something less. As a general matter, anyone who commands, counsels, or aids and abets the commission of a federal crime by another is equally culpable and equally punishable. \"In order to aid and abet another to commit a crime it is necessary that a defendant in some sort associated himself with the venture, that he participated in it as in something that he wishes to bring about,",
      " that he seek by his action to make it succeed.\"  Consequences Prison terms, fines, restitution, confiscation, and civil penalties may follow as a consequence of conviction of a money laundering offense. Imprisonment Any violation of Section 1956 is punishable by imprisonment for not more than 20 years. The first sentencing guidelines reflected the fact that Section 1956 was a 20-year felony and the anticipation that the section would apply primarily in cases in which drug trafficking and organized crime offenses were the predicate offenses. Thereafter, the Sentencing Commission became concerned about the application of the initial guidelines in cases involving less severely punished predicate offenses such as mail fraud.",
      " Subsequent amendments to the guidelines and penalty increases in some of the predicate offenses address that concern. Defendants sentenced to a term of imprisonment may also be subject to a term of supervised release of up to three years to be served upon their release from prison. Fines and Civil Penalties Violations of Section 1956(a)(1) and (a)(2), the financial institution and interstate or foreign transmission offenses, are punishable by a fine of no more than the greater of $500,000 or twice the value of the property involved in the offense. Sting violations are punishable by a fine of not more than the greater of $250,000 ($500,",
      "000 for an organization) or twice the amount involved in the offense. Violators of any provisions of Section 1956 are subject to a civil penalty of no more than the greater of $10,000 or the value of the property involved in the offense. Forfeiture Forfeiture is the confiscation of property to the government as a consequence of the property's proximity to some form of criminal activity. The government's claim to the property can be secured by default or through judicial proceedings conducted either civilly and ordinarily in rem (against the property itself) or as part of the criminal proceedings against the property owner. The proceeds of a confiscation are generally shared among the law enforcement agencies that participate in the investigation and prosecution of the forfeiture.",
      " Section 1956 provides a vehicle for civil or criminal confiscation in two very distinct ways. First, the \"proceeds\" of any Section 1956 predicate offense (and any property traceable to such proceeds) are subject to confiscation without the necessity of any actual violation of Section 1956. This permits the confiscation of property derived from crimes that might form the basis for a money laundering offense without having to prove that a money laundering offense occurred. Second, property \"involved\" in a Section 1956 money laundering offense (or property traceable to such involved property) may be confiscated. Involved property obviously includes more than the proceeds of the predicate offense,",
      " since the proceeds are separately forfeitable already. \"Property eligible for forfeiture under 18 U.S.C. \u00a7982(a)(1) includes that money or property which was actually laundered..., along with any commissions or fees paid to the launderer and any property used to facilitate the laundering offense.\"  In theory, confiscation might dip into both sides of a tainted transaction, the proceeds from the predicate offense and the cashier's check, real estate, jewelry, or sports car purchased with the proceeds in a laundering transaction. In practice, however, involved property has been construed to mean untainted property joined with the proceeds of a predicate offense as part of the laundering transaction.",
      " Property acquired in exchange for the proceeds or for the proceeds and other involved property is forfeitable as traceable property. The government may confiscate the property on either side of the transaction, but not the property on both sides. The Eighth Amendment prohibits excessive fines. Fines are excessive if they are grossly disproportionate to the gravity of the offender's misconduct. While the Excessive Fines Clause may impose limits upon the permissible extent of the confiscation for failure to comply with anti-money laundering reporting statutes, forfeitures under Section 1956 are not ordinarily considered excessive because of the gravity of the offense and of its predicate offenses. Venue The Constitution guarantees the accused the right to trial in the state in which the crime charged was committed and before a jury from the state and district in which the crime was committed.",
      " In United States v. Cabrales, the defendant was tried in Florida for laundering the proceeds of a Missouri drug trafficking ring. The Supreme Court held the Constitution requires that money laundering charges be tried in the state and district where the laundering occurred; trial in the state where the predicate offense drug trafficking occurred was not permissible alternative. The Court suggested, however, that trial in Florida have been permissible if the launderer was a co-conspirator in drug trafficking scheme or if he had participated in the transfer of the laundered property from the place where the predicate offense occurred (Missouri) to the place where the laundering occurred (Florida). Congress quickly amended Section 1956's venue provision in light of the Court's decision.",
      " 18 U.S.C. \u00a7 1957 Elements Unless there is some element of promotion, concealment, or evasion, Section 1956 does not make simply spending or depositing tainted money a separate crime. Section 1957 does. It outlaws otherwise innocent transactions contaminated by the origin of the property involved in the transaction. Using most of the same definitions as Section 1956, the elements of Section 1957 cover anyone who: 1. A. in the United States, B. in the special maritime or territorial jurisdiction of the United States, or C. outside the United States if the defendant is an American, 2.",
      " knowingly 3. A. engages or B. attempts to engage in 4. a monetary transaction 5. A.in or affecting U.S. interstate or foreign commerce, or B. committed by a U.S. national outside the U.S.  6. in criminally derived property that A. is of a greater value than $10,000 and B. is derived from specified unlawful activity. The courts often supply an abbreviated statement of the crime's elements. So it is said that \"In order to be found guilty of money laundering, 'a defendant must (1) knowingly engage, or attempt to engage in a monetary transaction,",
      " (2) know that the funds involved in the transaction are criminally derived, (3) use criminally derived funds in excess of $10,000 in the transaction, and (4) use funds derived from specified unlawful activity.'\"  At the heart of any Section 1957 offense lies a monetary transaction. A monetary transaction for purposes of Section 1957 is any deposit, withdrawal, or transfer of funds, in or affecting interstate or foreign commerce, and involving a financial institution. Numbered among the qualifying financial institutions are banks and credit unions, but also car dealerships, jewelers, casinos, stockbrokers, travel agents,",
      " and pawnbrokers, to mention a few. Section 1957 only applies to transactions involving $10,000 or more at the time of the transaction. The government's jurisdictional burden is comparable to the one it must bear for Section 1956 (a transaction in or affecting interstate or foreign commerce) and demands evidence of only a slight impact on commerce. The government must prove that the defendant knew the funds or other property in the transaction was \"criminally derived property,\" that is, the proceeds, or funds derived from the proceeds, of criminal activity. The government need not show that the defendant knew that proceeds were the product of a \"specified unlawful activity,\" but the proceeds must in fact be derived from a specified unlawful activity (predicate offense). The proceeds may consist of the gross receipts of crime (not merely its profits), and in most circuits proceeds are no less proceeds because they have been comingled with untainted funds.",
      "  Section 1957 contains an attorney's fee exception. It excludes from the \"monetary transaction\" element of the offense \"any transaction necessary to preserve a person's right to representation as guaranteed by the sixth amendment to the Constitution.\" The exception, however, reach no more than an individual's payment of services covered by the Sixth Amendment. It creates a safe harbor against prosecutions under Section 1957, but is no defense to a charge of promotional, concealment, or evasive money laundering under Section 1956. Conspiracy, Attempt, Aiding and Abetting Section 1957 proscribes attempts to violate its provisions. As a general rule,",
      " attempt requires proof of an intent to commit the underlying offense and the commission of a substantial step towards its completion. The general rules apply with respect to attempts to commit the offenses under Section 1956, and there is every reason to believe they apply to attempts to commit a violation of Section 1957. Section 1956(h) outlaws conspiracy to violate Section 1957. A conviction for conspiracy to violate the section requires the government to prove: \"(1) there was an agreement between two or more persons to commit money laundering and (2) that the defendant joined the agreement knowing its purpose and with the intent to further the illegal purpose.\" Section 1956(h)",
      " creates a crime which requires no proof of an overt act in furtherance of the conspiracy. In addition to the conspiracy offense, conspirators are liable for the foreseeable offenses committed by co-conspirators in furtherance of the scheme. Those who aid or abet the money laundering of another are likewise liable as though they had committed the offense themselves. Consequences Imprisonment Violation of Section 1957 and conspiracy to violate Section 1957 are each punishable by imprisonment for not more than 10 years. Under the recommendations of the Sentencing Guidelines, many offenders will be ineligible for a sentence of probation even as part of a split sentence.",
      " Where probation is available and imposed, the term must be not less than one nor more than five years. If imprisoned, offenders may also be subject to a term of supervised release of up to three years to be served after they leave prison. Fines Violation of Section 1957 and conspiracy to violate Section 1957 are each punishable by a fine of not more than the greater of $250,000 ($500,000 for an organization) or twice the amount involved in the transaction. Violators of Section 1957 are also subject to a civil penalty of no more than the greater of $10,000 or the value of the property involved in the offense.",
      " Forfeiture Any property involved in a violation of Section 1957 or traceable to property involved in a violation of Section 1957 is subject to confiscation under either civil or criminal procedures, and the applicable law is essentially the same as in the case of Section 1956. 18 U.S.C. \u00a7 1952: Travel Act The Travel Act, 18 U.S.C. \u00a7 1952, is one of the older members of the family of money laundering related criminal statutes. While Sections 1956 and 1957 punish transactions involving promoting, concealing, spending, and depositing tainted funds, the Travel Act punishes interstate or foreign travel (or use of the facilities of interstate or foreign commerce)",
      " conducted with the intent to (1) distribute the proceeds of a more modest list of predicate offenses (\"unlawful activity\"), (2) promote or carry on such offenses when there is an overt act in furtherance of that intent, or (3) commit some violent act in their furtherance. The first two variants bear some resemblance to the concealment and promotion offenses of Section 1956 and somewhat more remotely to the deposit/spending proscriptions of Section 1957. The violent crime component of the Travel Act is only coincidentally related to money laundering and consequently will be mentioned only in passing. The Travel Act's elements cover anyone who:",
      " 1. A. travels in interstate or foreign commerce, or B. uses any facility in interstate or foreign commerce, or C. uses the mail 2. with intent A. to distribute the proceeds of an unlawful activity, i.e., i. any business enterprise involving unlawful activities gambling, moonshining, drug dealing, or prostitution; or ii. extortion, bribery, or arson; or iii. any act which is indictable as money laundering; or B. commit an act of violence to further an unlawful activity; or C. to otherwise i. promote, ii. manage, iii. establish, iv. carry on, or v.",
      " facilitate the promotion, management, establishment, or carrying on any unlawful activity; and 3. thereafter A. distributes or attempts to distribute such proceeds, or B. commits or attempts to commit such act of violence, or C. promotes, manages, establishes, carries on, or facilitates the promotion, management, establishment, or carrying on such unlawful activities or attempts to do so. Distribution, Facilitation, and Violence The courts often abbreviate their statement of the Travel Act's elements to encompass only whichever of the versions\u2014distribution or promotion\u2014is at issue: Distribution \u2014 The essential elements of a violation under section 1952(a) are: \"(1)",
      " travel in interstate or foreign commerce; (2) with the specific intent to distribute the proceeds of an unlawful activity; and (3) knowing and willful commission of an act in furtherance of that intent.\" Promotion \u2014 The government must prove that \"(1) [the defendant] traveled in interstate or foreign commerce [or uses an interstate facility] (2) with the specific intent to promote, manage, establish, or carry on... any unlawful activity and (3) that [the defendant] committed a knowing and willful act in furtherance of that intent, subsequent to the act of travel in interstate commerce.\" The accused need not have been guilty of the unlawful activities that generated the distributed proceeds.",
      " \"Distribution\" in Section 1952(a)(1) \"carries a connotation of distribution of illegal proceeds to persons in organized crime conspiracies. Certainly the person receiving them must be entitled to them for reasons other than normal and otherwise lawful purchase and sale of goods at market prices.\" Distribution, however, does include distribution to \"pay off\" criminal associates, as well as the interstate transfer of criminal proceeds to a confederate for the purchase of a controlling interest in a bank in order to facilitate subsequent laundering. Actual distribution is not necessary for conviction; the offense simply involves interstate commerce; intent to distribute; and a subsequent attempt to distribute,",
      " meaning some action\u2014perhaps incomplete or unsuccessful\u2014in furtherance of the intent to distribute. The dimensions of the promotional offense are comparable. In addition to interstate travel or the use of interstate facilities with the requisite intent, it requires the performance or attempted performance of some subsequent overt act in furtherance of the intent to \"promote, manage, establish, carry on, or facilitate the promotion, management, establishment or carrying on\" of a predicate offense such as a business enterprise involving drug dealing. Since the statute condemns attempt and promotion rather than commission of a predicate act, the overt act need not constitute a completed predicate offense. The promotional travel offense encompasses forms of promoting,",
      " managing, and carrying on a predicate offense other than those that resemble money laundering, such as the interstate transportation of controlled substances or use of a cell phone (a facility in interstate commerce) to promote a predicate offense.  Travel, etc. Common to each of the three offenses is the jurisdictional element: interstate or foreign travel or the use of the mail or some other facility of interstate or foreign travel. When the Travel Act's jurisdictional element involves mail or facilities in interstate or foreign commerce, rather than interstate travel, evidence that a telephone was used, the Internet, or an ATM, or the facilitates of an interstate banking chain will do.",
      " The government is not required to show that the defendant used the facilities himself or that the use was critical to the success of the criminal venture. It is enough that he caused them to be used and that their employment was useful for his purposes. \"Substantive cases brought under 18 U.S.C. \u00a7 1952 have been uniform in their holdings that it is unnecessary to prove a defendant had actual knowledge of the jurisdictional element, and that he actually agreed and intended to use interstate facilities to commit a crime.\" Unlawful Activity The Travel Act's proceeds distribution, promotional, and violence in furtherance offenses all use the same list of predicate offenses (\"unlawful activity\"). The Travel Act's predicate offenses come in three stripes\u2014money laundering offenses;",
      " extortion-bribery-arson offenses; and offenses of the gambling, prostitution, drug dealing, and bootlegging \"businesses.\" The money laundering predicate offenses include Sections 1956 and 1957 as well as the currency transaction reporting offenses. The second class of Travel Act predicate offenses consists simply of the crimes of extortion, bribery, or arson committed in violation of state or federal law. The terms \"extortion,\" \"bribery,\" and \"arson\" as they appear in the Travel Act are generic; they mean what they were commonly understood to mean when the Travel Act was enacted, even if the common law definition is more restrictive or if the state law that proscribes them uses a different name.",
      " The final class of Travel Act predicates is more restrictive. It encompasses gambling, prostitution, drug dealing, and certain forms of tax evasion only when committed in conjunction with a \"business enterprise.\" A criminal business enterprise, as understood in the Travel Act, \"contemplates a continuous course of business \u2013 one that already exists at the time of the overt act or is intended thereafter. Evidence of an isolated criminal act, or even sporadic acts, will not suffice,\" and it must be shown to be involved in an unlawful activity outlawed by a specifically identified state or federal statute. Conspiracy, Aiding and Abetting Attempting to violate the Travel Act is not a federal offense.",
      " It is a crime to conspire to do so, however, or to aid and abet another to do so. The principles of accomplice and co-conspirator liability, discussed earlier, apply with equal force to the Travel Act. Coconspirators are liable for the crimes of their confederates committed in furtherance of the conspiracy. \"To support aider and abettor liability, [the] defendant must have had general knowledge regarding the activities prohibited under the Travel Act and the intent to assist those activities.\"  Consequences The money laundering-like distribution and facilitation offenses of the Travel Act, Sections 1952(a)(1)",
      " and 1952(a)(3), are punishable by imprisonment for not more than five years. Offenders subject to a fine of the greater of not more than $250,000 ($500,000 for organizations) or twice the gain or loss associated with the offense. If imprisoned, offenders may also be subject to a term of supervised release of up to three years to be served upon their release from prison. Property associated with a violation of Section 1952 is not subject to confiscation solely by virtue of that fact, although the property may be confiscated by operation of the laws governing a Section 1952 predicate offense or by operation of RICO or the money laundering provisions.",
      " For example, interstate travel conducted with the intent to distribute drug trafficking proceeds involving an act in furtherance of that intent is a violation of Section 1952. The proceeds are not subject to forfeiture as a consequence, but they are subject to confiscation by operation of the forfeiture provisions of the Controlled Substances Act. Moreover, Travel Act violations have been designated RICO predicate offenses and consequently qualify as money laundering predicates under Sections 1956 and 1957. Thus, to the extent that Travel Act proceeds are involved in a financial transaction or monetary transaction in violation of Section 1956 or 1957, they are subject to confiscation.",
      "  31 U.S.C. \u00a7 5322: Reporting Requirements Section 5322 penalizes willful violation of several monetary transaction reporting requirements found primarily in title 31 of the United States Code. The section's coverage extends to violations of the following sections and their attendant regulations: -31 U.S.C. \u00a7 5313 \u2013 financial institution reports of cash transactions involving $10,000 or more;  -31 U.S.C. \u00a7 5314 \u2013 reports by persons in the U.S. of foreign financial agency transactions; -31 U.S.C. \u00a7 5316 \u2013 reports by any person taking $10,000 in cash out of the U.S.",
      " or bringing it in; -31 U.S.C. \u00a7 5318 \u2013 suspicious transaction reports by financial institutions; -31 U.S.C. \u00a7 5318A \u2013 special measures record keeping and reports by financial institutions relating to foreign counter-money laundering concerns; -31 U.S.C. \u00a7 5325 \u2013 reports by financial institutions issuing cashier's checks in amounts of $3000 or more; -31 U.S.C. \u00a7 5326 \u2013 cash transaction reports by financial institutions and/or various trades or businesses pursuant to Treasury Department geographical orders; -31 U.S.C. \u00a7 5331 \u2013 reports of trades and businesses other than financial institutions of cash transactions involving $10,",
      "000 or more; -12 U.S.C. \u00a7 1829b \u2013 record keeping requirements of federally insured depository institutions; and -12 U.S.C. \u00a7 1953 \u2013 record keeping by uninsured banks or similar institutions. Section 5322 does not cover violations of Section 5315 (relating to foreign currency transaction reports) which are subject to the civil penalty provisions of 31 U.S.C. \u00a7 5321 or of Section 5324 (relating to structuring financial transactions) which carries its own criminal penalties.  In order to establish \"willful\" violation of Section 5322, the government must prove that the accused knew that his breach of the statute was unlawful.",
      " Simple violations of Section 5322 are punishable by imprisonment for not more than five years, a fine of not more than $250,000, or both. Violations committed during the commission of another federal crime or as part of a pattern of illegal activity involving more than $100,000 over the course of a year are punishable by imprisonment for not more than 10 years; a fine of not more than $500,000 (not more than $1 million for a special measures violation (31 U.S.C. 5318A)) or a violation involving a breach of due diligence with respect to private banking for foreign customers or foreign shell banks (31 U.S.C.",
      " 5318(i), (j)); or both. Section 5322 is a Travel Act predicate offense. It is also a RICO predicate offense, but unlike most RICO predicates is not a Section 1956 or 1957 money laundering predicate offense. Property associated with violations of two of the sections within its coverage is subject to confiscation. Under Section 5317(c), property becomes forfeitable when it is involved in, or traceable to, a violation of 31 U.S.C. \u00a7 5313 (reports relating to cash transactions involving $10,000 or more) or of 31 U.S.C. \u00a7 5316 (reports relating to taking $10,",
      "000 or more out of the U.S. or to bring it into the U.S.). The confiscation, however, may be subject to a constitutional limitation on excessive fine limitation. In United States v. Bajakajian, the Supreme Court held that the confiscation of $357,144 for a violation of 31 U.S.C. 5322 occasioned by a failure to comply with the reporting requirements of 31 U.S.C. \u00a7 5316 would constitute an unconstitutionally excessive fine\u2014in the absence of evidence that the money was derived from, or destined to facilitate, some other criminal activity. In later cases involving the failure to report transported cash,",
      " the courts have occasionally ordered confiscation of less than all of the unreported cash if the total was substantial and the cash was otherwise untainted. In most instances, however, Bajakajian appears to pose little obstacle to total or near total forfeiture. 31 U.S.C. \u00a7 5324: Anti-Structuring Structuring is organizing financial transactions or reports relating to financial transactions so as to evade reporting requirements, for example, by dividing a $12,000 bank deposit into three separate $4,000 deposits in order to evade the $10,000 reporting requirement. Section 5324 condemns three categories of structuring:",
      " one is devoted to transactions involving banks, credit unions, car dealerships, jewelers, casinos, and the other similar entities classified as financial institutions; another to cash transactions of $10,000 or more involving nonfinancial institutions; and a third to bringing $10,000 or more in cash into the country or taking it out of the country. There is no requirement that the funds in question were derived from criminal activity, or that the defendant knew that the structuring was illegal. Moreover, Section 5324 \"focuses on an individual's intent to evade the reporting requirements, not on whether he succeeds in doing so,\" and thus success is not an element of the offense.",
      "  Violations are punishable by imprisonment for not more than five years (not more than 10 years if committed in conjunction with another federal offense or if committed as part of a pattern of activity involving $100,000 or more) and a fine of not more than $250,000 (not more than $500,000 for organizations), with the fine maximum doubled if the offense is committed in conjunction with another federal crime or as part of a pattern of activity involving $100,000. Any property involved in a structuring violation of the section is subject to confiscation. Such forfeitures do not offend the Eighth Amendment's Excessive Fines Clause unless they are grossly disproportionate to the gravity of the offense.",
      " 31 U.S.C. \u00a7 5332: Bulk Cash Smuggling After the Supreme Court held in Bajakajian that the Excessive Fines Clause of the Eighth Amendment precluded confiscation of $300,000 of unreported, but otherwise untainted, cash, Congress enacted the bulk cash smuggling provisions of 31 U.S.C. \u00a7 5332. The section outlaws carrying or attempting to transport more than $10,000 in unreported, \"concealed\" cash across a U.S. border with the intent to evade 31 U.S.C. \u00a7 5316 reporting requirements. The section has been used to prosecute those who attempted to bring unreported cash into the United States,",
      " as well as those who attempted to smuggle cash out of the country. The fact that the money was neither derived from criminal activity nor intended for criminal purposes may be relevant for Eighth Amendment purposes, but it is no defense to the underlying offense. The proscribed methods of concealment seem to envelop any method short of public display. The offense carries a prison term of not more than five years, but also calls for confiscation of the cash and related property in lieu of a fine. The section was apparently enacted to overcome the consequences of Bajakajian. Initially, there may have been some question whether the effort had succeeded. 18 U.S.C.",
      " \u00a7 1960: Money Transmitters Section 1960 outlaws conducting or owning an unlicensed money transmitting business. \"Money transmitting\" is defined broadly by way of a nonexclusive list of examples, such as checks and wire transfers, and includes virtual currency such as Bitcoin. The term \"business\" restricts the offense to an enterprise conducted for profit and one engaged in more than a single qualifying transmission.  The section recognizes three categories of transmitting businesses. One consists of any transmission business operating in a state that requires it to be licensed and criminalizes the failure to do so. Here, the government must prove that the defendant knew that he was conducting a money transmitting business and that it was unlicensed.",
      " It need not prove the defendant knew that the state in which the defendant operated the business required him to seek a license or that the state outlawed transmission without a license.  The second category of unlicensed money transmitting businesses consists of any transmitting business operating in a manner that fails to comply with Department of the Treasury regulations governing such enterprises. Here, the government need not show that the defendant knew of federal regulatory requirements, but it must show that the defendant knew that he was operating a transmitting business. The third category consists of any licensed business that transmits money known to be derived from or intended to finance criminal activity even if the transmitter is duly licensed.",
      "  Section 1960 offenses are punishable by imprisonment for not more than five years and/or a fine of not more than $250,000 (not more than $500,000 for organizations). Property \"involved in\" violation of the section is subject to civil and criminal forfeiture. The section has withstood challenges arguing that it is unconstitutionally vague. Racketeer Influenced and Corrupt Organizations (RICO) As noted earlier, all RICO predicate offenses are by definition money laundering predicate offenses under Sections 1956 and 1957. The crimes that suggest the possibility of a RICO offense also suggest the possibility of money laundering.",
      " In some money laundering cases, although there is no separate RICO violation, prosecution is possible by virtue of the RICO shared predicate offense list. In a number of other cases, either money laundering is one of several predicate offenses of a larger RICO enterprise or the RICO enterprise is devoted primarily to money laundering. RICO makes it a federal crime for any person to: 1. conduct or participate, directly or indirectly, in the conduct of 2. the affairs of an enterprise 3. engaged in or the activities of which affect, interstate or foreign commerce 4. A. through the collection of an unlawful debt, or B.",
      " through a pattern of racketeering activity (predicate offenses). In other words, \"[f]or a defendant to convicted of a substantive RICO offense [under section 1962(c)], the government must prove the following elements beyond a reasonable doubt: (1) the existence of an enterprise; (2) that affected interstate commerce; and (3) that the defendant associated with the enterprise; (4) and conducted or participated in the conduct of the enterprise; (5) through a pattern of racketeering activity.\" The \"person\" who commits a RICO offense need not be a human being, but may be \"any individual or entity capable of holding a legal or beneficial interest in property.\" The \"enterprise\"",
      " element is defined with comparable breadth, embracing \"any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.\" In spite of their sweeping scope, the elements are distinct, and a single defendant may not be simultaneously charged as both the \"person\" and the \"enterprise\" under 18 U.S.C. \u00a7 1962(c). Subject to this limitation, however, a RICO enterprise may be formal or informal, legal or illegal. In order for a group associated in fact to constitute a RICO enterprise, the group need not have obvious hierarchical or business-like structure;",
      " it need only be characterized by \"at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit those associates to pursue the enterprise's purpose.\" The interstate commerce element of the RICO offense may be established by evidence that the enterprise either has conducted its affairs in interstate commerce or foreign commerce or has engaged in activities that affect interstate commerce or foreign commerce. The \"pattern of racketeering activity\" element demands the commission of at least two predicate offenses, which must be of sufficient relationship and continuity to be described as a \"pattern.\" Related crimes, for pattern purposes, are marked by \"the same or similar purposes,",
      " results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.\" The \"continuity\" of predicate offenses may be shown in two ways, either by proof of the regular occurrence of related misconduct over an extended period of time in the past (closed ended) or by evidence of circumstances suggesting that if not stopped by authorities, they would have continued in the future (open ended). The courts have been reluctant to find the continuity required for a RICO pattern for past, closed ended enterprises (those with no threat of future predicate offenses) unless the enterprise's activities spanned a fairly long period of time.",
      " Open ended continuity (found where there is a threat of future predicate offenses) is nowhere near as time sensitive and is often found where the predicates consist of murder, drug dealing or the like, or are part of the enterprise's regular way of doing business. Section 1962(d) outlaws conspiracy to violate any of Section 1962's substantive prohibitions; in the case of conspiracy to violate Section 1962(c), it outlaws any agreement of two or more to conduct the affairs of an enterprise through a pattern of RICO predicate offenses. The RICO conspiracy offense has no overt act requirement; the crime is complete upon the agreement to commit a RICO violation.",
      "  RICO violations are punishable by imprisonment for not more than 20 years (not more than life imprisonment if any of the applicable predicate offenses carries a life sentence). Offenders also face fines of up to $250,000 (up to $500,000 for organizations) as well as the confiscation of any property associated with the offense. Attachments Specified Unlawful Activities (Citations to Predicate Offenses: 18 U.S.C. \u00a7\u00a7 1956, 1957)(Maximum Terms of Imprisonment Noted) -7 U.S.C. \u00a7 2024 (Food Stamp Act of 1977 felony (violation involving a quantity of coupons having a value of not less than $5,",
      "000)) (various from 1 to 20 years); -8 U.S.C. \u00a7 1324 (bringing in and harboring certain aliens (committed for the purpose of financial gain)) (various from 5 years to life);* -8 U.S.C. \u00a7 1327 (aiding or assisting certain aliens to enter the United States (committed for the purpose of financial gain)) (10 years);* -8 U.S.C. \u00a7 1328 (importation of alien for immoral purpose (committed for the purpose of financial gain)) (10 years);* -15 U.S.C. \u00a7 77a et seq.",
      " (fraud in the sale of securities) (5 years);* -15 U.S.C. \u00a7 78ff (Foreign Corrupt Practices Act felony) (various from 5 to 20 years); -16 U.S.C. \u00a7 1538(a)(1)(certain violations of the Endangered Species Act involving species, items, or products valued at more than $10,000); -16 U.S.C. \u00a7 4223 (violations of the African Elephant Conversation Act involving species, items, or products valued at more than $10,000); -16 U.S.C. \u00a7 5303a (violations of the Rhinoceros and Tiger Conservation Act involving species,",
      " items, or products valued at more than $10,000);  -18 U.S.C. \u00a7 32 (destruction of aircraft) (20 years); -18 U.S.C. \u00a7 37 (violence at international airports) (20 years); -18 U.S.C. \u00a7 81 (arson within special maritime and territorial jurisdiction) (25 years);** -18 U.S.C. \u00a7 115 (influencing, impeding, or retaliating against a Federal official by threatening or injuring a family member) (various from 1 to 30 years); -18 U.S.C. \u00a7 152 (concealment of assets;",
      " false oaths and claims; bribery) (5 years); -18 U.S.C. \u00a7\u00a7 175-178 (biological weapons) (various from 5 years to life);* -18 U.S.C. \u00a7 175c (variola virus) (various from 25 years to life); -18 U.S.C. \u00a7 201 (bribery) (various from 2 to 15 years);* -18 U.S.C. \u00a7 215 (commissions or gifts for procuring loans) (various 1 to 30 years); -18 U.S.C. \u00a7 224 (sports bribery)",
      " (5 years);* -18 U.S.C. \u00a7\u00a7 229-229F (chemical weapons) (life);* -18 U.S.C. \u00a7 287 (federal health care offense relating to a benefit program) (5 years); -18 U.S.C. \u00a7 351 (violence against Members of Congress or Cabinet officers) (various from 1 year to life); -18 U.S.C. \u00a7 371 (conspiracy to commit a federal health care offense) (5 years);*** -18 U.S.C. \u00a7\u00a7 471, 472, and 473 (counterfeiting) (20 years);*",
      " -18 U.S.C. \u00a7\u00a7 500-503 (certain counterfeiting offenses) (5 years); -18 U.S.C. \u00a7 541 (goods falsely classified) (2 years); -18 U.S.C. \u00a7 542 (entry of goods by means of false statements) (2 years); -18 U.S.C. \u00a7 544 (smuggling goods from the United States) (2 years); -18 U.S.C. \u00a7 545 (smuggling goods into the United States) (20 years); -18 U.S.C. \u00a7 549 (removing goods from Customs custody) (10 years); -18 U.S.C.",
      " \u00a7 555 (border tunnels) (varies from 10 to 20 years); -18 U.S.C. \u00a7 641 (public money, property, or records) (various from 1 to 10 years); -18 U.S.C. \u00a7 656 (theft, embezzlement, or misapplication by bank officer or employee) (various from 1 to 30 years); -18 U.S.C. \u00a7 657 (lending, credit, and insurance institutions) (various from 1 to 30 years); -18 U.S.C. \u00a7 658 (property mortgaged or pledged to farm credit agencies)",
      " (various from 1 to 5 years); -18 U.S.C. \u00a7 659 (felonious theft from interstate shipment) (various from 3 to 10 years);* -18 U.S.C. \u00a7 664 (embezzlement from pension and welfare funds) (various from 1 to 10 years); -18 U.S.C. \u00a7 666 (theft or bribery concerning programs receiving Federal funds) (10 years); -18 U.S.C. \u00a7 669 (federal health care offense) (various from 1 to 10 years);*** -18 U.S.C.",
      " \u00a7\u00a7 793, 794, 798 (espionage) (various from 1 year to life); -18 U.S.C. \u00a7 831 (prohibited transactions involving nuclear materials) (various from 10 years to life); -18 U.S.C. \u00a7 832 (participation in foreign nuclear weapons programs) (various from 20 years to life);** -18 U.S.C. \u00a7 842(m), (n) (plastic explosives) (10 years);** -18 U.S.C. \u00a7 844(f), (i) (destruction by explosives or fire of Government property or property affecting interstate or foreign commerce)",
      " (various from 20 years to life); -18 U.S.C. \u00a7 875 (interstate communications) (various from 2 to 20 years); -18 U.S.C. \u00a7\u00a7 891-894 (extortionate credit transactions) (20 years);* -18 U.S.C. \u00a7 922(1) (unlawful importation of firearms) (5 years); -18 U.S.C. \u00a7 924(n) (firearms trafficking) (10 years); -18 U.S.C. \u00a7 930(c) (killing or attempted killing during an attack on a Federal facility with a dangerous weapon)",
      " (various from 7 years to life);** -18 U.S.C. \u00a7 956 (conspiracy to kill, kidnap, maim, or injure certain property in a foreign country) (various from 35 years to life); -18 U.S.C. \u00a7 1001 (false statement relating federal health care) (5 years); *** -18 U.S.C. \u00a7 1005 (fraudulent bank entries) (30 years); -18 U.S.C. \u00a7 1006 (fraudulent Federal credit institution entries) (30 years); -18 U.S.C. \u00a7 1007 (fraudulent Federal Deposit Insurance transactions)",
      " (30 years); -18 U.S.C. \u00a7 1014 (fraudulent loan or credit applications) (30 years); -18 U.S.C. \u00a7 1028 (fraud and related activity in connection with identification documents) (various from 1 to 30 years);* -18 U.S.C. \u00a7 1029 (fraud and related activity in connection with access devices) (various from 10 to 20 years);* -18 U.S.C. \u00a7 1030 (computer fraud and abuse) (various from 1 to 20 years); -18 U.S.C. \u00a7 1032 (concealment of assets from conservator,",
      " receiver, or liquidating agent of financial institution) (5 years); -18 U.S.C. \u00a7 1035 (false statements relating to federal health care) (5 years);*** -18 U.S.C. \u00a7 1084 (transmission of gambling information) (2 years);* -18 U.S.C. \u00a7 1111 (murder) (life); -18 U.S.C. \u00a7 1114 (killing a United States employee or officer) (various from 8 years to life); -18 U.S.C. \u00a7 1116 (killing a foreign official, official guest, or internationally protected person)",
      " (various from 7 years to life); -18 U.S.C. \u00a7 1201 (kidnapping) (life); -18 U.S.C. \u00a7 1203 (hostage taking) (life); -18 U.S.C. \u00a7 1341 (mail fraud) (various from 20 to 30 years);* -18 U.S.C. \u00a7 1343 (wire fraud) (various from 20 to 30 years);* -18 U.S.C. \u00a7 1344 (financial institution fraud) (30 years);* -18 U.S.C. \u00a7 1347 (federal health care fraud)",
      " (various from 20 years to life); -18 U.S.C. \u00a7 1351 (fraud in foreign labor contracting) (5 years);* -18 U.S.C. \u00a7 1361 (willful injury of Government property) (various from 1 to 10 years); -18 U.S.C. \u00a7 1362 (destruction of communication lines, stations, or systems) (10 years);** -18 U.S.C. \u00a7 1363 (destruction of property within the special maritime and territorial jurisdiction) (various from 5 to 20 years); -18 U.S.C.",
      " \u00a7 1366(a) (destruction of an energy facility) (20 years);** -18 U.S.C. \u00a7 1425 (procurement of citizenship or nationalization unlawfully) (various from 10 to 25 years);* -18 U.S.C. \u00a7 1426 (reproduction of naturalization or citizenship papers) (various from 10 to 25 years);* -18 U.S.C. \u00a7 1427 (sale of naturalization or citizenship papers) (various from 10 to 25 years);* -18 U.S.C. \u00a7\u00a7 1461-1465 (obscene matter)",
      " (various from 2 to 10 years);* -18 U.S.C. \u00a7 1503 (obstruction of justice) (various from 8 years to life);* -18 U.S.C. \u00a7 1510 (relating to obstruction of criminal investigations) (5 years);* -18 U.S.C. \u00a7 1511 (obstruction of State or local law enforcement) (5 years);* -18 U.S.C. \u00a7 1512 (tampering with a witness, victim, or an informant) (various from 3 years to life);* -18 U.S.C. \u00a7 1513 (retaliating against a witness,",
      " victim, or an informant) (various from 8 years to life);* -18 U.S.C. \u00a7 1518 (obstructing a federal health care investigation) (5 years); *** -18 U.S.C. \u00a7 1542 (false statement in application and use of passport) (various from 10 to 25 years);* -18 U.S.C. \u00a7 1543 (forgery or false use of passport) (various from 10 to 25 years);* -18 U.S.C. \u00a7 1544 (misuse of passport) (various from 10 to 25 years);*",
      " -18 U.S.C. \u00a7 1546 (fraud and misuse of visas, permits, and other documents) (various from 10 to 25 years);* -18 U.S.C. \u00a7\u00a7 1581-1592 (peonage, slavery, and trafficking in persons) (various from 2 years to life);* -18 U.S.C. \u00a7 1708 (theft from the mail) (5 years); -18 U.S.C. \u00a7 1751 (violence against the President) (various from 1 year to life); -18 U.S.C. \u00a7 1831 (economic espionage)",
      " (15 years);* -18 U.S.C. \u00a7 1832 (theft of trade secrets) (10 years);*  -18 U.S.C. \u00a7 1951 (interference with commerce, robbery, or extortion) (20 years);* -18 U.S.C. \u00a7 1952 (racketeering (Travel Act)) (various from 5 years to life);* -18 U.S.C. \u00a7 1953 (interstate transportation of wagering paraphernalia) (5 years);* -18 U.S.C. \u00a7 1954 (unlawful welfare fund payments) (3 years);*",
      " -18 U.S.C. \u00a7 1955 (illegal gambling businesses) (5 years);* -18 U.S.C. \u00a7 1956 (laundering of monetary instruments) (20 years);* -18 U.S.C. \u00a7 1957 (engaging in monetary transactions in property derived from specified unlawful activity) (10 years);* -18 U.S.C. \u00a7 1958 (use of interstate commerce facilities in the commission of murder-for-hire) (various from 10 years to life);* -18 U.S.C. \u00a7 1960 (money transmitters) (5 years);*",
      " -18 U.S.C. \u00a7 1992 (attacks and other acts of violence against mass transportation systems) (various from 20 years to life);** -18 U.S.C. \u00a7\u00a7 2113, 2114 (bank and postal robbery and theft) (various from 1 year to life); -18 U.S.C. \u00a7 2155 (destruction of national defense materials, premises, or utilities) (various from 20 years to life);** -18 U.S.C. \u00a7 2156 (national defense material, premises, or utilities) (10 years);** -18 U.S.C.",
      " \u00a7\u00a7 2251, 2251A, 2252, 2252A, and 2260 (sexual exploitation of children) (various from 10 years to life);* -18 U.S.C. \u00a7 2280 (violence against maritime navigation) (various from 20 years to life); -18 U.S.C. \u00a7 2280a (violence against maritime navigation involving weapons of mass destruction) (varies from 5 years to life);** -18 U.S.C. \u00a7 2281 (violence against maritime fixed platforms) (various from 20 years to life); -18 U.S.C.",
      " \u00a7 2281a (additional offenses against maritime fixed platforms (varies from 5 years to life);** -18 U.S.C. \u00a7\u00a7 2312, 2313 (interstate transportation of stolen motor vehicles) (10 years);* -18 U.S.C. \u00a7\u00a7 2314, 2315 (interstate transportation of stolen property) (10 years); -18 U.S.C. \u00a7 2318 (trafficking in counterfeit labels for phonorecords, computer programs or computer program documentation or packaging and copies of motion pictures or other audiovisual works) (5 years);* -18 U.S.C.",
      " \u00a7 2319 (criminal infringement of a copyright) (various from 1 to 5 years);* -18 U.S.C. \u00a7 2319A (relating to unauthorized fixation of and trafficking in sound recordings and music videos of live musical performances) (various from 5 to 10 years);* -18 U.S.C. \u00a7 2320 (trafficking in goods or services bearing counterfeit marks) (various from 10 to 20 years);* -18 U.S.C. \u00a7 2321 (trafficking in certain motor vehicles or motor vehicle parts) (10 years);* -18 U.S.C.",
      " \u00a7 2332 (terrorist acts abroad against United States nationals) (various from 3 years to life); -18 U.S.C. \u00a7 2332a (use of weapons of mass destruction) (life); -18 U.S.C. \u00a7 2332b (international terrorist acts transcending national boundaries) (various from 10 years to life); -18 U.S.C. \u00a7 2332f (bombing of public places and facilities) (life);** -18 U.S.C. \u00a7 2332g (missile systems designed to destroy aircraft) (life); -18 U.S.C.",
      " \u00a7 2332h (radiological dispersal devices) (life);  -18 U.S.C. \u00a7 2332i (nuclear terrorism) (life);** -18 U.S.C. \u00a7 2339 (harboring terrorists) (10 years);** -18 U.S.C. \u00a7\u00a7 2339A, 2339B (providing material support to terrorists) (various from 15 years to life); -18 U.S.C. \u00a7 2339C (financing of terrorism) (various from 10 to 20 years);** -18 U.S.C. \u00a7 2339D (foreign military training)",
      " (10 years)** -18 U.S.C. \u00a7 2340A (torture) (various from 20 years to life); -18 U.S.C. \u00a7\u00a7 2341-2346 (trafficking in contraband cigarettes) (various from 3 to 5 years);* -18 U.S.C. \u00a7\u00a7 2421-2424 (white slave traffic) (various from 10 years to life);* -19 U.S.C. \u00a7 1590 (aviation smuggling) (various from 5 to 20 years); -21 U.S.C. \u00a7 841 et seq.",
      " (felonious manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in a controlled substance or listed chemical) (various from 1 year to life);* -21 U.S.C. \u00a7 863 (drug paraphernalia) (3 years); -21 U.S.C. \u00a7 960A (narc-terrorism) (various from 2 years to life);** -22 U.S.C. \u00a7 2778(c) (Arms Export Control Act) (10 years); -22 U.S.C. \u00a7 611 et seq. (Foreign Agents Registration Act of 1938 felony)",
      " (various from 1 to 5 years); -22 U.S.C. \u00a7 9214 (North Korea Sanctions Enforcement Act violations) (20 years); -29 U.S.C. \u00a7 186 (dealing with restrictions on payments and loans to labor organizations) (various from 1 to 5 years);* -29 U.S.C. \u00a7 501(c) (embezzlement from union funds) (5 years);* -33 U.S.C. \u00a7 1251 et seq. (Federal Water Pollution Control Act felony) (various from 1 to 15 years); -33 U.S.C.",
      " \u00a7 1401 et seq. (Ocean Dumping Act felony) (5 years); -33 U.S.C. \u00a7 1901 et seq. (Act to Prevent Pollution from Ships felony) (6 years); -42 U.S.C. \u00a7 300f et seq. (Safe Drinking Water Act felony) (various from 3 to 20 years); -42 U.S.C. \u00a7 1490s(a)(1) (Housing Act of 1949 (equity skimming)) (5 years); -42 U.S.C. \u00a7 2122 (atomic weapons) (life); -42 U.S.C.",
      " \u00a7 2284 (sabotage of nuclear facilities or fuel) (various from 20 years to life);** -42 U.S.C. \u00a7 6901 et seq. (Resources Conservation and Recovery Act felony) (various from 2 to 15 years); -49 U.S.C. \u00a7 46502 of title 49 (air piracy) (life); -49 U.S.C. \u00a7 46504 (second sentence) (relating to assault on a flight crew with a dangerous weapon) (various from 20 years to life);** -49 U.S.C. \u00a7 46505(b)(3), (c)",
      " (explosive or incendiary devices, or endangerment of human life by means of weapons, on aircraft) (various from 10 to 20 years);** -49 U.S.C. \u00a7 46506 (if homicide or attempted homicide is involved) (application of certain criminal laws to acts on aircraft) (various from 7 years to life);** -49 U.S.C. \u00a7 60123(b) (destruction of interstate gas or hazardous liquid pipeline facility) (various from 5 years to life);** -50 U.S.C. \u00a7 1705 (International Emergency Economic Powers Act)",
      " (20 years); -50 U.S.C. App. \u00a7 16 (Trading with the Enemy Act) (10 years). State Money Laundering Laws (Citations) State Money Transmission Laws (Citations) Selected Federal Money Laundering Laws (Text) 18 U.S.C. \u00a7 1956. Laundering of monetary instruments (a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity\u2013 (A)(i) with the intent to promote the carrying on of specified unlawful activity;",
      " or (ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or (B) knowing that the transaction is designed in whole or in part\u2013 (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years,",
      " or both. For purposes of this paragraph, a financial transaction shall be considered to be one involving the proceeds of specified unlawful activity if it is part of a set of parallel or dependent transactions, any one of which involves the proceeds of specified unlawful activity, and all of which are part of a single plan or arrangement. (2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States\u2013 (A) with the intent to promote the carrying on of specified unlawful activity;",
      " or (B) knowing that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part\u2013 (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer whichever is greater,",
      " or imprisonment for not more than twenty years, or both. For the purpose of the offense described in subparagraph (B), the defendant's knowledge may be established by proof that a law enforcement officer represented the matter specified in subparagraph (B) as true, and the defendant's subsequent statements or actions indicate that the defendant believed such representations to be true. (3) Whoever, with the intent\u2013 (A) to promote the carrying on of specified unlawful activity; (B) to conceal or disguise the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity; or (C) to avoid a transaction reporting requirement under State or Federal law,",
      " conducts or attempts to conduct a financial transaction involving property represented to be the proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful activity, shall be fined under this title or imprisoned for not more than 20 years, or both. For purposes of this paragraph and paragraph (2), the term \"represented\" means any representation made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official authorized to investigate or prosecute violations of this section. (b) Penalties.\u2013 (1) In general.\u2013 Whoever conducts or attempts to conduct a transaction described in subsection (a)(1)",
      " or (a)(3), or section 1957, or a transportation, transmission, or transfer described in subsection (a)(2), is liable to the United States for a civil penalty of not more than the greater of\u2013 (A) the value of the property, funds, or monetary instruments involved in the transaction; or (B) $10,000. (2) Jurisdiction over foreign persons.\u2013 For purposes of adjudicating an action filed or enforcing a penalty ordered under this section, the district courts shall have jurisdiction over any foreign person, including any financial institution authorized under the laws of a foreign country, against whom the action is brought,",
      " if service of process upon the foreign person is made under the Federal Rules of Civil Procedure or the laws of the country in which the foreign person is found, and\u2013 (A) the foreign person commits an offense under subsection (a) involving a financial transaction that occurs in whole or in part in the United States; (B) the foreign person converts, to his or her own use, property in which the United States has an ownership interest by virtue of the entry of an order of forfeiture by a court of the United States; or (C) the foreign person is a financial institution that maintains a bank account at a financial institution in the United States.",
      " (3) Court authority over assets.\u2013 A court may issue a pretrial restraining order or take any other action necessary to ensure that any bank account or other property held by the defendant in the United States is available to satisfy a judgment under this section. (4) Federal receiver.\u2013 (A) In general.\u2013A court may appoint a Federal Receiver, in accordance with subparagraph (B) of this paragraph, to collect, marshal, and take custody, control, and possession of all assets of the defendant, wherever located, to satisfy a civil judgment under this subsection, a forfeiture judgment under section 981 or 982, or a criminal sentence under section 1957 or subsection (a)",
      " of this section, including an order of restitution to any victim of a specified unlawful activity. (B) Appointment and authority.\u2013A Federal Receiver described in subparagraph (A)\u2013 (i) may be appointed upon application of a Federal prosecutor or a Federal or State regulator, by the court having jurisdiction over the defendant in the case; (ii) shall be an officer of the court, and the powers of the Federal Receiver shall include the powers set out in section 754 of title 28, United States Code; and (iii) shall have standing equivalent to that of a Federal prosecutor for the purpose of submitting requests to obtain information regarding the assets of the defendant\u2013 (I)",
      " from the Financial Crimes Enforcement Network of the Department of the Treasury; or (II) from a foreign country pursuant to a mutual legal assistance treaty, multilateral agreement, or other arrangement for international law enforcement assistance, provided that such requests are in accordance with the policies and procedures of the Attorney General. (c) As used in this section\u2013 (1) the term \"knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity\" means that the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under State, Federal, or foreign law,",
      " regardless of whether or not such activity is specified in paragraph (7); (2) the term \"conducts\" includes initiating, concluding, or participating in initiating, or concluding a transaction; (3) the term \"transaction\" includes a purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition, and with respect to a financial institution includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, use of a safe deposit box, or any other payment, transfer, or delivery by,",
      " through, or to a financial institution, by whatever means effected; (4) the term \"financial transaction\" means (A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or  (ii) involving one or more monetary instruments, or  (iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or  (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree; (5) the term \"monetary instruments\"",
      " means (i) coin or currency of the United States or of any other country, travelers' checks, personal checks, bank checks, and money orders, or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery; (6) the term \"financial institution\" includes\u2013 (A) any financial institution, as defined in section 5312(a)(2) of title 31, United States Code, or the regulations promulgated thereunder; and (B) any foreign bank, as defined in section 1 of the International Banking Act of 1978 (12 U.S.C.",
      " 3101); (7) the term \"specified unlawful activity\" means\u2013 (A) any act or activity constituting an offense listed in section 1961(1) of this title except an act which is indictable under subchapter II of chapter 53 of title 31; (B) with respect to a financial transaction occurring in whole or in part in the United States, an offense against a foreign nation involving\u2013 (i) the manufacture, importation, sale, or distribution of a controlled substance (as such term is defined for the purposes of the Controlled Substances Act); (ii) murder, kidnapping, robbery,",
      " extortion, destruction of property by means of explosive or fire, or a crime of violence (as defined in section 16); (iii) fraud, or any scheme or attempt to defraud, by or against a foreign bank (as defined in paragraph 7 of section 1(b) of the International Banking Act of 1978); (iv) bribery of a public official, or the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official; (v) smuggling or export control violations involving\u2013 (I) an item controlled on the United States Munitions List established under section 38 of the Arms Export Control Act (22 U.S.C.",
      " 2778); or (II) an item controlled under regulations under the Export Administration Regulations (15 C.F.R. Parts 730-774); (vi) an offense with respect to which the United States would be obligated by a multilateral treaty, either to extradite the alleged offender or to submit the case for prosecution, if the offender were found within the territory of  to influencing, impeding, or retaliating against a Federal official by threatening or injuring a family the United States; or (vii) trafficking in persons, selling or buying children, sexual exploitation of children, or transporting, recruiting or harboring a person, including a child,",
      " for commercial sex acts; (C) any act or acts constituting a continuing criminal enterprise, as that term is defined in section 408 of the Controlled Substances Act (21 U.S.C. 848); (D) an offense under section 32 (relating to the destruction of aircraft), section 37 (relating to violence at international airports), section 115 (relating to influencing, impeding, or retaliating against a Federal official by threatening or injuring a family member), section 152 (relating to concealment of assets; false oaths and claims; bribery), section 175c (relating to the variola virus), section 215 (relating to commissions or gifts for procuring loans), section 351 (relating to congressional or Cabinet officer assassination), any of sections 500 through 503 (relating to certain counterfeiting offenses), section 513 (relating to securities of States and private entities), section 541 (relating to goods falsely classified), section 542 (relating to entry of goods by means of false statements), section 545 (relating to smuggling goods into the United States), section 549 (relating to removing goods from Customs custody), section 554 (relating to smuggling goods from the United States), section 555 (relating to border tunnels), section 641 (relating to public money,",
      " property, or records), section 656 (relating to theft, embezzlement, or misapplication by bank officer or employee), section 657 (relating to lending, credit, and insurance institutions), section 658 (relating to property mortgaged or pledged to farm credit agencies), section 666 (relating to theft or bribery concerning programs receiving Federal funds), section 793, 794, or 798 (relating to espionage), section 831 (relating to prohibited transactions involving nuclear materials), section 844(f) or (i) (relating to destruction by explosives or fire of Government property or property affecting interstate or foreign commerce), section 875 (relating to interstate communications), section 922(l)",
      " (relating to the unlawful importation of firearms), section 924(n) (relating to firearms trafficking), section 956 (relating to conspiracy to kill, kidnap, maim, or injure certain property in a foreign country), section 1005 (relating to fraudulent bank entries), 1006\u00a0 2 (relating to fraudulent Federal credit institution entries), 1007\u00a0 (relating to Federal Deposit Insurance transactions), 1014\u00a0 2 (relating to fraudulent loan or credit applications), section 1030 (relating to computer fraud and abuse), 1032\u00a0 2 (relating to concealment of assets from conservator,",
      " receiver, or liquidating agent of financial institution), section 1111 (relating to murder), section 1114 (relating to murder of United States law enforcement officials), section 1116 (relating to murder of foreign officials, official guests, or internationally protected persons), section 1201 (relating to kidnaping), section 1203 (relating to hostage taking), section 1361 (relating to willful injury of Government property), section 1363 (relating to destruction of property within the special maritime and territorial jurisdiction), section 1708 (theft from the mail), section 1751 (relating to Presidential assassination), section 2113 or 2114 (relating to bank and postal robbery and theft), section 2252A (relating to child pornography)",
      " where the child pornography contains a visual depiction of an actual minor engaging in sexually explicit conduct, section 2260 (production of certain child pornography for importation into the United States), section 2280 (relating to violence against maritime navigation), section 2281 (relating to violence against maritime fixed platforms), section 2319 (relating to copyright infringement), section 2320 (relating to trafficking in counterfeit goods and services), section 2332 (relating to terrorist acts abroad against United States nationals), section 2332a (relating to use of weapons of mass destruction), section 2332b (relating to international terrorist acts transcending national boundaries), section 2332g (relating to missile systems designed to destroy aircraft), section 2332h (relating to radiological dispersal devices), section 2339A or 2339B (relating to providing material support to terrorists), section 2339C (relating to financing of terrorism), or section 2339D (relating to receiving military-type training from a foreign terrorist organization)",
      " of this title, section 46502 of title 49, United States Code, a felony violation of the Chemical Diversion and Trafficking Act of 1988 (relating to precursor and essential chemicals), section 590 of the Tariff Act of 1930 ( 19 U.S.C. 1590 ) (relating to aviation smuggling), section 422 of the Controlled Substances Act (relating to transportation of drug paraphernalia), section 38(c) (relating to criminal violations) of the Arms Export Control Act, section 11 (relating to violations) of the Export Administration Act of 1979,",
      " section 206 (relating to penalties) of the International Emergency Economic Powers Act, section 16 (relating to offenses and punishment) of the Trading with the Enemy Act, any felony violation of section 15 of the Food and Nutrition Act of 2008 (relating to supplemental nutrition assistance program benefits fraud) involving a quantity of benefits having a value of not less than $5,000, any violation of section 543(a)(1) of the Housing Act of 1949 (relating to equity skimming), any felony violation of the Foreign Agents Registration Act of 1938, any felony violation of the Foreign Corrupt Practices Act,",
      " section 92 of the Atomic Energy Act of 1954 ( 42 U.S.C. 2122 ) (relating to prohibitions governing atomic weapons), or section 104(a) of the North Korea Sanctions Enforcement Act of 2016\u00a0 (relating to prohibited activities with respect to North Korea); (E) a felony violation of the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Ocean Dumping Act (33 U.S.C. 1401 et seq.), the Act to Prevent Pollution from Ships (33 U.S.C. 1901 et seq.), the Safe Drinking Water Act (42 U.S.C.",
      " 300f et seq.), or the Resources Conservation and Recovery Act (42 U.S.C. 6901 et seq.);  (F) any act or activity constituting an offense involving a Federal health care offense; or (G) any act that is a criminal violation of subparagraph (A), (B), (C), (D), (E), or (F) of paragraph (1) of section 9(a) of the Endangered Species Act of 1973 ( 16 U.S.C. 1538(a)(1) ), section 2203 of the African Elephant Conservation Act ( 16 U.S.C.",
      " 4223 ), or section 7(a) of the Rhinoceros and Tiger Conservation Act of 1994 ( 16 U.S.C. 5305a(a) ), if the endangered or threatened species of fish or wildlife, products, items, or substances involved in the violation and relevant conduct, as applicable, have a total value of more than $10,000; (8) the term \"State\" includes a State of the United States, the District of Columbia, and any commonwealth, territory, or possession of the United States; and (9) the term \"proceeds\" means any property derived from or obtained or retained,",
      " directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity. (d) Nothing in this section shall supersede any provision of Federal, State, or other law imposing criminal penalties or affording civil remedies in addition to those provided for in this section. (e) Violations of this section may be investigated by such components of the Department of Justice as the Attorney General may direct, and by such components of the Department of the Treasury as the Secretary of the Treasury may direct, as appropriate, and, with respect to offenses over which the Department of Homeland Security has jurisdiction, by such components of the Department of Homeland Security as the Secretary of Homeland Security may direct,",
      " and, with respect to offenses over which the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary of the Treasury, the Secretary of Homeland Security, and the Postal Service shall be exercised in accordance with an agreement which shall be entered into by the Secretary of the Treasury, the Secretary of Homeland Security, the Postal Service, and the Attorney General. Violations of this section involving offenses described in paragraph (c)(7)(E) may be investigated by such components of the Department of Justice as the Attorney General may direct, and the National Enforcement Investigations Center of the Environmental Protection Agency. (f) There is extraterritorial jurisdiction over the conduct prohibited by this section if\u2013 (1)",
      " the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States; and (2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000. (g) Notice of conviction of financial institutions.\u2013If any financial institution or any officer, director, or employee of any financial institution has been found guilty of an offense under this section, section 1957 or 1960 of this title, or section 5322 or 5324 of title 31, the Attorney General shall provide written notice of such fact to the appropriate regulatory agency for the financial institution.",
      " (h) Any person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy. (i) Venue.\u2013 (1) Except as provided in paragraph (2), a prosecution for an offense under this section or section 1957 may be brought in\u2013 (A) any district in which the financial or monetary transaction is conducted; or (B) any district where a prosecution for the underlying specified unlawful activity could be brought, if the defendant participated in the transfer of the proceeds of the specified unlawful activity from that district to the district where the financial or monetary transaction is conducted.",
      " (2) A prosecution for an attempt or conspiracy offense under this section or section 1957 may be brought in the district where venue would lie for the completed offense under paragraph (1), or in any other district where an act in furtherance of the attempt or conspiracy took place. (3) For purposes of this section, a transfer of funds from 1 place to another, by wire or any other means, shall constitute a single, continuing transaction. Any person who conducts (as that term is defined in subsection (c)(2)) any portion of the transaction may be charged in any district in which the transaction takes place.  18 U.S.C.",
      " \u00a7 1957. Engaging in monetary transactions in property derived from specified unlawful activity (a) Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived property that is of a value greater than $10,000 and is derived from specified unlawful activity, shall be punished as provided in subsection (b). (b)(1) Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for not more than ten years or both. If the offense involves a pre-retail medical product (as defined in section 670)",
      " the punishment for the offense shall be the same as the punishment for an offense under section 670 unless the punishment under this subsection is greater. (2) The court may impose an alternate fine to that imposable under paragraph (1) of not more than twice the amount of the criminally derived property involved in the transaction. (c) In a prosecution for an offense under this section, the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity. (d) The circumstances referred to in subsection (a) are \u2013 (1) that the offense under this section takes place in the United States or in the special maritime and territorial jurisdiction of the United States;",
      " or (2) that the offense under this section takes place outside the United States and such special jurisdiction, but the defendant is a United States person (as defined in section 3077 of this title, but excluding the class described in paragraph (2)(D) of such section). (e) Violations of this section may be investigated by such components of the Department of Justice as the Attorney General may direct, and by such components of the Department of the Treasury as the Secretary of the Treasury may direct, as appropriate, and, with respect to offenses over which the Department of Homeland Security has jurisdiction, by such components of the Department of Homeland Security as the Secretary of Homeland Security may direct,",
      " and, with respect to offenses over which the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary of the Treasury, the Secretary of Homeland Security, and the Postal Service shall be exercised in accordance with an agreement which shall be entered into by the Secretary of the Treasury, the Secretary of Homeland Security, the Postal Service, and the Attorney General. (f) As used in this section\u2013 (1) the term \"monetary transaction\" means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5)",
      " of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term does not include any transaction necessary to preserve a person's right to representation as guaranteed by the sixth amendment to the Constitution; (2) the term \"criminally derived property\" means any property constituting, or derived from, proceeds obtained from a criminal offense; and (3) the term \"specified unlawful activity\" and \"proceeds\" shall have the meaning given that term in section 1956 of this title.",
      " Travel Act: 18 U.S.C. \u00a7 1952. Interstate and foreign travel or transportation in aid of racketeering enterprises (a) Whoever travels in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce, with intent to\u2013 (1) distribute the proceeds of any unlawful activity; or (2) commit any crime of violence to further any unlawful activity; or (3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity, and thereafter performs or attempts to perform\u2013 (A) an act described in paragraph (1)",
      " or (3) shall be fined under this title, imprisoned not more than five years, or both; or (B) an act described in paragraph (2) shall be fined under this title, imprisoned for not more than 20 years, or both, and if death results shall be imprisoned for any term of years or for life. (b) As used in this section (i) \"unlawful activity\" means  (1) any business enterprise involving gambling, liquor on which the Federal excise tax has not been paid, narcotics or controlled substances (as defined in section 102(6) of the Controlled Substances Act), or prostitution offenses in violation of the laws of the State in which they are committed or of the United States,",
      "  (2) extortion, bribery, or arson in violation of the laws of the State in which committed or of the United States, or (3) any act which is indictable under subchapter II of chapter 53 of title 31, United States Code, or under section 1956 or 1957 of this title and (ii) the term \"State\" includes a State of the United States, the District of Columbia, and any commonwealth, territory, or possession of the United States. (c) Investigations of violations under this section involving liquor shall be conducted under the supervision of the Attorney General. (d) If the offense under this section involves an act described in paragraph (1)",
      " or (3) of subsection (a) and also involves a pre-retail medical product (as defined in section 670), the punishment for the offense shall be the same as the punishment for an offense under section 670 unless the punishment under subsection (a) is greater. (e)(1) This section shall not apply to a savings promotion raffle conducted by an insured depository institution or an insured credit union. (2) In this subsection- (A) the term \"insured credit union\" shall have the meaning given the term in section 101 of the Federal Credit Union Act ( 12 U.S.C. 1752 ); (B)",
      " the term \"insured depository institution\" shall have the meaning given the term in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 ); and (C) the term \"savings promotion raffle\" means a contest in which the sole consideration required for a chance of winning designated prizes is obtained by the deposit of a specified amount of money in a savings account or other savings program, where each ticket or entry has an equal chance of being drawn, such contest being subject to regulations that may from time to time be promulgated by the appropriate prudential regulator (as defined in section 1002 of the Consumer Financial Protection Act of 2010 ( 12 U.S.C.",
      " 5481 )). 31 U.S.C. \u00a7 5322: Reporting Requirements (a) A person willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except section 5315 or 5324 of this title or a regulation prescribed under section 5315 or 5324), or willfully violating a regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508, shall be fined not more than $250,000, or imprisoned for not more than five years, or both. (b) A person willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except section 5315 or 5324 of this title or a regulation prescribed under section 5315 or 5324), or willfully violating a regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-",
      "508, while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period, shall be fined not more than $500,000, imprisoned for not more than 10 years, or both. (c) For a violation of section 5318(a)(2) of this title or a regulation prescribed under section 5318(a)(2), a separate violation occurs for each day the violation continues and at each office, branch, or place of business at which a violation occurs or continues. (d) A financial institution or agency that violates any provision of subsection (i)",
      " or (j) of section 5318, or any special measures imposed under section 5318A, or any regulation prescribed under subsection (i) or (j) of section 5318 or section 5318A, shall be fined in an amount equal to not less than 2 times the amount of the transaction, but not more than $1,000,000. 31 U.S.C. \u00a7 5324. Structuring transactions to evade reporting requirement prohibited (a) Domestic coin and currency transactions involving financial institutions.\u2013No person shall, for the purpose of evading the reporting requirements of section 5313(a)",
      " or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508\u2013 (1) cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-",
      "508; (2) cause or attempt to cause a domestic financial institution to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by any order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508, that contains a material omission or misstatement of fact; or (3) structure or assist in structuring,",
      " or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions. (b) Domestic coin and currency transactions involving nonfinancial trades or businesses.\u2013No person shall, for the purpose of evading the report requirements of section 5331 or any regulation prescribed under such section\u2013 (1) cause or attempt to cause a nonfinancial trade or business to fail to file a report required under section 5331 or any regulation prescribed under such section; (2) cause or attempt to cause a nonfinancial trade or business to file a report required under section 5331 or any regulation prescribed under such section that contains a material omission or misstatement of fact;",
      " or (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with 1 or more nonfinancial trades or businesses. (c) International monetary instrument transactions.\u2013No person shall, for the purpose of evading the reporting requirements of section 5316 \u2013 (1) fail to file a report required by section 5316, or cause or attempt to cause a person to fail to file such a report; (2) file or cause or attempt to cause a person to file a report required under section 5316 that contains a material omission or misstatement of fact; or (3)",
      " structure or assist in structuring, or attempt to structure or assist in structuring, any importation or exportation of monetary instruments. (d) Criminal penalty.\u2013 (1) In general.\u2013 Whoever violates this section shall be fined in accordance with title 18, United States Code, imprisoned for not more than five years, or both. (2) Enhanced penalty for aggravated cases.\u2013 Whoever violates this section while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period shall be fined twice the amount provided in subsection (b)(3) or (c)(3)",
      " (as the case may be) of section 3571 of title 18, United States Code, imprisoned for not more than 10 years, or both. 31 U.S.C. \u00a7 5332. Bulk cash smuggling (a) Criminal offense.\u2013 (1) In general.\u2013Whoever, with the intent to evade a currency reporting requirement under section 5316, knowingly conceals more than $10,000 in currency or other monetary instruments on the person of such individual or in any conveyance, article of luggage, merchandise, or other container, and transports or transfers or attempts to transport or transfer such currency or monetary instruments from a place within the United States to a place outside of the United States,",
      " or from a place outside the United States to a place within the United States, shall be guilty of a currency smuggling offense and subject to punishment pursuant to subsection (b). (2) Concealment on person.\u2013For purposes of this section, the concealment of currency on the person of any individual includes concealment in any article of clothing worn by the individual or in any luggage, backpack, or other container worn or carried by such individual. (b) Penalty.\u2013 (1) Term of imprisonment.\u2013A person convicted of a currency smuggling offense under subsection (a), or a conspiracy to commit such offense, shall be imprisoned for not more than five years.",
      " (2) Forfeiture.\u2013In addition, the court, in imposing sentence under paragraph (1), shall order that the defendant forfeit to the United States, any property, real or personal, involved in the offense, and any property traceable to such property. (3) Procedure.\u2013The seizure, restraint, and forfeiture of property under this section shall be governed by section 413 of the Controlled Substances Act. (4) Personal money judgment.\u2013If the property subject to forfeiture under paragraph (2) is unavailable, and the defendant has insufficient substitute property that may be forfeited pursuant to section 413(p) of the Controlled Substances Act,",
      " the court shall enter a personal money judgment against the defendant for the amount that would be subject to forfeiture. (c) Civil forfeiture.\u2013 (1) In general.\u2013Any property involved in a violation of subsection (a), or a conspiracy to commit such violation, and any property traceable to such violation or conspiracy, may be seized and forfeited to the United States. (2) Procedure.\u2013The seizure and forfeiture shall be governed by the procedures governing civil forfeitures in money laundering cases pursuant to section 981(a)(1)(A) of title 18, United States Code. (3) Treatment of certain property as involved in the offense.\u2013For purposes of this subsection and subsection (b), any currency or other monetary instrument that is concealed or intended to be concealed in violation of subsection (a)",
      " or a conspiracy to commit such violation, any article, container, or conveyance used, or intended to be used, to conceal or transport the currency or other monetary instrument, and any other property used, or intended to be used, to facilitate the offense, shall be considered property involved in the offense. 18 U.S.C. \u00a7 1960. Prohibition of unlicensed money transmitting businesses (a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.",
      " (b) As used in this section \u2013 (1) the term \"unlicensed money transmitting business\" means a money transmitting business which affects interstate or foreign commerce in any manner or degree and \u2013 (A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable; (B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or (C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity;",
      " (2) the term \"money transmitting\" includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier; and (3) the term \"State\" means any State of the United States, the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States. RICO: 18 U.S.C. \u00a7 1962. Prohibited activities (a) It shall be unlawful for any person who has received any income derived, directly or indirectly,",
      " from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. A purchase of securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so,",
      " shall not be unlawful under this subsection if the securities of the issuer held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern or racketeering activity or the collection of an unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer. (b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in,",
      " or the activities of which affect, interstate or foreign commerce. (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt. (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section. 18 U.S.C. \u00a7 1961. Definitions As used in this chapter\u2013 (1)",
      " \"racketeering activity\" means  (A) any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in section 102 of the Controlled Substances Act), which is chargeable under State law and punishable by imprisonment for more than one year;  (B) any act which is indictable under any of the following provisions of title 18, United States Code: Section 201 (relating to bribery), section 224 (relating to sports bribery), sections 471, 472, and 473 (relating to counterfeiting), section 659 (relating to theft from interstate shipment)",
      " if the act indictable under section 659 is felonious, section 664 (relating to embezzlement from pension and welfare funds), sections 891-894 (relating to extortionate credit transactions), section 1028 (relating to fraud and related activity in connection with identification documents), section 1029 (relating to fraud and related activity in connection with access devices), section 1084 (relating to the transmission of gambling information), section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), section 1344 (relating to financial institution fraud), section 1351 (relating to fraud in foreign labor contracting), section 1425 (relating to the procurement of citizenship or nationalization unlawfully), section 1426 (relating to the reproduction of naturalization or citizenship papers), section 1427 (relating to the sale of naturalization or citizenship papers), sections 1461-",
      "1465 (relating to obscene matter), section 1503 (relating to obstruction of justice), section 1510 (relating to obstruction of criminal investigations), section 1511 (relating to the obstruction of State or local law enforcement), section 1512 (relating to tampering with a witness, victim, or an informant), section 1513 (relating to retaliating against a witness, victim, or an informant), section 1542 (relating to false statement in application and use of passport), section 1543 (relating to forgery or false use of passport), section 1544 (relating to misuse of passport), section 1546 (relating to fraud and misuse of visas,",
      " permits, and other documents), sections 1581-1592 (relating to peonage, slavery, and trafficking in persons), sections 1831 and 1832 (relating to economic espionage and theft of trade secrets), section 1951 (relating to interference with commerce, robbery, or extortion), section 1952 (relating to racketeering), section 1953 (relating to interstate transportation of wagering paraphernalia), section 1954 (relating to unlawful welfare fund payments), section 1955 (relating to the prohibition of illegal gambling businesses), section 1956 (relating to the laundering of monetary instruments), section 1957 (relating to engaging in monetary transactions in property derived from specified unlawful activity), section 1958 (relating to use of interstate commerce facilities in the commission of murder-for-hire), section 1960 (relating to illegal money transmitters), sections 2251,",
      " 2251A, 2252, and 2260 (relating to sexual exploitation of children), sections 2312 and 2313 (relating to interstate transportation of stolen motor vehicles), sections 2314 and 2315 (relating to interstate transportation of stolen property), section 2318 (relating to trafficking in counterfeit labels for phonorecords, computer programs or computer program documentation or packaging and copies of motion pictures or other audiovisual works), section 2319 (relating to criminal infringement of a copyright), section 2319A (relating to unauthorized fixation of and trafficking in sound recordings and music videos of live musical performances), section 2320 (relating to trafficking in goods or services bearing counterfeit marks), section 2321 (relating to trafficking in certain motor vehicles or motor vehicle parts), sections 2341-",
      "2346 (relating to trafficking in contraband cigarettes), sections 2421-24 (relating to white slave traffic),  (C) any act which is indictable under title 29, United States Code, section 186 (dealing with restrictions on payments and loans to labor organizations) or section 501(c) (relating to embezzlement from union funds),  (D) any offense involving fraud connected with a case under title 11 (except a case under section 157 of this title), fraud in the sale of securities, or the felonious manufacture, importation, receiving, concealment,",
      " buying, selling, or otherwise dealing in a controlled substance or listed chemical (as defined in section 102 of the Controlled Substances Act), punishable under any law of the United States,  (E) any act which is indictable under the Currency and Foreign Transactions Reporting Act,  (F) any act which is indictable under the Immigration and Nationality Act, section 274 (relating to bringing in and harboring certain aliens), section 277 (relating to aiding or assisting certain aliens to enter the United States), or section 278 (relating to importation of alien for immoral purpose) if the act indictable under such section of such Act was committed for the purpose of financial gain,",
      " or (G) any act that is indictable under any provision listed in section 2332b(g)(5)(B) [federal crimes of terrorism]; (2) \"State\" means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, any political subdivision, or any department, agency, or instrumentality thereof; (3) \"person\" includes any individual or entity capable of holding a legal or beneficial interest in property; (4) \"enterprise\" includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity;",
      " (5) \"pattern of racketeering activity\" requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity; (6) \"unlawful debt\" means a debt  (A) incurred or contracted in gambling activity which was in violation of the law of the United States, a State or political subdivision thereof, or which is unenforceable under State or Federal law in whole or in part as to principal or interest because of the laws relating to usury,",
      " and  (B) which was incurred in connection with the business of gambling in violation of the law of the United States, a State or political subdivision thereof, or the business of lending money or a thing of value at a rate usurious under State or Federal law, where the usurious rate is at least twice the enforceable rate; (7) \"racketeering investigator\" means any attorney or investigator so designated by the Attorney General and charged with the duty of enforcing or carrying into effect this chapter; (8) \"racketeering investigation\" means any inquiry conducted by any racketeering investigator for the purpose of ascertaining whether any person has been involved in any violation of this chapter or of any final order,",
      " judgment, or decree of any court of the United States, duly entered in any case or proceeding arising under this chapter; (9) \"documentary material\" includes any book, paper, document, record, recording, or other material; and (10) \"Attorney General\" includes the Attorney General of the United States, the Deputy Attorney General of the United States, the Associate Attorney General of the United States, any Assistant Attorney General of the United States, or any employee of the Department of Justice or any employee of any department or agency of the United States so designated by the Attorney General to carry out the powers conferred on the Attorney General by this chapter.",
      " Any department or agency so designated may use in investigations authorized by this chapter either the investigative provisions of this chapter or the investigative power of such department or agency otherwise conferred by law. 18 U.S.C. \u00a7 1963. Criminal penalties (a) Whoever violates any provision of section 1962 of this chapter shall be fined under this title or imprisoned not more than 20 years (or for life if the violation is based on a racketeering activity for which the maximum penalty includes life imprisonment), or both, and shall forfeit to the United States, irrespective of any provision of State law \u2013 (1) any interest the person has acquired or maintained in violation of section 1962;",
      " (2) any \u2013 (A) interest in; (B) security of; (C) claim against; or (D) property or contractual right of any kind affording a source of influence over; any enterprise which the person has established, operated, controlled, conducted, or participated in the conduct of, in violation of section 1962; and (3) any property constituting, or derived from, any proceeds which the person obtained, directly or indirectly, from racketeering activity or unlawful debt collection in violation of section 1962. The court, in imposing sentence on such person shall order, in addition to any other sentence imposed pursuant to this section,",
      " that the person forfeit to the United States all property described in this subsection. In lieu of a fine otherwise authorized by this section, a defendant who derives profits or other proceeds from an offense may be fined not more than twice the gross profits or other proceeds. (b) Property subject to criminal forfeiture under this section includes\u2013 (1) real property, including things growing on, affixed to, and found in land; and (2) tangible and intangible personal property, including rights, privileges, interests, claims, and securities. (c) All right, title, and interest in property described in subsection (a) vests in the United States upon the commission of the act giving rise to forfeiture under this section.",
      " Any such property that is subsequently transferred to a person other than the defendant may be the subject of a special verdict of forfeiture and thereafter shall be ordered forfeited to the United States, unless the transferee establishes in a hearing pursuant to subsection (l) that he is a bona fide purchaser for value of such property who at the time of purchase was reasonably without cause to believe that the property was subject to forfeiture under this section. (d)(1) Upon application of the United States, the court may enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability of property described in subsection (a)",
      " for forfeiture under this section\u2013 (A) upon the filing of an indictment or information charging a violation of section 1962 of this chapter and alleging that the property with respect to which the order is sought would, in the event of conviction, be subject to forfeiture under this section; or (B) prior to the filing of such an indictment or information, if, after notice to persons appearing to have an interest in the property and opportunity for a hearing, the court determines that\u2013 (i) there is a substantial probability that the United States will prevail on the issue of forfeiture and that failure to enter the order will result in the property being destroyed,",
      " removed from the jurisdiction of the court, or otherwise made unavailable for forfeiture; and (ii) the need to preserve the availability of the property through the entry of the requested order outweighs the hardship on any party against whom the order is to be entered: Provided, however, That an order entered pursuant to subparagraph (B) shall be effective for not more than ninety days, unless extended by the court for good cause shown or unless an indictment or information described in subparagraph (A) has been filed. (2) A temporary restraining order under this subsection may be entered upon application of the United States without notice or opportunity for a hearing when an information or indictment has not yet been filed with respect to the property,",
      " if the United States demonstrates that there is probable cause to believe that the property with respect to which the order is sought would, in the event of conviction, be subject to forfeiture under this section and that provision of notice will jeopardize the availability of the property for forfeiture. Such a temporary order shall expire not more than fourteen days after the date on which it is entered, unless extended for good cause shown or unless the party against whom it is entered consents to an extension for a longer period. A hearing requested concerning an order entered under this paragraph shall be held at the earliest possible time, and prior to the expiration of the temporary order. (3)",
      " The court may receive and consider, at a hearing held pursuant to this subsection, evidence and information that would be inadmissible under the Federal Rules of Evidence. (e) Upon conviction of a person under this section, the court shall enter a judgment of forfeiture of the property to the United States and shall also authorize the Attorney General to seize all property ordered forfeited upon such terms and conditions as the court shall deem proper. Following the entry of an order declaring the property forfeited, the court may, upon application of the United States, enter such appropriate restraining orders or injunctions, require the execution of satisfactory performance bonds, appoint receivers, conservators,",
      " appraisers, accountants, or trustees, or take any other action to protect the interest of the United States in the property ordered forfeited. Any income accruing to, or derived from, an enterprise or an interest in an enterprise which has been ordered forfeited under this section may be used to offset ordinary and necessary expenses to the enterprise which are required by law, or which are necessary to protect the interests of the United States or third parties. (f) Following the seizure of property ordered forfeited under this section, the Attorney General shall direct the disposition of the property by sale or any other commercially feasible means, making due provision for the rights of any innocent persons.",
      " Any property right or interest not exercisable by, or transferable for value to, the United States shall expire and shall not revert to the defendant, nor shall the defendant or any person acting in concert with or on behalf of the defendant be eligible to purchase forfeited property at any sale held by the United States. Upon application of a person, other than the defendant or a person acting in concert with or on behalf of the defendant, the court may restrain or stay the sale or disposition of the property pending the conclusion of any appeal of the criminal case giving rise to the forfeiture, if the applicant demonstrates that proceeding with the sale or disposition of the property will result in irreparable injury,",
      " harm or loss to him. Notwithstanding 31 U.S.C. 3302(b), the proceeds of any sale or other disposition of property forfeited under this section and any moneys forfeited shall be used to pay all proper expenses for the forfeiture and the sale, including expenses of seizure, maintenance and custody of the property pending its disposition, advertising and court costs. The Attorney General shall deposit in the Treasury any amounts of such proceeds or moneys remaining after the payment of such expenses. (g) With respect to property ordered forfeited under this section, the Attorney General is authorized to\u2013 (1) grant petitions for mitigation or remission of forfeiture,",
      " restore forfeited property to victims of a violation of this chapter, or take any other action to protect the rights of innocent persons which is in the interest of justice and which is not inconsistent with the provisions of this chapter; (2) compromise claims arising under this section; (3) award compensation to persons providing information resulting in a forfeiture under this section; (4) direct the disposition by the United States of all property ordered forfeited under this section by public sale or any other commercially feasible means, making due provision for the rights of innocent persons; and (5) take appropriate measures necessary to safeguard and maintain property ordered forfeited under this section pending its disposition.",
      " (h) The Attorney General may promulgate regulations with respect to\u2013 (1) making reasonable efforts to provide notice to persons who may have an interest in property ordered forfeited under this section; (2) granting petitions for remission or mitigation of forfeiture; (3) the restitution of property to victims of an offense petitioning for remission or mitigation of forfeiture under this chapter; (4) the disposition by the United States of forfeited property by public sale or other commercially feasible means; (5) the maintenance and safekeeping of any property forfeited under this section pending its disposition; and (6) the compromise of claims arising under this chapter.",
      " Pending the promulgation of such regulations, all provisions of law relating to the disposition of property, or the proceeds from the sale thereof, or the remission or mitigation of forfeitures for violation of the customs laws, and the compromise of claims and the award of compensation to informers in respect of such forfeitures shall apply to forfeitures incurred, or alleged to have been incurred, under the provisions of this section, insofar as applicable and not inconsistent with the provisions hereof. Such duties as are imposed upon the Customs Service or any person with respect to the disposition of property under the customs law shall be performed under this chapter by the Attorney General.",
      " (i) Except as provided in subsection (l), no party claiming an interest in property subject to forfeiture under this section may\u2013 (1) intervene in a trial or appeal of a criminal case involving the forfeiture of such property under this section; or (2) commence an action at law or equity against the United States concerning the validity of his alleged interest in the property subsequent to the filing of an indictment or information alleging that the property is subject to forfeiture under this section. (j) The district courts of the United States shall have jurisdiction to enter orders as provided in this section without regard to the location of any property which may be subject to forfeiture under this section or which has been ordered forfeited under this section.",
      " (k) In order to facilitate the identification or location of property declared forfeited and to facilitate the disposition of petitions for remission or mitigation of forfeiture, after the entry of an order declaring property forfeited to the United States the court may, upon application of the United States, order that the testimony of any witness relating to the property forfeited be taken by deposition and that any designated book, paper, document, record, recording, or other material not privileged be produced at the same time and place, in the same manner as provided for the taking of depositions under Rule 15 of the Federal Rules of Criminal Procedure. (l)(1)",
      " Following the entry of an order of forfeiture under this section, the United States shall publish notice of the order and of its intent to dispose of the property in such manner as the Attorney General may direct. The Government may also, to the extent practicable, provide direct written notice to any person known to have alleged an interest in the property that is the subject of the order of forfeiture as a substitute for published notice as to those persons so notified. (2) Any person, other than the defendant, asserting a legal interest in property which has been ordered forfeited to the United States pursuant to this section may, within thirty days of the final publication of notice or his receipt of notice under paragraph (1), whichever is earlier,",
      " petition the court for a hearing to adjudicate the validity of his alleged interest in the property. The hearing shall be held before the court alone, without a jury. (3) The petition shall be signed by the petitioner under penalty of perjury and shall set forth the nature and extent of the petitioner's right, title, or interest in the property, the time and circumstances of the petitioner's acquisition of the right, title, or interest in the property, any additional facts supporting the petitioner's claim, and the relief sought. (4) The hearing on the petition shall, to the extent practicable and consistent with the interests of justice,",
      " be held within thirty days of the filing of the petition. The court may consolidate the hearing on the petition with a hearing on any other petition filed by a person other than the defendant under this subsection. (5) At the hearing, the petitioner may testify and present evidence and witnesses on his own behalf, and cross-examine witnesses who appear at the hearing. The United States may present evidence and witnesses in rebuttal and in defense of its claim to the property and cross-examine witnesses who appear at the hearing. In addition to testimony and evidence presented at the hearing, the court shall consider the relevant portions of the record of the criminal case which resulted in the order of forfeiture.",
      " (6) If, after the hearing, the court determines that the petitioner has established by a preponderance of the evidence that \u2013  (A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or (B) the petitioner is a bona fide purchaser for value of the right,",
      " title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section; the court shall amend the order of forfeiture in accordance with its determination. (7) Following the court's disposition of all petitions filed under this subsection, or if no such petitions are filed following the expiration of the period provided in paragraph (2) for the filing of such petitions, the United States shall have clear title to property that is the subject of the order of forfeiture and may warrant good title to any subsequent purchaser or transferee. (m) If any of the property described in subsection (a), as a result of any act or omission of the defendant\u2013 (1)",
      " cannot be located upon the exercise of due diligence; (2) has been transferred or sold to, or deposited with, a third party; (3) has been placed beyond the jurisdiction of the court; (4) has been substantially diminished in value; or (5) has been commingled with other property which cannot be divided without difficulty; the court shall order the forfeiture of any other property of the defendant up to the value of any property described in paragraphs (1) through (5). 18 U.S.C. \u00a7 1964. Civil remedies (a) The district courts of the United States shall have jurisdiction to prevent and restrain violations of section 1962 of this chapter by issuing appropriate orders,",
      " including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise, making due provision for the rights of innocent persons. (b) The Attorney General may institute proceedings under this section. Pending final determination thereof, the court may at any time enter such restraining orders or prohibitions, or take such other actions,",
      " including the acceptance of satisfactory performance bonds, as it shall deem proper. (c) Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefore in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee, except that no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962. The exception contained in the preceding sentence does not apply to an action against any person that is criminally convicted in connection with the fraud,",
      " in which case the statute of limitations shall start to run on the date on which the conviction becomes final. (d) A final judgment or decree rendered in favor of the United States in any criminal proceeding brought by the United States under this chapter shall stop the defendant from denying the essential allegations of the criminal offense in any subsequent civil proceeding brought by the United States.\n"
    ],
    "length": 30872,
    "hardness": null,
    "role": null
  },
  {
    "id": 85,
    "question": null,
    "answer": "Title XI of the National Defense Authorization Act for FY2004, P.L. 108-136 , includesprovisions on a National Security Personnel System (NSPS) for the Department of Defense (DOD)and provisions on personnel management that are applicable government-wide. The law was enactedon November 24, 2003. Title XI, Subtitle A, of the law authorizes the Secretary of Defense and the Director of theOffice of Personnel Management (OPM) to establish a new human resources management (HRM)system for DOD's civilian employees and to jointly prescribe regulations for the system. TheSecretary and the Director are authorized to establish and adjust a labor relations system and arerequired to provide a written description of the proposed personnel system or any adjustments tosuch system to the labor organizations representing DOD employees. A collaboration proceduremust be followed by the Secretary, Director, and employee representatives. The Secretary isauthorized to engage in any collaboration activities and collective bargaining at an organizationallevel above the level of exclusive recognition. The Secretary also is authorized to establish anappeals process that provides fair treatment for DOD employees covered by the NSPS. Regulationsapplicable to employee misconduct or performance that fails to meet expectations may not beprescribed until after the Secretary consults with the Merit Systems Protections Board (MSPB) andmust afford due process protections and conform to public employment principles of merit andfitness at 5 U.S.C. \u00c2\u00a73201. A qualifying employee subject to some severe disciplinary actions maypetition the MSPB for review of the department's decision. The board could dismiss any petition thatdoes not raise a substantial question of fact or law and order corrective action only if the board findsthat the department's personnel decision did not meet some prescribed standards. An employeeadversely affected by a final decision or order of the board could obtain judicial review. Subtitle Cof Title XI includes amendments to the government-wide policies for the federal employee overtimepay cap, military leave, and Senior Executive Service pay, and creates a Human Capital PerformanceFund to reward the highest-performing and most valuable employees in an agency. DOD and OPM jointly published final regulations for the NSPS in the Federal Register onNovember 1, 2005. The regulations state that \"issuances\" to implement the regulations will beprepared by DOD. Draft versions of the \"issuances\" are currently under discussion by thedepartment and labor organizations. A coalition of federal unions, including the AmericanFederation of Government Employees, filed a lawsuit in federal district court challenging the finalregulations. On February 27, 2006, the court enjoined the regulations because they failed to ensurecollective bargaining rights, did not provide for independent third-party review of labor relationsdecisions, and failed to provide a fair process for appealing adverse actions. DOD said that it willappeal the decision. In early March 2006, DOD stated that the phased implementation of the newsystem and its classification, performance management, compensation, staffing, and workforceshaping components would begin in April 2006, with some 11,000 employees. This report will beupdated to reflect changes in the status of implementation.\n",
    "docs": [
      "Introduction In April 2003, the Department of Defense (DOD) sent a proposal entitled \"The DefenseTransformation for the 21st Century Act\" to Congress. (1) Changes in the uniformed military personnel and acquisitionsystems were the principal focus of the proposal. However, it also recommended changes to thestatutory bases for much of DOD's civilian personnel system, which covers some 700,000 civilianemployees (about 26% of federal civilian executive branch personnel worldwide). (2)  On May 22, 2003, the House of Representatives passed H.R. 1588, the NationalDefense Authorization Act for FY2004,",
      " amended, by a 361 to 68 (Roll No. 221) vote. (3) As reported to the House,H.R. 1588 included provisions at Subtitle A of Title XI related to government-widepersonnel management. The bill also included provisions for a National Security Personnel System(NSPS) for DOD at Subtitle B. Many of the provisions had originated in DOD's April 2003 proposaland had been included in H.R. 1836, the Civil Service and National Security PersonnelImprovement Act, reported to the House, amended ( H.Rept. 108-116, part 1), by the Committee onGovernment Reform on May 19,",
      " 2003. (4) The provisions were added to H.R. 1588 during ArmedServices Committee markup. (5) Several additional amendments were made to the personnelmanagement provisions during House consideration and passage of H.R. 1588. The Senateversion of the defense authorization bill, S. 1050, as passed by the Senate, amended,on May 22, 2003, on a 98 to 1 (No. 194) vote, did not include these Title XI personnel managementprovisions (but included other personnel provisions at Title XI). On June 4, 2003, the Senate struckall after the enacting clause and substituted the text of S.",
      " 1050 in H.R. 1588. TheSenate then passed H.R. 1588, amended, by voice vote the same day. (6) H.R. 1588, aspassed by the Senate, included, at Title XI, personnel provisions on pay authority for criticalpositions, the experimental personnel program for scientific and technical personnel, and personnelinvestigations that were not included in the House-passed version of the bill or S. 1166. Senator Susan Collins, Chairman of the Senate Committee on Governmental Affairs,introduced S. 1166, the National Security Personnel System Act, on June 2,",
      " 2003, andit was referred to the Senate Governmental Affairs Committee. On June 4, 2003, the committeeconducted a hearing on the bill. Following the hearing, Senators Voinovich and Thomas Carperasked the Comptroller General, David Walker, to respond to several additional questions. Hisresponse, submitted on July 3, 2003, included the following comments. [I]t is critical that agencies or components have in placethe human capital infrastructure and safeguards before implementing new human capital reforms.This institutional infrastructure includes, at a minimum (1) a human capital planning process thatintegrates the agency's human capital policies,",
      " strategies, and programs with its program mission,goals, and desired outcomes, (2) the capabilities to develop and implement a new human capitalsystem effectively, and (3) a modern, effective, credible and, as appropriate, validated performanceappraisal and management system that includes adequate safeguards, such as reasonable transparencyand appropriate accountability mechanisms, to ensure the fair, effective, and nondiscriminatoryimplementation of the system. Although we do not believe that DOD should wait forthe full implementation of the new human capital system at the Department of Homeland Security(DHS),... we do think that there are important lessons that can be learned from how DHS isdeveloping its new personnel system.",
      " For example, DHS has implemented an approach that includesa design team of employees from DHS, the Office of Personnel Management (OPM), and majorlabor unions. To further involve employees, DHS has conducted a series of town hall meetingsaround the country and held focus groups to further learn of employees' views and comments...DOD... needs to ensure that employees are involved in order to obtain their ideas and gain adequate\"buy-in\" for any related transformational efforts. [W]e suggest that DOD also be required to link itsperformance management system to program and performance goals and desired outcomes.... [This]helps the organization ensure that its efforts are properly aligned and reinforces the line of sightbetween individual performance and organizational success so that an individual can see how her/hisdaily responsibilities contribute to results and outcomes.",
      " In our view, it would be preferable to employ agovernmentwide approach to address certain flexibilities that have broad-based application andserious potential implications for the civil service system.... broad banding, pay for performance,reemployment, and pension offset waivers. In these situations, it may be prudent and preferable forCongress to provide such authorities on a governmentwide basis and in a manner that assures thata sufficient personnel infrastructure and appropriate safeguards are in place before an agencyimplements the new authorities. Based on our experience, while DOD's leadership hasthe intent and the ability to transform the department, the needed institutional infrastructure is notin place in a vast majority of DOD organizations.... In the absence of the right institutionalinfrastructure,",
      " granting additional human capital authorities will provide little advantage and couldactually end up doing damage if the authorities are not implemented properly by the respectivedepartment or agency. (7) The Senate Governmental Affairs Committee marked up the bill on June 17, 2003, and, onthe same day, ordered S. 1166 to be reported to the Senate, amended, on a 10 to 1 rollcall vote. During the mark-up, the committee agreed to an amendment offered by Senator JosephLieberman to clarify the intent of the bill's provisions on collective bargaining and an amendmentoffered by Senator George Voinovich to exclude 10 DOD laboratories from the NSPS.",
      " Bothamendments were agreed to by voice vote. On September 5, 2003, the committee reported S.1166 to the Senate with amendments and without a written report. Senator Collins, a conferee on the conference committee for H.R. 1588, alongwith Senators Voinovich and Carl Levin (an H.R. 1588 conferee), among others, expressedthe hope that the provisions of S. 1166, as amended, would be seriously considered bythe conference as an alternative to the provisions in H.R. 1588 on the NSPS. On July 14,2003, Senators Collins,",
      " Voinovich, Stevens, and Sununu wrote a letter to their Senate colleaguesexpressing their support for, and sharing their views on, the personnel provisions of S.1166. They stated that, \"[a]s a template for future governmentwide civilian personnelreform, the personnel provisions in the defense bill must strike the right balance between promotinga flexible system and protecting the rights of our constituents who serve in the federal civil service\"and that \"[w]e believe that our proposal strikes such a balance.\" (8) Several provisions that werethe same or similar to S. 1166 were added to H.R. 1588 in conference.",
      " On November 7, 2003, the House agreed to the conference report ( H.Rept. 108-354 )accompanying H.R. 1588 on a 362-40, 2 present (Roll No. 617) vote. The Senateagreed to the conference report on a 95-3 (No. 447) vote on November 12, 2003. President Bushsigned H.R. 1588 into law on November 24, 2003, as P.L. 108-136 (117 Stat. 1392). This report discusses each of the provisions in Title XI of P.L.",
      " 108-136 and plans toimplement the law. (9) Fordiscussion of the background to the provisions and side-by-side comparisons of the provisions withcurrent law, see CRS General Distribution Memorandum, Department of Defense TransformationProposal (Title I, Subtitle A, Section 101) and H.R. 1588 Conference Report (Title XI,Subtitles A,B,C): A Side-by-Side Comparison, coordinated by [author name scrubbed]; CRS Report RL31924, Civil Service Reform -- H.R. 1836, Homeland Security Act, and Current Law,by [author name scrubbed] and [author name scrubbed]; and CRS Report RL31916,",
      " Defense DepartmentOriginal Transformation Proposal: Compared to Existing Law, by [author name scrubbed], Gary J.Pagliano, [author name scrubbed], and [author name scrubbed]. Contributors to this report are Richard Best, Valerie Grasso, [author name scrubbed], Fred Kaiser,[author name scrubbed], Thomas Nicola, [author name scrubbed], Barbara Schwemle, [author name scrubbed], and JonShimabukuro. Implementation of Title XI of P.L. 108-136 The timetable for implementing the NSPS has changed several times. Discussions onimplementation began in January 2004. (10) Initially,",
      " DOD planned to publish details of the new system byApril 2004, and cover 300,000 civilian DOD employees under the NSPS by October 1, 2004. Inearly February 2004, Secretary of Defense Donald Rumsfeld named then-Navy Secretary andnow-Deputy Secretary of Defense Gordon England as the DOD official responsible for negotiatingwith labor organizations on the personnel reform effort. (11) On April 14, 2004, Secretary England announced thatimplementation of the NSPS would be phased in over several years so that all employees would becovered by the NSPS by October 1,",
      " 2006. More specific implementation steps and a revised timetable were announced by SecretaryEngland on December 15, 2004, as follows. (12) Civilian DOD employees being converted to the NSPS were tobe grouped into three \"spirals.\" Upwards of 300,000 General Schedule employees from the Army,Navy, Marine Corps, Air Force, Office of the Secretary of Defense, and other DOD offices who arebased in the United States were to comprise Spiral One. Spiral Two was to consist of all remainingeligible employees and Spiral Three was to cover employees of the DOD laboratories if currentlegislative restrictions covering laboratory employees had been eliminated.",
      " The new system was tobe implemented in phases. Spiral One was scheduled to be implemented in three phases over 18months beginning around July 2005 and covering some 60,000 employees. Spiral Two wasscheduled to begin after the department had assessed Spiral One and after the Secretary of Defensecertified DOD's performance management system. Full implementation of the new system wasanticipated anywhere from July 2007 through January 2008. Implementation of the labor relationscomponent of the new system was anticipated by summer 2005. On October 26, 2005, DOD announced a further revised implementation schedule for theNSPS. Key implementation steps were to occur as follows:",
      " In early FY2006, the labor relations system was to be implemented acrossDOD for employees who are currently covered by 5 U.S.C. Chapter 71, and training in performancemanagement was to begin for employees, managers and supervisors, and human resourcespractitioners. In early calendar year 2006, Spiral 1.1 was to be implemented and cover some65,000 employees. In spring 2006, Spiral 1.2 was to be implemented and cover some 48,000employees. In fall 2006, Spiral 1.3 was to be implemented and cover some 160,",
      "000employees and the performance cycle was to end for employees in Spirals 1.1 and1.2. In early calendar year 2007, employees in Spirals 1.1 and 1.2 were to receivetheir first pay-for-performance payout. In early calendar year 2008, employees in Spiral 1.3 were to receive their firstpay-for-performance payout. (13) Another revision to the NSPS implementation schedule was announced by DOD on January17, 2006, and updated on February 13, 2006, and March 3, 2006. Beginning in late April 2006,",
      " theclassification, performance management, compensation, staffing, and workforce shaping provisionsof the new system will be implemented. Under the revised schedule, the following was established: Spiral 1.1 will include the first employees to be covered by the NSPS, some11,000 workers in department-wide, Army, Navy, and Air Force activities. (14) The performance ratingcycle for these employees will extend through October 2006, and the first performance payout willoccur in January 2007. Spiral 1.2 will begin in October 2006, and Spiral 1.3 will begin in January2007. Performance payouts will occur in January 2008.",
      " The DOD agencies that will participate inthese Spirals are still to be determined. Spirals 2 and 3 will be formed and commence following certification of theperformance management system. (15) Proposed regulations to implement the system were jointly published in the Federal Register by DOD and OPM on February 14, 2005. (16) DOD and OPM conducted a joint briefing on the proposedregulations on February 10, 2005. (17) According to the Defense Department, more than 58,000comments were submitted on the proposed regulations. DOD and OPM jointly published the finalregulations in the Federal Register on November 1,",
      " 2005. (18) The regulations generallyexpress concepts for the new system rather than details about how it will operate. The regulationsstate that \"issuances\" to implement the regulations will be prepared by DOD. On November 23,2005, DOD released the drafts of the \"issuances\" and, as of the date of the report, are still underreview by the department and labor organizations. Revised drafts of the \"issuances\" on performancemanagement and pay pools were released on February 28, 2006, and, likewise, are subject tocontinuing collaboration between DOD and the unions.",
      " The process for designing the new personnel system involved Program Executive Officeworking groups, which began a nearly two-month process to develop and evaluate options for theNSPS in late July 2004. Focus groups and town hall meetings and discussions with union leaderswere employed by the working groups to gather input from employees and stakeholders. (19) Other specificimplementation steps are noted below under relevant sections of the law. DOD has established awebsite to monitor implementation of the NSPS. (20)  Prior to the enactment of the provisions authorizing the Department of Defense to create anew human resources management system, DOD civilians were covered by the personnel lawscodified in Title 5 United States Code on government organization and employees.",
      " Under theauthority granted by Title XI of P.L. 108-136, some 700,000 civilian employees are expected to becovered by the new National Security Personnel System. The NSPS policies (especially in the areasof pay, performance management, adverse actions and appeals, and labor management relations) aremore flexible than those under Title 5. During debate prior to the enactment of P.L. 108-136 andin discussions that have continued since, several Members of Congress stated that implementationof the NSPS (along with the Department of Homeland Security's new HRM system currently beingcreated) should be monitored as a possible model for amending Title 5 and extending thoseprovisions to the rest of the federal government's civilian workforce.",
      " Reflecting the importance of carefully crafting the NSPS, Senators Susan Collins, Carl Levin,Ted Stevens, John Sununu, and George Voinovich reportedly sent a letter to Secretary England onMarch 3, 2004, which stated that [t]he involvement of the civilian work force in thedesign of the new National Security Personnel System is critical to its ultimate acceptance andsuccessful implementation. Full collaboration with the Office of Personnel Management and thefederal employee unions will assist the department in meeting this critical challenge. (21) A March 12, 2004, letter sent by Senator Daniel Akaka to Secretary of Defense DonaldRumsfeld urged DOD to issue all proposals on the NSPS in the Federal Register and not as internalregulations,",
      " for reasons of \"openness, transparency, public comment, and scrutiny of thedetails.\" (22) SenatorEdward Kennedy, in a December 10, 2004, press release, also emphasized development of the newsystem \"in the most transparent way possible.\" According to the Senator: Congress gave the Department of Defense the authorityto make major personnel changes affecting 700,000 defense employees, but only with theunderstanding that those changes would be made in consultation with representatives of theemployees. It's appalling that the Bush Administration is ignoring that understanding bystonewalling the representatives and refusing to let them review personnel changes before they arepublished.... (23)",
      " Government Executive reported that Senator Kennedy wrote to Defense Secretary DonaldRumsfeld and OPM Director Kay Coles James on November 19, 2004, to voice opposition to theirrefusal to share the details of the new personnel system with officials of the unions representingDOD employees in advance of the publication of the regulations in the Federal Register. Reportedly, DOD believes that do to so would \"depart from the intent of the AdministrativeProcedures Act.\" (24)  In a press release issued on February 10, 2005, Senator Lieberman expressed his deepdisappointment with the personnel rules, stating: \"The proposal imposes excessive limits oncollective bargaining... changes the appeals process to interfere with employees'",
      " rights to dueprocess... and... contains unduly vague and untested pay and performance provisions.\" (25)  Department of Defense National Security Personnel System -- Title XI, Subtitle A, of P.L. 108-136 P.L. 108-136 provides the following. (26) Section 1101(a)(1) of P.L. 108-136 amends Part III, Subpart I,of Title 5 United States Code by adding a new Chapter 99 entitled Department of Defense (DOD)National Security Personnel System. The new system covers some 700,000 DOD civilianemployees. Section 9901.",
      " Definitions(27) This section defines terms for the new chapter. \"Director\" means the Director of the Officeof Personnel Management (OPM) and \"Secretary\" means the Secretary of Defense. Section 9902. Establishment of Human Resources Management System(28) In General. The new Section 9902(a) of P.L.108-136 provides that notwithstanding any other provision of Part III, the Secretary of Defense may,in regulations prescribed jointly with the OPM Director, establish, and from time to time adjust, ahuman resources management (HRM) system, referred to as the National Security Personnel System(NSPS), for some or all of the organizational or functional units of DOD.",
      " Requirements for the HRM System. The HRMsystem must be flexible and contemporary. The new Section 9902(b) provides that it could notwaive, modify, or otherwise affect: the public employment principles of merit and fitness at 5 U.S.C. \u00c2\u00a72301,including the principles of hiring based on merit, fair treatment without regard to political affiliationor other non-merit considerations, equal pay for equal work, and protection of employees againstreprisal for whistleblowing; any provision of 5 U.S.C. \u00c2\u00a72302, relating to prohibited personnelpractices; any provision of law referred to in 5 U.S.C.",
      " \u00c2\u00a72302(b)(1)(8)(9); or any provisionof law implementing any provision of law referred to in 5 U.S.C. \u00c2\u00a72302(b)(1)(8)(9) by providing forequal employment opportunity through affirmative action; or providing any right or remedy availableto any employee or applicant for employment in the public service. Various subparts and chapters of Part III of Title 5 United States Code which cannot bewaived, modified, or otherwise affected in the new HRM system are listed at the new Section9902(d) as follows: Subpart A -- General Provisions, including Chapter 21Definitions;",
      " Chapter 23 Merit System Principles; Chapter 29 Commissions, Oaths, Records, andReports; Subpart B -- Employment and Retention, includingChapter 31 Authority for Employment; Chapter 33 Examination, Selection, and Placement; Chapter34 Part-time Career Employment Opportunities; Chapter 35 Retention Preference (RIF), Restoration,and Reemployment; Subpart E -- Attendance and Leave, including Chapter61 Hours of Work; Chapter 63 Leave; Subpart G -- Insurance and Annuities, including Chapter81 Compensation for Work Injuries; Chapters 83 and 84 Retirement; Chapter 85 UnemploymentCompensation; Chapter 87 Life Insurance;",
      " Chapter 89 Health Insurance; Chapter 90 Long Term CareInsurance; Subpart H -- Access to Criminal History RecordInformation, including Chapter 91 for individuals underinvestigation; Chapter 41 --Training; Chapter 45 -- IncentiveAwards; Chapter 47 -- Personnel Research Programs andDemonstration Projects; Chapter 55 -- Pay Administration, including biweeklyand monthly pay periods and computation of pay, advanced pay, and withholding of taxes from pay,except that Subchapter V of Chapter 55 on premium pay (overtime, night, Sunday pay), apart fromsection 5545b, may be waived or modified; Chapter 57 -- Travel,",
      " Transportation, andSubsistence; Chapter 59 -- Allowances, which includes uniforms,quarters, overseas differentials; Chapter 71 -- Labor Management and EmployeeRelations [ H.R. 1588, as passed by the House, did not include thisprovision]; Chapter 72 -- Antidiscrimination, Right to PetitionCongress, including minority recruitment, antidiscrimination on the basis of marital status andhandicapping condition, furnishing information to Congress; Chapter 73 -- Suitability, Security, and Conduct,including security clearance, political activities (Hatch Act), misconduct (gifts, drugs,alcohol); Chapter 79 -- Services to Employees,",
      " including safetyprogram, protective clothing and equipment; or any rule or regulation prescribed under any provisionof law referred to in any of the statements in bullets immediatelyabove. Other requirements for the HRM system include that it must: ensure that employees may organize, bargain collectively as provided for inthe proposed Chapter 99, and participate through labor organizations of their own choosing indecisions that affect them, subject to the provisions of the proposed Chapter 99 and any exclusionfrom coverage or limitation on negotiability established pursuant to law; not be limited by any specific law or authority under Title 5, or by any rule orregulation prescribed under Title 5,",
      " that is waived in regulations prescribed under the proposedChapter 99, subject to the requirements stated above; and include a performance management system. Such a system must incorporatethese elements: adherence to the merit principles of 5 U.S.C. \u00c2\u00a72301; a fair, credible, and transparentemployee performance appraisal system; a link between the performance management system andthe agency's strategic plan; and a means for ensuring employee involvement in the design andimplementation of the system. Other elements the system must incorporate are: adequate trainingand retraining for supervisors, managers, and employees in the implementation and operation of theperformance management system; a process for ensuring ongoing performance feedback anddialogue between supervisors,",
      " managers, and employees throughout the appraisal period, and settingtimetables for review; effective safeguards to ensure that the management of the system is fair andequitable and based on employee performance; and a means for ensuring that adequate agencyresources are allocated for the design, implementation, and administration of the performancemanagement system; and a pay-for-performance evaluation system to better link individual pay toperformance, and provide an equitable method for appraising and compensatingemployees. Personnel Management at Defense Laboratories. The NSPS will not apply with respect to the laboratories listed below before October 1, 2008. It willapply on or after October 1,",
      " 2008, only to the extent that the Secretary determines that theflexibilities provided by the NSPS are greater than the flexibilities provided to those laboratoriespursuant to section 342 of the National Defense Authorization Act for Fiscal Year 1995( P.L.103-337 ) and section 1101 of the Strom Thurmond National Defense Authorization Act forFiscal Year 1999 (5 U.S.C. \u00c2\u00a73104 note) respectively. The laboratories covered by this provision (5U.S.C. \u00c2\u00a79902(c)) are the Aviation and Missile Research Development and Engineering Center; theArmy Research Laboratory; the Medical Research and Materiel Command;",
      " the Engineer Researchand Development Command; the Communications-Electronics Command; the Soldier andBiological Chemical Command; the Naval Sea Systems Command Centers; the Naval ResearchLaboratory; the Office of Naval Research; and the Air Force Research Laboratory. (SenatorVoinovich offered a similar provision as an amendment that was agreed to by voice vote by theSenate Governmental Affairs Committee during mark-up of S. 1166. According toSenator Voinovich's office, the amendment continued the authority of the reinvention laboratoriesto use various personnel flexibilities that DOD has found to be successful. The NSPS provisionsmight reduce these personnel flexibilities at the laboratories if they were to be included in NSPS saidhis office.",
      " In an article on the Governmental Affairs Committee mark-up, The Washington Post quoted a DOD official who said that the provision \"while designed to protect existing flexibilitiesat the labs, would prevent the Pentagon from increasing those flexibilities.\" (29)  Limitations Relating to Pay. Nothing in Section9902 constitutes authority to modify the pay of any employee who serves in an Executive Scheduleposition. Except for this provision, the total amount of allowances, differentials, bonuses, awards,or other similar cash payments paid under Title 5 in a calendar year to any employee who is paidunder 5 U.S.C. \u00c2\u00a75376 (senior-level pay)",
      " or 5383 (Senior Executive Service pay) or under Title 10or other comparable pay authority established for DOD senior executives or equivalent employeesmay not exceed the total annual compensation payable to the Vice President ($212,100, as of January2006). The law provides that to the maximum extent practicable, the rates of compensation forcivilian DOD employees would be adjusted at the same rate, and in the same proportion, as are ratesof compensation for members of the uniformed services. To the maximum extent practicable, for FY2004 through FY2008, the overall amountallocated for compensation of the civilian employees of an organizational or functional unit of DODthat is included in the NSPS may not be less than the amount of civilian pay that would have beenallocated for compensation of such employees for such fiscal year if they had not been converted tothe NSPS.",
      " The amount will be based on, at a minimum, the number and mix of employees in suchorganizational or functional unit prior to the conversion of such employees to the NSPS; andadjusted for normal step increases and rates of promotion that would have been expected had suchemployees remained in their previous pay schedule. ( S. 1166 included a similarprovision.) To the maximum extent practicable, the regulations implementing the NSPS will provide aformula for calculating the overall amount to be allocated for fiscal years after FY2008 forcompensation of the civilian employees of an organizational or functional unit of DOD that isincluded in the NSPS.",
      " The formula will ensure that in the aggregate, employees are notdisadvantaged in terms of the overall amount of pay available as a result of conversion to the NSPS,while providing flexibility to accommodate changes in the function of the organization, changes inthe mix of employees performing those functions, and other changed circumstances that mightimpact pay levels. ( S. 1166 included a similar provision.) The Executive Schedule is the pay system for the heads of federal departments and agencies. As of January 2006, pay for the five levels of the Executive Schedule ranges from $133,900 to$183,500. This provision appears to authorize pay,",
      " for individual employees, which could exceedthat of the department or agency heads. Under current law, OPM is required to certify that an agencyhas an acceptable performance management system in place before salaries for these employeescould range up to the Vice President's salary. Since the proposals would not amend 5 U.S.C. \u00c2\u00a75307,it remains to be determined if OPM certification of the DOD policy will be required. Under the new Section 9902(d) in P.L. 108-136, DOD is authorized to make changes in Title5 Chapters 43 (Performance Appraisal) and 53 (Pay Rates and Systems)",
      " in establishing the newHRM system. The law does not provide any further detail on the design and operation of that newpay system. Implementation of the Law. Several key chapters ofPart III of Title 5 United States Code may be waived, modified, or otherwise affected as the newHRM system is developed. These are: Chapter 43 -- Performance Appraisal Chapter 51 -- Position Classification Chapter 53 -- Pay Rates and Systems Chapter 71 -- Labor Management and EmployeeRelations Chapter 75 -- Adverse Actions Chapter 77 -- Appeals (30) During testimony before the House Subcommittee on Civil Service and Agency Organizationat its April 29,",
      " 2003 hearing on the proposed NSPS of the Defense Transformation for the 21stCentury Act, David Chu discussed DOD's Best Practices Initiative. He referred Members ofCongress to an April 2, 2003, Federal Register notice for additional details on the types of HRMflexibilities the department is implementing at its science and technology reinventionlaboratories. (31)  A September 3, 2004, paper by the Program Executive Office working groups listed (withoutdetails) \"Potential Options for the National Security Personnel System Human ResourceManagement System.\" Among the design options identified were those establishing a pay bandingsystem with broad salary ranges and simplified criteria and procedures for assigning positions to thebands;",
      " developing a market-sensitive pay system; streamlining and consolidating appointingauthorities to simplify the hiring of external candidates; developing a pay-for-performance systemallowing for progression through a pay band based on performance and/or contribution; allowingbase pay increases for reassignments; and streamlining the Performance Improvement Planprocess. (32)  As stated above, the proposed regulations to implement the NSPS were published in the Federal Register on February 14, 2005, and the final regulations were published on November 1,2005. Provisions on Classification (Subpart B, \u00c2\u00a7\u00c2\u00a79901.201-9901.231), Pay and Pay Administration(Subpart C,",
      " \u00c2\u00a7\u00c2\u00a79901.301-9901.373), Performance Management (Subpart D, \u00c2\u00a7\u00c2\u00a79901.401-9901.409),Staffing and Employment (Subpart E, \u00c2\u00a7\u00c2\u00a79901.501-9901.516) and Workforce Shaping (Subpart F,\u00c2\u00a7\u00c2\u00a79901.601-9901.611) are included in the regulations. Many of the details that will govern theoperation of these areas are currently under discussion by DOD and the labor organizations. A townhall briefing in March 2006 revealed the following details, which are subject to continuingcollaboration between the department and the unions.",
      " Classification. Positions will be grouped into broad pay bands based on thenature of the work and the competencies required to perform them. Performance, complexity of thejob, and market conditions will determine the progression of employees through a pay band.Positions descriptions will be less detailed. Managers will have flexibility to assign new or differentwork to employees. Classification decisions could be appealed. There are expected to be four careergroups -- Standard (covers 71% of DOD's white collar workforce), Scientific and Engineering(covers 18% of DOD's white collar workforce), Investigative and Protective Services (covers 6% ofDOD's white collar workforce), and Medical (covers 5%",
      " of DOD's white collar workforce). Table1 below shows the proposed career groups and the pay bands and salary ranges corresponding topositions under each.  Table 1. Proposed Career Groups, Pay Bands, and Salary Rangesfor the National Security Personnel System Performance Management. The system will directly link pay, performance,and mission accomplishment. It will have five rating levels -- \"Unsuccessful,\" \"Fair,\" \"ValuedPerformance,\" \"Exceeds Expectations,\" and \"Role Model.\" The performance of employees will berated on responsibilities, behaviors, skills, and tasks. An individual's technical proficiency, criticalthinking, cooperation and teamwork, communication,",
      " customer focus, resource management, andleadership will be evaluated. Employees who perform at Level 3, \"Valued Performance,\" Level 4,\"Exceeds Expectations,\" or Level 5, \"Role Model,\" will be eligible for a rate range adjustment, alocal market supplement, and performance-based pay. Individuals who perform at Level 2, \"Fair,\"will be eligible for a rate range adjustment and a local market supplement. There will not be any payincreases for those employees whose performance is rated at Level 1,\"Unsuccessful.\" Compensation. An employee could receive three types of pay adjustments --a rate range increase,",
      " a local market supplement, and a raise based on performance. The rate rangeincrease may vary by pay band. Employees must perform at Level 2, \"Fair,\" or higher to receive arate range increase. The local market supplement will be included in base pay and will be based onmarket conditions in a geographic area or for an occupation. This increase could differ from oneoccupation to another within a given area. Employees must perform at Level 2, \"Fair,\" or higher toreceive a local market supplement. The performance-based adjustment will be an annual pay raiseor bonus based on job performance. Employees must perform at Level 3, \"Valued Performance,\"or higher to receive a performance-based pay increase.",
      " High-performing employees could receivehigher pay raises. The rate ranges and local market supplements will be reviewed annually. Apromotion will result in a minimum six percent salary increase. Employees will not lose pay uponconverting to the new system. Individuals eligible for a within-grade increase will receive apro-rated salary increase. Staffing. The hiring process will be streamlined. Qualification requirementsfor positions will recognize DOD's unique mission. Some occupational categories will have longerprobationary periods for evaluating new employees. Veterans' preference rights willapply. Workforce Shaping. An employee's retention standing in a reduction in force(RIF) will be determined by tenure,",
      " veterans' preference, performance, and seniority. Multiple yearsof performance ratings will be used in making RIF determinations. Two years (104 weeks) ofretained pay will be provided to employees who are displaced. Provisions to Ensure Collaboration With EmployeeRepresentatives on National Security Personnel System. P.L. 108-136 adds a newsection, 5 U.S.C. \u00c2\u00a79902(f), that requires the Secretary of Defense and the Director of OPM toprovide a written description of the proposed personnel system or adjustments to such system to thelabor organizations representing employees in the department. The measure uses the term \"employeerepresentatives\"",
      " to describe these organizations. The employee representatives are given at least 30calendar days to review and make recommendations with respect to the proposal, unlessextraordinary circumstances require earlier action. Such recommendations must be given full andfair consideration by the Secretary and the Director. Section 9902(f)(B)(i) requires the Secretary andthe Director to notify Congress of those parts of the proposal for which recommendations weremade, but not accepted. Section 9902(f)(B)(ii) requires the Secretary and the Director to meet and confer with theemployee representatives for not less than 30 calendar days to attempt to reach agreement on whetherand how to proceed with those parts of the proposal for which recommendations were made,",
      " but notaccepted. At the Secretary's option, or if requested by a majority of the employee representativesparticipating, the Federal Mediation and Conciliation Service may assist with the discussions. After30 calendar days following notification and consultation, the Secretary may implement any or all ofthe disputed parts of the proposal if it is determined that further consultation and mediation areunlikely to produce agreement. However, such implementation may occur only after 30 daysfollowing notice to Congress of the decision to implement the part or parts involved. Implementationmay occur immediately for those parts of the proposal that did not generate recommendations fromthe employee representatives, and where the Secretary and the Director accepted therecommendations of the employee representatives.",
      " The Secretary may, at his discretion, engage inany and all of the collaboration activities at an organizational level above the level of exclusiverecognition. If a proposal is implemented, the Secretary and the Director must develop a method foremployee representatives to participate in any further planning or development which might becomenecessary. In addition, employee representatives must be given adequate access to information tomake participation productive. Provisions Regarding National Level Bargaining. A new section, 5 U.S.C. \u00c2\u00a79902(g)(1), allows any personnel system implemented or modified underSection 9902(f) to include employees from any bargaining unit with respect to which a labororganization has been accorded exclusive recognition.",
      " (A labor organization is described generallyas having been accorded \"exclusive recognition\" when an election has occurred (with the labororganization receiving support from a majority of employees) and the results have been certified bythe Federal Labor Relations Authority (\"FLRA\").) For any of these bargaining units, the Secretaryis permitted to bargain at an organizational level above the level of exclusive recognition. Thedecision to bargain at a level above the level of exclusive recognition is not subject to review or todispute resolution procedures outside the department. Any bargaining conducted at a level above the level of exclusive recognition is binding onall subordinate bargaining units and on the department and its subcomponents;",
      " supersedes all othercollective bargaining agreements, except as otherwise determined by the Secretary; is not subject tofurther negotiations for any purpose, except as provided for by the Secretary; and is subject to reviewby an independent third party only to the extent permitted by the act. Because organizational bargaining would likely focus on the larger issues affecting allemployees, other topics may not be considered, including concerns that are significant only to aparticular bargaining unit. Proponents of organizational bargaining, however, contend that suchbargaining is more expeditious. Provisions to Ensure Collaboration With EmployeeRepresentatives on Development of Labor Relations System. Section 9902(d)(2)",
      "prevents the new personnel system from waiving the application of Title 5, Chapter 71 of the UnitedStates Code. Chapter 71 sets forth the labor-management relations structure for the federalgovernment. At the same time, however, Section 9902(m)(1) states: \"Notwithstanding section9902(d)(2), the Secretary, together with the Director, may establish and from time to time adjust alabor relations system for the Department of Defense to address the unique role that the Department'scivilian workforce plays in supporting the Department's national security mission.\" To ensure that there is collaboration between the Secretary, the Director, and employeerepresentatives,",
      " the Secretary is required to implement a process similar to the one defined for thecreation of the NSPS. The Secretary and the Director are required to give employee representativesand management the opportunity to have meaningful discussions concerning the development of thenew system. Representatives must be given at least 30 calendar days to review the proposal for thesystem and make recommendations with respect to the proposal, unless extraordinary circumstancesrequire earlier action. Recommendations must be given full and fair consideration. Section 9902(m)(3)(B)(i) requires the Secretary and the Director to meet and confer with theemployee representatives for not less than 30 calendar days to attempt to reach agreement on whetherand how to proceed with those parts of the proposal for which recommendations were made,",
      " but notaccepted. At the Secretary's option, or if requested by a majority of the employee representativesparticipating, the Federal Mediation and Conciliation Service may assist with the discussions. After30 calendar days following consultation and mediation, the Secretary may implement any or all ofthe disputed parts of the proposal if it is determined that further consultation and mediation isunlikely to produce agreement. However, such implementation may occur only after 30 daysfollowing notice to Congress of the decision to implement the part or parts involved. Implementation may occur immediately for those parts of the proposal that do not generaterecommendations from the employee representatives, and where the Secretary and the Director haveaccepted the recommendations of the employee representatives.",
      " The process for collaboration with the employee representatives must begin no later than 60calendar days after the date of enactment. Section 9902(m)(4) authorizes the Secretary to engagein any and all of the collaboration activities at an organizational level above the level of exclusiverecognition. The labor relations system developed or adjusted under Section 9902(m) must provide forthe independent third party review of decisions and for determining which decisions could bereviewed, who would conduct the review, and the standards to be used during the review. Unlessextended or otherwise provided for in law, the authority to establish, implement, and adjust the laborrelations system expires six years after the date of enactment.",
      " At that time, the provisions of Chapter71 will apply. Implementation. On November 7, 2005, followingthe issuance of final regulations to establish the NSPS, a coalition of federal unions, including theAmerican Federation of Government Employees, filed a lawsuit in federal district court challengingthe regulations. On February 27, 2006, the court enjoined the new regulations on the grounds thatthey failed to ensure collective bargaining rights, did not provide for the independent third-partyreview of labor relations decisions, and failed to provide a fair process for appealing adverseactions. (33) DOD hasindicated that it will appeal the decision.",
      " (34) Despite the court's actions, this section reviews and discussesthe new regulations. Subpart I of the regulations defines the department's labor-relations system. The regulationsprovide for a variety of new features that would be unique to DOD. For example, the regulationsestablish a new labor relations board that would assume some of the duties that are performedcurrently by the FLRA. The regulations would also expand management rights beyond whatcurrently exists under chapter 71. The regulations provide for the creation of a National Security Labor Relations Board(NSLRB) that would do the following: conduct hearings and resolve complaints of unfair laborpractices;",
      " resolve issues relating to the scope of bargaining and the duty to bargain in good faith;resolve disputes concerning requests for information; resolve exceptions to arbitration awards;resolve negotiation impasses; and conduct de novo reviews on all matters within the Board'sjurisdiction. (35) Underthe regulations, the Board could also issue binding department-wide opinions for matters within itsjurisdiction upon request of a department component or a labor organization. (36) Many of these duties arecurrently performed by the FLRA pursuant to 5 U.S.C. \u00c2\u00a7 7105. The regulations contemplate a more limited role for the FLRA. Under the regulations, theFLRA is authorized to determine the appropriateness of bargaining units,",
      " to supervise or conductelections to determine whether a labor organization has been selected as an exclusive representativeby a majority of the employees in an appropriate unit, to resolve disputes regarding the granting ofnational consultation rights, and to review specified NSLRB decisions. (37)  In addition to retaining many of the rights otherwise provided to management under Title 5,Chapter 71 of the United States Code, department managers are granted additional rights under thefinal regulations. For example, management is given the right \"to determine the numbers, types, payschedules, pay bands and/or grades of employees or positions assigned to any organizationalsubdivision, work project or tour of duty,",
      " and the technology, methods, and means of performingwork.\" (38) Managementcould also assign employees to meet any operational demand. (39) Under the regulations,management is prohibited from bargaining not only over the exercise of its rights, but over theprocedures it would observe in exercising its rights. Although the regulations require the agency and any exclusive representative in anyappropriate unit to meet and negotiate in good faith for the purpose of arriving at a collectivebargaining agreement, they also indicate that management would have no obligation to bargain overa change to a condition of employment \"unless the change is otherwise negotiable pursuant to [the]regulations and is foreseeable,",
      " substantial, and significant in terms of both impact and duration onthe bargaining unit, or on those employees in that part of the bargaining unit affected by thechange.\" (40) Theregulations do not identify when a change would be considered \"substantial\" and \"significant.\" Finally, the regulations provide for the establishment of procedures by the NSLRB for the\"fair, impartial, and expeditious\" assignment and disposition of cases. (41) The NSLRB would usea single, integrated process to address disputes and claims, to the extent practicable. Certaindecisions by the NSLRB, including those involving negotiability disputes and arbitral awards,",
      " couldbe reviewed by the FLRA. Under the regulations, the FLRA would have to accept the findings of factand interpretations made by the NSLRB and sustain the NSLRB's decision unless the partyrequesting review could show that the NSLRB's decision was (1) arbitrary, capricious, an abuse ofdiscretion, or otherwise not in accordance with law; (2) caused by harmful error in the applicationof the Board's procedures in arriving at such a decision; or (3) was unsupported by substantialevidence. (42)  Provisions Relating to Adverse Actions and AppellateProcedures.",
      " (43) The new section, 5 U.S.C. \u00c2\u00a79902(h), of P.L. 108-136 (1) (A)authorizes the Secretary of Defense to establish an appeals process that must provide employees ofDOD organizational and functional units that are included in the NSPS fair treatment in any appealsthat they bring in decisions relating to their employment; and (B) mandates that the Secretary, inprescribing regulations for that appeals process, (i) ensure that these employees are afforded dueprocess protections; and (ii) toward that end, be required to consult with the Merit SystemsProtection Board (MSPB)",
      " before issuing such regulations. (2) Regulations implementing theappeals process may establish legal standards and procedures for personnel actions, includingstandards for applicable relief, to be taken for employee misconduct or performance that fails to meetexpectations. These standards must be consistent with the public employment principles of meritand fitness set forth in section 2301 of Title 5 of the United States Code. (3) Legal standards andprecedents applied before the effective date of the new section 9902 of Title 5 by the MSPB and thecourts under Chapters 43 (Performance Appraisal), 75 (Adverse Actions) and 77 (Appeals)",
      " of Title5 must apply to DOD employees included in the NSPS, unless these standards and precedents areinconsistent with standards established in section 9902. (4) An employee who (A) is removed, suspended for more than 14 days, furloughed for 30days or less, reduced in pay, or reduced in pay band (or comparable reduction) by a final decisionunder the appeals process established under paragraph 1; (B) is not serving a probationary periodunder regulations established under paragraph (2); and (C) is otherwise eligible to appeal aperformance-based or adverse action under Chapters 43 or 75,",
      " as applicable, to the MSPB has theright to petition the full MSPB for a review of the record of that decision pursuant to regulationsestablished under paragraph (2). The board is authorized to dismiss any petition that, in the board'sview, does not raise substantial questions of fact or law. No personnel action may be stayed and nointerim relief may be granted during the pendency of the board's review unless specifically orderedby the board. (5) The board is authorized to order corrective action as it considers appropriate only if itdetermines that the department's decision was (A) arbitrary, capricious,",
      " an abuse of discretion, orotherwise not in accordance with law; (B) obtained without procedures required by law, rule, orregulation having been followed; or (C) unsupported by substantial evidence. (6) An employee whois adversely affected by a final order or decision of the MSPB may obtain judicial review of the orderor decision as provided in section 7703. The Secretary of Defense, after notifying the OPM Director,may obtain judicial review of any board final order or decision under the same terms and conditionsas provided an employee. (7) Nothing in subsection (h) of the new section 9902 of Title 5 of the United States Code should be construed to authorize the waiving of any provision of law,",
      " including an appeals provisionproviding a right or remedy under section 2302(b)(1), (8), or (9) of Title 5 that is not otherwisewaivable under subsection (a) of the new section 9902. Section 2302(b)(1) makes it a prohibitedpersonnel practice to discriminate for or against any employee on such bases as race, color, religion,sex, or national origin, age, handicapping conditions under relevant statutes, or marital status orpolitical status under any law, rule, or regulation. Section 2302(b)(8) prohibits personnel actions inreprisal for whistleblowing.",
      " Section 2302(b)(9) prohibits personnel actions in reprisal for suchthings as exercising any right of appeal, complaint, or grievance; cooperating with or disclosinginformation to the Inspector General or Special Counsel; or refusing to obey an order that wouldrequire an individual to violate a law. (8) The right of an employee to petition the final decision of DOD on an action covered byparagraph (4) of section 9902(h) to MSPB, and the right of the board to review such action or toorder corrective action pursuant to paragraph (5), is provisional for seven years after the date Chapter99 is enacted,",
      " and becomes permanent unless Congress acts to revise such provisions. Chapter 77 is one of the chapters of Title 5 that is subject to waiver or modification by theSecretary of Defense in establishing an HRM system for DOD. Section 7701 of Title 5 grantsemployees and applicants for employment a right to appeal to MSPB any action which is appealableto the board under any law, rule, or regulation. An appellant has a right to a hearing at which atranscript will be kept and to be represented by an attorney or other representative. An agency decision is sustained by the board only if it is supported by substantial evidencein the case of an action based on unacceptable performance described in 5 U.S.C.",
      " \u00c2\u00a74303 or a removalfrom the Senior Executive Service for failing to be recertified or if it is supported by a preponderanceof evidence in any other case. Notwithstanding these standards, an agency's decision may not besustained, if the employee or applicant for employment (1) shows harmful error in the applicationof the agency's procedures in arriving at its decision; (2) shows that the decision was based on anyprohibited personnel practice described in 5 U.S.C. \u00c2\u00a72302; or (3) shows that the decision was notin accordance with law. Section 7702 of Title 5 prescribes special procedures for any case in which an employee orapplicant who has been affected by an action appeals to the board and alleges that a basis for theaction was discrimination.",
      " The board first decides both the appealable action and the issue ofdiscrimination within 120 days after it is filed. In any action before an agency which involves anappealable action and discrimination, the agency must resolve the matter within 120 days. Anagency decision is judicially reviewable unless the employee appeals the matter to the board. Any decision of the board in an appealable action where discrimination has been alleged isjudicially reviewable as of the date the board issues its decision if an employee or the applicant doesnot file a petition for consideration by the Equal Employment Opportunity Commission. Within 30days after a petition is filed,",
      " the commission must decide whether to consider the board's decision. If the commission decides to consider such a decision, within 60 days it must concur in the board'sdecision or issue a written decision which differs from it. Within 30 days after receiving acommission decision that differs from the board's initial decision, the board must consider thecommission's decision and either concur in whole in it or reaffirm its initial decision or reaffirm itsinitial decision with appropriate revisions. A board decision to concur and adopt in whole acommission decision is judicially reviewable. If the board reaffirms its initial decision or reaffirms it with revisions that it determinesappropriate,",
      " the matter must immediately be certified to a special panel comprised of one individualappointed by the President, one board member, and one commission member. Within 45 days aftercertification, the special panel is required to review the record, decide the disputed issues on thebasis of the record, and issue a final decision, which is judicially reviewable. The special panel mustrefer its decision to the board, which is required to order the agency involved to take any appropriateaction to carry out the panel's decision. The panel must permit the employee or applicant whobrought the complaint and the agency to appear before it to present oral arguments and to presentwritten arguments.",
      " If prescribed time periods for action by an agency, board, or commission are not met, anemployee is entitled to file a civil action in district court under some antidiscrimination statutes. Ifan agency does not resolve a matter appealable to the board where discrimination has been allegedwithin 120 days, the employee may appeal the matter to the board. Nothing in section 7702 of Title5 \"Actions Involving Discrimination\" can be construed to affect the right to trial de novo in districtcourt under named antidiscrimination statutes after a judicially reviewable action. Under Section 7703 of Title 5, any employee or applicant who is adversely affected oraggrieved by a final order or decision of the MSPB may obtain judicial review of the order ordecision.",
      " Except in cases involving allegations of discrimination, a petition to review a final boardorder or decision must be filed with the United States Court of Appeals for the Federal Circuit within60 days after the petitioner received notice of the final order or decision. Cases involvingdiscrimination must be filed in district court under procedures prescribed in antidiscriminationstatutes within 30 days after the individual filing the case receives notice of a judicially reviewableaction. In any case filed with the Federal Circuit Court of Appeals, the court is required to holdunlawful and set aside any agency action, findings, or conclusions found to be (1) arbitrary,capricious,",
      " an abuse of discretion, or otherwise not in accordance with law; (2) obtained withoutprocedures required by law, rule, or regulations having been followed; or (3) unsupported bysubstantial evidence, except that in the case of discrimination brought under namedantidiscrimination statutes, an employee or applicant has a right to have the facts heard in a trial denovo by a reviewing court. Implementation. Subpart G of the final regulationson adverse actions contains procedural requirements for employees who are removed, suspended,furloughed for 30 days or less, reduced in pay, or reduced in a pay band (or comparable reduction). DOD may prescribe implementing issuances to carry out the provisions of the subpart.",
      " With respectto any covered category of employee, these regulations waive and replace relevant subchapters ofChapter 75 \"Adverse Actions\" and Chapter 43 \"Performance Appraisal\" of Title 5 of the UnitedStates Code. Subpart G authorizes the Department to take an adverse action under this subpart for suchcause as will promote the efficiency of the service. It grants to the Secretary of Defense sole,exclusive, and unreviewable discretion to identify \"mandatory removal offenses\" (i.e., those thathave a direct and substantial adverse effect on the Department's national security mission). Theseoffenses will be identified in advance in implementing issuances,",
      " publicized in notices in the FederalRegister and made known to all employees on a periodic basis, as appropriate, through meansdetermined by the Secretary. The proposed regulation provided that mandatory removal offenseswould be identified in advance as part of departmental regulations and that employees would benotified when they are identified. Under the final and proposed regulation, the Secretary has thesole, exclusive, and unreviewable discretion to mitigate the removal penalty on his or her owninitiative or at the request of the employee in question and the Secretary's authority to removeemployees for offenses other than those that the Secretary identifies as mandatory removal offensesis not limited by the regulation relating to them.",
      " An employee against whom an adverse action is proposed is entitled to (1) a proposal notice,(2) an opportunity to reply, and (3) a decision notice. The Department must provide a minimum of15 days advance written notice of a proposed adverse action, unless there is reasonable cause tobelieve that the employee has committed a crime for which a prison sentence may be imposed, inwhich case the advance notice period can be shortened to a minimum of five days. No proposalnotice is required for furlough without pay, such as sudden breakdown of equipment, acts of God,or sudden emergencies requiring immediate curtailment of activities. Covered DOD employees are given a minimum of ten days,",
      " which run concurrently with thenotice period, to reply orally and/or in writing. If there is reasonable cause to believe that theemployee has committed a crime for which a prison sentence may be imposed, however, theDepartment may be reduced to a minimum of five days, which run concurrently with the noticeperiod, to reply orally and/or in writing. No opportunity for reply is necessary for furlough withoutpay due to unforeseen circumstances such as acts of God, or sudden emergencies requiringimmediate curtailment of activities. The opportunity to reply orally does not include the right to a formal hearing withexamination of witnesses. During the opportunity to reply period,",
      " an employee is given a reasonableamount of official time to review evidence and to furnish affidavits and other documentary evidenceif the employee is otherwise in active duty status. The Department is required to designate an official to receive the employee's written and/ororal response. That official has authority to make or recommend a final decision on the proposedadverse action. The employee may be represented by an attorney or other representative of theemployee's choice and at the employee's expense, but the Department may disallow a representativeunder some conditions. In arriving at its decision on an adverse action, DOD may not consider any reasons other thanthose specified in the proposal notice.",
      " The Department must consider any response from theemployee and the employee's representative given to the designated official during the opportunityto reply period, as well as any medical documentation furnished in accordance with relevantregulations. The decision notice must specify in writing the reasons for the decision and advise theemployee of any appeal or grievance rights. To the extent practicable, the Department must deliverthe notice to the employee on or before the effective date of the action. If the notice cannot bedelivered in person, the Department may mail the notice to the employee's last known address ofrecord. The Department is required to keep a record of all relevant documentation concerning theaction for a period of time pursuant to the General Records Schedule and the Guide to PersonnelRecordkeeping.",
      " DOD must make the record available for review by the employee and furnish a copyof the record upon request of the employee or the Merit Systems Protection Board. The requirementsin Subpart G do not apply to adverse actions proposed prior to the date of an affected employee'scoverage under the subpart. Subpart H of the final regulations on appeals implements the provisions of Section 9902(h)of Title 5 of the United States Code, which establishes the system for DOD employees to appealcertain adverse actions covered under Subpart G. In applying existing legal standards andprecedents, the Merit Systems Protection Board (MSPB)",
      " is bound by the regulation set forth inSection 9901.107(a)(2)of Title 5 of the Code of Federal Regulations, which provides that theregulations must be interpreted in a way that recognizes the critical national security mission of theDepartment of Defense and that each provision must be construed to promote the swift, flexible,effective day-to-day accomplishment of this mission as defined by the Secretary of Defense. When a specified category of employees is covered by an appeals system established underthis subpart, these regulations waive the provisions of Section 7701 \"Appellate procedures\" of Title5 of the United States Code established for that category to the extent that they are inconsistent withthe subpart.",
      " The regulation on discrimination cases, Section 9901.809 of Title 5 of the Code ofFederal Regulations, modifies the provisions of Section 7702 \"Actions involving discrimination\" ofTitle 5 of the United States Code. The appellate procedures specified in Subpart H supersede thoseof the MSPB to the extent that the MSPB regulations are inconsistent with the subpart. MSPB isrequired to follow the provisions of Subpart H until it issues conforming regulations, which may notconflict with the DOD regulations. Appellate procedures in Subpart H, subject to a determination by the Secretary of Defense,apply to employees in DOD organizational and functional units included under the National SecurityPersonnel System who appeal removals;",
      " suspensions for more than 14 days, including indefinitesuspensions; furloughs of 30 days or less; reductions in pay; or reductions in a pay band (orcomparable reductions), which constitute appealable adverse actions for the purpose of the subpart,provided that they are covered by the adverse actions procedures in Subpart G. The Department of Defense recognizes the value of using alternative dispute resolutionmethods such as mediation, an ombudsman, or interest-based problem-solving to addressemployee-employer disputes and encourages using alternative dispute resolution. The methods aresubject to collective bargaining under Subpart I \"Labor Management Relations\"",
      " of the DODregulations. A covered DOD employee may appeal an appealable adverse action to the Merit SystemsProtection Board. The employee has a right to be represented by an attorney or other representativeof his or her own choosing. The MSPB is required to refer all appeals to an administrative judge foradjudication. The administrative judge must make a decision at the close of the review and providea copy of the decision to each party to the appeal and to the Office of Personnel Management. Allappeals, including class appeals, must be filed no later than 20 days after the effective date of theaction being appealed, or no later than 20 days after the date of service of an adverse action,",
      "whichever is later. An initial decision by an administrative judge must be made no later than 90 daysafter the date on which the appeal is taken. An adverse action taken against an employee must be sustained by the MSPB administrativejudge if it is supported by a preponderance of evidence unless the employee shows by apreponderance of the evidence that (1) there was harmful error in the application of DODprocedures in arriving at the decision; (2) the decision was based on any prohibited personnelpractice; or (3) the decision was not in accordance with law. Preponderance of the evidence isdefined as the degree of relevant evidence that a reasonable person,",
      " considering the record as awhole, would accept as sufficient to find that a contested fact is more likely to be true than untrue. A Board administrative judge must give great deference to DOD's determination regardingthe penalty imposed. An administrative judge may not modify the penalty imposed unless it istotally unwarranted in light of all pertinent circumstances. In evaluating the appropriateness of apenalty, the administrative judge must give primary consideration to the impact of the sustainedmisconduct or poor performance on the Department's national security mission. In cases of multiplecharges, the third party's determination in this regard is to be based on the justification for the penaltyas it relates to the sustained charge or charges.",
      " When a penalty is mitigated, the maximum justifiablepenalty must be applied. That penalty is the severest one that is not so disproportionate to the basisfor the action as to be totally unwarranted in light of all pertinent circumstances. The final regulation changes some aspects of the proposed regulation. It states that anadministrative judge cannot modify a DOD penalty; the proposed regulation stated that anadministrative judge, an arbitrator, or the full MSPB could not modify one. The final regulation alsochanges the standard for mitigation. The final regulation provides that an administrative judge maynot modify a penalty imposed by DOD \"unless it is totally unwarranted in light of all pertinentcircumstances;\" the proposed regulation said that such a penalty could not be modified unless it is\"",
      "so disproportionate to the basis for the action as to be wholly without justification.\" Under the final regulation, like the proposed one, neither the MSPB administrative judge northe full MSPB may reverse an action of DOD based on the way in which the charge is labeled or theconduct is characterized, provided that the employee is on notice of the facts sufficient to respondto the factual allegations of the charge. Moreover, neither the MSPB administrative judge nor thefull MSPB may reverse the Department's action based on the way that a performance expectation isexpressed, provided that the expectation would be clear to a reasonable person. An employee willnot be granted interim relief,",
      " nor will an action taken against an employee be stayed, unlessspecifically ordered by the full Board after a final decision by the Department of Defense. Back paymay not be awarded and attorney fees may not be paid before a Board decision becomes final. Generally, an administrative judge of the MSPB may require DOD to pay attorney fees ifthe employee is the prevailing party and the administrative judge determines that such payment iswarranted in the interest of justice, including any case in which the Department was engaged in aprohibited personnel practice or any case in which the agency's action was clearly without merit. Ifthe employee is the prevailing party and the decision is based on a finding of discriminationinvolving a prohibited personnel practice under 5 U.S.C.",
      " section 2302(b)(1), however, payment ofreasonable attorney fees must be in accordance with the standards prescribed in section 706(k) ofthe Civil Rights Act of 1964, 42 U.S.C. 2000e-5(k). The final regulation relating to attorney fees is less restrictive than the proposed regulation. Under the proposed regulation, attorney fees were warranted to a prevailing party \"in the interest ofjustice,\" a phrase defined as \"only when the Department was engaged in a prohibited personnelpractice or the Department's action was clearly without merit based upon facts known tomanagement when the action was taken.\" The final regulation,",
      " like the proposed regulation, provides that an initial decision of anadministrative judge becomes the Department's final decision 30 days after it is issued unless eitherparty files a request for review with MSPB and the Department concurrently (with service to theother party) within that 30-day period. The final regulation states that the request must be filed \"inaccordance. with 5 U.S.C. section 9902(h), MSPB's regulations, and this subpart [Subpart H\"Appeals\"].\" It adds that if a party does not submit a request for review within the time limit, therequest will be dismissed as untimely filed unless a good reason for the delay is shown.",
      " The finalregulation deletes language in the proposed regulation which provided that a request for review hadto be served on the other party \"as specified by DOD implementing issuances.\" Moreover, languagein the final regulation regarding dismissing a request for review as untimely if it was not submittedwithin the 30 day period did not appear in the proposed regulation. Under the final regulation, thirty days after the timely filing of a request for review, the initial decision of the MSPB administrative judge becomes the Department's final, nonprecedentialdecision, unless notice is served on the parties and MSPB within that period that the Department willact on the request.",
      " When no such notice is served, MSPB must docket and process a party's requestas a petition for full Board review in accordance with 5 U.S.C. section 9902(h), MSPB's regulations,and this subpart. Timeframes will be established in implementing issuances for those instanceswhere action is taken on a request for review. If DOD decides to act on the request for review, the other party to the case is given 15 daysto respond to the request. An extension to the filing period may be granted for good cause. Afterreceiving a timely response to the request for review, the Department may (1)",
      " remand the matter tothe assigned administrative judge for further adjudication or issue a final DOD decision modifyingor reversing that initial decision or decision after remand; (2) issue a final DOD decision modifyingor reversing the initial decision; or (3) issue a final DOD decision affirming that initial decision. Anadministrative judge must make a decision after remand under (1) no later than 30 days afterreceiving a remand notice, unless the remand order requires that a hearing must be held, in whichcase the decision of the administrative judge must be made no later than 45 days after receiving theremand order.",
      " Decisions on remand are treated as initial decisions for the purpose of further review. Any decision issued by the Department after reviewing an initial decision of anadministrative judge is precedential unless the Secretary determines that the DOD decision is notprecedential or the final DOD decision is reversed or modified by the full Merit Systems ProtectionBoard. Precedential decisions must be published according to details provided in implementingissuances. The proposed regulation did not require publishing precedential decisions. Under the final regulation, any decision following the period for DOD review is final unlessa party to the appeal or the Director of the Office of Personnel Management petitions the full MSPBfor review within 30 days.",
      " The Director, after consulting with the DOD Secretary, may petition thefull Board for review if the Director believes that the decision is erroneous and will have asubstantial effect on a civil service law, rule, regulation, or policy directive. MSPB, for good causeshown, may extend the filing period. Upon receiving a final DOD decision, an employee or the Office of Personnel Managementmay file a petition for review with the full Board within 30 days in accordance with 5 U.S.C. section9902(h), MSPB's regulations, and this subpart. The Board may dismiss any petition that, in itsopinion,",
      " does not raise substantial questions of fact or law. The full Board may order correctiveaction only if it determines that the decision was (1) arbitrary, capricious, and an abuse of discretion,or otherwise not in accordance with law; (2) obtained without procedures required by law, rule, orregulation having been followed; or (3) unsupported by substantial evidence. The final regulation sets out these standards which are prescribed in the statute at section 9901(h) of of Title 5 of theUnited States Code. The proposed regulation did not set them out. Under the final regulation, upon receipt of a petition for full MSPB review or a request forreview that becomes a petition for review as a result of expiration of the Department's review periodfollowing an initial decision by an administrative judge,",
      " the other party to the case and/or OPM, asapplicable, has 30 days to file a response to the petition. The full Board is required to act on apetition within 90 days after receiving a timely response, or the expiration of the response period,as applicable, in accordance with 5 U.S.C. section 9902(h), MSPB's regulations, and this subpart. Section 9902(h) of Title 5 of the United States Code grants an eligible employee who isremoved, suspended for more than 14 days, furloughed for 30 days or less, reduced in pay,",
      " orreduced in a pay band (or comparable reduction) by a final decision under the appeals process theright to petition the full MSPB for review of the decision. This subsection also authorizes the Boardto dismiss any petition that, in the view of the Board, does not raise substantial questions of law orfact. No personnel action can be stayed and no interim relief can be granted during the pendency ofthe Board's review unless specifically ordered by the Board. The Director of the Office of Personnel Management, after consulting with the Secretary ofDefense, may seek reconsideration by MSPB of a final Board decision. Reconsideration must besought within 35 days after the Board's final order is served.",
      " If the Director seeks reconsideration,the full Board must render its decision no later than 60 days after receiving a response to OPM'spetition in support of reconsideration and state reasons for its decision. The 35-day deadline torequest reconsideration did not appear in the proposed regulation. Failure of MSPB to meet deadlines imposed by provisions relating to an initial decision byan administrative judge, a decision by the full Board on a petition for review, and Boardreconsideration sought by the Director of OPM does not prejudice any party to the case and does notform the basis for any legal action by any party. If the administrative judge or the full Board failsto meet time limits,",
      " the full Board is required to inform the Secretary of Defense in writing of thecause of the delay and recommend future actions to remedy the problem. The Secretary of Defense or an employee adversely affected by a final order or decision ofMSPB may seek judicial review under Section 9002(h) of Title 5 of the United States Code, whichauthorizes an adversely affected employee and the Secretary to obtain judicial review as providedin 5 U.S.C. Section 7703 \"Judicial review of decisions of the Merit Systems Protection Board.\"Language in the proposed regulation that authorized the Secretary of Defense to seek reconsiderationby MSPB of a final MSPB decision before seeking judicial review was deleted because currentMSPB rules authorize such a review.",
      " Procedures for appeals of adverse actions to MSPB based on mandatory removal offensesare the same as for other offenses except that if one or more mandatory removal offenses is or aresustained, the MSPB administrative judge may not mitigate the penalty. Only the Secretary ofDefense may mitigate the penalty within the Department. If the administrative judge or full Boardsustains an employee's appeal based on a finding that the employee did not commit a mandatoryremoval offense, a subsequent proposed adverse action (other than a mandatory removal offense)based in whole or in part on the same or similar evidence is not precluded. This final regulation differs from the proposed one in that it precludes only an administrativejudge of the MSPB to mitigate a penalty for a mandatory removal offense;",
      " the proposed regulationprecluded not only an administrative judge, but also the full Board from mitigating it. Moreover,the final regulation provides that \"only the Secretary may mitigate the penalty within theDepartment\"; the proposed regulation did not include the phrase \"within the Department.\" In considering any appeal of an action filed under Section 7702 \"Actions involvingdiscrimination\" of Title 5 of the United States Code, the Merit Systems Protection Board is requiredto apply the provisions of 5 U.S.C. Section 9902 \"Establishment of human resources system\" and these DOD regulations. In any appeal of an action filed under 5 U.S.C.",
      " Section 7702 that results ina \"final Department decision, if no petition for review of the Department's decision is filed with thefull Board, and if requested by the appellant, the Department will refer only the discrimination issueto the full Board for adjudication.\" All references in 5 U.S.C. Section 7702 to 5 U.S.C. Section 7701\"Appellate procedures\" are modified to read Part 9901 \"Department of Defense National SecurityPersonnel System\" of Title 5 of the Code of Federal Regulations. This final regulation changed the proposed regulation by adding \"final\" to precede\"Department decision,\" and \"and if requested by the appellant\"",
      " after \"if no petition for review of theDepartment's decision is filed with the full Board\" to the proposed regulation. Subpart H does notapply to adverse actions that were proposed prior to the date of an affected employee's coverageunder this subpart. Congress authorized DOD and OPM to establish an appeals process that provides employeeswith \"fair treatment in any appeals that they bring in decisions relating to their employment.\" Theprocess also must \"ensure that employees... are afforded the protections of due process.\" OnNovember 7, 2005, following the issuance of final regulations to establish the NSPS, a coalition offederal unions, including the American Federation of Government Employees,",
      " filed a lawsuit infederal district court challenging the regulations. On February 27, 2006, the court enjoined the newregulations on the grounds that they failed to ensure collective bargaining rights, did not provide forthe independent third-party review of labor relations decisions, and failed to provide a fair processfor appealing adverse actions. (44) DOD has indicated that it will appeal the decision. (45) The courtheld that theprocess of appealing adverse actions in the final regulations would fail to provide employees with\"fair treatment\" and, therefore, were contrary to authority that had been granted in the statute. The following regulations were found to be unfair:",
      " Regulations that would authorize DOD to reverse a decision of anadministrative judge of the Merit Systems Protection Board if the department determined that therehad been a \"material error of fact\" or that the decision had a \"direct and substantial impact of thedepartment's national security mission.\" The court said that, \"These regulations, in effect, allow oneparty to unilaterally modify or reverse the decision of an independent administrative lawjudge.\" A regulation that would prohibit an administrative judge from modifying apenalty imposed by the department \"unless such penalty is totally unwarranted in light of allcircumstances\" and required an administrative judge who did mitigate a penalty to impose themaximum justifiable one.",
      " The court quoted from an court decision which held that final regulationsof the Department of Homeland Security exceeded statutory authority to say that this DODregulation, like a similar one for DHS, would \"put the thumbs of the agencies down hard on thescales of justice in [the agencies'] favor.\" A regulation that would permit the Secretary \"in his or her sole, exclusive andunreviewable discretion\" to place an employee in an alternative position or on an excused absenceif the Secretary determined that the employee's return ordered by the Merit Systems Protection Boardwould be \"impracticable or unduly disruptive to the work environment.\" The court found that therewas no basis in the statute for this authority and conflicted with a statutory requirement that nointerim relief could be granted except by the board.",
      " A regulation that would authorize the Secretary \"in his sole, exclusive, andunreviewable discretion\" to \"identify offenses [known as mandatory removal offenses] that have adirect and substantial impact on the department's national security mission.\" An employee deemedto have committed one of these offenses would be removed from employment. The court said thatalthough the statute granted the department the discretionary authority to establish an appealsprocess, any process that it established had to provide employees with fair treatment and that thisregulation failed to do so. Provisions Related to Separation and RetirementIncentives. Under current law, a federal agency that is restructuring or downsizingcan,",
      " with the approval of OPM, offer voluntary early retirement to employees in specificoccupational groups, organizational units, or geographic locations who are age 50 or older and haveat least 20 years of service, or who are any age and have at least 25 years of service. Also with theapproval of OPM, a federal agency may offer voluntary separation incentive payments of up to$25,000 to employees who retire or resign. The full amount must be repaid if individual isre-employed by the federal government within five years. P.L. 108-136 creates a new Section 9902(i) of Title 5 that authorizes the Secretary ofDefense,",
      " without review by OPM, to establish a program within DOD under which employees maybe eligible for early retirement, offered separation incentive pay to separate from service voluntarily,or both. The authority may be used to reduce the number of personnel employed by DOD or torestructure the workforce to meet mission objectives without reducing the overall number ofpersonnel. It is in addition to, and notwithstanding, any other authorities established by law orregulation for such programs. The Secretary may not authorize the payment of voluntary separation incentive pay (VSIP)to more than 25,000 employees in any fiscal year, except that employees who receive VSIP as aresult of a closure or realignment of a military installation under the Defense Base Closure andRealignment Act of 1990 (Title XXIX of P.L.",
      " 101-510 ) will not be included in that number. TheSecretary must prepare a report each fiscal year setting forth the number of employees who receivedsuch pay as a result of a closure or realignment of a military base and submit it to the SenateCommittees on Armed Services and Governmental Affairs and the House Committees on ArmedServices and Government Reform. \"Employee\" means a DOD employee serving under an appointment without time limitation. The term does not include (1) a reemployed annuitant under 5 U.S.C. Subchapter III, Chapters 83or 84, or another retirement system for federal employees; (2)",
      " an employee having a disability on thebasis of which he or she is or would be eligible for disability retirement; or (3) for purposes ofeligibility for separation incentives, an employee who has received a decision notice of involuntaryseparation for misconduct or unacceptable performance. An employee who is at least 50 years of age and has completed 20 years of service, or hasat least 25 years of service, could, pursuant to regulations promulgated under this section, apply andbe retired from DOD and receive benefits in accordance with Chapters 83 or 84 if he or she has beenemployed continuously within DOD for more than 30 days before the date on which thedetermination to conduct a reduction or restructuring within one or more DOD components isapproved.",
      " Separation pay will be paid in a lump sum or in installments and will be equal to the lesserof (1) an amount equal to the amount the employee would be entitled to receive under 5 U.S.C.5595(c), if the employee were entitled to payment; or (2) $25,000. Separation pay is not a basis forpayment, and is not included in the computation, of any other type of government benefit. It will notbe taken into account to determine the amount of any severance pay to which an individual couldbe entitled under 5 U.S.C. 5595, based on any other separation.",
      " If paid in installments, separationpay will cease to be paid upon the recipient's acceptance of federal employment, or commencementof work under a personal services contract. An employee who receives separation pay may not be reemployed by DOD for a 12-monthperiod beginning on the effective date of the employee's separation, unless this prohibition is waivedby the Secretary on a case-by-case basis. An employee who receives separation pay on the basis ofa separation occurring on or after the enactment date of the Federal Workforce Restructuring Act of1994 ( P.L. 103-236 ) and accepts employment with the federal government, or who commences workthrough a personal services contract with the United States within five years after the date of theseparation on which payment of the separation pay is based,",
      " would be required to repay the entireamount of the separation pay to DOD. If the employment is with an executive agency other thanDOD, the OPM Director could, at the request of the agency head, waive the repayment if theindividual involved possesses unique abilities and is the only qualified applicant available for theposition. If the employment is within DOD, the Secretary could waive the repayment if theindividual involved is the only qualified applicant available for the position. If the employment iswith an entity in the legislative branch, or with the judicial branch, the head of the entity or theappointing official, or the Director of the Administrative Office of the U.S.",
      " Courts, could waive therepayment if the individual involved possesses unique abilities and is the only qualified applicantavailable for the position. Under this program, early retirement and separation pay may be offered only pursuant toregulations established by the Secretary, subject to such limitations or conditions as the Secretarymay require. Implementation. The Deputy Under Secretary ofDefense for Civilian Personnel Policy, Ginger Groeber, issued a memorandum to implement thevoluntary separation incentive payments (buyouts) and the voluntary early retirement provisions onDecember 30, 2004. Buyouts are limited to 25,000 employees annually. For FY2004, the Army,Navy,",
      " Air Force, and Defense agencies were allocated 7,722; 7,135; 5,873; and 4,270 buyouts,respectively. Voluntary early retirements are not limited. To be eligible for a buyout, an individualmust have been employed by DOD for a continuous period of at least 12 months. According to theDOD guidance, members of the Senior Executive Service and employees above GS-15 are noteligible for buyouts or early retirement unless the Principal Deputy Under Secretary of Defense forPersonnel and Readiness approves the action to avoid a reduction in force or to restructure theworkforce.",
      " (46)  Provisions Relating to Reemployment. Undercurrent law, a retired federal employee who is re-employed by the federal government may notreceive a federal retirement annuity and a federal salary simultaneously. Sections 8344 (CivilService Retirement System (CSRS)) and 8468 (Federal Employees' Retirement System (FERS)) ofTitle 5 provide that if a retired federal employee who is receiving an annuity from the Civil ServiceRetirement and Disability Fund is re-employed by a federal agency, an amount equal to the annuityshall be deducted from his or her pay. If re-employment lasts more than one year,",
      " the individual willbe eligible for a supplemental annuity for the period of re-employment when he or she retires. P.L. 108-136 creates a new Section 9902(j) of Title 5 that provides that if a retired federalemployee who is receiving an annuity from the Civil Service Retirement and Disability Fund wereto be employed by DOD, his or her annuity would continue. The employee would not accrueadditional credit under either CSRS or FERS during this period of re-employment. Implementation. On March 18, 2004, the UnderSecretary of Defense for Personnel and Readiness, David Chu,",
      " issued a memorandum to implementthe reemployment provisions. According to Mr. Chu, \"This critical hiring flexibility will helpaddress the challenges of'retirement-driven talent drain' as our current generation of dedicated civilservants become eligible to retire.\" Under the DOD guidance, annuitants may be reemployed: In positions that are hard-to-fill as evidenced byhistorically high turnover, a severe shortage of candidates or other significant recruiting difficulty;or positions that are critical to the accomplishment of the organization's mission; or to complete aspecific project or initiative; [If they] have unique or specialized skills, or unusualqualifications not generally available;",
      " or For not more than 2087 hours (e.g., one year full time,or two years part time) to mentor less experienced employees and/or to provide continuity duringcritical organizational transitions. Extensions beyond 2087 hours are not authorized. (47) The next-level manager or supervisor must certify in writing that one or more of the aboveconditions exists if a retiree seeks to return to the same or a substantially similar position as the onefrom which he or she retired. If less than 90 days has elapsed between the retirement and thereemployment, the certification must indicate that retention options were considered and offered tothe employee before retirement.",
      " The DOD guidance covers annuitants who are rehired afterNovember 23, 2004. The Deputy Under Secretary of Defense for Civilian Personnel Policy willmonitor the use of the reemployment authority and may establish reporting requirements. Additional Provisions Relating to PersonnelManagement. Notwithstanding Section 9902(d), the Secretary of Defense, inestablishing and implementing the NSPS, is not limited by any provision of Title 5 or any rule orregulation prescribed under Title 5 in establishing and implementing regulations relating to --  (A) the methods of establishing qualificationrequirements for, recruitment for, and appointments to positions; (B)",
      " the methods of assigning, reassigning, detailing,transferring, or promoting employees; and (C) the methods of reducing overall agency staff andgrade levels, except that performance, veterans' preference, tenure of employment, length of service,and such other factors as the Secretary considers necessary and appropriate must be considered indecisions to realign or reorganize the Department's workforce. In implementing this subsection, the Secretary must comply with 5 U.S.C. \u00c2\u00a72302(b)(11),regarding veterans' preference requirements. Phase-In. The Secretary may apply the NSPS toan organizational or functional unit that includes up to 300,",
      "000 civilian DOD employees and to anorganizational or functional unit that includes more than 300,000 civilian DOD employees, if theSecretary determines that the department has in place a performance management system that meetsthe criteria specified. ( S. 1166 included a similar phase-in provision.) Section 9903. Attracting Highly Qualified Experts(48) The new Section 9903 authorizes the Secretary of Defense to carry out a program in orderto attract highly qualified experts in needed occupations, as determined by him. Under the program,the Secretary may appoint personnel from outside the civil service and uniformed services (as suchterms are defined in 5 U.S.C.",
      " \u00c2\u00a72101) to positions in DOD without regard to any provision of Title5 governing the appointment of employees to positions in DOD. The Secretary also may prescribethe rates of basic pay for positions to which employees are appointed at rates not in excess of themaximum rate of basic pay authorized for senior-level positions under 5 U.S.C. \u00c2\u00a75376 (ExecutiveSchedule (EX) Level IV, $143,000 as of January 2006), as increased by locality-based comparabilitypayments (total cannot exceed EX level III, $152,000 as of January 2006), notwithstanding anyprovision of Title 5 governing the rates of pay or classification of employees in the executive branch.",
      " The Secretary may pay any employee appointed under this section payments in addition to basic paywithin the limits applicable to the employee as discussed below. The service of an employee under an appointment made pursuant to this section may notexceed five years. The Secretary may, however, in the case of a particular employee, extend theperiod to which service is limited by up to one additional year if he determines that such action isnecessary to promote DOD's national security missions. The total amount of the additional payments paid to an employee under this section for any12-month period may not exceed the lesser of $50,000 in FY2004, or an amount equal to 50%",
      " ofthe employee's annual rate of basic pay. The $50,000 may be adjusted annually thereafter by theSecretary, with a percentage increase equal to one-half of one percentage points less than thepercentage by which the Employment Cost Index (ECI), published quarterly by the Bureau of LaborStatistics, for the base quarter of the year before the preceding calendar year exceeds the ECI for thebase quarter of the second year before the preceding calendar year. \"Base quarter\" has the samemeaning given at 5 U.S.C. \u00c2\u00a75302(3). An employee appointed under this section is not eligible for any bonus, monetary award,",
      " orother monetary incentive for service except for payments authorized under this section. Notwithstanding any other provision of this subsection or of 5 U.S.C. \u00c2\u00a75307, no additional paymentsmay be paid to an employee in any calendar year, if, or to the extent that, the employee's total annualcompensation will exceed the maximum amount of total annual compensation payable to the VicePresident ($212,100, as of January 2006). The number of highly qualified experts appointed and retained by the Secretary may notexceed 2,500 at any time. (Under S. 1166, the limitation would have been 300.) In the event that the Secretary terminates this program,",
      " the following will occur. In the caseof an employee who on the day before the termination of the program is serving in a positionpursuant to an appointment under this section, the termination of the program does not affect theemployee's employment in that position before the expiration of the lesser of the period for whichthe employee was appointed or the period to which the employee's service is limited, including anyextension made under this section before the termination of the program. The rate of basic payprescribed for the position may not be reduced as long as the employee continues to serve in theposition without a break in service. The committee report which accompanied H.R.",
      " 1836 stated that \"[t]he authority[in this provision] is consistent with that now available to the Defense Advanced Research ProjectsAgency and Military Departments for hiring scientists and engineers.\" (49)  Implementation. DOD issued guidance toimplement the provision on highly qualified experts on February 27, 2004. The guidance identifiessuch an expert as: an individual possessing uncommon, specialknowledges or skills in a particular occupational field beyond the usual range of expertise, who isregarded by others as an authority or practitioner of unusual competence and skill. The expertknowledge or skills are generally not available within the Department and are needed to satisfy anemerging and relatively short-term,",
      " non-permanent requirement. (50) The hiring authority cannot be used to provide temporary employment in anticipation ofpermanent employment, to provide services that are readily available with DOD or another federalagency, to perform continuing DOD functions, to bypass or undermine personnel ceilings or paylimitations, to aid in influencing or enacting legislation, to give former federal employees preferentialtreatment, to do work performed by regular employees, or to fill in during staff shortages. (51)  Basic pay for experts would be determined according to such factors as: Labor market conditions; Type of position; Location of position; Work schedule; Level of independence in establishing work objectives;",
      " Working conditions; Organizational needs; Personal qualifications; Type of degree; Personal recommendations; Experience (recency, relevance); Budget considerations; Organizational equity/pay considerations; and Mission impact of work assignments. (52) An expert's pay may be increased because of an \"exceptional level of accomplishment relatedto projects, programs, or tasks that contribute to the Department or Component strategicmission.\" (53)  The Defense Civilian Personnel Data System will be used to record the employment of highlyqualified experts. Written documentation must be maintained and must include the criteria for theappointment and the factors and criteria used to set and increase pay and to provide additionalpayments.",
      " The records must be retained for three years after an employee is terminated. (54)  Section 9904. Special Pay and Benefits for Certain Employees Outside the UnitedStates(55) The new Section 9904 of P.L. 108-136 authorizes the Secretary of Defense to provideallowances and benefits to certain civilian DOD employees assigned to activities outside the UnitedStates, as determined by the Secretary to be in support of DOD activities abroad hazardous to lifeor health or so specialized because of security requirements as to be clearly distinguishable fromnormal government employment. Such allowances and benefits will be comparable to thoseprovided by the Secretary of State to members of the Foreign Service under Chapter 9 of Title I ofthe Foreign Service Act of 1980 or any other provision of law;",
      " or comparable to those provided bythe Director of Central Intelligence to personnel of the Central Intelligence Agency (CIA). Specialretirement accrual benefits and disability that are in the same manner provided for by the CIARetirement Act and in Section 18 of the CIA Act of 1949 also will be provided. Impact on Department of Defense Civilian Personnel Section 1101(b) of P.L. 108-136 provides that any exercise of authority under the proposednew Chapter 99, including under any system established under that chapter, must be in conformancewith the requirements of this subsection. No other provision of this act or of any amendment madeby this act may be construed or applied in a manner so as to limit,",
      " supersede, or otherwise affect theprovisions of this section, except to the extent that it does so by specific reference to this section. Department of Defense Civilian Personnel Generally -- Title XI, Subtitle B, ofP.L. 108-136 Military Leave for Mobilized Federal CivilianEmployees(56) Section 1113 of P.L. 108-136 amends 5 U.S.C. \u00c2\u00a76323 to authorize military leave for anindividual who performs full-time military service as a result of a call or order to active duty insupport of a contingency operation. (57) Under military leave, the individual receives leave without lossof,",
      " or reduction in, pay, leave to which he or she is otherwise entitled, credit for time or service, orperformance or efficiency rating, for up to 22 workdays in a calendar year. The provision appliesto military service performed on or after the act's enactment date, November 24, 2003. The committee report accompanying H.R. 1836 explained the need for theprovision: This section would help Federal civilian employeeswhose military pay is less than their Federal civilian salary \"transition\" to military service byallowing them to receive 22 additional workdays of military leave when mobilized. Such leavewould help alleviate the difference in pay for the first month of service by enabling them to receivethe difference between their Federal civilian pay and their military pay.",
      " Current law only entitlesReserve component members to the additional military leave. (58) Extension of Authority for Experimental Personnel Program for Scientific and TechnicalPersonnel(59) Section 1116 amends Subsection (e)(1) of Section 1101 of the Strom Thurmond NationalDefense Authorization Act for FY1999 ( P.L. 105-261 ; 112 Stat. 2139; 5 U.S.C. \u00c2\u00a73104 note) toextend the experimental personnel program for scientific and technical personnel until September30, 2008 (the annual report will be required in 2009). Subtitle B of Title XI of P.L.",
      " 108-136 also includes provisions on an automated personnelmanagement program, the demonstration project relating to certain acquisition personnelmanagement, restoration of annual leave to certain DOD employees affected by base closings, andemployment of certain civilian faculty members at a Defense institution, which are beyond thepurview of this report. Department of Defense Civilian Personnel Generally -- Title XI, Subtitle C, ofP.L. 108-136 The provisions at Subtitle C of Title XI of P.L. 108-136 apply to federal civilian employeesgovernment-wide. Modification of the Overtime Pay Cap(60) Section 1121 amends 5 U.S.C.",
      " \u00c2\u00a75542(a)(2) which covers the computation of overtime ratesof pay. It provides that such an employee will receive overtime at a rate which will be the greaterof one and one-half times the hourly rate for GS-10, step 1, or his or her hourly rate of basic pay. The law previously in effect provided that an employee whose basic pay rate exceeded GS-10, step1 (including any locality pay or special pay rate) received overtime at a rate of one and one-half timesthe hourly rate for GS-10, step 1 (150% of GS-10, step 1). For employees whose regular pay is greater than the 150%",
      " of GS-10, step 1 cap, the lawpreviously in effect resulted in overtime pay at a rate less than their regular hourly rate. P.L. 108-136 addresses this circumstance and the situation in which managers and supervisors, whose overtimerate is capped at 150% of GS-10, step 1, receive less compensation for overtime work thanemployees who are subordinate to them. The Congressional Budget Office (CBO) determined thatthe provision would affect employees above GS-12, step 5. (61)  Implementation. OPM advised agencies to ensurethat proper overtime payments were being made as of November 24,",
      " 2003, the law's enactment date. Final regulations to implement the provision were published by OPM in the Federal Register onMay 13, 2004, and became effective on the same day. (62)  Common Occupational and Health Standards for Differential Payments as a Consequenceof Exposure to Asbestos(63) Section 1122 amends 5 U.S.C. \u00c2\u00a75343(c)(4), which authorizes blue-collar employees toreceive pay differentials for unusually severe working conditions or unusually severe hazards, and5 U.S.C. \u00c2\u00a75545(d), which authorizes pay differentials for unusual physical hardship or hazard forGeneral Schedule (GS)",
      " employees. The amendment provides that pay differentials for any hardshipor hazard related to asbestos will be determined by applying occupational safety and health standardsconsistent with the permissible exposure limit promulgated by the Secretary of Labor under theOccupational Safety and Health Act of 1970. Subject to any vested constitutional property rights,any administrative or judicial determination after the act's enactment date concerning backpay fora differential under 5 U.S.C. \u00c2\u00a75343(c)(4) or 5545(d) will be based on occupational safety and healthstandards under the Occupational Safety and Health Act of 1970. The Congressional Budget Office (CBO)",
      " explained the provision in its cost estimate for H.R. 1836. According to CBO, the provision provides that federal wage-grade employees would be subject to thesame standards as general schedule employees when determining eligibility for environmentaldifferential pay (EDF) due to exposure to asbestos. Under current law, general schedule employeesare entitled to 8 percent hazard differential pay [HDP] if they are exposed to asbestos that exceedsthe permissible exposure limits established by OSHA. The current EDP standard for wage-gradeemployees entitles them to the same 8 percent of pay but does not set an objective measure fordetermining the level of asbestos exposure necessary to qualify for EDP.",
      " In several instances whenwage-grade employees have sought back pay for EDP, arbitrators have found in favor of theemployees when asbestos levels were below those consistent with OSHA standards. (64) Implementation. According to OPM,administrative or judicial determinations concerning EDP or HDP for asbestos exposure must bebased on the OSHA permissible exposure limits for asbestos as of November 24, 2003. OPMregulations on HDP for GS employees include this requirement. The personnel agency will updatethe EDP regulations for wage employees to include the requirement. Increase in Annual Student Loan Repayment Authority(65) Section 1123 amends 5 U.S.C.",
      " \u00c2\u00a75379(b)(2)(A) to provide that student loan repayments to anemployee may not exceed $10,000 in any calendar year, replacing the up to $6,000 per calendar yearthat the current law allows. The provision became effective on January 1, 2004. Given the increasingly larger burdens of debt that graduates are assuming, this provisioncould provide additional flexibility to managers and agencies wanting to offer student loanrepayments to their employees. Federal agencies have said that they would need additionalappropriations to fund such incentives as student loan repayments. Implementation. OPM issued regulations toimplement the program on April 20,",
      " 2004. (66)  Authorization for Cabinet Secretaries, Secretaries of Military Departments, and Headsof Executive Agencies to be Paid on a Biweekly Basis(67) Section 1124 \"allow[s] cabinet secretaries, secretaries of military departments and heads ofexecutive agencies to be paid bi-weekly like most Federal employees. This proposal save[s] timeand cost resources by relieving civilian pay and disbursing operations from having to utilize specialmanual procedures to accommodate these personnel.\" (68)  Section 5504 of Title 5 is modified by consolidating the definition of employee for thepurpose of the section so that the same groups are covered by the requirement for a bi-weekly payperiod and by the methods for converting annual rates of pay into hourly,",
      " daily, weekly, or biweeklyrates. Currently \"employee\" is defined under each of these provisions and both exclude groups ofpeople excluded from the definitions of employees in 5 U.S.C. \u00c2\u00a75541 on premium pay. P.L. 108-136 continues that exclusion, but adds a provision that an agency could elect to have excluded employeesbe paid on the bi-weekly basis. It should be noted that under the current provisions, employees inthe judicial branch are covered under the conversion language, but are not included in the languageof this provision. It is not known if that omission was by intent or if the latitude for discretionaryinclusion was assumed to apply to that class of employee.",
      " Implementation. The provision became effectiveon the first day of the first applicable pay period beginning on or after November 24, 2003, whichwas November 30, 2003, for most officials and employees. OPM published proposed regulationsto implement the provision in the Federal Register on October 7, 2004. (69)  Senior Executive Service Pay System(70) Section 1125(a), which amended portions of 5 U.S.C. \u00c2\u00a7\u00c2\u00a7 5304, 5382, and 5383, effectedchanges to basic pay and locality pay for members of the Senior Executive Service (SES), andindividuals in certain other positions.",
      " OPM issued the final rule to establish the new pay system, andto implement a higher cap on aggregate compensation for senior executives, in December 2004. (71) Significant changes forthe SES included the replacement of six pay rates or levels (ES-1 through ES-6) with one broad payrange; an increase in the cap on base pay from Executive Schedule level IV (EX-IV) to EX-III; theaddition of a second, higher cap on base pay, EX-II, for agencies whose SES performance appraisalsystems have been certified by the OPM, with the concurrence of OMB; and the elimination oflocality pay.",
      " (72) Eachsenior executive is to be paid at one of the rates within the broad pay range based on individualperformance, contribution to the agency's performance, or both. Previously, 5 U.S.C. \u00c2\u00a7 5382 requiredthe establishment of at least five rates of basic pay, and each senior executive was paid at one of therates. For agencies whose appraisal systems have not been certified, the cap on SES base pay in2006 is $152,000 (EX-III). (Previously, the cap would have been $143,000 (EX-IV).) For agencieswho have received certification, the cap on base pay in 2006 is $165,",
      "200 (EX-II). Demonstratingthat the design and implementation of its performance appraisal systems make \"meaningfuldistinctions based on relative performance\" is crucial to an agency's application forcertification. (73) (Anagency may have more than one performance appraisal system for senior employees.) Instituting a pay band and shifting the cap on basic pay from level IV to level III (or level IIfor agencies with certified appraisal systems) will help to ease pay compression, at least temporarily,within the SES. Many believe this provision has the potential for interjecting more accountabilityinto the SES. Others are concerned that in an effort to develop and apply a performance appraisalsystem that is based on meaningful distinctions,",
      " agencies might create and impose a forceddistribution of performance ratings. In addition to positions in the SES, positions in the Federal Bureau of Investigation (FBI) andDrug Enforcement Administration (DEA) SES, and positions in a system equivalent to the SES, asdetermined by the President's Pay Agent, are no longer eligible for locality pay. Considering thechanges made to the caps on basic pay, which resulted in the establishment of caps at levels II andIII of the Executive Schedule, the elimination of locality pay might be viewed as a practical matter. However, senior executives employed by an agency whose performance appraisal system is notcertified could be adversely affected by the loss of locality pay.",
      " Total Compensation. The performance appraisalcertification process was established by another statute, the Homeland Security Act of 2002 ( P.L.107-296 ; 116 Stat. 2135, at 2297), which also shifted the cap on total compensation. For seniorexecutives subject to a performance appraisal system that has not been certified by OPM, the cap ontotal compensation remains EX-I ($183,500 in 2006). For individuals subject to a certified appraisalsystem, the cap has shifted upward to the Vice President's salary, which is $212,100 in 2006. Thesignificance of this change has to do with timing.",
      " For senior executives with certified appraisalsystems, they are more likely to receive all of their compensation in one year instead of having somepayments deferred to the following year (which is what occurs when an individual's totalcompensation exceeds the applicable cap). Under Section 1125(c), the amendments made by this section took effect on the first date ofthe first pay period that began on or after January 1, 2004 (which was January 11 for most seniorexecutives). (74) Section1125(c) also ensures that a senior executive's basic rate of pay will not be reduced, as a result ofchanges effected by Section 1125(a), during the first year after enactment.",
      " For the purpose ofensuring that an individual's rate of basic pay is not reduced, a senior executive's rate of basic paywill equal the rate of basic pay and the locality pay he or she was being paid on the date of enactmentof this legislation. Section 1125(c) noted that any reference in law to a rate of basic pay above theminimum level and below the maximum level payable to senior executives will be considered areference to the rate of pay for Executive Schedule level IV. (75)  Post-Employment Restrictions(76) Section 1125(b) applies the post-employment conflict of interest provision commonly knownas the one-year \"cooling off\"",
      " period (18 U.S.C. \u00c2\u00a7207(c)(1)) to (in addition to those paid on theExecutive Schedule) those not paid on the Executive Schedule but who are compensated at a rateof pay equal to, or greater than, 86.5% of the rate of basic pay for level II of the Executive Schedule($165,200 in 2006, so $142,898), or, for two years after the enactment of this act, those persons whowould have been covered by the restriction the day before the act was passed (those compensatedat a base rate of pay equal to or greater than a level 5 for the SES). The provision amends 18 U.S.C.",
      "\u00c2\u00a7207(c)(2)(A)(ii). (77) The post-employment restrictions, according to OPM, require that for one year after service in a coveredposition ends, no former employee may knowingly make, with the intent to influence, anycommunication to or appearance before an employee of a department or agency in which he or sheserved in any capacity during the one-year period prior to ending service in that position, if thatcommunication or appearance is made on behalf of any other person (except the United States) inconnection with any matter concerning which he or she seeks official action by that employee. Employees... also are subject to 18 U.S.C.",
      " \u00c2\u00a7207(f), which imposes additional restrictions onrepresenting, aiding, or advising certain foreign entities with the intent to influence any officer oremployee of any department or agency of the United States. (78) Implementation. OPM published interimregulations to implement the provision in the Federal Register on October 15, 2004. (79) The regulations becameeffective on the first day of the first applicable pay period beginning on or after October 15, 2004. According to OPM, with the January 2004 implementation of the new Senior Executive Service(SES) performance-based pay system \"the vast majority of SES members are now subject to thepost-",
      "employment restrictions.\" (80)  Design Elements of Pay-for-Performance Systems in Demonstration Projects(81) Section 1126 amends 5 U.S.C. Chapter 47 which covers the conduct of personnel researchprograms and demonstration projects. The provision specifies certain elements that must be presentin a demonstration project's pay-for-performance system. The eight elements are as follows: adherence to merit system principles under 5 U.S.C.\u00c2\u00a72301; a fair, credible, and transparent employee performance appraisalsystem; a link between elements of the pay-for-performance system, the employeeperformance appraisal system, and the agency's strategic plan;",
      " a means for ensuring employee involvement in the design and implementationof the system; adequate training and retraining for supervisors, managers, and employees inthe implementation and operation of the pay-for-performance system; a process for ensuring ongoing performance feedback and dialogue betweensupervisors, managers, and employees throughout the appraisal period, and setting timetables forreview; effective safeguards to ensure that the management of the system is fair andequitable and based on employee performance; and a means for ensuring that adequate agency resources are allocated for thedesign, implementation, and administration of the pay-for-performancesystem. These eight elements address longstanding concerns expressed by employees,",
      " their unions,and representatives about the pay-for-performance component of demonstration projects. Implementation. In its semiannual regulatoryagenda published in the Federal Register on December 13, 2004, OPM states that it will issue\"proposed regulations to position agencies to operate pay-for-performance by having in placeperformance appraisal systems for covered employees that are capable of making performancedistinctions to support these pay systems.\" (82) The agenda anticipates final action by June 2005. Federal Flexible Benefits Plan Administrative Costs(83) Section 1127 prohibits federal agencies that offer flexible spending accounts (FSAs) fromimposing fees on employees to defray their administrative costs.",
      " It also requires agencies to forwardto OPM (or an entity it designates) amounts to offset these costs. OPM is required to submit to theHouse Committee on Government Reform and the Senate Committee on Governmental Affairs, nolater than March 31, 2004, reports on the administrative costs associated with the government-wideFSA program for FY2003 and the projected administrative costs for each of the five fiscal yearsthereafter. At the end of each of the first three calendar years in which an agency offers FSAs, theagency will be required to submit a report to the Office of Management and Budget (OMB) on theemployment tax savings from the accounts (i.e., the Social Security and Medicare taxes theyotherwise would have had to pay), net of administrative fees paid.",
      " Employees in most federal agencies were given an FSA option starting in July 2003. Thenew benefit allows employees to put pretax money aside for unreimbursed health care or dependentcare expenses in exchange for receiving lower pay. (Section 5525 of Title 5 provides that agencyheads may establish procedures under which employees are permitted to make allotments andassignments out of their pay for such purposes as the agency head considers appropriate.) Forexample, employees might elect to reduce their pay by $50 each pay period in exchange for having$1,300 (i.e., $50 x 26 pay periods in a year) placed in their health care FSA.",
      " When they incurunreimbursed health care expenses (e.g., copayments and deductibles, or dental expenditures notcovered by insurance) they would be reimbursed from their account. FSA reimbursements areexempt from federal income and employment taxes as well as state income taxes; thus, employeeselecting to participate can save on taxes they otherwise would have incurred had they instead usedtake-home pay for the expenses. Information about the federal FSAs can be found at https://www.fsafeds.com/fsafeds/index.asp. FSAs involve administrative costs, particularly for determining the eligibility of submittedclaims. OPM, which has contracted with SHPS,",
      " Inc., to administer the FSAs, originally intendedto have participating employees pay $4 a month for their health care FSA and 1.5% annually of theamount set aside for their dependent care FSA. Shortly before the program started, OPM gaveagencies the option of absorbing administrative expenses themselves, and most have done so. P.L.108-136 requires participating agencies to pay the administrative costs and prohibits the governmentfrom charging fees to employees. One argument for having employees pay FSA administrative costs is that they are theprincipal beneficiaries; if the government were to pay, the cost might be partially borne by employeeswithout FSAs or by other programs or even taxpayers generally.",
      " However, imposing fees onemployees could discourage participation. Few private sector or other employers impose FSA feeson participants; most pay for the administrative costs out of their employment tax savings. Implementation. As directed in P.L. 108-136,OPM reported to Congress in April 2004 on \"the cost of administrative fees agencies will pay tocover employees enrolled in a flexible spending account.\" The report showed that 117,950employees opened a health-care FSA and 18,178 employees opened a dependent-care FSA in 2004. OPM projected that more than 283,000 employees would have health-care FSAs and 43,",
      "627 wouldhave dependent-care FSAs by 2007. A January 2005 news release by OPM reported that 157,000employees are participating in the FSA program for 2005. (84) In the April 2004 report,administrative fees were projected to be $5.6 million for health-care FSAs and $980,000 fordependent-care FSAs in 2004 and were expected to total nearly $80 million for health-care FSAs,dependent-care FSAs, or both through 2007. According to OPM: \"Employees benefit becauseuntaxed contributions from their salaries are deposited into their FSA accounts,",
      " and the loweremployee taxable income translates into agencies paying out less in Social Security and Medicaretaxes... because agencies pay less in taxes, they more than recover the cost of paying FSAadministrative fees.\" (85)  Employee Surveys(86) Section 1128 mandates annual surveys of employees by federal executive departments,government corporations, and independent establishments. OPM will issue regulations prescribingsurvey questions that will appear on all agency surveys so as to allow a comparison of results acrossagencies. Questions unique to an agency also may be included on the survey. The surveys willaddress leadership and management practices that contribute to agency performance.",
      " Employeesatisfaction with leadership policies and practices, work environment, rewards and recognition forprofessional accomplishment and personal contributions to achieving organizational mission,opportunity for professional development and growth, and opportunity to contribute to achievingorganizational mission also will be surveyed. Agency results will be available to the public. Theyalso will be posted on the respective agency's website unless the agency head determines that doingso would jeopardize or negatively affect national security. From time to time, OPM has conducted surveys of federal employees, but the surveysauthorized by this provision would be conducted by agencies and particularly focus on theirleadership and performance and employee contribution to agency mission. The provision does notmandate any remedial actions that an agency might want to take once the survey results are known.",
      " As to not posting survey results for reasons of national security, the term \"national security\" is notdefined. OPM could address this issue in its regulations to implement the program which areanticipated in 2004. Implementation. OPM's semiannual regulatoryagenda published in the Federal Register on December 13, 2004, indicates that the regulations onemployee surveys were withdrawn as an agenda item on November 5, 2004. (87) No further informationwas provided. Human Capital Performance Fund(88) Section 1129 amends Part III, Subpart D of Title 5 United States Code by adding a newChapter 54 entitled Human Capital Performance Fund.",
      " The legislation states that the purpose of theprovision is to promote greater performance in the federal government. According to the law, thefund will reward the highest performing and most valuable employees in an agency and offer federalmanagers a new tool for recognizing employee performance that is critical to an agency achievingits mission. Organizations eligible for consideration to participate in the fund are executive departments,government corporations, and independent agencies. The Government Accountability Office is notcovered by the chapter. The fund may be used to reward General Schedule, Foreign Service, andVeterans Health Administration employees; prevailing rate employees; and employees included byOPM following review of plans submitted by agencies seeking to participate in the fund.",
      " ExecutiveSchedule (or comparable rate) employees; SES members; administrative law judges; contract appealsboard members; administrative appeals judges; and individuals in positions which are excepted fromthe competitive service because of their confidential, policy-determining, policy-making, orpolicy-advocating character are not eligible to receive payments from the fund. OPM will administer the fund which is authorized a $500,000,000 appropriation forFY2004. (89) Such sumsas may be necessary to carry out the provision are authorized for each subsequent fiscal year. In thefirst year of implementation, up to 10% of any appropriation will be available to participatingagencies to train supervisors,",
      " managers, and other individuals involved in the appraisal process onusing performance management systems to make meaningful distinctions in employee performanceand on using the fund. Agencies seeking to participate in the fund will submit plans to OPM for approval. The plansmust incorporate the following elements: adherence to merit principles under 5 U.S.C. \u00c2\u00a72301; a fair, credible, and transparent performance appraisalsystem; a link between the pay-for-performance system, the employee performanceappraisal system, and the agency's strategic plan; a means for ensuring employee involvement in the design and implementationof the system; adequate training and retraining for supervisors, managers,",
      " and employees inthe implementation and operation of the pay-for-performance system; a process for ensuring ongoing performance feedback and dialogue betweensupervisors, managers, and employees throughout the appraisal period, and setting timetables forreview; effective safeguards to ensure that the management of the system is fair andequitable and based on employee performance; and a means for ensuring that adequate agency resources are allocated for thedesign, implementation, and administration of the pay-for-performancesystem. An agency will receive an allocation of monies from the fund once OPM, in consultation withthe Chief Human Capital Officers Council, reviews and approves its plan. (90)",
      " After the reduction fortraining (discussed above), 90% of the remaining amount of any appropriation to the fund may beallocated to the agencies. An agency's prorated distribution may not exceed its prorated share ofexecutive branch payroll. (Agencies will provide OPM with necessary payroll information.) If OPMwere not to allocate an agency's full prorated share, the remaining amount will be available fordistribution to other agencies. After the reduction for training, 10% of the remaining amount of any appropriation to thefund as well as the amount of an agency's prorated share not distributed because of the agency'sfailure to submit a satisfactory plan,",
      " will be allocated among agencies with exceptionallyhigh-quality plans. Such agencies will be eligible to receive a distribution in addition to their fullprorated distribution. Agencies, in accordance with their approved plans, may make human capital performancepayments to employees based on exceptional performance contributing to the achievement of theagency mission. In any year, the number of employees in an agency receiving payments may not bemore than the number equal to 15% of the agency's average total civilian full-time and part-timepermanent employment for the previous fiscal year. A payment may not exceed 10% of theemployee's basic pay rate. The employee's aggregate pay (basic,",
      " locality pay, human capitalperformance pay) may not exceed Executive Level IV ($143,000 in 2006). A human capital performance payment will be in addition to annual pay adjustments andlocality-based comparability payments. Such payments will be considered basic pay for purposesof Civil Service Retirement System, Federal Employees' Retirement System, life insurance, and forsuch other purposes (other than adverse actions) which OPM determines by regulation. Informationon payments made and the use of monies from the fund will be provided by the agencies to OPMas specified. Initially, agencies will use monies from the fund to make the human capital performancepayments.",
      " In subsequent years, continued financing of previously awarded payments will be derivedfrom other agency funds available for salaries and expenses. Under current law (5 U.S.C. \u00c2\u00a75335)agencies pay periodic within-grade increases to employees performing at an acceptable level ofcompetence. Presumably, funds for such within-grade increases could be used to pay human capitalperformance payments. Monies from the fund may not be used for new positions, for otherperformance-related payments, or for recruitment or retention incentives. OPM will issue regulations to implement the new Chapter 54 provisions. Those regulationsmust include criteria governing the following:  an agency's plan;",
      " allocation of monies from the fund to the agencies; the nature, extent, duration, and adjustment of, and approval processes for,payments to employees; the relationship of agency performance management systems to the HumanCapital Performance Fund; training of supervisors, managers, and other individuals involved in the processof making performance distinctions; and the circumstances under which funds could be allocated by OPM to an agencyin amounts below or in excess of the agency's pro rated share. The Human Capital Performance Fund was proposed by President George Bush in hisFY2004 budget. According to the budget, the fund \"is designed to create performance-driven paysystems for employees and reinforce the value of employee performance management systems.\" (91)",
      " The effectiveness ofagency performance management systems and whether the performance ratings would be determinedaccording to preconceived ideas of how the ratings would be arrayed across the particular ratingcategories are among the concerns expressed by federal employees and their unions andrepresentatives. Other concerns are that the fund could take monies away from the already reducedlocality-based comparability payments and that the performance award amounts would be so smallas to not serve as an incentive. Implementation. OPM's semiannual regulatoryagenda published in the Federal Register on December 13, 2004, indicates that the agency plans toissue an interim final rule implementing the Human Capital Performance Fund,",
      " but also indicatesthat the timetable for publishing the rule is yet to be determined. (92) The ConsolidatedAppropriations Act for FY2005, P.L. 108-447, does not provide an appropriation for the fund. Other Personnel Provisions Contracting For Personal Services (93) Title VIII, Subtitle D, Section 841, of P.L. 108-136 amends 10 U.S.C. \u00c2\u00a7129(b) by adding anew subsection that authorizes the Secretary to enter into personal services contracts if the personalservices (1) are to be provided by individuals outside the United States, regardless of theirnationality,",
      " and are determined by the Secretary to be necessary and appropriate for supporting theactivities and programs of DOD outside the United States; (2) directly support the mission of adefense intelligence component or counterintelligence organization of DOD; or (3) directly supportthe mission of the special operations command of DOD. The contracting officer for a personalservices contract under this subsection is responsible for insuring that (1) the services to be procuredare urgent or unique; and (2) it would be impracticable for DOD to obtain such services by othermeans. The requirements of 5 U.S.C. 3109 will not apply to a contract entered into under thissubsection.",
      " Transfer of Personnel Investigative Functions and Related Personnel of the Departmentof Defense (94) Title IX, Section 906, of P.L. 108-136 authorized the transfer of the personnel securityinvestigations functions and associated personnel from the Department of Defense Security Service(DSS) to the Office of Personnel Management (OPM). (95) OPM now has responsibility for approximately 90% of allpersonnel security investigations (PSIs). This development has also been affected by the subsequentIntelligence Reform and Terrorism Prevention Act of 2004 (Title III, P.L. 108-458 ), which calledfor a consolidated and improved personnel investigative system.",
      " The functional transfer from DOD had to be accepted by both the Secretary of Defense andthe Director of OPM, as the law required. In addition, the move of DSS investigative personnel toOPM was mandatory, while the transfer of support personnel remained at the discretion of theSecretary and the Director. The transfer was also made contingent on the Director, in coordinationwith the Secretary, to review all functions performed at the time of the transfer by DSS and makea \"written determination regarding whether each such function is inherently governmental or isotherwise inappropriate for performance by contractor personnel.\" Such functions may not becontracted to private contractors unless and until the Director makes a written determination thatthese are not inherently governmental or otherwise not inappropriate for contractor performance.",
      " If so decided, the contracting is governed by the requirements of OMB Circular A-76. On November22, 2004, the DOD and OPM announced the transfer of the function, along with 1,850 staff, fromDSS to OPM. On February 15, 2005, OPM announced the selection of 12 managers for keyleadership positions in the personnel security investigations program. According to OPM,\"Beginning February 20, the transfer [of DSS' personnel security investigations program to OPM]will establish OPM as the single source for federal national security background and suitabilityinvestigative services for more than 90 percent of the federal government.\" (96)",
      "  The Intelligence Reform Act added several new requirements to the clearance process, whichaffected OPM. Designed to expedite, simplify, and standardize the process, the Intelligence ReformAct also called upon the President to designate a single executive branch agency to be responsiblefor security clearance investigations and directed the head of OPM to establish and operate anintegrated, secure database on security clearances. In response, the Office of Management andBudget, along with OPM, developed a plan to accomplish these goals, in part by setting prioritiesamong requests and emphasizing reciprocity among federal agencies in accepting previous PSIresults. (97) The plan alsoconsolidated responsibility for operating the investigative process system in OPM.",
      " Key CRS Policy Staff\n"
    ],
    "length": 27559,
    "hardness": null,
    "role": null
  },
  {
    "id": 86,
    "question": null,
    "answer": "The Federal Reserve (Fed) has been central in the policy response to the financial turmoil that began in August 2007. It has sharply increased reserves to the banking system through open market operations and lowered the federal funds rate and discount rate on several occasions. Since December 2008, it has allowed the federal funds rate to fall close to zero. As the crisis deepened, the Fed's focus shifted to providing liquidity directly to the financial system through new policy tools. Through new credit facilities, the Fed first expanded the scale of its lending to the banking system and then extended direct lending to non-bank financial firms. The latter marked the first time since the Great Depression that firms that are not banks or members of the Federal Reserve System have been allowed to borrow directly from the Fed. After the crisis worsened in September 2008, the Fed began providing credit directly to markets for commercial paper and asset-backed securities. All of these emergency facilities had expired by the end of June 2010, but central bank liquidity swap lines were reopened in May 2010 in response to the crisis in Greece. The Fed also provided emergency assistance to Bear Stearns, AIG, and Citigroup over the course of the crisis; the Fed still holds assets from and loans to AIG and assets from Bear Stearns. These programs resulted in an increase in the Fed's balance sheet of $1.4 trillion at its peak in December 2008, staying relatively steady since then. The Fed's authority and capacity to lend is bound only by fears of the inflationary consequences, which have been partly offset by additional debt issuance by the Treasury. High inflation has not materialized yet because most of the liquidity created by the Fed is being held by banks as excess reserves, but after the economy stabilizes, the Fed may have to scale back its balance sheet rapidly to avoid it. Asset sales could be disruptive, but the Fed has argued that it can contain inflationary pressures through the payment of interest on bank reserves, which it was authorized by Congress to do in 2008. The statutory authority for most of the Fed's recent actions is based on a clause in the Federal Reserve Act to be used in \"unusual or exigent circumstances.\" All loans are backed by collateral that reduces the risk of losses. Any losses borne by the Fed from its loans or asset purchases would reduce the income it remits to the Treasury, making the effect on the federal budget similar to if the loans were made directly by Treasury. It is highly unlikely that losses would exceed its other income and capital, and require revenues to be transferred to the Fed from the Treasury. To date, the Fed's crisis activities have increased its net income. Two policy issues raised by the Fed's actions are issues of systemic risk and moral hazard. Moral hazard refers to the phenomenon where actors take on more risk because they are protected. The Fed's involvement in stabilizing Bear Stearns, AIG, and Citigroup stemmed from the fear of systemic risk (that the financial system as a whole would cease to function) if they were allowed to fail. In other words, the firms were seen as \"too big (or too interconnected) to fail.\" The Fed regulates member banks to mitigate the moral hazard that stems from access to government protections. Yet Bear Stearns and AIG were not under the Fed's regulatory oversight because they were not member banks. Some Members of Congress have expressed concern that certain details of the Fed's lending activities are kept confidential. H.R. 4173 (P.L. 111-203) adds conditions to the Fed's emergency lending authority, removes most GAO audit restrictions, and requires disclosure of the identities of borrowers with a delay. It also changes the Fed's role in the financial regulatory system (see CRS Report R40877, Financial Regulatory Reform: Systemic Risk and the Federal Reserve).\n",
    "docs": [
      "Introduction On August 9, 2007, liquidity abruptly dried up for many financial firms and securities markets. Suddenly some firms were able to borrow and investors were able to sell certain securities only at prohibitive rates and prices, if at all. The \"liquidity crunch\" was most extreme for firms and securities with links to subprime mortgages, but it also spread rapidly into seemingly unrelated areas. The Federal Reserve (Fed) was drawn into the liquidity crunch from the start. On August 9, it injected unusually large quantities of reserves into the banking system to prevent the federal funds rate from exceeding its target. In a series of steps between September 2007 and December 2008,",
      " the Fed reduced the federal funds rate from 5.25% to a target range of 0% to 0.25%. It has been observed that the most unusual aspect of the crisis is its persistence over time. Over that time, the Fed has aggressively reduced the federal funds rate and the discount rate in an attempt to calm the waters. When this proved not to be enough, the Fed greatly expanded its direct lending to the financial sector through several new lending programs, some of which can be seen as adaptations of traditional tools and others which can be seen as more fundamental departures from the status quo. The Fed's decision to assist specific troubled financial institutions sparked controversy.",
      " In March 2008, the Fed helped the investment bank Bear Stearns avoid bankruptcy, even though Bear Stearns was not a member bank of the Federal Reserve system (because it was not a depository institution), and, therefore, not part of the regulatory regime that accompanies membership. At the same time, it created two lending facilities for other non-bank primary dealers. In September, the investment bank Lehman Brothers filed for bankruptcy (it did not receive emergency government assistance), and the financial firm American International Group (AIG), which was also not a member bank, received a credit line from the Fed in order to meet its obligations.",
      " (Additional aid to AIG was extended on three subsequent occasions.) The Fed then began directly assisting the markets for commercial paper and asset-backed securities. More recently, the Fed and federal government has guaranteed losses on assets owned by Citigroup. This marked the first time in more than 70 years that the Fed had lent to non-members, and it did so using emergency statutory authority (Section 13(3) of the Federal Reserve Act). The Dodd-Frank Wall Street Reform and Consumer Protection Act ( H.R. 4173 ) adds conditions to the Fed's emergency lending authority. H.R. 4173 was signed into law on July 21,",
      " 2010, as P.L. 111-203. In September 2008, the housing government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac were taken into conservatorship by the government. On November 25, 2008, the Fed announced that it would make large-scale purchases of the direct obligations and mortgage-backed securities (MBS) issued by the housing GSEs. As financial conditions have improved in 2009, the Fed's focus, in turn, has shifted from stabilizing financial markets to stabilizing the housing market. As fewer financial firms have accessed Fed lending facilities, direct assistance has been replaced on the Fed's balance sheet by purchases of debt and MBS issued by the housing GSEs.",
      " This has kept relatively constant the overall amount of liquidity the Fed has provided to the economy. The Fed purchased about $175 billion of GSE debt and $1.25 trillion of MBS by the spring of 2010. Most emergency facilities were allowed to expire in February 2010, but the central bank liquidity swap lines were reopened in May 2010 to provide dollar liquidity to foreign countries needed as a result of the economic crisis in Greece. One of the original purposes of the Federal Reserve Act, enacted in 1913, was to prevent the recurrence of financial panics. To that end, the Fed has been given broad authority over monetary policy and the payments system,",
      " including the issuance of federal reserve notes as the national currency. Because this authority is delegated from Congress, the Fed's actions are subject to congressional oversight. Although the Fed has broad authority to independently execute monetary policy on a day-to-day basis, the Fed's actions in the crisis have raised fundamental questions about the Fed's proper role, and what role Congress should play in assessing those issues. S. 896, which was signed into law on May 20, 2009 ( P.L. 111-22 ), allows Government Accountability Office (GAO) audits of a limited subset of Fed emergency activities. H.R. 4173 removes most GAO audit restrictions,",
      " calls for a GAO audit of emergency actions, and requires disclosure of the identities of borrowers with a delay. H.R. 4173 also made comprehensive changes to the financial regulatory system. The Fed's role in prudential regulation, consumer protection regulation, payment system regulation, and systemic risk regulation was modified by this legislation. CRS Report R40877, Financial Regulatory Reform: Systemic Risk and the Federal Reserve, analyzes the effects of this legislation on the Fed's role in the regulatory system. This report reviews the Fed's actions since August 2007 and analyzes the policy issues raised by those actions. Traditional Tools The Fed, the nation's central bank,",
      " was established in 1913 by the Federal Reserve Act (38 Stat. 251). Today, its primary duty is the execution of monetary policy through open market operations to fulfill its mandate to promote price stability and maximum employment. Besides the conduct of monetary policy, the Federal Reserve has a number of other duties: it regulates financial institutions and consumer financial products, issues paper currency, clears checks, collects economic data, and carries out economic research. Prominent in the current debate is one particular responsibility: to act as a lender of last resort to the financial system when capital cannot be raised in private markets to prevent financial panics. The next two sections explain the Fed's traditional tools,",
      " open market operations and discount window lending, and summarize its recent use of those tools. Open Market Operations and the Federal Funds Rate Open market operations are carried out through the purchase and sale of U.S. Treasury securities in the secondary market to alter the reserves of the banking system. By altering bank reserves, the Fed can influence short-term interest rates, and hence overall credit conditions. The Fed's target for open market operations is the federal funds rate, the rate at which banks lend to one another on an overnight basis. The federal funds rate is market determined, meaning the rate fluctuates as supply and demand for bank reserves change. The Fed announces a target for the federal funds rate and pushes the market rate toward the target by altering the supply of reserves in the market through the purchase and sale of Treasury securities.",
      " More reserves increase the liquidity in the banking system and, in theory, should make banks more willing to lend, spreading greater liquidity throughout the financial system. When the Fed wants to stimulate economic activity, it lowers the federal funds target, in what is referred to as expansionary policy. Lower interest rates stimulate economic activity by stimulating interest-sensitive spending, which includes physical capital investment (e.g., plant and equipment) by firms, residential investment (housing construction), and consumer durable spending (e.g., automobiles and appliances) by households. Lower rates would also be expected to lead to a lower value of the dollar, all else equal. A depreciated dollar would stimulate exports and the output of U.S.",
      " import-competing firms. To reduce spending in the economy (called contractionary policy), the Fed raises interest rates, and the process works in reverse. The Fed's actions with regards to open market operations have taken two forms in the crisis. First, a loss of liquidity in the interbank lending market has forced the Fed to inject unusually large volumes of reserves into the market on several occasions since August 2007. These actions have been necessary to maintain the availability of reserves at the existing federal funds target. Second, the Fed has reduced the federal funds target on numerous occasions over the course of the crisis. On September 18, 2007,",
      " the Fed reduced the federal funds target rate by 0.5 percentage points to 4.75%, stating that the change was \"intended to forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets.\" Since then, the Fed has aggressively lowered interest rates several times. The Fed decides whether to change its target for the federal funds rate at meetings scheduled every six weeks. In normal conditions, the Fed would typically leave the target unchanged or change it by 0.25 percentage points. From September 2007 to March 2008, the Fed lowered the target at each regularly scheduled meeting,",
      " by an increment larger than 0.25 percentage points at most of these meetings. It also lowered the target by 0.75 percentage points at an unscheduled meeting on January 21, 2008. Although financial conditions had not returned to normal, the Fed kept the federal funds rate steady from April 30, 2008, until October 9, 2008, when it again reduced the federal funds rate, this time by 0.5 percentage points, to 1.5%. Unusually, this rate reduction was coordinated with several foreign central banks. On December 16, 2008, the Fed established a target range of 0%",
      " to 0.25% for the federal funds rate. Quantitative Easing Even before December 2008, the Fed began supplying the federal funds market with a greater quantity of bank reserves than needed to reach the federal funds target, a policy that has been described as \"quantitative easing.\" Because the Fed has only one tool, it cannot meet more than one target at once. As long as the Fed was willing to create liquidity on demand, the federal funds rate was unlikely to meet its target. Therefore, after the Fed began focusing on meeting the financial sector's liquidity needs in September, the federal funds rate began undershooting the Fed's target on a regular basis.",
      " In December 2008, the Fed began providing so much liquidity that the interest rate target often fell close to zero. The target range of 0% to 0.25% set in December can be seen as an acknowledgment by the Fed that targeting interest rates had been subordinated to the goal of providing ample liquidity to the financial system for the time being. Initially, quantitative easing was implemented through direct lending, but even after that liquidity was no longer sought by financial firms through the Fed's lending facilities, quantitative easing was continued through large purchases of Treasury securities, Agency securities, and Agency mortgage-backed securities in an attempt to continue stimulating the economy.",
      " According to one estimate, the Fed purchased 22% of the entire available stock of these assets. The Discount Window The Fed can also provide liquidity to member banks (depository institutions that are members of the Federal Reserve system) directly through discount window lending. Discount window lending dates back to the early days of the Fed, and was originally the Fed's main policy tool. (The Fed's main policy tool shifted from the discount window to open market operations several decades ago.) Loans made at the discount window are backed by collateral in excess of the loan value. A wide array of assets can be used as collateral; loans and asset-backed securities are the most frequently posted collateral.",
      " Although not all collateral has a credit rating, those that are rated typically have the highest rating. Most discount window lending is done on an overnight basis. Unlike the federal funds rate, the Fed sets the discount rate directly through fiat. During normal market conditions, the Fed discouraged banks from borrowing at the discount window on a routine basis, believing that banks should be able to meet their normal reserve needs through the market. In 2003, the Fed made that policy explicit in its pricing by changing the discount rate from 0.5 percentage points below to 1 percentage point above the federal funds rate. A majority of member banks do not access the discount window in a typical year.",
      " Thus, the discount window has played a secondary role in policymaking to open market operations. On August 17, 2007, the Fed began reducing the discount rate\u2014about a month before it first reduced the federal funds rate. Since then, the discount rate has been lowered several times, typically at the same time as the federal funds rate. Over that period, the Fed has reduced the spread between the federal funds rate and the discount rate, but kept the spread positive. When the federal funds rate was allowed to fall to zero beginning in December 2008, the discount rate was set at 0.5%. From 1959 to 2007,",
      " discount window lending outstanding never surpassed $8 billion, and was usually well below $1 billion. Discount window lending (in the primary credit category) increased from a daily average of $45 million outstanding in July 2007 to $1,345 million in September 2007. Lending continued to increase to more than $10 billion outstanding per day from May 2008, and peaked at $111 billion in October 2008, but was superseded in economic significance by the creation of the \" Term Auction Facility \" in December 2007. Discount window lending fell steadily throughout 2009, and by mid-2010, it had returned to pre-crisis levels.",
      " New Tools The Fed's traditional tools are aimed at the commercial banking system, but current financial turmoil has occurred outside of the banking system as well. The inability of traditional tools to calm financial markets since August 2007 has led the Fed to develop several new tools to fill perceived gaps between open market operations and the discount window. Traditionally, the lender of last resort function has focused on the banking system, and the Fed's relationship with the banking system, encompassing costs and privileges, is prescribed in detail by the Federal Reserve Act. Many of the new facilities are aimed at other parts of the financial system, however, and the Federal Reserve Act is largely silent on the Fed's authority outside the banking system.",
      " One exception is the broad emergency authority under Section 13(3) of the Federal Reserve Act, which the Fed has frequently invoked since the financial crisis began. Term Auction Facility A stigma is thought to be attached to borrowing from the discount window. In good times, discount window lending has traditionally been discouraged on the grounds that banks should meet their reserve requirements through the marketplace (the federal funds market) rather than the Fed. Borrowing from the Fed was therefore seen as a sign of weakness, as it implied that market participants were unwilling to lend to the bank because of fears of insolvency. In the current turmoil, this perception of weakness could be particularly damaging since a bank could be undermined by a run based on unfounded,",
      " but self-fulfilling fears. Ironically, this meant that although the Fed encourages discount window borrowing so that banks can avoid liquidity problems, at first banks were hesitant to turn to the Fed because of fears that doing so would spark a crisis of confidence. To overcome these problems, the Fed created the supplementary Term Auction Facility (TAF) in December 2007. Discount window lending is initiated at the behest of the requesting institution\u2014the Fed has no control over how many requests for loans it receives. The TAF allows the Fed to determine the amount of reserves it wishes to make available to banks, based on market conditions. The auction process determines the rate at which those funds will be lent,",
      " with all bidders receiving the lowest winning bid rate. The winning bid may not be lower than the prevailing federal funds rate. Determining the rate by bid provides the Fed with additional information on how much demand for reserves exists. Any depository institution eligible for discount window lending can participate in the TAF, and hundreds have accessed it or the discount window at a time since its inception. Auctions through the TAF have been held twice a month beginning in December 2007. The amounts auctioned have greatly exceeded discount window lending, which averages in the hundreds of millions of dollars outstanding daily in normal times and more than $10 billion outstanding since May 2008.",
      " The TAF initially auctioned up to $20 billion every two weeks, but this amount was increased on several occasions to as much as $150 billion (and currently up to $125 billion) every two weeks. Loans outstanding under the facility peaked at $493 billion in March 2009, and have fallen steadily since. Like discount window lending, TAF loans must be fully collateralized with the same qualifying collateral. Loans and asset-backed securities are the most frequently posted collateral. Although not all collateral has a credit rating, those that are rated typically have the highest rating. As with discount window lending, the Fed faces the risk that the value of collateral would fall below the loan amount in the event that the loan was not repaid.",
      " For that reason, the amount lent diminishes as the quality of the collateral diminishes. Most borrowers borrow much less than the posted collateral. Loans mature in 28 days\u2014far longer than overnight loans in the federal funds market or the typical discount window loan. (In July 2008, the Fed began making some TAF loans that matured in 84 days.) Another motivation for the TAF may have been an attempt to reduce the unusually large divergence that had emerged between the federal funds rate and interbank lending rates for longer maturities. This divergence, which can be seen as a sign of how much liquidity had deteriorated in spite of the Fed's previous efforts,",
      " became much smaller after December 2007. In subsequent periods of market stress, such as September 2008, the divergence reemerged. The evidence on the effectiveness of the TAF in reducing this divergence is mixed. The TAF program was announced as a temporary program (with no fixed expiration date) that could be made permanent after assessment. Given that the discount rate is set higher than the federal funds rate to discourage its use in normal market conditions, it is unclear what role a permanent TAF would fill, unless the funds auctioned were minimal in normal market conditions. A permanent TAF would seem to run counter to the philosophy governing the discount window that financial institutions,",
      " if possible, should rely on the private sector to meet their short-term reserve needs during normal market conditions. The Fed has not held a TAF auction since March 2010. Term Securities Lending Facility For many years, the Fed has allowed primary dealers (see box for definition) to swap Treasuries of different maturities or attributes with the Fed on an overnight basis through a program called the System Open Market Account Securities Lending Program to help meet the dealers' liquidity needs. (While all Treasury securities are backed by the full faith and credit of the federal government, some securities are more liquid than others, mainly because of differences in availability.) Securities lending has no effect on general interest rates or the money supply because it does not involve cash,",
      " but can affect the liquidity premium of the securities traded. Because the loans were overnight and collateralized with other Treasury securities, there was very little risk for the Fed. On March 11, 2008, the Fed set up a more expansive securities lending program for the primary dealers called the Term Securities Lending Facility (TSLF) using emergency authority under Section 13(3) of the Federal Reserve Act. Under this program, up to $75 billion (previously up to $200 billion) of Treasury securities could be lent for 28 days instead of overnight. Loans could be collateralized with private-label MBS with an AAA/Aaa rating,",
      " agency commercial mortgage-backed securities, and agency collateralized mortgage obligations. On September 14, 2008, the Fed expanded acceptable collateral to include all investment-grade debt securities. Given the recent drop in MBS and other asset prices, this made the new lending program considerably more risky than the old one. But the scope for losses is limited by the fact that the loans are fully collateralized with a \"haircut\" (i.e., less money is loaned than the value of the collateral), and if the collateral loses value before the loan is due, the Fed can call for substitute collateral. In addition, most of the collateral that has been posted received a high rating from a credit rating agency.",
      " The first auction on March 27 involved $75 billion of securities. In August 2008, the program was expanded to allow the primary dealers to purchase up to $50 billion of options (with prices set by auction) to swap for Treasuries through the TSLF. The TSLF was announced as a temporary facility. In July 2009, the Fed announced that primary dealers could also swap their assets for the Fed's Agency debt securities. Securities lent through all programs peaked at $260 billion on October 1, 2008. Since August 2009, no securities have been borrowed through this facility. The facility expired at the end of January 2010.",
      " By allowing the primary dealers to temporarily swap illiquid assets for highly liquid assets such as Treasuries, \"[t]he TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally,\" according to the Fed. According to research from the New York Fed, the spreads between repos backed by GSE debt and MBS and repos backed by Treasuries fell from over 1 percentage point before the first TSLF auction to less than 0.2 percentage points by April 2008. Given the timing of the announcement\u2014less than a week before the failure of one of its primary dealers,",
      " Bear Stearns\u2014critics have alleged that the program was created, in effect, in an attempt to rescue Bear Stearns from its liquidity problems. As will be discussed below, the Fed would take much larger steps to aid Bear Stearns later the same week. Primary Dealer Credit Facility On March 16\u2014a day too late to help Bear Stearns\u2014the Fed announced the creation of the Primary Dealer Credit Facility (PDCF), a new direct lending program for primary dealers very similar to the discount window program for depository institutions. Loans are made through the PDCF on an overnight basis at the discount rate, limiting their riskiness.",
      " Acceptable collateral initially included Treasuries, government agency debt, and investment grade corporate, mortgage-backed, asset-backed, and municipal securities. On September 14, 2008, the Fed expanded acceptable collateral to include certain classes of equities. Many of the classes of eligible assets can and have fluctuated significantly in value. Fees will be charged to frequent users. The program was announced as lasting six months, or longer if events warrant. The program is authorized under paragraph 3 of Section 13 of the Federal Reserve Act. The facility was subsequently extended, but allowed to expire at the end of January 2010. Borrowing from the facility has been sporadic,",
      " with average daily borrowing outstanding above $10 billion in the first three months, and falling to zero in August 2008. Much of this initial borrowing was done by Bear Stearns, before its merger with J.P. Morgan Chase had been completed. Loans outstanding through the PDCF peaked at $148 billion during the week of October 1, 2008. Since May 2009, outstanding loans through the PDCF have been zero, because of improvement in the financial system and because the largest investment banks converted into or were acquired by bank holding companies in late 2008, making them eligible to access other Fed lending facilities. Although the program shares some characteristics with the discount window,",
      " the fact that the program was authorized under paragraph 3 of Section 13 of the Federal Reserve Act suggests that there is a fundamental difference between this program and the Fed's normal operations. The Fed is referred to as the nation's central bank because it is at the center of the banking system\u2014providing reserves and credit, and acting as a regulator, clearinghouse, and lender of last resort to the banking system. The privileges for banks that come from belonging to the Federal Reserve system\u2014access to Fed credit\u2014come with the costs of regulation to ensure that banks do not take excessive risks. Although the primary dealers are subject to certain capital requirements,",
      " they are not necessarily part of the banking system, and do not fall under the same \"safety and soundness\" regulatory structure as banks. Term Asset-Backed Securities Loan Facility In November 2008, the Fed created the Term Asset-Backed Securities Loan Facility (TALF) in response to problems in the market for asset-backed securities (ABS). According to the Fed, \"new issuance of ABS declined precipitously in September and came to a halt in October. At the same time, interest rate spreads on AAA-rated tranches of ABS soared to levels well outside the range of historical experience, reflecting unusually high risk premiums.\" Data support the Fed's view:",
      " issuance of non-mortgage asset backed securities fell from more than $175 billion per quarter from 2005 through the second quarter of 2007 to $5 billion in the fourth quarter of 2008, according to the Securities Industry and Financial Markets Association (SIFMA). The Fed fears that if lenders cannot securitize these types of loans, less credit will be extended to consumers, and eventually households will be forced to reduce consumption spending, which would exacerbate the economic downturn. The TALF is intended to stimulate the issuance of new securities backed by pools of the following assets: auto loans or leases, including motorcycles, recreational vehicles (including boats), and commercial,",
      " rental, and government fleets; credit cards, consumer and corporate; student loans, private and government guaranteed; SBA-guaranteed small business loans; business equipment loans, including retail and leases; floorplan loans for inventories, including auto dealers; mortgage servicing advances; commercial mortgages; and insurance premium finance loans. In May 2009, the Fed began accepting legacy commercial mortgage-backed securities (CMBSs). The Fed announced that the TALF may later be expanded to other classes of ABS. In March 2009, the Treasury announced that TALF may be expanded in the future to include private-label residential MBS, and collateralized debt and loan obligations.",
      " To date, most TALF loans have been backed by auto, credit card, and student loans. Rather than purchase ABS directly, the Fed will make non-recourse loans to any private U.S. company or subsidiary with a relationship with a primary dealer to purchase recently issued ABS receiving the highest credit rating, using the ABS as collateral. The minimum loan size will be $10 million. If the ABS lose value, the losses will be borne by the Fed and the Treasury (through the TARP program) instead of by the borrower\u2014an unusual feature for a Fed lending facility. The Fed will lend less than the current value of the collateral,",
      " so the Fed would not bear losses on the loan until losses exceed the value of the \"haircut\" (different ABS receive different haircuts). The loans will have a term of up to three years for most types of assets (and up to five years for some types of assets), but can be renewed. Interest rates will be set at a markup over different maturities of LIBOR or the federal funds rate, depending on the type of loan and underlying collateral. If the loans are not repaid, the Treasury will bear the first $20 billion in total losses on the underlying collateral, and the Fed will bear any additional losses. Treasury will receive interest in return for bearing this risk.",
      " The Treasury's losses will be financed through the Troubled Asset Relief Program (TARP), authorized by P.L. 110-343. In addition, TARP has already loaned the TALF program $100 million to finance initial administrative costs. It was originally proposed that ABS issuers would be subject to TARP's executive compensation restrictions. Subsequently, in a letter to the Special Inspector General for TARP, the General Counsel of the Treasury reasoned that the Fed, not the TALF loan recipients nor the ABS issuers, is the recipient of TARP funds, and so executive compensation restrictions do not apply to TALF.",
      " TALF has some similarities to TARP as it was originally envisioned, with the primary differences being that the Fed is lending to purchase rather than directly purchasing assets, and the assets backing the loans are mostly newly or recently issued as opposed to \"troubled\" existing assets. Because the Treasury's funds will finance loan losses rather than asset purchases, the $20 billion will support a much larger volume of assets than would be possible through direct purchase via TARP. In March 2009, Treasury announced a new Public-Private Partnership Investment Program (PPIP) within TARP. Under this program, private investors will receive matching capital from TARP to purchase up to $500 billion to $1 trillion of legacy loans and securities.",
      " These legacy securities are defined as existing ABS backed by mortgages and other assets. Treasury has announced that private partners will be able to use loans from TALF (and other sources) to finance the purchase of these legacy securities. In May 2009, the Fed began accepting legacy commercial mortgage-backed securities (CMBSs) as the first class of legacy securities eligible for TALF. PPIP has also turned out to be much smaller than envisioned\u2014as of May 2010, Treasury had pledged a maximum of $30 billion for PPIP-Securities. The Fed originally announced TALF as a $200 billion program, and Treasury expressed the desire to see it increased to $1 trillion.",
      " As it turns out, TALF lending grew slowly after inception, and peaked at $48 billion on March 17, 2010. The low lending totals seem less indicative of the unpopularity of TALF, and more indicative of the continued depressed state of the private securitization market. According to data from SIFMA, non-mortgage ABS issuance rose to $52 billion per quarter in the first two full quarters that TALF was in operation, but fell to $32 billion per quarter in the next two quarters\u2014a far cry from issuance of more than $175 billion per quarter before the crisis. Nevertheless,",
      " a review of the program by the Federal Reserve Bank of Dallas argues that TALF should be credited with a decline in ABS spreads against Treasury bonds and a rise in ABS issuance. The facility expired at the end of June 2010 for loans against newly issued CMBS and March 2010 for loans against other assets. Intervention in the Commercial Paper Market Many large firms routinely issue commercial paper, which is short-term debt purchased directly by investors that matures in less than 270 days, with an average maturity of 30 days. There are three broad categories of commercial paper issuers: financial firms, non-financial firms, and pass-through entities that issue paper backed by assets.",
      " The commercial paper issued directly by firms tends not to be backed by collateral, as these firms are viewed as large and creditworthy and the paper matures quickly. Individual investors are major purchasers of commercial paper through money market mutual funds and money market accounts. The Securities and Exchange Commission regulates the holdings of money market mutual funds, limiting their holdings to highly rated, short-term debt; thus, investors widely perceived money market mutual funds as safe and low risk. On September 16, 2008, a money market mutual fund called the Reserve Fund \"broke the buck,\" meaning that the value of its shares had fallen below face value. This occurred because of losses it had taken on short-term debt issued by Lehman Brothers,",
      " which filed for bankruptcy on September 15. Money market investors had perceived \"breaking the buck\" to be highly unlikely, and its occurrence set off a run on money market funds, as investors simultaneously attempted to withdraw an estimated $250 billion of their investments\u2014even from funds without exposure to Lehman. This run greatly decreased the demand for new commercial paper. Firms rely on the ability to issue new debt to roll over maturing debt to meet their liquidity needs. Fearing that disruption in the commercial paper markets could make overall problems in financial markets more severe, the Fed announced on September 19 that it would create the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF). This facility would make non-recourse loans to banks to purchase asset-backed commercial paper.",
      " Because the loans were non-recourse, the banks would have no further liability to repay any losses on the commercial paper collateralizing the loan. On October 1, 2008, daily loans outstanding peaked at $152 billion. The AMLF would soon be superseded in importance by the creation of the Commercial Paper Funding Facility, and lending fell to zero in October 2009. The temporary facility was authorized under Section 13(3) of the Federal Reserve Act, and was subsequently extended until the end of January 2010. Although the creation of the AMLF and the Treasury's temporary guarantee of money market mutual fund deposits had eased conditions in the commercial paper market,",
      " the market remained strained. For example, commercial paper outstanding fell from more than $2 trillion outstanding in August 2007 to $1.8 trillion on September 7, 2008, to $1.6 trillion on October 1, 2008. The yield on 30-day, AA-rated asset-backed commercial paper rose from 2.7% on September 8, 2008, to 5.5% on October 7, 2008. Because of the importance of commercial paper for meeting firms' liquidity needs, the Fed decided to take stronger action to ensure that the market was not disrupted. On October 7,",
      " it announced the creation of the Commercial Paper Funding Facility (CPFF), a special purpose vehicle (SPV) that would borrow from the Fed to purchase all types of three-month, highly rated U.S. commercial paper, secured and unsecured, from issuers. The Fed argued that the assurance that firms will be able to roll over commercial paper at the CPFF will encourage private investors to buy commercial paper again. The interest rate charged by the CPFF was set at the three month overnight index swap plus 1 percentage point for secured corporate debt, 2 percentage points for unsecured corporate debt, and 3 percentage points for asset-backed paper.",
      " The CPFF can buy as much commercial paper from any individual issuer as that issuer had outstanding in the year to date. Any losses borne by the CPFF would ultimately be borne by the Fed. The Fed has hired the private company PIMCO to manage the SPV's assets. The facility is authorized under Section 13(3) of the Federal Reserve Act, and was subsequently extended until the end of January 2010. At its peak in January 2009, the CPFF held $351 billion of commercial paper, and has fallen steadily since. Goldman Sachs reports that conditions in commercial paper markets improved significantly after the creation of the CPFF (although they remained worse than before the crisis), and in January 2009,",
      " the CPFF was holding far more commercial paper than the total that had been issued since its inception. The CPFF is notable on several grounds. First, it is the first Fed standing facility in modern times with an ongoing commitment to purchase assets, as opposed to lending against assets. Technically, the Fed is lending against the assets of the SPV, but the SPV was created by the Fed and is controlled by the Fed. Second, in the case of non-financial commercial paper, it is the first time in 50 years that the Fed is providing financial assistance to non-financial firms. (In practice, the Fed has bought very little commercial paper issued by non-financial firms.",
      " ) Third, in the case of commercial paper that is not asset backed, it is unusual for the Fed (through the SPV) to purchase uncollateralized debt. Indeed, the Federal Reserve Act would seem to rule out the direct purchase of uncollateralized debt. On October 21, 2008, the Fed announced the creation of the Money Market Investor Funding Facility (MMIFF), and pledged to lend it up to $540 billion. The MMIFF will lend to private sector SPVs that invest in commercial paper issued by highly rated financial institutions. Each SPV will be owned by a group of financial firms and can only purchase commercial paper issued by that group.",
      " These SPVs can purchase commercial paper from money market mutual funds and similar entities facing redemption requests to help avoid runs such as the run on the Reserve Fund. The facility expired at the end of October 2009 without ever being used. The Fed's director of the Division of Monetary Affairs reported that money market funds were unwilling to use it because \"investors would recognize that leverage would... intensify their incentive to run.\" Mortgage-Backed Securities Purchase Program and Purchase of GSE Obligations In July 2008, the stock prices of Fannie Mae and Freddie Mac, the housing GSEs, came under increasing pressure, leading to fears that they would be unable to roll over debt and become illiquid.",
      " On July 13, 2008, the Fed authorized lending to the housing GSEs, but this authority was not used at that point. On September 7, 2008, Treasury placed the two housing GSEs into conservatorship. On September 19, 2008, the Fed announced that it would purchase debt obligations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks through open market operations. On November 25, 2008, the Fed announced it would purchase up to $100 billion of direct obligations (e.g., bonds) issued by these institutions and up to $500 billion of MBS guaranteed by Fannie Mae,",
      " Freddie Mac, and Ginnie Mae, a government agency. GSE obligations will be purchased through auctions and MBS will be purchased on the Fed's behalf by private investment managers. Adjustable rate MBS, collateralized mortgage obligations (CMOs), real estate mortgage investment conduits (REMICs), and mortgage derivatives would not be eligible for purchase under the program. Assets purchased under these programs will be held passively and long-term. On March 18, 2009 the Fed announced an increase in the purchase commitment of up to $1.25 trillion in MBS and $200 billion of GSE obligations. In September 2009,",
      " the Fed announced that it would complete these purchases by the end of the first quarter of 2010. In November 2009, the Fed announced that it would purchase only $175 billion of Agency debt securities due to limited availability. The Fed argued that these programs would \"reduce the cost and increase the availability of credit for the purchase of houses.\" Support to mortgage markets through these programs can be seen as indirect and selective, however. The Fed is not providing or purchasing mortgages directly, nor is it purchasing newly issued MBS. By purchasing existing MBS from the secondary market, the price should rise, and that may induce more MBS to be issued.",
      " If more MBS are issued, then the increased availability of credit to mortgage markets would be expected to cause mortgage rates to fall. Further, the Fed is accepting MBS issued by GSEs but not by private firms, even though the GSEs have issued more MBS in 2008 than before the crisis started, while private-label issuance has dried up almost entirely, according to data from the Securities Industry and Financial Markets Association. Further, overall mortgage rates have been low during the crisis, but access has been limited to highly qualified lenders. Increasing the demand for GSE-issued MBS and GSE debt would be expected to primarily reduce already low mortgage rates,",
      " and increase borrower access only indirectly, at best. Mortgage rates fell noticeably after the Fed announced that the programs had begun, although the amounts of securities purchased by the Fed at that point were small. Subsequently, mortgage rates rose despite the Fed's purchases, presumably because of the economy's improvement. One concern is that mortgage rates could rise after the Fed's purchases are complete, and the housing market will not have recovered by then. These programs did not require the use of Section 13(3) emergency authority. Transactions involving agency debt are authorized under Section 13(13) and 14b of the Federal Reserve Act. The Fed's programs are similar to two Treasury programs,",
      " the GSE MBS Purchase Program and the GSE Credit Facility, already in place. Since the Treasury programs were authorized to provide the GSEs with unlimited financial assistance through the end of 2009, it is not clear why the Fed felt that the Treasury programs needed to be supplemented. Swap Lines with Foreign Central Banks In December 2007, the Fed announced the creation of temporary reciprocal currency agreements, known as swap lines, with the European Central Bank and the Swiss central bank. These agreements let the Fed swap dollars for euros or Swiss francs for a fixed period of time. Since September 2008, the Fed has extended similar swap lines to central banks in several other countries.",
      " To date, most of the swaps outstanding have been with the European Central Bank and Bank of Japan. In October 2008, it made the swap lines with certain countries unlimited in size. Interest is paid to the Fed on a swap outstanding at the rate the foreign central bank charges to its dollar borrowers. The temporary swaps are repaid at the exchange rate at the time of the original swap, meaning that there is no downside risk for the Fed if the dollar appreciates in the meantime (although the Fed also does not enjoy upside gain if the dollar depreciates). The swap lines are currently authorized through the end of January 2010. Except in the unlikely event that the borrowing country's currency becomes unconvertible in foreign exchange markets,",
      " there is no credit risk involved for the Fed. Swaps outstanding peaked at $583 billion in December 2008, and have fallen steadily since. The swap lines are intended to provide liquidity to banks in non-domestic denominations. For example, many European banks have borrowed in dollars to finance dollar-denominated transactions, such as the purchase of U.S. assets. Normally, foreign banks could finance their dollar-denominated borrowing through the private inter-bank lending market. As banks have become reluctant to lend to each other through this market, central banks at home and abroad have taken a much larger role in providing banks with liquidity directly. But normally banks can only borrow from their home central bank,",
      " and central banks can only provide liquidity in their own currency. The swap lines allow foreign central banks to provide needed liquidity in dollars. As such, the swap lines directly benefit foreign borrowers who need access to dollars. But the swap lines indirectly benefit the United States by promoting the use of the dollar as the \"reserve\" currency, which results in more seigniorage (earnings from currency) for the United States, as well as intangible benefits. Initially, the swap lines were designed to allow foreign central banks to acquire U.S. dollars. In April 2009, the swap lines were modified so that the Fed could access foreign currency to provide to its banks as well;",
      " to date, the Fed has not accessed foreign currency through these lines. The swap lines were ended in February 2010, but reopened with five countries in May 2010 in response to the crisis in Greece. To date, their use in 2010 was much more limited than in 2008 to 2009. Payment of Interest on Bank Reserves Banks hold some assets in the form of cash reserves stored in their vaults or in accounts at the Fed to meet daily cash-flow needs and required ratios imposed by the Fed. At times before the federal funds target was reduced to zero in December 2008, the Fed faced conflicting goals\u2014it sought to ensure that banks have enough reserves to remain liquid,",
      " but it also sought to maintain its target for the federal funds rate to meet its economic goals. The federal funds rate is the market rate in the private market where a bank with excess reserves lends them overnight to other banks. At times, ensuring that all banks have adequate reserves has resulted in an overall level of reserves in the market that has pushed the federal funds rate below its target. In other words, the only way for the Fed to make sure that each bank has enough reserves has been to oversupply the banking system as a whole with liquidity at the given federal funds target. To avoid this problem, Congress authorized the Fed to pay interest on bank reserves in the Emergency Economic Stabilization Act of 2008 ( H.R.",
      " 1424 / P.L. 110-343 ). By setting an interest rate on bank reserves close to the federal funds rate, the Fed would in effect place a floor on the rate. In theory, the federal funds rate would not fall below the interest rate on reserves because banks would rather hold excess reserves to earn interest than lend them out to other banks at a lower interest rate. Paying interest on reserves may also encourage banks to hold more reserves overall, which may somewhat reduce the likelihood that banks will have liquidity problems in the future. Paying interest on reserves does not encourage banks to increase overall lending to firms and households, however,",
      " because it increases the attractiveness of holding reserves. Thus, it is not a policy that stimulates the economy, at least in any direct sense; on the contrary, it prevents the increase in liquidity to banks from stimulating the economy by preventing the federal funds rate from falling. The interest rate on excess reserves was initially set at 0.75 percentage points less than the federal funds rate. In the short term, paying interest on reserves did not succeed in placing a floor under the federal funds target. Immediately after the Fed began paying interest, the federal funds rate was still falling below the target, and some days was even below the interest rate on reserves.",
      " In response, the Fed subsequently reduced the spread between the interest rate on reserves and the federal funds rate, but the actual federal funds rate continued to fall below the target rate. When the Fed reduced the federal funds rate target to a range of 0% to 0.25% in December 2008, it set the interest rate paid on reserves to 0.25%, the high end of the target range. At that point, paying interest on reserves could no longer place a floor under the federal funds rate, the stated rationale for its authorization. P.L. 110-343 gave the Fed permanent authority to pay interest on reserves.",
      " Once financial conditions return to normal, the liquidity benefits from paying interest will be less important (since banks will again be able to meet reserve needs through the federal funds market), and the primary remaining benefit would be a reduction in the volatility of the federal funds rate. The Fed previously intervened in the federal funds market on a daily basis to keep the market rate close to the target, sometimes unsuccessfully. The volatility partly resulted from banks devoting resources to activities that minimize reserves, such as \"sweep accounts.\" Paying interest on reserves reduces the Fed's profits, and thus reduces its remittances to the Treasury, thereby increasing the budget deficit, all else equal.",
      " It can be viewed as a transfer from the federal government to the banks, although in the long run, competition makes it likely that the banks will pass on the benefit to depositors in the form of higher interest paid on deposits. From Congress's perspective, the benefit of a less volatile target rate and less resources spent minimizing reserves would have to be weighed against the lost federal revenue, over time. The decision to pay interest on required, as well as excess, reserves also increases the cost of the policy without any additional benefit to liquidity or reduced volatility (because banks must keep required reserves even if no incentive is offered). The growth in the Fed's balance sheet has raised concerns about the future implications for inflation.",
      " The Fed has argued that paying interest on reserves can help prevent its balance sheet growth from becoming inflationary. It approved \"term deposits\" of up to six months for bank reserves in April 2010. The interest rate paid by term deposits will be determined by auction. Assistance to Individual Financial Institutions Over the course of the year, several financial firms that were deemed \"too big to fail\" received financial assistance from the Fed in the form of loans, troubled asset purchases, and asset guarantees. This assistance went beyond its traditional role of acting as a lender of last resort by providing loans to illiquid but solvent firms. In a joint announcement in March 2009,",
      " the Treasury and Fed stated a desire in the long run to transfer assets acquired by the Fed (via the Maiden Lane LLCs) from Bear Stearns and the American International Group (AIG) to the Treasury, but to date have not taken any steps to do so. H.R. 4173 alters Section 13(3) authority in an attempt to prevent assistance to individual firms in the future. The Fed's Role in the JPMorgan Chase Acquisition of Bear Stearns The investment bank Bear Stearns came under severe liquidity pressures in early March 2008, in what many observers have coined a non-bank run.",
      " On Friday, March 14, 2008, JPMorgan Chase announced that, in conjunction with the Federal Reserve, it had agreed to provide secured funding to Bear Stearns, as necessary. Through its discount window, the Fed agreed to provide $13 billion of back-to-back financing to Bear Stearns via JPMorgan Chase. It was a non-recourse loan, meaning that the Fed had no general claim against JPMorgan Chase in the event that the loan was not repaid and the outstanding balance exceeded the value of the collateral. Bear Stearns could not access the discount window directly because, at that point,",
      " only member banks could borrow directly from the Fed. This loan was superseded by the events of March 16, and the loan was repaid in full on March 17, 2008. On Sunday, March 16, after negotiations between the two companies, the Fed and the Treasury, JPMorgan Chase agreed to acquire Bear Stearns. The Fed agreed to purchase up to $30 billion of Bear Stearns' assets through Maiden Lane I, a new Limited Liability Corporation (LLC) based in Delaware that it created and controls. After the merger was completed, the loan was finalized on June 26, 2008.",
      " Two loans were made to the LLC: the Fed lent the LLC $28.82 billion, and JPMorgan Chase made a subordinate loan to the LLC worth $1.15 billion, based on assets initially valued at $29.97 billion. The Fed's loan will be made at an interest rate set equal to the discount rate (2.5% when the terms were announced, but fluctuating over time) for a term of 10 years, renewable by the Fed. JPMorgan Chase's loan will have an interest rate 4.5 percentage points above the discount rate. Using the proceeds from that loan, the LLC purchased assets from Bear Stearns worth $29.",
      "97 billion at marked to market prices by Bear Stearns on March 14, 2008. On its website, the New York Fed gives information on the current fair market value of the assets by type of asset, credit rating of the assets, and geographical location of the underlying assets. At the end of 2008, 44% of the portfolio consisted of agency collateralized mortgage obligations (CMOs), 6% was non-agency CMOs, 18% was commercial loans, 3% was residential loans, 8% was swap contracts, 7% was TBA commitments, and 8% was cash or cash equivalents.",
      " More than half of the non-agency CMOs had a credit rating of AAA; about one-fifth had a junk rating. (Agency CMOs are guaranteed by the GSE that issued them, and the Treasury has pledged to maintain the GSE's solvency.) The CEO of JPMorgan Chase testified that JPMorgan Chase \"kept the riskier and more complex securities in the Bear Stearns portfolio.... We did not cherry pick the assets in the collateral pool (for the LLC).\" These assets are owned by the LLC, which will eventually liquidate them to pay back the principal and interest owed to the Fed and JPMorgan Chase.",
      " The LLC's assets (purchased from Bear Stearns) are the collateral backing the loans from the Fed and JPMorgan Chase. A private company, BlackRock Financial Management, has been hired to manage the portfolio. Neither Bear Stearns nor JPMorgan Chase owes the Fed any principal or interest, nor are they liable if the LLC is unable to pay back the money the Fed lent it. The New York Fed explained that the LLC was created to \"ease administration of the portfolio and will remove constraints on the money manager that might arise from retaining the assets on the books of Bear Stearns.\" JPMorgan Chase and Bear Stearns did not receive the $28.",
      "82 billion from the LLC until the merger was completed. It was announced that the Fed is planning to begin liquidating the assets after two years. The assets will be sold off gradually, \"to minimize disruption to financial markets and maximize recovery value.\" As the assets are liquidated, interest will continue to accrue on the remaining amount of the loan outstanding. Thus, in order for the principal and interest to be paid off, the assets will need to appreciate enough or generate enough income so that the rate of return on the assets exceeds the weighted interest rate on the loans (plus the operating costs of the LLC). Table 1 shows how the funds raised through the liquidation will be used.",
      " Any difference between the proceeds and the amount of the loans is profit or loss for the Fed, not JPMorgan Chase. Because JPMorgan Chase's $1.15 billion loan was subordinate to the Fed's $28.82 billion loan, if there are losses on the total assets, the first $1.15 billion of losses will be borne, in effect, by JPMorgan Chase, however. The interest on the loan will be repaid out of the asset sales, not by JPMorgan Chase. At the end of 2009, the value of the assets had already been written down by over $3.5 billion,",
      " exceeding the maximum losses borne by JPMorgan Chase. The CEO of JPMorgan Chase testified that \"we could not and would not have assumed the substantial risks of acquiring Bear Stearns without the $30 billion facility provided by the Fed\" (emphasis in original). The primary risk was presumably that the value of mortgage-related assets would continue to decline. Had the transaction been crafted as a typical discount window loan directly to JPMorgan Chase, JPMorgan Chase would have been required to pay back the principal and interest, and it (rather than the Fed) would have borne the full risk of any depreciation in value of Bear Stearns'",
      " assets. The Fed's statutory authority for its role in both Bear Stearns transactions comes from paragraph 3 of Section 13 of the Federal Reserve Act. In his testimony, Timothy Geithner, New York Fed president at the time, stated that the Fed did not have authority to acquire an equity interest in Bear Stearns or JPMorgan Chase. Yet the LLC controlled by the Fed acquired assets from Bear Stearns, and the profits or losses from that acquisition will ultimately accrue to the Fed. It is unclear why the Fed decided to create and lend to a LLC to complete the transaction, rather than engaging in the transaction directly.",
      " Although the Fed did not buy Bear Stearns' assets directly, there are certainly important policy questions raised by the Fed's creation and financing of an LLC in order to buy Bear Stearns' assets. Typically, the Fed lends money to institutions and receives collateral in return to reduce the risk of suffering a loss. When the loan is repaid, the collateral is returned to the institution. In this case, the Fed made a loan, but to a LLC they created and controlled, not to a financial institution. From the perspective of JPMorgan Chase or Bear Stearns, the transaction was a sale (to the LLC), not a loan,",
      " regardless of whether the Fed or the LLC was the principal. Assistance to American International Group (AIG)63 Initial Loan On September 16, 2008, the Fed announced, after consultation with the Treasury Department, that it would lend up to $85 billion to the financial institution American International Group. AIG had experienced a significant decline in its stock price and was facing immediate demands for $14 billion to $15 billion in collateral payments due to recent downgrades by credit rating agencies, according to press reports. The Fed and Treasury feared that AIG was also \"too big to fail\" because of the potential for widespread disruption to financial markets that would result.",
      " The Fed announced that AIG could borrow up to $85 billion from the Fed over the next two years. On September 18, the Fed announced that it had initially lent $28 billion to AIG. The interest rate on the funds drawn is 8.5 percentage points above the London Interbank Offered Rate (LIBOR), a rate that banks charge to lend to each other. A lower interest rate is charged on any funds that it is does not draw from the facility. In return, the government agreed to receive warrants that, if exercised, would give the government a 79.9% ownership stake in AIG. The Fed named three independent trustees to oversee the firm for the duration of the loan.",
      " The lending facility is backed by the assets of AIG's non-regulated subsidiaries (but not the assets of its insurance company). In other words, the Fed can seize AIG's assets if the firm fails to honor the terms of the loan. This reduces the risk that the Fed (and ultimately, taxpayers) will suffer a loss. The risk still remains that if AIG turned out to be insolvent, its assets would be insufficient to cover the amount it had borrowed from the Fed. Since AIG has been identified as too big to fail, it is unclear how its assets could be seized in the event of non-payment without precipitating failure.",
      " Second Loan On October 8, 2008, the Fed announced that it was expanding its assistance to AIG and swapping cash for up to $37.8 billion of AIG's investment-grade, fixed-income securities. These securities, belonging to AIG's insurance subsidiaries, had been previously lent out and unavailable as collateral at the time of the original agreement. It has been reported that as AIG's loans matured, AIG realized losses on investments it had made with the collateral and some counterparties stopped participating in the lending program. As a result, AIG needed liquidity from the Fed to cover these losses and counterparty withdrawals.",
      " Although this assistance resembles a typical collateralized loan (the Fed receives assets as collateral, and the borrower receives cash), the Fed characterized the agreement as a loan of securities from AIG to the Fed in exchange for cash collateral. It appears the arrangement was structured this way because New York insurance law prevents AIG from using the securities as collateral in a loan. Revision to Agreement on November 10, 2008 On November 10, 2008, the Federal Reserve and the U.S. Treasury announced a restructuring of the federal intervention to support AIG. As evidenced by the additional borrowing after the September 16 loan, AIG had continued to see cash flow out of the company,",
      " particularly to post collateral for the credit default swaps that were arguably the primary cause of the financial problems in the company. The revised agreement points to the tension between making the terms of the assistance undesirable enough to deter other firms from seeking government assistance in the future, compared to making the terms of assistance so punitive that it exacerbates the financial problems of the recipient firm. It also points to the fact that once a firm has been identified as too big to fail, government assistance to the firm can become open-ended, as the original amounts offered were quickly revised upward. The November 10 restructuring eased the payment terms for AIG and had three primary parts:",
      " (1) a $40 billion direct capital injection, (2) restructuring of the $85 billion loan, and (3) a $52.5 billion purchase of troubled assets. Loan Restructuring The initial $85 billion loan facility from the Federal Reserve was reduced to $60 billion, for a time period extended to five years, and the financial terms are eased considerably. Specifically, the interest rate on the amount outstanding is reduced by 5.5 percentage points (to Libor plus 3%) and the fee on undrawn funds is reduced by 7.75 percentage points (to 0.75%). Purchase of Troubled Assets While P.L.",
      " 110-343 provided for the government purchase of troubled assets, the purchases related to AIG are being done by LLCs created and controlled by the Federal Reserve. This structure is similar to that created by the Federal Reserve to facilitate the purchase of Bear Stearns by JPMorgan Chase in March 2008. There are two LLCs set up for AIG\u2014one for residential mortgage-backed securities (RMBS) and one for collateralized debt obligations (CDO). The agreement called for the RMBS LLC (Maiden Lane II) to be lent up to $22.5 billion by the Federal Reserve and $1 billion from AIG to purchase RMBS from AIG's securities lending portfolio.",
      " The AIG loan is subordinated and AIG will bear the first $1 billion in losses should there be future losses on these securities. AIG and the Federal Reserve will \"share\" in any future gains, with five-sixths of future profits accruing to the Fed and one-sixth accruing to AIG. As of March 2009, the assets had lost nearly $3 billion in value, more than AIG's total loss exposure. The previous $37.8 billion loan securities lending loan facility is to be repaid and terminated with the proceeds from this LLC plus additional AIG funds if necessary. At the end of 2008,",
      " about half of the RMBS purchased were backed by subprime mortgages, and about one quarter were backed by Alt-A mortgages. Thirteen percent of the portfolio's holdings had a credit rating of AAA and 65% had a junk rating. At the end of 2009, the Maiden Lane II assets had lost $1.1 billion in value, slightly exceeding the AIG's maximum loss sharing. The agreement called for the CDO LLC (Maiden Lane III) to be lent up to $30 billion from the Federal Reserve and $5 billion from AIG to purchase CDOs on which AIG has written credit default swaps.",
      " The $5 billion loan from AIG is subordinated and AIG will bear the first $5 billion in future losses on these securities. As of March 2009, the assets had lost nearly $8.5 billion in value, more than AIG's total loss exposure. AIG and the Federal Reserve will \"share\" in any future gains, with five-sixths of future profits accruing to the Fed and one-sixth accruing to AIG. The Federal Reserve also indicates that the credit default swaps will be unwound at the same time that the CDOs are purchased. Many credit default swaps, however, are purchased by entities not holding the underlying CDOs;",
      " it is unclear how, or if, such credit default swaps written by AIG will be addressed. At the end of March 2009, 16% of the portfolio's holdings had a credit rating of AAA, and 72% had a junk rating. At the end of 2009, the Maiden Lane III assets had lost $0.9 billion in value, resulting in no losses to date for the Fed. Direct Capital Injection Through the TARP, the Treasury purchased $40 billion in preferred shares of AIG. In addition to $40 billion in preferred shares, the Treasury also receives warrants for common shares equal to 2%",
      " of the outstanding AIG shares. AIG was the first announced non-bank to receive TARP funds. The $40 billion in preferred AIG shares now held by the Treasury are slated to pay a 10% dividend per annum, accrued quarterly. Participation in TARP triggers restrictions on executive pay as required by Congress, including a restriction on \"golden parachutes\" and a requirement for clawbacks on previously provided bonuses in the case of accounting irregularities. According to the November 10, 2008, AIG filings with the Securities and Exchange Commission, the amount of shares held in trust for the benefit of the U.S. Treasury will be reduced by the shares and warrants purchased under TARP,",
      " so the total equity interest currently held by the U.S. government equals 77.9% plus warrants to purchase another 2%. The warrants equal to 77.9% of AIG equity were exercised and transferred to the government on March 4, 2009. Revision to Agreement on March 2, 2009 On March 2, 2009, the Treasury and Fed announced another revision of the financial assistance to AIG. On the same day, AIG announced a loss of more than $60 billion in the fourth quarter of 2008. In response to the poor results and ongoing financial turmoil, the ratings agencies were reportedly considering further downgrading AIG,",
      " which would most likely have resulted in further significant cash demands due to collateral calls. According to the Treasury, AIG \"continues to face significant challenges, driven by the rapid deterioration in certain financial markets in the last two months of the year and continued turbulence in the markets generally.\" The revised assistance is intended to \"enhance the company's capital and liquidity in order to facilitate the orderly completion of the company's global divestiture program.\" The revised assistance includes the following: Exchange of the existing $40 billion in preferred shares purchased through the TARP program for preferred shares that \"more closely resemble common equity,\" thus improving AIG's financial position.",
      " Dividends paid on these new shares will remain at 10%, but will be non-cumulative and only be paid as declared by AIG's board of directors. Should dividends not be paid for four consecutive quarters, the government has the right to appoint at least two new directors to the board. Commitment of up to $30 billion in additional preferred share purchases from TARP. As of October 2009, AIG had issued $3.2 billion of these shares. Reduction of interest rate on the existing Fed loan facility by removing the current floor of 3.5% over the LIBOR portion of the rate. The rate will now simply be three month LIBOR plus 3%, which is approximately 4.",
      "25%. Limit on Fed revolving credit facility will be reduced from $60 billion to $25 billion. Up to $33.5 billion of the approximately $38 billion outstanding on the Fed credit facility will be repaid by asset transfers from AIG to the Fed. Specifically, (1) $8.5 billion in ongoing life insurance cash flows will be securitized by AIG and transferred to the Fed; and (2) $25 billion in preferred interests in two of AIG's large life insurance subsidiaries will be issued to the Fed. The transfer of the preferred interest in the life insurance subsidiaries was finalized in December 2009.",
      " This effectively transfers a majority stake in these companies to the Fed, but the companies will still be managed by AIG. Assistance through the end of 2009 is summarized in Table 2. In addition to the new assistance, AIG announced that it was forming a new holding company to include its primary property/casualty insurance subsidiaries. Since the first assistance in September 2008, AIG has sought to sell subsidiaries, including those whose equity has been transferred to the Fed, to repay the loans and reduce its holdings to a core property/casualty business. Such sales have been difficult during the ongoing financial turmoil. By effectively transferring the two life insurance subsidiaries to the Fed and gathering property casualty subsidiaries in a new holding company,",
      " AIG is arguably progressing toward this goal. CBO estimates that most of the expected government losses from assistance to AIG will accrue to TARP, in part because those claims are junior to the Fed's. In addition, CBO did not expect losses from the Maiden Lane asset purchases at the time of purchase because the Fed reported the assets were bought at current market value. It is unclear why it was necessary for the Fed to acquire the assets if they could have been sold at the same price in the private market, however. Who Benefits From Assistance to AIG? While billions of dollars in government assistance have gone to AIG, in many cases,",
      " it can be argued that AIG has essentially acted as an intermediary for this assistance. In short order after drawing on government assistance, substantial funds have flowed out of AIG to entities on the other side of AIG's financial transactions, such as securities lending or credit default swaps. If AIG had been allowed to fail and had entered bankruptcy, as was the case with Lehman Brothers, then these counterparties in many cases would have been treated as unsecured creditors and seen their claims reduced. Seen from this view, the true beneficiaries of the billions in federal assistance that have flowed to AIG has not been AIG itself, but these counterparties.",
      " On March 15, 2009, AIG released information detailing the counterparties to many of its transactions. The released information detailed $52.0 billion of direct support to AIG that went to AIGFP related transactions, $29.6 billion in Maiden Lane III CDS-related transactions, and $43.7 billion in payments to securities lending counterparties. Legal Authority All Fed assistance to AIG is authorized under Section 13(3) of the Federal Reserve Act, the same emergency authorization used for Bear Stearns. This authorization was needed because the Fed cannot normally lend to a financial firm that is neither primarily a depository institution (although it owns a small thrift)",
      " nor a primary dealer. Guarantee of Citigroup's Assets Similar to Bear Stearns and AIG, Citigroup faced a sudden drop in its stock price in late 2008. Its stock price fell from $23 per share on October 1, 2008, to $3.77 on November 21, 2008, amidst investor concern about its losses. Stepping in before a potential run began, the Federal Reserve and federal government announced on November 23 that they would purchase an additional $20 billion of Citigroup preferred shares through TARP and guarantee a pool of up to $306 billion of Citigroup's assets.",
      " (The assets were valued at $301 billion when the agreement was finalized on January 16, 2009.) Citigroup announced that the assets guaranteed include mortgages, consumer loans, corporate loans, asset backed securities, and unfunded lending commitments. The guarantee was to be in place for 10 years for residential assets and five years for non-residential assets. Citigroup would exclusively bear up to the first $29 billion of losses on the pool. Any additional losses would be split between Citigroup and the government, with Citigroup bearing 10% of the losses and the government bearing 90%. The first $5 billion of any government losses would be borne by the Treasury using TARP funds;",
      " the next $10 billion would be borne by the FDIC; any further losses would be borne by the Fed through a non-recourse loan. Citigroup will pay the federal government a fee for the guarantee in the form of $7 billion in preferred stock with an 8% dividend rate and warrants to purchase common stock that were worth $2.7 billion at the time of the agreement. The assets will remain on Citigroup's balance sheet, and Citigroup will receive the income stream generated by the assets and any future capital gains. In December 2009, Citigroup and the Treasury reached an agreement to repay the outstanding $20 billion in preferred securities and to cancel the asset guarantee.",
      " As part of this agreement, Citigroup paid a termination fee of $50 million and Treasury agreed to cancel $1.8 billion worth of the trust preferred securities originally paid as a fee for the guarantee. While the asset guarantee was in place, no losses were claimed and no federal funds paid out.  In the cases of Bear Stearns and AIG, management was replaced and shareholders equity was diluted to limit moral hazard problems associated with receiving government assistance. Similar steps were not taken in the case of Citigroup. Guarantee of Bank of America's Assets On January 16, 2009, the federal government and the Federal Reserve announced that that they would purchase an additional $20 billion of Bank of America preferred shares through TARP and guarantee a pool of up to $37 billion of Bank of America's assets and derivatives with maximum potential future losses of up to $81 billion.",
      " The guarantee would remain in place for 10 years for residential mortgage-related assets and five years for all other assets. Bank of America will bear up to the first $10 billion of losses on the assets, with any subsequent losses split 90% by the government and 10% by Bank of America. The government's share of the next $10 billion of losses will be borne jointly by the FDIC and the Treasury, and any further losses will be borne by the Fed. It was announced that the assets being guaranteed were largely acquired during Bank of America's acquisition of Merrill Lynch. Bank of America will pay the federal government a fee for the guarantee in the form of $4 billion in preferred stock with an 8%",
      " dividend rate and warrants to purchase common stock worth $2.4 billion at the time of the agreement. As part of the agreement, Bank of America was prohibited from paying dividends on common stock for three years. The assets will remain on Bank of America's balance sheet, and Bank of America will receive the income stream generated by the assets and any future capital gains. Bank of America can further limit its cost and the benefit to the government by opting out of the guarantee early at its discretion. In the cases of Bear Stearns and AIG, management was replaced and shareholders equity was diluted to limit moral hazard problems associated with receiving government assistance.",
      " Similar steps were not taken in the case of Bank of America. On the other hand, the government has tried to encourage healthy financial firms to merge with troubled firms, and it may have felt that harsh terms on an agreement to guarantee assets that were in part acquired from Bank of America's takeover of Merrill Lynch would have discouraged future mergers. It has been reported that the asset guarantees to Bank of America were motivated by a desire to prevent them from withdrawing from their uncompleted merger agreement with Merrill Lynch. The agreement to guarantee Bank of America's assets was never finalized, and on September 22, 2009, it was announced that Bank of America would pay $425 million to exit the agreement.",
      " Although Bank of America never formally received government protection of its assets, an exit fee could be justified on the grounds that Bank of America benefited from the implicit support that the negotiations provided. Policy Issues Cost to the Treasury Unlike all other institutions, currency (Federal Reserve notes) is the Fed's primary liability. Along with its holdings of Treasury securities, its assets are the loans it makes (through the discount window and the new programs detailed above) and the private assets it buys directly or holds through LLCs (e.g., for AIG and the Bear Stearns takeover). It earns profits on its assets that are largely remitted to the Treasury.",
      " Its loans and asset purchases are financed by increasing its liabilities (Federal Reserve notes), and the financing does not necessarily result in any inherent cost for the Treasury. Indeed, if the loans are repaid, they would increase the profits of the Fed, which in turn would increase the Fed's remittances to the Treasury. Even if the loans are not repaid, most are fully collateralized (usually over-collateralized), so the Fed would not suffer losses unless the collateral had lost value. In addition, most of its loans are made with recourse, which means that borrowers are still liable if the collateral loses value. The Fed had net income of $38.",
      "8 billion and remitted $34.9 billion to the Treasury in 2008. Net income increased to $52.4 billion and remittances to the Treasury rose to $47.4 billion in 2009. In the past, most of the Fed's net income has derived from the interest on its Treasury securities holdings, not its loans. By the end of 2008, its loans and private assets holdings were much larger than its Treasury holdings (see Table 4 ). The earnings and any losses the Fed took on its loans would increase or reduce its net income, respectively. If loan losses caused an overall net loss,",
      " the Fed's capital (the excess of its assets compared with its liabilities) would be reduced. The Fed had capital equal to about $52 billion at end of 2009, half of which was paid-in capital of member banks and the other half of which was surplus. The Fed has not had an annual net operating loss since 1915. However, the Fed's balance sheet became more risky in 2008, due to the shift in composition of its assets from U.S. Treasuries to direct loans and private securities and due to the increase in its liabilities relative to its capital. For example, at the end of 2008,",
      " the Fed's capital would be depleted if its realized net losses were equal in value to 1.9% of its holdings of financial assets (U.S. Treasuries, loans, and other private securities). Thus, any potential losses on loans to the Fed would not involve taxpayer dollars flowing to the Fed unless the losses exceeded the sum of its other earnings and its capital and the Treasury decided it did not want the Fed to operate as technically insolvent. However, even if the losses did not result in insolvency, any losses could result in a smaller remittance of earnings to the Treasury than would have occurred had the Fed not made the loans.",
      " Therefore, the ultimate cost to the government is the same whether loans to the financial sector are made through the Fed or the Treasury. The Fed has reported to Congress that it does not expect there to be losses on any of the actions it has undertaken under its emergency authorities (including the Maiden Lane LLCs, two of which had unrealized capital losses at the end of 2009), but it has not provided details as to how it reached that conclusion. Some analysts are concerned that a future increase in interest rates could result in losses on the Fed's asset holdings, but these losses would be realized only if the Fed were forced to sell those assets.",
      " To date, all of the Fed's lending programs have earned income for the Fed, except for Maiden Lanes I and II, whose assets have accrued unrealized capital losses. In 2009, the Fed's loan programs earned $5.5 billion, the Maiden Lane assets had fallen in value by a combined $2.3 billion, and the Fed's other assets had earned $48.8 billion, as seen in Table 3. (The Maiden Lane losses will not be realized until the assets are sold, and the Fed has stated that it intends to hold the assets long term.) In the aggregate, the Fed earned higher profits and increased its remittances to the Treasury.",
      " The Fed could generate positive income from its programs but still operate those programs at a subsidy to the recipients. Subsidies would occur when the interest rates charged for loans or prices paid for assets are not high enough to fully compensate for the risks borne by the Fed in undertaking those transactions. In other words, the subsidy is equal to the difference between the price or interest rate the Fed received and what could have been received if the transaction had been made privately. CBO has estimated subsidies for each of the Fed's emergency programs, presented in Table 3. In evaluating the program, that subsidy would need to be compared with the benefits to the broader economy from the program,",
      " which CBO does not attempt to do. CBO estimated that lending programs with high collateral requirements and done on a recourse basis (Term Auction Facility, repurchase agreements, central bank currency swaps, Primary Dealer Credit Facility, Term Securities Lending Facility) generated no subsidies. CBO also concluded that all asset purchases involved no subsidy, either because the purchases were made in the open market (e.g., purchases of Treasury and GSE-related securities) or because the Fed reported that purchases were made at market value (e.g., the Maiden Lane assets). The assumption that Maiden Lane assets were bought at prevailing market prices can be questioned because the rationale for the Fed's purchase was that these assets could not be sold in private markets at the time.",
      " CBO finds subsidies for loan facilities without recourse (the two commercial paper facilities and TALF) and for special assistance to systemically significant firms (AIG, Citigroup, and Bank of America). In total, CBO estimates that the Fed's emergency actions were done at a subsidy of $21 billion. This estimate would likely be smaller if re-estimated today, based on current information. For example, CBO finds a subsidy of $13 billion for TALF because TALF was expected to make loans of $200 billion; in reality, loans peaked at $48 billion. CBO also estimates subsidies on the asset guarantees to Citigroup and Bank of America,",
      " although those programs were ended with payments to the government and no payouts by the government. Although the Fed has taken steps to minimize the risk that recent activities will result in losses, Members of Congress have raised the question of whether taxpayers should be exposed to additional fiscal risks without congressional approval, particularly because some of the Fed's actions have similarities to those authorized under TARP. H.R. 4173 requires the Fed to issue policies and procedures for emergency lending that, among other things, ensure that \"the security for emergency loans is sufficient to protect taxpayers from losses\" by assigning a lendable value to collateral that is \"consistent with sound risk management practices;\" and prohibit lending to borrowers that are insolvent or establishing a lending program or facility for the purpose of helping a single and specific company to avoid bankruptcy.",
      " How Much Can the Fed's Balance Sheet Expand? Will the Fed Run Out of Money? As a result of the Fed's new facilities and activities, its balance sheet has increased significantly, from $874 billion on August 1, 2007, a date shortly before the financial system first experienced turmoil, to $2,312 billion at its peak on December 17, 2008, an increase of 165%. Table 4 shows the increase in the balance sheet by category over that period. Since the size of the balance sheet peaked in December 2008, the overall size of the balance sheet has remained relatively steady, but there have been large changes in the composition of the balance sheet.",
      " For example, there has been a significant increase in the Fed's holdings of mortgage backed securities and GSE debt, and a significant decrease in lending to primary dealers, holdings of commercial paper, and swaps with central banks. The Fed also began lending through the TALF in March 2009. When the Fed makes loans or purchases assets, the asset side of its balance sheet expands; this must be matched by an increase in its liabilities. As direct loans from the Fed multiplied, some observers questioned at what point the Fed's lending power will be exhausted. The Fed cannot \"run out of money\" to buy assets and extend loans because it controls its liabilities,",
      " the monetary base (federal reserve notes and bank reserves), through which it expands or contracts the amount of money outstanding. There are no statutory limits on the size of the money supply or currency outstanding and, thus, how much it can loan; the ultimate constraint on the Fed's willingness to expand the monetary base in order to expand its activities comes from the part of its congressional mandate requiring stable prices (i.e., a low and stable rate of price inflation). If the Fed allows the money supply to grow too rapidly, then price inflation will become uncomfortably high (discussed in the section below on \" Stagflation? \"). Sterilization of Lending Before September 2008 Earlier in the financial crisis,",
      " the Fed was concerned about inflation rising. For example, in the 12 months ending in August 2008, inflation (as measured by the consumer price index) had risen to 5.4%\u2014significantly higher than the Fed's self-identified \"comfort zone.\" To address that concern, the Fed initially sought to keep its balance sheet from growing in order to offset the effects of its activities on the money supply. One way to keep its balance sheet from growing would be by reducing its other assets. For example, it could \"sterilize\" its new loans or asset purchases through contractionary open market operations, namely, the sale of Treasury securities.",
      " In practice, before September 2008, the Fed kept the monetary base relatively constant by selling enough Treasury securities to offset the additional loans it made. (When the Fed sells Treasury securities, it removes the money it receives in the sale from circulation.) Thus, as loans outstanding rose, the Fed's holdings of Treasury securities initially declined, by $340 billion through December 17, 2008. In September 2007, 88% of its assets were Treasury securities held outright and less than 1% were loans to the financial system. On December 17, 2008, 28% of its assets were Treasury securities,",
      " 32% were loans, 17% were private securities (mostly commercial paper), and 25% were currency swaps with foreign central banks. If sterilization through the sale of Treasury securities had continued, the Fed would eventually have held too few Treasury securities to be able to conduct open market operations. As seen in Table 4, the overall increase in the Fed's balance sheet at its peak was $1.4 trillion, more than the Treasury securities it held before the crisis started ($816 billion) or in September 2008 ($475 billion). The Treasury announced the Supplementary Financing Program on September 17, 2008 as an alternative method for the Fed to increase its assistance to the financial sector without increasing the amount of money in circulation.",
      " Under this program, the Treasury has temporarily auctioned more new securities than it needs to finance government operations and deposited the proceeds at the Fed. (The increase in the money supply does not affect inflation because the money received by the Treasury is held at the Fed and not allowed to circulate in the economy.) Ultimately, the program will not affect the Treasury's fiscal position, however, because it will increase the profits of the Fed, which are then remitted to the Treasury. By December 17, 2008, the Treasury had borrowed and increased its deposits at the Fed by $475 billion. From January to September 2009, Treasury deposits were between $200 billion and $300 billion,",
      " and were no longer large enough to offset the growth in the asset side of the Fed's balance sheet. Congress authorized this borrowing only indirectly by raising the statutory debt limit, in P.L. 110-343 and other subsequent legislation. In late 2009, Treasury withdrew its supplementary deposits at the Fed in order to finance government spending as the debt approached the statutory limit. Once the debt limit was increased, the Treasury increased its deposits back to around $200 billion. The fact that the Fed has been \"sterilizing\" the stimulative effects of its loans on the money supply (entirely until September 2008, and partially after then)",
      " limits the effects of those loans on financial conditions. In essence, the Fed has two methods for providing the financial system with liquidity\u2014open market operations or direct loans. The Fed increased the role of direct loans to directly meet individual financial institutions' liquidity needs. But the Fed was offsetting the effects of the direct loans on the money supply to meet its goals for inflation. Thus, the loans did not provide additional overall monetary stimulus to the economy when sterilized. Since the Fed was sterilizing the loans because of its concerns with inflation, the utility of sterilization was fundamentally a question of whether the Fed had achieved the proper balance between stabilizing the financial sector and providing price stability,",
      " two topics that are discussed below. Quantitative Easing and Balance Sheet Growth Since September 2008 As commodity prices fell later in 2008, the inflation rate also fell. The Fed became less concerned about inflation rising, and more concerned about the further deterioration in financial and economic conditions. After September 2008, the Fed further increased its direct assistance to the financial system, but no longer fully sterilized those activities. As a result, the Fed's balance sheet and the monetary base have expanded rapidly, as demonstrated in Table 4. The monetary base doubled from August to December 2008\u2014an unprecedented rise. Because this increase went beyond what was needed to target the federal funds rate,",
      " it has been referred to as \"quantitative easing.\" Normally, this would trigger a rapid increase in inflation. The main force preventing such an increase is the rapid increase in excess bank reserves held at the Fed during that period. Bank reserves increased from $44 billion in August 2008 to $802 billion on December 17, 2008, as banks preferred to hold the additional reserves created by the Fed's actions in order to shore up their balance sheets to avoid runs. In normal financial conditions, banks would lend out money they received from the Fed, and through a process referred to by economists as the \"money multiplier,\" a $1 increase in the monetary base would lead to a much larger increase in the overall money supply.",
      " But if banks hold the money received from the Fed in bank reserves instead of lending it out, the money multiplier process will not occur, so the growth in the overall money supply will be smaller. Data from the Fed show that almost all of the increase in reserves has been through excess reserves, rather than required reserves, which is consistent with banks holding most of the increase in reserves instead of lending them out. Thus, the large increase in the monetary base since September 2008 has not been matched by a corresponding increase in the overall money supply. Initially, the balance sheet grew because of high private demand for borrowing from the Fed, and asset purchases were not needed.",
      " But between the weeks of December 17, 2008, and March 25, 2009, the Fed's direct lending to the financial sector decreased from a weekly average of $976 billion to $848 billion. The pattern of decline was steady over that period, and presumably stemmed from the fact that as financial conditions improved, there was less financial sector demand for Fed lending. With declining loan balances, the balance sheet would have shrunk, unless other assets were added to offset the fall in direct lending. On March 18, 2009, the Fed announced a commitment to purchase $300 billion of Treasury securities, $200 billion of Agency debt (later revised to $175 billion), and $1.",
      "25 trillion of Agency mortgage-backed securities. Since then, direct lending has continued to gradually decline, while the Fed's holdings of Treasury and Agency securities have steadily increased, as seen in Table 5. The Fed's planned purchases of Treasury securities were completed by the fall of 2009 and planned Agency purchases were completed by the spring of 2010. By April 2010, direct lending outside of TALF and AIG was modest. Because other assets on the Fed's balance sheet (most notably, liquidity swaps with foreign central banks) have also declined over that period, the net result of these purchases has been to keep the overall size of the balance sheet relatively constant.",
      " Thus, the Fed's asset purchases have prevented liquidity from being removed from the financial system as Fed lending fell. But since the fall in lending was spurred by less demand among financial institutions, critics question if the level of liquidity needed in the crisis is still needed today. Purchases of Treasury securities could also stimulate the economy if private interest rates fall in response; a similar effect could occur with purchases of MBS, although those purchases should also more directly stimulate residential investment by reducing mortgage rates. Whether these purchases were more stimulative than the direct lending they replaced depends on their relative effects on financial conditions and interest rates. Future Concerns Once the financial outlook improves,",
      " banks may decide to use their reserve holdings to rapidly increase their lending. At that point, if the Fed found itself fighting inflationary pressures, it would have to find a way to prevent banks from lending those reserves in order to prevent a rapid increase in the money supply. The most straightforward method to achieve this would be to withdraw those reserves from the banking system, which would require the Fed to reduce both its assets and liabilities through asset sales. Some of the Fed's outstanding assets can be sold relatively quickly in theory, although there could be political resistance in reality. By April 2010, the Fed's balance sheet consisted predominantly of securities that could be sold in secondary markets.",
      " But the Fed has pledged to hold these assets long term. Given the Fed's concerns about the fragility of housing markets, it is not clear how these holdings could be reduced quickly if the Fed became concerned about rising inflation. (About $100 billion to $200 billion per year could be reduced by not replacing maturing assets, according to Chairman Bernanke. ) Another option would be to give banks incentives not to lend out reserves by raising the interest rate that the Fed pays on reserves, although it remains to be seen how interest-sensitive bank reserves are. To better prevent these reserves from being lent out if necessary, the Fed began offering \"term deposits\"",
      " with a one to six month maturity for bank reserves. The interest rate on these term deposits would be set through auction; banks would presumably be willing to bid for term deposits only if the interest rate exceeded the rate paid by the Fed on normal reserves. The Fed could also attempt to reduce liquidity by lending its assets out through \"reverse repos.\" This would change the composition of liabilities on the Fed's balance sheet, replacing Federal Reserve notes or bank reserves with reverse repos. It is unlikely that reverse repos operations could be large enough to remove most of the new liquidity, however. Cash balances held at the Fed through the Treasury Supplemental Financing Program could also be used to tie up liquidity,",
      " but the size of this program is constrained by the statutory debt limit (since Treasury needs to borrow to acquire cash), and would be insufficient to significantly reduce liquidity without a large increase in the debt limit. With an eye to the potential long-run inflationary effects of the growth in the Fed's balance sheet, the Fed and Treasury announced in March 2009 that they would seek \"legislative action to provide additional tools the Federal Reserve can use to sterilize the effects of its lending or securities purchases on the supply of bank reserves.\" Many analysts interpreted this statement to express the desire for the Fed to gain authority to issue its own bonds. Returning to the balance sheet in Table 4,",
      " the Fed must match an increase in assets with an increase in liabilities. The only liability it can currently issue are federal reserve notes that increase the monetary base. If the Fed were granted new authority to issue bonds, they could then expand their liabilities without increasing the monetary base and increasing inflationary pressures. Then, there would no longer be any statutory limit or check on the Fed's ability to directly allocate credit, provided it met the broad guidelines of Section 13(3). To date, legislation to allow the Fed to do so has not been considered. With a federal funds rate of zero, unsterilized purchases of long-term assets could help further stimulate the economy by adding needed liquidity to the financial system reducing long-term interest rates (flattening the yield curve). But once the Fed decides to start raising rates,",
      " economic theory casts some doubt on the economic usefulness of maintaining a large balance sheet, but sterilizing its effects on the economy by paying interest on reserves, reverse repos, the Treasury Supplemental Program, or issuing Fed bonds. The large balance sheet has no positive effect on liquidity if it is offset by any of these actions that drain liquidity from the economy. And if investors have rational expectations, it is not clear how a large balance sheet could flatten the yield curve in the face of sterilization since the long end of the yield curve should be determined primarily by expectations of future interest rates, and sterilized purchases of assets in the present should not change those expectations,",
      " all else equal. Previous experience suggests that sterilized attempts to flatten the yield curve have failed to stimulate the economy. For example, a study by Ben Bernanke (before he was Fed Chairman) and other economists concluded that a similar policy in the 1960s called \"Operation Twist\" is \"widely viewed today as having been a failure.\" Is the Fed Monetizing the Budget Deficit? Some commentators have interpreted the Fed's decision to make large scale purchases of Treasury securities as a signal that the Fed intends to \"monetize the federal deficit,\" which is projected this fiscal year to reach its highest share of GDP since World War II.",
      " Monetizing the deficit occurs when the budget deficit is financed by money creation rather than by selling bonds to private investors. Hyperinflation in foreign countries has consistently resulted from governments' decisions to monetize large deficits. According to this definition, the deficit has not been monetized. Section 14 of the Federal Reserve Act legally forbids the Fed from buying newly issued securities directly from the Treasury, and all Treasury securities purchased by the Fed to date have been purchased on the secondary market, from private investors. Moreover, the size of the Fed's purchases of Treasury securities thus far is small relative to the overall deficit, which was $1.4 trillion in 2009.",
      " The Fed has announced and completed purchases of $300 billion thus far, although that amount can be altered at its discretion. Nonetheless, the effect of the Fed's purchase of Treasury securities on the federal budget is similar regardless of whether the Fed buys the securities on the secondary market or directly from Treasury. When the Fed holds Treasury securities, Treasury must pay interest to the Fed, just as it would pay interest to a private investor. These interest payments, after expenses, become profits to the Fed. The Fed, in turn, remits about 95% of its profits to the Treasury, where they are added to general revenues. In essence, the Fed has made an interest-free loan to the Treasury,",
      " because almost all of the interest paid by Treasury to the Fed is subsequently sent back to Treasury. The Fed could increase its profits and remittances to Treasury by printing more money to purchase more Treasury bonds (or any other asset). The Fed's profits are the incidental side effect of its open market operations in pursuit of its statutory mandate (to keep prices stable and unemployment low). If the Fed chose instead to buy assets with a goal of increasing its profits and remittances, it would be unlikely to meet its statutory mandate. Limits on the Fed's Ability to Address Problems in the Financial\u00a0Sector The Fed's actions since 2007 have been primarily focused on restoring liquidity to the financial system\u2014lending to financial firms to convert their illiquid assets into cash or U.S.",
      " Treasury securities. But as financial conditions deteriorated in spite of increasing Fed intervention, it became apparent that the problems facing financial firms were not exclusively related to liquidity. The crux of the firms' problem in the fall of 2008 stemmed from the large losses on some of their assets, particularly mortgage-related assets. This caused a number of problems for the firms related to capital adequacy, which is the difference between the value of their assets and the value of their liabilities. First, losses and write-downs associated with those assets have reduced the firms' existing capital. Second, in the current environment, investors and creditors are demanding that firms hold more capital relative to assets than before so that firms can better withstand any future losses.",
      " Third, at the peak of the crisis, firms were unable to raise enough new capital. Firms can raise new capital through retained earnings, which had been greatly reduced for many firms by the poor performance of their assets, or by issuing new capital (equity) and selling it to new investors. But during the crisis, investors were reluctant to inject new capital into struggling firms. Part of the explanation for this is that losses made the firms less profitable. But another part of the reason was that investors feared that there would be further losses in the future that would reduce the value of their investment, and perhaps even cause the firm to become insolvent.",
      " Uncertainty about future losses was partly caused by the opacity surrounding the assets that have been declining in value, which makes it hard for investors to determine which assets remain overvalued and which are undervalued. The result for companies such as Bear Stearns, Lehman Brothers, AIG, Washington Mutual, and Wachovia was a downward spiral in their stock price, which had two self-reinforcing characteristics. First, there was little demand for existing stock since its worth would either have been diluted by new capital (raised privately or through government intervention) or lost in insolvency. Second, new capital could not be attracted because the fall in stock value had left the market capitalization of the firms so low.",
      " If a firm's capital is completely depleted, there is no longer a buffer between its assets and liabilities, and it becomes insolvent. In 2009, financial firms were again able to issue capital to private investors, and many did so successfully. Many large financial firms, including the firms that have failed, are heavily dependent on short-term borrowing to meet their current obligations. As financial conditions worsened, some of the firms that had the problems described above had problems accessing short-term borrowing markets that in normal conditions could be taken for granted. In an atmosphere where creditors cannot perceive which firms have insufficient capital, they become unwilling to lend for even short intervals.",
      " This is the essence of the liquidity problem\u2014although the firms' assets may exceed their liabilities, without access to short-term borrowing, the firm cannot meet its current obligations because it cannot convert its assets into cash quickly enough (at least not if it wishes to avoid \"fire sale\" prices). The Fed has always been the \"lender of last resort\" in order for banks to avoid liquidity problems during financial turmoil. To borrow from the Fed, a financial firm must post collateral. In essence, this allows the firm to temporarily convert its illiquid assets into cash, enabling the firm to meet its short-term obligations without sacrificing its assets. The Fed has always lent to commercial banks (depository institutions)",
      " through the discount window. As discussed above, it has extended liquidity to non-bank financial firms since 2008 through new lending facilities. Borrowing from the Fed increases liquidity but it does not change a firm's capital buffer since it now has a liability outstanding to the Fed. So borrowing from the Fed cannot solve the problems of undercapitalization that some firms faced. Indeed, the Fed will generally not lend to firms that are not creditworthy because it wants to provide liquidity only to firms that are solvent, and thus able to repay. H.R. 1424, which was signed into law on October 3, 2008 ( P.L.",
      " 110-343 ), created the Troubled Asset Relief Program. The Treasury initially used TARP funds to address the capital adequacy problem directly by providing $250 billion in capital to banks directly through preferred share purchases by TARP. Some have asked whether there is any way the Fed could have addressed the financial firms' capital adequacy problems. All of the Fed's standing lending facilities involve collateralized lending, and as discussed above, any program involving collateralized lending would not change a firm's capital position. According to one legal analysis, there is no express statutory authority for the Fed to purchase corporate bonds, mortgages, or equity. But the Fed's assistance through the three Maiden Lane LLCs it has created has some similarities to TARP.",
      " In the case of Bear Stearns, the Fed created a limited liability corporation called Maiden Lane I, and lent Maiden Lane $28.82 billion. Maiden Lane I used the proceeds of that loan and another loan from JPMorgan Chase to purchase mortgage-related assets from Bear Stearns. (A similar arrangement with AIG led to the creation of Maiden Lane II and Maiden Lane III.) Thus, although the Fed created and controlled the Maiden Lanes, the assets were purchased and held by the Maiden Lanes, not the Fed. The Fed plans to hold the Maiden Lane assets until markets recover, and then sell the assets to repay its loans.",
      " The Maiden Lanes were created under the Fed's Section 13(3) emergency authority. H.R. 4173 forbids \"a program or facility that is structured to remove assets from the balance sheet of a single and specific company.\" The Fed was presumably granted broad emergency powers under Section 13(3) so that it had the flexibility to deal with unforeseen circumstances. Nonetheless, too broad of a reading of its powers could provoke displeasure in Congress or legal challenges. Creating TARP within the Treasury through legislation rather than the Fed through emergency powers avoided the argument of whether such a program extended beyond the Fed's intended role. Lender of Last Resort,",
      " Systemic Risk, and Moral Hazard Since its early days, one of the Fed's main roles has been to act as a lender of last resort to the banking system when private sources of credit become unavailable. It does so by lending through the discount window and its new lending facilities. The lender of last resort function can be seen from the perspective of an individual institution or the financial system as a whole. From the perspective of the individual institution, discount window lending is meant to provide funds to institutions that are illiquid (cannot meet current obligations out of current cash flow) but still solvent (assets exceed liabilities) when they cannot access funds from the private market.",
      " Discount window lending was unable to end bank runs, however\u2014bank runs did not cease until the creation of federal deposit insurance. The experience of the Great Depression suggested that bank runs placed intolerably high costs on the financial system as a whole, as they led to widespread bank failures. Fed lending is not meant to help insolvent institutions, with one exception explained below. Access to Fed lending facilities and deposit insurance creates moral hazard for financial institutions\u2014they can take on more risk than the market would otherwise permit because of the government safety net. To limit moral hazard, institutions with depository insurance and access to the discount window are subject to a safety and soundness regulatory regime that includes capital requirements,",
      " reserve requirements, bank examinations, and so on. The exception to the rule that insolvent institutions cannot access Fed lending facilities is when the institution is deemed \"too big to fail.\" Institutions that are too big to fail are ones that are deemed to be big enough that their failure could create systemic risk, the risk that the financial system as a whole would cease to function smoothly. For example, failure could lead to systemic instability through \"contagion\" effects where the losses to creditors and counterparties imposed by the bankruptcy system drove those creditors and counterparties into insolvency. A systemic risk episode could impose heavy costs on the overall economy, as the bank panics of the Great Depression demonstrated.",
      " Although too big to fail institutions are not offered explicit guarantees, it can be argued that they have implicit guarantees since the government would not be willing to allow a systemic risk episode. This accentuates the moral hazard problem described above. There is no official governmental classification of which financial institutions are too big to fail, presumably since maintaining uncertainty over which institutions are too big to fail could help reduce the moral hazard problem. But the lack of official designation arguably creates a vacuum in terms of policy preparedness. (Making the problem more complex, as one report described the situation, \"Officials grimly concluded that while Bear Stearns isn't too big to fail,",
      " it was too interconnected to be allowed to fail in just one day.\" It is unclear how to judge which institutions are too interconnected to fail.) As the cases of Bear Stearns, Fannie Mae and Freddie Mac, and AIG illustrate, some of the modern-day financial institutions that are too big to fail are not depository institutions that fall under the strict regulatory umbrella that accompanies membership in the Federal Reserve system. Nevertheless, all received direct or indirect assistance from the Fed. This highlights the shift in financial activity from a bank-dominated financial system at the time of the Fed's creation to a system whose health now depends on many types of institutions.",
      " The Fed was set up to be a lender of last resort to only the banking system. In the current crisis, it has been able to extend its lender of last resort functions to non-bank financial institutions only because of its Section 13(3) emergency powers. A policy issue going forward is whether the extension of these functions should be made permanent, and if so, what types of regulatory safeguards should accompany it. Because Section 13(3) of the Federal Reserve Act is intended for responding to unanticipated emergencies, it grants authority that is broader and more open-ended than the Fed's normal authority. It is possible that part of the reason these institutions failed is because they took on excessive risks in the belief that they were too big to fail.",
      " Although that theory can be debated, it is clearer that the precedent of the Fed's role in the Bear Stearns acquisition may strengthen the perception of other institutions and investors that any financial firm, regardless of whether it is a depository institution, will be bailed out in the future if it is too big to fail, or merely too interconnected to fail. If so, it could be argued that the Bear Stearns episode may have increased moral hazard going forward. The government's decision not to intervene to prevent the failure of the investment bank Lehman Brothers in September 2008, but to subsequently assist AIG, Citigroup, and Bank of America may have created further market uncertainty regarding which institutions the government views as too big to fail.",
      " Lehman Brothers was larger than Bear Stearns and involved in similar business activities. Others have argued that the failure of Lehman Brothers set off a wave of unrest in money markets (see above), interbank lending markets, and the market for credit default swaps that would make the government unlikely to allow any large institution to fail in the future. The government assistance to Bear Stearns, Fannie Mae and Freddie Mac, and AIG all include clauses that significantly reduced the value of existing shareholder equity. This was partly justified in terms of reducing moral hazard\u2014investors would be reluctant to buy equity in too big to fail companies that were taking excessive risks if the government demanded a reduction in existing shareholder value.",
      " But government assistance in all of these cases made creditors and other counterparties whole. In these cases, the moral hazard problem manifests itself in a willingness of creditors to lend to, and counterparties to transact with, a firm they know to be taking excessive risks, thereby potentially allowing the firm to take more risks. More recent government assistance to Citigroup and Bank of America was provided without similar measures to replace management or dilute shareholders. (Warrants to purchase some common stock were issued but have not yet been exercised.) Market participants may view this decision as a signal that the government is no longer placing emphasis on avoiding moral hazard. The current situation raises three broad points about systemic risk.",
      " First, risk is at the foundation of all financial intermediation. Policymakers may wish to curb excessive risk taking when it leads to systemic risk, but too little financial risk would also be counterproductive for the economy. (Indeed, some would argue that part of the underlying problem for the financial system as a whole at present is that investors are currently too risk averse.) Second, many analysts have argued that part of the reason that so much financial intermediation has left the commercial banking system is to avoid the costs of regulation. This point applies to future regulatory changes as well. An attempt to increase regulation on banks could lead more business to move to hedge funds,",
      " for example. Third, financial markets have become significantly more complex and fast-moving in recent years. Many of the financial instruments with which Bear Stearns, Lehman Brothers, and AIG were involved did not exist until recently. For regulation to be effective in this environment, it faces the challenge of trying to keep up with innovation. If used prudently, many of these innovations can reduce risk for individual investors. Yet the Bear Stearns example implies that innovation may also lead to more interconnectivity, which increases systemic risk. Going forward, policymakers must determine whether new regulation is needed to limit moral hazard because there may be no credible way to maintain a policy that prohibits the rescue of future institutions that are too big to fail even if such a policy were desired.",
      " The financial crisis has led to the passage of comprehensive regulatory reform in the House and Senate that address the \"too big to fail\" problem and the Fed's role as a regulator and lender of last resort. CRS Report R40877, Financial Regulatory Reform: Systemic Risk and the Federal Reserve, analyzes the effects of this legislation on the Fed and the \"too big to fail\" issue. Oversight, Transparency, and Disclosure of Emergency Programs Because profits and losses borne by the Fed ultimately get passed on to taxpayers (see \" Cost to the Treasury \"), some Members of Congress have argued that more information about the Fed's emergency activities should be made available to the public.",
      " The Fed has not been subject to many of the oversight and reporting requirements applied to the TARP, although the amount of direct assistance outstanding from the Fed at its peak exceeded the authorized size of TARP. Nonetheless, the Fed has publicly released a significant amount of information on its emergency actions. The Fed's financial statements are published weekly and audited by private sector auditors, with the results published in the Fed's annual report. The Fed has provided detailed information to the public on the general terms and eligibility of its borrowers and collateral by class for each crisis-response program. It has also provided a rationale for why each crisis program has been created,",
      " and an explanation of the goals the program is meant to accomplish. The Emergency Economic Stabilization Act ( P.L. 110-343 ) requires the Fed to report to the House Financial Services Committee and the Senate Banking, Housing, and Urban Affairs Committee on its justification for exercising Section 13(3), the terms of the assistance provided, and regular updates on the status of the loan. Beginning in June 2009, the Fed began releasing a monthly report that listed the number of and concentration among borrowers by type, the value and credit-worthiness of collateral held by type, and the interest income earned for each of its facilities.",
      " Contracts with private vendors to purchase or manage assets are also posted on the New York Fed's website. But the Fed has kept confidential the identity of the borrowers from its facilities, the collateral posted in specific transactions, the terms of specific transactions, and the results of specific transactions (i.e., whether they resulted in profits or losses). As historical precedent, the Fed has had a longstanding policy of keeping the identity of banks that borrow from its discount window confidential. Those calling for more disclosure note that the new Fed programs place the Fed in a more expansive role and are potentially riskier than the discount window, and, unlike the discount window, were not explicitly endorsed by legislation (many were authorized under its emergency authority). The Fed has argued that allowing the public to know which firms are accessing its facilities could undermine investor confidence in the institutions receiving aid because of a perception that recipients were weak or unsound.",
      " A loss of investor confidence could potentially lead to destabilizing runs on the institution's deposits, debt, or equity. If institutions feared that this would occur, the Fed argues, then the institutions would be wary of participating in the Fed's programs, which, in the aggregate, would retard economic recovery. A historical example supporting the Fed's argument would be the Reconstruction Finance Corporation (RFC) in the Great Depression. When the RFC publicized to which banks it had given loans, those banks typically experienced depositor runs. A more recent example provides mixed evidence\u2014disclosure of TARP fund recipients. At first, TARP funds were widely disbursed,",
      " and recipients included all the major banks. At that point, there was no perceived stigma to TARP participation. More recently, many banks have repaid TARP shares at the first opportunity, and remaining participants have expressed concern that if they did not repay soon, investors would perceive them as weak. Arguments about investor confidence are arguably less compelling when applied to publicly disclosing collateral held by the Fed. There are several different approaches to expanding disclosure or oversight: Congress could remove the Government Accountability Office's (GAO's) restrictions on conducting investigations of the Fed for Congress. While GAO has had longstanding authority to audit the Fed's non-monetary policy functions,",
      " the Federal Banking Agency Audit Act of 1978 (31 USC 714(b)) restricts GAO from auditing certain Fed activities: (1) transactions with foreign central banks or governments; (2) \"deliberations, decisions, or actions on monetary matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;\" and (3) \"transactions made under the direction of the Federal Open Market Committee.\" While the act does not specifically mention activities taken under the Fed's emergency authority, those activities have been interpreted as falling under the restrictions. Also included in the Federal Banking Audit Act of 1978 are restrictions on GAO disclosure of confidential information about the financial firms subject to the Fed's policies.",
      " Thus, if audit restrictions were removed but these disclosure restrictions remained in place, GAO audits would not necessarily accomplish some policymakers' goal of disclosing the identities of borrowers from Fed lending facilities. S. 896, which was signed into law on May 20, 2009 ( P.L. 111-22 ), allows GAO audits of \"any action taken by the Board under... Section 13(3) of the Federal Reserve Act with respect to a single and specific partnership or corporation.\" This would allow GAO audits of the Maiden Lane facilities and the asset guarantees of Citigroup and Bank of America, but would maintain audit restrictions on non-emergency activities and broadly-accessed emergency lending facilities,",
      " such as the Primary Dealer Credit Facility or the commercial paper facilities. In performing the audit under S. 896, GAO must maintain the confidentiality of the private documents it accesses, but cannot withhold any information requested by Members of Congress on the committees of jurisdiction. H.R. 4173 allows GAO to audit emergency actions, discount window lending, and open market operations for operational integrity, accounting financial reporting, internal controls, collateral policies, favoritism, and third-party contracting policies. With the exception of the Maiden Lane facilities, GAO would be prohibited from releasing confidential information to Congress or the public about the transactions until the information was released by the Fed.",
      " H.R. 4173 also requires a GAO audit, according to the criteria listed above, of all lending between December 2007 and the date of enactment. It also requires a separate GAO audit to determine whether the selection of Federal Reserve regional bank presidents meets the criteria under Section 4 of the Federal Reserve Act, whether there are actual or potential conflicts of interest created by member banks choosing Fed regional bank directors, to examine the role regional banks played in the Fed's response to the crisis, and to propose reforms to regional bank governance. Congress could require the Fed to disclose more information on the identities of borrowers, the collateral accepted,",
      " or the terms and results of transactions. Congress requires the Fed to make some general policy reports, but does not typically require the Fed to disclose this type of specific information. Indeed, much of the information about monetary policy that the Fed currently makes public is done so on a voluntarily basis. H.R. 4173 requires the Fed to disclose the identities of borrowers and terms of borrowing to the committees of jurisdiction within seven days of a loan and allows for the information to be kept confidential if desired. It requires that the identities of borrowers and terms of borrowing be released to the public with up to a two year delay for the discount window and a one year delay after a facility has been terminated for other lending.",
      " It requires that the identities of counterparties and terms of sale be released to the public with up to a two year delay for open market operations. It requires that the identities of borrowers and borrowing terms be released to the public by December 1, 2010, for actions taken during the financial crisis. Congress could create specific oversight boards or committees that focus on the Federal Reserve. Currently, regular congressional oversight of the Fed is done at a general level through semi-annual hearings with the House Financial Services Committee and the Senate Banking, Housing, and Urban Affairs Committee, as well as ad hoc hearings on more focused topics. There is no routine,",
      " specific oversight of the Fed's crisis-response actions, and no group with monetary policy expertise tasked with evaluating the Fed's actions for Congress. Greater disclosure and outside evaluation could potentially help Congress perform its oversight duties more effectively. The main argument against increasing Fed oversight would be that it could be perceived to reduce the Fed's operational independence from Congress. Chairman Bernanke has argued that \"The general repeal of (the audit) exemption would serve only to increase the perceived influence of Congress on monetary policy decisions, which would undermine the confidence the public and the markets have in the Fed.\" Most economists believe that the Fed's independence to carry out day-to-day decisions about monetary policy without congressional input strengthens the Fed's credibility in the eyes of the private sector that it will follow policies that maximize price and economic stability.",
      " Greater credibility is perceived to strengthen the effectiveness of monetary policy on the economy. This independence is seen as consistent with the democratic process because the Fed's mandate to pursue price and economic stability has been given to it by Congress, and choosing the interest rate policies best able to achieve these goals is viewed as relatively technocratic and non-political in nature. The Fed's unprecedented response to the financial crisis moves it into new policy areas involving decisions that are arguably more political in nature, such as deciding which financial actors should be eligible to access Fed credit. While few policymakers argue for total independence or total disclosure and oversight, the policy challenge is to strike the right balance between the two.",
      " In February 2010 testimony, Chairman Bernanke has also advocated striking such a balance: we understand that the unusual nature of (the emergency credit and liquidity) facilities creates a special obligation to assure the Congress and the public of the integrity of their operation. Accordingly, we would welcome a review by the GAO of the Federal Reserve's management of all facilities created under emergency authorities. In particular, we would support legislation authorizing the GAO to audit the operational integrity, collateral policies, use of third-party contractors, accounting, financial reporting, and internal controls of these special credit and liquidity facilities\u2026. We are also prepared to support legislation that would require the release of the identities of the firms that participated in each special facility after an appropriate delay.",
      " It is important that the release occur after a lag that is sufficiently long that investors will not view an institution's use of one of the facilities as a possible indication of ongoing financial problems, thereby undermining market confidence in the institution or discouraging use of any future facility that might become necessary to protect the U.S. economy. Effects on the Allocation of Capital In normal conditions, the Fed primarily influences economic conditions through the purchase and sale of U.S. Treasury securities on the secondary market. This enables the Fed to influence overall economic conditions without favoring any particular financial firm or asset, thus minimizing its effect on the market allocation of capital. As the Fed has shifted to an increasing reliance on more direct intervention in the financial system since 2008,",
      " its actions have had growing consequences for the allocation of private capital. Its actions can affect the allocation of capital by favoring certain classes or types of assets over others or by favoring certain financial firms or types of firms over others. As discussed above, assisting Bear Stearns and AIG after their mistakes may encourage inefficiently high risk taking by other firms that are deemed \"too big to fail.\" Punitive conditions attached to the assistance mitigate but do not eliminate these effects. Allowing primary dealers to temporarily swap their illiquid assets for Treasuries protects those who invested poorly. The Fed has attempted to push down yields on certain assets that it feels have become inefficiently high (e.g., through the Term Asset Backed Securities Lending Facility), but it may be that at the height of the boom yields on these assets had become inefficiently low because investors underestimated their riskiness.",
      " The Fed's efforts could eventually reintroduce inefficient underpricing of risk. By purchasing commercial paper, the Fed has increased the relative demand for those assets, which confers an advantage to those firms that can access that market, which are generally large and have high credit ratings. Likewise, the Fed is purchasing GSE obligations and GSE-guaranteed MBS, but not similar securities issued by private firms. This increases the GSEs' funding advantage over private competitors. In a time when liquidity is scarce, access to Fed borrowing confers an advantage on banks and primary dealers over other types of institutions. It may also arguably retard the process of weeding out bad institutions,",
      " since reputation is needed to access private liquidity, but not Fed liquidity. On the other hand, during a panic both good and bad firms can be shut out of credit markets. Liquidity has positive externalities that means it would be underprovided by the private sector if it were not provided by the government. When financial markets are not functioning, credit allocation is an incidental but unavoidable side effect of liquidity provision. But some of the Fed's efforts, such as paying interest on bank reserves or possibly seeking to issue its own bonds, could be interpreted as signaling that the Fed intends to go beyond allocating credit for the sole purpose of providing liquidity because these initiatives allow the Fed to extend more credit than is needed for liquidity purposes.",
      " The Fed's short-term goal is to avoid the downward spiral in conditions that could lead to a panic, causing serious disruptions to the credit intermediation process for all firms, prudent or otherwise. But in the long run, once financial stability has been restored, these distortions to the market allocation of capital could result in economic inefficiencies. There is also a risk that the Fed's activities could \"crowd out\" private lenders and investors in specific markets, such as the markets for bank reserves, private-label MBS, and commercial paper, leading to less robust private markets. This risk seems greater since the Fed has suggested methods to keep its balance sheet large (such as paying interest on bank reserves or issuing \"Fed bonds\") even after the economy has returned to normal.",
      " As demand for Fed lending facilities has fallen as financial conditions have improved, the Fed has already decided to purchase more GSE debt and MBS, rather than scale back its balance sheet. Even if some of the Fed's current programs are allowed to expire, if investors believed that they would be revived during the next downturn, capital allocation and incentives would remain altered. Is the Economy Stuck in a Liquidity Trap? The Use of Quantitative Easing at Zero Interest Rates Although monetary policy is credited with having contributed to an unusual degree of economic stability since at least the mid-1980s, some economists argue that it has been rendered ineffective by the current outlook.",
      " The argument is that lower interest rates will not boost spending because the economy is stuck in a credit crunch in which financial institutions are unwilling to lend to creditworthy borrowers because of balance sheet concerns. Borrower demand may increase in response to lower rates, but as long as institutions are trying to rebuild their balance sheets, they will remain reluctant to extend credit. Following September 2008, banks greatly increased their holdings of excess reserves, which could potentially be a troubling sign that banks currently prefer extremely safe, liquid assets over lending. Further, the Fed has already reduced the federal funds rate to near zero, and cannot reduce it further. By some measures,",
      " the recession was deep enough that zero interest rates are not stimulative enough to move the economy back to full employment quickly. A scenario where monetary stimulus has no effect on the economy is sometimes referred to as a \"liquidity trap.\" Liquidity traps are rare in modern times, but the decade of economic stagnation suffered by Japan in the 1990s after the bursting of its financial bubble is cited as an example. Interest rates were lowered to almost zero in Japan, and the economy still did not recover quickly. There are some problems with this line of reasoning at present. First, liquidity traps are most likely to occur when overall prices of goods and services are falling (called deflation ). When prices are falling,",
      " real interest rates are higher than nominal interest rates, so it is more likely that a very low nominal interest rate would still be too high in real terms to stimulate economic activity. Although prices fell at the end of 2008, they have been rising modestly since. Inflation would not be expected to be steady were the economy in a liquidity trap. Second, monetary policy always suffers lags between a reduction in interest rates and corresponding increases in economic activity. Most importantly, it would be wrong to conclude that the Fed has had no further policy options available to stimulate the economy since December 2008, when the Fed reduced the federal funds rate target to a range of 0%",
      " to 0.25%. At this point, the potential for further stimulus via traditional monetary policy channels had been exhausted, since the federal funds rate cannot be reduced below zero. But in a 2004 study, Ben Bernanke (a Fed governor at the time) and co-authors laid out policy options for how the Fed could further stimulate the economy once interest rates reached zero. In that study, the authors note that \"nothing prevents the central bank from adding liquidity to the system beyond what is needed to achieve a policy rate of zero, a policy that is known as quantitative easing.\" By that definition, the Fed has engaged in \"quantitative easing\"",
      " since September 2008\u2014instead of adjusting the monetary base to meet the interest rate target, the Fed has adjusted the monetary base to meet the financial sector's liquidity needs. But many different levels of Fed direct lending (and of the corresponding monetary base) are compatible with a zero federal funds rate. Once the federal funds rate hits zero, there is nothing stopping the Fed from further increases in lending that would have further expansionary effects on the economy. It could also engage in quantitative easing without direct lending by purchasing securities. From March 2009 to March 2010, the Fed purchased about $300 billion of longer-term Treasury securities, $1.",
      "25 trillion in MBS, and $175 billion of GSE obligations. Fed Vice Chairman Donald Kohn, while acknowledging great uncertainties, estimated that quantitative easing could increase nominal GDP by as much as $1 trillion over the next several years relative to a baseline forecast. The large increase in excess bank reserves casts doubt on the effectiveness of quantitative easing. Since the Fed has increased its balance sheet, excess reserves have averaged between $643 billion and $1,162 billion per month, compared with less than $2 billion before August 2007. The Fed can supply banks with unlimited liquidity, but if banks hold that liquidity at the Fed, the added liquidity will not stimulate economic activity.",
      " Even so, the Fed's actions may help bring down other interest rates in the economy, but this will be stimulative only if interest-sensitive spending is responsive to lower interest rates. This would occur through a flattening of the yield curve (i.e., pushing down long interest rates relative to short rates). Some economists argue that reductions in long-term rates are more stimulative than equivalent reductions in short-term rates. But past experience with the efficacy of this method is mixed. Research by the New York Fed concludes that the recent purchases were effective in lowering interest rates based on the immediate response of rates to official announcements about the purchases, although this research could be questioned on the grounds that the rate reductions must be long-lasting to be stimulative,",
      " and for some of the maturities in question, interest rates over the entire period rose, on balance. Interpreting the overall effect on interest rates during the life of the asset purchase program is clouded by the fact that other changes in economic conditions also influence interest rates. The authors also use time-series evidence to estimate that the purchase program reduced the yield on ten-year securities relative to short-term securities by 0.38 to 0.82 percentage points. This evidence may suffer from omitted variable bias, however\u2014namely, the change in the risk-premium associated with MBS over the period in question, given the uncertainty prior to the purchase program caused by GSE conservatorship and the financial crisis.",
      " Another study by outside economists found small effects of the Fed's MBS purchases on interest rates after adjusting for prepayment and default risk, with the effect mainly occurring at the time the program was announced\u2014before purchases had begun. Although a liquidity trap cannot be ruled out, it is premature to conclude the economy is stuck in one at this point in time. Liquidity traps are a threat when monetary policy has been kept too tight, but the Fed has eased monetary policy aggressively since the crisis began. Stagflation? Other critics have argued that the Fed has created the opposite problem of a liquidity trap\u2014rising inflation due to excessive liquidity. They argue that the economy will enter a period of stagflation,",
      " where falling or negative economic growth is accompanied by high or rising inflation. Typically, one would expect an economic slowdown to be accompanied by a decline in the inflation rate. Excess capacity in the capital stock and rising unemployment would force firms and workers to lower their prices and wage demands, respectively. But critics believe the economy is in a situation where a modest but persistent increase in inflation in recent years has led individuals to come to expect higher inflation, and factor that expectation into their price and wage demands. Further driving up inflationary expectations, critics believe that individuals will observe the large increase in the budget deficit and monetary base and conclude that the government will inflate its way out of the crisis.",
      " Couple those higher inflation expectations with rising commodity prices, and critics argue that inflation will rise even if the economy slows. They point to the experience of the 1970s, when inflationary expectations became so ingrained that inflation continued to rise despite a fairly deep recession, as a potential parallel to the current situation. Data suggest that the fear of stagflation is premature\u2014inflation remains relatively low at present. There is a consensus among economists that in the long run inflation is primarily a monetary phenomenon, and if the Fed's recent monetary stance were maintained for too long, it would not be consistent with stable inflation. But in the near term, a large amount of unemployment and excess capacity has removed most inflationary pressure.",
      " This can be seen in the example of Japan, where the Bank of Japan allowed the monetary base to increase by more than 10% per year after 2001, without inflation ever reaching high levels because of economic sluggishness. Furthermore, commodity prices fell in the second half of 2008, leading to a brief period of falling prices. Since then, inflation has been stable. Ironically, if the Fed's actions succeed in reviving the economy, then the probability that its actions would boost inflation would increase. Under normal conditions, the doubling of the monetary base between August and December 2008 would have led to a sharp increase in inflation,",
      " but this did not occur because of the even greater increase in bank reserves held at the Fed that led to only a moderate increase in broader measures of the money supply. If banks responded to improved economic conditions by lending out the reserves they are now holding, the money supply and inflation would rise rapidly. The key to maintaining a stable inflation rate is finding the proper balance between the disinflationary pressures of the slowdown and the inflationary pressures of quantitative easing. The large amounts of liquidity that the Fed has added to the system must be removed soon enough that inflation does not rise, but not so soon that a nascent economic recovery is stubbed out.",
      " Removing all of the liquidity is complicated by the fact that the Fed has created some of it by buying assets it has pledged to hold long term. Given the uncertainty facing policymakers at present, finding the proper balance is extremely difficult. Concluding Thoughts While turmoil plagues financial markets periodically, the current episode is notable for its breadth, depth, and persistence. It is difficult to make the case that the Fed has not responded to the current turmoil with alacrity and creativity. The slow financial and economic recovery is not necessarily a sign that the Fed's policy decisions have been wrongheaded\u2014the Fed has provided the financial sector with unprecedented liquidity, but it cannot force institutions to use that liquidity to expand their lending or investing.",
      " The Fed's response has raised statutory issues that Congress may wish to consider in its oversight capacity. Namely, the Fed's role in the Bear Stearns acquisition, the assistance to AIG, Citigroup, and Bank of America, the creation of the Primary Dealer Credit Facility (a sort of discount window for a group of non-member banks), and its intervention in the commercial paper market involved emergency authorities that had not been used in more than 70 years. This authority was needed because the actions involved financial institutions that were not member banks of the Federal Reserve System (i.e., depository institutions). But because the authority is broad and open-ended,",
      " the Fed's actions under this authority are subject to few legal parameters. The authority allows lending to non-member banks, but some of the loans in the Bear Stearns and AIG agreements were to LLCs that the Fed created and controls, and have been used to purchase Bear Stearns' and AIG's assets. These actions raise an important issue\u2014if financial institutions can receive some of the benefits of Fed protection, in some cases because they are \"too big to fail,\" should they also be subject to the costs that member banks bear in terms of safety and soundness regulations, imposed to limit the moral hazard that results from Fed and FDIC protections?",
      " H.R. 4173 attempts to limit future emergency lending to broadly available, collateralized facilities to avoid assistance to failing firms. Some policymakers have questioned whether an institution largely independent from the elected branches of government should be able to (indirectly) place significant taxpayer funds at risk by providing the financial sector with hundreds of billions of dollars of assistance through use of its emergency powers. This raises the policy issue of how to balance the needs for congressional transparency and oversight against the economic benefits of Fed independence. H.R. 4173 removes most GAO audit restrictions and requires disclosure of the identities of borrowers with a delay. Furthermore, without congressional input,",
      " hundreds of billions of dollars of borrowing by the Treasury (through the Treasury Supplementary Financing Program) has allowed the Fed to increase its lending capacity without detrimental effects on inflation. But as long as there is no government program to systematically manage financial difficulties at too big to fail institutions, the Fed is the only institution that can step in quickly enough to cope with problems on a case-by-case basis. While some had believed TARP provided the type of systemic approach that would allow the Fed to return to a more traditional role, the Fed's subsequent creation of lending facilities to support the commercial paper market, mortgage market, and asset-backed securities market suggests that TARP cannot cover all unforeseen contingencies.",
      " Furthermore, TARP is scheduled to expire in October 2010 and is limited in size, although Fed and TARP money have been coupled in order for TARP to have an impact beyond the $700 billion authorized by Congress. The Fed's actions have resulted in an unprecedented expansion in its balance sheet and the portion of the money supply it controls. Normally, this would be highly inflationary, but inflation has remained low because of the financial crisis. As the economy improves, the Fed will need to contain this monetary expansion to prevent inflation from rising, but not so fast that it causes the financial system to destabilize again. The increase in the balance sheet could have already been automatically reversed by the decline in the Fed's direct lending,",
      " but the Fed has chosen to offset it through large-scale purchases of assets to maintain a high level of liquidity in the economy. The Fed views paying interest on bank reserves (authorized by P.L. 110-343 ) as an effective way to prevent inflation from rising.\n"
    ],
    "length": 28933,
    "hardness": null,
    "role": null
  },
  {
    "id": 87,
    "question": null,
    "answer": "Pursuant to congressional requests, GAO reviewed the cumulative impact of federal regulations on a limited number of businesses, focusing on: (1) what selected businesses and federal agencies believed were the federal regulations that applied to those businesses; (2) what those businesses believed were the cost and other impacts of those regulations; and (3) the regulations those businesses said were most problematic to them and relevant federal agencies' responses to those concerns. GAO found that: (1) most of the businesses contacted declined to participate in the study; (2) none of the 15 participating companies developed a complete list of regulations that were applicable to them or provided comprehensive data on the cost of regulatory compliance; (3) time and resource constraints and the difficulty of disentangling federal regulatory requirements from those of other jurisdictions and other nonregulatory procedures proved to be major obstacles for the companies; (4) most federal regulatory agencies said that they could not detail which regulations applied to a particular company without a great deal of company-specific information and the expenditure of a substantial amount of resources; (5) measuring the incremental impact of all federal regulations on individual companies is extremely difficult and, therefore, decisionmakers need to be aware of the conceptual and methodological underpinnings of studies that attempt to measure total current regulatory costs; (6) many of the 15 participating companies recognized that regulations provide benefits to society and their own businesses, but all of them provided GAO with a varied list of concerns about regulatory costs and the regulatory process; (7) these concerns included perceptions of high compliance costs, unreasonable, unclear, and inflexible demands, excessive paperwork, and a tendency of regulators to focus on deficiencies; (8) the agencies responsible for the regulations the companies viewed as problematic often said that the companies misinterpreted regulatory requirements; (9) the agencies and some congressional members do not always agree on the extent to which problematic regulations are statutorily driven; and (10) the agencies said that they were aware of and were responding to a number of the companies' concerns.\n",
    "docs": [
      "Introduction The process of issuing and enforcing regulations is one of the basic tools of government, and the process has generated considerable controversy. Some individuals and organizations have called for increasing regulation of businesses and other nonfederal entities to achieve certain goals, such as fairer competition, cleaner water, or safer consumer products and services. Others have recommended drastic reductions in federal regulatory activity and/or the imposition of constraints on how agencies develop or implement regulations, often because of the burden associated with regulatory compliance and questions about whether the regulations are actually achieving their stated purposes. A number of studies have attempted to analyze the effect of federal regulations on businesses or the economy as a whole,",
      " with some analysts claiming that federal regulations cost the economy hundreds of billions of dollars each year. Although these estimates are frequently cited, measurement of the effects of regulation on the economy is imprecise and controversial. Also, relatively little is known about the impact of all regulations on individual businesses or even how many regulations apply to a business. This type of information about the impact of regulations on individual businesses would provide a better understanding of the impact of regulations on the economy as a whole. Background Regulations generally start with an act of Congress and serve as the means by which statutes are implemented and specific requirements are established. These requirements tell people and businesses what must be done to comply with the law.",
      " The statutory basis for a regulation can vary dramatically, from (1) very broad grants of authority that state only the general intent of the legislation and leave agencies with a great deal of discretion as to how that intent should be implemented to (2) very specific requirements delineating what regulatory agencies should do and how they should do it. The Agricultural Adjustment Act is an example of a broad grant of authority, delegating to the Secretary of Agriculture wide discretion to make agricultural marketing \u201corderly.\u201d The statute provides little guidance on which crops should have marketing orders or how to apportion the market among growers. The toxic air provisions of the Clean Air Act Amendments of 1990 are examples of very specific statutory requirements.",
      " The provisions specified that the Environmental Protection Agency (EPA) establish standards, on the basis of the best existing pollution control technologies, for major sources of 189 of the most prevalent and hazardous air pollutants. The provisions also established three interim milestones and a final milestone for setting the standards and specified certain consequences if EPA missed a milestone for any source category. Likewise, in the Safe Drinking Water Act Amendments of 1986, Congress specified 83 contaminants for which EPA was to promulgate standards within 3 years. The act also required EPA to regulate drinking water contaminants to be as close as technically feasible to a level at which no known or anticipated health effects occur.",
      " The federal government has long regulated economic activity, often through independent regulatory agencies established separate from traditional federal departments and agencies. Social regulation in such areas as environmental quality, workplace safety, and consumer protection is a relatively recent phenomenon. Beginning in the 1960s, a number of major new statutes were enacted in those areas, including amendments to the Clean Air Act (CAA) and the Clean Water Act (CWA), the Toxic Substances Control Act (TSCA), the Resource Conservation and Recovery Act (RCRA), the Occupational Safety and Health Act, the Truth in Lending Act, and the Consumer Product Safety Act. Those and other acts,",
      " as well as executive orders, also created new regulatory agencies, such as EPA, the Occupational Safety and Health Administration (OSHA), the National Highway Traffic Safety Administration, and the Consumer Product Safety Commission. By the 1980s, an array of federal regulations were in place that affected many decisions made by American businesses. Concerns then began to be raised about whether the benefits these regulations and regulatory agencies were attempting to achieve were worth the costs associated with compliance. Concerns were also being raised about the cumulative effect of all federal regulations on individual businesses. Rulemaking Process The basic rulemaking process is spelled out in section 553 of the Administrative Procedure Act,",
      " which, among other things, generally requires agencies to (1) publish notice of a proposed rulemaking in the Federal Register; (2) allow interested persons an opportunity to participate in the rulemaking by providing \u201cwritten data, views, or arguments\u201d; and (3) publish the rule 30 days before it becomes effective. Other procedural rulemaking requirements have been added through general statutes, executive orders, and judicial decisions. For example, certain executive orders since 1981 have required agencies (other than those considered to be independent regulatory agencies) to submit at least their significant regulations to the Office of Management and Budget (OMB) for its review before publication in the Federal Register.",
      " Because of the numerous processes involved, federal rulemaking can take years to complete. Once completed, federal regulations are compiled in the Code of Federal Regulations (CFR). Regulatory Reform Efforts Numerous attempts have been made legislatively and by the executive branch to reform federal regulatory processes. For example, Congress enacted the following two regulatory reform initiatives in 1980: (1) the Paperwork Reduction Act and (2) the Regulatory Flexibility Act. As its name implies, the Paperwork Reduction Act attempted to minimize the paperwork and reporting burdens agencies impose on nonfederal entities. The act also established the Office of Information and Regulatory Affairs (OIRA)",
      " within OMB to review and approve all agency information collection activities. The Regulatory Flexibility Act required agencies to assess the impact of their regulations on small entities (e.g., businesses and governments) and to publish their plans for new regulations. We have reported on the effects these laws have had on agencies\u2019 regulatory programs and recommended improvements to their design and implementation. During the 104th Congress, numerous legislative initiatives have been introduced that attempted to reform the regulatory process and/or reduce businesses\u2019 regulatory burden. As of July 1996, at least three major governmentwide reform initiatives had been enacted. The Unfunded Mandates Reform Act of 1995 established a mechanism for advising Congress of the nature and size of federal mandates in proposed legislation or regulations to allow congressional consideration of the appropriateness of such mandates on state,",
      " local, or tribal governments or the private sector. As part of that process, agencies are required to assess the anticipated costs and benefits of federal mandates. The Paperwork Reduction Act of 1995 reaffirmed the principles of the 1980 Act, required OIRA to establish governmentwide and agency-specific paperwork reduction goals, redefined key terms such as \u201ccollection of information,\u201d and required agencies to establish their own paperwork review and clearance function. The Small Business Regulatory Enforcement Fairness Act of 1996 made several changes in regulatory procedures, including (1) amending the Regulatory Flexibility Act to allow for judicial review of agency decisions, (2)",
      " requiring the publication of \u201csmall entity compliance guides\u201d to explain the actions a small business or other small entity must take to comply with a rule or a group of rules, and (3) establishing a congressional review process through which Congress can disapprove of final agency regulations. Some Members of Congress viewed this review process as necessary because they believed some agencies had issued regulations that went beyond the intent of Congress when it passed the underlying statutes. Every president in recent years also has taken steps intended to reduce the burden of federal regulations. In 1981, President Reagan issued Executive Order 12291, which gave OMB the authority to review all new regulations for consistency with administration policies.",
      " The order also required agencies to prepare a \u201cregulatory impact analysis\u201d for each major rule, describing the costs, benefits, and alternatives to the rule. In 1985, President Reagan issued Executive Order 12498, which required agencies subject to Executive Order 12291 to submit a list of significant regulatory actions they expected to propose during the upcoming year to OMB for clearance. The President also established a Task Force on Regulatory Relief, headed by then Vice President Bush. In turn, President Bush named his Vice President to head the Competitiveness Council, which was charged with advocating regulatory relief for business. In 1992, President Bush sent a memorandum to all federal departments and agencies calling for a 90-day moratorium on new proposed or final rules.",
      " During the moratorium, agencies were \u201c... to identify and accelerate action on initiatives that will eliminate any unnecessary regulatory burden or otherwise promote economic growth.\u201d The Clinton administration has also made a number of attempts to reform the federal regulatory process. Issued in September 1993, Executive Order 12866 revoked Executive Orders 12291 and 12498 and, among other things, established a number of \u201cprinciples of regulation\u201d (e.g., use the best scientific, technical, economic, or other information; specify performance objectives, not behaviors; make regulations simple and easy to understand; and use cost-benefit analysis and risk assessment)",
      " and reaffirmed the role of OMB in the regulatory review process (although only for \u201csignificant\u201d rules). Vice President Gore\u2019s National Performance Review also made a number of recommendations to improve the regulatory process, including (1) encouraging innovative regulatory approaches and negotiated rulemaking; (2) streamlining agency rulemaking procedures; and (3) ranking the seriousness of environmental, health, or safety risks. In March 1995, the President reiterated his interest in regulatory reform, calling on all agencies to (1) conduct a page-by-page review of all their regulations and eliminate or revise those outdated or in need of reform; (2) change the performance measures of agencies and regulators to focus on results,",
      " not process and punishment; (3) convene groups of regulators and the people affected by their regulations around the country and create \u201cgrassroots partnerships\u201d; and (4) expand their efforts to promote consensual rulemaking. During 1995 and early 1996, the President also announced regulatory reform initiatives aimed at certain agencies or issues (e.g., the environment, pensions, and cancer drugs) and announced other reforms applicable to all federal agencies. For example, agencies were asked to halve many of their reporting requirements, reduce penalties for self-disclosed violations of certain regulations, and allow companies to change processes for certain low-risk manufacturing operations without agency preapproval.",
      " Measures of Regulatory Activity/Burden The level of federal regulatory activity, and the burden placed on businesses and others as a result of that activity, has been measured in a number of ways. For example, a number of commentors have used relatively simple, easy-to-understand indicators, such as the number of pages in the CFR, the length of the CFR on the bookshelf, the total weight of the rules, and even the length of all of the rules if each sheet of paper were placed end to end. Others have characterized federal regulatory burden in terms of federal spending on regulatory programs or the number of federal employees assigned to regulatory activities.",
      " Although these types of measures are relatively easy to develop and are appealing in some respects, they are at best only relative and indirect measures of regulatory burden and may not accurately reflect the difficulties experienced by the public or individual businesses in complying with federal regulations. These measures also require careful interpretation. Another indicator of regulatory burden that some analysts have used is the number of hours federal agencies estimate are needed to fill out their required paperwork. Although a more direct measure of regulatory burden than the measures previously described, a paperwork hour estimate has several limitations as a measure of overall regulatory burden. First, paperwork is but one element of the overall burden of federal regulations, and paperwork burden does not include other potentially relevant factors,",
      " such as labor costs unrelated to paperwork or capital expenditures. Second, paperwork burden is generally considered to be inaccurately measured. Not all paperwork burden is always counted in the data that agencies submit pursuant to the Paperwork Reduction Act, and many believe that the paperwork burden that is measured is underestimated. Finally, users of these paperwork estimates must be careful in their interpretation; changes in the burden hour totals may not reflect changes in the regulatory burden felt by businesses and individuals. Another common measure of regulatory burden is the cost borne by entities responsible for complying with the regulations involved. Studies of the costs associated with federal regulations vary in such terms as their scope (i.e., whether focused on individual businesses,",
      " sectors, or the economy as a whole) and the factors they consider (i.e., economic costs, social costs, paperwork costs, etc.). Types of regulatory cost studies are discussed in detail in chapter 3 of this report. Regardless of the nature of the study, though, the results must be carefully interpreted. Objectives, Scope, and Methodology At the request of five Members of Congress, we agreed to obtain information about the cumulative impact of federal regulations on selected businesses. Therefore, we focused our efforts on a limited number of businesses that could help us understand the issues and variables involved. Our specific objectives were to describe (1) what selected businesses and federal agencies believed were the federal regulations that applied to those businesses,",
      " (2) what those businesses believed was the impact (cost and other) of those regulations, and (3) the regulations those businesses said were most problematic to them and relevant federal agencies\u2019 responses to those concerns. To accomplish these objectives, we first needed to identify the businesses that would be the focus of our study. Because some of the information we wanted to collect was proprietary in nature (e.g., information on the companies\u2019 operating expenses) or involved regulatory enforcement actions that could be very sensitive, we recognized that some companies might not want to participate in our study unless their identities could be concealed. Therefore, we told the businesses we contacted that we would not disclose their identity unless we had their permission to do so or unless we were legally compelled or required to do so by Congress.",
      " We asked for and received pledges from our requesters that they would concur with and honor our pledge of confidentiality, and that they would oppose disclosure requests from other committees or Members of Congress. The requesters agreed that, although they would have access to summary data that would not identify individuals or firms, neither they nor their staff would have access to the individual business\u2019 responses. We initially attempted to obtain nominations of businesses to participate in our study from two types of organizations: (1) business interest groups, including several that had testified before Congress and/or made public comments criticizing federal regulations, and (2) public interest groups, some of which had defended the need for federal regulatory action.",
      " The five business interest groups we contacted were the U.S. Chamber of Commerce, the National Federation of Independent Businesses (NFIB), the National Association of Manufacturers (NAM), the Chemical Manufacturers Association (CMA), and the Greater Washington Board of Trade. The four public interest groups we contacted were Public Citizen Litigation Group, OMB Watch, Business for Social Responsibility (BSR), and Global Environmental Management Initiative (GEMI). We initially contacted most of these organizations during June through August 1994 and asked them to nominate businesses that they believed would be good candidates for our study. Of these organizations, NAM and the Greater Washington Board of Trade provided nominees for the study (three and six nominees,",
      " respectively). Although the U.S. Chamber of Commerce initially indicated it would be able to provide nominees for our study, several months later a representative of the Chamber said that it would not provide any nominees because of concerns its member companies had about our ability to guarantee the confidentiality of their responses. During several months of telephone calls, the NFIB representatives said that they were not able to provide nominees because their efforts were then directed toward other legislative initiatives and priorities. GEMI\u2019s board of directors declined to participate but did not provide a reason. BSR representatives initially appeared interested in providing nominees for the review, but they did not respond to any of our subsequent telephone calls.",
      " CMA, Public Citizen, and OMB Watch initially agreed to try to identify companies for us to contact, but we never received any nominees from either organization. Because we wanted to contact more companies than the interest groups identified, we turned to other sources for potential study participants. One such source was a list of companies that had participated in a March 1994 forum on regulatory reform sponsored by the Small Business Administration (SBA). SBA staff who worked on the forum identified seven companies that they believed would be good candidates for participation in our review, and we accepted the nomination of another company from one of the SBA nominees. Another source that we used to identify possible company participants (35 companies)",
      " was newspaper and magazine articles in which specific companies commented either positively or negatively about federal regulations or their federal regulatory experience. The periodicals we reviewed to identify these companies included INC., Nation\u2019s Business, The Wall Street Journal, and the ABA Banking Journal. We also used a literature search to improve the diversity of our company selections, focusing on articles about companies in certain industrial categories and geographic areas that were not represented by the other nominees. The combination of all of these methods yielded a total of 51 companies as potential participants. Many Companies Were Reluctant to Participate in the Study Before contacting the 51 company nominees, we developed a standardized telephone interview guide as part of an initial screening process to (1)",
      " provide consistent descriptions of the purpose of our review, (2) collect preliminary information about the companies\u2019 views regarding federal regulations, (3) explain the confidentiality guarantees we were able to offer, and (4) determine the companies\u2019 interest in participating in our study and their ability to provide the information we needed. Of the 51 company nominees we contacted, 8 did not respond to repeated telephone calls made over the course of several months. Of the remaining 43 companies, 16 declined to participate in the study during the screening process. Officials from 12 of these 16 companies said they did not have the time or resources needed to participate in our study.",
      " Two companies\u2019 officials said they did not have the kinds of documentation we were seeking. The other two companies did not specify the reason for their decision not to participate. Some companies decided not to participate in the study after we had been in discussions with them for several months. We then sent each of the 27 companies that agreed to participate in the study a standardized interview guide we developed for use in our site visits. The interview guide included an overall description of the study, a list of the questions we intended to ask, and definitions of what regulations and regulatory costs would and would not be considered applicable in the study. (See app. I for a reprint of this interview guide.) We asked that the companies review the guide\u2019s instructions and prepare the requested information in advance of our visit.",
      " Of the 27 companies that initially agreed to participate in the study, 10 withdrew before we could visit them and collect any detailed information. These companies cited a variety of reasons for their withdrawal, such as a lack of resources needed to participate in the study, the review\u2019s data requirements, and company personnel problems. Of the remaining 17 companies, we selected 15 for inclusion in the study. We did not select one company because of its remote geographic location, and another company was not chosen because we had already selected other companies in the same industry. Ten of the 15 companies requested that we not disclose their identity. Whenever we discussed those companies with federal regulators and whenever those companies are referred to in this report,",
      " we used 10 generic company descriptors. Those 10 descriptors are listed below: \u2022 a federally chartered community bank (\u201cBank A\u201d), \u2022 a state-chartered community bank (\u201cBank B\u201d), \u2022 a large commercial bank (\u201cBank C\u201d), \u2022 a large teaching hospital (\u201chospital\u201d), \u2022 a manufacturer of railway tank cars (\u201ctank car company\u201d), \u2022 a manufacturer of flexible plastic packaging (\u201cpackaging manufacturer\u201d), \u2022 a manufacturer of consumer glassware and fiber optic systems (\u201cglass \u2022 a manufacturer of paper and allied products (\u201cpaper company\u201d), \u2022 a tropical fish farm (\u201cfish farm\u201d), and \u2022 a producer of crude oil and natural gas (\u201cpetrochemical company\u201d). The following five companies allowed us to use their names.",
      " \u2022 Metro Machine Corporation, a ship repair and maintenance company located in Norfolk, VA, with 850 employees; \u2022 Minco Technologies Labs, Inc., a computer chip testing company located in Austin, TX, with 129 employees; \u2022 Multiplex Company, Inc., a beverage dispenser equipment manufacturer headquartered in St. Louis, MO, with 217 employees; \u2022 Roadway Services, Inc., a transportation and logistics company headquartered in Akron, OH, with about 50,000 employees; and \u2022 Zaclon, Inc., a chemical manufacturing company located in Cleveland, OH, with 52 employees. Table 1.1 shows the distribution of all 15 participating companies by size and industry category.",
      " We defined a company as small if it had 49 or fewer employees, medium if it had from 50 to 249 employees, and large if it had 250 or more employees. The industry category groupings are the nine major Standard Industrial Classifications defined by the Department of Labor (DOL). As table 1.1 indicates, larger manufacturing companies constitute the largest proportion of participating companies while companies with few employees and companies in the services, transportation, agriculture, and mining industries constitute the smallest proportion of participating companies. The 15 companies that participated in the review were geographically dispersed. They were located in California, the District of Columbia,",
      " Florida, Illinois, Iowa, Missouri, New York, Ohio, Tennessee, Texas, and Virginia. Collection of Information From the Companies Using our standardized interview guide developed for the site visits, we visited 14 of the 15 companies, interviewed company officials, and obtained any available supporting documentation. Specifically, we asked each company for information on (1) the aggregate list of regulations with which the company must comply, (2) the aggregate impact (cost and other) of all of those regulations on the company, (3) the regulations the company viewed as most problematic, (4) what the company believed government and businesses could do to correct or mitigate those problematic regulations,",
      " and (5) what the company viewed as the benefits of federal regulations. After our discussions with the companies, we developed written summaries of the concerns they expressed about problematic regulations, sent them to the companies for their review and correction, and obtained their written agreement that the summaries accurately portrayed the concerns they expressed. Subsequently, the companies also reviewed and approved any other information in our report that we attributed to a named company. The companies provided more than 100 usable examples of regulations or regulatory actions that they considered problematic. To present a general summary of those concerns, we coded each concern according to 10 recurring themes that we developed by analyzing the companies\u2019 comments.",
      " (See ch. 4 for a discussion of these 10 themes.) Most of the companies\u2019 concerns contained expressions of more than one theme. To verify our coding, we had a staff reviewer, who was otherwise not involved in the job, select a random sample of about 26 percent of the concerns (29 of 111 concerns) and independently code each concern using our original theme definitions. The independent reviewer agreed with our original determinations as to whether a theme was present in more than 90 percent of the cases. Agency Information Collection Methodology We provided the verified summaries of the companies\u2019 regulatory concerns to the appropriate federal regulatory agencies for their review and comment.",
      " The following agencies responded to the companies\u2019 concerns: \u2022 Board of Governors of the Federal Reserve System; \u2022 Department of Health and Human Services\u2019 (HHS) Food and Drug Administration (FDA) and Health Care Financing Administration (HCFA); \u2022 Department of Housing and Urban Development (HUD); \u2022 Department of the Interior\u2019s Fish and Wildlife Service; \u2022 Department of Justice (DOJ); \u2022 Department of Labor\u2019s Occupational Safety and Health Administration, Employment Standards Administration\u2019s (ESA), and Pension and Welfare Benefits Administration (PWBA); \u2022 Department of Transportation (DOT); \u2022 Department of the Treasury\u2019s Financial Crimes Enforcement Network (FinCEN) and Internal Revenue Service (IRS); \u2022 Environmental Protection Agency;",
      " \u2022 Equal Employment Opportunity Commission (EEOC); \u2022 Federal Deposit Insurance Corporation (FDIC); \u2022 Federal Emergency Management Agency; \u2022 Office of the Comptroller of the Currency (OCC); \u2022 Pension Benefit Guaranty Corporation (PBGC); and \u2022 United States Sentencing Commission (USSC). Each agency was allowed to decide how it would respond to the companies\u2019 regulatory concerns. We used a content analysis, which was similar to the one we used for the companies\u2019 concerns, to code each of the agencies\u2019 responses to one of nine recurring themes to allow summarization of those responses. The agency response coding was also independently reviewed by a staff reviewer to ensure accuracy and consistency.",
      " We also asked the agencies to identify which of their regulations were applicable to each of the selected companies. However, several of the regulatory agencies said developing a regulatory inventory for each company would be very time consuming and would require detailed information about the companies. Because 10 of the 15 companies requested anonymity, and because detailed information (location, industry, and size) could lead to identification of those companies, we could not provide the agencies with the information they said they needed to identify the companies\u2019 responsibilities. Therefore, we asked several of the regulatory agencies to identify (1) the general types of company information they would need to determine which of their regulations would apply to a specific company (i.e., regulatory determinants)",
      " and (2) the types of assistance they provide to businesses to help them identify their regulatory responsibilities and how to comply with those responsibilities (i.e., informational mechanisms). We also asked three of the agencies\u2014EPA, DOL, and EEOC\u2014to identify their regulatory responsibilities for two of the companies that did not request anonymity\u2014Minco Technologies Lab, Inc., and Zaclon, Inc. Review Limitations The methodology we used in this study\u2014focusing on a small group of nonrandomly selected businesses\u2014prevents us from drawing statistical generalizations from the information we obtained. The 15 companies we selected were generally those that (1)",
      " were identified by interest groups, SBA officials, or in the literature and (2) were willing to participate in our study and to provide the information we requested. Therefore, we make no inferences about the representativeness of their responses to how other companies would respond. For example, even though 8 of our 15 companies were manufacturers, we cannot conclude that their responses are typical of how other manufacturing companies would have responded. However, the comments the companies we contacted made during this study were similar in many respects to comments made by companies in some of our previous reports and in the literature. Therefore, we believe that these 15 companies are not atypical and their comments and experiences provide insights regarding issues common to organizations beyond the limited sample of companies.",
      " Because the purpose of our review was to determine businesses\u2019 and federal agencies\u2019 views regarding regulatory issues, we did not collect information from individuals and organizations outside of those groups. For example, we did not discuss companies\u2019 regulatory responsibilities or their regulatory concerns with labor unions or other employee organizations. Neither did we collect information from individuals and organizations that were the potential beneficiaries of the regulations cited by the companies as problematic. Collecting the views of all such organizations for all of the regulations cited in this report would have been difficult, if not impossible. Therefore, this report does not reflect the full range of opinions that may exist regarding the issues raised during this review.",
      " However, it does reflect the views of the two stakeholders in which we were most interested\u2014certain elements of the regulated community and the regulators themselves. One of our objectives was to describe what the selected businesses believed was the impact (cost and other) of all existing federal regulations that applied to them. This portion of the study does not address the development of cost or cost-benefit analysis information for individual regulations, such as the analyses agencies are required to perform under Executive Order 12866. Although we attempted to obtain documentation wherever possible, we were unable to verify most of the data companies provided on the cost of regulatory compliance, their regulatory concerns,",
      " and other issues. Companies frequently provided little documentation to support their cost estimates, and we had no basis to judge whether the costs they identified were reasonable, comparable to costs incurred by similar companies, or even whether such costs were, in fact, the direct result of a specific federal regulatory requirement. Neither did we evaluate the accuracy of the information we obtained from federal regulatory agencies. Our approach was to present the views of both the businesses and the agencies without attempting to resolve the many differences in opinions or attempting to independently determine whether sufficient evidence was available to support either view. In this report, when we indicate that \u201csome\u201d of the companies met a certain condition,",
      " we mean that at least three and no more than five companies met that condition. When we use the term \u201cmany companies\u201d we mean either 6 or 7 companies, and the term \u201cmost companies\u201d refers to between 8 and 14 companies. We conducted our review from June 1994 to July 1996 in accordance with generally accepted government auditing standards. We invited comments on a draft of this report from the OIRA Administrator because of OIRA\u2019s governmentwide regulatory responsibilities, but an OIRA official said OIRA had no comments. We also invited comments from the top officials or their designees in the previously listed 19 federal departments and agencies responsible for the companies\u2019 federal regulatory concerns.",
      " Between August 19, 1996, and September 19, 1996, we received comments from top officials or their designees in 13 of these 19 departments and agencies, but officials from the Board of Governors of the Federal Reserve System, FDA, HUD, the Department of the Interior\u2019s Fish and Wildlife Service, the Federal Emergency Management Agency, and USSC said they had no comments. In general, the agencies\u2019 comments indicated that the report was an accurate characterization of their regulatory operations and their positions regarding the companies\u2019 concerns. Most of the agencies suggested technical corrections or additions of text, which were incorporated as appropriate. Companies and Agencies Had Difficulty Developing Lists of Applicable Regulations As noted in chapter 1,",
      " representatives from both government and industry have described federal regulatory burden in terms of the sheer volume of regulations with which businesses and other regulated entities must comply. Several of the companies participating in this review also made such comments to us in the course of our discussions with them. For example, an official from the fish farm compared the range of regulatory requirements to \u201cgetting pecked to death by ducks\u2014each bite may not hurt, but all together they are very painful.\u201d In recognition of the large number of federal regulations and the burden they impose, an element of both the Clinton administration\u2019s and Congress\u2019 recent regulatory reform initiatives has been the review of existing regulations and,",
      " where possible, the elimination of certain requirements. Although the total number of regulations is only a rough indication of regulatory burden, developing an inventory of those requirements is the first step in developing an accurate measure of an organization\u2019s regulatory burden. Therefore, we asked the companies participating in this review to develop a list of all of the federal regulations with which they had to comply at the time of our review. We also asked a number of federal regulatory agencies to identify which of their regulations they believed were applicable to those businesses. None of the Companies Provided a Complete List of Regulations We generally provided the companies with a copy of our data collection instrument several weeks in advance of our visit,",
      " and each company agreed to develop a list of regulations applicable to their firm. We recognized that, in preparing such a list, the companies might find it difficult to identify the specific names or legal citations of regulations. Therefore, we told the businesses that their list of applicable regulations should, at a minimum, cite the major federal statutes governing the regulations. For example, we said the list of statutes in the health and safety area of workplace regulations might include the Occupational Safety and Health Act or the Drug Free Workplace Act. We also said that other categories of workplace regulations could include labor standards (e.g., the Fair Labor Standards Act); employee benefits (e.g., Employee Retirement Income Security Act (ERISA)); civil rights (e.g., title VII of the Civil Rights Act of 1964); and labor relations (e.g., the National Labor Relations Act). Finally,",
      " we noted that other categories of regulations (e.g., environmental and tax regulations) could also be listed. We told the companies not to include certain types of regulations on their lists, such as federal regulations that had been proposed but had not been published as a final rule. We also said that they should not include state or local regulations, but we said that any state or local requirement that they believed was mandated by federal law or regulation should be included. Although all 15 of the companies participating in the review identified at least some regulations that they believed were applicable to their organizations, none of the companies provided us with a complete list of applicable federal regulations.",
      " The companies\u2019 lists varied substantially in the degree to which they covered the general regulatory areas that would probably be applicable to the companies (e.g., tax, wage and hour, and workplace rules). Several companies listed regulations in only certain functional areas or for certain agencies. For example, officials from the paper company identified what they believed were applicable environmental, health and safety, and transportation regulations\u2014areas that they said were their company\u2019s greatest concern. However, they did not identify any regulations in the employee benefits, civil rights, labor relations, or tax areas. Some companies provided what they described as a partial list of regulations and indicated they would provide additional information,",
      " but never did so. Two companies\u2019 lists reflected only the problematic regulations we asked them to identify for another portion of this review. (See ch. 4 of this report.) Although officials from several companies said they believed their lists contained 75 to 90 percent of the regulations applicable to them, most of the companies\u2019 officials acknowledged that their lists were incomplete. The companies\u2019 lists also varied in the level of detail they provided. Some companies identified only broad regulatory areas or general regulatory requirements (e.g., \u201cworkmen\u2019s compensation\u201d or \u201cIRS\u201d) but other companies\u2019 lists were more specific. For example, one section of Roadway\u2019s list focused on civil rights and employee benefits.",
      " Within that section, the company officials cited title VII of the Civil Rights Act of 1964 and listed its associated regulations\u201429 C.F.R. Parts 1601 and 1602 (Subparts A-E) and 29 C.F.R. Parts 1604-1606, 1608, and 1610-1612. Most of the companies did not maintain lists of applicable regulations, so they had to compile the information they provided in response to our request. Although officials from each company told us they would prepare a list of applicable regulations, several companies had not done so at the time of our site visit. Other companies made a more extensive effort to respond to our requests for information.",
      " For example, a number of officers and staff within Roadway conducted research and developed documentation. The hospital provided several lists of applicable regulations, one that the administrative staff had developed covering a variety of issues and another from hospital health protection staff. A few companies compiled the information we requested on the basis of lists of regulations that had been previously developed for certain areas of their operations. However, even these lists were not comprehensive. For example, the petrochemical company had developed a list of environmental, workplace safety, and other regulations for use by their internal auditing staff. However, company officials told us that the list was not necessarily complete. The paper company used an EPA publication entitled Federal Environmental Regulations Potentially Affecting the Commercial Printing Industry.",
      " However, company officials noted that this document contained a disclaimer that said it should \u201cnot be relied on by companies in the printing industry to determine applicable regulatory requirements.\u201d Companies Cited Various Reasons for Incomplete Lists of Regulations Some of the companies said it was difficult for them to produce a complete list of applicable regulations because they had limited resources and higher priorities. For example, Multiplex officials said that to compile a complete list of regulations would \u201cuse so much time and so many resources that it would be a burden on the company and adversely affect its business operations.\u201d Bank C\u2019s official said the bank could not devote the time and staff resources needed to produce a complete list of regulations due to higher priority bank-related work.",
      " We recognized that producing an aggregate list of regulations would be an expensive and time-intensive endeavor because of the complex analysis required to identify every regulation affecting the business. Some of the companies also said that some federal regulatory requirements were hard to identify because they had become part of the companies\u2019 standard procedures. For example, Roadway\u2019s officials said that developing a comprehensive list of regulations was difficult because many regulations have been around for so long they are now part of everyday operations of the company. Officials from the fish farm said that some regulatory requirements (e.g., payroll recordkeeping standards) are now considered part of their everyday business operations. The officials also said that some outside organizations (e.g., insurance companies)",
      " require the company to follow certain safety procedures, and they were not sure whether those procedures were also required by regulations. Officials from the petrochemical company said regulations often cause a fundamental shift in business processes that later becomes less distinctive. The officials noted that industry incurred start-up costs associated with the requirement to produce unleaded gasoline, but because the entire industry was required to be in compliance the identification and capture of these costs became less relevant over time. Some of the companies also said it was difficult to distinguish between federal requirements and those of other governmental jurisdictions. Officials from the paper company said making this distinction was \u201cdifficult, if not impossible.\u201d The petrochemical company indicated that it was particularly difficult to separate the requirements when state or local governments enforce federal standards and can add additional requirements.",
      " One California company noted that all OSHA regulations and many EPA regulations are enforced by the state, and that California often adds stricter state requirements. The companies also cited other reasons why their lists of applicable regulations were incomplete or difficult to compile. For example, a fish farm official said that the regulators themselves are sometimes unable to inform the company of all applicable regulations. Petrochemical company officials were reluctant to characterize their list as complete because of a concern that if a regulator saw certain requirements missing from their list they might assume the company was not complying with the missing regulations and pursue some type of enforcement action against the company. Other companies simply noted that their lists were incomplete,",
      " but did not provide a reason for this characterization. Agencies Had Difficulty Providing Lists of Applicable Regulations We also planned to ask each of the agencies whose regulations were cited by the companies to provide a list of regulations applicable to each of the companies. However, officials from several of the agencies we initially contacted said they could not provide such lists without first obtaining a great deal of specific information about the company. For example, a DOT official said that the agency would need such information as whether the company uses rail transportation, the types of material the company transports, and the nature of the business enterprise (e.g., whether it was a partnership or a corporation). IRS officials said they would need to know whether the business was privately or publicly held,",
      " whether it imported or exported materials or products, and whether it had foreign as well as domestic operations. The IRS officials said operational and administrative decisions made throughout the existence of the companies affect their tax status and, therefore, the applicable tax regulations. EPA officials also said that the collection of the information they needed to identify applicable regulations would require a large expenditure of resources at a time when their budget was uncertain. The officials said they would have to conduct a site visit at each company to identify their applicable regulations. Another reason we did not ask the agencies to provide lists of regulations for each of the participating companies was that 10 of the 15 participating companies wanted to remain anonymous.",
      " Therefore, the agencies could not contact them directly to collect information, and we could not provide the agencies with detailed information about the companies (e.g., industry, size, location, etc.) that could disclose their identities. Because we were unable to receive lists of applicable regulations from the agencies, we changed the nature of our inquiry to focus on three related issues. First, we asked 17 of the regulatory agencies that the companies had cited in their lists of regulations to describe the kinds of information they needed to be able to determine the applicability of their regulations to a particular company. Second, we asked each of these agencies to describe the kinds of assistance they provide to companies to help them determine which regulations were applicable to them and how to comply with the regulations.",
      " Finally, we asked six agencies and offices to identify which of their regulations were applicable to two of the participating companies that had not asked for anonymity. Agencies\u2019 Determinants of Regulatory Coverage Varied Fifteen agencies provided information on their regulatory determinants. Officials from many of the 15 agencies said that unique characteristics of a business or a business activity determine whether their regulations are applicable to that business. See the following examples of agencies\u2019 regulatory determinants. \u2022 DOT officials said that the applicability of its regulations generally varied by industry, transportation mode, location, and other factors, including the type of material being shipped and the nature and ownership of the transportation firm.",
      " \u2022 OCC officials said that a bank\u2019s specific activities determined the applicability of its regulations. Similarly, the Federal Reserve Board\u2019s (FRB) officials said that coverage of its regulations \u201cis determined by either the nature of a particular company or the nature of the activities in which a particular company engages or intends to engage.\u201d \u2022 EPA officials said that \u201cthere is no single set of regulatory determinants that would cover all situations in which a facility may be covered by EPA\u2019s regulations. Many of our regulations are event driven, some factors are related to facility location, and many regulations are triggered by physical and operational characteristics of a particular facility.\u201d IRS officials said it was difficult to come up with criteria for the development of a list of regulations applicable to a particular company because of decisions that companies make in the course of their business.",
      " For example, IRS officials said that if a company chooses to provide a qualified retirement plan, it must comply with the statutory provisions and regulations applicable to such plans. \u2022 OSHA\u2019s officials said that it \u201cregulates occupational safety and health hazards, not specific industries.\u201d Therefore, the \u201capplicability of individual standards depends on whether or not the hazard addressed by the standard is present in the workplace.\u201d Officials from DOL indicated that companies\u2019 specific reporting requirements also varied according to specific criteria. For example, the officials said that the requirements for the Form 5500 used by employee benefit plan administrators to satisfy their reporting obligations under title I of ERISA,",
      " title IV of ERISA, and the Internal Revenue Code depend on (1) the type of plan (i.e., whether the plan is a pension or welfare plan); (2) the size of the plan (i.e., whether the plan has fewer than 100 participants or 100 or more participants); and (3) how the benefits are funded (i.e., through a trust or insurance or from the general assets of the employer). On the other hand, some agencies\u2019 officials said that determining the applicability of their regulations is relatively straightforward. See the following examples: \u2022 EEOC officials said that, with the exception of reporting requirements,",
      " EEOC regulations apply to all entities covered by the statutes it enforces, and the officials indicated that the applicability of those statutes is primarily a function of company size. For example, EEOC officials said that title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act (ADA) apply to any company with 15 or more employees. The officials also said that the Age Discrimination in Employment Act (ADEA) applies to all employers with 20 or more employees. According to the officials, any private employer with 100 or more employees must complete their EEO-1 reporting form indicating the race,",
      " ethnicity, and sex of employees by job category.\u2022 Officials from the Office of Federal Contract Compliance Programs (OFCCP) in DOL said Executive Order 11246, which OFCCP administers, applies only to contractors and subcontractors who perform government contracts that total at least $10,000 in a 12-month period. However, the officials said that nonconstruction contractors with 50 or more employees and contracts greater than $50,000 have additional obligations. \u2022 The PBGC officials said PBGC\u2019s insurance program and regulations apply only with respect to defined benefit pension plans as described in section 4021 of ERISA. The agency officials said that section 4021 generally covers all defined benefit pension plans voluntarily established by private sector employers,",
      " and specifically states what plans are excluded from coverage. \u2022 The FDIC officials said that coverage by FDIC regulations \u201cis determined basically by whether an institution is FDIC-insured, and as a subset of that status, whether the institution is an insured nonmember bank for which the FDIC has primary supervisory responsibility at the federal level.\u201d Agency Informational Mechanisms Varied Sixteen agencies described how they provide information to companies and the public on their regulatory requirements. Most of the agencies identified telephone numbers and listed various publications, handouts, brochures, informational pamphlets, and notifications containing regulatory information. Half of these agencies had or were developing (1)",
      " special programs to communicate regulatory requirements to affected businesses and (2) outreach efforts to gather feedback on their regulatory requirements. Six agencies indicated that they used some type of electronic bulletin board as an informational mechanism. OSHA described a variety of informational resources and programs, including the following examples: \u2022 more than 80 different publications available from OSHA\u2019s Publications Office, some of which were also available in OSHA\u2019s 100 field offices; \u2022 safety and health standards in CD-ROM format (available for purchase from the Government Printing Office) containing all OSHA standards, compliance directives, and standards interpretations; \u2022 a DOL-operated Labor News Electronic Bulletin Board and an OSHA Computer Information System accessible through the Internet,",
      " which contains some of the information on the CD-ROM; the OSHA Consultation Program, which offers free, on-site, expert assistance to small employers in all 50 states to help them comply with OSHA requirements and establish effective safety and health programs (according to OSHA, more than 100,000 employers have used this service and priority is given to small firms in high-hazard businesses); and \u2022 courses on specific safety and health issues for employers who want intensive information about specific safety and health issues at OSHA\u2019s Training Institute in Des Plaines, IL, and at OSHA Education Centers in 12 states. OSHA\u2019s officials said OSHA is also piloting several other ways to use computer technology to provide assistance to employers,",
      " including the development of interactive compliance tools. EPA also cited dozens of sources of information about its regulations, including brochures, pamphlets, fact sheets, booklets, letters, hotlines, regional contact numbers, guidance manuals, posters, question and answer sheets, and catalogues of informational materials. EPA listed informational sources for each of its program offices and, within those offices, the sources were also often differentiated by issue. For example, the Office of Prevention, Pesticides and Toxic Substances said it had many of the informational modes listed above as well as information lines for pesticide questions, \u201cPR Notices\u201d providing detailed information to regulated industries,",
      " registration kits for those interested in how to register new pesticide products, and outreach efforts to help growers that rely on minor use pesticides. Among the initiatives EPA particularly noted were the following: \u2022 Compliance assistance centers were being established by EPA\u2019s Office of Compliance for four industry sectors\u2014automotive, metal finishing, printing, and agriculture. EPA officials said the centers offer \u201cone-stop shopping\u201d for understandable guidance materials, waste minimization and pollution prevention assistance, and advice in reducing regulatory compliance costs. \u2022 Sector Notebooks, which are profiles of 18 industries (e.g., metal fabrication, petroleum refining, and printing), were designed to assist firms in understanding what multimedia regulations apply to them.",
      " Each profile includes, among other things, applicable federal statutes and regulations as well as compliance assistance information. Notebooks are available through the Government Printing Office and on an electronic bulletin board. \u2022 The Office of the Small Business Ombudsman was established to provide a variety of information mechanisms to help communication between the small business community and EPA. EPA officials said the Office has a hotline service that receives nearly 20,000 calls per year, serves as the \u201cone-stop shop\u201d for EPA technical assistance and information, maintains an informal dialogue with over 45 trade associations, and advocates small business positions inside EPA. EPA also described the mechanisms one of its regional offices (Kansas City)",
      " used to communicate regulatory information to the public, including an Agricultural Compliance Assistance Center, public meetings and workshops, \u201cavailability sessions\u201d in which regional staff privately meet with citizens one-on-one to discuss issues, state- and trade association-sponsored meetings, mass mailings, public speaking, a toll-free Action Line, and an Iowa RCRA Hazardous Waste Helpline. Other agencies cited many of the same kinds of mechanisms. According to its officials, EEOC (1) conducted training and outreach seminars during fiscal year 1993 that reached an estimated 4,000 private sector employers and more than 94,000 individuals; (2) published and distributed millions of copies of training materials;",
      " (3) mailed out 477,933 publications during the first three quarters of fiscal year 1995; and (4) responded to thousands of public inquiries per year. DOT\u2019s officials said DOT public information efforts include electronic bulletin boards, toll-free hotlines, free guidance materials, news releases, mailing lists, and briefings to industry associations. The DOJ officials cited their toll-free ADA Information Line; technical assistance materials; a computer bulletin board and Internet connections; a speakers\u2019 bureau, which provides technical assistance at about 120 events each year; more than 40 technical assistance grants to trade associations; an ADA Information File containing more than 30 technical assistance publications placed in 15,",
      "000 public libraries throughout the country; and informational notices about the ADA, which are distributed to 6 million businesses through IRS\u2019 quarterly mailing to employers. Regulatory Information Relies on Businesses\u2019 Initiative, Appears Fragmented Some of the agencies\u2019 regulatory informational mechanisms are proactive, providing information to businesses and others at the agencies\u2019 initiative. However, many agencies, if not most, require businesses to take the initiative in obtaining compliance information. For example, OSHA officials said that although the agency offered a variety of informational mechanisms, it was up to each business to understand its own regulatory compliance responsibilities. However, the businesses that we talked to sometimes indicated a reluctance to approach regulatory agencies for information.",
      " For example, an official from Minco said that it was difficult to stay aware of the changes in regulatory requirements because they could not ask \u201cenforcers\u201d to provide information without potentially calling Minco\u2019s actions into question. Other indications of the businesses\u2019 reluctance to address regulators directly were the decisions by 10 of the 15 companies to remain anonymous during this review. Also, it is not always readily apparent to businesses which agency of the federal bureaucracy is responsible for a particular program. For example, DOJ officials explained that the ADA defines separate responsibilities for EEOC and DOJ. EEOC provides information about ADA employment regulations, but information about titles II and III of the act (architectural barriers)",
      " is available only from DOJ. Sometimes multiple information sources exist within a particular agency, with businesses frequently required to make more than one contact to gather information about that agency\u2019s regulatory requirements. As previously noted, EPA listed informational mechanisms by program office\u2014Air and Radiation; Prevention, Pesticides, and Toxic Substances; Solid Waste and Emergency Response; and Water\u2014as well as within a regional office. Therefore, a business would need to be aware of EPA\u2019s structure and programmatic configuration to obtain information about all EPA programs. However, EPA has taken some steps to consolidate this information by providing single points of contact for small businesses in its Small Business Ombudsman office and compliance assistance centers for certain industries.",
      " Several Agencies Recently Developed Innovative Informational Mechanisms Some agencies are attempting to develop methods by which businesses can obtain information about regulatory requirements and other topics in a more efficient and understandable way. For example, in June 1995, the President asked SBA to cochair an effort to make government information more accessible to government customers. SBA developed the idea of a World Wide Web site on the Internet that would, among other things, allow companies to know what federal regulations apply to their operations. Working with the Lawrence Livermore National Laboratory, the University of Massachusetts, and more than two dozen federal departments and agencies, SBA developed the \u201cU.S.",
      " Business Advisor\u201d home page, a version of which was formally unveiled in February 1996. Using the Advisor, businesses can access a regulatory assistance center to search an electronic database of current and proposed regulations within particular subject areas. For example, a business can type in the term \u201cchlorine production\u201d and get a listing of chlorine-related regulations and proposed regulations. Businesses can also use the Advisor to obtain the full text of the current or proposed rule. SBA officials said the Advisor is still being developed, and they hope that future iterations will be even more user-friendly. Some agencies are developing their own World Wide Web sites on the Internet with regard to particular issues.",
      " For example, in October 1995, OSHA worked with the business community to create an on-line \u201casbestos advisor\u201d program that helps businesses determine whether their company is complying with regulations on asbestos exposure. The program solicits information about users\u2019 workplaces and tasks, and automatically provides guidance to ensure compliance. As of July 1996, more than 6,100 people had downloaded copies of the program. OSHA said that because of further distribution of the asbestos advisor by major corporations and trade associations, actual circulation could be 10 times greater than the number of downloaded copies. OSHA has developed on-line advisors for other standards (e.g., permit-required confined spaces and cadmium)",
      " and plans to create other interactive expert advisors on other issues (e.g., lead in construction and control of hazardous energy sources). DOL officials said the Department has also developed an Internet web site that includes copies of its statutes and regulations and a small business handbook that provides information about all DOL workplace requirements in nontechnical language. Regulations Applicable to Two Companies Often Differed We asked EPA, EEOC, and four agencies and offices within DOL\u2014OSHA, PWBA, and the Wage and Hour Division and OFCCP within ESA\u2014to identify which of their regulations were applicable to two of the companies participating in this review\u2014Minco and Zaclon.",
      " Neither of these two companies requested anonymity, and they agreed to provide any information needed by the agencies in determining their applicable regulations. Minco is located in Austin, TX; has 129 employees; and is a federal subcontractor that tests computer chips for federal contractors involved in military, space, and medical industries. Zaclon is located in Cleveland, OH; has 52 employees; and manufactures organic and inorganic chemical compounds. Officials from some of the agencies we contacted initially expressed concerns about providing a list of regulations applicable to the companies. For example, EPA officials said that if the list was incomplete in any way (e.g., because new regulations were issued after they provided a list or because EPA did not know about an element of a company\u2019s operations that was covered by its regulations), the absence of a regulation from its list could be construed to mean that the company did not legally have to comply with that requirement.",
      " An official at OSHA questioned whether developing a list of applicable regulations was a useful method to measure the impact of OSHA\u2019s regulatory requirements. The official said that a list of all OSHA regulations a company must comply with could appear extensive, but would not provide any information on the beneficial results produced by these requirements. The official also said that this exercise might create an unfair impression of OSHA outreach efforts or a company\u2019s knowledge of its regulatory responsibilities. Despite these concerns, EPA, EEOC, and each of the four DOL agencies provided a list of regulations they said were applicable to the companies. Several of the agencies indicated that the two companies\u2019 regulatory responsibilities varied substantially.",
      " One indicated that the companies\u2019 regulatory responsibilities were the same in some respects and different in others. One agency said the two companies\u2019 responsibilities were the same in all respects. EPA Regulations EPA limited its description of applicable regulations to four major environmental statutes\u2014RCRA, CAA, CWA, and TSCA. The agency also emphasized that its observations were not meant to indicate there had been a formal compliance review or audit of the companies and, therefore, its observations were not an explicit or implied assessment of the companies\u2019 compliance status. With regard to Minco, EPA officials said that the company is not regulated at the federal level with regard to any of the above-",
      "mentioned statutes because it has no air permits, does not formulate new or existing chemicals, does not manufacture or handle herbicides or pesticides, and does not have any underground storage tanks. However, the officials said that EPA\u2019s limited review of Zaclon\u2019s operations indicated that it faced a number of federal regulatory requirements. \u2022 Because the company produces chemicals, EPA officials said Zaclon is responsible for reporting under TSCA\u2019s sections 5 and 8 and is subject to annual Emergency Planning and Community Right-to-Know Act (EPCRA) Section 313 emissions reporting. \u2022 EPA officials said Zaclon\u2019s discharges to the local waterways make the company responsible under CWA and its permits for (1)",
      " monthly discharge monitoring reports; (2) the Spill Prevention, Control, and Countermeasures\u2019 (SPCC) revision deadline; and (3) the National Emissions Standards for Hazardous Air Pollutants\u2019 (NESHAP) benzene waste water report. \u2022 EPA officials said Zaclon\u2019s stack emissions make the company responsible under CAA, including NESHAP fugitive and point source emission reporting for benzene, and air compliance reports. \u2022 As a hazardous waste generator EPA officials said Zaclon is subject to RCRA, including quantifying amounts of annual hazardous wastes, annual financial assurance reporting, and waste minimization reports.",
      " EPA officials also said that Zaclon is required under many of the statutes to report any spills or releases when they occur. The officials said that certain chemicals could be considered a pesticide under the Federal Insecticide, Fungicide, and Rodenticide Act; a drug or cosmetic under the Federal Food and Drug Act; a chemical under TSCA; or a waste under RCRA. However, because EPA assumed that the company knew whether any chemicals it produces or uses fall under one of these statutes, it did not describe applicable regulations in those situations. EEOC Regulations EEOC divided its response into reporting and recordkeeping issues.",
      " The agency\u2019s officials said that the only reporting requirement EEOC imposed on Minco was that it annually submit a complete Form 100 (also known as an EEO-1 report) because the company had at least 100 employees. However, the agency officials said that Zaclon does not have to submit the form because it has less than 100 employees. EEOC officials said both Minco and Zaclon are covered by the agency\u2019s recordkeeping requirements, but the length of time for which the records must be maintained varied by statute. The officials said 29 C.F.R. 1602.14 requires both companies to preserve all personnel and employment records for 1 year after the preparation of the record or the date of a related personnel action,",
      " whichever is later. Also, records must be retained for any employee involuntarily terminated. EEOC officials said 29 C.F.R. 1620.32 requires both companies to preserve records relevant to the payment of wages under the Equal Pay Act for 2 years. The officials said 29 C.F.R. 1627.3 requires each company covered by the ADEA to make and keep records for each employee (name, address, date of birth, occupation, rate of pay, and compensation earned each week) for 3 years. Employers also must keep a copy of their employee benefit plans on file. If an enforcement action is initiated under title VII,",
      " the ADA, or the ADEA, EEOC requires the employer to retain any related records until a final disposition. Finally, EEOC noted that Minco and Zaclon are covered by the recordkeeping requirements in the Uniform Guidelines on Employee Selection Procedures (29 C.F.R. 1607), but that each company has different obligations under these requirements. Since Minco has more than 100 employees, it is required to maintain records that would disclose whether its selection procedures have an adverse impact on the basis of race, gender, or ethnic group. The Guidelines also require Minco to annually evaluate whether its selection process is having an adverse impact.",
      " If so, it must maintain and have available evidence supporting the validity of its selection process. However, because Zaclon has less than 100 employees, it can use simplified recordkeeping procedures that use the existing statistical information present in the company\u2019s personnel files. DOL-OSHA Regulations OSHA officials indicated that the regulatory responsibilities of Minco and Zaclon are identical. The officials cited 29 C.F.R. 1903 (Inspections, Citations and Proposed Penalties); 1904 (Recording and Reporting Occupational Injuries and Illnesses); 1910.20 (Access to Employee Exposure Records); and various other subparts of section 1910 as applicable to both companies.",
      " They also said OSHA\u2019s General Industry Standards would generally apply to each company, depending on the hazards in the workplace. DOL-Wage and Hour Division Regulations DOL\u2019s Wage and Hour Division stated that most of the regulations it cited applied to both Minco and Zaclon. For example, it said the following: \u2022 The Fair Labor Standards Act (29 U.S.C 201 et seq.) and its applicable regulations (29 C.F.R. Parts 510-794) apply to both companies because they are covered \u201centerprises\u201d with sales in excess of $500,000 per year. \u2022 The Employee Polygraph Protection Act (29 U.S.C.",
      " 2001-2009) and its applicable regulations (29 C.F.R. Part 801) apply to both companies because they are \u201c... engaged in or affecting commerce or in the production of goods for commerce....\u201d \u2022 FMLA (29 U.S.C. 2601 et seq.) and its applicable regulations (29 C.F.R. Part 825) apply to both companies because they are both \u201c... engaged in commerce or in any industry or activity affecting commerce...\u201d and employ at least 50 employees during 20 or more work weeks during the year. However, the Wage and Hour Division\u2019s officials said that the McNamara-O\u2019Hara Service Contract Act (41 U.S.C.",
      " 351 et seq.) and its regulations (29 C.F.R. Part 4) applied only to Minco because Zaclon does not contract to provide services to the federal government or the District of Columbia. DOL-OFCCP Regulations OFCCP\u2019s officials said that OFCCP administers and enforces three equal employment opportunity programs that pertain to government contractors and subcontractors and to federally assisted construction contractors and subcontractors. The programs OFCCP officials noted are listed below: \u2022 Executive Order 11246, as amended (41 C.F.R. Parts 60-1 through 60-60), which prohibits discrimination in employment on the basis of race,",
      " color, religion, sex, or national origin and requires affirmative action; \u2022 section 503 of the Rehabilitation Act of 1973, as amended (29 U.S.C. 793), and its implementing regulations (41 C.F.R. Part 60-741), which require affirmative action and prohibit discrimination in employment against qualified individuals with disabilities; and \u2022 provisions of the Vietnam Era Veterans\u2019 Readjustment Assistance Act of 1974, as amended (38 U.S.C. 4212), and its implementing regulations (41 C.F.R. Part 60-250), which require affirmative action and nondiscrimination with respect to special disabled and Vietnam-era veterans.",
      " The programs apply to contractors and subcontractors who perform government contracts or federally assisted construction contracts that total at least $10,000 in a 12-month period. Because Zaclon was not a federal contractor or subcontractor at the time of our review, OFCCP officials said the programs\u2019 requirements did not apply to the company. However, Minco was a federal subcontractor with contracts in excess of $10,000, so OFCCP officials said that all three programs applied to the company. Also, because Minco had more than 50 employees and performed government contracts worth at least $50,000, OFCCP\u2019s officials said it was obligated to develop a written affirmative action program under each of these laws.",
      " OFCCP officials said these plans could be separate documents containing the different analysis that each law requires or a single document consolidating each of the laws\u2019 required analyses into one affirmative action plan. DOL-PWBA Regulations PWBA summarized the companies\u2019 basic reporting and disclosure requirements under Part 1 of ERISA. PWBA\u2019s officials stated that PWBA did not attempt to summarize all conceivable reporting and disclosure requirements because the requirements vary according to the size and nature of the benefit plan. For example, the officials said PWBA did not discuss the Consolidated Omnibus Budget Reconciliation Act of 1985, Part 6 of title I,",
      " or disclosure requirements related to fiduciary regulations. The agency officials also noted that ERISA contains general recordkeeping requirements. For example, adequate records must be maintained to verify the accuracy of benefit calculations and information reported in the annual report. PWBA said that the two companies\u2019 401(k) regulatory reporting and disclosure responsibilities differed somewhat because of differences in the companies\u2019 plan size and operations. For example, it said because Minco has a single-employer defined contribution 401(k) profit-sharing pension plan subject to Part 1 of title I of ERISA covering 105 of Minco\u2019s 129 eligible individuals with assets held in trust,",
      " the plan administrator must file the Form 5500 (with all applicable schedules) for each plan year. An annual audit is required and an opinion of an independent, qualified public accountant must also be filed. However, because Zaclon has fewer than 100 eligible employees, PWBA\u2019s regulations allow Zaclon\u2019s plan administrator to file the Form 5500-C/R (with all applicable schedules), which is an abbreviated Form 5500. Also, under PWBA\u2019s regulations for such small plans, an audit and opinion of an independent, qualified public accountant is not required. Although in both companies, participants covered by the pension plans and beneficiaries receiving benefits under the plans must be furnished a summary description of the plan,",
      " a summary of any material plan modifications, and a summary of each year\u2019s annual report. Both companies must also file their pension plan\u2019s description and modifications with DOL. PWBA also said that because Minco\u2019s welfare plans cover 100 or more employees, the administrator of Minco\u2019s plans must file the Form 5500 (and all applicable schedules) for each plan year, but Minco is exempt from the audit requirements because the plan was fully insured or unfunded. Zaclon, with less than 100 participants in its fully insured or unfunded welfare plans, is exempt from the Form 5500 report and the audit requirements.",
      " PWBA officials said that both companies must furnish their welfare plan participants a summary plan description; a summary of any material modifications; and, for Minco\u2019s welfare plan, a summary of each year\u2019s Form 5500 report. Minco must also file its welfare plan\u2019s description and modifications with DOL. Conclusions Our work suggests that the number of federal regulations applicable to a particular company may be substantial. However, producing a complete inventory of those regulations is a very difficult undertaking for both businesses and federal regulatory agencies. A business must have a sophisticated level of knowledge of its regulatory environment and be able to devote the time and resources needed to develop a comprehensive inventory.",
      " Our efforts to acquire this information from federal agencies demonstrated that regulatory requirements are contingent on a variety of factors and can vary substantially from one company to the next, thereby making this task more difficult than it appears to be. Although most of the companies initially told us that they could develop a complete list of regulations applicable to their companies, none of them ultimately did so. The partial lists the companies did develop often focused on only certain functional areas or certain problematic regulations. The companies said their lists were incomplete because of time and resource constraints and because of difficulties they experienced disentangling federal regulatory requirements from their regular operating procedures, state or local requirements, and other nonregulatory requirements.",
      " Other participating companies did not provide a reason why their lists were incomplete. Because of their day-to-day involvement in regulatory matters, it may seem logical that regulatory agencies would be able to determine the applicability of their regulations to particular companies quite easily. However, several of the agencies we contacted said they could not make that determination without expending a substantial amount of their limited resources. Several of the agencies said that unique characteristics of a business or a business activity determine whether their regulations apply to that business. Therefore, they said they would have to collect detailed information about each company to determine regulatory coverage\u2014information such as whether the firm (1) was a federal contractor or subcontractor,",
      " (2) had a qualified retirement plan, (3) had an underground storage tank, (4) used certain types of compressed gases, and (5) discharged water into a local waterway. The agencies also indicated that they made extensive amounts of information available to the public, so the businesses themselves could determine their regulatory responsibilities. However, these sources of information often appear to be fragmented both within and across agencies. As a result, a business attempting to determine its regulatory responsibilities may find it necessary to contact multiple agencies, and sometimes multiple offices within particular agencies, to collect the information it needs. In some cases, responsibility for an issue may be spread between two or more agencies,",
      " making it difficult for companies to determine which agency or agencies should be called regarding that issue. The increasing complexity of the federal regulatory environment makes effective communication between regulatory agencies and the regulated community even more important, and some agencies are taking steps in that direction. The difficulties businesses and agencies experienced in developing a list of applicable regulations also suggest two other conclusions\u2014one is an issue of compliance and the other is a research concern. First, a business that finds it difficult to list its regulatory compliance responsibilities may not be fully aware of those responsibilities. As a result, the business runs the risk of being out of compliance with regulations that it did not know were applicable.",
      " Second, the development of a list of a company\u2019s compliance responsibilities is the first step in determining the impact of all regulations on that company. If the list of regulations applicable to a company is incomplete, any assessment of the impact of regulations on that company will be equally incomplete. The difficulties businesses and agencies described in developing company-specific lists of regulatory compliance responsibilities suggest that the development of information on the costs and benefits of regulations to those companies will be at least as difficult. Companies Lacked Data on Regulatory Costs To fairly assess the impact of regulations on businesses, one must consider both the burden and the benefits of compliance. Of the two issues, regulatory burden is generally considered to be easier to measure than benefits.",
      " As mentioned in chapter 1, regulatory burden has been described and measured in various ways, including the number of pages in the CFR, the number of federal employees involved in regulatory activities, and the number of paperwork burden hours imposed by federal information collection requirements. One commonly cited measure of regulatory burden is the cost associated with compliance with regulations. In this chapter, we briefly discuss the ways regulatory costs could be assessed, what we attempted to measure in this review, and what company officials told us when we asked about the costs and other types of burden associated with compliance with federal regulations to their businesses. This chapter also discusses what businesses told us about the benefits associated with federal regulations.",
      " Measures of Regulatory Costs Vary Studies of regulatory costs vary in a number of ways, one of which is the types of costs the studies attempt to assess. Direct costs are those that regulated entities incur in the course of complying with regulatory requirements. These direct costs include the wages and salaries of workers carrying out regulatory responsibilities; capital expenditures (e.g., wastewater treatment facilities or safety equipment); employee training expenses; and other costs incurred as a direct result of regulatory requirements. Indirect or secondary costs include costs such as lost productivity, decreased competitiveness, construction delays, or resource misallocation. Still other costs include those associated with the development and enforcement of regulations,",
      " not just costs borne by regulated entities; therefore, these studies could include the budgets of regulatory agencies. Regulatory cost studies also vary in terms of the range of regulations included within the scope of the study. Studies may focus on costs associated with compliance with any regulatory requirements issued by any agency, or on only selected regulations, such as those within certain subject areas (e.g., environmental rules) or those issued by certain agencies. Cost studies also vary in terms of the types of costs considered attributable to regulatory requirements. Studies could include all expenditures by the regulated entity that are in any way related to the regulatory requirements at issue. In such studies, for example,",
      " if a company spent a total of $1 million during the course of a year on worker safety training and equipment, the full $1 million would be counted toward the company\u2019s regulatory costs. However, because the cost study includes all of the company\u2019s expenditures in this area, such an approach implicitly assumes that the company would have spent nothing on worker safety training and equipment during that year in the absence of regulatory requirements. Because many companies probably spend some money to protect their workers in the normal course of business, attributing those expenditures to regulatory requirements is erroneous and overstates the burden of regulations. Another approach does not include all expenditures in the measurement of regulatory costs,",
      " focusing only on the incremental costs directly attributable to the regulations in question. If, in the above example, the company had spent $600,000 on worker safety training and equipment, regardless of any regulatory requirements, the incremental cost attributable to regulations in that year would be $400,000 ($1 million minus $600,000). \u201c... must be measured against a baseline. The baseline should be the best assessment of the way the world would look absent the proposed regulation.... All costs calculated should be incremental, that is, they should represent changes in costs that would occur if the regulatory option is chosen compared to costs in the base case (ordinarily no regulation or the existing regulation)",
      " or under a less stringent alternative.\u201d Therefore, OMB recommends calculation of regulatory costs in incremental terms, not the total expenditures in a regulatory area. The scope of the cost studies we reviewed also varied widely. Some studies, such as the work of Thomas Hopkins, attempted to estimate the cost of regulations to the economy as a whole. Hopkins included the following five expenditure categories in his estimates of cumulative regulatory costs: \u2022 direct costs of environmental regulations; \u2022 direct costs of other social regulations, including consumer safety, nuclear safety, worker health, and worker security and pensions; \u2022 direct costs of economic regulations, which include agricultural, communications, transportation, energy,",
      " financial, construction, and international trade regulations; transfers stemming from economic regulations, including transfers stimulating exports and agricultural price supports; and \u2022 process costs of paperwork and reporting obligations, based upon the OMB estimate of the number of hours spent on federal paperwork requirements. Totaling data from all five cost categories, Hopkins estimated in 1993 that the cumulative cost of federal regulations to the economy would be $607 billion in 1995. However, some economists believe that one of the elements of Hopkins\u2019 study\u2014transfer costs\u2014should not be considered part of the cost of regulations to the economy because transfers represent a loss to one group and a corresponding benefit to another.",
      " There are also concerns about the accuracy of some of the data included in Hopkins\u2019 analysis. For example, we have noted that not all burden is counted in the preparation of OMB\u2019s paperwork burden-hour estimate, and that which is counted is often underestimated. Other studies have attempted to measure the costs of regulatory compliance on individual businesses, not the economy as a whole. One such study by Arthur Andersen and Company focused on 48 large companies\u2019 compliance with federal regulations during 1977. The study did not attempt to assess the companies\u2019 cost of complying with all federal regulations, focusing instead on six federal agencies and programs. Arthur Andersen auditors went to each company,",
      " instructed company officials on what they considered to be allowable and unallowable regulatory costs, and required company officials to estimate the amount the company spent complying with the identified regulations. The study used an incremental measure of regulatory cost, subtracting from the companies\u2019 total expenditures the amount the company would have spent to achieve the objectives of the regulations had those regulations not been in force. Using this methodology, Arthur Andersen estimated that the 48 companies\u2019 total compliance costs in 1977 were $2.6 billion\u2014an average of more than $54 million per company. This cost can be compared with the companies\u2019 1977 net income after taxes of $16.",
      "6 billion\u2014an average of about $346 million per company. Companies Generally Could Not Provide Comprehensive, Incremental Cost Data To assess the burden of federal regulations on the 15 companies participating in our review, we used an approach that was similar in some respects to the approach used in the Arthur Andersen study. Like the Arthur Andersen study, we asked each of the companies to provide information on their direct incremental costs. However, unlike the Arthur Andersen study, we focused on costs associated with complying with all federal regulations during 1994, not just selected agencies and programs. Also, we did not require the companies to estimate the costs associated with regulatory compliance.",
      " Instead, we left it to the companies to provide what information they believed was appropriate. Because we wanted to be sure that the companies described their regulatory costs consistently, we provided extensive instructions to the companies regarding what should and should not be included in their tabulations. (See app. I for the instructions provided to the companies and the data collection instrument.) For example, because our focus was on incremental costs, we told the companies that any costs that would have been incurred in the normal course of business during that period should not be included in their cost measures. Because indirect costs are more difficult to measure, we told the companies to provide cost data on direct costs and asked for examples of indirect costs.",
      " We also delineated other types of costs that should be excluded from their tabulations, including lobbying costs; costs associated with nonfederal rules; and payments to the federal government, such as taxes and fines for noncompliance. We asked the companies to include costs for all regulations that they had identified in developing their aggregate list of federal regulations (presented in ch. 2). We attempted to collect the cost data in total and in each of three cost classifications: (1) capital costs, (2) labor costs, and (3) other costs. We told the companies that their accounting and financial records should be their primary source of the cost data,",
      " and that we would like to collect, or at least review, any documentation of these costs. Although all of the 15 companies participating in our review provided at least some data on their compliance costs, none of the companies provided cost data that were both comprehensive and incremental. Some of the officials with whom we met recognized that the data provided were not what we had asked them to provide. Our interviews with these company officials and our review of the information they provided revealed various reasons why the companies\u2019 cost data were neither comprehensive nor incremental. Companies\u2019 Cost Data Were Not Comprehensive Although we asked each of the companies to provide cost data for all the regulations they faced,",
      " none of the companies provided comprehensive cost data. The uncomprehensive nature of the cost data provided was sometimes a function of the difficulty company officials had in citing all applicable regulations. (See ch. 2.) Because we asked each company to provide cost information for all applicable federal regulations, and because company officials generally said they could not identify all applicable regulations, they, therefore, could not provide a measurement of their regulatory costs that they believed reflected all of their responsibilities. Another reason company officials said they had difficulty providing data on their companies\u2019 federal regulatory compliance costs was because they found it difficult to distinguish between federal requirements and those of other governmental jurisdictions.",
      " For example, officials from Roadway told us that the intertwining of federal, state, and local requirements made it difficult to separate the effects of each type of requirement. Also, officials from the paper company said that determining their federal regulatory costs was \u201cdifficult if not impossible\u201d because they could not distinguish between costs to comply with federal regulations versus state and local requirements. Making this distinction was particularly difficult for the companies in regulatory areas where state governments enforced federal standards and could also attach additional requirements. Officials from a company operating in California said that California enforces all of OSHA\u2019s regulations and some of EPA\u2019s regulations\u2014often adding stricter state requirements.",
      " In other cases, company officials recognized federal regulatory requirements in certain functional areas but still did not provide any cost data for those functional areas. For example, officials from the petrochemical company provided data on environmental, health, and safety costs, but did not provide data on costs associated with other types of regulations with which they said they had to comply (e.g., transportation and shipping). The cost data the companies provided were also incomplete in other ways. For example, one company provided data on its incremental regulatory costs, but only for a portion of its labor expenses. The company did not provide comprehensive data on capital or other types of costs, and the labor cost data did not include the company\u2019s hourly workers.",
      " Also, although one company said its incremental cost estimate covered the entire company, the manner in which the estimate was calculated revealed that all units were not actually represented. Company officials estimated the company\u2019s total incremental regulatory costs at $52.4 million\u2014$44.9 million for labor costs, $6.8 million in capital costs, and $700,000 in other costs. The officials said they developed these cost figures by first generating these costs for their largest operating unit, then doubling this figure to arrive at the estimated total cost. They said they used this method because the operating unit generated one-half of the company\u2019s revenue and accounted for one-half of the company\u2019s costs.",
      " Therefore, they said that doubling the unit\u2019s regulatory costs was a reasonable estimate of the whole company\u2019s incremental regulatory costs. However, we believe that if their largest operating unit\u2019s regulatory costs were atypical in any way, simply doubling this estimate could result in an underestimate or an overestimate of the company\u2019s total incremental costs. Companies\u2019 Cost Data Were Not Incremental Although we requested that companies provide incremental compliance costs because we believe they are more accurate measures of regulatory burden than total expenditures in areas covered by regulations, most companies did not provide incremental cost data. As previously noted, calculation of incremental costs requires company officials to decide what actions their company would have taken in the absence of the identified regulations\u2014a determination that can be difficult,",
      " if not impossible, to make in retrospect. For example, officials from Bank C indicated that it would be very difficult, in most cases, to estimate what expenses they would have incurred if the federal regulations did not exist. An official from the glass company said that it was difficult to determine what percentage of its costs were due to regulations and what part would have been incurred as a normal part of business. Officials from the paper company said a substantial amount of their costs were costs they would have incurred even if federal regulations did not exist. They said that they would still have formidable environmental and health and safety programs simply as a good business practice, and they could not separate what was required from what they were doing voluntarily.",
      " Reflecting the difficulty in separating regulatory and business-related costs, the officials also said their companies\u2019 accounting and financial records did not capture the information necessary to determine incremental compliance costs. For example, officials from the petrochemical company told us their company\u2019s accounting systems were not designed to uniquely categorize the costs of new and ongoing regulatory requirements. These officials said that there is little incentive to isolate and monitor these costs because such information has little business value. Officials from Multiplex also said that their financial records did not itemize many of the administrative costs associated with specific regulatory compliance activities. Multiplex officials estimated that for environmental compliance, about 60 to 70 percent of their costs were captured using the company\u2019s financial records.",
      " Company officials also said they could not provide incremental regulatory cost data because the companies\u2019 regulatory responsibilities were sometimes difficult to distinguish from their regular processes and functions. For example, officials from the glass company said regulatory responsibilities were woven into individuals\u2019 jobs, and it was difficult to separate what was being done strictly for regulatory reasons. Officials from the tank car company said it would take a significant amount of time and resources to separate these compliance costs from their day-to-day operations costs. Officials from the petrochemical company said there is little incentive to isolate and uniquely monitor the explicit costs associated with new and ongoing regulatory requirements because they generally view regulations as nonrevenue-producing mandates.",
      " Indirect Costs of Federal Regulations Although we did not ask the companies that participated in our review to quantify their indirect costs of complying with federal regulations, company officials provided a number of examples of those costs that they said their companies had experienced. The examples indicate that indirect costs can be substantial and are probably the most difficult types of costs to measure. The types of indirect costs that the companies provided included lost productivity, decreased competitiveness, lost business opportunities, delays in the expansion of new products or businesses, misallocation of resources, and delays in construction of new plants and/or equipment. Examples of indirect costs the companies cited included the following. \u2022 Officials from the paper company said that regulations tie up company resources and staff that could be better used in other ways,",
      " such as developing new products or processes. They said the company\u2019s international competitiveness is also affected by regulations. The officials said that, contrary to popular belief, European countries are less regulated than U.S. companies, and as a result, U.S. companies are at a competitive disadvantage. \u2022 Representatives from the petrochemical company said that the company had curtailed or forgone facility expansions because of regulations that discourage voluntary emissions reductions at the plant site or emissions trading programs that are too administratively burdensome. Company officials also expressed concerns about regulations that restrict access to potential natural gas markets even though the increased use of natural gas is a cost-effective means of achieving emissions reductions.",
      " The officials also referred to the unavailability of cash flow to capture business opportunities because of the allocation of funds to compliance requirements. \u2022 An official from Minco, a federal subcontractor, said that regulatory activity tends to drive out other human resource-related actions the company would like to take. For example, she said that the company would like to offer more training and employee development but cannot do so because January and February are generally dedicated to development of affirmative action plans. Another Minco official said that the company could make more money as a prime contractor but intentionally remains a subcontractor because of the complexity of federal procurement regulations. \u2022 A Multiplex official commented on how responding to regulatory requirements causes a delay of management information and responsiveness to business-related needs.",
      " For example, the official said that a company management team\u2019s required involvement with an 18-month IRS audit slowed company management\u2019s response to internal requests and to other company business. He said a large company can easily absorb a certain level of recordkeeping requirements, but the same requirements can cause many problems for a smaller company like Multiplex. The Benefits of Federal Regulations The assessment of benefits is of equal importance to the measurement of costs and other types of burden in assessing the impact of a given regulation or regulations in general. However, as previously noted, accurate measures of the benefits of regulations appear even more difficult to develop than cost measures. For example,",
      " in 1991 we reported that, although environmental controls have resulted in substantial and valuable benefits, assigning a monetary value to these benefits was much more difficult than estimating costs. Few Studies Have Evaluated the Benefits of Regulation Much of the literature deals with the assessment of costs of regulations, and relatively few reports and studies have addressed the benefits of regulations. In June 1995, Public Citizen, a national consumer advocacy organization, released a report that sought to document the benefits of federal health and safety regulations. The report recognized that the benefits of health and safety standards cannot always be measured in dollar terms, and it highlighted the difficulty involved in attempting to calculate the exact number of lives saved,",
      " injuries prevented, and costs averted by a regulation. The report also criticized cost-benefit analysis by maintaining that many of the variables used in the analysis are unquantifiable, and in many cases the primary source of cost data is from industry itself. Most Companies We Interviewed Agreed Regulations Have Benefits Despite the concerns the businesses expressed about the costs of regulatory compliance, most of the company officials we interviewed generally recognized that regulations provide benefits to society as a whole, to certain groups and individuals, and even to their own businesses. Company officials said federal regulations had helped protect air and water quality, created safer workplaces, promoted fair competition, and improved both the manufacturing process and product quality.",
      " Specific examples of regulatory benefits the companies cited included the following. \u2022 Officials from the paper company said that compliance with federal regulations had helped to improve their manufacturing process. They said some of the dioxin regulations would make their paper manufacturing process more effective and less costly, even though short-term costs could be high. Company representatives added that solid waste regulations were leading the company to use chemicals that are not as hazardous. \u2022 Representatives of the hospital indicated that OSHA\u2019s Blood-borne Pathogens Standard had helped reduce the number of needlestick injuries experienced in the hospital. They also said that the Clinical Laboratory Improvement Amendment regulations encouraged laboratories to look more closely at the quality of their work.",
      " \u2022 Officials from the glass company said federal regulations had created business opportunities for their company. They said the company created its environmental products and pharmaceutical services businesses to assist others in meeting their regulatory requirements of air pollution control and product safety testing. Company officials also said that federal regulations protected environmental quality, created safer workplaces for employees, and protected businesses from unfair business practices by their competitors. \u2022 A Minco official said she believes the company\u2019s requirement as a federal contractor to create an affirmative action plan has aided in the employment of a diverse workforce and fair employment practices. Another official at the company said OSHA\u2019s regulations have brought about a greater awareness of job safety for both management and employees.",
      " \u2022 Officials from Roadway, Zaclon, Bank B, and the glass company indicated that federal regulations provide a level playing field of uniform requirements for businesses. With this level playing field, federal regulations preempt multiple and often different state and/or local standards, making compliance easier and less costly. As pointed out by the glass company, it can be far more costly to track and comply with 50 different regulations than to comply with a single federal regulation in a given area. Conclusions Our work suggests that measuring the incremental impact\u2014direct costs, indirect costs, and benefits\u2014of federal regulations on individual companies is an extremely problematical endeavor. Although the companies clearly experienced indirect costs associated with federal regulations and recognized that those regulations provided benefits to society and to themselves,",
      " our discussions with the companies also indicated that measuring indirect costs would be extremely difficult. We encountered a number of serious obstacles in our effort to assess even the most straightforward of such costs\u2014direct incremental costs. Although all of the 15 companies participating in our review provided some data on their regulatory costs, none could provide comprehensive, verifiable measures of their direct incremental costs of complying with federal regulations. As shown below, the companies described several obstacles in the development of such information. \u2022 As discussed in chapter 2, the companies did not produce a comprehensive inventory of federal regulations applicable to their operations. For example, the companies found it difficult to distinguish federal regulatory requirements from those of other governmental jurisdictions and from their normal business practices.",
      " Therefore, there was no comprehensive basis for cost assessment. \u2022 Companies could not isolate incremental regulatory costs because they were unable to identify what costs would have been incurred in the normal course of business operations without federal regulations. \u2022 Companies\u2019 financial information systems were not geared to identifying costs associated with regulation. These difficulties do not necessarily mean that regulatory costs are not substantial or that the measurement of those aggregate costs is impossible. However, they do suggest that serious conceptual and methodological questions need to be raised and answered before studies that attempt to measure total current regulatory costs are used to guide public policy. The following are examples of such questions. \u2022 Which regulations are included in the universe for which cost measures are developed?",
      " If federal regulations are the focus, how were they distinguished from those of other jurisdictions? \u2022 Are incremental regulatory costs being measured? If so, how did the researcher determine what businesses would have spent in the absence of regulations? \u2022 What financial records were used to substantiate the cost figures, and what assumptions guided the collection of the data? Users of studies of regulatory costs need to be aware of the inherent difficulties and assumptions involved in producing such measures. Companies\u2019 Regulatory Concerns Focused on Regulations and Regulators To this point, this report has attempted to assess the impact of federal regulations on selected businesses by focusing on aggregates\u2014the total number of regulations applicable to a company and the aggregate burden (cost and other)",
      " of those regulations. Another way to understand the impact of regulations is to examine the concerns those businesses have about the particular regulations that comprise that aggregate. In a June 1994 study, we used this type of approach to obtain comments on a defined set of federal regulations. Employer and union representatives in selected businesses were asked about their experiences in dealing with 26 statutes and 1 executive order on workplace regulation, including the ADA, the Equal Pay Act, and the Service Contract Act. In summary, both groups generally supported the need for workplace regulations but voiced concerns about the operation of the overall regulatory process. For example, many of the employers said that certain paperwork requirements had questionable value.",
      " These employers also said that the regulatory approach used by many agencies was largely adversarial, characterized by poor communication, unfair and inconsistent enforcement, and vague laws and regulations. Both employers and union representatives called for agencies\u2019 providing a more service-oriented approach to workplace regulation; improving information access and educational assistance to employers, workers, and unions; and permitting more input into agency standard-setting and enforcement efforts. In this study, we asked officials representing the 15 participating companies to identify the specific federal regulations that they considered most problematic for their organizations. We also asked those officials what government (Congress or federal agencies) and businesses could do to address either the problems they identified or the federal regulatory process in general.",
      " In our instructions to the companies, we defined \u201cproblematic regulations\u201d as any federal program, regulation, or law that the officials viewed as causing their companies the greatest difficulty. We said a regulation could be considered problematic for a variety of reasons, such as being too costly, too vague, unnecessary, or duplicative. In contrast to the difficulties the companies experienced in compiling an aggregate list of regulations and determining incremental regulatory costs, all 15 companies provided examples of what they considered to be their most problematic regulations. In total, we received more than 100 such concerns from the participating companies. We developed written summaries of each of the companies\u2019 concerns and verified the accuracy of those summaries with company officials.",
      " We then sent the verified summaries to the appropriate regulatory agencies for their review and comments. In some cases, the agencies said that they needed more information to allow them to respond to the companies\u2019 concerns. For example, one agency said it needed to know the state in which a company was located so that it could be certain that the company\u2019s concern involved a federal regulation and not a state or local regulation. In those cases, we attempted to obtain additional information from the companies or permission to disclose information we already had that could address the agencies\u2019 questions. We were usually able to provide the agencies with the additional information they said that they needed. However,",
      " in some cases we could not provide the information because doing so could have led to the identification of companies that wanted to remain anonymous. In those cases, the agencies responded as best they could with the information that was available to them. By obtaining and presenting agencies\u2019 responses to the companies\u2019 concerns, we attempted to present a balanced picture of the regulatory issues involved. However, it is important to note the limitations of this methodology and presentation sequence. The companies were able to set the agenda by specifying the topics to which the agencies had to respond. Also, although agencies could question or dispute the companies\u2019 concerns about regulatory issues, we did not give companies a comparable opportunity to respond to the agencies\u2019 assertions.",
      " Lastly, agencies had the final word regarding the companies\u2019 concerns, but this presentation should not be interpreted to imply our agreement with the agencies\u2019 positions regarding these issues. Companies Expressed Concerns About Regulations and Regulators\u2019 Actions The 15 companies\u2019 regulatory concerns varied substantially. Many of these concerns were about specific federal regulations, but others focused on federal regulatory agencies\u2019 actions and the interrelationship between regulations at other levels of government. After analyzing them, we grouped the companies\u2019 concerns into the following 10 broad themes: (1) Compliance with a regulation was costly and/or those costs outweighed the benefits provided by the regulation. (2)",
      " The compliance costs associated with a regulation affected the companies\u2019 competitiveness. (3) The regulation at issue was unreasonable (e.g., it was not scientifically based). (4) The requirements associated with a regulation were difficult to understand, either because of the technical language involved or because the requirements kept changing. (5) Certain regulatory requirements were unnecessarily rigid or inflexible. (6) The paperwork or process requirements associated with a regulation were excessive and costly. (7) The penalties imposed on companies for noncompliance were too severe. (8) Regulators were overly deficiency-oriented or had a \u201cgotcha\u201d enforcement approach. (9) Regulators lacked knowledge of industries and provided little assistance to businesses trying to comply with the regulations.",
      " (10) Regulations from different agencies or levels of government were poorly coordinated or duplicative. About half of the concerns that the businesses expressed included elements of more than 1 of these 10 themes. For example, 14 of the companies\u2019 concerns indicated that certain regulations were both too costly and unreasonable. Similarly, a number of concerns involved both paperwork issues and regulatory costs. Some individual concerns included as many as five themes. Each of the 10 company concern themes is discussed below along with the associated comments from the regulatory agencies. Like the companies\u2019 concerns, the agencies\u2019 comments varied substantially. In some cases, the agencies agreed with the companies\u2019 concerns and said that actions had been taken or needed to be taken to address those concerns.",
      " In other cases, the agencies disagreed with the companies\u2019 portrayal of an enforcement action or of a regulation\u2019s requirements. In still other cases, the agencies said the companies\u2019 concerns were a function of the regulations\u2019 underlying statutory requirements. Appendix II contains a sample of the companies\u2019 concerns and the applicable agencies\u2019 responses for each of the 10 themes. Companies Said Regulatory Compliance Was Costly or Costs Outweighed Benefits Company officials most frequently expressed concerns about the cost of complying with particular federal regulations. Representatives of 14 of the 15 companies mentioned this concern about at least one regulation. For example, one official said DOT-required hazardous materials training cost the company $475,",
      "000 annually. Another company official said that as a result of changes to CAA\u2019s regulatory requirements, the cost of air quality testing, which was needed to get approval of a construction permit, increased from $10,000 to $30,000. In response to these concerns, the agencies most frequently said that the companies had overstated regulatory compliance costs. For example, EEOC and DOJ raised questions about the $750,000 Roadway said it spent to comply with ADA requirements. Both agencies said that practical experience to date indicates that the cost of ADA compliance is limited. EEOC cited a study commissioned by Sears, Roebuck and Co.",
      " showing that less than 3 percent of the accommodations that Sears made to comply with the ADA cost the company more than $1,000. In several cases, agencies said the costs incurred by the companies might be a function of the way that they complied with the regulations. For example, one company said that OSHA required them to replace certain electrical receptacle boxes with more expensive ones. In response, OSHA said the company only had to abate the electrical hazard, and it was up to the company to decide how to accomplish that goal. According to OSHA officials, the company could have found other ways to power its equipment or used other,",
      " less expensive receptacle boxes available for indoor use. OSHA officials added that their standard is consistent with the national electrical code, which is recognized by most authorities as a safe way to provide electrical energy to buildings. A number of companies also said that they believed the costs associated with compliance with certain regulations outweighed any regulatory benefits. Many companies said they found it difficult to see any benefits associated with the regulations they mentioned, either to themselves or to society in general. Other companies said they did not mind spending money to comply with federal regulations, but not when costs exceeded the benefits. For example, some companies said that although they had substantially met the goals set in particular regulations,",
      " total compliance would be extremely costly and would far outweigh any marginal benefits provided by those increased costs. In other cases, two companies mentioned having to retrofit machinery and/or train more employees than necessary to satisfy certain regulatory requirements\u2014expenditures that they said were unnecessary and yielded no apparent benefits. Agencies responding to these concerns frequently said that the companies did not recognize the benefits that the regulations provided and/or that they overstated the costs. Another common agency response was that the company had misstated or misinterpreted the regulatory requirement. In several instances, the agencies said that the particular regulatory procedure mentioned by the company was required by law. For example, one company said that the nondiscrimination test IRS requires in the administration of the company\u2019s 401(k)",
      " thrift savings plan was costly, and that the IRS requirement for a separate audit of the plan was an unnecessary expense. However, IRS said that both of these requirements were imposed by statute. In other cases, though, the agencies agreed with the companies\u2019 cost concerns and said they had taken or were taking action to make regulatory compliance less costly. Examples 1 through 4 in appendix II illustrate companies\u2019 concerns and agencies\u2019 responses relating to cost and cost-benefit issues. Companies Said Regulatory Costs Affected Competitiveness Nine companies indicated that the costs associated with compliance with certain regulations were a disincentive to their investment or expansion decisions, or otherwise affected the companies\u2019 competitiveness in the marketplace.",
      " Some of the companies said that particular regulations prevented them from expanding their operations because their compliance costs would increase disproportionately to the profits they expected to generate from the expansion. Other companies said that compliance costs imposed a potential liability that discouraged investment. Still other company concerns were that some regulations applied to only certain types of businesses, thereby giving a competitive advantage to similar businesses that were exempt from those regulations. In response, the agencies often acknowledged that regulatory compliance costs could affect companies\u2019 competitiveness and/or flexibility of decisionmaking. However, they frequently said that the requirements in question were statutorily mandated. Several agencies also indicated that the regulations in question were necessary and yielded benefits that the companies did not mention.",
      " In several cases, the agencies said they were working to improve the operation of the regulations the companies cited as inhibiting competition, making them more consistent, flexible, or less burdensome. For example, one company said it would not purchase property that had previously been the site of industrial operations because of the potential cleanup liability under the Comprehensive Environmental Response, Compensation, and Liability Act. Thus, the company felt that its options for choosing new sites were restricted at a time when it needed property for business expansion. EPA responded to this concern by indicating that it has initiatives under way to encourage economic redevelopment through environmental cleanup. Also, EPA said it has encouraged redevelopment of these sites by reassuring prospective new owners that they may not have to face Superfund liability.",
      " Also, some agencies\u2019 responses indicated that the way in which companies chose to comply with the regulations could have affected their costs. For example, Bank C said that it had to create 15 new forms as a result of a regulatory requirement, but FRB said that there was no requirement that bank personnel had to complete forms to accomplish the goal of the regulation. Examples 5 and 6 in appendix II illustrate two of the companies\u2019 concerns and agencies\u2019 responses relating to the effect of regulatory costs on competitiveness. Companies Said Regulations Were Unreasonable Twelve of the 15 companies said that certain regulations they dealt with were unreasonable because they were either (1)",
      " not based on sound scientific research, (2) outdated, (3) unlikely to achieve their intended goals, or (4) unreasonable for some other reason. For example, officials of the paper company objected to a DOT requirement that each of the company\u2019s several hundred locations submit drivers\u2019 logs and other documents to the company\u2019s headquarters to help DOT\u2019s review. The company thought it was impractical and unnecessary to maintain all of the drivers\u2019 logs in one place. In another example, the paper company alleged that title V of CAA requires the regulation of extremely low levels of emissions, and that the company was required to obtain a permit for methanol emissions at the company\u2019s fence line that are no more concentrated than in a person\u2019s breath.",
      " The regulatory agencies frequently disagreed with the companies\u2019 characterization of their regulations as unreasonable. In about half of these areas of disagreement, the agencies said that the regulations did, in fact, have a rational basis and/or provided benefits the companies did not acknowledge. For example, EPA officials said that the paper company\u2019s concern creates the misleading impression that paper mills are subject to title V only for low levels of methanol emissions when, in fact, large emissions of other pollutants would easily justify the need for a title V permit even if the mill had no methanol emissions. In the other half of these cases, the agencies said that the companies had mischaracterized the regulation or the incident involved.",
      " For example, hospital officials questioned the reasonableness of what they described as a revised Federal Aviation Administration (FAA) rule that shortened the shift lengths of helicopter pilots. However, FAA said that the shift length rules had not recently changed. In several other instances, the regulatory agencies said that the regulatory provisions the companies characterized as unreasonable were required by law. For example, HUD officials said that disclosure requirements that bank officials said were unreasonable were established by Congress in specific provisions of the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq). However, in some cases the agencies agreed with the companies\u2019 concerns about the reasonableness of regulations,",
      " and said that they or Congress had taken or were taking steps to minimize the problems the companies had experienced. Examples 7 through 10 in appendix II illustrate companies\u2019 concerns and agencies\u2019 responses relating to the reasonableness of regulatory requirements. Companies Said Regulatory Requirements Were Difficult to Understand Most companies said they did not understand certain regulatory requirements because they were vague or complex. As a result, the companies said they had difficulty determining whether regulations applied to them and, if so, what they needed to do to be in compliance. Some companies cited confusing, ambiguous, or conflicting terminology used in the regulations themselves or on the required forms. Some companies said they were not able to obtain clarification of the regulations\u2019 requirements from agency staff.",
      " Other companies said they had to hire outside consultants to explain the requirements or complete the forms, but even those experts are sometimes not able to help them. For example, paper company officials said OSHA regulations require their paper machines to have mechanisms that will stop the machines \u201cquickly,\u201d but the rule does not define what \u201cquickly\u201d means, and experts do not agree on a single definition. In many instances, the regulatory agencies agreed with the companies that the regulations cited in their concerns were vague and/or complex. The agencies often said that some kind of action had been taken or was being taken to clarify the regulations and make them less complex.",
      " For example, regulators frequently cited direct compliance assistance, written guidance, simplified processes, toll-free telephone numbers, computerized bulletin boards, and presentation of examples within the regulations themselves as ways that they have tried to make the requirements more understandable. In several instances, the regulators said the complexity of the regulations in question\u2014particularly IRS regulations\u2014was a function of the law or actions taken by Congress. In other cases, the regulators indicated that the regulations were complex because of the inherent complexity of the subject matter being regulated. Companies also said they did not understand regulatory requirements because of frequent changes to the regulations, thereby making it difficult to stay up to date and know what was required to be in compliance.",
      " For example, officials from the hospital said that it was difficult to keep pace with the frequently changing Medicare and Medicaid billing rules, which caused the hospital\u2019s computer programmers to spend numerous hours attempting to update the automated patient billing system. In virtually every case where a company complained about frequent regulatory changes, the agencies said that the changes were caused by congressional, not agency, action. For example, in response to bank officials\u2019 concerns about frequent changes in the tax code, Department of the Treasury officials indicated that the changes were initiated by Congress. Treasury officials said they had urged Congress to stabilize the tax code so that taxpayers and their advisers could understand its requirements.",
      " FDIC officials said that the number of changes and the level of detail in their call reports were driven in part by statutory requirements. Examples 11 through 13 in appendix II illustrate companies\u2019 concerns about regulations that were vague, complex, and/or frequently changing and agencies\u2019 responses to those concerns. Companies Said Regulations Were Inflexible Many companies said some federal regulations that they have to comply with were unnecessarily inflexible or rigid. The companies expressed frustration with the same standards or regulations being applied to all companies, locations, or situations without any consideration to other factors that they believed should be taken into consideration. Some companies felt that in certain regulatory situations,",
      " a variety of factors should be considered in determining whether a company should have to comply with that regulation. Examples of the factors the companies believed should be considered included the number of employees in a company, the extent to which a company uses a particular chemical, and the amount of pollutant discharged as the result of a company\u2019s process. For the most part, the agencies disagreed that the regulations or the situations the companies cited were examples of unnecessary inflexibility. In some of the situations the companies described, the agencies said that the requirements were justifiable regardless of other factors that the companies believed should be taken into consideration. In other cases, the agencies said that the regulations the companies cited already had some flexibility built in or that the companies had misunderstood the process or the regulation cited.",
      " In some cases, the regulators said that there was no need for the regulations to be more flexible because the standards the company cited were not even applicable to the situation the company described. Examples 14 and 15 in appendix II illustrate companies\u2019 concerns and agencies\u2019 responses about regulations that are considered to be inflexible. Companies Said Paperwork and Process Requirements Were Excessive or Costly Officials from 14 of the 15 companies said certain regulations\u2019 paperwork or other procedural requirements were excessive. The paperwork that company officials cited as problematic included (1) forms or reports that had to be periodically submitted to federal agencies and/or kept for their own records and (2)",
      " permit applications that had to be submitted to an agency to obtain approval for certain company activities. Most of the paperwork or process costs the companies mentioned related to labor costs associated with having their employees complete the required forms or reports. For example, the hospital said it had to hire a consultant for $50,000 to help complete the annual Medicare cost report. Two of the companies indicated that they would not mind bearing the expense of preparing regulatory reports if they felt the reports were actually used by federal agencies. For example, Bank B considered the reporting requirements under the Bank Secrecy Act to be of negligible value to law enforcement agencies. Bank officials said they had seen little evidence of law enforcement agencies\u2019 using the information and few prosecutions resulting from information in these reports.",
      " Other companies\u2019 concerns focused on the costs associated with having to prepare similar reports for regulators at the federal, state, and/or local levels. Agencies responding to these concerns most frequently said they agreed that the paperwork or procedural requirements could be expensive. They also said their agencies had taken or were taking action to address the companies\u2019 concerns. In several other instances, the agencies said that the costly paperwork or procedures were required by law. For example, in response to the hospital\u2019s concern about the annual Medicare cost report being a burden to prepare, HHS officials said that the Social Security Act requires the agency to maintain a system of cost-reporting for prospective payment system hospitals,",
      " including annual information to settle costs associated with health care services rendered to Medicare beneficiaries. In about half of the other responses, the agencies said that the companies had misinterpreted or misstated the paperwork or procedural requirements; therefore, they were incurring unnecessary expenses. For example, although one company complained that they had to keep certain employee safety training records \u201cforever,\u201d OSHA said that no such employee training records were required and, therefore, no retention requirement existed. Examples 16 through 19 in appendix II illustrate companies\u2019 concerns and agencies\u2019 responses relating to paperwork and process issues. Companies Said Regulatory Penalties Were Too Severe Many companies expressed concerns that the penalties imposed on them for noncompliance with regulations or their requirements were too severe.",
      " For example, the glass company said sizable penalties had been imposed on them for procedural \u201cmistakes,\u201d such as not filing pension-related paperwork on time. Another company said it was fined several hundred thousand dollars for not obtaining a federal wastewater discharge permit. The company thought the penalty for this offense was too severe given that the company had a state permit that it believed was sufficient. In addition, a Metro Machine Corporation official said OSHA currently holds companies, rather than individual employees, accountable for violations caused by employee negligence or willful removal of company-installed safety devices. He said OSHA should differentiate between corporate negligence and employee responsibility. In response to these concerns,",
      " the agencies most frequently said that the penalties the companies cited would be imposed only in the most egregious circumstances. For example, in response to the Metro Machine Corporation concern, OSHA said that when it conducts an inspection and determines that a company\u2019s management is attempting all reasonable steps to comply and get employees to comply but the employees are systematically refusing to comply with safety and health standards or rules, OSHA will excuse the employer from a violation. OSHA officials added that the Occupational Safety and Health Act does not permit citing employees for violations. In another response, EPA said two companies\u2019 concerns about possible imprisonment of company officials for failing to disclose certain information would be imposed only in instances where those officials had knowingly falsified information or willfully failed to provide the required public notice of the release of a hazardous substance.",
      " Agencies also said that the penalties the companies complained about were established in the underlying statutes and, in other cases, that the agency had taken or would take action to address these concerns about the severity of certain regulatory penalties. Examples 20 and 21 in appendix II illustrate companies\u2019 concerns and agencies\u2019 responses to penalty issues. Companies Said Regulators Had a \u201cGotcha\u201d Enforcement Approach Officials from more than half of the companies cited incidents in which regulators evidenced a \u201cgotcha\u201d manner or were more interested in finding companies in noncompliance with regulatory requirements than helping companies comply with the regulations. For example, one company said an IRS official unexpectedly visited its facility and,",
      " in a \u201cnasty\u201d manner, threatened to close the company down if the company did not immediately remit taxes that were reportedly unpaid. In another instance, a company said that EPA could initiate enforcement actions even when companies self-report deficiencies. Company officials also cited examples in which regulators were more focused on procedural or administrative issues (e.g., filing timely reports) than on whether the objective of the regulation was being achieved (e.g., less air or water pollution from their manufacturing processes). The agencies responded to the companies\u2019 comments in a variety of ways. The agencies often said that (1) their enforcement approaches were reasonable and consistent with their policies,",
      " (2) the companies had mischaracterized the incidents or the rules involved, or (3) they have or will take action to minimize these problems. For example, OSHA said that it had used citations and penalties as workforce performance measures in the past, but said it has now \u201cput a stop to that practice.\u201d EPA said that in 1995, it revised its policy to generally reduce or eliminate penalties when violations are self-disclosed and corrected. In response to the company\u2019s concern about the IRS employee\u2019s demand for immediate payment, IRS said it did not approve of employees who do not follow IRS procedures that require employees to do their jobs in a professional,",
      " ethical, and fair manner. Examples 22 and 23 in appendix II illustrate the types of concerns companies had about how agencies enforce their regulations and the agencies\u2019 responses to those concerns. Companies Said Regulators Were Not Always Helpful or Knowledgeable Some companies said regulators were uninformed about the regulations they enforced and did not understand the business practices of the companies they regulate. For example, one company said IRS auditors who conducted an audit of their company in 1994 were not knowledgeable about business accounting practices or IRS rules. Also, some companies said regulators were not very helpful when the companies sought assistance. For example, although the tank car company repeatedly tried to obtain clarification from EPA about the meaning of the term \u201capproaching atmospheric,\u201d the company said it was unable to get any assistance from EPA.",
      " In another case, officials from the fish farm said they had difficulties getting assistance from DOL on how to interpret the Family and Medical Leave Act (FMLA) regulations when an employee is on leave under FMLA and does not intend to work after the leave period. Relatedly, officials from some companies said agencies do not always provide companies with sufficient opportunities for input into the rulemaking process or adequately consider the comments they receive during that process. For example, Bank B said that although the bank provided comments on Regulation C and Regulation DD, it did not believe the Federal Reserve addressed its concerns before finalizing the two regulations. Agencies responded in various ways to the companies\u2019 concerns about regulators\u2019 lack of knowledge and assistance.",
      " In a few cases, the agencies indicated efforts were under way to improve their staffs\u2019 knowledge of the industries they regulate. For example, IRS said it was working to develop a highly skilled frontline workforce that is more knowledgeable about different industries. In a response to a concern about lack of assistance, OSHA said it has implemented a number of information-dissemination projects and plans to undertake new initiatives to improve the availability of safety and health data to the public. In response to the rulemaking concerns, agencies said companies usually get the opportunity to provide comments as a rule is being developed. Also, one agency said that while all comments received are considered,",
      " these comments cannot always be incorporated in the final regulation. For example, OSHA said it had been working with stakeholders to identify the most pressing new priorities for agency action and had stepped up its efforts to involve business and labor in the entire regulatory process. Examples 24 and 25 in appendix II illustrate companies\u2019 concerns and agencies\u2019 responses about regulators\u2019 level of knowledge, the rulemaking process, and the availability of assistance from regulators. Companies Said Regulations Were Duplicative and Poorly Coordinated Some of the companies described what they believed were conflicting regulatory requirements from different federal agencies or, in some cases, from the same agency. For example,",
      " officials from the paper company claimed that sections of OSHA\u2019s pulp and paper standards (29 C.F.R. 1910.261) conflicted with other OSHA regulations, leaving company officials confused about what to do. Officials from this company also said DOT and OSHA had different and conflicting standards for defining corrosive materials. We also heard concerns about overlapping and duplicative regulations between federal and state or local agencies. Multiplex said that EPA required the local sewer district to test the company\u2019s sewer effluent\u2014the cost of which was charged to the company\u2014and then the local sewer district required Multiplex to perform the same tests. In response to the companies\u2019 concerns about coordination and duplication issues,",
      " several of the agencies\u2019 responses indicated that action has been or will be taken to remedy any further or potential confusion about regulatory requirements. For example, OSHA said it had been working closely with EPA to develop uniform process safety management standards to protect workers from accidental chemical releases. Also, some agencies indicated that the companies had mischaracterized the regulations or other factors in the companies\u2019 concerns. In response to a company\u2019s concerns about the overlap between FMLA and the ADA, DOL said the laws contain differing employee protections that serve distinctly different purposes. However, OSHA officials also said that on July 22, 1996, OSHA published proposed regulations to eliminate duplicate or redundant standards from its rules.",
      " Examples 26 through 29 in appendix II illustrate the companies\u2019 concerns and agencies\u2019 responses about coordination and duplication issues. Companies Suggested Ways to Address Regulatory Problems and Improve Relations With Regulators We also asked companies for suggestions on what government and businesses can do to address their regulatory concerns. Although most of the companies\u2019 proposals focused on actions that they believed regulatory agencies and/or Congress should take, they also suggested some steps businesses could take to make federal regulations less problematic. Companies Wanted Fewer Regulations Some of the companies said they simply want fewer regulations, or at least a halt in the growth of regulatory requirements. They suggested that the federal government could accomplish these goals by taking the following actions:",
      " \u2022 eliminate one old regulation for every new regulation issued, \u2022 review existing regulations for their relevance, and \u2022 eliminate paperwork and other regulatory requirements that are not related to the intent of the underlying statute. Companies Wanted Assurance That Costs Justify Benefits Officials from some of the companies said that if the federal government cannot reduce the total number of regulations, at a minimum, they wanted an assurance that the benefits of compliance justify the costs. To do this, officials suggested that regulators do cost-benefit analyses before issuing regulations. Another official said cost-benefit analyses could address the issue of \u201cbad science\u201d underlying some regulations, and could result in agencies\u2019 implementing only regulations that have proven benefits.",
      " However, another company official said he had difficulty envisioning how a sound cost-benefit analysis could work. He suggested that each regulation should have a sunset date and, before reauthorization, the responsible agency should determine whether the regulation was achieving its original intent. Companies Wanted Flexibility to Determine How to Comply With Regulations \u201c... government should move away from the current \u2019specification based\u2019 regulatory process and toward a new approach in which government and business jointly establish performance-based environmental, health, and safety standards. Government and business should both be accountable for achieving measurable, quantifiable objectives. Goals would be accomplished in a stepwise fashion, improving cost effectiveness by allowing parties to learn from what works.",
      " Government and business should work cooperatively and share the burden for obtaining information and demonstrating results. A peer review procedure could be used to maintain the quality and integrity of the process. Over time, the process would force industry and regulators toward low-cost, high impact solutions with proven effectiveness. Market-based incentives could be widely used, as there are currently few incentives for business to remedy the environmental impact of its operations. The new paradigm would allow those closest to a problem to solve it in the most cost-effective manner....\u201d Officials from another company agreed with this assessment, adding that the federal regulatory process could be improved if laws were developed that address general goals and objectives and were of long duration.",
      " The officials suggested developing long-term strategies that make laws less susceptible to short-term political whims. Another company official said Congress\u2019 tendency to be prescriptive and specific in writing legislation is driven even further by lobbyists on both sides of the issues. The official said that agencies would do a better job of writing sensible regulations if the legislation were less constraining. Companies Wanted More Assistance and Support From Regulators Many of the company officials said that regulators should offer companies more assistance as they try to comply with federal regulations. Specifically, the officials said that regulators could \u2022 adopt a partnership approach with companies to help them to comply with \u2022 serve as consultants to companies, \u2022 provide companies with compliance training,",
      " \u2022 support companies that make reasonable attempts to comply with \u2022 give companies a chance to correct regulatory violations before being \u2022 hire credible and technically competent staff, and \u2022 use review commissions to assist businesses in compliance with regulations. Companies Suggested Ways They Could Improve the Regulatory Environment Although officials of several companies clearly believed that the federal government could make changes to improve the regulatory environment, some officials also believed that companies had a role to play in that regard. They suggested several actions that businesses could take to make regulations less problematic, including the following: \u2022 devote more time to commenting on proposed regulations during the \u2022 devote sufficient resources to becoming more knowledgeable about \u2022 ensure that company management and employees are trained to properly \u2022 participate in trade and professional organizations that interact with Congress and federal agencies;",
      " \u2022 ensure that top management supports a regulatory compliance strategy; \u2022 modernize and make better use of information processing systems; and increase their employees\u2019 awareness of the seriousness of complying with federal regulations, the potential for problems related to noncompliance (e.g., an increase in job-related injuries), and the fines that could be imposed on them or the company for failure to comply. Many of the suggestions from the companies were consistent with the agencies\u2019 regulatory improvement goals. For example, several of the agencies said they have, or were planning to implement, active outreach programs that disseminate information to the companies through written communications, seminars, toll-free telephone numbers,",
      " and computer bulletin boards. In addition, several agency officials said they are in the process of systematically eliminating outdated and impractical regulations. Two agencies said they were shifting to a results-oriented focus because in the past their agencies focused too heavily on processes and activity. DOL officials said they intend to make greater use of negotiated rulemaking\u2014a process in which representatives of the government and all interested parties, including employers, actually draft the proposed rule for public comment. Conclusions The 15 participating companies provided us with a lengthy and varied list of regulatory concerns, the most common of which involved the cost of regulatory compliance. The companies also frequently said that federal regulations were unreasonable or inflexible,",
      " paperwork was excessive, regulatory requirements were difficult to understand, and regulators had a \u201cgotcha\u201d enforcement approach. Many of the regulatory agencies indicated that they were aware of the companies\u2019 concerns and, in a number of cases, the agencies said that they were taking or had already taken action to alleviate the problems. In several other cases, the agencies said that the companies\u2019 concerns were a function of the statutes underlying the regulatory requirement. However, in many instances, the agencies disagreed with the companies\u2019 comments, frequently saying that the companies did not recognize the benefits of the regulations or the companies mischaracterized, misstated, or misinterpreted the regulations involved.",
      " The companies\u2019 concerns and the agencies\u2019 responses indicate that communications between the companies and the agencies are not always effective. Companies do not seem to have enough information about their regulatory responsibilities, and they may be reluctant to seek that information from regulatory agencies. Agencies, on the other hand, have an array of information about their regulatory requirements; however, they do not appear to be getting the information to companies in such a way that the companies understand what regulations are applicable to them and how to comply with those regulations. The companies and the agencies had several suggestions to alleviate this communication gap and improve relations between them. Some of these suggestions were consistent with agencies\u2019 regulatory improvement goals.",
      " For example, the companies indicated they wanted more information made available to them about regulatory compliance. Meanwhile, the agencies said they were using or were planning to implement a number of outreach programs, including seminars, computer bulletin boards, and toll-free telephone numbers. However, the degree to which these various informational mechanisms will improve the flow of communication will depend to at least some extent on whether they are integrated, easy to use, and provided in a manner that businesses are willing to use them. Overview and Conclusions Government regulation, particularly at the federal level, has long been the subject of public debate. At times, that debate has been extremely contentious, with opponents and defenders of federal regulatory policy staking out very different positions.",
      " Opponents contend that some federal regulations are not needed and those that are needed often have become too burdensome. Therefore, opponents believe agencies\u2019 regulatory authority should be limited and closely scrutinized. Those defending federal regulations do not want to unnecessarily impose burdens but contend that federal regulatory standards are needed to provide certain societal benefits, such as safer transportation, cleaner air and water, greater workplace safety, and protection for some individuals and groups. Nevertheless, a consensus has emerged within government that the federal regulatory process needs reexamination. Both Congress and the executive branch have initiated efforts to improve that process. A number of legislative proposals have been introduced in the 104th Congress to change the federal regulatory process.",
      " Several of those changes have been enacted, including new paperwork reduction goals and new judicial review processes. Congress has even made itself part of the regulatory review process by instituting an expedited process to reject agency rules that it finds objectionable. The administration\u2019s regulatory reform efforts have addressed a number of areas as well, including eliminating and revising existing regulations; changing the performance measures of agencies and regulators to focus on results, not process and punishment; and working with the regulated community in the development of new regulations. A great deal of the debate about federal regulation has centered on whether the burdens associated with federal regulations outweigh the benefits that those regulations are intended to provide.",
      " A number of attempts have been made to measure the burden of federal regulations. Some of these measures are only indirect indicators of regulatory burden (e.g., the number of regulators and the number of pages in the CFR). Other, more direct measures are of questionable validity (e.g., paperwork burden-hour estimates). For example, one study of the direct cost of federal regulations estimated that their cost to the economy would be $607 billion in 1995. However, the validity of this estimate has been questioned by economists and others. Other studies of regulatory costs within particular sectors of the economy have been similarly criticized.The benefits of federal regulations are generally regarded as even more difficult to measure than regulatory burdens,",
      " so measures of those benefits may also be of questionable validity. In this review, we did not try to measure the overall burdens or benefits of federal regulations. We focused our analysis on a limited number of businesses so that we could better understand the issues and the variables involved in the federal regulatory process. Specifically, we attempted to develop information on the impact of federal regulations on selected businesses by determining (1) which federal regulations the businesses participating in our review and relevant federal agencies believed were applicable to those businesses, (2) the impact (particularly cost but also other effects) the businesses believed those regulations had on them, and (3) the regulations those businesses considered were most problematic and relevant federal agencies\u2019 responses to those concerns.",
      " Although our objectives were modest in comparison to those of many previous studies of regulations, we experienced a number of difficulties in conducting this review. First, most of the interest groups we contacted\u2014both critics and defenders of federal regulations\u2014did not provide the names of businesses with whom we could discuss these issues. Some of these groups cited concerns about confidentiality or the priority of other business as the reasons why they would not provide nominees. Second, most of the 51 businesses that we were able to identify and contact through other means refused to participate in our study, frequently citing time and resource constraints. Some of these businesses had publicly criticized federal regulations or regulatory processes.",
      " Third, many of the 15 businesses we contacted, which had agreed to participate in the review, did not provide information that they initially indicated that they would be able to provide. For example, although nearly all of the businesses said they could develop a list of applicable federal regulations, none of the businesses provided a complete listing. None could provide comprehensive data on the incremental costs of regulations. Our experience and the information we were able to collect led us to several conclusions. First, we believe that comprehensive, empirically based data about the cost of federal regulations to individual businesses do not readily exist and could not be developed without a great deal of time and effort on the part of both the regulators and the regulated community.",
      " Without such data, the cost of regulations to a business or the economy as a whole can only be roughly estimated. Second, the agencies also said that they are reexamining at least some of the federal regulations and processes that businesses found most problematic. If so, the businesses may feel some reduction in the burden associated with those regulations in the future. Third, we believe that communication between businesses and federal regulators about which regulations are applicable to particular businesses and how to comply with specific regulatory requirements is not always effective. Finally, although the agencies frequently said that problematic regulations were statutorily driven, some Members of Congress believe agencies sometimes establish regulations that go beyond the intent of Congress.",
      " This suggests that an opportunity exists for improved communication between Congress and federal regulators\u2014communication that may occur through recently enacted congressional regulatory review procedures. Cost of Regulations Is Difficult to Determine As previously noted, the burden associated with federal regulations is generally considered to be easier to measure than the benefits of regulations. Within the burden category, direct regulatory costs are generally regarded as easier to measure than other types of burden (e.g., negative effects on competitiveness or productivity). Conceptually and logistically, it would seem to be easier to calculate regulatory costs with regard to a single business than for an entire industry or the economy as a whole. However, our work suggests that it is extremely difficult to develop a comprehensive,",
      " data-based measure of direct incremental regulatory costs, even for an individual business. The first step in determining the cost of federal regulations to a business is to identify all of the regulations applicable to that business. Any comprehensive tally of a business\u2019 regulatory costs will only be as complete as its list of applicable regulations. Although nearly all of the businesses we contacted said they could develop a complete list of applicable federal regulations, none did so. As we discussed in chapter 2, development of such a list is very difficult, requiring a sophisticated understanding of the circumstances in which federal regulations apply as well as a detailed understanding of a company\u2019s business processes and products.",
      " The businesses we contacted generally did not have prepared lists of applicable regulations, and most found it difficult to distinguish between federal, state, and local regulations or said they did not have the time or resources to develop such a list. Although it may seem logical to assume that regulatory agencies would be able to easily develop a list of applicable regulations, in many cases the agencies would have to gather detailed information about the companies\u2019 business processes and products to determine regulatory applicability. Another step in determining the cost of regulations to a business is to obtain data on its expenditures that are directly traceable to federal regulatory requirements and estimate its incremental regulatory costs. Because most businesses would have incurred some expenses related to regulatory goals,",
      " such as a safe workplace or the prevention of environmental damage, even if no regulations existed, the incremental measure is the most appropriate gauge of a company\u2019s regulatory costs. To identify their incremental regulatory costs, businesses must subtract expenses they would have incurred in the absence of regulatory requirements from their total expenditures in such areas as worker safety or environmental protection. However, the businesses we contacted did not collect or retain data on their incremental regulatory compliance costs, probably because there is no business reason for them to do so. The businesses also indicated that they could not develop incremental cost data because they could not say what actions they would have taken or what expenses they would have incurred in the absence of regulatory requirements.",
      " In summary, determining the actual cost of federal regulations to a single company or the economy as a whole requires data\u2014data that the companies we visited did not have and that our work showed would be extremely difficult for them to obtain or develop. The universe of regulations for which cost data should be gathered was difficult for the companies to identify and incremental cost data could at best be roughly estimated because the businesses could not determine what expenses they would have incurred if current federal regulations did not exist. We believe that these problems are unlikely to be unique to the companies we visited. Therefore, unless the breadth of companies\u2019 regulatory responsibilities is made clear and the incremental costs of regulations can be accurately gauged,",
      " measures of the cost of regulations to a company or the economy as a whole should be viewed as estimates, not precise measures of regulatory burden. The more these estimates rely on empirical data and sound assumptions, the greater value they hold for decisionmakers. Public policymakers should use regulatory cost estimates only with a clear understanding of their underlying conceptual and methodological bases. Agencies Said Many Regulatory Concerns Are Being Addressed The agencies\u2019 responses to the companies\u2019 regulatory concerns also indicated that many of the regulations or regulatory processes underlying those concerns were being reviewed or had recently been changed. Listed below are some agencies\u2019 responses to companies\u2019 concerns. \u2022 EPA said it had proposed allowing oil recovered from collocated and/or commonly owned organic chemical plants to be exempt from its RCRA hazardous waste regulations.",
      " \u2022 Treasury officials said their agency was issuing a proposed regulation that would dramatically reduce the reporting obligations of banks under the Bank Secrecy Act.\u2022 DOL, IRS, and PBGC said that they had made a number of regulatory changes to make it easier for businesses to establish pension plans. They also said that new pension simplification proposals announced by the President in June 1995 would, if enacted, simplify the rules even further.\u2022 EPA said it was reexamining its data needs and ways to improve its data gathering systems for the RCRA hazardous waste management program. The agency also said that, for certain companies, it had completed a number of actions that significantly reduced the reporting burden associated with the EPCRA Form R report,",
      " thereby reducing companies\u2019 reporting requirements from nine pages to two pages. \u2022 EPA said it has published guidelines for reducing or eliminating penalties when violations are self-disclosed and corrected. EPA also said that its policy is to generally provide penalty reductions for such matters as good faith efforts to comply, ability to pay, and other factors. The number of times that the agencies indicated that they were taking action or had already taken action regarding areas of concern to the companies suggests that a variety of regulatory reform initiatives are under way within the federal government. As noted in chapter 1, every president in recent years has attempted to reform the regulatory process, and both the Clinton administration and Congress have recently taken a number of reform actions.",
      " The administration\u2019s National Performance Review and other initiatives in this area, such as those aimed at eliminating certain reporting requirements and reducing penalties for self-disclosed violations of certain regulations, are part of this larger effort. Also, Congress\u2019 recent assumption of a role in the review of proposed regulations also presages possible modification of regulations that Congress concludes are uneconomic or otherwise objectionable. We have not examined the initiatives the agencies described to determine whether they have been implemented or whether they will actually afford the businesses we talked with in this study the kind of regulatory relief they sought. If the changes the agencies described are made, the businesses may see a reduction in at least some of the regulatory burden that they viewed as most problematic.",
      " Communication Between Businesses, Regulatory Agencies, and Congress Is Not Always Effective The information that we collected regarding applicable federal regulations and what the businesses viewed as their most problematic regulations strongly indicated that communication between businesses and federal regulatory agencies has not always been adequate to meet their respective needs. Both businesses and agencies need information to determine which regulations are applicable to particular companies\u2014information that both parties said would require substantial time and resources to obtain. However, agencies have the information that businesses need, and vice versa; what seems to be lacking is an effective exchange of that information. Poor communication can also lead to businesses\u2019 misunderstanding regulatory requirements, which can in turn lead to compliance problems or unnecessary expenditures.",
      " Finally, opportunities appear to exist for improved communication between Congress and federal regulatory agencies regarding the consistency of regulations with their statutory underpinnings. Recently enacted regulatory review procedures may provide the vehicle for that communication. Determining Applicability of Regulations Difficult Without Communication The information that we obtained from federal regulatory agencies on the factors that determine the coverage of their regulations and on the regulatory compliance responsibilities of two of the companies in this review\u2014Minco and Zaclon\u2014clearly indicated that different businesses can have substantially different compliance responsibilities. Most of the agencies said that companies\u2019 compliance responsibilities are highly situational, dependent on such factors as the companies\u2019 size,",
      " location, and decisions they make in the course of conducting their business (e.g., whether to have an underground storage tank or to have a qualified retirement plan). As a result, most of the regulatory agencies we contacted said they needed a great deal of information about a business to identify the regulations applicable to that business. Businesses also need a great deal of information about the factors that trigger regulatory coverage to identify their own regulatory compliance responsibilities. However, both the agencies and the businesses told us they could not devote the time and resources needed to develop the information they need to make those determinations. Interestingly, each party in the regulatory process already has the information the other party needs.",
      " Agencies know about their regulations and what characteristics of companies can determine the applicability of those regulations, but are unfamiliar with individual companies\u2019 operations and, therefore, would need to expend substantial amounts of time and energy learning about them to provide regulatory counsel. Businesses know how their organizations are configured regarding relevant regulatory determinants, but they do not always understand those determinants and, therefore, may not know about all of their regulatory compliance responsibilities. More effective communications could help bridge the informational gap between businesses and federal regulatory agencies and, as a result, could help achieve the agencies\u2019 regulatory goals. Poor Communication Can Lead to a Misunderstanding of Regulatory Requirements Federal agencies\u2019 comments regarding the companies\u2019 most problematic regulations reinforced our conclusion regarding the adequacy of communication between those agencies and companies about regulations.",
      " In a number of cases, the agencies said that the companies had misstated or misinterpreted the statute or regulatory requirement involved. In some of those cases, the agencies said the companies were incurring unnecessary expenses because they had misconstrued the requirements or had taken steps that the regulations did not necessarily require. Listed below are examples of inadequate communication between the agencies and companies. \u2022 Officials from Bank B said that some regulations required banks (but not investment firms) to disclose the risks that consumers face regarding certain investment products, and that about a quarter of the advertising time Bank B purchased was used to publicize these risks. However, FDIC officials said there is no regulation requiring the disclosure of investment risks when advertising nondeposit investment products.",
      " \u2022 Hospital officials complained about a \u201ccostly rule change\u201d that limits helicopter pilots to 12-hour schedules during a 24-hour period, thereby forcing the hospital to hire two additional pilots at a cost of $100,000 per year. However, FAA officials said that the duty time rules had not recently changed and that no 12-hour shift limit existed. \u2022 Officials from the paper company said OSHA lead exposure standards require even routine maintenance workers to put on personal protective equipment and be \u201cfit tested,\u201d a process the company said was extremely expensive. However, OSHA said the regulations the company cited did not apply to the type of routine maintenance activities the company described.",
      " \u2022 Bank B officials said that BSA requires banks to complete a report on cash transactions of $10,000 or more while the depositor is still in the bank. However, Treasury officials said that once the bank has verified certain basic information about a customer, it can rely on this information in the future and need not require the customer to remain on-site each time a reportable transaction is conducted. \u2022 Bank A officials complained about an FDIC requirement that all banks\u2014even small ones\u2014should have a detailed contingency plan. However, FDIC officials said the bank was referring to a policy statement by the Federal Financial Institutions Examination Council, not a statutory or regulatory requirement.",
      " The FDIC officials said the policy statement sets forth areas for management to consider when developing a contingency plan but sets no requirements. Therefore, communication problems in the regulatory arena can result in misunderstandings of responsibilities and, ultimately, compliance problems and unnecessary costs. One of the reasons that government regulators and businesses have not always communicated effectively may be the nature of agencies\u2019 regulatory informational mechanisms. A business\u2019 regulatory compliance responsibilities can originate from any of the several dozen federal regulatory agencies, each of which separately provides information about its own regulatory programs. Therefore, although the agencies have a dizzying array of brochures, toll-free numbers, and other methods to inform businesses of their regulatory requirements,",
      " a business attempting to determine its governmentwide compliance responsibilities may have to contact each agency to obtain this information. In some cases, multiple agencies have responsibility for implementing a single statute, with each agency specifying its own functions and requirements. Regulatory compliance responsibilities may also differ within a particular agency. For example, EPA regulatory requirements originate from several different program units within the agency (Air and Radiation; Water; Solid Waste and Emergency Response; and Prevention, Pesticides, and Toxic Substances). Each of these units has its own informational mechanisms. EPA has established an Office of the Small Business Ombudsman and compliance assistance centers for certain industry sectors for the purpose of consolidating information from these different program offices.",
      " However, we did not evaluate the effectiveness of the Office or centers to determine whether they eliminate the need for a small business or a company within a covered industry to contact the program units directly. Also, these offices by definition do not cover large businesses or companies in industries not covered by the centers. We have not thoroughly analyzed agencies\u2019 regulatory informational mechanisms. However, the information that we obtained in this review suggests that the federal government\u2019s overall approach to the dissemination of regulatory information is fragmented and may be contributing to ineffective communication between regulatory agencies and the business community. We recognize that there is a natural tension that exists between regulators and those in the regulated community and that no amount of information or communication will completely eliminate disagreements and compliance problems.",
      " However, a better understanding of which regulations are applicable to a business and the requirements those regulations impose on the business is fundamental to an improved relationship between these parties. Agencies have recently taken steps to make information about their regulations more centralized and accessible to businesses. For example, the U.S. Business Advisor and the Asbestos Advisor programs are designed to make it easier for businesses to determine their federal regulatory compliance responsibilities. Other steps agencies have taken to be more \u201cuser friendly\u201d include (1) the previously mentioned EPA Office of the Small Business Ombudsman and EPA\u2019s compliance assistance centers and (2) OSHA\u2019s consultation program, which offers free,",
      " on-site expert assistance to small employers in all 50 states. Congress has also attempted to make information more available to businesses. The Small Business Regulatory Enforcement Fairness Act requires agencies to, among other things, publish \u201csmall entity compliance guides,\u201d explaining the actions a small business is required to take to comply with a rule or group of rules. These kinds of efforts may help improve communication between federal regulatory agencies and regulated businesses. Communication Between Congress and Agencies Can Help Address Regulatory Concerns Although virtually all regulations have some kind of statutory basis, the extent to which particular regulatory requirements are driven by the underlying statutes varies. Some statutes grant agencies the authority to issue rules within broad parameters whereas other statutes provide agencies with little discretion regarding what should be regulated and how the regulations should be developed and implemented.",
      " The federal regulatory agencies responding to the businesses\u2019 concerns about problematic regulations frequently said that the specific requirements the businesses were concerned about were statutorily driven. Listed below are examples of statutorily driven business concerns. IRS officials said that the requirements (1) to conduct a nondiscrimination test in the administration of a 401(k) thrift savings plan and (2) to audit the plan were required by statute rather than by IRS regulations.\u2022 HCFA officials said that the frequent changes in Medicare and Medicaid billing rules were, in a number of situations, \u201cdue to enhancements or changes made by Congress.\u201d \u2022 FDIC officials said that the level of detail and the number of changes in its call reports were driven by,",
      " among other things, statutory requirements. \u2022 EEOC officials said that its record retention requirements vary because they are tied to the different discrimination complaint filing periods established in each civil rights statute. We did not review the regulations and statutes that the agencies cited to determine whether the regulatory provisions of concern to the companies are required by the underlying statutes. If those provisions are required by the statutes, agencies will not be able to revise them significantly without changes in the underlying legislation. As previously noted, several agencies said they were recommending statutory changes to address some of the companies\u2019 concerns. In doing so, agencies can communicate to Congress the degree to which their regulations are required by the statutory language that Congress enacted.",
      " However, some Members of Congress clearly perceive that federal regulatory agencies have sometimes established regulatory requirements that go beyond the intent of Congress when it passed the underlying statutes. This perception in part led to the establishment of expedited congressional regulatory review procedures through the Small Business Regulatory Enforcement Fairness Act of 1996. If the regulatory provisions that are of concern to companies are, in fact, not required by the statutes, the agencies have a responsibility to address those concerns on their own and not shift the responsibility to Congress. If congressional committees of jurisdiction or individual Members of those committees believe that an agency\u2019s regulations do not reflect the intent of the underlying statute or its legislative history,",
      " those committees or Members can communicate their concerns to the agencies informally. If Congress as a whole believes an agency\u2019s regulation is inconsistent with the intent of the underlying statute, Congress can amend the statute to reflect current congressional intent and, in effect, require the agency to amend its regulation. The expedited congressional regulatory review procedures in the Small Business Regulatory Enforcement Fairness Act may also serve as a vehicle for that communication\u2014at least for new or revised regulations. If Congress believes a new or revised regulation is inconsistent with the intent of the underlying statute, it can pass a resolution disapproving the rule. On the other hand, Congress can allow regulations to take effect if it believes that a rule is in keeping with statutory intent.",
      " Although no substitute for straightforward discussions between agencies and Congress, the congressional review procedures in the act have the potential to lead to a better understanding between major players in the federal rulemaking process.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 88,
    "question": null,
    "answer": "For several years, some Members of Congress have favored \"comprehensive immigration reform\" (CIR), a label that commonly refers to omnibus legislation that includes increased border security and immigration enforcement, expanded employment eligibility verification, revision of nonimmigrant visas and legal permanent immigration, and legalization for some unauthorized aliens residing in the country. The omnibus legislative approach contrasts with incremental revisions of the Immigration and Nationality Act (INA) that would address some but not all of these elements, and with sequential reforms that would tackle border security and interior enforcement provisions prior to revising legal immigration or enacting legalization pathways. Leaders in both chambers have identified immigration as a legislative priority in the 113th Congress. While the House Committee on the Judiciary has ordered reported several distinct pieces of legislation that aim to reform immigration law thus far in the 113th Congress, the debate in the Senate has focused on a single CIR bill: the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744). This report summarizes major provisions of S. 744, which the Senate amended and passed by a yea-nay vote of 68-32 on June 27, 2013. CRS's analysis of S. 744 focuses on eight major policy areas that encompass the U.S. immigration debate: comprehensive reform \"triggers\" and funding; border security; interior enforcement; employment eligibility verification and worksite enforcement; legalization of unauthorized aliens; immigrant visas; nonimmigrant visas; and humanitarian provisions. Among the border and enforcement-related provisions in Senate-passed S. 744 are a number of provisions aimed at strengthening border security, including increased border security personnel, equipment, and infrastructure. The bill would mandate new border security strategies and the development of new border metrics that would be designed to achieve \"effective control\" of the Southern border. Most notably, S. 744 would authorize $44.5 billion in spending for additional border patrol agents, border fencing, and an electronic exit system to collect machine readable data at air and sea ports of entry.  The legislation would also authorize $750 million for the U.S. Department of Homeland Security (DHS) to implement a mandatory electronic employment verification system to be used by all employers. Furthermore, S. 744 would amend the INA to create additional grounds of inadmissibility and deportability, while broadening judges' discretion to waive some of these grounds. For certain immigration offenses, the bill would increase civil and misdemeanor penalties for first-time offenses and impose felony penalties when aggravating circumstances exist. The bill would amend INA provisions on unlawful reentry to increase criminal penalties. S. 744 would provide additional resources to immigration courts and would encourage alternatives to detention and strengthen detention standards and congressional oversight of immigrant detention. Special provisions would be included to protect children who are affected by immigration enforcement.  In turn, S. 744 would amend the INA to provide pathways for unauthorized aliens to adjust their immigration status to one of the proposed new statuses\u2014\"registered provisional immigrant\" (RPI) status and \"blue card\" status\u2014and ultimately legal permanent resident (LPR) status after specified border security and interior enforcement criteria are met. In addition to these legalization provisions, S. 744 would also accelerate the admission of an estimated 4 to 7 million foreign nationals who have pending petitions to become LPRs. S. 744 would substantially revise the categories for the admission of LPRs, eliminating the category for siblings of U.S. citizens, shifting the allocation of the other family-based categories, permitting more categories of LPRs to enter without numerical limits, and increasing the number of employment-based LPRs. The Congressional Budget Office (CBO) projects that the changes to the legal immigration system would result in an increase of 9.6 million LPRs in the first decade after enactment.  Senate-passed S. 744 would revise and expand nonimmigrant (i.e., temporary immigration) programs for high- and low-skilled workers, as well as for tourists, students, and other nonimmigrants. The bill would increase the cap on professional specialty workers (H-1B workers), while also imposing new requirements on businesses that employ H-1B workers, as well as those that employ intra-company transferees (L visas). Reforms would be made to the existing H-2B visa for lower-skilled non-agricultural workers in temporary or seasonal employment, while the H-2A visa for agricultural workers would be phased out. New nonimmigrant visas (the proposed W visas) would be established for lower-skilled agricultural and non-agricultural workers that would be more flexible for employers, while also expanding certain rights for workers. Additional nonimmigrant visa changes would facilitate temporary immigration by doctors, investors, and aliens from certain countries with U.S. trade agreements; encourage tourism within the United States; and strengthen oversight of foreign students and summer-work study exchanges, among other changes. An accompanying report, CRS Report R43099, Comprehensive Immigration Reform in the 113th Congress: Short Summary of Major Legislative Proposals, offers an overview of S. 744 as well.\n",
    "docs": [
      "Introduction For several years, some Members of Congress have favored \"comprehensive immigration reform\" (CIR), a label that commonly refers to omnibus legislation that includes increased border security and immigration enforcement, expanded employment eligibility verification, revision of nonimmigrant visas and legal permanent immigration, and legalization for some unauthorized aliens residing in the country. Other Members of Congress may favor addressing these issues sequentially (e.g., by implementing enforcement provisions and perhaps reforming legal immigration prior to legalization), and/or may disagree with the legalization and increased legal immigration provisions that have been features of major CIR bills. Still others may be interested in legislating on some elements of CIR but not others.",
      " Leaders in both chambers have identified immigration as a legislative priority in the 113 th Congress. While the House Committee on the Judiciary has ordered reported several distinct pieces of legislation that aim to reform immigration law thus far in the 113 th Congress, the debate in the Senate has focused on a single CIR bill: the Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ). As introduced on April 16, 2013, S. 744 was the product of months of negotiations among four Democratic and four Republican Senators\u2014the bill's original co-sponsors\u2014a group widely described as the \"Gang of 8.\" The Senate Judiciary held three days of hearings on S.",
      " 744 in April 2013 and then marked up the bill over five days in May, favorably ordering the bill reported by a vote of 13-5 on May 21, 2013. The Senate Judiciary Committee filed its written report on S. 744 on June 7. The Senate passed the motion to invoke cloture on S. 744 on June 11, 2013, by a yea-nay vote of 82-15. The full Senate debated S. 744 for several weeks in June and considered about two dozen amendments on the floor. Some amendments were folded into other amendments, the most significant of these being the Hoeven-Corker-Leahy amendment on border security ( S.Amdt.",
      " 1183 ), which the Senate approved by a yea-nay vote of 69-29. On June 27, 2013, the Senate passed S. 744, as amended, by a yea-nay vote of 68-32.  This report summarizes major provisions of S. 744, as reported by the Senate Judiciary Committee and as modified and passed on the Senate floor. CRS's analysis focuses on eight major policy areas that encompass the U.S. immigration debate: comprehensive reform \"triggers\" and funding; border security; interior enforcement; employment eligibility verification and worksite enforcement; legalization of unauthorized aliens;",
      " immigrant visas; nonimmigrant visas; and humanitarian provisions. Comprehensive Reform \"Triggers\" and Funding5 Some Members of Congress have raised concerns about proposals for comprehensive immigration reform on the grounds that the \"bargain\" some people see at the heart of such reform\u2014tougher enforcement on the one hand and legalization plus visa reforms on the other\u2014may be difficult to enforce. Some argue, for example, that while supporters of the 1986 Immigration Reform and Control Act (IRCA) promised that a one-time legalization, increased border enforcement, and a prohibition against employing unauthorized workers would solve the problem of illegal migration; some of IRCA's immigration enforcement provisions were incompletely implemented.",
      " Partly to allay these concerns, the first sections of S. 744 would make implementation of certain enforcement provisions pre-conditions for the bill's legalization provisions; and S. 744 would directly appropriate funding for certain enforcement measures. These \"trigger\" and funding provisions were subject to substantive changes on the Senate floor. Triggers for Legalization and Adjustment to LPR Status As reported by the Senate Judiciary Committee, Section 3 of S. 744 would establish two sets of triggers for the bill's legalization and adjustment of status provisions. First, the Department of Homeland Security (DHS) may only commence processing applications for registered provisional immigrant (RPI)",
      " status (see \" Registered Provisional Immigrants (RPIs) \") after DHS notifies Congress that the department has begun to implement a new Comprehensive Southern Border Security Strategy (Comprehensive Security Strategy) and Southern Border Fencing Strategy (Fencing Strategy) mandated by \u00a75 of S. 744 (see \"Border Security Strategies and Metrics\"). DHS would be required to begin implementing the Comprehensive Security Strategy within 180 days after the bill's enactment. Based on the interplay between the triggers in \u00a73 and other provisions of the bill, it appears that aliens likely could begin applying for RPI status within a year of the bill's enactment. Second,",
      " as reported by the Senate Judiciary Committee, \u00a73 generally provided that DHS could not begin adjusting the status of persons from RPI to legal permanent resident (LPR) until certain \"triggers\" are met. Specifically, the DHS Secretary would have been required to certify that four benchmarks have been reached: (1) the Comprehensive Southern Border Security Strategy has been submitted and is \"substantially deployed and substantially operational\"; (2) the Southern Border Fencing Strategy has been submitted and implemented and is \"substantially completed\"; (3) DHS has implemented a mandatory employment verification system to be used by all employers (see \"Interior Enforcement\"); and (4)",
      " an electronic exit system to collect machine readable data is being used at air and sea ports of entry (see \" Entry-Exit System \"). The bill as reported also described an exception to these trigger provisions. If 10 years have elapsed since the bill's enactment and these benchmarks have not been met due to litigation, a Supreme Court ruling that implementation is unconstitutional, or a \"force majeure,\" the Secretary shall permit RPIs to apply for LPR status. It is not clear, however, whether allowing such applications under this condition means that DHS would be permitted to adjust applicants to LPR status, or whether the previous sub-paragraph would prevent DHS from completing such adjustments until the benchmarks are met.",
      " These triggers would not have appl ied to adjustment of status for certain aliens who entered the United States as children (i.e., DREAMers) under Section 2103 of the bill or for aliens granted agricultural \"blue card\" status under Section 2201 of the bill. The timeline for these groups to adjust status is described in those two sections (see \" DREAM Act \" and \" Agricultural Worker Legalization \"). Notable Modifications during Senate Floor Debate The Hoeven-Corker-Leahy Amendment modified the second set of S. 744 trigger provisions (i.e., the triggers for DHS to begin adjusting the status of persons from RPI to LPR status). The amendment would continue to exempt DREAMers and aliens granted blue cards;",
      " and it would not change language concerning the exception to the trigger requirement due to litigation, a Supreme Court ruling, or force majeure. But the amendment generally would augment and expand the main trigger requirements for DHS to begin adjusting RPIs to LPR status. In particular, DHS could not begin such adjustments until six months after the DHS Secretary, after consultation with the Attorney General, the Secretary of Defense, the Inspector General of DHS, and the Comptroller General of the United States, certifies to Congress and the President the following: The Comprehensive Southern Border Security Strategy includes certain elements added by the Hoeven-Corker-Leahy Amendment,",
      " and the Strategy is deployed and operational (see \"Border Security Strategies and Metrics\"). For purposes of the trigger provision, \"operational\" is defined to mean that the technology, infrastructure, and personnel deemed necessary by the Secretary (including specific technology allocations described in the bill, as modified) have been procured, funded, and generally are in current use by the Department to achieve effective control of the Southern border. The Southern Border Fencing Strategy has been submitted to Congress and implemented (see \"Border Security Strategies and Metrics\"). The Secretary must certify, pursuant to such Strategy, that at least 700 miles of pedestrian fencing are in place along the Southern border,",
      " including the replacement of existing vehicle barriers on non-tribal land with pedestrian fencing where possible, as well as the subsequent installation of secondary fencing in locations where the Secretary deems it necessary or appropriate. DHS has implemented a mandatory employment verification system to be used by all employers as required by Section 3101, (see \"Electronic Eligibility Verification System\"). DHS is using the electronic exit system created by Section 3303 at all international air and sea ports within the United States where Customs and Border Protection (CBP) officers are deployed. No fewer than 38,405 trained full-time active duty U.S. Border Patrol agents are deployed,",
      " stationed, and maintained along the Southern border. Comprehensive Immigration Reform Funds Section 6 of S. 744 would establish a Comprehensive Immigration Reform (CIR) Trust Fund and a CIR Startup Account. As reported by the Senate Judiciary Committee, the bill would have authorized the transfer of an initial $8.3 billion from the Treasury's general fund to the CIR Trust Fund, and $3 billion from the general fund to the CIR Startup Account. The Hoeven-Corker-Leahy Amendment modified the bill to increase the increase the initial transfer into the CIR Trust Fund to $46.3 billion, and authorized additional expenditures out of the fund.",
      " The initial $46.3 billion effectively would be an appropriation to the CIR Trust Fund and would be made available immediately for obligation and expenditure for the following purposes: $30 billion over a 10-year period for the Department of Homeland Security (DHS) to hire and deploy at least 19,200 additional trained full-time active duty U.S. Border Patrol agents along the Southern Border; $4.5 billion over a five-year period for DHS to carry out the Comprehensive Security Strategy; $2 billion over a 10-year period for DHS to enact recommendations of the Southern Border Security Commission (see \"Border Security Strategies and Metrics\") and for administrative expenses directly associated with convening and providing summaries of public hearings required by Section 3(c)(2); $8 billion over a five-year period for DHS to procure and deploy fencing,",
      " infrastructure, and technology pursuant to the Fencing Strategy, with not less than $7.5 billion being used to deploy, repair, or replace fencing; $750 million over a six-year period for DHS to expand and implement the mandatory employment eligibility verification system in INA Section 274A as amended by Section 3101 of the bill (see \"Employment Eligibility Verification\"); $900 million over an eight-year period for the Department of State to pay for one-time and startup costs to implement the bill; and $150 million over a two-year period to be transferred to the Departments of Labor, Agriculture, and Justice for their initial costs of implementing the bill.",
      " The CIR Trust Fund would receive additional funding going forward from several immigration-related fees and penalties. As modified by the Hoeven-Corker-Leahy Amendment, the Secretary of DHS would be directed to modify certain fees and penalties added by S. 744 to ensure that at least $500 million is available in the CIR Trust Fund in FY2014 and at least $1 billion is available for S. 744 authorizations in each of FY2015-FY2023. Immigration fees and penalties added by the bill and deposited into the CIR Trust Fund would be designated for three purposes: The first $8.3 billion of such collections would be deposited back in the general fund (i.e., to repay the Treasury for a portion of the initial $46.",
      "3 billion transfer) and would be used for federal budget deficit reduction. An additional $500 million would be available over five years, without further appropriation, to pay for increased border-crossing prosecutions in the Tucson Sector and to fund Operation Stonegarden pursuant to Section 1104 of S. 744. Remaining funds would be available, subject to appropriations, to carry out the authorizations included in S. 744, including personnel increases described in Section 1102 and operations and maintenance of other border security and immigration enforcement investments. The CIR Startup Account would be used to pay for one-time and startup costs related to the act. Expenditure plans relating to the CIR Trust Fund and CIR Startup Account would be required.",
      " The revenue provisions in S. 744 have raised the \"blue slip\" procedural matter. \"Blue-slipping\" is the term applied to the act of returning to the Senate a measure that the House has determined violates its prerogatives, nicknamed because the House returned the legislation to the Senate by resolution printed on blue paper. The U.S. Constitution provides that \"(A)ll Bills for raising Revenue shall originate in the House of Representatives.\" Because S. 744 would, for example, create a new $1,000 fee to be charged to certain employers filing labor certification applications (LCAs) to be used for purposes other than processing the LCAs,",
      " the House could \"blue slip\" the legislation. Rather than \"blue slipping\" S. 744, the House also could simply ignore it or reintroduce a companion bill in the House. Border Security35 S. 744 includes a number of sections designed to strengthen border security, including mandates for new border security strategies; increased border security personnel, equipment, and infrastructure; DHS waiver authority and access to certain federal lands; provisions related to immigration-related crimes and prosecutions; and efforts to strengthen the entry-exit system. The bill also includes a number of provisions to strengthen oversight of border security activities. Border Security Strategies and Metrics Under S. 744,",
      " DHS would be required to submit to Congress a \"Comprehensive Southern Border Security Strategy\" (Comprehensive Security Strategy) and to establish a \"Southern Border Fencing Strategy\" (Fencing Strategy), both within 180 days of enactment. The Comprehensive Security Strategy would describe plans to achieve and maintain \"effective control\" of all sectors along the Southern border. \"Effective control\" is defined in Section 3 to include \"persistent surveillance\" and at least a 90% \"effectiveness rate\"; and the effectiveness rate is defined as the sum of alien apprehensions and turn backs divided by total illegal entries. As amended by the Hoeven-Corker-Leahy amendment on the Senate floor,",
      " S. 744 includes specific, detailed minimum requirements for the amounts and types of surveillance equipment to be deployed in each Border Patrol sector on the Southwest border as part of the Comprehensive Security Strategy. DHS would be required to implement the Comprehensive Security strategy beginning immediately after its submission, and to report on it semiannually.  The Fencing Strategy would identify locations along the Southern border, including ports of entry, where fencing, infrastructure, and technology should be deployed. DHS would be required to notify Congress upon commencing implementation of the Fencing Strategy. As amended by the Hoeven-Corker-Leahy amendment on the Senate floor, the Fencing Strategy would be required to identify where 700 miles of fencing should be deployed along the Southern border.",
      " As noted elsewhere, submission and implementation of the Comprehensive Security and Fencing Strategies would be among the triggers for the RPI legalization and adjustment of status provisions; and Section 6 would authorize direct spending in support of the strategies (see \"Comprehensive Reform 'Triggers' and Funding\"). In addition, as modified by the Hoeven-Corker-Leahy amendment, within one year of enactment, Section 4 of S. 744 would establish a Southern Border Security Commission (Commission). The Commission would be composed of the governor of each Southern border state (along with Nevada) or her appointee, as well as members appointed by each House of Congress and the President.",
      " If the DHS Secretary cannot certify that DHS has achieved effective control of all Southern border sectors for at least one year before the date that is five years after the bill's enactment, the Commission would be required to issue a report making recommendations on how to achieve and maintain border security goals, and would terminate after the issuance of the report. As noted elsewhere, the bill also would authorize direct spending to implementing the recommendations of the Commission (see \"Comprehensive Immigration Reform Funds\"); such spending would begin after the Commission report is issued, no sooner than five years after the bill's enactment.  As amended on the Senate floor (by the Hoeven-Corker-Leahy Amendment), the Secretary of State,",
      " in coordination with DHS and in consultation with Congress, also would be required to develop a strategy to address unauthorized immigration of individuals who transit through Mexico to the United States. The strategy would include steps to enhance the training of border and law enforcement personnel in Mexico and certain Central American states, and to educate the nationals of such countries about certain risks associated with illegal migration to the United States. The bill would authorize the Secretary of State to use funds from the CIR Trust Fund to implement this strategy. Border Security Personnel, Equipment, and Infrastructure Sections 1102-1109 of S. 744 would expand certain border enforcement programs and authorize border security funding.",
      " These sections would supplement previous investments by DHS and the legacy Immigration and Naturalization Service (INS). As reported by the Senate Judiciary Committee, Section 1102 of the bill would require U.S. Customs and Border Protection (CBP) to add 3,500 trained CBP officers by the end of FY2017. This section was modified by the Hoeven-Corker-Leahy amendment on the Senate floor to also require that DHS increase the number of trained full-time active duty U.S. Border Patrol agents deployed to the Southern border to 38,405; that the number of CBP Air and Marine crew and personnel increase by 160;",
      " and that the number of Air and Marine flight hours increase to 130,000 annually. The section (as amended on the floor) also would require DHS and the Department of Defense (DOD) to create a program to recruit former members of the armed forces to serve in CBP and ICE, and use a program to repay student loans as a recruitment incentive. The bill also would authorize the National Guard, operating under Title 32 authority (i.e., remaining under the authority of state governors while receiving federal pay and benefits), to assist border security efforts, including through the construction of fencing and other infrastructure, the deployment of surveillance aircraft, and by assisting CBP operations in rural,",
      " high-trafficked areas. Section 1104 would authorize funding for additional Border Patrol forward operating bases and other infrastructure, including distress beacons along the Northern and Southern borders in areas where migrant deaths are occurring, and would establish a grant program for the construction and improvement of infrastructure to facilitate border crossings. DHS would be directed to deploy manned and unmanned aircraft and other surveillance equipment to ensure \"continuous surveillance\" of border areas, with necessary funding authorized for FY2014 \u2013 FY2018. A grant program would be established and funding authorized to improve 9-1-1 service in rural areas; and funding also would be authorized to improve radio communication among border-area law enforcement agencies.",
      " Section 1109 would direct DOD and DHS officials to identify DOD equipment and technology that could be used by CBP at the border. DHS Waiver Authority and Access to Federal Lands  In general, federal agencies are required to review the potential impact of proposed projects on national and cultural resources prior to committing resources to a project. These environmental and other review requirements may delay the construction of certain border barriers and other infrastructure; but existing law grants DHS broad authority to waive legal requirements that might delay construction of border barriers. S. 744 would grant the DHS Secretary authority to waive any law she determines necessary to ensure expeditious construction of barriers,",
      " roads, and other infrastructure to secure the Southern border. This provision is similar to existing waiver authority, but only applies to projects along the Southern border, and potentially applies to a broader range of border infrastructure projects than the waiver authority in current law. The Secretary must identify and justify each law being waived; and the waiver would terminate upon certification that the Comprehensive Security and Fencing Strategy requirements for RPIs to adjust to LPR status have been satisfied (see \"Triggers and for Legalization and Adjustment to Status\"). Judicial review of action taken pursuant to this authority is limited. The Southwest border includes extensive federal lands; and some have been identified as \"high-risk areas\"",
      " for marijuana smuggling and illegal migration. DHS has entered into Memoranda of Understanding with the U.S. Department of Agriculture and the Department of the Interior governing CBP access to federal lands, among other topics. Some Members of Congress have argued that that DHS should have more complete access to such lands for enforcement purposes. Under Section 1105 of S. 744, the Secretaries of Agriculture and the Interior would be required to provide CBP with immediate access to federal lands within 100 miles of the southern Arizona border for certain border security activities. These activities would be conducted \"to the maximum extent practicable\" to protect natural and cultural resources.",
      " Environmental impact statements would be issued in accordance with the National Environmental Policy Act of 1969, but the impact statements would not restrict or delay DHS actions on federal lands. Immigration-Related Crimes  Certain aliens apprehended at the border and others involved in facilitating illegal migration may face immigration-related criminal charges under current law (also see \" Interior Enforcement \"). Several sections in Title III of S. 744 would modify these laws. The bill would rewrite INA Section 275 (unlawful entry) to increase civil and misdemeanor penalties for first-time offenses, impose felony penalties when aggravating circumstances exist (e.g., re-entry following a voluntary departure order), and also to eliminate criminal liability for attempted unlawful entry.",
      " The bill would amend INA Section 276 (unlawful reentry) to increase criminal penalties, provide affirmative defenses to certain aliens who had been removed as minors, and exempt certain offenses involving emergency humanitarian assistance. Additionally, S. 744 would create new felony offenses relating to the commercial smuggling of five or more people, impose criminal penalties for hindering or obstructing alien apprehensions, and impose enhanced penalties for use of a firearm in an alien smuggling offense. With respect to these border-related crimes, S. 744 would require guidelines to delay prosecutions against aliens seeking humanitarian relief from removal or immigration status until such adjudications are completed. S.",
      " 744 also would increase civil penalties for aircraft or vessel operators who fail to detain or transport out of the country unauthorized aliens that were transported by the operator into the country. Title III of S. 744 also would rewrite chapter 75 of the U.S. Criminal Code (passport and immigration-related document fraud), expanding its scope and increasing penalties for certain offenses. The U.S. Sentencing Commission would be required to reexamine minimum sentencing guidelines for fraud-related offenses. DHS would be required to establish rules to deter fraud in the preparation of immigration documents. And S. 744 would impose new criminal penalties for drug cultivation on federal lands. Historically,",
      " most aliens apprehended at the border have been repatriated to their country of origin without facing criminal charges, but DHS has worked with the Department of Justice (DOJ) to charge a higher proportion of people apprehended at the border. Title I of S. 744 includes several provisions to support this goal. Section 1104 would provide funding from the Trust Fund to support increased prosecutions in the Tucson sector, including through the appointment of attorneys, staff, and federal district court and magistrate judges. Trust Fund funding also would reimburse sub-federal and tribal jurisdictions for detention costs relating to those prosecutions; and would fund competitive grants to sub-federal and tribal border-area law enforcement agencies through Operation Stonegarden,",
      " with the proviso that at least 90% of such grants would reimburse immigration enforcement and drug smuggling expenses. In addition, the Attorney General would be required to reimburse sub-federal governments for costs related to the prosecution, detention, and other associated costs of federally-initiated criminal cases that are declined by U.S. Attorneys, as long as the underlying apprehensions were lawfully conducted, with appropriations authorized for FY2014-FY2018. And Section 1110 would modify and reauthorize through FY2015 the State Criminal Alien Assistance Program (SCAAP), which reimburses state prisons and local jails for the cost of detaining certain criminal aliens.",
      "  Oversight of Border Security Activities Other provisions in Title I of S. 744 concern oversight of border security activities. DHS would be required to work with DOJ to issue new rules governing the use of force by DHS personnel, as well as procedures to review the use of force, investigate complaints, and discipline those who violate such rules. Section 1112 would require DHS to provide border personnel specialized training to identify fraudulent documents, respect individual rights, and comply with use of force rules; and DHS would be required to provide specialized training for border community liaison officers and to establish standards for the humane treatment of children in CBP custody (also see \" Protection of Children during Immigration Enforcement \"). An independent task force consisting of Northern and Southern border-area stakeholders would be established to review border enforcement and make recommendations.",
      " A new Ombudsman for Immigration Related Concerns would be charged with monitoring immigration and enforcement policies of CBP, U.S. Immigration and Customs Enforcement (ICE), and U.S. Citizenship and Immigration Services, (USCIS), recommending policy changes, and assisting victims of crime or violence committed by aliens along the border, among other responsibilities. DHS also would be required to establish procedures to ensure that apprehended families of arriving aliens remain united, when feasible, and that aliens deported or removed to Mexico are repatriated during daylight hours under most circumstances. As amended on the Senate floor, Section 1116 of the bill would restrict DHS authority to conduct warrantless searches of vessels and conveyances and private lands near the Northern border,",
      " though the Secretary would be permitted to conduct such searches under certain conditions. Several new DHS reports would be required to help Congress monitor these and other border-related issues.  Entry-Exit System Section 110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, P.L. 204-208, Div. C) required development of an automated entry-exit system that collects records of alien arrivals and departures and that analyzes such records to identify nonimmigrants who overstay their visas (i.e., \"visa overstays\"). Subsequent legislation has revised and expanded this entry-exit requirement on several occasions,",
      " but the system has never been fully implemented. The existing system collects and stores biographic data (i.e., names, birthdates, and other identifying information) and biometric data (i.e., fingerprints and digital photographs) about aliens traveling to and from the United States. The system has been operational at almost all U.S. ports of entry since December 2006, and it has collected biometric data since January 2009 from non-citizens entering through air and seaports and from non-citizens subject to secondary inspection at land ports. Most aliens entering at land ports only provide biographic information, however. And although DHS has tested pilot programs to capture biometric exit data at air and land ports,",
      " the current exit system is limited to biographic data, and also is limited to airports and seaports. Under an agreement with Canada, the United States is scheduled to collect biographic data from third country nationals exiting via northern border lands beginning in June 2013. S. 744 includes several provisions intended to create a more robust exit tracking system. The bill would require DHS, by December 31, 2015, to establish a biographic exit system that collects machine-readable passport and other travel information (i.e., biographic data) for all aliens exiting from air and sea ports. As noted elsewhere, the implementation of this system would be one of the triggers for implementation of the adjustment of status provisions for RPIs (see \" Triggers for Legalization and Adjustment to LPR Status \"). Air and sea carriers would be responsible for collecting passenger exit data in a secure manner and for transmitting the information to DHS;",
      " and $500 million would be appropriated to reimburse carriers for such data collection. In addition, DHS would be required, within two years of enactment, to establish a biometric exit system at the ten U.S. airports with the greatest volume of international air travel. The U.S. Government Accountability Office (GAO) would be required to review the program, and DHS would be required within six years to expand biometric exit data collection to 30 airports, and to develop a plan to expand the system to major land and sea ports. Exit data would be fully integrated and interoperable with other DHS immigration databases, DOJ immigration enforcement databases, and Department of State (DOS)",
      " Consular Affairs databases. In addition, Section 3711(b) would make the withholding of information for biometric screening a basis for inadmissibility. Visa Overstays A primary goal of the entry-exit system is to limit visa overstays. Section 3303(c) of S. 744 would require DHS to ensure that information about visa overstays is shared across DHS and other federal law enforcement agencies, and that \"reasonably available enforcement resources are employed'' to locate and commence removal proceedings against visa overstayers identified by the entry-exit system. In addition, S. 744 was modified on the Senate floor (by the Hoeven-Corker-Leahy amendment)",
      " to include additional provisions designed to monitor and limit visa overstays. Under Section 1201, DHS would be required, beginning 180 days after enactment, to initiate removal proceedings, confirm that immigration relief has been granted or is pending, or otherwise close at least 90 percent of the cases of nonimmigrants who entered the United States after the bill's enactment and who have overstayed their visa by more than 180 days. The section also would require DHS to issue semiannual reports on visa overstay rates and enforcement outcomes. In addition, Section 1202 would direct DHS to establish a pilot program to notify nonimmigrants who have not departed the United States when their visa or period of authorized admission is about to expire.",
      " Interior Enforcement81 The immigration rules established by the INA are supplemented by an enforcement regime to deter and punish violations of those rules. Violations may be subject to criminal penalties (see \"Immigration-Related Crimes\"), civil fines, and/or may be grounds for an alien to be removed from the country. With respect to the latter, the INA identifies two overarching reasons aliens may be ordered removed: grounds for inadmissibility and grounds for deportability. The standard removal process, described in INA Section 240, is a civil administrative proceeding before an immigration judge from the DOJ Executive Office for Immigration Review (EOIR). In some cases, immigration judges may grant certain forms of relief during the removal process,",
      " though their discretion is limited with respect to certain grounds for removal.  Provisions in S. 744 would amend the INA's interior enforcement provisions in several ways. Subtitle E of Title III would provide additional resources to immigration courts (see \" Immigration Courts \"). The bill would create additional grounds of inadmissibility and deportability, while also broadening judges' discretion to waive certain such grounds (see \" Grounds of Inadmissibility, Deportability, and Relief\u00a0from\u00a0Removal \"). S. 744 also would encourage alternatives to detention and strengthen DHS detention standards as well as congressional oversight of immigrant detention (see \" Immigrant Detention \"). Subtitle H of Title III of S.",
      " 744 establishes special procedures to protect children who are affected by immigration enforcement (see \" Protection of Children during Immigration Enforcement \"). And other provisions in Title III address several additional aspects of immigration enforcement within the United States (see \" Additional Interior Enforcement Provisions \"). Immigration Courts83 With increased immigration removals in recent years, many immigration courts have seen growth in their hearing dockets, and aliens in removal proceedings may face wait times of months or even years in certain jurisdictions. Some Members of Congress have expressed concerns about long removal wait times for some non-detained aliens placed in removal proceedings before EOIR. Some also have expressed concern that, because removal is a civil proceeding,",
      " aliens are not guaranteed legal counsel (though aliens do have a right to counsel at no expense of the government), and some aliens may not be competent to represent themselves. S. 744 apparently seeks to address these concerns, and generally to ensure that aliens in removal proceedings have adequate opportunities to seek relief. The bill would increase the number of immigration judges by 75 per year for FY2014 through FY2016, and would also increase the number of immigration staff attorneys, paralegals, and Board of Immigration Appeals (BIA) staff attorneys. S. 744 would also provide statutory authority for the BIA (currently established through regulations); codify certain standards for immigration judge and BIA decisions;",
      " require EOIR to review and improve training programs for immigration judges, BIA members, and their staffs; and require EOIR to ensure adequate resources and services during immigration proceedings. Funding would be appropriated from the CIR Trust Fund to support the new personnel increases, training, and technology. Funding also would be appropriated for a pair of programs to enhance aliens' representation during removal proceedings. The Attorney General (AG) would be authorized to provide counsel to aliens in such proceedings at the AG's sole and unreviewable discretion. And the AG would be required to provide counsel, at government expense if necessary, for unaccompanied alien children, persons determined to be legally incompetent due to a serious mental disability,",
      " and certain other vulnerable persons. The AG also would be required to maintain an Office of Legal Access Programs within EOIR. The Office would develop legal orientation programs to educate alien detainees and other aliens in removal and asylum proceedings about their rights and to improve access to counsel, including in some cases at government expense. The AG also would assume responsibility, pursuant to the Trafficking Victims Protection Reauthorization Act of 2008 ( P.L. 110-457 ), for providing access to legal representation and appointing independent child advocates to child trafficking victims. Unexpended funds and contract authority to support such services would be transferred from the Secretary of Health and Human Services to DOJ.",
      " In addition, DHS would be required, at the beginning of removal proceedings, to provide an alien with complete copies of all relevant documents that DHS possesses (so-called \"A-files\"), including documents DHS has obtained from other agencies, with the exception of privileged or law enforcement sensitive documents. Removal proceedings could not proceed until an alien has received the required documents or waived the right to do so. S. 744 would also require EOIR to maintain records and report to Congress information on aliens in removal proceedings, including how the hearings are conducted (e.g., in person, by teleconference) and the outcomes of any hearings. Grounds of Inadmissibility,",
      " Deportability, and Relief\u00a0from\u00a0Removal S. 744 would amend the grounds of inadmissibility and deportability in the INA in several ways. The bill would add language to these provisions regarding conduct related to criminal street gangs, with the inadmissibility grounds related to such activity being somewhat broader in scope. Such conduct also would make aliens ineligible for adjustment to RPI status, though limited waivers would apply in this case and with respect to inadmissibility. The bill also would make three or more convictions for driving under the influence (DUI) a ground for deportability and inadmissibility A third such conviction would be made an aggravated felony for immigration purposes,",
      " and therefore such an alien would be subject to more limited relief from removal. Certain types of immigration-related fraud also would be made grounds for deportability and inadmissibility. And S. 744 would make crimes involving domestic violence, stalking, and child abuse, along with violations of protection orders, grounds for inadmissibility (though these new grounds generally would be more narrow than corresponding grounds of deportability found in current law). As noted elsewhere, withholding information for biometric screening also would be made a ground for inadmissibility (see \" Entry-Exit System \"). The bill also would expand the grounds for inadmissibility related to torture and extrajudicial killings,",
      " and would add war crimes and widespread human rights violations as inadmissibility grounds, though these added grounds would not apply when the acts were committed under duress). The President would be authorized to release the names of persons deemed inadmissible on these grounds. Moreover, the bill would amend the Torture Victims Protection Act to reference some of these added grounds in defining the scope of conduct for which covered entities be held civilly liable. The bill would clarify that sexual abuse of minor is an aggravated felony for immigration purposes regardless of whether the victim's age is established by extrinsic evidence to the record of conviction.  S. 744 also would increase discretion to waive certain grounds of inadmissibility.",
      " It would strike \"extreme\" from the hardship waiver for the 3- and 10-year bars for aliens who have been illegally present in the United States if they are parents of U.S. citizens or LPRs. And it would give immigration judges discretion to not order certain aliens in proceedings to be removed, deported, or excluded if the judge determined that such actions were against the public interest, would create a hardship to the alien's U.S. citizen or permanent resident immediate relatives, or if the alien appeared eligible for naturalization. This waiver would not be available to individuals subject to removal or inadmissibility based on certain criminal and national security grounds.",
      " DHS would have similar discretion to waive grounds of inadmissibility. In addition, an exception to the reinstatement of removal orders would be created for aliens who reentered prior to age 18, or where reinstatement would not be in the public interest or create hardship for the alien's U.S. citizen or LPR parent, spouse, or child.  Immigrant Detention The Immigration and Nationality Act (INA) provides broad authority to detain aliens while awaiting a determination of whether they should be removed from the United States and mandates that certain categories of aliens are subject to mandatory detention (i.e., the aliens must be detained) by DHS.",
      " Aliens placed in removal proceedings who are not subject to mandatory detention may, depending on the circumstances, be detained or released either on conditional parole (including on the alien's own recognizance)\u00a0or on bond. S. 744 would establish new statutory requirements for bond hearing procedures and the filing of notices to appear for aliens. All aliens would have the opportunity to appear before an immigration judge after DHS's custody determination. Other than in the cases of certain terrorists and criminal aliens, detention would be required only if the Secretary demonstrates that no conditions, including the use of alternatives to detention that maintain custody over the alien, will reasonably assure the appearance of the alien and the safety of any other person.",
      " Except for certain criminal aliens and terrorist aliens, immigration judges would be required to review custody determinations (even in the case of mandatory detainees); and the bill would also provide for additional review by an immigration judge every 90 days as to whether the custody of a detained alien is warranted. For aliens not eligible for bail or to be released on recognizance, S. 744 would require DHS to establish a secure alternative program offering a \"continuum of supervision mechanisms and options\" within each ICE field office. All aliens, including those subject to mandatory detention (other than suspected terrorists and security threats held under INA Section 236A) would potentially be eligible for the secure alternative program.",
      " DHS would also be authorized to contract with non-governmental organizations to implement secure alternatives. For aliens in detention, ICE has adopted national detention standards specifying detention conditions for immigration detainees; but existing standards do not themselves have the force of law, and detainees may have more limited recourse to violations of these standards than violations of applicable statutes and regulations. S. 744 would require DHS to adopt such standards and would provide oversight and compliance mechanisms. These mechanisms would include regular inspections (at least annually) of all DHS detention facilities, financial penalties and/or the termination of contracts for non-compliant facilities; and annual reports to Congress. The bill also would limit the use of solitary confinement of detained aliens,",
      " and set procedures that would have to be followed if an alien was placed in solitary confinement. Furthermore, S. 744 would require DHS to maintain records and report to Congress on the detention of aliens, including information regarding the length of an alien's detention, the charges that serve as the basis for removal proceedings against him, and the status of such proceedings. Protection of Children during Immigration Enforcement S. 744 include provisions intended to ensure that an alien's detention and/or removal does not result in the termination of a parent or caregiver's parental rights. The bill would require state child welfare agencies to offer certain protections and services to children in foster care who are separated from their parents due to immigration enforcement,",
      " and generally would make the fact that a child's parent had been detained or removed because of an immigration proceeding a compelling reason for a state child welfare agency not to seek termination of parental rights (TPR) to a child in foster care. Further, before the agency could file for TPR, S. 744 would require the agency to make reasonable efforts to locate a parent who has been removed from the country, notify that parent of the TPR proceedings, or reunite the child with the parents.  The bill would stipulate that a state's child protection standards cannot disqualify a parent or other relative as a placement option solely based on the immigration status of the adult and would require state child welfare agencies to ensure certain services and protections are offered to children in foster care whose parents are deported or detained under immigration law.",
      " Such services would include providing a case manager or native language interpreter, documenting in the child's written case plan the location of the parent or relative from whom the child was removed, and working with DHS to ensure parents who want their children to leave the country with them have enough time and access to necessary documents, among other requirements. The bill would also require DHS to determine within two hours if an individual apprehended during an immigration enforcement action is a parent or other primary caregiver of a child in the United States. DHS would be required to provide such parents or caregivers at least two telephone calls to arrange for the child's care, to notify relevant child welfare agencies if the parent or caregiver is unable to make arrangements for the child or if the child is at imminent risk of harm,",
      " and to ensure that the best interest of the child is considered on any decisions related to detention.  In addition, S. 744 would require that detention facilities provide mechanisms for detained parents/caregivers to maintain contact and custody of their children including by permitting regular calls and contact with the children and allowing detainees to participate in family court proceedings, ensuring that the detainee is able to fully comply with all family court or child welfare agency orders impacting custody of their children, and providing access to applications to request travel documents for their children. The bill would mandate that the Secretary of DHS, in consultation with the AG, Secretary of HHS and child welfare and family law experts,",
      " develop training on the new requirements under the bill. Additional Interior Enforcement Provisions S. 744 includes several additional provisions related to the enforcement of immigration laws within the United States and related issues (also see \"Immigration-Related Crimes\"). The bill would narrow immigration officers' authority to engage in enforcement actions in \"sensitive locations\" such as schools and hospitals without prior approval or exigent circumstances. It would also require DHS to report annually to Congress on any such enforcement actions The bill would provide that stipulated removal pursuant to INA Section 240(d) may only be granted following an in-person hearing that finds that the concession of removability is voluntary,",
      " knowing, and intelligent. S. 744 also would appear to give the State Department discretion to discontinue granting only certain types of visas upon notification that a country is refusing repatriation of its nationals, rather than discontinuing all immigrant or nonimmigrant visas (or both) as may occur under current law. In addition, S. 744 would eliminate the INA provision that currently allows a U.S. citizen to renounce citizenship during a time of war if the Attorney General approves the renunciation as not contrary to the interest of national defense. And it would broaden the criminal investigatory authority of State Department and Foreign Service Special Agents.  Employment Eligibility Verification and Worksite\u00a0Enforcement130  Since the enactment of the Immigration Reform and Control Act (IRCA)",
      " of 1986, it has been illegal for an employer to knowingly hire, recruit or refer for a fee, or continue to employ an alien who is not authorized to be so employed. Employers are required to review documents to verify the identity and work eligibility of new employees; and employers and employees must sign a form attesting that they have reviewed such documents (in the case of the employer) and are authorized to work in the United States (in the case of the worker). The law also gives immigration officers and administrative law judges (ALJs) authority to investigate alleged violations of these provisions, and establishes civil monetary penalties for substantive and paperwork violations,",
      " as well as criminal penalties for a pattern or practice of violations. Certain employers also use E-Verify, an Internet-based system that checks information provided by workers during the verification process against federal databases. Section 3101 of S. 744 would strike and re-write the employment verification and worksite enforcement provisions of the INA, imposing a new requirement to be phased in over time that all employers use an electronic eligibility verification system (EVS) similar to E-Verify, and strengthening the law's compliance provisions, among other changes. In general, civil and criminal penalties for hiring unauthorized workers would roughly double relative to their current levels. The law also would provide for several types of enhanced penalties,",
      " including special compliance plans, property liens, and potential debarment from federal contracts. At the same time, the bill would impose a tougher standard of proof for liability, and pre-penalty notices that only could be issued if there is reasonable cause to believe a civil violation has occurred in the past three years. Other sections of S. 744 include a number of provisions apparently designed to limit the burden on employers that would result from these changes to INA Section 274A (see \" Employer Protections \"), and to prevent discrimination and otherwise protect lawful workers against potential adverse effects of the new system (see \" Worker Protections \"). As noted elsewhere (see \"Comprehensive Immigration Reform Funds\"), Section 6 of S.",
      " 744 would appropriate $750 million over a six-year period for DHS to expand and implement the EVS. In addition, Section 3301 would establish an Interior Enforcement Account, and authorize $1 billion to support actions by DHS, the Commissioner of Social Security, the Attorney General, and the Department of State to carry out provisions described in Title III. Included within this authorization, DHS would be authorized, within five years, to increase to 5,000 the number of USCIS and ICE personnel assigned to administer and enforce the laws discussed in this section. The Secretary of DHS and the Commissioner of the Social Security Administration (SSA) would be required to enter into a reimbursable agreement to cover the full costs of SSA's responsibilities under the EVS.",
      " DHS would be required to issue regulations to implement Section 3101 no later than one year after the bill's enactment. Document Verification Requirements and Document Integrity The document verification requirements under Section 3101 of S. 744 would be similar to the existing system, with employers and new employees, respectively, required to attest to having reviewed workers' documents evidencing identity and work authorization and to being authorized to work in the United States. The bill would add \"enhanced\" driver's licenses or identification cards to the list of documents workers may present to establish both identity and employment eligibility. In addition, Section 3101 would include two new tools to combat the use of fraudulent documents by unauthorized workers.",
      " USCIS would be required to publish pictures of acceptable documents on its website. And employers would be required to use a new identity authentication mechanism to be developed by DHS. For certain documents, the mechanism would consist of a \"photo tool\" to detect documents that have been altered by photo substitution by allowing employers to check photographs on certain identity documents presented by workers against original images from the same documents. DHS would develop another mechanism for documents whose images are not available. Section 3101 would authorize $250 million for a DHS grant program for states to provide DHS with access to driver's license information to support the photo tool.  The bill also would address document integrity by requiring the Commissioner of Social Security,",
      " within five years of enactment of S. 744, to issue only \"fraud-resistant, tamper-resistant, wear-resistant, and identity theft-resistant\" Social Security cards. New criminal penalties would be created for fraudulent use of or traffic in a Social Security card or number. And DHS would be required to study the possible addition of biometric data to employment authorization documents. Electronic Eligibility Verification System  Section 3101 of S. 744 would establish and make permanent an electronic eligibility verification system (EVS) modeled on the current E-Verify system, and eventually would require that all employers use the system. Under E-Verify, employers submit information from workers'",
      " identity and work eligibility documents to USCIS to be checked against Social Security and (in some cases) DHS databases to confirm that the information matches federal records. In this way, E-Verify is designed to detect certain types of fraudulent documents. Current law makes E-Verify a primarily voluntary system; but S. 744 would require certain employers to begin using the EVS immediately, and would require all employers to use the system within six years of the bill's date of enactment. Participating employers would be required to register and to comply with EVS procedures. Eventually, all employers would have to use the system to verify newly-hired workers during the first three days of employment,",
      " and to re-verify all workers with expiring employment authorization documents. An employer who hires a worker without using the EVS after the date on which the employer is required to use the system would be presumed to have knowingly hired an unauthorized worker. Section 3101 would also authorize DHS to require that certain employers verify current workers who were not previously confirmed through the EVS. Similar to E-Verify, the EVS would be designed to immediately (or within three days) provide either a confirmation of work eligibility, or a \"further action notice\" indicating that the worker's eligibility initially could not be confirmed. Employers would be required to notify workers in receipt of a further action notice,",
      " to allow workers to correct potential database or user errors; and workers would have 10 days to contest the notice. In cases in which a worker fails to contest a further action notice or nonconfirmation, or exhausts his or her opportunities to contest or appeal a finding by the system that the worker is unauthorized, an employer would be required to terminate the worker's employment. Failure to do so would create a rebuttable presumption that the employer knowingly hired and continued to employ an unauthorized worker. USCIS also would be required to provide ICE with information about workers nonconfirmed by the system. Employer Protections Some Members of Congress have raised concerns about how changes to strengthen employment eligibility verification and worksite enforcement may affect certain U.S.",
      " employers. Some Members also have raised concerns about the costs to certain businesses of using the EVS. And with several states and localities passing laws to combat the employment of unauthorized workers, business groups have pushed for uniform national standards for employment verification. S. 744 includes several provisions apparently designed to address these concerns. With respect to uniform standards, the bill would expressly preempt state and local measures that include fines or \"penalty structures\" related to the hiring, continued employment, or status verification for employment eligibility purposes of unauthorized aliens. Section 3101 describes conditions under which the DHS Secretary or an administrative law judge may mitigate certain penalties, and includes more detailed provisions than in current law for challenging penalty claims.",
      " The section also would broaden existing language describing an employer's good-faith compliance defense against prosecution for violations of these provisions, and would protect employers from liability for actions taken in good faith based on the EVS. Under S. 744, DHS would be required to make arrangements to enable employers or employees who are not otherwise able to access the EVS to use electronic and telephonic formats, federal or public facilities, or other locations to utilize the system. Section 3101 of S. 744 also would require reports by DHS and GAO on unique challenges of implementing the EVS in the agricultural industry, on adverse impacts on employers associated with EVS implementation,",
      " and on the effects of new documentary requirements on different categories of work-authorized workers and employers. In addition, a new Office of the Small Business and Employee Advocate would be created. The office would be charged with assisting small businesses and individuals to comply with the law, and also to abate certain penalties. Worker Protections Along with adding employer sanctions provisions, the 1986 IRCA included provisions to prohibit employment discrimination (other than against unauthorized workers) based on national origin or citizenship status. The DOJ Office of Special Counsel for Immigration-Related Unfair Employment Practices was created to respond to the concern that some employers would discriminate against foreign-looking or foreign-sounding individuals to avoid possibly being penalized under INA Section 274A.",
      " E-Verify was intended, in part, to combat such discrimination, but evaluations of E-Verify have produced ambiguous findings about its effects. Section 3101 of S. 744 would require that the DHS Secretary design the EVS to allow for auditing to detect possible cases of this type of employment discrimination and other adverse actions, and to allow workers to check their own verification case histories, to verify their own eligibility through the system, and to temporarily lock their own or their children's Social Security numbers. DHS would develop procedures to notify workers directly when their records are queried and when they receive a further action notice, nonconfirmation, or confirmation.",
      " DHS also would conduct regular civil rights and civil liberties assessments of the EVS; and the DHS Inspector General would conduct annual audits of EVS accuracy rates. Section 3101 also outlines detailed provisions for administrative and judicial review of final nonconfirmations of a worker's eligibility, and would allow an ALJ, as part of the administrative review process, to uphold or reverse an EVS determination and to order lost wages and other appropriate remedies in cases of erroneous nonconfirmations. In addition to the worker protections in the EVS, S. 744 includes additional provisions apparently designed to prevent discrimination or other adverse outcomes during the verification process. In cases of labor disputes,",
      " all rights and remedies provided under federal, state, or local law relating to workplace rights, including back pay, would be available to an employee despite the employee's status as an unauthorized alien. And reinstatement would be available to individuals who lose employment authorized status due to unlawful acts of an employer. The bill also would make certain prohibited uses of the EVS unfair immigration-related employment practices, and therefore subject to civil penalties through the DOJ Office of Special Counsel (OSC). And it would the OSC's jurisdiction to cover certain small employers now exempt from the section. Section 3105 also would require the Equal Employment Opportunity Commission to refer all allegations of immigration-related unfair employment practices to the DOJ Special Counsel,",
      " and would more than double the monetary penalties for violations of worker rights under these provisions. The section also would authorize $120 million in FY2014-FY2016 to publicize these worker protections. As noted elsewhere, section 3107 would create a new Office of the Small Business and Employee Advocate (see \"Business Protections\"). The office would be charged with assisting individuals and small businesses with complying with employment verification requirements, including by helping individuals correct erroneous further action notices and nonconfirmations. S. 744 includes additional provisions to protect certain foreign workers. Section 3201 would expand eligibility for the U visa to cover a wider class of alien crime victims than under current law,",
      " as well as aliens who have been or may be helpful in a wider range of criminal investigations. The visa also would be expanded to include as new \"covered violations,\" serious workplace abuse, exploitation, retaliation, or violations of whistleblower protections. DHS would be required to stay the removal of certain aliens arrested or detained in the course of worksite enforcement activities, and to notify appropriate law enforcement agencies with jurisdiction over the violations. The section also amends other provisions of the INA to protect victims of \"serious violations\" of labor and employment law. Certain penalties collected from employers who hire or employ unauthorized workers would be deposited in the CIR Trust Fund and made available to DHS and DOJ to educate employers and workers about the EVS.",
      " The bill also would direct the U.S. Sentencing Commission to provide enhanced sentencing guidelines for persons convicted of certain employment-related offenses, and would generally preclude the disclosure of information provided by aliens who are victims of certain crimes. Legalization of Unauthorized Aliens166 How to address the unauthorized alien population in the United States is a key and controversial issue in comprehensive immigration reform. There is a fundamental split between those who want to grant legal status to unauthorized aliens in the United States and those who want unauthorized aliens to leave the country. Among those who support legalization for at least some portion of the unauthorized population, there also may be disagreement about how to treat different segments of the unauthorized population as part of a legalization process.",
      " S. 744 proposes to establish a general legalization program for unauthorized aliens in the United States (see \"Registered Provisional Immigrants (RPIs)\"), with special pathways for aliens who entered the country as children (See \"DREAM Act\") and for agricultural workers (see \"Agricultural Worker Legalization\"). As noted elsewhere, the implementation of certain enforcement provisions under Section 3 of the bill serve as pre-conditions for the bill's legalization provision (see \"Triggers for Legalization and Adjustment to LPR Status\"). Interim final regulations to implement all of the legalization provisions discussed in this section would have to be issued no later than one year after the enactment of S.",
      " 744 and would take effect immediately upon publication. Registered Provisional Immigrants (RPIs) Under current law, there are limited avenues for unauthorized aliens in the United States to become lawful permanent residents. Sections 2101, 2102 and 2103 of S. 744 would establish a new multi-step, multi-year process that would enable eligible unauthorized aliens to transition into a provisional legal status and ultimately to lawful permanent residence.  S. 744 Section 2101 would add a new section (245B) to the INA, allowing adjustment to a newly created \"registered provisional immigrant (RPI)\" status. The Secretary of DHS would be authorized to grant RPI status to a foreign national who meets the specified eligibility requirements,",
      " submits an application in the specified period, and pays a fee and a penalty, if applicable. The RPI eligibility requirements state that the alien must be physically present in the United States on the date of submitting the RPI application, must have been physically present in the United States on or before December 31, 2011, and must have maintained continuous physical presence in the United States from December 31, 2011, until the date the alien is granted RPI status. Dependent spouses and children could be classified as RPI dependents if they were physically present in the United States on or before December 31, 2012,",
      " have maintained continuous physical presence in the United States from that date until the date the principal alien is granted RPI status, and meet the other RPI eligibility requirements.  Under S. 744, a foreign national would be ineligible for RPI status if he or she has a conviction for specified criminal offenses or for unlawful voting; if the Secretary of DHS knows or has reasonable grounds to believe that the alien has engaged, or is likely to engage, in terrorist activity; or if the alien is inadmissible under certain provisions of the INA. Aliens with LPR, refugee, asylum, or (with specified exceptions) legal nonimmigrant status on the date S.",
      " 744 was introduced also would be ineligible. Section 2101 of S. 744 would further require that aliens satisfy any applicable federal tax liability prior to filing an RPI application, and that aliens submit biometric and biographic data and clear national security and law enforcement background checks as part of the application process. An RPI applicant also may be subject to additional security screening at the discretion of the DHS Secretary. The RPI application period would run for one year beginning on the date a final rule is published; the Secretary could extend the application period for an additional 18 months.  Aliens seeking RPI status under S. 744 would be required to pay both a processing fee and a penalty.",
      " Aliens age 16 and older would be charged a processing fee in an amount set by the DHS Secretary that is sufficient to cover the full costs of processing applications. Aliens 21 and older (who are not covered by DREAM Act provisions; see \"DREAM Act\") would be required to pay a penalty of $1,000, which could be paid in installments. The processing fees would be deposited into the existing Immigration Examinations Fee Account and the penalties would be deposited into the new CIR Trust Fund (see \" Comprehensive Immigration Reform Funds \").  Under S. 744, an alien who is apprehended before or during the RPI application period and appears to be eligible for RPI status would be given an opportunity to file an application and could not be removed until a final determination on the application is made.",
      " Similarly, in the case of an alien in removal proceedings during the same time frame who appears to be eligible for RPI status, S. 744 would provide for suspension of the removal proceedings to give the alien a reasonable opportunity to apply for RPI status. Aliens outside the United States who departed the country while subject to an order of exclusion, deportation, removal, or voluntary departure, and such aliens who reentered illegally after December 31, 2011, generally would not be eligible to file an application for RPI status under S. 744. The Secretary could waive this provision if the alien is the spouse or child of a U.S.",
      " citizen or LPR or the parent of a U.S. citizen or LPR child, or if the alien meets certain requirements under the DREAM Act provisions. While an alien's RPI application is pending, the alien could receive advance parole in urgent circumstances, could not be detained or removed unless the Secretary of DHS determines the alien is no longer eligible for RPI status, would not be considered unlawfully present, and would not be considered to be an unauthorized alien for employment purposes. In general, an employer who knows that an alien is or will be an applicant for RPI status would be permitted to employ the alien pending adjudication of the alien's RPI application.",
      "  A foreign national granted RPI status generally would be considered to have been admitted and lawfully present in the United States as of the application filing date, and would be permitted to travel in and out of the United States. The DHS Secretary would issue RPIs a machine-readable and tamper-resistant identity document with a digitized photo. The Commissioner of Social Security, in coordination with the DHS Secretary, would be required to implement a system to assign Social Security numbers and cards to each RPI. RPIs would be ineligible for federal means-tested public benefits (see \" Access to Federal Public Benefits \"). Section 2107 would specify that those who receive RPI status would not receive credit towards insured status or a benefit for Social Security coverage earned between January 1,",
      " 2004 and December 31, 2013. It would also specify that no quarter of coverage could be credited if it was earned by a person present under an expired visa, unless the person was authorized to work during that period. These limitations would not apply to anyone issued a Social Security Number (SSN) prior to January 1, 2004. S. 744 would allow persons who are unable to obtain documentation of work authorization to attest to such authorization but would criminally penalize a person for making a false attestation.  Under S. 744, the initial period of RPI status would be six years.",
      " This initial period could be extended for one or more additional periods of six years if the alien remains eligible for RPI status and meets specified requirements, including a continuous employment requirement. In general, to satisfy this employment requirement, an alien either must establish that he or she was regularly employed (allowing for periods of unemployment of up to 60 days) and is not likely to become a public charge, or must demonstrate average income or resources above a specified level throughout the RPI admission period. An alien also could satisfy the employment requirement by full-time attendance at certain educational institutions or programs. The employment requirement would not apply to RPI dependents and would be subject to other exceptions and waivers.",
      " RPI Adjustment of Status to Lawful Permanent Residence To enable RPIs to eventually become LPRs, S. 744 Section 2102 would add a new section (245C) to the INA on RPI adjustment of status. Under INA Section 245C, RPIs would not be permitted to adjust to LPR status until the Secretary of State certifies that immigrant visas have become available for all approved petitions that were filed under applicable sections of the INA before the enactment of S. 744.  For RPIs seeking to adjust to LPR status, the waivers of inadmissibility for aliens initially seeking RPI status would continue to apply.",
      " In addition, to adjust to LPR status in accordance with INA Section 245C, an alien would have to have remained eligible for RPI status, including by satisfying the employment requirement, and would have to have been continuously physically present in the United States during the period of admission as an RPI, as specified. RPIs adjusting status in accordance with INA Section 245C also would be required to satisfy any applicable federal tax liability and to register under the Military Selective Service Act if applicable, and would be subject to renewed national security and law enforcement checks prior to adjustment. Applicants 16 and older would be required to meet, or to be pursuing a course of study to meet,",
      " the INA English language and civics requirements for naturalization, subject to exceptions and waivers.  INA Section 245C would impose a second set of processing and penalty fees on RPIs who apply to adjust to LPR status under its terms. Applicants would have to pay a penalty of $1,000, which could be paid in installments. Processing fees would be deposited into the existing Immigration Examinations Fee Account and penalties would be deposited into the CIR Trust Fund (see \"Comprehensive Immigration Reform Funds\").  RPIs who satisfy these requirements under INA Section 245C could adjust to LPR status under the Merit-Based Track Two visa provisions pursuant to S.",
      " 744 Section 2302. These visas would become available beginning in FY2024, as discussed elsewhere (see \"Merit-Based Track Two\"). Those RPIs who also meet additional eligibility criteria set forth in the DREAM Act provisions (in S. 744 \u00a72103) may have the option of adjusting status more quickly under a new INA Section 245D (see next section, \"DREAM Act\"). RPIs only could adjust status under the Merit-Based Track Two provisions or the DREAM Act provisions. S. 744 Section 2102 also would amend current law to provide for naturalization of certain LPRs who were lawfully present in the United States and eligible for work authorization for at least 10 years prior to becoming an LPR\u2014language apparently covering RPIs following their adjustment to LPR status under the Merit-Based Track Two provisions (see \"Merit-Based Track Two\"). These aliens would be able to apply for naturalization after three years in LPR status,",
      " rather than five years as is usually the case for LPRs currently seeking to naturalize. DREAM Act S. 744 would add a new section (245D) to the INA on adjustment of status for certain RPIs who entered the United States as children and satisfy a set of requirements. Such aliens previously have been the subject of similar stand-alone legislation known as the Development, Relief, and Education for Alien Minors (DREAM) Act. Under S. 744, the DHS Secretary could adjust the status of an RPI to that of an LPR if the alien demonstrates that he or she has been an RPI for at least five years;",
      " was under age 16 at the time of initial entry into the United States; has earned a high school diploma, general education development (GED) certificate, or the equivalent in the United States; and has earned a degree from an institution of higher education or has completed at least two years in good standing in a bachelor's or higher degree program in the United States, or has served in the uniformed services for at least four years. Such aliens would be required to provide DHS with a list of secondary schools attended in the United States; and they would be subject to English language and civics requirements and national security and law enforcement screening. Aliens adjusting under INA Section 245D would be exempt from the $1,",
      "000 penalty charged to RPIs adjusting status under INA Section 245C, and would face a somewhat different set of application requirements than other RPIs.  For purposes of naturalization, an alien granted LPR status under INASection 245D would be considered to have been lawfully admitted for permanent residence and to have been in the United States as an LPR (and therefore accumulating time toward the residency requirement for naturalization) during the period the alien was an RPI. With some exceptions, however, an alien could not apply for naturalization while in RPI status.  S. 744 would amend the INA to exempt aliens who adjust to LPR status under INA Section 245C (for RPIs)",
      " or INA Section 245D (the DREAM Act) from the worldwide numerical limits on permanent admissions. In addition, S. 744 would repeal Section 505 of Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA), which places certain restrictions on state provision of postsecondary educational benefits to unauthorized aliens. The bill would further specify that RPIs who initially entered the United States before age 16 and aliens granted blue card status (see \"Agricultural Worker Legalization\")) would only be eligible for certain types of federal student financial assistance under Title IV of the Higher Education Act (HEA) of 1965.",
      " These aliens would be eligible for student loans, federal work-study programs, and services. Agricultural Worker Legalization  S. 744 would establish a new legal temporary status, termed \"blue card\" status, for agricultural workers who satisfy specified work and other requirements. Broadly similar provisions have been included in measures introduced regularly in recent Congresses, including in bills known as the Agricultural Job Opportunities, Benefits, and Security Act (AgJOBS Act). S. 744 provides that the Secretary of DHS could grant blue card status to an alien who either performed not fewer than 575 hours or 100 work days of agricultural employment in the United States during the two-year period ending on December 31,",
      " 2012, or is the spouse or child of such an alien, was physically present in the United States on or before December 31, 2012, and has maintained continuous presence in the United States from that date until the date on which the alien is granted blue card status. The application period for blue card status would run for one year beginning on the date a final rule is published, and the DHS Secretary could extend the period for an additional 18 months. The Secretary of DHS, in consultation with the Secretary of Agriculture, would have to issue final regulations to implement these provisions no later than one year after the enactment of S.",
      " 744. No alien would be permitted to remain in blue card status after the date that is eight years after regulations are published. The Secretary could only accept applications from aliens within the United States, except for aliens who have participated in the H-2A visa program, who could apply from abroad. Apart from their work experience, blue card applicants generally would be subject to similar eligibility restrictions and waivers of inadmissibility as RPIs (see \"Registered Provisional Immigrants (RPIs)\"), except that legal nonimmigrants in H-2A status would be eligible for blue cards. Blue card applicants also would be subject to national security and law enforcement background checks.",
      " They would enjoy similar protections as RPIs from being removed during the application period, and would similarly receive an identity document, work authorization, and permission to travel into and out of the United States. Applicants for blue card status also would be subject to processing and penalty fees, though penalties, at $100, would be lower than for RPI applicants. Processing fees would be deposited into the Immigration Examinations Fee Account, and the penalties would be deposited into the CIR Trust Fund.  Each employer of an alien with blue card status would be required to annually provide a record of the alien's employment to the alien and the Secretary of Agriculture.",
      " The Secretary of DHS would be allowed to adjust an alien with blue card status to RPI status if the alien is unable to fulfill the agricultural work requirement for adjustment from blue card status to LPR status, as specified.  Adjustment of Status to Lawful Permanent Residence S. 744 would add a new section (245F) to the INA to provide for the adjustment of status of aliens with blue card status to LPR status. The DHS Secretary, in consultation with the Secretary of Agriculture, would be required to issue final regulations implementing these provisions within one year of the enactment of S. 744. Under this new INA section, the DHS Secretary,",
      " not earlier than five years after the enactment of S. 744, would be required to adjust the status of certain aliens with blue card status if the alien has performed either: not less than 100 work days of agricultural employment annually for five years in the eight-year period beginning on the date of enactment, or not less than 150 work days of agricultural employment annually for three years in the five-year period beginning on the date of enactment. The Secretary of DHS could not adjust the status of an alien with blue card status if the alien is no longer eligible for blue card status or has failed to meet the agricultural work requirement. As with RPIs,",
      " grounds of inadmissibility waived during the initial application period would continue to apply for purposes of adjustment of status; and aliens adjusting from blue card status would be required to satisfy any applicable federal tax liability, and to pay a processing fee and a $400 penalty. S. 744 also would establish a criminal penalty for false statements in applications for blue card status or in applications for adjustment from blue card status to LPR status. The Secretary of DHS would grant LPR status to the spouse or child of an alien whose status was adjusted from blue card status to LPR status if the spouse or child applies for such status, the principal alien includes the spouse or child in an adjustment of status application,",
      " and the spouse or child is not ineligible for LPR status under the ineligibility provisions for obtaining RPI status (see \"Registered Provisional Immigrants (RPIs)\"). An alien granted blue card status would only be permitted to adjust to LPR status under this section, the RPI adjustment of status provisions, or the merit-based track two permanent admissions provisions (see \"Merit-Based Track Two\"). S. 744 further provides that worldwide and per-country immigration limits would not apply to adjustments of status from blue card status to LPR status. Immigrant Visas194 Immigrants are persons admitted as legal permanent residents (LPRs)",
      " of the United States. Under current law, permanent admissions are subject to a complex set of numerical limits and preference categories that give priority for admission on the basis of family relationships, an offer or employment in the United States, and geographic diversity of sending countries. These limits include an annual flexible worldwide cap of 675,000 immigrants, plus refugees and asylees. The INA specifies that each year, countries are held to a numerical limit of 7% of the worldwide level of U.S. immigrant admissions, known as per-country limits. The pool of people who are eligible to immigrate to the United States as LPRs each year typically exceeds the worldwide level set by U.S.",
      " immigration law, and as a consequence millions of prospective LPRs with approved petitions are waiting to receive a numerically limited visa (commonly referred to as the \"backlog\" or \"queue\"). The immediate relatives of U.S. citizens (i.e., their spouses and unmarried minor children, and the parents of adult U.S. citizens) are admitted outside of the numerical limits and are the flexible component of the worldwide cap.  S. 744 would revise the numerical limits on legal permanent immigration and would alter the system that allocates the visas. It would repeal the Diversity Visa Program beginning in FY2015, but enable those who received diversity visas for FY2013 and FY2014 to be eligible to obtain LPR status.",
      " Two new \"merit-based\" categories would be created (see \"Merit-Based Track One\" and \"Merit-Based Track Two\"), one of which would be designed, in part, to replace the diversity visa. The basic worldwide limits on family- and employment-based preference (i.e., numerically-capped) visas would be unchanged at 480,000 and 140,000, respectively; but the bill would allow the allocation of unused roll-over and recaptured visas from previous years, would eliminate the per-country ceiling for employment-based preferences, and would increase the per-country ceiling for family-based preferences from 7% to 15%, in addition to other changes to these systems (see \"Family-Based Immigration\"",
      " and Employment-based Immigration\"). S. 744 also would modify rules for investor visas (see \"Investor Visas\"), and include provisions to promote immigrant integration (see \"Immigrant Integration\").  In addition, S. 744 would make numerous other revisions to LPR immigration, including new procedures for how DHS and DOS manage visa backlogs, new provisions for fianc\u00e9s and fianc\u00e9es of LPRs, changes to the petition process when the sponsoring relative dies, and changes to certain country-specific and other special immigrant visas.  Point Merit-Based Systems S. 744 would include two different \"merit-based\" systems: one designed as a point system to admit aliens based on their employment skills,",
      " and the other designed to expedite the admission of certain people in the existing visa backlog. Merit-Based Track One The proposed Merit-Based Track One visa would replace the diversity visa and would admit 120,000 to 250,000 LPRs annually, with the annual flow based upon a sliding formula that would depend on demand for the visa in the previous year. If the average annual unemployment rate in the previous fiscal year was greater than 8.5%, the level would not be increased. Unused visas from past years would be recaptured. During each of the years FY2015 through FY2017, Track One visas would be made available to foreign nationals who meet existing criteria for the third preference professional,",
      " skilled shortage, and unskilled shortage workers. In FY2018 and subsequent years, visas would be allocated as follows: 50% would be allocated to Tier 1 based upon education (college plus), employment experience, high-demand occupation, entrepreneurship, younger workers, English language, familial relationship to a U.S. citizen, country of origin diversity, and civic engagement. 50% would be allocated to Tier two based upon employment in high-demand occupations that require little to medium preparation (high school diploma or GED) and caregivers, younger workers, English language, familial relationship to a U.S. citizen, country of origin diversity, and civic engagement.",
      " Foreign nationals who have pending LPR petitions or who acquire RPI status would not be eligible for Track One visas. GAO would be required to evaluate how this point system functions and report to Congress not later than seven years after enactment.  Merit-Based Track Two S. 744 would create a second Merit System (Track Two) that has four components. The first would consist of employment preference petitioners who filed before enactment of S. 744 and whose petitions were pending (i.e., were in the visa queue backlog) for at least five years. The second would consist of family preference petitioners who filed before enactment and whose petitions were pending (i.e., were in the visa queue backlog)",
      " for at least five years. The third would consist of persons filing current third or fourth- preference family petitioners during the first 18 months after the date of enactment (i.e., before the bill's final changes to the family preference categories become effective; see \"Family-based Immigration\") and whose visas are not issued during the first five years after the bill's date of enactment. The fourth would consist of long-term workers (other than W visa holders) who worked 10 years in a legally present status with employment authorization, a category apparently designed to describe RPIs. Under S. 744, the first two components of the Track Two merit system would function as current backlog reduction,",
      " as visas would be issued to 1/7 of the petitioners in these two categories, ordered by filing date, during each year from FY2015 through FY2021, regardless of country of origin or other numerical limits. During FY2022-FY2023, visas would be issued to the current family third and fourth preference petitioners filing after the date of enactment, with one half of such filers receiving visas in each of these years (ordered by filing date). These visas would thus accommodate certain family petitioners who no longer would be eligible following the implementation of reforms to the family preference system in S. 744 (see \"Family-Based Immigration\"). Ten years after enactment of S.",
      " 744 (i.e., beginning in FY2024), the Track Two merit system would become a pathway for RPIs adjusting to LPR status. Beginning in FY2029, aliens would be required to have been lawfully present in an \"employment authorized status\" for 20 years prior to filing for Track Two merit adjustment. The bill expressly waives the unlawful presence ground of inadmissibility of Track Two adjustments. Family-Based Immigration Under current law, to qualify as a family-based LPR, a foreign national must be a spouse or minor child of a U.S. citizen; a parent, adult child, or sibling of an adult U.S.",
      " citizen; or a spouse or unmarried child of a lawful permanent resident. At least 226,000 and no more than 480,000 family preference LPRs are admitted each year within four different preference categories. Immediate relatives of U.S. citizens may be eligible for non-preference (i.e., uncapped) visas.  Section 2305 of S. 744 would revise the family-based system in two main ways. First, it would reclassify spouses and minor unmarried children of LPRs as immediate relatives, making them exempt from family preference numerical limits. Second, S. 744 would reallocate family preference visas in two stages.",
      " For the first 18 months after enactment, family preference visas would be allocated as follows: (1) adult unmarried children of U.S. citizens would be capped at 20% of the worldwide limit for family-preference immigrants; (2) adult unmarried children of LPRs would be capped at 20% of the worldwide limit for family-preference immigrants plus unused visas from the first category; (3) adult married children of U.S. citizens would be capped at 20% of the worldwide limit for family-preference immigrants, plus unused visas from the first two categories; and (4) siblings of U.S. citizens would be capped at 40%",
      " of the worldwide limit for family-preference immigrants, plus unused visas from the first three categories. Beginning eighteen months after enactment, S. 744 would eliminate the current family fourth preference category for adult siblings of U.S. citizens, and allocate the family preference visas as follows: U.S. citizens' unmarried sons or daughters would not exceed 35% of worldwide level; U.S. citizens' married sons or daughters 31 years of age or younger (at the time of filing) would not exceed 25% of the worldwide level; and LPRs' unmarried sons and daughters would not exceed 40% of the worldwide level. In addition,",
      " S. 744 would make nonimmigrant V visas available to all persons with approved petitions pending within a family preference category. Thus, U.S. citizens' unmarried sons and daughters and LPRs' unmarried sons and daughters, as well as persons who are U.S. citizens' married sons and daughters under age 31, could reside in the United States until their visa date becomes current. They would also be granted work authorization during that period. U.S. citizens' siblings and adult sons and daughters age 31 or older with pending family preference visas could reside in the United States for 60 days per year, but would not be authorized to work.",
      "  Employment-Based Immigration The current employment-based LPR visa system consists of five numerically limited preference categories. To qualify within one of these categories, a foreign national must be an employee whom a U.S. employer has received approval from the Department of Labor to hire; a person of extraordinary or exceptional ability in specified areas; an investor who will start a business that creates at least 10 new jobs; or someone who meets the narrow definition of the \"special immigrant\" category. The INA currently allocates 140,000 admissions annually for employment-preference immigrants. S. 744 would make substantial changes to the employment-based system. Foremost,",
      " the bill would exempt from the numerical limits on employment-based LPRs the following: derivatives (i.e., accompanying immediate family members) of employment-based LPRs; persons of extraordinary ability in the arts, sciences, education, business, or athletics; outstanding professors and researchers; and certain multinational executives and managers, who are currently first preference employment-based; persons who earned a doctorate degree from an institution of higher education in the United States or the foreign equivalent; persons who earned a graduate degree in STEM fields from a U.S. institution within the five-year period before the petition filing date and have a U.S. offer of employment in the related field;",
      " and foreign national physicians who have completed foreign residence requirements under INA Section 212(e).  The bill would make the first preference employment-based category exempt from numerical limits, and amend that category to include aliens who are members of the professions holding advanced degrees who have a U.S. job offer (subject to a \"national interest\" waiver), including alien physicians accepted to a U.S. residency or fellowship program, or prospective employees of national security facilities. The second preference category would consist of advanced degree holders and generally would be allocated 40% of 140,000; but aliens with advanced degree in science, technology, engineering, or math (STEM)",
      " fields would be exempted from numerical limits if they have a job offer and meet other requirements. Employers petitioning for such aliens also would be exempted from labor certification required under INA Section 212(a)(5).  S. 744 also would change certain procedures for admitting second preference employment-based immigrants to facilitate physician immigration (also see \"Conrad State 30 Program\"). Under the bill, certain nonimmigrant alien physicians would be exempt from numerical limits if they adjust to LPR status as EB-2 immigrants. And EB-2 labor certification requirements would be waived for certain alien physicians.  S. 744 also would amend the third preference employment-based category (i.e., skilled workers with at least two years training,",
      " professionals with baccalaureate degrees, and unskilled workers in occupations in which U.S. workers are in short supply) from 28.6 % to 40% of the worldwide level and would repeal the cap of 10,000 on unskilled workers within that 40%. It would also amend the INA to increase visa allocation to fourth preference employment-based special immigrants and fifth preference employment-based employment creation/investors from 7.1% each to 10% each. The bill would also facilitate the admission and naturalization of aliens who are current or potential employees of certain federal national security facilities. Investor Visas There are currently one category of immigrant investor visas (admitted as conditional LPRs)",
      " and two categories of nonimmigrant investor visas. These investor visas are intended to benefit the U.S. economy by providing an influx of foreign capital and stimulating job creation. S. 744 would make changes to these existing visas and also create new immigrant and nonimmigrant investor categories (with respect to the latter, see \"New Nonimmigrant Investor Visas\").  Changes to the EB-5 Category Under current law, the visa category used for immigrant investors is the fifth preference employment-based (EB-5) visa category, which allows for up to 10,000 admissions annually and generally requires a minimum $1 million investment. The minimum is reduced to $500,",
      "000 for aliens who invest in certain targeted investment programs (known as regional centers) through the Regional Center Pilot Program. The pilot program is set to expire at the end of FY2015.  S. 744 would exempt spouses and children (derivatives) of EB-5 petitioners from the numerical limits. It would also redefine \"Target Employment Area\" to include areas with high poverty, as with other employment-based categories. Section 2308 would include communities adversely affected by a recommendation by the Defense Base Closure and Realignment Commission as targeted employment areas for purposes of satisfying requirements for fifth preference employment creation/investors. In addition, beginning on January 1,",
      " 2016, the bill would begin automatically adjusting the required investment amount by the Consumer Price Index (CPI-U) every five years. S. 744 also would specify the criteria for removing or terminating an alien's conditional LPR status and would permit the Secretary of DHS to delegate this authority to the Secretary of Commerce.  S. 744 would permanently authorize the Regional Center Pilot program and would make numerous changes to the program. Currently, almost all the requirements related to the Regional Center program are in regulation, not in statute. The bill would establish statutory requirements for those applying for a regional center designation, and specify the type of information that should be contained in a regional center proposal.",
      " It would also create a mechanism for a commercial enterprise affiliated with a regional center to be preapproved. The Secretary of DHS would also be authorized to establish a premium processing option for aliens investing in preapproved commercial enterprises. The bill would also create a series of sanctions for regional centers that violate newly created financial reporting requirements.  New EB-6 Investor Visas Subtitle H of Title IV of S. 744 would create a new EB-6 immigrant visa category designed to permit the entry of up to 10,000 immigrant entrepreneurs per year. (The bill also would create a new nonimmigrant entrepreneur visa; see \"New Nonimmigrant Investor Visas\"). To qualify for an EB-",
      "6 visa, the alien would have to be a qualified entrepreneur; to have maintained a valid nonimmigrant status during the past two years; and to have had significant ownership in a business that created at least five jobs and either raised $500,000 from qualified investors or generated not less than $750,000 in annual revenue. Broadly similar requirements would apply for qualified entrepreneurs with advanced STEM degrees seeking to become EB-6 LPRs. The DHS Secretary would be required to promulgate regulations covering EB-6 (and nonimmigrant investor visas) within 16 months, and to ensure that the visas are implemented in a manner that protects national security and promotes economic growth,",
      " job creation, and competitiveness. The minimum investments and other dollar amounts for EB-6 eligibility would be adjusted every five years based on the CPI-U, in a manner similar to the EB-5 category. Immigrant Integration  S. 744 would define immigrant integration and rename the USCIS's Office of Citizenship as the Office of Citizenship and New Americans (OCNA). OCNA's functions would include promoting institutions and providing training and educational materials on aliens' citizenship responsibilities and leading such activities across federal agencies and with state and local entities. The OCNA would also work with the Task Force on New Americans (TFNA), to be established within 18 months of enactment.",
      " The Task Force would be charged with coordinating federal program and policy responses to integration issues and advising and assisting the federal government in carrying out the immigration integration policies and goals in the bill. Membership would include the secretaries of most cabinet-level executive branch agencies. TFNA members would liaison with their agencies to ensure agency participation in creating goals, developing indicators, facilitating state and local participation, and collecting data. Eighteen months after formation, the TFNA would provide recommendations on these issues and assist in developing legislative and policy proposals to DHS and the Domestic Policy Council.  The OCNA, working with a new nonprofit United States Citizenship Foundation, also would administer a pair of grant programs:",
      " Initial Entry, Adjustment, and Citizenship Assistance (IEACA) grants to provide direct assistance to aliens who apply for provisional legal status, adjust to LPR status, or seek naturalization; and a Pilot Grant Program (PGP) to support state and local government activities fostering immigrant integration. The two grant programs would be authorized $100 million for the FY2014-FY2018 period and such sums as may be necessary for subsequent years.  With the express objective of reducing \"barriers to naturalization,\" S. 744 would waive the English and history and civics naturalization requirements for persons who, on the date of application, were unable to comply with such requirements because of physical or mental disability,",
      " or were age 65+ with five years as an LPR. It would waive the English requirement for persons above ages 50, 55, and 60, if they had 20, 15, and 10 years, respectively, as an LPR. It would also waive the civics requirement for persons aged 60+ with 10 years as an LPR on a case-by-case basis. The bill would allow individuals to continue to use paper-based application forms to petition for LPR status or U.S. citizenship until October 1, 2020. Citizenship of Adopted Children As a result of an amendment approved on the Senate floor,",
      " the bill would ease requirements for international adoptions and naturalization of international adoptees. The age for an adopted child would be increased from under 16 years old to under 18 years old and only one parent from an adopting couple, rather than the two together, would be required to have a pre-adoption visit with a child adopted abroad. In order to be automatically naturalized under INA Section 320, a child born abroad would only be required to be physically present after a lawful admission, rather than required to be residing in the United States as an LPR. Additionally, a person who no longer has legal status or is physically present in the United States may be deemed to have satisfied the requirements of INA Section 320 as amended by the bill if that person would have satisfied them if they have been in effect when the person was originally lawfully admitted.",
      " The automatic naturalization under INA Section 320 would apply to an adopted child regardless of when the adoption was finalized and the naturalization provisions for children in INA Sections 320 and 322 would apply regardless of when requirements were satisfied. Naturalization Based on Military Service The Senate also approved a floor amendment that would streamline military-service-based naturalization for persons who have awards for active engagement or participation in combat by deeming them to have satisfied most substantive requirements, including English and civics knowledge, attachment to the principles of the U.S. Constitution, being well disposed to the good order and happiness of the United States, good moral character, and honorable service and discharge.",
      " Naturalization under this provision would still be subject to potential revocation for discharge under other than honorable circumstances before serving honorably for an aggregate period of five years. Nonimmigrant Visas Nonimmigrants\u2014such as tourists, foreign students, diplomats, temporary workers, cultural exchange participants, or intracompany business personnel\u2014are admitted for a specific purpose and a temporary period of time. Nonimmigrants are required to leave the country when their visas expire, though certain classes of nonimmigrants are \"dual intent,\" meaning they may adjust to LPR status if they otherwise qualify. Current law describes 24 major nonimmigrant visa categories, and over 70 specific types of nonimmigrant visas,",
      " which are often referred to by the letter that denotes their section in the statute, such as H-2A agricultural workers, F-1 foreign students, or J-1 cultural exchange visitors.  S. 744 would make extensive revisions to nonimmigrant categories for professional specialty workers (see \" H-1B Professional Specialty Workers \"), intra-company transferees (see \"L Visa Intra-Company Transferees\"), and other skilled workers (see \"Other Skilled and Professional Worker Visas\"). The bill also would reform existing lower-skilled visa categories (see \" Reforms to the H-2B Program \") and establish a new \"W\"",
      " temporary worker category (see \"New Nonimmigrant Visas for Lower Skilled Workers\"). Additional nonimmigrant provisions in S. 744 would be designed to promote tourism (see \"Tourism Related Provisions\") and would make changes to student and other nonimmigrant visas (see \" Other Nonimmigrant Visa Changes \"). High-Skilled Workers228 H-1B Professional Specialty Workers Current law makes H-1B visas available for \"professional specialty workers,\" an employment category closely associated with science, technology, engineering, and mathematics (STEM) fields, but not limited to them. H-1B visas are good for three years,",
      " renewable once; and they are \"dual intent,\" meaning aliens on H-1B visas may seek LPR status without leaving the United States. Current law generally limits annual H-1B admissions to 65,000, but most H-1B workers are exempted from the limits because they are returning workers or they work for universities and nonprofit research facilities that are exempt from the cap. Employers seeking to hire an H-1B worker must attest that the employer will pay the nonimmigrant the greater of the actual wages paid to other employees in the same job or the prevailing wages for that occupation; that working conditions for the nonimmigrant will not adversely affect other workers;",
      " and that there is no applicable strike or lockout. The employer must provide a copy of the labor attestation to representatives of the bargaining unit where applicable, or must post the labor attestation in conspicuous locations at the work site. Prospective H-1B nonimmigrants must demonstrate to USCIS that they have the requisite education and work experience for the posted positions.  Changes to Facilitate H-1B Recruitment  In recent years, the H-1B visa has been an important pathway for many foreign students seeking employment in the United States after completing their degrees, and an important avenue for many U.S. businesses seeking to recruit high-skilled foreign workers.",
      " Thus, despite the fact that a majority of H-1B workers are exempted from annual limits, applications for new H-1B workers have routinely exceeded such limits in recent years\u2014in some years exceeding limits during the first week or even on the first day that applications are excepted. S. 744 would seek to address perceived H-1B shortages by replacing the 65,000 per year cap on new H-1B admissions with a flexible cap that would range from a floor of 115,000 to a ceiling of 180,000 annually, with a \"market-based\" mechanism to increase or decrease the cap based on demand during the previous year (i.e., whether and how quickly the previous year's limit was reached). Up to 25,",
      "000 STEM advanced degree graduates would be exempted from the cap. Spouses of H-1B workers would be permitted to work, thereby eliminating a potential barrier to H-1B recruitment and also likely further increasing the number of skilled foreign workers admitted (i.e., because many H-1B nonimmigrants have spouses who are also skilled workers). And the bill would ease the renewal of H-1B (and L visas; see \"L Visa Intra-Company Transferees\") by limiting the review of such renewals to material errors, substantive changes and newly discovered information. In addition, H-1B workers would have a 60-day grace period after loss of a job to seek additional employment without losing his or her visa status.",
      " Changes to Protect U.S. Workers  In addition to these concerns about whether employers have adequate access to H-1B workers, some Members of Congress have raised questions about whether H-1B workers may have an adverse effect on U.S. workers, including possibly by placing downward pressure on wages and/or by discouraging U.S. workers from entering STEM fields. S. 744 would establish two new fees apparently designed to address these concerns: a $1,000 fee for Labor Certification Applications (LCAs) for EB-2 and EB-3 immigrants, with the fee designated to fund STEM grants, scholarships, and training ; and a $1,",
      "250-$2,500 fee for H-1B and L visas, with the fee designated to provide ongoing funding for the CIR Trust Fund. Subtitle B of Title IV of S. 744 also would seek to protect U.S. workers by modifying H-1B application requirements and procedures for investigating H-1B complaints. The bill would amend the H-1B labor certification process to revise wage requirements based on Department of Labor (DOL) surveys, and would require employers to advertise for U.S. workers on a DOL website. With some exceptions, the four-level wage structure for current H-1B workers would be changed to a three-level wage structure.",
      " The subtitle would establish two new classes of H-1B employers: H-1B dependent employers, defined as a function of the proportion of an employer's workforce which consists of H-1B workers; and H-1B skilled worker dependent employers, defined as a function of the proportion of an employer's workforce which consists of H-1B workers in highly skilled occupations. New rules to prevent H-1B workers from being hired intentionally to displace U.S. workers would be established, with different requirements for each type of employer. Employers would be required to make good faith efforts to recruit U.S. workers prior to hiring H-",
      "1B workers, and H-1B skilled worker dependent employers would be required to offer a position to any equally or better qualified U.S. worker applying for a job otherwise to be filled by an H-1B worker. Certain H-1B dependent employers would not be permitted to outsource H-1B workers, and employers who are eligible to outsource H-1Bs would pay a fee of $500 per outplaced worker.  In addition, the subtitle would revise requirements for H-1Cs (nonimmigrant nurses), including by reducing the number of visas available for such workers from 500 to 300 per year,",
      " and by facilitating visa portability for such workers. Section 4213 would impose additional restrictions on how employers advertise for H-1B positions, and would impose limits on the total number of H-1B and L workers certain employers can hire. The DOL would be permitted to review an H-1B LCA for evidence of fraud and to investigate and adjudicate any evidence of fraud identified. Subtitle B of Title IV of S. 744 also would broaden DOL's authority to investigate alleged employer violations, would require DOL to conduct annual compliance audits of certain employers, and would increase information sharing between DOL and USCIS as well as DOL reporting requirements.",
      " Employers who willfully violate the terms of their LCAs would be subject to increased fines and would be liable for the lost wages and benefits of employees harmed by such violations. Employers also would be prohibited from failing to offer H-1Bs insurance, pension plans, and bonuses offered to U.S. workers, and from penalizing H-1B workers for terminating employment before a previously agreed date.  In addition, the subtitle would require DHS and DOS to provide H -1B and L workers with information regarding their rights and employer obligations. Certain H-1B dependent employers would be required to pay an additional $5,000 - $10,",
      "000 in filing fees beginning in FY2015 (also see \"L Visa Intra-Company Transferees\" regarding similar fees for L dependent employers). The bill would further authorize fees for premium processing of employment-based immigrant petitions. And Section 4237 would permit visa portability and streamline adjustment of status for certain aliens with long-standing employment-based petitions. L Visa Intra-Company Transferees Current law permits certain workers to enter the United States on nonimmigrant L visas as intracompany transferees. The L visa is designed for executives, managers, and employees with specialized knowledge of the firm's products. It permits multinational firms to transfer top-level personnel to their locations in the United States for up to five to seven years.",
      " Some Members of Congress have raised concerns that the L visa may displace U.S. workers who had been employed in those positions. These employees are often comparable in skills and occupations to H-1B workers, yet lack the labor market protections the law sets for hiring H-1B workers. These concerns have been raised, in particular, with respect to certain outsourcing and information technology firms that employ L workers as subcontractors within the United States.  In addition to extending certain H-1B protections described in Subtitle B of Title IV of S. 744 to L visa holders (see \" Changes to Protect U.S. Workers \"), S.",
      " 744 includes additional L visa protections. The bill would add prohibitions on the outsourcing and outplacement of L employees, including by charging a $500 fee to be deposited in the STEM Education and Training Account. Employers seeking to bring an L-visa worker to the United States to open a new office would face special application requirements. DHS would be required to work with DOS to verify the existence of multinational companies petitioning for the L workers. And Section 4304 would impose caps on the total proportion of certain employers' workforces that may consist of L and H-1B workers, falling from an upper limit of 75% in FY2015 to an upper limit of 50%",
      " after FY2016. Section 4305 would also impose additional fees of $5,000 - $10,000 for certain H-1B/L-dependent employers beginning in FY2014.  With respect to compliance, DHS would be authorized to investigate and adjudicate alleged employer violations of L-visa program requirements for up to 24 months after the alleged violation; and DOL would be required to conduct annual compliance audits of certain employers. The subtitle also would impose civil monetary penalties and other remedies for violations, including debarment from L-worker petitions and liability for lost wages and benefits to employees harmed by violations. In addition, Section 4308 would add whistleblower protections for L-workers.",
      " And DHS would be required to report on the L-visa blanket petition process. Other Skilled and Professional Worker Visas Current law includes two nonimmigrant visa categories similar to H-1B visas for temporary professional workers from specific countries: North American Free Trade Agreement (NAFTA) TN visas for Canadian and Mexican temporary professional workers, and E-3 treaty professional visas for Australians. In addition, several employment-based nonimmigrant visas are intended to attract outstanding individuals, entrepreneurs, professionals, and high-skilled workers. These nonimmigrant visa categories include persons with outstanding and extraordinary ability (O visas), cultural exchange workers (J visas), and international investors (E visas). S.",
      " 744 would add visa portability for foreign nationals on O-1 visas and would add flexibility to the requirements for being admitted on an O-1 visa based on achievement in motion picture or television production. The bill also would make changes to the E and J visa programs, and would establish a new nonimmigrant X visa for entrepreneurs.  Reforms to E Treaty Visas Current law with respect to nonimmigrant investor visas includes provisions for E-1 visas for treaty traders and E-2 visas for treaty investors. S. 744 would amend the requirements for the E visa to allow E visas to be issued to citizens from countries where there is a bilateral investment treaty or a free trade agreement.",
      " S. 744 would amend the E-3 visa category so that nationals of Ireland would be eligible. The Irish national would not be required to be employed in a professional specialty, and could provide services as an employee, provided he/she has at least a high school education or, within five years, two years work experience in an occupation that requires two years of training or experience. There would be a limit of 10,500 E-3 visas per year for Irish nationals. The bill also would create a new E-4 visa category that would be limited to 5,000 visas per year per country; only principal aliens would be counted against the cap.",
      " Additionally, the bill would create an E-5 visa category for South Korean workers in specialty occupations that would be limited to 5,000 visas annually. Employers seeking to hire E-4 or E-5 workers would have to file a labor attestation form with DOL. A new E-6 nonimmigrant visa category would be established for nationals of eligible sub-Saharan African countries or beneficiary countries of the Caribbean Basin Economic Recovery Act who are coming to the United States to work, and have at least a high school education or, within the past five years, two years of work experience in an occupation that requires at least two years of training/experience.",
      " These visas would be limited to 10,500 per year.  Conrad State 30 Program  Currently, foreign medical graduates (FMGs) may enter the United States on J-1 nonimmigrant visas in order to receive graduate medical education and training. Such FMGs must return to their home countries after completing their education or training for at least two years before they can apply for certain other nonimmigrant visas or LPR status, unless they are granted a waiver of the foreign residency requirement. States are permitted to sponsor up to 30 waivers per state, per year on behalf of FMGs under a temporary program, known as the Conrad State Program or the Conrad 30 Program.",
      " The objective of the Conrad 30 Program is to encourage immigration of foreign physicians to medically underserved communities. S. 744 would make the Conrad 30 waiver program permanent, and would allow the program to grow by up to five waivers per year based on demand for the program, or to be reduced (though never below 30) based on falling demand. The bill also includes a number of provisions to regulate working conditions and add flexibility to the J visa program for such physicians. And S. 744 would make changes to facilitate physicians holding J or H-1B visas seeking to remain in the United States, including by allowing dual intent for J-",
      "1 foreign medical graduates, by making alien physicians who received a Conrad waiver or completed their two-year home residency requirement exempt from numerical limits if they adjust to LPR status as EB-2 immigrants (see \"Employment-Based Immigration\"), and by making the spouses and children of J-1s no longer subject to the two-year home residency requirement. The bill would also allow physicians in H-1B status and completing their medical training to automatically have such status extended.  New Nonimmigrant Investor Visas In addition to creating a new EB-6 entrepreneurship LPR visa (see \"Investor Visas\"), S. 744 would create a new nonimmigrant X visa for qualified entrepreneurs whose U.S.",
      " business entities attracted at least $100,000 in total investment from qualified investors during the previous three years, or whose businesses created at least three jobs and generated at least $250,000 in annual revenue during the previous two years. Nonimmigrants with X visas would be admitted for three years, and the visa would be renewable for additional three-year periods if the alien's business met similar criteria. In addition, the visa would be renewable twice for periods of one year (a total of two years) under criteria established by DHS in consultation with the Secretary of Commerce if the alien was making substantial progress towards meeting the visa requirements and such renewal was economically beneficial to the United States.",
      " There would be a $1,000 fee for each nonimmigrant admitted under an X visa that would be deposited into the CIR Trust Fund. Lower-Skilled Workers281 Reforms to the H-2B Program  Current law permits the admission of H-2B visa holders to perform temporary, non-agricultural work when sufficient qualified U.S. workers are not available. Employers must apply to DOL to certify that such employment will not have an adverse effect on the wages or working conditions of U.S. workers. H-2B visas generally are limited to 66,000 new visas per year. S. 744 would increase the number of H-",
      "2B workers eligible to be admitted in a year, while also imposing additional requirements on H-2B employers. Renewing an H-2B returning worker exemption from the annual cap in effect in FY2005-FY2007, the bill would provide that H-2B nonimmigrants counted toward numerical limits for FY2013 would be exempt from numerical limits for FY2014 - FY2018. In another change, certain ski instructors now typically admitted as H-2B nonimmigrants would be eligible for admission as P-visa athletes. With respect to recruitment requirements, Section 4602 would require that an employer petitioning for an H-",
      "2B worker attest that U.S. workers are not and will not be displaced, and would require such employers to pay H-2B workers' transportation costs and immigration fees, as well as a $500 fee for labor certification, with the fee being deposited in the CIR Trust Fund. As a result of an amendment approved on the Senate floor, employers seeking to hire H-2B workers in forestry occupations would be required to conduct a \"robust effort\" to recruit U.S. workers and to submit a labor certification application to each appropriate state workforce agency. DOL could not grant labor certification unless the state workforce agency director determines that U.S.",
      " workers are not available to fill the jobs in question. In addition, Section 4211(a)(2) of S. 744 would revise INA Section 212(p) regarding computation of prevailing wage levels to specify that wages for H-2B nonimmigrant workers shall be the greater of the actual wage paid by the employer to other employees with similar experience and qualifications for the job or the prevailing wage level for the occupational classification of the job in the geographic area of the employment, based on the best information available at the time that the application was filed. The best information available could be the wage for the occupation in a collective bargaining agreement or the wage that applies to federal contracts (meaning,",
      " presumably, the Davis-Bacon Act or Service Contract Act). If such information is inapplicable, the best information could be a wage commensurate with the experience, training, and supervision required for the job based on U.S. Bureau of Labor Statistics (BLS) data; or if BLS data are unavailable, a wage from a private survey. New Requirements for J Summer Work/Travel  The Senate approved a floor amendment to S. 744 that would impose a $100 fee on designated program sponsors for each nonimmigrant entering on a J visa as part of a summer work/travel exchange. The J-1 visa is for individuals participating in work-",
      " and study-based exchange visitor programs and encompasses a variety of work-related programs. Although many J-1 programs include work, they are not categorized as temporary work programs under the INA and are not subject to standard temporary work program requirements or standard nonimmigrant visa petitioning procedures. The $100 fee would be deposited in the CIR Trust Fund and could not be charged to the nonimmigrant. The bill would also specify that summer work/travel exchange program participants are eligible to be employed in seafood processing in Alaska. S. 744 would also make aliens coming to the United States to perform specialized work that requires proficiency of languages spoken in countries with less than 5,",
      "000 LPR admissions in the previous year eligible for a J visa. New Nonimmigrant Visas for Lower-Skilled Workers Current law permits employers to hire certain lower-skilled foreign temporary workers, for temporary or seasonal employment; but does not provide for nonimmigrant visas for lower-skilled employment where the employer's need is not temporary. Given the high level of labor force participation among unauthorized immigrants, some Members of Congress have argued that increasing the number of employment-based lower-skilled nonimmigrant visas is a key element of comprehensive immigration reform. S. 744 would address this policy goal by creating a new \"W\" nonimmigrant visa category,",
      " which would accommodate ongoing employment in lower-skilled agricultural and non-agricultural positions.  In general, W visas would differ from the current H-2A agricultural worker and H-2B nonagricultural worker visas in that the W visas would not be limited to temporary or seasonal work. W visas would be good for three years, and could be renewed. In addition, rather than tying a worker's nonimmigrant status to a single employer, as under the current H-2 visas, W workers would be permitted to work for any employer that has registered within their respective visa programs, with some restrictions in the case of contract agricultural workers.",
      " Another key difference would be that prospective W employers, unlike prospective H-2 employers, would not have to apply to the Department of Labor for labor certification. W visa holders would lose their status if they are unemployed for a period of more than 60 days, though the DHS Secretary could waive this requirement in certain cases. DHS and the U.S. Department of Agriculture (USDA) would be required to establish an electronic monitoring system to monitor the presence and employment of W workers.  W-3 and W-4 Agricultural Workers Sections 2231 and 2232 of S. 744 would create new W-3 and W-4 nonimmigrant visas for agricultural workers.",
      " The W-3 visa would be for contract agricultural workers and the W-4 visa would be for at-will agricultural workers. W-3 and W-4 visas would be capped at 112,333 visas per year during the program's first five years, with provisions for the Secretary of Agriculture, in consultation with the Secretary of Labor, to adjust these caps and to set visa limits for subsequent years based on specified and other appropriate factors. W-3 and W-4 workers would not be allowed to bring their spouses and children with them to the United States as dependents. Beginning one year after W-3 and W-4 regulations go into effect,",
      " the H-2A program would be eliminated, making the W-3 and W-4 the only nonimmigrant agricultural visas available to U.S. employers. As set forth in S. 744, employers seeking to hire W-3 or W-4 workers would be required to pay a fee to cover the costs of the program and to register as designated agricultural employers. As part of the registration process, an employer would have to document that he or she is engaged in agriculture and needs specified agricultural occupations, and would have to estimate the number and timing of needed workers. A registration would be good for three years and could be renewed for another three years if the employer remains eligible.",
      " In order to import W-3 or W-4 workers, designated agricultural employers would be required to advertise jobs on a DOL job registry, to list the job for 45 days, and to offer employment to any equally or better qualified U.S. worker who applies during this period. Employers could not displace U.S. workers (except for good cause), as specifed. A designated agricultural employer would have to submit a petition to the DHS Secretary not later than 45 days before the date of need for workers. Unless the petition is incomplete or obviously inaccurate, the Secretary would process the petition and approve or deny it within seven days of the filing date.",
      " Under S. 744, W-3 and W-4 employers would be required to offer workers certain benefits and wages. They would be required to guarantee employment to W-3 contract workers for at least three-quarters of the contract period, with exceptions available in cases of natural disasters. If a job is not covered by state workers' compensation insurance, employers would be required to provide comparable insurance at no cost. Certain W-3 and W-4 workers would be eligible for housing or a housing allowance, as well as transportation expenses. Wage rates would be defined based on one of six standard agricultural occupational classifications, with certain wages specified and others to be determined by USDA in consultation with DOL.",
      " In general, employers would be required to offer U.S. workers the same or better benefits and wages as W-3 and W-4 workers. Section 2232 of S. 744 further specifies that W-3 and W-4 workers would be covered by all applicable labor and employment laws, including the Migrant and Seasonal Agricultural Workers Protection Act. DOL would establish procedures to investigate complaints and to implement penalties for non-compliance; and W-3 and W-4 workers would have whistleblower protections.  W-1 and W-2 Non-Agricultural Workers and Families Sections 4702 and 4703 of S.",
      " 744 would create the new W-1 and W-2 visas. Previous proposals to establish or expand temporary worker visas have been controversial, with business and labor groups often taking strongly opposing positions about the size and details of such programs. Partly to address the policy questions at the heart of these disagreements, S. 744 would establish a Bureau of Labor Market Research as an independent statistical agency within USCIS. The Bureau would be responsible for making recommendations about employment-based visa programs; determining methodologies for the index used to calculate numerical limits in the W-1 program; calculating annual changes to such limits, designating certain \"shortage occupations\" to be partially exempted from such limits;",
      " conducting specialized employment surveys and reporting to Congress on employment-based visa programs; and assisting with W visa recruitment, among other duties. The W-1 visa program would be capped at 20,000 positions during the program's first year, climbing to 75,000 during the fourth year, with subsequent years calculated based on a formula spelled out in S. 744. The total number of program positions would always range from 20,000 to 200,000 per year. Additional positions could be created for shortage occupations (as designated by the Bureau) and as special allocations for certain employers who meet specified recruitment requirements. Registered positions would be limited to lower-skilled occupations and generally to metropolitan areas where the unemployment rate is 8.",
      "5% or less, though DHS could waive this restriction under certain conditions. Aliens certified at a U.S. embassy or consulate as being eligible for a W-1 visa could be admitted to work in a registered position with a registered W-1 employer in an eligible location, and would be permitted to enter with dual intent (i.e., would not have to prove their intention to depart the United States at the end of the visa term). Upon admission, W-1 visa holders would have to begin working within 14 days of admission to meet the visa's employment requirement. Spouses and children of W-1 workers would be admissible as W-",
      "2 nonimmigrants and also would be authorized to work in the United States. Employers seeking to hire W-1 workers would be required to pay a fee to cover program costs and to register as W-1 employers for three years at a time. Employers would be subject to fraud detection investigations, and could be made ineligible for the W-1 program based on program violations. Applications for being a registered employer would include the estimated number of W-1 workers to be employed, while applications for designating a job as a registered position would include descriptions of W-1 positions, and attestations about wages and recruitment efforts. Employers could only hire W-",
      "1 workers if no qualified U.S. worker is available for the position and could not hire a W-1 worker in the case of a strike or lockout. Employers would be required to advertise positions for at least 30 days on a DOL website and with state workforce agencies, and would have to meet additional recruitment requirements to be identified by DHS before a position could be designated as a registered W-1 position. W-1 wages would have to at least equal the higher rate of either the actual wages paid to other employees or the prevailing wages in the area based on information from collective bargaining agreements, federal contract wages, government surveys,",
      " or private surveys. Higher wage rates would apply for workers hired as special allocations outside of the program's numerical limits. W-1 employers whose workforces consist of more than 15% W nonimmigrants could not outsource W-1 workers. And S. 744 includes a number of provisions designed to protect the terms of W-1 employment, including the applicability of relevant labor laws, whistleblower protections, a prohibition on treating W-1 workers as independent contractors, and provisions related to the investigation of complaints against W-1 employers and the imposition of civil penalties and other remedies for violations of W-1 employment conditions. Foreign Labor Contractors303 Some Members of Congress have argued that many migrant workers and other foreign workers are vulnerable to exploitation at the hands of foreign labor contractors,",
      " smugglers, and human traffickers. Contractors often play a critical role in the labor migration process by matching willing workers with willing employers. Yet because many prospective migrants depend on such \"middle men\" to help them enter the United States (legally or otherwise) and to connect them with employers, contractors may take advantage of migrant workers to extract unfair payments or other such concessions. S. 744 would establish new requirements to regulate foreign labor contractors and to combat human trafficking. The bill would require foreign labor contractors to provide workers with written information, in English and the worker's native language, about the terms and conditions of employment, with information about the worker's visa,",
      " and with other information. Employers and contractors would be prohibited from discriminating against workers on the basis of race, sex, national origin, religion, age, disability, or other similar factors; and could not charge workers a fee for contracting activity. To facilitate enforcement of these provisions, contractors would be required to register with DOL every two years, to provide annual reports on their activities, and to post a bond ensuring their ability to fulfill their responsibilities. The Secretary of Labor would maintain a list of registered contractors, and the Secretary of State would provide relevant information to certain nonimmigrant visa applicants. DOL would establish procedures to investigate complaints and impose civil fines against noncompliant contractors or employers;",
      " and individuals also could sue contractors for civil damages. Employers would be required to use registered contractors. Tourism-Related Provisions313 Several provisions in S. 744 are intended to encourage tourism to the United States. The bill would amend the INA to establish a pilot fee-based premium processing service to expedite visa interview appointments. It would also direct the Secretary of DOS to require overseas visa processing posts to report monthly on the availability of visa appointments during the previous two years to allow applicants to identify periods of low demand when wait times are lower. In addition, S. 744 would require, not later than 90 days after enactment, the Secretary of DOS to require U.S.",
      " missions to conduct nonimmigrant visa interviews expeditiously, consistent with national security and resource allocation requirements; set a goal of interviewing 80% of nonimmigrant visa applicants, worldwide, within three weeks of receipt of application; explore expanding visa processing capacity in China and Brazil with the goal of keeping interview wait times under 15 work days; and, report on needed resources to the appropriate congressional committees. It would allow DHS to expand registered traveler programs to include individuals employed by international organizations that maintain a strong working relationship with the United States. It would require that the individual traveler be sponsored by such an organization; complete security screening requirements; not be citizen of a state sponsor of terrorism;",
      " and that the individual's passport be from a country with a Trusted Traveler Arrangement with DHS.  S. 744 would direct the Secretary of DOS to develop and conduct a pilot program to use secure remote video-conferencing as a method to conduct interviews for B (short-term tourist/business) visas, unless the Secretary determines that it poses an undue security risk. The Secretary of DOS would be required to submit a report on the efficacy, efficiency, and security of such a program within 90 days of its termination. The bill would also require the collection of a $5 fee from each nonimmigrant admitted on a B visa to be deposited in the CIR Trust Fund.",
      "  S. 744 also would encourage Canadian tourism to the United States by authorizing the Secretary of DHS to admit into the United States (on a B visa) qualifying Canadian citizens who are at least 55 years old, and their spouses, for a period not to exceed 240 days if the person maintains a Canadian residence and owns a U.S. residence or has rented a U.S. accommodation for the duration of such stay. Such visitors would not be authorized to work, and must not seek PRWORA-described assistance/benefits. New Y Visa for Retirees S. 744 would create a new Y visa for foreign nationals who are over 55 years old.",
      " To qualify, aliens would be required to use at least $500,000 in cash to buy one or more residences, maintain ownership of residential property valued at least $500,000 during the period, and reside in the United States for more than 180 days a year in a residence worth at least $250,000. The bill would allow the qualifying alien's children and spouse to accompany him/her. Y visa holders would be required to possess health insurance, could not be employed in the United States (except for management of the residential property owned by the alien), and could not seek PRWORA-described assistance/benefits. The Y visa would be renewable every three years,",
      " indefinitely. Visa Waiver Program  S. 744 would authorize the Secretary of DHS, in consultation with the Secretary of State, to designate a country as a Visa Waiver Program ( VWP) country if the overstay rate and/or refusal rate was less than 3% in the previous fiscal year. The bill would allow the Secretary of DHS to waive the refusal rate requirement if certain conditions were met. The bill would revise the current probationary period and procedures for terminating a country's participation in the VWP if that country failed to comply with any of the program's requirements. The bill would also specify that Hong Kong could be designated a VWP country if it meets the program criteria.",
      "  Other Nonimmigrant Visa Changes325 S. 744 would make a number of additional changes to nonimmigrant visas. It would waive the INA requirement for the State Department to personally interview certain nonimmigrants (i.e., A, E, G, H, I, L, N, O, P, R, and W visas) who are renewing their visas, allowing such visas instead to be renewed within the United States under certain conditions. Nonimmigrants granted work authorization under the A, E, G, H, I, J, L, O, P, Q, R, and TN visa categories whose status expired but who filed a timely petition for an extension would be permitted to continue employment with the same employer during adjudication of the application/petition.",
      " S. 744 would make a number of additional changes affecting certain high-skilled workers entering the United States for purposes other than traditional employment. S. 744 would revise INA Section 214(a) to permit certain employees of multinational companies to enter the United States for up to 90 or 180 days to observe or oversee company operations, or to participate in leadership training. Such nonimmigrants would be prohibited from receiving U.S.-sourced compensation except for incidental expenses. The bill would expand the conditions under which certain B visa nonimmigrant aliens would be eligible to enter the United States and receive honoraria. It would also add new provisions for B-visa nonimmigrants to enter the United States to participate in disaster relief operations,",
      " and would add provisions for B-visa nonimmigrant aliens to perform maintenance or repairs for common carriers (airlines, ships, railways) on equipment manufactured outside the United States. S. 744 would also make aliens who are providing services aboard a fishing vessel having a home port or operating base in the United States, who is landing in Hawaii and departing on the same vessel eligible for a D visa. Student Visas For foreign students admitted on F visas who are seeking bachelors or graduate degrees, S. 744 would permit such aliens to have dual intent. The bill also would change accreditation requirements for schools accepting F students and for flight schools accepting foreign students.",
      " In addition, the bill would remove the 12-month limit for students on F visas who attend public secondary schools, and charge a $100 fee on all nonimmigrants admitted on F-1 visas. The bill would also modify the U.S. Immigration and Customs Enforcement's (ICE's) Student and Exchange Visitor Program (SEVP), which is responsible for administering the Student and Exchange Visitor Information System (SEVIS). SEVIS maintains information on schools that can accept foreign students, exchange programs, and on international students and exchange visitors in the United States on F, J, and M visas. SEVP also certifies schools to accept foreign students.",
      " S. 744 would require DHS to implement a real-time transmission of data from SEVIS to CBP databases. This interoperability would have to be completed within 120 days of enactment or the Secretary would be required to suspend the issuance of foreign student (F and M) visas. The bill would also require accrediting agencies or associations to notify DHS about the denial, withdrawal, suspension, or termination of accreditation so that the school could be immediately withdrawn from SEVP and prohibited from accessing SEVIS and enrolling foreign students. Within 180 days of enactment, DHS would be required to implement GAO's recommendations regarding SEVP and SEVIS,",
      " and report to Congress on the risk assessment strategy to prevent malfeasance in the student visa issuance system. Within two years after enactment, DHS would be required to deploy both phases of the second generation SEVIS system. The bill would also increase the criminal penalties for fraud and misuse of visa documents if the offense was committed by an owner, official, or employee of a SEVP certified school, and would allow the Secretary of DHS to impose fines on institutions that failed to comply with reporting requirements. The bill would also allow the Secretary of DHS to immediately withdraw an institution's SEVP certification if there is a reasonable suspicion that the owner or school official has committed fraud relating to any aspect of the SEVP.",
      " Any person convicted of such fraud would be ineligible to hold a position of authority at any institution that accepts F or M foreign students. The bill would also prohibit individuals from serving as a designated school official or being granted access to SEVIS unless the individual is a U.S. national or an LPR, and has undergone a background check during the past three years.  Humanitarian Provisions338 Refugee and Asylum Provisions The United States has long held to the principle that it will not return a foreign national to a country where his life or freedom would be threatened. This principle is embodied in several provisions of the INA, most notably in provisions defining refugees and asylees.",
      " Refugees are aliens displaced abroad who are unable or unwilling to return to their country of origin on account of their race, religion, nationality, membership in a particular social group, or political opinion; or, under certain conditions, who are in their home country and have a well-founded fear of persecution on one of these grounds. Refugees are processed and admitted to the United States from abroad. Foreign nationals also may claim asylum in the United States if they demonstrate a well-founded fear that if returned home, they will be persecuted based upon one of these same five characteristics. Foreign nationals arriving or present in the United States may apply for asylum affirmatively with USCIS after arrival into the country,",
      " or they may seek asylum defensively before an immigration judge during removal proceedings. S. 744 would increase the flexibility of these asylum and refugee provisions several ways, potentially rolling back some of the changes made by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 ( P.L. 104-208 ). S. 744 would repeal a current provision that requires asylum claims to be filed within one year of an alien's arrival in the United States, and would provide for the reconsideration of certain asylum claims that were denied because of the failure to file within one year. The bill also would authorize the spouse or child of a refugee or asylee who is admitted to the United States to bring his or her own accompanying child,",
      " also under a refugee or asylum visa. With respect to aliens found to have a credible fear of persecution based on an interview with a USCIS asylum officer during expedited removal, the asylum officer would be authorized to grant asylum under certain circumstances, rather than referring the alien to an immigration judge. And the bill would require that DHS issue work authorization to asylum applicants after 180 days. A new category of \"stateless persons\" would be defined, and such persons would be permitted to apply for conditional lawful status under certain conditions, and to adjust to LPR status after one year, as special immigrants under the employment-based preference category. S. 744 would increase the number of U visas available annually from 10,",
      "000 to 18,000 (also see \"Worker Protections), with no more than 3,000 going to aliens who are victims of covered violations. In addition, the president, based on a recommendation by DOS, would be authorized to designate certain high-need groups as refugees, facilitating their admission as a refugee. S. 744 would establish requirements for overseas refugee adjudications, including the right to legal counsel (not at government expense), a written record of the decision, and administrative review of a denial. S. 744 also includes provisions that would tighten refugee and asylum laws and would be especially aimed at national security concerns. Pursuant to Section 3411 an alien granted refugee or asylum status who returns to the alien's country of nationality or habitual residence would have his or her status terminated unless the DHS Secretary determines that the alien returned for good cause,",
      " or unless the alien is eligible to adjust to LPR status pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). And Section 3409 would impose additional law enforcement and national security checks during the refugee and asylum application process. Section 3403 would terminate preferential treatment for certain Amerasian immigrants that was established by Section 584 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1988. Section 3410 would authorize 5,000 immigrant visas during the three-year period beginning on October 1, 2013, for certain qualified displaced Tibetans who have been residing in Nepal or India continuously since before the date of enactment of S.",
      " 744. Anti-Trafficking Provisions S. 744 also includes special provisions to protect children who are trafficking victims. DOL would be required to establish specialized training for personnel who come into contact with such children, and to ensure under most circumstances that child trafficking victims are placed under care of the Office of Refugee Resettlement within 72 hours. S. 744 would require that all procedures and decisions concerning unaccompanied immigrant children pursuant to the INA would make the best interests of the child a primary consideration. S. 744 would provide work authorization for aliens whose applications for T or U status is approved or pending for 180 days,",
      " whichever occurs first. There would also be new reporting requirements for human trafficking offenses in the Federal Bureau of Investigation's (FBI's) Uniform Crime Reports, and human trafficking would be a part 1 crime for calculating funding under the Edward Byrne Memorial Justice Assistance Grant Program. S. 744 contains provisions to address the issue of protecting unaccompanied alien children from becoming victims of human trafficking. The bill would transfer from HHS to DOJ the responsibility for ensuring, to the greatest extent possible, that unaccompanied alien children in DHS custody have counsel to represent them and access to child advocates. It would require the Secretary of DHS, in consultation with child welfare experts,",
      " to create mandatory training for CBP personnel and other personnel who come in contact with unaccompanied alien children. The bill would also mandate that all unaccompanied alien children who will undergo any immigration proceedings before EOIR are transferred to HHS custody within 72 hours after apprehension. In addition, the bill would direct HHS to hire child welfare professionals to provide assistance in no fewer than seven of the CBP offices or stations with the largest number of unaccompanied minors. Such professionals would have to have trauma-centered and developmentally appropriate interviewing expertise and, among other duties, would be responsible for screening unaccompanied alien children to ensure that they are not trafficking victims,",
      " and ensuring that the children are appropriately cared for while in CBP custody. S. 744 would require HHS to submit to the Secretary of DHS a final determination on family relationships, and the Secretary of DHS shall consider such adult relatives for community-based support alternatives to detention (also see \" Immigrant Detention \"). The bill would also direct the Administrator of the U.S. Agency for International Development (USAID), in conjunction with the Secretaries of DHS, DOJ, and HHS and non-governmental organizations to create a multi-year program to implement best practices to ensure the safe repatriation of unaccompanied alien children. The bill would specify that in all procedures and decisions concerning unaccompanied immigrant child the best interests of the child shall be a primary consideration.",
      " Status for Certain Battered Spouses and Children  S. 744 would grant legal status to derivative spouses or children of nonimmigrants who: (1) accompany or follow to join principal nonimmigrants or aliens admitted under the blue card status provisions of Section 2211 of this act and (2) were subjected to battery or extreme cruelty by such principal nonimmigrants. The status would be granted under the same provisions as the principal alien, for the longer of either three years or the same admission period of the principal alien. DHS would grant employment authorization to the abused derivative alien and could renew his or her grant or extension of status.",
      " DHS could adjust the status of the abused derivative alien to LPR status if: (1) he or she either meets the admissibility criteria under INA Section 212(a) or DHS can justify his or her presence on humanitarian or public interest grounds or to ensure family unity; and (2) the status under which the principal nonimmigrant was admitted to the United States would have potentially allowed for eventual adjustment of status. Termination of the relationship with the principal alien would not alter status granted under this provision if abuse was the central reason for such termination.  Access to Federal Public Benefits360 Noncitizens' eligibility for major federal benefits largely depends on their immigration status and how long they have lived and worked in the United States.",
      " Eligibility rules differ for federal public benefits, including federal means-tested benefits. Under Section 403 of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA, P.L. 104-193 ), federal means-tested benefits have been defined by regulation to include Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Medicaid, and the Children's Health Insurance Program (CHIP).  Eligibility Rules for LPRs, Asylees, and Refugees LPRs, asylees, refugees, and other humanitarian migrants are generally eligible for federal public benefits.",
      " While humanitarian migrants are eligible for federal means-tested programs for at least five to seven years after entry, however, LPRs generally must have a substantial work history or military connection, or must meet additional requirements to be eligible for such programs, including in some cases a five year legal residency requirement. An additional factor affecting eligibility for benefits is that not all households or all aliens fall squarely into one category. \"Mixed status\" families and \"quasi-legal\" aliens pose ambiguities in the context of federal benefit programs, and how they are treated varies considerably across programs. S. 744 would not amend federal laws on public benefits. Moreover,",
      " the Senate approved a floor amendment to S. 744 that expressly forbids an officer or employee of the federal government from waiving compliance with any requirement in title IV of V PRWORA in effect on the date of enactment or with any restriction on eligibility for any form of assistance or benefit described in Section 403 of PRWORA (i.e., federal means-tested public benefit).  Treatment of Aliens with Newly Created Statuses S. 744 would expressly bar aliens who legalize under the bill from receiving federal means-tested benefits and certain other \"benefits.\" Specifically, S. 744 states that aliens with RPI status (see \"Registered Provisional Immigrants (RPIs)\", blue card status (see \"Agricultural Worker Legalization\"), and the newly-expanded V nonimmigrant visa status for family members would not be eligible for any federal means-tested public benefit,",
      " as defined and implemented by Section 403 of PRWORA.  The bill also would limit the access of aliens who legalize under the bill to certain benefits of the Patient Protection and Affordable Care Act (ACA). Aliens with RPI status and blue card status would be considered lawfully present for all purposes under S. 744, except that they would not be entitled to the premium assistance tax credits or cost sharing subsidies established by the ACA, and they would be exempt from the individual mandate to have health insurance. Such aliens would be eligible, however, to purchase insurance through an exchange without any credits or subsidies.  Restricted Eligibility of Certain Nonimmigrants for Health Benefits The Senate approved a floor amendment to S.",
      " 744 that would exclude short-term visitors for business or pleasure (B visas) and foreign students (F visas) from being considered lawfully residing for the purposes of the Children's Health Insurance Program (CHIP) option for states to cover pregnant women and children. S. 744 would further specify that all other U.S. Department of Health and Human Service (HHS) programs that use the term \"lawfully present\" should reflect these restrictions that S. 744 would impose. In other words, the S. 744 as passed by the Senate directs the Secretary of HHS to amend the definition for eligibility under the ACA to exclude short-term visitors and foreign students.",
      "  Congressional Budget Office Analysis of S. 744 The Congressional Budget Office (CBO) projects that the changes to immigration resulting from S. 744 as passed by the Senate would result in a net increase of 9.6 million LPRs in the first decade after enactment. Although CBO has observed the long-standing convention of not incorporating macroeconomic effects in cost estimates, CBO and the Joint Committee on Taxation \"relaxed that assumption by incorporating in this cost estimate their projections of the direct effects of the act on the U.S. population, employment, and taxable compensation.\" The increase in the number of legal residents would boost federal revenues,",
      " according to CBO, mostly because of the larger size of the labor force. CBO further estimates that the number of legal residents would boost direct spending for federal benefit programs and notes that under S. 744 direct spending for enforcement and other purposes would also increase. As a consequence, CBO estimates that enacting S. 744 as passed by the Senate would \"lead to a net savings of about $135 billion over the 2014-2023 period.\"\n"
    ],
    "length": 30579,
    "hardness": null,
    "role": null
  },
  {
    "id": 89,
    "question": null,
    "answer": "The foreign relations authorization process dovetails with the annual appropriation processfor the Department of State (within the Commerce, Justice, State and Related Agency appropriation)and foreign policy/foreign aid activities (within the foreign operations appropriation). Congress isrequired by law to authorize the spending of appropriations for the State Department and foreignpolicy activities every two years. Foreign assistance authorization measures (such as authorizationfor the U.S. Agency for International Development, economic and military assistance to foreigncountries, and international population programs) have been merged into the State Departmentauthorization legislation since 1985. Since that time, Congress has not passed a stand-alone foreignassistance authorization bill.  Congressman Hyde introduced H.R. 1950 on May 5, 2003. The HouseInternational Relations Committee reported the bill May 16 ( H.Rept. 108-105 , Part I). H.R. 1950 , as reported out by the Committee, contained authorization legislation forFY2004 and FY2005 and included a defense trade and security assistance title, as well as a foreignassistance title. As amended (July 15 and 16) and passed (July 16) by the House, H.R. 1950 also includes the Millennium Challenge Account and Peace Corps provisions. The legislationauthorizes about $27 billion for FY2004 and FY2005. The House bill contains the Israeli-Palestinianpeace plan, also known as the \"road map\" which goes beyond the President's plan by includingconditions that must be met before the United States can agree to a Palestinian state. Also includedare terrorist-related enforcement measures, munition and satellite export controls. Eliminated byamendment was a provision providing $50 million in U.S. contributions to the U.N. Population Fundfor each year that the legislation covers. House floor action occurred on July 15th and 16th. TheHouse passed the bill, as amended, by recorded vote (382-42) on July 16th. The Senate originally reported three separate bills providing authority for only FY2004: aforeign relations authorization ( S. 925 ), a foreign assistance authorization bill( S. 1161 ) which includes arms export control and counter terrorism measures, and theMillennium Challenge Account ( S. 1160 ). After political differences with unrelatedfloor amendments in 2003, the Senate gave up trying to vote on S. 925 (within whichthe other two bills had been merged). On February 27, 2004, Senator Lugar introduced the Senate'snew Foreign Relations Authorization Act, FY2005 ( S. 2144 ). The Senate ForeignRelations Committee reported it out on March 18, 2004 ( S.Rept. 108-248 ). Key Policy Staff  Division abbreviations: ALD = American Law Division; G&F = Government and Finance Division;RSI = Resources, Science, and Industry Division, DSP = Domestic Social Policy Division; FDT =Foreign Affairs, Defense, and Trade Division.\n",
    "docs": [
      "Most Recent Developments On February 27, 2004, Senator Lugar introduced S. 2144, the Foreign RelationsAuthorization Act, FY2005. This bill replaces S. 925 which received no Senate floorvote because of political disputes over unrelated floor amendments. (1) The Committee on ForeignRelations reported its new authorization bill out on March 18, 2004 ( S.Rept. 108-248 ). On May 5, 2003, Congressman Hyde introduced the House Foreign Relations AuthorizationAct, Fiscal Years 2004 and 2005 ( H.R. 1950 ). The House International RelationsCommittee held markup on it beginning May 7 and filed a report ( H.Rept 108-",
      "105 ) on May 16. Ifenacted, the House bill would have authorized the Department of State's operations and programsat more than $27 billion for FY2004 and FY2005, and would have establish U.S. policy on theIsraeli-Palestinian peace plan, export controls, security assistance to certain foreign countries, andfunding for the U.N. Population Fund. House floor action occurred on July 15th and 16th. The Housepassed the bill on July 16, 2003. Background The foreign relations authorization legislation provides authority for the State Departmentand related foreign policy agencies to conduct foreign policy activities and programs in the comingyear.",
      " It authorizes foreign policy programs and enacts changes in U.S. foreign policy. It also servesas a vehicle for Congress to influence executive branch management of foreign policy. SinceCongress has not passed a foreign assistance authorization bill since 1985, activities such asauthorization for the U.S. Agency for International Development (USAID), as well as U.S.economic, development, and military assistance are also typically included in the foreign relationsauthorization legislation. By law, authorization of foreign policy agencies and programs is required prior toexpenditure of Foreign Operations and State Department appropriations. In effect, the authorizinglegislation sets spending ceilings for the foreign policy agency appropriations.",
      " (See Table 1 inappendix.) Prior to 1995, Congress had reauthorized U.S. government foreign policy agencies andactivities in the foreign relations authorization legislation every two years until 1994 ( P.L. 103-236,April 30, 1994). P.L. 107-228 is the first stand-alone foreign relations authorization bill thatCongress has passed since 1994. In the intervening years, Congress waived the requirement orincluded authorization in appropriation laws. (See State Department Authorization History in theAppendix.) Foreign Relations  The foreign relations authorization legislation typically provides authority for StateDepartment spending for such activities as salaries and other operating expenses,",
      " passport and visaprocessing, embassy and Foreign Service activities, as well as public diplomacy and internationalbroadcasting. In addition, the legislation often becomes a convenient vehicle for numerous foreignpolicy-related issues, such as nonproliferation, human rights, international family planning policy,and international environment issues. Congress can influence U.S. foreign policy regarding specificregions or countries via this biannual legislation, as well.  Legislation in the 108th Congress on foreign relations authorization include H.R. 1950 and S. 2144. The Senate bill provides authorization for FY2005 only and includesDivision A -- Foreign Relations Authorization and Division B -- Foreign Assistance Authorization.",
      " H.R. 1950 has five divisions: Division A is entitled, Millennium Challenge Account; Division B is entitled Peace Corps Expansion Act of 2003; Division C is entitled Department ofState Authorization Act, Fiscal Years 2004 and 2005; Division D is entitled Defense Trade andSecurity Assistance Reform Act of 2003; and Division E is Assistance for Viet Nam.  Belarus(2) Since his election in 1994, Belarusian President Aleksandr Lukashenko has reversedBelarus's modest progress toward democracy and a free market economy and created anauthoritarian, Soviet-style regime. The Bush Administration has called him \"Europe's last dictator.\"The 2002 State Department Human Rights report said that Belarus's human rights record is \"verypoor.\" Lukashenko has extended his term in office by illegitimate means;",
      " drastically reduced thepower of the legislature and judiciary; harassed, arrested, and beaten opposition figures (perhapshaving four of them killed in 1999); forced the closure of independent media; and restricted freedomof religion. In November 2002, the United States joined 14 European Union countries in imposinga visa ban against Lukashenko and other top Belarusian officials due to Belarus's closure of an OSCEhuman rights monitoring mission in the country. The visa ban was lifted in April 2003 after theOSCE office was reopened. Belarus allegedly has ties with rogue regimes. Before the war in Iraq,Lukashenko made statements opposing U.S.",
      " military action and supporting Saddam Hussein. InApril 2003, Deputy Assistant Secretary of State Stephen Pifer said that there have been \"repeatedreports from a variety of credible sources that Belarus is involved in arms transfers to states orgroups that support terrorism, and in the military training of individuals associated with these states.\" He said those states included Iran and Iraq under Saddam Hussein. (3)  Congressional concerns about Belarus are reflected in the House version of H.R. 1950. Title XVI Section 1601 authorizes U.S. aid to assist Belarusian democracy; Section 1602authorizes appropriations for increased broadcasting to Belarus by Voice of America and Radio FreeEurope/Radio Liberty (RFE/",
      "RL); Section 1603 expresses the sense of the Congress that sanctionsbe imposed on Belarus until conditions are met that require Belarus's democratization; and Section1604 expresses the sense of the Congress that the President should coordinate with Europeancountries to take measures similar to those in this title. Section 1605 requires the President to reportwithin 90 days and every year thereafter on the sale of weapons or weapons-related assistance toregimes supporting terrorism, and on the personal wealth of Lukashenko and other senior Belarusianleaders.  This title could be viewed as non-controversial in that it does not formally require theAdministration to take action,",
      " except to submit a regular report on Belarus's military ties withregimes supporting terrorism. The title's authorization for aid for Belarus democratization and VOAand RFE/RL broadcasts is also unlikely to be controversial. Section 1603, which expresses supportfor, but does not mandate, sanctions against Belarus, could conceivably cause some disquiet amongsome U.S. allies in Europe, if it were perceived to be part of a U.S. effort to completely isolateLukashenko. While sharing U.S. distaste for the Belarusian leader, some European countries mayworry that isolation could provoke the regime into unpredictable actions,",
      " or contribute to instabilityin a country that will border on the European Union in 2004. Policymakers who support Title XVIargue that Lukashenko's regime is a source of instability, and that the sooner it is deposed anddemocracy is restored, the more stable the region will be. A mix of sanctions and support forpro-democracy groups would be the best way to achieve this aim, they believe. Neither the previous Senate version of the bill ( S. 925 ) nor the current one( S. 2144 ) contain similar provisions. CRS Products  CRS Issue Brief IB95077, The Former Soviet Union and U.S.",
      " Foreign Assistance, by [author name scrubbed]. CRS Report 95-776(pdf), Belarus: Country Background Report, by [author name scrubbed]. Biotech Agriculture Promotion(4) U.S. farmers have been rapidly adopting genetically engineered (GE) crops -- mainly corn,soybean, and cotton varieties -- to lower production costs and improve management. However,many foreign countries are wary of agricultural biotechnology, such as in the European Union (EU)where consumer and environmental organizations have been very vocal in expressing concerns aboutthe human health and environmental impacts of GE crops. U.S. exporters often have encounteredbarriers to trade in the EU and other markets,",
      " where in some cases their sales have been slowed orhalted. Both S. 2144 and H.R. 1950 contain provisions intended topromote agricultural biotechnology in international trade and development. The Senate bill (Sec.211) would authorize the Secretary of State to support through grants, cooperative agreements, orcontracts, \"outreach and public diplomacy activities\" on the benefits of agricultural biotechnologyand science-based regulatory systems, and on the application of agricultural biotechnology for tradeand development purposes. Grants cannot exceed $500,000 annually. The House version (Sec. 728)requires the Secretary to provide other countries, as appropriate,",
      " scientific evidence on the benefits,safety, and potential uses of agricultural biotechnology. The Secretary of State is required to chaira federal interagency task force to develop and disseminate such scientific information; and toinstruct USAID to develop a program demonstrating agricultural biotechnology benefits for thedeveloping world, among other things. Agricultural groups and the biotechnology industry might be expected to strongly supporta biotechnology provision in this legislation; they have been working for a number of years to urgethe Administration and Congress to do more to promote the products of U.S. agriculturalbiotechnology -- which, they assert, are as safe as conventionally produced crops -- in foreignmarkets.",
      " Some U.S. consumer and environmental advocacy organizations, who have expressedconcerns about the safety of such products, might oppose it; others could argue that numerous federalagencies, including the Department of State, the U.S. Trade Representative, and U.S. Departmentof Agriculture, already are working aggressively to open foreign markets to U.S. biotechnology. State is the lead department dealing with the so-called Cartagena Biosafety Protocol. ThisJanuary 2000 agreement, under the U.N. Convention on Biological Diversity, deals with the safehandling, transfer and transboundary movement of bio-engineered organisms and products, and itcame into effect in September 2003.",
      " The United States is a party to neither the Convention nor theProtocol, but has been attempting to work with the nearly 90 country ratifiers, and others, to ensurethat each country's implementation does not present obstacles to U.S. biotechnology exports. USDA operates numerous programs to promote GE products in international trade. Forexample, USDA's Foreign Agricultural Service (FAS) has undertaken a variety of activities toeducate, train, and provide technical assistance to foreign countries developing and/or purchasingbiotechnology products, and to negotiate and resolve disputes with trading partners. Also, Section3204 of the 2002 farm bill ( P.L. 107-",
      "171 ) created a new Biotechnology and Trade Program toprovide grants for public and private sector projects that will address nontariff barriers to U.S.agricultural exports involving biotechnology, food safety, disease, or related concerns. The measureauthorizes annual appropriations of up to $6 million through FY2007. CRS Products  See Agricultural Biotechnology in the CRS Agriculture Policy Briefing Book( http://www.congress.gov/brbk/html/ebagr52.html ) for more information and references to otherCRS reports. Child Abduction Prevention(5) Section 702 of S. 2144 (identical to the measure in S.",
      " 925 ) amendsthe Immigration and Nationality Act to declare inadmissible any aliens and relatives who supporta child being abducted from a parent in the United States who has custody. The alien(s) in questionwould remain inadmissible until the abducted child is surrendered to the person with custody or untilthe abducted child reaches age 21. Individuals deemed inadmissible under this provision would beplaced on the Consular Lookout and Support System data base with identifying information. Within180 days after enactment and annually for the following four years, the Secretary of State shallsubmit a report to specified congressional committees providing factual information on the numberof cases over the past year of such inadmissible aliens.",
      "  Section 275, H.R. 1950 would require the Secretary of State to establishprocedures to notify U.S. embassies regarding international child abduction situations and guidelinesfor embassy personnel on providing sanctuary. Section 276 is similar to the Senate's section 702,but the House adds \"spouse of the abducted child\" to the list of inadmissible aliens relatives. TheHouse bill also requires an annual report, but does not stipulate a deadline for the first report. Climate Change Policy(6) H.R. 1950 (Section 730) includes a \"Sense of Congress on Climate Change\" that \"the United States should demonstrate international leadership and responsibility in reducing thehealth,",
      " environmental, and economic risks posed by climate change,\" through several actions:\"taking responsible action to ensure significant and meaningful reductions in emissions ofgreenhouse gases from all sectors\"; creating flexible mechanisms such as tradable credits foremissions reductions and carbon sequestration; participating in international negotiations, includingmaking proposals that have the objective of obtaining U.S. participation in a future binding climatechange treaty in a manner consistent with the United Nations Framework Convention on ClimateChange (UNFCCC), that \"protects the economic interests of the United States, and that recognizesthe shared international responsibility for addressing climate change, including developing countryparticipation\"; and establishing in the House and Senate bipartisan observer groups to \"monitor anyinternational negotiations on climate change.\" The previous Senate bill ( S.",
      " 925 ) had alsoincluded this sense of Congress; however, the current Senate bill, S. 2144, does not. The findings sections of both bills review evidence that \"....atmospheric concentrations ofmanmade greenhouse gases are contributing to global climate change,\" and note some of theconsequences, such as rising sea levels, warming of the oceans, and reduced snow and ice cover. The findings also note that the United States is a party to the UNFCCC, which has the objective ofstabilization of greenhouse gas concentrations in the atmosphere at a level that would preventdangerous anthropogenic interference with the climate system, and that the United States has electedagainst becoming a party to the Kyoto Protocol (which establishes legally binding greenhouse gasreductions for developed countries), but that the U.S.",
      " position is not to interfere with other nations'activities in support of the Protocol. The findings also state \"United States businesses need to knowhow governments worldwide will address the risks of climate change.\" In 2001, President Bush rejected the Kyoto Protocol to the UNFCCC, and with it the conceptof legally binding international emissions reductions. The current U.S. policy stresses voluntarydomestic actions, not mandatory regulatory requirements, and outlines a number of voluntaryinitiatives and government research priorities that are aimed at fulfilling U.S. responsibility fortaking action. This Sense of Congress accepts the importance of the consequences of climate change,and asserts a U.S.",
      " role in taking responsibility and assuming leadership in reducing risks posed bythese consequences. It goes somewhat beyond current Administration policy in urging a proposalto gain U.S. participation in a future binding treaty on climate change. It retains caveats on the needfor developing country participation and protecting the economic interests of the United States thathave been part of the congressional debate since S.Res. 98, including these concerns,was passed in 1997 by the U.S. Senate.  CRS Products  CRS Issue Brief IB89005, Global Climate Change  CRS Report RL31931, Climate Change: Federal Laws and Policies Related to Greenhouse GasReductions.",
      "  Copyright Piracy Protection(7) International copyright protection against unauthorized use depends upon the national lawsof each country and effective enforcement of those laws. Although there is no single \"internationalcopyright\" which automatically grants protection in every country, various treaties concerningcopyright and intellectual property rights [IPR] establish minimum protection and enforcementstandards and reciprocity among the parties to those treaties, which include, inter alia, theAgreement on Trade-Related Aspects of Intellectual Property Rights [TRIPS] of the World TradeOrganization [WTO], the Berne Convention, and the World Intellectual Property Organization[WIPO] Copyright Treaty and WIPO Performances and Phonograms Treaty.",
      " The latter two,popularly known as the WIPO Internet Treaties, increased minimum standards of protectionparticularly for internet-based delivery of copyrighted works. Also, pursuant to the WIPO-WTOAgreement of 1995, which entered into force on January 1, 1996, each of these two organizationsagreed to provide legal-technical assistance to the developing country members of the other and toenhance their technical cooperation activities; WIPO has assisted over 130 developing and leastdeveloped countries in TRIPS implementation. (8) Under the TRIPS, developing and least developed countries weregiven a transition period within which to implement the laws and regulations and enforcementinfrastructure necessary to comply with TRIPS obligations.",
      " Under Article 65.2, developing countrieshad until January 1, 2000, and under Article 65.3, the least-developed countries have until January1, 2005, for implementation. Article 67 of the TRIPS requires developed countries to provide, uponrequest, technical cooperation to assist developing and least developed countries in implementation,including in the training of personnel. The United States has been providing such assistance, as reported to the WTO, through itsIPR Training Coordination Group, which is comprised of federal agencies responsible for IPR lawand enforcement and of private sector industry associations with an interest in IPR protection.",
      " (9) This Group providesprograms, training, and technical assistance to foreign officials and policy makers. In its 2003Special 301 Report, the Office of the U.S. Trade Representative (USTR) describes these and otherongoing efforts in combating the perennial and increasing problem of IPR piracy generally, throughthe negotiation of bilateral and regional free trade agreements and implementation of the WIPOInternet Treaties. Currently, the USTR notes a special focus on reducing counterfeiting and piracyof \"optical media\" products such as CDs, VCDs, DVDs, and CD-ROMs. It is also addressingcounterfeiting of U.S.",
      " trademarked goods, internet-disseminated piracy, and government use ofunauthorized software. Additionally, there has been increased attention to the problem of profitsfrom piracy as a source of funding for terrorist organizations and other organized criminalorganizations. (10) Somedeveloping and least developed countries have made progress in both implementation of laws andenforcement of such laws against IPR infringement; others have recently enacted laws but as yethave no track record on enforcement; still others have not yet implemented laws and regulations. Section 814 of S. 2144, the Foreign Affairs Authorization Act for FY2005,authorizes $5 million from funds appropriated for other educational and cultural exchange programsto be available for the State Department to provide direct assistance for combating copyright piracyto non-members of the Organization for Economic Cooperation and Development,",
      " whose membersare developed countries that adhere to the principles of an open market economy, democraticpluralism and respect for human rights. The authorized assistance specifically includes equipmentand training for foreign law enforcement, training for judges and prosecutors, and assistance incompliance with international IPR treaty obligations, including the TRIPS. The assistance programwould be carried out through the Bureau of Economic Affairs of the State Department. Theprovision further requires the Secretary of State, to the maximum extent practicable, to consult withand assist the WIPO in promoting the integration of such developing, non-OECD countries into theglobal intellectual property system. Section 814 of S.",
      " 2144 is consistent with currentU.S. international IPR obligations and policy in combating copyright piracy through training andother technical assistance to developing and least developed countries in the process of implementingand enforcing international IPR standards. Although some commentators have questioned thebenefit to developing countries of strong IPR protections because of the increased costs of importingand using protected works, others have noted a correlation between stronger IPR protections andincreased foreign direct investment, imports, and internationalization that can benefit developingcountries. Section 1810 of H.R. 1950, the Foreign Relations Authorization Act for FY2004and FY2005, contained similar language,",
      " but it would have authorized $10 million (over two fiscalyears) in addition to funds otherwise authorized for such purposes. According to House reportlanguage accompanying H.R. 1950, the chief U.S. diplomatic representative to a countryidentified under the USTR Priority Watch List as particularly deficient in IPR enforcement wouldbe responsible for preparing a plan and recommendations for actions the United States should taketo address such deficiencies. Priority Watch List countries would have priority in receivingassistance under this provision, but other countries could also receive such assistance. EarlierSenate bills ( S. 925 or S. 1161 ) did not contain similar language. Cuba:",
      " Support for Democracy Building(11) As passed by the House, H.R. 1950, in Section 1807, would authorize $15million for each of FY2004 and FY2005 to the President to support democracy-building efforts forCuba as allowed pursuant to the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L.104-114, Section 109(a)). Section 1807 also states \"that it is U.S. policy to support individuals andgroups who struggle for freedom and democracy in Cuba, including human rights dissidents,independent journalists, independent labor leaders, and other opposition groups.\" The House Reportto the bill ( H.Rept.",
      " 108-105 ) states that the funds are designated only for Cuba-related programs andshould not be diverted. (In the Senate, S. 1089, introduced May 20, 2003, also wouldauthorize $15 million to support democracy building in Cuba, as well as $30 million to establish afund to provide assistance to a future transition government in Cuba.) S. 2144 does notcontain similar language regarding democracy-building in Cuba. Over the past several years, the U.S. Agency for International Development (USAID) hasprovided assistance to increase the flow of information on democracy, human rights, and freeenterprise to Communist Cuba.",
      " The assistance has been part of the U.S. strategy of supporting theCuban people while at the same time isolating the government of Fidel Castro through economicsanctions. USAID's Cuba program supports a variety of U.S.-based non-governmental organizationsto promote rapid, peaceful transition to democracy, help develop civil society, and build solidaritywith Cuba's human rights activists. (12) These efforts are funded through the annual foreign operationsappropriations bill. In FY2001, $4.989 million was provided for various Cuba projects; $5 millionwas provided in FY2002; $6 million was provided in FY2003;",
      " and almost $7 million will beprovided in FY2004. For FY2005, the Administration has requested $9 million to back publicdiplomacy to promote democratization, respect for human rights, and the development of a freemarket economy in Cuba. In addition to funding through foreign operations appropriations, the United States providesdemocratization assistance for Cuba through the National Endowment for Democracy (NED), whichis funded through the annual Commerce, Justice, and State (CJS) appropriations measure. Cubafunding through NED has steadily increased over the past several years. NED-funded democracyprojects for Cuba amounted to $765,",
      "000 in FY2001; $841,000 in FY2002; and $1.143 million inFY2003. Funding levels for NED's Cuba projects in FY2004 are not yet available.  An argument in support of the House provision to increase funding for democracy buildingin Cuba is that it helps respond to the Cuban government's harsh crackdown on human rights anddemocracy activists in 2003. The increased funding could be viewed as bolstering the long-standingU.S. policy of providing support for the Cuban people. In contrast, an argument countering theHouse provision is that the Administration already has been funding significant democracy buildingefforts in Cuba for several years.",
      " The House provision would more than double the estimated $7million being provided for such efforts in FY2004 foreign aid appropriations, and would be inaddition to some $25 million spent for another program designed to support the Cuban people,broadcasting to Cuba via Radio and TV Marti. CRS Products  CRS Report RL31740, Cuba: Issues for the 108th Congress. International Broadcasting(13) The Senate bill ( S. 2144 ) would authorize FY2005 funding of internationalbroadcasting activities at $584.3 million (a 2.6% increase over the FY2005 request and 4.9%",
      "increase over current-year funding). The House bill would set funding for FY2005 at $650.9 million(a 14.3% increase over the FY2005 request and 16.8% more than the FY2004 enactedappropriation). Both House and Senate bills provide for a Mideast Broadcasting Network.  In 2002, the Broadcasting Board of Governors (BBG) began a pilot project to create theMiddle East Radio Network (MERN) within the Voice of America (VOA). The Foreign RelationsAuthorization Act, FY2003 ( H.R. 1646 / P.L. 107-228 ) authorized $20 million for theMiddle East Radio Network of VOA.",
      " In the Administration's FY2004 budget request, the BBGproposed the creation of a new U.S. Middle East Television Network. Within the EmergencyWartime Supplemental of FY2003 ( P.L. 108-11 ), signed April 16, 2003, Congress provided $30.5million for \"activities related to Middle East Television Network broadcasting in the Middle Eastand radio broadcasting to Iraq.\" S. 2144, Section 808 and H.R. 1950, Section 501 both similarlyamend the United States International Broadcasting Act of 1994 by authorizing grants for a \"MideastRadio and Television Network\"",
      " (House) or \"Middle East Broadcasting Network\" (Senate). Bothbills establish a Board of Directors for the network, include language directing the Board to avoidduplication of language services with other broadcasting activities to the extent possible, andexplicitly state that the network is not connected to the U.S. federal government in any way. Littlecontroversy on this measure is expected in the United States; however, some Middle East expertssuggest that increased broadcast activity in that region could draw the ire of fundamentalists in theMuslim/Arab world. Additionally, H.R. 1950, Div. C, Title V, Section 531 -- United StatesInternational Broadcasting Activities -- would amend Section 304 of the United States InternationalBroadcasting Act of 1994 (22 U.S.C.",
      " 6203) to reorganize international broadcasting by creating theUnited States International Broadcasting Agency which would be headed by the Broadcasting Boardof Governors (BBG). It would establish a full-time director who is appointed by the Board, ratherthan being run by the Board itself, as in the current broadcasting operation. This measure would aimprimarily to improve lines of authority and establish greater accountability. Other than establishingan agency rather than a board to run international broadcasting, most other aspects of theinternational broadcasting entity remain virtually the same. The Senate bill has no similar provision. Title V, subtitle B -- Global Internet Freedom -- would establish an office within the BBGwith the sole mission of countering internet blocking worldwide;",
      " to encourage development oftechnology to prevent such blocking; and to pressure repressive governments engaged in blockinginternet access to its people. Currently, the IBB has been handling internet access blocks on an adhoc basis with current appropriation levels. BBG officials say that this action would bring morevisibility to a problem and an activity that they were already handling, but it would not substantivelychange the internet counter-blocking activities that they would continue to conduct. S. 925 has no similar provision. Other international broadcasting measures in H.R. 1950 include a sense ofCongress expressing the need for expanded broadcasting to North Korea by Radio Free Asia;improved broadcasting measures to Cuba and counter jamming of radio and TV Marti;",
      " establishingin the Department of State a coordinator for International Free Media; a pilot program to promotetravel and tourism in the United States via international broadcasting; and a measure to prevent theelimination of international broadcasting in Eastern Europe. CRS Products  CRS Report RL31370, State Department and Related Agencies: FY2003 Appropriations andFY2004 Request  CRS Report RS21565, Middle East Television Network: An Overview  International Organizations H.R. 1950 would authorize funding of the International Organizations accountswithin the State Department budget at $1,040.8 million for U.S. Contributions to InternationalOrganizations (CIO) for FY2005 and S.",
      " 2144 would authorize CIO at $1,109.2 millionfor the same year. (The enacted funding level for FY2004 is $1,010.5 million before rescissions.) For U.S. Contributions to International Peacekeeping, H.R. 1950 would authorize suchsums as may be necessary, while S. 2144 would authorize $650 million for FY2005.(The FY2004 enacted level before rescissions is $465.3 million.) Other issues addressed in thelegislation include: Brahimi Report Implementation. (14) In August 2000, a panelof experts on United Nations Peace Operations,",
      " created by U.N. Secretary-General Kofi Annan inMarch 2000, issued a report assessing the shortcomings of the United Nations in the peacekeepingarea and offering nearly 60 recommendations for reform and change. The report is often referredto as the Brahimi Report, named after the chairman of the Panel, Lakhdar Brahimi, former ForeignMinister of Algeria and currently, the Special Representative of the Secretary-General forAfghanistan. Since August 2000, the U.N. General Assembly, its Special Committee onPeacekeeping Operations, and the U.N. Security Council have reviewed and implemented many ofthe Panel's recommendations.",
      " Secretary-General Annan has issued reports outlining areas ofimplementation.  Section 402 of S. 925 directed that the Secretary of State submit to \"appropriatecommittees of Congress\" a report \"assessing the progress made to implement the recommendations\"of the Brahimi Panel. Specifically, the Secretary's report, due 90 days after enactment, \"shall include-- (1) an assessment of the United Nations progress toward implementing the recommendations...;(2) a description of the progress made toward strengthening the capability of the United Nations todeploy a civilian police force and rule of law teams on an emergency basis at the request of theUnited Nations Security Council;",
      " and (3) a description of the policies, programs, and strategies ofthe United States Government that support the implementation of the recommendations..., especiallyin the areas of civilian police and rule of law.\" The Senate Foreign Relations Committee, in itsreport, noted that it was interested in \"learning how the U.S. government is contributing to thedevelopment of a more robust U.N. peacekeeping capacity, especially its ability to organize civilpolice units for use on an emergency basis.\" Section 402 of S. 2144, the bill replacing S. 925, contains an identical requirement, but with an increase of the reporting date to120 days after enactment.",
      " H.R. 1950 does not include a similar provision. Peacekeeping Contributions Cap(15). EffectiveOctober 1, 1995, Congress limited to 25% the U.S. assessed payments to U.N. peacekeepingaccounts, irrespective of the higher percent level assessed by the United Nations (Section 404 (b)(2),P. L. 103-236). Congress took this action as a result of continuing increases in the overall costs ofU.N. peacekeeping operations and of the failure of U.N. member governments to accept increasesin their own assessment levels, a step that would enable U.S. assessments to be lowered.",
      " Thisdifference between U.S. peacekeeping contributions and U.N. peacekeeping assessments, createdby the gap between U.N. and U.S.-recognized assessment levels, helped to produce a growingarrearage in U.S. contributions to U.N. peacekeeping accounts. In 2001, in response to a December2000 agreement by the U.N. General Assembly that the U.S. regular budget assessment would bereduced from 25% to 22%, the U.S. peacekeeping assessment level started to fall. [The U.N.peacekeeping assessment is based on a modification of the regular budget assessment level.] (SeeCRS Issue Brief IB90103,",
      " Table 1. U.N. Peacekeeping Assessment Levels for the United States andaccompanying text for further details and background.) In 2002, Congress stipulated that the 25% cap for peacekeeping payments would be raisedfor four calendar years to a range of 28.15% for CY2001 to 27.4 % for CY2004. This would enablecurrent U.S. peacekeeping assessments to be paid in full (section 402, P. L. 107-228). Section 401 of the Senate Foreign Relations Committee recommended S. 925 set the assessment limit for U.S. peacekeeping contributions beyond calendar year 2004 at 27.",
      "4%.This is the same as the level in P. L. 107-228 for CY2004. Section 401 of the House InternationalRelations Committee recommends H.R. 1950 set the peacekeeping assessment limit at27.1% for calendar years 2005 and 2006. In summary, S. 925 would establish 27.4%as the assessment level cap for the future, unless an initiative were taken to change it. H.R. 1950 would set the cap at 27.1 %, but for only two years. Acceptance of the H.R. 1950 recommendation would require a return to this issue either to continue the27.",
      "1% cap or to change it for calendar years beyond 2006. As reported, Section 401 of S. 2144 set the assessment limit for U.S. peacekeeping contributions beyond calendaryear 2004 at 27.4%, the same as Section 401 of S. 925. CRS Products  CRS Issue Brief IB90103, United Nations Peacekeeping: Issues for Congress, by Marjorie AnnBrowne. Status of Israel in U.N. Regional Group. (16) In May 2000,Israel wasadmitted, on a temporary basis, to membership into the Western European and Others Group(WEOG)",
      " that meets at United Nations headquarters in New York. This decision meant that, for thefirst time, Israel could be recommended or nominated for participation as a member or an officer ofU.N. bodies. A primary function of these regional groups is to elect and thus nominate a regionalcandidate for membership in U.N. organs and bodies, including the U.N. Economic and SocialCouncil and the U.N. Security Council. Regional groups were devised for the purpose of ensuringwhat is called \"equitable geographic distribution,\" a principle referred to in the U.N. Charter (Article23, paragraph 2, on election of the non-permanent members of the Security Council). If a memberstate is not a member of a regional group,",
      " that state has no chance of being elected, for example, tomembership on the Economic and Social Council or the Security Council. Israel would naturallybe eligible for membership in the Asian Group which includes other countries in the Middle East. A consensus has not existed within that Group to admit Israel. Some authorities have maintained thatnot being a member of a regional group violates the Charter principle of \"equality among all memberstates\" (Article 2, paragraph 1). The WEOG was seen as an alternative location for Israel, pending resolution of disputes inthe Middle East. WEOG's decision was that Israel's membership would have to be reviewed in fullafter four years.",
      " In addition, Israel could not be nominated from the WEOG for the first two years.On February 7, 2003, Israel was elected, as a candidate from WEOG, as one of the three Vice-Chairon the Open-Ended Working Group on Disarmament to consider the objectives and agenda for thefourth special session of the General Assembly devoted to disarmament (SSOD IV). This workinggroup was established by the U.N. General Assembly (Resolution 57/61) in the fall of 2002. In lateApril 2003, the U.N. Economic and Social Council elected Israel to a four-year term on the U.N.Commission on Narcotic Drugs,",
      " with membership starting on January 1, 2004. Congress has, over the past few years, expressed its concern that Israel, by not being amember of a regional group, did not have equal access for full participation as a member of theUnited Nations. The currently enacted legislation, in Section 721 of P. L. 106-113 (Appendix G. The Admiral James W. Nance and Meg Donovan Foreign Relations Authorization Act, Fiscal Years2000 and 2001), is entitled United Nations Policy on Israel and the Palestinians. Under this section,Congress expressed its view that U.S. policy shall \"promote an end to the persistent inequityexperienced by Israel in the United Nations\"",
      " by being \"denied acceptance into any of the UnitedNations regional blocs.\" This section further requires the Secretary of State to report, by January 15,of each year, on (1) actions taken by U.S. representatives to \"encourage the nations of the WesternEurope and Others Group (WEOG) to accept Israel into their regional bloc;\" and (2) \"other measuresbeing undertaken, and which will be undertaken, to ensure and promote Israel's full and equalparticipation in the United Nations.\" The report submitted to Congress in January 2003 noted that\"since the Asia Group where Israel most appropriately belongs also excludes it from participationin its activities at UN agencies outside of New York,",
      " our efforts are now focused on gaining Israel'sadmittance into WEOG or similar groups at those agencies.\" The report went on, \"We will continueefforts in 2003 and future years to gain Israel's entry into all WEOG or similar groups where it hasinterest in participating.\" Under Section 405 of H.R. 1950, U.S. officials \"should pursue an aggressivediplomatic effort and take all necessary steps to ensure the extension and upgrade of Israel'smembership in the Western European and Others Group at the United Nations.\" The Secretary ofState is required to report, semiannually through September 30,",
      " 2005, on the steps taken by theUnited States on this issue. As explained in its report, the Committee urged extension of WEOGmembership \"in UN bodies and UN affiliated agencies in New York and throughout the world.\"While S. 925 does not contain a comparable provision, it is likely that Congress willenact language identical or similar to this. It might be useful to review and compare this languagewith that of Section 721. S. 925 did not have a similar provision, and neither does S. 2144. Israel-Palestine Issues(17) Section 105 of S. 2144 and Section 115 of H.R.",
      " 1950 authorize $50million for settling Jewish migrants in Israel. Funds for Jewish migrants originally were intended forJews escaping from the former Soviet Union and Ethiopia. Section 806 of S. 2144 andSection 223 of H.R. 1950 call for a report on U.S. efforts to promote wider Israelidiplomatic relations. The bill seeks to expand Israel's diplomatic relations by directing the Secretaryof State to encourage other nations to develop and maintain relations with Israel. Section 809 of S. 2144 and Section 703 of H.R. 1950 call upon the Administration topress for membership in the International Red Cross for the Israeli Magan David Adom society.",
      " TheInternational Red Cross refused Israel's membership because the Israelis wanted to use the Star ofDavid as their symbol, which the Red Cross believed would open the door to other nations seekingtheir own individual emblems. Israel rejected a Red Cross offer to adopt an internationally neutralred diamond.  Section 2225 of S. 2144 establishes a private, non-profit Middle EastFoundation, funded through the Middle East Partnership Initiative, to make grants to personsinvolved in projects in civil society, human rights, political participation, education reform, rule oflaw, and other areas. H.R. 1950 does not have comparable provisions. H.R.",
      " 1950 has some provisions not found in the Senate bill. Section 222 addsto the annual State Department terrorism report a listing of facts about attacks against U.S. citizensin Israel, Israeli administered territory, and Palestinian territory. The listing should include date ofattack, number of U.S. citizens killed or wounded, total killed or wounded, groups responsible forthe attack, where the groups found refuge or support, suspects arrested, detained, indicted, orconvicted for the attacks, and other data. The Secretary of State is to consult with other agencies inmaking the report. Section 739 lists U.S. citizens killed by Palestinian terrorists since 1993,",
      " andseeks a listing of all U.S. citizens killed in terror attacks. Section 731 states a sense of the Congressthat the United States has played the major role in funding the United Nations Relief and WorksAgency (UNRWA) for assisting the Palestinian refugees. Section 731 urges UNRWA to resettle therefugees, eliminate anti-Jewish textbooks from the schools, stop terrorists from diverting funds, andstop anti-Israeli incitement. Section 1321 extends the authorization date for FMF assistance to Israel,and Section 1322 extends the authorization for aid to Egypt. Section 1804 ensures the U.S.Comptroller General access to financial records of U.S.",
      " aid to the West Bank and Gaza Strip, andcalls upon the Secretary of State to ensure that the funds are not used for terrorism.  CRS Products  CRS Issue Brief IB85066, Israel: U.S. Foreign Assistance  CRS Issue Brief IB92052, Palestinians and Middle East Peace: Issues for the United States.  Jerusalem(18) A majority of the Members of Congress believe that the United States should recognizeJerusalem as the capital of Israel as evidenced by congressional passage of numerous resolutions andbills, including P.L. 104-45 of November 8, 1995 calling for the U.S. embassy to be moved from TelAviv to Jerusalem.",
      " U.S. Administrations have disagreed, arguing that Jerusalem's final status shouldbe negotiated rather than decided unilaterally by Israel. Palestinian-Israeli agreements call fornegotiations on the future of the city, and most nations agree that Jerusalem's status should benegotiated. Section 805 of S. 2144 states that no funds authorized in the bill may beused for a U.S. Consulate in east Jerusalem unless the consulate is under the authority of the U.S.Ambassador to Israel, and that no funds may be used to publish materials listing national capitalsunless Jerusalem is named as the capital of Israel. Section 221 of Title I,",
      " H.R. 1950, hassimilar provisions, but adds that people born in Jerusalem may list Israel as their birthplace whenapplying for U.S. passports.  CRS Products  CRS Report RS20339, Jerusalem, the U.S. Embassy and P.L. 104-45  CRS Issue Brief IB91137, Middle East Peace Talks.  Mexico Issues(19) The House passed H.R. 1950 on July 16, 2003, with four provisions relating toMexico. This included a modified version of a sense of the Congress provision regarding a possiblebilateral migration accord with Mexico reported out by the House International Relations Committeeon May 16,",
      " 2003 ( H.Rept. 108-105, Part 1), two amendments stating the sense of Congress on jointpollution control on the border and Mexican extradition policy, and restrictions on Mexico's issuanceof consular ID cards. There were no similar provisions in the Senate bill ( S. 925 ) thatthe Senate considered but did not pass in July 2003, and there are no similar provisions in the Senatebill ( S. 2144 ) reported out by the Senate Foreign Relations Committee in March 2004.  Migration Accord. The idea of a migrationaccord has been advanced by President Vicente Fox and by President Bush at presidential meetingsin the last two years.",
      " Mexican officials have been pressing for the legalization of undocumentedMexican workers in the United States through amnesty or guest worker arrangements to protect theirhuman rights and to reduce the number of migrants who die each year while seeking entry into theUnited States. In mid-February 2001, the two presidents agreed to hold cabinet-level negotiationsto address migration and labor issues between the countries. Subsequent press reports suggested thatvarious proposals were being considered by the Administration and by Congress, with leaders ofboth U.S. political parties reportedly seeking to gain favor with Hispanic voters and to deal with theexistence of numerous undocumented workers in hard-to-fill jobs. In early September 2001,",
      " the twopresidents pledged to reach agreement as soon as possible on a range of issues, including bordersafety, a temporary worker program, and the status of undocumented Mexicans in the United States. However, following the September 2001 terrorist attacks in the United States, congressional actionfocused on strengthening border security and alien admission and tracking procedures. In March2002, the two presidents noted that important progress had been made to enhance migrant safety, andthey agreed to continue the cabinet-level talks to achieve safe, legal, and orderly migration flowsbetween the countries. During the annual Binational Commission meetings of cabinet secretariesin November 2002, Secretary of State Powell and Foreign Secretary Casta\u00c3\u00b1eda reaffirmed theintention to continue talks toward a migration agreement,",
      " but in January 2003, Casta\u00c3\u00b1eda resigned,reportedly in part out of frustration with the lack of progress in negotiating a migration accord withthe United States. When the House International Relations Committee marked up H.R. 1950 onMay 8, 2003, Representative Menendez offered an amendment, which, in modified form, becameSection 731. The initial amendment recounted the recent commitments on migration matters by thetwo governments as findings, and stated the sense of Congress that the United States should reachan agreement with Mexico on a migration accord that would ensure that migration to the UnitedStates is \"safe, orderly,",
      " legal, and dignified.\" Arguing that the Menendez provision was too broad,Representative Ballenger offered a substitute amendment, subsequently approved 24-22, that statedthe sense of Congress that a Mexico-U.S. migration agreement should address the key issues ofconcern for both nations, and should include an accord to open Mexico's state-run petroleummonopoly (PEMEX) to reform and to investment by U.S. oil companies. It also added a finding thatPEMEX \"is inefficient, plagued by corruption and in need of substantial reform and privateinvestment in order to provide sufficient petroleum products to Mexico and the United States to fuelfuture economic growth which can help curb illegal migration into the United States.\" Representative Gallegly,",
      " expressing concern about fugitives from U.S. justice that Mexico will notextradite, offered an amendment to the Ballenger substitute measure, which was approved byunanimous consent, that the issues of extradition and law enforcement cooperation should beaddressed in any migration agreement between the countries. In sum, Section 731, as reported, statesthe sense of Congress that the United States should as soon as practicable commence negotiationsto reach a migration accord with Mexico which addresses the key issues of concern in both countries,which opens PEMEX to reform and investment by U.S. oil companies, and which addressesextradition and law enforcement issues.",
      "  Mexican officials and commentators criticized the Committee-reported provisions relatedto PEMEX and extradition as an intrusion in the domestic affairs of Mexico. The Office of theMexican Presidency issued a statement on May 11, 2003, acknowledging that the negotiation of amigration agreement was a priority for the Fox Administration, but pointing out that \"negotiatingsuch an agreement in exchange for opening up Petr\u00c3\u00b3leos Mexicanos (the state oil industry - PEMEX)to foreign investment would be wholly unacceptable.\" The statement further asserted that \"majorchanges have been undertaken at PEMEX to modernize its infrastructure and make its managementtransparent, and thus guarantee that oil shall remain in Mexican ownership.\" During floor consideration on July 15,",
      " 2003, the House approved, as part of an en blocamendment, an amendment proposed by Representative David Dreier, as modified by HIRCChairman Henry Hyde, that became Section 730, that removed the previously mentioned referencesto PEMEX, and stated the sense of Congress that the United States and Mexico should concludenegotiations in an attempt to reach a migration accord that is as comprehensive as possible andwhich addresses the key issues of concern for both nations; and that as part of any agreement, theissues of extradition and law enforcement cooperation be addressed. Pollution Control. During floor consideration onJuly 15, 2003,",
      " the House approved, as part of an en bloc amendment, an amendment proposed byRepresentatives Hunter, Cunningham, Davis, and Filner, that became Section 740, that expressesthe sense of Congress that the U.S. Section of the International Boundary and Water Commissionshould give priority attention to treaty negotiations with Mexico on the building of a public-privatewastewater treatment facility in Mexico that can treat sewage flowing from Tijuana to San Diego,as outlined in P.L. 105-457. The amendment recounted in the findings the damage to San Diegobeaches, and the three year delay in negotiations, and it required that monthly progress reports besubmitted to appropriate congressional committees.",
      " Extradition Issues. During floor considerationon July 15, 2003, the House approved Amendment 27 proposed by Representative McKeon thatexpresses in Section 744 the sense of the Congress that the U.S. government should encourage theMexican government to work closely with the Mexican Supreme Court to persuade the Court toreconsider its October 2001 ruling so that the possibility of life imprisonment in the United Stateswill not have an adverse effect on the timely extradition of criminal suspects from Mexico to theUnited States.  Consular ID Cards. In floor action on July15, 2003, the House voted 226-198 to accept Amendment 17 by Representative John Hostettler thatwould establish in Section 232 a series of restrictions on the issuance of consular identification cardsby foreign missions.",
      " In recent years, the Mexican consulates have been issuing matr\u00c3\u00adcula consularcards for identity purposes, and they have been increasingly accepted in the United States insituations where proof of identity is required, such as for establishing banking accounts andobtaining credit cards, and transferring funds from the United States to Mexico. Critics argue thatthe cards are used primarily by illegal aliens seeking to obtain benefits not achieved through regularimmigration law and procedures, and that they might facilitate money-laundering and terroristactivity. The amendment would require that foreign missions issue consular identification cards onlyto bona fide citizens of the country as verified by birth certificates,",
      " voter IDs, and passports; that cardrecipients be required to notify the mission of any change of address; that automated records be keptby the missions to prevent duplicate or fraudulent issuance; that records be subject to audit by theUnited States; and that the United States be notified of each issuance, including the name andaddress. In the event that a foreign mission has issued consular ID cards in violation of theseprovisions, it could be required to suspend the issuance of cards; and in the event of non-compliance,the State Department would suspend the issuance of immigrant or nonimmigrant visas, or both, tonationals of that country until it was in compliance with the requirements.",
      " Supporters of theamendment argued that the issuance of the cards was out of control and needed to be controlled. Opponents argued that it was an attack on the Mexican identity card and persons of Hispanicheritage, and that the requirements were onerous and excessive.  Rural Development Assistance. When the Senateconsidered S. 925 on July 10, 2003, it adopted an amendment offered by Senator Reidto provide $100 million in assistance to Mexico to deal with the existing rural development crisisin the country. The Senate did not complete action on S. 925 in 2003, and there is nosimilar provision in the Senate bill ( S.",
      " 2144 ) reported out by the Senate ForeignRelations Committee in March 2004.  CRS Products  CRS Report RL31876, Mexico-U.S. Relations: Issues for the 108th Congress, by [author name scrubbed].  Peace Corps(20) The Peace Corps Charter for the 21st Century Act, appearing as title IX in the Senate bill( S. 2144 ), is partly a response to a January 2002 initiative of the Bush Administrationto double the size of the Peace Corps over a period of five years. In the House, the Peace CorpsExpansion Act of 2003, originally H.R.",
      " 2441 ( H.Rept. 108-205 ), was added during floordebate to H.R. 1950. S. 2144 and H.R. 1950 share many features. Chiefly, both billssupport an expanded volunteer force by authorizing appropriations to the year FY2007. Both billsrequire that volunteers be trained in the education, prevention, and treatment of infectious diseasesso that they can convey this knowledge during their service. They establish a number of reportingrequirements, including reports to Congress on how the Agency plans to increase the number ofvolunteers, new agency initiatives, country security concerns, student loans,",
      " and recruitment ofvolunteers for priority countries. The two bills reaffirm the Peace Corps' status as an independentagency. Both pieces of legislation focus attention on returned volunteers (RPCVs). They requirethat some members of a revived Advisory Council be RPCVs. Both bills urge that RPCVs beutilized to open or reopen programs in Muslim countries. The two bills differ in several ways. Their authorization levels are slightly different. S. 2144 authorizes $351 million for FY2005, $443 for FY2006, and $485 million forFY2007, while H.R. 1950 authorizes $411.80 million,",
      " $455.93 million, and $299.40million for these years. H.R. 1950 requires more reports -- on federal equal opportunityprograms and on medical screening procedures and health considerations for putting volunteers ina country. It requires that recruiting be the responsibility of the Peace Corps; the Senate bill requiresthat it be \"primarily\" its responsibility. H.R. 1950 raises the minimum readjustmentallowance provided volunteers at completion of service from $125 for each month served to $275in FY2004 and $300 thereafter, while S. 2144 raises it to $275 only (volunteerscurrently receive $225). Under H.R.",
      " 1950, the Advisory Council has 11 members, 6of whom are RPCVs; S. 2144 would have 7 members, including 4 RPCVs. The lattermeasure requires regular meetings and an annual report from the Council on its functions. Both billsauthorize establishment of an annual grant program to help RPCVs implement small projects -- in S. 2144 eligible projects must meet the so-called \"third goal\" of the Peace Corps(promoting an understanding of other peoples by Americans); in H.R. 1950 they couldmeet all Peace Corps goals. For this purpose, S. 2144 authorizes the Corporation forNational and Community Service to utilize $10 million in funds additional to the regular Corporationbudget;",
      " H.R. 1950 authorizes the Peace Corps Director to allocate the grants which areadditional to the Peace Corps budget (or the role can be delegated to the Corporation). H.R. 1950 requires that the number of Crisis Corps volunteers be expanded to at least120 in FY2004, 140 in FY2005, 160 in FY2006, and 165 in FY2007. It also contains a declarationof support for the Bush goal of doubling the Peace Corps by FY2007. Although the Peace Corps is viewed positively by the public and is widely supported inCongress, the Peace Corps provisions raise a number of potential issues for policymakers.",
      " Thedoubling of the size of the Peace Corps means a substantial increase in the size of the agency'sbudget to nearly $500 million by FY2007, presumably to be maintained for years thereafter. Budgetconstraints may prevent this rapid growth -- the FY2003 Administration request of $317 million wastrimmed in the final appropriations bill to $295 million. Further, Senate appropriators in their 2003report ( S.Rept. 107-219 ) called the expansion plan \"overly ambitious,\" potentially causing strainsin administrative and programming capacities and suggesting that expansion may have to be drawnout over more than five years. The FY2004 request of $359 million was effectively cut to $325million ($310 million in the regular Peace Corps account,",
      " plus $15 million to be transferred to PeaceCorps from the Global HIV/AIDS account). CRS Products  For further discussion, see CRS Report RS21168, The Peace Corps: Expansion Initiative andRelated Issues.  Public Diplomacy(21) Public diplomacy consists of U.S. government activities designed to present the Americanculture and promote understanding by foreign publics of U.S. government policies. Publicdiplomacy includes government exchange programs, international information programs, and U.S.government international broadcasting. (For details on international broadcasting measures, see thatsection above.) Both House and Senate bills include funding authorization and new programauthority relating public diplomacy to the post 9/",
      "11 world.  Title VI, S. 2144 -- Strengthening United States Outreach -- would require thePresident to develop an international information strategy, focusing on regions with significantMuslim populations, and report to the relevant congressional committees. In addition, Section 602would require the Secretary of State to include public diplomacy training at all levels of the ForeignService. Section 612 of this title would expand existing educational and cultural exchanges andwould include exchanges to promote religious freedom, information technology, and sportsdiplomacy. H.R. 1950 Title II of Div C, Subtitle A, United States Public Diplomacy -- Section 202 emphasizes that public diplomacy must be an integral component of U.S.",
      " foreign policy. The Department, in coordination with international broadcasting entity is called on to coordinateefforts of all federal agencies in promoting public diplomacy activities. The section would establisha public diplomacy reserve corps which may include public diplomacy experts and related fieldexperts from the private sector. Section 203 would require the Secretary of State to develop annuallya public diplomacy strategy and specify goals, agency responsibilities and resources needed toachieve the stated goals. The Secretary would annually review the public diplomacy strategy andits impact on target audiences. Each annual report shall include an assessment of the U.S. publicdiplomacy strategy both worldwide and by region. Comparable to Section 602 in S.",
      " 2144, Section 204 establishes public diplomacy as a priority in recruiting and training ForeignService officers. It would require the Secretary to seek to increase, through recruitment andincentives, the number of Foreign Services officers who are proficient in languages spoken inpredominantly Muslim countries.  Other measures contained in H.R. 1950, Title II, Subtitle A include reportingrequirements and enhancements of the Advisory Commission on Public Diplomacy; implementationof a pilot program to assist foreign governments in order to establish or improve a public librarysystem in their countries in order to improve literacy and public education; and a sense of Congressthat the Secretary should include the predominantly Muslim populated countries in sub-SaharanAfrica in the Department's public diplomacy activities.",
      " Similar to Section 612 of the Senate bill, H.R. 1950, Title II of Div C, SubtitleC -- Educational and Cultural Activities -- contains Section 251 which would establish an array ofexchange initiatives for predominantly Muslim countries. Included would be an expansion of theFulbright Exchange and the Hubert H. Humphrey Fellowship programs in Muslim countries, ajournalism training program, grants for U.S. citizens to teach English language overseas, and librarytraining exchange. State Department Authorities and Personnel Issues(22) In addition to providing the required authority for the Department of State and relatedagencies to spend specified levels of appropriations (see Table 1 in the Appendix for appropriationand authorization levels), Division C of H.R.",
      " 1950 and Title II and III of S. 2144 contain measures ranging from authorizing a U.S. diplomacy center to raising post differentialpay and danger pay allowances for Foreign Service Officers to a security cost sharing among allagencies represented in overseas posts. On these issues, both bills have similar provisions, none ofwhich appear controversial at this time. CRS Reports:  For more detail on State Department and related agencies, see CRS Report RL31370, StateDepartment and Related Agencies: FY2003 Appropriations and FY2004 Request.  Defense Trade and Security Assistance Export Controls for Satellites(23) Between 1992 and 1996,",
      " responsibility for decisions regarding export of commercialcommunications satellites was transferred from the State Department to the Commerce Department. In 1997, issues arose in connection with the launch of U.S.-built satellites by China as to whetherU.S. satellite manufacturers were abiding by the terms of the export licenses granted by theCommerce Department, and whether such exports should be under the more restrictive controls ofthe State Department. The concern was that China might be gaining militarily useful informationin connection with its launches of U.S.-built satellites. Subsequently, Congress directed that exportcontrol responsibility for these satellites be returned to the State Department effective March 15,1999 (FY1999 DOD authorization bill,",
      " P.L. 105-261 ). Which agency should control these exports remains controversial because of concern thatuncertainty associated with State Department control over the licenses (particularly in terms of thetime required for the licenses to be approved or denied) places U.S. companies at a competitivedisadvantage with European satellite manufacturing companies. The Satellite Industry Association(SIA) released figures in May 2001 showing U.S. satellite manufacturers losing market share toforeign companies in 2000. SIA and others attributed that loss in part to the shift in jurisdiction toState. Congress directed the Secretary of State to establish an export regime that includes expeditedapproval for exports to NATO allies and major non-NATO allies in the FY2000 State Departmentauthorization act (part of the FY2000 Consolidated Appropriations Act,",
      " P.L. 106-113 ). The newrules took effect on July 1, 2000. (Since 2001, U.S. companies have won the majority of contractsfor new commercial communications satellites, though it is not possible to draw a direct linkbetween that and the regulatory change.) Efforts to shift jurisdiction over these satellite exports back to the Commerce Departmentcontinue. In the 108th Congress, Title XV of H.R. 1950 as reported from HIRC ( H.Rept.108-105, Part 1) would have left the decision on agency jurisdiction to the President if the export isto a NATO country or major non-NATO ally;",
      " exports to China would remain under StateDepartment jurisdiction. However, the House Armed Services Committee struck Title XV when itmarked up the bill ( H.Rept. 108-105, Part 3), and it was not included in the version of the bill thatpassed the House on July 16, 2003. Separately, the Security Assistance Act ( P.L. 106-280 ) reduced from 30 days to 15 days thetime Congress has to review decisions on exporting commercial communications satellites to Russia,Ukraine, and Kazakhstan, making the time period the same as for NATO allies. H.R. 1950 as passed by the House changes that time period back to 30 days.",
      " S. 2144, the FY2005 Foreign Affairs Authorization Act, includes section 2239,which would exempt from export licensing requirements marketing information (as defined in theAct) related to sales of commercial communications satellites if the sale is to a NATO country,Australia, Japan, or New Zealand. The exemption does not apply to defense items and defenseservices. The same provision was included in S. 1161 (later incorporated into S. 925 ) last year. CRS Products  CRS Issue Brief IB93062, Space Launch Vehicles: Government Activities, CommercialCompetition, and Satellite Exports, by Marcia Smith. Israeli Palestinian Peace Enhancement Act of 2003(",
      "24) Title XVI of Div. C, H.R. 1950 addresses the effort to achieve peace betweenthe Israelis and Palestinians that began with President Bush's speech on June 24, 2002. It envisioned\"two states, living side by side in peace and security.\" The President called on the Palestinians toelect new leaders \"not compromised by terror\" and to undertake \"true reforms\" to build a practicingdemocracy. He declared that the United States will not support the establishment of a Palestinianstate until its leaders fight terrorists and dismantle their infrastructure. He promised that when thereare new leaders and new security arrangements with Israel,",
      " the United States will then support thecreation of a Palestinian state, but certain aspects of its sovereignty will be \"provisional\" until a finalsettlement in the Middle East. The President also declared that \"as we make progress towardsecurity, Israeli forces need to withdraw to positions they held prior to September 28, 2000, andIsraeli settlement in the occupied territories must stop.\" The President added that in real peace, the\"Israeli occupation that began in 1967 will be ended through a settlement negotiated by the parties,based on U.N. Resolutions 242 and 338, with Israeli withdrawal to secure and recognized borders.\"  Building on the President's vision,",
      " the United States, European Union, United Nations, andRussia (the \"Quartet\") developed a three-phase \"Performance-Based Roadmap to a PermanentTwo-State Solution to the Israeli-Palestinian Conflict.\" In Phase I, the focus will be on an end toterror and violence, the building of Palestinian political and security institutions, and thenormalization of Palestinians life through humanitarian and economic responses, the dismantlementof Israeli settlement outposts erected since March 2001, and the freezing of all settlement activity. Phase II, will focus on the creation of an independent Palestinian state with provisional borders. Phase III, will see negotiations for a permanent agreement and an end of the Israeli-Palestinianconflict.",
      " The Roadmap was presented on April 30, 2003. The Roadmap calls for Israeli actions to\"accompany\" those of the Palestinians, although in Phase I the Palestinians are to unconditionallycease violence \"immediately.\" The Palestinians, EU, and U.N. view the Roadmap as a parallelprocess, requiring simultaneous steps by both sides. The Israeli government and its supportersconsider it to be a sequential process, beginning with an end to Palestinian violence, and maintainthat the President's June 24, 2002 speech does so, as well. Title XVII, Sec. 1602 declares that the security of Israel is a national security interest of theUnited States.",
      " It endorses the two-state solution as necessary to achieving the security of Israel, ifthe Palestinian state is peaceful, democratic, \"and abandons the use of terror forever.\" Sec. 1603states a willingness to provide substantial assistance to the Palestinians after they achieve peace withIsrael. Sec. 1604 indicates that transformation of the Palestinian system of government along thelines outlined in President Bush's June 24, 2002 speech is a precondition for peace negotiations. Sec.1605 calls on the President not to recognize a Palestinian state until it embodies his June 24, 2002vision. Sec. 1606 allows the provision of assistance to a Palestinian state if the President certifiesthat an international peace agreement has been signed,",
      " in which both parties commit to aninternationally recognized boundary with no remaining territorial claims and, in which, the issue ofrefugees is resolved. In other words, the bill bans aid to the Palestinian state with provisionalborders that is to emerge from Phase II of the Roadmap. However, the President may waive thisprovision if he determines and certifies that it is in the U.S. national interest. The limitations onassistance do not apply to humanitarian assistance or aid to help reform the Palestinian Authority.Assistance to the Palestinian state for economic development, democratization, security cooperationwith Israel, and to help compensate Palestinian refugees is specifically authorized.",
      " The Senate bill has no parallel provisions. CRS Products  For background, see CRS Issue Brief IB91137, The Middle East Peace Talks, and CRS Issue Brief IB92052, Palestinians and Middle East Peace: Issues for the United States. Missile Technology Control Regime Annex(25) H.R. 1950 requires that the Secretary of State, in coordination with the Secretaryof Commerce, the Attorney General, and the Secretary of Defense certify to Congress no later thanMarch 1 of each year that items on the Missile Technology Control Regime (MTCR) Annex havebeen under stringent control in accordance with the International Traffic in Arms Regulations(ITAR)",
      " and Export Administration Regulations (EAR) for the previous year. The legislation alsorequires that if the requirement has not been met, then reasons why this did not occur must also beincluded in the certification. This proposed annual certification also requires that the Secretary ofState describe any updated coverage in both the ITAR and EAR as they relate to MTCR Annexitems. In addition, any overlap or omissions in these regulations as they relate to MTCR Annexitems will also be included in the certification to Congress. The Senate version, S. 2144,Foreign Relations Authorization Act, Fiscal Year 2004, does not contain similar provisions.",
      " Section 1201 of H.R. 1950 appears to be an attempt to strengthen controls byassigning specific accountability for U.S. missile-related activities. Current law (Section 832 of theForeign Relations Authorization Act, Fiscal Years 2002 and 2003) requires reporting on allinternational transfers of MTCR equipment or technology to any country seeking to acquire suchequipment, including U.S. transfers of such equipment or technology. Furthermore, current lawrequires the following: An analysis of the effectiveness of the regulatory and enforcement regimes ofthe United States as they relate to the MTCR, and; An explanation of U.S. policy regarding the transfer of MTCR equipment andtechnology to foreign programs.",
      " Section 1201, as proposed, also formally designates the Secretary of Commerce and theAttorney General to be part of the review and certification process, whereas current law stipulatesroles only for the Secretary of State and the Secretary of Defense. The formal inclusion of theSecretary of Commerce and the Attorney General in this requirement will likely be viewed infavorable terms as both are involved in a variety of missile nonproliferation capacities. Thereporting on overlaps and omissions in terms of the ITAR and EAR in the proposed annualcertification might help Congress identify areas where both regulations can be improved bylegislative action. The proposal of the annual certification proposed in Section1201 may generateopposition,",
      " particularly in the Executive Branch. The question that may arise is one ofCongressional intent: Is this certification intended to establish legal accountability, or is it to compelthe Secretaries of State, Defense, and Commerce, and the Attorney General to cooperate inimproving U.S. government control of MTCR-related items? If it is to establish legal accountability,there could be a significant degree of opposition. If it is to improve cooperation, it may be arguedthat there is alternative legislative language that could achieve the same intent. CRS Products  CRS Report RL31848(pdf), Missile Technology Control Regime (MTCR) and International Code ofConduct Against Ballistic Missile Proliferation (ICOC): Background and Issues forCongress,",
      " [author name scrubbed]. CRS Report RL31502, Nuclear, Biological, Chemical, and Missile Proliferation Sanctions: SelectedCurrent Law, [author name scrubbed]. Missile Threat Reduction Act of 2003(26) H.R. 1950, Section 1412 calls for a U.S.-led effort to seek a bindinginternational instrument(s) to restrict trade of offensive ballistic missiles. This proposal addressesoffensive ballistic missiles with a range of at least 300 km and a payload capacity of 500 kg or moreand would apply to both conventional and weapons of mass destruction-armed missiles. Becausethis proposal stipulates only offensive ballistic missiles,",
      " it is assumed that surface-to-air missiles andballistic missile defense interceptor missiles would not be subject to the binding instrument. Cruisemissiles and unmanned aerial vehicles (UAVs), which are included in provisions of the MissileTechnology Control Regime (MTCR), are not included in this proposal. This binding instrumentmay be in the form of a multilateral treaty, United Nations Security Council Resolution (UNSCR),or another instrument of international law. No matter what form this instrument takes, it is proposedthat it should also include enforcement measures including \"interdiction, seizure, and impoundmentof illicit shipments of offensive ballistic missiles and related technology,",
      " equipment, andcomponents\". Such a binding instrument is not reflected in current law.  The Senate version of the Foreign Relations Authorization Act, S. 2144, doesnot address the establishment of a binding agreement restricting the trade of ballistic missiles. It is unclear if the proposed instrument would replace the MTCR and the International Codeof Conduct Against Ballistic Missile Proliferation (ICOC), or if it would complement thesevoluntary, non-binding arrangements. U.S. sponsorship of a Security Council resolution or multilateral treaty could prove to be controversial, given the current climate in the United Nations. Attempts to include an enforcement mechanism, especially provisions for \"interdiction,",
      " seizure, andimpoundment,\" may face considerable resistance on a legal, policy, and practical basis. Thismeasure has led some experts to ask whether some sort of an international enforcement organizationwould be created or whether any country might \"interdict\" what they deem to be illicit ballisticmissile or technology shipments.  Those in Congress who favor revitalizing nonproliferation efforts in lieu of the currentAdministration's emphasis on a counterproliferation strategy involving potential preemption mightbe generally supportive of legislation that attempts to strengthen nonproliferation controls. There also likely will be skepticism, both in Congress and the Administration, based on the argument that proliferating countries would decline to accede to the treaty or refuse to comply with its provisionsif they become members.",
      " The U.S. aerospace industry, particularly companies involved in ballisticmissile interceptors, cruise missiles, and UAVs, might be supportive of this treaty as it does notinclude restrictions on these systems in its provisions. Likewise, the Department of Defense mightbe supportive as such exempted systems are considered by many the \"workhorses\" of the modernU.S. military. H.R. 1950, Section 1413 calls for U.S. sponsorship of a U.N. Security CouncilResolution prohibiting United Nations members from \"purchasing, receiving, assisting or allowingtransfer of\" missile or missile- related equipment and technology from North Korea and permitsinterdiction,",
      " seizure, or impoundment of North Korean missiles or related technology and equipment. (The Senate version, S. 925, does not contain similar provisions.) This resolution mightreceive support from countries that are concerned about continuing North Korean missileproliferation, particularly proliferation to countries such as Iran, Pakistan, and Libya. The proposaladdresses the possibility that countries such as North Korea, Iran, Pakistan, and Libya might notaccede to the proposed U.S.-sponsored ballistic missile treaty. Proponents believe that thisresolution, if vigorously and uniformly enforced, could significantly impede North Korean missileand technology sales and could also have a detrimental impact on the medium andintermediate-range ballistic programs of Iran,",
      " Pakistan, and Libya -- all reported to be heavilydependent on North Korean missile technology and assistance.  Critics are likely to maintain that a U.N. Security Council resolution presents the same issuesas does the proposed U.S.-sponsored treaty in terms of enforcement mechanisms. From theirperspective, the December 2002 U.S. release of Yemen-bound North Korean SCUDs seized at seacould serve as a legal precedent for countries opposing such a resolution. Additionally, theymaintain that there is likely to be resistance to this resolution if it permits interdiction withoutSecurity Council approval. Some analysts suggest that, to be approved, the resolution would haveto contain provisions for the Security Council to review evidence on a case-by-case basis andestablish \"probable cause\"",
      " before sanctioning interdiction or seizure. CRS Products  CRS Report RL31848(pdf), Missile Technology Control Regime (MTCR) and International Code ofConduct Against Ballistic Missile Proliferation (ICOC): Background and Issues forCongress, [author name scrubbed]. CRS Report RL31502, Nuclear, Biological, Chemical, and Missile Proliferation Sanctions: SelectedCurrent Law, [author name scrubbed]. Munitions Export Controls(27) H.R. 1950, as passed by the House, contains, in Title XIII, provisions relatedto export controls of items on the U.S.",
      " Munitions List, as well as new reporting requirements. Specifically, the committee bill contains technical amendments to the Arms Export Control Act(AECA) in Sections 1202-1204. Section 1202 amends section 36(c) of the AECA to require advancecertification to Congress of any comprehensive export authorization in the amount of $100 millionor more, regardless of whether a signed contract exists. This section also repeals clause (B) ofparagraph 2 of section 36(c), thus establishing a 30 day waiting period for satellite launches byRussia, Kazakhstan, and Ukraine. Section 1203 amends section 36(d)",
      " of the AECA to no longerrequire advance notification of agreements involving the manufacture abroad of significant militaryequipment that is valued at less than $7 million in the case of major defense equipment, or $25million in the case of all other significant military equipment. Section 1204 amends section 38 ofthe AECA to establish an accelerated and streamlined munitions license approval procedure of tendays for Australia and the United Kingdom. The procedure would apply to those defense articles,services, and technology that are currently exempt by regulation (i.e. section 126.5 of theInternational Traffic in Arms Regulations, title 22 C.F.R.) from prior U.S.",
      " Government review andlicensing requirements when they are to be exported or transferred to Canada. Section 1205 of theHouse bill would require the Secretary of State to establish a coordinator for small business affairsin the Office of Defense Trade Controls to serve as a point of contact for U.S. small businesses onexport licensing, registration, and other matters. The House bill also contains two reporting requirements. Section 1201 requires the Secretaryof State, in consultation with the Secretaries of Commerce and Defense, and the Attorney General,to provide an annual certification and report to Congress on U.S. missile technology export controls. The intent is to ensure that U.S.",
      " missile technology controls are clearly established and keptup-to-date, in light of the special threat to U.S. security interests that would be presented by theunauthorized export and proliferation of missile technologies. Section 1206 contains a sense of theCongress provision noting that administrative, licensing and compliance-related functions associatedwith arms exports under section 38 of the Arms Export Control Act could be expedited by areduction in those matters necessitating inter-agency referral outside of the State Department, or byco-locating munitions control functions of the Departments of State, Defense, and HomelandSecurity. Section 1206 requires the Secretary of State to consult with the Secretaries of HomelandSecurity and Defense,",
      " and the public -- through the U.S. Government's federal advisory committeestructure -- to examine the relative advantages and disadvantages of co-location of munitions controlfunctions, and to report on this matter to the appropriate committees of Congress within 180 daysof enactment of this provision. (28)  On May 29, 2003, the Senate Foreign Relations Committee reported S. 1161,a bill to authorize foreign assistance for FY2004. Subsequently on March 4, 2004, the ForeignRelations Committee ordered reported S. 2144, an original bill which incorporated mostof the elements of S. 1161.",
      " The latest committee bill ( S. 2144 ) containstechnical amendments to current law. Section 2231 of S. 2144, as reported, raises theminimum dollar thresholds at which sales of certain defense articles, design and constructionservices, and major defense equipment (or upgrades of such sales) must be reported to Congressunder Section 36 of the Arms Export Control Act (AECA). These thresholds were raised from $14million to $50 million for major defense equipment, from $50 million to $100 million for defensearticles and defense services, and from $200 million to $350 million for design and constructionservices.",
      " Section 2232 requires the President to make certifications to Congress under section36(c)(1) of the AECA before issuing comprehensive authorizations (under section 126.14 of theInternational Traffic in Arms Regulations (ITAR) Title 22 C.F.R.) for the export of defense articlesor defense services to an eligible country or foreign partner. Section 2233 provides an exception tothe requirements for bilateral agreements for country exemptions from International Traffic in ArmsRegulations contained in section 38(j)(A) of the AECA with respect to transfers of certainU.S.-origin defense items within Australia. Section 2233 also provides for an exemption fromcertain export licensing restrictions in Section 38(j)",
      " of the AECA for the United Kingdom. Section2233 further provides that not later than 30 days before authorizing any 38(j) exemptions forAustralia or the United Kingdom, the President must make specific certifications to Congressregarding such exemptions. In addition, the President is required to make an annual report toCongress for five years detailing various actions taken by the United States with the Governmentsof Australia and the United Kingdom relating to these exemptions. Section 2238 grants eligibilityto Haiti for the purchase of defense articles and services for the Haitian Coast Guard under theAECA, subject to existing notification requirements.  CRS Products  For related background see CRS Report RL31675,",
      " Arms Sales Congressional ReviewProcess ; and CRS Report RL31559, Proliferation Control Regimes: Background and Status. Security Assistance(29) H.R. 1950, as passed by the House, contains, in Title XIII, a number ofprovisions relating to military assistance and arms export control, including authorizations forappropriations for a number of security assistance programs. Specifically, the House bill containsprovisions providing funding authorizations for Foreign Military Sales and Financing, InternationalMilitary Education and Training, de-mining assistance, and the non-proliferation and disarmamentfund. A variety of technical language changes to existing law are made.",
      " Authority is also providedto transfer certain obsolete or surplus war reserve defense articles to Israel, and the authority isexpanded to loan to friendly foreign countries, material, supplies, and equipment for research anddevelopment purposes. Title XIII includes provisions establishing reporting requirements toCongress relating to U.S. cooperative efforts with foreign governments to foster development anddeployment of defenses against missile attack, as well as the obligation to submit to the HouseInternational Relations Committee all reports provided to the Senate Foreign Relations Committeeon Strategic Offensive Reductions between the U.S. and the Russian Federation. Fundingauthorization is provided for refurbishment and various costs associated with the transfer of up tofour maritime interdiction patrol boats for Mozambique.",
      " The House bill also contains a statementof the House of Representatives regarding the treaty with the Russian Federation on StrategicOffensive Reductions, as well as a statement of Congressional findings regarding Iran's program todevelop a nuclear explosive device. On May 29, 2003, the Senate Foreign Relations Committee reported S. 1161,to authorize foreign assistance for FY2004. Subsequently on March 4, 2004, the Foreign RelationsCommittee ordered reported S. 2144, an original bill which incorporated most of theelements of S. 1161. The latest committee bill ( S. 2144 ) contains a numberof provisions relating to military assistance and arms export control,",
      " including authorizations forappropriations for a number of security assistance programs. Specifically, the committee billcontains funding authorizations for Foreign Military Sales and Financing, de-mining assistance, thenon-proliferation and disarmament fund, and International Military Education and Training (IMET). The Senate bill makes various technical changes to existing law. Section 2204 creates the authorityfor the Secretary of State to receive lethal excess property from other U.S. Government agencies forthe purpose of providing it to foreign governments. Section 2207 authorizes the President to waivethe requirement that net proceeds from the disposal of defense articles granted to a foreign countrybe paid to the United States.",
      " Section 2208 authorizes the President to transfer certain obsolete orsurplus defense items to Israel, in exchange for concessions of equivalent value, with the requirementthat Congress receive prior notification before any transfer is made. Section 2209 authorizes thePresident, through FY2004, to transfer excess items to the Defense Department's War ReserveStockpile in Israel. Section 2212 makes permanent an authority to allow the State Department andUSAID to dispose of de-mining equipment on a grant basis in foreign countries. Section 2213updates authorities provided to the President in Section 614 of the Foreign Assistance Act, to waiverestrictions on providing economic and military assistance,",
      " and increases the amount of assistancethat can be provided, through use of this authority, to any single country from $50 million to $75million in any fiscal year. Section 2240 provides statutory authority to transfer certain naval vesselsby grant to Bahrain and to Portugal, and by sale to Chile. (30)  CRS Products  For funding levels for military assistance programs that are associated with this legislationsee CRS Report RL31811, Appropriations for FY2004: Foreign Operations, Export Financing, andRelated Programs.  Terrorist Organizations(31) The overall purpose of Section 501 in S. 2144 is to make it harder for terroristorganizations to be removed from designation as a Foreign Terrorist Organization absent a petitionby a designated entity itself and/or review by the Secretary of State.",
      " It also prevents groups fromusing aliases to evade the law. It is intended to improve U.S. ability to keep track of, and sanction,these groups.  Section 501(a) removes the current requirement set forth in Section 219 of the Immigrationand Nationality Act (8 U.S.C. 1189) that the designation of an organization as a Foreign TerroristOrganization (FTO) automatically lapse after two years unless the Secretary of State renews it. Instead it places the onus on the FTO to petition to ask to be removed. If the FTO does not petitionto be removed within a four-year period,",
      " however, then the Secretary must take the initiative and review the designation to determine whether or not it should continue. As amended, neither theresults of the four-year evaluation nor the procedures established to make such an evaluation aresubject to judicial review; thus, there is much more procedural protection if the FTO chooses tochallenge the designation before the four-year review. The ability to revoke the FTO's designationby act of Congress also stays in place.  An interesting implication of these changes is that, in placing the burden on the ForeignTerrorist Organization to come forward, the process could be useful to the U.S. government ingathering counter terrorist intelligence.",
      " A terrorist group must reveal its identity and membership,at least to some extent, in order to petition to be removed from the list. Since designation as aterrorist organization carries numerous legal implications, including the possible freezing of U.S.assets and barring of members' entry into the United States, this provision increases the leverage thatthe Executive branch has in both identifying and potentially controlling terrorist groups -- assumingthat Foreign Terrorist Organizations are appropriately labeled in the first place.  Section 501(b) gives the Secretary the flexibility to amend an FTO's designation to take intoaccount new or different names that a terrorist group might use. This is an effort to keep the lawfrom being evaded by groups that evolve or change their names but continue to be essentially thesame group -- an important problem in the current international terrorist environment.",
      " Sections 501(c) and 501 (d) are technical changes designed to make this part of the bill conform to Section 219of the Immigration and Nationality Act, and to ensure that earlier redesignations of FTOs remainvalid.  No similar provisions are in the House bill. Terrorist-Related Prohibitions and Enforcement Measures(32) Title XI of H.R. 1950, as passed by the House, deals with prohibitions that arerelated to preventing terrorists and their state sponsors from acquiring arms and other materials. Section 1101 amends section 3 of the Arms Export Control Act (AECA)",
      " strengthening theineligibility language to include specific reference to state sponsors of international terrorism andthose who trade with them. The next five sections relate to section 38 of the AECA: Section 1102strengthens and expands the statutory authority of the State Department (administering thePresident's authority) to regulate access by foreign persons to munitions and other defense articles,even in situations where the foreign person is in the United States and there is no classic \"export\"involved. (The legislation also notes that this authority must be exercised in close coordination withthe Attorney General.) Section 1103 expresses the sense of Congress that new exemptions fromlicensing requirements should be undertaken after coordination with law enforcement agencies.",
      " Section 1104 is a technical amendment that updates language to reflect new legislation enacted sinceSeptember 11. And Section 1105 attempts to prevent any prohibited material from being exportedwithout a license to the military, police, or intelligence services of embargoed countries unless thereis concurrence by both the Secretaries of State and Defense.  Section 1106 changes language in section 40 of the AECA, expanding upon the list ofprohibited items that may not be sold to state sponsors of international terrorism. Section 1107,which apparently aims to increase the deterrent effect of the penalties, strengthens the ability toenforce violations of the AECA,",
      " for example, by increasing the fines for criminal violations whenthey involve state sponsors of international terrorism. It also includes technical changes of languagein Section 47. Section 1108 changes the standards for high risk exports under Section 38 to requirefrequent coordination among the Secretary of Homeland Security, the Attorney General, the Directorof the Federal Bureau of Investigation, and the Director of Intelligence. Finally, Section 1110requires the President to submit a report to the Committee about the nature and origin offoreign-supplied items discovered by coalition forces in Iraq.  There are no similar measures in the Senate bill S. 2144. CRS Products  For more information on defense export controls,",
      " see CRS Report RL30983, U.S. DefenseArticles and Services Supplied to Foreign Recipients: Restrictions on Their Use, and CRS Report RL31675 Arms Sales: Congressional Review Process.  Foreign Assistance(33) Afghanistan(34) The House bill ( H.R. 1950 ) contains a provision calling on the Administrationto increase its efforts to strengthen the central government in Kabul. The \"findings\" section of theprovision asserts that the U.S.-led reconstruction effort in Afghanistan is in jeopardy because of alack of security throughout Afghanistan and the limited writ of the U.S.-backed central governmentin Kabul. The provision,",
      " no equivalent of which is contained in the Senate version, calls forexpanding the mandate and capabilities of an international peacekeeping force, the InternationalSecurity Assistance Force (ISAF), and augmentation of the number of forces devoted to U.S.-led\"provincial reconstruction teams,\" -- local groupings of U.S. and other forces and aid workersdesigned to promote the climate for reconstruction.  The provision is likely to be interpreted as a criticism of the Administration and an assertionthat the Administration has devoted insufficient resources to the Afghan reconstruction effort. Several recent press articles have reported that, among other difficulties, much of Afghanistanremains under the control of regional leaders,",
      " some of whom are clashing with each other, and thatinternational relief organizations are reluctant to work in parts of Afghanistan because of securityconcerns. In recent statements, Administration officials have identified some of the same securitydifficulties mentioned in the provision, although Administration statements say that these problemsare manageable and are not at a level of intensity where they materially hinder reconstruction or thereturn of political stability. The departing U.S. commander of the 9,000 U.S. troops still inAfghanistan said in late May 2003 that security is improving to the point where the United Statesis likely to begin reducing U.S. forces there by mid-",
      "2004. (35) According to the former commander, Lt. Gen. Dan McNeill,\"the preponderance of the country is enjoying a high degree of stability,\" and the U.S.-trained AfghanNational Army should begin to become self-sufficient within the coming year. Since training beganin mid-2002, the United States has trained about 4,500 recruits to the national army and the U.S. andAfghan plan is to build it to a force strength of 70,000. However, many experts believe it will beat least several more years before the army reaches that strength and that, in the interim, the UnitedStates and international peacekeeping forces will be needed to ensure stability.",
      "  CRS Products  CRS Report RL30588, Afghanistan: Current Issues and U.S. Policy.  CRS Report RL31759, Reconstruction Assistance in Afghanistan: Goals, Priorities, and Issues forCongress.  CRS Report RL31389, Afghanistan: Challenges and Options for Reconstructing a Stable andModerate State.  Africa-Related Provisions(36) S. 2144, as introduced in the Senate on February 27, 2004, contained severalAfrica-related provisions. Two of these measures, Section 2513, \"Support for Sierra Leone,\" andSection 2515, \"Support for Somalia,\" were stricken from the bill following a Senate ForeignRelations Committee mark-up hearing and vote on March 4,",
      " 2004. S. 2144, as amendedand reported by the Foreign Relations Committee, contains the following Africa-specific measures: Development Fund for Africa. Title XXI, SubtitleA, Section 2101 (d) would technically amend Section 497 of the Foreign Assistance Act of 1961 asit relates to the authorization of appropriations for the Development Fund For Africa. African Development Foundation. The AfricanDevelopment Foundation (ADF) is a public corporation and federal agency created by Congress in1980. Its activities center on the extension of small direct grants to African self-help organizations.Its grant work and other activities, administered primarily by local hires,",
      " support community-levelself-help initiatives aimed at alleviating poverty, promoting sustainable, participatory developmentin Africa, and supporting the growth of small, local development institutions. Title XXI, SubtitleC, Section 2132 would authorize $17 million -- the amount requested by the Administration in itsFY2005 budget request -- for the African Development Foundation for FY2005 by amending Section510 of the International Security and Development Cooperation Act of 1980. (37)  Congo Basin Forest Partnership (CBFP). TheCBFP is an association of governmental and nongovernmental organizations that supports projects,programs, and policies to promote sustainable management of central African Congo Basin Forestecosystems and wildlife.",
      " It seeks to improve the income earning potential and quality of life of Basinresidents through sustainable community-based natural resource and forestry concessionmanagement, and agriculture and eco-tourism projects; and help Basin countries to developeffectively-managed parks, protected areas, and ecological corridors. Title XXII, Subtitle A, Section2223 would endorse the aims of the CBFP and U.S. participation in the initiative, and in \"sense ofCongress\" language recommend that in FY2005 the President should make available \"for all [U.S.]agencies participating\" in the CBFP \"at least\" the amount he submitted in his FY2005 foreignassistance budget request.",
      " (38)  Independent Media in Ethiopia. According to theState Department, the private press in Ethiopia is active and often publishes articles that are highlycritical of the government. Nevertheless, the Department reports, constitutionally-protected freedomsof expression in Ethiopia are frequently restricted by the government, which prosecutes journalistsand editors for violating press laws; some journalists practice self-censorship; and \"the majority ofprivate papers... [are] printed at government-owned presses.\" The State Department also reports that\"much\" of the private press lacks reporting professionalism, and publishes \"inaccurate information,unsubstantiated stories, and harsh anti-government articles,\" though such actions are often notpenalized by the government,",
      " and some print media are developing into \"more responsible\"fora. (39) Title XXV,Subtitle B, Section 2513 would authorize the expenditure of \"such sums as are necessary\" tostrengthen the \"capacity\" of journalists and support increased access to printing facilities by printindustry workers in Ethiopia. Human Rights Abuse Accountability in CentralAfrica. Title XXV, Subtitle B, Section 2514 finds that the central African states ofBurundi, the Democratic Republic of the Congo, Rwanda, and Uganda \"have all been involved inoverlapping, regionally destabilizing armed conflicts that have contributed millions of civiliandeaths,\" and that serious,",
      " on-going human rights abuses occur in each of these countries. Section2514 would make it U.S. policy to support efforts to account for serious human rights abuses andcrimes that have taken place in central Africa since 1993; programs to prevent the future occurrenceof such crimes; and efforts to encourage reconciliation in relation to the past perpetration of suchabuses. For such purposes, it authorizes in FY2005 up to $12 million to support the development ofresponsible justice and reconciliation mechanisms, including programs to \"respond to\" gender-basedviolence and increase awareness and prevention efforts to counter it within the four central Africanstates previously noted.",
      " It would also require that the Secretary of State submit to congressionalcommittees of jurisdiction a report on U.S. actions taken to implement such a policies. (40)  African Contingency Operations Training and Assistance(ACOTA). The ACOTA program seeks to improve select African militaries'capacity to undertake joint multinational peace support operations and humanitarian crises in Africa.ACOTA consists primarily of country-tailored programs integrating classroom instruction, fieldtraining, and computer-assisted exercises. These are aimed at building equipment maintenance, forceprotection, and negotiations skills; and improving logistics support, refugee protection, convoy escortoperational, and command and control capabilities,",
      " particularly in potentially high-threat contexts.It also includes efforts to improve sub-regional organizations' abilities to mount and jointlycoordinate peacekeeping operations.  Title XXV, Subtitle B, Section 2516 would authorize the expenditure of $15 million inFY2005 for support of ACOTA; $15 million for this purpose was requested by the Administrationin its FY2005 budget request. It would also mandate that eligibility for participation in ACOTA bereviewed \"at least\" annually on the basis of \"consideration\" of a participant country's willingness toparticipate in peace support operations; its military capability; its human rights record, particularlywith regard to its military;",
      " its adherence to democratic governance principles; the nature ofcivil-military relations within the country; and the candidate country's relations with its neighboringstates. In \"sense of congress\" language, the bill also recommends that \"to the extent possible\" priorto ACOTA training activities in a given country, the United States provide information about thenature and purpose of such training to that country's nationals, including legislators andnon-governmental humanitarian and human rights organizations. It also recommends that relevantU.S. departments and agencies monitor the performance and conduct of military units that receiveACOTA training or support, and that information on such monitoring efforts be reported annuallyto Congress.",
      " Debt Relief for the Democratic Republic of Congo(DRC). The DRC, a central African country emerging from over three decades ofdictatorship under the late Mobutu Sese Seko and eight years of armed civil and inter-state war, hasa total external debt estimated by the World Bank to be about $8.21 billion in 2002. Of this amount,about $2.28 billion is owed to the United States. Under the Heavily Indebted Poor Country Initiative(HIPC), Title XXI, Subtitle A, Section 2115 would require the President to cancel all debtsassociated with U.S. loans or credits extended before June 20,",
      " 1999, and owed to the United Statesby the DRC, \"subject to the availability of amounts provided in advance in appropriations Acts\" and\"in addition to\" and in a manner not limiting any other U.S. debt relief authority. For such purposes,it would authorize the appropriation in FY2005 and FY2006 of $105 million, to \"remain availableuntil expended.\" The provisions in Section 2115 derive from a Chairman's amendment offered at therequest of the Treasury Department. (41)  The Africa Society(42) The Africa Society is an organization set up to implement the National Policy Plan of Actionfor U.S.-Africa Relations in the 21st Century,",
      " a programmatic document produced by the NationalSummit on Africa, and to pursue other activities similar to those described in H.R. 1950, as amended. The Summit, held in 2000, culminated a series of U.S. regional policy planningand outreach meetings. These sought to increase U.S. public support awareness of Africa andformulate a grassroots foreign policy strategy to increase public engagement with -- and guide --U.S.-Africa relations. The Society, hitherto financially supported by corporate and non-profitorganizations, is chaired by former U.S. United Nations ambassador Andrew Young. Its Presidentis Leonard H. Robinson, Jr., a former State Department African Affairs official and the firstpresident of the African Development Foundation.",
      " The Society has hosted many Africa-focusedpublic policy forums that have included bipartisan congressional Member and staff participation, aswell as African leaders, and Clinton and Bush administration officials. The Society has initiated ajoint project with the University of California, Los Angeles to establish a National Research Instituteon African Affairs.  Title XVIII, Section 1815, of H.R. 1950, as passed by the House on July 16,2003, authorizes the Secretary of State to make grants to the Africa Society of the National Summiton Africa of $1 million in FY2004 and \"such sums as may be necessary\" in FY2005.",
      " Such sumswould fund public and private partnership-based programs and activities, defined under \"necessaryand appropriate\" grant agreements, that advance U.S. interests and values in Africa. The billcharacterizes such interests as those that support the development in Africa of more open, democraticsystems; assist civil society capacity building; increase equitable trade and investment-basedeconomic growth; enhance public and private sector transparency and openness; and promote U.S.public awareness about Africa. Section 1815 had earlier been considered and adopted by voice voteby HIRC on May 8, 2003, after being offered by Representative Donald M. Payne on the same day. Neither S.",
      " 925 nor S. 2144 make reference to the Africa Society. Colombia and Andean Region Assistance(43) The House passed H.R. 1950 on July 16, 2003, with several provisions relatingto Colombia and neighboring countries in the Andean region, following the recommendationsreported out by the House International Relations Committee (House Report 108-105, Part 1) onMay 16, 2003. The Senate Foreign Relations Committee (SFRC) reported out S. 925 (Foreign Relations Authorization for FY2004, Senate Report 108-39) on April 24, 2003,",
      " with aprovision to repeal the requirement for a semi-annual report on extradition of narcotics traffickersfrom Andean countries; and it reported out S. 1161, Foreign Assistance AuthorizationAct for FY2004 (Senate Report 108- 56) on May 29, 2003, with several provisions on Colombia. The Senate considered S. 925 on July 9-10, 2003, and added several amendmentsrelated to Colombia, but action on it was not completed. On February 27, 2004, S. 2144, the Foreign Affairs Authorization Act, Fiscal Year 2005, was introduced in the Senate.",
      " Reflecting continuing concern with the persistent and complex conflict in Colombia, thespill-over of guerrilla and drug trafficking activities into neighboring countries, and the ongoinginvolvement of the United States (including the kidnaping and killing of American citizens), HIRCreported out H.R. 1950, with three reporting requirements similar to provisions in theForeign Relations Authorization for FY2003 ( H.R. 1646 / P.L. 107-228 ), and with theprovision of additional authority related to the interdiction of illicit arms trafficking. Theseprovisions were subsequently approved by the House without modification.  Section 702 of the House-passed bill requires the Secretary of State,",
      " after consulting withinternationally recognized human rights organizations, to make a very detailed report to Congress,not later than 30 days after enactment and every 180 days thereafter, on the specific measures thatthe Colombian authorities are taking to apprehend and prosecute leaders of paramilitaryorganizations and other terrorist organizations. The Committee report expressed concern about theillegal activities not only of two leftist guerrilla groups -- the Revolutionary Armed Forces ofColombia (FARC) and the National Liberation Army (ELN) -- but also of the rightist paramilitarygroups, specifically the United Self Defense Forces of Colombia (AUC), that are reported to beresponsible for at least half of all non-combatant killings,",
      " torture, and disappearances. Noting thatthe State Department's March 2003 human rights report found some continuing collusion with theAUC by members of the Colombian security forces, the Committee report stated that Colombia'sgovernment has not committed at every level to confront the paramilitaries and to protect civiliansfrom paramilitary abuses. Section 708 requires the Secretary of State to submit a report on the impact of the U.S.assistance plan known as Plan Colombia on Ecuador and Colombia's neighboring countries toappropriate congressional committees not later than 30 days after enactment. This report is to setforth a comprehensive strategy for United States activities in Colombia, with specific reference tothe impact of U.S.",
      " assistance on Ecuador and other adjacent countries, and it is to provide thereasons for the failure to submit a report on this subject as required by the Foreign RelationsAuthorization Act for FY2003. Stating that a State Department report of March 4, 2003 wasinadequate, the Committee report expressed the expectation that a new report \"will address in detailnot only the counter-drug repercussions of Plan Colombia and its successor programs on Ecuadorand other adjacent countries, but also the humanitarian and economic development implications ofincreased eradication efforts for these countries.\" Section 1801 provides specific authority for U.S. counter-drug assistance which is being usedto support the interdiction of aerial trafficking of illicit narcotics to be used to support theinterdiction of illicit arms in connection with illicit drug trafficking.",
      " The Committee report notesthat \"this provision ensures that any and all illegal arms brought into Colombia by aerial means thatare in any way trafficked in connection with the illicit drug trade, are also clearly eligible for U.S.assistance in interdicting.\" Section 1802 requires the Secretary of State, acting through the Department of State'sNarcotics Affairs Section (NAS) in Bogota, Colombia, to ensure, not later than 180 days afterenactment, \"that all pilots participating in the United States opium eradication program in Colombiaare Colombians and are fully trained, qualified and experienced pilots, with preference provided toindividuals who are members of the Colombian National Police.\" The Committee report states thatlocal Colombian police anti-drug pilots are more familiar with the terrain and can be more effectivein locating crops,",
      " thereby enhancing efforts to eradicate the small but potent opium crop that makesup nearly two-thirds of U.S. heroin use, according to recent United States estimates, while promotingthe Colombianization of the programs and reducing the involvement of U.S. private contractors. On the Senate side, S. 2144, the Foreign Affairs Authorization Act for FiscalYear 2005, was introduced on February 27, 2004. It includes several provisions relating to Colombiaand the Andean region that are similar to language contained in S. 925, the ForeignRelations Authorization Act for Fiscal Year 2004. Responding to a request from the ExecutiveBranch,",
      " Section 801 of the bill would repeal the requirement in the Emergency SupplementalAppropriation Act for FY2000 ( P.L. 106-246 ) that the State Department report semi-annually on theextradition of narcotics traffickers from Andean countries. Section 2121 of the bill authorizesfunding for international narcotics control programs, including $731 million for the AndeanCounterdrug Initiative. These funds can be used to support a \"unified campaign against narcoticstrafficking and terrorist activities.\" The bill also maintains the limitations as contained in currentlaw on the number of U.S. military and U.S.",
      " contract employees that may be stationed in Colombiain support of Plan Colombia at 400 each. It prohibits U.S. military personnel from engaging in anycombat operations, and conditions assistance to Colombia on its respect for human rights.  In floor action on S. 925 on July 10, 2003, the Senate approved two amendmentsrelated to Colombia and Andean region assistance, both approved by voice vote. Neither of theamendments are included in S. 2144. S.Amdt. 1162, proposed byChairman Lugar, added Section 815 which would modify the reporting requirements on U.S.personnel involved in the anti-narcotics campaign in Colombia by changing the frequency of thereports from bimonthly to quarterly,",
      " and by clarifying that the reports were to be provided toappropriate committees of Congress. S.Amdt. 1194, proposed by Majority Leader Frist,added Section 2522 which commends the leadership and people of Colombia for the progress madeagainst illicit drug traffickers and terrorists, and which expresses U.S. support for the efforts ofPresident Uribe and the government and the people of Colombia to preserve and strengthendemocracy, human rights, and economic opportunity in Colombia. On May 29, 2003, the Committee reported out S. 1161, the Foreign AssistanceAuthorization Act for Fiscal Year 2004,",
      " with several modifications on assistance to Colombia andthe Andean region. Section 122 authorizes $700 million (rather than the $731 million requested)for the Andean Counterdrug Initiative. It further provides that assistance for Colombia for FY2004and previous years may be used to support a unified campaign against narcotics trafficking andterrorist activities; and to take actions to protect human health and welfare in emergencycircumstances, including undertaking rescue operations. It further provides that U.S. personnelproviding such assistance shall be subject to the personnel caps in the Emergency Supplemental Actfor 2000, shall not participate in any combat operation in connection with such assistance;",
      " and shallbe subject to the condition that Colombia is fulfilling its commitment to the United States withrespect to its human rights practices, including specific conditions set forth in the Foreign OperationsAppropriations for FY2003. Section 502 provides that information on the extent of involvement ofU.S. businesses in counter-narcotics activities under State or Defense Department contracts, requiredby the previous Foreign Relations Authorization, may be reported in the annual report detailing thecounter-narcotics performance of drug producing and drug transit countries.  CRS Products:  For more information, see the section on Colombia and the Andean Regional Initiative in CRS Report RL31726 Latin America and the Caribbean:",
      " Issues for the 108th Congress, by Mark Sullivan; CRS Report RL32250 Colombia: Issues for Congress, by [author name scrubbed]; and CRS Report RL32021 Andean Regional Initiative (ARI): FY2003 Supplemental and FY2004 Assistance forColombia and Neighbors, by [author name scrubbed] and [author name scrubbed]. Congo Basin Forest Partnership(44) Section 1809 of H.R. 1950 authorizes $18.6 million for each of fiscal years 2004and 2005 for the Congo Basin Forest Partnership (CBFP) program. The Senate bill S.",
      " 2144 contains a Congo Basin initiative (sec. 2223), but without specifying a particular funding level. H.R. 1950 notes that the Subcommittee on Africa conducted an oversight hearing onthis program, which was announced by Secretary of State Colin Powell in 2002. The bill describesthe CBFP as \"an impressive and innovative approach to conservation in this environmentally at riskregion.\" The bill also notes that the program will help protect some 25,000,000 acres of landscapeagainst poorly managed and non-managed logging, and states the importance of the tropical forestsof the Congo Basin to both human livelihoods, the existence of several species,",
      " and environmentalprotection.  Announced as a key U.S. initiative at the World Summit on Sustainable Development inJohannesburg, South Africa, on September 4, 2002, and in Gabon, one of the key participatingcountries, the CBFP is a partnership that includes several Congo Basin African countries, theEuropean Union, the World Bank, the International Tropical Timber Organization (ITTO), and anumber of non-governmental organizations. In December 2002, the United States announced thatthe U.S. contribution would be through a $12 million per year increase within the Central AfricanRegional Program for the Environment (CARPE), and that the U.S.",
      " plan is to invest or leverage upto $53 million in the CBFP through the year 2005. The non-governmental organizations in thepartnership pledged to match the U.S. government's contribution, and other partners are expectedto provide significant additional contributions.  The bill provides for an increase in the announced level of annual support for this program,stating that $16 million each year is authorized for the on-going (CARPE), which will be the leadprogram through which the United States will participate in the CBFP. Foreign Assistance Authorization(45) Congress last enacted a broad foreign assistance authorization act in 1985. In the absence ofomnibus foreign aid measures,",
      " the majority of foreign assistance legislation has been enacted as partof annual Foreign Operations appropriation measures. The Foreign Assistance Authorization Act,Fiscal Year 2005, Division B of S. 2144, is an effort to \"reinforce\" the Senate ForeignRelations Committee's role in foreign assistance policy making. It is not an attempt tocomprehensively review and re-write existing foreign aid legislation, but rather it is a first step inproviding necessary authorization for program appropriations in FY2005 and updating selectedlegislative provisions to reflect current policy. Committee Chairman Lugar said that it was his intentto launch a more ambitious effort in the future to revamp the Foreign Assistance Act of 1961 andother long-standing foreign aid laws.",
      " Division B is divided into five titles. Title XXI includes FY2005 authorizations ofappropriations for most but not all foreign aid programs. Title XII updates and amends severalexisting foreign aid authorities, some of which have been annually extended in appropriation actsin recent years. Title XXIII is the Radiological Terrorism Security Act. Title XXIV is the GlobalPathogen Surveillance Act. Title XXV consists of several provisions, some of which address LatinAmerica and Africa issues, including additional aid for Haiti. The legislation authorizes the appropriation of about $16.9 billion for 22 foreign assistanceprograms, closely matching the account structure of the annual Foreign Operations appropriationsfor bilateral economic and military aid.",
      " The amounts authorized are nearly identical to levelsrequested by the Administration for FY2005, although the bill would increase spending forHIV/AIDS, development aid, assistance to the former Soviet Union and Eastern Europe, andnonproliferation programs, while reducing amounts for the Millennium Challenge Account. Title XXII addresses the threat posed by terrorist use of radiological dispersal devices, or RDDs. These devices spread radioactive material, whether by a chemical explosive (\"dirty bombs\") or byspraying, scattering, or dumping it without an explosive. The legislation requires the Secretary ofState to prepare and submit to Congress reports assessing the threat of a radiological attack on U.S.missions.",
      " The bill further authorizes the Secretary to aid foreign countries, or propose that theInternational Atomic Energy Agency (IAEA) develop programs, helping foreign first respondersidentify and address threats posed by radioactive materials. The legislation also includes the Global Pathogen Surveillance Act, authorizing $35 million forFY2005 to enhance the capability of developing nations to detect, identify, and contain infectiousdisease outbreaks, whether naturally occurring or the result of a bioterrorist attack. The measureincludes several provisions that are intended to support and strengthen the disease surveillancecapabilities of developing nations. Additionally, it would permit the expansion of Centers forDisease Control and Prevention facilities overseas to further the goals of global disease monitoring.",
      " Although the House International Relations Committee did not consider a broad foreignassistance authorization separately or as part of the Foreign Relations Authorization bill, H.R. 1950 includes a few similar provisions mostly related to security assistance issues. In addition, the Senate measure addresses reporting requirements concerning U.S. counternarcoticsaid to Colombia and the Congo Basin Initiative, other matters included in H.R. 1950. See above under this chapter and the section on Security Assistance for details regarding theseprovisions. For the most part, however, Division B of S. 2144 would introduce manynew issues that are not addressed in H.R. 1950 should House and Senate negotiatorsmeet in a conference committee to resolve differences between the two bills.",
      " CRS Products  CRS Report RL31959. Foreign Assistance Authorization Act, FY2005.  HIV/AIDS Assistance for the Caribbean and India(46) In May 2003, Congress approved the United States Leadership Against HIV/AIDS, Tuberculosis,and Malaria Act of 2003, H.R. 1298 ( P.L. 108-25 ), which authorized $3 billion per yearfor FY2003 through FY2008 to fight the three diseases worldwide. The legislation focused onassisting 12 African countries plus Guyana and Haiti, two of the poorest nations in the WesternHemisphere with high HIV prevalence rates, although the legislation notes that other countries maybe designated by the President.",
      " Some Caribbean leaders and Members of Congress want to expandthe Caribbean countries that would benefit from the assistance, arguing that high mobility in theregion necessitates a regional approach in combating the epidemic. They are concerned that onlyHaiti and Guyana have been identified as countries to benefit from the Bush Administration's plansfor increased assistance to combat HIV/AIDS, and that other Caribbean countries will be overlooked. Others have noted that the legislation does not preclude the President from designating additionalCaribbean or other countries.  Both the House-passed FY2004-FY2005 Foreign Relations Authorization Act, H.R. 1950 (Section 1818), and the Senate Foreign Relations Committee's reported FY2005 ForeignAffairs Authorization Act,",
      " S. 2144 (Section 2518), have provisions that would add 14Caribbean countries to those already listed in the United States Leadership Against HIV/AIDS,Tuberculosis, and Malaria Act of 2003, H.R. 1298 ( P.L. 108-25 ). The additionalcountries are Antigua and Barbuda, Barbados, the Bahamas, Belize, Dominica, Grenada, Jamaica,Montserrat, St. Kitts and Nevis, St. Vincent and the Grenadines, St. Lucia, Suriname, Trinidad andTobago, and the Dominican Republic. The provision in H.R.",
      " 1950 was added during July15, 2003, House consideration of the bill; a Rangel amendment ( H.Amdt. 247 ) addingthe language was approved by voice vote.  In addition, S. 2144 (Section 2519), would add India to the list of countries listedin the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003, H.R. 1298 ( P.L. 108-25 ). With more than four million Indians infected with HIV, thecountry has the second largest HIV-infected population in the world, second to South Africa.",
      " H.R. 1950 does not have a similar provision on India, which some are concerned wouldabsorb too large a portion of the funds available. CRS Products  CRS Report RS21181, HIV/AIDS International Programs: Appropriations, FY2002 - FY2005, by[author name scrubbed] CRS Report RL32001, AIDS in the Caribbean and Central America, by [author name scrubbed]. International Family Planning Aid and the U.N. Population Fund(47) House and Senate bills have each addressed contentious but different provisions relating to U.S.international family planning assistance and abortion, although the House voted to delete aCommittee-added section in H.R.",
      " 1950 regarding U.S. funding for the U.N. PopulationFund (UNFPA). The Senate, however, during July 2003 floor debate on S. 925, addeda provision that would effectively reverse the President's so-called \"Mexico City\" policy. Thecurrent Senate bill, S. 2144, does not contain a provision on UNFPA. These issues havebeen among the most controversial matters considered by Congress in foreign aid legislation fornearly two decades.  U.N. Population Fund. (48) UNFPA is the world'slargest international source of funding for family planning and reproductive health programs,",
      "providing nearly $6 billion in assistance to over 140 countries since 1969. The United States, whichhad been one of the organization's largest donors, suspended support for UNFPA in 1985 becauseof concerns over practices of forced abortions and involuntary sterilizations in China where UNFPAmaintained programs. Congress passed the so-called Kemp-Kasten amendment in that year and ineach subsequent year as part of the annual Foreign Operations appropriations. The amendment barsU.S. funding to any organization that supports or participates \"in the management\" of a program ofcoercive abortion or involuntary sterilization. Presidents Reagan and Bush found UNFPA to be inviolation of Kemp-Kasten,",
      " a position that was reversed in 1993 by President Clinton. In most yearssince 1993, Congress appropriated about $25 million for UNFPA, but required that the amount bereduced by however much UNFPA spent in China. Beginning in FY2002, however, the United States has withheld support for UNFPA. The matterbecame especially controversial after Congress approved not more than $34 million for UNFPA inFY2002 appropriations. The White House, however, froze the funds because new evidencesuggested that coercive practices were continuing in Chinese counties where UNFPA worked. AState Department team reviewing the situation (May 2002)",
      " concluded that there was no evidence thatUNFPA \"knowingly supported or participated in the management of a program of coercive abortionor involuntary sterilization,\" although the team found that China maintains coercive elements in itspopulation programs. Despite the team's recommendation to release the $34 million, Secretary ofState Powell determined on July 22, 2002, to withhold funds to UNFPA and to recommend that theybe re-directed to other international family planning and reproductive health activities. The StateDepartment said that even though UNFPA did not \"knowingly\" support or participate in a coercivepractice, that alone would not preclude the application of Kemp-Kasten.",
      " Instead, a finding that therecipient of U.S. funds -- in this case UNFPA -- simply supports or participates in such a program,whether knowingly or unknowingly, would trigger the restriction. For FY2003 Congress approved in P.L. 108-7 a provision allocating $34 million to UNFPA, solong as several conditions were met. The most significant requirement is that the President mustcertify that UNFPA is no longer involved in the management of a coercive family planning program. The President did not make the required determination, however, and resources for the organizationhave been reprogrammed for other purposes.",
      " For years in which the United States did not contribute to UNFPA, critics have argued that U.S.policy was undermining the most important international family planning organization and limitingreproductive health programs in over 140 countries in which UNFPA operates because of coercivepractices in one nation. Supporters of cutting off support for UNFPA contend that by withdrawingfrom China, UNFPA could immediately restore its eligibility for U.S. funding and remove itself frominvolvement with a national program that includes practices contrary to UNFPA's own non-coercivepolicies. During markup on H.R. 1950, the House International Relations Committeeapproved a Crowley amendment that would have authorized $50 million for a U.S.",
      " contribution toUNFPA for each of FY2004 and FY2005. The Crowley amendment further would have alteredexisting law for determining UNFPA eligibility by requiring that the President find that UNFPA didnot \"directly\" support or participate in coercive or involuntary activities. This would appear to havemade it more difficult for the President to block funding for UNFPA than under conditions thatapply for FY2003. Not only did the Crowley amendment add the word \"directly,\" but it also definedthe circumstances under which UNFPA would be found ineligible as \"knowingly and intentionallyworking with a purpose to continue, advance or expand the practice of coercive abortion orinvoluntary sterilization,",
      " or playing a primary and essential role in a coercive or involuntary aspectof a country's family planning program.\" Nevertheless, during floor debate, the House voted216-211 to delete the Crowley amendment. CRS Products  CRS Issue Brief IB96026. Population Assistance and Family Planning Programs: Issues forCongress.  Mexico City Policy. With direct funding ofabortions and involuntary sterilizations banned by Congress since the 1970s, the ReaganAdministration in 1984 announced that it would further restrict U.S. population aid by terminatingUSAID support for any organizations (but not governments) that were involved in voluntary abortionactivities, even if such activities were undertaken with non-U.S.",
      " funds. U.S. officials presented therevised policy at the 2nd U.N. International Conference on Population in Mexico City in 1984. Thereafter, it become known as the \"Mexico City\" policy. The policy continued in effect until liftedby President Clinton in 1993, but was re-imposed by President Bush in early 2001. Critics of the Mexico City requirements oppose it on several grounds. They argue that familyplanning organizations may cut back on services because they are unsure of the full implications ofthe restrictions and do not want to risk losing eligibility for USAID funding. Opponents also believethe conditions undermine relations between the U.S.",
      " government and foreign NGOs and multilateralgroups, creating a situation in which the United States challenges their sovereignty on how to spendtheir own money and impose a so-called \"gag\" order on their ability to promote changes to abortionlaws and regulations in developing nations. The latter restriction, these critics note, would beunconstitutional if applied to American groups working in the United States.  Supporters of the policy argue that even though permanent law bans USAID funds from beingused to perform or promote abortions, money is fungible; that organizations receivingAmerican-taxpayer funding can simply use USAID resources for legal activities while divertingmoney raised from other sources to perform abortions or lobby to change abortion laws andregulations.",
      " The policy, they contend, stops the fungibility \"loophole.\" During debate on S. 925, the Senate approved on July 9 an amendment offered bySenator Boxer that would effectively overturn the President's Mexico City policy. (The Senate failedto table the amendment 43-53.) Specifically, the Boxer language states that foreign NGOs shall notbe ineligible for U.S. funds solely on the basis of health or medical services they provide (includingcounseling and referral services) with non-U.S. government funds. This exemption would apply solong as the services do not violate the laws of the country in which they are performed and that theywould not violate U.S.",
      " laws if provided in the United States. The amendment further provides thatnon-U.S. government funds used by foreign NGOs for advocacy and lobbying activities shall besubject to conditions that also apply to U.S. NGOs. Since it is largely held that American NGOswould not be subject to these restrictions under the Constitutional protection of free speech, it ispossible that this latter exemption would lift current prohibitions that apply to overseas NGOs. TheWhite House says that the President would veto any legislation that includes a provision like theBoxer amendment. CRS Products  CRS Issue Brief IB96026. Population Assistance and Family Planning Programs: Issues forCongress.  International Narcotics Control(",
      "49) In the area of international narcotics control, interest often centers on Plan Colombia and itsspillover effect on neighboring countries. An important U.S. policy objective is an effectivenarcotics control program in Colombia, one in which eradication of crops and lawenforcement/interdiction play central roles. Complicating U.S. narcotics policy objectives inColombia is widespread corruption -- considered to be less in the Colombian National Police thanin other institutions involved in counter-narcotics. Also complicating U.S. policy objectives areconcerns that those involved in counter-narcotics may not maximize respect for human rights or maycommit atrocities in a campaign against members of the Revolutionary Armed Forces (FARC).Finally,",
      " many are concerned that U.S. personnel could be drawn into a combatant role in what isperceived by a growing number of analysts as a seemingly endless and unwinable war, therebyprompting efforts to minimize direct participation by U.S. personnel in counter-narcotics operations.A major criticism of U.S. foreign drug control policy initiatives from some commentators is that theyare overly \"Colombia centric.\" The Foreign Affairs Authorization Act, Fiscal Year 2005 ( S. 2144 ) contains anumber of provisions that refer to international narcotics control issues. All of these provisionsrelate either directly, or indirectly to Colombia.",
      " Section 2121 (b) of the Act continues existing limitations on the assignment of U.S. personnelin Colombia found in the Emergency Supplemental Act, 2000 (Section 3204 of P.L. 106-246 ) whichlimits assigned military personnel to 500 and contractors to 300. Contractors are prohibited fromparticipating in combat operations as well. Section 2121(b) also conditions assistance to fulfilmentby the Government of Colombia of its commitment to human rights practices.  Reporting requirements in the counter-narcotics arena are reduced in the Act. Section 801 repealsrequirements for a semi-annual report on extradition of narcotics traffickers,",
      " and Section 2502reduces the amount of work required on annual reports on activities in Colombia by permittingincorporation of language from one required report into another. CRS Products:  CRS Issue Brief IB88093, Drug Control: International Policy and Approaches. CRS Report RS21213, Colombia: Summary and Tables on U.S. Assistance, FY1889-FY2004.  CRS Report RL30541, Colombia: Plan Colombia Legislation and Assistance. CRS Report RL31383(pdf), Andean Regional Initiative (ARI): FY2002 Supplemental and FY2003Assistance for Colombia and Neighbors.  CRS Report RS20494(pdf)",
      ", Ecuador: International Narcotics Control Issues. CRS Report RS21317: Ecuador: Political and Economic Conditions and U.S. Relations. Assistance for Vietnam(50) The House version of H.R. 1950 contains a section, Division E, that bans increasesin certain non-humanitarian aid programs to the Vietnamese government if the President does notcertify that Vietnam is making \"substantial progress\" in human rights. In FY2003, the BushAdministration planned to spend about $6.6 million on programs -- primarily focused on promotingVietnamese business law and U.S.-Vietnam trade relations -- that would be affected by DivisionE.",
      " (51) The Division Eprovisions would allow the President to waive the cap on aid increases. The original version ofDivision E was introduced as the Vietnam Human Rights Act in April 2003. For FY2003, theUnited States government pledged $28 million in aid to Vietnam. CRS Products  For more details, see CRS Issue Brief IB98033, Foreign Assistance to Vietnam. Appendix State Department Authorization History Authorization of State Department appropriations are required by law every two years. Typically, the authorization is passed in the first year of a new Congress for the following even/oddyear authority.  FY1973 -- P.L. 93-",
      "126  FY1975 -- P.L. 93-475  FY1977 -- P.L. 94-350  FY1978 -- P.L. 95-105  FY1979 -- P.L. 95-426  FY1984 -1985 -- P.L. 98-164  FY1986-87 -- P.L. 99-93  FY1988-89 -- P.L. 100-204  FY1990-91 -- P.L. 101-246  FY1992-93 -- P.L. 102-138  FY1994-95 -- P.L.",
      " 103-236  Government shutdown -- Nov. 1995 -- Jan. 1996 FY1996 -- P.L. 104-134, Sec. 405 (appropriations legislation) FY1997 -- P.L. 104-208, Sec. 404 (appropriations legislation) FY1998-99 -- State Dept authorization was passed in the omnibus appropriations bill, Nov. 1998-- P.L. 105-277  FY2000-2001 -- P.L. 106-113, ( H.R. 3427 ), appendix G of consolidated appropriations Act/D.C. appropriations legislation FY2002 -- authorization requirement waived for FY2002 in CJS appropriations Act.",
      " (Section 405, P.L. 107-77, signed Nov. 28, 2001) FY2003 -- P.L. 107-228, authorization for FY2003, signed September 30, 2002.  Table 1. State Department and Related Agencies Appropriations and Proposed Authorizations (millions of dollars) *FY2002 enacted numbers do not include funds provided in the Emergency Supplemental Appropriation Act ( P.L. 107-38 ). ** P.L. 106-113 sec. 604 authorized up to $900 million for FY2000 through FY2004. a.",
      " Includes funding supplementals from P.L. 107-38 ; P.L. 107-117, P.L. 107-206, and P.L. 108-11. b. Funding level includes a transfer of $100.040 million from Foreign Operations appropriations to State Department appropriations for FSA and Seedprograms.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 90,
    "question": null,
    "answer": "Diesel engine emissions pose health risks, but one major source--heavy-duty diesel vehicles--is critical for our economy. To reduce risks, the Environmental Protection Agency (EPA) has set stringent emissions standards for diesel engines. In 1998, EPA found that some engine makers were violating standards, so they agreed to build engines that meet 2004 standards early, by October 2002. EPA has set even more stringent standards for 2007. GAO was asked to (1) assess the October 2002 deadline's effects on industry and emissions, and (2) obtain stakeholders' views on the readiness of technology for the 2007 standards and EPA's efforts to ensure this. GAO analyzed information from EPA, 10 large trucking companies, the engine makers subject to the early deadline, and other stakeholders. Implementing the 2004 diesel emissions standards 15 months early disrupted some industries' operations but also helped reduce pollution earlier. More specifically, because some manufacturers had to build new engines sooner than planned, most could not provide trucking companies with prototype engines early enough to test. Concerned that the new engines would be costly and unreliable, some of the companies said they bought more trucks with old engines than planned before October 2002. Our analysis of truck production and financial data also shows this surge. This adversely affected some companies' operations and profits. To meet the increased demand for trucks with old engines, some manufacturers reported that they ramped up production of such engines before October. But when demand subsequently dropped, they had to decrease production and release workers, reducing profits and disrupting operations, at least until demand increased later in 2003. Manufacturers of the new engines also continued to lose market share to manufacturers that either did not have to meet the early date, or that did but chose not to, paying penalties instead. While accelerating the schedule for new engines affected some industries, it accelerated emissions benefits, although not to the extent or in the time frames anticipated. For example, EPA roughly estimated that its agreements with engine manufacturers that violated standards would reduce nitrogen oxide emissions by about 4 million tons over the life of the engines. But because companies initially bought more trucks with old engines and owners are now operating trucks longer, some of the expected emissions reductions will be delayed. As for the 2007 standards, EPA has taken a number of steps to aid the transition to the new diesel engines and fuel, but some stakeholders would like more help. Most engine, emissions control, and fuel industry representatives said the needed technologies will be ready on time; but other engine, trucking, and fuel representatives have concerns and would like more help to ensure that the technology will be available. For example, manufacturers plan to have limited numbers of prototype engines ready for a few fleets to test by mid- to late-2005-- trucking companies say they need new engines 18 to 24 months before the 2007 deadline to test the engines in all weather conditions and to develop their longterm purchasing plans. Some companies, however, are concerned that providing test engines to only a few fleets may not provide the industry as a whole with sufficient information to judge the engines' performance. In addition, they are still concerned that the new engines may be too costly and much less fuelefficient. As a result, they expect companies will again buy more trucks with old engines before the deadline, disrupting industry operations and emissions benefits. The fuel industry representatives said they can produce the low-sulfur fuel the new engines require on time and see no reason to delay the standards. Nevertheless, they worry the fuel initially may not be available nationwide and it may be difficult not to contaminate it with other fuels in the distribution system. Environmental and health groups do not want to delay the standards or the expected emissions benefits. Some stakeholders would like more information on technological progress. In addition, they would like more reassurance--such as from an independent review panel--that the technology will be ready on time and additional assistance--such as economic incentives--to encourage timely purchases of trucks with the new technologies.\n",
    "docs": [
      "Background Trucks handled more than two-thirds of all freight commodities shipped in  2002, according to a recent report for the American Trucking Associations  (ATA), an organization representing the majority of freight-hauling  companies. Trucking companies that shipped freight earned revenues of  about $585 billion, or 87 percent, of the total transportation revenues that  year. The total volume of goods shipped by trucks is expected to rise to 10  billion tons by 2008, with trucking companies\u2019 revenues increasing to about  $745 billion, according to the ATA report. The majority of trucks  transporting freight are powered by diesel engines,",
      " primarily because they  are 25 percent to 35 percent more energy efficient and more durable and  reliable than gasoline-powered engines. Furthermore, diesel fuels generally  are less volatile and, therefore, safer to store and handle than gasoline. On the other hand, diesel engines also have an adverse impact on air quality  through their harmful exhaust emissions. Diesel exhaust is composed of  several toxic components, including nitrogen oxides, fine particles  (particulate matter), and numerous other known harmful chemicals. EPA  estimates that exhaust from heavy-duty trucks and buses accounts for  about one-third of the nitrogen oxide emissions and one-quarter of the  particulate emissions from all mobile sources.",
      " EPA\u2019s 2002 comprehensive  review of the potential health effects from exposure to diesel engine  exhaust found that short-term exposure to diesel emissions can cause  respiratory irritation and inflammation and exacerbate existing allergies  and asthma symptoms. Long-term exposure may cause lung damage and  pose a cancer hazard to humans. The harmful components of diesel  exhaust can also damage crops, forests, building materials, and statues.  The exhaust also impairs visibility in many parts of the country. Although diesel exhaust is harmful, both EPA and engine manufacturers  have successfully reduced the level of emissions from highway diesel  engines over the past two decades. Since 1984,",
      " EPA has progressively  implemented more and more stringent diesel emissions standards, for  example, reducing the level of allowable nitrogen oxide emissions from  diesel engines from 10.7 grams per unit of work in 1988 to 2.5 grams in 2004  (see fig. 1). To meet these standards, engine manufacturers should have made  increasingly cleaner engines so that their nitrogen oxide emissions  gradually declined to mandated levels. However, EPA determined that,  from 1987 to 1998, seven of the nation\u2019s largest diesel engine manufacturers  sold 1.3 million heavy-duty diesel engines with computer software that  altered the engines'",
      " pollution control equipment under highway driving  conditions. The Clean Air Act prohibits manufacturers from selling or  installing motor vehicle engines or components equipped with devices that  bypass, defeat, or render inoperative the engine's emission control system.  These devices altered the engines' fuel injection timing and, while this  improved fuel economy, it also increased nitrogen oxide emissions by two  to three times the existing regulatory limits. In response, EPA undertook  what it called \u201cthe largest Clean Air Act enforcement action in history\u201d  against the manufacturers. To settle these cases, in 1998, EPA, the U.S.  Department of Justice, and the engine manufacturers agreed to be bound  by consent decrees.",
      " In the decrees, the manufacturers agreed to, among  other things, (1) pay civil penalties of about $83 million, the largest civil  penalty for an environmental violation as of that date; and (2) collectively  invest $109.5 million towards research and development and other projects  to lower nitrogen oxide emissions. Table 1 includes information on   the number of engines that each manufacturer subject to the decrees  produced that violated the emissions standards,   the amount of nitrogen oxide emissions these engines produced in  excess of the amounts allowed by the standards in effect at the time,   the amount of penalties each company paid,",
      " and   the amount of funds each company committed to invest in  environmental projects. The manufacturers also agreed to collectively spend $850 million or more  to produce significantly cleaner engines by October 1, 2002. The nitrogen  oxide emissions from the new engines were not to exceed 2.5 grams. Without the decrees, the engines would not have been required to meet this  standard until January 1, 2004, 15 months later. The excess emissions caused by the defeat devices were of concern,  especially for states and localities with areas that already had air quality  problems (meaning that the areas did not meet at least one of the health-",
      " based air quality standards). Every state must devise a plan, called a state  implementation plan, that indicates what actions they will take to maintain  or come into compliance with the standards. In devising these plans, states  and localities estimate future emissions and design actions to reduce them  as necessary. If the states and localities do not comply, they face certain  sanctions, including the loss of access to federal transportation funds. But  the use of the pollution control defeat devices that increased engine  emissions jeopardized state air quality improvement plans and posed  public health risks. To ease compliance with the accelerated schedule, manufacturers could  continue to sell their old engines until October 2002.",
      " If manufacturers were  not able to, or chose not to, meet the deadline, they could continue to sell  engines that did not meet the standards through three actions (1) paying  nonconformance penalties, equal to the cost of engines that met the  standards, to maintain a \u201clevel playing field\u201d between the noncomplying  companies and those manufacturers who met the deadline; (2) using a  provision that allowed manufacturers to sell noncomplying engines after  October 2002 if they sold an equal number of the cleaner engines before  that date; and (3) using emissions averaging, banking, and trading to  generate emissions credits towards compliance by reducing emissions in  other areas.",
      " As the next step in its efforts to address diesel emissions, EPA, in January  2001, finalized a rule\u2014herein referred to as the 2007 rule--establishing new  emissions standards that heavy-duty engines and vehicles must generally  meet beginning in 2007. These standards, unlike the consent decrees  established as the result of an enforcement action, were developed through  a public rulemaking process that gave stakeholders from across the  industry sectors the opportunity to provide input to EPA for consideration. Also in contrast to the consent decrees, the 2007 standards gave industry 6  to 10 years to develop technologies to meet the rule\u2019s requirements.",
      " The  2007 rule limits fine particle and nitrogen oxide emissions from heavy-duty  diesel engines to 0.01 grams and 0.20 grams, respectively, a significant  decrease compared to the consent decrees and 2004 standards. While the  fine particle standard is effective in 2007, the nitrogen oxide standard will  be phased in based on engine production:  50 percent of the engines sold  between 2007 and 2009 and 100 percent of those sold beginning in 2010  must meet the nitrogen oxide emissions standard. EPA estimates that the  new standards will reduce emissions of fine particles and nitrogen oxides  by 90 percent and 95 percent,",
      " respectively, from 2000 levels. Also in the 2007 rule, EPA regulates both heavy-duty vehicles and their fuel  as a single system. To meet the standards, engines must include advanced  emission control devices. Because these devices are damaged by sulfur, the  rule establishes a mid-2006 deadline for reducing the sulfur allowed in  highway diesel fuel. Under the rule, refiners are required to start producing  diesel fuel with a sulfur content of no more than 15 parts per million  (compared to current diesel fuel, which can contain up to 500 parts per  million\u2014a 97 percent reduction) beginning June 1,",
      " 2006. All diesel-powered  highway vehicles produced in 2007 or later must use the low-sulfur fuel.  Under certain conditions, and generally only until 2010, the rule allows  refiners to continue producing and selling some diesel fuel with a sulfur  content greater than 15 parts per million, but not exceeding 500 parts per  million.  However, the two fuels must be segregated in the distribution  system so that the low-sulfur fuel is not contaminated. The fuel with the  higher sulfur content may only be used in heavy-duty vehicles built before  2007 because it will damage emissions control devices on newer engines.",
      " When developing the 2007 rule, EPA had to give appropriate consideration  to the rule\u2019s costs. The agency projected that the rule\u2019s benefits would  exceed its costs by a factor of 16 to 1. According to EPA, the new standards  will result in significant annual reductions in harmful emissions, with total  benefits as of 2030 estimated at about $70 billion. In addition, by 2030, the  reduced emissions will prevent 8,300 premature deaths, more than 9,500  hospitalizations, and 1.5 million workdays lost, according to EPA. The  agency estimated that these benefits will come at an average cost increase  of about $2,",
      "000 to $3,200 per new vehicle in the near term and about $1,200  to $1,900 per new vehicle in the long term, depending on the vehicle size.  This is relatively small compared to new vehicles whose base cost is about  $96,000 for a new heavy heavy-duty truck to $250,000 for a new bus.  Furthermore, EPA estimated that, when fully implemented, the sulfur  reduction requirement would increase the cost of producing and  distributing diesel fuel by about 4.5 to 5 cents per gallon, an increase of  about 3 percent over average U.S. diesel fuel prices as of late November  2003.",
      " The Consent Decrees  and Their Accelerated  Schedule for Reducing  Diesel Emissions  Overall Negatively  Affected Sales of the  Largest Trucks and  Engines but Achieved  Some Air Quality  Benefits In part because trucking companies did not have what they considered to  be sufficient time to adequately road test 2002 prototype engines, they had  concerns about the price and reliability of the new engines.  Representatives of four of the ten trucking companies we contacted said  their companies, among other things, bought more new heavy-duty trucks  equipped with older engine technology than planned before October 2002.  This adversely affected their operations,",
      " at least in the short term,  according to company officials. Our analysis of Class 8 truck production  data also indicates that trucking companies may have pre-bought these  trucks in 2002. To meet the increased demand for trucks with older  engines, the major engine manufacturers increased production of new  trucks with older engines before October, but had to decrease production  when demand subsequently dropped until about early 2003, with  detrimental effects, according to representatives of the engine  manufacturers we contacted. These manufacturers also said that they lost  market share to others that were not subject to the consent decrees or that  decided to pay penalties rather than make a new engine on time.",
      " EPA estimated that accelerating the schedule for cleaner engines would  accelerate emissions reductions, thereby better protecting public health.  EPA roughly estimated that two provisions of the consent decrees would  reduce nitrogen oxide emissions by roughly 4 million tons. However, as  discussed, trucking companies bought more trucks with the older engine  technology than planned, and truck owners are now operating trucks  longer than expected, thereby reducing the number of trucks with cleaner  engines on the road below anticipated levels. As a result, while emissions  levels were reduced, the consent decrees will not achieve the full emissions  reductions in the time frames EPA anticipated. Some Trucking Companies  Purchased Large Numbers  of Older Trucks Rather Than  Trucks with the New,",
      " but  Unproven Engines,  Adversely Affecting Their  Short-term Operations The consent decrees had an adverse effect on some trucking companies  even though the trucking industry was not a direct party to the decrees.  They affected the industry because trucking companies are the ultimate  purchasers of trucks equipped with new diesel engines designed to meet  the consent decrees\u2019 emissions standards requirements. Manufacturers did  not provide trucks with prototype engines to the companies in time to  sufficiently road test them, according to many of the trucking company  officials we contacted. Several officials noted that their companies did not  take delivery of trucks with the new engines for testing until the first half of  2002\u2014too late for their companies to perform what they considered to be  adequate road testing.",
      " Consequently, many trucking companies decided not  to risk the uncertainties associated with the new engines, instead opting for  the older, familiar diesel technologies. As table 2 indicates, eight of the ten  trucking companies we contacted bought trucks with the older engines  prior to October 2002, postponed buying new trucks, or bought only a  relatively small number of trucks with new engines, usually for testing  purposes. Werner Enterprises and Swift Transportation publicly reported in their  financial statements to shareholders that they pre-bought trucks with older  engines and postponed buying new trucks, respectively, because of  uncertainties surrounding the new engines. The two trucking companies in  table 2 that bought large numbers of trucks with the new engines did so  because they wanted to maintain consistent business relationships with  their established engine suppliers and follow the fleet acquisition plans that  they had developed based on their assessment of long-term business needs,",
      "  according to company officials. The four companies that pre-bought large numbers of trucks before the  October 2002 deadline did so primarily because they were concerned about  the higher price and unproven reliability of the new engines, according to  company officials. They said that the new engines would have added from  $1,500 to $6,000 to the purchase price of a new heavy-duty truck\u2014whose  base cost is about $96,000\u2014and would have reduced fuel economy by 2 to  10 percent. For 2002, these additional costs could have ranged from about  $4 million to $27 million per company in purchase price and about $3  million to $90 million per company in fuel costs.",
      " These trucking officials  said that these additional costs would have been problematic for some  companies because, according to one representative, the industry only  returns 3 or 4 cents per dollar invested. Compounding these additional  costs, according to trucking officials, is that they come without any clear  offsetting economic or business advantages. According to several of the  officials, recent engine modifications made to meet increasingly more  stringent emissions standards also had positive economic benefits for the  trucking companies, such as increased fuel efficiency. EPA officials noted,  however, that some of these benefits, including better fuel economy, were  achieved as a result of engine manufacturers using the defeat devices to  avoid meeting emission standards.",
      " The agency acknowledged that trucking  companies were not party to the engine manufacturers\u2019 tactic but did  benefit from it. Companies that pre-bought trucks found this strategy adversely affected  their operations, at least in the short term, according to company officials.  Companies had more trucks than they needed and lost money as excess  trucks sat idle. For example, one trucking company reported in its financial  statement to shareholders that such excess capacity cost the company  $16.3 million in revenues\u201429 percent\u2014in the first quarter of 2003. Despite  effects such as these, some trucking officials told us that they would have  pre-bought even more trucks with the older engines had they been  available.",
      " These officials noted that while larger companies may have been  able to weather these operational disruptions, smaller companies with  narrower profit margins might have found it more difficult. Our analysis of data on the production of trucks with the new engines  suggests that pre-buying in response to the consent decrees was a widely  used strategy. As figure 2 shows, truck production began to increase from  January through September 2002, despite a generally decreasing trend  since April 2000. More specifically, from April through September 2002, manufacturers  produced about 93,000 Class 8 trucks.  Our analysis shows that this  production volume cannot be fully explained by changes in the economy\u2019s  growth rate or diesel fuel prices,",
      " but this increase, and the subsequent  decrease, in production may be linked to the consent decrees. We  recognize that a number of factors other than the consent decrees are also  likely to have contributed to these trends. For example, trucking  companies\u2019 business decisions are driven by factors that affect their  profitability, such as economic growth and activity, their expectations  about future profits, their current inventory of trucks, and fuel and  operating costs. In addition, other factors such as regulations, taxes, or  subsidies affect companies\u2019 profitability and truck purchasing decisions.  After considering the information trucking companies provided us on their  responses to the decrees and controlling for economic growth and fuel  costs in our analysis,",
      " we estimate that 19,000 to 24,000 (20 percent to 26  percent) of the 93,000 Class 8 trucks produced during this period may have  been in response to the consent decrees. Subsequent to this increase, the  data also show that production sharply decreased after October 2002 until  recovering in 2003. Those companies that bought trucks with the new engines reported  experiencing few serious problems with them, although they generally  believe that it is too soon to be certain of the new trucks\u2019 maintenance  costs. Some stated that preliminary indications may not be encouraging.  For example,",
      " one company reported that roughly one-half of its 140 new  heavy-duty engines experienced an engine valve failure prior to 50,000  miles. In addition, these officials noted that roughly 20 percent of their  heavy-duty vehicles with the new engines are out of service at any given  time due to maintenance concerns, compared to 5 percent for the  remainder of their fleet. Several of these officials expressed a concern that  some companies may have difficulty absorbing increased costs from such  maintenance problems. Engine Manufacturers  Experienced Temporary  Fluctuations in Sales and  Shifts in Market Shares as a  Result of the Decrees Initially,",
      " trucking companies\u2019 increasing demand to pre-buy trucks with  older engines in the 6 months before the October 2002 deadline increased  the major diesel engine manufacturers' production and sales. In particular,  demand was so great, according to some engine manufacturers, they could  not keep up with it, despite hiring hundreds of temporary employees and  running production lines 24 hours a day, 7 days a week. According to all  five of the engine manufacturers we contacted, the pre-buy could have  been much larger, but the engine manufacturing industry did not have the  capacity to fill the demand. However, once the October 2002 deadline  passed,",
      " demand for these engines fell dramatically. These dramatic swings  in demand had a net adverse impact on engine manufacturers, at least for  the short-term, according to those manufacturers we contacted. For  example, at least one engine manufacturer laid off all of the temporary  employees it had recently hired to meet the rising demand before October,  as well as some more established workers. Another manufacturer said that  such instability also hindered its ability to make business decisions, acquire  capital, and meet customers\u2019 demands. However, figure 2 shows that truck  sales generally increased again starting in 2003. In addition to these general trends, many of the manufacturers of the new,",
      "  cleaner engines told us that they lost customers to those companies that  continued to produce engines that did not meet the new emissions  standards. In 1998, the seven manufacturers subject to the consent decrees  dominated the U.S. heavy-duty diesel engine market, accounting for about  90 percent of engine sales. In response to the decrees, four of the seven  engine manufacturers began to produce cleaner engines. Another of the  seven manufacturers, Renault, decided to leave the U.S. heavy-duty diesel  truck market in 2002, according to company officials. Furthermore,  according to EPA, Navistar International chose to take other actions to  compensate for its excess emissions rather than meet the new emissions  standards early,",
      " as permitted under its consent decree. Caterpillar, until  November 2003, continued to sell heavy-duty engines that did not fully  comply with the new nitrogen oxide standards, but paid a nonconformance  penalty for each engine sold. Therefore, by mid-2003, the U.S. heavy-duty  diesel engine market was dominated by (1) the four manufacturers subject  to the decrees that were selling engines that met the new emissions  standards\u2014Cummins, Detroit Diesel, Mack Trucks, and Volvo; (2) two  manufacturers subject to the decrees that were selling engines that did not  meet the standards\u2014Navistar International and Caterpillar;",
      " and (3)  Mercedes, that entered the U.S. market in 1999 but that did not have to  meet the standards until 2004. In 1998, the year in which EPA and the engine manufacturers entered into  the consent decree settlements, the four manufacturers selling engines that  met the new standards had a combined share of the U.S. Class 8 truck  market of about 73 percent, while the two manufacturers that were not  selling such engines had roughly a 27 percent market share. Since then, the  market shares of the two groups of engine manufacturers have moved in  almost directly opposite directions (see fig.",
      " 3). By September 2003, the market share of the four manufacturers selling  cleaner engines had shrunk to 50 percent and the share of the two  companies\u2014plus Mercedes\u2014that continued to sell engines that did not  meet the new standards increased to 50 percent. While factors other than the consent decrees contributed to this shift in  market shares over the years, according to many engine manufacturer and  trucking company officials we contacted, the manufacturers that sold  trucks with the cleaner engines also lost business because, as previously  noted, these engines had inherent disadvantages relative to the existing  engines that made them difficult to sell.",
      " Consequently, manufacturers that  continued to market trucks with the older engines captured business from  those companies selling trucks with the new engines. For example,  Caterpillar\u2019s share of the Class 8 truck market climbed from 24 percent in  1998 to 35 percent in 2003, while Detroit Diesel\u2019s share dropped from 27  percent to 15 percent during the same period. Similarly, Mercedes\u2019 market  share rose from zero in 1998 to 10 percent in 2003, while Cummins\u2019 share  fell from 31 percent to 21 percent. We were unable to verify all of the claims made by trucking companies and  engine manufacturers regarding financial impacts and truck purchase  decisions resulting from the consent decrees because much of this  information is confidential.",
      " To a limited extent, we were able to use  financial statements some of these companies submitted to the Securities  and Exchange Commission to verify some impacts for some companies. In  addition, we conducted econometric analysis to shed light on the possible  magnitude of the pre-buy. The Consent Decrees  Accelerated Emissions  Reductions but Not to the  Full Extent That EPA Had  Estimated Although EPA was not required to conduct a cost-benefit analysis of the  provisions of the consent decrees, it did a rough estimate of the potential  emissions reductions that could be achieved. At the time it made the  estimate, EPA used truck production data from 1998,",
      " the most recent  available at the time, to estimate that over the 15-month pull-ahead  period\u2014from October 2002 to January 2004\u2014some 233,000 more trucks  with cleaner engines would be on the road than without the pull-ahead.  EPA multiplied this number by the amount of emissions reductions a single  cleaner engine could achieve to estimate that the total emissions  reductions expected by accelerating the schedule was roughly 1 million  tons of nitrogen oxide emissions. As previously discussed, because trucking companies postponed  purchases, bought new trucks with the old engine technology, or bought  used trucks rather than the cleaner engines,",
      " initially fewer trucks with  cleaner engines will be on the road than EPA had estimated. Therefore, the  consent decrees are not going to produce the total 1 million reduction, at  least not during the time frames EPA predicted. For example, Class 8 truck  production data through October 2003, or 13 of the 15 months of the pull  ahead, show that about 148,000 fully or partially compliant heavy-heavy- duty diesel engines are on the road, compared to EPA\u2019s estimate of 233,000  such compliant engines for the entire 15-month time frame. However, some  factors came into play that EPA did not anticipate.",
      " For example, EPA did  not expect Mercedes to enter the U.S. diesel truck market and claim about  a 10 percent share, increasing the number of older-technology engines sold.  Furthermore, EPA did not expect Caterpillar, with the largest engine sales  when EPA developed its emissions estimates, to produce engines that,  although cleaner than previous models, did not fully meet the new  standards. Finally, the overall rate of engine production during the 15- month period covered by EPA\u2019s emissions estimates is going to be relatively  lower than the rate in 1998, the year on which EPA based its estimates.  Therefore,",
      " not as many cleaner engines were produced as EPA predicted. EPA also estimated that a second provision of the consent decrees\u2014a  requirement that computers on older engines be adjusted to better control  emissions when these engines undergo regularly scheduled rebuilding\u2014 would reduce nitrogen oxide emissions by about 3 million tons over the life  of the engines. Under these \u201clow-nitrogen oxide rebuild\u201d provisions of the  decrees, when operators brought their trucks in to have their engines  rebuilt, engine manufacturers were required to supply kits to adjust  computer controls to lower excess emissions. This adjustment is called  \u201creflashing.\u201d While reflashing can be performed without rebuilding the  engine,",
      " EPA saw this as a convenient time for performing both operations  at once. EPA estimated that this provision of the decrees would eventually  apply to roughly 856,000 trucks. In addition, a number of engine  manufacturing companies initiated incentive programs to encourage truck  companies to voluntarily bring their trucks in to have them reflashed.  Under the voluntary program, these trucks would be reflashed earlier than  if they waited until the engines needed to be rebuilt under EPA's program,  thereby reducing emissions sooner. As of September 2003, almost 60,000 trucks had been reflashed under the  consent decrees' mandatory program and another 43,",
      "000 under the  voluntary incentive programs, about 12 percent of EPA\u2019s projected total.  Fewer engines were rebuilt than EPA expected because trucking  companies are running their engines longer than in previous years before  rebuilding or replacing them. As a result, only a small portion of the  emissions reductions predicted by EPA from reflashing may be achieved,  depending on how many additional engines are adjusted and the rate at  which this occurs. Estimating how many of the remaining 740,000 or more  trucks will be reflashed under the consent decree provisions is difficult and  must take into account the age and likely future mileage of the trucks.",
      "  Many of these trucks no longer have enough useful life remaining to make  rebuilding their engines cost-effective. Nevertheless, the California Air  Resources Board and environmental departments in several other states  are considering making reflashing of heavy-duty diesel engines compulsory,  to try to reduce diesel emissions as much as possible. Remaining Technology  Challenges Must Be  Resolved to Meet the  2007 Standards, and  Stakeholders\u2019 Opinions  Differ as to Whether  They Will Be  Addressed in Time A number of engine technology and fuel supply and distribution issues  must still be resolved to implement the 2007 standards. Most stakeholders  who have made significant investments in developing the engine and fuel  technology to meet the standards maintained that the issues can be  resolved in time.",
      " Engine manufacturers we contacted expect to have new  engines ready for 2007 and to be able to meet the trucking companies\u2019 time  frames for delivering trucks with prototype engines for testing. However,  representatives of the fuel industry recognize that there is still work to do  to resolve issues about whether (1) low-sulfur fuel will be available in  sufficient volumes nationwide and (2) fuel distributors can keep from  contaminating it with higher sulfur fuel that damages the emissions control  equipment. However, they believe that there is sufficient time to resolve  these issues and do not want the 2007 standards delayed. Furthermore, the  environmental and health groups we contacted are encouraged by  industries\u2019 progress in developing the technologies needed to implement  the standards.",
      " Given these lingering technology questions, the uncertainty  about having sufficient time to test new engines, and the negative  economic impact they experienced under the consent decrees,  representatives of some of the trucking companies we contacted remain  concerned that the new standards can be implemented smoothly. Because  the technology to meet the 2007 standard is more advanced than prior  upgrades, some trucking companies are concerned that the new engines  will cost more and decrease fuel efficiency more than EPA has predicted.  Consequently, according to representatives of nine of the ten trucking  companies we contacted, companies will likely once again pre-buy trucks,  potentially disrupting markets and postponing needed emissions  reductions.",
      " Engine Manufacturers  Believe They Can Resolve  Challenges and Produce an  Engine in Time for 2007 Representatives of all five engine manufacturers we contacted, as well as  the association of emissions control technology manufacturers, noted that  control technologies for nitrogen oxide emissions\u2014one of the pollutants  addressed by the 2007 standards\u2014have continued to advance. For 2007,  manufacturers have evaluated five different engine technology options to  control nitrogen oxide emissions\u2014nitrogen oxide adsorbers, selective  catalytic reduction, advanced exhaust gas recirculation, a lean nitrogen  oxide catalyst, and advanced combustion emissions reduction technology  (ACERT\u2014a system developed by Caterpillar for its own engines).  Generally,",
      " exhaust gas recirculation and ACERT limit the formation of  nitrogen oxides, while the catalyst-based approaches promote nitrogen  oxides reduction into nitrogen and oxygen. In December 2003, three of the  five engine manufacturers we contacted announced the technologies they  plan to use to meet the 2007 emission standards:  Caterpillar chose its  ACERT technology and Cummins and Volvo selected exhaust gas  recirculation. In addition, in January 2004, while not specifically saying that  it would use exhaust gas recirculation technology, International announced  that it plans to meet the 2007 requirements without using either nitrogen  oxide adsorbers or selective catalytic reduction.",
      " The company currently  uses exhaust gas recycling technology in many of its existing engines. The  remaining engine manufacturer is considering selective catalytic reduction. Caterpillar, Cummins, International, and Volvo chose their respective  approaches because each company is already using a basic form of the  technology it selected to meet the 2004 standards and believes it can be  modified to meet the 2007 standards as well. Several engine manufacturers,  however, believe that they may not be able to advance the exhaust gas  recirculation technology far enough to comply with the 2010 requirements,  so, in planning ahead, they are pursuing this as well as other options.",
      " The  firm that is considering selective catalytic reduction noted that this  technology could meet both the 2007 and 2010 requirements. It has been in  use in the United States for several years to control nitrogen oxide  emissions from stationary sources, such as power plants or industrial  facilities. It has also been used in European demonstration fleets to control  pollution in diesel truck emissions. While the engine manufacturer that is  considering selective catalytic reduction believes that remaining  technological issues are relatively minor and should be resolved by 2007, it  is less clear that several implementation issues will be resolved by that  time. For example, selective catalytic reduction requires a continuing  supply of a chemical compound\u2014such as urea\u2014to function properly.",
      "  However, some engine manufacturers and other stakeholders, as well as  EPA, are concerned because urea is not widely available and the industry  would have to build its own distribution infrastructure, such as separate  tanks at refueling stations. There are concerns that this may not be possible  by 2007, that truck operators will not have sufficient supplies of the  chemical when and where they need it, or that the operators will  accidentally or intentionally fail to keep the urea tank on their trucks filled,  thereby defeating the emissions control equipment. According to EPA  officials, the engine manufacturer considering selective catalytic reduction  is expected to submit a plan for a urea infrastructure in early 2004.",
      " EPA will  evaluate the plan at that time. As for nitrogen oxide adsorbers, EPA has helped to support and develop  this technology and believes it remains a viable option for 2007, although  none of the manufacturers has chosen this technology for the earlier  deadline. In June 2002, the agency issued a report on, among other things,  the progress being made to develop this technology. EPA concluded that,  given the rapid progress and the relatively long lead-time before it would be  used, adsorbers could be available to meet the 2007 standards. In October  2002, the Clean Diesel Independent Review Panel EPA convened to assess  technology development progress reached a similar conclusion,",
      " stating  that although technological challenges remain, none are insurmountable.  The panel further noted that engine, vehicle, and emission control  manufacturers were making large investments to ensure the successful  development and implementation of the adsorber technology for the 2007  standards. In contrast, the engine manufacturers we contacted generally  concurred that adsorbers might be a viable option for meeting the next  phase of nitrogen oxide reductions in 2010, but they think the technology  faces too many significant technical barriers to be a viable option for 2007. Engine manufacturers believe they will have nitrogen oxide control  technology ready for 2007 model year heavy-duty trucks and that they can  make prototype trucks available to trucking companies for testing by mid-",
      "  to late-2005. We were unable to independently verify the claims of the engine  manufacturers about the progress being made in developing engines and  emissions control equipment and when these technologies are likely to be  available. This is primarily because companies were concerned about not  making information about their unique engine designs and progress readily  available so that they can remain competitive. Representatives of the Fuel  Industry Have Concerns  about Adequate Fuel  Supplies and Distribution,  but Believe They Have Time  to Resolve the Concerns and  Do Not Want the 2007  Deadline Delayed The representatives of the diesel fuel industry we contacted\u2014including  officials of nine organizations collectively representing refiners,",
      " pipeline  operators, terminal operators, and retail marketers\u2014still have a number of  concerns about implementing the new emissions standards on schedule.  But, they believe they can resolve these issues before 2007. Regardless of  their concerns, the representatives agreed that EPA should make no  changes to the 2007 rule\u2019s implementation dates and low-sulfur diesel fuel  requirements because changing or delaying the rule would negatively affect  the plans and investments already being made. Rather, these  representatives believe the certainty the 2007 deadline provides, such as  knowing what is required, is key to successfully implementing the  standards in a timely and cost-effective manner.",
      " The representatives of the fuel industry organizations we contacted said  that most of their members' efforts to meet the low-sulfur diesel fuel  requirements are still in the planning phase. While the industry has the  technical ability to produce fuel to meet the requirements\u2014low-sulfur fuel  is already being produced in limited quantities today\u2014the fuel industry  remains concerned about supply and distribution issues that could directly  hinder implementing the requirements (see table 3). As table 3 shows, the fuel industry\u2019s primary concerns include the high  probability that low-sulfur fuel supplies will be contaminated before they  reach the market or retail level and the potential for shortages of the low-",
      " sulfur fuel. The concern over possible contamination of the fuel arises from  the limited experience with these products. If such fuel is contaminated, it  will damage emissions controls. Although the 2007 rule requires fuel  refiners to produce diesel fuel containing no more than 15 parts per million  of sulfur, delivering such fuel to the end user may require refiners to  produce fuel with an even lower sulfur content. Sulfur from other fuel  products may unintentionally be added to low-sulfur supplies through  contamination in the distribution system. For example, a pipeline carries  many different fuel types, grades, and compositions to accommodate  product demands that vary both regionally and seasonally.",
      " As a result,  there is always a certain amount of intermixing between the first product  and the second at the point in the pipeline where the two meet. If these  products have different sulfur contents, the mixture where the two fuels  meet may contain much more sulfur than the lower graded of the two  products. Furthermore, products containing large amounts of sulfur may  leave residual amounts in the system that could become blended into other  products, raising their sulfur content. Therefore, according to fuel industry  representatives, fuel leaving the refinery must have a much lower sulfur  content than 15 parts per million to allow for an increase through  contamination.",
      " Because the extent of the contamination cannot be precisely predicted in  advance, the exact sulfur level of the fuel that refineries would have to  produce is uncertain. Pipeline operators expect that refiners will have to  provide diesel fuel with sulfur levels as low as 7 parts per million in order  to compensate for possible contamination from higher sulfur products in  the system. However, even at these lower levels, the nine fuel industry  representatives said that the likelihood of contamination during the  delivery of the fuel through the distribution system is extremely high. Even  if the low-sulfur fuel that pipeline operators receive meets their  specifications, pipeline operators are unsure how they will sequence the  new fuel with other products in the pipeline to prevent its contamination.",
      "   Once contamination occurs, the product could no longer be sold or used as  low-sulfur highway fuel, thereby leaving less of the low-sulfur fuel available  for sale. Fuel distributors also said that the potential for contamination  increases when a fuel additive such as kerosene is blended with diesel fuel.  Kerosene is commonly added to highway diesel fuel in the northern United  States to prevent fuel from thickening in the cold weather. Although the  2007 rule requires that additives must meet the same low-sulfur standard,  refiners are not currently producing low-sulfur kerosene. Fuel industry representatives also are concerned about the adequacy of  testing to detect and avoid widespread contamination of low-sulfur fuel  supplies.",
      " According to these officials, testing is crucial in determining  whether the low-sulfur fuel is meeting the standards at every point in the  distribution system. Product testing is performed to control contamination  and to define \u201ccut points,\u201d locations in a stream of products through a  pipeline where one type of product, such as high sulfur diesel, ends and  another product, such as low sulfur diesel, begins. Early detection of  contamination gives pipeline and terminal operators flexibility in  correcting problems before large portions of a product batch become  ruined. However, eight of the fuel industry representatives we contacted  expressed concern that a reliable and accurate test or testing device for  measuring sulfur content is currently not available.",
      " Because of these contamination issues, nine fuel industry representatives  expressed concern about whether there would be an adequate supply of  the low-sulfur fuel nationwide during the phase-in period from 2007 to  2010. For example, because adding separate storage tanks for low-sulfur  fuel to prevent contamination would be expensive, terminal operators and  retail marketers said they may be less likely to make the investment to  carry this fuel. Furthermore, according to fuel industry representatives,  trucking companies that deliver low-sulfur fuel may need to dedicate  trucks exclusively for this purpose to ensure product integrity during  delivery. This may lead to fuel shortages,",
      " which could be especially severe  in the northern United States where fuel distribution is generally limited to  delivery by truck. In contrast to several of the fuel industry\u2019s concerns, an EPA report  summarizing data on refiners' plans to produce low-sulfur diesel fuel  before 2010 stated that (1) the fuel industry is on target for complying with  the low-sulfur fuel standard and (2) low-sulfur diesel fuel production will  be sufficient to meet demand and the fuel will be available nationwide.   Although EPA acknowledges in its report that the information is  preliminary, the agency believes that it provided the clearest snapshot of  the highway diesel fuel market available at the time.",
      " According to EPA, the  agency will update this report in 2004 and 2005 based on the most current  data from the refiners. Despite their differing views on the progress towards meeting the 2007  rule's requirements, fuel industry representatives agree there is still  sufficient time to resolve their concerns. One of the representatives stated  that, even without knowing how much the fuel is likely to be degraded  through contamination, refineries are designing their plans and getting  their budgets approved to make the needed modifications to their facilities. Environmental and Health  Groups Have No Major  Concerns about  Implementing the Standards  on Time and Want to Avoid  Delays in Achieving  Emissions Reductions The representatives of the five environmental and health groups we  contacted are generally encouraged by industries\u2019 progress in developing  the technologies needed to implement the 2007 rule.",
      " While all five groups  commented on the 2007 rule when it was proposed in 2000, three of the  groups\u2019 representatives also were members of EPA\u2019s Clean Diesel  Independent Review Panel and assessed the industry\u2019s progress in  developing the needed technologies. In its 2002 report, the panel concluded  that significant progress had been made and, although some challenges  may remain, none were considered to be insurmountable. The fourth  group\u2019s representatives have been involved in a number of pilot projects  with states, local governments, and the private sector involving the use of  innovative emissions control technologies. Those experiences, in  conjunction with their involvement in commenting on the proposed 2007  rule,",
      " have led the group to believe that the technology is viable. Finally,  based on information gathered from emissions control equipment  manufacturers, the fifth group\u2019s representative believes that the technology  is progressing well. All of the representatives said that they are highly supportive of the 2007  standards. Although two of the five groups initially wanted the standards to  be implemented fully in 2007 rather than phasing them in through 2010,  none of the groups wanted any changes made to the rule now. In fact, the  only concern the representatives we contacted expressed was that there  would be a delay in the rule\u2019s implementation, resulting in a reduction of  the anticipated environmental and health benefits.",
      "  For example, the  representative of the State and Territorial Air Pollution Program  Administrators/Association of Local Air Pollution Control Officials stated  that the diesel emissions reductions expected from timely implementation  of the 2007 standards are critical to state and local air pollution control  agencies\u2019 efforts to meet air quality standards. According to this  representative, achieving these emissions reductions is especially  important for states and localities with areas that already have air quality  problems. Many of these areas are relying on the 2007 standards to achieve  their expected emissions reductions on time. Trucking Companies Are  Concerned about the New  Engines\u2019 High Costs and  Insufficient Time for Testing  and May Pre-Buy Trucks  with Old Engines before  2007,",
      " Disrupting Markets  and Postponing Air Quality  Benefits Trucking officials we contacted expect that the costs of purchasing and  operating trucks meeting the 2007 standards will be significantly higher  than comparable earlier models, despite EPA\u2019s estimates to the contrary.  These officials said they do not consider EPA\u2019s analysis credible, primarily  because they believe the agency previously had seriously underestimated  the industry\u2019s costs to comply with the consent decrees. For example,  EPA\u2019s regulatory impact analysis for the 2004 emissions standards  concluded that the industrywide cost to reduce nitrogen oxides would be  about $224 per ton. Subsequently,",
      " in 2000, EPA estimated that to comply  with the pull-ahead provisions of the consent decrees, these costs could  increase to $272 per ton. However, an industry analysis stated that the  actual cost could range between $8,000 and $13,000 per ton. EPA officials,  in commenting on the cost variance of its estimates pointed out that the  estimates it developed for the 2004 standards and its estimates of engine  costs to meet the accelerated deadline for development are not  comparable. Accelerating the schedule would generate additional costs  that would not have been components of the 2004 estimate. For example,",
      "  EPA officials noted that when the agency derived its estimates of costs to  comply with the 2004 nitrogen oxide standards, it did not know that heavy- duty engine manufacturers had installed defeat devices on existing engines.  Thus the actual cost to comply with 2004 standards will include the cost to  \u201ccatch up\u201d with the previous standard. We did not assess the accuracy of  EPA\u2019s cost estimates. Nevertheless, the difference in EPA\u2019s estimates has  raised concerns among trucking company officials about the accuracy of  EPA\u2019s 2001 estimate of engine costs to comply with the 2007 standards. One reason many industry officials that we contacted expect the  compliance costs of the 2007 standards to be higher than EPA\u2019s prediction  is because the new trucks will incorporate significant technological  advancements over current equipment to control nitrogen oxide emissions.",
      "  Many of these officials believe this technology will add thousands of dollars  to the purchase price of new trucks rather than the long-term $3,200  estimated by EPA. In addition, these officials are concerned that the 2007  trucks will experience another 3 to 5 percent loss in fuel economy\u2014added  to the 3 to 5 percent loss resulting from the consent decrees\u2014that could  increase their companies\u2019 fuel costs by millions of dollars per year. Even  minor increases in business costs can have adverse effects in the trucking  industry, according to trucking industry officials we contacted, because  these companies\u2019 profit margins are very narrow\u2014sometimes only 2 cents  per dollar earned.",
      " The officials claim that the highly competitive nature of  the trucking business precludes companies from passing such significant  cost increases to their customers. For example, the two trucking  companies we contacted that bought only trucks with the new engines  prior to October 2002\u2014and in so doing incurred millions of dollars in  additional expenses, according to company representatives\u2014said they had  to compete against companies that pre-bought trucks with the older  engines and avoided the additional expenses. These two companies felt  they could not increase the fees they charged without risking the loss of  customers to their competitors. According to officials of these two  companies,",
      " even large, profitable companies can afford to absorb these  losses for only a short time, and small- and mid-sized companies are likely  to have also experienced difficulties. None of the engine manufacturers  could estimate with precision the amount that acquisition or operating  costs are likely to increase. However, all of the engine manufacturers we  contacted agreed that the engines and emissions control equipment for  2007 trucks will be more expensive to buy and to operate than comparable  previous models. By February 2004, four of the five engine manufacturers had announced the  technologies they planned to pursue for 2007 and all five had stated their  plans to have limited numbers of prototype engines available for road  testing by mid-",
      " to late-2005. However, some trucking companies still had  doubts as to whether engine manufacturers would actually deliver  prototypes for road testing in the promised timeframes. For example, one  trucking company told us that the original timetable, which would allow  engine manufacturers to stay on schedule to deliver prototypes no later  than mid-2005, was for the manufacturers to select their technologies  during the summer of 2003. The 6-month delay added to his concern about  the availability of prototypes to enable valid field evaluations by mid-2005.  According to 7 of the 10 trucking firms we contacted,",
      " they need 18 to 24  months to put a sufficient number of miles on heavy-duty trucks\u2014under a  variety of driving conditions through all four seasons of the year\u2014to fully  evaluate the vehicles\u2019 operating costs, performance, reliability, and  durability. Officials at all ten trucking companies said that they were  reluctant to take the risks associated with the new technologies unless they  have enough time to fully assess the new trucks. For example, officials at  one company noted that it has only 12 maintenance facilities nationwide  and when a truck breaks down on the highway, it is very expensive to  repair. Consequently, these officials are not willing to take a chance on  equipment that has not been adequately tested.",
      " Without adequate testing time, the trucking company officials we contacted  believe that they and other trucking companies will likely pre-buy trucks  with older engines before 2007, with more companies purchasing more  trucks than they did before the consent decrees\u2019 October 2002 deadline.  Even officials from one of the trucking companies that bought only trucks  with new engines in 2002 said that they would consider pre-buying if the  new equipment is not fully tested. According to most of the trucking  industry officials we contacted, the adverse impacts of a pre-buy on  trucking companies and engine manufacturers could be worse in 2007 than  in 2002.",
      " Many of the trucking companies we contacted agreed that the  industry needs to have the cost, reliability, and other uncertainties  associated with the 2007 trucks resolved in order to achieve greater  stability within the industry. In late February 2004, we again contacted all ten trucking companies to  determine the extent to which the engine manufacturers\u2019 announcements  that test vehicles would likely be available in 2005 may have eased their  concerns regarding the introduction of new engine and emissions control  technologies in 2007. Of the five companies that responded to our inquiries,  one stated unequivocally that the engine manufacturers\u2019 announcements  had not at all reduced its concerns.",
      "  Representatives of the remaining four  companies stated that their levels of concern had been somewhat reduced  by the announcements, but they continue to be concerned about a number  of unresolved issues. For example, despite engine manufacturers\u2019  assurances, companies continue to be concerned about the durability of  the new engines as well as the cost of purchasing and operating them. In  addition, representatives of some of these companies questioned whether  the availability of a relatively small number of test vehicles in a limited  number of fleets could provide sufficient information to allay the concerns  of the trucking industry as a whole. Finally, some trucking companies  highlighted lingering concerns regarding potential shortages and higher  costs of low-sulfur diesel fuel.",
      " Some Stakeholders  Commended EPA\u2019s  Efforts to Ensure  Technology Is Ready  by 2007, but Others  Would Like the Agency  to Provide More  Certainty EPA has taken a number of steps to help with and monitor the engine and  fuel technology development. For example, EPA staff continue to meet  with representatives of the key industries, issue reports on technology  progress, and conduct stakeholder workshops. Representatives of some of  the engine manufacturers, the emissions control technology manufacturers  association, the fuel industry, and the environmental and health groups we  contacted commended EPA's efforts for helping to advance the needed  technologies.",
      " However, some of the engine manufacturers and the trucking  companies we contacted would like more help and reassurance that the  technology will be ready when needed, including economic incentives to  manufacturers to produce engines on time and trucking companies to buy  them as scheduled. Furthermore, some trucking representatives believe  that EPA has not included them in, or listened to their concerns about,  implementation of the standards. EPA program managers maintain that the  agency has given the industries more lead-time than required to produce  the technology and provided extensive assistance and monitoring. They  stated that the agency could take a number of additional actions if the  standards cannot be implemented on time,",
      " such as granting individual  companies temporary relief from the standards or postponing active  enforcement. But EPA sees no evidence that timely implementation of the  standards is not achievable. EPA Has Undertaken a  Number of Efforts to  Monitor and Facilitate the  Standards\u2019 Timely  Implementation According to EPA, the agency is not required to ensure that the engine and  emissions control technologies or low-sulfur fuel supplies will be available  on time or that the industries comply in a timely manner. However, the  Clean Air Act requires that EPA establish standards taking into  consideration the availability and costs of technology, lead-time, and other  factors.",
      " In responding to the act\u2019s requirements, EPA concluded that all of  the evidence indicates that industries can and will implement the engine  and fuel requirements of the 2007 rule successfully and in a timely manner.  According to EPA, the technologies for meeting the standards are well  known and some are already in use. For example, refineries are now using  technology to reduce sulfur in diesel fuel and engine manufacturers are  installing filters that reduce fine particle emissions from engines. In  addition, the technologies for meeting the nitrogen oxide standard in the  2007 rule are being developed at a rate faster than anticipated, according to  EPA,",
      " and the remaining engineering issues are being addressed. EPA\u2019s confidence is based, in part, on provisions that the agency built into  the 2007 rule to ease compliance. For example, in developing the rule, EPA  gave the industries 6 to 10 years to plan, develop, and produce fuel and  engines that meet the requirements. By comparison, the Clean Air Act only  requires EPA to allow no less than 4 years of lead-time for regulated entities  to develop any new technologies required to comply with a rule. EPA also  included hardship and other provisions to address problems that certain  small businesses may have in complying with the rule.",
      " In addition to specific rule provisions, EPA continues to take steps to  monitor the development of needed technologies and fuel supplies and to  ensure that the standards will be successfully implemented. These efforts  include:    Technology Progress Review Meetings - According to EPA, agency  representatives have continuously met with diesel engine  manufacturers, emissions control equipment producers, oil refiners,  refinery technology companies, and fuel distributors; visited technical  research centers; and met with leading engineers and scientists from  more than 30 companies for briefings on the progress being made to  comply with the 2007 standards. Progress Review Reports - In the preamble to the 2007 rule,",
      " EPA  committed to issuing a progress report every 2 years on the status of  nitrogen oxide adsorber technology, the emissions control technology,  which the agency believes to be the most promising for meeting the  standards. The first report, issued in June 2002, concluded that the  engine manufacturers and the emissions control equipment industry\u2019s  efforts to develop this technology were progressing rapidly and on  schedule. The report also included an update on the status of filters to  control particulates and the refining industry\u2019s progress towards  meeting the low sulfur diesel fuel requirements for 2006. The report did  not include supporting technical evidence from each company to  validate EPA\u2019s conclusions.",
      " EPA plans to release its second engine  progress review report in early 2004. Refiners Pre-Compliance Reports - The 2007 rule requires fuel refiners  and importers to submit annual reports from 2003 through 2005, which  must contain information on, among other things: (1) an estimate of the  volumes of low-sulfur and higher-sulfur diesel fuel that each refinery  plans to produce or import; and (2) engineering plans, the status of  efforts to obtain any necessary permits and financial commitments for  making the necessary refinery modifications to produce low-sulfur fuel,  and construction progress.",
      " EPA summarized these data and issued its  first annual report in October 2003, stating that the industry is on target  for complying with the low-sulfur fuel requirements on time, fuel  production will be sufficient to meet demand, and low-sulfur fuel will be  widely available nationwide. EPA plans to issue additional  precompliance reports in 2004 and 2005. Implementation Workshops - EPA has held public workshops on the  2007 standards and plans to hold additional ones in the future as  appropriate. In November 2002, EPA sponsored a clean diesel fuel  implementation workshop, which focused on issues such as record  keeping and reporting requirements for the fuel industry and diesel fuel  refining,",
      " distribution, storage, and marketing challenges. In addition, in  August 2003, EPA, the trucking industry, and engine manufacturers co- sponsored another implementation workshop to facilitate the exchange  of information among EPA, engine manufacturers, and other parties  including truck manufacturers and truck operators, and to give EPA a  forum to provide additional guidance on implementation issues. Clean Diesel Independent Review Panel - As previously discussed, at  EPA\u2019s request, the Clean Air Act Advisory Committee\u2019s Clean Diesel  Independent Review Panel\u2014an expert panel composed of  representatives of engine and emissions control equipment  manufacturers, trucking companies, fuel refiners and distributors, and  environmental and health organizations\u2014independently assessed  industries'",
      " progress towards complying with the 2007 rule. In its  October 2002 final report, the panel found that both the engine and fuel  industries were developing the technologies needed to comply with the  2007 standards at an appropriate rate, but that these industries needed  to address a number of technical issues for implementation to be  successful. The panel agreed that none of these issues was  insurmountable and that, for a number of these issues, EPA\u2019s planned  implementation workshops were an appropriate means to move  forward. Guidance Documents - In November 2002, EPA issued guidance on  engine manufacturers\u2019 testing procedures to determine whether their  engines comply with the new standards,",
      " and the agency also issued a  draft document responding to questions raised by the fuel refining and  distribution industries during the workshop held earlier that month.  EPA plans to issue additional guidance on implementing the 2007  standards, if needed. Other Technology-Related Activities - According to EPA, the agency has  taken an active role in a number of areas regarding technology  development and information-sharing with the diesel engine industry  and other stakeholders, including:  an on-going testing program at EPA\u2019s National Vehicle and Fuel  Emissions Laboratory in Ann Arbor, Michigan, in which EPA has  evaluated the status of engine and emissions control technology,  including particulate filters and nitrogen oxide adsorber catalyst  technologies.",
      " EPA believes that this program helps to inform the  agency of the current state of these technologies and allows EPA to  make general information on technology progress publicly available.   two government/industry technology demonstration programs  sponsored by the Department of Energy:  the Diesel Emission  Control-Sulfur Effects Project, completed in 2001, which primarily  focused on the impacts of diesel fuel sulfur on emission control  technologies; and the Advanced Petroleum-Based Fuels-Diesel  Emissions Control Project, which focuses on developing and  demonstrating engine and emissions control systems that can comply  with the 2007 standards.   a number of industry-sponsored task groups,",
      " including (1) the Diesel  Engine Oil Advisory Panel, made up of the American Petroleum  Institute, the American Chemistry Council, the American Society for  Testing and Materials (ASTM), and a number of individual oil, engine,  and additive companies, which is developing voluntary standards for  engine oil formulations for the 2007 engines; and (2) the Diesel Fuel  Lubricity Task Force, sponsored by ASTM, which is working to  develop fuel test methods and specifications. EPA participates in  these groups to provide input on technical issues and clarification on  the 2007 rule, and to track the industry\u2019s progress.",
      " Other Outreach Activities - EPA has participated in numerous  conferences and meetings sponsored by a wide range of stakeholders at  which agency officials have made presentations discussing the 2007  rule. EPA believes that these conferences are useful (1) for stakeholders  to get the latest information on the status of the 2007 rule  implementation and (2) for EPA to answer questions about the rule and  hear first-hand input from the regulated industry and other  stakeholders. Based on all of these activities, EPA maintains that industries will  successfully implement the requirements of the 2007 rule on time and that,  beyond the agency\u2019s planned workshops and other monitoring and  outreach activities,",
      " it needs to take no additional actions to ensure timely  compliance. Some Stakeholders Believe  EPA Has Done Enough to  Promote the Technology,  While Others Would Like  More Help and Outreach In general, a number of stakeholders we contacted\u2014the association of  emissions control equipment manufacturers, a number of the fuel industry  representatives, the environmental and public health groups, and two of  the engine manufacturers\u2014either commended EPA for its efforts to ensure  the needed technology is ready on time, or believe the agency is already  doing enough to provide such assurances. Two of the remaining engine  manufacturers and some fuel industry representatives, as well as all of the  trucking companies,",
      " would like more help in developing the technology or  proof that it is on track. The association of emissions control equipment manufacturers praised  EPA for its efforts to assist in the development of the needed technology. In  addition, many of the fuel industry representatives we contacted  commended EPA\u2019s efforts to reach out to them and actively involve them in  preparing for the implementation of the 2007 standards. In particular, the  representatives found EPA\u2019s implementation workshops and its draft  question-and-answer document to be the most helpful. Representatives of the five environmental and public health groups  commended EPA\u2019s efforts to implement the 2007 standards and to include  them and other stakeholders in the implementation process.",
      " Specifically,  the groups said that EPA\u2019s outreach efforts were comprehensive and  inclusive. Not only did EPA solicit comments from as many stakeholders as  possible during the rulemaking process, but it also has continued to  encourage discussions between the stakeholders at its implementation  workshops. Generally, the groups agreed that EPA does not need to go  beyond its current and planned activities to ensure timely implementation  of the standards. As for the five engine manufacturers, representatives from one found EPA\u2019s  efforts to be particularly supportive and representatives from two others  said the efforts were \u201csomewhat\u201d effective in easing development of the  needed technologies. Officials from one of these manufacturers said that  EPA has been responsive to the manufacturers\u2019 questions,",
      " all of which  should help them meet the 2007 standards. Representatives from another  manufacturer stated that EPA has been diligent in monitoring the progress  of engine development, visiting suppliers as well as the engine makers\u2019  facilities, which has helped speed the development of the engines. The  agency\u2019s work in its Ann Arbor, Michigan, research laboratory has also  helped in this regard. In contrast, officials from a fourth company noted  that EPA had not been particularly responsive to the industry or its  concerns. (The remaining manufacturer\u2019s representatives did not express  an opinion in this regard.) On the other hand, two engine manufacturers described workshops  sponsored by EPA that focused on complying with the 2007 rule as only  marginally effective.",
      " For example, one engine manufacturer\u2019s officials  commented that the workshops appear to be \"staged\u201d and convened only to  confirm the agency\u2019s preconceived ideas, although EPA noted that  members of the trucking and engine manufacturing industries co- sponsored these workshops, and that would make it difficult for the agency  to preordain their outcomes. These companies\u2019 officials further stated that  they did not need EPA\u2019s help in developing new diesel technologies, but did  need the agency\u2019s assistance in convincing customers to buy the trucks  with the 2007 engines, however. Four of the five manufacturers also  asserted that economic incentives for trucking companies could assist  them and facilitate the implementation of the 2007 rule.",
      " In general, officials  from both of these industry groups favored tax breaks or subsidies for  trucking companies to purchase the new technologies on time. According  to these officials, investing millions of dollars in developing or buying new,  relatively unproven equipment carries an inherent business risk and  provides companies with a powerful incentive to stay with older, familiar\u2014 and dirtier\u2014equipment. EPA officials told us that the agency would have to  request authority from the Congress to provide industries with economic  incentives. As for other stakeholders, representatives of the terminal and marketing  segment of the distribution industry, in particular, were disappointed that  the Clean Diesel Independent Review Panel addressed only technology  issues and not distribution issues,",
      " such as contamination. Furthermore, all  of the trucking companies we contacted agreed that EPA could do more to  address the uncertainties facing their industry, and thereby help minimize  any pre-buy that might occur. In particular, while EPA actively involved  them in developing the 2007 rule, they believe that the agency has not  addressed their concerns in implementing the standards. For example,  according to ATA officials, EPA did not initially include representatives of  the trucking industry in the agency\u2019s Clean Diesel Independent Review  Panel, and invited ATA to participate only after the organization  complained about being excluded. EPA acknowledged that, in retrospect,",
      "  they should have included trucking industry representatives on the panel  from the outset and responded by adding an ATA representative to the  panel. Furthermore, ATA officials told us that the panel\u2019s review did not  include several important technical issues, such as consideration of  alternative emissions control technologies, and that panel members were  discouraged from raising such issues. Finally, the ATA officials said that  several panel members published reports dissenting with the panel\u2019s main  conclusion that technology development was on schedule, but that EPA  has not made these reports generally available. As a result of these factors,  ATA officials said they do not have great confidence in the panel\u2019s findings  and they remain largely unconvinced that trucking companies\u2019 interests  have been well represented in EPA\u2019s panel process.",
      " According to EPA  officials, however, panel membership was comprised overwhelmingly of  experts on engine and vehicle technology development. Some trucking companies are also skeptical of the effectiveness of EPA\u2019s  other efforts to monitor and assist the development of technology for the  2007 rule. For example, several trucking company officials we contacted  believe EPA has already made important implementation decisions\u2014 largely without input from trucking companies\u2014and the workshops\u2019 main  function is merely to validate those decisions. Several trucking companies  and ATA officials expressed the belief that EPA\u2019s overall approach to  implementing the 2007 rule is too inflexible. For example, the ATA officials  maintain that EPA\u2019s analysis supporting the 2007 rule dramatically  understates trucking companies\u2019 costs to comply with the rule and ignores  the possible severe effects of these costs on the companies.",
      " ATA  representatives have recommended that EPA update its analysis to take  into account better information that is now available. However, EPA  officials continue to believe that the regulatory impact analysis it prepared  in support of the rule is sufficient, and pointed out that the agency is not  required to, and does not routinely, update its analysis supporting such  rulemakings. They also maintain that engine manufacturers, not trucking  companies, are the entities being regulated under the 2007 rule. As a result,  following the rulemaking, most of the EPA\u2019s direct dealings were with  engine makers, not trucking companies, according to these officials.",
      "  However, they said that, more recently, EPA has actively consulted trucking  companies. The trucking companies would like EPA to work more directly  and closely with them, hear and address their concerns, and provide more  reassurance that the technologies will be ready by 2007. EPA Could Take a Number  of Actions If the Standards  Cannot Be Implemented on  Time According to EPA, the agency is not required to take action in the event  that the engine and emissions control technologies and low-sulfur fuel are  not available in time to implement the 2007 standards as scheduled.  However, according to EPA,",
      " if circumstances arise that would require  additional action, the agency will address them at that time. EPA believes that timely implementation of the 2007 standards is  achievable and to plan for failure to meet the deadline would undermine  the rule. EPA maintains that the collective efforts of the industries to  develop plans and technologies needed to meet the standards, combined  with the agency\u2019s monitoring of their progress, is the proper course of  action at this time and is showing significant positive progress towards  timely and successful implementation. According to EPA, entities that are  being regulated have for decades developed technologies and implemented  requirements based on the certainty that the regulations would not be  changed in a way that would disrupt their planning and investment.",
      " With  this in mind, EPA maintains that it would not be prudent or good  government to change the regulations or delay their implementation.  According to EPA, the agency\u2019s efforts to provide the industries significant  lead-time for developing the needed technologies, ensure that all  stakeholders are actively developing them, and monitor their progress are  the most prudent actions the agency can take. According to EPA, if it appears that industries cannot comply with the 2007  standards on time, the agency would not readily make substantive changes  to the rule\u2014such as modifying the implementation dates or changing the  allowable emissions levels of the standards\u2014because industries have  invested large amounts to comply with the standards in the specified  timeframe.",
      " Nevertheless, EPA officials point out that, if there was  convincing evidence that modifying some aspect of the requirements was  justified and necessary, the agency could take a number of actions:     EPA could revise the rule in response to a specific petition. Under the  Clean Air Act, any person can petition the EPA Administrator to  change a rule. The petition must demonstrate that it was impracticable  to raise the objection during the public comment period when the rule  was composed and that the objection is of central relevance to the  outcome of the rule. EPA believes that the appropriate mechanism for  substantively changing the 2007 requirements would be to undertake a  standard rulemaking process in response to a petition,",
      " in which the  agency would post a notice of rulemaking in the Federal Register and  request, review, and address public comments on the proposed revisions  to the rule. EPA could also develop nonconformance penalties in the event that one  or more engine manufacturers was unable to produce compliant  engines, as it did for the 2004 standards and consent decrees. EPA  establishes nonconformance penalties when: (1) the emission standard  is more stringent than the previous standard or an existing standard  becomes more difficult to achieve because of a new standard, and if  EPA finds that it will require substantial work to comply; and (2)",
      " it is  likely that one or more manufacturers will be a \u201ctechnological laggard,\u201d  unable to produce compliant engines by the required date. Typically,  EPA decides whether to establish penalties 1 or 2 years before the  compliance dates, primarily because information on manufacturers\u2019  ability to comply is not available until then. Therefore, EPA believes that  it is not appropriate to consider penalties before late 2004. In the event that an individual refiner is unable to comply with the 2007  rule, EPA could grant the company relief from meeting its low-sulfur  requirement in response to a request under the rule\u2019s hardship  application process.",
      " The refiner would then develop an alternative  compliance plan. EPA may, in certain circumstances, determine in advance that it will not  actively enforce an environmental regulation, including the 2007 rule.  However, according to EPA, the agency would take this action only if it  is clearly needed to serve the public interest. Typically, EPA grants  requests for selective enforcement of a regulation when a weather  emergency, fire, explosion, or similar circumstance outside a requester\u2019s  control makes compliance impracticable, or when compliance with the  original rule would cause the regulated entities significant hardship. Conclusions The consent decrees and 2007 standards are critical pieces of EPA\u2019s  strategy to control harmful diesel emissions and protect public health.",
      "  While the accelerated schedule in the consent decrees had an impact on  both the engine and trucking industries, it helped to further the agency\u2019s  emissions reduction goals by putting cleaner diesel engines on the road  earlier than otherwise planned. The agency has also made a significant  investment in developing, and ensuring the implementation of, the 2007  standards. Nevertheless, stakeholders from two critical industry groups\u2014 engine manufacturers and trucking companies\u2014would like more help. In  particular, engine manufacturers would like assurances from EPA that,  once the cleaner engines are available, the trucking industry will purchase  them. Furthermore, the trucking industry,",
      " as a result of its experience with  the consent decrees, believes it has not been a key player with EPA in  responding to the consent decrees or implementing the 2007 standards.  Because the trucking industry is a major source of the emissions EPA is  trying to combat, if trucking companies delay purchase of the cleaner  engines, the economic effect could be more severe than what occurred as a  result of the decrees and could postpone the emissions reductions. The  trucking industry is also a key player in the nation\u2019s transportation system  needed to keep a healthy economy. Therefore, it is important to achieve  emissions reductions while minimizing the negative economic effects on  trucking and its related industries.",
      " For these reasons, EPA may want to consider what additional efforts it  could take to help engine manufacturers produce clean engines in time for  road testing, to reassure trucking companies that they will be able to buy  tested engines on time, and to address major concerns of other key  stakeholders. Careful consideration should be given to these efforts so that  they will not unduly delay progress towards the standards, however. For  example, EPA could consider if it has time to establish an independent  expert panel, similar to its 2002 panel, to review industry\u2019s progress in  developing the necessary technologies. The panel should consist of  representatives of all of the key stakeholders who would identify and  address their major concerns to the extent practicable.",
      " The panel could  review the data EPA has already collected or new data from the engine and  fuel industries to measure the progress of technology development,  communicate this to all stakeholders, and determine what, if any,  additional actions, such as incentives, are needed to ensure that standards  are met. The agency would have to establish the panel as soon as possible  in 2004, however, if it is to have enough time to be effective and not unduly  delay progress. Making more of an investment in working with all of the  stakeholders critical to meeting the 2007 standards would help EPA ensure  that it will achieve its goals of reduced emissions and increased public  health protection.",
      " Recommendation for  Executive Action To maximize public health and air quality benefits, and minimize adverse  impacts on affected industries, we recommend that the Administrator,  EPA, consider additional opportunities to allay engine, fuel, and trucking  industry concerns about the costs and likelihood of meeting the 2007  standards with reliable engine and fuel technology. Opportunities could  include better communicating with all stakeholders on the remaining  technological uncertainties. EPA could also convene another independent  review panel to (a) address stakeholders\u2019 remaining concerns; (b) assess  and communicate the progress of technology development; and (c)  determine what, if any, additional actions are needed to meet the 2007  standards such as considering the costs and benefits of incentives for  developing and purchasing the technology on time,",
      " and other alternatives. Agency Comments and  Our Evaluation We provided EPA with a draft of this report for review. The Assistant  Administrator for Air and Radiation said EPA believes that, in many  respects, our report is consistent with the agency\u2019s assessment of the  situation leading up to the implementation of the 2007 standards. However,  the agency has concerns about the basis for certain of our findings on the  standards. More specifically, EPA asserted that we (1) present selected  stakeholders\u2019 opinions without validating them and ignore evidence that  the agency believes would prove or disprove their validity, (2) overstate the  challenges to having fuel and engine technologies ready on time to meet the  2007 standards,",
      " and (3) inaccurately portray EPA\u2019s efforts to work with  stakeholders in developing the rule. As to our recommendations, EPA sees  merit in using financial incentives to achieve the 2007 milestone, but does  not see an agency role in this regard. Neither does the agency see a need to  convene an independent technology review board. We disagree with EPA\u2019s assertions. In our view, EPA needs to work with  stakeholders to better address any remaining concerns they have about the  availability of the new engines and fuel required to meet the 2007  standards. We fully appreciate that the anticipated emissions reductions  are critical for many states whose air quality is in trouble,",
      " that the 2007  standards are vital to protecting public health, and that the agency and the  engine, emissions control, and fuel industries have made extensive efforts  to successfully implement the 2007 rule. We also recognize that to achieve  the rule\u2019s objectives, the trucking industry must purchase trucks with the  new engines beginning in 2007. Otherwise, we are concerned that the  nation may relive the negative effects that resulted from the 2002 consent  decrees. In 2002, trucking companies pre-bought older engines before the  deadline, delaying emissions and health benefits, because they believed  they did not have enough time to test new engines or enough information  on costs.",
      " To ensure that this does not happen with the 2007 standards, we  believe EPA should strengthen its process for working with stakeholders to  allay any remaining concerns about whether fuel will be available in  sufficient quantities and locations, whether enough new engines will be  ready in time to thoroughly test them, and how much the engines will cost  to buy and operate. With respect to EPA\u2019s specific assertions, we disagree with EPA\u2019s opinion  that we present certain stakeholders\u2019 views without regard to their validity.  We carefully and consistently collected the views of engine and emissions  control manufacturers, trucking companies, fuel industry representatives,  and environmental and health groups,",
      " and were equally careful to  accurately present their opinions, consistent with our methodology and  quality assurance standards. Furthermore, the report acknowledges that  we were unable to verify opinions about the technologies\u2019 readiness with  hard data on their design and performance because the industries  manufacturing the technologies were not comfortable in releasing  information about their individual designs. Nevertheless, we did not simply  accept stakeholders\u2019 views at face value, but where possible, assessed the  basis for their opinions, such as reviewing available studies and reports on  the technologies. We also disagree with EPA\u2019s assertion that we did not  consider additional information and evidence that agency program  managers provided to us late in the course of our work after reviewing a  draft summary of the facts to be used in the report.",
      " At that time, EPA  provided extensive written comments on the summary, along with a  number of press releases from engine manufacturers and trade press  articles. In response, we spent considerable time carefully assessing all of  this information and made a number of changes to the report where  appropriate. However, the agency did not provide any additional  quantitative data or other information that would allow us to better  evaluate the stakeholders\u2019 positions. We also disagree with several EPA assertions that the report overstated the  technological challenges to successfully delivering the necessary fuel and  engines on time. In this regard, we devote considerable narrative to the  views of the agency and all the stakeholders who share these views that  both technologies are on track.",
      " However, we were obligated to  acknowledge some stakeholders\u2019 concerns over the remaining  technological risks and questions. In addition, we include the most current  information possible on technological developments in our report. For  example, after several manufacturers announced by February 2004 their  plans to have a limited number of prototype engines ready for testing in  2005, we re-contacted the trucking company representatives to determine  the extent to which these announcements addressed their concerns. Additionally, we acknowledge that EPA deserves credit for its activities to  work with various stakeholders to help ensure that the technologies will be  ready in time and we devote considerable narrative to describing these  activities in the report.",
      " We are also very careful to give a balanced  presentation of the stakeholders\u2019 opinions about EPA\u2019s activities and  therefore were obligated to acknowledge that some stakeholders  questioned the agency\u2019s openness to their concerns and willingness to  address them. For example, we note in the report that EPA officials  acknowledged the agency initially did not invite anyone from the trucking  industry to participate on the 2002 Clean Diesel Independent Review Panel  and only did so after the industry lobbied the agency. Finally, with regard to EPA\u2019s comments on our recommendations, we want  to emphasize that we are recommending that the agency consider  additional steps to alleviate the remaining concerns raised by stakeholders,",
      "  avoid a significant pre-buy of older engines, and better guarantee that the  emissions and health benefits are achieved. We suggest actions for the  agency to consider, but do not intend to limit the agency to the alternatives  we suggested, especially if it could design more effective solutions. In this  light, with regard to financial incentives, we recognize that the Congress  must provide the agency direction and funding for such an approach, but  expect that it would also look to the agency to play a role, such as making  the initial proposal for incentives or helping to determine their merits and  costs. As to convening an independent review panel,",
      " we do not believe that  this would unduly delay the schedule for implementing the standards. In  addition, we believe a panel could help address stakeholders\u2019 remaining  concerns, thereby helping to prevent a repeat of the negative impacts from  the 2002 consent decrees and instead ultimately ensure that the critical  emissions and health benefits anticipated from the 2007 standards are  achieved in a timely manner. Appendix III contains the text of EPA\u2019s letter along with our detailed  responses to the issues raised. EPA also provided some technical  comments, which we have incorporated as appropriate. We are sending copies of this report to the Chairman and Ranking Minority  Member of the Senate Appropriations Committee and its Subcommittee on  VA,",
      " HUD, and Independent Agencies; the Senate Committee on  Environment and Public Works; the Senate Committee on Commerce,  Science, and Transportation; the House Appropriations Committee and its  Subcommittee on VA, HUD, and Independent Agencies; the House  Committee on Energy and Commerce; the House Committee on  Transportation and Infrastructure; the House Committee on Government  Reform and its Subcommittee on Energy Policy, Natural Resources, and  Regulatory Affairs; other interested members of Congress; the  Administrator, EPA; the Director of the Office of Management and Budget;  and other interested parties. We will also make copies available to others  upon request. In addition,",
      " the report will be available at no charge on GAO\u2019s  Web site at http://www.gao.gov. If you have any questions about this report,  please contact me at (202) 512-3841. Key contributors to this report are  listed in appendix IV. Scope and Methodology Our objectives in this review were to determine (1) the effects, if any, of  EPA\u2019s 1998 consent decrees with diesel engine manufacturers on trucking  companies, engine manufacturers, and expected emissions reductions;   (2) stakeholders\u2019 views on industries\u2019 ability to comply with the 2007  standards and EPA\u2019s actions to ensure that the new engine technologies and  low-sulfur fuel will be ready in time;",
      " and (3) if not, EPA\u2019s options and plans  for mitigating any potential negative effects on key industry sectors. To address the first objective, we performed econometric modeling using  data on new Class 8 diesel truck production, GDP, and diesel fuel prices  from January 1992 through June 2003 to determine the extent to which  Class 8 truck purchases may have been associated with the consent  decrees. We assessed the reliability of these data by reviewing existing  information about the data as well as some testing of the truck data for  obvious errors. In addition, we had discussions with the vendor concerning  the reliability of the truck data.",
      " We determined that the data were  sufficiently reliable for purposes of this review. Details of our methodology  for this specific analysis are included in appendix II. In addition, we contacted, among others, officials of ten of the nation\u2019s  largest trucking companies as defined by the number of trucks in their  fleets (see table 4). We identified these companies from data provided by the American  Trucking Associations (ATA), an organization representing the majority of  the trucking companies involved in freight transportation. Because ATA  could not identify which of its member companies had purchased engines  in the months before and immediately after October 2002, GAO and ATA  agreed that the largest trucking companies,",
      " as determined by the total  number of trucks in their fleets, were more likely than smaller companies  to have purchased trucks during that period and, therefore, would be in the  best position to recount their experience with both the new engines and the  impacts of the accelerated schedule. ATA provided us with a list of 48 of  their member companies with truck fleets ranging from a high of over  52,000 trucks to a low of 60 trucks. From this list, we selected those ten  companies that each had fleets of over 10,000 trucks in 2002. (This 10,000- truck level provided a natural breaking point in the data,",
      " since the next  largest company owned about 8,400 trucks.)  These 10 companies  accounted for a total of 176,000 trucks, 3 percent of the total truck  inventory in 2002. Because these companies were not selected randomly,  we cannot project our findings to the entire trucking industry. We asked the  representatives of these companies a uniform set of questions about the  companies\u2019 strategies in reacting to the decrees, the effects of the decrees  on their operations, and their experiences with the new engines designed  to comply with the decrees. We also reviewed financial statements some of  these companies submitted to the Securities and Exchange Commission to  identify effects that the companies publicly disclosed.",
      " In addition, to determine the effects of accelerating implementation of the  2004 standards on the engine manufacturing industry, we contacted  officials of the seven engine manufacturers that were subject to the  consent decrees. These companies included Caterpillar Incorporated,  Cummins Engine Company, Detroit Diesel Corporation, Mack Trucks  Incorporated, Navistar International Transportation Corporation, Renault  Vehicules Industriels, s.a., and Volvo Truck Corporation. As with the trucking companies, we asked the representatives of these  engine manufacturers questions about their companies\u2019 strategies with  regard to the decrees, the decrees\u2019 effects on their operations, and the  performance of the new engines.",
      " We also reviewed some of these  manufacturers\u2019 Securities and Exchange Commission submissions. While  we asked these companies for data to support their statements about the  effects of the decrees, generally they said that it would be detrimental to  reveal information about their business operations or technology designs  because it might harm their competitive positions relative to other  companies. We also did not identify any other independent analyses of the  impacts of the consent decrees. To determine the air quality effects of the decrees, we reviewed EPA\u2019s 1998  projections of the emissions reductions expected from accelerating the  schedule, based on its estimate of the number of trucks that would have the  new engines.",
      " We compared this to data on the actual number of trucks with  new engines to assess the likelihood that EPA would achieve the expected  emissions reductions. We also discussed with EPA officials and staff the  basis for their estimates of the expected emissions reductions from a  second provision of the consent decrees, whereby truck owners would  have emission computer controls on their older engines adjusted during  engine overhauls. To respond to the second objective, we contacted officials representing 16  organizations and companies from among those that offered the largest  number of comments on EPA\u2019s 2007 emissions standards when proposed in  2000 (see table 5). We identified these stakeholders by first reviewing the list of  organizations/persons commenting on EPA\u2019s proposed 2007 rule during the  public comment period in 2000.",
      " EPA recorded over 700 separate comments  on various issues relating to the rule. We used the number of issues on  which individual organizations commented, as determined by EPA, as a  proxy for the level of interest or concern by these organizations regarding  EPA\u2019s 2007 rule. From EPA\u2019s response document, we identified over 500  separate commenters, ranging from individual citizens, local interest  groups, and companies to national organizations representing major  industries and environmental, health, and other interests. Using this  information, we placed commenters in general categories reflecting the  interests they represented, for example, the fuel industry or environmental  and health interests.",
      " Within each category, we ranked the commenters  based on the total number of issues on which each commented. From each  category, we generally selected those commenters who addressed more  than 25. This approach eliminated all but 21 of the more than 500  commenters. We then made several modifications to this list. First, we made an  exception to retain the ATA, which commented on 24 issues, but which  represents a large segment of the trucking industry, a key stakeholder  affected by the 2007 rule. We also eliminated two commenters who  represented agriculture interests, but addressed more than 25 issues  because agricultural issues were not relevant to our review.",
      " Finally, we  eliminated from our list most individual companies whose interests are  represented by national organizations that were also on the list of contacts.  We made this decision on the assumption that the national organization  would reflect the concerns of the individual member companies that also  commented. However, we included in our list Marathon Ashland Petroleum  because of the large number of issues on which this company commented,  although an organization representing its interests was also included. We  also included Cummins, Incorporated; Detroit Diesel Corporation; and  Navistar International Truck and Engine Corporation, three of the original  seven engine manufacturers who were subject to the consent decrees,",
      "  primarily because we wanted to discuss the effects of the decrees on their  industry and took the opportunity to discuss issues relating to the 2007  standards as well. In addition to the 16 organizations and companies identified through this  process, we also contacted representatives of the refining and distribution  sectors of the fuel industry to ensure that we had a broad range of views.  These sectors did not appear to be represented among the commenting  stakeholders, despite their key role in implementing the 2007 rule. These  organizations included the Association of Oil Pipe Lines, the Independent  Fuel Terminal Operators of America, the Independent Liquid Terminals  Association,",
      " the Petroleum Marketers Association of America, and the  Society of Independent Gasoline Marketers of America. We asked all of these stakeholders to provide their views on whether the  technologies needed to meet the 2007 standards would be available on  time. We took a number of steps to try to assess the basis of support for  stakeholders\u2019 views about the readiness of technology to meet the 2007  standards. First, we asked each engine manufacturer that we contacted if  the company could provide us with data to demonstrate the status of  technology development. However, the representatives said that it would  be detrimental to reveal information about their technology designs or  business operations because it might harm their competitive positions  relative to other companies.",
      " Alternatively, we evaluated the stakeholders\u2019  positions by considering publicly available information, including studies  and reports issued on the technologies and on the development of the  standards. Because the representatives of the trucking companies we contacted had  views about the availability, readiness, and costs of the engines for 2007  that differed from the other stakeholders, we took some additional steps to  assess the basis of their views. For example, we asked the engine  manufacturers and EPA officials to respond to the concerns raised by the  trucking representatives, and where the manufacturers\u2019 and agency\u2019s views  differed, we reflected them and the basis of their comments in the report  for balance.",
      " We also considered the information we collected and the  analyses we conducted in regard to the impacts of the 2002 consent  decrees to determine if they offered any perspectives on the trucking  industry\u2019s concerns about meeting the 2007 standards. For example, we  used the information showing that: (1) the industry pre-bought older  engines prior to October 2002 because companies did not have engines in  time to test their reliability and possible costs; (2) companies that had  bought the new engines determined both the purchase price, and  operations and maintenance costs, were higher than estimated and  anticipated; and (3)",
      " EPA developed its estimate of what it would cost to  buy and operate new engines for 2007 in 2000, before technology designs  were completed and selected to assess the trucking representatives\u2019  concerns about meeting the 2007 standards. We also used the information  obtained from the engine manufacturers to assess the trucking industry\u2019s  concerns about how soon test engines would be available, such as the fact  that manufacturers were 6 months behind schedule in selecting the  technology they would use to meet the standards. We also asked all of the stakeholders we contacted to provide their views  on EPA\u2019s efforts to ensure that the needed engine and fuel technologies will  be available by 2007.",
      " We obtained information from EPA on their activities  in this regard and provided a summary of these activities to the  stakeholders we contacted and asked them for their views on the  effectiveness of these efforts. We also discussed with the Director of EPA\u2019s  Office of Transportation and Air Quality as well as program managers from  the agency\u2019s Office of Air and Radiation (in Washington, D.C., and Ann  Arbor, Michigan), their activities to ensure timely compliance with the  standards, as well as their plans if the standards cannot be implemented on  schedule. We conducted our work between January 2003 and February 2004 in  accordance with generally accepted government auditing standards.",
      " Analysis of Class 8 Truck Production Data:  January 1992 through June 2003 This appendix describes the econometric models we used to analyze the  relationship between EPA\u2019s 1998 consent decrees with diesel engine  manufacturers and subsequent demand for Class 8 trucks. We used  quarterly data on U.S. and Canadian production of heavy-heavy-duty diesel  trucks (classified by the industry as Class 8 trucks) for the years 1992  through 2003.  We also accounted for the possible effects of gross  domestic product (GDP), diesel fuel prices, and seasonal factors on truck  demand in our analysis.",
      " After applying standard econometric techniques to control for possible  biases in our analysis, we found that there was a significant increase in  Class 8 truck production, ranging from about 19,000 to 24,000 trucks, in the  6 months before October 2002, which may be associated with EPA\u2019s  consent decrees. These amounts represent 20 percent to 26 percent of the  total 93,000 Class 8 diesel trucks produced in U.S. and Canadian plants  during that 6-month period. Theoretical  Framework To describe how EPA\u2019s consent decrees may have affected truck demand,  we defined a binary variable,",
      " CD. CD takes the value of one for the 6-month  period prior to October 2002 and the value of zero otherwise. In addition,  since truck demand is likely to be seasonal, related to the strength of the  economy, and related to diesel fuel prices, we included these three factors  in our basic model. Q=\u03b2 +\u03b3 T T T \u2206GDP +\u03b2 DP+ \u03b2 CD +\u03b5,                          (1) where  \u03b2, and \u03b3  are coefficients to be estimated. Q,  \u2206GDP, and DP denote quarterly truck production,, T are  binary variables, which,",
      " like CD, take values of one for specified quarters  but the value of zero otherwise. The three binary variables, T, and T is a random error, to which all standard assumptions apply; t  is the index for time period. The GDP is an important indicator of the strength of the economy, which  can be used by truck operators to gauge the strength of future demand for  their services. We expect truck operators to purchase more trucks in  response to a strong economy and vice versa, which implies a positive \u03b2 in  equation (1). On the other hand, we expect truck operators to delay truck  purchases if diesel fuel prices are increasing,",
      " because of the importance of  fuel in operating trucks.  As a result, we expect \u03b2, will be positive in equation (1). =\u03c1\u03b5t-1+ \u00b5. The numbers for AR(1), as  shown in table 7 for the analysis results represent the coefficient \u03c1.. Q=\u03b2 +\u03b3+\u03b3 T T +\u03b2 DP+\u03b2 CD +AR(1)+\u00b5,             (2) Q=\u03b2 T+\u03b3+\u03b2 \u2206GDP +\u03b2+\u03b2 Qt-1 +AR(1)+\u00b5, (3) Q=\u03b2 +\u03b3+\u03b3 T T +\u03b2 DP+\u03b2 CD +\u03b2 \u2206GDPt-",
      "1 +\u03b2 DPt- 1+AR(1)+\u00b5                                                                                            (4) Including AR(1) in models (2) through (4) allows us to account for the  possible temporal correlation or autocorrelation of factors that we did not  consider\u2014for example, truck insurance premiums and used truck prices,  among other factors\u2014with GDP or fuel prices. We included Qt-1, as in  model (3), because truck production in the current period is closely  associated with production in previous periods. In model (4), we included  the lagged GDP growth rate, \u2206GDPt-1, and fuel prices,",
      " DPt-1, in the previous  period because truck operators may purchase more trucks in response to  strong growth rates in GDP in previous periods, and they may delay truck  purchases when diesel fuel prices have been increasing in previous  periods. Data Used in the  Estimation Data on Class-8 Truck  Production in U.S. and  Canadian Factories Although EPA\u2019s consent decrees directly affected the cost and engineering  of diesel engines, data on diesel engine prices were not available.  Therefore, we used data on quarterly Class-8 truck production in the United States and Canada from 1992 through June 2003. Truck production is closely tied to diesel engine production with a slight lag.",
      " In addition,  for the best measurement, we intended to include only trucks produced, domestically or  abroad, for U.S. domestic consumption and exclude those produced for overseas markets.  However, this approach would not allow us to include in our analysis data from 1992  through 1997, because Ward\u2019s included separate domestic and export data for Class-8 truck  production in the United States and Canada only after 1997. Prior to 1998, truck production  data were aggregated for both the United States and Canada. The aggregate U.S. and  Canadian truck production should reflect closely the number of trucks produced,  domestically or abroad,",
      " for operation in the United States because the total Canadian truck  production was about one-sixth the size of total U.S. and Canada production, about three- quarters of the total Canadian production were exported to the United States, and about 86  percent of the Class-8 trucks produced in the United States are for domestic consumption  (calculations based on Ward\u2019s data on U.S. and Canadian production from 1998 through the  first half of 2003). We made this adjustment in order to be consistent with BEA\u2019s inflation adjustment for GDP  at 1996 price levels. services as alternative measures for GDP. These two indicators are more  closely related to truck production than GDP.",
      " Table 6 shows descriptive statistics of the three key variables used in the  estimation. Discussion of Results  of Analysis Table 7 presents the results of our analysis using total quarterly class-8  truck production in the United States and Canada as the dependent  variable. In addition, we performed various analyses using alternative combinations  and definitions of variables to test if our analysis results are sensitive to the  choices of variables. is not explained by the included variables. In addition, the Durbin- Watson (DW) statistic of 0.352, which is less than the critical value of 1.019  for a sample size of 45 with 7 explanatory variables at the 1 percent  significance level,",
      " suggests a strong positive autocorrelation of residuals  between the current and previous periods. Results of Model (2) We controlled for the possible autocorrelation, suggested by the low DW  statistic in model (1), by modeling the error term as a first-order  autoregressive process, AR(1), in model (2). As shown in table 7, the  adjusted R More importantly, only the coefficient of CD and the  constant term are statistically significant, suggesting an increase of 20,198  (the coefficient 10,099 multiplied by 2) Class-8 trucks in the 6 months prior  to EPA\u2019s consent decrees.",
      " This increase in truck production may be  associated with the decrees. For example, we substituted GDP with two other measures: GDP less consumption  expenditures on services, and ATA\u2019s tonnage index. In some analyses, we used annualized  percentage change in diesel prices instead of diesel fuel prices at 1996 dollars. In addition,  we experimented with different time lags. The results produced using model specifications  (2) through (4) with these alternative estimates consistently showed a signifcant increase in  truck production associated with EPA\u2019s consent decrees. For example, when we re- estimated models (1) through (4)",
      " using GDP less expenditures on services, the coefficients  of CD in models (1) through (4) are \u20135926.10, 10080.32, 11954.69, and 9381.81, respectively.  The above coefficients for models (2) through (4) are statistically significant at the 5 percent  level. Results of Model (3) For model (3), we added truck production in the previous period, Qt-1, to  model (2) to account for the effects of truck inventories. As a result, CD\u2019s  coefficient increases. The coefficient of \u2206GDP increased appreciably and  becomes statistically significant.",
      " The coefficient of DP changes little and  also becomes statistically significant. The coefficient of Qt-1 is positive and  statistically significant, suggesting that an increase in truck production in  the previous period is likely to be followed by an increase in production in  the current period. The high-adjusted R statistic of 0.933 also suggests that  much of the variation of Q  is explained by the included variables. The DW  statistic of 1.945 unambiguously suggests that including truck production  in the previous period can adequately account for the autocorrelation in the  error terms. Results of Model (4) In model (4), we added \u2206GDP,",
      " and DP of previous periods to model (2)  because they also may be good indicators of truck production in the  current period. Compared to model (3), including the additional lagged  variables to model (2) does not enable us to explain more of the variation  in truck production as suggested by a decreasing adjusted Rstrategies, our analysis does not assess the full extent of the effects of  EPA\u2019s consent decrees on truck operators\u2019 business operations. Comments from the Environmental  Protection Agency The following are GAO\u2019s comments on the Environmental Protection  Agency\u2019s letter dated February 24, 2004. GAO Comments As a preface to addressing EPA\u2019s specific comments on this report below,",
      "  GAO wants to reiterate that it recognizes how critical the anticipated  emissions reductions are for many states whose air quality is in trouble,  how critical it is for the 2007 standards to succeed in order to significantly  reduce emissions and protect public health, and all of the work and  investment the agency and the engine, emissions control, and fuel  industries have made. These critically important objectives, however,  depend to a large extent on trucking companies\u2019 decisions to buy and run  the improved engines. In our view, EPA has an important window of  opportunity to make some improvements in the process it is using to work  with stakeholders to both ensure technology is ready and allay any  remaining stakeholder concerns about the new engines and fuel.",
      "  Addressing concerns about whether fuel will be available in sufficient  quantities and locations and the new engines will be ready in time to test  should not be overly burdensome and will help to prevent a significant pre- buy of older engines before 2007 that would delay emissions and health  benefits as occurred in 2002.  1. EPA agrees that, in many respects, GAO\u2019s report is consistent with the  agency\u2019s assessment of the situation leading up to the implementation  of the 2007 standards. However, we do not agree with EPA\u2019s assertion  that we gave disproportionate weight and consideration to the views of  the trucking industry which conflict with the agency\u2019s assessment for  the following reasons.",
      " First, we carefully and consistently collected the  views of all stakeholders\u2014engine and emissions control  manufacturers, trucking companies, fuel industry representatives, and  environmental and health groups\u2014and were equally careful to  accurately present and assess their views. Consistent with our  methodology and quality assurance standards, we also did not simply  accept stakeholders\u2019 views at face value, but did where possible assess  the basis for their views. For example, we determined that the trucking  company representatives\u2019 concerns about the reliability and costs of  the new engines were based on the technological leap required to meet  the 2007 standards; that EPA\u2019s estimates of the new engines\u2019 costs were  developed in 2000 before engine designs were developed;",
      " and that  some of the engine manufacturers and fuel industry representatives  designing the technologies acknowledged that there were remaining  technological risks and questions. We also carefully point out that we  were unable to fully confirm some of the views and opinions of  stakeholders because the industries designing new engine and fuel  technology were not comfortable in releasing information about their  individual designs. In addition, we reviewed reports EPA issued on the  progress towards the standards, but the reports primarily represented  EPA\u2019s conclusions and did not present the specific data on which these  were based.  2. We also disagree with EPA\u2019s assertion that we did not consider  additional information and evidence that agency program managers  provided to GAO late in the course of our work after reviewing a draft  summary of the facts to be used in the report.",
      " Throughout our review,  we worked closely with the EPA program managers responsible for the  2007 standards to ensure that we clearly understood the issues and  EPA\u2019s positions, and had the most current information. In addition, to  ensure the accuracy of the information in our report, at the conclusion  of our work, we provided EPA program managers a summary of the  factual information supporting our findings for their review. At that  time, EPA provided extensive written comments on the summary, along  with a number of press releases from engine manufacturers and trade  press articles. However, the agency did not provide any additional  quantitative data or other information that would allow us to better  assess the stakeholders\u2019 positions.",
      " We spent considerable time  carefully assessing EPA\u2019s comments and the additional information and  made a number of changes to the report where appropriate.  Furthermore, we extended our report time frame by 6 weeks to give  EPA extra time to provide its comments and supporting information  and for us to carefully assess it and respond accordingly.  3. We also disagree with several EPA assertions that the report has an  overall negative tone and overstates the technological challenges to  successfully deliver the necessary fuel and engines, does not clearly  state engine manufacturers\u2019 commitments to have test engines ready in  time, and accepts at face value the trucking representatives\u2019 position  that having test vehicles by mid-",
      "2005 is a critical deadline. We devote  considerable narrative to the views of the agency and all the  stakeholders who share these views that the technologies\u2014for both  cleaner engines and low-sulfur fuel\u2014are on track. In addition, though,  we have a professional responsibility to acknowledge that some  stakeholders\u2014including some engine manufacturers and fuel  distribution and trucking industry representatives\u2014expressed  concerns over the remaining technological risks and questions. As  such, we accurately describe these challenges and the concerns they  create. For example, EPA asserts that the report projects a negative  tone with regard to the progress of the oil industry in preparing to  supply low-sulfur fuel for 2007.",
      " However, we report that the fuel  industry stakeholders we contacted identified a number of remaining  issues that need to be resolved, none of which they considered to be  insurmountable. We reviewed EPA\u2019s summary of pre-compliance  reports detailing refiners\u2019 plans to produce low-sulfur fuel and agree  that the refiners\u2019 ability to produce the fuel does not appear to be an  area of concern. However, these reports do not address the primary  concerns that industry representatives raised, which relate to  distribution challenges. As we make clear in the report, without trying  to further alleviate these and other stakeholder concerns,",
      " the agency  may not achieve its emissions and public health goals with the 2007  standards. We also took great care to include the most current information  possible in our report. For example, in January 2004, we updated our  report to reflect that engine companies had finally publicly announced  the technologies they would use to meet the 2007 standards, although 6  months later than planned. In addition, after several of the  manufacturers subsequently issued press releases in January and  February 2004, stating that they expected to have at least a limited  number of prototype engines ready for testing by mid-2005,",
      " we re- contacted the trucking company representatives to determine the  extent to which these announcements addressed their concerns, and  updated the report accordingly. Additionally, GAO does report the trucking representatives\u2019 position  that they need to have prototypes by about mid-2005, as well as the  basis for their position, which is to (a) determine engine reliability in all  seasons and weather conditions and for long enough periods to  determine the resulting operating and maintenance impacts, and (b)  subsequently develop their acquisition strategies based on this  information. These arguments seem plausible. However, more  importantly, we report their position because some of the  representatives said that without enough testing time,",
      " companies were  already considering whether to pre-buy older engines before 2007, in  larger quantities than they did for 2002, further jeopardizing emissions  and health benefits. We believe that this is the important concern EPA  needed to be aware of and try to mitigate. We did not attempt to  confirm the validity of the 18-24 month testing time frame  representatives said they needed for the 2007 standards with the  industry\u2019s historical time frames to test upgraded engines. In part, we  did not because the engine designs for 2007 are a technological leap  over current equipment and may require longer lead times to develop.",
      "  Similarly, they may need longer lead times for testing. 4. We agree with EPA\u2019s concern about clearly distinguishing the 2002  consent decrees and 2007 standards, and made changes to the report as  a result. The engine requirements established in the consent decrees  were done as part of a legal settlement in response to an enforcement  action, not through a public rulemaking process where all stakeholders  had input into establishing the requirements. In addition, the engine  companies had a relatively small amount of lead time to design the new  engines because as part of the settlement, manufacturers agreed to  accelerate the schedule for new engines by 15 months.",
      " In contrast, the  2007 standards were developed through a more extensive public  rulemaking process with wide participation from all stakeholders, and  manufacturers and fuel refiners had about 6 years lead time to develop  the needed emissions control, engine, and fuel technologies. We  disagree with EPA, however, that these two actions are not comparable  in any respect. Whether new engines are being designed in response to  an enforcement action or rulemaking, the industry\u2019s market reaction to  the consent decrees may offer some lessons learned that EPA could  incorporate into its process for implementing the 2007 standards. 5. We agree that EPA deserves credit for the large number of voluntary  activities it has undertaken to work with various stakeholders to help  ensure that the technology will be ready in time and devote  considerable narrative to describing these activities in the report.",
      " We  were also very careful to present a balanced view of the stakeholders\u2019  opinions about the agency\u2019s activities. For this reason, we were  obligated to acknowledge that some of the engine manufacturers and  trucking representatives raised questions about the agency\u2019s openness  to their concerns and willingness to address them. EPA maintains that  the agency had extensive involvement with stakeholders\u2014including  the trucking industry\u2014in developing the 2007 rule. This is true.  However, the trucking industry\u2019s concerns are not with the 2000  rulemaking process, but with the process EPA has used since then to  involve stakeholders in implementing the standards.",
      " For example, as  we note in the report, EPA officials acknowledged that the agency  initially did not invite anyone from the trucking industry to participate  on the 2002 Clean Diesel Independent Review Panel and only did so  after the industry lobbied the agency. 6. As to GAO\u2019s recommendations, EPA agrees with the merits of providing  financial incentives\u2014although the agency does not see a role for itself  in this action\u2014and disagrees with the merits of convening an  independent panel. We want to clarify that GAO is recommending that  the agency consider additional steps to alleviate existing concerns,  avoid a significant pre-buy of older engines,",
      " and better guarantee that  the emissions and health benefits are achieved. We thereby offer  several alternative actions for the agency to consider, but do not intend  to limit the agency in any way to these alternatives or suggest that they  are the only effective means to resolve concerns. That said, with regard  to the suggestion of using financial incentives, we recognize that the  Congress must provide the agency direction and funding for such an  approach, but expect that it would also look to the agency to play a  role, such as submitting a proposal for incentives or at least helping to  determine their merits and costs. As to convening an independent  review panel,",
      " we appreciate EPA\u2019s concerns that this could  unnecessarily delay the schedule for implementing the standards, and  the agency is in the best position to determine this. But, if EPA has the  necessary evidence available to demonstrate technologies are ready as  it contends it does, it should not be difficult or take considerable time  for an independent body to review the data and validate this conclusion  for all affected stakeholders. Otherwise, if the trucking industry  remains concerned and pre-buys older engines prior to 2007, this will in  effect delay implementation of the standards and their anticipated  benefits. GAO Contacts and Staff Acknowledgments GAO Contacts Acknowledgments In addition to the individuals named above,",
      " Charles W. Bausell, Jr., Tyra  DiPalma-Vigil, Richard Frankel, Terence Lam, and Eugene Wisnoski made  key contributions to this report. Important contributions were also made  by Nancy Crothers and Amy Webbink. GAO\u2019s Mission The General Accounting Office, the audit, evaluation and investigative arm of  Congress, exists to support Congress in meeting its constitutional responsibilities  and to help improve the performance and accountability of the federal government  for the American people. GAO examines the use of public funds; evaluates federal  programs and policies; and provides analyses, recommendations, and other  assistance to help Congress make informed oversight,",
      " policy, and funding  decisions. GAO\u2019s commitment to good government is reflected in its core values of  accountability, integrity, and reliability. Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost is  through the Internet. GAO\u2019s Web site (www.gao.gov) contains abstracts and full- text files of current reports and testimony and an expanding archive of older  products. The Web site features a search engine to help you locate documents  using key words and phrases. You can print these documents in their entirety,  including charts and other graphics.",
      " Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as \u201cToday\u2019s Reports,\u201d on its Web site  daily. The list contains links to the full-text document files. To have GAO e-mail this  list to you every afternoon, go to www.gao.gov and select \u201cSubscribe to   e-mail alerts\u201d under the \u201cOrder GAO Products\u201d heading. Order by Mail or Phone To Report Fraud,  Waste, and Abuse in  Federal Programs Public Affairs\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 91,
    "question": null,
    "answer": "Zimbabwe's prospects appeared promising in 1980, as it gained independence after a long liberation war. However, rising inflation and unemployment bred discontent in the 1990s and led in 1999 to the formation of the opposition Movement for Democratic Change (MDC). The MDC surprised many with its initial success, campaigning against a 2000 referendum that would have legalized the president's continued rule, made government officials immune from prosecution, and allowed the uncompensated seizure of white-owned land for redistribution to black farmers. The referendum failed, and the MDC won nearly half the seats in the 2000 parliamentary election. President Robert Mugabe's ruling party subsequently took numerous actions to bolster its power that were deemed undemocratic by many in the international community. President Mugabe's government was seen as increasingly autocratic and repressive by its critics, and its human rights record was poor. The government suppressed freedom of speech and assembly, and many contend that the ruling party restricted access to food, already scarce, in opposition areas. The MDC, divided over how to respond, split into two factions in 2005, hampering its ability to challenge the ruling party. Reports of political violence rose sharply after Zimbabwe's March 2008 elections, when, for the first time since independence, Mugabe's party lost its majority in the National Assembly. Mugabe's re-election as president in the June runoff was viewed as illegitimate by the United States and the United Nations Secretary-General, among others. In September 2008, after several weeks of negotiations, Mugabe and MDC leader Morgan Tsvangirai signed a power-sharing arrangement aimed at resolving the political standoff. As part of the deal, Tsvangirai became prime minister of a new coalition government in February 2009, and cabinet positions were divided among the parties.  Zimbabwe's economic output had decreased dramatically in the decade prior to the signing of the power-sharing agreement in 2008. At that time, many considered the economy to be in a state of collapse, with official inflation having risen above 200,000,000%. Although the economy has since stabilized, unemployment remains over 90%. An adult HIV prevalence rate of almost 14% has contributed to a sharp drop in life expectancy, and a nationwide cholera outbreak from late 2008 through early 2009 resulted in almost 100,000 infections and over 4,300 deaths. The number of Zimbabweans requiring food aid has declined significantly since 2008, but chronic malnutrition rates remain high and localized food insecurity persists. The deterioration of economic and humanitarian conditions over the past decade led many to emigrate to neighboring countries, which has created a substantial burden on the region. Zimbabwe appears to be making a gradual shift from humanitarian crisis toward recovery, but much of the population remains highly vulnerable. Political uncertainty continues to threaten the country's economic outlook. Robert Mugabe has historically enjoyed considerable popularity in Africa as a former liberation leader, but some African leaders have viewed his policies as increasingly damaging to the continent and have urged democratic reforms in recent years. Following controversial elections in 2000 and citing abuses of human rights and the rule of law, the United States and some other former allies of the government became vocal critics. The United States has enforced targeted sanctions against top Zimbabwe officials and associates since 2002. This report provides background on events leading up to and surrounding the country's most recent elections, in March and June 2008. For further discussion of Zimbabwe's power sharing agreement, its transitional government, and other more recent developments, please see CRS Report RL34509, Zimbabwe: The Transitional Government and Implications for U.S. Policy, by Lauren Ploch.\n",
    "docs": [
      "Overview On September 15, 2008, Robert Mugabe, president of Zimbabwe for more than two decades, and opposition leader Morgan Tsvangirai signed a power-sharing arrangement to resolve a political standoff stemming from flawed elections earlier in the year. The Global Political Agreement (GPA) laid the foundations for a transitional government and outlined a time frame for the drafting and adoption of a new constitution. As part of the deal, which was not implemented until February 2009 under pressure from regional powers and the international community, Tsvangirai became prime minister of a new coalition government. Cabinet positions have been divided among the parties.",
      " Many observers remain skeptical that the parties will be able to work together to implement the remaining political reforms deemed necessary by international donors. The coalition government has faced considerable challenges in prioritizing development needs, attracting donor funding, and making the reforms necessary for the country's economic recovery. For further discussion of the coalition government and other current events, please see CRS Report RL34509, Zimbabwe: The Transitional Government and Implications for U.S. Policy, by Lauren Ploch. Background After years of economic sanctions by the international community and a decades-long civil war that resulted in more than 30,000 dead, the white minority rule government of Southern Rhodesia concluded a series of agreements with the black majority in 1979 that resulted in the establishment of the government of the Republic of Zimbabwe.",
      " Among the greatest challenges facing the new government was the demand by the majority for greater equity in land distribution. At independence, the white minority, who composed less than 5% of the population, owned the vast majority of arable land. Many observers at that time considered the country's white-owned commercial farms crucial to the country's economy, although there was a general recognition that land reform was necessary. Britain initially funded a \"willing buyer, willing seller\" program to redistribute commercial farmland, offering to compensate amenable white farmers. Dissatisfaction with the pace of land reform grew and led in the 1990s to spontaneous and often violent farm invasions.",
      " At the same time, the country's labor movement and a segment of its urban middle class were becoming increasingly critical of the government's economic performance. Facing rising political and economic challenges, the government of Zimbabwe began to implement aggressive land expropriation policies, leading Britain and other donors to begin withdrawing financial support for resettlement. In 2000, the government held a referendum to approve changes to the constitution that would allow land seizures without compensation, a responsibility that in its view lay with Britain. The referendum was rejected by 55% of voters and was seen as a victory for a new opposition party, the Movement for Democratic Change (MDC). Within days of the vote war veterans and ruling party supporters moved onto an estimated 1,",
      "000 white-owned farms, and, months later, the president invoked emergency powers to take land without compensation. During this time there were numerous attacks against white farmers and their employees, as well as against supporters of the MDC; more than 30 people were killed. From 2000 onward, the country's problems deepened. Substantial political violence and human rights violations have accompanied elections. The broad scale of such abuses in the wake of the 2008 elections brought international condemnation, but little consensus on how best to stop the violence. Reports of government-orchestrated human rights abuses continued for months afterward. Zimbabwe's political difficulties were accompanied by a sharp decline in living standards,",
      " with more than 80% of the population living on less than $1 per day by 2009. Once touted as a potential \"breadbasket of Africa,\" a significant portion of Zimbabwe's population became periodically dependent on food aid. An estimated 13.7% of adults are infected by the HIV/AIDS virus, and life expectancy fell from an estimated 56 years in 1990 to 44 in 2008. Foreign Policy magazine ranked Zimbabwe second in its index of failed states, behind Somalia, in 2009. Its ranking \"improved\" to that of fourth in the 2010 index and sixth in 2011,",
      " but the classification suggests considerable room for progress. Observers are concerned that the difficulties confronting Zimbabwe have affected neighboring countries and deterred investors from the country and the wider region. Political Situation Zimbabwe has been ruled since independence by the Zimbabwe African National Union - Patriotic Front (ZANU-PF), which has come under increasing scrutiny from human rights activists, both at home and abroad, in the past decade. Although ZANU-PF now technically shares power in the coalition government, the party still controls the presidency and key security ministries. Critics have cited high levels of corruption, political violence, and strictly enforced laws restricting basic freedoms. The party contends that its detractors have engaged in a \"propaganda war\"",
      " backed by Britain and the United States, using democracy and human rights as a cover to push for regime change. Many domestic and international observers have judged elections since 2000 to be \"far from free and fair.\" The country's main opposition party, the MDC, split over tactical issues in 2005; Morgan Tsvangirai's faction remains dominant. ZANU-PF has also suffered internal competition, and some observers suggest that opposition to President Mugabe's continued rule has grown within the party. Internal ZANU-PF Struggles In view of President Mugabe's advanced age, the issue of presidential succession continues to be a matter of intense interest to observers.",
      " Some analysts have expressed concern that Zimbabwe could experience a violent succession struggle or a possible military coup in the event of his death. Under the constitution, the president may designate one of his two vice presidents to serve as acting president until the next election should he leave office, but Mugabe has never done so. One of the vice presidential posts was vacant prior to ZANU-PF's 2004 party conference, setting off a power struggle that transformed the political scene by revealing internal party divisions. Mugabe, who will turn 90 in 2014, appears to be in no rush to relinquish his post, although some rumors suggest his health is deteriorating.",
      " Prior to the 2004 party conference, Emmerson Mnangagwa, then speaker of the parliament and a political veteran long touted as Mugabe's heir, campaigned actively for the position of ZANU-PF's second vice president. His selection to that position would likely have assured his appointment as vice president of the country, but Mnangagwa was caught off guard when Mugabe decided that the country should have a woman in the post. Mugabe's choice for the position, Joice Mujuru, was inevitably elected by the party to serve as Zimbabwe's second vice president, alongside Vice President Joseph Msika. Mujuru,",
      " a veteran of the liberation war and a women's movement leader, had been serving as Minister of Water Resources and Infrastructure. According to reports, neither the Mnangagwa nor Mujuru camps initially supported Mugabe's proposal in 2007 to extend his term, which was set to expire after the 2008 elections, to 2010. Once a strong Mugabe ally, retired General Solomon \"Rex\" Mujuru, Joice's husband, was vocal in his disapproval and is rumored to have been pivotal in blocking the proposal at the national conference. Some have suggested that Mujuru covertly backed another ZANU-PF official,",
      " Simba Makoni, over his wife as a potential successor to Mugabe. Makoni, a technocrat, was considered by some to be a compromise candidate, untainted by the corruption scandals that have plagued others. Mugabe's own choice for a successor is unknown. Mnangagwa appears to have reconciled with Mugabe, leading the party's 2008 election efforts and taking a central role in guiding the country's security forces. He leads the Ministry of Defense in the transitional government. The outcome of any succession struggle within ZANU-PF may be affected by the country's ethnic and clan divisions. Mugabe and other key party officials are from the Zezuru clan of the Shona people,",
      " who are dominant in a wide area around the capital, Harare. Solomon Mujuru, who like his wife is Zezuru, was a close advisor to Mugabe and was once regarded as a king-maker. His death in August 2011 in a house fire has been viewed with suspicion by many in Zimbabwe. Emmerson Mnangagwa is seen as a representative of the large Karanga clan, which reportedly feels that its turn to control the reins of power has come. Mnangagwa's viability as a presidential contender has been hampered by accusations that he led the purge of alleged regime opponents in provinces of Matabeleland in the 1980s,",
      " which is believed to have resulted in the deaths of 20,000 Ndebele civilians. The events of the 1980s help to explain why Zimbabwe's second-largest city, Bulawayo, has long been regarded as a center of opposition to the government, although Mugabe has sought to gain support by elevating Ndebele to party and government posts.  Vice President Joseph Msika died in August 2009 at age 86. According to some reports, Mnangagwa lobbied, but failed, in the following months to have Joice Mujuru replaced as vice president with a candidate of his own as the party reconsidered its leadership slate.",
      " In December 2009, delegates at ZANU-PF's party congress re-elected Mujuru as vice president and chose then-party national chairman John Nkomo to replace Msika. Both Msika and Nkomo are Ndebele. The Movement for Democratic Change (MDC) The MDC party emerged out of the Zimbabwe labor movement. As poverty deepened in Zimbabwe in the late 1990s, and allegations of corruption against regime leaders became more frequent, the Zimbabwe Congress of Trade Unions (ZCTU) organized a number of strikes and protests. In September 1999, the MDC was formed on this trade union base with support from many in Zimbabwe's churches and in urban areas.",
      " In February 2000, MDC members elected the ZCTU secretary general, Morgan Tsvangirai, born in 1952, as MDC president. The MDC proved formidable in the 2000 referendum and in the 2000 parliamentary election; some contend their success may have prompted a range of repressive actions against the party and its supporters. Among the retaliatory measures alleged, several leaders of the MDC, including Tsvangirai himself, were arrested and charged with treason two weeks before the MDC leader first ran against Mugabe, in the 2002 presidential elections. Division in the Opposition In late 2004,",
      " the MDC became increasingly divided in its strategy to challenge ZANU-PF dominance. MDC officials initially decided that the party would not participate in the 2005 parliamentary race unless the government took steps to assure free and fair elections. Several members argued that this would deprive the MDC of any influence in parliament and hand control of parliament to Mugabe on a \"silver platter.\" Tsvangirai supported a boycott, arguing that the elections should be postponed until substantial reforms could be implemented. The party ultimately participated \"under protest,\" but did not do as well as in previous polls. As the subsequent 2005 Senate elections approached,",
      " the MDC was again divided on whether to participate. Supported by some civil society groups who suggested the elections were \"meaningless\" and \"a waste of time and resources,\" Tsvangirai argued that participating would legitimize previous \"rigged\" elections, and vowed instead to lead the opposition through mass action. He was opposed by a group led by the MDC's secretary-general, Welshman Ncube and MDC vice president Gibson Sibanda. In October, the party's national council voted 33-31 to participate in the election, but Tsvangirai overruled the vote and, reportedly in violation of the MDC constitution,",
      " expelled 26 senior officials from the party. Only the Ncube faction fielded candidates in the Senate race; they gained only seven seats. Both factions held party conferences in 2006; Tsvangirai was confirmed the leader of one faction, while Ncube ceded control of the \"pro-senate\" faction to Arthur Mutambara, a noted student leader in the 1980s. The factions attacked each other in the press, and there were allegations that the Tsvangirai faction was behind a violent assault on Member of Parliament (MP) Trudy Stevenson and several other Mutambara supporters. Stevenson identified the youths who attacked her as known followers of Tsvangirai,",
      " who denied the charges and denounced the beatings.  Opposition Defiance Against a Ban on Protests and Rallies In February 2007, the Zimbabwe government announced a three-month ban on political rallies and public demonstrations in Harare \"due to the volatile situation in the country.\" The MDC appealed to the High Court to lift the ban, which coincided with an increase in public activity by the opposition and civic groups. On February 18, despite a High Court decision allowing Morgan Tsvangirai to launch his presidential campaign at a rally in Harare, police reportedly used batons and water cannons to break up the event.",
      " A rally planned by the Mutambara faction in Bulawayo was similarly dispersed, and numerous opposition supporters were arrested. The ban was announced three days later, and police subsequently arrested several hundred civic activists. On March 11, 2007, police broke up a prayer meeting attended by both Tsvangirai and Mutambara, arresting an estimated 50 members of the opposition and civil society, including both MDC leaders. Police shot and killed one opposition supporter after MDC youth reportedly began throwing stones at police. The following day, police arrested an estimated 240 opposition supporters during a demonstration protesting the March 11 crackdown. Media and human rights reports suggest that Tsvangirai was severely beaten while in custody,",
      " and he appeared in court days later showing signs of head trauma. Other opposition and civic leaders also reportedly sustained injuries after their arrest. The protestors were released into the custody of their lawyers on March 14 after prosecutors reportedly failed to appear at their court hearing. The Zimbabwean government contended that the MDC incited violence and was responsible for attacks on several civilian targets and a Harare police station. The March 2007 incident spurred international media attention and drew considerable criticism from many world leaders. U.S. Secretary of State Condoleezza Rice issued a strong statement, saying, \"The world community again has been shown that the regime of Robert Mugabe is ruthless and repressive and creates only suffering for the people of Zimbabwe.\" U.N.",
      " Secretary-General Ban Ki-moon also condemned the \"reported beating of those leaders in police custody\" and criticized the ban, noting that \"such actions violate the basic democratic right of citizens to engage in peaceful assembly.\" Several of Zimbabwe's neighbors, including South Africa and Zambia, issued statements of concern regarding the incident, and Ghanaian President John Kufuor, then chairman of the AU, called the event \"very embarrassing.\" Restrictions on Political Freedoms Legislative actions by Zimbabwe's parliament, led by ZANU-PF until the 2008 elections, contributed to concerns about human rights in Zimbabwe. Laws that critics contend have been used to quiet dissent and influence political developments include the following:",
      " The Access to Information and Protection of Privacy Act (AIPPA). This 2002 act requires that all media services be licensed, and that all journalists, including foreign correspondents, be officially accredited. The government, citing AIPPA, closed The Daily News, at the time the only remaining independent daily, in 2003 (it began printing again in March 2011). The Media Institute of Southern Africa (MISA) has called AIPPA \"one of the most effective legal instruments of state control over the media and civil society communication anywhere in the world.\" ZANU-PF counters that AIPPA encourages responsible journalism.",
      " The African Commission on Human and People's Rights (ACHPR) ruled in 2009 that two sections of AIPPA should be repealed. The Public Order and Security Act (POSA), the Criminal Law (Codification and Reform) Act (\"Criminal Law Code\"), and the Miscellaneous Offences Act (MOA). POSA, also enacted in 2002, prohibits statements deemed to be \"abusive, indecent, obscene, or false\" about the president or considered to \"undermin(e) public confidence\" in the security forces, and prohibits false statements prejudicial to the state. The measure has been used in the arrest of thousands of political opponents and to break up public meetings and rallies.",
      " Zimbabweans overheard criticizing the president in public have also been jailed. The MOA criminalized \"conduct likely to cause a breach of the peace,\" and was often used with POSA against activists. Police and \"persons assisting the police\" may use \"all necessary force\" to stop unlawful gatherings. In 2006 many offences under POSA and MOA were transferred to a new Criminal Law Code. The Private Voluntary Organizations (PVO) Act. Critics suggest that the government has used the 2002 PVO Act to limit the activities of domestic NGOs, who are required to register with the government. A \"probe team\" of intelligence officers has wide powers to investigate groups and demand documents related to activities and funding.",
      " The ACHPR has recommended that it be repealed. In 2005, ZANU-PF won over two-thirds of the seats in the House of Assembly, giving it the power to amend the constitution. The parliament then passed several controversial constitutional amendments which some analysts contend breach international human rights standards. The 2005 Constitution of Zimbabwe Amendment Act (No.17) allowed the government to limit the right to freedom of movement when it is in \"the public interest\" or in \"the economic interests of the State\" and restricts the right to leave Zimbabwe. Journalists, MDC officials, and union leaders had their passports revoked under the act,",
      " with the government charging that they planned to lobby abroad for sanctions or military intervention against the country. The act also prevents land owners from challenging the acquisition of agricultural land by the state. It paved the way for passage of Gazetted Land Act in late 2006, making it illegal for former farm owners to occupy nationalized land and allowing the government to evict farmers and resettle the land without compensation. The 2005 constitutional amendment also revived the upper house of parliament. The MDC, prior to taking a majority in the House of Assembly in the 2008 elections, had limited success in preventing ZANU-PF from passing other legislation that it contended would restrict freedoms.",
      " An Interception of Communications Bill, which would allow the government to monitor all Internet, email, and telephone communications for threats to national security, was initially stalled by the Parliamentary Legal Committee (chaired by an MDC MP), but was later revised and approved in June 2007. Critics suggest that the revisions were cosmetic. Negotiations led by South Africa between Zimbabwe's political parties prior to the 2008 elections resulted in amendments to both AIPPA and POSA. Critics suggest the amendments did not fully address human rights concerns and have not been adequately implemented. The Media Institute of Southern Africa dismissed the AIPPA changes as \"dwelling \u2026 on inconsequential issues which will not advance basic freedoms.\" Numerous MDC rallies were blocked prior to the 2008 runoff,",
      " despite court orders allowing the events. Political space for civil society has widened since the formation of the coalition government, but police continued to use POSA on occasion to arrest civil society leaders. In December 2010, the MDC majority in the House passed legislation to amend POSA; to date, the ZANU-PF Senate has not approved the bill. Political Violence Human rights groups have documented numerous accounts of political violence in Zimbabwe in the past decade. In 2006, Freedom House declared that \"Zimbabwe's descent into the ranks of the world's most repressive states continued unabated.\" In 2007, the State Department reported that Zimbabwe's government has \"engaged in the pervasive and systematic abuse of human rights,",
      " which increased significantly during the year\" and contended that \"state-sanctioned use of excessive force increased, and security forces tortured members of the opposition, student leaders, and civil society activists.\" Amnesty International was similarly critical. The State Department's most recent human rights report, issued in April 2011, suggests that abuses continue, in spite of the transitional government's formation: Security forces, the police, and ZANU-PF-dominated elements of the government continued to commit numerous, serious human rights abuses. ZANU-PF's dominant control and manipulation of the political process through trumped-up charges, arbitrary arrest, intimidation, and corruption effectively negated the right of citizens to change their government.",
      " There were no politically motivated killings by government agents during the year, however, security forces continued to torture, beat, and abuses non ZANU-PF political activists and party members, student leaders, and civil society activists with impunity. Projections of an early election in 2011 also led to an increase in the number of cases of harassment and intimidation... Security forces continued to refuse to document cases of political violence committed by ZANU-PF loyalists against members of other political parties... Security forces, which regularly acted with impunity, arbitrarily arrested and detained activists not associated with ZANU-PF, members of civil society, labor leaders,",
      " journalists, demonstrators, and religious leaders; lengthy pretrial detention was a problem. Executive influence and interference in the judiciary continued... The government continued to use repressive laws to suppress freedom of speech, press, assembly, association, and movement... High-ranking government officials made numerous public threats of violence against demonstrators and political activists not associated with ZANU-PF.... President Mugabe has, on occasion, publicly condoned police and military brutality against Zimbabwean citizens. In 2006, during Heroes' Day, a holiday honoring war veterans, Mugabe warned that his security forces would \"pull the trigger\" against protesters. A month later, in an incident caught on video,",
      " Zimbabwean police conducted a particularly violent crackdown against leaders of the Zimbabwe Congress of Trade Unions (ZCTU), who had planned a civic protest to highlight the impact of inflation on the country's citizenry. Mugabe sanctioned the police action, saying, \"Some people are now crying foul that they were assaulted, yes you get a beating \u2026 when the police say move, move, if you don't move, you invite the police to use force.\"  Mugabe received international attention for his statement; the U.N. Country Team in Zimbabwe announced \"a profound sense of dismay\" over comments that \"might be interpreted as condoning the use of force and torture to deal with peaceful demonstrations by its citizens.\" The U.N.",
      " Special Rapporteur on Torture repeatedly requested an invitation from Zimbabwe to investigate, and the Harare magistrate who heard the case against the ZCTU leaders ordered an independent investigation into the allegations of police brutality. The Rapporteur received an invitation from Prime Minister Tsvangirai to visit Zimbabwe, but was blocked from entering the country when he tried to visit in October 2009. Human rights activists suggest that acts of political violence, such as abductions and beatings of opposition supporters, became \"more systematic and widespread\" after the events of March 2007. Despite provisions in the Electoral Laws Amendment Act banning such acts and assurances by security officials that the government would take a \"zero tolerance\"",
      " approach to violence, reports of attacks on opposition supporters further rose dramatically after the March 2008 elections. The State Department's annual human rights report on Zimbabwe states that over 289 died from injuries sustained during violence targeting the opposition in 2008, and that, according to one non-governmental organization, as many as 22,000 victims have sought treatment for political violence sustained that year. The State Department reports that, as of the most recent publication of its report, in April 2011, there had been no prosecutions or convictions related to any of the politically related killings that occurred in 2008.  Human rights reports suggest party youth militia and so-called war veterans have been the most common perpetrators of political violence,",
      " but that the police have also played a significant role. The Geneva-based International Commission of Jurists, which investigated the 2007 detention and beating of lawyers, expressed shock at the role of police in the attacks and at the \"cavalier response of Zimbabwean authorities.\" The State Department has documented multiple reports of police using excessive force and cruel, inhuman or degrading treatment against those in custody. Developments Surrounding the 2008 Elections South African Mediation International criticism of the political situation in Zimbabwe grew after the March 2007 opposition arrests, even among former allies on the continent. In one of the most critical statements from African leaders,",
      " Zambia's President Levy Mwanawasa compared the country to \"a sinking Titanic whose passengers are jumping out to save their lives.\" In South Africa, a senior Foreign Ministry official told their parliament, \"the South African government wishes to express its concern, disappointment, and disapproval of the measures undertaken by the security forces in dealing with the political protests,\" blaming the current situation on an \"absence of open political dialogue.\" SADC leaders convened an emergency summit on March 28, 2007. Given the strong statements made by some southern African leaders, many observers expected the SADC heads of state to increase pressure on Mugabe to make reforms.",
      " Reports suggest that in private the leaders may have been tough on the Zimbabwean president, who was in attendance, but their public response was deemed disappointing by human rights activists and critics of the regime. During the summit, the SADC leaders resolved to promote dialogue within the country, at the same time suggesting that Western countries should drop their sanctions against the Mugabe government and that Britain should provide funding to assist in land reform efforts. South African President Thabo Mbeki was appointed to mediate between the Zimbabwean government and the opposition. Mbeki, who opposed calls for regime change, pushed instead for elections, saying \"you might question whether these elections are genuinely free and fair... but we have to get the Zimbabweans talking so we do have elections that are free and fair.\" Talks between the Mugabe Administration and the MDC factions began in Pretoria in June 2007.",
      " According to human rights activists and the U.S. Department of State, political violence against opposition leaders and supporters continued in spite of the negotiations. The Mugabe Administration accused the opposition of being responsible for a series of bombings targeting shops, trains, and police stations, although some observers suggest the attacks were an attempt to frame the opposition. Harassment of university students by police also reportedly increased. In November 2007, 22 members of the National Constitutional Assembly, a pro-democracy civil society organization, reportedly sustained severe beatings during a peaceful protest set to coincide with a visit by President Mbeki to Harare. Although the South African negotiations resulted in several agreements between the parties,",
      " leading to the amendment of some laws seen to restrict press freedom and political activity, the talks were abandoned after Mugabe announced that elections would be held on March 29, 2008. Despite Mbeki's report to SADC leaders that his mediation had achieved \"commendable achievements,\" Tsvangirai announced in February 2008 that \"nothing has changed... changes in the law, negotiated by President Mbeki, have not changed the behavior of the dictatorship.\" Election Preparations Civil society activists reported significant pre-election irregularities prior to the March 2008 elections. Critics charged that the Zimbabwe Election Commission lacked independence, and that it was further crippled by limited administrative capacity and budget shortages.",
      " Reports from domestic groups suggest that the registration process was, at best, inconsistent, and there is no indication that the ZEC addressed alleged inaccuracies in the voters' roll from previous elections. The 2008 elections were Zimbabwe's first attempt at holding \"harmonized\" elections for all levels of government (local, National Assembly, Senate, and presidential) simultaneously. In addition to the logistical challenges this posed, civic groups argued that the complexity of a four-ballot election required a nationwide voter education campaign. They claim that the ZEC's education efforts were inadequate and that independent NGOs were barred from engaging in voter education programs of their own.",
      " The Zimbabwe Election Support Network (ZESN), a domestic observer group composed of 38 NGOs, alleges that the ruling party redrew constituencies to ensure its continued hold on power. In its pre-election report, ZESN argued that there were not enough polling stations designated for urban areas, where the MDC is believed to have its strongest support. ZESN's report also suggested that, as in past elections, the ruling party manipulated state resources for campaign purposes. And despite amendments to POSA and AIPPA, advocacy groups argue that the police selectively interpreted the laws and significantly limited the MDC's ability to campaign. Sections of POSA which prohibit false statements \"prejudicial\"",
      " to the state and criminalize statements construed as engendering hostility toward the president remained in effect. Alleged Vote Buying In addition to the allegedly partisan administration of the elections, many observers contend that the government used public resources to buy votes. In the weeks preceding the polls, President Mugabe announced significant salary increases for the military and civil servants and signed into law the Indigenization and Economic Empowerment Bill, requiring foreign-owned firms to transfer 51% of their shares to domestic investors. His administration also reportedly distributed vehicles and agricultural equipment worth millions of U.S. dollars to ZANU-PF supporters. At the same time, in a country where almost half the population was considered by the World Food Program at that time to be malnourished,",
      " domestic groups reported numerous incidents of opposition supporters being denied access to state food supplies. NGOs operating in Zimbabwe reported that the ban on their distribution of food and other humanitarian aid prior to the runoff continued until August, despite claims by the government that it had been lifted. Pre-Election Violence According to domestic human rights groups, the year prior the 2008 elections was marked by a significant increase in incidents of politically motivated violence from previous years. The government routinely deployed riot police to break up demonstrations, meetings and rallies, despite changes to the laws regulating freedom of assembly. In January 2008, police allegedly tear-gassed and assaulted protestors in Harare after a local magistrate overruled a police order banning their march.",
      " In February, members of the Progressive Teachers Union of Zimbabwe reported being abducted and beaten by ZANU-PF supporters; according to their accounts several members of the police and intelligence service were present during the attacks. According to reports, the perpetrators were not arrested, but the union leaders were charged with violating a law that prohibits the distribution of pamphlets in public areas. Several of the country's security service chiefs, including the heads of the army and the police, publicly announced that they would not recognize an electoral victory by anyone other that Mugabe. In speeches and statements to the press, they and other public officials, including the president himself, referred to opposition leaders as traitors or puppets of the West.",
      " In October 2007, the International Bar Association issued a report accusing Zimbabwe's police of being \"blatantly partisan\" and suggesting that the force's failure to guarantee equal protection of the law \"is a major obstacle to democracy in Zimbabwe and a considerable impediment to free and fair elections.\" As part of the 2008 electoral reforms, police were banned from the polling stations to allay fears of intimidation. However, just over a week before the elections President Mugabe issued a decree allowing police into polling stations, purportedly to help disabled voters. Election Monitoring The government of Zimbabwe reportedly invited election observers from over 40 countries and regional organizations,",
      " including the Southern African Development Community (SADC) and the African Union (AU), but barred observers from countries considered to be critical of its policies. CNN and other Western media organizations and journalists were reportedly denied permission to cover the elections. The AU observer mission, led by former President of Sierra Leone Tejan Kabbah, issued a preliminary statement after the elections suggesting that the vote was generally free and fair and expressed the will of the people. He urged all parties to accept the results. The SADC mission found the elections to be \"a credible expression of the will of the people\" but noted concerns regarding opposition access to the media, inflammatory statements by senior security officials,",
      " the presence of police officers at polling stations, and the delay in the publication of the voters' roll. Two members of the delegation, both from South Africa's largest opposition party, refused to sign the report, calling the elections \"chaotic\" and \"deeply flawed.\" Other observer groups differed with the SADC findings. The delegations of the World Council of Churches and the African Council of Churches found the elections to be \"skewed in favor of the incumbent who openly utilized state resources to his advantage\" and reported media bias, \"violence, intimidation and outright confrontation,\" and the use of food as a \"political tool.\" Press Restrictions Two international journalists,",
      " one a Pulitzer Prize-winning American correspondent for the New York Times, were arrested in April 2008. After several days in jail, they were released on bail but blocked from leaving the country. They were later acquitted. Several other journalists, both domestic and foreign, were arrested after the elections. The director of the ZESN was detained by police in April and questioned about possible ties to the Washington-based National Democratic Institute, which monitors elections worldwide. The editor of The Standard, the only remaining independent newspaper, was arrested for printing an editorial by opposition leader Arthur Mutambara entitled, \"A Shameful Betrayal of National Independence.\" He was later released,",
      " but charged with publishing statements prejudicial to the state. Mutambara was arrested weeks later. March 2008 Election Results Parliament The MDC, which split into two factions in 2005 (known as MDC-T and MDC-M for their respective leaders, Morgan Tsvangirai and Arthur Mutambara), remained divided for the March elections, and this division likely cost the party several parliamentary seats. The ZEC, widely criticized for its delayed release of the electoral results, announced the National Assembly results four days after the election. The MDC factions won a majority in the 220-seat National Assembly with 109 seats,",
      " over ZANU-PF's 97. Three weeks after the elections, the electoral commission conducted a recount of 23 races, an overwhelming majority of which were won by the opposition. The original results were upheld. On April 6, the ZEC announced that the ruling party had retained its majority in the Senate, where over one-third of the 93 members are appointed by the president. Of the 60 seats directly elected, ZANU-PF won 30, MDC-Tsvangirai 24, and MDC-Mutambara 6. Several senior ruling party members lost their parliamentary seats, including the Ministers of Justice,",
      " Agriculture, Mines, Energy, and Transport; several senior MDC-M parliamentarians, including Mutambara, lost to MDC-T candidates. The Presidency The MDC's decision to contest the election while still divided may also have cost the party a clear victory in the initial presidential race. In February 2008, then-ZANU-PF senior member Simba Makoni announced his intention to run against President Mugabe in the upcoming elections. He was subsequently expelled from the party and ran as an independent, although he was rumored to have been supported by several senior ruling party officials. MDC faction leader Arthur Mutambara, who had planned to run against Mugabe and Tsvangirai,",
      " withdrew as a presidential candidate and expressed his support for Makoni. It is unclear how many supporters of his faction voted for Makoni instead of Tsvangirai. The main MDC faction claimed victory for Tsvangirai days after the election with over 50% of the votes cast, basing its claim on tallies of poll results posted outside the polling stations and constituency centers immediately following the elections. Some have differed with the MDC count, suggesting that while Tsvangirai almost certainly received more votes than Mugabe, he may not have achieved the necessary 50% to avoid a runoff. ZESN reported that results were not posted in three constituency tabulation centers despite a legal requirement to do so.",
      " The results of the presidential race were not officially announced until five weeks after the elections. The opposition called for a nationwide strike on April 14 to protest the delayed release of results, asking supporters to stay home rather than to demonstrate publicly. Dozens of opposition supporters, including a newly elected member of parliament, were reportedly arrested that day for allegedly trying to incite violence or for obstructing the freedom of movement. According to reports, the strike was unsuccessful. With over 90% unemployment, some analysts suggest many Zimbabweans could not afford to miss a day's wages; other Zimbabweans said they had not heard of the strike. On the evening of May 2,",
      " the ZEC declared that Tsvangirai had received 47.9% of the votes, while Mugabe received 43.2% and Makoni 8.3%. Some in the international community questioned whether the government's delay in releasing the presidential results should be considered a political coup. The MDC had appealed unsuccessfully to the courts to have the results released earlier, but the electoral commission claimed that it could not do so until a \"process of verification of the presidential ballots\" was complete. Runoff Elections Called Although the opposition accused the government of manipulating the presidential results and initially objected to participating in a runoff, Morgan Tsvangirai agreed to stand against President Mugabe in a second round of voting.",
      " ZESN also questioned the validity of the presidential results, saying, \"ZESN cannot substantiate ZEC figures as the network is not aware of the chain of custody of the ballot materials during the aforementioned period\" and claiming that the delayed announcement of the presidential results undermined the impartiality of the ZEC. These concerns were echoed by the United States and others. Having waited for over a month to hear the final results from the first round of elections, Zimbabweans faced another significant delay before the second round. While the electoral law requires the government to hold a runoff within 21 days of announcing the initial results, the ZEC declared that the runoff would not be held until June 27,",
      " three months after the first round. Some analysts questioned whether the government could afford another election, estimated to cost up to $60 million. According to official Reserve Bank figures, government borrowing in the first three months of 2008 was 43% above the projected budget deficit for the year. The MDC initially called for the immediate deployment of election observers from outside Africa (in addition to the SADC and AU observers) as well as the deployment of regional peacekeepers during the runoff. The party later modified its demands, saying that an increased SADC and AU observer presence would be sufficient, if combined with an immediate repeal of restrictions on the MDC's ability to campaign and an end to political violence.",
      " The opposition remained largely unable to hold public rallies, which were banned by police in the capital in mid-April. Tsvangirai, who left the country a week after the elections amidst MDC concerns about his safety, returned on May 25. Given statements by government officials accusing him of treason, many believed he would not be allowed to campaign freely inside the country. The MDC leader had already been tried, and acquitted, for treason in 2004. Based on interviews with high-ranking Zimbabwean officials, the International Crisis Group issued a report warning that a Tsvangirai victory in the runoff could trigger a military coup.",
      " June 2008 Runoff Election During the weeks following the announcement of the presidential results, reports of political violence increased dramatically. Critics contend that the violence was a government-orchestrated attempt to punish opposition supporters and ensure a Mugabe victory in the runoff. According to media reports, security forces and militias manned roadblocks and detention centers across the country, despite the increased presence of over 500 SADC and AU monitors. The Washington Post reported on the government's alleged campaign of violence against the opposition, and suggested that ZANU-PF's inner circle was divided on the effort, which reportedly targeted mid-level MDC organizers and ordinary citizens for severe beatings or death.",
      " President Mugabe was quoted saying, \"We shed a lot of blood for this country. We are not going to give up our country for a mere X on a ballot. How can a ballpoint pen fight with a gun?\" Tsvangirai was detained by police several times during the runoff campaign, and on two occasions sought refuge in the Dutch Embassy. The MDC's Secretary General, Tendai Biti, was arrested in June 2008 upon return from South Africa and was charged with treason. After two weeks in jail, he was released on bail. On June 13, former U.N. Secretary-General Kofi Annan joined over 40 African leaders and former heads of state,",
      " including the group known as the Elders, in a letter calling on the government to stop the violence, postpone the runoff, and ensure conditions for free and fair elections. On June 22, less than a week before the runoff, ZANU-PF supporters, armed with sticks, iron bars, and rocks, blocked an MDC rally in Harare. Citing the high number of attacks against MDC supporters and the lack of a level playing field, Tsvangirai withdrew from the race the following day. Despite public comments from African observer missions and a presidential statement from the U.N. Security Council arguing that conditions for a free and fair election did not exist due the high level of violence,",
      " the government held the runoff as scheduled. Mugabe was declared the winner with over 85% of the vote and inaugurated on June 29, 2008. SADC fielded over 400 observers for the second round poll. In a preliminary report, the observers found the pre-election environment marred by \"politically motivated violence resulting in loss of life, damage to property, and serious injuries sustained and hindering political activities.\" They also noted the \"disruption of campaigning of the opposition party and the regrettable inaction of the law enforcement agencies,\" and cited harassment of their observers. The SADC mission found that the pre-election period did not conform to SADC Principles and Guidelines Governing Democratic Elections,",
      " damaging the credibility of the electoral process. Ultimately, the delegation reported that runoff \"did not represent the will of the people of Zimbabwe.\" The observer delegation from the Pan-African Parliament (PAP) was similarly critical of the runoff, saying, \"political tolerance in Zimbabwe has deteriorated to the lowest ebb in recent history.\" The delegation reported witnessing roadblocks and \"male-dominated groups [that] intercepted voters and gave them pieces of paper on which they were required to write the serial number of their ballots\" at many polling stations. The PAP's report questioned the impartiality of the ZEC, and found that \"the current atmosphere prevailing in the country did not give rise to the conduct of free,",
      " fair and credible elections.\" The African Union team echoed the SADC and PAP findings, declaring that process fell short of accepted AU standards. Post-Election Violence As noted above, although observers suggest that the March 29 election day was largely peaceful, reports of politically motivated violence subsequently increased to a level not seen in two decades, according to advocacy groups. In May, the Zimbabwe Association of Doctors for Human Rights reported that its doctors had treated hundreds of victims with injuries consistent with assault and torture since the elections, and that \"the violence is now on such a scale that it is impossible to properly document all cases.\" In total, almost 300 people died as a result of the political violence in 2008,",
      " according to the State Department. U.S. Ambassador James McGee implicated the ruling party in orchestrating the attacks. ZANU-PF and the Zimbabwean military have denied involvement with the violence, although the army; police; intelligence service; \"war veterans;\" and Zimbabwe's National Youth Service, also known as the \"Green Bombers,\" were all implicated. One week after the elections, self-styled war veteran leader Jabuli Sibanda warned, \"It has come to our realization that the elections were used as another war front to prepare for the re-invasion of our country.... As freedom fighters, we feel compelled to repel the invasion,\" echoing a frequent Mugabe refrain that an opposition victory would be tantamount to the British reinstating colonial rule.",
      " The state-owned Herald newspaper, contributed to fears of a white takeover in the wake of the election, reporting, \"an increasing number of white former commercial farmers are reportedly threatening resettled black farmers throughout the country with eviction from their farms or face the wrath of an anticipated 'incoming MDC government.'\" These pronouncements coincided with farm invasions throughout the country, and by April 16, the Commercial Farmers Union reported that over 100 of the estimated remaining 400 white farmers had been forced off their lands. Since independence, ZANU-PF had employed terminology associated with military-style campaigns for government programs ranging from the implementation of price controls,",
      " known as Operation Reduce Prices, to the demolition of informal urban settlements, or Operation Murambatsvina (translated as \"Clean Out the Filth\"). Reports suggest that the post-election round of violence had its own campaign name, Operation Mavhoterapapi (\"Who did you vote for?\"). Critics note the government's historic use of violent tactics against political opponents, pointing to the infamous Operation Gukurahundi (\"The rain that washes away the chaff\"), the violent \"pacification\" campaign by a North Korean-trained military unit, the 5 th Brigade, in the 1980s against alleged dissidents and supporters of ZANU-PF's political rival,",
      " the Zimbabwe African People's Union (ZAPU). Gukurahundi, sometimes referred to as the Matabeleland Massacres, resulted in the deaths of over 10,000 civilians, mostly from the Ndebele ethnic group in the southwest. That 5 th Brigade was led by then-Lt. Col. Perence Shiri, now commander of the Air Force. Other officials involved in the campaign were elevated to senior government posts, including former Defense Minister Sydney Sekeremayi (now Minister of State for National Security) and Emerson Mnangagwa. Mnangagwa, then Minister of State Security in charge of intelligence,",
      " once reportedly warned that the government would burn down \"all the villages infested with dissidents.\" He is rumored to lead the Joint Operations Command (JOC), a secretive group of security chiefs and top commanders that some allege controls the government. Zimbabwe's rural areas appear to have been the hardest hit by the post-election violence; the U.S. Embassy in Harare documented thousands who fled the countryside for urban areas in the months after the March elections. Most Harare medical clinics were at full capacity during the height of the violence, according to the U.S. Agency for International Development (USAID). Zimbabwe's largest farmers' union reported that militias displaced over 40,",
      "000 farm workers, and there were widespread reports of burned homes, granaries, and livestock. Human Rights Watch detailed the \"re-education\" and torture of more than 70 MDC supporters, seven of whom reportedly died from their injuries, in Mashonaland province on May 5. Amnesty International reported that victims were often denied medical access and that humanitarian organizations have been targeted by militias for providing assistance. The United Nations' resident representative in Zimbabwe declared, \"there is an emerging pattern of political violence inflicted mainly, but not exclusively, on suspected followers of the MDC.\" The level of violence was confirmed by a SADC mission, \"we have seen it,",
      " there are people in hospital who said they have been tortured, you have seen pictures, you have seen pictures of houses that have been destroyed.\" Some who fled to the cities faced further intimidation. Police repeatedly raided the offices of both the MDC and ZESN. Hundreds were arrested in the MDC raids, many of whom had reportedly already suffered attacks in their rural homes and fled to the MDC offices for refuge. In these raids, the police, allegedly looking for subversive documents, took computers and documents. On May 9, police arrested the leaders of the Zimbabwe Congress of Trade Unions (ZCTU) based on speeches made at a worker's day rally.",
      " The head of the Progressive Teacher's Union was also arrested. On May 5, more than 50 people were beaten by riot police during a protest against the ongoing violence in Bulawayo; 11 members of a women's advocacy group were arrested. Some Zimbabwean officials, including the police chief, accused the MDC of rigging and inciting violence. More than ten newly elected MDC legislators were arrested in the wake of the March elections. Over 100 election officers were arrested on charges of committing fraud and abusing public office in favor of the MDC. Independent reports suggest that teachers, who held many of the election officer positions,",
      " were specifically targeted by government supporters. The Power Sharing Agreement and the New Coalition Government On September 15, after several weeks of negotiations overseen by Thabo Mbeki, Mugabe and Tsvangirai signed the Global Political Agreement (GPA). The text of the agreement left oversight of the police undetermined, and debate over which party would control the force delayed the agreement's implementation for over four months. Amid concern that the parties would abandon compromises made in the GPA, SADC renewed pressure for the agreement to be implemented in January 2009. Tsvangirai agreed to join a coalition government on January 31, and,",
      " after Zimbabwe's parliament amended the constitution to allow its creation, Tsvangirai and new MDC ministers were sworn in as members of the new government in early February 2009.  Other Humanitarian Issues Operation Murambatsvina In May 2005, the government of Zimbabwe initiated Operation Murambatsvina (variously translated as \"Restore Order\" or \"Clean Out the Filth\"), a massive demolition program aimed at destroying allegedly illegal urban structures, such as informal housing and markets. By early July 2005, an estimated 700,000 urban Zimbabweans had been rendered homeless or unemployed by the operation, and an estimated 2.",
      "1 million (in total, almost 20% of the population) were indirectly affected by the demolitions. These are considered \"low-end estimates;\" some reports suggest the number affected was much higher. According to some sources, 70% of the country's urban population lost shelter, while approximately 76% lost their source of income. Security forces reportedly arrested forty thousand for allegedly illegal activities and told those whose homes were destroyed to \"return to their rural origins,\" although many had no rural home to which they could return. Operation Murambatsvina had a severe impact on the nation's economy and on the livelihood of its citizens. For many,",
      " this was not the first time they had been forcibly removed from their homes. As a result of the 2000 land reform program, an estimated 400,000 black laborers on commercial farms lost their livelihoods and/or homes, and many fled to urban areas to find work. Political violence surrounding the 2002 elections forced others from their homes, reportedly displacing more than 100,000. In 2004, under a new phase of land resettlement, an estimated 500,000 who settled on farms during the 2000 invasions were evicted. Many of the displaced inhabited the urban \"slums\" prior to the demolitions,",
      " making their living from trading on the black market. Given the collapse of the formal economy, 40% of the labor force was estimated to be informally employed prior to Murambatsvina, while 44% worked in the communal sector (including the agriculture industry), and 16% worked in the formal sector. Of those living in towns and cities, an estimated 70% were involved in informal trading prior to the demolitions. Political Motivations? The government described Murambatsvina as a program designed to restore the capital city to its former image as \"the Sunshine City,\" ridding the country's urban areas of illegal structures that foster criminal activity and stemming the black market trade in foreign currency.",
      " Launched shortly after the disputed 2005 parliamentary elections, many contend the demolitions were a political move aimed either at preventing mass protests over the growing economic crisis or at punishing the reputed urban support base of the MDC. The Harare Commission that initiated the campaign was established in order to contravene the authority of the elected city council, of which the MDC held the majority. The mayor of Harare, an MDC politician who was elected by 80% of the vote, was fired in April 2004, along with 19 MDC-allied city councilors, after having been arrested in 2003 under POSA for holding a public meeting without prior state approval.",
      " A high court ruling challenged the legality of the Harare Commission, which was appointed by the Minister of Local Government, finding that the commission did not have the authority to fire the mayor. A new election was supposed to be held within 90 days, according to law, but when no election occurred, the commission was reappointed. The remaining MDC councilors resigned in protest. With the exception of Harare, the local authorities of the other areas (many of which were MDC-controlled) affected by Murambatsvina reported that they were not informed of the demolitions prior to the event. The implications of this breakdown in governance are reflected in findings of the United Nations,",
      " which noted that Murambatsvina \"was implemented in a highly polarized political climate characterized by mistrust, fear and a lack of dialogue between Government and local authorities, and between the former and civil society.\" The International Response International reaction to Murambatsvina was highly critical. U.N. Secretary-General Kofi Annan named Tanzanian Anna Tibaijuka, Executive Director of UN-HABITAT, as the U.N. Special Envoy on Human Settlements Issues in Zimbabwe to investigate the humanitarian impact of the demolitions. Following a fact-finding trip, she issued a comprehensive report, which concluded: Operation Restore Order,",
      " while purporting to target illegal dwellings and structures and to clamp down on alleged illicit activities, was carried out in an indiscriminate and unjustified manner, with indifference to human suffering and, in repeated cases, with disregard to several provisions of national and international legal frameworks. The report also described police preventing civil society and humanitarian organizations from assisting those affected by the demolitions, and suggested that the groups were operating in a \"climate of fear\" and practicing \"'self-censorship' to avoid being closed down or evicted.\" The Chairman of the African Union sent his own envoy, but he was prevented from conducting an assessment (see \" International Perspectives,\" below). The presentation of the U.N.",
      " envoy's report to the U.N. Security Council stirred controversy as China, Algeria, Benin, and Russia objected to debate on the report. The majority of Security Council members voted to allow its discussion, albeit in a closed session. Secretary-General Annan also issued a strong statement condemning Murambatsvina, calling on the government of Zimbabwe to stop the evictions and allow unimpeded access for humanitarian assistance: \"Operation Murambatsvina\" has done a catastrophic injustice to as many as 700,000 of Zimbabwe's poorest citizens, through indiscriminate actions, carried out with disquieting indifference to human suffering. I call on the Government to stop these forced evictions and demolitions immediately,",
      " and to ensure that those who orchestrated this ill-advised policy are held fully accountable for their actions... the Government must recognize the virtual state of emergency that now exists, allow unhindered access for humanitarian operations, and create conditions for sustainable relief and reconstruction. Continued Evictions and Operation Garikai Many observers suggest the Zimbabwean government did little to respond to U.N. Envoy Tibaijuka's recommendations. Reports indicate that forced evictions continued, despite government declarations to the contrary. As was the case during the initial evictions, several thousand of those made homeless were taken, in some cases reportedly against their will, to police-run \"transit camps\"",
      " in late 2006. Conditions in these camps were described as dire, often lacking shelter, water, or basic latrine facilities. In keeping with the U.N. report findings, Amnesty International alleged that the government repeatedly prohibited aid agencies, including the United Nations, from providing temporary shelters, such as tents, for the displaced. Secretary-General Annan expressed his concern in October 2005 over the government's rejection of U.N. assistance to \"tens of thousands,\" noting \"there is no clear evidence that subsequent Government efforts have significantly benefitted these groups.\" The United Nations was subsequently permitted to erect approximately 2,300 shelters, a fraction of their target of 40,",
      "000. In response to international criticism of Murambatsvina, the government announced a new housing scheme, Operation Garikai, in June 2005. Under Garakai, also known as \"Hlalani Kuhle\" (Live Well), new housing for those rendered homeless was to be built with public funds. The ambitious reconstruction program would allegedly create tens of thousands of new homes, but given the shortage of building materials and the government's budgetary problems, it is highly unlikely the original target of 5,275 homes was met. Reports suggest that few houses were actually completed, and, instead of going to victims of Murambatsvina,",
      " the newly built houses were more likely to be occupied by soldiers, police, and members of the ruling party. The government denied these allegations. Amnesty International and a domestic group, the Coalition Against Forced Evictions, issued a May 2010 report on the progress of the government's re-housing scheme. The report argued that, five years after Murambatsvina, many victims continued to live in plastic shacks without basic essential services. The groups have been critical of the transitional government's response. According to 2010 Housing Ministry estimates, as many as 500,000 were still on the waiting list for housing in Harare alone,",
      " with the national backlog in urban areas possibly over 1 million.  Violations of Domestic and International Law In the wake of Murambatsvina, human rights organizations raised questions about how Zimbabwe and the international community should respond to what some have termed \"crimes against humanity,\" as defined by Article 7 of the Rome Statute of the International Criminal Court (ICC), and whether there was a \"responsibility to protect\" those affected by the campaign or subsequent government actions. Among the Murambatsvina report recommendations, the U.N. envoy suggested: Although a case for crime against humanity under Article 7 of the Rome Statute might be difficult to sustain,",
      " the Government of Zimbabwe clearly caused large sections of its population serious suffering that must now be redressed with the assistance of the United Nations and the international community. The international community should encourage the Government to prosecute all those who orchestrated this catastrophe and those who may have caused criminal negligence leading to alleged deaths, if so confirmed by an independent internal inquiry/inquest. The international community should then continue to be engaged with human rights concerns in Zimbabwe in consensus building political forums such as the UN Commission on Human Rights, or its successor, the African Union Peer Review Mechanism, and in the Southern African Development Community. The report provided legal analysis of Murambatsvina through international,",
      " regional, and national frameworks, ultimately finding that \"The Government of Zimbabwe is collectively responsible for what has happened\" during Murambatsvina, but that \"it appears there was no collective decision-making with respect to both the conception and implementation. Evidence suggests it was based on improper advice by a few architects of the operation.\" One media source, however, quoted Zimbabwe's State Security Minister saying, \"All the decisions to do with the operation emanated from the [party] politburo and were sent through me to the government.\" Several groups, including the International Bar Association (IBA), have called for President Mugabe's government to be brought before the ICC,",
      " not only for violations related to the demolitions, but also for its alleged support of political violence against its critics. Responding to President Mugabe's comments supporting the beating of trade union leaders in 2006, the Executive Director of the IBA made the following statement: Mugabe's statements add to the weight of evidence that torture and other serious violations of international law are sanctioned at the highest level in Zimbabwe. This underscores the urgent need for international and regional action to hold the Zimbabwean Government to account... the torture of the trade union activists is not an isolated incident, but part of a dangerous and illegal system of repression which constitutes crimes against humanity in international law.",
      " Decisive action is required by both the United Nations and the African Union to end impunity and violence in Zimbabwe. In May 2008, the IBA Executive Director reiterated his call for an ICC investigation of President Mugabe for crimes against humanity.  The government of Zimbabwe has yet to prosecute those who might be responsible for crimes related to Murambatsvina or the subsequent evictions. The victims, in most cases, lack the financial resources to seek redress in court, although human rights lawyers have represented groups of victims on several occasions. In one case, in November 2005, residents of a Harare suburb were given a temporary stay of eviction by the High Court,",
      " but police ignored the order and forcibly moved the group to a transit camp. Four cases involving Zimbabwe, two involving land reform cases and two related to evictions under Murambatsvina, are pending before the African Commission on Human and People's Rights. SADC's regional tribunal, established to ensure that SADC member states adhere to the SADC treaty and protocols, protect the rights of citizens, and provide for the rule of law, ruled against the Zimbabwe government in several cases between 2008 and 2010, finding, for example, that the government had undermined the rule of law by refusing to compensate nine victims of state-sponsored violence and torture as had been ordered by the Zimbabwean High Court.",
      " Zimbabwe's Justice Minister claims the tribunal has no jurisdiction over Zimbabwe, and the government refused to enforce the judgments. In August 2010, SADC heads of state ordered a review of the tribunal's role and mandate, effectively suspending its operations. Civic activists have argued that the inability of the Zimbabwe's judicial system to protect its citizens or their property in such cases, or to provide due process to those seeking remedy or compensation, suggests a fundamental breakdown in the rule of law. Food Insecurity Several Southern African countries have suffered from chronic food insecurity in the past decade, stemming from a combination of weather-related and man-made factors, including prolonged drought,",
      " floods, poor economic performance, and the impact of HIV/AIDS. Zimbabwe was particularly hard hit. Experts have attributed this primarily to severe crop failure, but some suggest Murambatsvina and other government policies also significantly limited the population's ability to feed itself, particularly in urban areas. Aid organizations estimated that some seven million Zimbabweans, almost three-quarters of the country's population, required food assistance between late 2008 and early 2009. That figure has declined significantly in the last two years \u2013 an estimated 3.5 required food aid in 2009/2010, and 1.7 million are estimated to require food aid in 2011.",
      " USAID reports that food production has slightly increased, but attributes the continued need to a number of factors, including localized food insecurity, limited access to currency, and displacement due to localized political violence. Drought is in part to blame for the country's food shortages, but many analysts have argued that disruptions to the farming sector resulting from Mugabe's land seizure program resulted in reduced food production. Others suggest while the fast-track land reform program did result in a major restructuring of the country's agricultural sector, not all of the effects have been negative. Nearly all of the country's white-owned 4,500 commercial farms have now been taken over;",
      " less than 300 white-owned commercial farms remain in operation. From independence to 1999, roughly three million hectares of commercial farmland were transferred under a land reform program largely funded by the British, and a further eight million hectares were subsequently re-allocated after 2000. The government's land redistribution program has reportedly been plagued by inefficiencies, and critics suggest large portions of redistributed land are not actively farmed. Thousands of experienced farm workers were reportedly forced to flee seized commercial farms, and many of those who received farmland had no previous agricultural expertise. Farming inputs have been in short supply for those without start-up assets.  Operation Taguta In late 2005,",
      " the Zimbabwe government established Operation Taguta (or \"Eat Well\"), a move seen by many as an acknowledgment that farm resettlement policies had failed to meet the country's agricultural production needs. With food distribution already under the control of the Grain Marketing Board, then reportedly led by military officers, the government established a command agriculture system, in which the military would be responsible for not only the distribution, but also the production of food. Under Taguta, there were numerous reports of the illegal seizure of farm equipment, destruction of the cash crops small-scale farmers grow to sell at market to support their families, and even army brutality against farmers. Some critics of the government suggest Operation Taguta was used by the government as an excuse to deploy military forces throughout the country to control the population.",
      " A Zimbabwe journalist was jailed in March 2009 for reporting on allegations of corruption within the Grain Marketing Board. Its power has been reduced under the coalition government.  Food as a Political Weapon? The ZANU-PF government's stance on food aid led many observers to suspect that it used food as a political weapon, a charge the government denied. Despite international donor agency assessments suggesting the need for food assistance, President Mugabe confounded observers in the mid-2000s by repeatedly declaring the country was running a maize surplus and would not need food aid. In 2004, the government stopped a U.N. food needs assessment and later halted general food aid distribution by donors (targeted food aid to vulnerable groups continued), despite independent estimates that suggested 4.",
      "8 million would require assistance. In March 2005, the government finally acknowledged serious food shortages, but delayed signing an agreement to allow the World Food Program and its implementing partners to provide assistance until December of that year. Reports suggested that the government maintained tight control of food distributions, before banning the distribution of aid by NGOs prior to the 2008 runoff. The government accused aid agencies of using food to turn Zimbabweans away from ZANU-PF. Critics accused the government of distributing food only in areas where people would agree to vote for ZANU-PF. During past elections, civil rights groups and the opposition reported instances of ZANU-PF holding campaign rallies in conjunction with government food distributions.",
      " In some areas, officials distributing food required recipients to show a party card\u2014MDC supporters were reportedly turned away. Two 2005 court rulings supported these claims, finding that ZANU-PF candidates politicized distributions and used violence against the MDC. HIV/AIDS In the midst of its political and economic crises, Zimbabwe has been ravaged by HIV/AIDS. The country's HIV prevalence rate is among the world's highest. The United Nations estimates that Zimbabwe has one of the highest percentages globally of children who have been orphaned by AIDS. The epidemic has caused a severe strain on the country's healthcare system; reports suggest that majority of hospital admissions are AIDS-related,",
      " leaving few beds or resources for other patients. To compound this problem, the economic crisis has resulted in the exodus of many of the country's medical professionals. The AIDS epidemic is having a crippling effect on the economy\u2014the inability of infected agricultural workers to adequately contribute to food production further hamstrings the struggling industry. Although its infection rate remains high, Zimbabwe is one of several countries in Sub-Saharan Africa in which HIV prevalence rates have declined, after reportedly peaking at 36% in the mid-1990s. Changes in sexual behavior and prevention programs have been credited, but mortality among diagnosed cases during the peak of the epidemic also contributed to the decline.",
      " Zimbabwe's government has claimed significant resolve to fight the disease. The country was the first to introduce a tax to finance HIV/AIDS programs (3% on taxable income). President Mugabe committed Zimbabwe to universal access to antiretroviral therapy (ART) by 2010, but access remains relatively low, with less than half of those requiring treatment on ART in 2010. Cholera and the Healthcare System Collapse From August 2008 to June 2009, over 98,500 suspected cases of cholera, including almost 4,300 deaths, were reported, according to the U.N. World Health Organization (WHO). Neighboring countries reported confirmed cases in border areas.",
      " Cholera, an acute diarrheal infection, is spread by contaminated food and water. In Zimbabwe, the reported case fatality rate (CFR) reached almost 6% at its peak in January 2009, much higher than the normal 1% CFR rate for cholera cases globally. Following significant international intervention, the country's CFR has since decreased substantially. Cholera remains a localized problem, however, from January through May 2011, there were almost 880 cases reported, but only 38 deaths.  Many health experts attribute the severity of Zimbabwe's 2008/2009 cholera outbreak to the collapse of the country's healthcare,",
      " water, and sanitation systems. According to reports, water treatment and delivery had dramatically declined in the late 2000s, and the decline of many other basic social services, such as trash collection, posed significant health risks. Public healthcare providers lacked basic medications, supplies and functioning medical equipment, and, by 2008, many public hospitals and clinics had closed due to understaffing as health workers migrated to neighboring countries in search of work. Despite subsequent water infrastructure improvements, an estimated one-third of rural Zimbabweans still lacked access to clean drinking water in 2011. The Economy The turmoil in Zimbabwe in the past decade led to a severe economic contraction,",
      " a sharp drop in living standards for the rural and urban poor, and a massive exodus of Zimbabweans in search of work. According to the Solidarity Peace Trust, founded by clergy from Zimbabwe and South Africa, well over three million Zimbabweans were living outside the country by 2004. The Trust calculated that this amounted to 25%-30% of the total population, or 60%-70% of productive adults. Many more are believed to have fled Zimbabwe since then. Some who left the country because of economic hardship have faced difficult conditions in their new host countries. Many in Zimbabwe still reportedly rely on remittances from family abroad.",
      " The IMF and the World Bank Dubbed \"the world's fastest shrinking economy\" by 2008, Zimbabwe's Gross Domestic Product (GDP) declined over 50% in the ten-year period from 1998. World Bank and International Monetary Fund (IMF) lending was suspended in 2000 due to nonpayment of arrears, and foreign currency for essential imports has periodically been in short supply. Zimbabweans have faced steep rises in the prices of food and non-food items in recent years. The transitional government's adoption in 2009 of multiple currencies, including the U.S. dollar, stabilized prices, but the cost of living remains high.",
      " In December 2003, Mugabe selected Gideon Gono, credited with turning around a troubled commercial bank, as governor of the Reserve Bank of Zimbabwe (RBZ). Critics maintain that his measures to fight corruption and discover illegally held foreign exchange were used to damage government opponents and further the interests of ZANU-PF, and international assessments of Zimbabwe's economic prospects remained bleak. Ignoring the advice of the IMF, the government refused to devalue the official exchange rate. Instead, in June 2006, Gono devalued the Zimbabwe dollar, removing three zeros in an effort to mitigate inflation. Under \"Operation Sunrise,\" the government printed new \"rebased\"",
      " currency, known as \"little heroes,\" in an effort to combat corruption and money laundering, according to the government. Zimbabweans were given only 21 days to exchange their old currency. Individuals were restricted from exchanging more than Z$100 million (USD$1000) of the old notes without clearance from tax authorities (companies were allowed to exchange Z$5 billion). Police arrested thousands at roadblocks for holding currency over the individual limit and seized a reported $40 million. Analysts suggest the devaluation did little to reverse the foreign exchange rate shortages. Gono devalued the currency again in early 2009, removing 12 zeros from the Zimbabwe dollar.",
      "  In late September 2008, Zimbabwe began officially trading in foreign currency in an effort to lower prices, and in February 2009, under the direction of Finance Minister Tendai Biti of the MDC, the government began issuing civil servant salaries in vouchers good for $100 U.S. dollars. Biti and Prime Minister Tsvangirai pledged to pay salaries in foreign currency in an effort to get Zimbabweans to return to work. Zimbabwe officials continue to report that without a significant influx of foreign currency, salaries will remain low. Most salaries have risen slightly since early 2009, but remain extremely low in comparison to the cost of living or by regional standards.",
      " Zimbabwe is currently restricted from borrowing from the IMF, to which the country still owes $134 million. The government paid $120 million in 2005 and $9 million in 2006 to settle other outstanding arrears with the Fund and to avoid compulsory withdrawal from the IMF. Mugabe has dubbed the IMF a \"political instrument\" and \"monster\" for regime change. Zimbabwe also owes an estimated $807 million to the World Bank, $510 million to the African Development Bank, and $239 to the European Investment Bank, among others; in total the country's external debt is estimated at $8.8 billion, including payment arrears of $5.",
      "9 billion (80% of GDP at the end of 2010). In response to the September 2008 power sharing agreement, the IMF's Managing Director encouraged the Zimbabwe government discuss policy reforms with the Fund and to \"take steps to show clear commitment to a new policy direction.\" Following a consultation visit to the country in March 2009, the IMF noted positive steps toward fiscal discipline and offered to provide further policy advice, but warned that IMF funding would not be renewed until Zimbabwe begins to repay its debts and establishes \"a track record of sound policy implementation [and] donor support.\" The IMF again noted progress after March 2010 and 2011 visits,",
      " but has suggested that the country remains in debt distress and that the economy will not recover without debt relief. The World Bank has pledged technical assistance to the coalition government, but like the IMF has predicated major support on Zimbabwe's payment of its arrears. Attempts to Revive Agriculture Industry In addition to the ZANU-PF government's attempts to revive its flagging agriculture industry through the introduction of a command agriculture system (see \" Food Insecurity \", above), the government introduced long-term leases in an effort to provide security of tenure for farmers willing to cultivate land nationalized in the 2005 constitutional amendment. One of the unintended side effects of the 2000 land reform strategy,",
      " which resulted in the abolition of land tenure, was that farmers were unable to use their land as collateral to obtain bank loans to invest in their farms. As a result, few commercial farmers were able to find the capital to maintain productivity. The government began to distribute 99-year leases in November 2006. Among the initial recipients were 19 white farmers, shocking many given Mugabe's declaration in July 2005 that his land reform program would be complete only when there was \"not a single white on the farms.\" Some banks have reportedly been reluctant to accept these leases as collateral, given that the government reserves the right to cancel a lease if it deems the farm unproductive.",
      "  Zimbabwe continues to suffer from electricity shortages, and its internal power generation capacity is reportedly capable of meeting only half of the country's demand. Periodic electricity shortages, caused by supply cuts from Mozambique, South Africa, and Zambia, compounded Zimbabwe's economic woes in recent years, periodically cutting the production capacity of the manufacturing and mining sectors by as much 50%. The MDC Minister for Energy and Power Development asserted in 2009 that country's power infrastructure is in disrepair and up to $1 billion will be needed to fix the crumbling energy sector. The Mining Industry  Zimbabwe's mining industry has brought much-needed income into the country,",
      " accounting for almost half the country's total foreign currency revenues in recent years. Zimbabwe has the world's second-largest reserves of platinum, behind South Africa. In 2006, the government announced plans to take a 51% share of all foreign-owned mines for local black investors; 25% of that share would be acquired at no cost to the government, and mines that refused to part with their shares would be expropriated. After industry officials cautioned that the plan would deter foreign investment, the proposal was modified, allowing firms that invested in community projects to keep their majority share. Parliament voted to approve similar plans to take a majority share in all foreign-owned businesses in 2007;",
      " the legislation became law in March 2008. The government insisted that it would not expropriate foreign-owned companies and that the law would not be applied to every company, but rather \"on the basis of capital and employment levels.\" A ZANU-PF controlled-ministry has introduced subsequent indigenization regulations related to the mining sector that are the subject of ongoing debate within the transitional government; critics argue the law further deters much-needed foreign investment. The coalition government has sought to encourage investment in the mining sector, despite uncertainty regarding the indigenization regulations. Under the previous administration, gold miners were required to sell their product to the Reserve Bank of Zimbabwe.",
      " As the bank's foreign currency reserves dwindled, it reportedly ceased to pay miners for the gold, and many of the country's gold mines closed. The coalition government now allows the mines to market their own gold and accept payment in foreign currency. It has also cut the tax on gold export revenues.  Illegal Mining The Zimbabwe government has taken various steps in recent years to crackdown on illegal mining, although some suggest that members of ZANU-PF may be complicit. Police arrested an estimated 20,000 illegal miners in 2006, including several hundred reportedly legal small-scale miners, confiscating gold, diamonds, emeralds,",
      " and gold ore. According to reports, most of the miners were released after paying fines. Security forces have been accused of serious human rights abuses related to some illegal mining crackdowns. As a result of the collapse of the formal economy, many of the country's unemployed have resorted to illegal mining, selling their goods on the black market.  \"Blood Diamonds\"? The World Diamond Council (WDC), a diamond industry organization that aims to prevent the trade of conflict diamonds, raised initial concerns in December 2008 that rough diamonds from Zimbabwe were being exported illegally, rather than through the Kimberly Process (KP), an international government certification scheme designed to prevent the \"blood diamond\"",
      " trade. According to civil society reports, Zimbabwean soldiers in the Marange diamond fields have forced villagers to labor in the mines and then smuggled the stones from the country. Rough stones from Zimbabwe have reportedly been confiscated in India and Dubai. The European Union pressed for an investigation into Zimbabwe's compliance with its Kimberly obligations in early 2009, and a high level KP delegation visited Zimbabwe in March to express the group's concern with reports of violence and smuggling from the Marange area. The KP Secretariat refrained from suspending Zimbabwe from the certification scheme, however. During a KP Plenary meeting in November 2009, the body called for stringent export controls on diamonds from Marange.",
      " The Zimbabwe government reported later that month that security forces had begun withdrawing from the area, and a judge ordered that the Reserve Bank of Zimbabwe hold all diamonds from the area until legal claims regarding the Marange mines are resolved. Some argue that \"Zimbabwe poses a serious crisis of credibility for the KP\" The U.S. government and others called for Zimbabwe to be suspended from the Process if the controls recommended at the KP Plenary were not implemented. In June 2011, the KP Chair, held by Mathieu Yamba of the DRC, announced that exports from Marange could resume. The United States and other Western governments, along with several human rights and industry groups,",
      " have protested the move, arguing that KP decisions are supposed to be based on consensus.  The Kimberly Process had previously investigated allegations that \"blood diamonds\" from the Democratic Republic of Congo (DRC) were being smuggled along with rough stones from Zimbabwe into South Africa for export. The Mugabe government dismissed those claims as a Western attempt to promote regime change. Zimbabwe has been previously linked to conflict diamonds; senior officials were named in a 2003 U.N. report for profiting from illicit trade during Zimbabwe's military operations in the DRC.  \"Look East\" Policy Blaming the United States, the United Kingdom, and other Western governments for the country's economic crisis,",
      " President Mugabe sought to engender investment and trade opportunities with Asia, particularly China. Dubbed the \"Look East\" policy, Mugabe's efforts were criticized by his own party as insufficient to address the economy's slide. In December 2006, the Parliamentary Portfolio Committee on Budget, Finance, and Economic Development, chaired by a ZANU-PF MP, accused the central bank governor of exacerbating inflation with \"quasi-fiscal activities\" and warned the administration that \"the Far East destinations be viewed as a market in its infancy and that the traditional market of the West should not be neglected as the nation moves toward regularizing relations with the international community.\" China has reportedly provided a number of sizable loans to the transitional government to support Zimbabwe's economic recovery in return for mining concessions.",
      "  The Military and the Economy Critics contend that President Mugabe has bought the continued loyalty of the country's security forces through patronage and bribery. Some observers suggest that loyalty of the security forces may have come at a heavy cost to the economy. Observers continue to speculate on how the government has paid for its military purchases from China, including a reported $240 million in fighter jets. In addition to allegations of land and housing handouts to security personnel, critics of the government highlight a significant number of current and former military officers who have been appointed to senior civilian government positions. Mugabe previously placed current or former military officers in control of the Ministries of Energy and Industry,",
      " the Zimbabwe Revenue Authority, the electoral commission, the state railway, the Grain Marketing Board, and the parks authority, and several have served in the Senate and ambassadorial posts abroad. Several of these individuals still hold senior offices in the government. As the economy contracted in the mid 2000s, signs emerged that the government might be running out of funds to maintain its security forces. During a parliamentary hearing in 2007, the Defense Minister reportedly suggested that soldiers were dissatisfied with their low salaries and that the forces were running out of food and might have to suspend training if new funds were not released. Later that month, Zimbabwean intelligence officials reportedly uncovered a coup plot led by several senior military officials.",
      " Unconfirmed reports suggest that as many as 400 members of the army, air force, and police may have been involved in the plan, which allegedly aimed to remove Mugabe and to install Emmerson Mnangagwa as president. Mnangagwa denied any knowledge of the plot. Other sources suggest Vice President Joice Mujuru and her husband were behind the coup attempt and used Mnangagwa's name to discredit him. Neither Mnangagwa nor the Mujurus were officially accused of involvement, although some reports suggest Solomon Mujuru may have been placed under house arrest for a limited time. In late 2008, soldiers looted Harare stores after they were unable to access their paychecks.",
      " Like other civil servants, the military and police now receive regular salary payments under the transitional government. International Perspectives The international community has been divided on how to respond to Zimbabwe's economic and political crises. In general, Western nations and institutions have expressed opposition to Robert Mugabe's methods of rule, and have pursued policies intended to pressure the Zimbabwe government for reforms. Mugabe has enjoyed greater support in Africa, where he has been viewed as an elder statesman and a leader of the anti-colonial struggle, and among the Non-Aligned nations generally. This has changed to an extent in recent years, however, with some African leaders concluding that the Zimbabwe situation has been damaging to regional interests and that political and economic reforms are needed.",
      " Nevertheless, African countries supported Zimbabwe in its successful bid to chair the United Nations Commission on Sustainable Development in 2007, allegedly to show African solidarity against Western opposition. AU member states were unable to come to a conclusion on how to address Zimbabwe's political situation at the 2008 AU Summit in Egypt, despite election observer reports from the AU, SADC, and the Pan-African Parliament finding that the June runoff was not free or fair. The African Union subsequently deferred to SADC's mediation role on Zimbabwe. The international donor community has generally expressed support for the new coalition government, but has predicated significant assistance on improvement in the following areas:",
      " the release of all political prisoners; the end of farm disruptions; the cessation of politically motivated violence; the establishment of a credible and transparent Reserve Bank team;  an end to harassment and intimidation of the media; and a commitment of all stakeholders to holding credible elections in a timely manner. U.S. Policy The United States government has been critical of Robert Mugabe and ZANU-PF for their poor human rights record and lack of respect for the rule of law, but has expressed cautious support for the transitional government. Key elements of U.S. policy toward Zimbabwe have included targeted sanctions against high-ranking ZANU-PF members and their affiliates,",
      " support for South Africa to spearhead an African effort to restore democracy, and assistance intended to help the country's poor and strengthen civil society. Former Secretary of State Condoleezza Rice told Congress during her 2005 confirmation hearing that Zimbabwe was one of six \"outposts of tyranny\" worldwide and that the United States stood with the oppressed people there. These remarks provoked an angry personal response from Mugabe. Prior to the formation of the unity government, Secretary of State Hillary Rodham Clinton told the Senate in January 2009 that \"the suffering inflicted on the Zimbabwean people by the illegitimate government of Robert Mugabe is appalling.\" Under her leadership,",
      " the State Department has welcomed the transitional government but warned, \"we will not consider providing additional development assistance or even easing sanctions until we see effective governance.\"  Sanctions The Mugabe administration has routinely blamed its economic crisis on sanctions from the west. The United States does not currently have trade sanctions against Zimbabwe, with the exception of a ban on transfers of defense items and services to the country. The U.S. government has, however, frozen government-to-government aid. Zimbabwe is not eligible for trade benefits under the African Growth and Opportunity Act (AGOA) because of its poor record of economic management and human rights abuses. The White House has annually renewed U.S.",
      " sanctions against ZANU-PF leaders. The sanctions are intended to punish those responsible for Zimbabwe's difficulties without harming the Zimbabwe population at large. The initial sanctions, imposed in 2003, ban travel to the United States by \"senior members of the government of Robert Mugabe and others... who formulate, implement, or benefit from policies that undermine or injure Zimbabwe's democratic institutions or impede the transition to a multi-party democracy.\" Persons who benefit financially from business dealings with such individuals are also banned, as are the spouses of people in either group. In 2003, President Bush issued an executive order freezing assets held in the United States by more than 70 high-ranking Zimbabwe officials and Mugabe's wife,",
      " Grace. Nine companies and commercial farms were added in 2004, and the list has been further expanded since then. The executive order also allows the Secretary of the Treasury, in consultation with the Secretary of State, to go beyond previous authority and block the property of additional persons who \"have engaged in actions or policies to undermine Zimbabwe's democratic processes or institutions,\" their immediate family members, and any persons assisting them. President Obama most recently renewed the sanctions in March 2011, stating,  While some advances have been made in Zimbabwe, particularly on economic stabilization, since the signing of the power-sharing agreement, the absence of progress on the most fundamental reforms needed to ensure rule of law and democratic governance leaves Zimbabweans vulnerable to ongoing repression and presents a continuing threat to peace and security in the region and the foreign policy of the United States.",
      " Politically motivated violence and intimidation, and the undermining of the power-sharing agreement by elements of the Zimbabwe African National Union-Patriotic Front party, continue to be of grave concern.  Congressional Response Congress expressed its opposition to Robert Mugabe's policies in the Zimbabwe Democracy and Economic Recovery Act of 2001 ( P.L. 107-99 ), which criticized \"economic mismanagement\" and \"undemocratic practices\" in Zimbabwe. This legislation called for consultations with allies on economic sanctions and a travel ban. In the 109 th Congress, the House of Representatives passed H.Res. 409 in December 2005, condemning Operation Murambatsvina,",
      " which it termed a \"humanitarian disaster that has compounded the country's humanitarian food and economic crises.\" The resolution also called on the United Nations and African regional bodies to investigate the impact of the demolitions and requested that the Administration use its influence to advocate further action by the IMF against the Zimbabwe government. Senator Russ Feingold introduced S.Amdt. 1254, providing $4 million for democracy and governance activities in Zimbabwe, which was included in the final version of the FY2006 foreign operations appropriations bill ( P.L. 109-102 ).  The 110 th Congress was also active on Zimbabwe. In April 2007,",
      " the House of Representatives passed H.Con.Res. 100, sponsored by Representative Tom Lantos, condemning the Zimbabwe government's recent actions against opposition and civil society activists. In June 2007, the Senate passed parallel legislation, S.Con.Res. 25, introduced by then-Senator Barack Obama. Former Senator Hillary Rodham Clinton introduced S. 1500, the Support for Democracy and Human Rights in Zimbabwe Act of 2007, which would have authorized up to $10 million to support democracy and human rights programs in the country. Several Members of Congress issued statements highly critical of the Mugabe Administration surrounding the 2008 elections and the related political violence.",
      " Some wrote letters to Bush Administration officials or African leaders. On April 25, the Senate passed S.Res. 533, introduced by Senator John Kerry, calling for the immediate release of the presidential results, an end to the political violence and intimidation, and a peaceful transition to democratic rule. The resolution also supported calls for an international arms embargo and other targeted sanctions against the Mugabe regime, and encouraged the creation of a comprehensive political and economic recovery package in the event a democratic government is installed. The House passed H.Res. 1230, sponsored by Representative Donald Payne and all the House Members of the Congressional Black Caucus, among others, condemning the violence and calling for a peaceful resolution to the political crisis.",
      " H.Res. 1270, sponsored by Representative Ileana Ros-Lehtinen, was also passed, calling for an international arms embargo, urging the United Nations to deploy a special envoy to Zimbabwe, and encouraging the parties to discuss the creation of a government of national unity. Prior to the June runoff, Representative Adam Schiff introduced legislation calling on the Zimbabwe government to postpone the election. Representative Tom Tancredo also introduced legislation, H.Con.Res. 387, calling for the United States to sever diplomatic ties with Zimbabwe.  The 111 th Congress monitored the progress of the transitional government and commenced a review existing U.S. policy toward Zimbabwe.",
      " In March 2009, Representative Ros-Lehtinen introduced H.Res. 238, declaring the economic and humanitarian crisis in Zimbabwe to be a threat to international security. Seven months after the new government's formation, the Senate Foreign Relations Africa Subcommittee held a hearing, Exploring U.S. Policy Options Toward Zimbabwe's Transition. Following that hearing, Subcommittee Chairman Russ Feingold called the transition a \"great opportunity... to help advance real reform and recovery,\" noting that while the transition remains incomplete and abuses in Zimbabwe continue, \"we need to seize this opportunity and look for ways that we can proactively engage and help strengthen the hands of reformers in Zimbabwe's transitional government.\" In May 2010,",
      " Senator Feingold, Senator John Kerry, and Senator Johnny Isakson introduced S. 3297, the Zimbabwe Transition to Democracy and Economic Recovery Act of 2010. According to Senator Feingold, S. 3297 aimed to \"update U.S. policy and to provide the necessary direction and flexibility for the United States to proactively push for democracy and economic recovery in Zimbabwe.\" Also in support of \"democratic and economic recovery,\" Representative Payne introduced H.R. 5971, the Zimbabwe Renewal Act of 2010 in July 2010, which, among other items, would have authorized debt forgiveness for Zimbabwe by U.S.",
      " government agencies. Other legislation on Zimbabwe during the 111 th Congress included S. 3722, the Zimbabwe Sanctions Repeal Act of 2010, introduced by Senator James Inhofe, which would have repealed ZDERA.  U.S. Support for African Diplomacy During President Bush's visit to South Africa in 2003, he praised the work of Thabo Mbeki as the \"point man\" in seeking a Zimbabwe solution. The statement suggested to some that the United States was stepping back from a lead role on the Zimbabwe issue and would accede to Mbeki's \"quiet diplomacy\" (see \" South Africa \" section,",
      " below) as the best means of achieving reform in Zimbabwe. Mbeki reportedly assured President Bush at that time that he would be able to bring about talks between ZANU-PF and the MDC, which did not occur until 2007. In 2004, former U.S. Assistant Secretary of State for Africa Jendayi Frazer, who was Ambassador to South Africa at the time, called for the formation of a \"coalition of the willing\" to deal with Zimbabwe. Frazer reiterated South Africa's position of leverage, and insisted more needed to be done by African states to return Zimbabwe to democracy. The Obama Administration has expressed support for South African President Jacob Zuma's role as the SADC facilitator on Zimbabwe issues.",
      " U.S. Assistance The United States remains the leader in humanitarian relief aid to the Zimbabwean people, supplying an estimated $1 billion in assistance since 2002. In FY2008, U.S. assistance included $271 million in food aid and $22 million in other humanitarian assistance, as well as over $22 million in health programs and over $10 million for democracy and governance support. During President Obama's June 2009 meeting with Tsvangirai, President Obama pledged $73 million in new governance, education, and health assistance to Zimbabwe; in total, the U.S. government obligated over $292 million in foreign aid in FY2009.",
      " The U.S. government provided over $7.3 million in FY2009 specifically to address the cholera outbreak, in addition to $8.6 million for other water and sanitation programs. U.S. assistance to Zimbabwe in FY2010 totaled over $168 million, including almost $80 million in humanitarian aid. The Obama Administration has requested almost $110 million in non-humanitarian aid funding for Zimbabwe for FY2012, including over $70 million for health programs, $21 million for governance programs, and over $16 million for economic growth initiatives. The Administration maintains that the provision of non-humanitarian assistance directly to the government remains predicated on progress toward political reforms,",
      " although the U.S. government is providing some technical assistance to reform-minded ministries and to parliament. Zimbabwe is not among the countries eligible to participate in the Millennium Challenge Account program, nor is it a focus country for the President's Emergency Plan for AIDS Relief. USAID has supported local democracy advocates in Zimbabwe through a variety of programs aimed at ensuring media freedom and strengthening civil society and the legislative process. USAID partners were reportedly instrumental in documenting the demolitions and human rights violations during Operation Murambatsvina and recent bouts of political violence, and USAID continues to prioritize protecting human rights defenders. Legal restrictions have limited the ability of journalists and independent newspapers to provide alternative source for news,",
      " and the Zimbabwean government has controlled all domestic radio and television broadcasting stations until recently. Reforms made under the coalition government have laid the foundation for independent media to operate, but reports suggest that restrictions on free speech remain. USAID has provided funding for Voice of America to broadcast Studio 7, a daily program on shortwave and AM radio. Studio 7, along with UK-based Shortwave (SW) Radio Africa and the Dutch-funded Voice of the People (VOP) have had their broadcasts periodically interrupted by the ZANU-PF government using Chinese jamming equipment. The U.S. State Department lifted its warning for Americans traveling to Zimbabwe in 2009,",
      " although it suggests that the situation in the country is \"unpredictable and could deteriorate quickly without warning\" and has warned that Americans have been detained for expressing their views about the political regime in Zimbabwe or President Mugabe. In 2006, a delegation of the U.S. Coalition of Black Trade Unionists (CBTU), led by AFL-CIO Vice President William Lucy, was expelled from the country. Then-U.S. Ambassador Christopher Dell said, Clearly, the Zimbabwe government's decision not to honor the delegation's visas is the result of the events of 13 September, when security forces brutally suppressed planned peaceful demonstrations by the Zimbabwe Congress of Trade Unions.... This transparent attempt to deflect international attention from the vicious beatings is itself an example of the Zimbabwean government's repression and of its fear of the truth.... There is increasing acknowledgment that a man who was regarded as a liberator of his people is an oppressor.",
      " Other International Perspectives United Kingdom In 2002, in conjunction with the United States and the European Union, the British Parliament imposed targeted sanctions on leading members and affiliates of the ZANU-PF regime, as well an arms embargo and an asset freeze. The UK has imposed travel bans on over 100 members of the ZANU-PF and close affiliates of the party. Britain continues to provide humanitarian aid in Zimbabwe. Concurrently, the UK has maintained its willingness to release funds to Zimbabwe to pay for parts of an orderly land redistribution program if Mugabe retires and the rule of law is returned. It is unclear whether Britain will concede to release such funds while President Mugabe is still in office.",
      " He was extremely hostile toward former British Prime Minister Tony Blair, a persistent critic. Speaking at his 81 st birthday celebration, Mugabe said the upcoming election would \"kill once and for all the machinations of that man in Number 10 Downing Street, who for some reason thinks he has the divine power to rule Zimbabwe and Britain.... On March 31, we must dig a grave not just six feet but 12 feet and bury Mr. Blair and the Union Jack.\" Prime Minister [author name scrubbed] maintained his predecessor's position, boycotting the December 2007 EU-Africa Summit to protest Mugabe's attendance. In an April 2008 speech to the House of Commons,",
      " Brown called for an international arms embargo against Zimbabwe, accusing the government of rigging the March elections and calling the political situation \"completely unacceptable.\" Britain's Queen Elizabeth stripped Mugabe of an honorable Knighthood he received in 1994. Mugabe allies do not appear to view Prime Minister David Cameron with the same hostility they viewed his predecessors. European Union The European Union was among the first to take action against Mugabe's government in the early 2000s. The EU imposed targeted sanctions on 19 members of Zimbabwe's elite and their spouses after pulling the EU election observer team out of Zimbabwe in February 2002. These \"light\"",
      " sanctions were later expanded and have been renewed yearly. Several individuals were removed from the list in 2010 and another 35 were removed in 2011. Current EU sanctions include a travel ban on over 160 members and beneficiaries of the ZANU-PF, an arms embargo, and an asset freeze. Mugabe defied the travel ban in 2005 to attend the funeral of Pope John Paul II. The EU has continued to provide humanitarian and limited development assistance. Commonwealth The Commonwealth of Nations sent a team of observers to the March 2002 presidential election in Zimbabwe, and the group found \"that the conditions in Zimbabwe did not adequately allow for the free expression of the will of the electors.\" Consequently,",
      " a special committee appointed to monitor and respond to the vote, consisting of Australia, South Africa and Nigeria, determined that Zimbabwe would be suspended from the Commonwealth for one year. The suspension was the first public action against Mugabe by a body that included influential African countries. In December 2003, the Commonwealth, including 19 other African members, voted to suspend Zimbabwe indefinitely. On this occasion, the decision was strongly criticized by President Thabo Mbeki, who had by then committed to his policy of quiet diplomacy, and by other governments in southern Africa. Mugabe responded by withdrawing Zimbabwe from the Commonwealth and ruling out any further discussions or a possible return.",
      " Some speculated, as a result, that the Commonwealth's action had backfired by placing Zimbabwe fully outside the bounds of its influence. Others argued that indefinite suspension by a body including many African members had important symbolic value in Africa and worldwide. China and Iran While many Western governments moved to isolate the ZANU-PF government in the last decade, China and Iran strengthened ties and deepened their involvement in Zimbabwe's economy. China, which became active on the continent in the 1950s and 1960s to gain global influence, now looks to Africa for natural resources to meet the needs of its growing population. A longtime ally of ZANU-PF,",
      " which it backed during the liberation struggle, China is reported to be Zimbabwe's second-largest trading partner, after South Africa, and its largest investor. Many observers see Zimbabwe's platinum concessions as a major draw for Beijing, and Chinese firms are playing roles in the cell phone industry, as well as in television, radio, and power generation. China holds controlling interest in the country's electricity generator. Some critics worry China's investment in Zimbabwe has come without the \"strings attached\" that Western governments might require, such as commitments to human rights, accountability, and anti-corruption. Arms agreements between China and Zimbabwe have attracted considerable attention in recent years, as most Western governments continue to enforce an arms embargo against the country.",
      " Zimbabwe's reported $240 million purchase of 12 Chinese fighter jets drew questions from analysts as to why a country that faces no immediate external threat from its neighbors would need such an air force. Reports indicate that Zimbabwe also ordered riot gear, water cannons, armored vehicles, and AK-47 rifles from China. How impoverished Zimbabwe could pay for arms from China is a subject of much speculation; Defense Ministry officials have admitted to being in arrears for the 2005 arms purchases. Some observers suspect that the acquisitions are covered in some way by China's growing economic role in Zimbabwe. In the face of Western condemnation and isolation, Zimbabwe also found an ally in Iran.",
      " During a 2006 visit to Tehran, President Mugabe reportedly secured commitments from Iran for direct aid and Iranian assistance to its energy, agriculture, and mining industries. Reports indicate that Iran or one of the Gulf countries may also be provide technical assistance to Zimbabwe to revive the country's only oil refinery, built 40 years ago to process Iranian crude. Most of Zimbabwe's fuel comes by road from South Africa. In addition to investment and economic assistance, Zimbabwe's Asian partners have occasionally offered President Mugabe diplomatic support. A Chinese official visiting in 2004 said that his government \"appreciates the reasons for the land issue\" and was opposed to any interference by foreign governments.",
      " China played a lead role in trying to quiet U.N. efforts to condemn Zimbabwe for Murambatsvina, and has vetoed proposed sanctions against the Mugabe Administration by the Security Council. China continues to press Western governments to lift their sanctions on Zimbabwe. Iranian President Mahmoud Ahmadinejad has expressed similar support, once saying \"We believe Zimbabweans have every right to defend their sovereignty and land. We are happy that Zimbabwe has once again taken control over its resources and we support the land redistribution programme.... We strongly condemn the bullying tactics of a number of (Western) governments against Zimbabwe.\"  Nigeria Although an observer team from Nigeria, a significant player in African politics,",
      " endorsed the 2002 presidential election in Zimbabwe, Nigeria's former president, Olusegun Obasanjo, attempted to mediate the country's crisis. He was reportedly concerned about the consequences of the Zimbabwe situation for the credibility of the New Partnership for Africa's Development (NEPAD). NEPAD was an AU initiative aimed at demonstrating Africa's capabilities for resolving its own problems in exchange for increased aid, trade, and investment. Obasanjo supported Zimbabwe's suspension from the Commonwealth, and in 2004, he held a long discussion with Tsvangirai and an MDC delegation in the Nigerian capital. The former Nigerian leader then took the Zimbabwe visitors on a personal tour of his farm\u2014an unusual privilege.",
      " After the 2005 elections, Obasanjo met again with Tsvangirai, and the government-owned Herald newspaper accused the Nigerian president of funding the MDC. Obasanjo's successor, Umaru Yar'Adua, expressed his own concern with the situation in Zimbabwe, telling journalists at a German-African summit in October 2007 that developments in the country were \"not in conformity with the rule of law.\" After an August 2011 meeting with Prime Minister Tsvangirai, current Nigerian President Goodluck Jonathan gave assurances that Nigeria would support the efforts of SADC and the AU to achieve peaceful and credible elections in Zimbabwe.",
      " South Africa Former President Thabo Mbeki's \"quiet diplomacy\" toward Zimbabwe drew criticism from some for its slow pace, although many credit Mbeki with playing a critical role in the 2008 power sharing agreement. Some analysts suggest that his reluctance to openly confront or condemn President Mugabe be viewed through the historical lens of the liberation struggles of Southern Africa. Mugabe lent aid and shelter to the African National Congress (ANC), now the ruling party in South Africa, during its long struggle against white minority rule, creating a bond of gratitude. Mugabe has enjoyed considerable popularity around Africa and in South Africa itself, not least because of his moves to seize lands owned by comparatively wealthy white farmers.",
      " Nonetheless, many have been dissatisfied that South Africa, a regional heavyweight both politically and economically, and which has extensive control over Zimbabwe's transport links to the outside world, as well as over its electricity supplies, has not played a more proactive role in resolving Zimbabwe's outstanding political disputes. As Zimbabwe's largest trading partner, many consider South Africa in a position to exert substantial leverage. At the same time, South Africa must weigh the unintended effects of such leverage\u2014state collapse across its northern border, for example, could produce a sharp increase in illegal migration and have a substantial impact on South Africa. In May 2008, as economic collapse and election violence in Zimbabwe pushed rising numbers to migrate south,",
      " Zimbabwean and other African immigrants became targets of xenophobic violence throughout South Africa. At least 60 were killed. Through his policy of engagement, former President Mbeki repeatedly brought the Zimbabwean government and the MDC together to discuss Zimbabwe's future. Mbeki's offer of economic incentives and an exit strategy for Mugabe in exchange for negotiations with the opposition and a commitment to free and fair elections were unsuccessful. In 2005, as the IMF threatened to expel Zimbabwe from the Fund for debt payment arrears, the country requested a loan from South Africa for fuel, food, and electricity, as well as to address the IMF payments.",
      " Amid rumors that the South African government would make any loan conditional on economic and political reforms, the negotiations stalled and Mugabe found another source from which to repay the IMF dues. In early 2006 speech, Mugabe warned Mbeki that he should \"keep away\" from interference in Zimbabwe's affairs. Mbeki's Zimbabwe policies drew criticism from within his country; former President Nelson Mandela, Nobel laureate Archbishop Desmond Tutu, former opposition leader Tony Leon, and even the ANC's ally, the Congress of South African Trade Unions (COSATU), were vocal detractors. COSATU, South Africa's powerful labor confederation,",
      " strongly opposed the quiet diplomacy policy. A certain sympathy on the part of COSATU toward the MDC may be inevitable, since the MDC has its roots in the union movement. COSATU delegations have been forcibly expelled from Zimbabwe twice, first in 2004 and more recently in late 2006, when COSATU members traveled to Harare to express their support for the ZCTU after the incidents of police violence. One COSATU leader remarked, \"we are not quiet diplomats,\" and \"we will not keep mum when freedom does not lead to respect for workers and human rights.\" When the Mbeki government issued a terse initial statement following the March 2007 arrest of MDC and civil society activists,",
      " COSATU criticized the government for a \"disgraceful\" response, \"in the face of such massive attacks on democracy and human rights, especially coming from those who owed so much to international solidarity when South Africans were fighting for democracy and human rights against the apartheid regime.\" Defenders of Mbeki's approach argued that he was the only leader with the influence and prestige needed to sway Mugabe. Some observers expressed hope for Mbeki's mediation role when the president and Morgan Tsvangirai met in October 2004, after Tsvangirai's acquittal. Tsvangirai, who had been critical of quiet diplomacy in the past,",
      " said after the meeting that he welcomed President Mbeki's efforts to mediate. But Mbeki stunned the MDC and many supporters of democracy in Zimbabwe in March 2005, when he told a press conference that he had \"no reason to think that anyone in Zimbabwe will militate in a way so that the elections will not be free and fair.\" He insisted that \"there will be a free and fair election in Zimbabwe\" and that \"things like access to the public media, things like violence-free election have been addressed.\" Earlier, he had termed Secretary Rice's description of Zimbabwe as an outpost of tyranny as \"an exaggeration.\" These remarks left critics questioning the substance behind Mbeki's diplomacy.",
      " The future of South Africa's policy toward Zimbabwe is now in the hands of Mbeki's successor. Mbeki, who resigned in late September 2008, was temporarily succeeded by ANC Deputy President Kgalema Motlanthe. Former Deputy President Jacob Zuma, who was elected as president of the ANC in December 2007, became South Africa's fourth post-apartheid president in early May 2009. Zuma has previously referred to the Zimbabwean president as \"a monster,\" and although he did not immediately call for Mbeki to step down as mediator after the 2008 elections, he did encourage African leaders to \"assist\"",
      " Mbeki, \"given the gravity of the situation.\" President Zuma himself assumed the role of SADC facilitator on the Zimbabwe situation in December 2009. South Africa's opposition parties have encouraged strong action on Zimbabwe.  The African Union The African Union (AU) and its predecessor, the Organization of African Unity (OAU), have been supportive of Mugabe in the past. In 2002, an OAU observer team labeled Mugabe's election victory legitimate, free, and fair. In 2004, when the AU allowed a report critical of the Mugabe government to be circulated at its annual summit, some believed the regional body might be indicating a change in its approach.",
      " The 114-page report, prepared by a delegation from the African Commission for Human and People's Rights (ACHPR) that visited Zimbabwe in 2002, reportedly criticized the Zimbabwe government for police abuses, press censorship, and compromising the judiciary. The AU tabled the report at the summit, however, and declared it would keep its contents secret until Zimbabwe has had a chance to respond in detail. According to some media reports, the Zimbabwean government used procedural regulations and technicalities to prevent its release. The ACHPR passed a resolution in 2005 calling on the \"government of Zimbabwe to respect the fundamental rights and freedoms of expression\"",
      " and to allow a second fact-finding mission to enter the country. The ACHPR resolution was hailed by human rights advocates, who suggested, \"This will exert a lot of pressure on Zimbabwe - this is the first time such a significant body, so close to African heads of state, observes and condemns such defiance of human rights compliance.\" But like the previous report, the second mission's findings were rejected by the AU's Council of Ministers because of \"irregularities and procedural flaws.\" Some observers and international human rights organizations such as the International Press Institute (IPI), suggest that the AU's repeated rejection of ACHPR resolutions on Zimbabwe tarnished the integrity of the body.",
      " As one AU official warned, \"If we continue to throw out every human rights report that comes before us, people out there will stop taking us seriously.\" IPI also suggests that refusal of the AU to act on the ACHPR resolutions or to condemn human rights abuses in Zimbabwe damages the credibility of the African Peer Review Mechanism (APRM) initiative, a vital part of NEPAD. Some suggest that criticism from the AU would have little effect on Zimbabwe, unless it is accompanied by more substantial policy changes. President Mugabe has routinely ignored his detractors and has frequently denied those who might be critical of the regime access to the country.",
      " In 2005, AU Commission Chairman Alpha Konare sent Tom Nyanduga, Special Rapporteur on Refugees, Internally Displaced Persons, and Asylum Seekers in Africa, as his envoy to investigate Operation Murambatsvina. The Zimbabwean government prevented Nyanduga from conducting his assessment and deported him, accusing the envoy of \"western collusion and agenda adoption.\" In November 2008, the government reportedly rejected the visa applications of several members of the Elders, a group of senior world leaders, including Kofi Annan and former U.S. President Jimmy Carter. SADC Many of the 14 members of the Southern African Development Community (SADC)",
      " are linked to Zimbabwe by a common historical experience, as well as cultural and economic ties, and the organization was seen as disinclined to publicly criticize the actions of President Mugabe or his government until recently. At a 2004 summit in Mauritius, SADC approved new electoral principles and guidelines for all its member nations. Analysts were hopeful that these rules might motivate meaningful democratic reforms in Zimbabwe, particularly since they laid out detailed guidelines for SADC observer missions. The signatory countries, including Zimbabwe, are pledged to allow SADC observers freedom of movement and access. As noted above, the SADC observer delegation's favorable report for Zimbabwe's 2005 elections was considered by critics of the Mugabe administration to be disappointing.",
      " Although Mugabe's neighboring leaders have not publicly singled him out for criticism, with the exception of Botswana, they have been increasingly concerned with the impact of Zimbabwe's crisis on their own countries. Southern African leaders blamed Zimbabwe and Swaziland for undermining economic growth in the region at a SADC Summit in Lesotho in 2006. Botswana has spoken out in the past on regional problems attributed to Mugabe's policies, including the burden placed on the country by Zimbabwe's refugees. In March 2007, following the arrest of Tsvangirai and other opposition members, Tanzanian President Jakaya Kikwete traveled to Harare to discuss the incident,",
      " and after the SADC summit, President Mbeki was nominated as mediator. SADC's election observer mission to the June 2008 runoff found that the election \"did not represent the will of the people of Zimbabwe,\" and called for dialogue among all political stakeholders toward a negotiated solution. Botswana refused to recognize Mugabe as president after the June 2008 runoff.  Pressure from SADC does appear to have brought the Zimbabwe parties to join together in the transitional government, but it remains unclear to what extent they might be willing to enforce the deal if the parties continue to struggle to work together. In March 2011, the SADC \"Troika,\" a trio of regional leaders representing the SADC Organ on Politics,",
      " Defense and Security, which is charged with coordinating efforts to promote peace and stability in the region, met in Livingstone, Zambia, to discuss, among other items, the Zimbabwe situation. President Jacob Zuma, in his role as mediator, briefed his counterparts on the latest developments, including a recent appeal by Prime Minister Tsvangirai for greater intervention to resolve outstanding political disputes and facilitate a path to credible elections. In his opening remarks at that meeting, Zambian President Rupiah Banda warned that the recent uprisings in North Africa were a warning of what could happen if the will of the people is not respected, a comment many observers considered to be a veiled warning regarding Zimbabwe.",
      " In the SADC Troika's official statement, referred to as the \"Livingstone Communiqu\u00e9,\" the Troika noted disappointment with \"insufficient progress\" in the implementation of the GPA and noted a \"resurgence of violence, arrests, and intimidation\" in Zimbabwe. The communiqu\u00e9 called for an end to the violence and harassment and called for SADC to \"assist\" Zimbabwe to prepare guidelines for peaceful, free and fair elections. President Mugabe and members of his party have expressed displeasure with the Troika's findings.  In a June 2011 SADC Summit in Sandton, South Africa, President Zuma issued a new report on Zimbabwe,",
      " reiterating the findings referenced in the Livingstone Communiqu\u00e9 and calling for an immediate end to the violence, harassment, and other actions that contradict the GPA. At the Summit, the SADC heads of state confirmed a decision to expected to appoint three officials from the region to support Zimbabwe's mechanism for monitoring the implementation of the political agreement. ZANU-PF has opposed the concept, arguing that it impinges on national sovereignty. The MDC continues to press for SADC to take a more forceful position on security sector reforms and other efforts to prevent the type of violence that surrounded the 2008 polls. The Obama Administration has been supportive of SADC efforts on Zimbabwe under President Zuma's leadership,",
      " but continues to differ with SADC on the issue of lifting sanctions against Mugabe and senior ZANU-PF officials.  Prospects for the Future Despite hopes that the transitional government would bring change to Zimbabwe, life for many of the country's people remains a daily struggle. The rate of unemployment and the cost of living remain high, and salaries for those with jobs are far below regional standards. The controversial issues of property rights and land reform have yet to be seriously addressed by the government. Prospects for Zimbabwe's youngest generation remain poor.. Many teachers have returned to work since 2008, but salaries remain low and enticing the thousands who have left the country to return will be a major challenge.",
      " Many families still struggle to afford basic food items, not to mention medicines or doctors. Analysts have cited a number of reasons for Zimbabwe's economic problems in the past decade, including recurrent drought, difficulties encountered in implementing economic reforms, and industrial competition from comparatively cheap South African imports. At the same time, analysts place considerable responsibility for Zimbabwe's problems on the policies adopted and actions taken by the government since 1997. Zimbabwe is at a critical juncture. Prior to the power sharing agreement, the government took some fiscal measures to reverse the economic downturn, but hyperinflation continued, and the measures were largely ineffective. The MDC controls the Ministry of Finance under the transitional government,",
      " but Zimbabwe is in debt distress and it remains unclear how effective the MDC's economic policies will be without major donor financing for its recovery plans, estimated to require up to $8 billion. Many donor governments and institutions have been reluctant to release significant funds until they can determine whether the transitional government's establishment will result in changes to the policies that brought about sanctions in the first place. The MDC and ZANU-PF, long-standing political foes, must now demonstrate their willingness to work together to put the country's economy on the path toward recovery.\n"
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  {
    "id": 92,
    "question": null,
    "answer": "Each year, tens of thousands of aliens in the United States apply for asylum, which provides refuge to those who have been persecuted or fear persecution on protected grounds. Asylum officers in DHS's USCIS and immigration judges in DOJ's EOIR adjudicate asylum applications. GAO was asked to review the status of the asylum system. This report addresses (1) what DHS and DOJ data indicate about trends in asylum claims, (2) the extent to which DHS and DOJ have designed mechanisms to prevent and detect asylum fraud, and (3) the extent to which DHS and DOJ designed and implemented processes to address any asylum fraud that has been identified. GAO analyzed DHS and DOJ data on asylum applications for fiscal years 2010 through 2014, reviewed DHS and DOJ policies and procedures related to asylum fraud, and interviewed DHS and DOJ officials in Washington, D.C., Falls Church, VA, and in asylum offices and immigration courts across the country selected on the basis of application data and other factors. The total number of asylum applications, including both principal applicants and their eligible dependents, filed in fiscal year 2014 (108,152) is more than double the number filed in fiscal year 2010 (47,118). As of September 2015, the Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services (USCIS) has a backlog of 106,121 principal applicants, of which 64,254 have exceeded required time frames for adjudication. USCIS plans to hire additional staff to address the backlog. USCIS and the Department of Justice's (DOJ) Executive Office for Immigration Review (EOIR) have limited capabilities to detect asylum fraud. First, while both USCIS and EOIR have mechanisms to investigate fraud in individual applications, neither agency has assessed fraud risks across the asylum process, in accordance with leading practices for managing fraud risks. Various cases of fraud illustrate risks that may affect the integrity of the asylum system. For example, an investigation in New York resulted in charges against 30 defendants as of March 2014 for their alleged participation in immigration fraud schemes; 829 applicants associated with the attorneys and preparers charged in the case received asylum from USCIS, and 3,709 received asylum from EOIR. Without regular assessments of fraud risks, USCIS and EOIR lack reasonable assurance that they have implemented controls to mitigate those risks. Second, USCIS's capability to identify patterns of fraud across asylum applications is hindered because USCIS relies on a paper-based system for asylum applications and does not electronically capture some key information that could be used to detect fraud, such as the applicant's written statement. Asylum officers and USCIS Fraud Detection and National Security (FDNS) Directorate immigration officers told GAO that they can identify potential fraud by analyzing trends across asylum applications; however, they must rely on labor-intensive methods to do so. Identifying and implementing additional fraud detection tools could enable USCIS to detect fraud more effectively while using resources more efficiently. Third, FDNS has not established clear fraud detection responsibilities for its immigration officers in asylum offices; FDNS officers we spoke with at all eight asylum offices told GAO they have limited guidance with respect to fraud. FDNS standard operating procedures for fraud detection are intended to apply across USCIS, and therefore do not reflect the unique features of the asylum system. Developing asylum-specific guidance for fraud detection, in accordance with federal internal control standards, would better position FDNS officers to understand their roles and responsibilities in the asylum process. To address identified instances of asylum fraud, USCIS can, in some cases, terminate an individual's asylum status. USCIS terminated the asylum status of 374 people from fiscal years 2010 through 2014 for fraud. In August 2015, USCIS adopted a target of 180 days for conducting initial reviews, in which the asylum office reviews evidence and decides whether to begin termination proceedings, when the asylee has applied for adjustment to lawful permanent resident status; however, this goal applies only to a subset of asylees and pertains to initial reviews. Further, asylees with pending termination reviews may be eligible to receive certain federal benefits. Developing timeliness goals for all pending termination reviews would help USCIS better identify the staffing resources needed to address the terminations workload.\n",
    "docs": [
      "Background Asylum Eligibility  Requirements To adjudicate asylum claims, USCIS asylum officers and EOIR  immigration judges determine an applicant\u2019s eligibility for asylum by  assessing whether the applicant has credibly established that he or she is  a refugee within the meaning of section 101(a)(42)(A) of the Immigration  and Nationality Act (INA), as amended. An applicant is eligible for asylum  if he or she (1) applies from within the United States; (2) suffered past  persecution, or has a well-founded fear of future persecution, based on  race, religion, nationality, membership in a particular social group,",
      " or  political opinion; and (3) is not statutorily barred from applying for or being  granted asylum. Among other things, the REAL ID Act of 2005 was a  legislative effort to provide consistent standards for adjudicating asylum  applications and to limit fraud.  Consistent with the REAL ID Act, the  burden is on the applicant to establish past persecution or a well-founded  fear of persecution, and asylum officers and immigration judges have the  discretion to require documentary support for asylum claims.  To  determine whether an applicant is credible, the act requires that asylum  officers and immigration judges consider the totality of the applicant\u2019s  circumstances and all relevant factors and states that a determination of  the applicant\u2019s credibility may be based on any relevant factor.",
      "  Such  factors could include, among others, the applicant\u2019s demeanor, candor, or  responsiveness in the asylum interview or immigration court hearing, or  any inaccuracies or falsehoods discovered in the applicant\u2019s written or  oral statements, whether or not an inconsistency, inaccuracy, or  falsehood goes to the heart of the applicant\u2019s claim. However, an  asylum officer or immigration judge may determine that an applicant is  credible, considering the totality of the circumstances, even if there are  inaccuracies, contradictions, or evidence of potential fraud. For example,  an applicant may have lied to a U.S. consular officer in order to obtain a  visa to travel to the United States when fleeing his or her home country,",
      "  and still have a credible asylum claim. Overview of the Affirmative  and Defensive Asylum  Application Processes To apply for affirmative asylum, an applicant submits a Form I-589,  Application for Asylum and for Withholding of Removal, to USCIS. An  applicant may include his or her spouse and unmarried children under the  age of 21 who are physically present in the United States as dependent  asylum applicants. The applicant mails paper copies of the application  and supporting documentation to a USCIS Service Center, which verifies  that the application is complete, creates a hard-copy file, and enters  information about the applicant,",
      " including biographic information as well  as attorney and preparer information submitted with the application, into  RAPS. Subsequently, using the applicant\u2019s biographic data, RAPS  initiates automated checks against other U.S. government databases  containing criminal history information, immigration violation records, and  address information, among other things. RAPS also schedules an  appointment to fingerprint and photograph the applicant. The Service  Center sends the applicant file to one of USCIS\u2019s eight asylum offices  based on the applicant\u2019s residential address and the asylum office then  schedules the applicant\u2019s interview with an asylum officer. In adjudicating  asylum applications,",
      " USCIS policy requires asylum officers to review the  applicant\u2019s hard-copy file; research country of origin information; verify  that an applicant has completed fingerprinting requirements; and  document the results of background, identity, and security checks, some  of which are repeated in the asylum office to identify any relevant  information that may have changed after the initial automated checks.  Asylum officers are to use the information obtained through this process  to (1) determine who is included in the application; (2) confirm the  applicant\u2019s immigration status, asylum filing date, and date, place, and  manner of entry into the United States;",
      " (3) become familiar with the  asylum claim and the applicant\u2019s background and supporting  documentation; (4) identify issues that could affect eligibility, such as  criminal history, national security concerns, participation in human rights  abuses, or adverse credibility or fraud indicators; and (5) identify issues  that must be discussed in an interview with the applicant to determine  asylum eligibility. During the interview, which is to be conducted in a nonadversarial  manner, the asylum officer asks questions to assess the applicant\u2019s  eligibility for asylum and determine whether his or her claim is credible.   If the asylum officer identifies inaccuracies, inconsistencies,",
      " or fraud in  the asylum application, the applicant must be given an opportunity to  explain such issues during the interview, according to the USCIS  Affirmative Asylum Procedures Manual. An independent interpreter  monitor listens to each affirmative asylum interview to ensure that the  applicant\u2019s interpreter is correctly interpreting and to notify the  interviewing officer of any discrepancies in interpretation. After the  interview, the asylum officer considers the totality of the circumstances  surrounding the applicant\u2019s claim and prepares a written decision. The  decision is reviewed by a supervisor, who is to check for quality,  accuracy, and legal sufficiency. After a supervisor has concurred with the  decision,",
      " the decision notice is delivered in hard copy to the applicant. If USCIS  grants asylum to the applicant, the asylee is eligible to apply for  adjustment to lawful permanent resident (LPR) status after 1 year.  If  USCIS  does not grant asylum and the applicant is present in the United  States lawfully through other means, USCIS is to issue a Notice of Intent  to Deny stating the reason(s) for asylum ineligibility and provide an  opportunity for the applicant to respond. Whether or not asylum is  granted, the applicant can continue living in the United States under his or  her otherwise valid status.",
      " If USCIS  does not grant asylum and the  applicant is present in the United States unlawfully, USCIS is to refer the  application to EOIR, together with a Notice to Appear, which requires that  the applicant appear before an EOIR immigration judge for adjudication of  the asylum claim in removal proceedings. Figure 1 provides an overview  of the USCIS  affirmative asylum process. EOIR follows the same procedures for defensive asylum applications and  affirmative asylum referrals from USCIS. For affirmative asylum referrals,  the immigration judge reviews the case de novo, meaning that the judge  evaluates the applicant\u2019s affirmative asylum application anew and is not  bound by an asylum officer\u2019s previous determination.",
      " EOIR asylum  hearings are adversarial proceedings in which asylum applicants appear  in removal proceedings for adjudication of the asylum claim, and may  apply for other forms of relief or protection as a defense against removal  from the United States. First, the judge conducts an initial hearing  (referred to as a master calendar hearing) to, among other things, ensure  that the applicant understands the court proceedings and schedule a  hearing to specifically address the asylum application (referred to as a  merits hearing). Second, during the merits hearing, the judge hears  testimony from the applicant and any other witnesses, oversees cross- examinations, and reviews evidence.",
      " ICE trial attorneys represent DHS in  these proceedings. An asylum applicant may self-represent or may be  represented by an attorney at no cost to the U.S. government. The judge  may question the applicant or other witnesses. Judges render oral and, in  some cases, written decisions after the immigration court proceedings  end. If the judge determines that the applicant is eligible for asylum, the  asylee can remain in the United States indefinitely unless asylum status is  subsequently terminated. A grant of asylum from an immigration judge  confers the same benefits as a grant of asylum from a USCIS  asylum  officer. If the judge determines that the applicant is ineligible for asylum,",
      "  and is removable, the judge may order the applicant to be removed from  the United States, unless the applicant seeks (and receives) another form  of relief from removal. Judges\u2019 decisions are final unless appealed to the  Board of Immigration Appeals (BIA). Figure 2 provides an overview of the  DOJ affirmative and defensive asylum process. Eligibility for Federal  Benefits Asylees, or individuals who have been granted asylum, are considered  qualified aliens for the purpose of eligibility for federal, and state or local,  public benefits. Subject to certain statutory criteria, asylees may be  eligible for a number of federal means-tested public benefits including  Supplemental Security Income,",
      " Supplemental Nutrition Assistance  Program, Temporary Assistance for Needy Families, and Medicaid. In  addition, asylees may also be eligible for federal student financial aid,  among other benefits. Asylees are authorized for employment in the  United States as a result of their asylum status and can receive an  Employment Authorization Document (EAD) issued by USCIS.  In  addition, asylum applicants can receive an EAD after their applications  have been pending, including in both the USCIS and EOIR adjudicative  process, for 180 days, not including any delays requested or caused by  the applicant such as requesting to reschedule or failing to appear at the  asylum interview or,",
      " where applicable, the time between issuance of a  request for evidence and receipt of the applicant\u2019s response. Within 2  years of receiving asylum status, asylees can request derivative asylum  status for their spouses and unmarried children under age 21, a provision  that allows family members to join the asylee in the United States. Fraud and Asylum Immigration benefit fraud involves the willful misrepresentation of material  fact for the purpose of obtaining an immigration benefit, such as asylum  status, without lawful entitlement. Immigration benefit fraud is often  facilitated by document fraud and identity fraud. Document fraud includes  forging, counterfeiting,",
      " altering, or falsely making any document, or using,  possessing, obtaining, accepting, or receiving such falsified documents in  order to satisfy any requirement of, or to obtain a benefit under, the INA.   Identity fraud refers to the fraudulent use of others\u2019 valid documents.  Fraud can occur in the affirmative and defensive asylum processes in a  number of ways. For example, an applicant may file fraudulent supporting  documents with his or her affirmative asylum application in an attempt to  bolster the facts of a claim. Or, an applicant may submit a fraudulent  address in order to file for asylum within the jurisdiction of an asylum  office or immigration court perceived to be more likely to grant asylum  than another office or court.",
      " Further, an attorney, preparer, or interpreter  can, in exchange for fees from the applicant, prepare and file fraudulent  documents, written statements, or supporting details about an applicant\u2019s  asylum claim, with or without the applicant\u2019s knowledge or involvement.  For the purposes of this report, we define asylum fraud as the willful  misrepresentation of material fact(s), such as making false statements,  submitting forged or falsified documents, or conspiring to do so, in  support of an asylum claim. It is possible to terminate an individual\u2019s asylum status under certain  circumstances, including where there is a showing of fraud in the  application such that the individual was not eligible for asylum at the time  it was granted.",
      " By regulation, USCIS may only terminate asylum  granted by USCIS; however, EOIR may terminate asylum granted by  either USCIS or EOIR. For cases granted by USCIS, except in the Ninth  Circuit, USCIS issues the asylee a Notice of Intent to Terminate and  conducts an interview in which the individual may present evidence of his  or her asylum eligibility. If termination is warranted, USCIS then  provides written notice to the individual of termination of his or her asylum  status and is to initiate removal proceedings for the individual in  immigration court, as appropriate. While in removal proceedings, the  individual may reapply for asylum before an immigration judge.",
      " The  judge is not required to accept the determination of fraud made by USCIS  and determines the respondent\u2019s eligibility for asylum anew.  For cases  granted by an immigration judge, the BIA, or by USCIS  in the Ninth  Circuit, ICE OPLA may petition the immigration court to re-open a case in  which an individual has been granted asylum and request the termination  of the individual\u2019s asylum status because of fraud. In such a case, ICE  OPLA must prove, by a preponderance of evidence, that there was fraud  in the asylum application that would have rendered the asylee ineligible  for asylum at the time it was granted.",
      " The immigration judge has  jurisdiction to conduct an asylum termination hearing as part of the  removal proceeding, and if asylum status is terminated, the individual  may be subject to removal from the United States. GAO\u2019s Fraud Framework Our Fraud Framework is a comprehensive set of leading practices that  serves as a guide for program managers to use when developing efforts  to combat fraud in a strategic, risk-based manner. The framework  describes leading practices for establishing an organizational structure  and culture that are conducive to fraud risk management, designing and  implementing controls to prevent and detect potential fraud, and  monitoring and evaluating to provide assurances to managers that they  are effectively preventing,",
      " detecting, and responding to potential fraud.  Managers may perceive a conflict between their priorities to fulfill the  program\u2019s mission, such as efficiently disbursing funds or providing  services to beneficiaries, and taking actions to safeguard taxpayer dollars  from improper use. However, the purpose of proactively managing fraud  risks is to facilitate, not hinder, the program\u2019s mission and strategic goals  by ensuring that taxpayer dollars and government services serve their  intended purposes. Figure 3 illustrates our Fraud Framework. The Fraud Framework includes control activities that help agencies  prevent, detect, and respond to fraud risks as well as structures and  environmental factors that influence or help managers achieve their  objectives to mitigate fraud risks.",
      " The framework consists of four  components for effectively managing fraud risks: commit, assess, design  and implement, and evaluate and adapt. Leading practices for each of  these components include the following: Commit: create an organizational culture to combat fraud at all levels  of the agency, and designate an entity within the program office to  lead fraud risk management activities; Assess: assess the likelihood and impact of fraud risks and determine  risk tolerance and examine the suitability of existing controls and  prioritize residual risks; Design and implement: develop, document, and communicate an  antifraud strategy, focusing on preventive control activities; and Evaluate and adapt: collect and analyze data from reporting  mechanisms and instances of detected fraud for real-time monitoring  of fraud trends,",
      " and use the results of monitoring, evaluations, and  investigations to improve fraud prevention, detection, and response. The Number  of  Asylum Applications  Filed per Fiscal Year  Has Increased Every  Year from 2010 to  2014 The Number of Asylum  Applications Filed in Fiscal  Year 2014 Is More than  Double the Total Filed in  Fiscal Year 2010 The total number of asylum applications (principal applicants and their  eligible dependents), including affirmative and defensive applications,  increased from 47,118 in fiscal year 2010 to 108,152 in fiscal year 2014,  an increase of 130 percent.",
      " During this time, affirmative asylum  applications filed directly with USCIS increased by a total of 131  percent. Defensive asylum applications filed with EOIR increased 125   percent. Table 1 shows the number of affirmative and defensive asylum  applications filed each year for fiscal years 2010 through 2014. The number of principal affirmative applications and their eligible  dependents has increased each year from fiscal years 2010 through  2014. The number of principal affirmative applications filed has increased  from 28,108 in fiscal year 2010 to 56,959 in fiscal year 2014, a 103  percent increase.",
      " The portion of affirmative asylum applicants noted as  dependents increased from 6,266 in fiscal year 2010 to 22,526 in fiscal  year 2014, a 259 percent increase. Table 2 shows the number of principal  and dependent affirmative asylum applications filed each year for fiscal  years 2010 through 2014. Asylum applications (including principal applicants and their eligible  dependents) filed with EOIR\u2014affirmative applications referred from  USCIS  and defensive applications\u2014increased from 32,830 in fiscal year  2010 to 41,920 in fiscal year 2014,",
      " an increase of 28 percent. Table 3  shows the number of affirmative and defensive asylum cases EOIR  received from fiscal years 2010 through 2014. The number of affirmative  applications USCIS referred to EOIR increased from 20,086 in fiscal year  2010 to 25,907 in fiscal year 2012, and decreased from fiscal year 2012  to fiscal year 2014. Asylum Division officials attribute the decrease in  affirmative asylum cases referred to EOIR to the increased number of  credible fear and reasonable fear cases USCIS has received, which has  caused USCIS to divert resources away from affirmative asylum cases  and adjudicate fewer affirmative asylum cases overall.",
      " The number of  credible fear and reasonable fear cases increased from 11,019 in fiscal  year 2010 to 60,085 in fiscal year 2014, an increase of 445 percent. Asylum Applicant  Characteristics Vary By  Country of Nationality and  Location Country of Nationality From fiscal year 2010 through fiscal year 2014, China accounted for the  largest number of affirmative asylum applicants (26 percent), followed by  Mexico (13 percent) and Egypt (6 percent). Figure 4 shows the top 10  countries for affirmative asylum applications filed with USCIS. From fiscal year 2010 through fiscal year 2014,",
      " China accounted for the  largest number of asylum applicants filing with EOIR (20 percent),  followed by Mexico (20 percent) and El Salvador (9 percent). Figure 5  shows the top 10 countries for asylum applicants filing with EOIR. USCIS  has eight asylum offices across the United States and, as of April  2015, 353 asylum officers who are responsible for adjudicating affirmative  asylum claims. The number of affirmative asylum applications filed per  USCIS  office varied widely. From fiscal years 2010 through 2014, the  New York and Los Angeles asylum offices accounted for 45 percent of all  affirmative asylum applications filed.",
      " The number of affirmative asylum  applications filed in Newark and Los Angeles has grown more than in any  other asylum office during this time, with a total increase of 8,352 and  9,070 applications. Figure 6 shows affirmative asylum applications  received by each USCIS asylum office from fiscal year 2010 through  fiscal year 2014. USCIS Has a Backlog of  More than 100,000  Principal Affirmative  Asylum Applications, Most  of Which Have Exceeded  Required Time Frames for  Adjudication Final administrative adjudication of an asylum application, not including  administrative appeals, is to be completed within 180 days after filing,",
      "  absent exceptional circumstances and not including any delays requested  or caused by the applicant, or, where applicable, the amount of time  between issuance of a request for evidence and the receipt of the  applicant\u2019s response. USCIS\u2019s backlog of principal affirmative asylum  applications as of September 2015 was 106,121. Of those pending cases,  64,254 (61 percent) have exceeded the 180-day requirement. In addition,  the number of affirmative asylum cases that were adjudicated in more  than 180 days has increased from fiscal years 2010 through 2014. Figure  7 shows the number of affirmative asylum applications adjudicated from  fiscal years 2010 through 2014 where USCIS\u2019s adjudication exceeded  180 days.",
      " According to Asylum Division officials, several factors have affected  USCIS\u2019s  ability to adjudicate affirmative asylum applications in a timely  manner. For example, officials stated that they have diverted resources to  address the growth in credible fear and reasonable fear cases, which  increased by over 400 percent from fiscal year 2010 through fiscal year  2014. In addition, these officials stated that they had prioritized  applications from unaccompanied alien children based on the time  sensitivity of such cases. Asylum Division officials said that this  diversion of resources and prioritization of these claims contributed to the  increasing backlog of affirmative asylum applications.",
      " Asylum Division  officials stated that the increasing number of affirmative applications in  recent years has also had significant implications for the workload of  USCIS\u2019s  asylum offices, and that USCIS plans to hire additional staff to  help address the current level of applications and the increasing backlog. DHS and DOJ Have  Limited Capabilities to  Detect and Prevent  Asylum  Fraud DHS and DOJ Have  Established Dedicated  Antifraud Entities Both DHS and DOJ have established dedicated antifraud entities, a  leading practice for managing fraud risks. Our Fraud Framework states  that a leading practice for managing fraud risks is to establish a dedicated  entity to design and oversee fraud risk management activities.",
      " Within  DHS, USCIS  created FDNS in 2004 to help ensure immigration benefits  are not granted to individuals who pose a threat to national security or  public safety or who seek to defraud the immigration system. As of fiscal  year 2015, USCIS has deployed 35 FDNS immigration officers and 4  supervisory immigration officers working across all eight asylum offices.  FDNS immigration officers working in asylum offices are tasked with  conducting background checks to resolve national security \u201chits\u201d and  fraud concerns, which arise when asylum officers conduct required  background checks of asylum applicants; addressing fraud-related leads  provided by asylum officers and other sources;",
      " and liaising with law  enforcement entities, such as HSI, to provide logistical support in law  enforcement and national security matters. In September 2007, DOJ established an EOIR antifraud officer through  regulation. The regulation states that the antifraud officer is to (1) serve  as a point of contact relating to concerns about fraud, particularly with  respect to fraudulent applications or documents affecting multiple removal  proceedings, applications for relief from removal, appeals, or other  proceedings before EOIR; (2) coordinate with DHS and DOJ investigative  authorities with respect to the identification of and response to fraud; and  (3)",
      " notify EOIR\u2019s Disciplinary Counsel and other appropriate authorities  as to instances of fraud, misrepresentation, or abuse related to an  attorney or accredited representative. The activities of the antifraud  officer (also known as the Fraud Prevention Counsel) and supporting staff  collectively are referred to as the Fraud and Abuse Prevention Program.  According to EOIR\u2019s Fraud Prevention Program fact sheet, the goal of the  program is to protect the integrity of EOIR and other immigration  proceedings by promoting efforts to deter fraud and provide a systematic  response to identifying and referring instances of suspected fraud and  abuse. In practice, according to the Fraud Prevention Counsel,",
      " they  collect data and review records of proceedings in response to reports of  suspected fraud. In addition, through the program, EOIR coordinates with  law enforcement agencies to refer appropriate matters for investigation  and assist in fraud investigations and prosecutions. Further, the program  provides training for EOIR staff, including immigration judges, and  distributes a monthly newsletter about fraud related activity. Table 4  shows the total number of complaints received, the number of case files  opened, and the number of asylum-related case files opened from fiscal  year 2010 through fiscal year 2014. EOIR\u2019s Fraud and Abuse Prevention  Program tracks the number of complaints it receives about potential  fraud,",
      " but does not create a formal case file if the complaint or request for  assistance can be closed quickly with minimal investment of staff time. As  a result, not every complaint has a corresponding file. USCIS Has Not Assessed  Fraud Risks across  Affirmative Asylum Claims USCIS  has not assessed fraud risks across the affirmative asylum  application process. The Fraud Framework states that it is a leading  practice for agencies to create an organizational culture to combat fraud  at all levels and designate an entity to lead fraud risk management  activities, such as planning regular fraud risk assessments to determine a  fraud risk profile for their program.",
      "  There is no universally accepted  approach for conducting fraud risk assessments, since circumstances  among programs vary; however, assessing fraud risks generally involves  five actions: identifying inherent fraud risks affecting the program,  assessing the likelihood and impact of those fraud risks, determining  fraud risk tolerance, examining the suitability of existing fraud controls  and prioritizing residual fraud risks, and documenting the program\u2019s fraud  risk profile. Depending on the nature of the program, the frequency with  which antifraud entities update the assessment can range from 1 to 5  years. USCIS  officials stated that USCIS has not conducted an enterprise-wide  fraud risk assessment,",
      " as the agency has implemented individual  activities that demonstrate that it is conducting risk assessments.  According to USCIS officials, such activities include the prescreening of  asylum applications by FDNS immigration officers in advance of asylum  interviews, security and background checks of applicants, information  sharing agreements between the United States and other countries to  access records related to persons of interest, fraud training for asylum  officers, and mechanisms for the referral of cases to FDNS and to other  investigative entities. Investigations of fraud are usually conducted after  fraud has occurred and asylum may or may not have been granted. While  these efforts can help USCIS detect and investigate potential fraud in  individual asylum applications,",
      " they do not position USCIS to assess  fraud risks across the affirmative asylum application process. The  mentioned mechanisms are all tools with which to support a fraud risk  assessment; however, an enterprise-wide fraud risk assessment would  provide further information on the inherent risks across all applications.  For example, asylum officers face fraud risks because they must make  decisions, at times, with little or no documentation to support or refute an  applicant\u2019s claim. As noted in the Fraud Framework, fraud risk  management activities such as a fraud risk assessment may be  incorporated into or aligned with internal activities and strategic objectives  already in place, and information on fraud trends and lessons learned can  be used to improve the design and implementation of fraud risk  management activities.",
      " Further, regular fraud risk assessments will help  identify fraud vulnerabilities before any actual fraud occurs, and allow  management to take steps to strengthen controls for fraud. Various cases  of asylum fraud demonstrate ways in which applicants and preparers  have sought to exploit the asylum system and help illustrate fraud risks in  the affirmative asylum application process, especially risks associated  with attorney and preparer fraud. For example, As of March 2014, a joint fraud investigation led by the U.S. Attorney\u2019s  Office for the Southern District of New York, the Federal Bureau of  Investigation (FBI), the New York City Police Department, and USCIS,",
      "  known as Operation Fiction Writer, resulted in charges against 30  defendants, including 8 attorneys, for their alleged participation in  immigration fraud schemes in New York City. According to  discussions with USCIS  officials and a FBI press release, allegations  regarding these defendants generally involved the preparation of  fraudulent asylum applications that often followed one of three fact  patterns: (1) forced abortions performed pursuant to China\u2019s family  planning policy; (2) persecution based on the applicant\u2019s belief in  Christianity; or (3) political or ideological persecution, typically for  membership in China\u2019s Democratic Party or followers of Falun Gong.  Attorneys and preparers charged in Operation Fiction Writer filed  5,",
      "773 affirmative asylum applications with USCIS, and USCIS  granted  asylum to 829 of those affirmative asylum applicants. According to  EOIR data, 3,709 individuals who were connected to attorneys and  preparers convicted in Operation Fiction Writer were granted asylum  in immigration court; this includes both affirmative asylum claims  referred from USCIS as well as defensive asylum claims. An asylum fraud investigation prompted in 2009 and led by the Los  Angeles asylum office resulted in the indictment and subsequent  conviction of two immigration consultants. The indictment alleged that  the two consultants charged approximately $6,500 to prepare and file  applications on behalf of Chinese nationals seeking asylum in the  United States.",
      " These applications falsely claimed that the applicants  had fled China because of persecution for their Christian beliefs. HSI  investigators have linked the consultants to more than 800 asylum  applications filed since 2000. In 2002, we reported that the legacy Immigration and Naturalization  Service (INS) did not know the extent of immigration benefit fraud.  In  response, INS initiated the Benefit Fraud Assessment program in 2002 to  measure the integrity of specific nonimmigrant and immigrant applications  by conducting administrative inquiries on randomly selected cases, but  later discontinued the effort because of competing priorities after the  terrorist attacks of September 11,",
      " 2001. USCIS reinitiated the Benefit  Fraud Assessment program through FDNS in 2005 and, in November  2009, FDNS drafted a Benefit Fraud and Compliance Assessment  (BFCA) on asylum for internal USCIS discussion. The assessment was  intended to study the scope and types of fraud associated with the Form  I-589, determine the relative utility of a number of fraud detection  methods, and assess the extent to which asylum officers were using the  fraud detection measures that were part of the adjudication process at the  time. However, FDNS did not release the report to external parties  because of questions about the validity and soundness of the  methodology used in the BFCA.",
      " In 2010, USCIS\u2019s Office of Policy and  Strategy assumed responsibility for future BFCAs. USCIS contracted for a  review of the BFCA on asylum, and in September 2012, the contractor  reported that USCIS should not release the BFCA and made  recommendations to improve future studies. For example, the contractor  reported that the assessment process was not well planned and had  methodological problems and issues with clarity. As of September 2015, officials from the Office of Policy and Strategy  stated that USCIS is renaming the BFCA as the Immigration Benefit  Fraud Assessment (IBFA). USCIS officials stated that under the new  IBFA program,",
      " they plan to design rigorous research methods to provide  fraud rates for selected benefit types. Office of Policy and Strategy  officials did not provide a timeframe regarding the completion of future  IBFA studies, and stated that USCIS has no plans to conduct an IBFA on  asylum because they are still working to develop a framework for  selecting which immigration benefits to study in the future. Office of Policy  and Strategy officials said that the IBFA is not a fraud risk assessment  and that their efforts will not be used to assess the risk of fraud in benefit  types but will, instead, estimate the fraud rate of a given benefit. USCIS  officials stated that they do not view the IBFA as a fraud risk assessment  and that asylum is more difficult to study than other immigration benefits  because asylum claims are generally based on testimonial evidence,",
      "  making it more difficult to prove fraud than with other claims, and involve  confidentiality restrictions. Standards for Internal Control in the Federal Government states that  entities should comprehensively identify risks at both the entity-wide and  activity levels. A risk assessment will help to determine how risks should  be managed through the identification and analysis of relevant risks  associated with achieving agency objectives.  Because USCIS must  balance its mission to protect those with genuine asylum claims with the  need to prevent ineligible individuals from fraudulently obtaining asylum,  USCIS  could benefit from assessing fraud risks across its asylum  adjudication process, particularly to assess the fraud risk tolerance of the  asylum system\u2014a leading practice for assessing fraud risks.",
      " The Fraud  Framework states that managers who effectively assess fraud risks  attempt to fully consider the specific fraud risks the agency or program  faces, analyze the potential likelihood and impact of fraud schemes, and  document prioritized fraud risks. The aforementioned examples of fraud  investigations further illustrate the need for preventive measures of fraud  detection within the asylum program. In addition, risk tolerance reflects  management\u2019s willingness to accept a higher level of fraud risk based on  the circumstances and objectives of the program. For example, to protect  genuine asylum applicants who may be unable to provide documents  supporting their applications, asylum law states that testimonial  information alone can be sufficient for asylum applicants to meet the  burden of proof for establishing asylum eligibility.",
      " According to USCIS training materials for new asylum officers, asylum  officers are to interview applicants in a nonadversarial manner and  assume a cooperative approach as the applicant seeks to establish his or  her eligibility. USCIS instructs asylum officers, when assessing whether  an applicant has provided sufficient detail about his or her claim, to  account for the amount of time that has elapsed since the events  occurred; the possible effects of trauma; the applicant\u2019s background,  education, and culture; and any other factors that might impair the  applicant\u2019s memory. The Asylum Division Branch Chief said that while  this cooperative approach aims to protect genuine asylees,",
      " it can also  create favorable circumstances for ineligible individuals who seek to file  fraudulent claims, and asylum officers in seven of the eight asylum offices  we spoke with told us that they have granted asylum in cases in which  they suspected fraud. For example, three asylum offices said that it was  difficult to prove fraud existed in the asylum application. Although there  are individual efforts in place to detect fraud, an enterprise-wide  assessment of fraud risk could better inform asylum officers when  adjudicating cases, and influence training materials regarding such  subjects as country conditions. Without regularly assessing fraud risks  and determining the fraud risk tolerance of the USCIS asylum  adjudication process,",
      " USCIS does not have complete information on the  inherent fraud risks that may affect the integrity of the affirmative asylum  application process and therefore does not have reasonable assurance  that it has implemented controls to mitigate those risks. Moreover, given  the growth in affirmative asylum applications in recent years, and the  USCIS  pending caseload of over 100,000 affirmative asylum cases to  adjudicate, assessing program-wide fraud risks could help USCIS target  its fraud prevention efforts to those areas that are of highest risk in  accordance with its fraud risk tolerance. EOIR Has Not Assessed  Fraud Risks across  Asylum Applications in the  Immigration Courts EOIR has not assessed the fraud risks associated with asylum  applications across immigration courts.",
      " EOIR\u2019s immigration judges serve  as the sole adjudicators for all defensive asylum claims made in the  immigration courts and affirmative asylum applications referred by  USCIS\u2019s  asylum officers. Asylum fraud-related cases mentioned below  have demonstrated that EOIR faces fraud risks in these claims. The  Fraud Framework states that it is a leading practice for agencies to create  an organizational culture to combat fraud at all levels and designate an  entity to lead fraud risk management activities, such as planning regular  fraud risk assessments to determine a fraud risk profile for their  program. EOIR officials told us that the Fraud and Abuse Prevention  Program has not assessed fraud risks across asylum applications in the  immigration courts because it lacks financial and human resources.",
      "  EOIR\u2019s Fraud and Abuse Prevention Program is composed of one full- time fraud prevention counsel, who serves as the antifraud officer  pursuant to EOIR\u2019s regulations, one part-time attorney, and several  student interns. Therefore, according to EOIR\u2019s antifraud officer, the  Fraud and Abuse Prevention Program has primarily served as an in- house referral system for EOIR employees. EOIR officials also stated that  it would be difficult to conduct a fraud risk assessment across immigration  courts because fraud is difficult to measure. EOIR has efforts in place to assess fraud identified and referred to the  Fraud and Abuse Prevention Program,",
      " such as reviewing fraud referrals  once received, reviewing records of proceedings, and making referrals to  law enforcement entities for investigation. However, recent asylum fraud  cases identified in the program\u2019s case files illustrate the presence of fraud  risks across asylum applications in immigration courts. For example,  according to EOIR data, immigration judges granted asylum to 3,709  individuals who were connected to attorneys and preparers convicted in  Operation Fiction Writer. In addition, almost 20 percent (30 of 153) of  EOIR\u2019s Fraud and Abuse Prevention Case files opened in fiscal year  2010 through fiscal year 2014 were related to asylum fraud.",
      " Further, 17 of  the 30 case files we reviewed contained multiple types of immigration  fraud, including document fraud and benefit fraud, as well as potential  fraud in connection with the unauthorized practice of law.  As discussed  above and in appendix II, the Fraud Framework states that it is a leading  practice for agencies to plan regular fraud risk assessments and  determine a fraud risk profile for their programs.  Managers who  effectively assess fraud risks attempt to fully consider the specific fraud  risks the agency or program faces, analyze the potential likelihood and  impact of fraud schemes, and document prioritized fraud risks. The Fraud  Framework states that it is a leading practice for an agency to designate  an antifraud entity as a repository of knowledge for fraud risk,",
      " and to tailor  its fraud risk assessments process to the program in question. Factors  such as size, resources, maturity of the program, and experience in  managing fraud risks can influence how an agency plans its fraud risk  assessment. Although quantitative techniques are generally more precise  than qualitative methods, when resource constraints, expertise, or other  circumstances prohibit the use of statistical analysis for assessing fraud  risks, other quantitative or qualitative techniques can still be informative.  For example, the Fraud Framework discusses the use of risk scoring to  quantify the likelihood and effect of particular fraud risks. Our analysis of  the Fraud and Abuse Prevention case files indicate that there are multiple  types of fraud that could be assessed through a fraud risk assessment  such as benefit fraud,",
      " marriage fraud, and fraud in connection with the  unauthorized practice of law. We recognize that it can be difficult to measure or assess fraud risks and  that EOIR has limited resources for assessing and addressing such risks.  However, as noted in the framework, fraud risk management activities  such as a fraud risk assessment may be incorporated into or aligned with  internal activities and strategic objectives already in place, and  information on fraud trends and lessons learned can be used to improve  the design and implementation of fraud risk management activities.  Proactive fraud risk management would also mitigate the risk for fraud so  that it is less likely to occur. Without regularly identifying and assessing  fraud risks and determining the fraud risk tolerance in immigration courts,",
      "  EOIR does not have complete information on the inherent fraud risks that  may affect the integrity of the defensive asylum process and therefore  does not have reasonable assurance that it has implemented controls to  mitigate those risks. In addition, as noted in our framework, fraud risk assessments can  provide partners and stakeholders with information that can also assist in  their operations and efforts. Managers who effectively manage fraud risks  collaborate and communicate with internal and external stakeholders to  share information on fraud risks, emerging fraud schemes, and lessons  learned related to fraud control activities. ICE OPLA attorneys are  responsible for presenting evidence of and proving fraud in immigration  court,",
      " and ICE HSI investigates cases of asylum fraud that are referred  from the immigration courts. EOIR officials said that its Office of Planning  Analysis and Statistics has previously provided data for OPLA attorneys  to assist in court proceedings and investigations when requested. ICE  OPLA attorneys we interviewed at all four of the field offices we visited  told us that if asylum fraud is detected, it is difficult to prove in immigration  court. Attorneys at two of the offices we visited stated that, in their  experience, proving fraud requires an immense amount of time and  evidence. ICE OPLA attorneys in one location stated that, as a result of  factors such as these,",
      " there is no incentive for them to litigate asylum  fraud cases. An EOIR fraud risk assessment could help ICE OPLA, for  example, better educate OPLA attorneys about fraud risks as they  represent the government in immigration court proceedings. Moreover,  managers can use the fraud risk assessment process to determine the  extent to which controls may no longer be relevant or cost-effective. Thus,  a fraud risk assessment would help EOIR ensure that it is targeting its  limited fraud prevention resources effectively. USCIS Does Not Have  Complete or Readily  Available Data on FDNS\u2019s  Efforts to Combat Asylum  Fraud Within USCIS,",
      "  FDNS does not have complete or readily available data on  fraud referrals and requests for assistance from asylum officers and on its  asylum fraud-related investigations and the outcomes of those  investigations. First, with regard to data on fraud referrals and requests  for assistance from asylum officers, such data are not consistently  entered into the FDNS Data System (FDNS-DS), which is USCIS\u2019s  agency-wide database for maintaining data and information on all FDNS  activities, including activities associated with asylum fraud investigations.  According to training materials for new asylum officers, if an asylum  officer has questions about a potential fraud indicator while adjudicating  an affirmative asylum claim,",
      " he or she can submit a request for  assistance to the FDNS immigration officers in his or her asylum office.  For example, FDNS may be able to provide additional information about  an asylum applicant by conducting searches of databases that asylum  officers cannot access. In addition, FDNS immigration officers can  conduct document reviews and analyses of the application to determine  whether fraud may exist. According to USCIS training materials for new  asylum officers, each asylum office may have a different process for  requesting assistance from FDNS. According to the training materials, as  well as FDNS immigration officers we spoke with in asylum offices,  officers typically deliver their responses to a request for assistance  informally,",
      " such as by orally communicating the results of their reviews to  asylum officers without supporting documentation. FDNS\u2019s fraud  detection standard operating procedures state that requests for  assistance are to be entered into FDNS-DS. However, according to  FDNS officials in headquarters and field offices, these requests are not  consistently entered into FDNS-DS. Additionally, while the requests may  be tracked at the office level within individual asylum offices, they are not  otherwise tracked across individual offices by either the Asylum Division  or FDNS. Moreover, according to the training materials for new asylum officers, in  cases where a fraud indicator cannot be quickly resolved by FDNS,",
      " such  as a suspicion of fraud or a complicated case needing more research by  FDNS, the asylum officer is to complete a Fraud Referral Sheet. After  receiving a referral, FDNS is to determine whether the referral has  sufficient information to warrant further investigation. According to  FDNS\u2019s fraud detection standard operating procedures, FDNS  immigration officers are to enter all fraud referrals, including those that  they will decline, into FDNS-DS to accurately record the number of  referrals received, track their processing, and support quality assurance.  However, in practice, FDNS headquarters officials stated that officers  typically enter referrals into FDNS-",
      "DS as \u201cleads\u201d only if they warrant  additional investigation. While some FDNS immigration officers track  referrals at the asylum office level, not all referrals are entered into the  agency-wide FDNS-DS. As a result, FDNS-DS does not have complete  data on the number of fraud referrals or requests for assistance in each  asylum office or across asylum offices, making it difficult to determine the  extent to which asylum officers request assistance from FDNS on fraud- related questions or suspicions in adjudicating asylum applications. Second, FDNS does not have readily available data on the number of  asylum fraud cases it investigates,",
      " the number of asylum fraud cases in  which FDNS immigration officers find asylum fraud, or the number of  asylum fraud cases that FDNS refers to HSI for further investigation.  According to FDNS\u2019s fraud detection standard operating procedures, if  FDNS immigration officers determine that a referral warrants additional  investigation, they are to enter that referral into FDNS-DS as a fraud lead.  If, after conducting research and analyzing the information associated  with a lead, the immigration officer determines that a reasonable  suspicion of fraud is articulated and actionable, the lead is elevated to a  case. FDNS immigration officers may also enter a referral into the  database directly as a case if a reasonable suspicion of fraud is  articulated and actionable.",
      " According to FDNS officials, FDNS data entry  rules require that all immigration forms associated with an individual  under investigation be included with the individual\u2019s FDNS-DS case. Not  every immigration form associated with an individual or case is the basis  for fraud in that case and a case may include multiple immigration forms.  For example, if FDNS opened a case about an individual who was  legitimately granted asylum, but who later committed marriage fraud, the  FDNS-DS case record would include both the legitimate asylum  application and the fraudulent marriage-based benefit application.  Furthermore, according to FDNS officials, when an immigration officer  first enters a case into FDNS-",
      "DS, he or she is to categorize the type of  fraud that is the subject of the case. For example, the officer would  categorize an asylum fraud case as \u201cbenefit fraud\u2014asylum\u201d in FDNS-DS.  However, FDNS officials stated that, because of the limitations of FDNS- DS, each case record can only reflect one type of fraud at a time,  although the system does have the capacity to record and report updates  if, for example, the type of fraud associated with a record is changed.   FDNS officials stated that a case that begins as an asylum fraud  investigation might ultimately result in a fraud finding or referral to HSI  based on another type of fraud,",
      " such as marriage fraud. FDNS officials  stated that if asylum fraud is not the most egregious type of benefit fraud  in a particular investigation, the investigation may not be categorized as  asylum fraud in FDNS-DS. Because of the limitations of FDNS-DS, FDNS headquarters officials  stated that the number of FDNS-DS records categorized as \u201cbenefit  fraud\u2014asylum\u201d may not accurately represent the number of asylum fraud  investigations completed by FDNS or the number of asylum fraud cases  FDNS referred to HSI. FDNS headquarters officials stated that making  such a determination would require a manual review of each case record  in FDNS-",
      "DS categorized as \u201cbenefit fraud\u2014asylum\u201d or associated with an  I-589, the asylum application. Both of these data fields indicate that the  case record could be, but is not necessarily, related to an investigation of  asylum fraud. Without this manual review, a process that would be  extremely labor-intensive, FDNS cannot determine which immigration  forms or benefit types are the subject of an investigation or of a referral  from FDNS to HSI. According to FDNS data from FDNS-DS, in fiscal year  2014, FDNS opened 336 cases in which the individual implicated was  associated with an asylum application,",
      " either as the applicant or as an  attorney, preparer, or interpreter assisting the applicant, and FDNS found  fraud in 210 of those cases. However, FDNS cannot readily determine  how many of those cases involved asylum fraud without manually  reviewing each individual case. Standards for Internal Control in the Federal Government states that  agencies must have relevant, reliable, and timely information to determine  whether their operations are performing as expected. Without complete  data on the number of requests for assistance from asylum officers to  FDNS, the number of referrals that asylum officers submit to FDNS, and  the number of FDNS investigations that result in a finding of asylum fraud,",
      "  USCIS  officials cannot determine how often the fraud referral process is  used or how often it results in a finding of asylum fraud. Complete data on  these matters would also help support a fraud risk assessment, as  previously discussed, by giving USCIS additional information about fraud  schemes and trends from fraud detection activities so that officials can  ensure that fraud detection activities are appropriately tailored to the  agency\u2019s risk profile. USCIS Has Limited  Capability to Detect Fraud  in Affirmative Asylum  Applications USCIS\u2019s Capability  to Identify  Patterns of Fraud across  Asylum Applications  is Limited USCIS  uses various tools to attempt to identify fraud in specific  affirmative asylum applications.",
      " USCIS uses some of these tools, such as  biometric identity verification and biographic and biometric background  and security checks, on all asylum applications. These tools help asylum  officers identify fraud by confirming the applicant\u2019s identity and identifying  prior criminal convictions, among other things. Further, the Asylum  Division and FDNS have some additional tools available that officers can  use to address cases with indicators of fraud; however, our analysis of  HSI  and USCIS data indicates that some of these tools are of limited  utility and use. Specifically, USCIS guidance for FDNS immigration  officers discusses the use of two fraud detection tools for verifying  applicants\u2019 claims and supporting documents\u2014the ICE HSI  Forensic  Laboratory and overseas verification.",
      " HSI\u2019s Forensic Laboratory  specializes in determining the authenticity of documents and identifying  the presence of alterations within those documents. In particular, the  Forensic Laboratory specializes in verifying travel and identity documents,  such as passports, visas, driver\u2019s licenses, and identification cards.  However, according to Forensic Laboratory guidance for document  submission issued in 2010, the Forensic Laboratory prioritizes matters of  national security, criminal violations, cases involving people who have  been detained, and cases involving multiple incidents related to organized  fraudulent activity. According to Forensic Laboratory officials, the  Forensic Laboratory may accept non-priority requests on a case-by-case  basis.",
      " Asylum applications, which are not criminal cases and usually  involve nondetained applicants, therefore generally do not fit within the  laboratory\u2019s priorities, according to USCIS and ICE officials. Furthermore,  both FDNS and Forensic Laboratory officials stated that the Forensic  Laboratory generally cannot verify some types of documents commonly  submitted as support for asylum claims, such as foreign police reports  and medical records. Forensic Laboratory officials told us that these  documents are difficult to authenticate because the laboratory does not  have genuine exemplar documents for comparison purposes and  because the documents are typically not standardized and do not have  security features that can be verified by forensic examination.",
      " According  to HSI  and Asylum Division officials, neither the Forensic Laboratory nor  the Asylum Division tracks submissions to the Forensic Laboratory  specific to asylum applications; however, according to HSI data, USCIS  submitted 60 cases to the Forensic Laboratory in fiscal year 2014 across  all immigration benefits. Asylum officers we interviewed in all eight asylum  offices said that they rarely use the Forensic Laboratory, in part because  of untimely and inconclusive responses. Asylum officers may also submit documents for overseas verification,  either by USCIS officers overseas or, in areas where USCIS does not  have an overseas presence,",
      " by State Department consular officers.  Overseas verification refers to the verification of events, education, or  work experience that occurred in a foreign country or the authentication of  a document or information that originated overseas. From fiscal years  2010 through 2014, asylum offices submitted 111 requests to either  USCIS  officers or State Department consular officers for overseas  verification. Asylum officers we interviewed in all eight asylum offices  stated that they rarely use overseas verification, in part because they do  not receive responses to their requests in a timely manner. In addition,  asylum confidentiality restrictions limit the extent to which asylum officers  can verify information overseas;",
      " USCIS and State Department personnel  generally cannot share information contained in or pertaining to an  asylum application outside the U.S. government in a manner that would  disclose the fact that the individual applied for asylum in the United  States. Furthermore, asylum officers told us that the outcome of asylum  adjudications rarely hinges on the authenticity of a single document, so  document verification may not change the outcome of a case. Further, USCIS\u2019s tools for detecting patterns of fraud across affirmative  asylum applications are limited because USCIS relies on a paper-based  system for asylum applications. After the applicant submits a paper Form  I-589 to USCIS,",
      "  Service Center personnel input certain biographic  information, such as the applicant\u2019s name, date of birth, and nationality,  from the paper application into the RAPS database. Asylum office  personnel use RAPS to track the application\u2019s status and facilitate  interview scheduling. In some cases, FDNS immigration officers can use  information from RAPS for fraud detection by creating reports of cases  with certain biographic characteristics, thereby identifying cases for  potential review. However, RAPS does not have the capability to detect  fraud trends because, while it captures biographic data about an asylum  applicant, it does not capture other key information that could be used to  detect fraud.",
      " Such information could include the applicant\u2019s written  statement, the reason for the applicant\u2019s claim, or the name of the  applicant\u2019s interpreter. Asylum officers and FDNS immigration officers told  us that they can identify potential fraud by manually analyzing trends  across asylum applications they review. Because of USCIS\u2019s reliance on  paper asylum applications, asylum officers and FDNS immigration officers  use ad hoc, labor-intensive methods to detect such trends among asylum  cases. For example, FDNS immigration officers at three of the eight  asylum offices stated that they photocopy asylum applications and  maintain hard-copy case files for analysis. In our 2008 report on the  asylum adjudication process,",
      " we surveyed asylum officers across all  asylum offices and found that 61 percent of asylum officers stated that  scanning all I-589s and using software to identify boilerplate language  and trends was \u201cgreatly needed,\u201d and 16 percent said it was \u201cmoderately  needed.\u201d According to the FDNS Branch Chief for USCIS\u2019s RAIO Directorate,  automated analytic capabilities for asylum applications, such as tools to  detect fraud indicators, would lead to significant increases in efficiencies  for fraud detection and investigation. For example, since 2014, FDNS has  been reviewing the asylum applications associated with Operation Fiction  Writer. FDNS does not have automated analytic tools to review  information.",
      " Rather, FDNS immigration officers must manually review  hundreds of asylum applications, requiring large investments of time and  resources. In our interviews with asylum officers, officers in all eight  asylum offices stated that they would benefit from greater access to  analytic tools. According to the FDNS Branch Chief for RAIO, an  automated analytic capability for asylum applications is a \u201ccritical need\u201d  for fraud detection. As we previously reported, in 2005, USCIS embarked on its multiyear  Transformation Program to transform its paper-based immigration  benefits process to a system with electronic application filing,  adjudication, and case management. The main component of the  program is the USCIS  Electronic Immigration System (ELIS), which is to  provide case management for adjudication of immigration benefits.",
      "  However, USCIS  has faced longstanding challenges in implementing its  Transformation Program, which raise questions about the extent to which  its eventual deployment will position USCIS to collect and maintain more  readily-available data. In May 2015, we reported that USCIS expects the  Transformation Program will cost up to $3.1 billion and be fully deployed  no later than March 2019, which is an increase of approximately $1  billion, and a delay of more than 4 years from its initial July 2011  baseline. USCIS\u2019s most recent Life Cycle Cost Estimate for the  Transformation Program states that USCIS will not complete deploying  functional capabilities for USCIS\u2019s humanitarian mission,",
      " which includes  asylum, until September 2018. Officials from USCIS\u2019s Transformation  Program told us that, as of June 2015, they have not yet developed  business requirements for asylum adjudication in USCIS ELIS or  determined how USCIS ELIS implementation will affect asylum  adjudications because they are currently focused on developing and  deploying USCIS ELIS for other immigration benefits. Because USCIS has not yet developed business requirements for asylum  in USCIS ELIS, it is too early to assess how the information contained in  USCIS  ELIS could facilitate USCIS\u2019s asylum fraud detection efforts.  Additionally,",
      " as we reported in May 2015, USCIS\u2019s ability to effectively  monitor USCIS  ELIS program performance and make informed decisions  about its implementation has been limited because department-level  governance and oversight bodies were not using reliable program  information to inform their program evaluations.  The Fraud Framework  states that it is a leading practice for agencies to use data analytics to  identify and monitor trends that may indicate fraud and use information to  improve fraud risk management activities, such as addressing control  vulnerabilities and improving training.  Identifying and implementing  additional fraud detection tools, such as automated analytic software,  could enable FDNS and asylum officers to detect fraud more readily while  using limited resources more efficiently.",
      " Without such tools, FDNS  immigration officers are not well positioned to identify cases associated  with particular asylum fraud rings or aid in the investigation and  prosecution of the attorneys, preparers, and interpreters who perpetrate  asylum fraud. FDNS Prescreens Asylum  Applications  in Some, but Not  All, Asylum Offices Some asylum offices have strengthened their capability to detect and  prevent fraud by using FDNS immigration officers to prescreen affirmative  asylum applications; however, the use of this practice varies across  asylum offices. Prescreening applications, that is, reviewing the  application for potential fraud indicators in advance of the asylum  interview,",
      " allows FDNS to identify fraud trends and detect patterns that  may not be evident in a small sample of asylum applications. Asylum  officers we spoke with in all eight asylum offices stated that they face time  constraints in adjudicating asylum applications. For example, asylum  officers we spoke with in three asylum offices stated that they have  limited time to review the details of the applications that they are  adjudicating in advance of the applicant interview. Additionally, each  asylum officer adjudicates approximately eight affirmative asylum  applications per week. Therefore, an individual officer might not see  patterns of fraud in single applications that would be visible if he or she  were reviewing the entire universe of applications in each asylum office.",
      "  For example, asylum officers or supervisors we spoke with in six of eight  asylum offices stated that FDNS prescreening was, or would be, helpful in  identifying fraud indicators or fraud trends. USCIS  training materials state that it is important to identify indicators of  fraud before the applicant\u2019s interview so that asylum officers can ask  appropriate questions during the interview. Before an interview, asylum  officers can consult with their supervisors or FDNS about indicators of  potential fraud in an application; however, they are not required to do so.  As previously discussed, consistent with the REAL ID Act of 2005,  credible testimony from the asylum applicant may be sufficient,",
      " without  corroboration, for the applicant to receive asylum.  Asylum officers are to  raise discrepancies, inconsistencies, or identified fraud in the asylum  application during the interview, and upon completion of the interview, the  applicant or the applicant\u2019s representative must have an opportunity to  respond to the evidence presented. When FDNS does not prescreen  applications, the asylum officer is responsible for identifying potential  fraud in the application prior to the interview and using that information  during the interview to assess the applicant\u2019s credibility unless he or she  temporarily pauses the interview to seek support from supervisors or  FDNS. After an interview, the asylum officer may call applicants back to  answer additional questions before a decision is rendered or conduct a  full reinterview with applicants.",
      " However, in two asylum offices,  supervisory asylum officers we spoke with stated that they prefer not to  reinterview applicants because doing so adds to their adjudication  backlog. Supervisory asylum officers we spoke with in three asylum  offices stated that they conduct reinterviews when needed or in particular  circumstances. In three offices where FDNS prescreens asylum  applications for indicators of fraud, FDNS immigration officers we spoke  with stated that FDNS provides information to the asylum officer about the  nature of the potential fraud in the application in advance of the applicant  interview. This allows the asylum officer to ask relevant questions during  the interview;",
      " gives the applicant the opportunity to provide an  explanation for any discrepancies, inconsistencies, or identified fraud in  the file; and ensures that the asylum officer is in the strongest position to  assess the credibility of the applicant. According to FDNS immigration  officers we spoke with in two asylum offices, prescreening also allows  FDNS to identify applications that are affiliated with attorneys, preparers,  or interpreters under FDNS investigation. FDNS immigration officers we interviewed in five of the eight asylum  offices stated that they prescreen some affirmative asylum applications;  one asylum office prescreens all applications; and two asylum offices do  not prescreen applications.",
      " FDNS officials stated that staffing and  resource constraints, coupled with the increase in affirmative asylum  applications in recent years, have made it difficult for FDNS to prescreen  all asylum applications. For example, in January 2015, immigration  officers in one asylum office that does not prescreen asylum applications  developed a plan to begin prescreening, but were unable to implement  the plan because of a lack of administrative resources. In the five offices  that prescreen some applications, officers may select applications for  prescreening at random or based on certain characteristics such as the  applicant\u2019s country of origin. Immigration officers set their own  prescreening priorities in most of these offices.",
      " In both offices that do not  prescreen affirmative asylum applications, FDNS officials stated that  prescreening would be helpful and is an effective system for identifying  fraud patterns but that resource constraints and national security priorities  have limited their ability to prescreen asylum applications. However, the  asylum office that prescreens all asylum applications is also the office that  received the most affirmative asylum applications from fiscal years 2010  to 2014, and from fiscal years 2010 to 2013, this office was staffed with  two full-time FDNS immigration officers, which is equal to or less than the  staffing of all other FDNS immigration officers in asylum offices in that  time period.",
      " This office was able to prescreen all asylum applications  even though it had similar staffing resources and a higher volume of  asylum applications than any other asylum office. Moreover, the head of  the Asylum Division stated that FDNS prescreening is helpful to asylum  officers and that he would like FDNS to prescreen all asylum applications  prior to the interview. The FDNS Branch Chief for RAIO also stated that  she supported more robust prescreening of affirmative asylum  applications and noted that the process would need to be tailored to the  specific needs and resource levels for each office. According to the Fraud Framework, designing and implementing specific  control activities to prevent and detect fraud is a leading practice for  managers.",
      " Additionally, the framework states that preventive control  activities generally offer the most cost-effective investment of resources  and that, while targeted controls, such as prescreening, may be more  costly than agencywide controls, such as general fraud detection  responsibilities, targeted controls may lower the cost of identifying each  instance of fraud because they are more effective than controls that are  not targeted. Although prescreening asylum cases may require additional  time from FDNS immigration officers, it could ultimately help save time  and resources by helping FDNS officers build large-scale asylum fraud  investigations and detect new fraud patterns in a timely manner.  Moreover, prescreening could help save resources by identifying  indicators of fraud before the asylum interview.",
      " This would allow asylum  officers to ask relevant questions during the interview and reduce the  need for time-consuming reinterviews, in which the asylum office requests  that an applicant return for a second interview to address issues not  covered in the initial interview. Requiring that FDNS immigration officers  prescreen all affirmative asylum applications for indicators of fraud, to the  extent that it is cost-effective and feasible, would allow FDNS to better  detect any such indicators at the point where that information is most  useful for preventing asylum fraud. FDNS Has Not  Established Clear  Responsibilities for Fraud  Detection in Asylum  Offices FDNS has not established clear responsibilities related to fraud detection  for its immigration officers in asylum offices,",
      " and FDNS fraud detection  activities vary widely by asylum office. In March 2011, FDNS issued  standard operating procedures for fraud detection, which describe the  procedures that FDNS immigration officers are to follow when  investigating referrals related to immigration benefit fraud, as well as the  process for referring immigration benefit fraud cases to HSI or other  government or law enforcement agencies. These standard operating  procedures are intended to guide fraud detection in all USCIS  adjudications, including those at Service Centers and Field Offices, in  addition to asylum offices. However, the standard operating procedures  do not provide further details or guidance on the roles and responsibilities  of FDNS immigration officers working in asylum offices.",
      " According to  RAIO officials, FDNS immigration officers working in asylum offices face  unique fraud detection challenges and the standard operating procedures  state that immigration officers working in asylum offices must be sensitive  to the unique legal requirements and issues involved with asylee  processing, such as confidentiality requirements. FDNS immigration  officers we spoke with in all eight asylum offices stated that they have  limited guidance about their roles and responsibilities with respect to  fraud detection, and officers at seven of the eight offices stated that the  limited guidance creates challenges for them in addressing asylum  fraud. Further, some of the processes outlined in the standard operating  procedures differ from the processes we observed FDNS immigration  officers following during our site visits to asylum offices.",
      " For example, the  procedures state that FDNS will refer single-scheme cases\u2014that is,  individual cases of fraud\u2014to HSI when they involve an attorney,  interpreter, or preparer. FDNS immigration officers we spoke with at  seven of eight asylum offices told us that they generally do not submit  single-scheme cases to HSI. HSI officials we spoke with confirmed that  they rarely accept single-scheme asylum fraud cases for investigation  because single-scheme cases are difficult to prosecute, and the penalties  for individual instances of fraud are low. In addition, FDNS immigration  officers at three asylum offices expressed confusion about whether they  were permitted to conduct site visits for asylum fraud investigations,",
      "  which the standard operating procedures list as one of the duties of an  immigration officer. Site visits allow FDNS immigration officers to verify  information presented in an asylum application, such as an applicant\u2019s  home address. According to FDNS officials, immigration officers may  have been confused because they were not permitted to conduct site  visits in the past because of limited resources and concerns about officer  safety. However, in September 2015, FDNS headquarters officials stated  that officers are permitted to conduct site visits, as appropriate for case- specific needs, and the additional FDNS officers hired in 2014 helped  address prior resource constraints.",
      " Further, the standard operating  procedures do not discuss prescreening asylum cases in advance of the  asylum interview; however, as we previously stated, we found that  immigration officers at six of the eight asylum offices were prescreening  at least some asylum applications. Additionally, FDNS\u2019s fraud detection activities varied widely across the  eight asylum offices. For example, one asylum office we visited was  responsible for submitting 87 of the 111 total overseas verification  requests submitted by asylum offices from fiscal years 2010 through  2014. FDNS immigration officers at this office told us that they regularly  prescreened asylum cases for potential fraud indicators,",
      " tracked potential  fraud indicators in internal spreadsheets, submitted fraud referrals to HSI,  and testified about asylum fraud in immigration court at the request of ICE  OPLA trial attorneys. In another asylum office we visited, FDNS  immigration officers we spoke with told us that they devote \u201cvery little  time\u201d to fraud detection and investigation because they focus on national  security priorities. Immigration officers at this office did not submit any  overseas verification requests from fiscal years 2010 through 2014, nor  do they regularly prescreen applications. Asylum officers from one asylum  office we spoke with said they report identified fraud trends to FDNS  immigration officers in their office,",
      " but FDNS does not take action on the  referrals or disseminate fraud trends or feedback regarding fraud  referrals. In another asylum office, asylum officers said that fraud referrals  and fraud trends are discussed informally between individual asylum and  FDNS officers. USCIS  issued guidance in December 2014 detailing FDNS\u2019s priorities for  immigration officers in the field for fiscal year 2015. The guidance states  that FDNS will develop, implement, and monitor policies and programs  that enhance USCIS\u2019s ability to detect and resolve fraud issues.  Standards for Internal Control in the Federal Government states that a  good internal control environment requires that the agency\u2019s  organizational structure clearly define key areas of authority and  responsibility and establish appropriate lines of reporting.",
      "  Furthermore,  the Fraud Framework states that effective managers of fraud risks  establish roles and responsibilities for fraud detection activities and  describe the fraud risk management activities intended to prevent, detect,  and respond to fraud as part of an overall antifraud strategy. According  to FDNS officials, FDNS did not think it was necessary to issue asylum- specific guidance for some fraud detection activities, such as site visits,  because the number of immigration officers assigned to asylum was so  small in the past that immigration officers had very little time for fraud  detection activities. However, between fiscal years 2014 and 2015, the  number of FDNS immigration officers working in asylum offices more than  doubled,",
      " from 18 to 39. This increase in staffing levels will allow FDNS  immigration officers to devote more time to detecting asylum fraud,  according to FDNS headquarters officials. Developing asylum-specific  guidance on the fraud detection roles and responsibilities of FDNS  immigration officers working in asylum offices would better position those  officers to understand their fraud detection roles and responsibilities, tools  that are available to them in carrying out those roles and responsibilities,  and features that are unique to the asylum system. USCIS Provides Limited  Fraud Training for Asylum  Officers and Does Not  Have a Mechanism for  Conducting Ongoing  Training Needs  Assessments USCIS Provides Limited Fraud  Training for Asylum Officers USCIS  training for asylum officers includes basic training for new asylum  officers and weekly training for all asylum officers;",
      " however, these  trainings include limited information on fraud as compared to other topics.  The training program for asylum officers is comprised of three main  components. First, new asylum officers participate in 3 weeks of self- paced RAIO Directorate and Asylum Division distance training in their  respective asylum offices. Distance training consists of webinars and  video teleconference presentations, and asylum officers are expected to  read the training materials and complete exercises and quizzes in  preparation for residential training. Second, asylum officers participate in  a 6-week residential basic training program, which includes 3 weeks of  RAIO Directorate training and 3 weeks of Asylum Division training.",
      " Both  courses include classroom instruction, practical exercises, and mock  interviews on a variety of topics, such as national security, case law,  children\u2019s claims, gender-related claims, human trafficking, and  interviewing. At the end of the residential training courses, new asylum  officers must pass final exams about the course with a score of at least  70 percent. Third, USCIS policy requires asylum offices to allocate 4  hours per week for formal or informal training for asylum officers and  supervisory asylum officers. The training can range from classroom  instruction by the asylum office\u2019s Training Officer to individual study time  that asylum officers can use to study case law,",
      " research country  conditions affecting prospective asylees, and read new USCIS  procedures and guidance. The Asylum Division requires Training Officers  to track the date and topic of each weekly training session and report that  information to Asylum Division headquarters on a quarterly basis. Regarding the distance training and residential training for new officers,  USCIS\u2019s  training materials include some information related to identifying  and addressing potential fraud. Specifically, the RAIO distance training  includes a webinar about fraud, and during the RAIO residential training  sessions, asylum officers receive classroom instruction on various topics  such as interviewing, evidence, and gender-related claims. Asylum  officers also participate in mock interviews.",
      "  In addition, the Asylum  Division residential training includes in-class instruction on the topics  mentioned above, as well as on fraud-related issues. Asylum officers  participate in practical exercises and mock interviews related to various  topics. Specifically, during the Asylum Division residential training  session, new asylum officers receive four hours of fraud training delivered  via PowerPoint slide presentations taught by various FDNS officials.  During this session, asylum officers also complete practical exercises  related to the fraud referral sheet. According to USCIS officials, although  each instructor has his or her own set of slides and may present the  information in different formats or use different asylum case examples,",
      "  the content of these slides does not vary among FDNS instructors and  the instructors teach a core set of principles in each class. We analyzed  the RAIO distance training webinar regarding fraud, as well as two  presentations that USCIS provided to us as examples of those used  during the Asylum Division\u2019s training session. We found that the slides  contained information on fraud indicators and the fraud referral process  and, in particular, one PowerPoint presentation defined fraud, listed types  of asylum fraud, highlighted the FDNS fraud referral sheet, and provided  examples of prior fraud investigations. While the distance and residential training sessions include materials  related to asylum fraud,",
      " these materials do not include the same level of  detail, depth, or breadth as the written training modules for other RAIO  and Asylum Division training sessions. These materials serve as  reference materials for asylum officers after they begin to adjudicate  cases. In particular, RAIO\u2019s written training modules on other topics, such  as the modules on human trafficking and gender-related claims, provide  more robust discussions of each topic, contain links to relevant laws, and  include suggested supplemental reading materials. For example, the  human trafficking module and Asylum Division supplement contains lists  of suggested interview questions, a sample memo that asylum officers  can use to document human trafficking concerns,",
      " and a sample asylum  decision. The gender-related claims module contains substantive  definitions of eight types of gender-based harm, proposed interview  considerations and sample questions, and an extensive legal analysis of  such claims. The materials used for RAIO and Asylum Division training on  fraud provide useful information on how fraud is defined and how to make  referrals of suspected fraud to FDNS; however, these materials do not  include extensive definitions of fraud, a sample memo, a sample decision,  or sample interview questions. For example, our review of RAIO and  Asylum Division training materials showed that these materials do not  explain how asylum officers are to interview applicants when they suspect  fraud or document fraud when writing asylum decisions.",
      " Moreover,  supervisory asylum officers and asylum officers at six of the eight asylum  offices we spoke with stated that they need additional fraud training. In  particular, asylum officers in three offices cited a need for training on  interviewing applicants in cases where they suspect fraud, and officers  we spoke with at two offices cited a need for training on how to document  and substantiate fraud in asylum decisions. Prior to 2012, USCIS had a written fraud training module. USCIS  redeveloped its asylum officer training in 2012 and, since that time,  neither the RAIO Directorate nor Asylum Division distance or residential  basic training course have been guided by a written module on asylum  fraud.",
      " Other USCIS materials refer asylum officers to the pre-2012 written  fraud training module, which is no longer in place. For example, the  Affirmative Asylum Procedures Manual refers asylum officers to the basic  training materials for further guidance and instruction on various subjects,  including how to address fraudulent evidence in an asylum application.  Further, five of the RAIO training modules on other topics\u2014such as the  modules covering the affirmative asylum process and procedures,  decision making, and evidence\u2014refer asylum officers to the pre-2012  fraud module for more details on how to address and detect fraud in  asylum applications.",
      " In September 2015, Asylum Division officials told us  that they were working to finalize an updated fraud training module, but  stated that the module required additional review before being finalized.  Officials were unable to provide a time frame for finalizing the module.  Officials previously attributed these delays to vacancies in the senior  FDNS positions overseeing RAIO and the Asylum Division who would  need to approve the updated module. As of March 2015, those positions  have been filled. In technical comments that USCIS provided to us on a  draft of this report, USCIS stated that it expected to finalize the written  training module by March 2016 and provide this training to asylum officers  by September 2016.",
      " While these plans are a positive step, it is too soon  to tell the extent to which the finalized module will address the limitations  we and asylum officers identified. Regarding ongoing training for asylum officers, according to Asylum  Division officials, USCIS complements its basic training program by  providing weekly training sessions on a variety of topics, including fraud  issues. However, our analysis of quarterly Training Officer reports for all  eight asylum offices in fiscal year 2014 found that 8 of 408 training  sessions were reported as being dedicated to fraud, and four of the eight  asylum offices did not report providing dedicated specific fraud training in  fiscal year 2014.",
      " According to Asylum Division officials, many of the  weekly training sessions in fiscal year 2014 focused on credible and  reasonable fear because of the increased number of those cases.  According to our analysis of the training reports, the most common use of  weekly training time was staff meetings or cancellations of formal training  for the week, and the second most common use was information on  country conditions. According to Asylum Division officials, training on  country conditions can provide asylum officers with information they can  use to detect fraud in interviews; however, these trainings are not directly  focused on identifying fraud. Weekly training topics also included security  checks,",
      " immigration and asylum law, and USCIS policy changes. Three  asylum offices we spoke with said that weekly training was not helpful for  asylum adjudications. In one office, for example, officers stated that the  weekly training was not helpful for identifying fraud, and was a burden at  times because of their adjudication workload. The Fraud Framework states that it is a leading practice for agencies to  design and implement specific controls to prevent and detect fraud, which  include fraud awareness initiatives such as training. Increasing  managers\u2019 and employees\u2019 awareness of potential fraud schemes  through training and education can serve a preventive purpose by helping  to create a culture of integrity and fraud deterrence.",
      " Providing asylum  officers with additional training on asylum fraud, including finalizing the  fraud training module and asylum division supplement for new asylum  officers, would better position to USCIS to ensure that asylum officers  have the training and skills needed to detect and address fraud indicators. USCIS Does Not Have a  Mechanism for Regularly  Assessing Asylum Officer  Training Needs USCIS  has taken steps to assess training needs among asylum officers;  however, USCIS has not conducted an agencywide training needs  assessment for asylum officers since 2010. In 2008, we recommended  that the Chief of the Asylum Division develop a framework for soliciting  information in a structured and consistent manner on asylum officers\u2019 and  supervisors\u2019 respective training needs.",
      " In response to our  recommendation, USCIS delivered an online training needs assessment  to asylum officers and supervisors in July 2010 and committed to creating  a training agenda by soliciting and evaluating training needs and priorities  annually thereafter. However, USCIS has not conducted regular training  needs assessments since 2010. In 2012, as part of an effort to redesign  its training programs, RAIO hired an independent contractor to identify  critical skills for RAIO officers, develop strategies to deliver training  content, and support the development of new officer exams.  However,  the exercise was a one-time effort, not an ongoing mechanism.",
      " As of April  2015, RAIO and Asylum Division officials stated that they collect feedback  from new asylum officers immediately following each basic training  course using an online survey collection tool. Asylum officers are  encouraged to fill out a questionnaire related to the course and the  instructor after each basic training module. At the conclusion of distance  and residential training, RAIO officials compile the feedback and discuss  ways to improve future sessions. However, both Asylum Division and  RAIO officials stated that they review survey results as they are collected  after each session rather than tracking trends across multiple classes of  participants. Furthermore, asylum officers cannot use this feedback  mechanism once they return to their asylum offices and begin  adjudicating cases.",
      " According to RAIO officials, in June 2015, RAIO  began developing a new post-training survey to assess the effectiveness  of basic training for new officers. As of September 2015, the survey  instrument is in draft form and undergoing internal review. RAIO officials  said they plan to survey participants from the calendar year 2015 basic  training program, and may include participants who attended basic  training prior to 2015. However, RAIO officials stated that, like the online  surveys following basic training modules, this survey will be limited to new  asylum officers. Asylum Division officials stated that they collect information on training  needs through monthly calls with Training Officers in each asylum office,",
      "  as well as a recently implemented Quality Workplace Initiative to allow  asylum officers to provide feedback within asylum offices on any topic or  issue. However, the Asylum Division does not request information on  training needs from the officers themselves on a regular basis and has  not formally analyzed officer training needs over time. Further, the Asylum  Division does not specifically solicit feedback on training needs through  the Quality Workplace Initiative. Asylum Division officials stated that they  previously collected feedback from new officers several months after they  returned from basic training, but they discontinued this practice because  of low response rates and a lack of resources. Asylum Division officials  stated that it is difficult to devote resources to assessing the training  needs of existing asylum officers when much of the Asylum Division\u2019s  training resources are devoted to training newly hired asylum officers.",
      "  GAO\u2019s Guide for Strategic Training and Development Efforts in the  Federal Government states that evaluating training can aid decision  makers in managing scarce resources and provide agencies information  to systematically track the cost and delivery of training and assess the  benefits of these efforts. Further, Standards for Internal Control in the  Federal Government states that effective management of an  organization\u2019s workforce includes relevant training and that management  must continually assess and evaluate its internal control activities to  ensure that the control activities being used are effective and updated  when necessary. During our interviews with asylum officers and RAIO and Asylum Division  officials, the perspectives regarding the effectiveness of the training  program varied.",
      " Both RAIO and Asylum Division officials said that the  asylum officer basic training was sufficient and thoroughly prepared  officers to adjudicate cases; however, officers we spoke with in six of  eight asylum offices stated that the basic training was insufficient.  Specifically, asylum officer perspectives on the sufficiency of their training  on credibility differed from those of RAIO and Asylum Division officials.  According to Asylum Division officials, training on credibility provides  information to asylum officers on how, for example, they can ask  questions during interviews to determine whether an applicant\u2019s claim is  credible. Suspected contradictions in an applicant\u2019s testimony may  indicate credibility concerns or fraud.",
      " Therefore, officials stated that  ongoing training related to credibility is crucial for new officers. However,  asylum officers we spoke with in seven of the eight asylum offices stated  that USCIS\u2019s  credibility training is insufficient for asylum officers. Both  RAIO and Asylum Division basic training includes modules on credibility;  however, as of June 2015, the Asylum Division\u2019s credibility training  materials were under revision. Although the draft credibility training  materials we analyzed discussed legal standards of credibility and case  law analysis, the lesson plan contained blank sections, and unlike other  RAIO and Asylum Division training materials, did not include sample  decisions,",
      " or memos asylum officers can use to document such concerns.  According to our analysis of the weekly training reports, 11 of 408 training  sessions were reported as being dedicated to credibility determinations. The Guide for Strategic Training and Development Efforts in the Federal  Government states that agencies should be able to evaluate training and  development programs and demonstrate how these efforts help develop  employees and improve the agencies\u2019 performance. Additionally,  because the evaluation of training and development programs can aid  decision makers in managing scarce resources, our guide notes the  importance of agencies\u2019 need for developing evaluation processes that  systematically track the cost and delivery of training and development  efforts and assess the benefits of these efforts.",
      " USCIS does not have  mechanisms in place to allow asylum officers to provide feedback about  training needs after they begin adjudicating cases, making it difficult for  Asylum Division headquarters officials to regularly obtain perspectives  from asylum officers and supervisory officers about asylum officer  training. In addition, asylum officers at one asylum office we spoke with  said that a training feedback loop would improve training for asylum  officers by allowing them to make suggestions for future training. Asylum  officers within that office said they have made training requests to  supervisors in the past, but did not see any follow-up or improvements as  a result of their suggestions.",
      " Developing and implementing a mechanism  to regularly collect feedback from asylum officers and supervisory asylum  officers on their training needs would provide USCIS with insights to help  the agency better evaluate its training program, and enhance the training  courses based on asylum officer feedback. USCIS Does Not Have  Readily Available Data on  Asylum Officer Attrition According to the Chief of the Asylum Division and other senior division  officials, it has been difficult for USCIS to retain asylum officers because  of the challenging nature of the position and the variety of other career  opportunities available to asylum officers; however, USCIS does not  systematically collect or analyze attrition data for asylum officers\u2014a key  component of strategic workforce planning.",
      " Asylum Division officials told  us they use DHS\u2019s staffing database, the Table of Organization Position  System (TOPS), to track net asylum officer staffing changes for each  fiscal year. However, these officials stated that this database does not  capture comprehensive asylum officer attrition rates. For example,  Asylum Division officials stated that TOPS does not track total hiring for  each position type within the division and does not record departures from  the asylum officer position when officers transfer within USCIS. Asylum  Division officials also stated that they collect information monthly from  each asylum office on all personnel changes, including new hires,  transfers,",
      " and departures. However, Asylum Division officials told us that  they do not collect these data in a systematic manner and rely on asylum  offices to manually collect and report them to headquarters. In April 2015,  we requested asylum officer attrition data from the Asylum Division for  fiscal years 2010 through 2014. At the conclusion of our audit work, in  September 2015, the Asylum Division provided updated attrition data that  officials stated were reliable. These data differed significantly from the  initial data provided in August 2015. Asylum Division officials stated that  they had compiled these data by manually reviewing all personnel  changes in the Asylum Division for fiscal years 2010 through 2014,",
      " a  process that was labor-intensive and required several weeks to complete. Asylum officers and supervisory asylum officers we interviewed stated  that, from their perspectives, attrition is high among asylum officers and  this poses several challenges in effectively adjudicating asylum  applications. For example, they stated that attrition has increased time  pressures on each officer as asylum officers resign or transfer out of the  Asylum Division. Officers we interviewed at all eight asylum offices told us  that they face pressure from time constraints, which affects their ability to  devote time to detecting fraud in asylum applications. In addition,  according to senior Asylum Division officials,",
      " attrition requires USCIS to  hire new, inexperienced officers who are not as knowledgeable about  how to detect asylum fraud as more experienced officers. Supervisory  asylum officers we spoke with told us that fraud detection is a skill honed  through experience, and that newer asylum officers hired as a result of  increased attrition are less skilled at being able to detect fraud in asylum  applications. Asylum Division officials told us that they have faced  challenges because of attrition and are working to reduce attrition among  asylum officers. For example, Asylum Division officials told us that they  created a new \u201csenior asylum officer\u201d position in 2014 to provide greater  opportunity for advancement and have worked to support staff through  training and mentoring programs.",
      " However, without reliable attrition data,  it is difficult for USCIS  to assess the effectiveness of these efforts in  retaining staff. Key Principles of Effective Strategic Workforce Planning states that  federal agencies should develop a strategic workforce plan that  incorporates management, employee, and stakeholder input, and  identifies critical skills and competencies needed to achieve  programmatic goals. Further, the strategic workforce plan should  address gaps in the number of staff, ensure that administrative and  educational requirements are supporting workforce planning strategies,  and monitor and evaluate progress toward programmatic goals. Without  reliable, readily-available attrition data, USCIS does not have the  information needed to develop an effective workforce planning strategy to  determine the number of staff needed to address the increase in  affirmative asylum applications and the applications backlog.",
      " USCIS Could Enhance Its  Quality Assurance  Processes by Examining  for Indicators of Fraud USCIS  has implemented some quality assurance procedures for asylum  decisions that are designed to ensure asylum officers\u2019 decisions are  legally sufficient. However, USCIS\u2019s random quality assurance reviews of  asylum cases do not include examination of potential indicators of fraud in  the case file. USCIS  has a three-tiered framework for conducting quality  reviews of asylum decisions. First, the Asylum Division requires a supervisory asylum officer to  review every case file to assess whether the asylum officer\u2019s decision  is supported by law and the asylum officer followed proper  procedures.",
      " For fiscal year 2014, USCIS also released new guidelines  for asylum officer performance evaluation, which specify that  supervisory asylum officers are to evaluate and provide feedback on  whether asylum officers appropriately referred fraud indicators to  FDNS and submitted fraudulent documents to the Forensic  Laboratory or for overseas verification. Second, the Asylum Division\u2019s Quality Assurance Branch requires that  asylum offices submit certain types of cases to Asylum Division  headquarters for review. According to Quality Assurance Branch  officials, these reviews focus on sensitive asylum cases, such as  cases involving complex issues of law or cases that could result in  particularly negative outcomes if the applicant is improperly denied  asylum,",
      " such as cases involving a juvenile. For example, as of July  2015, the Quality Assurance Branch requires asylum offices to submit  to headquarters all cases for which the principal applicant is under 18  years of age and the officer had decided not to grant asylum.  Our  review of Quality Assurance Branch data found that, from fiscal years  2010 through 2014, the Quality Assurance Branch reviewed 5,696  applications. The most common type of application reviewed (3,213)  involved juvenile applicants. The next most common reviews were of  applications granted by an asylum officer for applicants from a country  contiguous to the United States (Canada or Mexico)",
      " that relate to  \u201cnovel\u201d legal issues or criminal activity by the applicant in the United  States or abroad (829 cases), applications that USCIS determined are  likely to be publicized (425), and applications involving potential  national security or terrorism risks (414). Third, each asylum office has a Training Officer, who, in addition to  developing weekly training for asylum officers, also plays a quality  assurance role. However, the extent of this function varies from office  to office. Training Officers in six of the eight asylum offices stated that  they generally review cases that are required to be submitted for  headquarters review. None of the Training Officers we interviewed  conducted random reviews of asylum applications and none reviewed  applications for indicators of fraud,",
      " according to our interviews and  observations. In 2008, we reported that although the Asylum Division had a quality  review framework to ensure the quality and consistency of asylum  decisions, local quality assurance reviews did not always occur.  We  recommended that USCIS develop a plan to more fully implement its  quality review framework to, among other things, ensure that a sample of  decisions was reviewed for quality and consistency. DHS concurred with  the recommendation and, in response, in April 2009, the Asylum Division  developed a program plan for reviewing a sample of asylum officers\u2019  decisions and subsequently piloted the materials it developed for  implementing the program.",
      " Over a 2-year period in 2012 and 2013, the  RAIO Directorate reviewed a sample of decisions from each of the eight  offices. Since that time, USCIS  has not reviewed further samples of  asylum decisions because it is still implementing the action items that  resulted from the previous review and because RAIO plans to study  credible fear in its next review. RAIO officials told us they tentatively plan  to conduct another review of a random sample of affirmative asylum  cases in 2017. However, USCIS\u2019s  random quality assurance reviews of asylum  applications do not include examination for fraud or fraud indicators.",
      "  RAIO\u2019s 2012-2013 random review of asylum decisions did not include  fraud because, according to RAIO officials, asylum officers should have  referred any cases with fraud indicators to FDNS. The Asylum Division\u2019s  reviews of specific types of asylum applications are not random and do  not include a review for fraud indicators. Asylum Division officials told us  that they do not conduct random reviews of all asylum cases because  they have already implemented 100 percent supervisory review of asylum  decisions in the field. Furthermore, the Asylum Division\u2019s review does not  include a review for fraud indicators because, according to Asylum  Division officials,",
      " fraud is not a component of legal sufficiency in asylum  decisions. The Fraud Framework states that ongoing monitoring and  periodic evaluation provide assurances to managers that they are  achieving the objectives of fraud prevention, detection, and response. For  instance, monitoring and evaluation activities can support managers\u2019  decisions about allocating resources and can help managers to  demonstrate their commitment to effectively managing fraud risks.  Although supervisory review is an important step in fraud detection and  quality assurance, it does not position USCIS to ensure quality and  consistency across supervisors and asylum offices, does not provide  insight into quality concerns across the Asylum Division, and does not  allow USCIS  to evaluate whether supervisors are reviewing cases for  fraud appropriately.",
      " Given USCIS\u2019s plans to conduct future random  reviews of asylum applications, including an examination of possible fraud  indicators in such reviews would help strengthen USCIS\u2019s oversight of  officers\u2019 adjudication of asylum applications and supervisory asylum  officers\u2019 reviews of the officers\u2019 adjudications. Random reviews for fraud  would also help USCIS evaluate how effectively supervisory asylum  officers are implementing the new fiscal year 2014 performance  evaluation guidelines for addressing fraud. DHS and DOJ Have  Implemented  Mechanisms to  Address Identified  Fraud, but Use of  These Mechanisms  Has Been Limited DHS and DOJ Rarely  Pursue Criminal Penalties  or Discipline Attorneys for  Fraud  Criminal Penalties Law enforcement agencies can pursue criminal charges against  individuals who commit asylum fraud;",
      " however, according to an official  from the Executive Office for U.S. Attorneys, individual asylees who  commit asylum fraud may be subject to removal proceedings, but are not  generally criminally prosecuted. Under the terms of a memorandum of  agreement between USCIS and ICE, HSI has the right of first refusal to  investigate all FDNS fraud referrals. However, FDNS immigration officers  we interviewed in six of eight asylum offices reported that HSI rarely  accepts asylum fraud referrals from FDNS, or that HSI accepts asylum  fraud referrals and then does not pursue them or closes them without  further investigation. In four of the eight asylum offices,",
      " FDNS  immigration officers referred 0 or 1 asylum fraud cases to HSI from fiscal  years 2010 to 2014. In one asylum office, FDNS immigration officers  reported that HSI had not accepted a referral from FDNS in the previous  2 years, and that the U.S. Attorney\u2019s Office, which is responsible for  prosecuting asylum fraud cases, does not generally accept asylum fraud  referrals. The understanding of these FDNS officers was that the U.S. Attorney\u2019s Office in that district prefers to have at least 100 asylum  applicants connected to an asylum fraud case before the office will  consider prosecution.",
      " According to FDNS officials, fraud cases  associated with 100 or more asylum applicants provide for sentencing  enhancements, which is one of the factors that influence the willingness  of HSI  and U.S. Attorney\u2019s Offices to accept a case. In another asylum  office, FDNS immigration officers reported that HSI had not accepted an  asylum fraud case for investigation since 2010. From fiscal years 2010 to  2014, FDNS immigration officers working in asylum offices referred 40  cases to HSI;  however, as discussed above, FDNS cannot determine  how many of these cases involved asylum fraud.",
      " In fiscal year 2014, HSI  initiated 37 asylum fraud investigations, which resulted in 7 criminal  arrests, 6 indictments, and 4 convictions. ICE headquarters officials stated that criminal investigations for asylum  fraud are more likely to be brought against attorneys, preparers, and  interpreters who perpetrate large-scale asylum fraud than against  individuals. For example, in April 2014, an immigration consultant who  was linked by HSI  to more than 800 asylum applications filed since 2000  in the Los Angeles Asylum Office was sentenced to 4.5 years in federal  prison after pleading guilty to conspiracy,",
      " immigration document fraud,  and aggravated identity theft. HSI began investigating this individual\u2019s  business in 2009. HSI agents in all four of the locations we visited stated  that they face challenges in investigating asylum fraud cases, such as  competing priorities, confidentiality restrictions, and low interest from the  U.S. Attorney\u2019s Offices that prosecute these immigration-related criminal  cases. The FBI has also pursued asylum fraud investigations such as  Operation Fiction Writer; according to FDNS officials, the asylum office  sent repeated referrals to HSI about the asylum fraud ring associated with  Operation Fiction Writer from 2005 to 2009. In 2009,",
      " HSI requested that  the asylum office stop sending it information about Operation Fiction  Writer, at which time the asylum office began working with the FBI to  pursue the case. As of March 2014, 30 individuals had been charged in  connection with Operation Fiction Writer. According to HSI field office  officials, asylum fraud prosecutions are time and labor-intensive and  typically do not result in lengthy prison sentences; as a result, both HSI  and the U.S. Attorney\u2019s Office tend to focus on large-scale asylum fraud  rings, such as those involving attorneys, preparers, and interpreters,  rather than individual applicants.",
      " Because HSI does not prioritize  investigations of single instances of asylum fraud, FDNS immigration  officers we interviewed in seven of the eight asylum offices stated that  they generally do not submit single-scope cases, in which only one  individual is implicated in the fraudulent activity, to HSI. Attorney  Discipline and  Disbarment EOIR\u2019s Disciplinary Counsel can pursue a variety of penalties against  attorneys who perpetrate asylum fraud in immigration courts.  However,  as of June 2015, the EOIR Disciplinary Counsel has not taken action to  publicly discipline any attorney for having committed immigration fraud  who had not already been disbarred by his or her state bar authority.",
      "  EOIR\u2019s Disciplinary Counsel has jurisdiction over the regulation of  practitioners, who are private immigration attorneys, and other accredited  representatives authorized to practice before the BIA and the immigration  courts. The Disciplinary Counsel investigates complaints about  practitioners who may be engaging in criminal, unethical, or  unprofessional conduct or in frivolous behavior before EOIR and takes  disciplinary action, as appropriate. The Disciplinary Counsel works closely  with EOIR\u2019s Fraud and Abuse Prevention Program, although the  Disciplinary Counsel seeks to impose disciplinary sanctions against  practitioners, while the Fraud and Abuse Prevention Program can refer  cases to ICE HSI  or other law enforcement agencies for criminal  investigation.",
      " The Disciplinary Counsel may choose to resolve potential  disciplinary issues prior to issuance of a Notice of Intent to Discipline by  taking certain confidential actions against a practitioner. Such confidential  discipline includes warning letters or informal admonitions for low-level  misconduct or for first-time offenders. According to EOIR\u2019s Disciplinary  Counsel, confidential discipline is intended to educate the lawyer about  what he or she did wrong and how to improve conduct in the future.  Public discipline imposed by the BIA includes a range of disciplinary  actions, such as public censure, suspension, or disbarment. Disbarment,  in which an attorney is prohibited from practicing law before EOIR\u2019s  immigration courts and the BIA,",
      " is the most severe disciplinary sanction  that the BIA can impose. According to the Disciplinary Counsel, to date,  the Disciplinary Counsel has not prosecuted any original jurisdiction  cases to the point of disbarment, which means that the Disciplinary  Counsel has not requested disbarment for any attorneys who engaged in  asylum fraud and who were not already disbarred by their state bar or a  federal court. Disciplinary Counsel officials stated that they have not  initiated any original jurisdiction disbarments against attorneys in part  because of a lack of administrative resources to pursue such cases. The  Disciplinary Counsel has completed reciprocal disciplinary cases,",
      " in  which attorneys who may have engaged in fraud and have already been  suspended or disbarred by their state bar or by a federal court, or who  have been convicted of a crime, are also disbarred by EOIR. An attorney  who has been disbarred by a state bar or a federal court is permitted to  practice before the immigration courts until EOIR takes the proper  reciprocal action. Circuit Court Rulings and  Agency Priorities Play a  Role in Recent Decreases  in Asylum Terminations  due to Fraud Asylum terminations due to fraud are not common and have decreased in  recent years.",
      " USCIS data indicate that USCIS terminated the asylum  status of 374 individuals for fraud from fiscal years 2010 through 2014. In  the same time period, USCIS granted asylum to 76,122 individuals. The  number of USCIS  asylum terminations for fraud has decreased in recent  years, from 103 in fiscal year 2010 to 34 in fiscal year 2014. If a final  order by an immigration judge or the BIA specifically finds that the  individual knowingly filed a \u201cfrivolous\u201d asylum application and the  individual initially received a warning regarding the consequences of filing  a frivolous application,",
      " then he or she will be barred from receiving future  immigration benefits. Asylum Division officials attributed the decrease in asylum terminations  due to fraud from fiscal year 2010 to fiscal year 2014 to several factors.  First, according to Asylum Division officials, USCIS made several policy  changes in order to comply with two decisions of the United States Court  of Appeals for the Ninth Circuit. In Robleto-Pastora v. Holder, the court  noted the BIA\u2019s conclusion that asylees who adjust to LPR status no  longer qualify as asylees and held, among other things, that an alien who  has previously adjusted to LPR status retains that status unless he or she  receives a final order of removal.",
      "  Accordingly, a former asylee who had  already adjusted to LPR would no longer have asylum status to  terminate. According to Asylum Division officials, USCIS changed its  policy nationwide in June 2012 and no longer pursues termination of  asylum status for fraud after someone has adjusted to LPR. In June 2012, USCIS developed a process, called Post Adjustment  Eligibility Review, for addressing suspected fraud with respect to former  asylees who have already adjusted to LPR. Under the Post Adjustment  Eligibility Review process, an FDNS immigration officer reviews adverse  information about the individual, documents a summary of findings,",
      " and  forwards the file to an asylum officer. An asylum officer then reviews the  evidence to determine whether sufficient evidence of fraud exists, and, if  a preponderance of the evidence supports the finding of fraud, forwards  the case to ICE OPLA, which reviews the case and determines whether  the individual should be placed in removal proceedings. Additionally, in Nijjar v. Holder (August 2012), the Ninth Circuit held that  only the Attorney General has the authority to terminate asylum status  because Congress did not confer authority to terminate asylum on  DHS. On the basis of this ruling, USCIS does not have the authority to  terminate an individual\u2019s asylum status in the Ninth Circuit,",
      " which includes  the Los Angeles and San Francisco asylum offices. Subsequently, in  August 2012, the BIA noted that no other circuits currently share the Ninth  Circuit\u2019s position that DHS lacks authority to terminate asylum, and the  case before it arose within the Second Circuit; as a result, it would \u201conly  apply Nijjar within the jurisdiction of the Ninth Circuit.\u201d  Therefore,  Asylum Division officials stated that USCIS applied the Nijjar ruling only in  the asylum offices located within the Ninth Circuit\u2014San Francisco and  Los Angeles. Asylum Division officials stated that these two decisions in  the Ninth Circuit resulted in a decrease in the number of terminations  conducted by USCIS because,",
      " prior to these decisions, USCIS would  pursue termination of the asylum status of individuals who had adjusted  to LPR nationwide and was able to terminate asylum status in the Ninth  Circuit. Second, Asylum Division officials stated that increases in the number of  affirmative asylum, credible fear, and reasonable fear applications in  recent years have strained resources in the Asylum Division, the  immigration courts, and ICE OPLA. Terminations are time and labor- intensive, according to Asylum Division officials, and there are fewer  resources available to pursue them than in the past because of the  increased asylum caseload. In seven of the eight asylum offices,",
      " asylum  officers we spoke with stated that terminations are not a priority. Third, Asylum Division officials stated that individuals who lose their  asylum status because of fraud generally would not fit within the  Secretary of Homeland Security\u2019s enforcement priorities, making the  likelihood very low that they would be removed from the United States  after their asylum status has been terminated. DHS\u2019s enforcement and  removal priorities focus on the removal of aliens who pose a threat to  national security, border security, and public safety. On the basis of our analysis of USCIS, EOIR, and ICE Enforcement and  Removal Operations data, we found that 14 of the 374 people who had  their asylum status terminated for fraud from fiscal years 2010 through  2014 were indicated as having been removed from the country by ICE  Enforcement and Removal Operations as of March 2015;",
      " 4 were granted  voluntary departure; and 20 had been ordered removed by an  immigration judge, but ICE had not yet removed them. USCIS Has Not Tracked  Asylum Cases Pending  Termination Due to Fraud  and Has Limited Goals for  Terminations USCIS  has taken some steps to address asylum cases pending  termination due to fraud but has not tracked these cases or established  goals for completing termination cases. The Asylum Division receives  information about potential asylum fraud from a variety of sources,  including USCIS offices that adjudicate asylees\u2019 applications for other  immigration benefits such as adjustment to LPR and naturalization,",
      " and  information arising from criminal investigations into attorneys, preparers,  and interpreters suspected of engaging in asylum fraud. After receiving  such information, the asylum office with jurisdiction over the asylee\u2019s  place of residence reviews the case to assess whether to pursue  potentially terminating the individual\u2019s asylum status, and, if a  preponderance of the evidence supports a finding of fraud, sends the  asylee a Notice of Intent to Terminate and schedules a termination  interview. However, the Asylum Division does not begin to track cases  pending potential termination until the asylum office issues a Notice of  Intent to Terminate.",
      " The implementation of asylum office procedures for  addressing terminations across asylum offices varies. For example, in  one office, asylum officers maintain hard copies of the files pending  termination in a particular area of the office\u2019s file room. In another office,  asylum officers maintained a spreadsheet of pending termination cases.  In other offices, there is an asylum officer responsible for handling  terminations, typically on a part-time basis. However, the Asylum Division  does not track the number of cases that are pending review for potential  termination across asylum offices, making it difficult for USCIS to know  how many of such cases exist and are pending review.",
      " The Fraud  Framework states that it is important for agencies to ensure that the  response to fraud is prompt and consistently applied. Moreover, the  Fraud Framework states that monitoring response activities helps ensure  that the response to identified fraud is prompt and consistently applied.  Monitoring fraud response activities, such as tracking asylum cases  pending termination due to fraud, could help the Asylum Division ensure  that cases pending termination due to fraud are managed promptly and  consistently. Asylum Division officials told us that they have identified a  need for greater tracking of cases pending termination review to better  address requests for the asylees\u2019 files from other USCIS offices.",
      " In May  2015, Asylum Division officials requested a modification to RAPS that  would give asylum officers the capability to record that a case is pending  review for termination. As of September 2015, Asylum Division officials  stated that this modification would be released in November 2015. In addition, the Asylum Division has limited goals or metrics for reviewing  termination cases, such as goals or metrics for the completion of  terminations. According to USCIS officials, USCIS faces progressively  higher burdens of proof to address potential asylum fraud as the asylee  receives additional immigration benefits, which requires more time and  resources.",
      " In August 2015, the Asylum Division adopted a new target of  180 days for conducting initial termination reviews that applies solely for  cases with pending applications for adjustment to LPR.  This goal is a  positive step, but it addresses the subset of pending terminations for  individuals with pending applications for adjustment to LPR and it applies  only to initial termination reviews rather than termination completions. Furthermore, asylees who have not applied for adjustment to LPR may be  eligible to receive certain federal benefits, such as Supplemental Security  Income, Supplemental Nutrition Assistance Program, Temporary  Assistance for Needy Families,",
      " and Medicaid; the new 180-day target will  not apply to these individuals unless and until they apply to adjust to LPR.  Asylum Division officials stated that they periodically review the number of  terminations pending review in each asylum office to assess staffing  needs, and asylum offices may also choose to prioritize certain  termination reviews, as needed. However, Asylum Division officials stated  that the division has not adopted goals or metrics for the completion of  terminations because termination proceedings are extremely labor- intensive and asylum offices have limited resources to allocate to  terminations. Asylum Division officials also stated that terminations are  not a priority for their officers given increases in their adjudicative case  load of affirmative asylum,",
      " credible fear, and reasonable fear cases as  well as the prioritization of certain time sensitive cases, such as those  involving unaccompanied minors. According to the Fraud Framework, the likelihood that individuals who  engage in fraud will be identified and punished serves to deter others  from engaging in fraudulent behavior. Timely reviews of potential asylum  terminations can also help the Asylum Division use its resources more  effectively because, according to Asylum Division and FDNS officials,  USCIS  faces progressively higher burdens to address potential asylum  fraud as the asylee receives additional immigration benefits. USCIS\u2019s new  180-day target for conducting initial termination review for cases with  pending applications to adjust to LPR is a positive step;",
      " however,  developing and implementing timeliness goals for all pending termination  reviews of asylees granted affirmative asylum would help USCIS to better  identify the staffing resources needed to address the terminations  workload and better utilize existing resources to address potential fraud  before asylees adjust to LPR or receive other immigration or federal  benefits. Conclusions The U.S. asylum process is designed to protect those who legitimately  fled persecution, affording them the opportunity to prove their eligibility  and credibility. Adjudicating asylum cases is a challenging undertaking  because asylum officers do not always have the means to determine  which claims are authentic and which are fraudulent.",
      " With potentially  serious consequences for asylum applicants if they are incorrectly denied  asylum balanced against the importance of maintaining the integrity of the  asylum system, asylum officers and immigration judges must make the  best decisions they can within the constraints they face. Both DHS and DOJ have established dedicated antifraud entities\u2014an  important leading practice for managing fraud risks\u2014but these agencies  have limited capability to detect and prevent asylum fraud and both  agencies\u2019 efforts to date have focused on case-by-case fraud detection  rather than more strategic, risk-based approaches. DHS and DOJ could  be better positioned to assess and address fraud risks across their  asylum processes. Specifically,",
      " regularly assessing fraud risks across  asylum claims would help provide DHS and DOJ with reasonable  assurance that their fraud prevention controls are effective and  appropriately targeted to their fraud risks. Further, developing and  implementing a mechanism to collect more complete and reliable data on  FDNS\u2019s fraud detection activities, including the number of referrals that  asylum officers submit to FDNS and the number of FDNS investigations  that result in a finding of asylum fraud, would help USCIS  officials  determine how often FDNS officers have identified and pursued fraud  indicators. In addition, identifying and implementing tools for identifying  fraud patterns in asylum applications, such as automated analytic  software and prescreening,",
      " would better position FDNS immigration  officers to identify cases associated with particular asylum fraud rings and  aid in the investigation and prosecution of the attorneys, preparers, and  interpreters who perpetrate asylum fraud. Moreover, developing asylum- specific guidance on the fraud detection roles and responsibilities of  FDNS immigration officers working in asylum offices would help those  officers better use the tools that are available to them. By providing  additional fraud training for asylum officers and regularly assessing  asylum officer training needs, USCIS could better ensure that asylum  officers have the training and skills needed to detect and address fraud  indicators in the asylum applications they adjudicate.",
      " Additionally,  including an examination of possible fraud indicators in future USCIS  random reviews of asylum decisions would help strengthen USCIS\u2019s  oversight of officers\u2019 adjudication of asylum applications and supervisory  asylum officers\u2019 reviews of the those adjudications. Last, developing and  implementing timeliness goals for all pending termination reviews of  asylees granted affirmative asylum would help USCIS better utilize  existing resources by addressing potential fraud before asylees adjust to  LPR or receive other immigration or federal benefits. Recommendations  for  Executive Action To provide reasonable assurance that EOIR\u2019s fraud prevention controls  are adequate, we recommend that the Attorney General direct EOIR to  conduct regular fraud risk assessments across asylum claims in the  immigration courts.",
      " To provide reasonable assurance that USCIS\u2019s fraud prevention  controls are adequate and effectively implemented, and ensure that  asylum officers and FDNS immigration officers have the capacity to  detect and prevent fraud, we recommend that the Secretary of  Homeland Security direct USCIS to take the following ten actions:  conduct regular fraud risk assessments across the affirmative asylum  application process; develop and implement a mechanism to collect reliable data, such as the number of referrals to FDNS from asylum officers, about FDNS\u2019s efforts to combat asylum fraud; identify and implement tools that asylum officers and FDNS immigration officers can use to detect potential fraud patterns across affirmative asylum applications;",
      " require FDNS immigration officers to prescreen all asylum  applications for indicators of fraud to the extent that it is cost-effective and feasible; develop asylum-specific guidance on the fraud detection roles and responsibilities of FDNS immigration officers working in asylum  offices; develop and deliver additional training for asylum officers on asylum  fraud; develop and implement a mechanism to regularly collect and incorporate feedback on training needs from asylum officers and  supervisory asylum officers; develop and implement a method to collect reliable data on asylum  officer attrition; include a review of potential fraud indicators in future random quality assurance reviews of asylum applications; and develop and implement timeliness goals for all pending termination  reviews of affirmative asylum cases.",
      " Agency Comments  and Our Evaluation We provided a draft of this report to DOJ and DHS for their review and  comment. DOJ did not provide official written comments to include in this  report. However, in an e-mail received on November 12, 2015, a DOJ  audit liaison official told us that DOJ concurred with our recommendation  that the Executive Office for Immigration Review conduct regular fraud  risk assessments across asylum claims in the immigration courts. DHS  provided formal, written comments, which are summarized below and  reproduced in full in appendix III.  DOJ and DHS provided technical  comments, which we incorporated as appropriate. DHS concurred with our ten recommendations and described actions  under way or planned to address them.",
      " With regard to our first  recommendation that USCIS conduct regular fraud risk assessments,  DHS indicated that the Asylum Division and RAIO FDNS plan to develop  an assessment tool and implementation plan for completing regular fraud  risk assessments of the affirmative asylum process, with the first  assessment to be completed no later than the end of fiscal year 2017. With regard to our second recommendation that USCIS develop and  implement a mechanism to collect reliable data on FDNS\u2019s efforts to  combat fraud, DHS noted that FDNS plans to update user guidance and  training materials and conduct training to clarify FDNS-DS data entry  rules for asylum fraud referrals,",
      " leads, and cases and plans to complete  these efforts by the end of fiscal year 2016. With regard to our third and fourth recommendations that USCIS identify  and implement tools to detect fraud patterns across applications and  require FDNS immigration officers to pre-screen all asylum applications  for indicators of fraud, DHS noted that USCIS recently approved a fiscal  year 2016 budget request for such tools and stated that the Asylum  Division and FDNS are coordinating with the Office of Information  Technology to develop requirements and identify tools for acquisition. As  part of this acquisition process, the Asylum Division and RAIO FDNS are  also discussing the acquisition of software that would aid FDNS  immigration officers in prescreening all asylum cases.",
      " DHS also stated  that the Chiefs of the Asylum Division plan to issue a joint memorandum  and companion guidance for asylum offices that will establish the  framework for a national prescreening program. Regarding our fifth recommendation that USCIS develop asylum-specific  guidance on roles and responsibilities for FDNS immigration officers  working in asylum offices, DHS stated that USCIS plans to issue a  memorandum to clarify its guidance on the fraud-related roles and  responsibilities of FDNS officers working in asylum offices by the end of  fiscal year 2016. Regarding our sixth recommendation that DHS develop and deliver  additional fraud training for asylum officers, DHS stated that the Asylum  Division is in the process of finalizing an updated lesson plan about fraud  in asylum claims to be ready for asylum officer training by the end of  March 2016.",
      " DHS also stated that it would provide this training to its  asylum officers by the end of fiscal year 2016. In commenting on our draft  report, DHS also stated that the draft did not reflect all of the fraud  training currently provided to new asylum officers. In response to this  comment, we clarified our discussion of USCIS\u2019s existing fraud training  for new officers. Specifically, we added additional details about the fraud- related training sessions USCIS delivers as part of RAIO and Asylum  Division basic trainings. Regarding our seventh recommendation that USCIS develop and  implement a mechanism to regularly collect and incorporate feedback on  training needs from asylum officers and supervisory asylum officers,",
      " DHS  stated that USCIS is in the process of preparing a division survey to be  delivered to officers and supervisors to gather feedback on training needs  in fiscal year 2016, and stated that officers and supervisors will be  surveyed on training no less than once every 2 years. With regard to our eighth recommendation that DHS develop and  implement a mechanism to collect reliable data on asylum officer attrition,  DHS stated that, beginning in September 2015, the Asylum Division has  expanded the scope and frequency of its tracking of asylum officer  attrition data. DHS stated that, moving forward, the Asylum Division plans  to update its data on asylum officer transfers,",
      " promotions, moves to other  USCIS  offices, moves to outside employment, and departures from the  labor force on a biweekly basis and confirm the accuracy of those data  through regular validation. Based on this information, DHS requested that  we consider this recommendation closed. While these are positive steps  toward addressing our recommendation, USCIS needs to demonstrate  that it has implemented its plans to update and validate its asylum officer  attrition data to fully address the intent of our recommendation. Regarding our ninth recommendation that USCIS review for potential  fraud indicators in future random quality assurance reviews of asylum  applications, DHS stated that, in October 2015,",
      " the Asylum Division  added a fraud-specific question to the Asylum Division quality assurance  review checklist. DHS stated that this change will ensure asylum cases  selected for Asylum Division quality assurance will be reviewed for fraud  indicators to determine whether those indicators were properly identified,  analyzed, and processed. Based on this information, DHS asked us to  consider this recommendation closed. While DHS has taken positive  initial steps toward addressing this recommendation, to fully address the  intent of our recommendation, DHS needs to demonstrate the extent to  which this change allows them to review for fraud indicators in a random  sample of all asylum cases, rather than in only the specific categories of  cases that the Asylum Division headquarters currently reviews.",
      " As we  note in our report, the Asylum Division does not currently conduct random  reviews of all asylum cases. Regarding our tenth recommendation that DHS develop and implement  timeliness goals for pending termination reviews, DHS stated that the  Asylum Division plans to revise its case management system, RAPS, to  improve tracking of termination processing. The Asylum Division then  plans to analyze the resulting data to develop timeliness goals for  termination cases by the end of fiscal year 2016 and plans to implement  those goals during fiscal year 2017. These and other actions that DHS  indicated are planned or under way should help address the intent of our  recommendations if implemented effectively.",
      " DHS also noted that judicial  constraints imposed by Nijjar v. Holder (9th Cir. 2012) have foreclosed  DHS\u2019s ability to terminate asylum status for fraud in the Ninth Circuit, and  stated that a legislative change would be necessary to restore USCIS\u2019s  authority to terminate asylum status in the first instance. We are sending copies of this report to the Secretary of Homeland  Security, the Attorney General of the United States, appropriate  congressional committees, and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov. Should you or your staff have questions about this report,",
      " please contact  me at (202) 512-8777 or gamblerr@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 are listed in appendix IV. Appendix I: Objectives,  Scope, and  Methodology Our objectives were to (1) describe what Department of Homeland  Security (DHS) and Department of Justice (DOJ) data indicate about  trends in the characteristics of asylum claims, (2) evaluate the extent to  which DHS and DOJ have designed mechanisms to prevent and detect  fraud in the asylum system,",
      " and (3) evaluate the extent to which DHS and  DOJ have designed and implemented processes to address any fraud  that has been identified in the asylum system. To describe trends in the characteristics of asylum claims, we analyzed  U.S. Citizenship and Immigration Services (USCIS) Refugee, Asylum,  and Parole System (RAPS) data on asylum applications, adjudications,  and grants by asylum offices nationwide for fiscal years 2010 through  2014. In addition, we analyzed record-level data from RAPS for asylum  applications adjudicated from fiscal years 2010 through fiscal year 2014.  To assess the reliability of the RAPS data,",
      " we reviewed USCIS  documents about the design of the RAPS system, completed data entry  and duplicate record checks, and discussed the reliability of the data with  USCIS  officials. We also analyzed two reports issued by the Executive  Office for Immigration Review\u2019s (EOIR) Office of Planning, Analysis, and  Statistics from fiscal year 2010 through 2014\u2014Asylum Statistics and  Statistics Yearbook. These reports contain data about the characteristics  of asylum applications adjudicated through the immigration courts in the  period of our analysis. To assess the reliability of the data in EOIR\u2019s  reports, we reviewed EOIR documentation about the management of  EOIR cases and appeals and spoke with officials about how EOIR  collects and monitors data.",
      " The EOIR Office of Planning, Analysis, and  Statistics changed the methodology it used to compile EOIR statistics in  the reports issued in fiscal year 2013, and data from previous fiscal years  are not comparable with those reported in fiscal year 2013 and 2014  reports. As a result, we relied on the fiscal years 2013 and 2014 reports  for our analyses. We determined that the USCIS and EOIR data about  the characteristics of asylum claims were sufficiently reliable for the  purposes of this report. To evaluate the extent to which DHS and DOJ have designed  mechanisms to prevent and detect fraud in the asylum system,",
      " we  identified the antifraud entities responsible for detecting and preventing  asylum fraud within USCIS and EOIR and reviewed their asylum fraud  data, policies and practices. We analyzed data from the Fraud Detection  and National Security Directorate\u2019s (FDNS) case management system,  FDNS Data System (FDNS-DS), about the number of benefit fraud cases  associated with asylum applications that were opened from fiscal years  2010 to 2014 and the number of those cases in which FDNS found fraud.  To assess the reliability of these data, we reviewed policies about how  data are entered into FDNS-DS,",
      " such as the Fraud Detection Standard  Operating Procedures and the FDNS Basic Training presentation that  FDNS uses to introduce FDNS-DS to staff. We interviewed FDNS  immigration officers and headquarters officials about their use of FDNS- DS and observed FDNS immigration officers using FDNS-DS. We  discuss our findings about the reliability of the FDNS-DS data in this  report. We also analyzed the extent to which the data captured in RAPS  can be used to identify and detect asylum fraud. We compared FDNS  immigration officers\u2019 reported use of the FDNS-DS system and FDNS-DS  data capabilities with procedures in the Fraud Detection Standard  Operating Procedures and standards in Standards for Internal Control in  the Federal Government.",
      " To assess USCIS policies and procedures to prevent and detect fraud in  the USCIS  affirmative asylum process, we reviewed USCIS Asylum  Division policy documents such as the Affirmative Asylum Procedures  Manual, FDNS policy documents such as the Fraud Detection Standard  Operating Procedures and FDNS Field Priorities FY15, and guidance  such as the 2015 memorandum of agreement between FDNS and the  Refugee, Asylum, and International Operations Directorate (RAIO)  regarding the governance structure for FDNS. We reviewed Asylum  Division workforce planning efforts to address asylum fraud and  interviewed Asylum Division officials about attrition among asylum  officers.",
      " We reviewed the Asylum Division Staffing Allocation Models,  which officials stated were used to support Asylum Division workforce  planning efforts, for fiscal years 2012 through 2014, the most recent years  available, as well as the Staffing Allocation Model for fiscal year 2015. We  also reviewed staffing levels for Asylum Offices, including asylum officer  staffing and FDNS immigration officer staffing, from fiscal year 2010 to  2014 and compared actual staffing levels with estimates in the Staffing  Allocation Models. We reviewed asylum officer attrition data, which  USCIS  compiled manually at our request. We compared Asylum Division  workforce planning efforts with principles in GAO\u2019s Key Principles for  Effective Strategic Workforce Planning to assess how USCIS workforce  planning efforts align with the key principles.",
      "  We also reviewed USCIS  quality assurance policy documents such as the Quality Sampling  Reference Guide and the Quality Handbook and spoke with Asylum  Division and RAIO officials about the extent to which these reference  materials are used in asylum quality assurance. We reviewed documents  associated with the random quality assurance reviews that RAIO  conducted in each asylum office in 2012 and 2013, including the  checklists used to evaluate asylum adjudications and the quality  assurance results. We evaluated the extent to which these quality  assurance reviews included reviews for fraud. We reviewed performance  evaluation documents for asylum office staff, including asylum officers  and supervisory officers,",
      " and examined the extent to which fraud  detection efforts are reflected in staff performance evaluations, including  the extent to which supervisory asylum officers evaluate the fraud  detection efforts of asylum officers. We spoke with Asylum Division  headquarters officials about ongoing Asylum Division headquarters  quality assurance reviews of certain asylum adjudications. We reviewed  past USCIS  efforts to examine fraud in the USCIS asylum system and  spoke with officials in the USCIS  Office of Policy and Strategy about past  efforts and plans for future efforts to examine asylum fraud. We compared  these policy documents and their role in preventing and detecting asylum  fraud with standards in GAO\u2019s A Framework for Managing Fraud Risks in  Federal Programs (Fraud Framework)",
      " and Standards for Internal Control  in the Federal Government. To learn about FDNS policies and  procedures to detect and prevent asylum fraud, we reviewed FDNS  guidance such as the Fraud Detection Standard Operating Procedures  and training materials for FDNS immigration officers about asylum fraud  as well as training materials for asylum officers about how to refer  potential fraud to FDNS. We reviewed the extent to which asylum officers  and FDNS immigration officers used other fraud detection tools such as  overseas verifications and HSI\u2019s Forensic Laboratory. We compared  USCIS  efforts to prevent and detect fraud with leading practices in GAO\u2019s  Framework for Effective Fraud Risk Management.",
      " We reviewed USCIS  asylum officer basic training materials from RAIO and the Asylum  Division, as well as training materials for FDNS immigration officers. We  reviewed USCIS  Asylum Division quarterly training reports for fiscal year  2014 and used them to analyze the weekly training activities in each  asylum office for each week of the reporting quarter. We compared RAIO  and Asylum Division training materials with material in GAO\u2019s Guide for  Strategic Training and Development Efforts in the Federal Government. We visited five of the eight asylum offices \u2014 Newark, New Jersey; New  York, New York; Los Angeles, California;",
      " Houston, Texas; and Arlington,  Virginia. We selected these offices for site visits based on a variety of  factors, including their number of asylum officers, the number of asylum  applications they receive, and geographic proximity to EOIR immigration  courts. During our site visits, we visited immigration courts and observed  asylum hearings in New York, Los Angeles, Houston, and Arlington. In  addition, we interviewed approximately 11 ICE OPLA attorneys and 10  ICE HSI investigators in the New York, Los Angeles, Houston, and  Arlington offices. In each asylum office, we observed asylum interviews  and spoke with supervisory asylum officers,",
      " asylum officers, training  officers, and FDNS immigration officers to obtain their perspectives on  asylum fraud and the risk of asylum fraud. Although the results of our  visits cannot be generalized to officers in all asylum offices or to all  immigration courts, they provided first-hand observations on asylum  adjudication practices and insights regarding policies and procedures to  detect asylum fraud. We conducted in-person interviews during our site visits and telephone  interviews with supervisory asylum officers, asylum officers, training  officers, and FDNS immigration officers in the remaining three asylum  offices \u2013Miami, Florida; Chicago, Illinois; and San Francisco, California.  Across the eight asylum offices,",
      " we spoke with 35 supervisory asylum  officers, 37 asylum officers, 24 FDNS immigration officers (including four  supervisors), and 12 training officers. We spoke with supervisory asylum  officers, asylum officers, and FDNS immigration officers in all eight  asylum offices about the tools and systems that they use to identify and  detect asylum fraud and the roles of asylum officers and FDNS  immigration officers in asylum fraud detection. We spoke with Asylum  Division and RAIO headquarters officials about how asylum officers are  trained to detect and prevent fraud, and how training needs are assessed.  We also spoke with training officers in each of the eight asylum offices  about how they develop and present training,",
      " as well as evaluate training  needs. We spoke with Asylum Division and RAIO Performance  Management and Planning officials about quality assurance mechanisms  in the asylum program, such as 100 percent supervisory review of asylum  officer decisions, and about the extent to which fraud detection and  prevention is part of the Asylum Division quality assurance process. The EOIR antifraud officer and the EOIR Fraud and Abuse Prevention  Program are responsible for detecting and preventing asylum fraud within  the immigration courts. We analyzed EOIR Fraud Abuse Prevention  Program case files to determine the number of complaints received,  number of case files opened, and number of asylum-related case files  opened from fiscal year 2010 through fiscal year 2014.",
      " We also reviewed  35 EOIR case files, which EOIR identified as being all cases associated  with asylum fraud. During this review, EOIR classified two of these files  as unauthorized practice of law rather than asylum fraud, and opted not to  include a case file re-opened in fiscal year 2012 due to a prior case  closure in fiscal year 2008.Two other case files were outside of the fiscal  year 2010 through fiscal year 2014, which was the time period of our  review. We reviewed EOIR\u2019s Fraud and Abuse Prevention Program  guidance and policy documentation, including the regulation that  established EOIR\u2019s antifraud officer position.",
      " We also reviewed the  Immigration Judge Benchbook, which includes tools, templates, and legal  resources for immigration judges to use in their adjudications. We  analyzed EOIR\u2019s fraud-related training materials for immigration judges,  and spoke with the antifraud officer about the fraud detection and  prevention activities associated with her role. While observing immigration  court proceedings in New York City, Los Angeles, Houston, and Arlington,  including asylum cases, we spoke with court administrators and  immigration judges about asylum fraud. To evaluate the extent to which DHS and DOJ have designed and  implemented processes to address any fraud that has been identified in  the asylum system,",
      " we analyzed Immigration and Customs Enforcement  (ICE) Homeland Security Investigations (HSI) data on the number of  asylum fraud indictments, criminal arrests, convictions, and administrative  arrests as well as the number of asylum fraud cases initiated by HSI from  fiscal year 2010 through fiscal year 2014. We also analyzed USCIS  RAPS data to identify the number of individuals who have had their  asylum status terminated because of fraud from fiscal years 2010 through  2014 and any trends in asylum terminations because of fraud over those  years. We used ICE Enforcement and Removal Operations data to  analyze the outcomes for individuals whose asylum status was  terminated for fraud from fiscal years 2010 through 2014.",
      " We assessed  the reliability of these data by reviewing documentation about how data  were collected; interviewing knowledgeable agency officials about the  data; and conducting electronic testing for missing data, outliers, and  obvious errors. We determined that these data were sufficiently reliable  for the purposes of analyzing the number of asylum terminations due to  fraud and the outcome of those terminations. We reviewed USCIS policy  documents related to asylum terminations, such as the Affirmative  Asylum Procedures Manual, which details termination policy and  procedures that are to be followed for asylum terminations. We also  reviewed U.S. Circuit Court of Appeals decisions that were identified by  Asylum Division officials as influencing how USCIS pursues asylum  terminations due to fraud and USCIS policy documents related to asylum  termination,",
      " such as the Post Adjustment Eligibility Review memo, that  reflect USCIS policy changes made as a result of circuit court decisions.  We visited five HSI  locations \u2013 New York, New York; Washington, D.C.;  Houston, Texas; Los Angeles, California; and Fairfax, Virginia \u2013-and  interviewed officials about how they receive asylum fraud referrals and  how they investigate allegations of asylum fraud. We interviewed officials  from EOIR about mechanisms to address identified asylum fraud in the  immigration courts and how those mechanisms are used, including  disciplinary measures available to EOIR for attorneys and other  practitioners who commit asylum fraud, and how frequently they are used.",
      "  We interviewed officials in the eight USCIS asylum offices as well as  Asylum Division officials to determine how USCIS  handles cases with  identified fraud, including cases in which fraud is identified after asylum  has been granted, and how USCIS tracks, monitors, and adjudicates  cases in which an individual\u2019s asylum status is pending termination for  identified fraud. We compared USCIS and EOIR mechanisms to address  identified asylum fraud and the frequency of their use with mechanisms in  GAO\u2019s Fraud Framework to assess their likely effectiveness as a fraud  deterrent. We conducted this performance audit from September 2014 to November  2015 in accordance with generally accepted government auditing  standards.",
      " Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. Appendix II: Fraud Risk Assessment Process GAO\u2019s A Framework for Managing Fraud Risks in Federal Programs  notes that managers who effectively assess fraud risks attempt to fully  consider the specific fraud risks the agency or program faces, analyze the  potential likelihood and impact of fraud schemes, and then ultimately  document prioritized fraud risks. Moreover, managers can use the fraud  risk assessment process to determine the extent to which controls may  no longer be relevant or cost-effective.",
      " There is no universally accepted  approach for conducting fraud risk assessments, since circumstances  vary among programs; however, assessing fraud risks generally involves  five actions, as noted in figure 8. Appendix III: Comments from the  Department  of Homeland Security Appendix IV: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the contact named above, Kathryn Bernet, Assistant  Director; Ashley Vaughan Davis; David Alexander; Dominick Dale, Imoni  Hampton; Grant Mallie; Mara McMillen; Linda Miller; Jan Montgomery;  Jon Najmi; and Mary Pitts made significant contributions to this report.\n"
    ],
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  },
  {
    "id": 93,
    "question": null,
    "answer": "Honey bees and other managed and wild, native bees provide valuable pollination services to agriculture worth billions of dollars to farmers. Government and university researchers have documented declines in some populations of bee species, with an average of about 29 percent of honey bee colonies dying each winter since 2006. A June 2014 presidential memorandum on pollinators established the White House Pollinator Health Task Force, comprising more than a dozen federal agencies, including USDA and EPA. GAO was asked to review efforts to protect bee health. This report examines (1) selected USDA agencies' bee-related monitoring, research and outreach, as well as conservation efforts, and (2) EPA's efforts to protect bees through its regulation of pesticides. GAO reviewed the White House Task Force's national strategy and research action plan, analyzed data on USDA research funding for fiscal years 2008 through 2015, reviewed EPA's guidance for assessing pesticides' risks to bees, and interviewed agency officials and stakeholders from various groups including beekeepers and pesticide manufacturing companies. The U.S. Department of Agriculture (USDA) conducts monitoring, research and outreach, and conservation that help protect bees, but limitations in those efforts hamper the department's ability to protect bee health. For example, USDA has increased monitoring of honey bee colonies managed by beekeepers to better estimate losses nationwide but does not have a mechanism in place to coordinate the monitoring of wild, native bees that the White House Pollinator Health Task Force's May 2015 strategy directs USDA and other federal agencies to conduct. Wild, native bees, which also pollinate crops, are not managed by beekeepers and are not as well studied. USDA officials said they had not coordinated with other agencies to develop a plan for monitoring wild, native bees because they were focused on other priorities. Previous GAO work has identified key practices that can enhance collaboration among agencies, such as clearly defining roles and responsibilities. By developing a mechanism, such as a monitoring plan for wild, native bees that establishes agencies' roles and responsibilities, there is better assurance that federal efforts to monitor bee populations will be coordinated and effective. Senior USDA officials agreed that increased collaboration would improve federal monitoring efforts. USDA also conducts and funds research and outreach on the health of different categories of bee species, including honey bees and, to a lesser extent, other managed bees and wild, native bees. Consistent with the task force strategy and the 2008 Farm Bill, USDA has increased its conservation efforts on private lands to restore and enhance habitat for bees but has conducted limited evaluations of the effectiveness of those efforts. For example, a USDA-contracted 2014 evaluation found that agency staff needed additional expertise on how to implement effective habitat conservation practices, but USDA has not defined those needs through additional evaluation. By evaluating gaps in expertise, USDA could better ensure the effectiveness of its efforts to restore and enhance bee habitat plantings across the nation. USDA officials said that increased evaluation would be helpful in identifying where gaps in expertise occur. The Environmental Protection Agency (EPA) has taken steps to protect honey bees and other bees from risks posed by pesticides, including revising the label requirements for certain pesticides, encouraging beekeepers and others to report bee deaths potentially associated with pesticides, and urging state and tribal governments to voluntarily develop plans to work with farmers and beekeepers to protect bees. EPA also issued guidance in 2014 that expanded the agency's approach to assessing the risk that new and existing pesticides pose to bees. The task force strategy also calls for EPA to develop tools to assess the risks posed by mixtures of pesticide products. EPA officials agreed that such mixtures may pose risks to bees but said that EPA does not have data on commonly used mixtures and does not know how it would identify them. According to stakeholders GAO interviewed, sources for data on commonly used or recommended mixtures are available and could be collected from farmers, pesticide manufacturers, and others. By identifying the pesticide mixtures that farmers most commonly use on crops, EPA would have greater assurance that it could assess those mixtures to determine whether they pose greater risks than the sum of the risks posed by individual pesticides.\n",
    "docs": [
      "Background This section provides information on the role and economic value of bees,  bee population trends, factors affecting bee health, effects of bee losses  on agriculture and ecosystems, and the roles and responsibilities that  USDA\u2019s ARS, FSA, NASS, NIFA, and NRCS, and EPA have played with  respect to addressing bee health issues. The Role and Economic  Value of Bees Pollinators\u2014including honey bees, other managed bees, and wild, native  bees\u2014are critical to our nation\u2019s economy, food security, and  environmental health. Honey bees\u2014nonnative insects introduced to the  United States in the 1620s by early settlers\u2014are the most recognizable  pollinators of hundreds of ecologically and economically important crops  and plants in North America.",
      " In 2014, USDA reported that crops  pollinated by honey bees directly or indirectly account for up to one-third  of the U.S. diet. The most recent study on the value of pollinators to  U.S. food and agriculture was published in 2012 and estimated that, as of  2009, the total value of crops that were directly dependent on honey bee  pollination, including almonds, apples, and cherries, was almost $12  billion. The study estimated that, also as of 2009, the total value of  crops that were indirectly dependent on bees, such as hay,",
      " sugar beets,  asparagus, and broccoli, was more than $5 billion. In addition,  according to a 2015 USDA-NASS report, honey bees produced more  than $385 million worth of honey in 2014. Approximately 1,500 to 2,500 commercial U.S. beekeepers manage  honey bee colonies, according to an estimate by the American  Beekeeping Federation. Many commercial beekeepers travel across the  country to provide pollination services for farmers\u2019 crops and to support  honey production. According to the 2014 USDA report, in 2012, almonds,  sunflowers,",
      " canola seed, apples, cherries, and watermelons were among  the top crops that were sources of pollination service fee revenue for  beekeepers. About 1.6 million honey bee colonies\u2014approximately 60 to  75 percent of all U.S. commercial honey bee colonies\u2014provide pollination  services to California\u2019s almond orchards early each spring. Figure 1  shows the estimated acreage of crops for which beekeepers provide  pollination services and the location of summer feeding grounds for  commercially managed bees. In addition to honey bees, certain managed bees and wild, native bees  also provide valuable pollination services.",
      " Whereas honey bees comprise  an estimated 98 percent of managed bees in the United States, other  managed bee species\u2014including bumble bees, alfalfa leafcutting bees,  and orchard mason bees\u2014comprise the remaining 2 percent, according  to a representative of the Pollinator Stewardship Council. These other  managed bees pollinate alfalfa, almonds, apples, cherries, and tomatoes.  Wild, native bee species may also pollinate agricultural crops. In 2009,  crops directly and indirectly dependent on pollination by other managed  bees; wild, native bees; and other insects were valued at almost $10  billion according to the 2012 study of the value of pollinators to U.S.",
      " food  and agriculture. In addition, a 2007 National Research Council study  found that wild, native bees provide most of the pollination in natural plant  communities, which contributes to valuable ecosystem services, including  water filtration and erosion control. Bee Population Trends According to the White House Task Force\u2019s 2015 Pollinator Research  Action Plan, in 2006, some beekeepers in the United States began to  notice unusually high mortality among their honey bee colonies over the  winter months. From 2006 to 2014, beekeepers who responded to the  Bee Informed Partnership\u2019s nongeneralizable national survey of managed  honey bee colony losses reported that an average of about 29 percent of  their bee colonies died each winter.",
      " Those losses exceeded the  approximately 13 to 19 percent winter loss rate that beekeepers indicated  in the surveys were acceptable. Furthermore, when winter losses are  combined with losses at other times of the year, total annual losses can  be higher. For example, a preliminary report from the Bee Informed  Partnership indicated that beekeepers who responded reported total  annual losses of more than 40 percent of colonies from April 2014  through March 2015. Whereas nongeneralizable data on short-term  losses in honey bee colonies are available, the status of other managed  bees and most of the wild, native bee species in the United States is less  well-known.",
      " Factors Affecting Bee  Health According to the White House Task Force\u2019s strategy and research action  plan, intensive public and private research in the United States and  abroad over the past 8 years has shown that no single factor is  responsible for the general problems in pollinator health, including the  loss of honey bee colonies or declines in other bee populations. The task  force stated that bee health problems are likely caused by a combination  of stressors. Some of these stressors, in no particular order, include habitat loss, degradation, and fragmentation, including reduced  availability of sites for nesting and breeding; poor nutrition, due in part to decreased availability of high quality and pests (e.g., the mite Varroa destructor)",
      " and disease (e.g., viral,  bacterial, and fungal diseases); pesticides and other environmental toxins; and migratory stress from long-distance transport. Effects of Bee Losses on  Agriculture and  Ecosystems Continued losses of honey bees; other managed bees; and wild, native  bees threaten agricultural production and the maintenance of natural  plant communities. Commercial beekeepers are concerned that honey  bee colony losses could reach an unsustainable level for the industry.  According to a 2014 USDA report, the cost of honey bee almond  pollination services is believed to have risen in connection with the  increased cost of maintaining hives in the midst of industry-wide  overwintering losses.",
      " Officials we interviewed from a commercial  beekeeping organization said that, for beekeepers, meeting the growing  demand for pollination services in agricultural production has become  increasingly difficult, particularly as a result of bee colony losses.  Although the number of managed honey bee colonies has been relatively  consistent since 1996, ranging from about 2.4 to 2.7 million colonies, the  level of effort by the beekeeping industry to maintain colony numbers has  increased, according to the White House Pollinator Health Task Force\u2019s  strategy. For example, beekeepers face increasing production costs,  which include sugar, protein, medications,",
      " and miticides (chemicals that  kill the mites that can infest bee hives). Furthermore, when winter colony  losses are high, beekeepers may compensate for these losses by splitting  one colony into two, supplying the second colony with a purchased queen  bee and supplemental food to build up colony strength. Using this  method, the commercial honey beekeeping industry has generally been  able to replenish colonies lost over the winter, but at a cost. These  increased maintenance costs can result in increased rental fees for  farmers renting the hives. Specific Roles and  Responsibilities of USDA  and EPA in Addressing  Bee Health Issues Five USDA agencies within the scope of our review\u2014NASS,",
      " ARS, NIFA,  FSA, and NRCS\u2014as well as EPA have specific roles and responsibilities  with respect to addressing bee health issues. USDA has surveyed beekeepers in the United States since the late 1930s  to determine the number of honey bee colonies and the amount of honey  produced. The survey, now conducted by NASS, is called the Bee and  Honey Inquiry. NASS maintains a list of beekeeping operations in the  nation and has been surveying beekeepers in all states except Alaska  since the 1970s to gather data on honey bee colonies, including the  number of colonies producing honey,",
      " total pounds of honey produced,  and total value of production by state for a production year. ARS, USDA\u2019s largest research agency, conducts research within several  of its laboratories that could protect bee health. NIFA, USDA\u2019s primary  agency providing research grants to universities, provides competitive  grants to conduct research related to bee health and to disseminate the  results through the Cooperative Extension System. CRIS, which is  managed by NIFA, contains information on ARS and NIFA research and  outreach. CRIS provides documentation and reporting for agricultural,  food science, human nutrition, and forestry research, education and  extension activities for USDA,",
      " including those related to bee health. FSA and NRCS oversee conservation programs that, among other things,  help provide habitat for bees. FSA administers the Conservation Reserve  Program (CRP), which implements long-term rental contracts with  farmers to voluntarily remove certain lands from agricultural production  and to plant species that will improve environmental health and quality,  such as improving forage plantings for bees and other pollinators. The  long-term goal of the program is to reestablish valuable land cover to help  improve water quality, prevent soil erosion, and reduce loss of wildlife  habitat. NRCS administers the Environmental Quality Improvement  Program (EQIP), which implements short-",
      " to long-term contracts with  farmers to voluntarily implement practices to conserve natural resources  and deliver environmental benefits, such as created wildlife habitat, which  may benefit bees. In addition, NRCS administers components of the  Agricultural Conservation Easement Program, in which plantings may  benefit bees or other pollinators. NRCS has primary responsibility for  providing to landowners the technical assistance needed to plant the  pollinator-friendly habitats. NRCS assists farmers through a network of  staff at headquarters, state, and county offices. In addition to supporting  overall pollinator habitat across the nation, FSA and NRCS are focusing  CRP and EQIP pollination resources on five upper Midwest states  (Michigan,",
      " Minnesota, North Dakota, South Dakota, and Wisconsin) that  are home to a significant percentage of honey bee colonies during the  summer months. Under FIFRA, EPA is responsible for regulating pesticides, including  those used on crops and other plants and those used by beekeepers to  combat bee pests. As part of this responsibility, EPA reviews applications  from pesticide manufacturers seeking to obtain a registration for new  pesticides or new uses of existing pesticides. Under FIFRA, pesticide  registrants are required to report to EPA any information related to known  adverse effects to the environment caused by their registered  pesticides. In addition, the Food Quality Protection Act of 1996  amended FIFRA to require that EPA begin a review of the registrations of  all existing pesticide active ingredients.",
      " As further amended in 2007 by  the Pesticide Registration Improvement Renewal Act, FIFRA requires all  reviews be completed by October 2022. According to EPA\u2019s website, the  FIFRA requirement applies to about 1,140 pesticides. EPA has chosen to  review the registration of all of these pesticides in about 740 \u201ccases.\u201d A  case may cover more than one pesticide active ingredient that are closely  related in chemical structure and toxicological profile. The Pesticide  Registration Improvement Act of 2003 (PRIA) amended FIFRA to require  that EPA issue annual reports containing a review of its progress in  carrying out its responsibilities for reviewing new and registered  pesticides.",
      " Other agencies, including some within USDA, also have programs related  to bee health. For example, USDA\u2019s Forest Service has conducted some  research and monitoring and conserves habitat to protect bee  populations. The U.S. Geological Survey (USGS) within the Department  of the Interior (Interior) has monitored wild, native bee populations.  Interior\u2019s National Park Service and the National Science Foundation  have also funded research on bee health, and Interior\u2019s Bureau of Land  Management is making changes to land-management programs by  incorporating native, pollinator-friendly plants in its management  practices. Selected USDA  Agencies Conduct  Monitoring, Research  and Outreach,",
      " and  Conservation to  Protect Bees, but  Limitations Exist  within Those Efforts Five selected USDA agencies conduct monitoring, research and  outreach, and conservation to protect bees, but limitations within those  efforts hamper the agencies\u2019 ability to protect bee health. In 2015, USDA  agencies increased honey bee colony monitoring to better estimate honey  bee colony losses nationwide, but as a co-chair of the White House  Pollinator Health Task Force with EPA, the department has not worked  with task force partners to coordinate a native bee monitoring plan. In  addition, USDA has conducted and funded research and outreach,  primarily by ARS and NIFA,",
      " on the health of different categories of bees,  including honey bees and, to a lesser extent, other managed and wild,  native bees, but CRIS, which tracks USDA-funded research and  outreach, is not currently designed to enable tracking or searching of  projects by bee category. Furthermore, USDA\u2019s FSA and NRCS have  increased funding and taken other actions to promote bee habitat, but  neither agency has a method to count all of the acres that landowners  have restored or enhanced to benefit bees and other pollinators, and  limitations in their evaluation of those actions may hinder their  conservation efforts. USDA Agencies Increased  Honey Bee Colony  Monitoring in 2015 but  Have Not Worked with  Federal Partners to  Coordinate a Native Bee  Monitoring Plan USDA agencies have taken some actions to increase monitoring of honey  bees,",
      " other managed bees, and wild, native bees, but USDA, which co- chairs the White House Pollinator Health Task Force with EPA, has not  worked with its partners on the task force to coordinate a native bee  monitoring plan. Monitoring Honey Bees In April 2015, NASS, which conducts USDA bee surveys, initiated colony  loss surveys to provide quarterly estimates of honey bee colony losses in  the United States. NASS officials told us that the results of these surveys  will improve data on colony losses from prior USDA-funded surveys.  According to the task force\u2019s strategy, federal agencies plan to use data  from these surveys to assess progress toward the strategy\u2019s goal of  reducing winter honey bee colony losses to no more than 15 percent by  2025.",
      " USDA has conducted surveys of beekeepers in the United States  to track the number of honey bee colonies in the country since the late  1930s, but those surveys have not gathered beekeepers\u2019 observations or  data about bee health problems. Before NASS\u2019s new surveys, NIFA provided most of the funding for the  Bee Informed Partnership to survey beekeepers about colony losses and  honey bee health from 2006 through 2015. The surveys showed that, on  average, about 29 percent of respondents\u2019 honey bee colonies have been  dying over the winter, but the results cannot be generalized beyond the  survey respondents.",
      " The partnership has used a variety of methods to  reach out to all beekeepers in the country and in recent years received  responses from over 6,000 beekeepers. However, the partnership has  not calculated or estimated response rates to the surveys and has not  reported whether nonrespondents might differ from the respondents in  terms of survey answers. Because of this, the results cannot represent  beekeepers in general. In a letter to the Office of Management and Budget (OMB) commenting  on the new NASS survey, the partnership stated that NASS is well- equipped to take over the honey bee colony loss surveys with its new  quarterly and annual surveys.",
      " According to NASS officials, improvements  will be possible in the new NASS surveys in part because NASS  maintains a comprehensive list of beekeepers from which it can select a  random sample. According to an agency document and official, the  quarterly survey will capture data from beekeeping operations with five or  more colonies, and operations with fewer than five colonies will receive  one annual survey in December. NASS officials said that their estimates  of U.S. colony losses during 2015 will be available in May 2016. NASS  has also added questions to the annual Bee and Honey Survey on the  costs associated with colony maintenance,",
      " which may include costs  associated with colony losses. In addition, USDA\u2019s Animal and Plant Health Inspection Service (APHIS)  has coordinated a national survey of honey bee pests and diseases  annually since 2009 with the University of Maryland and ARS. However,  that survey does not provide estimates of colony losses in the United  States. Monitoring Other Managed  Bees According to NASS officials, NASS does not conduct surveys to estimate  populations or colony losses of other managed bees, such as bumble  bees, alfalfa leafcutting bees, and orchard mason bees, because NASS  does not consider them to be within the scope of their responsibilities for  farm livestock commodities.",
      " USDA\u2019s ARS and NIFA conduct and fund  limited monitoring activities in agricultural settings to estimate populations  and health issues for these other types of managed bees. However, the  research action plan established as a priority engaging NASS in collecting  data on the commercial sales of nonhoney bee pollinators to understand  the economic value of alternative pollinators. To address this priority,  NASS included in a new survey on the cost of pollination\u2014which largely  focuses on honey bees\u2014questions on the cost to agricultural producers  for products such as wildflowers and pollination by other managed bees  and native bees. NASS began data collection for this new survey in  December 2015.",
      " Monitoring Wild, Native Bees USDA agencies, including ARS and NIFA, have conducted and supported  limited monitoring of wild, native bees, according to USDA documents  and officials. For example, one NIFA-funded project at Pennsylvania  State University begun in 2010 seeks to establish baseline biodiversity  and abundance data for native bees in and adjacent to Pennsylvania  orchards, determine which species are pollinators, and quantify their  relative significance and economic importance, according to the project  summary in CRIS. In addition, in 1997, ARS\u2019s laboratory in Logan, Utah,  began monitoring wild, native bees in parks,",
      " forests, and other areas in  the United States as part of their efforts to develop alternative pollinators  for U.S. agriculture, according to ARS scientists. In one project, ARS has  annually conducted surveys of bumble bee populations for 5 to 8 years at  five sites in Nevada, Oregon, and Utah. The goal is to provide insight into  natural population dynamics of native bees in native habitat and identify  bumble bee population trends by species on the basis of 10 years of  surveys. According to the project description, bumble bee declines have  been documented over the last decade, but long-term studies of bumble  bee community dynamics are lacking,",
      " and such monitoring will help  determine whether a fluctuation in a bumble bee population is a natural  cycle or something unusual. In its 2007 report on the status of pollinators, the National Research  Council stated that wild, native bees are arguably the most important and  least studied groups of pollinators. The report recommended  establishing a baseline for long-term monitoring, and a coordinated  federal approach with a network of long-term pollinator-monitoring  projects that use standardized protocols and joint data-gathering  interpretation. The report also stated that pollinator monitoring programs  in Europe have effectively documented declines in pollinator abundance,",
      "  but there is no comparable U.S. monitoring program. Stakeholders from  pesticide manufacturing, university research, and  conservation/environmental groups we interviewed said that USDA  should take additional actions to monitor wild, native bees because  current monitoring is insufficient and will not facilitate provision of trends  in these bee populations. Stakeholders from some groups suggested that  USDA and other agencies, such as USGS, should coordinate federal  monitoring efforts. A stakeholder from a university said that USDA should  develop a coordinated assessment policy for native bees to provide  information on their status because, without such a policy, agencies will  not know which species are declining,",
      " endangered, or extinct. The 2014 presidential memorandum on pollinators called for the White  House Task Force to assess the status of native bees and other  pollinators. The subsequent White House Task Force strategy and  research action plan state that native bees are affected by habitat loss  and degradation, and that there is strong evidence, for some species, that  such factors have led to population declines. For example, the research  action plan states that collapses in bumble bee species have been  statistically documented, but little is known about trends for wild, native  bees, most of which are solitary, rather than social, bees.",
      " The research  action plan also states that (1) the scope of native bee monitoring is  limited by available funding, (2) assessments of native bees\u2019 status rely  on disparate historical collection data and limited contemporary surveys,  and (3) a survey of bees in various ecosystems is needed to determine  the status of native pollinators. The White House Task Force\u2019s research action plan identified several  priority actions, with corresponding lead and support agencies  responsible for different aspects of the monitoring. For example, the  research action plan identifies ARS, USGS, and the Fish and Wildlife  Service as three of the lead agencies for the priority actions to develop  baseline status data and to assess trends in pollinator populations.",
      " And  the research action plan identifies NIFA, NASS, the National Science  Foundation, the Forest Service, and the National Park Service as primary  support agencies for these priority areas. Although the research action  plan identifies which agencies have responsibility for monitoring  pollinators, it does not identify the development of a mechanism, such as  a monitoring plan, to coordinate the efforts of those agencies related to  native bees. As of September 2015, USDA did not have plans to work  with task force members to coordinate development of such a mechanism  for wild, native bees. Some officials said that USDA has not coordinated  with other task force agencies to develop a wild,",
      " native bee monitoring  plan because they were developing the broader task force strategy. The  research action plan also does not define and articulate the common  outcome or identify specific roles and responsibilities for each lead or  support agency. Key practices for agency collaboration that we identified  in an October 2005 report call for agency staff to work together across  agency lines to define and articulate the common federal outcome or  purpose they are seeking to achieve that is consistent with their  respective agency goals and mission. Another key practice we identified  calls for collaborating agencies to work together to define and agree on  their respective roles and responsibilities, including how the collaborative  effort will be led.",
      " In addition, we identified, in a February 2014 report, key practices for  agency collaboration that call for establishing shared outcomes and goals  that resonate with, and are agreed upon, by all participants and are  essential to achieving outcomes in interagency groups. Furthermore,  although the research action plan mentions stakeholders and  partnerships, it does not articulate how they will be included in addressing  priority actions related to monitoring native bees. In September 2012,  another key practice we identified calls for ensuring that the relevant  stakeholders have been included in the collaborative effort. This  collaboration can include other federal agencies, state and local entities,",
      "  and private and nonprofit organizations. By developing a mechanism,  such as a monitoring plan for wild, native bees that would (1) establish  roles and responsibilities of lead and support agencies and their shared  outcomes and goals and (2) obtain input from relevant stakeholders,  there is better assurance that a coordinated federal effort to monitor bee  populations will be effective. One senior USDA official stated that  coordinating with the other task force agencies to develop a wild, native  bee monitoring plan would be very important for gathering data to show  the status of wild, native bees in the future. Key USDA and USGS officials  with bee-related management responsibilities agreed that developing  such a monitoring plan would help them establish a consistent approach  across their agencies.",
      " The officials also said that USDA and other  agencies should establish a team of federal scientists to coordinate the  development of a federal monitoring plan for wild, native bees that would  establish monitoring goals and standard methods and involve state and  other stakeholders. Some USDA and USGS officials said that without a  team to coordinate a monitoring plan, individual agency efforts may be  ineffective in providing the needed information on trends in wild, native  bees in the United States. USDA Bee Research and  Outreach Have Focused  Primarily on Honey Bee  Health, but Limitations in  Its Research Information  System Hinder Efforts to  Track Research Projects USDA has conducted and funded research and outreach,",
      " primarily by  ARS and NIFA, on the health of different categories of bees, including  honey bees and, to a lesser extent, other managed and wild, native bees,  but CRIS, which tracks USDA-funded research and outreach, does not  currently facilitate tracking or searching of projects by bee category.  ARS\u2019s honey bee projects have focused on projects for many health  concerns. For example, the ARS laboratory in Baton Rouge, Louisiana,  has focused for many years on breeding honey bees that are resistant to  Varroa mites. Also, ARS\u2019s laboratory in Beltsville, Maryland, has  conducted research to develop management strategies for diagnosing  and mitigating disease,",
      " reducing the impacts of pesticides and other  environmental chemicals, and improving nutrition. ARS\u2019s laboratory in  Logan, Utah, is identifying how farmers may use different pollinators,  including managed and wild, native bees. This research includes  developing methods for mass production, use, and disease control for a  selection of bees. ARS scientists have regularly disseminated the results of their research at  national, regional, state, and local bee-related conferences and events.  ARS officials have also conducted outreach at meetings to provide  information to commodity growers, such as the Almond Board of  California. One ARS scientist noted that he had attended 27 state and  other types of beekeeper meetings over the past 5 years.",
      " Another ARS  scientist told us that he spends about 25 percent of his time conducting  outreach with beekeepers. In addition, ARS scientists have published  dozens of articles summarizing their research results in scientific journals. From fiscal year 2008 through fiscal year 2015, ARS obligated $88.5  million for projects focused on bee health and $1.6 million for projects on  the effect of pollination by different types of bees on crop or plant  production. Of the $88.5 million obligated, our analysis determined that  $72.6 million was for projects primarily focused on honey bee health,",
      " an  additional $6.3 million was for projects with a combined focus on the  health of honey bees and other bees, and $9.6 million was for projects  focused only on other managed bees or wild, native bees. According to  ARS officials, all ARS funding for research on wild, native bees has been  for the purpose of developing new uses for managed bees in commercial  agriculture. Unlike ARS, which itself conducts research, NIFA provides funds for  research through grants. For fiscal years 2008 through 2014, NIFA\u2019s  competitive grants for research on bee health were largely focused on  honey bees,",
      " with some efforts focused on managed and wild, native  bees. For example, NIFA obligated funds for a 2012 grant to a team of  scientists and outreach specialists at Michigan State University, the  University of California-Davis, and other institutions that works with  growers to develop best practices for pollinator habitat enhancement and  farm management practices to bolster managed and wild, native bee  populations. The project is examining the performance, economics, and  farmer perceptions of different pollination strategies in various fruit and  vegetable crops, according to the project website. These strategies  include complete reliance on honey bees, farm habitat manipulation to  enhance suitability for native bees,",
      " and use of managed, native bees  alone or in combination with honey bees. For fiscal years 2008 through 2014, NIFA obligated $29.9 million on  competitive grant projects focused primarily or partially on bee health, and  $11.6 million on projects focused on pollination effectiveness. Of the  $29.9 million, our analysis of individual grant project objectives and  descriptions determined that NIFA provided $16.7 million to projects on  honey bee health, $9.8 million to projects on the health of honey bees  and other bees, and $3.4 million to projects on the health of wild,",
      " native  bees. In addition to funding competitive grants, NIFA provides support for bee  research at land-grant institutions through capacity grants to the states on  the basis of statutory formulas. From fiscal year 2008 through fiscal year  2014, these institutions expended $10.7 million in NIFA grants for  research related to bees. Furthermore, state institutions have used NIFA  capacity grants to support bee-related extension and education activities  through the Cooperative Extension System, such as teaching best  management practices to beekeepers, according to an agency budget  official. However, because NIFA and its partners do not track capacity  grant funding related to extension activities by subject,",
      " we were not able  to determine the amount of extension funding dedicated to bee-related  activities. In addition, according to estimates by the Economic Research  Service, overall research funding has declined in inflation-adjusted  dollars, from 1980 to 2014, which may have resulted in a reduction in the  number of cooperative extension bee specialists. According to NIFA  officials, about 28 bee specialists are currently supported by the  Cooperative Extension System in the United States and its territories.  That number has declined from an estimated 40 extension bee specialists  in 1986, largely due to funding reductions. In addition, according to NIFA  officials,",
      " the reduction in extension funding may have reduced expertise  in related areas, including Integrated Pest Management (IPM), which  focuses on long-term prevention of pests or their damage through a  combination of techniques, such as biological control, habitat  manipulation, modification of cultural practices, and use of resistant  varieties, paired with monitoring to reduce unnecessary pesticide  applications. IPM extension agents routinely advise farmers on  alternatives to pesticides and pesticide application methods that reduce  risk to bees and other pollinators. USDA\u2019s CRIS provides overall funding data and descriptions of bee- related research and outreach but does not facilitate tracking projects and  funding by the categories of bees addressed by the White House Task  Force\u2019s strategy and research action plan.",
      " In addition, the research action  plan identifies key research needed to fill knowledge gaps for honey  bees; other managed bees; wild, native bees; and other pollinators.  However, the three categories for bees and other pollinators used in  CRIS to code USDA projects are \u201choney bees,\u201d \u201cbees, honey and other  pollinators,\u201d and \u201cother pollinators,\u201d so that bee-related research projects  that could help fill the identified knowledge gaps may not be easily  identified in CRIS. For example, NIFA guidance on reviewing certain  competitive grant applications states that national program leaders must  check CRIS to determine if the proposed work has already been funded  by NIFA or ARS and to ensure that it is not unnecessarily repeating work  not yet published.",
      " In addition, ARS guidance directs the agency\u2019s  scientists to search CRIS for potentially duplicative projects when  preparing project plans. Because projects may have multiple objectives, it  would be time-consuming to readily identify and track completed and  ongoing bee-related research by category of bee. Both the NIFA staff and  the researchers would have to search the codes for the up to three  different CRIS categories and then review the descriptions and the  multiple objectives for all projects with those codes. By updating the categories of bees in CRIS to reflect the categories of  bees discussed in the White House Task Force\u2019s strategy and research  action plan,",
      " USDA could increase the accessibility and availability of  information about USDA-funded research on bees. Senior USDA officials  said that CRIS would be more useful within the department and to others  seeking to identify bee-related research projects and project funding by  topic if USDA revised it to indicate the categories of pollinators that are  consistent with the research action plan. ARS and NIFA officials agree  improvements to CRIS could help managers track research spending  over time by the categories of bees identified in the research action plan.  One NIFA official estimated that revisions to CRIS could be done cost- effectively using minimal staff time. FSA and NRCS Have  Taken Actions That  Promote Bee Habitat  Conservation,",
      " but  Limitations Could Hinder  the Agencies\u2019  Conservation Efforts FSA and NRCS have taken many actions to promote bee habitat  conservation since 2008, but limitations in research, tracking of pollinator  habitat, and evaluation of the agencies\u2019 conservation efforts could hinder  those efforts. FSA and NRCS Have Taken  Many Actions That Promote  Bee Habitat Conservation The Farm Bill of 2008 authorized USDA to encourage the use of  conservation practices that benefit native and managed pollinators and  required that USDA review conservation practice standards to ensure the  completeness and relevance of the standards to, among other things,  native and managed pollinators.",
      " In August 2008, and again in May 2015,  NRCS in partnership with the Xerces Society and San Francisco State  University published guidance identifying several conservation  programs, including CRP, EQIP, and NRCS\u2019s Conservation  Stewardship Program (CSP) that could be used to promote pollinators  on working lands. This guidance identified 37 practices to create or  enhance pollinator habitat by providing more diverse sources of pollen  and nectar, and shelter and nesting sites, among other things. According to FSA and NRCS officials, CRP and EQIP are the largest  USDA private land conservation programs benefiting pollinators.",
      "  Participants voluntarily sign up or enroll in FSA or NRCS conservation  programs and in specific practices within those programs. As of August  2015, FSA had over 132,000 acres enrolled in pollinator-specific CRP  practices, with a remaining allocation of 67,000 acres that could be  enrolled under these practices. In 2014, FSA announced an additional $8  million in incentives to enhance CRP cover crops to make them more  pollinator-friendly. FSA is offering incentives to CRP participants in the  five states that are home to most honey bee colonies during the  summer\u2014Michigan,",
      " Minnesota, North Dakota, South Dakota, and  Wisconsin\u2014to establish pollinator habitat. According to an FSA official,  because CRP participants began to implement habitat enhancements in  fiscal year 2015, FSA does not yet have information on the number of  acres of habitat established. Also, within CRP, the State Acres for Wildlife  (SAFE) initiative allows agricultural producers to voluntarily enroll acres in  CRP contracts for 10 to 15 years. In exchange, producers receive annual  CRP rental payments, incentives, and cost-share assistance to establish,  improve, connect, or create higher-quality habitat. As of November 2015,",
      "  the SAFE initiative was providing pollinator habitat in Michigan, Ohio, and  Washington. For example, the goal of the Michigan Native Pollinators  SAFE project is to enroll 2,500 acres of enhanced habitat over the next 5  years to benefit native pollinators. In addition, in fiscal year 2014, NRCS provided more than $3.1 million in  technical and financial assistance to EQIP participants in the five states  that are home to most honey bee colonies during the summer to  implement conservation practices that would provide pollinator habitat.  This funding led to over 220 contracts with participants to establish about  26,",
      "800 acres of pollinator habitat, according to NRCS data. NRCS made  $4 million available in fiscal year 2015 through EQIP for honey bee  habitat. NRCS also funds other conservation programs that can benefit  bees and other pollinators. For example, the CSP provides financial and  technical assistance for participants whose operations benefit pollinators.  From 2012 through 2014, 17,500 acres were enrolled in one beneficial  CSP practice intended to improve habitat for pollinators and other  beneficial insects. Another CSP practice for grazing management may  benefit pollinators, but the acreage that benefits pollinators is unknown,",
      "  according to an NRCS official. In addition, NRCS offices in several states,  including Montana and South Dakota, seek to benefit pollinators with  upland habitat restoration funded by the Wetlands Reserve Program. NRCS and FSA have taken steps to provide information to field offices,  agricultural producers, and others that is useful for pollinator habitat  conservation programs. For example, in collaboration with the Xerces  Society and academic partners, NRCS has revised and expanded lists of  plants that benefit bees and technical guidance for conserving pollinator  forage. The NRCS Conservation Innovation Grants program has  supported several projects across the country designed to demonstrate  the value of habitat for pollinators,",
      " as well as to expand and improve  NRCS\u2019s capacity to establish and monitor high-quality bee forage sites.  The task force\u2019s strategy notes that FSA is working collaboratively with  NRCS to promote the use of more affordable, pollinator-friendly seed  mixes on CRP land. Some NRCS Plant Materials Centers\u2014which  evaluate plants for conservation traits and make them available to  commercial growers who provide plant materials to the public\u2014have  pollinator forage demonstration field trials under way to determine and  demonstrate the effectiveness of forage planted for pollinators. In  addition, FSA, NRCS, and Interior\u2019s USGS and Fish and Wildlife Service  have funded a website that provides information on plant-pollinator  interactions to help agencies improve pollinator seed mixes for programs  such as CRP and EQIP,",
      " according to a USGS official. USGS manages  this website, known as the Pollinator Library, to provide information on the  foraging habitat of pollinating insects with the goal of improving their  habitat. The Pollinator Library is to help users determine which flowers  that various insects, including native bees, prefer. The website includes a  search feature so users can determine, for example, what types of  pollinators have been found on different plant species, by state and land  type (such as CRP land). Knowing which flowers pollinators prefer is  useful to agencies creating seed mixes for CRP and EQIP habitat  enhancement efforts.",
      " Limitations in Research,  Tracking Acres of Pollinator  Habitat, and Evaluation Could  Hinder the Agencies\u2019  Conservation Efforts While USDA agencies have taken steps to improve bee habitat,  according to USDA officials and documents, limitations related to (1)  research on bee habitat and forage, (2) tracking acres of restored or  enhanced pollinator habitat, and (3) evaluating NRCS and FSA  conservation efforts, could hinder conservation efforts. Research on Habitat and Forage  As part of the task force\u2019s strategy and research action plan, federal  officials evaluated completed research and determined that additional  research on bee forage and habitat is needed to support NRCS,",
      " FSA,  and other entities\u2019 conservation efforts. The task force\u2019s research action  plan notes that there is much more to learn about the relationships  between plants and pollinators, including  identifying habitat with the greatest potential for pollinator benefits; developing locally-adapted plant mixes to provide resources for  pollinators throughout the year; designing a means for properly collecting, processing, storing, and  germinating sufficient seeds for restoration; and developing new concepts and techniques to understand how to  establish a broad mix of plants required for restoration based on  different factors\u2014e.g., cost-effectiveness and site properties. In addition,",
      " the research action plan identifies priority research actions for  federal agencies. For example, one priority action is developing a  science-based plant selection decision support tool to assist land  managers. According to the research action plan, this tool would help  land managers use the most effective and affordable plant materials  currently commercially available for pollinator habitat in wildland,  agricultural, or urban areas. The strategy for carrying out this action in 2  to 3 years, according to the research action plan, is to identify existing  science capacity to produce the decision-support tool. The research  action plan identifies ARS, NRCS, and USGS as able to provide  collaborative leadership for this action within the Plant Conservation  Alliance (PCA). Another priority action is developing a system for  monitoring the use of native plant materials.",
      " According to the research  action plan, the strategy for this action is within 2 years to develop an  interagency, online, searchable database to collect and analyze relevant  data efficiently (e.g., species, plant material type, location, acreage, year,  establishment, impacts on pollinators) to evaluate the use of native plant  materials. The research action plan identifies ARS and NRCS as sharing  collaborative leadership within the PCA for this action with the U.S. Forest  Service and Interior\u2019s USGS and Bureau of Land Management. Tracking Acres of Restored and Enhanced Pollinator Habitat  In response to the June 2014 presidential memorandum on pollinators,",
      "  the task force established an overarching goal on pollinator habitat  acreage of restoring and enhancing 7 million acres of land for pollinators  over the next 5 years through federal actions and public-private  partnerships. Under the task force\u2019s strategy, USDA agencies, including  FSA and NRCS, are to contribute to this goal. FSA and NRCS are able to  track acres of pollinator habitat restored and enhanced under pollinator- specific initiatives and practices, according to agency officials. However,  they are unable to track acres on which landowners implement practices  for other conservation purposes, such as for erosion control,",
      " improved  water quality, or wildlife habitat, that may also have an additional benefit  for pollinators, according to agency officials. According to FSA and NRCS  officials, developing a method for tracking most acres with conservation  practices benefiting pollinators will be time-consuming and may require  some form of estimation. For example, according to FSA officials, the  agency may be able to estimate acres of pollinator habitat using  information it has on the types of plants landowners have planted.  Nevertheless, by developing an improved method, within available  resources, to track conservation program acres that benefit pollinators,  FSA and NRCS would be better able to measure their contribution to  restoring and enhancing the acres called for by the task force strategy\u2019s  goal.",
      " Both agencies agreed that developing an improved method for  tracking acres on which pollinator habitat has been restored or enhanced  would provide valuable information. As of November 2015, the agencies  had begun to discuss and consider methods they might use to track acres  on which pollinator habitat has been restored or enhanced but had yet to  develop an improved method. Evaluating FSA and NRCS Conservation Efforts  USDA has funded two evaluations of the effectiveness of FSA and NRCS  conservation efforts related to pollinator habitat. First, in 2013, FSA and  NRCS began jointly supporting a USGS study to evaluate the effect of  CRP and EQIP plantings on honey bee health and productivity in five  Midwestern states\u2014Michigan,",
      " Minnesota, North Dakota, South Dakota,  and Wisconsin. According to a January 2015 USGS progress report, the  monitoring will quantify the effect USDA conservation lands have on  honey bee health and productivity. For example, USGS is comparing the  health of honey bee colonies in areas dominated by row crops with the  health of colonies located in areas with significant CRP and pasture  acreage. The evaluation has begun to show which weeks or months may  have a shortage of blooming forage. USGS plans to expand this  evaluation in 2016 to additional sites in Michigan and Wisconsin and add  a demonstration project to monitor the effect of CRP and EQIP plantings  on orchards,",
      " according to a USGS official. Information generated from  this USGS evaluation will be used to improve pollinator seed mixes for  CRP and EQIP, according to FSA and NRCS officials. Second, in 2014,  the Pollinator Partnership, under a cooperative agreement with NRCS,  issued an independent evaluation of how NRCS field offices were  promoting, implementing, monitoring, and documenting pollinator habitat  efforts in conservation programs in several states. This evaluation  concluded, among other things, that NRCS field offices were eager to  support pollinators, but agency staff needed additional expertise to advise  landowners how to implement effective conservation practices.",
      " However,  NRCS has not conducted an evaluation to show where there may be  gaps in expertise and how they might be filled; for example, whether the  gaps should be filled through additional formal training for staff or through  the informal learning that occurs when field staff, using technical  assistance funding, monitor the field work to determine which plants are  thriving and attracting bees. According to NRCS officials, headquarters\u2019 evaluations of pollinator  habitat have been limited, in part, because the agency has been focused  on implementing the plantings. The NRCS National Planning Procedures  Handbook directs an evaluation of the effectiveness of the implemented  plan to ensure it is achieving its objectives.",
      " The officials said that  increased evaluation would be helpful because, while each state office  has a biologist and other conservation experts, including partner  biologists from nonprofit organizations, there are gaps in technical  expertise on pollinator habitat available to some field offices. As a result,  some field offices have less ability to effectively plan and monitor  pollinator habitat. One university stakeholder suggested that NRCS  ensure that each of the approximately 30 states with a significant need for  pollinator habitat has a native bee expert. NRCS officials said an  evaluation of field office efforts to restore or enhance bee habitat could  help identify where expertise gaps occur.",
      " Another NRCS official said that  the agency could survey its staff to gather their views on the need for  additional training or expertise. In addition, one NRCS official said that  on-site evaluation of the success of the pollinator habitat is important to  understanding the effectiveness of the technical assistance. NRCS officials also said that additional evaluation is needed to determine  if technical assistance funding is adequate to support conservation  planning efforts for different pollinator habitats across the country. NRCS  funding for technical assistance enables field staff to develop  conservation plans for landowners and to assess the implementation of  those plans. NRCS\u2019s financial assistance funding to landowners helps  pay to implement conservation plans.",
      " If technical assistance funding is  too low, the effectiveness of conservation efforts may be compromised,  according to NRCS officials. As total funding for NRCS conservation  programs has increased, the percentage available for technical  assistance has decreased relative to financial assistance. In 2014,  funding for technical assistance was proportionally half of what it was in  2002, relative to the amount of financial assistance that it supported in  terms of conservation planning and monitoring. Specifically, according to  NRCS officials, for every dollar provided for financial assistance in 2002,  about $1.22 went to technical assistance. However, in 2014,",
      " for every  dollar provided for financial assistance, about 59 cents was provided for  technical assistance. According to USDA officials, the reduced  percentage of funding devoted to technical assistance has resulted in  NRCS field office staff having less time to plan for and ensure the quality  of conservation efforts, including pollinator habitat, because the staff must  spend more time in the office managing contracts and ensuring that all  financial assistance dollars are obligated. By increasing evaluation of its  habitat conservation efforts, including gaps in expertise and technical  assistance funding available to field offices, USDA could better ensure  the effectiveness of its efforts to restore and enhance bee habitat  plantings across the nation.",
      " EPA Has Taken Some  Steps to Address  Pesticide Threats to  Bees, but Potential  Threats Remain EPA has taken steps to address pesticide threats to bees, but potential  threats remain. Among other steps, in 2013, EPA revised the label  requirements for certain pesticides and in 2015, proposed revisions for  certain additional pesticides that are acutely toxic in an effort to reduce  bees\u2019 exposure. Since at least 2009, EPA has encouraged beekeepers  and others to report bee kill incidents potentially associated with  pesticides, but agency officials and others point to challenges to accurate  reporting and data collection on these incidents.",
      " EPA has also  encouraged state and tribal governments to voluntarily develop plans to  work with farmers and beekeepers to protect bees from pesticides. EPA  has revised its guidance for assessing the risks new and existing  pesticides pose to bees, but there are limitations to the approach,  including a lack of data on pesticides\u2019 risks to nonhoney bees and risks  that pesticide mixtures pose to bees. Changes to EPA\u2019s risk assessment  approach will likely extend its schedules for reviewing the registrations of  some existing pesticides\u2014including many that are known to be toxic to  bees\u2014as the agency gathers and reviews additional data on risks to  bees. However,",
      " EPA has not revised the publicly available work  schedules for pesticides currently under review. EPA Revised the Label  Requirements for Certain  Pesticides and Has  Proposed Revisions to  Label Requirements for  Additional Pesticides  Known to Be Acutely Toxic In August 2013, EPA directed the registrants of four pesticides in a class  of chemicals known as neonicotinoids to submit an amendment to revise  the labels of products containing those pesticides that were registered for  outdoor use on plant foliage. Neonicotinoids are insecticides that affect  the central nervous system of insects, causing paralysis and death.  Pesticide labels contain directions for use and warnings designed to  reduce exposure to the pesticide for people and nontarget organisms,",
      "  including beneficial insects such as bees. It is unlawful to use any  pesticide in a manner inconsistent with its labeling. In proposing the label  changes, EPA cited the possible connection between acute exposure to  particular pesticides and bee deaths. EPA called for the labels to have a  pollinator protection box (also called a \u201cbee advisory box\u201d) and new  language outlining the directions for the products\u2019 use, in addition to any  restrictive language that may already be on the product labels. The  agency directed the registrants to submit revisions to their product labels  with EPA\u2019s prescribed language no later than September 30, 2013,",
      " and  told the registrants that it anticipated that the new product labels would be  in place in 2014. The new language for the pollinator protection box warns of the threat the  pesticide poses to bees and other pollinators and instructs the user to  follow the new directions for use. The directions for use restrict the use of  the pesticide on crops and other plants at times when bees are foraging  on those plants. More specifically, the directions generally prohibit foliar  use, or use on leaves, until flowering is complete, and all petals have  fallen from the plants. However, the new directions for use allow for  exceptions to the prohibition under certain conditions,",
      " which vary,  depending on whether or not managed bees are on-site to provide  contract pollination services. In November 2014, EPA staff told us the label changes to the four  neonicotinoids had led to confusion for pesticide users and resentment by  some stakeholder groups, but that the agency planned to address these  concerns through additional label changes for those and other pesticides  that are acutely toxic to bees. In particular, according to EPA officials,  pesticide users found that new label language, in some instances,  contradicted other parts of the label or was poorly defined. In May 2015,  EPA requested public comments on a proposal to make label changes  restricting the use of some products containing acutely toxic pesticides  on pollinator-attractive crops when managed bees are present for the  purpose of providing pollination services,",
      " saying that \u201cclearer and more  consistent mandatory label restrictions could reduce the potential  exposure to bees from pesticides categorized as acutely toxic to bees.\u201d  The deadline for public comments on EPA\u2019s proposal was June 29, 2015.  Subsequently, that deadline was extended to August 28, 2015. According  to EPA officials, as of October 2015, the agency was in the process of  reviewing more than 100,000 comments on the label proposal; in part due  to the number of comments, the officials said they could not estimate  when the agency will finalize the proposal. EPA Has Encouraged  Beekeepers and Others to  Report Bee Kill Incidents  Potentially Associated with  Pesticides Since at least 2009,",
      " EPA has encouraged beekeepers and others to  voluntarily report bee kill incidents\u2014that is, when bees in or near a hive  are killed by a suspected exposure to a pesticide, according to agency  officials. EPA records reports of bee kills that may have been associated  with pesticide use in its Ecological Incident Information System (EIIS)  database on adverse pesticide incidents. When EPA receives reports of  bee kill incidents, according to agency officials, it considers a range of  evidence to evaluate the probability that a specific pesticide was the  cause. The evidence could include information about pesticide use near  the incident, the known toxicity of the pesticides used in the area,",
      " and  physical or observational evidence associated with the affected bees.  After considering the evidence, EPA categorizes the likelihood that a  specific pesticide was associated with the bee kill as highly probable,  probable, possible, unlikely, or unrelated. In total, the EIIS data include  306 unique bee kill incidents occurring from 1974 through 2014 and  another 90 incidents with no associated year. Of this total of 396  incidents, EPA found sufficient evidence to categorize 201 as highly  probable or probable. The 201 incidents were associated with 42  pesticides. (The EIIS data show that 3 bee kill incidents were highly  probable or probable but name no specific pesticide.) According to agency officials,",
      " EPA encourages the public to report  incidents to their state lead agency (typically the state\u2019s department of  agriculture) so that such incidents can be properly investigated.  Recognizing that some members of the public may not feel comfortable  with reporting to their state officials, EPA\u2019s website and the \u201cbee advisory  boxes\u201d added to certain pesticide labels identify additional options for the  public to voluntarily report bee kill incidents. These include reporting  through beekill@epa.gov, an e-mail address monitored by EPA\u2019s Office of  Pesticide Programs or to report incidents to the National Pesticide  Information Center. In addition, EPA enters into cooperative agreements  with states.",
      " Through these agreements, EPA may delegate certain  authority to states to cooperate in enforcing FIFRA. One condition of the  cooperative agreement is that states must report information on all known  or suspected pesticide incidents involving pollinators to beekill@epa.gov  and send a copy to the relevant EPA regional office. EPA stores data on  incident reports from the public, the National Pesticide Information  Center, and the states in its EIIS database. Several factors may contribute to underreporting of bee kill incidents,  according to EPA staff and others we interviewed. According to officials  from EPA and beekeeping and environmental organizations,",
      " beekeepers  may be reluctant to report bee kills to state agencies or to EPA for one or  more of three reasons. First, beekeepers may want to avoid conflicts with  farmers with whom they have an arrangement for providing pollination  services or for obtaining access to forage for honey production, even if  the farmer\u2019s pesticide application practices may have contributed to the  incident. Second, beekeepers may want to avoid investigations that may  suggest the beekeeper\u2019s hive management practices\u2014specifically, the  use of miticides or other pesticides to combat hive pests\u2014contributed to  the incident. Third, according to a senior EPA official in the Office of  Pesticide Programs,",
      " some beekeepers believe that submitting reports in  the past has not resulted in a positive response from regulatory  authorities and, therefore, is not worth the effort. According to the senior EPA official, other challenges exist that may make  bee kill incident reports inaccurate. For example, beekeepers may not be  able to frequently monitor their colonies, so incidents may not be  discovered for several days; the passage of time may hamper a  conclusive investigation. Honey bees forage over an extensive range.  Therefore, it may be difficult to determine to which crops and pesticides  they have been exposed. Finally, according to the EPA official, the states  have increasingly limited budgets to support bee colony inspection  programs and pesticide incident inspection programs in general,",
      " and may  not be able to fully investigate reported incidents. In addition to the voluntary incident reports from beekeepers and others,  FIFRA requires that pesticide registrants report factual information they  are aware of concerning adverse effects associated with their products\u2014 including the death of nontarget organisms such as bees. The  information reported by a registrant is known as a FIFRA 6(a)(2) Incident  Report. However, according to EPA staff, FIFRA 6(a)(2) reports are not  particularly useful in providing details on bee kills because FIFRA and its  implementing regulations do not require registrants to identify bees as the  species harmed by a pesticide.",
      " Instead, bees are recorded within a larger  category of \u201cother nontarget\u201d organisms. In addition, registrants do not  need to report individual incidents involving \u201cother nontarget\u201d organisms  when they occur. Instead, registrants can \u201caggregate\u201d incidents that occur  over a 90-day period and report those aggregated data to EPA 60 days  after the end of the 90-day period. While these FIFRA reporting  requirements apply generally to pesticide registrants, as we noted earlier,  EPA modified its requirements for the registrants of four neonicotinoid  pesticides. In its July 22,",
      " 2013, letter notifying the registrants of its plans  to modify the pesticides\u2019 labels to be more protective of bees, EPA also  instructed the registrants to report bee kill incidents within 10 days of  learning of the incident and that information on bee kills must not be  aggregated, regardless of the number of individual pollinators involved in  any incident. EPA Has Encouraged  State and Tribal  Governments to  Voluntarily Develop Plans  to Protect Managed Bees  from Pesticides In response to a directive from the June 2014 presidential memorandum  on pollinators, EPA has encouraged state and tribal environmental,",
      "  agricultural, and wildlife agencies to voluntarily develop managed  pollinator protection plans (protection plans) that focus on improved  communication between farmers and beekeepers regarding the use of  pesticides and the proximity of managed bees. EPA is working with two  organizations to encourage states and tribes to implement the protection  plans: (1) the State-FIFRA Issues, Research, and Evaluation Group  (SFIREG) and (2) the Tribal Pesticide Program Council. In December  2014, SFIREG issued draft guidance for state lead agencies for the  development and implementation of state protection plans. According to  the guidance,",
      " the scope of the plans is limited to managed bees not  providing contracted pollination services at the site of application. As  such, the protection plans are intended to reduce pesticide exposure to  bees that are adjacent to, or near a pesticide treatment site where bees  can be exposed via drift or by flying to and foraging in the site of  application. According to SFIREG\u2019s draft guidance, many of the strategies  to mitigate the risk of pesticide exposure to managed pollinators are also  expected to reduce the risk to native bees and other pollinators. The  voluntary protection plans would supplement EPA\u2019s proposal to make  label changes restricting the use of acutely toxic pesticides,",
      " described  above, to protect managed bees that are under pollination contracts  between farmers and beekeepers. According to the task force\u2019s strategy,  one of the key elements of the state protection plans are the metrics that  will be used to measure their effectiveness in reducing honey bee losses.  Those metrics, according to the strategy, may differ across states and  tribes. Because the development of the protection plans is voluntary, EPA will  not approve or disapprove them, and measures of the plans\u2019  effectiveness will be state- or tribe-specific, according to agency officials.  According to EPA officials, as of January 2016,",
      " seven states had  protection plans in place: Arkansas, California, Colorado, Florida, Iowa,  Mississippi, and North Dakota, while all but a few of the other states had  protection plans in some stage of development. In addition, EPA provided  funding for a November 2015 training program to address tribal pollinator  protection plans. Stakeholders we interviewed who commented on this  topic generally supported EPA\u2019s efforts to encourage pollinator protection  plans. Stakeholders\u2019 views on protection plans are summarized in  appendix II. EPA Has Revised Its  Guidance for Assessing  Risks to Bees Posed by  New and Existing  Pesticides,",
      " but Limitations  Remain In June 2014, EPA issued guidance advising the agency\u2019s staff to  consider requiring pesticide registrants to conduct additional studies on  the risks that new or existing pesticides may pose to bees and bee  colonies for pesticides going through the registration or registration review  processes. The 2014 guidance formalized interim guidance issued in  2011. EPA summarized the need for the risk assessment guidance in a  2012 White Paper to the FIFRA Scientific Advisory Panel that noted that  the lack of a clear, comprehensive and quantitative process for evaluating  pesticide exposure and subsequent risk to bees from different routes of  exposure was a major limitation.",
      " The guidance may result in registrants  conducting additional studies on the toxicity of new and existing  pesticides on honey bees. It also allows for several methods of  characterizing pesticide risk. However, EPA\u2019s 2014 risk assessment  guidance relies largely on honey bees as a surrogate for other bee  species. In addition, the guidance does not call for EPA to assess the  risks that pesticide mixtures may pose to bees. EPA\u2019s Risk Assessment  Guidance Potentially Calls for  More Study of the Effects of  New and Existing Pesticides  on Honey Bees EPA\u2019s June 2014 guidance calls for agency staff to consider requiring  pesticide applicants or registrants to conduct additional studies on the  toxicity of their pesticides to honey bees.",
      " The guidance applies to EPA\u2019s  review of new pesticide registration applications and its ongoing review of  existing registrations. EPA has used, and continues to use, a three-tiered  approach for assessing the risks that pesticides may pose to bees (and  other organisms). That is, the agency may require additional studies\u2014in  Tiers II and III\u2014from pesticide applicants or registrants, depending on the  results of any Tier I studies that it required. Therefore, under the June  2014 guidance, EPA staff are to consider a range of studies that examine  different life stages of honey bees (adult and larval), different types of  toxicity (acute and chronic), and different types of exposure to pesticides  (contact and oral). Studies may be conducted in laboratories on individual  bees (Tier I), as \u201csemi-field\u201d tests of small colonies (Tier II), or as field  tests of whole colonies (Tier III). EPA may also consider other lines of  evidence,",
      " including open scientific literature and incident reports. Another aspect of assessing the risk of pesticides is deciding which  chemicals within a pesticide product are to be studied. EPA\u2019s June 2014  guidance addresses this issue but leaves it to the discretion of agency  staff. Specifically, EPA\u2019s June 2014 guidance states that toxicity data  using the end-use product may be needed if data suggest that a typical  end-use product is potentially more toxic than the active ingredient, and  bees may come directly in contact with the product. The guidance also  calls for agency staff to consider the effects that systemic pesticides  applied to seeds or in the soil may have on honey bees.",
      " Systemic  pesticides applied to plants and soil can move through the plant to other  plant tissues, potentially contributing to quantities of pesticide residues in  pollen and nectar. EPA regulations identify three honey bee studies as required, or  conditionally required, and EPA\u2019s 2014 guidance suggests additional bee  toxicity studies that agency staff might consider requiring. EPA staff we  interviewed acknowledged that additional steps are needed to establish  study guidelines, but said that the agency has the authority under FIFRA  to require and review any studies that it deems necessary to determine  whether a pesticide will have unreasonable adverse effects. In addition,  as of October 2015,",
      " EPA had not yet issued guidelines for the new types  of studies that registrants may be required to submit. However, in July  2015, EPA announced on its website that it was considering a proposal  within 12 months that would update and codify the data requirements  needed to characterize the potential risks of pesticides to bees and other  pollinators. In the meantime, registrants may conduct three of the  additional studies\u2014acute adult oral toxicity, acute larval toxicity, and  semi-field testing with whole colonies\u2014using guidelines developed by the  Organization for Economic Cooperation and Development (OECD).  EPA officials told us that,",
      " as of October 2015, formal guidelines did not  exist for chronic toxicity testing with adult bees and chronic toxicity testing  with bee larvae but said that EPA is contributing to international efforts to  develop formal guidelines, including draft guidelines on chronic toxicity  with bee larvae. In addition, the task force\u2019s strategy stated that  standardized guidelines may not be developed for field studies (Tier III)  because \u201cthese studies are intended to address specific uncertainties  identified in lower tier tests.\u201d Instead, according to agency officials, EPA  will have to agree on specific Tier III protocols proposed by the pesticide  applicant or registrant for particular pesticides. EPA\u2019s Risk Assessment  Guidance Allows for Tiered  Studies in Making Registration  Decisions for New Pesticides  and New Uses for Existing  Pesticides EPA\u2019s June 2014 risk assessment guidance for honey bees allows the  agency to use tiered studies in reviewing registration applications for new  pesticides and new uses for existing pesticides.",
      " EPA\u2019s review of  registration applications for four pesticides\u2014cyantraniliprole, oxalic acid,  sulfoxaflor, and tolfenpyrad\u2014provides examples of how the agency\u2019s use  of its 2011 interim and 2014 final guidance and its call for bee-related  studies can vary. Because EPA\u2019s risk assessment approach for this  guidance is a tiered one, the agency staff uses its discretion when  requiring registrants to conduct toxicity studies. For example, EPA  approved oxalic acid for a new use as a miticide to combat Varroa mites  in bee hives without requiring its own Tier II or Tier III studies.",
      " According  to EPA staff, the agency relied on existing data from Canada that shows  the pesticide has low acute toxicity and is effective at killing Varroa mites  without harming bee colonies. For the other three pesticides, which were  registered before the 2014 final guidance was issued, EPA reviewed  varying numbers and types of studies but did not require all of the types  of studies described in the new risk assessment guidance. However, EPA  decided, on the basis of the studies that were done, to place restrictions  on the pesticides\u2019 use in order to reduce bees\u2019 exposure. For example,  EPA did not require Tier III studies for sulfoxaflor but used the results of  Tier I and Tier II studies as the basis for reducing the amount of the  insecticide that was allowed to be applied per acre under the pesticide\u2019s  2013 registration.",
      " In addition, cyantraniliprole and tolfenpyrad are  among the acutely toxic pesticides covered by EPA\u2019s May 2015 proposal  to make label changes restricting the use of acutely toxic pesticides. A finding from study results that a pesticide is toxic to bees (or other  organisms) does not necessarily mean that EPA will disapprove an  application for registration. Under FIFRA, throughout the tiered process,  EPA considers whether mitigation measures (e.g., changes to application  rates, the timing of applications, or the number of applications) are  sufficient to reduce exposure to a level at which risk estimates are below  levels for concern,",
      " while also taking the benefits from using the pesticide  into consideration. EPA\u2019s 2014 Risk Assessment  Guidance Relies Largely on  Honey Bees as a Surrogate for  Other Bee Species While EPA\u2019s June 2014 pesticide risk assessment approach provides for  the inclusion of data on additional bee species where available, it relies  primarily upon data from honey bees as a surrogate for all bee species.  However, other bee species may be affected differently by pesticides.  EPA acknowledges in its guidance that there are limitations to using  honey bees as surrogates but maintains that honey bees can provide  information relevant to other species,",
      " and that adequate, standardized  tests are not yet available for other species. EPA is involved in  international efforts to develop standardized tests for other bee species  and has been directed by the task force\u2019s strategy with researching risk  assessment tools for nonhoney bee species. However, EPA does not  have a schedule for expanding the risk assessment process to other bee  species. Stakeholders we interviewed from farming, commercial  beekeeping, university, and conservation/environmental groups said EPA  should expand its risk assessment process to include testing the effects  of pesticides on pollinators other than the honey bee, including other  commercial, or managed,",
      " and wild, native bees. Several of these  stakeholders specified that EPA should develop testing models and  guidelines for other types of bees, such as solitary and bumble bees. EPA\u2019s September 2012 White Paper attributed the agency\u2019s focus on  honey bees to two factors: (1) honey bees are considered the most  important pollinator in North America from a commercial and ecological  perspective and (2) standardized tests on the effects of chemicals are  more developed for honey bees than for other managed bee species,  such as the alfalfa leafcutting and orchard mason bees. However, the  White Paper also noted that there are an estimated 4,",
      "000 species of wild,  native bees in North America and more than 20,000 worldwide. These  wild, native bees also provide important pollination services. Other  managed and wild, native bee species may be exposed to pesticides  through different routes, at different rates, or for different durations than  honey bees, all of which may influence the effects of pesticides. The  White Paper concluded that there was a clear need for a process to  assess risks to species other than honey bees, owing to potential  differences in sensitivity and exposure compared to honey bees. While  noting the importance of assessing risks to diverse bee species, the  White Paper also cited a 2012 European Food Safety Authority  conclusion that published laboratory,",
      " semi-field, and open field test  methods for other species (i.e., bumble bees, orchard mason bees,  leafcutting bees, and alkali bees) needed further development. In its December 2012 review of EPA\u2019s White Paper, the FIFRA Scientific  Advisory Panel recommended that EPA require testing on at least one  additional species to address the goal of protecting diversity. The FIFRA  panel stated that alfalfa leafcutting bee and orchard mason bees are the  easiest to include for Tier I testing, adding that these bees are  commercially available in large numbers and would be fairly easy to use  for higher-tiered tests.",
      " In addition, the panel noted that bumble bees are  also available commercially, and considerable research is available on  how to raise them, so they would be useful for Tier II tests, although with  limitations. EPA\u2019s June 2014 risk assessment guidance stated that, as the  science evolves, methods and studies using other bee species may be  considered and incorporated into risk assessments. The task force\u2019s strategy stated that uncertainty is created by relying on  honey bees as a surrogate and stated the agency was working with  regulatory counterparts through the OECD to ensure the development of  standardized testing methods to address this uncertainty. In that regard,  the task force\u2019s research action plan directs EPA to develop appropriate  assessment tools for sublethal effects of pesticides,",
      " adjuvants, and  combinations of pesticides on the fitness, development, and survival of  managed and wild pollinators (i.e., honey bees and other bees). The task  force\u2019s strategy states that a metric for progress in meeting the strategy\u2019s  directives will be the extent to which standardized guidelines are  developed and implemented for evaluating potential risks to bees other  than honey bees. According to the strategy, these studies will be critical  for determining the extent to which honey bees serve as reasonable  surrogates for other species of bees. However, the strategy and the  research action plan do not identify how or when EPA is to ensure that  adequate test protocols are incorporated into the risk assessment  process.",
      " According to EPA officials, it would not be reasonable for the  strategy to dictate a timeline or for EPA to commit to one given the  absence of appropriations to support the development of test guidelines.  Instead, these officials said that EPA is working with the OECD and other  international bodies to develop test guidelines for other species of bees. According to OECD documents, progress has been made in developing  guidelines to assess the acute contact and oral toxicity of pesticides to  individual bumble bees. The documents state that the results of validation  testing for the guidelines (known as ring tests) are expected to be  reported by late 2015 or early 2016.",
      " However, it is not clear when EPA  could incorporate them into its risk assessment process, and guidelines  for other bee species would take additional time to develop. Regardless,  EPA has the authority under FIFRA to require pesticide registrants to  submit data on the toxicity of pesticides on other bee species using  methods that meet the agency\u2019s approval. By developing a plan for  obtaining data from pesticide registrants on the effects of pesticides on  nonhoney bee species, including other managed or wild, native bees, into  its risk assessment process, EPA could increase its confidence that it is  reducing the risk of unreasonable harm to these important pollinators,",
      "  consistent with the task force\u2019s strategy and research action plan. EPA\u2019s June 2014 Guidance  Does Not Call for the Agency  to Assess the Risks That  Pesticide Mixtures May Pose  to Bees EPA\u2019s June 2014 risk assessment guidance calls for the agency to  assess the risks that individual pesticides may pose to bees but not for  the assessment of the risks from combinations of pesticide products or  combinations of pesticide products with other chemicals. Farmers  sometimes mix pesticide products for a single application to reduce the  number of times they have to spray their fields. These combinations of  pesticide products are known as tank mixtures.",
      " Beekeepers have raised  concern that these mixtures of pesticide products may have synergistic  effects on bees, meaning that the effect of the combination is greater than  the sum of the effects of the individual pesticides. The Pollinator  Stewardship Council reported on its website in 2014 that beekeepers  attributed bee kill incidents to pesticides that acted in combination with  each other to increase their collective toxicity. In addition, farmers may  mix pesticide products with adjuvants, or chemicals to enhance the  pesticides\u2019 effectiveness. University researchers have also reported that  combining certain pesticide products with other products can  synergistically increase the overall toxicity to bees.",
      " Stakeholders we  interviewed from commercial bee groups, universities, and conservation/  environmental groups suggested that EPA require companies to conduct  toxicity studies on pesticide tank mixtures as part of its risk assessment  process. According to agency officials, EPA has taken some steps to  expand the scope of its risk assessment to include mixtures of pesticides,  but challenges remain, as discussed below. EPA registers an individual pesticide after assessing the risks the  pesticide poses to human health or the environment when used according  to its directions for use. EPA also assesses the risks posed by  combinations of pesticides that the applicant intends to be used as a  registered combination.",
      " Otherwise, EPA does not assess the risks of  tank mixtures of pesticides or combinations of pesticides and other  chemicals such as adjuvants that farmers or others may use. According  to EPA officials, the use restrictions that apply to tank mixtures of  pesticides are, instead, based on the most restrictive elements of the  individual pesticides\u2019 labels. In EPA\u2019s September 2012 White Paper, the agency stated that \u201cwith  respect to mixtures, while multiple stressors and the interactive effects of  pesticides and/or other environmental stressors are important issues,  they will not be examined at this time.\u201d However, the task force\u2019s strategy  recognized the risks that pesticide mixtures may pose and called for EPA  to develop appropriate tools to assess the sublethal effects of pesticides,",
      "  adjuvants, and combinations of pesticides with other products on the  fitness, development, and survival of managed and wild pollinators. Senior EPA officials told us in October 2015 that they agreed that tank  mixtures of registered pesticides pose potential risks to bees. However,  they said that there was no reliable process for assessing mixtures and  that, given the number of possible permutations that may occur in tank  mixing, it was difficult to imagine how EPA could reasonably commit to  such an effort. EPA officials also said that the use of tank mixes may  change over time and by location as farmers respond to different pest  outbreaks,",
      " and that the agency does not know how it would identify  commonly used mixtures. However, according to stakeholders we  interviewed, sources for data on commonly used or recommended  mixtures are available. These sources include the California Department  of Pesticide Regulation\u2014which has an extensive data base on pesticide  use\u2014the pesticide industry, farmers, pesticide application companies,  and extension agents. At the same time, EPA officials noted that the agency is working with the  Fish and Wildlife Service and the National Marine Fisheries Service on  assessing the risks of pesticides to threatened and endangered species  such as salmon, including the risk posed by mixtures of pesticides.",
      " They  said the agencies\u2019 effort could eventually be relevant to EPA\u2019s guidance  for assessing pesticide risks to bees. EPA and the other agencies  subsequently developed joint interim scientific approaches for assessing  the risks of pesticides to threatened and endangered species. With  respect to pesticide mixtures, the agencies\u2019 document on interim  approaches stated that risks associated with pesticide mixtures will  largely be considered qualitatively rather than quantitatively. A related  agency document states that long-term future work includes establishing  a quantitative approach for assessing risks of mixtures but provides no  time frames for doing so. We acknowledge that EPA\u2019s work with other  agencies on pesticide risks to threatened and endangered species may  eventually contribute to its risk assessments for bees,",
      " but the effects of  that work remain to be seen. By identifying the pesticide mixtures that  farmers and pesticide applicators most commonly use on agricultural  crops, EPA would have greater assurance that it could assess those  mixtures to determine whether they pose greater risks than the sum of the  risks posed by the individual pesticides. According to senior EPA officials, if the agency has information about  certain combinations being used regularly, it could require that pesticide  registrants provide testing data on those combinations. If an assessment  of commonly-used pesticide mixtures found synergistic effects on bees,  FIFRA authorizes EPA to take regulatory actions to reduce risks,",
      " such as  requiring label language warning of those effects. Applying EPA\u2019s New Risk  Assessment Guidance Will  Likely Extend the Agency\u2019s  Reviews of Registered  Pesticides, and EPA Has  Not Revised Review  Schedules Amendments to FIFRA require that EPA complete its reviews of all  pesticide active ingredients registered as of October 1, 2007, by October  2022. Applying EPA\u2019s new risk assessment guidance to its review of  registered pesticides will add time to the posted review schedules for  some individual pesticides, and EPA has not revised these schedules.  As discussed, EPA\u2019s revised risk assessment guidance for bees calls for  the agency to consider requiring registrants to conduct additional studies  on their pesticide\u2019s effect on bees.",
      " According to EPA documents and  officials, the agency is now applying the new guidance to registered  pesticides that are in the review process, as well as to new pesticides.  Deciding what studies are needed, requesting the data from registrants,  waiting for the studies to be conducted, and analyzing the study data will  add time to EPA\u2019s review of some pesticides\u2019 risks to bees. The director  of EPA\u2019s Pesticide Re-Evaluation Division and other senior officials told  us in April 2015, and confirmed in October 2015, that the agency was in  the process of deciding what additional bee studies, if any,",
      " will be needed  for specific individual pesticides. They could not estimate how long it will  take to make those decisions but said a large number of pesticides for  which EPA had begun a registration review prior to issuing its risk  assessment guidance in June 2014 could require data on bees. The  number of pesticides affected by the new risk assessment guidance is,  therefore, likely to be substantial, according to EPA officials. In its annual  PRIA implementation report, EPA reported to Congress in March 2015  that by September 30, 2014, it had begun the review process for 528  pesticide cases and prepared final work plans for 491 of those cases.",
      " The  final work plans identify the studies the agency is requiring the registrant  to conduct and show the agency\u2019s estimated schedule for completing a  registration review. Of the 491 cases with final work plans, EPA had  issued registration review decisions for 105 cases by the end of fiscal  year 2014. According to EPA officials, as of September 30, 2015, the  agency had increased the number of reviews begun to 612 pesticide  cases, had prepared final work plans for 580 pesticides cases, and had  issued 155 interim and final registration review decisions. According to the EPA division director, if EPA determines through  registration review that additional data are necessary to make the  necessary findings,",
      " the agency must obtain approval from the Office of  Management and Budget (OMB) to request the data from registrants that  use a particular active ingredient in their products. He added that, if EPA  decides that registrants need to do additional studies on bees, it will need  to obtain another approval from OMB for the new data. Once OMB  approves the request, the required risk assessment studies on bees may  take registrants from one to several years to conduct. The division  director said that EPA was concerned that the number of pesticides  needing new bee test data could overwhelm the supply of qualified testing  laboratories, which could delay the start and completion of those studies.",
      "  In its written comments on a draft of this report, EPA said that it had more  recently learned that laboratories are building capacity to conduct these  studies. However, the conduct of honey bee studies is confined to a  limited window within the year, typically from April through August. The final work plans for most of the pesticide cases for which EPA had  begun registration review were developed and posted to the  www.Regulations.gov website before EPA adopted its revised risk  assessment guidance for bees in June 2014. According to EPA officials,  those work plans may therefore not reflect the types of studies that are  now called for by the new guidelines or the estimated schedules for  completing the registration reviews.",
      " Work plans that EPA posted after the  June 2014 risk assessment guidance, on the other hand, may better  reflect the types of studies that are called for by the new guidance. To examine the effect that EPA\u2019s revised risk assessment guidance has  had on its review of individual pesticide registrations, we selected eight  registered pesticides associated with bee kill incidents reported in EPA\u2019s  EIIS database. The work plans for these pesticides (amitraz, carbaryl,  chlorpyrifos, coumaphos, malathion, and three neonicotinoid pesticides\u2014 clothianidin, imidacloprid,",
      " and thiamethoxam)\u2014could provide information  on how EPA\u2019s new risk assessment process will affect registration review,  although we found the full effect is not yet clear. The director of the  Pesticide Re-Evaluation Division explained that the work plans EPA has  posted at www.Regulations.gov for amitraz, carbaryl, chlorpyrifos,  coumaphos, and malathion are out of date because EPA has not yet  decided what additional data on the effects of the pesticides on bees the  agency will ask registrants to submit. However, EPA staff told us that the  work plans for the three neonicotinoid pesticides\u2014which predate the June  2014 risk assessment guidance\u2014more closely reflect the guidance and  call for additional studies on bees.",
      " EPA staff said that they were aware  of the need for more bee studies for those pesticides as the agency  developed its 2014 guidance. While the new guidance is likely to affect many pesticide reviews, EPA  officials told us that the agency does not plan to revise the review  schedules in work plans that have already been posted. The officials said  that doing so would place a significant burden on agency staff and detract  from their ability to conduct registration reviews. Instead, EPA officials  said that the agency would annually announce for which pesticides it  expected to have preliminary risk assessments available for public review  in that year. In keeping with that plan,",
      " the May 2015 task force\u2019s strategy  included a list of 58 registration review preliminary risk assessments that  EPA said would be open for public comments during 2015. Unlike the  posted work plans for pesticides undergoing registration review, the  announcement in the strategy did not estimate when the reviews of the 58  pesticides would be complete or identify what studies EPA has  determined will be required. We understand that it may be challenging for  agency staff to revise the review schedules in work plans that have  already been posted. However, given that EPA is working to determine  what studies will be required, it may soon be able to determine the  studies it would require of registrants.",
      " By disclosing in its annual PRIA  implementation reports which registration reviews have potentially  inaccurate schedules and when it expected those reviews to be  completed, EPA could provide Congress and the public with accurate  information about the schedules for completing the registration reviews,  thereby increasing understanding of EPA\u2019s progress toward meeting the  October 2022 deadline for completing all registration reviews. As required by FIFRA as amended by PRIA and subsequent legislation,  EPA\u2019s PRIA implementation reports contain data on the number of cases  opened and closed in a particular fiscal year and cumulatively since the  start of registration review in 2007. EPA has reported on its website that it  expects to open 70 or more new registration review dockets annually  through fiscal year 2017.",
      " Although the reports do not estimate the number  of reviews EPA expects to close each year as it moves toward the 2022  deadline, the agency wrote in its fiscal year 2014 PRIA implementation  report that it continued to open dockets for new registration review cases  at the pace that must be maintained in order to finish reviews in 2022.  EPA has estimated that the average time it will take to complete a  registration review is about 6 years and that the agency has completed an  average of less than 20 per year. However, the new risk assessment  guidance for bees may increase the average time needed for reviews,",
      "  raising questions about EPA\u2019s ability to complete its registration reviews  by 2022. EPA officials said that they are planning to assign additional  agency staff to work on these registration reviews. Conclusions USDA and EPA have taken numerous actions to protect the health of  honey bees and other species of bees, thereby supporting agriculture and  the environment. Even with these efforts, honey beekeepers continue to  report rates of colony losses that they say are not economically  sustainable. Although data on the size of nonhoney bee populations  (other managed bees and wild, native bees) are lacking, there is concern  that these bee species also need additional protection.",
      " Finding solutions  to address the wide range of factors that may affect bee health, including  pests, disease, reduced habitat and forage, and pesticide exposure, will  be a complex undertaking that may take many years and require  advances in science and changes in agricultural and land use practices. Monitoring honey bees and other bee species is critical to understanding  their population status and threats to their health. The task force\u2019s  research action plan on bees and other pollinators identified monitoring of  wild, native bees as a priority and directed agencies in USDA and the  Department of the Interior to take leading and supporting roles. However,  the research action plan did not establish a mechanism,",
      " such as a  monitoring plan, that would establish participating agencies\u2019 roles and  responsibilities, establish common outcomes and goals, and obtain input  from states and other stakeholders on native bees. By working with other  key agency stakeholders, USDA can help agencies understand their  respective roles, focus on the same goals and outcomes, and better  solicit input from external stakeholders. The task force\u2019s strategy also includes a plan for extensive research on  issues important to honey bees; other managed bees; wild, native bees;  and other pollinators. USDA\u2019s ARS and NIFA have funded and continue  to fund research on these three categories of bees.",
      " While the ability to  identify research projects by bee category is key to tracking projects  conducted to implement the task force\u2019s research action plan, USDA\u2019s  CRIS database does not currently reflect these categories. This limitation  hinders users\u2019 ability to search for or track completed and ongoing bee  research. Updating the CRIS database to include the three bee  categories would increase the accessibility and availability of information  about USDA-funded research on all bees. In addition, the task force\u2019s strategy established a governmentwide goal  of restoring and enhancing 7 million acres of habitat for bees and other  pollinators. USDA\u2019s NRCS and FSA are supporting efforts to improve  habitat to help meet the strategy\u2019s goal.",
      " It is not yet clear, however, how  the agencies will determine which acres count toward this goal because  USDA cannot currently track all acres on which conservation practices  have restored or enhanced bee habitat as part of the effort to achieve the  strategy\u2019s goal. Without an improved method, USDA cannot accurately  measure its contribution to the strategy\u2019s goal. In addition, NRCS, which  provides technical assistance to landowners implementing conservation  practices, has conducted limited evaluation of the effectiveness of those  efforts. NRCS\u2019s National Planning Procedures Handbook calls for the  agency to evaluate its conservation practices, including the technical  assistance provided to landowners.",
      " According to one evaluation, agency  staff need additional expertise to effectively advise landowners on how to  conserve pollinator habitat. However, NRCS has not evaluated which  locations have gaps or identified methods for filling the gaps. Such  methods could include providing additional training or time to conduct  technical assistance through which staff can learn which practices are  working and which are not. By increasing the evaluation of its habitat  conservation efforts to include identifying gaps in expertise and technical  assistance, USDA could better ensure the effectiveness of its efforts to  restore and enhance bee habitat plantings across the nation. Moreover, EPA has expanded its assessment of pesticides for their risks  to honey bees.",
      " EPA generally uses data on pesticides\u2019 risks to honey  bees as a surrogate for risks to nonhoney bee species but stated that  having data on those species would help meet the goal of protecting bee  diversity. The task force\u2019s research action plan calls for EPA to develop  tools for assessing risks to a variety of bee species, including nonhoney  bee species, such as other managed or wild, native bees. EPA is  collaborating with international counterparts to develop standardized  guidelines for how to study the effects of pesticides on other bee species.  FIFRA authorizes EPA to require pesticide registrants to submit data from  tests on nonhoney bee species using methods that meet EPA\u2019s approval.",
      "  By developing a plan for obtaining data from pesticide registrants on  pesticides\u2019 effects on nonhoney bee species until the standardized  guidelines are developed, EPA could increase its confidence that it is  reducing the risk of unreasonable harm to these important pollinators. Furthermore, EPA does not assess the risks that mixtures of pesticides  and other chemicals may pose to bees. Depending on the chemicals  involved, a mixture may pose a greater risk to bees than the sum of the  risks from exposure to individual pesticides. The task force\u2019s research  action plan generally called for research on the effects mixtures of  pesticides can have on bees and,",
      " in particular, directed EPA to develop  appropriate assessment tools for sublethal effects of pesticides,  adjuvants, and combinations of pesticides with other products on the  health of managed and wild pollinators. However, EPA does not have  data on commonly used mixtures and does not know how it would identify  them. By identifying the mixtures that farmers and pesticide applicators  most commonly use on agricultural crops, EPA would have greater  assurance that it could assess those mixtures to determine whether they  pose greater risks than the sum of the risks posed by the individual  pesticides and, if appropriate, take regulatory action.",
      " As directed by FIFRA, EPA began a review of all pesticide active  ingredients registered as of October 1, 2007, in fiscal year 2007 and is  required to complete it by October 2022. EPA\u2019s review has been affected  by the changes to its risk assessment process that call for pesticide  registrants to submit additional bee-related data for some pesticides. As a  result, the agency\u2019s posted schedules for reviewing the registration of  pesticides may be inaccurate because the schedules do not reflect  requests for additional data. However, EPA has not posted revised  schedules. Accurate information about the agency\u2019s estimated schedule  would help Congress and the public better understand EPA\u2019s progress  toward meeting the October 2022 deadline for completing all registration  reviews.",
      " Recommendations for  Executive Action We are making four recommendations to the Secretary of Agriculture and  three recommendations to the Administrator of EPA. To improve the effectiveness of federal efforts to monitor wild, native bee  populations, we recommend that the Secretary of Agriculture, as a co- chair of the White House Pollinator Health Task Force, coordinate with  other Task Force agencies that have monitoring responsibilities to  develop a mechanism, such as a federal monitoring plan, that would (1)  establish roles and responsibilities of lead and support agencies, (2)  establish shared outcomes and goals, and (3) obtain input from relevant  stakeholders, such as states.",
      " To increase the accessibility and availability of information about USDA- funded research and outreach on bees, we recommend that the  Secretary of Agriculture update the categories of bees in the Current  Research Information System to reflect the categories of bees identified  in the White House Pollinator Health Task Force\u2019s research action plan. To measure their contribution to the White House Pollinator Health Task  Force strategy\u2019s goal to restore and enhance 7 million acres of pollinator  habitat, we recommend that the Secretary of Agriculture direct the  Administrators of FSA and NRCS to develop an improved method, within  available resources, to track conservation program acres that contribute  to the goal.",
      " To better ensure the effectiveness of USDA\u2019s bee habitat conservation  efforts, we recommend that the Secretary of Agriculture direct the  Administrators of FSA and NRCS to, within available resources, increase  evaluation of the effectiveness of their efforts to restore and enhance bee  habitat plantings across the nation, including identifying gaps in expertise  and technical assistance funding available to field offices. To better ensure that EPA is reducing the risk of unreasonable harm to  important pollinators, we recommend that the Administrator of EPA direct  the Office of Pesticide Programs to develop a plan for obtaining data from  pesticide registrants on the effects of pesticides on nonhoney bee  species,",
      " including other managed or wild, native bees. To help comply with the directive in the White House Pollinator Health  Task Force\u2019s strategy, we recommend that the Administrator of EPA  direct the Office of Pesticide Programs to identify the pesticide tank  mixtures that farmers and pesticide applicators most commonly use on  agricultural crops to help determine whether those mixtures pose greater  risks than the sum of the risks posed by the individual pesticides. To provide Congress and the public with accurate information about the  schedules for completing the registration reviews for existing pesticides  required under FIFRA, we recommend that the Administrator of EPA  disclose in its PRIA implementation reports,",
      " or through another method of  its choosing, which registration reviews have potentially inaccurate  schedules and when it expects those reviews to be completed. Agency Comments  and Our Evaluation We provided a draft of this report to USDA and EPA for review and  comment. USDA and EPA provided written comments on the draft, which  are presented in appendixes IV and V, respectively. In its written  comments, USDA said that it agreed, in large part, with the four  recommendations relevant to the department in the draft report and that  progress with regard to the recommendations would improve protection  for pollinators, especially bees. In its written comments, EPA said that it  agreed with the three recommendations relevant to the agency in the  draft report and that it has actions under way to implement the three  recommendations.",
      " In its written comments, USDA described actions it has taken or could  take to implement our first recommendation that the Secretary of  Agriculture, as a co-chair of the White House Pollinator Health Task  Force, coordinate with other task force agencies that have monitoring  responsibilities to develop a mechanism, such as a federal monitoring  plan, that would (1) establish roles and responsibilities of lead and  support agencies, (2) establish shared outcomes and goals, and (3)  obtain input from relevant stakeholders, such as states. USDA noted that  while it would be impossible to monitor all of the approximately 4,000  species of bees in North America,",
      " it would be informative for agencies to  survey changes in the distributions of a common set of sentinel, or  indicator, bee species. The agency also described some of the monitoring  methods that it plans to use or that could be used by USDA, the  Department of the Interior, and other collaborators. In doing so, USDA  noted that identifying native bee species can be very difficult (even to  those trained in biology and museum curators) and that possible  remedies will be explored, including the development of a universal field  guide or apps that would facilitate bee identification efforts. USDA also described steps that it plans to take to implement our second  recommendation that the Secretary of Agriculture update the categories  of bees in CRIS to reflect categories of bees identified in the White House  Task Force\u2019s research action plan.",
      " USDA states that the discrepancy  between the government-wide effort and current classifications needs to  be reconciled to capture efforts of research, education, and extension  projects as they work to address threats to bee health. While USDA  states that the CRIS categories can be changed relatively quickly, it also  states that the efficacy of the changes varies, depending on whether they  are made for historical project data or for future project reports. USDA  describes the additional staff time needed to analyze and recode projects  manually in CRIS and that adding new classifications would affect current  projects and would require analysis to determine if changes will affect  trend reporting of the budget.",
      " USDA also states that a strategy will be  needed to increase awareness of the new classifications for project  directors and other scientists who may choose to change to the more  specific bee classifications for their projects. The agency then describes  the process by which changes are made to research classifications in  CRIS, saying that if the CRIS Classification Board approves changes to  CRIS when it meets in the spring of 2016, NIFA would address relevant  changes at that time. USDA generally agreed with our third recommendation that the Secretary  of Agriculture direct the Administrators of FSA and NRCS to develop an  improved method, within available resources,",
      " to track conservation  program acres that contribute to the goal of restoring and enhancing  habitat for pollinators. USDA said that since November 2015, FSA has  had a method for estimating acres of pollinator habitat associated with  Conservation Reserve Program practices. In addition, according to  USDA, NRCS is exploring options to develop a method for tracking acres  on which conservation practices are planned and applied to benefit  pollinators. USDA generally agreed with our fourth recommendation that the  Secretary of Agriculture direct the Administrators of FSA and NRCS to,  within available resources, increase evaluation of the effectiveness of  their efforts to restore and enhance bee habitat plantings across the  nation,",
      " including gaps in expertise and technical assistance funding  available to field offices. USDA said that it would expand and deepen its  studies on the impact of conservation cover on honey bee and other  pollinator health, diversity, and abundance as its budget allows. EPA agreed with our first recommendation that the Office of Pesticide  Programs develop a plan for obtaining data from pesticide registrants on  the effects of pesticides on nonhoney bee species, including other  managed or wild, native bees. In addition, EPA described actions that it is  taking in collaboration with other parties to develop methods for testing  the effects of pesticides on nonhoney bee species.",
      " We also noted many  of these actions in the report. EPA agreed with our second recommendation that the Office of Pesticide  Programs identify pesticide mixtures that farmers and pesticide  applicators most commonly use on agricultural crops to help determine  whether those mixtures pose greater risks than the sum of the risks  posed by the individual pesticides. EPA noted that there is opportunity to  identify some commonly used tank mixtures. At the same time, EPA  commented on our use of the term \u201cunregistered mixtures.\u201d In our draft  report, we intended for the term \u201cunregistered mixtures\u201d to mean  combinations of registered pesticides that EPA has not registered for use  in combination.",
      " However, we agree with EPA that the term \u201cunregistered  mixtures\u201d might cause confusion and revised the draft, replacing that term  with the term \u201ctank mixtures.\u201d EPA agreed with our third recommendation that the agency provide  Congress and the public with accurate information about the schedules  for completing the registration reviews for existing pesticides required  under FIFRA. However, rather than agreeing to disclose this information  in its PRIA implementation reports, EPA committed to creating a public  website containing this information by April 2016. We agree that a public  website could be a suitable method for accomplishing the intent of our  recommendation.",
      " USDA and EPA also provided technical comments, which we  incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of Agriculture, the Administrator  of EPA, and other interested parties. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please  contact me at (202) 512-3841 or morriss@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 who made key contributions to this  report are listed in appendix VI. Appendix I: Objectives, Scope, and  Methodology This report examines (1) the bee-related monitoring, research and  information dissemination, and conservation efforts of selected U.S  Department of Agriculture (USDA) agencies and (2) the Environmental  Protection Agency\u2019s (EPA) efforts to protect bees through its regulation of  pesticides. To examine USDA\u2019s monitoring, research and outreach, and conservation  efforts with respect to bees,",
      " we focused on the National Agricultural  Statistics Service (NASS), which surveys honey beekeepers; the  Agricultural Research Service (ARS) and National Institute of Food and  Agriculture (NIFA), which are the two largest USDA research agencies;  and the Natural Resources Conservation Service (NRCS) and Farm  Service Agency (FSA), which oversee conservation programs. To  examine bee monitoring activities, we analyzed the methodology that  NASS and the Bee Informed Partnership are using for their monitoring  efforts related to their surveys of honey bee colony losses. We also  reviewed the White House Task Force plans for wild, native bee  monitoring by a variety of federal agencies to determine whether a means  of federal coordination had been established.",
      " We also reviewed our prior  body of work on interagency collaboration, as agencies within USDA  carry out work related to bee monitoring in conjunction with other  agencies; from that work, we selected practices that were related to  challenges that we or agency officials identified and used the practices to  assess interagency collaboration at USDA concerning bee monitoring. In  addition, we reviewed ARS and NIFA documents related to monitoring  projects and interviewed ARS and U.S. Geological Survey officials and  university researchers participating in monitoring projects. To examine bee-related research and outreach, we analyzed USDA  project funding data for ARS and NIFA for fiscal years 2008 through 2015  and for fiscal years 2008 through 2014,",
      " respectively, to identify the types  of bees addressed by the projects. We selected fiscal year 2008 as the  starting point to reflect 2008 Farm Bill initiatives; data from fiscal years  2015 and 2014 were the most recent data available for ARS and NIFA,  respectively. We evaluated the reliability of these data by comparing  agency-provided data with data found in USDA\u2019s website for its Current  Research Information System (CRIS) and reviewing the agencies\u2019  management controls to ensure the data\u2019s reliability. We determined that  the data are sufficiently reliable for the purposes of this report. We also  reviewed how ARS and NIFA categorize research data in USDA\u2019s CRIS  database and compared the CRIS categories to those used in the task  force strategy and research action plan.",
      " We interviewed ARS and NIFA  officials in headquarters and in three bee laboratories regarding research  and outreach projects being conducted and the usefulness of the CRIS  bee categories. To examine bee-related activities in two key USDA agencies with  conservation programs, we collected data from NRCS and FSA on bee  habitat acres established in 2014 and 2015 for two honey bee initiatives  and associated agency funding. We evaluated the reliability of these data  by reviewing the agencies\u2019 management controls for the systems  maintaining the data to ensure the data were sufficiently reliable for the  purposes of this report. We also reviewed NRCS and FSA guidance and  other documents on bee habitat,",
      " as well as evaluations of the NRCS  technical assistance efforts. In particular, we reviewed an evaluation by  the Pollinator Partnership of NRCS\u2019s technical assistance efforts and  examined the agency\u2019s response to conclusions about the level of bee  habitat conservation expertise within the agency. We interviewed FSA  and NRCS officials to discuss strengths and weaknesses of their  pollinator habitat efforts, particularly related to evaluation and technical  assistance. To examine EPA\u2019s efforts to protect bees, we gathered information on its  regulation of pesticides under the Federal Insecticide, Fungicide, and  Rodenticide Act (FIFRA). In particular,",
      " we obtained documents from, and  conducted interviews with, officials in EPA\u2019s Office of Pesticide Programs  (OPP). OPP carries out EPA\u2019s responsibilities for regulating the  manufacture and use of all pesticides (including insecticides, herbicides,  rodenticides, disinfectants, sanitizers, and more) in the United States.  Specifically, we reviewed EPA\u2019s decisions in 2014 to modify the labels of  pesticide products containing neonicotinoid active ingredients. We also  reviewed EPA\u2019s 2015 proposal to modify the labels of pesticides the  agency has determined to be acutely toxic to bees. We also gathered  information about pesticides that have been associated with bee kill  incidents from 1974 through 2014,",
      " as indicated by reports in EPA\u2019s  Ecological Incident Information System (EIIS). To assess the reliability of  the EIIS data, we discussed with EPA officials the methods by which the  agency collects and assesses the EIIS data and determined that, while  they had limitations, they were sufficiently reliable for the purpose of  identifying pesticides potentially associated with bee kills. Furthermore,  we reviewed documents and interviewed agency officials regarding EPA\u2019s  efforts to encourage states to develop voluntary \u201cmanaged pollinator  protection plans.\u201d In addition, we reviewed the agency\u2019s 2011 interim and 2014 final  guidance for assessing the risks that pesticides pose to bees and  examined how the agency has applied the new guidance to particular  pesticides.",
      " We also reviewed an EPA \u201cWhite Paper\u201d on risk assessment  the agency submitted to the FIFRA Scientific Advisory Panel for  comment, as well as the panel response. To learn more about how the  agency has used its 2014 risk assessment guidance when reviewing the  registration of existing pesticides, we selected 10 pesticides shown by  EPA\u2019s EIIS database to be associated with bee kills. When EPA receives  reports of bee kill incidents, according to agency officials, it considers the  evidence provided and categorizes the likelihood that a specific pesticide  was associated with the bee kill as highly probable, probable, possible,  unlikely,",
      " or unrelated. We assigned to those certainties a score of 4, 3, 2,  1, or 0, respectively, and multiplied the number of incidents for each  pesticide by the certainty score. Using the product of those calculations,  we identified the 10 pesticides associated with the largest number of bee  kill incidents and weighted by EPA\u2019s degree of certainty. The 10  pesticides, in alphabetical order, are amitraz, carbaryl, chlorpyrifos,  clothianidin, coumaphos, imidacloprid, malathion, methyl parathion,",
      "  parathion, and thiamethoxam. However, 2 of the pesticides, parathion  and methyl parathion, have been cancelled by their registrants and,  therefore, are no longer subject to EPA\u2019s registration review process. For  the remaining 8 pesticides, we reviewed EPA\u2019s final work plans and other  documents related to the agency\u2019s registration review process and  interviewed agency officials to determine what effect the new risk  assessment guidance had on the registration review process. We reviewed data and interviewed agency officials about the status of  EPA\u2019s pesticide registration and registration review programs. The data  included the number of pesticide \u201ccases\u201d for which EPA had started the  registration review process from the beginning of fiscal year 2007 through  the end of fiscal year 2015,",
      " the number of cases with final work plans  completed, and the number of case reviews that EPA has completed. We  selected these time frames because EPA began the registration review  process required by FIFRA in fiscal year 2007, and the most recent data  available from the agency were through the end of fiscal year 2015. To  assess the reliability of the data on registration reviews provided directly  to us by EPA\u2019s OPP, we compared them to data in EPA implementation  reports to Congress required by FIFRA and found them sufficiently  reliable for our reporting purposes. To address both objectives, we gathered stakeholders\u2019 views on what  efforts,",
      " if any, USDA and EPA could take to protect bee health.  Specifically, we interviewed stakeholders from the following types of  organizations or entities: general farming, including conventional and  organic farming; commodity farmers whose crops are pollinated by  managed bees; commercial beekeepers; pesticide manufacturers; state  governments; universities; and conservation/environmental protection.  We developed a list of candidate stakeholders by asking for suggestions  from knowledgeable federal officials and others knowledgeable about bee  health and through our review of relevant literature. USDA and EPA  officials reviewed our list of candidate stakeholders and made  suggestions. We also obtained advice from a member of the National  Academy of Sciences with extensive experience on bee and pollinator  research about how to achieve a balanced list of stakeholders with varied  expertise and knowledge.",
      " Appendix II presents a summary of  stakeholders\u2019 views on USDA and EPA efforts to protect bees. We conducted 35 interviews with stakeholders. A total of 50 individuals  participated in the interviews because, in some instances, more than one  person represented a stakeholder organization. See appendix III for the  names of the individuals we interviewed, their title, affiliation, and type of  stakeholder organization. To ensure we asked consistent questions among all the identified  stakeholders, we developed an interview instrument that included  questions about the stakeholders\u2019 expertise and experience regarding  bees, their knowledge of relevant USDA and EPA activities to protect bee  health, and their views on suggestions for efforts,",
      " if any, (1) USDA\u2019s ARS,  NIFA, or NRCS should make with regard to bee-related research and  information dissemination; (2) other USDA agencies should make to  protect bee health; or (3) EPA should make to protect bee health. With  the exception of the university research scientists, the stakeholders  represented their organizations\u2019 views. After completing the interviews,  we conducted a content analysis of the stakeholders\u2019 responses, whereby  we organized their comments into relevant categories. Because we used  a nonprobability sample of stakeholders, their views cannot be  generalized to all such stakeholder organizations but can be illustrative.",
      " In  addition, the views expressed by the stakeholders do not represent the  views of GAO. Further, we did not assess the validity of the stakeholders\u2019  views on what efforts USDA and EPA should make to protect bee health. We conducted this performance audit from October 2014 to February  2016 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.",
      " Appendix II: Stakeholders\u2019 Views on Efforts  USDA and EPA Should Make to Further  Protect Bees This appendix presents stakeholders\u2019 views regarding suggested efforts  the U.S. Department of Agriculture (USDA) and Environmental Protection  Agency (EPA) should make to further protect bee health. Stakeholders  provided these views in interviews. Specifically, we interviewed a  nonprobability sample of stakeholders from 35 of the following types of  organizations or entities: general farming, including conventional and  organic farming; commodity farmers whose crops are pollinated by  managed bees; commercial beekeeping; pesticide manufacturing; state  government; university research;",
      " and conservation/environmental  protection. In our interviews, we asked stakeholders for their familiarity with agency  efforts to protect bee health as well as for their views on suggestions for  any efforts the agencies should make to further protect bee health. The  information in table 1 provides a summary of stakeholders\u2019 views on  commonly-cited topics and indicates the types of stakeholder groups that  expressed those views. Appendix III: Bee Health Stakeholders We  Interviewed Name of stakeholder  Laurie Davies Adams The IPM Institute of North  America, Inc. Assistant Extension/Research  Professor of Entomology   Commercial Director of Beeologics  Monsanto Company  Project Apis m.",
      " Name of stakeholder  Dudley Hoskins Assistant Professor of Entomology  University of Maryland  Board Member and Past President  Western Alfalfa Seed Growers  Project Apis m. Appendix IV: Comments from the  Department of Agriculture Appendix V: Comments from the  Environmental Protection Agency Appendix VI: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the individual named above, Anne K. Johnson, (Assistant  Director), Kevin Bray, Ross Campbell, John Delicath, Ashley Hess,  Meredith Lilley, Beverly Peterson, and Leigh White made key  contributions to this report. Barbara El Osta,",
      " Karen Howard, Ying Long,  Perry Lusk, Jr, Anne Rhodes-Kline, Dan Royer, Kiki Theodoropoulos, and  Walter Vance also made important contributions to this report.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 94,
    "question": null,
    "answer": "In recent years, the United States and other countries have expressed considerable concernthat China's national currency (the yuan or renminbi) is seriously undervalued. Some analysts saythe yuan needs to rise by as much as 40% in order to reflect its equilibrium value. Critics say thatChina's undervalued currency provides it with an unfair trade advantage that has seriously injuredthe manufacturing sector in the United States. Chinese officials counter that they have not peggedthe yuan to the dollar in order to gain trade advantages. Rather, they say the fixed rate promoteseconomic stability that is vital for the functioning of its domestic economy.  On July 21, 2005, China announced a new foreign exchange system which is intended toallow more flexibility and to permit the international value of the yuan to be established by marketforces. The yuan was increased in value by 2% and a \"managed float\" was introduced. However,the value of the yuan has changed little since then. Despite the publication of many studies, scholarsdo not agree whether or by what percent the yuan is undervalued. The wide range of estimatessuggests that there is no reason to believe that any particular figure is correct. It is not clear that theU.S. trade deficit would be lower or U.S. manufacturers would benefit if China raised the value ofthe yuan. In the short run, U.S. producers might be able to sell higher-priced products to U.S.consumers if the inflow of Chinese goods were reduced. In the long run, though, as long as the United States is a net importer of capital, it would have a trade deficit and other countries wouldultimately replace China as suppliers of low-cost goods to the U.S. market. The Treasury Department has strongly urged China in recent years to adopt procedures thatwould allow the yuan to rise in value. Congress is considering legislation that would penalize Chinaif its currency is not revalued. The United States has pursued the yuan-dollar exchange rate issueas a bilateral U.S.-China issue. Other countries are also affected by the presumably undervaluedyuan -- some more than the U.S. -- but they have allowed the United States to take the lead. There are at least five ways the United States could deal with the yuan exchange rate issue. Some of these would involve other countries more explicitly in the process. First, the UnitedStates could continue pressing China publicly to raise the value of the yuan on the assumption thatchange will not occur without foreign pressure. Second, it could stop pressing China publicly, on theexpectation that China might move more rapidly towards reform if it is not pressured. Third, theUnited States could restrict imports from China pending action to revalue the yuan. Fourth, the U.S.could ask the IMF to declare that China is manipulating its currency in violation of IMF rules. Fifth,the United States could refer the issue to the World Trade Organization (WTO), asserting that theUnited States has been injured by unfair trade practices linked to the undervaluation of China'scurrency. The WTO, in turn, could authorize trade remedies (tariffs on Chinese goods, for example)aimed at correcting this abuse. This report will be updated as new developments arise. \n",
    "docs": [
      "Scope and Content Overview In recent years, there has been growing concern in the United States and elsewhere that Chinamay be manipulating the value of its currency to gain unfair trade advantages. Many believe thatChina's national currency, the yuan or renminbi (RMB), may be seriously undervalued compared tothe dollar and other major currencies. (1) The United States and other countries have urged China to raisethe value of its currency. Chinese officials say they want to make their exchange rate system moreflexible, but they say China also needs long-term stability in its currency value in order to avoidinternal dislocations. Discussion of this question has taken place at the International Monetary Fund(IMF)",
      " and at other multilateral fora such as the periodic meetings of the G-8 (the seven largestindustrial countries plus Russia.) The United States and other countries have also spoken directlyto China on a bilateral basis about this issue.  The key issue is what -- if the yuan is undervalued -- China and the world should do aboutit. China is undergoing a major shift from a state-dominated to a market-based economy. It haspursued a policy of export-led growth in order to generate the employment and income necessaryto facilitate change in the overall structure of its economy. It has priced its currency in order tofacilitate that policy.",
      " In July 2005, China adopted reforms aimed at giving market forces a possible role in thevaluation of the yuan. Most observers say the initial changes (a 2% rise in value) were too small andthey note that little change has occurred since. Chinese officials retain firm control over themechanisms which produce the yuan-dollar exchange rate and the criteria they use in this processremain opaque. International discussions have sought to persuade China to accelerate the process but-- while the concerns of other countries may bear weight in the thinking of Chinese officials -- thereare no effective \"teeth\" in the International Monetary Fund that could compel China to change itspolicies and procedures more rapidly than it wishes to do so.",
      " Many in the United States believe that the large volume of Chinese exports to the UnitedStates is damaging the U.S. manufacturing sector and feeding the U.S. trade deficit. They believethat the undervalued yuan is an important reason why China is able to price its goods socompetitively and why production in many areas is shifting to China. Other analysts believe that --by virtue of its undervalued currency -- China is damaging the world trading system and denyingexport opportunities to other countries whose currencies are more fairly priced. Congress isconsidering legislation which would place countervailing duties or special tariffs on Chinese goodsentering the U.S.",
      " in order to offset the trade benefits China presumably gains from its presentexchange rate policies.  This Report in Four Parts Events and Issues. This report has four parts. The first part discusses the issues and events surrounding the yuan-dollar controversy. It describesthe actions which Chinese authorities have taken to revalue the yuan and, arguably, to lay thegroundwork for a larger future role for market forces in its valuation. It also describes the methodsthe Chinese authorities have used and still use to hold the value of the yuan at the level they prefer. This section discusses the efforts the International Monetary Fund, the U.S. Government and othergovernments have made to encourage or press China to revalue its currency.",
      " It also reviews the U.S.Treasury Department's discussion of China in its semi-annual report on currency manipulation andlegislation currently pending in Congress which would levy special duties on Chinese goods if theyuan is not increased considerably in value. Five Questions which Frame the Controversy. The second part of this report looks at five central questions. First, is the yuan undervalued and,if so, by how much? This question may be harder to answer than many people assume. Mosteconomists agree the yuan is undervalued, but the 17 studies reviewed in this report show widelydifferent conclusions. Some say the yuan is slightly overvalued,",
      " others say it is 15% or 25% orperhaps 49% undervalued, while several say it is impossible to make an accurate computation. Thedata are poor, China is changing rapidly, and scholars use different assumptions in their studies. Moreover, new economic data published in December 2005 seem to render all previous studiesobsolete, as they give a very different picture of the Chinese economy than was available before. Inrecent studies, IMF experts say the yuan is undervalued but they also say it is impossible to knowhow large the distortion might be. The IMF also says that it is impossible to separate the tradeeffects of that distortion from the other factors (labor costs,",
      " productivity, etc.) which also affect theprice of Chinese goods. Without some objective way of determining what the \"real\" value of the yuan might be, itmay be difficult for China and other countries to agree what size increase is \"enough.\" Likewise,without knowing the proper rate, it might be difficult to design special U.S. tariffs which the worldwould consider fair and compensatory rather than arbitrary or punitive. It might be helpful if China,the United States and other countries could agree on criteria by which to decide how an appropriateexchange rate for the dollar and yuan might be determined.  Second, does China manipulate the value of the yuan?",
      " The IMF rules state that countriesmay not manipulate the value of their currency in order to gain unfair trade advantage. The secondsection of this report examines China's behavior in light of the five standards the IMF uses to judgewhether manipulation is taking place. The IMF has not publicly declared that China is manipulatingits currency. China's actions seem to meet four of the IMF's criteria in this regard. The IMF has noevident means other than persuasion to make countries comply with its rules. In this context, it isnot clear that an IMF announcement that China was violating its rules would help or hinder thecurrent discussions aimed at persuading China to raise the value of the yuan.",
      "  Third, how fast could China revalue the yuan if it wanted to? Theoretically, the People'sBank of China could raise the exchange value of the yuan to any specified level overnight. However, Chinese officials are concerned about the growth and employment effects any change in the valueof the yuan may have on their economy. A too-rapid increase might have serious negative effectson employment, output and growth. Some also worry that \"hot money\" could complicate the processof revaluation and may require China to delay any changes until the perceived speculative pressureabates. Many experts believe that a gradual and measured approach to currency revaluation isappropriate for China.",
      " The IMF says, for example, that emerging market countries generally do nothandle rapid and large exchange rate movements well and that serious dislocations can occur. Othersbelieve, however, that basic fairness to other countries requires China to raise the value of itscurrency. Some analysts believe China could suffer serious damage to its economy if it does notchange is economic strategy. Its heavy reliance on export-led growth makes it vulnerable, forexample, to a slowdown in world demand. Higher currency values would stimulate growth of itsdomestic economy.  Fourth, has China \"cooked the books\" in terms of its trade surplus? Some analystsbelieve that China's actual net income from trade is many times larger than that which China'spublishes in its official trade statistics.",
      " Data published by the IMF show that, while China reportsthat it had a net trade surplus of $41 billion in 2004, its trading partners report that they had acombined trade deficit of $267 billion with China. Some people say that a trade surplus this largeis proof that China's currency is substantially undervalued.  Others would ask, however, where -- if China is accruing an extra $200 billion annually intrade income beyond the amounts accounted for in its balance of payments figures -- that moneymight be. It might be hard, for example, for China to hide all this additional income year after yearin secret undeclared foreign exchange reserves without somebody discovering that it exists.",
      "  Trade data for other countries also show (though on a smaller scale) this same mismatchbetween the amount reported by exporter countries and the amounts reported by those who importtheir products. Bad data collection by individual countries and methodological problems in thereporting system seem to be better explanations for these discrepancies than is the uniform prospectthat exporters fudge their data while importers report their incoming trade data correctly.  Fifth, would the U.S. economy benefit if China revalued the yuan? Correcting theinternational value of the yuan may improve the efficiency of international trade. But will it reducethe U.S. trade deficit and strengthen the U.S.",
      " manufacturing sector? Most economists believe not. The U.S. and Chinese economies have become increasingly interdependent in recent years. Chinais pursuing a policy of export-led growth and the United States provides a ready market for its goods. Meanwhile, the United States imports large quantities of capital from abroad (by borrowing or byopening its economy to foreign investment) and -- in order (more money chasing the same quantityof goods) to avoid turning that imported money into inflation -- it must also import goods andservices for the imported money to buy. If China raised the value of the yuan, its exports to theUnited States would likely shrink and the amount of money it could place in the U.S.",
      " economywould decline.  Multinational firms based in the United States are a major presence in the Chinese economyand a large share of China's exports to the United States are produced by or mediated through thosefirms. For them, the undervalued yuan provides major benefits because it keeps down theirproduction costs and it enables them to produce things which might be too costly to produce in theUnited States. U.S. consumers who purchase the output from these facilities in China are able to getmore product at a lower cost than they would be able to get if the products were produceddomestically or if the value of the yuan were higher.",
      " These firms say they need to produce someof their output in low-cost places such as China and they would move their facilities elsewhere (butnot back to the United States) if China were no longer available to them.  On the other hand, many U.S.-based small and medium size enterprises cannot or wish notto move their operations abroad. For them, the undervalued yuan is a major threat to theircommercial viability and their bottom line. To compete with goods produced in China, they mustreduce their costs (perhaps by economizing on labor or lowering their profit margins), find non-pricebased reasons for consumers to prefer their products to those produced abroad,",
      " merge some of theiroperations with similarly affected domestic firms, or seek some type of political remedy to shieldthem from the foreign competition.  Temporarily, if exports from China were restricted because of trade legislation, U.S.producers might be able to take over some of the market (albeit at higher prices) previously suppliedby China. From a longer perspective, though, it is likely that multinational firms would shift muchof their production to other low-cost countries and these would ramp up their exports in order tosupply the U.S. market previously supplied by Chinese goods. The inflow of foreign goods mightdecline and U.S. manufactured goods might be more competitive in U.S.",
      " and foreign markets if theU.S. savings rate increased, the United States borrowed less and received fewer investments fromabroad, and the international value of the dollar declined. (2) However, this would require major changes in American economicbehavior which cannot be easily legislated.  It is difficult to know on a net basis whether the U.S. economy benefits or whether on a netbasis it is hurt from the low cost of products it imports from China. The interests of the large andsmall-to-medium sized firms appear to conflict and the interests of U.S. consumers seem to conflictin some ways with the interests of some U.S. producers of products which compete with Chineseexports.",
      " From an economic point of view, the profit margins realized by the Chinese exportersappear to be relatively small whereas the profit margins earned by the distributors of those productsin the United States may be higher. Meanwhile, though the data are not clear, many experts believethat on a trade-weighted basis, the U.S. producers benefit more from their exports to China thanChinese exporters do on their sales to the United States. At the same time, China's investments inthe United States provide badly needed capital which helps spur growth in the American economyat the same time that the growing volume of debt owed to foreigners increases the internationalexposure of the U.S.",
      " economy. Weighing all of these factors together in order to determine on anoverall basis whether the undervalued yuan is a benefit or burden to the U.S. economy is a difficulttask.  Three Dilemmas for China. The third section ofthis report looks at some of the monetary and financial dilemmas which affect China's views aboutexchange rate policy. First, what should China do about its foreign exchange (forex) reserves? Chinahas $819 billion in foreign exchange reserves (rough 70% in dollars). These are an important sourceof income, influence, and future spending power. However, they are also a problem.",
      " For one thing,the growth in China's forex reserves fuels domestic inflation. For every dollar the People's Bank ofChina buys (to hold down the value of the yuan and to increase its reserves), it injects 8 yuan intoChina's economy. China's reserves grew by $100 billion in 2005, so this is a lot of new \"printingpress\" money. The central bank has tried with limited success to bottle up the inflationary effect ofthis money with public debt transactions and tight monetary policy. If China raised the value of theyuan, the growth in its foreign exchange reserves would slow or stop and -- if it relaxed its monetarypolicy -- the growth and reform prospects of its internal economy might be enhanced.",
      "  On the other hand, revaluation would cost China a great deal of money. If the yuan increasedin value by 20%, the purchasing power of China's foreign reserves would go down corresponding. It would lose, from China's perspective, about 1.3 trillion yuan (about $200 billion) in purchasingpower. If China began withdrawing assets from the U.S. market and converting them to othercurrencies, in order to reduce its exposure, it would lose money because its actions would push downthe value of the securities and the dollars it sold. When it purchased other currencies and foreignassets to replace its former U.S. holdings,",
      " it would lose money again because its actions would alsopush up their prices. Chinese officials may want to reduce the inflationary pressure which comesfrom growth in their foreign exchange reserves but they may not be happy about the prospect ofmajor financial losses if they revalue or if they move their current assets elsewhere. Second, where is the money coming from that fuels those growing reserves? Many peoplebelieve that exports and incoming foreign investment account for most of the increase in China'sforeign exchange reserves. Some suggest, however, that \"hot money\" -- speculative inflows offoreign funds seeking to profit from revaluation of the yuan -- may account for most of the growthin China's reserves.",
      "  Depending on the source of the money, the policy implications for China are very different. If trade and investment are the main source of the funds, then -- if Chinese officials want to slow thegrowth in reserves -- they should raise the value of the yuan. However, if speculative inflows arethe primary source, then China's policy choices are more difficult. A large quick revaluation wouldstop the speculative pressure but it might also damage China's economy. Gradual increases wouldallow the Chinese economy to adjust but it might also encourage speculators to bring more moneyinto China in hopes of profiting as the currency goes up in value. A refusal to consider any changein the value might discourage the speculators over a long period of time.",
      " But if the status quoprevailed during that period, this would also make China's trading partners angry and give themreasons to doubt whether Chinese officials are sincere when they say they want to revalue the yuan.  Third, would revaluation strengthen or weaken China's banking system? China's banksare riddled with bad debt and their competitiveness weakened by years of state control. If the yuanwere increased in value, would the shock cause Chinese banks to strengthen their procedures orwould it put the system at risk? A change in exchange rates which weakened the export sectorwithout simultaneously stimulating domestic commerce could hold bad news for China's banks. Some experts point out that Chinese banks hold only a small portion of their assets in foreigncurrencies and the government has recently established asset management companies (similar to themechanisms the U.S.",
      " Government used in the 1980s to resolve the U.S. savings and loan crisis) totake bad debt off the books of the banks. However, export-related activities account for a majorshare of the customers in China's banking system. Nevertheless, most experts agree that bad debts(non-performing assets) account for perhaps 30% of the assets of Chinese banks and they say thegovernment will need to spend hundreds of billions of dollars in yuan to recapitalize and restructurethe major banks. The IMF says that the strength of China's banking system should not be animpediment to a gradual increase in the value of the yuan. However,",
      " Chinese officials haveexpressed reservations and may not be willing to revalue the yuan very quickly until their concernsabout the impact on their national banking system have been alleviated. External pressure to revaluerapidly might be seen as an effort by foreigners to create more opportunities for their firms to buyailing Chinese banks.  Policy Options for the United States. The fourthpart of this report identifies five major options which U.S. policy-makers might consider if theywant to encourage China to revalue the yuan. They are not mutually exclusive, though it might bedifficult for some of them to be pursued simultaneously.  First, the United States could continue pressing China publicly for further changes in itsforeign exchange system,",
      " in order that the yuan's value would better reflect market conditions andeconomic realities. If Chinese reformers need outside pressure to help them persuade other officialsto consider reform, this strategy might help. Second, as a reciprocal of the first option, U.S.policy-makers might refrain from pressing China to move more quickly with its reforms. This mightbe an effective strategy if the Chinese proponents of change find that outside pressure strengthensthe hand of those resisting reform. Third, the United States could levy special tariffs on Chinese imports in an effort toencourage China to be more accommodating in their discussions with the United States about theyuan. However, such duties may violate WTO rules.",
      " Also, Chinese exporters may be able to absorbsome of the cost of the new duties. Further, if the yuan were revalued, the price of Chinese exportswould need not increase by the same rate as did the yuan. Chinese exports include a high proportionof inputs imported from other countries. The price of those inputs would not change if the yuan wentup in value. To break even, producers in China would only need to increase the price of their exportsby an amount which reflects the higher dollar-equivalent cost of Chinese-produced inputs and laborpaid in yuan. Fourth and fifth, the United States might refer the dollar-yuan controversy to the IMF or theWorld Trade Organization.",
      " As noted above, this issue has been discussed at the IMF for some time. Proposed changes in the power of the IMF might give it more authority over country exchange ratepolicies, including authority to address problems of manipulation. Whether China would be themain country affected, whether the United States and other countries would allow the IMF todetermine their exchange rates, and what impact these rule changes might have on the policies of thecountries with the world's largest economies are matters for speculation. An appeal to the WTO might be based on the grounds that China's undervalued currencyallegedly constitutes a subsidy to its export sector. The WTO can evaluate trade disputes and it canauthorize countries to levy trade penalties in order to enforce its decisions.",
      " However, it has noauthority to judge exchange rate issues. The WTO and IMF have an agreement, though, specifyingthat any exchange rate issues which arise in WTO deliberations shall be referred to the IMF and theIMF's decision shall be final. In effect, the WTO would be the enforcer if the IMF decided that acountry was manipulating its currency to gain unfair trade advantage. Issues and Events Yuan-Dollar Exchange Rate Issue The Controversy. In 1994, the People's Bank ofChina (PBC) lowered the value of its currency from 5.8 to about 8.7 yuan to the dollar. The rategradually settled by 1997 to 8.",
      "3 and was locked at that rate during the Asian financial crisis. In thepast dozen years, China's economy has grown substantially, both in size and in the level ofmodernization, and the proportion of its economy oriented towards exports has increasedconsiderably. One might expect that these changes would have had an impact as well on the relativeexchange value of China's currency, particularly its rate compared to the U.S. dollar as the UnitedStates became China's most important single export market. However, the value of the yuanremained largely unchanged during most of that period and it remained fixed at 8.3 yuan to the dollarafter 1997 as the People's Bank of China (PBC)",
      " sold yuan into the market in order to keep the yuan'svalue constant. Many argue that this constitutes manipulation. Arguments Pro and Con. Many argue that Chinais manipulating the value of its currency in order to gain unfair trade advantage. (3) They believe this has seriouslyinjured the manufacturing sector in the United States and contributed significantly to the U.S. tradedeficit.  The act of currency manipulation is often hard to see. However, the effect of manipulationon currency prices is more apparent. Critics of China's exchange rate policies argue that China'scurrency is perhaps 25% to 50% undervalued compared to the U.S.",
      " dollar. They cite various studieswhich support their view. They say the undervalued yuan adds to the U.S. trade deficit and hurtsU.S. output and employment. Many have urged the Administration to put pressure on China in orderto make it stop manipulating the yuan. They say China should either raise the value of the yuan byofficial action (\"revalue\") or let it trade freely in foreign exchange markets (\"float\") so that the freemarket can determine its real international value.  The issue of manipulation is controversial. The IMF says, in its Articles of Agreement(Article IV), that countries shall \"Avoid manipulating exchange rates or the international monetarysystem in order to prevent effective balance of payments adjustment or to gain an unfair competitiveadvantage over other members.\" (4)",
      " Member countries are supposed to comply with this requirement. In addition, the U.S. Omnibus Trade and Competitiveness Act of 1988 requires that the Secretaryof the Treasury determine whether other countries \"manipulate the rate of exchange between theircurrency and the United States dollar for the purpose of preventing effective balance of paymentsadjustments or gaining unfair competitive advantage in international trade.\" (5)  Chinese officials say they are not trying to gain unfair trade advantage with their foreignexchange policies. Rather, they are seeking economic stability. China is experiencing rapid andfar-reaching economic changes, they say. Major reforms in China's economic policies andinstitutions have taken place,",
      " in this view, but more are yet needed. The economy has grown rapidlyin the past decade, they say, but the distribution of the benefits has been uneven and the strainsbetween the needs of the old economy and the new economy are great. Meanwhile, they say, theexport sector is the engine of growth for the Chinese economy.  Chinese officials acknowledge that China's foreign exchange policies stimulate economicgrowth. However, they say, the goal is not the attainment of unfair trade advantage but rathercontinued growth in the export sector. Many Chinese export industries operate on very thin profitmargins, they report, and an increase in the value of the yuan would lead to widespread bankruptcies.",
      " China's export sector is the engine driving the growth and modernization of China's nationaleconomy. A downturn in that sector would lead to a slowdown in growth or even a decline in thenational economy as a whole. This could lead to widespread instability, they say, with potentiallyserious consequences. Thus, they believe, China's exchange rate policy is aimed at promotingstability in the country's export sector and economy as a whole. Achieving trade advantages throughundervaluation of the currency is only an instrumental means towards the achievement of this goal. From this point of view, efforts by foreigners to raise the exchange rate for China's currency areaimed not merely at the elimination of this trade advantage but at undercutting China's economic andpolitical stability and at thwarting its emergence as a great power.",
      " Chinese officials have not entered into the debate concerning the \"real\" value of China'scurrency, though some say there is no convincing evidence that the yuan is undervalued. They couldcite econometric studies (see below) which support the view that China's currency is slightlyovervalued or perhaps only a little undervalued compared to the dollar.  Many economists doubt that China's actions have had any appreciable impact on thelong-term value of the dollar. The dollar plays a broad role in international finance and the amountof dollars in circulation globally is very large. A recent survey by the world's leading central banksindicated that the daily trading of foreign currencies totals more than $1.",
      "9 trillion, 90% of which isin dollars. (6)  China Announces a Change. On July 21, 2005,China's central bank announced a new exchange rate system for China's currency. First, it increasedthe value of the yuan, which rose from 8.28 to 8.11 to the dollar. (7) Second, the yuan would bereferenced, not just to the dollar but to a basket of currencies, and it would be allowed to vary by0.3% each day above or below a central parity. Third, the central bank said that \"the closing priceof...the US dollar traded against the RMB [yuan]",
      "...after the closing...of the market each working day\"would become \"the central parity for the...following working day.\" (8) This seemed to be anexchange system which economists call a \"crawling peg.\"  If the new procedure had been allowed to function as announced, the yuan could haveincreased in value by 30% in five months. On July 27, 2005, however, the central bank announcedthat no further changes in the value of the yuan should be expected. Rather, it said, China's newsystem would be a \"managed float.\" The central bank would compare the value of the yuan to a\"",
      "basket\" of currencies issued by its major trading partners. However, the Chinese authorities madeit clear that they would decide what the value of the yuan would be and they would determine whenand how liberalization might occur. The yuan might fluctuate compared to other currencies, butthey said its dollar value would be fixed.  Too Small? To many observers, the 2% increasein the value of the yuan announced in July 2005 was too small and the process for possible futureincreases was too obscure and uncertain. Some might argue that the changes in the new systemreflect the current debate about economic policy within the Chinese leadership. Some Chineseofficials may believe that reform,",
      " including liberalization of the yuan, is in China's best interest. Others may believe that China must continue the policy of export-led growth and the advantages ofthe old system should not be disposed of lightly.  From this perspective, some might say the new system was adopted in order to buy time, todelay reform, and to forestall outside pressure. China was scheduled to discuss its exchange ratepolicies with the IMF executive board in August 2005 and the advent of a new system gave theChinese something new to present. The IMF board was critical of China's exchange rate policies in2004 and IMF staff had strongly urged China in mid-",
      "2005 to introduce market forces into China'sexchange rate regime. The change was also announced just before Congress was scheduled toconsider several bills which sought to put pressure on China if it did not revalue its currency. Arguably, a series of ambiguous steps which seemed to herald change might buy China time toconsider its options and lay its plans. It might give the IMF board a reason not to press for fasteraction and it might persuade Congress to postpone action on the pending bills. (9)  Alternatively, instead of seeing the new system as the product of internal debate, one mightsay that it is obscure because it seeks to confuse and frustrate speculators.",
      " The inflow of speculative\"hot money\" is serious. An official with China's State Administration of Foreign Exchangereportedly observed that \"Whether we [can] effectively refrain speculation on yuan is the key to thesuccess or failure of the reform.\" (10) If China wants to avoid instability and sharp changes incurrency prices, its actions must not invite speculators to bring in more foreign currency and buymore yuan. In effect, China faces a challenge of doing what the speculators expect -- increase thevalue of the yuan -- without encouraging them to capitalize on their expectations.  The old system offered speculators a one-way, no-risk bet,",
      " since there was little chance theyuan would fall in value whereas there seemed a real possibility that the value would eventually rise,perhaps substantially. This offered potentially large rewards to those who owned yuan oryuan-denominated assets. (11) The inflow of speculative money puts pressure on China torevalue the yuan to reduce the flow. (12) However, if the increase were not sudden and massive,speculators might be encouraged to buy more yuan in hopes of profiting as it goes up in value. Aslong as there is a general expectation that the yuan is underpriced and as long as these speculativeflows continue, Chinese officials are reluctant to allow the market to determine the yuan's value.",
      " They worry that it might increase too much in value (\"overshoot\") if it were opened suddenly tomarket forces and this could also have negative consequences for the Chinese and world economies.  New Initiatives Since July 2005. More recently,the Chinese authorities have taken other steps that could allow market forces to eventually play a rolein the valuation of the yuan. In mid-2005, they created a system of non-deliverable forwardcontracts which let individuals take positions and make predictions as to the future value of theyuan. (13)  In January 2006, China's State Administration of Foreign Exchange (SAFE) authorized 13local and foreign banks (14)",
      " to buy and sell yuan for dollars in the yuan spot market. Anexperiment allowing some banks to trade yuan for euros and Hong Kong dollars had begun in 2005. The new arrangement is supposed to improve liquidity and allow market forces a role in thevaluation of the yuan. Under the new rule, the opening price for the yuan would be determined bythe average closing price of the 13 banks (with the two most extreme eliminated.) In principle, thiswould allow yuan to move up or down in value in response to market forces. However, observersassert that the central bank remains the biggest trader in the yuan-dollar market and any bank whichquotes too high a rate will be vulnerable if it floods the market with yuan in order to keep the rateat its preferred price.",
      "  In December 2005, the Chinese authorities took two additional steps that would either reducethe demand for yuan or increase the demand in China for dollars. The central bank announced thatit was raising the interest rate for deposits held in U.S. or Hong Kong dollars, widening the gapbetween those rates and those paid for accounts denominated in yuan. (15) This was aimed atdiscouraging speculators from buying yuan in hopes they can turn a profit by converting them backinto dollars if, in the near future, the yuan should increase substantially in value.  The central bank also announced that it would soon scrap the existing limits on the amountsthat Chinese firms could take out of the country.",
      " (16) This could marginally push down the value of the yuan whenChinese firms sold their national currency in order to purchase the dollars needed to expand theiroverseas operations. Market Expectations. The dollar exchange ratefor the yuan has changed by only a little more than one-half of 1% since the new system wasintroduced, going from Rmb 8.11 to the dollar on July 21, 2005 to Rmb 8.0424 to the dollar onFebruary 26, 2006. The People's Bank of China retains firm control of the exchange rate throughits transactions in foreign exchange markets.",
      " In January 2006, futures contracts suggested thattraders believed the value of the yuan would rise 2.1% (to Rmb 7.86 to the dollar) in six months and4.3% by the end of 2006. A global markets analyst for Goldman Sachs predicted, by contrast, thatthe value of the yuan would increase by 9% (to Rmb 7.34) by the end of the year. (17) The EconomistIntelligence Unit said the yuan would rise 4.4% in 2006 (to Rmb 7.9) and 3.7%",
      " in 2006 (to Rmb7.6.) (18)  These predictions assume that the People's Bank of China will bring these results aboutthrough its exchange market transactions or (to say the same thing) that it will not act to preventmarket forces from generating these rates of exchange.  International Views Efforts by the IMF. The IMF staff proposed, inits June 2005 report on its recent Article IV consultations, that China should revise its foreignexchange policies and allow the market to play a larger role in the valuation of the yuan. (19) The IMF executive boardhad the report prior to its formal review of China's policies,",
      " though the actual document was notpublished until September. The IMF executive board discussed China's new exchange rate policies during its August2005 annual Article IV consultation review. Many people believe that China announced its newpolicies two weeks before that meeting in order to show they were addressing the issue. The previousyear, during its August 2004 review of China's policies, the board had said that greater exchange rateflexibility was in China's best interests. (20) It also welcomed China's statement that it would \"introduce, ina phased manner, greater exchange rate flexibility.\" Some observers suggest that it might have beenawkward for China to go to the 2005 meeting and report that it had done nothing.",
      "  In its August 2005 review, the IMF executive board \"welcomed the change in the exchangerate regime -- an important move toward greater exchange rate flexibility -- and encouraged theauthorities to utilize the flexibility afforded by the new arrangement.\" It reiterated its earlier pointthat greater exchange rate flexibility was both necessary and in China's best interests. (21) It also said that \"a moreflexible exchange rate, not simply a revaluation, is the key to providing scope for monetary policyindependence and enhancing the economy's resilience to external shocks.\" According to thesummary of the board discussion, most directors supported a gradual and cautious approach butmany others recommended that China move quickly to a foreign exchange level which reflectsunderlying market forces.",
      "  Other Countries' Views. No other country hastaken as strong a public position on the Chinese exchange rate issue as has the United States, eventhough the low cost of Chinese exports has been a source of concern to interests in their countriesas well. Nevertheless, some other countries reportedly have been vigorous in their privatediscussions with Chinese officials, urging them to give market forces a larger role in determiningthe value of the yuan. Their public statements have tended to show patience with China's concerns. Some observers suggested that they preferred to let the United States do the \"heavy lifting.\" Some countries have spoken out. In early June 2005,",
      " for example, David Dodge, Governorof the Bank of Canada, called on China to free its currency from the fixed rate against the U.S.dollar or to risk sparking U.S. and European trade protectionism. (22) At the same time, Japan'sfinance minister urged China to reform its tight currency peg on grounds that the current yuan-dollarexchange rate was hurting the Chinese economy and causing it to overheat. (23)  European ministers reportedly have been more accommodating in their remarks. Forexample, Chinese Premier Wen Jiabao told an Asia-Europe ministerial meeting in June 2005 thatChina would adopt a more flexible currency policy only when it believed itself ready.",
      " Europeanministers replied, in their public statements, that they hoped it would not take too long (24) but they agreed that Chinashould not be pressured and it had the right to determine when and how it would reform itscurrency. (25)  Since July 2005, observers have been waiting for an announcement by China that it wouldfurther liberalize its exchange rate policy. The IMF executive board urged this at its discussion ofChina's policies in August 2005. The governing boards of the IMF and World Bank urged it at theirjoint annual meetings in late September 2005. Treasury Secretary Snow urged it during his October2005 trip to China.",
      " President Bush reiterated the point during a state visit to China in November2005. In September 2005, the finance ministers of the G-7 countries said, in the communiquefollowing a meeting in Washington, D.C., that \"we welcome the recent decision by the Chineseauthorities to pursue greater flexibility in their exchange rate regime.\" (26) This was the first time aG-7 communique had called on China by name to take action. \"We expect the development of thismore market-oriented system to improve the functioning and stability of the global economy and theinternational monetary system,\" they added. China's President told the G-",
      "8 leaders that China wantedto base the yuan's value on market forces but it would do this on its own time and not as a result offoreign pressure. (27)  The G-7 finance ministers were even more specific in their communique following theirmeeting in London on December 3, 2005. They said that \"further implementation of China'scurrency system would improve the functioning and stability of the global economy and theinternational monetary system.\" They said, in language not directly mentioning China, that suchdisparities, along with high oil prices, were a threat to a \"solid\" world economy. (28)",
      " They also said that\"exchange rates should reflect economic fundamentals\" and that they would monitor exchangemarkets closely. This was much stronger language than the \"welcome\" the ministers had expressedthree months earlier.  Individual leaders were even more specific in their remarks. European Central Bankpresident Jean-Claude Trichet said at the time that the G-7's public comments were \"in continuitywith the message that we have been giving.\" He also said, referring to Asia, that \"this part of theworld has to contribute to the solution of global imbalances.\" (29) Japan's finance minister,Sadakazu Tanigaki,",
      " said, at the same time, that \"we believe China needs some time to getaccustomed to their new currency regime, but a considerable time has already passed. I expect Chinato make its currency a bit more flexible.\" (30) Treasury Secretary Snow said, on this occasion, that \"this rigidityconstrains exchange rate flexibility in the region and thus poses risks to China's economy and theglobal economy.\" Jin Renqing, China's finance minister, did not comment directly but did say thatChina would over time allow market forces to play a greater role in determining the value of therenminbi.  U.S. Views.",
      " In the United States, both theAdministration and Congress have spoken to the issue of China's currency. Action by the Executive Branch. In January 2004,President George W. Bush told a crowd in Toledo, Ohio that \"we expect countries like China tounderstand that trade imbalances mean that trade is not balanced and fair. They have got to deal withtheir currency.\" (31) OnJuly 21, 2005, responding to China's announcement that it was adopting a new exchange rate system,Treasury Secretary John Snow said that he welcomed the announcement but \"we will monitorChina's managed float as their exchange rate moves to alignment with underlying marketconditions.\" (32)",
      " Heagreed that the initial 2% change was small, but he said the important thing was China's willingnessto change. \"This is the start of a process,\" he said, \"and the Chinese have indicated they want to gettheir currency based on markets rather than a peg.\" (33)  The United States has urged the IMF to press China to introduce market forces in its foreignexchange process more quickly. (This is discussed further, below.) In January 2006, at the WorldEconomic Forum in Davos, Switzerland, Under Secretary Tim Adams told Bloomberg Televisionthat China was not doing enough. \"China needs to undertake serious reforms.",
      " They're on the roadto reform but they need to move faster.\" (34) He also told a panel at the Forum that the United States hadnever asked China to float its currency as it does not think the Chinese financial system couldwithstand it. Rather, he said, the United States had urged China to allow more flexibility in theirexchange rate. \"All we've asked them to do is what they've agreed to do and what they know is intheir best interest to do,\" he said. (35)  The Omnibus Trade and Competitiveness Act of 1988 (sec. 3004) requires the Secretary ofthe Treasury to determine,",
      " in consultation with the International Monetary Fund, whether countriesare manipulating their currency in order to gain unfair trade advantage. In May 2005, Treasury reported that China was not manipulating its currency. (36) Some observers said the Treasury Department was more criticalof China in this report than earlier in part due to congressional pressure. \"If current trends continuewithout substantial alteration [i.e., revaluation],\" the report said, \"China's policies will likely meetthe statute's technical requirements\" for designating China as a country which unfairly manipulatesits currency value. Nevertheless, the report said that Chinese authorities had assured TreasurySecretary Snow that they were laying the groundwork for a future revaluation of the yuan.",
      " It was onthis basis that the Department found that China was not manipulating its currency. Snow reportedlygave China six months to rectify the situation and he called for an immediate 10% revaluation. (37) No such change occurred.  In November 2005, Treasury reported that China's actions \"are not sufficient and do notrepresent fulfillment of the Chinese authorities' [earlier] commitment.\" (38) It said, though, thatChinese authorities had pledged in October 2005 \"that they would enhance the flexibility andstrengthen the role of market forces in their managed floating exchange rate regime.\" It also said that\"President Hu told President Bush that China would unswervingly press ahead with reform in itsexchange rate mechanism.\" Therefore,",
      " by implication, they were not manipulating the yuan. TheChinese authorities should act, the report concluded, \"by the time this report is next issued\" (i.e., insix months).  In May 2006, in its most recent six-month report, the Treasury Department reported that \"toolittle progress has been made in introducing exchange rate flexibility for the renminbi.\" (39) The Departmentdetermined once again, however, that China's foreign exchange policies did not violate the terms ofthe Omnibus Trade and Competitiveness Act of 1988. Whatever the effects of China's policiesmight be, the Department said it was unable to determine,",
      " from the evidence at hand \"that China'sforeign exchange system was operated during the last half of 2005 for the purpose (i.e., with theintent) of preventing adjustments in China's balance of payments or gaining China an unfaircompetitive advantage in international trade.\" Therefore, without a demonstration of intent, \"thetechnical requirements for China to be designated under the terms of the Act have not been met.\"The report cited the various initiatives China had introduced in the past six months. It also reportedthat China's President Hu told President Bush in April 2005 that China would reduce its tradebalance in the future by boosting demand and stimulating domestic growth.",
      "  Action by Congress. In late 2005, Congress passedlegislation which urged the President to create a comprehensive plan to address diplomatic, militaryand economic issues relating to China. (40) In particular, it said the Administration should encourage Chinato revalue its currency further against the U.S. dollar by allowing the yuan to float against atrade-weighted basket of currencies. Congress is currently considering several bills which wouldrequire the United States to limit trade with China if it does not revalue the yuan or direct thePresident to take the yuan-dollar exchange rate issue to the IMF or WTO for action.  Three bills are prominent among this legislation.",
      " In July 2005, the House of Representativespassed legislation ( H.R. 3283 ) introduced by Representative Phil English which wouldmake imports from non-market economies (such as China) subject to U.S. countervailing duty. (41) Exports from China whichwere found to be subsidized on account of exchange rate manipulation might be subject to thesetrade rules and monetary penalties could be assessed which would raise the price of those goods inU.S. markets. The bill also required the Treasury Department to define the term \"currencymanipulation\" for the purpose of U.S. law and to report periodically on China's implementation ofits new exchange rate regime.",
      " (42)  The House is also considering another bill ( H.R. 1498 ), introduced byRepresentatives Tim Ryan and Duncan Hunter, that would make it clear under U.S. law thatexchange rate manipulation by China would make goods imported from that country actionable toU.S. countervailing duties. (43) Proponents argue that the language of H.R. 3283,though seemingly aimed at China, would actually make it more difficult for firms to levycountervailing duty claims against China. No action has been taken on H.R. 1498, thoughit currently has 169 co-sponsors. The Senate is also considering legislation that would limit China's access to the U.S.",
      " marketif it does not stop manipulating the value of its currency. Senators Charles Schumer and LindseyGraham proposed on April 6, 2005, for example, that Congress enact a 27.5% tariff on all Chineseproducts entering the United States if China does not raise the value of its currency. (44) This is deemed to be theaverage degree of undervaluation identified by several studies. The Senate voted 67-33 for thisproposal, as a rider on another bill, but it was later introduced as a separate bill ( S. 295 ).Originally scheduled for consideration in mid-2005,",
      " action was postponed. The bill is expected tocome up again for consideration sometime in 2006. Five Key Questions Is the Yuan Undervalued? By How Much? The IMF said in its 2004 evaluation of the Chinese economy that it was \"difficult to findpersuasive evidence that the renminbi [yuan] is substantially undervalued.\" (45) Since then, manyeconomic studies have been published seeking to determine the yuan's \"equilibrium\" exchange rate.(This is the exchange rate that would prevail if the value of the yuan was not controlled and if theU.S. and Chinese economies were both at macroeconomic equilibrium.) The results of these studiesdiffer widely.",
      " Consequently, there is sufficient research available to support any position about thevalue of the yuan that one might wish to take.  The IMF's China experts found in their 2005 evaluation that the yuan is undervalued and therate of undervaluation is increasing. More flexibility is needed, they said, to avoid disruption of thedomestic economy. (46) The difficulty, however, one expert told CRS, is the lack of any reliable way of knowing how largethe distortion may be or how its effects can be separated from the other factors (such as labor costsand productivity) which affect the international price of Chinese goods. In a market economy,",
      " the exchange rate of a currency (vis-a-vis another currency) can beaffected by many things. These including interest rates, trade relationships, institutional arrangementsthe international flow of money between currency markets, and interventions (purchases or sales ofcurrency) by the central bank. Market forces will balance these factors and establish an exchangerate which is supposed to reflect the actual value of goods and services in one country compared tothose in another country but sometimes -- depending on other considerations affecting the economyof either country -- it does not.  The task of assessing exchange rates is more difficult when market forces are constrained andcurrency values are set by official action.",
      " A simple method would have one look at the price of asingle product in world markets, on the theory that properly functioning currency markets shouldadjust to equalize product costs. One example is the Economist's well known \"Big Mac Index,\" alight-hearted procedure which compares the cost of McDonald's hamburgers around the world. (47) By its calculation, basedon the price of hamburgers sold in both markets, the yuan is 59% undervalued compared to the U.S.dollar. Most economists agree that this index provides only a general suggestion of the relativevaluation of currencies. (48) The disparity in hamburger prices around the world can also beread as a comment on the valuation of the U.S.",
      " dollar. The Economist says that the index shows thatthe U.S. dollar is more overvalued now, compared to most other currencies, than at any time sincemeasure was introduced 16 years ago. (49)  A more substantive effort to calculate the equilibrium value requires construction of aneconometric model for the countries whose currencies are being compared. Much statisticalinformation is required as well as a clear concept of the way the institutions and sectors relate to eachother. Often, information is not available and analysts have to substitute data based on theirunderstanding as to how each economy works and what the correct number would be if it wereavailable.",
      " (50)  In 2005, the Chinese Currency Coalition published a report citing eight reports or statements(in addition to the Big Mac Index) which said that, to varying degrees, the yuan was substantiallyundervalued. (51) Twoof the sources dated from 1998 or 2000. The others dated from 2002 or 2003. These included (inaddition to the hamburger index) a reference saying that the World Bank thought the yuan was 75%undervalued and other studies, statements or testimony to Congress saying the yuan was priced 10%to 40% below its \"real\" value.",
      " (52)  The IMF published a paper in late 2005 which compared eight major studies released in 2004and 2005 that sought to calculate China's \"real\" exchange rate on the basis of macroeconomic andeconometric analysis. (53) One scholar found, in two studies using 2003 data, that the yuan was either slightly undervalued orslightly overvalued that year. He found in a later study (using the next year's data) that the yuan was5% overvalued in 2004. Another analyst found, using the same data, that the yuan was only slightlyundervalued in 2004.",
      " By contrast, other scholars have found, using essentially the same statistics,that the yuan has been substantially undervalued in recent years. One team concluded, for example,that the yuan was pegged (in a study using 2002 data) at a rate that 18%-49% and (in another studyusing 2003 data) 23% below its \"real\" value. Another researcher found, in a study using 2000 data,that the yuan was undervalued by 35% that year. Yet another scholar concluded, on the basis of2004 data, that the official rate that year was 15%-30%",
      " below its \"real\" market equilibrium value. Meanwhile, Funke and Rahn, two scholars from Hamburg University in Germany, found\"compelling evidence that the renminbi is not substantially undervalued.\" (54) They seem to haveemployed the same econometric equilibrium modeling techniques used by scholars cited in the recentIMF paper. The claims by some that China's currency is grossly undervalued are incorrect, theyargue. Rather, they say, it seems in some circles to be \"politically expedient to scapegoat the Chinesecurrency for economic difficulties elsewhere.\" Higgins and Humpage, two economists with theFederal Reserve Bank of Cleveland,",
      " report that it \"is next to impossible\"to determine the equilibriumexchange rate for developing countries through econometric modeling. (55) China is particularlydifficult, they say, because institutions and patterns of economic activity are changing very rapidly.  Data on the Chinese economy are incomplete, uncertain or unreliable. In late December2005, China announced that -- when services previously omitted from official statistics were takeninto account -- its gross domestic product (GDP) was 17% larger than expected. This was likediscovering a province the size of Turkey or Indonesia that was previously not counted in nationalstatistics. The new data make the Chinese economy the sixth largest in the world in dollar terms.",
      " If it grows by 10% in 2006 and its currency appreciates by a like amount, China could surpassGermany, Britain and France to become the world's third largest economy. (56) All the previousmacroeconomic ratios -- investment to GDP, exports as a share of GDP, rate of growth, etc. --changed with the advent of the new data. None of the studies cited above used the new data. Thus,even if they are correct in their use of the old data, their calculations do not reflect this more recentdata on the Chinese economy. The variations in the conclusions of the 17 studies mentioned above may be due in large partto the way scholars define the relationships among the different segments of the Chinese economyand the different assumptions they use to fill in gaps when they lack adequate information.",
      " Withoutcareful analysis of the methodology and assumptions used in each study, there is no way of knowingwhether the results of any of these studies are more accurate than others. (57)  It appears that few of the participants in the debate about the value of China's currency havestudied the methodologies or the assumptions of the various studies. Rather, it seems that advocatesselect the studies they quote more because they like their conclusions than because they believe theyare the best research available. Few of the participants in the debate cite findings which supportconclusions other than those they support or provide reasons why their preferred studies are superioron substantive grounds to others which disagree.",
      " Is China Manipulating Its Currency? The IMF and Exchange Rate Policy. In the pastthirty years, the role of the IMF in the international financial system has changed. Until the early1970s, the IMF had a central role in determining world exchange rates. All currencies had a fixedvalue (\"par value\") compared to the U.S. dollar and the U.S. dollar was worth a specified amountof gold. If countries wanted to change their par value compared to the U.S. dollar, the IMF had tofirst approve. Since 1976, however, with passage of the Second Amendment to the IMF Articles ofAgreement, each country is free to determine the exchange rate system it will use.",
      " Some countrieshave floated the value of their currency in world money markets, others have fixed the value of theircurrency to that of another major country, and others have pursued a mixed strategy.  IMF Surveillance. The IMF is no longer thearbiter of world exchange rates. Rather, in the modern world, it exercises surveillance over exchangerates in order to encourage and to help countries comply with the basic rules. Article IV of the IMFcharter prohibits countries from manipulating their exchange rates in order to gain unfair tradeadvantage. It also says that \"the Fund shall exercise firm surveillance over the exchange rate policiesof members, and shall adopt specific principles for the guidance of all members with respect to thosepolicies.\" Its current principles for surveillance were adopted by the IMF executive board in 1979and have been revised periodically since.",
      " (58) The principles say that countries may peg the value of theircurrency to another currency but they cannot do this in ways which violate the requirements ofArticle IV. Basically, the pegged rate needs to reflect a country's underlying economic realities.These include, for example, changes in the volume and composition of its domestic output, in thesize, composition and direction of its foreign trade, in its domestic rates of growth and nationalincome, in the size of its reserves and in shifts in its domestic fiscal and monetary policies, relativerates of productivity and of change and technological advance. Countries are allowed, under the guidelines, to use their exchange rates to promote growthand development.",
      " The IMF rules for surveillance say the Fund's appraisal of country policies \"shalltake into account the extent to which the policies of a member, including its exchange rate policies,serve the objectives of the continuing development of orderly underlying conditions that arenecessary for financial stability, the promotion of sustainable economic growth, and reasonablelevels of employment.\" However, countries are also required to \"take into account in theirintervention policies the interests of other members, including those of the countries in whosecurrencies they intervene.\" In other words, countries can use exchange rate policy to help sustaingrowth and employment in their domestic economy but they cannot use an unrealistic exchange rateto prevent balance of payments (BOP)",
      " adjustment or to gain unfair trade advantages. Adjustmentincludes such things as increased imports, capital inflows to fund BOP deficits or outflows to offsetBOP surpluses, increased domestic interest rates or price levels, and the accumulation of excessreserves. If one country does not adjust its BOP imbalance, the burden of adjustment will be thrownupon its trading partners through monetary contraction, unemployment and the like.  China and Manipulation. The IMF has six criteriawhich might be used to identify situations where countries are manipulating their currencies in orderto gain unfair trade advantage. Any one of the criteria would be sufficient to note the likelypresence of manipulation.",
      " It appears that China's foreign exchange practices are congruent with atleast four of the IMF criteria. (59)  Persistent Intervention. The IMF says (its criterionnumber 1) that \"protracted large-scale intervention in one direction in the exchange market\" is oneindication that a country may be manipulating the value of its currency. Countries may intervenein foreign exchange markets to counter short-term disorderly conditions that cause disruptiveshort-term movements in the exchange value of their currencies. However, the IMF guidelines saythat persistent one-way intervention\"might indicate the need for discussion with a member.\" (60)  If China's currency were properly priced and the goal were exchange rate stability,",
      " the centralbank would intervene in the market in both directions, buying and selling yuan in order to dampenthe effect of temporary shocks and to spread the effects of change over a longer period of time. Instead, China routinely sells yuan in order to keep the market price from rising. It rarely buys yuanto keep the market price from sinking too low. This would seem to be the kind of \"protractedlarge-scale intervention in one direction\" which the IMF specified in its first operational definitionof manipulation. An Unchanging Peg. The IMF's second criterionwhich indicates that a country might be manipulating its currency is \"behavior of the exchange ratethat appears to be unrelated to underlying economic and financial conditions including factorsaffecting competitiveness and long-term capital movements.\" Countries may peg the value of theircurrency to another currency but the pegged rate needs to reflect the country's economic realities.These include,",
      " for example, changes in the volume and composition of its domestic output, in thesize, composition and direction of its foreign trade, in its domestic rates of growth and nationalincome, in the size of its reserves and in shifts in its domestic fiscal and monetary policies, relativerates of productivity and of change and technological advance.  The yuan-dollar exchange rate was largely unchanged from1994 to 2005. Since reformswere announced in mid-2005 it has changed very little. Some might argue that the fact that Chinaheld its exchange rate constant during this period is evidence that China was not manipulating theyuan through fine-tuning of its valuation.",
      " However, manipulation can be as much a lack of changeas an act of change. (61)  Whether an unchanging exchange rated is a violation of Article IV depends on the way thecountry holds the rate constant. China did not have to micro-manage the daily rate for its currencyin order to maximize its export opportunities. They merely sold yuan whenever the yuan-dollarexchange rate increased beyond the level the central bank desired. Chinese authorities used domesticmonetary policy and other domestic economic practices to offset the effects of the fixed yuan-dollarrate. Economic conditions have changed markedly in China since 1994. Production andconsumption patterns changed.",
      " Import and export patterns changed. The relative value of goods andservices and the relative value of labor, capital and other factors of production changed. Theinternational value of China's currency should have changed as well to reflect these changes. Amongother things, this would have produced price signals that could have changed consumption andproduction patterns, promoted efficient and effective utilization of resources, and improved theChinese people's standard of living and level of real income. The behavior of the yuan-dollarexchange rate after 1994 \"appears to be unrelated to underlying economic and financial conditions\"and is therefore consistent with the IMF's second criterion for identifying currency manipulation.",
      "  Prolonged Foreign Lending. The IMF's fourthcriterion says that \"excessive and prolonged short-term official or quasi-official lending for balanceof payments purposes\" can be evidence that currency manipulation is taking place. Prolongedborrowing for the same purpose is also evidence of manipulation. Since 1994, China's foreign exchange reserves have grown sixteen-fold, from $53 billionto $819 billion. Some of the funds in China's foreign exchange reserves are equity investments. Most, however, are loans to foreign governments or private borrowers. For example, China'sinvestment in U.S. Government debt has more than tripled in the past five years,",
      " from $71 billionin 2000 to $242 billion in 2005. By definition, these are loans to the U.S. Government and they areshort-term, in the sense that they can be liquidated at any time through sales in security markets.They help the United States cover its balance of payments (current account) deficit and they helpChina adjust its balance of payments in a way which does not require it to spend its internationalincome on purchases of goods and services from abroad. At least on the part of China, this appearsto be the kind of behavior \"to prevent effective balance of payments adjustment\" (in the words ofArticle IV)",
      " that meets the IMF's fourth test for currency manipulation.  Influence on Capital Movements. The IMF's fifthcriterion says that a conversation with a country might be in order if it evidences \"the pursuit, forbalance of payments purposes, of monetary and other domestic policies that provide abnormalencouragement or discouragement to capital flows.\" Many observers say that the growing size ofChina's reserves shows that its government is promoting an abnormal outflow of capital for BOPpurposes. The Chinese government purchases large amounts of foreign exchange in order to maintainthe price of its currency. Thus, foreign money is less available to Chinese citizens and firms thanit might be otherwise.",
      " Consequently, instead of being cleared on the current account through importsand other current activity, China's balance of payments is cleared through the capital account by largeadditions to China's foreign exchange reserves. Many analysts agree that China's reserves are larger than its normal trade or financial needswould require. They are larger, for example, than any need China is likely to face if its internationalincome suddenly declined -- as a result, for instance, of an economic shock originating elsewherein the world economy -- and it needed money for a while to pay for imports or to service debt. Inthis light, many would argue with reference to the IMF criterion noted above,",
      " that continuedexpansion of China's foreign exchange reserves is not just an encouragement for the outward flowof capital but an encouragement for \"abnormal\" flows as well. Some would argue in addition that the continued growth of China's reserves is inconsistentwith provisions of the IMF charter. Article IV also stipulates that all members shall \"seek topromote stability by fostering orderly underlying economic and financial conditions and a monetarysystem that does not tend to produce erratic disruptions.\" Every dollar that China adds to its reservesis a dollar that some other country adds to its foreign debt. Arguably, the accumulation of largereserves and large debts does not enhance the stability of the world financial and trading system.",
      " Countries with large foreign exchange reserves do not import as much as they could and debtorcountries have difficulty retiring their foreign obligations by trade. In that sense, high reserves arenot a formal trade barrier but they have the same effect. They hamper \"the expansion and balancedgrowth of international trade\" (one of the purposes, stated in its Articles of Agreement, for whichthe IMF was created.) China is not the only country accumulating large reserves but many wouldargue that its practices are a source of concern. China's View. Chinese officials say they are notseeking unfair trade advantage. They only want exchange rate stability to protect their economyfrom destabilizing change.",
      " The result, however, is the same. Chinese officials say that, whateverthe technicalities might be, the economic benefits of stability are important and are shared by manycountries. Moreover, they could argue, their efforts to influence exchange rates through interventionin currency markets differ little in their effect from similar action which countries with floatingexchange rates take to influence their currencies' exchange rates -- changes in interest rates and otherpolicies, for example. Furthermore, they might say, Japan and other Asian countries also buy dollarsin order to keep down the value of their currencies and to stimulate their exports. Arguably, theywould argue, it is unfair to single out China in this regard when others do the same thing and theirtrade impact on the U.S.",
      " economy is at least as great as that of China. (62)  How Fast Should China Revalue? If China can continue to contain the inflationary pressures caused by rapid growth in itseconomy and its foreign exchange reserves, it can probably delay for some time any need for a majorchange in the dollar value of its currency. Unlike countries with overvalued currencies, it will notrun out of foreign exchange if it postpones the decision. Rather, its foreign exchange reserves willgrow. China could increase the value of the yuan overnight to a much higher level if it wished todo so. However, Chinese officials are concerned that too-fast and too-steep an increase could hurtthe growth rate,",
      " employment rate, and reform prospects of the Chinese economy. Chinese officialssay they want to shift away from export led growth towards an economic program focused more ongrowth in the internal economy. However, they do not want to slow down the export sector untiltheir internal economy is able to provide the growth they need to continue the transformation processnow underway. These considerations seem to suggest that revaluation should take place gradually. However, if speculative capital flows are a problem, as discussed below, they may want to delay theprocess considerably.  Most experts agree that China's current situation is not sustainable and they cannot postponerevaluation of the yuan indefinitely. If nothing is done to slow the growth of China's foreignexchange reserves,",
      " for instance, inflation may eventually push up domestic prices in China and raiseits export prices. Experts differ, though, as to how quickly China should move towards amarket-based exchange system. The IMF says a gradual approach is needed. In July 2005, the IMFstaff proposed that China adopt a phased approach in moving towards full exchange rateflexibility. (63) Morerecently, the director of the IMF's research department urged a deliberate pace. (64) Experience has shown,he said, that emerging markets do not handle large, rapid exchange rate movements well. In China,he suggested, rapid change might disrupt or bankrupt major segments of the economy -- particularlythe banking system -- and make reform a long,",
      " drawn-out and painful process.  Other experts believe that policy reform must occur more quickly. Some say that China'sundervalued currency is hurting other countries and fairness requires rapid action to remedy thesituation. Some suggest that China risks a financial crisis if it does not revalue soon. (65) One says that rapidrevaluation is needed because China's emphasis on export-led growth makes it vulnerable to anyslowdown in global demand. (66) Otherwise, they say, China risks being another \"Asian miracle\"country, like those that went bust during the Asian financial crisis in the 1990s.  Many also believe quick action is needed because the current economic relationship betweenthe United States and China is unstable and harbors serious risk.",
      " Roubini and Setser argue, forinstance, that change is inevitable and the only question is how it will take place. (67) A smooth landing ispossible, they say, if Chinese officials lessen China's emphasis on exports and the accumulation ofreserves and U.S. policy makers reduce their country's dependence on foreign loans and capital.Otherwise, they believe, some unforseen event may trigger a crisis which could have serious negativeconsequences for both countries.  Is China Hiding its Real Trade Surplus? Some people argue that China's trade surplus is many times larger than the amount whichChina publishes in its official statistics.",
      " The China Currency Coalition says, for instance, that China'strade balance was nearly six times larger in 2003 than its official statistics suggest. (68) IMF data show that in2004 the 156 countries it categorized as \"world\" had a combined trade deficit with China of $267billion, roughly six and one-half times more than trade surplus of $41 billion that China reported that year. (69) If China'strade income were the larger of these figures, this would be strong evidence the yuan is undervalued.  In theory, the net trade figures reported by exporter and importer countries should match. In practice,",
      " the data are often inconsistent. There is strong reason to believe that methodologicalreasons account for much of the discrepancy in data. Perhaps countries keep better count of theirimports than their exports. Perhaps the figures are confused and intermingled when products areimported and re-exported or when inputs from several sources are channeled through a final exportercountries.  The IMF's Direction of Trade Statistics (DOTS) shows, in any case, that -- when the exportsof all countries to every country are subtracted from the imports every country receives from allcountries, the world had a $269 billion trade deficit with itself in 2004.",
      " (70) Other countries showsimilar disparities between the trade balances they report and those reported by their tradepartners. (71) In 2005,the IMF executive board noted weaknesses in China's BOP statistics in its annual Article IV reviewin 2005 and it urged the Chinese authorities to take advantage of Fund's technical assistance to helpimprove them. (72)  The China Currency Coalition says, however, that China is \"hiding the ball\" by deliberatelyreporting incorrect trade statistics. It believes the figure reported by importer countries moreaccurately reflects China's net income from trade. This is further evidence, the Coalition says,",
      " thatthe yuan is seriously overvalued.  If this is correct, China must be receiving over $200 billion more each year from tradeincome than it reports. In that case, the money must be somewhere. China could not have spent thismoney on imports, as it would have then shown up in the trade statistics of the exporter countries. It seems unlikely that Chinese exporters would have brought this additional foreign currency backinto China. If they had, the People's Bank of China would have had to spend three times more yuanthan the amount officially announced to keep the yuan at the pegged rate. The inflationary impactof these additional yuan would be substantial and would have manifested itself through rapidlyincreasing domestic price levels.",
      "  Alternatively, the presumed $200 billion in extra annual revenue might have been heldabroad. This would require the cooperation of Chinese officials, since it would mean that roughly80% of China's trade income each year does not come back to China. It seems unlikely that Chinahas been giving the money away, since this would make it the world's largest foreign aid donor (tentimes the size of the United States) and international effects of its generosity would be evident. Possibly, if the money exists and is not the product of a methodological flaw, the government ofChina might have accumulated it annually into secret foreign exchange reserves. This would mean,",
      "again if the money exists, that China has perhaps $1 trillion in clandestine funds invested in othercountries (over and above its announced official reserves.) Even if China were only using thismoney to acquire revenue, not influence, it would be difficult to hide. If the assets were registeredas Chinese at the time of purchase, for instance, they would likely show up in host country statistics. As another possibility, if the government of China does not control the money, then it mightbe held by Chinese citizens and companies. In any other country, the fact that people prefer to holdforeign currencies rather than their own currency might be taken as evidence of capital flight.",
      " Itmight suggest that people \"in the know\" believe the yuan is overpriced and likely to crash. Keepingtheir assets in foreign currencies would be a way of protecting themselves against that eventuality. For China, however, the general view is one suggesting that the yuan will be going up in value andforeign currencies will go down in value compared to it. It seems unlikely that Chinese insiderswould see the situation so differently from the common view or that they would have been able tohold a secret this big for so long.  The above scenarios are not be impossible, but they seem unlikely. It seems more likely thatthe $200 billion difference in the trade data reported by China and its trade partners is not realmoney.",
      " Rather, it is probably the result of methodological and procedural error. China's real exportfigures may be higher or its trading partners' import figures may be lower than the reported amounts. We do not know. Caution in the use of published data would seem appropriate. It is probably nota good idea, though, to ignore or discard the existing body of world trade and finance statistics justbecause some of the data do not match. The IMF and its member countries might scrutinize theirprocedures to see whether errors and inaccuracies of this sort can be reduced or eliminated overtime.  Would Revaluation Help the U.S. Economy? A Symbiotic Relationship.",
      " The dollar-yuanexchange rate is not determined in a vacuum. Rather, the relationship between the two currenciesreflects the broader relationship between the countries which issue them. The rates are theconsequence of each country's economic priorities and the way those priorities interact. The UnitedStates needs to import capital from abroad to finance its present level of economic activity withoutincurring higher interest rates. Consequently, the international value of the dollar must be relativelyhigh in order to encourage the inflow of capital. China needs to encourage exports in order tostimulate economic growth and facilitate economic reform. Therefore, for China's purpose, the valueof the yuan must be low enough to encourage export growth.",
      " So long as these are the main issueson each country's economic agenda, major changes in yuan-dollar exchange rate or the U.S. tradedeficit are unlikely.  The U.S. Imports Capital. The United States doesnot save enough domestically to finance simultaneously its preferred levels of consumption andinvestment and to cover the Federal budget deficit. By contrast, other countries (including severalin Asia) save more than their economies can effectively absorb. The United States needs morecapital than it can generate on its own to sustain the U.S. economy and foreigners need safe andprofitable ways to invest their surplus funds. This generates a continual inflow of foreign funds intothe United States.",
      " The inflow of funds, in turn, helps generate more demand for imported goods. TheU.S. current account deficit equals about 6% of GDP and requires the United States to import morethan $2 billion daily from abroad. (73)  This capital inflow pushes up the exchange value of the dollar, which lowers the relativeprice of imports and generates a corresponding inflow of foreign goods. It is a basic principle ofeconomics that countries which are net borrowers of money from the world must be net importersof goods and services as well. (74) If the value of the yuan increased, the volume of Chineseexports and Chinese capital flows to the United States would likely decrease.",
      " (75) In the short run, U.S.producers would probably take over a share of the market previously supplied by Chinese goods,though consumers would likely have to pay more for those goods than they did for Chinese imports. Profits and employments in those firms would likely increase. If China's trade balance declined,under this scenario, its rate of investment in the United States would also likely decline. In that case,many economists believe, U.S. interest rates would probably increase. This would likely have anegative impact, they expect, on the housing market and (with interest taking a larger share ofhousehold income) on consumer purchases.",
      " Over the longer run, foreign production is likely to shift from China to other low-costcountries. As their exports to the United States increase, producers in these other countries wouldlikely recover much of the market previously supplied by the Chinese. On the other hand, higherinterest rates in the United States might stimulate an inflow of capital from other foreign sources. One can only speculate whether interest rates would eventually decline to their former level and whatthe impact these changes would have on the U.S. economy.  China Wants Growth. China, for its part, alsohas priorities other than an accurate valuation of the yuan. Chinese officials believe they need topursue a policy of export-led growth.",
      " They believe their domestic economy is too inefficient togenerate the levels of employment and resources needed for economic reform and conversion of theeconomy from a state-directed to a market-based system. They worry that the domestic economycannot otherwise absorb the unemployment being generated by reform in the rural sector andstate-owned enterprises. They also worry that their banking system would be unable to allocatecapital effectively or to cope with the speculative pressure that might follow the introduction of amore flexible exchange rate system and more open capital markets.  China's economy has been growing at a rate of about 9% annually for the past decade. Mostexperts believe this rate cannot be sustained indefinitely,",
      " given both the present levels of productivityand the strain and inflationary pressure such growth places on the economy. Many believe Chinaneeds to slow down its growth rate in order to consolidate recent gains and to correct imbalances. Increasing the value of the yuan would help, they say, by slowing the growth in reserves, loweringinflationary pressures, reducing the cost of imports, raising per capita income, reducing distortionsand encouraging the flow of resources from the export sectors to the domestic economy. However,Chinese officials are reluctant to shift from a policy of export-led growth to one based more oninternal growth until they believe their domestic economy is more efficient and productive andeconomic reform has further progressed.",
      "  According to the IMF, most Chinese officials believe they eventually need to liberalize theyuan and shift more to a policy of domestic led growth. (76) Senior Chinese officials told the press in December 2005 that thevalue of the yuan would be increasingly influenced by the market and the trend is for China'scurrency to appreciate over time. (77) Yu Yongding, a member of the central bank's policy committee, said at the time that there is a risk that inflation could be ignited if the exchange rate is not allowedto appreciate. He also said that China's foreign exchange reserves had been growing too fast.  Many in the Chinese leadership believe their country is not yet ready for substantial changesin the value of the yuan.",
      " In any case, they say, efforts to resolve the imbalances in the worldeconomy will require concerted action by many nations and China should not be expected to solvethem alone. (78)  Three Dilemmas For China  Intervention and Reserves The People's Bank of China intervenes in the market to buy foreign exchange and sell yuanin order to hold the value of its currency at a relatively constant level. As a result, China hasaccumulated foreign exchange reserves which now total more than $819 billion. At the present rateof growth, its reserves will surpass those of Japan and total $1 trillion by the end of 2006.",
      " (79) If the bank did not sellyuan, the value of China's currency would rise and its volume of exports would fall. Many ofChina's export industries reportedly operate on very slim profit margins and many might go bankruptif the yuan rose substantially in price. (80)  Much attention has been paid to the size of China foreign exchange reserves. Many see themas a potential financial threat to other countries. Many believe the growth in China's reserves provesthat its currency is undervalued and manipulated. However, the growth in China's reserves causes problems as well. For one thing, it putsgreat pressure on China's monetary system.",
      " China cannot have an independent monetary policy,since its domestic money supply grows at the size of its foreign reserves expands. For every dollarbought by the central bank to maintain the peg, the People's Bank of China creates 8 yuan which itgives to the seller. The PBC has reportedly intervened in the currency market at a rate equal to about12% of China's GDP. (81) The IMF says that only about half the liquidity caused by the increase in reserves has been sterilized(that is, removed from circulation through sales of government bonds.) (82) Thus, the central bank hashad to hold down the growth of credit and lending by state banks in order to keep this excessliquidity from causing inflation.",
      " The June 2005 IMF Article IV staff report urged China to wringmore excess liquidity from the system and to tighten monetary policy still further. The growth in China's reserves also creates another problem. Roughly 70% of its reservesare held in dollars or dollar-denominated securities. If the yuan should go up in value compared tothe dollar, the value of China's reserves will go down and China would lose a great deal ofmoney. (83) If a changein the value of the yuan vis-a-vis the dollar is inevitable, then Chinese officials might want to actquickly to revalue the yuan because the problem will only get worse the longer they wait.",
      " On theother hand, if they raise the value of the yuan too much, they will lose large amounts of moneyunnecessarily. Further, if the change in the value of the yuan is a gradual process, China mightreduce the size of its exposure if it gradually shifted some of its present dollar-denominated assetsinto other currencies.  The State Agency for Foreign Exchange announced in mid-January 2006 that it would be\"actively exploring more efficient use of our FX [foreign exchange] reserve assets\" and \"wideningthe foreign exchange reserves scope.\" It said it wanted to \"optimize the currency and asset structure\"of China's reserves and to \"actively boost investment returns.\" (84)",
      " Some market analyststhought this meant that China intended to sell some of its dollar-denominated assets. (85) Their alarm abated,however, when it became clear that China simply planned to invest a smaller portion of its newreserves in dollars and more in the currencies of other trading partners.   Where's the Money Coming From? Hot Money or Trade? China's foreign exchangereserves are growing because the country's central bank is buying dollars and other foreign currenciesin order to stabilize the market price of the yuan. The question is where the foreign currency iscoming from. Many argue that the growth in China's reserves is the result of its trade policies as wellas the inflow of foreign investment.",
      " Recent research suggests, however, that speculative inflows(\"hot money\") may be responsible for over three-quarters of the net increase in China's foreignexchange reserves since 1998.  Table 1. Composition of China's Buildup in Foreign ExchangeReserves (billions of U.S. dollars) Source: Prasad and Wei. a. Foreign reserve increase is the sum of the current account and capital account balances plus errorsand omissions. b. FDI is Foreign Direct Investment. c. Includes errors and omissions. Accounting the BOP. Table 1 shows (based onIMF data) the size and amount of change which took place in China's foreign exchange reserves andbalance of payments (BOP)",
      " during the period 1998 to 2004. Foreign exchange reserves andalternative BOP figures have been discussed above. The balance of payments is a comprehensivepicture of a country's international financial and commercial transactions. It has three parts: thecurrent account balance, the capital account balance and the total for errors and omissions. Thecurrent account balance is the net sum of a country's exports and imports of goods and services plusits net income from foreign investment. The capital account balance is the net sum of all themonetary flows to or from a country -- net foreign investments, loans made or received, transfers byindividuals (remittances from migrant workers,",
      " for example) and other transactions needed tofinance activity in the current account.  Conceptually, the current account and capital account balances should cancel each other out,one being positive and the other negative. Imports which are not paid for with current revenue, forexample, would have to be financed directly or indirectly by capital from abroad. In fact, however,some financial and commercial transactions are not recorded and the current account or capitalaccount is often larger than the other. To make the two parts of the BOP match, economists add athird figure, called \"errors and omissions\" (E&O), which acknowledges that for unexplained reasonsmore money is in one account or the other.",
      " This may reflect income from illegal trade,mis-measurement, or undisclosed movement of money by individuals (\"capital flight\") seeking toprotect their assets from an expected change in the exchange rates or by speculators hoping to profitfrom that change.  Analyzing China's BOP Table 1 breaks China's balance of payments figures into these three components. It alsoprovides separate figures, in the capital account, for foreign direct investment. Prasad and Wei, theauthors of the table, identified the annual changes in China's foreign exchange reserves and theamounts recorded for each element of China's balance of payments and they present the averageannual amounts for each item for the first three and the last four years of the 1998 to 2004period.",
      " (86) From thatdata, they derive the amount of change which occurred in each instance between the first and the lasthalves of that seven-year period. On first inspection, looking only at the middle column, it seems that most of the growth inChina's reserves was due to trade and investment. Between 2001 and 2004, Prasad and Wei note,China's net annual current account balance was $42.2 billion while the net inflow from FDI was$46.6 billion. (87) Itappears, therefore, that the $88.8 billion from these two sources accounted for most of the $128billion average annual increase in China's foreign exchange reserves during that period.",
      "  Prasad and Wei find, however, that other factors -- particularly the inflow of \"hot money\"were more important. As Table 1 also shows, comparing the first and second columns, that theaverage annual level of China's foreign exchange reserves grew by $8.5 billion from 1998 to 2000and by $122.8 billion from 2001 to 2004. In column 3, Prasad and Wei found that the annualchange in China's trade receipts ($18.5 billion) and FDI ($8.1 billion), shown in column three, werenot sufficient to account for the average $114.",
      "3 billion in China's reserves. On the other hand, theswing in flows from non-FDI investment and E&O were substantial.  Between 1998 and 2000, they observe, capital flowed out of China openly (non-FDI) orcovertly (E&O.) They speculate that initially Chinese firms and families moved money abroad totake advantage of favorable investment and exchange rate opportunities. After 2001, however, theysuggest, Chinese firms and families and foreign speculators began moving money back into Chinain hopes of profiting from the expected increase in the value of the yuan. They observe that, as Table 1 indicates,",
      " the net flow of funds from non-FDI investment and E&O between the two periodsamounted to an average $87.7 billion a year, nearly 77% of total change in China's foreign exchangereserves during the 1998-2004 period. Policy Implications. The policy prescriptions aredifferent, depending on the source, if one wants to reduce the inflow of foreign currencies and tolessen the central bank's incentive to sell yuan in foreign exchange markets. If trade-related factorsare the major reason why foreign exchange is flowing to China, then changes in the country's tradepolicies and exchange rate would help diminish the flow.",
      " China's government would need to takesteps, in this scenario, to shift resources and employment from the export sector to the domesticeconomy. On the other hand, if \"hot money\" is responsible for the buildup in reserves, then a gradualappreciation in the value of the yuan might encourage further inflows of speculative funds. In thatcase, the central bank might cool the inflow of \"hot money\" by holding the value of the yuan constantfor a sustained period of time.  The Economist reported in late January 2006 that the delay and uncertainty of the newChinese exchange rate system may have had this effect. (88)",
      " The flow of portfolio capital investment, one form of \"hotmoney,\" declined to about $1 billion a month in late 2005, it reported, from the average level of $8billion a month seen from late 2003 through mid-2005. It appears, the Economist suggests, that \"thespeculators who have been furiously pumping money into China for the past three years have at lastgiven up and gone home.\" The magazine predicts that China's trade surplus may also start to falland import growth may revive.  If the data for the last part of 2005 are correct and if the Economist's predictions are right --and it is much too soon to know whether these are so -- then the People's Bank of China may havean easier time managing monetary policy in the future.",
      " There would be less need, for example, forit to print yuan in order to keep down the value of the yuan by buying up the inflow of dollars. Thiswould make it easier, if the PBC wishes to do so, for the central bank to relax its control and to allowmarket forces more influence on the yuan-dollar exchange rate.  Would Revaluation Hurt China's Banks? Many believe China needs to reform its financial system before the yuan can rise appreciablyin value. If revaluation occurs first, they say, the banking system may not be able to cope and thismight have negative effects on economic growth. Others believe,",
      " however, that -- while more reformis needed -- China's banking system should be able to accommodate more flexibility in the value ofthe yuan. Nevertheless, there is serious worry on the part of many that a floating exchange ratesystem could lead to destabilizing capital outflows. (89)  The IMF says that major steps have been taken to restructure the banking system (eventhough further action is required) and the condition of the banking system is no longer an obstacleto exchange rate reform. As a result of recapitalization, sales of nonperforming loans, and otherreform efforts, the IMF staff reported, the capital strength,",
      " asset quality and operating results forChina's banks have significantly improved. In the old days, state banks made loans to state industrywith little expectation those loans would be repaid. Thus the savings of Chinese individuals weresunk into subsidizing these money-losing firms.  Most of these \"legacy\" loans have been transferred to four government-owned assetmanagement corporations (AMCs), so the government budget rather than the banking system willbear the cost of those bad loans. Consequently, the IMF reports, bad loan ratios for the majorcommercial banks (the four largest state banks and 14 joint stock commercial banks) have fallenfrom about 24% of loans in 2002 to about 13%",
      " in September 2005. (90) These institutions accountfor about three-quarters of total bank assets. They say that efforts to tighten the banks' balance sheetsand to strengthen their internal controls and risk management procedures are still needed. The IMF does not report figures for the ratio of bad loans (non-performing loans) in thebanking system as a whole because the procedures for reporting bad loans by small banks aredifferent from those for large banks. Two IMF economists, Prasad and Wei, reported in their 2005article that non-performing loans in the banking system amounted to 30% of GDP in 2003. (91)",
      " IMF staff indicates thatthis larger figure calculates the bad loan ratio for smaller banks in the same way that bad loans arecalculated for the larger banks. Prasad and Wei suggest that a major share of China's foreignexchange reserves may need to clear up the accumulated bad debt. Setser asserts that conditions in the Chinese banking system are grim and the costs of reformwill be great. (92) Hesays the banking system is not ready yet for a more flexible currency. Bad debt in the bankingsystem is equivalent to 20% or 30% of GDP, he says. Officials estimates reported that 40% of allloans in 2002 were non-performing,",
      " he indicates, and \"legacy\" bad loans (debt owed by state firms)totaled $400 billion. Other estimates put the figure at $650 billion, he says, or about 50% of China's2002 GDP. The recent boom in bank lending may have reduced the level to 25% or so, he says.However, he suggests, the total volume of bad debt may be higher once the bad loans made since2002 are included in the total. Setser says that many analysts believe that the government will need to buy out the bad\"legacy\"debt if it wants to improve the soundness of the banking system.",
      " The IMF's statement (seeabove) that some bad loans were transferred out of the banking system seems to confirm this view. Setser says the government will also need to provide large amounts of money to stabilize itsundercapitalized state banks. Some estimates report, he says, that the cost of cleaning up thefinancial system could equal 20% of national GDP (about $340 billion of China's 2004 GDP) andnearly all of it will be borne by the national government. This could push the national debt-to-GDPratio, he says, from 33% in 2004 to perhaps 50% overall.",
      "  IMF experts say that China does not need to resolve the problem of bad debt in its bankingsystem before its currency can be liberalized. They argue that -- so long as capital controls continue-- the yuan-dollar exchange rate could be more flexible without harming the Chinese banks. TheChinese banks know how to trade currencies and manage their foreign exchange exposure, the IMFstaff reports. They already do this in their worldwide operations. Some economists believe that Chinacannot have a flexible currency until it ends capital controls. (93) IMF experts argue,however, that China's banks cannot handle full liberalization of the capital account at this juncture.",
      " If capital controls were removed, they assert, a substantial outflow of capital from the banks wouldlikely occur and this would be very destabilizing. (94)  Options for the United States There are several ways the United States might encourage China to move more quicklytowards increasing the value of the yuan. These options or policy tools are not mutually exclusive,but it might be difficult or awkward for the United States to pursue some of them simultaneously. (95)  First, the U.S. government might continue pressing China publicly for additional changes inits foreign exchange system in order to make the international value of the yuan better reflect marketconditions and economic realities.",
      " This assumes either that China is reluctant to change or thatreformers in China will be helped by external stimulus. Second, the U.S. Government might stoppressing China publicly for change. This option is predicated on the expectation that reformers willbe able to move China more rapidly towards currency liberalization if China is not pressured fromabroad. Third, the United States could enact legislation restricting Chinese exports to the UnitedStates if the value of the yuan is not increased. This assumes that China will change its exchangerate policies only if forced to do so. Fourth, the U.S. government might refer the question to theIMF,",
      " asking the international agency to determine whether China has been manipulating its currencyin violation of IMF rules. This assumes that technical findings and persuasion by the IMF and itsmajor member countries may have effect. Fifth, the U.S. government might refer the issue to theWorld Trade Organization (WTO), alleging that the United States has been injured by unfair tradepractices linked to the undervaluation of China's currency. If the WTO found that the U.S. petitionhad merit, it could authorize trade remedies to correct the allege abuse. This assumes that exchangerate issues and questions of general system-wide subsidy will fall within the purview of the WTOrules.",
      "  Continue Public Pressure Continued public pressure is one method the United States might use to encourage China toadopt further reforms in its foreign exchange procedures. This might include official findings by theTreasury Department that China is a manipulator or strong exhortations by high-level U.S. officials. Among other things, U.S. officials might press Chinese officials to provide them more informationas to the ways they intend to link reform of their domestic economy to reform in their exchange rateregime and the criteria they might use for discerning progress.  In evaluating this option, it would be helpful to know whether Chinese officials really intendto move towards a market-based valuation of the yuan or whether they intend to drag the process outas long as possible.",
      " If China adopted the reforms announced to date mainly in response to foreignpressure, then it is possible that further pressure might persuade them to go faster. However, ifChinese officials adopted these reforms because they believe that market-based reform is in China'sbest interests, foreign pressure may complicate this process. China has a long tradition of not givingin to foreign pressure. Foreign pressure might strengthen the hand of the reformers, but it might alsostiffen resistence by the opponents of reform and make it harder for the reformers to achieve theirends.  It also might be helpful if U.S. officials and legislators had more information about China'sinternal decision making process.",
      " How strong are the reformers? What key choices do Chineseofficials believe they face as regards the economy and value of the yuan? How do they think Chinaand other countries can best determine what the true international value of the yuan might be? Whatcriteria do they believe are relevant for determining currency value and their timetable for change? Given their most recent statements, other G-7 countries will likely support the United Statesif it continues to press China for more rapid action. However, they may also back away and leavethe United States on its own if they believe U.S. efforts are potentially counterproductive.  Pursue a Policy of Restraint Instead of pressing China publicly for reform,",
      " the United States might decide on a policy ofrestraint. This is not an option in favor of the status quo. Rather, it accepts the premise that Chineseofficials want to proceed with their reform program as rapidly as economic conditions and the policyconsensus in China permits. This option assumes that overt foreign pressure may becounterproductive if it slows the process and strengthens the hand of those in China who opposereform. Arguably, the Treasury Department has shown restraint of this sort when it said, in itsrecent reports, that China was not manipulating the value of its currency.  Some might argue that the United States should view the trade and currency dispute withinthe context of its overall relationship with China.",
      " While economic issues are important, this viewwould suggest, it is also important not to raise tensions to the point where China becomes reluctantto cooperate with the United States on other issues, such as North Korea's policies on nuclearweapons. Pressing the yuan-dollar exchange rate issue to the exclusion of other important U.S.interests might be seen, from this perspective, as counterproductive. Others might respond,however, that China will cooperate with the United States in other areas when it believes that thisserves its interests.  China may have strong reasons for wanting change in its foreign exchange system. As notedbefore, China faces the prospect of serious inflation if it does not slow or stop the growth in itsforeign exchange reserves.",
      " An increase in the value of its currency would be a key way ofaccomplishing that goal.  Ironically, some kind of external encouragement may still be needed to help Chinaaccomplish its plans. Even if Chinese authorities want to move forward with their reform program,they may need some external pressure -- if only in the form of agreed deadlines and benchmarks --to help them overcome inertia when they encounter difficult choices as they put their currency reformpolicies into effect.  Restrict Exports to the United States Instead of exerting public and mostly verbal pressure, the United States could adoptlegislation restricting China's access to the U.S. market until it raises the value of its currency.",
      " Thereare several ways this could be done. The English bill ( H.R. 3282 ), Ryan-Hunter bill( H.R. 1498 ) and Schumer/Graham bill ( S. 295 ), all mentioned above, would have this effect. By raising the U.S. price of Chinese imports, they would presumably reducethe flow of Chinese exports to the United States, raise the prices paid by U.S. consumers (perhapshelping some U.S. producers) and stimulate the growth of export industries in other countries thatwould take China's place. Similar effects would likely occur if the U.S. government invoked the provisions of Section301,",
      " authorizing the U.S. Trade Representative to respond to unreasonable or discriminatorypractices that burden or restrict U.S. commerce. (96) Likewise, if the Treasury Department found in its semi-annualreport that China was manipulating the value of its currency to the detriment of the United States,consultations with China and trade actions would also be required. Under the Section 301mechanism, the United States could impose trade sanctions against Chinese goods if China does notchange its trade or foreign exchange policies. The United States could also use other U.S. trade lawsto impose special \"safeguard\" restrictions on Chinese goods if the growth in Chinese imports isfound to have caused (or threatens to cause)",
      " market disruption to U.S. domestic produce. (97) Measures of this sort areallowable under WTO rules on a temporary or limited basis but it is less clear that they may be usedacross the board or for longer periods.  It is not clear how much the price of Chinese goods would need to increase, or the volumeof Chinese exports to the United States would decrease, though, if the value of the yuan increased. Components purchased from other countries account for a major share of the value of exportsbearing the label \"Made in China.\" The cost of Malaysian or Thai inputs would not change for theproducer in China if the value of the yuan increased.",
      " The price of the final product would only needto increase by an amount sufficient to recover the higher cost of the producer's that weredenominated in yuan. Depending on the products and methods of production, it is possible that theoverall increase in product costs would be modest and the volume of Chinese exports to the UnitedStates would be large even after the value of the yuan increased. It is uncertain what the Chinese authorities and Chinese firms would do if faced withrestrictive import legislation of this sort. They might cut prices and trim profits in order to keepunchanged their share of U.S. markets. They might retaliate against U.S. exports,",
      " setting off a tradewar between the United States and China. They might also ask the WTO for authority to levy tradesanctions, on grounds that the United States was not complying with the WTO rules on internationaltrade. Alternatively, they might raise the value of the yuan in hopes that this will eliminate the newU.S. tariffs on their goods.  The WTO trade rules allow countries to levy countervailing duties to offset any subsidiesforeign exporters might receive from their home governments. WTO rules do not allow countriesto impose tariffs or restrictions merely for the purpose of excluding foreign goods. If the UnitedStates hopes to persuade other countries that its special levies on Chinese imports are fair andcompensatory,",
      " it will likely need to show that the size of the levies match the degree of subsidywhich Chinese producers receive through the undervalued yuan. It might be helpful in this regardif there were more agreement among scholars and the affected countries as to whether and by howmuch China's currency is undervalued. If the United States put special levies on Chinese goods, China might ask the WTO to rulethat the United States acted in a manner inconsistent with its obligations. (98) The countervailing dutiesand anti-dumping penalties allowed under WTO rules are usually applied to specific goods ratherthan to all exports coming from a particular country. Exchange rate manipulation might be seen asa type of general across-the-board subsidy for a country's exports.",
      " Nevertheless, there is littleprecedent (but see below) at the WTO for considering exchange rates from this perspective. TheWTO may be concerned that the rules governing world trade would be harder to enforce if countrieswere free to impose countervailing duties whenever they decided unilaterally that the currencies ofother countries were undervalued. If the WTO agreed with China's petition, it could authorize China to retaliate by withdrawingtariff concessions on U.S. goods. The WTO dispute settlement process is adjudicated with referenceto the WTO rules and there seems little room for political pressure by the United States and othercountries. Other countries could,",
      " however, submit briefs in support of the U.S. or the Chineseposition. Countries likely will give some thought to the potential impact that a trade dispute betweenthe United States and China might have more broadly on world trade negotiations. If the volume of Chinese exports to the United States declines because of new tradelegislation, the profits of foreign firms located in China which produce those goods will likely godown as well. Exporters could shift their production facilities further to the west in China, wherelabor costs are lower than on the coast. This might reduce costs enough for Chinese exporters to paythe new tariff and leave their prices unchanged.",
      " Alternatively, Chinese companies and internationalfirms might shift production to other countries where the costs of production have become lowerthan those in China because of yuan revaluation. In that case, these countries might replace Chinaas major suppliers of manufactured products to the United States. If the United States wants to keep out foreign products (not just Chinese products) whichundersell U.S. manufactures, then new legislation would be needed to penalize other countries asthey ramp up to take China's place. This would violate WTO rules and the terms of internationaltrade agreements to which the United States is a party. Because the U.S. economy needs to importforeign goods of similar value to the foreign capital it imports each year,",
      " it may be hard for the U.S.government to stop countries from expanding their exports to the United States. role. If the volumeof imports declines, however, prices for manufactured products in the United States may increase,giving U.S. producers some relief. U.S. consumers would likely need to spend a larger portion oftheir income in this case to purchase the goods which were previously produced abroad.  Take It to the IMF The United States could also pursue the issue of China's exchange rate policy at theInternational Monetary Fund. The key issue is whether China is complying with the requirementsof Article IV of the IMF Articles of Agreement and,",
      " if not, what steps it should take to comply. Though other countries seem to have preferred that the United States take the lead and break the icefor them, they are also affected by China's trade policies. Arguably, international meetings whererepresentatives of the major countries may speak with Chinese officials at the same time will bemore persuasive than scattered bilateral talks where the only strong public statements come from theUnited States.  There continues to be debate as to what, if anything, the outside world can do to acceleratethe reform process in China. In late September 2005, Treasury Under Secretary Adams demandedthat the IMF crack down on countries that violate the prohibition in Article IV against currencymanipulation,",
      " though it is not clear what tools he thought the IMF should use. (99) The IMF was, he said,\"asleep at the wheel\" and it should confront China concerning the deficiencies in its exchange ratepolicies. IMF Managing Director Rodrigo de Rato rejected that charge. (100) The IMF wasaddressing all aspects of the issue, he replied. The IMF had already investigated and rejectedsuggestions that China's currency policies warrant the use of \"special consultations.\" Rather, hesuggested, the United States should act more vigorously to straighten out its own budget andeconomic policies rather than blaming other countries for its problems.  According to IMF sources,",
      " special consultations between IMF management and a countryhave occurred twice previously in response to formal complaints by another country that it wasmanipulating its currency. In the 1990s, the United States made a complaint about Korea andGermany filed a complaint about Sweden. The two countries eventually adjusted their currencyvalues, though they may have done this for their own reasons rather than in response to IMFconsultations. In January 2006, Adams maintained that the IMF should play a stronger role enforcingexchange rates and preventing currency manipulation. (101) The IMF should demonstrate strong leadership on multilateralexchange rate surveillance, he said. \"A strong IMF role in exchange rate issues is central to thestability and health of the international economy,\" he remarked.",
      " The IMF's leaders \"should endorsesuch an enhanced role for the IMF, restoring its central role on exchange rates.\" While Adams didnot mention China by name, he said the IMF should identify countries \"whose exchange rate policiesmight not be in accord with Fund principles\" and it should \"seek to identify problematic orinappropriate exchange rate behavior.\"  However, IMF Managing Director Rato told a session at the World Economic Forum inDavos, Switzerland that he does not consider China to be a currency manipulator. He rejectedproposals that the Fund should put greater pressure on China. He said \"there is a trade-off betweenour role as confidential adviser in our surveillance work and our role as a transparent judge.\" (102)",
      " He noted that the IMFhad been the first international body to urge China to move from its fixed peg to a more flexibleexchange rate process. Rato also said the IMF should not take a proactive role on exchange rates,in response to Adam's question what the IMF should do about countries \"that are attempting tothwart balance of payments adjustments.\" On February 9, 2006, Rato outlined his future plans for the IMF. He said the IMF should putmore emphasis on surveillance but he raised several reservations about the Fund's taking the centralpolicing role Adams had proposed. (103)  The IMF is a place where the views of affected countries can be presented to China andefforts can be made to press China to revalue its currency.",
      " The IMF cannot force countries to haveexchange rate policies which mirror underlying economic conditions, even if they might benon-compliant with IMF rules. However, continuing discussion at the IMF and at other internationalmeetings serves to focus attention on the issue. At the least, it puts Chinese officials in a situationwhere they need to explain or justify their policies and to respond in some way to internationalpressure. Arguably, it has caused them to take steps towards liberalization that they otherwise mightbe reluctant to take -- or they might have taken more slowly -- if these conversations had not takenplace.  If the IMF were given the broader authority contemplated by Adams and others,",
      " thefundamental structure of the world exchange rate system would change and many countries, inaddition to China, would have to seriously revise their domestic and international economic policies. China might not be willing to make fundamental changes in its foreign exchange and economicpolicies unless other major countries make fundamental changes in their policies as well.  Refer It to the WTO Another option might be for the United States to refer the issue of China's undervaluedcurrency to the World Trade Organization (WTO). In 2004, the China Currency Coalition and 30Members of Congress petitioned the U.S. Trade Representative separately asking the Administrationto take action of this sort.",
      " The undervalued exchange rate for the yuan is a kind of subsidy forChinese exports, they argue. It lowers the cost of production in China and enables Chinese exportersto sell products abroad at prices lower than their real costs of production should allow. They believethis is an unfair practice which is inconsistent with the rules of the world trading system and theyappear to believe that a WTO dispute settlement panel would support that view if the issue were putbefore it. The Administration rejected the two petitions, however. (104) Officials expresseddoubt that the United States could win a case of this sort in the WTO, though they did not detail thereasons for their doubt.",
      " They also said that action to challenge China's exchange rate and tradepolicies in the WTO might be \"more damaging than helpful at this time.\" (105)  The WTO and IMF have a formal agreement between them which specifies that certain kindsof international finance issues shall be referred to the IMF for judgment, if they come up in thecontext of WTO deliberations, and the IMF's findings will be considered conclusive. (106) The scope of theagreement is discussed below. China's critics acknowledge that the WTO has no authority toadjudicate exchange rate issues. Some believe, however, that if the United States complained to theWTO that China was manipulating its currency in order to gain unfair trade advantage and the IMFagreed,",
      " the WTO could authorize the United States and other countries to put special tariffs onChinese goods. These would stay in effect until China raised the value of its currency.  This section discusses whether appealing this issue to the WTO is a feasible alternative. First, this section examines the question whether export subsidies arranged through exchange ratemanipulation are a \"subsidy\" as the WTO defines the term. The WTO's list of prohibited practicesis specific and limited in scope. Complaints that China is subsidizing its exports through currencymanipulation are actionable in the WTO dispute settlement process if currency manipulation is notconsidered to be covered by the agreement.",
      " Second, this section discusses two ways the UnitedStates might seek to change the rules of the world trading system so as to make currencymanipulation actionable in the WTO context. There are several contexts within the WTO where theUnited States could raise the issue and seek international agreement to revise the rules andobligations of members of the organization. In some cases, consensus or unanimity is required. Inone instance, however, a very large majority can change the requirements of the WTO in way thatapplies the changes so that new requirements apply to all member countries, even those which didnot approve its adoption. The WTO's dispute settlement process is a quasi-judicial procedure that is intended to resolvetrade disputes between countries which cannot be resolved through conciliation or negotiation.",
      " Ifa complaining country so requests, a three member panel is appointed. The panel reviews the factsand arguments in the case and renders judgment based on the facts and WTO rules. (107) The WTO AppellateBody may review the initial panel's findings and, unless the panel and Appellate Body's findings areset aside by the WTO membership by consensus, the disputing parties are expected to implementthe panel decision, together with any modifications made by the Appellate Body. If a country doesnot comply within a reasonable period of time, the WTO may authorize the complaining country toimpose retaliatory duties on the non-compliant country's goods or take other retaliatory action thecomplainant proposes.",
      " Those duties or barriers remain in force until the country complies or untilthe disputing parties otherwise resolve the issue. (108)  There are several issues with the China scenario discussed above. First, some critics maymisconstrue the nature and extent of the agreement between the IMF and the WTO. The agreementhas to do with temporary trade restrictions, not with exchange rate policies or currency manipulation. The General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade inServices (GATS) include provisions which allow countries to impose temporary trade barriers inorder to safeguard their external financial situation. Certain financial and balance of paymentsconditions must be present,",
      " however, in order for countries to be justified in taking these steps. TheIMF has the final word as to whether those conditions prevail. (109) Currency manipulationfor the purpose of gaining unfair trade advantage and exchange rate policy are not mentioned in theinteragency agreement between the WTO and IMF or in the text of the GATT itself. (110)  Second, the key issue is not so much whether China's exchange policy gives it unfairadvantages in international trade but whether this is a kind of subsidy which is prohibited by WTOrules. When Chinese officials say they need to keep their currency at roughly its present rate becausean increase might bankrupt large sectors of China's export economy,",
      " they are admitting that theirexchange rate subsidizes exports. However, the WTO has a specific definition as to the types ofthings which are subsidies and therefore prohibited under its rules. Currency manipulation is notincluded among them. When the core rules and obligations of the world trading system were laid down in 1947,with the adoption of the GATT, the world was on a fixed-parity exchange rate system managed bythe IMF. It was difficult, during this period, for countries to manipulate their exchange rates in orderto gain unfair trade advantage. During the 1970s, the fixed rate system broke down and the rulesof the IMF were changed to allow countries to have floating,",
      " fixed or whatever other types ofexchange rate systems they desire. (111) The IMF was given the task of monitoring (\"surveillance\")exchange rates but, as discussed above, it was given no effective means of enforcing its rule (ArticleIV) against currency manipulation. For its part, the GATT did not amend its rules when the IMFprocedures changed to take into account the possibility that countries might use exchange ratemanipulation as a trade policy tool. The WTO likewise took no steps when it was formed to fill thisapparent lacuna in the rules and obligations of the world trading regime.  The WTO defines the concept \"subsidy\"",
      " in very specific terms. If a government's actions donot meet the terms of the definition, even if they benefit exporters or cause trade injury, they are notactionable (subject to challenge) for purposes of the WTO dispute adjudication process. Further,to be actionable, subsidies must be specific to an industry (\"specificity.\") The WTO Agreement onSubsidies and Countervailing Measures (ASCM) expressly prohibits (112) export subsidies, whichare defined as \"subsidies contingent...upon export performance.\" The ASCM deems export subsidiesto be per se specific. Domestic subsidies are not prohibited but may be challenged if they cause tradeinjury,",
      " as specified in the ASCM.  Subsidies that are not directly export contingent are also not allowed if (1) the governmentmakes a financial contribution and (2) it benefits the recipients. Government financial support cantake a variety of forms, such as direct payments to the exporter, the waiver of tax payments or otherrevenue that would otherwise be collected from the exporter, or special government purchases or theprovision of low-cost goods and services (other than general infrastructure) which lowers the costof production. Tax subsidies to broad categories of exporters, through mechanisms such as foreignsales corporations, also meet the test for specificity.  The WTO agreement makes no mention of subsidies provided through exchange ratepractices or monetary policy.",
      " All of the subsidies mentioned in the agreement occur on the fiscalside of the government's ledger and involve a direct cost to the government. Some legal analystsbelieve that, though doing so would be difficult, it might be possible to challenge China's actions inthe WTO. (113) Benitah suggests, for instance, that if the United States were able to show that China's fixedexchange rate is a de facto export subsidy it could take advantage of the per se specificity language. He also suggests that China's fixed rate might be viewed as a form of \"in kind\" subsidy similar tothat prohibited by the ASCM. Other legal commentators believe,",
      " however, that the likelihood thatthe WTO would view China's exchange rate practices as a prohibited subsidy are at best veryslim. (114)  Some critics of China's exchange rate policies have sought to circumvent this difficulty byarguing that China pays a direct subsidy to Chinese exporters through its exchange rate policy. Thedirect financial support occurs, they say, because Chinese exporters receive more yuan in exchangefor the dollars they earn from trade than they would if the yuan were valued correctly. An exportermight receive 8 yuan from the central bank today when it exchanges its dollars for yuan, whereas itmight receive 7 yuan instead if the yuan were valued appropriately.",
      " That extra yuan is a subsidy toexporters, the theory holds, and it is therefore a direct violation of WTO trade agreements. (115)  The idea that exports can be subsidized in this fashion seems to contradict the normallyaccepted concepts about international monetary transactions. Moreover, the effects on the worldtrading system would be considerable if the idea were accepted and applied to all countries. TheChinese are perhaps more blatant in the way their official actions effect currency values, but mostgovernments do things from time to time which influence the value of their national currency. If acentral bank lowers interests rates and the exchange value of its currency declines, one could arguethat the central bank is making its national exports more competitive and increasing the amount (inlocal currency)",
      " that its national exporters earn from trade. Likewise, an increase in exchange ratesmight be seen as an effort to purchase goods from other countries for less than their true value or toreduce the price that a country's foreign investors would need to pay in real terms for foreignacquisitions. If every change in the exchange rate for a currency is deemed to provide a subsidy orraise a barrier to trade, then the current rules of the world trading system would be unworkable ina world of floating (or inaccurately fixed) exchange rates.  Some would also argue that the concept that exchange rate differences can provide a subsidyto exporters is fundamentally flawed.",
      " Regardless of the exchange rate, the exporter receives a dollar'sworth of its local currency whatever the current rate might be. When the local currency goes up invalue, the exporter receives less local currency but each unit is more valuable than before. Importedgoods would also be cheaper and a dollar's worth of local currency would buy more foreign goodsthan before. Firms that use imports as part of their commercial process would see their costs declineproportionally. In any case, the presumed subsidy implicit in the yuan exchange rate is not paid solely toexporters, as likely would be necessary for it to be found in violation of the direct payment andexport contingency provisions of the ASCM.",
      " Anybody -- exporters, tourists, banks, or personswishing to buy yuan in order to make foreign investments in China -- receives the same exchangerate for their money. It is also not clear that the exchange rate \"subsidy\" is paid by the government or at thegovernment's behest. Many organizations in China buy and sell currency and -- while the centralbank continues to have a substantial effect on currency prices -- market forces determine the contextin which the central bank exerts its influence. If an exporter sells dollars to a commercial bank, theimplicit subsidy in the transaction would be paid by the bank and not the government. If Chineseexports were priced in yuan,",
      " the purchaser would have to sell dollars and buy yuan in order to settleits bill. In that case, the purchaser would pay any subsidy that is implicit in the transaction.  It appears that a strict interpretation of the WTO's current rules would provide little latitudefor a finding that China's exchange rate practices constitute a \"subsidy\" for exports insofar as thatterm is used within the WTO. The United States has taken a \"strict construction\" view of the WTOrules. Special Trade Representative Susan Schwab told Congress in May 2006, for example, that\"the United States has emphasized the necessity for strict adherence to the Rules negotiating mandate... which requires that the effectiveness and basic principles of the WTO Antidumping and SubsidiesAgreements must be preserved.\" (116)",
      " Efforts by other countries to interpret the rules more broadlyor flexibly have been met, she said, by vigorous U.S. attacks.  Schwab also said that \"initiating a WTO case on this matter [currency manipulation] wouldplace China in the position of defending, rather than reforming, its currency regime.\" (117) This would be the firstoccasion where the WTO was asked to resolve a currency dispute, she said, and it \"would thereforehave an unpredictable outcome and take a relatively long time to reach completion.\" Some suggestthat a WTO decision against the U.S. position could have the effect of making currency manipulationan implicitly acceptable practice under the WTO,",
      " a result quite contrary to U.S. goals. Schwab saidthat continued dialog with China about its currency regime would likely be a more constructivemeans for resolving this concern.  Article IV of the IMF charter prohibits countries from manipulating their exchange rates forthe purpose of gaining an unfair trade advantage. Giving the IMF the authority to enforce thatprovision of its charter would be one way of addressing the currency manipulation problem. However, as noted above, this could require major changes in the structure of the world financialsystem and it could give the IMF new authority over the economic policies of its member countries. Many countries might be reluctant to adopt far-reaching changes of this sort merely to address theexchange rate aspects of a controversy about international trade.",
      " It might be possible to address this issue through adjustments in the rules governing worldtrade. It could be argued, for example, that restrictions on currency manipulation should be includedin the rules of the WTO in order to make its procedures consistent with the requirements of theArticles of Agreement of the IMF. The IMF may not have the effective authority to enforce theprohibition in its Articles of Agreement against currency manipulation for the purpose of unfair tradeadvantage. This does not mean, however, that the world must live with the problem of currencymanipulation and contrary effects it may have on the relative efficiency of international productionand the patterns of international trade. The WTO could choose instead to incorporate this sameprohibition against currency manipulation into its own text in order to take deleterious trade effectsinto account.",
      "  There are two ways the United States might seek to make exchange rate manipulationactionable within the WTO dispute settlement framework if it wished to pursue the issue. First, itcould raise the issue during the Doha Round trade negotiations. Second, it could raise the issueseparately at the WTO Governing Council or the WTO Ministerial Conference in hopes of garneringa sufficient majority to reinterpret the WTO rules or to amend the trade agreements. In both cases,the goal would be adoption of changes in the WTO language in order to make exchange ratemanipulation a prohibited trade practice.  First, the United States might broach the issue in the current world trade negotiations.",
      " TheDoha Round of trade negotiations is currently discussing major changes in the basic ground rulesfor world trade as well as possible adjustments in tariff rates. The United States could ask that thecurrency manipulation issue should be added to the agenda. There are already many difficultsubjects on the agenda, however, and the WTO members have not yet agreed on a framework fornegotiating the most contentious issues before them. Adding another controversial issue to theagenda may not make the task of the negotiators any easier. On the other hand, nobody knows atthis point how many countries might want to make currency manipulation actionable under WTOrules.  Alternatively, the United States could raise the issue of currency manipulation in the WTO'sGoverning Council and in the biannual meeting of its Ministerial Conference.",
      " The Doha roundnegotiations seem to be in trouble and it may be too late, as a practical matter, to add anothercontroversial issue to the agenda. The Ministerial Conference consists of the trade ministers of allthe WTO member countries. These are the top policy making bodies of the WTO. Positive actionby them could lead to a change in WTO treatment of the exchange rate issue, either throughreinterpretation of the existing WTO rules or through amendment to the international agreementsthemselves. (118)  Article IX of the Agreement Establishing the World Trade Organization (WTO Agreement)says that decisions shall be made by consensus.",
      " However, it says, when consensus cannot beachieved, decisions shall be made on the basis of a majority of the votes cast, each country havingone vote. Interpretation of the charter and of international trade agreements and amendments tothose documents require a higher majority, however, to be effective. Article IX of the WTO chartersays that the General Council and Ministerial Conference have exclusive authority to adoptinterpretations of the WTO Agreement and the multilateral trade agreements such as the GATT,GATS, TRIPS, ASCM, etc. Interpretations are to be based on recommendations of the Council andrequire an affirmative vote of three-quarters of the entire WTO membership.",
      "  In theory, a three-quarters vote of the General Council and Ministerial Conference couldinterpret the existing trade rules in such a way as to make exchange rate manipulation for the purposeof gaining unfair trade advantage actionable under WTO rules. However, Article IX says that theinterpretation clause should not be used to undermine the amendment clause (Article X) of the WTOcharter. The procedural difficulties of using Article IX are daunting. A three-quarters vote of theentire membership is required, yet at most meetings of the WTO less than that share of themembership is in attendance at any one time. Nevertheless, there are sections of the GATT whichmight be considered anew in terms of their contemporary relevance.",
      " Article XV says, for instance,that the contracting parties \"shall not, by exchange action, frustrate the intent of the provisions of thisAgreement, nor, by trade action, the intent of the Articles of Agreement of the InternationalMonetary Fund.\" Whether this could be interpreted as meaning that members of the WTO shouldnot violate Article IV of the IMF charter by manipulating their currency might be a matter for debate.  The United States could also propose that the WTO Agreement should be amended. ArticleX of the WTO Agreement says that any country may propose to the Ministerial Conference that theWTO charter or the multilateral trade agreements should be amended.",
      " Amendments can also beproposed by the WTO General Council or its subsidiary bodies. The Ministerial Conference mayadopt amendments to these documents by consensus. If consensus is not reached, then theConference may recommend by a two-thirds vote of the entire membership to submit a proposedamendment to the WTO's member countries for their consideration. Generally, amendments becomeeffective if they are ratified by two-thirds of the WTO's member countries. Amendments to a fewarticles of the WTO charter and the multilateral trade agreements require a unanimous vote. However, none of these seem to involve exchange rate issues or questions of export subsidy. Theimpact of any amendment to the WTO Agreement or the multilateral trade agreements may belimited,",
      " however. Article X says that any amendment which affects member rights and obligationsshall apply only to the countries which ratified it. One prominent WTO legal scholar, John H.Jackson, says that, in practice, this means that any changes of a substantive nature would apply onlyto the countries which endorsed them. (119) It would seem likely, then, that an amendment which said thatcurrency manipulation for the purpose of achieving unfair trade advantage was not an acceptabletrade practice would apply only to the countries which endorsed it. The Ministerial Conference can also decide by a three-quarters vote of the entiremembership, however, that an amendment shall apply to all countries even if all countries have notratified its adoption.",
      " Article X says that the Ministerial Conference may decide that a country whichdoes not accept an amendment within a time period specified by the Conference \"shall be free towithdraw from the WTO or to remain a Member with the consent of the Ministerial Conference.\" Presumably, serious negotiations would predate any decision that a country would be allowed toremain a WTO Member without accepting the application of a new amendment to itself.  It cannot be known in advance whether the United States and other countries that areconcerned about the trade effects of currency manipulation would succeed in gaining the votesnecessary to reinterpret or amend the trade rules. This is a very steep requirement.",
      " While theUnited States and its associates were lobbying the membership to consider the change, China andother countries which employ that practice would presumably be lobbying the membership to votethe other way. The result would likely depend on the strength of the arguments brought forth insupport of the initiative and the number of countries that believe that currency manipulation for thepurpose of gaining unfair trade advantage is injuring their interests or is otherwise undesirable.  It may not be possible to achieve the three-quarters positive vote needed to reinterpret theWTO agreement or to adopt amendments which are mandatory for all member countries. Nonetheless, discussion of this issue within the WTO may have salutary effects.",
      " It would requirethe countries which favor use of this trade practice to defend their policies and to explain why theybelieve currency manipulation is an appropriate tool of trade policy. The countries which might beamenable to changes in the WTO rules might also be identified. This information may be usefulif the United States decides to seek a negotiated arrangement during a later phase of the Doha tradenegotiations or in some future round of talks. A strategy of taking the Chinese currency issue to the WTO is not likely to lead to a promptresolution of the controversy. It seems doubtful that adequate grounds can be found, given thecurrent language of the WTO agreement and the accompanying multilateral trade agreements,",
      " tosuccessfully address the question in the WTO dispute settlement process. Addressing the questionin the WTO policy process may offer opportunities for building support for changing the rules andguidelines used by organization, however. Discussion in the General Council and MinisterialConference would offer the United States an opportunity to discuss why, as a general principle,currency manipulation should not be a legitimate tool of national trade policy. It need not bediscussed, in this context, as an issue affecting only China. Obtaining the three-quarters vote tochange the language or prevailing interpretation of the WTO agreements would be difficult. Discussion in this context may help identify potential supporters and lay the groundwork for possiblyincluding currency manipulation as an additional agenda item in future trade negotiations.\n"
    ],
    "length": 28313,
    "hardness": null,
    "role": null
  },
  {
    "id": 95,
    "question": null,
    "answer": "Congress established two CMS-administered programs--the Electronic Prescribing Program and the Electronic Health Records (EHR) Program--that provide incentive payments to eligible Medicare providers who adopt and use health information technology, and penalties for those who do not. The Medicare Improvements for Patients and Providers Act of 2008 required GAO to report on the Electronic Prescribing Program. To do so, GAO examined how CMS determines which providers receive incentive payments and avoid penalties from that program and how many providers received incentive payments in 2009. Also, GAO was asked to examine how the requirements of the two programs compare. GAO reviewed relevant laws and regulations, interviewed CMS officials, and analyzed CMS data on incentive payments made for 2009, which were the most recent data available for a full year. CMS analyzes information reported by eligible providers on their Medicare Part B claims--which are used to submit charges for covered services--to determine which Medicare providers should receive Electronic Prescribing Program incentive payments or be subject to penalties. In 2009--the first year the program provided incentive payments--CMS paid approximately $148 million in incentive payments to about 8 percent of the approximately 600,000 Medicare providers who had an applicable patient visit--that is, supplied 1 of 33 CMS-designated services typically provided in the office or outpatient setting. For 2009, CMS examined Part B claims to determine whether, after each applicable patient visit, providers marked any one of three electronic prescribing reporting codes used to report information on the adoption and use of electronic prescribing systems. To receive an incentive payment that year, the provider had to report the codes for at least 50 percent of applicable patient visits, and at least 10 percent of the provider's total allowed Medicare Part B charges for the year had to be from the applicable patient visits. CMS made changes in the reporting requirements for 2010. For example, the agency reduced the number of reporting codes to one and required that individual providers report the code after at least 25 applicable visits, instead of for 50 percent of applicable visits. From 2012 through 2014, the Electronic Prescribing Program will assess penalties on providers that do not adopt and use electronic prescribing. Individual providers will have to submit the electronic prescribing reporting code at least 10 times in the first 6 months of 2011 to avoid penalties in 2012. Although GAO found similarities in the technology and reporting requirements for both programs, GAO also found that the requirements of the two programs are inconsistent in several areas. The EHR Program provides incentives from 2011 to 2016 and introduces penalties beginning in 2015, while the Electronic Prescribing Program provides incentives from 2009 to 2013 and provides for penalties from 2012 to 2014, when the program ends. Both the EHR and Electronic Prescribing Programs require providers to adopt and use technology that can perform similar electronic prescribing-related activities. However, the EHR Program requires providers to adopt and use certified EHR systems that meet criteria established by HHS, which include electronic prescribing-related capabilities, while the Electronic Prescribing Program does not have a certification requirement. As a result, providers have no assurance that the systems they invest in will meet the Electronic Prescribing Program's requirements. Additionally, the two programs have established separate reporting requirements related to electronic prescribing, potentially requiring physicians--the largest and only group of providers eligible to earn incentive payments in both programs--to report to both programs from 2011 through 2014. CMS recognizes that this duplication places additional burden on physicians; however, CMS is still in the process of developing a strategy to address this duplication.\n",
    "docs": [
      "Background HHS and others have promoted electronic prescribing as one way to  improve the quality of health care that beneficiaries receive and as one  way to reduce costs. Health care costs are typically paid for by health care  payers, such as CMS in the Medicare Program. In traditional, or paper- based, prescribing, health care providers that are licensed to issue  prescriptions for drugs (e.g., physicians or physician assistants in some  states) write a prescription, and the beneficiary takes that prescription to a  dispenser (e.g., pharmacy) to be filled. In contrast, electronic prescribing  consists of a licensed health care provider using a computer or hand-held  device to write and transmit a prescription directly to the dispenser.",
      "  Before doing so, the health care provider can request the beneficiary\u2019s  eligibility, formulary, benefits, and medication history. This information  can be used to improve quality and reduce costs. For example, a health  care provider can use this information to avoid potentially adverse drug  events such as drug-to-drug or drug-to-allergy interactions and to prescribe  less-expensive medications, such as lower-cost generic drugs. Figure 1  illustrates the flow of information during the electronic prescribing  process and identifies areas in this process that may result in  improvements in the quality of health care provided to beneficiaries and  reductions in costs to health care payers.",
      " Appendix II provides  information from studies measuring whether or to what extent electronic  prescribing improves quality or reduces costs. Eligibility for the  Electronic Prescribing and  EHR Programs The types of Medicare providers eligible to earn incentive payments or  who may be subject to penalties in the EHR and Electronic Prescribing  Programs were established in statute, and although they overlap they are  not identical. Specifically, only physicians, who are the largest population  among each program\u2019s eligible providers, can earn incentive payments or  be subject to penalties from both programs, but they cannot receive  incentive payments or be subject to penalties from both programs during  the same year.",
      " Other health care providers, such as nurse practitioners  and physician assistants, are only eligible to receive incentive payments or  are subject to penalties from the Electronic Prescribing Program. (See  fig. 2.) Incentive Payments and  Penalties in the Electronic  Prescribing and EHR  Programs There is some overlap in the time frames for incentive payments and  penalties for the Electronic Prescribing and EHR Programs. Incentive  payments for the Electronic Prescribing Program are available from 2009  through 2013. Incentive payments for the EHR Program begin in 2011 and  may be available until 2016,",
      " depending on which calendar year the  provider initially receives an incentive payment from the program.  Incentive payments for both programs are determined by multiplying the  provider\u2019s total allowed charges for provider services covered by Medicare  Part B for the year by the incentive percent authorized by statute.  However, in the EHR Program the year in which the provider first adopts  and meaningfully uses the EHR technology determines the maximum  annual incentive payment a provider can earn and the total number of  years incentive payments are available. For both programs, incentive  payments are disbursed after providers demonstrate that they met the  applicable program requirements. Figure 3 displays the timeline and  maximum incentive payments and penalties for both programs.",
      " (App. IV  provides additional detail on the annual and total incentive payments an  eligible provider could receive from the EHR Program based on the initial  year the provider receives an incentive payment.) By law, providers  cannot receive an incentive payment for both programs during the same  year. Penalties for the Electronic Prescribing Program and the EHR Program  may be automatically applied to providers that fail to meet the programs\u2019  requirements. Penalties for the Electronic Prescribing Program begin in  2012 and end after 2014. Penalties for the EHR Program begin in 2015, and  there is no statutory end-point provided for when the penalties will end.",
      "  Since the Electronic Prescribing Program ends after 2014 and penalties for  the EHR Program do not begin until 2015, providers will not receive  penalties from both programs during the same year. However, providers  who are subject to penalties from the Electronic Prescribing Program in  2014 and who are subject to penalties from the EHR Program in 2015 will  face a higher penalty from the EHR Program\u20142 percent instead of   1 percent. Similar to the incentive payments, penalties for not adopting a  program\u2019s technologies are also calculated by multiplying the provider\u2019s  total allowed charges for provider services covered by Medicare Part B by  the penalty percent authorized by statute.",
      " Penalties will be assessed by  reducing the reimbursement that the provider would ordinarily receive for  furnishing Part B services by the applicable penalty percentage. The amount of incentive payments or penalties eligible providers may  receive depends on the year in which the provider chooses to begin  participating in\u2014that is, meeting the requirements of\u2014either or, if eligible,  both programs. In general, the earlier a provider begins participating in the  program, the more incentive payments the provider will earn and the  fewer penalties the provider will be assessed. Figure 4 below presents  three scenarios of participation in the Electronic Prescribing and EHR  Programs between 2009 and 2018.",
      " In each scenario, we assume that the  provider is eligible for both programs and has $24,000 in total allowed  Medicare Part B charges each year. Reporting Requirements  for the EHR Program CMS will develop the reporting requirements that providers will have to  meet for the EHR Program in three stages. To date, CMS has only  developed the reporting requirements that eligible providers will have to  meet to receive incentive payments for the first stage, which will apply to  providers first obtaining incentive payments from the EHR Program from  2011 through 2014. By the end of 2011, CMS expects to develop reporting  requirements for receiving incentives in the second stage and,",
      " by the end  of 2013, develop reporting requirements for receiving incentives in the  third stage. CMS has stated that it may include information on the  reporting requirements that eligible providers must meet to avoid penalties  at the same time it issues regulations describing the third-stage  requirements. CMS intends to make the reporting requirements more  stringent over time as EHR technology and providers\u2019 use of that  technology becomes more sophisticated. To receive an incentive payment for the EHR Program, eligible providers  must meet or exceed a total of 20 reporting requirements established by  CMS. Of the 20 reporting requirements, 15 are mandatory, and providers  must choose an additional 5 from a menu of 10 other reporting  requirements.",
      " The reporting requirements encompass a variety of  activities related to the delivery of health care to encourage providers to  capture the following types of information in their EHR systems: patient  demographics and clinical conditions, use of clinical decision support,  and the coordination of care across health care settings. See app. V for a  complete list of the stage-one reporting requirements for receiving  incentive payments. The reporting requirements that CMS develops for the second and third  stages of the EHR Program may be influenced by the Patient Protection  and Affordable Care Act of 2010 (PPACA), which directed CMS to develop  a plan to integrate the reporting requirements used in the EHR Program  with the information that CMS collects from eligible providers in the  Physician Quality Reporting System (PQRS). Similar to the EHR and  Electronic Prescribing Programs,",
      " CMS, as directed by Congress,  implemented PQRS to provide incentive payments to eligible providers  who satisfactorily reported data on various quality measures and impose  penalties on those providers who did not. Specifically, PPACA directed  CMS to develop an integration plan by January 1, 2012, that would identify  reporting requirements that could be used to demonstrate meaningful use  for the EHR Program and also be used to demonstrate quality of care  provided to individuals for PQRS. CMS Analyzed  Medicare Part B  Claims to Pay  Electronic Prescribing  Program Incentive  Payments to about   8 Percent of Certain  Medicare Providers  for 2009 To determine which providers should receive the Electronic Prescribing  Program\u2019s incentive payments,",
      " CMS analyzes information reported by  providers on their Medicare Part B claims, which are used to submit  charges for covered services. To determine which providers are subject to  penalties, which begin in 2012, CMS will also analyze information reported  by providers on their Part B claims, but the requirements for avoiding  penalties are different than those for obtaining incentive payments. In  2009, CMS paid incentive payments to about 8 percent of certain Medicare  providers\u2014that is, of the over 597,000 Medicare providers who had at least  one applicable visit during 2009\u2014and another 7 percent of those same  Medicare providers participated in the Electronic Prescribing Program but  did not receive incentive payments.",
      " CMS Analyzes Information  Reported by Providers on  Part B Claims to  Determine Which  Providers Should Receive  Incentive Payments and  Avoid Penalties Incentive payments for the Electronic Prescribing Program are available  from 2009 through 2013, and to determine which providers meet the  program\u2019s requirements and should receive the payments, CMS analyzes  information reported by providers on their Part B claims. Specifically, for  2009, CMS first examined 2009 Part B claims to determine whether, after  each applicable patient visit, providers marked any one of three electronic  prescribing reporting codes used to report information on the adoption  and use of electronic prescribing systems.",
      " For 2009, the three electronic  prescribing reporting codes were:  the provider had a qualified electronic prescribing system and used it to  generate all prescriptions during the visit; the provider had a qualified electronic prescribing system but did not use  it to generate one or more prescriptions during the visit for one of the  following reasons: the patient requested a paper prescription, the  pharmacy could not receive an electronic transmission, or the prescription  was for a narcotic or other controlled substance and could therefore not  be electronically prescribed; and the provider had a qualified electronic prescribing system but did not  generate any prescriptions during the visit. By submitting any one of the three electronic prescribing reporting codes  to CMS,",
      " providers attested that they met the program\u2019s technology  requirement by adopting a qualified electronic prescribing system and are  eligible to earn incentive payments from the program. Second, CMS analyzed the 2009 Part B claims to determine which of the  providers who submitted the electronic prescribing reporting codes also  met or exceeded both components of the following reporting  requirement:  the provider submitted one of the three electronic prescribing reporting  codes at least 50 percent of the time that the provider had an applicable  visit; and   at least 10 percent of the provider\u2019s total allowed Medicare Part B charges  for the year were from the services designated as applicable patient visits.",
      " If the provider met or exceeded the reporting requirement, CMS gave the  provider an incentive payment for 2009, which the agency calculated as   2 percent of the provider\u2019s total allowed Medicare Part B charges for the  year and by applying a small adjustment factor. For 2010, to increase the adoption of electronic prescribing technology,  CMS made some changes to the Electronic Prescribing Program\u2019s  reporting requirement that providers had to meet in order to receive an  incentive payment. CMS eliminated the three electronic prescribing  reporting codes for 2009 and replaced them with a single code for  providers to submit to CMS. The new code indicates that after each  applicable visit the provider generated and transmitted at least one  prescription during the visit using a qualified electronic prescribing  system.",
      " The agency stated that it believed that this change would simplify  reporting. CMS also changed the first portion of the reporting requirement  related to how frequently providers must submit the new electronic  prescribing code in order to receive an incentive payment. Instead of  requiring that providers submit the electronic prescribing reporting code  at least 50 percent of the time that they had an applicable visit\u2014the  requirement in 2009\u2014CMS required that an individual provider submit the  new electronic prescribing reporting code for at least 25 visits. CMS noted  that the agency believes that meeting the 2010 reporting requirement is  achievable by a majority of eligible providers. If providers participated in  the Electronic Prescribing Program as a group practice containing 200 or  more providers\u2014a new option in 2010\u2014the practice had to submit the  electronic prescribing reporting code for at least 2,",
      "500 applicable visits  before all of the providers in the practice could receive incentive  payments. When it proposed the change to at least 25 and at least 2,500  visits for individual providers and group practices, respectively, CMS  noted that it assumed that once a provider has invested in an electronic  prescribing system, integrated the use of that system into the practice\u2019s  work flows, and used that system to some extent, the provider is likely to  continue to use the electronic prescribing system for most of the  prescriptions generated. The other component of the reporting  requirement remained unchanged from 2009: at least 10 percent of the  provider\u2019s or practice\u2019s total allowed Medicare Part B charges for the year  were from the services designated as applicable visits.",
      " Finally, as an  individual or as part of a group practice, providers could report the  electronic prescribing code on their Part B claims, as they did in 2009, or  they could do so using one of two alternative reporting mechanisms CMS  created. CMS has described how it will determine which providers should receive  incentive payments for 2011, but the agency has not yet indicated how it  will determine which providers should receive incentive payments for  2012 or 2013. CMS will determine which providers meet the program\u2019s  requirements and should receive an incentive payment in 2011 generally  using the same methods the agency used in 2010.",
      " However, one important  change CMS made for 2011\u2014one that is consistent with changes the  agency is making to PQRS\u2014is that CMS expanded the definition of group  practice to include practices containing 2 through 199 individuals and will  require those group practices to report the electronic prescribing code for  a minimum of between 75 and 1,875 applicable visits, depending on the  size of the group practice. The requirement for group practices of 200 or  more providers is unchanged; those practices must report the code for at  least 2,500 applicable visits. From 2012 through 2014, the Electronic Prescribing Program will assess  penalties on individual providers and group practices that do not adopt  and use electronic prescribing.",
      " To avoid these penalties in 2012, individual  providers and group practices will have to meet certain reporting  requirements. Individual providers will have to submit the electronic  prescribing reporting code on their Part B claims for at least 10 applicable  visits between January 1, 2011, and June 30, 2011. However, CMS will  not penalize certain individuals in 2012 if they do not prescribe or do so  infrequently. In addition, both individual providers and groups that  practice in rural areas or areas with a limited number of pharmacies that  accept electronic transmissions will be exempt from penalties. The  reporting requirement for individuals and the exemption criteria are  consistent with the agency\u2019s statement that it does not want to penalize  providers with low prescribing volumes.",
      " Group practices will have to  submit the electronic prescribing reporting code on their Part B claims the  same number of times required to receive incentive payments in 2011, but  they must do so within the 6-month period from January 1, 2011, through  June 30, 2011. For example, group practices containing 200 or more  providers will have to submit the electronic prescribing reporting code at  least 2,500 times from January 1, 2011, through June 30, 2011. CMS has  noted that it did not think that group practices would be disadvantaged by  having to meet the reporting requirement in a 6-month period to avoid the  penalty in 2012 rather than in a 12-month period to earn an incentive in  2011 because the agency requires group practices to submit the electronic  prescribing reporting code fewer times on average to earn an incentive  payment than it requires for individual providers to submit to earn an  incentive payment.",
      " CMS has not yet established all the requirements for providers to avoid  penalties in 2013 or 2014. However, for 2013, CMS has indicated that it  will not penalize individual providers or group practices that year if they  reported the electronic prescribing code the minimum number of times  required to qualify for incentive payments in 2011. Additionally, CMS  indicated that it may publish an alternative reporting requirement that  providers could meet to avoid penalties in 2013. A CMS official that we  interviewed told us that the agency could, for example, require individual  providers to submit the electronic prescribing reporting code at least 10  times between January 1,",
      " 2012, and June 30, 2012, in order to avoid  penalties in 2013. CMS is exploring an alternative to using electronic prescribing code  submissions to determine which providers should receive incentive  payments or penalties. As a part of CMS\u2019s Medicare Part D, which provides  outpatient prescription drug benefits for Medicare beneficiaries, CMS has  required that Part D plan sponsors submit additional data on the claims  they send to Medicare for reimbursement. CMS officials believe that  Medicare Part D data could be used at some point instead of the electronic  prescribing reporting code to determine which providers should receive  incentive payments. However, CMS officials have concerns about the  reliability of data from Part D claims,",
      " and note that these concerns should  be resolved before the data can be used. CMS does not have specific  plans or a time frame for implementing such a change. CMS Paid about 8 Percent  of Certain Medicare  Providers Electronic  Prescribing Program  Incentive Payments for  2009 CMS paid Electronic Prescribing Program incentive payments for 2009 to  about 8 percent (about 47,500) of the over 597,000 Medicare providers who  had at least one applicable visit during 2009. Each of these  approximately 47,500 providers received incentive payments equal to   2 percent of their total allowable Medicare Part B charges in 2009,",
      " with  payments totaling approximately $148 million. The mean payment was  about $3,120, the median payment was about $1,700, and the five highest  payments were between about $54,500 and $67,500. CMS disbursed these  payments to providers for 2009 in September and October 2010. CMS  officials expect that the number of Medicare providers reporting the  electronic prescribing reporting code in 2010 will increase over 2009 and  noted that lowering the reporting requirement for 2010 to submitting the  applicable electronic prescribing reporting code for at least 25 visits may  increase the number of providers receiving incentive payments.",
      " CMS  officials also told us that the penalties, which do not begin until 2012,  might have a bigger effect on participation than the incentive payments. For the 2009 Electronic Prescribing Program, the percentage of Medicare  providers who received incentive payments and the average incentive  payment varied by state. (See fig. 5 and fig. 6.) Although Minnesota and  Wisconsin had the largest share of providers receiving incentive payments  at about 17 and 15 percent, respectively, providers in those two states also  received the lowest mean incentive payment at about $740 and $1,500,  respectively. Alaska and North Dakota had the smallest share of providers  receiving incentive payments at about 2 percent each.",
      " Providers in Florida  and South Carolina had the highest mean incentive payments at about  $5,800 and $4,700, respectively. According to a report prepared for CMS  about the 2009 Electronic Prescribing Program, the physician specialties  with the largest number of providers that earned incentive payments were  family practice and internal medicine, and the nonphysician specialties  with the largest number of providers that earned incentive payments were  nurse practitioners and physician assistants. About 87,500 Medicare providers\u2014approximately 15 percent of Medicare  providers who had at least one applicable visit during 2009\u2014participated  in the program in 2009 by reporting the electronic prescribing reporting  codes to CMS.",
      " However, about 40,000 of those participating providers\u2014 approximately 7 percent of Medicare providers who had at least one  applicable visit during 2009\u2014did not receive incentive payments because  they did not meet or exceed both components of the reporting  requirement. (See fig. 7.) Specifically, these providers (a) submitted the  electronic prescribing reporting codes less than 50 percent of the time that  they had an applicable visit, (b) had less than 10 percent of their total  allowed Medicare Part B charges for the year from the services designated  as applicable visits, or (c) both (a) and (b)",
      " occurred. The vast majority of  the about 40,000 Medicare providers that participated in the program but  did not receive incentive payments submitted the electronic prescribing  escribing  codes less than 50 percent of the time they had an applicable visit.  codes less than 50 percent of the time they had an applicable visit. While the  Requirements in the  EHR and Electronic  Prescribing Programs  Are Similar in Some  Cases, Aspects of  These Requirements  Are Not Consistent We compared the electronic prescribing\u2013related technology and reporting  requirements in the EHR Program with the requirements in the Electronic  Prescribing Program. The EHR Program provides incentives from 2011 to  2016 and introduces penalties beginning in 2015,",
      " while the Electronic  Prescribing Program provides incentives from 2009 to 2013 and introduces  penalties beginning in 2012. In comparing the programs\u2019 requirements, we  found some similarities but also areas where the requirements of the  programs are not consistent. Technology requirement. Both the EHR and Electronic Prescribing  Programs require eligible providers to adopt and use technology that  meets certain requirements. The EHR Program requires providers to adopt  certified EHR technology and the Electronic Prescribing Program requires  providers to adopt qualified electronic prescribing systems. (For more  details, see fig. 8.) Certified EHR systems and qualified electronic prescribing systems must  be able to perform similar electronic prescribing\u2013related activities.",
      " For  example, both types of systems must be able to generate and transmit  prescriptions electronically, check for potential drug and allergy  interactions, and provide formulary information. The technology that providers must adopt and use for the EHR Program  must pass a certification process, which is used to designate a technology  as having met the program\u2019s technology requirements. For the EHR  Program, HHS\u2019s ONC, through the work of several advisory committees,  established a set of standards and specifications for EHR technology and  then created a program that will certify EHR technology for use in the  EHR Program based upon those standards and specifications.",
      " According  to ONC\u2019s Web site, the certification process will ensure that the EHR  technology that providers adopt and use has the technological capabilities  necessary for providers to obtain incentive payments or avoid penalties  from the EHR Program. Further, the agency notes that certifying EHR  technology to these standards enhances the interoperability of health  information technology\u2014that is, the ability of different systems or  components to exchange information and to use the information that has  been exchanged. EHRs that conform to interoperability standards allow  health information to be created, managed, and consulted by authorized  health care providers across more than one health care organization,",
      " thus  providing patients and their caregivers the necessary information required  for optimal care. The EHR Program\u2019s certification process is designed to produce a list of  certified EHR systems and certified EHR modules, which ONC has made  available to the public on its Web site. Accordingly, this information  should allow providers to identify and adopt systems that meet the EHR  Program\u2019s technological requirements. A module is a component of an  EHR system that meets at least one of the certification criteria established  by ONC. Individual EHR modules can be certified and integrated with  other certified EHR modules to form a complete, certified EHR system.",
      " At  the time of our review, technologies certified for use in the EHR  Program\u2014that is, complete EHR systems or combinations of modules that  collectively can perform the capabilities that constitute a qualified  electronic prescribing system\u2014appeared to also meet the Electronic  Prescribing Program\u2019s technological requirements. Although according to  ONC officials, certified EHR technology is not required to provide  information on lower-cost alternatives\u2014which is a component of the  Electronic Prescribing Program\u2019s technology requirement\u2014CMS has  indicated that an electronic prescribing system that does not conform to  that component of the Electronic Prescribing Program\u2019s technology  requirement would still meet the definition of a qualified system in 2011  and until this function is more widely available in the marketplace.",
      " Although providers seeking incentive payments or trying to avoid penalties  from the Electronic Prescribing Program must adopt and use qualified  electronic prescribing systems, according to a CMS official the Electronic  Prescribing Program does not have a process like the EHR Program\u2019s to  identify and certify which electronic prescribing systems meet the   requirements of a qualified system. As a result, providers may not be  certain which systems meet the program\u2019s technological requirement. Reporting requirements. Both the EHR Program and Electronic  Prescribing Program require eligible providers to report certain  information about their electronic prescribing activities to CMS in order to  receive incentive payments, which began in 2009 for the Electronic  Prescribing Program and began in 2011 for the EHR Program.",
      " (See   fig. 9 for a summary of the two programs\u2019 electronic prescribing\u2013related  reporting requirements.) However, we also found that the electronic  prescribing\u2013related reporting requirements in the EHR Program are more  rigorous. Providers seeking incentive payments from the EHR Program  have at least five reporting requirements related to electronic  prescribing, while providers in the Electronic Prescribing Program h  Moreover, the EHR Program requires  only one reporting requirement. providers to report more-detailed information\u2014namely, information on  their use of various electronic prescribing\u2013related technological  capabilities\u2014a requirement that should increase their use of these capabilities. Additionally,",
      " while CMS has established reporting  ave  requirements providers must meet in order to avoid the penalties under  the Electronic Prescribing Program that begin in 2012, CMS has not yetidentified what providers must report in order to avoid penalties under the  EHR Program, but plans to do so in future rulemakings. We also found that the two programs\u2019 reporting requirements are not  consistent because they make certain Medicare providers subject to both  programs\u2019 reporting requirements during the same year. Specifically,  physicians\u2014the largest population among each program\u2019s eligible  providers\u2014may choose to participate in the EHR Program in 2011 because  the potential incentive payment will likely be higher under that program  than under the Electronic Prescribing Program in 2011.",
      " However, to  avoid the penalty assessed by the Electronic Prescribing Program in 2012,  CMS will require physicians to meet the Electronic Prescribing Program\u2019s  reporting requirement in 2011, even if they elect to participate in the EHR  Program in 2011. Public comments on the agency\u2019s proposed  requirements for the 2011 Electronic Prescribing Program included the  concern that providers are burdened by having to submit electronic  prescribing data more than once. In response, CMS stated that it will study  possible methods of aligning the two programs and will include this  information in the integration plan it is already required to develop by  January 1,",
      " 2012, to integrate the reporting requirements in the EHR  Program and PQRS, CMS\u2019s quality measures program. However, if CMS  adheres to this schedule, the agency will not be able to remove the  reporting burden placed on physicians subject to penalties from the  Electronic Prescribing Program in 2013, given that the requirements for  avoiding penalties in 2013 would likely be proposed in July 2011 and  finalized in November 2011. If CMS includes possible methods of aligning  the two programs in the integration plan, any action to propose and  finalize requirements will take place sometime after January 1,",
      " 2012, well  beyond the date for making changes to the program in 2013. In technical  comments provided on a draft of this report, HHS noted that it plans to  include possible methods of aligning the two programs for the 2012  program year (and possibly for the 2013 program year) in rulemaking  during 2011. Both the EHR Program and Electronic Prescribing Program require  providers seeking incentive payments to attest that they have met the  programs\u2019 reporting requirements. In the EHR Program, providers will  submit the results of their performance on each of the reporting  requirements once per program year,",
      " while providers in the Electronic  Prescribing Program attest that they adopted and used a qualified  electronic prescribing system by reporting the electronic prescribing code  to CMS. At least with reference to the EHR Program, CMS has  acknowledged that attestation may create a potential for fraud and abuse  and noted that the agency is developing an audit strategy to address this  risk. CMS officials from the Office of E-Health Standards and Services  told us they plan to make guidance on this strategy available by May 2011. In the case of the Electronic Prescribing Program, an official from CMS\u2019s  Office of Clinical Standards and Quality, which administers that program,",
      "  told us that the agency did not audit electronic prescribing codes  submitted by providers for 2009 and does not have plans to develop an  audit strategy for the program. However, this official did tell us that CMS  reserves the right to audit any program participant. Conclusions Health information technology, such as electronic prescribing, has the  potential to improve the quality of care received by patients and also  reduce costs for the health care system. To help encourage the adoption of  such technologies among Medicare providers, Congress first established  the Electronic Prescribing Program and then the EHR Program, both of  which provide incentive payments to eligible providers that adopt and use  the appropriate health information technologies and impose penalties on  those eligible providers that fail to do so.",
      " Despite both programs having a goal to expand the adoption and use of  health information technologies by health providers, and in particular,  physicians\u2014the largest and only group of providers eligible to earn  incentive payments in both programs\u2014we found inconsistencies in the  requirements. We believe these inconsistencies may limit the programs\u2019  effectiveness in encouraging the use of health information technologies.  First, we found that because the Electronic Prescribing Program lacks a  certification process like that established for the EHR Program, physicians  and other health care providers who want to obtain incentive payments or  avoid penalties from the former program have no assurance that the  systems they invest in will meet that program\u2019s technology requirements.",
      "  In contrast, physicians who invest in certified EHR systems can be assured  that in doing so they would meet the current requirements of both  programs. In addition, physicians that invest in certified EHR modules  integrated together to perform the electronic prescribing\u2013related  capabilities could also be assured that they meet the current requirements  of the Electronic Prescribing Program and that the adopted technology  could later be integrated with other certified modules to form a complete,  certified EHR system. This inconsistency between the programs has the  potential to create uncertainty among physicians as to what technology  they should adopt, because although the Electronic Prescribing Program  ends after 2014,",
      " the EHR Program continues; encouraging physicians to  adopt certified electronic prescribing technology now may also help  facilitate their later transition between the programs. Nonphysician health  care providers who are not eligible to earn incentive payments from the  EHR Program could adopt certified technology and in so doing could have  assurance that the electronic prescribing technology they invest in meets  the Electronic Prescribing Program\u2019s technology requirements. Second,  we also found that the two programs have established separate reporting  requirements related to electronic prescribing, requiring some physicians  who elect to report to the EHR Program to report to both programs in  2011 and potentially requiring physicians to report to both programs  through 2014,",
      " when penalties for the Electronic Prescribing Program end.  CMS recognizes that this duplication places additional burden on  physicians, and we believe this duplication could affect the decision of  physicians to adopt and use health information technology. However, CMS  is still in the process of studying possible ways to address this duplication,  and if the agency wants to eliminate the burden for providers in 2012, it  would need to do so during its 2011 rulemaking. In addition, CMS has not  been consistent in the steps it has taken to ensure the appropriate use of  these programs\u2019 resources. Namely, CMS plans to establish an audit  program for the EHR Program\u2014under which the maximum incentive  payment for a provider will generally not exceed $18,",
      "000 per year\u2014to  address potential fraud and abuse that might arise from the use of self- attestations, but CMS does not have plans to develop a similar approach in  the Electronic Prescribing Program, under which CMS paid providers up  to approximately $67,500 for 2009. The Electronic Prescribing Program began before the EHR Program, so  CMS has already had the opportunity to encounter and learn from  challenges in implementation. For example, in the first year of the  Electronic Prescribing Program, only about 8 percent of providers  received incentive payments, and CMS changed some of the program\u2019s  requirements in the second year to encourage greater adoption and use of  electronic prescribing technology.",
      " For the EHR Program, it is too soon to  know how many providers will adopt EHR systems. However, given that  the electronic prescribing\u2013related reporting requirements in the EHR  Program are more rigorous than the reporting requirement in the  Electronic Prescribing Program, CMS may find that it needs to modify the  EHR Program requirements to better encourage the adoption and use of  EHR systems. Because implementation of the Electronic Prescribing  Program preceded the EHR Program, CMS has an opportunity to use the  experiences gained in implementing the Electronic Prescribing Program to  inform its implementation of the EHR Program in order to determine how  to best encourage the adoption and use of health information technology  among Medicare providers.",
      " One approach could be to incorporate these  experiences into the integration plan the agency is already required to  develop by January 1, 2012, to integrate the reporting requirements in the  EHR Program and PQRS. Recommendations for  Executive Action To help improve the effectiveness of the Electronic Prescribing and EHR  Programs to encourage the adoption of health information technologies  among Medicare providers, the Administrator of CMS should take the  following three actions:    Encourage physicians and other health care providers in the Electronic  Prescribing Program to adopt certified electronic prescribing technology. Expedite efforts to remove the overlap in reporting requirements for  physicians who may be eligible for incentive payments or subject to  penalties under both the Electronic Prescribing and EHR Programs by,",
      " for  example, aligning the reporting requirements so that successfully  qualifying for incentive payments or for avoiding penalties under the EHR  Program would likewise result in meeting the requirements for the  Electronic Prescribing Program. Identify factors that helped or hindered implementation of the Electronic  Prescribing Program to help support the ongoing implementation of the  EHR Program. CMS could include consideration of such factors in the  integration plan that the agency is required to develop by January 1, 2012. To help ensure that Electronic Prescribing Program resources are used  appropriately, the Administrator of CMS should develop a risk-based  strategy to audit a sample of providers who received incentive payments  from the Electronic Prescribing Program to help ensure that providers  who receive incentive payments meet that program\u2019s requirements.",
      " A risk- based strategy could, for example, focus on those providers who received  larger incentive payments. Agency and External  Party Comments and  Our Evaluation We obtained written comments on our draft report from HHS on behalf of  CMS, which are reprinted in appendix VI. CMS agreed in full with two  recommendations, agreed in principle with one recommendation, and  disagreed with a fourth recommendation. CMS disagreed with our first recommendation that the agency direct  providers in the Electronic Prescribing Program to use technology  certified as an EHR system or module(s). While CMS said that it concurred  with the notion that eligible providers should be able to use certified EHR  systems for the Electronic Prescribing Program,",
      " it did not agree that it  should direct eligible providers to use prescribing technology that has  been certified as an EHR system. CMS said that doing so could result in  Electronic Prescribing Program participants having to replace their  qualified electronic prescribing systems with systems certified under the  EHR Program. We do not recommend that CMS direct those providers  who are already participating in the Electronic Prescribing Program to  replace their current systems with certified systems. On the contrary, the  intent of our recommendation is to have CMS encourage providers in the  Electronic Prescribing Program who have not yet adopted electronic  prescribing systems, or who plan on upgrading their existing systems,",
      " to  choose systems that have already been certified through the EHR  Program\u2019s certification process. We continue to assert our  recommendation because, as we noted in our draft report, this  certification process identifies a list of available systems that meet the  certification requirements and provides assurance that the technology  physicians and other health care providers adopt would meet the  technology requirements of the Electronic Prescribing Program.  Additionally, the physicians who later participate in the EHR Program  could be assured that the technology also meets the requirements in the  EHR Program. In our draft report, we noted that there is no comparable  process in the Electronic Prescribing Program,",
      " and as a result, providers  have no assurance that the systems they invest in for the EHR Program  will meet that program\u2019s technology requirements. Given that the  Electronic Prescribing Program ends after 2014 while the EHR Program  will continue, encouraging providers to adopt certified electronic  prescribing technology now may also help facilitate physicians\u2019 transition  between the programs. We have clarified the recommendation to state that  CMS should encourage physicians and other health care providers in the  Electronic Prescribing Program to adopt certified electronic prescribing  technology. CMS agreed with our second recommendation that it expedite efforts to  remove the overlap in reporting requirements for physicians eligible for  both programs,",
      " and noted that it plans to address this overlap in  rulemaking during 2011, where applicable. We support CMS\u2019s efforts to  expeditiously remove the overlap in the reporting requirements as we  recommended. CMS agreed with our third recommendation that it would be helpful for  the agency to identify factors that helped or hindered implementation of  the Electronic Prescribing Program to help support the ongoing  implementation of the EHR Program. While CMS identified factors that  may be affecting implementation of electronic prescribing, other factors  that may have broader applicability to the implementation of the EHR  Program could include the effect of penalties on technology adoption,",
      "  measuring compliance with program requirements, and validating self- reported attestations. CMS agreed in principle with our fourth recommendation that CMS  develop a risk-based strategy to audit a sample of providers who received  incentive payments from the Electronic Prescribing Program. In response  CMS said that it agrees that an audit of a sample of providers may be  needed, however, it disagreed that such a strategy should necessarily  focus on eligible providers who received large incentive payments, noting  that such an audit process, if implemented, could select providers at  random. As we recommended, we believe that an audit strategy should be  implemented for this program. We recommended a risk-based audit  strategy because although many providers received modest incentive  payments in 2009,",
      " some providers received payments at least three times  as high as the maximum annual incentive payment in the EHR Program.  However, if implemented by CMS, a random audit would be consistent  with the intent of our recommendation. CMS also noted that because it is  considering using Part D data in the future to determine which providers  should receive incentive payments for this program, use of these data  could also alleviate the need for an audit. However, as we noted in our  draft report, CMS officials raised several concerns\u2014concerns echoed in its  comments on our draft report\u2014about the reliability of Part D data to  determine which providers receive incentive payments.",
      " As we reported,  CMS officials told us that these data reliability concerns should be  resolved before Part D data can be used to determine which providers  should receive incentive payments for this program. HHS has also provided technical comments, which we incorporated as  appropriate. We also provided excerpts of our report to the VA, Blue Cross  Blue Shield of Massachusetts, CVS Caremark, the Florida Agency for  Health Care Administration, and organizations that participated in the  Southeastern Michigan ePrescribing Initiative, which provided technical  comments that we incorporated as appropriate. We are sending copies of this report to the Secretary of HHS, the  Administrator of CMS,",
      " and the National Coordinator for Health  Information Technology in HHS and interested congressional committees.  In addition, the report will be available at no charge on the GAO Web site  at http://www.gao.gov. If you or your staffs have questions about this report, please contact me at  (202) 512-7114 or at kohnl@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 who made key contributions to this report are  listed in appendix VII. Appendix I: List of Committees Appendix II: Effect of Electronic Prescribing  on Quality or Cost This appendix addresses congressional interest in how others have  measured whether or to what extent electronic prescribing improves  quality or reduces cost.",
      " For example, the Medicare Improvements for  Patients and Providers Act of 2008 (MIPPA) directed us to report on  information related to reductions in avoidable medical errors and  estimated savings to Medicare resulting from the use of electronic  prescribing. To address these issues, we obtained information from  organizations about research they conducted, funded, or participated in  that measured the effects of electronic prescribing on quality, cost, or  both. Specifically, we obtained information from the following  organizations: Blue Cross Blue Shield of Massachusetts, CVS Caremark,  the Florida Agency for Health Care Administration, and the Southeastern  Michigan ePrescribing Initiative.",
      " In addition, we reviewed 29 published  studies that measured the effects of electronic prescribing on quality, cost,  or both. Our information collection, review of published studies, and summaries  contained in this appendix focused on specific aspects of quality and cost  that we believed were most similar to the policy goals underlying the  development of the Electronic Prescribing Program and the Electronic  Health Records (EHR) Program. Quality. We included studies that reported findings related to beneficiary  quality, such as reductions in avoidable medical errors. Cost. We included studies that reported findings related to savings to  health care payers, which are those parties generally responsible for  paying claims for health care services,",
      " because we believed they would be  the most applicable to determining the effects of electronic prescribing on  costs for Medicare. We did not review studies that estimated potential  savings for providers, such as savings associated with reductions in time  spent writing prescriptions or resolving questions about prescriptions. The studies evaluated the effects of a variety of different types of  electronic prescribing technology, such as stand-alone electronic  prescribing systems and EHR systems that include electronic prescribing\u2013 related functions. According to the Healthcare Information and  Management Systems Society (HIMSS), EHR systems also typically  include information such as patient demographics, progress notes,  problems, medications, vital signs,",
      " past medical history, immunizations,  laboratory data, and radiology reports. Additionally, computerized  physician order entry (CPOE) systems (also referred to as computerized  provider order entry systems or computerized prescriber order entry  systems) allow for electronic ordering of medications and may include  other functions, such as ordering laboratory procedures and referrals.  Hospitals may employ CPOE systems as part of a strategy to reduce  medication errors. Some organizations and published studies evaluated  the effects of electronic prescribing systems that had clinical decision  support (CDS) capabilities, which can include checks for allergies, drug\u2013 drug interactions,",
      " overly high doses, clinical conditions, and other patient- specific dose checking, and can provide access to information on patient  medical histories, pharmacy eligibility, and formulary and benefits. It is  important to note that the electronic prescribing systems evaluated by the  organizations we obtained information from and published studies we  reviewed may have had technical capabilities that differ from the  technological requirements in the Electronic Prescribing Program or the  EHR Program. Methodology The studies utilized a variety of different methodologies, including the  following: (1) pre-post methodologies, which compare dimensions of  quality or cost before and after the implementation of electronic  prescribing systems or CPOE systems;",
      " (2) comparison methodologies,  which are used to compare dimensions of quality, cost, or both between a  control group (i.e., one that does not electronically prescribe) and an  intervention group (i.e., one that does electronically prescribe); and (3)  cost simulations and cost-benefit analyses that projected the costs and  savings of implementing electronic prescribing systems. How Electronic  Prescribing Was  Determined Some studies identified compared a population of providers that  electronically prescribed to a population that did not (e.g., handwrote  prescriptions). For example, some studies identified a population of  providers who had access to electronic prescribing systems and compared  them to a population of other providers who did not have access to  electronic prescribing systems,",
      " while other studies identified prescriptions  before CPOE implementation and compared those prescriptions to  prescriptions transmitted after CPOE implementation. Other studies only  looked at populations of providers known to be electronic prescribers.  Other studies were designed to evaluate the effect of advanced features of  the electronic prescribing system. For example, one study by Steel et al.  was designed to compare medication ordering behavior when no alert was  triggered by the CPOE system to ordering behavior after alerts were  triggered. Outcomes Measured The organizations we interviewed and published studies we reviewed  examined a variety of different outcomes in order to evaluate the effect on  quality,",
      " cost, or both. Examples of the outcomes measured to evaluate the  effect of electronic prescribing on health care quality include the  following:    medication order changes resulting from information provided by the  electronic prescribing system, such as alerts for potentially inappropriate  medications or formulary information, or changes resulting from problems  with the quality of the prescription such as errors identified by the  electronic prescribing system related to dosage, directions, or illegibility;    changes in potential or actual adverse drug events (ADE); and    provider satisfaction that the electronic prescribing system was improving  safety. Examples of the outcomes measured to evaluate the effect of electronic  prescribing on cost include the following:",
      "    drug costs or other outcomes that have cost implications, such as  formulary compliance or generic utilization; and  follow-up health care costs resulting from reductions in adverse drug  events. Reported Findings In terms of health care quality, some studies found differences in  medication error rates when electronic prescribing was used. For  example, a study conducted by Weingart et al. and funded by Blue Cross  Blue Shield of Massachusetts estimated that medication safety alerts  prevented an estimated 402 ADEs (49 serious or life threatening, 125  significant, and 228 minor) and that alerts that resulted in physicians  canceling or changing the medication order may have prevented deaths in  3 cases,",
      " permanent disability in 14 cases, and temporary disability in   31 cases. Another study by Devine et al. reported that rates of errors in  prescriptions declined from 18.2 percent before to 8.2 percent after  implementation of a CPOE system. However, some studies found no  significant differences in medication error rates before and after the  implementation of electronic prescribing systems. Some of the evaluations that focused on prescription drug costs showed  savings when electronic prescribing systems were used. For example, a  cost-benefit analysis conducted by Byrne et al. estimated that the use of  Veterans Health Information Systems and Technology Architecture  (VistA), which includes electronic prescribing and CDS capabilities of the  Department of Veterans Affairs (VA)",
      " health system electronic health  records, contributed to a cumulative $4.64 billion in value due to the  prevention of unnecessary hospitalizations and outpatient visits resulting  from prevented ADEs. In this study, the total net value of the VA\u2019s  investments in the VistA components modeled was estimated to exceed  $3.09 billion. A study by McMullin et al. of an electronic prescribing system  that provided patient formulary information shifted prescriber behavior  from selecting drugs from eight high-cost therapeutic groups to less- expensive alternatives. However, a study by Ross et al. found no  significant difference in formulary compliance between electronic  prescribers (83.",
      "2 percent) and paper prescribers (82.8 percent). Of the studies we reviewed in which the electronic prescribing systems  were reported to have CDS capabilities\u2014such as drug\u2013drug, drug\u2013allergy  alerts, or drug\u2013formulary checks\u2014most reported health care quality or  cost effects. For example, a study by DesRoches et al. reported that  providers who adopted EHR with electronic prescribing decision support  capabilities averted potentially dangerous drug\u2013drug interactions. One  study by Galanter et al. found that the likelihood of contraindicated drugs  being administered to patients of inadequate kidney function decreased by  42 percent after electronic prescribing CDS alerts were implemented.",
      "   Ko et al. surveyed providers and found that the majority viewed drug\u2013drug  interaction alerts as increasing their potential to more safely prescribe  medications. Another study by Kaushal et al. attributes the implementation  of a CPOE with CDS as leading to an estimated $28.5 million in savings\u2014 $12.9 million from decreased adverse drug events and $6 million from  decreased drug costs\u2014however, the study also estimated that the cost to  develop, implement, and operate the CPOE system was $11.8 million. Summaries of Evaluations Obtained from Organizations  Blue Cross Blue Shield of Massachusetts   Beginning in 2003,",
      " Blue Cross Blue Shield of Massachusetts contracted with software vendors to provide electronic prescribing  software, which included CDS, free of charge to high-volume prescribers in their provider network. Blue Cross Blue Shield of  Massachusetts continues to sponsor a limited number of electronic prescribing software licenses free of charge. As of September  2010, Blue Cross Blue Shield of Massachusetts estimated that 60 percent of its network physicians were electronically prescribing. A pre-post study comparing 1,932 Blue Cross Blue Shield of Massachusetts\u2019s  providers that were using an electronic prescribing device to the providers in the  network that were not electronically prescribing (control group). The preintervention  period was calendar year 2003 and the postintervention period was 2006.",
      " Whether the prescriber used an electronic prescribing device, as determined from  data obtained from Blue Cross Blue Shield of Massachusetts\u2019s pharmacy benefits  manager.   (1) Prescribing patterns by drug tier. (2) Savings in drug costs as a result of  different prescribing patterns.   (1) Prescribers who used an electronic prescribing device prescribed more generic  and on-formulary prescriptions. (2) Prescribers saved Blue Cross Blue Shield of  Massachusetts 5 percent on drug costs relative to those prescribers that did not use  an electronic prescribing device. Blue Cross Blue Shield of Massachusetts noted that some of the individuals in the  control group may have been electronically prescribing but they assumed in the  study that they were not because of the absence of data.",
      " Study #2: Fischer, M.A., C. Vogeli, M. Stedman, T. Ferris, M.A. Brookhart, and J.S. Weissman. \u201cEffect of Electronic Prescribing With  Formulary Decision Support on Medication Use and Cost.\u201d Archives of Internal Medicine, vol. 168, no. 22. (2008): 2433-39. Blue Cross Blue Shield of Massachusetts provided pharmacy claims data used by  the researchers in a pre-post study of the implementation of electronic prescribing  software with formulary decision support. The study consisted of an intervention  group of 1,198 prescribers who wrote at least one electronic prescription,",
      " and a  control group of 34,453 prescribers who did not electronically prescribe. Claims data  were collected for 18 months\u20146 months before the intervention (October 2003  through March 2004) and 12 months postintervention (April 2004 through March  2005)\u2014and data on electronic prescriptions were collected in the 12 month  postintervention period. Whether the prescriber wrote at least one electronic prescription, as captured by the  electronic prescribing system.   (1) The change in the proportion of prescriptions for three formulary tiers before and  after electronic prescribing was implemented;",
      " and (2) the potential savings  associated with this change.   (1) Electronic prescribing led to a 3.3 percent increase in Tier 1 prescribing\u2014that is,  those medications with the lowest copayment. (2) On the basis of average costs, the  study estimated that implementation of electronic prescribing software with  formulary decision support could lead to a savings of $845,000 per 100,000  patients. Study #3: Weingart, S.N., B. Simchowitz, H. Padolsky, T. Isaac, A.C. Seger, M. Massagli, R.B.",
      " Davis, and J.S. Weissman. \u201cAn  Empirical Model to Estimate the Potential Impact of Medication Safety Alerts on Patient Safety, Health Care Utilization, and Cost in  Ambulatory Care.\u201d Archives of Internal Medicine, vol. 169, no. 16. (2009): 1465-73. Blue Cross Blue Shield of Massachusetts funded and provided some data for a  study that estimated the quality improvement and savings associated with  medication safety alerts. The study examined 1,833,254 prescriptions written using  a commercial electronic prescribing system by 2,321 clinicians for 60,352 patients.  During the study period (January through June 2006), 279,",
      "476 drug\u2013drug interaction  alerts were generated. For each drug\u2013drug interaction, expert panelists examined  whether it might result in an adverse drug event and the severity of that event. The  study used published sources and payer data to estimate the costs to third-party  payers associated with different types of health care services due to adverse drug  events. All prescriptions were generated from the electronic prescribing system. The  company that developed the electronic prescribing system provided researchers  information on all drug\u2013drug interactions generated and data on the prescribers\u2019  action on receiving the alert.   (1) The likelihood and severity of the potential ADE that the alert prevented,",
      " and (2)  cost savings estimated from reduced health care utilization.   (1) The study estimated that medication safety alerts prevented an estimated 402  adverse drug events (49 serious or life threatening, 125 significant, and 228 minor).  Alerts that physicians \u201caccepted,\u201d meaning the physician either cancelled the  prescription or changed to an alternative medication, may have prevented deaths in  3 cases, permanent disability in 14 cases, and temporary disability in 31 cases. (2)  Due to lower utilization of health care services the study estimated annual savings to  be $402,619. Beginning in 2000, CVS Caremark made electronic prescribing available through its proprietary iScribe system to interested providers  by download from a Web site.",
      " In late 2004, CVS Caremark supported electronic prescribing by providing software, hardware,  installation, training, and service to providers on behalf of health care payers. Study #1: Hutchins, D.S., M. Lewis, R. Velazquez, and J. Berger. \u201cE-Prescribing Reduces Beers Prescribing Among the Elderly.\u201d CVS  Caremark, May 22, 2007. A control group study of 383,855 prescription claims written for 14,557 persons over  65 years of age between April 2002 and June 2005 by over 3,",
      "700 providers, 70 of  whom implemented an electronic prescribing tool that alerted them to the  prescribing of \u201cBeers List\u201d medications to patients over 65 years of age. Whether the prescription was dispensed before or after a provider adopted the  electronic prescribing tool. Whether use of the specific electronic prescribing tool had an effect on the  prescribing of potentially inappropriate drugs from the Beers List to the elderly. Use of the specific electronic prescribing tool that provided alerts specific to Beers  List medications can reduce prescribing of those medications among the elderly. Study #2: Hutchins, D.S., J.N. Liberman, J. Berger,",
      " S. Jan, M. M. Johnson. \u201cThe Impact of an Electronic Prescribing Solution on the  Selection and Prescribing of Cost-Effective Therapeutic Options.\u201d CVS Caremark, 2009. A pre-post control group study of over 9 million claims in seven drug classes  prescribed by one of over 29,000 providers (about 250 of which used the electronic  prescribing tool) that were filled between July 2002 and December 2005. Whether the provider used an electronic prescribing tool. Whether the use of an electronic prescribing system has an effect on prescribing  low-cost generic and mail-delivered drugs. Across multiple drug classes,",
      " study reported a link between use of electronic  prescribing systems and a greater likelihood that generic drugs were prescribed and  that they were dispensed through mail order, both of which likely lower overall costs. The Florida Agency for Health Care Administration  The Florida Agency for Health Care Administration provided Medicaid providers, at no charge, access to a CDS tool called  EMPOWERx, which allows for electronic prescribing and includes the following capabilities: provides comprehensive medication  histories, alerts providers to drug\u2013drug and drug\u2013allergy interactions, and provides formulary information. A comparison of the costs and savings for 1,000 Medicaid providers in the state in  the EMPOWERx personal digital assistant program to the total population of  Medicaid providers in the state.",
      " Whether or not the provider was in the EMPOWERx personal digital assistant  program.   (1) The average cost per patient for all prescriptions. (2) The estimated savings for  prescriptions written by providers in the EMPOWERx personal digital assistant  program, based on the difference between costs for providers in the two groups and  the number of patients associated with the EMPOWERx personal digital assistant  program providers. (3) The estimated savings for the 1,000 Medicaid providers in  the EMPOWERx personal digital assistant program based on information collected  about alerts those providers received about drug interactions in response to a  medication order,",
      " assumptions about avoidable hospitalizations, and assumptions  about hospitalization costs. In the fourth quarter of 2009 (1) average costs per patient for all prescriptions were  about $28 to $30 lower for the providers in the EMPOWERx personal digital  assistant program; (2) the cost differences between the two groups represents  estimated savings of approximately $5.5 million; and (3) by assuming that 5 percent  of the 12,480 high- or very-high-severity drug interactions would have led to  hospitalizations and that hospitalizations resulting from preventable drug interactions  are associated with an average increased cost of $4,",
      "685 per incident, the study  estimated that the state Medicaid program saved approximately $2.9 million. The Southeastern Michigan ePrescribing Initiative, a collaborative effort of employers, health plans, pharmacy benefit managers,  physician groups, and others, was launched in 2005 to speed the adoption of electronic prescribing. Some of the studies that resulted  from this collaboration are summarized below. Study #1: An official with Medco described a study it conducted. Medco is a pharmacy benefit manager and member of the  collaborative. A comparison study of a group of 1,165 physicians who electronically prescribed to  Medco\u2019s mail-order drug program and 1,",
      "000 physicians that did not. Data were  collected in the second quarter of 2008. Providers were included in the electronic prescribing group if they had sent at least  20 prescriptions electronically to Medco\u2019s mail-order drug program during the study  time period. Providers were included in the nonelectronic prescribing group if they  had not met this criterion and provided services in the same zip codes as the  providers in the electronic prescribing group. The average cost per prescription per group for retail and mail order prescriptions,  which was calculated by dividing total costs (identified through claims data) for each  category and group by the number of prescriptions for each category and group.",
      " Providers in the electronic prescribing group saved an average of $2.11 per retail  prescription and $7.44 per mail-order prescription compared to the group that did  not electronically prescribe. The Medco official noted that the findings were not tested for significance or  subjected to other more-rigorous validations. It is possible that providers in the  group that did not electronically prescribe were electronic prescribing, just not to  Medco\u2019s mail order service drug program. In addition, while the providers in each  group were from the same geographic service areas, Medco did not examine the  types of patients served by the providers, so it is possible that the groups were  serving different patient populations.",
      " Study #2: An official described a study conducted by HaldyMcIntosh, under the direction of the Southeastern Michigan ePrescribing  Initiative project manager, Point-of-Care Partners. A telephone survey of 500 providers participating in the collaborative that responded  to the survey, conducted in the fourth quarter of 2007. Only providers that were electronically prescribing were surveyed. Providers\u2019 perceptions of the effect of electronic prescribing on quality. Nearly 70 percent of respondents highly agreed that electronic prescribing improves  quality of care; almost 75 percent highly agreed that electronic prescribing improves  patient safety; approximately 70 percent were very satisfied with the ease of  identifying drug-related interactions;",
      " and more than 60 percent reported that they  changed a prescription in response to a safety alert at least once. Study #3: An official with the Health Alliance Plan described a study conducted by Henry Ford Medical Group and the Health Alliance  Plan that looked at generic utilization. A comparison study conducted in 2005 of a group of 24 physicians who  electronically prescribed from eight practice sites and 26 physicians from eight  comparable practice sites that did not. Whether the practice site had converted to electronic prescribing. Rate of generic prescribing using pharmacy claims data and associated savings. Facilities with access to an electronic prescribing system had a 1.25 percent larger  increase in their rate of generic prescribing compared with sites that did not have  access to an electronic prescribing system.",
      " The study estimated that the health plan  can save $800,000 per year for each 1 percentage point improvement in the rate of  generic prescribing. Study #4: An official with the Health Alliance Plan described a study conducted by Henry Ford Medical Group and the Health Alliance  Plan that looked at the savings associated with adverse drug events. A cost estimate conducted in 2006 of the savings associated with decreases in  ADEs. Whether a prescription was changed based on an alert from the electronic  prescribing system, identified from internal data sources. Estimated savings in (1) avoidable hospitalizations and (2) avoidable emergency  room admissions,",
      " due to the decrease in ADEs.   (1) By assuming that 2 percent of hospitalizations are attributable to ADEs, that   33 percent of those are avoidable due to use of the electronic prescribing system,  and that $7,000 is saved per avoidable hospitalization, the study estimated that  $441,000 was saved in 2007. (2) By assuming that 1 percent of emergency room  visits are attributable to ADEs, that 33 percent of those are avoidable due to use of  the electronic prescribing system, and that $500 is saved per avoidable emergency  room visit,",
      " the study estimated that $99,000 was saved in 2007. Study #5: An official with the Health Alliance Plan described a study it conducted that identified patients taking contraindicated  prescription drug combinations. A file review of pharmacy and medical claims for about 200,000 patients before  implementation of electronic prescribing (in 2004) and after implementation of  electronic prescribing (in 2007) to identify patients that were prescribed  contraindicated drug combinations. The study identified claims before and after implementation of electronic prescribing. The rate of patients taking contraindicated drug combinations. The study reported a 24 percent decrease in the incidence of patients with generally  contraindicated medications and a 48 percent decrease in patients taking  medications contraindicated for pregnancy 1 year after the implementation of  electronic prescribing.",
      " Study #6: An official with the Health Alliance Plan described a survey conducted by Henry Ford Medical Group and the Health Alliance  Plan. A 2006 survey about electronic prescribing attitudes. About 100 physicians in the  Henry Ford Medical Group responded to the survey. Only physicians who were electronically prescribing were included in the survey. A variety of questions related to electronic prescribing attitudes, some of which  focused on physician attitudes regarding the effect of electronic prescribing on  safety. Various findings reported including the following percentages of respondents who  \u201cstrongly agreed\u201d or \u201csomewhat agreed\u201d: 84.6 percent of respondents reported that  electronic prescribing has improved the practice of medicine in their clinics;",
      " 77.2  percent and 74.8 percent reported that electronic prescribing improves the safety of  the care and the quality of the care, respectively, provided to their patients; 66.7  percent reported that the drug\u2013drug warnings were helpful, 80.5 percent reported  that the drug\u2013allergy warnings were helpful, and 68.3 percent reported that the  formulary warnings were helpful. Summaries of Evaluations Obtained from Literature Review  Byrne, C.M., L.M. Mercincavage, E.C. Pan, A.G. Vincent, D.S. Johnston, and B. Middleton.",
      " \u201cThe Value from Investments in Health  Information Technology at the U.S. Department of Veterans Affairs.\u201d Health Affairs, vol. 29, no. 4 (2010): 629-638. A comparison study of the VA health system and the private-sector health systems on  information technology spending, adoption, and quality of care. The study also  conducts a cost-benefit analysis to estimate the financial value of key components of  the VA\u2019s VistA. Whether or not the health system surveyed had adopted health information  technology and whether the health information technology system had certain  capabilities as defined by six frameworks in relevant literature and internal VA and  publicly available documents.",
      "  (1) The information technology\u2013related quality of care quantified using previously  collected quality measures from the VA that could be compared to measures  available for the private sector for 2004 to 2007. (2) Cost-benefit analysis that  estimates the costs and effects of the core components of the VA VistA system from  2001 to 2007.  (1) The VA was found to have higher performance on preventive care process  measures from 2004 to 2007 relative to the private sector. The VA averaged about   15 percentage points higher than the private sector on preventive care for patients  with diabetes and 17 percentage points higher for patients with diabetes who have  well-controlled cholesterol.",
      " (2) The gross value of the investment in VistA applications  was projected to be $7.16 billion. Of the gross value, the researchers estimated that  cumulative reductions in unnecessary care attributable to VistA in preventing ADE- related hospitalizations and outpatient visits was valued at $4.64 billion, or 65 percent  of the total estimated value. The VA system electronically captures and reports allergies and adverse reactions,  inpatient and outpatient medications, medication orders, and includes CDS such as  clinical reminders and order checking. Cunningham, T.R., E.S. Geller, and S.W. Clarke. \u201cImpact of Electronic Prescribing in a Hospital Setting:",
      " A Process-Focused  Evaluation.\u201d International Journal of Medical Informatics, vol. 77, no. 8 (2008): 546-554. A pre-post study reviewing the medication orders of two different hospitals, a control  hospital that did not implement a CPOE system and an intervention hospital that did  at each of three different phases of the study\u2014a 4-week baseline phase, a 3-week  pilot phase, and 5-week post-CPOE implementation phase. At the control hospital,  247 handwritten orders were reviewed from the baseline phase, 279 handwritten  orders from the pilot phase, and 453 handwritten orders from the post-CPOE  implementation phase.",
      " At the intervention hospital, 201 handwritten orders were  reviewed from the baseline period, 283 electronically submitted orders were reviewed  from the pilot phase, and 587 orders (276 handwritten and 311 submitted  electronically) were reviewed from the post-CPOE implementation phase. Whether or not the physicians\u2019 medication orders were handwritten or submitted  electronically in the three different phases of the study, as identified from the files of  previously processed medication orders stored in the pharmacy departments of each  hospital.   (1) Rates of compliance with hospital medication protocols (such as recording date,  time, drug name, or dosage) by examining behavioral checklists used to collect  information on each prescription written;",
      " and (2) time it took for a patient to receive  antibiotics, as recorded in the hospital medication ordering database.   (1) Medication orders submitted electronically at the intervention hospital were  compliant with hospital medication protocols 79.9 percent of the time, compared to a  62.9 percent compliance rate for paper orders written at the same hospital, and a  64.2 percent compliance rate for paper orders written at the control hospital. (2) At  the intervention hospital, the average amount of time from the medication order until  the first dose of antibiotics was administered was shorter for orders submitted through  the CPOE system (185.",
      "0 minutes) than paper orders (326.2 minutes). The CPOE had CDS but the specific features of the CDS system are not discussed. DesRoches, C.M., E.G. Campbell, S.R. Rao, K. Donelan, T.G. Ferris, A. Jha, R. Kaushal, D.E. Levy, S. Rosenbaum, A.E. Shields,  and D. Blumenthal. \u201cElectronic Health Records in Ambulatory Care\u2014A National Survey of Physicians.\u201d New England Journal of  Medicine, vol. 359, no. 1 (2008): 50-",
      "60. A survey of 2,758 physicians conducted between September 2007 and March 2008. Whether or not physicians reported on the survey that they adopted an EHR system,  including whether the EHR system was a \u201cfully functional\u201d or \u201cbasic\u201d EHR. The study  defined a \u201cfully functional\u201d EHR as one that allows physicians to record patients\u2019  clinical and demographic data, view and manage results of laboratory tests and  imaging, manage order entry (including electronic prescriptions), and support clinical  decisions (including warnings about drug interactions or contraindications). In the  study, the principal differences between \u201cfully functional\u201d and \u201cbasic\u201d EHRs were the  absence of certain order-entry capabilities and CDS in a basic system.",
      " The survey asked respondent a variety of questions related to EHR adoption,  including questions related to quality of care. Findings reported by the study included the following: of the respondents with fully  functional EHR systems, 80 percent reported averting a potentially dangerous drug  allergic reaction and 71 percent of respondents reported averting a potentially  dangerous drug interaction compared to 66 percent and 54 percent of respondents  with basic EHR systems. DesRoches, C.M., E.G. Campbell, C. Vogeli, J. Xheng, S.R. Rao, A.E. Shields, K. Donelan,",
      " S. Rosenbaum, S.J. Bristol, and A.K. Jha.  \u201cElectronic Health Records\u2019 Limited Successes Suggest More Targeted Uses.\u201d Health Affairs, vol. 29, no. 4 (2010): 639-646. The researchers created a survey and surveyed 4,840 acute-care general medical  and surgical hospitals from March to September 2008 that were members of the  American Hospital Association. The researchers linked the information gathered in  their survey to information from three other data sources. Whether the hospital had a comprehensive EHR, defined as an EHR with 24 clinical  functions used across all major clinical units in the hospital,",
      " a basic EHR system,  defined as a system with 10 key functions in at least one major clinical unit in the  hospital, or no EHR system.   (1) Performance on quality metrics based on data released from the Hospital Quality  Alliance for three clinical conditions\u2014acute myocardial infarction, congestive heart  failure, and pneumonia\u2014and prevention of surgical complications, and (2) efficiency,  as measured by the hospitals\u2019 risk-adjusted length of stay, risk-adjusted 30-day  readmission rates, and risk-adjusted inpatient costs, which were determined using  two sources of data, the Medicare Inpatient Impact File and the Area Resource File.",
      "   (1) No relationships were found between EHR adoption and quality process  measures for acute myocardial infarction, congestive heart failure, pneumonia, or 30- day risk-standardized mortality of these conditions. Hospitals with EHR had  somewhat better performance on the prevention of surgical complications measures  than hospitals without EHR (93.7 percent for hospitals with a comprehensive EHR,  93.3 percent for hospitals with a basic EHR, and 92.0 percent for those without EHR).  (2) No relationships between the level of EHR adoption and overall risk-adjusted  length of stay were found.",
      " Hospitals with comprehensive EHRs had similar rates of  readmissions within 30 days of hospital discharge compared to hospitals with basic or  no EHRs. The researchers found that hospitals with such systems had comparable  inpatient costs to hospitals without them. Pneumonia patients in hospitals with a  comprehensive EHR had a length of stay that was, on average, 0.5 days shorter than  those of patients in hospitals without EHR. In this article, CDS consisted of clinical reminders and clinical practice guidelines and  was associated with marginally better performance on each of the Hospital Quality  Alliance quality metrics. Devine, E.B., R.N.",
      " Hansen, J.L. Wilson-Norton, N.M. Lawless, A.W. Fisk, D.K. Blough, D.P. Martin, and S.D. Sullivan. \u201cThe Impact of  Computerized Provider Order Entry on Medication Errors in a Multispecialty Group Practice.\u201d Journal of the American Medical  Informatics Association, vol. 17, no. 1 (2010): 78-84. A pre-post study compared prescriptions written at a multilocation clinic before and  after the implementation of a CPOE system. For the pre-CPOE implementation  period between March 1,",
      " 2002, and July 15, 2002, for one clinic and between  January 2, 2004, and March 4, 2004, for other clinics, 5,016 prescriptions were  evaluated. For the post-CPOE implementation period between January 14, 2004, and  July 13, 2004, for one clinic and between July 1, 2005, and April 26, 2006, for other  clinics, 5,153 prescriptions were evaluated. Whether the prescription was written before or after the implementation of the CPOE  system.",
      "   (1) Rates, (2) types, and (3) severity of errors in prescriptions written before CPOE  system implementation compared to prescriptions submitted electronically after the  implementation of the CPOE system.   (1) Rates of errors in prescriptions declined from 18.2 percent before to 8.2 percent  after implementation of the CPOE system, and the adjusted odds of an error  occurring postimplementation of CPOE system were 70 percent lower than  preimplementation. (2) There were reductions in the adjusted odds of the following  error types: illegibility (97 percent), inappropriate abbreviations (94 percent),  information missing (85 percent), wrong strength (81 percent), drug\u2013disease  interaction (79 percent), and drug\u2013drug errors (76 percent). (3)",
      " Electronic prescribing  led to a 57 percent decrease in the odds of an error occurring that did not cause  harm. There was a 49 percent reduction in the odds of errors occurring that caused  harm. The authors note that this reduction was not significant and that the small  number of errors in this category could have caused this result to not be significant. The CPOE had limited CDS alerts that included basic dosing guidance and duplicate  therapy checks. Feldstein, A.C., D.H. Smith, N. Perrin, X. Yang, S.R. Simon, M. Krall, D.F. Sittig,",
      " D. Ditmer, R. Platt, and S.B. Soumerai. \u201cReducing  Warfarin Medication Interactions: An Interrupted Time Series Evaluation.\u201d Archives of Internal Medicine, vol. 166, no. 9 (2006): 1009- 1015. A pre-post study of 239 primary care providers with 9,910 patients taking Warfarin at  15 primary care clinics that implemented medication interaction alerts for the drug  Warfarin into their electronic medical records with computerized order entry and  decision support. The baseline period was from January 2000 through November  2002 and the postintervention period was from April 2003 through August 2004.",
      " The presence of electronic medical record alerts for selected coprescriptions of  medications that interact with Warfarin. When Warfarin and a targeted interacting  medication were coprescribed, an alert would appear, whereupon the clinician had to  click \u201cOK\u201d to continue prescribing the interacting medication or prescribe a different  drug. The interacting prescription rate, defined as the number of coprescriptions of  Warfarin-interacting medications per 10,000 Warfarin users per month. At baseline, about a third of patients had an interacting prescription. Coinciding with  the implementation of the alerts, the estimated Warfarin-interacting medication  prescription rate decreased from 3,",
      "294 interacting prescriptions per 10,000 Warfarin  users to 2,804 interacting prescriptions per 10,000 Warfarin users, resulting in a 14.9  percent relative reduction. The electronic medical record had CDS in the form of medication alerts. Galanter, W.L., R.J. Didomenico, and A. Polikaitis. \u201cA Trial of Automated Decision Support Alerts for Contraindicated Medications  Using Computerized Physician Order Entry.\u201d Journal of the American Medical Informatics Association, vol. 12, no. 3 (2005): 269-274. A comparison,",
      " pre-post study of a CPOE alert designed to appear when a clinician  attempted to order potentially contraindicated drugs for patients with decreased  kidney function through the CPOE. The study was conducted with 233 patients over  an 18 month period (4-month pre-CPOE alert period and 14-month post-CPOE alert  period). Whether or not CPOE alerts were generated when contraindicated drugs were  ordered electronically.   (1) The likelihood of a contraindicated drug being administered before and after  implementation of the CPOE alerts, as collected from electronic medical records.",
      " (2)  Alert compliance.   (1) Likelihood of a patient receiving at least one dose of the contraindicated  medication decreased from 89 percent in the prealert period to 47 percent in the  postalert period. (2) Patient gender was associated with alert compliance rate, with  compliance in female patients lower than that in male patients. Alert compliance also  decreased as kidney function increased. Housestaff with more than 1 year of  residency training had a higher compliance rate than those with less than 1 year of  training. Gandhi, T.K., S.N. Weingart, A.C.",
      " Seger, J. Borus, E. Burdick, E.G. Poon, L.L. Leape, and D.W. Bates. \u201cOutpatient Prescribing Errors  and the Impact of Computerized Prescribing.\u201d Journal of General Internal Medicine, vol. 20, no. 9 (2005): 837-841. A comparison study of 1,879 prescriptions reviewed by a pharmacist and submitted at  four adult primary care practices, two of which utilized electronic prescribing and two  that did not, over a period of 7 months (September 1999 to March 2000). Whether prescriptions were written at computerized or noncomputerized sites.",
      " Rates of (1) prescribing errors and (2) potential adverse drug events as determined  by the expert reviewers from conducting prescription reviews, chart reviews, and  conducting patient surveys.   (1) Sites with electronic prescribing contained errors in 4.3 percent of prescriptions,  compared to 11.0 percent of prescriptions written at sites without electronic  prescribing. (2) Sites with electronic prescribing contained potential ADEs in   2.6 percent of prescriptions, compared to 4.0 percent of prescriptions at sites without  electronic prescribing. The authors note that the differences between the two groups  in errors and prevented ADEs were not significant,",
      " but that the rates of prescribing  errors and prevented ADEs could have been substantially reduced with more  advanced CDS. The system provided no automatic checks for correct doses, frequencies, allergies, or  drug interactions, and authors found that decision support (such as drug-dose  checking and drug-frequency checking) could have prevented 97 percent of  prescribing errors and 95 percent of potential ADEs. Kaushal, R., A.K. Jha, C. Franz, J. Glaser, K.D. Shetty, T. Jaggi, B. Middleton, G.J. Kuperman, R. Khorasani,",
      " M. Tanasijevic, and  D.W. Bates. \u201cReturn on Investment for a Computerized Physician Order Entry System.\u201d Journal of the American Medical Informatics  Association, vol. 13, no. 3 (2006): 261-266. A cost-benefit assessment of the implementation of CPOE with CDS at Brigham and  Women\u2019s Hospital, a 720-adult bed tertiary care medical center in Boston from 1993  through 2002. Determined the capital and operational costs of implementing a CPOE  with CDS and of each CDS intervention through internal documents and interviews  with the CPOE developers and reviewing published literature.",
      " Whether or not the CDS intervention was active. Identified cost savings associated with specific CDS interventions. GAO grouped the  savings into those resulting from: (1) decreased ADEs and (2) decreased drug costs. Of the estimated $28.5 million in estimated savings from the CPOE, (1) $12.9 million  in estimated savings were due to CDS interventions that reduced ADEs, and (2)   $6 million in estimated savings were due to CDS interventions that reduced drug  costs. The cost to develop, implement, and operate the CPOE was $11.8 million,",
      "  resulting in cumulative savings of $16.7 million. The CPOE was equipped with CDS. Kaushal, R., L.M. Kern, Y. Barr\u00f3n, J. Quaresimo, and E.L. Abramson. \u201cElectronic Prescribing Improves Medication Safety in  Community-Based Office Practices.\u201d Journal of General Internal Medicine, vol. 25, no. 6 (2010): 530-536. A pre-post study of 30 ambulatory care providers (15 electronic prescribers and 15  paper prescribers) in 12 practices in Hudson Valley region of New York (conducted  from September 2005 to June 2007). The researchers collected 2 weeks of carbon  copies and downloads of prescriptions to identify medication errors at baseline and   1 year follow-up and compared error rates among and between the electronic and  paper prescriber groups.",
      " Whether or not the physicians\u2019 medication orders were handwritten or submitted  electronically through a stand-alone electronic prescribing system as identified  through the carbon copies of prescriptions or prescription downloads.   (1) Medication prescribing errors (including omitting the quantity or incorrect  medication dose and duration), (2) illegibility errors, (3) near misses (i.e., potentially  harmful errors that were intercepted or reached the patient but caused no harm),   (4) ADEs, (5) rule violations (e.g., failing to write \u201cpo\u201d for a medication taken orally),  and (6) effects of CDS on medication errors.",
      "   (1) The medication prescribing error rate among electronic prescribers decreased  from 42.5/100 prescriptions at baseline to 6.6/100 prescriptions at 1 year follow-up.  Electronic prescribers had a lower medication prescribing error rate than paper  prescribers (6.6/100 v. 38.4/100). (2) Electronic prescribing eliminated all illegibility  errors. (3) Electronic prescribers had fewer near misses (1.3/100 v. 2.7/100) than  paper prescribers. (4) Rates of preventable adverse drug events trended lower  among electronic prescribers (0.",
      "04 vs. 0.26 per 100 prescriptions). The authors noted  that this was not a significant difference between electronic and paper prescribers.   (5) Electronic prescribing eliminated nearly all types of rule violation errors.   (6) Electronic prescribers had fewer errors judged preventable by advanced/basic  CDS than paper prescribers at 1 year than paper prescribers. The stand-alone electronic prescribing system was equipped with CDS. Kim, G.R., A.R. Chen, R.J. Arceci, S.H. Mitchell, K.M. Kokoszka, D. Daniel, and C.U.",
      " Lehmann. \u201cError Reduction in Pediatric  Chemotherapy: Computerized Order Entry and Failure Modes and Effects Analysis.\u201d Archives of Pediatrics and Adolescent Medicine,  vol. 160 (2009): 495-498. A pre-post study of chemotherapy orders written in a pediatric oncology unit. The  study compared 1,259 paper orders written before implementation of the CPOE  system (from July 31 to August 1, 2001, and from August 14, 2001, to August 22,  2002) to 1,116 electronic orders written after implementation of the CPOE system  (from February 3,",
      " 2003, to February 12, 2004). Whether the orders were submitted before or after the implementation of the CPOE.  A paper based survey was used to capture the pre-CPOE data, and the post-CPOE  data were captured through the system. Data on chemotherapy steps of high morbidity/mortality potential if missed, as  determined by attending oncologists. Findings reported by the study included: after CPOE implementation, daily  chemotherapy orders (1) were less likely to have improper dosing, incorrect dosing  calculations, missing cumulative dose calculations, and incomplete nursing  checklists,",
      " and (2) had a higher likelihood of not matching medication orders to  treatment plans. Ko, Y., J. Abarca, D.C. Malone, D.C. Dare, D. Geraets, A. Houranieh, W.N. Jones, W.P. Nichol, G.P. Schepers, M. Wilhardt.  \u201cPractitioners\u2019 Views on Computerized Drug-Drug Interaction Alerts in the VA System.\u201d Journal of the American Medical Informatics  Association, vol. 14, no. 1 (2007): 56-64. A survey of 258 prescribers and 84 pharmacists from seven VA Medical Centers  across the United States.",
      " The time period of the survey was between 2004 and 2005. Survey participants had prescribing authority in a VA Medical Center and an active  outpatient practice. In the VA\u2019s computerized patient record system, prescribers enter  prescription orders electronically for review and verification by a pharmacist before  dispensing. The survey asked respondent a variety of questions including those related to   (1) respondent satisfaction with the combined inpatient and outpatient CPOE system  (the computerized patient record system), (2) attitude towards drug\u2013drug interaction  alerts, and (3) suggestions for improving drug\u2013drug interaction alerts. Findings reported in the study included the following:",
      " (1) in general, both prescribers  and pharmacists indicated that the computerized patient record system had a positive  effect on their jobs. Pharmacists revealed more favorable attitudes toward  computerized patient record system than prescribers. (2) Sixty-one percent of  prescribers felt that drug\u2013drug interaction alerts had increased their potential to  prescribe safely. Thirty percent of prescribers felt that drug\u2013drug interaction alerts  provided them with exactly what they needed most of the time. (3) Both prescribers  and pharmacists agreed that drug\u2013drug interaction alerts should be accompanied by  management alternatives (73 percent and 82 percent,",
      " respectively) and more  detailed information (65 percent and 89 percent, respectively). Kocakulah, M.C., and J. Upson. \u201cCost Analysis of Computerized Physician Order Entry Using Value Stream Analysis: A Case Study.\u201d  Research in Healthcare Financial Management, vol. 10, no. 1 (2005): 13-25. A case study of a 400-bed urban hospital, using value-stream mapping to conduct a  cost analysis of a CPOE system. The study determined the potential costs and  adverse drug reaction reductions related to CPOE implementation in this hospital,  which did not have CPOE installed.",
      " This hospital did not have an electronic prescribing or CPOE system. Using published studies or reports and data from the hospital, this study determined  (1) the projected decrease in medication errors, (2) the potential net savings, (3) net  present value, and (4) project internal rate of return for a CPOE system based on the  severity, average cost, and projected reduction of adverse drug reactions.   (1) The percentage of illegible orders is projected to decrease by 78 percent,  incomplete orders by 71 percent, incorrect orders by 46 percent, and drug therapy  problems by 9 percent.",
      " (2) The projected net savings were $155,686 per year. (3)  The projected project 5-year net present value was a negative $1,270,112. (4) The  projected 5-year internal rate of return was negative 24 percent. Because of these  projections, the authors did not recommend the hospital invest in a CPOE system at  the current time. McCullough, J.S., M. Casey, I. Moscovice, and S. Prasad. \u201cThe Effect of Health Information Technology on Quality in U.S. Hospitals.\u201d  Health Affairs, vol. 29,",
      " no. 4 (2010): 647-654. A comparison study of 3,401 nonfederal acute-care U.S. hospitals from 2004 to 2007. Whether the hospital had an EHR and a CPOE system, as identified from information  from the American Hospital Association\u2019s annual survey and the HIMSS analytics  database that describes hospitals\u2019 health information technology adoption decisions. Performance on six process quality measures in the CMS Hospital Compare  database. For nearly all measures, average quality was higher for hospitals with EHR and  CPOE (with larger effects for academic hospitals than when compared to all  hospitals). However,",
      " the difference was only significant for pneumococcal vaccine  administration (2.1 percent increase) and use of the most appropriate antibiotic for  pneumonia (1.3 percent increase). The study defined an EHR as a set of applications including a computerized patient  record with a clinical data repository and some CDS capabilities, such as providing  treatment recommendations. McMullin, S.T., T.P. Lonergan, and C.S. Rynearson. \u201cTwelve-Month Drug Cost Savings Related to Use of an Electronic Prescribing  System with Integrated Decision Support in Primary Care.\u201d Journal of Managed Care Pharmacy, vol.",
      " 11, no. 4 (2005): 322-332. A comparison study of 38 primary care clinicians (19 electronic prescribing system  users; 19 electronic prescribing system nonusers) conducted from June 2002 through  May 2003. Whether or not the physician was using an electronic prescribing system with CDS  capabilities as identified through the study design. Using pharmacy claims, determined (1) if the 6-month savings on new prescriptions  were sustained during the 12-months of follow-up, (2) the 12-month cost savings  associated with CDS on pharmacy claims, and (3)",
      " prescribing behavior of clinicians  on eight high-cost therapeutic groups targeted by electronic messages to prescribers.  (1) Savings seen in the last 6 months of the 12 month follow-up period were greater  than the first 6 months ($748 per-member-per-month at 6 months to $794 at   12 months per-member-per-month). (2) Use of the electronic prescribing system was  associated with a sustained decrease in prescription costs. Over the 12 month follow- up period, the average cost per new prescription for the intervention group decreased  by $1.00 and increased by $3.75 in the control group.",
      " The number of other refilled  prescriptions decreased more in the intervention group than in the control group. The  number of new prescriptions increased slightly more in the intervention group than  the controls. (3) Prescriptions for high-cost target medications overall decreased by  9.1 percent in the intervention group because of CDS and increased in the control  group by 8.2 percent. Compared with the control group, the prescription ratio for high- cost drug classes was a relative 17.5 percent lower in the group using the CDS   (35.8 percent versus 43.4 percent). The electronic prescribing system had integrated CDS,",
      " formulary, payor, and clinical  guideline alert messaging capabilities. Peterson, J.F., G.J. Kuperman, C. Shek, M. Patel, J. Avorn, and D.W. Bates. \u201cGuided Prescription of Psychotropic Medications for  Geriatric Inpatients.\u201d Archives of Internal Medicine, vol. 165, no. 7 (2005): 802-807. A comparison study at a tertiary care hospital, including 3,718 patients 65 years or  older that were prescribed a psychotropic medication targeted in the intervention and  admitted for medical, surgical, neurology, or gynecology services from October 8,",
      "  2001, to May 16, 2002. Whether the geriatric decision support system, which included medication dosing and  selection guidelines for elderly patients, was activated. The study measured several outcomes including: (1) The rate at which prescriptions  were written in agreement with expert recommendations regarding recommended  daily dose for the initial drug order, (2) incidence of dosing at least 10-fold greater  than the recommended daily dose, and (3) prescription of nonrecommended drugs. Findings presented included: (1) The prescriptions for psychotropic medications  agreed with the system recommendations for dosing more frequently during the  intervention periods when the geriatric decision support application was available.",
      "  The agreement rate for both control periods was lower than the agreement rate for  the intervention periods. (2) During the intervention periods, the incidence of 10-fold  dosing decreased from 5.0 percent to 2.8 percent, (3) the prescription of  nonrecommended drugs decreased from 10.8 percent to 7.6 percent. Ross, S.M., D. Papshev, E.L. Murphy, D.J. Sternberg, J. Taylor, and R. Barg. \u201cEffects of Electronic Prescribing on Formulary  Compliance and Generic Drug Utilization in the Ambulatory Care Setting:",
      " A Retrospective Analysis of Administrative Claims Data.\u201d  Journal of Managed Care Pharmacy, vol. 11, no. 5 (2005): 410-415. A comparison study of 110,975 paid pharmacy claims submitted by two groups\u201495  providers using predominantly electronic prescribing and a matched sample of 95  providers who did not electronically prescribe\u2014between August 1, 2001, and July 31,  2002. Whether or not a provider used electronic prescribing during the study period.  (1) Formulary compliance, which was assessed using the formulary code field in  pharmacy data claims, and (2)",
      " generic utilization rates, which was assessed using  First DataBank National Drug Data File Plus software to determine the brand or  generic status of each drug.  (1) Formulary compliance for both groups was similar. The electronic prescribing  group was 83.2 percent compliant, compared to 82.8 percent compliance in the group  that did not electronically prescribe. (2) Generic utilization rates were also similar,  37.3 percent for those who electronically prescribed and 36.9 percent for those that  did not. The electronic prescribing system provided drug and formulary information during the  prescribing process. Spencer, D.C., A.",
      " Leininger, R. Daniels, R. Granko, and R.R. Coeytaux. \u201cEffect of a Computerized Prescriber-Order-Entry System on  Reported Medication Errors.\u201d American Journal of Health-System Pharmacy, vol. 62, no. 4 (2005): 416-419. A pre-post study and comparison of two medicine units at an academic hospital  before and after implementation of a CPOE with CDS, compared to units in the  hospital that did not implement a CPOE system. Data were collected over a period of  16 months. Whether the medication error was reported before or after the implementation of the  CPOE system in two medicine units of the hospital and whether or not the medication  error was reported from the two medicine units of the hospital that implemented  CPOE.",
      " Reported medication errors and potential medication errors, as obtained from the  hospital\u2019s center for medication safety. Implementation of the CPOE system in the two units was associated with an increase  in reported errors, from 0.068 per discharge preimplementation to 0.088 per  discharge after implementation. The units in the hospital that did not implement  CPOE systems had a decrease in the number of reported errors from 0.133 per  discharge to 0.079 per discharge. The authors note that while the error rates increased in the units with CPOE, the error  rates in the units in the hospital without CPOE decreased.",
      " Therefore, the increase in  reported medication errors on units with CPOE systems may have been attributable  to the direct or indirect consequences of introduction of the CPOE system. Steele, A.W., S. Eisert, J. Witter, P. Lyons, M.A. Jones, P. Gabow, and E. Ortiz. \u201cThe Effect of Automated Alerts on Provider Ordering  Behavior in an Outpatient Setting.\u201d PLoS Medicine, vol. 2, no. 9 (2005): 864-870. A pre-post study of the implementation and effect of alerts generated during  medication ordering in primary care clinics.",
      " The baseline data were collected from  August 1, 2002, to November 29, 2002, and the postintervention data were collected  from December 1, 2002, to April 30, 2003. All provider staff entered medication orders using CPOE. The study design compared  baseline ordering behavior (when no alert was triggered) to ordering behavior after  alerts were triggered.   (1) The number of medication orders not completed in response to an alert, (2) the  number of rule-associated laboratory test orders initiated after an alert was displayed,  as captured in the electronic prescribing system,",
      " and (3) the rates of adverse drug  events assessed by completing file reviews on a random sample of medication  orders.   (1) Before the alerts were implemented, prescribers did not complete medication  orders 5.4 percent of the time, compared to 8.3 percent of the time after the alerts  were implemented. The authors noted that this was not a significant difference  between the groups. When the alert was for an abnormal laboratory value, the  percentage of times where the medication order was not completed increased from  5.6 percent at baseline to 10.9 percent during the intervention. (2)",
      " Comparing the pre-  and postintervention periods for medication orders when no alert was displayed,  prescribers ordered associated laboratory tests 17 percent of the time during the  preintervention period, compared to 16.2 percent of the time in the postintervention  period. The authors state that this finding was not significant and indicates that there  was no trend, in general, to increased laboratory test ordering during the study  period. (3) The preintervention group had a potential ADE in 10.3 percent of charts  compared to in 4.3 percent of the charts in the postintervention group.",
      " The authors  state that the difference between the groups was not significant and that the study  was too small to show for sure whether there was any true effect on adverse drug  reactions. Stone, W.M., B.E. Smith, J.D. Shaft, R.D. Nelson, and S.R. Money. \u201cImpact of a Computerized Physician Order-Entry System.\u201d  Journal of the American College of Surgeons, vol. 208, no. 5 (2009): 960-969. A pre-post study of patient-safety measures before and after CPOE implementation  at the Mayo Clinic Hospital in Phoenix, Arizona.",
      " The CPOE system was implemented  from May 8, 2007, to April 30, 2008. Whether or not the physicians\u2019 orders were submitted electronically using the CPOE  system.   (1) Medication errors and (2) order-implementation time.  (1) There were no significant differences in the rate of medication errors in any of the  study time periods, which were captured through self-reporting. (2) The time from a  doctor placing an order, which was recorded or captured electronically, to a nurse  receiving that order decreased from 41.2 minutes pre-CPOE to 27 seconds post-",
      " CPOE. Taylor, J.A., L.A. Loan, J. Kamara, S. Blackburn, and D. Whitney. \u201cMedication Administration Variances Before and After  Implementation of Computerized Physician Order Entry in a Neonatal Intensive Care Unit.\u201d Pediatrics, vol. 121, no. 1 (2008): 123-128. A comparison, pre-post study of how the actual medication administration differed  from the medication order before and after CPOE implementation. The study was  conducted in the 30-bed Neonatal Intensive Care Unit at Madigan Army Medical  Center from August 2004 to April 2006 (pre-CPOE:",
      " August 2004 to June 2005; post- CPOE: August 2005 to April 2006). Whether or not the physicians\u2019 medication orders were handwritten or submitted  electronically using a CPOE system.  (1) Differences between the medication order and how the medication was actually  administered. (2) Reasons for variances between the medication order and  administration, as noted by the research nurses.   (1) The variation between the medication order and how the medication was actually  administered was lower post-CPOE than pre-CPOE (11.6 percent and 19.8 percent,  respectively). (2)",
      " Findings related to rates of variance in medication order and  administration in the pre- and post-CPOE included the following: similar variances in  both periods were found for administration mistakes, pharmacy problems, and  prescribing problems; and variances related to administration of drugs by the wrong  route and the wrong time were significantly lower after CPOE implementation. The CPOE utilized CDS and display formats and defaults configured specifically for  use in the Neonatal Intensive Care Unit for ordering prescriptions. Upperman, J.S., P. Staley, K. Friend, W. Neches, D. Kazimer, J.",
      " Benes, and E.S. Wiener. \u201cThe Impact of Hospitalwide Computerized  Physician Order Entry on Medical Errors in a Pediatric Hospital.\u201d Journal of Pediatric Surgery, vol. 40, no.1 (2005): 57-59. A pre-post study comparing orders written before the implementation of a CPOE  system in a children\u2019s hospital from January 2002 to October 2002 to those written  after the implementation of CPOE system in November 2003 (the end point of the  study period was not specified). Whether a prescription was written before or after the implementation of CPOE.",
      " The rate and types of ADEs determined by analyzing data collected at the hospital. ADE rates pre-CPOE were 0.3 per 1,000 doses, compared to 0.37 per 1,000 doses  post-CPOE. The authors note that the study demonstrates a substantial decrease in  harmful ADEs, but no significant difference in all ADEs between the pre- and post- CPOE periods. The rate of harmful ADEs pre-CPOE were 0.05 per 1,000 doses,  compared to 0.03 per 1,000 doses post-CPOE.",
      " The CPOE had CDS. Vaidya, V., A.K. Sowan, M.E. Mills, K. Soeken, M. Gaffoor, and E. Hilmas. \u201cEvaluating the Safety and Efficiency of a CPOE System  for Continuous Medication Infusions in a Pediatric ICU.\u201d AMIA Symposium Proceedings, 2006. A comparison study evaluating the safety of a CPOE system compared to a  handwritten, hand-calculated method for prescribing continuous drug infusions for  pediatric ICU patients. The time period of the study was not specified. Whether the orders for the drug infusions were generated in the CPOE system or  through a handwritten,",
      " hand-calculated method. The (1) occurrence and (2) risk level of errors, as identified through a review of order  sheets for errors.   (1) The drug infusion orders generated using the CPOE system had fewer errors   (4.3 percent) than those that were handwritten (73 percent). (2) Twenty-five percent  of the errors in the handwritten group were judged to be \u201chigh-risk\u201d compared to 0  percent in the CPOE group. All of the errors in the CPOE group were missing  signatures. The CPOE included decision support. Varkey, P., P.",
      " Aponte, C. Swanton, D. Fischer, S.F. Johnson, and M.D. Brennan. \u201cThe Effect of Computerized Physician-Order Entry  on Outpatient Prescription Errors.\u201d Managed Care Interface, vol. 20, no. 3 (2007): 53-57. A retrospective survey of 4,527 prescriptions ordered from March 1996 through  March 2002 at Mayo Clinic ambulatory clinics comparing prescriptions ordered  through the clinic\u2019s CPOE to handwritten orders. Whether or not the type of prescription generated was handwritten, computerized, or  preprinted. The (1) prevalence and (2)",
      " type of pharmacist-intercepted prescription errors in  computerized and handwritten prescriptions.   (1) The frequency of intercepted prescription errors were highest in handwritten  prescriptions (7.4 percent), followed by computerized prescriptions (4.9 percent), and  preprinted prescriptions (1.7 percent). (2) The most commonly intercepted  prescriptions involved the dosage form, dispense quantity, medication dosage, and  drug allergies. CPOE resulted in lower rates in every type of intercepted prescription  error, including form, dosage, quantity, allergy, frequency, drug name, patient name,  illegibility, route, and drug\u2013drug interaction,",
      " compared to handwritten prescriptions. The CDS included required fields and duplicate order checking. Wang, C.J., M.H. Patel, A. Schueth, M. Bradley, S. Wu, J.C. Crosson, P.A. Glassman, and D.S. Bell. \u201cPerceptions of Standards- based Electronic Prescribing Systems as Implemented in Outpatient Primary Care: A Physician Survey.\u201d Journal of the American  Medical Informatics Association, vol. 16, no. 4 (2009): 493-502. Cross-sectional survey of physicians was fielded from October 2006 to December  2006 among physicians enrolled in a Blue Cross Blue Shield electronic prescribing  sponsorship program.",
      " Whether or not the physician had installed an electronic prescribing system.   (1) Adequacy of available drug formulary and medication history information and   (2) perceptions of the electronic prescribing system\u2019s enhancement of job  performance.   (1) Electronic prescribing users were more likely than nonusers to \u201cagree\u201d or \u201cstrongly  agree\u201d that the information available about the patient\u2019s medication history helps them  to identify clinically important drug\u2013drug interactions and prevent callbacks from  pharmacies for safety problems. Electronic prescribing users were slightly more  favorable toward statements that electronic prescribing system drug coverage helps  patients maintain lower drug costs. (2) Sixty-two percent of electronic prescribers  \u201cagreed\u201d or \u201cstrongly agreed\u201d that electronic prescribing improves the quality of care  they can deliver.",
      " Weingart, S.N., B. Simchowitz, L. Shiman, D. Brouillard, A. Cyrulik, R.B. Davis, T. Isaac, M. Massagli, L. Morway, D.Z. Sands, J.  Spencer, and J.S. Weissman. \u201cClinicians\u2019 Assessments of Electronic Medication Safety Alerts in Ambulatory Care.\u201d Archives of  Internal Medicine, vol. 169, no. 17 (2009): 1627-1632. A survey mailed to 300 clinicians in December 2007 about the value of electronic  prescribing.",
      " Whether clinicians adopted a commercial electronic prescribing system with a drug- allergy and interaction alerts drug reference database and used the electronic  prescribing system to write at least 100 prescriptions per month between January 1  and June 30, 2006.  (1) Clinicians\u2019 satisfaction with electronic prescribing and (2) perceptions of the  effects of electronic prescribing and alerts on the safety, efficiency, and cost of care.   (1) Forty-seven percent were satisfied or very satisfied with medication safety alerts.  Clinicians said electronic prescribing would improve the quality of care delivered   (78 percent); prevent medical errors (83 percent); enhance patient satisfaction   (71 percent); and improve clinician efficiency (75 percent). (2)",
      " Seventy-eight percent  said at least one alert had caused them to change their behavior in the past 6  months. Fifty-seven percent said an alert might have prevented at least one error or  injury in the average month. Twenty-two percent said an alert had prevented a  serious error or injury in their practice. Sixty-three percent of respondents said an  alert caused them to take action other than change an alerted prescription (counsel  patient, look up information in a drug reference, or change how they monitor a  patient). The study also reported participant ratings on potential problems associated  with the drug allergy or interaction alerts. For example,",
      " 58 percent of respondents  reported that alerts were triggered by discontinued medications. Yu, F.B., N. Menachemi, E.S. Berner, J.J. Allison, N.W. Weissman, and T.K. Houston. \u201cFull Implementation of Computerized  Physician Order Entry and Medication Related Quality Outcomes: A Study of 3364 Hospitals.\u201d American Journal of Medical Quality,  vol. 24, no. 4 (2009): 278-286. A comparison study of hospitals\u2014264 that used a CPOE system to enter all orders  and 3,100 that did not\u2014over a 1\u2013year period (July 2003 to June 2004). Whether the hospital reported on the HIMSS analytics survey that it entered all orders  through CPOE.",
      " Performance on hospital quality-of-care measures from CMS. Of the 11 medication-related measures, the mean performance on 6 cardiovascular- related measures was higher among CPOE hospitals than non-CPOE hospitals, and  the mean performance on one measure, antibiotics within 4 hours of arrival, was  lower among CPOE hospitals than non-CPOE hospitals. Yu, F., M. Salas, Y. Kim, and N. Menachemi. \u201cThe Relationship Between Computerized Physician Order Entry and Pediatric Adverse  Drug Events: A Nested Matched Case-Control Study.\u201d Pharmacoepidemiology and Drug Safety,",
      " vol. 18, no. 8 (2009): 751-755. A comparison study between 54 pediatric hospitals that had CPOE systems and 68  pediatric hospitals that did not. Patient data were retrieved between October 1, 2005,  and September 30, 2006. Whether a CPOE system was fully implemented for all orders and clinical domains,  as identified through the HIMSS analytics database. The odds of ADEs, using data from the national association of children\u2019s hospitals  and related institutions case-mix comparative data program and HIMSS. The odds of experiencing an ADE were 42 percent higher for hospitals without CPOE  compared to those with CPOE.",
      " Zhan C., R.W. Hicks, C.M. Blanchette, M.A. Keyes, and D.D. Cousins. \u201cPotential Benefits and Problems with Computerized Prescriber  Order Entry: Analysis of a Voluntary Medication Error-Reporting Database.\u201d American Journal of Health-System Pharmacy, vol. 63,  no. 4. (2006): 353-358. Comparison study of 120 facilities that reported having a CPOE in all clinical areas to  339 facilities that did not have a CPOE. Facilities included general community  hospitals, specialty hospitals, and outpatient clinics. Data analyzed were from 2003.",
      " Whether the facility had CPOE, as determined by Medmarx, a national voluntary  medication-error reporting database.  (1) The number of errors reported by CPOE versus non-CPOE facilities and (2) the  characteristics of errors caused by CPOE, as captured in the Medmarx database. The authors stated that the different facilities that self-reported data to the Medmarx  database appeared to have different levels of underreporting of medication errors,  and therefore, these data cannot be used to assess the potential benefits of CPOE or  compare rates of medication errors between providers though facilities with CPOE  had fewer inpatient errors,",
      " more outpatient errors, and smaller numbers of outpatient  and inpatient errors that reached or harmed patients compared to facilities without  CPOE. The article did not evaluate the sophistication of the CDS employed by the  studied CPOE systems. Appendix III: Scope and Methodology This appendix provides additional details regarding our scope and  methodology for reporting information on the providers who participated  in and received incentive payments from the 2009 Electronic Prescribing  Program. To conduct our analyses, we analyzed four Centers for Medicare &  Medicaid Services (CMS) files.    2009 Electronic Prescribing Program Participation. We obtained a  file from CMS in October 2010 that provided summary information for  each provider that participated in the Electronic Prescribing Program in  2009,",
      " which CMS also used to make payments to providers for 2009. For  each combination of national provider identifier and tax identification  number, this file contained the following information: the total number of  times each of the three electronic prescribing codes were submitted; the  total number of applicable visits; whether CMS determined that the  provider would receive an incentive payment; and the amount of the  incentive payment.   2009 Electronic Prescribing Program Eligible Providers. We  obtained a file from CMS in October 2010 that listed each provider that  had at least one applicable visit for the Electronic Prescribing Program in  2009\u2014which we refer to in this appendix as \u201capplicable providers.\u201d Over  597,",
      "000 providers had at least one applicable visit for the Electronic  Prescribing Program in 2009. This number represents a count of all  Medicare providers who had at least one applicable visit in 2009. However,  not all of these providers have prescribing authority. Consequently, there  may be some individuals included in the count of 597,000 providers that  were not eligible for an electronic prescribing incentive payment. National Plan and Provider Enumeration System (NPPES) Downloadable File. We downloaded this file from CMS\u2019s Web site  (http://nppes.viva-it.com/NPI_Files.html) in October 2010.",
      " We used the  variable \u201cProvider Business Practice Location Address State Name\u201d to  obtain the state for providers. Provider Enrollment, Chain, and Ownership System (PECOS) Global Extract File. We obtained this file from CMS in October 2010. In  the few cases when we were unable to obtain the state for providers using  the NPPES Downloadable File, we attempted to determine the state for  providers using either the \u201cPractice Location State\u201d variable or the  \u201cCorrespondence Address State\u201d variable from the PECOS Global Extract  File. CMS determined which providers met or exceeded the reporting  requirement for 2009 using each unique combination of providers\u2019 national  provider identifiers and tax identification numbers.",
      " However, we analyzed  and report information at the national provider identifier level only so that  we could present results for unduplicated providers. We were unable to  match 1,052 applicable providers (less than 0.2 percent of applicable  providers) to either the NPPES Downloadable File or the PECOS Global  Extract file. To determine the percent of Medicare providers who received incentive  payments by state and the average incentive payment by state using the  state for each provider, we obtained state information for over 99 percent  of applicable providers using data from the NPPES Downloadable File and  for the remaining applicable providers using data from the PECOS Global  Extract File.",
      " We excluded the about 0.2 percent of applicable providers  mentioned above that we could not match to either the NPPES  Downloadable File or the PECOS Global Extract File. In addition, we  excluded about another 0.2 percent of applicable providers for whom we  were unable to obtain state information, the 0.9 percent of applicable  providers who were from U.S. insular areas, and six providers whose state  information we deemed unreliable. Appendix IV: Maximum Electronic Health  Record (EHR) Program Incentive Payments,  Based on First Year of Payment Appendix IV: Maximum Electronic Health  Record (EHR)",
      " Program Incentive Payments,  Based on First Year of Payment Maximum EHR incentive payments by year   ual to 75 percent of the provider\u2019s total allowed charges for  services covered by Medicare Part B for the year, but are subject to the annual limits displayed in this  table. Appendix V: Stage-One Reporting  Requirements for the Electronic Health  Records (EHR) Program 1.  Generate and transmit more than 40 percent of permissible 1.  Perform medication reconciliation for more than 50 percent  of all transitions of care. 2.  Enter medication order into computerized physician order  entry (CPOE)",
      " system for more than 30 percent of patients  with at least one medication in their medication lists.3.  Enter medication lists or indicate no current prescriptions for  2.  Enable the EHR system\u2019s ability to check a prescription  against a formulary and maintain access to at least one  internal or external drug formulary for the entire EHR  reporting period.  3. Incorporate as structured data more than 40 percent of all  clinical lab tests results ordered. allergies for more than 80 percent of patients.5.  Enable the EHR system\u2019s ability to check a prescription for  4.  Generate at least one list of patients by a specific condition.",
      "  5.  Send reminders during the EHR reporting period for  potential drug\u2013drug and drug\u2013allergy interactions.  6.  Record as structured data demographics for more than   preventative or follow-up care to more than 20 percent of  patients aged 65 and over or aged 5 and younger.  6.  Provide electronic access to health information within 4  7.  Record as structured data list of current and active diagnoses  business days of being updated in the EHR system to more  than 10 percent of patients. or indicate no known problems for more than 80 percent of  patients.",
      " 7.  Provide patient-specific education resources to more than   8.  Record as structured data height, weight, and blood pressure  10 percent of all patients. for more than 50 percent of patients aged 2 and over. 8.  Provide summary of care record to more than 50 percent of  9.  Record as structured data smoking status for more than   transitions of care and referrals. 50 percent of patients aged 13 and over. 9.  Perform at least one test of certified EHR technology\u2019s  10.  Implement one clinical decision support rule relevant to  capacity to submit electronic data to immunization registries  and follow-up submission if the test is successful.",
      " Medicare & Medicaid Services (CMS) or the states.  12.  Provide electronic copy of health information within 3 business  capacity to provide electronic syndromic surveillance data to  public health agencies and follow-up submission if the test is  successful. days to more than 50 percent of all patients who requested  that information.  13.  Provide clinical summaries to patients within 3 business days  for more than 50 percent of all office visits.  14.  Perform at least one test of certified EHR technology\u2019s  capacity to electronically exchange key clinical information   (i.e., problem list, medication list,",
      " medication allergies, or  diagnostic test results).  15.  Protect electronic health information created or maintained by  the certified EHR technology by conducting or reviewing a  security risk analysis, implementing security updates as  necessary, and correcting identified security deficiencies. uirement is electronic prescribing-related.  uality measures help uantify health care processes, outcomes, patient  perceptions, and organizational structure. To meet this reporting reuirement, providers must report  on 6 out of 44 clinical uality measures identified by CMS. The reuirement is public health\u2013related. Appendix VI: Comments from the  Department of Health and Human Services Appendix VII:",
      " GAO Contact and Staff  Acknowledgments Staff  Acknowledgments In addition to the contact name above, Robert Copeland, Assistant  Director; Nick Bartine; George Bogart; Julianne Flowers; Krister Friday;  Toni Harrison; Daniel Lee; Shannon Legeer; and Sarah Marshall made key  contributions to this report.\n"
    ],
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  },
  {
    "id": 96,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO provided information on the outcome of the 1996 World Food Summit, focusing on factors that could affect progress toward meeting world food security goals. GAO noted that: (1) the 1996 World Food Summit brought together officials from 185 countries and the European Community to discuss the problem of food insecurity and produced a plan to guide participants' efforts in working toward a common goal of reducing undernutrition; (2) to reach this goal, they approved an action plan, the focus of which is to assist developing countries to become more self-reliant in meeting their food needs by promoting broad-based economic, political, and social reforms at local, national, regional, and international levels; (3) the participants endorsed various actions but did not enter into any binding commitments; (4) they also agreed to review and revise national plans, programs, and strategies, where appropriate, so as to achieve food security consistent with the summit action plan; (5) according to U.S. officials, a willingness on the part of food-insecure countries to undertake broad-based policy reforms is a key factor affecting whether such countries will achieve the summit goal; (6) other important factors that could affect progress toward achieving the summit goal are: (a) the effects of trade reform; (b) the prevalence of conflict and its effect on food security; (c) the sufficiency of agricultural production; and (d) the availability of food aid and financial resources; (7) also needed are actions to monitor progress, such as the ability and willingness of the participant countries to develop information systems on the status of food security and to coordinate, monitor, and evaluate progress in implementing the summit's plan; (8) given the complexity of the problems in each of these areas, participants acknowledged that progress will be difficult; (9) the Food and Agriculture Organization's (FAO) Committee on World Food Security requested that countries report to the FAO Secretariat on their progress in meeting the summit's goal in 1998, but many countries did not respond in a timely fashion; (10) in addition, some reports were more descriptive than analytical, and some reported only on certain aspects of food security actions; (11) thus, the Secretariat was unable to draw general substantive conclusions on progress made to reduce food insecurity; and (12) the Agency for International Development said that the level of effort by both donor and developing countries will probably fall short of achieving the summit's goal of reducing chronic global hunger by one-half.\n",
    "docs": [
      "Background The Food and Agriculture Organization (FAO), the U.S. government, and others define food security to exist when all people at all times have physical and economic access to sufficient food to meet their dietary needs for a productive and healthy life. Food insecurity exists when the availability of nutritionally adequate and safe foods, or the ability to acquire acceptable foods in socially acceptable ways, is limited or uncertain. Although it is generally agreed that the problem of food insecurity is widespread in the developing world, the total number of undernourished people is unknown, and estimates vary widely. For example, estimates for 58 low-income, food-deficit countries range from 576 million people to 1.",
      "1 billion people. Appendix I provides further information about these estimates. Summit Outcomes The summit resulted in an action plan for reducing undernourishment. Included in the plan were a variety of measures for promoting economic, political, and social reforms in developing countries. Summit Produced a Plan of Action to Achieve Goal To reach their goal, summit participants approved an action plan that included 7 broadly stated commitments, 27 objectives, and 181 specific actions (see app. II). Among other things, the plan highlighted the need to reduce poverty and resolve conflicts peacefully. While recognizing that food aid may be a necessary interim approach, the plan encouraged developing countries to become more self-reliant by increasing sustainable agricultural production and their ability to engage in international trade,",
      " and by developing or improving social welfare and public works programs to help address the needs of food-insecure people. The plan further noted that governments should work closely with others in their societies, such as nongovernmental organizations (NGO) and the private sector. Although the summit action plan is not binding, countries also agreed to (1) review and revise as appropriate national plans, programs, and strategies with a view to achieving food security; (2) establish or improve national mechanisms to set priorities and develop and implement the components of the summit action plan within designated time frames, based on both national and local needs, and provide the necessary resources;",
      " and (3) cooperate regionally and internationally in order to reach collective solutions to global issues of food insecurity. They also agreed to monitor implementation of the summit plan, including periodically reporting on their individual progress in meeting the plan\u2019s objectives. Summit Called for Developing Countries to Implement Broad-Based Reforms The summit placed considerable emphasis on the need for broad-based political, economic, and social reforms to improve food security. For example, summit countries called for the pursuit of democracy, poverty eradication, land reform, gender equality, access to education and health care for all, and development of well-targeted welfare and nutrition safety nets. Other international conferences have suggested that major policy reforms were needed in connection with food security issues.",
      " For example, countries that attended the 1974 World Food Conference and the 1979 World Conference on Agrarian Reform and Rural Development said they would undertake major economic, social, and political reforms. According to some observers, the most important challenge of food security today is how to bring about major socio-institutional change in food-insecure countries, since previous efforts have met with limited success. According to other observers, there is a growing acceptance on the part of developing countries that policy reform must be addressed if food security is to be achieved. However, reports on progress toward implementing summit objectives that many countries provided to FAO in early 1998 did not contain much information on the extent to which countries have incorporated policy reforms into specific plans for implementing summit objectives.",
      " As defined by the summit and others, achieving improved world food security by 2015 is largely an economic development problem; however, the summit did not estimate the total resources needed by developing countries to achieve the level of development necessary to cut in half their undernutrition by 2015, much less assess their ability to finance the process themselves. Many developed countries that attended the summit agreed to try to strengthen their individual efforts toward fulfilling a long-standing U.N. target to provide official development assistance equivalent to 0.7 percent of the gross national product each year. However, the countries did not make a firm commitment to this goal, and the United States declined to endorse this target.",
      " Assistance from the Organization for Economic Cooperation and Development\u2019s (OECD)Development Assistance Committee members has been declining in recent years\u2014from about $66.5 billion in 1991 to $52.7 billion in 1997 (measured in 1996 dollars). Total official development assistance from these countries in 1997 represented 0.22 percent of their combined gross national product, compared to 0.32 percent during 1990-94. Many developed countries believe that the private sector is a key to resolving the resources problem. Whether the private sector will choose to become more involved in low-income, food-deficit countries may depend on the extent to which developing countries embrace policy reform measures.",
      " Private sector resources provided to the developing world have grown dramatically during the 1990s, and by 1997 the private sector accounted for about 75 percent of net resource flows to the developing world, compared to about 34 percent in 1990. However, according to the OECD, due to a number of factors, most of the poorest countries in the developing world have not benefited much from the trend and will need to rely principally on official development assistance for some time to come. (See app. III for additional analysis on official and private sector resource flows to the developing countries.) Factors Affecting Summit Goal Among factors that may affect whether the summit\u2019s goal is realized are trade reforms,",
      " conflicts, agricultural production, and safety net programs and food aid. Trade Reform Summit participants generally believed that developing countries should increasingly rely on trade liberalization to promote greater food security, and in support of this belief, the summit plan called for full implementation of the 1994 Uruguay Round Trade Agreements (URA). The participants also recognized that trade liberalization may result in some price volatility that could adversely affect the food security situation of poor countries. To help offset these possible adverse effects, the participants endorsed the full implementation of a Uruguay Round decision on measures to mitigate possible negative effects. The summit participants generally acknowledged that the URAs have the potential to strengthen global food security by encouraging more efficient food production and a more market-oriented agricultural trading system.",
      " Reforms that enable farmers in developing countries to grow and sell more food can help promote increased rural development and improve food security. Trade reforms that increase the competitiveness of developing countries in nonagricultural sectors can also lead to increased income and, in turn, a greater ability to pay for commercial food imports. However, trade reforms may also adversely affect food security, especially during the near-term transitional period, if such reforms result in an increase in the cost of food or a reduced amount of food available to poor and undernourished people. Reforms may also have adverse impacts if they are accompanied by low levels of grain stocks and increased price volatility in world grain markets.",
      " The summit plan acknowledged that world price and supply fluctuations were of special concern to vulnerable groups in developing countries. As part of the plan, food exporting countries said they would (1) act as reliable sources of supplies to their trading partners and give due consideration to the food security of importing countries, especially low-income, food-deficit countries; (2) reduce subsidies on food exports in conformity with the URA and in the context of an ongoing process of agricultural reform; and (3) administer all export-related trade policies and programs responsibly to avoid disruptions in world food agriculture and export markets. Also, to mitigate the possible adverse effects of trade reforms on food security situations,",
      " the summit plan called for full implementation of a Uruguay Round ministerial decision made in Marrakesh, Morocco, in 1994. Under this decision, signatory nations to the URA agreed to ensure that implementing the trade reforms would not adversely affect the availability of sufficient food aid to assist in meeting the food needs of developing countries, especially the poorest, net food-importing countries. To date, however, agreement has not been reached about the criteria that should be used in evaluating the food aid needs of the countries and whether trade reforms have adversely affected the ability of the countries to obtain adequate supplies of food. While trade liberalization by developing countries was especially encouraged by summit participants,",
      " some observers believe that developed countries have been slow in removing their trade barriers and that this may inhibit developing countries from achieving further trade liberalization. For example, according to reports by the International Food Policy Research Institute (IFPRI) and the World Bank, member countries of the OECD continue to maintain barriers to free trade that are adversely affecting the means and willingness of developing nations to further liberalize their own markets and to support additional trade liberalization. According to the World Bank, without an open trading environment and access to developed country markets, developing countries cannot benefit fully from producing those goods for which they have a comparative advantage. Without improved demand for developing countries\u2019 agricultural products,",
      " for example, the agricultural growth needed to generate employment and reduce poverty in rural areas will not be achieved, the Bank report said. This is critical to food security. If developing countries are to adopt an open-economy agriculture and food policy, they must be assured of access to international markets over the long term, particularly those of the developed nations, according to the Bank. (For a more detailed discussion of these issues, see app. IV.) Officials of the Department of State and the U.S. Department of Agriculture (USDA), however, said that the problem of developed countries\u2019 trade barriers against developing countries is not as severe as portrayed by IFPRI and the World Bank.",
      " State acknowledged that there are still some significant barriers to trade but said most barriers are being progressively removed because of the Uruguay Round. In addition, it said, the United States has a number of preferential areas and regimes that favor developing countries and allow most agricultural imports. State said the European Union has similar arrangements. USDA officials generally agreed that it is important for developed countries to remove trade barriers but said it is equally important for developing countries to eliminate domestic policies and restrictions on trade that have adversely affected their own economic growth. The price volatility of world food commodities, particularly grains, and its relationship to the level of food reserves, is a key issue related to trade liberalization and a significant problem for food-insecure countries.",
      " Views differ over the level of global grain reserves needed to safeguard world food security, the future outlook for price volatility, and the desirability of holding grain reserves. The summit observed that maintaining grain reserves was one of several instruments that countries could use to strengthen food security; however, the summit did not identify a minimum level of global grain reserves needed to ensure food security nor did it recommend any action by countries individually or in concert. Instead, the summit participants agreed to monitor the availability and adequacy of their individual reserve stocks, and FAO agreed to continue its practice of monitoring and informing member nations of developments in world food prices and stocks. FAO,",
      " IFPRI, and the World Bank have observed that agricultural markets are likely to be more volatile as the levels of world grain reserves are reduced, an outcome expected as trade reforms are implemented. However, they and other observers have also noted that as a result of trade market reforms, agricultural producers may respond more quickly to rising prices in times of tightening markets, the private sector may hold more reserves than it did when governments were holding large reserves (though not in an amount that would fully replace government stocks), and the increased trade in grains among all nations will help offset a lower level of world grain reserves. Some observers believe that most countries, including food-insecure developing countries,",
      " are better off keeping only enough reserves to tide them over until they can obtain increased supplies from international markets, since it is costly to hold stocks for emergency purposes on a regular basis and other methods might be available for coping with volatile markets. Others support the view that ensuring world food security requires maintaining some minimum level of global grain reserves and that developed countries have a special responsibility to establish and hold reserves for this purpose. Some have also suggested examination of the feasibility of establishing an international grain reserve. The U.S. position is that governments should pursue at local and national levels, as appropriate, adequate, cost-effective food reserve policies and programs. The United States has opposed creation of international food reserves because of the difficulties that would arise in deciding how to finance,",
      " hold, and trigger the use of such reserves. (See app. IV for additional analysis on grain reserves.) Actions to Reduce Conflict The summit countries concluded that conflict and terrorism contribute significantly to food insecurity and declared a need to establish a durable, peaceful environment in which conflicts are prevented or resolved peacefully. According to FAO, many of the countries that had low food security 30 years ago and failed to make progress or even experienced further declines since then have suffered severe disruptions caused by war and political disturbances. Our analysis of data on civil war, interstate war, and genocide in 88 countries between 1960 and 1989 shows a relationship between the incidence of these disturbances and food insecurity at the national level.",
      " A sharp rise in international emergency food aid deliveries during the early 1990s has been largely attributed to an increasing number of armed conflicts in different parts of the world. Summit countries pledged that they would, in partnership with civil society and in cooperation with the international community, encourage and reinforce peace by developing conflict prevention mechanisms, by settling disputes through peaceful means, and by promoting tolerance and nonviolence. They also pledged to strengthen existing rules and mechanisms in international and regional organizations, in accordance with the U.N. Charter, for preventing and resolving conflicts that cause or exacerbate food insecurity and for settling disputes by peaceful means. The FAO Secretariat analyzed progress reports submitted to FAO by member countries in 1998 and cited several examples of country efforts to support peaceful resolution of domestic and international conflicts.",
      " However, the analysis did not provide any overall results on the extent to which countries had made progress in ending already existing violent conflicts and in peacefully resolving or preventing other conflicts. (See app. VI for our analysis on the relationship between conflict and food security.) Increasing Agricultural Production One objective of the summit was to increase agricultural production and rural development in the developing world, especially in low-income, food-deficit countries. FAO estimates show that achieving the required production increases will require unusually high growth rates in the more food-insecure countries and, in turn, greater investments, especially in the worst-off countries. World Bank officials have said that the Bank is committed to emphasizing rural agricultural development in countries that receive its assistance.",
      " Its plan calls for country assistance strategies that treat agriculture comprehensively and include well-defined, coherent, rural strategy components. Despite public statements by the World Bank, there are still differences of opinion within the Bank and among its partners as to the priority that should be given to the rural sector. These opinions range from recognizing a positive role for agricultural growth in an overall development strategy, to benign neglect, to a strong urban bias. Achieving needed agricultural production increases will also require other major changes in the rural and agricultural sector and in society more generally. For example, according to the U.S. mission to FAO, the most critical factor affecting progress toward achieving the summit goal is the willingness of food-insecure countries to undertake the kind of economic policies that encourage rather than discourage domestic production in the agricultural sector and their willingness to open their borders to international trade in agricultural products.",
      " There must be an \u201cenabling environment,\u201d the mission said, that favors domestic investment and production in the agricultural sector. Moreover, the mission said, these policies are under the control of the food-insecure countries themselves and can have a far greater impact on domestic food security than international assistance. Another issue involving increased agricultural production concerns promotion of modern farming methods, such as chemicals to protect crops, fertilizers, and improved seeds. Agriculture production in developing countries can be substantially improved if such methods are adopted and properly implemented. However, some groups strongly oppose the introduction of such methods because of concerns about the environment. (See app. VII for additional information on this issue.) Safety Net Programs and Food Aid The summit\u2019s long-term focus is on creating conditions where people have the capability to produce or purchase the food they need,",
      " but summit participants noted that food aid\u2014both emergency and nonemergency\u2014could be used to help promote food security. The summit plan called upon governments of all countries to develop within their available resources well-targeted social welfare and nutrition safety nets to meet the needs of their food-insecure people and to implement cost-effective public works programs for the unemployed and underemployed in regions of food insecurity. With regard to emergency food aid, the summit plan stated the international community should maintain an adequate capacity to provide such assistance. Nevertheless, this goal has been difficult to implement and, since the summit, some emergency food aid needs have not been met. For example,",
      " according to the World Food Program, which distributes about 70 percent of global emergency food aid, approximately 6 percent of its declared emergency needs and 7 percent of its protracted relief operations needs were not satisfied in 1997. Also, donors direct their contributions to emergency appeals on a case-by-case basis, and some emergencies are underfunded or not funded at all. In addition, according to the World Food Program, lengthy delays between appeals and contributions, as well as donors\u2019 practice of attaching specific restrictions to contributions, make it difficult for the World Food Program to ensure a regular supply of food for its operations. In 1998,",
      " the program\u2019s emergency and protracted relief operations were underfunded by 18 percent of total needs. Other problems affecting the delivery of emergency food aid include government restrictions on countries to which the food aid can be sent and civil strife and war within such countries. Notable recent examples of countries that have not received sufficient assistance, according to the World Food Program, include North Korea and Sudan, where both situations involve complex political issues that go well beyond the food shortage condition itself. (See app. V for additional information on food aid.) Actions Needed to Monitor Progress Summit participants agreed that an improved food security information system, coordination of efforts, and monitoring and evaluation are actions needed to make and assess progress toward achieving the summit\u2019s goal.",
      " Need to Develop a Food Security Information System Many countries participating in the summit acknowledged that they do not have adequate information on the status of their people\u2019s food security. Consequently, participants agreed that it would be necessary to (1) collect information on the nutritional status of all members of their communities (especially the poor, women, children, and members of vulnerable and disadvantaged groups) to enable monitoring of their situation; (2) establish a process for developing targets and verifiable indicators of food security where they do not exist; (3) encourage relevant U.N. agencies to initiate consultations on how to craft a food insecurity and vulnerability information and mapping system;",
      " and (4) draw on the results of the system, once established, to report to CFS on their implementation of the summit\u2019s plan. According to FAO and U.S. officials, improvement in data collection and analysis is necessary if countries are to have reasonably accurate data to design policies and programs to address the problem. However, not much progress has been made in this regard over the past 20 years, and serious challenges remain. A major shortcoming is that agreement has not yet been reached on the indicators to be used in establishing national food insecurity information systems. Following the 1996 summit, an international interagency working group was created to discuss how to create such a system.",
      " As of November 1998, the working group had not yet decided on or begun to debate which indicators of food insecurity should be used, and the working group is not scheduled to meet again before the mid-1999 CFS meeting. FAO Secretariat officials told us that a proposal will be ready for the 1999 CFS meeting. Thus far, only a few developed and not many more developing countries have participated. (See app. VIII for additional analysis of this issue.) Coordination Is Considered Essential The summit\u2019s action plan incorporates several objectives and actions for improved coordination among all the relevant players. For example, it calls upon FAO and other relevant U.N.",
      " agencies, international finance and trade institutions, and other international and regional technical assistance organizations to facilitate a coherent and coordinated follow-up to the summit at the field level, through the U.N.\u2019s resident coordinators, in full consultation with governments, and in coordination with international institutions. In addition, the plan calls on governments, cooperating among themselves and with international institutions, to encourage relevant agencies to coordinate within the U.N. system to develop a food-insecurity monitoring system, and requested the U.N. Secretary General to ensure appropriate interagency coordination. Since the summit, the United Nations, FAO, the World Bank, and others have endorsed various actions designed to promote better coordination.",
      " In April 1997, the United States and others expressed concern to FAO about problems related to FAO efforts to help developing countries create strategies for improving their food security. Donor countries noted that nongovernmental groups had not been involved in the preparation of the strategies, even though the summit plan stressed the importance of their active participation. In June 1997, the European Union expressed concern about the uncoordinated nature of food aid, noting that responsibilities were scattered among a number of international organizations and other forums, each with different representatives and agendas. And in October 1997, the World Bank reported that many agricultural projects had failed due to inadequate coordination among the donors and multilateral financial institutions.",
      " (See app. IX for additional information on the coordination issue.) Need to Monitor and Evaluate The summit participants acknowledged the need to actively monitor the implementation of the summit plan. To this end, governments of the countries agreed to establish, through CFS, a timetable, procedures, and standardized reporting formats for monitoring progress on the national, subregional, and regional implementation of the plan. CFS was directed to monitor the implementation of the plan, using reports from national governments, the U.N. system of agencies, and other relevant international institutions, and to provide regular reports on the results to the FAO Council. As previously noted, as of November 1998,",
      " a monitoring and evaluation system had not yet been developed to provide reasonably accurate data on the number, location, and extent of undernourished peoples. In addition, a system had not been created to assess implementation of the various components of the summit\u2019s action plan (that is, 7 broad commitments, 27 major supporting objectives, and 181 supporting actions). Many of these involve multiple activities and complex variables that are not easily defined or measured. In addition, CFS has requested that the information provided allow for analysis of which actions are or are not successful in promoting summit goals. In April 1997, CFS decided that the first progress reports should cover activities through the end of 1997 and be submitted to the FAO Secretariat by January 31,",
      " 1998. Countries and relevant international agencies were to report on actions taken toward achieving the specific objectives under each of the seven statements of commitment. As of March 31, 1998, only 68 of 175 country reports had been received. The Secretariat analyzed the information in the 68 reports and summarized the results in a report to the CFS for its June 1998 session. The Secretariat reported it was unable to draw general substantive conclusions because (1) all countries, to varying degrees, were selective in providing the information they considered of most relevance for their reporting; (2) varied emphasis was given to reporting on past plans and programs,",
      " ongoing programs, and future plans to improve food security; and (3) the reports did not always focus on the issues involved. Furthermore, some countries chose to provide a report that was more descriptive than analytical, and some countries reported only on certain aspects of food security action, such as food stocks or reserve policies. CFS had not stipulated or suggested any common standards for measuring the baseline status and progress with respect to actions, objectives, or commitments prior to the preparation of the progress reports. In the absence of common standards, the Secretariat is likely to experience difficulty in analyzing relationships and drawing conclusions about the progress of more than 100 countries.",
      " In addition, CFS did not ask countries and agencies to report on planned targets and milestones for achieving actions, objectives, or commitments or on estimated costs to fulfill summit commitments and plans for financing such expenditures. The Secretariat provided the June 1998 CFS session with a proposal for improving the analytical format for future progress reports. CFS did not debate the essential points that should be covered in future reports and instead directed the Secretariat to prepare another proposal for later consideration. Given the complexity of the action plan and other difficulties, CFS also decided that countries will not prepare the next progress report until the year 2000 and will address only half of the plan\u2019s objectives.",
      " A progress report on the remaining objectives will be made in 2002. Thus, the second report will not be completed until 6 years after the summit. A third set of progress reports is to be prepared in 2004 and 2006. Under the summit plan, countries also agreed to encourage effective participation of relevant civil society actors in the monitoring process, including those at the CFS level. In April 1997, CFS decided to examine this issue in detail in 1998. However, the issue was not included in the provisional agenda for the June 1998 session. Detailed discussion of proposals by Canada and the United States on the issue was postponed until the next CFS session in 1999.",
      " The postponement occurred as a result of opposition by many developing country governments to an increased role for NGOs in CFS. (See app. X for additional analysis of this issue.) Agency Comments The Department of State, USDA, FAO, and the World Food Program provided oral comments and USAID provided written comments on a draft of this report. They generally agreed with the contents of the report. State emphasized the important role that broad-based policy reforms play in helping developing countries address food insecurity and suggested that our report further highlight this factor. We agree with State on this matter, and have reemphasized the need for developing countries to initiate appropriate policy reforms as a prelude to addressing food security issues.",
      " State and USDA officials also commented that in their opinion, the World Bank and IFPRI overstated the effect of developed countries\u2019 trade barriers on the food insecurity of least-developed countries. We have modified the report to reflect State\u2019s and USDA\u2019s views on this matter more fully. USAID said that, although an unfortunate circumstance, it believes the level of effort by donor and developing countries will probably fall short of achieving the summit\u2019s goal of reducing chronic global hunger by one-half. While we cannot quantify the extent to which developing countries may fall short, we tend to agree with USAID\u2019s observation. USAID\u2019s comments are reprinted in appendix XII.",
      " FAO officials said the report\u2019s general tone of skepticism was justified based on the past record and reiterated that reducing by one-half the number of undernourished people by 2015 requires a change in priorities by countries along the lines spelled out in the summit action plan. They also said that work was underway to further investigate the extent to which the target is feasible at the national level in those countries facing political instability or with a high proportion of undernourished people. FAO officials said that our discussion in appendix IX of coordination issues concerning FAO\u2019s Special Program for Food Security and a Telefood promotion did not reflect FAO members\u2019 support for these initiatives.",
      " We provided additional information on the initiatives to reflect FAO\u2019s views (see app. IX). World Food Program officials said food aid for nonemergency and developmental purposes is more effective than is suggested by the discussion in our report. However, the officials did not identify any studies or analysis to support the Program\u2019s position that food constitutes an efficient use of assistance resources. The World Food Program said that it has acted on recommendations for improving its operations, and we modified the report to reflect the World Food Program\u2019s views. However, it is important to note that a recent USAID study on the use of food aid in contributing to sustainable development concluded that while food aid may be effective,",
      " it is less efficient than financial assistance, although the report pointed out that financial aid is often not available. World Food Program officials acknowledged that important issues remain unresolved concerning establishment of an international database on food insecurity. All of the above agencies and the Department of Health and Human Services also provided technical comments that were incorporated into the report where appropriate. We are sending copies of this report to Senator Joseph R. Biden, Senator Robert C. Byrd, Senator Pete V. Domenici, Senator Jesse Helms, Senator Frank R. Lautenberg, Senator Patrick J. Leahy, Senator Joseph I. Lieberman, Senator Mitch McConnell, Senator Ted Stevens,",
      " and Senator Fred Thompson, and to Representative Dan Burton, Representative Sonny Callahan, Representative Sam Gejdenson, Representative Benjamin A. Gilman, Representative John R. Kasich, Representative David Obey, Representative Nancy Pelosi, Representative John M. Spratt, Representative Henry A. Waxman, and Representative C. W. Bill Young. We are also sending copies of this report to the Honorable Dan Glickman, Secretary of Agriculture; the Honorable William M. Daley, Secretary of Commerce; the Honorable William S. Cohen, Secretary of Defense; the Honorable Donna E. Shalala, Secretary of Health and Human Services;",
      " the Honorable Madeline K. Albright, Secretary of State; the Honorable Robert E. Rubin, Secretary of the Treasury; the Honorable J. Brian Atwood, Administrator, Agency for International Development; the Honorable Carol M. Browner, Administrator, Environmental Protection Agency; the Honorable George J. Tenet, Director, Central Intelligence Agency; the Honorable Jacob J. Lew, Director, Office of Management and Budget; the Honorable Samuel R. Berger, National Security Adviser to the President; and the Honorable Charlene Barshefsky, U.S. Trade Representative. Copies will also be made available to others upon request.",
      " If you or your staff have any questions about this report, please contact me at (202) 512-4128. The major contributors to this report are listed in appendix XIII. Current Status of Global Food Security Although the problem of food insecurity is widespread in the developing world, the total number of undernourished people is unknown, and estimates vary widely. An accurate assessment of the number of people with inadequate access to food would require data from national sample surveys designed to measure both the food consumption and the food requirements of individuals. Such studies may include a dietary survey and a clinical survey that involves anthropometric, or body, measurements,and biochemical analyses.",
      " According to the Food and Agriculture Organization (FAO), clinical and anthropometric examinations are the most practical and sound means of determining the nutritional status of any particular group of individuals in most developing countries in Africa, Asia, and Latin America because the countries lack vital statistics, accurate figures on agricultural production, and laboratories where biochemical tests can be performed. However, clinical examinations have often been given a low priority by developing countries, and studies of anthropometric measurements have been undertaken very infrequently. National dietary intake surveys are costly and time-consuming and have also been undertaken in very few countries. As a result, there are no internationally comparable, comprehensive survey data for tracking changes in undernutrition for individuals and population groups within countries,",
      " according to FAO. FAO\u2019s Method for Estimating Undernourishment For many years FAO has employed a method to estimate the prevalence of chronic undernourishment at the country level that is subject to a number of weaknesses. Nevertheless, FAO estimates are frequently cited in the absence of better estimates. FAO uses (1) food balance sheets that estimate the amount of food available to each country over a 3-year period and (2) estimates of each country\u2019s total population to calculate the average available per capita daily supply of calories during that period. FAO then estimates the minimum average per capita dietary requirements for the country\u2019s population,",
      " allowing for only light physical activity. Then, in combination with an estimate of inequality in the distribution of food among households in the country, it derives the percentage distribution of the population by per capita calorie consumption classes. On the basis of this distribution and a cutoff point for food inadequacy based on the estimate of the minimum average per capita dietary energy requirements, the proportion of undernourished is estimated. This is then multiplied by an estimate of the size of the population to obtain the absolute number of undernourished. According to FAO, a minimum level of energy requirements is one that allows for only light physical activity. Depending on the country,",
      " FAO says, the minimum level of energy requirements for the average person ranges from 1,720 to 1,960 calories per day. Depending on data availability, FAO\u2019s assessment of equitable food distribution for a country is based on survey data on household food energy intake, food expenditure, total income or expenditure, and/or the weighted average of estimates for neighboring countries. FAO\u2019s method has a number of weaknesses, and the validity of its estimates has not been established. For example, FAO\u2019s food supply figures are based on 3-year averages, and population estimates are for the midpoint of the reference period used. As a result,",
      " FAO\u2019s estimates of the prevalence of undernutrition do not reflect the short-term, seasonal variations in food production or availability in countries. In addition, FAO\u2019s method relies on total calories available from food supplies and ignores dietary deficiencies that can occur due to the lack of adequate amounts of protein and essential micronutrients (for example, vitamins essential in minute amounts for growth and well-being). FAO\u2019s method for measuring inequality in food distribution or access is ideally based on food consumption data from household surveys, but the number of developing countries for which such data are available is limited, and the surveys may not be national in scope or may have been done infrequently.",
      " FAO uses these data to estimate parameters for countries for which data are not available. FAO acknowledges that the quality and reliability of data relating to food production, trade, and population vary from country to country and that for many developing countries the data are either inaccurate or incomplete. According to one critic of FAO\u2019s method, FAO\u2019s estimates are unreliable indicators of the scope of the undernutrition problem and erroneously find chronic undernutrition to be most prevalent in Africa. The main reasons for the latter finding are systematic bias in methods used by African countries to estimate food production and, to a lesser extent, certain minor food items that are not completely covered in FAO\u2019s food balance sheets.",
      " The author concludes that anthropometric measurements, based as they are on measurements of individuals, would be a more promising method for future estimates of undernourishment than estimates based on FAO\u2019s aggregate approach. FAO\u2019s method does not provide information on the effects of chronic undernourishment (for example, the prevalence of growth retardation and specific nutritional deficiencies), does not specify where the chronically undernourished live within a country, and does not identify the principal causes of their undernutrition. According to FAO and other experts, such information is needed to develop effective policies and programs for reducing undernourishment. In addition,",
      " FAO does not provide estimates for developed countries and does not provide estimates of chronic undernutrition of less than 1 percent. Overall, according to FAO, its estimates of food availability and/or the prevalence of undernutrition for many countries are subject to errors of unknown magnitude and direction. Nonetheless, FAO believes that its estimates permit one to know generally in which countries undernutrition is most acute. According to FAO, the consensus of a group of experts that it consulted in March 1997 was that (1) despite the deficiencies of its method, FAO had no current substitute for assessing chronic undernutrition than its food balance sheets based on per capita food availability and distribution;",
      " (2) FAO\u2019s approach tends to underestimate consistently per capita food availability in African countries because of its inadequate coverage of noncereal crops; (3) attention needs to be given not just to indications of severe malnutrition but also to mild and moderate malnutrition; and (4) more subregional information is needed on malnutrition and on local levels of food stocks and trade, wages and market conditions, and household perceptions of medium-term food insecurity. It was also argued that about 67 percent of child deaths are associated with nonclinically malnourished children. In analyses for the World Food Summit, FAO estimated that about 840 million people in 93 developing countries were chronically undernourished during 1990-",
      "92. These countries represented about  98.5 percent of the population in all developing countries. According to the FAO estimates, a relatively small number of countries account for most of the chronically undernourished in the 93 countries (see table I.1). For example, during 1990-92, China and India were estimated to have about 189 million and 185 million chronically undernourished, respectively; collectively, they had nearly 45 percent of the total for all 93 countries. Five countries\u2014Bangladesh, Ethiopia, Indonesia, Nigeria, and Pakistan\u2014accounted for between 20 million and 43 million chronically undernourished each.",
      " The next 13 countries represented between about 6 million and 17 million of the chronically undernourished. Altogether, the 20 countries accounted for about 679 million, or nearly 81 percent, of the undernourished in the 93 countries. Number of undernourished (millions) As table I.2 shows, great variation also characterizes the extent to which chronic undernutrition is a problem within countries. According to FAO figures, a majority of the countries were estimated to have chronically undernourished people at a rate ranging between 11 and 40 percent in 1990-",
      "92, and 19 had rates ranging between 41 and 73 percent. Total number of chronically undernourished (millions) Table I.3 provides estimates of the number of undernourished people in developing country regions of the world between 1969-71 and 1994-96. (The figures include FAO revised estimates for the periods prior to 1994-96.As a result, the total for 1990-92 is slightly lower than that shown in  tables I.1 and I.2.) FAO\u2019s estimates indicate that the developing world as a whole made considerable progress in reducing the level of chronic undernourishment between 1969-",
      "71 and 1990-92, from an estimated 37 percent of the total population to 20 percent. However, the absolute number of undernourished was reduced by only 14.3 percent during the period\u2014from 959 million to about 822 million\u2014because the total population of the developing world increased by nearly 1.5 billion people during that time. Also, a large number of states did so poorly that their chronically undernourished people increased both absolutely and as a percentage of their total population. Between 1990-92 and 1994-96, the proportion of undernourished people in the developing world declined another 1 percent,",
      " but the number of undernourished increased by about 6 million people. Year (3-year averages) Total population (millions) Persons (millions) Although the percentage of chronically undernourished people in the developing world was considerably reduced between 1969-71 and 1994-96, sub-Saharan Africa\u2019s reduction was very small. According to FAO\u2019s estimates, in 1994-96 the proportion of sub-Saharan Africa\u2019s population that was undernourished greatly exceeded that of the other regions of the world. However, in absolute numbers, the most undernourished persons were still found in East and Southeast Asia and in South Asia.",
      " USDA Estimate of Undernutrition A 1997 U.S. Department of Agriculture (USDA) Economic Research Service (ERS) study employed an alternative indirect method for estimating the amount of undernutrition at the country level that is similar to FAO\u2019s method in some respects. Like FAO, ERS estimates food availability within a country. It also adopts a minimum daily caloric intake standard necessary to sustain life with minimum food-gathering activities. However, the standard is higher than that used by FAO (for light physical activity)\u2014ranging between about 2,000 and 2,200 calories per day, depending on the country. According to ERS,",
      " its standard is comparable to the activity level for a refugee; it does not allow for play, work, or any activity other than food gathering. ERS estimates how inequality affects the distribution of available food supplies based on consumption or income distribution data for five different groups of the population. Like FAO\u2019s estimate, ERS\u2019 estimate is highly dependent on the availability and quality of national-level data. In 1997, ERS used its method to estimate the number of undernourished in 58 of the 93 developing countries regularly reported on by FAO. ERS estimated that during 1990-92, about 1.",
      "038 billion people could not meet their nutritional requirements\u2014nearly 200 million more than FAO\u2019s estimate of 839 million people for 93 countries. FAO\u2019s data for the same 58 countries indicates 574 million chronically undernourished, about 45 percent less than USDA\u2019s estimate. One reason for the much larger estimates resulting from the USDA approach are the higher standards used for minimum energy requirements that were previously noted. World Health Organization Undernourishment Estimates Another important source of data on the status of food security in the developing world is the World Health Organization\u2019s global database on growth in children under age 5. Since 1986,",
      " the World Health Organization has sought to assemble and systematize the results of representative anthropometric surveys conducted in different parts of the world. The data indicate that about 2 out of 5 children in the developing world are stunted (low height for age), 1 out of 3 underweight (low weight for age), and 1 out of 11 wasted (low weight for height). In absolute numbers, the estimates for 1990 are 230 million stunted children, 193 million underweight, and 50 million wasted under the age of 5. According to the U.N. Children\u2019s Fund, more than 6 million children in developing countries die each year from causes either directly or indirectly tied to malnutrition.",
      " World Food Summit\u2019s Commitments, Objectives, and Select Actions for Promoting Food Security The 185 countries that attended the World Food Summit pledged their actions and support to implement a plan of action for reducing food insecurity. The plan includes 7 major commitments, 27 subordinate objectives, and 181 specific actions. The commitments, subordinate objectives, and 24 of the specific actions relating to a variety of objectives are summarized in table II.1. Table II.1: Commitments, Objectives, and Select Examples of Actions in the World Food Summit\u2019s Plan of Action Ensure an enabling political, social, and economic environment designed to create the best conditions for the eradication of poverty and for durable peace,",
      " based on full and equal participation of men and women. Prevent and resolve conflicts peacefully and create a stable political environment through respect for all human rights and fundamental freedoms, democracy, a transparent and effective legal system, transparent and accountable governance and administration in all public and private national and international institutions, and effective and equal participation of all people in decisions and actions that affect their food security. Ensure stable economic conditions and implement development strategies that encourage the full potential of private and public initiatives for sustainable, equitable, economic, and social development that also integrate population and environmental concerns. Establish legal and other mechanisms that advance land reform and promote the sustainable use of natural resources.",
      " Ensure gender equality and empowerment of women. Promote women\u2019s full and equal participation in the economy. Encourage national solidarity and provide equal opportunities for all in social, economic, and political life, particularly vulnerable and disadvantaged people. Support investment in human resource development, such as health, education, and other skills essential to sustainable development. Implement policies aimed at eradicating poverty and inequality and improving physical and economic access by all. Pursue poverty eradication and food sustainability for all as a policy priority and promote employment and equal access to resources, such as land, water, and credit, to maximize incomes of the poor. Promote farmers\u2019 access to genetic resources for agriculture.",
      " Enable the food insecure to meet their food and nutritional requirements and seek to assist those unable to do so. Develop national information and mapping systems to identify localized areas of food insecurity and vulnerability. Implement cost-effective public works programs for the underemployed. Develop targeted welfare and nutrition safety nets. (continued) Ensure that food supplies are safe, physically and economically accessible, appropriate, and adequate to meet the needs of the food insecure. Promote access to education and health care for all. Pursue participatory and sustainable food, agriculture, fisheries, forestry, and rural development policies and practices, in areas with low as well as high potential, that are essential for adequate and reliable food supplies at the household,",
      " national, regional, and global levels and combat pests, drought, and desertification. Pursue, through participatory means, sustainable, intensified, and diversified food production, and increased productivity and efficiency and reduced losses, taking into account the need to sustain resources. Combat environmental threats to food security, in particular droughts and desertification, pests, and erosion of biological diversity, and restore the natural resource base, including watersheds, to achieve greater production. Promote sound policies and programs on the transfer and use of technologies, skills development, and training for food security needs. Strengthen and broaden research and scientific cooperation on agriculture, fisheries,",
      " and forestry to support policy and international, national, and local actions to increase productive potential and maintain the natural resource base in agriculture, fisheries, and forestry and in support of efforts to eradicate poverty and promote food security. Formulate and implement integrated rural development strategies, in high and low potential areas, that promote employment, skills, infrastructure, institutions, and services in support of food security. Strengthen local government institutions in rural areas and provide them with adequate resources, decision-making authority, and mechanisms for grassroots participation. Promote the development of rural banking, credit, and savings schemes, including equal access to credit for men and women, microcredit for the poor,",
      " and adequate insurance mechanisms. Strive to ensure that food, trade, and overall trade policies are conducive to fostering food security for all through a fair and market-oriented world trade system. Use the opportunities arising from the international trade framework established in recent global and regional trade negotiations. Establish well-functioning internal marketing and transportation systems to facilitate local, national, and international trade. Meet essential food import needs in all countries, considering world price and supply fluctuations and taking into account food consumption levels of vulnerable groups in developing countries. Food-exporting countries should act as reliable sources of supplies to their trading partners and give due consideration to the food security of importing countries.",
      " Reduce subsidies on food exports in conformity with the Uruguay Round Agreements. Support the continuation of the reform process in conformity with the Uruguay Round Agreements. Endeavor to prevent and be prepared for natural disasters and man-made emergencies and meet transitory and emergency food requirements in ways that encourage recovery, rehabilitation, and development of a capacity to satisfy future needs. Reduce demands for emergency food assistance through efforts to prevent and resolve man-made emergencies, particularly international, national, and local conflicts. Establish as quickly as possible prevention and preparedness strategies for low-income, food-deficit countries and areas vulnerable to emergencies. (continued) Improve or develop efficient and effective emergency response mechanisms at international,",
      " regional, national, and local levels. Strengthen links between relief operations and development programs to facilitate the transition from relief to development. Promote optimal allocation and use of public and private investments to foster human resources, sustainable food and agricultural systems, and rural development. Create the policy framework and conditions that encourage optimal public and private investments in the equitable and sustainable development of food systems, rural development, and human resources necessary to contribute to food security. Endeavor to mobilize and optimize the use of technical and financial resources from all sources, including debt relief, to raise investment in sustainable food production in developing countries. Raise sufficient and stable funding from private,",
      " public, domestic, and international sources to achieve and sustain food security. Strengthen efforts towards the fulfillment of the agreed official development assistance target of 0.7 percent of the gross national product. Focus official development assistance (ODA) toward countries that have a real need for it, especially low-income countries. Explore ways of mobilizing public and private financial resources for food security through the appropriate reduction of excessive military expenditures. Implement, monitor, and follow up the summit plan of action at all levels in cooperation with the international community. Adopt actions within each country\u2019s national framework to enhance food security and enable implementation of the commitments of the World Food Summit plan of action.",
      " Review and revise, as appropriate, national plans, programs, and strategies to achieve food security consistent with summit commitments. Establish or improve national mechanisms to set priorities and develop, implement, and monitor the components of action for food security within designated time frames. In collaboration with civil society, formulate and launch national food-for-all campaigns to mobilize all stakeholders and their resources in support of the summit plan of action. Actively encourage a greater role for, and alliance with, civil society. Improve subregional, regional, and international cooperation and mobilize and optimize the use of available resources to support national efforts for the earliest achievement of sustainable food security.",
      " Continue the coordinated follow-up by the U.N. system to the major U.N. conferences and summits since 1990; reduce duplication and fill in gaps in coverage, making concrete proposals for strengthening and improving coordination with governments. Relevant international organizations are invited, on request, to assist countries in reviewing and formulating national plans of action, including targets, goals, and timetables for achieving food security. Actively monitor the implementation of the summit plan of action. Establish, through FAO\u2019s Committee on Food Security, a timetable, procedures, and standardized reporting formats, on the national and regional implementation of the summit plan of action. Monitor,",
      " through the Committee on Food Security, implementation of the summit action.plan. Clarify the right to adequate food and the fundamental right of everyone to be free from hunger, as stated in the International Covenant on Economic, Social, and Cultural Rights and other relevant international and regional instruments. (continued) Share responsibilities for achieving food security for all so that implementation of the summit plan of action takes place at the lowest possible level at which its purpose is best achieved. Resources for Financing Food Security As defined by the countries at the summit, achieving improved world food security by 2015 is largely a development problem, the primary responsibility for attaining food security rests with individual countries,",
      " ODA could be of critical importance to countries and sectors left aside by other external sources of finance, and developing country governments should adopt policies that promote foreign and direct investment and effective use of ODA. There is a growing body of evidence that foreign financial aid works well in a good policy environment. For example, according to a recent World Bank report, financial assistance leads to faster growth, poverty reduction, and gains in social indicators with sound economic management. With sound country management, the report said, 1 percent of gross domestic product in assistance translates into a 1 percent decline in poverty and a similar decline in infant mortality. The report concluded that improvements in economic institutions and policies in the developing world are the key to a quantum leap in poverty reduction and that effective financial aid complements private investment.",
      " Conversely, financial aid has much less impact in a weak policy environment. The report\u2019s conclusions are consistent with the approach espoused by the summit. For example, according to the summit countries, a sound policy environment in which food-related investment can fulfill its potential is essential. More specifically, summit participants said governments should provide an economic and legal framework that promotes efficient markets that encourage private sector mobilization of savings, investment, and capital formation. In addition, the participants said that the international community has a role to play in supporting the adoption of appropriate national policies and, where necessary and appropriate, in providing technical and financial assistance to assist developing countries in fostering food security.",
      " Table III.1 shows, as could be expected, that a majority of the more food-insecure countries are low-income countries and many of them are also least developed. Of 93 developing countries reported on in the table, 72 had inadequate food supplies in 1990-92. Forty-six of the countries were low income (that is, they had a gross national product per capita of less than $766), and 34 of the 46 countries were designated as \u201cleast developed,\u201d meaning they were the poorest countries in the world. Together, the 46 countries accounted for more than 700 million of the chronically undernourished people in developing countries in 1990-",
      "92. Table III.1: Relationship Between Income Levels of Developing Countries and Food Security Income level (number of countries) Least developed, low income Average is based on available food supply at the country level. We designated countries as having inadequate or adequate daily per capita energy supplies based on an FAO analysis of the relationship between average per capita daily energy supplies and chronic undernutrition. According to FAO, for countries having an average daily per capita undernutrition threshold ranging between 1,750 calories and 1,900 calories and a moderate level of unequal food distribution, between 21 percent and 33 percent of the population will be below the undernutrition threshold if the average per capita daily energy supply is 2,",
      "100 calories. If the average per capita daily energy supply is 2,400 calories, 7 to 13 percent of the population will be undernourished. At 2,700 calories, 2 to 4 percent of the population will be undernourished. If food is distributed more equitably, the percentage of the population that is undernourished decreases, and vice versa. Table III.2 shows that between 1990 and 1997, Organization for Economic Cooperation and Development (OECD) Development Assistance Committee countries\u2019 allocation of ODA averaged $60.9 billion (1996 prices and exchange rates). However,",
      " ODA has been steadily declining, from a high of $66.5 billion in 1991 to $52.7 billion in 1997. Table III.2: Total Net Resource Flows From OECD Development Assistance Committee Countries and Multilateral Agencies to Aid Recipient Countries, 1990-97 Dollars in billions (1996 prices and exchange rates) Excluding forgiveness of nonofficial development assistance debt for the years 1990-92. For many years, OECD\u2019s Development Assistance Committee (DAC) has supported a target of providing ODA equivalent to 0.7 percent of the gross national product. This goal was reaffirmed by most DAC countries at the World Food Summit.",
      " As table III.3 shows, since the early 1980s ODA as a percent of the gross national product has declined for most DAC countries, including the five largest providers (France, Germany, Japan, the United Kingdom, and the United States). Only four countries met the ODA target in 1997 (Denmark, Norway, the Netherlands, and Sweden), and they represent a small amount of the ODA provided by the DAC countries. For the DAC countries in total, ODA represented 0.34 percent of their combined gross national product during 1980-84 and only 0.22 percent in 1997.",
      " Most countries\u2019 ODA in 1997 ranged between only 0.22 percent and 0.36 percent of their gross national product. The United States was the lowest, contributing only 0.08 percent of its gross national product, or about one-ninth of the DAC target. Table III.3: ODA Performance of OECD DAC Countries, 1980-97 1997 ODA in dollars (billions) Target amount of 0.7 percent of GNPThe United States has never approved the ODA target. According to U.S. government officials, the government has no plans to try to meet the target.",
      " Apart from ODA, the United States devotes substantial resources to promoting global peace through its participation in a variety of strategic alliances, such as the North Atlantic Treaty Organization, and maintenance of the world\u2019s most sophisticated defense forces. U.S. expenditures on ODA and defense combined in 1995 represented 3.9 percent of the U.S. gross national product\u2014a higher percentage than that for any other DAC country. (The average for all other DAC countries was 2.4 percent, with a range from 1.1 percent for Luxembourg to 3.6 percent for France.) According to the OECD, reasons for the decline include the end of the Cold War,",
      " which removed a traditional and well-understood security rationale for development assistance, preoccupation with domestic issues and budgetary pressures in some donor countries, and fiscal restraint policies that have included disproportionate cuts in development assistance budgets. In June 1998, the OECD reported that fiscal restraint programs had succeeded in reducing OECD public deficits from 4.3 percent of combined gross domestic product in 1993 to 1.3 percent in 1997. The OECD said that the continuing decline in ODA ran counter to the widespread improvements in the economic and budgetary situations of the DAC member countries and to their clearly stated policy goals for increasing ODA. According to a June 1998 report by FAO (based on information provided by only some of the DAC countries), Ireland plans to increase its ODA to 0.",
      "45 percent of its gross national product by 2002 (compared to 0.31 percent in 1997); Switzerland plans to increase its ODA to 0.45 percent of its gross national product (from 0.32 percent in 1997 ), but the year for reaching this level was not cited; and Norway seeks to raise its assistance to 1 percent of gross national product by the year 2000 (compared to 0.86 percent in 1995). Private Sector Resource Flows to Developing Countries As table III.2 shows, private sector resource flows applied to the developing world have grown dramatically during the 1990s,",
      " from $52.4 billion in 1990 to about $286 billion in 1996 (1996 prices and exchange rates), although private flows declined in 1997 to an estimated $222 billion. Although the flow of private resources has increased considerably, the vast majority of the world\u2019s poorest countries continue to rely heavily on official development financing. According to the OECD and the World Bank, with some exceptions, these countries are as yet unable to tap significant, sustainable amounts of private capital; without official assistance, these countries\u2019 progress toward financial independence will be slow and difficult. One measure of the difficulty of attracting private investment to the most food-insecure countries and peoples is shown in table III.",
      "4. The table relates creditworthiness ratings of the risk of investing in 92 developing countries to the level of their food security. The ratings are from Euromoney, a leading international publication, that assigns ratings as a weighted average of indicators of economic performance, political risk, debt, credit, and access to bank finance, short-term trade finance, and capital. Ratings can range between a possible low of 0 points (poorest rating) to a possible high of 100 points (most favorable rating). As shown in the table, we grouped countries into four category ranges\u20140 to 25, 26 to 50, 51 to 75,",
      " and 76 to 100 points. The large majority of countries with inadequate average daily calories per capita had a creditworthiness rating of less than 51 points. Only 2 of the 71 countries with inadequate food availability received a creditworthiness rating of more than 75 points. As the table also shows, 358 million chronically undernourished people lived in countries that received a creditworthiness rating of less than 51 points, and another 459 million undernourished people lived in countries that received ratings between 51 and 75 points. Table III.4: Creditworthiness Ratings and Level of Food Security in Developing Countries Average based on available food supply at the country level.",
      " We designated countries as having inadequate or adequate daily per capita energy supplies based on an FAO analysis of the relationship between average per capita daily energy supplies and chronic undernutrition. According to FAO, for countries having an average daily per capita undernutrition threshold ranging between 1,750 calories and 1,900 calories and a moderate level of unequal food distribution, between 21 percent and 33 percent of the population will be below the undernutrition threshold if the average per capita daily energy supply is 2,100 calories. If the average per capita daily energy supply is 2,400 calories, 7 to 13 percent of the population will be undernourished.",
      " At 2,700 calories, 2 to 4 percent of the population will be undernourished. If food is distributed more equitably, the percentage of the population that is undernourished decreases, and vice versa. Trade, Food Prices, and Grain Reserves The World Food Summit identified trade as a key element for improving world food security and urged countries to meet the challenges of and seize opportunities arising from the 1994 Uruguay Round Trade Agreements (URA). According to the summit plan of action, the progressive implementation of the URA as a whole will generate increasing opportunities for trade expansion and economic growth to the benefit of all participants.",
      " The summit action plan encouraged developing countries to establish well-functioning internal marketing and transportation systems to facilitate better links within and between domestic, regional, and world markets and to further diversify their trade. The ability of developing countries to do so depends partly on steps taken by developed countries to further open their domestic markets. Food-insecure countries have concerns about possible adverse effects of trade reforms on their food security and about price volatility in global food markets, particularly in staple commodities such as grains. Effects of Trade Liberalization on Developing Countries\u2019 Food Security Trade liberalization can positively affect food security in several ways. It allows food consumption to exceed food production in those countries where conditions for expanding output are limited.",
      " Food trade has an important role to play in stabilizing domestic supplies and prices; without trade, domestic production fluctuations would have to be borne by adjustments in consumption and/or stocks. Trade allows consumption fluctuations to be reduced and relieves countries of part of the burden of stockholding. Over time, more liberal trade policies can contribute to economic growth and broaden the range and variety of foods available domestically. However, during the negotiations leading up to the URAs and since then, concerns have been raised about possible adverse impacts of trade liberalization on developing countries\u2019 food security, especially low-income, food-deficit countries. These concerns relate to impacts on food prices,",
      " the ability of the developing countries to access developed countries\u2019 markets, food aid levels, and global grain reserves. For example, FAO said that future levels of food aid might be adversely affected, since historically food aid volumes had been closely linked to the level of surplus stocks, and future surplus stocks could be low. FAO also expressed concern that if grain stocks fell to low levels, trade liberalization measures might be less effective in stabilizing world cereal market prices. In 1995, FAO estimated that the effects of the URAs would likely cause a sizable increase in the food import bills of developing countries. For the low-income, food-deficit countries as a whole,",
      " FAO projected the food import bill would be 14 percent higher in the year 2000 (about $3.6 billion) as a result of the URAs. However, a World Bank study, issued at about the same time, estimated very modest price increases for most major traded commodities and concluded the changes would have a very minor impact on the welfare of the developing countries. Some more recent studies have also indicated that the impact of the URAs on international food and agricultural prices will be very limited. The authors of one study estimated that grains and livestock product prices will increase by only about 2 to 5 percent by 2005 and concluded that the small increases are not expected to offset a long-term declining trend in food prices.",
      " Table IV.1 reports the results of two models that estimated the income effects resulting from reforms in the agricultural sector alone and economywide. Despite the delicate nature of modeling complex trade agreements, both models projected positive economy-wide benefits (from 0.29 percent to 0.38 percent of the base gross domestic product for developing countries as a whole). For agricultural reform alone, one model projected negative benefits and the other positive benefits for developing countries as a whole. Both models projected that Africa and the Near East would experience negative benefits from agricultural reform alone. The study that cited the results concluded that further work was needed to reconcile differences between the various assessments before firm policy recommendations could be made.",
      " Elsewhere, FAO commented that studies modeling the impact of the URAs typically cover only the parts of the agreement that are more amenable for quantification. In FAO\u2019s view, estimates of the URA trade and income gains from the increase in market access for goods underestimate the full benefits of the agreement on world trade and income. Economy-wide reform as percent of base gross domestic product $39.6 (Table notes on next page) Legend UR = Uruguay Round In FMN, the Near East region is covered under Africa. Members include Iceland, Liechtenstein, Norway, and Switzerland. Austria, Finland, and Sweden left the association in January 1995.",
      " Not applicable. Implementing the Uruguay Round According to some observers, the most important thing that developed countries can do to help food-insecure countries is to open their own markets to developing country exports. Market access is important not only in primary commodities but also in clothing, textiles, footwear, processed foods, and other products into which developing countries may diversify as development progresses. Yet, according to the International Food Policy Research Institute (IFPRI) and the World Bank, the way developed countries are implementing the URAs is adversely affecting the ability of developing countries to improve their food security and may jeopardize their support for further trade liberalization. U.S.",
      " government officials state, however, that because of the URAs, most of the relatively few remaining barriers are being progressively eliminated. A State Department official further noted that the United States and the European Union have a number of preferential arrangements that favor developing countries and allow most agricultural imports. One study, by IFPRI, concluded that a large number of developing countries have liberalized foreign trade in food and agricultural commodities in response to structural adjustment programs and the recent URAs, but OECD countries have not matched their actions. While specific quantities of certain commodities from developing countries still receive preferential treatment, OECD countries have been reluctant to open their domestic markets to developing countries\u2019 exports of high-value commodities such as beef,",
      " sugar, and dairy products. In IFPRI\u2019s view, this reduces benefits to developing countries and may make continued market liberalization unviable for them. IFPRI recommended that the next round of World Trade Organization (WTO) negotiations emphasize the opening of OECD domestic markets to commodities from developing countries. According to a World Bank report, without an open trading environment and access to OECD country markets, developing countries cannot fully benefit from the goods they produce that give them a comparative advantage. Without improved demand for developing countries\u2019 agricultural products, the agricultural growth needed to generate employment and reduce poverty in rural areas will not occur. Under the Uruguay Round (UR)",
      " Agreement on Agriculture, countries generally agreed to eliminate import restrictions, including quotas. However, according to the World Bank, the elimination of agricultural import restrictions through tariffication resulted in tariff levels that in many cases were set much higher than previously existing tariff levels. If developing countries are to adopt an open-economy agricultural and food policy, they must be assured of stable, long-term access to international markets\u2014including those of the OECD, the Bank said. Yet during 1995-96, when international grain prices were soaring, the European Union restricted cereal exports from member countries (by imposing a tax on exports) to protect their domestic customers. An export tax was also applied during a few weeks in 1997.",
      " Trade Liberalization, Food Aid, and the Marrakesh Decision The 1994 URAs included a ministerial decision reached by trade ministers in Marrakesh, Morocco, that recognized that implementation of the UR agricultural trade reforms might adversely affect the least-developed and net food-importing countries. The concern was that as a result of the reforms, these countries might not have available to them adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions and might face short-term difficulties in financing normal levels of commercial imports. To obviate this situation, the decision included, among others, agreements to review the level of food aid established periodically by the Committee on Food Aid under the Food Aid Convention of 1986 and to initiate negotiations in an \u201cappropriate forum\u201d to establish food aid commitments sufficient to meet the legitimate food aid needs of the developing countries during the reform program;",
      " adopt guidelines to ensure that an increasing proportion of basic foodstuffs is provided to least-developed countries and net food-importing countries in fully grant form and/or on appropriate concessional terms in line with the 1986 Food Aid Convention; and have the WTO\u2019s Committee on Agriculture monitor, as appropriate, follow-up actions. The decision specifically targeted developing countries whose food aid needs may be adversely affected as a result of the UR agricultural trade reforms. It did not establish or propose criteria for assessing whether trade reforms had adversely affected the availability of and terms and conditions for accessing basic foodstuffs. (Methodologically, it could be difficult to separate the effects of the URAs\u2019 reforms from other factors affecting the ability to access food from external sources.) Nor did the decision establish what criteria would be used in determining the \u201clegitimate needs\u201d of different developing countries.",
      " For example, would \u201clegitimate needs\u201d be based on a country\u2019s current overall food aid needs, the amount of food aid it received prior to completion of the URAs, the amount of food aid adversely affected by the agreements, or something else? In addition, the decision did not establish any timetable for resolving these issues. Finally, the decision did not clearly identify what would be the appropriate forum for establishing a level of sufficient food aid commitments. In March 1996, the WTO\u2019s Committee on Agriculture established a list of eligible countries covered by the decision with an understanding that being listed did not confer automatic benefits. During country negotiations over the content of the proposed World Food Summit action plan in the fall of 1996,",
      " there was considerable debate about the ministerial decision. Developing countries attributed recent high world grain prices to UR agricultural reforms and wanted the plan to commit countries to prompt and full implementation of the decision. U.S. negotiators disagreed. They recognized that the high market prices for grain had adversely affected the least-developed and net food-importing countries but said that the reforms were just beginning to be implemented and it was thus too early for the reforms to have had any measurable adverse effects. The summit plan that was finally approved by all countries, in November 1996, states that the ministerial decision should be fully implemented. To date, however, decisions still have not been made about criteria that should be used for judging and quantifying the legitimate food aid needs of developing countries.",
      " In addition, no decisions have been made about an appropriate forum or criteria for assessing whether the Uruguay Round trade reforms have adversely affected the availability of and terms and conditions for accessing basic foodstuffs. Consequently, no findings have been made as to whether adverse impacts have already occurred. In December 1996, the WTO ministerial meeting in Singapore agreed that the London-based Food Aid Committee, in renegotiating the Food Aid Convention (scheduled to expire in June 1998), should develop recommendations for establishing a level of food aid commitments, covering as wide a range of donors and donatable foodstuffs as possible, sufficient to meet the legitimate needs of developing countries during implementation of the Uruguay Round reform program.",
      " In January 1997, Food Aid Committee members indicated they would do so, with an understanding that the committee would direct its recommendations to the WTO and reflect its recommendations in the provisions of a new food aid convention. Agreement on a new convention has not yet been reached. The existing agreement was re-extended and is scheduled to expire in June 1999. According to a U.S. official, if ongoing efforts to negotiate a new agreement are successful, the document should go some distance in assuring food-deficit, low-income countries that the Uruguay Round trade liberalization will not drastically reduce food aid. According to the official, the United States,",
      " Australia, Canada, and Japan are pressing hard for conclusion of the negotiations. In January 1998, the FAO Secretariat advised the WTO Committee on Agriculture that there was little it could do in its analyses to isolate the effect of the Uruguay Round from other factors influencing commodity prices. Trade, Price Volatility, and Global Grain Reserves As countries rely more on trade to meet their food needs, they become more vulnerable to possible volatility in world food prices. Price volatility of basic food commodities, especially grains, can be a significant problem for food-insecure countries. Many poor people spend more than half their income on food. FAO and others have suggested that sufficient grain stocks be held to help contain excessive price increases during times of acute food shortages and thus provide support to the most vulnerable countries.",
      " However, views differ over the level of global reserves needed to safeguard world food security, the future outlook for price volatility, and the desirability of governments\u2019 holding grain reserves. In response to the world grain crisis of the early 1970s, the 1974 World Food Conference endorsed several principles regarding grain stock-holding policies: (1) governments should adopt policies that take into account the policies of other countries and would result in maintaining a minimum safe level of basic grain stocks for the world as a whole; (2) governments should take actions to ensure that grain stocks are replenished as soon as feasible when they drop below minimum levels to meet food shortages;",
      " and (3) in periods of acute food shortages, nations holding stocks exceeding minimum safe levels to meet domestic needs and emergencies should make such supplies available for export at reasonable prices. Subsequently, the Intergovernmental Group on Grains established a stocks-to-consumption ratio of 17 to 18 percent as an indicator of a minimum safe global food security situation. As table IV.2 shows, the world grain stocks-to-use ratio reached and exceeded the minimum level in 1976-77 and remained at or above that level for the next 18 years. In the year before the November 1996 World Food Summit, the ratio fell to 14 percent,",
      " the lowest level in the previous 25 years. During 1995-96, world grain prices rose significantly. The price of wheat increased from $151 per ton in April 1995 and reached a peak of $258 in May 1996, a rise of 71 percent. Corn prices rose continuously from $113 in May 1995 to a record $204 in May 1996, an increase of 81 percent. The world price increases were accompanied by high grain prices in many developing countries. In some cases, the latter prices exceeded the world price increases because of simultaneous depreciation of developing countries\u2019 currencies. According to the World Bank,",
      " the price increases were a result of a poor U.S. grain harvest in 1995, combined with unusually low world grain stockpiles. Another factor was China\u2019s entry into world grain markets, with a purchase of 5 million tons in 1995 (after exporting nearly 11 million tons of grain in 1993-94). Total carryover stocks as a percent of world grain consumption (Table notes on next page) Not available. Although the high grain prices of 1996 have abated, estimates of the stocks-to-use ratio remained at a low level through early 1998. As recently as April 1998,",
      " FAO estimated the ratio would be 15.9 percent for 1997-98. However, FAO revised its figures in June 1998, estimating that the ratio might reach 16.9 percent for 1997-98 and cross the 17-percent threshold in 1998-99. These revisions reflected the expectation of a record grain crop in 1998 and lower feed demand in China, the United States, and some countries affected by the Asian financial crisis. Summit\u2019s Action on Reserves World Food Summit participants said that reserves was one factor, in combination with a number of others, that could be used to strengthen food security.",
      " According to the summit action plan, it is up to national governments, in partnership with all actors of civil society, to pursue at local and national levels, as appropriate, adequate and cost-effective emergency food security reserve policies and programs. Summit countries agreed that governments should monitor the availability and nutritional adequacy of their food supplies and reserve stocks, particularly areas at high risk of food insecurity, nutritionally vulnerable groups, and areas where seasonal variations have important nutritional implications. In addition, international organizations and particularly FAO were asked to continue to monitor closely and inform member nations of developments in world food prices and stocks. The summit did not identify a minimum level of global grain reserves needed to ensure food security nor recommend any action by countries individually or in concert to achieve or maintain such a level.",
      " Views About Future Stock Levels and Price Volatility In 1996, FAO invited a group of experts to Rome to consider a number of developments that directly or indirectly influence price stability. These included, among others, production variability, the URAs, and the role of cereal stocks. The group agreed that there was little evidence to reach conclusions on whether production variability at the global level would increase or decrease in the future. Price instability caused by shifts in production between countries that may occur because of the URAs was expected to be slight. The group concurred that ongoing market liberalization initiatives, including those under the URAs, regional trading arrangements,",
      " and other unilateral initiatives, should as a whole contribute to stability in international markets by inducing greater adjustments to demand/supply shocks in domestic markets. However, changes under the URAs were not considered to be drastic enough for instability to decrease significantly, as many countries, especially some larger trading countries, still retained instruments and institutions (such as policies similar to variable levies and state trading) that had impeded price transmission in the past. The group agreed that a lack of transparency and consistency in government stock-holding and trade policies had been a source of instability in the past and that less involvement of governments in stock management and a more transparent trade policy should contribute to stability in the future.",
      " At the same time, there was considerable doubt whether private stocks would increase to the extent required to offset the shocks that previously were countered by the public sector stocks. The group concluded that increased funds in international commodity markets were expected to influence only within-year price volatility and were unlikely to affect annual price levels in the longer run. In addition, there were uncertainties regarding how fast China and countries of the former Soviet Union would be fully integrated into the world agricultural trading system. Overall, the experts agreed that compared to the situation in the past, future world commodity markets would likely retain lower levels of overall stocks but should be less prone to instability due to faster and more broad-based adjustments to production/demand shocks.",
      " However, the path to a new market environment was seen as uncertain. The group generally believed that price instability would be greater during the transitional period than after the system had fully adjusted. According to an FAO study prepared for the summit, global stocks are likely to remain relatively low compared with the previous decade, and the chance of price spikes occurring is probably greater than in the past.According to a World Bank study, grain stocks are not likely to return to the high levels of the 1980s, given the current focus on reducing government involvement in agriculture, and with smaller grain stocks, prices could be more volatile than in the past. According to IFPRI,",
      " policy changes in North America and Europe could result in a permanent lowering of grain stocks and thus increase future price fluctuations because of a lack of stocks to buffer price variations. IFPRI noted that the moderating or cushioning impact on world price instability that once was exercised by varying world grain stocks has been reduced by the substantial decline in grain stocks in recent years. As a result, IFPRI said, international price instability, if fully transmitted to domestic markets, especially to low-income, food-deficit countries, may raise domestic price instability in these countries. Views on Actions to Increase Stocks and Hold Emergency Reserves Views differ over whether governments should take action to hold and/or increase grain reserves.",
      " Among the views expressed against increasing or maintaining large government-held reserves are the following: Reserves are expensive to accumulate, store, manage, and release. An annual cost of 25 percent to 40 percent of the value of the reserves is not unusual. Developing countries cannot afford such costs; it is cheaper for them to deal with periodic price increases. They should hold only enough stocks to tide them over until replacement supplies can be obtained from international markets. It is much cheaper for most countries to rely on trade, using financial reserves or international loans to make up shortfalls. If reserves are to be held, it is more efficient and cheaper to hold reserves in money than in physical stock.",
      " Governments, including the U.S. government, have not been good at managing stocks. Stocks are not the only measures available for coping with price volatility. As a result of market and trade liberalization measures, markets can respond more quickly to shocks, which will lead to much briefer price cycles than those in the past. Free trade permits stocks to be shifted, thereby reducing the need to maintain large amounts of domestic stocks. World food supplies have been adequate since the Second World War. Good and bad weather conditions for growing crops tend to balance out across countries. In addition, some crops and food products can be substituted for others, depending on the weather.",
      " The problem is not one of supply but of buying power, including when prices rise to high levels. Other measures are needed, such as policy reforms, that increase economic development and enable people to buy the food they need. Among views advanced for governments\u2019 taking action to increase and maintain emergency reserve levels (some of the views pertain specifically to the United States; others apply to countries more generally) are the following: It is good government policy to store grain during prosperous years in order to survive lean years. Private companies will not hold many reserve stocks, since it is expensive to do so and governments may limit price increases in times of short supply,",
      " thus affecting companies\u2019 ability to recoup the added cost of holding emergency reserves. Even if governments do not excel at managing reserves, the social costs of their not doing so may be greater. The use of emergency food reserves to respond quickly to periodic food shortages in developing countries is the most unobtrusive way for governments to intervene in the market. Responsible trade requires that wealthier countries establish and maintain essential grain reserves as a supply safety net (available to other countries when the need arises) and thus to encourage and compensate poorer countries for relying on increased trade liberalization. If a tight U.S. grains supply situation occurs and export customers perceive that a unilateral U.S.",
      " export embargo is plausible, they will intensify their food self-sufficiency goals and seek grain commitments from other exporters. Possible Alternatives to Reserves for Coping With Price Volatility A 1996 FAO study identified several possible alternatives for mitigating price volatility problems, including national and international measures. However, it is not clear to what extent developing countries, particularly low-income, food-deficit countries, are capable of establishing such measures or the costs and benefits of such measures relative to one another and to grain reserves. The Uruguay Round Agreement on Agriculture limits the use of quotas and variable levies, two measures traditionally employed to deal with price instability.",
      " According to the FAO study, a country may adopt a sliding scale of tariffs related inversely to the level of import prices and keep the maximum rate of duty at a level no higher than its agreed rate of duty in the WTO. If the agreed rate of tariffs is fairly high, which is commonly the case, developing countries may offset variations in import prices by reducing tariffs when prices rise and raising them when prices fall. In addition, at times of sharply rising world prices or sharply rising demand from a neighboring country, it may be possible for a country to limit exports, provided it has taken other countries\u2019 food security into account. (See URA on Agriculture,",
      " Article 12.) Commodity exchanges, futures contracts, and options could be used to reduce uncertainty associated with price and income instability. However, not all countries could make use of existing exchanges because of lack of knowledge, lack of economies of scale, and/or higher transaction costs. To ease such constraints, the experts suggested establishing nongovernmental institutions to allow a large number of small entities to pool their risks. Countries with sufficient food reserves or cash to purchase food could seek to mitigate the effect of price spikes by providing food aid to meet the unmet food needs of urban and rural poor. Food aid from international donors could be used to help mitigate the consequences of high increases in the price of imported food.",
      " However, with reduced surpluses and budgetary constraints in donor countries, it is not clear how much additional aid would be available when needed. The International Monetary Fund\u2019s Compensatory and Contingency Financing Facility can be used by members to obtain credit if they are experiencing balance of payment difficulties arising from shortfalls in export receipts (that is, foreign exchange) or increases in the costs of grain imports\u2014provided these are temporary and largely attributable to conditions outside the control of the countries. However, partly because of the conditions and interest costs associated with drawings from the facility and the availability of alternative facilities that are more favorable, countries have not used the facility very frequently over the past 15 years.",
      " (The International Monetary Fund believes that price spikes have not been sufficiently frequent since the facility\u2019s inception to warrant its use.) The European Union also has a financing mechanism for certain countries, but the financing is limited to covering shortfalls in export earnings (high food import bills are not covered), and the mechanism lacks the funding and concessional terms (below-market interest rates) necessary for wider use by poorer countries. Finally, according to the FAO report, an international insurance scheme could be devised for financing food imports by low-income, food-deficit countries during periods of price instability. Beneficiary countries could finance the system with premium payments. Ideally, such a scheme would operate without conditions.",
      " However, according to the FAO study, in practice only a few countries could afford to pay the premiums by themselves. Thus, for countries requiring assistance from developed countries, setting conditions for the use of withdrawals from the insurance facility might be necessary. Following the large increase in grains prices during 1995-96, FAO surveyed the governments of 47 developing countries to determine whether their domestic retail and wholesale prices of grains rose and, if so, how they responded. FAO found that domestic market prices increased considerably in most countries but usually not as much as the world price. (In some countries, prices did not increase or they even fell because of favorable domestic harvests.) Many countries mitigated the price effects by annulling or reducing import duties.",
      " Some countries mitigated price effects by further subsidizing already regulated prices of grain products. Emergency and Nonemergency Food Aid At the World Food Summit, countries said they would try to prevent and be prepared for natural disasters and man-made emergencies that create food insecurity and to meet transitory and emergency food requirements in ways that encourage recovery, rehabilitation, development, and a capacity to satisfy future needs. The summit\u2019s action plan said that food assistance can also be provided to help ease the plight of the long-term undernourished, but concluded that food aid is not a long-term solution to the underlying causes of food insecurity. The plan called upon countries\u2019 governments to implement cost-effective public works programs for the unemployed and underemployed in regions of food insecurity and to develop within their available resources well-targeted social welfare and nutrition safety net programs to meet the needs of their food insecure.",
      " The summit did not recommend an increase in development assistance for the specific purpose of helping countries to establish or improve such programs. However, donor countries generally agreed to strengthen their individual efforts toward providing official development assistance equivalent to 0.7 percent of gross national product each year. Trends in Food Aid Over the past several decades, food aid has helped meet some of the emergency and nonemergency food needs of many food-insecure countries. In recent years, food aid has declined significantly. As table V.1 shows, world grain aid shipments increased from 6.8 million tons in 1975-76 to a peak of 15.2 million tons in 1992-",
      "93. Shipments in 1997 were 5.9 million tons, about 40 percent of the peak value and about 60 percent of the former World Food Conference target. FAO estimates that shipments in 1997-98 were at about the same level as in 1996-97 (that is, at about 5.3 million tons). According to FAO, grain shipments in 1996-97 were at the lowest level since the start of food aid programs in the 1950s. Table V.1 also shows a substantial decline in the proportion of food aid provided for program purposes and a steady increase in the proportion of food aid allocated for emergency purposes.",
      " In absolute terms, in 1997 project food aid equaled about 54 percent of its peak level (1986-87), emergency food aid was about 55 percent of its peak level (1992), and program aid was about 17 percent of its peak level (1993). Program and project aid combined peaked in 1993 at 11.3 million tons. The combined total for 1997 was 3.5 million tons or 31 percent of the peak-year total. Type of aid (percent) All donors (million tons) According to a recent FAO forecast, cereal food aid shipments are expected to increase substantially in 1998-",
      "99, after 4 years of decline, and reach 9 million tons. FAO attributed the increase to a greater availability of grain supplies in donor countries and higher food aid needs, particularly in Asia. According to FAO, food aid availabilities have been growing in recent months, triggered by relatively low international grain prices and accumulating grain stocks, mostly in the European Union and the United States. (The United States announced in July 1998 that it would increase its wheat donations by up to 2.5 million tons, most of which has been allocated.) On the demand side, financial and economic turmoil has affected the economies of many food import-dependent countries,",
      " raising the need for food aid. Although grain prices have declined, countries experiencing severe food emergencies will not necessarily be able to increase commercial cereal imports, FAO said. And, the slower growth of the world economy, combined with falling cash crop prices and export earnings, could force some developing countries to sharply cut back on their imports of essential foods. Table V.2 shows how food aid trends have affected the low-income, food-deficit countries (for total food aid, not just grains). Food aid received in 1995-96 was at the lowest level since 1975-76 and represented about 50-55 percent of previous peak-year deliveries.",
      " During the 1990s, food aid provided to low-income, food-deficit countries has averaged about 78 percent of food aid deliveries to all developing countries; by way of comparison, between 1983-84 and 1986-87, low-income, food-deficit countries averaged more than 92 percent of deliveries. In 1995-96, the proportion of these countries\u2019 food imports covered by food aid fell to 8 percent, the lowest level in more than 20 years. Food aid to low-income, food-deficit countries (million tons) Costs to Feed the Long-Term Undernourished In 1996,",
      " FAO estimated that it would take an additional 30 million tons of grain and over 20 million tons (grain equivalent) of other foods simply to bring 800 million chronically undernourished people up to \u201cminimum nutritional standards\u201d (assuming perfect targeting of food assistance and local absorptive capacity). FAO estimated the value of the additional required food at about $13 per person per year (in 1994 dollars), or about $10.4 billion. According to FAO, the world produces enough food to meet the needs of all people, but hundreds of millions remain chronically undernourished because they are too poor to afford all the food they need.",
      " In addition, others are undernourished because they are otherwise unable to provide for themselves (for example, because of humanitarian crises), because not enough food assistance has been provided, or because the assistance has not been sufficiently effective. The provision of food aid costing $10.4 billion would require a large commitment compared to recent expenditures on foreign assistance more generally. For example, during 1996 and 1997, net disbursements of ODA by the Development Assistance Committee members of the OECD averaged about $55 billion (1996 prices and exchange rates). Effectiveness of Food Aid for Nonemergency Purposes Several studies have questioned whether food aid is an efficient means of satisfying nonemergency,",
      " chronic food shortage needs. A joint 1991 study by the World Bank and the World Food Program on food aid for Africareported that food aid may in some cases be a second-best solution and there are problems in its implementation. The study concluded, however, that it is unlikely that an equal amount of financial aid would be available if the food aid is not provided. The study included a number of specific recommendations for improving the effectiveness of food aid and concluded that food aid contributes substantially to growth, long-term food security, and the reduction of poverty and that its use should continue. A 1993 evaluation of the World Food Program found that while emergency food aid was quite effective,",
      " food aid for development had a number of weaknesses. There was little evidence that country strategies seriously addressed the use of food aid to support national priorities. At the project level, many weaknesses were found: the targeting of food aid on the poorest areas and the poorest people was often unsatisfactory, the technical content of projects often left much to be desired, and the phasing out of projects was often not planned. The study made several recommendations to improve the effectiveness and efficiency of the food aid development program. In addition, a 1996 study prepared for European Union member states evaluated food aid commodities that were provided directly to a recipient government or its agent for sale on local markets.",
      " Such aid was intended to provide some combination of balance of payments support (by replacing commercial imports) and budgetary support (through governments\u2019 use of counterpart funds generated from the sale of the commodities). This study noted the following: The impacts of the food aid on food security were marginally positive, but transaction costs were very high, suggesting the need for radical changes to improve effectiveness and efficiency. Minor, short-term negative impacts on local food production were common. Food aid was still being used, though to a decreasing extent, to support subsidized food sales, which in some countries favored food-insecure and poor households and, in others, urban middle-class and public sector groups.",
      " The little available evidence suggested that the food aid had modest positive impacts on the nutritional status of vulnerable groups. The European Commission and the member states should consider (1) either phasing out such assistance, especially in the case of donors with smaller programs or (2) making radical changes in policies and procedures to increase effectiveness and reduce transaction costs to acceptable levels. A group of experts meeting at FAO in June 1996 opposed food aid as a regular instrument to deal with market instability because of its market displacement and disincentive effects. A 1997 report prepared for the Australian government recommended that Australia considerably reduce its food aid commitment to the Food Aid Convention and in the future use food aid primarily for emergency relief.",
      " In October 1998, USAID reported on the results of a 2-year study that it conducted to assess the role of U.S. food aid in contributing to sustainable development during the past 40 years. It examined 6 case studies. The U.S. Agency for International Development (USAID) concluded that U.S. food aid had at times been successfully used to leverage or support a sound economic policy environment and thus promote sustainable development. At other times, however, U.S. food aid had hampered sustainable development by permitting governments to postpone needed economic policy adjustments and, at still other times, had no discernible effect on a country\u2019s economic policy environment.",
      " USAID found that providing large quantities of food aid for sale on the open market at the wrong time has at times been a disincentive to domestic food production. However, targeting food aid to those who lack purchasing power and are unable to buy food has at other times increased food consumption and incomes without adversely affecting domestic food production. In addition, USAID concluded that it is normally more efficient to transfer resources as financial aid rather than as food aid, but in practice this is a moot point because generally the choice is between U.S. food aid or no aid. Provision of Emergency Food Aid Since the Summit According to the World Food Program, which distributes about 70 percent of global emergency food aid,",
      " some of its emergency relief projects tend to be underfunded or not funded at all because donors direct their contributions to the program\u2019s emergency appeals on a case-by-case basis. In addition, the program has problems in ensuring a regular supply of food to its operations more generally because of lengthy delays between its appeals and donor contributions and donors\u2019 practice of attaching specific restrictions to their contributions. In 1997, about 6 percent of the program\u2019s declared emergency needs were unmet and 7 percent of its protracted relief operations needs were not satisfied. Table V.3 shows the program\u2019s resource shortfall for emergency food aid, including emergency operations and protracted relief operations,",
      " for 1998. As the table shows, 33 operations were underfunded and 18 percent of total 1998 needs were not covered. Dollars (millions) Assistance to victims of Kosovo crisis Vulnerable groups, refugees, others Refugees, returnees, internally displaced persons, war victims Displaced persons and vulnerable groups Displaced persons and vulnerable groups Food assistance for Afghan refugees Food assistance to refugees, returnees, internally displaced persons (continued) Dollars (millions) Central America regional \u201cEl Ni\u00f1o\u201d Crop failure caused by drought (\u201cEl Ni\u00f1o\u201d) Assistance to Western Sahara refugees Food assistance for Somali refugees Locust infestation and crop losses Ethiopia,",
      " Somalia, Djibouti refugees Somalia, Sudanese, Djibouti, Kenya refugees Victims of Meher crop failure Somalia, Ethiopia, Sudanese refugees Feeding for schools affected by unrest Internally displaced persons & returning Sierra Leone refugees (continued) Dollars (millions) Conflicts\u2019 Contribution to Food Insecurity The countries attending the World Food Summit acknowledged a clear relationship between conflict and food insecurity and agreed that an environment in which conflicts are prevented or resolved peacefully is essential to improving food security. They also noted that conflicts can cause or exacerbate food insecurity. Table VI.1 presents the results of an analysis in which we examined the relationship between four different types of conflict (genocide,",
      " civil war, interstate war, and revolution) and the level of food security in 88 developing countries. In general, the table shows an association between countries experiencing conflict and food inadequacy. For example, countries with low levels of average daily calories per capita generally experienced more involvement in conflict proportionately than did countries with higher levels of average daily calories per capita. In terms of types of conflict, for each of the 3 decades shown, all countries that experienced genocide had an inadequate level of food security. For 2 out of the 3 decades (that is, the 1960s and the 1980s), countries that experienced civil war were more likely to have experienced food inadequacy.",
      " Similarly, for 2 out of the 3 decades (the 1960s and the 1970s), countries that experienced interstate war on their own territory were more likely to have been food insecure. In the case of revolution, the relationship is more in the other direction; for 2 out of the 3 decades, food-secure countries were more likely to have experienced revolution than food-inadequate countries. Average daily calories per capita(Table notes on next page) Increasing Agricultural Production in Developing Countries The summit\u2019s policy declaration and action plan stress the importance of promoting sustainable agricultural development in developing countries. In an analysis prepared for the summit,",
      " FAO concluded that it was technically possible for the more food-insecure developing countries to increase their agricultural production by substantial amounts and in so doing to contribute significantly to the summit\u2019s goal of halving the number of their undernourished people by 2015. According to a U.S. official, the FAO analysis was an important basis underlying the agreement of summit countries to try to halve undernutrition by 2015. At issue is whether the developing countries will be able to achieve the kind of production increases indicated by the FAO study. Table VII.1 shows the key results of the FAO analysis. FAO differentiated between three levels of food-insecure countries:",
      " (1) countries with an estimated average per capita daily energy supply (DES) of less than 1,900 calories, (2) countries with an estimated average per capita DES of 2,300 calories, and (3) countries with an estimated average per capita DES of more than 2,700 calories. As the table shows, the proposed goal for 17 group 1 countries is to raise their DES to at least 2,300 and if possible 2,500 calories by 2010. The normative goal for 38 group 2 countries is to raise their DES to at least 2,500 calories and,",
      " if possible, to 2,700 calories by 2010. The normative goal for 38 group 3 countries is to maintain DES above 2,700 calories and to achieve a more equitable distribution of food supplies among their citizenry. Table VII.1: FAO Analysis of Daily Per Capita Calorie Levels, Grain Production Growth Rates, and Millions of Undernourished to 2010 for 93 Developing Countries (percent per year) (millions) Not available. According to FAO\u2019s analysis, if the normative goals were achieved, additional production would deliver 60 percent of the developing countries\u2019 additional needed food for consumption.",
      " The balance would have to be covered by net imports, which would increase from the 24 million tons in 1990-92 to 70 million tons in 2010 (instead of the 50 million tons projected by a 1995 FAO study). FAO estimated that the additional export supply was within the bounds of possibility for the main grain exporting countries. Production Increases Are Not Likely to Be Easy Achieving the production increases previously discussed is not likely to be easy because it requires unusually high growth rates in the more food-insecure countries and, in turn, higher amounts of investments, especially in the worst-off countries. In addition,",
      " it requires numerous major changes in these countries, particularly in the rural and agricultural sector. According to FAO, aggregate production must increase rapidly in countries with too-low daily caloric levels and must also contribute to development and generate incomes for the poor. As table VII.1 shows, the group 1 countries would have to more than double their aggregate agricultural production growth rate during 1970-92, from 1.7 percent to 3.8 percent per year. FAO considered 3.2 percent the most likely production increase. For several group 1 countries, production increases of 4 to 6 percent annually are implied,",
      " according to FAO. For group 2 countries, the goal is to slow an expected decline in the agricultural production growth rate per year relative to the 3 percent rate during 1970-92. FAO estimated the most likely production increase for these countries at 2.3 percent but said the rate would need to be at least 2.5 percent to achieve the summit goal of halving the number of food insecure by 2010. FAO based its normative targets on fairly optimistic assumptions about expanding domestic production and access to imports, including food aid.In fact, FAO said, extraordinary measures would have to be taken to realize the normative goals.",
      " FAO offered the following rationale to justify the targets. Previously, some of the countries had already achieved average per capita daily caloric levels above the proposed minimum of  2,300 calories. For most of the countries, daily caloric levels were at the minimum or near the minimum recorded for them during the previous 30 years. There was a marked correlation between these low levels and the prevalence of unsettled political conditions, which suggested that progress could be made during a recovery period if more peaceful conditions prevailed. Finally, FAO said, the historical record showed that periods of 10-20 years of fairly fast growth in production and consumption had not been uncommon\u2014mostly during periods of recovery (usually from troughs associated with war,",
      " drought, or bad policies). Thus, if conditions were created for the onset of a period of recovery, policies and efforts to achieve the required high growth rates could bear fruit. According to one expert, most low-income developing countries and countries of the former Soviet Union and Central and Eastern Europe have large, unexploited gaps in agricultural yields. He estimated that yields can be increased by 50-100 percent in most countries of South and Southeast Asia, Latin America, the former Soviet Union and Eastern Europe and by 100-200 percent in most of sub-Saharan Africa. According to the expert, it is technically possible for the world population to meet growing food demands during the next few decades,",
      " but it is becoming increasingly difficult because of groups that are opposed to technology, whether it be developed from biotechnology or more conventional methods of agricultural science. The expert has expressed particular concern about the effect of these groups on the ability of small-scale farmers in developing countries to obtain access to the improved seeds, fertilizers, and crop protection chemicals that have allowed affluent nations plentiful and inexpensive foodstuffs. Additional Amount of Needed Investment Not Clear Under its scenario of the most likely increase in agricultural production in developing countries by 2010, FAO roughly estimated, in a presummit analysis, that gross investment in primary agricultural production in the developing countries would require an increase from $77 billion annually in the early 1990s to $86 billion annually during 1997-",
      "2010 (constant 1993 dollars). FAO estimated that another $6 billion of investment would be needed to halve the number of undernourished people in countries with low daily per capita caloric levels. While the $6 billion increase represented only a 7-percent rise, FAO noted that all of the additional investment would be required in the lagging countries. Thus, group 1 countries (table VII.1) would require a 30-percent annual increase in investment, and group 2 countries a 17-percent increase. However, according to FAO, the low-income, food-deficit countries will mostly continue to have very low domestic savings and access to international credit.",
      " As a result, both private and public sectors will have difficulty, at least in the short and medium term, in raising the investment funds needed to respond to new production opportunities, even when they have a comparative economic advantage, and there will be a continuing need for external assistance on grant or concessionary lending terms. FAO\u2019s presummit analysis did not address, for countries with low daily per capita caloric levels, added investment needs for (1) post-production agriculture and improved rural infrastructure (excluding irrigation), (2) public services to agriculture, and (3) social support in rural areas. Consequently, the analysis may understate the amount of additional investment required in those countries to attain the normative production goals.",
      " In addition, there is no indication that bilateral or multilateral donors will increase their assistance by the amounts indicated by the FAO study. In fact, ODA for primary agriculture steadily declined from a peak of $18.9 billion in 1986 (1990 constant prices) to $9.8 billion in 1994. According to FAO, external assistance is almost the only source of public investment in agriculture for many of the poorer developing countries. Desired State of Rural Development May Be Difficult to Achieve According to an October 1997 World Bank report, several major regions of the world and many countries that receive the Bank\u2019s assistance are agricultural underperformers.",
      " These regions and countries have institutions and agricultural policies that discriminate against the rural sector, underinvest in technology development, maintain inappropriate agrarian structures, use arable land for low-productivity ranching, undervalue natural resources and therefore waste them, seriously underinvest in the health and education of their rural populations, discriminate against private sector initiatives in food marketing, and fail to maintain existing or invest in new rural infrastructure. Unless these policies, institutions, and public expenditure patterns are corrected, the Bank said, they will not have abundant food supplies. In the Bank\u2019s view, rural areas have not been developed for three reasons. First, countries are not politically committed to the broad vision of rural development.",
      " Second, for many reasons, international interest in agricultural and rural matters has waned over the past decade. Third, the Bank has in the past been poorly committed to rural development, and its performance on rural development projects has been weak. For example, according to a Bank official, a 1993 review found that Bank expenditures on agriculture and rural development had declined from $6 billion to about $3 billion and that less than half of the Bank\u2019s projects in the area were successful. Following the review, the Bank conducted additional analyses and developed a vision statement for its future work in the area. In September 1996, the Bank\u2019s President announced that rural development would be one of six key Bank objectives.",
      " To tackle the issue of weak commitment at the country level, the Bank is focusing on improving its strategies for country assistance. According to the Bank, the strategies define the key issues for development, analyze the current and future prospects for dealing with the issues, and provide the overall context within which Bank operations are undertaken. The Bank believes that the strategies are crucial to renewing the commitment by countries and the Bank to rural growth. The Bank plans to build a comprehensive rural development strategy into each of its overall country assistance strategies. According to the Bank, no approach to rural development will work for all countries, and developing and implementing rural strategies will be complex for most countries.",
      " The Bank believes that if country assistance strategies include well-defined, coherent rural strategies and treat agriculture comprehensively, the chances for a sustained and effective rural sector program will be substantially improved. Even so, in October 1997, a Bank report acknowledged that there were still wide differences of opinion within the Bank and among its partners as to the priority that should be given the rural sector. Establishing an Information System for Assessing Undernutrition and Food Insecurity Summit countries agreed to set out a process for developing targets and verifiable indicators of national and global food security where they do not exist, to establish a food insecurity and vulnerability information and mapping system,",
      " and to report to the Committee on World Food Security on the results produced by the system. On March 24-25, 1997, FAO convened a group of experts to discuss ways and means of implementing such a system. This group recommended a series of initial steps to take prior to the CFS meeting in June 1998. Subsequently, an interagency working group was established to promote development of the information and mapping system. (Membership included 21 international agencies and organizations, including bilateral donor agencies.) The working group met in December 1997 and April 1998. The FAO Secretariat helps staff the work of the group between meetings.",
      " According to FAO, among some of the key tasks identified for establishing the information and mapping system are the following: Designate country focal points for all the information and mapping system matters. Develop an awareness and advocacy strategy for end-users of the system; where key national policymakers are not fully aware of the need for strong food insecurity and vulnerability information systems, secure their commitment to provide adequate and continuing support for the establishment and maintenance of such systems. Inventory available as well as planned data collection systems at both the international and national levels, and evaluate the quality and coverage of their data; at the national level, identify and prioritize the information needs of key food security decisionmakers and determine to what extent needs are already met;",
      " define a priority set of information required by national decisionmakers and a set of verifiable objectives; set out a scheduled program of initiatives and activities to meet those objectives. Define the conceptual framework and scope of the information and mapping system, including the indicators to be used at both national and international levels for identifying (down to at least the household level) people who are food insecure or at risk of becoming food insecure, the degree of their undernutrition or vulnerability, and the key factors or causes for their food insecurity or vulnerability. When agreement on system indicators is reached, complete and issue guidelines for the establishment of the system at the national level. Inventory national systems to determine to what extent the information and mapping system indicator needs are already met;",
      " identify significant gaps and weaknesses; assess the cost and time required to implement the information and mapping system and to what extent, if any, countries require technical or financial assistance; and set out a scheduled program of initiatives and activities for establishing an effective system. Identify and prepare a computerized system for compiling and analyzing multisectoral data and an information system for mapping, posting, and disseminating information accessible to all users. Ensure the exchange of information among international agencies and organizations on all aspects related to food insecurity and vulnerability information and mapping. Do the same at the national level. By the time of the June 1998 CFS meeting, none of these tasks was complete.",
      " Two reports, based on the interagency working group\u2019s work, were provided to CFS for its June 1998 meeting. The first was a proposed plan for continuing and future work on the information and mapping system. The plan included a long list of tasks, but the items were not prioritized, and no schedule for completing them was suggested. The second was a report providing background information and principles that could be followed in establishing national information and mapping systems. The report could be useful to officials interested in how to go about developing an awareness and advocacy strategy for end-users of the system within their countries, including securing the support of national decisionmakers.",
      " The interagency working group and FAO Secretariat had been taking an inventory of available information for use in the information and mapping system at the international level. However, no report on the results was available for the June 1998 CFS. The Secretariat, interagency working group, and member countries had not yet begun to debate what indicators should be used for the system. At the June 1998 CFS meeting, a number of countries stressed the need for a decision on what indicators to use so that member countries could take steps toward measuring progress in achieving the overall summit goal. A March 1997 technical advisory group and the CFS have stressed the need to involve FAO countries in the design of the information and mapping system.",
      " However, the interagency working group has not asked member countries to identify and prioritize their information needs, determine the extent to which those needs have already been met, and share the results with the interagency working group. Only a few developing countries sent representatives to the first interagency working group meeting. Fourteen developing countries were invited to the second meeting, and 12 countries sent representatives. The interagency working group met for the third time in November 1998. No developing countries sent representatives to the meeting. There was some discussion of indicators that might be used at the national and international levels for a food insecurity and vulnerability mapping system and of existing international data systems from which some indicators could be drawn.",
      " However, no proposals were offered and no attempt was made to reach agreement on a common set of indicators for use at the national or international level. The group is not scheduled to meet again before the next CFS meeting, which will be held in June 1999. Since agreement had not been reached on the information and mapping system indicators, detailed technical guidance to countries on how to develop information on the indicators and establish the system at the national level also had not been developed. Similarly, member countries had not been able to identify whether their existing systems meet their needs or assess the time, financial resources, and technical assistance required to establish national systems.",
      " The interagency working group and the Secretariat have made progress in identifying a computer system for compiling and analyzing data and an information system for mapping, posting, and identifying the information. However, the work is not yet complete. A cooperative process is underway among U.N. and other international agencies. For example, FAO and the International Fund for Agricultural Development hosted the first and second meetings of the interagency working group, respectively, and the World Bank hosted the third meeting. Agreements have been reached for sharing information among some of the agencies, for example, between FAO and the World Food Program. However, FAO officials told us that problems have arisen in the exchange of information and that the World Food Program and the World Health Organization had not yet made important data sets available.",
      " As of mid-December 1998, only about 60 countries had identified focal points. In commenting on a draft of this report, FAO officials said considerable progress has been made in addressing the key tasks for establishing an information and mapping system, and implementation of many of the tasks requires a longer period of time. In addition, FAO said, many developing countries have difficulty in mobilizing the required resources. According to FAO, only about 15 countries are currently engaged in establishing national food insecurity and vulnerability mapping systems, with or without international assistance. FAO said that the interagency group is working on a technical compendium,",
      " to be issued in mid-1999, which will provide more detailed technical guidance to prospective users on technical issues related to the selection of indicators, the cut-off points, the analysis of data, and so forth. World Food Program officials noted that their program is actively involved in the interagency working group that is promoting development of a food insecurity and vulnerability information mapping system, cited several specific areas of cooperation that involve the agency and FAO, and said the program recently made available a data base on China that includes data at the provincial and county level. At the same time, program officials said that the November 1998 meeting of the interagency working group did not resolve the issue of mechanisms to be used in the development of an international food insecurity and vulnerability mapping system data base as well as the possible technical composition of the data base.",
      " Several different systems (FAO, World Bank, and the World Health Organization) offer possible alternatives, the officials said. They said the meeting discussed the issue of availability of data sets and data-sharing, and all participants are aware that many complications relate to data copyrights issues. Such issues will need to be resolved at the political level, officials said, before free data-sharing becomes a practical reality. Coordination in Implementing Summit Goals The summit action plan stressed a need to improve coordination among governments, international agencies, and civil society. Numerous organizations are involved in food security issues, including FAO, the World Health Organization, the U.N. Development Program,",
      " the World Bank, the International Monetary Fund, the WTO, regional development banks, key donor countries, for-profit private sector companies, and NGOs. Since the summit, international groups have taken steps to promote better coordination, but problems still exist. Coordination Since the Summit In February 1997, FAO and the International Fund for Agricultural Development proposed that the U.N. resident coordinator in each country facilitate inter-U.N. coordination and that FAO headquarters establish and manage a network among the U.N. and non-U.N. agencies. The Administrative Coordination Committee of the United Nations (ACC)endorsed this proposal in April 1997 and authorized FAO to consult with other U.N.",
      " agencies on detailed arrangements to establish the network and a detailed work plan. The United States succeeded in placing the issue of food security coordination on the agendas of the 1997 Group of Seven developed countries\u2019 economic summit in Denver, Colorado, and the 1997 U.S.-European Union Summit. Despite these actions, coordination problems continued. For example, at a June 1997 meeting of the Food Aid Forum, the European Union and 11 other countries attending the meeting expressed concern about the uncoordinated nature of food aid in contributing to food security goals.The European Union and 11 of the other countries attending the meeting said global food aid policy components were scattered among a number of international organizations and other forums,",
      " each with different representatives and agendas, and that they lacked effective coordination. In addition, they said that systemic coordination of food aid at the regional and national levels was needed. To improve coordination and the effectiveness of food aid, the European Union is drafting a proposed code of conduct for food aid. The code of conduct is to include a statement of responsibility for both food aid donors and recipients and stress the need to ensure optimal use of food aid resources. Another coordination problem concerned rural agricultural development. In October 1997, the World Bank reported that in virtually all of the countries it works with, many donors and multilateral financial institutions are promoting often disjointed projects.",
      " According to the Bank, these projects are launched when the policy environment is not favorable and a coherent rural strategy is lacking. Consequently, many of the projects fail to achieve their development objectives and undermine local commitment and domestic institutional capacity. Other examples of coordination problems concern FAO\u2019s Special Program on Food Security, a telefood promotion to raise money, efforts to assist developing countries develop food security action plans for implementing summit commitments, FAO coordination with NGOs, and FAO coordination with other U.N. agencies. Special Program for Food Security The intent of FAO\u2019s Special Program for Food Security, an initiative of FAO\u2019s Director-General, is to provide technical assistance to help low-income,",
      " food-deficit countries increase their agricultural production. The program began in 1995 with a pilot phase involving 18 countries. At a spring 1997 meeting of the CFS, many developed countries expressed concern about the program. For example, the European Union representative said FAO was not sufficiently emphasizing the need for policy reform, donor coordination, and rural development, as called for by the summit, and was not developing the program in a sufficiently participatory manner to allow recipient countries to take ownership of the program. The United States and other countries also complained about a lack of information on the costs and results of the program and expressed concern that the program was using FAO resources needed for summit implementation and FAO\u2019s traditional normative work.",
      " According to a U.S. official, the United States was concerned that FAO was using the special program to become a development agency rather than an agency that sets standards for countries to follow. The official also said that the FAO Director-General had not been responsive to donor concerns about the program. In commenting on a draft of this report, FAO officials said that we did not adequately reflect the views of developing countries that are the main beneficiaries of the program, nor did we recognize that the special program was an initiative of the Director-General that was approved by the FAO membership. Moreover, FAO said that the special program is now part of its regular Program of Work and Budget.",
      " USDA officials advised us that our discussion of the April 1997 events was correct, but that since then, the FAO Director-General had been responsive to concerns expressed about the program. For example, FAO has provided factual data on the program\u2019s activities, and that while early discussions about the program had emphasized supporting large capital projects that were questionable, the focus of the program has since shifted to encourage many small projects. Telefood Promotion In 1997, the FAO Director-General announced plans to put on a 48-hour global television program to mobilize public opinion and financial resources to pay for the Special Program and other food security activities.",
      " Participating countries were to organize national broadcasts, to be held on October 18 and 19, 1997, centered on World Food Day, an annual event designed to raise awareness about food security problems. According to the Director-General, the telecast was an important way to raise money for FAO\u2019s Special Program in light of declining aid levels from donor countries. The main purpose originally was to raise public awareness of food problems and, only as a secondary suggestion from member countries, to mobilize resources for micro-projects providing direct support to small farmers. In general, donor countries did not initially support the telefood initiative when it was discussed at the April 1997 CFS meeting.",
      " Some key donor countries, such as the United States, Australia, and Canada, announced they would not participate in the telecast, because the proposal (1) had not been reviewed or approved by FAO members; (2) lacked participation by civil society in each country; (3) was designed to help fund the Special Program, which was viewed as not fully reflecting World Food Summit commitments; and (4) would impinge upon national NGO fundraising activities centered on World Food Day. In November 1997 FAO indicated the operation was successful, and invited FAO members to take all measures they deem appropriate to promote Telefood in the future.",
      " According to FAO, 58 countries participated in awareness-raising activities in the 1997 Telefood, including 5 developed countries (France, Greece, Italy, Japan, and Turkey). Twenty of the countries also engaged in fundraising, including one developed country (Japan). For the 1998 Telefood, 45 countries participated in awareness activities and 35 of these countries also engaged in fund-raising. Five developed countries participated, including in both sets of activities (Italy, Japan, Portugal, Spain, and Turkey). In commenting on this report, FAO officials acknowledged that concerns had been expressed about supporting events that might be seen as competing with the activities of nongovernmental organizations (NGO)",
      " but said that most Telefood supporters came from civil society. USDA officials said that the United States was critical of Telefood in spring 1997 but expressed support for the program later in the year. They said that the United States now recognizes that Telefood may be a significant activity for other countries and that it can help in raising consciousness about food insecurity. Country Strategy Papers Shortly before the summit was held, the FAO Director-General ordered that food security strategy papers be drafted for each member country, including developed countries. (According to FAO officials, papers for the developed countries would simply describe the food security situation in each country and not include recommendations.) The Director-General did so without advising or securing the approval of at least some member countries,",
      " including the United States. The strategies for the developing countries reportedly included recommendations for improving food security that focused on the agricultural sector. FAO officials told us that each paper cost approximately $2,000 to produce and was drafted over a 2-week period. Sixty strategy papers, prepared before the summit was held, were reviewed jointly by FAO, the associated member country governments, and the World Bank. By April 1997, about 90 papers had been drafted, and parliaments in about 20 countries had approved the documents as national action plans for implementing World Food Summit commitments, according to FAO officials. At the April 1997 CFS session,",
      " donor countries expressed concern that civil societies of the countries had not been involved in preparation of the strategies, even though the summit action plan stressed the need for civil society to participate in planning, promoting, and implementing measures for improving food security. Donors were also concerned that the presummit strategies would not reflect the full range of commitments and actions agreed upon by summit participants. Also of concern was the short amount of time allotted for drafting the papers. Several FAO officials indicated that 2 weeks was not sufficient time to prepare sound country strategy papers. They noted that prior FAO preparation of country strategies typically took about 6 months. FAO officials also acknowledged that FAO lacked expertise in several key areas related to food security,",
      " such as macroeconomic and political policy reform, that were emphasized by the summit. In general, the donors were also displeased about FAO\u2019s funding of country briefs for the developed countries. Countries had written position papers on their individual approaches to food security during preparations for the summit. Representatives from several developed countries noted that neither FAO nor FAO contractors had contacted their governments to obtain key data and information on the status of country efforts to develop country action plans. The European Union representative instructed FAO to stop preparing briefs on the European Union\u2019s member states unless one of its countries specifically requested that FAO do so. FAO staff told us that the country strategies had been well received by the developing countries,",
      " were not meant to substitute for action plans developed by the civil society of each country, and were only a starting point to stimulate discussion and debate. However, donor country governments and other key groups were not invited to critique the drafts. Moreover, completed strategy papers and briefs have not been made available to other FAO members. According to FAO, as of June 1998, FAO had provided assistance to 150 countries in preparing strategy briefs. FAO Coordination With Other U.N. Agencies The summit action plan said coordination and cooperation within the U.N. system, including the World Bank and the International Monetary Fund, are vital to the summit follow-up.",
      " Governments agreed to cooperate among themselves and with international agencies to encourage relevant agencies within the U.N. system to initiate consultations on the further elaboration and definition of a food insecurity and vulnerability information and mapping system. As part of an already existing effort by U.N. agencies to coordinate follow-up with major U.N. conferences and summits since 1990, these governments also agreed to seek to reduce duplications and fill gaps in coverage, defining the tasks of each organization within its mandate, making concrete proposals for their strengthening, for improved coordination with governments, and for avoiding duplication of work among relevant organizations. The summit plan also requested that the ACC ensure appropriate interagency coordination and,",
      " when considering who should chair any mechanisms for interagency follow-up to the summit, recognize the major role of FAO in the field of food security. In April 1997, the ACC approved a proposal to establish a network on rural development and food security as the mechanism for providing interagency follow-up to the summit. At the country level, the network consists of thematic groups established under the U.N. Resident Coordinator System. According to FAO, these groups typically include U.N. agencies, national institutions, bilateral donors, and civil society representatives. At the headquarters level, the network includes 20 U.N. organizations that participate in and support the country-level groups.",
      " The network is jointly coordinated and backstopped by FAO and the International Fund for Agricultural Development, in close cooperation with the World Food Program. Despite these efforts, FAO, other U.N. agency officials, and U.S. officials advised us that coordination problems continue. For example, an FAO official said that in May 1998, the U.N. Economic and Social Council met to review a set of indicators for measuring follow-up to the various U.N. conferences and summits. According to the official, FAO had not been involved in the exercise to create the indicators, and the proposed indicators did not adequately represent food security issues.",
      " As discussed in appendix VIII, FAO officials told us that although the World Food Program and World Health Organization have been cooperating in establishing an information and mapping system, FAO was still waiting to receive previously promised data from the organizations. According to both FAO and U.N. Children\u2019s Fund officials, their two agencies have had problems coordinating with each other. In commenting on a draft of our report, FAO officials noted that coordination problems exist even at the national level among ministries and agencies, and said that such problems cannot be absent in the U.N. system of agencies. However, FAO said great efforts had been made, particularly in the framework of the Administrative Committee on Coordination,",
      " to improve the cooperation and synergy among the different institutions. According to officials, the network on rural development and food security is growing rapidly and proceeding satisfactorily. Monitoring and Evaluation of the Action Plan The summit directed FAO\u2019s Committee on Food Security to monitor and evaluate progress toward national, subregional, regional, and international implementation of the action plan, using reports from national governments, the U.N. system of agencies, and other relevant international institutions. Governments are to provide regular reports on progress made to the FAO Council and the U.N. Economic and Social Council. The summit also directed that NGOs and other interested parties should play an active role in this process,",
      " at the national level and within CFS itself. Since the summit, countries have provided their first progress report to CFS and the FAO Secretariat, and planning has begun for a revised format for future reports. NGOs have made some progress in increasing their involvement in food security efforts, but not as much as they would like. Progress Reports In April 1997, CFS decided that the first report would cover progress through the end of 1997 and the reporting procedure would be provisional. Reports would be prepared by national governments, U.N. agencies, and other relevant international institutions and were to be received by the FAO Secretariat by January 31,",
      " 1998. Countries agreed to report on actions taken toward achieving the specific objectives under each of the seven statements of commitment (following the format of the summit plan of action) and include information on the actors and, if available, results, including quantitative assessments, under each of the objectives. CFS allowed each country to decide whether to report on the specific actions included in the summit\u2019s action plan. CFS emphasized that the information should include some analysis on how national policies and actions were geared toward, and effective in, achieving the food security objective of reducing the number of undernourished. A more detailed reporting format, proposed to CFS by the Secretariat,",
      " was not approved. CFS did not set any other requirements concerning the information to be provided. A proposal by some delegates that countries provide baseline information on actions taken to implement each of the seven commitments was noted but not endorsed as a requirement. Countries were not asked to provide baseline information on the number of their undernourished, the extent of undernourishment, or the principal causes of undernourishment. Nor were they asked to provide baseline information regarding actions already underway or planned or information on targets and milestone dates for implementing actions. They were not asked to provide information on actual or planned expenditures for implementing actions. Although CFS did not ask for baseline or target information,",
      " in a July 1997 letter to countries, FAO\u2019s Director-General said that the first report after the World Food Summit was of the utmost importance and would be of critical value in setting baselines and the orientations that governments intend to pursue. He also said it was expected that governments\u2019 reports would cover the contributions of all relevant partners at the national level, including governmental institutions, as well as nongovernmental and private sector actors. In addition, he asked for a one-page summary of the major food security issues that each country was facing and the priority targets being addressed through implementation of the plan. By the January 31, 1998,",
      " due date, only 5 countries had provided progress reports to the Secretariat; as late as March 31, 1998, only 68 of 175 country reports had been received. The Secretariat analyzed and summarized the results in a report for the CFS\u2019 June meeting but drew no overall substantive conclusions because (1) information on policies and programs predominantly covered continuing actions already taking place at the time of the summit, (2) the Secretariat\u2019s analysis of country actions was limited to 68 reports, (3) the countries only provided selective information rather than focusing on all the issues involved, (4) some countries provided descriptive rather than analytical information,",
      " and (5) some countries reported only on certain aspects of food security action such as food stocks or food reserve policies. The Secretariat said future reports need to be oriented more toward providing a precise analysis of selected situations, actions conducted over time to address them, results obtained, and reasons for such results. To date, CFS\u2019 approach to monitoring and evaluation of country performance has focused on encouraging countries to report on actions taken and the impact of the actions on food security. Under this approach, the FAO Secretariat seeks to summarize the results across all countries. CFS has not considered directly assessing the quality of a country\u2019s overall action plan\u2014including strategy,",
      " programs, resources, targets, and milestones for achieving the summit commitments, objectives, and actions. Secretariat officials told us that they lack sufficient staff to evaluate action plans for all CFS members. The Secretariat prepared a report for the June 1998 CFS session that included a proposed standard format for reporting future progress in implementing the plan. The proposal was considerably more structured than that which CFS asked members to use for the provisional report provided in 1998. The proposal included suggestions regarding essential substantive points to be addressed in future reports. Prior to convening on June 2, CFS held a 1-day working group meeting on June 1 to examine the Secretariat\u2019s proposals and report on them to CFS.",
      " However, the working group did not debate and CFS did not reach any decisions on the essential points to be included in future progress reports. CFS directed the Secretariat to collaborate with member states and other concerned partners in the continuing preparation of a set of indicators for measuring progress in implementing the plan and said the work should be completed sufficiently in advance to be used by CFS in preparing for its session in the year 2000. CFS also directed the Secretariat to further develop an analytical framework for preparing future reports and assessing progress in implementing the summit action plan. Participation of Civil Society The summit action plan directed that civil society be involved in CFS\u2019 monitoring and that governments,",
      " in partnership with civil society, report to CFS on national implementation of the plan. The plan\u2019s directive is consistent with a growing interest in involving civil society to help promote the objectives and work of international agencies during the past decade in response to various transformations within and across countries. For example, the globalization of the economy has reduced the ability of individual governments to control the direction of development. Structural adjustment reforms have led to a redefinition of the role of the state in many countries, reducing its function as a doer and provider and leaving it to the private sector and citizen initiatives to take on responsibilities for services it no longer provides. The demise of authoritarian regimes in many countries has created opportunities for groups and collective initiatives of many kinds to spring up and make their voices heard.",
      " Increasing the role of civil society in CFS is not easily accomplished since FAO was created as an intergovernmental forum and operates by consensus of all the members. Unless the members of CFS agree to allow for NGO participation, this cannot occur. According to several U.N. officials with whom we spoke, developing countries are generally opposed to greater involvement by NGOs in U.N. agencies, including FAO. According to FAO and other participants, if CFS member countries agree that civil society should have a greater role, a variety of practical questions must be addressed. For example, how can FAO deal effectively and equitably with the large number of civil society organizations that would like to be heard,",
      " the variety and number of conflicting views and interests that they express, the disparities in their legitimacy and representativeness, and the difficulties many NGOs in developing countries have in gaining access to information and policy forums? In addition, given limited resources, where should priorities lie in promoting policy dialogue, and how can links between national and global levels be promoted? Some NGOs believe that some of these issues could be addressed if NGOs were allowed to hold separate meetings for developing consensus positions and selecting a few NGOs to represent them in CFS meetings. At the April 1997 CFS session, several delegates suggested that ways be considered for strengthening or widening the participation of civil society organizations in the work and deliberations of CFS.",
      " CFS asked the Secretariat to take interim measures to broaden NGO participation at the 1998 session of CFS and agreed to examine the issue in greater detail at that time. In responding to the April 1997 CFS session, the Secretariat took several positive actions prior to June 1998. It increased the number of NGOs invited to the June 1998 CFS meeting, made documents available on the FAO website about 1 month prior to the meeting, and provided FAO countries with a copy of a proposal by a group of NGOs for enhanced civil society participation. The proposal identified a number of specific actions that could be taken to increase NGO opportunities for participation before and around CFS meetings.",
      " NGOs expressed particular disappointment about not being allowed to make prepared statements in CFS meetings until after government delegates have spoken and said if they were to make the effort of participation, they needed to be assured of a say in decision-making and to know that NGO positions could at least be reflected in CFS reports. environment for civil society organizations and building dialogue with governments and how civil society\u2019s views could be better taken into account given the intergovernmental nature of FAO. The seven NGOs provided their views in an information paper that was made available for the CFS June meeting. In addition, the Secretariat drafted its own paper on how the NGOs\u2019 role could be enhanced in CFS and invited the CFS Bureau to approve the paper for use at the June 1998 meeting.",
      " Notwithstanding the positive steps taken by the Secretariat and CFS\u2019 April 1997 decision, CFS did not seriously consider the issue in 1998. For example, the CFS Bureau, a small executive committee, did not approve the Secretariat\u2019s paper for use at the June 1998 CFS session, and the issue was not included in the provisional agenda for the meeting. At the opening of the session, Canada, with support from the United States, proposed that the provisional agenda be amended to include a discussion of the role of civil society. However, rather than permitting debate on the proposal, the CFS Chairman announced that he had decided to seek to satisfy NGOs\u2019 interests by holding informal discussions with them.",
      " Subsequently, the Chairman advised the NGOs that he and the CFS Bureau would meet with representatives of five NGOs. During the morning of the second day of the CFS meeting, the United States again proposed that civil society participation be added to the agenda and asked that it be addressed without further delay. The Chairman agreed to add the item to the agenda but postponed discussion until the end of the third day\u2019s meeting. During the abbreviated discussion, various ideas for broadening civil society participation were noted. However, some delegates, including China, stressed that CFS is an intergovernmental forum and that any measures taken to broaden participation would need to respect that principle.",
      " At the conclusion of the June session, CFS countries agreed to make the issue of increased civil society participation in its activities a main agenda item for the 1999 meeting. It asked the Secretariat to prepare and circulate a discussion paper at least 6 months prior to the next meeting to allow ample time for consultations between governments and national civil society organizations. The Secretariat was also asked to analyze the pros and cons of proposals, including their legal, procedural, and financial implications. According to a statement presented on behalf of NGOs that attended the June 1998 CFS session, the involvement of civil society organizations in preparing national reports on progress in implementing the summit\u2019s action plan was varied.",
      " In some cases, NGOs had written inputs; in other cases, NGOs gave their views orally in meetings with government officials; and in numerous other cases, civil society was not invited to participate in the drafting of the national report. Objectives, Scope, and Methodology At the request of Senator Russell D. Feingold, Ranking Minority Member of the Subcommittee on African Affairs, Senator John Ashcroft, and Congressman Tony P. Hall, we reviewed the outcome of the 1996 World Food Summit and key factors that could affect progress toward achieving the summit\u2019s goal. Our overall objective was to comment on key issues and challenges related to developing countries\u2019 achieving the summit\u2019s goal of reducing undernourishment by half by 2015.",
      " Our overall approach was to analyze and synthesize information from a wide variety of primary and secondary sources. To address the current status of global food security, the summit\u2019s approach to reducing food insecurity, and the summit\u2019s possible contribution to reducing hunger and undernutrition, we did the following: reviewed documents and studies by the FAO, the U.N. Children\u2019s Fund, the World Health Organization, the World Bank, and the World Food Program; the Organization for Economic Cooperation and Development; the Consultative Group on International Agricultural Research; IFPRI; USDA, USAID, the Department of State, and the Department of Health and Human Services; and various academics,",
      " NGOs, and private sector entities concerned with past and possible future efforts to reduce poverty and undernutrition; discussed issues concerning the extent and causes of undernutrition with national and international experts in food security, including experts at FAO, the World Food Program, the World Bank, IFPRI, USDA, USAID, the Department of State, various NGOs, and universities and international food companies; observed presummit negotiations over the text to be included in the World Food Summit\u2019s policy declaration and plan of action, the World Food Summit, and subsequent FAO follow-up meetings to the summit (the latter include the April 1997 CFS meeting, the November 1997 FAO Conference meeting,",
      " and the June 1998 CFS meeting; attended various other conferences and seminars where food security and related issues were discussed; and developed a database on country-level estimates of undernutrition and various economic, political, and social variables possibly associated with food insecurity. private sector resource flows, and investors\u2019 ratings of the risk associated with investing in countries. We did not validate the reliability of these data. To address the current status of global food security, more specifically, we reviewed methodological issues associated with efforts to accurately identify and measure the extent of undernutrition; reviewed FAO, USDA, and World Health Organization estimates of the number of undernourished people or children in up to 93 developing countries that collectively account for about 98 percent of the population in the developing world;",
      " used FAO estimates of the number of undernourished people in 93 developing countries to calculate and describe (1) the distribution of the total number of undernourished people across countries and (2) the variation across countries in the proportion of population that is undernourished; and compared FAO and USDA estimates of the number of undernourished people in 58 low-income, food-deficit countries to show to what extent the estimates differ. To describe the summit\u2019s policy declaration and action plan for reducing food insecurity, we reviewed both and prepared a table summarizing the 7 major commitments, 27 supporting objectives,",
      " and 24 of the 181 supporting actions. The latter were selected to further illustrate the depth and specificity of the summit\u2019s plan. To provide perspective on the summit\u2019s goal of halving the number of undernourished people by 2015, we reviewed and compared FAO and USDA estimates on the number of undernourished people in developing countries. In addition, we analyzed a variety of key issues associated with the summit\u2019s proposed commitments, objectives, and actions for halving undernutrition by no later than 2015. These issues concern the ability and willingness of countries to reasonably measure the prevalence of undernourishment and the possible effects of trade liberalization,",
      " grain reserves, food aid, conflict, increased agricultural production, policy reforms, resources, coordination, and monitoring and evaluation of progress in reducing food insecurity. production growth rates relative to food insecurity levels and the aggregate number of undernourished people of the countries. To assess the impact of trade liberalization on food security, we reviewed various analyses of the subject, including two detailed estimates of the projected income impacts of the URAs on major regions of the world and several major trading countries. To provide perspective on trends and issues associated with grain reserves and food aid, we analyzed data on (1) world private and government grain reserves and the ratio of total grain reserves to world cereal consumption;",
      " (2) world and U.S. cereals shipments of food aid in terms of total quantities and the proportion provided as program, project, and emergency aid; and (3) total food aid deliveries to low-income, food-deficit countries and as a percent of total global food aid deliveries. We also analyzed country-level data on average per capita caloric levels and related this measure of food security to other country-level variables, including (1) the incidence of civil war, war, revolution and genocide during 1960-89; (2) the level of income; and (3) creditworthiness ratings of the risk associated with investing in these countries;",
      " related country-level data on the number of undernourished people to (1) income levels of developing countries, (2) total official and private resources provided to these countries, and (3) creditworthiness ratings of the risk associated with investing in the countries; and analyzed data on the role of official development assistance and private sector investment in developing countries during 1990-97. To comment on the issues of (1) improving coordination among governments, international agencies, and civil society and (2) monitoring and evaluating their progress in implementing the summit action plan, we considered information that became available to us in some of our previously discussed actions.",
      " For example, we relied heavily on the FAO Secretariat\u2019s assessment of individual developing and developed country progress reports that were provided to the Secretariat during early 1998. We did not undertake a comprehensive study of actions taken by governments, international agencies, and civil society to improve coordination and monitor and evaluate progress toward achieving summit commitments. We conducted our review from February 1997 to September 1998 in accordance with generally accepted government auditing standards. Comments From the U.S. Agency for International Development Major Contributors to This Report National Security and International Affairs Division, Washington, D.C. Phillip J. Thomas Wayne H. Ferris Gezahegne Bekele Edward George The first copy of each GAO report and testimony is free.",
      " Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC  20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202)",
      " 512-6000  or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony.  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
    "length": 31438,
    "hardness": null,
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  },
  {
    "id": 97,
    "question": null,
    "answer": "In recent years, much attention has been focused on the roles that the private sector and federal government play in providing insurance and financial aid before and after catastrophic events. In this context, GAO examined (1) the rationale for and resources of federal and state programs that provide natural catastrophe insurance; (2) the extent to which Americans living in catastrophe-prone areas of the United States are uninsured and underinsured, and the types and amounts of federal payments to such individuals since the 2005 hurricanes; and (3) public policy options for revising the federal role in natural catastrophe insurance markets. To address these questions, GAO analyzed state and federal programs, examined studies of uninsured and underinsured homeowners and federal payments to them, identified and analyzed policy options, and interviewed officials from private and public sectors in both high- and low-risk areas of the United States. GAO also developed a four-goal framework to help analyze the available options. The federal government and some states have developed natural catastrophe insurance programs that supplement or substitute for private natural catastrophe insurance. These programs were created because homeowner coverage for catastrophic events is often not available from private insurers at prices deemed affordable by insurance regulators. Large losses associated with natural catastrophes are some of the biggest exposures that insurers face. Particularly in catastrophe-prone locations, government insurance programs have tended not to charge premiums that reflect the actual risks that homeowners face, resulting in financial deficits. After a resource-depleting disaster, the programs have postfunded themselves through, among other sources, payments from insurance companies and policyholders and appropriations from state and federal taxpayers. Large numbers of Americans are not insured for natural catastrophes. Homeowners may not purchase natural catastrophe insurance because doing so is voluntary and they may not believe that the risk justifies the expenditure. In addition, some homes may be underinsured--that is, not insured for the full replacement value. GAO estimates that the federal government made about $26 billion available to homeowners who lacked adequate insurance in response to the 2005 Hurricanes Katrina, Rita, and Wilma. Given the unsustainable fiscal path of federal and state governments, they will be challenged to maintain their current fiscal role. As Congress reevaluates the role of the federal government in insuring for natural catastrophes, Congress is faced with balancing the often-competing goals of ensuring that citizens are protected and limiting taxpayer exposure. This report examines seven public policy options for changing the federal government's role, including establishing an all-perils homeowner insurance policy, providing reinsurance for state catastrophe funds, and creating a mechanism to provide federal loans for state catastrophe funds. Each option has advantages and disadvantages, especially when weighed against competing public policy goals. For example, establishing an all-perils homeowner policy is a private sector approach that could help create broad participation. But low-income residents living in parts of the United States with high catastrophe risk could require subsidies, resulting in costs to the government. Similarly, federal reinsurance for state programs could lead to broader coverage, but could displace private reinsurance. GAO also identified several policy options for tax-based incentives for insurance companies, homeowners, investors, and state governments. But these options, which could help recipients better address catastrophe risk, could also result in ongoing costs to taxpayers. While some options would address the public policy goals of charging risk-based rates, encourage broad participation, or promote greater private sector participation, these policy goals need to be balanced with the desire to make rates affordable.\n",
    "docs": [
      "Background The United States is exposed to several major hazards, in particular  earthquakes and hurricanes, in coastal areas. As shown in figure 1, the  Pacific, South Atlantic, and Gulf Coasts face the highest risk of earthquakes  and hurricanes. According to the National Oceanic and Atmospheric  Administration (NOAA), 53 percent of the nation\u2019s total population, or  approximately 153 million people, lived in coastal counties in 2003.  Moreover, the total coastal population increased by 33 million people, or   28 percent, between 1980 and 2003. California led in coastal population  change, with the number of residents increasing by 9.",
      "9 million people.  Florida showed the greatest percentage population change between 1980  and 2003, increasing nearly 75 percent. The nation\u2019s coastal population is  expected to increase by more than 7 million people by 2008 (over current  levels) and by 12 million people by 2015. The housing supply in coastal areas also continues to grow, despite the  high risk of earthquakes and hurricanes. NOAA reported that coastal  counties contained 52 percent of the nation\u2019s total housing supply in 2000.  The leading states in terms of total housing units in coastal counties were  California, Florida, and New York,",
      " which together have 41 percent of the  total housing supply in these counties. One study put the estimated insured  value of coastal property in states bordering the Atlantic Ocean and Gulf of  Mexico at $7.2 trillion as of December 2004. As shown in figure 2,  properties along the Pacific and North-Atlantic Coasts and the Gulf of  Mexico have some of the highest insured property values. The value of  residential and commercial coastal property in Florida and New York was  $1.94 trillion and $1.90 trillion, respectively, in 2004. Private Natural Catastrophe  Insurance Insurance coverage against natural catastrophes for a home may or may  not be included in homeowners insurance contracts.",
      " For example,  coverage against wind loss from an event such as a hurricane is typically  included. However, in some areas of certain states\u2014mostly coastal  regions\u2014wind coverage may be excluded from homeowners insurance  contracts and may be available only through the surplus lines insurance  market or a state-managed entity. Similarly, earthquake coverage is  commonly excluded from homeowners insurance contracts and instead is  sold separately by insurance companies or, in the case of California,  through a state-managed program. The price of property and casualty insurance is affected by both the annual  expected loss and the cost of diversifying the risk of catastrophic losses.  Insurers can diversify the risk of catastrophic losses by,",
      " among other  things, purchasing reinsurance, which is insurance for insurance  companies, or by selling financial instruments such as catastrophe bonds.  Insurance companies do not know in advance what their actual costs are  going to be, because they can determine these costs only after a policy has  expired. The insurer\u2019s objectives are to calculate premiums that will make  the business profitable, enable the company to compete effectively with  other insurers, and allow the company to pay claims and expenses as they  occur. When insurers, reinsurers, and investors in catastrophe financial  instruments perceive that the expected frequency or severity of natural  catastrophes has increased,",
      " they may increase the price of insurance. If a  company believes that the risk of loss\u2014for example, from flooding or  earthquake\u2014is unacceptably high given the rate that can be charged, it  declines to offer coverage. State Regulation of  Insurance Prices While the federal government retains the authority to regulate insurance, it  has given primary responsibility for insurance regulation to the states, in  accordance with the McCarran-Ferguson Act of 1945. State insurance  commissioners are responsible for regulating rates, monitoring the  availability of insurance, and assessing insurance firms\u2019 solvency. The  insurance regulators of the 50 states, the District of Columbia,",
      " and the U.S.  territories have created NAIC to coordinate regulation of multistate  insurers. NAIC serves as a forum for the development of uniform policy,  and its committees develop model laws and regulations that, when adopted  by state legislatures or promulgated by state regulators, govern the U.S.  insurance industry. Critics of state insurance regulation argue that insurance prices and terms  of coverage, particularly for homeowners insurance in areas prone to  natural catastrophes, are highly regulated and that the insurance industry is  generally not allowed to respond freely to changing risks or market  conditions. In particular, these critics say that  insurance regulators do not allow private insurers in catastrophe-prone  areas to charge rates sufficient to build surpluses or transfer risks to  reinsurers,",
      "  regulators may be subject to voter pressure and thus to legislative  pressure to keep insurance premiums affordable and coverage readily  available, and  regulatory and political restrictions prevent markets from giving  consumers accurate price signals regarding the risks of living in  catastrophe-prone areas. NAIC officials told us that projected loss costs to cover the insurer\u2019s  catastrophe exposure vary widely depending on which risk-modeling firm  the insurer selects to produce its catastrophe loss costs. Only future results  prove whether insurance company actuaries or insurance regulator  actuaries are correct. The officials said that one should not assume that  insurers and their actuaries have perfect information about what  catastrophes will occur during the next year and about how the economy  will behave.",
      " They added that one should also not assume that actuaries  working for insurance companies are always correct in their projections of  the needed price for the future experience period and that actuaries  working for insurance regulators are always wrong. In the aftermath of natural catastrophes, some insurers responded by  limiting their exposure in catastrophe-prone areas with restrictions on  underwriting, higher deductibles, and lower coverage limits. In particular,  there were property insurance affordability and availability crises in the  Gulf Coast states or Florida after Hurricane Camille in 1969, Hurricane  Celia in 1970, Hurricane Andrew in 1992, and the 2005 hurricanes;",
      " and in  California following the Northridge Earthquake in 1994. Various proposals  have been put forth over the past 15 years seeking to have the federal  government take a larger role\u2014for example, as a reinsurer or by allowing  insurance companies to accumulate tax-deferred reserves\u2014in addressing  the affordability and availability of natural catastrophe insurance. Federal Natural Catastrophe  Insurance and Disaster Aid The federal government engages in a wide variety of insurance activities,  among them providing multiperil crop insurance to farmers and flood  insurance to homeowners and businesses. In addition, the federal  government provides disaster assistance to individuals and households.  FEMA,",
      " SBA, and HUD are the primary agencies administering federal  disaster relief and recovery programs. FCIC provides insurance coverage for farmers who suffer financial losses  when their crops are damaged by droughts, floods, or other natural  disasters. By law, FCIC pays the premium for catastrophic coverage against  losses of 50 percent of a farm\u2019s normal yield at 55 percent of the market  price. In addition, FCIC offers premium subsidies for \u201cbuy-up\u201d coverage  against crop, revenue, and prevented planting losses, with coverage for  losses ranging from 50 to 90 percent of a farm\u2019s normal yield. FCIC  estimates that participation of eligible farmers is approximately 80 percent  of acres planted.",
      " FEMA, through NFIP, offers insurance to homeowners and businesses for  losses due to flooding and currently has 5.3 million policyholders. By law,  NFIP must offer reduced premium rates for homes built in floodplains prior  to the creation of flood insurance rate maps (pre-Flood Insurance Rate Map  (FIRM) properties). About one quarter of NFIP policies are pre-FIRM and  pay about 40 percent of the risk-based rate. According to NFIP, homes built  in floodplains to an approved building code after the creation of flood maps  pay actuarially sound premiums. Participation in the program is mandatory  for homeowners with mortgages issued by federally regulated lenders on  properties in special flood hazard areas (SFHA)",
      " where flood insurance is  available. According to the RAND Corporation, about half of all  homeowners who live in SFHAs purchase flood insurance. In addition to providing crop, flood, and other insurance, the federal  government provides disaster assistance to individuals. FEMA provides  disaster relief and recovery assistance to individual citizens through its  Individuals and Households Program (IHP), which is intended to provide  money and services to people in a disaster area when losses are not  generally covered by insurance and property has been damaged or  destroyed. IHP includes Housing Assistance (HA) and Other Needs  Assistance (ONA). FEMA may provide five types of HA:",
      " financial assistance  to rent temporary housing, \u201cdirect\u201d temporary housing assistance, repair  assistance, replacement assistance, and permanent housing construction in  certain areas outside of the continental United States and other remote  areas. FEMA may provide ONA grant funding for transportation expenses,  medical and dental expenses, and funeral and burial expenses. ONA grant  funding may also be available to replace personal property, repair and  replace vehicles, and reimburse moving and storage expenses under  certain circumstances. IHP is not intended to restore damaged property to  its predisaster condition. SBA\u2019s Disaster Loan Program (DLP) is the primary federal program for  funding long-range recovery for private sector,",
      " nonfarm disaster victims.  Eligible losses include under or uninsured damages and can not duplicate  benefits received from another source (i.e. insurance recovery, FEMA,  etc.). The Small Business Act authorizes SBA to make available the  following two types of disaster loans: (1) physical disaster home loans to  homeowners, renters, and businesses of all sizes, and (2) economic injury  disaster loans to small businesses. Homeowners and renters can borrow  up to $40,000 for repair or replacement of household and personal effects.  Homeowners can also borrow up to $200,000 to repair or replace a primary  residence.",
      " Businesses of all sizes can borrow up to $1.5 million to repair or  replace disaster damaged real estate, machinery and equipment, inventory,  etc. Small businesses can borrow up to $1.5 million for disaster related  economic injury resulting from the declared disaster. The combined loans  to a business for physical loss and economic injury cannot exceed   $1.5 million. Homeowners and businesses must provide reasonable  assurance that they can repay the loan out of personal or business cash  flow, and they must have satisfactory credit and character. HUD also provides disaster recovery assistance through several programs.  After the 2005 hurricanes, Congress appropriated $16.",
      "7 billion to the  Community Development Block Grant (CDBG) program for disaster  recovery. The CDBG program generally provides funding to metropolitan  cities and urban counties that have been designated as entitlement  communities and to states for distribution to other communities. Grant  recipients must give maximum feasible priority to activities, including  emergency-related activities, that (1) benefit low- and moderate-income  families or aid in the prevention or elimination of slums or blight, or   (2) meet urgent community development needs. However, HUD can waive  regulatory and statutory program requirements to increase the flexibility of  the CDBG funds for disaster recovery.",
      " These grants afford states and local  governments a great deal of discretion to help them recover from  presidentially declared disasters. Government Natural  Catastrophe Insurance  Aims to Provide  Affordable Protection  but Often Requires  Postfunding after Large  Natural Catastrophes Government natural catastrophe insurance programs were created because  certain perils are difficult to insure privately and because, when private  insurance is available, it may not be affordable. To keep natural  catastrophe insurance available and affordable, government insurance  programs operate differently than private insurance companies. Private  insurance companies generally rely on premiums collected from those they  insure to cover operating costs and losses and set premium rates at levels  that are designed to reflect the risk that the company assumes in providing  the insurance.",
      " These companies may also accumulate reserves to cover  large losses. Federal and state government insurance programs also collect  up-front premiums, but their rates do not always reflect the risks that the  programs assume. Because premiums are inadequate to cover operating  costs and losses, the government programs generally have limited  resources and often face deficits after disasters. However, unlike private  insurers, federal insurers may obtain funds after a catastrophic event  through emergency appropriations. State programs may also access  postevent funding through various means, including assessments on  private insurers, bonds, and private reinsurance. State programs may also  be postfunded through state general revenue funds and federal disaster  relief payments.",
      " This structure has several implications. First, it may  encourage homeowners in catastrophe-prone locations to seek coverage  from government programs, crowding out the private market and  increasing the government\u2019s financial exposure. Second, homeowners may  not receive appropriate price signals about the risk of living in catastrophe- prone locations. Third, taxpayers who live in less risky locations may be  subsidizing those living in catastrophe-prone locations. Finally, the added  burden of private insurers\u2019 assessment obligations may provide another  reason for them to leave already stressed markets. Federal natural catastrophe insurance programs fill gaps in private  insurance markets and help limit disaster relief payments. For example,",
      "  FCIC and NFIP were created because private insurers had determined that  multiperil crop and flood losses were uninsurable and declined to provide  coverage. A 1937 study by the Executive Committee on Crop Insurance,  which noted that commercial attempts to insure against crop losses had  been unsuccessful, provided the impetus for creating FCIC in 1938. Initially,  the program was experimental and suffered heavy losses. The Federal Crop  Insurance Act of 1980 expanded the program to replace free disaster  coverage (in the form of compensation to farmers who were unable to  plant crops and who suffer yield losses) with insurance.",
      " The flood  insurance program was initiated because it had become clear by the 1950s  that private insurance companies could not profitably provide affordable  flood coverage because of the catastrophic nature of flooding and the  impossibility of developing an actuarial rate structure that could  adequately reflect the risk to flood-prone properties, among other reasons.  One of the primary purposes of the National Flood Insurance Act of 1968,  which created NFIP, was to reduce federal expenditures for disaster  assistance and flood control. State natural catastrophe insurance programs were created to avoid  homeowners insurance crises that threatened the states\u2019 housing markets.  For example,",
      " the California Earthquake Authority was formed in 1996 in  response to a crisis in the residential property insurance market following  the Northridge earthquake in 1994. According to the Insurance Information  Institute, California insurers had collected only $3.4 billion in earthquake  premiums in the 25-year period prior to the Northridge earthquake but had  paid out more than $15 billion on Northridge claims alone. Moreover,  insurers representing about 95 percent of the homeowners insurance  market in California began to limit their exposure to earthquakes by writing  fewer or no new homeowners insurance policies, triggering a crisis that  threatened California\u2019s housing market and stalled the state\u2019s recovery  from recession.",
      " See appendix II for a more detailed description of state  natural catastrophe insurance programs. Florida Citizens is a nonprofit tax-exempt entity that provides residential  and commercial property insurance coverage when private insurance is not  available. Florida Citizens was established in 2002 after two separate  insurance pools\u2014the Florida Windstorm Underwriting Association  (FWUA) and the Florida Residential Property and Casualty Joint  Underwriting Association (JUA)\u2014were combined. In addition, the  Florida Hurricane Catastrophe Fund (FHCF) provides an alternative to  traditional hurricane reinsurance, reducing the cost of coverage  significantly below that of private reinsurance and lowering the cost of  insurance to homeowners.",
      " The FHCF was established in 1993 in response  to Hurricane Andrew, which resulted in a severe shortage of catastrophe  property reinsurance capacity, stricter policy terms and conditions, and  sharp increases in property catastrophe reinsurance rates in the year  following the storm. The post-Andrew reaction of a number of insurance  companies was to attempt to reduce their underwriting exposure, and 39  insurers stated in early 1993 that they intended to either cancel or not  renew approximately 844,000 policies in Florida. Other states\u2014including  Alabama, Louisiana, Mississippi, and Texas\u2014have created state funds to  make natural catastrophe insurance available and affordable.",
      " Premium Rates for  Government Natural  Catastrophe Insurance  Programs Are Often  Determined by Factors  Other Than Risk Because government natural catastrophe insurance programs are often  created to ensure the availability and affordability of natural catastrophe  insurance, homeowner premiums for these programs\u2014although risk- related\u2014are generally not based entirely on the homeowners level of risk.  Federal natural catastrophe insurance program premium rates are often set  by statute and involve government subsidies. For example, to encourage  broad participation in the crop insurance program, federal law seeks to  ensure that the premiums are affordable to all farmers by requiring FCIC to  pay a portion of the premium cost.",
      " Specifically, FCIC offers farmers  varying subsidy rates for crop insurance, depending on the level of  protection they seek. Crop insurance subsidies totaled about $2.3 billion  in crop years 2005 and 2006. In addition, federal crop insurance legislation  directs FCIC to operate at a loss ratio of no more than 1.075. A loss ratio  greater than 1.00 indicates that the program paid more in claims than it  collected in premiums. Furthermore, we have previously reported that  NFIP is not designed to be actuarially sound. Annually, flood insurance  subsidies total about $1.",
      "3 billion. State natural catastrophe insurance program premium rates may also be  set by statute. Florida Citizens historically has been required to maintain  premium rates that were not competitive with the private insurance  market. However, in January 2007, the Florida Legislature allowed Florida  Citizens to charge competitive rates. Even by 2006, Florida Citizens was  the largest property insurer in Florida. It receives much of its reinsurance  coverage from the FHCF, which charges premium rates that are estimated  to be about a quarter to a third the cost of private market reinsurance. The  program can charge these rates because of its tax-exempt status and ability  to postfund claims losses through bonds,",
      " among other advantages. These  two state programs are able to charge lower premiums than private  insurance companies, encouraging more people to seek coverage in the  state programs and leaving the state more financially vulnerable in the  event of a large hurricane. State natural catastrophe insurance program premium rates are also  subject to approval by state insurance regulators that have generally  resisted rate increases. The Mississippi Windstorm Underwriting  Association (Mississippi Windpool) provides coverage against windstorms  and hail for people in the six coastal counties of Mississippi who might not  be able to get wind coverage in the private insurance market. After  Hurricane Katrina, the Mississippi Windpool sought a rate increase of  almost 400 percent,",
      " primarily to cover the increased cost of reinsurance.  The state insurance regulator granted a 90 percent increase. Furthermore,  the state government will use $50 million in federal disaster recovery funds  provided by HUD to offset the increased cost of reinsurance in 2007 and  2008. In addition, the state government created a reinsurance fund that  uses state general revenue funds to offset the increased cost of  reinsurance. Similarly, the Texas Windstorm Insurance Association (Texas Windpool)  offers wind and hail coverage in 14 coastal counties and other specified  areas. By law, Texas Windpool residential and commercial premium rates  may not increase more than 10 percent above the rates for noncommercial  windstorm or hail insurance that are in effect at the time the request for an  increase is filed.",
      " However, the insurance commissioner may suspend this  rule to ensure rate adequacy in the catastrophe area. In May 2006, the  Texas Windpool sought a 19 percent residential and 24 percent commercial  rate increase, but the insurance commissioner approved a 3.1 percent  residential and 8 percent commercial rate increase. When the Texas  Windpool sought a 20 percent residential and 22 percent commercial rate  increase in November 2006, the insurance commissioner approved a 4.2  percent residential and 3.7 percent commercial rate increase. In both  instances, the insurance commissioner stated that he favored an  incremental approach to strengthening the Texas Windpool that did not put  an undue economic burden on coastal homeowners.",
      " Federal and State Natural  Catastrophe Insurance  Programs Have Incurred  Large Postdisaster Deficits  Because of Inadequate  Resources and Reliance on  Postfunding Unlike private insurance companies, government natural catastrophe  insurance programs often do not employ accrual accounting and are not  always required to accumulate adequate resources to meet their  obligations. Generally, insurance premiums are paid in advance, but the  period of protection extends into the future. Private insurers are required  by statutory accounting rules to establish reserves for incurred or known  claims and for the cost of \u201cincurred but not reported\u201d claims to ensure that  the premiums collected in advance will be available to pay future losses.",
      "  Incurred but not reported claims are insured losses that have already  happened but that for any of a variety of reasons have not yet been  reported to the insurer. Most government natural catastrophe insurance  programs are not required to have these resources, because they are  structured to postfund losses. As we have previously mentioned, NFIP and  the federal crop insurance program are postfunded by emergency  appropriations from federal taxpayers. State programs are generally  postfunded by several mechanisms, including assessments on private  insurers, bonds, and proceeds from general revenues. In most property and  casualty insurance lines, state assessments are often passed through to  policyholders.",
      " As a result, homeowners living in less risky locations also  contribute to cover the shortfall\u2014a scenario known as cross-subsidization.  In those states where assessments cannot be passed through in some  manner, private insurers must pay the assessments, while at the same time  paying large claims from their own policyholders. In such instances, some  companies may be reluctant to continue offering coverage in the state or  may become insolvent. In the wake of recent natural catastrophes, some government natural  catastrophe insurance programs suffered losses that eliminated their  accumulated resources. For example, NFIP reported unexpended cash of  approximately $1 billion following fiscal year 2004,",
      " but the program had  suffered almost $16 billion in losses from Hurricane Katrina alone as of  May 31, 2007. Similarly, Florida Citizens\u2019 high-risk account had a surplus  of approximately $1.1 billion prior to the 2004 hurricane season, but the  program incurred over $2 billion in losses from the 2004 hurricanes and  almost $2 billion in losses from the 2005 hurricanes. The FHCF had  accumulated net assets of $5.5 billion at the end of the 2004 fiscal year but  had an estimated shortfall of approximately $1.4 billion following  reimbursements to participating insurers after the 2004 and 2005 hurricane  seasons.",
      " Prior to 2007, the Mississippi Windpool did not have resources  beyond premiums and reinsurance because year-end profits and losses  were shared by member companies. By the end of 2005, following  Hurricane Katrina, the Mississippi Windpool had incurred a net loss of   $473 million. In Louisiana, Citizens Property Insurance Corporation  (Louisiana Citizens), which has a structure similar to that of Florida  Citizens, had $80 million in cash reserves prior to the 2005 hurricane  season but suffered more than $1 billion in losses after Hurricanes Katrina  and Rita. Emergency appropriations authorizing funding for federal natural  catastrophe insurance programs after disasters have often been significant.",
      "  In the case of FCIC, not only are premium rates subsidized by almost 59  percent for the most popular coverage, but farmers may receive additional  emergency disaster relief\u2014for example, farmers received $1.6 billion  following Hurricane Katrina. In the case of NFIP, not only are premium  rates for pre-FIRM homes subsidized up to 60 percent on average, but after  Hurricane Katrina NFIP was authorized to borrow over $20 billion to pay  claims. State natural catastrophe insurance programs have also often required  postfunding to satisfy their obligations in the wake of large natural  catastrophes. For example, to fund its 2004 and 2005 deficits,",
      " Florida  Citizens assessed insurance companies in most property and casualty lines  $516 million and $205 million, respectively, and these amounts will be  passed through to policyholders. In addition, the Florida Legislature  appropriated $715 million from the general revenue fund to reduce the size  of the 2005 deficit. Furthermore, to fund a bond issuance to cover the  FHCF\u2019s shortfall, eligible Florida insurance policyholders incurred a   1 percent assessment that will be levied over at least 6 years beginning in  January 2007. In June 2006, the FHCF issued a $1.35 billion postevent  revenue bond to cover 2005 losses,",
      " and in July 2006 it issued a $2.8 billion  preevent financing bond to provide liquidity for 2006 and future years. Similarly, Louisiana Citizens assessed all property insurance companies in  the state $193 million after the 2005 hurricanes. It has also issued a  postevent bond for $978 million to cover 2005 losses that will be financed  by emergency assessments on insurers in certain lines of property and  casualty insurance. These assessments are levied directly on policyholders,  who may claim a tax credit against state income tax. The assessments will  continue for as many years as needed to cover the plan\u2019s deficit.",
      " Both  Florida Citizens and Louisiana Citizens have been declared to be  municipalities rather than insurance companies by their respective state  legislatures, and as a result cannot declare bankruptcy until the bond  obligations are satisfied. In addition, the Mississippi Windpool funded its  deficit through $525 million in assessments on member companies in  proportion to their share of business in the state. At the time, these  assessments could not be directly passed through to policyholders. At least  one private insurance company found that its assessment liability was  more than the entire amount of premiums it collected in the state and was  forced to liquidate. Finally, the Texas Windpool assessed private insurance  companies in Texas for the first $100 million in program losses and  expenses from Hurricane Rita beyond its ability to pay from premiums and  other income.",
      " Because Many  Americans Are  Inadequately Insured  for Natural  Catastrophes, Federal  Programs Play a  Significant Role in  Recovery The 2005 hurricanes illustrated how many Americans are uninsured and  underinsured for natural catastrophes and the federal government\u2019s role in  recovery from natural catastrophes. An analysis by HUD found that of the  192,820 owner-occupied homes with major or severe damage from  Hurricanes Katrina, Rita, and Wilma, approximately 78,000, or about   41 percent, did not have any insurance or did not have enough insurance to  cover the damage incurred.",
      " Homeowners do not purchase natural  catastrophe insurance for a variety of reasons, including financial reasons.  Moreover, buying a natural catastrophe insurance policy does not  guarantee complete coverage for a dwelling. For example, if the home\u2019s  replacement value is calculated inaccurately, the homeowner will buy too  little insurance to cover all of the damage. More and more frequently,  responsibility for supporting the needs of individuals who lack adequate  insurance against natural catastrophe risk is falling to the federal  government. We estimate that the federal government made approximately  $26 billion available for homeowners and renters who lacked adequate  insurance in response to the 2005 hurricanes.",
      " Homeowners May Not Be  Insured against Natural  Catastrophes for Several  Reasons Homeowners may not purchase natural catastrophe insurance because  they face budget constraints, underestimate the risk they face, or fail to  understand the protection such insurance affords. Information on the  number of individuals who are uninsured against natural catastrophe risks  is somewhat limited but helps demonstrate the extent to which  homeowners do not purchase natural catastrophe insurance. About   41 percent of homes that sustained severe damage from any peril during  the 2005 hurricanes were uninsured or underinsured. HUD reported that of  the 60,196 owner-occupied homes with major or severe wind damage,",
      "  almost 23,000, or 38 percent, lacked insurance against wind loss. Also, the  Insurance Information Institute reported that about 86 percent of  Californians did not have earthquake insurance on their homes in 2004.  Furthermore, only about one half of eligible single-family homes in Special  Flood Hazard Areas (SFHA) nationwide have purchased flood insurance.  In areas outside of SFHAs, where flood insurance is voluntary, only about 1  percent of owners of single-family homes have purchased flood insurance,  even though 20 to 25 percent of NFIP\u2019s claims come from outside of SFHAs.",
      " Purchasing insurance to protect homes against natural catastrophes is  mandatory for some homeowners, but often it is voluntary. For example,  homeowners who do not have mortgages are generally not required to have  property and casualty coverage, and in some areas certain types of hazards  are routinely excluded from homeowners policies. As we have seen, wind  coverage is often excluded in some coastal areas, and the surplus lines  market or a state-managed entity may offer coverage separately. Although  lenders may require homeowners to purchase this supplemental insurance,  those who own their homes outright may choose not to buy it. A similar  situation exists with earthquake coverage in certain areas of the country.",
      " In  earthquake-prone areas, earthquake coverage is commonly excluded from  the homeowners insurance contract and is sold separately by insurance  companies or, as in the case of California, by a state-managed program. In  general, lenders do not require earthquake insurance as a condition of  extending a mortgage. Consumers will purchase natural catastrophe insurance on the basis of  their perception of risk. Studies have shown that consumers often consider  the likelihood of a future catastrophe to be much lower than insurance  companies\u2019 estimates. According to academic research, some homeowners  may underestimate the risk of loss, have an overly optimistic view of  expected losses, or be unaware that insurance is available.",
      " One insurance  expert has concluded that if people believe that the chance of a serious  event occurring is low, they often consider insurance unnecessary and will  not seek out information on its benefits and costs. Reluctance to purchase  insurance protection can be compounded by budget constraints. For some  homeowners with relatively low incomes, disaster insurance is considered  an expense that can be made only after taking care of necessities. An insurance expert has noted that insurance trade associations, consumer  advocacy groups, and governments can provide better information to  consumers about risk probabilities, insurer profitability, and prices to  motivate better insurance purchasing behavior. One study of those living  in earthquake zones has identified a variety of reasons for declining to  purchase earthquake insurance.",
      " Some consumers are unwilling or  reluctant to pay high premiums to insure against potentially large but rare  disaster losses. Some consumers believe that the deductible for earthquake  insurance\u2014the standard deductible is 15 percent of the value of the  home\u2014is too high, given the premium rates and amount of coverage  provided. A study of flood insurance market penetration rates cites  several reasons why people do not purchase flood insurance. For  property owners in SFHAs, the decision to purchase insurance is affected  primarily by its price. Outside of SFHAs, property owners are not  purchasing flood insurance because they may not be aware of flood risk,  and because flood insurance agents have less interest in promoting flood  insurance and in learning how to write flood policies.",
      " Also, certain  limitations of the coverage, such as limits on basement flooding, make the  policies less attractive in inland areas. Inaccurate Home Valuations  Can Result in  Underinsurance Homes may be underinsured because replacement costs are not calculated  accurately. Replacement cost has been defined as the amount necessary to  repair or replace the dwelling with material of like kind and quality at  current prices. Replacement cost may not be calculated accurately for  several reasons, including the effects of inflation, custom home building,  remodeling, high demand for contractors, and changes in building codes  following a natural catastrophe. Generally, property insurance losses are partial losses rather than total  losses.",
      " However, in catastrophe-prone areas, the prospect of a total loss of  property is real. If a homeowner suffers a total loss of property as a result  of a natural catastrophe and the replacement cost has not been properly  calculated, the property will not be fully insured. An insurance industry  consultant estimates that in 2006 approximately 58 percent of the  residential housing stock in the United States was undervalued for  insurance purposes by an estimated 21 percent. Homeowners insurance coverage can vary by type of policy and from  insurer to insurer, but there are fundamental similarities. The broadest  coverage generally provides that a policyholder will receive full  replacement cost with no deduction for depreciation (up to the policy  limit)",
      " if a policyholder maintains coverage limits of 80 percent or more of  the dwelling\u2019s full replacement cost. Otherwise, the homeowner receives  a lesser amount according to the formula in the policy (see sidebar). The reasons that replacement costs may not be calculated accurately,  leaving homeowners underinsured, are complex. First, replacement costs  must be periodically updated to account for inflation. Second, beginning in  the early 1980s developers began building more custom homes, and a  significant percentage of homes were remodeled, sometimes extensively.  Historically, the methodologies that the insurance industry used to  calculate replacement costs did not always capture custom features.",
      " The  industry has improved its calculation methodologies, but an insurance  industry consultant told us that a large number of policies had not been  properly updated. Furthermore, homeowners whose properties were  remodeled may not have understood the need to tell their insurers about  the remodeling, possibly to avoid rate increases. The problem of  underinsurance can be exacerbated in the wake of a natural catastrophe  when demand for contractors and materials to repair homes is high and the  supply is tight. This phenomenon is known as \u201cdemand surge.\u201d In these  circumstances, the short-term costs of repairing and rebuilding homes can  escalate substantially, and replacement costs become significantly higher.",
      "  In addition, over time a community may implement improved building  codes, so that rebuilding may have to conform to stricter standards than  those that were in place when a dwelling was first built. This situation can  also make replacement costs much higher, as it did in Florida in the  aftermath of Hurricane Andrew in 1992. Large Amounts of Federal  Postdisaster Aid Have Been  Distributed to Uninsured  and Underinsured  Homeowners As of May 2007, Congress approved approximately $88 billion in emergency  appropriations to assist in relief and recovery efforts in the Gulf Coast  states following the 2005 hurricanes.",
      " Three federal agencies\u2014FEMA,  SBA, and HUD\u2014received over $60 billion, or about two-thirds, of this  amount. As we have previously noted, these agencies play a significant role  in distributing federal disaster relief funds to individual victims. We  estimate that, as of June 2007, the agencies had obligated approximately  $26 billion, or between a quarter and a third, of the emergency  appropriations to homeowners and renters in Alabama, Florida, Louisiana,  Mississippi, and Texas who lacked adequate insurance (see fig. 3). Federal disaster assistance for homeowners and renters comes from  FEMA, SBA,",
      " and HUD. For example:   For disasters declared between October 1, 2004, and October 1, 2005,  FEMA could provide a maximum of $26,200 for housing and other needs  assistance to an individual or household in a disaster area if property  was damaged or destroyed and the losses were not covered by  insurance. In total, FEMA obligated over $15 billion to homeowners  and renters through IHP grants and manufactured housing. We have  reported extensively on the difficulties that FEMA experienced in  distributing disaster assistance through IHP. Homeowners and renters can borrow up to $40,000 in personal property  loans from SBA to repair or replace clothing,",
      " furniture, cars, and  appliances damaged or destroyed in a disaster. SBA can also make real  property loans up to a maximum of $200,000 to repair or restore a main  residence to its predisaster condition. Any proceeds from insurance  coverage on the personal property or home are deducted from the total  loan amount. The interest rates on SBA disaster loans do not exceed 4  percent for those who are unable to obtain credit elsewhere or 8 percent  for those who can get other credit. As of January 31, 2007, SBA  approved over $5 billion in disaster loans for homeowners and renters  after the 2005 hurricanes,",
      " at an interest subsidy cost of almost $800  million to the federal government. We have reported on the difficulties  that SBA experienced in distributing disaster loans. The largest recovery program for homeowners and renters after the  2005 hurricanes was HUD\u2019s CDBG program, which received $16.7 billion  in supplemental appropriations to help homeowners with long-term  recovery (including providing funds for uninsured damages), restore  infrastructure, and fund mitigation activities in the declared disaster  areas of Alabama, Florida, Louisiana, Mississippi, and Texas. To  receive CDBG funds, HUD required that each state submit an action  plan describing how the funds would be used,",
      " but the agency waived  some program requirements for disaster recovery purposes. For  example, HUD granted a waiver to Mississippi so that a portion of the  CDBG funds could be used to pay reinsurance costs for 2 years for wind  pool insurance maintained by the Mississippi Windpool. Two of the  states receiving the largest allocation from the emergency CDBG  appropriations were Louisiana and Mississippi, both of which opted to  direct the vast majority of their housing allocations to homeowners.  Both states based the amount of compensation that homeowners  received on the value of their homes before the storms and the amount  of damage that was not covered by insurance or other forms of  assistance.",
      " The grants provided up to $150,000 for eligible  homeowners. Both programs also attached various conditions to the  acceptance of grants, such as requiring homeowners to rebuild their  homes above the latest available FEMA advisory base flood elevation  levels and establishing covenants to the land requiring that homeowners  maintain hazard and flood insurance. It will be a challenge for federal, state, and local governments to sustain  their current role in natural catastrophe insurance going forward. The  Comptroller General of the Unites States has repeatedly warned that the  current fiscal path of the federal government is \u201cimprudent and  unsustainable.\u201d In addition, we reported that,",
      " for state and local  government sectors, large and growing fiscal challenges will begin to  emerge within the next few years in the absence of policy changes. The  fiscal challenges facing all levels of government are linked and should be  considered in a strategic and integrated manner. Options for Changing  the Federal Role in  Natural Catastrophe  Insurance Attempt to  Address Market Issues  but May Not Limit  Federal Exposure We identified seven public policy options for changing the role of the  federal government in natural catastrophe insurance (see fig. 4). These  policy options have many variants and are often contained in other  proposals, including some bills that are before Congress.",
      " Some of these  proposals are also being debated in venues such as the NAIC committees.  We examined the advantages and disadvantages of these policy options and  evaluated them against four broad public policy goals. These goals are   charging premium rates that fully reflect actual risks,   encouraging private markets to provide natural catastrophe insurance,   encouraging broad participation in natural catastrophe insurance   limiting costs to taxpayers before and after a disaster. Our analysis showed that each of the seven options met at least one of the  policy goals but failed to meet others. The first option\u2014a mandatory all- perils homeowners insurance policy\u2014would help create broad  participation and could provide a private sector solution.",
      " But this option  could also require subsidies for low-income residents and thus potentially  create substantial costs for the federal government that would have to be  balanced against money saved from reduced disaster relief. A second  option would involve providing federal reinsurance for state catastrophe  funds\u2014a change that could lead to greater private insurance market  participation but that could also displace the private reinsurance market. A  third option, establishing a federal lending facility for state catastrophe  funds, could help such funds with financing needs after a catastrophe. But  this option exposes the federal government to the risk that a state fund  might not repay a loan and thus might not limit taxpayer exposure.",
      " The  remaining four options include tax-based incentives to encourage greater  participation by insurers and homeowners in managing natural catastrophe  risks. These incentives offer some advantages, but could also represent  ongoing costs to the federal government and taxpayers. An All-Perils Policy Would  Broaden Participation but  Could Require Government  Subsidies A mandatory all-perils policy would require private insurers to provide  coverage against all perils in a single standard homeowners policy that  would be priced according to the risk of natural hazards each homeowner  faced. For example, the policy would cover not only theft and fire but also  wind, floods, and earthquakes. It would also be mandatory for all  homeowners.",
      " This type of option offers several potential advantages. First, a mandatory  all-perils policy, by definition, would encourage broad participation in  natural catastrophe insurance programs. Moreover, including all American  homeowners in natural catastrophe coverage could help reduce the  number of Americans needing postdisaster payments and possibly limit the  federal government\u2019s exposure. An all-perils policy would also eliminate  existing gaps in coverage and remove the uncertainty many homeowners  face in determining whether certain perils are covered and by whom\u2014an  issue that was spotlighted after Hurricane Katrina, when disputes emerged  between private insurers and homeowners over the extent of the insurers\u2019  obligations to cover certain damages.",
      " Finally, because it would be  mandatory and broad-based, an all-perils policy could lessen the problem  of adverse selection that is often identified as the reason that some types of  catastrophes, such as flooding, are considered to be uninsurable. This type  of policy would spread risks geographically and potentially would make the  policy more affordable than other options. However, this option is not without its disadvantages. First, it is unclear  how private markets would be encouraged to underwrite all risks. Second,  a mandatory all-perils policy might not be a cost-effective solution for the  federal government, because it could create affordability concerns for low-",
      " income residents in certain areas and might require targeted government  subsidies. If they did not sufficiently reduce postevent disaster relief,  these subsidies could increase costs to taxpayers. Third, an all-perils policy  would undoubtedly be more expensive than current homeowner policy  premiums in some regions of the country. As a result, at least during the  transition, it could lead to complaints about higher premium costs from  residents of catastrophe-prone areas. Moreover, homeowners in relatively  low-risk areas could wind up subsidizing the costs of insurance for those  living in high-risk areas. Fourth, enforcement would be extremely  challenging, as we have seen with mandatory flood insurance in  communities in designated floodplains.",
      " Finally, this policy option faces  opposition from the private insurance industry, in part because of concerns  about state insurance regulators impeding private insurers\u2019 ability to  charge premiums that reflect the actual risk of loss in catastrophe-prone  areas. Private insurers have also traditionally opposed all-perils policies  because of the difficulty of pricing flood and earthquake coverage. One  insurance company has said that an all-perils policy would cause rates to  skyrocket and could cause many insurers to abandon the homeowners  insurance market. NAIC officials told us that the homeowners market was  a $55 billion market\u2014not counting flood and earthquake exposure\u2014and  that most insurers were unlikely to walk away from a market this large.",
      " Federal Reinsurance Could  Eliminate Timing Risk for  Insurance Companies but  Could Displace the Private  Market A federal reinsurance mechanism would provide an additional layer of  insurance coverage for very large catastrophes, or megacatastrophes, and  could be implemented in two ways. The first version of this option would  create a federal mechanism that would serve as a backstop for state  catastrophe funds to increase the amount of insurance and reinsurance  available to states, expand the availability of catastrophe coverage, and  possibly improve its affordability. States would create catastrophe funds  and enter into agreements with the federal government\u2014possibly,",
      " but not  necessarily, the U.S. Treasury\u2014and pay premiums for the reinsurance that  would be used to support the reinsurance fund. Each state\u2019s payments  would be based on risk and determined using actuarial and catastrophe  modeling, and the states would be responsible for collecting premiums  from insured commercial and residential property owners. The federal  fund would provide payments to state funds for storms of a certain  magnitude up to some predetermined level of payments. If the federal  reinsurance fund was not adequately financed at the time of a catastrophe,  it would issue government-backed bonds. A related but different version of this federal reinsurance option would  authorize the Secretary of the Treasury to create an auction process for the  sale of reinsurance contracts to private and state insurers and reinsurers.",
      "  The secretary would make available reinsurance contracts covering both  earthquakes and wind events. The auction process would be open to state  and private insurers and reinsurers and would take place in at least six  separate geographic regions, so that risks would be based on local factors  and insurers in less risk-prone areas would not be subsidizing those in  riskier areas. State programs would have to reach a minimum loss level  before they would be eligible for federal funds. This version also  establishes a disaster reinsurance fund within the U.S. Treasury to be  credited with, among other sources of funds, amounts received from the  sale of reinsurance contracts.",
      " The Treasury would be authorized to issue  debt if the fund\u2019s resources were insufficient to pay claims\u2014and  reinsurance premiums paid to Treasury would be used to make interest  payments to debt holders\u2014but the fund would not receive federal  appropriations. A national commission on catastrophe risks and insurance  loss costs would advise the secretary. Both versions of this option offer advantages and disadvantages. First,  federal reinsurance is advantageous because it has the potential to help  insurance companies by limiting timing risk\u2014the possibility that events  will occur before insurers have collected enough premiums to cover  them\u2014potentially making insurers more willing to underwrite natural  catastrophe insurance policies.",
      " Second, primary insurance companies  may be less interested in canceling catastrophe insurance policies in  coastal regions after a disaster if stable sources of reinsurance are available  from state catastrophe funds. This option could also encourage the  provision of catastrophe insurance via private insurance markets by  limiting private insurers\u2019 liability for very large events and thus increasing  their willingness to offer insurance for less catastrophic events. And a  greater supply of natural catastrophe insurance could reduce the cost of  insurance as competition for business intensified. Third, this option may  also be advantageous because, if it were appropriately structured\u2014that is,  if program losses were funded by upfront premium payments\u2014federal  reinsurance should not require the use of taxpayer dollars.",
      " Finally, to the  extent that this option increased the availability and affordability of  catastrophe insurance, it would be preferable to postdisaster assistance  and could limit the need for some types of postevent government payouts. While federal reinsurance has some appealing options, it is not without  disadvantages. For example, neither version of the reinsurance option is  intended to displace or compete with the private reinsurance market,  because reinsurance contracts would not be sponsored in markets where  private reinsurance markets offered coverage. However, federal  reinsurance could compete with and possibly displace private reinsurance  if the government offered coverage at levels that were well within private  market capacity or set premium rates below what the private sector would  charge for comparable risk.",
      " While the stated intent of this option is to  charge a premium that fully reflects the risk assumed by the federal  reinsurance fund, political and consumer pressures could be put on the  federal fund to underprice premiums in terms of risk to keep premiums low  for policyholders in high-risk areas. Charging a reinsurance premium that  was not fully risk-based would expose the federal fund and the government  to potentially significant unfunded contingent insurance risk. As a result,  federal reinsurance could disproportionately benefit those living in high- risk areas. Should the fund experience losses that exceeded the premiums  collected, the difference would have to be paid by the taxpayers,",
      " creating a  cross-subsidy that favored those in catastrophe-prone areas. Also, the  existence of federal reinsurance might affect market discipline, leading  private insurers and state catastrophe insurance funds to loosen  underwriting guidelines\u2014that is, to insure properties that would not have  been insurable without the availability of (low-cost) federal reinsurance.  Such a change could be costly for the reinsuring federal facility. As a result,  a federal reinsurance role could inadvertently encourage further  development and population growth in areas with high natural catastrophe  risk. Finally, government natural catastrophe insurance programs are not  purely insurance programs and may have social goals.",
      " But if the  government plans to intervene in the catastrophe insurance market, it may  want to use mechanisms that mimic as closely as possible what operating  private markets could have been expected to do. When federal insurance  programs mimic private insurance, and base decisions on risk (as  consistent with social goals), then government losses are more likely to be  contained. A Federal Lending Facility  Would Eliminate Timing  Risk for State Catastrophe  Insurance Programs but  Would Face the Risk That  the Loan Might Not Be  Repaid A federal lending facility would allow the federal government to use its  borrowing power to extend temporary loans to state catastrophe funds.",
      "  State catastrophe funds may not have the creditworthiness to borrow at  acceptable interest rates. One proponent of this plan has suggested that the  private insurance market could handle all or nearly all catastrophe  exposure, but possibly not at the moment the catastrophe happened.  Creating a lending facility in the federal government would allow the  government to provide the capital to meet the temporary shortage and  spread the repayment over time without assuming the underwriting risk  held by the insurers. Under this option, state catastrophe funds would be  required to secure private reinsurance and would have the ability to sell  catastrophe bonds to repay the money loaned to them by the federal  government.",
      " The loans would be made at market prices to guarantee that  capital was efficiently allocated and\u2014given that an insurance company  that has just paid out a large claim does not have the same quantity or  quality of assets as a solvent insurer or bank\u2014would be secured both by  the future income stream of premium payments from state residents  through insurance companies to the state catastrophe funds and by bond  proceeds. The loans would be of short duration, perhaps 2 to 3 years at  maximum, and would provide state catastrophe funds with encouragement  and time to access the private capital market. State catastrophe funds  would be expected to demonstrate to the federal lending facility that the  states were doing all that they could to attract private capital.",
      " A proposed  trigger for the federal lending facility would be a megacatastrophe. The creation of a federal lending facility would have several advantages.  First, a federal lending facility would shift timing risk, which is significant  in the catastrophe insurance business, from the insurance industry to the  federal government. The federal government, because of its borrowing  power, is uniquely able to deal with timing risk. Second, a federal lending  facility could mean that taxpayers would assume little or possibly no  insurance risk, because the insurers would be responsible for paying all of  the losses from catastrophic events, although not necessarily in the year of  the catastrophe.",
      " Finally, through the requirement that the states do all that  they can to attract private capital, the option may lead to insurance  regulatory reforms in areas such as rate regulation that have inhibited the  influx of private capital. A federal lending facility would also have a number of disadvantages. First,  it is not clear how this federal lending facility would encourage premiums  that reflected risks, would foster broad citizen participation, or would be a  cost-effective solution. Second, it would expose the facility and ultimately  taxpayers to credit risk if a state did not repay its debt. Third, a federal  lending facility could also require the creation of a new federal entity or  structure to administer the system.",
      " Fourth, like the federal reinsurance  option, such a lending facility could have a competitive advantage over the  private reinsurance sector, particularly if the terms were too easy or if  borrowed funds did not have to be repaid. States in high-risk regions would  have a financial incentive to seek nonmarket terms and conditions in loans.  Finally, this option would decrease the incentives for insurers and  reinsurers to accurately assess, underwrite, and price risk. Tax-Deferred Reserves for  Insurance Companies Could  Encourage Greater Private  Sector Coverage but Could  Be Costly for the Federal  Government and Have  Other Disadvantages A fourth policy option would be to permit private insurers to establish tax-",
      " deferred reserves for future catastrophes. This option could encourage  some insurers to maintain or expand their catastrophe insurance coverage  in regions with significant or projected catastrophe exposures. This option  is also intended to provide insurers with an incentive to write catastrophe  coverage in hazard-prone areas while improving their own financial  strength. It would require amending the U.S. Tax Code, because current tax  laws and accounting principles discourage U.S. property and casualty  insurers from accumulating long-term assets specifically for payment of  future losses by taxing these assets. Because the size and timing of  disasters that have not taken place is uncertain, assets set aside for  catastrophe losses,",
      " together with any interest accrued, are taxed as  corporate income in the year in which they are set aside. Although there is  a federal income tax deduction for losses that have already occurred,  reserves for uncertain future losses are not tax deductible. Tax-deferred reserving has its advantages. Tax-deferred reserving could  mean that state regulators would be more willing to approve risk-based  rates, because premiums could now be set aside rather than flow into  profits. Consistent with the intended purpose of this option, tax-deferred  reserving could increase the willingness of insurance companies to  increase capacity without risking insolvency,",
      " because the companies would  be less dependent on the uncertain prices available in reinsurance markets.  In this case, the option would encourage a solution by private insurance  markets and more broad-based participation in catastrophe insurance  programs. Finally, this approach could reduce the need for state  catastrophe insurance mechanisms by increasing the willingness of private  insurers to remain or enter certain catastrophe-prone markets, such as  Florida and other Gulf Coast states. However, tax-deferred reserving also raises a number of broader issues  that must be considered. Tax-deferred reserving would reduce current  federal tax revenue. However, as with other options,",
      " the net cost would  have to be determined by weighing the tax cost against potential savings  from federal postdisaster assistance programs. Deferring taxes on reserves  for insurance companies could also be disadvantageous if this system  created tax benefits that favored one type of activity over another. For  example, to the extent that tax-deferred reserving became prevalent, it  could displace the reinsurance market or other forms of hedging. Finally,  such reserves could also be subject to manipulation or abuse if insurers  used them to obscure current income by smoothing income flows across  years. Homeowner Catastrophe  Savings Accounts Could  Broaden Participation in  Catastrophe Insurance  Programs but Could Reduce  Federal Tax Revenue Like tax-deferred reserves,",
      " the fifth policy option would also require  amending the U.S. Tax Code to provide a tax incentive, but this one would  be aimed at homeowners, who would be allowed to accumulate before-tax  funds to pay expenses related to disasters. The accounts would operate  much like those currently in use for health care expenses, allowing  homeowners to withdraw both savings and interest for qualified disaster  expenses such as deductibles, uninsured losses, flood damage, and  structural upgrades to mitigate damage from future storms. A bank or  another designated organization would be the custodian for these  accounts. Under one current option, homeowner contributions would be  limited to (1)",
      " $2,000 for individuals with homeowners insurance and  deductibles of not more than $1,000, and (2) the lesser of $15,000 or twice  the insurance deductible for homeowner insurance deductibles of more  than $1,000. In June 2007, the South Carolina Legislature passed legislation  authorizing the creation of catastrophe savings accounts for use by state  residents in paying natural catastrophe insurance deductibles. This option could induce more homeowners to participate in natural  catastrophe insurance programs. Moreover, allowing homeowners to use  tax-deferred savings to cover mitigation expenses might encourage more  mitigation activities to reduce natural catastrophe risk.",
      " However,  implementation challenges pose disadvantages that would have to be  addressed. For example, it is unclear to what extent such a mechanism  would encourage those who are not insured to purchase insurance. Rather  than increasing participation, it could result in a tax benefit for those who  are already insured. Like the tax-free reserves option, these savings  accounts would also cost the federal government in reduced tax revenues.  But once again, the actual net cost to the government would depend on the  potential offsetting savings from postcatastrophe funding mechanisms. Favorable Tax Treatment  for Catastrophe Bonds  Could Increase Insurers\u2019  Access to Capital Markets,",
      "  but Some Question the Need  for Such Tax Treatment The sixth policy option would create certain tax advantages for  catastrophe bonds. Historically, catastrophe bonds have been created in  offshore jurisdictions where they are not subject to any income or any  other tax (i.e., in tax havens). This option would facilitate the creation of  onshore transactions, potentially reducing transactions costs and allowing  for increased regulatory oversight. Tax treatment of catastrophe bonds  would be similar to the treatment received by issuers of asset-backed or  mortgage-backed securities that, for example, are generally not subject to  tax on the income from underlying assets, which is passed on to investors.",
      "  More favorable tax treatment of catastrophe bonds would increase the  ability of insurance markets to access capital markets by making these  products more attractive to investors. Making catastrophe bonds more  attractive to issuers and investors could, in turn, make insurance and  reinsurance companies more willing to underwrite catastrophe risk and  increase the availability of coverage, because these companies could pass  on more catastrophe risk to investors. One disadvantage of this option is that it is not clear how its  implementation would encourage premiums that fully reflect risk or how it  would encourage broad-based participation in catastrophe insurance  markets. It is also not clear how this option would be a cost-effective  solution for the federal government when both predisaster and postdisaster  costs are counted.",
      " Some reinsurers have pointed out that favorable tax  treatment of catastrophe bonds could be disadvantageous because it could  create a new class of reinsurer that would operate under regulatory and tax  advantages not afforded U.S. reinsurance companies. Finally, recent  catastrophe bond issuances by the two largest U.S. primary insurance  companies may indicate that catastrophe bonds do not need a different tax  treatment to make them economically viable. However, if market  transparency and the development of uniform terms and conditions do not  take place, only the largest insurers may be able to take advantage of  catastrophe bonds. Property-Tax Assessment  for Federal Reinsurance  May Broaden Participation  but May Be Costly for the  Federal Government The final policy option we examined was a state plan,",
      " funded by state  property taxes, that would require mandatory all-perils natural catastrophe  insurance coverage on residential property. All primary residential  properties in a state would be required to have catastrophe insurance  coverage. Participating insurers would assume the primary risk on the  property and would have reinsurance from a qualifying reinsurance  company. The state would pay an annual natural catastrophe insurance  premium financed by an annual property tax assessment on all residential  and commercial properties in the state, and homeowners could deduct the  cost from their federal taxes. The insurance coverage would be provided  by private insurance companies selected by a government administrator  who would qualify them as providers of catastrophe insurance.",
      " To ensure  that premiums were reasonable, the primary and reinsurance coverage  would require large deductibles that would be paid in layers by the  homeowner, the state, and the federal government. Homeowners would be  responsible for the first 10 percent of the value of the home, with a state  catastrophe fund paying the next layer of the deductible. The state would  provide a fixed-dollar deductible\u2014for example, $100 million\u2014for all  homeowners, with the federal government as the backstop provider, paying  a deductible that was a multiple of the amount that the state put up. Proponents of this plan point out that it is market-based,",
      " designed to  involve the private sector, and if risk-based premiums are required is not a  \u201cgovernment relief program.\u201d Plan supporters also point out that the option  protects the tax base of a state\u2019s economy as well as the creditworthiness  of a state\u2019s bond rating. One possible advantage of this policy option for the  consumer is that the premiums paid from property taxes are intended to be  tax deductible. Moreover, paying the premium from property taxes could  increase participation at the state level and create a broad-based program  that would limit adverse selection and moral hazard. Finally, maintaining  higher deductibles could result in lower insurance premiums.",
      " However, this plan also has its disadvantages. Paying the premium from  homeowner property taxes collected by the state would reduce federal tax  revenues, and, if a disaster occurred, the federal government would have to  pay some portion of the deductible. Like the other tax-related options, this  option could reduce federal tax revenue if the new deduction were not  offset by savings from the elimination of preevent premium subsidies or  postevent disaster relief. As a result, it is not clear whether this option may  or may not be the most cost-effective for the federal government. Also,  using property taxes to pay insurance premiums might diminish the  effectiveness of using the price of insurance as a signal of the risk of living  in a particular location.",
      " One critic has argued that allowing homeowners to  deduct the premium portion of the property taxes combined with the  federal deductible could result in a double federal subsidy. Finally, this  policy option would raise homeowners property taxes, potentially creating  homeowner resistance to the assessment. Agency Comments and  Our Evaluation We provided a draft of this report to NAIC for comment and provided  excerpts from the draft to Alabama Beach Pool, the CEA, FCIC, FHCF,  Florida Citizens, FHCF, the GUA, HUD, Louisiana Citizens, Mississippi  Windpool, the North Carolina Beach Plan, SBA, the South Carolina  Windpool,",
      " and the Texas Windpool. NAIC provided written comments that  are reprinted in appendix III. In these comments, NAIC officials said that  our draft report was thorough, and that they were pleased that we outlined  the advantages and disadvantages of several proposals rather than favoring  a single outcome. NAIC officials suggested that we also include in this  report two recently proposed options, including one that includes an  allocation system for determining what portion of hurricane damages  should be attributed to wind and what portion to flooding and the creation  of a federal entity to oversee property insurance rates in the coastal zone.  While there are interesting features to both options,",
      " they were too recent to  be included in our review and analysis. However, we will explore both  options during the course of our ongoing work involving NFIP. NAIC officials also commented on the language in the draft report  discussing allegations made by some critics of state rate regulation who  suggest that state regulators may be suppressing rates for some  catastrophe insurers. As these officials pointed out, the allegations in this  report are attributed to others and are not presented as our position. We  recognize the challenges involved in ensuring that consumers are charged  appropriate premiums that reflect their risk of exposure to natural  catastrophes. Given that premium rates requested are based on a variety of  factors that involve a certain amount of judgment\u2014including anticipated  losses on claims and related expenses;",
      " the need to build a surplus; and  other factors, including profit\u2014the rate-setting process is open to  interpretation and some amount of negotiation. That is, reasonable but  different assumptions about the probability of future losses can result in  substantial disagreements about rates. However, if state regulators and the  insurance markets consistently have divergent opinions about the cost of  the risk exposures, the implications can be far-reaching. As we discuss in  this report, for state natural catastrophe insurance programs, if premium  rates determined by state insurance regulators consistently result in  financial resources that are inadequate to pay policyholder claims after a  disaster, postfunding mechanisms must be used to pay shortfalls.",
      "  Postfunding can result in costs to the private insurance market and may  mean that taxpayers in low-risk areas are subsidizing the costs of those  living in high-risk areas. Similarly, a pattern of regulator-approved rates for  private insurance companies that are consistently below what the market  believes to be the true risk rate may result in the withdrawal of healthy,  diversified insurance companies from the market. However, if premium  rates are set at a level reflecting the market\u2019s perception of the true risk  rate, more competitors are likely to enter. Alabama Beach Pool, the CEA, FCIC, FEMA, Florida Citizens, FHCF,",
      " the  GUA, Louisiana Citizens, Mississippi Windpool, the North Carolina Beach  Plan, SBA, the South Carolina Windpool, and the Texas Windpool provided  technical comments that we incorporated in this report as appropriate. As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of the report until 30 days from the  date of this letter. At that time, we will provide copies to interested  congressional committees; the Chairman and Ranking Member of the  Senate Committee on Banking, Housing, and Urban Affairs; and the  Chairman of the House Committee on Financial Services. We will also  make copies available to others upon request.",
      " In addition, this report will  be available at no charge on the GAO Web site at http://www.gao.gov. Please contact me at (202) 512-8678 or williamso@gao.gov if you or your  staff have any questions concerning this report. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. Key contributors to this report are listed in  appendix IV. Objectives, Scope, and Methodology Our objectives in this report were to examine (1) the rationale and funding  of the federal and state programs that have supplemented, or substituted  for,",
      " private natural catastrophe insurance; (2) the extent to which  Americans living in areas of the United States that are at high risk for  natural catastrophes are uninsured and underinsured, and the types and  amounts of federal payments to such individuals since Hurricanes Katrina,  Rita, and Wilma; and (3) public policy options for revising the federal role  in natural catastrophe insurance markets. We reviewed or analyzed documents on federal and state natural  catastrophe insurance programs, the numbers of uninsured and  underinsured and federal payments to them, options to redefine the federal  role in natural catastrophe insurance, and principles on which change  options can be based and evaluated.",
      " We interviewed officials from public  interest groups, insurance companies, reinsurance companies, insurance  brokers, insurance and reinsurance associations, insurance agents and  their associations, state catastrophe insurance plans, state insurance  departments, federal catastrophe insurance agencies, the Department of  Housing and Urban Development (HUD), the Small Business  Administration (SBA), Fannie Mae, Freddie Mac, rating agencies, a risk  modeling organization, academia, law firms, a hedge fund, a private  research organization, consumer groups, and others. To determine the  mechanisms governments use to supplement or substitute for private  catastrophe insurance markets, we collected oral and documentary  information from public and private officials in various states with high and  low catastrophe risk and in Washington,",
      " D.C. We sourced financial data for  government natural catastrophe insurance programs from financial  statements, bond offering documents, and other similar financial  documents. To determine the number of uninsured and underinsured Americans and  payments made to such individuals after the 2005 hurricanes, we collected  information from states, examined federal agency data, interviewed federal  officials who prepared these data, sought information from the private  sector, and interviewed state officials responsible for disbursing federal  disaster funds. We focused our analysis on the federal disaster assistance  to homeowners and renters who lacked adequate insurance in the five Gulf  Coast states directly impacted by Hurricanes Katrina,",
      " Rita, and Wilma.  These five states are Alabama, Florida, Louisiana, Mississippi, and Texas.  Data on the numbers and amounts of money disbursed to the uninsured  and underinsured were incomplete and had a number of limitations. For  instance, because we often could not separate payments to homeowners  versus payments to renters, we generally included the entire amount in our  analysis. Also, we generally excluded administrative and other expenses  that federal disaster assistance programs incur in distributing assistance.  Our analysis was limited to the major federal disaster assistance programs  that we identified as providing relief to homeowners and renters. These  programs are the Federal Emergency Management Agency\u2019s (FEMA)",
      "  Individuals and Households Program (IHP), SBA\u2019s Disaster Loan Program  (DLP), and HUD\u2019s Community Development Block Grant (CDBG) program.  Our identification of relevant federal disaster assistance programs may be  incomplete. Other federal agencies are involved in federal disaster  assistance according to the mission assignment issued and approved by  FEMA, as we reported separately in Disaster Relief: Governmentwide  Framework Needed to Collect and Consolidate Information to Report on  Billions in Federal Funding for the 2005 Gulf Coast Hurricanes, GAO-06- 834 (Washington, D.C.: Sept. 6, 2006). To determine the amount of federal disaster assistance appropriated by  Congress to FEMA and the amount paid to homeowners and renters who  lacked adequate insurance through FEMA IHP,",
      " we obtained and analyzed  data provided by FEMA officials describing the funds obligated for the  subcategories of Housing Assistance, Other Needs Assistance, and  Manufactured Housing in Alabama, Florida, Louisiana, Mississippi, and  Texas following Hurricanes Katrina, Rita, and Wilma. In analyzing these  data, we had to make certain judgments in deciding which specific  subcategories of funds to include in our analysis. In particular, FEMA noted  that the Other Needs Assistance data contained funds for services that  would not be provided by personal property coverage in standard private  homeowners insurance, such as medical and funeral expenses. However,  we included Other Needs Assistance data in our analysis because these are  expenses that may have been covered by other types of insurance,",
      " such as  health and life, and, therefore, still provide a reasonable approximation of  insurance coverage. Also, FEMA officials noted that the Manufactured  Housing data included expenses that would not be included in additional  living expenses coverage provided by standard private homeowners  insurance. For example, other expenses included unit purchase,  haul/install, utilities, site lease, maintenance, deactivation, and the  transition out of service. We included these data in our analysis because  they are designed to serve a similar purpose as the additional living  expenses coverage provided by insurance companies. We assessed the  reliability of the data provided by agency officials by interviewing agency  officials knowledgeable about the data systems;",
      " obtaining oral responses  from the agency; and reviewing agency reports regarding (1) the agency\u2019s  methods of data collection and quality control reviews, (2) practices and  controls over data entry accuracy, and (3) any limitations of the data. It is  possible that FEMA\u2019s data analysis methodology is different from that  employed by the other agencies we reviewed. Nevertheless, we determined  that these data were sufficiently reliable for the purposes of our  engagement. Finally, we interviewed officials from FEMA Disaster  Assistance Directorate, which administers IHP, and reviewed the document  entitled Oversight of Gulf Coast Hurricane Recovery, A Semiannual  Report to Congress,",
      " October 1, 2006-March 31, 2007, by the President\u2019s  Council on Integrity and Efficiency and the Executive Council on Integrity  and Efficiency. To determine the amount of federal disaster assistance appropriated by  Congress to SBA and the amount paid to homeowners and renters who  lacked adequate insurance through SBA DLP, we reviewed the previously  mentioned document entitled Oversight of Gulf Coast Hurricane  Recovery, and interviewed agency officials. We obtained and analyzed data  provided by SBA that included, among other things, the amount of loan  funds approved net of other federal disaster assistance and insurance  proceeds to loan recipients.",
      " We multiplied this total by the subsidy rate of  the loans\u201414.64 percent in 2006. That is, for every $100 that SBA lends, the  cost to the federal government is $14.64. The subsidy rate is roughly the  percentage of loan principal that is not repaid as well as the difference  between the market interest rate and the rate charged by SBA. We believe  that subsidy cost is the most accurate representation of the amounts made  available and paid to homeowners and renters because the loans under  DLP must be repaid by recipients at a subsidized interest rate. We assessed  the reliability of the data provided by agency officials by interviewing  agency officials knowledgeable about the data systems and obtaining from  the agency written responses regarding (1)",
      " the agency\u2019s methods of data  collection and quality control reviews, (2) practices and controls over data  entry accuracy, and (3) any limitations of the data. It is possible that SBA\u2019s  data analysis methodology is inconsistent with that employed by the other  agencies we reviewed. Nevertheless, we determined that these data were  sufficiently reliable for the purposes of our engagement. To determine the amount of federal disaster assistance appropriated and  paid to homeowners and renters who lacked adequate insurance through  the HUD CDBG program, we interviewed agency officials and reviewed the  previously mentioned document entitled Oversight of Gulf Coast  Hurricane Recovery. We obtained publicly available data from HUD and  each of the five Gulf Coast states that received emergency CDBG  appropriations.",
      " We reviewed GAO testimony on Gulf Coast rebuilding that  described the CDBG programs established in the Gulf Coast states.  Congress approved emergency appropriations for HUD CDBG in two  installments: $11.5 billion in December 2005 and $5.2 billion in June 2006,  for a total appropriation of $16.7 billion. Our goal was to determine what  portion of the total appropriation was intended for homeowners in the five  Gulf States. We made certain judgments in deciding whether particular  subcategories of funds applied to our calculations for each state. It is  possible that we did not identify all of the relevant funds.",
      " For Florida, we used the Florida Department of Community Affairs, 2005  Disaster Recovery Initiative Action Plan (Apr. 14, 2006) and 2006 Disaster  Program Action Plan (Dec. 19, 2006). HUD designated for Florida $82.9  million of the original $11.5 billion included in the December 2005  emergency appropriation. Florida\u2019s action plan calls for the funds to be  distributed through entitlement communities, nonentitlement  communities, and federally recognized Indian tribes. Grant recipients are  required to use at least 70 percent of the funds for the provision of  affordable housing.",
      " Therefore, approximately $58 million of the Florida  CDBG grants will be allocated to the provision of affordable housing. In  addition, the June 2006 emergency appropriation included $5.2 billion to  the CDBG program, and, on August 18, 2006, HUD made $100,066,518  available to Florida for repair, rehabilitation, and reconstruction of  affordable rental housing, and for the unmet needs of evacuees who were  forced from their homes and are now living in other states. The entire  amount has been made available for mitigation programs through the My  Safe Florida Home Program and other programs.",
      " For Alabama, we interviewed officials from the Alabama Department of  Economic and Community Affairs (DECA). We obtained and analyzed  information from DECA officials regarding the plan for distribution of HUD  CDBG disaster recovery funds. We learned that DECA determined to make  $14,460,588 available for unmet housing needs. In addition, on August 18,  2006, HUD made $21,225,574 available to Alabama for repair, rehabilitation,  and reconstruction of affordable rental housing, and for the unmet needs of  evacuees who were forced from their homes and are now living in other  states.",
      " Of this amount, $16,964,296 has been made available for Disaster  Relief, Recovery and Restoration of Housing and Infrastructure, and  Affordable Rental Housing. For Mississippi, we used the Mississippi Development Authority,  Homeowner Assistance Program Partial Action Plan (Mar. 31, 2006).  Mississippi\u2019s partial action plan made $3 billion available for the  Homeowner Grant Assistance Program, which is for people who owned  homes located outside of the federally designated flood zone, yet still  suffered structural flood damage caused by Hurricane Katrina. In addition,  on August 18, 2006, HUD made $423,036,",
      "059 available to Mississippi for  repair, rehabilitation, and reconstruction of affordable rental housing, and  for the unmet needs of evacuees who were forced from their homes and are  now living in other states. For Louisiana, we obtained the Louisiana Recovery Authority, The Road  Home Housing Programs, Action Plan for the Use of Disaster Recovery  Funds (May 11, 2006) and the Louisiana Recovery Authority, Proposed  Action Plan for the Use of Disaster Recovery Funds Allocated by P.L. 109- 234 (May 16, 2007). Louisiana made $3,551,600,000 available to the Road  Home Program,",
      " which is intended to help owner-occupants repair or  rebuild their homes, buy or build replacement homes, or sell unwanted  properties so that they can be redeveloped or converted to open space. In  addition, on July 11, 2006, HUD allocated $4.2 billion to Louisiana for the  Road Home Program. Louisiana designated $2,496,150,000 of this funding  as assistance to owner-occupants to compensate them for their hurricane  loss. For Texas, we used the State of Texas Action Plan for CDBG Disaster  Recovery Grantees under the Department of Defense Appropriations Act,",
      "  2006 (Apr. 13, 2006, and May 9, 2006) and the Proposed Partial Texas Action  Plan for Disaster Recovery to Use Community Development Block Grant  (CDBG) Funding to Assist with the Recovery of Distressed Areas Related  to the Consequences of Hurricanes Katrina, Rita, and Wilma in the Gulf of  Mexico in 2005 (Dec. 15, 2006). Texas\u2019 action plan made $38,938,268  available for its \u201cMinimum Housing Need Allocation.\u201d In addition, on  August 18, 2006, HUD made $428,",
      "671,849 available to Texas for repair,  rehabilitation, and reconstruction of affordable rental housing, and for the  unmet needs of evacuees who were forced from their homes and are now  living in other states. Of this amount, $305,238,257 has been made available  for a Homeowner Assistance Program, Sabine Pass Restoration Program,  and Rental Housing Stock Restoration Program. We identified various options for altering the role of the federal government  in catastrophe insurance by looking at bills before the current and previous  Congresses as well as other change options that were not in current  legislative proposals\u2014for example, a proposal before a committee of the  National Association of Insurance Commissioners (NAIC). We sought out  advantages of these options from their supporters and disadvantages from  critics.",
      " We also developed a four-goal framework, on the basis of challenges  faced by current government natural catastrophe insurance programs, to  analyze current options for an increased federal role in natural catastrophe  insurance. We developed these goals by drawing insights from the  following: past GAO work, legislative histories of laws that changed the  roles of state governments and the federal government after disasters, bills  before the current and previous Congresses, interviews with public and  private sector officials, and articles written by experts in insurance  economics. Although we identified numerous possible goals that could  assist our analysis, we believe the four goals we chose accurately capture  the essential concerns of the federal government.",
      " The scope of our work  covered hurricane and earthquake perils\u2014we did not investigate tornado,  hail, or other perils. Also, we focused on the property and casualty  insurance line\u2014especially homeowners insurance. We did fieldwork in Alabama; California; Connecticut; Florida; Illinois;  Indiana; Louisiana; Massachusetts; Mississippi; Missouri; New Jersey; New  York; Ohio; Texas; and Washington, D.C. Our work was conducted between  March 2006 and October 2007 according to generally accepted government  auditing standards. Selected State Natural Catastrophe Insurance  Programs State government natural catastrophe insurance programs, in most cases,",
      "  have been created after disasters because homeowners insurance coverage  for catastrophic events is often not available from private insurers at prices  deemed affordable by state legislators and insurance regulators. These  programs supplement or substitute for private natural catastrophe  insurance. For example, California created an earthquake fund in 1994  when private insurers stopped writing homeowner earthquake coverage  following the Northridge Earthquake. Likewise, Florida created Citizens  Property Insurance Corporation (Florida Citizens)\u2014the largest home  insurer in Florida\u2014to provide state-backed insurance coverage, including  for wind damage, for homeowners who cannot get coverage in the private  sector. State natural catastrophe insurance programs differ in their details,",
      "  including the percentage of homeowners covered, geographic locations  covered, coverage limits, deductible levels, how the premiums are  calculated, losses, and other details. The natural catastrophe insurance  programs in California, Florida, and other states are funded through a  combination of premium payments and postevent assessments and bonds.  Particularly in catastrophe-prone locations, government insurance  programs have tended not to charge premiums that reflect the actual risks  that homeowners face, resulting in financial deficits. After the 2005  hurricanes, for example, some of these state programs faced large  accumulated deficits and required substantial public funding to continue  operations. See figure 5 for a comparison of the features of selected state  natural catastrophe insurance programs,",
      " especially their losses, after the  2005 hurricanes. The text that follows figure 5 contains the most recent  information on the state programs. California Earthquake  Authority Program Overview The California Earthquake Authority (CEA) is an instrumentality of the  state that sells earthquake insurance policies for residential property  throughout California. Most standard homeowners insurance policies do  not cover earthquake damage.  However, California law requires insurers  that sell residential property insurance in California to offer earthquake  coverage to their policyholders every 2 years.  In offering earthquake  coverage, insurance companies can manage the risk themselves or they can  become a CEA-participating insurance company and offer the CEA\u2019s  residential earthquake policies.",
      "  The CEA is managed by a Governing Board  composed of the Governor, Treasurer, and Insurance Commissioner. An 11- member Advisory Panel advises the board. The base CEA policy, known as a \u201cminipolicy,\u201d is a reduced-coverage,  catastrophic earthquake insurance policy intended to protect a dwelling,  while excluding coverage for costly nonessential items, such as swimming  pools, patios, and detached structures.  Dwelling coverage will help pay to  repair or (up to the policy limit) replace an insured home when structural  damage exceeds the policy deductible. Coverage for fire is not included;  fire is covered in the companion homeowners insurance policy.",
      "  The  dwelling coverage limit is determined by the insured value of the home, as  stated on the companion homeowners insurance policy.  Personal property  coverage provides up to $5,000 to replace items, including furniture,  televisions, audio and video equipment, household appliances, bedding,  and clothing. Policyholders can increase their personal property  coverage to as much as $100,000. The CEA policy provides $1,500 of  Additional Living Expense coverage to pay for necessary increases in living  expenses incurred to maintain a normal standard of living. Policyholders  can increase that coverage to as much as $15,000.",
      " In addition to providing  funds for repairing or replacing a home, the CEA base policy includes an  additional $10,000 in Building Code Upgrade coverage. For policies that  renew or become effective on or after July 1, 2006, policyholders can  choose to increase Building Code Upgrade coverage by an additional  $10,000, for a total Building Code Upgrade coverage limit of $20,000. The  CEA policy offers two deductible options:  the standard base-limit  deductible of 15 percent of the policy of the total coverage or a 10 percent  deductible option. Damage to personal property is not covered,",
      " unless the  dwelling deductible is met. There is no deductible for Additional Living  Expense/Loss of Use coverage. CEA coverage is available to homeowners  only from the insurance company that provides their residential property  insurance and only if that company is a CEA-participating insurance  company.  Participating insurance companies process all CEA policy  applications, policy renewals, invoices, and payments and handle all CEA  claims. CEA Was Created in the  Wake of the Northridge  Earthquake to Avoid  Collapse of the  Homeowners Insurance  Market The Northridge Earthquake jolted the San Fernando Valley in January 1994.",
      "  It caused 57 deaths and an estimated $49.3 billion in economic losses.  California insurers had collected only $3.4 billion in earthquake premiums  in the 25-year period prior to the Northridge Earthquake and paid out more  than $15 billion on Northridge claims alone. In January 1995, insurers  representing about 95 percent of the homeowners insurance market in  California began to limit their exposure to earthquakes by writing fewer or  no new homeowners insurance policies. This triggered a crisis that by mid- 1996 threatened the vitality of California\u2019s housing market and stalled the  state\u2019s recovery from recession.",
      " In 1995, California lawmakers passed a bill  that allowed insurers to offer a reduced-coverage earthquake insurance  policy that became the \u201cminipolicy.\u201d The CEA became operational in  December 1996. CEA Premium Rates Are  Required to Be Actuarially Sound In determining premium rates, the CEA is required by law to use the best  science available and is expressly permitted by law to use earthquake  computer modeling, to establish actuarially sound rates. The CEA will  examine rating factors, such as the rating territory (determined by ZIP  code), age, and type of construction of a home,",
      " in determining the premium  rate. The CEA applies a 5 percent premium discount to dwellings that meet  the following requirements:  the dwelling was built before 1979, it is of a  wood-frame construction-type, the frame is tied to the foundation, it has  cripple walls braced with plywood or its equivalent, and the water heater is  secured to the building frame.  The CEA governing board establishes  premium rates, subject to the prior approval of the Insurance  Commissioner. The Governing Board voted to reduce the base policy rates  on July 1, 2006, by a statewide average of 22.",
      "1 percent resulting in a rate  reduction for approximately 85 percent of CEA policyholders. The CEA  says that a sharp drop in the cost of reinsurance and several years without  a major earthquake, allowing CEA insurers to build up reserves, made the  cut possible. While consumer advocates support the cut, some industry  experts fear that the lower rates could make the CEA financially vulnerable  in the event of a major earthquake. CEA Accumulates Surplus  When Premiums Exceed  Claims Paid No state funds and no public money are used to finance the CEA. The CEA  is funded from policyholder premiums,",
      " contributions from and  assessments on participating insurers, returns on invested funds, borrowed  funds, and reinsurance. Assessments on participating insurers may not be  directly passed through to policyholders. The CEA is authorized to issue  bonds, and may not cease to exist so long as its bonds are outstanding. As  of January 2006, the CEA had a projected total claims-paying capacity of  $7.8 billion, but if an earthquake causes insured damage greater that the  CEA\u2019s claims-paying capacity, then policyholders affected will be paid a  prorated portion of their covered losses. The surplus of the CEA increases  each year in which there is no major event.",
      " Participation in the CEA Is  Relatively Low The CEA is one of the world\u2019s largest residential earthquake insurers, with  about 755,000 policies and $501.4 million in premiums in 2006. The CEA  states that over 8 million households in California have homeowners  insurance, and that about 12 percent of these households have earthquake  insurance. The CEA states that there would not be enough capacity to  support 100 percent participation in the program. There are insurance  companies that offer only earthquake coverage and do not write  homeowners insurance. Such companies physically select the properties  that they will insure.",
      " Private insurers accounted for about 30 percent of the  earthquake insurance market in California in 2005. Florida Citizens  Property Insurance  Corporation Program Overview Citizens Property Insurance Corporation (Florida Citizens) is a not-for- profit and tax-exempt government entity that provides property insurance  for personal, commercial residential, and commercial nonresidential  properties when private insurance is unavailable or, in the case of  residential insurance, unaffordable. Florida Citizens maintains three  accounts: (1) the high-risk account (HRA) provides personal and  commercial multiperil and wind-only coverage in certain high-risk coastal  areas (\u201cHRA areas\u201d); (2)",
      " the personal lines account (PLA) offers personal  residential multiperil policies outside of the HRA areas, and ex-wind  policies for residential properties inside of the HRA areas; and (3) the  commercial lines account (CLA) offers commercial residential and  commercial nonresidential multiperil policies outside of the HRA areas,  and ex-wind policies inside of the HRA areas. Florida law requires Citizens  to maintain the separate accounts until the retirement of bonds issued by  Citizens\u2019 predecessors prior to Citizens\u2019 formation. Since these predecessor  bonds have been retired, the separate accounts may be combined, but  Citizens has made no decision to do so.",
      " Policies are sold by independent insurance agents, who receive 6 to  8 percent commissions for residential policies and 7 to 12 percent  commission for commercial policies. Underwriting standards are  somewhat limited, as the company is intended to be an insurer of last  resort. Hurricane deductibles are offered at $500, 2 percent, 5 percent, and  10 percent for personal lines multiperil policies and at $500, 2 percent,   3 percent, 4 percent, 5 percent, and 10 percent for personal lines wind-only  policies. All-other-peril deductibles are $500,",
      " $1,000, and $2,500. Coverage  limits for homeowners policies must be at least equal to 100 percent of the  estimated replacement value. Florida Citizens offers premium discounts up  to 45 percent to homeowners who take qualifying mitigation measures.  Florida Citizens imposes a surcharge on older homes that reaches a  maximum of 20 percent for homes over 40 years old, while policyholders  with newer homes can receive a premium credit of up to 10 percent. Florida Citizens Was  Created to Consolidate  Separate Residual Market  Mechanisms and Achieve  Tax-Exempt Status to Lower  Costs Florida Citizens was established in 2002 after two separate insurance  pools,",
      " known as the Florida Windstorm Underwriting Association (FWUA)  and the Florida Residential Property and Casualty Joint Underwriting  Association (JUA) were combined. The FWUA was created by statute in  1970 to provide high-risk, windstorm and hail residual market coverage in  selected areas of Florida. Florida Citizens\u2019 HRA assumed the debt and  obligations of the FWUA. The JUA was created in December 1992, in the  wake of the capacity crisis following Hurricane Andrew, to provide residual  market residential-property multiperil insurance coverage, excluding wind  if the property was within FWUA-eligible areas.",
      " Florida Citizens\u2019 PLA and  CLA assumed the debt and obligations of the JUA. A primary driver for the  merger was that the combined entity obtained federally tax-exempt status,  thus saving federal income taxes that otherwise would have been paid by  the FWUA and the JUA. In addition, as a tax-exempt entity, Florida Citizens  is able to issue lower coupon tax-free bonds postevent, as well as taxable  preevent bonds. The merger also resulted in some overhead cost savings by  having a single organization. Florida Citizens Premium  Rates Are Required to Be  Actuarially Sound, but Are  Subject to Legislative  Change Until recently,",
      " Florida Citizens\u2019 premium rates were required to be  noncompetitive with the voluntary market, using a formula that determined  rates on a county-by-county basis, on the basis of the highest rate offered in  the voluntary market among the state\u2019s top 20 insurers writing in that area.  Then, as part of legislation passed in May 2006, Florida Citizens\u2019 rates were  required to be high enough to purchase reinsurance to cover 1-in-100-year  hurricane probable maximum loss in the PLA and 1-in-70-year hurricane  probable maximum loss in the CLA. Finally, in January 2007, legislation  was passed that eliminated both of these requirements and required that  Florida Citizens\u2019 rates be actuarially sound and not excessive,",
      " inadequate,  or unfairly discriminatory. In addition, the legislation rescinded a rate  increase that took effect on January 1, 2007; froze 2007 rates at the  December 31, 2006, rate level; and required Florida Citizens to make a new  rate filing to be effective January 1, 2009. In the Event that Florida  Citizens Has Losses That  Exceed Surplus, It Can Levy  Assessments to Recover the  Deficit Storms in 2004 and 2005 resulted in more than $30 billion in insured  damage in Florida. Florida Citizens sustained deficits of $515 million in  2004 and $1.",
      "8 billion in 2005. To fund its deficit, Florida Citizens is required  by statute to assess admitted insurers in proportion to the amount of  property and casualty insurance business (except for workers\u2019  compensation or accident and health) they write in Florida, and also to  assess its own policyholders and surplus lines policyholders. The admitted  insurers have the ability to recoup regular assessments from their  policyholders upon renewal of a policy or issuance of a new policy. If the  amount of the deficit exceeds the amount Florida Citizens can collect as a  regular assessment, it is required to levy emergency assessments on its  own policyholders,",
      " on surplus lines policyholders, and on the policyholders  of admitted insurers. Admitted insurers collect emergency assessments  from their policyholders and remit the collections to Citizens. To fund its 2004 deficit, Florida Citizens assessed insurance companies and  surplus lines insureds over $515 million in regular assessments. To fund the  2005 deficit of approximately $1.8 billion, the Florida Legislature  appropriated $715 million from the Florida general revenue fund, which  reduced the size of the regular assessment from $878 million to   $163 million. The regular assessment imposed to fund the 2005 deficit was  reduced from an estimated 11.",
      "2 percent to 2.07 percent due to the infusion  of general revenue funds. The Florida Legislature also directed Florida  Citizens to amortize the collection of the emergency assessment for the  remaining $888 million deficit over a 10-year period, resulting in a   1.4 percent emergency assessment levied beginning in June 2007. Florida Citizens\u2019 resources also come from its reinsurance arrangement  with the Florida Hurricane Catastrophe Fund (FHCF). In 2006, the FHCF  provided coverage for Florida Citizens for 90 percent of $4 billion in losses  above its deductible. As a tax-exempt entity,",
      " Florida Citizens is able to  issue tax-exempt postevent bonds as well as taxable preevent bonds. The  tax-exempt status is beneficial because in the event of a major disaster,  Florida Citizens can finance loss payment by issuing bonds that carry low  interest rates, thereby reducing financing costs over the years by hundreds  of millions of dollars. In June 2006, Florida Citizens completed a $3.05  billion taxable pre-event bond sale. In February 2007, Florida Citizens  closed a $1 billion tax-exempt postevent bond issuance. In June 2007,  Citizens completed a $1.95 billion preevent financing plan consisting of a   $1 billion line of credit and $950 million in bonds.",
      " Under its enabling  statute, Florida Citizens is a government entity and not a private insurance  company. As long as Florida Citizens has bonds outstanding, it may not file  a voluntary petition under Chapter 9 of the Federal Bankruptcy Code. Florida Citizens Has Had  Moderate Growth in All but  2 Years, Partially Due to  Depopulation Incentives Except for 2 years, Florida Citizens\u2019 growth has been relatively moderate  given the market dynamics. Since its establishment in 2002, when it had  658,085 policies, the policy count has increased to 1.38 million policies-in- force as of September 30,",
      " 2007. Over this 5-year period, there has been  nominal growth in Citizens\u2019 formerly wind-only HRA of 10 percent. Most of  the growth of Florida Citizens has been in its PLA and has been caused by  the following factors: (1) the private market pulling back following eight  hurricane events in 2004 and 2005, (2) private insurers\u2019 curtailing coverage  in sinkhole parts of the state, and (3) the July 2006 assumption by Florida  Citizens of approximately 300,000 policies following the insolvency of a  private insurer. Aside from 2006,",
      " the only other significant policy increase  occurred in 2003, a 25 percent increase. By comparison, total policies grew  by only 7 percent in 2004, decreased by 7 percent in 2005, and grew by   7 percent for the first 9 months of 2007\u2014all net of depopulation activities. Prior to 2007, part of Florida Citizens\u2019 lower growth rate was the result of  incentives to private insurers to take policies out of Citizens, also known as  depopulation incentives. Florida Citizens had the authority to pay insurers  a take-out bonus of up to 12.",
      "5 percent of premiums removed from the HRA.  The incentive program required that a minimum of 25,000 policies or a total  insured value of at least $5 billion be removed. Insurers could earn higher  bonuses, up to 10 percent, for assuming more than the minimum. They  were required to retain the policies for either 3 or 5 years. Take-out  incentives were eliminated in 2007. Nonetheless, through August 31, 2007,  131,000 policies have been removed without incentives. Louisiana Citizens  Property Insurance  Corporation Program Overview The Louisiana Citizens Property Insurance Corporation (Louisiana  Citizens)",
      " is a nonprofit, tax-exempt entity that acts as a market of last  resort for residential and commercial property insurance in Louisiana.  Louisiana Citizens is modeled on a similar Citizens Plan created in Florida. Louisiana Citizens was specifically organized to operate the state's Coastal  Plan and Fair Access to Insurance Requirements (FAIR) Plan. The Coastal  Plan offers coverage in coastal areas of the state. The FAIR Plan offers  coverage in the rest of the state. Louisiana Citizens offers coverage for fire,  vandalism, windstorm, hail, and homeowners. Residential policy limits are  up to $750,000 for property, and up to $375,",
      "000 for contents. Policy  deductibles are offered at various levels, with 2 and 5 percent offered for  wind/hail coverage. Underwriting standards are somewhat limited since  the company is intended to be an insurer of last resort. A 15-member  governing board supervises company operations. The company has very  limited infrastructure in place, as it maintains an administrative services  contract with the Property Insurance Association of Louisiana, a nonprofit  organization of licensed insurance carriers in the state. The company also  entered into agreements for underwriting, policy management, and claims  management services with three service providers. Louisiana Citizens Was  Created to Change  Assessment Structure of  Residual Market  Mechanisms Louisiana created the Louisiana Joint Reinsurance Plan (the predecessor to  the FAIR Plan)",
      " in 1968 to provide a residual market for property insurance  in inner cities within the state in response to damage caused by civil unrest.  The state created the Louisiana Insurance Underwriting Plan (the  predecessor to the Coastal Plan) in 1970 to provide a residual market for  property insurance in coastal areas of the state in response to damage  caused by Hurricane Camille. All insurers licensed to write property  insurance in the state were required to participate in the predecessor  insurance plans. Property losses caused by hailstorms, Hurricane Lili, and  Tropical Storm Isidore resulted in assessments against the participating  insurers that were not recoverable from policyholders.",
      " The insurers  became reluctant to write insurance in the state. The legislation creating  Louisiana Citizens gave participating insurers the ability to recoup a regular  assessment from policyholders and gave Louisiana Citizens the ability to  impose emergency assessments directly on policyholders. Citizens Rates Are Not  Competitive with the  Private Market and  Necessitated Postfunding Louisiana Citizens premium rates are required to be actuarially sound.  Premium rates are not intended to be competitive with the private market  and are set at least 10 percent above the average rate of the insurer that had  the highest rate of the top 10 insurers by parish, provided they make up at  least 3 percent of the market.",
      " In 2005, Louisiana Citizens suffered more  than $1 billion in losses from Hurricanes Katrina and Rita, with the vast  majority of the losses in the FAIR Plan. Citizens had not built up sufficient  reserves to meet its obligations. It had only $80 million in cash reserves and  tapped into its reinsurance for an additional $295 million. In October 2005,  because there was still a deficit, Citizens assessed all property insurance  companies in the state a one-time regular assessment of a maximum  amount of 15 percent of premium: 10 percent for the FAIR Plan and 5  percent for the Coastal Plan.",
      " Insurers recoup the amount of their regular  assessments from their policyholders in the subsequent year. The regular  assessment following the 2005 hurricanes generated approximately $200  million for Louisiana Citizens. Because a deficit situation still existed after  the regular assessment was levied, Citizens was authorized by law to issue  bonds. In December of 2006, Citizens received approval from the State  Bond Commission to issue up to $1.4 billion of tax-exempt revenue bonds.  The actual bond issue in April 2006 was for approximately $978 million.  The bond offering will be financed by an emergency assessment on  policyholders that is estimated to be about 5 to 6 percent of insurance  premiums per year for as many years as needed to cover the plan deficit.",
      " Mississippi Windstorm  Underwriting  Association Program Overview The Mississippi Windstorm Underwriting Association (Mississippi  Windpool) is a nonprofit association of all insurance companies writing  property insurance in Mississippi on a direct basis. It was established by  the legislature to provide an adequate market for windstorm and hail  insurance in the six coastal counties of Mississippi. The maximum  coverage available for residential coverage is $1 million for the dwelling  and $250,000 for contents. The policy contains a \u201cnamed storm\u201d deductible  of 2 percent of the insured value of the home with a $500 minimum or, if  coverage exceeds $500,",
      "000, a $1,000 minimum. Any structure built after  June 1, 1987, in an area that has not adopted the standard building code  must produce proof that the structure is built in substantial accordance  with the code. Otherwise, it is not insurable by the Mississippi Windpool.  Policies can be sold by any approved insurer, and agents receive a   15 percent commission on new business and a 10 percent commission on  renewals. Mississippi Windpool Was  Created in the Wake of  Insurance Crisis Following  Hurricane Camille The Mississippi Insurance Underwriting Association (MIUA), the  predecessor to the Mississippi Windpool,",
      " was created by the Mississippi  Legislature in 1970 as the state struggled to recover from Hurricane Camille  in 1969. The MIUA provided fire and windstorm coverage in the six coastal  counties of the state, and its basic purpose was to enable individuals to  secure a mortgage since there was no private market for fire and wind  coverage. In 1987, the legislature found that the market for fire coverage  had recovered, but there remained the need for residual windstorm  coverage. Thus, the legislature created the Mississippi Windpool. Mississippi Windpool  Premium Rates Are  Significantly Less Than  Requested Mississippi Windpool premium rates are required to be nondiscriminatory  as to the same class of risk,",
      " and are subject to the approval of the state  insurance commissioner. Prior to 2007, in light of agent commissions and  the servicing carrier agreement, the Mississippi Windpool recovered just  over 75 percent of premium payment on new business and about 82 percent  of premium payment on renewals. The Mississippi Windpool used most of  the premium to buy reinsurance. In 2004, the Windpool sought to raise  premium rates by 76 percent, but the insurance commissioner approved a  22 percent increase. In April 2006, the Mississippi Windpool sought  approval of a 397.8 percent rate increase for residential coverage.",
      " Much of  the increase was needed to buy adequate reinsurance, which cost the  Mississippi Windpool about $0.65 to $0.70 per dollar of reinsurance. The  state insurance commissioner granted a 90 percent increase. To defray the  cost of reinsurance for the Mississippi Windpool, the state requested that  HUD allow it to allocate up to $50 million in CDBG funds. HUD gave the  state permission to use $30 million in 2006 and $20 million in 2007 for the  Mississippi Windpool reinsurance. In 2007, the State Legislature created the  Mississippi Windstorm Underwriting Association Reinsurance Assistance  Fund for the purpose of defraying the cost of Mississippi Windpool  reinsurance.",
      " The fund will be financed using state tax dollars and may be  used only by the state insurance department upon appropriation by the  State Legislature. The Mississippi Windpool was also granted authority to  issue bonds and other debt instruments. Catastrophic Mississippi  Windpool Losses Are Borne  by Participating Insurers Following Hurricane Katrina, the Mississippi Windpool suffered about   $720 million in losses. It received loss claims from every policyholder,  about 18,000 total. About 700 to 800 policyholders did not meet their  deductible, but the vast majority of claims resulted in payment. Prior to  2007,",
      " the Mississippi Windpool did not retain profits, if any, at year-end, but  distributed them to participating insurers. The Mississippi Windpool did  not have adequate reinsurance and capital to cover their losses in Katrina,  and assessed participating insurers $525 million, on the basis of their level  of participation in the state property insurance market. About   400 companies were participating in the Mississippi Windpool at the time.  Each could reduce their assessment liability by $1.40 for every $1.00 of  voluntarily written premium for property insurance in the coastal area.  This credited amount came out of the second 90 percent of the assessment;",
      "  all members were responsible for the first 10 percent of the assessment. No  company completely wrote themselves out of the Katrina assessment, and  some companies incurred greater direct losses than their assessment.  However, some companies were assessed more than their entire direct  written premium received in the state. Legislation passed in 2007 requires  the state insurance commissioner to levy a surcharge on all property  insurance premiums in the state to recover within 1 year the amount of the  regular assessment for reimbursement to assessable insurers who paid the  regular assessment. Texas Windstorm  Insurance Association Program Overview The Texas Windstorm Insurance Association (Texas Windpool)",
      " offers  windstorm and hail coverage for residential and commercial properties in  14 coastal counties and parts of Harris County (but not Houston). About   25 percent of the state\u2019s population lives along the coast. The membership  of the Texas Windpool includes every property insurer licensed to write  property insurance in the state. Each company\u2019s percentage of  participation is based on their statewide sales. The Texas Windpool is  governed by a nine-member board of directors. Coverage limits are  adjusted annually to reflect inflation. Effective January 1, 2007, residential  coverage for a dwelling and its contents is capped at $1.597 million.",
      "  Policies include coverage for wind-driven rain, loss of use, and  consequential losses. Since 2004, the Texas Windpool has required that  residential properties that it insures conform to the International  Residential Code. However, under certain conditions, the Texas Windpool  will insure homes built before 1988 that were not built according to any  recognized building code. Policies are sold by individual licensed agents  who receive 16 percent of gross written premium as commission. Texas Windpool Was  Created Due to Insurance  Crisis Following Hurricane  Celia Hurricane Celia struck the Texas coast in August 1970 and caused an  estimated $310 million in insured losses ($1.",
      "55 billion in 2005 dollars).  Many insurers decided to stop writing business in the state\u2019s coastal  communities. In response, the State Legislature created the Texas  Catastrophe Property Insurance Association (predecessor to the Texas  Windpool) in 1971. Texas Windpool Premium  Rates Are Less Than  Requested The Texas Windpool must file all rates with the state insurance  commissioner for approval. The commissioner assesses whether the rates  are reasonable, adequate, not unfairly discriminatory, and nonconfiscatory  as to any class of insurer. Approved rates must be uniform throughout the  14 coastal counties. By law,",
      " the Texas Windpool residential premium rates  may not increase by more than 10 percent above the rate for  noncommercial windstorm or hail insurance in effect at the time of filing,  but the insurance commissioner may suspend this rule after a catastrophe  or series of catastrophes to ensure rate adequacy in the catastrophe area.  In May 2006, the Texas Windpool sought a 19 percent residential and   24 percent commercial rate increase. The insurance commissioner  approved a 3.1 percent residential and 8 percent rate increase. Again, in  November 2006, the Texas Windpool sought a 20 percent residential and   22 percent commercial rate increase.",
      " The insurance commissioner  approved a rate increase of 4.2 percent for residential policies and   3.7 percent for commercial policies. Texas Windpool Claims- Paying Capacity Mixes  Industry Assessments and  Reserves The Texas Windpool is authorized to assess participating insurers for  excess losses. In addition, the State Legislature created the Catastrophe  Reserve Trust Fund, into which Texas Windpool profits are deposited,  rather than distributed to participating insurers. Under the plan, companies  are assessed the first $100 million losses in excess of the Texas Windpool\u2019s  premiums and other income. Losses in excess of this amount are funded by  private reinsurance and the trust fund.",
      " An additional $200 million  assessment can be levied if private reinsurance and the trust fund are  inadequate to cover losses. In March 2006, the Texas Windpool had the  ability to fund $1.3 billion in excess losses based on a combination of  assessments, reinsurance, and other means. Losses in excess of $1.3 billion  are funded through further industry assessments. An insurer may credit the  amount paid under this top-layer assessment against its premium tax.  Hurricane Rita produced estimated losses of between $160 million and  $165 million for the Texas Windpool. The payment of some 11,",
      "506  Hurricane Rita claims in 2005 resulted in a deficit and a $100 million  assessment on insurance companies. The pool grew from almost 69,000  policyholders at the end of 2001 to about 207,000 at the end of September  2007. Texas Windpool liability, or exposure to loss, was about $56 billion as  of the end of September 2007. Alabama Insurance  Underwriting  Association Program Overview Alabama Insurance Underwriting Association (Alabama Beach Pool) is a  voluntary unincorporated nonprofit association established to provide  essential residential and commercial insurance coverage to the beach area  counties of Baldwin and Mobile.",
      " Twelve percent of Alabamans live on the  coast. Every licensed property insurer in the state is a member of the  Alabama Beach Pool. The Beach Pool offers two types of policies: fire and  extended coverage, and wind and hail. The Beach Pool offers coverage  limits on residential buildings up to a maximum of $500,000, combined  dwelling and contents. A hurricane deductible of 5 percent ($1,000  minimum) is applicable in the event of a named storm. Policies covering  property located in certain areas may opt for a 2 percent hurricane  deductible for an additional premium. The standard deductible for all other  perils is $500.",
      " Buildings must conform to the Southern Standard Building  Code for the Alabama Beach Pool to provide coverage. Any insurance  agent licensed in Alabama can sell Beach Pool policies and receive an   8 percent commission. The Beach Pool is managed by a board of directors. Alabama Beach Pool Was  Created Due to Insurance  Crisis Following Hurricane  Camille The Alabama Beach Pool was created in the aftermath of Hurricane  Camille in 1969. Insurance companies operating in Alabama voluntarily  agreed to join the association at the behest of the state insurance  commissioner. The Beach Pool was not created by the State Legislature,  but is subject to regulation by the Alabama Department of Insurance.",
      " Alabama Beach Pool  Premium Rates Have Been  Subject to Political Pressure The Alabama Beach Pool and other insurers operating in the state must file  premium rate change requests with the Alabama Department of Insurance.  Alabama is a \u201cprior approval\u201d state, meaning that insurers must either  allow a waiting period to expire or receive approval from the insurance  department prior to using those rates in pricing insurance coverage.  Insurance company officials told us that they are not always able to get  their requested rates, and that Alabama Beach Pool rates are too low. Prior  to Hurricane Katrina, the state insurance department conducted a study  comparing Beach Pool premium rates with rates charged by state-run  coastal insurance programs in Florida and Mississippi.",
      " The study showed  that Alabama Beach Pool rates were higher than the Florida and  Mississippi programs. The State Legislature put pressure on the insurance  department to lower Beach Pool rates. In the wake of Hurricane Katrina,  however, coastal insurance rates in Florida and Mississippi are higher than  in Alabama. Alabama Insurers May Not  Pass-Through Alabama  Beach Pool Assessments to  Policyholders The Alabama Beach Pool is authorized to make assessments upon all  member insurers. The calculation of the assessment is based on the  member\u2019s proportion of net direct premiums of property insurance in the  state. Members can receive annual credit against assessments for property  insurance voluntarily written in the coastal area.",
      " In the event of  catastrophe loss requiring assessment, a first partial loss assessment will  be limited to not exceed $2 million per member insurer. Members may not  pass-through assessments to policyholders. The Beach Pool currently has  about 8,500 policies, insuring about $1.5 billion in property. Georgia Underwriting  Association Program Overview The Georgia Underwriting Association (GUA) was created by insurance  companies licensed to write property insurance in Georgia to administer  the state FAIR Plan. The plan insures homeowners throughout the state  who have not been able to find certain types of insurance coverage in the  voluntary market,",
      " and also coverage against windstorm and hail damage in  coastal counties and off-shore islands. The coverage limit for any one  building, including the dwelling and its contents, for windstorm and hail  coverage is $2 million. The deductible for windstorm and hail coverage is at  least 1 percent, subject to a minimum of $500. Any structure in the  windstorm and hail area that is less than 10 years old and not built in  compliance with the Southern Standard Building Code or its equivalent is  not eligible for coverage. Replacement cost and loss of use coverage are  available as supplemental coverage. Homeowners may apply for GUA  coverage directly or through a state-",
      "licensed insurance agent. Agents  receive a commission of 10 percent of the premium. Premium rates either  may be approved by the state insurance commissioner and must not be  excessive, inadequate, or unfairly discriminatory or may be advisory rates  and premiums from the Insurance Services Office, Inc. The average  premium for coverage is about $590. The GUA maintains reinsurance of  $100 million in excess of $50 million, and a second-event limit covers a  second loss greater than $25 million. The GUA is authorized to assess  member insurers for program losses in proportion to each member\u2019s  property insurance premiums written during the most recent calendar year.",
      "  Member assessments may not be passed-through to policyholders. Member  insurers also share in program profits. In June 2006, the GUA had 26,882  policies in-force, of which 7,136 policies were on the coast. The exposure  statewide as of June 2006 was $3.2 billion, of which $1.3 billion was coastal  exposure. South Carolina Wind  and Hail Underwriting  Association Program Overview The South Carolina General Assembly authorized the creation of the South  Carolina Wind and Hail Underwriting Association (South Carolina  Windpool) in 1971. All admitted property and casualty companies licensed  by the South Carolina Department of Insurance are members of and are  required to participate in the South Carolina Windpool.",
      " The Windpool  provides wind and hail coverage in the coastal areas of the state, which are  specifically designated by statute. The state director of insurance recently  expanded the territory eligible for Windpool coverage and divided the  territory into two zones. Insurance companies writing policies in the  defined territory may either offer wind coverage or exclude wind coverage  (for a reduced premium). If an insurer excludes wind coverage, that  coverage may be written by the South Carolina Windpool (for an additional  premium). Cover limits for one-to-four family dwellings, including mobile  homes and condominiums, is $1.3 million. Items that are specifically  excluded from coverage include property over water and wind-driven rain.",
      "  South Carolina Windpool policies are actual cash value contracts. Primary  residences are eligible to purchase replacement cost coverage. The  standard building/contents deductible is 3 percent of the policy limit in  zone 1 with a minimum deductible of 2 percent in zone 2. Loss of use  coverage is subject to a time deductible that is based on the underlying  building/contents deductible. Policies may be sold by any insurance  producer or broker licensed by the state. Premium rates must be approved  by the state director of insurance. Premium rate increases or decreases of   7 percent may take effect on a file-and-use basis; rate increases or  decreases of more than 7 percent are subject to prior approval.",
      " In 2005, the  average premium per residential policy for the South Carolina Windpool  was $1,385. In 2007, the State Legislature required the Windpool to ensure  rate adequacy so as to permit it to be self-sustaining. The South Carolina  Windpool is authorized to assess member insurers to cover program losses.  Insurers may pass through assessments to policyholders through future  rate filings. In June 2007, the State Legislature authorized the South  Carolina Windpool to sell bonds and incur debt. The South Carolina  Windpool had 36,196 residential policies in-force as of September 30,",
      " 2007,  compared with 16,430 residential policies in-force in 2001. Windpool  exposure was almost $13.735 billion as of September 30, 2007. North Carolina  Insurance  Underwriting  Association Program Overview The North Carolina Insurance Underwriting Association (North Carolina  Beach Plan) was created in 1969 to provide insurance coverage to people  not able to buy it through the standard insurance market only on the barrier  islands adjacent to the Atlantic Ocean. In 1998, the North Carolina General  Assembly expanded the Beach Plan to include the state\u2019s 18 coastal  counties for windstorm and hail only coverage.",
      " A 14-member board of  directors acts as the North Carolina Beach Plan policymaking body. All  property and casualty insurance companies that do business in North  Carolina participate in funding the plan. The North Carolina Beach Plan  provides Basic coverage, which includes most major perils, and broad  coverage, which includes a broader array of perils. Coverage limits are up  to $1.5 million on private dwellings. Coverage is provided on an actual cash  value basis or replacement cost if certain specific criteria are met. Policies  meeting plan criteria are continuous 1 year policies if premiums are paid.  Underwriting standards are somewhat basic since the North Carolina  Beach Plan is intended to be an insurer of last resort.",
      " North Carolina Beach  Plan premium rates must be filed with the state insurance commissioner by  the North Carolina Rate Bureau for approval prior to their use. In 2007,  homeowner rates were raised by an average of 25 percent for beach and  coastal areas. Homeowners wind-only policies were increased 25 percent  for beach areas and 38 percent for the coastal areas. In 2006, dwelling  extended coverage rates were increased about 25 percent. For commercial  property maximum coverage limits are $3 million (combined building and  contents) and $300,000 for business income. The Beach Plan adopts  Insurance Services Office commercial loss cost filings approved by the  state insurance commissioner.",
      " All member insurers share in North Carolina  Beach Plan expenses, profits, and losses in proportion to their property  insurance net direct premium written in the state. Member insurers can  receive credit against expenses, profits, and losses for property insurance  voluntarily written in the beach and coastal areas. The North Carolina  Beach Plan has a \u201ctake out\u201d program within its plan of operation; however,  to date, this program has not been initiated. As of fiscal year end   September 30, 2007, the Beach Plan had over 162,000 policies in-force with  an exposure of $64.1 billion, compared with about 88,",
      "000 policies and an  exposure of $28.9 billion at the end of fiscal year 2004. Florida Hurricane  Catastrophe Fund Program Overview The goal of the FHCF has been to provide a cost-effective source of  reinsurance to residential property insurers in the state. It is structured as a  tax-exempt state trust fund under the direction and control of the State  Board of Administration of Florida (State Board). The State Board is a  constitutional entity of Florida state government. It is governed by a Board  of Trustees composed of the Governor, Chief Financial Officer, and  Attorney General. The State Board appoints a nine-member advisory  council to provide the State Board with information and advice with its  administration of the FHCF.",
      " The management and day-to-day operations of  the FHCF is the responsibility of the Senior Officer. The Senior Officer  currently manages eight professional staff. Paragon Strategic Solutions,  Inc. is the FHCF administrator as well as the actuarial consultant to the  State Board. The FHCF collects premiums from and provides reimbursements to  insurers writing residential property and casualty insurance policies within  the state. As a condition of doing business in Florida, each insurer writing  \u201ccovered policies\u201d is required to contract with the FHCF. \u201cCovered  policies\u201d means any insurance policy covering residential property in the  state that provides wind or hurricane coverage.",
      " This includes any such  policy written by Florida Citizens. A limited exemption is available for  insurance companies with less than $10 million in covered exposure (not  premium). The FHCF is obligated, pursuant to reimbursement contracts, to  reimburse participating insurers for a specified percentage of qualifying  losses on the basis of selected coverage (45, 75, or 90 percent) in excess of  loss retention thresholds (or deductibles). Nearly 85 percent of insurers  selected the 90 percent coverage option for fiscal year 2005-2006   (July 1, 2005 through June 30, 2006). There were 205 insurance companies  that contracted with the FHCF during that period.",
      " The aggregate industry deductible is set by law at $4.5 billion to be adjusted  to reflect increased exposure to the FHCF. Currently, the aggregate  deductible is $6.089 billion for the contract year ending May 31, 2007. An  individual insurer\u2019s deductible is based on an insurer\u2019s pro rata share of  reimbursement premium due for a contract year and other factors. An  insurer\u2019s full deductible shall apply to each of the insurer\u2019s largest two  hurricanes. The insurer\u2019s full deductible would then be adjusted to one  third for any other hurricanes occurring during the contract year. The insured value of property reinsured by the FHCF in contract year   2007 is estimated to be approximately $2 trillion.",
      " The FHCF\u2019s claims-paying  capacity in a contract year is set by law, and legislation passed in early   2007 will increase capacity from $15 to $38.4 billion. Due to actual coverage  selected, the resulting capacity was $27.83 billion. The FHCF\u2019s multiyear  claims-paying capacity is over $50 billion. The cap on capacity represents  the limited liability of the FHCF\u2014it is not obligated by contract if losses in  a given contract year exceed claims-paying capacity. In contract years  where there is growth in the FHCF\u2019s cash balance, the capacity is allowed  to increase to the lesser of the growth in the cash balance or the growth in  the reported insured property values.",
      " The projected payout for a participating company is set as a pro rata share  of the FHCF\u2019s annual capacity. Prior to reimbursement, an insurer\u2019s loss  reports are examined by the State Board and tested for reasonableness.  Limited apportionment companies, which possess capital not exceeding  $20 million, are entitled to reimbursement first. No one county is  responsible for more than 9.8 percent of the fund\u2019s exposure. Dade,  Broward, and Palm Beach Counties are contiguous and make up less than  28 percent of the fund\u2019s total exposure. FHCF Was Created in 1993  after Hurricane Andrew  Limited the Availability of  Reinsurance On August 24,",
      " 1992, Hurricane Andrew hit the southern coast of Florida  just south of Miami and caused economic damages estimated in excess of  $25 billion, including an estimated $15.5 billion in insured losses. The major  impacts for primary insurance company buyers of reinsurance in the year  following Andrew included a severe shortage of catastrophe property  reinsurance capacity and stricter policy terms and conditions, as well as  sharp increases in property catastrophe cover rates. The poststorm reaction of a number of insurance companies was to  attempt to reduce their underwriting exposure. In early 1993, 39 insurers  stated they intended to either cancel or not renew 844,",
      "433 policies in  Florida. The factors influencing these private insurers included  the inability to obtain adequate reinsurance or, when available, the cost  for reinsurance was too high;  new catastrophe risk models indicated that exposure levels were higher  than previously thought, and the exposure levels were disproportionate  to company and industry financial resources;  significant reductions in insurers\u2019 policyholders surplus;  concerns about rate adequacy, especially for coastal counties and  certain risk categories, such as condominiums;  \u201chidden\u201d exposures from potential assessments by various other  insurance mechanisms, for example, residual markets and catastrophe  funds; and  fear that unfavorable catastrophe exposure would hurt ratings from  agencies such as A.M.",
      " Best and Standard & Poor\u2019s. The Department of Insurance (now called the Office of Insurance  Regulation) issued a study examining the state of the property insurance  market and enumerating many recommendations. Among the  recommendations was a proposal (originally suggested and supported by  the two largest private insurers in the state\u2014State Farm and Allstate) to  establish a tax-free state catastrophe fund to provide reinsurance  protection between that provided by the private market and a proposed  federal fund. Later, the legislature created a Study Commission on Property  Insurance and Reinsurance to look into the viability of the property  insurance industry and the adequacy of reinsurance.",
      " Of the 40  recommendations made by the commission, a key recommendation  included the establishment of a state catastrophe fund \u201cto fill the void  between currently available private sector reinsurance and the proposed  federal catastrophic fund program.\u201d Virtually all of the recommendations  from the commission were enacted with minor alterations, including  creation of the FHCF. FHCF Premiums Are  Significantly Less Than  Private Reinsurance  Premiums The cost of FHCF coverage is significantly less than the cost of private  reinsurance (one fourth to one third the cost) due to the FHCF\u2019s tax- exempt status, low administrative costs, and lack of a profit or risk-load.",
      "  The tax-exempt status of the FHCF removes a level of potential income  taxation for participating insurers resulting from the annual buildup of  contingent reserves in years when there are few or no hurricanes, and,  thus, allows for the accumulation of funds for the payment of Florida  losses. Another reason FHCF premiums are low is that a significant part of  the coverage provided by the FHCF may be paid by long-term debt issued  by the FHCF after a large hurricane event occurs, as discussed below. A company\u2019s annual reimbursement premium is based on an actuarial  formula that considers property location, type of construction, deductible,",
      "  and loss mitigation. Premiums have been stable over time due to  mandatory participation but have increased significantly since 2004 when  the FHCF\u2019s capacity was increased. Growth in reported exposure has also  factored into increased premiums. The top 10 insurers in the FHCF  contribute 64 percent of the total reimbursement premiums paid. The  FHCF is expected to collect $736 million in reimbursement premium during  contract year 2006. Beginning in 2006, the FHCF was required to charge a  rapid cash build-up factor equal to 25 percent of premiums, which was  expected to provide $200 million annually.",
      " However, the Florida Legislature  repealed this provision in early 2007. According to the FHCF, most insurers select the 90 percent coverage  option. Insurers may purchase private market reinsurance to cover their  hurricane losses for amounts below the retention, above their  reimbursement limit, or for the coinsurance amount (10 percent \u2013 along  side) that is the insurer\u2019s responsibility for the layer of coverage provided  by the FHCF. In fact, for some large national insurers, the FHCF is a small  part of their total reinsurance program. FHCF Maintains Reserves,  but They May Not Be  Adequate to Handle  Catastrophe Losses The FHCF is not required to have the loss reserves that are required of  insurers or reinsurers under state law.",
      " Financial reserves of the FHCF  accumulated steadily through fiscal 2004 due to limited hurricane activity.  Specifically, the FHCF had accumulated net assets of $5.5 billion at the end  of the 2004 fiscal year (June 30, 2004). Following the 2004 and 2005  hurricane seasons, the FHCF reimbursed participating insurers over   $5 billion, which has eliminated the reserves and created an estimated  shortfall of $1.425 billion. Standard & Poor\u2019s states that this cyclical  financial performance is expected, given the nature of FHCF funding  requirements. FHCF Authorized to  Postfund Revenue Shortfalls To support the capacity of the FHCF,",
      " revenue bonds may be issued. The  Florida Hurricane Catastrophe Fund Finance Corporation was formed in  1996 to issue bonds and engage in such other financial transactions as are  necessary to provide sufficient funds to achieve the purposes of the FHCF.  The corporation is governed by a five-member board of directors, including  the governor, chief financial officer, attorney general, director of the  Division of Bond Finance of the State Board, and the Senior Officer.  Revenue bonds issued are exempt from state and federal taxes. The  corporation has authority to create preevent and postevent financing. In  June 2006, the corporation undertook postevent financing of $1.",
      "35 billion  to address its 2005 shortfall. In July 2006, the corporation undertook  preevent financing of $2.8 billion to address 2006 liquidity needs. To pay debt service on outstanding revenue bonds and to reimburse  insurers for the reimbursable losses under a covered event, the State Board  directs the Office of Insurance Regulation to levy an emergency assessment  which insurance companies collect from their policyholders. Emergency  assessments are levied on premiums for all assessable lines of business in  Florida. For 2006, there are 27 assessable lines, and medical malpractice  policies will be added in 2010.",
      " In 2004, surplus lines insurers were added to  the emergency assessment base. Excluded lines include accident and  health, workers\u2019 compensation, and federal flood insurance. The  assessment base, which totaled $35 billion in 2005, has grown at a  compound annual growth rate of 14.6 percent since 1970. Over 40 percent  of the direct-written premium base is from auto insurance. In May 2006, a   1 percent emergency assessment was directed. The assessments are collected by insurance companies from policyholders  and remitted to the FHCF throughout the year. Policyholders are required  to pay the assessments,",
      " and insurers are required to treat the failure to pay  the assessment as a failure to pay premium, which permits an insurer to  cancel the policy. The maximum assessment in a single season is 6 percent  of premium, and the aggregate limit is 10 percent of the premium base.  Emergency assessments had never been assessed or collected prior to the  levy of assessments relating to the issuance of the June 2006 bonds.  Statewide assessments can also be levied for Florida Citizens and the state  insurance guarantee fund. The emergency assessment of 1 percent for the  FHCF is expected to be in place for 6 years.",
      " Comments from the National Association of  Insurance Commissioners GAO Contact and Staff Acknowledgments GAO Contact Staff  Acknowledgments In addition to the person named above, Lawrence D. Cluff, Assistant  Director; Joseph A. Applebaun, Patrick S. Dynes; Philip J. Curtin;   Carrie Watkins; John P. Forrester; Emily R. Chalmers; Thomas J. McCool,  Marc W. Molino; David S. Dornisch; and Tania L. Calhoun made key  contributions to this report. Related GAO Products Federal Insurance National Flood Insurance Program: Preliminary Views on FEMA\u2019s  Ability to Ensure Accurate Payments on Hurricane-Damaged Properties.",
      "  GAO-07-991T. Washington, D.C.: June 12, 2007. Climate Change: Financial Risks to Federal and Private Insurers in  Coming Decades Are Potentially Significant. GAO-07-285. Washington,  D.C.: March 16, 2007. Definitions of Insurance and Related Information. GAO-06-424R.  Washington, D.C.: February 23, 2006. Federal Emergency Management Agency: Improvements Needed to  Enhance Oversight and Management of the National Flood Insurance  Program. GAO-06-119. Washington, D.C.: October 18,",
      " 2005. Crop Insurance: Actions Needed to Reduce Program\u2019s Vulnerability to  Fraud, Waste, and Abuse. GAO-05-528. Washington, D.C.: September 30,  2005. Catalogue of Federal Insurance Activities. GAO-05-265R. Washington,  D.C.: March 4, 2005. Catastrophe Risk: U.S. and European Approaches to Insure Natural  Catastrophe and Terrorism Risks. GAO-05-199. Washington, D.C.:  February 28, 2005. Catastrophe Insurance Risks: Status of Efforts to Securitize Natural  Catastrophe and Terrorism Risk.",
      " GAO-03-1033. Washington, D.C.:  September 24, 2003. Catastrophe Insurance Risks: The Role Risk-Linked Securities and  Factors Affecting Their Use. GAO-02-941. Washington, D.C.: September 24,  2002. Insurers\u2019 Ability to Pay Catastrophe Claims. GAO/GGD-00-57R.  Washington, D.C.: February 8, 2000. Budget Issues: Budgeting for Federal Insurance Programs. GAO/AIMD- 97-16. Washington, D.C.: September 30,",
      " 1997. Natural Disaster Insurance: Federal Government\u2019s Interests  Insufficiently Protected Given Its Potential Financial Exposure. GAO-T- GGD-96-41. Washington, D.C.: December 5, 1995. Federal Disaster Insurance: Goals Are Good, but Insurance Programs  Would Expose the Federal Government to Large Potential Losses. GAO/T- GGD-94-153. Washington, D.C.: May 26, 1994. Flood Insurance: Financial Resources May Not Be Sufficient to Meet  Future Expected Losses. GAO/RCED-94-80. Washington, D.C.: March 21,",
      "  1994. Property Insurance: Data Needed to Examine Availability, Affordability,  and Accessibility Issues. GAO/RCED-94-39. Washington, D.C.: February 9,  1994. Crop Insurance: Federal Program Faces Insurability and Design  Problems. GAO/RCED-93-98. Washington, D.C.: May 24, 1993. Crop Insurance: Program Has Not Fostered Significant Risk Sharing by  Insurance Companies. GAO/RCED-92-25. Washington, D.C.: January 13,  1992. Disaster Assistance: Crop Insurance Can Provide Assistance More  Effectively Than Other Programs.",
      " GAO/RCED-89-211. Washington, D.C.:  September 20, 1989. Congress Should Consider Changing Federal Income Taxation of the  Property/Casualty Insurance Industry. GAO/GGD-85-10. Washington,  D.C.: March 25, 1985. Federal Disaster  Assistance Gulf Coast Rebuilding: Observations on Federal Financial Implications.  GAO-07-1079T. Washington, D.C.: August 2, 2007. Gulf Coast Rebuilding: Preliminary Observations on Progress to Date  and Challenges for the Future. GAO-",
      "07-574T. Washington, D.C.: April 12,  2007. Small Business Administration: Additional Steps Needed to Enhance  Agency Preparedness for Future Disasters. GAO-07-114. Washington, D.C.:  February 14, 2007. Hurricanes Katrina and Rita: Unprecedented Challenges Exposed the  Individuals and Households Program to Fraud and Abuse; Actions  Needed to Reduce Such Problems in Future. GAO-06-1013. Washington,  D.C.: September 27, 2006. Catastrophic Disasters: Enhanced Leadership, Capabilities, and  Accountability Controls Will Improve the Effectiveness of the Nation\u2019s  Preparedness,",
      " Response, and Recovery System. GAO-06-618. Washington,  D.C.: September 6, 2006. Disaster Relief: Governmentwide Framework Needed to Collect and  Consolidate Information to Report on Billions in Federal Funding for the  2005 Gulf Coast Hurricanes. GAO-06-834. Washington, D.C.: September 6,  2006. Small Business Administration: Actions Needed to Provide More Timely  Disaster Assistance. GAO-06-860. Washington, D.C.: July 28, 2006. Federal Disaster Assistance: What Should the Policy Be? PAD-80-",
      "39.  Washington, D.C.: June 16, 1980.\n"
    ],
    "length": 29904,
    "hardness": null,
    "role": null
  },
  {
    "id": 98,
    "question": null,
    "answer": "The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior's Bureau of Reclamation, the Department of Energy (DOE), and a number of independent agencies. Key budgetary issues for FY2010 involving these programs may include: the distribution of Corps appropriations across the agency's authorized planning, construction, and maintenance activities (Title I);      support of major ecosystem restoration initiatives, such as Florida Everglades (Title I) and California \"Bay-Delta\" (CALFED) and San Joaquin River (Title II);      funding for the proposed national nuclear waste repository at Yucca Mountain, Nevada (Title III: Nuclear Waste Disposal);       several new initiatives proposed for Energy Efficiency and Renewable Energy (EERE) programs (Title III); and      funding decisions in DOE's Office of Environmental Management. Energy and Water Development funding for FY2009 was included in the Omnibus Appropriations Act, 2009 (P.L. 111-8). In addition, the American Recovery and Reinvestment Act (ARRA, the \"Stimulus\" Act, P.L. 111-5) included funding for numerous programs in the Corps of Engineers, the Bureau of Reclamation, and the Department of Energy, to be expended in FY2009 and FY2010. Funding for FY2010 Energy and Water Development programs is contained in H.R. 3183, which the House passed July 17, 2009. The Senate passed its version of H.R. 3183 July 29. The Conference Committee issued its report (H.Rept. 111-278) September 30, and the House passed the conference bill October 1, and the Senate October 15. The President signed the bill October 28 (P.L. 111-85).\n",
    "docs": [
      "Most Recent Developments Energy and Water Development funding for FY2009 was included in the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ). Appropriations for these programs in P.L. 111-8 totaled $40.549 billion, including $7.5 billion for Advanced Technical Vehicles Manufacturing Loans in the Department of Energy. In addition, the American Recovery and Reinvestment Act (the \"Stimulus\" Act, P.L. 111-5 ) included $44.325 billion to fund numerous programs in the Corps of Engineers, the Bureau of Reclamation, and the Department of Energy, to be expended in FY2009 and FY2010.",
      "  President Obama's proposed FY2010 budget for Energy and Water Development programs was released in May 2009. The House Appropriations subcommittee on energy and water development marked up the FY2010 bill on June 25, 2009, and the full committee voted to report the bill ( H.R. 3183, H.Rept. 111-203 ) on July 8. The House passed the bill, including several amendments, July 17.  The Senate subcommittee marked up its bill July 8, and the full Senate Appropriations Committee reported the bill ( S. 1436, S.Rept.",
      " 111-45 ) on July 9. The Senate passed its version of H.R. 3183, incorporating the provisions of S. 1436, with amendments, on July 29. The Conference Committee reported out H.R. 3183 on September 30 ( H.Rept. 111-278 ) and the House passed it October 1 and the Senate October 15. It was signed by the President October 28 ( P.L. 111-85 ). Status Overview The Energy and Water Development bill includes funding for civil works projects of the U.S. Army Corps of Engineers (Corps), the Department of the Interior's Central Utah Project (CUP)",
      " and Bureau of Reclamation, the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC).  Table 2 includes budget totals for energy and water development appropriations enacted for FY2002 to FY2009.  Table 3 lists totals for each of the bill's four titles. It also lists the total of several scorekeeping adjustments. Tables 4 through 1 4 provide budget details for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Department of Energy), and Title IV (independent agencies)",
      " for FY2009-FY2010. Accompanying these tables is a discussion of the key issues involved in the major programs in the four titles. Title I: Army Corps of Engineers Recent Agency Appropriations Annual Appropriations  In most years, the budget request for the Army Corps of Engineers is below the agency's final appropriations. The conference report would appropriate $5.445 billion, which is $0.320 billion above the Obama Administration's budget request of $5.125 billion and $0.043 billion above the $5.402 billion appropriated for FY2009. The House bill would have appropriated $5.540 billion;",
      " the Senate bill would have appropriated $5.405 billion. Supplemental Appropriations  Regular annual appropriations for the Corps' civil works activities have been regularly augmented since Hurricane Katrina, through supplemental appropriations and through the American Recovery and Reinvestment Act of 2009. For example, in the Supplemental Appropriations Act of 2008 ( P.L. 110-252 ), the agency received $5.761 billion in FY2009 funds for Louisiana hurricane protection. The American Recovery and Reinvestment Act of 2009 provided an additional $4.6 billion to the agency for FY2009 and FY2010. The Supplemental Appropriations Act of 2009,",
      " P.L. 111-32, provided the Corps $0.797 billion in supplemental FY2009 appropriations.  An Agency Budget Composed Mainly of Projects Unlike highways and municipal water infrastructure programs, federal funds for the Corps are not distributed to states or projects based on a formula or delivered via a competitive program. Generally about 85% of the appropriations for the Corps' civil works activities is directed to specific projects. Many of these projects are identified in the budget request, and others are added during congressional deliberations of the agency's appropriations. As a result, the agency's funding is often part of the debate over earmarks. Generally,",
      " appropriations are not provided to studies, projects, or activities that have not been previously authorized, typically in a Water Resources Development Act (WRDA). Estimates of the backlog of authorized projects vary from $11 billion to more than $80 billion, depending on which projects are included (e.g., those that meet Administration budget criteria, those that have received funding in recent appropriations, those that have never received appropriations). The backlog raises policy questions, such as whether there is a disconnect between the authorization and appropriations processes, and how to prioritize among authorized activities. New Starts  The Obama Administration's request for the Corps includes new starts (i.e., activities not previously funded). For example,",
      " the request includes five new, but previously authorized, construction projects. This contrasts with the George W. Bush Administration's policy generally opposing new starts in order to focus funds on completing ongoing activities. Congress funded new starts during the G.W. Bush years. The House bill supports the Obama Administration's request on new starts and adds 20 new projects not requested by the Administration. The Senate Appropriations Committee concluded in its report ( S.Rept. 111-45, p. 15) that new starts in the current budget environment would be imprudent. It is unclear how many new starts are in the H.Rept. 111-278.",
      " Key Policy Issues\u2014Corps of Engineers Inland Waterway Trust Fund The Inland Waterway Trust Fund (IWTF) has a looming deficit; needed funding for eligible ongoing work has exceeded the incoming collections. Collections have been roughly $100 million per year, but the outlays more than $200 million. Current law establishes the expenses associated with construction and major rehabilitation of inland waterways as a federal responsibility (i.e., no local cost-share), with 50% of the federal monies coming from the IWTF and 50% from the federal general revenue fund. The IWTF monies derive from a fuel tax (not indexed for inflation)",
      " imposed on vessels engaged in commercial transportation on designated waterways, plus investment interest on the balance.  The Obama Administration's budget request included a legislative proposal to authorize a lock usage fee to replace the current fuel tax, which previously had been proposed by the Bush Administration. This proposal is included in neither the House nor the Senate bill. The House identified addressing the insolvency of the IWTF as the most immediate navigation need, but did not include legislative language to address the need. The Senate Committee report discussed alternatives to the Administration's proposal, but it did not propose legislative changes. Instead, S.Rept. 111-45 stated: \"A solution to this problem must be developed with the users of the system,",
      " the Corps and the appropriate authorizing committees of the Congress.\" The conference report directed the Administration to report by April 2010 on the status of the fund and to identify a list of priority projects with supporting information. Like the House bill and the Senate bill, the conference bill would prohibit funds in the bill to be used for awarding any new continuing contracts that commit additional IWTF funds until the insolvency issue has been resolved.  Everglades The Corps plays a significant coordination role in the restoration of the Central and Southern Florida ecosystem. In addition to funding for Corps activities through Energy and Water Development appropriations, federal activities in the Everglades are also funded through Department of the Interior appropriations bills.",
      " Concerns regarding the level of appropriations across the federal agencies and the State of Florida and progress in the restoration effort are discussed in CRS Report RS20702, South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan, by [author name scrubbed] and [author name scrubbed]. The FY2010 Obama Administration request for the Corps' south Florida Everglades restoration work totals $214.5 million. The conference bill provides $180 million for Everglades restoration. The House bill would have appropriated $210.2 million for Everglades restoration; the Senate bill would have provided $163.4 million. None of the bills would appropriate funds to the Modified Water Deliveries Project,",
      " with the direction for the project to be funded through the Department of Interior. Post-Katrina Gulf Coast Hurricane Protection  The Corps is responsible for much of the repair and fortification of the hurricane protection system of coastal Louisiana, particularly in the New Orleans area. To date, most of the Corps' work on the region's hurricane protection system has been funded through $15 billion in emergency supplemental appropriations, not through the annual appropriations process. In addition to the post-hurricane emergency repairs, these funds are being used for construction of levees, floodwalls, storm surge barriers, and pump improvements to reduce the hurricane flooding risk to the New Orleans area to a 100-year level of protection (i.e., protection against a storm surge of an intensity that has 1%",
      " probability of occurring in a given year) and to restore and complete hurricane protection in surrounding areas to previously authorized levels of protection by 2011. The Supplemental Appropriations Act of 2009, P.L. 111-32, provided the Corps $0.439 billion in supplemental FY2009 appropriations for barrier island restoration and ecosystem restoration for the Mississippi Gulf Coast. Title II: Department of the Interior Central Utah Project and Bureau of Reclamation: Budget in Brief The Obama Administration requested $42.0 million for the Central Utah Project (CUP) Completion Account, the same amount as appropriated for FY2009. The FY2010 request for the Bureau of Reclamation totals $1,",
      "020.7 million in gross current budget authority. This amount is $55.1 million less than enacted for FY2009. The FY2010 request included an \"offset\" of $35.1 million for the Central Valley Project (CVP) Restoration Fund (Congress does not list this line item as an offset), yielding a \"net\" discretionary authority of $985.7 million. Another $117.3 million is estimated to be available for FY2010 via \"permanent and other\" funds, for a grand total of $1.1 billion for FY2010. The total discretionary budget request (not including the CVPRF offset)",
      " for Title II funding\u2014Central Utah Project and Reclamation\u2014is $1.06 billion. The House-passed bill includes approximately $1.08 billion for Title II funding; the Senate bill would appropriate $1.17 billion. The conference report includes approximately $1.13 billion, slightly more than enacted under the regular appropriations bill for FY2009. Reclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, the Dam Safety Program, Water and Energy Management Development, and Fish and Wildlife Management and Development, among others. The Obama Administration requested $893.1 million for the Water and Related Resources Account for FY2010.",
      " This amount is $27.1 million (approximately 3%) less than enacted for FY2009. The House bill includes $910.3 million for the Water and Related Resources Account\u2014roughly $17 million more than requested; the Senate bill would appropriate $993.1 million\u2014$100 million more than requested. The conference agreement includes $951.2 million for the account, roughly $31.0 million more than enacted in the FY2009 regular appropriations bill and approximately $58 million more than requested for FY2010. Key Policy Issues\u2014Bureau of Reclamation Background Most of the large dams and water diversion structures in the West were built by,",
      " or with the assistance of, Reclamation. Whereas the Army Corps of Engineers built hundreds of flood control and navigation projects, Reclamation's mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs in 17 western states. These projects provide water to approximately 10 million acres of farmland and a population of 31 million. Reclamation is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control,",
      " recreation, and fish and wildlife benefits. At the same time, operations of Reclamation facilities are often controversial, particularly for their effect on fish and wildlife species and conflicts among competing water users. As with the Corps of Engineers, the Reclamation budget is made up largely of individual project funding and relatively few \"programs.\" The House Committee on Appropriations noted that despite Reclamation's past achievements, the agency has become a \"caretaker agency\" and has not exerted leadership in the provision of water supply or maintaining the West's existing water supply infrastructure. The House Appropriations Committee notes that the combined challenges of balancing competing needs, increasing demand for water supply,",
      " and changing hydrology will require active leadership in western water resource management.  Central Valley Project (CVP) Operations The CVP in California is one of Reclamation's largest and most complex water projects. Recently, Reclamation has had to limit water deliveries and pumping from CVP facilities due to drought and other factors, including environmental restrictions. This action has resulted in several amendments including attempts to prevent Reclamation from implementing new Biological Opinions (BiOps) on the effect of project operations on certain fish species. For example, Representative Calvert offered an amendment to prohibit Reclamation or any state agency from restricting operations of the CVP or State Water Project (SWP)",
      " due to recent BiOps on project operations. The two BiOps in question have found that continued operation of the projects under a plan developed and implemented in 2004 (Operations Criteria and Plan (OCAP)) would jeopardize the existence of both Delta Smelt and salmon (and other) species in California. These species are protected under the federal Endangered Species Act (ESA) and the California Endangered Species Act. OCAP allowed increased pumping from the Delta, which some believe has further imperiled fish species listed as threatened or endangered under ESA long before the increased pumping plan went into effect. Others note that other factors such as invasive species,",
      " pollution, and non-federal withdrawals of water from the Delta have contributed to fishery declines. Critically low numbers of Delta Smelt resulted in a court-imposed limit on pumping at certain times and more recently, a new review of project operations and impacts on the economy and species. In the meantime, low water deliveries to certain water districts (e.g., those with junior water rights) are exacerbating unemployment in an area with an economy already challenged by changes in the farming industry, the downturn in housing and financial sectors, and the economy in general. The Calvert amendment was defeated by a vote of 25 to 33. Similar amendments were proposed for several other appropriations bills,",
      " in the House. And a similar amendment via a motion to recommit the annual Interior, Environment, and Related Agencies appropriations bill in the Senate was not successful. However, two other amendments related to Delta pumping restrictions passed during House consideration of the bill: one providing an additional $10 million for the California Bay-Delta Restoration Program (changed to $9 million in conference), and another including language to facilitate water transfers. The latter amendment was subsequently modified and appears as Section 211 of the conference agreement, providing for a two-year authorization of water transfers among certain CVP contractors without meeting particular conditions established by the Central Valley Project Improvement Act (Title 34 of P.L.",
      " 102-575 ). CALFED and the Central Valley Project Restoration Fund (CVPRF) The Administration requested $31.0 million for the California Bay-Delta Restoration Account (Bay-Delta, or CALFED) for FY2010. This request is $9.0 million less than the $40.0 million enacted for FY2009. The bulk of the requested funds is targeted at five program areas: (1) water use efficiency ($5.0 million); (2) water quality ($5.0 million); (3) water storage ($4.05 million); (4) conveyance ($4.1 million); and ecosystem restoration ($7.",
      "85 million). The remainder of the request is allocated for science, planning, and management activities. In a departure from previous years, the Administration requested no funding for the \"Environmental Water Account\" and instead applied $5.0 million of the FY2010 CALFED request to \"water use efficiency,\" $3.0 million of which is for the Bay Area Regional Water Recycling Program. In prior years, such recycling programs and projects (Title XVI projects) have been included in the Water and Related Resources Account. Funding for three CALFED subaccounts declined substantially (storage, conveyance, and EWA), while funding for water use efficiency and ecosystem restoration increased substantially.",
      " (For more information on CALFED, see CRS Report RL31975, CALFED Bay-Delta Program: Overview of Institutional and Water Use Issues, by [author name scrubbed] and [author name scrubbed].)  The conference agreement provides $40 million for CALFED, which is $9 million more than requested, but $1 million less than recommended in the House and Senate bills. The conference agreement provides $35.4 million for the CVPRF; the same amount as requested for FY2010. The conference agreement also includes a provision (Section 210) extending the CALFED authorization from 2010 to 2014.",
      "  Requested funding for both the Central Valley Project Restoration Fund (CVPRF) and CALFED are lower than for FY2009. The House Appropriations Committee notes that the lower amount for the CVPRF is done to meet a statutory requirement to limit the three-year rolling average to no more than $50 million and does not represent an intent to reduce funding in future years. Both funds serve areas in California experiencing water supply reductions due to drought, as well as pumping restrictions due to stress on state- and federally listed fish species.  San Joaquin River Restoration Fund Reclamation proposed an allocation of $15.9 million for the newly authorized San Joaquin River Restoration Fund for FY2010.",
      " The Fund was authorized by the enactment of Title X of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ), the San Joaquin River Restoration Settlement Act. The Fund is to be used to implement fisheries restoration and water management provisions of a stipulated settlement agreement for the Natural Resources Defense Council et al. v. Rodgers lawsuit and is to be funded through the combination of a reallocation of approximately $7.5 million annually in Central Valley Project Restoration Fund receipts from the Friant Division water users and accelerated payment of Friant water users' capital repayment obligations, as well as other federal and non-federal sources.",
      " Reclamation notes that \"significant actions planned for initiation in FY2010 include releasing interim flows from Friant Dam and completion of a permit application for the reintroduction of spring-run Chinook salmon into the San Joaquin River for consideration by the National Marine Fisheries Service.\" Construction of Friant Dam in the 1940s and subsequent diversion of San Joaquin River water to off-stream agricultural uses blocked salmon migration and dewatered stretches of the San Joaquin, resulting in elimination of spring-run Chinook into the upper reaches of the river. One goal of the settlement is to bring back the salmon run; another is to reduce or avoid adverse water supply impacts to Friant Division long-term contractors.",
      " (For more information on the settlement agreement and the San Joaquin River Restoration Fund, see CRS Report R40125, Title X of H.R. 146: San Joaquin River Restoration, by [author name scrubbed] and [author name scrubbed].) The Senate bill would appropriate $7.0 million in CVP funding for the San Joaquin River Restoration, to be used in conjunction with and in advance of funds available from the San Joaquin River Restoration Fund. The conference agreement includes $5.0 million for this purpose. Water Conservation Initiative  Reclamation proposed funding for a new program for FY2010\u2014a Water Conservation Initiative (WCI). The proposal is similar to components of a program funded in FY2009\u2014the Water for America Initiative.",
      " P.L. 111-8 provided $15.1 million for the Reclamation portion of the Water for America Initiative line item for FY2009 (the USGS was also to receive funding under the initiative); an additional $20.1 million was included for Endangered Species Recovery Implementation. The FY2010 request does not mention the Water for America Initiative. Instead, it includes a request of $46 million for the WCI, which includes $37 million for two components of last year's Water for America initiative (challenge grants and basin studies), and $9 million to fund portions of seven Title XVI projects (not included as part of the Water for America Initiative last year). The Water for America Initiative subsumed two previously existing Reclamation programs:",
      " Water 2025 (challenge grants) and the Water Conservation Field Services program. The House Committee on Appropriations report did not discuss the WCI; however, the report notes that $100,000 will be provided for each Title XVI project pending the announcement of American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) funding and accurate projections of project needs. Reclamation has announced $134.3 million in ARRA funding for 27 projects\u201426 of which are in California. The Senate Committee on Appropriations encourages Reclamation to work with a lab at Utah State University to expand water quality monitoring among other things,",
      " as does the conference agreement. Title III: Department of Energy The Energy and Water Development bill has funded all DOE's programs since FY2005. Major DOE activities historically funded by the Energy and Water bill include research and development on renewable energy and nuclear power, general science, environmental cleanup, and nuclear weapons programs, and the bill now includes programs for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, and energy statistics, which formerly had been included in the Interior and Related Agencies appropriations bill. The FY2009 appropriations acts funded DOE programs at $34.2 billion. This sum included $7.5 billion for Advanced Technical Vehicles Manufacturing Loans,",
      " appropriated in the Continuing Resolution, P.L. 110-329. In addition, the ARRA ( P.L. 111-5 ) appropriated $38.7 billion for selected DOE programs: primarily Conservation and Renewable Energy, Electricity Delivery, Fossil Energy R&D, Science, and Environmental Clean-up.  Key Policy Issues\u2014Department of Energy DOE administers a wide variety of programs with different functions and missions. In the following pages, the most important programs are described and major issues are identified, in approximately the order in which they appear in Table 7. Energy Efficiency and Renewable Energy (EERE) In President Obama's address to a joint session of Congress on February 24,",
      " 2009, he stressed that energy policy\u2014in particular energy efficiency and renewable energy policy\u2014would be a major focus of his Administration, which would be reflected in the FY2010 budget request. In the address, he stated that humankind's \"survival depends on finding new sources of energy\" and that one of the major functions of the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) was designed to boost jobs for renewable energy industries such as wind and solar energy.  DOE's FY2010 request seeks $2.3186 billion for the EERE programs. Compared with the FY2009 appropriation,",
      " the FY2010 request would increase EERE funding by $390.1 million, or 20.2%. In addition to the regular FY2009 appropriation, however, the ARRA appropriated $17.05 billion (including $250 million provided for the Weatherization Program in P.L. 110-329 ) for EERE programs, and an additional $4.5 billion for Electricity Delivery and Energy Reliability. Table 8 gives the programmatic breakdown of the regular appropriations and the ARRA supplement for EERE and EDER.  American Recovery and Reinvestment Act (P.L. 111-5) The ARRA emphasizes jobs,",
      " economic recovery, and assistance to those most impacted by the recession.  The law provides $16.8 billion for several program accounts under EERE, which must be obligated during FY2009 and FY2010. In particular, it provides $2.5 billion for the R&D programs, including $800 million for the Biomass Program, $400 million for the Geothermal Program, $118 million for Wind Energy, $50 million for Industrial Technologies, $43.4 million for Fuel Cell Technologies (formerly Hydrogen Technologies), $87.2 million for Facilities and Infrastructure, and $50 million for Program Direction. Further, the law provides $11.",
      "3 billion for grant programs, including $5.0 billion for the Weatherization Grants Program, $3.1 billion for the State Energy Program, and $3.2 billion for the Energy Efficiency and Conservation Block Grant Program\u2014a new program authorized by Title V of the Energy Independence and Security Act of 2007 (EISA). Additionally, the law provides about $3.65 billion in transportation related grants, including $2.0 billion for Advanced Battery Manufacturing, $400 million for Transportation Electrification, $300 million for Alternative Fueled Vehicles. Also, the law provides $4.5 billion to the Office of Electricity Delivery and Energy Reliability for grid modernization and related technologies,",
      " especially transmission development to support renewable energy. That amount includes funds for the smart grid and grid modernization provisions in the EISA (Title 13). Regular FY2009 and FY2010 Appropriations Compared The $390.1 million difference between the regular FY2009 appropriation and the FY2010 request results from several proposed increases and decreases for EERE programs. The request proposes one major increase, $115 million, that would create a new science and engineering education program entitled Regaining our Energy Science and Engineering Edge (RE-ENERGYSE). Other major proposed program funding increases would go to Solar Technologies ($145 million), Building Technologies ($97.",
      "7 million), Vehicle Technologies ($60.1 million), and State Energy grants ($25.0 million). Other proposed major cuts would include Congressionally-Directed Activities (-$228.8 million) and Fuel Cells (-$100.7 million). Smaller proposed program cuts would include Facilities (-$13.0 million), Water Technologies (-$10.0 million), and Renewable Deployment (-$10.0 million). The House bill includes $2.250 billion for EERE, which is $321.5 million more than the FY2009 appropriation and $68.6 million less than the FY2010 request. Compared with the request,",
      " the House bill would provide major increases for Congressionally Directed Activities ($157.6 million) and for Vehicle Technologies ($40.0 million). The bill decreases RE-ENERGYSE by 107.5 million, Program Management by $69.1 million, Solar Technologies by $61.3 million, and Building Technologies by $27.2 million. In floor action, the House approved a $15.0 million increase over the reported bill, including $10.0 million more for the Water Power Technologies program and $5.0 million more for the Vehicle Technologies program, targeted for natural gas vehicles. The Senate bill would appropriate $2.",
      "233 billion for EERE, $304.5 million more than the FY2009 appropriation and $17.0 million less than the House bill. Compared with the House bill, the Senate bill would provide a major increase for Hydrogen/Fuel Cell Technologies ($121.8 million) and significant increases for Water Power Technologies ($30.0 million) and Wind Technologies ($15.0 million). The Senate bill would zero out the DOE-proposed RE-ENERGYSE program. Compared to the House bill, the Senate would decrease Program Management by $64.4.5 million, Vehicle Technologies by $50.0 million, state energy grants by $25.",
      "0 million, and weatherization grants by $20.0 million. In floor action, the Senate approved an amendment to the reported bill that would designate $15.0 million of the funding for Industrial Programs for technical assistance grants. Solar Energy Program Increase The request would nearly triple spending for the Concentrating Solar Power (CSP) program and proposed three new solar subprogram focus areas: Systems Integration, Market Transformation, and the Solar Electricity Energy Innovation Hub. Two new subprogram activities would garner most (about $39 million) of the $54.1 million increase proposed for CSP funding. About $17 million would be provided for a high-",
      "temperature baseload power activity, which aims to develop CSP systems capable of operating competitively in the baseload power market by 2020. Meeting this goal would require CSP systems that operate at higher temperatures, which elevates system efficiency and enables cost reductions for thermal storage. About $22 million would be provided for a \"Pilot Solar Zone.\" Under this activity, a land parcel would be developed in a way that facilitates the construction of utility-scale solar projects. The activity calls for DOE cooperation with the Bureau of Land Management (BLM) and solar developers to devise a model for addressing infrastructure (roads, water, transmission linkages) and conducting environmental studies.",
      " The Systems Integration subprogram would receive a boost of $17.5 million to cover three main activities. System Modeling and Analysis assesses potential annual energy production based on pilot (model) projects, for example, photovoltaic system operations in a region with cloudy weather. Grid Integration activities focus on enabling high-penetration solar integration into end-use locations and the power grid, with an emphasis on life-cycle costs for inverters, storage, and other equipment. Grid access for CSP will be a key focus too. Resource and Safety activities aim to improve solar resource mapping and help industry select sites. Market Transformation, a completely new subprogram, would aim to help reduce solar power costs and promote commercial use of solar technologies by identifying and breaking down market barriers and promoting deployment through stakeholder outreach.",
      " Some targeted areas of market barriers include interconnection standards, net metering, utility policies, solar access laws, policymaker understanding of solar technologies, and international safety issues. The subprogram would also aim to promote large-scale solar deployment. The Solar America Cities activity would assist 25 U.S. cities that have committed to using solar power by addressing implementation issues such as financing, permitting, city planning, stakeholder engagement, and grid integration. Also, the Solar America Showcases activity would provide technical assistance (not hardware purchases) to large-scale, high-visibility installations, such as new building communities, big box retailer installations, and utility-scale solar.",
      " The Solar Policy and Analysis Network (SPAN) is a new market transformation activity proposed for launch in FY2010. SPAN would help fulfill the need for analysis on local, state, regional, national, and international policies that promote solar market transformation by tapping into the expertise of the Nation's universities. In addition, SPAN aims to further solar professional development by attracting and educating a new generation of university students who can join the solar industry in various capacities. Energy Innovation Hubs would address the basic science, technology, economics, and policy issues hindering the ability to become energy secure and economically strong while being good stewards of the planet by reducing greenhouse gas (GHG)",
      " emissions. The main focus of the Hub is to push the current state-of-the-art energy science and technology toward fundamental limits and support high-risk, high-reward research projects that produce revolutionary changes in how the United States produces and uses energy. The objective is to focus a high-quality team of researchers on a specific question and to encourage risk taking that can produce real breakthroughs. The Solar Electricity Energy Innovation Hub would be devoted to the discovery and design of wholly new concepts and materials needed by solar to electricity conversion. The House bill would provide $258.7 million for Solar programs, about $61.3 million less than the request. No funding would be provided for the Solar Electricity Energy Innovation Hub.",
      " More generally, the Appropriations Committee's report expressed concern with DOE's proposal to establish eight Energy Innovation Hubs. The Committee found that the proposed new group of centers would have goals that overlap with other existing centers, which could lead to \"confusion and redundancy.\" Further, the Committee found that there has been insufficient development of plans and implementation details for the proposed Hubs. However, the Committee said that it otherwise \"believes that the Hubs are a promising concept,\" and it recommended $35 million to establish one Hub under the Office of Science. The Senate bill would appropriate $255.0 million for Solar Technologies. From the amount provided,",
      " the report directed DOE to provide $30.0 million for Concentrating Solar. Also, the Committee \"encourages\" DOE to support R&D on \"innovative textiles,\" such as solar cell roofing shingles. The Committee directed DOE to develop the PV Manufacturing Initiative consistent with the findings of workshops being conducted by the National Academy of Sciences. It also encouraged DOE to use an existing facility for the Initiative. In floor action, the Senate adopted the Committee's funding recommendations. The conference report would appropriate $225.0 for the Solar Technologies Program. Funding would be provided for Concentrating Solar. No funding would be provided for the Solar Electricity Energy Innovation Hub.",
      " Building Technologies Program Increase Of the $97.7 million increase proposed for the Building Technologies program, the Emerging Technologies subprogram would get nearly half ($48.9 million). Within that subprogram, the proposed creation of an Energy Innovation Hub would get $35.0 million. The main focus of the Hub would be on energy efficient building systems design. This Hub would work on integrating smart materials, designs, and systems to tune building usage to better conserve energy, as well as maximizing the functioning of lighting, heating, air conditioning, and electricity to reduce energy demand. Other areas of interest include improved exterior shell materials, membranes of energy efficient windows,",
      " insulation, improved approaches to building design, systems control, and energy distribution networks. The Residential Buildings Integration subprogram would get an increase of $18.1 million. The main goal is to develop cost effective, production-ready systems in five major climate zones that result in houses that produce as much energy as they use on an annual basis. The Zero Energy Home (ZEH) initiative in residential sector research would bring a new concept to homebuilders. A ZEH combines state-of-the-art, energy efficient construction and appliances with commercially available renewable energy systems such as solar water heating and solar electricity. The ZEH also has a cost component goal of net zero financial cost to the home owner.",
      " The Senate Appropriations Committee recommended no funds for the proposed Equipment Standards and Analysis Hub. In floor action, the Senate approved the Committee's recommendation. The conference report recommends $200.0 million and noted that $27.0 million should be provided for solid state R&D from within available funds. No funding would be provided for the Energy Efficient Building Systems Design Innovation Hub. Vehicle Technologies Program Increase Of the $60.1 million requested increase, the largest share (a net increase of nearly $39.0 million) would go to Hybrid Electric Systems. This subprogram includes all of the Vehicle Program efforts directly related to the planning and modeling, development,",
      " and evaluation of advanced hybrid (HEV), electric, and plug-in hybrid (PHEV) drive systems. The Hybrid Electric Systems subprogram funds R&D on advanced (passenger and commercial) vehicle technologies that could achieve significant improvements in fuel economy without sacrificing safety, the environment, performance, or affordability. Primary emphasis is given to the technologies that support development of advanced HEVs and PHEVs. Within that subprogram, the Vehicle and Systems Simulation and Testing (VSST) activity would grow by about $32.2 million. This activity integrates the modeling, systems analysis, and testing efforts that support the Vehicle Program. The FY2010 increase would support expanded heavy vehicle systems modeling and development of technologies to reduce commercial vehicles'",
      " \"parasitic\" energy losses due to aerodynamic drag, friction and wear, under-hood thermal conditions, and accessory loads. It will also support increased testing of both commercial vehicles and passenger vehicles. A portion of the increase will also be used to expand the laboratory and field evaluation of advanced prototype and pre-production electric drive vehicles with dual energy storage systems and other advanced energy storage devices, electric motor and power electronics. VSST will also expand the evaluation of advanced HEVs and PHEVs in medium and heavy duty uses such as school buses, urban delivery vehicles, and transit buses. Also within the Hybrid Electric Systems subprogram, the Advanced Power Electronics and Electric Motor R&D activity would get an increase of about $12.",
      "7 million. In FY2010, a new solicitation would be issued to fund industry R&D efforts to develop power electronics and electric motors associated with increased vehicle electrification. DOE states that electrification of light-duty vehicles has great potential to reduce dependence on oil imports, and advanced power electronics and electric motors are critical components for the successful deployment of advanced vehicles. The awards would enable substantial reductions in cost, weight, and volume, while ensuring a domestic supply chain. Emphasis would be placed on R&D for advanced packaging, enhanced reliability, and improved manufacturability. Awards would also accelerate the technology transfer from research organizations to domestic manufacturers and suppliers.",
      " The activity also supports R&D on inverters and motors (permanent magnet (PM) and non-PM), DC-to-DC converters, low-cost magnet materials, high temperature capacitors, advanced thermal systems, and motor control systems. Work would be expanded to address the more stringent performance requirements for PHEVs, including using the power electronics to provide plug-in capability by integrating the battery charging function into the traction drive, thereby reducing electric propulsion system cost. Activities focusing on advanced materials will be enhanced to enable the production of prototype devices to accelerate the process of transferring research results to device manufacturers. The House bill would appropriate $40 million above the request.",
      " This increase would support technologies for hydrogen transportation, in order to continue activities that the request would eliminate from the former Hydrogen Technologies Program which DOE identified as the Fuel Cell Technologies Program. In floor action, the House approved the Committee's recommendation. However, a floor amendment added $5.0 million targeted for the development of natural gas vehicles. The Senate bill would zero out the Fuel Cells account, but would provide $190.0 million for the Hydrogen Technologies account and directed that DOE fund Fuel Cell work from that account. The conference report would provide $7.5 million for coordination with the Biomass Program to support testing of intermediate fuel blends of ethanol and gasoline;",
      " $5.0 million for natural gas vehicle R&D, and $2.2 million (within available funds) for an analysis of light-duty vehicle transportation. The report does not include $40.0 million for hydrogen (as proposed by the House) and it does not include a study of recharging options (as proposed by the Senate).  Other EERE Directives The House Appropriations Committee report calls on DOE to continue the effort to study the \"green job economy,\" including the employment and macroeconomic effects of funding for DOE's clean energy programs. Also, it directs DOE to \"continue implementing an aggressive program\" to recruit staff from Historically Black Colleges and Universities and Hispanic Serving Institutions.",
      " The Senate Appropriations Committee report includes numerous directives for EERE. There appear to be four key directives. First, the Committee directs that at least $35 million be provided for an RD&D strategy focused on algae biofuels. In particular, the Committee finds that algae could support large-scale biofuels production on non-arable land, using non-potable water, and potentially provide for the re-use of industrial carbon dioxide. Second, the Committee directs that the Wind Energy Program work with the Office of Electricity (OE) to increase deployment nationwide. Third, if DOE is able to fund certain facilities projects with money from ARRA, then the Committee said it would support DOE in using $44 million to fund its proposed Fuels from Sunlight and Energy Efficient Building Systems hubs at $22 million each.",
      " Fourth, from available funds under the Weatherization Program, the Committee directs DOE to use $35 million for a pilot project to improve home insulation and sealing in homes built before 1980 and $35 million for a pilot project that aims to use public private partnerships to increase the leverage of federal funds from less than even to $3 private for each $1 federal. Several other program directives would \"carve out\" funds for specific projects or studies, including ethanol use, water power technologies, geothermal technologies, and renewable energy demonstrations in Hawaii and on tropical biomass farms. The conference report would direct that at least $35.0 million be made available,",
      " from within available funds, to prepare a comprehensive strategy for R&D and deployment algae biofuels. It would require DOE to prepare a five-year R&D plan for water power technologies. Also, the report would provide $292.1 million for congressionally directed activities. The report does not include a House-proposed reporting requirement to track the progress and impact of EERE investments.  Electricity Delivery and Energy Reliability Program The FY2010 request would provide $208.0 million to the Office of Electricity Delivery and Energy Reliability (OE), which would be a $71.0 million (51.8%) increase above the FY2009 appropriation (excluding the ARRA funding). The increase is designed to coordinate with a major restructuring of the accounts to include four new major programs:",
      " Clean Energy Transmission and Reliability, Smart Grid R&D, Energy Storage, and Cyber Security for Energy Delivery Systems. The House bill provision is identical to the request. In floor action, the House reduced the OE recommendation to $193.0 million. The Senate bill would appropriate $179.6 million. The Committee recommended no funding for the Grid Materials, Devices, and Systems Hub and would provide $6.5 million for congressionally directed activities. The conference report would provide $172.0 million for OE. No funds would be provided for the Grid Materials, Devices, and Systems Hub. Nuclear Energy The Obama Administration's FY2010 funding request for nuclear energy research and development totals $761.",
      "3 million\u2014including advanced reactors, fuel cycle technology, infrastructure support, and security. The House provided $812.0 million, $50.4 million above the request and $20.0 million above the FY2009 level. The total FY2010 funding level approved by the Senate is the same as the Administration request. According to DOE's FY2010 budget justification, the nuclear energy R&D program includes \"generation, safety, waste storage and management, and security technologies, to help meet energy and climate goals.\" However, opponents have criticized DOE's nuclear research program as providing wasteful subsidies to an industry that they believe should be phased out as unacceptably hazardous and economically uncompetitive.",
      " Although total funding in the FY2010 nuclear energy request is similar to levels in previous years, the Obama Administration is calling for significant priority changes. Funding for the Nuclear Power 2010 Program, which assists the near-term design and licensing of new nuclear power plants, would be largely eliminated. Research on producing hydrogen with nuclear reactors would stop entirely. The Advanced Fuel Cycle Initiative (AFCI), which had been the primary research component of the Bush Administration's Global Nuclear Energy Partnership (GNEP), would be renamed Fuel Cycle Research and Development and shifted away from the design and construction of nuclear fuel recycling facilities toward an emphasis on longer-term research.",
      " The House Appropriations Committee report called for DOE to submit a strategic plan on balancing long-term nuclear R&D with near-term deployment of new reactors. Funding for the Mixed Oxide Fuel Fabrication Facility, which is to help dispose of surplus weapons plutonium, would be shifted from DOE's Office of Nuclear Energy to the Defense Nuclear Nonproliferation Program. Nuclear Power 2010 Under President Bush, DOE's initial efforts to encourage near-term construction of new commercial reactors\u2014for which there have been no new U.S. orders since 1978\u2014focused on the Nuclear Power 2010 Program. The program provided up to half the costs of licensing lead plant sites and reactors and preparing detailed reactor designs.",
      " Nuclear Power 2010 also includes the Standby Support Program, authorized by the Energy Policy Act of 2005 ( P.L. 109-58 ) to pay for regulatory delays that might be experienced by new reactors. The Obama Administration proposed to cut the Nuclear Power 2010 Program's funding from $177.5 million in FY2009 to $20 million in FY2010 and then terminate the program. Administration of the Standby Support Program was to continue under the Office of Nuclear Energy program direction account. The House approved a funding level of $71.0 million for the program, to \"complete the Department's commitment to this effort.\" The Senate voted to provide $120 million for the program,",
      " with no mention of program termination. The conference agreement provides $105.0 million \"as the final installment\" for the Nuclear Power 2010 program. DOE's budget justification contended that industry interest in new nuclear power plants has now been demonstrated to the extent that federal funding is no longer needed. The $20 million requested for FY2010 was to provide the final assistance to an industry consortium called NuStart for licensing a new reactor at the Vogtle plant in Georgia. No further funding was to be provided for a second industry consortium led by Dominion Resources, or for the design of General Electric-Hitachi's ESBWR reactor or the Westinghouse AP-",
      "1000 reactor. \"By FY 2010 sufficient momentum will have been created by the cost-shared programs that the vendors (GEH and Westinghouse) and other partners will have adequate incentive to complete any additional work through private funding,\" according to the DOE justification. Generation IV Advanced commercial reactor technologies that are not yet close to deployment are the focus of Generation IV Nuclear Energy Systems, for which $191.0 million was requested for FY2010, $11 million above the FY2009 appropriation. The budget request would have cut $24 million from activities previously conducted by the program, a reduction that \"reflects the emphasis shifting from near-term R&D activities to those R&D activities aimed at long-term technology advances,\" according to the DOE justification.",
      " The request included $35 million to establish the Energy Innovation Hub for Modeling and Simulation, which would focus on computer assistance for the development, implementation, and management of nuclear power and radioactive waste. The House provided no funding for the Modeling and Simulation Hub, while boosting total Generation IV funding to $272.4 million. The Senate approved a funding level of $143 million, including the Modeling and Simulation Hub. The conference agreement provides $220.1 million, including $22.0 million for the Modeling and Simulation Hub. The focus in the budget request on \"long-term technology advances\" differed sharply from the program's previous emphasis on developing the Next Generation Nuclear Plant (NGNP). Most of the FY2009 appropriation\u2014$",
      "169.0 million\u2014was for NGNP research and development. NGNP is currently planned to use Very High Temperature Reactor (VHTR) technology, which features helium as a coolant and coated-particle fuel that can withstand temperatures up to 1,600 degrees Celsius. Phase I research on the NGNP was to continue until 2011, when a decision was to be made on moving to the Phase II design and construction stage, according to the FY2009 DOE budget justification. In its recommendation on the FY2009 budget, the House Appropriations Committee had provided additional funding \"to accelerate work\" on NGNP. DOE's proposed FY2010 nuclear research program did not mention NGNP,",
      " although it included several research activities related to the development of VHTR technology, including fuel testing, graphite experiments, and development of VHTR simulation software. Fundamental research on other advanced reactor concepts, such as sodium-cooled fast reactors and molten salt reactors, were also to continue. For FY2010, the House Appropriations Committee report noted that NGNP had been one of its priorities and specified that at least $245.0 million of the Generation IV funding be devoted to the project. The Senate Appropriations Committee FY2010 report did not specifically mention NGNP, but it called for DOE to select two advanced reactor technologies as the focus of future research and potential deployment.",
      " The conference agreement provides $169.0 million for NGNP and directs DOE within 90 days to prepare a detailed plan for moving forward with the NGNP project. The conference agreement also provides $17.8 million for other Generation IV reactor concepts and $10.0 million for research on extending the lives of existing light water reactors. No funding is provided for gas centrifuge enrichment technology. The Energy Policy Act of 2005 authorized $1.25 billion through FY2015 for NGNP development and construction (Title VI, Subtitle C). The authorization requires that NGNP be based on research conducted by the Generation IV program and be capable of producing electricity,",
      " hydrogen, or both. The act's target date for operation of the demonstration reactor is September 30, 2021. The FY2010 budget request anticipated that Generation IV reactors \"could be available in the 2030 timeframe.\" Fuel Cycle Research and Development Formerly called the Advanced Fuel Cycle Initiative, DOE's Fuel Cycle Research and Development program is to be redirected from the development of engineering-scale and prototype reprocessing facilities toward smaller-scale \"long-term, science-based research.\" The FY2010 budget request for the program was $192.0 million, nearly $50 million above the FY2009 level, although $35 million of that amount was to go toward establishing an Energy Innovation Hub for Extreme Materials.",
      " The House provided no funding for the Extreme Materials Hub and an overall reduction in the request to $129.2 million, citing \"the lack of specificity in terms of the direction of the research in this area.\" The Senate provided $145.0 million, the same as FY2009, and no funding for the Extreme Materials Hub. The conference agreement provides $136.0 million, with nothing for the Extreme Materials Hub. According to the DOE budget justification, Fuel Cycle R&D will continue previous research on technology that could reduce the long-term hazard of spent nuclear fuel. Such technologies would involve separation of plutonium, uranium, and other long-lived radioactive materials from spent fuel for reuse in a nuclear reactor or for transmutation in a particle accelerator.",
      " DOE plans to broaden the program to include waste storage technologies, security systems, and alternative disposal options such as salt formations and deep boreholes. R&D will also focus on needs identified by a planned DOE nuclear waste strategy panel, according to the justification. In previous years, AFCI had been the primary technology component of the Bush Administration's GNEP program, including R&D on reprocessing technology and fast reactors that could use reprocessed plutonium. Funding for GNEP was eliminated by Congress in FY2009 and GNEP was not mentioned in the FY2010 budget request, although, as noted above, much of the related R&D work is to continue at a smaller scale.",
      " The Energy Innovation Hub for Extreme Materials was intended to support fundamental research on advanced materials for use in high-radiation and high-temperature environments. Such materials could improve the performance of nuclear waste packages, allow advances in nuclear reactor designs, and improve the safety and operation of existing commercial reactors, according to the budget justification. (For more information about nuclear reprocessing, see CRS Report RL34579, Advanced Nuclear Power and Fuel Cycle Technologies: Outlook and Policy Options, by [author name scrubbed].) Nuclear Hydrogen Initiative The Obama Administration proposed to complete work being conducted under the Nuclear Hydrogen Initiative in FY2009 and provide no further funding in FY2010.",
      " The program, which received $7.5 million in FY2009, had been developing processes for producing hydrogen in nuclear reactors for use in transportation fuel cells and other applications. According to the DOE budget justification, funding for the Nuclear Hydrogen Initiative will be shifted to \"higher priority activities that are more directly related to the [Nuclear Energy Office] mission, such as waste management and storage, materials, and simulation.\" Both the House and the Senate agreed to zero out the program, as does the conference agreement. Fossil Energy Research, Development, and Demonstration For FY2010, the Obama Administration requested $617.6 million for Fossil Energy Research and Development;",
      " which represents a 29.5% decrease ($258.8 million) from the FY2009 appropriation ( Table 9 ). The FY2010 request, however, is supplemented by $3.4 billion appropriated under the American Recovery and Reinvestment Act of 2009 (ARRA\u2014 P.L. 111-5 ), which is to be expended in FY2009 and FY2010. No new funding has been requested for the Clean Coal Technology program, under the justification that all project funding commitments have been fulfilled and only project closeout activities remain.  No funding has been requested for the Clean Coal Power Initiative in FY2010 because of appropriations provided under ARRA.",
      "  No funding has been requested for the FutureGen project pending a program review. The project was originally intended to demonstrate clean coal-based Integrated Gasification Combined Cycle (IGCC) power generation with capture and sequestration of CO 2 emissions. However, in early 2008, after cost estimates for the project escalated to $1.8 billion, the Bush Administration restructured the program to focus exclusively on commercial application of Carbon Capture and Storage (CCS) technologies for IGCC or other advanced clean coal-based power generation technology. Under a \"Restructured FutureGen\" program, DOE proposed a cost-shared collaboration with industry and anticipated making a number of awards ranging from $100 million to $600 million (DOE share). For FY2009,",
      " the House Appropriations Committee directed DOE to merge FutureGen and the Clean Coal Power Initiative into a single solicitation for a Carbon Capture Demonstration Initiative, and that account was funded in ARRA at $1.52 billion. The FY2010 request has no funding for the Carbon Capture Initiative. The President's request for Fuels and Power has been reduced $288.5 million (42%) from the prior year appropriation. No funding has been requested for Oil Technology under the justification that it is the Obama administration's policy not to fund government R&D for petroleum. The $29.9 million increase in the request for Carbon Sequestration supports an Energy Innovation Hub.",
      " The $25 million requested for Natural Gas represents a 25% increase over the prior year appropriation (the Bush administration had requested no funding). The $158 million requested for Program Direction represents a 4% increase of the prior year appropriation, not counting the additional $10 million appropriated under ARRA. The House bill would appropriate $617.6 million for the Fossil Energy R&D program, the same as the President's budget request. However, the bill would reduce the carbon sequestration research by $35 million below the request, and would not fund the proposed Energy Innovation Hub. The bill also adds $25.45 million above the request for the Fuels program to fund research into the production of high purity hydrogen from coal.",
      " The Senate bill would appropriate $699.2 million for Fossil Energy R&D, a 13.2% increase over the President's budget request. The bill provided no funds for the Clean Coal Power Initiative and FutureGen because of substantial increases in the American Recovery and Reinvestment Act. The bill's $428.2 million for fuels and power systems is $24.3 million above the request, but Carbon Sequestration has been reduced $19.7 million below the request. The bill includes $5 million for Cooperative Research and Development.  In the Conference Report that accompanies H.R. 3183, conferees agree to provide $672.",
      "4 million for Fossil Energy R&D, out of which $36.9 million applies to Congressionally Directed Fossil Energy Projects. This represents a 23% ($204 million) reduction compared to FY2009's appropriation. Fuels and Power Systems, in particular, would receive $288.4 million less.  In the FY2009 Appropriations ( P.L. 111-8 ), $876.3 million was appropriated for fossil energy research and development, of which $149.0 million is to be derived by transfer from Clean Coal Technology. Of that total, $288.2 million is available for the Clean Coal Power Initiative Round III solicitation.",
      " Furthermore, $43.9 million of the appropriated amount is to be used for projects specified as Congressionally Directed Fossil Energy Projects. Under ARRA, $3.4 billion was appropriated for DOE fossil energy programs in FY2009. Funds under this heading include $1.0 billion for fossil energy research and development programs; $800.0 million for additional amounts for the Clean Coal Power Initiative Round III Funding Opportunity Announcement; $1.52 billion for a competitive solicitation for a range of industrial carbon capture and energy efficiency improvement projects, including a small allocation for innovative concepts for beneficial CO 2 reuse; $50.0 million for a competitive solicitation for site characterization activities in geologic formations;",
      " $20.0 million for geologic sequestration training and research grants; and $10.0 million for program direction. Strategic Petroleum Reserve The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in 1975, consists of caverns formed out of naturally occurring salt domes in Louisiana and Texas. Its current capacity is very nearly filled at 727 million barrels, and it is authorized at 1 billion barrels. The purpose of the SPR is to provide an emergency source of crude oil that may be tapped in the event of a presidential finding that an interruption in oil supply,",
      " or an interruption threatening adverse economic effects, warrants a drawdown from the reserve. A Northeast Heating Oil Reserve (NHOR) was established during the Clinton Administration. The NHOR houses 2 million barrels of home heating oil in above-ground facilities in Connecticut, New Jersey, and Rhode Island. Appropriations for the purchase of oil for the SPR ceased in the mid-1990s. Beginning in FY1999, fill of the SPR has been principally accomplished with deliveries of royalty-in-kind (RIK) oil to the SPR, in lieu of cash royalties on offshore production paid to the federal government. Loans of crude oil from the SPR to keep refineries supplied after recent hurricanes were returned with a greater volume of oil returned than was borrowed.",
      " On May 13, 2008, the House and Senate passed H.R. 6022 ( P.L. 110-232 ), suspending RIK fill unless the price of crude oil fell below a specified threshold. Fill was resumed with RIK oil during FY2009 after the precipitous drop in the price of oil. The Energy Policy Act of 2005 (EPACT) required expansion of the SPR to its authorized maximum of one billion barrels. Congress approved $205 million for the SPR program for FY2009, including $31.5 million to continue expansion activities at a site acquired during FY2008 in Richton,",
      " MS, that would eventually provide an additional 160 million barrels of capacity. The FY2010 budget request, at $229 million dollars, included $43.5 million for purchase of a cavern at Bayou Choctaw to replace a cavern posing environmental risks. The additional expense was to be offset by no new spending in FY2010 on expansion. The House approved the Administration request. The Senate Committee on Appropriations added $30 million to provide for engineering activities at the site chosen for expansion of the SPR in Richton, MS. The Committee expressed its position that it did not support any other activities at this time for expansion of the SPR.",
      " In conference, a Senate proposal was retained that would forbid the expenditure of funds appropriated for the SPR program to firms providing $1 million or more in refined products to Iran, or services, such as transportation, underwriting, and financing that facilitated exports of product to Iran, or expansion of Iranian refining capacity. The conference bill also includes $25 million to continue work at the site in Richton. The conference bill provides a total of $243.8 million.  Congress approved $9.8 million in the Omnibus Appropriations bill, P.L. 111-8, for the NHOR in FY2009, a reduction of $2.",
      "5 million from the FY2008 enactment, principally due to a reduction in the need for funds for repurchasing heating oil that was sold during FY2007 to finance new storage contracts. The FY2010 request for the NHOR is $11.3 million, an increase of $1.5 million to finance the purchase of nearly 16,000 barrels of heating oil sold during FY2007. The House approved the Administration request for the NHOR, as did the Senate and the conferees. Science and ARPA-E The DOE Office of Science conducts basic research in six program areas: basic energy sciences, high-energy physics,",
      " biological and environmental research, nuclear physics, fusion energy sciences, and advanced scientific computing research. Through these programs, DOE is the third-largest federal funder of basic research and the largest federal funder of research in the physical sciences. The Advanced Research Projects Agency\u2013Energy (ARPA-E), a new organization separate from the Office of Science, was authorized by the America COMPETES Act ( P.L. 110-69 ) to support transformational energy technology research projects. For FY2010, DOE has requested $4.942 billion for the Office of Science, an increase of 4% from the regular FY2009 appropriation of $4.",
      "758 billion, and $10 million for ARPA-E, a reduction of 33% from the regular FY2009 appropriation of $15 million. Both offices also received substantial FY2009 funding in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ): an additional $1.6 billion for the Office of Science and an additional $400 million for ARPA-E. The House provided $4.944 billion for the Office of Science in FY2010. The Senate provided $4.899 billion. The conference report provided $4.904 billion. The House and Senate bills and the conference report all provided no new funds for ARPA-E.",
      " The President's Plan for Science and Innovation would double the combined R&D funding of the Office of Science and two other agencies over the decade from FY2006 to FY2016. This continues a plan initiated by the Bush Administration in January 2006 as part of its American Competitiveness Initiative. The 4% increase requested for FY2010 is less than the annual rate required to achieve the doubling goal, but because some ARRA funds will be spent during FY2010, actual expenditures during FY2010 are likely to be greater than the amount appropriated. The requested funding for the largest Office of Science program, basic energy sciences, is $1.",
      "686 billion, up 7% from $1.572 billion in FY2009 (not including $555 million in the ARRA). Proposed increases include $34 million each for two innovation hubs, one focused on materials for energy storage and the other on direct production of fuels from solar energy. For the first time, funding for the development and operation of scientific user facilities is identified as a separate subprogram; a proposed increase of $20 million for this subprogram would support full use of the facilities. The House report accepted the proposal to establish scientific user facilities as a separate subprogram. The Senate rejected it. The conference report was silent.",
      " The House provided a total of $1.675 billion for basic energy sciences, including one hub (to be selected at the Secretary's discretion) and $23 million more than the request for scientific user facilities. The Senate provided $1.654 billion, including both the requested hubs. The conference report provided $1.636 billion, including neither hub. For high-energy physics, the request is $819 million, up 3% from $796 million in FY2009 (not including $232 million in the ARRA). Proposed increases include $31 million for construction of the NO\u03bdA detector at Fermilab and $12 million for U.S.",
      " activities in support of upgrades at the Large Hadron Collider (LHC). The House provided the requested amount. The Senate provided $813 million and questioned increased support for the LHC in light of the program's current technical difficulties. The conference report provided $810 million. The request for biological and environmental research is $604 million, up less than 1% from $602 million in FY2009 (not including $166 million in the ARRA). This program's two subprograms have been slightly renamed, and $100 million has been moved between them, but the changes are organizational, with little impact on program content. The House provided $597 million.",
      " The Senate bill and the conference report both provided the requested amount. For nuclear physics, the request is $552 million, up 8% from $512 million in FY2009 (not including $155 million in the ARRA). All four research subprograms would receive increases. Isotope development and production (transferred from the Office of Nuclear Energy in FY2009) would receive a reduction of $6 million. The conference report provided expressed concern about the state of U.S. isotope production but provided \"not less than\" the requested amount for the isotope development and production subprogram. The Senate report proposed funding nuclear medicine applications research in the nuclear physics program,",
      " but the conference report funded that activity in the biological and environmental research program as in previous years. The House provided a total of $536 million for nuclear physics. The Senate provided $540 million. The conference report provided $535 million. The request for fusion energy sciences is $421 million, up 5% from $403 million in FY2009 (not including $91 million in the ARRA). The request includes an $11 million increase for the U.S. share of the International Thermonuclear Experimental Reactor (ITER), a fusion facility now under construction in France. The ITER partners are China, the European Union, India, Japan,",
      " Russia, South Korea, and the United States. Under an agreement signed in 2006, the U.S. share of ITER's construction cost is 9.1%. According to estimates released in December 2007, that amount will be between $1.45 billion and $2.2 billion, with a completion date between FY2014 and FY2017. Press reports refer to \"ballooning costs and growing delays\" and the likelihood that \"only a skeletal version\" of ITER will be built, at least initially. A revised official estimate of ITER's cost and schedule is expected in late FY2010 or FY2011.",
      " The House provided $20 million more than the request, to be spent on laser fusion research at the Naval Research Laboratory. The Senate provided $416 million. The conference report provided $426 million, including \"no explicit funding\" for the Naval Research Laboratory. The request for the smallest Office of Science research program, advanced scientific computing research, is $409 million, up 11% from $369 million in FY2009 (not including $157 million in the ARRA). Proposed increases include $13 million for design of computer architectures for science and $12 million for the Leadership Computing Facility at Argonne National Laboratory. The House provided the requested amount.",
      " The Senate provided $399 million. The conference report provided $394 million. The request for Office of Science laboratory infrastructure is $134 million, down 8% from $145 million in FY2009 (not including $198 million in the ARRA). No new funds are requested for excess facilities disposition, which DOE expects to be fully funded under the ARRA. The House and Senate bills provided the requested amount. The conference report provided $128 million. The request for ARPA-E is $10 million, down 33% from $15 million in FY2009 (not including $400 million in the ARRA). This is a new program.",
      " DOE budget documents describe its mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. The House provided no new funds for ARPA-E because of the ARRA funds that remain available. The House committee report stated that \"the decision not to provide any additional funding... does not in any way suggest a lack of commitment to this program by the Committee.\" The Senate and the conference report also provided no new funds for ARPA-E. Nuclear Waste Disposal DOE's Office of Civilian Radioactive Waste Management (OCRWM) is responsible for management and disposal of highly radioactive waste from nuclear power plants and defense facilities. Under the Nuclear Waste Policy Act (NWPA,",
      " 42 U.S.C. 10101 et seq.), the only candidate site for permanent disposal of such waste is Yucca Mountain, Nevada. DOE filed a license application with the Nuclear Regulatory Commission for the proposed Yucca Mountain repository in June 2008. The Obama Administration has decided to \"terminate the Yucca Mountain program while developing nuclear waste disposal alternatives,\" according to the DOE FY2010 budget justification. Alternatives to Yucca Mountain are to be evaluated by a \"blue ribbon\" panel of experts convened by the Administration. At the same time, according to the justification, the NRC licensing process for the Yucca Mountain repository is to continue,",
      " \"consistent with the provisions of the Nuclear Waste Policy Act.\" The FY2010 OCRWM budget request of $198.6 million sought only enough funding to continue the Yucca Mountain licensing process and to evaluate alternative policies, according to DOE. The request was about $90 million below the FY2009 funding level, which was nearly $100 million below the FY2008 level. More than 2,000 waste program contract employees were to be terminated during FY2009, according to the budget justification. Most of the program's remaining work is to be taken over by federal staff. All work related solely to preparing for construction and operation of the Yucca Mountain repository is being halted,",
      " according to the DOE budget justification. Such activities include development of repository infrastructure, waste transportation preparations, and system engineering and analysis. The House agreed with the Administration's plans to provide funding solely for Yucca Mountain licensing activities and for a blue-ribbon panel to review waste management options. The House approved the Administration budget request, including $5 million for the blue-ribbon review. However, the House-passed bill specified that the review must include Yucca Mountain as one of the alternatives, despite the Administration's contention that the site should no longer be considered. According to the House Appropriations Committee report, \"It might well be the case that an alternative to Yucca Mountain better meets the requirements of the future strategy,",
      " but the review does not have scientific integrity without considering Yucca Mountain.\" The House panel also recommended that at least $70 million of the program's funding be devoted to maintaining expertise by the Yucca Mountain Project management contractor to support the licensing effort, rather than relying entirely on federal staff. The Senate also recommended approval of the Administration request, but without any restrictions on the blue-ribbon panel. Funding for the nuclear waste program is provided under two appropriations accounts. The Administration's FY2010 request is divided evenly between an appropriation from the Nuclear Waste Fund, which holds fees paid by nuclear utilities, and the Defense Nuclear Waste Disposal account,",
      " which pays for disposal of high-level waste from the nuclear weapons program. The Senate Appropriations Committee report called for the Secretary of Energy to suspend fee collections, \"given the Administration's decision to terminate the Yucca Mountain repository program while developing disposal alternatives.\" The conference agreement provides the reduced funding requested by the Administration and includes bill language that states, \"$5,000,000 shall be provided to create a Blue Ribbon Commission to consider all alternatives for nuclear waste disposal.\" That is the same language that appeared in the House-passed bill, along with House Appropriations Committee instructions that the Blue Ribbon panel include Yucca Mountain as a disposal option.",
      " However, the Conference Committee Joint Explanatory Statement states that \"all guidance provided by the House and Senate reports is superseded by the conference agreement.\" Additional funding from the Nuclear Waste Fund for the Yucca Mountain licensing process was included in the NRC budget request. The House provided the full $56 million requested, while the Senate voted to cut the request to $29 million. The conference agreement includes the Senate reduction. NWPA required DOE to begin taking waste from nuclear plant sites by January 31, 1998. Nuclear utilities, upset over DOE's failure to meet that deadline, have won two federal court decisions upholding the department's obligation to meet the deadline and to compensate utilities for any resulting damages.",
      " Utilities have also won several cases in the U.S. Court of Federal Claims. DOE estimates that liability payments would eventually total $11 billion if DOE were to begin removing waste from reactor sites by 2020, the previous target for opening Yucca Mountain. (For more information, see CRS Report R40202, Nuclear Waste Disposal: Alternatives to Yucca Mountain, by [author name scrubbed], and CRS Report RL33461, Civilian Nuclear Waste Disposal, by [author name scrubbed].) Loan Guarantees and Direct Loans Congress established the DOE Innovative Technology Loan Guarantee Program with Title XVII of the Energy Policy Act of 2005 ( P.L.",
      " 109-58 ). The act authorized loan guarantees for energy projects using \"new or significantly improved technologies\" to reduce greenhouse gas emissions. The FY2009 omnibus funding measure ( P.L. 111-8 ) provided DOE with loan guarantee authority of $47 billion, to remain available indefinitely, in addition to previously approved authority of $4 billion. Of the $47 billion, $18.5 billion was for nuclear power, $18.5 was for energy efficiency and renewables, $6 billion was for coal, $2 billion was for carbon capture and sequestration, and $2 billion was for uranium enrichment. The FY2010 budget request proposed no changes in DOE's loan guarantee authority,",
      " but it requested an increase in administrative funding from $19.9 million in FY2009 to $43.0 million in FY2010, to be entirely offset by fees. The House and Senate approved the Administration request, as did the conference agreement. Additional loan guarantees of up to $60 billion for renewable energy and electric transmission projects were provided by the American Recovery and Reinvestment Act ( P.L. 111-5 ). Unlike the loan guarantee authority provided by the appropriations measures, project sponsors under P.L. 111-5 will not have to pay up-front fees to cover potential loan defaults; instead, $6 billion was appropriated to cover such potential costs.",
      " However, $2 billion of that funding has since been transferred to the \"cash for clunkers\" automobile trade-in program by P.L. 111-47. A related DOE program, the Advanced Technology Vehicles Manufacturing Loan Program, was established by the Energy Independence and Security Act of 2007 ( P.L. 110-140 ). The FY2009 Continuing Resolution appropriated $7.5 billion to allow DOE to issue up to $25 billion in direct loans. No additional appropriations for loans were sought for FY2010, but DOE requested $20 million in new funding for administrative expenses, which is included in the conference agreement. The program is to provide loans to eligible automobile manufacturers and parts suppliers for making investments in their plant capacity to produce vehicles with improved fuel economy.",
      " Nuclear Weapons Stockpile Stewardship Congress established the Stockpile Stewardship Program in the FY1994 National Defense Authorization Act ( P.L. 103-160 ) \"to ensure the preservation of the core intellectual and technical competencies of the United States in nuclear weapons.\" The program is operated by the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE that Congress established in the FY2000 National Defense Authorization Act ( P.L. 106-65, Title XXXII). It seeks to maintain the safety and reliability of the U.S. nuclear stockpile. Stockpile stewardship consists of all activities in NNSA's Weapons Activities account:",
      " three main programs\u2014Directed Stockpile Work, Campaigns, and Readiness in Technical Base and Facilities\u2014and several smaller ones. All are described below. Table 10 presents their funding. NNSA manages two programs outside of Weapons Activities: Defense Nuclear Nonproliferation, discussed later in this report, and Naval Reactors. Most stewardship activities take place at the nuclear weapons complex, which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City Plant, MO; Pantex Plant, TX; Savannah River Site,",
      " SC; and Y-12 Plant, TN); and the Nevada Test Site. NNSA manages and sets policy for the complex; contractors to NNSA operate the eight sites. The FY2010 request document includes data from NNSA's Future Years Nuclear Security Program (FYNSP), which projects the budget and components through FY2014 (see Table 11 ). Nuclear Weapons Complex Reconfiguration Although the nuclear weapons complex (the \"Complex\") currently consists of eight sites, it was much larger during the Cold War in terms of number of sites, budgets, and personnel. Despite the post-Cold War reduction, many in Congress have for years wanted the Complex to change further,",
      " in various ways: fewer personnel, lower cost, greater efficiency, smaller footprint at each site, increased security, and the like. (For congressional action on FY2005-FY2008 appropriations, see CRS Report RL34009, Energy and Water Development: FY2008 Appropriations, coordinated by [author name scrubbed].) In response, in January 2007 NNSA submitted a report to Congress on its plan for transforming the Complex, \"Complex 2030.\" The House Appropriations Committee, in its FY2008 report, expressed displeasure with this plan and demanded \"a comprehensive nuclear defense and nonproliferation strategy,\" a detailed description translating that strategy into a \"specific nuclear stockpile,\" and \"a comprehensive,",
      " long-term expenditure plan, from FY2008 through FY2030\" before considering further funding for Complex 2030 and a nuclear weapon program, the Reliable Replacement Warhead (RRW, discussed below). It stated that \"NNSA continues to pursue a policy of rebuilding and modernizing the entire complex in situ without any thought given to a sensible strategy for long-term efficiency and consolidation.\" The Senate Appropriations Committee saw an inadequate linkage between warheads, the Complex, and strategy, and \"rejects the Department's premature deployment of the NNSA Complex 2030 consolidation effort.\" The joint explanatory statement accompanying the consolidated appropriations bill said,",
      " \"The Congress agrees to the direction contained in the House and Senate reports requiring the Administration... to develop and submit to the Congress a comprehensive nuclear weapons strategy for the 21 st century.\" On December 18, 2007, NNSA announced its plan, Complex Transformation, a name change from Complex 2030. It would retain existing sites, reduce the weapons program footprint by as much as one-third, close or transfer from weapons activities about 600 structures, reduce the number of weapons workers by 20%-30%, dismantle weapons more rapidly, and build several major new facilities, such as a Uranium Processing Facility at Y-12 Plant,",
      " a Weapons Surveillance Facility at Pantex Plant, and a Chemistry and Metallurgy Research Replacement Nuclear Facility at Los Alamos National Laboratory. This plan is more fully described in the Final Complex Transformation Supplemental Programmatic Environmental Impact Statement released in October 2008, along with two Records of Decision of December 2008. The House Appropriations Committee reiterated its FY2008 views in its FY2009 report: Before the Committee will consider funding for most new programs, substantial changes to the existing nuclear weapons complex, or funding for the RRW [Reliable Replacement Warhead], the Committee insists that the following sequence be completed: (1) replacement of Cold War strategies with a 21 st Century nuclear deterrent strategy sharply focused on today's and tomorrow's threats,",
      " and capable of serving the national security needs of future Administrations and future Congresses without need for nuclear testing; (2) determination of the size and nature of the nuclear stockpile sufficient to serve that strategy; (3) determination of the size and nature of the nuclear weapons complex needed to support that future stockpile. In keeping with this approach, the committee recommended eliminating funds for RRW and for several programs described below. In its FY2009 report, the Senate Appropriations Committee also recommended eliminating funds for RRW and made various changes to individual programs. It did not provide general comments on Complex transformation. P.L. 111-8 provided no funds for RRW.",
      " Similarly, the FY2010 budget requests no funds for RRW. Another FY2010 budget document states, \"The Administration proposes to cancel development of the Reliable Replacement Warhead (RRW)\u2014a new design warhead intended to replace the current inventory of nuclear weapons\u2014because it is not consistent with Presidential commitments to move towards a nuclear-free world.\" Directed Stockpile Work (DSW) This program involves work directly on nuclear weapons in the stockpile, such as monitoring their condition; maintaining them through repairs, refurbishment, life extension, and modifications; R&D in support of specific warheads; and dismantlement. Specific items under DSW include the following:",
      " Life Extension Programs (LEPs). These programs aim to extend the life of existing warheads by 20 to 30 years through design, certification, manufacture, and replacement of components. An LEP for the B61 mods 7 and 11 bombs was completed in FY2009; no funds are requested for it for FY2010. An LEP for the W76 warhead for the Trident II submarine-launched ballistic missile is ongoing. P.L. 111-8 provided $202.9 million for that purpose; the FY2010 request is $209.2 million. Life-extended W76 warheads are designated W76-",
      "1; the first such warhead entered the stockpile in February 2009. The House bill would increase the request for the W76-1 to $233.2 million. It expressed its concern that NNSA's request for the W76-1 \"does not reflect the needs of military clients\" and \"directs NNSA to explicitly highlight in its future budget requests any instance in which its budget request will not support the military requirements of its Air Force and Navy clients.\" The Senate bill would appropriate the amount requested. The conference bill includes $223.2 million. Stockpile Systems. This program involves routine maintenance, replacement of limited-life components,",
      " ongoing assessment, and the like for all weapon types in the stockpile. P.L. 111-8 provided $328.5 million; the FY2010 request is $390.3 million. Of the eight warhead types listed, the largest program under stockpile systems is for the B61 bomb, $59.5 million for B61 sustainment and $65.0 million to complete a B61 Phase 6.2/6.2A refurbishment study. The House bill would appropriate the sustainment funds as requested and no funds for the latter study. It \"will not support a major warhead redesign in the absence of clearly defined nuclear weapons strategy,",
      " stockpile, and complex plans.\" The Senate bill also includes the amount requested. The conference bill includes $357.8 million, of which $92.0 million is included for B61 stockpile systems activities. The bill provides that \"upon completion of the Nuclear Posture Review and confirmation of the requirement for the B61-12, the NNSA is authorized to reallocate an additional $15,000,000 within the Stockpile Systems activities to support the continuation of the B61-12 non-nuclear upgrade study \u2026 [and that] no funds may be obligated or expended for B61-12 nuclear components without prior approval by the Appropriations Committees of the House and Senate.\" The conference agreement calls for two reports on the B61-",
      "12. Weapons Dismantlement and Disposition (WDD). The President and Congress have agreed on the desirability of reducing the stockpile to the lowest level consistent with national security, and numbers of warheads have fallen sharply since the end of the Cold War. According to NNSA, \"Reducing the total number of U.S. nuclear weapons sends a clear message to the world that critical modernization programs do not signal a return to the arms race of the Cold War.\" WDD involves interim storage of warheads to be dismantled; dismantlement; and disposition (i.e., storing or eliminating warhead components and materials). P.L.",
      " 111-8 appropriated $190.2 million. The FY2010 request is $84.1 million; the House bill would appropriate $108.9 million and the Senate bill the amount requested. The conference bill includes $96.1 million. Within WDD, the major activity for FY2009 was the Pit Disassembly and Conversion Facility (PDCF), which has been moved to the Readiness in Technical Base and Facilities account for FY2010. The \"pit\" is the fissile component (usually plutonium) of a nuclear warhead that initiates a thermonuclear explosion. As warheads are dismantled, pits may be stored,",
      " but for permanent disposition PDCF would convert the plutonium in pits to plutonium oxide for use in a Mixed Oxide Fuel Fabrication Facility (MFFF), where it would become fuel for commercial light-water nuclear reactors. In FY2008, MFFF was transferred from NNSA to DOE's Office of Nuclear Energy. WDD includes a Waste Solidification Building (WSB) to convert liquid wastes from PDCF and MFFF into solids for disposal off-site. For FY2010, the WSB account has been moved to the Fissile Materials Disposition Program within Defense Nuclear Nonproliferation. Stockpile Services. This category includes Production Support;",
      " R&D Support; R&D Certification and Safety; Management, Technology, and Production; and pit work. P.L. 111-8 provided $866.4 million for Stockpile Services. The FY2010 request is $831.1 million; the House bill recommended $805.1 million. Pit work has undergone several changes. For FY2008, it was divided into Pit Manufacturing and Pit Manufacturing Capability. The explanatory statement for H.R. 1105 ( P.L. 111-8 ) stated that in the FY2009 request, \"[t]hese two functions were not well defined or delineated.\" As a result,",
      " the bill provided a single appropriation of $155.3 million for Plutonium Capability, a reduction from $198.8 million for the two FY2008 pit accounts. For FY2010, NNSA changed the name of Plutonium Capability to Plutonium Sustainment, and requests $149.2 million. NNSA states that FY2010 Plutonium Sustainment \"activities will be focused on sustaining the pit manufacturing infrastructure and manufacturing W88 pits to meet stockpile surveillance requirements.\" The W88 is a warhead for the Trident II (D-5) submarine-launched ballistic missile. The House bill recommended $123.",
      "2 million for Plutonium Infrastructure Sustainment, $26.0 million below the request, to produce W88 pits at a minimum rate to maintain plutonium capability. The Senate bill includes $844.1 million, including an increase of $30 million to support subcritical experiments at the Nevada Test Site, and no funds to implement a transfer of tritium responsibilities as included in NNSA's Complex Transformation plan. The conference bill includes $828.8 million. Reliable Replacement Warhead. This program sought to develop a warhead initially to replace W76 warheads. Congress eliminated FY2008 and FY2009 funds for developing this warhead.",
      " For FY2010, the Administration proposes to cancel the program and NNSA requests no funds for it. Campaigns These are \"multi-year, multi-functional efforts\" that \"provide specialized scientific knowledge and technical support to the directed stockpile work on the nuclear weapons stockpile.\" Many campaigns have significance for policy decisions. For example, the Science Campaign's goals include improving the ability to assess warhead performance without nuclear testing, improving readiness to conduct nuclear tests should the need arise, and maintaining the scientific infrastructure of the nuclear weapons laboratories. Campaigns also fund some large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory.",
      " The FY2010 request includes five campaigns: Science Campaign. According to NNSA, this campaign \"develops improved scientific capabilities and experimental infrastructure to assess the safety, security, reliability, and performance of the nuclear explosives package (NEP) portion of weapons without reliance on further underground testing.\" P.L. 111-8 provided $316.7 million; the FY2010 request is also $316.7 million. The House bill has $296.4 million. Regarding campaigns generally, the Senate Appropriations Committee stated, \"The Committee does not believe this [requested] level of funding is adequate to support modernization of the complex.\" The Senate bill includes $319.",
      "7 million for the Science Campaign, the conference bill includes $295.6 million. Engineering Campaign. This campaign seeks \"to develop capabilities to assess and improve the safety, reliability, and performance of the non-nuclear and nuclear explosive package engineering components in nuclear weapons without further underground testing.\" P.L. 111-8 provided $150.0 million, and the FY2010 request is also $150.0 million. A component of this campaign is Enhanced Surety to develop improved means of safety, security, and use control for nuclear weapons. In the explanatory statement on H.R. 1105, the House and Senate Appropriations Committees \"strongly support improved surety,\" and P.L.",
      " 111-8 provided $46.1 million for Enhanced Surety, non-RRW. \"Non-RRW\" specifies that surety is not to be enhanced through RRW: a goal of RRW was to enhance surety, but Congress denied funding for that program. The House bill includes $174.1 million for FY2010, of which $66.1 million is only for Enhanced Surety, and \"directs that priority for Enhanced Surety go to those weapon types at greatest long-term risk.\" The Senate and conference bills include the amount requested. Inertial Confinement Fusion Ignition and High Yield Campaign.",
      " This campaign is developing the tools to create extremely high temperatures and pressures in the laboratory\u2014approaching those of a nuclear explosion\u2014to support weapons-related research and to attract scientific talent to the Stockpile Stewardship Program. The centerpiece of this campaign is the National Ignition Facility (NIF), the world's largest laser. While NIF was controversial in Congress for many years and had significant cost growth and technical problems, controversy waned as the program progressed. The facility was dedicated in May 2009, with key experiments expected to begin in 2010. P.L. 111-8 provided $436.9 million for this campaign.",
      " The FY2010 request is also $436.9 million; the House bill would appropriate $461.9 million, the Senate bill, $453.4 million; and the conference bill, $457.9 million. Advanced Simulation and Computing Campaign. This campaign develops computation-based models of nuclear weapons that integrate data from other campaigns, past test data, laboratory experiments, and elsewhere to create what NNSA calls \"the computational surrogate for nuclear testing,\" thereby enabling \"comprehensive understanding of the entire weapons lifecycle from design to safe processes for dismantlement.\" It includes funds for hardware and operations as well as for software. P.L. 111-",
      "8 provided $556.1 million; the FY2010 request is also $556.1 million. According to the explanatory statement on H.R. 1105, \"The budget submitted by NNSA has a striking lack of detail regarding he NNSA's computing strategy, acquisition plan \u2026 [raising] the concern that the acquisition strategy for new [computing] platforms will not fit within the available budget.\" The statement directed NNSA to report on several aspects of this campaign, with the report having independent review and a six-month deadline (September 11, 2009). For FY2010, the House bill would appropriate $561.",
      "1 million, an increase of $5.0 million. It specified that $5.0 million be used for \"technology assessments of nuclear weapons that could be employed by sub-state actors or potentially hostile minor nuclear powers.\" The Senate Appropriations Committee stated that this campaign needs more resources in the future and the Senate bill would appropriate $566.1 million. The conference bill includes $567.6 million. Readiness Campaign. This campaign develops technologies and techniques to improve the safety and efficiency of manufacturing and reduce its costs. P.L. 111-8 provided $160.6 million. The FY2010 request is $100.0 million,",
      " and the House, Senate, and conference bills include that amount. NNSA explains that it made most of the reduction \"to support higher priority work.\" Readiness in Technical Base and Facilities (RTBF) This program funds infrastructure and operations at nuclear weapons complex sites. P.L. 111-8 provided $1,674.4 million. The FY2010 request is $1,736.3 million, and the House bill would appropriate $1,779.3 million, adding funds above the request for operations at Pantex Plant and Y-12 Plant. The Senate bill would appropriate $1,848.9 million \"to fill significant gaps in infrastructure development at the NNSA facilities.\" The conference bill includes $1,",
      "842.9 million. RTBF has six subprograms. By far the largest is Operations of Facilities ( P.L. 111-8, $1,163.3 million; FY2010 request, $1,342.3 million; conference bill, $1,348.3 million). Others include Program Readiness, which supports activities occurring at multiple sites or in multiple programs ( P.L. 111-8, $71.6 million; FY2010 request, $73.0 million; conference bill, $73.0 million); Material Recycle and Recovery, which recovers plutonium, enriched uranium, and tritium from weapons production and disassembly ( P.L.",
      " 111-8, $70.3 million; FY2010 request, $69.5 million; conference bill, $69.5 million); and Construction ( P.L. 111-8, $314.5 million; FY2010 request, $203.4 million; conference bill, $303.9 million). The most costly and controversial item in Construction is the Chemistry and Metallurgy Research Building Replacement (CMRR) Project at Los Alamos National Laboratory ( P.L. 111-8, $97.2 million; FY2010 request, $55.0 million). CMRR would replace a building over 50 years old that,",
      " among other things, houses research into plutonium and supports pit production at Los Alamos. In considering the FY2008 budget, the House Appropriations Committee stated, \"Proceeding with the CMRR project as currently designed will strongly prejudice any nuclear complex transformation plan. The CMRR facility has no coherent mission to justify it unless the decision is made to begin an aggressive new nuclear warhead design and pit production mission at Los Alamos National Laboratory.\" In contrast, the Senate Appropriations Committee stated, \"The current authorization basis for the existing CMR [facility] lasts only through 2010, as it does not provide adequate worker safety or containment precautions.",
      " However, deep spending cuts... will likely result in delays that will require the laboratory to continue operations in the existing CMR facility.\" In its FY2009 report, the House Appropriations Committee stated, regarding CMRR and the Radioactive Liquid Waste Treatment Facility, \"In the absence of critical decisions on the nature and size of the stockpile, which in turn generate requirements for the nature and capacity of the nuclear weapons complex, it is impossible to determine the capacity required of either of these facilities. It would be imprudent to design and construct on the basis of a guess at their required capacity.\" The committee recommended no funds for either project. It also recommended no funds for two other projects,",
      " stating, \"Each is a new start in the absence of a strategy defining the requirements for the facility.\" The Senate Appropriations Committee recommended $125.0 million, an increase of $24.8 million, for CMRR \"to make up for [previous] funding shortfalls.\" For FY2010, the House bill includes $55.0 million for CMRR, and the Senate bill, $98.0 million. The conference bill provides $97.0 million. Another major proposed facility is the Uranium Processing Facility (UPF) at Y-12 Plant. The House Appropriations Committee stated that the budget does not permit construction of UPF and CMRR at the same time,",
      " and that UPF would incorporate high security and would have nonproliferation benefits. Accordingly, the House bill would appropriate $101.5 million for UPF, $50.0 million above the request. The Senate bill would appropriate $94.0 million, and the conference bill includes that amount. Other Programs Weapons Activities includes several smaller programs in addition to DSW, Campaigns, and RTBF. Among them: Secure Transportation Asset: provides for safe and secure transport of nuclear weapons, components, and materials. It includes special vehicles for this purpose, communications and other supporting infrastructure, and threat response. P.L. 111-",
      "8 provided $214.4 million. The FY2010 request is $234.9 million; the conference bill includes that amount. Nuclear Weapons Counterterrorism Response (House Appropriations Committee terminology) or Nuclear Weapons Incident Response (Senate Appropriations Committee terminology): \"responds to and mitigates nuclear and radiological incidents worldwide and has a lead role in defending the Nation from the threat of nuclear terrorism.\" P.L. 111-8 provided $215.3 million. The FY2010 request is $221.9 million; the conference bill includes that amount. Facilities and Infrastructure Recapitalization Program (FIRP): \"continues its mission to restore,",
      " rebuild and revitalize the physical infrastructure of the nuclear security enterprise.\" It focuses on \"elimination of legacy deferred maintenance.\" P.L. 111-8 provided $147.4 million. The FY2010 request is $154.9 million; the conference bill includes $93.9 million. Site Stewardship seeks to \"ensure environmental compliance and energy and operational efficiency throughout the nuclear security enterprise.\" It is a new program, consolidating several earlier programs. Its FY2010 request is $90.4 million. The House Appropriations Committee said it supports the program but made a reduction due to \"budget limitations.\" The House bill includes $62.",
      "4 million. The Senate bill includes $61.3 million and denies funding for the stewardship planning initiative because \"the mission priorities are poorly defined.\" The conference bill provides $61.3 million. Safeguards and Security consists of two elements. (1) Defense Nuclear Security provides operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and the like. P.L. 111-8 provided $735.2 million. The FY2010 request is $749.0 million. The House bill has $789.0 million, adding funds for security upgrades and for improved training and equipment. The Senate bill includes the amount requested.",
      " The conference bill provides $769.0 million. (2) Cyber Security seeks to \"ensure that sufficient information technology and information management security safeguards are implemented throughout the NNSA enterprise to adequately protect the NNSA information assets.\" P.L. 111-8 provided $121.3 million. The FY2010 request is $122.5 million, and the conference bill includes that amount. P.L. 111-8 provided $22.8 million for congressionally directed projects. For FY2010, the House bill includes $3.0 million for one such project and the Senate bill has no such projects. The conference bill provides $3.",
      "0 million. Nonproliferation and National Security Programs DOE's nonproliferation and national security programs provide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weapons worldwide. These nonproliferation and national security programs are included in the National Nuclear Security Administration (NNSA). Funding for these programs in FY2009 was $1.482 billion. The Obama Administration requested $2.137 billion for FY2010 for Defense Nuclear Nonproliferation, but most of this increase results from returning two major construction projects, the Mixed-Oxide (MOX) plant and the Waste Solidification Building,",
      " to the Fissile Materials Disposition program from other parts of DOE. (See below.) The House bill, which does not include the transfer of the construction projects, would appropriate $1.4712 billion. The Senate bill, which includes the transfer, would appropriate $2.1367 billion. The conference bill appropriates $2.1367 billion, the same as the Senate bill. The Nonproliferation and Verification R&D program was funded at $363.8 million for FY2009. The request for FY2010 was $297.3 million, and the House bill would appropriate the same amount. The Senate bill includes $337.",
      "3 million for this program. The conference amount is $317.3 million. Nonproliferation and International Security programs include international safeguards, export controls, and treaties and agreements. The FY2010 request for these programs was $207.0 million, compared with $150.0 million appropriated for FY2009. The House bill included $187.2 million, the Senate bill and the conference bill the same.  International Materials Protection, Control and Accounting (MPC&A), which is concerned with reducing the threat posed by unsecured Russian weapons and weapons-usable material, was funded at $400.0 million in FY2009;",
      " the FY2010 request was $552.3 million. The House bill would provide $592.1 million, and the Senate bill would provide the requested $552.3 million. The conference bill appropriates $572.1 million. Elimination of Weapons-Grade Plutonium Production is aimed at persuading Russia to shut down three nuclear reactors that produce weapons-grade plutonium and also supply power to several communities. Two of the three reactors were shut down in 2008 and their power replaced by a refurbished fossil-fueled facility. The third plutonium-producing reactor will be replaced by construction of another fossil-fueled facility. The program was funded at $141.",
      "3 million for FY2009; the request for FY2010 was $24.5 million. The House and Senate bills would appropriate that amount, and the conference bill does also. The goal of the Fissile Materials Disposition program is disposal of U.S. surplus weapons plutonium by converting it into fuel for commercial power reactors, including construction of a facility to convert the plutonium to \"mixed-oxide\" (MOX) reactor fuel at Savannah River, SC, and a similar program in Russia. However, funding for the U.S. side of the program has been controversial for several years, because of lack of progress on the program to dispose of Russian plutonium.",
      " For FY2008 the Administration requested $609.5 million for Fissile Materials Disposition, including $393.8 million for construction. The House Appropriations Committee, noting that Russia had decided in 2006 not to pursue plutonium disposition in light water MOX reactors but to build fast breeder reactors instead, declared the bilateral agreement a failure and asserted that the $1.7 billion previously appropriated for facilities to be used in the U.S. side of the plutonium disposal agreement was \"without any nuclear nonproliferation benefit accrued to the U.S. taxpayer.\" The committee recommended transferring the MOX plant and another project,",
      " the Pit Disassembly and Conversion Facility (PDCF), both at Savannah River, SC, to the nuclear energy program and NNSA's weapons program respectively. The FY2008 omnibus funding act adopted the House position, transferring the MOX plant and PDCF to other programs. The net appropriation for the NNSA's Fissile Materials Disposition program was reduced to $66.2 million. For FY2009, the Bush Administration requested $41.8 million, and that amount was appropriated.  However, for FY2010 the Obama Administration proposed returning the MOX plant and the Waste Solidification Building to the Nonproliferation program,",
      " and requested a total of $701.9 million for Fissile Materials Disposition. The request justification notes that \"DOE and its Russian counterpart agency, Rosatom, agreed on a financially and technically credible program to dispose of Russian surplus weapon-grade plutonium in November 2007.\" The program would rely on Russian fast reactors \"operating under certain nonproliferation restrictions,\" according to the budget document. The House Appropriations Committee did not agree with this move, and the House bill would transfer the projects to Other Weapons Activities, reducing Fissile Materials Disposition to $36.4 million. The Senate bill agrees with the Administration's project transfer and would appropriate the requested $701.",
      "9 million, and the conference bill appropriates the Senate number. Cleanup of Former Nuclear Weapons Production Facilities and Nuclear Energy Research Facilities In 1989, DOE established what is now the Office of Environmental Management to consolidate the cleanup of former nuclear weapons sites. Cleanup includes disposal of large amounts of radioactive and other hazardous wastes, management and disposal of surplus nuclear materials, remediation of soil and groundwater contamination, and decontamination and decommissioning of excess buildings and facilities. Cleanup of sites where the federal government conducted civilian nuclear energy research is also carried out by the Office of Environmental Management. Over 100 federal facilities across the United States were involved in the production of nuclear weapons and nuclear energy research.",
      " The total land area of these facilities encompasses over 2 million acres. Although cleanup is complete at over 80 of these facilities, DOE expects cleanup to continue at some facilities for many years, even decades at the larger and more complex facilities where large volumes of wastes are stored and contamination is more severe. DOE estimates that total outstanding costs to complete cleanup at all of the remaining facilities could range between $205 billion and $260 billion. DOE expects that additional funds will be needed at many facilities to operate, maintain, and monitor cleanup remedies over the long term. At sites where the cleanup remedy involves the permanent containment of radioactive wastes, such long-term activities may need to be continued indefinitely because of the lengthy periods of time required for radioactivity to decay to acceptable levels.",
      " Some of the facilities historically administered under the Office of Environmental Management have been transferred to other offices within DOE and to the Army Corps of Engineers. In 1997, Congress directed the Office of Environmental Management to transfer responsibility for the cleanup of smaller, less contaminated facilities under the Formerly Utilized Sites Remedial Action Program (FUSRAP) to the Corps. (See Title I.) Once cleanup of a FUSRAP site is complete, the Corps is responsible for activities that may be needed only for the first two years after the initial cleanup work is completed. After that time, jurisdiction over the site is transferred to DOE's Office of Legacy Management.",
      " The Office of Legacy Management also administers any long-term activities that may be needed at facilities cleaned up under the Office of Environmental Management. Appropriations for both of these offices are discussed below. Office of Environmental Management Three accounts fund the Office of Environmental Management: Defense Environmental Cleanup, Non-Defense Environmental Cleanup, and the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund. Defense Environmental Cleanup by far constitutes the largest portion of funding for the Office of Environmental Management. The conference report on H.R. 3183 would provide a total of $5.64 billion for Defense Environmental Cleanup in FY2010. Prior to conference,",
      " the House had proposed $5.38 billion, and the Senate had proposed $5.76 billion. The President had requested $5.50 billion. Congress appropriated $5.66 billion for Defense Environmental Cleanup in FY2009. The conference report would provide $244.7 million for Non-Defense Cleanup in FY2010. Prior to conference, the House had proposed $237.5 million, the same as the President requested. The Senate had proposed $259.8 million. Congress appropriated $281.8 million for FY2009. For the Uranium Enrichment D&D Fund account, the conference report would provide $573.",
      "9 million in FY2010. Prior to conference, the House had proposed $559.4 million, the same as the President requested. The Senate had proposed $588.3 million. Congress appropriated $535.5 million to the Uranium Enrichment D&D Fund account in FY2009. The above comparisons to the FY2009 appropriations reflect the amounts provided in the FY2009 Omnibus Appropriations Act ( P.L. 111-8 ). In addition to these \"regular\" appropriations, the Office of Environmental Management received a total of $6.0 billion in supplemental appropriations for FY2009 in the ARRA ( P.L.",
      " 111-5 ). Per the law, DOE is to obligate the funds by the end of FY2010 (September 30, 2010). Of the $6 billion in supplemental appropriations, $5.13 billion was allocated to Defense Environmental Cleanup, $483 million to Non-Defense Cleanup, and $390 million to the Uranium Enrichment D&D Fund account. In its FY2010 budget justification, DOE stated that it was not going to use the FY2009 supplemental funding to accelerate the scheduled cleanup of larger sites. Instead, the funds would be directed to what the Office of Environmental Management calls \"footprint reduction\"",
      " and finishing up projects that are nearing completion. DOE asserts that such activity has the potential to reduce maintenance costs and yield significant cleanup progress. DOE also stated that its approach in allocating the funding \"will allow thousands of blue-collar workers to be hired with limited training required,\" thus addressing the economic stimulus goals of the ARRA. In its report on H.R. 3183, the House Appropriations Committee directed DOE to update certain elements of the Department's most recent report on its cleanup progress to reflect the impacts of the additional resources provided in the ARRA and appropriations anticipated for FY2010. DOE released its last report in January 2009,",
      " presenting funds spent on cleanup through FY2007, estimating the remaining costs from FY2008 through the completion of cleanup, and identifying cleanup \"milestones.\" These milestones are binding deadlines for the completion of cleanup actions to which DOE has agreed with federal and state regulators in formalized agreements at each site. In recent years, the adequacy of funding for DOE to achieve these milestones has been an issue. The committee drew attention to the significant increase in funding for FY2009 provided in the ARRA, and indicated its expectation that these additional resources should allow scheduled milestones to be met in FY2009. The committee directed DOE to update its cleanup progress report by April 1,",
      " 2010. The pace of cleanup has been of particular concern at the largest sites that present the greatest environmental risks, including Hanford in the State of Washington, the Savannah River site in South Carolina, and the Idaho National Laboratory. These sites present some of the most complex cleanup challenges resulting from decades of nuclear weapons production, and therefore receive the greatest portions of funding for the Office of Environmental Management. For Hanford, the conference report would provide $2.09 billion in FY2010. The House has proposed $1.95 billion, and the Senate had proposed $2.12 billion. The President had requested $2.00 billion.",
      " The conference report would provide $1.21 billion in FY2010 for the Savannah River site, the same as the President requested. The House had proposed $1.19 billion, and the Senate had proposed $1.24 billion. For the Idaho National Laboratory, the conference report would provide $464.2 million in FY2010. The House had proposed $475.0 million, and the Senate had proposed $470.2 million. The President had requested $406.2 million. Funding needs at these sites are expected to continue for decades. DOE estimates that cleanup may not be complete at Hanford until as late as 2062,",
      " at the Savannah River site until 2040, and at the Idaho National Laboratory until 2037. These lengthy horizons in part are due to the time that will be needed to treat and dispose of substantial volumes of high-level radioactive wastes stored at each of these sites. According to DOE's most recent estimate, there are a total of 54 million gallons of high-level wastes stored in 177 tanks at Hanford, 33 million gallons in 49 tanks at Savannah River, and nearly 1 million gallons in 4 tanks at the Idaho National Laboratory. These high-level wastes are intended to be permanently disposed of in a geologic repository,",
      " but the removal and treatment of the wastes to prepare them for disposal presents many technical difficulties. The lack of availability of a geologic repository presents other challenges. Delays in the construction of facilities needed to treat the wastes have raised concern about environmental risks from the potential release of untreated wastes still stored in the tanks. Some of the tanks at Hanford are known or suspected to have leaked wastes into groundwater that discharges into the Columbia River. DOE routinely monitors water quality in the Columbia River to determine whether contaminant levels are within federal and state standards. There has been similar concern about the possible contamination of the Snake River from the tank wastes at the Idaho National Laboratory,",
      " and the Savannah River itself from the tank wastes at DOE's Savannah River site.  There also has been rising interest in the source of funding for the cleanup of three uranium enrichment facilities administered by the Office of Environmental Management. These facilities are located at Paducah, KY; Portsmouth, OH; and Oak Ridge, TN. Title XI of the Energy Policy Act of 1992 ( P.L. 102-486 ) established the Uranium Enrichment D&D Fund to pay for the cleanup of these facilities. To support this fund, P.L. 102-486 authorized the collection of assessments from nuclear utilities, and payments by the federal government from appropriations out of the General Fund of the U.S.",
      " Treasury, as both nuclear utilities and the United States benefitted from the production of enriched uranium. The authority to collect the utility assessments, and the authorization of appropriations for the federal payment, expired on October 24, 2007. Congress has continued federal payments to the fund through the annual appropriations process without enacting reauthorizing legislation. Whether to reauthorize the Uranium Enrichment D&D Fund has been an issue, as its remaining balance does not appear sufficient to pay the estimated costs to complete the cleanup of the federal enrichment facilities. As of the end of FY2008, the Office of Management and Budget (OMB) reported that $4.",
      "5 billion remained available in the Uranium Enrichment D&D Fund for appropriation by Congress, far less than DOE's estimated range of $15 billion to $29 billion that may be needed to meet all outstanding cleanup needs over the long-term. If the fund is insufficient to pay for the cleanup, P.L. 102-486 states that DOE is responsible for the costs, subject to appropriations by Congress. To help offset the federal payment and to increase overall resources to meet projected long-term funding needs, the President proposed to reinstate the utility assessments, and included $200 million in estimated collections in his FY2010 budget request. Neither the conference report on H.R.",
      " 3183, nor the original House and Senate bills, included the $200 million in offsetting collections in FY2010. Reauthorizing legislation first must be enacted before the assessments could be collected and made available for appropriation. So far in the 111 th Congress, at least two bills have been introduced to reauthorize the utility assessments, H.R. 2471 and S. 1061. Although the utility assessments have not been reauthorized to date, the conference report on H.R. 3183 did include $463 million within the Defense Environmental Cleanup account to continue the federal payment to the Uranium Enrichment D&D Fund in FY2010,",
      " the same as the House and Senate had proposed, and the President had requested. On another matter related to the Uranium Enrichment D&D Fund account, the conferees on H.R. 3183 highlighted DOE's recent plan to expand cleanup work at the Portsmouth uranium enrichment plant. The conferees observed that the President had not included any funding in his budget request to finance this more recently planned work. The conferees noted the Department's intent to finance this work instead with an \"off-budget barter strategy for federal uranium assets.\" The conferees raised questions about the financial viability of this strategy, and directed the Government Accountability Office (GAO)",
      " to evaluate DOE's management of federal uranium assets and the Department's \"success or failure\" in meeting federal budgetary objectives through the sale of these materials.   Table 13 presents funding levels proposed for FY2010 for the accounts that fund DOE's Office of Environmental Management, compared to appropriations enacted for FY2009. A breakout is provided for sites and activities in which there has been broad interest within Congress. Office of Legacy Management Once a facility is cleaned up under DOE's Office of Environmental Management or the FUSRAP program of the Corps, responsibility for any necessary long-term operation, maintenance, and monitoring activities is transferred to DOE's Office of Legacy Management.",
      " This Office also manages the payment of pensions and post-retirement benefits of former contractor personnel who worked at these sites. The conference report on H.R. 3183 would provide $189.8 million in FY2010 for the Office of Legacy Management, the same as the House and Senate had proposed prior to conference, and the same as the President had requested. Congress appropriated $186.0 million for the Office of Legacy Management in FY2009. It also should be noted that Congress began to fund all facilities administered under the Office of Legacy Management entirely within the \"Other Defense Activities\" account of DOE in FY2009. The majority of these facilities were involved in the U.S.",
      " nuclear weapons program. Prior to FY2009, Congress had appropriated funding in a separate account for the relatively small number of non-defense facilities administered under the Office of Legacy Management. As in FY2009, the conference report on H.R. 3183 would provide this Office's funding in FY2010 entirely within the Other Defense Activities account of DOE. Power Marketing Administrations DOE's four Power Marketing Administrations (PMAs)\u2014Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA)\u2014were established to sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers.",
      " In many cases, conservation and management of water resources\u2014including irrigation, flood control, recreation or other objectives\u2014were the primary purpose of federal projects. (For more information, see CRS Report RS22564, Power Marketing Administrations: Background and Current Issues, by [author name scrubbed].) Priority for PMA power is extended to \"preference customers,\" which include municipal utilities, cooperatives, and other \"public\" bodies. The PMAs sell power to these entities \"at the lowest possible rates\" consistent with what they describe as \"sound business practice.\" The PMAs are responsible for covering their expenses and for repaying debt and the federal investment in the generating facilities.",
      " The Obama Administration's FY2010 request for the PMAs was $288.9 million. This is an overall increase of $8.3 million (23.1%) compared with the FY2009 request. The individual requests for each PMA are: SEPA, $7.6 million; SWPA, $44.9 million; and WAPA, $256.7 million. In addition, $2.6 million was requested for Falcon and Amistad operations and maintenance. The House and Senate bills includes spending at the levels requested by the Administration. The FY2010 budget also proposes the permanent reclassification of receipts from mandatory to discretionary to offset the annual expenses of the Western,",
      " Southwestern, and Southeastern Power Marketing Administrations to allow for better operations and maintenance planning and execution, leading to a more reliable power system. Reclassification of these receipts would be achieved through legislation with a 2010 impact for all of the PMAs of $189.384 million.  ARRA provided $10 million in non-reimbursable appropriations to WAPA to support implementation of activities authorized in section 402 of the act. ARRA also provided WAPA borrowing authority for the purpose of planning, financing or building new or upgraded electric power transmission lines to facilitate the delivery of renewable energy resources constructed by or expected to be constructed after the date of enactment.",
      " This authority to borrow from the United States Treasury is available to WAPA on a permanent, indefinite basis, with the amount of borrowing outstanding not to exceed $3.25 billion. WAPA has established a new Transmission Infrastructure Program for this purpose. In approving the Administration's budget request, the SCA directs WAPA to work with its firm power customers in developing annual work plans. BPA is a self-funded agency under authority granted by P.L. 93-454 (16 U.S.C. \u00a7838), the Federal Columbia River Transmission System Act of 1974, and receives no appropriations. However, it funds some of its activities from permanent borrowing authority,",
      " which was increased in FY2003 from $3.75 billion to $4.45 billion (a $700 million increase). ARRA increased the amount of borrowing that BPA conducts under the Transmission System Act by $3.25 billion to the current authority for $7.7 billion in bonds outstanding to the Treasury.  This FY2010 budget proposes Bonneville accrue expenditures of $3.029 billion for operating expenses, $105 million for Projects Funded in Advance, $846 million for capital investments, and $420 million for capital transfers in FY2010. The budget has been prepared on the basis of Bonneville's major areas of activity,",
      " power and transmission. BPA published in the Federal Register its initial proposal for power and transmission rates for the FY2010 and FY2011 rate period in February 2009 and expects to complete the rate case by August 2009. Title IV: Independent Agencies Independent agencies that receive funding from the Energy and Water Development bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Denali Commission. Key Policy Issues\u2014Independent Agencies Nuclear Regulatory Commission The Nuclear Regulatory Commission (NRC) requested $1.071 billion for FY2010 (including $10.1 million for the inspector general's office), an increase of $25.",
      "6 million from the FY2009 funding level. The House endorsed the full NRC request, including funding for licensing the proposed Yucca Mountain nuclear waste repository. The Senate provided the full request for NRC, plus a slight increase for the inspector general, and included a higher revenue offset that resulted in a net appropriation level that was $24.3 million below the total request. The conference agreement provides $1.067 billion, including $10.9 million for the inspector general. Major activities conducted by NRC include safety regulation and licensing of commercial nuclear reactors and oversight of nuclear materials users. The NRC budget request included $248.",
      "3 million for new reactor activities, largely to handle new nuclear power plant license applications. Until recently, no new commercial reactor construction applications had been submitted to NRC since the 1970s. However, volatile fossil fuel prices, the possibility of controls on carbon emissions, and incentives provided by the Energy Policy Act of 2005 prompted electric utilities to apply for licenses for 26 reactors since September 2007, with several more expected through 2010. NRC's proposed FY2010 budget also included $56.0 million from the Nuclear Waste Fund for licensing DOE's proposed Yucca Mountain nuclear waste repository, for which the license application was submitted June 3,",
      " 2008. NRC's FY2009 appropriation for Yucca Mountain licensing was $49.0 million, but NRC noted that previously appropriated funding raised the total FY2009 spending level to $59.0 million. The House provided the full NRC request for Yucca Mountain licensing, but the Senate cut the amount to $29.0 million. The conference agreement included the lower Senate level. The Obama Administration has pledged to halt the Yucca Mountain repository and find alternative strategies for handling nuclear waste, but it has allowed the Yucca Mountain licensing process to continue. However, Senator Reid, a long-time opponent of the proposed Yucca Mountain repository,",
      " announced on July 29, 2009, that the Administration had agreed to terminate the Yucca Mountain licensing effort in the FY2011 budget request. For reactor oversight and incident response, NRC's FY2010 budget request included $263.2 million, about $2 million above the FY2009 level. Those activities include reactor safety inspections, collection and analysis of reactor performance data, and oversight of security exercises. (For more information on protecting licensed nuclear facilities, see CRS Report RL34331, Nuclear Power Plant Security and Vulnerabilities, by [author name scrubbed] and [author name scrubbed].) The Energy Policy Act of 2005 permanently extended a requirement that 90%",
      " of NRC's budget be offset by fees on licensees. Not subject to the offset are expenditures from the Nuclear Waste Fund to pay for waste repository licensing, spending on general homeland security, and DOE defense waste oversight. The offsets in the FY2010 request would have resulted in a net appropriation of $183.9 million, an increase of $9 million from FY2009. The House approved the requested FY2010 net appropriation, while the Senate-passed net appropriation was $159.7 million. The net appropriation in the conference agreement, including the inspector general, is $154.7 million.\n"
    ],
    "length": 26319,
    "hardness": null,
    "role": null
  },
  {
    "id": 99,
    "question": null,
    "answer": "Stopping the ability of terrorists to finance their operations is a key component of the U.S.counterterrorism strategy. To accomplish this, the Administration has implemented a three-tieredapproach based on (1) intelligence and domestic legal and regulatory efforts; (2) technical assistanceto provide capacity-building programs for U.S. allies; and (3) global efforts to create internationalnorms and guidelines.  Effective implementation of this strategy requires the participation of, and coordinationamong, several elements of the U.S. Government. This report provides an agency-by-agency surveyof U.S. efforts. This report will be updated as events warrant. \n",
    "docs": [
      "Introduction(1) Since the September 11, 2001 attacks, there has been significant interest in terroristfinancing. Following the attacks, the Administration's strategy to combat terrorist financing wasfocused foremost on freezing terrorist assets. According to the U.S. Department of the Treasury, theaim of U.S. policy was \"starving the terrorists of funding and shutting down the institutions thatsupport or facilitate terrorism.\" (2) In the months immediately following the attacks, substantial fundswere frozen internationally. After this initial sweep, however, the freezing of terrorist assets sloweddown considerably.  According to the Department of the Treasury's Terrorist Assets Report,",
      " as of December 2004,programs targeting assets of international terrorist organizations have resulted in the blocking in theUnited States of almost $10 million. Of the $1.6 billion in state sponsors of terrorism's assets locatedin the United States, $1.5 billion have been frozen by U.S. economic sanctions. Of that $1.5 billion,the assets of Libya, which were blocked on September, 20, 2004, made up all but $425 million. (3)  According to many analysts, these numbers are very small and seem to support the 9/11Commission's conclusion that the United States must \"[e]",
      "xpect less from trying to dry up terroristmoney and more from following the money for intelligence, as a tool to hunt terrorists, understandtheir networks, and disrupt their operations.\" (4)  As detailed in the March 2005 U.S. Department of State International Narcotics ControlStrategy Report, (5) theUnited States has a three-tiered anti-money laundering-counter-narcotics/counterterrorist financingstrategy that employs: Traditional and non-traditional law enforcement techniques and intelligenceoperations to disrupt and dismantle terrorist financiers networks. (These efforts may includeinvestigations, diplomatic actions, criminal prosecutions, designations, among otheractions); Capacity building programs to improve the domestic financial,",
      " legal, andregulatory institutions of U.S. allies; and Global efforts to deter terrorist financing.  Implementing this strategy requires coordination of many different elements of nationalpower including intelligence gathering, financial regulation, law enforcement, and buildinginternational coalitions. Following a review of legislation on terrorist financing, this report providesan agency-by-agency survey of these U.S. efforts. (6)  Legislation on Terrorist Financing(7) \"Money laundering\" has traditionally been understood to mean the process by which \"dirty\"money derived from illegal activity is disguised as legitimate -- or \"clean\" -- by virtue of how it isdistributed among financial institutions.",
      " The federal government stepped up its efforts to targetmoney laundering in 1970 with the passage of the Bank Secrecy Act (BSA) and subsequentamendments. In the years following the enactment of the BSA, Congress added criminal and civilsanctions for money launderers. The threat posed by terrorists, however, forced Congress in 2001to bring terrorist financing -- which often is accomplished with legally-derived funds -- within therange of activities punishable under the federal money laundering laws. What follows is an overviewof these laws. The Bank Secrecy Act. Congress laid thefoundations of the federal anti-money laundering (AML)",
      " framework in 1970 when it passed theBSA, (8) the major moneylaundering provisions of which make up the Currency and Foreign Transaction Reporting Act(CFTRA). The BSA framework focuses on financial institutions' record- keeping, so that federalagencies are able to apprehend criminals by tracing their money trails. (9) Under this statute andsubsequent amendments to it, primary responsibility rests with the financial institutions themselvesin gathering information and passing it on to federal officials. CFTRA also contains civil (10) and criminal (11) penalties forviolations ofits reporting requirements. Under CFTRA, financial institutions must file reports for cash transactions exceeding theamount set by the Secretary of the Treasury in regulations.",
      " (12) The Secretary has set theamount for filing these currency transaction reports (CTRs) at $10,000. (13) The Secretary alsorequires financial institutions to file suspicious activity reports (SARs) for transactions of at least$5,000 in which the bank suspects or has reason to suspect the transaction involves illegally-obtainedfunds or is intended to evade reporting requirements. (14)  CFTRA contains significant requirements related to foreign-based monetary transactions. Citizens are required to keep records and file reports regarding transactions with foreign financialagencies, and the Treasury Secretary must promulgate regulations in this area. (15)",
      " The statute also requiresthe filing of reports by anyone who exports from the United States or imports into the United Statesa monetary instrument of more than $10,000. (16)  The Internal Revenue Service has certain authorities and responsibilities under the BSA (seep. 21). The International Emergency Economic PowersAct. Under the International Emergency Economic Powers Act (17) (IEEPA), enacted in 1977,the President has broad powers pursuant to a declaration of a national emergency with respect to athreat \"which has its source in whole or substantial part outside the United States, to the nationalsecurity, foreign policy, or economy of the United States.\" (18)",
      " These powers include theability to seize foreign assets under U.S. jurisdiction, to prohibit any transactions in foreignexchange, to prohibit payments between financial institutions involving foreign currency, and toprohibit the import/export of foreign currency. (19)  The Money Laundering Control Act. Congresscriminalized money laundering in 1986 with the passage of the Money Laundering Control Act. (20) Defining moneylaundering as conducting financial transactions with property known to be derived from unlawfulactivity in order to further or conceal such activity, the act made three specific types of moneylaundering illegal: 1) domestic money laundering;",
      " 2) international money laundering; and 3)attempted money laundering uncovered as part of an undercover sting operation. (21) If the transaction is foran amount in excess of $10,000, the government does not have to show that the defendant knew thetransaction in question was meant to further or conceal an illegal act, only that the defendant knewthe property was procured via illegal activity. (22)  The Annunzio-Wylie Anti-Money LaunderingAct. With the passage of the Annunzio-Wylie Anti-Money Laundering Act (23) in 1992, Congressincreased the penalties for depository institutions that violate the federal anti-money laundering laws.",
      " In addition to authorizing the Secretary of the Treasury to require filings of the aforementionedSARs, the act made it possible for banking regulators to place into conservatorship banks and creditunions that violate these laws. (24) In addition, the act gave the Office of the Comptroller of theCurrency (OCC) the power to revoke the charters of national banks found to be guilty of moneylaundering or cash reporting offenses, (25) and gave the Federal Deposit Insurance Corporation (FDIC) theauthority to terminate federal insurance for guilty state banks and savings associations. (26) The Annunzio-Wylie Actalso introduced federal penalties for operating money transmitting businesses (27)",
      " operating without licensesunder state law. (28)  The Money Laundering Suppression Act. In theearly 1990s it became apparent that the number of currency transaction reports being filed greatlysurpassed the ability of regulators to analyze them. So, in 1994, Congress passed legislation (29) mandating certainexemptions from reporting requirements in an effort to reduce the number of CTR filings by30%. (30) In addition,the act directed the Treasury Secretary to designate a single agency to receive suspicious activityreport filings. (31) Underthis statute, money transmitting businesses are required to register with the Treasury Secretary. Inaddition,",
      " the act clarified the BSA's applicability to state-chartered and tribal gamingestablishments. (32)  The Money Laundering and Financial Crimes StrategyAct. Congress in 1998 directed the Treasury Secretary to develop a nationalstrategy for combating money laundering. (33) As part of this strategy, the Treasury Secretary -- in consultationwith the U.S. Attorney General -- must attempt to prioritize money laundering enforcement effortsby identifying areas of the U.S. as \"high-risk money laundering and related financial crimes areas\"(HIFCAs). (34) Inaddition, the Treasury Secretary may issue grants to state and local law enforcement agencies forfighting money laundering in HIFCAs.",
      " (35)  Title III of the USA PATRIOT Act. In the wakeof the terrorist attacks of September 11, 2001, Congress passed the USA PATRIOT Act. (36) Congress devoted TitleIII of this act to combating terrorist financing. (37) Given that funds used to finance terrorist activities are often notderived from illegal activities, prosecution for funding terrorist activities under the pre-USAPATRIOT Act money laundering laws was difficult. Title III, however, made providing materialsupport to a foreign terrorist organization a predicate offense for money laundering prosecutionunder section 1956 of Title 18 of the U.S. Code.",
      " (38)  Under Title III, the Treasury Secretary may require domestic financial institutions toundertake certain \"special measures\" if the Secretary concludes that specific regions, financialinstitutions, or transactions outside of the United States are of primary money launderingconcern. (39) In additionto retaining more specific records on financial institutions, these special measures include obtaininginformation on beneficial ownership of accounts and information relating to certainpayable-through (40) andcorrespondent accounts. (41) The Treasury Secretary is also empowered to prohibit or restrictthe opening of these payable-through and correspondent accounts, (42) and U.S. financialinstitutions are required to establish internal procedures to detect money laundered through theseaccounts.",
      " (43) In addition,financial institutions and broker-dealers are prohibited from maintaining correspondent accounts forforeign \"shell banks,\" i.e., banks that have no physical presence in their supposed homecountries. (44) Institutionsare subject to fines of up to $1 million for violations of these provisions. (45)  Title III allows for judicial review of assets seized due to suspicion of terrorist-relatedactivities and the applicability of the \"innocent owner\" defense, (46) although the governmentis permitted in such cases to submit evidence that would not otherwise be admissible under theFederal Rules of Evidence, if following those rules would jeopardize national security.",
      " (47) Title III also allows forjurisdiction over foreign persons and financial institutions for prosecutions under sections 1956 and1957 of Title 18 of the U.S. Code. (48)  The USA PATRIOT Act permits forfeiture of property traceable to proceeds from variousoffenses against foreign nations. (49) The act also permits forfeiture of accounts held in a foreign bankif that bank has an interbank account in a U.S. financial institution; in essence, law enforcementofficials are authorized to substitute funds in the interbank account for those in the targeted foreignaccount. (50) Forfeitureis also authorized for currency reporting violations and violations of BSA prohibitions againstevasive structuring of transactions.",
      " (51)  Title III requires each financial institution to establish an anti-money laundering program,which at a minimum must include the development of internal procedures, the designation of acompliance officer, an employee training program, and an independent audit program to test theinstitution's anti-money laundering program. (52) In order to allow for meaningful inspection of financialinstitutions' AML efforts, Title III requires financial institutions to provide information on their AMLcompliance within 120 hours of a request for such information by the Treasury Secretary. (53) Also, financial institutionsapplying to merge under the Bank Holding Act or the Federal Deposit Insurance Act mustdemonstrate some effectiveness in combating money laundering.",
      " (54) Financial institutions areallowed to include suspicions of illegal activity in written employment references regarding currentor former employees. (55)  Title III extends the Suspicious Activity Reports filing requirement to broker-dealers, (56) and gives the TreasurySecretary the authority to pass along SARs to U.S. intelligence agencies in order to combatinternational terrorism. (57) Anyone engaged in a trade or business who receives $10,000cash in one transaction must file a report with the Treasury Department's Financial CrimesEnforcement Network (FinCEN) identifying the customer and specifying the amount and date of thetransaction. (58) Inaddition,",
      " the USA PATRIOT Act makes it a crime to knowingly conceal more than $10,000 in cashor other monetary instruments and attempt to transport it into or outside of the United States. Thisoffense carries with it imprisonment of up to five years, forfeiture of any property involved, andseizure of any property traceable to the violation. (59)  Significantly, the USA PATRIOT Act requires financial institutions to establish proceduresso that these institutions can verify the identities and addresses of customers seeking to openaccounts, and check this information against government-provided lists of known terrorists. (60) Title III also allows theTreasury Secretary to promulgate regulations that prohibit the use of concentration accounts todisguise the owners of and fund movements in bank accounts.",
      " (61)  Under Title III, FinCEN has statutorily-based authority to conduct its duties within theTreasury Department. (62) Significantly, the act requires FinCEN to maintain a highly secure network so that financialinstitutions can file their BSA reports electronically. (63)  The Suppression of the Financing of Terrorism ConventionImplementation Act. In order to implement the International Convention for theSuppression of the Financing of Terrorism, Congress in 2002 made it a crime to collect or providefunds to support terrorist activities (or to conceal such fund-raising efforts), regardless of whetherthe offense was committed in the United States or the accused was a United States citizen.",
      " (64)  The Intelligence Reform and Terrorism Prevention Act of2004. Section 362 of the USA PATRIOT Act required the Secretary of theTreasury to establish within FinCEN a \"highly secure network\" to process BSA reports and toprovide information to financial institutions regarding patterns of suspicious activity gleaned fromthese reports. With the passage of the Intelligence Reform and Terrorism Prevention Act of 2004(IRTPA), Congress authorized the appropriation of $16.5 million for the development of FinCEN's\"BSA Direct\" program, which is designed to improve the aforementioned network by making iteasier for law enforcement to access BSA filings and improving overall data management.",
      " (65) The act also authorizesan additional $19 million for improvements related to -- among other things -- telecommunicationsand analytical technologies, (66) and makes permanent the amendments to the BSA contained inTitle III of the USA PATRIOT Act. (67)  The Intelligence Reform and Terrorism Prevention Act of 2004 requires the TreasurySecretary to issue regulations mandating the reporting of cross-border transmittals by certainfinancial institutions, (68) and to submit a report to Congress on the Treasury Department's efforts to combat money launderingand terrorist financing. (69) In addition, under IRTPA, a federal financial institutionexaminer who leaves the federal government is required to wait one year before accepting a job withan institution that the examiner was responsible for examining.",
      " (70)  The Intelligence Community (71) In approving the Intelligence Reform and Terrorism Prevention Act of 2004, Congressestablished the position of the Director of National Intelligence (DNI) and created the new NationalCounterterrorism Center (NCTC), where a panoply of the U.S. Government's counterterrorismorganizations are now co-located under the DNI's control. Among them is the Foreign TerroristAsset Targeting Group (FTATG), the Executive Branch's principal inter-agency analytic group,which is charged with assessing intelligence on terrorist financing, and providing the NationalSecurity Council's (NSC)",
      " Terrorist Finance Policy Coordinating Committee (PCC) \"intelligenceassessments\" of individuals and groups suspected of financially supporting terrorists. FTATG engages in joint discussions with member agencies of the Targeting Action Groupunder the Terrorist Financing PCC, developing suggested actions -- ranging from the freezing ofassets to diplomatic options -- that policymakers can consider taking against suspected terroristfinanciers.  Although FTATG's first two directors were Immigration and Custom Enforcement detailees,the NSC in November 2004 restructured FTATG and named a Federal Bureau of Investigationspecial agent as director and an Immigration and Customs Enforcement (ICE)",
      " special agent as deputydirector. Until then, both positions had been vacant for eight months, a period during which FTATGfoundered, according to some observers. As part of the restructuring, the NSC narrowed FTATG'sfocus to providing intelligence assessments of terrorist financing targets designated by the NSC'sTerrorist Financing PCC. Prior to the restructuring, FTATG in some instances would identifytargets, but now serves strictly as the NSC's research arm. In January 2005, FTATG's memberagencies (72) eachcommitted to providing staff to serve at FTATG. The Group currently has slightly over half its staffcomplement in place.",
      "  In May 2000 President Bill Clinton announced the establishment of the Foreign TerroristAsset Tracking Center (FTATC), FTATG's predecessor, (73) as part of a $300 million counterterrorism initiative, $100 millionof which was to be used to establish FTATC and target terrorist financing. (74) Congress authorizedfunding in October 2000. (75)  The Clinton initiative followed the prevention the previous year of a planned series of OsamaBin Laden terrorist attacks to mark the Millennium. Although the Intelligence Community (IC)successfully disrupted those attacks before they could occur, Administration officials remainedtroubled by the IC's continuing inability to identify,",
      " track and disrupt al Qaeda's financial supportnetwork. (76)  Vowing to gain a better understanding of the terrorists' financial network -- particularly itsfund-raising component -- White House officials conceived of and pushed for the establishment ofFTATC as a way to improve the government's understanding of how terrorists fund theiroperations. (77) Officialsenvisioned FTATC as an inter-agency all-source terrorist-financing intelligence analysis center, andsuccessfully pushed to have it located at the Department of the Treasury. (78) But, at the time, some ofthe key agencies expected to participate and contribute resources, including the Treasury Departmentitself,",
      " did not attach a priority to collecting and analyzing terrorist financing intelligence. Indeed,Treasury officials made no mention of terrorist financing in their national security money launderingstrategy. (79) The CIA,in turn, saw little utility in tracking terrorist financing. (80) Despite this skepticism, President Bush's National SecurityAdviser Condoleezza Rice determined by spring of 2001 that terrorist financing proposals wereworth pursuing. By this time, a year had passed since the Clinton White House initially establishedterrorist finance analysis as a priority, and, yet, the Treasury Department still had not stood up acenter. Instead, Treasury officials continued their planning,",
      " intending at some future point toestablish a 24-analyst strong office. (81)  On the eve of the September 11, 2001 attacks, Treasury still had taken no concrete steps toestablish a center. By then, sixteen months had passed since the Clinton Administration announcedits intention to establish the Center. More than seven months had elapsed since the incoming BushAdministration had adopted the concept. And despite numerous post-9/11 declarations to thecontrary (82) -- FTATC,prior to 9/11, remained a plan rather than a reality. Even before the 9/11 attacks, signs of frustrationwere becoming evident.",
      " Treasury officials had begun blaming CIA for adopting a posture of \"benignneglect\" toward FTATC. (83)  Three days after the terrorist attacks of September 11, Treasury officials finally took action,establishing the Center (84) and placing it under the control of the Department's Office ofForeign Asset Control. At the time, a Treasury spokeswoman denied that there had been any unusualdelay in launching the Center, citing the logistical difficulties involved in bringing togetherrepresentatives of a number of investigative agencies. Senator Charles E. Grassley, however,expressed concern as to whether the delay \"is indicative of larger problems.\" (85)",
      "  Initially, the Center was comprised of the same member agencies as Operation Green Quest,a multi-agency, financial enforcement initiative set up to identify, disrupt, dismantle and ultimately\"bankrupt\" terrorist networks and their sources of funding. (86) FTATC's mission was toprovide intelligence assessments of individual and group terrorist financing targets identified byGreen Quest, which was responsible for conducting investigative operations. (87)  In September 2001, the Senate Select Committee on Intelligence (SSCI), in a reportaccompanying its approved fiscal year (FY) 2002 intelligence authorization bill, endorsed IC effortsto exploit financial intelligence, and noted that the Treasury Department's FTATC concept showedpromise in providing terrorist financial analysis.",
      " But the Committee cautioned that FTATC, \"...tothe extent it will function as an element of the Intelligence Community, has not been coordinatedadequately with the Director of Central Intelligence nor reviewed by this Committee.\" (88) The Committee directedthe DCI and the Treasury Secretary to jointly prepare a report \"assessing the feasibility andadvisability of establishing an element of the federal government to provide for effective andefficient analysis and dissemination of foreign intelligence related to the financial capabilities andresources of international terrorist organizations.\" The Committee instructed that the report containan evaluation of FTATC's suitability for the task and, if appropriate, a plan for FTATC'sdevelopment.",
      " (89)  By May 2002, the Executive Branch had yet to complete the requested report, despite asubsequent statutory requirement contained in the USA PATRIOT Act requiring that it do so. TheSSCI noted its dissatisfaction and included a provision in the FY2003 intelligence authorization,subsequently approved by the House, establishing the FTATC at CIA, and placing it under DCIcontrol. (90)  Despite the statutory requirement that the FTATC be under the DCI's control, the ExecutiveBranch placed FTATC under the supervision of the NSC's Office of Combating Terrorism. As notedearlier,",
      " the Executive Branch also renamed FTATC. Following the enactment of the 2004Intelligence Reform Act, the DNI assumed control of FTATG. The Interagency Process(91) The National Security Council is responsible for the overall coordination of the interagencyframework for combating terrorism including the financing of terrorist operations. Given divergentconcerns among various departments and agencies only the NSC may be in a position to chooseamong alternative approaches and make tactical decisions when disagreements emerge. The NSCstaff inevitably has a significant influence on the decisionmaking process although great reliance isplaced on interagency Policy Coordination Committees some of which are headed by departmentalofficials and some by the National Security Adviser.",
      " A PCC specifically on terrorist financing was not included in the list of PCCs published bythe White House in February 2001, but media accounts indicate that a PCC for this issue wasestablished in the aftermath of the events of September 11. (92) Since the introduction ofthe PCC, it has been argued that a new position on the NSC staff should be established -- a specialassistant to the President for combating terrorist financing. The individual, who would not havedepartmental responsibilities, would chair meetings of the PCC on terrorist financing and would beassisted by a team of directors on the NSC staff in coordinating and directing all Federal efforts onthe issue.",
      " This team would \"focus its attention on evaluating the all-source intelligence available onterrorist organizations, conducting link analysis on the organizations with information and technicalintelligence available from other departments and agencies, and developing tactics and strategies todisrupt and dismantle terrorist financial networks.\" (93)  There are, however, arguments that can be made against establishing new positions on theNSC staff. Size of the White House staff and expanding the span of control of the National SecurityAdviser are one set of issues. Another question is the desirability of having tactics and strategiesdeveloped by the NSC staff rather than operating departments. For instance, the Tower Boardestablished in the wake of the Iran-Contra affair in the Reagan Administration,",
      " recommended that\"As a general matter, the NSC Staff should not engage in the implementation of policy or theconduct of operations. This compromises their oversight role and usurps the responsibilities of thedepartments and agencies.\" (94) Arguably, the best approach would have the PCC developstrategies against terrorist financing, resolve inter-departmental disagreements on tactics, and bringdifferences to the attention of the NSC for resolution. It may be, however, that the perspectives ofagencies and departments are so different that there need to be arrangements more permanent thanregular PCC meetings to maintain requisite coordination. Others would argue that while a separatestaff within the larger NSC staff may not be necessary,",
      " it would be better to have the PCC headedby the National Security Adviser or her/his designee rather than an official with other importantresponsibilities and loyalties. Financial Regulators and Institutions(95) The nation's financial institutions, their regulators, and certain offices within the U.S.Department of the Treasury share primary responsibility for providing information on financialtransactions that could be helpful in detecting, disrupting, and preventing the use of the nation'sfinancial system by terrorists and terrorist organizations. Congress has statutorily required newreporting to improve the timeliness of terrorist financing detection, suppression, and control.Historically, such information has aided law enforcement authorities in dealing with moneylaundering to hide the gain from crimes,",
      " and is now being used to track possible terrorist financing.Figures for this kind of activity have been available only with a long time lag. Even longer lags characterize Inspector General and reported internal assessments of the effectiveness of antiterroristfinancing efforts.  Parts of the USA PATRIOT Act are scheduled to expire on December 31, 2005. Differentlegislation has been passed by both houses that would reauthorize these sections ( H.R. 3199 and S. 1389 ). (96) While the expiring provisions of the act are nonfinancial (TitleII), congressional reauthorization initiatives might well expand to amend the financial Title III.",
      " Andaccording to Senate Banking Committee Chairman Richard Shelby: \"The Committee will continueits thorough series of hearings on terror finance. As part of our country's anti-terror efforts, theCommittee will continue to conduct hearings and a review of our national money launderingstrategy.\" (97) TheGovernment Accountability Office (GAO) has a study under way for this Committee on suchpolicies and practices. (98)  The Offices Within the Department of theTreasury. Offices within the Treasury include the Office of Terrorism and FinancialIntelligence (TFI, formerly the Executive Office for Terrorist Financing and Financial Crimes),established in April 2004.",
      " TFI is charged with developing and implementing strategies to counterterrorist financing and money laundering both domestically and internationally. It participates indeveloping regulations in support of both the Bank Secrecy Act and USA PATRIOT Acts. It alsorepresents the United States at international bodies that focus on curtailing terrorist financing andfinancial crime, including the Financial Action Task Force (FATF) whose \"Forty Recommendations\"and \"Eight Special Recommendations\" are the basic frameworks for anti-money laundering andterrorist financing efforts internationally. Two offices with antiterrorist financing responsibilitieswithin TFI are the Office of Foreign Assets Control and the Financial Crimes Enforcement Network.",
      "  FinCEN originated in the Treasury in 1990 as the data-collection and analysis bureau for theBSA. It provides a government-wide, multi-source intelligence network under which it collects Suspicious Activity Reports and Currency Transaction Reports from reporting financial institutions(with assistance from the Internal Revenue Service), tabulates the data in a large database that hasbeen maintained since 1996, and examines them to detect trends and patterns that might suggestillegal activity. FinCEN then reports what it finds back to the financial community as a whole to aidfurther detection of suspicious activities. There have been eight SAR Activity Review s issued sinceOctober 2000,",
      " the most recent dated April 2005 and covering data through June 2004. BetweenApril 1, 2003, and June 30, 2004, 2175 suspicious activity reports were submitted to FinCEN ofwhich 51% came from money services businesses and 47% came from depository institutions. Therest came from casinos and securities and futures institutions. (99) SARs from depositoryinstitutions are responsible for most of the reporting accuracy problems. Nevertheless, such reportsare a part of FinCEN's outreach and education efforts on behalf of financial regulators and lawenforcement agencies. While FinCEN has no criminal investigative or arrest authority,",
      " it uses itsdata analysis to support investigations and prosecutions of financial crimes, and refers possible casesto law enforcement authorities when warranted. It also submits requests for information to financialinstitutions from law enforcement agencies conducting of criminal investigations.  According to Treasury testimony, a terror hotline established by FinCEN after 9/11 resultedin 853 tips passed on to law enforcement through April 2004. In the same time period, financialinstitutions filed 4,294 SARs involving possible terrorist financing, of which 1,866 had possibleterrorist financing as their primary impetus. (100)  The Inspector General (IG) of the Department of the Treasury has conducted a series of auditsof the FinCEN SAR database and raised some potentially troubling issues.",
      " The IG found that thedatabase lacks critical information and is filled with inaccuracies. An analysis of a sample of 2,400SARs, for example, determined that most of the reports did not detail the specific actions that ledto suspicion, did not give a location for possible illegal transactions, or omitted the narrativedescription required in the reports entirely. In June 2004, the IG testified that subsequent auditsrevealed little or no improvement. (101) More recent IG reports on FinCEN and the use of FinCEN'sBSA e-filing of SAR reports continues to give FinCEN low grades in eliminating ongoing problemsconcerning enforcement of the Bank Secrecy Act and USA PATRIOT Act.",
      " (102)  Following the IG audit, FinCEN announced it would collect information from the agenciesresponsible for Bank Secrecy Act compliance on their examination procedures, cycles and resources;on any significant deficiencies in reporting by financial institutions; and other data including formaland informal actions taken by regulators to correct reporting failures by financial institutions. FinCEN has created an internal Office of Compliance to support the work of financial regulators. The Office of Foreign Assets Control is designed primarily to administer and enforceeconomic sanctions against targeted foreign countries, groups, and individuals, including suspectedterrorists, terrorist organizations, and narcotics traffickers. OFAC acts under general presidentialwartime and national emergency powers as well as legislation,",
      " to prohibit financial transactions andfreeze assets subject to U.S. jurisdiction. OFAC lists those persons, groups, or countries whosetransactions it has been instructed to block or assets to be frozen by financial institutions. OFAC hasclose working relations with the financial regulatory community and maintains telephone \"hotlines\"through which it receives information about in-progress questionable transactions. OFAC alsoworks closely with the Federal Bureau of Investigation and with the Department of Commerce'sOffice of Export Enforcement, and cooperates with the United Nations in imposing sanctions onforeign governments. The most recent IG audit was completed in April 2002 and concluded that OFAC ishampered because of its reliance on regulators'",
      " examinations of the financial institutions that supplydata under the BSA. The IG recommended that Treasury inform Congress that OFAC lackedsufficient authority to ensure that financial institutions comply with foreign sanctions, after findinginstances in which institutions either did not have databases on foreign sanctions, or did not updatethem. Further, some institutions did not routinely follow guidance in processing rejected financialtransactions and did not report blocked assets. (103)  The Intelligence Reform and Terrorism Prevention Act of 2004 addressed financial sectorcounterterrorism. Section 6303 required the Treasury Secretary to report on governmental ways tocurtail terrorist financing, including organizational changes as well as procedural ones.",
      " Section 7802stated that: \"It is the sense of Congress that the Secretary of the Treasury, in consultation with theSecretary of Homeland Security, other Federal agency partners, and private-sector financialorganization partners, should -- (1) furnish sufficient personnel and technological and financialresources to educate consumers and employees of the financial services industry about domesticcounter terrorist financing activities, particularly about -- (A) how the public and private sectororganizations involved in such activities can combat terrorism while protecting and preserving thelives and civil liberties of consumers and employees of the financial services industry; and (B) howthe consumers and employees of the financial services industry can assist the public and privatesector organizations involved in such activities;",
      " and (2) submit annual reports to Congress on effortsto accomplish subparagraphs (A) and (B)....\" President Bush's FY2006 budget request for the Treasury Department includes more fundingfor combating terrorist and other illegal financing. FinCEN would receive $73.6 million in directlyappropriated funds, an increase of about 2%. In addition, $1.5 million would flow into FinCEN asoffsets and reimbursements from other agency accounts. TFI's new internal Office of IntelligenceAnalysis would essentially double in size, receiving $1.8 million in funding. OFAC would receive$23.8 million,",
      " up almost 8%. Additional funding of $0.6 million would increase TFI's other effortsto detect illegal activities. (104)  The Financial Institution Regulators. TheTreasury delegates responsibility for examining financial institutions for compliance with the BSAto the financial regulators of those institutions. These regulators are already responsible for thesafety and soundness examinations of the institutions they supervise, and generally conduct theirBSA examinations concurrently with those routine inspections. When there is cause do so, however,any of the regulators may carry out a special BSA examination. The primary regulators for depository financial institutions are all participants in the FederalFinancial Institutions Examination Council (FFIEC). FFIEC prescribes uniform principles,",
      "standards, and reporting forms for all banking and other depository institution examinations. It alsoworks to promote uniformity in all depository supervision. As a result, all the depository financialinstitutions follow similar procedures in enforcing the BSA. FFIEC has formed an additionalWorking Group to enhance coordination of regulatory agencies, law enforcement, and privatefinancial institutions to strengthen current arrangements. All, including the non-depositoryregulators, are also part of the National Anti-Money Laundering Group (NAMLG), first formed in1997 by the Office of the Comptroller of the Currency to set up guidelines for depositories to followwith respect to training of employees to detect illegal transactions,",
      " a system of internal controls toassure compliance, independent testing of compliance, and daily coordination and monitoring ofcompliance. The continuing purpose of the group, which also includes the Department of Justiceand banking industry trade groups, is to identify institutions at high risk of being used for moneylaundering or terrorist financing. (105)  For federal budgetary purposes, the financial regulatory agencies are essentially self-funding.Thus, most of their increasing spending on antiterrorist and money laundering efforts comes fromgeneral operating funds, including assessments and fees on their regulated institutions and portfoliointerest earnings, rather than federal appropriations.  The Office of the Comptroller of the Currency (OCC)",
      " is the regulator for just over 2,000nationally chartered banks and the U.S. branches and offices of foreign banks. The OCC conductson-site examinations of each national bank at least three times within every two-year period. Alongwith loan and investment portfolios, it reviews internal controls, internal and external audits, andBSA compliance. According to the OCC, it conducted about 1,340 BSA examinations of 1,100institutions in 2003, and nearly 5,000 BSA examinations of 5,300 institutions since 1998. (106)  When the OCC finds violations or deficiencies in filing SARs and CTRs,",
      " it may take eitherformal or informal action. Not generally made public, informal actions result when examinersidentify problems that are of limited scope and size, and when they consider managements ascommitted to and capable of correcting the problems. Informal actions include commitment letterssigned by institution management, or memoranda of understanding, and matters requiring boardattention in the examination reports. Formal enforcement actions are made public because they aremore severe. Such actions include cease and desist orders and formal agreements requiring theinstitution to take certain actions to correct deficiencies. Formal actions may also be taken againstofficers, directors and other individuals, including removal and prohibition from participation in thebanking industry,",
      " and civil fines. From 1998 through 2003, the OCC issued a total of 78 formalenforcement actions based, at least in part, on BSA problems. The number of informal enforcementactions has been characterized as \"countless.\" (107) The most recent case of severe BSA problems involved RiggsBank. In this case, according to the OCC, deficiencies had been noted for many years before a $25million penalty was imposed in May 2004. Riggs has ended operations and has been sold to PNCFinancial Services Group. The Federal Reserve System (Fed) supervises about 950 state-chartered commercial banksthat are members of the system and more than 5,",
      "000 bank and financial holding companies. Alongwith the OCC, it also supervises some international activities of national banks. The Fed uses bothon-site examination and off-site surveillance and monitoring in its supervision process. Eachinstitution is to be examined on-site every 12 to 18 months. Regulators' in-house examiners are toexamine larger institutions continuously. The Board of Governors of the Fed coordinates theexamination and compliance activities of the 12 regional banks. In early 2004, the Fed created a newsection within the Board's Division of Banking Supervision and Regulation -- the Anti-MoneyLaundering Policy and Compliance Section -- to improve control.",
      "  According to the Fed, from 2001 through 2003, it took 25 formal enforcement actions againstfinancial institutions under the BSA. In every case, the examination process identified violationsthat were severe enough to require action. (108) Recent public action involved a $100 million fine againstUBS for transmitting U.S. currency to trade-sanctioned nations through the Fed of New York's ownsystems. (109) It alsosanctioned the holding company for Riggs Bank. (110)  The Federal Deposit Insurance Corporation (FDIC) regulates about 4,800 state-charteredcommercial banks and 500 state-chartered savings associations that are not members of the Fed.",
      " Italso insures deposits of the remaining 4,000 depository institutions without regulating them. TheFDIC examines its supervised institutions about once every 18 months. The FDIC also serves as thepoint of contact for FinCEN to communicate identities of suspected terrorists to banking regulatorsand institutions.  Since 2000, the FDIC has conducted almost 1,100 BSA examinations and from 2001, hasissued formal enforcement actions (cease and desist orders) against 25 institutions and bans or civilfines against three individuals for violations. The FDIC also has taken 53 informal actions since2001.  The Inspector General of the FDIC has audited the FDIC twice,",
      " covering the period 1997through September 2003 to assess the FDIC's BSA examinations and its implementation of the USAPATRIOT Act. The IG generally concluded that FDIC examiners have insufficient guidance for BSAexaminations, which were judged to be inadequate. During the audit period, 2,672 institutions werecited for BSA failures to report, and 458 had repeat violations. Further many citations were forserious violations such as a failure to comply with record-keeping and reporting requirements forCTRs. (111) Whilesome transactions of over $10,000 are exempt -- such as regular and routine business,",
      " includingmeeting payroll or depositing receipts, by known customers -- the citations involved unambiguousrequirements to report. In 30% of the cases, the FDIC was found to have waited until the nextexamination to follow up on BSA violations and taken more than a year in 71% of the cases to act,with many violations taking five years before the FDIC acted. The Office of Thrift Supervision (OTS) supervises about 950 federally chartered savingsassociations, savings banks, and their holding companies (thrifts). Like the OCC, the OTS is locatedwithin, but is independent of the Treasury.",
      " The OTS is to conduct on-site examinations of eachinstitution at least three times every two years. Data on actions taken are from the Treasury IG'saudit of OTS actions covering a period from January 2000 through October 2002. During that time,examiners found substantive problems at 180 thrifts, and took written actions against eleven. According to the IG, in five cases the action was not timely, was ineffective, and did not evenaddress all violations found. The IG also took exception to the extent to which the OTS relied onmoral suasion instead of money penalties to gain compliance: in a sample of 68 violations,",
      " forexample, the OTS took such actions in 47 cases but failed to make any positive difference incompliance in 21 cases. The National Credit Union Administration (NCUA) currently regulates 8,945 federallychartered credit unions and another 3,442 federally insured, state-chartered credit unions. Mostcredit unions are small and considered to have limited exposure to money laundering activities. Inat least one case, however, penalties were assessed against a credit union for CTR deficiencies. In2000, the Polish and Slavic Federal Credit Union in New York City was assessed $185,000 forwillful failure to file CTRs and improperly granting exemptions from filings for somecustomers.",
      " (112)  In 2003, the NCUA examined 4,400 credit unions and participated with state regulators in another 600 examinations of state-chartered institutions. They found 334 BSA violations in 261credit unions. Most deficiencies were inadequate written policies, inadequate customeridentification, or inadequate currency reporting procedures. NCUA reported that 99% of violationswere corrected during or soon following the on-site examinations. NCUA actions are generallyinformal but may involve memoranda of understanding. (113)  The Securities and Exchange Commission (SEC) regulates to protect investors againstfraud and deceptive practices in securities markets.",
      " It also has authority to examine institutions itsupervises for BSA compliance. This covers securities markets and exchanges, securities issuers,investment advisers, investment companies, and industry professionals such as broker-dealers. TheSEC supervises more than 8,000 registered broker-dealers with approximately 92,000 branch officesand 67,500 registered representatives. The depth and breadth of the securities markets are such thatthey could arguably prove to be efficient mechanisms for money laundering. The SEC's approach to BSA monitoring and enforcement is a joint product of the NAMLGand modified from that used by depository institution regulators. Much of the securities industry isoverseen by self-regulating organizations (SROs), such as the New York Stock Exchange.",
      " Thus,most examinations are carried out jointly by the SEC's Office of Compliance Inspections andExaminations (OCIE) and the relevant SRO. The SEC does not make public its findings of BSAviolations. Agency efforts are focused on educating the securities industry on its complianceresponsibilities. This may be in part because compliance rules for the industry are relatively recent. For example, FinCEN and the SEC released specific regulations for customer identificationprograms for mutual funds in June 2003. The Commodity Futures Trading Commission (CFTC) protects market users and thepublic from fraud and abusive practices in markets for commodity and financial futures and options.",
      " The CFTC delegates BSA examinations to its designated self-regulatory organizations (DSROs), ofwhich the most prominent are the National Futures Association (NFA), the Chicago Board of Trade,and New York Mercantile Exchange. NFA membership covers more than 4,000 firms and 50,000individuals. The regulatory process generally starts at registration, when the SRO screens firms andindividuals seeking to conduct futures business. The DSROs monitor business practices and, whenappropriate, take formal disciplinary actions that could prohibit firms from conducting any furtherbusiness. Covered businesses include all registered futures commission merchants, \"introducingbrokers,\" commodity pool operators,",
      " and commodity tracing advisers, who are required to reportsuspicious activity and verify the identity of customers, as well as monitor certain types of accountsinvolving foreigners. According to the CFTC, in 2003, the NFA conducted 365 examinations of the 180 futurescommission merchants and 605 introducing brokers. These examinations resulted in 238 auditreports of which 54 reflected anti-money laundering deficiencies at nine merchants and 45 brokers. Primary deficiencies cited were failures to comply with annual audit and training requirements. (114)  Internal Revenue Service(115) To help finance its operations and its many spending programs, the federal government leviesincome taxes,",
      " social insurance taxes, excise taxes, estate and gift taxes, customs duties, andmiscellaneous taxes and fees. The federal agency responsible for administering all these taxes andfees -- except customs duties -- is the Internal Revenue Service (IRS). In managing that hugeresponsibility, the IRS receives and processes tax returns and related documents, payments, andrefunds, enforces compliance with tax laws and regulations, collects overdue taxes, and provides avariety of services to taxpayers intended to answer questions, help them understand their rights andresponsibilities under the tax code, and resolve disputes in ways that seek to avoid protracted andcostly litigation.",
      " Role in Government's Campaign Against Terrorist Financing The IRS also contributes to current efforts by the federal government to uncover, disrupt, andstaunch the flow of funds to terrorist groups, especially those expressing implacable hostility towardthe United States. These efforts involve the use of a variety of weapons, including the collection andanalysis of financial intelligence, diplomatic pressure, regulatory actions, administrative sanctions,and criminal investigations and prosecutions. The IRS's role rests on the agency's wealth ofexperience and expertise in tax law enforcement. For the most part, it consists of providinganalytical and resource support for investigations (many done in concert with other federal agencies)of possible links between terrorist groups and actual or alleged violations of the financial reportingrequirements of the Bank Secrecy Act of 1970,",
      " money laundering schemes, and the diversion offunds from tax-exempt charities. The IRS is responsible for enforcing compliance with the BSA forall non-banking financial institutions not regulated by another federal agency, including moneyservice businesses (MSBs), casinos, and credit unions. Capabilities and Resources The current allocation of funds among major IRS operations suggests to some that exposingand disrupting the flow of funds to terrorist organizations hostile to the United States is not anespecially high priority for the IRS. In FY2005, the IRS is receiving $10.236 billion in appropriatedfunds. Of this total, $4.363 billion (or nearly 43%) is designated for tax law enforcement,",
      " theappropriations account from which the IRS funds its contributions to the federal government'scampaign against terrorist financing. While there is no specific line item in the IRS budget foractivities related to terrorist financing, the agency estimates that its spending for this purpose inFY2005 may total $31.2 million, up from between $20 and $25 million in FY2004. (116) This amounts to 0.7%of its budget for tax law enforcement and slightly more than 0.3% of its total budget. It is not clearfrom available information how much the IRS is likely to spend on activities related to terroristfinancing in FY2006.",
      " IRS's contribution to the government's campaign against terrorist financing draws mostly onthe resources of three of its operating divisions: Criminal Investigation (CI), the Small Business andSelf-Employed Taxpayers Division (SB/SE), and the Tax-Exempt and Government Entities Division(TE/GE). The principal division, as measured by resources devoted to investigating and opposingterrorist financing, seems to be CI, whose main function is to investigate instances of alleged taxevasion and other financial crimes related to tax administration. In recent decades, CI has becomeincreasingly involved in investigations of possible violations of anti-money laundering and financialreporting statutes.",
      " CI uses BSA and money-laundering statutes to investigate and prosecute criminalconduct related to the tax code, such as abusive tax shelters, offshore tax evasion, and corporatefraud. CI also investigates failures to file Form 8300 (Report of Cash Payments Over $10,000Received in a Trade or Business) and criminal violations of the BSA, including the structuring ofdeposits to avoid the reporting requirements for currency transactions. As a result, the division hasbecome adept at exposing the attempts of individuals and organizations (including charities) to evadetaxes on legal income or to launder money obtained through illicit activities with the use ofnominees,",
      " cash, multiple bank accounts, layered financial transactions involving multiple entities,and the movement of funds offshore. In the aftermath of the terrorist attacks of September 11, 2001,CI has been adapting this capability to the special requirements of exposing, tracking, anddismantling the sources of terrorist financing. This is no easy task, partly because terrorist groupsand their financiers are constantly adjusting to efforts by major countries like the United States tostop the flow of funds to these groups. These groups are beginning to rely on methods of movingfunds outside formal financial systems such as the use of cash couriers and alternative remittancesystems. In FY2005,",
      " CI's spending on investigating terrorist financing is likely to amount to $30.5million, or nearly 98% of the total IRS budget for this purpose. (117) Of the 186 IRSemployees expected to work on a full-time basis on activities related to terrorist financing inFY2005, 182 come from CI. The SB/SE Division performs a number of important tasks. One is to enforce compliancewith certain sections of the tax code. Another is to monitor and enforce compliance by certainnon-banking financial institutions with the reporting requirements of the BSA. In discharging thisresponsibility, SB/SE agents conduct examinations of MSBs,",
      " casinos, and credit unions to ensurethey comply with reporting requirements under the BSA. They refer possible violations to CI andTreasury's Financial Crimes Enforcement Network for investigation. Some of the cases couldinvolve suspected attempts to launder money to terrorist groups. In October 2004, a new office wasestablished within the SB/SE Division -- the Office of Fraud/BSA -- to coordinate IRS's efforts toenforce compliance with the BSA. The director of the office reports directly to the Commissionerof SB/SE and is responsible for BSA policy formation and data management. It is not clear fromavailable information how much the Division is likely to spend on activities tied to investigationsof terrorist financing in FY2005.",
      " A primary responsibility of the TE/GE Division is oversight of the financial affairs ofcharities. TE/GE civil examiners evaluate applications submitted by organizations seekingtax-exempt status and monitor the continuing eligibility of organizations already granted that statusthrough information obtained from tax returns and other sources. The Division recently revised itsapplication form for charities seeking tax-exempt status (Form 1023) to include more relevantinformation for criminal investigators in cases involving allegations of financial crimes or terroristfinancing. Additionally, agents from the Exempt Organizations branch of the TE/GE Division lendassistance to CI and other federal agencies in their investigations of charities suspected of havingdiverted funds to support terrorist activities.",
      " In FY2004, the EO began an intensive educationalprogram to persuade charities to implement effective internal controls to prevent the unintendeddiversion of assets to terrorist groups. And in FY2005, the Exempt Organizations branch plans toestablish an office known as the Exempt Organization Fraud and Financial Transactions Unit, whosemain tasks will include exposing and disrupting the diversion of charitable assets to fund terroristactivities and expanding the database on the flow of funds from donors to charitable organizationsavailable to CI and other law enforcement agencies. Once again, it is not clear how much theDivision will spend on activities related to investigations of terrorist financing in FY2005. Underpinning the IRS's contribution to the federal government's fight against terroristfinancing are the knowledge,",
      " skills and technology possessed by CI special agents and certainfinancial information the agency collects under a variety of tax and anti-money laundering statutes,including the BSA. Criminal Investigations special agents must have academic degrees in accounting andbusiness finance. In addition, they undergo rigorous training in criminal investigative techniques,forensic accounting, and the fundamentals of financial investigations. Some also receive specializedtraining in methods of tracking and thwarting terrorist financing from prosecutors with theDepartment of Justice's Counterterrorism Section. Experienced special agents tend to excel atunraveling complex financial transactions by acquiring and analyzing key pieces of detailed financialinformation and re-assembling them in the manner of a jigsaw puzzle to form what is intended tobe a coherent picture of expenditures,",
      " life-style changes, and acquisition of assets. As of March 19,2005, the IRS employs 2,733 special agents, 111 of whom serve as computer investigative specialiststrained to use special equipment and techniques to preserve digital evidence and to recover financialdata. (118)  Around 182 special agents and CI support personnel are working on counterterrorisminvestigations in FY2005. (119) Some of these agents, along with a number of agents from theTE/GE Division, are involved in a pilot anti-terrorism initiative being conducted at the Garden CityCounterterrorism Lead Development Center (LDC) in Garden City,",
      " NY. The initiative, which isdirected by the CI, offers research and project support to anti-terrorist financing investigations beingconducted by the Joint Terrorism Task Forces led by the FBI or by CI special agents. (120) By combiningconfidential data from tax forms with public sources of information and data gathered from othercriminal investigations, the LDC can undertake thorough analyses of financial data relevant tospecific investigations and disseminate the results in accordance with the limits imposed by taxdisclosure laws and the rules governing the secrecy of grand jury proceedings. CI special agentsassigned to the LDC have focused their investigations on the members of known terrorist groupswho might have violated tax,",
      " money-laundering, and currency laws and individuals linked totax-exempt organizations who might be raising funds to support terrorist groups.  Owing to its responsibility for enforcing tax laws and various money laundering statutes, theIRS has direct access to financial information that might be useful in detecting and tracking taxevasion and various financial crimes, including the movement of money earned through illegalactivities through domestic financial institutions to foreign terrorist groups. Under Section 6050Iof the Internal Revenue Code, firms not covered by the BSA must report to the IRS customerpurchases of more than $10,000 paid in cash. (121) Under Section 5314 of the BSA,",
      " U.S. residents and citizensand any firms with domestic business operations having transactions with foreign financialinstitutions must file a form known as the Report of Foreign Bank and Financial Accounts with theIRS; the form provides important details about those transactions. And since December 1992, theIRS has had the authority to monitor and enforce compliance with the BSA reporting requirementsby non-banking financial institutions not regulated by other federal agencies; these institutionsinclude MSBs, casinos, and non-federally insured credit unions. The IRS is also responsible forprocessing and storing electronically all BSA documents collected by all federal agencies (includingFBARs, currency transactions reports,",
      " and suspicious activity reports) in a computer data baseknown as the Currency Banking Retrieval System. Currently, the CBRS contains close to 144million BSA documents. Sometime in 2006 or 2007, FinCEN is to assume primary responsibilityfor processing and storing all BSA documents through a project known as BSA Direct. (122) Although all thesedocuments are made available to other law enforcement and regulatory agencies, the IRS appearsto be the largest user. According to congressional testimony by Nancy Jardini, Chief of the CriminalInvestigations Division, data culled from BSA documents played important roles in 26%",
      " of the 150investigations into terrorist financing conducted by special agents through June 2004. (123)  Coordination and Cooperation with Other Treasury Bureaus and FederalAgencies The IRS shares its investigative resources with a variety of other Treasury bureaus andfederal agencies. It is forging close working relationships with the Treasury Department's Office ofTerrorism and Financial Intelligence as well as Treasury's Office of Foreign Assets Control, FinCEN,and the Working Group on Terrorist Financing and Charities. A key function of TFI is to assembleand analyze intelligence on the methods used by terrorist groups to finance their activities. FinCENand the IRS work closely on enforcing compliance with the BSA,",
      " and FinCEN refers possible casesof terrorist financing to IRS's LDC for further investigation. In addition, the IRS is contributing to numerous inter-agency initiatives aimed in whole orin part at tracking and disrupting the flow of funds to terrorist groups. Among the noteworthyinitiatives are the National Counterterrorism Center; the Informal Value Transfer System WorkingGroup; the Organized Crime Drug Enforcement Task Force Program; the Defense IntelligenceAgency Center; the Anti-Terrorism Advisory Council created by the Attorney General; the FBI'sJTTF, Terrorist Financing Operations Section, and National Joint Terrorism Task Force; HighIntensity Money Laundering and Related Financial Crime Area Task Forces;",
      " and the TerroristFinance Working Group led by the State Department. Besides the FBI, the federal law enforcementagencies involved in these initiatives are the Bureau of Alcohol, Tobacco, Firearms and Explosives;the Drug Enforcement Administration; and Immigration and Customs Enforcement. Measures of Success in Campaign Against Terrorist Financing There is no evidence that the IRS has developed a formal and publicly accessible method forevaluating the cost-effectiveness of its contributions to the campaign against terrorist financing. Theapparent lack of such a method makes it difficult to address some key policy issues raised by thosecontributions. Specifically, it is not clear to what extent the agency's involvement complements orduplicates work done by other agencies,",
      " yields financial information that results in the eliminationor disruption of specific sources of terrorist financing, and can be regarded as a desirable investmentof public resources. Nonetheless, the IRS does keep track of the number of anti-terrorist financinginvestigations its agents are involved in and their outcomes. According to 2004 congressionaltestimony by Dwight Sparlin, the Director of Operations, Policy, and Support for CI, betweenOctober 1, 2000, and early May 2004, the CI conducted 372 such investigations \"in partnership withother law enforcement agencies.\" (124) Of these, over 100 led to criminal indictments;",
      " another 120were referred to the Justice Department for prosecution; and the remaining 150 or so wereincomplete and still being worked on by CI special agents. Impact of the Recommendations of the 9/11 Commission By all available accounts, the IRS has made limited changes in its contributions to the federalgovernment's campaign to combat terrorist financing in response to the 9/11 Commission'srecommendation to improve the collection of intelligence regarding terrorist financing. On thewhole, it appears that IRS's role in the government's campaign against terrorist financing is not onlyconsistent with this recommended change in strategy but arguably critical to its prospects for success. In September 2004,",
      " the IRS established a new senior executive position to coordinate itsactivities related to terrorist financing. The current Counterterrorism Coordinator is RebeccaSparkman. Her duties include evaluating the efficacy of the agency's contributions to the fightagainst terrorist financing; monitoring criminal cases involving allegations of terrorist financing;overseeing the interactions between IRS and other Treasury bureaus and federal agencies involvedin the fight against terrorism to make sure they are not hampered by a lack of coordination; andfostering open communication among the divisions in IRS contributing to the fight against terroristfinancing. In addition, the IRS shifted its representative on the National Joint Terrorism Task Forceto the National Counterterrorism Center established in August 2004 through an executive ordersigned by President Bush.",
      "  Departments of Homeland Security and Justice Bureau of Customs and Border Protection (CBP)(125) The Bureau of Customs and Border Protection is the principal agency responsible for thesecurity of the nation's borders. CBP was established March 1, 2003 with the creation of Departmentof Homeland Security (DHS). CBP is primarily composed of the inspection staffs of the legacy U.S.Customs Service, Immigration and Naturalization Service (INS), and the Animal and Plant HealthInspection Service (APHIS). CBP's primary mission is interdicting illicit cross-border traffic whileefficiently processing the flow of legitimate or low-risk traffic across the border.",
      " CBP enforces morethan 400 laws and regulations on behalf of many federal agencies, including those that relate toterrorist financing. Role in Fighting Terrorist Financing. CBP's rolein the national effort to combat terrorist financing is confined to its inspection and interdictionactivities along the border and at or between ports of entry. In this role CBP intercepts illicit materialand contraband illegally entering or exiting the country. CBP interdicts inbound illicit currencyduring the course of its inspection operations at and between ports of entry. To prevent illicitfinancial proceeds from reaching terrorist or criminal groups outside the U.S., CBP has developedtwo outbound programs that specifically relate to terrorists and terrorist financing:",
      " the CurrencyProgram and the EXODUS program, run by CBP's Outbound Interdiction Security staff. The mission of CBP's Outbound Interdiction and Security activities is to enforce U.S. exportlaws and regulations. This mission includes (among other things): interdicting illegal exports ofmilitary and dual-use commodities; enforcing sanctions and embargoes against specially designatedterrorist groups, rogue nations, organizations and individuals; and interdicting the illicit proceedsfrom narcotics and other criminal activities in the form of unreported and smuggled currency. Interdiction and Security Outbound is also responsible for enforcing the International Traffic in ArmsRegulations (ITAR)",
      " for the Department of State, the Export Administration Regulations (EAR) forthe Department of Commerce, and sanctions and embargoes for the Department of the Treasury'sOffice of Foreign Assets Control. As a part of the Currency Program, dedicated outbound currencyteams work to interdict the illicit flow of money to terrorist, criminal, and narcotics traffickingorganizations. Under the EXODUS program, CBP enforces the ITAR, EAR, and OFAC regulations.  Capabilities and Resources. CBP enforces morethan 400 laws at the border. Those associated with criminal violations include violations of 18U.S.C. 1956 and 1957 (money laundering); 18 U.S.C.",
      " 541 (entry of goods falsely classified); 18U.S.C. 542 (entry of goods by means of false statements); and 18 U.S.C. 545 (smuggling goods intothe United States).  Data regarding budget and resources devoted to terrorist financing specifically are not readilyavailable. However, general data regarding CBP operations are available. CBP has more than40,000 employees. Of these, nearly 18,000 are front line inspectors. CBP's budget for FY2005 is$6.5 billion and $6.7 billion has been requested for FY2006.  CBP has developed an Outbound Currency Interdiction Training (OCIT)",
      " program to supportits currency interdiction mission. This training includes instruction and practical exercises to providespecialized knowledge in currency interdiction, and has an anti-terrorism component. In addition,CBP has the largest Canine Enforcement Program in the country with more than 1,200 teamsassigned to 79 ports of entry, and 69 Border Patrol Stations. Some of these canines have beentrained to detect currency. Measures of Success and Accomplishments. InFY2004 CBP Interdiction and Security (Outbound) operations made 1,320 seizures of unreportedand bulk smuggling of currency valued at $45.9 million.",
      " This same unit, in FY2003, also made atotal of 1,337 seizures valued at $51.7 million for violations of: the ITAR for the Department ofState, the EAR for the Department of Commerce, and sanctions and embargoes for the Departmentof the Treasury's OFAC. CBP's Canine Enforcement Program was responsible for seizures of U.S.currency worth $28.2 million in FY2004. According to recently reported statistics, CBP makes fivecurrency seizures valued at more than $226 thousand on an average day. In terms of relevantperformance measures, CBP sets targets based on the value of outbound currency seizures,",
      " and onthe effective percentage of outbound enforcement targeting.  Relationships and Coordination with OtherAgencies. CBP maintains relationships and coordinates with many agencies in theperformance of its border security missions. These include other DHS agencies includingImmigration and Customs Enforcement, Coast Guard, and the Transportation SecurityAdministration (TSA). They also include those agencies whose statutes and regulations CBPenforces at the border, for example the Departments of the Treasury and State. CBP's NationalTargeting Center, houses staff from a number of agencies including the Bureau of Immigration andCustoms Enforcement, Coast Guard; the U.S. Department of Agriculture; the Transportation SecurityAdministration;",
      " and the FBI. In addition, CBP's Office of Intelligence (OINT) supports CBP frontline operations in detecting and interdicting terrorists and instruments of terror. OINT maintains avariety of important relationships with other intelligence agencies including ICE; InformationAnalysis and Infrastructure Protection (IAIP); the FBI; the Central Intelligence Agency (CIA); thejoint venture Terrorist Threat Integration Center (TTIC); and the FBI-led Terrorist Screening Center(TSC). Bureau of Immigration and Customs Enforcement (ICE)(126) The Bureau of Immigration and Customs Enforcement is the main investigative branch ofthe Department of Homeland Security. Established in March 2003 during the reorganization thatfollowed the creation of DHS,",
      " ICE is composed of the investigative components of the legacy U.S.Customs Service (Customs), the legacy U.S. Immigration and Naturalization Service; the FederalProtective Service, and the Federal Air Marshals. ICE's work on financial investigations isconducted by the Financial Investigations Division (FID). FID's mission is to investigate financialcrimes and to work closely with the financial community to identify and address vulnerabilities inthe country's financial infrastructure. FID is organized into two primary sections: the FinancialInvestigative Program (FIP) and Cornerstone. Role in Fighting Terrorist Financing. In theaftermath of the September 11,",
      " 2001 terrorist attacks, legacy Customs launched a multi-agency taskforce called \"Operation Green Quest.\" Green Quest was the focus of Customs efforts to counterterrorist financing operations. With the creation of DHS, and the subsequent creation of ICE andCBP, legacy Customs investigative resources were combined with investigative assets of the legacyINS. While Operation Green Quest continued past the date of the creation of DHS, as investigationscontinued it was discovered that there was (the potential if not actual) overlap between cases beingpursued by ICE under Green Quest and cases being pursued by the Federal Bureau of Investigation under its Terrorist Financing Operation Section (TFOS). In an attempt to avoid overlap,",
      " and todelineate investigative priorities and responsibilities, the Secretary of Homeland Security and theAttorney General signed a Memorandum of Agreement (MOA) in May 2003. This MOA designatedthe FBI as the lead investigative agency with respect to terrorist financing investigations.  Concerned about the potential loss of expertise held by ICE agents, the MOA also containedprovisions to ensure that ICE, while not the lead agency on terrorist financing investigations, is ableto play a significant role. The MOA provided that ICE and the FBI detail appropriate personnel tothe other agency. GAO reports and testimony indicate, for example, that an ICE manager serves asthe Deputy Section Chief of TFOS,",
      " and that an FBI manager is detailed to ICE's FinancialInvestigations Division. (127) The MOA further specified that the two agencies developcollaborative procedures to determine whether ICE investigations or leads are related to terrorismor terrorist financing. To this end, ICE created a vetting unit, staffed by both ICE and FBI personnel,to conduct reviews and determine any links to terrorism in ICE investigations or financial leads. Ifa link is found, the case or lead is to be referred to the FBI's TFOS, where the FBI and FBI-led JointTerrorism Task Forces are to assume a leadership role in the investigation with significant supportfrom DHS investigators.",
      " As mentioned above, ICE has combined the authorities and jurisdictions of the legacyCustoms Service, and legacy INS. ICE created the Financial Investigations Division and reorganizedit into two primary programs: the Financial Investigations Program and Cornerstone, to harness itsfull investigative potential. FIP's mission is to oversee efforts in accordance with and in support ofthe National Money Laundering Strategy. These efforts include investigations targeting drug and'non-drug' money laundering (human smuggling, telemarketing fraud, child pornography, andcounterfeit goods trafficking); and other financial crimes. FIP also runs the Money LaunderingCoordination Center (MLCC), which serves as the central clearinghouse for domestic andinternational money laundering operations within ICE.",
      " Cornerstone's mission is to coordinate andintegrate ICE's financial investigations to systematically target the \"methods by which terrorist andcriminal organizations earn, move, and store their illicit funding.\" Cornerstone applies athree-pronged approach involving: mapping and coordinating the investigation and analysis offinancial, commercial, and trade crimes; close collaboration with the private sector to identify andeliminate vulnerabilities; and gathering, assessing and distributing intelligence regarding thesevulnerabilities to relevant stakeholders. The ICE Office of Intelligence supports all of ICE'sinvestigations, and supports the financial investigations through its Illicit Finance Unit in theIntelligence Operations Branch at ICE headquarters. ICE has investigatory jurisdiction over violations of 18 U.S.C.",
      " 1956 and 1957 that derivefrom the jurisdiction formerly vested in the legacy Customs Service, which was a part of theTreasury Department. ICE has jurisdiction over criminal violations including internationaltransportation of financial instruments including those involving unlicenced money transmitters,smuggling bulk currency, and transactions to evade currency reporting requirements; launderingproceeds derived from drug smuggling, trade fraud, export of weapons systems and technology, aliensmuggling, human trafficking, and immigration document fraud.  In addition, ICE has attache offices in foreign countries, all of which are involved in financialinvestigations. ICE also leads a Foreign Political Corruption Unit (which conducts jointinvestigations with representatives of the victimized foreign government), focused on combating thelaundering of proceeds deriving from foreign political corruption,",
      " and bribery or embezzlement. ICEalso provides training and assistance to foreign governments through the International LawEnforcement Academy (ILEA) and programs sponsored by the Department of State's Bureau ofInternational Narcotics Law Enforcement (INL). ICE has provided money laundering-relatedtraining through ILEA schools located in Bangkok, Thailand; Gaborrone, Botswana; and Budapest,Hungary. ICE provides INL sponsored training on financial investigations to countries identifiedby State's Terrorist Finance Working Group, including United Arab Emirates, Qatar, and Brazil. TheOrganization of American State's Inter-American Drug Abuse Control Commission (CIDAD)Program, specifically requested ICE to conduct the money laundering/",
      "financial investigationsmodule at the Andean Community Counterdrug Intelligence School. This program provides trainingfor law enforcement officers from five South American countries. Capabilities and Resources. According to theFY2005 DHS Congressional Budget Justifications, ICE's Financial Investigations Division had 2,150FTE in FY2003 and was appropriated more than $287 million for its operations. FID received $283million in FY2004. (128) According to the GAO, as of February 2004, a total of 277ICE personnel were assigned full-time to JTTFs. This total breaks out to 161 former INS agents, 59Federal Air Marshals,",
      " 32 former Customs Service agents, and 25 Federal Protective Serviceagents. (129) ICE'sOffice of Investigations (of which FID is a component) received a budget of $1.1 billion in FY2005and has requested $1.3 billion for FY2006. (130)  Measures of Success and Accomplishments. While data are not readily available specifically concerning ICE investigations related to terroristfinancing, data are available regarding financial investigations in general. Recent informationpublished by ICE indicates that through Cornerstone, ICE has seized nearly $300 million in currencyand monetary instruments, and made 1,800 arrests for financial crimes.",
      " (131)  Relationships and Coordination with Other RelevantAgencies. The breadth of ICE's financial investigative responsibilities require ICEto maintain strong relationships with other U.S. agencies involved in financial investigationsincluding the FBI, Internal Revenue Service, Secret Service, the Drug Enforcement Administration,State Department, and others. As noted above, ICE also maintains significant relationships withforeign governments and international organizations.  U.S. Secret Service(132) The United States Secret Service -- now a part of the Department of Homeland Security,where it is to be \"maintained as a distinct entity\" (133) -- had been housed, since its inception as a smallanti-counterfeiting force in 1865,",
      " in the Department of the Treasury. (134) As a result of itsmissions and responsibilities, the Service's roles in combating terrorism and financial crimes aremanifold, extending to anti-terrorist financing. (135) These can be direct, through participation in relevantinteragency task forces and its own investigations of financial crimes, or indirect, through itsactivities and operations in seemingly unrelated areas. (Protective and security duties, for instance,might uncover terrorist financing arrangements behind potential assaults; or examination of identitytheft might disclose the use of credit cards by terrorist cells.) Even though the Secret Service no longer resides in the Treasury Department, the agency isstill connected to its previous departmental home and certain responsibilities.",
      " This occurs becausethe Secret Service's authority, mandates, functions, and jurisdiction were continued when it wasmoved intact to its new residence. Secret Service Involvement. Secret Serviceinvolvement in combating terrorist financing is an outgrowth of its two principal missions --protection and, especially, criminal investigations -- and it is connected with several Serviceresponsibilities, functions, and activities. (136) The agency's mission statement on criminal investigationssummarizes these: The Secret Service also investigates violations of lawsrelating to counterfeiting of obligations and securities of the United States; financial crimes thatinclude, but are not limited to,",
      " access device fraud, financial institution fraud, identify theft,computer fraud; and computer-based attacks on our nation's financial, banking, andtelecommunications infrastructure. (137) Flowing into this main stream are several tributaries from within the Service, including aCounterfeit Division. But the most relevant for combating terrorist financing is the Financial CrimesDivision, which, among other matters, covers financial institution fraud, money laundering, forgery,and access device fraud. (138) The division has also been involved in numerous task forcesconsisting of other federal agencies as well as subnational government entities: Several of these task forces specifically targetinternational organized crime groups and the proceeds of their criminal enterprises... These groupsare not only involved in financial crimes,",
      " but investigations indicate that the proceeds obtained fromfinancial fraud are being diverted toward other criminal enterprise. (139) The task forces can also extend to international components or connections. Task forces involvingthe Financial Crimes Division include CABINET (Combined Agency Interdiction Network),INTERPOL (International Criminal Police Organization), the Financial Crimes Task Force, theAsian Organized Crime Task Force, and the West African Task Force. (140)  Caveats and Their Meaning. Several importantcaveats to any examination of Secret Service activities as well as efforts to combat terrorist financingare in order. One is that authoritative, detailed, and comprehensive information about the SecretService and its operations in the public record is lacking.",
      " This results from the high degree ofsecrecy and sensitivity surrounding them and agency operations. In addition, public submissionsfrom the Service itself or from its adoptive parent, the Department of Homeland Security, are usuallygeneral in scope, limited in detail, and short on specifics. (The Secret Service, however, doesprovide more information directly to Members and committees of Congress in executive session orotherwise in confidence, through reports, hearings, meetings, and briefings.) A second qualification is that the federal involvement in combating terrorist financing hasbeen and probably still is evolving, involving a number of different entities and connections amongthem. (As noted above, for example,",
      " Treasury's Office of Terrorism and Financial Intelligenceemerged only recently.) Changes over time have occurred, affecting organizational structure, agencyduties and operations, interagency coordinative arrangements, networks consisting of federal alongwith subnational and private organizations, and informal relationships. Similar changes might occuragain with the same impact. A third caveat is that actual practice might not conform to expected practice and that formalinstitutional arrangements and procedures might differ from informal undertakings. Consequently,some of the accounts in the public record might not adequately describe on-going interrelationships,activities, and operations; their scope and range; their effectiveness and results; or their comparativeimportance.",
      " Collectively, these qualifications have meaning for the Secret Service's role andresponsibilities in combating terrorist financing. These are not specified in detail in the publicrecord, a gap that leads to uncertainty and even some confusion about them. In addition, the rolesmay have been transformed since the Service's move into Homeland Security and out of Treasury,where the lead agency (and several related bureaus) are headquartered. The roles or practices maycontinue to change under certain circumstances: for instance, if Treasury's bureaus and officesincrease their responsibility and operations; if the reverse occurs, whereby TFI calls upon the SecretService for additional involvement; or if the Secret Service's own priorities are altered,",
      " to elevate,as an illustration, the protective mission while reducing criminal investigations. The Federal Bureau of Investigation (FBI)(141) The Federal Bureau of Investigation is the lead agency in the Department of Justice (DOJ)for the dual mission of protecting U.S. national security and combating criminal activities. As astatutory member of the U.S. Intelligence Community, it is charged with maintaining domesticsecurity by investigating foreign intelligence agents/officers and terrorists who pose a threat to U.S.national security. The FBI's criminal investigative priorities include organized crime and drugtrafficking, public corruption, white collar crime, and civil rights violations. In addition,",
      " the FBIinvestigates significant federal crimes including, but not limited to, kidnaping, extortion, bankrobberies, child exploitation and pornography, and international child abduction. The FBI alsoprovides training and operational assistance to state, local, and international law enforcementagencies. Its two top priorities are counterterrorism and counterintelligence, respectively. Due to its dual law enforcement and national security missions, the FBI has the responsibilityand jurisdiction to counter both criminal money laundering and terrorist-related financing. According to the FBI, \"...Within the FBI, the investigation of illicit money flows crosses allinvestigative program lines.\" (142) As mentioned above,",
      " while there are some similaritiesbetween money laundering and terrorist financing at the tactical or operational level -- that is themethodologies by which fungible resources are stored and transferred -- there are also differencesbetween these two areas, not the least of which is the end use of the financial resources. Whatfollows is a description of the FBI's organization, capabilities, and relationships to and coordinationwith other agencies with respect to money laundering and terrorist financing.  The FBI has primary jurisdiction over the bulk of specified criminal offenses associated withmoney laundering in statute. (143) In general, investigations involving money laundering fallunder the purview of its Criminal Investigative Division.",
      " The Division's Financial Crimes Section(FCS) and Money Laundering Unit (MLU) specialize in tracing illicit proceeds -- \"following themoney\" -- that criminals seek to hide in multiple transactions in legitimate commerce and finance. Indeed, the investigative techniques developed by the FCS were used to trace the movements andcommercial transactions of the 9/11 hijackers. (144)  The MLU works with federal, state, and local agencies -- often through federal task forces-- to identify and document emerging money laundering trends and methods. The MLU analyzessuspicious activity reports and other criminal intelligence to generate new investigations andcontribute to ongoing investigations.",
      " (145)  In 2001, the FBI accounted for over one-quarter of criminal cases (423) referred to the U.S.Attorneys for prosecution in which money laundering was the primary charge, (146) but such cases onlyaccounted for a small percentage (1.4%) of the 30,708 cases referred by the FBI for prosecution inthat year. (147) TheFBI was also the lead agency for Title 18 U.S.C. money laundering referrals (376), (148) but such cases do notinclude those involving material support to foreign terrorists and international financial transactionoffenses. (149)  The FBI Mission to Counter Terrorist Financing.",
      " The Department of Justice/FBI jurisdiction and authority to investigate cases of terrorist financingas crime distinct from money laundering date back to 1994 with the enactment of the first \"materialsupport\" legislation. (150) The material support laws were subsequently enhanced withthe enactment of the USA PATRIOT Act. (151) A variety of other legal tools are also used in the investigationand prosecution of terrorist financing activity. (152)  Pursuant to its national security mandate, the FBI has long had responsibility for trackingterrorist financing either in response to a terrorist attack, or in a manner that would prevent such anattack. However, according to the FBI,",
      " \"...Prior to the events of 9/11/2001, [the FBI] had nomechanism to provide a comprehensive, centralized, focused and pro-active approach to terroristfinancial matters.\" (153) It was not until April 2002, that the various elements of the FBI tracking terrorist financing wereintegrated under the Terrorist Financing Operations Section of the FBI's Counterterrorism Division. According to the FBI, the mission of TFOS is to: conduct full financial analysis of terrorist suspects andtheir financial support structures in the United States and abroad; coordinating joint participation,liaison and outreach efforts to appropriately utilize financial information resources of private,government and foreign entities;",
      " utilizing FBI and Legal Attache expertise to fully exploit financialinformation from foreign law enforcement, including the overseas deployment of TFOS personnel;working jointly with the intelligence community to fully exploit intelligence to further terroristinvestigations; working jointly with prosecutors, law enforcement, and regulatory communities; anddeveloping predictive models and conducting data analysis to facilitate the identification ofpreviously unknown terrorist suspects. (154) TFOS Resources and Capabilities. Due to thesensitive, if not classified, role of some of the activities of the TFOS, there is little publicly availableinformation about the resources dedicated to this function at the FBI. In terms of the types ofprofessionals working within TFOS,",
      " FBI testimony indicates that there is a mixture of financialintelligence analysts and law enforcement officers. According to the FBI, in order to analyzeexisting financial and other information for counterterrorism purposes, TFOS, working with theCounterterrorism Section of the Department of Justice's Criminal Division, works to identifypotential electronic data sources controlled by domestic and foreign governments, as well as theprivate sector that may be valuable in its efforts. Once these are identified, TFOS attempts to createthe legally appropriate protocols to access and analyze this information in order to provide reactiveand proactive operational, predictive and educational support to investigators and prosecutors.According to the FBI, some of the projects and initiatives associated with information technologyexploitation include:",
      " The Proactive Exploits Group (PEG). This TFOS group serves as a proactiveunit by working closely with document exploitation personnel to generate investigative leads forTFOS and other FBI investigative divisions. The PEG has conducted a survey of available datamining and link analysis software for use in TFOS activities. The Suspicious Activity Report Project. The SAR Project attempts to identifypotential terrorists through the mining of existing databases for \"...key words, patterns, individuals,entities, accounts and specific numeric indicators (i.e. Social Security...passport, telephoneetc.).\" (155) Thisresearch and analysis is conducted independent of whether the reported SAR has a nexus toterrorism.",
      "  The Terrorist Risk Assessment Model. Under this project, the FBI is attemptingto identify potential terrorists and terrorist financing activities through the use of \"predictive patternrecognition algorithms,\" or profiles of historical financial transactions that are associated withterrorist activities. (156) Information Access. According to the FBI, theTFOS has developed substantial contacts domestically and internationally that have enhanced itsaccess to near real-time information to advance the TFOS mission. Domestically, through outreachto the private sector, and with appropriate legal process, the FBI has access to, among otherinformation: \"...Banking, Credit/Debit Card Sector, Money Services Businesses,",
      "Securities/Brokerages Sector, Insurance, Travel, Internet Service Providers, and theTelecommunications Industry.\" (157) Internationally, TFOS investigators have supported numerousinvestigations which have led to the exchange of investigative personnel between the FBI andnumerous foreign countries or agencies. For example, according to the FBI, the United Kingdom,Switzerland, Canada, Germany, and Europol have all detailed investigators to the TFOS ontemporary duty. (158) Moreover, the State Department has requested that the FBI-TFOS lead an interagency team toprovide a TFOS-developed training curriculum to other countries requesting assistance in furtherdeveloping their existing investigative programs,",
      " legislative and legal regimes, and financialoversight controls to counter terrorist financing. FBI Measures of Success and RelatedAccomplishments. A review of publicly available FBI documents and officialtestimony suggests that the FBI measures its success in countering terrorist financing throughnumerous measures, to include the deterrence, disruption, or prevention of terrorist attacks; theidentification of previously unknown (\"sleeper\") terrorist suspects, terrorist organizations, andterrorist supporters; enhancing the understanding of a terrorist attack after it has occurred byanalyzing existing financial information gathered through the case and liaison; the development andgeneration of additional terrorism leads and investigations; the number of arrests,",
      " indictments andconvictions for activities in violation of the aforementioned and related statutes; the closure ofdomestic and international non-governmental organizations and charities with linkages to designatedterrorist organizations; and the seizure and/or blockage of terrorist assets. Given theseself-determined criteria for assessing performance, in public remarks, the FBI has articulated itsvarious successes in working with foreign and domestic law enforcement and intelligence agenciesto achieve its goals. Some of the often cited FBI successes in terrorist financing include (1) thedisruption and dismantlement of a Hezbollah procurement and fund-raising network relying oninterstate cigarette smuggling; (2)",
      " FBI support to a U.S. Treasury, Office of Foreign Asset Controlinvestigation that led to the blocking of assets of the Holy Land Foundation for Relief andDevelopment (HLF), which, according to the FBI, had been linked to the funding of Hamas terroristactivities, and (3) the shutting down of the U.S.-based Office of the Benevolence InternationalFoundation (BIF) after it was determined through FBI-OFAC cooperation that the charity wasfunneling money to Al Qaeda. (159)  According to the FBI, in order to address some of the concerns raised by the GAO withrespect to alternative financing mechanisms,",
      " it has developed intelligence requirements related toknown indicators of terrorist financing activity. (160) Theoretically, such requirements should cause the FBI's fieldcollectors (largely its special agents located at the 56 FBI field offices (161) ) to pro-actively collectintelligence on alternative mechanisms of financing terrorism. Secondly, according to the FBI, theTFOS Program Management and Coordination Unit (PCMU) has been tasked with \"tracking variousfunding mechanisms used by different subjects on ongoing investigations -- to include alternativefinancing mechanisms.\" (162)  Relationships to and Coordination with OtherAgencies. The FBI participates in, and leads some,",
      " domestic and internationalgroups to coordinate activities related primarily to terrorist financing. The interagency FBI-led JointTerrorism Task Forces, of which there are currently 100, play the lead role in investigating terroristfinancing activities. In addition to representatives from other federal law enforcement agencies, theJTTFs also include participation of many state and local law enforcement officers. Domestically, theFBI is a participant in the National Security Council's Policy Coordination Committee on TerroristFinancing (established in late 2001) which meets at least once a month to coordinate the UnitedStates Government's activities to counter terrorism financing. It is also a participant in the StateDepartment-",
      "chaired Terrorist Financing Working Group which identifies, prioritizes and assiststhose countries whose financial systems may be vulnerable to manipulation for terrorist purposes;other agencies participating in this group include the Departments of the Treasury and HomelandSecurity.  In May of 2003, a Memorandum of Agreement was signed by the Attorney General andSecretary of Homeland Security to de-conflict and clarify the terrorist financing activities of the FBIand DHS, particularly the Bureau of Immigration and Customs Enforcement. Under the MOA,generally, the FBI was designated the lead agency for the investigation of terrorist financing, andDHS was enabled to focus its law enforcement activities on protecting the integrity of the financialsystem.",
      " A process was established whereby existing DHS terrorist financing investigations (largelypart of legacy U.S. Customs' \"Operation Green Quest\") would be reviewed jointly to determine ifthere was a nexus to terrorism. If a joint determination was made by the FBI and DHS that there wasa nexus to terrorism, the case would be transferred to the FBI-led JTTF. Because DHS - ICE lawenforcement officers are on the JTTF, they would continue to play an important role in theinvestigation. If a joint determination was made that there was no nexus to terrorism, the case wouldremain with DHS- ICE, and likely become a part of \"Operation Cornerstone,\" ICE's effort to identifyand work to resolve vulnerabilities in the U.S.",
      " financial system that may be exploited by terrorists. Internationally, in addition to its 51 Legal Attache Offices which conduct law enforcementand intelligence liaison, (163) the FBI formed the International Terrorism Financing WorkingGroup (ITFWG). Composed of law enforcement and intelligence agency representatives from theUnited Kingdom, Canada, Australia, and New Zealand, the ITFWG works to coordinate informationand intelligence sharing with respect to national efforts to counter terrorist financing. (164) Moreover, the FBI isa participant in the Joint Terrorist Financing Task Force, based in Riyadh, Saudi Arabia to gatherinformation about financing activities having a potential nexus to the Kingdom of Saudi Arabia andother countries or non-state terrorist groups operating in the Near East region.",
      " The informationgathered is provided to TFOS, and subsequently to the FBI-led JTTFs in the United States forinvestigation, as appropriate. (165)  Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)(166) ATF's Mission and Roles Related to TerroristFinancing. On January 24, 2003, the Bureau of Alcohol, Tobacco and Firearms'law enforcement functions were transferred from the Treasury Department to the Department ofJustice, and became the Bureau of Alcohol, Tobacco, Firearms and Explosives. ATF enforces thefederal laws and regulations relating to alcohol, tobacco, firearms, explosives and arson by workingdirectly and in cooperation with others to:",
      " 1) suppress and prevent crime and violence throughenforcement, regulation, and community outreach; 2) ensure fair and proper revenue collection andprovide fair and effective industry regulation; 3) support and assist federal, state, local, andinternational law enforcement; and 4) provide innovative training programs in support of criminaland regulatory enforcement functions. In supporting the Department of Justice's primary strategic goal of preventing terrorism andpromoting national security, the ATF participates in joint terrorism task force initiatives, as well asother interagency counterterrorism mission partnerships. Operations and intelligence data infirearms trafficking and explosives accountability have shown that terrorist organizations may beshifting to tobacco and alcohol commodities to fund their criminal activities.",
      " As it relates to terroristfinancing, the ATF seeks to reduce and divest criminal and terrorist organizations of monies derivedfrom illicit alcohol diversion and contraband cigarette trafficking activity. Specifically, the mission of the ATF's Alcohol and Tobacco Diversion Program is to: 1)disrupt and eliminate criminal and terrorist organizations by identifying, investigating and arrestingoffenders who traffic in contraband cigarettes and illegal liquor; 2) conduct financial investigationsin conjunction with alcohol and tobacco diversion investigations in order to seize and deny furtheraccess to assets and funds utilized by criminal enterprises and terrorist organizations; 3) preventcriminal encroachment on the legitimate alcohol and tobacco industries by organizations traffickingin counterfeit/",
      "contraband cigarettes and illegal liquor and; 4) assist local, state, and other federal lawenforcement and tax agencies in order to thoroughly investigate the interstate trafficking ofcontraband cigarettes and liquor.  Teams of ATF auditors, special agents and inspectors are all involved with performingcomplex investigations of multi-state criminal violations of federal law. Several ATF investigationshave found terrorism links. For example, in 2003, ATF investigated an organization in NorthCarolina that was trafficking cigarettes to Michigan and utilizing some of the profits to fund theHezbollah in the Middle East. ATF efforts contributed to the indictment of 18 defendants associatedwith this operation.",
      " ATF Coordination with Other Federal Agencies. In preventing unlawful trafficking in firearms and explosives and the diversion of alcohol andtobacco as financial means in support of terrorist activities, ATF continues to work in conjunctionwith all responsible law enforcement agencies to support terrorism-related investigations. ATF isrepresented at the National Drug Intelligence Center, El Paso Intelligence Center (EPIC), FinancialCrimes Enforcement Network, INTERPOL, the FBI Counterterrorism Center, Central IntelligenceAgency, Department of Homeland Security, Defense Intelligence Agency, and the National JointTerrorism Task Force. ATF is also represented at the executive level in the FBI StrategicIntelligence Operations Center and is involved in the Law Enforcement Information Sharing (LEIS)",
      "group. ATF maintains a Memorandum of Understanding with six Regional Information SharingSystems (RISS) agencies, which represent thousands of state and local law enforcement agencies. Drug Enforcement Administration (DEA)(167) DEA's Responsibilities with Regard to TerroristFinancing. DEA's mission is to enforce the treaties, laws, and regulations that seekto eliminate the manufacture, distribution, sale, and use of illegal drugs. The size of the worldwidemarket in illicit drugs -- estimates range from $300-$500 billion per year -- provides ampleopportunities for drug proceeds to be diverted to terrorist ends through money laundering activitiesand other financial schemes.",
      " (168)  Statutorily, DEA has authority to investigate monetary transactions resulting from unlawfuldrug activities under the primary U.S. money laundering statutes (18 U.S.C.1956 and 1957) and theapplicable civil and criminal forfeiture statute (18 U.S.C. 981 and 982). Jurisdiction under thesestatutes was granted to the Attorney General (as well as the Secretary of the Treasury and thePostmaster General) and delegated to DEA (and the FBI). DEA's enforcement jurisdiction iscontingent upon the funds involved being derived from the trafficking of illegal narcotics. DEA alsoexercises authority under 18 U.S.C.",
      " 1960, the illegal money remitter statute, and 31 U.S.C. 5332,dealing with bulk cash smuggling when the funds involved in the violations are derived fromtrafficking of illegal narcotics. Both of these criminal statutes also have applicable forfeiturestatutory provisions. Operationally, DEA Administrator Karen Tandy has mandated that every DEA investigationwill have a financial investigative component. Thus, any DEA investigation could potentiallydiscover monetary links to terrorist entities. Within DEA's infrastructure, the following componentsare specifically designated with anti-money laundering responsibilities: The Office of Financial Operations at DEA headquarters has overall programresponsibility for all DEA financial investigative efforts;",
      " The Financial Intelligence/Investigations Unit at DEA headquarters providesanalytical support to the Office of Investigative Intelligence; The Financial Section at the Special Operations Division (SOD) is amulti-agency section that coordinates multi-district, complex money-laundering wiretapinvestigations; and Each of DEA's 21 Field Divisions as well as the Bangkok, Bogot\u00c3\u00a1, and MexicoCity Country Offices have Financial Investigative Teams. DEA Resources Devoted to Combating TerroristFinancing. There are 45 positions in DEA authorized to support counter-terrorismefforts. Since FY2002, DEA has received funding from the FBI to reimburse DEA forcounter-terrorism related investigative and analytical support provided through the SpecialOperations Division-Special Coordination Unit (SOD-",
      "SCU). DEA received, via reimbursableagreement from the FBI, $7.7 million in FY2002, $11.4 million in FY2003, and $6.3 million inFY2004. For FY2005, DEA again anticipates reimbursement from the FBI for the counterterrorismsupport provided by DEA. The anticipated reimbursement would equal $6.3 million, which includesfunding to support 45 positions (including 11 Special Agents and 13 Intelligence Analysts).  Measures of Success and Accomplishments. DEA does not maintain specific statistics related to terrorist financing. DEA's investigations,however,",
      " are routinely directed at activities involving narcotics and precursor materials that have thepotential to fund terrorist organizations. Examples are Operation Mountain Express and OperationNorthern Star, investigations that uncovered possible links between the trafficking ofpseudoephedrine (a methamphetamine precursor) in the United States and Middle Eastern groupswith terrorist connections. (169)  DEA Coordination with Other Federal Agencies. The SOD-SCU is responsible for coordinating all responses to terrorism-related requests for SODassistance and is responsible for sharing tactical and/or investigative information with otherappropriate federal agencies. For the purpose of information exchange at the headquarters level, SCUpersonnel have been assigned to the National Joint Terrorism Task Force and the Department ofHomeland Security.",
      " Domestic field investigations that identify extremist/terrorist information aredocumented in a teletype and/or DEA-6 Report of Investigation (ROI) and are immediately passedto the local FBI office and, if applicable, to JTTFs in the field. This information, as appropriate, isalso passed to state and local enforcement counterparts. Foreign Country Office investigations thatidentify extremist/terrorist information are documented in a teletype and/or ROI and immediatelypassed to the respective U.S. government agencies that are part of the local country team (e.g., StateDepartment, Regional Security Officer, Military Attach\u00c3\u00a9, FBI Legal Attach\u00c3\u00a9,",
      " etc.). Documentationon domestic and foreign office investigations that identify extremist/terrorist information is alsoprovided to the SOD-SCU along with the names of all individuals to whom the information waspassed and their contact information. All \"cooperating sources\" utilized in DEA investigations are debriefed quarterly regardingtheir knowledge of any terrorist-related information, including money laundering. This informationis documented on a DEA Form 6 Report of Investigation using the protocols outlined above. The Department of State(170) As the lead foreign policy agency, the Department of State is tasked with formulating andconducting the foreign policy of the United States. Within that broad mission,",
      " the Department ofState has responsibilities for fighting terrorism in five categories: military, intelligence, lawenforcement, diplomatic, and financial. The bureaus within State that are concerned withcounterterrorism finance programs include the Office of the Coordinator for Counterterrorism(S/CT), the Bureau of Economic and Business Affairs (EB), and the Bureau for InternationalNarcotics and Law Enforcement (INL). (171)  Following is a description of the State Department's primary responsibilities to block the flowof terrorist financing. (172)  Office of the Coordinator for Counterterrorism (S/CT) The Office of the Coordinator for Counterterrorism (S/CT)",
      " within the Department of Stateimplements some key activities to help identify and stop terrorist financing and acts as the lead incoordinating U.S. government agencies in these efforts. S/CT receives funding for these activitiesfrom two accounts: the Nonproliferation, Anti-terrorism, De-mining and Related (NADR) programsaccount within the Foreign Operations appropriation and the Diplomatic and Consular Programs(D&CP) account within the Science, State, Justice, Commerce, and Related Agencies appropriation(formerly the Commerce, Justice, State and Related Agencies appropriation). S/CT administersseveral counterterrorism programs. One such program, Counterterrorism Engagement andInternational Cooperation,",
      " supports international counterterrorism conferences (some on terroristfinancing issues) and training. S/CT makes policy guidance and funding available to State's Bureauof Diplomatic Security's Office of Anti-terrorism Assistance which gives anti-terrorism training andequipment to law enforcement agencies. S/CT provides policy, planning, and programmingguidance to the Terrorist Interdiction Program which works with immigration authorities to disruptterrorists' travel. S/CT offers training and assistance to the State Department program ofCounterterrorism Finance (CTF) to block terrorist finances; S/CT works with countries in whichfinancial systems are deemed most vulnerable to terrorist financing and money laundering.",
      " Counterterrorism finance assistance programs are aimed at reinforcing legal, judicial, financialregulatory, financial intelligence, and law enforcement capabilities to detect, dismantle, and deterthe abuse of charities, cash couriers and alternative remittance systems by terrorist financiers.  The Office of the Coordinator for Counterterrorism also co-chairs the interagency TerroristFinancing Working Group. The Office of the Coordinator leads the State Department in designatingForeign Terrorist Organizations in order to freeze assets, stigmatize and isolate designated terroristorganizations internationally by restricting their ability to travel, and deter donations to and economictransactions with named organizations. S/CT has lead responsibility at State for preparingdesignations which block assets and prohibit contributions of terrorists and terrorist organizations.",
      "  Bureau of Economic and Business Affairs Office of Terrorism Finance and EconomicSanctions Policy (EB/ESC/TFS) The Office of Terrorism Finance and Economic Sanctions Policy (EB/ES/TFS) is the keyoffice within the State Department's Economic Bureau focused on disrupting terrorism financing. The Assistant Secretary of the Economic Bureau chairs meetings of an interagency CoalitionBuilding Group which meets weekly and coordinates international outreach on terrorism finance forthe United States government. EB/ESC/TFS maintains a network of Embassy officials designatedas Terrorism Finance Coordinating officers (TFCOs) in each U.S. overseas mission. The Office ofTerrorism Finance also develops and conducts,",
      " in coordination with other U.S. government agencies,effective economic sanctions programs against state sponsors of terrorism, such as Syria, Iran, Libya,North Korea, Sudan, Zimbabwe, and Burma. Bureau for International Narcotics and Law Enforcement (INL) The Bureau for International Narcotics and Law Enforcement (INL) has responsibilities formonitoring, reporting, and coordinating activities dealing with money laundering and financialcrimes, generally. In addition, INL and the Office of the Coordinator for Counterterrorism co-chairthe interagency Terrorist Finance Working Group. INL coordinates multilateral and bilateralanti-money laundering efforts, as well. Other State Department Terrorist Financing Activities In addition to the State Department counterterrorism financing activities within thepreviously discussed offices/bureaus,",
      " the Department plays an important role in both multilateralinstitutions and interagency counterterrorism financing activities.  State Department personnel frequently take lead roles in multi-agency diplomatic missionsrelating to money laundering and terrorist financing. The State Department chairs the interagencyCoalition Building Group, which implements the Policy Coordinating Committee on TerroristFinancing's decisions on actions to combat terrorist financing and manages international outreachon terrorism finance for the United States. State also leads the interagency Terrorist FinancingWorking Group (TFWG) which coordinates all U.S. counterterrorism financing and anti-moneylaundering capacity-building programs around the world.  State Department Funding Levels for Terrorist Financing Activities The Department of State receives funding for its various counterterrorism activities withinboth the Foreign Operations and the Science,",
      " State, Justice, Commerce, and Related Agencies(SSJC) appropriations. The following tables provide the FY2004 actual appropriation, the FY2005estimate, and the FY2006 request for State Department counterterrorism program funding.  Table 1. State Department Counterterrorism Funding WithinNon-proliferation, Anti-terrorism, De-mining, and Related Programs (NADR) ($ millions) Source: Office of the Coordinator for Counterterrorism, Department of State.  Table 2. State Department Counterterrorism Funding Within theDiplomatic and Consular Programs (D&CP) ($ millions) Source: Office of the Coordinator for Counterterrorism,",
      " Department of State. International Cooperation(173) In response to concerns expressed by the 9/11 Commission that the U.S. government \"hasbeen less successful in persuading other countries to adopt financial regulations that would permitthe tracing of financial transactions,\" (174) some observers have recommended the establishment of acounter-terrorist financing certification regime as a means of securing greater cooperation andcompliance with international counter-terrorist financing standards. In Congress, legislativeproposals to enact such a regime are currently under consideration. H.R. 1952 wouldestablish a certification regime modeled on the existing illicit drug certification process that wouldrequire the Department of the Treasury to identify countries of concern based on non-compliancewith the requirements of the International Convention for the Suppression of the Financing ofTerrorism.",
      " The bill would require the withholding of 50% of Foreign Assistance Act assistance anddirect opposition voting by U.S. representatives to multilateral financial institutions with regard tocountries of concern. The bill provides for a Presidential national security interest waiver subjectto Congressional review. H.R. 1952 has been read and referred to the House Committeeon International Relations and the House Committee on Financial Services. International Agreements and Bodies Given the significant overlap between international money laundering and terrorist financing,the international community has addressed these crimes with a similar set of measures and policies. In 1988, the United Nations (UN) General Assembly passed the Vienna Convention Against IllicitTraffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention), the firstinternational agreement to criminalize money laundering.",
      " An important component of theagreement, some argue, is that it includes a mutual assistance clause mandating that governmentscollaborate with each other in money laundering investigations. (175) In order to facilitatecooperation on anti-money laundering issues among various nations and to help countries implementthe Vienna Convention, the Group of Seven nations created the Financial Action Task Force (FATF)in 1989. Several recent conventions on terrorist financing have been negotiated. Most prominentamong these is the UN's International Convention for the Suppression of the Financing of Terrorism,which entered into force on April 10, 2002. As of June 2005,",
      " 132 countries had signed theconvention and 117 were full parties to the agreement. (176) The convention requires each country to criminalize thefunding of terrorist activities under its domestic law and to seize or freeze funds used or allocatedfor terrorist purposes. Countries must ensure that their domestic laws require financial institutionsto implement measures that identify, impede, and prevent the flow of terrorist funds. Finally,countries are required to prosecute or extradite individuals suspected of involvement in thefinancing of terrorism and to cooperate with other countries in the investigation and/or prosecutionof those suspected of engaging in these acts.  United Nations Security Council Resolution (UNSCR)",
      " 1373, was adopted on September 28,2001. It established numerous measures to combat terrorism, in addition to calling on membercountries to become parties to the International Convention for the Suppression of the Financing ofTerrorism. It focused on areas of financing, intelligence sharing, and limiting terrorists' ability totravel. The resolution also required states to criminalize Al Qaeda financial activities and to freezethe group's monetary assets; it mandated exchanges of intelligence, among other arrangements.UNSCR 1373 was passed under Chapter VII of the UN Charter, making compliance mandatory forall member-states and giving the Security Council enforcement powers.  UNSCR 1267,",
      " passed in October 1999, set up the \"1267 Committee,\" to monitor thesanctions imposed on then Taliban-controlled Afghanistan for its support of Osama Bin Laden andAl Qaeda. These sanctions require U.N. member states, among other things, to freeze assets ofpersons and entities listed by the 1267 committee. The Council has revised and strengthened thesesanctions since 1999. On January 30, 2004, the Council, in Resolution 1526 (2004), furtherstrengthened and expanded the Committee's mandate by requiring that states freeze economicresources derived from properties owned or controlled by Al Qaeda and the Taliban and also thatstates cut the flow of funds derived from non-profit organizations and alternative/informal remittancesystems to terrorist groups.",
      " Financial Action Task Force (FATF). TheFinancial Action Task Force is an inter-governmental body that develops and promotes policies andstandards to combat money laundering (the so-called Forty Recommendations ) and terroristfinancing ( Eight Special Recommendations on Terrorist Financing ). (177) It is housed at theOrganization for Economic Cooperation and Development (OECD) in Paris. As of July 2005, FATFhas 33 members. (178) According to its most recent mandate (May 2004, renewed until 2012):  FATF will continue to set anti-money laundering andcounter-terrorist financing standards in the context of an increasingly sophisticated financial system,and work to ensure global compliance with those standards.",
      " FATF will enhance its focus oninformal and non-traditional methods of financing terrorism and money laundering, includingthrough cash couriers, alternative remittance systems, and the abuse of non-profit organizations. (179) FATF sets minimum standards and makes recommendations for its member countries. Eachcountry must implement the recommendation according to its particular laws and constitutionalframeworks. In 2001, FATF released Eight Special Recommendations on Terrorist Financing. These are very focused, and reflect a more nuanced understanding of how terrorist groups raise andtransmit funds. The eight recommendations are:  1. Take immediate steps to ratify and implement the relevant United Nationsinstruments.",
      " 2. Criminalize the financing of terrorism, terrorist acts and terrorist organizations. 3. Freeze and confiscate terrorist assets. 4. Report suspicious transactions linked to terrorism. 5. Provide the widest possible range of assistance to other countries' law enforcementand regulatory authorities for terrorist financing investigations. 6. Impose anti-money laundering requirements on alternative remittance systems. 7. Strengthen customer identification measures in international and domestic wiretransfers. 8. Ensure that entities, in particular non-profit organizations, cannot be misused tofinance terrorism. (180)  In October 2004, FATF added a ninth recommendation calling on countries to stopcross-border movements of currency and monetary instruments related to terrorist financing andmoney laundering and confiscate such funds.",
      " It also called for enhanced information-sharingbetween countries on the movement of illicit cash related to terrorist financing or money laundering. Middle East and North Africa Financial Action TaskForce. The Middle East and North Africa Financial Action Task Force(MENAFATF) was inaugurated in November 2004 and works to promote the adoption andimplementation of internationally recognized anti-money laundering and counter-terrorism financingstandards among its 14 Middle Eastern member states. (181) The new body is designed to provide a regional forum forsharing knowledge and expertise on terrorist financing issues and to serve as a mutual assessmentand assistance mechanism for countries working to develop legal and enforcement infrastructure tocombat terrorist financing.",
      " The regional body is headquartered in Bahrain, and its President, VicePresident, and Executive Secretary are from Lebanon, Egypt, and Saudi Arabia, respectively. (182) At the MENAFATF'sfirst plenary meeting in April 2005, representatives assessed and evaluated progress in combatingterrorist financing in the region and discussed the organization's budget, action plan, and workinggroups. Its next meeting is scheduled for late-September 2005 in Beirut. The International Monetary Fund (IMF) and the World Bank have also incorporatedcounter-terrorist financing activities into their work. During 2003-2004, the IMF and the WorldBank undertook a twelve-month pilot program that evaluated 33 countries and assessed theircompliance with the FATF 40 + 8 recommendations.",
      " In March 2004, the IMF and World Bankagreed to make the pilot program permanent. Experience under the pilot program with bothassessments and with technical assistance considerably deepened collaboration between the IMF andWorld Bank and FATF and the FATF Style Regional Bodies (FSRBs). Recommendations for theIMF and World Bank on how to improve monitoring include the need for close coordination withFATF and FATF-Style Regional Bodies on the timing of assessments, more equitable sharing of theassessment burden among agencies, and broadening the responsibilities of IMF and World Bank stafffor the supervision and integration of assessment missions to insure comprehensive and high qualityassessments.",
      " (183)  In addition to the pilot program, numerous IMF products, including annual economic reports(Article IV Assessments) and the Reports on Standards and Codes, and Financial Sector AssessmentProgram reports consider issues relevant to terrorist financing. (184) None of these reportsconstitutes a binding agreement. The legal basis for the IMF and World Banks' work on these issuesis through its technical assistance function. The IMF and World Bank may offer advice andguidance, but it is the responsibility of the national governments to implement and enforce any newlaws suggested by FATF's, IMF's, or the World Bank's recommendations.  Conclusion: Policy Issues for Congress(",
      "185) While the current campaign against terrorist finance reportedly has diminished terrorists'abilities to gather and transmit finances, significant funds still appear to be available. Efforts tofurther regulate and introduce transparency into the global financial system are welcome steps; yetthey will not completely reduce terrorists' striking capacity because most of the proposed measurescannot with certainty separate out terrorists from other types of lawbreakers. Terrorists' ability toexploit non-bank mechanisms of moving and storing value, as well as their decentralizedself-supporting network of cells represent additional challenges to law enforcement. These challenges and concerns lead to numerous policy questions that may be relevant forCongress as it debates both a U.S.",
      " strategy to counter terrorist financing and to reorganize the U.S.government in order to best implement this strategy. Among those questions are:  Should the U.S. strategy emphasize freezing assets or following financialtrails? In the wake of the 9/11 report, this does not appear to be answered. More importantly, whoshould author the U.S. Government terrorist financing strategy? Although the current terroristfinancing strategy is drawn up by the State Department, many would argue that Treasury maintainsmore expertise on the issue and, having prepared the previous Anti-Money Laundering Strategies,would be better suited to draft a national counterterrorist financing strategy.",
      "  Does the current architecture of the U.S. Government display clear jurisdictionamong the various federal departments and agencies involved in the fight against terrorist financing? The preceding analysis points to many possible overlaps among the various investigatory agencies(FBI/DOJ and DHS) as well as between Treasury and State in policy setting and providing technicalassistance to foreign allies. To what extent has the Administration analyzed each federal agencybudget allocation for combating terrorist financing to reconcile duplication of efforts? What future efforts can be put in place to further inter-departmental andinter-agency coordination on both policy-setting and enforcement? How well are the functions of thepanoply of new and legacy departments and agencies being coordinated?",
      " Who is best suited tocoordinate these functions?  How well is the congressional oversight mechanism designed to assess federalperformance on countering terrorist financing? The Senate Banking and Finance Committees agreedto joint jurisdiction over the Treasury's Office of Terrorism and Financial Intelligence. Several otherCommittees have potential relevance in the overall fight against terrorist financing. Reform ofcongressional jurisdiction is an historically tricky issue, yet some argue that reevaluating howCongress oversees the fight against terrorism and terrorist financing may lead to more effectiveExecutive Branch action.  Considering terrorists' increased use of alternative remittance systems, is thereany way to regulate these practices? What would the costs be to register all informalmoney-transmitters and bring them in line with USA PATRIOT Act requirements?",
      " Many smallremittance services cater to immigrant communities without reliable access to the formal bankingsector. Making alternative remittance systems illegal is likely impractical and could create a swellof resentment among the immigrant population in the United States. If the U.S. Government wantsto license and regulate alternative remittance systems, some say it may be necessary to offer fundsand technical assistance to small remittance providers to help insure theircompliance. How effectively is the United States cooperating with other countries andinsuring their cooperation in implementing and enforcing national regulations to restrict terroristfinancing? If a U.S. bank, charity, or remittance system is based in the U.S., or has U.S.",
      " operations,it is subject to U.S. jurisdiction. When such entities lie outside U.S. jurisdiction, the United Statesis often at the mercy of other governments to first enact legislation making terrorist financing illegaland, more importantly, rigorously enforce this legislation. Creating a legal and regulatory system islikely meaningless if it is not enforced. Key Acronyms AML - Anti-Money Laundering APHIS - Animal and Plant Health Inspection Service ATF - Bureau of Alcohol, Tobacco, Firearms, and Explosives BSA - Bank Secrecy Act CBP - Bureau of Customs and Border Protection CBRS - Currency Banking Retrieval System CFTC - Commodity Futures Trading Commission CFTRA - Currency and Foreign Transaction Reporting Act CI - Criminal Investigation CIDAD - The Organization of American State's Inter-American Drug Abuse Control Commission CTR - Currency Transaction Report DCI - Director of Central Intelligence DEA - Drug Enforcement Agency DHS - Department of Homeland Security DNI - Director of National Intelligence DSRO - Designated Self-",
      "Regulatory Organizations EB - Bureau for Economic and Business Affairs FATF - Financial Action Task Force FBAR - Report of Foreign Bank and Financial Accounts FBI - Federal Bureau of Investigation FCS - Financial Crimes Section FDIC - Federal Deposit Insurance Corporation Fed - Federal Reserve System FFIEC - Federal Financial Institutions Examination Council FID - Financial Investigations Division  FinCEN - Financial Crimes Enforcement Network FIP - Financial Investigative Program FSRBs - FATF Style Regional Bodies FTATC - Foreign Terrorist Asset Tracking Center FTATG - Foreign Terrorist Asset Targeting Group HIFCA - High-risk money laundering and related financial crimes areas IC - Intelligence Community ICE - Bureau of Immigration and Customs Enforcement IG - Inspector General IMF - International Monetary Fund INS - Immigration and Naturalization Service IEEPA - International Emergency Economic Powers Act IRS - Internal Revenue Service IRTPA - Intelligence Reform and Terrorism Prevention Act of 2004 ITFWG - International Terrorism Financing Working Group JTTF - Joint Terrorism Task Forces LDC - Garden City (Garden City,",
      " NY) Counterterrorism Lead Development Center MENAFATF - Middle East and North Africa Financial Action Task Force MLCC - Money Laundering Coordination Center MOA - Memorandum of Understanding MSB - Money Service Business NAMLG - National Anti-Money Laundering Group NCTC - National Counterterrorism Center NFA - National Futures Association  NSC - National Security Council OCC - Office of the Comptroller of the Currency OECD - Organization for Economic Cooperation and Development OFAC - Office of Foreign Assets Control OTS - Office of Thrift Supervision PCC - Policy Coordinating Committee SARs - suspicious activity reports  SB/",
      "SE - Small Business and Self-Employed Taxpayers Division S/CT - Office of the Coordinator for Counterterrorism SEC - Securities and Exchange Commission SSCI - Senate Select Committee on Intelligence TE/GE - Tax-Exempt and Government Entities Division TFI - Office of Terrorism and Financial Intelligence TFOS - Terrorist Financing Operation Section TFWG - Terrorist Finance Working Group TSA - Transportation Security Administration UNSCR - United Nations Security Council Resolution\n"
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  {
    "id": 100,
    "question": null,
    "answer": "As the Administration and Congress move forward to pursue engagement, harsher sanctions, or both, regional actors are evaluating their policies and priorities with respect to Iran. Iran's neighbors share many U.S. concerns, but often evaluate them differently than the United States when calculating their own relationship with or policy toward Iran. Because Iran and other regional concerns\u2014the Arab-Israeli peace process, stability in Lebanon and Iraq, terrorism, and the ongoing war in Afghanistan\u2014have become increasingly intertwined, understanding the policies and perspectives of Iran's neighbors could be crucial during the consideration of options to address overall U.S. policy toward Iran. Iran's neighbors seek to understand and influence changes in the following areas: Iran's regional influence,      Iran's nuclear program,      Iran's role as an energy producer, and      Iran's support for terrorism and non-state actors. Although the Obama Administration may share many goals of the previous administration on Iran, it also sees the need for new strategies and approaches. The Obama Administration has advocated a policy of engagement with Iran to determine the nature of its nuclear program and address other subjects of international concern. While post-election turmoil in Iran delayed these efforts temporarily, it appears that the Administration is committed to pursue engagement through the P5+1 framework.  At the same time, some Members of Congress have called for increased sanctions on Iran. The United States, Israel, and the EU proposed the end of 2009 as a deadline for Iran to demonstrate its willingness to cooperate on the nuclear issue. That deadline has lapsed with no visible progress toward a resolution and the Administration is now working with its P5+1 partners to determine a course of action for 2010. Regardless of how they decide to proceed, any actions on the part of the Obama Administration, Congress, or the international community, and any developments in or provocations by Iran, will have implications for U.S. interests in the region as Iran's neighbors react and reevaluate their policies accordingly. This report provides a description of Iran's neighbors' policies and interests, options for Congressional consideration, and an analysis of potential regional implications. For more information on Iran and regional perspectives, see CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by [author name scrubbed]; CRS Report RL33476, Israel: Background and Relations with the United States, by [author name scrubbed]; CRS Report RS20871, Iran Sanctions, by [author name scrubbed]; CRS Report RL33533, Saudi Arabia: Background and U.S. Relations, by [author name scrubbed]; CRS Report RS22323, Iran's Activities and Influence in Iraq, by [author name scrubbed]; and CRS Report R40653, Iran's 2009 Presidential Elections, by [author name scrubbed]. \n",
    "docs": [
      "Introduction: U.S. and Regional Interests1 As the Administration and Congress move forward to pursue engagement, harsher sanctions, or both, regional actors are evaluating their policies and priorities with respect to Iran. Iran's neighbors share many U.S. concerns, but often evaluate them differently than the United States when calculating their own relationship with or policy toward Iran. Because Iran and other regional concerns\u2014the Arab-Israeli peace process, stability in Lebanon and Iraq, terrorism, and the ongoing war in Afghanistan\u2014have become increasingly intertwined, understanding the policies and perspectives of Iran's neighbors could be crucial during the consideration of options to address overall U.S. policy toward Iran.",
      " Iran's neighbors seek to understand and influence changes in the following areas: Iran's regional influence, Iran's nuclear program, Iran's role as an energy producer, and Iran's support for terrorism and non-state actors. Iran's Regional Influence The United States and Iran's neighbors have expressed concerns about Iran's regional ambitions, its ability to influence the domestic political circumstances of its neighbors, and its ability to act as a spoiler in the peace process. Many analysts have cast events in the region as a power struggle between Sunni-ruled Arab states, led by Egypt and Saudi Arabia, and Iran and its allies and proxies, namely Syria, Hamas, and Hezbollah.",
      " Others reject this paradigm as overly simplistic, pointing to Iran's physical and demographic attributes as an explanation for its regional role. Iran is a country of considerable size and resources and, as a result, exerts a natural level of influence, both in positive and negative ways, they argue. Some observers have argued that Iran's soft power has diminished since the June 2009 presidential election and ongoing unrest.  For some of Iran's neighbors, Iran's regional influence is a domestic political concern. For example, Bahrain and Kuwait\u2014Gulf states with signification Shiite populations\u2014often express concerns that Iran is fomenting unrest among Shiites, highlighting fears about their own internal stability.",
      " In recent years, Morocco, Egypt, and Yemen have expressed similar concerns. Iran also uses proxies that at times are a destabilizing force, as is the case with Hezbollah in Lebanon. Others view Iran's regional aspirations in a broader sense. Saudi Arabia, for example, criticizes Iran's interference in what it perceives as \"Arab causes,\" like the Israeli-Palestinian issue, and reportedly confronts Iran's proxies in Lebanese politics with material support of Sunni political parties and candidates.  Iran's Nuclear Program The primary goal of U.S. and international engagement with Iran is to gain a clear understanding of Iran's nuclear activities through inspections and safeguards,",
      " and to limit Iran's uranium enrichment capacity to mitigate future concerns about the nature of its program and its possible weaponization. Some argue that uncertainty over Iran's nuclear program centers on the regime's political will to develop a nuclear weapon and are uncertain whether that will exists. Many analysts, however, perceive the weaponization of Iran's nuclear program as a certainty unless the international community acts to stop it. The disclosure on September 21, 2009 of a second uranium enrichment facility near Qom raised concerns on all sides (see \" Caspian Neighbors \" below). Iran's intentions are difficult to discern, but most analysts and observers agree that if Iran was seeking enriched fuel for nuclear energy and other civilian purposes,",
      " then it would not need to conceal an enrichment facility or restrict access of International Atomic Energy Agency (IAEA) inspectors to existing sites.  Most of Iran's neighbors share the concern of the United States and the international community over the nature of Iran's nuclear program, but some perceive it as a more imminent threat than others. Others recognize the threat but have competing economic and political interests that may prevent them from publicly expressing their concerns. Almost all of Iran's neighbors share the primary concern that uncertainty over Iran's nuclear program could lead to a regional arms race or war that could spill over into their territories, complicate their relationships with the United States,",
      " and/or badly damage their economies. Iran's Role as an Energy Producer Iran's energy resources serve as both a source of funds for its nuclear program, support for terrorism, and other activities, and as leverage over international players who might otherwise condemn those activities. According to the Energy Information Administration (EIA), Iran holds an estimated 10% of proven global oil reserves, the third largest proven reserves following Saudi Arabia and Canada. It is the fourth largest exporter of crude oil by volume, behind Saudi Arabia, Russia, and Norway. Perhaps just as valuable is Iran's strategic location along the Strait of Hormuz, a narrow chokepoint through which more than 40%",
      " of the world's traded oil transits. In addition to its oil reserves, Iran holds an estimated 15% of the world's natural gas reserves, the second largest globally. (Russia is first.) Iran's vast energy resources, some argue, are underexploited and with continued investment could become more vital as world demand also grows. This fact is increasingly relevant to regional and U.S. approaches to Iran, as nations n Asia develop stronger energy partnerships with Iran as a means of capitalizing on its potential. For some of Iran's neighbors, economic and security concerns are in conflict when it comes to their relationships with Iran, and their policy priorities are shaped by whether they perceive potential economic benefits to outweigh security concerns.",
      " While almost all of Iran's neighbors share the view that a nuclear Iran is not desirable, especially if its development leads to a regional arms race or military conflict, some likely are unwilling to publicly challenge Iran on the issue because of their economic dependence on or relationships with Iran. Iran's Support for Terrorism The United States and Iran's neighbors are concerned about Iran's support for terrorism in the region. According to the U.S. State Department Country Reports on Terrorism, Iran supports an array of U.S.-designated terrorist organizations and militant groups, including Lebanese Hezbollah, Hamas, Palestinian terrorist groups, Iraqi militants, and Taliban fighters in Afghanistan. This support has at times undermined the political stability of Iran's neighbors,",
      " like Iraq, and poses direct military threats to others, like Israel and Lebanon. It also directly challenges U.S. efforts to advance the peace process, stabilize Iraq and Afghanistan, and promote regional stability. Terrorist groups supported by Iran have perpetrated attacks in the Middle East, Europe, and Central Asia. While these attacks have targeted U.S. or Israeli interests, the presence of terrorist groups often limits the options available to Iran's neighbors to act together to address other regional concerns. By creating internal divisions and exploiting existing political and sectarian discord in places like the Palestinian territories and Lebanon, and by maintaining a proxy military presence on Israel's northern border (Hezbollah), Iran can perpetuate conflict without directly involving its own troops while using continued Arab-Israeli strife to justify its own militant,",
      " revolutionary rhetoric at home to shore up domestic support. Iran: Regional Perspectives and Policies Saudi Arabia7 Perspectives and Interests  As the two most politically and religiously influential states in the Gulf region, Saudi Arabia and Iran have long maintained a binary balance of power, with each seeking to maximize its position relative to the other and relative to important outside players. Knit together by a common Islamic history but divided by sectarian, ethnic, and linguistic differences, the two Gulf energy giants leverage their economic resources and political power competitively to shape policy outcomes across the region and around the world. During the Cold War, the shared anti-Communist positions of the late King Faisal bin Abdul Aziz Al Saud and the late Shah Mohammed Reza Pahlavi made each a key regional ally of the United States under the so-called Twin Pillar policy,",
      " in spite of their latent rivalry. Iran's Islamic revolution accentuated core strategic tensions between the two regional powers by bringing religious and ideological differences into sharp contrast. In the 1980s, Iran's revolutionary clerical regime produced anti-Al Saud propaganda that questioned Saudi custodianship of the holy cities of Mecca and Medina, while official Saudi clerics and Salafi activists amplified their anti-Shiite rhetoric. Sectarian clashes in Saudi Arabia's Eastern Province and the holy city of Mecca underscored Saudi fears of potential subversion from Iran, and Saudi Arabia led other Gulf Arab states in supporting Iraq in its eight year war against Iran.",
      "  In the 1990s, Saudi Arabia served as the key hub for the implementation of the U.S. \"dual containment\" strategy, which was designed to maintain United Nations sanctions and no-fly zones in Iraq and to deter potential Iranian or Iraqi aggression. During this period Saudi Arabia viewed Iran in less hostile terms in light of Iraq's invasion of neighboring Kuwait. The U.S.-led invasion of Iraq in 2003 and the subsequent empowerment of Iraqi Shiites via the ballot box upended the prevailing security balance in the Gulf: in Saudi Arabia's view, Iran was the main beneficiary of the removal of Saddam Hussein. The potential for insecurity and sectarian violence in Iraq to draw Saudi Arabia and Iran into proxy warfare appears to have subsided at present.",
      " However, the fundamental reorientation of Iraq's political scene has created a new field of competition that continues to shape the views of Iranian and Saudi leaders about regional dynamics. The outcome of the pending national elections in Iraq will affect the relative interests of Saudi Arabia and Iran and the prospects for future engagement or competition among them. Elsewhere, Iran and Saudi Arabia remain engaged in a direct competition for influence, at times pursuing diametrically opposed policies with regard to Lebanon and the Israeli-Palestinian peace process. Whereas Saudi Arabia previously placed great emphasis on positioning itself as the spiritual, if not political defender, of Sunni Islamic orthodoxy and a transnational Muslim community,",
      " its leaders' current focus appears to be on strengthening national and pan-Arab solidarity in an attempt to undercut domestic extremist threats and contain Iran. While sectarian rhetoric continues to enflame Saudi-Iranian relations, the dynamic between the two governments has reverted to basic strategic competition, overlaid with official assurances of mutual respect and periodic consultation. Saudi authorities have become less wary about asserting a leadership role in the Arab world and have asked Iranian leaders not to unduly interfere in what the Saudi Arabian government now considers to be strictly \"Arab causes,\" including Palestinian political disputes. Iran's nuclear program is a source of concern for Saudi Arabia, as is the potential for regional conflict resulting from the international community's confrontation with Iran.",
      " More recently, Saudi Arabia's military campaign against the Shiite Al Houthi rebel group in northern Yemen has brought fears of proxy conflict back into focus. Yemeni and Saudi sources have alleged that Iran has provided material support to the Houthis, while Iranian figures have condemned Saudi and Yemeni military operations as anti-Shiite. Policy Priorities  Iran may no longer be working overtly to destabilize or overturn neighboring governments, but Iranian politicians nevertheless advocate for and support actors that have opposed Saudi policy and disrupted regional security in recent years, such as Hamas and Hezbollah. Combined with the perceived influence Iran has gained in Iraq and from its nuclear program,",
      " these trends have led the Saudi government to adopt a cautious policy approach that seeks to avoid direct confrontation while limiting the further spread of Iranian influence through coordination with other Arab governments and, to a lesser extent, with the United States. In general, Saudi officials have pursued limited engagement with their Iranian counterparts and have avoided exacerbating sectarian tensions with official public statements. Saudi media outlets, including government owned television channels and newspapers, have taken a more critical line toward Tehran, and have capitalized on controversies such as the early 2009 flare-up over Bahrain (see below) and the ongoing confrontation with the Al Houthi rebels in Yemen to fan popular opposition to perceived Iranian interference in the region.",
      " On the nuclear issue, Saudi Foreign Minister Prince Saud Al Faisal said in April 2009 that Saudi Arabia welcomed,  \"the US Government's positive approach of wishing to deal with the Iranian nuclear dossier crisis diplomatically and through dialogue. We are very hopeful that the Iranian Government will respond to these efforts for solving the crisis in a way that spares the Arab Gulf region and the Middle East the dangers of the proliferation of nuclear weapons and ensures the right of all the region's countries to the peaceful use of nuclear energy in accordance with the International Atomic Energy Agency's standards.\" At the United Nations General Assembly in September 2009, Prince Saud linked Israel's nuclear program to Iran's in arguing that the international community's response to Israel's presumed nuclear capabilities \"has motivated some states to push ahead with the development of nuclear capabilities,",
      " using the pretext of double standards to justify non-compliance with international resolutions in this regard.\"  Economic and Security Concerns  The value of Saudi-Iranian trade remains relatively limited, estimated by the International Monetary Fund at $1.42 billion in 2007 and $1.87 billion in 2008. The limits imposed on the productivity of Iran's oil sector by U.S. and international sanctions and the difficulties foreign firms have found working in Iran benefit Saudi Arabia by helping to preserve its global market share. As an oil producer with significant excess production capacity, Saudi Arabia is able to exert some pressure on global oil prices and thereby has the power to affect the potential oil export revenue available to its fellow OPEC member Iran.",
      "  Economic and security concerns are linked for both parties, as regional security disruptions have the potential to threaten the viability of oil exports and necessary imports. Saudi Arabia's military forces possess more sophisticated modern equipment than those of Iran, in spite of the Iranian military's larger overall manpower. Saudi military spending also far outpaces that of Iran. However, Iran's ballistic and cruise missile forces, the unconventional capabilities of Iranian naval forces, and Iran's relationships with non-state actors like Hezbollah are thought by many experts to pose a credible and dangerous threat in the minds of Saudi security officials. Saudi Arabia, as a longstanding military ally of the United States, is likely viewed by Iranian policy makers as a potential staging ground or facilitator for attacks on Iran and a potential target for retaliation against Iran's enemies by virtue of the international community's dependence on Saudi oil exports.",
      " As such, Saudi officials reportedly fear that Iran could attack in the event Iran were to face a military confrontation with the United States or Israel, even if Saudi Arabia had not been involved in the planning or execution of a military operation.  Prospects  The rivalry inherent to the Iranian-Saudi relationship appears natural given that the two states are emerging powers seeking to maximize their interests in a volatile, economically important region and on the world stage. The vulnerability of both countries' energy assets and the unique constraints imposed by religious factors may help mitigate the likelihood of direct conflict, in spite of economic competition and apparent sectarian tensions between the two. Saudi-Iranian political tensions have flared in the past to the point of sparking limited military engagements,",
      " but over time Saudi and Iranian leaders consistently have found means of defusing their disagreements before these crises have escalated into broader conflict. To the extent that political developments in Iran empower figures intent on asserting Iranian influence in Iraq, the Gulf, and the Levant without regard for the views or interests of Arab states, Saudi Arabia can be expected to use its considerable economic and political influence to resist Iranian encroachment. To the extent that more accommodating, pragmatic figures prevail, Saudi leaders can be expected to continue limited engagement with Iran, in light of persistent concerns about Iran's regional ambitions. Developments in Iraq will shape Saudi and Iranian leaders' decision making about their own bilateral relationship.",
      "  Saudi Arabia's prospective response to the acquisition of a nuclear weapon by Iran has long been a matter of intense debate and conjecture among observers and policy makers. Speculative predictions aside, history and recent policy statements suggest that if Saudi leaders decide that a Iranian nuclear weapon would have a significant deterrent effect on the United States or otherwise intolerably alter the balance of power in the Gulf, then Saudi Arabia would take decisive action to secure its national interests as it has in the past, whether unilaterally or in cooperation with other governments. Most Gulf experts expect that Saudi Arabia's response would be a critical factor in other regional actors' decisions about a possible Iranian nuclear weapon's capability.",
      " Qatar12  Perspectives and Interests  Since the Iranian revolution, Iran and Qatar have maintained positive relations, in spite of periods when Iran's relationships with the Arab Gulf states otherwise foundered, such as during the Iran-Iraq war and tanker war of the 1980s. Qatari officials have met frequently with members of Iran's government in Iran and in Qatar in recent years, and the Qatari government regularly advocates for increased dialogue between the GCC states, other Arab states, and Iran. Iranian President Mahmoud Ahmedinejad attended the December 2007 GCC summit in Doha at the invitation of Qatari Emir Hamad bin Khalifa Al Thani.",
      " He also attended a January 2009 summit on Gaza sponsored by the emir. The emir in turn visited Iran in November 2009 for consultations on bilateral and regional issues. In a March 2009 interview with a German newspaper, the emir explained Qatar's current perspective on the region and on Iran by saying,  \"We are a small country and we can live with anything around us. We will not be an enemy to anybody, but of course we will not allow anybody to use us against others. We will not, for example, stand with America against Iran. For sure. Iran never bothered us, it never created a problem for us... It will be hard for the Gulf countries to be with Iran against the United States.",
      " And I believe Iran knows this.\"  These remarks, coupled with Qatari decisions to host Iranian leaders and to encourage Arab solidarity with Hamas during the January 2009 Gaza war have led some observers to argue that Qatar is working in opposition to the efforts of Saudi Arabia and Egypt and in favor of Iran. Qatari officials largely reject analyses that divide the region into opposing camps and argue that engagement, dialogue, and collective approaches to regional security problems between Arab states and Iran may offer opportunities to avert further tension and conflict. These arguments and positions are consistent with the Qatar' government's reputation for favoring independent policies and attempting to assert a leadership role consistent with its growing economic clout,",
      " in spite of its small population and very limited military capabilities. Policy Priorities  Qatar's foreign policy priorities reflect its leaders' desire to maintain their country's independence, security, and freedom of action among more powerful competing regional and international actors, including the United States. Like other Arab Gulf states, Qatar's economic growth and diversification is in many ways dependent on the maintenance of stability in the Gulf region. Thus it views potential conflict, whether initiated by Iran or by others, as undesirable. Statements from Qatari leaders suggest that Doha views Iran as an ascendant regional power that cannot be ignored or fully contained by non-military means,",
      " and thus Qatar prioritizes engagement with Iran and its potential adversaries. Qatar's recent diplomatic activities, including its mediation of Lebanon's political deadlock in early 2008 and its advocacy on behalf of Hamas in January 2009, have been viewed by many regional observers as consistent with Iran's priorities, although Qatari leaders have described their regional diplomacy as driven by traditional Arab nationalist concerns. In July 2006, Qatar was the sole member of the United Nations Security Council to oppose Security Council Resolution 1696, which called on Iran to \"suspend all enrichment-related and reprocessing activities, including research and development, to be verified by the IAEA,\" and proposed potential sanctions should Iran refuse.",
      " Economic and Security Concerns  According to the IMF, the value of Iranian-Qatari trade was estimated at $57 million in 2007 and $75 million in 2008. Iran and Qatar share the large North Field/South Pars natural gas deposit off the Qatari coast. Most of the gas in the field lies in Qatar's territorial waters (approximately 900 trillion cubic feet), with Iran's waters possessing the remainder (approximately 280 trillion cubic feet). Qatar's share of the field is the basis for the country's status as holding the third largest natural gas reserves in the world. Qatari liquefied natural gas exports brought an estimated $35.",
      "6 billion in export revenue to the country in 2008. With small and lightly equipped armed forces, Qatar effectively relies upon the U.S. armed forces stationed in the country for its defense. However, the presence of U.S. forces also creates a potential flashpoint vis-\u00e0-vis Iran; in the event of U.S.-Iranian hostilities, U.S. military facilities in Qatar would be critical for U.S. command and control purposes and thus could be likely targets of Iranian attack. The Chief of Staff of the Qatari Armed Forces Major General Hamad bin Ali al Attiyah travelled to Iran in July 2009 and held security talks with Iranian defense officials,",
      " including the commander of the Iranian Revolutionary Guard Corps. Prospects Unlike the other GCC states, Qatar has an enduring economic and security linkage to Iran, by virtue of the shared energy resources in the countries' contiguous waters. Without access to the shared gas deposit or under conditions where gas production facilities created with massive state investments were threatened with attack, Qatar's economy and fiscal position could suffer greatly. Qatar has maintained a policy of engagement with Iran and has strengthened bilateral ties as Iran's influence relative to other regional actors has grown in recent years. Absent a change in the nature and senior clerical leadership of the Iranian government, political changes among Iran's elected leadership are unlikely to jeopardize or significantly alter Iranian-Qatari relations.",
      " In late June 2009, Qatari Prime Minister and Foreign Minister Sheikh Hamad bin Jassem bin Jabr Al Thani characterized Iran's post-election disputes as \"an internal matter because we must respect the right of each state to solve its own problems. The Iranians will decide how to resolve their problems among themselves, and I am certain that they will bypass this crisis.\" A more moderate government in Tehran could empower Qatari efforts to promote GCC engagement with as a means of preventing conflict.  Qatari officials have simultaneously pursued a policy of rapprochement with Saudi Arabia, bringing an end to a series of long running political and boundary disputes,",
      " and with other Gulf states, building transportation and energy linkages to Bahrain, the United Arab Emirates, and Oman. Qatar's policy of attempting to \"not be an enemy to anybody\" appears sustainable unless drastic changes in security conditions compel Qatari leaders to choose among friends.  Bahrain17  Perspectives and Interests  As the rulers of a small state among larger regional and international powers, Bahrain's Sunni Arab monarchy historically has depended on good relations with external actors as the ultimate guarantee of its stability and security. Bahrain's current foreign relations reflect dynamics common to the country's history: the government of Bahrain seeks to maintain the country's security and independence through alliances with fellow Arab states,",
      " through a policy of engagement and non-antagonism toward Iran, and through the support of a powerful extra-regional actor, the United States. As an international hub for business and banking, Bahrain's economic success depends upon its image as a secure environment for investment and commerce. The potential for disruptive regional developments or conflict and the island's perennially disgruntled Shiite majority are the two principal concerns of Bahrain's ruling elite. Bahrain's ruling family, the Al Khalifa, first established control over Bahrain and its predominantly Shiite population in the 1780s, after overcoming and expelling Persian outposts on the island. The Al Khalifa family subsequently sought alliances to secure itself from the predations of several regional powers,",
      " including Persia, until ultimately agreeing to make Bahrain a British protectorate in 1861. Persian officials contested Bahrain's sovereignty repeatedly during the 19 th and 20 th centuries, most notably in the early 1930s, when Reza Shah contested the right of Bahraini officials to grant oil concessions to U.S. and British interests, and in 1957, when a bill was submitted to the Iranian Majlis (legislature) to make Bahrain a province of Iran. Prior to Bahrain's independence from Britain in 1971, Iran reasserted its claim to Bahrain, and the United Nations Secretary General dispatched a representative to determine the views of Bahrainis,",
      " who found that the island's residents overwhelmingly favored independence from all outside powers, including Iran. The findings were endorsed by the United Nations Security Council in Resolution 278 and Iran's legislature ratified the resolution, in effect relinquishing all claims to Bahrain.  While these issues were formally settled nearly forty years ago, concerns that the claims will be revived have arisen from time to time based on comments by officials and clerics associated with the Islamic Republic of Iran. The most recent example occurred in February and March 2009, when media reports that a former speaker of the Iranian parliament and then-aide to Iran's Supreme Leader had referred to Bahrain as Iran's 14 th province sparked a regional controversy.",
      " In response, the Iranian Foreign Ministry repeatedly reasserted Iran's respect for Bahrain's sovereignty and independence alongside Bahraini officials, amid condemnations from a number of other Arab states. In spite of Iranian government assurances, the remarks were seized upon by Arab governments and observers who are convinced that Iran harbors hostile intentions toward its neighbors and have been concerned about perceived Iranian interference in Arab affairs in recent years. Bahrain's leaders, like those of other Arab Gulf states, have responded cautiously to Iran's nuclear program and the sectarian tension that has accompanied conflict in Iraq and rise of the Shiite Arab political parties since the fall of Saddam. Policy Priorities Bahrain's limited resources and large Shiite population,",
      " some of whom are of Persian ethnicity, create unique challenges for the country's leaders as they view their relationship with Iran and events in the region. In the past, Bahrain's rulers have accused Iran of supporting pro-Iranian proxy groups against the Bahrain government, and Bahraini concerns about the potential for Iranian-supported unrest have been amplified in recent years amid sectarian violence in Iraq and resurgent protests by Shiite groups in Bahrain. Riots in 2009 mirrored similar events in the mid-1990s that produced accusations of Iranian interference, although reporting suggests the political disputes driving the more recent unrest are based on long-standing unresolved domestic grievances and government reactions rather than widespread pro-Iranian sentiment.",
      "  Bahrain's leading Shiite opposition party, Al Wefaq, remains engaged in the political process and expressed concern about Iranian comments concerning Bahrain's sovereignty in early 2009. The party also played a mediating role following the December 2008 arrests of Shiite activists accused of plotting bombing attacks on Bahrain's national day, helping to secure the release of rival Shiite leader Hassan Mushaima. In November 2009, Sunni politicians criticized Al Wefaq after the Shiite party's members in the lower house of parliament refused to support a resolution endorsing Saudi Arabia's military campaign against the Al Houthi fighters accused of infiltrating the kingdom from northern Yemen.",
      " The controversy reignited concerns about sectarian divisions among Bahrainis, although both the royal court and Al Wefaq have issued statements underscoring the linkage between Saudi and Bahraini security. Al Wefaq and Mushaima's hard-line Al Haq movement will compete for influence among Bahrain's Shiite majority in the run-up to parliamentary elections scheduled for 2010, although it remains unclear whether Al Haq will formally participate or seek to put pressure on Al Wefaq to reinstate its boycott in light of continuing disillusionment among Shiites. Al Wefaq has delayed confirming that it will participate in the election, citing concerns about the overall effectiveness of the parliamentary system and continued allegations of sectarian discrimination.",
      " Bahrain's monarchy and Sunni community are likely to continue to closely monitor developments among leading Shiites for signs of Iranian influence or agitation. Economic and Security Concerns  Iranian-Bahraini trade is limited; the IMF estimated its 2007 value at $166 million and $177 million in 2008. Negotiations for a potential natural gas agreement for Bahrain to import Iranian gas to meet growing domestic energy demand was temporarily placed on hold following the sovereignty controversy in early 2009. Under the terms of the agreement, Bahrain and Iran would build a pipeline to enable Bahrain to import 28 million cubic meters per day of gas over 25 years.",
      " As stated above, Bahrain's primary security concerns are domestic and relate to Iran only to the extent that Iranian leaders may seek to exacerbate existing tensions between Bahrain's Sunni monarchy and its majority Shiite population. Bahrain relies on its relations with the United States and Saudi Arabia for its external security. Like Qatar, Bahrain hosts major U.S. military facilities, specifically the forward headquarters for the U.S. Navy component of U.S. Central Command, and may fear a potential retaliatory attack in the case of hostilities involving the United States or Israel and Iran. Prospects  Suspicions of Iran among Bahrain's leaders appear deeply ingrained, and are amplified in instances where Bahrain's leaders perceive Iran to be pursuing hegemonic or sectarian policies.",
      " Political changes in Iran as a result of the disputed 2009 election could mitigate some, but not all of Bahrain's concerns. Acquisition of a nuclear weapon by Iran would likely deepen Bahrain's reliance on the United States, although trends and reactions among the Gulf Cooperation Council states would also exert significant influence on Bahrain's response. Iran appears poised to continue its efforts \"to consolidate and deepen relations with all nations in the Persian Gulf, especially Bahrain,\" as a means of minimizing the prospects for collective GCC action that could harm its interests. The United Arab Emirates24 Perspectives and Interests  Like the other Gulf states, the individual emirates of the United Arab Emirates (UAE)",
      " have had complex relationships with Iran historically, marked by changing alliances and, in some cases, contested sovereignty. On a national basis, the UAE government has viewed Iran simultaneously both as a potentially hostile neighbor and as an important commercial partner since the formation of the UAE in 1971. The seven constituent emirates' relations with Iran have proven complex, with some, such as Ras Al Khaymah and Abu Dhabi, having long held more negative views of Iran and its intentions, and others, such as Dubai and Sharjah, taking more accommodating positions based on shared commercial and demographic ties. Persian and Iranian interaction with the Arab Trucial States,",
      " as the emirates were collectively known prior to the formation of the UAE in 1971, was critical in their early economic and political development and shaped interactions and rivalries between the emirates as the new state emerged. In 1971, Iran, then ruled by U.S.-backed Shah Mohammed Reza Pahlavi, seized two islands, Greater and Lesser Tunb, from the emirate of Ras Al Khaymah, and established a military outpost on the largely uninhabited island of Abu Musa under a bilateral agreement with the emirate of Sharjah. In April 1992, Iran exerted control of the remainder of Abu Musa.",
      " The dispute over the sovereignty of the islands has persisted over the last nearly 40 years, and frequently has enflamed tensions between the UAE, Arab states, and Iran. In October 2008, the UAE and Iran signed an agreement to establish a joint commission to resolve the islands dispute; that agreement came two months after the UAE protested Iran's opening in August 2008 of administrative and maritime security offices on Abu Musa. The United States is concerned about Iran's control over the islands, but takes no position on the sovereignty of the islands.  In a March 2009 interview, UAE President Sheikh Khalifa bin Zayed Al Nahyan explained the UAE government's views on the islands dispute and the Iranian nuclear program:",
      " \"As a matter of principle, we do not condone the use of force in solving international disputes no matter how far away the location of this dispute may be. How much more so, when it is next door! We always stress the need to listen to the sense of reason in resolving the differences on Iran's nuclear program, which should be by peaceful means. We still hope these efforts will succeed. We also hope that all parties will exercise self-restraint and meet the demands of the international community on this issue... We hope that our brothers and neighbors [sic] Iranians will respond to our demands by handing over the Islands to the UAE.",
      " Our request is not an impossible one (to accept), since we are only asking that our legitimate rights to the three islands of Abu Musa, Greater Tunb Greater and Tunb Lesser be restored. We are looking forward to retrieving our sovereignty over the Islands through peaceful approach and dialogue. We have said repeatedly that the UAE will accept any ruling by the International Court of Justice, whether in our favor or not.\" In December 2009, the leaders of the GCC states reiterated their support for UAE sovereignty over the islands and called for Iran to accept mediation or ICJ adjudication of the islands dispute. Iran's Foreign Ministry responded by asserting Iran's ownership of the islands \"forever.\" On December 23,",
      " UAE Foreign Minister Sheikh Abdullah bin Zayed al Nahyan stated that \"They [Iran] call the [islands] issue a misunderstanding and we call it occupation. However, we should not view Iran's continuous occupation of the UAE islands as a barrier for developing economic ties between the two countries. We even hope that such ties will reach a level through which we can resolve the dispute, not the other way around.\" Policy Priorities  Like Saudi Arabia, the UAE's policy priorities wih regard to Iran are multifaceted. In general, Emirati officials stress that they are seeking to avoid circumstances that would lead to regional conflict in which Iran could attack UAE territory.",
      " Specifically, they are seeking to engage with Iran on key disputes and cooperate with international partners to stem the advance of Iranian regional influence. The UAE's economic potential and planned growth depends on security and regional stability, and UAE leaders accordingly promote peaceful resolutions to regional disputes, even as they prepare to minimize the threat that regional security disruptions and military threats could post to the UAE. Tangible expressions of these priorities are visible in UAE support for the Obama Administration's outreach to Iran and calls for a mediated resolution to the islands dispute. These initiatives are paired with UAE political and financial support for the Palestinian Authority, endorsement of the Arab League peace proposal to Israel, and the UAE's diplomatic engagement and debt forgiveness toward Iraq,",
      " all of which attempt to balance countervailing Iranian efforts. Economic and Security Concerns  Iran-UAE economic relations are well developed. The IMF estimates the value of bilateral trade at $5.9 billion in 2007 and $7.74 billion in 2008. Dubai has long served as a particularly important commercial center for Iranian traders and businessmen, and Iranian merchants make significant profits bringing goods back and forth across the Gulf to Emirati ports. A number of Iranian banks operate branches in Abu Dhabi and Dubai, which U.S. officials suspect have become increasingly important nodes for the Iranian banking system as it seeks to maintain access to international financial markets amid tightening multilateral banking sanctions.",
      " It remains unclear what impact, if any, Dubai's debt challenges and subsequent financial bailouts by Abu Dhabi will have on political relations within the federation or what effect any changes could have on the UAE's relations with Iran. The UAE, under the auspices of the Abu Dhabi Executive Authority, also has begun to move forward with plans to build nuclear power stations, and has sought to position its program as a counterexample to Iran's by agreeing to forego the development of indigenous uranium enrichment and fuel reprocessing capabilities. Ironically, the willingness of international partners to support the UAE nuclear program has been undermined by instances in which Iran and other nuclear proliferation customers and suppliers have used the UAE as a transit,",
      " shipping, and financial hub. The UAE, particularly Abu Dhabi, has long feared that the large Iranian-origin community in Dubai emirate (est. 400,000 persons) could pose a \"fifth column\" threat to UAE stability. Military cooperation and arms sales form a key pillar of U.S.-UAE relations. The UAE hosts frequent port calls and shore visits for U.S. naval vessels and allows the U.S. military to use Al Dhafra air base in support of a variety of missions in the U.S. Central Command (CENTCOM) area of operations. In 2007 and 2008, the Bush Administration notified Congress of over $19.",
      "4 billion in potential arms sales to the UAE, including what would be the first overseas sale of the Terminal High Altitude Air Defense system, an anti-missile system well suited for responding to potential Iranian threats. Prospects  UAE-Iranian relations are shaped by tensions inherent to interactions between a small, heterogeneous federation and a more powerful, ambitious, ideologically motivated neighbor. Each side views the bilateral relationship through the lenses of their economic interdependence, their open territorial disputes, their ethnic differences, and sectarian divisions. Emirati authorities allowed public protests at the Iranian consulate in Dubai in relation to post-election disputes in Iran, and subsequent political changes in Iran as a result of the election dispute have the ability to amplify or reduce the extent to which the UAE views Iran as a threat.",
      " The UAE strongly opposes the militarization of Iran's nuclear program and would likely seek greater security coordination with the Gulf Cooperation Council or a clear commitment of protection from the United States. The prospect remains that the UAE could alter its decision to forego domestic uranium enrichment or plutonium reprocessing technology at some time in the future, which could signal pursuit of a more independent option, although doing so would risk harming UAE-U.S. relations. Refined petroleum product sanctions legislation pending in the U.S. Congress (see H.R. 2194, S. 908, and S. 2799 ) could affect firms operating in the UAE, as well as proposed U.S.-UAE nuclear cooperation.",
      " Kuwait30 Perspectives and Interests Kuwait's relationship with and perceptions of Iran have generally been a function of Kuwait's core concerns about Iraq, Kuwait's larger neighbor which invaded and occupied it from August 1990 until February 1991. During the rule of Saddam Hussein in Iraq, Kuwait considered Iran a counterweight to Iraqi power in the Gulf region, and most strategists in Kuwait did not view Tehran as the potential regional hegemon that some of its Gulf allies have. Some of its Gulf neighbors criticized Kuwait for attempting to use Iran and Iranian-supported movements to weaken Saddam Hussein. During the 1990s, Kuwait often hosted pro-Iranian Iraqi Shiite oppositionists against Saddam,",
      " including those of the Supreme Council for the Islamic Revolution in Iraq (SCIRI), which is now a major Shiite party in Iraqi politics and has changed its name to the Islamic Supreme Council of Iraq (ISCI).  Policy Priorities In keeping with Kuwait's overall perceptions and strategy, Iran-Kuwait relations are relatively normal. High level visits are routine, including parliamentary exchanges. In early 2008, the two formed an Iran-Kuwait Higher Committee to continue building relations. Kuwaiti refineries supply gasoline to Iran, which must import about 30% of its gasoline needs. The two are attempting to resolve their common maritime border,",
      " a pre-requisite for the proposed joint development of the disputed Durra offshore oil field, which also straddles the Saudi maritime border.  Kuwait has also taken a moderate approach to Iran's nuclear program. While the Kuwaiti government has stated that it is committed to complying with all U.N. Security Council Resolutions, including resolution 1801 which includes sanctions on Iran, it has also cautioned against an escalation to conflict. Speaker of the Kuwaiti National Assembly Jassem al Kharafi stated that \"there are provocative Western statements, and Iran responds in the same way...I believe that a matter this sensitive needs dialogue not escalation.\"  Economic and Security Concerns So acute were Kuwait's fears of Saddam Hussein that it curried favor with pro-Iranian Iraqi Shiite parties even though these same Shiite groups had conducted attacks in Kuwait in the 1980s.",
      " The December 1983 bombings of the U.S. and French embassies in Kuwait and an attempted assassination of the Amir in May 1985 were attributed to the Iraqi Da'wa (Islamic Call) Party, the Shiite party of Iraqi Prime Minister Nuri al-Maliki. Seventeen Da'wa activists were arrested for these attacks. Da'wa activists also hijacked a Kuwait Airlines plane in 1987. These acts in the 1980s were perceived by many as an effort by Tehran \u2013 using these Iraqi allies \u2013 to pressure Kuwait into ending its support of Iraq during the Iran-Iraq war. At that time,",
      " Iran was viewed by Kuwait and the other Gulf states as the larger threat in the Gulf. During 1987-88, the United States protected Kuwaiti oil tankers against Iranian attack. Kuwait's perception changed when Saddam turned against the Gulf states by invading Kuwait in August 1990. In May 2001, Kuwait publicly apologized for supporting Iraq during the Iran-Iraq war.  Iran and Kuwait also have limited trade, approximately $43 million in 2008. Prospects Some Kuwaiti strategists, such as former Ambassador to the United States Shaykh Saud al Nasser Al Sabah, have questioned Kuwait's stance as naive and potentially dangerous.",
      " These observers question Iran's motives and believe that Kuwaiti leaders mistakenly do not perceive that Iran is slowly seeking to establish hegemony in the Gulf. Kuwait has not publicly accused Iran of attempting to support Kuwaiti Shiites (who are about 30% of Kuwait's population) as a potential internal opposition in Kuwait, but some believe Iran is looking for opportunities to strengthen Shiites in Kuwait to ensure that Kuwait maintains a relatively friendly posture towards Iran. Others say that Iran has no opportunity to support Shiites in Kuwait as an opposition movement because Kuwaiti Shiites are relatively well integrated into Kuwait's society and economy, and have fewer grievances than do Shiites in other states of the Gulf.",
      " On July 18, 2008, Kuwait named its first ambassador to Iraq since the 1990 Iraqi invasion\u2014Ali al Momen, a retired general. Momen is a Shiite Muslim, and his appointment signaled Kuwait's acceptance that Iraq is now dominated politically by Shiites.  Oman35 Perspectives and Interests Of the Gulf states, Oman is perceived as politically closest to and the least critical of Iran. Its leader, Sultan Qaboos bin Said Al Said, has often pursued foreign policies outside an Arab or Gulf consensus, and Qaboos sees no inconsistency between Oman's alliance with the United States and its friendship with Iran. This relationship has proved useful to the United States in the past;",
      " Oman was an intermediary through which the United States returned Iranian prisoners captured during U.S.-Iran skirmishes in the Persian Gulf in 1987-88. Oman's attempts to steer a middle ground caused problems for Oman in April 1980 when, within days of signing an agreement allowing the United States military to use several Omani air bases, the United States used these facilities\u2014reportedly without prior notification to Oman\u2014to launch the abortive mission to rescue the U.S. Embassy hostages seized by Iran in November 1979.  Policy Priorities The question many observers ask is why is Oman not as wary of Iran as are the other GCC states.",
      " Oman has no sizable Shiite community with which Iran could meddle in Oman, so the fear of Iranian interference is less pronounced. There are also residual positive sentiments pre-dating Iran's Islamic revolution. Oman still appreciates the military help the Shah of Iran provided in helping end a leftist revolt in Oman's Dhofar Province during 1964-1975. Others attribute Oman's position on Iran to its larger concerns that Saudi Arabia has sought to spread its Wahhabi form of Islam into Oman, and Oman sees Iran as a rival to and potential counterweight to Saudi Arabia.  Economic and Security Concerns Oman reportedly is discussing a security pact with Iran,",
      " although the scope is as yet undefined. In addition, Oman's government is said to turn a blind eye to the smuggling of a wide variety of goods to Iran from Oman's Musandam Peninsula territory. The trade is illegal in Iran because the smugglers avoid paying taxes in Iran, but Oman's local government collects taxes on the goods shipped. Bilateral trade between Oman and Iran was approximately $1.45 billion in 2008, and consists mostly of natural gas exports from Iran to Oman. Oman's position on Iran's nuclear program is consistent with the general trend of Oman-Iran relations. On October 1, 2009,",
      " Omani Foreign Minister Yusuf bin Allawi bin Abdallah stated that \"the Arabs and any Arab have no interest in being hostile to Iran,\" adding that \"the entire world calls for a peaceful solution\" to the international dispute over the nature of Iran's nuclear program. Prospects Some accounts say that Oman is in the process of drawing closer to Iran than it has previously. Oman, as do the other GCC states, publicly opposes any U.S. attack on Iran's nuclear facilities, and has rebuffed efforts by the other Gulf states to persuade Oman to distance itself from Iran politically.  Iraq41 Perspectives and Interests Since the fall of Saddam Hussein,",
      " Iran has sought to shape and influence the post-Saddam political structure to Iran's advantage. Iran succeeded in that strategy during 2004-2007, when Iraq was highly unstable and when it appeared, at times, that the U.S. effort to secure and democratize Iraq were failing. As Iraq stabilized during 2008, Iraqi nationalism strengthened and Iran came to be seen by many Iraqis, both Sunni and Shiite, as contributing to sectarian conflict. Iraqi leaders continue to take Iran's interests into account, but they no longer reflexively support Iranian positions.  Policy Priorities Several of Iran's interests have been served by post-Saddam Iraqi leaders.",
      " This continuing Iranian influence might be reflected in Iraq's announcement in December 2009 that it would relocate the 3,000 Iranian oppositionists who live at \"Camp Ashraf,\" near the Iran border, to a detention center in southern Iraq. These oppositionists had been invited to set up camp in Iraq in 1986, from where they could launch incursions into Iran, but the current, relatively pro-Iranian central government does not want to host this group any longer.  Iran attempted, but failed, to derail a U.S.-Iraq Status of Forces Agreement (SOFA) that authorizes the U.S. military presence beyond December 31,",
      " 2008. Senior Iranian leaders publicly opposed the pact as an infringement of Iraq's sovereignty\u2014criticism that masked Iran's fears the pact is a U.S. attempt to consolidate its \"hold\" over Iraq and encircle Iran militarily. This criticism did not derail the accord, but might have contributed to insistence by Iraqi leaders on substantial U.S. concessions to a final draft agreement. In the end, Iran's concerns were attenuated by a provision in the final agreement (passed by Iraq's parliament on November 27, 2008 and now in force as of January 1, 2009) that U.S. forces could not use Iraqi territory as a base for attacks on any other nation.",
      " This provision is perceived by some as a statement that Iraq does not support military action against Iran's nuclear program. During exchanges of high-level visits in July 2005, Iraqi officials took responsibility for starting the 1980-1988 Iran-Iraq war, indirectly blamed Saddam Hussein for using chemical weapons against Iranian forces during the war, signed agreements on military cooperation, and agreed to open Iranian consulates in Basra, Karbala, Irbil, and Sulaymaniyah. In response to U.S. complaints, Iraqi officials subsequently said that any Iran-Iraq military cooperation would not include Iranian training of Iraqi forces. On May 20,",
      " 2006, Iraq's Foreign Minister, Hoshyar Zebari, supported Iran's right to pursue \"peaceful\" nuclear technology.  On the other hand, Iran has not returned the 153 Iraqi military and civilian aircraft flown to Iran at the start of the 1991 Gulf War, and Iraqi leaders demand their return. Iraqi officials also have refused to expel the Party for a Free Life in Kurdistan (PJAK), an Iranian Kurdish separatist group, which Iran says is staging incursions into Iran from Iraqi territory. On February 5, 2009, that group was named by the U.S. Treasury Department as a terrorism supporting entity under Executive Order 13224.",
      "  Most territorial issues that have contributed to past disputes were resolved as a result of an October 2000 rededication to recognize the thalweg, or median line of the Shatt al Arab waterway as the water border (a provision of the 1975 Algiers Accords between the Shah of Iran and the Baathist government of Iraq, abrogated by Iraq prior to its September 1980 invasion of Iran.) The water border is subject to interpretation, but the two sides agreed to renovate water and land border posts during the March 2008 Ahmadinejad visit to Baghdad. In February 2009, Foreign Minister Zebari urged Iran to move forward with these demarcations,",
      " suggesting Iranian foot-dragging to resolve an issue whose ambiguity now favors Iran.  Economic and Security Concerns The key concern of the central government is Iran's separate relationship with Shiite factions and militias. These factions are political opponents of the government of Prime Minister Nuri al-Maliki and their serve militias serve as a limitation on full government security control, particularly in the south. The most prominent such faction is that of Moqtada Al Sadr. His political ties to Iran were initially limited because his family remained in Iraq during Saddam's rule. Still, the Sadr clan has ideological ties to Iran; Moqtada's cousin, Mohammad Baqr Al Sadr,",
      " founded the Da'wa Party and was a political ally of Ayatollah Khomeini when Khomeini was in exile in Najaf (1964-1978). Iran came to see political value and potential leverage in Sadr's faction\u2014which has 30 total seats in parliament, a large and dedicated following among lower-class Iraqi Shiites, and which built a 60,000 person \"Mahdi Army\" (Jaysh al-Mahdi, or JAM) militia after Saddam's fall.  Perceiving the JAM as useful against the United States in the event of a U.S.-Iran confrontation, in 2005,",
      " Iran began arming it through the Revolutionary Guard's \"Qods (Jerusalem) Force,\" the unit that assists Iranian prot\u00e9g\u00e9 forces abroad. During 2005-6, the height of sectarian conflict in Iraq, Badr fighters in and outside the ISF, as well as JAM militiamen, were involved in sectarian killings of Sunnis, which accelerated after the February 2006 bombing of the Al Askari Mosque in Samarra.  The sectarian conflict empowered Shiite militias such as the JAM, but the arbitrary administration of justice and sense of constant conflict created by the militias triggered a popular backlash against them and against Iran.",
      " This was demonstrated in the January 31, 2009 provincial elections, which represented a clear setback for Iran and its interests. The Islamic Supreme Council of Iraq (ISCI), traditionally close to Iran politically and formerly an ally of Maliki's Da'wa Party, was hoping to sweep the elections in the Shiite south, but it did not come in first in any Shiite province. Sadrist candidates also fared generally poorly. In most of the Shiite provinces, the slate of Prime Minister Nuri al-Maliki\u2014who is relatively pro-Iranian but whose party does not have a militia and whose slate ran on a platform of rule of law\u2014came in first.",
      " The Sadrist faction and ISCI have forged a coalition with several other parties (\"Iraqi National Alliance\") to compete against Maliki in the March 7, 2010 national elections that will determine the next four year government.  The Defense Department's latest \"Measuring Stability and Security in Iraq\" report, dated September 2009, appears to reflect a continued U.S. concern about Iran's support for Shiite militias in Iraq. The report reiterates previous assessments that Iran \"poses a significant challenge to Iraq's long-term stability and political independence\" and says that Iran can influence Iraqi elections through its \"sponsorship of Iraqi [Shiite]",
      " militant groups.\" However, the report did not repeat previous assertions that Tehran is also improving the training and weapons systems received by the proxy militants.  Suggesting the degree to which the Iraqi government still views Iran as a benefactor, Maliki has visited Iran four times as Prime Minister to consult on major issues and to sign agreements. On March 2-3, 2008, Iranian President Ahmadinejad visited Iraq, a first since the 1979 Islamic revolution. In conjunction, Iran announced $1 billion in credits for Iranian exports to Iraq (in addition to $1 billion in credit extended in 2005, used to build a new airport near Najaf,",
      " opened in August 2008, which helps host about 20,000 Iranian pilgrims per month who visit the Imam Ali Shrine there). Suggesting Iran's earlier generosity is being reciprocated, in February 2009, the Iraqi government awarded a $1 billion contract to an Iranian firm to help rebuild Basra, and to repair ancient Persian historical sites in southern Iraq. The the two countries now conduct about $4 billion annually in bilateral trade, according to Iraq's Trade Minister, and the February 2009 visit of Iranian Foreign Minister Mottaki resulted in a plan to increase that trade to $5 billion annually through increases in oil and electricity-related trade.",
      "  Prospects Iran's influence in Iraq remains substantial, but might be beginning to wane. The Shiite militias that Iran has supported are far weaker than they were two years ago. Iran's influence could fall further if Maliki's coalition prevails in the March 7, 2010 election and he continues to assert Iraq's independence and sovereignty from all influences, including U.S. and Iranian. Some experts have long predicted that Iran's influence would fade as Iraq asserts its nationhood, as the security situation has improved, and as Arab-Persian differences reemerge. Many experts point out that Iraqi Shiites generally stayed loyal to the Iraqi regime during the 1980-",
      "1988 Iran-Iraq war. Najaf, now relatively secure and prosperous, might eventually meet pre-war expectations that it would again exceed Iran's Qom as the heart of the Shiite theological world.  On the other hand, U.S. forces will be drawing down to about 50,000 by August 2010, and some fear that this will expose vulnerabilities among government forces that allow Shiite militias and Sunni insurgent groups to flourish again and challenge stability. If the security situation deteriorates sharply as the U.S. withdraws, Iranian influence could experience a resurgence \u2013 assuming the current government in Iran fends off a major challenge by its own opposition.",
      "  Turkey48 Perspectives and Interests Turkey and Iran share an almost 500 kilometer (310 mile) border that was established in the 17 th century, and they have not been to war since then. Over the years, however, their bilateral relations have been characterized by both conflict and collaboration. Tensions sometimes surfaced from the neighbors' competing regional ambitions and from their rival forms of Islam: most Turks are Sunnis, while most Iranians are Shiites. After Iran declared itself an Islamic Republic in 1979, some predicted a worsening of relations because the Turkish Republic established in 1923 had abolished the caliphate, the office of the Prophet Muhammad's successors,",
      " and adopted a constitution that guaranteed secularism as a basic principle of the state. However, Ankara's pragmatic policy of accepting and officially recognizing the new Islamic Republic speedily and focusing on economic relations proved the forecasters wrong. The ruling Justice and Development Party (AKP) in Turkey has Islamist roots and a foreign policy doctrine of seeking \"zero problems\" with neighbors and of nurturing beneficial relations with all, including Iran. Powered by a robust economy, the AKP government has continued the realistic pragmatism or pronounced self-interest of its predecessors toward Iran. Since AKP came to power in 2002, Turkish-Iranian relations have expanded markedly.",
      " Officials have exchanged numerous visits, culminating in Iranian President Mahmud Ahmadinejad's visit to Turkey in August 2008. The AKP government hosted him in Istanbul, thereby working around Ahmadinejad's antipathy to Turkish secularism by enabling him to avoid a usually obligatory visit in the capital of Ankara to the mausoleum of Mustafa Kemal Ataturk, the founder of the Turkish Republic. Turkish President Abdullah Gul reciprocated by visiting Iran for a regional summit in March 2009, when he met both Supreme Leader Ayatollah Ali Khamene'i and President Ahmadinejad.  Turkey's pragmatism or realpolitik was evident in official reactions to Iran's June 12,",
      " 2009, presidential election as President Gul and Prime Minister Recep Tayyip Erdogan were among the first international leaders to congratulate Ahmadinejad on his re-election. Foreign Minister Ahmet Davutoglu later declared controversies over the outcome to be an internal Iranian affair. AKP's domestic critics charged that these \"reflexive and premature\" actions may have undermined Turkey's stature and credibility as an interest in stability embodied in the status quo appeared to trump values. Prior to visiting Iran in October 2009, Prime Minister Erdogan told the British newspaper, The Guardian, \"There is not doubt he (Ahmadinejad) is our friend\u2026. As a friend,",
      " so far we have good relations and have no difficulty at all.\"  Policy Priorities Turkey seeks to further regional stability and its own national interests in its relations with Iran. Ankara has made common cause with Tehran in seeking to preserve the territorial integrity of Iraq in order to prevent its division into ethnic states that might serve as a model for separatists. Both Turkey and Iran have separatist/terrorist foes who attack them from safe havens in northern Iraq\u2014the Kurdistan Workers Party (PKK) and the Party for a Free Life in Kurdistan (PJAK), respectively\u2014 and both place a high priority of combating these threats. At the same time,",
      " Turkish officials have encouraged Iraqi Kurds to play a greater role in Baghdad to help counter what the Turks fear might become excessive Iranian influence over a Shiite-led Iraqi government. Ankara also may believe that greater involvement in the central government might moderate the Iraqi Kurds' separatist inclinations. Turkish officials state that Iran has the right to develop nuclear energy for peaceful purposes and have called on Tehran to cooperate with the International Atomic Energy Agency (IAEA) in order to demonstrate that its nuclear program has peaceful intentions. Prime Minister Erdogan has criticized the international community for its \"double standards\" in targeting Iran's nuclear program while ignoring Israel's nuclear arsenal. He almost always mentions Israel (if not by name,",
      " then as \"the country in the region with nuclear arms\") when defending Iran, which he does frequently. For example, after discussing Iran with President Obama at the White House on December 7, 2009, the Prime Minister said, \"We do not want to see a country in our region possessing nuclear weapons and we want the countries in the region who have nuclear weapons to be rid of them.\" Turkey seeks to have the dispute between Iran and the international community solved diplomatically. Erdogan considers the idea of a military attack on Iran to be \"an insanity\" and has warned Israel of \"a response equal to an earthquake\" if it used its relationship with Turkey,",
      " referring to Turkish airspace to \"wage aggression on a third party,\" i.e., Iran. In October 2009, Turkey cancelled Israel's participation in an annual NATO military exercise in Turkey ostensibly because of continuing public anti-Israel sentiment resulting from the December 2008-January 2009 Gaza conflict. Some analysts suggested that, in addition, Turkey did not want to give Israel an opportunity to rehearse flying in Turkish airspace near the Iranian border. Turkey also opposes the imposition of sanctions on Iran which might harm Turkey's interests because it is a neighbor and economic partner of Iran. It is likely to abstain should the U.N. Security Council vote on sanctions as in November 2009,",
      " when the IAEA passed a resolution demanding that Iran immediately freeze operations at a previously secret uranium enrichment plant. These misgivings or disagreements concerning approaches to thwart Iran's nuclear ambitions aside, Turkey still does not want Iran to develop nuclear weapons and thereby upset the regional balance of power.  Finally, access to Iran's energy resources is a high priority for Turkey, which imports 70% of all the energy it consumes. Turkey depends on Russia for 68% of its gas supplies and wants retain access to Iran for much of the rest and to lessen that dependence.  Economic and Security Concerns Turkish-Iranian relations have a very strong economic component.",
      " About 1.5 million Iranian tourists visit Turkey annually, visa-free. Trade is growing and reached $10 billion annually in 2008, with Iranian exports of oil, oil products, and gas to Turkey accounting for $7.2 million of the total. Officials of both governments have said that they hope to increase trade to $30 billion a year in the next few years. A pipeline commissioned in 2001 carries natural gas from Tabriz to Ankara. In 2007, Turkey and Iran signed a memorandum of understanding (MOU) for the state-run Turkish Petroleum Corporation (TPAO) to be granted the right to develop natural gas fields in South Pars,",
      " to extract up to 20 billion cubic meters (bcm) of additional gas, and to transport it via a new 1,850 kilometer pipeline to Turkey. Turkey is to invest an estimated $3.5 billion and receive 50% of the gas produced. Both governments hope that the new pipeline will eventually link with the planned 3,300-kilometer Nabucco pipeline. Scheduled to be completed in 2014, Nabucco is intended to carry natural gas from the Caspian/Central Asian region via Georgia and Turkey to Austria, bypassing Russia. Iranian gas has the potential to make Nabucco more viable especially if Russia dissuades the Central Asian states from using it and China competes for their resources as well.",
      " Turkey and Iran have formed a joint company to transfer the gas to Europe. However, the European partners in Nabucco (Hungary, Bulgaria, Romania, Germany, and Austria) have declared, \"No Iranian gas will be accepted unless the nuclear problem is solved\" and U.S. Special Envoy for Eurasian Energy Ambassador Richard Morningstar has stated, \"At present, we do not support Iran's participation in the project.\" Turkey opposes all energy-related sanctions on Iran mainly because of its energy needs.  In addition, in 2007, Turkey signed an MOU to build three natural gas-fired power plants in Iran and to import 3 to 6 billion kilowatt hours of electricity annually.",
      " The two neighbors also have plans for an ambitious new road and rail transportation network to link the Turkish Black Sea port of Trabzon and the Iranian Persian Gulf port of Bandar Abbas, and to establish a free industrial zone on their border. In private, Turkish officials have voiced some security concerns about a nuclear-armed Iran and about the impact that such a development would have on the regional balance of power. They note that Turkey is Iran's closest neighbor and easily within range of its missiles -- even though Iran has not threatened Turkey. These concerns may have prompted Turkey's possible purchase of U.S. Patriot air defense missiles. As noted above, Prime Minister Erdogan and President Gul have criticized the West's policy on the issue and charged it with \"double standards,\" suggesting that Iran is being judged more harshly than presumed nuclear power Israel.",
      " In November 2008, Erdogan told a Brookings Institution audience, \"We do not find it correct to tell just one country to scrap nuclear weapons. We do not think this is an honest approach. Whoever has nuclear weapons should scrap them first then let us all be rid of them.\" The two leaders have repeatedly put Turkey forward as a possible mediator between Iran and the United States and Turkey accepted an IAEA suggestion that it act as a repository for Iran's uranium, but Iran rejected the idea. Ahmadinejad has said that there is no need for Turkish or any other mediation. President Gul noted \"the need for the Western world to understand Iran's security apprehensions about its regime\"",
      " as well as Iran's \"need to persuade the Western world that it is not seeking the nuclear weapon and that all its researches are within the peaceful framework.\"  Due to their common security concerns about Kurdish separatists, the Turkish and Iranian armed forces have conducted joint operations against the PKK and PJAK in northern Iraq. Prime Minister Erdogan has said that cooperation with Iran in dealing with terrorism will continue. Prospects Turkey is likely to consult closely with like-minded Arab Sunni powers, such as Saudi Arabia and the United Arab Emirates, concerning the impact of Iran's nuclear weapons' ambitions on the regional balance of power. Should Iran acquire nuclear arms, Turkey could,",
      " as a NATO member, rely on NATO defense guarantees if it believes them to be credible. If it does not have that belief, Turkey could develop its own nuclear weapons program. Turkey already has plans for nuclear power plants, the technical abilities needed for a weapons program, and some uranium resources. At the same time as it pursues this path, Ankara is likely to continue to cultivate good relations with Tehran in line with its \"zero problems\" approach to foreign policy and because of its energy needs and economic interests.  Afghanistan64 Perspectives and Interests As it attempts to stabilize Afghanistan, nearly eight years after the United States helped Afghan militias overthrow the Taliban,",
      " the Obama Administration has seen Iran as potentially helpful \u2013 or at least not an obstruction -- to its strategy for Afghanistan. The U.S. Special Representative for Afghanistan and Pakistan, Ambassador Richard Holbrooke, has advocated a \"regional\" component of the strategy, which focuses primarily on Pakistan but also envisions cooperation with Iran to help keep Afghanistan calm.  Policy Priorities Still, Iran and U.S. interests in Afghanistan, while in many ways coincident, are not identical. Iran perceives its key national interests in Afghanistan as exerting its traditional influence over western Afghanistan, which Iran borders and was once part of the Persian empire, and to protect Afghanistan's Shiite minority.",
      " Iran's assistance to Afghanistan has totaled about $1.164 billion since the fall of the Taliban, mainly to build roads and schools and provide electricity and shops to Afghan cities and villages near the Iranian border. This makes Iran among the top financial donors to Afghanistan and is in many ways supportive of the U.S. policy of attempting to stabilize Afghanistan in part through economic development. Iran did not oppose Karzai's firing of Iran ally Ismail Khan as Herat governor in September 2004, although Iran has opposed the subsequent U.S. use of the Shindand air base, located in Herat Province, which Iran fears the United States might use to attack or conduct surveillance against Iran.",
      "  During his visit to the United States in May 2009, Karzai said he had told both the United States and Iran that Afghanistan must not become an arena for the broader competition and disputes between the United States and Iran. In public statements, in part because of the economic development work done by Iranian firms, President Hamid Karzai has, at times, called Iran a \"friend\" of Afghanistan. In June 2009, Karzai congratulated Iranian President Mahmoud Ahmadinejad for his re-election at a time when many Iranians took to the streets to dispute his victory. Similarly, Karzai's August 2009 re-election bid was flawed by charges of widespread fraud,",
      " yet Ahmadinejad congratulated him for a victory on September 19, 2009 \u2013 long before it was clear that a second round election run-off would not be held. The two leaders, along with the President of Pakistan, have formed a tripartite summit process to discuss regional issues; the last meeting was in May 2009, hosted in Tehran by Ahmadinejad.  At other times, the two countries have had disputes over Iran's efforts to expel Afghan refugees. About 1.2 million remain, mostly integrated into Iranian society, and a crisis erupted in May 2007 when Iran expelled about 50,",
      "000 into Afghanistan. About 300,000 Afghan refugees have returned from Iran since the Taliban fell. Economic and Security Concerns The United States has reserved its strongest objections to Iran's shipment of weapons into Afghanistan. This could represent an Iranian attempt to build influence with armed opposition factions in Afghanistan, through which Iran might be able to retaliate against the United States in the event of U.S.-Iran conflict. The State Department report on international terrorism for 2008, released April 30, 2009, said Iran continues to provide some training to and ships arms to \"selected Taliban members\" in Afghanistan. Weapons provided, according to the State Department report,",
      " include mortars, 107mm rockets, rocket-propelled grenades, and plastic explosives. Several shipments of such weapons were captured by the U.S. military in Afghanistan in 2007. Secretary of Defense Gates testified before the Senate Armed Services Committee in late January 2009 that the Defense Department had seen a slight increase in Iranian shipments of arms into Afghanistan in the few preceding months. On December 17, 2009, U.S. Ambassador to Afghanistan Karl Eikenberry said that \"Iran or elements within Iran have provided training assistance and some weapons to the Taliban.\"  Iranian aid to Taliban fighters puzzle some experts since these shipments would appear to jeopardize Iran's relations with the Karzai government.",
      " Iran actively helped put together that government, in cooperation with the United States \u2013 at the December 2001 \"Bonn Conference.\" In addition, Iran has traditionally supported Persian-speaking non-Pashtun factions in Afghanistan, who would presumably be suppressed and marginalized by any new Taliban-led regime in Afghanistan. Iran saw the Taliban regime, which ruled during 1996-2001, as a threat to its interests in Afghanistan, especially after Taliban forces captured Herat (the western province that borders Iran) in September 1995. Iran subsequently drew even closer to the ethnic minority-dominated Northern Alliance than previously, providing its groups with fuel, funds,",
      " and ammunition. In September 1998, Iranian and Taliban forces nearly came into direct conflict when Iran discovered that nine of its diplomats were killed in the course of the Taliban's offensive in northern Afghanistan. Iran massed forces at the border and threatened military action, but the crisis cooled without a major clash, possibly out of fear that Pakistan would intervene on behalf of the Taliban. Iran offered search and rescue assistance in Afghanistan during the U.S.-led war to topple the Taliban, and it also allowed U.S. humanitarian aid to the Afghan people to transit Iran.  Prospects Others see Iran as a marginal player in Afghanistan, because it is identified primarily with non-Pashtuns and its links to Taliban fighters are tenuous and sporadic.",
      " Those who take this view question whether U.S. engagement with Iran would contribute much to solving the core problems plaguing the U.S. mission there. Still others believe that talks with Iran on Afghanistan could lead to broader U.S.-Iran talks, or potentially even open up the possibility of using Iran as a supply line for non-U.S. NATO forces in Afghanistan. Secretary of State Clinton made a point of inviting Iran to the U.N.-led meeting on Afghanistan at the Hague on March 31, 2009. However, since then, Iran has been faced with a growing and increasingly strong democratic opposition movement and the Obama Administration might be re-thinking its degree of engagement with the current regime.",
      " In addition, Iranian leaders have not accepted U.S. and partner country proposals to formulate a mechanism to ensure that Iran's nuclear program is for purely civilian and peaceful purposes.  Egypt70 Perspectives and Interests Throughout history, Egypt and Iran have, at times, been fierce rivals, a natural outgrowth of the region's balance of power. Egypt envisions itself as the standard-bearer of Arab nationalism, and Persian Iran serves as a foil. During the Cold War, Egypt was militarily aligned with the Soviet Union while Iran was a U.S. client state. Then, in the late 1970s, as a result of the Camp David Peace Accords and the Iranian revolution,",
      " Egypt and Iran essentially traded places in their regional allegiances. Egypt's peace treaty with Israel resulted in a much closer relationship with the United States, while Iran's revolutionary theocratic government perceived the United States, its moderate Arab allies, and Israel as its primary adversaries in the Middle East, and Iran developed a closer relationship with Russia. For over 30 years, this pattern has persisted and, in recent years, new dimensions have been added to the Egyptian-Iranian rivalry.  Iran and Egypt severed diplomatic ties in 1980, a year after the Iranian revolution. Iran not only objected to Egypt's peace treaty with Israel, but also to its hosting of the deposed Shah and its support for Iraq during the 1980-",
      "1988 Iran-Iraq war. As a provocation, Iran applauded the assassination of former Egyptian President Anwar Sadat, naming a street after the assassin (Khalid Islambouli). The Egyptians have insisted that this street be renamed and the mural of Islambouli along side it be removed before normal ties can be restored. Policy Priorities Currently, Egypt is concerned about Iran's support for Palestinian militants, particularly Hamas, Iran's influence in Iraq, and Iran's nuclear program. Hamas's control of the Gaza Strip poses a challenge for neighboring Egypt. Hamas's call for armed resistance against Israel and its alleged Iranian financial and military support runs counter to Egypt's foreign policy,",
      " which is largely based on its peace treaty with Israel and friendly relations with the United States. A nuclear-armed Iran and its effect on the regional balance of power is a pressing security concern. Egypt firmly opposes Iran's nuclear ambitions, and, as is the case with its stance toward Israel's clandestine nuclear program, Egypt has called for a \"nuclear-free zone\" in the Middle East. Egypt is a signatory to the Nuclear Non-Proliferation Treaty (NPT) and has pledged not to develop weapons programs of its own. It also has rebuffed U.S. talks of a nuclear shield protecting Gulf states and possibly Egypt from an Iranian attack.",
      "  In 2006, the Mubarak government announced its own intention to develop a civilian nuclear energy program. To date, progress on its development has been slow, and most experts expect that it will be at least a decade before the construction of nuclear power plants will be completed. Although Egypt may have legitimate energy shortfalls that are driving the pursuit of nuclear energy, most analysts suspect that concern over Iran's quest for nuclear weapons is behind the Egyptian initiative.  Economic and Security Concerns Between 2007 and 2008, for reasons not entirely clear, Egypt and Iran began a dialogue to tentatively explore improving bilateral relations. During that period,",
      " Iran had been reaching out to a number of Sunni Arab states, as some commentators called it a charm offensive designed to assuage fears of its regional ambitions and nuclear program. Egypt may also have been looking to raise eyebrows in U.S. policymaking circles, hoping that its independent initiative with Iran might draw more Bush Administration attention and political support at a time when relations had been strained due to U.S. concerns about human rights in Egypt.  In December 2007, former Iranian National Security Council Chief Ali Larjani, a close aide to Ali Khamanei, visited Egypt and held talks with President Mubarak. As a follow up,",
      " on January 30, 2008, Mubarak held talks with Iran's then Majles (parliament) Speaker Gholam Ali Haddad Adel in Cairo. Adel was the first senior Iranian parliamentary official to conduct high-level talks with Egyptian counterparts in three decades. At the end of March 2008, Former Iranian President Mohammed Khatami visited Cairo for additional discussions. However, the supposed Egypt-Iran rapprochement was short-lived, as neither side appeared ready to reconcile differences. In July 2008, an Iranian group, the Committee for Commemoration of Martyrs of Global Islamic Movement, re-edited an old Al Jazeera documentary on the murder of former Egyptian President Anwar Sadat and released it publicly as a new documentary entitled,",
      " \"Execution of a Pharaoh.\" The film positively portrayed Sadat's assassin as a martyr. Although Iran attempted to distance itself from the film, relations again soured. In October 2008, Egyptian Foreign Minister Ahmad Abu-al Ghayt warned Iran that anyone \"who intervenes in Egypt's internal affairs will not be happy with the response they receive. The Iranians cannot interfere in our internal affairs.\"  Although Egyptian-Iranian relations have been cool for decades, tensions remained relegated to the diplomatic and cultural spheres. Iran and Egypt maintain a limited economic relationship, with bilateral trade estimated at $99 million in 2008. However, in April 2009,",
      " the discovery of an alleged Hezbollah military cell in Egypt significantly heightened tensions. On April 8, 2009, the Egyptian government declared that it had uncovered a 49-person Hezbollah \"cell\" clandestinely operating in Egypt. According to authorities, cell members had been monitoring ship traffic at the Suez Canal and were planning terrorist attacks against Sinai tourist resorts, particularly those frequented by Israelis. Egypt also accused Hezbollah of smuggling weapons to Hamas along the Egypt-Gaza border and spreading \"Shi'ite ideology\" inside Egypt. On April 10, Hezbollah chief Sheikh Hassan Nasrallah acknowledged that one of the plotters in custody had been dispatched to Egypt to conduct \"reconnaissance\"",
      " for Hezbollah. Prospects The revelation of a Hezbollah cell serves Egyptian interests in several ways. First, it draws a sharp contrast between it and Iran, the primary U.S. and Israeli adversary in the region. By demonstrating that Egypt is a direct target of Iran's regional meddling, Egypt may hope to rally other moderate Arab states behind it, while placing Iran's Arab allies (such as Hezbollah, Hamas, Syria, and Qatar) on the defensive. Second, Egyptian leaders had been eager to retaliate against Iranian-backed Hezbollah after the Lebanese Shiite organization called for the overthrow of the Mubarak regime for its alleged lack of support to Palestinians in Gaza during Israel's Operation Cast Lead between December and January 2009.",
      " Nevertheless, by the end of 2009, tensions in the Egyptian-Iranian relationship had eased, as evident by the December 2009 meeting between Iranian Parliament Speaker Ali Larijani and President Mubarak in Cairo. In a news conference following their meeting, Larijani said that \"As for the economic relationship, there is a positive tone from the two sides.\" According to one report, he also remarked that \"Israel was the Islamic world's main enemy, and that Iran and Egypt had the same strategy with regard to the Palestinian cause but different ways of implementing the strategy.\" One unnamed Egyptian official claims that during their meeting,",
      " Larijani proposed to improve Iranian-Arab relations, saying \"the message is offering a new Iranian approach to resolve outstanding issues.\" Most analysts remain skeptical of the Iranian proposal, suggesting that it may be another \"charm offensive\" similar to previous attempts mentioned above. Overall, so long as Iran pursues a nuclear program and continues to strongly back Hamas and Hezbollah, Egypt will feel threatened and will work to counterbalance Iranian policy. However, a direct confrontation appears highly unlikely. For now, Iran will use non-state actors to provoke and pressure Egypt, while the Mubarak government will continue to rally other Sunni Arab states around its mantle of leadership to keep Iran in check.",
      " Egypt also will continue to demand that Israel and the United Sates prioritize the Arab-Israeli peace process in order to reduce the allure of Iran's so-called axis of resistance. Syria78 Perspectives and Interests For over 30 years, close Syrian-Iranian relations have been a mainstay of Middle East power politics. Starting with the 1979 Iranian revolution and spanning the 1980-1988 Iran-Iraq war, the arming and training of Shiite militias in Lebanon after Israel's invasion in 1982, and the maturation of Palestinian militant groups such as Hamas over the last decade, Syria-Iran ties have grown stronger,",
      " as both governments have built an alliance based on shared strategic interests rather than shared cultural and religious affinities. Though their partnership has changed over the years, with Syria now serving as the junior partner, both sense that their self-described \"axis of resistance\" is becoming more powerful, as their non-state proxies, Hezbollah and Hamas, exercise more influence on the politics of the region.  Nevertheless, many observers continue to question the permanence of a Syrian-Iranian alliance, as some analysts assert that Syrian foreign policy is essentially pragmatic rather than revolutionary. They argue that should a solution to the Israeli-Palestinian conflict emerge, Syria would end its policy of resistance and join other Arab states in making peace with Israel.",
      " Other experts suggest the foundation of the Syrian-Iranian relationship\u2014a shared concern over Iraq, support for Hezbollah in Lebanon, and countering Israel\u2014is deeply rooted in the geopolitics of the region and cannot be easily overturned. Policy Priorities From a military and economic standpoint, Syria is a weak state, but its active support of Palestinian, Lebanese, and Iraqi militants/terrorist groups gives it a disproportionate regional role. Syria is surrounded by powerful U.S-allied neighbors (Israel and Turkey and Iraq) whom Syria seeks to counter through its own alliances. Though Syria's self image is pan-Arab and the majority of its citizens are Sunni Arabs,",
      " predominantly Persian Shiite Iran has a similar foreign policy outlook, creating the foundation for close relations.  The Asad regime's primary policy priority is to control Lebanon either directly or indirectly. Many hard-line Syrian nationalists consider their smaller, weaker neighbor to be an appendage of a greater Syrian nation and an artificial French colonial creation. In order to wield substantial influence in the byzantine world of Lebanese confessional politics, Syria needs allies, particularly now that it no longer occupies the country. Iranian-backed Hezbollah, the Lebanese Shiite terrorist group/militia/political party/charitable organization, serves as Syria's primary local partner. Without Hezbollah, Syria would have far more difficulty influencing Lebanese politics.",
      "  The Syrian-Hezbollah partnership also is valuable to Iran. According to the U.S. State Department's 2008 Country Reports on Terrorism, Syria allowed Iran to use its territory as a transit point for weapons bound for Hezbollah. Hezbollah provides Iran with an entree into the Levant, allowing it to project power far beyond its immediate borders and to threaten Israel by proxy. As long as Israel still occupies the Golan Heights, Syrian leaders apparently believe that this serves Syrian interests as well. In 2009, Israeli and other foreign governments accused Syria of continuing to serve as an Iranian conduit for weapons shipments to Hezbollah. In November 2009,",
      " Israeli forces siezed a freighter named the Francop en route from Iran to the Syrian port of Latakia which contained, according to reports, thousands of medium-range 107- and 122-millimeter rockets, armor-piercing artillery, mortar bombs, hand grenades, and ammunition for Kalashnikov rifles. Economic and Security Concerns Though the Syrian-Iranian relationship is primarily a diplomatic alliance, Iranian trade with and investment in Syria (or at least the appearance of them) have somewhat expanded in recent years, perhaps partially in response to Western policymakers' attempts to woo Syria away from Iran. In the financial sector, Iran has stated its intention to establish a joint Iranian-Syrian bank,",
      " possibly involving Bank Saderat and the Commercial Bank of Syria \u2013 entities which have been sanctioned by the U.S. Treasury Department. In the manufacturing and industrial sectors, the Iran Khodro Industrial Group has established two car assembly plants in Syria. Iranian companies also have invested in concrete production, power generation, and urban transportation. In the energy sector, Syria, Iran, Venezuela, and Malaysia established a joint petroleum refinery in Homs, Syria. In addition, Iran, Turkey, and Syria reached a new natural gas deal that would allow Iran to export 105 billion cubic feet of natural gas annually to Syria via Turkey. Despite increased Iranian investments,",
      " the overall volume of Iranian-Syrian trade remains low. According to the Economist Intelligence Unit, bilateral trade may total between just $160 and $400 million.  Prospects Barring a major change in Lebanese affairs or a breakthrough in Israeli-Palestinian peace negotiations, Syrian-Iranian relations will most likely remain strong. As an indication of their enduring ties, both countries signed a defense cooperation agreement in December 2009, despite many Arab and Western attempts to divide them. Nevertheless, some experts suggest that the alliance has its weak points, and that Western and moderate Arab governments should try to exploit them. In October 2009, King Abdullah of Saudi Arabia paid an historic visit to Syria that was interrupted by many as a return to somewhat normal Saudi-Syrian relations.",
      " As a result of the king's visit, some observers anticipate that Saudi investment in Syria may resume or even increase. Although it is difficult to discern the true state of Iranian-Syrian relations due to the opaque nature of both regimes, tensions may have developed over the issue of Syrian peace talks with Israel. After Syria attended the November 2007 U.S.-sponsored Annapolis peace conference, one Syrian media outlet asserted that it was Syria's right to pursue its own interests, stating that it was \"fine for Syria to knock at doors that appear closed, as there is often someone inside to open [them].\" According to a report by the Washington Institute for Near East Policy,",
      " \"Iranian officials have likewise issued public warnings to the Assad regime not to go too far in these discussions. In June 2008, a senior advisor to Supreme Leader Ayatollah Khameini cautioned Syria of the consequences of peace on its relations with Tehran.\" The Saudi media has focused on exploiting tensions in Iranian-Syrian relations. In 2008, the London-based, Saudi-owned Al Hayat pan-Arab daily noted that Syrian President Bashar al Asad's recent visit to Tehran had been a \"failure\" in reassuring Iran of his intentions regarding indirect Syrian-Israeli peace talks. According to the report, \"sources told Al Hayat that these reports contain information,",
      " not sheer speculation or analysis, that Syrian President Bashar al Asad's recent visit to Tehran was not successful with regard to the stand on the Syrian-Israeli negotiations.... The same reports added that the Iranian concerns prompted Iran to ask the Syrian side a lot of questions during al Asad's visit, which did not end in an agreement. In fact, these reports used the phrase 'the failure of the visit.'\" The future direction of Hezbollah may hold the key to the strength of the Syrian-Iranian alliance. The group has multiple aims, as it seeks to balance an anti-Israel, pro-Iranian revolutionary regional agenda while appearing to uphold both Lebanese national interests and the independent interests of its Shiite constituents.",
      " Sometimes it succeeds in merging these agendas, as when Hezbollah claims it is acting as a national liberation movement struggling to free Lebanon from Israeli occupation, even after Israel's 2000 withdrawal from the south. Other times, particularly after its 2006 war with Israel, critics of Hezbollah have been successful in blaming it for wreaking havoc on the state itself and serving as a pawn of foreign, in this case Iranian and Syrian, interests.  Although many analysts charge that Hezbollah's ties to Iran are immutable, others believe that Hezbollah seeks greater independence from its Iranian and, to a lesser extent, Syrian patrons. According to one RAND study, \"Hezbollah statements suggest that it does not consider its interests to be in perfect alignment with those of Iran,",
      " and its behavior reaffirms this assessment\u2014Hezbollah continues to focus its energies on internal Lebanese politics.\" For now, Hezbollah remains a hybrid organization with a militia, an intelligence apparatus, terrorist capabilities, charities, private companies, religious institutions, and a political party. For Hezbollah to evolve into a strictly non-violent movement, a Lebanese-Israeli peace treaty would have to be signed. Should that occur, however unlikely, some experts assert that without a common enemy (Israel) binding them together, Iran, Syria and Hezbollah's interests would diverge, and Syria would perceive Hezbollah more as a competitor for control over the Lebanese political scene. In this scenario,",
      " Syria and Iran would find themselves without a common proxy advancing their mutual interests. Lebanon86 Perspectives and Interests Lebanon, and in particular Lebanon's Shiite population, have looked to Iran for financial support and political backing since (at least) 1982. At the time of the Iranian Revolution, Lebanon was engulfed in a civil war (1975-1990). As part of his policy to export the revolution, the founder of the Islamic Revolution of Iran, Ayatollah Ruhollah Khomeini, reached out to Lebanon's Shiites, who had long felt underserved and underrepresented in Lebanon. During the Israeli invasion of Lebanon in 1982,",
      " Iran sent a contingent of Pasdaran security forces into Lebanon. The force armed and trained Shiite militia groups that later formed the terrorist organization Hezbollah, and provided medical attention and other services to Lebanese affected by the Israeli invasion.  Iran's support for Lebanese Shiites during the civil war cemented a partnership that both sides consider mutually beneficial. Hezbollah requires outside funding and military support and Iran requires a proxy to pressure Israel and the United States. Iran is one of a number of regional actors vying for influence in Lebanon, and Lebanon's policy priorities reflect this reality.  Policy Priorities During the Syrian occupation of Lebanon (1976-2005), Lebanese-Iranian relations paralleled Syria's relationship with Iran.",
      " Since Syrian withdrawal from Lebanon in 2005, Lebanon's politics have reflected the sectarian realities in Lebanese politics and Lebanon's policy toward Iran has changed little. Iranian support for Shiites in Lebanon (and Hezbollah in particular) serves as a counterpoint to Saudi Arabian support for Sunni groups. This foreign patronage, when considered along with Lebanon's consensus government, requires that any Lebanese government maintain a friendly relationship with all regional actors to avoid upsetting the delicate political balance among its religious sects and political parties.  Some analysts argue that Syria's withdrawal from Lebanon left a power vacuum that has been filled by Iran via its proxy Hezbollah. Others argue that,",
      " despite initial concerns following Hezbollah's 2008 siege of Beirut, the outcome of the June 2009 parliamentary elections represented a setback for Iranian influence in Lebanon and in the Levant. Regardless, as long as Lebanese politics includes a stake for Shiites and, most of all, Hezbollah, the Lebanese government, whatever its composition, will likely maintain a friendly orientation toward Iran. The Lebanese government has supported Iran's right to peaceful nuclear energy and has not articulated any official concerns about a possible Iranian nuclear weapons program. Economic and Security Concerns Trade between Iran and Lebanon is limited. The International Monetary Fund (IMF) estimated it at $192 million in 2007 and $247 million in 2008.",
      " Iran and Lebanon also established a joint economic commission to expand economic cooperation and bilateral ties. During a meeting in March 2009, then-Lebanese Prime Minister Fouad Siniora stated that \"There are lots of grounds for the growth and expansion of commercial, industrial, infrastructure, and tourism cooperation between the two countries, and our relations have to expand on a daily basis, therefore.\"  Official trade statistics do not include Iranian support for Hezbollah, which many analysts expect is substantial. Prior to Lebanon's June 7, 2009 parliamentary elections, Iran announced that it would provide Hezbollah and its allies with $600 million in aid, heightening concerns about Iran's material support for Hezbollah.",
      "  Other events indicate that Iran might also aim to increase its influence among non-Shiites in Lebanon. Lebanon's primary security concern is Israel. In spite of efforts on the part of the Lebanese government and the international community to strengthen the Lebanese Armed Forces, many Lebanese perceive Hezbollah as the best line of defense against possible Israeli attacks along Lebanon's southern border. In what appeared to be an attempt to improve the standing of Hezbollah and its allies ahead of the parliamentary elections, Iran reportedly offered to provide arms and financial support to the Lebanese Armed Forces \"without conditions.\" No official agreement materialized. Prospects Since the civil war ended in 1990,",
      " Hezbollah, backed by Iranian largesse, has expanded its role in Lebanese politics. Many analysts, and some among Lebanon's non-Shiite groups, argue that Hezbollah's 2006 war with Israel and 2008 siege of Beirut demonstrate its growing strength in Lebanese domestic politics and its ability to act as a spoiler of Western interests in the region. These analysts have expressed concerns about the future of stability in Lebanon and the region if Hezbollah were backed by the promise of an Iranian nuclear device.  In Lebanon, Sunnis and some Christians have expressed similar fears. As the regional influence of Iran grows, so does Hezbollah's strategic depth. Lebanese politics and policies are built around the national memory of the civil war,",
      " and any prospect for a change in Lebanese politics or a shift of power balance in the region underscores fears that Lebanon could again become a theater of regional conflict, especially if international efforts to curb Iran's nuclear program fail, or if Israel decides to take military action against Iran.  Palestinians93 Perspectives and Interests Since its 1979 Islamic Revolution, Iran has at least rhetorically, and at times materially, supported the Palestinian national cause. Because Iran and its population were relatively remote from the Arab-Israeli conflict\u2014Iran does not border Israel or the Palestinian territories, it had not been a party to any of the Arab-Israeli wars, and most Iranians are not Arab\u2014many analysts believe that the Islamic Republic's adoption of the Palestinian cause after the 1979 revolution was calculated to persuade Sunni and Shiite Arab populations throughout the region that the Iranian regime more truly embodies the principles of Islamic leadership than the traditional Sunni Arab states of the region.",
      " Other reasons\u2014geopolitical competition with Israel and the United States, sympathy for the Palestinians as \"victims of neo-colonialism\" (given Iran's sensitivity to foreign involvement in its own affairs), religious and civilizational opposition to a Jewish/Zionist stronghold in a predominantly Muslim region\u2014also are possible. Dating back to when the late Yasser Arafat and the Palestine Liberation Organization (PLO) were in exile, the Palestinians have been historically ambivalent about openly accepting Iranian support for their national cause. While Arafat courted Ayatollah Khomeini's support at times, he preferred to associate himself publicly with fellow Sunni Arab leaders (including Iran's enemy Saddam Hussein), and later developed greater ties with the West and engaged Israel through the Oslo \"peace process.\" Arafat's engagement of Israel led Iran to refocus its efforts on influencing Palestinian groups that rejected Oslo\u2014particularly Hamas,",
      " but also Palestinian Islamic Jihad and others\u2014and that sought to derail efforts to forge peace with Israel on terms that they and Iran found objectionable. Since then, Hamas has grown significantly in influence\u2014from the political margins to rivaling Arafat's Fatah movement in preeminence.  Mahmoud Abbas, Arafat's successor as PLO Chairman, Palestinian Authority (PA) President, and the head of Fatah, is clearly opposed to Iranian influence in Palestinian politics. From the viewpoint of Abbas and his allies, Iran has sowed factional and geographical division among Palestinians at a time when assembling credible, unified leadership to deal with Israel is vitally important.",
      " Analysts might conclude that the threat Iran poses to Israel\u2014with its nuclear program and its support of militant groups such as Hamas and Hezbollah\u2014has greatly increased the difficulty of Abbas's task of marshaling and sustaining international political will sufficient to persuade Israel to (1) abandon its control over Palestinian territory and (2) agree to Palestinian statehood in both principle and fact. Official representatives of the PLO and PA limit their statements on Iran to its role in internal Palestinian affairs, and thus have not taken a public position on the nuclear issue.  Some Palestinians who are skeptical of the Arab-Israeli peace process, however, believe that Iranian support for Palestinian militants and Hezbollah provides needed leverage with Israel that the United States and Europe are unlikely to deliver to Abbas.",
      " Yet, even though Hamas welcomes Iranian assistance, and even though Iran's reputation among Arab populations has arguably been bolstered in recent years by its anti-Western and anti-Israel positions and rhetoric, many believe that Hamas and Iran intentionally maintain a measure of distance from one another. An alternate interpretation is that they merely understate the extent of their ties. They appear to understand the importance of Hamas maintaining an image among its domestic constituents as an authentic Palestinian offshoot of the Muslim Brotherhood, instead of as an Iranian proxy\u2014owing to the ethnic, sectarian, and linguistic differences between Palestinians (who are predominantly Sunni Arabs) and Iranians (who are mostly Shiite and non-Arab). Policy Priorities Iran's future influence over the Palestinian political scene seems tied to Hamas's fortunes,",
      " which have been on the rise since Hamas's political emergence in the late 1980s (and were accentuated by its victory in Palestinian Legislative Council elections in 2006). By consolidating its control over Gaza and pursuing popular support through resistance to Israel, Hamas appears to seek legitimacy by establishing its indispensability to any Arab-Israeli political arrangement. Many analysts believe that Hamas hopes to leverage this indispensability into sole or shared leadership of the PA in both the West Bank and Gaza\u2014either through a unity arrangement with Abbas and his Fatah movement, or through presidential and legislative elections (which were supposed to take place in January 2010 under PA law,",
      " but have been postponed pending factional agreement on conditions for holding them)\u2014and to gain membership in or somehow supplant the PLO, which remains internationally recognized as the legitimate representative of the Palestinian people. Since its takeover of Gaza, however, some polls indicate that Hamas's popularity has suffered. Some analysts attribute this to doubts among Palestinians that Hamas is as incorruptible or as committed to ordinary people's best interests as was thought in 2006, partly due to the realities of governing and to certain of Hamas's practices (i.e., enabling/profiting from the smuggling of goods through tunnels from Egypt, provoking harm to Gazan civilians by firing on Israeli targets from dense urban populations during the 2008-",
      "2009 Gaza conflict). Abbas and Fatah hope to regain influence in Gaza and to neutralize Hamas's ability to act as a peace process spoiler. To that end, they have alternated between, and sometimes have simultaneously pursued, (1) mobilization of international support for a Palestinian state to undercut Hamas's appeal to Palestinian peace process skeptics and (2) engagement in intermittent, Egyptian-brokered national unity discussions with the aims of integrating Hamas more fully into PA institutions and of ending or reducing Hamas's dependence on Tehran.  Various U.S. and international policymakers, including Secretary of State Hillary Rodham Clinton, have said or implied that organizational fissures may exist,",
      " particularly between Hamas's Gaza-based leadership and its leadership-in-exile\u2014viewed as more closely tied to Iran\u2014in Damascus, Syria. Some believe that these potential fissures could be exploited by promising Gazan Hamas leaders greater engagement and other incentives in return for moderating their goals and tactics. Others have said that Hamas is more united than it seems, and that it benefits from the portrayal of its leadership as divided because this perception provides Hamas with greater flexibility in dealing with both Western actors who hold out hope of its moderation and its Syrian and Iranian allies who are reminded not to take its rejectionist stance for granted. Economic and Security Concerns The Gaza Strip is at the epicenter of economic and security concerns over Iranian influence on Palestinian life.",
      " Because Gaza and the West Bank are part of a customs union controlled by Israel, the Palestinians do not conduct formal trade with Iran. Nevertheless, possible Iranian-supported smuggling of weapons, cash, and other contraband into the Gaza Strip, along with Iranian training for Hamas militants, is believed by many to reinforce both Hamas's ability to maintain order and control over Gaza and its population, and Palestinian militants' ability to fire mortars and rockets into Israel. Some reports say that contributions from Iran range from $20-30 million annually, supplementing the funds Hamas receives from private individuals and organizations from the Palestinian diaspora and greater Arab and Muslim worlds (particularly in Saudi Arabia and other Gulf states). The deputy leader of the Iran-backed Hezbollah movement in Lebanon told the Financial Times in May 2009 that Hezbollah has been providing \"every type of assistance\"",
      " to Palestinians in Gaza, including military assistance, for some time. In addition, Hezbollah has acted in some ways as a mentor or role model for Hamas, which has sought to emulate the Lebanese group's political and media success. During a December 2009 visit to Tehran, Hamas politburo chief Khaled Meshaal (who is based in Damascus) said, \"Other Arab and Islamic states also support us... but the Iranian backing is in the lead, and therefore we highly appreciate and thank Iran for this.\" The situation in Gaza came to a head with the December 2008-January 2009 conflict between Hamas and Israel,",
      " leading to the death and injury of hundreds of Gazan civilians, the displacement of thousands more, massive destruction of public and private infrastructure, and a general deterioration in quality of life. In the conflict's aftermath, dilemmas remain over how to reconstruct Gaza, support the recovery of its people, weaken Hamas's control, and end smuggling. Some advocate opening Gaza's border crossings for commerce to ease the economic pressures that may encourage smuggling; some advocate internationally coordinated anti-smuggling operations; some advocate both. In January 2009, the U.S interdiction of the Cypriot-flagged ship Monchegorsk in the Red Sea after it reportedly left Iran with weapons-related equipment and the Israeli bombing of an apparent arms-smuggling convoy in Sudan moving in the direction of the Egypt-Gaza border were signs of possible Iranian involvement in smuggling\u2014perhaps in collusion with other states and non-state actors.",
      " Although construction materials are generally not being allowed into Gaza through the border crossings, Iran has proposed its own reconstruction plans and claims to be distributing funds to Gazans affected by the conflict. These plans may reflect Iranian ambition to compete\u2014in concert with Hamas\u2014against the PA, Gulf Arab states, and the international donor community for patronage and public support among Palestinians and other Arabs in the region. Prospects How Iranian influence on the Palestinians is likely to play out could depend in large part on events over the next several months. It is unclear how the popular unrest in Iran that has followed its June 2009 presidential elections might affect the Iranian regime's willingness and ability to exercise influence in the wider region and the strategic approach taken toward the Iranian-Palestinian linkage by the United States and Israel.",
      " Thus far, the Obama Administration has suggested that progress in the Arab-Israeli peace process (with the Palestinians and perhaps also with Syria and Lebanon) could improve the prospects of both countering Iran's nuclear threat and reducing its support of Hamas and Hezbollah, while Israel seems less inclined to pursue Arab-Israeli peace until the Iranian problems are addressed directly. Iran's internal political discord has complicated prospects for direct U.S.-Iran diplomacy aimed at resolving the nuclear issue. As a consequence, the U.S. focus on advancing the Arab-Israeli peace process could intensify. Alternatively, concerns about Iran's unpredictability might foster more of a \"wait-and-",
      "see\" attitude by the United States and other key actors with respect to the peace process and other diplomatic or strategic options in the region\u2014possibly ceding the initiative to Palestinian militants, Hezbollah, or other potential spoilers.  Some claim that a conciliatory tone that some detect from Hamas, particularly since Barack Obama became President, may be due to the movement's calculation that cultivating an image of reasonableness presently serves its interests in light of (1) the diplomatic climate following President Obama's inauguration, (2) Israeli deterrence of Hamas-generated violence in the aftermath of the Gaza conflict, and/or (3) geopolitical changes affecting Hamas's principal benefactors in the region\u2014Syria,",
      " Hezbollah, and Iran. Those who are more skeptical of Hamas's intentions have countered that nothing of substance has changed in Hamas's existing positions, and that any reasonable-sounding statements are best explained as a ploy to give the impression of moderation.  Israel107 Perspectives and Interests From its founding in 1948 until the fall of Mohammed Reza Shah Pahlavi in 1979, Israel had good relations with Iran as, in the 1950's, it pursued a policy of trying to surround its Arab enemies with friends in the \"periphery,\" including Iran, Turkey, and Ethiopia. Israel provided the Shah with weapons and trained his secret police,",
      " the infamous SAVAK, and Iran provided Israel with oil, even during the Arab oil embargo after the October 1973 War.  Ayatollah Ruhollah Musavi Khomeini, founder of the Islamic Republic of Iran in 1979, rejected Israel's right to exist and ended all bilateral cooperation. In the early years of the Republic, Israel generally ignored Khomeini's rhetoric because it viewed Saddam Hussein in Iraq as the greater threat. Moreover, Israel indirectly served Iran's interests in 1981, when it bombed Iraq's Osirak nuclear reactor, and is said to have secretly supported Iran briefly in the mid-",
      "1980's during the Iran-Iraq War (1980-1988).  Yet, also in the 1980's, Israel began to perceive Iran as a threat as Tehran provided ideological inspiration and military support for the founding of the Lebanese Hezbollah, which later attacked Americans and Israelis in the region, and Jews abroad. This threat perception grew as Israel increasingly confronted Iranian-supported violent Palestinian terrorist groups (Hamas and Palestine Islamic Jihad) which rejected the existence of Israel and sought to sabotage the peace process.  In October 2005, shortly after taking office, Iranian President Mahmud Ahmadinejad is said to have called for Israel to be \"wiped off the map,\" and he has since repeatedly expressed virulently anti-Israel sentiments.",
      " Israel perceives an existential threat from an Iran whose officials have these views plus an intent to develop nuclear weapons. Israeli officials believe that a nuclear Iran could pose a direct threat to Israel, provide a nuclear shield for terrorists, and possibly provide them with a nuclear weapon. In a November 15, 2009, speech, Israeli Prime Minister Binyamin Netanyahu laid out his views regarding Iran's nuclear potential. He said Iran's pursuit of nuclear weapons threatens our security, peace in the Middle East, and global stability. With nuclear weapons, its powers of destruction, already considerable, would grow immensely. The moderates in the Middle East would be weakened and extremists strengthened.",
      " Other countries in the region would join the race for nuclear weapons. An Iranian regime that pledges to wipe Israel off the map would work day and night to undermine any attempt to advance peace between Israel and its neighbors \u2013 whether it is peace with the Palestinians, with Syria, and with anyone else. In contrast, if Iran's nuclear ambitions are thwarted, peace would be given a dramatic boost. Hezbollah and Hamas would be considerably weakened and moderate forces within the region would quickly become ascendant. That is why the fate of Iran's nuclear program is a true turning point in history. It would significantly influence our ability to achieve a stable and secure peace in the Middle East.",
      " Policy Priorities Stopping Iran from acquiring nuclear weapons is Israel's number one foreign policy priority. The Israeli government insists that Iran is an international, not just an Israeli problem. Like his predecessors, Prime Minister Netanyahu said that he intended to enlist an international front to increase sanctions on Iran and preserve Israel's security interests. His government is trying to prod the United States and other Western governments to progress from dialogue, to harsher sanctions, to military action if Iran continues to refuse to abandon uranium enrichment. Israel also hopes to influence Russia and China in order to end their obstruction of harsher U.N. sanctions against Iran. It particularly seeks to dissuade Russia from selling advanced S-",
      "300 anti-aircraft missiles to Iran, thereby enabling it to thwart an attack on its nuclear installations. As an interim measure, on October 31, 2009, Netanyahu endorsed a U.S. proposal to have Iran move enriched uranium outside of Iran as \"a positive first step\" in the effort \"to unite the international community to address the challenge of Iran's attempts to become a nuclear military power.\" Israel's Defense Minister Ehud Barak opined that the agreement would set Iran back by about a year, but added \"there is a drawback\" in that it \"recognized that Iran enriches uranium, on a low level, on its soil for peaceful purposes.",
      " This is problematic for us.\" He insisted, \"what is required is a halt to enrichment in Iran, not just an export of the enriched material to build fuel rods.\" His views reflect those of other Israelis who regarded the proposed agreement as a retreat from the demand that Iran stop all uranium enrichment. In the end, the views of Israeli officials did not matter as Iran rejected the proposal. Israeli officials have been skeptical about the Obama Administration's outreach toward and possible engagement with Iran. Defense Minister Barak said, \"if there is an engagement, we believe it should be short in time, well-defined in objectives, followed by sanctions.\" Many times,",
      " he has reaffirmed that Israel is taking \"no options off the table,\" signaling that a military strike is among its policy choices.  The priority that Israel gives to Iran lowers the priority it accords to the Arab-Israeli peace process. Because of the perceived Iranian threat, Israeli officials are wary of the possible establishment of a Palestinian state that would be vulnerable to takeover by Iranian-supported Hamas \u2013 thereby creating what Prime Minister Netanyahu calls \"Hamastan,\" an Iranian proxy, on Israel's borders. Israeli leaders link movement on the Syrian-Israeli peace track partly to Syria's distancing itself from its ally Iran, again noting that it is essential to keep Iran away from Israel's northern border.",
      " Economic and Security Concerns Israel has no economic relations with Iran and, therefore, has few, if any, direct economic concerns. It is aware, however, that should Iran block the Straits of Hormuz and interfere with oil shipments from the Gulf in retaliation for an attack, then Israel's Western allies would be harmed, and Israel could be affected as a result. Israel's security concerns are more immediate. Iran's ongoing arming of Hamas, Palestine Islamic Jihad, and Hezbollah is a threat to Israel's security. Israel wants Egypt and the United Nations to impede the smuggling of Iranian arms into Gaza and Lebanon, respectively. On at least five occasions,",
      " Israel has seized ships that it says were smuggling Iranian weapons. Foremost, as noted above, Israel believes that an Iran possessing nuclear arms would threaten its security and existence. Prospects Israel is keeping \"all options on the table.\" It has been willing to give the United States and others in the international community a chance to engage in a dialogue with Tehran to see if incentives would induce Iran to stop enriching uranium or to enrich it outside of the country so that nuclear fuel could be monitored and not diverted from peaceful purposes to a weapons program. If dialogue does not work within a limited period of time, however, Israel expects the international community to impose rapidly escalating sanctions on Iran.",
      "  As 2009 drew to a close, Israeli officials and commentators noted that President Obama said that he would give Tehran until the end of the year to comply with international demands regarding its nuclear program. Since Iran has not complied, the Israelis expect the United States and the other members of the P5+1 (United Kingdom, France, Russia, China, and Germany) to ask the U.N. Security Council to endorse harsher sanctions in January 2010. Should sanctions not work, Israel has indicated that it is preparing/prepared to take armed action. Israel already may have signaled its readiness to thwart Iran's nuclear ambitions by military means if diplomacy fails.",
      " On September 6, 2007, the Israeli Air Force carried out an air raid against a site in northeastern Syria. U.S. officials later confirmed that it was a nuclear reactor. Then, on June 20, 2008, the New York Times reported that the Israeli Air Force had conducted a major exercise about 900 miles west of Israel, comparable to the distance planes would have to fly to strike Iran's uranium enrichment plant at Natanz. In June and July 2009, Israel sent a submarine capable of launching a nuclear missile and several missile class warships through the Suez Canal into the Red Sea, in deployments that some observers suggested were preparation for a possible attack on Iran's nuclear facilities.",
      "  While displaying its ability to attack Iran, Israel also has been reinforcing its defenses against an Iranian attack. It has proceeded with development, improvement, and successful testing of the Arrow anti-ballistic missile. In October 2009, Israel and the United States held one of their regular joint biennial military exercises, called Juniper Cobra, to work on integrating their weapons, radars, and other systems. This time, it was a large exercise, involving 17 U.S. naval ships, one of which was armed with the Aegis Ballistic Missile Defense System, 1,400 U.S. European Command (EUCOM) servicemen and an equal number of IDF forces,",
      " and it tested the U.S. and Israeli air-defense systems and their interoperability. Juniper Cobra was considered yet another signal to discourage Tehran. Experts appear to agree that an Israeli strike on Iran would be a complicated undertaking and carry a risk of asymmetric retaliation against both Israel and the United States, its closest ally, by Iranian-allied non-state actors. There is some question as to whether it would be possible for Israel to attack Iran without U.S. permission, given U.S. control of Iraqi airspace which Israeli planes might have to transit en route to Iran, and possibly without more sophisticated U.S. weaponry than Israel now possesses. Furthermore,",
      " because Iranian nuclear facilities are dispersed, multiple air raids would be required, perhaps diminishing the chances of success. Some analysts believe that a successful strike would set back Iran's nuclear program for only a few years. Given the closeness of U.S.-Israeli relations and reported warnings by CIA Director Leon Panetta of U.S. expectations of advance notice, it is likely that Israel would inform and consult Washington before attacking Iran. Finally, there are those who contend that the danger to Israel from a nuclear-armed Iran is overstated because Iran would not want to risk a response from Israel's own unacknowledged nuclear arsenal -- a powerful deterrent. Some conclude that Israel and the international community should become reconciled to the possibility of a nuclear-",
      "armed Iran and put aside other concerns. It is uncertain if the Netanyahu government would heed this advice. Caspian Neighbors123 Iran's neighbors in the Caspian Sea region include Russia, the South Caucasian states of Armenia and Azerbaijan, and the Central Asian states of Kazakhstan and Turkmenistan. Russia is the dominant player in relations with Iran. Armenia and, to a lesser degree, Kazakhstan, have aligned themselves with Russian policy toward Iran. A major proportion of the world's Azerbaijanis (estimates range from 6-12 million), and about 200,000 Armenians reside in Iran. Ethnic Azerbaijanis are Iran's largest ethnic minority,",
      " constituting almost one-third of its population. More ethnic Turkmen reside in Iran and Afghanistan\u2014over three million\u2014than in Turkmenistan. The leaders of Kazakhstan, Turkmenistan, and Azerbaijan publicly embrace Islam but display hostility toward Islamic fundamentalism. Most of the people in Kazakhstan and Turkmenistan are Sunni Muslims. About three-fourths of the population of Azerbaijan is Shiia, and about one-fourth is Sunni. Among the Russian citizens living in the Caspian region, most are Russian Orthodox Christians, although a large proportion are Sunni or Sufi Muslims. Policy Priorities Iran has traditionally had friendly relations with Armenia and both have at times joined in opposing Turkish and Azerbaijani interests in the region.",
      " Armenia's relations with Iran are focused on trade, since its borders with Turkey and Azerbaijan are closed as a result of the unresolved Armenia-Azerbaijan conflict over Azerbaijan's breakaway Nagorno Karabakh (NK) region. As a result of the conflict, Armenian NK forces occupy areas along the border with Iran. Iran has an official policy of neutrality regarding the NK conflict and has offered to mediate the conflict. Islamic Shiite fundamentalists in Iran have urged Iran's government to forego its policy of neutrality in the NK conflict and to embrace solidarity with Shiites in Azerbaijan. Energy security has been one of Armenia's main concerns, since it has been dependent on gas shipments from Russia through a pipeline that transits Georgia.",
      " Russia's fractious relations with Georgia have often jeopardized these shipments, causing Armenia to look to Iran for gas supplies.  Iran and Azerbaijan have differed on such issues as border delineation in the Caspian Sea, Iran's objections to Azerbaijani security ties with the United States, and Azerbaijan's objections to Iranian trade ties with Armenia. Some observers have suggested that Iran's increased acrimony with the United States in recent years may have been a spur to its efforts to improve official relations with Azerbaijan, in order either to encourage Azerbaijan to be a mediator or to urge it not to permit U.S. basing. Azerbaijan and Iran have normal ties at the official level,",
      " but some in Azerbaijan have questioned whether Iran really supports the continued sovereignty and independence of the country. As an independent country, Azerbaijan stirs the aspirations of ethnic cohorts residing in Iran for greater rights or even secession. Iran has limited trans-Azerbaijani contacts to discourage the spread of ethnic consciousness among its \"Southern Azerbaijanis,\" and has heavily criticized politicians in Azerbaijan who advocate separatism in Iran. The example of the assertion of Kurdish ethnic rights in post-Saddam Iraq in 2003 has galvanized some Azerbaijanis who propagandize for greater rights for \"Southern Azerbaijanis.\" Alternatively, officials in Azerbaijan at times have alleged that elements in Iran have fostered Islamic fundamentalism among the Shiia population or have sponsored terrorism.",
      " Since 2006, many in Azerbaijan increasingly have been concerned about Iran's arrests of ethnic Azerbaijani civil rights advocates and alleged separatists, including Abbas Lisani. Azerbaijani-Iranian relations were roiled at the end of 2007 by the conviction in Azerbaijan of fifteen individuals on charges of collaborating with the Islamic Revolution Guards Corps to plan a coup and carry out terror operations. After the Azerbaijani National Security Ministry released details of the case, the Iranian Foreign Ministry denied any Iranian involvement and termed the case a scheme by Israel and the United States to harm Azerbaijani-Iranian relations. In mid-2008,",
      " relations were further strained after the arrest of six individuals on charges of collaborating with the Islamic Revolution Guards Corps and Lebanon's Hizballah to attack the Israeli embassy in Baku. Movement in 2009 toward rapprochement between Armenia and Turkey may have contributed to some countervailing moves by Azerbaijan to improve relations with Iran, although Turkey has reassured Azerbaijan that such rapprochement will not make headway until Armenian forces withdraw from areas around the disputed Nagorno Karabakh region. Although a disagreement with Turkey over prices and transit fees for gas appeared to be the primary motive, the Armenia-Turkey rapprochement may have been a factor in Azerbaijan's agreement in November 2009 to boost gas exports to Iran.",
      " At the same time, Iran announced that it would lift visa requirements for Azerbaijani visitors (Turkey immediately made a similar offer to Baku). Russia's ties with Iran have been both cooperative and competitive, and are grounded in Russia's drive to regain a prominent, if not superpower, status in international relations, to establish trade and transport links to the Persian Gulf, to coordinate oil and gas export policies as a cartel, and to counter U.S. influence in the Middle East. Russia's sizeable arms sales and nuclear technology transfers to Iran have raised regional concerns among such countries as Azerbaijan, Iraq, and Saudi Arabia, as well as wider international concern.",
      " Russia and Iran also want to limit Turkey's role in the region, which they view as an avatar of U.S. and NATO interests.  Russian perceptions of the Iranian nuclear threat and its policies toward Iran are driven by a number of different and sometimes competing factors. In January 1995, Russia signed an agreement to build a nuclear power plant at Bushehr and to provide other assistance for an Iranian civilian nuclear program. Moscow has maintained that its cooperation with Iran's civilian nuclear program is legal, proper, and poses no proliferation threat.After Iran's clandestine program to master the entire nuclear cycle became public in 2002 with an announcement by Iranian dissidents that Tehran had built an underground enrichment plant,",
      " Russia withheld delivery of nuclear fuel for the Bushehr reactor until the two sides agreed in 2005 that spent reactor fuel would be returned to Russia for reprocessing. Following further revelations about Iran's nuclear enrichment program, Russia joined in approving a series of limited U.N. Security Council sanctions on trade with Iran's nuclear infrastructure and a freeze on trade with and the assets of certain Iranian entities and individuals. The delivery of Russian fuel for the Bushehr reactor was completed in January 2008, but the reactor has not yet begun to operate.  On September 21, 2009, Iran informed the IAEA that it had been building a second uranium enrichment plant near the city of Qom.",
      " Many observers raised fears that the disclosure was further evidence that Iran intended to build nuclear weapons. In a meeting with concerned nations on October 1, 2009 (the so-called P-5 plus one, consisting of the United States, United Kingdom, France, Russia, China, and Germany), Iran agreed to a late October IAEA inspection of the Qom enrichment site and initially appeared positive toward a plan to export most of its low-enriched uranium to other countries to be further enriched to fuel the Tehran Research Reactor. After inspecting the enrichment plant, the IAEA concluded that the plant was in the advanced stage of completion and that Iran's efforts to hide the plant for years heightened IAEA concerns that other nuclear facilities were being hidden.",
      " Russia reportedly mediated with Iran to urge it to accept the research reactor fuel deal. In mid-November 2009, Russia announced that it was further delaying the start-up of the Bushehr reactor, perhaps indicating some Russian pressure on Iran to accept the research reactor fuel deal. On November 18, however, Iran rejected the research reactor fuel deal. In December 2009, Russia rejected international calls for added U.N. sanctions on Iran, with Prime Minister Putin declaring that Russia had no evidence that Iran intended to produce nuclear weapons. Since the early 1990s, Iran and Russia have used the issue of the status of the Caspian Sea to hinder Western oil development efforts.",
      " With Russia's adoption of a more conciliatory stance regarding Caspian seabed development, Iran in 2001 became isolated in still calling for the Sea to be held in common, or alternatively for each of the littoral states to control 20% of the Sea (and perhaps, any assets). In 2007, Iran declined Russia's call for forming a Russia-dominated joint Caspian naval task force, but joined Russia in opposing any naval presence by non-littoral states. Among other recent differences of viewpoint between Iran and Russia, Iran objected to then-President Putin's offer to the United States in June 2007 to make the Gabala radar site in Azerbaijan available for tracking missile launches from Iran.",
      " Some observers suggest that one reason Iran has opposed a settlement of the legal status of the Caspian Sea has been its opposition to the construction of trans-Caspian oil and gas pipelines from Kazakhstan and Turkmenistan to Azerbaijan that would not transit Iranian territory. While Russia also opposes such pipelines, it has joined other littoral states in calling on Iran to resolve the legal status of the sea. Kazakh President Nursultan Nazarbayav has urged Iran to agree to a median-line delineation of Caspian Sea borders rather than demand territorial concessions (Kazakhstan claims the largest area of seabed), and dangles prospects for energy pipelines through Iran and enhanced trade as incentives to an agreement.",
      " Turkmenistan may seek to settle on sea borders as part of its seemingly increased interest in a possible trans-Caspian gas pipeline. In October 2009, Iran lodged strong diplomatic protests following a meeting between the littoral states on energy cooperation that excluded it. Iranian Foreign Minister Manuchehr Mottaki warned the littoral states that \"before the final decision on the legal regime of the Caspian Sea is made, Iran will not permit the exploration and exploitation of energy sources in the 20 percent section belonging to other countries.\" This statement was viewed by observers as referring to future energy development, since all the littoral states except Iran have offshore energy projects underway.",
      " Economic and Security Concerns Iran maintains bilateral trade with each of its Caspian neighbors, but trade with Russia, valued at $4.33 billion in 2008, is more developed than the other relationships. On March 19, 2007, Armenia's then-President Robert Kocharyan and Iranian President Mahmoud Ahmadinejad inaugurated an 88-mile gas pipeline from Tabriz in Iran to Kadjaran in Armenia. Work was completed on the second section of the pipeline, a 123 mile section from Kadjaran to Ararat, in December 2008. The Russian-controlled ArmRosGazprom joint venture built this second section and operates the pipeline.",
      " Initial deliveries reportedly are 10.6-14.1 billion cubic feet of gas per year, with plans for more gas deliveries in future years. Some of this gas will be used to generate electricity for Iran and Georgia, but the remainder eventually may satisfy all Armenia's consumption needs, alleviating its dependence on Russian gas transported via Georgia. Iran has argued for some time that Azerbaijan would most benefit financially by cooperating in building energy pipelines to Iran. At the end of 2005, Azerbaijan began sending up to about 35 million cubic feet of gas per day through a section of Soviet-era pipeline to the Iranian border at Astara in exchange for Iranian gas shipments to Azerbaijan's Nakhichevan exclave.",
      " In November 2009, Azerbaijan and Iran signed an agreement to boost Azerbaijani gas exports. In late March 2009, Azerbaijan's state-owned SOCOR energy firm announced that it was holding talks with Russia's state-controlled Gazprom gas firm on the refurbishment of the gas pipeline from Russia to Astara (including the part now used by Azerbaijan), in order to facilitate a Russian gas swap arrangement with Iran. In October 2009, however, Azerbaijan and Russia signed a gas supply agreement that would use a section of this pipeline, but would reverse its flow to permit exports from Azerbaijan to Russia. Seeking alternatives to pipeline routes through Russia,",
      " in December 1997 Turkmenistan opened the first pipeline from Central Asia to the outside world beyond Russia, a 125-mile gas pipeline linkage to Iran. Turkmenistan provided 282.5 bcf of gas to Iran in 2006 and reportedly a larger amount in 2007. At the end of 2007, however, Turkmenistan suddenly suspended gas shipments, causing hardship in northern Iran. Turkmen demands for higher payments were the main reason for the cut-off. Gas shipments resumed in late April 2008 after Iran agreed to a price boost. In July 2009, the two countries agreed to build a second pipeline to increase gas shipments.",
      " Prospects According to many observers, Iran appears likely to continue to build good relations with the Caspian regional states, and to not permit the export of Islamic extremism to damage correct state-to-state relations. All the Caspian littoral states have pledged not to permit the establishment of airbases that could be used for operations against any other littoral state, and the Collective Security Treaty Organization (to which all Iran's northern neighbors belong except Azerbaijan) forbids the presence of non-member state bases. On other issues, it is possible that Iranian-Azerbaijani relations might become more fragile if civil dissent increases among some ethnic Azerbaijanis in Iran.",
      " According to analyst Mark Katz, Iran and Russia are likely to continue their uneasy \"contentious cooperation\" in regional affairs as long as both countries view the United States as a major opponent. In the wake of the August 2008 Russia-Georgia conflict, several observers suggest that Russia is accelerating its efforts to reduce or eliminate U.S. influence in the wider Caspian region. Greater Russian influence in the region could contribute in the future to greater contention in Russian-Iranian relations over energy routes, regional security, nuclear technology-sharing, and other issues. More broadly, a possibly deteriorating security situation in Afghanistan might contribute to rising cross-border terrorism and trafficking in weapons,",
      " drugs, and weapons of mass destruction in the Caspian region. Issues for Congressional Consideration134 Although the Obama Administration may share many goals of the previous administration on Iran, it also sees the need for new strategies and approaches. The Obama Administration advocated a policy of engagement with Iran to determine the nature of its nuclear program and address other subjects of international concern. While post-election turmoil in Iran delayed these efforts temporarily, the Administration pursued engagement through the P5+1 framework. The first meeting took place on October 1, 2009 and President Obama called it a \"constructive beginning.\" As the talks continued, however, prospects for an agreement appeared to diminish.",
      "  The United States, Israel, and the EU proposed the end of 2009 as a \"firm\" deadline for Iran to demonstrate its willingness to cooperate on the nuclear issue. That deadline has lapsed with no visible progress toward a resolution and the Administration is now working with its P5+1 partners to determine a course of action for 2010. It is widely expected that the group will pursue a fourth round of sanctions through the U.N. Security Council with the goal of targeting the ruling elite in Tehran. U.S. Secretary of State Hillary Clinton said on January 12, 2010 that \"It is clear that there is a relatively small group of decision makers inside Iran\u2026They are in both political and commercial relationships,",
      " and if we can create a sanctions track that targets those who actually make the decisions, we think that is a smarter way to do sanctions. But all that is yet to be decided upon.\" Clinton also said the administration's thinking developed as part of consultations with a wide range of other countries and that the U.S. remains interested in engaging with Iran, even as it considers ways to pressure Tehran through sanctions. Possible Regional Implications Regardless of how they decide to proceed, any actions on the part of the Obama Administration, Congress, or the international community, and any developments in or provocations by Iran, will have implications for U.S. interests in the region as Iran's neighbors react and reevaluate their policies accordingly.",
      " Questions remain about the course of U.S. and international efforts to resolve the issue of Iran's uranium enrichment program: Will the U.N Security Council pass additional sanctions? Will member states enforce those sanctions? Can sanctions be effective to deter Iran from pursuing a nuclear weapons program? How will sanctions affect engagement with Iran and how might they increase or diminish the prospects for a negotiated resolution to Iran's nuclear program? How should the international community evaluate the effectiveness of sanctions? Is there a deadline for sanctions to yield results? What are the options of sanctions and continued engagement fail?  Regardless of the answers to these questions, most analysts agree that sanctions are the logical next step and that if they fail the U.S.",
      " and the international community could be forced to weigh the costs of a preemptive strike against the implications of a nuclear Iran. In any case, the policies pursued by the United States and the international community will continue to affect regional approaches toward Iran, and could have implication for other U.S. and international interests in the Middle East. Of Increased Sanctions While attention in the United States tends to focus on the response of European countries to expanded unilateral sanctions or the likelihood that Russia and China would join an international effort to impose sanctions on Iran, many of Iran's neighbors would also be affected. Iran has strong economic relations and shared economic interests with many of its neighbors that could be complicated by efforts to further isolate it.",
      " It is unclear whether Iran's neighbors would stop trade or forgo plans to cooperate in the area of resource exploitation in the face of international condemnation. The United Arab Emirates (UAE), for example, is among Iran's major gasoline suppliers by virtue of the fact that much of the refined petroleum products that Iran imports transit storage facilities in the UAE en route to Iran. Turkey and Armenia depend on cooperation with Iran to reduce their dependence on Russia for energy resources. Expanded sanctions could force Iran's neighbors to choose between cooperating with the international community and their own economic well-being.  Of a Preemptive Strike Engagement and sanctions are both aimed at alleviating tensions over Iran's nuclear program,",
      " but many also view them as the best hope for preventing a new war in the Middle East. Israeli Prime Minister Binyamin Netanyahu has made it clear that \"all options remain on the table\" for dealing with Iran, including the military option. So far, the Obama Administration has as well. They have also both referred to the end of 2009 as a deadline for Iran to demonstrate its willingness to cooperate with the international community on the nuclear issue. As the deadline fast approaches, Iran's Arab neighbors, the Gulf States in particular, appear nervous, weighing the cost of a regional war against the danger of a nuclear Iran, while calculating the long term political viability of the Iranian regime in light of continuing domestic protests.",
      " Some argue that tension between Iran and Israel could bring Israel and/or the United States and Iran's Arab neighbors closer together, perhaps even to some level of cooperation. Others caution that any Israeli strike could outrage Iran's Arab neighbors, and that the conflict would become regional and factious. The security of U.S. military personnel, facilities, and material in neighboring countries is also of concern to U.S. decision makers and regional leaders. Of a Nuclear Iran Most regional states (with a few noteworthy exceptions) are concerned primarily with avoiding potential conflicts with Iran that could lead to military action or regional instability. Some might even prefer to learn to live with a nuclear Iran than to endure a regional war to prevent one.",
      " The primary concern among policy makers is the potential for a nuclear arms race in the Middle East, which would under undermine regional stability and run counter to the Obama Administration's long term vision of a world without nuclear weapons and its shorter term strategy to reduce the number of strategic warheads and missiles and to end the production of fissile material. U.S. Secretary of State Hillary Clinton's remark about possibly protecting the Gulf states under a \"defense umbrella\" was perceived by some as a tacit acceptance of the prospect of a nuclear Iran. Others saw it as an effort to mitigate the risk of a nuclear arms race\u2014highlighting concerns that some of Iran's neighbors might pursue their own nuclear programs if they become convinced that Iran's nuclear aspirations cannot be checked.",
      " In the interim others have highlighted the dangers of a de facto regional conventional arms race, as Iran's Gulf Arab neighbors take steps to upgrade and expand their military forces as a deterrent and Iraq continues its efforts to reconstitute and reequip its military.\n"
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  {
    "id": 101,
    "question": null,
    "answer": "The budget reconciliation process is an optional procedure that operates as an adjunct to thebudget resolution process established by the Congressional Budget Act of 1974. The chief purposeof the reconciliation process is to enhance Congress's ability to change current law in order to bringrevenue, spending, and debt-limit levels into conformity with the policies of the annual budgetresolution. Reconciliation is a two-stage process. First, reconciliation directives are included in thebudget resolution, instructing the appropriate committees to develop legislation achieving the desiredbudgetary outcomes. If the budget resolution instructs more than one committee in a chamber, thenthe instructed committees submit their legislative recommendations to their respective BudgetCommittees by the deadline prescribed in the budget resolution; the Budget Committees incorporatethem into an omnibus budget reconciliation bill without making any substantive revisions. In caseswhere only one committee has been instructed, the process allows that committee to report itsreconciliation legislation directly to its parent chamber, thus bypassing the Budget Committee. The second step involves consideration of the resultant reconciliation legislation by theHouse and Senate under expedited procedures. Among other things, debate in the Senate on anyreconciliation measure is limited to 20 hours (and 10 hours on a conference report) and amendmentsmust be germane and not include extraneous matter. The House Rules Committee typicallyrecommends a special rule for the consideration of a reconciliation measure in the House that placesrestrictions on debate time and the offering of amendments. As an optional procedure, reconciliation has not been used in every year that thecongressional budget process has been in effect. Beginning with the first use of reconciliation byboth the House and Senate in 1980, however, reconciliation has been used in most years. In threeyears, 1998 (for FY1999), 2002 (for FY2003), and 2004 (for FY2005), the House and Senate did notagree on a budget resolution. Congress has sent the President 19 reconciliation acts over the years;16 were signed into law and three were vetoed (and the vetoes not overriden). Following an introduction that provides an overview of the reconciliation process anddiscusses its historical development, the report explains the process in sections dealing with theunderlying authorities, reconciliation directives in budget resolutions, initial consideration ofreconciliation measures in the House and Senate, resolving House-Senate differences onreconciliation measures, and presidential approval or disapproval of such measures. The text of tworelevant sections of the Congressional Budget Act of 1974 (Sections 310 and 313) is set forth in theappendices, along with a list of other Congressional Research Service products pertaining toreconciliation procedures. This report will be updated as developments warrant.\n",
    "docs": [
      "Introduction Overview of the Budget Reconciliation Process The Congressional Budget Act of 1974 established the congressional budget process. (1) Under the act, the House andSenate are required to adopt at least one budget resolution each year. (2) The budget resolution, whichtakes the form of a concurrent resolution and is not sent to the President for his approval or veto,serves as a congressional statement in broad terms regarding the appropriate revenue, spending, anddebt-limit policies, as well as a guide to the subsequent consideration of legislation implementingsuch policies at agency and programmatic levels. Budget resolution policies are enforced througha variety of mechanisms, including points of order.",
      " (3) The House and Senate Budget Committees, which were createdby the 1974 act, exercise exclusive jurisdiction over budget resolutions and are responsible formonitoring their enforcement. In developing a budget resolution, the House and Senate Budget Committees use varioussources of budgetary information and analysis, including baseline budget projections of revenue,spending, and the deficit or surplus prepared by the Congressional Budget Office (CBO). A budgetresolution typically reflects many different assumptions regarding legislative action expected tooccur during a session that would cause revenue and spending levels to be changed from baselineamounts. Most revenue and direct spending, (4) however, occurs automatically each year under permanent law;",
      "therefore, if the committees with jurisdiction over the revenue and direct spending programs do notreport legislation to carry out the budget resolution policies by amending existing law, revenue anddirect spending for these programs likely will continue without change. The budget reconciliation process is an optional procedure that operates as an adjunct to thebudget resolution process. The chief purpose of the reconciliation process is to enhance Congress'sability to change current law in order to bring revenue, spending, and debt-limit levels intoconformity with the policies of the budget resolution. Accordingly, reconciliation can be a potentbudget enforcement tool for a large portion of the budget. Reconciliation is a two-stage process.",
      " First, reconciliation instructions are included in thebudget resolution, directing the appropriate committees to develop legislation achieving the desiredbudgetary outcomes. If the budget resolution instructs more than one committee in a chamber, thenthe instructed committees submit their legislative recommendations to their respective BudgetCommittees by the deadline prescribed in the budget resolution; the Budget Committees incorporatethem into an omnibus budget reconciliation bill without making any substantive revisions. (5)  The second step involves consideration of the resultant reconciliation legislation by theHouse and Senate under expedited procedures. Among other things, debate in the Senate on anyreconciliation measure is limited to 20 hours (and 10 hours on a conference report)",
      " and amendmentsmust be germane and not include extraneous matter. The House Rules Committee typicallyrecommends a special rule for the consideration of a reconciliation measure in the House that placesrestrictions on debate time and the offering of amendments. In cases where only one committee has been instructed, the process allows that committeeto report its reconciliation legislation directly to its parent chamber, thus bypassing the BudgetCommittee. In some years, budget resolutions included reconciliation instructions that afforded theHouse and Senate the option of considering two or more different reconciliation bills. Once thereconciliation legislation called for in the budget resolution has been approved or vetoed by thePresident, the process is concluded;",
      " Congress cannot develop another reconciliation bill in the wakeof a veto without first adopting another budget resolution containing reconciliation instructions. As an optional procedure, reconciliation has not been used in every year that thecongressional budget process has been in effect. Beginning with the first use of reconciliation byboth the House and Senate in 1980, however, reconciliation has been used in most years. (In threeyears, 1998 (for FY1999), 2002 (for FY2003), and 2004 (for FY2005), the House and Senate did notagree on a budget resolution.) Congress has sent the President 19 reconciliation acts over the years;",
      "16 were signed into law and three were vetoed (and the vetoes not overriden). Table 1 provides alist of these 19 reconciliation acts. Not every reconciliation measure considered by one chamber has been considered by theother chamber, or been regarded as a reconciliation measure when considered by the other chamber. In 2000, for example, the House considered and passed several reconciliation measures, but theywere not considered by the Senate. (6)  In 1976, the Senate considered a House-passed revenue bill under reconciliation procedures,although the measure had not been considered as a reconciliation bill in the House; the bill later wasvetoed.",
      " (7) Conversely, in1984, the House and Senate agreed to deficit-reduction legislation that had been considered as areconciliation bill by the House but not the Senate; the bill, the Deficit Reduction Act of 1984, wassigned into law by President Ronald Reagan ( P.L. 98-369 ) but was not designated as a reconciliationmeasure. Historical Development The budget reconciliation process reflects a complex set of rules, procedures, and practicesemployed by the House and Senate. Like other complex processes of the House and Senate, suchas the annual appropriations process, the reconciliation process has been marked by significantchange over time. The House and Senate have adapted reconciliation procedures to fit changingpolitical and budgetary circumstances.",
      "  Table 1. Reconciliation Resolutions and Resultant ReconciliationActs: FY1981-FY2005  Source : Prepared by the Congressional Research Service. The framers of the Congressional Budget Act of 1974 anticipated that changes might be madefrom time to time in the budget resolution and reconciliation processes that it established. In aneffort to provide limited procedural flexibility, the act contains a provision referred to as the \"elasticclause.\" Originally framed as Section 301(b)(2), the elastic clause authorized the House and Senateto include in a budget resolution, at their discretion, \"any other procedure which is consideredappropriate to carry out the purposes of this Act.\" The clause later was redesignated as Section301(b)(4)",
      " and revised to read: The concurrent resolution on the budget may--... (4) set forth such other matters, and require such other procedures, relating to the budget, as maybe appropriate to carry out the purposes of this Act.  The House and Senate have used authority under the elastic clause to modify reconciliationprocedures over time in many significant ways, including advancing the use of reconciliation to thespring budget resolution and extending the reconciliation time frame from one year to multiple years. While some innovations in reconciliation procedure were dropped, others persisted and eventuallywere incorporated into the 1974 act as required elements of reconciliation procedure. Two of the most significant changes in reconciliation procedure involved advancing its useto the spring budget resolution and extending its time frame from one year to multiple years(paralleling the changes in budget resolution scheduling and time frame). As originally framed,",
      " the1974 act required the adoption of two budget resolutions each year. The first budget resolution, tobe adopted in the spring, set advisory budget levels for the upcoming fiscal year. The second budgetresolution, to be adopted on September 15, just before the start of the new fiscal year on October 1,set binding budget levels for the year. Reconciliation was established as an adjunct to the adoptionof the second budget resolution. Congress and the President could use reconciliation procedures toquickly make any adjustments in existing law or pending legislation that were required to achievebudget policies as they changed between the adoption of the spring and fall budget resolutions. Action on any required reconciliation legislation was expected to be completed by September 25.",
      " In the early 1980s, the House and Senate abandoned the practice of adopting a second budgetresolution, choosing instead to adopt a single budget resolution in the spring of each year (althoughthe schedule often slipped, sometimes markedly). This change in practice formally was incorporatedinto the 1974 act by the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177 ; December 12, 1985; 99 Stat. 1037-1101). The growing prominence of the spring budget resolution was indicated by the decision in1980 to use it to initiate reconciliation procedures for FY1981.",
      " Reconciliation procedures were usedagain the following year as an adjunct to the adoption of the FY1982 budget resolution in the spring,but the budget resolution and reconciliation time frame was extended to three years,FY1982-FY1984 (although figures for the latter two years were considered to be \"planning\" levels). These changes occurred for several reasons, including the belief that an advancement in thereconciliation schedule was needed to allow committees more time to develop their reconciliationrecommendations, and to allow the House and Senate more time to consider them on the floor andreconcile their differences in conference, and that an extended time frame would promote moreeffective and lasting changes in budgetary policy while discouraging evasions of enforcement.",
      " In addition to the changes made with respect to the timing and scheduling of reconciliation,the 1974 act has been amended to bar in the Senate the inclusion of extraneous matter inreconciliation legislation (see later discussion of Section 313 of the act, known as the \"Byrd rule\"). Although Section 313 operates as a rule of the Senate, it has also dramatically affected thedevelopment of reconciliation legislation in the House and, at times, been a source of frictionbetween the two chambers. Other significant changes in reconciliation practice have derived from the changing politicaland budgetary environment, or changes in precedent, and have not relied upon the elastic clause.",
      " Initial actions under reconciliation, for example, focused on deficit-reduction efforts. Consequently,the procedures were employed to achieve spending reductions and revenue increases on a net basis. In the latter part of the 1990s, particularly when large surpluses emerged in the federal budget forthe first time in decades, the focus of reconciliation action was shifted to reducing revenues, whichcontinued into the 2000s. Most recently, for FY2006, reconciliation directives entail reductions inboth revenues and spending. Underlying Authorities of the Reconciliation Process The principal authorities underlying the reconciliation process are set forth in two keysections of Title III (\"Congressional Budget Process\") of the Congressional Budget Act of 1974.",
      " Section 310 (2 U.S.C. 641) establishes the basic reconciliation procedures, and Section 313 (2U.S.C. 644) establishes a Senate rule aimed at preventing the inclusion of extraneous matter inreconciliation legislation. The text of Section 310 and Section 313 is provided in Appendix A and Appendix B, respectively. In addition, other provisions in Title III have a bearing on the reconciliation process. Section300 (2. U.S.C. 631), for example, lays down the timetable of the congressional budget process,indicating that Congress should complete action on any required reconciliation legislation by June15 during a session.",
      " Section 301 (2 U.S.C. 632) contains a provision authorizing the inclusion in a budgetresolution of reconciliation directives (in subsection (b)(2)), a deferred enrollment procedure to usedin connection with reconciliation (in subsection (b)(3)), and other appropriate \"matters\" and\"procedures\" under the elastic clause (in subsection (b)(4)). Section 305 (2 U.S.C. 636) sets forth, in subsection (b), Senate procedures for theconsideration of budget resolutions, which, by virtue of a reference in Section 310(e), also apply tothe consideration of reconciliation measures (except for the time limit on debate). Points of order pertaining to the enforcement of timing requirements,",
      " substantive budgetresolution policies, and the jurisdiction of the House and Senate Budget Committees, that couldapply to the consideration of reconciliation measures, are found in Sections 302, 303, and 311. Additional points of order that could apply to reconciliation measures, dealing with budgetarylegislation not subject to appropriations and unfunded mandates, are set forth in Title IV of the act. Finally, Section 904 (2 U.S.C. 621 note) imposes a three-fifths vote requirement on waivers (andappeals of the ruling of the chair) with respect to certain points of order under the act. Section 310 of the Congressional Budget Act of 1974 Section 310(a)",
      " of the 1974 act provides for the inclusion of reconciliation directives in abudget resolution. The directives shall, \"to the extent necessary to effectuate the provisions andrequirements of such resolution,\" specify the total amounts by which spending, revenues, the publicdebt limit, or a combination of these elements are to be changed. The directives take the form ofinstructions to each appropriate committee to make changes in the laws under its jurisdiction toachieve the specified budgetary results. Under Section 310(b), when only one committee in the House or Senate is subject toreconciliation directives, it reports its recommendations directly to its chamber. When two or morecommittees in the House or Senate receive reconciliation instructions,",
      " each committee submits itsrecommendations to its respective Budget Committee. The Budget Committee incorporates therecommendations of all of the instructed committees, \"without any substantive revision,\" into anomnibus measure, which it then reports to its chamber. The subsection refers to a reconciliation resolution, which is a concurrent resolution directingthe Clerk of the House or the Secretary of the Senate to make changes in legislation that has not yetbeen enrolled. A reconciliation resolution is intended to be used with a \"deferred enrollment\"procedure (see discussion below), but the House and Senate instead have always used reconciliationbills. Section 310(c), known informally as the \"fungibility rule,\" grants some flexibility tocommittees subject to reconciliation directives pertaining to both spending and revenues.",
      " Thisprovision applies principally to the House Ways and Means Committee and the Senate FinanceCommittee because they exercise jurisdiction in their chambers over tax legislation generally; someother committees exercise jurisdiction over matters, such as certain fees, involving budgetarytransactions that are treated as revenues. In essence, the fungibility rule deems either committee tobe in compliance with its reconciliation directives if its recommended legislation does not causeeither the spending changes or the revenue changes to exceed or fall below its instruction by morethan 20% of the sum of the two types of changes, and the total amount of changes recommended isnot less than the total amount of changes that were directed.",
      " Section 310(d) imposes a requirement in the House and Senate that amendments be deficitneutral, but suspends the requirement if a declaration of war is in effect. The subsection providesthat, in the Senate, a motion to strike always is in order, notwithstanding the deficit-neutralityrequirement. Further, the subsection authorizes the House Rules Committee to make in orderamendments to achieve compliance with the reconciliation instructions in the event one or more ofthe instructed committees fail to submit recommendations. Senate procedures for the consideration of budget resolutions are made applicable to theconsideration of reconciliation measures by Section 310(e), except that the 50-hour debate limitapplicable to budget resolutions is reduced to a 20-hour limit for reconciliation bills.",
      " Section 310(f) is intended to enforce in the House the June 15 deadline for completing actionon reconciliation legislation (as indicated in the timetable in Section 300). It does so by barring theconsideration in July of an adjournment resolution providing for the traditional August recess if theHouse has not completed action. There is no comparable provision in the act for the Senate. Finally, Section 310(g) prohibits the consideration of any reconciliation measure, includinga special reconciliation measure under Section 258C of the Balanced Budget and Emergency DeficitControl Act of 1985 (see discussion below), that contains recommendations with respect to theSocial Security program.",
      " Section 313 of the Congressional Budget Act of 1974 Section 313 of the 1974 act is informally known as the \"Byrd rule,\" after its chief sponsor,Senator Robert C. Byrd. The Byrd rule originated on October 24, 1985, as Amendment No. 878 (asmodified) to S. 1730, the Consolidated Omnibus Budget Reconciliation Act (COBRA) of1985. The Senate adopted the amendment by a vote of 96-0. In this form, the Byrd rule applied toinitial Senate consideration of reconciliation measures, but a short while later its coverage wasextended to conference reports.",
      " Senator Byrd explained that the basic purposes of the amendment were to protect theeffectiveness of the reconciliation process (by excluding extraneous matter that often provokedcontroversy without aiding deficit reduction efforts) and to preserve the deliberative character of theSenate (by excluding from consideration under expedited procedures legislative matters not centralto deficit reduction that should be debated under regular procedures). The rule achieves its purposes by defining six categories of extraneous matter inreconciliation legislation, and several exceptions thereto, and providing points of order against anysuch matter. The Byrd rule, and its operation, is discussed in more detail in the section of this reportdealing with \"Initial Consideration in the Senate.\" During the first five years that the Byrd rule was in effect,",
      " from late 1985 until late 1990, itconsisted of two separate components: (1) a provision in statute applying to initial Senateconsideration of reconciliation measures; and (2) a Senate resolution extending application ofportions of the statutory provision to conference reports and amendments between the two chambers. Several modifications were made to the Byrd rule in 1986 and 1987, including extending itsexpiration date from January 2, 1987, to January 2, 1988, and then to September 30, 1992, but thetwo separate components of the rule were preserved. In 1990,",
      " these components were mergedtogether and made permanent when they were incorporated into the 1974 act as Section 313. Therehave been no further changes in the Byrd rule since 1990. Procedural Provisions in Budget Resolutions Pursuant to authority granted in Section 301(b) of the 1974 act, including the elastic clause,the House and Senate have, on occasion, included procedural provisions in budget resolutions thataffect the reconciliation process. Several examples are discussed below. In 1980, the second budget resolution for FY1981 contained a bar against House or Senateconsideration of a resolution providing for sine die adjournment of either chamber \"unless action hasbeen completed on H.R.",
      " 7765, the Omnibus Reconciliation Act of 1980,\" which had beendeveloped in response to reconciliation directives in the first budget resolution for FY1981. (8)  In 1987, a provision in the FY1988 budget resolution declared that any reconciliationrecommendations developed by the House Ways and Means Committee and the Senate FinanceCommittee pertaining to the establishment of a special Deficit Reduction Account would not beconsidered extraneous matter under the Byrd rule. (9)  Most recently, the FY2006 budget resolution included a procedural provision applying athree-fifths vote requirement to waivers and appeals of points of order dealing with unfundedmandates and the consideration of certain measures prior to passage of a budget resolution,",
      " butprovided that the change not apply in the case of reconciliation legislation. (10)  In 1993, the Senate established a \"pay-as-you-go\" (PAYGO) rule as part of the FY1994budget resolution. The rule, which has been modified several times and extended through September30, 1998, was not part of the statutory PAYGO requirement in effect from FY1992-FY2002 (seediscussion below). The Senate's PAYGO rule generally prohibits the consideration of direct spending andrevenue legislation that is projected to increase (or cause) an on-budget deficit in any one of threetime periods:",
      " the first year, the first five years, and the second five years covered by the mostrecently adopted budget resolution. Any increase in direct spending or reduction in revenuesresulting from such legislation must be offset by an equivalent amount of direct spending cuts, taxincreases, or a combination of the two. Without an offset, such legislation would require the approvalof at least 60 Senators to waive the rule and be considered on the Senate floor. An exception is madefor revenue or spending legislation assumed in the budget resolution levels. (11)  Prior budget resolutions containing reconciliation directives explicitly exemptedreconciliation legislation from the Senate's PAYGO rule;",
      " reconciliation legislation also wasexempted by virtue of being assumed in budget resolution levels. Section 301(b)(3) of the 1974 act authorizes an optional \"deferred enrollment\" procedure.Under the procedure, if reconciliation is triggered by the budget resolution, all or certain spendingbills (i.e., bills providing new budget authority or new entitlement authority) for the upcoming fiscalyear that have passed the House and Senate may be held at the desk rather than being enrolled. Thisaffords the House and Senate an opportunity, through a reconciliation resolution, to direct the Clerkof the House or the Secretary of the Senate to make changes in the enrollment of pending legislation,rather than having to use a reconciliation bill to make the changes in existing law.",
      " Once action hasbeen completed on the reconciliation resolution, and any necessary changes are made in theenrollment of the spending measures held at the desk, they are cleared for the President. Several budget resolutions in the early 1980s contained deferred enrollment provisions, butthe release of the deferred measures was made contingent upon the adoption of the then-requiredsecond budget resolution, not upon the passage of reconciliation legislation. Other Authorities Key elements of the methodology used to prepare budget baselines and score budgetarylegislation are laid out in Section 257 of the Balanced Budget and Emergency Deficit Control Actof 1985. Other scoring practices that underpin the congressional budget process,",
      " includingreconciliation procedures, are rooted partly in scorekeeping guidelines that were included in the jointexplanatory statements accompanying two reconciliation acts -- the Omnibus Budget ReconciliationAct of 1990 and the Balanced Budget Act of 1997. (12)  One of the guidelines, number 3, specifically refers to the treatment of reconciliationlegislation under certain circumstances. Guideline number 3 requires that changes in direct spending(i.e., entitlement and other mandatory spending, including offsetting receipts), made in annualappropriations acts, be scored against the Appropriations Committees' Section 302(b) allocations ofspending made under the budget resolution.",
      " The guideline states, in part, that \"direct spendingsavings that are included in both an appropriations bill and a reconciliation bill will be scored to thereconciliation bill and not to the appropriations bill.\" Section 258C (2 U.S.C. 907d) of the Balanced Budget and Emergency Deficit Control Actof 1985 (Title II of P.L. 99-177, as amended) established a special reconciliation process in theSenate, but not the House, tied initially to statutory deficit targets, and subsequently, to a statutorypay-as-you-go (PAYGO) requirement. Violations of the deficit targets and PAYGO requirementwere to be enforced by \"sequestration,\" a process entailing the automatic imposition of largelyacross-the-board spending cuts.",
      " Section 258C, which was never invoked, provided for the consideration of reconciliationlegislation in the fall in order to achieve deficit reductions that would obviate the need for anexpected sequester under the PAYGO requirement (or, previously, the deficit targets). The PAYGOrequirement effectively expired at the end of the 107th Congress. (13) All of the reconciliationmeasures considered by the Senate thus far have originated pursuant to Section 310 of the 1974 act. (Sections 310 and 313 of the 1974 act currently reference the reconciliation process under Section258C of the 1985 act.) Reconciliation Directives in Budget Resolutions Features of Reconciliation Directives The fundamental purpose of reconciliation directives is to compel committees to developlegislation to achieve certain goals reflected in the budget resolution that require changes in existinglaw (or pending legislation)",
      " to be realized. A directive to a committee represents an expression ofthe intent of the parent chamber that the specified legislative action be carried out. Reconciliation directives, and the budget resolution policies that underpin them, areexpressed in terms of highly aggregated dollar amounts and do not determine the budgetaryoutcomes for individual accounts, programs, or activities. Decisions at these levels remain theprerogative of the committees with jurisdiction over spending and revenue legislation. In a few rareinstances, however, reconciliation directives have been couched in programmatic terms. In theFY1981 budget resolution, for example, the Senate Appropriations Committee was instructed to\"",
      "limit appropriations for fiscal year 1981 subsidies to the U.S. Postal Service\" to a particular levelas part of the reconciliation directives. (14) In response to a parliamentary inquiry on May 19, 1982,however, the Senate Presiding Officer advised that reconciliation directives may not specify that theinstructed committee must achieve its changes from certain types of programs or in specificways. (15)  Nonetheless, the Budget Committees may indicate particular options or assumptions thatwould allow an instructed committee to meet its spending or revenue reconciliation directives, partlyto garner credibility and support for the budget resolution and partly to influence the subsequentpolicy debates.",
      " A reconciliation directive to a committee usually consists of several components: (1) anidentification of the House or Senate committee being instructed; (2) the type of budgetary changesthat are intended to be achieved by changes in laws, bills, and resolutions within the instructedcommittee's jurisdiction, together with specified amounts; (3) the fiscal year periods to which thechanges apply; and (4) a deadline by which the instructed committees must submit theirrecommendations to their respective Budget Committee, or, if singly instructed, report them to theirchamber. Each dollar amount of change for a fiscal year time period is regarded as a separatedirective.",
      " A committee instructed to achieve savings in direct spending outlays of $100 million forthe first fiscal year and $800 million for a five-fiscal year period, for example, is considered to besubject to two different directives. Given that the language authorizing reconciliation directives refers to \"changes,\" suchdirectives may properly recommend both increases and decreases in revenues, spending, and the debtlimit (see further discussion below). Types of Directives. Section 310(a) of the 1974act enumerates three different types of budgetary changes that reconciliation directives may require: (1) spending, in the form of new budget authority for the budget year and thereafter,",
      " budget authorityinitially provided for prior fiscal years, new entitlement authority, and credit authority; (2) revenues ;(3) and the statutory limit on the public debt. In addition, Section 310(a) provides that reconciliationdirectives may combine any of the three types of changes, including \"a direction to achieve deficitreduction\" (representing a combination of spending reductions and revenue increases). The type of budgetary changes included in the reconciliation directives determines the typeof legislation that will result. After the first several years of experience with reconciliation, spendingdirectives have applied almost exclusively to direct spending (also known as mandatory spending),rather than discretionary spending.",
      " Direct spending, which is under the jurisdiction of the legislativecommittees of the House and Senate, funds entitlements and other mandatory programs (e.g.,Medicare, unemployment compensation, federal employee retirement), largely on a permanent basis. Discretionary spending, which mainly funds the ongoing operations of federal agencies, falls underthe jurisdiction of the House and Senate Appropriations Committees and is provided in annualappropriations acts. Under current practice, reconciliation directives for direct spending generally refer to changesin outlay levels. (16) While such directives usually specify the dollar amounts by which outlay levels are to be changed,for a time the House Budget Committee specified the total outlay level that should occur after therequired changes had been made.",
      " (Therefore, the amount of changes involved had to be calculatedby comparing baseline levels to the levels expected to occur following reconciliation.) In the courseof complying with a directive to change spending, a committee may recommend changes inoffsetting collections or offsetting receipts within its jurisdiction; offsetting collections, whichinclude many user fees, are treated as negative spending. Reconciliation directives have sometimes been used to affect discretionary spending levels,although this is not the usual practice. Initially, reconciliation was used to directly change the levelsof discretionary spending. The House Appropriations Committee (in the FY1981 budget resolution)and the Senate Appropriations Committee (in the FY1981 and FY1982 budget resolutions)",
      " wereinstructed to reduce spending for the fiscal year already in progress. In order to comply with theseinstructions, the committees recommended rescissions of annual appropriations that already had beenenacted. (The rescissions were considered separately from the reconciliation legislation for thoseyears.) A more expansive, and indirect, attempt to reduce discretionary spending through thereconciliation process occurred in 1981. The FY1982 budget resolution included reconciliationdirectives that, in part, required legislative committees to reduce authorizations of appropriations. The intent behind this approach was to set in place reduced authorization levels over a three-yearperiod that would reduce spending levels in the annual appropriations acts considered in each ofthose years.",
      " This approach was widely regarded as having unnecessarily complicated thereconciliation legislation and strained relationships between the authorizing committees and theAppropriations Committees. The House and Senate Budget Committees have not returned to thisapproach, except occasionally on a much more selective basis. In the Senate, such languageprobably would be judged extraneous under the Byrd rule, on the ground that it does not affectoutlays. Due to the dispersal of spending jurisdiction to almost every standing committee of theHouse and Senate, nearly every one of them has been involved in reconciliation at least once. Directives to change revenue levels have been less complicated generally in that they havenot differentiated between different sources of revenue,",
      " such as individual incomes taxes, corporateincome taxes, or excise taxes. On occasion, revenue reconciliation directives have beenaccompanied by directives to change outlays because some tax-related changes, such as increasesin refundable tax credits, are scored as outlays. (Conversely, in some instances changes in spendingprograms may affect revenue levels.) As mentioned previously, reconciliation directives may also instruct a committee to achievea level of \"deficit reduction,\" reflecting a combination of spending reductions and revenues increasesat the committee's discretion. In the reconciliation process, compliance with reconciliation directives is judged on a netbasis, or on the basis of the \"bottom line.\" Consequently,",
      " directives to reduce spending or increaserevenues in order to achieve deficit reduction generally may include \"sweeteners\" that increasespending and reduce revenues, so long as the required amount of deficit reduction is accomplished. As practiced by the House and Senate, a reconciliation instruction to reduce spending, orincrease revenues, includes a target that is a minimum amount of spending reduction, or revenueincrease (a floor). Similarly, a reconciliation instruction to increase spending, or reduce revenues,includes a target that is a maximum amount of spending increase, or revenue reduction (a ceiling). For years, the public debt limit has been codified in Section 3101(b)",
      " of Title 31, UnitedStates Code. Periodic adjustments in the debt limit take the form of amendments to 31 U.S.C.3101(b), usually by striking the current dollar limitation and inserting a new one. While mostadjustments to the debt limit have been increases, in some instances the debt limit has been reducedor extended at its current level for a specified interval. For example, P.L. 455 of the 79th Congress(60 Stat. 316; June 26, 1946) reduced the debt limit from $300 billion to $275 billion as budgetsurpluses reemerged following World War II.",
      " While the debt limit has been adjusted inreconciliation legislation, in most instances Congress employs another type of measure for thispurpose. The House Ways and Means Committee and the Senate Finance Committee exercisejurisdiction over the debt limit. (17)  From time to time, budget resolutions have included contingent reconciliation directives. Under a contingent directive, the amount of changes in spending or revenue that a committee isdirected to achieve may be adjusted at a later time upon the happening of a contingency. TheFY1998 budget resolution, for example, provided for an adjustment in the Senate FinanceCommittee's reconciliation directives (as well as the committee's spending allocations and otherbudget levels)",
      " to accommodate a five-year children's health initiative of up to $16 billion. Theadjustments were made contingent upon the committee reporting reconciliation legislation with anexcess of outlay savings so that the additional spending on the children's health initiative would bedeficit neutral. (18)  In at least one instance, reconciliation directives to a committee became effective (withoutany adjustment) upon the happening of a contingency. The FY1996 budget resolution containeddirectives to the Senate Finance Committee to reduce revenues by $245 billion over seven yearsupon the certification by the Congressional Budget Office that spending reconciliation legislationwould lead to a balanced budget by FY2002.",
      " Under the budget resolution, if CBO did not certifya balanced budget, the revenue reconciliation directives to the committee would not becomeeffective, and the revenue reductions could not be included in the final reconciliation bill. (19)  Multiple Directives The House and Senate typically use multiple directives, in terms of the number of committeesinstructed and the types of budgetary changes designated, when initiating the reconciliation process. Whenever the House and Senate included spending reconciliation directives in a budget resolution,more than one House and Senate committee received them, except for the FY2002 and FY2004budget resolutions; in these two cases, the House Ways and Means Committee and the SenateFinance Committee received instructions regarding outlays in order to accommodate the outlayeffects of certain changes in revenue laws.",
      " The number of House and Senate committees given spending reconciliation directives in abudget resolution ranged from one, for both chambers (both in the FY2002 and FY2004 budgetresolutions), to 14 for the Senate and 15 for the House (both in the FY1982 budget resolution). Reconciliation directives to change the statutory limit on the public debt are made only to asingle committee in each chamber, because the House Ways and Means Committee and the SenateFinance Committee exercise sole jurisdiction in their chambers over this matter. Whilereconciliation directives to change revenue levels principally involve the Ways and MeansCommittee and the Finance Committee, other committees sometimes receive such instructions aswell.",
      " As stated previously, the Ways and Means Committee and Finance Committee exercisejurisdiction in their chambers over the tax code and revenues generally, but some other committeesexercise jurisdiction over matters, such as certain fees, involving budgetary transactions that aretreated as revenues. When reconciliation directives require different types of budgetary changes, the committeerecommendations affecting revenues, spending, or the debt limit, as appropriate, may be incorporatedinto a single omnibus measure or considered as separate measures, depending on how the directivesare fashioned. In the FY1998 budget resolution, for example, the Senate Finance Committeereceived a two-part reconciliation directive in Section 104(a). Section 104(a)(5)(A)",
      " instructed thecommittee to reduce outlays (by $40.911 billion for FY2002 and $100.646 billion forFY1998-FY2002) and Section 104(a)(5)(B) instructed the committee to increase the statutory limiton the public debt (to not more than $5.950 trillion). Seven other Senate committees received aninstruction to reduce spending (or the deficit) in Section 104(a). In a separate provision, Section104(b), the Finance Committee was instructed to reduce revenues (by not more than $20.5 billionin FY2002 and $85 billion for FY1998-FY2002). Accordingly,",
      " in response to its directives, theFinance Committee could develop reconciliation legislation reducing spending and raising the debtlimit, for inclusion in an omnibus bill, and reducing revenues in a separate bill. Under current procedures in the Senate, only one reconciliation measure of each type ofbudgetary change is allowed. Thus, a budget resolution may create as many as three reconciliationbills -- one for spending, one for revenues, and one for the debt limit. The reconciliation directives,however, may not lead to two reconciliation bills for spending, or two for revenues, or two for thedebt limit. In the case of the FY2006 budget resolution, for example,",
      " the directives to eight Senatecommittees to reduce direct spending, and to the Senate Finance Committee to reduce revenues andincrease the debt limit, are expected to result, at most, in three reconciliation measures -- a spendingbill, a revenue bill, and a debt-limit bill. House practices in this regard allow for greater latitude in the development of multiplereconciliation measures. Reconciliation measures may mix together different types of reconciliationchanges, and more than one reconciliation measure involving a particular type of budgetary changemay be provided for under the reconciliation directives. The FY1997 budget resolution, forexample, provided for the potential consideration of three separate reconciliation measures in theHouse,",
      " including a \"Welfare and Medicaid Reform and Tax Relief\" act, a \"Medicare Preservation\"act, and a \"Tax and Miscellaneous Direct Spending Reforms\" act. As explained by the HouseBudget Committee: The House conferees note that themulti-reconciliation process provides maximum flexibility to achieve the changes in spending andthe tax relief assumed in this conference report. For example, any of the spending or revenuechanges assumed in the first bill could -- if not enacted -- be achieved in the third bill. (20) Given that the Senate's flexibility in packaging reconciliation legislation is relatively moreconstrained under its current practices compared with past ones,",
      " the House is more constrained inits choice of reconciliation packaging as well. Consequently, a reconciliation procedure in the Houseas flexible as the one proposed for FY1997 may no longer be practicable. Impact of Directives on the Deficit or Surplus During the period covering FY1981 through FY2006, the House and Senate adopted 18budget resolutions containing reconciliation directives. (The budget resolutions for FY1985,FY1989, FY1992, FY1993, and FY1995 did not include reconciliation directives; also, the Houseand Senate did not reach final agreement on budget resolutions for FY1999, FY2003,",
      " and FY2005.) The reconciliation directives included in budget resolutions through FY1998 were intended to reducethe deficit in the net; the directives in budget resolutions since then (through FY2006), while partof an overall budget resolution policy to improve the budgetary posture over time, on their own termsproposed reducing the surplus or increasing the deficit in the net (by virtue of revenue reductions). The reconciliation directives to House and Senate committees during this period generallywere of comparable scope, although there were some significant differences in particular years. Table 2 and Table 3 present information on the reconciliation directives to House committeesduring this period to illustrate the relationship taken generally by the House and Senate betweenreconciliation and deficit reduction.",
      " As Table 2 shows, all 18 of the budget resolutions recommended policies that assumed animprovement in budgetary posture from the budget year to the final fiscal year covered, either bychanging a deficit into a surplus (seven instances), reducing a deficit to a lower level (eightinstances), or increasing a surplus to a higher level (three instances). (21) For example, over afive-year time frame, the budget resolution for FY1991 called for a deficit of $64 billion in the firstyear and surplus of $156 billion in the final year; the budget resolution for FY1994 called for adeficit of $254 billion in the first year and a deficit of $202 billion in the final year;",
      " and the budgetresolution for FY2001 called for a surplus of $170 billion in the first year and a surplus of $232billion in the final year. The reconciliation directives in the first 10 budget resolutions listed in Table 2, coveringthrough FY1981-FY1994, all recommended net deficit reduction in the aggregate, ranging from $12billion (in the FY1981 budget resolution) to $343 billion (in the FY1994 budget resolution). Thereconciliation directives included revenue increases, spending decreases (and other changes), or acombination thereof intended to eliminate or reduce the deficit by the final year. With regard to the next three budget resolutions (for FY1996,",
      " FY1997, and FY1998), precisedata are not available because the reconciliation directives to House committees were not expressedas amounts of change from baseline levels, but rather were expressed as the levels of revenue anddirect spending outlays that were to result from the changes. The reconciliation directives in thesethree budget resolutions, however, generally were regarded as containing revenue reductions thatwere expected to be more than offset by reductions in direct spending. (22)  The remaining five sets of reconciliation directives (in the FY2000-FY2002, FY2004, andFY2006 budget resolutions), all recommended net reductions in the surplus/increases in the deficit,ranging from $35 billion (over six years)",
      " to $1.350 trillion (over 11 years). The budget resolutions for FY2000-FY2002 included directives that recommended largerevenue reductions (and a $100 billion increase in outlays in the FY2002 budget resolution) withoutoffsetting changes. These resolutions recommended allocating a portion of the projected surplusesfor tax cuts; in each case, the estimated final year surplus was larger than estimated for the first year. The FY2004 budget resolution included reconciliation directives that recommended largerevenue reductions (and a $27 billion increase in outlays) without any offsetting changes. Despiteaggregate reductions in the surplus/increases in the deficit through reconciliation of $550 billion over11 years,",
      " covering FY2003-FY2013, the budget resolution envisioned a deficit of $385.0 billion forthe budget year becoming a surplus of $36.8 billion by the final year. The FY2006 budget resolution included reconciliation directives that recommended revenuereductions of $70 billion over five years (FY2006-FY2010) and outlay reductions of $35 billion oversix years (including FY2005) in the context of a decline in the total deficit over the period. Table 3 provides more detailed information on the overall deficit and surplus levels and thereconciliation directives to House committees in the budget resolutions for this period.",
      "  Table 2. Summary of Reconciliation Directives to House Committees and Overall Deficit or Surplus Levelsin BudgetResolutions for FY1981-FY2006 (amounts in $ billions) Sources : conference reports on budget resolutions (see Table 3 for complete listing). a. The budget resolutions for FY1985, FY1989, FY1992, FY1993, and FY1995 did not contain reconciliation directives; also, the House and Senate didnot reach final agreement on budget resolutions for FY1999, FY2003, and FY2005. Details may not add to totals due to rounding. b.",
      " The \"revenue changes\" column reflects reconciliation directives to the House Ways and Means Committee to change revenue levels, and the \"outlay(or deficit reduction) changes\" column reflects reconciliation directives to all House committees to change outlay levels or to achieve deficitreduction, which in some cases could have allowed additional revenue increases beyond those reflected in the preceding column. \"Net decreases(-)\" in the deficit also refers to net increases in the surplus; \"net increases (+)\" in the deficit also refers to net decreases in the surplus. c. Although the text of the budget resolution reflects only the on-budget deficit or surplus (as required by law), tables in the joint explanatory statementaccompanying the conference report usually reflect the total deficit or surplus (which includes the off-budget Social Security trust funds and PostalService Fund). This column presents total deficit or surplus levels,",
      " unless otherwise noted. d. The $343.1 billion in \"outlay (or deficit reduction) changes\" and \"net decreases\" excludes $42.953 billion in reconciled reductions in authorizations. e. Reconciliation directives to House committees in the budget resolutions for FY1996-FY1998 were not expressed as amounts of change from baselinelevels, but rather were expressed as the levels of revenue and direct spending outlays that were to result from the changes. The amounts of revenuereduction expected to occur over the multiyear period, apparently by means of reconciliation, were indicated in the joint explanatory statementaccompanying the conference report for each of the fiscal years involved;",
      " see H.Rept. 104-159, page 89 (for FY1996), H.Rept. 104-612, page 51(for FY1997), and H.Rept. 105-116, page 100 (for FY1998). While the amounts of direct spending reductions in reconciliation directives to Housecommittees were not indicated in the joint explanatory statements, such amounts in reconciliation directives to Senate committees yielded estimatednet savings of $387.1 billion (over seven years) in the FY1996 budget resolution, $228.9 billion (over six years) in the FY1997 budget resolution,and $52.",
      "2 billion (over five years) in the FY1998 budget resolution.  Table 3. Detailed Information on Reconciliation Directives to House Committees and Overall Deficit orSurplus Levelsin Budget Resolutions for FY1981-FY2006 (amounts in $ billions) Sources : FY1981 -- conference report on H.Con.Res. 307, H.Rept. 96-1051 (May 23, 1980), pages 27 and 28. FY1982 -- conference report on H.Con.Res. 115, H.Rept. 97-46 (May 15, 1981), pages 41-",
      "43 and 46.  FY1983 -- conference report on S.Con.Res. 92, H.Rept. 97-614 (June 21, 1982), pages 19 and 29; FY1984 -- conference report on H.Con.Res. 91, H.Rept. 98-248 (June 21, 1983), pages 29, 45, and 46; FY1986 -- conference report on S.Con.Res. 32, H.Rept. 99-249 (August 1, 1985), pages 24, 32, and 33; FY1987 -- conference report on S.Con.Res.",
      " 120, H.Rept. 99-664 (June 26, 1986), pages 20, 30, and 31; FY1988 -- conference report on H.Con.Res. 93, H.Rept. 100-175 (June 22, 1987), pages 23 and 30-32; FY1990 -- conference report on H.Con.Res. 106, H.Rept. 101-50 (May 15, 1989), pages 19, 29, and 30; FY1991 -- conference report on H.Con.Res. 310, H.Rept.",
      " 101-820 (October 7, 1990), pages 21, 26, and 27; FY1994 -- conference report on H.Con.Res. 62, H.Rept. 103-48 (March 31, 1993), pages 38 and 41-43;  FY1996 -- conference report on H.Con.Res. 67, H.Rept. 104-159 (June 26, 1995), pages 44 and 50-51; FY1997 -- conference report on H.Con.Res. 178, H.Rept. 104-612 (June 7,",
      " 1996), pages 56 and 83-84; FY1998 -- conference report on H.Con.Res. 84, H.Rept. 105-116 (June 4, 1997), pages 58, 100, and 104-105;  FY2000 -- conference report on H.Con.Res. 68, H.Rept. 106-91 (April 14, 1999), pages 36, and 61; FY2001 -- conference report on H.Con.Res. 290, H.Rept. 106-577 (April 12, 2000), pages 49 and 66;",
      " FY2002 -- conference report on H.Con.Res. 83, H.Rept. 107-60 (May 8, 2001), pages 48, and 76-77; FY2004 -- conference report on H.Con.Res. 95, H.Rept. 108-71 (April 10, 2003), pages 38 and 102-104; and FY2006 -- conference report on H.Con.Res. 95, H.Rept. 109-62 (April 18, 2005), pages 50 and 68-71. Note : Details may not add to totals due to rounding.",
      " a. The reconciliation directives applied to the budget year (i.e., the fiscal year beginning on October 1 of the calendar year in which the budget resolutionwas considered) and ensuing fiscal years covered by the budget resolution, except that reconciliation directives in budget resolutions for FY1981,FY2002, and FY2004 also applied to the current year (i.e., the fiscal year in progress at the time). b. This column reflects reconciliation directives to the House Ways and Means Committee to change revenue levels. c. This column reflects reconciliation directives to all House committees to change outlay levels or to achieve deficit reduction (which in some cases couldhave allowed additional revenue increases beyond those reflected in the preceding column). d.",
      " \"Net decreases (-)\" in the deficit also refers to net increases in the surplus; \"net increases (+)\" in the deficit also refers to net decreases in the surplus. e. Although the text of the budget resolution reflects only the on-budget deficit or surplus (as required by law), tables in the joint explanatory statementaccompanying the conference report usually reflect the total deficit or surplus (which includes the off-budget Social Security trust funds and PostalService Fund). This column presents total deficit or surplus levels, unless otherwise noted, and does not include any revised deficit or surplusfigures for the current fiscal year. f. In addition to reconciliation directives to House and Senate Committees for FY1981,",
      " the budget resolution included reconciliation directives to theHouse and Senate Appropriations Committees to reduce spending for FY1980. Accordingly, savings of $1.0 billion in outlays from the directivesto the Appropriations Committees are reflected in this figure. g. The $343.1 billion in \"other changes\" and \"net savings\" excludes $42.953 billion in reconciled reductions in authorizations. h. Reconciliation directives to House committees in the budget resolutions for FY1996-FY1998 were not expressed as amounts of change from baselinelevels, but rather were expressed as the levels of revenue and direct spending outlays that were to result from the changes.",
      " The amounts of revenuereduction expected to occur over the multiyear period, apparently by means of reconciliation, were indicated in the joint explanatory statementaccompanying the conference report for each of the fiscal years involved; see H.Rept. 104-159, page 89 (for FY1996), H.Rept. 104-612, page 51(for FY1997), and H.Rept. 105-116, page 100 (for FY1998). While the amounts of direct spending reductions in reconciliation directives to Housecommittees were not indicated in the joint explanatory statements, such amounts in reconciliation directives to Senate committees yielded estimatednet savings of $387.",
      "1 billion (over seven years) in the FY1996 budget resolution, $228.9 billion (over six years) in the FY1997 budget resolution,and $52.2 billion (over five years) in the FY1998 budget resolution. Initial Consideration in the House Four aspects of House action at this stage of the reconciliation process areaddressed in this section: (1) the development of legislative recommendations by theinstructed committees; (2) the preparation of an omnibus measure by the HouseBudget Committee; (3) the special rule providing for the consideration ofreconciliation legislation; and (4) floor consideration of reconciliation legislation.",
      " Development of Legislative Recommendations by the InstructedCommittees Each committee included in the reconciliation directives is instructed torecommend legislative changes to existing law to meet specific budgetary targets bya certain date. The Congressional Budget Act of 1974 does not provide any specialrequirements (other than meeting those specified in the reconciliation directives ina budget resolution) or any guidance as to the procedures committees must follow todevelop their legislative recommendations pursuant to reconciliation directives. Theinstructed committees generally follow the rules and practices of developinglegislation under the normal legislative process. It is expected that each instructed committee will comply with the pertinentrequirements in the Standing Rules of the House,",
      " as well as its committee rules,when developing its legislative recommendations pursuant to the reconciliationdirectives. In particular, clause 2(h)(1) of House Rule XI requires that a committeemust meet, with a majority quorum present, to report its reconciliationrecommendations. Prior to marking up and reporting reconciliation recommendations, as in thecase of other legislation, instructed committees often hold hearings. In 1997, forexample, in developing reconciliation recommendations pursuant to the directivesin the FY1998 budget resolution, at least four of the eight instructed committeesconducted oversight and legislative hearings related to its reconciliationrecommendations subsequently transmitted to the House Budget Committee.",
      " (23)  Committee Markup Procedures. While there are variations among committees' formal rules and informal practices,House committees typically follow a standard markup process. (24) Under thisprocess, the legislative text to be considered first is read in full, unless waived by amajority vote or unanimous consent, and then it is read for amendment, section bysection. (25) Amendments are considered under a five-minuterule. At the end of consideration of the legislative text and amendments, a committeevotes to order the legislation reported to the House directly or, if instructed by thereconciliation directives, transmitted to the House Budget Committee. A key decision in the markup process is selecting the text the committee willconsider.",
      " A committee may consider a bill introduced and referred to the committeeor consider draft legislation that has not been introduced. In most cases, in responseto reconciliation directives, committees have considered draft legislation developedby the committee's staff, instead of a bill introduced and referred to the committee.  In 1997, for example, pursuant to the reconciliation directives contained inthe FY1998 budget resolution, all eight committees instructed to submit to the HouseBudget Committee legislative recommendations changing existing law consideredoriginal legislative language as the markup text. (26) Three ofthese committees considered its reconciliation recommendations in the form ofcommittee prints as the markup text. Only one committee considered a billintroduced and referred to the committee.",
      " In that case, the Education and theWorkforce Committee considered H.R. 1515 and incorporated the textof the bill, as amended during markup, into its reconciliation recommendations; thecommittee, as well, ordered the bill reported, as amended, to the House directly. (27)  In some cases, however, especially in those cases when a committee receivedinstructions to report legislative recommendations to the House directly, as in recentyears, committees have considered a bill introduced and referred to the committee asthe markup vehicle. In 2003, for example, the House Ways and Means Committeeconsidered and marked up H.R. 2,",
      " which had been previously introducedand referred to the committee, as the legislative vehicle to respond to itsreconciliation directives contained in the FY2004 budget resolution. (28)  Committee Submissions. Asmentioned above, the reconciliation directives contained in a budget resolutionspecify a certain date in which an instructed committee is required to report itslegislative recommendations. In addition, the directives indicate, as provided in the1974 act, whether a committee is required to report its legislative recommendationsto the House directly or to submit such recommendations to the House BudgetCommittee. Section 310(b) of the 1974 act specifies two options for the submissionof legislative recommendations to comply with reconciliation directives:",
      " (1) if onecommittee is instructed, the committee reports its legislative recommendations to itsparent chamber directly; or (2) if two or more committees are instructed, thecommittees submit their legislative recommendations to their respective BudgetCommittee. Of the 17 budget resolutions that have contained reconciliation directives,excluding the FY2006 budget resolution, five budget resolutions contained directivesinstructing a committee to report legislation to the House directly. (29) Thirteenbudget resolutions directed two or more committees to submit legislativerecommendations to the House Budget Committee. In either case, the submission material is similar. A committee reporting itsreconciliation recommendations to the House directly must include the requiredcontents of a written report to accompany the reported legislation.",
      " Such informationincludes, for example, supplemental, minority, or additional views, a cost estimate,and committee rollcall votes. (30)  In the case of submissions to the House Budget Committee, the BudgetCommittee typically provides guidance to the instructed committees, requesting thatthey include with their reconciliation submissions similar material required in acommittee report. This year, for example, the Budget Committee requested thefollowing material to be submitted by each instructed committee: 1. legislative text; 2. transmittal letter signed by the committee chairman; 3. summary of the major policy decisions in the legislation; 4. section-by-section description; 5.",
      " committee oversight findings; 6. constitutional authority statement; 7. committee votes; 8. Ramseyer statement regarding the text of changes made in existing law; 9. performance goals; and 10. supplemental, additional, and minority views. (31) When a committee is directed to submit reconciliation recommendations tothe Budget Committee, it also may report legislation to the House directly. On atleast two occasions, for example, the Ways and Means Committee submittedreconciliation recommendations to the Budget Committee as well as reportinglegislation, containing those recommendations, to the House directly. (32) In addition,on at least one occasion, several instructed committees reported reconciliationlegislation to the House directly instead of submitting their recommendations to theBudget Committee.",
      " In 1982, four of the nine instructed committees reportedindividual reconciliation measures to the House directly. The House considered andpassed each of these measures individually and subsequently incorporated them intoone omnibus reconciliation bill (H.R. 6955, 97th Congress). (33)  Compliance with ReconciliationDirectives. Each instructed committee is expected to comply withits reconciliation directives, specifically with regard to submitting its reconciliationrecommendations by the date specified and recommending legislative changes toexisting law projected to produce the budgetary changes specified. Neither the 1974act nor the Standing Rules of the House provides a point of order, or any othersanction,",
      " against a committee's reconciliation recommendations, or the subsequentomnibus reconciliation legislation, for not complying with the reconciliationdirectives. The House Rules Committee, however, as will be discussed furtherbelow, under Section 310(d)(5) of the 1974 act, may make in order amendments toachieve compliance if one or more committees fail to submit their legislativerecommendations pursuant to their reconciliation instructions. In the past, several committees have submitted their reconciliationrecommendations after the submission deadline or not at all. In 1995, for example,nine of the 12 instructed committees submitted their reconciliation recommendationsto the Budget Committee after the September 22 deadline.",
      " (34) All of thetardy submissions were included in the reconciliation measure reported by the BudgetCommittee. In this case, as in the past, it does not appear that the late submissionscaused any procedural consequences. (35)  In several instances, one or more of the instructed committees did not submitany legislative recommendations. In at least two years, 1981 and 1995, the HouseRules Committee made in order amendments that provided language within thejurisdiction of the non-compliant committees to satisfy their reconciliation directives. In 1995, for example, the Rules Committee made in order an amendment in thenature of a substitute,",
      " offered by then-Budget Committee Chairman John Kasich,that, among other things, achieved compliance for the House AgricultureCommittee. (36) In 1996, several of the instructed committees didnot submit reconciliation recommendations to the Budget Committee, butreconciliation legislation applicable to those committees was not developed. Preparation of an Omnibus Measure by the House BudgetCommittee The House Budget Committee plays a significant, if not substantive, role inthe development of reconciliation legislation when two or more committees aredirected to recommend legislative changes pursuant to reconciliation directives. Asmentioned above, when two or more committees are involved, each committee isrequired to submit its legislative recommendations to the Budget Committee,",
      " by acertain date, as specified in the reconciliation directives contained in the budgetresolution. Section 310(b)(2) of the 1974 act provides that when the BudgetCommittee receives all the legislative recommendations from the directedcommittees, it is required to report to the House \"reconciliation legislation carryingout all such recommendations, without any substantive revision.\" In practice, this administrative function has entailed incorporating thecommittee's recommendations as separate titles into an omnibus reconciliationmeasure. The Budget Committee has performed this function formally by conductinga markup of the reconciliation legislation. At the end of the markup, the BudgetCommittee orders reported the omnibus reconciliation legislation,",
      " containing theinstructed committees' submissions, as an original bill. During the markup, amendments are not considered, as in the case of astandard committee markup, because of the prohibition against any substantiverevision to the instructed committees' recommendations. The Budget Committee,however, traditionally has entertained motions to direct the Budget Committeechairman to request that the Rules Committee make in order certain amendments. In 1997, for example, during the markup of H.R. 2015, the BalancedBudget Act of 1997, committee Members made 11 motions to direct the BudgetCommittee chairman to request that the rule for floor consideration include anamendment;",
      " one motion passed, seven motions were rejected, and three motionswere withdrawn. (37)  The Budget Committee formally orders reported the omnibus reconciliationmeasure to the House with a written report (see Table 4 ). An original billsubsequently is introduced in the House by the chairman of the Budget Committee. Past committee reports have included an overview of the reconciliation measure,occasionally including comments by the Budget Committee on the instructedcommittees' compliance with the reconciliation directives. The committee report also typically contains report language submitted by thecommittees, including a general explanation of the development of the legislativerecommendations and a section-by-section analysis of the recommendations.",
      " Asmentioned above, the committee submissions usually, but not always, include all theinformation that is required to be printed in committee reports, such as committeevotes. In most cases, the Budget Committee report has included a cost estimateprepared by the Congressional Budget Office (or, for revenue measures, the JointCommittee on Taxation) for the recommended legislative changes submitted by eachcommittee. Special Rules and the House Rules Committee The House considers most major legislation under the provisions of a specialrule, supplementing and at times superseding the Standing Rules of the House. Aspecial rule, when adopted by the House, governs the consideration of the applicablemeasure,",
      " including regulating the amending process. (38) The HouseRules Committee has the exclusive responsibility for developing and reporting aspecial rule providing for the consideration of a measure on the House floor. The 1974 act contemplates a role for the Rules Committee in thereconciliation process by providing, under Section 310(d)(5), as mentioned above,that the committee may make in order amendments to achieve changes specified byreconciliation directives if one or more committees fails to comply with them. Aswith most major legislation considered by the House, reconciliation measurestypically have been considered under a special rule reported by the Rules Committee.  In most cases,",
      " the special rule reported by the House Rules Committee wasagreed to by the House (see Table 5 ). Only one special rule was amended (in 1981for FY1982), after the previous question was defeated, and only two were rejected(in 1984 for FY1985 and 1988 for FY1989). Provisions of the Special Rule. The special rule providing for the consideration of the reconciliation measure usuallyhas provided for general debate; made only certain amendments in order; placeddebate limitations on some of these amendments; waived points of order against theconsideration of the reconciliation bill, the provisions of the bill, and certainamendments;",
      " and provided for a motion to recommit with or without instructions. General debate under special rules providing for the consideration of areconciliation measure has ranged from one hour to 10 hours. In 1980, the first timethe House considered an omnibus reconciliation measure, the special rule divided thegeneral debate time among all the instructed committees plus the Budget Committee.  After 1980, general debate on an omnibus reconciliation measure has beenequally divided between the chair and the ranking minority member of the BudgetCommittee. In cases when the reconciliation measure was reported by onecommittee, such as in recent years with the Ways and Means Committee,",
      " the specialrule has divided the time for general debate equally between the chair and rankingminority member of that committee. The special rule providing for the consideration of a reconciliation measurealways has limited the consideration of amendments to the bill; a reconciliationmeasure has never been considered under an open rule, as defined by the RulesCommittee. In three instances, the Rules Committee reported and the House adopteda rule prohibiting any floor amendments (defined as a closed rule by the RulesCommittee). (39)  On several occasions, especially since the mid-1980s, the special ruleprovided that an amendment, or modifications to the underlying reconciliation bill,be considered as adopted upon the adoption of the special rule (sometimes referredto as a self-executing provision). The special rule (H.Res.",
      " 186) on theOmnibus Budget Reconciliation Act of 1993, for example, included twoself-executing provisions involving: (1) about two dozen brief amendments affectingvarious titles in the bill; and (2) a new title (Title XV) dealing with the budgetprocess. Both of the self-executing provisions were printed in the Rules Committeereport on the special rule. Most special rules for the consideration of a reconciliation measure havemade in order very few floor amendments. In fact, many special rules allowed onefloor amendment only, usually an amendment in the nature of a substitute. Moreover, only five special rules,",
      " excluding those that prohibited any flooramendments, allowed more than two floor amendments; the greatest number of flooramendments made in order by a special rule was 10 in 1989 (H.Res. 249for H.R. 3299). In every instance that a floor amendment was made in order by the specialrule, debate on the amendment was limited by the rule as well. Debate on individualamendments under the special rules has ranged from 20 minutes to four hours,equally divided between the proponent and an opponent of the amendment. Typically, the special rule provided an hour of debate for each floor amendment.",
      " All special rules waived one or more points of order against the considerationof the reconciliation bill, the bill itself, or a floor amendment. In most cases, thespecial rule waived all points of order against the reconciliation bill. Two specialrules waived certain points of order against the reconciliation bill except for certainprovisions in the bill. (40) In addition, most special rules waived all pointsof order against the floor amendments, including amendments in the nature of asubstitute, made in order by the special rule. Finally, all the special rules providing for the consideration of a reconciliationmeasure provided for the offering of a motion to recommit. A motion to recommitmay be offered with or without instructions.",
      " Most special rules allowed the motionwith instructions. Four special rules, however, explicitly prohibited any motion torecommit that contained instructions. (41)  Floor Consideration: Debate and Amendment The House floor consideration of a reconciliation measure, as mentionedabove, usually is governed by a special rule. Of the 29 reconciliation measuresconsidered on the House floor during the period covering 1980 to 2003, 23 measureswere considered under a special rule. Of the remaining six reconciliation measures,five measures were considered under \"suspension of the rules\" procedures and onewas considered by unanimous consent. (42) This section discusses the consideration ofreconciliation measures under a special rule.",
      " During the House floor consideration of a reconciliation measure under aspecial rule, at least three key elements can have a substantive impact on themeasure: amendments, points of order, and motions to recommit the measure. Thehistorical experience of the House regarding each of these actions is discussed below. Consideration and Disposition ofAmendments. The special rule providing for the consideration ofa reconciliation measure limited the consideration of floor amendments to thosemade in order by the special rule. In only one instance, a Member offered anamendment not made in order by the rule. (43) In most cases, a Member offered the amendmentsmade in order by the rule.",
      " The number of amendments offered to a reconciliation billranged from one (eight times) to 10 (once). In six cases, an amendment made in order by the rule was not offered or waswithdrawn by a Member. In one of these cases, a Member attempted to modify hisamendment prior to offering it but was unsuccessful; consequently, he did not offerhis original amendment made in order by the rule. (44)  With regard to 13 reconciliation measures, one or more amendments wereadopted upon the adoption of the special rule; four of these amendments wereamendments in the nature of a substitute to the reconciliation bill.",
      " Overall, of the 30 floor amendments offered to reconciliation measures, 19amendments were agreed to and 11 amendments were rejected (see Table 6 ). Thisoverall success of amendments, however, masks the variation over the years. In theearly 1980s, for example, almost all of the amendments offered to the reconciliationmeasures were agreed to (between 1980 and 1985, 16 of the 19 floor amendmentswere agreed to). Since 1985, only eight of the 21 floor amendments to reconciliationmeasures were agreed to. Moreover, over half (five) of these eight floor amendmentswere offered to one reconciliation measure (H.R.",
      " 3299 in 1989). Raising and Sustaining Points ofOrder. Any Member may make a point of order against a pendingmatter (e.g., a provision in a bill or an amendment) on the grounds that it violates arule of the House. (45) Unless a special rule waives the relevant pointsof order, a reconciliation measure and amendments thereto are subject to the StandingRules of the House, such as the germaneness requirement under clause 7 of RuleXVI. In addition, as a budgetary measure, a reconciliation bill is subject to thebudget enforcement procedures associated with the Congressional Budget Act of1974 and the annual budget resolution.",
      " (46) In particular, a reconciliation measure and anyamendments thereto must not cause the aggregate spending and revenue levels(Section 311), and any committees' spending allocations (Section 302) associatedwith the annual budget resolution, to be exceeded. Under Section 310(d)(1) of the1974 act, amendments to a reconciliation measure also must be deficit neutral to thebill. Most of the special rules providing for the consideration of a reconciliationmeasure, however, waived one or more points of order against the bill and flooramendments made in order. Therefore, while various provisions in the reconciliationbills or amendments offered thereto might have violated certain points of order underthe Standing Rules of the House or the 1974 act,",
      " the special rule prohibited aMember from raising such points of order. Two special rules, as mentioned above, made exceptions to the waiver ofcertain points of order. In each of these cases, Members raised points of orderagainst the unprotected provisions during the consideration of the reconciliationmeasure. In 1985, for example, the special rule providing for the consideration of H.R.3500, the Omnibus Budget Reconciliation Act of 1985, waived any pointsof order under clauses 5(a) and (b) of Rule XXI (now clauses 4 and 5(a) of Rule XXI)against the bill except for certain provisions.",
      " Clause 5(a) of Rule XXI prohibited anappropriation in legislation reported by a committee not having jurisdiction to reportappropriations. Clause 5(b) of Rule XXI prohibited a tax measure reported by acommittee not having jurisdiction to report a tax measure. During the consideration of H.R. 3500, Representative SidneyYates raised a point of order against one of the unprotected provisions that containedan appropriation in a title of the reconciliation bill reported by a committee nothaving jurisdiction to report an appropriation. In addition, Representative DanRostenkowski raised points of order against two unprotected provisions thatcontained a tax measure in a title of the bill reported by a committee not havingjurisdiction to report tax measures.",
      " In all three cases, the points of order weresustained and thus the violating provisions were stricken from the bill. (47)  Motions to Recommit. Under theStanding Rules of the House, one motion to recommit a reconciliation measure maybe offered by a Member opposed to the measure, with preference given to a Memberof the minority party, after the previous question has been ordered on the measure butbefore the vote on final passage (House Rule XIX, clause 2). (48) Themotion may be made with or without instructions. A motion to recommit with instructions is debatable for 10 minutes, equallydivided between the proponent and an opponent of the motion;",
      " this debate time maybe extended to an hour if requested by the majority floor manager. A motion torecommit without instructions is not debatable. All special rules providing for the consideration of a reconciliation measureallowed for the offering of a motion to recommit. Members offered 16 motions torecommit 15 reconciliation bills. Almost all of these motions to recommit (13 of the16) included instructions. All of the motions to recommit with or withoutinstructions were rejected. In one case, in 2003, a motion to recommit withinstructions fell on a point of order that it was not germane to the bill. (49) Subsequently,",
      " another motion to recommit with instructions was offered; it wasrejected.  Table 4. Initial House Action on Reconciliation Measures: FY1981-FY2005  Source : Prepared by the Congressional Research Service. a. The first four measures listed, H.R. 6782, H.R. 6812, H.R. 6862, and H.R. 6892, were considered and passed separatelyby the House, but later were incorporated into H.R. 6955, which became the Omnibus Budget Reconciliation Act of 1982 (except forH.R. 6782, which became public law separately,",
      " P.L. 97-306 ). b. The House Budget Committee issued a report, Efforts to Reduce the Federal Deficit (H.Rept. 98-673, Apr. 10, 1984) pertaining to the reconciliationrecommendations contained in H.R. 5394, but the report did not officially accompany that measure. c. Following its passage by the House, H.R. 3500 was incorporated into H.R. 3128 by H.Res. 330.  Table 5. Special Rules Providing for the Consideration of Reconciliation Measures in the House:FY1981-FY2005  Source : Prepared by the Congressional Research Service.",
      "  Table 6. House Floor Amendments and Motions to Recommit to Reconciliation Measures:FY1981-FY2005  Source : Prepared by the Congressional Research Service. Note : \"ANS\" refers to an amendment in the nature of a substitute. a. The previous question on the amendment was agreed to by a vote of 215-212. b. The amendment was agreed to in the Committee of the Whole on a division vote of 31-24. The amendment, subsequently, was agreed to in the Houseon a vote of 245-176, as indicated. c. The ruling of the chair was appealed and a motion to table the appeal was agreed to by a vote of 222-",
      "202. Initial Consideration in the Senate The initial consideration of reconciliation measures in the Senate ispotentially a complex process that parallels House action in some respects, but differssignificantly in others. Four aspects of Senate action at this stage of thereconciliation process are addressed in this section: (1) the development oflegislative recommendations by the instructed committees; (2) the preparation of anomnibus measure by the Senate Budget Committee; (3) floor consideration of reconciliation legislation; and (4) the operation of the Senate's \"Byrd rule.\" Development of Legislative Recommendations by the InstructedCommittees The reconciliation directives contained in the budget resolution,",
      " as finallyagreed to by the House and Senate, inform each instructed Senate committee as to thetype and scope of the legislative recommendations it must develop in order to complywith the directives. In addition, the reconciliation directives include a deadline forthe submission of legislative recommendations to the Budget Committee or thereporting of legislation directly to the Senate. Whether a committee has been instructed to submit legislativerecommendations to the Senate Budget Committee for inclusion in an omnibusreconciliation measure, or has been instructed to report a reconciliation measuredirectly to the Senate, it develops its recommendations in generally the same manneras it develops other legislation. (50)",
      " In doing so, the committee must adhere to thepertinent requirements in the Standing Rules of the Senate, as well as it owncommittee rules, including rules regarding the reporting of a measure or matter. (51)  Relationship With the BudgetCommittee. Prior to the commencement of work by the instructedcommittees on their reconciliation recommendations, the Senate Budget Committeeusually sends a set of \"guidelines\" to the chairman and ranking member of eachcommittee. The guidelines summarize the applicable procedural requirementsstemming from the budget resolution containing the reconciliation directives andpertinent provisions of the Congressional Budget Act of 1974, and provide additionalinformation on related matters,",
      " such as scoring conventions that will be used toevaluate the reconciliation recommendations. The Budget Committee also mayadvise each instructed committee on drafting considerations (e.g., the number of thetitle or titles in the measure for the committee's recommendations) to avoid confusionwhen compiling the committee recommendations into a single measure. In most instances, the instructed committees maintain an ongoing relationshipwith the Budget Committee during the process of developing their legislativerecommendations, at least informally at the staff level. Consultations occur betweenthe committees to foster a clear understanding of procedural requirements, to assesspotential compliance issues with the aim of avoiding them, and for other reasons.",
      " Inaddition, the instructed committees regularly consult with CBO and, if appropriate,the Joint Committee on Taxation (JCT) on the budgetary implications of policyoptions and other budget-related assessments, and seek appropriate guidance andsupport from the Parliamentarian, Legislative Counsel, and other offices. Hearings, Markup, and Reporting or Submissionof Recommendations. While committees typically are afforded acertain amount of flexibility in conducting their legislative activities, Senate RuleXXVI, entitled \"Committee Procedure,\" lays out basic requirements with regard tosuch matters as the scheduling of meetings and hearings, quorums, openness, andvoting and reporting requirements. As in the case of other legislation,",
      " instructed committees often hold hearingsprior to marking up their legislative recommendations. The Senate FinanceCommittee, for example, held multiple hearings at the full committee andsubcommittee level before marking up a revenue reconciliation measure on June 19,1997. Over a period spanning from February 4 through June 5 of that year, thecommittee held 10 full committee and two subcommittee hearings on topics relatedto the reconciliation recommendations, covering such matters as the status of theAirport and Airway Trust Fund, Individual Retirement Account proposals, capitalgains and losses, the Administration's FY1998 budget, and tax proposals related toeducation, health care, and small business.",
      " (52)  Committees may proceed by marking up a bill that already has beenintroduced. The most common approach, however, is for the committee to originatelegislation in the markup, such as by considering a \"chairman's mark,\" which may bealtered by the adoption of amendments in committee. Before an instructed committee can submit reconciliation legislation to theBudget Committee or report it directly to the Senate, it must meet to consider andapprove the legislation, including relevant amendments and motions that may beoffered, and then order the legislation reported by a majority vote. A majority of thecommittee must be physically present in order to vote to report the legislation;",
      "otherwise, a point of order may be raised on the Senate floor to prevent itsconsideration. (53)  Committee Report or SubmissionRequirements. In addition to complying with reportingrequirements under Senate Rule XXVI, the committee must comply with reportingrequirements in Section 308 (2 U.S.C. 637), Section 402 (2 U.S.C. 653), and Section423 (2 U.S.C. 658b) of the 1974 act. These sections pertain to various analyses ofbudgetary legislation, including cost estimates and assessments of unfundedmandates prepared by CBO and, in the case of revenue legislation,",
      " the JCT. TheCBO and JCT estimates must be included in committee reports only if they areavailable in a timely manner. Further, with respect to revenue legislation, Section 4022(b) of the InternalRevenue Service Reform and Restructuring Act of 1998 ( P.L. 105-206 ) requires theinclusion of a tax complexity analysis in the report accompanying any revenuemeasure reported by the House Ways and Means Committee, the Senate FinanceCommittee, or a conference committee, if the measure directly or indirectly amendsthe Internal Revenue Code and has widespread applicability to individuals or smallbusinesses. Committee submissions to the Budget Committee usually consist of fourrequired elements.",
      " In addition to the legislative text, the submission includes thecommittee report language, the CBO or JCT estimates, and a transmittal letter signedby the chairman of the instructed committee. In many instances, the ranking memberof the instructed committee signs the transmittal letter as well. Like committee reports on other measures, the committee report languageaccompanying reconciliation legislation may include additional, supplemental, ordissenting views, which allow committee members individually, or as part of a group,to amplify their views, register their concerns, or express their dissent regarding partor all of the legislation. In the case of 1995 reconciliation legislation, for example,eight minority members of the Budget Committee signed a statement collectivelyexpressing their views.",
      " (54)  On occasion, the CBO or JCT estimates may not be prepared in time forinclusion in the committee's submission and are omitted, but usually becomeavailable in time for inclusion in the Budget Committee's report on the omnibusreconciliation measure. On other occasions, the instructed committee may includeCBO or JCT estimates that are preliminary and are revised later. While a committee that is participating in the development of an omnibusreconciliation measure must submit its legislative recommendations to the BudgetCommittee, it may also publish them separately or report them as separate legislationaltogether. Senate committee actions that led to the enactment of two reconciliation actsin one year during the 105th Congress,",
      " the Balanced Budget Act of 1997 and theTaxpayer Relief Act of 1997, illustrate the potential complexity involved. TheFY1998 budget resolution provided for a revenue reconciliation act and an omnibusspending reconciliation act. The initial Senate version of the spending reconciliation measure, theBalanced Budget Act (S. 947), originated in the Budget Committee andwas reported on June 20, 1997. In lieu of a written report on the bill, the BudgetCommittee issued a 241-page committee print containing the transmittal letters,report language, and cost estimates provided by the eight instructed Senatecommittees. (55)",
      " The print included (on pages 71-197) a 126-pagesubmission from the Senate Finance Committee. As a supplement to the BudgetCommittee's print, the Finance Committee issued its own 474-page committee print,explaining its spending reconciliation recommendations in more detail. (56)  The initial Senate version of the revenue reconciliation measure, the TaxpayerRelief Act of 1997 ( S. 949 ), was reported directly to the Senate by theFinance Committee (because it was the sole committee subject to revenuereconciliation directives) on June 20. The committee issued a written report toaccompany the measure. (57)",
      "  Preparation of an Omnibus Measure by the Senate BudgetCommittee In the course of preparing an omnibus reconciliation measure, the BudgetCommittee's task usually is described as a \"ministerial function.\" Under Section310(b)(2) of the 1974 act, after receiving the legislative recommendations of theinstructed committees, the Budget Committee must report omnibus reconciliationlegislation carrying out the recommendations \"without any substantive revision.\" Ensuring Accuracy andCompleteness. Although this task may be described correctly asbeing ministerial, the Budget Committee still is faced with several issues at thispoint. First, the Budget Committee must endeavor to ensure that all responses frominstructed committees are complete and accurate.",
      " As indicated previously, theBudget Committee secures any CBO or JCT estimates that were not prepared in timefor inclusion with the committee submissions, or secures final estimates in place ofpreliminary ones. In order to ensure accuracy, the Budget Committee from time to time hasmade technical corrections in the submissions at the request of the instructedcommittees. In the case of reconciliation legislation in 1996 dealing with welfarereform, for example, both of the instructed committees asked the Budget Committeeto make corrections in their previous submissions. On July 9, 1996, ChairmanRichard Lugar and Ranking Member Patrick Leahy of the Senate Agriculture,Nutrition,",
      " and Forestry Committee sent a letter to Budget Committee Chairman PeteDomenici, with technical corrections to four provisions in the June 28 submissionattached. (58) Similarly, on July 15, Chairman William Rothof the Finance Committee sent a letter to Chairman Domenici notifying him that theJuly 11 submission \"inadvertently included a change to the child care section of thebill which was not actually made by the Committee.\" (59) TheBudget Committee indicated that it had made the changes requested by bothcommittees. It was the instructed committees, and not the Budget Committee, thathad the authority to make these changes. Dealing With Tardy Responses.",
      " A second issue faced by the Budget Committee is what to do if one or morecommittees does not submit its recommendations by the deadline. The initialpractice of the Senate was to extend the deadline when the Budget Committee feltthat such action was warranted. This practice was motivated by the view thatincluding tardy committee submissions could \"taint\" the reconciliation measure,thereby causing it to lose its privilege and the protection of expedited procedures. In1985, for example, the Senate extended the September 27 deadline set in the FY1986budget resolution to October 1 by unanimous consent in order to accommodate theBanking, Housing, and Urban Affairs Committee.",
      " (60) In someinstances, the deadline was extended in a series of tightly constrained steps. In 1986,for example, the deadline of July 25 set in the FY1987 budget resolution wasextended to 6:00 p.m. on July 29, to 12:00 noon on July 30, and then to 3:30 p.m. onthat same day, July 30. (61) Finally, the deadline has been extended by largermargins; the July 28 deadline in the FY1988 budget resolution was extended toSeptember 29 and then to October 19. (62)",
      "  Under more recent practice, the Budget Committee may be afforded somediscretion in awaiting the responses of tardy committees in order to include them inthe omnibus reconciliation measure. While the budget resolution provides a deadlinefor the submissions by the instructed committees, it does not impose a reportingdeadline on the Budget Committee. Under Section 310(b)(2) of the 1974 act, theBudget Committee is obliged to report the omnibus reconciliation measure only\"upon receiving all such recommendations.\" Consequently, the Budget Committee'sobligation to report does not ripen until all recommendations have been received,even tardy ones. (63)  Nonetheless,",
      " the Budget Committee is expected to report the omnibusreconciliation measure in a reasonably prompt manner. Accordingly, when facedwith lingering delay in the responses by one or more instructed committees, it maychoose to report the omnibus reconciliation measure without the responses and seeka remedy for the omissions during floor consideration. Evaluating Compliance. A thirdtask facing the Budget Committee at this stage of the reconciliation process, andperhaps the most important one, is evaluating compliance by the respondingcommittees. Compliance may be judged by several criteria. First and foremost, theBudget Committee assesses whether each instructed committee has met the goals laidout in the reconciliation directives. In the case of each committee,",
      " the estimatedlevels of spending changes (and, if appropriate, revenue changes and debt-limitchanges) that would be achieved for each time period are measured against theinstructed levels. Although the Budget Committee and each instructed committee receives costestimates from CBO and the JCT, it is the Budget Committee's responsibility andprerogative to assess committee compliance on the basis of spending or revenuelevels. In measuring compliance, the Budget Committee sometimes will makeadjustments to the estimates provided by CBO or the JCT. One such adjustment,which occurred in 1995, involved a change in the enactment date assumed by CBO,",
      "which shortened the time available in FY1996 for the sale of the Naval PetroleumReserves. As a consequence of this change, CBO judged that the sale could not becompleted in FY1996 and reduced the savings attributed to the Armed ServicesCommittee accordingly. As explained by the Senate Budget Committee: The FY1996 budget resolutionassumed an October 1, 1995 enactment date and the reconciliation instructions tocommittees were based on this enactment date. Due to the delay of some of thecommittee's submissions and other factors, CBO is currently using a November 15,1995 enactment date. As a result, some committees followed the assumptions in thebudget resolution and still failed to meet their fiscal year 1996 reconciliationinstruction because of this change in the assumption on the enactment date.... However,",
      " if a committee follows the assumptions in the budget resolution and failsto meet its instructions for fiscal year 1996 solely because of an assumption on theenactment date, the Senate Budget Committee will hold the committee harmless andwill score the committee as achieving its instruction. Therefore, with thisadjustment, the Armed Services Committee has complied with the budget resolution'sreconciliation instructions for FY1996. (64) A second criterion for determining compliance involves the \"fungibility rule,\" which is set forth in Section 310(c) of the 1974 act. (65) Thepurpose of the rule is to allow some flexibility in the response of a committeeinstructed to change both spending and revenues.",
      " The fungibility rule may not applyif revenue and spending changes are reported in separate reconciliation measurespursuant to separate directives. In sum, the fungibility rule: (1) applies to any Senate (or House) committeethat is subject to reconciliation directives in a budget resolution requiring it torecommend reconciliation legislation changing both spending and revenues; (2)deems any such committee to be in compliance with its reconciliation directives ifits recommended legislation does not cause either the spending changes or therevenue changes to exceed or fall below the directives by more than 20% of the sumof the two types of changes, and the total amount of changes recommended is not lessthan the total amount of changes that were directed;",
      " and (3) authorizes the chairmanof the Senate Budget Committee to file appropriate adjustments in the levels in thebudget resolution, and committee spending allocations thereunder, upon the exerciseof the rule, and requires any committee receiving revised spending allocations topromptly report Section 302(b) suballocations. The operation of this rule in the Senate was described in 1993 in a print of theSenate Budget Committee, as follows: For an example of the rule inoperation, take the case of a budget resolution that instructs a committee to achieve$3 million in outlay reductions and $7 million in revenue increases, for a total of $10million in deficit reduction.",
      " By virtue of this section, that committee maypermissibly achieve outlay reductions as low as $1 million ($3 million minus 20percent of $10 million, or $2 million), as long as it achieves a total of at least $10million in deficit reduction by also achieving at least $9 million in revenue increases. Alternatively, the committee may achieve revenue increases as low as $5 million ($7million minus 20 percent of $10 million, or $2 million), as long as it achieves a totalof at least $10 million in deficit reduction by also achieving outlay reductions of atleast $5 million. (66)",
      " In its current form, the fungibility rule authorizes the chairman of the SenateBudget Committee to file changes in budget resolution levels, and committeespending allocations thereunder, whenever the rule is exercised, and to require thatany committee receiving revised spending allocations promptly report Section 302(b)suballocations. (67)  As Senate and House rules grant jurisdiction over revenue matters primarilyto the Senate Finance Committee and House Ways and Means Committee,respectively, these are the two main committees to which the fungibility rule applies. Finally, a third criterion for assessing committee compliance with thereconciliation directives is the Senate's \"Byrd rule,\" which is discussed in detailbelow.",
      " Briefly, the rule bars the inclusion of matter in reconciliation legislation thatis extraneous to the purposes of the reconciliation directives. The Parliamentarian also plays a role in assessing compliance withreconciliation directives, determining whether provisions from the instructedcommittees are within their respective jurisdictions. Further, the Parliamentariandetermines, as a threshold matter, whether the assembled submissions from theinstructed committees constitute a reconciliation bill and, thus, whether the bill maybe considered under the expedited procedures of the reconciliation process. While the Budget Committee must report the legislative recommendationssubmitted to it, the committee need not necessarily issue a written report. Beginningin the late 1980s,",
      " the practice of the Senate Budget Committee has been to reportomnibus reconciliation bills without a written report. The purpose of this practiceis to avoid both a Budget Committee rule providing for time to submit additional andminority views, and the Senate rule requiring legislation accompanied by a writtenreport to lay over for a period of time before floor consideration. The BudgetCommittee usually issues a committee print explaining the legislation in lieu of areport. The Budget Committee, because it must report an omnibus reconciliation bill\"without any substantive revision,\" may not resolve any substantive issues onnon-compliance at this point. The Budget Committee may, however, in concert withthe leadership,",
      " evaluate strategies for remedying the non-compliance on the Senatefloor through one or more manager's amendments or by other means. Floor Consideration: Debate and Amendment The basic contours of Senate procedure for the consideration of reconciliationmeasures are shaped by Section 310 of the 1974 act. In particular, Section 310(e)provides that the provisions of Section 305 of the act, which establish procedures forthe consideration of budget resolutions and conference reports thereon in the Senate,shall also apply to the consideration of reconciliation measures and conferencereports thereon. In one important exception, a 20-hour limit on debate is set forreconciliation measures,",
      " instead of the 50-hour limit applicable to budget resolutions. The timetable for the congressional budget process set out in Section 300 ofthe 1974 act indicates that Congress should complete action on any requiredreconciliation by June 15. While Section 310(f) of the act is intended to enforce thisdeadline in the House (by barring the consideration in July of an adjournmentresolution providing for the traditional August recess if the House has not completedaction), the act does not contain any comparable provision for the Senate. Like other budgetary legislation, reconciliation measures generally must bein compliance with budget enforcement procedures in the 1974 act and included inannual budget resolutions.",
      " In particular, spending levels in the measure must notcause any committee's spending allocations under the budget resolution to beexceeded (Section 302), revenues levels in the measure must not drop below therevenue floor established in the budget resolution (Section 311), and no policy orprocedural matters within the Budget Committee's jurisdiction can be included(Section 306), or the bill will be subject to points of order under these sections thatrequire a three-fifths vote to waive. Patterns in the Consideration of Senate and HouseLegislation. During the period from 1980-2004, covering budgetresolutions for FY1981-FY2005,",
      " the Senate completed action on a total of 19reconciliation acts stemming from reconciliation directives in budget resolutions for17 different years (see Table 7 ). In all but three of these years, the Senate considereda single reconciliation measure in response to the reconciliation directives in thebudget resolution. In the three remaining years, the Senate considered two differentreconciliation measures each year, resulting in the enactment of five reconciliationacts -- one act in 1980 (for FY1981) and two acts each in 1982 and 1997 (for FY1983and FY1998). As a general matter, the Senate initially considers a single, Senate-numberedreconciliation measure,",
      " either an omnibus reconciliation act reported by the BudgetCommittee or a reconciliation act reported by the Finance Committee. Following thecompletion of debate and amendment, the Senate positions itself for conference withthe House by taking up the House-passed reconciliation measure, striking all after theenacting clause, and inserting the text of the Senate-passed measure. This procedure is especially important with respect to reconciliation measuresthat affect revenues due to the requirement in the Constitution that revenue measuresoriginate in the House. By passing a House-numbered bill in the final instance, theSenate abides by the constitutional requirement. (After the Senate considers theSenate-numbered bill,",
      " the 1974 act would allow an additional 20 hours to considerthe House-numbered bill, but the Senate usually considered the House-numbered billby unanimous consent.) Different patterns of legislative action have occurred as well. In 1980, forexample, the Senate Budget Committee reported two different original Senate billscarrying out revenue and spending reconciliation instructions, and the Senateconsidered each of them separately. Following their consideration, the Senateincorporated both of the measures into the House-passed reconciliation bill. (68)   Table 7. Initial Senate Action on Reconciliation Measures: FY1981-FY2005  Source : Prepared by the Congressional Research Service.",
      " On two occasions, in 1982 and 1997, the Senate considered separate revenueand spending reconciliation acts that each became law. (69) Three ofthe four measures were original Senate bills reported by the Budget Committee (twobills) or the Finance Committee (one bill), but in the remaining instance the FinanceCommittee reported a House-passed bill instead of an original Senate bill. (70)  In 2001 and 2003, the Finance Committee reported original Senate billscarrying out revenue reconciliation instructions, but the Senate did not consider them. Instead, the Senate considered House-passed reconciliation bills under an acceleratedschedule.",
      " (71)  The Senate usually completes initial action on reconciliation measures overa period of two to four days. In 1980, the Senate devoted only one day each to theinitial consideration of two reconciliation bills, but in 1985 it considered areconciliation measure for eight days. Initiating Consideration and ControllingTime. Although not explicitly stated in the 1974 act, reconciliationmeasures are privileged measures. Accordingly, the motion to proceed to theconsideration of a reconciliation measure is not debatable. In practice, mostreconciliation measures are laid before the Senate by unanimous consent. A reconciliation measure does not need to lie over on the calendar for onelegislative day,",
      " but if such legislation is accompanied by a written report, the reportmust be available for 48 hours before the measure can be considered. As statedpreviously, the usual practice of the Budget Committee since the late 1980s has beento report omnibus reconciliation bills without a written report, issuing a committeeprint in lieu of a report. The Finance Committee has been instructed to reportlegislation directly to the Senate on several occasions in recent years, sometimesissuing a written report and sometimes not doing so. Reconciliation legislation is subject to a 20-hour debate limitation. Debateon first degree amendments is limited to two hours, and debate on second degreeamendments and debatable motions or appeals is limited to one hour.",
      " In practice,debate time may vary from these limits, pursuant to unanimous consent agreements. Control of time under the 20-hour limit is equally divided between, andcontrolled by, the majority leader and the minority leader or their designees. Thechairman and ranking member of the Budget Committee usually are designated toserve as floor managers and to control the time. With respect to amendments (anddebatable motions and appeals), time is divided equally and controlled by the Senatorwho proposed the amendment and the majority manager (or, if the majority managerfavors the amendment, the minority manager). Not all actions pertaining to a reconciliation measure are counted under the20-hour time limit.",
      " Debate on the measure, all amendments thereto, debatablemotions and appeals, and time used in quorum calls (except for those that precede arollcall vote) is counted under the limit, but time used to read amendments, to vote,or to establish a quorum prior to a rollcall vote is not counted, absent a unanimousconsent agreement to the contrary. Therefore, it is possible, especially with theconsideration of a large number of amendments under a \"vote-arama\" situation(discussed below), for consideration to extend well beyond 20 hours. Conversely,because the time for debate may be reduced by yielding back time,",
      " by unanimousconsent, or by a nondebatable motion, the consideration of a reconciliation measuremay not consume the full 20 hours. Restrictions on Amendments and Motions toRecommit. There are several restrictions on the consideration ofamendments. First, as provided in Section 305(b)(2) of the 1974 act, amendmentsmust be germane (the germaneness requirement also applies to amendments tobudget resolutions). (72) While certain amendments are per se germane(e.g., an amendment to strike, or to change numbers or dates), the germaneness of anamendment typically is determined on a case-by-case basis if a point of order israised.",
      " Once matter has been stricken from the measure by amendment, the mattercan no longer be used to justify germaneness. Conversely, matter added to themeasure by amendment can be used as the basis for additional amendments to bedeemed germane. An important exception to the germaneness requirement is made inconnection with a motion to recommit with instructions intended to bring acommittee's recommendations into full compliance. Although the motion itself mustbe germane, the amendment reported back by the instructed committee is not subjectto a germaneness requirement. This practice recognizes the fact that in order to makethe changes in spending or revenues necessary to achieve full compliance, it may benecessary to address matter not included in the instructed committee's originalrecommendations.",
      " Section 310(d) prohibits the consideration of any amendment that wouldcause the reconciliation measure to reduce outlays by less than the amount instructed,or would cause it to increase revenues by less than the amount instructed, unless theresulting deficit increase is offset. The prohibition does not interfere, however, witha motion to strike, regardless of that motion's effect on the deficit. Section 310(g) bars the consideration of any reconciliation legislation,including any amendment thereto or conference report thereon, \"that containsrecommendations with respect to\" Social Security. For purposes of these provision,Social Security is considered to include the Old-Age, Survivors,",
      " and DisabilityInsurance (OASDI) program established under Title II of the Social Security Act; itdoes not include Medicare or other programs established as part of that act. Finally, Section 313, the Senate's \"Byrd rule,\" prohibits the consideration ofany reconciliation legislation, including amendments, that include extraneous matter(see discussion below). One provision of the Byrd rule buttresses the prohibitionagainst considering recommendations affecting Social Security set forth in Section310(g). Each of the restrictions discussed above requires an affirmative vote ofthree-fifths of the membership (60 Senators, if no seats are vacant) to waive or toappeal the ruling of the chair.",
      " An amendment fashioned to avoid one restriction still may run afoul ofanother. An amendment may be germane, for example, yet violate the Byrd rulebecause it has no budgetary effect and therefore is extraneous. Motions to recommit, as previously indicated, afford a means of bringingcommittee recommendations into full compliance. Section 305(b)(5) of the 1974 actprohibits any motion to recommit, except for a motion to recommit with instructionsto report back within no more than three days. In practice, such motions usuallyrequire the instructed committee to report back \"forthwith.\" While the committeenamed in the instructions may not be amended,",
      " the legislative language included inthe instructions is amendable in two degrees. If not necessary to bring a committeeinto compliance, the amendments proposed by a motion to recommit must begermane. \"Vote-arama\". The number ofamendments offered to reconciliation measures generally has increased over thehistory of the reconciliation process. Only a few amendments were offered to theearliest reconciliation bills, but dozens of amendments have been offered toreconciliation bills in recent years. When the 20-hour debate limit has been reached, Senators may continue toconsider amendments and motions to recommit with instructions (and to take otheractions as well), but they may not debate them unless unanimous consent is granted.",
      " The circumstance under which debate time on a reconciliation measure (or budgetresolution) has expired but amendments and motions continue to be considered hascome to be known as \"vote-arama.\" As a general matter, accelerated votingprocedures sometimes are put into effect under a vote-arama scenario, allowing twominutes of debate per amendment for explanation and a 10-minute limit per vote. During the consideration of the three most recent reconciliation measures, in2000, 2001, and 2003, the Senate considered 162 amendments and motions torecommit (38 in 2000, 59 in 2001, and 65 in 2003). Many of the amendments andmotions were considered and disposed of under a vote-",
      "arama, as discussed in moredetail below. Marriage Tax Relief Reconciliation Act of 2000 (vetoed). TheSenate considered H.R. 4810 ( S. 2839 ) on July 14, 17, and18, 2000. Under a series of unanimous consent agreements, 37 amendments and onemotion to recommit were offered and debated on the first day of consideration, July14, without any final action being taken on them. On the second day ofconsideration, July 17, the Senate took up these amendments for disposition at 6:15p.m., with two minutes of debate time available for explanation of each amendment.",
      " This procedure was employed on the following day, July 18, as well, ending withfinal passage of the bill. Over the two days, 37 amendments and one motion torecommit were considered under this procedure; 10 amendments were adopted, threeamendments (and one motion to recommit) were rejected, seven amendments fell ona point of order, and 17 amendments were withdrawn. Economic Growth and Tax Relief Reconciliation Act of 2001(P.L. 107-16). The Senate considered H.R. 1836 on May 17, 21, 22, and23, 2001. On the second day of consideration,",
      " May 21, after the 20-hour limit ondebate apparently had expired, (73) the Senate took up and disposed of a series ofamendments under a unanimous consent agreement, propounded by Senator Lott,under which the votes would be limited to 10 minutes each, with two minutes beforeeach vote for an explanation. (74) This procedure was employed on the followingtwo days of consideration, May 22 and May 23, as well, ending with final passageof the bill. Under this procedure, over the three-day period, the Senate considered59 amendments and motions to recommit; eight were adopted, 20 were rejected,",
      " 26fell on a point of order, and five were withdrawn. Thirty-five of these 59amendments and motions to recommit had been offered, considered, and temporarilylaid aside prior to the expiration of the 20-hour limit. Subsequently, these 35amendments and motions to recommit were considered under the accelerated votingprocedures; three were adopted, 14 amendments were rejected, 13 fell on a point oforder, and five were withdrawn. Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L.108-27). The Senate considered S. 1054 on May 14 and 15,",
      " 2003. Onthe first day of consideration, the Senate agreed by unanimous consent that the20-hour limit on debate be expired and that the Senate proceed to vote onamendments at the beginning of the following day. (75) At the endof May 14, Senator Grassley announced that during consideration of the amendmentson May 15, all votes after the first vote would be limited to 10 minutes each. (76) On May15, the Senate considered 65 amendments; 30 amendments were adopted, nineamendments were rejected, 19 amendments fell on a point of order, and sevenamendments were withdrawn.",
      " Of these 65 amendments, 26 amendments wereoffered, considered, and set aside prior to the expiration of the 20-hour limit. Subsequently, these 26 amendments were considered under the accelerated votingprocedures; eight amendments were adopted, 14 amendments fell on a point of order,and four amendments were withdrawn. The Senate's \"Byrd Rule\" Against Extraneous Matter During the first several years' experience with reconciliation, the legislationcontained many provisions that were extraneous to the purpose of implementingbudget resolution policies. The reconciliation submissions of committees includedsuch things as provisions that had no budgetary effect, that increased spending orreduced revenues when the reconciliation instructions called for reduced spendingor increased revenues,",
      " or that violated another committee's jurisdiction. Reconciliation procedures, and other expedited procedures that limit debateand restrict the offering of amendments, run counter to the long-standing practicesof the Senate applicable to most legislation, in which Senators may engage inextended debate and freely offer amendments. Many Senators were willing tosurrender customary freedoms with respect to debate and amendment in order toexpedite reconciliation legislation, but they sought a means of confining the scopeof such legislation to its budgetary purposes. In 1985 and 1986, the Senate adopted the Byrd rule (named after its principalsponsor, Senator Robert C. Byrd)",
      " on a temporary basis as a means of curbing thesepractices. The Byrd rule has been extended and modified several times over theyears. In 1990, the Byrd rule was incorporated into the 1974 Congressional BudgetAct as Section 313 and made permanent. (77)  In general, a point of order authorized under the Byrd rule may be raised inorder to strike extraneous matter already in the bill as reported or discharged (or inthe conference report), or to prevent the incorporation of extraneous matter throughthe adoption of amendments or motions. A point of order may be raised against asingle provision or two or more provisions in the bill (usually as designated by titleor section number,",
      " or by page and line number), in amendments offered thereto, orin motions made thereon, or against an entire amendment or amendments. The chairmay sustain a point of order as to all of the provisions (or amendments) or only someof them. The maker of the point of order defines the scope of the provision orprovisions being challenged. The Byrd rule is nearly unique in that points of order made thereunder bringdown the offending matter, but not the entire measure. Once material has beenstricken from reconciliation legislation under the Byrd rule, it may not be offeredagain as an amendment. A motion to waive the Byrd rule,",
      " or to sustain an appeal of the ruling of thechair on a point of order raised under the Byrd rule, requires the affirmative vote ofthree-fifths of the membership (60 Senators if no seats are vacant). (78) A singlewaiver motion can: (1) apply to the Byrd rule as well as other provisions of theCongressional Budget Act; (2) involve multiple as well as single provisions oramendments; (3) extend (for specified language) through consideration of theconference report as well as initial consideration of the measure or amendment; and(4) be made prior to the raising of a point of order,",
      " thus making the point of ordermoot. While the point of order itself is not debatable, the motion to waive isdebatable, subject to the time limits for debatable motions. When a reconciliation measure, or a conference report thereon, is considered,the Senate Budget Committee must submit for the record a list of potentiallyextraneous matter included therein. (79) This list is advisory, however, and does not bindthe chair in ruling on points of order. Determinations of budgetary levels for purposes of enforcing the Byrd ruleare made by the Senate Budget Committee. Definitions of Extraneous Matter. Subsection (b)(1)",
      " of the Byrd rule provides definitions of what constitutes extraneousmatter for purposes of the rule. Some aspects of the Byrd rule require considerablejudgment regarding its application to complex legislation. As the Senate BudgetCommittee noted in its report on the budget resolution for fiscal year 1994,\"'Extraneous' is a term of art.\" (80) In the most general terms, the rule bars theinclusion of matter that is not related to the purposes of the reconciliation process. A provision is considered to be extraneous if it falls under one or more of thefollowing six definitions: 1. It does not produce a change in outlays or revenues;",
      " 2. It produces an outlay increase or revenue decrease when theinstructed committee is not in compliance with its instructions; 3. It is outside of the jurisdiction of the committee that submitted thetitle or provision for inclusion in the reconciliation measure; 4. It produces a change in outlays or revenues which is merelyincidental to the non-budgetary components of the provision; 5. It would increase the deficit for a fiscal year beyond those coveredby the reconciliation measure; and 6. It recommends changes in Social Security. The last definition complements the ban in Section 310(g) of the 1974 actagainst considering any reconciliation legislation that contains recommendationspertaining to Social Security.",
      " While a successful point of order under the lastdefinition in the Byrd rule would excise the offending provision, a successful pointof order under Section 310(g) would defeat the entire bill. Exceptions to the Definition of ExtraneousMatter. Subsection (b)(2) of the Byrd rule provides that aSenate-originated provision that does not produce a change in outlays or revenuesshall not be considered extraneous if the chairman and ranking minority members ofthe Budget Committee and the committee reporting the provision certify that: the provision mitigates direct effects clearly attributable to aprovision changing outlays or revenues and both provisions together produce a netreduction in the deficit;",
      " or the provision will (or is likely to) reduce outlays or increaserevenues: (1) in one or more fiscal years beyond those covered by the reconciliationmeasure; (2) on the basis of new regulations, court rulings on pending legislation, orrelationships between economic indices and stipulated statutory triggers pertainingto the provision; or (3) but reliable estimates cannot be made due to insufficientdata. Subsection (b)(3) of the Byrd rule provides an exception to the definition ofextraneousness on the basis of committee jurisdiction for certain provisions reportedby a committee, if they would be referred to that committee upon introduction as aseparate measure.",
      " Additionally, under subsection (b)(1)(A), a provision that does not changeoutlays or revenues in the net, but which includes outlay decreases or revenueincreases that exactly offset outlay increases or revenue decreases, is not consideredto be extraneous. The Byrd rule has been applied to 19 reconciliation measures considered bythe Senate from 1985 through 2004. In 42 of the 55 actions involving the Byrd rule,opponents were able to strike extraneous matter from legislation (18 cases) or bar theconsideration of extraneous amendments (24 cases) by raising points of order. Nineof 41 motions to waive the Byrd rule,",
      " in order to retain or add extraneous matter,were successful. The Byrd rule has been used only four times during considerationof a conference report on a reconciliation measure (twice in 1993, once in 1995, andonce in 1997). Resolving House-Senate Differences on ReconciliationMeasures Under the usual practice, the House and Senate initially consider and passtheir own reconciliation measures. In addition, reconciliation measures are complex,and in many instances, quite lengthy legislation. Accordingly, these factorseffectively guarantee that the House and Senate bills will be different. The twochambers must, however, as with all legislation,",
      " agree to the same reconciliationmeasure in the exact same form before it can be sent to the President. For the mostpart, the House and Senate employ the usual legislative procedures and practicesunder their rules to resolve differences on reconciliation measures, although theCongressional Budget Act of 1974 specifies some aspects of procedure at this stage. As with other complex legislation, the House and Senate typically use aconference as the means of developing an agreement on reconciliation legislation. In the case of all but one of the 19 reconciliation measures ultimately submitted byCongress to the President, the House and Senate convened a conference on themeasure and a conference report was issued. In the one instance in which aconference was not used,",
      " the two chambers passed identical legislation and therewere no differences to resolve. (In response to reconciliation directives in theFY1984 budget resolution, the Senate passed a House-passed reconciliation billwithout amendment, clearing it for the President.) The pattern with regard to conference procedure on reconciliation measureshas been for the Senate to consider one or two Senate bills initially, then to take upand amend the House-passed bill in order to proceed to conference. Table 8 provides information on House and Senate actions on conference reports onreconciliation measures. The one exception to the pattern occurred in 1982. Inresponse to reconciliation directives in the FY1983 budget resolution,",
      " the Senateinitially considered, and went to conference with the House on, a House-numberedbill, H.R. 4961 (which became the Tax Equity and Fiscal ResponsibilityAct of 1982). The House and Senate also may use an amendment exchange instead of aconference in order to resolve differences regarding legislation, or as a fallbackprocedure when conference agreements are not completed successfully. In the caseof reconciliation legislation, amendment exchanges are seldom used. The conferencereport on the Consolidated Omnibus Budget Reconciliation Act of 1985, forexample, was rejected by the House on December 19, 1985, by a vote of205-",
      "151. (81)  Between December 19, 1985, and March 20, 1986, the House and Senate exchangedamendments nine times before their disagreements were resolved. (82) In addition,a successful point of order raised under the Byrd rule against the conference reporton the Balanced Budget Act of 1995 resulted in the Senate receding and concurringwith a further amendment that effectively deleted the offending matter. Although theHouse had previously adopted the conference report, it resolved the disagreement byconcurring in the further Senate amendment. Initial Motions and Appointment of Conferees In order to proceed to conference, the second chamber to act insists on itsamendment,",
      " thereby expressing its disagreement with the recommendations of thefirst chamber. Then, the second chamber requests a conference with the firstchamber in order to resolve the disagreement. In the case of reconciliationlegislation, the Senate has always been the \"second\" chamber to act, with respect tosetting up a conference. After a conference has been requested and agreed to, each chamber appointsconferees. Upon the appointment of conferees by both chambers, the conferencecommittee may then convene to carry out its work. In the Senate, these steps usuallyare merged together into a single unanimous consent request; in the House, confereesare not necessarily appointed at the time that the other actions occur.",
      " (83)  In instances where there is unusual controversy or complications in enteringinto a conference, each of the three required steps may entail a separate motion (andvote). The House, in a few cases, used special rules reported by the House RulesCommittee to go to conference.  In the House, it is the prerogative of the Speaker to appoint conferees, whilein the Senate, the usual practice is for the full Senate by unanimous consent toauthorize the Presiding Office to appoint them. Conferees can be appointed to consider the entire matter in conference or onlyfor limited-purposes. \"General conferees\"",
      " negotiate over the entire bill and anyamendments, and \"limited-purpose\" conferees negotiate only on a portion of thematter in conference designated at the time of appointment. Both types of conferees are appointed on omnibus reconciliation measures. Members of the House and Senate Budget Committee are appointed as generalconferees (and the chairman and ranking member serve as floor managers of theconference report). Members of the committees that submitted reconciliationrecommendations make up the rest of the conference committee. The conferees fromthe legislative committees have the responsibility of resolving differences in thelegislative language within their committee's jurisdiction, while the conferees fromthe Budget Committees work to facilitate the conference actions generally andpromote a timely resolution of policy disagreements.",
      " From time to time, when aMember must drop out of conference proceedings, a replacement may be appointed. When a conference committee deals with a reconciliation measure that wasreported to each chamber by a single committee, the conferees usually are chosenfrom the legislative committee's membership. Sometimes matter within the jurisdiction of a committee in one chamber thatdid not receive a reconciliation instruction may be before the conferees because ofthe action of the other body. Therefore, a chamber may include conferees from morecommittees than were instructed in the budget resolution. Conferences on reconciliation measures sometimes involve only a fewMembers from each chamber. The House and Senate appointed three conferees each,",
      "for example, on the Marriage Tax Relief and Reconciliation Act of 2000. In manyinstances, however, the wide range of issues encompassed by reconciliation, and thelarge number of conferees appointed to address them, leads to the creation ofsubconferences. The largest conference on a reconciliation measure, the OmnibusBudget Reconciliation Act of 1982, involved 184 Representatives and 69 Senatorsand relied upon 58 subconferences. The subconferences are established informally by agreement of theconference leaders. Members of the legislative committees involved in theconference typically are assigned only to the subconferences that deal with matterswithin their committee's jurisdiction.",
      " The general conferees from the BudgetCommittees also are assigned to subconferences, but they do not directly negotiatethe resolution of the pending legislative issues. These procedures are informal in theSenate, for under the Senate rules, a Senate conferee is a conferee for all purposes,and a majority of all Senate conferees must sign the conference report to conclude theconference, regardless of the purposes for which the Senate appointed the conferees. Motions to Instruct Conferees When the House and Senate prepare to go to conference on a measure, it isnot uncommon in either chamber for one or more motions to be considered thatinstruct conferees.",
      " Instructions to conferees may encourage them to take a particularposition on an issue, or set of issues, but neither chamber regards the instructions asbinding the conferees in any way. In the House, the motion to instruct can be offered at three separate times inthe legislative process: (1) prior to the appointment of conferees; (2) after theconferees have been appointed for 20 calendar days and 10 legislative days, butbefore they report to the House; (3) and after the conferees have reported, inconjunction with a motion to recommit the conference report. Only one motion toinstruct conferees is allowed prior to the appointment of conferees,",
      " and only one ina motion to recommit a conference report; in contrast, the practice of the House is toadmit multiple 20-day motions to instruct. Members of the minority party areaccorded preference in recognition to offer motions to instruct in the first twoinstances, but are not accorded preference in recognition to offer the 20-day motion. Motions to instruct conferees are not as common in the Senate as in theHouse, in part because Senators generally have more opportunity thanRepresentatives to be heard on measures and to let their views on conferencenegotiations be known. In the Senate, motions to instruct can only be offered priorto the appointment of conferees,",
      " but Senators also instruct their conferees throughsimple resolutions and amendments to legislation.  Motions to instruct conferees have been made to reconciliation measures, justas they have been made to budget resolutions. In the case of budget resolutions,motions to instruct conferees have been made regularly in the House but infrequentlyin the Senate. (84) With respect to reconciliation measures,however, such motions have been made regularly in the House and on occasion in theSenate. Some examples of the circumstances under which motions to instructconferees were made in each chamber are discussed below: Motions to Instruct in the House. In the House,",
      " the firstmotion to instruct conferees on a reconciliation measure occurred the first year thatreconciliation was used. On September 18, 1980, the House agreed to such a motionwith respect to the conference on H.R. 7765 by a vote of 300-73. In 1997,motions to instruct conferees were made in the case of both reconciliation bills thatyear. A motion offered by Representative John Spratt, ranking member of the BudgetCommittee, on July 10, 1997, to the Balanced Budget Act of 1997 (H.R.2015) was approved by a vote of 414-",
      "14, but a motion offered the same dayby Representative Charles Rangel, ranking member of the Ways and MeansCommittee, to the Taxpayer Relief Act of 1997, was rejected by a vote of199-233. Motions to Instruct in the Senate. The Senate considered asingle motion to instruct conferees in 1981 and 1989. The first such motion insistedthat funding for the Head Start Program be set at specified levels forFY1982-FY1984, while the second instructed the Senate conferees not to accept anyHouse language that would not result in savings or in revenue increases. Duringconsideration of the Balanced Budget Act of 1995,",
      " the Senate on November 13,1995, considered four different motions to instruct conferees, adopting three of themand tabling the other. Motions to instruct conferees may be amended. On July 14, 1993, forexample, a motion to instruct House conferees on the Omnibus BudgetReconciliation Act of 1993 was amended by an amendment in the natureof a substitute, by a vote of 235-183; the motion to instruct, as amended, was agreedto by a vote of 415-0. Conducting the Conference and Reporting the ConferenceAgreement Procedures relating to the conduct of conferences between the House andSenate on legislation are relatively informal,",
      " and conferees are granted considerablelatitude in resolving the chambers' differences. The chairmanship of the conferencecommittee is determined by the conferees, who usually select the chairman of theBudget Committee, in the case of omnibus reconciliation bills, or the chairman of theHouse Ways and Means Committee or the Senate Finance Committee, when thosecommittees were instructed to report separate reconciliation legislation. By tradition,the chairmanship of the conference alternates between the House and Senate. When the conferees reach agreement with respect to their disagreements ona reconciliation measure, they submit a conference report explaining the agreement. The report consists of two separate items: (1)",
      " the conference report, which explainsthe actions proposed by the conferees to resolve the disagreements between the twobodies, including the recommended legislative text; and (2) the accompanying \"jointexplanatory statement,\" also referred to as the \"managers' statement,\" which explainsthe actions of the conferees with regard to the particular policy issues that theyaddressed, often in great detail. The conference report reflects the agreement of a majority of the confereesof the House and a majority of the conferees from the Senate. Each of the confereesthat supports the conference report signs a signature sheet for both the conferencereport and the joint explanatory statement.",
      " Any conferee who does not support theagreement is not required to sign the signature sheets, and usually does not do so.  For a conference report to be valid in the House, a majority of the Membersfrom each chamber who were appointed to negotiate each provision must sign thereport; limited-purpose House conferees sign only for the portion of the agreementthey were given authority to negotiate. For a conference report to be valid in theSenate, a majority of all House conferees and a majority of all Senate conferees mustsign the report, regardless of whether or not any of the conferees were appointed forlimited purposes.",
      " The conference report and joint explanatory statement are published as aHouse report and printed in the Congressional Record. (Although a conferencereport may be published as a Senate report too, the Senate usually defers such action.) Consideration of the Conference Report Conference reports are privileged matters in both the House and Senate andmay be called up for consideration as a priority matter. Motions to proceed to theconsideration of a conference report are not debatable. In the House, conferencereports typically are considered for one hour, but in the Senate conference reportsmay be debated for up to10 hours. The House usually considers conference reports on major legislation underthe terms of a special rule.",
      " In recent years, the special rule has provided a \"blanket\"waiver of all points of order against the conference report and, in some instances,more than the typical hour of debate time. In 1997, for example, special rulesextended the debate time on the conference report on the Balanced Budget Act of1997 to 90 minutes, under H.Res. 202, and extended the debate time onthe Taxpayer Relief Act of 1997 to two and one-half hours, under H.Res. 206. In the Senate, the consideration of a conference report on a reconciliationmeasure may differ markedly from the consideration of conference reports on othertypes of measures in one key respect.",
      " The Byrd rule, which applies only toreconciliation measures, allows for extraneous matter to be stricken from aconference report pursuant to the successful raising of a point of order. Typically,when a point of order is successfully raised against a conference report in the Senate,the conference report is defeated. Pursuant to the Byrd rule, however, the Senate mayremove language from the conference report without causing the remainder of theconference report to be rejected. In that case, under the Byrd rule, the Senate recedesand concurs with a further amendment that effectively deletes the offending matter. The House and Senate may reach final agreement on the measure by resolving theirdisagreement on the further Senate amendment,",
      " as occurred in connection with theBalanced Budget Act of 1995. The Senate sometimes will use unanimous consent agreements to customizeprocedures during the consideration of a conference report, and agreements reachedduring initial consideration of a reconciliation measure often are made applicable tothe consideration of the conference report as well. In July of 1997, for example, theSenate considered two reconciliation measures under a unanimous consent agreementthat had been entered into on May 21 of that year, at the time the FY1998 budgetresolution was under consideration. (85) The agreement suspended the application of onecomponent of the Byrd rule under certain circumstances, during both initial actionon the reconciliation measures and during consideration of the conference reports,effectively allowing long-term tax cuts in one act to be offset by long-term spendingreductions in the other.",
      " One chamber may recommit the conference report to the existing conferencecommittee if the other chamber has not yet acted on the report. This situationoccurred in 1982, during House consideration of the conference report (H.Rept.97-750) on the Omnibus Budget Reconciliation Act of 1982. On August 17, 1982,the House recommitted the report to the conference by a vote of 266-145. Subsequently, the conference committee reported a second agreement (H.Rept.97-759), which both chambers accepted. Once a chamber acts on the conference report, the conference committeeformally is dissolved and cannot resume consideration of the measure.",
      " If eitherchamber disagrees to a conference report, \"the matter is left in the position it was inbefore the conference was asked but in the stage of disagreement.\" (86) At thispoint, the chambers may dispose of the matter in disagreement by motion, or send itto a further conference. In the case of reconciliation legislation, a further conferencenever has been convened. Enrollment and Technical Corrections The House and Senate often consider measures pertaining to the enrollmentof complex and lengthy legislation, either to expedite the enrollment or to maketechnical corrections. Title 1, Section 107 of the United States Code, requires that measures beenrolled on parchment paper.",
      " In order to expedite the enrollment of the measure,thereby speeding up its presentation to the President, the requirement in 1 U.S.C. 107sometimes is waived (upon certification by the House Administration Committee thata \"true\" or accurate enrollment is prepared) by the enactment of a joint resolution. On July 31, 1997, for example, the House and Senate agreed to H.J.Res. 90, which waived the enrollment requirements with respect to the two reconciliationmeasures, H.R. 2014 and H.R. 2015. The measure became P.L.105-32 (111 Stat. 250)",
      " on August 1, 1997. Second, the House and Senate may make technical corrections in a measureprior to enrollment by adopting a concurrent resolution directing the Clerk of theHouse or the Secretary of the Senate, as appropriate, to make the necessary changes. Enrollment correction measures may originate in either the House or Senate and oftenhave been used in connection with the reconciliation process. Technical correctionswere made, for example, in the Omnibus Budget Reconciliation Act of 1981 pursuantto H.Con.Res. 167, and such corrections were made in the Omnibus BudgetReconciliation Act of 1983 pursuant to S.Con.Res. 102.",
      "  Table 8. House and Senate Action on Conference Reports on Reconciliation Acts:FY1981-FY2005  Source : Prepared by the Congressional Research Service. Presidential Approval or Disapproval Reconciliation measures follow the same legislative path to enactment asother legislation. After a bill is submitted to him, the President has 10 days(excluding Sundays) in which to approve or disapprove it. If the President signs ordoes not sign the bill during the 10-day period, it becomes law; however, if Congressadjourns sine die during the 10-day period, thereby preventing the bill's return, it isdisapproved by \"pocket veto.\" If the President vetoes the bill during the 10-dayperiod,",
      " it is returned to the chamber in which it originated (as a \"return veto\"), alongwith a message explaining the President's objections. The House and Senate thenhave an opportunity to override the President's veto, thus enacting the measure intolaw. In 1996, the Line Item Veto Act conferred line-item veto authority on thePresident, which President Clinton used in 1997 in connection with tworeconciliation measures and several annual appropriations acts; the act was nullifiedby the Supreme Court in 1998. Presidential Approval Congress has sent the President 19 reconciliation acts, of which 16 have beensigned by the President into law.",
      " None of these measures became law without thePresident signing them. Eleven reconciliation acts were signed into law byRepublican Presidents -- Ronald Reagan (7), George H.W. Bush (2), and George W.Bush (2); five reconciliation acts were signed into law by Democratic Presidents -- Jimmy Carter (1) and Bill Clinton (4). While congressional deliberations on reconciliation legislation are underway,the President may signal his approval of congressional action through various means. In the case of major budgetary legislation, these signals are conveyed principallythrough the issuance of Statements of Administration Policy (SAPs), which theOffice of Management and Budget maintains for the current administration on itsWeb site ( http://www.whitehouse.gov/",
      "omb/ ). SAPs take on more significance ifcongressional action is at significant variance with the President's recommendations. In such instances, his advisers may use SAPs to raise the possibility or likelihood ofa presidential veto if policy adjustments acceptable to the Administration are notmade in the legislation (see discussion below). In view of the significance usually attached to reconciliation legislation, thePresident often signs such legislation into law in an official signing ceremonyattended by Members of Congress, cabinet members, and other executive officialsinvolved in the process that culminated in the enactment of the legislation. Anyofficial statement issued by the President upon the signing of the measure, as well asany remarks made during the event,",
      " are included in the Weekly Compilation ofPresidential Documents, which is maintained by the National Archives and RecordsAdministration and is available at the GPO Access Web site http://www.gpoaccess.gov. Presidential Veto Three of the reconciliation acts sent to the President by Congress were vetoed,all by President Bill Clinton. (87) In each instance, Republican majorities inCongress fashioned reconciliation measures proposing significant policy changes thatwere fundamentally at odds with President Clinton's policy agenda. When an Administration is engaged with Congress in the formulation ofbudgetary legislation, the SAPs may be used to motivate Congress to adopt policiesfavored by the Administration and to drop policies that it does not favor.",
      " Thelanguage of the SAPs may be modulated to present the mix of encouragement andveto threat considered appropriate. With respect to a particular issue encompassedby the legislation, for example, the SAP might express the \"concern\" of seniorAdministration officials and indicate the possibility that they might recommend tothe President that he veto the bill if the offending provisions are retained or notappropriately modified. In the case of the three reconciliation acts that President Clinton vetoed, theSAPs clearly communicated his opposition. The SAP issued on July 27, 1999,pertaining to Senate action on the Taxpayer Refund and Relief Act of 1999,",
      " forexample, stated: \"The Administration strongly opposes the package of tax cutproposals contained in S. 1429. If a bill encompassing these proposalswere to pass the Congress, the President would veto it.\" The bluntness of thewording left Congress no doubt regarding how the President would react to such abill, if it were presented to him. When the President vetoes a bill, he returns it to the House of its origin witha message notifying the chamber of his action and explaining the basis of hisobjections. The veto message, together with the vetoed bill, is printed as a Housedocument.",
      " President Clinton's message to the House regarding his veto of theBalanced Budget Act of 1995 began: I am returning herewith withoutmy approval H.R. 2491, the budget reconciliation bill adopted by theRepublican majority, which seeks to make extreme cuts and other unacceptablechanges in Medicare and Medicaid, and to raise taxes on millions of workingAmericans. (88) The veto message continued with a title-by-title summary of the majorprogrammatic objections to the legislation. In addition, a nine-page enumeration of82 specific objections, arranged by program area (e.g., Medicare, Medicaid, studentloans, food stamps, and special interest tax provisions), was attached.",
      " (89)  Upon the return of a vetoed bill to the House or Senate, the veto message isread and the measure either is reconsidered, referred to committee, or tabled. If thechamber to which the vetoed bill was returned passes it by a two-thirds vote, it isthen sent to the other chamber. If the second chamber also passes it by a two-thirdsvote, then it becomes law over the President's objections. All of the reconciliation bills sent to the President carried a House number. Consequently, the three vetoed bills were returned to the House. The vetoed billswere referred to the committee that reported them,",
      " either the House BudgetCommittee or the House Ways and Means Committee. Subsequent motions todischarge the bill from committee were made with respect to the two bills referredto the Ways and Means Committee. One discharge motion was tabled by a vote of215-203, but the other discharge motion was successful. In that instance, the Housereconsidered the vetoed bill (the Marriage Tax Relief Reconciliation Act of 2000),but the bill failed on a vote of 270-158, by not securing the necessary two-thirdsmargin. These actions are discussed in more detail below: the Balanced Budget Act of 1995 (H.R.",
      " 2491) wasvetoed on December 6, 1995, and returned to the House. Later that day, the chair laidthe veto message (H.Doc. 104-141) before the House, which referred the messageand the bill to the Budget Committee by unanimous consent. The House took nofurther action on the matter. the Taxpayer Refund and Relief Act of 1999 ( H.R. 2488 ) was vetoed on September 23, 1999, and returned to the House. Later that day,the chair laid the veto message (H.Doc. 106-130)",
      " before the House, which referredthe message and the bill to the Ways and Means Committee by voice vote. OnOctober 19, a motion to discharge the bill from committee was tabled by a vote of215-203. the Marriage Tax Relief Reconciliation Act of 2000( H.R. 4810 ) was vetoed on August 5, 2000, and returned to the House. The chair laid the veto message (H.Doc. 106-291) before the House on September6 and, later that day, the House referred the message and the bill to the Ways andMeans Committee by unanimous consent. On September 13,",
      " the House dischargedthe bill from committee and reconsidered it. Upon reconsideration, the bill failed bya vote of 270-158, lacking the necessary two-thirds.  Because the House did not successfully reconsider any of the three vetoedreconciliation bills, they were not sent to the Senate. Line-Item Veto The Line Item Veto Act was enacted into law on April 9, 1996 ( P.L. 104-130 ;110 Stat. 1200-1212) and became effective on January 1, 1997. The main proceduresunder the act were incorporated into the Congressional Budget and ImpoundmentControl Act of 1974,",
      " as amended, as a new Part C of Title X (Sections 1021-1027). Reconciliation measures were included in the several types of budgetary legislationsubject to line item veto authority. In 1998, the Line Item Veto Act was nullified by the Supreme Court in Clinton v. City of New York, 524 U.S. 417 (1998). (90) The caseinvolved actions taken by President Bill Clinton pertaining to reconciliationlegislation enacted in 1997. The reasoning behind the Supreme Court's decision ischaracterized as follows: The Court rejected the argument that thePresident's power to cancel items was a mere exercise of discretionary authoritygranted by Congress.",
      " Instead, the cancellation authority represented the repeal of lawthat could be accomplished only through the regular legislative process, includingbicameralism and presentment. In the two cancellations that reached the Court,Congress did not pass a resolution of disapproval. As a result, the Court concludedthat \"the President has amended two Acts of Congress by repealing a portion ofeach.\" (91) The act authorized the President to cancel any dollar amount of discretionarybudget authority, any item of new direct spending, or any limited tax benefit in an actif such cancellation will reduce the deficit, not impair any essential governmentfunctions, and not harm the national interest.",
      " The President could exercise thisauthority only within five days of signing an act into law. If he chose to line-itemveto any provisions in an act, he was required to notify Congress in a specialmessage. Each cancellation had to be separately identified by its own referencenumber. Congress could consider, under expedited procedures set forth in the act,special legislation to disapprove any cancellations. At the end of July 1997, the House and Senate completed action on tworeconciliation measures implementing the tax cuts and most of the deficit reductioncalled for in the FY1998 budget resolution ( H.Con.Res. 84 ). The firstreconciliation act,",
      " the Balanced Budget Act of 1997 ( H.R. 2015 ), madenet reductions in direct spending of $122 billion over the five fiscal years andincreased the statutory limit on the public debt to $5.950 trillion. The secondreconciliation act, the Taxpayer Relief Act of 1997 ( H.R. 2014 ),contained tax cuts which partially are offset by revenue increases. The net effect ofrevenue changes in the Taxpayer Relief Act of 1997, coupled with several revenueprovisions in the Balanced Budget Act of 1997 (most notably, an increase in thetobacco tax), was a revenue reduction of $95 billion.",
      " President Clinton signed the two measures into law on Tuesday, August 5 --the Balanced Budget Act of 1997 as P.L. 105-33 (111 Stat. 251), and the TaxpayerRelief Act of 1997 as P.L. 105-34 (111 Stat. 788). On Monday, August 11, President Clinton exercised his authority under theLine Item Veto Act to cancel one item of direct spending in the Balanced Budget Actof 1997 and two limited tax benefits in the Taxpayer Relief Act of 1997. Theseactions represented the first use of the line-item veto authority. Cancellation of Limited TaxBenefits.",
      " Section 1027 of the Line Item Veto Act required the JointCommittee on Taxation (JCT) to prepare a statement for any revenue orreconciliation measure (amending the Internal Revenue Code of 1986) for which aconference report was being prepared, identifying whether such legislation containedany limited tax benefits. The conferees, at their discretion, could include the JCTinformation in a separate section of the measure, using a form prescribed by the LineItem Veto Act. If such a section was included, then the President could use theitem-veto authority only against the limited tax benefits identified in the section;otherwise,",
      " the President could use the authority against any provision in the measurethat he felt met the definition of limited tax benefit provided in the act. A total of 80 limited tax benefits were identified in the two reconciliationbills sent to the President. The conference report on the Balanced Budget Act of1997 ( H.Rept. 105-217 ) was filed on July 29. Section 9304 of the act identified onesection as providing a limited tax benefit subject to the line-item veto (see the Congressional Record of July 29, 1997, vol. 143, no. 109, part II, at page H6140). That section,",
      " Section 5406, pertained to the tax treatment of certain servicesperformed by prison inmates. The conference report on the Taxpayer Relief Act of 1997 ( H.Rept. 105-220 )was filed on July 30. Section 1701 set forth a list prepared by the JCT of 79 limitedtax benefits subject to the line-item veto (see the Congressional Record of July 30,1997, vol. 143, no. 110, part II, at pages H6490-91 and H6607-08).  President Clinton applied the line-item veto to two limited tax benefits in theTaxpayer Relief Act of 1997.",
      " The first, identified in his special message asCancellation No. 97-1, canceled Section 1175 (Exemption for Active FinancingIncome) of the act. Cancellation No. 97-2 applied to Section 968 (Nonrecognitionof Gain on Sale of Stock to Certain Farmers' Cooperatives) of the act. Theseprovisions were identified in Section 1701 of the act as items 54 and 30, respectively,and dealt with the sheltering of income in foreign tax havens by financial servicescompanies and the treatment of capital gains on the sale of certain agricultural assets. Cancellation of Direct SpendingItem.",
      " Unlike limited tax benefits, there was no special procedurefor congressional identification of items of new direct spending. The cost estimateprepared by the Congressional Budget Office on the Balanced Budget Act of 1997identified about a dozen accounts that had increases in direct spending for one ormore fiscal years. Presumably, at least a dozen (if not dozens) of \"items\" of newdirect spending were associated with these accounts. President Clinton applied the line-item veto to one item of new directspending in the Balanced Budget Act of 1997. Cancellation No. 97-3 applied tosubsection 4722(c) (Waiver of Certain Provider Tax Provisions)",
      " of Section 4722(Treatment of State Taxes Imposed on Certain Hospitals), a Medicaid provisioninvolving New York State. Appendices Appendix A. Text of Section 310 (Reconciliation) (Section 310 of the Congressional Budget Act of 1974; 2 U.S.C. 641)  Reconciliation Appendix B. Text of Section 313 (the \"Byrd Rule\") (Section 313 of the Congressional Budget Act of 1974; 2. U.S.C. 644)  Extraneous Matter in Reconciliation Legislation Appendix C. Other Congressional Research Service Products on the Budget Reconciliation Process CRS Report 98-",
      "814, Budget Reconciliation Legislation: Development and Consideration, by [author name scrubbed] CRS Report RL30458, The Budget Reconciliation Process: Timing of LegislativeAction, by [author name scrubbed]. CRS Report RL30862, The Budget Reconciliation Process: The Senate's \"ByrdRule,\" by [author name scrubbed]. CRS Report RL30714, Congressional Action on Revenue and Debt ReconciliationMeasures in 2000, by [author name scrubbed]. CRS Report RL31902(pdf), Revenue Reconciliation Directives in the FY2004 BudgetResolution, by [author name scrubbed]. CRS Report RS20870,",
      " Revenue Reconciliation Directives to the Senate FinanceCommittee in Congressional Budget Resolutions, by [author name scrubbed]. CRS Report RS21993, Spending Reconciliation Directives to the Senate FinanceCommittee in Congressional Budget Resolutions, by [author name scrubbed] and [author name scrubbed] CRS Report RS22098, Deficit Impact of Reconciliation Legislation Enacted in 1990,1993, and 1997, by [author name scrubbed]. CRS Report RS22160(pdf), Reconciliation and the Deficit in FY2006 and ThroughFY2010: Fact Sheet, by Philip D. Winters.",
      " CRS Congressional Distribution Memorandum, January 14, 2005, ReconciliationDirectives to House Committees in Budget Resolutions for FY1976-FY2005, by BillHeniff Jr. CRS Congressional Distribution Memorandum, Reconciliation Directives to SenateCommittees in Budget Resolutions for FY1976-FY2005, January 14, 2005, by BillHeniff Jr.\n"
    ],
    "length": 31995,
    "hardness": null,
    "role": null
  },
  {
    "id": 102,
    "question": null,
    "answer": "The transformation of the Government Printing Office (GPO) is under way. This report captures the results of our efforts over the past year to assess and help strengthen GPO's transformation and strategic planning efforts. It is the final part of GAO's response to both a mandate requiring GAO to examine the current state of printing and dissemination of public government information and a congressional request that we conduct a general management review of GPO focusing on that GPO's transformation and management. Federal government printing and dissemination are changing due to the underlying changes to the technological environment. The Public Printer and his leadership team understand the effects of this technological change on GPO and have begun an ambitious effort to transform GPO and reexamine its mission. Federal agencies are publishing more documents directly to the Web and are doing more of their printing and dissemination of information without using GPO services. At the same time, the public is obtaining government information from government Web sites such as GPO Access rather than purchasing paper copies. As a result, GPO has seen declines in its printing volumes, printing revenues, and document sales. To assist in the transformation process under way at GPO, GAO convened a panel of printing and information dissemination experts, who developed a series of options for GPO to consider in its strategic planning. The panel suggested that GPO (1) develop a business plan to focus its mission on information dissemination as its primary goal, rather than printing; (2) demonstrate to its customers the value it can provide; (3) improve and extend partnerships with agencies to help establish itself as an information disseminator; and (4) ensure that its internal operations are adequate for efficient and effective management of core business functions and for service to its customers. GPO can also use other key practices that GAO identified to help agencies successfully transform, such as involving employees to obtain their ideas and gain their ownership for the transformation. GPO fully applied one of these practices, related to ensuring that top management drives the transformation, and has partially implemented each of the remaining eight practices. To fully implement the remaining practices, GPO needs to take actions including establishing its mission and strategic goals and developing a documented plan for its transformation. GPO has taken some initial steps to adopt the best practices of other public and private sector organizations, most notably with respect to human capital management. GPO is actively implementing the recommendations GAO made in October 2003. For example, GPO reorganized the human capital office into customer-focused teams devoted to meeting the human capital needs of GPO's operating units. Continued leadership attention is needed to build on the initial progress made in information technology and financial management. For example, GPO should implement an information technology investment management process to help management choose, monitor, and evaluate projects, and GPO should train its line managers to effectively use financial data.\n",
    "docs": [
      "Background GPO\u2019s mission includes both printing government documents and  disseminating them to the public. Under the public printing and documents  statutes of Title 44 of the U.S. Code, GPO\u2019s mission is to fulfill the printing  needs of the federal government and to distribute those printed products to  the public. All printing for the Congress, the executive branch, and the  judiciary\u2014except for the Supreme Court\u2014is to be done or contracted by  GPO except for authorized exemptions. The Superintendent of  Documents, who heads GPO\u2019s Information Dissemination division,  disseminates these government products to the public through a system of  nearly 1,",
      "300 depository libraries nationwide (the Federal Depository  Library Program), GPO\u2019s Web site (GPO Access), telephone and fax  ordering, an on-line ordering site, and its bookstore in Washington, D.C.  The Superintendent of Documents is also responsible for classification and  bibliographic control of tangible and electronic government publications. Printing and related services. In providing printing and binding services  to the government, GPO generally dedicates its in-house printing  equipment to congressional printing, contracting out most printing for the  executive branch. Table 2 shows the costs of these services in fiscal year  2003, as well as the source of these printing services.",
      " Documents printed for the Congress include the Congressional Record,  hearing transcripts, bills, resolutions, amendments, and committee reports,  among other things. GPO also provides publishing support staff to the  Congress. These support staff mainly perform print preparation activities,  such as typing, scanning, proofreading, and preparation of electronic data  for transmission to GPO. GPO generally provides printing services to federal agencies through an  acquisition program that relies on the commercial sector by passing the  contractors\u2019 costs on to its government customers. Prequalified businesses,  small to large in size, compete for printing jobs that GPO printing experts  oversee to ensure that the contractors meet customer requirements for  quality.",
      " For this service, GPO attaches a 7 percent surcharge that GPO  officials have stated was established partly by what the market will bear  and partly by what is needed to cover GPO expenses. GPO procures about  83 percent of printing for federal agencies from private contractors and  does the remaining 17 percent at its own plant facilities. Most of the  procured printing jobs (85 percent for the period from June 2002 to May  2003) were for under $2,500 each. Besides printing, GPO provides a range of services to agencies including,  for example, CD-ROM development and production,",
      " archiving/storage,  converting products to electronic format, Web hosting, and Web page  design and development. Dissemination of government information. The Superintendent of  Documents is responsible for the acquisition, classification, dissemination,  and bibliographic control of tangible and electronic government  publications. Regardless of the printing source, Title 44 requires that  federal agencies make all their publications available to the Superintendent  of Documents for cataloging and distribution. The Superintendent of Documents manages a number of programs related  to distribution, including the Federal Depository Library Program (FDLP),  which provides copies of government publications to libraries across the  country for public use.",
      " Generally, documents distributed to the libraries  are those that contain information on U.S. government activities or are  important reference publications. GPO evaluates documents to determine  whether they should be disseminated to the depository libraries. When  documents are printed through GPO, it evaluates them at the time of  printing; if documents are not printed through GPO, agencies are to notify  GPO of these documents, so that it can evaluate them and arrange to  receive any copies needed for distribution. A relatively small percentage of  the items printed through GPO for the executive branch are designated as  depository items. Another distribution program under the Superintendent of Documents is  the Sales of Publications Program,",
      " which purchases, warehouses, sells, and  distributes government documents. Publications are sold by mail,  telephone, and fax; through GPO\u2019s on-line bookstore; and at its bookstore  in Washington, D.C. In addition, GPO provides electronic copies of the  Congressional Record and other documents to the Congress, the public,  and the depository libraries in accordance with the Government Printing  Office Electronic Information Access Enhancement Act of 1993. The Superintendent of Documents is also responsible for GPO\u2019s Web site,  GPO Access, which is one mechanism for electronic dissemination of  government documents to the public through links to over 268,",
      "000  individual titles on GPO\u2019s servers and other federal Web sites. More than 2  billion documents have been retrieved by the public from GPO Access  since August 1994; almost 372 million downloads of government  information from GPO Access were made in fiscal year 2002 alone. About  two-thirds of new FDLP titles are available online. GPO Is Funded by  Appropriations and by a  Revolving Fund GPO receives funding from two appropriations: (1) the Congressional  Printing and Binding Appropriation, which is used for in-house printing of  congressional activities and (2) the Salaries and Expenses Appropriation,",
      "  which is used for certain Superintendent of Documents activities. In addition to these appropriations, GPO has a business-oriented revolving  fund, which is used to fund its procured printing, document sales, and  other operations. The revolving fund was designed to financially \u201cbreak  even\u201d by recovering costs through rates, prices, and other charges to  customers for goods and services provided by GPO. The revolving fund is  supported by the 7 percent service charge levied on agency customers of  GPO-procured printing services and also receives funds from sales of  publications to the general public. Trends in Printing and  Information Dissemination Current printing industry trends show that the total volume of printed  material has been declining for the past few years,",
      " and this trend is  expected to continue. A major factor in this declining volume is the use of  electronic media options. The move to electronic dissemination is the  latest phase in the electronic publishing revolution that has transformed  the printing industry in recent decades. This revolution was driven by the  development of increasingly sophisticated electronic publishing (\u201cdesktop  publishing\u201d) software, run on personal computers, that allows users to  design documents including both images and text, and the parallel  development of electronic laser printer/copier technology with capabilities  that approach those of high-end presses. These tools allow users to  produce documents that formerly would have required professional  printing expertise and large printing systems.",
      " These technologies have brought major economic and industrial changes to  the printing industry. As electronic publishing software becomes  increasingly sophisticated, user-friendly, and reliable, it approaches the  ideal of the print customer being able to produce files that can be  reproduced on the press with little or no intervention by printing  professionals. As the printing process is simplified, the customer can take  responsibility for more of the work. Thus, the technologies diminish the  value that printing organizations such as GPO add to the printing process,  particularly for simpler printing jobs. Nonetheless, professional expertise  remains critical for many aspects of printing, and for many print jobs it is  still not possible to bypass the printing professional altogether.",
      " The advent of the Internet permits the instantaneous distribution of the  electronic documents produced by the new publishing processes, breaking  the link between printing and dissemination. With the increasing use of the  Web, the electronic dissemination of information becomes not only  practical, but also more economical than dissemination on paper. As a result, many organizations are changing from a print to an electronic  focus. In the early stages of the electronic publishing revolution,  organizations tended to prepare a document for printing and then convert  the print layout to electronic form\u2014in other words, focusing on printing  rather than dissemination. Increasingly, however, organizations are  changing their focus to providing information\u2014not necessarily on paper.",
      "  Today an organization may employ computers to generate both plates used  for printing as well as electronic files for dissemination. Tomorrow, the  organization may create only an electronic representation of the  information, which can be disseminated through various media, such as  Web sites. A printed version would be produced only upon request. Government Printing  and Dissemination  Changes Are Forcing  GPO\u2019s Transformation As in private industry, printing and dissemination in the federal government  are being heavily affected by the changing technological environment. This  new environment presents both financial and management challenges to  GPO. Just as the volume of material provided to private firms for printing  has decreased over the past few years,",
      " so has the volume of material that  federal agencies provide to GPO for printing. In addition, federal agencies  are publishing more items directly to the Web\u2014without creating paper  documents at all\u2014and are able to print and disseminate information  without using GPO services. Similarly, individuals are downloading  documents from government Web sites, such as GPO Access, rather than  purchasing paper copies of government documents, thus reducing  document sales. As a result, GPO\u2019s financial condition has deteriorated,  and the relationship between GPO and its federal agency customers has  changed. Changes in Government  Printing and Dissemination  Result in Reduced Revenues The reduction in the demand for procured printing and for printed  government documents has resulted in reduced revenues to GPO.",
      " These  diminished revenues, combined with steady expenses and management\u2019s  use of retained earnings for GPO-wide needs, have totally depleted the  retained earnings from revolving fund activities. These retained earnings  have gone from a surplus of $100 million in fiscal year 1998 to a deficit of  $19 million in fiscal year 2003. Figure 1 shows the declining trend in  retained earnings. Specifically, most of the reductions to revenues for GPO\u2019s revolving fund  activities are from two sources: (1) losses to the sales of publications  operations and (2) adjustments to actuarial calculations of future  liabilities for GPO\u2019s workforce compensation.",
      " Additional reductions to  retained earnings resulted from GPO\u2019s procured printing operations and  regional printing. (See fig. 2.) Also, retained earnings were used to provide  the Retirement Separation Incentive Program for reductions to GPO\u2019s  workforce. Losses to the sales program account for the largest reductions to GPO\u2019s  retained earnings. The sales program has had a net loss of $77 million over  the past 5 years, $20 million in fiscal year 2003 alone. According to GPO,  these losses are due to a downward trend in customer demand for printed  publications that has significantly reduced document sales revenues.",
      " For  example, according to the Superintendent of Documents, GPO sold 35,000  subscriptions to the Federal Register 10 years ago and now sells 2,500; at  the same time, over 4 million Federal Register documents are downloaded each month from GPO Access. The Superintendent also reported that the  overall volume of sales has dropped from 24.3 million copies sold in fiscal  year 1993 to 4.4 million copies sold in fiscal year 2002. As a result, revenues  have not covered expenses, and the sales program has sustained significant  annual operating losses. (See fig. 3.) By comparison,",
      " the losses from GPO\u2019s procured printing business are less  significant: $15.8 million over the last 5 years. According to GPO, its federal  agency print jobs at one time generated close to $1 billion a year. In fiscal  year 2003, the amount was just over half that\u2014$570 million. Changes in Printing and  Dissemination Affect How  Federal Agencies Use GPO  Services These changes in federal printing and dissemination are also creating  challenges for GPO\u2019s long-standing structure for centralized printing and  dissemination. As mentioned earlier, agencies are to notify GPO of  published documents (if they used other printing sources), which allows  GPO to review agency documents to determine whether the documents  should be disseminated to the depository libraries.",
      " If they should be, GPO  can then add a rider to the agency\u2019s print contract to obtain the number of  copies that it needs for dissemination. However, if agencies do not notify  GPO of their intent to print, these documents become \u201cfugitive documents\u201d  and may not be available to the public through the depository library  program. In responding to our surveys, executive branch agencies reported that they  are producing a significant portion of their total printing volume internally,  generally on desktop publishing and reproduction equipment instead of  large-scale printing equipment. In addition, while most agencies (16 of 21)  reported that they have established procedures to ensure that documents  that should be disseminated through the libraries are forwarded to GPO,",
      " 5  of 21 did not have such procedures, thus potentially adding to the fugitive  document problem. Responding agencies also reported that although currently more  government documents are still being printed than are being published  electronically, more and more documents are being published directly to  the Web, and their numbers are expected to grow in the future. Most  agencies reported that documents published directly to the Web were not  of the type that is required to be sent to GPO for dissemination. However, a  GPO official, in commenting on this, said that unless there is a specific  reason why a document should not be disseminated to the public,",
      " such as if  it is classified or of administrative interest only, GPO should have the  opportunity to evaluate whether that document is suitable for  dissemination through its depository library system. Of the five agencies that did publish eligible documents electronically, only  one said that it had submitted these documents to GPO. As electronic  publishing continues to grow, such conditions may contribute further to the  fugitive document problem. Change in Printing and  Dissemination Affect  Relationship between GPO  and Executive Branch  Customers The ongoing agency shift toward electronic publishing is also creating  challenges for GPO\u2019s existing relationships with its executive branch  customers.",
      " In responding to our surveys, executive branch agencies  expressed overall satisfaction with GPO\u2019s products and services and  expressed a desire to continue to use these services for at least part of their  publishing needs. However, these agencies reported a few areas in which  GPO could improve\u2014for example, in the presentation of new products and  services. (We provide further results from our surveys on agency  satisfaction in app. III.) Further, some agencies indicated that they were less familiar with and less  likely to use GPO\u2019s electronic products and services. As shown in table 3,  these agencies were hardly or not at all familiar with services such as Web  page design and development (8 of 28), Web hosting services (8 of 29), and  electronic publishing services (5 of 28). As a consequence,",
      " these agencies  were also less likely to use these services. With the expected growth in  electronic publishing and other services, making customer agencies fully  aware of GPO\u2019s capabilities in these areas is important. Table 3 provides  agency responses on their familiarity with various GPO products and  services. A few of the responding agencies reported less than satisfied ratings for  some GPO products and services. Among these services were financial  management services (7 of 23) and Web page design/development (3 of 10).  Agencies also reported not using some GPO products and services,  including Web hosting and Web page design/development services (18 of  28), converting products to electronic format (11 of 28), and electronic  publishing services (9 of 28). Table 4 shows the results of our survey on  agency satisfaction with GPO services,",
      " which includes agencies\u2019 reports of  products and services that they do not use. GPO Is Taking Action to  Address Challenges GPO officials agreed with our assessment of the impact of technological  change and said they are taking action to make GPO a more customer- focused organization. According to these officials, GPO is  taking a new direction with its Office of Sales and Marketing, including  hiring an outside expert and establishing nine national account  managers, who spend most of their time in the field building  relationships with key customers, analyzing their business processes,  identifying current and future needs, and offering solutions;  working with its largest agency customer,",
      " the Department of Defense, to  determine how to work more closely with large in-house printing  operations;  evaluating recommendations received from the Depository Library  Council; and  continuing to implement a Demonstration Print Procurement Project,  jointly announced with the Office of Management and Budget on June 6,  2003. The Demonstration Print Procurement Project is to provide a Web-based  system that will be a one-stop, integrated print ordering and invoicing  system. The system is to allow agencies to order their own printing at  reduced rates, with the option of buying additional printing procurement  services from GPO. According to GPO,",
      " this project is also designed to  address many of the issues identified through our executive branch  surveys, particularly the depository library fugitive document problem. Recommended Next Steps Although executive branch agencies generally expressed satisfaction with  GPO products and services, their survey responses indicate some areas for  improvement. Accordingly, we recommend that the Public Printer   work with executive branch agencies to examine the nature of their in- house printing and determine whether GPO could provide these  services more economically;  address the few areas in which executive branch agencies rated GPO\u2019s  products, services, and performance as below average;  reexamine GPO\u2019s marketing of electronic services to ensure that  agencies are aware of them;",
      " and  use the results of our surveys to work with agencies to establish  processes that will ensure that eligible documents (whether printed or  electronic) are forwarded to GPO for dissemination to the public, as  required by law. Expert Panel Suggests  Strategic Options for GPO\u2019s  Future Role The Public Printer and his leadership team recognize the challenges that  they face in the very competitive printing and dissemination marketplace  and have embarked upon an ambitious effort to transform the agency. First  and foremost, the Public Printer agrees with the need to reexamine the  mission of the agency within the context of technological change that  underlies GPO\u2019s current situation.",
      " To assist in that process, our expert  panel developed a series of options for GPO to consider in its planning.  Briefly, the panel suggested that GPO   develop a business plan to focus its mission on information  dissemination as its primary goal, rather than printing;  demonstrate to its customers\u2014including agencies and the public\u2014the  value it can provide;  improve and extend partnerships with agencies to help establish itself  as an information disseminator; and  ensure that its internal operations\u2014including technology, how it  conducts business with its customers, management information  systems, and training\u2014are adequate for efficient and effective  management of core business functions and for service to its customers.",
      " We shared the results of the panel with GPO leadership, who commented  that the panel\u2019s suggestions dovetail well with their own assessments.  These leaders stated that they are using the results of the panel as a key  part of the agency\u2019s ongoing strategic planning process. The panel  members are listed in appendix IV. Create a New Vision  Focusing on Dissemination In view of the changing federal government printing and dissemination  environment, the panel suggested that GPO first needs to create a new  vision of itself as a disseminator of information, and not only a printer of  documents. As one panel member put it,",
      " GPO should end up resembling a  bank of information rather than a mint that stamps paper. As a first step in this new vision, according to the panel, GPO needs to  develop a business plan that emphasizes direct electronic dissemination  methods over distribution of paper documents. The panel identified several  elements that could be included in such a business plan:  Improving GPO Access. GPO Access should be upgraded, and particular  emphasis should be placed on improving the search capabilities. Investigating methods to disseminate information directly. For  example, GPO could develop additional services to \u201cpush\u201d data and  documents into the hands of those who need or want them.",
      " To become  more active in disseminating data, GPO could provide information to  public interest or advocacy groups that are interested in tracking  government information on certain subjects. These groups require  something like a news clipping service, and the panel suggested that this is  one way in which GPO could provide \u201cvalue-added\u201d service for which it  could collect fees. Modernizing production processes. GPO should be moving toward  production processes that will allow it to prepare a document once for  distribution through various media (print or electronic). In the past, most  organizations have focused on printing paper documents that are then  turned into electronic ones.",
      " According to the panel members, the strategy  for the future is to publish electronically and print only when necessary. Promote the federal use of metadata. GPO should support the use of  metadata\u2014descriptive information about the data provided that is carried  along with the data\u2014across the federal government as a requirement for  electronic publishing. Providing increased support to the depository libraries. According to  the panel, the depository libraries will continue to play an important role in  providing access to electronically disseminated government information\u2014 through GPO Access and other tools\u2014to that portion of the public that  does not have access to the Internet.",
      " To support this role, GPO will have to  ensure that the depository libraries receive training in electronic search  tools, especially in GPO Access. GPO officials stated that its Office of Innovation and New Technologies,  established in early 2003, is leading an effort to transform GPO into an  agency \u201cat the cutting edge of multichannel information dissemination.\u201d A  major goal in this effort is to disseminate information while still addressing  the need \u201cto electronically preserve, authenticate, and version the  documents of our democracy.\u201d Also, GPO has established an Office of New  Business Development that is to develop new products and service ideas  that will result in increased revenues.",
      " GPO officials stated that they are  using the results of the panel discussion to categorize and prioritize their  initial compilation of ideas for new products and services and, in this  context, plan to assess how these ideas would improve operations and  revenue. Demonstrate Value to  Customers and the Public The panel also agreed that, while GPO appears to provide value to agencies  because of its expertise in printing and dissemination, it is not clear that  agencies and the general public realize this. Therefore, GPO should focus  on demonstrating its value to federal agencies and to the public. According  to the panel, areas that GPO could emphasize include the following:",
      " Providing competitively priced printing that meets customer needs.  GPO should collect the data to show that it can, in fact, provide the \u201cbest  value\u201d for the government print dollar. GPO should demonstrate its  capabilities by assisting agencies to select optimal alternatives for  obtaining their printing. Providing expert assistance in electronic dissemination. Given GPO\u2019s  major role in providing information dissemination, one panel member  suggested that GPO provide its expert advice on electronic Web site  dissemination to agencies. Once again, GPO could develop information that  demonstrates how it can add value in this area. Disseminating government information to the public. GPO should  focus on demonstrating the usefulness of agencies\u2019 sharing information  with GPO for public dissemination.",
      " In addition, the depository libraries and  GPO Access should be made better known to the public. GPO could  demonstrate its value to the public as a trusted source of authentic  government information. GPO agreed that demonstrating its value is an important part of its new  customer service direction. GPO\u2019s Office of Sales and Marketing is also  working to augment customer service, including hiring an outside expert  and establishing nine national account managers, as mentioned earlier. Establish Partnerships with  Collaborating and Customer  Agencies According to the panel, GPO should establish partnerships with other  agencies and enhance the partnerships it already has. These partnerships  can be used to assist GPO in establishing itself as a disseminator and  depository of information and to expand agencies\u2019 use of GPO in this role.",
      "  Specifically, the panel suggested that GPO establish partnerships with the  other information dissemination and preservation agencies (such as the  National Library of Medicine, the Office of Scientific and Technical  Information, the Library of Congress, and the National Archives and  Records Administration) with which it has related responsibilities.  Through ongoing dialogue with these agencies, GPO will be able to  (1) coordinate standards and best practices for digitizing documents and  (2) work with agencies to archive documents in order to keep them  permanently available to the public. GPO could be successfully marketed  as the source of government information for public use. In addition,",
      " the panel suggested that GPO improve and expand its  partnerships with other agencies. Most agencies consider GPO a resource  for printing documents; however, it now has the capability to assist in the  collection and dissemination of electronic information. GPO agreed that partnerships with other agencies, particularly the  information dissemination agencies, would be a key item in its  transformation. GPO has made efforts to join various working groups  within the government working on information dissemination issues. Most  recently, the Public Printer has been added to the oversight committee of  the National Digital Information Infrastructure and Preservation Program  (NDIIPP), a national cooperative effort to archive and preserve digital  information,",
      " led by the Library of Congress. Improve Internal Operations The panel suggested that GPO would need to improve its internal  operations to be successful in the very competitive printing and  dissemination marketplace. Panel members suggested that GPO consider  the following strategies. Emphasize the use of technology to address future needs. The panel  members suggested that GPO hire a chief technical officer (in addition to  its chief information officer), who would focus on bringing in new printing  and dissemination technologies while maintaining older technologies. Improve how it conducts business with its customers. An electronic  means for submitting printing requests would streamline the printing  process for GPO customers.",
      " One panel member noted that when his  organization started an electronic submission system for manuscripts, the  number of requests it received increased dramatically because such  systems made it easier for the user. (GPO\u2019s demonstration project,  currently being piloted at the Department of Labor, includes use of a Web- based tool for submitting printing requests.) Improving management information systems. GPO should overhaul its  outdated management information systems and acquire new ones that can  provide management with the information it needs to effectively monitor  operations and to make good business decisions. Enhance employee training. GPO\u2019s transformation should include  significant improvements to employee training. GPO customer service  employees should have the knowledge they need to effectively assist  customers not only in printing publications and creating electronic  documents,",
      " but also in advising customers on the best form of  dissemination (paper or electronic) for their jobs. GPO agreed that its internal operations need improvement. Among its  actions to address the adequacy of its internal functions, GPO has hired a  chief technical officer. The chief technical officer serves as a codirector of  the Innovation and New Technology Office and provides principal guidance  in the creation and development of technology designed to accelerate the  transformation of GPO into a 21st century information organization using  state of the art solutions to provide the highest quality government  information services to the nation. GPO Has Made the  Case for Change,",
      " but  Actions to Advance  Transformation  Needed Large-scale change management initiatives, such as organizational  transformations, are not simple endeavors and require the concentrated  efforts of both leadership and employees to realize intended synergies and  to accomplish new organizational goals. We have identified a number of  key practices and related implementation steps that have consistently been  found at the center of successful transformations. Collectively, these key  practices and implementation steps can help agencies transform their  cultures so that they have the capacity to fulfill their promises, meet  current and emerging needs, maximize their performance, and ensure  accountability. GPO has applied some key practices as part of its  transformation effort,",
      " such as involving top leadership and strategically  communicating with employees and other stakeholders. However, it has  not fully applied key practices that emphasize planning and goal setting.  For example, GPO has not developed a plan for its transformation that  would include goals and strategies to achieve its goals. Such a plan is  important to pinpoint performance shortfalls and gaps and suggest  midcourse corrections. GPO\u2019s Leadership Has  Clearly Articulated the Need  to Transform and Taken  Steps to Ensure the  Continued Delivery of  Services Because transformation of an organization entails fundamental change,  strong and inspirational leadership is indispensable. Our work has found  that leadership articulating a succinct and compelling reason for change  helps employees,",
      " customers, and stakeholders understand the expected  outcomes of the transformation and engenders not only their cooperation,  but also their ownership of these outcomes. In addition, to ensure that the  productivity and effectiveness of the organization do not decline,  leadership must also balance the continued delivery of services with  transformation activities. Ensure top leadership drives the  transformation. Define and articulate a succinct and compelling  reason for change. Balance continued delivery of services with  transformation activities. On several occasions and to different audiences, the Public Printer has  reiterated the need for GPO to move from the 19th century to the 21st  century. The Public Printer bases his case for change on three interrelated  points that are consistent with our findings discussed above:",
      "  GPO\u2019s printing business and customer base has decreased significantly  in recent years due to the government\u2019s and public\u2019s increased use of  and reliance on electronic documents, necessitating GPO to establish  itself as the leading organization within the federal government for  dealing with the collection, authentication, and preservation of  government documents\u2014rather than a traditional printing operation. GPO has failed to update its technological abilities to keep pace with  changes in the information dissemination environment, and as a result  must update its technology to address the needs of today\u2019s customers  and information users and stay alert to future trends and changing  needs. GPO\u2019s retained earnings,",
      " which were normally available to fund  technological investment, are virtually depleted, requiring GPO to  change the way in which it does business to ensure that it can reverse  the trend of financial losses. GPO\u2019s precarious financial condition makes it essential that its leaders  effectively balance transformation efforts with the continued delivery of  services. The Public Printer created and filled eight top leadership  positions. The creation of these positions recognized that the demands of  transforming while managing an ongoing operation can strain leadership,  as well as the importance of organizational structure as a key factor  affecting an agency\u2019s management control environment. These positions,  which had no counterpart in GPO\u2019s former organization,",
      " can help ensure  that GPO balances its transformation efforts with its day-to-day operations.  For example, the Chief Operating Officer (COO) focuses primarily on day- to-day activities, the Chief of Staff focuses on strategic planning, and the  Chief Human Capital Officer (CHCO), CIO, and CFO address both types of  activities within their respective functional areas. (See fig. 4.) GPO Has Set Interim Goals  for Its Operating Units  While It Works on a  Strategic Plan The mission and strategic goals of a transformed organization must  become the focus of the transformation, define the culture, and serve as the  vehicle for employees to unite and rally around.",
      " In successful  transformation efforts, developing, communicating, and constantly  reinforcing the mission and strategic goals give employees, customers, and  stakeholders a sense of what the organization intends to accomplish, as  well as helping employees determine how their positions fit in with the new  organization and what they need to do differently to help the new  organization achieve success. Adopting leading practices for results- oriented strategic planning and reporting, including those mandated for  executive agencies in the Government Performance and Results Act  (GPRA), can help focus transformation efforts. While GPO is not required  to follow GPRA, the act can provide a relevant framework for GPO to  follow in developing its strategic plan.",
      " GPRA requires that strategic plans  include several elements, including a mission statement, goals and  objectives, and approaches or strategies to achieve goals and objectives.  The framework can help an agency meet management control standards by  enabling top management review of actual performance against planned  performance. Establish a coherent mission and  integrated strategic goals to guide  the transformation. Adopt leading practices for results-oriented strategic  planning and reporting. GPO is establishing a mission and strategic goals. Its overall approach is to  consider the information gathered in the past year on GPO\u2019s current  environment\u2014including the results of our work\u2014and develop its strategic  plan by the summer of 2004.",
      " Specific responsibilities for drafting a strategic  plan have been placed with the Chief of Staff, who, beginning in April 2004,  held biweekly meetings with the Public Printer to discuss the direction for  the strategic plan. These meetings were meant to provide the Chief of  Staff with updates on the Public Printer\u2019s vision, which, according to a GPO  official, is being developed as he meets with stakeholders and industry  leaders. Over the past year, the Public Printer has spoken with employees,  stakeholders, and the Congress to help focus and refine a vision for GPO\u2019s  future. On April 28, 2004,",
      " the Public Printer made his most clear and direct  statement of his vision for GPO thus far, stating that GPO has \u201cbegun to  develop a new vision for the GPO: an agency whose primary mission will be  to capture digitally, organize, maintain, authenticate, distribute, and  provide permanent public access to the information products and services  of the federal government.\u201d GPO\u2019s strategic plan has the potential to unite  employees around the new mission and determine what they need to do to  help GPO transform and achieve success in the new environment. Although GPO has not fully developed its mission and strategic goals,  GPO\u2019s leadership has started to change GPO\u2019s culture by setting interim  goals for major operating units.",
      " Managers told us that in the past, GPO\u2019s  culture was to not set goals in order to avoid being held accountable for  results. More specifically, GPO did not set or track any organizational goals  and, therefore, did not develop the capacity to measure performance. The  COO began to change GPO\u2019s culture by leading an initiative in October 2003  to develop goals for its operating units and told us that it was important to  begin to focus managers\u2019 attention on priority issues and hold them  accountable for progress. He said he viewed the interim goals as a  necessary step to prepare GPO managers to operate in a results-oriented  environment after GPO\u2019s strategic plan is completed.",
      " The COO met with the heads of each business unit to develop goals that  they thought would be consistent with GPO\u2019s yet-to-be-developed strategic  mission based on discussions with the Public Printer. Once the goals were  developed, the COO and business unit managers identified areas where  some interdependence with other managers\u2019 goals might exist. Each  manager is responsible for achieving between 6 and 11 goals that are  specific to his or her business unit, and 6 additional goals that are common  across GPO. The common goals are as follows:   offer training opportunities to all employees in necessary job skills;  establish baseline information on customer satisfaction;",
      "  resolve all reportable conditions from financial audits;  establish a line of communication through regular meetings to   complete second-level reorganizations; and   establish adequate off-site backup to enable continuity of essential  operations. GPO\u2019s efforts to set goals are a significant step toward strengthening  communication and accountability; however, many of the goals do not  emphasize outcomes. For example, one of the goals for both the Customer  Services and Information Dissemination divisions is to implement the  Office of Management and Budget (OMB) compact demonstration  program. While this demonstrates that GPO has incorporated cross- cutting goals between its operating units, this goal is a statement of a task  to be accomplished rather than an outcome to be achieved.",
      " While goals are important for establishing accountability, so too are  measures, because they allow leaders to perform their management control  responsibilities for monitoring performance and ensuring resolution of  identified performance gaps. GPO\u2019s COO has stated that he would like to  strengthen performance measurement as GPO sets its goals for fiscal year  2005. To this end, GPO has the opportunity to learn from the practices of  leading organizations that implemented results-oriented management.  Among other things, such leading organizations generally developed  measures that were tied to program goals, demonstrated the degree to  which the desired results were achieved, and were limited to the vital few  that were considered essential to producing data for decision making.",
      " Recommended Next Steps Consistent with the efforts under way, the Public Printer should ensure that  GPO\u2019s strategic planning process includes development of  a comprehensive agency mission statement to define the basic purpose   agencywide long-term goals and objectives to explain what results are  expected from the agency\u2019s main functions and when to expect those  results;  approaches or strategies to achieve goals and objectives to align GPO\u2019s  activities, core processes, and resources to support achievement of  GPO\u2019s strategic goals and mission;  a description of the relationship between the long-term and annual goals  to show expected progress;  an identification of key external factors to help determine what actions  will be needed to meet the goals;",
      " and  a description of program evaluations used to establish or revise  strategic goals, and a schedule for future program evaluations. The Public Printer should reinforce a focus on results by continuing efforts  to set goals, measure performance, and hold managers accountable by  adopting leading practices of organizations that have been successful in  measuring their performance. First, the measures that GPO develops  should be  tied to program goals and demonstrate the degree to which the desired   limited to the vital few that are considered essential to producing data   responsive to multiple priorities, and   responsibility-linked to establish accountability for results. Second, GPO leadership needs to recognize the cost and effort involved in  gathering and analyzing performance data and make sure that the data it  collects are sufficiently complete,",
      " accurate, and consistent to be useful in  decision making. GPO Can Strengthen Its  Transformation by Focusing  on a Key Set of Principles  and Priorities Principles are the core values of the new organization; like the mission and  strategic goals, they can serve as an anchor that remains valid and enduring  while organizations, personnel, programs, and processes may change. Core  values define the attributes that are intrinsically important to what the new  organization does and how it will do it. They represent the institutional  beliefs and boundaries that are essential to building a new culture for the  organization. Focus on a key set of principles  and priorities at the outset of the  transformation.",
      " Embed core values in every aspect of the  organization to reinforce the new culture. GPO leadership has not adopted a set of agencywide core values to help  unify GPO to achieve its transformation, but has created a task team under  the direction of the Deputy Chief of Staff to develop them. Although the  core values have yet to be developed, they are referenced in draft  performance agreements for its senior managers. The experience of a GPO unit demonstrates the benefits of having core  values. According to the Director of the Pueblo Document Distribution  Center, core values were developed in 1998 that helped change the center\u2019s  culture and focus employees on improving the center\u2019s performance.",
      " The  employees at Pueblo had a series of meetings to develop and agree on the  core values, thereby taking ownership of them and reinforcing employees\u2019  understanding that they were responsible for the success of the Pueblo  facility. Figure 5 shows a banner detailing these core values that hangs  prominently in the facility. Employees said that the banner is a constant reminder that their individual  and organizational success is dependent on how well they employ the core  values as they serve their customers. The Pueblo Document Distribution  Center Director said that establishing core values has helped employees  take ownership for improving customer service, as measured by the  center\u2019s per order error rate.",
      " He said that the employees understand the  importance of these core values because most of their work is done on a  reimbursable basis for other federal agency customers, the center\u2019s  primary source of funding. Efforts to improve customer service are  consistent with the recommendation made by the panel of printing and  information dissemination experts we convened. Recommended Next Steps articulate to all employees how the core values can guide GPO\u2019s  transformation and serve to anchor GPO\u2019s transformation efforts and  ensure core values developed by units within GPO are consistent with  GPO\u2019s agencywide core values. GPO Does Not Have a  Transformation Plan, but  Has Taken Steps to  Demonstrate Progress Because a transformation is a substantial commitment that could take  years to complete,",
      " it must be carefully and closely managed. As a result, it  is essential to establish and track implementation goals and establish a  timeline to pinpoint performance shortfalls and gaps and suggest  midcourse corrections. Further, research suggests that failure to  adequately address\u2014and often even consider\u2014a wide variety of people  and cultural issues is at the heart of unsuccessful transformations. Thus,  people and cultural issues must be monitored from day one of a  transformation. Set implementation goals and a  timeline to build momentum and  show progress from day one. Make public implementation goals and timeline.  Seek and monitor employee attitudes and take  appropriate follow-up actions.",
      " Identify cultural features of transforming  organizations. Attract and retain key talent.  Establish an organizationwide knowledge and skills  inventory. Make public implementation goals and timeline. GPO has not  established a transformation plan with specific time frames and goals for  which leadership would be held accountable. Although GPO leadership has  stated that a critical phase of its transformation is to develop a strategic  plan by the summer of 2004, other more specific goals and timelines for the  transformation, which could be linked to those being included in the  strategic plan, are under development. GPO has the opportunity to ensure that its transformation remains on track  and is ultimately successful by applying project management principles.",
      "  Project management is a control mechanism that provides some assurance  that desired outcomes can be achieved. It involves establishing key goals,  tasks, time frames, and responsibilities that guide project accomplishment  and ensure accountability. GPO leaders have acknowledged general  weaknesses in GPO\u2019s project management capabilities and have identified  this as a skills gap that is being addressed through training initiatives. By  enhancing project management skills at various levels of the organization  and applying project management principles to key efforts like the  transformation, GPO can have greater assurance that these efforts will  produce desired outcomes. Seek and monitor employee attitudes and take appropriate follow- up actions. Because people are the drivers of any merger or  transformation,",
      " monitoring their attitudes is vital. Top leadership should  also take appropriate follow-up actions to avoid creating negative attitudes  that may translate into actions that could have a detrimental effect on the  transformation. In February 2003, GPO leadership sought employee attitudes by  implementing an employee climate survey, an important first step to  establish a baseline on employee attitudes and concerns. After the survey  was completed, GPO leadership adopted recommendations to address  employee concerns. GPO will have the opportunity to take additional  follow-up actions based on a second employee survey it plans to administer  in the coming months. This survey has the potential to provide GPO  leadership with updated information on GPO employee attitudes and views  on GPO\u2019s transformation.",
      " Identify cultural features of transforming organizations. Because a  change of culture is at the heart of a successful transformation, it is  important for leadership to gain a better understanding of the  organization\u2019s beliefs and values prior to, or early in, the transformation  process. By listening to GPO employees and customers, GPO management  determined that its culture was not sufficiently customer focused in dealing  with agencies\u2019 printing needs. Instead, GPO relied on the requirement in  Title 44 that federal agencies use GPO for their printing needs and made  little effort to develop customer relationships and anticipate the needs of  its customers. As mentioned earlier,",
      " to foster a more customer-oriented  culture, GPO has created new positions, national account managers,  responsible for developing relationships with customer agencies. The  national account managers\u2019 role is to develop relationships with agency  customers and provide them with information about the products and  services that GPO can offer to meet their information dissemination needs. Similarly, GPO\u2019s former CHCO spoke with GPO employees about their  views of the Human Capital Office and identified features of the office\u2019s  culture that he is trying to change. The recent restructing of the Human  Capital Office is aimed at creating a culture that is more customer focused,  breaking down organizational barriers,",
      " and enhancing internal and external  communication. For example, the Human Capital Office has been  reorganized into teams dedicated to support GPO\u2019s operating units. These  teams will be able to address the full range of human resources activities,  from hiring to retirement, as well as worker safety issues. According to  GPO, physically locating the human capital team members with the  business unit staff ensures that the operating units\u2019 human resources needs  are more easily met, improves communication between the units and the  Human Capital Office, and allows for faster decision making. Attract and retain key talent. Success is more likely when the best  people are selected for each position based on the competencies needed  for the new organization.",
      " To help ensure that GPO retained key talent  needed for GPO\u2019s transformation, the Public Printer appointed experienced  GPO employees to fill the top management positions of Superintendent of  Documents, Managing Director of Customer Services, and Managing  Director of Plant Operations. (One of the three employees has over 40  years of experience at GPO.) According to the Public Printer, each of these  individuals is committed to helping GPO transform and successfully meet  the needs and demands of GPO's customers in the 21st century. In addition,  these appointments ensured that a vast amount of institutional knowledge  remained at GPO during the transformation and were meant to give other  current GPO employees a clear message that,",
      " while GPO is transforming  and changing the way it does business, there is a place for current GPO  employees at all levels of the new organization. To ensure that GPO attracts the people it needs to successfully transform  and to obtain the next generation of technical skills needed to prepare GPO  for the challenges of the 21st century, the Public Printer has increased the  recruitment of outstanding college scholars. GPO has implemented a  recruiting initiative at universities and colleges that emphasize fields of  study that would benefit GPO in meeting its current and emerging needs.  For example, the initiative will target graduates in printing and graphic  communication;",
      " electrical, mechanical, and chemical engineering; and  business administration. In response to a request from the General Counsel of GPO, we recently  provided an advance decision that GPO may use appropriated funds to  provide recruitment and relocation payments and retention allowances to  certain GPO employees, but suggested that it consult with the Joint  Committee on Printing before doing so. GPO is exploring these and other  strategies to enhance its ability to recruit and retain top talent with needed  skills and knowledge. We have reported that agencies have successfully  used human capital flexibilities, such as recruitment and retention  allowances, as important human capital strategies to assist in reaching  program goals.",
      " Establish an organizationwide knowledge and skills inventory. A  knowledge and skills inventory can help a transforming organization  identify the skills and competencies of the existing workforce that can help  the organization adapt to its new mission. In addition, a transforming  organization needs to define the critical skills and competencies that it will  require in the future to meet its strategic program goals and identify how it  will obtain these requirements, including those that it will need to acquire,  develop, and retain (including full- and part-time federal staff and  contractors) to meet future needs. GPO\u2019s Human Capital Office is planning to complete a knowledge and skills  inventory to identify the skills and competencies of the existing workforce.",
      "  In a memorandum to all GPO employees, the former CHCO explained that  the Workforce Development Department will undertake a comprehensive  skills assessment involving all employees to strategically determine how  GPO will need to retrain the workforce as the transformation proceeds.  The skills assessment will include a number of measurement tools and  methods, including skills tests, electronic and paper-based surveys,  interviews, focus groups, and observations of work. The knowledge and  skills inventory could help GPO as it reorganizes and shifts focus to new  missions and competencies. Knowledge and skills inventories have been used by agencies to identify  related training needs.",
      " We have reported that agencies have used a variety  of approaches in assessing skills and competencies to identify training  needs. For example, agencies used workforce planning models; assessed  the workforce in view of organizational, occupational, and unit-based competency standards; and evaluated job performance appraisals and  information from individual development plans. While GPO completes the skills assessment of its current employees, it  plans to also complete a systematic identification of new skills and  competencies that it will need in the future. When GPO leadership  completes both of these efforts, it will be able to pinpoint skills gaps within  its workforce and develop strategies to ensure that GPO retains,",
      " develops,  and acquires employees with these skills. These efforts can serve to help  employees understand how they can enhance their skills to contribute to  GPO\u2019s future and are consistent with the recommendation to strengthen  training made by the panel of printing and information dissemination  experts that we convened. The skills inventory is an important step to ensure that GPO employs  people with the skills necessary for its future mission. However, until GPO  leadership finalizes the mission and goals of the transformed GPO, it  cannot determine fully the skills needed to achieve current and future  programmatic results or develop strategies focused on those skills. Recommended Next Steps The Public Printer should develop a documented transformation plan that  outlines his goals for the transformation and when he expects to meet   identifies critical phases and essential activities that need to be  completed.",
      "   determine, based on the results of the upcoming employee survey,  whether any changes are needed to the transformation strategies and  ensure that the development of human capital strategies focuses on the  skills gaps identified by GPO leadership. GPO\u2019s Management Team Is  in Place, but Attention to  Daily Transformational  Activities Could Be  Strengthened Dedicating a strong and stable implementation team that will be  responsible for the transformation's day-to-day management is important  to ensuring that it receives the focused, full-time attention needed to be  sustained and successful. Specifically, the implementation team is  important to ensuring that various change initiatives are sequenced and  implemented in a coherent and integrated way.",
      " Top leadership must vest  the team with the necessary authority and resources to set priorities, make  timely decisions, and move quickly to implement top leadership\u2019s decisions  about the transformation. Dedicate an implementation team  to manage the transformation  process. Establish networks to support implementation team.  Select high-performing team members. The Public Printer has put in place a senior management team, referred to  as the management council, which can help bring GPO into the future. This  council is composed of the COO, CFO, CHCO, CIO, Superintendent of  Documents, Managing Director of Plant Operations, Managing Director of  Customer Services,",
      " the Chief of Staff, the Deputy Chief of Staff, General  Counsel, and the Inspector General. According to GPO officials, the  management council does not have regularly scheduled meetings and only  meets when convened by the Public Printer. About 80 percent of the  management council\u2019s time is devoted to long-term, transformational  activities, while 20 percent of the time is devoted to addressing day-to-day  operational issues. A second management team, referred to as the operations council, is  composed of the CFO, CHCO, CIO, Superintendent of Documents,  Managing Director of Plant Operations, and Managing Director of  Customer Services;",
      " this council meets weekly with the COO. According to  GPO officials, this council spends about 80 percent of its time dealing with  day-to-day operations and 20 percent with transformation issues. Although  the operations council occasionally discusses transformation-related  issues, its meetings are not structured around specific transformation tasks  or decisions required to make progress on the transformation. Instead, the  meetings give each member of the council an opportunity to provide an  update on issues affecting his or her unit\u2019s operations, improve  communication among GPO\u2019s top managers, and ensure that crosscutting  issues in day-to-day operations receive management attention. GPO leadership recognizes the importance of establishing networks to  support its transformation efforts,",
      " and it is creating a network of task  forces to lead the development of various transformational strategies. For  example, GPO created a task force to focus on \u201crevenue enhancements and  new investments.\u201d This task force will be chaired by the CFO, and will  include members of other GPO business units, such as New Business  Development and Information Technology and Systems. The Public Printer  directed the chairpersons of the task teams to select task force members  and develop the strategies that will be the basis for GPO\u2019s strategic plan by  June 17, 2004. Our work on transformations has found that establishing  networks,",
      " including a senior executive council, functional teams, or  crosscutting teams, can help the implementation team conduct the day-to- day activities of the transformation and help ensure that efforts are  coordinated and integrated. GPO leaders have acknowledged that creating the support capacity and  accountability for daily transformation activities could help ensure that the  transformation continues to make progress. These leaders said that  responsibilities for day-to-day transformation activities could include  setting priorities, proposing milestones, tracking progress, providing  analysis to support decision making, and coordinating among teams. Recommended Next Steps The Public Printer should establish a transformation team, or augment the  management council, to address the day-to-day management of GPO\u2019s  transformation effort.",
      " The team should include high-performing employees  who have knowledge and competencies that could help GPO plan its  future. Establishing such a team could create the focus needed to stimulate  and sustain GPO\u2019s transformation efforts. GPO Is Planning Changes to  Strengthen Its Performance  Management System A performance management system can help manage and direct the  transformation process and serves as the basis for setting expectations for  individuals\u2019 roles in the transformation. To be successful, transformation  efforts must have leaders, managers, and employees who have the  individual competencies to integrate and create synergy among the  multiple operating units involved in the transformation effort.",
      " Individual  performance and contributions are evaluated on competencies such as  change management, cultural sensitivity, teamwork and collaboration, and  information sharing. Leaders, managers, and employees who demonstrate  these competencies are rewarded for their success in contributing to the  achievement of the transformation process. Use the performance management  system to define responsibility and  assure accountability for change. Adopt leading practices to implement effective  performance management systems with adequate  safeguards. GPO plans to implement a new performance management system for its  executives and will later work on changes for employees at other  organizational levels. As part of this effort, GPO is exploring the use of  competencies to provide a fuller assessment of performance.",
      " For example,  GPO has developed performance agreements for its senior managers based  upon the executive core qualifications adopted by the Office of Personnel  Management for senior executives and included responsibilities such as  leading strategic change. Each responsibility will be linked to three or four  competencies. Additionally, the draft performance agreements include  interim goals that GPO developed for its operating units and other elements  that we have identified as important for executive performance. They  include, for example, specific levels of performance that GPO plans to link  to strategic objectives to help senior executives see how they directly  contribute to organizational results. Until GPO\u2019s strategic plan is completed,",
      " however, GPO will not be able to  fully align individual performance competencies or expectations with  organizational goals. The completion of the strategic plan will provide  human capital officials with the information needed to develop  competencies and expectations for employees that have a direct link to  GPO\u2019s goals, providing employees with the information they need to  understand how their performance leads to organizational success. As part of GPO\u2019s effort to strengthen performance management, GPO plans  to pilot a new system that, beginning with its senior executives, will more  closely link an individual\u2019s pay with his or her performance. Linking pay to  performance is a key practice for effective performance management.",
      " We  have reported that efforts to link pay to performance require adequate  safeguards, including reasonable transparency and appropriate  accountability mechanisms, to ensure the fair, effective, and  nondiscriminatory implementation of the system. The Human Resources  Office has begun developing a pay-for-performance program that will use  measures of effectiveness that directly link individual performance with  organizational goals and objectives. The newly established Workforce  Development, Education and Training Office will be required to develop  and deliver training to supervisors and managers on performance  management. The objective is to ensure that supervisors and managers are  equipped with the necessary skills to effectively manage their employees,  help drive change efforts,",
      " and achieve results. Recommended Next Steps The CHCO should continue developing a performance management system  for all GPO employees that creates a line of sight by linking employee  performance with agency goals. The CHCO should ensure that GPO\u2019s new  performance management system has adequate safeguards, including  reasonable transparency and appropriate accountability mechanisms, to  ensure the fair, effective, and nondiscriminatory implementation of the  system. GPO Has Improved  Communication, but Can  Better Address Employee  Needs Communication, an important management control, is most effective when  done early, clearly, and often, and when it is downward, upward, and  lateral.",
      " Successful organizations have comprehensive communication  strategies that reach out to employees, customers, and stakeholders and  seek to genuinely engage them in the transformation process. Establish a communication  strategy to create shared  expectations and report related  progress. Communicate early and often to build trust.  Ensure consistency of message.  Encourage two-way communication.  Provide information to meet specific needs of  employees. The Public Printer communicated his intention to transform GPO early and  often and to various audiences. For example, in his confirmation hearing in  October 2002, the Public Printer told Congress that GPO \u201cmust step back  and take a new look at the changing and emerging information needs of its  customers and develop a deeper understanding of its true strengths so that  it can determine how best to build a new business model.\u201d Then again,",
      " just  8 days after the Public Printer took office, he publicly stated his intention  to transform GPO. In his communications with employees, the Public  Printer has also frequently expressed his intention to transform GPO. For  example, GPO\u2019s biweekly management newsletter, the GPO Link, often  contains articles about GPO\u2019s transformation. Transforming organizations  have found that communicating information early and often helps to build  an understanding of the purpose of the planned changes and builds trust  among employees and stakeholders. GPO leadership has communicated a consistent message about the  transformation to employees, customers, and other stakeholders through  such methods as sponsoring conferences,",
      " attending customers\u2019 meetings,  and speaking with relevant trade magazines. For example, in  correspondence with the Congress, employees, and the library community,  the Public Printer and other senior managers have used similar terms and  concepts when discussing GPO\u2019s transformation. This consistency is  important in ensuring that GPO\u2019s employees, customers, and other  stakeholders understand the current environment under which GPO  operates. A message to employees and others affected by a transformation  that is consistent in tone and content can alleviate the uncertainties  generated during the unsettled times of large-scale change management  initiatives. GPO leadership has encouraged two-way communication by instituting  methods for employees and others to provide feedback and ask questions.",
      "  For example, GPO\u2019s intranet site has a section called \u201cAsk the Public  Printer.\u201d On the site, the Public Printer fields questions on issues ranging  from training opportunities, to building renovation issues, to contingency  planning. In addition, the Public Printer holds periodic town hall meetings  that include time for employees in attendance to ask him questions in  person. In addition, stakeholders have been asked to communicate with  GPO leaders. For example, on January 22, 2004, the Depository Library Council provided GPO with advice on topics that the Public Printer  identified as important to the future of GPO.",
      " The Public Printer expects to  use feedback from stakeholders such as the Depository Library Council as  GPO develops its strategic plan. Two-way communication is central to  forming the effective internal and external partnerships that are vital to the  success of any organization. GPO leadership has also made significant efforts to improve  communication between management and employees. For example, GPO  established the Employee Communications Office, which was developed  with the vision \u201cto have the best informed workforce in the U.S.  Government by over-communicating organizational clarity and the mission  and vision of the new GPO.\u201d An important initiative undertaken by the  Employee Communications Office is the development of GPO Link,",
      " a  biweekly newsletter that reports on activities of GPO\u2019s top managers. Despite these efforts, because GPO\u2019s future mission and strategies have not  yet been decided, the Public Printer has been unable to communicate the  nature of the change that GPO needs to make in a way that addresses the  specific needs of employees. During a communications focus group GPO  held in October 2003, employees stated that recent efforts to improve  communication were positive, but failed to provide the specific  information needed to alleviate job concerns. These concerns were also  voiced during town hall meetings led by the Public Printer in January 2004  and were consistent with concerns raised by union representatives in their  discussions with us about GPO\u2019s transformation.",
      " Employees have indicated  they are unsure about their future in the new GPO, and are seeking specific  information on the skills they will need to remain useful to GPO.  Communicating with employees about their specific concerns can help  them understand how they might be affected and how their responsibilities  might change with the new organization. GPO managers, union leaders, and employees have indicated that  employees are unsure of their role in GPO\u2019s transformation. Union leaders  told us that much of the communication has been rhetoric with insufficient  detail regarding how the transformation will affect employees. For  example, the Public Printer has stated that the transformation will bring  GPO into the 21st century,",
      " but the specifics of what jobs might be lost or  changed have not been discussed because GPO is developing its mission  and strategic plan. Recommended Next Steps The Public Printer can augment GPO\u2019s communication about the  transformation to include additional information that employees can use to  understand their role in building the GPO of the 21st century. As GPO\u2019s  strategic planning effort moves forward, communication with employees  should include topics such as GPO\u2019s new mission, strategic goals, and in  particular, employee concerns about their role in the new environment. As  key decisions are made, communication should address how GPO\u2019s  transformation will affect employees so that they understand how their  jobs may be affected,",
      " what their rights and protections might be, and how  their responsibilities might change. GPO Can Expand the  Involvement of Employees  in the Transformation Employee involvement strengthens the transformation process by  including frontline perspectives and experiences. Further, employee  involvement helps to create the opportunity to establish new networks and  break down existing organizational silos, increase employees\u2019  understanding and acceptance of organizational goals and objectives, and  gain ownership for new policies and procedures. Involve employees to obtain their  ideas and gain their ownership for  the transformation. Use employee teams.  Involve employees in planning and sharing  performance information. Incorporate employee feedback into new policies  and procedures.",
      " Delegate authority to appropriate organizational  levels. The former and Acting CHCO, CIO, CFO, and Managing Director of  Customer Services told us that they are adopting team-based approaches  for accomplishing their units\u2019 goals, which includes improved customer  service. For example, GPO combined the former procurement division with  the customer services division to create teams of employees who have a  range of skills to address customer needs. Previously, GPO\u2019s customers  were shuffled between these two divisions, neither of which was clearly  accountable for addressing the customers\u2019 needs. A GPO official explained  that by changing to a team approach, where a group of about five  employees is responsible for all work with a customer,",
      " accountability for  meeting the needs of that customer is clear and may lead to improved  service. A teams-based approach to operations can create an environment  characterized by open communication, enhanced flexibility in meeting job  demands, and a sense of shared responsibility for accomplishing  organization goals and objectives. GPO units can expand the involvement of employees and use their  feedback in planning and sharing performance information, which can help  employees accept and understand the goals of their units and their role in  achieving them. For example, GPO officials told us that the CFO has shared  goals for his division with his managers, who have, in turn, shared the goals  with their employees.",
      " Therefore, all employees under the CFO know the  goals of the division and how their work and performance helps realize the  goals. However, not all division managers have shared goals with their  employees. The practice of involving employees in planning and sharing  performance information can be transferred to other GPO units as GPO\u2019s  transformation progresses. Major transformations, like GPO\u2019s, often include redesigning work  processes, changing work rules, or making other changes that are of  particular concern to employees. GPO has made or plans to make changes  to many of its policies and procedures. As we mentioned earlier, for  example, GPO is planning to pilot test a new pay-for-performance system,",
      "  beginning with its senior managers. We have reported on other agencies\u2019  attempts to involve employees and unions in developing aspects of its  personnel systems. For example, at the Department of Homeland  Security, employees and union representatives played a role in shaping the  design of a proposed personnel system. The design process attempted to  include employees by creating multiple opportunities for employees to  provide feedback. GPO has taken some actions to delegate authority to employees. Soon after  the new Public Printer took office, GPO instituted a time-off awards  program, which provides supervisors with a means to recognize employees  for their productivity, creativity, dedication, and outstanding contributions  to the mission of GPO.",
      " Before GPO created this award program,  supervisors did not have the authority to recognize and reward outstanding  performance. In a transformation, employees are more likely to support  changes when they have the necessary authority and flexibility\u2014along with  commensurate accountability and incentives\u2014to advance the  organization\u2019s goals and improve performance. Delegating certain personnel authorities is important for managers and  supervisors who know the most about an organization\u2019s programs and can  use those authorities to make those programs work. The former Deputy  Public Printer told us that decision making on many day-to-day matters was  centralized within his office. For example, his approval was required for all  training requests from GPO employees.",
      " The current Public Printer has  delegated authority to approve training to lower level managers who are  more familiar with the employees\u2019 work requirements and, therefore, have  a better understanding of the training individual employees need to  improve their performance. We have reported that agency managers and employees have important  roles in the success of training and development activities. Managers are  responsible not only for reinforcing new competencies, skills, and  behaviors but also for removing barriers to help employees implement  learned behaviors on the job. Furthermore, if managers understand and  support the objectives of training and development efforts, they can  provide opportunities for employees to successfully use new skills and  competencies and can model the behavior they expect to see in their  employees.",
      " Employees also need to understand the goals of agencies\u2019  training and development efforts and accept responsibility for developing  their competencies and careers, as well as for improving their  organizations\u2019 performance. Recommended Next Steps GPO leadership should involve employees more in planning and decision  making for the future, allowing employees to gain ownership of the  transformation. For example, the CHCO should incorporate employee  feedback as part of the process for developing GPO\u2019s pay for performance  system and in training and development activities. World-Class  Management Practices  Can Strengthen GPO\u2019s  Transformation Successful change efforts start with a vision of radically improved  performance and the relentless pursuit of that vision.",
      " Leaders of successful  transformations seek to implement best practices in systems and processes  and guard against automatically retaining the approaches used in the past.  Instead of developing optimal systems and processes, transforming  organizations risk devoting attention to attempting to mend less than fully  efficient and effective systems and processes merely because they are  already in place. Over the longer term, leaders of successful mergers and  acquisitions, like leaders of successful organizations generally, seek to  learn from best practices and create a set of systems and processes that are  tailored to the specific needs and circumstances of the transforming  organization. GPO leadership has articulated a vision to transform GPO into a world-",
      " class organization and has taken some initial steps toward this objective,  most notably with respect to human capital management. However,  because significant change efforts are difficult and take a long time,  continued leadership attention is needed. The commitment of the Public  Printer, the appointment of a COO, and other key leadership selections are  positive steps in this regard. In particular, we have reported that COOs can  be part of a broader effort to elevate attention to management and  transformation issues, integrate various key management and  transformation efforts, and institutionalize accountability for addressing  management issues leading a transformation. By their very nature, the  problems and challenges facing agencies are crosscutting and thus require  coordinated and integrated solutions.",
      " However, the risk is that  management responsibilities (including, but not limited to, information  technology, financial management, and human capital) will be \u201cstovepiped\u201d  and thus will not be carried out in a comprehensive, ongoing, and  integrated manner. GPO Has Taken Numerous  Actions to Strengthen  Human Capital Management Having effective human capital policies and procedures is a critical factor  in an organization\u2019s management control environment. GPO\u2019s efforts to  strengthen human capital management demonstrate a commitment to  these management controls. In October 2003, we reported on how GPO leadership could advance its  transformation through strategic human capital management and made  numerous recommendations to GPO leadership that were based on leading  practices in strategic human capital management.",
      " Taken as a whole, these  recommendations represent a framework for radically improving GPO\u2019s  human capital practices. GPO\u2019s Human Capital Office is using our October  2003 report as GPO\u2019s roadmap for transforming its human capital  management and is actively implementing the recommendations we made.  Much of GPO\u2019s progress in improving its human capital management has  been described previously in this report. Our recommendations focus on  four interrelated areas:  communicating the role of managers in GPO\u2019s transformation,   strengthening the role of the human resources office,   developing a strategic workforce plan to ensure GPO has the skills and  knowledge it needs for the future,",
      " and   using a strategic performance management system to drive change. GPO has made clear progress toward adopting the leading practices that  we described in our October report, and has shown a continuing interest in  improving GPO\u2019s Human Capital Office by identifying management best  practices used by other organizations. The experience of transforming  organizations, including GAO, has shown that transformation must be  based on the best, most up-to-date management practices to reach its full  potential. Consistent with this practice, GPO leadership requested our  assistance in identifying and describing approaches and strategies used by  other organizations to restructure their workforces. In response to this request,",
      " on January 20, 2004, we briefed GPO leadership  on the workforce restructuring efforts of the Federal Deposit Insurance  Corporation, GAO, and the Treasury\u2019s Financial Management Service. The  briefing presented the lessons that these agencies learned from their  workforce restructuring efforts, with particular emphasis on efforts to  assist employees in finding other employment. The approaches and  strategies we highlighted were retraining, outplacement assistance,  workforce restructuring planning, communication, and employee and  union involvement. Our briefing contained specific examples, related  agency materials, and contacts that could provide further information and  assistance to GPO. GPO\u2019s CIO Organization Has  Begun to Transform The Public Printer has stated that the new vision of GPO will be an agency  whose primary mission will be to capture digitally,",
      " organize, maintain,  authenticate, distribute, and provide permanent public access to the  information products and services of the federal government. To execute  this vision, he states that GPO must deploy the technology needed by  federal agencies and the public to gather and produce digital documents in  a uniformly structured database in order to authenticate documents  disseminated over the Internet and to preserve the information for  permanent public access. However, improved information technology (IT) systems such as those  contained in the Public Printer\u2019s vision are not simple to develop or  acquire. Through our research of best IT management practices and our  evaluations of agency IT management performance,",
      " we have identified a  set of essential and complementary management disciplines that provide a  sound foundation for IT management. These include  software/system development and acquisition,  IT human capital. GPO\u2019s CIO understands that his IT organization, like all of GPO, will have to  transform to meet current and future needs. More specifically, he  acknowledges the need to establish IT management policies, procedures,  and practices in the key areas listed above. The CIO has taken steps, or  plans to take steps, to begin improving IT in each of these areas. Enterprise Architecture An enterprise architecture is to an organization\u2019s operations and systems as  a set of blueprints is to a building.",
      " That is, building blueprints provide those  who own, construct, and maintain the building with a clear and  understandable picture of the building\u2019s uses, features, functions, and  supporting systems, including relevant building standards. Further, the  building blueprints capture the relationships among building components  and govern the construction process. Enterprise architectures do nothing  less, providing to people at all organizational levels an explicit, common,  and meaningful structural frame of reference that allows an agency to  understand (1) what the enterprise does; (2) when, where, how, and why it  does it; and (3) what it uses to do it.",
      " An enterprise architecture provides a clear and comprehensive picture of  the structure of an entity, whether an organization or a functional or  mission area. This picture consists of snapshots of both the enterprise\u2019s  current or \u201cas-is\u201d technical and operational environments, its target or \u201cto- be\u201d technical and operational environments, and a capital investment  roadmap for transitioning from the current environment to the target  environment. An enterprise architecture is an essential tool for effectively  and efficiently engineering business practices, implementing and evolving  supporting systems, and transforming an organization. Managed properly, it  can clarify and help optimize the interdependencies and relationships  among an organization\u2019s business operations and the underlying IT  infrastructure and applications that support these operations.",
      " Employed in  concert with other important management controls, such as portfolio- based capital planning and investment control processes, architectures can  greatly increase the chances that organizations\u2019 operational and IT  environments will be configured to optimize mission performance. Our  experience with federal agencies has shown that investing in IT without  defining these investments in the context of an enterprise architecture  often results in systems that are duplicative, not well integrated, and  unnecessarily costly to maintain and interface. The development of an  enterprise architecture is an essential part of a successful organizational  transformation. Our research has shown that an organization should ensure that adequate  resources are provided for developing the architecture and that  responsibility for directing,",
      " overseeing, and approving enterprise  architecture development is assigned to a committee or group with  representation from across the organization. Establishing this  organizationwide responsibility and accountability is important in  demonstrating the organization\u2019s commitment to building the management  foundation and obtaining support for the development and use of the  enterprise architecture from across the organization. This group should  include executive-level representatives from each line of business, and  these representatives should have the authority to commit resources to  architecture-related efforts and enforce decisions within their respective  organizational units. Our research shows that enterprise architecture  efforts also benefit from developing an architecture program management  plan that specifies how and when the architecture is to be developed,",
      "  including a detailed work breakdown structure, resource estimates (e.g.,  funding, staffing, and training), performance measures, and management  controls for developing and maintaining the architecture. The plan  demonstrates the organizations\u2019 commitment to managing enterprise  architecture development and maintenance. Currently, GPO does not have such an enterprise architecture. Its CIO  agrees that an enterprise architecture is an important tool and is working to  develop one for GPO. As the first step towards developing an enterprise  architecture, the CIO organization is in the process of documenting GPO\u2019s  current business processes and supporting IT architecture (the \u201cas-is\u201d  enterprise architecture). In doing this work,",
      " the agency is focusing first on  those business items of greater interest to two sets of critical customers\u2014 the Congress and users of the Federal Register. The CIO has also hired a  manager to lead this effort who has significant experience in the  development and institutionalization of enterprise architecture and related  processes. Investment Management In concert with a properly developed and institutionalized enterprise  architecture, an effective and efficient IT investment management process  is key to a successful transformation effort. An effective and efficient IT  investment process allows agencies to maximize the value of their IT  investments and to minimize the risks of IT acquisitions. This is critically  important because IT projects,",
      " while having the capability to significantly  improve an organization\u2019s performance, can become very costly, risky, and  unproductive. Federal agency IT projects too frequently incur cost  overruns and schedule slippages while contributing little to mission-related  outcomes. GPO\u2019s transformation may require significant investment in IT and related  efforts. Therefore, it is essential that GPO effectively manage such  investments. We have developed a guide to effective IT investment  management based on a select/control/evaluate model:   Select. The organization (1) identifies and analyzes each project\u2019s risks  and returns before committing significant funds to any project and  (2)",
      " selects those IT projects that best support its mission needs. This  process should be repeated each time, reselecting even ongoing  investments, as described below. Control. The organization ensures that, as projects develop and  investment expenditures continue, the project continues to meet  mission needs at the expected levels of cost and risk. If the project is not  meeting expectations or if problems have arisen, steps are quickly taken  to address the deficiencies. If mission needs have changed, the  organization can adjust its objectives for the project and appropriately  modify expected project outcomes. Evaluate. The organization compares actual versus expected outcomes  after a project is fully implemented.",
      " This is done to (1) assess the  project\u2019s impact on mission performance, (2) identify any changes or  modifications to the project that may be needed, and (3) revise the  investment management process based on lessons learned. To oversee the investment management process, an investment review  board is established, made up of managers, that is responsible and  accountable for selecting and monitoring projects based on the agency\u2019s  investment management criteria. The IT investment board is a key  component in the investment management process. An organizationwide  investment board has oversight responsibilities for developing and  maintaining the organization\u2019s documented IT investment process. It plays  a key role in establishing an appropriate IT investment management  structure and processes for selecting,",
      " controlling, and evaluating IT  investments. The organization may choose to make this board the same  board that provides executive guidance and support for the enterprise  architecture. Such overlap of responsibilities may enhance the ability of the  board to ensure that investment decisions are consistent with the  architecture and that it reflects the needs of the organization. This model allows an organization to effectively choose, monitor, and  evaluate projects. GPO intends to complete a major transformation of itself  within a few years, with most of its transformation based on improved IT  capabilities. For an organization like GPO, in the midst of transformation,  effective oversight of its IT investments is essential.",
      " Currently, GPO does not have an IT investment management process.  GPO\u2019s CIO said that his review of projects at GPO indicated that in the past,  for example, most projects were selected without documentation such as a  cost-benefit analysis, economic justification, alternatives analysis, and fully  validated requirements. The CIO\u2019s long-term goal is to implement a  standard investment management process requiring such items. As a  beginning, he is working on a list of required documents that each new  information technology proposal will have to provide before it can be  approved by GPO management. He is holding workshops aimed at  introducing the business managers to this documentation and providing  training in the meaning and use of these documents in support of project  initiation.",
      " Software/System Development  and Acquisition Capability Underlying enterprise architecture management and investment  management is the ability to effectively and efficiently develop and acquire  systems and software. GPO\u2019s CIO is aware that his organization\u2019s  development and acquisition capabilities could be improved and plans to  take steps to achieve these improvements. The CIO has tasked one of his new managers to begin improving key  process areas for software development and acquisition. On the basis of  this manager\u2019s recommendation, GPO has selected the software acquisition  models of the Institute of Electrical and Electronics Engineers (IEEE) as  its standard for this process. The IEEE defines a nine-step process for the  acquisition of software,",
      " which GPO plans to implement for future software  acquisitions. The CIO also plans to implement a process for software  development, but has not determined which model to use. IT Security Dramatic increases in computer interconnectivity, especially in the use of  the Internet, are revolutionizing the way our government, our nation, and  much of the world communicate and do business. The benefits from this  have been enormous. However, this widespread interconnectivity poses  significant risks to computer systems and, more importantly, to the critical  operations and infrastructures they support, such as telecommunications,  power distribution, and national defense. The same factors that benefit  operations\u2014speed and accessibility\u2014if not properly controlled,",
      " also make  it possible for individuals and organizations to inexpensively interfere with  or eavesdrop on these operations from remote locations for purposes of  fraud or sabotage, or for other malicious or mischievous purposes. In  addition, natural disasters and inadvertent errors by authorized computer  users can have devastating consequences if information resources are  poorly protected. As GPO transforms, its information resources will become increasingly  dependent upon correctly functioning IT. Whereas in the past, GPO needed  only to have several paper copies of each document available, greater  security measures will be required as GPO implements a database for  permanent public access to all federal government information.",
      " GPO\u2019s current information security could be improved. In fiscal year 2003,  an independent audit of GPO\u2019s internal controls, done as part of a review of  GPO\u2019s financial statements, found that GPO did not have in place an  effective security management structure that provides a framework and  continuing cycle of activity for managing risk, developing security policies,  and monitoring the accuracy of GPO\u2019s computer security controls. Among  the specific findings:  Security-related policies and procedures had not been documented or  had not been kept current and did not reflect GPO\u2019s current  environment. These policies also provided no guidance for developing  risk assessment programs.",
      " Local network administrators did not have guidance in developing  formal procedures to perform network administration duties, such as  creating and maintaining user accounts, periodically reviewing user  accounts, and reviewing audit logs. GPO had not established a comprehensive business continuity and  disaster recovery plan for its mainframe, client-server platforms, and  major software applications. The CIO has ongoing projects aimed at addressing each of the issues  outlined by the audit organization. First, he is in the process of issuing new  security-related policies and procedures reflecting GPO\u2019s current  environment. The CIO\u2019s security organization is also working on policies  and procedures and guidance for local network administrators.",
      " Finally,  GPO is negotiating with other legislative branch agencies to use their  backup computer facility and is developing a business continuity and  disaster recovery plan for GPO\u2019s platforms and major software  applications. IT Human Capital As mentioned earlier, the Public Printer has emphasized the importance of  strategically managing GPO\u2019s people in order to successfully transform the  organization. The CIO, like other GPO managers, considers human capital a  vital part of his organization\u2019s operations as well as critical to the success  of GPO\u2019s transformation efforts. The CIO and his managers are reviewing the current human capital  situation and taking interim steps to improve.",
      " At the same time, they are  working with GPO\u2019s human capital organization to develop a strategy to  improve GPO\u2019s human capital management capability for the long term.  For example, the CIO has tasked each IT area manager to complete such a  review of his or her staff and report the results to the CIO. While a few  needed skill sets will be hired from the outside, the emphasis for the CIO  organization in the near term will be on finding needed skills inside the  organization and retraining individuals with related skills. The CIO is also  providing training to his CIO staff on project management and related  issues.",
      " Recommended Next Steps Like efforts in other parts of GPO, the CIO\u2019s actions to improve GPO\u2019s IT  capabilities are important first steps. However, much more needs to be  done to establish an effective IT investment process, to establish an  enterprise architecture, and to improve the agency\u2019s system development  and acquisition, security, and human capital capabilities. Therefore, we  recommend that the Public Printer direct the GPO CIO to do the following. Begin an effort to create and implement a comprehensive plan for the  development of an enterprise architecture that addresses completion of  GPO\u2019s current or \u201cas-is\u201d architecture, development of a target or \u201cto-be\u201d  architecture,",
      " and development of a capital investment plan for  transitioning from the current to the target architecture. As part of the  capital investment plan, designate an architecture review board of  agency executives who are responsible and accountable for overseeing  and approving architecture development and maintenance, and  establish an enterprise architecture program management plan. Begin an effort to develop and implement an investment management  process by (1) developing guidance for the selection, control, and  evaluation processes and then (2) establishing an investment review  board responsible and accountable for endorsing the guidance,  monitoring its implementation, and executing decisions on projects  based on the guidance. Develop and implement a comprehensive plan for software  development and acquisition process improvement that specifies  measurable goals and time frames,",
      " sets priorities for initiatives,  estimates resource requirements (for training staff and funding), and  defines a process improvement management structure. Establish the appropriate security and business continuity policies,  procedures, and systems to ensure that its information products are  adequately protected. Ensure that GPO\u2019s Human Capital Office, in its efforts to develop and  implement a human capital strategy, considers the special needs of IT  human capital. Financial Management\u2019s  Role in Supporting  Transformation Sound financial management practices that produce reliable and timely  financial information for management decision making are a vital part of a  strategic plan to achieve transformation. In recent testimony the Public  Printer acknowledged that GPO is in a precarious financial position with  sustained significant financial losses over the past 5 years,",
      " which appear to  be structural in nature. Such structural losses point out the clear need for  transformation. In response to GPO\u2019s financial condition, the Public Printer  has taken positive, immediate steps to stem losses, cut costs, and curtail  certain program activities. Given the importance of GPO\u2019s business transformation, it is imperative  that transformation efforts be clearly linked to financial management  results and receive the sustained leadership needed to improve the  economy, efficiency, and effectiveness of GPO\u2019s business operations  through its transformation plan. The transformation plan should provide a  strategic-level \u201croad map\u201d from the current environment to the planned  future environment,",
      " including a link to current cost-cutting and other  financial improvement initiatives. In addition, management needs reliable  and up-to-date information on progress, including financial results. As discussed in our executive guide on best practices in financial  management, dramatic changes over the past decade in the business  environment have driven finance organizations to reevaluate their role. The  role of financial management and reporting will be critical to managing the  progress and impact of GPO\u2019s transformation efforts. In the transformation environment, GPO will need to define a vision for its  financial management organization such that it is a value-creating,  customer-focused partner in business results in order to build a world-class  finance organization and to help achieve GPO\u2019s transformation goals.",
      " As  reported and shown in figure 6, certain success factors, goals, and  practices are instrumental in achieving financial management excellence. Build a team that delivers finance. results. prority. decision makers. 1. Build a  foundation of control and accountability. 10. Develop a finance team with the right mix of skills and  competencies 2. Provide clear strong executive leadership. 4. Assess the finance organization's current role in meeting mission objectives. 7. Develop systems that support the partnership between finance and operations. 3. Use training to change the culture and  engage line managers. 5. Maximize the efficiency of day-to-day accounting activities.",
      " 8. Reengineer processes in conjunction with new technology. 11. Build a finance organization that attracts and retains talent. 6. Organize  finance to add value. 9. Translate financial data into meaning- ful information. We compared best practices that would be most applicable to GPO\u2019s  financial management operations and transformation efforts to many of the  activities and goals planned by GPO. Overall, GPO and its CFO have taken  many actions and have plans for efforts that are consistent with many best  practices in financial management; however, additional emphasis is needed  for other best practices that enhance GPO\u2019s transformation and to ensure  that planned efforts are fully supported.",
      " In addition, GPO\u2019s strategic  planning for transformation should include the actions, plans, and goals to  be initiated by its CFO and its financial management team to ensure that  GPO\u2019s weakening financial position does not undermine its transformation  goals. Making Financial  Management an Entitywide  Priority Our prior report observes that the chief executive should recognize the  important role the finance organization plays in improving overall business  performance and involve key business managers in financial management  improvement initiatives. This is especially important in a transformation  environment. In order to make financial management an entitywide  priority, the organization should (1) build a foundation of control and  accountability,",
      " (2) provide clear strong executive leadership, and (3) use  training to change the culture and engage line managers. GPO has shown that financial reporting and the audit process are  important management and oversight tools for building a foundation of  control and accountability by routinely receiving \u201cunqualified\u201d audit  opinions on its annual financial statements. In addition, GPO receives an  opinion on its management assertion on internal controls from its external  auditor. Additional accountability is provided through oversight from the  GPO Office of Inspector General established by Title 44, U.S. Code, section  3901. Also, GPO has expanded reported financial information beyond  audited financial statements to include performance information on  revolving fund operations such as printing and binding operations,",
      "  purchased printing, and procured printing. Our executive guide on best practices in financial management also  recognizes that the chief executive officers of leading organizations  understand the important role that the CFO and the finance organization  play in improving overall business performance of the organization.  Consequently, the CFO is a central figure on the top management team and  heavily involved in strategic planning and decision making. In this regard,  the Public Printer established the CFO position shortly after arriving at  GPO and has included the CFO as a member of the management council. The key to successfully managing change and changing organizational  culture is gaining the support of line management. To change the  organizational culture and enlist the support of line managers,",
      " many  organizations use training programs. This training may be geared towards  providing line managers with a greater appreciation of the financial  implications of their business decisions and transformation efforts. GPO has engaged its nonfinancial managers with financial-related goals.  For example, customer services, which includes purchased printing, has a  goal of increasing revenue by identifying potential government work and  increasing business to GPO. As discussed earlier in this report, account  managers are assigned to increase revenue from federal agencies through  regular customer agency visits, presentations at selected agencies to  highlight GPO services, and targeting customers for specialized outreach  efforts. GPO could provide a greater emphasis on training its nonfinancial  managers on the financial implications of business decisions and the value  of financial information.",
      " Training on how to fully use the financial  information they receive not only produces better managers, but also helps  break down functional barriers that can affect productivity and impede  improvement efforts, especially in a time of transformation. In addition,  training and other tools facilitate and accelerate the pace of the change  initiative, which helps to reduce the opposition that could ultimately  undermine the effort. Redefine the Role of  Finance Today, leading finance organizations are focusing more on internal  customer requirements by providing products and service that directly  support strategic decision making and ultimately improve overall business  performance. Again, this is critical in a transformation environment. Best  practices reported by our prior review of leading financial organizations  include actions to (1)",
      " assess the finance organization\u2019s current role in  meeting mission objectives, (2) maximize the efficiency of day-to-day  accounting activities, and (3) organize finance to add value. Consistent with best practices for redefining financial operations, GPO has  plans to integrate on-line workflow systems for all major operations  including the receipts and processing operations, to streamline the budget  formulation process, and to eliminate all paper-based accounting and  budget reports. Customer feedback is also useful both in the future to  assess the perceived benefits of changes related to transformation and to  use as a baseline on which to compare future changes. The CFO plans to  establish a baseline of information on customer satisfaction based on our  survey of GPO\u2019s major customers.",
      " This includes a planned assessment of  customer satisfaction with services provided, identification of areas for  improvement, implementation of plans to increase the value and efficiency  of services provided, and identification of key performance measures. Provide Meaningful  Information to Decision  Makers Financial information is meaningful when it is useful, relevant, timely, and  reliable. Therefore, organizations should have the systems and processes  required to produce meaningful financial information needed for  management decisions. Financial organizations should (1) develop systems  that support the partnership between finance and operations,  (2) reengineer processes in conjunction with new technology, and  (3) translate financial data into meaningful information.",
      " Our executive guide for best practices in financial management suggests  that relevant financial information should be presented in an  understandable, simple format, with suitable amounts of detail showing the  financial impact and results of cost-cutting initiatives and transformation  efforts. Leading finance organizations have designed reporting formats  around key business drivers to provide executives and managers with  relevant, forward-looking information on business unit performance. We  believe that such reports can be a key to linking GPO\u2019s financial  management efforts to transformation. GPO provides financial information to its key decision makers that is  consistent with best practices for reports that are useful and relevant to  key decision makers.",
      " The GPO CFO provides monthly summaries for each  of GPO\u2019s key operational areas, including plant operations, customer  service, sales program, salaries and expenses programs, and administrative  support operations, as well as other information on the status of  appropriated funds, billings, and contractors. The information includes  cumulative year-to-date summaries, profit and loss statements, use of  employees and staff levels, and other information specific to each  operational area. The CFO organization is developing plans to provide  financial, administrative, and analytical support to all of GPO in addition to  the monthly information packages provided to the management council. GPO is also developing plans to replace legacy information systems to  integrate and streamline internal and external ordering as well as inventory  and accounts payable processes.",
      " GPO expects to greatly improve the  monthly financial processes with information necessary to make  calculations regarding time spent on performance or cost analysis and on  transaction processing. This information can be useful in gauging office  efficiencies as a result of changes and transformation efforts. Build a Team That   Delivers Results The finance function has evolved over the past decade from a paper-driven,  labor-intensive, clerical role to a more consultative role as advisor, analyst,  and business partner. Many leading finance organizations have seen a  corresponding shift in the mix of skills and competencies required to  perform this new role. GPO has plans and goals that are consistent with best practices for  financial organizations.",
      " GPO should ensure that these plans are completed,  fully supported, and expanded, especially in light of the critical function  that finance will play in GPO\u2019s transformation efforts. Specifically, the CFO  is completing input for training plans that include both skill and education  assessments of administrative support staff, budget operations staff, and  staff in the Office of Comptroller. The CFO stated that he is directly  involved in recruiting talented staff for GPO\u2019s financial operations and is  coordinating with the human resource office on developing a career path  and opportunities for rotational assignments for financial-related staff. While these planned and developed efforts are consistent with best  practices for financial organizations,",
      " GPO should keep focused on the need  to ensure that its financial professionals are equipped to meet new  challenges and support their agency\u2019s mission and goals. This requires GPO  to develop a finance team with the right mix of skills and competencies and  to play the role needed in GPO\u2019s transformation efforts. GPO has taken actions through ongoing efforts and planned goals that are  often consistent with best practices for financial management.  Nevertheless, unless it includes critical financial management activities in  strategic plans for transformation, GPO creates the risk of undermining its  ultimate goal of successful transformation. Without the link to  transformation, GPO may lack the commitment to sustain sound financial  management and lose the benefit of best practices that may be used as  tools to assist decision makers during a period of great change.",
      "   emphasize training on the usefulness and understanding of financial  information to nonfinancial managers who are critical to GPO\u2019s business  operations;  ensure that planned GPO and CFO efforts and goals in redefining the  role of finance, providing information to decision makers, and building a  team that delivers results receive the full and consistent support of  GPO\u2019s top management;  ensure that management is receiving the financial information needed to  manage day-to-day operations and track progress against  transformation goals; and  recognize the importance of financial management and reporting in  strategic plans for transformation. Concluding  Observations The Public Printer has taken action to transform GPO in response to  changes in the environment for printing and information dissemination.",
      "  Change is not optional for GPO\u2014it is required, and it is driven by declines  in GPO\u2019s printing volumes, printing revenues, and document sales. The  panel we convened of printing and information dissemination experts  identified options for GPO\u2019s future that focused on GPO\u2019s role in  information dissemination rather than printing. GPO leadership is using the  panel\u2019s suggestions to inform its strategic plan and set a direction for the  agency\u2019s transformation. We have noted that setting a clear direction for the future is vital to GPO\u2019s  transformation. GPO\u2019s draft strategic plan is to be completed imminently;  however,",
      " its transformation efforts are at a critical juncture, and GPO  leadership will need to take further actions to strengthen and sustain GPO\u2019s  transformation by using the nine key practices that we identified to help  agencies successfully transform. One of these practices, related to ensuring  that top management drives the transformation, has already been fully  applied by GPO\u2019s leadership. Our recommendations, outlined in this report,  will assist GPO with the implementation of the eight practices where GPO\u2019s  efforts are still under way. GPO leadership has articulated a vision to transform GPO into a world- class organization and has taken some initial steps toward this objective.",
      "  GPO is actively implementing our prior recommendations to strengthen  strategic human capital management and has also taken steps toward  improving information technology and information technology  management. GPO could build on this progress by focusing additional  leadership attention on adopting best practices in these areas. Agency Comments and  Our Evaluation We provided a draft of this report on June 9, 2004, to the Public Printer for  review and comment. We received written comments from the Public  Printer, which are reprinted in appendix II. The Public Printer agreed with  the content, findings, and recommendations of the draft report. In his written comments, the Public Printer stated that this report,",
      " together  with our October 2003 report on human capital management, will support  many future actions that are necessary to bring about a successful  transformation of GPO. For example, GPO will use our recommendations,  along with the panel\u2019s suggestions, to develop a customer service model  that partners with GPO\u2019s agency customers to meet their publishing needs.  Further, the Public Printer said that he fully agrees with our assessment of  GPO\u2019s human capital environment and will make significant investments in  workforce development in order to train existing employees in the skills  required for 21st century printing and information processing. In addition,  he added that GPO is moving toward becoming a world-class organization  in both financial management and information technology management by  adopting leading business practices.",
      " GPO also provided minor technical clarifications, which we incorporated  as appropriate in this report. We are sending copies to the Public Printer, as well as the Joint Committee  on Printing, the House Appropriations Legislative Subcommittee, the  Senate Committee on Rules and Administration, and the House Committee  on Administration. We will also make copies available to others upon  request. In addition, the report will be available at no charge on GAO\u2019s Web  site at http://www.gao.gov. If you have any questions about this report, please contact J. Christopher  Mihm or Steven Lozano on (202) 512-",
      "6806 or mihmj@gao.gov and  lozanos@gao.gov. Questions concerning the expert panel, the survey of  executive branch agencies, and information technology issues should be  directed to Linda Koontz at (202) 512-6240 or Tonia Johnson at (202) 512- 6447 or koontzl@gao.gov and johnsontl@gao.gov. Questions about GPO\u2019s  financial management should be directed to Jeanette Franzel at (202) 512- 9471 or Jack Hufnagle at (202) 512-9470 or franzelj@gao.gov or  hufnaglej@gao.gov.",
      " Other contributors to this report were Barbara Collier,  Benjamin Crawford, William Reinsberg, Amy Rosewarne, and Warren  Smith. Scope and Methodology To help explore the options for the future for the Government Prining  Office (GPO), we contracted with the National Academy of Sciences to  convene a panel of experts to discuss (1) trends in printing, publishing, and  dissemination and (2) the future role of GPO. In working with the National  Academy to develop an agenda for the panel sessions, we consulted with  key officials at GPO, representatives of library associations, including the  Association of Research Libraries and the American Library Association,",
      "  and other subject matter experts. The National Academy assembled a panel  of experts on printing and publishing technologies, information  dissemination technologies, the printing industry, and trends in printing  and dissemination. This panel met on December 8 and 9, 2003. To obtain information on GPO\u2019s printing and dissemination activities\u2014 including revenues and costs\u2014we collected and analyzed key documents  and data, including laws and regulations; studies of GPO operations; prior  audits; historical trends for printing volumes and prices; and financial,  budget, and appropriations reports and data. We did not independently  verify GPO\u2019s financial information, but did perform limited tests of the  work performed by external auditors.",
      " We also interviewed appropriate  officials from GPO, the Library of Congress, and the Office of Management  and Budget. To determine how GPO collects and disseminates government  information, we collected and analyzed documents and data on the  depository libraries, the cataloging and indexing program, and the  International Exchange Service program. We also interviewed appropriate  officials from GPO. To determine executive branch agencies\u2019 current reported printing  expenditures, equipment inventories, and preferences, familiarity and level  of satisfaction with services provided by GPO, and current methods for  disseminating information to the public, we developed two surveys of  GPO\u2019s customers in the executive branch.",
      " We sent our first survey to  executive agencies that are major users of GPO\u2019s printing programs and  services. It contained questions on the department\u2019s or agency\u2019s   (1) familiarity with these programs and services and (2) level of satisfaction  with the customer service function. These major users, according to GPO,  account for the majority of printing done through GPO. We sent one survey  each to 7 independent agencies and 11 departments that manage printing  centrally. We also sent one survey each to 15 component agencies within 3  departments that manage printing in a decentralized manner. A total of 33  departments and agencies were surveyed.",
      " The response rate for the user  survey was 91 percent (30 of 33 departments and agencies). We sent our second survey to print officers who manage printing services  for departments and agencies. These print officers act as liaisons to GPO  and manage in-house printing operations. This survey contained questions  concerning the department\u2019s or agency\u2019s (1) level of satisfaction with GPO\u2019s  procured printing and information dissemination functions; (2) printing  preferences, equipment inventories, and expenditures; and (3) information  dissemination processes. These agencies include those that were sent the  user survey plus two others that do not use GPO services.",
      " We sent this  survey to 11 departments that manage printing centrally, 15 component  agencies within 3 departments that manage printing in a decentralized  manner, and 9 independent agencies. A total of 35 departments and  agencies were surveyed. The response rate for the print officer survey was  83 percent (29 of 35 departments and agencies). To develop these survey instruments, we researched executive agencies\u2019  printing and dissemination issues with the assistance of GPO\u2019s Customer  Services and Organizational Assistance Offices. We used this research to  develop a series of questions designed to obtain and aggregate the  information that we needed to answer our objectives.",
      " After we developed  the questions and created the two survey instruments, we shared them with  GPO officials. We received feedback on the survey questions from a  number of internal GPO organizations including Printing Procurement,  Customer Services, Information Dissemination, and Organizational  Assistance. We pretested the executive branch surveys with staff at the Department of  Transportation and the Environmental Protection Agency. We chose these  agencies because each had a long-term relationship with GPO, experience  with agency printing, and familiarity with governmentwide printing and  dissemination issues. Finally, we reviewed customer lists to determine the  appropriate agencies to receive the executive branch surveys.",
      " We did not  independently verify agencies\u2019 responses to the surveys. To assess GPO\u2019s actions and plans for the transformation, we reviewed  statements by the Public Printer, Superintendent of Documents, and other  senior leaders; analyzed draft performance agreements, employee surveys,  communication plans, and strategic planning documents; GPO policies and  procedures; organizational charts; audited financial statements;  information from GPO\u2019s intranet; communications with employees from  the Employee Communications Office and Public Relations; and other  relevant documentation. To obtain additional information and perspectives on GPO\u2019s transformation  issues, we interviewed key senior GPO officials, including the Deputy  Public Printer;",
      " Chief Operating Officer; Chief of Staff; Deputy Chief of Staff;  Superintendent of Documents; Deputy Superintendent of Documents;  Managing Director of Plant Operations; Managing Director of Customer  Services; the former and Acting Chief Human Capital Officer; Chief  Financial Officer; Chief Information Officer; and Director, Office of  Innovations and New Technology. We also interviewed GPO officials at the  next level of management responsible for information dissemination,  customer service, and human capital. To get employee perspectives, we  spoke with union leaders, attended town hall meetings, and analyzed  results of the employee survey and focus groups held by the Human Capital  Office.",
      " In addition, we visited the Pueblo, Colorado, Document Distribution  Center to talk with frontline managers about their views of the  transformation. We used the practices presented in our report Results Oriented Cultures:  Implementation Steps to Assist Mergers and Organizational  Transformations, GAO-03-669, to guide our analysis of the actions taken by  GPO to transform. We developed the recommended next steps by referring  to our other models, guides, reports, and products on transforming  organizations, strategic human capital management, and best practices for  information technology and financial management, and by identifying  additional practices that were associated with and would further  complement or support current GPO efforts.",
      " We performed our work from March 2003 through June 2004. During this  time we worked cooperatively with GPO leaders, meeting regularly with  them about the progress of their transformation initiatives and providing  them with information that they plan to use to develop GPO\u2019s strategic plan  and strengthen management. Because of this collaborative, cooperative  approach, we determined that our work in response to the mandate could  not be considered an audit subject to generally accepted government  auditing standards. However, in our approach to the work, we followed  appropriate quality control procedures consistent with the generally  accepted standards. For the general management review examining GPO\u2019s  transformational efforts,",
      " we did follow generally accepted government  auditing standards. Comments from the Government Printing  Office Executive Agency Satisfaction with GPO  Services Agencies responding to our surveys were generally satisfied with the  Government Printing Office (GPO) and its services. Many agencies rated  certain services favorably:    18 of 19 that use electronic publishing services rated these as average or   16 of 17 that use large-format printing services rated these as average or   16 of 17 that use services to convert products to electronic format rated  these as average or above. However, a few of the responding agencies suggested areas in which GPO  could improve,",
      " as the following examples illustrate:  7 of 23 that use financial management services (such as billings,  payments, and automated transfers) rated these as below average or  poor;  3 of 10 that use Web page design/development rated it as below average   5 of 24 that use the Federal Depository Library Program rated it as  below average or poor. Table 5 (repeated from the body of the report) summarizes (1) agency  users\u2019 levels of satisfaction with GPO\u2019s services and (2) products and  services that they do not use. As the table shows, in responding to questions on customer satisfaction,",
      "  some agencies indicated that they did not use certain electronic services:  18 of 28 do not use Web hosting and Web page design/development   11 of 28 do not use services to convert products to electronic format,  and  9 of 28 do not use electronic publishing services. Some responding agencies identified other services that they did not use:  19 of 28 do not use reimbursable storage and distribution services,  15 of 28 do not use archiving and storage services,  12 of 28 do not use custom-finishing services,  10 of 27 do not use large format printing services,",
      " and  10 of 28 do not use preflighting services. In addition, we asked agencies about specific GPO services, which are  reported in the sections that follow. Level of Satisfaction  with GPO Term  Contracts Most of the responding agencies\u2019 print officers were generally satisfied  with GPO\u2019s Print Procurement Term Contracts organization\u2014the group  that awards and manages long-term multiple print contracts. All print  officers responding to our survey rated this organization as average or  above in the following areas:  cost of products and services, and  knowledge of products and services. Among the few less-than-average ratings were  presentation of new products and services\u20144 of 20 rated GPO\u2019s   timeliness\u20143 of 23 rated GPO\u2019s performance below average,",
      " and  responsiveness to customer needs\u20142 of 24 rated GPO\u2019s performance  below average. Table 6 shows the specific responses. Level of Satisfaction  with GPO Procurement  Purchasing Most of the responding agencies\u2019 print officers also were generally satisfied  with GPO\u2019s Print Procurement Purchasing organization\u2014the organization  that manages one-time print procurements. Among the areas in which the  organization was highly rated were  ability to solve problems\u2014all ratings were average or above,  accessibility by phone\u2014all ratings were average or above, and  communication skills\u2014all ratings were average or above. Among the few less than average ratings were  presentation of new products and services\u20144 of 16 rated this below   responsiveness to customer needs\u20142 of 19 rated this below average,",
      "   timeliness\u20141 of 19 rated this below average. Table 7 shows the specific responses. Level of Satisfaction  with GPO Regional  Print Procurement Most of the responding agencies\u2019 print officers were satisfied with GPO\u2019s  regional print procurement organizations, which manage print contracting  for agency organizations outside of Washington, D.C. Among the areas in  which these organizations were favorably rated were  ability to solve problems\u2014all ratings were average or above,  accessibility by phone\u2014all ratings were average or above, and  accuracy of information\u2014all ratings were average or above. Among the few less-than-average ratings were  presentation of new products and services\u20142 of 15 rated this below   product and services knowledge\u20141 of 21 rated this below average.",
      " Table 8 shows the specific responses. Level of Satisfaction  with GPO Information  Dissemination Most of the responding agencies\u2019 print officers were generally satisfied  with GPO\u2019s information dissemination. Among the areas in which this  function was favorably rated were  courtesy\u2014all rated average or above,  product and/or service knowledge\u2014all rated average or above, and  professionalism\u2014all rated average or above. Among the few less than average ratings were  presentation of new products and services\u20143 of 13 rated this below   accessibility by phone\u20143 of 22 rated this poor. Table 9 shows the specific responses. Level of Satisfaction  with GPO Customer  Services Most responding agencies were generally satisfied with the Customer  Services program.",
      " Among the areas rated as average or above were  ability to solve problems,  professionalism. Among the few less than average ratings were  presentation of new products and services\u20149 of 25 rated below average  or poor,  cost of products and services\u20144 of 26 rated below average or poor, and  timeliness and responsiveness to customer needs\u20142 of 28 rated below  average. Table 10 shows the specific responses. Most of the responding agencies were generally satisfied with their most  recent experience with this program. Specifically,  27 of 29 were able to reach a customer service representative, and  27 of 29 felt that the customer service representatives were helpful.",
      " Among the few less than positive ratings were  7 of 29 strongly agreed or agreed that additional contact was required to   3 of 28 disagreed that their complaint was resolved in a timely manner,  3 of 29 disagreed that their question was answered in a timely manner. Table 11 shows the specific responses. Panel of Experts Prudence S. Adler  Associate Executive Director  Federal Relations and Information Policy  Association of Research Libraries Jamie Callan  Associate Professor  School of Computer Science  Carnegie Mellon University Bonnie C. Carroll  President and Founder  Information International Associates, Inc. Gary Cosimini  Business Development Director  Creative Pro Product Group  Adobe Systems Incorporated John S.",
      " Erickson  Principal Scientist  Digital Media Systems Lab  Hewlett-Packard Laboratories Michael Jensen  Director of Web Communications  National Academies Press P. K. Kannan  Associate Professor  Robert H. Smith School of Business  University of Maryland Nick Kemp  Senior Vice President of Operations  Nature Publishing Group William C. Lamparter  President and Principal  PrintCom Consulting Group Craig Nevill-Manning  Senior Staff Research Scientist  Google Inc. GAO\u2019s Mission The General Accounting Office, the audit, evaluation and investigative arm of  Congress, exists to support Congress in meeting its constitutional responsibilities  and to help improve the performance and accountability of the federal government  for the American people.",
      " GAO examines the use of public funds; evaluates federal  programs and policies; and provides analyses, recommendations, and other  assistance to help Congress make informed oversight, policy, and funding  decisions. GAO\u2019s commitment to good government is reflected in its core values of  accountability, integrity, and reliability. Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost is  through the Internet. GAO\u2019s Web site (www.gao.gov) contains abstracts and full- text files of current reports and testimony and an expanding archive of older  products. The Web site features a search engine to help you locate documents  using key words and phrases.",
      " You can print these documents in their entirety,  including charts and other graphics. Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as \u201cToday\u2019s Reports,\u201d on its Web site  daily. The list contains links to the full-text document files. To have GAO e-mail this  list to you every afternoon, go to www.gao.gov and select \u201cSubscribe to   e-mail alerts\u201d under the \u201cOrder GAO Products\u201d heading. Order by Mail or Phone To Report Fraud,  Waste, and Abuse in  Federal Programs Public Affairs\n"
    ],
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  },
  {
    "id": 103,
    "question": null,
    "answer": "The Department of Homeland Security (DHS) established the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program to collect, maintain, and share data on selected foreign nationals entering and exiting the United States at air, sea and land ports of entry (POEs). These data, including biometric identifiers like digital fingerprints, are to be used to screen persons against watch lists, verify visitors' identities, and record arrival and departure. GAO was asked to review implementation at land POE facilities and in doing so GAO analyzed: (1) efforts to implement US-VISIT entry capability; (2) efforts to implement US-VISIT exit capability; and (3) DHS's efforts to define how US-VISIT fits with other emerging border security initiatives. GAO reviewed DHS and US-VISIT program documents, interviewed program officials, and visited 21 land POEs with varied traffic levels on both borders. US-VISIT entry capability has been installed at 154 of the 170 land POEs. Officials at all 21 sites GAO visited reported that US-VISIT had improved their ability to process visitors and verify identities. DHS plans to further enhance US-VISIT's capabilities by, among other things, requiring new technology and equipment for scanning all 10 fingerprints. While this may aid border security, installation could increase processing times and adversely affect operations at land POEs where space constraints, traffic congestion, and processing delays already exist. GAO's work indicated that management controls in place to identify such problems and evaluate operations were insufficient and inconsistently administered. For example, GAO identified computer processing problems at 12 sites visited; at 9 of these, the problems were not always reported. US-VISIT has developed performance measures, but measures to gauge factors that uniquely affect land POE operations were not developed; these would put US-VISIT officials in a better position to identify areas for improvement. US-VISIT officials concluded that, for various reasons, a biometric US-VISIT exit capability cannot now be implemented without incurring a major impact on land POE facilities. An interim nonbiometric exit technology being tested does not meet the statutory requirement for a biometric exit capability and cannot ensure that visitors who enter the country are those who leave. DHS has not yet reported to Congress on a required plan describing how it intends to fully implement a biometric entry/exit program, or use nonbiometric solutions. Until this plan is finalized, neither DHS nor Congress is in a good position to prioritize and allocate program resources or plan for POE facilities modifications. DHS has not yet articulated how US-VISIT is to align with other emerging land border security initiatives and mandates, and thus cannot ensure that the program will meet strategic program goals and operate cost effectively at land POEs. Knowing how US-VISIT is to work with these initiatives, such as one requiring U.S. citizens, Canadians, and others to present passports or other documents at the border in 2009, is important for understanding the broader strategic context for US-VISIT and identifying resources, tools, and potential facility modifications needed to ensure success.\n",
    "docs": [
      "Background US-VISIT is a large, complex governmentwide program intended to  achieve the goals of (1) enhancing the security of U.S. citizens and visitors,  (2) facilitating legitimate travel and trade, (3) ensuring the integrity of the  U.S. immigration system, and (4) protecting the privacy of visitors. The  program is intended to carry out these goals by    collecting, maintaining, and sharing information on certain foreign  nationals who enter and exit the United States;  identifying foreign nationals who (1) have overstayed or violated the  terms of their visit; (2) can receive, extend,",
      " or adjust their immigration  status; or (3) should be apprehended or detained by law enforcement  officials;    detecting fraudulent travel documents, verifying visitor identity, and  determining visitor admissibility through the use of biometrics (digital  fingerprints and a digital photograph); and  facilitating information sharing and coordination within the  immigration and border management community. Currently, US-VISIT\u2019s scope includes the pre-entry, entry, status, and exit  of hundreds of millions of foreign national travelers who enter and leave  the United States at over 300 air, sea, and land POEs. Legislative Overview The current statutory framework for US-VISIT originates with a  requirement to implement an integrated entry and exit data system for  foreign nationals,",
      " enacted in the Immigration and Naturalization Service  Data Management Improvement Act (DMIA) of 2000. The DMIA replaced  in its entirety a provision of the Illegal Immigration Reform and Immigrant  Responsibility Act of 1996 (IIRIRA) that had required an automated system  to record and then match the departure of every foreign national from the  United States to the individual\u2019s arrival record. The DMIA instead  required an electronic system that would provide access to and integrate  foreign national arrival and departure data that are authorized or required  to be created or collected under law and are in an electronic format in  certain databases,",
      " such as those used at POEs and consular offices. Unlike  the earlier law, the DMIA specifically provided that it not be interpreted to  impose any new documentary or data collection requirements on any  person, but it also provided that it not be construed to reduce or curtail  the authority of DHS or State under any other provision of law. Thus, the  DMIA did not specifically require the collection of any new data on foreign  nationals departing at land POEs. The system as described in the DMIA is to compare available arrival  records to available departure records; allow on-line search procedures to  identify foreign nationals who may have overstayed their authorized  period of admission;",
      " and use available data to produce a report of arriving  and departing foreign nationals. The DMIA also required the  implementation of the system at airports and seaports by December 31,  2003, at the 50 highest volume land POEs by December 31, 2004; and at all  remaining POEs by December 31, 2005. Laws passed after the DMIA also provided specific requirements with  regard to the use of biometrics for those entering and leaving the country.  For example, the USA PATRIOT Act required, by October 26, 2003, the  development and certification of a technology standard,",
      " including  appropriate biometric identifier standards, that can be used to verify the  identity of persons applying for a U.S. visa, or seeking to enter the United  States pursuant to a visa, for the purposes of conducting background  checks, confirming identity, and ensuring that a person has not received a  visa under a different name. The act also provided that in developing US- VISIT, DHS and State were to focus particularly on the utilization of  biometric technology and the development of tamper-resistant documents  readable at POEs. The Enhanced Border Security and Visa Entry Reform  Act of 2002 required DHS and State to implement,",
      " fund, and use the  technology standard, including biometric identifier standards, developed  under the USA PATRIOT Act at U.S. POEs; it also required the installation  at all POEs of equipment and software to allow biometric comparison and  authentication of all U.S. visas and other travel and entry documents  issued to aliens, and passports issued by Visa Waiver Program  participating countries with biometric identifiers. The Intelligence Reform  and Terrorism Prevention Act of 2004, unlike the DMIA, specifically  required the collection of biometric exit data for all categories of  individuals required to provide biometric entry data under US-VISIT,",
      "  regardless of the port of entry where they entered the United States. The  2004 law did not set a deadline for implementation of this requirement,  however. Appendix III discusses the legislative history of the US-VISIT  program in greater detail. Management and  Implementation of US- VISIT Within DHS, the US-VISIT Program Office is headed by the US-VISIT  Director, who reports directly to the Deputy Secretary for Homeland  Security. The US-VISIT Program Office has responsibility for managing the  acquisition, deployment, operation, and sustainment of US-VISIT and has  been delivering US-VISIT capability incrementally.",
      " According to US-VISIT,  increments 1 and 2 include a mix of interim or temporary solutions and  permanent deployments. For example, increment 1B, dealing with exit  capability at airports, is still being piloted, while US-VISIT entry capability  at the 50 busiest land POEs\u2014increment 2B\u2014is considered to be a  permanent deployment. Increment 3\u2014providing entry capability at the  land POEs not covered under Increment 2B\u2014is considered by US-VISIT to  be a permanent deployment and increment 4 is, according to US-VISIT, the  yet-to-be defined US-VISIT strategic capability.",
      " Table 1 summarizes the  scope, timeline, and intended functionality of the US-VISIT increment  schedule. This report focuses generally, but not exclusively, on increments  2B (entry capability at the 50 busiest land POEs), 2C (exit capability at the  50 busiest land POEs), and 3 (entry capability at the remaining land  POEs)\u2014the increments and information that are shown in bold in table 1. From fiscal year 2003 through fiscal year 2007, total funding for the US- VISIT program has been about $1.7 billion. Table 2 summarizes  appropriations for US-VISIT for fiscal years 2003 through 2007,",
      " as enacted. In prior reports on US-VISIT, we have identified numerous challenges that  DHS faces in delivering program capabilities and benefits on time and  within budget. In September 2003, we reported that the US-VISIT program  is a risky endeavor, both because of the type of program it is (large,  complex, and potentially costly) and because of the way that it was being  managed. We reported, for example, that the program\u2019s acquisition  management process had not been established, and that US-VISIT lacked a  governance structure. In March 2004, we testified that DHS faces a major  challenge maintaining border security while still welcoming visitors.",
      "  Preventing the entry of persons who pose a threat to the United States  cannot be guaranteed, and the missed entry of just one can have severe  consequences. Also, US-VISIT is to achieve the important law enforcement  goal of identifying those who overstay or otherwise violate the terms of  their visas. Complicating the achievement of these security and law  enforcement goals are other key US-VISIT goals: facilitating trade and  travel through POEs and providing for enforcement of U.S. privacy laws  and regulations. Subsequently, in May 2004, we reported that DHS had  not employed the kind of rigorous and disciplined management controls  typically associated with successful programs.",
      " Moreover, in February  2006, we reported that while DHS had taken steps to implement most of  the recommendations from our 2003 and 2004 reports, progress in critical  areas had been slow. Of 18 recommendations we made since 2003, only 2  had been fully implemented, 11 had been partially implemented, and 5  were in the process of being implemented, although the extent to which  they would be fully carried out was not yet known. US-VISIT Scope,  Operations, and  Processing at Land POEs As mentioned earlier, US-VISIT currently applies to a certain group of  foreign nationals\u2014non-immigrants from countries whose residents are  required to obtain nonimmigrant visas before entering the United States  and residents of certain countries who are exempt from U.S.",
      " visa  requirements when they apply for admission to the United States for up to  90 days for tourism or business purposes under the Visa Waiver Program.  US-VISIT also applies to (1) Mexican nonimmigrants traveling with a  Border Crossing Card (BCC) who wish to remain in the United States  longer than 30 days or who declare that they intend to travel more than 25  miles into the country from the border (or more than 75 miles from the  Arizona border in the Tucson area) and (2) Canadians traveling to the  United States for certain specialized reasons. Most land border crossers\u2014including U.S.",
      " citizens, lawful permanent  residents, and most Canadian and Mexican citizens\u2014are, by regulation or  statute, not required to enroll into US-VISIT. In fiscal year 2004, for  example, U.S. citizens and lawful permanent residents comprised about 57  percent of land border crossers; Canadian and Mexican citizens comprised   about 41 percent; and less than 2 percent were US-VISIT enrollees.   Figure 1 shows the number and percent of persons processed under US- VISIT as a percentage of all border crossings at land, air, and sea POEs in  fiscal year 2004.",
      " Foreign nationals covered by US-VISIT enter the United States via a multi- step process. For individuals required to obtain visas before entering the  United States, the US-VISIT process begins overseas at U.S. consular  offices, which in addition to other processes, collect biographic data   (i.e., country of origin and date of birth) and biometric data (i.e., digital  fingerscans and a digital photograph) from the applicant. These data are  checked against databases or watch lists of known criminals and  suspected terrorists. If the individual\u2019s name does not appear on any watch  list and the individual is not disqualified on the basis of other issues that  may be relevant,",
      " he or she is to be issued a visa and may seek admission to  the United States at a POE. When visitors in vehicles first arrive at a land POE, they initially enter the  primary inspection area where CBP officers, often located in booths, are  to visually inspect travel documents and query the visitors about such  matters as their place of birth and proposed destination. Visitors arriving  as pedestrians enter an equivalent primary inspection area, generally  inside a CBP building. If the CBP officer believes a more detailed  inspection is needed or if the visitors are required to be processed under  US-VISIT for the first time,",
      " the visitors are to be referred to the secondary  inspection area\u2014an area away from the primary inspection area\u2014which is  generally inside a facility. The secondary inspection area inside the facility  generally contains office space, waiting areas, and space to process  visitors, including US-VISIT enrollees. Equipment used for US-VISIT  processing includes a computer, printer, digital camera, and a two- fingerprint scanner. Figure 2 shows US-VISIT equipment installed at one  land POE. CBP officers use a document reader to scan machine readable travel  documents, such as a passport or visa, and use computers to check  biographic data from the documents against watch list databases.",
      " For US- VISIT processing, biometric verification is performed in part by taking a  digital scan of visitors\u2019 fingerprints (the left and right index fingers) and by  taking a digital photograph of the visitor. These data are stored in the  system\u2019s databases. The computer system compares the two index  fingerprints to those stored in DHS\u2019s Automated Biometric Identification  System (IDENT) that, among other things, collects and stores biometric  data about foreign nationals, including FBI information on all known and  suspected terrorists. If the fingerprints are already in IDENT, the system performs a match  against the existing digital scans to confirm that the person submitting the  fingerprints at secondary inspection at the POE is the one on file.",
      " In  addition, the CBP officer visually compares the person to the photograph  that is in the database, which is brought up onto the computer screen. If  no prints are found in IDENT (for example, if the visitor is from a visa- waiver country), that person is then processed into US-VISIT, with  biographic data entered into the databases, a digital scan of his or her two  index fingerprints, and a digital photograph. Once the CBP officer deems  the visitor to be admissible, the individual is issued an I-94 or an I-94W (for  persons from visa waiver countries)",
      " arrival/departure form. Figure 3  shows how U.S. citizens and most Mexicans, Canadians, and foreign  nationals subject to US-VISIT are to be processed at land POEs. In addition to IDENT, US-VISIT relies on a number of information systems  to process visitors. Among the computer software applications utilized as  part of US-VISIT is U.S. Arrival, which provides an integrated process for  issuing I-94 forms and collection of biometric data for visitors covered by  US-VISIT who arrive at land POEs. Another is U.S. Pedestrian, which is  used by CBP officers in conducting inspections of visitors who arrive at  land POEs,",
      " entering the United States on foot, mostly along the southern  border. Overview of Land POE  Facilities As of August 2006, there were 170 land POEs that are geographically  dispersed along the nation\u2019s more than 7,500 miles of borders with Canada  and Mexico. Some are located in rural areas (such as Alexandria Bay, New  York and Blaine-Pacific Highway, Washington) and others in cities (such  as Detroit) or in U.S. cities across from Mexican cities, such as Laredo and  El Paso, Texas. The volume of visitor traffic at these POEs varies widely,  with the busiest four POEs characterized by CBP as San Ysidro,",
      " Calexico,  and Otay Mesa, California, and Bridge of the Americas in El Paso, Texas.  Appendix IV lists the 20 busiest land POEs, based on the number of  individuals in vehicles and pedestrian traffic recorded entering the country  through POEs in fiscal year 2005. From a facilities standpoint, land POEs vary substantially in building type  and size (square footage) as shown in Figures 4a, 4b, and 4c. DHS Has Installed US- VISIT Biometric Entry  Capability at Nearly  All Land POEs, but  Faces Challenges  Identifying and  Monitoring the  Operational Impacts  on POE Facilities DHS has installed US-VISIT biometric entry capability at nearly all land  POEs consistent with statutory deadlines,",
      " but faces challenges identifying  and monitoring the operational impacts on POE facilities. CBP officials at  the 21 land POEs we visited told us that US-VISIT has generally enhanced  the officials\u2019 ability to process visitors subject to US-VISIT by providing  officials the ability to do biometric checks and automating the issuance of  the visitor I-94 arrival/departure form. DHS plans to introduce changes and  enhancements to US-VISIT at land POEs intended to bolster border  security, but deploying them poses potential operational challenges to  land POE facilities that are known by DHS to be space-constrained.",
      " US- VISIT\u2019s efforts to evaluate the impact of US-VISIT on land POE facilities  thus far raises questions about whether sufficient management controls  exist to ensure that additional operational impacts, such as processing  delays or further space constraints, will be anticipated, identified, and  appropriately addressed and resolved. US-VISIT Biometric Entry  Capability Was Installed at  Nearly All Land POEs with  Minimal Construction,  According to Program  Officials In December 2005, DHS officials announced that US-VISIT biometric entry  capability had been installed at land POEs in conformance with statutory  mandates and Increments 2B and 3 of DHS\u2019s US-VISIT schedule.",
      "  Deployment at the 50 busiest land POEs was completed by December 31,  2004, and at all but 2 of the other land POEs where DHS determined the  program should operate by December 31, 2005, as required by law. Our  review of US-VISIT records and discussions with US-VISIT program  officials indicated that DHS installed US-VISIT biometric entry capability  at 154 of 170 land POEs. (App. V lists all land POEs where US-VISIT has  been installed.) With regard to 14 of the 16 POEs where US-VISIT was not  installed,",
      " CBP and US-VISIT program office officials told us there was no  operational need for US-VISIT because visitors who are required to be  processed into US-VISIT are, by regulation, not authorized to enter the  United States at these locations. Generally, these POEs are small facilities  in remote areas. At 2 other POEs, US-VISIT needs to be installed in order  to achieve full implementation as required by law, but both of these  present significant challenges to installation of US-VISIT. These POEs do  not currently have access to appropriate communication transmission  lines to operate US-VISIT.",
      " CBP officials told us that, given this constraint,  they determined that they could continue to operate as before.  Thus, CBP  officers at these locations process foreign visitors manually. US-VISIT program officials reported and available records showed that  equipment for US-VISIT entry capability was installed with minimal  construction at the 154 land POEs. At the 21 land POEs we visited, we  observed that US-VISIT entry capability equipment had been installed with  little or no change to facilities. For example, at the Detroit-Windsor tunnel  and the Detroit Ambassador Bridge POEs in Detroit, Michigan,",
      " officials  confirmed that no additional computer workstations were required to be  installed; at the Blaine-Peace Arch POE at Blaine, Washington, electrical  capacity was upgraded to accommodate US-VISIT computer needs. In  general, our review of reports prepared for each of these POEs indicated  that DHS upgraded existing or added new computer workstations and  printers in the secondary inspections areas of these facilities (the area  where US-VISIT enrollees are processed); installed digital cameras to  photograph those to be processed in US-VISIT; installed two-fingerprint  scanners that digitally record fingerprints; and installed electronic card  readers for detecting data embedded in machine-readable passports and  visas.",
      " According to US-VISIT officials, funding for installing US-VISIT entry  equipment nationwide was approximately $16 million\u2014about 9 percent of  the $182 million budgeted for US-VISIT deployment at land ports between  fiscal year 2003 and fiscal year 2005. Officials reported that the remaining  funds were allocated to computer network infrastructure (about 72  percent) and design and development, network engineering, fingerscan  devices, and public awareness and outreach (about 19 percent). During our site visits, CBP officials at all 21 facilities told us that having  US-VISIT biometric entry capability generally improved their ability to  process visitors required to enroll in US-VISIT because it provided them  additional assurance that visitors are who they say they are and automated  the paperwork associated with processing the I-",
      "94 arrival/departure form.  For example, with US-VISIT, the ability to scan a visitor\u2019s passport or other  travel document enables the computer at the inspection site to capture  basic biographic information and automatically print it on the I-94 form;  prior to US-VISIT deployment, the I-94 was filled in manually by the CBP  officer or the visitor. Steps Have Been Taken to  Address Operational  Challenges Identified at  Land POEs, but DHS May  Face Additional  Challenges Resulting from  Planned Enhancements DHS plans to introduce changes and enhancements to US-VISIT at land  POEs that are designed to further bolster CBP\u2019s ability to verify that  individuals attempting to enter the country are who they say they are.",
      "  While these changes may further aid border security, deploying them  poses potential challenges to land POE facilities where US-VISIT operates  and where millions of visitors are processed annually. Our site visits,  interviews with US-VISIT and CBP officials, and the work of others  suggest that both before and after US-VISIT entry capability was installed  at land POEs, these facilities faced a number of challenges\u2014operational  and physical\u2014including space constraints complicated by the logistics of  processing high volumes of visitors and associated traffic congestion. With respect to operational challenges at land POE facilities, we reported  in November 2002\u2014more than 2 years before US-VISIT entry capability  was installed at the 50 busiest land POEs\u2014that busy land POEs were  experiencing 2-",
      " to 3-hour delays in processing visitors and that any  lengthening of the entry process could affect visitors significantly, through  additional wait times. While we cannot generalize about the impact US- VISIT has had on processing time at all land POEs, at one of the busiest  land POEs we visited\u2014San Ysidro, California, where more than 41 million  visitors entering the country in 2005 were processed\u2014CBP officials told us  that, although they had not measured differences in processing times  before and after US-VISIT was installed, the steps required to process US- VISIT visitors had added to the total time needed to process all visitors  entering through the port.",
      " As a result, CBP officials told us that they must  occasionally direct visitors arriving at peak times, such as holidays, to  leave and return later in the day because there was no room for them to  wait. In this case, US-VISIT had an effect on both visitor processing times  and on the capacity of the facility to physically accommodate pedestrian  and vehicular traffic. A similar type of operational problem that reflects how complex visitor  processing activities occur at facilities was reported by a contractor  retained by DHS to study wait times associated with the I-94 issuance  process at another busy POE, Nogales-DeConcini in Arizona.",
      " The study,  which examined wait times for 3 separate time periods over a 3-month  period in the summer of 2005, found that wait times varied by day (ranging  from about 3\u00bd minutes to almost 7 minutes across the time periods  studied) and was more a function of the number of people waiting for an I- 94 rather than the time needed to process each individual under US- VISIT. The contractor noted that the group size, wait time, and processing  all affected the dynamics of the secondary-processing area or room, which  measured approximately 40 feet by 50 feet. During one day of the study,",
      "  the contractor noted that the secondary processing room became  crowded, straining processing capacity.  The contractor stated that this  occurred because some of the individuals waiting to obtain I-94s were  students or seasonal workers that required checks that included phone  calls to verify their visa status. The contractor concluded that US-VISIT  provided an advantage over manual I-94 processing because the  processing was ultimately more efficient. Nevertheless, the extent to  which these problems occur is unknown because US-VISIT has not  performed comparable studies at other locations. DHS has long been aware of space constraints and other capacity issues at  land POE facilities.",
      " A task force report developed in response to the  Immigration and Naturalization Service Data Management Improvement  Act of 2000 found that 117 of 166 land POEs operating at that time (about  70 percent) had three-fourths or less of the required space. The US-VISIT  Program Office subsequently confirmed that land POEs had traffic flow  problems (i.e., lack of space, insufficient roadways, and poor access to  facilities) and that many were aging and undersized; the majority of land  POEs were constructed before 1970 when the volume of border crossings  was not as great as it is now.",
      " Our work for this report indicates that such  problems persist, though we cannot generalize to all facilities. For  example, at the Nogales-Morley Gate POE in Arizona, where up to 6,000  visitors are processed daily (and up to 10,000 on holidays), US-VISIT  equipment was installed, but the system is not used there because CBP  determined that it could not accommodate US-VISIT visitors because of  concerns about CBP\u2019s ability to carry out the process in a constrained  space while thousands of other people not subject to US-VISIT processing  already transit through the facility daily.",
      " Thus, if a visitor is to be  processed into US-VISIT from Morley Gate, that person is directed to  return to Mexico (a few feet away) and to walk the approximately 100  yards to the Nogales-DeConcini POE facility, which has the capability to  handle secondary inspections of this kind. Figure 5 shows the Nogales- Morley Gate POE building\u2014the small windowed structure on the right is  the processing site. CBP officials at three other land POEs on the southwest border also told  us that space constraints were a factor in their ability to efficiently process  those subject to US-VISIT.",
      " Specifically, at the POEs at Los Tomates,  Gateway, and Brownsville/Matamoros, Texas, CBP officials told us that  US-VISIT had made I-94 processing more efficient, but travelers continued  to experience delays of up to 2 hours on peak holiday weekends as they  had before US-VISIT was installed. Officials at these facilities told us that  they believe they could alleviate this problem if the facility had the space  to install more workstations capable of operating US-VISIT entry  capability. According to CBP officials, CBP has begun to examine the condition of  each facility with the intent of developing a list of border station  construction and modification needs and plans to prioritize construction  projects based on need.",
      " In the meantime, CBP and US-VISIT officials told  us that they have taken steps to address problems operating US-VISIT  when space constraints are an issue. For example, at the POE in Highgate  Springs, Vermont, CBP officials told us that US-VISIT computers and those  needed to process commercial truck drivers and their cargoes were  competing for space at the interior counter area of the building. Following  our visit, we were told that the POE had adjusted its space allocation  inside the POE building so that there are now five workstations for US- VISIT and other noncommercial visitor processing,",
      " one of which can do  both. According to the POE assistant area port director, the POE also  extended the hours during which truck drivers can be processed in a  separate building designed entirely for processing them and their cargoes,  in order to relieve the space pressures in the main building that occur  during the high-volume tourist summer season. US-VISIT and CBP officials reported that they have taken other steps to try  to minimize any problems that may arise integrating US-VISIT entry  capability operations with other CBP operations. For example, to help  ensure that US-VISIT does not have an adverse impact on CBP\u2019s  operations at ports of entry,",
      " US-VISIT and CBP established a liaison office  in June 2005, involving supervisory managers detailed from various CBP  offices. The liaison officers worked with US-VISIT staff to overcome  operational issues at POEs; review plans; develop and deliver training; set  up call sites during busy holiday periods to provide support to POEs  needing assistance; and work through technology problems. A CBP official  told us that he believes both US-VISIT and CBP have been successful in  helping land POEs overcome problems as they arise (such as those that  might occur operating new technology at space constrained facilities). The  CBP officers detailed to the liaison office have since returned to their  original duty stations.",
      " According to CBP officials, CBP has an open  invitation to re-initiate the liaison office at any time. While past challenges with facilities are well known to US-VISIT and CBP  officials and efforts have been made to address them, it is not clear  whether US-VISIT or CBP is prepared to anticipate additional facilities  challenges\u2014challenges already acknowledged by senior US-VISIT  officials\u2014that may arise as new US-VISIT capabilities are added. The  following two key initiatives, in particular, could affect operations at land  POEs:    10-fingerprint scanning of US-VISIT enrollees.",
      " DHS plans to  require that individuals subject to US-VISIT undergo a 10-fingerprint  scan, in place of the current 2, to ensure the highest levels of accuracy  in identifying people entering and exiting the country. Under this plan,  US-VISIT visitors would be required to have all fingerprints scanned the  first time they enroll in US-VISIT and to submit a 2-fingerprint scan  during subsequent visits. A cost/benefit analysis of this capability is  under way by DHS, selected components, and other agencies, with an  anticipated transition period (from the 2- to 10-fingerprint scan  requirement)",
      " taking place later this year and next. In January 2006, the  former Director of US-VISIT testified before the Senate Appropriations  Subcommittee on Homeland Security that in order to introduce a 10- fingerprint scan capability at land POEs and other locations, DHS  would need a 6-to-8-month period to develop the capability and  additional time to introduce initial operating capability. The former  Director testified that unresolved technical challenges create the  potential for a significant increase in the length of time needed to  process individuals subject to US-VISIT at POEs once the 10-fingerprint  requirement is in place. In commenting on this report,",
      " DHS noted that  US-VISIT has been working with industry to speed up processing time  and reduce the size of 10-print capture devices to \u201celiminate or  significantly reduce the impact of deploying 10-print scanning.\u201d  As  noted earlier, our past work has shown that any lengthening in the  process of entering the United States at the busiest POEs could  inconvenience travelers and result in fewer visits to the United States  or lost business to the nation. Electronic passport readers for Visa Waiver Program travelers.  All Visa Waiver Program travelers with passports issued after October  26, 2005 must have passports that contain a digital photograph printed  in the document;",
      " passports issued to visa waiver travelers after  October 26, 2006 must have integrated circuit chips, known as  electronic passports, which are also called \u201ce-passports.\u201d (The Visa  Waiver Program allows travelers from certain countries to gain entry to  the United States without a visa.) These e-passports are to contain  biographic and biometric information that can be read by an e-passport  reader or scanner, a device which electronically reads or scans the  information embedded in the e-passport at close proximity, about 4  inches to the reader. According to DHS, all POEs must have the ability  to compare and authenticate e-passports as well as visas and other  travel and entry documents issued to foreign nationals by DHS and the  Department of State.",
      " Earlier this year, DHS announced it had  successfully tested e-passports and e-passport scanners. A US-VISIT  Program Office official told us that deployment of these scanners is  moving toward implementation at POEs located at 34 selected  international airports where about 97 percent of the Visa Waiver  Program travelers enter the country. The official said that e-passport  readers will not initially be installed at land POEs\u2014which process a  small percentage of visa waiver travelers\u2014and there is no timeline for  deploying the scanners at land POEs, although there are plans to do so  at some point. CBP\u2019s Director of Automated Programs in the Office of  Field Operations told us that e-passport readers and the database used  to process e-passport information do not operate as fast as current  processes at land POEs and thus could cause additional delays,",
      "  especially at POEs experiencing processing backlogs and wait times,  such as San Ysidro, California, and Nogales-Mariposa, Arizona. Given the potential impact that enhancements to US-VISIT could have  both on visitor processing overall and on land POE facilities, it is  important for US-VISIT and CBP to be able to gauge how new changes  associated with US-VISIT may affect operations. However, our past work  showed that US-VISIT had not taken all needed steps to help ensure that  US-VISIT entry capability operates as intended because the approaches  used to gauge or anticipate the impact of US-VISIT operations on land  POE facilities was limited.",
      " Specifically, in 2005, in an effort to evaluate the  impact of US-VISIT on the busiest land POEs, DHS completed evaluations  of the time needed to process and issue the I-94 arrival/departure form at 5  POEs. To conduct its study, DHS studied the I-94 process before and after  US-VISIT was installed at five land POEs at three locations (Port Huron,  Michigan; Douglas, Arizona; and Laredo, Texas). Based on data collected  from these 5 POEs, US-VISIT officials concluded that no additional staff or  facility modifications were needed at other POEs in order to accommodate  US-VISIT.",
      " We reported in February 2006 that the scope of this evaluation  was too limited to determine potential operational impacts on POEs.  We  reported three limitations, in particular: (1) that the evaluations did not  take into account the impact of US-VISIT on workforce requirements or  facility needs because the evaluations focused solely on I-94 processing  time; (2) that the locations selected were chosen in part because they  already had sufficient staff to support a US-VISIT pilot-test; and (3) that  US-VISIT officials did not base their evaluation of I-94 processing times on  a constant basis before and after deployment of US-VISIT\u2014that is,",
      " pre- deployment sites used fewer computer workstations to process travelers  than did sites studied after deployment. We recommended that DHS  explore alternative means to obtaining a full understanding of the impact  of US-VISIT on land POEs, including its impact on workforce levels and  facilities and that POE sites be surveyed that had not been included in  their original assessment. US-VISIT responded that wait times at land  POEs were already known and that it would conduct operational  assessments at POEs as new projects came online. However, apart from a  study conducted at one POE facility by a DHS contractor in August 2005  (cited above), US-VISIT has not provided documentation on any additional  evaluations conducted that would provide additional insights about the  effect of US-VISIT on land POE operations,",
      " including wait times. We recognize that it may not be cost-effective for US-VISIT or CBP to  conduct a formal assessment of the impact US-VISIT has on each land  POE now that the entry capability has been installed or of all facilities  once new enhancements are introduced. Nevertheless, the assessment  methodology US-VISIT has used in the past\u2014which focused on measuring  changes in I-94 processing times\u2014raises questions about how the agency  will assess the impact that the transition from 2- to 10-fingerprint scanning  may have on land POE operations. That is, if US-VISIT uses the same  methodology and focuses on the changes in processing time,",
      " rather than  on the overall impact on operations, including facilities, staffing, and  support logistics, the results will have the same limitations we highlighted  in our earlier study. Our February 2006 recommendation would also be  applicable to enhancements that have the potential to negatively affect  operations. Management Controls Did  Not Always Alert US-VISIT  and CBP to Operational  Problems US-VISIT and CBP have management controls in place to alert them to  operational problems as they occur, but these controls did not always  work to ensure that US-VISIT operates as intended. Specifically, US-VISIT  and CBP officials had not been made aware of computer processing  problems that affected operations,",
      " in particular, until we brought them to  their attention, partly because these problems were not always reported.  These computer processing problems have the potential to not only  inconvenience travelers because of the increased time needed to complete  the inspection process, but to compromise security, particularly if CBP  officers are unable to perform biometric checks\u2014one of the critical  reasons US-VISIT was installed at POEs. Our standards for internal control in the federal government state that it is  important for agencies to provide reasonable assurance that they can  achieve effective and efficient operations. This includes establishing and  maintaining a control environment that sets a positive and supportive  attitude toward control activities that are designed to help ensure that  management\u2019s directives are carried out.",
      " Control activities include  reviewing and monitoring agency operations at the functional level (i.e., at  land POEs) to compare operational performance with planned or expected  results and to ensure that controls described in policies and procedures  are actually applied and applied properly, and having relevant, reliable,  and timely communications to ensure that information flows down,  across, and up the organization thereby helping program managers carry  out their responsibilities and providing assurance that timely action is  taken on implementation problems or information that requires follow-up. Our site visit interviews suggest that current monitoring and control  activities were not sufficient to ensure that US-VISIT performs in  accordance with its security mission and objectives.",
      " For example, at 12 of  the 21 land POEs we visited, computer-processing problems arose that,  according to CBP officials at those locations, had an impact on processing  times and traveler delays. Generally, officials at these 12 sites said that  computer problems occurred with varying frequency and duration; some  said that computers were at times slow or froze up during certain times of  the day, while others said that problems were sporadic and they could not  ascribe them to a particular time of the day. None of the officials we  interviewed had formally assessed the impact of computer slowdowns or  freezes on visitors and visitor wait times,",
      " but nonetheless cited computer  problems as a cause of visitor delays. In November 2005, we notified a US- VISIT program official in headquarters that we had heard about computer  processing problems at some of the POEs we had visited. The official told  us that US-VISIT had not been aware of these problems and said that, as a  result of our work, CBP had been contacted to investigate the problem. In  June 2006, a CBP official responsible for information technology at CBP\u2019s  data center told us that POEs had experienced slowdowns associated with  certain US-VISIT data queries.",
      " The CBP official told us that since the  computer processing problems were identified and resolved, performance  had greatly improved. We did not verify whether the actions taken fully  resolved these problems. \u201c\u2026on the morning of Thursday, June 23, the computer systems used to perform  secondary inspections became very slow, impacting the issuance of I-94 and  enrollment in US-VISIT. The staff had to revert to using the paper I-94s, which  visitors had to fill out by hand...\u201d  \u201cAs happened during the  study, the computer systems were unavailable for  a period of time. This occurred on Tuesday from 1:",
      "00 to 2:00 p.m. Port officials  decided to revert to the manual process because the network had become very  slow and the queue was growing. CBP officers told \u2026 researchers that it was  taking up to twenty minutes to receive responses to queries....\u201d In an undated memorandum commenting on the contractor\u2019s report, US- VISIT\u2019s Director of Mission Operations expressed concern about the  contractor\u2019s discussion of computer \u201cdowntime\u201d as a factor impacting US- VISIT processing times. He stated that these problems can be caused by a  variety of factors, including factors related to I-94 processing and that  capturing biometric information \u201cis only rarely responsible for the inability  to complete the process.\u201d Based on our work,",
      " it is unclear what analysis  US-VISIT had done to make this determination. US-VISIT officials told us that various controls are in place to alert them to  problems as they occur, but the lack of awareness about computer- processing problems raises questions about whether these controls are  working as intended. US-VISIT officials told us that it is their position that  once US-VISIT entry capability equipment was installed and operating,  CBP became responsible for identifying problems and notifying US-VISIT  when US-VISIT-related problems occurred so that US-VISIT can work with  CBP to resolve them. The officials stated that computer problems can be  attributable to other processes and systems not related to US-VISIT which  are not the US-VISIT Program Office\u2019s responsibility.",
      " In addition, the  Acting Director of US-VISIT noted that there are mechanisms in place to  help CBP and US-VISIT identify problems. For example, US-VISIT officials  told us that US-VISIT and CBP headquarters officials meet regularly to  discuss issues associated with US-VISIT implementation and CBP  maintains a help desk at its Virginia data center to resolve technology  problems raised by CBP field officials. Regarding the latter, the Acting  Director noted that if POE officials do not report problems, there is  nothing CBP and US-VISIT can do to resolve them. During our review,",
      " we  noted that CBP officers are required\u2014in training and as part of standard  operating procedures\u2014to report problems with US-VISIT technology to  the CBP help desk. Nevertheless, CBP officials at 9 of the 12 sites we  visited where computer processing problems were identified said they did  not always use the help desk to report or resolve computer problems (and  thereby generating a record of the problems). Officials at 5 of the 9 sites  told us they temporarily resolved the problem by turning off and restarting  the computers. Although US-VISIT and CBP have some controls in place to help them  identify and address problems like those discussed above,",
      " these controls  may not have been implemented consistently or may not be sufficient to  ensure that US-VISIT operates as intended because officials did not always  alert CBP and US-VISIT program managers to the fact that problems were  occurring that adversely affected operations. It is important that US-VISIT  and CBP managers are alerted to problems as they occur to ensure  continuity of operations consistent with US-VISIT\u2019s goal of providing  security to U.S. citizens and travelers. Moreover, in light of the fact that  US-VISIT plans to enhance security through additional technology  investments and that it may be challenging to deploy and operate at  facilities that are already known to be aging and undersized,",
      " it is  incumbent upon the US-VISIT program office to play a continuing and  proactive role in the management control structure. Our internal control standards also call for agencies to establish  performance measures and indicators throughout the organization so that  actual performance can be compared to expected results. The US-VISIT  program office has established and implemented performance measures  for fiscal years 2005 and 2006 that are designed to gauge performance of  various aspects of US-VISIT covering a variety of areas, but these  measures do not gauge the performance of US-VISIT entry capabilities at  land POEs. For example, according to a July 2006 draft report prepared by  the US-VISIT program office,",
      " US-VISIT has begun to measure the ratio of  adverse actions (defined as decisions to deny entry into the country) to  total-biometric-watch-list \u201chits\u201d when visitors are processed at ports of  entry. According to US-VISIT, this measure seeks to help CBP focus its  inspection activities on preventing potential known or suspected criminals  or terrorists from entering the country. US-VISIT reported that it had not  established a baseline or target for this measure in fiscal year 2005.  However, according to US-VISIT, CBP officers at all POEs combined  denied entrance to 30 percent of persons whose biometric information  appeared on a watch list during fiscal year 2005 (about 617 of the 2,",
      "059  watch list \u201chits\u201d). US-VISIT established a target for this measure during  fiscal year 2006 of 33 percent. Another measure is designed to gauge the wait time incurred by a specific  US-VISIT activity at all air, land, and sea POEs, namely the average  response time to deliver results on biometric watch list queries for finger  scans. (This measure does not gauge other US-VISIT related activities such  as scanning the visa or passport, taking and processing a digital  photograph, or printing an I-94.) To ensure that wait times are not  increased substantially due to additional US-VISIT capabilities at POEs,",
      "  US-VISIT has established a goal of 10 seconds and reported that, since  October 2004, US-VISIT has been able to maintain, on average, less than an  8-second response time at POEs at which US-VISIT had been installed. These and other existing measures of certain key aspects of program  performance with respect to both security and efficiency can be useful in  analyzing trends and measuring results against planned or expected  results. However, because there are operational and facility differences  among air, sea, and land POEs, it is important to be able to measure and  distinguish differences\u2014one would not expect baseline or target measures  to be the same across these environments.",
      " At air and sea ports, visitors are  processed in primary inspection in a controlled environment and CBP  officers are able to prescreen visitors using passenger manifests, which  are transmitted to CBP while passengers are enroute to the POE. By  contrast, at land POEs, visitors arrive on foot or in a vehicle and CBP  officers refer them to secondary inspection for US-VISIT processing  without the benefit of a manifest and based on the information available to  officers at the point of initial contact\u2014a process substantially different  than that used at air and sea ports. The measures used in August 2006  aggregated baselines and targets for all POEs and did not distinguish  among them with regard to air,",
      " land, and sea POEs. Without additional performance measures to more fully gauge operational  impacts of US-VISIT on land POEs, CBP and US-VISIT may not be well  equipped to identify problems, trends, and areas needing improvements  now and as additional US-VISIT entry capabilities, such as 10-finger scans,  are introduced. Consistent with our past work, we believe such measures  could help DHS identify and quantify problems, evaluate alternatives,  allocate resources, track progress, and learn from any mistakes that may  have been made while deploying and operating US-VISIT at land POEs.",
      " DHS Cannot  Currently Implement  a Biometric US-VISIT  Exit Capability at  Land POEs and Faces  Uncertainties as  Testing of an  Alternative Exit  Strategy Continues While federal laws require the creation of a US-VISIT exit capability using  biometric verification,  the US-VISIT Program Office concluded that  implementing a biometrically-based exit-recording system like that used to  record visitors entering the country would require additional staff and new  infrastructure (such as buildings and roadways) that would be  prohibitively costly, would likely produce major traffic congestion in exit  lanes at the busier land POEs and could have adverse impacts on trade  and commerce.",
      " Although current technology does not exist to enable  biometric verification of those leaving the country without major  infrastructural changes, US-VISIT officials believe technological advances  over the next 5- to 10- years will enable them to record who is leaving the  country using biometrics without requiring travelers to stop at a facility,  thereby minimizing the need for major infrastructure changes.  In the  interim, US-VISIT is testing an alternative nonbiometric technology for  recording visitors as they exit the country, in which electronic tags  containing a numeric identifier associated with each visitor are embedded  in I-94 forms. US-VISIT\u2019s own analysis of this technology and our analysis  and that of others has identified numerous performance and reliability  problems with this solution,",
      " including the inability of the nonbiometric  solution to ensure that the person exiting the country is the same who  entered. US-VISIT has taken corrective actions and testing is still ongoing,  but uncertainties remain about how US-VISIT will use technology in the  future to meet biometric exit requirements. These uncertainties reflect the  fact that DHS has not met a June 2005 statutory requirement to submit a  report to the Congress that describes (1) the status of biometric exit data  systems already in use at POEs and (2) the manner in which US-VISIT is to  meet the goal of a comprehensive screening system,",
      " with both entry and  exit biometric capability. Various Factors Have  Prevented US-VISIT from  Implementing a Biometric  Exit Capability Federal laws require the creation of a US-VISIT exit capability using  biometric verification methods to ensure that the identity of visitors  leaving the country can be matched biometrically against their entry  records. However, according to officials at the US-VISIT program office  and CBP and US-VISIT program documentation, there are interrelated  logistical, technological, and infrastructure constraints that have  precluded DHS from achieving this mandate, and there are cost factors  related to the feasibility of implementation of such a solution.",
      " The major  constraint to performing biometric verification upon exit at this time, in  the US-VISIT Program Office\u2019s view, is that the only proven technology  available would necessitate mirroring the processes currently in use for  US-VISIT at entry. A mirror-image system for exit would, like entry, require  CBP officers at land POEs to examine the travel documents of those  leaving the country, take fingerprints, compare visitors\u2019 facial features to  photographs, and, if questions about identity arise, direct the departing  visitor to secondary inspection for additional questioning. These steps  would be carried out for exiting pedestrians as well as for persons exiting  in vehicles.",
      " The US-VISIT Program Office concluded in an internal January  2005 report assessing alternatives to biometric exit that the mirror-imaging  solution was \u201can infeasible alternative for numerous reasons, including but  not limited to, the additional staffing demands, new infrastructure  requirements, and potential trade and commerce impacts.\u201d US-VISIT officials told us that they anticipated that a biometric exit  process mirroring that used for entry could result in delays at land POEs  with heavy daily volumes of visitors. And they stated that in order to  implement a mirror-image biometric exit capability, additional lanes for  exiting vehicles and additional inspection booths and staff would be  needed,",
      " though they have not determined precisely how many. According  to these officials, it is unclear how new traffic lanes and new facilities  could be built at land POEs where space constraints already exist, such as  those in congested urban areas. (For example, San Ysidro, California,  currently has 24 entry lanes, each with its own staffed booth and 6  unstaffed exit lanes. Thus, if full biometric exit capability were  implemented using a mirror image approach, San Ysidro\u2019s current capacity  of 6 exit lanes would have to be expanded to 24 exit lanes.) As shown in  figure 6,",
      " based on observations during our site visit to the San Ysidro POE,  the facility is surrounded by dense urban infrastructure, leaving little, if  any, room to expand in place. Some of the 24 entry lanes for vehicle traffic  heading northwards from Mexico into the United States appear in the  bottom left portion of the photograph, where vehicles are shown waiting  to approach primary inspection at the facility; the six exit lanes (traffic  towards Mexico), which do not have fixed inspection facilities, are at the  upper left. Other POE facilities are similarly space-constrained. At the POEs at  Nogales-",
      "DeConcini, Arizona, for example, we observed that the facility is  bordered by railroad tracks, a parking lot, and industrial or commercial  buildings. In addition, CBP has identified space constraints at some rural  POEs. For example, the Thousand Islands Bridge POE at Alexandria Bay,  New York, is situated in what POE officials described as a \u201cgeological  bowl,\u201d with tall rock outcroppings potentially hindering the ability to  expand facilities at the current location. Officials told us that in order to  accommodate existing and anticipated traffic volume upon entry, they are  in the early stages of planning to build an entirely new POE on a hill about  a half-mile south of the present facility.",
      " CBP officials at the Blaine-Peace  Arch POE in Washington state said that CBP also is considering whether  to relocate and expand the POE facility, within the next 5-to-10 years, to  better handle existing and projected traffic volume. According to the US- VISIT program officials, none of the plans for any expanded, renovated, or  relocated POE include a mirror-image addition of exit lanes or facilities  comparable to those existing for entry. In 2003, the US-VISIT Program Office estimated that it would cost  approximately $3 billion to implement US-VISIT entry and exit capability  at land POEs where US-VISIT was likely to be installed and that such an  effort would have a major impact on facility infrastructure at land POEs.",
      "  We did not assess the reliability of the 2003 estimate. The cost estimate did  not separately break out costs for entry and exit construction, but did  factor in the cost for building additional exit vehicle lanes and booths as  well as buildings and other infrastructure that would be required to  accommodate a mirror imaging at exit of the capabilities required for entry  processing. US-VISIT program officials told us that they provided this  estimate to congressional staff during a briefing, but that the reaction to  this projected cost was negative and that they therefore did not move  ahead with this option. No subsequent cost estimate updates have been  prepared,",
      " and DHS\u2019s annual budget requests have not included funds to  build the infrastructure that would be associated with the required  facilities. US-VISIT officials stated that they believe that technological advances  over the next 5-to-10 years will make it possible to utilize alternative  technologies that provide biometric verification of persons exiting the  country without major changes to facility infrastructure and without  requiring those exiting to stop and/or exit their vehicles, thereby  precluding traffic backup, congestion, and resulting delays. US-VISIT\u2019s  report assessing biometric alternatives noted that although limitations in  technology currently preclude the use of biometric identification because  visitors would have to be stopped,",
      " the use of the as-yet undeveloped  biometric verification technology supports the long-term vision of the US- VISIT program. However, no such technology or device currently exists  that would not have a major impact on facilities. The prospects for its  development, manufacture, deployment and reliable utilization are  currently uncertain or unknown, although a prototype device that would  permit a fingerprint to be read remotely without requiring the visitor to  come to a full stop is under development. While logistical, technical, and cost constraints may prevent  implementation of a biometrically based exit technology for US-VISIT at  this time, it is important to note that there currently is not a legislatively  mandated date for implementation of such a solution.",
      " The Intelligence  Reform and Terrorism Prevention Act of 2004 requires US-VISIT to collect  biometric-exit-data from all individuals who are required to provide  biometric entry data. The act did not set a deadline, however, for  requiring collection of biometric exit data from all individuals who are  required to provide biometric entry data. Although US-VISIT had set  a  December 2007 deadline for implementing exit capability at the 50 busiest  land POEs, US-VISIT has since determined that implementing exit  capability by this date is no longer feasible, and a new date for doing so  has not been set.",
      " The US-VISIT Program  Office Is Testing  Nonbiometric Technology  to Record Travelers\u2019  Departure US-VISIT evaluated 12 different exit-recording technologies against the six criteria listed  above, including some that incorporated biometric features\u2014scanning the retina or iris,  and a facial recognition system. Because the biometric solutions considered would have  required an exiting visitor to slow down, stop, or possibly enter a POE facility, they were  rejected. Other alternatives, such as the use of a global positioning system, were rejected  because they transmit signals that could facilitate surveillance of individuals, raising  concerns about privacy.",
      " no additional traffic congestion); (5) be convenient to the visitor, and (6)  be commercially available.  None of these criteria directly addressed or  reflected the legislative mandate to deploy a system to record entry and  exit by foreign travelers using biometric identifiers in order to ensure that  persons leaving the country were those who had entered. Rather, the  criteria focused on choosing a technology that would not require a major  investment in facilities, would protect privacy, and would not generate  large traffic backups that would inconvenience or delay both travelers and  commercial carriers. Among the technologies considered for testing by the US-VISIT Program  Office,",
      " the only one that met all the US-VISIT evaluation criteria was  passive, automated, radio frequency identification (RFID). This  technology, according to US-VISIT, \u201cbest satisfied all the assessment  criteria.\u201d RFID is an automated data-capture technology that can be used  to electronically store information contained on a very small tag that can  be embedded in a document (or some other physical item). This  information can then be identified, and recorded as having been identified,  by RFID readers that are connected to computer databases. For purposes of US-VISIT\u2019s testing of the nonbiometric technology, the  RFID tag is embedded in a modified I-",
      "94 arrival/departure form, called an  I-94A. Each RFID tag has only a single number stored in it; privacy is  protected because no information is stored on these tags other than a  unique ID number that is linked to the visitor\u2019s biographic information.  To  facilitate the transmission of the number from the RFID tag, a new DHS  system of records\u2014the Automated Identification Management System  (AIDMS) \u2014was created to link the unique RFID tag ID number to existing  information stored in the Treasury Enforcement Communications System  (TECS) database, which is used by CBP to verify travel information and  update traveler data.",
      " According to US-VISIT, limiting the data on the tag  to a single number helps preserve the privacy of travelers; acquisition of  the number would provide no meaningful information to non-authorized  persons, since they would then have to access TECS to link the number to  biographic data. However, access to computers and their databases at land  POEs is restricted to authorized personnel and involves additional  protections such as passwords as well as entrance into physically  restricted areas inside POE buildings. (A more detailed discussion of RFID  technology and privacy issues is contained in appendix VI.) The RFID technology used in this way is considered passive because the  tag cannot initiate communications.",
      " Rather, the tag responds to radio  frequency emissions from an RFID reader\u2014an electronic device that can  be installed on a pole, or on a steel gantry of the kind that holds highway  signs over the entire width of a roadway (see figure 11)\u2014and transmits the  numeric information stored on the tag back to the reader, from up to 30  feet away, according to the US-VISIT Program Office. Figure 7a shows  RFID readers mounted on a metal gantry at the Thousand Islands Bridge  land POE, Alexandria Bay, New York. The readers are attached to metal  extensions that project out from the right side of the gantry,",
      " to record an I- 94A embedded with tags that are inside the vehicles that pass underneath.  RFID readers can also be installed in portals or on poles at pedestrian  traffic areas to read the I-94A embedded with tags of persons leaving the  country on foot. Figure 7b shows RFID readers in portals positioned on  either side of pedestrian exit doors at the Blaine-Peace Arch POE in  Washington State. Initial Results of Testing  Using RFID Technology  Indicate Problems Meeting  a Key Program Goal\u2014 Verifying the Identity of  Persons Leaving the  Country In December 2004 and January 2005,",
      " a team of US-VISIT contractors  conducted the first part of a feasibility study to test passive RFID  equipment in a simulated environment-at a mock POE in Virginia. At this  site, different types of vehicles\u2013 including cars, buses, and trucks\u2014were  run at different speeds to test RFID read rates. Pedestrians carrying  documents with RFID tags embedded or attached were not tested. The  feasibility study raised numerous issues about the reliability and  performance of the RFID technology. For example, RFID readers held on a  gantry over a roadway had difficulty detecting RFID-detectable tags that  were inside vehicles with metallic tinted windows (whether the windows  were open or closed). The read rate was improved from about 56 percent  to about 70 percent if the readers were moved to both sides of the road,",
      "  rather than overhead, and if the occupants held their documents with the  RFID-detectable tags up to the vehicle\u2019s side windows. The study  concluded that the physical actions of the visitor had to be taken into  account when obtaining a read of the I-94A and made specific  recommendations to improve read rates, such as suggesting that vehicle  occupants hold the I-94A up to a side window and keep multiple forms  apart. After the feasibility study, US-VISIT proceeded, as planned, with phase 1 of  proof-of-concept testing for RFID at five land POEs at the northern and  southern borders to determine what corrective actions,",
      " if any, should be  taken to improve RFID read rates for exiting vehicles and pedestrians.  This effort comprised testing for both exit and for re-entry by persons who  have been issued a tag-embedded I-94A that is valid for multiple entries  over several months.  The RFID performance tests were conducted for  one-week periods at land POEs, as follows: vehicular traffic was tested at  Nogales-Mariposa and Nogales-DeConcini POEs in Nogales, Arizona; the  Blaine-Pacific Highway and Blaine-Peace Arch POEs in Blaine,  Washington;",
      " and Thousand Islands Bridge POE in Alexandria Bay, New  York; pedestrian traffic was tested at the Nogales-Mariposa and Nogales- DeConcini POEs. For these exit tests, the US-VISIT Program Office developed critical  success factor target read rates to compare them to the actual read rates  obtained during the test for both pedestrians carrying an I-94A with RFID- detectable tags and for travelers in vehicles who also had an RFID- detectable I-94A with them inside the vehicles. The target exit read rates  ranged from an expected success rate of 70 percent to 95 percent,",
      " based  on anticipated performance under different conditions, partly as  demonstrated in the earlier feasibility study, on business requirements,  and on a concept of operation plan prepared for Increment 2C. In a January 2006 assessment of the test results, the US-VISIT Program  Office reported that the exit read rates that occurred during the test  generally fell short of the expected target rates for both pedestrians and  for travelers in vehicles. For example, according to US-VISIT, at the  Blaine-Pacific Highway test site, of 166 vehicles tested, RFID readers  correctly identified 14 percent; the target read rate was 70 percent.",
      "  Another problem that arose was that of cross-reads, in which multiple  RFID readers installed on gantries or poles picked up information from the  same visitor, regardless of whether the individual was entering or exiting  in a vehicle or on foot. Thus, cross-reads resulted in inaccurate record- keeping. According to a January 2006 US-VISIT corrective-action report,  signal-filtering equipment is to be installed to correct the problem and  additional testing is to be conducted to confirm and understand the extent  of the problem. The report also noted that remedying cross-reads would  require changes to equipment and infrastructure on a case-by-case basis at  each land POE,",
      " because each has a different physical configuration of  buildings, roadways, roofs, gantries, poles, and other surfaces against  which the signals can bounce and cause cross-reads. Each would therefore  require a different physical solution to avoid the signal interference that  triggers cross-reads. Although cost estimates or time lines have not been  developed for such alterations to facilities and equipment, it is possible  that having to alter the physical configuration at each land POE in some  regard and then test each separately to ensure that cross-reads had been  eliminated would be both time consuming and potentially costly, in terms  of changes to infrastructure and equipment.",
      " We observed potential problems with the RFID exit system relating to  facilities and infrastructure at some of the POEs we visited. At the  Nogales-Mariposa POE, in Nogales, Arizona, for example, we observed  that RFID portals for pedestrians had been placed on the right side of the  CBP POE building, on a rocky, sloping hillside, and that there was no  signage directing pedestrians to walk between them, nor was a walkway  installed, as shown in figure 8a. Although travelers were expected to walk  between the portals, this configuration enabled pedestrians to avoid the  portals altogether\u2014to walk around them or cross the road to avoid them,",
      "  as shown in figure 8b. According to the US-VISIT corrective actions report, 15 percent of exiting  pedestrian (including those participating in the test and those who did not)  used the pathway between the two portals at the Nogales facility during a  September 2005 observation period. In this same report, US-VISIT  acknowledged that there was no defined pathway or infrastructure for  pedestrian exit at Nogales-Mariposa, Arizona, and that only one of the  three pedestrian paths were covered by the portals that had been placed  there. US-VISIT reported that while the placement of the portal readers  will not be changed,",
      " it is taking steps to improve the likelihood of  detection with additional antennae, readers, and signage. However, there  are no plans at present to modify the existing POE infrastructure on the  west side of the building where the portals were installed, such as by  installing a paved walkway or by constructing fencing to divert those  exiting to go through the readers in order to increase the chances that  exiting pedestrians are detected.  In commenting on this report, DHS  stated that it had constructed a new primary pedestrian exit walkway  parallel to the existing pedestrian entry and had installed signage,  sidewalks, and a new secure gate.",
      "  However, according to a CBP official at  the Nogales-Mariposa POE, the newly constructed pedestrian exit  walkway is on the other (east) side of the building from the pathway  where the portal readers were placed and tested. During the period that US-VISIT carried out RFID exit tests at land POEs,  US-VISIT also tested read rates for RFID-detectable documents carried by  pedestrians or persons in vehicles who had been issued an I-94A during a  prior visit to the United States, had subsequently left the country, and were  intending to re-enter. (I-",
      "94s can be issued that are valid for up to 6  months for multiple re-entries into the country.) US-VISIT performed the  re-entry test for documents held by persons in vehicles at the Mariposa  and DeConcini POEs in Nogales, Arizona; the Blaine-Pacific Highway and  Blaine-Peace Arch, POEs in Washington state; and Thousand Islands  Bridge POE at Alexandria Bay, New York. For pedestrians, the re-entry  test was performed at the Mariposa and DeConcini POEs in Nogales,  Arizona (see tables 6a and 6b,",
      " appendix VII). US-VISIT set higher expected  target read rates for the re-entry test than for exit because all persons and  vehicles entering or re-entering the country must stop for questioning by  CBP officers and must take travel documents out of their pockets or from  inside a vehicle, and show them to the officer, enhancing the likelihood  that RFID-detectable documents would be detected. As expected by US- VISIT, read rates for the re-entry test for vehicles were generally higher  than for exit, although the results did not meet the critical success factors  initially projected by US-VISIT. Appendix VII discusses the results of RFID  performance for exit and re-entry in greater detail.",
      " Beyond RFID operations issues that affect facilities, our work and that of  the DHS Privacy Office have identified other performance and reliability  problems related to passive RFID. In June 2005, we testified before the  Subcommittee on Economic Security, Infrastructure Protection, and  Cybersecurity of the House Committee on Homeland Security on similar  reliability problems with RFID. We noted, for example, that when an  object close to the reader or tag interferes with the radio waves, read-rate  accuracy decreases, and that environmental conditions, such as  temperature and humidity, can make tags unreadable. We further noted  that tags read at high speeds have a significant decrease in read rates.",
      " According to US-VISIT officials, phase 2 of the RFID proof-of-concept  testing, which is to expand the capabilities identified at the five phase 1  locations will, among other things, link visitor data to vehicle exit data (or  re-entry, if the visitor already has an RFID- embedded I-94 form), address  deficiencies noted in phase 1, and further evaluate RFID performance. At  the time of our review, many uncertainties about the future of a US-VISIT  exit capability remained because US-VISIT had not developed a plan to  show when phase 2 of proof-of-concept testing of RFID would conclude,",
      "  when an evaluation of the technology would be completed, and how US- VISIT would define success. However, even if RFID deficiencies were to be fully addressed and  deadlines set, questions remain about DHS\u2019s intentions going forward. For  example, the RFID solution does not meet the congressional requirement  for a biometric exit capability because the technology that has been tested  cannot meet a key goal of US-VISIT\u2014ensuring that visitors who enter the  country are the same ones who leave. By design, an RFID tag embedded in  an I-94 arrival/departure form cannot provide the biometric identity- matching capability that is envisioned as part of a comprehensive  entry/",
      "exit border security system using biometric identifiers for tracking  overstays and others entering, exiting, and re-entering the country.  Specifically, the RFID tag in the I-94 form cannot be physically tied to an  individual. This situation means that while a document may be detected as  leaving the country, the person to whom it was issued at time of entry may  be somewhere else. DHS was to have reported to Congress by June 2005 on how the agency  intended to fully implement a biometric entry/exit program. As of October  2006, this plan was still under review in the Office of the Secretary,",
      "  according to US-VISIT officials. According to statute, this plan is to  include, among other things, a description of the manner in which the US- VISIT program meets the goals of a comprehensive entry and exit  screening system\u2014including both biometric entry and exit\u2014and fulfills  statutory obligations imposed on the program by several laws enacted  between 1996 and 2002. Until such a plan is finalized and issued, DHS is  not able to articulate how entry/exit concepts will fit together\u2014including  any interim nonbiometric solutions\u2014and neither DHS nor Congress is  positioned to prioritize and allocate resources for a US-VISIT exit  capability or plan for the program\u2019s future.",
      " In commenting on this report, DHS acknowledged that the interim non- biometric exit technology using RFID tags embedded in the I-94 does not  meet the statutory requirement for a biometric exit capability.  DHS stated  that it used the non-biometric technology because industry was not to the  point of developing a device that could satisfy US-VISIT requirements,  such as not impacting traffic flows or not having safety impacts.  DHS said  that US-VISIT officials would perform subsequent research and industry  outreach activities in an attempt to satisfy statutory requirements for a  biometric exit capability. DHS Has Not  Articulated How US-",
      " VISIT Strategically  Fits with Other Land- Border Security  Initiatives In recent years, DHS has planned or implemented a number of initiatives  aimed at securing the nation\u2019s borders. However, DHS has not defined a  strategic context that shows how US-VISIT fits with other land border  initiatives. As we reported in September 2003, agency programs need to  properly fit within a common strategic context governing key aspects of  program operations\u2014e.g., what functions are to be performed by whom;  when and where they are to be performed; what information is to be used  to perform them; what rules and standards will govern the application of  technology to support them;",
      " and what facility or infrastructure changes  will be needed to ensure that they operate in harmony and as intended.  Without a clear strategic context for US-VISIT, the risk is increased that  the program will not operate with related programs and thus not cost- effectively meet mission needs. In our September 2003 report, we stated that DHS had not defined key  aspects of the larger homeland security environment in which US-VISIT  would need to operate. For example, certain policy and standards  decisions had not been made, such as whether official travel documents  would be required for all persons who enter and exit the country,  including U.S.",
      " and Canadian citizens, and how many fingerprints would be  collected\u2014factors that could potentially increase inspection times and  ultimately increase traveler wait times at some of the higher volume land  POE facilities. To minimize the impact of these changes, we recommended  that DHS clarify the context in which US-VISIT is to operate. Three years  later, defining this strategic context remains a work in progress. Thus, the  program\u2019s relationships and dependencies with other closely allied  initiatives and programs are still unclear. According to the US-VISIT Chief Strategist, the Program Office drafted in  March 2005 a strategic plan that showed how US-VISIT would be  strategically aligned with DHS\u2019s organizational mission and also defined an  overall vision for immigration and border management.",
      " According to this  official, the draft plan provided for an immigration and border  management enterprise that unified multiple internal departmental and  other external stakeholders with common objectives, strategies,  processes, and infrastructures. As of October 2006, we were told that DHS  had not approved this strategic plan. This draft plan was not available to  us, and it is unclear how it would provide an overarching vision and road  map of how all these component elements can at this time be addressed  given that critical elements of other emerging border security initiatives  have yet to be finalized. For example, under the Intelligence Reform and  Terrorism Prevention Act of 2004,",
      " DHS and State are to develop and  implement a plan, no later than June 2009, which requires U.S. citizens and  foreign nationals of Canada, Bermuda, and Mexico to present a passport  or other document or combination of documents deemed sufficient to  show identity and citizenship to enter the United States (this is currently  not a requirement for these individuals entering the United States via land  POEs from within the western hemisphere). This effort, known as the  Western Hemisphere Travel Initiative (WHTI), was first announced in  2005, and some members of Congress and others have raised questions  about agencies\u2019 progress carrying out WHTI.",
      " In May 2006, we issued a  report that provided our observations on efforts to implement WHTI along  the U.S. border with Canada.   We stated that DHS and State had taken  some steps to carry out the Travel Initiative, but they had a long way to go  to implement their proposed plans, and time was slipping by. Among other  things, we found that:    key decisions had yet to be made about what documents other than a  passport would be acceptable when U.S. citizens and citizens of  Canada enter or return to the United States\u2014a decision critical to  making decisions about how DHS is to inspect individuals entering the  country,",
      " including what common facilities or infrastructure might be  needed to perform these inspections at land POEs;    a DHS and Department of State proposal to develop an alternative form  of passport, called a PASS card, would rely on RFID technology to help  DHS process U.S. citizens re-entering the country, but DHS had not  made decisions involving a broad set of considerations that include (1)  utilizing security features to protect personal information, (2) ensuring  that proper equipment and facilities are in place to facilitate crossings  at land borders, and (3) enhancing compatibility with other border  crossing technology already in use. As of September 2006,",
      " DHS had still not finalized plans for changing the  inspection process and using technology to process U.S. citizens and  foreign nationals of Canada, Bermuda, and Mexico reentering or entering  the country at land POEs. In the absence of decisions about the strategic  direction of both programs, it is still unclear (1) how the technology used  to facilitate border crossings under the Travel Initiative will be integrated  with US-VISIT technology, if at all, and (2) how land POE facilities would  have to be modified to accommodate both programs to ensure efficient  inspections that do not seriously affect wait times. This raises the  possibility that CBP would be faced with managing differing technology  platforms and border inspection processes at high-volume land POEs  facilities that,",
      " according to DHS, already face space constraints and  congestion. Similarly, it is not clear how US-VISIT is to operate in relation to another  emerging border security effort, the Secure Border Initiative (SBI)\u2014a new  comprehensive DHS initiative, announced last year, to secure the  country\u2019s borders and reduce illegal migration. According to DHS, as of  June 2006, SBI is to focus broadly on two major themes:    border control\u2014gaining full control of the borders to prevent illegal  immigration, as well as security breaches, and  interior enforcement\u2014disrupting and dismantling cross border crime  into the interior of the United States while locating and removing aliens  who are present in the United States in violation of law.",
      " Under SBI and its CBP component, called SBInet, DHS plans to use a  systems approach to integrate personnel, infrastructures, technologies,  and rapid response capability into a comprehensive border protection  system. DHS reports that, among other things, SBInet is to encompass  both the northern and southern land borders, including the Great Lakes,  under a unified border control strategy whereby CBP is to focus on the  interdiction of cross-border violations between the ports and at the official  land POEs and funnel traffic to the land POEs. DHS has recently awarded a contract to help DHS design, build, and  execute SBInet.",
      " Although DHS has published some information on various  aspects of SBI and SBInet, it remains unclear how SBInet will be linked, if  at all, to US-VISIT so that the two systems can share technology,  infrastructure, and data across programs. For example, from a border  control perspective, questions arise on whether CBP needs additional  resources, facilities or facility modifications, and procedural changes at  land POEs if all those who attempt to enter the country on the northern  and southern border are successfully funneled to land POEs. Also, given the absence of a comprehensive entry and exit system,",
      "  questions remain about what meaningful data US-VISIT may be able to  provide other DHS components, such as Immigration and Customs  Enforcement (ICE), to ensure that DHS can, from an interior enforcement  perspective, identify and remove foreign nationals covered by US-VISIT  who may have overstayed their visas. In a May 2004 report, we stated that  although no firm estimates were available, the extent of overstaying is  significant. We stated that most long-term overstays appeared to be  motivated by economic opportunities, but a few had been identified as  terrorists or involved in terrorist-related activities. Notably, some of the  September 11 hijackers had overstayed their visas.",
      " We further reported  that US-VISIT held promise for identifying and tracking overstays as long  as it could overcome weaknesses matching visitors\u2019 entry and exit. Conclusions Developing and deploying complex technology that records the entry and  exit of millions of visitors to the United States, verifies their identities to  mitigate the likelihood that terrorists or criminals can enter or exit at will,  and tracks persons who remain in the country longer than authorized is a  worthy goal in our nation\u2019s effort to enhance border security in a post-9/11  era. But doing so also poses significant challenges; foremost among them  is striking a reasonable balance between US-VISIT\u2019s goals of providing  security to U.S.",
      " citizens and visitors while facilitating legitimate trade and  travel. DHS has made considerable progress making the entry portion of  the US-VISIT program at land ports of entry (POEs) operational, and  border officials have clearly expressed the benefits that US-VISIT  technology and biometric identification tools have afforded them.  Nevertheless, US-VISIT is one in a series of ambitious border security  initiatives that could take a toll on the current facilities and infrastructure  in place to support the activities at land POEs, which already process a  large majority (more than 75 percent) of all visitors entering the United  States via legal checkpoints.",
      " Many land POEs operate out of small, aging  structures that are constrained by space and that were constructed before  technology and associated equipment played a prominent role in  processing activities. Our current and past work has raised questions on whether DHS has  adequately assessed how US-VISIT has affected operations at land POEs,  given current constraints at facilities that routinely experience high traffic  volumes and which encounter occasional computer-processing problems.  As additional US-VISIT capabilities\u2014such as 10-fingerprint scanning\u2014are  installed at land POEs and as other border security initiatives unfold,  including the Western Hemisphere Travel Initiative, it is particularly  important that DHS be able to anticipate potential problems and develop  solutions to minimize any operational and logistical impacts on aging and  already overcrowded land POE facilities.",
      " Our earlier recommendation on  this issue suggested that DHS needed to expand upon prior efforts to  assess the impact of US-VISIT on busy land POEs in order to obtain a  fuller understanding of the system\u2019s impact on these facilities from an  operational and human capital perspective. We believe this remains an  important step to take because it would help DHS establish a baseline or  foundation from which to anticipate potential problems while providing a  framework for developing strategies and action plans to overcome them. Although US-VISIT has said it would conduct operational assessments at  POEs as new projects came online, the assessment methodology US-VISIT  has used in the past\u2014which focused on measuring changes in I-",
      "94  processing times\u2014raised questions about how the agency will perform  future assessments. In addition, because US-VISIT will likely continue to have an impact on  land POE facilities as it evolves, it is important for US-VISIT and CBP  officials to have sufficient management controls for identifying and  reporting potential computer and other operational problems as they  arise\u2014problems that could affect the ability of US-VIST entry capability to  operate as intended. If additional delays in processing visitors were to  occur, the ability of POE facilities to handle additional vehicular and  pedestrian traffic could be further strained, and incidents requiring  officials to turn visitors away temporarily may increase.",
      " Likewise, if  disruptions to US-VISIT computer operations are not consistently and  promptly reported and resolved and if communication between CBP and  US-VISIT officials about computer-related problems and other operational  challenges is not effective, then it is possible that a critical US-VISIT  function\u2014notably, the ability to use biometric information to confirm  visitors\u2019 identities through various databases\u2014could be disrupted, as has  occurred in the past. The need to avoid disruptions to biometric  verification is important given that one of the primary goals of US-VISIT is  to enhance the security of U.S. citizens and visitors,",
      " and in light of the  substantial investment DHS has made in US-VISIT technology and  equipment. US-VISIT has taken appropriate steps to develop performance measures  that focus on various aspects of US-VISIT performance across air, land,  and sea POEs. However, these measures do not go far enough to assess  the affect of US-VISIT on POE operations, particularly land POEs, which  are operationally distinctive from air and sea POEs where US-VISIT entry  has also been installed. Such measures are needed to ensure that officials  can identify and address problems at land-based facilities where  improvements may be needed.",
      " With respect to DHS\u2019s effort to create an exit verification capability,  developing and deploying this capability for US-VISIT at land POEs has  posed a set of challenges that are distinct from those associated with  entry. US-VISIT has not determined whether it can achieve, in a realistic  time frame, or at an acceptable cost, the legislatively mandated capability  to record the exit of travelers at land POEs using biometric technology.  Apart from acquiring new facilities and infrastructure at an estimated cost  of billions of dollars, US-VISIT officials have acknowledged that no  technology now exists to reliably record travelers\u2019 exit from the country,",
      "  and to ensure that the person leaving the country is the same person who  entered, without requiring them to stop upon exit\u2014potentially imposing a  substantial burden on travelers and commerce. US-VISIT officials stated  that they believe a biometrically based solution that does not require those  exiting the country to stop for processing, that minimizes the need for  major facility changes, and that can used to definitively match a visitor\u2019s  entry and exit will be available in 5 to 10 years. In the interim, it remains  unclear how officials plan to proceed\u2014whether a nonbiometric alternative  now being tested can provide an acceptable interim solution or whether  the government ought to wait for a viable biometric solution to become  available.",
      " According to statute, DHS was required to report more than a  year ago on its plans for developing a comprehensive biometric entry and  exit system, but DHS has yet to finalize this road map for Congress.  Reporting might provide better assurance that US-VISIT can balance its  goals of providing security, serving the immigration system, facilitating  trade and travel, and protecting privacy at land POEs. This plan would also  give DHS the opportunity to discuss the costs, benefits, barriers, and  opportunities associated with various strategies for deploying biometric  and nonbiometric exit capabilities and keep Congress informed of its  progress overall. Until DHS finalizes such a plan,",
      " neither Congress nor  DHS are likely to have sufficient information as a basis for decisions about  various factors relevant to the success of US-VISIT, ranging from funding  needed for any land POE facility modifications in support of the  installation of exit technology to the trade-offs associated with ensuring  traveler convenience while providing verification of travelers\u2019 departure  consistent with US-VISIT\u2019s national security and law enforcement goals. Finally, DHS has not articulated how US-VISIT fits strategically and  operationally with other land-border security initiatives, such as the  Western Hemisphere Travel Initiative and Secure Border Initiative.  Without knowing how US-VISIT is to be integrated within the larger  strategic context governing DHS operations,",
      " DHS faces substantial risk  that US-VISIT will not align or operate with other initiatives at land POEs  and thus not cost-effectively meet mission needs. Knowing how US-VISIT  is to work in harmony with these initiatives could help Congress, DHS, and  others better understand what resources, tools, and investments in land  POE facilities and infrastructure are needed to ensure their success, while  providing critical information to help make decisions about other DHS  missions. This could include, for example, information on what funds and  staffing resources ICE would need to enforce immigration laws if US-VISIT  were able to provide reliable and timely information on potentially  millions of persons who have overstayed the terms of their visas,",
      " some of  whom may pose a threat to the nation\u2019s security. Recommendations for  Executive Action To help DHS achieve benefits commensurate with its investment in US- VISIT at land POEs and security goals and objectives, we are  recommending that the Secretary of Homeland Security direct the US- VISIT Program Director, in collaboration with the Commissioner of CBP,  to take the following two actions:  improve existing management controls for identifying and reporting  computer processing and other operational problems as they arise at  land POEs and ensure that these controls are consistently  administered; and    develop performance measures for assessing the impact of US-VISIT  operations specifically at land POEs.",
      " We also recommend that as DHS finalizes the statutorily mandated report  describing a comprehensive biometric entry and exit system for US-VISIT,  the Secretary of Homeland Security take steps to ensure that the report  include, among other things,  information on the costs, benefits, and feasibility of deploying  biometric and nonbiometric exit capabilities at land POEs;    a discussion of how DHS intends to move from a nonbiometric exit  capability, such as the technology currently being tested, to a reliable  biometric exit capability that meets statutory requirements; and    a description of how DHS expects to align emerging land border  security initiatives with US-VISIT and what facility or facility  modifications would be needed at land POEs to ensure that technology  and processes work in harmony.",
      " Agency Comments  and Our Evaluation We requested comments on a draft of this report from the Secretary of  Homeland Security.  In an October 31, 2006, letter, DHS provided written  comments, which are summarized below and included in their entirety in  appendix VIII. DHS generally agreed with our recommendations and stated that it needed  to improve existing management controls associated with US-VISIT,  develop performance measures to assess the impact of US-VISIT  operations at land POEs, and ensure that the statutorily mandated report  describes how DHS will move to a biometric entry and exit capability and  align US-VISIT with emerging land border initiatives.",
      "  DHS did not provide  timelines for when it plans to take these steps, including finalizing the  statutorily mandated report, which was to have been issued to the  Congress in June 2005. DHS disagreed with certain aspects of or sought clarification on some of  our findings.  DHS disagreed with our finding that the US-VISIT program  office did not fully consider the impact of US-VISIT on the overall  operations at POEs.  It said that US-VISIT impacts are limited to changes  in Form I-94 processing time, which it says are positive, as supported by  US-VISIT evaluations.",
      "  According to DHS other factors related to capacity,  staffing, and the volume of travelers are \u201carguably\u201d beyond the scope of  US-VISIT. We agree that the approach taken to do operational assessments of the  impact of US-VISIT land POE facilities focused on changes to I-94  processing time and that a variety of factors and processes can affect  traveler inspections and associated wait times at land POEs.  However, as  discussed in this and our February 2006 report, the assessment  methodology US-VISIT has used thus far had limitations--including  focusing solely on I-94 processing time.",
      "  Unanticipated problems at  facilities that routinely experience high traffic volumes and occasionally  encounter computer processing shortfalls raise questions about whether  DHS has adequately assessed how US-VISIT has affected operations at  land POEs.  Although it may not be cost-effective for US-VISIT or CBP to  conduct a formal assessment of the impact of US-VISIT at each land POE,  it is important that DHS be positioned to anticipate potential problems and  develop solutions to minimize any operational and logistical impacts on  aging and already overcrowded land POE facilities.  This is especially true  given that DHS recognizes that the transition from 2-",
      " to 10-print digital  scanning has a high likelihood of impacting port facilities. Regarding the latter, we have amended our report to clarify, consistent  with DHS\u2019s comments, that US-VISIT is currently working with industry to  speed up processing time and reduce the size of the 10-print capture  devices to \u201celiminate or significantly reduce the impact of deploying 10- print scanning.\u201d  DHS efforts to work with industry highlights the need to  more fully assess how US-VISIT affects land POEs so that potential  problems can be identified and addressed before the readers, or any other  new programs, are introduced at land POEs.",
      "  As noted in our report, based  on our past work, any lengthening in the process of entering the United  States at the busiest land POEs could inconvenience travelers and result in  fewer visits to the United States or lost business to the nation. DHS also suggested that we clarify its acknowledgement that the non- biometric technology tested did not meet the statutory requirement for  biometric exit capability.  DHS stated that the non-biometric technology  was used because industry has yet to develop a biometric exit device that  could satisfy mission requirements such as not impacting traffic flow and  not having safety impacts.  We have amended our report to clarify that  DHS acknowledged that the non-biometric technology would not satisfy  statutory requirements and to reflect that it would perform research and  industry outreach to satisfy the mandate.",
      " Nonetheless, the fact that the  non-biometric exit technology used does not satisfy the congressionally  mandated biometric exit capability underscores the importance of our  recommendation for DHS to clearly articulate how it plans to move from a  non-biometric exit technology to a biometric exit solution. In addition, DHS suggested that we clarify that, with regard to the RFID  pedestrian exit portals at the Nogales-Mariposa, Arizona, POE, it had  constructed a new primary pedestrian exit walkway parallel to the existing  pedestrian entry and had installed signage, sidewalks, and a new secure  gate.  We have amended the report to include information about the new  pedestrian exit walkway.",
      "  However, as we noted in our report, portals  were installed only on one of the three pedestrian pathways used to exit  the United States.  According to a CBP official at the Nogales-Mariposa  POE, the newly constructed pedestrian exit walkway is on the other side  of the building from the pathway where the portal readers were placed  and tested and thus would not mitigate the vulnerabilities we identified. Finally, DHS provided other comments that we considered technical in  nature.  We have amended our report to incorporate these clarifications,  where appropriate. As agreed with your offices, unless you publicly announce its contents  earlier,",
      " we plan no further distribution of this report until 30 days after the  issuance date of our original report, which, as discussed earlier, was  classified For Official Use Only.  At that time, we will provide copies of  this report to appropriate departments and interested congressional  committees.  We will also make copies available to others upon request. In addition, this report will be available on GAO\u2019s Web site at  http://www.gao.gov. If you or your staff have any questions about this report or wish to discuss  the matter further, please contact me at (202) 512-8777 or stanar@gao.gov.",
      "  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Major contributors to  this report are listed in appendix IX. Appendix I: Objective, Scope, and  Methodology This report addresses the progress the Department of Homeland Security  and U.S. Customs and Border Protection (CBP) have made in  implementing the United States Visitor Status Indicator Technology (US- VISIT) program at existing land Ports of Entry (POE). Specifically, we  analyzed the following issues: (1) What has the US-VISIT Program Office  done to implement US-VISIT entry capabilities at land POEs and what  impact has US-VISIT had on these facilities?",
      " (2) What is the status of US- VISIT Program Office efforts to implement a US-VISIT exit capability at  land POE facilities? (3) What has DHS done to define a strategic context to  show how US-VISIT entry and exit capabilities at land POE facilities fit  with other current and emerging border security initiatives? We performed our work at the Department of Homeland Security\u2019s US- VISIT Program Office and CBP. We also carried out work at 21 of 154 land  POEs where US-VISIT entry capability had been installed. At 3 of these 21  land POEs,",
      " DHS was also testing exit capability. Table 3 shows the 21 land  POEs we visited, by location and state, between August 2005 and February  2006. In selecting land POEs to visit, we originally selected 10 land POEs on the  northern border and 10 POEs on the southern border based on geographic  dispersion along the border and taking into consideration POEs that were  located near each other to minimize travel costs. We added the Morley  Gate POE after we initially selected sites because it is physically located  about 100 yards from the DeConcini POE in downtown Nogales (Ariz.) and  after learning that US-VISIT was treating Morley Gate as a stand-alone  POE for US-VISIT deployment purposes.",
      " In making our selections, we  also considered US-VISIT deployment schedules, facility size, and the  number of border crossings and I-94 issuances. Fifteen of the 21 selected  sites in our study were among the 50 busiest land POEs for which US- VISIT entry capability was to be operating by December 31, 2004, as  required by law. The other 6 sites were among those remaining POEs  where, according to law, US-VISIT entry capability was to be operating by  December 31, 2005. While selecting sites, we also included the five POEs  at which the US-VISIT program office was testing radio frequency  identification (RFID)",
      " technology as part of a proof of concept for meeting  US-VISIT exit capability requirements. These were: Blaine-Peace Arch;  Blaine-Pacific Highway; Thousand Islands Bridge, Alexandria Bay;  Nogales-Mariposa; and Nogales-DeConcini. The information from our site  visits is limited to the 21 POEs we visited and is not generalizable to the  remaining POEs. To examine what the US-VISIT Program Office has done to implement US- VISIT entry capabilities at land POEs and what impact US-VISIT has had  on these facilities, we interviewed US-VISIT and CBP headquarters  officials as well as CBP officials at the 21 locations we visited.",
      " We  obtained and analyzed available DHS reports on US-VISIT entry capability  planning, deployment, and operations across land POEs, including the 21  we visited. At the 21 locations, we (1) discussed US-VISIT entry capability  deployment at the facility, any facility-related barriers or constraints  encountered during installation, and any operational issues encountered  since and (2) obtained any available documentation about US-VISIT  deployment and operations at the facility. We also toured secondary  inspection at each facility to observe what US-VISIT equipment was  installed, how it was installed, and where possible, how it operated when  visitors covered by US-VISIT arrived at the facility for processing into the  country.",
      " While doing our site visits, we met with US-VISIT and CBP  officials at headquarters to discuss our field work; discern why problems  we identified in the field may have occurred, and if problems occurred,  gather and analyze available US-VISIT and CBP information about those  problems, including information on any corrective actions. We also  examined whether internal or management controls were in place to alert  officials to the problems we identified, and examined whether these  controls were being applied, consistent with GAO\u2019s Standards for Internal  Controls in the Federal Government. In addition, we interviewed CBP and  US-VISIT headquarters officials about plans for installing and operating  new technology and equipment related to US-VISIT,",
      " such as 10-finger-scan  readers, at land POEs; reviewed available DHS documents about plans to  implement these devices; and reviewed available DHS documents that  discussed performance measures for US-VISIT overall. We also reviewed  applicable laws, regulations, and DHS federal register notices pertaining to  US-VISIT entry capability deployment at land POEs, as well as reports  prepared by DHS, GAO, the DHS Office of Inspector General, and the  Congressional Research Service. To determine the status of DHS\u2019s efforts to implement a US-VISIT exit  capability at land POEs, we interviewed US-VISIT and CBP headquarters  officials and CBP officials at the five locations where US-VISIT exit  capability was being tested (Nogales-Mariposa,",
      " Nogales-DeConcini,  Blaine-Pacific Highway, Blaine-Peace Arch, and Alexandria Bay). At each  of the locations, we toured the areas where exit testing equipment and  technology had been installed and discussed with CBP officials how it was  installed and to be tested. We also reviewed applicable laws and  regulations and obtained and analyzed available DHS reports on US-VISIT  exit capability including an operational alternatives assessment; feasibility  studies; and proof of concept performance evaluation and corrective  action reports. Our analysis of these reports focused on DHS strategies for  selecting, testing, acquiring, and evaluating alternative methods that could  meet the requirements;",
      " DHS\u2019s criteria used to select and test the potential  of RFID technology; and the challenges encountered, including any  privacy issues associated with RFID use. Finally, we obtained and  analyzed DHS reports on the costs of the equipment and related facility  infrastructure, such as the metal gantry erected over roadways to hold  RFID readers, to estimate what it would cost to install RFID equipment at  all land POEs. We developed our overall estimate based on the average  cost to date (about $1 million each) of installing exit gantries and  associated RFID equipment at the four POEs where gantries and  equipment were installed. (Although RFID use was tested at five POEs,",
      " at  the DeConcini POE in downtown Nogales, Arizona, the RFID readers were  placed on poles on either side of entry lanes, since all entering vehicles  pass under a large permanent canopy structure that precludes installing a  gantry. At the other four POEs, RFID readers were attached to metal  gantries placed over roadway lanes.) To examine what DHS has done to define a strategic context to show how  US-VISIT entry and exit capabilities at land POE facilities fit with other  current and emerging border security initiatives, we reviewed past GAO  reports and public DHS announcements about the Western Hemisphere  Travel Initiative and the Secure Border Initiative (SBI). We also  interviewed DHS officials about the status of efforts to implement these  initiatives as well as the status of efforts to develop and promulgate a  strategic plan for US-VISIT and compared available information on DHS  plans to implement initiatives with the results of our discussions with US-",
      " VISIT program officials. We conducted our work from September 2005 through October 2006 in  accordance with generally accepted government auditing standards. Appendix II: Visa Waiver Countries The Department of State\u2019s (State) Visa Waiver Program (VWP) enables  nationals of certain countries to travel to the United States for tourism or  business for stays of 90 days or less without obtaining a visa. The program  was established in 1986 with the objective of promoting better relations  with U.S. allies, eliminating unnecessary barriers to travel, stimulating the  tourism industry, and permitting the Department of State to focus consular  resources in other areas.",
      " VWP eligible travelers may apply for a visa, if  they prefer to do so. Not all countries participate in the VWP, and not all  travelers from VWP countries are eligible to use the program. VWP  travelers are screened prior to admission into the United States, and they  are enrolled in the Department of Homeland Security\u2019s US-VISIT program.  Currently, 27 countries participate in the Visa Waiver Program as shown in  the following table. Appendix III: Legislative Overview of the   US-VISIT Program The Illegal Immigration Reform and Immigrant Responsibility Act of 1996  originally required the development of an automated entry and exit control  system to collect a record of departure for every alien departing the United  States and match the record of departure with the record of the alien\u2019s  arrival in the United States;",
      " make it possible to identify nonimmigrants  who remain in the country beyond the authorized period; and not  significantly disrupt trade, tourism, or other legitimate cross-border traffic  at land border ports of entry. It also required the integration of overstay  information into appropriate databases of the INS and the Department of  State, including those used at ports of entry and at consular offices. The  system was originally to be developed by September 30, 1998; this deadline  was changed to October 15, 1998, and was changed again for land border  ports of entry and sea ports to March 30, 2001.",
      " The Immigration and Naturalization Service Data Management  Improvement Act (DMIA) of 2000 replaced the 1996 statute in its entirety,  requiring instead an electronic system that would provide access to and  integrate alien arrival and departure data that are authorized or required to  be created or collected under law, are in an electronic format, and are in a  data base of the Department of Justice or the Department of State,  including those created or used at ports of entry and at consular offices.  The Act specifically provided that it not be construed to permit the  imposition of any new documentary or data collection requirements on  any person for the purpose of satisfying its provisions,",
      " but it further  provided that it also not be construed to reduce or curtail any authority of  the Attorney General (now Secretary of Homeland Security) or Secretary  of State under any other provision of law. The integrated entry and exit  data system was to be implemented at airports and seaports by December  31, 2003, at the 50 busiest land ports of entry by December 31, 2004, and at  all remaining ports of entry by December 31, 2005. The DMIA also required that the system use available data to produce a  report of arriving and departing aliens by country of nationality,",
      "  classification as an immigrant or nonimmigrant, and date of arrival in and  departure from the United States. The system was to match an alien\u2019s  available arrival data with the alien\u2019s available departure data, assist in the  identification of possible overstays, and use available alien arrival and  departure data for annual reports to Congress. These reports were to  include the number of aliens for whom departure data were collected  during the reporting period, with an accounting by country of nationality;  the number of departing aliens whose departure data was successfully  matched to the alien\u2019s arrival data, with an accounting by country of  nationality and classification as an immigrant or nonimmigrant;",
      " the  number of aliens who arrived pursuant to a nonimmigrant visa, or as a  visitor under the visa waiver program, for whom no matching departure  data have been obtained as of the end of the alien\u2019s authorized period of  stay, with an accounting by country of nationality and date of arrival in the  United States; and the number of identified overstays, with an accounting  by country of nationality. In 2001, the USA PATRIOT Act provided that, in developing the integrated  entry and exit data system under the DMIA, the Attorney General (now  Secretary of Homeland Security) and Secretary of State were to focus  particularly on the utilization of biometric technology and the  development of tamper-resistant documents readable at ports of entry.",
      " It  also required that the system be able to interface with law enforcement  databases for use by federal law enforcement to identify and detain  individuals who pose a threat to the national security of the United States.  The PATRIOT Act also required by January 26, 2003, the development and  certification of a technology standard, including appropriate biometric  identifier standards, that can be used to verify the identity of persons  applying for a U.S. visa or persons seeking to enter the United States  pursuant to a visa for the purposes of conducting background checks,  confirming identity, and ensuring that a person has not received a visa  under a different name.",
      " This technology standard was to be the  technological basis for a cross-agency, cross-platform electronic system  that is a cost-effective, efficient, fully interoperable means to share law  enforcement and intelligence information necessary to confirm the  identity of persons applying for a U.S. visa or persons seeking to enter the  United States pursuant to a visa. This electronic system was to be readily  and easily accessible to consular officers, border inspection agents, and  law enforcement and intelligence officers responsible for investigation or  identification of aliens admitted to the United States pursuant to a visa.  Every 2 years beginning on October 26, 2002,",
      " the Attorney General (now  Secretary of Homeland Security) and the Secretary of State were to jointly  report to Congress on the development, implementation, efficacy, and  privacy implications of the technology standard and electronic database  system. The Enhanced Border Security and Visa Entry Reform Act of 2002 required  that, in developing the integrated entry and exit data system for the ports  of entry under the DMIA, the Attorney General (now Secretary of  Homeland Security) and Secretary of State implement, fund, and use the  technology standard required by the USA PATRIOT Act at U.S. ports of  entry and at consular posts abroad.",
      " The act also required the  establishment of a database containing the arrival and departure data from  machine-readable visas, passports, and other travel and entry documents  possessed by aliens and the interoperability of all security databases  relevant to making determinations of admissibility under section 212 of the  Immigration and Nationality Act. In implementing these requirements, the  INS (now DHS) and the Department of State were to utilize technologies  that facilitate the lawful and efficient cross-border movement of  commerce and persons without compromising the safety and security of  the United States and were to consider implementing a North American  National Security Program, for which other provisions in the act called for  a feasibility study.",
      " The act, as amended, also established a number of requirements regarding  biometric travel and entry documents. It required that not later than  October 26, 2004, the Attorney General (now Secretary of Homeland  Security) and the Secretary of State issue to aliens only machine-readable,  tamper-resistant visas and other travel and entry documents that use  biometric identifiers and that they jointly establish document  authentication standards and biometric identifiers standards to be  employed on such visas and other travel and entry documents from among  those biometric identifiers recognized by domestic and international  standards organizations. It also required by October 26, 2005,",
      " the  installation at all ports of entry of the United States equipment and  software to allow biometric comparison and authentication of all U.S.  visas and other travel and entry documents issued to aliens and passports  issued by visa waiver participants. Such biometric data readers and  scanners were to be those that domestic and international standards  organizations determine to be highly accurate when used to verify identity,  that can read the biometric identifiers used under the act, and that can  authenticate the document presented to verify identity. These systems also  were to utilize the technology standard established pursuant to the  PATRIOT Act. The Intelligence Reform and Terrorism Prevention Act of 2004 did not  amend the existing statutory provisions governing US-VISIT,",
      " but it did  establish additional statutory requirements concerning the program. It  described the program as an \u201cautomated biometric entry and exit data  system\u201d and required DHS to develop a plan to accelerate the full  implementation of the program and to report to Congress on this plan by  June 15, 2005. The report was to provide several types of information  about the implementation of US-VISIT, including a \u201clisting of ports of entry  and other DHS and Department of State locations with biometric exit data  systems in use.\u201d The report also was to provide a description of the  manner in which the US-VISIT program meets the goals of a  comprehensive entry and exit screening system,",
      " \u201cincluding both entry and  exit biometric;\u201d and fulfills the statutory obligations imposed on the  program by several laws enacted between 1996 and 2002. The act provided  that US-VISIT \u201cshall include a requirement for the collection of biometric  exit data for all categories of individuals who are required to provide  biometric entry data, regardless of the port of entry where such categories  of individuals entered the United States.\u201d The new provisions in the 2004 act also addressed integration and  interoperability of databases and data systems that process or contain  information on aliens and federal law enforcement and intelligence  information relevant to visa issuance and admissibility of aliens;",
      "  maintaining the accuracy and integrity of the US-VISIT data system; using  the system to track and facilitate the processing of immigration benefits  using biometric identifiers; the goals of the program (e.g., serving as a vital  counterterrorism tool, screening visitors efficiently and in a welcoming  manner, integrating relevant databases and plans for database  modifications to address volume increase and database usage, and  providing inspectors and related personnel with adequate real time  information); training, education, and outreach on US-VISIT, low risk  visitor programs, and immigration law; annual compliance reports by DHS,  State, the Department of Justice,",
      " and any other department or agency  subject to the requirements of the new provisions; and development and  implementation of a registered traveler program. Appendix IV: The 20 Busiest Land Ports of  Entry (POE) by Volume of Individuals  Entering the United States in Fiscal Year 2005 Appendix IV: The 20 Busiest Land Ports of  Entry (POE) by Volume of Individuals  Entering the United States in Fiscal Year 2005  and Foreign Entrants  (Pedestrians and Vehicle  Occupants) Calif. Calif. Calif. Tex. Tex. Tex. Ariz. Tex. N.Y.",
      " Ariz. Tex. Mich. Ariz. N.Y. Tex. Tex. Calif. Mich. Mich. Tex. This site comprises multiple POEs at this location. Appendix V: Land Ports of Entry (POE) at  Which US-VISIT Has Been Installed According to the US-VISIT program office, US-VISIT entry capability was  installed at the following land POE by December 31, 2005. The list is  arranged in state alphabetical order. Alaska (3) Arizona (8) California (6) Idaho (2) Maine (15) Michigan (6) Minnesota (8) Montana (13)",
      " New Hampshire (1) New Mexico (3) New York (16) North Dakota (18) Ohio (1) Texas (25) Vermont (14) Washington (13) Canada (1) Appendix VI: Actions Taken by US-VISIT  Program Office to Mitigate Privacy Risks  Associated with RFID at Land POEs Protecting the privacy of visitors to the United States is one of the four  stated primary mission goals of the US-VISIT program. We and others have  raised questions in recent years about the potential privacy risks  surrounding the use of RFID technology to track the movement of  persons, as opposed to goods;",
      " the potential for the technology to be  subverted for surveillance purposes, rather than identification; and the  potential for \u201cfunction creep,\u201d whereby information collected for one  purpose gradually develops other secondary uses, such as has occurred  with Social Security numbers. In congressional testimony, we have noted  that the use of RFID tags and associated databases raises important  security considerations related to the confidentiality, integrity, and  availability of the data on the tags and in the databases, and in how this  information is being protected. We have noted, as well, that while the  federal government had begun using RFID technology for a variety of  applications\u2014to track and identify assets,",
      " weapons, and baggage on  flights, for example\u2014using this technology for generic inventory control  did not raise the same privacy issues as using it to track the movement of  persons. The US-VISIT Program Office has taken steps to meet statutory and  congressional requirements protecting the privacy of individuals who  would be affected if RFID technology were to be implemented as part of  the US-VISIT exit and re-entry process, and to address the privacy  concerns raised by us and others. According to OMB guidance, a privacy  impact assessment should be conducted before an agency develops or  procures an information technology system, such as the proposed RFID  system,",
      " which collects, maintains, or disseminates information about an  individual\u2014in this case, numeric information that may be linked to  biographic information contained within databases. In January 2004, DHS  published a Privacy Impact Assessment in the Federal Register, as  required by law, for the initial deployment of US-VISIT, and published the  latest in a series of updated Privacy Impact Assessments in July 2005,  addressing privacy issues related to the proof-of-concept testing of RFID  for Increment 2C. In its July 2005 Privacy Impact Assessment, DHS said that by design, the  information embedded in the RFID-readable I-",
      "94 tag does not compromise  a visitor\u2019s security, for the following reasons and with the following  strictures:    Passive RFID minimizes privacy impacts and reduces the chance of  visitors being surreptitiously tracked because it does not constantly  transmit information or \u201cbeacon\u201d a signal. The numeric identifier read in the I-94 tag does not contain and is not  derived from any personal information, and can only be used to obtain  personal information when combined with data within the Automated  Identification Management System (the system created to link the  unique RFID tag ID number to existing biographic information received  from the TECS database). The Automated Identification Management System records the exit and  re-entry data automatically captured for a particular RFID tag,",
      " rather  than a specific individual. The individual\u2019s complete travel history is  created only when the information captured from the RFID tag is sent  along with the biographic information stored in the TECS database to a  DHS Arrival and Departure Information System. The Automated Identification Management System is undergoing the  DHS certification and accreditation process, which includes having an  approved detailed security plan and a comprehensive technical  assessment of the risks of operating the system. The certification and  accreditation process will be completed before the proof-of-concept  becomes operational. The Automated Identification Management System database can only  be accessed by authorized personnel signed into authorized  workstations that communicate with the system via a secure network.",
      "  These computer workstations are generally in CBP POE buildings,  inside work areas with physical controls over who can enter the area,  according to the Privacy Impact Assessment, and each POE is required  to be in compliance with DHS regulations with regard to security. Even  if an RFID tag number were secretly detected by someone, that person  would also have to obtain access to the Automated Identification  Management System secure database, to link the number to an  individual\u2019s records. DHS acknowledged that two potential privacy risks related to the RFID  exit/re-entry solution have been identified, and that US-VISIT creates a  pool of individuals whose personal information is at risk.",
      " Nevertheless, it  is stated in the July 2005 Privacy Impact Assessment that the privacy risks  will either be avoided or mitigated through the use of access controls,  education and training, encryption, and minimizing collection and use of  personal information will mitigate privacy risks associate with data  sharing. The first stated risk is that, if the format or some other  characteristic of the RFID tag number renders it recognizable as a US- VISIT RFID tag, this would allow an unauthorized reader to surreptitiously  determine an individual\u2019s status (i.e., within US-VISIT covered population).  DHS stated that the RFID tag number will be structured so that it cannot  be used to identify an individual specifically as a nonimmigrant.",
      " Second,  DHS noted there is a low risk that the RFID tag could be used to conduct  surreptitious locational surveillance of an individual; i.e., to use the  presence of the tag to follow an individual as he or she moves about in the  United States. However, ensuring that RFID tag numbers do not exhibit  properties that can be readily attributed to US-VISIT and using a limited  radio frequency range effectively mitigates this risk, according to DHS. Appendix VII: US-VISIT Test of Radio  Frequency Identification (RFID) Readers Upon  Exit and Re-entry at Selected Land POEs The US-VISIT Program Office has been testing the use of passive,",
      "  automated, radio frequency identification (RFID) technology as a means to  record the exit of visitors from the United States at land POEs. RFID is an  automated data-capture technology that can be used to electronically store  information contained on a very small tag that can be embedded in a  document (or some other physical item); in this case, US-VISIT embedded  the tag in a modified Form I-94, called an I-94A. This information can then  be identified, and recorded as having been identified, by RFID readers that  are connected to computer databases. The RFID tests were conducted for  one-week periods at land POEs,",
      " as follows: vehicular traffic was tested at  Nogales-Mariposa and Nogales-DeConcini POEs in Nogales, Arizona; the  Blaine-Pacific Highway and Blaine-Peace Arch POEs in Blaine,  Washington; and Thousand Islands Bridge POE in Alexandria Bay, New  York; pedestrian traffic was tested at the Nogales-Mariposa and Nogales- DeConcini POEs. For these exit tests, the US-VISIT Program Office developed critical  success factor target read rates to compare them to the actual read rates  obtained during the test for both pedestrians carrying I-",
      "94As with RFID- detectable tags and for travelers in vehicles who also had RFID-detectable  I-94As with them inside the vehicles. The target exit read rates ranged  from an expected success rate of 70 percent to 95 percent, based on  anticipated performance under different conditions, partly as  demonstrated in the earlier feasibility study, on business requirements,  and on a concept of operation plan prepared for Increment 2C. Table 5  shows the exit test results compared to the target read rates, reflecting  specifically the percentage of persons detected by the readers who were  carrying RFID-detectable documents for (1)",
      " pedestrians and (2) persons in  vehicles, as they passed through the POE area, while exiting the country. In phase 1 of proof-of-concept testing for RFID, US-VISIT reported that  read rates were higher for both vehicle occupants and pedestrians who  held the I-94A up toward the reader, rather than leaving it inside a pocket.  Through the use of billboards, radio and print advertisements, and other  methods of communication, visitors were encouraged to place their RFID- detectable I-94A forms on the vehicle dashboard or up to a window. These  locations were believed to increase the chances for a successful read.",
      "  Those who took these actions were referred to as \u201cparticipants,\u201d and those  who did not as \u201cnonparticipants.\u201d The US-VISIT Program Office reported  that during the week-long proof-of-concept exit testing, one of the three  pedestrians was a participant\u2014that is, the individual was observed as  voluntarily complying with the instructions; for those exiting in a vehicle,  these data were not reported. Moreover, although CBP officials made  substantial pre-test efforts to encourage travelers to optimize the chances  of I-94A tags being read, the report noted that this effort apparently met  with mixed success and that no additional solutions were planned.",
      " During the time period that US-VISIT tested the performance of RFID  readers for detecting I-94As carried by persons exiting the country in  vehicles at two land POEs (Thousand Islands Bridge, Alexandria Bay, New  York and Blaine-Pacific Highway, Washington), it also tested RFID reader  performance for persons in vehicles with RFID-embedded I-94As who re- entered the country at both of these locations and three others (Blaine- Peace Arch, Washington; and, in Arizona, Nogales-Mariposa and Nogales- DeConcini). In addition, tests of RFID detectability carried by pedestrians  re-entering the country were conducted at Nogales-Mariposa,",
      " and Nogales- DeConcini; pedestrian exit was tested only at Nogales-Mariposa because  of operational constraints at Nogales-DeConcini, according to the report  on the tests. Since persons re-entering the country with a RFID-enabled I- 94 would already have obtained an I-94A on a prior visit to the United  States, in order for it to be detected by an RFID reader, this process is  sometimes referred to by the US-VISIT program office as \u201cre-entry.\u201d DHS set separate, higher critical success factors (performance targets) for  the RFID proof-of-concept tests for the vehicle re-entry process than for  the vehicle exit process.",
      " According to a US-VISIT official, these higher  performance targets were based, in part, on the fact that vehicles must  stop as part of the re-entry process, which makes it more likely that a tag  will be detected than is the case for exiting vehicles, which do not need to  slow down or stop at land POEs. As with the tests conducted for exit, test  observers monitored traveler behavior to see whether, in compliance with  numerous advertisements in print and on local radio, the vehicle driver  placed the RFID-enabled I-94A on the vehicle dashboard or on an empty  passenger seat, or, for vehicle occupants,",
      " if they held the I-94A up to a  window or who made it otherwise visible, to better enable detection it by  the reader. Vehicle drivers or occupants who displayed an I-94A in any of  these requested ways were categorized as \u201cparticipants,\u201d but read rates for  them were, nevertheless, low at four of five test locations. For example, at  Nogales-DeConcini, which had the lowest vehicle-entry read rates overall,  the read rate was 27 percent for the 62 persons re-entering in vehicles with  visitors whom US -VISIT reported as making an effort to have their I-",
      "94A  tags read. In contrast, at Nogales-Mariposa, which had the highest overall  re-entry read rate for the vehicle test, US-VISIT reported that 83 out of 96  (86 percent) of travelers who were categorized as participants were  detected. Among those at this same location who did not make this effort,  US-VISIT reported that I-94s with RFID tags were detected for about half  (51 percent) of the persons in the vehicles. Table 6 shows the results of  RFID read-rates upon re-entry for vehicle participants and  nonparticipants. Table 7 shows the results of RFID read-rate detection upon re-entry for  pedestrian participants and nonparticipants.",
      " Appendix VIII: Comments from the U.S.  Department of Homeland Security Appendix IX: GAO Contact and  Acknowledgments Acknowledgments In addition to the above, John F. Mortin, Assistant Director; Amy  Bernstein, Frances Cook, Odi Cuero, Richard Hung, Amanda Miller, James  R. Russell, and Jonathan Tumin made key contributions to this report.\n"
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  {
    "id": 104,
    "question": null,
    "answer": "Congress passed the Sarbanes-Oxley Act to help protect investors and restore investor confidence. While the act has generally been recognized as important and necessary, some concerns have been expressed about the cost for small businesses. In this report, GAO (1) analyzes the impact of the Sarbanes-Oxley Act on smaller public companies, particularly in terms of compliance costs; (2) describes responses of the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) to concerns raised by smaller public companies; and (3) analyzes smaller public companies' access to auditing services and the extent to which the share of public companies audited by mid-sized and small accounting firms has changed since the act was passed. Regulators, public companies, audit firms, and investors generally agree that the Sarbanes-Oxley Act of 2002 has had a positive and significant impact on investor protection and confidence. However, for smaller public companies (defined in this report as $700 million or less in market capitalization), the cost of compliance has been disproportionately higher (as a percentage of revenues) than for large public companies, particularly with respect to the internal control reporting provisions in section 404 and related audit fees. Smaller public companies noted that resource limitations and questions regarding the application of existing internal control over financial reporting guidance to smaller public companies contributed to challenges they face in implementing section 404. The costs associated with complying with the act, along with other market factors, may be encouraging some companies to become private. The companies going private were small by any measure and represented 2 percent of public companies in 2004. The full impact of the act on smaller public companies remains unclear because the majority of smaller public companies have not fully implemented section 404. To address concerns from smaller public companies, SEC extended the section 404 deadline for smaller companies with less than $75 million in market capitalization, with the latest extension to 2007. Additionally, SEC and PCAOB issued guidance intended to make the section 404 compliance process more economical, efficient, and effective. SEC also encouraged the Committee of Sponsoring Organizations of the Treadway Commission (COSO), to develop guidance for smaller public companies in implementing internal control over financial reporting in a cost-effective manner. COSO's guidance had not been finalized as of March 2006. SEC also formed an advisory committee to examine, among other things, the impact of the act on smaller public companies. The committee plans to issue a report in April 2006 that will recommend, in effect, a tiered approach with certain smaller public companies partially or fully exempt from section 404, \"unless and until\" a framework for assessing internal control over financial reporting is developed that recognizes the characteristics and needs of smaller public companies. As SEC considers these recommendations, it is essential that the overriding purpose of the Sarbanes-Oxley Act--investor protection--is preserved and that SEC assess available guidance to determine if additional supplemental or clarifying guidance for smaller public companies is needed. Smaller public companies have been able to obtain access to needed audit services and many moved from the largest accounting firms to mid-sized and small firms. The reasons for these changes range from audit cost and service concerns cited by companies to client profitability and risk concerns cited by accounting firms, including capacity constraints and assessments of client risk. Overall, mid-sized and small accounting firms conducted 30 percent of total public company audits in 2004--up from 22 percent in 2002. However, large accounting firms continue to dominate the overall market, auditing 98 percent of U.S. publicly traded company sales or revenues.\n",
    "docs": [
      "Background Responding to corporate failures and fraud that resulted in substantial  financial losses to institutional and individual investors, Congress passed  the Sarbanes-Oxley Act in 2002. As shown in table 1, the act contains  provisions affecting the corporate governance, auditing, and financial  reporting of public companies, including provisions intended to deter and  punish corporate accounting fraud and corruption. The Sarbanes-Oxley Act generally applies to those companies required to  file reports with SEC under the Securities Exchange Act of 1934 and does  not differentiate between small and large businesses. The definition of  small varies among agencies, but SEC generally calls companies that had  less than $75 million in public float non-accelerated filers.",
      " Accelerated  filers are required by SEC regulations to file their annual and quarterly  reports to SEC on an accelerated basis compared to non-accelerated filers.  As of 2005, SEC estimated that about 60 percent \u20145,971 companies\u2014of all  registered public companies were non-accelerated filers. SEC recently  further differentiated smaller companies from what it calls \u201cwell-known  seasoned issuers\u201d\u2014those largest companies ($700 million or more in  public float) with the most active market following, institutional  ownership, and analyst coverage. Title I of the act establishes PCAOB as a private-sector nonprofit  organization to oversee the audits of public companies that are subject to  the securities laws.",
      " PCAOB is subject to SEC oversight. The act gives  PCAOB four primary areas of responsibility:  registration of accounting firms that audit public companies in the U.S.  securities markets;  inspections of registered accounting firms;    establishment of auditing, quality control, and ethics standards for  registered accounting firms; and investigation and discipline of registered accounting firms for violations of  law or professional standards. Title II of the act addresses auditor independence. It prohibits the  registered external auditor of a public company from providing certain  nonaudit services to that public company audit client. Title II also specifies  communication that is required between auditors and the public  company\u2019s audit committee (or board of directors)",
      " and requires periodic  rotation of the audit partners managing a public company\u2019s audits. Titles III and IV of the act focus on corporate responsibility and enhanced  financial disclosures. Title III addresses listed company audit committees,  including responsibilities and independence, and corporate  responsibilities for financial reports, including certifications by corporate  officers in annual and quarterly reports, among other provisions. Title IV  addresses disclosures in financial reporting and transactions involving  management and principal stockholders and other provisions such as  internal control over financial reporting. More specifically, section 404 of  the act establishes requirements for companies to publicly report on  management\u2019s responsibility for establishing and maintaining an adequate  internal control structure,",
      " including controls over financial reporting and  the results of management\u2019s assessment of the effectiveness of internal  control over financial reporting. Section 404 also requires the firms that  serve as external auditors for public companies to attest to the assessment  made by the companies\u2019 management, and report on the results of their  attestation and whether they agree with management\u2019s assessment of the  company\u2019s internal control over financial reporting. SEC and PCAOB have issued regulations, standards, and guidance to  implement the Sarbanes-Oxley Act. For instance, both SEC regulations  and PCAOB\u2019s Auditing Standard Number 2, \u201cAn Audit of Internal Control  Over Financial Reporting Performed in Conjunction with an Audit of  Financial Statements\u201d state that management is required to base its  assessment of the effectiveness of the company\u2019s internal control over  financial reporting on a suitable,",
      " recognized control framework  established by a body of experts that followed due process procedures,  including the broad distribution of the framework for public comment.  Both the SEC guidance and PCAOB\u2019s auditing standard cite the COSO  principles as providing a suitable framework for purposes of section 404  compliance. In 1992, COSO issued its \u201cInternal Control\u2014Integrated  Framework\u201d (the COSO Framework) to help businesses and other entities  assess and enhance their internal control. Since that time, the COSO  framework has been recognized by regulatory standards setters and others  as a comprehensive framework for evaluating internal control, including  internal control over financial reporting.",
      " The COSO framework includes a  common definition of internal control and criteria against which  companies could evaluate the effectiveness of their internal control  systems.  The framework consists of five interrelated components:  control environment, risk assessment, control activities, information and  communication, and monitoring. While SEC and PCAOB do not mandate  the use of any particular framework, PCAOB states that the framework  used by a company should have elements that encompass the five COSO  components on internal control. Internal control generally serves as a first line of defense in safeguarding  assets and preventing and detecting errors and fraud. Internal control is  defined as a process,",
      " effected by an entity\u2019s board of directors,  management, and other personnel, designed to provide reasonable  assurance regarding the achievement of the following objectives: (1)  effectiveness and efficiency of operations; (2) reliability of financial  reporting; and (3) compliance with laws and regulations. Internal control  over financial reporting is further defined in the SEC regulations  implementing section 404. These regulations define internal control over  financial reporting as providing reasonable assurance regarding the  reliability of financial reporting and the preparation of financial  statements, including those policies and procedures that    pertain to the maintenance of records that, in reasonable detail, accurately  and fairly reflect the transactions and dispositions of the assets of the  company;",
      "   provide reasonable assurance that transactions are recorded as necessary  to permit preparation of financial statements in conformity with generally  accepted accounting principles, and that receipts and expenditures of the  company are being made only in accordance with authorizations of  management and directors of the company; and   provide reasonable assurance regarding prevention or timely detection of  unauthorized acquisition, use, or disposition of the company\u2019s assets that  could have a material effect on the financial statements. PCAOB\u2019s Auditing Standard No. 2 reiterates this definition of internal  control over financial reporting. Internal control is not a new requirement  for public companies. In December 1977,",
      " as a result of corporate  falsification of records and improper accounting, Congress enacted the  Foreign Corrupt Practices Act (FCPA). The FCPA\u2019s internal accounting  control requirements were intended to prevent fraudulent financial  reporting, among other things. The FCPA required companies to: (1) make  and keep books, records, and accounts that in reasonable detail accurately  and fairly reflect the transactions and dispositions of assets and (2)  develop and maintain a system of internal accounting controls sufficient to  provide reasonable assurance over the recording and executing of  transactions, the preparation of financial statements in accordance with  standards, and maintaining accountability for assets.",
      " Smaller Public  Companies Have  Incurred  Disproportionately  Higher Audit Costs in  Implementing the Act,  but Impact on Access  to Capital Remains  Unclear Based on our analysis, costs associated with implementing the Sarbanes- Oxley Act\u2014particularly those costs associated with the internal control  provisions in section 404\u2014were disproportionately higher (as a  percentage of revenues) for smaller public companies. In complying with  the act, smaller companies noted that they incurred higher audit fees and  other costs, such as hiring more staff or paying for outside consultants, to  comply with the act\u2019s provisions. Further,",
      " resource and expertise  limitations that characterize many smaller companies as well as their  general lack of familiarity or experience with formal internal control  frameworks contributed to the challenges and increased costs they faced  during section 404 implementation. Along with other market factors, the  act may have encouraged a relatively small number of smaller public  companies to go private, foregoing sources of funding that were  potentially more diversified and may be less expensive for many of these  companies. However, the ultimate impact of the Sarbanes-Oxley Act on  smaller public companies\u2019 access to capital remains unclear because of the  limited time that the act has been in effect and the large number of smaller  public companies that have not yet fully implemented the act\u2019s internal  control provisions.",
      " Smaller Public Companies  Incurred  Disproportionately Higher  Audit Costs Our analysis indicates that audit fees have increased considerably since  the passage of the act, particularly for those smaller public companies that  have fully implemented the act. Both smaller and larger public companies  have identified the internal control provisions in section 404 as the most  costly to implement. However, audit fees may have also increased because  of the current environment surrounding public company audits including,  among other things, the new regulatory oversight of audit firms, new  requirements related to audit documentation, and legal risk. Figure 1  contains data reported by public companies on audit fees paid to external  auditors before and after the section 404 provisions became effective for  accelerated filers in 2004.",
      " Based on this data, we found that (1) audit fees  already were disproportionately greater as a percentage of revenues for  smaller public companies in 2003 and (2) the disparity in smaller and  larger public companies\u2019 audit fees as a percentage of revenues increased  for those companies that implemented section 404 in 2004. For example,  of the companies that reported implementing section 404, public  companies with market capitalization of $75 million or less paid a median  $1.14 in audit fees for every $100 of revenues compared to $0.13 in audit  fees for public companies with market capitalization greater than $1  billion.",
      " Among public companies with market capitalization of $75  million or less (2,263 in total), the 66 companies that implemented section  404 paid a median $0.35 more per $100 in revenues compared to those that  had not implemented section 404. However, using publicly reported audit  fees as an indicator of the act\u2019s compliance costs has some limitations.  First, the audit fees reported by companies that complied with section 404  should include fees for both the internal control audit and the financial  statement audit. As a result, we could not isolate the audit fees associated  with section 404. Second,",
      " the fees paid to the external auditor do not  include other costs companies incurred to comply with section 404  requirements, such as testing and documenting internal controls and fees  paid to external consultants. While the spread between what smallest and  largest public companies that implemented section 404 paid as a  percentage of revenue increased between 2003 and 2004, we also noted  that, as a percentage of revenue, the relative disproportionality between  the audit fees paid by smaller public companies and the largest public  companies remained roughly the same between 2003 and 2004. However,  unlike audit fees, these costs are not separately reported and,",
      " therefore,  are difficult to analyze and measure. Smaller Public Companies  Incurred Other Costs in  Complying with the Act According to executives of smaller public companies that we contacted,  smaller companies incurred substantial costs in addition to the fees they  paid to their external auditors to comply with section 404 and other  provisions of the act. For example, 128 of the 158 smaller public  companies that responded to our survey (81 percent of respondents) had  hired a separate accounting firm or consultant to assist them in meeting  section 404 requirements. Services provided included assistance with  developing methodologies to comply with section 404,",
      " documenting and  testing internal controls, and helping management assess the effectiveness  of internal controls and remediate identified internal control weaknesses.  These smaller companies reported paying fees to external consultants for  the period leading up to their first section 404 report that ranged from  $3,000 to more than $1.4 million. Many also reported costs related to  training and hiring of new or temporary staff to implement the act\u2019s  requirements. Additionally, some of the smaller companies that responded  to our survey reported that their CFOs and accounting staff spent as much  as 90 percent of their time for the period leading up to their first section  404 report on Sarbanes-Oxley Act compliance-related issues.",
      " Finally, many  of the smaller public companies incurred missed \u201copportunity costs\u201d to  comply with the act that were significant. For example, nearly half (47  percent) of the companies that responded to our survey reported deferring  or canceling operational improvements and more than one-third (39  percent) indicated that they deferred or cancelled information technology  investments. While most companies, including the majority of the smaller public  companies that responded to our survey and that we interviewed, cited  section 404 as the most difficult provision to implement, smaller public  companies reported challenges in complying with other Sarbanes-Oxley  Act provisions as well.",
      " Nearly 69 percent of the smaller public companies  that responded to our survey said that the act\u2019s auditor independence  requirements had decreased the amount of advice that they received from  their external auditor on accounting- and tax-related matters. About half  the companies that responded to our survey indicated that they incurred  additional expenses by hiring outside counsel for assistance in complying  with various requirements of the act. Examples mentioned included legal  assistance with drafting charters for board committees, drafting a code of  ethics, establishing whistleblower protection, and reviewing CEO and CFO  certification requirements. About 13 percent of the smaller public  companies reported incurring costs to appoint a financial expert to serve  on the audit committee,",
      " and about 6 percent reported incurring costs to  appoint other independent members to serve on the audit committee.  While these types of costs were consistent with those reported for larger  companies, the impact on smaller public companies was likely greater  given their more limited revenues and resources. Smaller Companies Have  Different Characteristics  Than Larger Companies,  Some of Which  Contributed to Higher  Implementation Costs While public companies\u2014both large and small\u2014have been required to  establish and maintain internal accounting controls since the Foreign  Corrupt Practices Act of 1977, most public companies and their external  auditors generally had limited practical experience in implementing and  using a structured framework for internal control over financial reporting  as envisioned by the implementing regulations for section 404.",
      " Our  survey of smaller public companies and our discussions with external  auditors indicated that the internal control framework\u2014that is the COSO  framework\u2014referred to in SEC\u2019s regulations and PCAOB\u2019s standards  implementing section 404 was not widely used by public companies,  especially smaller companies, prior to the Sarbanes-Oxley Act. Many companies documented their internal controls for the first time as  part of their first year implementation efforts to comply with section 404.  As a result, many companies probably underestimated the time and  resources necessary to comply with section 404, partly because of their  lack of experience or familiarity with the framework.",
      " These challenges  were undoubtedly compounded in companies that needed to make  significant improvements in their internal control systems to make up for  deferred maintenance of those systems. While this was largely true for  both larger and smaller companies, regulators (SEC and PCAOB), public  accounting firms, and others have indicated that smaller public companies  often face particular challenges in implementing effective internal control  over financial reporting. Resource limitations make it more difficult for smaller public companies  to achieve economies of scale, segregate duties and responsibilities, and  hire qualified accounting personnel to prepare and report financial  information. Smaller companies are inherently less able to take advantage  of economies of scale because they face higher fixed per unit costs than  larger companies with more resources and employees.",
      " Implementing the  functions required to segregate transaction duties in a smaller company  absorbs a larger percentage of the company\u2019s revenues or assets than in a  larger company. About 60 percent of the smaller public companies that  responded to our survey said that it was difficult to implement effective  segregation of duties. Several executives told us that it was difficult to  segregate duties due to limited resources. According to COSO\u2019s draft  guidance for smaller public companies, smaller companies can develop  and implement compensating controls when resource constraints  compromise the ability to segregate duties. The American Institute of  Certified Public Accountants noted that smaller public companies often do  not have the internal audit functions referred to in COSO\u2019s internal  framework guidance.",
      " Other executives commented that it was difficult to  achieve effective internal control over financial reporting because they  lacked expertise within their internal accounting staff. For example,  according to an executive from a company that reported a material  weakness in its section 404 report, the financial accounting standards for  stock options were too complex for his staff and it was easier to have its  auditor fix the mistakes and cite the company for a material weakness in  internal control over financial reporting. Two other executives told us that  their auditors cited their companies with material weaknesses in internal  controls over financial reporting for not having appropriate internal  accounting staff; to remediate this weakness,",
      " the companies had to hire  additional staff. According to COSO, however, some of the unique characteristics of  smaller companies create opportunities to more efficiently achieve  effective internal control over financial reporting and more efficiently  evaluate internal control which can facilitate compliance with section 404.  These opportunities can result from more centralized management  oversight of the business, and greater exposure and transparency with the  senior levels of the company that often exist in a smaller company. For  instance, management\u2019s hands-on approach in smaller companies can  create opportunities for less formal and less expensive communications  and control procedures without decreasing their quality. To the extent that  smaller companies have less complex product lines and processes,",
      " and/or  centralized geographic concentrations in operations, the process of  achieving and evaluating effective internal control over financial reporting  could be simplified. According to SEC, another characteristic of smaller public companies is  that they tend to be much more closely held than larger public companies;  insiders such as founders, directors, and executive officers hold a high  percentage of shares in the companies. Further, CFOs of smaller public  companies frequently play a more integrated operational role than their  larger company counterparts. According to a recommendation by  participants at the September 2005 Government-Business Forum on Small  Business Capital Formation hosted by SEC, these types of shareholders  are classic insiders who do not need significant SEC protection.",
      "  According to SEC\u2019s Office of Economic Analysis, among public companies  with a market capitalization of $125 million or less, insiders own on  average approximately 30 percent of the company\u2019s shares. Although the  \u201cinsider\u201d shareholders owners may not have the same need for significant  investor SEC protection as investors in broadly held companies, minority  shareholders who are not insiders may have a need for such protection. Complexity, Scope, and  Timing of PCAOB  Guidance also Appeared to  Influence Cost of Section  404 Implementation Accounting firms and public companies also have noted that the scope,  complexity, and timing of PCAOB\u2019s Auditing Standard No.",
      " 2 contributed to  the challenges and higher costs in the first year of implementation of  section 404. PCAOB\u2019s Auditing Standard No. 2 establishes new audit  requirements and governs both the auditor\u2019s assessment of controls and its  attestation to management\u2019s report. PCAOB first issued an exposure draft  of the standard for comment by interested parties on October 7, 2003. The  Board received 194 comment letters from a variety of interested parties,  including auditors, investors, internal auditors, public companies,  regulators, and others. Due to the time needed to draft the standard,  evaluate the comment letters,",
      " and finalize the standard, PCAOB did not  issue the final standard until March 2004\u2014more than 8 months after SEC  issued its final regulations on section 404 and part way into the initial year  of implementation for accelerated filers. SEC, which under the act is  responsible for approving standards issued by PCAOB, did not approve  Auditing Standard No. 2 until June 17, 2004. As a result of both timing and  unfamiliarity with PCAOB\u2019s Auditing Standard No. 2, auditors were not  prepared to integrate the internal control over financial reporting  attestation and financial audits in the first year of implementation as  envisioned by Auditing Standard No.",
      " 2. Furthermore, according to PCAOB, auditors were not always consistent in  their interpretation and application of Auditing Standard No. 2. In  PCAOB\u2019s report on the initial implementation of Auditing Standard No. 2,  the Board found that both auditors and public companies faced enormous  challenges in the first year of implementation arising from the limited time  frames for implementing the new requirements; a shortage of staff with  prior training and experience in designing, evaluating, and testing controls;  and related strains on available resources. The Board found that some  audits performed under these circumstances were not as effective or  efficient as they should have been.",
      " Auditing firms and a number of public  companies have stated that they expect subsequent years\u2019 compliance  costs for section 404 to decrease. Costs Associated with the  Sarbanes-Oxley Act May  Have Impacted the  Decision of Some Smaller  Public Companies to Go  Private, but Other Factors  also Influenced Decision to  Go Private Since the passage of the act in July 2002, the number of companies going  private (that is, ceasing to report to SEC by voluntarily deregistering their  common stock) increased significantly. As shown in figure 2, the number  of public companies that went private has increased significantly from 143  in 2001 to 245 in 2004,",
      " with the greatest increase occurring during 2003.  However, the 245 companies represented 2 percent of public companies as  of January 31, 2004. Based on the trends observed in 2003 and 2004 and  the 80 companies that went private in the first quarter of 2005, we project  that the number of companies going private will have risen more than 87  percent, from the 143 in 2001 to a projected 267 through the end of 2005.  Our analysis also indicated that companies going private during this entire  period were disproportionately small by any measure (market  capitalization,",
      " revenue, or assets). The costs associated with public company status were most often cited as  a reason for going private (see table 2). While there are many reasons for a  company deregistering\u2014including the inability to benefit from its public  company status\u2014the percentage of deregistered companies citing the  direct cost associated with maintaining public company status grew from  12 percent in 1998 to 62 percent during the first quarter of 2005. These  costs include the accounting, legal, and administrative costs associated  with compliance with SEC\u2019s reporting requirements as well as other  expenses such as those related to managing shareholder accounts.",
      " The  number of companies citing indirect costs, such as the time and resources  needed to comply with securities regulations, also has increased since the  passage of the Sarbanes-Oxley Act. In 2002, 64 companies that went  private cited cost as one of the reasons for the decision; however, that  number increased to 143 and 130 companies in 2003 and 2004,  respectively. Many of the companies mentioned both the direct and  indirect costs associated with maintaining their public company status.  Over half of the companies that cited costs mentioned the Sarbanes-Oxley  Act specifically (roughly 58 percent in 2004 and 2005 and 41 percent in  2003). For smaller public companies,",
      " the costs of complying with  securities laws likely required a greater portion of their revenues, and cost  considerations (indirect and direct) were the leading reasons for  companies exiting the public market, even prior to the enactment of the  Sarbanes-Oxley Act. Further, the benefits of public company status historically appeared to  have been disproportionately smaller for smaller companies, companies  with limited need for external funding, and companies whose public  shares were traded infrequently or in low volume at low prices. As a  result, issues unrelated to the Sarbanes-Oxley Act, such as market and  liquidity issues and the benefits of being private,",
      " are also major reasons for  companies going private. From 1999 to 2004, more companies cited market  and liquidity issues than the indirect costs associated with maintaining  their public company status. Companies in this category cited a wide  variety of issues related to the company\u2019s publicly traded stock such as a  lack of analyst coverage and investor interest, poor stock market  performance, limited liquidity (trading volume), and inability to use the  secondary market to raise additional capital. Smaller companies also  have cited advantages of private status such as greater flexibility, freedom  from the short-term pressures of Wall Street, belief that the markets had  consistently undervalued the company,",
      " and the ability to avoid disclosures  of information that might benefit their competitors (see app. II). Companies that elect to go private reduce the number of financing options  available to them and must rely on other sources of funding. In aggregate,  equity is cheaper when it is supplied by public sources, net of any costs of  regulatory compliance. However, in some circumstances, private equity or  bank lending may be preferable alternatives to the public market.  Statistics suggest bank loans are the primary source of funding for U.S.  companies that rely on external financing. Some companies with  insufficient market liquidity had little opportunity for follow-on stock  offerings and going private would not have fundamentally altered the way  they raised capital.",
      " We found that almost 25 percent of the companies that  deregistered from 2003 through the end of the first quarter of 2005 were  not trading on any market at all (see fig. 3). Approximately 37 percent of  the companies that went private during this period were traded on the  Over-the-Counter Bulletin Board (OTCBB); the general liquidity of this  market is significantly less than major markets traded on the NASDAQ  Stock Market, Inc. (NASDAQ) or the New York Stock Exchange (NYSE).  Additionally, 14 percent were traded in the Pink Sheets and, therefore,  were most likely closely held and traded sporadically,",
      " if at all. Pink Sheets  LLC is not registered with SEC, has no minimum listing standards, does  not require quoted companies to provide detailed information to its  investors, and is regarded as high-risk by many investors. As a result,  trading on the Pink Sheets may produce negative reputational effects that  can further reduce liquidity and the market value of the company\u2019s stock,  thereby increasing the cost of equity capital. It Is Too Soon to  Determine How Sarbanes- Oxley Affected Access to  Capital for Smaller Public  Companies As previously discussed, a large number of smaller public companies have  not fully implemented all the requirements of the Sarbanes-Oxley Act,",
      "  notably non-accelerated filers (public companies with less than $75 million  in public float). As a result, it is unlikely that the act has affected access to  the capital markets for these companies. Moreover, the limited time that  the act\u2019s provisions have been in force would limit any impact on access to  capital, even for the companies that have implemented section 404. For  instance, more than 80 percent of the smaller public companies that  responded to our survey indicated that the act has had no effect or that  they had no basis to judge the effect of the act on their ability to raise  equity or debt financing or on their cost of capital.",
      " There are indications that the Sarbanes\u2013Oxley Act at a minimum has  contributed to some smaller companies rethinking the costs and benefits  of public company status. For example, more than 20 percent of the  smaller companies that responded to our survey also stated that the act  encouraged them to consider going private or deregistering. In contrast, a  number of the smaller public companies that responded to our survey  cited positive effects associated with the implementation of the act,  notably positive impacts on audit committee involvement (60 percent),  company awareness of internal controls (64 percent), and documentation  of business processes (67 percent). SEC and PCAOB Have  Been Addressing  Smaller Company  Concerns Associated  with the  Implementation of  Section 404 SEC and PCAOB have taken actions to address smaller public company  concerns about implementation of Sarbanes-Oxley Act provisions,",
      "  particularly section 404, by giving smaller companies more time to comply,  issuing or refining guidance, increasing communication and education  opportunities, and establishing an advisory committee on smaller public  companies. In particular, SEC has extended deadlines for complying with  section 404 requirements several times since issuing its final rule in 2003  (see table 3). In its final rulemaking on section 404 requirements, SEC  stated that it was sensitive to concerns that many smaller public  companies would experience difficulty in evaluating their internal control  over financial reporting because these companies might not have as formal  or well-structured a system of internal control over financial reporting as  larger companies.",
      " In November 2004, SEC granted \u201csmaller\u201d accelerated  filers an additional 45 days to file their reports on internal control over  financial reporting out of concern that these companies were not in a  position to meet the original deadline. SEC granted non-accelerated filers  two additional extensions in March 2005 and September 2005, with the  latter extension giving non-accelerated filers until their first fiscal year  after July 2007 before having to report under section 404. SEC also  considered the particular challenges facing smaller companies when  granting these extensions. Further, SEC noted that there were other small  business initiatives underway that could improve the effectiveness of non-",
      " accelerated company filers\u2019 implementation of the section 404 reporting  requirements. While SEC\u2019s final rule serves as basic guidance for public company  implementation of section 404 requirements, PCAOB\u2019s Auditing Standard  Number 2 provides the auditing standards and requirements for an audit of  the financial statements and internal control over financial reporting, as  part of an integrated audit. It is a comprehensive document that addresses  the work required by the external auditor to audit internal control over  financial reporting, the relationship of that work to the audit of the  financial statements, and the auditor\u2019s attestation on management\u2019s  assessment of the effectiveness of internal control over financial reporting.",
      "  The standard requires technical knowledge and professional expertise to  effectively implement. While both SEC regulations and the PCAOB standard refer to COSO\u2019s  internal control framework, many companies were unfamiliar with or did  not use this framework, despite the fact that public companies have been  required by law to have implemented a system of internal accounting  controls since 1977. According to SEC, smaller public companies and their  auditors had expressed concern that the COSO internal control framework  was designed primarily for larger public companies and smaller companies  lacked sufficient guidance on how they could use COSO\u2019s internal control  framework, resulting in disproportionate section 404 implementation  costs.",
      " As a result, SEC staff asked COSO to develop additional guidance to  assist smaller public companies in implementing COSO\u2019s internal control  framework in a small business environment. In October 2005, COSO issued  a draft of the guidance for public comment, and anticipated issuing final  guidance for smaller public companies in early 2006. The draft guidance  outlined 26 principles for achieving effective internal control over financial  reporting and provides examples on how companies can implement them.  The draft guidance states that the fundamental concepts of good internal  control over financial reporting are the same whether the company is large  or small. At the same time,",
      " the draft guidance points out differences in  approaches used by smaller companies versus their larger counterparts to  achieve effective internal control over financial reporting and discusses  the unique challenges faced by smaller companies. While intended to  provide additional clarity to smaller companies for implementing an  internal control framework, the guidance has received mixed reviews with  some questioning whether it will significantly change the disproportionate  cost and other burdens for smaller public companies associated with  section 404 compliance. In December 2004, SEC announced its intention to establish its Advisory  Committee on Smaller Public Companies to assess the current regulatory  system for smaller companies under the securities laws, including the  impact of the Sarbanes-Oxley Act.",
      " In addition to granting companies more  time to meet the act\u2019s requirements, SEC has been considering how its  section 404 guidance and overall approach to implementation might be  revised. SEC chartered the advisory committee on March 23, 2005. The  committee plans to issue its final report to SEC by April 2006. On March 3, 2006, the committee published an exposure draft of its final  report for public comment that contained 32 recommendations related to  securities regulation for smaller public companies. Due to the number of  recommendations, the advisory committee refers to its 14 highest priority  recommendations as \u201cprimary recommendations.\u201d One of its primary  recommendations is an overarching recommendation calling for a \u201cscaled\u201d  approach to securities regulation,",
      " whereby smaller public companies are  stratified into two groups, \u201cmicrocap\u201d and \u201csmallcap\u201d companies. Under  this recommendation, microcap companies would consist of companies  whose common stock in the aggregate make up the lowest 1 percent of  U.S. equity market capitalization. The advisory committee estimates, based  on data from SEC\u2019s Office of Economic Analysis, that the microcap  category would include public companies whose individual market  capitalization is less than $128 million, approximately 53 percent of all U.S.  public companies. For the smallcap category, the advisory committee  estimates that the category would include public companies whose  individual market capitalization is less than $787 million and greater than  $128 million,",
      " and would encompass an additional 26 percent of U.S. public  companies and an additional 5 percent of U.S. market capitalization.  Taken together, the categories of microcap and smallcap companies, as  defined by the advisory committee draft recommendations, would include  approximately 79 percent of all U.S. public companies and 6 percent of  market capitalization, according to the advisory committee\u2019s analysis of  SEC data. The recommendation calling for a scaled approach for securities  regulation based on company size was also incorporated into the  committee\u2019s preliminary recommendations related to internal control over  financial reporting. While acknowledging that some have questioned whether smaller public  companies\u2019 problems with section 404 have been overstated,",
      " the advisory  committee concluded that section 404, as currently structured, \u201crepresents  a clear problem for smaller public companies and their investors, one for  which relief is urgently needed.\u201d In part, the advisory committee based  its conclusion on a belief that smaller public company compliance with  section 404 has resulted in disproportionate costs and less certain  benefits. The advisory committee\u2019s primary recommendations related to internal  control over financial reporting address regulatory relief from section 404  for a subset of the microcap and smallcap categories described above by  the inclusion of revenue criteria. Specifically, the committee\u2019s  preliminary recommendations are that:    Unless and until a framework for assessing internal control over financial  reporting for such companies is developed that recognizes their  characteristics and needs,",
      " provide exemptive relief from all of the  requirements of section 404 of the Sarbanes-Oxley Act to microcap  companies with less than $125 million in annual revenue and to smallcap  companies with less than $10 million in annual product revenue. Unless and until a framework for assessing internal control over financial  reporting for smallcap companies is developed that recognizes the  characteristics and needs of those companies, provide exemptive relief  from section 404(b) of the act\u2014the external auditor involvement in the  section 404 process\u2014to smallcap companies with less than $250 million  but greater than $10 million in annual product revenues and microcap  companies with between $125 million and $250 million in annual revenues.",
      " By including the revenue criteria, the committee\u2019s recommendations  regarding section 404 cover a subset of the public companies included  within its microcap and smallcap definitions. The committee estimated  that, after applying the revenue criteria, 4,641 \u201cmicrocap\u201d public  companies (approximately 49 percent of 9,428 public companies identified  in data developed for the advisory committee by SEC\u2019s Office on  Economic Analysis) may potentially qualify for full exemption from  section 404 and another 1,957 \u201csmallcap\u201d public companies  (approximately 21 percent of the SEC-identified public companies)\u2014a  total of 70 percent of SEC-",
      "identified public companies\u2014may potentially  qualify for exemption from the external audit requirement of section  404(b). It is likely that a number of public companies that would qualify  for exemptive relief under the committee\u2019s recommendations have  probably already complied with both sections of 404(a) and (b), based on  their status as accelerated filers. If adopted, these recommendations would effectively establish a \u201ctiered  approach\u201d for compliance with section 404, \u201cunless and until\u201d a framework  for assessing internal control over financial reporting is developed for  microcap and smallcap companies. Under the tiered approach, larger  public companies that do not meet the committee\u2019s size criteria for  exemption would continue to be required to comply with both section  404(a)\u2014management\u2019s assessment of and reporting on internal control  over financial reporting\u2014and section 404(b)\u2014the external auditors\u2019  attestation on management\u2019s assessment and the effectiveness of the  company\u2019s internal control.",
      " \u201cSmallcap\u201d public companies that meet the  revenue criteria would be exempt from complying with section 404(b), but  the companies would still be required to comply with section 404(a).  \u201cMicrocap\u201d and some \u201csmallcap\u201dcompanies that meet the revenue criteria  would be entirely exempt from both section 404(a) and (b). The  committee\u2019s two primary recommendations related to regulatory relief  from section 404 for smaller public companies also include additional  requirements that affected public companies apply additional corporate  governance provisions and report publicly on known material internal  control weaknesses. In its next primary recommendation on internal control over financial  reporting,",
      " which is premised on the adoption of the recommendation for  microcap companies described above, the committee acknowledged that  SEC might conclude, as a matter of public policy, that an audit  requirement is necessary for smallcap companies. In that case, the  committee recommended SEC provide for the external auditor to perform  an audit of only the design and implementation of internal control over  financial reporting, which by its nature would be more limited than the  audit of the effectiveness of internal control over financial reporting  required by section 404(b) and PCAOB\u2019s Auditing Standard No. 2, and that  PCAOB develop a new auditing standard for such an engagement.",
      " While  this recommendation is based on the view that having the external auditor  perform a review of the design and implementation of internal control  over financial reporting would be more cost-effective than the work  otherwise required under Auditing Standard No. 2, the committee\u2019s report  does not address the extent to which costs for such a review would be  lower than that required under Auditing Standard No. 2 and whether the  lower costs would be worth the reduced assurances provided by reduced  scope of the external auditors\u2019 work on internal control over financial  reporting. While not specifically focused on small business issues, SEC also  conducted a public \u201croundtable\u201d in April 2005 that gave public companies,",
      "  accounting firms, and others an opportunity to provide feedback to SEC  and PCAOB on what went well and what did not during the first year of  section 404 implementation. GAO also participated in this roundtable.  Following the roundtable, the SEC and PCAOB Chairmen noted the  importance of section 404 requirements but acknowledged that initial  implementation costs had been higher than expected and noted the need  to improve the cost-benefit equation for small and mid-sized companies.  Both agencies issued additional guidance in May 2005 based on findings  from the roundtable. PCAOB\u2019s guidance clarified that auditors (1)",
      " should  integrate their audits of internal control over financial reporting with their  audits of the client\u2019s financial statements, (2) exercise judgment and tailor  their audit plans to best meet the risks faced by their clients rather than  relying on standardized \u201cchecklists,\u201d (3) use a top-down approach  beginning with company-level controls and use the risk assessment  required by the standard, (4) take advantage of the work of others, and (5)  engage in direct and timely communication with their audit clients, among  other matters. Guidance by SEC and its staff emphasized the need for  reasonable assurance, risk-based assessments, better communication  between the auditor and client,",
      " and clarified what should be in material  weakness disclosures. Representatives of the smaller public companies  that we interviewed indicated that the additional guidance that SEC and  PCAOB issued was helpful. SEC and PCAOB plan to hold a second  roundtable in May 2006 to discuss companies\u2019 second year experiences  with implementing section 404. Both chairs of SEC and PCAOB have said  that they would consider additional guidance if necessary. On November 30, 2005, PCAOB also issued a report on the initial  implementation of its auditing standard on internal control over financial  reporting. The report included observations by PCAOB\u2014based in  significant part,",
      " but not exclusively, on its inspections of public  accounting firms, which in the 2005 cycle included a review of a limited  selection of audits of internal control over financial reporting\u2014on why the  internal control audits were not as efficient or effective as the standard  intended. PCAOB also amplified the previously issued guidance of May  2005, discussing how auditors could achieve more effective and efficient  implementation of the standard. Further, PCAOB has held a series of forums nationwide to educate the  small business community on the PCAOB inspections process and the new  auditing standards. The goal of the forums was to provide small  accounting firms and smaller public companies an opportunity to discuss  PCAOB-related issues with Board members and staff.",
      " PCAOB also  established a Standing Advisory Group to advise PCAOB on standard- setting priorities and policy implications of existing and proposed  standards. The Standing Advisory Group has considered ways to improve  the application of its internal control over financial reporting  requirements\u2014Auditing Standard No. 2\u2014with respect to audits of smaller  public companies. Finally, both SEC and PCAOB have acknowledged the challenges that  smaller public companies faced and continue to face in implementing  section 404 and have begun to address those challenges. SEC also has  emphasized that smaller companies need to focus on the quality of their  internal control over financial reporting. Data provided by SEC\u2019s Office of  Economic Analysis and other studies have pointed to the increased level  of restatements as an indicator that the Sarbanes-Oxley Act\u2014section 404  in particular\u2014has gotten companies to identify and correct weaknesses  that led to financial reporting misstatements in prior fiscal years.",
      " For  example, according to recent research conducted by Glass, Lewis and Co.,  the restatement rate for smaller public companies was more than twice  the rate for the largest public companies (9 percent for companies with  revenues of less than $500 million and 4 percent for companies with more  than $10 billion). SEC staff also noted that smaller public companies had  a disproportionately higher rate of material weaknesses in internal control  over financial reporting during the first year of implementing section 404.  Our discussions with accounting firms confirmed that smaller public  companies have had a higher rate of reported material weaknesses in  internal control over financial reporting than larger public companies.",
      " A major challenge in considering any regulatory relief from section 404 is  that the overriding purpose of the Sarbanes-Oxley Act is investor  protection. Investor confidence in the integrity and reliability of financial  reporting is a critical element for the efficient functioning of our capital  markets. The purpose of internal control over financial reporting is to  provide reasonable assurance over the integrity and reliability of the  financial statements and related disclosures. Market reactions to financial  misstatements illustrate the importance of accurate financial reporting,  regardless of a company\u2019s size. Given the anticipated regulatory changes, particularly those relating to  section 404\u2019s internal control reporting requirements, smaller public  companies may be limiting or not taking definitive actions to improve  internal control over financial reporting based on a perception that they  could become exempt from section 404.",
      " Further, PCAOB officials noted  that such a perception may have limited smaller business involvement in  PCAOB forums. Sarbanes-Oxley Act  Requirements  Minimally Affected  Smaller Private  Companies, Except  for Those Seeking to  Enter the Public  Market While the act does not impose new requirements on privately held  companies, companies choosing to go public realistically must spend  additional time and funds in order to demonstrate their ability to comply  with the act, section 404 in particular, to attract investors. This may have  been a contributing factor in the reduction of the number of initial public  offerings (IPO)",
      " issued by small companies since 2002. However, other  factors\u2014stock market performance and changes in listing standards\u2014 likely also have affected the number of IPOs. While a number of states  proposed legislation with provisions similar to the Sarbanes-Oxley Act,  three states actually enacted legislation requiring private companies or  nonprofit organizations to adopt requirements similar to certain Sarbanes- Oxley Act provisions. Finally, some privately held companies have been  adopting the act\u2019s enhanced governance practices because these  companies believe these practices make good business sense. Sarbanes-Oxley May Have  Affected IPO Activity;  however, Other Important  Factors also Influence  Entry into the Public  Market and Access to  Capital Small businesses that are not public companies typically rely on a variety  of sources to finance their operations,",
      " including personal savings, credit  cards, and collateralized bank loans. In addition, small businesses can use  private equity capital sources such as venture capital funds\u2014private  partnerships that provide private equity financing to early- and later-stage  high-growth small businesses\u2014to fund their growth. Small businesses may  also issue equity shares to other types of investors to finance further  growth. These shares may be sold through private placements where  shares are sold directly to investors (direct placement) or through a public  offering where the shares are sold through an underwriter (going public).  In addition, some small companies issue equities that trade on smaller  markets such as the Pink Sheets.",
      " For those private companies desiring to  enter the public market, the IPO process has always been recognized as a  time-consuming and expensive endeavor. However, venture capitalists and private company officials told us that, as  a result of the act and other market factors, many private companies have  been spending additional time, effort, and money to convince investors  that they can meet the requirements of the act. For example, investors  have become more cautious and demanding of the private companies in  which they invest. Consequently, private companies have hired auditors  and additional staff to make substantial changes to their financial system  and data-reporting capabilities,",
      " document internal controls and processes,  and review or change accounting procedures. According to venture capitalists and private company officials with whom  we spoke, a private company\u2019s ability to meet the Sarbanes-Oxley Act\u2019s  requirements can significantly decrease some of the investment risk  associated with becoming a public company. For example, both groups  told us that companies with well-documented internal control and  governance policies were more attractive and able to secure investor  funding at a much lower cost. Moreover, they noted that underwriters  expected private companies to consider and comply with the act well in  advance of going public. If a private company were unable to meet the  act\u2019s requirements,",
      " venture capitalists would want the company to show  evidence of a plan for becoming compliant as soon as the company  became public. If not, venture capitalists noted that they would be less  likely to invest in such a company and look elsewhere for investment  opportunities. These new expectations may have served to increase the expenses  associated with the IPO process through changes in the professional fees  charged by auditors and potentially other costs as well. Specifically, we  found that there has been a disproportionate increase for the smallest  companies when IPO expenses were viewed as a percentage of revenue.  As shown in table 4, the direct expenses (excluding underwriting fees)",
      "  associated with the IPO represented a significant portion of a small  company\u2019s revenues, relative to larger companies, from 1998 through the  second quarter of 2005. These expenses have increased disproportionably  since 2002 for small companies going public\u2014especially for the smallest of  these companies ($25 million or less in revenues). While Sarbanes-Oxley  Act requirements could explain some of this increase, legal, exchange  listing, printing, and other fees unrelated to the act could also account for  this increase. Moreover, other market factors also could explain the  increase in IPO expenses paid to auditors. In addition to the requirements of the Sarbanes-Oxley Act and the general  increase in direct expenses,",
      " other important factors likely have influenced  IPO activity. To illustrate, the downward trend in IPOs occurred before the  passage of the Sarbanes-Oxley Act in mid-2002. It is widely acknowledged  that IPO filings and pricings tend to be closely associated with stock  market performance. As shown in figure 4, companies generally issued  (priced) significantly more IPOs when stock market valuations were  higher. Companies with smaller reported revenues now make up a smaller share  of the IPO market. The number of IPOs by companies with revenues of $25  million or less decreased substantially, from 70 percent of all IPOs in 1999  to about 48 percent in 2004 and 31 percent during the first two quarters of  2005.",
      " Venture capitalists told us that, on average, a private company had to  demonstrate at least 6 quarters of profitability before it could go public  and hire an auditor to carry it through the IPO process. According to the  venture capitalists, an increasing number of small and mid-sized private  companies have been pursuing mergers and acquisitions as a means of  growing without going through the IPO process, which now typically costs  more than a merger or acquisition. Potential Spillover Effects  of the Sarbanes-Oxley Act  on Private Companies  Have Been Minimal While the Sarbanes-Oxley Act has increased corporate governance and  accountability awareness throughout business and investor communities,",
      "  our research and discussions with representatives of financial institutions  suggest that financiers are not requiring privately held companies to meet  Sarbanes-Oxley Act requirements as a condition to obtaining access to  capital or other financial services. For example, the representatives said  they emphasize utilization of credit scoring to make decisions and may  make lending decisions using \u201cpersonal guarantees\u201d in lieu of audited  financial statements and reported cash flow on financial statements for the  smallest private companies. For larger private companies, the  representatives stated that they require audited financial statements and  cash flow information, but that their lending requirements existed well  before the Sarbanes-Oxley Act and have not changed as a result of its  passage.",
      " Overall, they noted that they do not believe that the act has  affected the way financial institutions and lenders conduct business with  private companies. They also noted that financial institutions and lenders  have always enjoyed the freedom to obtain virtually any information about  a potential borrower and to inquire about the company\u2019s financial  reporting process and corporate governance practices. For example, if it  were considered necessary to help determine a company\u2019s ability repay a  debt, a lender could ask the company to provide copies of any corporate  governance guidelines, business ethics policies, and key committee  charters that the company had adopted. Immediately following the act\u2019s passage, several states proposed  legislation to enact corporate governance and financial reporting reforms  for private companies and nonprofit organizations.",
      " Specifically, several  state legislatures proposed instituting requirements similar to those in the  Sarbanes-Oxley Act for privately held state-registered companies.  Subsequently, three states\u2014Illinois, Texas, and California\u2014passed  legislation that mandates corporate governance and accountability  requirements that resemble certain provisions of the Sarbanes-Oxley Act.  For example, Illinois passed legislation in 2004 that requires enhanced  disclosures for certain nonpublic companies and additional licensing  requirements for certified public accountants and, in 2003, Texas passed  legislation that imposes strict ethics and disclosure requirements for  outside financial advisors and service providers,",
      " public or private, that  provide financial services to the state government. On September 29, 2004,  California adopted the Nonprofit Integrity Act of 2004, becoming the first  state in the nation to require nonprofit organizations to meet requirements  that resemble some provisions of the Sarbanes-Oxley Act. For instance,  nonprofits with gross revenues of $2 million or more operating within the  state of California currently are required to have independent auditors  and, in the case of charitable corporations, audit committees. Further, two  other states\u2014Nevada and Washington\u2014have passed legislation that  require accounting firms to retain work papers for 7 years for audits of  both public and private companies.",
      " Furthermore, based on our research  and discussions with representatives from the National Association of  State Boards of Accountancy, we found that some state boards made  changes to regulations that focus on key governance and accountability  issues similar to those mandated by the Sarbanes-Oxley Act. For example,  New Jersey adopted enhanced peer review requirements and Tennessee  instituted additional work paper retention requirements for certified  public accountants. Based on our discussions with private equity providers and private  company officials, it appears that some privately held companies  increasingly have incorporated certain elements of the Sarbanes-Oxley Act  into their governance and internal control policies.",
      " Specifically, they have  adopted practices such as CEO/CFO financial statement certification,  appointment of independent directors, corporate codes of ethics,  whistleblower procedures, and approval of nonaudit services by the board.  According to these officials, some private companies have reported  receiving pressure from board members, auditors, attorneys, and investors  to implement certain \u201cbest practice\u201d policies and guidelines, modeled after  the requirements of the act. They noted that the act has raised the bar for  what constitutes best practices in corporate governance and for  expectations regarding internal control. Additionally, the officials told us  that some private companies may have chosen to voluntarily adopt certain  practices that resemble Sarbanes-Oxley Act provisions to satisfy external  auditors and legal counsel looking for comparable assurances to reduce  risk,",
      " increase confidence, and improve credibility with many stakeholders.  Based on our research, we found that many of the aspects of corporate  governance reform currently being adopted by private companies were  those relatively inexpensive to implement, but information on the specific  costs associated with adopting these provisions was not available. Smaller Companies  Appear to Have Been  Able to Obtain  Needed Auditor  Services, Although the  Overall Audit Market  Remained Highly  Concentrated Since the enactment of the Sarbanes-Oxley Act, smaller public companies  have been able to obtain needed auditor services; however, auditor  changes suggest smaller companies have moved from using the services of  a large accounting firm to using services of mid-sized and small firms.",
      "  Some of this activity has resulted from the resignation of large accounting  firms from providing audit services to small public companies. Reasons for  these changes range from audit cost and service concerns cited by  companies to client profitability and risk concerns cited by accounting  firms, including capacity constraints and assessments of client risk. In  recent years, public accounting firms have been categorized into three  categories\u2014the largest firms, \u201csecond tier\u201d firms (mid-sized), and regional  and local firms (small).  From 2002 to 2004, 1,006 companies reported  auditor changes involving a departure from a large accounting firm. Over  two-thirds of these companies reported switching to a mid-sized or small  accounting firm.",
      " Most of the companies that switched to a mid-sized or  small accounting firm were smaller public companies with market  capitalization or revenues of $250 million or less. Overall, mid-sized and  small accounting firms conducted 30 percent of the total number of public  company audits in 2004\u2014up from 22 percent in 2002. Despite client gains  for mid-sized and small firms, the overall market for audit services  remained highly concentrated, with mid-sized and smaller firms auditing  just 2 percent of total U.S. publicly traded company revenue. In the long  run, mid-sized and small accounting firms could increase opportunities to  enhance their recognition and acceptance among capital market  participants as a result of the gains in public companies audited and  operating under PCAOB\u2019s registration and inspection process.",
      " Smaller Companies Found  It Harder to Keep or  Obtain the Services of a  Large Accounting Firm,  but Overall Access to  Audit Services Appeared  Unaffected Our limited review did not find evidence to suggest that the Sarbanes- Oxley Act has made it more difficult for smaller public companies to  obtain needed audit services, but did suggest that smaller public  companies may have found it harder to retain a large accounting firm as a  result of increased demand for auditing services, largely due to the  implementation of section 404 and other requirements of the act, and the  capacity limitations of the large accounting firms. Of the 2,",
      "819 auditor  changes from 2003 through 2004 that we identified using Audit Analytics  data, 79 percent were made by companies that represented the smallest of  publicly listed companies (companies with $75 million or less in market  capitalization or revenue). Although fewer mid-sized and small  accounting firms conducted public company audits in 2004 because some  firms did not register with PCAOB or merged with other firms, the market  appears to have absorbed these changes effectively, with other firms  taking on these clients. Recent Auditor Changes  Resulted in Small  Accounting Firms Gaining  Clients Our analysis showed that 1,",
      "006 of the 2,819 changes, or 36 percent,  involved departures from a large accounting firm. Of the 1,006 auditor  changes, less than one-third (311 or 31 percent) resulted in the public  company moving to another large accounting firm, and slightly under two- thirds (651 or 65 percent) retained a mid-sized or small accounting firm  (see table 5). Over the same period, mid-sized and small accounting firms lost fewer  public company clients to the large accounting firms; as a result, mid-sized  and small firms experienced a net increase of 510 public company  clients\u2014a net gain of 161 and 349 companies for mid-sized and smaller  firms,",
      " respectively. Because we had no data on companies\u2019 selection  processes, we could not determine whether mid-sized and small firms  competed for these clients with other large accounting firms or if they  received these clients by default with no competition from the other large  accounting firms. According to Who Audits America, small and mid-sized  accounting firms increased their percentage public company audit from 22  percent in 2002 to 27 percent in 2003, and by 2004 they audited 30 percent  of all U.S. publicly traded companies. Small and mid-sized firms audited  over 38 percent of all public clients in 2004 according to Audit Analytics  data,",
      " which include, in addition to publicly traded companies, other SEC  reporting companies including foreign registered entities, registered funds  and trusts, and registered public companies that are not publicly traded. The majority of the clients the mid-sized and small firms gained were  smaller companies with market capitalization or revenues averaging  $200 million or less. As shown in table 5 and figure 5, the companies  leaving a large accounting firm and retaining another large firm tended to  be very large\u2014with average market capitalization (or revenue) of more  than $1 billion. However, the average market capitalization (or revenue) of  companies leaving a large accounting firm and retaining a mid-sized  accounting firm was less than $175 million and the capitalization (or  revenue)",
      " of companies retaining a small firm was significantly smaller\u2014 less than $53 million. Similarly, companies leaving smaller and mid-sized  firms that retained a large accounting firm tended to be much larger than  those that retained another mid-sized or small firm. Reasons for Auditor  Changes May Have  Included Costs Related to  the Act and Risk  Assessments While the reasons for the movement of smaller public companies to mid- sized and small accounting firms may be somewhat speculative at this  point, the Sarbanes-Oxley Act may have contributed to this shift. Some  smaller companies may have preferred a large firm because of the  perception that large accounting firms\u2014by virtue of their reputation or  perceived skills\u2014can help attract investors and improve access to  capital.",
      " Workload demands placed on the large firms by larger public  companies, which represent the overwhelming majority of their clients,  have increased with section 404 and other Sarbanes-Oxley Act  implementing regulations. The resulting increases in workload and audit  fees appear to have constrained smaller companies\u2019 access to large  accounting firms\u2014either because smaller companies were unable to  afford a large accounting firm or because large accounting firms resigned  from smaller clients. According to Audit Analytics, the largest accounting  firms resigned from three times as many clients in 2004 as in 2001, and  three-quarters of those were companies with revenues of less than $100  million.",
      " Beyond resignations by large accounting firms in response to increased  demand for audit services, the act may have caused large accounting firms  to reevaluate the risk in their aggregate client portfolios by increasing the  responsibilities and liability of auditors, leading them to shed smaller  public companies. According to the large accounting firms with whom we  spoke, they did not have enough resources to retain all of their clients  after the Sarbanes-Oxley Act and cited risk as a significant factor in  choosing which clients to keep. Moreover, the largest audit firms could  be applying stricter profitability guidelines in selecting their clients,  eliminating those engagements where profit margins are smaller.",
      " While former clients of large accounting firms may represent opportunities  for mid-sized and small accounting firms, they also represent some risks.  For example, we found that a disproportionate percentage of the  companies that left a large accounting firm for a small firm had accounting  or risk issues. Overall, about 69 percent of the companies that left a large  accounting firm switched to a mid-sized or small accounting firm.  However, 92 percent of the companies that received a going concern  qualification went to a mid-sized or small accounting firm. In addition,  about 81 percent of the companies with at least one accounting issue  (such as restatement,",
      " reportable condition, scope limitation, management  found to be unreliable, audit opinion concerns, illegal acts, or SEC  investigation) went from a large to a mid-sized or small accounting firm. In  contrast, 63 percent of the companies with no going concern qualification  or any additional \u201crisk\u201d issues went to mid-sized and small firms. We also  found that, if a large accounting firm resigned as the auditor of record, the  company was more likely to switch to a mid-sized or small accounting  firm. Roughly 85 percent of the smallest companies that were dropped by  one of the largest accounting firms retained a smaller audit firm.",
      " Mid-sized and Small  Accounting Firms  Continued to Operate in a  Highly Concentrated  Market Although mid-sized and small accounting firms gained clients in 2003 and  2004, they continued to operate in a market dominated by large accounting  firms. The market for audit services in 2004 changed little from the market  we described in our 2003 report. For example, mid-sized and small  accounting firms increased their share of all public company revenues by 1  percentage point in 2002\u20132004. The market for audit services remained  highly concentrated\u2014a tight oligopoly, where in 2004 the four largest  firms audited 98 percent of the market and the remaining firms audited 2  percent\u2014and the potential market power was significant.",
      " The market for smaller public company audits was much more  competitive than the overall and large public company market. As shown  in figure 6, while the market for audit services for large company clients  remained dominated by large accounting firms, the market for the smallest  public company clients appeared to indicate healthy competition. Mid- sized and small firms audited 59 percent of all public company clients with  revenues of $25 million or less, 45 percent of all clients with revenues  greater than $25 million up to $50 million, and 32 percent of all clients with  revenues greater than $50 million up to $100 million.",
      " When these revenue  categories were combined, the large accounting firms combined with the  mid-sized firms audited 75 percent of companies with revenues of $100  million or less, while the small firms audited the remaining 25 percent. As  noted in our 2003 report, as companies expanded operations around the  world, the large audit firms globally expanded through mergers in order to  provide service to their international clients. More recently, mid-sized and small accounting firms gained more large  clients. In 2004, these accounting firms audited approximately 3 percent of  the companies with revenues greater than $500 million, up from 2 percent  in 2002.",
      " However, as shown in table 5, the average revenue of the clients  lost to the largest accounting firms was $1.1 billion while the average  revenue of the client gained from the largest accounting firms was $138.8  million. Overall, mid-sized and small accounting firms conducted 30  percent of the total number of public company audits in 2004\u2014up from 22  percent in 2002. While these companies make up just 2 percent of total  public company revenue, they are a large segment of the market of  publicly traded clients. Sarbanes-Oxley Act May  Impact the Continuing  Competitive Challenges  Faced by Mid-Sized and  Small Accounting Firms According to some experts,",
      " competitive challenges related to the ability of  mid-sized and small firms to compete for public companies such as  capacity, expertise, recognition, and litigation risks may have been  strengthened since the passage of the Sarbanes-Oxley Act. For example,  in a recent American Assembly report, a number of industry professionals  indicated that large accounting firms\u2019 facility with new requirements was  seen as increasingly important as audits have become more complex and  time-consuming and the financial consequences of noncompliance more  severe. Additionally, even though some experts believe that large accounting  firms\u2019 regulatory competence has been overstated, a perception may exist  among many large and some small U.S.",
      " companies as well as other market  influencers and stakeholders that only the large accounting firms can  provide the required auditing services necessary to meet the requirements  of the act. For example, the venture capital industry representatives that  we spoke with stated that this perception has been especially prevalent for  companies issuing IPOs. As shown in figure 7, companies large and small  tended to use large accounting firms for IPOs. Over the long run, the Sarbanes-Oxley Act could ease some of these  challenges. For example, mid-sized and small accounting firms have  continued to confront the perceptions of capital market participants that  only large firms have the skills and resources necessary to perform public  company audits.",
      " These perceptions have constrained firms from obtaining  or retaining many clients that the firms believed were within their capacity  to audit. However, the increase in public company audits performed by  mid-sized and small accounting firms has given these firms additional  opportunities to enhance their recognition and acceptance among more  public companies and capital market participants. Also, as smaller public  companies begin complying with section 404 in 2007, small accounting  firms will gain additional experience with the implementation of the act.  Taking on additional clients will provide an important growth opportunity.  Effectively matching company size and needs with accounting firm size  and capabilities could allow smaller public companies to find the best  combination of quality,",
      " service value, and reach. In addition, the PCAOB registration and inspection process and the  establishment of attestation, quality control, and ethics standards to be  used by registered public accounting firms in the preparation and issuance  of audit reports could provide increased assurance of the quality of small  accounting firm audits. Similarly, as more information will become  available through PCAOB\u2019s ongoing inspection program, small accounting  firms could establish a \u201ctrack record,\u201d allowing for additional  opportunities for recognition and acceptance among analysts, investment  bankers, investors, and public companies. Conclusions The Sarbanes-Oxley Act was a watershed event\u2014strengthening disclosure  and internal control requirements for financial reporting,",
      " establishing new  auditor independence standards, and introducing new corporate  governance requirements. Regulators, public companies, audit firms, and  investors generally have acknowledged that many of the act\u2019s provisions  have had a positive and significant impact on investor protection and  confidence. Yet, for smaller public companies and companies of all sizes  that have complied with the various provisions of the Sarbanes-Oxley Act,  compliance costs have been higher than anticipated\u2014with the higher cost  being associated with the internal control over financial reporting  requirements of section 404. There is widespread agreement that several factors contributed to the  costs of implementing section 404 for both larger and smaller public  companies.",
      " Few public companies or their audit firms had prior direct  experience with evaluating and reporting on the effectiveness of internal  control over financial reporting or with implementing the COSO internal  control framework, particularly in a small business environment. This was  despite previous requirements, dating back to 1977, that public companies  implement a system of internal accounting controls. The first year costs  were exacerbated because many companies were documenting their  internal control over financial reporting for the first time and remediating  poor or nonexistent internal controls as part of their first-year  implementation efforts to comply with section 404, both of which could be  viewed as a positive impact of the act.",
      " In addition, the nature, timing, and  extent of available guidance on establishing and assessing internal control  over financial reporting made it more difficult for most public companies  and audit firms to efficiently and effectively implement the requirements  of section 404. As a result, management\u2019s implementation and assessment  efforts were largely driven by PCAOB\u2019s Auditing Standard No. 2, as  guidance at a similar level of detail was not available for management\u2019s  implementation and assessment process. These factors, in conjunction  with the changed environment and expectations resulting from the act,  contributed to a considerable amount of \u201clearning curve\u201d activities and  inefficiencies during the initial year of implementation.",
      " Auditing firms and  a number of public companies have stated that they expect subsequent  years\u2019 compliance costs for section 404 to decrease. This is not  unexpected given the significance and nature of the changes and a  preexisting environment that did not place enough emphasis on effective  internal control over financial reporting. Consistent with the findings of the Small Business Administration on the  impact of regulations generally on smaller public companies, it is  reasonable to conclude that smaller public companies face  disproportionately greater costs, as a percentage of revenues, than larger  companies in meeting the requirements of the act. While facing the same  basic requirements, smaller public companies generally have more limited  resources,",
      " fewer shareholders, and generally less complex structures and  operations. Again, this is to be expected given the economies of scale and  differing levels of corporate infrastructure and resources. However, some  of the unique characteristics of smaller companies can create  opportunities to efficiently achieve effective internal control over financial  reporting. Those characteristics include more centralized management  oversight of the business, more involvement of top management in the  business operations, simpler operations, and limited geographic locations. The ultimate impact of the Sarbanes-Oxley Act on the majority of smaller  public companies remains unclear because the time frame to comply with  section 404 of the act was extended until fiscal years ending after July  2007 for the approximately 5,",
      "971 public companies with less than   $75 million in public float. Recognizing the challenges that smaller public  companies have faced in meeting the requirements of the act, particularly  section 404, SEC formed an advisory committee on smaller public  companies to analyze the impact of the act and other securities laws on  smaller public companies. The advisory committee has issued an exposure  draft of its final reporting stating that certain smaller public companies  need relief from section 404, \u201cunless and until\u201d a framework for assessing  internal control over financial reporting is developed that recognizes the  characteristics and needs of smaller public companies. The exposure draft  contains specific recommendations that would essentially result in a  \u201ctiered approach\u201d for compliance with section 404 requirements,",
      " where  larger public companies would continue to be required to fully comply  with all requirements of section 404, while smaller public companies  consisting of \u201cmicrocap\u201d and \u201csmallcap\u201d companies would be granted  differing levels of exemptions until an adequate framework was in place. We have two specific concerns regarding the advisory committee\u2019s  recommendations. First, the recommendations propose relief \u201cunless and  until a framework for assessing internal control over financial reporting\u201d  for smaller companies is developed that \u201crecognizes the characteristics  and needs of those companies.\u201d While the recommendations hinge on the  need for a framework that recognizes smaller public company  characteristics and needs of smaller public companies,",
      " they do not  address what needs to be done to establish such a framework or how such  a framework should take into consideration the characteristics and needs  of smaller public companies. Many, if not most, of the significant problems  and challenges encountered by large and small companies in implementing  section 404 related to problems with implementation, rather than the  internal control framework itself. In addition to having a useful internal  control framework, appropriate implementation of a framework by public  companies must be based on risk, facts and circumstances, and  professional judgment. We believe that sufficient guidance covering both  the internal control framework and the means by which it can be  effectively implemented is essential to enable large and small public  companies to implement a framework which would enable effective and  efficient assessment and reporting on the effectiveness of internal control  over financial reporting.",
      " Our second concern relates to the ambiguity surrounding the conditional  nature of the \u201cunless and until\u201d provisions of the recommendations and its  potential impact on a large number of companies that would likely qualify  for the proposed exemptions. If resolution of small public company  concerns about a framework and its implementation results in an  extended period of exemption, then large numbers of public companies  would potentially be exempted for additional periods from complying with  this important investor protection component of the act. The categories of  microcap and smallcap companies, as defined by the advisory committee  recommendations, cover 79 percent of U.S. public companies and   6 percent of the U.S.",
      " equity market capitalization when combined.  Although the categories of microcap and smallcap have been further  refined by the advisory committee through the addition of a revenue size  filter for purposes of its primary recommendations on section 404, it  appears that a large number of companies, up to 70 percent of all U.S.  public companies, would be potentially exempted. Specifically, the  committee estimates that, after applying the revenue criteria, 4,641 \u201cmicro  cap\u201d public companies (approximately 49 percent of 9,428 public  companies identified in data developed for the advisory committee by  SEC\u2019s Office on Economic Analysis)",
      " may potentially qualify for the  proposed full exemption from section 404 and another 1,957 \u201csmallcap\u201d  public companies (approximately 21 percent of the identified public  companies) may potentially qualify for the proposed exemption from the  external audit requirement of section 404(b). These estimates do not  include those public companies trading on the Pink Sheets that would be  covered by the Advisory Committee\u2019s preliminary recommendations. In  addition, it is likely that a number of public companies qualifying for  exemptive relief under the committee\u2019s recommendations are likely to  have already complied with both sections of 404(a) and (b) of the act  under the current category of accelerated filers.",
      " Also, regarding the committee\u2019s third primary internal control  recommendation calling for a review of the design and implementation of  internal control if SEC concludes, as a matter of public policy, that the  external auditor\u2019s involvement is required, it is not clear from the  committee\u2019s report the extent to which, particularly in the present  environment, such a review would result in lower costs than those being  associated with the implementation of PCAOB\u2019s Auditing Standard No. 2.  Any lower costs that might result must be considered in light of the  reduced independent assurances on the effectiveness of internal control  over financial reporting that would result and the potential for confusion  on the part of users of the public company\u2019s financial statements and audit  reports.",
      " Until sufficient guidance is available for smaller public companies, some  interim regulatory relief on a limited scale may be appropriate. However,  given the number of public companies that would potentially qualify for  relief under the recommendations being considered, we believe that a  significant reduction in scope of the proposed relief needs to occur to  preserve the overriding investor protection purpose of the Sarbanes-Oxley  Act. The purpose of internal control over financial reporting is to provide  reasonable assurance over the integrity and reliability of the financial  statements and related disclosures. Public and investor confidence in the  fairness of financial reporting is critical to the effective functioning of our  capital markets.",
      " Market reactions to financial statement misstatements  illustrate the importance of accurate financial reporting, regardless of a  company\u2019s size. SEC staff and others have pointed to the increased level of  restatements as an indicator that the Sarbanes-Oxley Act\u2014section 404 in  particular\u2014has prompted companies to identify and correct weaknesses  that led to financial reporting misstatements in prior fiscal years. Indicators also show that in some respects, smaller companies have a  higher risk profile for investors. For instance, smaller public companies  have higher rates of restatements generally and showed a  disproportionately higher rate of reported material weakness in internal  control over financial reporting during the initial year of section 404  implementation.",
      " Over time, having the effective internal control over  financial reporting envisioned by the act can reduce some aspects of the  higher risk profile of smaller public companies. When SEC receives and considers the final recommendations of SEC\u2019s  small business advisory committee, it is essential that SEC consider key  principles, under the umbrella principle of investor protection, when  deciding whether or to what extent to provide smaller public companies  with alternatives to full implementation of the section 404 requirements.  These principles include (1) assuring that smaller public companies have  sufficient useful guidance to implement, assess, and report on internal  controls over financial reporting to meet the requirements of section 404,",
      "  (2) if additional relief is considered appropriate, conducting further  analysis of small public company characteristics to significantly reduce  the scope of companies that would qualify for any type of additional relief  while working to ensure that the Sarbanes-Oxley Act\u2019s goal of investor  protection is being met, and (3) acting expeditiously such that smaller  public companies are encouraged to continue improving their internal  control over financial reporting. First, it is critical that SEC carefully assess the available guidance,  including that being developed by COSO, to determine whether it is  sufficient or whether additional action needs to be taken, such as issuing  supplemental or clarifying guidance to smaller public companies to help  them meet the requirements of section 404.",
      " Our analysis of available  research and discussions with smaller public companies and audit firms  indicate that public companies and external auditors have had limited  practical experience with implementing internal control frameworks in a  smaller company environment and that additional guidance is needed.  Moreover, it is critical that SEC coordinate its actions with PCAOB, which  is responsible for establishing standards for the external auditor\u2019s internal  control attestations, to ensure that external auditors are using standards  and guidance on section 404 compliance that are consistent with guidance  for public companies and that they are doing so in an effective and  efficient manner. As SEC considers the need for additional  implementation guidance,",
      " it will be important that the guidance and  related PCAOB audit standards be consistent and compatible. Also, it will  be important for the PCAOB to continue to identify ways in which auditors  can achieve more economical, effective, and efficient implementation of  audit-related standards and guidance. Second, as SEC considers whether and to what extent it might be  appropriate to provide additional interim relief to some categories of  smaller public companies, it will be important to balance the needs of the  investing public with the concerns expressed by small businesses. In doing  so, it is important to determine whether there are unique characteristics,  in addition to size,",
      " that could influence the extent that some regulatory  accommodation might be appropriate in order to arrive at a targeted and  limited category of companies being provided with potential exemptions.  For example, if these companies were closely held or have a higher rate of  insider investors, regulatory relief may raise less of an investor protection  concern. These investors may be more knowledgeable about company  operations and receive fewer benefits from section 404\u2019s enhanced  disclosures. For companies that are widely traded, regulatory relief would  raise more concerns about investor protection and relief would appear  less appropriate. Furthermore, although the \u201cinsider\u201d shareholder owners  may not have the same need for investor protection as investors in broadly  held companies,",
      " minority shareholders who are not insiders may need  such protection. For other purposes, certain provisions of SEC\u2019s securities  regulations and the Employee Retirement Income Security Act of 1974  regulations condition different types of relief, in part, on the nature and/or  the financial sophistication of the investor, and SEC may wish to consider  whether such approaches would help serve to balance the concerns of  small businesses against the needs of investors. The criteria and  characteristics used should be linked to the investor protection goals of  the Sarbanes-Oxley Act and be geared toward limiting the numbers of  companies that would be eligible based on those investor protection goals.",
      "  In addition, the advisory committee\u2019s preliminary recommendations to  exempt \u201csmaller public companies\u201d from the external audit requirements  of section 404 would include a number of companies that have already  complied with section 404, and SEC needs to carefully consider whether it  is appropriate to provide regulatory relief on this basis. Finally, we believe that SEC has an obligation to resolve section 404  implementation requirements for smaller public companies in a way that  creates incentives for smaller public companies to take actions to improve  their internal control over financial reporting. Rather than delaying  implementation, which would likely result in smaller public companies  anticipating future extensions or relief,",
      " SEC\u2019s resolution of these issues  would provide needed clarity and certainty over the scope and timing of  smaller companies\u2019 compliance with section 404 and provide incentives to  smaller public companies to begin the process of implementing section  404. Recommendations In light of concerns raised by the SEC Advisory Committee on Smaller  Public Companies and others regarding the ability of smaller public  companies to effectively implement section 404, we recommend that the  Chairman of SEC    assess the guidance available, with an emphasis on implementation  guidance for management\u2019s assessment of internal control over financial  reporting, to determine whether the current guidance is sufficient and  whether additional action is needed,",
      " such as issuing supplemental or  clarifying guidance to help smaller public companies meet the  requirements of section 404, and   coordinate with PCAOB to (1) help ensure that section 404-related audit  standards and guidance are consistent with any additional guidance  applicable to management\u2019s assessment of internal control and (2) identify  additional ways in which auditors\u2019 can achieve more economical, effective,  and efficient implementation of the standards and guidance related to  internal control over financial reporting. If, in evaluating the recommendations of its advisory committee, SEC  determines that additional relief is appropriate beyond the current July  2007 compliance date for non-accelerated filers,",
      " we recommend that the  Chairman of SEC analyze and consider, in addition to size, the unique  characteristics of smaller public companies and the knowledge base,  educational background, and sophistication of their investors in  determining categories of companies for which additional relief may be  appropriate to ensure that the objectives of investor protection are  adequately met and any relief is targeted and limited. Agency Comments  and Our Evaluation We provided a draft of this report to the Chairman, SEC, and the Acting  Chairman, PCAOB, for their review and comment. We received written  comments from SEC and PCAOB that are summarized below and  reprinted in appendixes III and IV.",
      " SEC agreed that the Sarbanes-Oxley  Act has had a positive impact on investor protection and confidence, and  that smaller public companies face particular challenges in implementing  certain provisions of the act, notably section 404. SEC stated that our  recommendations should provide a useful framework for consideration of  its advisory committee\u2019s final recommendations. PCAOB stated that it is  committed to working with SEC on our recommendations and that it is  essential to maintain the overriding purpose of the Sarbanes-Oxley Act of  investor protection while seeking to make its implementation as efficient  and effective as possible. Both SEC and PCAOB provided technical  comments that were incorporated into the report as appropriate.",
      " As we agreed with your office, unless you publicly announce the contents  of this report earlier, we plan no further distribution of it until 30 days  from the date of this letter.  At that time, we will send copies of this report  to interested congressional committees and subcommittees; the Chairman,  SEC; the Acting Chairman, PCAOB; and the Administrator, SBA. We will  make copies available to others upon request. In addition, the report will  be available at no charge on the GAO Web site at http://www.gao.gov. If you have any questions concerning this report, please contact William B.",
      "  Shear at (202) 512-8678 or shearw@gao.gov, or Jeanette M. Franzel at  (202) 512-9471 or franzelj@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. See appendix V for a list of other staff who contributed to  the report. Appendix I: Objectives, Scope, and  Methodology Our reporting objectives were to (1) analyze the impact of the Sarbanes- Oxley Act on smaller public companies in terms of costs of compliance  and access to capital;",
      " (2) describe the Securities and Exchange  Commission\u2019s (SEC) and Public Company Accounting Oversight Board\u2019s  (PCAOB) efforts related to the implementation of the act and their  responses to concerns raised by smaller public companies and the  accounting firms that audit them; (3) analyze the impact of the act on  smaller privately held companies, including costs, ability to access public  markets, and the extent to which states and capital markets have imposed  similar requirements on smaller privately held companies; and (4) analyze  smaller companies\u2019 access to auditing services and the extent to which the  share of public companies audited by small accounting firms has changed  since the enactment of the Sarbanes-Oxley Act.",
      " In arriving at our report objectives, we incorporated nine specific  questions contained in your request letter. See table 6 for a cross-sectional  comparison of the nine specific questions contained in your letter, the four  report objectives, and our findings. To address our four objectives, we reviewed and analyzed information  from a variety of sources, including the legislative history of the act,  relevant regulatory pronouncements and related public comment letters,  and available research studies and papers. We also interviewed officials at  SEC, PCAOB, and the Small Business Administration (SBA). In addition,  we held discussions with the chief financial officers (CFO)",
      " of smaller  public and private companies, representatives of relevant trade  associations, accounting firms, market participants, and experts. Impact of Sarbanes-Oxley  Act on Smaller Public  Companies We could not analyze the impact of the act on many smaller public  companies because SEC has extended the date by which public registrants  with less than $75 million public float (known as \u201cnon-accelerated\u201d filers)  must comply with Section 404 of the act to their first fiscal year ending on  or after July 15, 2007. According to SEC, non-accelerated filers represent  about 60 percent of all registered public companies and about 1 percent of  total available market capitalization.",
      " As a result, we analyzed public data  and other information related to the experiences of public companies that  have fully implemented the act\u2019s provisions. We also compared the  information from companies that had implemented the act with  information from smaller companies that took the SEC extension to gain  some insight into the potential impact of these provisions on the non- accelerated filers. Audit Fees and Auditor  Changes Audit Analytics, an on-line market intelligence service maintained by Ives  Group, Incorporated provides, among other things, a database of audit  fees by company back to 2000 along with demographic and financial  information. Using this database, we analyzed changes in the audit fees  companies have paid by various size categories.",
      " Audit Analytics also  provides a comprehensive listing of all reported auditor changes, which  includes data on the date of change, departing auditor, engaged auditor,  whether the change was a dismissal or resignation, whether there was a  going concern flag or other accounting issues, and whether a fee dispute  or fee reduction occurred. Using this database, we identified 2,819 auditor  changes from 2003 through 2004. We performed several checks to verify the reliability of the Audit Analytics  data. For example, we crosschecked random samples from each of the  Audit Analytics databases with SEC proxy and annual filings and other  publicly available information.",
      " While we determined that these data were  sufficiently reliable for the purpose of presenting trends in audit fees and  auditor changes, the descriptive statistics on audit fees contained in the  report should be viewed in light of a number of data challenges. First, the  Audit Analytics audit fee database does not include fees for companies  who did not disclose audit fees paid to their independent auditor in an  SEC filing. Second, some companies included in the database\u2014especially  small companies\u2014did not report complete financial data. We handled  missing data by dropping companies with incomplete financial data from  any analysis involving the use of such data. Therefore, it should be noted  that we are not dealing with the entire population included in the Audit  Analytics database but rather a large subset.",
      " Because of these issues, the  results should be viewed as estimates of audit fees based on a large  sample rather than precise estimates of all fees charged over the entire  population. It should also be noted that SEC found issues with the data on  market capitalization (used largely in our discussion of auditor changes  and companies going private) which are being addressed by Audit  Analytics. Deregistrations To determine the number of companies that have deregistered before and  after the implementation of the Sarbanes-Oxley Act, we obtained and  analyzed data filed with SEC. From 1998 through April 24, 2005,",
      " over  15,000 companies filed SEC Form 15 (Certification and Notice of  Termination of Registration). First, we analyzed all the companies to  determine whether the company was deregistering its common stock to  continue to operate as a privately held company. During this step, we  eliminated companies that filed the Form 15 as a result of acquisitions,  mergers that were not \u201cgoing private\u201d transactions liquidations,  reorganizations, or bankruptcy filings or re-emergences. We also  eliminated duplicate filings and filings by foreign registrants. For the  remaining companies, we reviewed their SEC filings and press releases  and other press articles to determine their reasons for deregistration.",
      " We  grouped the reasons into seven categories for our final analysis. We took a number of steps to ensure the reliability of the database,  including testing of random samples of the coded data, 100 percent  verification of certain areas of the database, and various other quality  control measures. For the initial coding, we found the error rates to be 0.6  percent or lower for all years except 2001 and 1998. Because the initial  error rate exceeded 1.5 percent for these 2 years, we performed 100  percent verification and corrected any errors. However, because the error  rate for the remaining years was positive,",
      " it is unlikely that we captured  every company going private in 1998\u20132005. We also excluded all  companies with one or zero holders of record unless that company also  filed a Schedule 13E-3 (Going private transaction by certain issuers) with  SEC. In doing so, we may have missed some companies going private.  However, an outside study found only 12 companies that filed a Form 15  but did not file a Schedule 13E-3 from 1998 through 2003. Additionally,  our analysis of the companies that listed more than one holder of record  on the Form 15 should have picked up some of these types of firms.",
      " As a  result, this limitation is minor in the context of this report and does not  alter the trends also found by a number of research reports. Survey of Public Company  Views on Implementing the  Sarbanes-Oxley Act To obtain information about public companies\u2019 views on implementing  Sarbanes-Oxley Act requirements, we conducted a Web-based survey of  companies with market capitalization of $700 million or less and annual  revenues of $100 million or less that reported to SEC that they had  complied with the act\u2019s requirements related to internal control over  financial reporting. To develop and test our questionnaire, we interviewed  officials at 14 smaller public companies.",
      " We then pretested drafts of our  questionnaire with 10 companies and then discussed their answers and  experiences with our social science survey specialists. The pretests were  conducted in person and by telephone with company executives in  Virginia, Maryland, New York, Connecticut, California, Georgia, and  Illinois. To identify the smaller public companies eligible to participate in the  survey, we analyzed company SEC filings from the Audit Analytics  database. Our survey universe consisted of 591 companies that met the  following five criteria: (1) $700 million or less in market capitalization as  of the end of the company\u2019s 2004 fiscal year;",
      " (2) $100 million or less in  revenues as of the end of the company\u2019s 2004 fiscal year end; (3)  completed section 404 requirements by filing related reports of  management and the company\u2019s external auditor as of August 11, 2005; (4)  were not foreign companies; and (5) were not investment vehicles such as  mutual funds and shell companies. Of the 591, we could not reach 168  within the survey period because we were not able to obtain e-mail  addresses for the CFO or other executive. We began our Web-based survey  on September 21,",
      " 2005, and included all useable responses as of November  1, 2005. We sent follow-up e-mails on three occasions to remind  respondents to complete the survey. One hundred fifty-eight companies  completed the survey for an overall response rate of 27 percent. Only one  respondent indicated that his company was a non-accelerated filer. The low response rate raised concerns that the views of 158 respondents  might not be representative of all smaller public company experiences  with the Sarbanes-Oxley Act. While we could not test this possibility for  our primary questions (whether the act places a disproportionate burden  on smaller companies or compromises their ability to raise capital), we did  conduct an analysis to determine whether our sample differed from the  population of 591 in company assets,",
      " revenue, and market capitalization  and type (based on the North American Industrial Classification System  code). We found no evidence of substantial non-response bias based on  these characteristics. However, because of the low response rate we still  could not assume that the views of the 158 respondents were  representative of the views of other smaller public companies on  implementing Sarbanes-Oxley Act requirements. Therefore, we do not  consider these data to be a probability sample of all smaller public  companies. In addition to potential non-response bias, the practical difficulties of  conducting any survey may introduce other non-sampling errors. For  example,",
      " difference in how a particular question is interpreted or the  sources of information available to respondents may introduce errors. We  took steps to minimize such non-sampling errors in both the data  collection and data analysis stages. We examined the survey results and  performed computer analyses to identify inconsistencies and other  indications of error. A second independent analyst checked all the  computer analyses. Further, we used GAO\u2019s Questionnaire Programming  Language (QPL) system to create and process the Web-based survey. This  system facilitates the creation of the instrument, controls access, and  ensures data quality. It also automatically generates code for reading the  data into SAS (statistical analysis software). This tool is commonly used  for GAO studies.",
      " We used QPL to automate some processes, but also used analysts to code  the open-ended questions and then had a second, independent analyst  review them. (The survey contained both open- and close-ended  questions.) We entered a set of possible phrases, called tags, which we  identified for each question into QPL. When the analysts reviewed the text  responses, they assign the tags that best reflect the meaning of what the  respondent has written. The system then compares the tags assigned by  the independent reviewers. Multiple tags may be assigned to a single  response; thus, it is possible for reviewers to agree on some tags and not  on others.",
      " Although it is possible to have reviewers resolve their  differences until agreement is found, for this survey we only considered  tags that were selected by all reviewers on the first pass. Tags assigned by  only one reviewer were dropped. This process allowed a quantitative  analysis of open comments made by respondents. Finally, we verified all  data processing on the survey in house and found it to be accurate. SEC and PCAOB Efforts to  Address Smaller Company  Concerns To address our second objective describing SEC\u2019s and PCAOB\u2019s efforts  related to the implementation of the act and their responses to concerns  raised by smaller public companies and the accounting firms that audit  them,",
      " we interviewed SEC and PCAOB staff on the rulemaking and  standard setting processes. We also interviewed public company  executives, representatives of relevant trade associations, and market  participants for their reaction to the agencies\u2019 rules, guidance, and other  public announcements. During the course of our review, both SEC and PCAOB held forums and  other open meetings to allow a public discourse on the act\u2019s impact on  public companies, accounting firms, investors, and other market  participants. We attended most of these forums and open meetings and  reviewed submitted comments. Specifically, from November 2004 to  February 2006, we attended either in person or through a Web cast the  following:",
      " SEC\u2019s Advisory Committee on Smaller Public Companies open  meetings; SEC\u2019s Roundtable on Implementation of Internal Control  Reporting Provisions; SEC\u2019s Government-Business Forum on Small  Business Capital Formation; PCAOB\u2019s Standing Advisory Group Meetings;  and PCAOB\u2019s forums on auditing in the small business environment. We  reviewed the guidance that SEC and PCAOB separately issued on May 16,  2005, as a result of comments received at SEC\u2019s section 404 roundtable. Impact of Act on Smaller  Privately Held Companies To determine the act\u2019s impact on smaller privately held companies, we  analyzed available research and studies.",
      " We also interviewed officials of  the National Association of State Boards of Accountancy in states that  required or were considering requiring privately held companies to comply  with corporate accountability, governance, and financial reporting  measures comparable to key provisions in the Sarbanes-Oxley Act. Further, we analyzed data and interviewed officials on whether lenders,  financial institutions, private equity providers, or others were imposing the  act\u2019s requirements on privately held companies as a condition of obtaining  capital or financial services. Finally, we interviewed officials and analyzed  available data on whether, as a result of the act, privately held companies  were voluntarily adopting key provisions of the act as best practices or  whether they had faced challenges in trying to reach the public markets.",
      " To assess the impact of the act on privately held companies trying to reach  the public markets, we obtained a sample from SEC\u2019s Electronic Data  Gathering, Analysis, and Retrieval (EDGAR) system, a database that  includes companies\u2019 initial public offering (IPO) and secondary public  offering (SPO) filings. Our sample contained registration statements,  pricings and applications for withdrawal filed with SEC from 1998 through  July 2005. We performed various analyses of IPO and SPO activity prior to  and after enactment of Sarbanes-Oxley, including analyses of the sizes of  companies coming and returning to the market,",
      " types and amounts of IPO  expenses, and the reasons cited by companies for withdrawing their IPO  filing. We analyzed IPO expenses as a percentage of revenue and offering  amount for companies in various size categories to determine whether the  differences between the groups changed over time and whether the  differences were statistically significant when controlling for other  determining factors. SEC\u2019s EDGAR database is considered the definitive source for information  on IPOs since all companies issuing securities that list on the major  exchanges and the OTCBB, as well as those that meet certain criteria  listing on the Pink Sheets, must register the securities with SEC.  Nevertheless, we crosschecked the descriptive statistics retrieved from  EDGAR with NASDAQ\u2019s IPO data.",
      " However, there was no financial data  available on several companies, while others failed to provide information  to complete all of the fields. In cases where revenue was left blank,  individual filings were reviewed and actual revenue, 9-month revenue or  pro-forma data was used to determine the size of the company. In cases  were this data was not available we dropped these companies from any  analysis involving the use of such data. Additionally, there can be  significant lag between the dates a company initially files for an IPO with  SEC and when the stock of the company is finally priced (begins trading).  Because we had data on IPO filings during the last 2 months of 1997,",
      " we  were able to include those companies that priced IPOs over the 1998-2005  period that initially filed for an IPO during that time. However, any IPOs  that were priced during this time but had an initial filing that occurred  prior to November 1, 1997, are not included. For this reason the number of  priced IPOs for 1998 (and to an even lesser extent 1999) may understate  somewhat the actual numbers of companies coming to the public market  during that year. This limitation is insignificant in the context of this  report. Company Access to  Auditing Services and  Changes in Share of Public  Companies That Small  Firms Audit To assess changes in the domestic public company audit market,",
      " we used  public data\u2014for 2002 and 2004\u2014on public companies and their external  accounting firm to determine how the number and mix of domestic public  company audit clients had changed for firms other than the large  accounting firms. To be consistent with our 2003 study of the structure of  the audit market, we used the Who Audits America database, a directory  of public companies with detailed information for each company,  including the auditor of record. Only domestic public companies traded on  the major exchanges or over-the-counter with available financial data were  included in our analysis of audit market concentration and the results do  not include a number of clients of the smallest audit firms.",
      " Users of our  2003 study will also note that we used the term \u201csales\u201d when referring to  auditor concentration but use the term \u201crevenue\u201d in this report. Although  Who Audits America refers to sales, our conversations with the provider  of the data, confirmed that although the terms can be used  interchangeably, \u201crevenue\u201d is a better term than \u201csales\u201d in accurately  describing the contents of the database. To verify the reliability of these data sources, we performed several  checks to test the completeness and accuracy of the data. Previously GAO  crosschecked random samples of the Who Audits America database with  SEC proxy filings and other publicly available information.",
      " Descriptive  statistics calculated using the database were also compared with similar  statistics from published research. Moreover, academics who worked with  GAO in the past also compared random samples from Compustat, Dow- Jones Disclosure, and Who Audits America and found no discrepancies.  We also crosschecked the results with estimates obtained using Audit  Analytics\u2019 audit opinion database. The results were not significantly  different and confirm the finding outlined in the body of the report.  However, because of the lag in updating some of the financial information  and the omission of a number of small public clients, the results should be  viewed as estimates useful for describing the market for audit services.",
      " We conducted our work in California, Connecticut, Georgia, Maryland,  New Jersey, New York, Virginia, and Washington, D.C., from November  2004 through March 2006 in accordance with generally accepted  government auditing standards. Appendix II: Additional Details about GAO\u2019s  Analysis of Companies Going Private A number of research studies and anecdotal evidence suggest that a  significant number of small companies have gone private as a result of  costs associated with the increased disclosure and internal control  requirements introduced by the Sarbanes-Oxley Act of 2002. To provide a  better understanding of companies going private, we analyzed Form 15s  filed by companies,",
      " related Securities and Exchange Commission (SEC)  filings and press releases to determine the total number of companies  exiting the public market and the reasons for the change in corporate  structure. See appendix I for our scope and methodology. This appendix  provides additional information on the construction of our database and  descriptive statistics. Our Database Included  Firms That \u201cWent Dark\u201d as  Well as Firms That  Completely Exited the  Public Market Although there is no consensus on the term \u201cgoing private,\u201d we started  with the description used in the \u201cFast Answers\u201d section of SEC\u2019s Web site:  a company \u201cgoes private\u201d when it reduces the number of its shareholders  to fewer than 300 (or 500 in some instances)",
      " and is no longer required to  file reports with SEC. To reduce the number of holders of record, a  company can undertake a number of transactions including tender offers,  reverse stock splits, and cash-out mergers. In many cases, the company  already meets the requirement for deregistration and therefore the  registrant need only file a Form 15 (which notifies SEC of a company\u2019s  intent to deregister) with SEC to meet this description of \u201cgoing private.\u201d  As a result, we use the terms \u201cgoing private\u201d and \u201cderegistering\u201d  interchangeably. However, not all companies that deregister completely  exit the public markets;",
      " some elect to continue trading on the less  regulated Pink Sheets. Companies that deregister their shares with SEC  but continue public trading on the Pink Sheets are often considered as  having \u201cgone dark\u201d rather than private in the academic literature.  However, our final \u201cgoing private\u201d numbers include companies that no  longer trade on any exchange and those that continue to trade on the less  regulated Pink Sheets (\u201cwent dark\u201d). It should be noted that SEC does not  have rules that define \u201cgoing dark\u201d and the term is used here as it is used  in academic research. The companies contained in our database include only those companies  that deregistered common stock,",
      " were no longer subject to SEC filing  requirements, and were headquartered in the United States. Moreover, the  database excludes most cases where the company was acquired by, or  merged into another company; filed for, or was emerging from,  bankruptcy; or was undergoing or planning liquidation. We also excluded a  significant number of companies that filed for an initial public offering and  subsequently filed a Form 15 within a year; filed no annual or quarterly  financials between the first filing with SEC and the Form 15; or filed as a  result of reorganization where the company remained a public registrant.  Based on the information contained on the Form 15,",
      " we were able to  exclude four types of filers: (1) companies that deregistered securities  other than their common stock; (2) companies that continued to be  subject to public reporting requirements; (3) companies that were  headquartered in a foreign country; and (4) companies for which a Form  15 could not be retrieved electronically. In addition to SEC filings, we used press releases located through Lexis- Nexis to investigate whether the companies experienced any of the  disqualifying conditions (bankruptcy, merger, acquisition, liquidation,  etc.). Companies that were merged into, or were acquired by,",
      " another  company were only included if the transaction was initiated by an affiliate  of the company (either the company filed a Schedule 13E-3 with SEC or  our analysis found evidence of a \u201cgoing private\u201d transaction in the case of  Over-the-Counter Bulletin Board (OTCBB) and Pink Sheet-quoted  companies). Moreover, if the transaction resulted in the company  becoming a subsidiary of another publicly traded company or a foreign  entity, or if the transaction met any of the other disqualifying conditions,  that company was excluded from our final numbers. Each Form 15 also contained the number of holders of record.",
      " We  excluded all companies with one or zero holders of record unless that  company also filed a Schedule 13E-3 with SEC. A test of a random sample  of 200 of these companies found that merging, bankrupt, and liquidating  firms typically reported one or zero as the number of holders of record.  Because there may have been some companies that went private by way of  merger that did not file a Schedule 13E-3, our database may have excluded  some companies going private as a result of using this qualifier. However,  this limitation is minor in the context of this report (see app. I for  additional information on data reliability). In total,",
      " these exclusions left us  with 1,093 U.S. companies going private from 1998 through the first  quarter of 2005 out of the 15,462 Form 15 filings initially provided to us by  SEC. Consistent with Outside  Studies, We Found That  the Number of Companies  That Went Private  Increased Significantly  from 2001 through 2004 The number of public companies going private increased significantly  from 143 in 2001 to 245 in 2004 (see fig. 8). Based on the number of  companies going private during the first quarter of 2005,",
      " we project that  the number of companies going private will increase, to 267 companies by  the end of 2005. While these numbers constitute a small percentage of the  total number of public companies, the trends we identified suggest that  more small companies are reconsidering the cost and benefits of  remaining public and raising capital on domestic public equity markets. As  figure 8 shows, the number of companies going private increased  significantly, whether or not we excluded the types of companies  explicitly considered as speculative investments by SEC\u2014blank check and  shell companies. Overall, these companies, identified as such by Standard  Industry Classification code,",
      " represent 17 percent of the companies going  private in 2004 but just 2.5 percent of the companies going private during  the first quarter 2005 and 8.4 percent of the overall sample. A number of research reports have also found that the number of  companies exiting the public market has increased since 2002. Although  there are differences in the search methodologies and types of companies  included, each study found similar trends and reached similar conclusions  (see fig. 9). For example, in Leuz et al. (2004) the number of companies  going dark or private increased from 144 to 313 between 2002 and 2003.",
      "  Moreover the authors found that the bulk of the increase was made up of  companies that continued trading on the Pink Sheets after deregistration.  Engel et al. (2004), which was based on a smaller subset of deregistering  companies, found a statistically significant increase in the rate at which  companies went private. Marosi and Massoud (2004) excluded all merger- related transactions and found that the number of companies going dark  increased from 71 in 2002 to 127 in 2003. We Grouped Reasons for  Company Decisions to Go  Private into Seven  Categories In analyzing company decisions,",
      " we used various sources to determine  why the companies included in our database deregistered their common  stock. Because companies did not always disclose the reasons for their  decision in an SEC filing, we also searched press releases and newswire  announcements using the Lexis-Nexis search engine. We then used the  reasons given in the various filings and other media to construct seven  broad categories, summarized in table 7. Because companies often gave  multiple reasons for the decision to deregister (go private) and it was  difficult to tell which were the most important, we allowed up to six  reasons for each company included in our database.",
      " For example,  Westerbeke Corporation went private in 2004 and cited the following  reasons for the decision: \u201ca small public float,\u201d inability to use its stock as  currency for acquisitions, benefits the company would receive as private  entity such as \u201cgreater flexibility,\u201d the ability to make \u201cdecisions that  negatively affect quarterly earnings in the short run,\u201d and the costs and  time devoted by employees and management \u201cresulting from the adoption  of the Sarbanes-Oxley Act of 2002.\u201d This company is included in our  database with following coded reasons for going private: (1)  market/",
      "liquidity issues; (2) private company benefits; (3) direct costs; and  (4) indirect costs. More Companies Have  Cited Costs as Reasons for  Going Private Since 2002 Although companies go private for a variety of reasons, in recent years,  more companies cited the direct costs of maintaining public company  status as at least one of the reasons for going private. As shown in figure  10, the number of companies citing costs as at least one reason for going  private increased from 64 in 2002 to 143 and 130 in 2003 and 2004.  However,",
      " the percentage of companies citing cost as the only reason for  exiting the market has increased significantly in recent years. While only  21 cited costs and no other reason in 2003 (15 percent of the total citing  cost), 43 did so in 2004 (33 percent of the total citing cost). During the first  quarter of 2005, nearly 50 percent of the companies mentioning cost, cited  costs as the only reason for going private. Companies Going Private  Typically Were among the  Smallest of Publicly  Traded Companies By any measure (market capitalization, revenue or assets), the companies  that went private over the 2004\u20132005 period represent some of the  smallest companies in the public arena (see figs.",
      " 11 and 12). Because these  companies were on average very small, they enjoyed limited analyst  coverage and limited market liquidity\u2014one of the primary benefits cited  for going or remaining public. The median market capitalization and  revenue for these companies was less than $15 million. Figure 12 also illustrates that companies going private were  disproportionately small, which reflected that the net benefits from being  public likely were smallest for small firms and the costs of complying with  securities laws likely required a higher proportion of a smaller company\u2019s  revenue. For example, 84 percent of the companies that went private in  2004 and 2005 had revenues of $100 million or less and nearly 69 percent  had revenues of $25 million or less.",
      " We also found that a significant  portion of these companies\u201412.5 percent of those that went private in  2004\u20132005\u2014had not filed quarterly or annual financial statements with  SEC in more than 2 years; therefore, we did not have access to recent  financial information. Appendix III: Comments from the Securities  and Exchange Commission Appendix IV: Comments from the Public  Company Accounting Oversight Board Appendix V: GAO Contacts and Staff  Acknowledgments GAO Contacts  GAO Contacts Acknowledgments In addition to those named above, Harry Medina and John Reilly, Assistant  Directors; E. Brandon Booth;",
      " Michelle E. Bowsky; Carolyn M. Boyce; Tania  L. Calhoun; Martha Chow; Bonnie Derby; Barbara El Osta; Lawrance L.  Evans Jr.; Gabrielle M. Fagan; Cynthia L. Grant; Maxine L. Hattery; Wilfred  B. Holloway; Kevin L. Jackson; May M. Lee; Kimberly A. McGatlin; Marc W.  Molino; Karen V. O\u2019Conor; Eric E. Petersen; David M. Pittman; Robert F.  Pollard; Carl M. Ramirez; Philip D. Reiff;",
      " Barbara M. Roesmann; Jeremy S.  Schwartz; and Carrie Watkins also made key contributions to this report.\n"
    ],
    "length": 24795,
    "hardness": null,
    "role": null
  },
  {
    "id": 105,
    "question": null,
    "answer": "Although the U.S. government provides broad protection for intellectual property, intellectual property protection in parts of the world is inadequate. As a result, U.S. goods are subject to piracy and counterfeiting in many countries. A number of U.S. agencies are engaged in efforts to improve protection of U.S. intellectual property abroad. This report describes U.S agencies' efforts, the mechanisms used to coordinate these efforts, and the impact of these efforts and the challenges they face. U.S. agencies undertake policy initiatives, training and assistance activities, and law enforcement actions in an effort to improve protection of U.S. intellectual property abroad. Policy initiatives include assessing global intellectual property challenges and identifying countries with the most significant problems--an annual interagency process known as the \"Special 301\" review--and negotiating agreements that address intellectual property. In addition, many agencies engage in training and assistance activities, such as providing training for foreign officials. Finally, a small number of agencies carry out law enforcement actions, such as criminal investigations involving foreign parties and seizures of counterfeit merchandise. Agencies use several mechanisms to coordinate their efforts, although the mechanisms' usefulness varies. Formal interagency meetings--part of the U.S. government's annual Special 301 review--allow agencies to discuss intellectual property policy concerns and are seen by government and industry sources as rigorous and effective. In addition, a voluntary interagency training coordination group meets about once a month to discuss and coordinate training activities. However, the National Intellectual Property Law Enforcement Coordination Council, established to coordinate domestic and international intellectual property law enforcement, has struggled to find a clear mission, has undertaken few activities, and is generally viewed as having little impact. U.S. efforts have contributed to strengthened intellectual property legislation overseas, but enforcement in many countries remains weak. The Special 301 review is widely seen as effective, but the impact of actions such as diplomatic efforts and training activities can be hard to measure. U.S. industry has been supportive of U.S. actions. However, future U.S. efforts face significant challenges. For example, competing U.S. policy objectives take precedence over protecting intellectual property in certain regions. Further, other countries' domestic policy objectives can affect their \"political will\" to address U.S. concerns. Finally, many economic factors, as well as the involvement of organized crime, hinder U.S. and foreign governments' efforts to protect U.S. intellectual property abroad.\n",
    "docs": [
      "Background Intellectual property is a category of intangible rights that protect  commercially valuable products of the human intellect, such as inventions;  literary and artistic works; and symbols, names, images, and designs used  in commerce. U.S. protection of intellectual property has a long history:   Article 1 of the U.S. Constitution grants the Congress the power \u201cto  promote the Progress of Science and useful Arts, by securing for limited  Times to Authors and Inventors the exclusive Right to their respective  Writings and Discoveries.\u201d Copyrights, patents, and trademarks are the  most common forms of protective rights for intellectual property.",
      "   Protection is granted by guaranteeing proprietors limited exclusive rights  to whatever economic reward the market may provide for their creations  and products. Ensuring the protection of IPR encourages the introduction  of innovative products and creative works to the public. Intellectual property is an important component of the U.S. economy, and  the United States is an acknowledged global leader in the creation of  intellectual property. According to USTR, \u201cAmericans are the world\u2019s  leading innovators, and our ideas and intellectual property are a key  ingredient to our competitiveness and prosperity.\u201d However, industries  estimate annual losses stemming from violations of intellectual property rights overseas are substantial.",
      " Further, counterfeiting of products such as  pharmaceuticals and food items fuels public health and safety concerns.   USTR\u2019s Special 301 annual reports on the adequacy and effectiveness of  intellectual property protection around the world demonstrate that, from a  U.S. perspective, intellectual property protection is weak in developed as  well as developing countries and that the willingness of countries to  address intellectual property issues varies greatly. U.S. laws have been  passed that address the need for strong intellectual property protection  overseas and provide remedies to be applied against countries that do not  provide adequate or effective protection. For example, the Omnibus Trade  and Competitiveness Act of 1988 allows the U.S.",
      " government to impose  trade sanctions against such countries. Eight federal agencies, the FBI, and the USPTO undertake the primary U.S.  government activities to protect and enforce U.S. intellectual property  rights overseas. These agencies are the Departments of Commerce, State,  Justice, and Homeland Security; USTR; the Copyright Office; USAID; and  USITC. The U.S. government also participates in international  organizations that address intellectual property issues, such as the World  Trade Organization (WTO), the World Intellectual Property Organization  (WIPO), and the World Customs Organization (WCO). U.S. Agencies  Undertake Three Types  of IPR Efforts The efforts of multiple U.S.",
      " agencies to protect U.S. intellectual property  overseas fall into three general categories\u2014policy initiatives, training and  technical assistance, and U.S. law enforcement actions. USTR leads most  U.S. policy activities, in particular the Special 301 review of intellectual  property protection abroad. Most agencies involved in efforts to protect  U.S. IPR overseas conduct training and technical assistance activities.  However, the number of agencies involved in U.S. law enforcement actions  is more limited, and the nature of these activities differs from other U.S.  government actions related to intellectual property protection. USTR Leads Policy Efforts U.S.",
      " policy initiatives to increase intellectual property protection around  the world are primarily led by USTR, in coordination with the Departments  of State and Commerce, USPTO, and the Copyright Office, among other  agencies. These efforts are wide ranging and include the annual Special 301  review of intellectual property protection abroad, use of trade preference  programs for developing countries, negotiation of agreements that address  intellectual property, and several other activities. Special 301 Review Is Central  U.S. Policy Effort A centerpiece of policy activities is the annual Special 301 process.   \u201cSpecial 301\u201d refers to certain provisions of the Trade Act of 1974,",
      " as  amended, that require USTR to annually identify foreign countries that  deny adequate and effective protection of intellectual property rights or fair  and equitable market access for U.S. persons who rely on intellectual  property protection. USTR identifies these countries with substantial  assistance from industry and U.S. agencies and publishes the results of its  reviews in an annual report. Once a pool of such countries has been  determined, the USTR, in coordination with numerous agencies, is required  to decide which, if any, of these countries should be designated as a Priority Foreign Country (PFC). If a trading partner is identified as a PFC,",
      "  USTR must decide within 30 days whether to initiate an investigation of  those acts, policies, and practices that were the basis for identifying the  country as a PFC. Such an investigation can lead to actions such as  negotiating separate intellectual property understandings or agreements  between the United States and the PFC or implementing trade sanctions by  the U.S. government against the PFC if no satisfactory outcome is reached.  In its annual Special 301 report, USTR also lists countries with notable but  less serious intellectual property protection problems as, in order of  decreasing severity, \u201cPriority Watch List\u201d countries and \u201cWatch List\u201d  countries.",
      " Unlike PFCs, countries cited on these lists are not subject to  automatic consideration for investigation. Between 1994 and 2004, the U.S. government designated three countries as  PFCs\u2014China, Paraguay, and Ukraine\u2014as a result of intellectual property  reviews (see table 1). China was initially designated as a PFC in 1994  owing to acute copyright piracy, trademark infringements, and poor  enforcement. Paraguay was designated as a PFC in 1998 owing to high  levels of piracy and counterfeiting resulting from an absence of effective  enforcement, its status as a major point of transshipment for pirated or  counterfeit products to other South American countries,",
      " and its inadequate  IPR laws. The U.S. government negotiated separate bilateral intellectual  property agreements with both countries to address these problems. These  agreements are subject to annual monitoring, with progress cited in each  year\u2019s Special 301 report. Ukraine, where optical media piracy was prevalent, was designated a PFC  in 2001. No mutual solution was found, and in January 2002, the U.S.  government imposed trade sanctions in the form of prohibitive tariffs (100  percent) aimed at stopping $75 million worth of certain imports from  Ukraine over time. These sanctions negatively affected Ukraine\u2019s exports  to the United States.",
      " U.S. data show that overall imports from Ukraine  experienced a dramatic 70 percent decline from 2000 to 2003. U.S. trade  data also show that U.S. imports of the items facing punitive tariffs (with  one exception) declined by $57 million from 2000 to 2003. Since 2001,  Ukraine has remained the sole PFC and the sanctions have remained in  place. In early 2002, according to Department of State officials, Ukraine  passed an optical disc licensing law\u2014a key U.S. factor in originally  designating Ukraine as a PFC. Further, the Ukrainian government  reportedly closed plants that were pirating optical media products.",
      "  However, the U.S. government remains concerned that the optical disc law  is inadequate. Although it designated only three countries as PFCs between 1994 and  2004, the U.S. government has cited numerous countries\u2014approximately  15 per year recently\u2014on its Special 301 Priority Watch List. Of particular  note, the European Union has been placed on this list every year since  1994, while India and Argentina have been on the list for 10 and 9 years,  respectively, during that period. By virtue of membership in the WTO, the United States and other countries  commit themselves not to take WTO-inconsistent unilateral action against  possible trade violations involving IPR protections covered by the WTO but  to instead seek recourse under the WTO\u2019s dispute settlement system and its  rules and procedures.",
      " This may impact any U.S. government decision  regarding whether to retaliate against WTO members unilaterally with  sanctions under the Special 301 process when those countries\u2019 IPR  problems are viewed as serious. U.S. Policy Efforts Include  Generalized System of  Preferences and Other Trade  Preference Programs U.S. IPR policy efforts also include use of the Generalized System of  Preferences (GSP) and other trade preference programs administered by  USTR. The GSP is a unilateral program intended to promote development  through trade, rather than through traditional aid programs, by eliminating  tariffs on certain imports from eligible developing countries.",
      " The GSP was  originally authorized by the Trade Act of 1974; when it was reauthorized by  the Trade and Tariff Act of 1984, new \u201ccountry practice\u201d eligibility criteria  were added, including a requirement that beneficiary countries provide  adequate and effective IPR protection. Petitions to withdraw GSP benefits  from countries that do not meet this criterion can be filed as part of an  annual GSP review and are typically filed by industry interests. Petitions  are considered through an interagency process led by USTR, with input  from the Departments of State and Commerce, among others. In  administering the GSP program,",
      " USTR has led reviews of the IPR regimes  of numerous countries and has removed benefits from some beneficiary  countries because of IPR problems. Ukraine lost its GSP benefits in  August 2001 (approximately 6 months before the imposition of sanctions  that stemmed from Ukraine\u2019s designation as a PFC under the Special 301  process) because of inadequate protection for optical media, and these  benefits have not been reinstated. Adequate and effective IPR protection is required by other trade preference  programs, including the Andean Trade Preference Act (ATPA), which  provides benefits for Bolivia, Colombia, Ecuador, and Peru;",
      " the African  Growth and Opportunity Act (AGOA); and the Caribbean Basin Initiative  (CBI). USTR reviews IPR protection provided under these trade preference  programs, and, according to USTR officials, GSP, which includes numerous  developing countries, has been used more actively (in terms of reviews  and actual removal of benefits) than ATPA, CBI, and AGOA. In fact,  according to USTR officials, benefits have never been removed under ATPA  or AGOA owing to IPR concerns. However, USTR officials emphasized that  these programs and their provisions for intellectual property protection  have been used effectively nevertheless.",
      " For example, one USTR official  noted that in response to U.S. government concerns regarding whether  Colombia was meeting ATPA eligibility criteria, the Colombian government  implemented measures to, among other things, ensure the legitimate use  and licensing of software by government agencies. USTR also pointed out  that in Mauritius, an unresolved trademark counterfeiting concern for U.S.  industry was specifically raised with the government of Mauritius as a  follow-up to the annual review of the country\u2019s eligibility for preferences  under AGOA. Following bilateral discussions, this counterfeiting concern  was addressed and resolved. U.S. Government Engages in  IPR-related Trade Negotiations Since 1990,",
      " the U.S. government has negotiated 25 IPR-specific agreements  or understandings with foreign governments. USTR noted that USPTO and  other agencies are responsible for leading negotiating efforts for such  agreements (and the Copyright Office participates in negotiations as an  adviser). According to USTR officials, IPR-specific agreements are  sometimes negotiated in response to particular problems in certain  countries and are monitored when a relevant issue arises. USTR has also  negotiated an additional 23 bilateral trade agreements\u2014primarily with  countries of the former Soviet Union or Eastern Europe\u2014that contain IPR  provisions (see app. II for a listing of these agreements). In addition,",
      " the U.S. government, primarily USTR and USPTO (with input  from the Copyright Office) participated actively in negotiating the WTO\u2019s  Agreement on Trade-Related Aspects of Intellectual Property (TRIPS),  which came into force in 1995 and broadly governs the multilateral  protection of IPR. TRIPS established new or improved standards of  protection in various areas of intellectual property and provides for  enforcement measures. Most of the U.S. government\u2019s IPR-specific  bilateral agreements and understandings were signed prior to the  implementation of TRIPS or before the other country involved in each  agreement joined, or acceded to,",
      " the WTO and was thus bound by TRIPS  commitments. As a result, according to a USTR official, some U.S. bilateral  agreements have become less relevant since TRIPS was implemented. One of USTR\u2019s priorities in recent years has been negotiating free trade  agreements (FTAs). Since 2000, USTR has completed negotiations for FTAs  with Australia, Bahrain, Central America, Chile, Jordan, Morocco, and  Singapore. According to officials at USTR, these agreements offer  protection beyond that required in TRIPS, including, for example,  adherence to new WIPO Internet treaties, a longer minimum time period  for copyright protection,",
      " additional penalties for circumventing  technological measures controlling access to copyrighted materials,  transparent procedures for protection of trademarks, stronger protection  for well-known marks, patent protection for plants and animals, protection  against arbitrary revocation of patents, new provisions dealing with  domain name disputes, and increased enforcement measures. A formal  private sector advisory committee that advises the U.S. government on IPR  issues has provided feedback to the U.S. government on free-trade  agreement negotiations, including reports on the impact of free-trade  agreements on IPR industries in the United States. U.S. Government Participates in  International Organizations That  Address IPR The U.S.",
      " government is actively involved in the activities of the WTO,  WIPO, and WCO that address IPR issues. The U.S. government participates  in the WTO primarily through the efforts of the USTR offices in  Washington, D.C., and Geneva and participates in WIPO activities through  the Department of State\u2019s Mission to the United Nations in Geneva and  through the Copyright Office and the USPTO. The Department of  Homeland Security (DHS) works with the WCO on border enforcement  issues. The WTO, an international organization with 147 member states, is  involved with IPR primarily through its administration of TRIPS.",
      " In  addition to bringing formal TRIPS disputes to the WTO (discussed in the  following section on strengthened foreign IPR laws), the U.S. government  participates in the WTO\u2019s TRIPS Council. The council, which is comprised  of all WTO members, is responsible for monitoring the operation of the  TRIPS agreement and can be used by members as a forum for mutual  consultation about TRIPS implementation. Recently the council has  addressed issues such as TRIPS and public health. A WTO IPR official  stated that the U.S. government is the most active \u201cpro-IPR\u201d delegate  during council activities. The U.S.",
      " government is also a major contributor  to reviews of WTO members\u2019 overall country trade policies; these reviews  are intended to facilitate the smooth functioning of the multilateral trading  system by enhancing the transparency of members\u2019 trade policies. All  WTO member countries are reviewed, and the frequency of each country\u2019s  review varies according to its share of world trade. According to a USTR  official in Geneva, IPR is often a central topic of discussion during the trade  policy reviews, and the U.S. government poses questions regarding a  country\u2019s compliance with TRIPS when relevant. The United States also  provides input as countries take steps to accede to the WTO,",
      " and,  according to the USTR official, IPR is always a primary issue during this  process. As of June 2004, 26 countries were working toward WTO  accession. The Department of State, the Copyright Office, and USPTO actively  participate in the activities of WIPO, a specialized United Nations agency  with 180 member states that promotes the use and protection of  intellectual property. Of particular note, WIPO is responsible for the  creation of two \u201cInternet treaties\u201d that entered into force in 2002. In  addition, WIPO administers the 1970 Patent Cooperation Treaty (PCT),  which makes it possible to seek patent protection for an invention  simultaneously in each of a large number of countries by filing an  \u201cinternational\u201d patent application.",
      " According to a WIPO Vice Director  General, the State Department\u2019s U.S. Mission in Geneva and USPTO work  closely with WIPO, and the U.S. government has actively participated in  WIPO activities and monitored the use of WIPO\u2019s budget. The Copyright  Office also participates in various activities of the WIPO General Assembly  and WIPO committees and groups, including the WIPO Standing  Committee on Copyright and Related Rights. USPTO has participated in  WIPO efforts such as the negotiation of the Internet treaties (the Copyright  Office was also involved in this effort) and also conducts joint USPTO-",
      " WIPO training events. In addition, DHS works with the WCO regarding IPR protection. DHS  participates in the WCO\u2019s IPR Strategic Group, which was developed as a  joint venture with international business sponsors to help member customs  administrations to improve the efficiency and effectiveness of their IPR  border enforcement programs. The IPR Strategic Group meets quarterly to  coordinate its activities, discuss current issues on IPR border enforcement,  and advise member customs administrations regarding implementation of  border measures under TRIPS. Further, a DHS official emphasized that  DHS has been involved in drafting WCO model IPR legislation and strategic  plans geared towards global IPR protection and otherwise helping foreign  countries develop the tools necessary for effective border enforcement  programs.",
      " U.S. Officials Undertake  Diplomatic Efforts to Protect  Intellectual Property In countries where IPR problems persist, U.S. government officials  maintain a regular dialogue with foreign government representatives. In  addition to the bilateral discussions that are held as a result of the Special  301 process and other specific initiatives, U.S. officials address IPR as part  of regular bilateral relations. We also noted that U.S. government officials  at U.S. embassies overseas take the initiative, in coordination with U.S.  agencies in Washington, D.C., to pursue IPR with foreign officials. For  example, according to officials at the U.S.",
      " Embassy in Moscow, the  economic section holds interagency IPR coordination meetings and has  met regularly with the Russian ministry responsible for IPR issues to  discuss U.S. concerns. In Ukraine, State Department officials told us that  they communicate regularly with the Ukraine government as part of a  dialogue regarding the actions needed for the removal of Special 301  sanctions. U.S. embassies also undertake various public awareness  activities and campaigns aimed at increasing support for intellectual  property in the general public as well as among specific populations, such  as law enforcement personnel, in foreign countries. Further, staff from  the Departments of State and Commerce at U.S.",
      " embassies interact with  U.S. companies overseas and work to assist them with commercial  problems, including IPR concerns, and have at times raised specific  industry concerns with foreign officials. Finally, a Justice official told us  that during the past 2 years, Justice attorneys engaged high-level law  enforcement officials in China, Brazil, and Poland in an effort to bolster  coordination on cross-border IPR cases. Diplomatic efforts addressing IPR have also included actions by senior U.S.  government officials. For example, a senior official at the Commerce  Department met in 2004 with the Brazilian minister responsible for  industrial property issues,",
      " such as patents and trademarks, to discuss  collaboration and technical assistance opportunities. In China, the U.S.  Ambassador places a great emphasis on IPR and has organized an  interagency task force that will work to implement an IPR Action Plan. In  addition, presidential-level communication regarding IPR has occurred  with some countries. For instance, according to Department of State  sources, the Presidents of the United States and Russia discussed IPR,  among other issues, when they met in September 2003. Further, USTR  officials told us that the Presidents of the United States and Paraguay had  IPR as an agenda item when they met in the fall of 2003.",
      " Most Agencies Conduct IPR  Training and Assistance  Activities Most of the agencies involved in efforts to promote or protect IPR overseas  engage in some training or technical assistance activities. Key activities to  develop and promote enhanced IPR protection in foreign countries are  undertaken by the Departments of Commerce, Homeland Security, Justice,  and State; the FBI; USPTO; the Copyright Office; and USAID. These  agencies also participate in an IPR Training Coordination Group. Training events sponsored by U.S. agencies to promote the enforcement of  intellectual property rights have included enforcement programs for  foreign police and customs officials, workshops on legal reform,",
      " and joint  government-industry events. According to a State Department official, U.S.  government agencies, including USPTO, the Department of Commerce\u2019s  Commercial Law Development Program, the Departments of Justice and  Homeland Security have conducted intellectual property training for a  number of countries concerning bilateral and multilateral intellectual  property commitments, including enforcement, during the past few years.  For example, intellectual property training has been conducted by a  number of agencies over the last year in Poland, China, Morocco, Italy,  Jordan, Turkey, and Mexico. We attended a joint USPTO-WIPO training  event in October 2003 in Washington,",
      " D.C., that covered U.S. and WTO  patent, copyright, and trademark laws and enforcement. About 35  participants from numerous countries, ranging from supreme court judges  to members of national police forces, attended the event. An official at the  State Department observed that the Special 301 report is an important  factor in determining training priorities. Other agency officials noted  additional factors determining training priorities, including embassy input,  cost, and requirements of trade and investment agreements. Although  regularly sponsored by a single agency, individual training events often  involve participants from other agencies and the private sector. In addition to sponsoring seminars and short-term programs,",
      " agencies  sponsor longer-term programs for developing improved intellectual  property protection in other countries. For example, USAID funded two  multiyear programs, the first of which began in 1996, aimed at improving  the intellectual property regime in Egypt through public awareness  campaigns, training, and technical assistance in developing intellectual  property legislation and establishing a modern patent and trademark office.  USAID has also sponsored longer-term bilateral programs that are aimed at  promoting biotechnology and address relevant IPR issues such as plant  variety protection. Private sector officials in Brazil told us that they  believed the longer-term programs sponsored by USAID elsewhere would  be helpful in Brazil.",
      " In addition to USAID, other U.S. agencies that sponsor  training also provide other types of technical assistance in support of  intellectual property rights. For example, the Copyright Office and USPTO  revise and provide comments on proposed IPR legislation. Training and  technical assistance activities that focus more broadly on institution  building, biotechnology, organized crime, and other law enforcement issues  may also support improved intellectual property enforcement. Select Agencies Engage in  U.S. IPR Law Enforcement  Efforts A small number of agencies are involved in enforcing U.S. intellectual  property laws. Working in an environment where counterterrorism is the  central priority,",
      " the FBI and the Departments of Justice and Homeland  Security take actions that include engaging in multicountry investigations  involving intellectual property violations and seizing goods that violate  intellectual property rights at U.S. ports of entry. In addition, the USITC is  responsible for some enforcement activities involving patents and  trademarks. U.S. Agencies Investigate IPR  Violations Although officials at the FBI, DHS, and Justice have emphasized that  counterterrorism is the overriding law enforcement priority, these agencies  nonetheless undertake IPR investigations that involve foreign connections.  For example, the Department of Justice has an office that directly  addresses international IPR problems.",
      " Justice has been involved with  international investigation and prosecution efforts and, according to a  Justice official, has become more aggressive in recent years. For example,  Justice and the FBI recently coordinated an undercover IPR investigation,  with the involvement of foreign law enforcement agencies. The  investigation focused on individuals and organizations, known as \u201cwarez\u201d  release groups, that specialize in the Internet distribution of pirated  materials. In April 2004, these investigations resulted in 120 simultaneous  searches worldwide (80 in the United States) by law enforcement entities  from 10 foreign countries and the United States in an effort known as  \u201cOperation Fastlink.\u201d Law enforcement officials told us that IPR-related investigations with an  international component can be instigated by,",
      " for example, industry  complaints to agency headquarters or field offices. Investigations are  pursued if criminal activity is suspected. U.S. officials noted that foreign  law enforcement action may be encouraged by the U.S. government if an  investigation results in evidence demonstrating that someone has violated  U.S. law and if evidence in furtherance of the crime is located overseas. A  Justice official added that international investigations are pursued when  there is reason to believe that foreign authorities will take action and that  additional impact, such as raising public awareness about IPR crimes, can  be achieved. Evidence can be developed through investigative cooperation  between U.S.",
      " and foreign law enforcement. In addition, the Justice official  emphasized that the department also supports prosecutorial efforts in  foreign countries. International cooperation between the United States and  other countries can be facilitated through Mutual Legal Assistance Treaties  (MLATs), which are designed to facilitate the exchange of information and  evidence for use in criminal investigations and prosecutions. MLATs  include the power to summon witnesses, compel production of documents  and other real evidence, issue search warrants, and serve process. A  Justice official emphasized that informal international cooperation can also  be extremely productive. Although investigations can result in international actions such as those  cited above,",
      " law enforcement officials from the FBI told us that they  cannot determine the number of past or present IPR cases with an  international component because they do not track or categorize cases  according to this factor. DHS officials emphasized that a key component of  their enforcement authority is a \u201cborder nexus.\u201d  Investigations have an  international component established when counterfeit goods are brought  into the United States, and DHS officials noted that it is a rare exception  when DHS IPR investigations do not have an international component.  However, DHS does not track cases by a specific foreign connection. The  overall number of IPR-oriented investigations that have been pursued by  foreign authorities as a result of DHS efforts is unknown.",
      " Department of Homeland  Security Seizes Items Violating  IPR DHS seizures of goods that violated IPR totaled more than $90 million in  fiscal year 2003. While the types of imported products seized have varied  little from year to year (in recent years, products such as cigarettes,  wearing apparel, watches, and media products\u2014CDs, DVDs, and tapes\u2014 have been key products), the value of seizures for some of these products  has varied greatly. For example, in fiscal year 1999, the value of seized  media products\u2014for example, CDs, DVDs, and tapes\u2014was, at nearly $40  million,",
      " notably higher than the value of any other product; by 2003, the  value of seized counterfeit cigarettes, at more than $40 million, was by far  the highest, while media products accounted for less than $10 million in  seizures. Seizures of IPR-infringing goods have involved imports primarily  from Asia. In fiscal year 2003, goods from China accounted for about two- thirds of the value of all IPR seizures, many of them shipments of  cigarettes. Other seized goods from Asia that year originated in Hong  Kong and Korea. DHS has highlighted particular recent seizures, such as an  estimated $500,",
      "000 in electrically heated coffee mugs bearing counterfeit  Underwriters Laboratories (UL) labels and an estimated $644,000 in pirated  video game CDs. A DHS official pointed out that providing protection  against IPR-infringing imported goods for some U.S. companies\u2014 entertainment companies in particular\u2014can be difficult, because  companies often fail to record their trademarks and copyrights with DHS. U.S. International Trade  Commission Conducts Section  337 Investigations The USITC investigates and adjudicates Section 337 cases, which involve  allegations of certain unfair practices in import trade, generally related to  patent or registered trademark infringement.",
      "  Although the cases must  involve merchandise originating overseas, both complainants and  respondents can be from any country as long as the complainant owns and  exploits an intellectual property right in the United States. U.S.  administrative law judges are responsible for hearing cases and issuing an  initial decision, which is then reviewed and issued, modified, or rejected by  the USITC. If a violation has occurred, remedies include directing DHS  officials to exclude infringing articles from entering the United States. The  USITC may issue cease-and-desist orders to the violating parties. Violations  of cease-and-desist orders can result in civil penalties.",
      " As of June 2004,  exclusion orders remained in effect for 51 concluded Section 337  investigations, excluding from U.S. entry goods such as certain  toothbrushes, memory chips, and video game accessories that were found  to violate a U.S. intellectual property right. U.S. Efforts Have  Contributed to  Improved Foreign IPR  Laws, but Enforcement  Overseas Remains  Weak; Industry  Supports U.S. Efforts U.S. efforts have contributed to strengthened foreign IPR laws and  international IPR obligations, and, while enforcement overseas remains  weak, U.S. industry groups are generally supportive of U.S.",
      " efforts. U.S.  actions are viewed as aggressive, and Special 301 is characterized as a  useful tool in encouraging improvements overseas. However, the specific  impact of many U.S. activities, such as diplomatic efforts or training and  technical assistance, can be difficult to measure. Further, despite the  progress that has been achieved, enforcement of IPR in many countries  remains weak and, as a result, has become a U.S. government priority.  Although U.S. industries recognize that problems remain, they  acknowledge the many actions taken by the U.S. government, and industry  representatives that we contacted in the United States and abroad were  generally supportive of the U.S.",
      " efforts to pursue intellectual property  protection overseas. U.S. Efforts Have  Contributed to  Strengthened Foreign IPR  Laws Several representatives of major intellectual property industry associations  stated that the United States is the most aggressive promoter of intellectual  property rights in the world; an IPR official at the WTO concurred with this  assessment, as did foreign officials. The efforts of U.S. agencies have  contributed to the establishment of strengthened intellectual property  legislation in many foreign countries. The United States has realized progress through bilateral efforts. For  example, the Special 301 review has been cited by industry as facilitating  the introduction or strengthening of IPR laws around the world over the  past 15 years.",
      " In the 2004 Special 301 report, USTR noted that Poland and  the Philippines had recently passed optical disc legislation aimed at  combating optical media piracy; the 2003 Special 301 report had cited both  countries for a lack of such legislation. Special 301 is cited by USTR and  industry as an effective tool in alerting a country that it has trade problems  with the United States, which is a key trading partner for numerous  nations. Industry and USTR officials pointed out that countries are eager to  avoid being publicly classified as problem nations. Further, according to  U.S. government officials, incremental \u201cinvisible\u201d changes take place  behind the scenes as countries take actions to improve their standing on  the Special 301 listing prior to its publication.",
      " USTR notes that legislative  improvements have been widespread but also cites other  accomplishments, such as raids against pirates and counterfeiters in  Poland and Taiwan, resulting from U.S. attention and the Special 301  process. However, Special 301 can have an alienating effect when countries believe  they have made substantial improvements in their IPR regimes but the  report are still cites them as key problem countries. According to some  officials we spoke with in Brazil and Ukraine, this happened in their  countries. For example, although Ukrainian government officials we spoke  with stated their desire to further respond to U.S. concerns, they expressed  the view that the sanctions have run their course.",
      " They also said that the  Ukrainian government cannot understand why Ukraine was targeted for  sanctions while other countries where U.S. industry losses are higher have  not been targeted. A USTR official responsible for IPR issues informed us  that Ukraine was sanctioned because of IPR problems that the U.S.  government views as serious. Additional bilateral measures are cited as successful in encouraging new  improvements overseas in the framework for IPR protection. For example,  following a 1998 U.S. executive order directing U.S. government agencies  to ensure the legitimate use of software, USTR then addressed this issue  with foreign governments and has reportedly achieved progress in  addressing this violation of IPR.",
      " According to USTR, more than 20 foreign  governments have issued decrees mandating that government ministries  use only authorized software. As another example, the negotiation of FTAs  has been cited by government and IPR industry officials as a useful tool,  particularly as such agreements require IPR protections, including  protection for digital products, beyond what is required in TRIPS. However,  because most FTAs have been negotiated within the past 5 years, their long- term impact remains to be seen. U.S. efforts through multilateral forums have also had positive effects. For  example, as a result of TRIPS obligations\u2014which the U.S.",
      " government was  instrumental in negotiating\u2014many developing countries have improved  their statutory systems for the protection of intellectual property. For  example, China revised its intellectual property laws and regulations to  meet its WTO TRIPS commitments. Further, in Ukraine and Russia,  government officials told us that improvements to their IPR legislation was  part of a movement to accede to the WTO. U.S. agencies have assisted  other developing countries in drafting TRIPS-compliant laws. In addition, a WTO member country can bring disputes over TRIPS  compliance to the WTO through that organization\u2019s dispute settlement  mechanism. The U.S. government has exercised this right and brought  more TRIPS cases to the WTO for resolution than any other WTO member.",
      "  Since 1996, the United States has brought a total of 12 TRIPS-related cases  against 11 countries and the European Community (EC) to the WTO (see  app. III for a listing of these cases). Of these cases, 8 were resolved before  going through the entire dispute settlement process by mutually agreed  solutions between the parties\u2014the preferred outcome, according to a  USTR official. In nearly all of these cases, U.S. concerns were addressed via  changes in laws or regulations by the other party. Only 2 have resulted in  the issuance of a final decision, or panel report, both of which were  favorable rulings for the United States.",
      " In a case involving Argentina,  consultations between the countries are ongoing and the case has been  partially settled, and another case regarding an EC regulation protecting  geographical indications is currently in panel proceedings. Impact of Many Activities  Can Be Difficult to Measure Despite the fact that persistent U.S. efforts have contributed to positive  developments, it can be difficult to precisely measure the impact of specific  U.S. activities such as policy efforts or training assistance programs. U.S.  activities are not conducted in isolation, but are part of the spectrum of  political considerations in a foreign country. Although regular efforts such  as the annual Special 301 review or diplomatic contact may create  incentives for countries to improve intellectual property protection,",
      " other  factors, such as countries\u2019 own political interests, may contribute to or  hinder improvements. Therefore, it can be difficult to measure changes  resulting from U.S. efforts alone. For example, China revised its intellectual  property laws as a result of its accession to WTO. Although China had for  some time been under pressure from the United States to improve its  intellectual property protection, revisions to its intellectual property  legislation were also called for by its newly acquired WTO commitments.  Thus, it is nearly impossible to attribute any of these developments to  particular factors or to precisely measure the influence of individual  factors on China\u2019s decision to reform.",
      " Further, officials at the U.S. Embassy  in Moscow have emphasized that the regular U.S. focus on IPR issues has  raised the profile of the issue with the Russian government\u2014a positive  development. However, once again, it is difficult to determine the specific  current and future effects of this development on intellectual property  protection. Nonetheless, despite these limitations, several agency officials  we spoke with said that these activities are important and contribute to  incremental changes in IPR protection (such as legislative improvements to  Russia\u2019s copyright law that were enacted in July 2004). A Commerce  official also noted that regular contacts by U.S.",
      " government officials with  their foreign counterparts have apparently helped some individual U.S.  companies seeking to defend patent or trademark rights overseas by  reminding foreign officials that their administrative proceedings for such  protection are under U.S. scrutiny. Regarding training activities, officials at agencies that provide regular  training reported using post-training questionnaires by attendees to  evaluate the trainings, but several noted that beyond these efforts,  assessing the impact of trainings is challenging. An official at USPTO stated  that although he does not believe it is possible to quantify fully the impact  of USPTO training programs, accumulated anecdotal evidence from  embassies and the private sector has led the office to believe that the  activities are useful and have resulted in improvements in IPR  enforcement.",
      " USPTO recently began sending impact evaluation  questionnaires to training attendees 1 year after the training, to try to  gather more information on long-term impact. However, a low response  rate has thus far limited the effectiveness of this effort. Officials from the  Departments of State and Commerce also pointed out anecdotal evidence  that training and technical assistance activities are having a positive impact  on the protection of intellectual property overseas. Although some industry  officials raised criticisms or offered suggestions for improving training,  including using technology to offer more long-distance training and  encouraging greater USAID involvement in coordination efforts, many  were supportive of U.S.",
      " training efforts. Enforcement Overseas  Remains Weak Despite improvements in intellectual property laws, the enforcement of  intellectual property rights remains weak in many countries, and U.S.  government and industry sources note that improving enforcement  overseas is now a key priority. USTR\u2019s most recent Special 301 report states  that \u201calthough several countries have taken positive steps to improve their  IPR regimes, the lack of IPR protection and enforcement continues to be a  global problem.\u201d  For example, although the Chinese government has  improved its statutory IPR regime, USTR remains concerned about  enforcement in that country. According to USTR, counterfeiting and piracy  remain rampant in China and increasing amounts of counterfeit and pirated  products are being exported from China.",
      " USTR\u2019s 2004 Special 301 report  states that \u201cddressing weak IPR protection and enforcement in China is  one of the Administration\u2019s top priorities.\u201d  Further, Brazil has adopted  modern copyright legislation that appears to be generally consistent with  TRIPS, but it has not undertaken adequate enforcement actions, according  to USTR\u2019s 2003 Special 301 Report. In addition, as noted above, although  Ukraine has shut down offending domestic optical media production  facilities, pirated products continue to pervade Ukraine, and, according to  USTR\u2019s 2004 Special 301 Report, Ukraine is also a major trans-",
      "shipment  point and storage location for illegal optical media produced in Russia and  elsewhere as a result of weak border enforcement efforts (see fig. 1). An  industry official pointed out that addressing foreign enforcement problems  is a difficult issue for the U.S. government. Although U.S. law enforcement does undertake international cooperative  activities to enforce intellectual property rights overseas, executing these  efforts can prove difficult. For example, according to DHS and Justice  officials, U.S. efforts to investigate IPR violations overseas are complicated  by a lack of jurisdiction as well as by the fact that U.S. officials must  convince foreign officials to take action.",
      " Further, a DHS official noted that  in some cases, activities defined as criminal in the United States are not  viewed as an infringement by other countries, and U.S. law enforcement  agencies can therefore do nothing. In particular, this official cited China as  a country that has not cooperated in investigating IPR violations. However,  according to DHS, recently the Chinese government assisted DHS in an  undercover IPR criminal investigation (targeting a major international  counterfeiting network that distributed counterfeit motion pictures  worldwide) that resulted in multiple arrests and seizures. While less constrained than law enforcement, training and technical  assistance activities may also be unable to achieve the desired  improvements in IPR enforcement in some cases,",
      " even when considerable  U.S. assistance is provided. For example, despite USAID\u2019s long-term  commitment to strengthening IPR protection in Egypt with training and  technical assistance programs, Egypt was elevated to the Priority Watch  List in the 2004 Special 301 report and IPR enforcement problems clearly  persist. Industry Generally Supports  U.S. Efforts, Despite  Worsening Problems in  Some Areas Despite the weakness of IPR enforcement in many countries, industry  groups representing intellectual property concerns for U.S. industries we  contacted were generally supportive of U.S. government efforts to protect  U.S. intellectual property overseas.",
      " Numerous industry representatives in  the U.S. and overseas expressed satisfaction with a number of U.S.  activities as well as with their interactions and collaborations with U.S.  agencies and embassies in support of IPR. Industry representatives have  been particularly supportive of the Special 301 process, and many credited  it for IPR improvements worldwide. According to an official from a key  industry association, Special 301 \u201cis a great statutory tool, it leads to strong  and effective interagency coordination, and it gets results.\u201d  Industry  associations overseas and in the U.S. support the Special 301 process with  information based on their experiences in foreign countries.",
      " An  entertainment software industry official stated that the U.S. government  has \u201cconsistently demonstrated their strong and continuing commitment to  creators\u2026pressing for the highest attainable standards of protection for  intellectual property rights\u2026.One especially valuable tool has been the  Special 301 review process.\u201d  Other representatives have advocated  increased use of leverage provided by trade preference programs,  particularly the GSP program. Industry association officials in the United States and private sector  officials in Brazil, Russia, and Ukraine also expressed support for U.S. IPR  training activities, despite limited evidence of long-term impact. Industry  associations regularly collaborate with U.S.",
      " agencies to sponsor and  participate in training events for foreign officials. A number of government  and law enforcement officials in our case study countries commented that  training and seminars sponsored by the U.S. government were valuable as  forums for learning about IPR. Others, including private sector officials,  commented on the importance of training as an opportunity for networking  with other officials and industry representatives concerned with IPR  enforcement. Nonetheless, some industry officials acknowledged that U.S.  actions cannot always overcome challenges presented by political and  economic factors in other countries. Industry support occurs in an environment where, despite improvements  such as strengthened foreign IPR legislation,",
      " the situation may be  worsening overall for some intellectual property sectors. For example,  according to copyright industry estimates, losses due to piracy grew  markedly in recent years. The entertainment and business software  sectors, for example, which are very supportive of USTR and other  agencies, face an environment where their optical media products are  increasingly easy to reproduce, and digitized products can be distributed  around the world quickly and easily via the Internet. According to an  intellectual property association representative, counterfeiting trademarks  has also become more pervasive in recent years. Counterfeiting affects  more than just luxury goods; it also affects various industrial goods.",
      " Several Mechanisms  Coordinate IPR  Efforts, but Their  Usefulness Varies Several interagency mechanisms exist to coordinate overseas intellectual  property policy initiatives, development and assistance activities, and law  enforcement efforts, although these mechanisms\u2019 level of activity and  usefulness varies. The mechanisms include interagency coordination on  trade (IPR) issues; the IPR Training Coordination Group, which maintains a  database of training activities; the National Intellectual Property Law  Enforcement Coordination Council; and the National IPR Coordination  Center. Apart from formal coordination bodies, regular, informal  communication and coordination regarding intellectual property issues  also occurs among policy agencies in the United States and in overseas  embassies and is viewed as important to the coordination process.",
      " Formal Interagency  Coordination Mechanism  Viewed as Working Well According to government and industry officials, an interagency trade policy  mechanism established by Congress has operated effectively in reviewing  IPR issues (see fig. 2). In 1962, the Congress established the mechanism to  assist USTR in developing policy on trade and trade-related investment,  and the annual Special 301 review is conducted with this tool. Three tiers  of committees constitute the principal mechanism for developing and  coordinating U.S. government positions on international trade, including  IPR. The Trade Policy Review Group (TPRG) and the Trade Policy Staff  Committee (TPSC), administered and chaired by USTR,",
      " are the subcabinet  interagency trade policy coordination groups that participate in trade  policy development. More than 80 working-level subcommittees are  responsible for providing specialized support for the TPSC. One of the specialized subcommittees is central to conducting the annual  Special 301 review and determining the results of the review. During the  2004 review, which began early in the year, the Special 301 subcommittee  met formally seven times, according to a USTR official. The  subcommittee reviewed responses to a Federal Register request for  information about intellectual property problems around the world; it also  reviewed responses to a cable sent to every U.S.",
      " embassy soliciting specific  information on IPR issues. IPR industry associations provided lengthy,  detailed submissions to the U.S. government during the Special 301 review;  such submissions identify IPR problems in countries around the world and  are an important component in making a determination as to which  countries will be cited in the final report. After reaching its own decisions  on country placement, the subcommittee submitted its proposal to the  Trade Policy Staff Committee. The TPSC met twice and submitted its  recommendations to the TPRG for final approval. The TPRG reached a  final decision via e-mail, and the results of this decision were announced  with the publication of the Special 301 report on May 3,",
      " 2004. The entire  process for 2004 is considered typical of how the annual process is usually  conducted. In addition, this subcommittee can meet at other times to  address IPR issues as appropriate. According to U.S. government and industry officials, this interagency  process is rigorous and effective. A USTR official stated that the Special  301 subcommittee is very active, and subcommittee leadership  demonstrates a willingness to revisit issues raised by other agencies and  reconsider positions. A Commerce official told us that the Special 301  review is one of the best tools for interagency coordination in the  government and that the review involves a \u201cphenomenal\u201d amount of  communication.",
      " A Copyright Office official noted that coordination during  the review is frequent and effective. A representative for copyright  industries also told us that the process works well and is a solid  interagency effort. IPR Training Coordination  Group Facilitates  Collaboration, though  Database Is Incomplete The IPR Training Coordination Group, intended to inform its participants  about IPR training activities and facilitate collaboration, developed a  database to record and track training events, but we found that the  database was incomplete. This voluntary, working-level group comprises  representatives of U.S. agencies and industry associations involved in IPR  programs and training and technical assistance efforts overseas or for  foreign officials.",
      " Meetings are held approximately every 4 to 6 weeks and  are well attended by government and private sector representatives. The  State Department leads the group and supplies members with agendas and  meeting minutes. Training Coordination Group meetings in 2003 and 2004  have included discussions on training \u201cbest practices,\u201d responding to  country requests for assistance, and improving IPR awareness among  embassy staff. According to several agency and private sector participants,  the group is a useful mechanism that keeps participants informed of the  IPR activities of other agencies or associations and provides a forum for  coordination. Since it does not independently control budgetary resources,",
      " the group is  not responsible for sponsoring or evaluating specific U.S. government  training events. One agency official noted that, partly owing to the lack of  funding coordination, the training group serves more as a forum to inform  others regarding already-developed training plans than as a group to  actively coordinate training activities across agencies. Officials at the  Department of Commerce\u2019s Commercial Law Development Program and  USPTO commented that available funds, more than actual country needs,  often determine what training they are able to offer. A private sector  official also voiced this concern, and several agency and industry officials  commented that more training opportunities were needed.",
      " A Justice  official also noted that if there were more active interagency consultations,  training could be better targeted to countries that need criminal  enforcement training. The Training Coordination Group helped develop a public training  database, which it uses as a resource to identify planned activities and  track past efforts. However, although the database has improved in recent  years to include more training events and better information, it remains  incomplete. Officials from the Copyright Office and USPTO stated that the  database should contain records of all of their training efforts, but officials  from other agencies, including the Departments of Commerce, State, and  Justice, and the FBI,",
      " acknowledged that it might not record all the training  events they have conducted. Although the group\u2019s meetings help to keep  the database updated by identifying upcoming training offered by members  that have not been entered into the database, training activities that are not  raised at the meeting or that are sponsored by embassies or an agency not  in attendance may be overlooked. In addition, USAID submits training  information only once per year at the conclusion of its own data-gathering  exercise. Since USAID is a major sponsor of training activities\u2014in 2002,  according to the database, USAID sponsored or cosponsored nearly one- third of the total training events\u2014the lack of timely information is notable.",
      "  Several members expressed frustration that USAID does not contribute to  the database regularly and inform the group about training occurring  through its missions. USAID officials noted that the decentralization of  their agency makes it difficult for them to address these concerns, because  individual missions plan and implement training and technical assistance  activities independently. Council to Coordinate IPR  Enforcement Has Had Little  Impact The National Intellectual Property Law Enforcement Coordination Council  (NIPLECC), created by the Congress in 1999 to coordinate domestic and  international intellectual property law enforcement among U.S. federal and  foreign entities, seems to have had little impact. NIPLECC consists of (1)",
      "  the Under Secretary of Commerce for Intellectual Property and Director of  the United States Patent and Trademark Office; (2) the Assistant Attorney  General, Criminal Division; (3) the Under Secretary of State for Economic  and Agricultural Affairs; (4) the Deputy United States Trade  Representative; (5) the Commissioner of Customs; and (6) the Under  Secretary of Commerce for International Trade. NIPLECC is also required  to consult with the Register of Copyrights on law enforcement matters  relating to copyright and related rights and matters. NIPLECC\u2019s authorizing  legislation did not include the FBI as a member of NIPLECC,",
      " despite its  pivotal role in law enforcement. However, according to representatives of  the FBI, USPTO, and Justice, the FBI should be a member. NIPLECC,  which has no independent staff or budget, is cochaired by USPTO and  Justice. In the council\u2019s nearly 4 years of existence, its primary output has  been three annual reports to the Congress, which are required by statute. In its first year, according to the first annual report, NIPLECC met four  times to begin shaping its agenda. It also consulted with industry and  accepted written comments from the public related to what matters the  council should address and how it should structure council-industry  cooperation.",
      " It drafted a working paper detailing draft goals and proposed  activities for the council. Goals and activities identified in the first report  were \u201cdraft\u201d only, because of the imminent change in administration.  Although left open for further consideration, the matters raised in this  report were not specifically addressed in any subsequent NIPLECC reports. NIPLECC\u2019s second annual report states that the council\u2019s mission includes  \u201claw enforcement liaison, training coordination, industry and other  outreach and increasing public awareness.\u201d In particular, the report says,  the council \u201cdetermined that efforts should focus on a campaign of public  awareness, at home and internationally,",
      " addressing the importance of  protecting intellectual property rights.\u201d  However, other than a one-page  executive summary of NIPLECC\u2019s basic mission, the body of the second  annual report consists entirely of individual agencies\u2019 submissions on their  activities and details no activities undertaken by the council. NIPLECC met  twice in the year between the first and second reports. The third annual report also states that \u201cefforts should focus on a campaign  of public awareness, at home and internationally, addressing the  importance of intellectual property rights.\u201d Although this is identical to  the language in the previous year\u2019s report, there is little development of the  theme,",
      " and no evidence of actual progress over the course of the previous  year. Like the previous year\u2019s report, other than a single-page executive  summary, the body of the report consists of individual agency submissions  detailing agency efforts, not the activities or intentions of the council. The  report does not provide any detail about how NIPLECC has, in its third  year, coordinated domestic and international intellectual property law  enforcement among federal and foreign entities. Under its authorizing legislation, NIPLECC has a broad mandate.  According to interviews with industry officials and officials from NIPLECC  member agencies, and as evidenced by its own legislation and reports,",
      "  NIPLECC continues to struggle to define its purpose and has as yet had  little discernable impact. Indeed, officials from more than half of the  member agencies offered criticisms of the NIPLECC, remarking that it is  unfocused, ineffective, and \u201cunwieldy.\u201d  In official comments to the  council\u2019s 2003 annual report, major IPR industry associations expressed a  sense that NIPLECC is not undertaking any independent activities or  effecting any impact. One industry association representative stated that  there is a need for law enforcement to be made more central to U.S. IPR  efforts and said that although he believes the council was created to deal  with this issue,",
      " it has \u201ctotally failed.\u201d  The lack of communication regarding  enforcement results in part from complications such as concerns regarding  the sharing of sensitive law enforcement information and from the different  missions of the various agencies involved in intellectual property actions  overseas. According to an official from USPTO, NIPLECC is hampered  primarily by its lack of independent staff and funding. He noted, for  example, a proposed NIPLECC initiative for a domestic and international  public awareness campaign that has not been implemented owing to  insufficient funds. According to a USTR official, NIPLECC needs to define a  clear role in coordinating government policy.",
      " A Justice official stressed  that, when considering coordination, it is important to avoid creating an  additional layer of bureaucracy that may detract from efforts devoted to  each agency\u2019s primary mission. This official also commented that while  NIPLECC\u2019s stated purpose of enhancing interagency enforcement  coordination has not been achieved, the shortcomings of NIPLECC should  not suggest an absence of effective interagency coordination elsewhere. Despite NIPLECC\u2019s difficulties thus far, we heard some positive comments  regarding this group. For example, an official from USPTO noted that the  IPR training database web site resulted from NIPLECC efforts. Further,",
      " an  official from the State Department commented that NIPLECC has had  some \u201ctrickle-down\u201d effects, such as helping to prioritize the funding and  development of the intellectual property database at the State Department.  Although NIPLECC principals meet infrequently and NIPLECC has  undertaken few concrete activities, this official noted that NIPLECC is the  only forum for bringing enforcement, policy, and foreign affairs agencies  together at a high level to discuss intellectual property issues. A USPTO  official stated that NIPLECC has potential, but needs to be \u201cenergized.\u201d National IPR Coordination  Center Is Not Widely Used  by Industry The National IPR Coordination Center (the IPR Center)",
      " in Washington,  D.C., a joint effort between DHS and the FBI, began limited operations in  2000. According to a DHS official, the coordination between DHS, the FBI,  and industry and trade associations makes the IPR Center unique. The IPR  Center is intended to serve as a focal point for the collection of intelligence  involving copyright and trademark infringement, signal theft, and theft of  trade secrets. Center staff analyze intelligence that is collected through  industry referrals of complaints (allegations of IPR infringements) and, if  criminal activity is suspected, provide the information for use by FBI and  DHS field components.",
      " The FBI at the IPR Center holds quarterly meetings  with 11 priority industry groups to discuss pressing issues on violations  within the specific jurisdiction of the FBI. Since its creation, the IPR Center  has received 300 to 400 referrals, according to an IPR Center official. The  center is also involved in training and outreach activities. For example,  according to IPR Center staff, between May 2003 and April 2004, personnel  from the center participated in more than 16 IPR training seminars and  conducted 22 outreach events. The IPR Center is not widely used by industry. An FBI official associated  with the IPR Center estimated that about 10 percent of all FBI industry  referrals come through the center rather than going directly to FBI field  offices.",
      " DHS officials noted that \u201cindustry is not knocking the door down\u201d  and that the IPR Center is perceived as underutilized. An FBI official noted  that the IPR Center is functional but that it generally provides training,  outreach, and intelligence to the field rather than serving as a primary  clearinghouse for referral collection and review. The IPR Center got off to a  slow start partly because, according to an FBI official, after the events of  September 11, 2001, many IPR Center staff were reassigned, and the center  did not become operational until 2002. The IPR Center is authorized for 24  total staff (16 from DHS and 8 from the FBI); as of July 2004,",
      " 20 staff (13  DHS, 7 FBI) were \u201con board\u201d at the center, according to an IPR Center  official. This official noted that the center\u2019s use has been limited by the fact  that big companies have their own investigative resources, and not all small  companies are familiar with the IPR Center. Informal Coordination Is  Considered Important  among Policy Agencies In addition to the formal coordination efforts described, policy agency  officials noted the importance of informal but regular communication  among staff at the various agencies involved in the promotion or protection  of intellectual property overseas. Several officials at various policy- oriented agencies,",
      " such as USTR and the Department of Commerce, noted  that the intellectual property community was small and that all involved  were very familiar with the relevant policy officials at other agencies in  Washington, D.C. One U.S. government official said, \u201cNo one is shy about  picking up the phone.\u201d  Further, State Department officials at U.S.  embassies also regularly communicate with Washington, D.C. agencies  regarding IPR matters and U.S. government actions. Agency officials noted  that this type of coordination is central to pursuing U.S. intellectual  property goals overseas. Although communication between policy and law enforcement agencies  can occur through forums such as the NIPLECC,",
      " these agencies do not  share specific information about law enforcement activities systematically.  According to an FBI official, once a criminal investigation begins, case  information stays within the law enforcement agencies and is not shared. A  Justice official emphasized that criminal enforcement is fundamentally  different from the activities of policy agencies and that restrictions exist on  Justice\u2019s ability to share investigation information, even with other U.S.  agencies. Law enforcement agencies share investigation information with  other agencies on an \u201cas-needed\u201d basis, and a USTR official said that there  is no systematic means for obtaining information on law enforcement cases  with international implications. An official at USPTO commented that  coordination between policy and law enforcement agencies should be  \u201ctighter\u201d and that both policy and law enforcement could benefit from  improved communication.",
      " For example, in helping other countries draft  IPR laws, policy officials could benefit from information on potential law  enforcement obstacles identified by law enforcement officials. Officials at the Department of State and USTR identified some formal and  informal ways that law enforcement information may be incorporated into  policy discussions and activities. They noted that enforcement agencies  such as Justice and DHS participate in the formal Special 301 review and  that officials at embassies or policy agencies consult and make use of the  publicly available DHS seizure data on IPR-violating products. For  example, a USTR official told us that USTR had raised seizures at U.S.",
      "  borders in bilateral discussions with the Chinese. Discussions addressed  time-series trends, both on an absolute and percentage basis, for the overall  seizure figures available from DHS. This official noted that the agency will  generally raise seizure figures with a foreign country if that country is a  major violator, has consistently remained near the top of the list of  violators, and/or has increasingly been the source of seized goods. In  addition, a Justice official noted that the department increasingly engages  in policy activities, such as the Special 301 annual review and the  negotiation of free trade agreements, as well as training efforts, to improve  coordination between policy and law enforcement agencies and to  strengthen international IPR enforcement.",
      " U.S. Government Faces  Challenges to Further  Progress The impact of U.S. activities is challenged by numerous factors. For  example, internally, competing U.S. policy objectives can affect how much  the U.S. government can accomplish. Beyond internal factors, the  willingness of a foreign country to cooperate in improving its IPR is  affected by that country\u2019s domestic policy objectives and economic  interests, which may complement or conflict with U.S. objectives. In  addition, many economic factors, including low barriers to entering the  counterfeiting and piracy business and large price differences between  legitimate and fake goods as well as problems such as organized crime,",
      "  pose challenges to U.S. and foreign governments\u2019 efforts, even in countries  where the political will for protecting intellectual property exists. U.S. Government Faces  Internal Constraints Because intellectual property protection is one among many objectives that  the U.S. government pursues overseas, it is viewed in the context of  broader U.S. foreign policy interests where other objectives may receive a  higher priority at certain times in certain countries. Industry officials with  whom GAO met noted, for example, their belief that policy priorities  related to national security were limiting the extent to which the United  States undertook activities or applied diplomatic pressure related to IPR  issues in some countries.",
      " Officials at the Department of Justice and the FBI  also commented that counterterrorism, not IPR, is currently the key  priority for law enforcement. Further, although industry is supportive of  U.S. efforts, many industry representatives commented that U.S. agencies  need to increase the resources available to better address IPR issues  overseas. Lack of Support in Foreign  Countries Can Limit U.S.  Efforts\u2019 Impact The impact of U.S. activities is affected by a country\u2019s own domestic policy  objectives and economic interests, which may complement or conflict with  U.S. objectives. U.S. efforts are more likely to be effective in encouraging  government action or achieving impact in a foreign country if support for  intellectual property protection exists there.",
      " Groups in a foreign country  whose interests align with that of the United States can bolster U.S. efforts.  For example, combating music piracy in Brazil has gained political  attention and support because Brazil has a viable domestic music industry  and thus has domestic interests that have become victims of widespread  piracy. Further, according to a police official in Rio de Janeiro, efforts to  crack down on street vendors are motivated by the loss of tax revenues  from the informal economy. The unintended effect of these local Brazilian  efforts has been a crackdown on counterfeiting activities because the  informal economy is often involved in selling pirated and counterfeit goods  on the streets.",
      " Likewise, the Chinese government has been working with a  U.S. pharmaceutical company on medicines safety training to reduce the  amount of fake medicines produced in China (see fig. 3). However, U.S. efforts are less likely to achieve impact if no such domestic  support exists in other nations. Although U.S. options such as removing  trade preference program benefits, considering trade sanctions, or visibly  publicizing weaknesses in foreign IPR protection can provide incentives for  increased protection of IPR, such policies may not be sufficient alone to  counter existing incentives in foreign countries. In addition, officials in  some countries view providing strong intellectual property protection as an  impediment to development.",
      " A Commission on Intellectual Property Rights  (established by the British government) report points out that strong IPR  can allow foreign firms selling to developing countries to drive out  domestic competition by obtaining patent protection and to service the  market through imports rather than domestic manufacture, or that strong  intellectual property protection increases the costs of essential medicines  and agricultural inputs, affecting poor people and farmers particularly  negatively. A lack of \u201cpolitical will\u201d to enact IPR protections makes it  difficult for the U.S. government to achieve impact in locations where a  foreign government maintains such positions. Economic Factors and  Involvement of Organized  Crime Pose Additional  Challenges Many economic factors complicate and challenge U.S.",
      " and foreign  governments\u2019 efforts, even in countries where the political will for  protecting intellectual property exists. These factors include low barriers  to entering the counterfeiting and piracy business and potentially high  profits for producers. For example, one industry pointed out that it is much  more profitable to buy and resell software than to sell cocaine. In addition,  the low prices of fake products are attractive to consumers. The economic  incentives can be especially acute in countries where people have limited  income. Moreover, technological advances allowing for high-quality  inexpensive and accessible reproduction and distribution in some  industries have exacerbated the problem. Further, many government and  industry officials also believe the chance of getting caught for  counterfeiting and piracy,",
      " as well as the penalties even if caught, are too  low. For example, FBI officials pointed out that domestic enforcement of  intellectual property laws has been weak, and consequently the level of  deterrence has been inadequate. These officials said that criminal  prosecutions and serious financial penalties are necessary to deter  intellectual property violations. The increasing involvement of organized crime in the production and  distribution of pirated products further complicates enforcement efforts.  Federal and foreign law enforcement officials have linked intellectual  property crime to national and transnational organized criminal operations. According to the Secretary General of Interpol, intellectual property crime  is now dominated by criminal organizations,",
      " and law enforcement  authorities have identified some direct and some alleged links between  intellectual property crime and paramilitary and terrorist groups. Justice  Department officials noted that they are aware of the allegations linking  intellectual property crime and terrorist funding and that they are actively  exploring all potential avenues of terrorist financing, including through  intellectual property crime. However, to date, U.S. law enforcement has not  found solid evidence that intellectual property has been or is being pirated  in the United States by or for the benefit of terrorists. The involvement of  organized crime increases the sophistication of counterfeiting operations,  as well as the challenges and threats to law enforcement officials  confronting the violations.",
      " Moreover, according to officials in Brazil,  organized criminal activity surrounding intellectual property crime is  linked with official corruption, which can pose an additional obstacle to  U.S. and foreign efforts to promote enhanced enforcement. Many of these challenges are evident in the optical media industry, which  includes music, movies, software, and games. Even in countries where  interests exist to protect domestic industries, such as the domestic music  industry in Brazil or the domestic movie industry in China, economic and  law enforcement challenges can be difficult to overcome. For example, the  cost of reproduction technology and copying digital media is low, making  piracy an attractive employment opportunity,",
      " especially in a country where  formal employment is hard to obtain. According to the Business Software  Alliance, a CD recorder is relatively inexpensive (less than $1,000). The  huge price differentials between pirated CDs and legitimate copies also  create incentives on the consumer side. For example, when we visited a  market in Brazil, we observed that the price for a legitimate DVD was  approximately ten times the price for a pirated DVD. Even if consumers are  willing to pay extra to purchase the legitimate product, they may not do so  if the price differences are too great for similar products. We found that  music companies have experimented with lowering the price of legitimate  CDs in Russia and Ukraine.",
      " A music industry representative in Ukraine  told us that this strategy is intended to make legitimate products really  affordable to consumers. However, whether this program is successful in  gaining market share and reducing sales of pirated CDs is unclear. During  our visit to a large Russian marketplace, a vendor encouraged us to  purchase a pirated CD despite the fact that she also had the same CD for  sale under the legitimate reduced-price program. Further, the potentially  high profit makes optical media piracy an attractive venture for organized  criminal groups. Industry and government officials have noted criminal  involvement in optical media piracy and the resulting law enforcement  challenges. Recent technological advances have also exacerbated optical media piracy.",
      "  The mobility of the equipment makes it easy to transport it to another  location, further complicating enforcement efforts. Industry and  government officials described this phenomenon as the \u201cwhack-a-mole\u201d  problem, noting that when progress is made in one country, piracy  operations often simply move to a neighboring location. According to a  Ukraine official, many production facilities moved to Russia after Ukraine  started closing down CD plants. These economic incentives and  technological developments have resulted in particularly high rates of  piracy in the optical media sector. Likewise, the Internet provides a means  to transmit and sell illegal software or music on a global scale.",
      " According to  an industry representative, the ability of Internet pirates to hide their  identities or operate from remote jurisdictions often makes it difficult for  IPR holders to find them and hold them accountable. Conclusions To seek improved protection of U.S. intellectual property in foreign  countries, U.S. agencies make use of a wide array of tools and  opportunities, ranging from routine discussions with foreign government  officials, to trade sanctions, to training and technical assistance, to  presidential-level dialogue. The U.S. government has demonstrated a  commitment to addressing IPR issues in foreign countries using multiple  agencies and U.S. embassies overseas.",
      " However, law enforcement actions  are more restricted than other U.S. activities, owing to factors such as a  lack of jurisdiction overseas to enforce U.S. law. U.S. agencies and industry  communicate regularly, and industry provides important support for  various agency activities. Although the results of U.S. efforts to secure improved intellectual property  protection overseas often cannot be precisely identified, the U.S.  government is clearly and consistently engaged in this area and has had a  positive impact. Agency and industry officials have cited the Special 301  review most frequently as the U.S. government tool that has facilitated IPR  improvements overseas.",
      " The effects of U.S. actions are most evident in  strengthened foreign IPR legislation and new international obligations.  Industry clearly supports U.S. efforts, recognizing that they have  contributed to improvements such as strengthened IPR laws overseas. U.S.  efforts are now focused on enforcement, since effective enforcement is  often the weak link in intellectual property protection overseas and the  situation is deteriorating for some industries. Several IPR coordination mechanisms exist, with the interagency  coordination that occurs during the Special 301 process standing out as the  most significant and active. Of note, the Training Coordination Group is a  completely voluntary effort and is generally cited as a positive  development.",
      " Further, the database created by this group is useful,  although it remains incomplete. Conversely, the mechanism for  coordinating intellectual property law enforcement, NIPLECC, has  accomplished little that is concrete. Currently, little compelling information  demonstrates a unique role for this group, bringing into question its  effectiveness. In addition, it does not include the FBI, a primary law  enforcement agency. Members, including NIPLECC leadership, have  repeatedly acknowledged that the group continues to struggle to find an  appropriate mission. As agencies continue to pursue IPR improvements overseas, they will face  daunting challenges. These challenges include the need to create political  will overseas,",
      " recent technological advancements that facilitate the  production and distribution of counterfeit and pirated goods, and powerful  economic incentives for both producers and consumers, particularly in  developing countries. Further, as the U.S. government focuses increasingly  on enforcement, it will face different and complex factors, such as  organized crime, that may prove quite difficult to address. Matter for  Congressional  Consideration Because the authorizing legislation for the National Intellectual Property  Law Enforcement Coordination Council (NIPLECC) does not clearly define  the council\u2019s mission, NIPLECC has struggled to establish its purpose and  unique role. If the Congress wishes to maintain NIPLECC and take action  to increase its effectiveness,",
      " the Congress may wish to consider reviewing  the council\u2019s authority, operating structure, membership, and mission. Such  consideration could help the NIPLECC identify appropriate activities and  operate more effectively to coordinate intellectual property law  enforcement issues. Agency Comments We received technical comments from USTR, the Departments of State,  Justice, and Homeland Security, the Copyright Office, and USITC. We  incorporated these comments into the report as appropriate. We also  received formal comment letters from the Department of Commerce  (which includes comments from USPTO), the Department of Homeland  Security, and USAID. USAID raised concerns regarding our findings on the  agency\u2019s contribution to an online IPR training database.",
      " No agency  disagreed with our overall findings and conclusions, though all suggested  several wording changes and/or additions to improve the report\u2019s  completeness and accuracy. The FBI provided no comments on the draft  report. As arranged with your offices, unless you publicly announce the contents  earlier, we plan no further distribution of this report until 30 days after the  date of this letter. At that time, we will send copies of this report to other  interested committees. We will also provide copies to the Secretaries of  State, Commerce, and Homeland Security; the Attorney General; the U.S.  Trade Representative; the Director of the Federal Bureau of Investigation;",
      "  the Director of the U.S. Patent and Trademark Office; the Register of  Copyrights; the Administrator of the U.S. Agency for International  Development; and the Chairman of the U.S. International Trade  Commission. We will make copies available to other interested parties  upon request. If you or your staff have any questions regarding this report, please call me  at (202) 512-4128. Other GAO contacts and staff acknowledgments are  listed in appendix XI. Objectives, Scope, and Methodology The Chairmen of the House Committees on Government Reform,  International Relations, and Small Business requested that we review U.S.",
      "  government efforts to improve intellectual property protection overseas.  This report addresses (1) the specific efforts that U.S. agencies have  undertaken; (2) the impact, and industry views, of these actions; (3) the  means used to coordinate these efforts; and (4) the challenges that these  efforts face in generating their intended impact. To describe agencies\u2019 efforts, as well as the impact of these efforts, we  analyzed key U.S. government intellectual property reports, such as the  annual \u201cSpecial 301\u201d reports for the years 1994 through 2004, and reviewed  information available from databases such as the State Department\u2019s  intellectual property training database and the Department of Homeland  Security\u2019s online database of counterfeit goods seizures.",
      " To assess the  reliability of the online Department of Homeland Security seizure data  (www.cbp.gov/xp/cgov/import/commercial_enforcement/ipr/seizure/), we  interviewed the officials responsible for collecting the data and performed  reliability checks on the data. Although we found that the agency had  implemented a number of checks and controls to ensure the data\u2019s  reliability, we also noted some limitations in the precision of the estimates.  However, we determined that the data were sufficiently reliable to provide  a broad indication of the major products seized and the main country from  which the seized imports originated. Our review of the reliability of the  State Department\u2019s training database is described below as part of our  work to review agency coordination.",
      " While we requested a comprehensive  listing of countries assessed and GSP benefits removed due to IPR  problems, USTR was unable to provide us with such data because this  information is not regularly collected. We met with officials from the Departments of State, Commerce, Justice,  and Homeland Security; the Office of the U.S. Trade Representative  (USTR); the U.S. Patent and Trademark Office (USPTO); the Copyright  Office; the Federal Bureau of Investigation (FBI); the U.S. International  Trade Commission (USITC); and the U.S. Agency for International  Development (USAID). We also met with officials from the following  industry groups that address intellectual property issues:",
      "  the International  Intellectual Property Alliance, the International AntiCounterfeiting  Coalition, the Motion Picture Association of America, the Recording  Industry Association of America, the Entertainment Software Association,  the Association of American Publishers, the Software and Information  Industry Association, the International Trademark Association, the  Pharmaceutical Research and Manufacturers of America, and the National  Association of Manufacturers. We reviewed reports and testimonies that  such groups had prepared. In addition, we attended a private sector  intellectual property rights enforcement conference and a U.S. government  training session sponsored by USPTO and the World International Property  Organization (WIPO). We met with officials from the World Trade  Organization (WTO)",
      " and WIPO in Geneva, Switzerland, to discuss their  interactions with U.S. agency officials. We reviewed literature modeling trade damages due to intellectual property  violations and, in particular, examined the models used to estimate such  losses in Ukraine, which has been subject to U.S. trade sanctions since  2002. We met with officials to discuss the methodologies and processes  employed in the Ukraine sanction case. To identify the impact of trade  sanctions against Ukraine, we studied the U.S. overall imports from  Ukraine as well as imports of commodities on the sanction list from  Ukraine from 2000 to 2003. Finally,",
      " to verify information provided to us by industry and agency  officials and obtain detailed examples of U.S. government actions overseas  and the results of those actions, we traveled to four countries where  serious IPR problems have been identified\u2014Brazil, China, Russia, and  Ukraine\u2014and where the U.S. government has taken measures to address  these problems. We met with U.S. embassy and foreign government  officials and with U.S. companies and industry groups operating in those  countries. To choose the case study countries, we evaluated countries  according to a number of criteria that we established, including the extent  of U.S. government involvement;",
      " the economic significance of the country  and seriousness of the intellectual property problem; the coverage of key  intellectual property areas (patent, copyright, and trademark) and  industries (e.g., optical media, pharmaceuticals); and agency and industry  association recommendations. We collected and reviewed U.S. government  and industry documents in these countries. To describe and assess the coordination mechanisms for U.S. efforts to  address intellectual property rights (IPR) overseas, we identified formal  coordination efforts (mandated by law, created by executive decision, or  occurring and documented on a regular basis) and reviewed documents  describing agency participation, mission,",
      " and activities. We interviewed  officials from agencies participating in the Special 301 subcommittee of the  Trade Policy Staff Committee, the National Intellectual Property Law  Enforcement Coordination Council, the IPR Training Coordination Group,  and the IPR Center. While USTR did provide GAO with a list of agencies  that participated in Special 301 subcommittee meetings during the 2004  review, USTR officials requested that we not cite this information in our  report on the grounds that this information is sensitive. USTR asked that  we instead list all the agencies that are invited to participate in the TPSC  process, though agency officials acknowledged that,",
      " based upon their own  priorities, not all agencies actually participate. We also met with officials  from intellectual property industry groups who participate in the IPR  Training Coordination Group and who are familiar with the other agency  coordination efforts. We attended a meeting of the IPR Training  Coordination Group to witness its operations, and we visited the IPR  Center. To further examine the coordination of agency training efforts, we  conducted a data reliability assessment of the IPR Training Database  (www.training.ipr.gov) to determine whether it contained an accurate and  complete record of past and planned training events. To assess the  completeness and reliability of the training data in the database,",
      " we spoke  with officials at the Department of State about the management of the  database and with officials at the agencies about the entering of the data in  the database. We also conducted basic tests of the data\u2019s reliability,  including checking to see whether agencies input information related to  training events in the database and information appeared accurate. We  assessed the reliability of these data to determine how useful they are to  the agencies that provide IPR training, not because we wanted to include  them in this report. As noted on pages 34 and 35, we determined that these  data had some problems of timeliness and completeness, which limited  their usefulness.",
      " Finally, we compared the data with documents containing  similar information, provided by some of the agencies, to check the data\u2019s  consistency. To identify other forms of coordination, we spoke with U.S.  agency officials about informal coordination and communication apart  from the formal coordination bodies cited above. To identify the challenges that agencies\u2019 activities face in generating their  intended impact, we spoke with private sector and embassy personnel in  the case study countries about political and economic circumstances  relevant to intellectual property protection and the impact of these  circumstances on U.S. activities. We also spoke with law enforcement  personnel at the Departments of Justice and Homeland Security,",
      " the FBI,  and foreign law enforcement agencies in Washington, D.C., and our case  study countries about the challenges they face in combating intellectual  property crime overseas. We visited markets in our case study countries  where counterfeit and pirated merchandise is sold to compare local prices  for legitimate and counterfeit products and to confirm (at times with  industry experts present) that counterfeit goods are widely and easily  available. We reviewed embassy cables, agency and industry reports, and  congressional testimony provided by agency, industry, and overseas law  enforcement officials documenting obstacles to progress in IPR protection  around the world. We reviewed studies and gathered information at our  interviews on the arguments for and against IPR protection in developing  countries.",
      " In addition to the general discussion, we chose the optical media sector to  illustrate the challenges facing antipiracy efforts. To identify the  challenges, we interviewed industry representatives from the optical media  sector both in the United States and overseas regarding their experiences  in fighting piracy. We reviewed Special 301 reports and industry  submissions to study the optical media piracy levels over the years. In  Brazil, Russia, and Ukraine, we recorded the prices of legal and illegal  music CDs, movies, and software at local markets. We used U.S. overall imports and import of the products on the sanction list  from Ukraine. The source of the overall import data is the U.S.",
      " Bureau of  the Census, and the source of the import data of the products on the  sanction list is the Trade Policy Information System (TPIS), a Web site  operated by the Department of Commerce. In order to assess the reliability  of the overall import data, we (1) reviewed \u201cU.S. Merchandise Trade  Statistics: A Quality Profile\u201d by the Bureau of the Census and (2) discussed  the data with the Chief Statistician at GAO. We determined the data to be  sufficiently reliable for our purpose, which was to track the changes in U.S.  overall imports from Ukraine from 2000 through 2003.",
      " In order to assess  the reliability of the data from TPIS, we did internal checks on the data and  checked the data against a Bureau of the Census publication. We  determined the data to be sufficiently reliable for our purpose, which was  to track changes in U.S. imports from Ukraine of the goods on the sanction  list. We conducted our work in Washington, D.C.; Geneva, Switzerland; Brasilia,  Rio de Janeiro, and Sao Paolo, Brazil; Beijing, China; Moscow, Russia; and  Kiev, Ukraine, from June 2003 through July 2004, in accordance with  generally accepted government auditing standards.",
      " Trade Agreements Negotiated Since 1990 That  Address IPR, and the WTO Membership Status  for Countries Involved Czech Republic Trade Relations Agreement Turkmenistan Agreement on Trade Relations North American FTA (Mexico and Canada) WTO TRIPS Dispute Settlement Cases  Brought by the U.S. Government Since the implementation of the WTO Agreement on Trade-Related Aspects  of Intellectual Property (TRIPS) in 1996, the United States has brought a  total of 12 TRIPS-related cases against 11 countries and the European  Community (EC) to the WTO through that organization\u2019s dispute  settlement mechanism (see below). Of these,",
      " 8 cases were resolved by  mutually agreed solutions. In nearly all of these cases, U.S. concerns were  addressed via changes in laws or regulations by the other party. Only 2  (involving Canada and India) have resulted in the issuance of a panel  report, both of which were favorable rulings for the United States.   Consultations are ongoing in one additional case, against Argentina, and  this case has been partially settled. One case, involving an EC regulation  protecting geographical indications, has gone beyond consultations and is  in WTO dispute settlement panel proceedings.  1. Argentina: pharmaceutical patents       \u2014 Brought by U.S., DS171 and DS196  Case originally brought by the United States in May 1999.",
      " Consultations  ongoing, although 8 of 10 originally disputed issues have been resolved. 2. Brazil: \u201clocal working\u201d of patents and compulsory licensing      \u2014 Brought by U.S., DS199  Case originally brought by the United States in June 2000. Settled  between the parties in July 2001. Brazil agreed to hold talks with the  United States prior to using the disputed article against a U.S. company. 3. Canada: term of patent protection      \u2014 Brought by U.S., DS170  Case originally brought by the United States in May 1999. Panel report  issued in May 2000 decided for the United States,",
      " (WT/DS170/R) later  upheld by Appellate Body report. According to USTR, Canada  announced implementation of a revised patent law on July 24, 2001. 4. Denmark: enforcement, provisional measures, civil proceedings      \u2014 Brought by U.S., DS83  Case originally brought by United States in May 1997. Settled between  the parties in June 2001. In March 2001, Denmark passed legislation  granting the relevant judicial authorities the authority to order  provisional measures in the context of civil proceedings involving the  enforcement of intellectual property rights. 5. EC:",
      " trademarks and geographical indications      \u2014 Brought by U.S., DS174  Case originally brought by U.S. in June 1999. WTO panel proceedings  are ongoing. 6. Greece and EC: motion pictures, TV, enforcement      \u2014 Brought by U.S., DS124 and DS125  Case originally brought by the United States in May 1998. Greece  passed a law in October 1998 that provided an additional enforcement  remedy for copyright holders whose rights were infringed upon by TV  stations in Greece. Based on the implementation of this law, the case  was settled between the parties in March 2001.",
      " 7. India: patents, \u201cmailbox,\u201d exclusive marketing      \u2014 Brought by EC, DS79      \u2014 Brought by U.S., DS50  Case originally brought by the United States in July 1996. Panel report  issued in September 1997 decided for the United States (WT/DS50/R). 8. Ireland and EC: copyright and neighbouring rights      \u2014 Brought by U.S., DS82 and DS115  Case originally brought by the United States in May 1997. Settled  between the parties in November 2000. Ireland passed a law and  amended its copyright law in ways that satisfied U.S.",
      " concerns. 9. Japan: sound recordings intellectual property protection      \u2014 Brought by EC DS42      \u2014 Brought by U.S., DS28  Case originally brought by the United States in February 1996. Settled  between the parties in January 1997. Japan passed amendments to its  copyright law that satisfied U.S. concerns. 10. Pakistan: patents, \u201cmailbox,\u201d exclusive marketing      \u2014 Brought by U.S., DS36  Case originally brought by the United States in May 1996. Settled  between the parties in February 1997. Pakistan issued rulings with  respect to the filing and recognition of patents that satisfied U.S.",
      "  concerns. 11. Portugal: term of patent protection      \u2014 Brought by U.S., DS37  Case originally brought by the United States in May 1996. Settled  between the parties in October 1996. Portugal issued a law addressing  terms of patent protection in a way that satisfied U.S. concerns. 12. Sweden: enforcement, provisional measures, civil proceedings      \u2014 Brought by U.S., DS86  Case originally brought by the United States in June 1997. Settled  between the parties in December 1998. In November 1998, Sweden  passed legislation granting the relevant judicial authorities the  authority to order provisional measures in the context of civil  proceedings involving the enforcement of intellectual property rights.",
      " Country Case Study:  Brazil The State of IPR in Brazil Brazil is generally credited with having adequate laws to protect  intellectual property, but the enforcement of these laws remains a problem.  Officials we interviewed in Brazil identified several reasons for the weak  enforcement, including insufficient and poorly trained police and a  judiciary hampered by a lack of resources, inefficiencies and, in some  cases, corruption. Most broadly, they cited the weak economy and lack of  formal sector employment as reasons for the widespread sale and  consumption of counterfeit goods. One Brazilian official commented that  the current intellectual property protection system has generated large  price gaps between legitimate and illegitimate products,",
      " making it very  difficult to combat illegitimate products. However, private sector officials  also pointed to high tax rates on certain goods as a reason for  counterfeiting. Regardless, the sale of counterfeit merchandise abounds.  One market in Sao Paulo that we visited covered many city blocks and was  saturated with counterfeit products. For example, we identified counterfeit  U.S. products such as Nike shoes, Calvin Klein perfume, and DVDs of  varying quality. The market not only sold counterfeit products to the  individual consumer, but many vendors also served as \u201ccounterfeit  wholesalers\u201d who offered even cheaper prices for purchasing counterfeit  sunglasses in bulk,",
      " for example. According to industry representatives, this  market also has ties to organized crime. Private and public sector officials identified two significant challenges to  Brazil\u2019s improving its intellectual property protection: establishing better  border protection, particularly from Paraguay\u2014a major source of  counterfeit goods\u2014and a better-functioning National Industrial Property  Institute (INPI). The acting president of INPI acknowledged that, owing to  insufficient personnel, money, and space, INPI is not functioning well and  has an extremely long backlog of patent and trademark applications. Two  private sector representatives commented that U.S. assistance to INPI  could be very valuable. It can currently take as long as 9 years to get a  patent approved.",
      " Patent problems have been exacerbated by an ongoing  conflict between INPI and the Ministry of Health over the authority to grant  pharmaceutical patents. A pharmaceutical industry association report  claims that the current system, which requires the Ministry of Health to  approve all pharmaceutical patents, is in violation of TRIPS. U.S. Government Actions to  Address Brazil\u2019s IPR  Problems The U.S. government has been involved in various activities to promote  better enforcement of intellectual property rights in Brazil. Brazil has been  cited on the Special 301 Priority Watch List since 2002 and is currently  undergoing a review to determine whether it should remain eligible for  Generalized System of Preferences (GSP)",
      " benefits. In recent years,  Brazilian officials have participated in training offered by USPTO in  Washington, D.C., and have studied intellectual property issues in depth in  the United States as participants in U.S.-sponsored programs. The  Departments of State, Justice, and Homeland Security have also sponsored  or participated in training events or seminars on different intellectual  property issues. The Department of State\u2019s public affairs division has also  worked on public awareness events and seminars. Officials from industry associations representing American companies, as  well as officials from individual companies we met with, stated that they  are generally satisfied with U.S. efforts to promote the protection of IPR in  Brazil.",
      " Many had regular contact with embassy personnel to discuss  intellectual property issues, and several had collaborated with U.S.  agencies to develop and present seminars or training events in Brazil that  they believed were useful tools for promoting IPR. The private sector  officials we spoke with made some suggestions for improving U.S.- sponsored assistance, including consulting with the private sector earlier  to identify appropriate candidates for training. However, private and public  sector officials commented regularly on the usefulness of training activities  provided by the United States, and many expressed a desire for more of  these services. In particular, several officials expressed a hope that the  United States would provide training and technical assistance to INPI.",
      " In  February 2004, a senior Department of Commerce official discussed  collaboration and technical assistance matters with a Brazilian minister,  and USPTO staff recently traveled to Brazil to provide training at INPI. Overall, the direct impact of U.S. efforts was difficult to determine, but U.S.  involvement regarding IPR in Brazil was widely recognized. Several  industry and Brazilian officials we spoke with were familiar with the  Special 301 report; many in the private sector had contributed to it via  different mechanisms. One industry official commented that the Special  301 process is helpful in convincing the Brazilian authorities of the  importance of intellectual property protection.",
      " Others were less certain  about whether the report had any impact. A Brazilian minister stated that  the United States is the biggest proponent of IPR, although he did not  believe that any particular U.S. program had had a direct impact on  Brazilian intellectual property laws or enforcement. Others, however,  believed that pressure from the U.S. government lent more credibility to  the private sector\u2019s efforts and may have contributed to changes in  Brazilian intellectual property laws. Changes in Brazil\u2019s IPR  Protection Most private sector officials we spoke with agreed that the government\u2019s  interest in combating intellectual property crime has recently increased.  They noted that developments have included the work of the Congressional  Investigative Commission on Piracy (CPI)",
      " in the Brazilian Congress and  newly formed special police groups to combat piracy. In addition, President  Lula signed a law last year amending the penal code with respect to  copyright violations; minimum sentences were increased to 2 years and  now include a fine and provide for the seizure and destruction of  counterfeit goods. However, these increased sanctions do not apply to  software violations. According to an official with the Brazilian special  police, the Brazilian government was moved to prosecute piracy more  vigorously because government officials realized that the growing informal  economy was resulting in the loss of tax revenue and jobs. However, a  Brazilian state prosecutor and the CPI cited corruption and the  involvement of organized crime in intellectual property violations as  challenges to enforcement efforts.",
      " Country Case Study:  China The State of IPR in China China\u2019s protection of IPR has improved in recent years but remains an  ongoing concern for the U.S. government and the business community.  Upon accession to the WTO in December 2001, China was obligated to  adhere to the terms of the Agreement on Trade-Related Aspects of  Intellectual Property (TRIPS). According to the U.S. Trade Representative\u2019s  (USTR) 2003 review of China\u2019s compliance with its WTO commitments, IPR  enforcement was ineffective, and IPR infringement continued to be a  serious problem in China. USTR reported that lack of coordination among  Chinese government ministries and agencies,",
      " local protectionism and  corruption, high thresholds for criminal prosecution, lack of training, and  weak punishments hampered enforcement of IPR. Piracy rates in China continue to be excessively high and affect products  from a wide range of industries. According to a 2003 report by China\u2019s State  Council\u2019s Development Research Center, the market value of counterfeit  goods in China is between $19 billion and $24 billion. Various U.S.  copyright holders also reported that estimated U.S. losses due to the piracy  of copyrighted materials have continued to exceed $1.8 billion annually.  Pirated products in China include films,",
      " music, publishing, software,  pharmaceuticals, chemicals, information technology, consumer goods,  electric equipment, automotive parts, and industrial products, among many  others. According to the International Intellectual Property Alliance, a  coalition of U.S. trade associations, piracy levels for optical discs are at 90  percent and higher, almost completely dominating China\u2019s local market.  Furthermore, a U.S. trade association reported that the pharmaceutical  industry not only loses roughly 10 to 15 percent of annual revenue in China  to counterfeit products, but counterfeit pharmaceutical products also pose  serious health risks. U.S. Government Actions to  Address China\u2019s IPR  Problems Since the first annual Special 301 review in 1989,",
      " USTR has initiated several  Special 301 investigations on China\u2019s IPR protection. However, since the  conclusion of a bilateral IPR agreement with China in 1996, China has not  been subject to a Special 301 investigation but has instead been subject to  monitoring under Section 306. In 2004, USTR reviewed China\u2019s  implementation under Section 306 and announced that China would be  subject to an out-of-cycle review in 2005. In addition to addressing China\u2019s  IPR protection through these statutory mechanisms, the U.S. government  has been involved in various efforts to protect IPR in China.",
      " The U.S.  government\u2019s activities in China are part of an interagency effort involving  several agencies, including USTR, State, Commerce, Justice, Homeland  Security, USPTO, and the Copyright Office. In 2003, U.S. interagency  actions in China to protect IPR included (1) engaging the Chinese  government at various levels on IPR issues; (2) providing training and  technical assistance for Chinese ministries, agencies, and other  government entities on various aspects of IPR protection; and (3) providing  outreach and assistance to U.S. businesses. Most private sector  representatives we met with in China said that they are generally satisfied  with the U.S.",
      " government\u2019s efforts in China but noted areas for potential  improvement. In 2003, U.S. government engagement with China on IPR issues ranged  from high-level consultations with Chinese ministries to letters, demarches,  and informal meetings between staff-level U.S. officials and their  counterparts in the Chinese government. U.S. officials noted that during  various visits to China in 2003, the Secretaries of Commerce and Treasury  and the U.S. Trade Representative, as well as several subcabinet level  officials, urged their Chinese counterparts to develop greater IPR  protection. U.S. officials said that these efforts were part of an overall  strategy to ensure that IPR protection was receiving attention at the highest  levels of China\u2019s government.",
      " U.S. officials also noted that the U.S.  Ambassador to China has placed significant emphasis on IPR protection. In  2002 and 2003, the U.S. government held an Ambassador\u2019s Roundtable on  IPR in China that brought together representatives from key U.S. and  Chinese agencies, as well as U.S. and Chinese private sector  representatives. U.S. officials said that China Vice Premier Wu\u2019s  involvement in the 2003 roundtable was an indication that IPR was  receiving attention at high levels of China\u2019s government. One U.S. official  stated that addressing pervasive systemic problems in China,",
      " such as lack  of IPR protection, is \u201cnearly impossible unless it stays on the radar at the  highest levels\u201d of the Chinese government. A second key component of U.S. government efforts to ensure greater  protection of IPR in China involved providing numerous training programs  and technical assistance to Chinese ministries and agencies. U.S.  government outreach and capacity-building efforts included sponsoring  speakers, seminars, and training on specific technical aspects of IPR  protection to raise the profile and increase technical expertise among  Chinese officials. The U.S. government targeted other programs to address  the lack of criminalization of IPR violations in China.",
      " For example, an  interagency U.S. government team (Justice, DHS, and Commerce)  conducted a three-city capacity-building seminar in October 2003 on  criminalization and enforcement. The program was cosponsored by the  Chinese Procuratorate, the Chinese government\u2019s prosecutorial arm. U.S.  government officials noted that the program was unique because the  seminar brought together officials from Chinese criminal enforcement  agencies, including customs officials, criminal investigators, and  prosecutors, as well as officials from administrative enforcement agencies.  In March 2004, the Copyright Office hosted a week-long program for a  delegation of Chinese copyright officials that provided technical assistance  and training on copyright-related issues,",
      " including the enforcement of  copyright laws, as well as outreach and relationship-building. The U.S. government has also provided outreach regarding IPR protection  to U.S. businesses in China, and Commerce has played a lead role in this  effort. For example, in late 2002, Commerce established a Trade  Facilitation Office in Beijing to, among other things, provide outreach,  advocacy, and assistance to U.S. businesses on market access issues,  including IPR protection. Additionally, Foreign Commercial Service  officers in China work with U.S. firms to identify and resolve cases of IPR  infringement. Commerce officials indicated that increasing private sector  awareness and involvement in IPR issues are essential to furthering IPR  protection in China.",
      " GAO\u2019s 2004 analysis of selected companies\u2019 views on China\u2019s  implementation of its WTO commitments reported that respondents  ranked IPR protection as one of the three most important areas of China\u2019s  WTO commitments but that most respondents thought China had  implemented IPR reforms only to some or little extent. In general, other  industry association and individual company representatives whom we  interviewed in China were satisfied with the range of U.S. government  efforts to protect IPR in China. Several industry representatives noted that  they had regular contact with officials from various U.S. agencies in China  and that the staff assigned to IPR issues were generally responsive to their  firm\u2019s or industry\u2019s needs.",
      "  Private sector representatives stated that the  U.S. government\u2019s capacity-building efforts were one of the most effective  ways to promote IPR protection in China. Some representatives noted that  Chinese government entities are generally very receptive to these types of  training and information-sharing programs. However, some private sector  representatives also said that the U.S. agencies could better target the  programs to the appropriate Chinese audiences and follow up more to  ensure that China implements the knowledge and practices disseminated  through the training programs. Most private sector representatives we met  with also said that the U.S. government efforts in China were generally well  coordinated, but they indicated that they were not always able to  determine which U.S.",
      " agency was leading the effort on a specific issue. Changes in China\u2019s IPR  Protection Although Chinese laws are now, in principle, largely compliant with the  strict letter of the TRIPS agreement, U.S. government and other industry  groups note that there are significant gaps in the law and enforcement  policies that pose serious questions regarding China\u2019s satisfaction of the  TRIPS standards of effective and deterrent enforcement. In 2003, USTR  found that China\u2019s compliance with the TRIPS agreement had been largely  satisfactory, although some improvements still needed to be made. Before  its accession to the WTO, China had completed amendments to its patent  law,",
      " trademark law, and copyright law, along with regulations for the patent  law. Within several months after its accession, China issued regulations for  the trademark law and copyright law. China also issued various sets of  implementing rules, and it issued regulations and implementing rules  covering specific subject areas, such as integrated circuits, computer  software, and pharmaceuticals. China has taken some steps in administrative, criminal, and civil  enforcement against IPR violators. According to USTR\u2019s review, the central  government promotes periodic anticounterfeiting and antipiracy  campaigns as part of its administrative enforcement, and these campaigns  result in a high number of seizures of infringing materials.",
      " However, USTR  notes that the campaigns are largely ineffective; because cases brought by  the administrative authorities usually result in extremely low fines,  criminal enforcement has virtually no deterrent effect on infringers. China\u2019s  authorities have pursued criminal prosecutions in a small number of cases,  but the Chinese government lacks the transparency needed to determine  the penalties imposed on infringers. Last, China has seen an increased use  of civil actions being brought for monetary damages or injunctive relief.  This suggests an increasing sophistication on the part of China\u2019s IPR  courts, as China continues to make efforts to upgrade its judicial system. However, U.S.",
      " companies complain that the courts do not always enforce  China\u2019s IPR laws and regulations consistently and fairly. Despite the overall lack of IPR enforcement in China, IPR protection is  receiving attention at high levels of the Chinese government. Notably, in  October 2003, the government created an IPR Leading Group, headed by a  vice premier, to address IPR protection in China. Several U.S. government  officials and private sector representatives told us that high-level  involvement by Vice Premier Wu would be critical to the success of future  developments in IPR protection in China. In April 2004, the United States  pressed IPR issues with China during a formal,",
      " cabinet-level consultative  forum with China called the Joint Commission of Commerce and Trade  (JCCT). In describing the results of the April 2004 JCCT meeting, USTR  reported that China had agreed to undertake a number of near-term actions  to address IPR protection. China\u2019s action plan included increasing penalties  for IPR infringement and launching a public awareness campaign on IPR  protection. Additionally, China and the United States agreed to form an IPR  working group under the JCCT to monitor China\u2019s progress in  implementing its action plan. Country Case Study:  Russia The State of IPR in Russia Although the Russian government has demonstrated a growing recognition  of the seriousness of IPR problems in the country and has taken some  actions,",
      " serious problems persist. Counterfeiting and piracy are common  (see fig. 4). For example, a Microsoft official told us that approximately 80  percent of business software is estimated as pirated in Russia, and that the  Russian government is a \u201chuge\u201d user of pirated software. Further, the  pharmaceutical industry estimates that up to 12 percent of drugs on the  market in Russia are counterfeit. Of particular note to the U.S. government,  piracy of optical media (e.g., CDs, DVDs, etc.) in Russia is rampant.  According to an official from the Russian Anti-Piracy Organization,",
      " as  much as 95 percent of optical media products produced in Russia are  pirated. U.S. concern focuses on the production of pirated U.S. optical  media products by some or all of the 30 optical media production facilities  in Russia, 17 of which are located on Russian government-owned former  defense sites where it has been difficult for inspection officials to gain  access (though, according to an embassy official, access has recently  improved). According to a U.S. embassy official, Russian demand for  optical media products is estimated at 18 million units per year, but Russian  production is estimated to be 300 million units.",
      " U.S. Embassy and private  sector officials believe that the excess pirated products are exported to  other countries. Industry estimates losses of over $1 billion annually as a  result of this illegal activity. Russia has made many improvements to its IPR legislation, but the U.S.  government maintains that more changes are needed. For example, the  2004 Special 301 report states that the Russian government is still working  to amend its laws on protection of undisclosed information\u2014in particular,  protection for undisclosed test data submitted to obtain marketing  approval for pharmaceuticals and agricultural chemicals. Further, U.S.  industry and Russian officials view Russia\u2019s IPR enforcement as inadequate  and cite this as the largest deterrent to effective IPR protection in Russia.",
      "  For example, the 2004 Special 301 report emphasizes that border  enforcement is considered weak and that Russian courts do not have the  authority in criminal cases to order forfeiture and destruction of machinery  and materials used to make pirated and counterfeit products. Further, one  Russian law enforcement official told us that since IPR crimes are not  viewed as posing much of a social threat, IPR enforcement is \u201cpushed to  the background\u201d by Russian prosecutors. U.S. Government Actions to  Address Russia\u2019s IPR  Problems The U.S. government has taken several actions in Washington, D.C., and  Moscow to address its concerns over Russia\u2019s failure to fully protect IPR.",
      "  Russia has been placed on USTR\u2019s Special 301 Priority Watch List for the  past 8 years (1997 through 2004). Further, a review of Russia\u2019s eligibility  under the Generalized System of Preferences (GSP) is underway owing to  concerns over serious IPR problems in the country. The U.S. government has actively raised IPR issues with the Russian  government, including at the highest levels. According to the Department  of State, at a United States\u2013Russia summit in September 2003, President  Bush raised IPR concerns with Russian President Putin. Further, in  Moscow, the U.S.",
      " Ambassador to Russia considers IPR an embassy priority  and has sent letters to Russian government officials and published articles  in the Russian press that outline U.S. government concerns. Many agencies resident in the U.S. Embassy in Moscow are engaged in IPR  issues. The Department of State\u2019s Economic Section is the Embassy office  with primary responsibility for IPR issues. This office collaborates closely  with USTR and holds interagency embassy meetings to coordinate on IPR  efforts. In addition to interagency communication through these meetings,  each agency is also engaged in separate efforts. For example, the Economic  Section has met regularly with Russian government officials to discuss IPR  issues.",
      " Justice has held two training events on IPR criminal law  enforcement in 2004, and has two more events planned for this year, while  the Embassy\u2019s Public Affairs Office is involved with IPR enforcement  exchange and training grants. Further, the Department of Commerce\u2019s  Foreign Commercial Service works with U.S. companies on IPR issues and  sponsored a 2003 seminar on pharmaceutical issues, including IPR-related  topics. According to a Justice official, U.S. law enforcement agencies are  making efforts to build relationships with their Russian counterparts. Industry representatives whom we interviewed in Moscow expressed  support for U.S. government efforts to improve intellectual property  protection,",
      " particularly the U.S. Ambassador\u2019s efforts to increase the  visibility of IPR problems. An official from one IPR association in Moscow  noted, with respect to USTR\u2019s efforts in Russia, \u201cNo other country in the  world is so protective of its copyright industries.\u201d  Industry representatives  noted that the U.S. government has played an important role in realizing  IPR improvements in Russia, although the Russian government is also  clearly motivated to strengthen intellectual property protections as part of  its preparation for joining the World Trade Organization. Further, U.S. Embassy staff believe that they have been successful in ensuring that IPR is  now firmly on the \u201cradar screen\u201d of the Russian government.",
      " Changes in Russia\u2019s IPR  Protection According to U.S. sources, numerous IPR laws have been enacted. For  example, the Department of State has noted that the Russian government  has passed new laws on patents, trademarks, industrial designs, and  integrated circuits and has amended its copyright law. Further, U.S. and  Russian sources note that Russia has improved its customs and criminal  codes. Moreover, in 2002, the Russian government established a high-level  commission, chaired by the prime minister, specifically to address  intellectual property problems (although, despite a recognized desire to  address IPR enforcement, the commission has reportedly not  accomplished a great deal in terms of concrete achievements). In addition to these promising improvements,",
      " there have been some signs  that enforcement is improving, if slowly. For example, the Russian  government issued a decree banning the sale of audio and video products  by Russian street vendors, and the U.S. Embassy has reported that  subsequently several kiosks known to sell pirated goods were closed.  Industry associations have reported that law enforcement agencies are  generally willing to cooperate on joint raids, and in 2003 several large  seizures were made as a result of such raids. Further, in February 2004 the  Russian Anti-Piracy Organization reported that police raids involving  optical media products took place almost daily all over Russia and were  covered widely on national TV channels.",
      " In addition, according to the U.S.  Embassy, the consumer products industry reports progress in reducing the  amount of counterfeit consumer goods on the Russian market, and one  major U.S. producer even claims that it has virtually eliminated  counterfeiting of all its consumer goods lines. Finally, according to a U.S.  Embassy official, the first prison sentence was handed down during the  summer of 2004 for an IPR violator who had been manufacturing and  distributing pirated DVDs. U.S. and Russian officials have identified several problems that the Russian  government faces in implementing effective IPR protection in the future.  Issues identified include:",
      "  (1) the price of legitimate products is too high for  the majority of Russians, who have very modest incomes; (2) Russian  citizens and government officials are still learning about the concept of  private IPR\u2014a Russian Ministry of Press official pointed out that until the  dissolution of the Soviet Union, all creations belonged to the state, and the  general public and the government didn\u2019t understand the concept of private  IPR; and (3) corruption and organized crime make the effective  enforcement of IPR laws difficult. Country Case Study:  Ukraine The State of IPR in Ukraine Ukraine has been the subject of intense industry and U.S.",
      " government  concern since 1998 owing primarily to the establishment of pirate optical  media plants that produced music, video discs, and software for the  Ukraine market and for export to other countries. This followed the  crackdown on pirate plants in Bulgaria in 1998 that resulted in many of  these manufacturers relocating to Ukraine. Regarding Ukraine, USTR cites  U.S. music industry losses of $210 million in revenues in 1999, while the  Motion Picture Association reported losses of $40 million.  The  international recording industry association estimated that the production  capacity of optical media material was around 70 million units per year and  the demand within Ukraine for legitimate CD was fewer than 1 million units  in 2000.",
      " Further the audio and video consumer market in Ukraine has  consisted overwhelmingly of pirated media. For example, in 2000, the  international recording industry association estimated that 95 percent of  products on the market were pirated. Further, USTR and industry cite  significant counterfeiting of name brand products, pharmaceuticals, and  agricultural chemicals. By 2004, IPR in Ukraine has shown improvement in several areas, although  the digital media sold in the consumer retail market remain predominantly  pirated. The production of such digital media in local plants has ended  however, according to U.S. government and industry officials in Kiev.",
      "  Further, U.S. officials noted Ukraine\u2019s accession to key WIPO conventions  and improvements in intellectual property law that represents progress in  fulfilling TRIPS requirements as part of Ukraine\u2019s WTO accession process. Remaining areas of concern regarding U.S. IPR are inadequacies in the  existing optical media licensing law and the fact that Ukraine remains a key  transit country for pirated products. Other areas of concern are the  prevalence of pirated digital media products in the consumer retail  markets, lack of law enforcement actions, and the use of illegal software by  government agencies (although this situation has also improved). U.S.  industry and government now seek certain amendments to intellectual  property laws and better enforcement efforts,",
      " including border controls to  prevent counterfeit and pirated products from entering the Ukrainian  domestic retail market. U.S. Government Actions to  Address Ukraine\u2019s IPR  problems The U.S. government has undertaken concerted action in Washington and  Kiev to address its concerns regarding the state of intellectual property  protection in Ukraine. With the emergence of serious music and audio- visual piracy, Ukraine was placed on USTR\u2019s Special 301 Watch list in 1998.  Ukraine was elevated to USTR\u2019s Special 301 Priority Watch list for 2 years,  in 1999 and 2000. In June 2000, during President Clinton\u2019s state visit to Kiev,",
      "  he and President Kuchma endorsed a U.S.-Ukrainian joint action plan to  combat optical media piracy. However, slow and insufficient response by  Ukraine led to its designation as a Priority Foreign Country in 2001 and to  the imposition of punitive economic sanctions (100 percent duties) against  Ukrainian exports to the United States valued at $75 million in 2002. The  Priority Foreign Country designation remains in place. The sanctions affect  a number of Ukrainian exports, including metal products, footwear, and  chemicals. In addition, a U.S. government review of Ukraine\u2019s eligibility for  preferential tariffs under the GSP program was undertaken,",
      " and Ukraine\u2019s  benefits under this program were suspended in August 2001. GSP benefits  have not been reinstated. In Kiev, intellectual property issues remain a priority for the U.S. Embassy,  including the U.S. Ambassador. A State Department economic officer has  been assigned responsibility as the focal point for such issues and has been  supported in this role by the actions of other U.S. agencies. The  Commercial Law Center, funded by USAID, and the Commercial Law  Development Program of the U.S. Department of Commerce have provided  technical advice to Ukraine as it crafted intellectual property laws. A U.S.",
      "  private sector association reported that it had worked closely with USAID  on projects related to commercial law development. Ukrainian legislative  officials reported that training opportunities and technical assistance  provided by the United States had facilitated the creation of IP legislation.  Training is also focused on enforcement, including training of a Ukrainian  judicial official by USPTO in Washington, D.C., during 2003. The State  Department has trained police and plans further police training in Ukraine  during 2004. Further, Department of Commerce officials maintain contact  with U.S. firms and collect information on intellectual property issues for  State and USTR. Changes in Ukraine\u2019s IPR  Protection Ukraine has made improvements in its legal regime for IPR protection.",
      "  According to Ukrainian officials, Ukraine passed a new criminal code with  criminal liability for IPR violations, as well as a new copyright law.  Ukrainian officials report that the laws are now TRIPS compliant. U.S.  government documents show that Ukraine implemented an optical disk  law in 2002, although it was deemed \u201cunsatisfactory,\u201d and sanctions remain  in place based on Ukraine\u2019s failure to enact and enforce adequate optical  disk media licensing legislation. In addition, Ukraine has pursued enforcement measures to combat  counterfeiting, although enforcement overall is still considered weak.  USTR reported that administrative and legal pressure by the Ukrainian  government led to the closure of all but one of the major pirate CD plants.",
      "  Some pirate plants moved to neighboring countries. According to U.S. and  private sector officials in Kiev, remaining optical plants have switched to  legitimate production. However, pirated optical media are still prevalent in  Ukraine, imported from Russia and elsewhere, with little effort to remove  them from the market. In a visit to the Petrovska Market in Kiev, we found a  well-organized series of buildings where vendors sold movies, music,  software, and computer games from open-air stands. The price for a pirated  music CD was $1.50, compared to legitimate CDs that were sold for almost  $20 in a music store located near the market.",
      " According to USTR, Ukraine is a major trans-shipment point and storage  location for illegal optical media produced in Russia and elsewhere. A  Ukrainian law enforcement official reported that the number of IPR crimes  detected has risen from 115 in 2001 to 374 in 2003. He noted that to date,  judges have been reluctant to impose jail time, but had used fines that are  small compared to the economic damages. A U.S. government official also  reported that the fines are too small to be an effective deterrent. While one U.S. company told us about the lack of Ukrainian government  actions regarding specific IPR enforcement issues,",
      " a large U.S. consumers  goods company told us that consumer protection officials and tax police  had worked with it to reduce counterfeit levels of one product line from  approximately 40 percent in 1999 to close to zero percent 16 months later.  The company provided 11 laboratory vans as well as personnel that could  accompany police to open markets and run on-the-spot tests of products. Comments from the Department of  Commerce The following are GAO\u2019s comments on the Department of Commerce\u2019s  letter dated August 20, 2004. GAO\u2019s Comments 1. We have reviewed the report to ensure that the term \u201ccounterfeiting\u201d is  used to refer to commercial-scale trademark-related infringements of a  good or product and the term \u201cpiracy\u201d is used to refer to commercial-",
      " scale infringements of copyright-protected works. 2. While we do not discuss \u201cadvocacy\u201d separately in this report, this type  of effort has been addressed in the policy initiatives section of the  report, specifically in the discussion entitled \u201cU.S. Officials Undertake  Diplomatic Efforts to Protect Intellectual Property\u201d (see p. 18). We note  that U.S. government officials overseas, including officials from the  Department of Commerce, work with U.S. companies and foreign  governments to address specific IPR problems. We have also included a  particular example involving Department of Commerce efforts to  resolve problematic issues related to proposed Mexican legislation that  involved the pharmaceutical industry.",
      " We have also added another  reference to advocacy efforts on page 27. 3. We chose to emphasize IPR-specific agreements, bilateral trade  agreements, and free trade agreements in our report (discussion  entitled \u201cU.S. Government Engages in IPR-Related Trade Negotiations\u201d)  because USTR officials consistently cited these agreements as central  components of their IPR efforts. However, we do note the negotiation  of trade and investment framework agreements in footnote 24 of the  report. 4. The efforts of the Department of Commerce\u2019s International Trade  Administration (ITA) are cited in our report. The report does not  specifically list the ITA,",
      " as we intentionally kept the discussion for all  government entities at the \u201cdepartmental\u201d level (with a few exceptions  for entities that have distinct responsibilities, such as the FBI and  USPTO) without mentioning the numerous bureaus and offices  involved for each department. This approach was adopted to keep the  report as clear as possible for the reader. While the report does not  specifically attribute Commerce\u2019s IPR efforts to ITA, several examples  of Commerce\u2019s efforts that are listed in the report are, in fact, ITA  activities. For example, in addition to the activities cited in point 2  above, Commerce (meaning ITA)",
      " is also mentioned as a participant in  annual GSP and Special 301 reviews (see pp. 12 and 32), and as a  participant in IPR efforts in the report\u2019s China, Russia, and Ukraine  appendixes. Further, we have specified that Commerce (meaning ITA),  along with USTR, is the administrator for the private sector trade  advisory committee system (p. 15). Comments from the Department of Homeland  Security The following are GAO\u2019s comments on the Department of Homeland  Security\u2019s letter dated August 24, 2004. GAO\u2019s Comments 1. We have added a paragraph citing the Department of Homeland  Security\u2019s work with the World Customs Organization (see p.",
      " 17). 2. We added language on p. 22 of the report that notes that a key  component of DHS authority is a \u201cborder nexus.\u201d Comments from the U.S. Agency for  International Development The following are GAO\u2019s comments on the U.S. Agency for International  Development\u2019s letter dated August 19, 2004. GAO\u2019s Comments 1. We agree with USAID\u2019s point that IPR protection and enforcement are  not the primary responsibility of the agency. USAID and the other 9 U.S.  government entities mentioned in the report have broader missions.  Rather, we state that USAID and the other U.S.",
      " government entities  undertake the primary U.S. government activities to improve the  protection and enforcement of U.S. intellectual property overseas. 2. As we noted in the report, the decentralized structure of USAID,  whereby individual country missions plan and implement training,  makes it difficult for Washington-based officials to contribute timely  information to the public training database or to inform the Training  Coordination Group about USAID\u2019s training efforts. Further, several  members of the Training Coordination Group are frustrated with the  extent of USAID's information sharing. 3. As we note in the report, USAID submits information annually  following the conclusion of its own data-gathering exercise.",
      " However,  this data-gathering exercise, which contributes to the USAID trade  capacity building database, does not provide information needed by the  Training Coordination Group, such as dates of training or contact  information, that would improve coordination. GAO Contacts and Staff Acknowledgments GAO Contacts Acknowledgments In addition to those named above, Sharla Draemel, Ming Chen, Martin de  Alteriis, Matt Helm, Ernie Jackson, Victoria Lin, and Reid Lowe made key  contributions to this report. GAO\u2019s Mission The Government Accountability Office, the audit, evaluation and  investigative arm of Congress, exists to support Congress in meeting its  constitutional responsibilities and to help improve the performance and  accountability of the federal government for the American people.",
      " GAO  examines the use of public funds; evaluates federal programs and policies;  and provides analyses, recommendations, and other assistance to help  Congress make informed oversight, policy, and funding decisions. GAO\u2019s  commitment to good government is reflected in its core values of  accountability, integrity, and reliability. Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost  is through GAO\u2019s Web site (www.gao.gov). Each weekday, GAO posts  newly released reports, testimony, and correspondence on its Web site. To  have GAO e-mail you a list of newly posted products every afternoon,",
      " go to  www.gao.gov and select \u201cSubscribe to Updates.\u201d Order by Mail or Phone To Report Fraud,  Waste, and Abuse in  Federal Programs Congressional  Relations Public Affairs\n"
    ],
    "length": 27459,
    "hardness": null,
    "role": null
  },
  {
    "id": 106,
    "question": null,
    "answer": "GAO reviewed the Internal Revenue Service's (IRS) program to audit the tax returns of about 45,000 large corporations that are not in the Coordinated Examination Program (CEP), focusing on factors that contributed to the assessment rate and audit results. GAO noted that: (1) IRS invested 25 percent more hours in audits of large corporations during 1994 than it did in 1988, yet it recommended 23 percent less additional tax per hour and doubled the rate at which it closed audits with no tax changes; (2) during this 7-year period, IRS assessed 27 percent of the additional taxes revenue agents recommended; (3) GAO's analysis of questionnaire responses and interviews of officials from across IRS identified at least four factors that had a negative effect on both the audit results and the assessment rate; (4) the complexity and vagueness of the tax code caused legitimate differences in interpretation between IRS and corporations over the correct tax liability; (5) this complexity and vagueness made it difficult for IRS revenue agents to find the necessary evidence to clearly support any additional recommended taxes without investing a lot of audit hours; (6) such recommended taxes were less likely to survive the IRS Office of Appeals process and be assessed; (7) also, complex and vague tax laws increased the tax burden on large corporations by increasing their uncertainty about what actions they had to take to comply with the tax code; (8) the IRS Examination Division and Office of Appeals used different performance measures; (9) this difference in measures resulted in a lower assessment rate; (10) these revenue agents worked alone on complex audits without much assistance from district counsel or their group managers, who tended to be responsible for managing all types of audits; (11) further, audit staff had a limited basis on which to classify and select returns that had the most audit potential; (12) IRS' approach for these large corporate returns gave a great deal of discretion to audit staff, however the staff had little information on previously audited corporations or industry issues to serve as guideposts; (13) all these aspects can contribute to a reduction in the amount of taxes recommended per audit hour and, with the possible exception of the problems in selecting returns, can affect the assessment rate; (14) Appeals usually did not share with Examination information that could be used to educate revenue agents; (15) even if Appeals did share information, revenue agents did not always have time to review the new information due to time pressures to do other audits; (16) although Appeals usually shared the final settlement on disputed issues, Examination management often did not distribute those results to the revenue agents; and (17) such feedback can help agents decide whether and how to audit similar issues in the future with better support of any recommended taxes.\n",
    "docs": [
      "Background For audit purposes, IRS splits large corporations (those reporting $10 million or more in gross assets) into two groups. Of the 46,700 large corporations in 1994, IRS placed about 1,700 corporations, usually exceeding $250 million in assets, into CEP. IRS audits the large corporations not in CEP (hereafter referred to as \u201clarge corporations\u201d) under the Examination Division\u2019s general program. The Examination Division audits tax returns to determine whether taxpayers paid the correct amount of tax. As discussed later in detail, IRS audit staff are to take various steps before auditing a return. First, the staff must classify and select a return for audit.",
      " IRS classifies returns to highlight tax issues (e.g., income, deductions, credits) that should be audited. Then, an IRS revenue agent is to plan how to audit such issues and collect information from the large corporation, as needed. If the corporation does not provide all requested information in a reasonable period without a valid excuse, IRS may issue a legal summons to compel the taxpayer to comply. The Department of Justice works with IRS to enforce the summons in court. For each audit issue, if the revenue agent views this information as insufficient support for the position taken on the return, the agent is to recommend adjustments to the return and compute a corrected tax liability.",
      " On the other hand, if the information supports the return filed by the large corporation, the agent is to recommend no tax change. The revenue agent presents the audit results to the large corporation officials, who may either agree or disagree. If the large corporation agrees, any additional tax that the revenue agent recommended becomes assessed. If the large corporation disagrees, it may file a protest with IRS\u2019 Office of Appeals, which is tasked with settling tax disputes without litigation on the basis of what is fair to the government and the taxpayer. An appeals officer is to evaluate the relative strengths of the government\u2019s and taxpayer\u2019s positions by reviewing the facts, including additional information provided by the taxpayer,",
      " pertinent court decisions, and the results of informal conferences with the taxpayer. To settle a tax dispute, an appeals officer can consider the hazards of litigation. The officer is then to negotiate mutual concessions in an attempt to arrive at a settlement. If a case is settled, any additional tax is assessed and the appeals officer is to prepare an Appeals case memorandum, or written summary, of how the case was handled. The summary is to include the issues raised; pertinent facts; applicable regulations, rulings, and court decisions; and the merits and hazards of litigation of each side. If a case is not settled, Appeals is required to issue a notice of deficiency and the taxpayer has 90 days to file a petition with the Tax Court.",
      " Even after a case is docketed in court, IRS District Counsel, by itself or by reengaging Appeals, may attempt to settle the case prior to trial. IRS data showed that in fiscal year 1992, Examination sent 2,235 large corporate cases to Appeals. As of late fiscal year 1995, Appeals had settled about 1,800 of those cases. Of those not settled by Appeals, three were settled by District Counsel, two were settled by trial, and the remainder were still open in Appeals. Objectives, Scope, and Methodology Our objective was to determine what factors affected the results of auditing large corporations as well as the amount of additional taxes recommended in these audits that are ultimately assessed.",
      " To accomplish our objective, we used two methodologies. First, we sent questionnaires to IRS revenue agents, IRS appeals officers, and corporate taxpayers associated with a nationally representative sample of audits in which a large corporation agreed with the additional recommended taxes at the end of either the audit or appeals processes during fiscal year 1994. To focus on larger audits, we restricted this questionnaire study to the universe of large corporate audits with $75,000 or more in recommended additional taxes and concentrated about one-third of the sample in a stratum with recommended taxes of $1 million or more. Our sample of 500 included about $2.3 billion of the $2.",
      "6 billion in recommended additional taxes and $648 million of the $810 million in taxes assessed from the 1,266 large corporate audits in our universe. Appendix I provides a detailed description of our sample selection methodology. We also sent a more general questionnaire to IRS group managers because, being responsible for many types of audits, they were not as likely as the above respondents to recall information about specific audits of large corporations. We randomly sampled group managers nationwide who had large corporate audits in their inventories as of August 1995. Questionnaire results for revenue agents, group managers, and appeals officers are presented in appendices II through IV, respectively.",
      " Because the questionnaires were sent to a sample rather than all members of their respective universes, all of the sample results are subject to sampling error. Unless otherwise noted, all estimates presented in this report have a 95 percent confidence interval of less than plus or minus 10 percent. Questionnaire results for the large corporations are not included because of a low response rate that did not allow us to develop estimates. Second, we obtained input from various IRS staff. We visited IRS\u2019 National Office, its 4 regional offices, and 7 of its 33 district and appeals offices to interview key officials. During the design phase of our review,",
      " we visited three additional districts and two additional appeals offices. In the National Office, we contacted officials in the Examination Division, National Appeals Office, and the Strategic Planning Division. In conjunction with our site visits, we interviewed selected Appeals, District Counsel, and Examination officials to obtain their views. Appendix V lists all locations visited and the officials interviewed at each location. In addition, we asked the Examination Chiefs in all 33 IRS district offices nationwide and Appeals Chiefs in all 33 appeals offices nationwide to give us their written comments on certain factors related to these large corporate audits. We received responses from 31 (94 percent) of the Examination Chiefs and 30 (91 percent)",
      " of the Appeals Chiefs. Their views are incorporated throughout this report. We obtained oral comments on a draft of our report from IRS and the Tax Executives Institute (TEI). We discuss such comments and our evaluation of them at the end of this letter. Overall, we conducted our work at IRS\u2019 National Office, 4 regional offices, 10 of the 33 district offices, and 9 of the 33 appeals offices. In addition, we used questionnaires received from all of IRS\u2019 33 district offices. We also asked Examination Chiefs and Appeals Chiefs nationwide to give us their comments on factors related to these large corporate audits.",
      " We did our work from May 1995 to November 1996 in accordance with generally accepted government auditing standards. Recent Statistics Raise Issues About Audits of Large Corporations Our 1995 report on large corporate audit trends provided statistics on IRS audits of large corporations between fiscal years 1988 and 1994. These statistics covered the audit results and assessment rate over this 7-year period. Neither we nor IRS knows what the assessment rate should be, but these statistics indicate that IRS has been investing a lot of time and money recommending additional taxes that do not get assessed. For example, in a comparison of data for 1988 and 1994,",
      " we found that IRS invested more resources in large corporate audits but recommended less additional tax per hour. IRS spent 25 percent more hours and audited only 3 percent more returns. Even so, the amount of taxes recommended (in constant dollars) dropped 23 percent per audit hour and 7 percent per audited return. In addition, IRS\u2019 no-change rate doubled from 8 percent to 16 percent. Further, for the 7-year period, we computed that IRS assessed, on average, 27 percent of the additional taxes that IRS revenue agents recommended in these audits. The assessment rate includes the amount of recommended taxes that the large corporations agreed to pay at the end of the audit as well as those amounts sustained after any appeal.",
      " Over the 7 years, large corporations appealed between 66 and 85 percent of the additional taxes recommended and agreed to pay the rest. Since 1990, corporate taxpayers have been appealing a lower percentage of the recommended taxes and agreeing to a higher percentage. Factors Affecting Assessment Rate and Audit Results We identified four factors that affected the assessment rate and/or audit results, such as the lower recommended taxes per audit hour in 1994 compared to 1988. Although the exact impact is unknown, each factor can affect both the rate and results. For example, three of the four factors\u2014complex tax laws, conflicting performance measures between Examination and Appeals,",
      " and limited coordination between these two IRS functions\u2014can produce a lower assessment rate. As for lower audit results, the three factors can each have a different impact. Complex laws cause IRS\u2019 audits to be very time consuming, which can lower the amount of recommended taxes per hour. Although Examination\u2019s performance measures would encourage higher amounts of recommended tax, Appeals measures would not be as likely to affect the audit results. Limited coordination between Appeals and Examination was unlikely to affect the audit results being disputed by corporations because the audits had already been done. On the other hand, future audit results on similar tax issues were likely to be reduced when revenue agents did not receive feedback on which disputed issues were conceded and why;",
      " such knowledge could enhance future audits. The fourth factor entailed a number of aspects of an audit that could reduce the taxes recommended per audit hour or the assessment rate. Because revenue agents generally worked alone without much assistance from counsel or their management, they needed more time to develop enough support to recommend taxes that could be assessed after an appeal. These agents also did not have a sufficient basis for selecting corporate tax returns with potential for significant tax changes. Generally, audits of returns with low potential were more likely to result in recommendations for little or no tax change and were less likely to be appealed. Thus, these audits would generally have little effect on the assessment rate.",
      " However, when a revenue agent tried to recommend taxes without sufficient support, such recommended taxes would not likely be sustained in Appeals, and the assessment rate would be lower. The following sections discuss each of these four factors in more detail. Tax Law Complicates IRS\u2019 Audits of Large Corporations IRS and large corporate taxpayers can have legitimate differences over how tax laws should be interpreted. We found that complex, ambiguous laws have created opportunities for both large corporations and IRS to interpret the tax laws differently. This discretion, in turn, increased the likelihood of tax disputes. Without clear tax laws, resolution of these disputes can get complicated and can ultimately depend on the negotiating skills of the IRS and corporate representatives.",
      " Because the corporate representatives have usually prevailed in Appeals or the courts, recommended additional taxes have tended not to be assessed. We have previously reported that the federal tax laws are complex, difficult to understand, and in some cases indecipherable. Some of the large corporate officials who responded to our survey indicated that a major reason for disputing recommended taxes was revenue agents\u2019 interpretation of tax laws. We estimate that revenue agents judged that about 86 percent of the corporate tax disputes were due to different interpretations of the tax laws. Appeals officers in our universe cited the hazards of litigation as the primary reason for resolving these interpretive differences in favor of the corporations for an estimated 56 percent of the additional taxes being appealed.",
      " The National Director of Appeals told us in a letter that these audits often raise issues involving substantial doubt or variances of opinion because these issues are complex and not definitively answered by litigation. The complex tax laws also affected IRS\u2019 ability to conduct audits, according to 21 of the 33 Examination Chiefs and 27 of the 33 Appeals Chiefs nationwide. Such complexity, in combination with the broad scope of the tax laws, made it difficult for IRS to ensure that its revenue agents stayed current in their tax law knowledge and for large corporations to comply with the tax laws. \u201cTaxpayers are aware of the difficulty of determining with exactness the liability that they have.",
      " They are also aware that the courts cannot resolve all disputes arising out of the audit process. Therefore, the Service must pursue the administrative resolution of these cases whenever possible. The fact that the Service is highly motivated to resolve cases without litigation means that compromises on difficult and controversial issues will take place. Knowing this, taxpayers naturally take advantage of the process to dispute those issues on which some doubt exists.\u201d To help resolve problems with tax law complexity and recurring issues in CEP audits, our 1994 report recommended that IRS should more strongly propose changes to the tax laws. IRS agreed and has established a work group to evaluate ways to implement this recommendation. To the extent that IRS is successful in getting Congress to simplify the various complex tax issues,",
      " large corporations are likely to benefit as well as IRS. Differing Measures in Examination and Appeals May Have Reduced the Assessment Rate IRS\u2019 overall mission is to collect the proper amount of taxes in a manner that is efficient and fair and promotes public confidence. The Examination and Appeals functions also have important missions that should contribute to IRS\u2019 overall mission. Revenue agents are charged with protecting the government\u2019s interest in receiving the proper amount of tax. They are instructed to make their audit recommendations without deviating from IRS\u2019 legal positions or considering the hazards of litigation (i.e., the chance of losing in court). On the other hand, appeals officers are charged with resolving tax controversies without litigation to the extent possible while being fair and impartial to both the government and the taxpayer.",
      " They are instructed to consider the hazards of litigation and may concede the recommended taxes in part or in whole on that basis. Performance measures typically move a function toward desired ends within a mission. In doing so, the performance measures within the two functions reflect their respective missions and may not encourage the functions to work together effectively to accomplish IRS\u2019 overall mission. For example, Examination has traditionally focused on measuring the amount of additional taxes recommended per audit and per audit hour. On the other hand, Appeals has focused on measuring the number of tax disputes settled as quickly as possible without litigation. These different measures have the potential to lead to a lower assessment rate. The audit measures may encourage revenue agents to propose tax adjustments regardless of whether they can be sustained on appeal and discourage agents from fully developing issues because of time pressures to close the audits.",
      " Appeals\u2019 measures may encourage appeals officers to settle more cases in less time even when some of the recommended taxes have a justifiable basis under vague or complex tax laws. As a result, a high proportion of recommended taxes may not be assessed, but Examination could claim success for recommending high amounts of taxes and Appeals could claim success for settling the case without litigation. In our 1994 CEP report, we reported a similar situation for CEP audits and recommended that IRS add an IRS-wide measure, such as the collection rate, to the functional measures. Although IRS disagreed with this recommendation when commenting on a draft of the CEP report, IRS officials subsequently told us they plan to implement such an IRS-wide measure in some form during fiscal year 1998.",
      " Such a measure could similarly be applied to various types of audits, including audits of other large corporations. An IRS-wide measure such as the collection and/or assessment rate could encourage IRS functions to work together to accomplish IRS\u2019 overall mission of collecting the proper amount of tax. National Office Examination and Appeals officials expressed concerns about possible unintended effects from creating such a measure. For example, they said an overall IRS measure such as the assessment rate could encourage revenue agents to avoid raising difficult audit issues or appeals officers to settle disputes just to drive up the assessment rate. However, this measure of the tax outcomes also would be likely to encourage revenue agents to more fully develop audit issues that could be sustained if appealed.",
      " As discussed later, such a measure also could encourage appeals officers to coordinate with Examination while still remaining impartial and independent in settling tax disputes. As measures are emphasized over time, they become ingrained, making changes very difficult. At every location we visited, we heard about the driving force of existing measures from Examination or Appeals officials and the difficulty of changing or adding to them. These officials noted that as new measures are introduced, the culture of the organization will resist change and cling to the past. Many Examination and Appeals managers we contacted also expressed concerns over using an assessment rate as a measure for the large corporate program. In part, they pointed to impurities in IRS\u2019 databases that do not allow them to separate audit actions from nonaudit actions,",
      " such as claims or net operating losses. IRS has been developing a new database to help identify these problems and their impacts on the revenue collected due to audits and other enforcement efforts. One case in our sample epitomizes the concerns about the assessment rate being skewed by nonaudit actions. In this case, the revenue agent recommended several hundred million dollars in additional taxes. Appeals sustained 100 percent of the issues and the taxes recommended by the revenue agent. However, the large corporation submitted additional information as well as a net operating loss and other claims during the Appeals process. Appeals accepted and approved these losses and claims. The losses and claims almost completely offset the additional taxes recommended by the revenue agent.",
      " As a result, about 1 percent of the recommended taxes was assessed. Until the databases account for them, nonaudit actions that are considered during the Appeals process will continue to overstate or understate the rate at which taxes recommended in audits get assessed. On the other hand, of the 40 regional and district officials we interviewed, 14 told us they supported using the assessment rate. One Appeals Chief told us \u201cThe measurement standards would be more appropriately based on dollars ultimately assessed and collected.\u201d In addition, at least one official from each function\u2014Appeals, Counsel, and Examination\u2014in the four regions told us that both Examination and Appeals should be accountable for the assessment rate.",
      " Further, 7 of 33 Chiefs of Examination said they already used a cross-functional measure, such as the amount of additional taxes recommended that gets assessed, as an additional way to evaluate audit effectiveness. Audit Circumstances Hindered Revenue Agents From Developing Recommended Taxes That Could Be Sustained Audits of these large corporations can be complex and technical but are generally done by a single revenue agent. Although they worked alone, these revenue agents received little assistance from district counsel or their group managers. Also, IRS\u2019 approach for classifying and selecting these large corporate returns did not help ensure that revenue agents spent their audit time on the most noncompliant returns.",
      " Finally, the agents had difficulty obtaining information from the large corporations. In combination, these circumstances made it difficult for revenue agents to recommend taxes that had enough support to be assessed without investing a lot of time. Revenue Agents\u2019 Corporate Audit Experience and Training Limited IRS officials said the level of large corporate auditing experience for revenue agents was not as high as they would like it to be. For the large corporations in our study, the average return was audited by a single revenue agent with about 8.5 years of corporate auditing experience. IRS has lost about 1,800 experienced revenue agents over the past 3 years. IRS National Office Examination officials as well as regional and district officials interviewed noted that if IRS continues to lose its senior revenue agents without being able to replace them,",
      " corporate audits will become less productive. Furthermore, these agents could not easily develop corporate expertise because they generally conducted many other types of audits, such as those of partnerships and individuals. Given the level of experience of these revenue agents and the complexity of the tax law, training in corporate income tax practices and the tax laws is important. In this regard, the revenue agents in an estimated 38 percent of the audits in our study population believed that they needed, but had not received, training that would have improved their ability to conduct their audits. A common need cited was for more industry-related training. Further, 25 of the 33 Examination Chiefs nationwide indicated that additional training in specific industries would enhance audits of complex,",
      " technical issues. A regional task force cited a need for additional training so revenue agents could become more proficient in recognizing and developing corporate issues. In February 1997, National Office Examination officials told us they were developing a specific course that will be used to train all revenue agents assigned to large corporate audits. To help guide revenue agents doing large corporate audits, they also planned to have audit criteria and procedures in place by the end of calendar year 1998. However, six Examination Chiefs pointed out the difficulty in providing additional training when training funds have been diverted to other areas because of budget limitations. For example, one Examination Chief told us that for fiscal year 1996 the training budget was cut so severely that Examination could not conduct continuing professional education for revenue agents.",
      " National Office Examination officials told us during November 1996 that IRS added $10 million to fiscal year 1997 training funds across IRS, of which Examination received $1.4 million. According to one of the officials, these funds should help Examination provide most, but not all, of the basic continuing professional education training to its revenue agents. Moreover, this official said funding for training is unlikely to improve for fiscal year 1998 under the current budget environment. Limited Counsel and Managerial Assistance Working alone on these corporate audits, revenue agents may need assistance in planning and developing their audits. However, we found that revenue agents usually did not request assistance from district counsel or their group managers on planning and doing the audits.",
      " Revenue agents for most of the 1,266 audits in our study population said they did not request any legal assistance on matters of tax law or overall issue development. We estimate that revenue agents reported requesting assistance from the Office of District Counsel for about 14 percent of the audits, and from the Office of Chief Counsel for about 8 percent of the audits. However, for an estimated 55 percent of those audits in which revenue agents requested assistance, they judged that such assistance had a positive or very positive effect on their ability to obtain the taxpayers\u2019 agreement. Appeals officers consulted with district counsel during resolution of an estimated 20 percent of the most significant issues raised by revenue agents.",
      " For about half of these consultations, the appeals officers indicated that District Counsel helped them to resolve the disputes to a great or very great extent. Our interviews with district office officials identified a major reason for infrequent requests for legal assistance. These officials were concerned about revenue agents and appeals officers not receiving the assistance in a timely manner. Counsel officials in the four districts we visited acknowledged that responding to requests for formal legal assistance can be time-consuming. However, these officials told us they could help improve the effectiveness of the large corporation audits by assisting the revenue agent in developing audit issues and obtaining requested information. They believed that such involvement could be justified and helpful.",
      " In February 1997, National Office Examination officials told us that Counsel involvement in CEP cases is working well and support looking for ways to increase Counsel\u2019s involvement in the large corporate cases. However, Counsel officials cautioned that increased involvement would have to be on a selective and informal basis due to staffing constraints. Less than half of the revenue agents in our universe indicated their group managers were involved in identifying audit issues, discussing complex audit issues, obtaining information from the taxpayer, or resolving disputed issues. In well over half of those audits in which revenue agents indicated their managers were involved, the revenue agents indicated that such involvement helped them. For example, we estimated that in 207 of the audits in our population,",
      " revenue agents indicated that their group managers were involved in obtaining requested information from taxpayers; in an estimated 83 percent of those audits, the revenue agents viewed such involvement as either very positive or somewhat positive. Examination officials and the regional task force report provided insights on why managers were not more frequently involved in agents\u2019 audits. For example, they said most group managers did not have sufficient experience or time to substantially assist revenue agents. Examination officials from the districts we visited told us that group managers were responsible for many revenue agents and other auditors who audit a range of tax entities, from individual returns through complex corporate returns, that involve different tax rules and issues.",
      " Officials said that group managers tended to focus their attention on newer staff and administrative duties. They said that as a result, revenue agents were left to conduct these corporate audits with minimal managerial involvement, and group managers lost the opportunity to develop their corporate audit experience. Both the Examination officials and the regional task force report concluded that these large corporate audits were more effective when group managers with corporate audit experience were actively involved. For example, 20 of the Examination Chiefs nationwide indicated that group manager involvement was crucial to the success of these audits. To increase managerial involvement and audit effectiveness, four districts we visited had recently created groups of existing revenue agents that specialized in large corporate audits.",
      " Managers with extensive corporate auditing experience led these groups to help their agents get assistance in selecting, planning, and doing audits. District officials believed that these groups, although fairly new, have improved the effectiveness of large corporate audits because, in part, of the focus and assistance of group managers. IRS\u2019 National Office has not yet issued any uniform guidance on how to measure the success of these groups. Accordingly, not all districts were consistently measuring the impacts; some were focusing on different audit results (e.g., recommended taxes per hour versus no-change rate). National Office Examination officials told us that they would like to learn more about the impacts of these specialized groups across the districts that had created them.",
      " In evaluating these groups, it is important to recognize that some districts may not have enough corporate workload or revenue agents to justify these specialized groups. That is, such districts may wish to maintain flexibility in using revenue agents on other than large corporate audits. At least one Examination Chief was concerned about the potential impacts on audit results in the short term. Even so, officials in these districts believed that these specialized groups will ultimately yield better large corporate audit results, cancelling out any initial decline in the results. And, if the districts who were experimenting with such groups maintain a similar level of investment in large corporate audits, shifting the agents into specialized groups would not necessarily increase IRS\u2019 costs or reduce resources for other types of audits.",
      " Inconsistent Approach Among Districts for Selecting Corporate Returns for Audit Compared to CEP tax returns, the approach for selecting these large corporate returns was more subjective and varied. To determine which large corporations to select for CEP, IRS scores corporate tax returns on specific criteria, such as corporate structure, assets, and income. IRS does not have a consistent approach or criteria for classifying and selecting tax returns for large corporations not in CEP. The approach and criteria varied by district. In general, revenue agents and/or their group managers selected the returns to audit, depending on the IRS district. Many districts charged revenue agents with both classifying and selecting issues for audit,",
      " and some districts had other auditors do the initial selection and classification. Some districts relied on service center staff to classify large corporate returns, using criteria provided by that district, or subjectively without using any such criteria before sending the selected returns to the district. In sum, our analysis of questionnaire responses and our interviews with IRS officials showed that the IRS staff doing the selection and classification had to ultimately rely on their experience and judgment about audit potential. They had limited criteria and little information on (1) any previous audits of the large corporation or (2) overall large corporate audit results by issue and industry to guide their decisions. Some of these staff may be sufficiently experienced to find returns that would be productive to audit.",
      " However, the audit results in fiscal year 1994 showed that more returns were audited without any recommended tax changes or with lower amounts of recommended tax per audit hour than in fiscal year 1988. National Office Examination officials have expressed similar concerns about their selection and classification system for large corporate audits. They established a task force to develop a more structured system, but budget constraints have stalled the task force\u2019s efforts. In lieu of the task force, the National Office is testing the benefits of providing additional information on a corporation, such as Securities and Exchange Commission (SEC) reports, to the revenue agent reviewing the corporate return. Examination is also testing potential improvements to the classification system;",
      " none of the tests are far enough along to have useable results. Selected IRS districts are testing classification of returns by market segment. Also, IRS is developing the Examination Operational Automated Database in an attempt to capture audit results by issue and industry. Examination officials believe that this database could be used to enhance any selection and classification system by providing feedback on tax issues (e.g., unreported gross receipts, overstated travel expenses) by industry (e.g., manufacturing, wholesale trade) that have proven to be productive to audit. That is, IRS could identify issues and industries in which audits generated more recommended taxes per audit hour. By tracking such audit results,",
      " Examination officials believed that this database will be particularly helpful in classifying audit issues. These officials said IRS already had most of the necessary hardware and software. They estimated that enhancements in fiscal year 1997 would cost about $320,000 and that administrative costs would average a staff year per district. This system is being tested in two IRS districts and is expected to be operational by the end of calendar year 1998. Further, IRS officials from some districts with groups specializing in audits of large corporations told us such groups have helped improve the return selection and classification processes at these districts. These groups can improve not only the selection process but ultimately the productivity of these corporate audits.",
      " For example, in one district, an Examination official told us that while the overall percentage of audits closed with no additional tax recommended was about 10 percent, the rate within the specialized group was only about 3 percent. Such audits can result in ineffective use of IRS\u2019 as well as the corporations\u2019 resources. Difficulty in Obtaining Information to Support Tax Recommendations During audits, revenue agents may question items on the return, such as income, deductions, or credits. If a corporation cannot provide adequate information as support, the revenue agent may adjust the items, which usually results in additional taxes being recommended. Both the revenue agents and large corporations contributed to problems in obtaining such information.",
      " Not having the information hindered IRS\u2019 ability to do effective audits and support tax recommendations. Appeals and Counsel officials in all four districts we visited told us that revenue agents do not always have adequate information to support recommended taxes. Taxpayers provided information to Appeals that had not been provided to the revenue agents in an estimated 53 percent of the disputed audits. Appeals officers for some of the audits noted that revenue agents had provided insufficient information to justify their development of an audit position. For example, appeals officers for an estimated 27 percent of the disputed audits indicated that not all of the top three dollar issues had been fully developed by the revenue agents during the audit.",
      " Examination and Appeals officials told us that some corporate taxpayers did not always provide requested information in a timely manner, if at all. Corporations can have difficulty providing information when IRS\u2019 requests are vague, for old data, or made late in the audit. On the other hand, corporations have little incentive to provide all information, particularly if it will lead revenue agents to make adjustments or to audit other areas on the tax return. IRS officials we interviewed believed that problems in obtaining all the information needed to support tax recommendations were becoming more prevalent. Examination, Appeals, and Counsel officials said agents should ensure that they have adequate information to support tax recommendations. They also expressed the opinion that the recently formed specialized groups can increase managerial and counsel involvement in helping revenue agents obtain the information needed to support their recommended taxes.",
      " They noted that these group managers, when involved, were usually able to help agents obtain requested information from taxpayers. Counsel officials told us that their involvement, including the discussion and issuance of summons when needed, could help secure information. They noted that revenue agents need to make information requests early in the audit so that the summons process, if needed, can begin as soon as possible, enhancing its effectiveness. IRS generally uses a summons as a last resort, meaning IRS has tried all other administrative means of obtaining requested information. Although used infrequently, a summons can prompt large corporations to provide the requested information. If it does, the investment in time and money can prove to be worthwhile compared to spending time awaiting information that may not be received.",
      " Coordination Between Appeals and Examination Was Limited During the appeals process for large corporate audits, coordination between Appeals and Examination was limited. Appeals generally did not share with Examination new information from large corporations. Sharing this information would give revenue agents the opportunity to review it and provide their comments to Appeals before the settlement. After the final settlement, Examination did not always distribute Appeals\u2019 summary of that settlement to its revenue agents. Our work showed that such limited coordination resulted from insufficient requirements and incentives to coordinate. Although Appeals\u2019 independence in settling tax disputes is critical, limited coordination between the two functions can hinder IRS\u2019 efforts to reach a balanced settlement as well as to improve future audits.",
      " Appeals officers for an estimated 25 percent of the disputed audits indicated they had no interaction with revenue agents while resolving the disputed tax issues. Appeals and Examination officials have acknowledged such limited coordination overall. An Appeals task force draft report cited Examination\u2019s concerns about the current Appeals process not providing Examination with an opportunity to present its views on key issues prior to resolution. Knowing that large corporations usually have unlimited access to the appeals officer to discuss the dispute, Examination officials said limited involvement and coordination with Appeals creates the appearance that the government\u2019s interest is not fairly represented and that the Appeals process is not balanced. This appearance of bias can be aggravated when an appeals officer does not share with Examination staff new information provided by large corporations.",
      " Appeals officers for an estimated 53 percent of the disputed audits in our study population indicated that large corporations provided additional factual information for at least one of the top three dollar issues. However, the appeals officers asked Examination to review the new information in 139, or an estimated 43 percent, of those disputed audits in which corporations provided new information. Revenue agents reported a similar lack of coordination. They indicated that Appeals asked them about new information in only an estimated 17 percent of all disputed audits. Neither we nor IRS knows whether the appeals officers should have shared the new information in these cases. Our CEP work indicated that CEP corporations are more likely to win more disputes when they provide information to Appeals that Examination has not had the opportunity to review.",
      " In addition, Examination officials told us that Appeals seldom shared the proposed settlement with Examination so that revenue agents could have one last look at how the dispute was to be settled and whether any new information played a part. National Office Examination officials told us in February 1997 that they do not believe it is realistic for Appeals to share proposed settlements in every case. However, Examination wanted the opportunity to review and discuss new information submitted after the audit closed. Two reasons help explain this limited sharing with Examination staff. First, although IRS does require appeals officers to share significant new information with Examination, it left the definition of \u201csignificant\u201d to the discretion of each appeals officer,",
      " recognizing that sharing all new information would not be realistic. Given the uncertainty over this requirement, Appeals could not ensure that the significant information had been shared. Without a definition of significant and without adequate controls to ensure that all significant new information is shared, neither we nor IRS knew whether the appeals officers involved with our study population had met the requirement for sharing significant new information. Also, IRS did not require Appeals to share its proposed settlements with Examination. Second, the limited sharing partially resulted from the differing roles and incentives driving the work of Examination and Appeals. Appeals Chiefs we interviewed said they encourage appeals officers to involve the revenue agents in reviewing new information but advised their appeals officers to be conscious of the time and costs to do so.",
      " That is, if the appeals officers believe they can review the information in a shorter period of time than a revenue agent can, the appeals officers should most likely do it. Our interviews with Examination officials also indicated that many revenue agents have little incentive to spend time reviewing new information on a case that Examination has already closed. Further, both Appeals and Examination officials at the National Office said that sharing all new information would be unnecessary and too time-consuming. In February 1997, these Appeals officials told us they believed much of the new information submitted by taxpayers was not significant. Regardless, sharing significant new information, especially that relating to issues that may not be sustained,",
      " would help IRS to maintain its designed separation of duties\u2014revenue agents could audit the new information and appeals officers could focus on settling the entire dispute. To help meet this end, our 1994 CEP report recommended that IRS improve controls to ensure that Appeals provides CEP teams an opportunity to comment on proposed settlements. IRS disagreed at the time, but Appeals subsequently proposed a procedure to promote better communication with Examination and better settlement of key issues in CEP cases. Under that proposal, Examination could identify five key issues in a case nearing settlement and Appeals would not settle the key issues until it had considered feedback from Examination. This way, Examination would have the opportunity to review the proposed settlement and advise Appeals of any significant facts,",
      " laws, or other factors that may need further consideration. According to many Examination and Appeals officials we interviewed in the districts, allowing Examination to provide this input could add balance to the appeals process without adversely affecting Appeals\u2019 independence. The proposed procedure also could help ensure that Appeals provides Examination with significant new information that taxpayers submit and an opportunity to comment just prior to settling a case. Recognizing that taking these steps could involve some additional time, both Examination and Appeals officials told us during our field visits in early 1996 that the steps were worth taking. However, in November 1996, National Office Appeals officials told us that IRS had recently decided not to implement testing of this proposed procedure because of concerns by both Appeals officials and large corporations that such a procedure could impede Appeals\u2019 ability to independently settle tax disputes.",
      " However, these Appeals officials said that Appeals\u2019 independence would not necessarily have to suffer under this proposal. Regarding final settlements, Appeals has a procedure for sending a copy of the final written summary to Examination, but Examination has no process in place to ensure that this feedback reaches the appropriate revenue agent. Revenue agents indicated that they received the written summary in an estimated 61 percent of the disputed audits. Examination officials and revenue agents told us that this summary can provide insights on why a recommended tax adjustment was or was not sustained on appeal. For example, the summary typically discusses the reasons for settling the disputes, such as hazards of litigation. Without knowledge of significant facts or laws followed in the settlement,",
      " the revenue agents lose an opportunity to learn about the types of tax issues involved in the case and the support needed to sustain future tax disputes. In summary, Appeals attempts to provide large corporations with a review of their tax disputes that is independent of Examination or other IRS functions before these corporations decide whether to litigate. However, both Examination and Appeals officials told us that increased coordination and communication could help to improve their working relationship and to correct the appearance of imbalances during appeals without reducing the independence. To illustrate this point, a Regional Chief Compliance Officer told us about the need for more balance whenever large corporations withhold information during the audit but provide that information to Appeals.",
      " Examination Chiefs told us more interaction would afford an opportunity for their agents to better explain their recommended taxes as well as any difficulties they may have had in obtaining information to support their recommendations. Conclusions Our analysis of questionnaire responses and interviews with IRS officials identified at least four factors that contributed to the low assessment rate or decline in audit results for 1988 to 1994. First, complex tax laws impeded revenue agents\u2019 efforts to determine the correct tax liability and appeals officers\u2019 efforts to fairly settle tax disputes. Second, differing performance measures prompted revenue agents to recommend as much tax as soon as possible and appeals officers to settle tax disputes without litigation as soon as possible.",
      " We recommended in our 1994 report that IRS more strongly propose legislative changes to reduce tax law complexity and consider cross-functional measures, such as the collection and/or assessment rate. IRS is taking action on both of these recommendations. We make no new recommendations on these issues because our 1994 recommendations can also apply to audits of other large corporations. Third, various aspects of the audit process impeded revenue agents\u2019 ability to develop recommended taxes that can survive appeals. IRS recognized these aspects but faced constraints in surmounting them. Budget pressures limited the use of team auditing to buttress agents\u2019 lack of expertise in auditing large corporations. The broad and complex nature of tax administration complicated efforts to carve out more time for group managers and district counsels to formally assist revenue agents\u2014who often work alone without much assistance.",
      " Revenue agents viewed such assistance, whether formal or informal, as helpful in identifying and discussing audit issues, requesting corporate information, and pursuing requests that have not been answered. Further, IRS initiated efforts, such as a task force to study ways to improve return selection and classification, but these efforts stalled due to budget constraints. Some IRS districts have taken a step that could address many of these problems. They have combined senior revenue agents and managers into groups that specialize in large corporate audits. Examination officials in districts that created these groups believed that their initial experiences indicated that the groups helped improve return selection and classification, information gathering, and audit productivity. They also believed that the groups allowed managers and agents to share knowledge and assistance in a focused,",
      " timely way. However, the districts generally had limited data on the actual impacts of these groups, and IRS\u2019 National Office has not provided criteria or oversight to guide the measurement of the impacts. National Office Examination officials said they would like to learn about the impacts of these groups across the districts. Fourth, the Appeals and Examination functions did not always share information. Unlike CEP teams that have an ongoing audit presence, revenue agents who audit these large corporations move on to other audits. We recognize that sharing all information would not be realistic; however, Appeals could inform Examination officials of any new information that would cause the appealed issues to not be fully sustained.",
      " Doing so would help IRS to maintain the intended separation of duties. Examination could have an opportunity to audit the new information and Appeals officers could then focus on their responsibility for settling the entire dispute. After a dispute was settled, Examination did not have a system for regularly sharing Appeals\u2019 summaries of the final settlements with revenue agents. Knowing about the final settlement could help agents to learn about and support tax issues that could sustain appeals. For any form of enhanced sharing, maintaining Appeals\u2019 independence would be paramount. In recommending improvements, we tried to recognize the costs and constraints to IRS. Most of our recommendations will entail limited costs. For example, providing more specific,",
      " objective guidance and criteria on return selection need not be an expensive proposition, particularly if the new database on audit results helps to identify the types of large corporations and tax issues that have proven productive to audit. The use of more informal legal assistance would create some costs, but that assistance could be provided more quickly and at less cost than formal assistance. Further, providing more structure and guidance to districts on evaluating the impacts of the specialized audit groups should not cost much and could provide big dividends if IRS had more certainty about the impacts of these groups on the productivity of large corporate audits. Appeals\u2019 sharing of significant new information with Examination could add some time to resolving the disputes,",
      " but that investment should be worthwhile if the revenue agents learn how to do better audits or help to determine the correct tax liability. Even if some costs increase, the accompanying improvements should help IRS to better invest its limited enforcement funds in trying to ensure that large corporations are paying the correct amount of taxes. Recommendations To improve the audits of tax returns filed by large corporations, we recommend that the IRS Commissioner provide more specific objective criteria and procedures to guide the selection of large corporate tax returns and classification of tax issues with high audit potential across the districts; develop criteria and procedures to guide the evaluation across the districts of the impacts of groups specializing in audits of large corporations;",
      " encourage District Examination management to work with District Counsel officials on finding cost-effective ways to provide revenue agents with the necessary legal assistance; require Appeals to notify Examination of new information received from a large corporation that could cause the appealed issues to not be fully sustained, and require Examination to (1) indicate whether it wishes to review the new information and, if so; (2) review the information and notify Appeals of the results of the review as soon as possible; and require Examination management to provide feedback to its revenue agents on the final settlements that Appeals reaches with large corporations. Agency Comments and Our Evaluation We obtained comments on a draft of this report in a meeting on February 20,",
      " 1997, with IRS officials who represented you. These officials included a representative of the Commissioner\u2019s Office of Legislative Affairs, a representative of the Chief of Staff to the Assistant Commissioner of Examination, as well as representatives of the Large Business Examination Programs, and representatives of the National Director of Appeals. In general, they agreed with our findings and conclusions and provided a few technical comments on specific sections of the draft. We have incorporated these comments, such as on additional training funds for revenue agents, Appeals\u2019 discretion to share significant new information, and performance measures, in the sections of the report where appropriate. As for our five recommendations, IRS agreed to implement four,",
      " as discussed below. First, IRS officials said they have already started to analyze closed large corporation audits to develop an objective system for better classifying and selecting large corporation returns to audit. IRS plans to begin testing this system in selected districts within each IRS region by the summer of 1997 and to implement it by the end of 1998. Second, IRS officials said they plan to develop criteria and procedures to guide the evaluation of the district groups that specialize in audits of large corporations. IRS hopes to finish these actions during 1998. Third, IRS officials said they plan to issue an IRS-wide memo by May 1997 to encourage district Examination management to work with District Counsel officials on finding cost-effective ways to provide revenue agents with the necessary legal assistance,",
      " including the use of field service advice and technical advice memoranda. Fourth, IRS Examination management said it plans to change the Internal Revenue Manual to require that revenue agents be provided with feedback on Appeals\u2019 final settlements with large corporations. Because the next series of changes to the Manual will not be done until the end of fiscal year 1997, Examination officials plan to issue a memorandum on this requirement during May 1997. IRS officials did not agree to implement the fifth recommendation that would require Appeals to share its proposed settlements with Examination so that Examination could see whether the large corporation provided new information that affected the settlement. Examination officials said they want to see significant new information,",
      " but requiring Appeals to share all proposed settlements may be too formalized and too strong a process for obtaining the new information. Appeals officials expressed concern that sharing proposed settlements could create perceptions that Appeals\u2019 settlement authority would be subject to an Examination veto. This perception could prompt large corporations to close off Examination\u2019s reinvolvement by taking the dispute to court. They also believed that this sharing would add time to the settlement process that usually would be significant and would not change the final settlement. Finally, they believed that reinvolving Examination could produce an adversarial relationship to the extent that appeals officers felt pressured to justify their settlement proposals. We also asked TEI to provide comments on the same draft report.",
      " We met with TEI officials on February 21, 1997, to obtain their comments. They also supported or had no opposition to the same four recommendations that IRS agreed to implement. Although we made no recommendations on these topics, they supported creating an IRS-wide performance measure and more training for revenue agents as well as applying CEP processes to non-CEP audits. Like IRS, they expressed similar concerns with the recommendation on sharing proposed settlements with Examination so that it could see how new information affected the settlements. They also expressed the concern that sharing the proposed settlement may prompt Examination to go beyond the new information and try to re-audit other issues.",
      " In recommending that Appeals share proposed settlements to allow Examination to see whether new information significantly affected the settlement, we did not intend to undercut Appeals\u2019 settlement authority or grant Examination veto power over settlements; in fact, our draft report pointed to the importance of retaining Appeals\u2019 independence in settling disputes. Thus, we did not envision that the act of sharing would require a highly formalized process or much time in the majority of cases. Rather, our intent was, and still is, to provide an inducement for appeals officers as well as large corporations to share significant information with Examination. We believed that some control or check was needed to better ensure that Examination had the opportunity to play its appropriate role in reviewing information to determine the correct tax liability and protect the government\u2019s revenue.",
      " We intended that the requirement to share would provide a control over the appeals officers\u2019 use of discretion in judging the need to share new information. We also intended that this requirement would send a signal that large corporations cannot intentionally bypass the audit process by providing new information to appeals officers during negotiations over tax liability. Our focus on the need for a control stems from responses to our questionnaires and to our interviews with district office officials during 1996. Although Examination officials recognized that communication with Appeals has been improving, Examination officials and staff still pointed to instances in which they did not have a chance to review significant new information that a large corporation had provided to Appeals.",
      " In some cases, they noted that they had asked for similar information during the audit. Even so, we understand the concerns expressed by Appeals and TEI officials about sharing the significant new information through the proposed settlements. We discussed several other ways to address the concerns and still have IRS provide a control over Appeals\u2019 sharing of new information with Examination. These discussions prompted us to change our recommendation on how to better ensure that Examination has an opportunity to review the new information. Under our changed recommendation, Appeals would notify Examination as soon as possible after a large corporation provided new information that could cause the disputed issues to not be fully sustained. Upon notification, Examination could choose to do nothing,",
      " ask for details, or ask to review the information. Examination and Appeals would need to develop procedures on how much time Examination has to request and review the information, how the information would be shared, how extensive the review would be, and how the results of the review would be communicated to Appeals. We believe that this option would provide Examination the opportunity to fulfill its intended roles\u2014determine the correct tax liability and protect the government\u2019s revenue\u2014while mitigating the concerns raised by Appeals and TEI. As we envision it, this recommendation would not delay or disrupt many final settlements because the information would be shared soon after being received. One exception,",
      " of course, would be if the information was significant enough and the review was revealing enough to change the settlement that the appeals officer would have made without Examination\u2019s involvement. Even with this exception, settlement authority would still rest with the appeals officers. This report contains recommendations to you. As you know, the head of a federal agency is required by 31 U.S.C. 720 to submit a written statement on actions taken on the recommendations to the Senate Committee on Governmental Affairs and the House Committee on Government Reform and Oversight not later than 60 days after the date of this letter. A written statement also must be sent to the House and Senate Committees on Appropriations with the agency\u2019s first request for appropriations made more than 60 days after the date of this letter.",
      " Copies of this report are being sent to the Chairmen and Ranking Minority Members of the House Committee on Ways and Means and the Senate Committee on Finance, various other congressional committees, the Director of the Office of Management and Budget, the Secretary of the Treasury, and other interested parties. We also will make it available to others upon request. Major contributors to this report are listed in appendix VI. Please contact me on (202) 512-8633 if you or your staff have any questions about this report. Sampling and Data Analysis Methodology This appendix describes how we identified our universe of large corporate audits closed agreed in Examination or Appeals during fiscal year 1994 and our sampling methodology.",
      " In addition, it discusses our methodology for developing and administering questionnaires to IRS audit and Appeals staff and taxpayers for our sample. Sample Selection Methodology In order to send questionnaires to IRS audit and Appeals staff and taxpayers, we identified a universe of corporate taxpayers related to corporate audits closed agreed in Examination or Appeals during fiscal year 1994. We chose fiscal year 1994 for two reasons. First, it provided us with the most recent cases closed agreed in Examination or Appeals. Second, IRS revenue agents and appeals officers and taxpayers would be more likely to recall specific case information on the most recent closed cases. Our computer analysis of IRS\u2019 databases identified a total population of 1,",
      "266 audits closed in fiscal year 1994 with $75,000 or more in additional taxes recommended. Table I.1 shows the division of the 1,266 audits by additional taxes recommended. Dollars assessed (in millions) We determined that a survey of the revenue agents, appeals officers, and taxpayers associated with a nationally representative, stratified random sample of 500 audits would be sufficient to accomplish our objective. The sample is divided into six strata based on the assessment rate and the amount of additional taxes recommended. Since those audits with the greatest amount of dollars recommended have the most affect on the assessment rate, the sample includes a relatively large number of the larger dollar cases.",
      " We included in our sample all of the 117 audits with $3 million or more in additional taxes recommended; 133 of those audits with between $1,000,000 and $2,999,999 in additional taxes recommended; 120 of those audits with between $300,000 and $999,999 in additional taxes recommended; and 130 of those audits with between $75,000 and $299,999 in additional taxes recommended. The 500 cases in our sample accounted for $2.3 billion, or 88 percent, of the total $2.6 billion in additional taxes recommended in our population. Similarly, the $648 million in additional taxes recommended that were assessed accounted for 80 percent of the total $810 million assessed from the corporate audits shown in table I.",
      "1. In the study analyses, the sample selections have been properly weighted to represent the total population of 1,266 audits with $2.6 million in recommended additional taxes. Because group managers are responsible for a large number of audits of different entities, not just corporations, we sampled these managers without respect to their involvement in any particular audit. To do this we asked the 63 district offices to identify all group managers having large corporate audits in their inventories as of August 1995. The districts identified 555 group managers meeting this criterion. From this universe we randomly selected a sample of at least a third of the group managers at each of the 63 district offices.",
      " This resulted in a total sample of 215 group managers. In our analyses, the 215 sample selections have been properly weighted to represent the total population of 555 group managers. Questionnaire Methodology We developed four mail-out questionnaires to obtain the views of IRS revenue agents, appeals officers, group managers, and corporate taxpayers on the factors affecting the audit and appeals processes, such as obtaining needed information, the effect of the tax laws, and the interaction between Appeals, Counsel, and Examination staff involved with these audits. We pretested the questionnaires on several separate occasions for technical accuracy. We tested the revenue agent and group manager questionnaire in the Baltimore,",
      " Chicago, and St. Louis District Offices; the appeals officer questionnaire in the Baltimore and St. Louis Appeals Offices; and the taxpayer questionnaire in the St. Louis District Office. In addition to these pretests, we asked National Office Examination and Appeals officials to review, for technical accuracy, all questionnaires for IRS staff. We asked the Tax Executives Institute (TEI) officials to review the taxpayer questionnaire for technical accuracy. From comments received from both IRS and TEI, we made changes to the questionnaires as appropriate. In August 1995, we sent letters to IRS\u2019 33 district offices requesting the names and addresses of the revenue agents responsible for the 500 corporate audits in our sample.",
      " We also requested the districts to provide us the names and addresses of their group managers who had corporate income tax audits in their inventories as of that date. In addition, we requested from the National Appeals Office the names and addresses of the appeals officers who considered any tax disputes involving any of our sample cases. We initially mailed revenue agent and group manager questionnaires in October 1995. We subsequently sent follow-up questionnaires in November 1995. We initially mailed the appeals officer questionnaires in November 1995 and sent follow-up questionnaires in December 1995. We initially mailed the taxpayer questionnaires in January 1995 with follow-up questionnaires sent in February 1996.",
      " Table I.2 shows the response rate and disposition of initial sample selection by type of questionnaire. Questionnaire results for the revenue agent, group manager, and appeals officer questionnaires are presented in appendixes II, III, and IV respectively. Results from the taxpayer questionnaire are not presented in this report nor are they used in the report because of the low response rate to the questionnaire. Sampling Errors for Key Estimates Used in the Report Because the survey results come from samples, all results are estimates that are subject to sampling errors. We calculated sampling errors for all of the survey results presented in this report. These sampling errors measure the extent to which samples of these sizes and structure can be expected to differ from their total populations.",
      " Each of the sample estimates is surrounded by a 95 percent confidence interval. This interval indicates that we are 95-percent confident that the results for the total population fall within this interval. In addition to the reported sampling errors, the practical difficulties of conducting any survey may introduce other types of errors, commonly referred to as nonsampling errors. For example, differences in how a particular question is interpreted, in the sources of information that are available to respondents, or in the types of people who do not respond can introduce unwanted variability into the survey results. We included steps in our audit for the purpose of minimizing such nonsampling errors. For example, we carefully pretested the questionnaires and made follow-up mailings to people who did not initially respond.",
      " Revenue Agent Questionnaire Results Case ID - 1 (1-7) For the specialist(s) that assisted you during this audit, please identify (1) the type of  specialist(s) that assisted you, (2) whether they provided you timely assistance, and (3) the affect their assistance had on your ability to obtain agreement with the taxpayer. (IDENTIFY THE TYPE OF SPECIALIST.  FOR EACH ONE IDENTIFIED, CHECK TWO BOXES IN EACH ROW.) (8-16) Did the specialist(s) provide you timely specialist(s) affect Exam's you? assistance? taxpayer's agreement on these issues? (1)",
      " (2) (3) 36.3% Engineer 31.8% International 11.2% Issue/Industry 10.3% CAS 3.3% Valuation 1.4% Economist 5.5% Other 89.9%  Yes 9.1%  No 1.0%  Don't know 24.8% Very positively 29.0% Positively 32.2% Neither positively nor  negatively 7.1% Negatively 5.1% Very negatively 1.8% Don't know 38.3% Engineer 33.",
      "5% CAS 10.9% Employee plan 6.7% Issue/Industry 4.4% International 2.5% Economist 3.6% Other 89.0%  Yes 11.0%  No 0.0%  Don't know 25.9% Very positively 22.8%  Positively 29.8% Neither positively nor negatively 4.8% Negatively 9.0% Very negatively 7.8% Don't know 27.7% Issue/Industry 24.0% International 15.6% CAS 8.",
      "4% Engineer 8.4% Valuation 16.0% Other 84.4%  Yes 15.6%  No 0.0%  Don't know 32.7% Very positively 14.4% Positively 45.7% Neither positively nor negatively 7.2% Negatively 0.0% Very negatively 0.0% Don't know 22. Was the specialist's manager  involved in this audit?  (CHECK ONE BOX.) (17-19) 36.2% Yes  \ufb01 How satisfied or dissatisfied were  you with the specialist(s)",
      " manager's involvement, or lack of involvement, on this audit?  (CHECK ONE BOX.) 35.1% Neither satisfied  nor dissatisfied If you were dissatisfied with the specialist(s) manager's involvement, please explain why. ________________________________________________________________________________________ 11.9% Don't know N=509 VI.  YOUR  MANAG ER'S INVO LVEMENT  IN  AUDITS 23. Was your manager involved in the following on the audit shown on page 1 of this questionnaire? In  your opinion, how did his/her involvement, or lack of involvement, positively or negatively affect the effectiveness of this audit?",
      "  (CHECK TWO BOXES IN EACH ROW.) (20-37) How did his/her involvement, or lack of involvement, affect the effectiveness of this audit? this audit? (1) (2) (3) (4) (5) (6) (7) N=1,189 VII.  OTH ER  AUDIT  RESOURCES 24. In your opinion, did you receive adequate resources in the following areas?  If  not, please indicate to what extent, if at all, the lack of these resources negatively affected your ability to develop all identified issues.  (CHECK AT LEAST ONE BOX IN EACH ROW.",
      "  IF YOU ANSWERED \"NO\" IN THE FIRST PART, THEN ANSWER THE SECOND PART.  IF YOU ANSWER \"YES\" OR \"NOT NEEDED\" TO THE FIRST PART, THEN GO TO THE NEXT LINE.) (38-53) If  no, to what extent, if at all, did the lack of  resource(s) negatively adequate? affect your ability to develop identified issues? (1) (2) (3) (4) (5) (6) (7) (8) (9) f.  Other (Specify) INFORMATION  REQUESTED  F RO M  TH E  TAXP AY ERS 25.",
      " Which of the following did you use in obtaining information  from the taxpayer or the taxpayer's representative (i.e., power of attorney)?  (CHECK ALL THAT APPLY.) (54-59) Issued written information requests to the taxpayer or the taxpayer's representative Verbally requested information from the taxpayer or the taxpayer's representative Discussed obtaining third-party information with the taxpayer or the taxpayer's representative Discussed a summons with the taxpayer or the taxpayer's representative Issued a summons to the taxpayer or the taxpayer's representative Other (Specify)  __________________________________________________________________________________ 26. Regarding the information you requested from the taxpayer or his/her representative for this audit,",
      " how satisfied or dissatisfied were you with the following?  (CHECK ONE BOX IN EACH ROW.  DO NOT CHECK IN THE SHADED AREA.) (60-66) (1) (2) (4) (5) (6) (3) (67-68) 84.5% Yes If no, did the missing information prevent you from  proposing certain adjustments? (CHECK ONE BOX.) 15.0% Don't know 2.1% Don't know N=1,254 IX. CAS E  CLOSURE  INFORMATION 30. How satisfied or dissatisfied were  you with Exam's 28.",
      " How satisfied or dissatisfied were  you with the length of time it took to complete  this audit?  (CHECK ONE BOX.) emphasis on attempting to obtain more agreements with  taxpayers on proposed adjustments at the lowest level?  (CHECK ONE BOX.) (72-73) (69-70) 17.5% Very satisfied Please explain your dissatisfaction. Please explain your dissatisfaction. 31. In your opinion, how did the overall outcome of this audit for this taxpayer affect their compliance with the tax laws since this audit?  (CHECK ONE BOX). (74) 29. If the audit closed later than  you expected,",
      " which of the 34.5% Taxpayer became more compliant following reasons best describes why this audit closed out after the expected completion date?  (CHECK ONE BOX.) (71) 1.8% Taxpayer became less compliant 51.8% Not  applicable (the audit was completed in a 42.7% No basis to judge timely manner) 0.5% IRS delays in beginning audit 3.8% IRS staff/specialists not available when needed 2.5% Taxpayer or taxpayer representative not available 17.4% Taxpayer delays in responding to information 8.4% Exam work took longer than anticipated 15.",
      "5% Other (Specify)____________________________ N=1,119 _________________________________________ 32. Taking into consideration IRS' corporate audit environment and your district's policies and procedures at the time of this audit, to what extent, if at all, were you able to sufficiently do the following on this audit?  (CHECK ONE BOX IN EACH ROW.) (75-83) (1) (2) (3) (4) (5) (6) Identify balance sheet and Schedule M issues b. Probe for unallowable returns in this taxpayer's industry d. Examine corporation's books your position on issues in written reports (e.g., RAR or written response to taxpayer's protest)",
      " N=1,238 g. Compute the corporate tax h. Other (Specify) Please comment on factors that  you believe adversely affect your  ability to do the above items.  If the policies and/or procedures have changed, briefly discuss the change(s) and  its affect.  (ATTACH ADDITIONAL SHEETS IF NECESSARY.) _______________________________________________________________________________________________________ X. TAXP AY ER'S P ROTEST  OF ADDITIONAL  TAXES RECO MMENDED  BY EXAM 33. After this audit closed from Exam, did Appeals consider any disputed tax issues?  (CHECK ONE BOX.) (84) 34.",
      "6% Yes, as a result of the taxpayer's protest Continue with question 34. 1.9% Yes, as a result of a statutory 90-day letter   Skip to question 42. 7.1% Don't know 34. Was a written response to the taxpayer's protest provided to Appeals?  (CHECK ONE BOX.) (85) 12.1% Don't know 1.5% Not applicable (no protest filed) 35. For any disputed issues from this audit, did the following factor(s) cause the taxpayer to disagree?  (CHECK ONE BOX IN EACH ROW. ) (86-",
      "91) (1) (2) (3) a. The interpretation of the law b. The facts of the case c. The Appeals settlement on a prior N=393case for this taxpayer d. The Appeals settlement for a e. Other (Specify) f. Other (Specify) 36. In order to consider the relevant facts in this case, did you discuss the disputed issues with Appeals?  (CHECK ONE BOX.) (92) 7.6% Don't know 37. Did Appeals ask you about any of the following:  (CHECK ONE BOX IN EACH ROW.) (93-98) (1)",
      " (2) (3) a. The facts relevant to the disputed issue(s) b. Your legal position on the disputed issue(s) c. Records provided to Appeals by the taxpayer Information in the unagreed report, 90-day letter, or the written response to the protest e. Alternative positions proposed by the taxpayer during f. Other (Specify) Repeat ID - 3  (1-7) 38. How, if at all, did you learn about Appeals final resolution of disputed issues from this audit?  To what extent, if at all, did this feedback help you understand how Appeals resolved the disputed  issues?",
      "  (CHECK AT LEAST ONE BOX IN EACH ROW.  IF YOU ANSWER \"YES\" TO THE FIRST PART, THEN ANSWER THE SECOND PART.  IF YOU ANSWER \"NO\" TO THE FIRST PART, THEN GO TO THE NEXT LINE.) (8-17) If yes, to what extent, if at all, did this feedback on Appeals final resolution help you understand how Appeals resolved the disputed issues? ways? (1) (2) (3) (4) (5) (6) (7) (8) a. Exam contacted Appeals to b. Appeals provided Exam the Appeals Case Memorandum or supporting statement c.",
      " Appeals contacted Exam after they resolved the disputed issues d. The taxpayer told Exam  N=366 e. Other (Specify) If you did not receive any feedback on Appeals'  final resolution of this audit, please skip to question 42 39. Based on Appeals' resolution of disputed issues in this case, to what extent, if at all, were potential issues (a)  dropped on your cases in-process or  (b) not raised on future audits you were assigned? (CHECK ONE BOX IN EACH ROW.) (1) (2) (3) (4) (5) (6) Potential issues dropped on cases in-process N=",
      "367 Issues not raised on future audits N=372 40. In general, in your opinion, to what extent, if at all, does Appeals final resolution of disputed issues cause Exam to alter the way it develops similar issues on future audits of either the same taxpayer or different taxpayers?  (CHECK ONE BOX IN EACH ROW.) (1) (2) (3) (4) (5) (6) a. Similar issues on future audits for the same taxpayer b. Similar issues for different 41. Taking everything into consideration, what is your opinion on the quality of Appeals' overall resolution of disputed issues on these corporate income tax returns?",
      "  (CHECK ONE BOX.) If you believe the quality of Appeals' resolutions are poor or very poor, please explain your response. ______________________________________________________________________________________________________ VII.  G ENERAL  QUESTIONS AND  CO MMENTS 42. In your opinion, how positively or negatively do each of the following factors affect the amount of additional  taxes recommended by revenue agents that are ultimately assessed?  (CHECK ONE BOX IN EACH ROW.) (1) (2) (3) (4) (5) (6) The revenue agent's workload The revenue agent's group/case manager's workload The revenue agent's skills and knowledge The complexity of the tax laws e.",
      " Appeals resolution of disputed issues from a prior audit of this taxpayer Appeals resolution of disputed issues from a different taxpayer g. Other (Specify) In your opinion, to what extent, if at all, do audits of large corporations unreasonably burden those taxpayers selected for audit?  (CHECK ONE BOX.) 0.3% To a very great extent 2.5% To a great extent 27.1% To a moderate extent 34.9% To some extent 35.2% To a little or no extent N=1,255 44. Please use the space below to provide any additional comments about this case or IRS'",
      " audit and appeals processes for these large corporate taxpayers.  You may attach additional sheets if necessary. (32) Thank you for your  assistance.  Please return the questionnaire in the pre-addressed envelope. Group Manager Questionnaire Results (1-7) The U.S. General Accounting Office (GAO), an agency of Congress, is conducting a study of IRS' audits of corporations with assets of $10 million or more (activity codes 219 to 225).  The  scope  of  our  review  does  not  include  corporate  returns  in the  Corporate  Examination  Program  (CEP).  The overall objective of our study is to determine what factors affect the rate at which taxes recommended by revenue agents on these corporate returns get assessed.",
      "  We are surveying a random sample of group or case managers who are currently responsible for these large corporate audits. Please provide us your current work telephone number to assist us if we need to clarify a response: Do you currently have corporate income tax returns (activity codes 219 to 225) in your inventory? 1. Please  continue  with the  questions. You have been selected to complete this questionnaire due to your involvement with these audits of large corporations.  Your response to this questionnaire will help us to identify the factors that affect these audits, both positively and negatively.  We cannot develop meaningful information without your frank and honest answers to the questions.",
      " 2. STOP:  Do  not  continue  if  you do not  currently  have  these  corporate tax  returns in your  inventory. Please  return the  questionnaire  in the  enclosed envelope. GAO will safeguard the privacy of your responses to this questionnaire.  They will be combined with those of other respondents and will be reported only in summary form.  The control number is included only to aid us in our follow-up efforts. 1. Please answer the following as it applies to you :   (ENTER \"00\" IF NONE OR UNDER 6 MONTHS.) (8-17) This questionnaire should take about 45 minutes to complete.",
      "  If you have any questions concerning any part of this survey, please call Mr. Kirk Boyer at (913) 384-7570. in the Examination Division.......... 20.8  Years N=506 b. Number of years auditing corporations  with assets of $10 million or more  (activity codes 219 to 225) that are  not in CEP...................... U.S. General Accounting Office         Kansas City Regional Office         Attn: Mr. Kirk Boyer         5799 Broadmoor - Suite 600         Mission,",
      " Kansas  66202 d. Number of years auditing CEP..................... Thank you for your  assistance.... 1.5  Years N=500 2. Which of the following best describes the type of group 3. How many corporate income tax returns (activity codes you currently manage?  (CHECK ONE BOX.) (18) 219 to 225) do you currently have in your inventory?  (ENTER  NUMBER.) (19-21) 67.1% Non-specialized General Program group  (i.e., a mixture of revenue agent grades and/or office auditors)",
      " Specialized General Program group targeted toward large corporate audits 13.8% Other (Specify)  ___________________________ F ACTORS RELATED  TO AUDITS OF LARG E  CORPORATIONS 4. To what extent, if at all, are you currently involved in the following on audits of large corporations? IN EACH ROW.) (22-33) (1) (2) (3) (4) (5) (6) N=503 5. Overall, how satisfied or dissatisfied are  you with the following factors related to large corporate audits?  (CHECK ONE BOX IN EACH ROW.) (34-44)",
      " (1) (2) (3) (4) (5) a. Length of these audits b. Thoroughness of these audits c. Any out-of-district audit work or d. Extent to which other IRS staff (including specialists) adequately developed the issues  e. Timeliness of taxpayers' responses to f. Cooperation of taxpayers to provide g. Cooperation of taxpayers' representatives to provide information N=506 h. Overall level of cooperation of i. Overall level of cooperation of k. Corporate taxpayers' compliance with N=503the tax laws l. Other (Specify) RESOURCES US ED  TO  AUDIT LARG E  CORPORATIONS  6.",
      " How often, if at all, do you or your revenue agents do any of the following during these corporate audits?  (CHECK ONE BOX IN EACH ROW.) (45-51) 10% of the time (1) (2) (3) (4) (5) a. Contact the industry coordinator or specialist to discuss any issue related to this taxpayers primary industry b. Obtain a position paper on an issue c. Contact the market segment coordinator to discuss d. Obtain or review the market segment audit guide e. Review a District Office memorandum discussing an issue related to this taxpayer's  primary industry f. Contact revenue agents or group managers in other N=",
      "500districts on specialized industries/issues g. Other (Specify) __________________________________________ 7. Consider the revenue agents you assign to these large corporate audits.  How satisfied or dissatisfied are you with their ability to audit large corporations in each of the following areas?  (CHECK ONE BOX IN EACH ROW. ) (52-62) (1) (2) (3) (4) (5) b. Probing for unallowable c. Applying the tax laws to e. Examining the corporation's g Determining when to request the services of a specialist h. Determining when to request legal assistance from District Counsel or national office i.",
      " Securing taxpayer agreement k.  Other (Specify) N=18 8. In your opinion, to what extent, if at all, do the revenue agents conducting these audits receive adequate resources in the following areas? (CHECK ONE BOX IN EACH ROW.) (63-70) (1) (2) (3) (4) (5) (6) Travel funds for local travel Travel funds for out- of- district audit workN=491 Out-of-district assistance or  support N=488 audit f. Other (Specify) 9. When revenue agents are assigned corporate income tax returns to audit, do you consider each revenue agents'",
      " financial interests to determine if any potential conflicts of interest exist?  (CHECK ONE BOX.) (71-72) 55.9% Yes \ufb01 Please explain how you are made aware of the revenue agents' financial interests. N=485 10. How often, if at all, are any of the following types of assistance used during these large corporate audits?  (CHECK ONE BOX IN EACH ROW.) (73-84) 10% of the time (1) (2) (3) (4) (5) b.  National office technical Counsel assistance other than technical advice i. Other (Specify) j.",
      " Additional revenue agents N=482 while the audit is open If  you  checked  box  4  or  5 (10-39% or Less than 10%) anywhere in the above matrix, please explain your response. ______________________________________________________________________________________________________ 11. In your opinion, does the use of IRS specialists positively or negatively affect Exam's ability to obtain the taxpayer's agreement on large corporate audit issues?  (CHECK ONE BOX.) (85) 31.3% Neither positively nor negatively 12. In your opinion, to what extent, if at all, does assistance from each of the following improve the development of  issues in these large corporate audits?",
      "  (CHECK ONE BOX IN EACH ROW.) (86-96) (1) (2) (3) (4) (5) (6) Counsel assistance other than technical advice i. Other (Specify) Appeals while the audit is open N=506 IV. CAS E  CLOSURE  INFORMATION  13. During the past 12 months, how often, if at  all, were potential issues dropped by your revenue agents in these audits of large corporations because these taxpayers did not provide all of the requested information?  (CHECK ONE BOX.) (97) 0.0% 90-100% of the time 2.",
      "4% 60-89% of the time 0.6% 40-59% of the time 12.0% 10-39% of the time 85.0% Less than 10% of the time 14 How satisfied or dissatisfied are  you with Exam's emphasis on attempting to obtain more agreements with the taxpayers on proposed adjustments at the Exam level? (CHECK ONE BOX.) (98-99) 25.7% Neither satisfied  nor dissatisfied Please explain your dissatisfaction: 15. How often, if at all, do these large corporate taxpayers provide Exam a written protest of additional taxes recommended by revenue agents?",
      " (CHECK ONE BOX.) (8) 50.0% 90-100% of the time 19.3% 60-89% of the time 12.7% 40-59% of the time 13.9% 10-39% of the time 4.2% Less than 10% of the time N=500 16. How often, if at all, does your district conduct post-audit critiques on these large corporate audits to determine if the audit standards were met?  (CHECK ONE BOX.) (9) 8.4% 90-100% of the time 6.",
      "5% 60-89% of the time 7.7% 40-59% of the time 21.3% 10-39% of the time 56.1% Less than 10% of the time V.  EXAM'S INTERACTION  WITH APPEALS 17. In cases where taxpayers provide new information to Appeals, how often, if at  all, does Appeals request Exam to review and verify this information?  (CHECK ONE BOX.) (10-11) If Appeals returns cases 40% or more of the time, how often,  has Exam requested this or similar information from the taxpayers but had not received it?",
      "  (CHECK ONE BOX.) 13.7% 10-39% of the time 44.7% 90-100% of the time 10.1% Less than 10% of the time -------------------------- 30.3%  60-89% of the time 40-59% of the time 28.6% Do not know 10-39% of the time 2.6% Less than 10% of the time -------------------------- 13.2%  Do not know 18. When Exam receives a written protest, how often, if at  all, do you or your revenue agents provide a written response to the taxpayer's protest to Appeals in these large corporate  cases?",
      "  (CHECK ONE BOX.) (12) 48.8% 90-100% of the time 19.3% 60-89% of the time 8.4% 40-59% of the time 7.8% 10-39% of the time 15.7% Less than 10% of the time N=500 19. How often, if at all, do you or your revenue agents discuss the following with Appeals? ROW.) (13-18) 10% of the time (1) (2) (3) (4) (5) (6)",
      " a. The facts relevant to the b. Legal position cited by the c. Records provided to Appeals N=503by the taxpayer d. Information in the unagreed report (i.e., RAR) or the written response to the protest considered by Appeals to resolve disputed issues f. Other (Specify) __________________ 20. How often, if at all, do you receive the following feedback on Appeals' final resolution of disputed issues from these audits? To what extent, if at all, does this feedback help you or the revenue agent understand how Appeals resolved the disputed issues?  (CHECK TWO BOXES IN EACH ROW.) (19-",
      "28) To what extent, if at all, did these types of feedback on Appeals final resolution help Exam understand how issues? Appeals resolved the disputed issues? Feedback by... (4) (1) (2) (3) (5) (1) (2) (3) (4) (5) (6) Appeals to obtain the final resolution N=485 16.0% 21.2% 26.3% 27.5% 21.9% 13.7% 14.4% 20.9% 15.8% 7.0% providing Exam the Appeals Case Memorandum or supporting statement N=",
      "482 11.4% 22.2% 29.1% officer contacting Exam after they resolved the disputed issues 13.9% 31.6% 40.5% telling Exam of the final resolution N=482 e Other (Specify) 25.0% 25.0% 50.0% 21. In your opinion, does Appeals' resolution of disputed  issues for these large corporate audits positively or negatively affect the following:  (CHECK ONE BOX IN EACH ROW.) (1) (2) (4) (5) (6) (3) N=491 22.",
      " Based on Appeals' resolution of disputed issues, to what extent, if at all, are potential issues  dropped on cases in-process or not raised on future audits? (CHECK ONE BOX IN EACH ROW.) (32-33) (1) (2) (3) (4) (5) (6) a. Potential issues dropped Issues not raised on future audits 23. In your opinion, to what extent, if at all, does Appeals' final resolution of disputed issues cause Exam to alter the way it develops similar issues on future audits of either the same taxpayer or different taxpayers?  (CHECK ONE BOX IN EACH ROW.) (34-",
      "35) (1) (2) (3) (4) (5) (6) a. Similar issues on future audits for the same taxpayer b. Similar issues for different 24. In your opinion, to what extent, if at all, was Appeals' consideration of this case fair and impartial to both the government and the taxpayer?  (CHECK ONE BOX IN EACH ROW.) (1) (2) (3) (4) (5) (6) N=476 25. Taking everything into consideration, what is your opinion on the quality of Appeals' overall resolution of disputed issues on these corporate income tax returns?",
      "  (CHECK ONE BOX.) (38-39) If you believe the quality of Appeals' resolutions are poor  or  very  poor, please explain your response. G ENERAL  QUESTIONS AND ANY DISTRICT  OFFICE  CHANG ES 26. In your opinion, how positively or negatively do each of the following factors affect the amount of those additional taxes recommended by revenue agents that are ultimately assessed?  (CHECK ONE BOX IN EACH ROW.) (40-46) (1) (2) (3) (4) (5) (6) b. Revenue agent's workload Revenue agent's skills and knowledge d.",
      " Complexity of the tax laws e. Appeals resolution of disputed issues from a prior audit of this taxpayer Appeals resolution of disputed issues from a different taxpayer g. Other (Specify) ________________________ In your opinion, to what extent, if at all, do audits of large corporations unreasonably burden those taxpayers selected for audit?  (CHECK ONE BOX.) (47) 28.1% Little or no extent 28. Have you or your district modified any audit procedure for these large corporate cases due to IRS national office's task force teams reviewing corporate workload identification and/or compliance strategies?  (CHECK ONE BOX.) (48) N=506 29.",
      " Please indicate if your district has implemented or plans changes to  its policies or  procedures for any of the following.  If yes, briefly describe each change  and the impact you believe these changes will have on the amount of dollars recommended in Exam. (CHECK ONE BOX IN COLUMN 1 IN EACH ROW.  IF YOU ANSWER THE FIRST PART \"YES\" THEN ANSWER THE REMAINING PARTS OF THE QUESTION.) (49-81) Please use this space to describe the change(s). Has your district implemented the   following or does it plan to in the future? revenue agents? (Attach additional pages if necessary.) (2)",
      " (1) a. Method for selecting (3) Involving specialists in more of these audits 74.2% Positive impact 4.8% No impact 3.2% Negative impact 17.7% Don't know 66.0% Positive impact 5.7% No impact 5.7% Negative impact 22.6% Don't know with corporate taxpayers on proposed audit adjustments Increasing management involvement 80.6% Positive impact 11.1% No impact 0.0% Negative impact 8.3% Don't know 72.1% Positive impact 14.0%",
      " No impact 2.3% Negative impact 11.6% Don't know to clarify vague and complex tax laws 56.0% Positive impact 12.0% No impact 0.0% Negative impact 32.0% Don't know k. Other (Specify) N=9 30. Please use the space below to provide any additional comments about this case or IRS' audit and appeals processes for these large corporate taxpayers.  You may attach additional sheets if necessary. (82) Thank you for your  assistance.  Please return the questionnaire in the pre-addressed envelop. Appeals Officer Questionnaire Results Case ID - 1  (1-",
      "7) The U.S. General Accounting Office (GAO), an agency of Congress, is conducting a study of IRS' audits of corporations with assets of $10 million or more (activity codes 219 to 225).  The  scope  of  our  review  does  not  include  corporate  returns  in the  Corporate  Examination  Program  (CEP).  The overall objective of our study is to determine what factors affect the rate at which taxes recommended by revenue agents on these corporate returns get assessed.  We are surveying a random sample of appeals officers who considered corporate income tax disputes closed from Appeals during fiscal year 1994.",
      " GAO will safeguard the privacy of your responses to this questionnaire.  They will be combined with those of other respondents and will be reported only in summary form.  The control number is included only to aid us in our follow-up efforts.  We will not identify specific taxpayer information in our report. This questionnaire should take about 1 hour to complete.  If you have any questions concerning any part of this survey, please call Mr. Kirk Boyer at (913) 384-7570. You have been selected to complete this questionnaire  due to your involvement with the corporate returns for the tax years indicated at the bottom of this page.",
      "  Because of your work on this case, your response to this questionnaire will help us to identify the factors that affected these audits, both positively and negatively.  We cannot develop meaningful information without your frank and honest answers to the questions. Thank you for your  assistance. After completing the questionnaire, please remove the case information sticker before returning your  completed questionnaire. Please provide us your current work telephone number to assist us if we need to clarify a response:   Were you assigned to resolve the disputes on the corporate tax returns shown on page 1? Please  continue  with the  questions. STOP:  Do  not  continue  if  you were  not  involved in resolving  the  disputes on these  corporate  tax  returns.",
      " Please  return the  questionnaire  in the  enclosed envelope.  1. Please answer the following as it applied to  you at the time you were assigned to the work unit shown on page 1:  (ENTER \"00\" IF NONE OR UNDER 6 MONTHS.) (8-21) Years reported are  m eans a. Total number of years of IRS experience................................. b. Total number of years of IRS experience in Appeals......",
      ".................. 1. Number of years as an Appeals Officer............................... 2. Number of years as an Appeals Officer resolving deficiency disputes over $10 million................................. 3. Number of years as a Team Chief..........",
      "........................ c. Total number of years as a revenue agent ................................ d. Total number of years in other government or private industry position(s) related  to tax/auditing........................................",
      "............ (Specify the position(s)  you've held under d above)  ___________________________________________ 2. What grade level were you at the time you were assigned to this work unit?  (ENTER NUMBER.) (22-23) N=623 3. Did you receive the following formal training prior to being assigned the work unit shown on page 1 of this questionnaire?  If yes, indicate to what extent, if at all, the training improved your ability to resolve the taxpayer's disputed issues?  (CHECK AT LEAST ONE BOX IN EACH ROW.  IF YOU ANSWER \"YES\"",
      " TO THE FIRST PART, THEN ANSWER THE SECOND PART OF THE QUESTION.  IF YOU ANSWER \"NO\" TO THE FIRST PART, GO TO THE NEXT LINE.) (24-39) If  yes, to what extent, if at all, did it improve your ability to resolve the taxpayer's disputed issues? assigned? (1) (2) (3) (4) (5) (6) a. Advanced corporate training or equivalent of Phase 5 b. Corporate training or complex technical and/or legal issues e. IRS training (3 days or more) related to this taxpayer's primary industry (including industry specialization program (ISP)",
      " training) f. Non-IRS training or seminars on any issues related to this taxpayer's primary industry g. Topical training provided by Appeals, Exam, and/or Counsel relevant to this corporate taxpayer h. Other (Specify) 4. Was there any training that you had  not  received before you were assigned to this corporate work unit that  you believe you needed to improve your ability to resolve the taxpayer's disputed issues?  (CHECK ONE.) (40-41) 14.6% Yes \ufb01 Please describe the training needed. Y ou will need the  Appeals Case  Mem orandum  to  com plete  this section.",
      " 5. For the corporate entity shown on page 1 of this questionnaire, how many issues were protested by the taxpayer?  (ENTER NUMBER.) (42-43) 6. Did this return have any related entities? If yes, please indicate the type(s) of related entities and the tax years associated with each type.  (CHECK ONE BOX.  IF YOU ANSWER \"YES\", THEN COMPLETE THE REMAINING PARTS.  IF YOU ANSWER \"NO\", GO TO THE NEXT QUESTION.) (44-62) 26.9%   Yes \ufb01 (e.g., S corp, partnership, individual,",
      " etc.) 1. 2. 3. 4. 5. 6. N=560 7. Please provide the following information on the top three dollar adjustments to income or credit protested by the taxpayer for the entity shown on page 1 of this questionnaire. (Largest dollar adjustment) (Third largest dollar adjustment) adjustment) (63) (64) (65) Identify the (66) (67) (68) c. Exam's (69) (70) (71) Adjustment was (72-80) (81-89) (90-98) Exam (8-16) (17-",
      "25) (26-34) Appeals (35-41) (42-48) (49-55) Adjustment apply.) 137 Other (Specify) 72 Other (Specify) 47 Other (Specify) (56-60) (61-65) (66-70) between Exam apply.) Questions 8 through 24 relate specifically to the three top dollar adjustments to income or credit you identified in question 7. 8. Please identify the reason code(s) (from those listed below) which best describe your basis for resolving these issues.   (ENTER THE LETTER CORRESPONDING TO THE REASON IN THE APPROPRIATE BOX.) (71-",
      "76) Please note: In many cases, a single reason will be adequate.  However, you may select two codes if necessary, to adequately describe the action taken on these  issues.  If more than one reason code is selected, please list them in the order of impact on the resolution of these issues.    (Highest Impact)    (2nd Highest Impact) 30.2% A= Appeals/Counsel fully sustains the issue B= Continuing issue - followed  prior cycle settlement C= New facts/evidence obtained and evaluated by Appeals/Counsel D= New facts/evidence obtained and evaluated by Exam 30.8%",
      " E= Hazards - Facts/evidence are open to judgement F = Hazards - Conflict between Service position and case law 23.1% G= Hazards - Application or interpretation of law I = Changes in law If you did not fully sustain any of these top three dollar issues, did you document your position in the written summary (i.e., Appeals Case Memorandum)? (CHECK ONE BOX FOR EACH ISSUE.)  (77-79) summary? (fully sustained) (fully sustained) (fully sustained) IV.EXAM'S DEVELOPMENT  O F TH E  TOP THREE  DO LLAR  ISSUES 10. Were all of the top three dollar issues you listed in question 8 fully  developed when the case was transferred to Appeals?",
      "  (CHECK ONE.) (80) 73.1% Yes  \ufb01 Skip to question 13. 26.9% No  \ufb01 Continue with question 11. 11. For the issue(s) that were not fully developed,  did you request that Exam further develop the issue(s) before you attempted to resolve the taxpayer's dispute?  (CHECK ONE.) (81-82) 50.6% Yes  \ufb01 Continue with question 12. 49.4% No  \ufb01 Please explain below and then skip to question 13. If you did not request Exam to further develop the  issue(s), please explain why.",
      " 12. For  the  issue(s)  you  requested  Exam  to  further  develop, did they (1) provide you the requested feedback, (2) provide it to you in a timely manner, and (3) did it help you resolve the disputed issues?   (CHECK AT LEAST ONE BOX IN EACH ROW.  IF YOU ANSWER  \"YES\" TO THE FIRST PART, THEN ANSWER THE REMAINING PARTS.  IF YOU ANSWER \"NO\" TO THE FIRST PART, THEN GO TO THE NEXT ISSUE.) (83-91) If  yes, was the feedback feedback you requested?",
      " provided to you in a timely manner? issue? (1) (2) (3) Issue #1 (Issue fully developed) Issue #2 (Issue fully developed) Issue #3 (Issue fully developed) 13. Did Exam use an IRS specialist(s) or outside consultant(s) to develop any of these three issues?  (CHECK ONE BOX.) (92) 31.8% Yes  \ufb01 Continue with question 14. Skip to question 16. Repeat ID - 3  (1-7) 14. Identify the specialist(s) or outside consultant(s) that Exam used to develop any of these three  issues.",
      " (IDENTIFY THE SPECIALIST OR OUTSIDE CONSULTANT.  FOR EACH ONE IDENTIFIED, CHECK TWO BOXES IN EACH ROW.) (8-17) Type of IRS specialist or outside To what extent, if at all, did the use of their services help you related issue. resolve the disputed issues? (1) (2) (3) (4) (5) (6) 62.4%  7.3%  6.5%  6.0% 77.9% Issue #1 13.2% Issue #2  7.5% Issue #3 N=",
      "189 65.5% 19.4% 10.5% 4.6% 14.7% Issue #1 56.1% Issue #2 24.5% Issue #3 N=56 45.3% 19.6% 19.6% 15.6% 19.6% Issue #1 29.7% Issue #2 50.7% Issue #3 N=17 15. Did you consult with any of the specialist(s) and/or outside consultant(s) listed above while you were considering the disputed issues?  (CHECK ONE BOX.) (18-",
      "19) 60.3% Yes Please describe why you did not consult with them. ______________________________________________________________________________ 16. In your opinion, did Exam need, but not obtain, an IRS  specialist or outside consultant to develop any of these three top dollar issues?  If yes, please identify the type of IRS specialist(s) or outside consultant(s) that  Exam needed, but did not obtain, for each issue.  (CHECK ONE BOX IN EACH ROW.  IF \"YES\", IDENTIFY THE ISSUE AND THE NEEDED SPECIALIST OR OUTSIDE CONSULTANT.) (20-28) Did Exam need but not obtain an IRS  specialist or outside consultant?",
      " Identify the type of IRS specialist or outside consultant needed but not obtained. 80.9%  Issue #1    4.9% Issue #2    9.3% Issue #3 N=53                  30.9% 24.6% 20.4% 14.8% 100%  Issue #235.8% 35.8% 28.4% 100%  Issue #3 43.2% 28.4% 28.4% 17. For each of the top three dollar issues identified,  did Exam obtain technical advice to develop the issue?",
      "  If yes,  please indicate to what extent, if at all, the technical advice helped you resolve the taxpayer's disputed  issues.   (CHECK AT LEAST ONE BOX IN EACH ROW.  IF YOU ANSWER \"YES\" TO THE FIRST PART, THEN CHECK ONE BOX IN THE SECOND PART.  IF YOU ANSWER \"NO\" OR \"DON'T KNOW\" TO THE FIRST PART, THEN GO TO THE NEXT LINE.) (29-34) Did Exam obtain technical advice? If  yes, to what extent, if at all, did it help you resolve the taxpayer's disputed issues? (1) (2) (3)",
      " (4) (5) (6) 89.6% No 5.7% Don't know 96.4%  No 0.6%  Don't know 97.3%  No 0.0%  Don't know 18. For those issue(s) that Exam did  not  obtain technical advice, do you believe Exam should have obtained technical advice from the national office?  (CHECK ONE BOX FOR EACH ISSUE.) (35-37) Should Exam have obtained technical advice from the national office?  6.3% Yes 91.2% No  2.",
      "5% Not applicable (Technical advice used)  2.6% Yes 94.4% No  2.9% Not applicable (Technical advice used)  2.1% Yes  95.2% No  2.8% Not applicable (Technical advice used) V. ADDITIONAL  INFORMATION  P ROVIDED  BY TH E  TAXP AY ER  FOR  TH E  TOP THREE  DO LLAR  ISSUES 19. For any of the top three dollar issues you identified, did the taxpayer provide additional factual information or  documentation to Appeals to support its protest on the issue?",
      " (CHECK ONE.) (38) 53.1%  Yes \ufb01 Continue with question 20. Skip to question 22. 20. For those issues that the taxpayer provided additional factual information, did you request  that Exam review or verify the accuracy of the information?  (CHECK ONE.) (39-40) 43.2%  Yes \ufb01 Continue with question 21. Please explain below and then skip to question 22. 21. For those issues that you requested Exam to verify additional information, did Exam (1) provide you the requested feedback, (2) provide the feedback to you in a timely manner,",
      " and (3) was the feedback helpful in resolving the taxpayer's disputed issues?  (CHECK AT LEAST ONE BOX IN EACH ROW.  IF YOU ANSWER  \"YES\" TO THE FIRST PART, THEN ANSWER THE REMAINING PARTS.  IF YOU ANSWER \"NO\"  OR \"NOT APPLICABLE\" TO THE FIRST PART, THEN GO TO THE NEXT LINE.) (41-49) Did this feedback help  you in resolving the disputed issue? requested? timely manner? (3) (1) (2) V.  APPEALS P ROCESSING OF TH E  TOP THREE  DO LLAR  ISSUES 22.",
      " Were any of the top three dollar issues disputed by this  taxpayer recurring (i.e., the same issue) from previously audited tax returns?  (CHECK ONE BOX IN EACH ROW.  IF YOU ANSWER \"YES\" TO THE FIRST PART, THEN COMPLETE THE SECOND PART.  IF YOU ANSWER \"NO\" OR \"DON'T KNOW\" TO THE FIRST PART, THEN GO TO THE NEXT LINE.) If yes, please explain what you did, if anything, to resolve the recurring  issue(s). (50-55) issue? If  yes, what did you do, if anything, to resolve these recurring issues? (1)",
      " (2) 86.3% No   8.8% Don't know 81.3% No 14.5% Don't know 86.6%  No 12.4%  Don't know 23. Did you discuss any of the top three dollar issues (either formally or informally) with District Counsel?  If yes, did this discussion positively or negatively affect your ability to resolve the taxpayer's disputed issues?  (CHECK AT LEAST ONE BOX IN EACH ROW.  IF YOU ANSWER \"YES\" TO THE FIRST PART, THEN ANSWER THE SECOND QUESTION.  IF YOU ANSWER \"NO\"",
      " OR \"NOT NECESSARY\" TO THE FIRST PART, THEN GO TO THE NEXT LINE.) (56-61) District Counsel? you resolve the taxpayer's disputed (1) issues? (2) 67.0%  No  6.0%  Not necessary 19.7%  Very great extent 28.3%  Great extent 26.1%  Moderate extent  8.2%  Some extent  8.9%  Little extent  8.9%  No extent 76.9%  No   6.2% Not necessary 16.5%",
      "  Very great extent 31.5%  Great extent 30.2%  Moderate extent  9.5%  Some extent  3.8%  Little extent  8.5%  No extent 79.5%  No  8.9%  Not necessary  0.0%  Very great extent 29.7%  Great extent 14.2%  Moderate extent 49.0%  Some extent  0.0%  Little extent  7.1%  No extent 24. Were any of the top three dollar issues referred to Counsel for litigation?",
      "  (CHECK ONE BOX FOR EACH ISSUE.) (62-64) Please  consider  the  entire  case  (not  just  the  three  issues you identified previously)  as you answer  the  rem aining  questions. 25. Did Exam provide you with a written response to the taxpayer's protest?  (CHECK ONE.) (65) 43.5% Yes  \ufb01 Continue with question 26. Skip to question 28. 41.7% Don't know  N=611 26. To what extent, if at all, did this written response help you resolve the taxpayer's disputed issues?",
      "  (CHECK ONE.) (66-67) 10.2%  No extent N=266 Please explain your response. 27. Did you discuss (e.g., telephone calls, meetings, etc.) the written response with Exam? (CHECK ONE.) (68-69) 71.7% Yes  \ufb01 To what extent, if at all, did this discussion help you resolve the taxpayer's disputed issues?  (CHECK ONE.)  9.1% Very great extent  28.3% No 28. Were you satisfied or dissatisfied with the level of cooperation between you and Exam?  (CHECK ONE.) (70)",
      " 0.4%  Very dissatisfied --------------------------- 24.2%  Not applicable  (No interaction with  Exam) N=607 29. Did the taxpayer use any of the following specialist(s) or representative(s) to assist them with the resolution of the disputed issues?  (CHECK ONE BOX IN EACH ROW.) (71-76) Yes (1) No (2) (3) c. d. f.  Other (Specify) 30. Overall, how satisfied or dissatisfied were you with the following concerning the taxpayer?  (CHECK ONE BOX IN EACH ROW.) (77-80) (1)",
      " (2) (4) (5) (6) (3) N=604 31. Did the taxpayer file any of the following while this case was in Appeals' jurisdiction?  If yes, did you refer these to Exam?  (CHECK AT LEAST ONE BOX IN EACH ROW.  IF YOU ANSWER \"YES\" TO THE FIRST PART, THEN ANSWER THE SECOND QUESTION.  IF YOU ANSWER \"NO\" TO THE FIRST PART, GO TO THE NEXT LINE.) (81-86) If  yes, did you refer these to Exam? Appeals' jurisdiction? (1) (2) a. File a claim for a refund 82.",
      "1%  Yes 17.9%  No b. Raise an affirmative 31.5%  Yes 68.5% No c. File a request for a tentative refund  (e.g., NOL carryback) 25.8% Yes 74.2% No Continue  with question 32  if  you checked \"Yes\" to  any  box  above. If  the  taxpayer  did  not  file  a  claim  for  a  refund, raise  an affirm ative  issue, or  file  a  request  for  tentative  refund, skip to question 34.",
      " 32. How much did you increase or decrease the taxable income or credits because of the claim(s), affirmative issue(s), or requests(s) for tentative refund identified in the previous question?  (CHECK THE APPROPRIATE INCREASE OR DECREASE BOX AND ENTER THE  APPROPRIATE AMOUNT.   IF NONE, DO NOT CHECK A BOX AND ENTER \"00\".) (87-96) Repeat ID - 4  (1-7) (8-17) 66.1%  No N=91 Skip to question 37. Continue with question 35. 35.To what extent, if at  all,",
      " did the associate chief participate in resolving these disputed  issues by (1) meeting with the taxpayer, and (2) providing you guidance, advice, or other assistance.?  (CHECK ONE BOX IN EACH ROW.)  (20-22) (6) (1) (2) (3) (4) (5) Please explain your response. 36.To what extent, if at  all, did the associate chief's participating in the following ways improve  your ability to resolve these disputed returns?  (CHECK ONE BOX IN EACH ROW.  IF ASSOCIATE CHIEF DID NOT PARTICIPATE, CHECK \"NOT APPLICABLE\".)",
      "  (23-25) (1) (2) (3) (4) (5) (6) (7) Please explain your response. ______________________________________________________________________________________________________ 37. How did you inform Exam, if at all, of the final resolution of the disputed issues?  (CHECK ALL THAT APPLY.) (26-29) Discussed the final resolution with Exam Sent the Appeals Case Memorandum to Exam Other (Specify)  _______________________________________________________________________ No feedback provided to Exam 38. Considering the overall case, did the following positively or negatively affect your ability to resolve the taxpayer's disputed issues for the case shown on page 1 of this questionnaire?",
      "  (CHECK ONE BOX IN EACH ROW.) (30-35) (1) (2) (3) (4) (5) (6) If dissatisfied, please explain.  _______________________________________________________________________ 40. In your opinion, to what extent, if at all, did the Appeals' final resolution of these disputed issues influence the way Appeals will consider (a) recurring issues for this taxpayer, and (b) similar issues for different taxpayers?  (CHECK ONE BOX IN EACH ROW.) (38-40) (1) (2) (3) (4) (5) (6) a. Recurring issues for this b.",
      " Similar issues for Please explain your response. 41. In your opinion, to what extent, if at all, was Appeals' dispute resolution processing of this case fair and impartial to both the taxpayer and the government?  (CHECK ONE BOX IN EACH ROW.) (41-42) (1) (2) (3) (4) (5) (6) N=601 42. Taking everything into consideration, what is your opinion on the quality of Exam's overall development of the  issues on this case?  (CHECK ONE BOX.) (43-44) 0.5% Very poor N=607 If you believe the quality of Exam's issue development is  poor  or  very  poor,",
      " please explain your response. 43. In your opinion, to what extent, if at all, did the dispute resolution process for large corporations unreasonably burden this taxpayer selected for audit?  (CHECK ONE BOX.) (45) 75.3% Little or no extent N=598 44. Please use the space below to provide any additional comments about this case or IRS' audit and appeals processes for these large corporate taxpayers.  You may attach additional sheets if necessary. (46) Thank  you for  your  assistance. Please  rem ove  the  yellow  case  inform ation sticker  from   page  1  and return the  questionnaire  in the  pre-addressed return envelope.",
      " Offices Visited and Officials Interviewed This appendix describes the various IRS offices we visited and the officials we interviewed. In addition, it discusses the scope of our requests to selected officials for written comments on factors related to large corporate audits. Included in this appendix is table V.1, which shows the offices we visited and officials we interviewed. In addition to the questionnaires, we interviewed numerous IRS National Office, regional, district office, and Appeals officials to obtain their views on the factors that affected the amount of additional taxes recommended by revenue agents that were ultimately assessed. At the National Office we interviewed the Executive Director, Corporate Audits Section; the National Director,",
      " Strategic Planning Division; the National Director of Appeals; and selected members of their staffs. At each of IRS\u2019 four regional offices we interviewed the Regional Compliance Chief, Regional Counsel, and the Assistant Regional Director for Appeals. In addition, we visited 10 of IRS\u2019 33 district offices and 9 appeals offices. Table V.1 shows the district offices and appeals offices we visited and the titles of the individuals we interviewed. Further, we also asked Examination Chiefs in all 33 IRS district offices nationwide and Appeals Chiefs in all 33 appeals offices nationwide to give us their comments on certain factors related to these large corporate audits. We received written responses from 31 of the Examination Chiefs and 30 of the Appeals Chiefs.",
      " Their views are incorporated throughout this report where appropriate. Major Contributors to This Report General Government Division, Washington, D.C. Kansas City Regional Office Royce L. Baker, Tax Issue Area Coordinator Terry Tillotson, Evaluator-in-Charge Kirk R. Boyer, Senior Evaluator Kathleen J. Squires, Evaluator Bradley L. Terry, Evaluator Thomas N. Bloom, Computer Specialist The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted,",
      " also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000  or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony.",
      "  To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone.  A recorded menu will provide information on how to obtain these lists.\n"
    ],
    "length": 24353,
    "hardness": null,
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  },
  {
    "id": 107,
    "question": null,
    "answer": "Billions of dollars have been spent governmentwide to modernize financial management systems that have often exceeded budgeted cost, resulted in delays in delivery dates and did not provide the anticipated system functionality when implemented. GAO was asked to identify (1) the key causes for financial management system implementation failures, and (2) the significant governmentwide initiatives currently under way that are intended to address the key causes of financial management system implementation failures. GAO was also asked to provide its views on actions that can be taken to help improve the management and control of agency financial management system modernization efforts. GAO's work has linked financial management system implementation failures to three recurring themes: (1) disciplined processes, (2) human capital management, and (3) other information technology (IT) management practices. The predictable result of not effectively addressing these three areas has been numerous agency systems throughout the federal government that did not meet their cost, schedule, and performance objectives. Problems related to disciplined processes included requirements management, testing, data conversion and system interfaces, and risk and project management. Human capital management issues included strategic workforce planning, human resources, and change management. Other areas of IT management identified as problems included enterprise architecture, investment management, and information security. The Office of Management and Budget (OMB) has undertaken a number of initiatives to reduce the risks associated with acquiring and implementing financial management systems and addressing long-standing financial management problems. Some of these initiatives are in collaboration with others and are broad-based attempts to reform financial management operations governmentwide. First, OMB has developed and continues to evolve Federal Enterprise Architecture products and has required a mapping of agency architectures to this federal architecture. Another key OMB initiative is referred to as the financial management line of business which established centers of excellence to consolidate financial management activities for major agencies through cross-servicing arrangements. Finally, certain financial management activities and responsibilities have been reassigned to OMB, the Financial Systems Integration Office, and a Chief Financial Officers Council Committee. OMB's initiatives for reforming financial management systems governmentwide could help address the key causes of system implementation failures, but further actions are needed to fully define and implement the processes necessary to successfully complete these initiatives. OMB has correctly recognized the need to implement financial management systems as a governmentwide solution, rather than individual agency stove-piped efforts designed to meet a given entity's needs. Based on industry best practices, GAO believes that four concepts are integral to OMB's approach and key to successfully implementing financial management systems: a concept of operations provides the foundation, standard business processes promote consistency, a strategy for implementing the financial management line of business, and disciplined processes to help ensure successful implementations. GAO recognizes that implementing these concepts is a complex undertaking and raises a number of issues that have far-reaching implications for the government and private sector application service providers.\n",
    "docs": [
      "Background OMB plays a central role in setting federal financial management policy  and guidance. The CFO Act of 1990 established OMB\u2019s Office of Federal  Financial Management (OFFM), which has responsibility to provide  overall direction and leadership to the executive branch on financial  management matters by establishing financial management policies and  requirements, and by monitoring the establishment and operation of  federal government financial management systems. Among the key issues  OFFM addresses in addition to financial management systems, are agency  and governmentwide financial reporting, asset management, grants  management, improper payments, performance measurement, single  audits, and travel and purchase cards. Within OFFM,",
      " the Federal Financial  Systems Branch is responsible for orchestrating all of the elements of the  financial systems governmentwide into a coherent, coordinated  architecture. These elements include    agency financial management systems and JFMIP standards;  interfaces between agency financial systems and other systems that  support business processes (e.g., human resources systems,  procurement systems, databases supporting performance  management);    common financial management services, including e-Travel, e-Learning,  Contractor Central Registry, Intragovernmental Payment and  Collection System, and Electronic Certification System; and    governmentwide accounting and other data consolidation systems. Another office in OMB, the Office of Electronic Government and  Information Technology,",
      " has responsibility for providing overall  leadership and direction to the executive branch on electronic  government. In particular, this OMB office oversees implementation of IT  throughout the federal government, including monitoring and consulting  on agency technology efforts; advising the OMB Director on the  performance of IT investments, as well as identifying opportunities for  joint agency and governmentwide IT projects; and overseeing the  development of enterprise architectures within and across agencies, which  is being fulfilled through the Federal Enterprise Architecture. This office  also shares statutory IT management responsibilities with the Office of  Information and Regulatory Affairs, which OMB was required to establish  under the Paperwork Reduction Act of 1995.",
      " Finally, OMB is the preparer of the President\u2019s budget and provides  instructions to executive branch agencies to submit budget-related  information in accordance with the requirements of OMB Circular   No. A-11, Preparation, Submission and Execution of the Budget. OMB is  responsible for reviewing and evaluating IT spending across the federal  government and uses the IT spending information submitted by the  agencies during the budget formulation process to review requests for  agency financial management systems and other IT spending. Major  agency IT investments are reported to OMB individually. OMB Circular   No. A-11 defines a major IT investment as a system or project that requires  special management attention because of its importance to an agency\u2019s  mission,",
      " or has significant program or policy implications, among other  criteria. Financial management systems costing more than $500,000  annually are considered major IT investments. OMB Circular No. A-11 also  requires agencies to use Exhibit 300, Capital Asset Plan and Business  Case, to describe the business case for the investment, which serves as the  primary means of justifying IT investment proposals as well as managing  IT investments once they are funded. Elements of IT  Management Best practices are tried and proven methods, processes, techniques, and  activities that organizations define and use to minimize risks and maximize  chances for success. As we have previously reported,",
      " using best practices  related to IT acquisitions can result in better outcomes\u2014including cost  savings, improved service and product quality, and ultimately, a better  return on investment. We and others, such as the Software Engineering  Institute (SEI), have identified and promoted the use of a number of best  practices associated with acquiring IT systems. For the purposes of this  report, we have identified various elements of IT management and  categorized them as disciplined processes, human capital and other IT  management practices that are critical elements for minimizing the risks  related to financial management system implementations. These areas are  interrelated and interdependent, collectively providing an agency with a  comprehensive understanding both of current business approaches and of  efforts (under way or planned)",
      " to change these approaches and a means to  implement those changes. Understanding the relationships among these  areas can help an agency determine how it is applying its resources,  analyze how to redirect these resources in the face of change, implement  such redirections, and measure success. With this decision-making  capability, the agency is better positioned to deploy financial management  systems and direct appropriate responses to unexpected changes in its  environment. The following sections provide additional background  information on the key elements of IT management discussed in this  report, including disciplined processes, human capital and other IT  management practices. Disciplined Processes Disciplined processes are fundamental to successful systems  implementation efforts and have been shown to reduce the risks  associated with software development and acquisition to acceptable  levels.",
      " A disciplined software development and acquisition process can  maximize the likelihood of achieving the intended results (performance)  within established resources (costs) on schedule. Although there is no  standard set of practices that will ever guarantee success, several  organizations, such as the SEI and the Institute of Electrical and  Electronic Engineers (IEEE), as well as individual experts, have  identified and developed the types of policies, procedures, and practices  that have been demonstrated to reduce development time and enhance  effectiveness. The key to having a disciplined system development effort is  to have disciplined processes in multiple areas, including requirements  management, testing, data conversion and system interfaces,",
      "  configuration, risk and project management, and quality assurance.  Effective processes should be implemented in each of these areas  throughout the project life cycle because change is constant. Effectively  implementing the disciplined processes necessary to reduce project risks  to acceptable levels is difficult to achieve because a project must  effectively implement several best practices, and inadequate  implementation of any one may significantly reduce or even negate the  positive benefits of the others. Figure 1 shows how organizations that do not effectively implement the  disciplined processes lose the productive benefits of their efforts as a  project continues through its development and implementation cycle.  Although undisciplined projects show a great deal of what appears to be  productive work at the beginning of the project,",
      " the rework associated  with defects begins to consume more and more resources. In response,  processes are adopted in the hopes of managing what later turns out, in  reality, to have been unproductive work. Generally, these processes are  \u201ctoo little, too late\u201d because sufficient foundations for building the systems  were not done or not done adequately. Experience in both the private  sector and the government has shown that projects for which disciplined  processes are not implemented at the beginning then must be  implemented later, when it takes more time and they are less effective. As shown in figure 1, a major consumer of project resources in  undisciplined efforts is rework (also known as thrashing). Rework occurs  when the original work has defects or is no longer needed because of  changes in project direction.",
      " Disciplined organizations focus their efforts  on reducing the amount of rework because it is expensive. Fixing a  requirements defect after the system is released costs anywhere from 10 to  100 times the cost of fixing it when the requirements are defined. Projects  that do not successfully address rework will eventually spend even more  effort on rework and the associated processes rather than on productive  work. In other words, the project will continually require reworking items. Human Capital Management People\u2014human capital\u2014are a critical element to transforming  organizations to meet the challenges of the 21st century. Recognizing this,  we first added strategic human capital management as a governmentwide  high-risk issue in January 2001,",
      " and although progress has been made,  continued to include it on the latest high-risk list issued in January 2005.  Strategic human capital management for financial management projects  includes organizational planning, staff acquisition, and team development.  Human capital planning is necessary for all stages of the system  implementation. It is important that agencies incorporate strategic  workforce planning by (1) aligning an organization\u2019s human capital  program with its current and emerging mission and programmatic goals  and (2) developing long-term strategies for acquiring, developing, and  retaining an organization\u2019s total workforce to meet the needs of the future.  This incorporates a range of activities from identifying and defining roles  and responsibilities,",
      " to identifying team members, to developing individual  competencies that enhance performance. It is essential that an agency  take the necessary steps to ensure that it has the human resources to  design, implement, and operate a financial management system. In  addition, organizational change management, which is the process of  preparing users for the business process changes that usually accompany  implementation of a new system, is another important human capital  element. Strategic workforce planning is essential for achieving the mission and  goals of financial management system projects. As we have reported,  there are five key principles that strategic workforce planning should  address:  Involve top management,",
      " employees, and other stakeholders in  developing, communicating, and implementing the strategic workforce  plan. Determine the critical skills and competencies that will be needed to  achieve current and future programmatic results. Develop strategies that are tailored to address gaps in the number,  deployment, and alignment of human capital approaches for enabling  and sustaining the contributions of all critical skills and competencies.    Build the capability needed to address administrative, educational, and  other requirements important to support workforce planning strategies. Monitor and evaluate the agency\u2019s progress toward its human capital  goals and the contribution that human capital results have made  toward achieving programmatic results. Having adequate and sufficient human resources with the requisite  training and experience to successfully implement a financial management  system is another critical success factor.",
      " According to OMB, qualified  federal IT project managers are our first line of defense against the cost  overruns, schedule slippage, and poor performance that threaten agencies\u2019  ability to deliver efficient and effective services to citizens. In July 2004,  OMB issued a memorandum to help agencies comply with fiscal year  2005 budget guidance that instructed agencies to ensure \u201cby September 30,  2004, all major projects are managed by project managers qualified in  accordance with CIO Council guidance.\u201d The CIO Council\u2019s Federal IT  Project Manager Guidance Matrix and Federal IT Project Management  Validation define levels of complexity for IT projects/systems,",
      " identify  appropriate competencies and experience, suggest education and training  sources, and serve as a tool for validating IT project manager credentials.  IT project managers are expected to achieve and demonstrate baseline  skills in applicable competency areas listed in the Office of Personnel  Management (OPM) Interpretive Guidance for Project Manager  Positions. The OMB memorandum also required agencies to submit a plan  to meet the guidance on project manager qualifications and document the  approach, milestones, and schedule. The plans should also follow OPM\u2019s  Workforce Planning Model and Human Capital Assessment and  Accountability Framework. Changing an organization\u2019s business processes is not an easy task.",
      "  Managing culture and process change in large, diverse, organizationally  and geographically decentralized agencies is a much greater challenge.  Frequently, the greatest difficulties lie not in managing the technical or  operational aspects of change, but in managing the human dimensions of  change. Some experts caution that unless planning and accountability for  change management are given a separate focus, the efforts will not be  managed well. Management roles in implementing a new system include  establishing business goals, realistic expectations, accountability, and  leading cultural change necessary to accept the capabilities of a new  system. During the implementation phase especially, agency executives  must be in the forefront in dealing with the social,",
      " psychological, and  political resistance to changing the way work is done. Executives must  also recognize that their own roles and responsibilities may need to  undergo change as well. Other IT Management Practices Weaknesses in other IT management processes also increase the risks  associated with financial management system implementation efforts.  Developing an enterprise architecture, establishing IT investment  management policies, and addressing information security weaknesses are  critical to ensuring successful system implementation. OMB Circular No. A-130, which establishes executive branch policies  pursuant to the Paperwork Reduction Act of 1995 and the Clinger-Cohen  Act of 1996 among other laws,",
      " requires agencies to use architectures. A  well-defined enterprise architecture provides a clear and comprehensive  picture of the structure of any enterprise by providing models that  describe in business and technology terms how the entity operates today  and predicts how it will operate in the future. It also includes a plan for  transitioning to this future state. Enterprise architectures are integral to  managing large-scale programs. Managed properly, an enterprise  architecture can clarify and help optimize the interdependencies and  relationships among an organization\u2019s business operations and the  underlying IT infrastructure and applications that support these  operations. Employed in concert with other important management  controls, architectures can greatly increase the chances that organizations\u2019  operational and IT environments will be configured to optimize mission  performance.",
      " To aid agencies in assessing and improving enterprise  architecture management, we issued guidance establishing an enterprise  architecture management framework. The underpinning of this  framework is a five-stage maturity model outlining steps toward achieving  a stable and mature process for managing the development, maintenance,  and implementation of an enterprise architecture. IT investment management provides for the continuous identification,  selection, control, life-cycle management, and evaluation of IT  investments. The Clinger-Cohen Act lays out specific aspects of the  process that agency heads are to implement to maximize the value of the  agency\u2019s IT investments. In addition, OMB and GAO have issued guidance  for agencies to use in implementing the Clinger-Cohen Act requirements  for IT investment management.",
      " For example, we issued guidance  establishing an IT investment management framework. This framework is  also a maturity model composed of five progressive stages of maturity that  an agency can achieve in its IT investment management capabilities. These  stages range from creating investment awareness to developing a  complete investment portfolio to leveraging IT for strategic outcomes. The  framework can be used both to assess the maturity of an agency\u2019s  investment management processes and as a tool for organizational  improvement. The Federal Information Security Management Act of 2002 provides the  overall framework for ensuring the effectiveness of information security  controls that support federal operations and assets and requires agencies  and OMB to report annually to the Congress on their information security  programs.",
      " OMB Circular No. A-130 also requires agencies to protect  information commensurate with the risk and magnitude of the harm that  would result from the loss, misuse, or unauthorized access to or  modification of such information. The reliability of operating  environments, computerized data, and the systems that process, maintain,  and report these data is a major concern to federal entities that have  distributed networks that enable multiple computer processing units to  communicate with each other. Such distributed networks increase the risk  of unauthorized access to computer resources and possible data  alteration. Effective departmentwide information security controls will  help reduce the risk of loss due to errors,",
      " fraud, and other illegal acts,  disasters, or incidents that cause systems to be unavailable. Inadequate  security and controls can adversely affect the reliability of the operating  environments in which financial management systems and their  applications operate. Agencies\u2019 Failure to  Follow Best Practices  in Three Key Areas  Has Hampered  Successful  Implementation of  Financial  Management Systems We reviewed numerous prior GAO and IG reports and identified several  problems related to agencies\u2019 implementation of financial management  systems in three recurring and overarching themes: disciplined processes,  human capital and other IT management practices. Simply put, the  agencies were not following best practices in these three critical areas.",
      "  The predictable result of not effectively addressing these three areas has  been numerous agency systems throughout the federal government that  did not meet their cost, schedule, and performance objectives. We have  issued governmentwide reports on other IT management practices  including agencies\u2019 enterprise architecture, IT investment management,  and information security and therefore will not be addressing those  issues further in this report. However, broad-based actions are needed to  address the problems repeatedly experienced at the agencies as they  continue to struggle to implement new financial management systems.  Many of the systems we reviewed had at least one problem in each of the  three critical areas. While there was some overlap in these three areas,",
      " we  selected examples that best illustrate the specific problems in each area. Disciplined Processes  Have Not Been Fully Used From our review of over 40 prior reports, we identified a number of key  problem areas in disciplined processes related to requirements  management, testing, data conversion and system interfaces, risk  management, and project management activities. Inadequate  implementation of disciplined processes can manifest itself in many ways  when implementing a financial management system and the failure to  properly implement disciplined processes in one area can undermine the  work in all the other areas and cause significant problems. Table 2  summarizes and provides examples for some of the problems we identified  from prior reports that can be expected when agencies do not effectively  implement the disciplined processes necessary to manage their financial  management system implementation projects.",
      " The following provides more specific details on three of the examples of  financial management system implementation problems related to the lack  of disciplined processes. In May 2004, we first reported our concerns with the requirements  management and testing processes used by the Army in the  implementation of the Logistics Modernization Program and the  problems being encountered after it became operational in July 2003. At the time of our initial report, the Army decided that future  deployments would not go forward until they had reasonable assurance  that the deployed system would operate as expected for a given  deployment. However, as we reported in June 2005, the Army had not  effectively addressed its requirements management and testing  problems and data conversion weaknesses had hampered the Army\u2019s  ability to address the problems that need to be corrected before the  system can be fielded to other locations.",
      " For example, the system  cannot properly recognize revenue nor bill customers. Data conversion  problems resulted in general ledger account balances that were not  properly converted to the new system in July 2003, and these  differences remained unresolved almost 18 months later. These  weaknesses adversely affected the Army\u2019s ability to set the prices for  the work performed at the Tobyhanna Army Depot. In addition, data  conversion problems resulted in excess items being ordered and  shipped to Tobyhanna. As noted in our June 2005 report, three  truckloads of locking washers (for bolts) were mistakenly ordered and  received, and subsequently returned,",
      " because of data conversion  problems. As a result of the problems, the Army has implemented  error-prone, time-consuming manual workarounds as a means to  minimize disruption to critical operations; however, the depot\u2019s  financial management operations continue to be adversely affected by  systems problems. NASA has struggled to implement a modern integrated financial  management system. After two failed efforts over 12 years and about   $180 million, NASA embarked on a third effort that is expected to cost  about $983 million. We have previously identified problems and made  recommendations to NASA related to requirements, testing, and project  management as well as problems with human capital and other IT  management issues related to this effort.",
      " For example, NASA had not  implemented quantitative metrics to help gauge the effectiveness of its  requirements management process. Such metrics would be particularly  important for NASA to address the root causes of system defects and  be reasonably assured that its processes would result in a system that  meets its business needs. However, in our September 2005 report, we  found that overall progress implementing our recommendations had  been slow. From our perspective, of the 45 recommendations we made  in prior reports, NASA had taken sufficient action to close 3  recommendations and had partially implemented 13, but 29  recommendations remained open. Furthermore, in November 2004,",
      "  NASA\u2019s independent auditor reported that NASA\u2019s new financial  system, which was implemented in June 2003, could not produce  auditable financial statements for fiscal year 2004 and did not comply  with the requirements of FFMIA. Key areas of concern included the  core financial module\u2019s inability to (1) produce transaction-level detail  in support of financial statement account balances, (2) identify  adjustments or correcting entries, and (3) correctly and consistently  post transactions to the right accounts. In August 2004, the VA IG reported that the effect of transferring  inaccurate data to its new core financial system at a pilot location  interrupted patient care and medical center operations.",
      " This raised  concerns that similar conversion problems would occur at other VA  facilities if the conditions identified were not addressed and resolved  nationwide prior to roll out. Some of the specific conditions the IG  noted were that contracting and monitoring of the project were not  adequate, and the deployment of the new system encountered multiple  problems including those related to software testing, data conversion  and system interfaces, and project management. When the new  financial system was deployed at the pilot location in October 2003, it  did not function as project managers had expected because of  inaccurate or incomplete vendor and inventory system data. As a result  of these problems,",
      " patient care was interrupted by supply outages and  other problems. The inability to provide sterile equipment and needed  supplies to the operating room resulted in the cancelation of 81 elective  surgeries for a week in both November 2003 and February 2004. In  addition, the operating room was forced to operate at two-thirds of its  prior capacity. Because of the serious nature of the problems raised  with the new system, VA management decided to focus on transitioning  back to the previous financial management software at the pilot  location and assemble a senior leadership team to examine the results  of the pilot and make recommendations to the VA Secretary regarding  the future of the system.",
      " Human Capital  Management Problems  Impede Financial Systems  Development and  Deployment Effective human capital management is critical to the success of systems  implementations. As we previously reported in our Executive Guide:  Creating Value Through World-class Financial Management, having  staff with the appropriate skills is key to achieving financial management  improvements, and managing an organization\u2019s employees is essential to  achieving results. By not identifying staff with the requisite skills to  implement such systems and by not identifying gaps in needed skills and  filling them, agencies reduce their chances of successfully implementing  and operating new financial management systems. For example, in our  prior report on building the IT workforce,",
      " we found that in the 1990s the  initial rounds of downsizing were set in motion without considering the  longer-term effects on agencies\u2019 IT performance capacity. Additionally, a  number of individual agencies drastically reduced or froze their hiring  efforts for extended periods. Consequently, following a decade of  downsizing and curtailed investments in human capital, federal agencies  face skills, knowledge, and experience imbalances, especially in their IT  workforces. Without corrective action, this situation will worsen,  especially in light of the numbers of federal civilian workers becoming  eligible to retire in the coming years. In this regard, we are emphasizing  the need for additional focus on key problem areas we identified from  prior reports including strategic workforce planning,",
      " human resources,  and change management. Examples for some of the human capital  management problems we identified in prior reports that hamper the  implementation of new financial management systems are summarized in  table 3. The following provides more specific details on two of the examples of the  types of human capital management problems we found. In May 2002, we first reported that the Customs Modernization Office  did not have the people in place to perform critical system acquisition  functions and did not have an effective strategy for meeting its human  capital needs. Customs had decided to compress its time frame for  delivering its new system from 5 to 4 years and was taking a schedule-",
      " driven approach to acquiring the system because of the system\u2019s  national importance. This exacerbated the level of project risk by  introducing more overlap among incremental system releases and  stretching critical resources. In our most recent report issued in March  2005, we found that although Customs had developed a staffing plan,  it had not been approved and was already out of date because the  modernization office subsequently implemented a reorganization that  transferred government and contractor personnel to the modernization  office. We also observed that changes in roles and responsibilities had  the modernization office and the contractor sharing development  duties of the new system. Finally, Customs developed a revised  organizational change approach with new change management  activities,",
      " but key actions associated with the revised approach were  not planned for implementation because the funding request for fiscal  year 2005 did not fully reflect the revised approach. In July 2004,  Customs extended delivery of the last release from fiscal year 2007 to  fiscal year 2010, adding a new release for screening and targeting, and  increasing the life-cycle cost estimate by about $1 billion to   $3.1 billion. The new schedule reflected less overlap between future  releases. While Customs, which is now under the Department of  Homeland Security, has taken important actions to help address  release-by-release cost and schedule overruns that we previously  identified,",
      " we concluded that it was unlikely that these actions would  prevent the past pattern of overruns from recurring because the  Department of Homeland Security had relaxed system quality  standards, so that milestones were being passed despite material  system defects, and because correcting these defects will ultimately  require the program to expend resources, such as people and test  environments, at the expense of later system releases (some of which  are now under way). We reported, in September 2004, that staff shortages and limited  strategic workforce planning resulted in HHS not having the resources  needed to effectively design and operate its new financial management  system. HHS had taken the first steps in strategic workforce planning.",
      "  For example, the Centers for Disease Control and Prevention (CDC),  where the first deployment was scheduled, was the only operating  division that had prepared a competency report, but a skills gap  analysis and training plan for CDC had not been completed. In addition,  many government and contractor positions on the implementation  project were not filled as planned. For example, an independent  verification and validation contractor reported that some key personnel  filled multiple positions and their actual available time was inadequate  to perform the allocated tasks. As a result, some personnel were  overworked, which, according to the independent verification and  validation contractor could lead to poor morale.",
      " The organization chart  for the project showed that the project team was understaffed and that  several integral positions were vacant or filled with part-time detailees.  While HHS and the systems integrator had taken measures to acquire  additional human resources for the implementation of the new  financial management system, we concluded that scarce resources  could significantly jeopardize the project\u2019s success and lead to several  key deliverables being significantly behind schedule. In September  2004, HHS decided to delay its first scheduled deployment at CDC by 6  months in order to address these and other issues identified with the  project. Other IT Management  Practices Were Not Fully  Implemented We identified a number of key problems related to other IT management  practices.",
      " Specifically, we found that in planning and developing new  financial management systems, agencies had not adequately considered  their existing IT management processes and framework. Through our  research into IT management best practices and our evaluation of agency  IT management performance, we have identified a set of essential and  complementary management disciplines. These include key areas where  we found problems such as enterprise architecture, investment  management, and information security, among others. Using the results of  this research and evaluation, we have developed various management  frameworks and guides and reported on numerous IT management  weaknesses at individual agencies. Table 4 summarizes and provides  examples for some of the key problems we found described in prior  reports on financial management system implementations related to other  IT management areas not previously discussed.",
      " The following provides more specific details on two of the examples of  other problems related to IT management that have had an impact on  financial management system implementation projects. For several years, we have reported that deficiencies in DOD\u2019s  enterprise architecture and IT investment management policies are  contributing factors to DOD\u2019s stovepiped, duplicative, and  nonintegrated systems environment. In May 2004, we reported that we  had not seen any significant change in the content of DOD\u2019s  architecture or in DOD\u2019s approach to investing billions of dollars  annually in existing and new systems. Few actions had been taken to  address prior recommendations,",
      " which were aimed at improving  DOD\u2019s plans for developing the next version of the architecture and  implementing the institutional means for selecting and controlling both  planned and ongoing business systems investments. In April 2005, we  reported that DOD still did not have an effective departmentwide  management structure for controlling business investments despite  DOD requesting over $13 billion in fiscal year 2005 to operate,  maintain, and modernize its existing duplicative business systems. In  addition, because DOD lacked a well-defined business enterprise  architecture and transition plan, billions of dollars continued to be at  risk of being spent on systems that would be duplicative,",
      " not  interoperable, cost more to maintain than necessary, and would not  optimize mission performance and accountability. In July 2005, we  reported that despite spending almost 4 years and about $318 million,  DOD still did not have an effective architecture program, and as a  result its modernization program remained a high risk. We reported, in February 2005, that OPM had implemented selected  processes in the areas of systems acquisition, investment management,  and information security; however, many processes were not  sufficiently developed, were still under development, or were planned  for future development. Although OPM had an executive steering  committee chaired by the deputy associate director of the Center for  Retirement and Insurance Services that acted as an IT investment  management board for the new retirement system,",
      " program officials  were not aware of formal policies or procedures guiding the board\u2019s  oversight responsibilities or activities. Agency officials stated that they  would define such a governance structure for the retirement system  project during the contract award process. In addition, the agency had  not yet developed security plans for the licensed technology and data  conversion portions of the new system. Agency officials said they did  not have detailed security requirements for the licensed technology  portion of the new system, although the request for proposals  identified the need for high-level security requirements. They planned  to develop detailed security requirements after awarding the licensed  technology contract to a vendor. Without fully developed security plans  and security requirements for the licensed technology and data  conversion portions of the new system,",
      " OPM increased the risk that  both it and its vendors would not meet information security needs for  these portions of the program expected to be implemented in fiscal  year 2008. Federal Initiatives  Under Way to  Improve System  Implementations As the federal organization with key responsibility for federal financial  management systems, OMB has undertaken a number of initiatives related  to acquiring and implementing financial management system capabilities.  Some of these initiatives are in collaboration with the CIO and CFO  Councils and are broad-based attempts to reform financial management  operations across the federal government. While reforming federal  financial management is an undertaking of tremendous complexity,",
      " it  presents great opportunities for improvements in financial management  system implementations and related business operations. Notably, OMB has developed and continues to evolve governmentwide  Federal Enterprise Architecture products and has required a mapping of  agency architectures to this federal architecture as part of the budget  review process. Another key OMB initiative is referred to as the lines of  business and promotes streamlining common systems to enhance the  government\u2019s performance and services, such as establishing centers of  excellence to consolidate financial management activities for major  agencies through cross-servicing arrangements. The advantages of this  approach are many, including the implementation of standard business  processes and focusing system acquisition,",
      " development, and maintenance  activities at select agencies or entities with experience that have the  necessary resources to reduce the risks associated with such efforts.  Furthermore, certain activities and responsibilities performed by JFMIP  prior to its termination have been reassigned to OMB\u2019s OFFM, the  Financial Systems Integration Office, and a CFO Council Committee  providing guidance and oversight. However, as discussed in the next  section, we identified four key concepts that are not yet fully developed  and integrated in OMB\u2019s initiatives and related processes. Table 5  highlights some of the foremost initiatives under way at OMB and their  potential strengths. Federal Enterprise  Architecture In 2002,",
      " OMB established the Federal Enterprise Architecture Program  Management Office to develop a Federal Enterprise Architecture  according to a collection of five reference models. These models are  intended to facilitate governmentwide improvement through cross-agency  analysis and the identification of duplicative investments, gaps, and  opportunities for collaboration, interoperability, and integration within  and across government agencies. According to OMB, the result will be a  more citizen-centered, customer-focused government that maximizes  technology investments to better achieve mission outcomes. The Federal  Enterprise Architecture reference models are summarized in table 6. In May 2005, the five reference models were combined into the  Consolidated Reference Model document to compose a framework for  describing important elements of the Federal Enterprise Architecture in a  common and consistent way.",
      " OMB views the Federal Enterprise  Architecture not as a static model, but as a program, built into the annual  budget process to repeatedly and consistently improve all aspects of  government service delivery. OMB officials acknowledged that they are  still mapping out the Federal Enterprise Architecture and making it more  robust and recognized that some lines of business have fleshed out their  areas in more detail than others. In prior testimony on the Federal  Enterprise Architecture, we recognized that OMB and the CIO Council  have made important progress, but that hard work lies ahead to ensure  that the Federal Enterprise Architecture is appropriately described,  matured, and used.",
      " The development of the Federal Enterprise  Architecture has continued to evolve and OMB has been promoting the  adoption of the Federal Enterprise Architecture. For example, for the  fiscal year 2007 budget submission, agencies will be required to use  predetermined codes to link their major IT investments on Exhibit 53 to  the Federal Enterprise Architecture. For fiscal year 2005, agencies were  required to use the Federal Enterprise Architecture Performance  Reference Model to identify performance measurements for each new  major IT investment. As we have previously testified, questions remain  regarding the nature of the Federal Enterprise Architecture, the  relationship of agency enterprise architectures to the Federal Enterprise  Architecture,",
      " and the security aspects of the Federal Enterprise  Architecture. Therefore, we will not be addressing these issues further  from a governmentwide perspective in this report. Lines of Business Building upon the efforts of the Federal Enterprise Architecture program,  OMB and designated agency task forces have launched the lines of  business initiative. This initiative seeks to develop business-driven  common solutions for six lines of business that span across the federal  government. OMB and the lines of business task forces plan to use  enterprise architecture-based principles and best practices to identify  common solutions for business processes or technology-based shared  services to be made available to government agencies. Driven from a  business perspective rather than a technology focus,",
      " the solutions are  expected to address distinct business improvements to enhance the  government\u2019s performance and services for citizens. The end results of the  lines of business efforts are expected to save taxpayer dollars, reduce  administrative burden, and significantly improve service delivery. We have long supported and called for such initiatives to standardize and  streamline common systems, which can reduce costs and, if done  correctly, can also improve accountability. OMB officials from both OFFM  and the Electronic Government office told us that they worked  collaboratively to develop the financial management line of business along  with an interagency task force. The interagency task force recommended  the establishment of governmentwide service providers in the areas of  financial management and human resources management.",
      " The financial  management line of business raises a number of issues that have far- reaching implications for the government and private sector application  service providers. This concept has commonly been used in the private  sector where application service providers provide services such as  payroll, sales force automation, and human resource applications to many  corporate clients. The interagency task force analysis estimated that  savings of more than $5 billion can be expected over a 10-year time frame  through consolidation of financial management and human resources  systems and the standardization and optimization of associated business  processes and functions. To help realize these benefits, OMB evaluated  agencies\u2019 business cases submitted as part of the fiscal year 2006 budget  process.",
      " On the basis of the review, the following four agencies were  designated as governmentwide financial management application service  providers, which OMB refers to as centers of excellence. Department of the Interior (National Business Center)    General Services Administration    Department of the Treasury (Bureau of the Public Debt\u2019s  Administrative Resource Center) Department of Transportation (Enterprise Services Center) The National Business Center, the General Services Administration, and  the Bureau of the Public Debt have significant experience providing  financial management services to other federal entities. For a number of  years, these entities have provided financial management services\u2014 primarily to smaller federal agencies such as the Nuclear Regulatory  Commission,",
      " the Office of Government Ethics, and the Panama Canal  Commission. The Department of Transportation plans to utilize its newly  implemented financial management system to provide services to other  agencies. OMB officials told us that, at a minimum, centers of excellence  must be able to support, or must use, core financial system software that  has passed the most recent qualification test of the Financial Systems  Integration Office, which is the current entity that performs many of the  roles and responsibilities of the former JFMIP Program Management  Office as we discuss below. Centers of excellence may provide related  maintenance, interfaces with feeder systems, and transaction processing. Other services may also be offered,",
      " including hosting and other financial  applications such as payroll and travel. OMB also indicated that it plans to  explore using private sector application service providers to serve as  centers of excellence. OMB expects to manage the migrations of agencies to centers of  excellence using the agencies\u2019 business cases submitted as part of the  annual budget process. According to OMB, agencies that submit business  cases with proposals to develop new financial systems or significantly  update or enhance current financial systems are prime candidates for  moving to a financial management center of excellence. The general  principle OMB plans to follow is that agencies should migrate to a  financial management center of excellence when it is cost effective to do  so and they have maximized the return on investment in the current  system,",
      " which averages about 5 to 7 years. OMB officials told us that  several major executive branch agencies are considering moving to a  financial management center of excellence. In August 2005, OPM was the first large agency to announce its plans to  move to a designated center of excellence. At the time of our review, OPM  was still in the planning phase; although it had selected the Bureau of the  Public Debt as the provider, it did not yet have a project plan. OPM  officials recognized that moving to a center of excellence at the beginning  of a fiscal year and not converting mid-year was a best practice they  planned to follow.",
      " In addition, at the time of our review, the  Environmental Protection Agency was in the planning and acquisition  phase of its Financial System Modernization Project. As part of its best- value determination, the Environmental Protection Agency was  considering the designated centers of excellence as well as private sector  providers for software, integration, and hosting and had issued a draft  request for quotations. Also, OMB officials stated that they helped the  National Gallery of Art in preparing its solicitation for a new system, and  the agency recently selected a private sector firm as its application service  provider. OMB expects that most agencies will move to a center of  excellence or private sector firm within the next 7 to 8 years.",
      " In OMB  Circular No. A-11, for fiscal year 2007 OMB has asked agencies to provide  an overview of their current and future financial management systems  framework, including migration strategies for moving to a financial  management center of excellence. JFMIP Realignment In an effort to eliminate duplicative roles and streamline financial  management improvement efforts, the four principals of JFMIP agreed to  realign JFMIP\u2019s responsibilities for financial management policy and  oversight as described in a December 2004 OMB memorandum. Some of  the former responsibilities of JFMIP, such as issuing systems  requirements, were to be placed under the authority of OFFM and a  renamed CFO Council committee\u2014the Financial Systems Integration  Committee.",
      " As a result of the realignment, JFMIP ceased to exist as a  separate organization, although the principals will continue to meet at  their discretion consistent with the Budget and Accounting Procedures  Act of 1950 (codified, in part, at 31 U.S.C. \u00a73511(d)). Under the realignment announced in December 2004, the JFMIP Program  Management Office was to report to the chair of the CFO Council\u2019s  Financial Systems Integration Committee. This reporting relationship  subsequently changed. At the request of the OMB Controller, the CFO at  the Department of Labor now chairs the Financial Systems Integration  Committee and is the leading agency sponsor of the financial management  line of business.",
      " Two subcommittees were also established under the  announced realignment:    Configuration Control Subcommittee\u2014to focus on interface    Transaction Processing Standardization Subcommittee\u2014to support  interagency development of functional requirements for the software  certification process. OMB officials indicated that the roles and responsibilities of the two  subcommittees under the Financial Systems Integration Committee will  likely continue to evolve. However, the full committee will periodically  evaluate the subcommittees and whether they are well aligned and still  needed or if additional subcommittees are needed. Other significant responsibilities of the former JFMIP Program  Management Office, which was previously managed by the JFMIP  executive director using funds provided by the CFO Council,",
      " were shifted  to the Financial Systems Integration Office (FSIO), which was established  with staff from the original JFMIP Program Management Office. The FSIO  will now report to the FSIO executive director, who will report to the OMB  Controller. Before the realignment, the JFMIP Program Management  Office was responsible for the testing and certification of commercial off- the-shelf (COTS) core financial systems for use by federal agencies and  coordinating the development and publication of functional requirements  for financial management systems, among other things. OMB officials  expect that the FSIO will continue to focus on core financial systems and  still be responsible for certification and testing of core systems,",
      " but they  plan to evaluate the effectiveness of the certification and testing function.  In addition, OMB has recognized the need for standardization and the  inclusion of key stakeholders in developing systems requirements and  processes, but considers it a long-term goal. The FSIO will develop  systems requirements and the Financial Systems Integration Committee  will be responsible for advising OFFM on the systems requirements. OFFM  will now be responsible for issuing new systems requirements. According to OMB officials, the FSIO is reassessing the realignment plan  described in the December 2004 OMB memorandum and recently  developed foundational materials including the mission statement,",
      " goals,  objectives, performance indicators, scope of activities, prioritization of  work, budget, organizational chart, and communication plan. According to  OMB officials, resources at FSIO will be aligned under the priorities  identified and the office will be structured according to the new priorities.  The FSIO will identify its needs for additional staff and determine how  many are needed and what skill sets are appropriate. The FSIO will  continue defining its priorities and evaluating the effectiveness of  processes and its plans will continue to evolve. While OMB has taken  steps to accomplish the Federal Enterprise Architecture, lines of business,  and JFMIP realignment initiatives,",
      " as discussed in the next section, it is  generally at the early stages of implementation and a firm foundation has  not yet been established to address the long-standing problems that have  impeded success. Broad-Based Actions  Needed to Implement  Financial  Management Systems  Governmentwide The key for federal agencies to avoid the long-standing problems that have  plagued financial management system improvement efforts is to address  the foremost causes of those problems and adopt solutions that reduce the  risks associated with these efforts to acceptable levels. Although OMB has  articulated an approach for reforming financial management systems  governmentwide under its financial management line of business and  JFMIP realignment initiatives,",
      " implementing these initiatives will be  complex and challenging. OMB has correctly recognized that enhancing  the government\u2019s ability to implement financial management systems that  are capable of providing accurate, reliable, and timely information on the  results of operations needs to be addressed as a governmentwide solution,  rather than as individual agency stove-piped efforts designed to meet a  given entity\u2019s needs. However, OMB has not yet fully defined and  implemented the processes needed to successfully complete these  initiatives. Specifically, based on industry best practices, we identified  four key concepts that are not yet fully developed and integrated in OMB\u2019s  initiatives and related processes.",
      " While OMB has addressed certain  elements of these best practices in its initiatives, many specific steps are  not yet completed. Careful consideration of these four concepts, each one  building upon the next, will be integral to the success of OMB\u2019s initiatives  and will help break the cycle of failure in implementing financial  management systems. The four concepts are (1) developing a concept of  operations, (2) defining standard business processes, (3) developing a  strategy for ensuring that agencies are migrated to a limited number of  application service providers in accordance with OMB\u2019s stated approach,  and (4) defining and effectively implementing disciplined processes  necessary to properly manage the specific projects.",
      " The following sections  highlight the key issues to be considered for each of the four areas. Concept of Operations  Provides Foundation What is considered a financial management system? Who will be responsible for developing a governmentwide concept of operations and  what process will be used to ensure that the resulting document reflects the  governmentwide solution rather than individual agency stove-piped efforts? How will the concept of operations be linked to the Federal Enterprise Architecture? How can the federal government obtain reliable information on the costs of its financial  management systems investments? A concept of operations defines how an organization\u2019s day-to-day  operations are (or will be) carried out to meet mission needs.",
      " The concept  of operations includes high-level descriptions of information systems, their  interrelationships, and information flows. It also describes the operations  that must be performed, who must perform them, and where and how the  operations will be carried out. Further, it provides the foundation on  which requirements definitions and the rest of the systems planning  process are built. Normally, a concept of operations document is one of  the first documents to be produced during a disciplined development  effort and flows from both the vision statement and the enterprise  architecture. According to the IEEE standards, a concept of operations is  a user-oriented document that describes the characteristics of a proposed  system from the users\u2019 viewpoint.",
      " The key elements that should be  included in a concept of operations are major system components,  interfaces to external systems, and performance characteristics such as  speed and volume. In the case of federal financial management systems, another key element  for the concept of operations would be a clear definition and scope of the  financial management activities to be included. One problem with the  current OMB approach for reporting is that systems that have historically  been considered part of financial management, such as payroll and  inventory management, are not captured under the financial management  line of business when a particular agency reports IT investments to OMB  as part of the annual budget submission for inclusion in the Budget of the  United States Government.",
      " This is because the Federal Enterprise  Architecture coding structure for agencies to use when transmitting IT  investment information to OMB calls for only IT investments that support  certain financial system functions to be identified as a financial  management system. An effective concept of operations would help  identify these omissions. Financial management systems are defined by OMB in Circulars No. A-11  and A-127 in similar terms to that found in statutes such as FFMIA. This  definition is also similar to that used by DOD to define a defense business  system as provided by the fiscal year 2005 Defense Authorization Act.  These various sources generally consider financial management systems  to be financial systems and the financial portion of mixed systems that  support the interrelationships and interdependencies between budget,",
      "  cost, and management functions, and the information associated with  business activities. A mixed system is an information system that supports  both financial and nonfinancial functions of the federal government. At  DOD, for example, an estimated 80 percent of the information needed to  prepare annual financial statements comes from mixed systems such as  logistics, personnel, and procurement systems that are outside of the  responsibility of the DOD CFO. In contrast, the Federal Enterprise  Architecture\u2019s Business Reference Model defines a financial management  system as one that uses financial information to measure, operate, and  predict the effectiveness and efficiency of an entity\u2019s activities in relation  to its objectives.",
      " These differences illustrate that a consistent definition of  financial management systems is not being used across the federal  government. One of the key challenges faced by OMB when evaluating financial  management system implementation efforts is capturing all financial  management system investments and their related costs. The fiscal year  2006 budget requests for IT spending totaled about $65.2 billion. Our  analysis showed that, of this amount, only $3.9 billion, less than 6 percent,  is reflected under the financial management mission as defined by OMB  using the definition of a financial management system in its Federal  Enterprise Architecture. A more comprehensive analysis of financial  management system investments using the definition in OMB Circular No.",
      "  A-127 that includes mixed systems such as payroll and inventory and  including those considered by DOD as business systems brings the total to  about $20 billion. Payroll and inventory management systems clearly  support financial management activities, but these systems are not  included in the financial management line of business within the Federal  Enterprise Architecture framework. The payroll and inventory systems are  reflected under the human resource management and supply chain  management lines of business, respectively. Because of these differing definitions, the total number of systems and the  respective costs associated with financial management system  implementation efforts are difficult to capture. OMB officials stated that  they are currently revising OMB Circular No.",
      " A-127 and will consider  clarifying the definition to ensure that it is consistent with FFMIA. In  addition, an effective concept of operations would help bridge this gap and  facilitate the monitoring of the activity related to financial management  systems. Addressing this issue would be a key factor in developing a  foundation for the lines of business initiative to consolidate federal  financial management systems under a limited number of application  service providers. An effective concept of operations would describe, at a high level (1) how  all of the various elements of federal financial systems and mixed systems  relate to each other, and (2) how information flows from and through  these systems.",
      " Further, a concept of operations would provide a useful  tool to explain how financial management systems at the agency and  governmentwide levels can operate cohesively. It would be geared to a  governmentwide solution rather than individual agency stove-piped  efforts. Further, it would provide a road map that can be used to   (1) measure progress and (2) focus future efforts. OMB officials told us  that they had developed a concept of operations, but did not know when it  would be released or if it meets the criteria in the IEEE standards.  Because the federal government has lacked such a document, a clear  understanding of the interrelationships among federal financial systems  and how the application service provider concept fits into this framework  has not yet been achieved.",
      " While the Federal Enterprise Architecture, when fully populated, could  provide some of this perspective, a concept of operations document  presents these items from a user\u2019s viewpoint in nontechnical terms. Such a  document would be invaluable in getting various stakeholders, including  those at the agency and governmentwide levels, the software vendors, and  the three branches of the federal government, to understand how the  financial systems are expected to operate cohesively and how they fit into  \u201cthe big picture.\u201d A concept of operations from this perspective would  clarify which financial management systems should be operated at an  agency level and which ones would be handled at a governmentwide level  and how those two would integrate.",
      " In addition, it could identify the  nature and extent of skills needed to effectively operate these systems.  This would play a part in resolving some of the human capital  management problems discussed previously. Another key element of a concept of operations is a transition strategy that  is useful for developing an understanding of how and when changes will  occur. Not only is this needed from an investment management point of  view, it is a key element in the human capital problems discussed  previously that revolved around change management strategies.  Describing how to implement OMB\u2019s approach for outsourcing financial  management systems and the process that will be used to deactivate  legacy systems that will be replaced or interfaced with a new financial  management system are key aspects that need to be addressed in a  transition strategy.",
      " This, in turn, allows the agencies to begin taking the  necessary actions to integrate this approach into their investment  management and change management processes. Standard Business  Processes Promote  Consistency How can governmentwide standard business processes be developed to meet the  needs of federal agencies? How can agencies be encouraged to adopt new processes, rather than selecting other  methods that result in simply automating old ways of doing business? How will the standard business processes be implemented by the application service  providers to provide consistency across government agencies and among the  application service providers? What process will be used to determine and validate the processes needed for  agencies that have unique needs?",
      " Business process models provide a way of expressing the procedures,  activities, and behaviors needed to accomplish an organization\u2019s mission  and are helpful tools to document and understand complex systems.  Business processes are the various steps that must be followed to perform  a certain activity. For example, the procurement process would start when  the agency defines its needs, issues a solicitation for goods or services and  would continue through contract award, receipt of goods and services,  and would end when the vendor properly receives payment. The  identification of preferred business processes would be critical for  standardization of applications and training and portability of staff, as well  as for the software vendor community to use for software design and  implementation purposes.",
      " Without standard processes, the federal  government will continue to spend funds to develop individual agency  stove-piped efforts that may or may not meet a given entity\u2019s needs. To maximize the success of a new system acquisition, organizations need  to consider the redesign of current business processes. As we noted in our  Executive Guide: Creating Value Through World-class Financial  Management, leading finance organizations have found that productivity  gains typically result from more efficient processes, not from simply  automating old processes. Moreover, the Clinger-Cohen Act of 1996  requires agencies to analyze the missions of the agency and, based on the  analysis,",
      " revise mission-related and administrative processes, as  appropriate, before making significant investments in information  technology used to support those missions. Another benefit of what is  often called business process modeling is that it generates better system  requirements, since the business process models drive the creation of  information systems that fit in the organization and will be used by end  users. Other benefits include (1) providing a foundation for agency efforts  to describe the business processes needed for unique missions, or to  develop subprocesses to support those at the governmentwide level and  (2) describing the business processes of the federal government to the  vendor community for standardization.",
      " While in many cases, government  business processes will be identical or very similar to processes used by  the private sector, these standards should also describe processes unique  to federal accounting. However, according to OMB officials, the lines of business initiative is  moving forward even though this important key issue has not yet been  addressed. OMB officials believed that for standardized processes, it is  important to get buy-in as the processes are developed, and not force the  process from the top. OMB officials we talked with recognized that  standardization of business processes is important, but they did not want  to wait to deploy the financial management line of business initiative until  standard business processes had been developed.",
      " OMB planned to task  the newly created CFO Council Transaction Processing Standardization  Subcommittee with the responsibility for developing standard federal  business processes. Because this key issue has not been addressed, and  the other key issues flow from it, little has been done to address those  important considerations. From our perspective, adopting standardized  processes is a fundamental step needed for all financial system  implementations, but especially for making the financial management line  of business initiative successful. Otherwise, we believe that there is a  much greater risk of the continued proliferation of nonstandard business  processes that would not result in a marked improvement from the current  environment. Strategy for Implementing  the Financial Management  Line of Business Initiative  Will Be Key What guidance will be provided to assist agencies in adopting a change management  strategy that reduces the risks of moving to the application service provider  approach?",
      " What processes will be put in place to ensure that agency financial management  system investment decisions focus on the benefits of standard processes and  application service providers? What process will be used to facilitate the decision-making process used by agencies  to select a given provider? How will agencies incorporate strategic workforce planning in the implementation of  the application service provider approach? Although OMB has a goal of migrating agencies to a limited number of  application service providers within the next 7 to 8 years to deliver the  standard business processes, rather than funding individual agency efforts,  it has not yet articulated a clear and measurable strategy for achieving this  goal. This is important because there has been a historical tendency for  agencies and units within agencies to view their needs as urgent and resist  standardization.",
      " Decisive action will be needed to ensure that agencies  adopt the application service provider concept and that agencies do not  continue to attempt to develop and implement their own financial  management systems. OMB has been proactive since the beginning of the  financial management line of business initiative in describing the goals of  the initiative by making speeches, discussing the initiative with the media,  including it in the President\u2019s budget request, and highlighting it on its Web  site. However, there are limited tools and guidance available and OMB has  not provided centers of excellence with standard document templates  needed to minimize risk, provide assurance, and develop understandings  with customers on topics such as service level agreements and concept of  operations.",
      " A service level agreement is critical for both the application  service providers and the agencies to be held accountable for their  respective parts of the agreement. Much work remains to develop a  change management strategy that addresses key activities needed to  minimize the risk associated with the implementation of the financial  management line of business initiative. Change management in the context of migrating federal agencies to an  application service provider will need to include activities such as   (1) developing specific criteria for requiring agencies to migrate to an  application service provider rather than attempting to develop and  implement their own stove-piped business systems; (2) providing the  necessary information for an agency to make a selection of an application  service provider;",
      " (3) defining and instilling new values, norms, and  behaviors within agencies that support new ways of doing work and  overcoming resistance to change; (4) building consensus among  customers and stakeholders on specific changes designed to better meet  their needs; and (5) planning, testing, and implementing all aspects of the  transition from one organizational structure and business process to  another. According to leading IT organizations, organizational change management  is the process of preparing users for the business process changes that will  accompany implementation of a new system. An effective organizational  change management process includes project plans and training that  prepare users for impacts the new system might have on their roles and  responsibilities and a process to manage those changes.",
      " We have reported  on various problems with agencies\u2019 change management including the  failure to develop transition plans, reengineer business processes, and  limit customization. In addition, one CFO Council member told us that  from his perspective systems do not fail, but there is an implementation  failure because of (1) ineffective coordination and communication  between the CFO and CIO offices, (2) excessive modification of COTS  systems, (3) business processes not being reengineered correctly,  completely, or timely, and (4) a lack of authority and leadership for the  CFO and project management offices to make the implementation work.",
      " With regard to establishing criteria for transitioning agencies to an  application service provider, we note that providing governmentwide  financial services is not a new concept to the federal government. One of  the 24 Presidential Electronic Government initiatives is e-payroll, which  was intended to consolidate 22 federal payroll systems into 4 federal  payroll providers to simplify and standardize federal human  resources/payroll policies and procedures to better integrate payroll,  human resources, and finance functions. Numerous agencies had targeted  their payroll operations for costly modernizations, and according to OMB,  by consolidating duplicative payroll modernization efforts, an estimated  $1.",
      "1 billion can be saved over the next decade in future IT investments  given the economies of scale and cost avoidance. Federal agencies already  have or will be migrating to one of the four selected payroll providers to  process payroll and pay employees. OMB officials told us they learned from the e-payroll initiative that  directing and forcing change as they had done with the e-payroll effort was  not palatable to federal agencies. The agencies preferred having choices  on timing the move and on having options for various providers. As a  result, for the financial management line of business initiative, they do not  plan to establish a migration path or time table.",
      " Further, processes have  not been put in place to facilitate agency decisions on selecting a provider  or focusing investment decisions on the benefits of standard processes  and application service providers. It is not clear how this will impact the  adoption of this initiative. Given the pressures to reduce budgets,  discipline with respect to following a clear migration path will be  essential. Without such a migration path, while some agencies may readily  migrate to a center of excellence or application service provider to  minimize the tremendous undertaking of implementing or significantly  upgrading a financial system, other agencies will likely perpetuate the  waste of taxpayer dollars previously described related to failed system  implementation efforts.",
      " The need for clear criteria on migrating agencies to the financial  management line of business initiative is highlighted by the following  example. In fiscal year 2004, the Department of Justice embarked on  implementing a new core financial system and is not planning to move  to a center of excellence. OMB officials stated that they were not  requiring Justice to move to a center of excellence because it had  unique needs and was already far enough along in its attempt to  modernize and consolidate the financial systems used throughout the  agency. OMB officials also speculated that Justice might eventually  become a center of excellence that focuses on law enforcement  agencies and addresses the law enforcement community\u2019s unique  needs.",
      " According to a supporting document of the Analytical  Perspectives, Budget of the United States Government, Fiscal Year  2006, Justice spent about $6.9 million on modernizing its core financial  system in fiscal year 2004. Further, Justice planned to spend $23.1  million for modernization during fiscal year 2005, and expects fiscal  year 2006 modernization costs to more than triple to $72.5 million. In  October 2004, the IG reported that little progress had been made in  implementing the new system and continued to report financial  management and systems as a top management challenge.",
      " Thus, it is  not clear why Justice should continue with its financial systems  development project when the cost is expected to significantly escalate  and significant challenges remain. Further, the application service provider concept will still require that  agencies address long-standing human capital problems by incorporating  elements of strategic workforce planning such as (1) aligning an  organization\u2019s human capital program with its current and emerging  mission and programmatic goals and (2) developing long-term strategies  for acquiring, developing, and retaining an organization\u2019s total workforce  to meet the needs of the future. This includes a range of activities from  identifying and defining roles and responsibilities,",
      " to identifying team  members, to developing individual competencies that enhance  performance. To maintain and enhance the capabilities of IT staff,  organizations should develop and implement a human capital strategy  that, among other things, includes assessing competencies and skills  needed to effectively perform IT operations to support agency mission and  goals, inventorying the competencies and skills of current IT staff to  identify gaps in needed capabilities, and developing and implementing  plans to fill the gap between requirements and current staffing. As we have testified, having sufficient numbers of people on board with  the right mix of knowledge and skills can make the difference between  success and failure.",
      " This is especially true in the IT area, where  widespread shortfalls in human capital have contributed to demonstrable  shortfalls in agency and program performance. According to Building the  Work Force Capacity to Successfully Implement Financial Systems, the  roles needed on an implementation team are consistent across financial  system implementation projects and include a project manager, systems  integrator, functional experts, information technology manager, and IT  analysts. Many of these roles require the dedication of full-time staff for  one or more of the project\u2019s phases. Finally, sustained leadership will be key to a successful strategy for  moving federal agencies towards consolidated financial management  systems.",
      " In our Executive Guide: Creating Value Through World-class  Financial Management, we found that leading organizations made  financial management improvement an entitywide priority by, among  other things, providing clear, strong executive leadership. We also  reported that making financial management a priority throughout the  federal government involves changing the organizational culture of federal  agencies. Although the views about how an organization can change its  culture can vary considerably, leadership (executive support) is often  viewed as the most important factor in successfully making cultural  changes. Top management must be totally committed in both words and  actions to changing the culture, and this commitment must be sustained  and demonstrated to staff.",
      " In addition, a recent best practice guide on  shared services stated that it is not enough for management to merely  support the financial operations\u2019 shared service implementation\u2014top  management must provide the leadership structure to ensure that the  transition is successful. Because the tenure of political appointees is  relatively short, the current and future administrations must continue a  strong emphasis on top-notch financial management. Disciplined Processes Will  Help Ensure Successful  Implementations How can existing industry standards and best practices be incorporated into  governmentwide guidance related to financial management system implementation  efforts, including migrating to an application service provider? What actions will be taken to reduce the risks and costs associated with data  conversion and interface efforts?",
      " What oversight process will be used to ensure that modernization efforts effectively  implement the prescribed policies and procedures? Once the concept of operations and standard business processes have  been defined and a migration strategy is in place, individual agencies will  have to work closely with the selected application service provider or  systems integrator to help ensure that the implementation is successful.  Although application service providers may provide a COTS solution,  effective implementation and testing processes are still required to ensure  that the system delivers the desired functionality on time and within  budget. As previously discussed, a partnership between the CIO and CFO  offices, as well as with those program management offices responsible for  financial or mixed systems such as payroll and inventory,",
      " is critical for  success. Agencies have frequently struggled to implement key best  practices when implementing COTS financial management systems. The  key to avoiding these long-standing implementation problems is to provide  specific guidance to agencies for financial management system  implementations, incorporating the best practices identified by the SEI,  the IEEE, the Project Management Institute, and other experts that have  been proven to reduce risk in implementing systems. Such guidance  should include the various disciplined processes such as requirements  management, testing, data conversion and system interfaces, risk and  project management, and related activities, which have been problematic  in the financial systems implementation projects we reviewed.",
      " Disciplined processes have been shown to reduce the risks associated  with software development and acquisition efforts to acceptable levels and  are fundamental to successful system implementations. The principles of  disciplined IT systems development and acquisition of services apply to  shared services implementation. A disciplined software implementation  process can maximize the likelihood of achieving the intended results  (performance) within established resources (costs) on schedule. For  example, disciplined processes should be in place to address the areas of  data conversion and interfaces, two of the many critical elements  necessary to successfully implement a new system that have contributed  to the failure of previous agency efforts. The former JFMIP provided  guidance on data conversion,",
      " and the Configuration Control  Subcommittee under the CFO Council\u2019s Financial Systems Integration  Committee was tasked with focusing on interface requirements.  However, a standard set of practices will be needed to guide the migration  from legacy systems to new systems and application service providers.  Further details on disciplined processes needed can be found in appendix  III. In addition, oversight to help ensure that the disciplined processes are in  place and operating as intended will be a critical factor in the success of  the implementation of new and consolidated financial management  systems. Currently, OMB guidance requires agencies to have qualified  project managers and to use earned value management tools for major IT  investments.",
      " However, OMB only performs limited reviews of agencies\u2019  financial management systems implementations. OFFM officials told us  that these reviews vary considerably in scope and that one of their goals is  to provide more structure to the reviews. OMB\u2019s review depends on the  agency and the phase of the project, and generally does not focus on  implementation of the disciplined processes used. Industry experts agree  that the best indicator of whether risks have been reduced to an  acceptable level is an assessment of the disciplined processes in place. For  example, in the area of requirements management, disciplined processes  would help ensure (1) the requirements document contains all the  requirements identified by the customer,",
      " as well as those needed for the  definition of the system, (2) the requirements fully describe the software  functionality to be delivered, (3) the requirements are stated in clear terms  that allow for quantitative evaluation, and (4) traceability among various  documents is maintained. Proper oversight would entail verification of  these requirements-related disciplined processes. In addition to problems with the structure and scope of OMB\u2019s current  system reviews, we noted that OFFM has a staff of only four employees  dedicated to reviewing federal executive branch agency projects to  implement financial management systems. These four staff also have other  time-consuming duties such as developing a coherent,",
      " coordinated  architecture and issuing federal financial system requirements. As a result,  the current level of detail in the existing system reviews is necessarily  limited. Moreover, there is limited follow-up by OMB on suggested  improvements they have made to agency officials, and there is not any  impetus for agencies to implement suggested improvements. For example,  OFFM officials told us that they advised an agency that there were  numerous disadvantages to deploying a new financial management system  mid-year. Nonetheless, the agency deployed the system at mid-year and  has faced problems by doing so. The FSIO also has a limited number of  staff to perform its numerous financial management policy and oversight  activities and is currently reassessing its priorities and available resources.",
      "  Given the range of OMB\u2019s leadership roles and its relatively small size as  part of the Executive Office of the President, it is not realistic to expect  OMB to be able to carry out a comprehensive review function. Instead,  agencies could be required to have their financial management system  projects undergo independent verification and validation reviews to  ensure that the projects adequately implemented the disciplined processes  needed to manage the risks to acceptable levels. OMB could then review  reports produced as a result of the independent verification and validation  process to leverage its oversight efforts. Accordingly, OMB could then  focus its oversight efforts on the projects with the greatest risks.",
      " Conclusions Because the federal government is one of the largest and most complex  organizations in the world, operating, maintaining, and modernizing its  financial management systems represent a monumental challenge\u2014 technically and cost-wise. The past paradigm must be changed from one in  which each federal agency attempts to implement systems that, in many  cases, are to perform redundant functions and have all too often resulted  in failure, have been delayed, and cost too much. Thus, a more holistic  governmentwide approach as OMB has been advocating is necessary to  address the key causes of failure. OMB has recognized the seriousness of  the problems. Its primary initiative related to the use of a limited number  of application service providers is a step in the right direction.",
      " This  initiative is in the early stage and does not yet include basic elements that  are integral to its success. Based on industry best practices, the following  four concepts would help ensure a sound foundation for developing and  implementing a governmentwide solution for long-standing financial  management system implementation failures: (1) developing a concept of  operations that ties in other systems, (2) defining standard business  processes, (3) developing a strategy for ensuring that agencies are  migrated to a limited number of application service providers, and   (4) defining and effectively implementing applicable disciplined processes.  As pressure mounts to do more with less, to increase accountability,",
      " and  to reduce fraud, waste, abuse, and mismanagement, and efforts to reduce  federal spending intensify, sustained and committed leadership will be a  key factor in the successful implementation of these governmentwide  initiatives. However, regardless of the approach taken, the adherence to  disciplined processes in systems development and acquisition will be at  the core of successfully addressing the key causes of financial  management system implementation failures. Recommendations for  Executive Action To help reduce the risks associated with financial management system  implementation efforts and facilitate the implementation of the financial  management line of business and JFMIP realignment initiatives across the  government, we recommend that the Director of OMB take the following  18 actions.",
      " This would entail placing a high priority on fully integrating  into its approach the following concepts and underlying key issues, all of  which are related to the fundamental disciplines in systems  implementation:    Developing a concept of operations. This would include  identifying the interrelationships among federal financial systems  and how the application service provider concept fits into this  framework,    prescribing which financial management systems should be  operated at an agency level and which should be operated at a  governmentwide level and how those would integrate, and    defining financial management systems in the Federal Enterprise  Architecture to be more consistent with the similar definitions used  in FFMIA and OMB Circulars No.",
      " A-11 and No. A-127. Defining standard business processes. This would include    describing the standard business processes that are needed to meet  federal agencies\u2019 needs,    developing a process to identify those that are needed to meet  unique agency needs,  requiring application service providers to adopt standard business  processes to provide consistency, and    encouraging agencies to embrace new processes. Developing a strategy for ensuring that agencies are migrated to a  limited number of application service providers in accordance with  OMB\u2019s stated approach. This would include    articulating a clear goal and criteria for ensuring agencies are  subject to the application service provider concept and cannot  continue developing and implementing their own stove-piped  systems,",
      "    establishing a migration path or time table for when agencies should  migrate to an application service provider,    providing the necessary information for an agency to select an  application service provider, and    developing guidance to assist agencies in adopting a change  management strategy for moving to application service providers. Defining and effectively implementing disciplined processes necessary  to properly manage the specific projects. This would include    providing specific guidance to agencies on disciplined processes for    providing a standard set of practices to guide the migrations from  legacy systems to new systems and application service providers,  and    developing processes to facilitate oversight and review that allow  for a more structured review and follow-up of agencies\u2019 financial  system implementation projects.",
      " Agency Comments  and Our Evaluation We received written comments on a draft of this report from the  Controller of OMB, which are reprinted in appendix IV. The Controller  agreed with our recommendations and described the approach and steps  that OMB is taking to improve financial management system  modernization efforts. As OMB moves forward to address the  recommendations in our report, it is important that it prioritize its efforts  and focus on the concepts and underlying key issues we discussed, such  as adequately defining and implementing disciplined processes. We are  encouraged that OMB plans to issue additional guidance outlining the  fundamental risk-reduction approaches that agencies can implement when  acquiring and implementing financial systems.",
      " It will be critical that the  guidance stresses the importance of this standard set of practices. We  continue to believe that careful consideration of all the building blocks  and key issues we identified will be integral to the success of OMB\u2019s  initiatives. OMB also provided additional oral comments which we  incorporated as appropriate. We are sending copies of this report to the Chairman and Ranking  Minority Member, Senate Committee on Homeland Security and  Governmental Affairs, and other interested congressional committees. We  are also sending a copy to the Director of OMB. Copies will also be made  available to others upon request. The report will also be available at no  charge on GAO\u2019s Web site at http://www.gao.gov.",
      " If you or your staff have any questions about this report, please contact  McCoy Williams, Director, Financial Management and Assurance, who  may be reached at (202) 512-9095 or by e-mail at williamsm1@gao.gov, or  Keith A. Rhodes, Chief Technologist, Applied Research and Methods, who  may be reached at (202) 512-6412 or by e-mail at rhodesk@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 who made  major contributions to this report are listed in appendix V.",
      " Appendix I: Scope and Methodology To determine the key causes for financial management system  implementation failures, we conducted database searches of GAO and  inspector general (IG) Web sites to identify reports issued by any GAO  teams or IGs that could be relevant. We summarized and analyzed prior  GAO reports on commercial off-the-shelf financial management system  implementations within the last 5 years. We performed a content analysis  of the GAO and IG reports to determine if causes for the financial  management system implementation problems were included. We  discussed the relevant GAO report findings and current status with the key  staff that worked on the reports.",
      " In addition, we identified other potential  data sources, such as key industry groups and well-known national  experts for information they had on this topic. We also interviewed key  Office of Management and Budget (OMB) officials and had discussions  with other interested parties such as Chief Financial Officers (CFO)  Council representatives. To identify the significant governmentwide initiatives that are currently  under way that impact financial management systems implementation  failures, we interviewed key OMB officials and reviewed relevant OMB  policies, guidance, and memorandums related to the initiatives. We also  interviewed CFO Council representatives to discuss the initiatives to  reform federal financial management systems.",
      " In addition, we interviewed  Office of Personnel Management officials to discuss their plans to migrate  to a financial management center of excellence. We also reviewed reports  from various authors and governmentwide forums where participants  provided their perspectives on governmentwide initiatives. To provide our views on actions that can be taken to help improve the  management and control of agency financial management system  modernization efforts, we analyzed the GAO and IG reports we had  identified as relevant to the topic to highlight the actions called for in  those reports. Further, we reviewed material from key industry groups and  national experts to identify any potential solutions posed by those groups,  lessons learned,",
      " and relevant best practices. We took into consideration  those governmentwide initiatives that were currently under way and the  perspectives provided by authors and participants in governmentwide  forums. In addition, during our consultations with various GAO  stakeholders, and external groups such as OMB and the CFO Council, we  obtained their perspectives on the actions needed to address the  problems. We conducted our work in Washington, D.C., from January 2005 through  October 2005, in accordance with U.S. generally accepted government  auditing standards. We did not evaluate the federal government\u2019s overall  IT strategy or whether a particular agency selected the most appropriate  financial management system.",
      " Because we have previously provided  agencies with specific recommendations in individual reports, we are not  making additional recommendations to them in this report. We requested  comments on a draft of this report from the Director of OMB or his  designee. Written comments from OMB are reprinted in appendix IV and  evaluated in the Agency Comments and Our Evaluation section. Appendix II: IG Reports Reviewed Department of the Treasury Office of Inspector General. The  Modernization Program Is Establishing a Requirements Management  Office to Address Development and Management Problems. Reference  No. 2005-20-023. Washington, D.C.: January 19, 2005.",
      " Department of Transportation Office of Inspector General. Consolidated  Financial Statements for Fiscal Years 2004 and 2003. Report FI-2005- 009. Washington, D.C.: November 15, 2004. Department of Housing and Urban Development Office of Inspector  General. Fiscal Year 2004 Review of Information Systems Controls in  Support of the Financial Statements Audit. Report 2005-DP-0001.  Washington, D.C.: October 19, 2004. Department of Justice Office of Inspector General. The Drug Enforcement  Administration\u2019s Management of Enterprise Architecture and  Information Technology Investments. Report 04-",
      "36. Washington, D.C.:  September 2004. Department of Veterans Affairs Office of Inspector General. Issues at VA  Medical Center Bay Pines, Florida and Procurement and Deployment of  the Core Financial and Logistics System. Report 04-01371-177.  Washington, D.C.: August 11, 2004. Department of Energy Office of Inspector General. Management of the  Federal Energy Regulatory Commission\u2019s Information Technology  Program. Report DOE/IG-0652. Washington, D.C.: June 2004. Department of Justice Office of Inspector General. The Federal Bureau of  Investigation\u2019s Implementation of Information Technology  Recommendations.",
      " Report 03-36. Washington, D.C.: September 2003. Small Business Administration Office of Inspector General. Audit of SBA\u2019s  Acquisition, Development and Implementation of the Joint Accounting  and Administrative Management System. Report 3-32. Washington, D.C.:  June 30, 2003. Department of Energy Office of Inspector General. Audit Report on  Business Management Information System. Report DOE/IG-0572.  Washington, D.C.: November 2002. Department of the Interior Office of Inspector General. Developing the  Department of the Interior\u2019s Information Technology Capital Investment  Process: A Framework for Action.",
      " Report 2002-I-0038. Washington, D.C.:  August 2002. Department of Defense Office of Inspector General. Development of the  Defense Finance and Accounting Service Corporate Database and other  Financial Management Systems. Report D-2002-014. Washington, D.C.:  November 7, 2001. Department of Transportation Office of Inspector General. Implementing  a New Financial Management System. Report FI-2001-074. Washington,  D.C.: August 7, 2001. Appendix III: Disciplined Processes Disciplined Processes  Are Key to Successful  Financial  Management System  Implementation  Efforts Disciplined processes have been shown to reduce the risks associated  with software development and acquisition efforts to acceptable levels and  are fundamental to successful system implementations.",
      " A disciplined  software implementation process can maximize the likelihood of  achieving the intended results (performance) within established resources  (costs) on schedule. Although a standard set of practices that will  guarantee success does not exist, several organizations, such as the  Software Engineering Institute (SEI) and the Institute of Electrical and  Electronic Engineers (IEEE), and individual experts, have identified and  developed the types of policies, procedures, and practices that have been  demonstrated to reduce development time and enhance effectiveness. The  key to having a disciplined system development effort is to have  disciplined processes in multiple areas, including requirements  management, testing,",
      " data conversion and system interfaces, configuration  management, risk management, project management, and quality  assurance. Requirements Management Requirements are the specifications that system developers and program  managers use to design, develop, and acquire a system. They need to be  carefully defined, consistent with one another, verifiable, and directly  traceable to higher-level business or functional requirements. It is critical  that they flow directly from the organization\u2019s concept of operations (how  the organization\u2019s day-to-day operations are or will be carried out to meet  mission needs). According to the IEEE, a leader in defining the best practices for such  efforts, good requirements have several characteristics,",
      " including the  following:  The requirements fully describe the software functionality to be  delivered. Functionality is a defined objective or characteristic action  of a system or component. For example, for grants management, a key  functionality includes knowing (1) the funds obligated to a grantee for  a specific purpose, (2) the cost incurred by the grantee, and (3) the  funds provided in accordance with federal accounting standards. The requirements are stated in clear terms that allow for quantitative  evaluation. Specifically, all readers of a requirement should arrive at a  single, consistent interpretation of it. Traceability among various requirement documents is maintained.",
      " Requirements for projects can be expressed at various levels  depending on user needs. They range from agencywide business  requirements to increasingly detailed functional requirements that  eventually permit the software project managers and other technicians  to design and build the required functionality in the new system.  Adequate traceability ensures that a requirement in one document is  consistent with and linked to applicable requirements in another  document. The requirements document contains all of the requirements identified  by the customer, as well as those needed for the definition of the  system. Studies have shown that problems associated with requirements definition  are key factors in software projects that do not meet their cost, schedule,",
      "  and performance goals. Examples include the following:    A 1988 study found that getting a requirement right in the first place  costs 50 to 200 times less than waiting until after the system is  implemented to get it right. A 1994 survey of more than 8,000 software projects found that the top  three reasons that projects were delivered late, over budget, and with  less functionality than desired all had to do with requirements  management. A 1994 study found that, on average, there is about a 25-percent  increase in requirements over a project\u2019s lifetime, which translates into  at least a 25-percent increase in the schedule.",
      " A 1997 study noted that between 40 and 60 percent of all defects found  in a software project could be traced back to errors made during the  requirements development stage. Testing Testing is the process of executing a program with the intent of finding  errors. Because requirements provide the foundation for system testing,  they must be complete, clear, and well documented to design and  implement an effective testing program. Absent this, an organization is  taking a significant risk that substantial defects will not be detected until  after the system is implemented. As shown in figure 2, there is a direct  relationship between requirements and testing.",
      " Although the actual testing occurs late in the development cycle, test  planning can help disciplined activities reduce requirements-related  defects. For example, developing conceptual test cases based on the  requirements derived from the concept of operations and functional  requirements stages can identify errors, omissions, and ambiguities long  before any code is written or a system is configured. Disciplined  organizations also recognize that planning the testing activities in  coordination with the requirements development process has major  benefits. Although well-defined requirements are critical for implementing a  successful testing program, disciplined testing efforts for projects have  several characteristics, which include the following:    Testers who assume that the program has errors are likely to find a  greater percentage of the defects present in the system.",
      " This is  commonly called the testing mindset. Test plans and scripts that clearly define what the expected results  should be when the test case is properly executed and the program  does not have a defect that would be detected by the test case. This  helps to ensure that defects are not mistakenly accepted. Processes that ensure test results are thoroughly inspected. Test cases that include exposing the system to invalid and unexpected  conditions as well as the valid and expected conditions. This is  commonly referred to as boundary condition testing. Testing processes that determine if a program has unwanted side  effects. For example, a process should update the proper records  correctly but should not delete other records.",
      " Systematic gathering, tracking, and analyzing statistics on the defects  identified during testing. Although these processes may appear obvious, they are often overlooked  in testing activities. Data Conversion and  System Interfaces Data conversion is defined as the modification of existing data to enable  them to operate with similar functional capability in a different  environment. It is one of the many critical elements necessary to  successfully implement a new system. Because of the difficulty and  complexity associated with financial systems data conversion, highly  skilled staff are needed. There are three primary phases in a data  conversion:  1.  Pre-conversion activities prior to and leading up to the conversion,",
      "  such as determining the scope and approach or method, developing  the conversion plan, performing data cleanup and validation, ensuring  data integrity, and conducting necessary analysis and testing.  2.  Cutover activities to convert the legacy data to the new system, such  as testing system process and data edits, testing system interfaces  (both incoming and outgoing), managing the critical path, supervising  workload completion, and reconciliation.  3.  Post-installation activities such as verifying data integrity,  conducting final disposition of the legacy system data, and monitoring  the first reporting cycle. There are also specific issues that apply uniquely to converting data as  part of the replacement of a financial system,",
      " including  identifying specific open transactions and balances to be established,    analyzing and reconciling transactions for validation purposes, and    establishing transactions and balances in the new system through an  automated or manual process. Further, consideration of various data conversion approaches and  implications are important. Some considerations to be taken into account  for the system conversion are the timing of the conversion (beginning-of- the-year, mid-year, or incremental) and other options such as direct or  flash conversions, parallel operations, and pilot conversions. In addition,  agencies should consider different data conversion options for different  categories of data when determining the scope and time lines such as    opting not to conduct a data conversion,",
      "    processing new transactions and activity only,    establishing transaction balances in the new system for reporting    converting open transactions from the legacy system, and  recording new activity on closed prior year transactions. Validation and adjustment of open transactions and data in the legacy  system are essential prerequisites to the conversion process and have  often been problematic. When data conversion is done right, the new  system can flourish. However, converting data incorrectly has lengthy and  long-term repercussions. System interfaces operate on an ongoing basis linking various systems and  provide data that are critical to day-to-day operations, such as obligations,  disbursements, purchase orders, requisitions,",
      " and other procurement  activities. Testing the system interfaces in an end-to-end manner is  necessary so agencies can have reasonable assurance that the system will  be capable of providing the intended functionality. Systems that lack  appropriate system interfaces often rely on manual reentry of data into  multiple systems, convoluted systems, or both. According to the SEI, a  widely recognized model for evaluating the interoperability of systems is  the Levels of Information System Interoperability. This model focuses on  the increasing levels of sophistication of system interoperability. Efforts at  the highest level of this model\u2014enterprise-based interoperability\u2014are  systems that can provide multiple users access to complex data  simultaneously,",
      " data and applications are fully shared and distributed, and  data have a common interpretation regardless of format. This is in contrast  to the traditional interface strategies that are more aligned with the lowest  level of the SEI model. Data exchanged at this level rely on electronic links  that result in a simple electronic exchange of data. Configuration Management  According to the SEI, configuration management is defined as a discipline  applying technical and administrative direction and surveillance to   (1) identify and document the functional and physical characteristics of a  configuration item, (2) control changes to those characteristics, (3) record  and report change processing and implementation status,",
      " and (4) verify  compliance with specified requirements. The purpose of configuration  management is to establish and maintain the integrity of work products.  Configuration management involves the processes of  identifying the configuration of selected work products that compose  the baselines at given points in time,    controlling changes to configuration items,    building or providing specifications to build work products from the    maintaining the integrity of baselines, and    providing accurate status and current configuration data to developers,  integrators, and end users. The work products placed under configuration management include the  products that are delivered to the customer, designated internal work  products, acquired products, tools,",
      " and other items that are used in  creating and describing these work products. For COTS systems, configuration management focuses on ensuring that  changes to the requirements or components of a system are strictly  controlled to ensure the integrity and consistency of system requirements  or components. Two of the key activities for configuration management  include ensuring that (1) project plans explicitly provide for evaluation,  acquisition, and implementation of new, often frequent, product releases  and (2) modification or upgrades to deployed versions of system  components are centrally controlled, and unilateral user release changes  are precluded. Configuration management recognizes that when using  COTS products, it is the vendor,",
      " not the acquisition or implementing  organization, that controls the release of new versions and that new  versions are frequently released. Risk Management Risk and opportunity are inextricably related. Although developing  software is a risky endeavor, risk management processes should be used  to manage the project\u2019s risks to acceptable levels by taking the actions  necessary to mitigate the adverse effects of significant risks before they  threaten the project\u2019s success. If a project does not effectively manage its  risks, then the risks will manage the project. Risk management is a set of activities for identifying, analyzing, planning,  tracking, and controlling risks. Risk management starts with identifying  the risks before they can become problems.",
      " If this step is not performed  well, then the entire risk management process may become a useless  exercise since one cannot manage something that one does not know  anything about. As with the other disciplined processes, risk management  is designed to eliminate the effects of undesirable events at the earliest  possible stage to avoid the costly consequences of rework. After the risks are identified, they need to be analyzed so that they can be  better understood and decisions can be made about what actions, if any,  will be taken to address them. Basically, this step includes activities such  as evaluating the impact on the project if the risk does occur,",
      " determining  the probability of the event occurring, and prioritizing the risk against the  other risks. Once the risks are analyzed, a risk management plan is  developed that outlines the information known about the risks and the  actions, if any, which will be taken to mitigate those risks. Risk monitoring  is a continuous process because both the risks and actions planned to  address identified risks need to be monitored to ensure that the risks are  being properly controlled and that new risks are identified as early as  possible. If the actions envisioned in the plan are not adequate, then  additional controls are needed to correct the deficiencies identified. Project Management Effective project management is the process for planning and managing all  project-related activities,",
      " such as defining how components are  interrelated, defining tasks, estimating and obtaining resources, and  scheduling activities. Project management allows the performance, cost,  and schedule of the overall program to be continually measured,  compared with planned objectives, and controlled. Project management  activities include planning, monitoring, and controlling the project. Project planning is the process used to establish reasonable plans for  carrying out and managing the software project. This includes   (1) developing estimates of the resources needed for the work to be  performed, (2) establishing the necessary commitments, and (3) defining  the plan necessary to perform the work. Effective planning is needed to  identify and resolve problems as soon as possible,",
      " when it is the cheapest  to fix them. According to one author, the average project expends about  80 percent of the time on unplanned rework\u2014fixing mistakes that were  made earlier in the project. Recognizing that mistakes will be made in a  project is an important part of planning. According to this author,  successful system development activities are designed so that the project  team makes a carefully planned series of small mistakes to avoid making  large, unplanned mistakes. For example, spending the time to adequately  analyze three design alternatives before selecting one results in time spent  analyzing two alternatives that were not selected.",
      " However, discovering  that a design is inadequate after development can result in code that must  be rewritten, at a cost greater than analyzing the three alternatives in the  first place. This same author notes that a good rule of thumb is that each  hour a developer spends reviewing project requirements and architecture  saves 3 to 10 hours later in the project. Project monitoring and control help to understand the progress of the  project and determine when corrective actions are needed based on the  project\u2019s performance. Best business practices indicate that a key facet of  project management and oversight is the ability to effectively monitor and  evaluate a project\u2019s actual performance,",
      " cost, and schedule against what  was planned. In order to perform this critical task, the accumulation of  quantitative data or metrics is required and can be used to evaluate a  project\u2019s performance. An effective project management and oversight  process uses quantitative data or metrics to understand matters such as  (1) whether the project plan needs to be adjusted and (2) oversight actions  that may be needed to ensure that the project meets its stated goals and  complies with agency guidance. For example, an earned value  management system is one metric that can be employed to better manage  and oversee a system project. An earned value management system  attempts to compare the value of work accomplished during a given  period with the work scheduled for that period.",
      " With ineffective project  oversight, management can only respond to problems as they arise. Agency management can also perform oversight functions, such as project  reviews and participation in key meetings, to help ensure that the project  will meet the agency needs. Management can use independent verification  and validation reviews to provide it with assessments of the project\u2019s  software deliverables and processes. Although independent of the  developer, verification and validation is an integral part of the overall  development program and helps management mitigate risks. This core  element involves having an independent third party\u2014such as an internal  audit function or a contractor that is not involved with any of the system  implementation efforts\u2014verify and validate that the systems were  implemented in accordance with the established business processes and  standards.",
      " Doing so provides agencies with needed assurance about the  quality of the system, which is discussed in more detail in the following  section. Quality Assurance Quality assurance is defined as a set of procedures designed to ensure that  quality standards and processes are adhered to and that the final product  meets or exceeds the required technical and performance requirements.  Quality assurance is a widely used approach in the software industry to  improve upon product delivery and the meeting of customer requirements  and expectations. The SEI indicates that quality assurance should begin in  the early phases of a project to establish plans, processes, standards, and  procedures that will add value to the project and satisfy the requirements  of the project and the organizational policies.",
      " Quality assurance provides  independent assessments, typically performed by an independent  verification and validation or internal audit team, of whether management  process requirements are being followed and whether product standards  and requirements are being satisfied. Some of the widely used quality  assurance activities include defect tracking, technical reviews, and system  testing. Defect tracking\u2013keeping a record of each defect found, its source,  when it was detected, when it was resolved, how it was resolved (fixed  or not), and so on. Technical reviews\u2013reviewing user interface prototypes, requirements  specifications, architecture, designs, and all other technical work  products. System testing\u2013executing software for the purpose of finding defects,",
      "  typically performed by an independent test organization or quality  assurance group. According to one author, quality assurance activities might seem to result  in a lot of overhead, but in actuality, exactly the opposite is true. If  defects can be prevented or removed early, a significant schedule benefit  can be realized. For example, studies have shown that reworking defective  requirements, design, and code typically consumes 40 to 50 percent of the  total costs of software development projects. An effective quality  assurance approach is to detect as many defects as possible as early as  possible to keep the costs of corrections down. However, enormous  amounts of time can be saved by detecting defects earlier than during  system testing.",
      " Appendix IV: Comments from the Office of  Management and Budget Appendix IV: Comments from the Office of  Management and Budget  o Facilitate stronger internal controls that ensure integrity in accounting and other  o Reduce costs by providing a competitive alternative for agencies to acquire, develop,  implement, and operate financial management systems through shared service solutions;  o Standardize systems, business processes and data elements; and  o Provide for seamless data exchange between and among Federal agencies by  implementing a common language and structure for financial information and system  interfaces. 3. What are the critical milestones that must be accomplished in order to achieve  the vision and goals of the FMLOB?",
      " Federal agencies have begun implementing the FMLOB initiative by actively migrating to shared  service providers and initiating solutions to integrate financial data among and between agency  business systems.  Nothing in this memorandum changes the expectation that agencies will  continue to take all the necessary steps (in the earliest possible timeframes) to meet FMLOB  objectives.  The milestones described below, therefore, are intended to facilitate, not delay,  agency efforts. As depicted in Attachment 1, the critical milestones of the FMLOB can be broken down into  three stages \u2013 (i) transparency and standardization; (ii) competitive environment and seamless  data integration; and (iii)",
      " results. Stage 1: Transparency and Standardization.   In order to enable a competitive environment  where agencies have more options and leverage in choosing a financial system, and in order to  facilitate seamless integration of financial data among agency business systems, additional  transparency and standardization is required. Transparency:   In determining the best options available when modernizing financial systems,  the Federal financial community must have clarity on how to evaluate the performance and cost  of shared service alternatives (i.e., Centers of Excellence (COE)) as well as clarity on what steps  Federal agencies are expected to undertake in order to migrate to a COE.  As described in more  detail below,",
      " a COE is a shared service solution where a single entity provides financial  management services for multiple organizations.  In order to achieve additional transparency,  two specific projects (with associated milestones) will be undertaken:    Establishment of Common Performance Measures \u2013 This project will result in standard  quality and cost measures for agencies to benchmark and compare the performance of  financial system alternatives. Development of Migration Planning Guidance \u2013 This project will result in  comprehensive guidance that helps Federal agencies describe, prepare for, and manage an  agency\u2019s migration to a COE.  This guidance will also include a definition of the full  range of services to be provided by all COEs and a description of the \u201crules of  2 engagement,\u201d including templates for service level agreements outlining provider and  client responsibilities.",
      " Standardization:  In order to mitigate the cost and risk of migrations to a COE and to ensure that  financial data can be shared across agency business systems, the Federal government must  ensure greater standardization of business processes, interfaces, and data.  To this end, two  specific projects (with associated milestones) will be undertaken:    Development of Standard Business Processes \u2013 This project will result in government- wide common business rules, data components, and policies for funds control, accounts  payable, accounts receivable, and fixed assets. Creation of a Common Government-wide Accounting Code \u2013 This project will result in a  uniform accounting code structure,",
      " layout, and definitions. Once established, all agencies will be expected to adopt these common processes on a schedule  agreed upon between the agency and OMB.   See Attachment 2 for additional details on the  priority projects related to the transparency and standardization initiatives described above. Stage 2: Competitive Environment and Seamless Data Integration.  In order to enable  improved performance of financial systems, the FMLOB envisions more competitive alternatives  for financial systems and an environment where financial data can be more easily compared and  aggregated across agencies. Competitive Environment:  To enable improved cost, quality, and performance of financial  systems, Federal agencies must have competitive options available for financial systems.",
      "  The  COE framework is intended to help achieve these results.  A COE is a shared service solution  where a single entity provides financial management services for multiple organizations.   When  the FMLOB is successful, there will be a limited number of stable and high performing COEs  that provide competitive alternatives for agencies investing in financial system modernizations.    The economies of scale and skill of a COE will allow it to provide Federal agencies with a lower  risk, lower cost, and increased service quality alternative for financial system modernization  efforts. Notably, a competitive environment is sustainable if Federal agencies have the ability to migrate  from one solution to a more competitive or better performing alternative that is offered.",
      "  The  transparency and standardization efforts described above will lay the foundation for facilitating  better portability of agency systems from one solution to another. Seamless Data Integration:   The standardization efforts, associated with Stage 1 of the FMLOB  initiative, will enable financial data to be easily compared and aggregated across agencies.  For  3 example, the development of a common government-wide accounting code will assist in the  intra-governmental reconciliation process by requiring that all common types of financial data be  accounted for in a similar format.  A common structure will also enable easier transmission of  financial reports to OMB and Treasury and assist these central agencies with aggregating  similar-type data on a government-wide basis.",
      "  Seamless and standardized data exchange will  enable the government to streamline operations through more efficient information management  and increased data accuracy. In addition, seamless data integration will reduce the costs and risks of establishing interfaces  between agency business systems.  By requiring standard core business processes, rules, data  definitions, and a common government-wide accounting code, interfacing systems, such as  travel, will not have to be specifically designed for each agency.  This will save agencies money  and enable them to more easily migrate between different system solutions. Stage 3: Results.   When the FMLOB is fully realized, agencies\u2019 data will be more timely and  accurate for decision-making and there will be improved government-wide stewardship and  accounting.",
      "  More timely and accurate data will result from the standardization and seamless  data integration efforts, including the implementation of centralized interfaces between core  financial systems and other systems.  These efforts will focus on promoting strong internal  controls and ensuring the integrity of accounting data.  The easy exchange of data between  federal agencies will increase federal managers\u2019 stewardship abilities. There will also be a reduction of government-wide information technology costs and risks.   These benefits will be the result of shared-service solutions, also assisted by the standardization  and seamless data integration efforts.  Shared-service solutions will enable economies of scale by  centrally locating, or consolidating,",
      " solution assets and reusing Federal and commercial subject  matter expertise through common acquisitions, interface development, and application  management.  The reduction in the number of agencies implementing their own systems will  reduce the risks, and associated costs, of systems implementations.  4.  What governance structure will be in place to ensure accountability for  successful completion of priority FMLOB initiatives? As depicted in Attachment 3, FSIO will have direct responsibility for completing priority  projects under the FMLOB.  OMB, in consultation with the Financial Systems Integration  Committee (FSIC) of the CFO Council, will provide oversight and guidance to FSIO on  priorities and expected performance in meeting these priorities.",
      " OMB will continue its role as Executive Sponsors of the FMLOB.  The FSIC chair will be the  lead agency sponsor for the FMLOB.  A liaison from the CIO community and the Executive  Director of FSIO will serve on the FSIC and support the FSIC chair in his/her responsibilities as  they relate to the FMLOB.  Going forward, FSIO will coordinate the collection and expenditure  of FMLOB funds. 4 The FSIC will assist OMB in evaluating and monitoring FSIO\u2019s progress in completing FMLOB  projects and provide feedback to OMB and FSIO.   As appropriate, members of the FSIC will  participate in working groups to assist FSIO with completing deliverables.",
      "  The FSIC will  evaluate its current subcommittee structure to assess whether changes are needed to best meet  these objectives. The updated governance structure ensures that the FSIO, FMLOB, and the FSIC do not operate  in separate stovepipes.  In addition, responsibility for work products will now rest with FSIO,  where full time dedicated staff will be held accountable for achieving FMLOB milestones.   5. What is the status of the realignment of JFMIP to FSIO? In December of 2004, the JFMIP Principals voted to modify the roles and responsibilities of the  JFMIP Program Office,",
      " now FSIO.  As a result, OMB and the FSIC were given an increased  management and oversight role in the activities of FSIO.  OMB and the FSIC have worked  closely with FSIO staff to update FSIO\u2019s mission statement and define FSIO\u2019s scope of activities  and priorities for FY 2006. In terms of mission and scope, FSIO has three major areas of responsibilities:  (a) continuing its  primary role of core financial system requirements development, testing, and certification; (b)  providing support to the Federal financial community by taking on special priority projects as  determined by the OMB Controller,",
      " CFO Council, and the FSIO Executive Director, and (c)  conducting outreach through the annual financial management conference and other related  activities. Most importantly, the projects that FSIO undertakes will directly reflect the priorities of the CFO  Community and OMB.  As noted above, the priority projects to be undertaken in the near term  will relate to the transparency and standardization initiatives of the FMLOB.  Other projects that  were previously under FSIO\u2019s purview \u2013 acquisition, budget formulation, and property system  requirements \u2013 have been transitioned to the Chief Acquisition Council, the Budget Officers  Advisory Council, and the Federal Real Property Council,",
      " respectively, for their consideration  and completion. Also, effective January 2006, the FSIO office will be transferred from the General Service  Administration\u2019s (GSA) Office of the Chief Financial Officer to the Office of Government-wide  Policy, Office of Technology Strategy (OTS).   There are several significant benefits of this  move: lower administrative cost through shared resources (rent, supplies, equipment, etc.)  permanent SES in place to  provide leadership to FSIO staff  access to immediate resources and expertise on IT, administrative management, contract  management, testing, etc.  fits well with current mission and stakeholder focused model of OTS   5 6.",
      " What specific actions are expected of Federal agencies? As described above, a central goal of the FMLOB is that financial system investments will be at  lower risk and lower cost as agencies leverage the economies offered by shared service solutions  (i.e., COEs).   To this end, OMB has instituted a policy that agencies seeking to modernize their  financial system must either be designated a public COE or must migrate to a COE (public,  private, or a combination of both).  Although exceptions to this policy will be made in limited  situations when an agency demonstrates compelling evidence of a best value and lower risk  alternative,",
      " it is OMB\u2019s intent to avoid investments in \u201cin-house\u201d solutions wherever possible so  that the shared service framework can fully achieve potential and anticipated returns. To the extent we require any specific action on your part to carry out the priority initiatives and  milestones outlined above, we will communicate such requests through subsequent memos from  OMB or the FSIC. Performance Measures Performance Measures Performance Measures Performance Measures Performance Measures Performance Measures Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  series of measures (i.e., cost,",
      "  series of measures (i.e., cost,  series of measures (i.e., cost,  series of measures (i.e., cost,  series of measures (i.e., cost,  series of measures (i.e., cost,  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  quality, timeliness) to assess the  performance of those services.   performance of those services.   performance of those services.   performance of those services.   performance of those services.",
      "   performance of those services.    Measures will address the   Measures will address the   Measures will address the   Measures will address the   Measures will address the   Measures will address the  major service areas offered by a  major service areas offered by a  major service areas offered by a  major service areas offered by a  major service areas offered by a  major service areas offered by a  financial service organization  financial service organization  financial service organization  financial service organization  financial service organization  financial service organization  (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence). (e.g., Center of Excellence).  For each measure,",
      " identify   For each measure, identify   For each measure, identify   For each measure, identify   For each measure, identify   For each measure, identify  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  corresponding benchmarks for  equivalent services (either  equivalent services (either  equivalent services (either  equivalent services (either  equivalent services (either  equivalent services (either  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced) offered by  internal or outsourced)",
      " offered by  public and private organizations.   public and private organizations.   public and private organizations.   public and private organizations.   public and private organizations.   public and private organizations.    In order to compare   In order to compare   In order to compare   In order to compare   In order to compare   In order to compare  performance across the Federal  performance across the Federal  performance across the Federal  performance across the Federal  performance across the Federal  performance across the Federal  government, it must be possible  government, it must be possible  government, it must be possible  government, it must be possible  government,",
      " it must be possible  government, it must be possible  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  to normalize the measures (e.g.,  cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time). cost per transaction, cycle-time). Common Accounting Code Common Accounting Code Common Accounting Code Common Accounting Code Common Accounting Code Common Accounting Code Project Description:",
      " Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  Project Description: Develop a  common accounting code  common accounting code  common accounting code  common accounting code  common accounting code  common accounting code  structure, including an applicable  structure, including an applicable  structure, including an applicable  structure, including an applicable  structure, including an applicable  structure, including an applicable  set of definitions, which all federal  set of definitions, which all federal  set of definitions, which all federal  set of definitions, which all federal  set of definitions,",
      " which all federal  set of definitions, which all federal  agencies\u2019 new financial  agencies\u2019 new financial  agencies\u2019 new financial  agencies\u2019 new financial  agencies\u2019 new financial  agencies\u2019 new financial  management systems must  management systems must  management systems must  management systems must  management systems must  management systems must  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  adhere. The common accounting  code structure will:  code structure will:  code structure will:  code structure will:  code structure will:  code structure will:",
      "   menu of services offered by   menu of services offered by menu of services offered by   menu of services offered by   menu of services offered by   menu of services offered by  COEs; COEs; COEs; COEs; COEs; COEs;  project plan templates;  project plan templates;  project plan templates;  project plan templates;  project plan templates;  project plan templates;  service level agreement   service level agreement   service level agreement   service level agreement   service level agreement   service level agreement  templates;  templates;  templates;  templates;  templates;  templates;   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant   rules of engagement (i.e., relevant  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  contractual and competitive criteria  involved in migration)",
      "  involved in migration)  involved in migration)  involved in migration)  involved in migration)  involved in migration)   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified   due diligence checklist (clarified  and updated);  and updated);  and updated);  and updated);  and updated);  and updated);   comparison of approaches on   comparison of approaches on   comparison of approaches on   comparison of approaches on   comparison of approaches on   comparison of approaches on  public vs. private solutions;  public vs.",
      " private solutions;  public vs. private solutions;  public vs. private solutions;  public vs. private solutions;  public vs. private solutions;   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,   migration risk areas (interfaces,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  data conversion and clean up,  testing, financial reporting, change  testing, financial reporting, change  testing,",
      " financial reporting, change  testing, financial reporting, change  testing, financial reporting, change  testing, financial reporting, change  to business processes); and to business processes); and to business processes); and to business processes); and to business processes); and to business processes); and  human capital planning.  human capital planning.  human capital planning.  human capital planning.  human capital planning.  human capital planning. Project Description: Develop  Project Description: Develop  Project Description: Develop  Project Description: Develop  Project Description: Develop  Project Description: Develop  a standard set of business  a standard set of business  a standard set of business  a standard set of business  a standard set of business  a standard set of business  practices for core financial  practices for core financial  practices for core financial  practices for core financial  practices for core financial  practices for core financial  management functions (funds,",
      "  management functions (funds,  management functions (funds,  management functions (funds,  management functions (funds,  management functions (funds,  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  payments, receipts, fixed  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  assets) to be adopted by all  federal agencies.   The  federal agencies.",
      "   The  federal agencies.   The  federal agencies.   The  federal agencies.   The  federal agencies.   The  document/model will include:   document/model will include:   document/model will include:   document/model will include:   document/model will include:   document/model will include:    sequenced activities for core   sequenced activities for core   sequenced activities for core   sequenced activities for core   sequenced activities for core   sequenced activities for core  business processes; business processes; business processes; business processes; business processes; business processes;  data objects participating in a   data objects participating in a   data objects participating in a   data objects participating in a   data objects participating in a   data objects participating in a  business activity;",
      " business activity; business activity; business activity; business activity; business activity;  relationships among the   relationships among the   relationships among the   relationships among the   relationships among the   relationships among the  objects as they exist in the  objects as they exist in the  objects as they exist in the  objects as they exist in the  objects as they exist in the  objects as they exist in the  actual business activities; actual business activities; actual business activities; actual business activities; actual business activities; actual business activities;  data elements and definitions   data elements and definitions   data elements and definitions   data elements and definitions   data elements and definitions   data elements and definitions  stored about these objects;",
      "  stored about these objects;  stored about these objects;  stored about these objects;  stored about these objects;  stored about these objects;  and and and and and and  business rules governing   business rules governing   business rules governing   business rules governing   business rules governing   business rules governing  these objects.  these objects.  these objects.  these objects.  these objects.  these objects. Appendix V: GAO Contacts and Staff  Acknowledgments GAO Contacts Staff  Acknowledgments In addition to the contacts named above, Kay Daly, Assistant Director;  Chris Martin, Senior-Level Technologist; Francine DelVecchio;",
      " Mike  LaForge; and Chanetta Reed made key contributions to this report. Related GAO Products DOD Business Systems Modernization: Navy ERP Adherence to Best  Business Practices Critical to Avoid Past Failures. GAO-05-858.  Washington, D.C.: September 29, 2005. Financial Management: Achieving FFMIA Compliance Continues to  Challenge Agencies. GAO-05-881. Washington, D.C.: September 20, 2005. Business Modernization: Some Progress Made toward Implementing  GAO Recommendations Related to NASA\u2019s Integrated Financial  Management Program. GAO-05-",
      "799R. Washington, D.C.: September 9,  2005. Business Systems Modernization: Internal Revenue Service\u2019s Fiscal Year  2005 Expenditure Plan. GAO-05-774. Washington, D.C.: July 22, 2005. DOD Business Systems Modernization: Long-standing Weaknesses in  Enterprise Architecture Development Need to Be Addressed. GAO-05-702.  Washington, D.C.: July 22, 2005. Army Depot Maintenance: Ineffective Oversight of Depot Maintenance  Operations and System Implementation Efforts. GAO-05-441.  Washington,",
      " D.C.: June 30, 2005. DOD Business Systems Modernization: Billions Being Invested without  Adequate Oversight. GAO-05-381. Washington, D.C.: April 29, 2005. Internal Revenue Service: Assessment of the Fiscal Year 2006 Budget  Request. GAO-05-566. Washington, D.C.: April 27, 2005. Information Technology: OMB Can Make More Effective Use of Its  Investment Reviews. GAO-05-276. Washington, D.C.: April 15, 2005. Information Technology: Customs Automated Commercial Environment  Program Progressing,",
      " but Need for Management Improvements  Continues. GAO-05-267. Washington, D.C.: March 14, 2005. Office of Personnel Management: Retirement Systems Modernization  Program Faces Numerous Challenges. GAO-05-237. Washington, D.C.:  February 28, 2005. DOD Systems Modernization: Management of Integrated Military  Human Capital Program Needs Additional Improvements. GAO-05-189.  Washington, D.C.: February 11, 2005. Department of Defense: Further Actions Are Needed to Effectively  Address Business Management Problems and Overcome Key Business  Transformation Challenges.",
      " GAO-05-140T. Washington, D.C.:   November 18, 2004. Business Systems Modernization: IRS\u2019s Fiscal Year 2004 Expenditure  Plan. GAO-05-46. Washington, D.C.: November 17, 2004. Financial Management: Improved Financial Systems Are Key to FFMIA  Compliance. GAO-05-20. Washington, D.C.: October 1, 2004. Financial Management Systems: HHS Faces Many Challenges in  Implementing Its Unified Financial Management System. GAO-04- 1089T. Washington, D.C.: September 30,",
      " 2004. Financial Management Systems: Lack of Disciplined Processes Puts  Implementation of HHS\u2019 Financial System at Risk. GAO-04-1008.  Washington, D.C.: September 23, 2004. Information Technology: DOD\u2019s Acquisition Policies and Guidance Need  to Incorporate Additional Best Practices and Controls. GAO-04-722.  Washington, D.C.: July 30, 2004. Department of Defense: Financial and Business Management  Transformation Hindered by Long-standing Problems. GAO-04-941T.  Washington, D.C.: July 8, 2004.",
      " Information Security: Agencies Need to Implement Consistent Processes  in Authorizing Systems for Operation. GAO-04-376. Washington, D.C.:  June 28, 2004. DOD Business Systems Modernization: Billions Continue to Be Invested  with Inadequate Management Oversight and Accountability. GAO-04- 615. Washington, D.C.: May 27, 2004. Information Technology: The Federal Enterprise Architecture and  Agencies\u2019 Enterprise Architectures Are Still Maturing. GAO-04-798T.  Washington, D.C.: May 19, 2004. National Aeronautics and Space Administration:",
      " Significant Actions  Needed to Address Long-standing Financial Management Problems.  GAO-04-754T. Washington, D.C.: May 19, 2004. DOD Business Systems Modernization: Limited Progress in  Development of Business Enterprise Architecture and Oversight of  Information Technology Investments. GAO-04-731R. Washington, D.C.:  May 17, 2004. Information Technology: Early Releases of Customs Trade System  Operating, but Pattern of Cost and Schedule Problems Needs to Be  Addressed. GAO-04-719. Washington, D.C.: May 14, 2004. Information Technology Investment Management:",
      " A Framework for  Assessing and Improving Process Maturity (Version 1.1). GAO-04-394G.  Washington, D.C.: March 2004. Information Technology Management: Governmentwide Strategic  Planning, Performance Measurement, and Investment Management Can  Be Further Improved. GAO-04-49. Washington, D.C.: January 12, 2004. Human Capital: Key Principles for Effective Strategic Workforce  Planning. GAO-04-39. Washington, D.C.: December 11, 2003. Business Modernization: NASA\u2019s Challenges in Managing Its Integrated  Financial Management Program.",
      " GAO-04-255. Washington, D.C.:  November 21, 2003. Business Modernization: NASA\u2019s Integrated Financial Management  Program Does Not Fully Address Agency\u2019s External Reporting Issues.  GAO-04-151. Washington, D.C.: November 21, 2003. Business Modernization: Disciplined Processes Needed to Better Manage  NASA\u2019s Integrated Financial Management Program. GAO-04-118.  Washington, D.C.: November 21, 2003. Information Technology: Architecture Needed to Guide NASA\u2019s  Financial Management Modernization. GAO-04-43. Washington, D.C.:  November 21,",
      " 2003. Information Technology: Leadership Remains Key to Agencies Making  Progress on Enterprise Architecture Efforts. GAO-04-40. Washington,  D.C.: November 17, 2003. DOD Business Systems Modernization: Important Progress Made to  Develop Business Enterprise Architecture, but Much Work Remains.  GAO-03-1018. Washington, D.C.: September 19, 2003. Business Systems Modernization: IRS Has Made Significant Progress in  Improving Its Management Controls, but Risks Remain. GAO-03-768.  Washington, D.C.: June 27, 2003.",
      " Business Modernization: Improvements Needed in Management of  NASA\u2019s Integrated Financial Management Program. GAO-03-507.  Washington, D.C.: April 30, 2003. Department of Housing and Urban Development: Status of Efforts to  Implement an Integrated Financial Management System. GAO-03-447R.  Washington, D.C.: April 9, 2003. Information Technology: A Framework for Assessing and Improving  Enterprise Architecture Management (Version 1.1). GAO-03-584G.  Washington, D.C.: April 2003. DOD Business Systems Modernization:",
      " Continued Investment in Key  Accounting Systems Needs to be Justified. GAO-03-465. Washington, D.C.:  March 28, 2003. DOD Business Systems Modernization: Improvements to Enterprise  Architecture Development and Implementation Efforts Needed. GAO-03- 458. Washington, D.C.: February 28, 2003. Customs Service Modernization: Automated Commercial Environment  Progressing, but Further Acquisition Management Improvements  Needed. GAO-03-406. Washington, D.C.: February 28, 2003. Customs Service Modernization: Third Expenditure Plan Meets  Legislative Conditions,",
      " but Cost Estimating Improvements Needed.  GAO-02-908. Washington, D.C.: August 9, 2002. DOD Financial Management: Important Steps Underway but Reform  Will Require a Long-term Commitment. GAO-02-784T. Washington, D.C.:  June 4, 2002. Customs Service Modernization: Management Improvements Needed on  High-Risk Automated Commercial Environment Project. GAO-02-545.  Washington, D.C.: May 13, 2002. Tax Administration: IRS Continues to Face Management Challenges in  its Business Practices and Modernization Efforts.",
      " GAO-02-619T.  Washington, D.C.: April 15, 2002. Business Systems Modernization: IRS Needs to Better Balance  Management Capacity with Systems Acquisition Workload. GAO-02-356.  Washington, D.C.: February 28, 2002. Human Capital: Building the Information Technology Workforce to  Achieve Results. GAO-01-1007T. Washington, D.C.: July 31, 2001. Business Systems Modernization: Results of Review of IRS\u2019 March 2001  Expenditure Plan. GAO-01-716. Washington,",
      " D.C.: June 29, 2001. Information Technology: DLA Should Strengthen Business Systems  Modernization Architecture and Investment Activities. GAO-01-631.  Washington, D.C.: June 29, 2001. Customs Service Modernization: Results of Review of First Automated  Commercial Environment Expenditure Plan. GAO-01-696. Washington,  D.C.: June 5, 2001. Information Technology: Architecture Needed to Guide Modernization of  DOD\u2019s Financial Operations. GAO-01-525. Washington, D.C.: May 17,  2001. District of Columbia:",
      " Weaknesses in Financial Management System  Implementation. GAO-01-489. Washington, D.C.: April 30, 2001. Tax Systems Modernization: Results of Review of IRS\u2019 Third  Expenditure Plan. GAO-01-227. Washington, D.C.: January 22, 2001. Tax Systems Modernization: Results of Review of IRS\u2019 August 2000  Interim Spending Plan. GAO-01-91. Washington, D.C.: November 8, 2000. Indian Trust Funds: Improvements Made in Acquisition of New Asset  and Accounting System But Significant Risks Remain.",
      " GAO/AIMD-00- 259. Washington, D.C.: September 15, 2000. Tax Systems Modernization: Results of Review of IRS\u2019 March 7, 2000,  Expenditure Plan. GAO/AIMD-00-175. Washington, D.C.: May 24, 2000. Executive Guide: Creating Value Through World-class Financial  Management. GAO/AIMD-00-134. Washington, D.C.: April 2000. Indian Trust Funds: Interior Lacks Assurance That Trust Improvement  Plan Will Be Effective. GAO/AIMD-99-",
      "53. Washington, D.C.: April 28, 1999. Federal Information System Controls Audit Manual, Volume I:  Financial Statement Audits. GAO/AIMD-12.19.6. Washington, D.C.:  January 1999. District of Columbia: Status of Efforts to Develop a New Financial  Management System. GAO/AIMD-97-101R. Washington, D.C.: July 9, 1997. Information Security: Opportunities for Improved OMB Oversight of  Agency Practices. GAO/AIMD-96-110. Washington, D.C.: September 24,  1996.\n"
    ],
    "length": 28654,
    "hardness": null,
    "role": null
  },
  {
    "id": 108,
    "question": null,
    "answer": "For fiscal year 2002 (the most recent data), the Corporation for Public Broadcasting provided about 16 percent of public television's revenues of $1.63 billion. GAO agreed to review the statutory allocations for federal funding of public television, the Corporation's distribution of funds through its Community Service Grant and Television Future Fund programs, its distribution of funds for the Public Broadcasting Service's National Program Service and for local programming, and its grant programs for assisting public television's transition to digital technologies and services. By statute, 75 percent of the Corporation's annual federal funding for public television is to be distributed among licensees of public television stations, and 25 percent is to be available to the Corporation for the support of national public television programming. In our survey of all 176 licensees, of which 85 percent responded, more than three-fifths favored maintaining the current allocations. Of those favoring a change, most proposed an increase in the allocation for distribution among licensees. The Corporation uses Community Service Grants as the primary means of distributing funding to licensees. Most licensees were generally satisfied with the recent consultation process for reviewing the eligibility criteria for these grants. Another program, the Television Future Fund, awarded grants to projects designed to reduce licensees' operational costs and enhance revenues. Only about 40 percent of the licensees indicated that these projects had resulted in practical methods to help their stations, and only about 30 percent agreed with the Corporation's approach of using funds designated for distribution among licensees to partly support these projects. In our legal view, the use of such funds for this purpose is not consistent with the statutory authority under which the Corporation operates. The Corporation provides an annual grant to the Public Broadcasting Service to help fund a package of children's and prime-time programming that make up the National Program Service. Most licensees favored continuation of the Corporation's funding, noting that this national programming helps them meet their educational and cultural missions and build community support for their stations. Licensees also indicated that local programming is important in serving their communities. However, most responded that they do not produce enough local programs to meet their communities' needs, and many cited a lack of funds as the reason. About 85 percent of the licensees responding to our survey indicated that the congressionally mandated transition from analog to digital broadcasting will improve their ability to provide local services to their communities. The Corporation has received appropriations to help support this transition since fiscal year 2001. In consultation with licensees, the Corporation has used these funds to provide licensees with grants for acquiring digital transmission equipment. Some grantees, however, did not receive their awards in time to meet FCC deadlines for the construction of digital transmission facilities. In addition, the Corporation received only a few grant applications during the latter part of 2003. Our survey indicates that most licensees' priorities now involve other aspects of the transition, some of which (including digital production equipment and development of digital content) were not included in the scope of the grant programs. The Corporation is also seeking funds for digitally based infrastructure improvements for distributing public television programming to stations and is working with public television stakeholders to develop a strategic plan that includes the creation of digital content.\n",
    "docs": [
      "Background air, each operating under the terms of a license granted by the FCC. These  stations are owned and operated by 176 entities that, under FCC rules,  must either be: (1) a nonprofit educational institution, such as a university  or a local school board (shown separately below as \u201cuniversity\u201d and \u201clocal  authority\u201d); (2) a governmental entity other than a school, such as a state  agency; or (3) another type of nonprofit educational entity, such as a  \u201ccommunity\u201d organization. Among these 176 licensees, some operate a  single station, such as the Detroit Educational Television Foundation,",
      "  which operates WTVS public television; others operate multiple stations,  such as the Kentucky Authority for Educational Television, which has 16  stations on the air throughout the state. Figure 1 provides a breakdown of  the number of licensees and stations they operate (by type of licensee). Licensees also differ by the size of their budgets, ranging from the smallest  licensees, with total revenues below $3.5 million, to the largest, with total  revenues exceeding $20 million. A few of the largest licensees are also  among the most prominent producers of public television programming,  such as WGBH in Boston,",
      " producer of Masterpiece Theatre, Arthur, and  other notable series. Other licensees also produce programming for  national distribution, such as KUHT in Houston, producer of The American  Woodshop and the children\u2019s program Mary Lou\u2019s Flip Flop Shop.  Programs intended for local and regional audiences are produced by many  licensees, such as KDIN public television in Johnston, Iowa, producer of  Iowa Press and Living in Iowa. Finally, public television licensees provide  numerous services to their communities, such as programming-related  outreach, formal educational services, literacy services, Amber Alerts for  the abduction of children, and emergency weather information.",
      " Public television is characterized as a decentralized system, with all  licensees owned and controlled at the local level. Stations exercise  substantial discretion over programming decisions. This structure is due, in  part, to the institutional and financial factors that motivated the founding  of each individual public television station. Unlike commercial television  stations, which typically involve business-related investment decisions,  establishing a public television station entails a local-level commitment to  the education and cultural enrichment of viewers. Further, whereas  advertising revenues finance commercial television, public television has  always been financed by both public and private sources. For fiscal year  2002 (the most recent data available), public television generated $1.",
      "63  billion in revenues, which came from a variety of sources: federal, state,  and local government; private foundations; corporations; and subscribers  (individual memberships) (see fig. 2). The Corporation\u2019s funding of $263  million provided about 16 percent of this total. Figure\u00a02:\u00a0 Sources\u00a0of\u00a0Public\u00a0Television\u00a0Revenues,\u00a0Fiscal\u00a0Year\u00a02002\u00a0($1.63\u00a0billion) The Educational Television Facilities Act of 1962 authorized the first form  of federal funding support for public television, establishing a program in  the former Department of Health, Education, and Welfare to provide grants  to public broadcasting licensees for equipment and facilities.",
      " Soon  thereafter, the Carnegie Commission on Educational Television, a national  commission formed in 1965 with the sponsorship of the Carnegie  Corporation, studied educational television\u2019s financial needs. Based on  recommendations in the Carnegie Commission\u2019s 1967 report, President  Lyndon Johnson proposed and the Congress enacted the Public  Broadcasting Act of 1967, amending the Communications Act of 1934 to  reauthorize funding for facilities and equipment grants and, among other  provisions, to authorize funding for public television programming through  a new entity\u2014the Corporation for Public Broadcasting. The Corporation is  organized under the act as a nongovernmental,",
      " nonprofit corporation to  facilitate the growth and development of public television and radio  broadcasting and the use of public television and radio broadcasting for  instructional, educational, and cultural programming. In passing the 1967 act, the 90th Congress did not intend that annual  authorizations and appropriations for the Corporation would serve as a  permanent process for funding support of public broadcasting. Rather,  they were seen as temporary measures pending the development and  adoption of a long-term financing plan for public broadcasting. Although  various financing proposals for public broadcasting have since been  suggested, the Corporation continues to receive nearly all of its budget in  the form of an annual federal appropriation.",
      " Figure 3 illustrates the history  of annual federal appropriations made to the Corporation in current  dollars. The Corporation is governed by a board of directors that is appointed by  the President and confirmed by the Senate.The Corporation\u2019s most recent  mission statement, adopted by the board in July 1999, states that the  Corporation is to facilitate the development of, and ensure universal access  to, noncommercial high-quality programming and telecommunications  services in conjunction with licensees. Reflecting the local and national  characteristics of public television, the Corporation\u2019s current goals include:  (1) strengthening the value and viability of local stations as essential  community institutions by improving their operational effectiveness and  fiscal stability and increasing their capacity to invest in and create services  and content to advance their mission and (2)",
      " developing economically  sustainable, high-quality noncommercial programming that inspires,  enlightens, and entertains. The most important work the Corporation has underway, according to a  July 2003 memorandum to the board, is a systemwide planning study that  addresses three facets of public television. First, to improve the financial  sustainability of public television, the Corporation has determined that  improvements in public television\u2019s net revenues can occur by attracting  increased financial support for stations from major donors and by  developing new practices to improve the efficiency of stations\u2019 operations.  Second, through a strategic assessment of the local services provided by  public broadcasting stations,",
      " the Corporation seeks to \u201chelp stations chart  the course ahead\u201d and aid in efforts to improve the financial sustainability  of public television, provide direction for efficiencies in station operations,  and inform decisions on national programming. Systemwide efforts related  to national programming, the third area of focus, will address the \u201cwide  disconnect between audience research, national commissioning and  scheduling decisions, and local service strategy.\u201d According to the  Corporation, this will involve strategic analysis and reengineering of  national programming. Public television also faces the challenge of transitioning its broadcast  operations from analog to digital technology. Unlike analog broadcasting,  which converts moving pictures and sound into a \u201cwave form\u201d electrical  signal,",
      " digital technology converts pictures and sound into a stream of  digits consisting of zeros and ones that are transmitted over the air. Digital  technology has the potential to significantly enhance the capabilities and  services of all television broadcasters and is viewed as critical to the  broadcast television industry\u2019s ability to enhance its provision of  communications services. The Telecommunications Act of 1996 established  the framework for licensing digital television spectrum to existing  broadcasters. Under FCC rules implementing this framework, public  television licensees are required to complete the construction of digital station facilities by May 1, 2003; broadcast in digital a minimum of 50 percent of the programming that  they broadcast in analog\u2014known as \u201csimulcasting\u201d\u2014as of November 1,",
      "  2003,simulcast 75 percent by April 2004, and simulcast 100 percent by  April 2005; and by December 31, 2006, return their analog (or digital) spectrum to FCC  for reallocation. In response to the difficulties faced by public television licensees in  financing expenses related to the digital transition, the regulatory deadline  for the construction of digital public television stations was set for May 1,  2003, a year later than the deadline for commercial stations. Further,  eligible licensees were allowed to request extensions of time to meet the  construction requirement if they had good cause for failing to meet the  requirement.",
      " A Majority of Licensees  Favor the Current  Statutory Allocations  for Public Television  Funding through the  Corporation Provisions of the Communications Act, as amended, specify the allocation  of federal funds appropriated to the Corporation for Public Broadcasting.  Of the federal funds provided for public television, the Corporation is  directed to distribute 75 percent of such funds among licensees of public  television stations and 25 percent for support of national public television  programming. Based on responses to our survey, more than three-fifths of  licensees indicated that these statutory allocations for funding support of  public television should stay the same, compared to about one-third that  favored a change.",
      " The Communications Act  Specifies the Allocation of  Federal Funds for Public  Television Licensees and  National Programming Federal funds appropriated to the Corporation must be allocated in  accordance with provisions of the Communications Act, as amended. As  shown in figure 4, the act directs the Corporation to allocate 6 percent of its  federal appropriation for various expenses incurred by public  broadcasting, an account the Corporation identifies as \u201cSystem Support;\u201dnot more than 5 percent is to be allocated for the Corporation\u2019s  administrative expenses; and of the remaining funds (about 89 percent),  the act specifies that 75 percent is to be allocated for public television and  25 percent for public radio.",
      " Of the funds allocated for public television, 75  percent is to be made available for distribution among licensees of stations  and 25 percent for national public television programming. For example, with a federal appropriation of $380 million for fiscal year  2004, the Corporation made the following allocations to its budget: $24  million (6 percent) for System Support; $17.8 million (5 percent) for  administrative expenses; and of the remaining $338.2 million, $253.7 million  (75 percent) for public television. Of these funds, $190.2 million (75  percent) is allocated for distribution among station licensees,",
      " and $63.4  million (25 percent) is allocated for support of national public television  programming. A Majority of Licensees  Favor the Current Statutory  Allocations of Federal  Funding for Public  Television We asked public television licensees in our survey whether the statutory  allocations for federal funding support of public television by the  Corporation\u2014the 75 percent allocation for distribution among licensees  and the 25 percent allocation for national programming\u2014should remain the same or be changed. Overall, 62 percent of licensees responded that  these statutory allocations should stay the same, and 34 percent responded  that the allocations should be changed (see fig.",
      " 5). We further analyzed responses to this question factoring in the type (e.g.,  state, university, community, and local authority) and size (based on total  revenues) of licensees, to determine whether the views of licensees on the  statutory allocations vary on the basis of these characteristics. Our analysis  indicates that the current allocations were favored by a majority of  licensees of each type, with the exception of local authority licensees (see  fig. 6) and by each size, based on total revenues (see fig. 7). Among the  various types and sizes of licensees, those that most favored the current  allocations were university licensees (71 percent of the 51 university  licensees responding)",
      " and large licensees by total revenues (80 percent of  the 20 large licensees responding). percent allocation, commented that even though additional federal funding  for station operations would be useful, quality national programming is  also important to support the station\u2019s fundraising efforts. Of the respondents favoring a change in the allocations, most proposed  that the allocation for support among licensees increase above the current  level of 75 percent and the allocation for national programming decrease  below 25 percent. In fact, several of these respondents suggested that all of  the public television funds should be allocated among licensees, with no  funds for national programming.",
      " Among the reasons cited for an increase  in the allocation for licensees was the view that providing more of these  funds to licensees, rather than to national programming entities, would  advance the \u201clocal\u201d quality of public television. Another reason given was  that distributors of national programming would be more accountable and  responsive to licensees\u2019 local needs if more funds were allocated to  licensees. In addition, one licensee noted that by placing the funds in the  hands of licensees, a greater degree of insulation from political influence  over national programming would be likely. However, a couple of licensees suggested that the 25 percent allocation for  national programming should be increased and the 75 percent allocation  for licensees decreased.",
      " One licensee suggested, for example, that despite  the need for national programming, licensees would likely not pool funding  necessary to produce national programming if all funds were distributed to  licensees. Another licensee noted that funding for costly, high-quality,  national programming should occur at the national level, and that local  stations should obtain most of their financial support from their local  communities. Most Licensees Were  Generally Satisfied  with the Process for  Determining  Community Service  Grants, but Many  Expressed Concerns  about the Television  Future Fund Community Service Grants, the principal mechanism by which the  Corporation provides federal funding among licensees of public television  stations,",
      " are to be awarded in accordance with applicable statutory  provisions. Among these provisions is a requirement that the Corporation  periodically review, in consultation with licensees, the eligibility criteria  established by the Corporation for distribution of funds among public  television stations. More than three-fourths of the licensees responding to  our survey expressed overall satisfaction with the most recent consultation  process. Another grant program, the Television Future Fund, was created  by the Corporation to support projects to help public television achieve  greater economic self-sufficiency. However, over 40 percent of licensees in  our survey responded that the projects have not resulted in practical  methods for reducing costs or enhancing revenues in their own operations.",
      "  Moreover, our legal review of this program determined that the  Corporation\u2019s approach of supporting these projects, in part, with funds  designated for distribution among licensees is not consistent with the  statutory authority under which the Corporation operates. In September  2002, the Corporation temporarily suspended the awarding of further  Television Future Fund grants pending the outcome of a review. The  program has recently been reactivated under different procedures but  continues to be funded, in part, with funds that the Congress has made  available for distribution among licensees of public television stations. Most Licensees Were  Satisfied with the Review  and Consultation Process  for Determining Community  Service Grants The Community Service Grant program is the principal mechanism by  which the Corporation currently distributes federal funding among  licensees of public television stations.",
      " Although not expressly established  by the act, the Community Service Grant program is administered by the  Corporation under the provisions of the act that provide for the allocation  of funds for distribution among public television licensees. Statutory  provisions requiring that the Corporation distribute funds directly among  licensees were first enacted in 1975. Of the $190.2 million allocated for  distribution among licensees in fiscal year 2004, the Corporation\u2019s  budget for the Community Service Grant program is $181.2 million. The Corporation currently administers the program by providing each  licensee that operates an on-air public television station with a \u201cbasic\u201d  grant,",
      " as specifically required by the act. The $10,000 in funds awarded to  each eligible licensee currently as the basic grant component of a  Community Service Grant predates the establishment of the program and  began soon after establishment of the Corporation. In addition to the basic  grant, eligible licensees also receive two additional component grants in  their Community Service Grant\u2014a \u201cbase\u201d grant and an \u201cincentive\u201d grant.Base grant funds are determined on the basis of the statutory allocations,  the Corporation\u2019s total annual appropriation, the number of licensees  eligible for grants, and a fixed grant funding level set by the Corporation\u2019s  board of directors.",
      " Incentive grant funds depend largely on each individual  licensee\u2019s share of the combined amount of revenues generated from  nonfederal sources. (See app. II for detailed information on the grant  components of Community Service Grants.) The act specifies that the funds distributed through the 75 percent  allocation may be used at the discretion of the recipient for purposes  related primarily to the production or acquisition of programming.According to officials of the Corporation, this provision is generally  understood to provide licensees with discretion to use such funds for any  expenses incurred. In tandem with the act\u2019s requirements setting forth the basis for distributing  funds, the Corporation is required to review periodically the eligibility  criteria for distributing these funds in consultation with licensees or their  designated representatives.",
      " In practice, the Corporation has undertaken a  review and consultation of the Community Service Grant program every 2  to 3 years. According to Corporation officials, a review and consultation  consists of polling licensees and other public broadcasters to identify  issues of concern regarding the distribution of funds and convening an  advisory panel that broadly represents licensees to facilitate the review.  Further, the Corporation develops and analyzes numerical models to assess  likely impacts of recommended policy changes in the distribution of funds  and disseminates information to licensees for further advice and  consultation. Ultimately, the advisory panel\u2019s recommendations are  presented first to licensees and the Corporation\u2019s management and then to  the Corporation\u2019s board,",
      " with any exceptions or refinements proposed by  management for its vote of approval. In our survey, we asked licensees several questions about the Corporation\u2019s  most recent consultation on the eligibility criteria for distributing  Community Service Grants, conducted in 2001. Over 80 percent of  licensees responding said that they were aware of the 2001 consultation  process. Slightly more than half of the respondents said the Corporation  solicited input from them to a great or moderate extent. Half of the  licensees said they provided input to the Corporation to a great or  moderate extent. Overall, more than three-fourths of all licensees said they  were either basically satisfied with the consultation process,",
      " or that only  minor changes were needed (see fig. 8). changes. For example, several licensees indicated their belief that the  Corporation predetermines the desired outcome of modifications to the  Community Service Grant eligibility criteria and is not responsive to  licensees. With regard to the make-up of the review panel, suggestions  were made to rotate panel members, involve licensee officials that have not  previously served on a review panel, and make the review panel more  representative of the licensee community. One perspective highlighted by a  few licensees was that small stations do not have adequate representation  on the Corporation\u2019s review panels. For example,",
      " one licensee said that  small rural station licensees only have \u201ctoken\u201d representation on the  Corporation\u2019s review panels, and another noted the difficulty for officials of  small station licensees to participate in review panels given the costs and  time commitments for participating in the panel meetings. In both our survey and in interviews we conducted with licensees and  officials from the Corporation, PBS, and the Association of Public  Television Stations, specific factors in the eligibility criteria for grant award  determinations were noted as causing some licensees to perceive  disparities in the distribution of funds through the Corporation\u2019s  Community Service Grants. Among such factors were the policy which  specifies that licensees operating stations in the same market (known as an  \u201coverlap\u201d market)",
      " share a single base grant component of their Community  Service Grants, the provision of supplemental funds in the incentive grant  portion of the Community Service Grant for licensees that operate multiple  public television stations, and an insufficient level of Community Service  Grant funds provided to licensees to cover PBS membership assessment  for access to PBS\u2019s national programming. However, we were told that while modifying the eligibility criteria for  establishing the base and incentive grant portions of Community Service  Grants may result in an increase in the grant funds awarded to some  licensees, it would also likely reduce the grant amounts awarded to others.  Further, we were told that the Corporation makes every attempt to ensure  that these grant funds are distributed fairly among public television  licensees.",
      " For example, as a result of the 2001 review, the Corporation  revised a policy previously adopted to increase the minimum level of  nonfederal financial support that licensees must raise to $1 million  beginning in fiscal year 2003 in order to receive the incentive portion of the  Community Service Grant. As revised, the minimum level was set at  $800,000. Many Licensees Expressed  Concerns About Aspects of  the Television Future Fund Concerned in the mid-1990s over the prospect of declining revenues from  public television funding sources, including federal funding, the  Corporation created the Television Future Fund in 1995 as a means of  helping public television licensees achieve greater economic self\u00ad sufficiency.",
      " The program provided grants to projects aimed at reducing  stations\u2019 operating cost and enhancing their revenues. Prior to the end of  fiscal year 2003, the Television Future Fund awarded grants to licensees,  consortia of licensees, and non-licensee entities (e.g., consultants) on the  basis of project-specific criteria. Grant proposals were to show clear evidence that the project would meet a demonstrated need; actively involve a number of stations, have benefits beyond one  individual station, offer economic returns that could be widely shared,  and/or act as a model that could be widely replicated; prove, through feasibility studies, that concepts could be widely  implemented,",
      " thus demonstrating that the effort can lead to economies  of scale; be envisioned as long-term efforts, sustainable after the Corporation\u2019s  funding for the project concluded; and reflect a shared risk through funds provided by the applicant, thereby  demonstrating an institutional commitment. In addition, all proposals were to demonstrate an awareness of systemwide  efforts already under way and make use of existing resources, whether  from public television or the private sector. To provide funding for Television Future Fund projects, the Corporation  annually pooled funds from two separate sources: funds from its System  Support account and funds from the 75 percent allocation for distribution  among licensees. Between 1996 and 2004,",
      " $30.5 million came from the  System Support account and $28.5 million from the licensee allocation.Based on recommendations of advisory panels comprised of station and  system representatives, the Corporation awarded 204 Television Future  Fund grants through September 2002 for a broad range of projects,  including development projects aimed at improving fundraising through local,  regional, and national underwriting efforts, strengthening pledge  practices, and studying financial contributions given via the Internet; technology projects designed to increase the public television  community\u2019s knowledge of its digital capabilities, including developing  interactive television programming; new service and business models projects aimed at forging links  between the public television community and other entities,",
      " such as  licensee and university partnerships; management information projects to improve efforts to manage and  disseminate relevant data, such as a database used by licensees to  compare their programming and fundraising activities with other  licensees and a section of the Association of Public Television Stations\u2019  Web site that contains information for both licensees and the public  about the digital transition; collaboration and consolidation projects designed to support the  development of back office operations that could be used by more than  one station; and research projects aimed at improving the public television community\u2019s  understanding of viewers and the public television industry, such as  updating the handbook for television programmers and a viewer panel  study.",
      " Figure 9 illustrates the distribution of the types of Television Future Fund  projects. According to Corporation officials, some licensees raised issues regarding  how the program is funded and what benefits are being derived from it. We  heard similar concerns while interviewing several licensees. To evaluate  these concerns, we asked licensees in our survey to indicate the extent to  which they knew about the findings and outcomes of Television Future  Fund projects, whether any such projects resulted in practical methods for  enhancing revenues or reducing costs in licensees\u2019 own operations, and  whether they supported the way in which the Television Future Fund is  funded. The extent of the licensees\u2019 knowledge of Television Future Fund projects  varied significantly.",
      " Of licensees responding to our survey, 58 percent  stated that they knew about Television Future Fund projects to a great or  moderate extent, but the other 42 percent indicated that they knew about  the findings and outcomes of Television Future Fund projects to little or no  extent (see fig. 10). Several licensees noted that they did not know about the findings and  outcomes of Television Future Fund projects because of inadequate efforts  by the Corporation to distribute information about the projects. For  example, the Corporation did not compile and distribute to licensees, or  release publicly, a list of the findings and outcomes of Television Future  Fund projects until November 2001,",
      " 5 years after the first grants were  awarded. One licensee stated that although there has always been  sufficient information about the awarding of Television Future Fund grants,  there has been little information on the outcomes of the projects supported  by those grants. practical methods for enhancing revenues. In cross-tabulating these  responses, we determined that, overall, only 41 percent of licensees  responded that Television Future Fund projects had provided them with  practical methods for reducing costs and/or enhancing revenues (see fig.  11). by philanthropic foundations. Over one-fifth of our survey respondents,  however, indicated that the Corporation should cease all funding for the  Television Future Fund.",
      " In September 2002, the Corporation suspended the award of further  Television Future Fund grants pending a review of the program to (1)  assess the consistency between the planning and execution of the program  in relation to the Corporation\u2019s goals and (2) determine how the program  could address concerns that the public broadcast mission and business  models were no longer adequate in the digital era. In the course of its  review, the Corporation\u2019s Future Fund Advisory Panelconcluded that  while a majority of the projects had yielded the results anticipated, some  were not successful for reasons that included an inability to achieve  appropriate scale or significant economic benefit,",
      " inadequately defined  objectives and poor execution, and inadequate marketing of results to  stations. The panel solicited comments from the public television  community on how the Future Fund could best be used to help stations  maximize their financial resources and invest these resources in new and  strengthened service to their local communities. Based on input from  public television stakeholders and its own deliberations, the panel  developed four new criteria to guide the investment of funds. Specifically,  Television Future Fund initiatives should have the potential to change systemwide decision making and transform  current approaches to achieving system and station goals, measurable and sustainable outcomes, strong and verifiable support of key advocates and participants,",
      " and consistency with the Corporation\u2019s legislative mandate. In addition, the panel recommended changes in how Television Future  Fund initiatives are developed and supported. Rather than continuing to  invite proposals on a broad array of themes, as had been done in the past,  the panel recommended that the solicitations more directly define the  initiatives\u2019 intended outcomes for participants, the station community, and  the system overall. The panel also recommended that funding  commitments be made over longer time frames at higher monetary levels in  order to focus on fewer initiatives that have greater impact. The panel  called for improved project management, with clearly defined expectations  and performance measures and a clear definition of success.",
      " To evaluate  and monitor the progress of the initiatives, the panel recommended that the  membership of the Future Fund Advisory Panel include greater  representation from across the station community. planning study discussed earlier. According to Corporation officials, it was  anticipated that the Future Fund program would help support some of the  new initiatives and projects stemming from the planning study. The Television Future Fund was reactivated in November 2003 with the  advisory panel endorsing several funding grants. In a December 2003  memorandum to station managers, the Corporation outlined the new  Television Future Fund review and selection process and described three  Future Fund projects that were in progress:",
      " (1) the Major Giving Initiative  aimed at helping stations attract financial support from major donors\u2014an  area of opportunity identified in the Corporation\u2019s systemwide planning  study; (2) the Education Leadership Academy, a pilot effort to identify  opportunities for improved community partnership in elementary and  secondary school education; and (3) an online knowledge base to improve  public television\u2019s fundraising potential, strategies, and practices.  Corporation officials noted that 90 of the 176 licensees have signed up to  participate in the first Major Giving Initiative workshop, and they expect  licensees to participate in another workshop to be held later this year. In  addition,",
      " they noted that the Future Fund was used to cover the  participation of about 110 station personnel in a 2-day concentrated track  of sessions for the Education Leadership Academy. Corporation\u2019s Approach to  Funding the Television  Future Fund Is Not  Consistent with Its  Underlying Statute counsels to support their differing positions on this issue. As part of our  review, we examined the Corporation\u2019s statutory authority to use funds  allocated for distribution among public television licensees to support the  Television Future Fund. Although our legal review focused on the program  as it was constituted prior to its recent revisions, the recent changes made  do not appear to have solved the legal deficiencies that we identified.",
      " As  reconstituted, the Future Fund program still is funded, in part, with funds  designated by the Congress for distribution among public television  licensees. According to the Corporation, its authority to establish \u201celigibility criteria,\u201d  and the formula under which the funds are disbursed, is broad enough to  allow the Corporation to take a portion of the funds allocated for  distribution among licensees, pool them with System Support funds, and  use this aggregated pool of money to make selective grants only to  applicants submitting project proposals acceptable to the Corporation after  being reviewed and recommended by a review panel. We disagree. The  difference between our view and that of the Corporation rests on whether  the eligibility criteria the Corporation may adopt include project-focused  criteria that govern the selective award of funds for a particular project (as  the Corporation maintains)",
      " or whether eligibility criteria the Corporation  may adopt include only station-based criteria that distinguish among public  television licensees on the basis of such factors as financial needs,  audience satisfaction, or fundraising effectiveness. It is our view that the  phrase \u201celigibility criteria\u201d should be read in the context of the distribution  mechanism to mean criteria focusing on the eligibility of the licensees,  rather than the eligibility of the projects. Although we often defer to an  agency\u2019s interpretation of a statute it is charged to administer, we cannot  do that here because the Corporation\u2019s interpretation of its authority is  neither consistent with the statutory language nor the Congress\u2019 policy  choice favoring local,",
      " not Corporation, control of the expenditure of the  funds allocated for licensees. Fundamentally, we believe that the Corporation\u2019s interpretation of the  statutory language changes the basic nature and control over the  expenditure of the funds allocated for licensees. First, the language of the  distribution provision makes no reference to funding specific projects. By  contrast, the Congress has provided the Corporation with specific  authority to fund projects using system support funds. Second, the statute  and its legislative history reflect a clear division of roles vis-\u00e0-vis the  Corporation and the licensees and permittees of public television stations.  Under the statutory scheme,",
      " it is the Corporation that is responsible for  distributing funds to the licensees, and it is the recipients of these funds  that are granted the discretion over how they are to be used. Thus, in the  context of the entire statutory scheme, these funds would not be available  for project-specific systemwide grants. Moreover, as implemented by the Corporation, the Television Future Fund  grants are available to nonstation entities. We believe this is inconsistent  with the direction in the statute regarding the fact that the funds are to be  distributed among licensees of public television stations. For example, an  award was given to a consultant to conduct studies to identify skills that  will be needed by chief executive officers of public television stations in  the next decade.",
      " Another award was given to a consultant group to study  the perception of public television by its current and potential financial  supporters. In our view, the funds allocated by statute for distribution  among licensees are not available to nonstation entities. Appendix III  presents our legal opinion in detail. 2005 monies designated for distribution among licensees would no longer  be used to support the Future Fund. The officials said that they would be  developing a proposal for the board\u2019s vote before the end of fiscal year  2004. Meanwhile, the ongoing and planned projects will continue to be supported  from the balance in the Television Future Fund account,",
      " which amounted  to about $18.3 million as of December 31, 2003. According to the  Corporation, $10.1 million of this balance came from funds designated for  distribution among licensees from fiscal year 2004 and previous fiscal  years; the remaining $8.2 million came from System Support funds.  Approximately $8.4 million of the $18.3 million in the account balance has  been committed for ongoing projects, mostly for the Major Giving Initiative  ($6.6 million). The remaining $9.9 million has been \u201cearmarked\u201d by the  Future Fund Advisory Panel for several other major initiatives that are  under development.",
      " Most Licensees Favor  Continued Federal  Funding Support for  the National Program  Service, as Well as  Additional Funding to  Produce More Local  Programming Provisions of the Communications Act govern the Corporation\u2019s support  for the production and distribution of national programming. The  Corporation provides PBS with an annual grant to help support its National  Program Service, a package of children\u2019s and prime-time series that are  broadcast by most public television stations. In response to our survey,  most licensees expressed support for continuation of the Corporation\u2019s  annual grant to PBS for the National Program Service and held the view  that the Service\u2019s programming enables them to meet their mission and  build underwriting and membership support.",
      " Many licensees also  emphasized the importance of producing their own programs to meet the  needs of their local communities, suggesting that federal funds should be  made available for the production of local programming. Most Licensees Favor  Having the Corporation  Continue Funding for the  National Program Service Expressly prohibited from producing or distributing public television  programming, the Corporation is authorized by provisions of the  Communications Act to provide federal funding for national public  television programming. Under the act, the Corporation is directed to  distribute a substantial amount of available programming funds to  independent producers and production entities, producers of national  children\u2019s educational programming, and producers of programming  addressing the needs and interests of minorities.",
      " In fulfillment of this  mandate, the Corporation provides programming support through three  mechanisms\u2014the General Program Fund, the Program Challenge Fund,  and an annual grant to PBS for the production and distribution of some of  public television\u2019s best known or \u201csignature\u201d series, a package known as  the \u201cNational Program Service\u201d (see fig. 13). Some of the productions  supported through the Program Challenge Fund and the General Program  Fund are broadcast as part of the PBS National Program Service. The Independent Television Service was founded in 1988. See, 47 U.S.C. \u00a7396(k)(3)(B)(iii). The Minority Consortia consist of the following organizations:",
      " National Black Programming  Consortium, Native American Public Telecommunications, Latino Public Broadcasting, National Asian  American Telecommunications Association, and Pacific Islanders in Communications. amounted to only 14 percent of the $450 million in total funds used for such  programming in fiscal year 2003. Many of the best-known programs associated with public television are  part of PBS\u2019s National Program Service. The Service currently includes  miniseries, specials, and children\u2019s and prime-time series\u2014including  Sesame Street, NOVA, The NewsHour with Jim Lehrer, and American  Experience\u2014providing PBS member-stations with approximately 2,100  hours of programming in 2003.",
      " The Corporation\u2019s annual grant of $22.5  million to PBS makes up only a small portion of the funds that finance the  National Program Service; a large source of the Service\u2019s financing comes  from public television station licensees that collectively paid $126 million  in 2003 membership assessments to PBS for programming and related  broadcast rights to the Service\u2019s programs. In 2003, 171 of the 176 public  television licensees were PBS members. The National Program Service is  distributed to PBS member-stations for broadcast either at the time of their  delivery or at a time of the licensees\u2019 choosing. Member-stations are free to  choose which of the Service\u2019s programs to broadcast,",
      " although PBS  officials stated that licensees receive no reduction or rebate in their  assessment for programming that is not broadcast. Our survey asked a series of questions about the National Program Service.  In response to our question on whether the Corporation should continue to  provide direct funding for the Service at its current level, 72 percent of the  responding licensees answered \u201cyes.\u201d Some licensees stated that the  quality of the programs included in the Service would suffer without  continued funding from the Corporation. Of the 19 percent of the licensees  who indicated that a change was needed, most suggested that the funding  be reduced or eliminated and be given instead to the licensees.",
      " Concerns with the process that PBS uses to choose the programs selected  for the National Program Service were also noted in some of our interviews  with officials of public television licensees. The Corporation\u2019s annual grant  to PBS for the National Program Service was instituted as a result of a  statutory provision enacted in 1988 requiring that the Corporation study  and submit a plan to the Congress for funding support of national public  television programming. Prior to the establishment of the National  Program Service, grants were awarded by the Corporation directly to  several of the producers of programming included on the PBS national  schedule. Other programs were made part of the national schedule through  a mechanism known as the \u201cStation Program Cooperative.\u201d Through the  Cooperative,",
      " officials from public television stations would vote on which  individual programs to include on the national schedule and participate in a  \u201cgroup buy\u201d\u2014combining their funds for the purchase of programming for  distribution by PBS. However, concerns arose that the Station Program  Cooperative model was not effective in the establishment of programming  priorities, the production of minority programming, or the ability of  producers to effectively attract underwriters. In 1989, a National Program  Funding Task Force\u2014comprised of representatives from the Corporation,  public television stations, PBS, independent producers, and other  stakeholders\u2014was formed to review the method of funding national  programming.",
      " This review led to the replacement of the Station Program  Cooperative with a new model for selecting PBS programming. Under this  new model, PBS created the position of chief programming executive to  make programming decisions. Currently, two chief programming  executives located on the East and West coasts, respectively, select  programs for the National Program Service with input from licensees,  internal PBS programming staff, and PBS management. This approach was  designed to facilitate the centralized development and purchasing of  programming for the National Program Service and for other programming  distributed nationally under the PBS logo\u2014including children\u2019s, prime\u00ad time, and syndicated programs. Our survey of licensees found that only a small percentage expressed a  desire to reinstate the former Station Program Cooperative or a similar  model to select programming for PBS\u2019s National Program Service.",
      "  However, a majority of the survey respondents, 58 percent, indicated that  changes were needed in the process for selecting programs for the Service.  Specifically, respondents suggested that PBS solicit more input from  licensees in making the selections. Some licensees we interviewed  commented that the strong relationship between PBS and producers has  created an entrenched system that limits the ability of new producers to get  their programs on the National Program Service. Figure 14 highlights the licensees\u2019 views on the Corporation\u2019s funding of the  PBS National Program Service and the process used to select the programs  that are included in the Service. While our survey shows that over half of the licensees indicated that  changes are needed in the selection process for the PBS National Program  Service,",
      " most respondents nevertheless indicated satisfaction with the  extent to which the Service\u2019s programming helps them meet the missions of  their stations. few licensees also noted that PBS provides a \u201csafe harbor\u201d of children\u2019s  programs that are distinct from their commercial counterparts. Children\u2019s  programming was viewed as more important to licensees\u2019 missions than to  building underwriting and membership support because only 23 percent of  the licensees responding to our survey indicated that they rely to a great  extent on children\u2019s programming to build such support, and 39 percent  said they rely on such programming to a moderate extent. Many licensees  stated that they do not rely on children\u2019s programming for underwriting  support because of content restrictions and because underwriters do not  see a strong market in the viewers of such programs.",
      " However, a few  licensees stated that some underwriters support children\u2019s programs  because of their high quality and their educational and social value. Several  licensees stated that they do not rely on children\u2019s programming to  generate membership support because families with young children often  do not have the economic means to contribute financially. Licensees also indicated that they value the prime-time programs on the  National Program Service, with 96 percent of the respondents indicating  that prime-time programs help them meet their mission to a great or  moderate extent. As noted above, some licensees criticized the programs  for having become less unique, less innovative,",
      " and less willing to explore  controversial issues in recent years. However, most licensees stated that  they rely on the prime-time programs included in the National Program  Service to meet their mission of providing quality life-long educational  content for adults of all ages. Many licensees added that the prime-time  programs allow them to compete with commercial stations, attract new  audiences, and retain existing viewers. Our survey also showed that 91  percent of the licensees believe that prime-time programs help them build  local underwriting and membership support to a great or moderate extent.  According to the licensees, some of the reasons that the prime-time  programs are helpful in attracting local underwriters are that audience  numbers are higher,",
      " the program titles are familiar, and the programs  themselves are of high quality and are well promoted. Figures 15 and 16  summarize the responses of licensees to questions regarding the National  Program Service\u2019s children\u2019s and prime-time programming. Most Licensees Indicated  that They Would Produce  More Local Programming if  Additional Funding  Resources Were Available national program. This method allows individual licensees the possibility of  extending the value of national promotions to such local programs. For  example, local stations in several cities took advantage of the popularity of  the PBS series Jazz: A Film by Ken Burns, broadcast in 2001, by producing  local programs that featured local and regional jazz musicians and cultural  influences.",
      " Previously, the Corporation funded regional organizations that provided  licensees with specialized content for their areas. In 1961, the Eastern  Educational Network began as a collaboration of public television stations  in the northeastern United States that produced regional programs for its  member stations. Other regional collaborations were formed to provide  similar functions, such as the Southern Educational Communications  Association, the Central Educational Network, and the Pacific Mountain  Network. However, over the last decade, almost all of these regional  organizations have changed their focus to provide quality national  programming to members nationwide. In 1997, the Southern Educational  Communications Association and the Pacific Mountain Network joined to  form the National Educational Telecommunications Association,",
      " a  membership organization that offers a library of national programs to  licensees. Rather than paying for or obtaining the rights to programs, public  television producers give to the National Educational Telecommunications  Association the rights to distribute the programs; in return, the association  provides producers with basic promotion of programming on its Web site  and a forum for licensees to exchange products. In 1998, the Eastern  Educational Network became American Public Television, which acquires  finished programs and develops and coproduces original programming in a  variety of genres, including documentaries, biographies, and instructional  programs, among others. In our survey,",
      " some licensees indicated that public television stations are  rapidly becoming the only locally owned and operated television broadcast  medium. They stated that the consolidation of local media outlets and  expanding national cable and satellite networks have resulted in less local  programming on commercial television, creating a void in their  communities. They believe that their locally produced programs set them  apart from commercial television and allow them to provide their  communities with a unique product that contributes to the civic and  cultural lives of their viewers. However, 79 percent of the licensees  responding to our survey indicated that the amount of local programming  they currently produce is not sufficient to meet local community needs (see  fig.",
      " 17). Moreover, of the 139 licensees that provided narrative comments  regarding this issue, 85 stated that they do not have adequate funds for  local programming or that they would produce more local programming if  they could obtain additional sources of funding. Several licensees stated  that they have had to ignore local issues and turn away programming  opportunities because they lacked the financial resources to produce them. television and has more of a direct impact on the community. However,  among the licensees who expressed a willingness to sacrifice funding for  national programming to fund local productions, some warned that taking  too much from national programming would be harmful to the entire  system.",
      " Corporation Has  Funded Digital  Transmission  Equipment, but Other  Digital Infrastructure  and Content Needs  Remain Digital technology offers public television licensees opportunities to  provide innovative services to their communities. The Corporation  received additional funding of $93.4 million for the digital transition for  fiscal years 2001 through 2003. After consultation with representatives of  the public television community, the Corporation directed these funds  toward providing grants to licensees for acquiring digital transmission  equipment. However, some licensees did not receive their grants in a timely  manner and cited this as contributing to their failure to meet FCC\u2019s initial  May 2003 deadline for constructing digital transmission facilities.",
      " At the  systemwide level, the Corporation is seeking funding for infrastructure  improvements to fully leverage the potential benefits of the digital  transition. In addition, the Corporation, licensees, and other public  television stakeholders have emphasized the importance of support for the  production of digital content as part of the transition. Various mechanisms,  including additional federal funding, have been suggested to address these  needs. Licensees See the Digital  Transition as an  Opportunity to Provide  Innovative Services The Corporation, licensees, and other public television stakeholders have  emphasized that the future of public television depends on the successful  rollout of digital services. Such services would,",
      " in the view of public  television stakeholders, help public television realize the full potential of  digital technology, solidify existing audiences, and reach new viewers in an  era of increased competition from cable and satellite television providers.Nearly all of licenses in our survey reported that they either now have, or  plan to have, key digital capabilities to produce sharper television pictures  and CD-quality sound (high-definition), offer multiple channels for  programming and data services (\u201cmulticasting\u201d), and transmit text and  other data in a digital format (\u201cdatacasting\u201d) (see fig. 19). About 85 percent of the licensees responding to our survey indicated that  successful completion of the digital transition would improve their ability  to serve their communities to a great or moderate extent.",
      " Many of the  digital-based services mentioned by licensees involve supporting  educational, governmental, and cultural activities. Educational services  include the delivery of on-demand instructional content material to  teachers and students in K-12 classrooms, higher education institutions,  and libraries. Local and state governmental services include emergency  response services and alerts, such as Amber Alerts for child abductions. In  addition, licensees noted that multicasting would allow for an increased  range of cultural content, such as programs that highlight local arts or  serve minority populations. Many licensees also indicated their intention to use digital technology to  provide \u201cancillary and supplementary\u201d services.",
      " These are nonbroadcast  services, such as subscription-based video services, paging services, and  computer software distribution, offered by stations to generate revenue.  Fifty-one percent of the licensees indicated they are offering or would offer  these services to nonprofit entities, while slightly more than one-third of  licensees indicated they would offer these services to for-profit entities. Corporation Has Assisted  Licensees in Acquiring  Digital Transmission  Equipment, Though Its  Support Has Not Always  Been Timely The Corporation, licensees, and other public television stakeholders have  identified the importance of federal and nonfederal support for the digital  transition that enables public broadcasters to provide a full range of digital  services to their communities.",
      " In 1997, the Corporation and other public  television stakeholders estimated the costs of the digital transition for  public television stations to be approximately $1.7 billion, largely for  transmission equipment.At that time, the Corporation, PBS, and other  stakeholders proposed a plan under which the majority of this cost would  be funded by nonfederal sources, such as state governments, foundations,  and corporations, and about $771 million (45 percent) would be funded  through federal funds. In the plan, the Corporation also requested an  increase of $100 million in its regular fiscal year 2000 appropriation for the  acquisition,",
      " enrichment, and production of digital programming and  services. For fiscal years 2000 and 2001, the Clinton administration  proposed a funding approach whereby the National Telecommunications  and Information Administration\u2019s (NTIA) Public Telecommunications  Facilities Program, a source of financial support for public television  infrastructure, would provide federal funding for licensees to acquire  digital equipment. The Corporation, for its part, would provide federal  funding to support digital programming production, development, and  distribution. Although this initial funding approach included federal funding for both  digital equipment and digital programming, most of the federal funds that  have been awarded through fiscal year 2003 have been for digital  equipment.NTIA began awarding grants to public television licensees for  digital transmission equipment in fiscal year 1998.",
      " Although specific  appropriations for the digital transition were made for the Corporation in  fiscal years 1999 and 2000\u2014at $15 million and $10 million, respectively\u2014  both were contingent on the enactment of an authorization which did not  occur. The Corporation received its first specific digital appropriation ($20  million) in August of fiscal year 2001 after the enactment of both an  appropriation and an authorizing provision. A second digital appropriation  ($25 million) was received in February 2002. The Corporation, relying on  report language accompanying its fiscal year 2002 appropriation and  considering the limited funds available to licensees from NTIA,",
      " determined  that the highest priority for its digital funds was to assist as many licensees  as possible in meeting FCC\u2019s May 2003 deadline for constructing digital  transmission facilities. Accordingly, the Corporation developed two grant  programs to help licensees acquire basic digital transmission equipment\u2014  the Digital Distribution Fund and the Digital Universal Service Fund. The Digital Distribution Fund, established in January 2002, offers grants  to both individual stations and collaborations of multiple stations for  digital transmission equipment; the Corporation provides 50 percent  matching funds to the nonfederal funds raised by grantees. The Digital Universal Service Fund was established in June 2002 to take  advantage of FCC\u2019s 2001 decision permitting licensees to satisfy the May  2003 construction deadline by initially constructing digital facilities that  use power levels that are lower than what is needed to fully cover their  service areas.",
      " Stations can then increase their power levels over time to  full-power operation.This program is designed to provide grant  recipients with a standard package of equipment for use in constructing  a low-power digital facility. The Corporation funds up to 75 percent of  the cost of the equipment packages, with the remaining cost covered by  grant recipients with nonfederal funds. Both Corporation and NTIA officials told us they coordinate their grant  programs to ensure that there is no duplication in the types of transmission  equipment purchased by licensees with funds from their respective  programs. Figure 20 provides a time line of the Corporation\u2019s activities up  to November 2003 for awarding funds through these two digital grant  programs.",
      " The Corporation used its fiscal year 2001 and 2002 digital appropriations to  award grants to 96 stations for digital transmission equipment prior to  FCC\u2019s May 2003 construction deadline. However, the Corporation was not  always timely in getting the awarded equipment packages or funds to the  grantees. Specifically, 30 stations did not receive their equipment packages  or funds by the deadline. Most of these stations were recipients of  equipment package grants from the Digital Universal Service Fund. Public  television stations that did not expect to meet the construction deadline  had to apply to the FCC for a 6-month extension. In requests to FCC for  extensions,",
      " 28 of the 30 stations cited the delay in receiving their digital  grant from the Corporation as a contributing factor, among others, as to  why they filed for an extension. We identified two reasons for the Corporation\u2019s lack of timeliness in  distributing its fiscal year 2001 and 2002 digital appropriations. First, the  Corporation took several months after receiving its digital funds to (1)  convene consultation panels comprised of licensees (or their designated  representatives) to develop recommendations for the use of those funds  and (2) obtain approval of the panels\u2019 recommendations by the  Corporation\u2019s board. Second, the Corporation had to devise grant  programs for the distribution of its digital appropriations.",
      " When the  Corporation\u2019s board initially approved the use of the funds for transmission  equipment in November 2001, the Corporation did not have any equipment\u00ad related grant programs in place. Due to its inexperience in this area, the  Corporation contracted with PBS (which had staff with expertise in  transmission technology) for assistance in developing and administering  these programs. As a result, the first Digital Distribution Fund grants were not awarded  until 9 months after the first digital appropriation was received by the  Corporation in August 2001. With regard to the Digital Universal Service  Fund, the administration contract between the Corporation and PBS and  the equipment contracts negotiated between PBS and 2 manufacturers for  low-power transmission equipment were not finalized until 2 months  before the May 2003 construction deadline.",
      " Only 15 of the 43 stations that  were awarded a Digital Universal Service Fund grant received their  equipment package by the May deadline. The Corporation also had difficulties distributing its fiscal year 2003 digital  appropriation of $48.4 million, of which $37.4 million was allocated for  public television.Having received all of its 2003 funds by March 2003, the  consultation panel process again took several months to develop  recommendations for the use of these funds and obtain the approval of the  Corporation\u2019s board. In July 2003, the panel recommended two phases of  grant awards for these fiscal year 2003 funds,",
      " the first of which was to  continue funding for licensees\u2019 digital transmission equipment. The  application period for this first phase extended from August to October  2003. Although 201 stations had filed for a 6-month extension to FCC\u2019s May 2003  construction deadline, only 26 stations applied to the Corporation for a  digital grant during this first phase. Of these 26 applicants, 23 stations  received grants from the Corporation, totaling $7 million. None of the new  grantees, however, received its funds or equipment package prior to the  end of the 6-month extension period in November 2003.",
      " As of December  2003, $24 million of the Corporation\u2019s fiscal year 2003 digital  appropriation\u2014more than two-thirds of the total fiscal year 2003 amount  for television\u2014remained unobligated, with 126 stations operating under a  second 6-month extension for meeting FCC\u2019s digital construction  requirement. In a survey commissioned by the Corporation and PBS of licensees with  stations that had not met the May 2003 deadline or previously applied for a  Corporation grant, the most common response for why a station had not or  was not planning to apply for this phase of funding was because they had  been able to secure funding through other sources.",
      " Survey respondents  suggested that they would consider applying for future grant rounds of the  Digital Distribution Fund if it awarded funding for transmission equipment  upgrades from low to full power, digital master control facilities that  control broadcast management, and studio and production equipment to  create digital content. Because many of these licensees were able to secure funding from other  sources, funding priorities for these licensees and for those that met the  May 2003 deadline had shifted from transmission equipment to other digital  transition needs not included in the scope of the grant programs. In our  survey, we, too, found that licensees\u2019 priorities for additional federal  funding of the digital transition were in areas other than transmission  equipment.",
      " Only 14 percent of the respondents indicated that digital  transmission equipment was their top priority for additional federal  funding and over half indicated that it was their lowest (see fig. 21).Digital master control, digital content, digital production equipment, and  digital operating costs were all named more frequently as the highest  priority. and repeaters. At the time we concluded our audit work in February 2004,  Corporation officials indicated that applications were due in March and  that a digital review panel was scheduled to meet at the end of that month  to review the applications. Corporation officials also indicated that the  digital consultation panel would meet in early March to provide guidance  on allocating the $49.",
      "7 million made available to the Corporation in fiscal  year 2004 appropriations for the digital transition. System Infrastructure  Improvements and Digital  Content Identified as  Important to Leveraging  Benefits from the Digital  Transition In addition to supporting licensees in constructing their digital  transmission facilities, the Corporation and PBS have identified  systemwide infrastructure improvements as important in maximizing the  benefits of the digital transition. The development of digital content and  production is also becoming more important as more public television  stations become digital ready. Under the Communications Act, the Corporation is to assist in the  establishment and development of an interconnection system to facilitate  the distribution of public television service.",
      " The current interconnection  system, which is managed by PBS under agreement with the Corporation,  uses satellites to distribute PBS and other programming to stations and is  scheduled for replacement by the time the current leases for satellite  capacity expire in 2006. As proposed by the Corporation and PBS, a new  system, called the \u201cNext Generation Interconnection System,\u201d would  replace the current system with a digital one that distributes programming  in real-time and nonreal time to licensees. Licensees can then store these  programs for later broadcast, which in turn allows PBS to become more  efficient by broadcasting these programs to licensees once instead of  multiple times.",
      " The Corporation and PBS have estimated that it will cost  $177 million to replace the interconnection system. The Corporation has  requested that the cost be covered by federal appropriations during fiscal  years 2004 through 2006. The Corporation received an initial $10 million  appropriation for fiscal year 2004 for this purpose. In addition, PBS is separately seeking funds from the Corporation for a  project to provide enhancements to the new interconnection system. This  effort, known as the Enhanced Interconnection Optimization Project, is  designed to allow licensees and PBS to schedule and manage the digital  broadcasting of public television programs through the use of automated  channel operations and monitoring.",
      " According to PBS, this system will cost  approximately $12 million to $15 million to implement at its facilities. PBS  told us that approximately $8 million is still needed, half of which it is  seeking from the Corporation. The individual stations will also need to  implement the interconnection project at their ends. PBS has estimated  that a typical station-side installation costs between $1 million and $1.2  million. The Corporation\u2019s consultation panel for digital funds  recommended in July 2003 that PBS receive $4.1 million for the project  from the Corporation\u2019s fiscal year 2003 digital transition funds. While some licensees noted that this project has potential to bring about  substantial savings and improved operations for licensees,",
      " others  expressed concerns about increased maintenance costs, stranded  investments in digital master control equipment bought before the project  was announced, and a lack of detailed information to assess the costs and  usefulness of the project. For example, in our survey, about 25 percent of  the licensees responding said that they have already acquired some types of  digital equipment (master control, production, or storage) that are not fully  compatible with the project, which may limit the capabilities and  usefulness of the project to them. New equipment may need to be acquired  in order to obtain the full benefits of the project. In response to concerns  about the potential incompatibility of some licensees\u2019 existing digital  equipment with the project,",
      " the Corporation has conditioned the award of  its $4.1 million grant to PBS on an independent review of the project. working group\u2014funded by the Corporation and comprised of Corporation  and PBS officials, as well as public television licensees\u2014highlighted this  need in a 2003 report, which stated that the digital transition provides  public television with an opportunity to reposition itself to carry out its  mission if it is willing to create digital services that are \u201cmore responsive to  the needs of our constituents and cheaper, simpler, smaller, and more  convenient to use.\u201d Noting that 2 years\u2019 advance time may be needed to plan,",
      " develop, and  launch digital services, and that digital production costs are generally  higher than the costs of creating analog programming, the Corporation has  characterized the need for digital content and research as \u201ceven more  pressing\u201d due to the limited availability of past federal funding for the  digital transition. Corporation officials told us that licensees and other  national public television organizations, including the Corporation, are  developing a systemwide strategic plan on the future of public television  that includes the creation of digital content. As part of this planning, the  Corporation is in discussions with PBS on the need to develop a new  national programming plan to support digital content needs.",
      " Some Public Television  Stakeholders Have  Suggested Funding  Alternatives for the Digital  Transition Many public television stakeholders have indicated a need for additional  federal funds to support the digital transition and fully utilize the potential  of digital television. Several licensees in our survey, however, suggested  changes to some of the Corporation\u2019s existing funding mechanisms to help  manage such needs. Among the suggested changes were limiting the  Corporation\u2019s digital grants to one licensee in a market served by multiple  licensees; offering grants to support shared operations, such as digital  master control equipment, among public television stations in the same  market; and eliminating duplication of public television stations in markets  served by multiple licensees.",
      " However, several licensees in markets with  multiple stations believe that they provide valuable services and unique  programming to their communities. In addition, some public television stakeholders have observed that  Corporation funds should be repositioned in order to achieve the benefits  of the digital transition.According to these stakeholders, the Corporation  should foster new collaborative services by supporting the provision of  digital content favoring alternative distribution platforms such as the  Internet over the traditional medium of over-air broadcasting. These  services include interactive Web sites that provide audio and video content  on subjects such as history, science, and literature. Unlike over-air  broadcasting, interactive Web sites would allow people to access this  content regardless of their location.",
      " Stakeholders have noted that such  services would encourage collaboration of licensees without diminishing  their local presence and that this approach may help public television  strengthen its mission to provide high-quality noncommercial programming  and services. Conclusion A long-standing issue for the pubic television community is how best to  distribute the Corporation\u2019s funds among local station operations, national  programming, and infrastructure support. Most licensees responding to our  survey supported the existing statutory allocation of the Corporation\u2019s  television funds between licensees and national programming and were  generally satisfied with the Corporation\u2019s process for periodically  reviewing the eligibility criteria for distributing funds through Community  Service Grants.",
      " In addition, most licensees expressed their support for the  Corporation\u2019s continued funding for PBS\u2019s National Program Service,  which nearly all see as helping them meet their missions for providing  quality children\u2019s and prime-time programming. As for local programming,  most licensees indicated that the amount of local programming they  produced was not sufficient to meet their communities\u2019 needs, largely due  to their limited financial resources. The Corporation\u2019s approach for funding its Television Future Fund  program is a concern for many licensees. As our survey shows, only 30  percent of respondents agreed with the Corporation\u2019s current approach of  using funds designated for distribution among licensees to support  Television Future Fund projects.",
      " The Corporation, as informed by counsel,  contends that it has the authority to use these funds to support the  Television Future Fund program. It is our view that the Corporation may  not take a portion of the funds designated by the Congress for distribution  among public television licensees, pool them with System Support funds,  and use them to make competitive grants only to applicants submitting  project proposals acceptable to the Corporation after review and  recommendation by an advisory panel. Although our legal analysis focused  on the Television Future Fund program as it existed prior to the end of  fiscal year 2003, we note that under the revised program, the Corporation is  still aggregating the funds and using them for projects that benefit the  entire system rather than giving the monies directly to the individual  licensees.",
      " Moreover, it appears that the majority of the funds will be going  to vendors rather than the stations. Accordingly, we continue to question  whether the Corporation has the authority to utilize in this fashion the  $10.1 million of the $18.3 million currently in the Television Future Fund  account that came from funds designated for distribution among licensees. The Corporation\u2019s support for the digital transition is another area of  concern. As shown by our survey, the priorities of most licensees in 2003  shifted beyond the digital transmission equipment supported by  Corporation grants. This contributed to a low application rate for the  Corporation\u2019s digital grants in the latter half of that year and a carryover of  $24 million in digital transition funds into calendar year 2004.",
      " While the  Corporation is broadening the scope of its digital transition grants in 2004,  the licensees\u2019 priorities for digital production equipment and digital content  still are not included in the Corporation\u2019s digital transition funding. Recommendations for  Executive Action We recommend that the Corporation for Public Broadcasting take the  following two actions regarding the Television Future Fund and its digital  transition funds: Before making further Television Future Fund awards or expending any  funds in the Television Future Fund account, the Corporation should  request specific statutory authority to do so, if it intends to continue  using funds that were designated for distribution among licensees.  Should this specific authority not be obtained,",
      " the Corporation should  return to the licensees such funds remaining in the Television Future  Fund account that came from the funds designated for distribution  among licensees. The Corporation should broaden the scope of its digital transition  funding support to include digital production equipment and digital  content. Agency Comments We provided a draft of this report to the Corporation for Public  Broadcasting and to the Public Broadcasting Service for their review and  comments. The Corporation agreed with our recommendation to broaden  the scope of its digital funding to include production equipment and  content, consistent with congressional directives and station needs after  consultation with licensees or their designated representatives. The  Corporation stated that it recognizes that stations are at various stages in  the conversion process and that all station needs are being given careful  consideration in consultations on the distribution of fiscal year 2004 digital  transition funds.",
      " The Corporation did not agree with our recommendation  that the Corporation should request specific statutory authority before  making further Television Future Fund awards or expending any funds in  the Television Future Fund account. The Corporation\u2019s comments include a  legal memorandum from its outside counsel which concludes that the  Television Future Fund is fully consistent with the Communications Act of  1934, as amended. For the most part, the legal memorandum raises the  same arguments that we have addressed in our opinion. However, one  argument raised for the first time involves the \u201cdoctrine of ratification.\u201d  The Corporation cites to cases holding that when the Congress reenacts,",
      "  without change, statutory terms that have been given a consistent judicial  or administrative interpretation, the Congress has expressed an intention  to adopt that interpretation. The Corporation uses this doctrine to support  its contention that the Congress has consistently replenished funds  designated for distribution among licensees knowing that a portion of these  funds are being used for Future Fund projects. Thus, the Corporation  contends that the Congress has, in essence, ratified by appropriation the  Corporation\u2019s interpretation of the statute. However, as recognized by GAO  opinions summarizing the test that courts have used to find ratification by  appropriation, three factors generally must be present to conclude that the  Congress,",
      " through the appropriations process, has ratified agency action.  First, the agency takes the action pursuant to at least arguable authority;  second, the Congress has specific knowledge of the facts; and third, the  appropriation of funds clearly bestows the claimed authority. None of these  factors is present here. The Corporation\u2019s comments and our response to  points raised by its attached legal memorandum are included in appendix  VII. generating program input from member stations and will seek counsel from  the Content Policy Committee of its board on how best to improve its  systems for securing member input. PBS also provided additional  information to clarify the respective funding needs of the Enhanced  Interconnection Optimization Project and the Next Generation  Interconnection System.",
      " We also provided a draft of the report to FCC and have incorporated FCC\u2019s  technical comments where appropriate. Matter for  Congressional  Consideration If the Congress supports the concept of using funds that were designated  for distribution among licensees to finance the Television Future Fund program, it should provide the Corporation with the authority to use the  funds for this purpose. As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution of it until 30 days from  the date of this letter. We will then send copies of this report to the  appropriate congressional committees, the President and Chief Executive  Officer of the Corporation for Public Broadcasting,",
      " the President and Chief  Executive Officer of the Public Broadcasting Service, the Chairman of the  Federal Communications Commission, and others who are interested. We  also will make copies available to others who request them. In addition, the  report will be available at no charge on the GAO Web site at  http://www.gao.gov. If you or your staff have questions concerning this  report, please contact me on (202) 512-2834 or at goldsteinm@gao.gov. Key  contacts and major contributors to this report are listed in appendix IX. Scope and Methodology Our objectives were to review the Corporation\u2019s activities and obtain the  views of public television station officials regarding:",
      " (1) the statutory  allocations for federal funding of public television; (2) the distribution of  funds by the Corporation through its Community Service Grant and  Television Future Fund programs, including a legal analysis of whether the  funding of the Television Future Fund program is consistent with the  Corporation\u2019s underlying statutory authority; (3) the distribution of funds  by the Corporation for PBS\u2019s National Program Service and for local  programming; and (4) Corporation funding to assist public television  stations in their transition to digital technologies and services. We also  reviewed the statutory and regulatory requirements, system policies and  guidance, and licensees\u2019 views on underwriting acknowledgments.",
      " To respond to these objectives, we gathered information from a variety of  sources, including a survey of all public television licensees receiving funds  from the Corporation for Public Broadcasting. To respond to the first and  second objectives, we reviewed provisions of the Communications Act, as  well as documents and records used by the Corporation to implement and  administer programs supporting public television stations. We also  interviewed officials of the Corporation, PBS, and the Association of Public  Television Stations, a nonprofit organization whose members include  nearly all of the licensees of public television stations. To respond to the third objective on Corporation funding for national  programming, we reviewed provisions of the Communications Act and  documentation on funding for national programming obtained from the  Corporation,",
      " PBS, and the Independent Television Service, a nonprofit  corporation that receives federal support from the Corporation for  distribution to independent public television producers. We also  interviewed officials from all of these organizations, the Association of  Public Television Stations, and two additional distributors of national  programming that do not receive funding from the Corporation\u2014American  Public Television and the National Educational Telecommunications  Association. awards grant funds to public television stations for digital equipment costs.  To further our understanding of public television\u2019s progress in the digital  transition, we requested and received data from the FCC on its June 2003  survey of public television licensees that are PBS-affiliates in the top 100  television markets.",
      " For our objective on underwriting acknowledgments, we reviewed  statutory and regulatory documents and interviewed officials of FCC,  which enforces acknowledgment requirements, and obtained guidance  provided by and interviewed officials of the primary national programming  distributors\u2014PBS, American Public Television, and the National  Educational Telecommunications Association. We also reviewed the legal opinions of the Corporation\u2019s outside counsels  as part of our legal analysis to determine whether the Corporation\u2019s  approach to funding the Television Future Fund is consistent with the  governing statute. Our legal review focused on the program as it existed  prior to the end of fiscal year 2003. We responded to all of these objectives by conducting interviews with 16  licensees of public television stations and deploying a Web-based survey of  public television licensees.",
      " As the scope of our work was limited to an  evaluation of the Corporation\u2019s activities, we only surveyed entities  licensed by FCC to operate one or more public television stations that  received funds from the Corporation as of mid-August 2003. We identified  the population of public television licensees from the Public Broadcasting  Directory published by the Corporation and verified this information with a  database provided by the Association of Public Television Stations, as well  as with FCC\u2019s database of public television licensees. This information  included names, addresses, and other contact information of public  television licensees, as well as licensee type and size. We acquired data on  public television licensee market size and station revenues from an online  Station Activities and Benchmarking Survey and Station Grant Making  System,",
      " both developed by the Corporation and to which all recipients of  Corporation grants contribute data. To assess the reliability of this licensee  data, we reviewed these documents and discussed the data with  knowledgeable agency officials. As a result, we determined that the data  were sufficiently reliable for the purposes of this report. We surveyed 178  licensees and subsequently excluded the surveys of two licensees: (1) one  licensee who did not meet the aforementioned criteria and (2) another  licensee who holds two licenses, but who completed only one survey rather  than two. Our resulting population consisted of 176 licensees. To develop our survey,",
      " we interviewed officials at the Corporation, PBS,  the Association of Public Television Stations, the Independent Television  Service, American Public Television, the National Educational  Telecommunications Association, and several licensees of public television  stations. We also conducted an interview with an official of and obtained  documents from Citizens for Independent Public Broadcasting, a national  membership organization dedicated to addressing public broadcasting  issues. We then conducted pretests with seven public television licensees  to help further refine our questions, develop new questions, clarify any  ambiguous portions of the survey, and identify any potentially biased  questions. These pretests were conducted in person and by telephone with  licensees of various types,",
      " sizes, and regional locations across the country. We began our Web-based survey on August 21, 2003, and included all  useable responses received as of September 22, 2003. Log-in information to  the Web survey was e-mailed to officials of public television licensees,  which included general managers and presidents. We sent two follow-up  e-mails, and after the survey was online for 3 weeks, we attempted to  contact all those who had not logged into the survey. The Corporation and  the Association of Public Television Stations coordinated with us to  encourage station licensees to complete the survey.",
      " Of the population of  176 public television licenses, we received 149 complete surveys, for an  overall response rate of 85 percent. However, the number of responses to  individual questions may be fewer than 149, depending upon how many  licensees were eligible to or chose to respond to a particular question. to provide a basis for adjusting survey responses. Distributions by type of  licensee (community, local authority, state, university) and numbers of  stations operated by licensees were not significantly different. Licensees  operating large stations were somewhat more likely to respond and those  operating smaller stations were somewhat less likely to respond,",
      " but the  differences were not significant. The following data is used only as background information in the report;  therefore, the data was not verified for data reliability purposes: (1) the  digital television cost estimate developed by the Corporation and PBS; (2)  the sources and percentages of public television revenue provided by the  Corporation; (3) the number of Television Future Fund and digital  television grants awarded by category; (4) and the distribution of funds by  the Corporation for programming. Our review was performed from April 2003 through February 2004 in  accordance with generally accepted government auditing standards. Components of the Corporation\u2019s Community  Service Grants On the basis of statutory provisions and the receipt of an annual federal  appropriation from the Congress,",
      " the Corporation for Public Broadcasting  makes an annual Community Service Grant award to each eligible licensee  of one or more noncommercial educational public television station(s).  Figure 22 summarizes the factors upon which funds are awarded through  each of the three component grants of a Community Service Grant. Appendix\u00a0II\u00a0 Components\u00a0of\u00a0the\u00a0Corporation\u2019s\u00a0Community\u00a0 Service\u00a0Grants\u00a0 Nine other eligibility criteria for the base grant are specified by the Corporation, including licensees\u2019  compliance with regulations on equal opportunity employment, Internal Revenue Service  requirements, provisions of the Communications Act, and regulations on the use and control of donor  names and lists.",
      " Legality of the Corporation for Public  Broadcasting\u2019s Television Future Fund  Program The Corporation for Public Broadcasting (the Corporation) established the  Television Future Fund in 1995 for the purpose of investing in projects that  would reduce costs, facilitate collaboration, and increase revenue across  the public television system. The Television Future Fund is funded, in part,  by monies designated by the Congress to be distributed among public  television licensees. As part of our review of the Corporation, we were  asked to determine the legality of this funding practice. Specifically, the  issue is whether the Corporation may use funds designated by the Congress  for distribution among public television licensees to support a competitive  grant program,",
      " the Television Future Fund program. As explained more  fully below, the Corporation\u2019s funding and distribution of grants under the  Television Future Fund program are not in accord with the underlying  statutory authority under which the Corporation operates. Background The Congress established the Corporation in 1967 as a nonprofit  corporation to facilitate the development of public radio and television  broadcasting. 47 U.S.C. \u00a7396. To ensure insulation from government control  or influence over the expenditure of federal funds, the Congress provides  funds directly to the Corporation. Although not a federal agency, the  Corporation receives an annual appropriation from the Congress, which is  its primary source of funding and is deposited into the Public Broadcasting  Fund.",
      " The 2004 fiscal year appropriation was $380 million. In turn, the  Corporation supports local television and radio stations, programming, and  improvements to the public broadcasting system as a whole. According to  the Corporation, its support represents approximately 15 percent of public  broadcasting\u2019s revenues. Other support for the public broadcasting system  comes from such sources as membership, businesses, college and  universities, and state and local governments. The Corporation funds more than 350 locally operated public television  stations across the country. Prior to the establishment of the Television  Future Fund, the Corporation distributed available monies among  licensees of public television stations through the Community Service  Grant mechanism.",
      " Community Service Grants (CSG) are unrestricted  general operating grants provided by the Corporation directly to qualified  public television stations according to a mathematical formula. As  required by 47 U.S.C. \u00a7396(k)(6)(B), the Corporation established eligibility  criteria and a formula for distributing these funds and has periodically  reviewed them in consultation with the public television station  community. All qualified licensees receive a CSG, although the amount  varies. A full-power station operating under a noncommercial, educational  Federal Communications Commission (FCC) license qualifies for a CSG if  it meets minimum requirements including a minimum level of nonfederal  financial support,",
      " a minimum broadcast schedule, and bookkeeping and  programming standards. The Corporation established the Television Future Fund in 1995. At that  time, the Corporation had growing concerns about declining federal  support, as well as diminished revenues from other sources. The  Corporation saw a need to establish and maintain a pool of money,  aggregating funds from two different sources, to fund projects to address  systemwide concerns. According to the 1995 Public Television Issues and  Policies Task Force, the Future Fund was established to provide seed capital or short-term financing for projects that can  significantly reduce costs, increase efficiency, provide economies of  scale,",
      " or generate incremental gains in membership, underwriting, or  other sources of income; fund station proposals to explore opportunities to achieve new  operating efficiencies through collaborative efforts, partnerships, joint  operating agreements, consolidations, and other arrangements resulting  in significant annual savings; and fund extraordinary efforts and new initiatives to raise nonfederal  income, in anticipation of reduced federal funding, with a goal of  stimulating an increase in annual nonfederal revenue. needed. Accordingly, the Corporation\u2019s board, after what it terms  extensive consultation with the public television station community,  approved the funding of the Television Future Fund using monies from the  system support and the CSG pools.",
      " The Corporation views Television Future Fund awards as a special  category of grant that is neither exclusively a CSG grant nor a System  Support expenditure. The Corporation notes that while CSGs typically are  utilized only as determined by an individual station recipient for its own  benefit, Television Future Fund grants can be used as determined or  directed by more than one station for the benefit of multiple stations and,  potentially, for the benefit of public television as a whole. Under  procedures in place prior to the end of fiscal year 2003, the Corporation  solicited interest in Future Fund grants by issuing a Request for Proposal  (RFP)",
      " and would evaluate applicants for grants on the basis of RFP funding  criteria. Not all applicants received funding. has made 204 grant awards, of which 39 percent of the grants have gone to  stations, 30 percent have gone to stations paired with consultants, and 31  percent have gone to third-party awardees. The nature of the projects  funded with Television Future Fund grants has varied greatly and included  Web site experiments and marketing projects. The grant amounts have  varied from a few thousand dollars to hundreds of thousands of dollars. Issues From its inception, the Corporation always envisioned that monies from  two sources\u2014the System Support and CSG pools\u2014would support the  Television Future Fund program.",
      " We are not aware of any concerns that  have been raised about the Corporation\u2019s use of System Support funds to  support the Television Future Fund. Because the statute provides that  System Support monies may be used, if available funding levels permit, for  projects and activities that enhance public broadcasting, the Corporation is  clearly permitted to so use such funds. 47 U.S.C. \u00a7396(k)(3)(A)(i)(II). The  primary question concerning the legality of the Television Future Fund  program involves the use of CSG funds. Specifically the issue is whether  the Corporation may use CSG funds to support the Television Future Fund,",
      "  a competitive grant program that awards grants on the basis of selective,  project-specific criteria. As explained more fully below, we have  determined that the statute does not authorize the Corporation to use these  funds in this manner. The Statutory Framework \u201cThe balance of the portion reserved for television stations... shall be distributed to  licensees and permittees of such stations in accordance with eligibility criteria (which the  Corporation shall review periodically in consultation with public... television licensees or  permittees, or their designated representatives) that promote the public interest in public  broadcasting, and on the basis of a formula designed to\u2014  i.",
      " provide for the financial needs and requirements of stations in relation to the  communities and audiences such stations undertake to serve;   ii. maintain existing, and stimulate new, sources of nonfederal financial support for stations  by providing incentives for increases in such support....\u201d 47 U.S.C. \u00a7396(k)(6)(B).  (Emphasis added.) The next paragraph of the statute further provides that funds distributed  through the above mechanism \u201cmay be used at the discretion of the  recipient for purposes related primarily to the production or acquisition of  programming.\u201d 47 U.S.C. \u00a7396(k)(7) (Emphasis added.) Analysis In our view,",
      " subsection 396(k)(6)(B) does not authorize the Corporation to  establish a competitive grant program using project-focused criteria funded  in part with CSG funds. Although we often defer to an agency\u2019s  interpretation of a statute it is charged to administer, in this instance, the  Corporation\u2019s interpretation of its authority under the statute is neither  consistent with the statute\u2019s language nor the Congress\u2019s policy choice  favoring local, not Corporation, control of the expenditure of CSG funds. Moreover, as implemented by the Corporation, some Television Future  Fund grants have been awarded to nonstation entities. This is in direct  contravention of paragraph (k)(6)(B)",
      " directions that these funds be  distributed to eligible licensees and permittees of public television stations. The difference between our view and that of the Corporation focuses on  whether the \u201celigibility criteria\u201d the Corporation may adopt includes  project-focused criteria that would govern the competitive award of funds  for a particular project or whether the \u201celigibility criteria\u201d the Corporation  may adopt includes only station-based criteria that distinguishes among  public television licensees on the basis of such factors as financial needs,  audience satisfaction, or fundraising effectiveness. According to  Corporation officials, the term \u201celigibility criteria\u201d is broad enough to allow  them, in consultation with the station community,",
      " to adopt not only station  \u201cqualification\u201d criteria but also \u201cselective\u201d project criteria. We disagree.  There are, in our view, several reasons why the Congress did not intend the  Corporation\u2019s authority to establish \u201celigibility criteria,\u201d and the formula  under which CSG funds are disbursed, to mean that the Corporation may  take a portion of CSG funds, pool them with System Support funds, and use  them to make competitive grants only to applicants submitting project  proposals acceptable to the Corporation after review and recommendation  by an advisory panel. First, the language of subsection 396(k)(6)(B) does  not readily support such a reading.",
      " Second, the statutory construct  governing the Corporation\u2019s distribution of funds indicates that the  Congress specifically identified a limited source of funding for  Corporation-approved project-specific grants, which by necessary  implication is the exclusive source of funding for such grants. And third,  the Television Future Fund program runs contrary to the Congress\u2019s  expressed policy favoring local, not Corporation, control of the  expenditure of these discretionary funds. These reasons for our  conclusions are discussed more fully below. permittee of a public television station that is on the air.\u201d 47 U.S.C.  \u00a7396(k)(6)(B). Second, paragraph (6)(B)",
      " directs the balance of the portion  reserved for public television stations to \u201cbe distributed to licensees and  permittees of  stations in accordance with eligibility  criteria... that promote the public interest in public broadcasting.\u201d Id. In  addition, the distribution of such balance shall be \u201con the basis of a formula  designed to\u201d honor station-focused considerations such as their \u201cfinancial  needs and requirements... in relation to the communities and audiences  they serve or the level of, and increases in, nonfederal financial support  received by the stations. The point of paragraph (6)(B) is to direct the  Corporation\u2019s distribution of CSG funds to the licensees and permittees of  public television stations.",
      " While paragraph (6)(B) provides only that the  \u201celigibility criteria\u201d are to \u201cpromote the public interest in public  broadcasting,\u201d the Congress nonetheless directed the distribution of such  funds on the basis of a formula with a pronounced focus on station-based  considerations. Hence, in the context of paragraph (6)(B)\u2019s distribution  mechanism, we believe the phrase \u201celigibility criteria... that promote the  public interest in public broadcasting\u201d can best be read to mean criteria  focusing on the eligibility of licensees and permittees of public television  stations, not project eligibility criteria. activities that will enhance public broadcasting.\u201d Public  Telecommunications Act of 1988,",
      " Pub. L. No. 100-626, 102 Stat. 3207 (1988).  As stated above, by identifying a specific source of funds to be used for  project-based grants, the legislative language suggests that other funds  would not be used for the same purpose. The legislative history supports  the view that the Congress anticipated that these funds would be used for  systemwide projects that benefit the public broadcasting community. licensees and the licensees having \u201cdiscretion\u201d over the use of the funds.The Corporation\u2019s creation of a competitive grant program where it decides  not only who receives a grant but also more importantly the specific  purposes for which the grant funds can be used alters the fundamental  balance of discretion over the use of the funds.",
      " Under the Corporation\u2019s  process, in effect prior to the end of fiscal year 2003, the Request for  Proposal Submission Guidelines and Application (RFP) establishes the  funding initiatives that guide awards for project support. However, the  Corporation reserves the right to fund \u201cotherwise outstanding proposals  based on their individual merits, though they may not necessarily respond  to these priorities but demonstrate a clear response to Fund objectives.\u201d Fiscal Year 2002 RFP. By setting forth what recipients could spend funds  on, the Corporation transferred discretionary authority from each  individual licensee to itself. Faced with the statute\u2019s clear division of roles, the Corporation\u2019s outside  counsel attempts to justify first,",
      " the Corporation\u2019s use of CSG funds to  make project-specific grants and second, that the Television Future Funds  grants are not primarily designated for programming. In our view, the  outside counsel\u2019s conclusion that the Corporation, in consultation with the  stations, \u201cmay\u201d spend funds on projects that will be financially beneficial to  the stations and that will stimulate nonfederal funding is based on two  unsupported assumptions. First, the outside counsel reads paragraph  (k)(6)(B) as providing the Corporation with authority to \u201cspend\u201d CSG  funds. Second, the outside counsel contends that the goals of the formula  design are in essence mandates on how the CSG funds are to be used.",
      " We  see no support for either proposition. Paragraph (k)(6)(B) directs the  Corporation on how CSG funds are to be distributed not on how they are to  be spent. The goals of the formula design also provide guidance on what  criteria the Corporation should consider in distributing funds, but does not  constrain a recipient\u2019s use of CSG funds. Moreover, although the  Corporation\u2019s outside counsel reads paragraph (k)(7) in terms of its  permissive direction, this does not recognize that the subsection  emphasizes the discretion of the recipient to use CSG funds for purposes  related primarily to programming, i.e., for purposes chosen by the  recipient.",
      " (Emphasis added). any person, foundation, institution, partnership, corporation, or other  business whose project is expressly intended to benefit public television.\u201d  Fiscal Year 2002 RFP. Thus, some CSG funds have been awarded to entities  other than licensees or permittees of public television stations. According  to the Corporation, so long as the purpose of the grants is to benefit public  television stations, the award of grants to consultants or other third-party  entities is consistent with the statute. Since consultants and stations often  work together to generate project proposals that are reviewed by a panel  representing a diverse group of stations,",
      " the Corporation\u2019s outside counsel  concludes that the statutory purposes are being fulfilled, regardless of  whose name appears as payee on the Corporation check. Letter from  Stephen A. Weiswasser, July 9, 2003. The difficulty with this approach is  that paragraph (6)(B) directs the Corporation to distribute the balance of  funds reserved for television stations, after deduction of the basic grant, \u201cto  licensees of such stations.\u201d 47 U.S.C. \u00a7396(k)(3)(A)(ii)(I) (Seventy-five  percent of 75 percent remaining after deduction of administrative and  system support funds \u201cshall be available for distribution among the  licensees and permittees of public television stations pursuant to  paragraph (6)(B).\u201d) Accordingly,",
      " in our view, the Corporation may not  distribute CSG funds to a nonstation entity (other than one acting as the  agent for a station or group of stations). Conclusion For the reasons noted above, we find that the Corporation\u2019s funding and  distribution of the Television Future Fund program is not consistent with  the underlying statutory authority under which the Corporation operates. Digital Transition Regulatory Issues of  Concern to Public Television Licensees and others in the public television community maintain that the  ability of licensees to provide a full range of digital services depends, in  part, on regulatory issues related to digital carriage by cable and satellite  system providers.",
      " Many in the public television community believe that  how mandatory carriage obligations are applied to their digital signal is at  the heart of public television\u2019s future. Cable systems are required to carry  local noncommercial educational television stations based upon a cable  system\u2019s number of usable activated channels. Satellite carriers are  required to carry all nonduplicative noncommercial educational television  stations in markets where they provide local-into-local service. These  mandatory carriage requirements are often referred to as \u201cmust carry\u201d  obligations. There are two key issues on how to apply the mandatory carriage  obligations in the digital arena that are of importance to the public  television community.",
      " The first is whether the \u201cmust carry\u201d requirements  apply to both the digital and analog signal during the transition period. In  other words, would a cable provider be required to carry both the analog  and digital signal until the analog spectrum is returned. In a January 2001  Order concerning the carriage of digital television broadcast signals by  cable operators, FCC tentatively concluded, based on the existing record  evidence, that during the transition, a dual must-carry requirement would  burden the cable operator\u2019s First Amendment interests more than is  necessary to further the government\u2019s interests. In this regard, the record  was found insufficient to demonstrate the degree of harm that  broadcasters,",
      " including public television stations, would suffer without  carriage of both signals. In order to ensure that it had sufficient evidence  to fully evaluate this issue, FCC issued a Further Notice of Proposed  Rulemaking. operate on a much more flexible basis that could allow for multiple  streams, or \u201cmulticasting,\u201d of standard definition digital television  programs. Under the statute, a cable operator is required to carry in its  entirety the \u201cprimary video\u201d of the commercial broadcast station.According to FCC, largely parallel provisions are contained in the statute  relating to carriage of noncommercial stations. Although FCC recognized  that the term \u201cprimary video\u201d was susceptible to different interpretations,",
      "  FCC concluded that, based on the available record, the term \u201cprimary  video\u201d means a single programming stream and other program-related  content. In its Further Notice of Proposed Rulemaking, FCC sought  comment on the appropriate parameters for \u201cprogram-related\u201d in the digital  context. FCC also raised questions concerning the applicability of the rules  and policies it adopted in the above cited Order to satellite carriers. Public  television stations and other broadcasters have asked FCC to reconsider its  ruling, and a decision on this request is pending. As our own survey of licensees shows, there is a very strong consensus  among licensees that the lack of dual carriage of analog and digital signals  by cable companies,",
      " as well as a lack of cable carriage of the entire digital  over the air stream such as multicast offerings are seen as factors impeding  public television\u2019s digital transition. Additionally, there is a strong  consensus that lack of carriage of local stations\u2019 digital signals by direct  broadcast satellite (e.g., DISH Network, DIRECTV), would produce  similarly negative results (see fig. 23). freedom of speech restrictions and a governmental limitation on cable  television providers\u2019 right to decide what services they provide. Absent changes to FCC\u2019s ruling on these issues, some in the public  television community have taken the position that they \u201cmust convince\u201d  cable and satellite providers that the digital services offered by public  television are valuable additions for their customers and,",
      " therefore, should  be carried by them. Underwriting Acknowledgments on Public  Television One of the distinguishing features of public television is, by definition, its  noncommercial character. Unlike commercial television stations, public  television stations are prohibited from airing advertisements. However,  public television stations are permitted to acknowledge station supportand, without interrupting regular programming, may acknowledge  underwriters on the air. Dating back to the initial decision to reserve  spectrum for noncommercial educational broadcast television, FCC  rejected proposals to allow noncommercial educational licensees the  ability to generate revenues through advertising sales and frequency  sharing with commercial broadcasters. In 1981,",
      " as part of a \u201cmajor\u201d  reevaluation of the noncommercial educational broadcast service, FCC  reaffirmed its rejection of advertising on public television, concluding that  advertiser-supported programming of any kind could harm the service.  FCC\u2019s 1981 policy statement on the nature of public broadcasting states  that the Commission\u2019s interest in creating a noncommercial service in 1951  was to remove the programming decisions of public broadcasters from the  normal kinds of market pressures faced by commercial broadcasters. FCC  noted, however, that acknowledgments of funders are \u201cproper\u201d and  possibly necessary to ensure continued funding from such sources. public broadcasting,",
      " and to conduct demonstrations of limited advertising  for the purpose of \u201creduc the uncertainty about the advantages and  disadvantages accompanying public broadcast station\u2019s use of limited  commercial advertising or expanded underwriting credits.\u201d In its 1983  Report to the Congress, the Temporary Commission concluded that  potential revenues from advertising were limited in scope and that the  avoidance of significant risks to public broadcasting could not be ensured.  In addition, it recommended that the Congress continue to provide federal  funding for public broadcasting until or unless adequate alternative  financing becomes available. Under current law, the Communications Act defines a \u201cnoncommercial  educational broadcast station\u201d and \u201cpublic broadcast station\u201d as a  television or radio broadcast station that under the rules and regulations of  the Commission in effect on November 2,",
      " 1978, is eligible to be licensed as  a station that is \u201cowned and operated by a public agency or nonprofit  private foundation, corporation or association\u201d or \u201cis owned and operated  by a municipality and which transmits only noncommercial programs for  educational purposes.\u201d For our purposes here, the act defines  \u201cadvertisements\u201d as any message or other programming material that is  broadcast or otherwise transmitted \u201cin exchange for any remuneration\u201d  and is intended to \u201cpromote any service, facility, or product\u201d of for-profit  entities. As noted above, the act permits public broadcasting stations to  provide facilities and services for remuneration so long as those uses do  not interfere with stations\u2019 provision of public telecommunications  services;",
      " the act also prohibits stations from making their facilities  \u201cavailable to any person for the broadcasting of any advertisement.\u201d identification purposes only. Such acknowledgments may not promote the  contributors\u2019 products, services, or business, and may not contain  comparative or qualitative descriptions, price information, calls to action,  or inducements to buy, sell, rent, or lease. No limitation, however, was  adopted on the length of acknowledgments. Recognizing that it may be  difficult to distinguish between language that \u201cpromotes\u201d and language that  merely \u201cidentifies\u201d an underwriter, broadcasters must make \u201creasonable  good faith judgments\u201d to exclude language or visual elements in their  acknowledgments that promote the contributors\u2019 products,",
      " services, or  business. Consistent with the identification of underwriters, FCC has  determined that acknowledgments may include, in addition to the  underwriter\u2019s name, the following identifying information:  logo-grams or slogans which identify and do not promote,  location information and telephone numbers, value neutral descriptions of a product line or service, and/or brand and trade names and product or service listings. According to FCC, enforcement primarily occurs through self-policing by  licensees of public television stations and also by the Commission\u2019s  response to complaints. For the period from January 2000 through early  February 2004,",
      " FCC had 43 complaint cases. Thirteen of the complaints  were denied or dismissed, 17 complaints resulted in admonishments or  cautions, and 2 resulted in notices of apparent liability. Eleven others were  under investigation. distributed programs may be identified on air. The acceptance of program  funding from third parties, the guidelines state, are intended to ensure that  editorial control of programming remains in the hands of program  producers, that funding arrangements will not create the perception that  editorial control has been exercised by someone other than the producer,  and that the noncommercial character of public broadcasting is protected  and preserved. PBS guidelines also specify that the maximum duration for  all underwriter acknowledgments may not exceed 60 seconds and  generally that the maximum duration for a single underwriter not exceed  15 seconds.",
      " Other national distributors of public television programming,  such as American Public Television and the National Educational  Telecommunications Association, also have guidelines with similar  acknowledgment length limitations. The PBS Board adopted an exception  to its guidelines in February 2003. As modified, the maximum duration for  one underwriter may not exceed 30 seconds within a 60-second maximum  interval for all acknowledgments. This applies only to underwriters that  contribute $2.5 million or more per year for the production of PBS\u2019s prime  time programming and the NewsHour with Jim Lehrer. In our survey of licensees, we asked several questions related to the airing  of 30-second underwriting acknowledgments by licensees themselves and  not those aired as part of PBS programming.",
      " The percentage of licensees  that said they are currently airing 30-second acknowledgments (41 percent)  was equal to the percentage of licensees that said that they neither air, nor  plan to air, 30-second underwriting acknowledgments. An additional 9  percent of the licensees responded that they intend to air 30-second  acknowledgments in the future. Figure 24 illustrates the responses of  licensees to this question. Of the respondents who told us that they are currently airing 30-second  acknowledgments, the earliest date provided for the first airing of such  acknowledgments was 1982. We also asked licensees who currently air or plan to air 30-second  acknowledgments to prioritize the reasons for such decisions.",
      " For both  groups of licensees, the highest priority identified was to attract new  underwriters\u201456 percent of those that already air 30-second  acknowledgments and 69 percent of those that plan to air 30-second  acknowledgments. For both groups, maintaining revenues from existing  underwriters was the second most frequently identified top priority. Only 5  percent of those that currently air such acknowledgments and 8 percent of  those that plan to air such acknowledgments identified increasing revenues  from existing underwriters as their highest priority. These responses are  illustrated in figure 25. In response to our question as to whether licensees would favor or oppose  a federal requirement that limits the length of underwriting  acknowledgments,",
      " 71 percent said they oppose a requirement, and 22  percent said they favor a federal requirement (see fig. 26). to the length of acknowledgments in order to attract underwriting  support and to further the mission of public television. Survey of Public Television Licensees Our survey of public television licensees consisted of objective questions  and the option to include narrative comments in each section of the survey.  The aggregate results of objective questions are presented below.  We  received completed surveys from 149 out of 176 licensees\u2014an overall  response rate of 85 percent.  The number of respondents answering  individual questions may be lower,",
      " however, depending on the number of  licensees who were eligible to answer a particular question or who chose to  do so.  Each question indicates the number of licensees responding to it. Q1. Do you think the current 75% / 25% allocation of the federal funds supporting public television should remain the same or be changed? Allocation\u00a0should\u00a0 Allocation\u00a0should\u00a0be\u00a0 changed\u00a0remain\u00a0the\u00a0same\u00a0 (percent)\u00a0(percent) Don't\u00a0know\u00a0 (percent) Q2. Please provide the reasons for your answer and, if you think the allocation should be changed, describe what the allocation should be.",
      " Q3. Were you aware of the consultation process that was conducted in 2001 to review the eligibility criteria for Community Service Grants? I\u00a0was\u00a0not\u00a0 associated\u00a0with\u00a0a\u00a0 station\u00a0during\u00a0the\u00a0 2001\u00a0consultation\u00a0 process\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q4. During the 2001 consultation process, to what extent did CPB solicit input from your station(s) on the Community Service Grant  eligibility criteria? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Q5. During the 2001 consultation process,",
      " to what extent did your station(s) provide CPB with input on the Community Service Grant  eligibility criteria? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q6. To what extent do you think CPB considered input from your station(s) on the Community Service Grant eligibility criteria? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q7. Overall, are you basically satisfied with the process used by CPB to periodically review the eligibility criteria for Community Service  Grants or do you think changes are needed?",
      " Substantial\u00a0 changes\u00a0are\u00a0 needed\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q8. Please explain what changes you think are needed. Q9. To what extent do you know about the outcomes or findings of CPB Television Future Fund projects? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q10. How have you learned about the outcomes or findings of CPB Television Future Fund projects? Yes\u00a0 (percent) No\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q10a. Please describe other ways,",
      " if any, you have learned about outcomes or findings of CPB Television Future Fund projects. Q11. Have the outcomes or findings of any CPB Television Future Fund project provided your station(s) with practical methods for either  reducing costs or enhancing revenues? No\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q11a. If you answered yes to either above, please provide examples or the name(s) of one or more project(s). Q12. Do you agree with CPB's current approach of using the funds allocated for distribution among public television licensees to fund the  Television Future Fund or would you prefer an alternate approach,",
      " such as using funds from a different source? I\u00a0prefer\u00a0using\u00a0only  the\u00a0System\u00a0Support\u00a0 account\u00a0as\u00a0an\u00a0 alternate\u00a0approach  of\u00a0funding\u00a0the  Television\u00a0Future\u00a0 Fund.\u00a0 (percent) I\u00a0prefer\u00a0using\u00a0other\u00a0 sources\u00a0of\u00a0funds\u00a0as\u00a0an\u00a0 alternate\u00a0approach\u00a0of\u00a0 funding\u00a0the\u00a0Television\u00a0 Future\u00a0Fund\u00a0(please\u00a0 describe\u00a0below).\u00a0 (percent) CPB\u00a0should\u00a0 not\u00a0fund\u00a0the\u00a0 Television\u00a0 Future\u00a0Fund.\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q13.",
      " Please provide the reasons for your answer to Question 12. Q14. To what extent do the children's programs offered by PBS's National Program Service help you to meet the mission of your  station(s)? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) My\u00a0station\u00a0is\u00a0 not\u00a0a\u00a0member\u00a0 of\u00a0PBS\u00a0 (percent) Q15. Please provide the reasons for your answer to Question 14. Q16. To what extent do the prime-time programs offered by PBS's National Program Service help you to meet the mission of your  station(s)? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent)",
      " Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q17. Please provide the reasons for your answer to Question 16. Q18. To what extent do the children's programs offered by PBS's National Program Service help you to build local underwriting and  membership support? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q19. Please provide the reasons for your answer to Question 18. Q20. To what extent do the prime-time programs offered by PBS's National Program Service help you to build local underwriting and  membership support?",
      " To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q21. Please provide the reasons for your answer to Question 20. Q22. Do you believe that changes are needed to the processes involved in selecting programming for PBS's National Program Service? Don't\u00a0know\u00a0 (percent) Q23. Please provide your comments on any program selection issues that are of concern to you. Q24. Should CPB continue to provide direct funding to support the PBS National Program Service (as it exists today)? Don't\u00a0know\u00a0 (percent) Q25.",
      " Please provide the reasons for your answer to Question 24. Q26. Is the amount of local programming that you produce sufficient to meet the needs of your community? No,\u00a0the\u00a0amount\u00a0of\u00a0local\u00a0 programming\u00a0is\u00a0sufficient\u00a0to\u00a0meet\u00a0 programming\u00a0is\u00a0not\u00a0sufficient\u00a0to\u00a0 the\u00a0needs\u00a0of\u00a0our\u00a0community.\u00a0 meet\u00a0the\u00a0needs\u00a0of\u00a0our\u00a0community.\u00a0 (percent)\u00a0(percent) Don't\u00a0know\u00a0 (percent) Q27. Please provide the reasons for your answer to Question 26. Q28. In addition to CPB's current statutory authority to support the production of national programming,",
      " should CPB have explicit statutory  authority to award station grants for the production of local programming? No\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q29. Assuming CPB's statutory authority to award station grants for local programming would require the use of funds that currently  support national programming, would you still favor this authority? No\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q30. Please provide the reasons for your answer to Question 29. Q31. In addition to or in conjunction with television broadcasting, do you currently provide each of the following local services to your  community? Yes\u00a0 (percent)",
      " No\u00a0 (percent) Don't\u00a0know\u00a0 (percent) a. Services to support pre-school through 12th grade  education  c. Services to support workforce training, professional  development, and/or continuing education  d. Television program-related outreach (e.g., additional  program-related material on station's own website,  sponsoring workshops and discussion groups about  programs, community partnerships, PBS toolkits)  e. Services to support local, state, and/or federal  government agencies (e.g. National Weather Service,  Homeland Security) Q31a. Please describe other services, if any, you provide to your community in addition to or in conjunction with television broadcasting.",
      " Q32. What types of services does (at least one of) your station(s) currently provide, or plan to provide after transitioning to digital? Currently\u00a0 provide\u00a0 (percent) Don't\u00a0provide\u00a0 Plan\u00a0to\u00a0 and\u00a0don't\u00a0plan\u00a0 to\u00a0provide\u00a0 (percent)\u00a0 provide\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q32a. Please describe other services, if any, you plan to offer. Q33. Do you currently provide, or are you likely to provide after transitioning to digital, revenue-generating ancillary and supplementary  non-broadcast services to nonprofit entities? Don't\u00a0know\u00a0 (percent)",
      " Q34. Do you currently provide, or are you likely to provide after transitioning to digital, revenue-generating ancillary and supplementary  non-broadcast services to for-profit entities? Don't\u00a0know\u00a0 (percent) Q35. Were you aware of the consultation process conducted by CPB on the allocation of fiscal year 2003 digital television funding? Don't\u00a0know\u00a0 (percent) Q36. To what extent did CPB solicit input from your station(s) on the allocation of fiscal year 2003 digital television funding? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent)",
      " Q37. To what extent did your station(s) provide CPB with input on the allocation of fiscal year 2003 digital television funding? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q38. To what extent do you think CPB considered input from your station(s) on the allocation of fiscal year 2003 digital television funding? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q39. Overall, are you basically satisfied with the consultation process used by CPB to allocate fiscal year 2003 digital television funding?",
      " Substantial\u00a0 changes\u00a0are\u00a0 needed\u00a0 (percent) Q40. Please explain what changes you think are needed. Q41. How would you currently prioritize the use of any additional federal funding to support your station(s) during the digital transition?  %\u00a0Ranking\u00a01\u00a0 %\u00a0Ranking\u00a02\u00a0 %\u00a0Ranking\u00a03\u00a0 %\u00a0Ranking\u00a04\u00a0 %\u00a0Ranking\u00a05\u00a0 (percent)\u00a0(percent)\u00a0(percent)\u00a0(percent)\u00a0(percent) Q42. Is your digital master control equipment fully compatible with the EIOP (for all of your stations)? No,\u00a0not\u00a0fully\u00a0 compatible,",
      "\u00a0 and\u00a0our\u00a0 capabilities\u00a0 materially\u00a0 affected\u00a0 (percent) Don't\u00a0have\u00a0 will\u00a0be\u00a0 digital\u00a0master\u00a0 control\u00a0 equipment\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q43. Is your digital production equipment fully compatible with the EIOP (for all of your stations)? No,\u00a0not\u00a0fully\u00a0 compatible,\u00a0 and\u00a0our\u00a0 capabilities\u00a0 will\u00a0be\u00a0 materially\u00a0 affected\u00a0 (percent) Don't\u00a0have\u00a0 digital\u00a0 production\u00a0 equipment\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q44. Is your digital storage equipment fully compatible with the EIOP (for all of your stations)? No,",
      "\u00a0not\u00a0fully\u00a0 compatible,\u00a0 and\u00a0our\u00a0 capabilities\u00a0 will\u00a0be\u00a0 Don't\u00a0have\u00a0 materially\u00a0 digital\u00a0storage\u00a0 equipment\u00a0affected\u00a0 (percent)\u00a0(percent) Don't\u00a0know\u00a0 (percent) Q45. Please use the box below to describe any other comments on the Next Generation Interconnection System or the Enhanced  Interconnection Optimization Project. Q46. To what extent will completion of the digital transition improve the ability of your station(s) to provide local services to your  community? To\u00a0a\u00a0little\u00a0 extent\u00a0 (percent) Not\u00a0at\u00a0all\u00a0 (percent) Don't\u00a0know\u00a0 (percent)",
      " Q47. Please describe how the ability of your station(s) to provide local services will or will not improve with the digital transition. Q48. Could any of the following digital carriage issues impede your station's future if not resolved during the digital transition? Yes\u00a0 (percent) No\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q48a. Please list other digital carriage issues, if any, that will impede your station's future if not resolved during the digital transition. Q49. Aside from acknowledgements included as part of PBS's National Program Service, do you currently run or plan to run 30-second  underwriter acknowledgements on your station(s)? Yes,",
      "\u00a0I\u00a0plan\u00a0to\u00a0run\u00a0 30-second\u00a0 underwriter\u00a0 acknowledgements\u00a0 acknowledgements\u00a0 (percent)\u00a0(percent) No,\u00a0I\u00a0do\u00a0not\u00a0run\u00a0and\u00a0 do\u00a0not\u00a0plan\u00a0to\u00a0run\u00a0 30-second\u00a0 underwriter\u00a0 acknowledgments\u00a0 (percent) Don't\u00a0know\u00a0 (percent) Q50.  In what year did you begin to run 30-second underwriter acknowledgements? (Enter a 4 digit number only. Letters and symbols will  be deleted.) Q51. How did you prioritize your reasons for deciding to run 30-second underwriter acknowledgements?",
      " %\u00a0Ranking\u00a01\u00a0 %\u00a0Ranking\u00a02\u00a0 %\u00a0Ranking\u00a03\u00a0 (percent)\u00a0(percent)\u00a0(percent) Q52. How would you prioritize your reasons for your plans to run 30-second underwriter acknowledgements?  %\u00a0Ranking\u00a01\u00a0 %\u00a0Ranking\u00a02\u00a0 %\u00a0Ranking\u00a03\u00a0 (percent)\u00a0(percent)\u00a0(percent) Q53. Would you favor or oppose a federal requirement that limits the length of underwriter acknowledgements? Oppose\u00a0a\u00a0federal\u00a0 requirement\u00a0that\u00a0 limits\u00a0the\u00a0length\u00a0of\u00a0 underwriter\u00a0 acknowledgements\u00a0 acknowledgements\u00a0 (percent)",
      "\u00a0(percent) Don't\u00a0know\u00a0 (percent) Q54. Please provide the reasons for your answer to Question 53. Q55. If there are other issues that you would like to raise, or if you would like for GAO staff to be in contact with you to discuss in greater  detail issues included in this survey, please use the space below to identify those issues and/or provide your contact information. Comments from the Corporation for Public  Broadcasting The following are GAO\u2019s comments on the Corporation for Public  Broadcasting\u2019s letter dated March 12, 2004. GAO Comments 1. Our legal opinion on this issue remains unchanged.",
      " See our comments  below on the attached legal memorandum from Covington and Burling.  The Corporation notes that its ability to support projects designed to  improve the system as a whole could decrease if it had to depend only  on system support funds. We recognize the Corporation\u2019s concern.  However, we continue to believe that this is a matter that should be  addressed to the Congress. 2. The point of the cited paragraph of our report is limited to historical  background and is not a characterization of congressional commitment  to public television. To restate, when the Public Broadcasting Act of  1967 was passed, annual congressional appropriations were seen as a  temporary measure pending the development and adoption of a long\u00ad term financing plan for public broadcasting.",
      " Absent the development of  such a plan, the Congress has in fact continued to support public  broadcasting with annual appropriations at the levels indicated in  figure 3. We agree with the Corporation that when the Congress  deferred the development of a long-term financing plan at the time the  1967 act was passed, it did not intend that federal funding for the  Corporation would be discontinued. Congressional committee reports  accompanying the 1967 legislation and subsequent reauthorization  legislation suggest the need for ongoing federal funding to enable the  Corporation to fulfill its mission. 3. We do not agree with the Corporation that our report implies that its  policy decisions should be made on the basis of our survey of licensees.",
      "  Although we recognize that the views of licensees are, by statute and in  practice, central to the making of policy decisions by the Corporation,  the survey served as only one source of evidence for our review. We  determined that it was important to ascertain the views of licensees  because we believe they are integral to the discussion of the statutory  framework for federal support of public television and the  Corporation\u2019s funding programs and processes. The findings,  conclusions, and recommendations in this report are based on several  methodologies we employed to review the Corporation\u2019s activities in  support of public television (as described in app. I) including,",
      " but not  limited to, the survey of public television licensees. President, General Counsel and Corporate Secretary of the Corporation  for Public Broadcasting to Mindi Weisenbloom, Senior Attorney,  General Accounting Office, dated August 11, 2003.  6. \t Our review did not examine whether the make-up of the Television  Future Fund advisory panels have adequately represented a cross\u00ad section of the public broadcasting community. We note that the  Corporation intends to change the composition of the advisory panel to  ensure a greater representation from across the station community. It  also appears that the Corporation envisions that the panel will operate  more as an investment board than as a consultation panel.",
      " Although the  Corporation contends that the Future Fund plan has been regularly  placed before the constituent elements of public broadcasting, our  survey of public television licensees indicates a number of concerns  about the program. For example, 42 percent of the respondents to our  survey indicated that they had little or no knowledge about the findings  and outcomes of Television Future Fund projects. Overall, only 41  percent of licensees responding to our survey indicated that the  projects had provided them with practical methods for reducing costs  and/or enhancing revenues. The Corporation\u2019s approach for funding the  Television Future Fund program was another area identified in our  survey as a concern for licensees.",
      " Only 30 percent of the responding  licensees indicated that they favored the current funding approach, and  one-fifth of our survey respondents indicated that the Corporation  should cease all funding for the program.  7. \t We agree that nothing in the statute suggests that the Corporation\u2019s role  is passive. Section 396(k)(6)(B) provides the Corporation with  discretion to establish eligibility criteria and a formula for the  distribution of funds reserved by the Congress for public television to  the licensees. However, this discretion must be exercised within the  constraints of the provision. The Corporation must periodically review  its eligibility criteria with the station community,",
      " and the formula must  be designed to provide for the financial needs and requirements of  stations and to maintain existing, and stimulate new, sources of  nonfederal financial support. More importantly, the provision provides  that the funds are to be distributed to licensees. Thus, under the plain  meaning of the provision, these funds are not available for the  Corporation\u2019s use or for the Corporation to decide how the licensees  may use the funds. Nor are the funds available for distribution to  entities other than the licensees themselves. 8. \t The statute specifies that it is the recipients of the funds, in other words  the public television licensees,",
      " who have discretion over the use of  these funds. Specifically, section 396(k)(7) provides that these funds  \u201cmay be used at the discretion of the recipient for purposes related  primarily to the production or acquisition of programming.\u201d  9. \t GAO is not suggesting that the Corporation \u201cpick and choose\u201d stations  for grants. Rather, under the plain meaning of section 396(k)(6)(B), the  Corporation is to distribute the funds reserved to television stations on  the basis of eligibility criteria and a formula. And under the plain  meaning of section 396(k)(7), it is the licensees who have the discretion  over the use of these funds within the constraints of the statute.",
      " The  Congress has directed that the 396(k)(6)(B) funds be used \u201cfor  purposes related primarily to the production or acquisition of  programming.\u201d  10.  We disagree that the Congress has ratified the Corporation\u2019s use of  section 396(k)(6)(B) funds for the purposes of the Future Fund by  continuing to make funds available for distribution under section  396(k)(6)(B). \u201cRatification by appropriation\u201d is the doctrine by which  the Congress can, by the appropriation of funds, confer legitimacy on  any agency action that was questionable when it was taken. However,  this doctrine is not favored and will not be accepted where prior  knowledge of the specific disputed action cannot be demonstrated  clearly.",
      " GAO summarized the test courts have used to find ratification  by appropriation in B-285725, September 29, 2000. \u201cTo conclude that Congress through the appropriations process has ratified agency  action, three factors generally must be present. First, the agency takes the action  pursuant to at least arguable authority; second, the Congress has specific knowledge of  the facts; and third, the appropriation of funds clearly bestows the claimed authority.\u201d All three elements are missing here. The Corporation does not have the  authority to use funds designated for distribution to public television  licensees to support the Future Fund. The Congress has not clearly  been informed that the Future Fund is supported in part with section  396(k)(6)(B)",
      " funds. Finally, the Congress has not in any way indicated  that the funds it has provided to the Corporation for public television  licensees may be used to support the Television Future Fund.  Accordingly, \u201cratification by appropriation\u201d is not applicable in this  instance. exercise their discretion over the use of their funds to contribute to  such efforts.  14.  As stated in the report, under the plain meaning of the statute, section  396(k)(6)(B) directs the Corporation to distribute the balance of funds  reserved for television stations, after deduction of the basic grant, \u201cto  licensees of such stations.\u201d Thus,",
      " the Corporation does not have the  discretion to distribute these funds to other than public television  licensees even if the purpose of the grant is to ultimately benefit public  television stations. Comments from the Public Broadcasting  Service The following are GAO\u2019s comments on the Public Boardcasting Service\u2019s  letter dated March 15, 2004. GAO Comments We have edited language in the report to clarify that the funds needed to  complete the Enhanced Interconnection Optimization Project of $12  million to $15 million are separate from those to purchase the Next  Generation Interconnection System. Key Contacts and Staff Acknowledgments GAO Contacts Staff \t Acknowledgments In addition to those named above,",
      " Dennis Amari, Alan Belkin,  Edda Emmanuelli-Perez, Colin Fallon, Michele Fejfar, Kevin Heinz, Logan Kleier, Randall Lennox, Omari Norman, Tina Sherman, Mindi Weisenbloom,  and Alwynne Wilbur made key contributions to this report. GAO\u2019s Mission The General Accounting Office, the audit, evaluation and investigative arm of  Congress, exists to support Congress in meeting its constitutional responsibilities  and to help improve the performance and accountability of the federal government  for the American people. GAO examines the use of public funds; evaluates federal  programs and policies;",
      " and provides analyses, recommendations, and other  assistance to help Congress make informed oversight, policy, and funding  decisions. GAO\u2019s commitment to good government is reflected in its core values of  accountability, integrity, and reliability. Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost is  through the Internet. GAO\u2019s Web site (www.gao.gov) contains abstracts and full\u00ad text files of current reports and testimony and an expanding archive of older  products. The Web site features a search engine to help you locate documents  using key words and phrases.",
      " You can print these documents in their entirety,  including charts and other graphics. Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as \u201cToday\u2019s Reports,\u201d on its Web site  daily. The list contains links to the full-text document files. To have GAO e-mail this  list to you every afternoon, go to www.gao.gov and select \u201cSubscribe to  e-mail alerts\u201d under the \u201cOrder GAO Products\u201d heading. Order by Mail or Phone To Report Fraud,  Waste, and Abuse in  Federal Programs Public Affairs\n"
    ],
    "length": 27328,
    "hardness": null,
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  },
  {
    "id": 109,
    "question": null,
    "answer": "Pursuant to a congressional request, GAO reviewed the creation of a drug class that would be available only through pharmacies, but would not require a physician's prescription, focusing on: (1) studies and reports on the development, operation, and consequences of different drug distribution systems; (2) the drug distribution systems in 10 selected countries; (3) how access to nonprescription drugs varies between the selected countries and the United States; (4) how pharmacists ensure the proper use of nonprescription drugs; and (5) the U.S. experience with pharmacists dispensing drugs without a prescription. GAO found that: (1) available evidence shows that there are no major benefits from establishing a class of pharmacist-controlled nonprescription drugs; (2) studies have not attempted to link different drug distribution systems with differences between the countries' health care costs, adverse drug reactions, and quality of care; (3) the two-tier system in the United States is unique, since all other countries have at least one intermediate class of drugs; (4) although all 10 countries restrict some or all sales of nonprescription drugs, they do not use the pharmacy or pharmacist drug class to assess the drugs' suitability for sale outside of pharmacies; (5) the European Union has decided not to impose any particular drug distribution system on its members, since no system has proved to be superior; (6) there is no clear pattern of increased or decreased access to nonprescription drugs where an intermediate class of drugs exists; (7) the countries' safeguards to prevent drug misuse and abuse are easily circumvented and pharmacist counseling is infrequent and incomplete; (8) pharmacists are rarely required to keep records on drug use and none are required to report adverse reactions; and (9) Florida's unsuccessful experience with a similar class of drugs was due to pharmacists' failure to regularly prescribe these drugs, give patients adequate counseling, or follow recordkeeping requirements.\n",
    "docs": [
      "Introduction In the United States, there are essentially two categories of drugs for distribution: prescription and nonprescription. Nonprescription drugs are often referred to as over-the-counter (OTC) medications (the terms are used interchangeably in this report). The term \u201cprescription\u201d has several meanings but generally refers to the order of a physician to a pharmacist for the delivery of certain medications to a patient. A prescription drug may be dispensed to a patient only on the basis of such an order. Nonprescription drugs are available for general sale without a prescription by self-service in pharmacies and in nonpharmacy outlets such as grocery stores, mass merchandisers,",
      " gas stations, and restaurants. The principal factors used to determine the prescription or nonprescription status of drugs are the margin of safety, method of use and collateral measures necessary to use, benefit-to-risk ratio, and adequacy of labeling for self-medication. Nonprescription drug sales were over $13 billion in 1992 and may reach $18 billion by the end of 1995 or 1996 (Covington, 1993, p. xxv). The importance of these medicines is growing, partly as a result of the reclassification of some commonly used drugs from prescription to nonprescription status. The two-tier system in the United States is unusual.",
      " Other countries typically have either more or different categories. There can be limitations on where and by whom a nonprescription drug can be sold. In some countries, the sale of some or all nonprescription drugs is restricted to pharmacies. Additionally, in some countries, certain nonprescription products have to be dispensed personally by a pharmacist. The 1951 Durham-Humphrey Amendment to the Federal Food, Drug, and Cosmetic Act of 1938 provided the statutory basis for the two-tier drug classification system in the United States. Since that time, there have been a number of proposals to introduce a third category of drugs in the United States.",
      " These proposals have been called by a number of names, including pharmacist-legend, pharmacist-only, third class of drugs, and transition class. Although there is some variation between them, the basic idea is the same: a class of drugs would be established that would be available only in pharmacies but no prescription would be needed. One variation is that the pharmacist would have to be personally involved in the sale of a drug in this class; a sales clerk could not sell the drug without the permission of the pharmacist. (For additional information on the history of this issue in the United States, see appendix I.) There are two general views on how an additional class of drugs would be used in the United States.",
      " The first, and the one advocated in the past by various pharmacist organizations such as the American Pharmaceutical Association (APhA) and the California Pharmacists Association, sees it as a permanent class. It would be similar to the current classes in that drugs would be placed in the class with no expectation that they would eventually be moved to the prescription or nonprescription class. Drugs in the new class would be thought not to be appropriate for use without some supervision by a health professional but a physician\u2019s oversight would not be necessary. Drugs in this middle class could come from either the prescription or nonprescription classes, although it is generally believed that they should come from the prescription class.",
      " Opponents of this proposal have included the Nonprescription Drug Manufacturers Association (NDMA) and the American Medical Association (AMA). The second, advocated first in 1982 by the National Association of Retail Druggists (NARD) and currently supported by such groups as APhA and the National Consumers League, sees the intermediate class as a transition class. A drug that was being switched from prescription to nonprescription status would spend a period of time in the transition class, during which the suitability of the drug for general sale could be assessed. The assessment could be based not only on experiences with the drug as a prescription product (as is currently done)",
      " but also on experiences with the drug in the transition class, where it would not be limited to prescription sale. The argument is that this would give a better picture of how the drug would be used if it were available for general sale (that is, without a prescription and outside of pharmacies). Information that could be gathered while the drug was in the transition class includes types and levels of misuse among the general public, incidents of adverse drug reactions, and interactions with other medications. At the end of a specified period, the Food and Drug Administration (FDA) would decide to switch the drug to the general sale class, return the drug to prescription status,",
      " or keep the drug in the transition class for further study. This proposal has also been opposed by, among others, NDMA and AMA. The effect of an intermediate class of drugs in the United States would depend on whether the drugs in it would come from the prescription or general sale class. Figure 1.1 illustrates the several ways an intermediate drug class might function in the United States. Arguments for and Against an Intermediate Class of Drugs Arguments for and against an intermediate class of drugs fall into two general (but sometimes related) categories: health and economic. Table 1.1 lists some of the arguments that have been put forth in support of and opposition to an intermediate class of drugs.",
      " Most of the arguments are relevant for both a fixed and a transition class. The principal difference between a fixed and a transition class is not the benefits and costs that would ensue but their goals. The goal of a transition class in the United States would be to facilitate the movement of drugs into the general sale category. The goal of a fixed class would be to place drugs permanently in the class. Many of the arguments for an intermediate class of drugs suggest that the quality of health care would improve if pharmacists\u2019 involvement were greater. Proponents such as APhA argue that pharmacists are well trained in pharmacology and that their expertise is underused.",
      " They could play an important role in improving drug use. It is argued further that making use of this expertise is especially important for recently switched drugs whose potential for widespread abuse and toxicity is great. In the case of a transition class, Penna (1985) writes that pharmacists would be in a position to aid FDA in its switch decisions by maintaining records of the medications they dispense and by providing access to them to researchers assessing the safety and efficacy of these drugs. They might also be encouraged or required to report adverse drug reactions and be involved in postmarketing evaluation studies. Currently, FDA derives this information only from the use of drugs as prescription products.",
      " Some arguments against an intermediate class of drugs come from industry officials who have argued that while pharmacists have useful information to pass on to consumers, an intermediate class is not necessary for tapping into it. If customers are interested in getting advice from pharmacists, they can go to a pharmacy and ask for it but are not forced to do so. They also note some difficulties with an increased role for pharmacists. Counseling for nonprescription products is infrequent and sometimes inappropriate, and they argue that this would not change with the establishment of an intermediate class of drugs. In addition, consumers use nonprescription drugs responsibly. They read and understand drug labels.",
      " There is nothing for the pharmacist to add. NDMA agrees that pharmacists are well-trained in pharmaceuticals but believes that they are not trained in other roles\u2014in particular, diagnosing illnesses (NDMA, 1992). Only physicians have this training and should be performing this role. Improper diagnosis could lead to treating symptoms rather than the underlying cause of an illness. Finally, opponents argue that the current two-tier system works well (NDMA, 1992). It is simple and effective. Either a drug is safe enough to be taken without medical supervision or it is not. There is no need for an intermediate class of drugs. Objectives,",
      " Scope, and Methodology Objectives To find out whether there would be significant advantages to creating an additional class of drugs, the Ranking Minority Member of the House Committee on Commerce asked us to examine the operation of drug distribution systems in 10 countries that have a pharmacist or pharmacy class of drugs and to compare these systems with that in the United States. To respond to this request, we posed specific evaluation questions: 1. What conclusions can be drawn from studies or reports on the development, operation, and consequences of different multiple-classification drug distribution systems? 2. What are the drug distribution systems for the 10 countries? 3. What drug distribution will be implemented in the European Union?",
      " 4. How does access to nonprescription drugs vary between the study countries and the United States? 5. How do pharmacists ensure the proper use of nonprescription drugs? 6. What is the U.S. experience with dispensing drugs without a physician\u2019s prescription but only by pharmacists? Our purpose was to learn generally about factors that affect drug distribution in other countries and, in particular, about the perceived costs and benefits of a pharmacist or pharmacy class of drugs. This can raise important issues about the desirability or usefulness of such a class of drugs in the United States. By studying other countries, it is possible to bring empirical data to the debate.",
      " Scope We examined the drug distribution systems in Australia, Canada, Denmark, France, Germany, Italy, the Netherlands, Sweden, Switzerland, and the United Kingdom. (See appendix II.) As requested, we also studied the harmonized system for the members of the European Union (EU). We examined the classification of the following 14 drugs: aspirin, cimetidine, codeine, diclofenac, diflunisal, ibuprofen, indomethacin, naproxen, phenylpropanolamine, promethazine, ranitidine, sulindac, terfenadine, and theophylline.",
      " (See appendix III and IV.) We chose these drugs because they either are past switches or have been suggested as candidates for switching in the United States or another country. We focused on an intermediate class of drugs as it has generally been discussed in the United States and practiced in other countries\u2014that is, a class of nonprescription drugs available only in pharmacies or from a pharmacist. We did not assess the more general notion of pharmaceutical care, although we discuss it briefly in chapters 4 and 5. An intermediate class of drugs might be considered one form of pharmaceutical care. While some arguments and evidence regarding pharmaceutical care are therefore relevant for an intermediate class of drugs,",
      " a complete evaluation of pharmaceutical care was beyond our scope. Methodology To determine what is known about the operation of drug distribution systems that include a pharmacist or pharmacy class of drugs, we examined extant information and gathered expert opinion on six general issues. (1) The findings of studies on the health and economic effects of a pharmacist or pharmacy class. (2) The experiences of other countries and the European Union with a pharmacist or pharmacy class, including its use to move a drug to a general sale class, its usefulness in preventing drug abuse, and its effect on drug expenditures. (3) The effect on consumers\u2019 access to nonprescription drugs of restricting their sale to pharmacies or personal sale by pharmacists.",
      " (4) The role of pharmacists in the study countries and the United States and the findings of studies on pharmacist counseling for nonprescription drugs. (5) The limited experience in the United States of pharmacists prescribing drugs without a physician\u2019s involvement and of restricting some nonprescription drugs to sale only by pharmacists. We gathered information from a number of sources and used several data collection methods. We did not do independent analyses of data bases. Literature Review We conducted computerized literature searches on the following topics: (1) drug distribution systems in the study countries, (2) the behavior of pharmacists, (3) the classification of the 14 drugs,",
      " (4) the advantages and disadvantages of an intermediate class of drugs, and (5) assessments of the health and economic effects of different drug distribution systems. Interviews With U.S. Experts and Officials We conducted interviews with officials of FDA involved in the regulation of prescription and nonprescription drugs, pharmacy associations, drug manufacturers, consumer groups, and drug manufacturer associations. We also interviewed academics who have written on this subject. In addition, we met with officials and academics in Florida to discuss their experiences with the Florida Pharmacist Self-Care Consultant Law (see appendix V). Country Studies We requested information from government and pharmacy association officials in the 10 study countries.",
      " Because Canada\u2019s individual provinces have a great deal of power over drug distribution, we also requested information from officials in Ontario. We sought to gather descriptive information on the drug distribution system in each country, including criteria for drug classification, the classification of the 14 drugs, requirements for pharmacist counseling, and liability issues. To obtain more in-depth information about the systems and experiences of particular countries, we traveled to Australia, Canada, Germany, the Netherlands, Switzerland, and the United Kingdom. We chose these countries because each allows the sale of some drugs outside pharmacies. The extensiveness of this general sale class varies greatly between countries; however, it was important to assess the experiences of countries where at least some drugs are available in the same manner as in the United States.",
      " We met with government officials, industry and pharmacy representatives, and other individuals knowledgeable about drug distribution in each country. The trips also allowed us to gather the views of a wider range of people than we contacted by mail, such as consumer groups, physicians\u2019 associations, drug manufacturers, and academics. We also visited officials in Brussels, Belgium, to understand the rationale behind the decisions of the European Union regarding drug distribution in the member countries. We conducted our evaluation between February 1993 and December 1994 in accordance with generally accepted government auditing standards. Study Strengths and Limitations Although studies have examined individual drug distribution systems, we found that little effort has been made to systematically compare systems.",
      " Our study brings together information about the drug distribution systems in 11 countries (including the United States), Ontario, Canada, and the European Union. In addition to describing the systems, we examine the accessibility of nonprescription drugs in the study countries and the United States, describe the role of pharmacists in the countries, and assess evidence for implementing a class of nonprescription drugs available only from pharmacies (or personally from a pharmacist) in the United States. This information allows the assessment of the operation of a pharmacist or pharmacy class of drugs in the study countries as well as raises issues that would have to be addressed if such a class of drugs were considered in the United States.",
      " One important difference between the United States and the other countries limits the lessons that can be learned. In all the countries other than the United States, there is some government provision of health care to the general public or universal health insurance through the private sector but regulated by the government. Thus, the context in which drugs are acquired, sold, and paid for can be quite different in these countries from that in the United States. If the barriers to obtaining a prescription drug in these countries are smaller than in the United States because individuals do not directly pay for physician visits and drugs prescribed in them, there may be less incentive there to purchase nonprescription products.",
      " Another limitation is that the available data did not allow us to directly assess the effect of a pharmacy or pharmacist class on adverse drug effects, quality of care, and cost of drugs to the consumer and health care system. Instead, we had to rely on the assessments of government officials, association representatives, and other experts in each country. We also did not examine in great detail the individual drug classification decisions made in each country. That is, we did not examine the documentation that supports particular classification decisions to assess how decisionmaking varies between countries. Additionally, because of cost and resource limitations, we did not visit every country included in the study. (We did not travel to Denmark,",
      " France, Italy, and Sweden.) Finally, because our focus is on the experiences of other countries and what can be learned from them, we did not assess the principal reason FDA has given for not establishing an intermediate class of drugs\u2014namely, that a public health need for such a class in the United States has not been demonstrated. Consequently, we did not address issues such as the frequency of adverse effects for nonprescription drugs in general and, more specifically, for recently switched drugs in the United States. Agency Comments Officials from FDA reviewed a draft of this report and provided written comments (see appendix VI). They stated that the report does not consider certain additional requirements establishing an intermediate class of drugs would impose upon FDA,",
      " drug manufacturers, or pharmacists such as new FDA labeling requirements and additional training of pharmacists. The report discusses other potential additional requirements for pharmacists in chapters 2, 3, and 5. However, we did not attempt to address all additional requirements because a comprehensive assessment was beyond the scope and objectives of our report. An assessment of the additional requirements for FDA and drug manufacturers was also beyond our scope. Report Organization The following chapters address each of the five evaluation questions. Chapter 2 summarizes studies that have assessed the effects of different drug distribution systems and describes the drug distribution systems in the 10 countries as well as officials\u2019 views on the operation of their systems.",
      " It also describes the system in the European Union. Chapter 3 presents information on access to nonprescription drugs in the study countries, including the classification of the 14 drugs. Chapter 4 summarizes the role of pharmacists in each country and examines studies of pharmacists\u2019 behavior in the study countries and the United States. Chapter 5 examines the U.S. experience, focusing on Florida with its Pharmacist Self-Care Consultant Law. Chapter 6 summarizes our findings and presents conclusions. Drug Distribution Systems Drug distribution systems differ from country to country. In this chapter, we summarize information from studies on the consequences of the different systems. To show how the United States differs,",
      " we describe the drug distribution systems for the 10 countries and the European Union. Our purpose is to identify the countries that have a pharmacist or pharmacy class of drugs and examine possible benefits that the United States does not receive because they have such a class and the United States does not. Specifically, we answer the following questions: 1. What conclusions can be drawn from studies or reports on the development, operation, and consequences of different drug distribution systems? 2. What is the structure of the drug distribution system in each country? 3. What are the criteria for the initial classification, and subsequent classification changes, of a given drug product in each country?",
      " 4. To what extent is the pharmacist or pharmacy drug class used as a transition class for drugs being moved from prescription to general sale? 5. How effective is a pharmacist or pharmacy class in preventing the abuse of drugs? 6. What is the effect on expenditures on a drug when the drug is switched from prescription to nonprescription status? 7. What drug distribution system will be implemented in the European Union? Studies on the Consequences of Different Drug Distribution Systems Little or no analysis has been done to show the advantages and disadvantages of different drug distribution systems. For example, as of March 1995, researchers had not attempted to determine how differences in drug distribution systems may affect health care costs.",
      " A number of studies have found significant differences in prescription drug prices across countries, both at the retail and manufacturers\u2019 level. However, as the costs of production and distribution make up only a small share of the total cost of any prescription drug, it is unlikely that differences in distribution systems are major sources of country-by-country differences in drugs prices (GAO, 1994a, p. 29). The effect of different drug distribution systems on nonprescription drug prices has not been assessed. Similarly, no studies have attempted to link the type of drug distribution system in a country to the frequency of adverse drug reactions or have attempted to relate different drug distribution systems to the quality of health care.",
      " The studies that have been done focus on the experiences of a single country when switching specific drugs and do not attempt to assess the merits of alternative drug distribution systems (Andersen and Schou, 1993; Bytzer, Hansen, and Schaffalitzky de Muckadell, 1991; Halpern, Fitzpatrick, and Volans, 1993; Hansen, Bytzer, and Schaffalitzky de Muckadell, 1991; Hopf, 1989; Perry, Streete, and Volans, 1987; Ryan and Yule, 1990;",
      " and Temin, 1992). While some researchers have found health and economic benefits to switching specific drugs in a particular country, no attempt has been made to determine what the effects would have been under a different drug classification system. For instance, would cough and cold remedies have been switched earlier in the United States if an intermediate-drug class had been available? If so, what would the benefits have been? If not, are there costs (for instance, adverse drug reactions) that would have been avoided if they had been switched into an intermediate class? There are also no studies that explicitly attempt to link the drug distribution system with the switching of specific drugs.",
      " In sum, it is necessary to examine other data to assess how a new class of drugs in the United States might operate. The Number and Type of Drug Classes in the Study Countries Table 2.1 summarizes the drug classes in the 10 countries, Ontario, and the United States. Note that in the Netherlands and Switzerland, a distinction is made between pharmacies and drugstores. Pharmacies are run by professionals with university degrees in pharmacy. All nonprescription drugs can be sold in pharmacies and prescriptions can be dispensed. Conversely, in drugstores, the principal \u201cdrug expert\u201d is the druggist. Although some training is required to become a druggist,",
      " it is not university-based and is not as extensive as that for a pharmacist. In contrast to pharmacies, prescription drugs cannot be dispensed in drugstores, nor can all nonprescription drugs be sold there. In Australia, Canada, and Switzerland, some of or all the power for classifying drugs for distribution rests with the states, provinces, or cantons rather than the national government. For our purposes, it is sufficient to note that drug classification is rather uniform throughout Australia and Switzerland and, therefore, we categorize these systems as being national rather than local. In Canada, since the number of drug classes and classification decisions varies greatly between provinces,",
      " we present information on Ontario as well as the national government. As table 2.1 shows, the two-tier system in the United States is unique. All the other countries restrict the sale of at least some nonprescription drugs to pharmacies. France, Italy, and the Netherlands do not allow the sale of any drugs outside pharmacies or drugstores. Although some drugs are available for sale outside pharmacies in Denmark, Germany, Sweden, and Switzerland, this general sale class is quite small. In Australia, Canada (including Ontario), and the United Kingdom, the general sale class is larger than in these 4 countries but smaller than in the United States.",
      " The general rationale for restricting the sale of nonprescription drugs is the same in all the countries. Drugs are not typical consumer products. The dangerous aspects to them means they should be treated accordingly. A pharmacist can help provide guidance to patients on the proper use of the drugs and, thereby, reduce the possibility of adverse effects. Criteria for Classifying Drugs All 10 countries and the United States generally use a drug\u2019s safety, efficacy, and quality for approving it. Each country then uses related criteria for determining the drug\u2019s distribution class. For instance, among the criteria the United Kingdom uses when switching a drug from prescription to pharmacist class is that the medicine has an acceptable margin of safety during unsupervised use,",
      " including safety in overdose or following accidental misdiagnosis. Officials in the United Kingdom also told us that when making classification decisions, they take into account the role that pharmacists are expected to play. Among the criteria Denmark uses is that the drug should be available by prescription for 2 years without problems before it is switched. (A detailed comparison of the specific classification criteria was beyond our scope.) An Intermediate Class as a Transition Class Over the last 15 years, the number of drugs switched from prescription to nonprescription status has increased in the United States. In fact, this is a worldwide trend. Despite arguments for a transition class in the United States,",
      " an intermediate class is not frequently used as a transition class in the study countries. It is operative only in Australia (and there was some support for it by government officials in Ontario and by Canadian national pharmacy association officials). In the Australian state of Victoria, after a drug is switched from prescription class to pharmacist class, officials watch for reports of adverse drug effects (they do not actively track users of the drug). If reports do not materialize, they consider switching the drug from pharmacist to pharmacy class. It is important to emphasize that even when the class is considered a transition class, the goal is not to allow the drug to be sold outside pharmacies.",
      " One Australian official told us that she could remember only paracetemol (acetaminophen in the United States) being moved into the general sale category. In Canada, although some government and pharmacy officials told us they support the general idea of a transition class, the intermediate class is not generally used in this manner. Some manufacturers\u2019 officials were concerned that drugs could get \u201cstuck\u201d in a transition class. They said that ibuprofen was switched in the provinces in 1989 out of prescription class into pharmacist class, where it was supposed to remain for only a short time, but it still remains there today, 6 years later.",
      " More generally, a Canadian official questioned the idea of whether a transition class would allow drugs to be switched from prescription status faster if the data package for switching remained the same. Only by altering the package could the process be made faster: either fewer or shorter tests would be required or drugs would have to be switched before the tests were completed. The same official raised the issue of the usefulness of the data that might be gathered through a transition class. There would be no controls in the studies. The official thought that because of the lack of controls, the studies would provide little useful information. A U.S. manufacturer echoed this idea and stated that FDA responds to randomized,",
      " double-blind studies in which the experimental drugs are compared to placebos. (In a double-blind medical experiment, neither the patients nor the persons administering the treatment and recording the results know which subjects are receiving the drug and which are receiving the placebo.) This allows the effectiveness and adverse effects to be accurately assessed. A transition class would not provide this type of study. An official in the United Kingdom stated that, theoretically, new adverse reactions could be found when a drug is switched to a pharmacist or pharmacy class but that, as a practical matter, the adverse-effect profile for a drug is established by the time a drug is switched. In the other countries we visited,",
      " the intermediate classes were not transition but permanent. There was no certainty that the drugs would be assessed for reclassification after a period of time. Thus, little helpful information is available from other countries as to whether or how a transition class might speed the switching of drugs. If a transition class is to play a role in speeding approval of a change from prescription to nonprescription status, it must regularly employ a system to track adverse effects. Without this information, the class could not aid FDA in assessing a drug for general sale. Tracking studies would help link drug use (or at least purchases) to adverse effects. They could also give some indication of the pattern of use in the population.",
      " Two difficulties with such a recordkeeping requirement are the time burden it places on pharmacists and the likelihood of increased costs. Preventing Abuse Proponents for an intermediate class of nonprescription drugs argue that limiting the availability of certain drugs to pharmacies would impede abuse. For example, the pharmacist would be expected to intervene if a customer wanted to purchase inordinate amounts of a drug (either at one time or over a period of time) or if the customer appeared to have no medical need for it. The class could be used in two ways. First, for drugs being switched from prescription to nonprescription status, abuse could be studied and a decision made at a later time on appropriate classification.",
      " Second, nonprescription products that were being abused could be moved back to the intermediate class for some safeguards. The advantage of moving a drug from general sale to an intermediate class is that it would still be available to customers for legitimate uses. Although access would be restricted to pharmacies, the added impediment of a prescription would not be required. Currently, if access is to be restricted, the drug must be moved to prescription class. The usefulness of an intermediate class to prevent drug abuse has not been demonstrated. We identified no studies that addressed the general issue of using an intermediate class to deter drug abuse. Few government and pharmacy officials whom we spoke with in the United States and abroad thought that an intermediate class would be completely successful in doing so.",
      " They agreed that it would be quite easy for an individual who wanted a large amount of a drug simply to visit several pharmacies and buy what appears to be a reasonable amount in each one, thereby avoiding potential surveillance. Having to deal with a pharmacist might be an impediment, as would the necessity of visiting several pharmacies; however, it would not be overly difficult to get around the system. The difficulties in using a pharmacist class to prevent abuse can be illustrated by experience in New South Wales, where Australian truck drivers were taking ephedrine to try to stay awake. At the time, the drug was restricted to sale by pharmacists. New South Wales officials decided to move the drug back to prescription status,",
      " and eventually the other Australian states followed their lead. In this case, since restricting the sale of ephedrine to pharmacists did not prevent abuse, officials thought it necessary to put tighter controls on the product. Similarly, a study in Germany indicated the difficulty of preventing the sale of nonprescription drugs even when they are restricted to pharmacies (Product Testing Foundation, 1991). Children between the ages of 10 and 14 were sent to pharmacies to see how easily they could purchase nonprescription medications containing alcohol. In all 54 pharmacies the children visited, they were allowed to purchase the drugs. In only one case was the purchaser questioned intensively.",
      " The consumer association that did the study criticized the pharmacists, and the pharmacy association called the results \u201clamentable.\u201d The Economics of an Intermediate Class of Drugs Much of the discussion about the proposed roles for an intermediate drug class has centered on public health issues. For example, a primary concern has been the effect of an intermediate class on consumers\u2019 ability to use pharmaceuticals safely and effectively. In addition, an intermediate class of drugs would also have an economic effect. Establishing a pharmacy or pharmacist class could affect the price and availability of drugs to consumers and might also alter the revenues or profits of both manufacturers and retailers. Drug Expenditures Pharmacy experts in the United States told us that drugs cost less as nonprescription than prescription medicines,",
      " although initially the nonprescription cost may be higher than was the prescription price. Ibuprofen is an example. However, the experiences of other countries do not clarify what the economic effect of establishing an intermediate class of drugs would be in the United States. The few studies that have been done focus on the switching of particular drugs in particular countries. The studies do not generalize beyond the study country and do not attempt to determine the effect of the presence or absence of a pharmacist or pharmacy class. Ryan and Yule (1990), examining the economic benefits of switching loperamide (an antidiarrheal) and topical hydrocortisone from \u201cprescription only medicines\u201d to \u201cpharmacy medicines\u201d in the United Kingdom,",
      " found that the costs of obtaining each drug decreased after the products were switched. However, in the United Kingdom (and all the study countries), prescription drug prices are controlled in some manner by the government. Nonprescription drug prices generally are not, although some are controlled if the drugs are purchased with a prescription. Therefore, a comparison of drug prices before and after a switch is not a comparison of two free markets. Because there is no U.S. government price control, a comparison of drug prices in the study countries before and after switching would not yield useful insights for the United States. (Thus, the Ryan and Yule findings do not necessarily indicate what would occur in the United States if a drug were switched to an intermediate class.) When Temin (1992)",
      " studied the costs and benefits of switching cough-and-cold medicines in the United States, he found that visits to doctors for common colds fell by 110,000 per year (from 4.4 million) from 1976 to 1989, coinciding with the switching of the medicines. After ruling out other possibilities, he concluded that the decrease in physicians\u2019 visits was attributable to the switching of these drugs. He estimated this to be a saving of $70 million per year. Although there is thus some evidence of cost savings from switching drugs, the effect of an intermediate class of drugs has not been assessed. Ryan and Yule did not assess what the savings would have been if loperamide and topical hydrocortisone had been sold outside pharmacies.",
      " Temin did not study how the savings would have been different if cough-and-cold medications had been restricted to sale by pharmacists.Therefore, while the studies do indicate potential savings from switching drugs, we cannot use them to assess empirically the relative savings from different drug distribution systems. Our interviews with officials in the study countries indicated that the cost savings from fewer physicians\u2019 visits may not be as great as expected. They said that many patients do not pay the full price for a prescribed drug. For instance, an insured patient might have only a $5.00 copayment for a prescription drug while having to pay the full price for a nonprescription product.",
      " Patients might thus have an incentive to go to doctors for a prescription. It could be for either a different but therapeutically equivalent product or the original drug if insurance covers it. The latter has occurred in Denmark with antiulcer medications that were switched in 1989. Bytzer, Hansen, and Schaffalitzky de Muckadell (1991) estimated that only 3 percent of the sales of cimetidine and ranitidine were made without some medical assessment or control. In Germany, approximately half of nonprescription drug sales are prescribed and reimbursed. A somewhat similar situation exists in the Netherlands with respect to acetaminophen.",
      " This drug can be purchased without a prescription as a general pain reliever; however, it is also commonly used as a pain killer for cancer patients and, in fact, is the most prescribed drug in the country. When it is prescribed, it is reimbursable. An official told us that this results in consumers being able to get their headache remedy free of charge. Economic Factors The economic effects of an intermediate class of drugs depend on several different factors and the current literature does not provide a comprehensive analysis of them. A complete treatment of economic issues was outside our scope. In the remainder of this section, however, we briefly illustrate some of the unresolved economic issues in assessing proposals for an intermediate class of drugs.",
      " The economic effect of an intermediate class of drugs would largely depend on how this class were structured and used\u2014that is, whether it was a transition or a permanent class and, if the latter, whether the drugs in this class were coming largely from the prescription or the nonprescription category. For example, if drugs were moved to pharmacy or pharmacist class from prescription status, then the drug choices available to consumers without a prescription would increase. However, if drugs were largely moved to the intermediate class from the general sale category, then these drugs would be less widely available to consumers because fewer retail outlets could sell them (although they would still be available without a prescription). A major unresolved question is how the availability of a pharmacist or pharmacy class would affect pharmaceutical prices.",
      " Depending on the structure of the new class, several factors might strengthen or soften its effect. The following four examples provide an illustrative, but not comprehensive, list of scenarios that could play out if the United States adopted an intermediate class of drugs. The availability of an intermediate class of drugs might prompt a change in manufacturers\u2019 pricing patterns. For example, if the introduction of an intermediate class permitted a drug to be switched from prescription status, the price might decline. If drugs were switched from general sale to the intermediate class, they would be available in fewer retail outlets. It is possible that the decrease in the number of retailers selling these drugs could adversely affect retail competition and,",
      " as a result, drive up prices. However, the availability of mail-order pharmacies and other outlets (provided they sold the drugs in the intermediate class), and the likelihood of new pharmacies opening, could mitigate or eliminate this effect. If drugs were moved to the intermediate class from the general sale category, the greater role of pharmacists might lead to higher prices if a counseling fee were implemented. The effect of an intermediate class of drugs on consumers\u2019 out-of-pocket drug expenses would depend on the behavior of third-party payers such as health insurers, which often pay all or most of the cost of prescription drugs but generally do not pay for over-the-counter products.",
      " If insurers elected not to reimburse consumers for drugs that were moved from prescription status to an intermediate class, consumers\u2019 out-of-pocket expenditures would increase. However, if fewer drugs were reimbursed, health insurance costs might decrease and partially or fully offset consumers\u2019 greater out-of-pocket drug expenditures. An intermediate class of drugs could also produce savings in other health care costs. The cost of obtaining a prescription drug includes not only the cost of the drug itself but also the cost of the visit to a physician. Patients would be saved the cost of the visit to the physician for a pharmacy- or pharmacist-class drug. While this is potentially true for new prescriptions,",
      " cost savings for refilling prescriptions is less clear, since refills are often ordered on the telephone. Drug Distribution in the European Union The 15 member countries of the European Union are moving toward the creation of a single international market, without barriers to the free movement of goods, services, persons, or capital. One aspect of this is the harmonization of requirements governing the manufacturing and marketing of pharmaceuticals.Regulatory authority rests with Directorate General III \u201cIndustry.\u201d Section III-E-3 deals with pharmaceutical products. Decisions of the European Union must be approved by a vote of the member countries. \u201cMedicinal products shall be subject to medical prescription where they:",
      " \u2014are likely to present a danger either directly or indirectly, even when used correctly, if utilized without medical supervision, or \u2014are frequently and to a very wide extent used incorrectly, and as a result are likely to present a direct or indirect danger to human health, or \u2014contain substances or preparations thereof the activity and/or side effects of which require further investigation, or \u2014are normally prescribed by a doctor to be established parenterally.\u201d The directive goes on to state that \u201cMedicinal products not subject to prescription shall be those which do not meet the criteria established in Article 3.\u201d Despite this directive, the member countries will retain the authority for classifying drugs into prescription and nonprescription classes.",
      " This power will not be transferred to the European Union. Nonetheless, the expectation is that because of the EU classification criteria, drugs will be increasingly classified as prescription or nonprescription throughout the union. It is expected that classification into prescription and nonprescription classes will become harmonized throughout the European Union in the next 15 to 20 years. However, the European Union has decided not to impose a particular drug distribution system on the member countries. It will be up to each country to determine the number and nature of nonprescription drug classes in it. If a country decides that it wants to restrict the sale of nonprescription drugs to pharmacies,",
      " this will be allowed. Similarly, if a country wants to allow the sale of some or all nonprescription drugs outside pharmacies, it may do so. Thus, despite the European Union\u2019s developing criteria to distinguish prescription from nonprescription products, member countries can have more than two drug distribution classes. An EU official with major responsibilities for and involvement in the directive told us that the reason the European Union decided not to require a particular drug distribution system was that sufficient evidence did not exist to recommend one system over another. EU officials were not convinced that restricting drug sales to pharmacies was a commercial barrier to trade. Conversely, they were not convinced that allowing the sale of drugs outside pharmacies would increase health concerns.",
      " We were told that as long as a country\u2019s requirements are the same for both domestic and foreign entities, the European Union will accept its drug distribution system. Drug distribution systems are seen, in part, as a function of tradition. Member countries were unwilling to give up their current systems. In general, the northern European countries are less restrictive on the sale of medications than are the southern countries. The northern countries did not want to restrict the sale of all nonprescription drugs to pharmacies, while the southern countries did not want to allow their sale outside pharmacies. In the absence of sound evidence to support one system as superior to the other, the European Union decided to allow the countries to determine their own individual systems.",
      " While there will be no required changes in the number and type of drug classes in a country, officials in the Netherlands told us that they are planning to adapt to EU guidelines by moving from a three-tier to a two-tier system. Their plan is to combine the pharmacist and drugstore classes into one class and allow the drugs to be sold in both locations. It was noted that some nonprescription drugs currently restricted to sale by pharmacists will be moved back to prescription status. Officials of the Netherlands indicated that they perceived no major, consistent benefit from requiring that a large category of nonprescription drugs be available only from pharmacists. Access to Nonprescription Drugs Proponents of an intermediate drug class argue that access to pharmaceuticals would increase in the United States if an additional nonprescription drug class,",
      " either fixed or transition, were established. Opponents argue that access would decrease. The actual change in access would depend on how the intermediate class were used. In general, access would decrease if (1) drugs that are currently available without a prescription were to be moved into the intermediate class or (2) drugs that would have been switched to general sale were instead placed into the intermediate class. However, access would increase if (1) drugs that would have been moved back to prescription status were placed in the intermediate category or (2) the effect of an intermediate class were to allow drugs to move into it that could not be moved into the general sale class.",
      " While the number of outlets (54,000 pharmacies) selling the product would not change, accessibility would increase because a prescription would not be necessary. Beyond these general observations, it is unclear exactly how access would change. No studies have assessed this issue and, moreover, it would be very difficult to do so. A complete understanding of how access would be affected would require assessing a number of factors, including the number of drug outlets that would sell the drugs, how the class would be used, and the number and nature of drugs that would be placed in it. None of these can be precisely predicted. In this chapter, we report our comparison of access to nonprescription drugs in the United States with that in the study countries.",
      " Making this comparison helped us understand what the effects of an intermediate class might be in the United States regardless of whether a fixed or transition class were established. We focused on the following three aspects of access: the number of community pharmacies and drugstores in each country, the availability of nonprescription drugs by self-selection, and, more generally, the classification of particular drugs as either prescription or nonprescription products. In particular, we answer the following questions: 1. How many pharmacies and drugstores are there in each of the study countries and the United States? 2. In the study countries, can consumers select nonprescription drugs themselves,",
      " or must they request such drugs from a pharmacist? 3. How does the classification of the 14 drugs we selected vary between the study countries and the United States? The drugs include a number of pain relievers, antiulcer medications, and allergy medicines (see appendix IV). Their classification varies from country to country, and all have been either switched or mentioned as candidates for switching in the United States or another country. Private sector officials in the United States indicated that the 14 are a good list for getting a general indication of the access to nonprescription drugs in a country. However, it is not possible to generalize from this list about drug classification in a country\u2014that is,",
      " the classification of these drugs does not necessarily indicate the overall availability of nonprescription drugs in a country. Instead, the drugs should be viewed as examples of differences between countries. The Access to Pharmacies and Drugstores Number of Pharmacies and Drugstores The number of community pharmacies can give some indication of how available intermediate-class drugs would be in the United States. However, there are a number of other drug outlets that could increase the availability of these products, including government, managed care, and mail-order pharmacies. If these outlets were to sell intermediate class drugs, consumers would not have to go to a community pharmacy to purchase them. However, we cannot be certain that all or any of these potential outlets would choose to sell the drugs.",
      " Thus, any analysis of how accessible intermediate class drugs would be is limited by uncertainty over the number of outlets. Similarly, any comparison between countries of the number of drug outlets must note that in some countries physicians are permitted to dispense drugs where there is no convenient pharmacy. For example, in France and Italy physicians are allowed to dispense nonprescription drugs in rural areas where no pharmacy is available. The effect is to increase the number of drug outlets for nonprescription drugs and, hence, their accessibility. For countries that have more specialized drug outlets than the United States, physicians\u2019 dispensing would increase the difference between the countries while narrowing the difference for countries that have fewer pharmacies than the United States.",
      " If the United States were to allow physicians to dispense intermediate-class drugs where no pharmacy was available, this would also reduce inconvenience but negate one rationale (not having to visit a physician to receive the drug) for such a class of drugs. To get some indication of how many U.S. outlets would be able to sell these drugs and how similar this is to other countries, we compared the number of community pharmacies per capita in the United States with a comparable measure in other countries. We found that the United States has considerably fewer community pharmacies or drugstores per capita than 6 of the countries. (See table 3.1.) However,",
      " only Denmark, with one pharmacy for every 17,500 residents, and Sweden, with one for every 10,200 residents, have substantially fewer pharmacies per capita than the United States, which has one for every 4,800 residents. The United Kingdom, Canada, and Ontario have a similar number per capita to the United States. This gives some indication that restricting nonprescription drugs to sale in pharmacies might be more of an inconvenience in the United States than it is in 6 of the countries we studied. Accessibility of Community Pharmacies in the United States If drugs in the intermediate class were to come from the general sale rather than prescription class,",
      " change in access to these products would depend on not only the number of community pharmacies but also their distribution. In some parts of the country, the nearest pharmacy can be 100 or more miles away. Even within a city, the number of pharmacies varies between neighborhoods, and nonpharmacy drug outlets generally sell fewer products than do pharmacies. Therefore, people with a nearby pharmacy already have an advantage in the number of nonprescription products readily available to them. Moving drugs from the general sale class to an intermediate class could make this difference somewhat larger. The number of outlets selling the drugs would decrease, and individuals with easy access to pharmacies would find these drugs readily available to them while those without accessible pharmacies would not.",
      " However, moving drugs from the prescription class to an intermediate class would not change the number of outlets (that is, pharmacies) selling them (assuming noncommunity pharmacies chose to sell the products), and, therefore, the difference in access for individuals with readily available pharmacies and those without would remain the same. It would still be necessary to go to a pharmacy to purchase the drug. The difference would be that a prescription would not be required. Moreover, introducing an intermediate class of drugs in the United States would constitute a large change in nonprescription drug distribution since the more than 690,000 nonpharmacy drug outlets would not be allowed to sell these products.",
      " Consumers would have to learn that not all nonprescription drugs could be sold in all retail outlets. Individuals who wanted to purchase a drug in the intermediate class would need to know that it was necessary to purchase the drug at a pharmacy. This would affect all residents, regardless of location. The Self-Selection of Drugs In the United States, nonprescription products (except for controlled substances available without a prescription and insulin) are generally available by self-service\u2014that is, consumers can select their nonprescription products from the shelves personally. Consumers have the power to choose their own nonprescription drug regimen by comparing different products on such items as dosing,",
      " side-effects, and price. Of course, if they are in a pharmacy, they can always ask the pharmacist for information or advice. In other countries, self-selection of pharmaceuticals is limited to certain drug classes or not allowed at all. Table 3.2 summarizes the direct availability of nonprescription drugs to consumers. The table shows that the ability to choose one\u2019s own drugs is limited, except for drugs available outside pharmacies (in countries where this is allowed). Only in Australia, Canada (as determined by the individual provinces such as Ontario), and Sweden is self-service allowed for some or all pharmacist or pharmacy drugs. If the United States were to follow the general pattern in other countries of not permitting self-service for pharmacist-",
      " or pharmacy-class products (as is done for controlled substances available without a prescription and insulin in some states), purchasing these products would be much different from purchasing other nonprescription drugs. Consumers would not only be unable to buy the products in outlets such as convenience stores and gas stations but would also find it more difficult to compare products if they could not select pharmacist- or pharmacy-class drugs directly from the shelf. The Effect of an Intermediate Class on Drug Classification One of the principal benefits cited by proponents of an intermediate class is that the number of products available without a prescription would increase because FDA would have the option of putting drugs in a class that provides for consumer counseling (National Consumers League,",
      " 1991). To see if there is a pattern of greater nonprescription availability in countries that have a pharmacist or pharmacy class, we examined the classification of 14 drugs in the study countries and the United States. (See appendixes III and IV.) These drugs have either been switched or mentioned as candidates for switching in the United States or in another country, but they are only examples meant to illustrate differences between the countries. It is not possible to generalize from them to the entire drug classification system in a country. Our analysis shows only that the presence or absence of a pharmacist or pharmacy class has no consistent effect on drug classification. It is unclear what effect establishing an intermediate class in the United States would have on the classification of drugs as prescription or nonprescription products.",
      " Specific examples illustrate how classification varies between countries. Ibuprofen is available for general sale in the United States but, although it is a nonprescription product in 10 other countries, its distribution is limited to specialized drug outlets in all of them. Naproxen is also available for general sale in the United States but as a nonprescription product in only 2 of the 10 countries. For these two drugs, the United States clearly has the most open system and the lack of an intermediate class has not prevented their being switched here. In fact, the United States was among the first to classify ibuprofen (1984) and naproxen (1994)",
      " as nonprescription products. However, for other drugs the United States is more restrictive. For the 10 countries studied, only France, Italy, and Sweden, like the United States, do not allow nonprescription sale of the antihistamine terfenadine. Similarly, only Germany, Sweden, and the United States do not allow the nonprescription sale of promethazine, another antihistamine. In the seven countries, these drugs are available in either a pharmacist or pharmacy class; the U.S. system is less open than theirs are. It is unclear whether the theoretical safeguards associated with a pharmacist or pharmacy class would be sufficient for regulators to switch these drugs from prescription to nonprescription.",
      " It is thus unclear whether establishing an intermediate class of drugs in the United States would allow more drugs to be switched, since the United States already classifies some drugs as nonprescription that other countries that have a pharmacist or pharmacy class still restrict to prescription class. What is clear is that other factors in addition to or instead of the existence of a pharmacist or pharmacy class account for differences in drug classification between the study countries. An assessment of the relative openness of the current drug distribution system in the United States compared to the other countries studied depends on one\u2019s definition of \u201caccess.\u201d If access is defined by the availability of drugs for general sale, the United States appears to have the most open system,",
      " since more of the 14 drugs are available for sale outside pharmacies than in any of the other countries. However, if access is defined by the availability of drugs for nonprescription sale regardless of where they can be sold, the United States falls somewhere in the middle. Some countries have more of the 14 drugs available without a prescription than the United States does, but others have fewer. The Practice of Pharmacy Many of the theoretical benefits associated with a pharmacist or pharmacy class of drugs (whether a fixed or transition class) involve improving drug use or, conversely, reducing misuse. The assumption is that pharmacists will pass on to consumers the information they need to take a drug properly.",
      " Critics of an intermediate class in the United States do not question the potential value of pharmacists\u2019 relaying information to consumers but do not believe that it is necessary to have an additional drug class to do this. In this chapter, we describe the role pharmacists play in monitoring the use of pharmacist- and pharmacy-class drugs in the study countries. We focus on pharmacist practices that would have to be engaged in for a fixed or transition class to be effective. We also report on selected aspects of pharmacy practice in the United States, including counseling on nonprescription drugs. Specifically, we answer the following questions: 1. Are pharmacists in the 10 countries required by law to counsel consumers on the proper use of nonprescription drugs?",
      " 2. What are the legal sanctions for failing to provide counseling? 3. What studies show whether pharmacists in the study countries and the United States counsel purchasers of nonprescription drugs, and what is the quality of that counseling? 4. What are the requirements and practices of pharmacists in monitoring adverse drug reactions and maintaining patient profiles? 5. How might recent developments in the practice of pharmacy affect the counseling behavior of pharmacists in the United States? Counseling Requirements on Nonprescription Drugs One reason proponents commonly give for limiting nonprescription drugs to sale in pharmacies (even if no counseling is required) is that it allows customers to ask for advice if they want it.",
      " Table 4.1 summarizes the counseling requirements for nonprescription drugs in the 10 study countries and Ontario. Only in Australia, Denmark, Germany, and Italy are pharmacists required to provide information to patients on the use of nonprescription drugs. In Australia, these requirements vary by state: some states require counseling on pharmacist class drugs but others do not. For instance, in Victoria, the pharmacist is required to speak with the patient every time a pharmacist-class drug is sold. In Denmark, Germany, and Italy, the pharmacist is required to provide information to patients on their medications; however, there are no specific counseling requirements. In Ontario and the United Kingdom,",
      " nothing is required beyond the pharmacists\u2019 supervision of sales. In France, the Netherlands, and Switzerland, pharmacists need merely be physically present on the premises of the pharmacy. In Sweden, while the pharmacist is expected to promote proper drug usage, there is no requirement that a pharmacist be present when a nonprescription drug is sold. There are no national counseling requirements in Canada. The Enforcement of Counseling Requirements In the 6 countries we visited\u2014Australia, Canada, Germany, the Netherlands, Switzerland, and the United Kingdom\u2014and Ontario, there is some enforcement of the requirements for pharmacists selling nonprescription drugs, but it is somewhat limited.",
      " Enforcement is sometimes by a professional association and is sometimes focused on physical aspects of the pharmacy rather than the counseling of patients. The number of inspectors is sometimes small and nonprescription drugs can be less emphasized than prescription products. Counseling requirements are set by the states in Australia. Officials in the state of Victoria told us that enforcement is done primarily through three pharmacy inspectors of the Pharmacy Board of Victoria on the basis of professional standards. One reason for the board\u2019s enforcing the law rather than the state is that the board\u2019s standard of proof is less stringent, thereby making it easier to discipline recalcitrant pharmacists. The state standard of proof, \u201cbeyond a reasonable doubt,\u201d has been replaced by the less strict \u201cbalance of probabilities.\u201d The pharmacy board brings its case before pharmacy representatives who may impose penalties ranging from letters of admonition and fines to temporary suspension or permanent cancellation of a pharmacist\u2019s registration.",
      " There are three or four suspensions or cancellations per year. We were told that generally there is not a great deal of enforcement in Australia unless there are complaints or drug abuse concerns. Enforcement of pharmacist requirements is done at the state and regional level in Germany and focuses on the physical aspect of the pharmacy rather than the behavior of pharmacists. Inspectors check such items as cleanliness of the pharmacy, proper storage of medicines, size of the laboratory, availability of instruments, and orderliness of records. In the Netherlands, the State Public Health Inspectorate supervises all matters relating to the sale of drugs. Pharmacists must give access at any time to inspectors to examine the pharmacy and everything in it.",
      " If inspectors find that the pharmacy is not operating in accordance with the law, they inform the pharmacist and stipulate a time within which the problem must be corrected. We were unable to determine the amount of effort put forth in identifying violations of counseling requirements for nonprescription products. In Switzerland, each canton has a pharmacist organization that conducts inspections. Inspectors examine the shop and laboratory to determine if they are in accordance with regulations. They also check to see if the pharmacist is present when the pharmacy is open, as required by law. In the United Kingdom, pharmacy medicines are to be sold only under the supervision of a pharmacist. This is normally defined as being present,",
      " aware of the transaction, and in a position to intervene. Enforcement of the law is not by the government but by the Royal Pharmaceutical Society of Great Britain. The society has 18 pharmacy inspectors and 2 inspectors for nonpharmacy drug outlets. This works out to about 650 to 700 pharmacies per inspector. We were told that a large number of cases are brought to the attention of the Royal Pharmaceutical Society every year by competitors and consumers. After the society visits the pharmacy to meet with the pharmacist, it decides whether to handle the case informally or to take formal evidence. Often it sends only a warning letter. Approximately 15 cases a year are prosecuted.",
      " Additional cases (6 in 1993) are dealt with through the pharmacy code of ethics. However, we were told that the society is unlikely to base action on the sale of pharmacy-class drugs (for instance, selling a pharmacy medicine without appropriate counseling). Overall, Royal Pharmaceutical Society officials thought that a great deal of effort was put into identifying violations of laws and regulations concerning purchases of nonprescription drugs. Government officials told us that enforcement of pharmacy practice requirements is successful mainly as a deterrent. Pharmacists are aware of the law and try to stay within it. In Ontario, pharmacists (or an intern) must make the \u201cdecision to sell\u201d a pharmacist-class drug.",
      " This is generally defined as the pharmacist\u2019s being \u201caware of the sale.\u201d There is no requirement that pharmacists actually speak with the patients. Enforcement is done by the Ontario College of Pharmacists, a professional and regulatory association. Officials told us that compliance with the law is minimal. There is no method for monitoring pharmacist interventions other than through consumer complaints to the college, which are then investigated. We asked pharmacy officials in the countries we did not visit how much effort is put forth in enforcing nonprescription drug counseling requirements. Officials in France and Denmark told us that \u201cmoderate\u201d effort is put into enforcing counseling requirements in those countries; Swedish officials said that there is \u201csome\u201d effort.",
      " In Italy, there are no sanctions against pharmacists who do not counsel patients on the use of nonprescription drugs. Officials noted that the enforcement of counseling requirements can be problematic. It is difficult to determine what is or is not appropriate counseling behavior. Appropriateness needs to be assessed case by case. What appears to be a lack of counseling might reflect a legitimate judgment by the pharmacist, such as that a particular customer regularly uses the drug and does not need counseling on it. This makes enforcement of counseling requirements quite difficult. Studies of Pharmacist Counseling on Nonprescription Drugs Various academics, consumer groups, and pharmacy associations have conducted studies of the behavior of pharmacists when they sell nonprescription drugs.",
      " Typically, participants in a study go to a pharmacy and attempt to purchase a particular nonprescription product or describe their symptoms (or those of the person for whom they are buying the product), seeking advice from the pharmacist on what drug to purchase. Each shopper has been trained by the investigators to act in accordance with a script developed for the study. The pharmacist\u2019s advice is recorded and compared to what the pharmacist should have done according to criteria determined by a group of experts. We refer to these investigations as trained shopper studies. Other common study designs are investigators\u2019 observation of pharmacists\u2019 behavior and pharmacists\u2019 completion of a questionnaire on their counseling activities.",
      " Table 4.2 lists the pharmacist counseling studies, their methodologies, and what they assessed. Studies have not been conducted in all the countries. While the studies vary considerably in design and objective, a number of common themes are evident. Despite differences in the law and regulations across countries, counseling is generally incomplete and infrequent. Estimates of the frequency of pharmacists\u2019 counseling on nonprescription products (that is, the percentage of patients receiving advice) ranged from 11.1 percent in Sweden (Marklund, Karlsson, and Bengtsson, 1990) and 12.3 percent in Canada (Taylor and Suveges,",
      " 1992a) to 93.75 percent in Germany (Product Testing Foundation, 1991). Germany\u2019s was by far the highest estimate. The second highest, based on self-reports of pharmacists, was 37.6 percent in the United Kingdom for single proprietor pharmacies (Phelan and Jepson, 1980). (The lowest estimate for the United Kingdom was 21 percent for chain pharmacies, also found by Phelan and Jepson.) However, even in Germany, the researchers generally thought that too little counseling was being done. In one third of the cases in Germany, only one piece of information was being passed to the consumer.",
      " An Australian study found that the vast majority of pharmacists thought that they should counsel for both prescription and nonprescription medications (Ortiz et al., 1984b). However, pharmacists gave a number of reasons for not counseling. The three most important were lack of adequate medical histories, lack of feedback from the person counseled, and the belief that counseling may not be necessary. Another reason counseling may not occur is that customers may not want it. In Canada, Taylor and Suveges (1992a) found that 195 of 207 customers who did not receive advice on a nonprescription product indicated that they did not want counseling.",
      " The main reasons they gave were that they had \u201cused  medicine before with good results\u201d and \u201chad already received advice elsewhere on what to buy.\u201d Regarding the quantity of counseling (that is, the availability of pharmacists to counsel, the number of counseling events per day, and the time spent counseling), a Canadian study found that pharmacists responded to requests from patients for advice on nonprescription drugs an average of 2.8 times a day (Poston, Kennedy, and Waruszynski, 1994). The range between pharmacies was from 0.07 to 38.64 counseling events per day. A study in Australia found that 23 percent of pharmacist counseling activities involved OTC medications (Ortiz,",
      " Thomas, and Walker, 1989). (This was the second most frequent counseling activity behind giving advice on prescribed medications.) Patients initiated the counseling in 259 of 438 cases. In 394 of the cases, counseling took 2 minutes or less. The quality of counseling was somewhat mixed. Recommended products and advice (when given) were generally found to be appropriate. Willison and Muzzin (1992) found that in Canada the quality of advice varied by ailment, with patients receiving better advice on less complex problems. For three of four scenarios in which the use of a prescription medication was not involved, the percentage of patients receiving totally safe and appropriate advice ranged from 62 to 77 percent.",
      " For the fourth scenario, only 17 percent received such advice. In Germany, the Product Testing Foundation (1991) found that pharmacists\u2019 explanations tended to be accurate for preparations requiring special explanations (for instance, appetite suppressants and iron preparations) and that performance had improved since 1984. There are also examples of inappropriate advice being given. For instance, Goodburn et al. (1991) found that pharmacists in the United Kingdom gave inappropriate advice for the treatment of childhood diarrhea 70 percent of the time. In Germany, Glaeske (1989) found that 61 percent of all nonprescription products sold were ineffective or presented dangers to the uninformed user.",
      " In all the countries where studies have been conducted, researchers found that information-gathering and advice were often incomplete (that is, the information given was appropriate but not everything that should have been covered was discussed). In Australia, Feehan (1981) found a lack of information-gathering on patients\u2019 characteristics. For instance, 25 of 43 pharmacists were prepared to sell a weight-reduction product without checking on the patient\u2019s health or to see whether she was taking other medications. Glaeske (1989) reported that in Germany no pharmacist asked all the questions considered to be essential. For instance, not one trained shopper who was a woman was asked if she was pregnant or lactating.",
      " Consultation on side effects was unsatisfactory\u2014for example, such simplistic statements as \u201cevery medication has side effects\u201d and \u201cthere are no side effects\u201d were sometimes made. In a 1991 study, the Consumers Association (1991) of the United Kingdom found that customers were not adequately questioned. Only 10 percent of pharmacists asked the trained shoppers what other medications they were taking. Studies in Australia (Harris et al., 1985), Canada (Willison and Muzzin, 1992), and the United Kingdom (Smith, Salkind, and Jolly, 1990) found a wide range of skills and performance between pharmacists.",
      " Feehan (1981) in Australia and Willison and Muzzin (1992) in Canada thought that this could indicate a shortcoming in pharmacists\u2019 education for dealing with patients and that there is a need to strengthen their clinical interviewing skills. Interestingly, Smith, Salkind, and Jolly (1990) in the United Kingdom found that pharmacists\u2019 counseling was either very good or very poor. Few pharmacists were in the middle. The studies generally found that pharmacy practice has improved as more and better counseling has been given. This is so when the same organization collected the same data at different times (Product Testing Foundation,",
      " 1984 and 1991) as well as when the results of different studies over time were compared (Willison and Muzzin, 1992). The results of studies in the United States of pharmacist counseling on nonprescription drug use are quite similar to the findings in other countries. However, no studies in the United States have assessed the frequency of pharmacy counseling on these products. Three studies assessed some aspect of the quantity of counseling. In a mail survey, Carroll and Gagnon (1983) found that 96 percent of households said the pharmacist was available to answer questions about nonprescription medications half the time or more.",
      " Meade (1992), reporting on a study conducted for APhA, noted that 69 percent of pharmacists said they counsel patients 10 or more times per day on nonprescription products, well within the range reported in Canadian pharmacies. Another survey conducted for APhA (Market Facts, 1994) indicates that pharmacist counseling for nonprescription drugs is increasing. The 1993 National Prescription Buyers Survey found that the percentage of respondents who had ever asked a pharmacist for advice about a nonprescription drug had increased from 37 percent in 1979 to 64 percent in 1993. (There was evidence that interactions with pharmacists for prescription advice had increased as well.) The other U.S.",
      " studies in table 4.2 examined the quality of counseling. In the 1960\u2019s and early 1970\u2019s, two studies examined pharmacists\u2019 counseling regarding nonprescription drugs in U.S. pharmacies (Knapp et al., 1969, and Wertheimer, Shefter, and Cooper, 1973). The conclusions of both studies were generally negative. Insufficient inquiries of patients were made, counseling was infrequent, and inappropriate drugs were sold. Jang, Knapp, and Knapp (1975), while finding some positive aspects of pharmacists\u2019 counseling, also had criticisms, including poor performance on drug monitoring and controlling OTC drug use.",
      " The Wertheimer, Shefter, and Cooper (1973) study was replicated by Vanderveen and colleagues (Vanderveen, Adams, and Sanborn, 1978; Vanderveen and Jirak, 1990). In the 1978 study, the authors concluded that the pharmacy \u201cprofession has not made any great strides in the area of OTC product counseling.\u201d The only question asked by more than one fourth of the pharmacists was the age of the child for whom the medicine was being purchased. The 1990 study found some improvement, with a majority of pharmacists asking about both the age of the child and the duration of the illness.",
      " However, no other issue was raised by more than half the pharmacists. The general conclusion was that while pharmacists\u2019 counseling had improved, it could still be better. Barnett, Nykamp, and Hopkins (1992) found that the majority of pharmacists questioned customers before making OTC recommendations and gave directions on their use. For one scenario, an average of 2.81 out of 5 pertinent questions were asked; for a second, an average of 1.58 questions out of 5 were asked. Combining results from the two scenarios, they found that 68.2 percent of product recommendations by pharmacists younger than 30 were appropriate while 42.",
      "4 percent by pharmacists 30 and older were appropriate. Overall, the authors concluded in 1992 that pharmacists had made strides in OTC counseling since the earlier studies. In a study of pharmacist counseling for prescription drugs in Wisconsin, where there is a requirement that pharmacists provide appropriate consultation for a prescription, Pitting and Hammel (1983) sent trained shoppers to 84 pharmacies. (The number of trained shoppers and the selection method for the pharmacies was not given.) They found that 61.5 percent of pharmacists did not consult with the patient when a prefabricated drug was dispensed, although 87.5 percent did consult on compounded products.",
      " Thus, even when pharmacists were legally required to counsel patients, not all pharmacists did so. The results of the studies in the United States are rather similar to those in countries where the sale of at least some nonprescription drugs is restricted to pharmacies. In general, the theory of pharmacy practice diverges from the reality. The advice of pharmacists is often appropriate but not universally given. In addition, it is often incomplete, with little information being given to customers on such items as possible side effects. In other words, what information is given is accurate, but not enough was passed on to consumers. Researchers consistently found a lack of information-gathering on the part of pharmacists.",
      " For instance, information is often not gathered on symptoms and other medications. More positively, within a range of pharmacists\u2019 behavior, many pharmacists do a good job. In addition pharmacists\u2019 performance, while still often deficient, has improved over time. Activities of Pharmacists Reporting Adverse Drug Reactions One argument for an intermediate class of drugs is that pharmacists would be in a position to monitor patients for adverse drug reactions to medications in this class. In the case of a transition class, this information could be passed on to FDA and aid in its decision whether to allow the sale of a drug outside pharmacies. However, in Italy and the United Kingdom,",
      " adverse drug reaction reports from pharmacists are not accepted. In the other countries, reports from pharmacists are accepted but not required. This is the same as in the United States. Government, pharmacy, and manufacturers\u2019 officials stated that pharmacists rarely submit adverse drug reaction reports. Thus, the experiences of the 10 other countries do not allow us to assess the benefits from or costs of requiring pharmacists to report adverse drug reactions. However, there is some limited information from the United States that suggests that community pharmacists can, at least in some situations, successfully monitor patients for adverse drug reactions. Meade (1994a and b) gives examples of pharmacists who have successfully done this.",
      " She reported on a pharmacist in Minnesota who, through consultation with a patient, detected that a prescription drug was causing the patient dizziness, chest pain, and swelling and tingling in the hands. When the prescribing physician took the patient off the drug, the symptoms disappeared. Meade also reported on a pharmacist in Tennessee who discovered from a patient\u2019s reaction to a prescribed drug that the patient had diabetes. Maintaining Patient Profiles One potential role for pharmacists is to record prescription and nonprescription drug sales in patient profiles. This information could help link drug use with adverse drug reactions and other complications. Other uses for profiles would be prospective. For instance,",
      " a patient profile could alert a pharmacist to medical conditions that might be affected by a prescribed drug\u2019s side effects. The pharmacist could alert the physician to the problem and, if it were appropriate, the physician or pharmacist could select a different drug without these side effects. Similarly, a profile could alert the pharmacist to possible adverse interactions with other drugs that a patient was currently taking. It is not possible to judge the usefulness of such a procedure for nonprescription products. Only in Australia are pharmacists ever required to include nonprescription drug use in patient profiles. These requirements are determined by the individual Australian states and exist only in certain states and for particular pharmacist-class drugs.",
      " The drugs for which sales must be recorded vary from state to state. There are no requirements in any of the states for recording sales of pharmacy-class drugs or drugs available outside pharmacies. Officials in Victoria told us that there has been some difficulty in getting pharmacists to comply with recording requirements. They attributed this to the requirements\u2019 covering too many drugs and, consequently, they have reduced the list of nonprescription drugs for which the sale must be recorded to those for which they believe recording is most important. The situation in Victoria is similar to one in the state of Washington in the United States for prescription drugs. Washington has mandatory regulations governing pharmacy practice that include a requirement that pharmacists maintain and use patient profiles.",
      " In a trained shopper study, Campbell et al. (1989) found that 67 percent maintained these profiles. While this was an increase from 54 percent in 1974 (when the law was enacted), it was considerably below the law\u2019s 100 percent. The authors speculated that it was doubtful that maintaining and using patient profiles was significantly greater in Washington than it was in states that did not have the same requirements. In 1987, the National Association of Retail Druggists surveyed pharmacists through the NARD Newsletter (The NARD Survey, 1988). More than 1,300 pharmacists responded. While 92 percent of the pharmacists reported that they maintain patient profiles,",
      " only 15 percent said that they record OTC drug sales in them. Officials\u2019 Views The views of many of the government officials in the countries we visited (Australia, Canada, Germany, the Netherlands, Switzerland, and the United Kingdom) were consistent with the results of the studies discussed above. There was agreement that pharmacists have done a rather poor job of passing their knowledge on to consumers. Many officials questioned the frequency of pharmacists\u2019 counseling and thought that not enough counseling was being done. Pharmacists were selling drugs and providing little or no advice on their use. Officials gave several possible explanations for this, including time constraints and a lack of counseling skills.",
      " Nonetheless, the officials thought that pharmacists had the potential to improve drug use if they passed their knowledge on to patients. There was general agreement that pharmacists are knowledgeable and have a great deal to offer patients on the proper use of medications. This position was held even by those who opposed or questioned the usefulness of restricting the sale of some nonprescription drugs to pharmacies. Pharmacists could ask key questions about other drugs a patient is currently taking and about underlying medical conditions and could monitor compliance and report adverse drug reactions. Professional pharmacist associations in these countries are taking criticisms seriously, and many have initiated various programs to address them. They have instituted continuing education courses to give pharmacists the skills necessary to better perform their counseling role.",
      " A number of officials noted that pharmacy education has changed a great deal in the past 10 or so years. There is currently more of an emphasis on clinical pharmacy with its focus on patient service. Pharmacists who received their training before this change are often described as not having the \u201cpeople skills\u201d to be good counselors. Recent Developments in Pharmacy Practice In this section, we briefly describe some recent developments in the practice of pharmacy that are relevant to our assessment of an intermediate class of drugs. Our purpose is not to evaluate these changes but to make the reader aware of them. Pharmaceutical Care The idea of pharmaceutical care constitutes a major change in the practice of pharmacy.",
      " It moves pharmacists away from their traditional role of dispensing drug products and involves them more in selecting and monitoring drug therapies. The idea has been advocated in the United States by academics in university-based pharmacy schools and pharmacy organizations and has spread to other countries (the initiatives mentioned above have often been undertaken under the name of pharmaceutical care). Hepler defined pharmaceutical care as \u201cthe responsible provision of drug therapy for the purpose of achieving definite outcomes that increase a patient\u2019s quality of life\u201d (1991, pp. 141-42). It involves \u201cdesigning, implementing, and monitoring a therapeutic plan, in cooperation with the patient and other health professionals,",
      " that will produce specific therapeutic outcomes\u201d (Klein-Schwartz and Hoopes, 1993, p. 11). The proponents of pharmaceutical care point to various studies (most of them in institutional settings where complete patient information exists) that show the benefits that pharmacists can have on health care. For instance, one hospital study showed shorter length of stay, smaller total cost per admission, and smaller pharmacy cost per admission for patients who received either of two programs involving pharmaceutical care (Clapham et al., 1988). In another study, elderly apartment residents were instructed in drug use and given access to drug counseling by pharmacists (Hammarlund,",
      " Ostrom, and Kethley, 1985). After 1 year, the residents who initially had the greatest number of medication problems (and were available for follow-up interviews) were found to have had an 11-percent decrease in the number of prescriptions taken and a 39-percent decrease in the number of medication problems. There is some evidence of the value of pharmaceutical care in community pharmacies. McKenney et al. (1973) examined the effect of a clinical pharmacist\u2019s counseling hypertensive patients in three community pharmacies. Throughout the study, the pharmacist maintained close contact with the patients\u2019 physicians. The patients who received the counseling were more likely than those who did not receive it to show an increased knowledge of hypertension and its treatment,",
      " comply more often with their prescribed therapy, and maintain their blood pressure within the normal range. In a later study, pharmacists in six community pharmacies in Virginia were trained to provide similar services (McKenney et al., 1978). Results showed improved compliance and better blood pressure control in patients receiving counseling than in those not receiving it. Pharmacists also detected 38 instances of adverse drug reactions. Rupp (1992) estimated the value of community pharmacists intervening to correct prescribing errors. Of 33,011 prescriptions that were examined, 623 (1.9 percent) were found to be problematic. The estimated value of these interventions was $76,",
      "615. Nichols et al. (1992) examined the effect of counseling on nonprescription drug purchasing decisions. They found that 25.4 percent of patients purchased a different product than they had intended after receiving counseling, 13.4 percent did not purchase a drug, and 1.3 percent were referred to their physician. However, the study did not measure the importance of these decisions (for instance, how much of an improvement was brought by changing medications). More research is being conducted on the effect of pharmaceutical care in community pharmacies. Studies are focusing on the effect of drug use reviews by pharmacists, the use of protocols by pharmacists in managing and monitoring diseases,",
      " and a pharmaceutical care program for pediatric and adolescent patients with asthma. In addition, there appears to be at least some movement among community pharmacists to implement pharmaceutical care. Training courses are offered on how to implement pharmaceutical care (Martin, 1994) and articles have been written on pharmacies where it has been established (Meade, 1994a and b). For our purposes, it is important to note that the methods and goals of pharmaceutical care are consistent with those of an intermediate drug class. The general idea of both is that pharmacists would be more involved in a patient\u2019s drug therapy by such actions as consulting with patients. The evaluation of pharmaceutical care in community pharmacies would give some indication of the potential value of a greater role for pharmacists and,",
      " consequently, would provide some information on the value of an intermediate class of drugs. However, even if a positive value were established, or at least indicated, a number of the difficulties we have identified in this report would still have to be addressed. For nonprescription drugs, pharmacists would need to counsel patients, monitor and report adverse drug reactions, refer patients to physicians when necessary, and perform many other activities. This has not been the norm. Other issues would also need to be addressed. For instance, pharmaceutical care can take a great deal of time. Pharmacists would probably have to delegate more responsibility to technicians. The appropriate role for technicians would have to be determined.",
      " Pharmacists\u2019 compensation for pharmaceutical care activities may be especially important. Many pharmacies now charge a fee for pharmaceutical care services. (Some pharmacies have different fees depending on the level of services offered.) However, some insurance companies have been reluctant to pay for the services (Martin, 1994). It should be clear that pharmaceutical care regarding nonprescription drugs can be given without an intermediate class of drugs. When and if pharmaceutical care is established in community pharmacies, the need for an intermediate class will still need to be established. It will still be unclear what benefits would accrue from establishing such a class of drugs. Arguments such as we hear now will still be heard (for instance,",
      " more drugs would be switched and health care costs would be reduced). The difference would be that, at least in some areas, pharmacists would be doing what is necessary for an intermediate-drug class to be successful. How much, if anything, would be gained by establishing an intermediate class of drugs, even under these circumstances, is unclear. Omnibus Budget Reconciliation Act of 1990 Within the Omnibus Budget Reconciliation Act of 1990 are new requirements for the practice of pharmacy that went into effect on January 1, 1993, and that mandate prospective drug use reviews, counseling of patients, and maintenance of patient profiles for Medicaid recipients.",
      " Although these requirements cover only Medicaid beneficiaries, most (44) state boards of pharmacy have extended them to cover other patients receiving prescriptions. The goal, of course, is to improve health care through helping patients understand and follow medication directions better. Success is being evaluated by several studies funded by the Health Care Financing Administration. The applicable regulations require prospective drug use reviews before each Medicaid prescription is filled. Prescriptions are to be screened for potential problems from therapeutic duplication, drug-disease interactions, drug-drug interactions, incorrect dosage or duration of treatment, drug-allergy interactions, and clinical abuse or misuse. The pharmacist is to intervene, if necessary, before the prescription is dispensed.",
      " Additionally, in drug use reviews pharmacists must offer to counsel patients about their prescription medications. Exact counseling requirements are defined by each state. Information that might be passed on includes the name and description of the medication, the dosage, special directions and precautions, common severe side or adverse effects, interactions, therapeutic contraindications, and proper storage. Pharmacists must also make a \u201creasonable effort\u201d to obtain, record, and maintain at least the following information: the patient\u2019s name, address, telephone number, date of birth or age, and gender; the patient\u2019s individual history, where significant, including disease states, known allergies and drug reactions,",
      " and a comprehensive list of medications and relevant devices; the pharmacist\u2019s comments relevant to the patient\u2019s drug therapy. The reaction of practicing pharmacists to the new requirements has been mixed. Some see it as an opportunity while others are wary. While the law requires pharmacists to perform additional duties, it does not stipulate that they should be compensated for them, despite some pharmacies\u2019 having had to hire new employees and buy new computer software. Pharmacists are also concerned that lawsuits against them will increase. A 1994 survey conducted for the National Association of Boards of Pharmacy found that only 38 percent of all customers stated that someone in the pharmacy offered to have a pharmacist discuss their prescription medications with them.",
      " The president of the association stated that the results \u201cclearly indicate that too few patients and caregivers are being counseled on their prescription medications.\u201d However, the same study found that pharmacist counseling is perceived positively by the public. Seventy-one percent of offers to counsel were accepted, and the same percentage of patients thought that counseling was very important. The counseling that was done also appears to have been of a high quality, with 99 percent of respondents believing that the pharmacist had clearly presented the information and with pharmacists telling patients how and how often to use their medications at least 93 percent of the time. A large majority of patients were also told the dosage amount,",
      " the name (along with a description) of the medication, how long it should be taken, special directions or precautions, and any side effects. However, less than half of the pharmacists told patients how to monitor the effects of their medications and what they should do in the event of a missed dose. Liability Pharmacists\u2019 liability is becoming a concern throughout the United States.Data from the Chicago Insurance Company show that claims against pharmacists rose 22 percent from 1987 to 1990. Recent court rulings have expanded a pharmacist\u2019s liability under some circumstances. Pharmacists in some states may now be held liable if they fail to instruct a patient about the maximum safe dosage or fail to identify a potential adverse drug interaction for a prescribed drug.",
      " (Chapter 5 discusses pharmacists\u2019 liability in prescribing drugs in Florida.) A 1994 ruling by an Arizona appellate court also indicates that pharmacists\u2019 liability might be increasing. According to one source, a majority of court decisions involving pharmacy liability between 1986 and 1994 had concluded that pharmacists generally did not have a responsibility to warn patients of potential adverse effects of their drug regimen. However, in Lasley v. Shrake (880 P.2d 1129 (1994)), the appellate court ruled that pharmacists have a general duty of \u201creasonable care\u201d that could include a duty to warn. The case was sent back to the trial court to determine what constitutes reasonable care.",
      " In addition, some pharmacists have speculated that requirements of the Omnibus Budget Reconciliation Act of 1990 will also increase pharmacists\u2019 potential liability, as could pharmaceutical care. The U.S. Experience While the United States has essentially only two classes of drugs (prescription and general sale, the latter commonly referred to as OTCs), there are situations in which a pharmacist may supply a prescription drug to a patient without a physician\u2019s prescription and instances in which nonprescription drugs are not available for general sale. These include dispensing a small number of controlled substances (for instance, particular amounts of codeine) regulated under the Controlled Substances Act (Public Law 91-",
      "513, title II) and insulin. Similarly, in Florida pharmacists have been given the independent authority to dispense a limited number of prescription drugs without a doctor\u2019s prescription. Federal law requires that prescriptions be dispensed by \u201cpractitioners\u201d but allows individual states to determine who is a \u201cpractitioner.\u201d In Florida, this group includes pharmacists. Finally, in some states pharmacists have been given dependent prescribing authority\u2014that is, they may prescribe under the supervision of a physician. In this chapter, we describe these situations. The lessons that can be learned from them are relevant for both a fixed and transition class since, as with an intermediate class,",
      " pharmacists are expected to do more than simply dispense medications. Schedule V Controlled Substances and Insulin Under the Controlled Substances Act of 1970, the manufacturing, distribution, and dispensing of controlled substances (that is, psychoactive drugs) is regulated. The act\u2019s purpose, among other things, is to prevent drug abuse and dependence and strengthen law enforcement authority in the field of drug abuse. These drugs are placed into one of five categories (referred to as schedules) based on three criteria: currently accepted medical use, abuse potential, and human safety. Schedule V drugs have the fewest restrictions and may be made available by FDA without a prescription.",
      " They are defined as drugs having a low abuse potential relative to drugs or other substances in schedule IV, having a currently accepted medical use in treatment in the United States, and leading to limited physical or psychological dependence when abused relative to drugs or other substances in schedule IV. Schedule V drugs are classified as prescription or nonprescription products as determined under the Durham-Humphrey Amendment to the Federal Food, Drug, and Cosmetic Act of 1938. Some schedule V drugs classified as nonprescription under this act are available without a prescription in some states but not all. However, even when a prescription is not required, schedule V drugs are still available only from a pharmacist.",
      " Schedule V products are few. They are the narcotic buprenorphine, the stimulant pyrovalerone, and products containing specific amounts of the narcotics codeine, dihydrocodeine, ethylmorphine, diphenoxylate with atropine sulfate, opium, or difenoxin with atropine sulfate. Larger doses of these products (when available) are in a more restricted schedule. Sellers of schedule V products must follow federal and state requirements. For instance, in Connecticut the seller must keep a record containing \u201cthe full name and address of the person purchasing the medicinal preparation, in the handwriting of the purchaser,",
      " the name and quantity of the preparation sold and the time and date of sale.\u201d Federal regulations state more generally that the purchaser must be 18 years old or older and furnish suitable identification and that all transactions must be recorded by the dispensing pharmacist. While one purpose of the Controlled Substances Act is to improve public health, the requirements for selling a product differ from what is typically discussed for an intermediate class of drugs. Under the act, the focus is on recordkeeping; in an intermediate class of drugs, activities such as counseling and monitoring patients would be stressed. Nonetheless, the two are somewhat similar in that the pharmacist is involved in the sale and that reducing drug abuse is a goal.",
      " Any information on how successful the establishment of schedule V has been in reducing drug abuse would be helpful in evaluating the potential value of an intermediate class of drugs. However, we were unable to locate any studies evaluating the usefulness of schedule V in preventing abuse or monitoring the use of the products.Therefore, while it would be useful to know how successful schedule V has been, we have no data with which to find out. Insulin is also available without a prescription but restricted to dispensing by pharmacists in most states. However, a physician must first determine the patient\u2019s insulin needs and provide instructions for controlling diabetes. As with schedule V products, we located no studies that evaluated the effect of this restriction.",
      " The Florida Pharmacist Self-Care Consultant Law The Florida Pharmacist Self-Care Consultant Law (sometimes referred to as the Florida Pharmacist Prescribing Law), which went into effect on October 1, 1985, is unique in the United States. It allows pharmacists to independently prescribe specific categories of medications that under federal law may be dispensed only upon the prescription of a licensed practitioner; in Florida, this includes pharmacists. Perhaps the most important point about the law is that pharmacists are able to independently prescribe medicines\u2014that is, they are not operating under the supervision of a physician. Despite this independence, the law does limit what pharmacists can do.",
      " Pharmacists are not allowed to order injectable products, treat a pregnant patient or nursing mother, order more than a 34-day supply of the drug, prescribe refills unless specifically authorized to do so in the formulary, or order and dispense anyplace but in a pharmacy. Pharmacists recommending a drug must advise patients to see a physician if their condition does not improve at the end of the drug regimen. When the law went into effect, there were 35 drugs in the formulary. Since then, 7 drugs have been added, bringing the total to 42. Responsibility for the original list, as well as for adding and deleting drugs,",
      " rests with a seven-member committee. The law states that any drug sold as an OTC product under federal law may not be included in the formulary. Among the categories of drugs in the formulary are oral analgesics, antinausea preparations, and antihistamines and decongestants. Under the law, pharmacists are not required to perform the prescribing role. However, if they choose to do so, a number of requirements pertain, including the labeling of products, creating prescriptions, and maintaining patients\u2019 profiles. (More detail on the products in the formulary and the requirements for pharmacists is in appendix V.) Evaluation In 1990,",
      " a group of researchers from the College of Pharmacy at the University of Florida reported on the effect of Florida\u2019s Pharmacist Self-Care Consultant Law during its second and third years of operation (Eng et al., 1990). Four methods were used in the study: a survey of pharmacists, pharmacy audits, shopper visits, and a survey of consumers. The following four subsections summarize the results that are most relevant to our report. Survey of Pharmacists In a mail survey of pharmacists, Eng and colleagues found that pharmacists infrequently prescribed drugs from the formulary. Thirty-three percent of community pharmacists had prescribed a drug at least once.",
      " Of this group, 60 percent had prescribed less than one drug per month. The principal reasons given for not prescribing were that drugs in the formulary offered no advantages over nonprescription drugs, prescribing increased the risk of liability, and time was too short. Conversely, the main reasons for prescribing were that it helped the patient maximize self-care, used the pharmacist\u2019s knowledge, and saved the patient money. No differences were found between the prescribers and nonprescribers with respect to gender, professional degree, position (for instance, prescription department manager and pharmacy owner), and prescription volume. The study authors did find that pharmacists with fewer years of practice were more likely to prescribe than those with more years of practice,",
      " and independent community pharmacists were more likely to prescribe than chain pharmacists. Pharmacy Audits The law requires that if a pharmacist prescribes a drug, the pharmacy must maintain a profile of the patient. Of 19 pharmacies that reported that their pharmacists prescribed drugs, only 9 maintained the required profiles. The audits showed that pharmacists\u2019 prescriptions made up a small proportion of the total number of prescriptions: less than 0.25 percent of all the medications that were prescribed in the 9 pharmacies. These prescriptions were primarily limited to topical pediculicides (lindane shampoo), oral analgesics, and otic (ear)",
      " analgesics. These categories constituted 82 percent of all pharmacists\u2019 prescriptions. Shoppers\u2019 Visits Trained shoppers found that the quality of the pharmacists\u2019 performance in 21 community pharmacies was high in two areas: (1) following the law\u2019s labeling and quantity limitation requirements and (2) practicing the art of communication. In more than 70 percent of the cases, the shoppers found that the pharmacist was friendly, provided some privacy, and appeared to be interested. However, the pharmacists spent very little time in assessing and responding to medical complaints presented by patients. Less than 17 percent of the 62 pharmacists asked about chronic medical conditions,",
      " medication allergies, and current prescription and nonprescription drugs that the patients were taking. Only 5 percent of the pharmacists asked about the onset, duration, and frequency of the medical problem while 13 percent asked if they had tried other medications. In less than 40 percent of the visits, pharmacists provided information on topics such as the number of doses to be taken per day, the duration of the treatment, and side effects. The authors noted that when counseling was provided, the information was generally accurate but incomplete. The performance of the 21 pharmacists in three scenarios was mixed. In a scenario leading to the recommendation of an OTC product,",
      " all 21 pharmacists recommended the correct product. However, for a scenario that should have led to referral to a physician, only 1 pharmacist made the referral. In a scenario leading to the pharmacist\u2019s prescribing a product, the patient asked for a specific shampoo that was in the formulary; only 5 pharmacists prescribed it. The four reasons given for not prescribing were that liability insurance did not cover the pharmacist\u2019s prescribing, it is against company policy to prescribe, a prescription is needed, and the particular pharmacist does not prescribe. Consumer Survey Consumers in the pharmacies were surveyed to determine their attitudes toward receiving advice from pharmacists. Three principal reasons were given for seeking advice from pharmacists:",
      " confidence in their abilities, convenience, and the problem\u2019s not being serious enough to consult a physician. All 149 of the patients who answered the question on how pleased they were with the pharmacist\u2019s actions indicated that they were satisfied. Ninety percent of consumers said that they would follow the pharmacists\u2019 advice regarding seeing their physician or taking a recommended OTC product or pharmacist prescribed drug. A small majority (52.3 percent) also indicated a willingness to pay a fee for a pharmacist\u2019s services if a drug were prescribed by the pharmacist but not if the pharmacist only provided advice, recommended a nonprescription product, or referred the patient to a doctor.",
      " Of those willing to pay a separate fee, one third were willing to pay more than $5.00. Officials\u2019 Assessment of the Effect of the Law Officials we met with in Florida invariably thought that the effect of the law had been minimal because few pharmacists were using their prescribing authority. One official who had previously done pharmacy inspections in Florida estimated that 1 in 50 pharmacists actually prescribed drugs. The officials\u2019 reasons for the lack of prescribing mirrored those given by the pharmacists themselves. The first involved the drugs in the formulary. There is a belief that the drug categories available to the pharmacists and the specific drugs in them are not very useful because some OTC products work just as well.",
      " Therefore, there is no incentive for a pharmacist to use one of the drugs in the formulary to treat patients. The second explanation involved the liability issue. Individual pharmacists were concerned that they would increase their liability risk if they prescribed. Insurance companies did not want to insure individuals who prescribed drugs. The policies of some pharmacists who prescribed were canceled while others had riders attached. At one point, there was an insurance surcharge if a pharmacist wanted to prescribe. The third common reason given for pharmacists\u2019 not prescribing was the presence of time constraints. As shown in appendix V, a number of recordkeeping requirements are associated with prescribing a drug.",
      " They take time (one official estimated 10 minutes per prescription). One official tied the recordkeeping requirements to the liability issue, noting that the paperwork involved with prescribing brings pharmacists into the spotlight and makes them more fearful of liability. Comparisons With Studies in Other Countries In chapter 4, we discussed the practice of pharmacy in the study countries, including reports on pharmacists\u2019 counseling on nonprescription drugs. The experiences in Florida are generally similar to those in the other countries. For example, Florida is similar to Australia\u2014the one country where pharmacists are ever required to maintain patient profiles on nonprescription drug use\u2014in that pharmacists often did not maintain the required profiles.",
      " Recordkeeping requirements were seen in both places as being excessive. In Florida, this was attributed to the requirements taking too much time, while in Australia the requirements were viewed as covering too many drugs. Similarly, in counseling their patients, pharmacists in other countries and Florida did not gather sufficient information from them on such items as medical conditions and other medications being taken. In many cases, counseling was more incomplete than inappropriate. Consumers\u2019 views toward pharmacist counseling were also quite similar. Customers in Florida were generally positive toward pharmacists\u2019 counseling, but they were less willing to pay for advice from pharmacists if only a nonprescription drug was involved. A study in Canada also found that most customers did not want advice on nonprescription drugs.",
      " Pharmacists as Dependent Prescribers While pharmacists in Florida have been given independent (although limited) prescribing authority, some pharmacists elsewhere in the United States have been given dependent prescribing authority. Typically, the pharmacists are constrained by protocols established by supervisory physicians. Dependent prescribing has not normally been discussed in terms of an intermediate class of drugs, but it does indicate roles that pharmacists have played in addition to the traditional one of dispensing medications. Because these activities are outside the scope of this report, we do not evaluate them here. Instead, we only describe alternative roles that pharmacists sometime have in the United States. Pharmacists in the Indian Health Service and the Veterans Administration The Indian Health Service (IHS), part of the U.S.",
      " Public Health Service in the Department of Health and Human Services, provides health services to American Indians and Alaskan Natives, including hospital and ambulatory medical care. IHS pharmacists are authorized to provide certain prescription drugs directly to patients without a physician\u2019s authorization. At the outset of the program, the pharmacists could modify doses, dosage forms, and quantities of medicines and make therapeutic substitution of medicines. Later, their responsibilities were expanded to include treating minor acute illness and monitoring patients receiving chronic drug therapy between physician visits. The activities of pharmacists are defined by approved protocols that indicate their functions, responsibilities, and prescribing privileges. The protocols are organized by disease and include such elements as the criteria for inclusion in pharmacy-based care,",
      " specific definitions of the role of the referring physician or nurse and the pharmacist, criteria for periodic visits by physicians to review a patient\u2019s status and the quality of care the pharmacist delivers, and drug therapy. In March 1995, the Department of Veterans Affairs (VA) issued a directive establishing medication prescribing authority for, among others, clinical pharmacy specialists. The directive defines inpatient and outpatient prescribing authority for clinical pharmacy specialists and other professionals, it lists the requirements for pharmacists to be given prescription authority, and it notes that each professional given the prescription authority will be limited by \u201ca locally-determined scope of practice\u201d that indicates his or her authority.",
      " Prescriptions written within the scope of practice do not require a physician\u2019s signature, but those outside the scope of practice do. Dependent Prescribing Authority in the States Nine states have established dependent prescribing privileges for pharmacists. In California, Nevada, and North Dakota, pharmacists are allowed to prescribe only in institutional settings; there are no such restrictions in the six other states. Only in New Mexico is special training required for pharmacists to prescribe. In these nine states, prescribing is done by a protocol that involves a voluntary agreement between the pharmacist and the physician. The pharmacist is responsible for initiating, monitoring, and modifying drug therapy while the physician supervises the process and overall patient care.",
      " For example, in Washington, all practicing pharmacists are eligible to initiate and modify drug therapy by protocol, but a written agreement must be developed between the pharmacist and an authorized prescriber. The agreement must be sent to the Washington State Board of Pharmacy for review. It must include, among other items, the type of prescribing authority to be exercised (including types of medical conditions and drugs or drug categories), documentation of prescriptive activities to be performed, and a mechanism for communicating with the authorizing practitioner. North Dakota recently gave pharmacists the right to prescribe but only in institutional settings (a hospital, skilled nursing facility, or swing bed facility)",
      " in which a patient\u2019s medical records are readily available to the physician. Following diagnosis and initial patient assessment by a licensed physician, pharmacists in these settings (under the supervision of the same licensed physician) can initiate or modify drug therapy. Summary and Conclusions The purpose of this report was to examine the structure and operation of drug distribution systems in other countries in order to better understand the potential advantages and disadvantages of establishing an intermediate class of drugs in the United States. The assumption is that while the experiences of other countries might not be models for the United States, they might provide a useful starting point for discussion. This chapter summarizes our findings and presents our conclusions.",
      " Extant Studies The two-tier U.S. drug distribution system with its prescription and general sale classes is unique among the 10 countries we studied. These countries restrict the sale of at least some nonprescription drugs to pharmacies or personal sale by a pharmacist. However, their drug distribution systems differ, and no efforts have been made to study systematically the consequences of the different systems. We found no systematic evidence to support the superiority of one drug distribution system over another. Drug Distribution Systems The Benefits of a Transition Class It is unclear how some of the benefits of a transition class would be realized in the United States. The experiences of other countries cannot be used to assess its usefulness because their intermediate classes are not used in this manner.",
      " Instead, they are generally viewed as fixed classes into which drugs are placed permanently. The intermediate classes are used solely to restrict access to drugs, not to facilitate their movement to general sale. It is unclear whether a transition class could be effective in monitoring adverse drug reactions while a drug is being considered for general sale. Several officials, questioning the usefulness of the data that would be collected, argued that toxicity profiles are well established through clinical research and experience with drugs as prescription products. Additionally, the data that would be collected when a drug was in the transition class would not be from well-controlled studies. The conclusions that could be drawn from the data would not be as well supported as conclusions from other types of studies.",
      " If an intermediate class were used to increase knowledge to better assess drugs for switching, pharmacists would have to keep records on patients\u2019 drug purchases. This would allow the purchase of a drug to be linked with adverse outcomes. Pharmacists would have to record symptoms, other medical conditions, the practitioners who recommended the product, and the amount purchased. They would also have to follow up, recording experiences with a product such as efficacy, side effects, and interactions with food, drugs, and medical conditions. These recordkeeping requirements would take time and add costs; much less demanding recordkeeping requirements deter pharmacists in Florida from prescribing such drugs. Similarly, in the Australian state of Victoria,",
      " we found that pharmacists often did not maintain records of patients\u2019 use of pharmacist-class drugs, despite being required to do so. The Use of an Intermediate Class to Prevent Abuse Officials in the United States and abroad thought that an intermediate class, whether fixed or transition, would do little to prevent drug abuse. While having to buy drugs in pharmacies rather than in other outlets would be a deterrent (for instance, a consumer would have to talk to the pharmacist or would be able to buy only a small amount of the drug), this safeguard would be relatively easy to circumvent. Consumers could visit the same pharmacy on numerous occasions or go to several pharmacies to purchase the drug.",
      " Experiences in Australia and Germany in which pharmacist-controlled nonprescription drugs were either used or purchased improperly are consistent with these conclusions. Drug Expenditures All 10 countries control the prices of prescription drugs but not necessarily nonprescription products. Consequently, we could not draw useful lessons for the United States (where neither prescription nor nonprescription prices are controlled) on how prices change when a drug is switched. We did find some evidence from the United States and the United Kingdom that the price of a drug decreases when it is switched from prescription to nonprescription status. However, the effect on price of the presence or absence of an intermediate drug class has not been assessed.",
      " We also found that moving a drug to nonprescription status did not necessarily reduce health care costs. An incentive is created to obtain a drug with a prescription when such drugs remain reimbursable if they are prescribed but not if bought without a prescription. This can occur if patients have less out-of-pocket costs (for instance, because of a small copayment) for a prescription drug than for a nonprescription product, even if the nonprescription product is less expensive. The European Union The European Union has decided not to require that the member countries establish a particular drug distribution system. The European Union was not convinced of the superiority of any particular system.",
      " Each member country will be allowed to establish whatever drug distribution it wants, provided the requirements for domestic producers and importers are the same. The European Union has established criteria for distinguishing prescription from nonprescription drugs in the hope that drugs in these categories will become consistent from country to country. Access to Pharmaceuticals Number of Pharmacies and Drugstores There are approximately 54,000 community pharmacies in the United States. This is substantially less per capita than 6 of the countries studied (if drugstores are included), while 2 other countries and the Canadian province of Ontario have approximately the same number as the United States. Only Denmark and Sweden have many fewer community pharmacies per capita than the United States.",
      " This suggests that limiting the sale of some nonprescription drugs to pharmacies in the United States would create somewhat greater access problems than in 6 of the countries. However, this is complicated by the number of other outlets such as mail-order and managed care pharmacies that might choose to sell these drugs. If such outlets chose to sell these products, the reduced access to these drugs from limiting them to sale in pharmacies could be offset. While the number of pharmacies gives some indication of access, the distance to a pharmacy is also very important. The distance that people live from pharmacies varies greatly in the United States. The nearest pharmacy can be 100 or more miles away.",
      " Restricting the sale of some nonprescription drugs to pharmacies would give individuals who have ready access to a pharmacy a greater number of nonprescription drugs from which to choose. However, if the drugs were to come from the prescription class, relative access between customers with and without ready access to a pharmacy would remain the same. The drugs would still be available for sale only in pharmacies; the difference would be that a prescription would not be required. Self-Selection of Drugs Of the countries studied, only the United States allows self-selection of all nonprescription drugs. Denmark, France, and Italy do not allow self-service for any drugs,",
      " while the remaining countries allow it for some but not all nonprescription products. If the United States were to establish an intermediate class of drugs (whether fixed or transition), it might not allow the self-selection of these products, since the theoretical benefits associated with the class would be difficult to achieve without some control on their distribution in pharmacies. This could change the way nonprescription drug purchases are made, since comparisons between products would be more difficult for consumers to make, not being able to select intermediate-class products from the shelf personally. Classification of Drugs Our examination of the classification of 14 selected drugs in the study countries indicated no clear pattern of increased nonprescription drug availability because of the existence of a pharmacist or pharmacy class.",
      " It appears that other factors in addition to or instead of the existence of a pharmacist or pharmacy class account for differences in drug classification between the countries. Despite the absence of an intermediate class, the United States allows the sale of some of the 14 drugs without a prescription that many other countries restrict to prescription sale. Conversely, the United States restricts to prescription sale some drugs that other countries allow to be sold without a prescription but only in a pharmacist or pharmacy class. It also appears that access in one country relative to another depends in part on how access is defined. More of the 14 drugs were available for sale outside pharmacies in the United States than in any of the other countries.",
      " However, the United States restricts the sale of more of these drugs to prescription status than do 5 of the countries. These drugs, while available for sale without a prescription, are restricted to a pharmacist class. Thus, if the criterion used for defining access is the number of drugs available for general sale, the United States has the most accessible system. However, if the criterion is the number of drugs available without a prescription, the United States is somewhere in the middle in terms of accessibility. Pharmacy Practice Officials in the countries we visited and the literature on pharmacist counseling generally agree that the theory of pharmacy practice diverges from the reality. The theory of pharmacy practice involves (and the success of a fixed-intermediate or transition class requires), for example,",
      " the complete and appropriate counseling of patients on such issues as dosing instructions and potential adverse drug reactions, as well as maintaining patient profiles. However, pharmacists have often not performed these roles (especially for nonprescription drugs), either in the United States or abroad, even when doing so is expected and, in some cases, required. Pharmacist counseling, as practiced, is less frequent and less thorough than desired, although it has improved over time. In efforts in the United States and elsewhere to increase the role of pharmacists, professional associations and academics are advocating the idea of \u201cpharmaceutical care,\u201d with its emphasis on monitoring a patient\u2019s drug therapy rather than on dispensing the drugs.",
      " There is evidence that in institutional settings such as hospitals, there are benefits from pharmaceutical care. However, pharmaceutical care is only now being implemented in community pharmacies and its value has yet to be established. Improved drug use is often cited as a justification for an intermediate drug class, and evidence for it gives support for expanding the role of pharmacists in general. Such an expansion does not necessitate creating an additional drug class. Indeed, the current system would benefit from an improvement in pharmacist counseling. The Florida Experience The Florida Pharmacist Self-Care Consultant Law has had very little effect on the practice of pharmacy. Pharmacists rarely prescribe drugs in the formulary.",
      " This is attributed to (1) drugs being available without a prescription that are just as effective as the ones in the formulary, (2) the perception of increased liability, and (3) burdensome recordkeeping requirements. Conclusions Other countries\u2019 and Florida\u2019s experiences do not support a fundamental change in the drug distribution system of the United States such as creating an intermediate class of drugs, whether fixed or transition, at this time. Its benefits are unclear. No evidence at this time shows the overall superiority of a drug distribution system that restricts the sale of at least some nonprescription drugs to pharmacies. However, it should also be clear that there is no evidence that systems that do this are necessarily inferior to drug distribution systems that allow some or all nonprescription drugs to be sold outside pharmacies.",
      " The evidence that does exist tends to undermine the contention that major benefits are being obtained in countries with a pharmacist or pharmacy class. Such a class is not being used to facilitate the movement of drugs to sale outside pharmacies. Also, pharmacist counseling as it is currently practiced does not support the goals of either a fixed or a transition class. Pharmacists are not regularly counseling patients, maintaining patient profiles, or monitoring for adverse drug effects. Thus, there is no evidence to show that the role that U.S. pharmacists would have to play to support the appropriate use of an intermediate class of drugs (either fixed or transition) would be fulfilled reliably and effectively.",
      " The evidence indicates that at this time major improvements in nonprescription drug use are unlikely to result from restricting the sale of some OTCs to pharmacies or by pharmacists, nor are the safeguards for pharmacy- or pharmacist-class drugs that would have otherwise remained in the prescription class likely to be sufficient.\n"
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  {
    "id": 110,
    "question": null,
    "answer": "U.S. policymakers and industry groups are concerned that some foreign textile and apparel imports are entering the United States fraudulently and displacing U.S. textile and apparel industry workers. Congress mandated GAO to assess U.S. Customs and Border Protection's (CBP) system for monitoring and enforcing textile transshipment and make recommendations for improvements, as needed. Therefore, GAO reviewed (1) how CBP identifies potential illegal textile transshipment, (2) how well CBP's textile review process works to prevent illegal textile transshipment, and (3) how effectively CBP uses its in-bond system to monitor foreign textiles transiting the United States. To identify potential illegal textile transshipments, CBP uses a targeting process that relies on analyzing available trade data to focus limited inspection and enforcement resources on the most high-risk activity. In 2002, CBP targeted about 2,500 textile shipments out of more than 3 million processed, or less than 0.01 percent. Given resource constraints at CBP ports, CBP's textile review process for preventing illegal textile transshipment increasingly depends on information from foreign factory visits that CBP conducts, based on the targeting results. However, CBP's foreign factory visit reports are not always finalized and provided to ports, other agencies, or the foreign governments for timely follow-up. Further, after the global textile quotas end in 2005, CBP will lose its authority to conduct foreign factory visits in former quota countries. U.S. overseas Attache offices and cooperative efforts by foreign governments can supplement information provided to the ports. Under CBP's in-bond system, foreign textiles and apparel can travel through the United States before formally entering U.S. commerce or being exported to a foreign country. However, weak internal controls in this system enable cargo to be illegally diverted from its supposed destination, thus circumventing quota restrictions and payment of duties. Moreover, CBP's penalties do not deter in-bond diversion. Bond amounts can be set considerably lower than the value of the cargo, and violators may not view the low payments as a deterrent against diverting their cargo.\n",
    "docs": [
      "Background The United States, like the European Union and Canada, maintains annual  quotas on textile and apparel imports from various supplier countries.  When a country\u2019s quota fills up on a certain category of merchandise, that  country\u2019s exporters may try to find ways to transship its merchandise  through another country whose quota is not yet filled or that does not have  a quota.  Transshipment may also occur because obtaining quota can be  very expensive and the exporters want to avoid this expense.  The actual  illegal act of transshipment takes place when false information is provided  regarding the country-of-origin to make it appear that the merchandise was  made in the transited country.",
      "   The effects of the illegal act of  transshipment are felt in both the transited country (potentially displacing  its manufactured exports) and the United States, increasing competition  for the U.S. textile and apparel industry. These U.S. quotas, embodied in approximately 45 bilateral textile  agreements, are scheduled for elimination on January 1, 2005, in  accordance with the 1995 World Trade Organization (WTO) Agreement on  Textiles and Clothing.  However, U.S. quotas will remain for approximately  five countries that are not members of the WTO and for specific product  categories when trade complaint actions,",
      " resulting in reinstated quotas, are  approved.  Incentives to engage in transshipment will also continue due to  the differing tariff levels resulting from the various bilateral or multilateral  free trade agreements and preference programs that the United States has  signed with some countries.  U.S. tariffs on certain types of sensitive  textile and apparel products range up to 33 percent, but such tariffs can  fall to zero for imports from trade agreement countries.  As with quotas,  manufacturers from countries facing higher U.S. tariffs may find ways to  transship their merchandise to countries benefiting from lower or no U.S.  tariffs,",
      " illegally indicate the merchandise\u2019s country-of-origin, and enter the  merchandise into the U.S. market. Imports Nearly Double over  Past Decade, While  Production and  Employment Decline Over the past decade, U.S. imports of textile and apparel products have  grown significantly, while domestic production and employment have  declined.  For example, textile and apparel imports in 2002 were about $81  billion, nearly double their value in 1993.  The largest suppliers to the U.S.  market in 2002 were China (15 percent), Mexico (12 percent), and Central  America and the Caribbean (as a group,",
      " 12 percent).  See appendix II for  more information on textile and apparel trade, production, and  employment. While imports have grown over the decade, domestic production and  employment have declined.  Figure 1 shows U.S. domestic production,  imports, exports, and employment in the U.S. textile and apparel sector.   From 1993 through 2001 (latest year available), textile and apparel  production (as measured by shipments to the U.S. market or for export)  declined by 11 percent, and employment fell by 38 percent.  However, the  United States still maintains significant production (over $130 billion)",
      " and  employment (about 850,000 jobs) in the textile and apparel sector. U.S. Government Roles in  Monitoring Textile  Transshipment CBP has responsibility for ensuring that all goods entering the United  States do so legally.  It is responsible for enforcing quotas and tariff  preferences under trade agreements, laws, and the directives of the  interagency Committee for the Implementation of Textile Agreements  (CITA) involving the import of textiles and wearing apparel.  CBP has  established a Textile Working Group under its high-level Trade Strategy  Board that prepares an annual strategy for textiles and apparel.  This  annual strategy establishes national priorities and an action plan to carry  out its goals.",
      " Within the framework of this overall strategy, CBP  administers quotas for textiles, processes textile and apparel imports at  U.S. ports, conducts Textile Production Verification Team (TPVT) visits to  foreign countries, provides technical input for trade agreement  negotiations, and monitors existing trade agreements.  In addition to staff  at CBP\u2019s headquarters, officials at 20 Field Operations Offices and more  than 300 CBP ports of entry oversee the entry of all goods entering the  United States.   CBP has a specific unit, the Strategic Trade Center (STC) in  New York City, assigned to analyze textile trade data and other information  sources for the targeting process.",
      " In addition to CBP, the departments of Commerce, Justice, State, and  Treasury, and the Office of the U.S. Trade Representative (USTR) also play  a role in transshipment issues.  Further, as an interagency committee, CITA  determines when market-disrupting factors exist, supervises the  implementation of textile trade agreements, coordinates U.S.  administration efforts to combat illegal textile and apparel transshipment,  and administers the phase-out of textile and apparel quotas on WTO  countries required under the 1995 Agreement on Textiles and Clothing. CBP Uses a Targeting  Process to Identify  Potential Textile  Transshipment CBP\u2019s process for identifying potential illegal textile transshipments  depends on targeting suspicious activity by analyzing available data and  intelligence.",
      "  Due to increased trade volumes and shifted priorities, CBP  seeks to focus its limited enforcement resources on the most suspect  activity.  CBP targets countries, manufacturers, shipments, and importers  that it determines to be at a higher risk for textile transshipment.  First,  CBP identifies the countries in which trade flows and other information  indicate a high potential for transshipment.  CBP then targets selected  manufacturers in those high-risk countries for overseas factory visits.   Information from the factory visits is then used to target shipments to the  United States for review and potential exclusions or penalties.  Finally, CBP  also targets importers based on high-risk activity and conducts internal  control audits that include verifying that controls against transshipment  exist.",
      "  However, CBP selects only a small share of foreign factories and  shipments for review due to limited resources. Targeting Is Essential, Due  to High Trade Volumes and  Shifting Priorities for  Resources In response to a rapidly growing volume of trade at the border and limited  resources for enforcement, CBP relies on a targeting process to identify  shipments that have a high risk of being transshipped.  According to CBP  officials, trade growth and expanding law enforcement efforts have nearly  overwhelmed its staff and resources.  In addition, CBP\u2019s modernization of  its processes and technology, as called for in the Customs Modernization  and Informed Compliance Act of 1993,",
      " recognizes that the nearly 25 million  entries (shipments) CBP processes annually cannot all be inspected.   Furthermore, since the terrorist attacks of September 11, 2001, CBP has  shifted resources to security concerns as its priority mission.   Inspection  and some other port-level staff have been diverted from detecting  commercial violations to ensuring security.  In addition, during higher alert  levels (such as code orange and above), additional staff is also refocused to  assist in port and national security. CBP Targets Risky  Countries, Manufacturers,  Shipments, and Importers CBP\u2019s process of targeting high-risk activity begins by identifying the  countries that supply textile imports that pose the greatest risk of illegal  textile transshipment.",
      "   Applying a risk-management approach, CBP  targets shipments for review based on trade data, such as sudden surges of  products restricted by quotas from nonquota countries, production data,  results of past factory and port inspections, suspicious patterns of  behavior, and tips from the private sector.  CBP then reviews the targeted  shipments for evidence of transshipment, while expediting the processing  of nontargeted shipments.  From its country-level review, CBP targets 16  countries per year on average, and actually visits 11 of them on average.   For the countries CBP selects, it targets on average about 45 high-risk  manufacturing plants to visit.",
      "  These visits seek to find evidence of  transshipment or to verify that the factories are in compliance with U.S.  trade laws and regulations regarding the origin of the goods exported to the  United States.  If problems are found, CBP uses that information to target  shipments (entries) entering the United States for possible detention and  exclusion.  CBP targeted 2,482 shipments in 2002.  CBP has begun to target  high-risk importers\u2019 shipments for review while also conducting internal  audits of selected importers.  Figure 2 shows the general process CBP uses  to target suspicious activity.",
      " Before the beginning of each fiscal year, CBP analyzes trade and  production data, as well as other available intelligence, to assess the  relative risk of each major U.S. trade partner for engaging in illegal textile  transshipment.  CBP generally identifies 16 countries a year on average as  being at high risk for transshipment or other trade agreement violations  and updates its assessment at least once during the fiscal year.  The risk  level (high, moderate, or low) is based largely on the volume of trade in  sensitive textile categories, such as certain types of knit apparel and fabric,  and the likelihood of transshipment through that country.",
      "  For example, as  of November 1, 2003, quotas on men and women\u2019s knit shirts and blouses  were approximately 80 percent or more filled for China, India, and  Indonesia.  This situation creates an incentive for producers in those  countries concerned that the quotas will close before the end of the year to  transship their goods.  CBP may increase its monitoring of trade in these  products through neighboring countries.  The likelihood of transshipment  is a qualitative judgment that CBP makes based on available intelligence. Countries with high production capabilities and subject to restrictive  quotas and tariffs, such as China,",
      " India, and Pakistan, are considered  potential source countries.  These countries could produce and export to  the United States far more textile and apparel products than U.S. quotas  allow.  Countries that have relatively open access to the U.S. market, either  through relatively generous quotas (Hong Kong and Macau) or trade  preferences programs (Central America and the Caribbean, and sub- Saharan Africa) are considered potential transit points for textile  transshipment.  CBP focuses its efforts on targeting and reviewing goods  from these transit countries rather than source countries because any  evidence that goods were actually produced elsewhere, such as closed  factories or factories without the necessary machinery to produce such  shipments,",
      " would be found in the transit country. After selecting the high-risk countries, CBP then selects a subset of these  countries to visit during the year to conduct TPVT factory visits.  During  the past 4 years, CBP conducted 42 TPVT visits to 22 countries.  Cambodia,  Hong Kong, Macau, and Taiwan in Asia, and El Salvador in Latin America  received three or more visits between 2000 and 2003.  Table 1 shows the  U.S. trade partners that CBP visited on a TPVT trip in those years, along  with their share of U.S.",
      " imports of textile and apparel products in 2002.   For some U.S. trade partners, their share of overall textile and apparel  trade may be relatively low, but for certain products they are significant  suppliers.  For example, although Thailand is the tenth largest supplier  overall, it is the fifth largest supplier of cotton bed sheets. The number of countries CBP visits each year has varied, but from 1996  through 2003 CBP visited 11 countries per year on average.  Although the  overall size of trade is an important factor in targeting countries, CBP also  looks at a range of information in making its determination.",
      "  For example,  several relatively small suppliers, such as Nicaragua, Swaziland, and  Botswana, were visited because they receive special preferences as  developing countries.  Also, Vietnam, which only accounted for about 1  percent of U.S. imports in 2002, was selected partly due to trade anomalies  occurring during a period when Vietnam\u2019s quota-free access to the U.S.  market made it a potential transit country. Figure 3 describes the case of  Vietnam as an example of the role and limitations of the targeting process.   However, Canada and Mexico are both top U.S. trade partners and  designated as high-risk countries,",
      " but CBP has not made any TPVT visits.   Under the NAFTA, producers in these countries are subject to visits to  verify NAFTA eligibility.  However, these visits do not focus on  transshipment specifically and although CBP has sought to send a TPVT  visit to Canada, it has not yet been successful in persuading the Canadian  government. CBP targets about 45 factories on average per country visit, although this  number varies depending on the characteristics of each country.  For  example, the proximity of factories to one another and the length of trip (1  to 2 weeks) will affect the number of factories that can be visited.",
      "  The  importance of the trade partner in U.S. textile and apparel trade will affect  the length of the trip and number of factories targeted.  On the November  2003 Hong Kong TPVT trip, for example, CBP visited over 200 factories.   Before undertaking a TPVT visit in a foreign country, CBP conducts a  special targeting session to identify the manufacturers in that country that  it suspects may be involved in textile transshipment.  Similar to its  targeting of countries, CBP import and trade specialists consider the recent  trade flows, available intelligence, experience from past factory visits, and  reviews of merchandise at U.S.",
      " ports in order to narrow down from the  total list of factories in the country to a list of the highest-risk factories that  they will target for a visit.  The process involves collaboration between  the STC trade specialists, the port-level import specialists that will travel to  the factories, and headquarters staff. During the past 4 years, CBP found that about half the manufacturers that it  targeted as high risk were actually found by TPVT visits to have serious  problems.  These problems included actual evidence of transshipment,  evidence that indicated a high risk of potential transshipment, permanently  closed factories, and factories that refused admission to CBP officials.",
      "   Each of these problems is considered a sufficient reason to review and  detain shipments from these factories as they reach U.S. ports.  In addition,  some factories were found to warrant additional monitoring by the STC.   They were listed as low risk and their shipments were not targeted for  review when they reached U.S. ports. Although the share of targeted factories found to have problems is  relatively high, the factories that CBP targeted were those that generally  had some indication of risk, based on intelligence or trade data analysis.  Also, the targeted manufacturers that were visited (about 1,700) during the  4-year period generally make up a small share of the total number of  manufacturers in each country.",
      "  However, for smaller trade partners, such  as those that receive trade preferences under the Caribbean Basin Trade  Partnership Act (CBTPA) or African Growth and Opportunity Act (AGOA),  CBP can visit a sizable share of the factories within the country because  their overall number of factories is smaller.  For El Salvador and Nicaragua,  CBP has visited about 10 percent of the factories, and for Swaziland and  Botswana, CBP has visited about 22 and 28 percent of the factories,  respectively. Due to the small share of factories that CBP can actually visit, the STC says  it is developing evaluation tools to improve CBP\u2019s process of targeting  foreign manufacturers for TPVT visits.",
      "  Currently, the STC tracks the  number and results of the TPVT visits in order to assess whether the  targeted factories were actually found to have problems by the TPVT visits.   CBP says it is developing a database to keep track of the specific criteria it  used to target manufacturers for TPVT visits.  It plans to use the results of  the TPVT visits to identify which criteria were most useful in its targeting  process. CBP Identified More Than 2,400  Shipments in 2002 In 2002, CBP identified 2,482 high-risk shipments (entries) for greater  scrutiny or review\u2014less than one-tenth of 1 percent of the more than 3  million textile and apparel entries that year.",
      "  CBP actually reviewed 77  percent of the shipments that were identified.  Of the shipments reviewed,  about 24 percent resulted in exclusions from U.S. commerce, 2 percent in  penalties, and 1 percent in seizures.  To choose shipments for review, CBP  headquarters uses information collected from TPVT factory visits as well as  other intelligence information to create criteria for its targeting system.   When shipments match these criteria, they are flagged at the ports for a  review.  For instance, when a TPVT visit finds that a foreign factory has  been permanently closed, CBP will place this information in its automated  system to be used as criteria for targeting any shipments destined for entry  into the United States that claimed to have been produced in that factory.",
      "   In addition, other information such as prior shipment reviews or  intelligence information concerning possible illegal activity by  manufacturers, importers, or other parties can be entered as criteria to stop  shipments.  Criteria can be entered nationally for all ports, or individual  ports can add criteria locally that only affect shipments to their own port. CBP Identifies High-Risk  Importers for Review and Audit CBP has recently begun to increase targeting of U.S. importers of textile  and apparel products who demonstrate patterns of suspicious behavior.   For example, CBP identified more than 40 importers in the past year who  have a pattern of sourcing from foreign manufacturers involved in  transshipment.",
      "  According to CBP officials, they can pursue penalties  against these companies, because this pattern of behavior may violate  reasonable care provisions of U.S. trade laws.  CBP also uses this  information and other intelligence it collects to target for review shipments  that these importers receive.  In addition to this targeting, CBP\u2019s Regulatory  Audit division has traditionally conducted internal control audits of  importers, and it uses a separate targeting process to identify the importers  that it will audit.  One component of its audits focuses on whether the  importer has and applies internal controls for transshipment.  The STC has  also provided information about the companies it targets to Regulatory  Audit for its own investigations or audits.",
      " Number of Targets  Identified Is Limited by CBP  Resource Constraints Although CBP\u2019s textile transshipment strategy relies on targeting, resource  constraints limit both the number of targets that CBP generates and the  type of targeting analysis that CBP can conduct.  First, the number of  foreign factories and shipments targeted is limited by the ability of CBP to  conduct the reviews.  As previously discussed, CBP is able to visit only a  small share of the foreign factories exporting textile and apparel products  to the United States. The results of these visits then provide key  information for targeting shipments for review as they arrive at U.S.",
      " ports.   Similarly, CBP targets only a small share of textile and apparel shipments  to U.S. ports for review.  CBP officials with whom we met said CBP limits  the number of shipments it targets for port reviews because port staff are  unable to effectively examine a significantly larger number of shipments. In addition to resource constraints due to security (previously discussed),  reviewing shipments for textile transshipment is labor intensive and  involves more than a simple visual inspection of the merchandise.  Unlike  cases involving narcotics in which physical inspections alone can lead to  discovery of the drugs, physical inspections of textile or apparel products  rarely provide sufficient evidence of transshipment.",
      "  Port staff generally  needs to scrutinize detailed production documentation, which is time  consuming, to determine a product\u2019s origin and assess the likelihood of  transshipment. Second, staff constraints restrict the extent to which CBP can utilize and  develop its targeting process. As of December 2, 2003, the STC had 25  percent of its staff positions unfilled (3 out of 12 positions), while its  responsibilities are growing as trade agreements are increasing.  For each  new trade agreement, STC staff monitor trade and investment patterns to  detect whether anomalies are developing that should be targeted.   Consequently,",
      " CBP officials said that resource constraints have meant that  several types of analysis that the STC planned on conducting have either  been delayed or not conducted at all.  These included analyses of high-risk  countries, improvements to existing targeting processes, and studies of  alternative targeting techniques.  Despite these resource limitations, CBP  and the STC, in particular, have made regular improvements to the  targeting process.  For example, CBP\u2019s targeting of countries and  manufacturers for TPVT visits has become more systematic, relying on  trade data and other intelligence to select factories for visits. CBP Has Adapted  Textile Review  Activities to Changing  Environment but Faces  Further Challenges CBP has consolidated textile functions at headquarters and has adapted  textile review activities at the ports to changing resource levels.",
      "  In  response to national security priorities, CBP inspectors at the ports are  being shifted to higher-priority duties, leaving import specialists at the  ports to play the critical role in making decisions on excluding or seizing  illegal textile shipments. CBP now relies on TPVT visits as an essential part  of its targeting process, but CBP has not always finalized these TPVT  results and provided them to CBP ports, CITA, and the foreign governments  for follow-up in a timely manner.  With the expiration of the WTO global  textile quota regime in 2005, CBP will lose its authority to conduct TPVTs in  the former quota countries,",
      " and supplementing the enforcement  information provided to the ports will be important.  Information from  overseas Customs Attach\u00e9 offices and cooperative efforts with foreign  governments can provide additional important information for port  inspections. CBP Has Consolidated Its  Textile Activities Amid  National Security Priorities CBP has moved most textile functions into a single headquarters division to  foster a coordinated agency approach to monitoring textile imports and  enforcing textile import laws, but it must still depend on its port staff to  identify and catch illegal textile transshipments.  As CBP inspectors are  shifted to higher-priority functions, such as antiterrorism and drug  interdiction efforts,",
      " import specialists at the ports are playing an  increasingly central role in scrutinizing the growing volume of textile  imports.  They review the entry paperwork for all textile imports covered  by quotas or needing visas in order to exclude shipments that are  inadmissible or to seize those that are illegal, according to port officials.   However, resource constraints at the ports have forced them to depend  increasingly on STC targeting, results of TPVTs, and information from  headquarters to identify suspect shipments and enforce textile laws. CBP Has Centralized Textile  Transshipment Activities, but  Ports Still Key In 2001, CBP consolidated oversight of most of its textile operations into  one headquarters division in the Office of Field Operations,",
      " creating the  Textile Enforcement and Operations Division.  One important exception to  that consolidation was the Textile Clearinghouse in the New York STC,  which remained in the Office of Strategic Trade.  The Textile Enforcement  and Operations Division is responsible for monitoring and administering  textile quotas; providing technical input to textile negotiations; overseeing  implementation of textile import policies at the ports; and for planning,  reporting, and following up on TPVT visits.  It uses the results of targeting  by the STC, the findings of the TPVTs, and input from the ports to oversee  the daily implementation of textile policy at the ports.",
      "  It also works with  CITA, the domestic textile industry, the importing community, and the  Bureau of Immigration and Customs Enforcement (BICE). Notwithstanding this, the critical point in identifying and preventing  illegally transshipped textiles from entering the United States is at the  ports.  There are more than 300 CBP ports across the country\u2014including  seaports, such as Los Angeles/Long Beach, California; land border  crossings for truck and rail cargo such as Laredo, Texas; and airports  handling air cargo such as JFK Airport in New York, New York.  The top 10  of 42 CBP service ports that processed textile imports accounted for about  75 percent by value of all shipments in 2002,",
      " according to the official trade  statistics of the Commerce Department.  The key staff resources for textile  enforcement at the ports are the inspectors and the import specialists. Figure 4 provides an overview of CBP\u2019s textile monitoring and enforcement  process, including targeting, port inspections, and penalty investigations.   The figure also provides data for the results obtained at each stage of the  process in 2002.  CBP processed about 3 million entries in that year, with  2,482 entries triggering targeting criteria, of which 981 entries were  detained, 455 excluded, and 24 seized. (2,482 hit targeting criteria in 2002)",
      " Entry seized (24 entries,  (1,908 entries, 77 percent of targeted) 1 percent of targeted) (981 entries, 40 percent of targeted) Civil investigation and case (71 CBP cases; 45 penalties) (455 entries, 18 percent of targeted) At any point in the review or detention of an entry,  entry can either be released into commerce or  seized, depending on the circumstances. As national security and counternarcotics concerns have become CBP\u2019s top  priorities, CBP inspectors\u2019 roles have shifted away from textile and other  commercial inspection. The result is that, even at the larger ports,",
      " fewer  CBP inspectors are knowledgeable about a specific commodity, such as  textiles. These inspectors now have less time and expertise to inspect  textile shipments.  For example, at all but one of the ports we visited,  inspectors were mainly pulling sample garments from shipments for import  specialists to examine rather than acting as an additional, knowledgeable  source on textiles who could do a first level of review. As a result, the import specialists have become more critical in preventing  textile transshipment.  About 900 import specialists work at the ports, of  which approximately 255 are assigned to work on textiles, according to a  senior CBP official.",
      "  These specialists have always been central to  determining whether illegal textile transshipment has occurred, because  visual inspection is usually not sufficient.  While physical clues such as cut  or resewn labels can provide an indicator that a garment should be further  examined, in many cases nothing about the garment itself indicates that a  problem exists.  To establish textile transshipment, import specialists must  request production documents from the importer (who, in turn, requests  them from the manufacturer) and review them to see if they support the  claimed country of origin.  This is a highly complex, technical, and labor- intensive process. Import specialists (or at some ports,",
      " entry specialists or inspectors) review  the basic entry paperwork for all textile shipments arriving at the ports that  are covered by quotas or need visas.  They will place a hold on a textile  shipment: 1. if there are \u201cnational criteria,\u201d that is, if headquarters has entered an  alert in the Automated Commercial System (ACS), CBP\u2019s computer  system for imports, based on targeting, TPVT findings, and other risk  factors, to detain all shipments from that manufacturer or to that  importer and request production documents;  2. if there are \u201clocal criteria,\u201d that is, the port has entered an ACS alert  based on concerns particular to that port;",
      "  3. if the port has conducted its own targeting on shipments arriving at the  port and found questionable entries;  4. if there are abnormalities in the paperwork that warrant further review;  or 5. if there is other information that may be provided by domestic industry,  the Office of Textiles and Apparel at the Commerce Department, CITA,  foreign governments, or informants. In most cases, shipments with national criteria will automatically be  detained, a sample pulled from the shipment, and production verification  documents requested.  For shipments held due to local criteria, port  targeting, abnormalities, or other information,",
      " the import specialist may  request that the CBP inspectors pull a sample from the shipment, which  must be done within 5 days.  The import specialist examines the sample  garments and determines whether shipments being held can be released or  require further review.  If further review is warranted, they detain the  shipment and send the importer a detention letter, in which they ask the  importer to provide the production verification documentation for an in- depth review.  CBP must receive and review the documents within 30 days,  or the shipment is automatically excluded. Based on the in-depth review of the documentation, the import specialist  decides whether to release the goods into commerce,",
      " exclude them if  found to be inadmissible, or seize them if found to be illegal.  Goods are  inadmissible and are denied entry when the importer has not provided  sufficient information to substantiate the claimed country of origin or if  documents required for entry have not been provided.  Goods may be  seized when the import specialist has evidence that the law has been  broken; this requires a higher level of evidence than exclusion. Port Staff Review \u201cNational  Criteria\u201d Shipments but Have  Less Time for Local Monitoring In the post-September 11, 2001, environment, the ports have become more  likely to rely on national criteria.",
      "  At all of the ports we visited, CBP  officials said that, in response to national criteria in ACS for textile  shipments, they will detain all such shipments and request production  documents.  However, only a few large ports that handle a high level of  textile imports, such as Los Angeles/Long Beach and New York/Newark,  have been able to do much proactive local targeting.  At most of the other  ports, officials said that they do as much local criteria or targeting as they  can but rarely get the spare time to do very much.  CBP data support these  statements.  While national criteria accounted for about 75 percent of  inspections in 2002,",
      " local criteria and self-initiated reviews accounted for  25 percent.  Further, local criteria and self-initiated reviews had declined by  half, from 2000 to 2002; and most of the local criteria in 2002 were  generated by the ports in Los Angeles and New York. According to a senior CBP official, headquarters directs the input of  national criteria to improve communications to the ports and foster greater  uniformity of response and action by all affected ports.  National criteria  are continually tracked, analyzed, and adjusted as appropriate.  One reason  is that smaller ports have fewer import specialists; and in some cases,",
      " no  import specialists are dedicated to specific commodities.  In some ports,  the import specialist is responsible for the entire range of products that can  enter the country. TPVTs Are Critical to  Enforcement, but Follow-up  Reporting Is Not Always  Timely TPVTs are a critical enforcement tool, and the conduct and reporting of  TPVT visits have been made more uniform and rigorous in recent years.   However, while the TPVT reports are an important part of the targeting  process, they are not always provided in a timely manner to CBP ports,  CITA, and the foreign governments. TPVT Process Triggers Port  Textile Reviews TPVTs are critical to enforcement because the ports increasingly depend  on the national criteria that headquarters supplies to trigger enforcement.",
      "   These national criteria primarily result from STC targeting and the findings  of the TPVTs conducted in high-risk countries.  Additionally, CBP may  receive enforcement information provided by a foreign government or  other sources. The TPVT process has two main objectives: (1) to verify that the  production capacity of the factory matches the level and kind of shipments  that have been sent to the United States and (2) to verify production of the  specific shipments for which they have brought copies of the entry  documents submitted to CBP.  If a factory is closed, refuses entry, or the  team finds evidence of transshipment,",
      " the team immediately notifies  headquarters so that national criteria can be entered into ACS.  Any further  shipments from the closed factories will be excluded.  Shipments from  factories refusing entry or found to be transshipping will be detained, and  importers will be asked for production verification documents.  If a factory  is deemed to be at high risk for transshipment, but no clear evidence has  been found, CBP has generally waited until the TPVT report is approved  before entering the criteria.  Figure 5 shows a TPVT team verifying  production in El Salvador textile factories. TPVT report drafting and approval involves several steps.",
      "  First, the import  specialists on the team write the initial draft of their TPVT results report  while in country. When the team members return to their home ports, the  team leader completes the report and forwards it to headquarters, where it  is reviewed, revised, and finally approved by CBP management.  Once the  TPVT report is approved, the remaining national criteria for the high-risk  factories are entered into ACS. TPVT Follow-Up Is Not Always  Timely CBP\u2019s standard operating procedures for TPVTs, dated September 21, 2001,  state that the TPVT team leader should finalize the reports within 21  calendar days after completing the trip and get headquarters approval  within 2 weeks afterwards,",
      " or 5 weeks total.  However, when we examined  the approval timeline for TPVT reports during the past 4 years, we found  that, in practice, report approvals have averaged 2.3 months, or almost  twice as long as the procedural requirement.  For example, the El Salvador  TPVT we observed was conducted from July 21 through August 1, 2003, but  headquarters did not approve the TPVT report until October 20, 2003. More importantly, during such interim periods, although national criteria  have been identified for high-risk factories, they are generally not entered  into ACS until the report is approved within CBP.",
      "  The result is that  questionable shipments for which criteria are intended can continue to  enter commerce for another 2.3 months on average.  From 2000 to 2003, an  average of 37 percent of TPVT-generated criteria were for high-risk  factories.  This means that import specialists at the ports may not see more  than a third of the criteria for about 2.3 months after the TPVT visits.  At  that time, if examination of these high-risk factories\u2019 production  documents show transshipment of textiles during the interim period, the  import specialists will not be able to exclude these shipments,",
      " because  they will have already entered commerce.  Instead, import specialists will  have to ask for redelivery by the importer to the port.  At that point, most  garments will likely have been sold.  Although, according to CBP, it can  charge the importer liquidated damages for failure to redeliver, additional  transshipped garments will have entered commerce nevertheless. CITA Uses TPVTs to Generate  Information Exchange with  Foreign Governments The TPVT reports are also sent to CITA and trigger another set of actions in  the textile enforcement process.  If the TPVT cannot verify the correct  country of origin in all shipments being investigated,",
      " then CITA will ask the  foreign government to investigate, which also provides it with an  opportunity to respond before CITA takes an enforcement action.  CITA\u2019s  goal is to get foreign governments to monitor and control their own  plants\u2014essentially to self police.  According to a CITA official, if the  government does not provide a satisfactory response, CITA is then  obligated to direct CBP to exclude the illegal textiles. When CBP provides CITA with information that the TPVT (1) was refused  entry to the factory, (2) found evidence of textile transshipment, or (3)  found the factory was unable to produce records to verify production,",
      " CITA  will send a letter to the foreign government requesting that it investigate  whether transshipment has occurred and report back to CITA.  The  foreign government has 30 days to respond; if there is no response, CITA  can also direct CBP to block entry of that factory\u2019s goods, generally for 2  years.  In such cases, CBP ports do not even have to review production  documents first; the goods will be denied entry.  Notice of this prohibition  is published in the Federal Register to inform U.S. importers. When CITA sends a letter to the foreign government, CITA officials said  that most governments respond with an investigation of the manufacturer.",
      "   Sometimes governments penalize the factory with a suspended export  license, or they report back that the factory has closed.  As long as they are  taking steps to prevent further transshipment, CITA is satisfied, according  to CITA officials. CITA officials stated that TPVT reports are essential to CITA\u2019s efforts to  address illegal transshipment and that CBP has made progress in providing  CITA, through the TPVT reports, with useful information to identify suspect  factories and to determine the nature and extent of illegal transshipment.   However, CITA officials continue to seek improvement in these reports, in  particular for the reports to contain factual,",
      " verifiable information with  definitive conclusions regarding whether a visited factory is involved in  illegal transshipment and for this information to be provided clearly and  concisely.  While CITA officials acknowledged that it may be extremely  difficult to CBP to find a \u201csmoking gun\u201d necessary to make this type of  conclusion, CITA officials believe that increased clarity and more definitive  conclusions are possible.  Also, delay in receiving the reports hamper  prompt action by CITA, and CBP in many instances does not advise CITA of  follow-up action it has taken against factories that the CBP found to be  unable to verify production or otherwise suspect.",
      " A CITA official estimated that about one-half to three-quarters of TPVTs  result in CITA letters.  He estimated that CITA sent about six to seven  letters between October 2002 and October 2003.  Overall, CBP\u2019s TPVTs  and TPVT reports are more geared toward providing CBP with national  criteria, as recognized by a CBP official.  However, CITA officials said that  they need more detailed evidence to better support CITA enforcement  actions. Information from Attach\u00e9  Offices, Cooperation of  Foreign Governments  Crucial CBP faces further challenges to which it must adapt with the expiration of  the Agreement on Textiles and Clothing\u2014the global textile quota regime\u2014 on January 1,",
      " 2005.  The end of the quota regime will mean that the United  States will also lose its authority under that agreement to conduct TPVTs in  former quota countries, unless customs cooperation provisions with the  foreign governments are renewed. CBP has other means by which it can  supplement the enforcement information it receives from targeting and  TPVTs, including placing import specialists in overseas Customs Attach\u00e9  offices in high-risk countries and obtaining greater foreign government  cooperation. End of Global Quota Regime  Could Affect CBP\u2019s Cooperation  with Foreign Governments Finding means of supplementing the enforcement information provided to  CBP ports will be critical once the global textile quota regime,",
      " embodied in  the WTO Agreement on Textiles and Clothing, expires on January 1, 2005.   The numerous U.S. bilateral quota agreements with WTO-member textile  exporting countries were all subsumed in the global regime.  The textile  enforcement provisions in these agreements provided the authority for  CBP to conduct TPVTs.  All of these provisions will expire together with  the global textile quota regime. CBP will have continued authority to  conduct TPVTs in countries with free trade agreements and preference  agreements (such as the Caribbean Basin Trade Preference Act), as well as  in non-WTO countries whose bilateral quota agreements will not expire  (such as Vietnam). However,",
      " certain incentives for transshipment will continue to exist.  For  example, special provisions that apply to imports of Chinese textiles have  recently been invoked under the safeguard provision of China\u2019s Accession  Agreement to the WTO to limit growth of imports of certain textile  categories.  The safeguard provision allows individual categories of  textiles to remain under quota for up to an additional 12 months, if the  domestic industry petitions CITA for relief and CITA affirms the petition.   The petition must establish that imports of Chinese origin textiles and  apparel products are threatening to impede the orderly development of  trade in these products, due to market disruption.",
      " The U.S. government currently maintains a Memorandum of Understanding  with Hong Kong under which customs cooperation has been conducted.   Given the possibility of additional safeguard quotas being imposed on  Chinese textiles after the global quota regime expires, it will be critical that  U.S.-Hong Kong customs cooperation continues.  However, the United  States does not have such memorandums of understanding with other high- risk countries in the region, such as Taiwan, Macau, and Bangladesh.  CBP  will no longer have the authority to conduct TPVTs in these high-risk  countries unless customs cooperation agreements are renewed. CBP Has Other Possible Means  to Supplement Its Enforcement  Information CBP has sought to supplement the enforcement information it receives by  placing some import specialists in overseas Customs Attach\u00e9 offices in  high-risk countries and by obtaining greater foreign government  cooperation.",
      "  CBP started sending import specialists to its overseas  Customs Attach\u00e9 offices in 2000.  The reason for this effort was that most  staff in the Customs Attach\u00e9 offices were special agents who were criminal  investigators and had no trade background.  Import specialists were to  provide this missing trade experience.  CBP identified the countries that  would most benefit from having an import specialist in the Attach\u00e9 office,  and by November 2003, six import specialists were assigned to Canada,  Hong Kong, Japan, Mexico, Singapore, and South Africa. A CBP official said that the import specialists are assisting with providing  information.",
      "  They have been able to help in following up on TPVT findings.   They also have been useful in uncovering counterfeit visa cases in which  fake company names and addresses are given in import documents.  If  more import specialists were in Customs Attach\u00e9 offices in high-risk  countries to assist with textile monitoring and enforcement, additional  benefits would result, according to the CBP official.  In between TPVT  visits, they would be able to assist the targeting effort with activities such  as checking to see whether a particular factory really exists or has the level  of capacity claimed.  They could also verify factory addresses and  licensing.",
      "  Finally, they would be able to facilitate cooperation and  coordination with the foreign government on textile transshipment issues,  including conducting training on transshipment prevention. Another means by which CBP can also supplement the enforcement  information it receives is by encouraging foreign government cooperation  and self-policing.  A good example of such an arrangement is CBP\u2019s present  relationship with Hong Kong customs authorities.  The Hong Kong Trade  and Industry Department has established an extensive system for  regulating Hong Kong\u2019s textile industry, which it enforces together with the  Customs and Excise Department.  Hong Kong officials work closely with  the U.S.",
      " Customs Attach\u00e9 Office in Hong Kong and CBP\u2019s Textile  Enforcement and Operations Division at headquarters.  Hong Kong also  provides self-policing assistance to CBP.  Hong Kong officials conduct  follow-up investigations on findings by the TPVTs, called Joint Factory  Observation Visits in Hong Kong, which have resulted in numerous  cancelled or suspended export licenses.  Hong Kong officials have also  actively prosecuted and convicted individuals violating Hong Kong\u2019s textile transshipment laws. As it is a matter of public record, CBP gets the names  of those companies that have been convicted of violations. Macau and  Taiwan also provide CBP with such information.",
      "  CBP creates national  criteria for these manufacturers, and the ports would detain any future  shipments for production verification documentation.  Figure 6 shows the  high volume of commercial traffic coming into Hong Kong from Shenzhen,  China, at the Lok Ma Chau Control Point. However, it is not clear whether many other high-risk countries have the  capacity to self-police.  In some countries, customs authorities may be  constrained by domestic laws that either limit their authority or do not  extend sufficient authority to adequately enforce textile transshipment  provisions in their bilateral agreements with the United States.  For  example, government officials in El Salvador said that they do not have the  same authority that U.S.",
      " CBP has in requesting production documentation  from Salvadoran factories, because such authority is not provided in their  customs laws. Such lack of authority was also an issue that USTR  addressed when it negotiated the U.S.-Singapore Free Trade Agreement  (FTA), finalized in 2003.  CBP, which is a technical advisor to such  negotiations, encouraged the addition of a provision to require the  government of Singapore to enact domestic legislation that provided the  authority needed to fully enforce the agreement\u2019s textile transshipment  provisions. The United States is currently negotiating numerous new FTAs.  As with the  Singapore FTA negotiations,",
      " USTR may be able to include such provisions  in new FTAs, providing an opportunity for the United States to buttress  textile transshipment enforcement provisions and enhance the ability of  foreign governments to conduct more effective self-policing.  Such  provisions have generally been included in the FTAs negotiated since  NAFTA, according to a senior CBP official. Weak Internal Controls  Hinder Effectiveness of  CBP\u2019s In-bond System CBP uses its in-bond system to monitor cargo, including foreign textiles,  transiting the U.S. commerce or being exported to a foreign country.   However, weak internal controls in this system enable cargo to be illegally  diverted from the supposed destination,",
      " thus circumventing U.S. quota  restrictions and duties.  At most of the ports we visited, CBP inspectors we  spoke with cited in-bond cargo as a high-risk category of shipment because  it is the least inspected and in-bond shipments have been growing.  They  also noted that CBP\u2019s current in-bond procedures allow too much reliance  on importer self-compliance and that little actual monitoring of cargo using  this system takes place.  Lack of automation for tracking in-bond cargo,  inconsistencies in targeting and examining cargo, in-bond practices that  allow shipments\u2019 destinations to be changed without notifying CBP and  extensive time intervals to reach their final destination,",
      " and inadequate  verification of exports to Mexico hinder the tracking of these shipments.   Although CBP has undertaken initiatives to tighten monitoring, limitations  continue to exist.  These limitations pose a threat not only to textile  transshipments but also to other areas related to national security.  Without  attention to this problem, enforcement of national security, compliance  with international agreements, and proper revenue collection cannot be  ensured. In-bond System Designed to  Expedite Flow of  Commerce To expedite the flow of commerce into the United States, Congress   established in-bond movements to allow cargo to be transported from the  port of arrival to another U.S.",
      " port for entry into U.S. commerce or for  export to a foreign country.  Cargo can be transported in several ways  using the in-bond system.  When a vessel arrives with containers, an  importer may elect to use the in-bond system to postpone payment of taxes  and duties while moving the goods from the original port of arrival to  another port.  By doing this, the importer delays paying duties until the  goods are closer to their ultimate destination\u2014for example, goods arriving  by ship in Los Angeles may transit the country and ultimately be inspected  and have duties levied in Chicago.  Or goods may pass through the United  States on their way to another destination,",
      " such as goods that are  transported from Los Angeles to Mexico or from Canada to Mexico. There are three types of in-bond movements:  Immediate transportation (I.T.). This is merchandise that is moved  from one U.S. port to another for entry into U.S. commerce. Transportation and exportation (T&E).  This is merchandise \u201cin  transit\u201d through the United States.  Export to another country is  intended at the U.S. destination port. Immediate exportation (I.E.).  This is merchandise exported from the  port at which it arrives in. Once the shipment leaves the port of arrival, the bonded carrier has 30  days to move the merchandise to the U.S.",
      " destination port.   Upon arrival at  the destination port, the carrier has 48 hours to report arrival of  merchandise.  The merchandise must then be declared for entry or  exported within 15 days of arrival (see fig. 4). Use of the In-Bond System  Growing Rapidly Based on responses from our survey of 11 of 13 major area ports, the use of  the in-bond system as a method of transporting goods across the country  nearly doubled from January 2002 through May 2003.  For our study, we  surveyed the 13 ports across the country that process the largest amount of  textiles and apparel and asked them about in-bond operations at their port.",
      "   Figure 7 shows the increase in in-bond shipments processed in the past 17  months at 11 of these ports.  From January 2002 through May 2003, in- bond entries increased 69 percent.  A recent study on crime and security at  U.S. seaports estimated that approximately 50 percent of all goods entering  the United States use the in-bond system and projects that this figure will  increase. Based on our survey, the top three U.S. ports that were the most frequent  reported destinations for in-bond shipments from October 2002 to May  2003 were Miami,",
      " New York, and Los Angeles.  In-bond entries comprised a  significant portion of the total entries for these ports, with 58.2 percent of  total entries in Miami, 60 percent in New York, and 45.9 percent in Los  Angeles.   For goods arriving at the Los Angeles-Long Beach seaport, the  top three intended in-bond destination ports for fiscal year 2002 were  Chicago, New York, and Dallas-Fort Worth, Texas. In-bond System May  Facilitate Textile  Transshipment Many officials at the ports we surveyed expressed concern in their  responses over the growth of in-bond shipments and their lack of  additional resources to examine and track these shipments.",
      "  In addition,  some port officials we spoke with also expressed concern that the in-bond  system is increasingly being used for diverting goods that are quota  restricted (such as textiles) or that have high duty rates. One example of how illegal in-bond diversion occurs is when textile  shipments arrive by vessel at Los Angeles and are transported by truck to a  port such as Laredo, Texas, where the carrier (trucking company) may  declare immediate exportation to Mexico (see fig. 5).     However, instead of  exporting the goods to Mexico, they are shipped to another U.S. location  for sale.",
      "  This can occur because CBP relies heavily on importer  compliance, and it requires only that carriers drop off paperwork showing  exportation, without actually requiring physical inspection of the cargo. CBP and BICE presently have ongoing investigations to address the  problem of illegal diversion of in-bond merchandise.  For example, a 2003  in-bond diversion investigation found that 5,000 containers of apparel were  illegally imported, thus avoiding quota restrictions and payment of $63  million in duties.  Between May 2003 and October 7, 2003, the ports of Long  Beach and El Paso made 120 seizures with cases involving a textile in-bond  diversion smuggling scheme.",
      " The total domestic value for these goods was  more than $33 million.  Table 2 shows the number of in-bond cases and the  penalty amounts assessed by CBP for the past 3 fiscal years.  Total penalty  amounts assessed were more than $350 million. In-bond System Lacks  Automation and Critical  Information to Properly  Monitor Cargo Movement At present, CBP lacks a fully automated system that can track the  movement of in-bond transfers from one port to another.  Much shipment  information must be entered manually\u2014a time-consuming task when  thousands of in-bond shipments must be processed every day\u2014and as a  result,",
      " recorded information about in-bond shipments is minimal and  records are often not up to date.   In addition, in-bond arrival and departure  information recording is not always timely; and according to our survey  results, insufficient cargo information, along with a lack of communication  between U.S. ports about in-bond shipments, makes it difficult for ports of  destination to monitor cargo and know the number of in-bond shipments to  expect.  CBP has begun to automate its in-bond system but concerns  remain. Under Current CBP Procedures,  In-bond Shipments Transit with  Minimal Information Provided to  CBP By definition,",
      " an in-bond movement is entry for transportation without  appraisement. CBP collects significantly less information on in-bond  shipments than regular entries that are appraised.  While CBP has the  ability to collect additional information for textile products, our survey  results show that very little information is collected by CBP for in-bond  shipments in general. To process an in-bond shipment, all in-bond paper transactions require a  Customs Form 7512, Transportation and Entry form.  This form is filled out  by brokers and submitted to the port of arrival.  According to many in-bond  personnel responding to our survey,",
      " the information that is provided on  this form to allow the shipment to travel in-bond is often minimal,  capturing some, but not all, shipment manifest information, shipment data,  and carrier data.  They also responded that the information on the Customs  Form 7512 is often vague, with not enough descriptions of the commodities  shipped.  The form also lacks any invoice or visa information\u2014information  that is critical for shipment targeting.  This lack of information causes  difficulty in tracking.  Without this information, CBP is unable to effectively  track in-bond shipments. In-bond shipments of textiles or textile products have specific description  requirements.",
      " CBP regulations require that these shipments be described in  such detail as to allow the port director to estimate any duties or taxes due.   In addition, the port director may require evidence of the approximate  correctness of value and quantity or other pertinent information.   However, our survey results show that such additional information has not  been obtained in practice. CBP\u2019s Recording of Arrival and  Departure In-bond Information  Is Not Always Timely In-bond data are not entered in a timely, accurate manner, according to  some port in-bond personnel we spoke with, as well as some survey  respondents.  Currently, CBP accounts for goods that initially arrive at one  CBP port (port of arrival)",
      " but are shipped immediately to the port of entry  (port of destination) through an in-bond module in CBP\u2019s ACS.  For  automated entry forms submitted on electronic manifests, departure data  can be entered in ACS automatically showing that an in-bond transfer is  planned from the port of arrival.  For nonautomated entries  (paper), CBP  officials are supposed to input departure data manually at the port of  arrival to establish accountability for the merchandise.  When the goods  arrive at the port of destination, personnel are to input data indicating that  the goods have arrived, at which time accountability is transferred from the  port of arrival to the port of destination.",
      " However, at three of the seven ports we visited, officials stated that the  departure and arrival information was not consistently maintained,  because personnel did not input data promptly.  As the volume of  shipments transiting via in-bond has increased, the workload for ports  across the country to enter this information has created a backlog, often  resulting in entries that are never entered into the system.  More than half  of the 29 ports we surveyed reported that between 50 and 100 percent of  their in-bond entries were paper entries.  At two of the largest ports  processing the highest volume of in-bond entries,",
      " officials reported that  more than 75 percent of the entries received were paper entries requiring  that staff manually enter information.  CBP personnel at two major ports  told us that in-bond data are often not entered into the system at the port of  arrival, because CBP lacks the personnel to enter in-bond information for  every shipment. Communication between Ports  Regarding In-bond  Arrival/Departure Data Is  Minimal Results from our survey showed that 80 percent of the ports did not track  in-bond shipments once they left the port of arrival.  A CBP official at the  Port of Laredo,",
      " Texas, a major port of destination, said that they have no  way of knowing the number of shipments intended to arrive at their port.   Without proper communication between them, ports are unable to  determine the location of a shipment traveling in-bond until it reaches its  destination.  As a result, personnel at the port of destination were unable to  anticipate a shipment\u2019s arrival and thereby identify and report any delayed  arrivals, because a record of departure had never been set up.  However,  some ports such as Laredo, Texas are beginning to communicate with other  ports more frequently to anticipate and track in-bond shipments.",
      " Finally, although CBP has computer-generated reports available to identify  in-bond shipments that were not reported and closed within the required 30  days, 70 percent of ports we surveyed report that they have never used  these reports.   They said they do not do so because (1) they either did not  consider the report to be reliable or (2) they had never heard of these  reports.  Tracking overdue shipments is a critical internal control, because  it alerts CBP to shipments that never made it to their stated destinations.   Without consistent examination of overdue shipments, CBP cannot  account for in-bond shipments that failed to meet the time requirements for  delivery.",
      " We reported these limitations in 1994 and 1997, and we made several  recommendations to CBP on improving the monitoring of in-bond  shipments.  In 1998, CBP initiated the TINMAN Compliance Measurement  Program to address some of the weaknesses noted in our 1997 report,  including the ability to generate reports to follow-up on overdue shipments.   In 2001, the Treasury Department\u2019s Inspector General conducted a financial  management audit and found that although TINMAN resolved some of the  weaknesses found in prior audits, CBP was still unable to ensure that  goods moving in-bond were not diverted into U.S.",
      " commerce, thereby  evading quotas and proper payment of duties.  Results from our survey  show that this compliance program is not consistently implemented across  ports. CBP Is Making Progress in  Automating Its In-bond System;  However, Concerns Remain In March 2003, CBP launched an initiative to automate the in-bond system  with a pilot program called the Customs Automated Form Entry System  (CAF\u00c9\u2019s), currently being tested at six U.S. ports. CAF\u00c9\u2019s is an interim  step toward full automation.  It is intended to allow more detailed shipment  data to be entered into the system electronically,",
      " thus reducing the amount  of time personnel must spend entering shipment data.   The CAF\u00c9\u2019s  program is currently voluntary, and, so far, about 8 to 10 percent of the  brokers at the pilot ports are participating.  However, according to a 2003  CBP Action Plan, all land border truck ports will be required to use the  automated in-bond system by midyear 2004.  Nevertheless, no time frame  yet exists for deploying CAF\u00c9\u2019s at other locations. Although CAF\u00c9\u2019s will improve automation of the in-bond system, it will not  resolve the tracking of in-bonds until full automation occurs.",
      "  When we  spoke to CBP headquarters officials about this continuing weakness, they  stated that they had not made additional improvements to the in-bond  program, because those improvements will be made when their new  Automated Commercial Environment (ACE) computer system is rolled out.   CBP stated that it does not have a time frame for deploying the system to  fully automate in-bonds because development is still under way but it  estimated this might be accomplished within 3 years.  Without a definite  time frame, it is not clear if the automation of in-bonds will actually be  implemented. In-bond Shipments Are Not  Consistently Targeted and  Examined Before Leaving  the Arrival Port Although all incoming cargo is targeted for national security purposes,",
      "  once the paperwork is filled out for a shipment to travel in-bond, CBP does  not generally perform any additional targeting for these shipments.  CBP  instead focuses on targeting shipments making an official entry into U.S.  commerce.  The New York STC also does not analyze information from in- bond shipments in order to perform additional targeting.   Conducting  additional targeting for in-bond is also critical because in-bond shipments  that are not identified as high-risk shipments by Container Security  Initiative may go through CBP undetected and without inspection.   Recognizing the need for targeting in-bond shipments,",
      " some ports we  surveyed responded that they have begun to target in-bond shipments.   However, targeting is not consistently performed because ports do not  have the staff to conduct targeting or exams.  Port management officials we  spoke with at two major ports stated that since the September 11 attacks,  resources have shifted to other antiterrorism areas.  In addition, because  brokers for in-bond shipments at the port of arrival provide very little  information regarding shipments, targeting of in-bond shipments is difficult  to conduct (See fig. 9 for illustration of in-bond shipment process and  points of concern). CBP officials at most of the ports we visited cited resource constraints as a  top reason for not inspecting in-bond shipments.",
      "  For example, CBP  officials at the Los Angeles/Long Beach, California, port\u2014one of the  busiest, with the highest volume of in-bond entries\u2014told us that the  current understaffing does not allow examination for many in-bond  shipments.  Moreover, results from our survey showed that more than 80  percent of the 13 area ports we surveyed do not have full-time staff  dedicated to inspecting in-bond shipments.  Some ports responded that if  they had more staff dedicated to in-bond shipments, they would have a  greater ability to inspect in-bond shipments.  In addition,",
      " seven of the eight  largest ports that responded to our survey stated that inspectors dedicate  less than 10 percent of their time to in-bond inspections.   For example,  CBP officials at the port of New York/Newark said that they estimated that  less than 2 percent of in-bond entries are actually inspected. Nature of In-bond  Regulations May Make It  Difficult to Monitor In-bond  Shipments According to several CBP in-bond personnel we spoke with at two ports,  certain provisions in the in-bond regulations make it more difficult to track  in-bond shipments.  These regulations pertain to (1)",
      " whether importers can  change a shipment\u2019s final destination without notifying CBP and (2) the  time allowed for in-bond shipments to reach their final destination. Under the regulations, an in-bond shipment can be diverted to any Customs  port without prior notification to CBP, except where diversions are  specifically prohibited or restricted.  For example, an importer with a  shipment arriving in Los Angeles may declare that it will travel in-bond to  Cleveland, Ohio.  However, after filing the paperwork, the importer may  then elect to change the final destination to New York, without filing new  paperwork or informing CBP.",
      "  The information provided to CBP at the port  of arrival will still state Cleveland as a final destination.  CBP has no way of  knowing where the shipment is going until and if it shows up at another  port. For in-bond shipments of textiles or textile products, a change in  destination requires approval of CBP\u2019s director at the port of origin.  However, officials at three ports that handle high volumes of textile in-bond  shipments said that they were either unaware of the regulation or that it  was too difficult to enforce due to the high volume of shipments they  processed. Another problem CBP in-bond personnel mentioned in monitoring in-bond  movements is the extensive time allowed to carriers to transport  merchandise across the country.",
      "  The Tariff Act of 1930 established the in- bond system and CBP regulations set time limits at 30 days for the delivery  of merchandise at the port of destination for entry or for exportation.   Port officials stated that this time limit is excessive and may contribute to  the diversion of cargo by giving carriers too much time to move  merchandise to different locations.  Tracking would be easier if a carrier  had a more restricted time period during which brokers or carriers would  have to close out the in-bond, such as 10 to 20 days, depending on the  distance between the port of arrival and the final port of destination,",
      "  according to these CBP officials. Mexico\u2019s in-bond system works differently than the U.S. system.  In fact,  when we spoke with Mexican Customs officials at the port of Nuevo  Laredo in Mexico regarding illegal textile transshipment, they said that  their in-bond system could track the movement of goods more easily  because (1) importers were not allowed to change the final destination and  (2) carriers are given a certain time limit to deliver merchandise, depending  on the distance between the port of arrival and the port of destination. Shipments Declaring  Exportation to Mexico Lack  Sufficient Monitoring to  Ensure Actual Exportation Several BICE investigations have uncovered in-bond fraud concerning  textile shipments that were allegedly exported to Mexico but instead  entered into U.S.",
      " commerce to circumvent quota and duty payment.  To  cope with this problem, BICE officials in Laredo, Texas, initiated an effort  to improve the verification of exports to Mexico by requiring that for  shipments processed for immediate exportation, brokers had to submit a  Mexican document known as a \u201cpedimento,\u201d as proof that shipments were  exported to Mexico.  However, these documents are easily falsified and can  be sold to willing buyers for submission to CBP, according to Laredo CBP  officials.  When we spoke with Mexican Customs officials at the Nuevo  Laredo, Mexico, port,",
      " they acknowledged that reproducing false  government pedimentos is easy to do and that it is not a reliable method for  verifying exportations.  The broker community in Laredo, Texas, also  expressed serious concerns with fraudulent activity by some Mexican  government officials.   They suspected that pedimentos were being sold by  some Mexican Customs officials to facilitate the diversion of goods into the  United States.  In fact, in August 2003, the port director of Nuevo Laredo,  Mexico, was indicted for selling false Mexican government documents for  $12,000 each. Moreover, many ports along the U.S.-Mexican border do not have export  lots where trucks with shipments bound for Mexico can be physically  examined to ensure that the shipments are actually exported to Mexico  instead of entering the U.S.",
      " commerce.   Although export lots were  opened at one time, they have been closed at many ports as a result of  resource constraints.  When export lots were open, inspectors were able to  verify exportation because carriers were required to physically present the  truck with the shipments for inspection. Since our review began, CBP has opened an export lot in Laredo, Texas,  and has required that all shipments declared for export to Mexico be  presented and inspected at the export lot.  However, not all ports along the  border have export lots, and Laredo in-bond personnel have noticed that as  a result many trucks were now choosing to clear their goods through those  ports without export lots.",
      "  CBP officials we interviewed in Laredo, along  with the members of the Laredo broker community, have raised this  concern and have noted the need to reopen export lots as a way to  minimize fraud. As of October 20, 2003, a CBP directive mandated that all merchandise to  be exported should be presented for export certification.  Certification is  not to take place until the merchandise is physically located where export  is reasonably assured.  According to a senior CBP official, as a result of this  directive, ports with export facilities have reopened them or provided a  reasonable alternative such as reporting to the import facility.",
      "  He also  stated that CBP has developed plans to verify that at least a representative  sample of reported exports are actually reported.  However, officials we  spoke with at two ports are not sure whether they will have the resources  to verify every in-bond export.  A senior CBP official confirmed this  problem, saying that verification of exports might not occur during periods  of staffing constraints. CBP Has Experienced  Serious Challenges in  Enforcing Textile  Transshipment CBP has broad enforcement authority regarding illegal textile  transshipment, but it has experienced challenges in implementing  enforcement actions.  These challenges include a complex and lengthy  investigative process,",
      " as well as competing priorities.  As a result of these  challenges, CBP generally has relied on excluding transshipped textiles  from entry into the United States, rather than seizing merchandise or  assessing penalties.  In addition, addressing in-bond violations presents  special challenges due to weaknesses in CBP\u2019s internal controls and in the  nature of the penalty structure.  CBP also employs other means to deter  illegal transshipment, such as informing the importer community of  violations of textile transshipment laws and by making available lists of  foreign violators. CBP Has Extensive  Authority to Address Textile  Transshipment Violations CBP has broad authority to act when violations of textile transshipment  occur.",
      "  Depending on the circumstances, CBP may pursue the following  enforcement actions:    Exclusion of the textile shipment.  CBP can exclude textiles from entry  if the importer has not been able to prove country of origin.  Before  admitting goods into the United States, CBP may ask for production  records, review them, and then make a determination on origin.  The  importer must be able to prove the textiles\u2019 country of origin.  If CBP  cannot clear the goods within 30 days, the textiles are automatically  excluded.  CBP may also deny entry of textiles if production documents  reveal that the textiles were produced at a factory identified in the  Federal Register by the Committee for the Implementation of Textile  Agreements,",
      " as discussed below. Seizure of the textile shipment.  CBP can seize the textiles, if it has  evidence that violations of a law have occurred. By law, seizure is  mandatory if textiles are stolen, smuggled, or clandestinely imported.    In other instances, CBP can exercise discretion in deciding whether  seizure is the most appropriate enforcement action.  When seizure is  invoked, CBP takes physical possession of the merchandise.  In order  for textiles to be seized, there must be specific statutory authority that  allows for the seizure. Imposition of penalties.  CBP has several administrative penalties  available,",
      " based on the nature of the violation.  CBP may levy  administrative penalties locally at the port level without conducting an  investigation.  Alternatively, CBP may refer a suspected violation for an  investigation by BICE.  The outcome of the BICE investigation may be a  referral to (1) CBP for an administrative penalty or (2) a referral to the  U.S. Attorney for possible criminal prosecution of the importer and its  principal officers and the imposition of criminal monetary penalties.   Thus, some monetary penalties result from investigations performed by  BICE, while others simply result from activity within a port.  In addition  to civil administrative penalties,",
      " CBP may also assess liquidated  damages claims against bonded cartmen (carriers) implicated in  violations involving cargo transported in-bond.  CBP\u2019s Office of Fines,  Penalties and Forfeitures is responsible for assessing certain penalty  actions for transshipment violations and is responsible for adjudicating  penalties, liquidated damages claims and seizures occurring at the ports,  up to a set jurisdictional amount. Pursuit of judicial criminal or civil prosecutions.  CBP may refer unpaid  civil administrative penalty or liquidated damages cases to the  Department of Justice for the institution of collection proceedings  either in federal district court or in the Court of International Trade.",
      "   Additionally BICE investigates potential violations to establish the  evidence needed for criminal prosecution of the violations.  When BICE  deems sufficient evidence can be established, cases may be referred to  the appropriate U.S. Attorney\u2019s Office for criminal prosecution. CBP Relies Primarily on  Exclusions Due to Lengthy  and Complex Investigative  Processes CBP has increasingly relied on exclusions rather than seizures or penalties  for textile transshipment enforcement for two primary reasons.  First, it is  easier to exclude transshipped goods than to seize them because  exclusions require less evidence.   Second, although excluded textile  shipments may incur penalties,",
      " often CBP does not assess penalties against  importers of excluded merchandise because it is impossible to attach  specific culpability to the importer.  According to CBP officials, absent the  evidence to conclude the importer failed to exercise reasonable care, it  would be difficult to sustain a penalty against an importer of excluded  merchandise.  CBP also avoids the lengthy and complex process associated  with criminal and civil prosecutions and penalties by excluding the  shipments. CBP Relies on Exclusions for  Enforcement In enforcing textile transshipment violations, CBP has relied more on  exclusions than on seizures or penalties.  Textiles may be excluded if the  importer is unable to prove country of origin,",
      " whereas seizures may occur  when false country of origin documents are presented to evade quota or  visa restrictions\u2014a situation requiring a higher standard of evidence.    Exclusions usually have an immediate effect, although if the importer  chooses to protest the decision to exclude, the importer can appeal CBP\u2019s  decision to the Court of International Trade.  Import specialists in Long  Beach/Los Angeles said that when an exclusion determination is made,  they are ready to go to court if needed.  The importer can ship to another  country, abandon, or destroy the excluded textiles. CBP may elect not to levy penalties on excluded goods where culpability of  the importer cannot be established,",
      " and generally issues penalties against  the importer only if the importer is implicated or the transshipped textiles  entered the commerce of the United States.  However, a senior CBP official  said that the exclusion of textiles is considered a better deterrent than  penalties because the importer cannot receive the goods and, therefore,  cannot get them into U.S. stores that are waiting for them\u2014often for  seasonal shopping.   Also, the complexity and length of investigations and  litigation are no longer of concern, since the goods are simply excluded  from entering the United States.  Table 3 presents port-level data on  selected enforcement actions in 2000 to 2002.",
      " The investigative phase for textile transshipment cases can be a complex  and lengthy effort, resulting in few criminal penalties.  Investigators often  must follow convoluted paper trails for the movement of goods and money,  obtain accounting records\u2014sometimes having to get Internal Revenue  Service records (which can be a 6 to 9 month process).  They also may have  to subpoena banks, interview brokers and shippers, get foreign government  cooperation, and pursue new leads as they arise.  A BICE official noted that  it is often difficult to pursue textile transshipment criminal cases because,  unlike with some crimes, there is no \u201csmoking gun\u201d at the port.",
      "  For  example, when drugs are found, the drugs themselves are evidence of the  violation.  With textile transshipment, an illegal T-shirt will look no  different than a legal one.  The basis for the violation is established by  proving that a false country of origin was knowingly claimed and that the  importer intended to commit fraud, committed negligence, or gross  negligence. Although CBP does not keep records on the length of time for disposition  of cases, import specialists and inspectors voiced concern that  investigations can be lengthy.  For example, a senior CBP official noted that  in 1989, there were 83 illegal entries.",
      "  Although some civil cases went to the  Court of International Trade in 1990, the first decisions were made in 1993,  and the last were not decided until 1995, 1997, and 1999.  Two of the larger  civil cases against multinational corporations took 7 and 10 years to pursue  at the Court of International Trade.  Accordingly, CBP has a process in  place to determine whether to accept offers to settle civil cases out of  court, which includes evaluating the litigation risk and the resources CBP  would have to devote to a trial. One factor relating to the length of the case is that,",
      " if BICE initiates a  criminal investigation, any action relating to that case is held in abeyance  pending possible criminal prosecution of the case.  If sufficient evidence  exists to justify a criminal prosecution, the case then goes to the U.S.  Attorney\u2019s Office.  This move delays related civil proceedings.  BICE  officials in Los Angeles/Long Beach noted that U.S. attorneys are short on  resources, since they are also working on drug-smuggling and money- laundering investigations; and in the past 10 years in that district, fewer  than 10 cases have been sent to the U.S. Attorney\u2019s Office and prosecuted.",
      "   They noted, though, that the U.S. attorneys had not rejected any textile  transshipment cases that BICE had brought to them.  Neither CBP nor the  Justice Department could provide exact figures on the numbers of  prosecutions of illegal textile transshipments, but CBP officials noted that  the figures were low. In addition, investigating a case may entail allowing the suspect textile  transshipments to continue for a while, to obtain sufficient evidence.   However, investigators can be pulled off a particular textile investigation  for a higher priority; and then the textile case sits, with CBP sometimes  never getting back to it,",
      " according to a senior CBP official. When CBP pursues a case, the monetary amounts of the penalties may get  reduced, according to CBP staff, in line with CBP\u2019s mitigation guidelines.   CBP data are not available to summarize the penalty amounts assessed and  the final mitigated penalty amounts.  But in one example, CBP discovered  that a company transshipped $600,000 worth of blue jeans to evade quota  and visa restrictions.  Company officials pled guilty and, in the end, paid  CBP civil penalties totaling only $53,000.  CBP officials in the field  expressed concern that substantial penalty reductions may be a  disincentive to pursuing penalties or investigations.",
      " CBP\u2019s Enforcement of In- bond Violations Presents  Challenges CBP has experienced two basic challenges in deterring in-bond diversions  through enforcement actions.  First, the previously discussed weaknesses  in the system make it difficult for CBP to track in-bond movements and  catch the violators.  Second, when CBP discovers a breach of a bond by a  bonded cartman (carrier), the total liability associated with the bond  breach is limited to the value of the bond, rather than the value of the  merchandise.  Additionally, it is difficult for CBP to enforce payment of  unpaid penalties and liquidated damages because the Department of  Justice does not have sufficient resources available to prosecute all the  referrals for collections actions.",
      " Because in-bond shipments are not tracked, CBP cannot account for all the  in-bond shipments that fail to fulfill the requirements of timely cargo  delivery. According to a senior BICE official involved in in-bond  investigations, when an investigation is initiated, BICE must physically  track the cargo to prove a violation has occurred. This is difficult because  the cargo is often not at the port but at a warehouse, and CBP\u2019s surveillance  must be constant in order to establish that the cargo was not exported. When CBP does find in-bond diversion occurring, it typically seeks  liquidated damages for breach of the bond.",
      "  When CBP demands payment  of liquidated damages, the claim cannot exceed the amount of the bond.   Several CBP and BICE officials stated that the bond amounts set by CBP  regulations are low, compared with the value of the merchandise.  The  original bond amount for textile entries relates to the total value of  shipments.  However, according to BICE officials, convention has allowed  bonds for bonded cartmen (carrier) to be generally set at $25,000-$50,000 a  year\u2014a minimal amount that, as one BICE investigator put it, is the \u201ccost of  doing business.\u201d   For example,",
      " if a textile shipment with a domestic value  of $1 million is illegally diverted, liquidated damages can be set at three  times the value of the merchandise.  However, if the bond is set at $50,000,  the demand for payment of liquidated damages cannot go above this bond  amount.  Furthermore, violators may request mitigation of the $50,000 fine  so that the resulting mitigation may only be as little as $500.  Bond  amounts are usually set every calendar year and, if the liquidated damages  claims in one year exceed that year\u2019s bond amount, the next year\u2019s bond  cannot be used to pay the liquidated damages incurred the previous year.",
      " In 1989, CBP recognized the problem in which the amount of delinquent  liquidated damages claims against a bonded carrier exceeded the amount  of the bond.  CBP then issued a directive that required district directors to periodically review bond sufficiency.  CBP again issued directives in 1991  and 1993 to provide guidelines for the determination of bond sufficiency.   However, CBP and BICE officials we spoke with stated that inadequate  bond amounts continue to make liquidated damages for in-bond diversion a  weak deterrent. CBP Also Uses Informed  Compliance and Outreach  to the Community as  Deterrence Methods CBP also employs methods to deter illegal transshipment by informing the  importer community of violators of illegal textile transshipment.",
      "   CBP  officials view the publication of violators as a means to deter  transshipment.  CBP and CITA maintain various lists of foreign violators, in  part, for this purpose.  In addition, under the Customs Modernization Act,  CBP is obligated to use informed compliance and outreach with the trade  community.  CBP regularly meets with the trade community to keep it  informed of the latest enforcement information and to help encourage  reasonable care on its part.  CBP is looking increasingly at patterns of  company conduct to establish lack of reasonable care.  It currently is  investigating or monitoring 40 U.S.",
      " importers it suspects may have violated  the reasonable care standard. CBP Maintains Lists to Serve as  Deterrence CBP maintains three lists associated with illegal transshipment violations:  the \u201c592A list,\u201d the \u201c592B list,\u201d and the \u201cadministrative list.\u201d The 592A list is published every 6 months in the Federal Register and  includes foreign manufacturers who have been issued a penalty claim  under section 592A of the Tariff Act of 1930. The 592B list enumerates foreign companies to which attempts were  made to issue prepenalty notices, but were returned \u201cundeliverable\u201d and  therefore could not be included on the 592A list.",
      " The administrative list identifies companies that have been convicted or  assessed penalties in foreign countries, primarily Hong Kong, Macau,  and Taiwan.  CBP decided that because these companies had due  process in their countries and were determined by that country\u2019s law to  have illegally transshipped textiles (false country of origin), CBP could  legally make this information public, according to a senior CBP official.   This list is updated as necessary.  Between 1997 and October 2003, the  names of 488 companies from Hong Kong, 7 from Taiwan, and 34 from  Macau have been published in the administrative list.",
      " CITA Maintains an Exclusion List  and May Issue Chargebacks CITA has a policy in place whereby a letter is sent to the government of an  offending country requiring it to address what is being done to enforce anti- transshipment policies.  If the government does not respond, the company  is placed on an \u201cexclusion\u201d list; and goods from that company may not be  shipped to the United States.  This exclusion could run anywhere from 6  months to 5 years, but the standard period is 2 years.  In 1996, CITA issued  a new policy stating that all goods could be banned if a TPVT visit was not  allowed in that factory.",
      "  After the policy was issued, Hong Kong began  allowing the United States to observe enforcement efforts in factories,  although it does not allow CBP access to companies\u2019 books and records.   Extensive enforcement efforts led to 500 convictions in Hong Kong courts  for origin fraud from 1997 to October 2003. When CITA has evidence of textile transshipment from CBP\u2019s TPVTs or  other sources, it may also apply chargebacks if it has evidence of the actual  country of origin and the goods have entered the commerce of the United  States.  Chargebacks occur when goods were not charged against quotas as  they should have been.",
      "  CITA then will go ahead and \u201ccharge those goods  back\u201d against the appropriate levels for an appropriate country.  For  example, if textiles have been transshipped through Vietnam, but their  actual country of origin was found to be China, China\u2019s quota will be  reduced by the appropriate amount.  CITA also has the authority to \u201ctriple  charge\u201d goods.  Although CITA has the authority to issue chargebacks, over  the last decade it has only issued chargebacks against China and Pakistan.   The last chargebacks were issued in 2001 for a sum of $35 million.  From  1994 to 2001,",
      " chargebacks totaled $139 million.   Chargebacks require a  higher burden of proof because they require that the actual country of  origin be established. CBP Conducts Outreach with the  Textile Trade Community When the Customs Modernization Act became effective on December 8,  1993, CBP, then known as Customs, was given the responsibility of  providing the public with improved information concerning the trade  community\u2019s rights and responsibilities.   In order to do so, Customs  created initiatives aimed at achieving informed compliance, that is, to help  ensure that the importers are meeting their responsibilities under the law  and to help deter illegal transshipment.",
      "  Accordingly, Customs issued a  series of publications and videos on new or revised Customs requirements,  regulations, or procedures.  CBP also has the responsibility to inform  importers of their duty to act in accordance with its reasonable care  standard.  To that end, CBP provides guidance to help importers avoid  doing business with a company that may be violating CBP laws.  For  example, CBP suggests the U.S. importer ask its supplier questions  regarding the origin of the textiles, the labeling, and the production  documentation, among others.  CBP is currently investigating 40 importers  for potential violations of the reasonable care standard.",
      "   In a continuing  effort to deter transshipment and meet its own responsibilities, CBP  officials regularly meet with members of the trade industry to share  information about the latest developments regarding textile transshipment. Conclusions Despite increasing trade volumes and heightened national security  priorities, CBP has maintained a focus on textile transshipment by  consolidating its various textile enforcement activities and by using its  expertise to target its review process at the most suspect shipments.  The  actual number of textile and apparel shipments CBP reviews at the ports is  low (less than 0.01 percent), and in 2002 about 24 percent of these reviews  resulted in exclusions,",
      " 2 percent in penalties, and 1 percent in seizures.   CBP\u2019s overall efforts at deterrence are aimed more at excluding problem  shipments from U.S. commerce and emphasizing importer compliance  responsibilities rather than at pursuing enforcement actions in the courts,  due to the complexity and length of the investigative process and past  experiences with ultimate imposition of minimal penalties.  The low  likelihood of review and minimal penalties limit the system\u2019s deterrent  effect and make high-quality intelligence and targeting essential to focusing  limited resources on the highest risk overseas factories and shipments.   Although textile import quotas on WTO members will be eliminated on  January 1,",
      " 2005, with the expiration of the Agreement on Textiles and  Clothing, the roles of the STC and the port import specialists will continue  to be important, because incentives will continue to exist to illegally  transship merchandise through countries benefiting from trade preferences  and free trade agreements.  In addition, quotas will remain on Vietnam until  its WTO accession, and quotas may be placed into effect on certain imports  from China under the safeguard provision of China\u2019s WTO Accession  Agreement. Because transshipment will remain a concern beyond this coming year,  CBP will still face challenges in implementing its monitoring system.  First,  CBP has been slow to follow up on some of the findings from the TPVT  factory visits,",
      " which are one of the key sources of information used in  decisions on what textile shipments to review.  CBP has not fully made the  results of these trips known and acted quickly by entering all national  criteria at an earlier stage rather than waiting until CBP approves the TPVT  report.  CBP has the authority to review any shipments presented for  import.  The result of waiting for TPVT report approval may mean that  some suspect shipments are not reviewed or inspected at the ports.   Second, CBP faces challenges in ensuring that additional import specialists  are placed in Customs Attach\u00e9 Offices overseas to assist with textile  monitoring and enforcement activities.",
      "  CBP would be able to further  facilitate cooperation on textile issues, follow up on TPVT findings, and  supplement the enforcement information it needs to trigger port textile  reviews if it placed more import specialists in Customs Attach\u00e9 Offices in  high-risk countries. In addition, we found weaknesses in CBP\u2019s current monitoring of in-bond  cargo transiting the United States, and CBP has only in the last year begun  to intensively address the issue of in-bond textile and apparel shipments  being diverted into U.S. commerce.  CBP\u2019s current in-bond procedures may  facilitate textile transshipment by allowing loosely controlled interstate  movement of imported cargo upon which no quota or duty has been  assessed.",
      "   Internal control weaknesses have meant that CBP places an  unacceptably high level of reliance on the integrity of bonded carriers and  importers.  Without an automated system and detailed and up-to-date  information on in-bond shipments, CBP cannot properly track the  movement of in-bond cargo.   In addition, limited port targeting and  inspections of in-bond shipments constitute a major vulnerability in  monitoring possible textile transshipments and other areas of national  security.  CBP\u2019s regulations regarding delivery time and shipment  destination also hinder proper monitoring.  Unless these concerns are  addressed, proper revenue collection, compliance with trade agreements,",
      "  and enforcement of national security measures cannot be ensured.  While  CBP has taken some preliminary steps, much remains to be done before  the in-bond system has an acceptable level of internal controls. Moreover, CBP\u2019s system for assessing liquidated damages does not provide  a strong deterrent against in-bond diversion.   With bond amounts set  considerably lower than the value of the merchandise and mitigation of  liquidated damages down to a fraction of the shipment value, violators may  see paying the bond as a cost of doing business and may not perceive it as a  deterrent against the diversion of goods.  CBP has the authority to review  bond sufficiency and can change the bond amounts to provide an effective  deterrent against the illegal diversion of goods.",
      " Recommendations for  Executive Action To improve information available for textile transshipment reviews at CBP  ports and to encourage continued cooperation by foreign governments, we  recommend that the Commissioner of U.S. Customs and Border Protection  take the following two actions:  Improve TPVT follow-up by immediately entering all criteria resulting  from overseas factory visits into ACS to trigger port reviews. Assign import specialists to Customs Attach\u00e9 Offices in high-risk textile  transshipment countries to assist with textile monitoring and  enforcement activities, including conducting follow-up to TPVTs. To improve its monitoring of in-bond cargo and ensure compliance with  U.S. laws and enforcement of national security,",
      " we also recommend that  the Commissioner of U.S. Customs and Border Protection take the  following four steps:   Place priority on timely implementation of a fully automated system,  including more information to properly track the movement of in-bond  cargo from the U.S. port of arrival to its final port of destination. Increase port targeting and inspection of in-bond shipments. Routinely investigate overdue shipments and, pending implementation  of an improved automated system, require personnel at ports of entry to  maintain accurate and up-to-date data on in-bond shipments. Assess and revise as appropriate CBP regulations governing (1) the time  intervals allowed for in-bond shipments to reach their final destinations,",
      "  taking into consideration the distance between the port of arrival and  the final port of destination and (2) whether importers or carriers can  change the destination port without notifying CBP. Finally, to strengthen the deterrence value of in-bond enforcement  provisions, we recommend that the Commissioner of U.S. Customs and  Border Protection review the sufficiency of the amount of the bond for  deterring illegal diversion of goods. Agency Comments The Department of Homeland Security provided written comments on a  draft of this report, which is reproduced in appendix III.  The Department  agreed with our recommendations and stated that it would take the  appropriate steps needed to implement the recommendations.",
      "  In its letter,  the department listed its key planned corrective actions for each of our  recommendations.  In addition, we received technical comments from the  Departments of Homeland Security, Commerce, and the Office of the U.S.  Trade Representative, which we incorporated in this report as appropriate. We are sending copies of this report to appropriate congressional  Committees and the Secretaries of Homeland Security, Commerce, and  State and the Office of the U.S. Trade Representative.  We will also make  copies available to others upon request.  In addition, this report will be  available at no charge on the GAO Web site at http://www.gao.gov.",
      " If you or your staff have any questions about this report, please contact me  on (202) 512-4128.  Additional contacts and staff acknowledgments are  listed in appendix IV. Objectives, Scope, and Methodology In a legislative mandate in the Trade Act of 2002 (P.L. 107-210, Aug. 6, 2002),  Congress directed GAO to review U.S. Customs and Border Protection\u2019s  (CBP) system for monitoring and enforcing textile transshipment and  make recommendations for improvements, as needed, to the Chairman and  the Ranking Minority Member of the Senate Committee on Finance and the  Chairman and the Ranking Minority Member of the House Committee on  Ways and Means.",
      "  As discussed with Committee representatives, we have  focused on answering the following questions: (1) how CBP identifies  potential textile transshipment, (2) how well CBP\u2019s textile review process  works to prevent illegal textile transshipment, (3) how effectively CBP  monitors foreign textiles transiting the United States in its in-bond system  before entering U.S. commerce or being exported, and (4) what challenges  CBP experienced in using penalties and other means to deter illegal textile  transshipment. To examine how CBP identifies potential textile transshipment, we  reviewed and analyzed internal planning documents and trade studies from  the Office of Strategic Trade\u2019s Strategic Trade Center (STC)",
      " in New York  City, which conducts analysis and targeting of textile transshipment.  We  also analyzed CBP foreign factory and cargo shipment reports and  summaries from the STC; the Office of Field Operations\u2019 Textile  Enforcement and Operations Division at CBP\u2019s headquarters; and some  ports of entry, from 2000 to 2003.  We collected and analyzed data from  2000 to 2003 on the targeting process from CBP\u2019s internal database and  documents and reviewed how CBP collected the data. We examined the  data for their reliability and appropriateness for our purposes.  We found  the data to be sufficiently reliable to represent CBP\u2019s targeting activity.",
      "  In  addition, we also collected official U.S. international trade statistics from  the Census Bureau for 1993 to 2002, textile and apparel production  statistics from the Census Bureau (Annual Survey of Manufacturers) for  1993 to 2001, and employment statistics from the Bureau of Labor Statistics  (Current Employment Survey) for 1993 to 2002.  We defined \u201ctextile and  apparel goods for international trade,\u201d based on the definition in the World  Trade Organization\u2019s (WTO) Agreement on Textiles and Clothing (Annex),  as well as additional textile and apparel goods not covered by the  agreement but identified as textile and apparel goods by the Department of  Commerce\u2019s Office of Textiles and Apparel on the Department of  Commerce\u2019s Web site.",
      "  We reviewed these statistics for their reliability and  appropriateness for our purposes and found them sufficiently reliable to  represent the trends and magnitude of trade, production, and employment  in the textile and apparel sector.  We also observed a targeting session at  the STC in preparation for a foreign factory visit to El Salvador.  In  addition, we interviewed CBP officials in the Office of Strategic Trade\u2019s  STC and Regulatory Audit Division, the Office of Field Operations, and in  seven ports of entry (New York/Newark, New York; Los Angeles/Long  Beach, California; Laredo, Texas; Columbus and Cleveland,",
      " Ohio; and  Seattle and Blaine, Washington) about their targeting activities and roles.  Together, these ports represent CBP service ports that processed 55  percent of textiles and apparel imported into the United States in 2002.   However, we recognize that activities among individual ports of entry  within CBP service port areas may vary from ports that we visited.  To gain  additional perspectives on CBP\u2019s targeting operations, we interviewed  officials of the Department of Commerce and the Office of the U.S. Trade  Representative (USTR), as well as former Customs officials and private  sector business associations. To examine CBP\u2019s textile review process to prevent illegal textile  transshipment,",
      " we reviewed internal planning documents, directives, and  reports of the Office of Field Operations\u2019 Textile Enforcement and  Operations Division, the Office of International Affairs, and the Office of  Strategic Trade\u2019s STC and Regulatory Audit Division covering the years  1999 to 2003.  We visited seven ports of entry and observed operations.  To  review CBP\u2019s foreign factory visits, we observed a Textile Production  Verification Team (TPVT) visit in El Salvador.  To report on CBP\u2019s overall  textile review activity, we collected data on TPVT visits and port-level  textile review activity from 1996 to 2003 from CBP\u2019s internal database and  documents.",
      "  We reviewed how CBP collected the data and examined the  data for their reliability and appropriateness for our purposes.  We found  the data to be sufficiently reliable to represent CBP\u2019s foreign factory  inspections and port-level activity.  We interviewed CBP officials in the  Office of Field Operations, the Office of International Affairs, the Office of  Strategic Trade, and the seven ports of entry we visited.  We also  interviewed officials of the Department of Commerce, including the  Committee for the Implementation of Textile Agreements (CITA) and the  Office of Textiles and Apparel; USTR; and the Department of State;",
      " as well  as former Customs officials and private sector business associations.  In  addition, we interviewed customs and trade officials in Hong Kong and  Macao, as well as a Mexican embassy trade official in Washington, D.C.,  and Mexican port officials in Nuevo Laredo, Mexico.  We communicated  with Canadian officials through an exchange of written questions and  answers. To review how CBP uses its in-bond system to monitor foreign textiles  transiting the United States before entering U.S. commerce or being  exported, we observed in-bond operations at six of the ports of entry we  visited: Newark, New Jersey/New York,",
      " New York; Long Beach/Los  Angeles, California; Cleveland and Columbus, Ohio; Laredo, Texas; and  Blaine, Washington.  We reviewed documents on CBP\u2019s in-bond operations  from the Office of Field Operations\u2019 Cargo Verification Division, as well as  documents on in-bond penalties from the Office of Field Operations\u2019 Fines,  Penalties, and Forfeitures Branch.  We conducted interviews on the in-bond  system with CBP officials in the Cargo Verification Division; the Fines,  Penalties, and Forfeitures Branch; and the Textile Enforcement and  Operations Division at headquarters;",
      " and at the ports of entry and Bureau  of Immigration and Customs Enforcement (BICE) headquarters and Field  Offices. In addition, we conducted a survey of in-bond activities at 11 major U.S.  area ports that process the highest levels of textile and apparel imports and  2 smaller area ports that also process textile and apparel imports.  For each  area port, we also requested that the survey be distributed to two  additional subports that also processed textile and apparel imports.  We  asked ports to respond to the survey, based on in-bond activities from  October 2001 to May 2003.",
      "  We received responses from all 13 area ports  and 29 subports we surveyed.  We selected ports for our survey, based on  four criteria: (1) ports with the highest value of textile and apparel imports;  (2) geographic distribution that included coastal, in-land, northern, and  southern border ports; (3) ports with the highest value of textile and  apparel imports by trade preference program (such as the African Growth  and Opportunity Act and the Caribbean Basin Trade Partnership Act); and  (4) ports of various sizes, allowing us to include smaller ports that also  process textile and apparel imports.",
      "  We found the data to be sufficiently  reliable to review how the in-bond system monitors foreign textiles  transiting the United States.  Not all ports were able to provide data for the  entire time period requested; therefore, we were not able to use some of  the data for the missing time period.  In addition, although we received a  100-percent response rate, the in-bond data we received from the 13 area  ports and 29 subports are not representative of in-bond operations at all  Customs ports.  Copies of the survey are available from GAO. To examine the challenges CBP experienced in using penalties and other  means to deter illegal textile transshipment,",
      " we reviewed internal planning  documents, memorandums, and reports, dating from 1999 to 2003, from  former Office of Investigations officials now in the BICE, as well as from  CBP\u2019s Offices of Chief Counsel; Field Operations (including the Textile  Enforcement and Operations Division and the Fines, Penalties, and  Forfeitures Division); Strategic Trade, (including the STC and Regulatory  Audit Division); and Regulations and Rulings.  We also reviewed CBP\u2019s  enforcement authorities in the relevant statutes and federal regulations, as  well as reviewing informed compliance publications and other information  on CBP\u2019s and BICE\u2019s Web sites.",
      "  We collected data on CBP\u2019s enforcement  and penalty actions for the years 2000 to 2002, from CBP\u2019s internal  databases and documents.  We reviewed how CBP collected the data and  examined the data for their reliability and appropriateness for our  purposes.  We found the data to be sufficiently reliable to represent CBP\u2019s  enforcement and penalty actions.  We interviewed officials in BICE and in  CBP\u2019s Offices of Chief Counsel; Field Operations (including the Textile  Enforcement and Operations Division and the Fines, Penalties, and  Forfeitures Division); Strategic Trade (including the STC and Regulatory  Audit Division); and Regulations and Rulings,",
      " as well as at the seven ports  of entry we visited, and associated BICE Field Offices.  We also interviewed  officials of the Department of Commerce, including CITA and OTEXA; as  well as former Customs officials and private sector business associations. We performed our work from September 2002 through December 2003 in  accordance with generally accepted government auditing standards. U.S. Textile and Apparel Trade, Production,  and Employment U.S. textile and apparel imports have grown considerably over the past  decade and have been comprised largely of apparel products.  In 2002,  China surpassed Mexico as the largest foreign supplier of textile and  apparel to the U.S.",
      " market, followed by Caribbean Basin countries that  benefit from preferential access.  New York and Los Angeles are the  service ports that receive the largest share (by value) of textile and apparel  imports, with Miami, Florida, and Laredo, Texas, important service ports  districts for imports from Latin America.  The United States is in the  process of gradually phasing out textile and apparel quotas under a 1995  World Trade Organization (WTO) agreement, but a significant number of  quotas are still to be eliminated at the end of the agreement\u2019s phase-out  period on January 1, 2005.",
      "  Elimination of these quotas is likely to affect  trade patterns as more efficient producers acquire greater market share.   Tariffs and other potential barriers, however, such as antidumping and  safeguard measures, still exist and could still affect trade patterns and  create an incentive for illegal textile transshipment.  Also, as quotas are  removed, a more competitive market may place increasing pressure on the  U.S. textile and apparel industry.  Industry production and employment in  the United States has generally been declining in recent years, with  employment in the apparel sector contracting the most. Imports of Textile and  Apparel U.S. imports of textile and apparel products have nearly doubled during the  past decade (1993 to 2002), rising from about $43 billion to nearly $81  billion.",
      "  Because overall imports have also nearly doubled during the  decade, textile and apparel products have maintained about a 7 percent  share of total U.S. imports throughout this period.   As figure 10 shows, the  majority of U.S. textile and apparel imports are apparel products (about 73  percent in 2002).  The remaining imports consist of yarn (10 percent),  uncategorized textile and apparel products (9 percent), made-up and  miscellaneous textile products (7 percent), and fabric (2 percent). The major foreign suppliers of textile and apparel to the U.S. market are  China, Mexico, and the Caribbean Basin countries.",
      "   However, as figure 11  shows, no major supplier had more than a 15 percent share of overall  textile and apparel imports in 2002.  Also, after the top 10 suppliers,  remaining suppliers still provided more than a third of imports.  These  smaller suppliers include Africa Growth and Opportunity Act (AGOA)  countries, which supplied $1.1 billion (about 1.4 percent) of imports, and  Andean Trade Promotion and Drug Eradication Act (ATPDEA) countries,  which supplied $790 million (about 1 percent) of imports. Countries with free trade agreements (FTA)",
      " with the United States  accounted for 18.8 percent of total textile and apparel imports in 2002.  This  includes the North American Free Trade Agreement (NAFTA) countries,  Mexico and Canada, which supplied 17.1 percent.  Other FTA partners\u2014 Chile, Israel, Jordan, and Singapore\u2014supplied the remaining 1.7 percent.   In addition, the United States is negotiating FTAs with several other  countries, which combined accounted for 15 percent of U.S. imports.  The  most important (in terms of imports) of these potential FTA partners are  the countries in the Central American FTA negotiations (Costa Rica,",
      " El  Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican  Republic, all of which are also part of the overall Free Trade Area of the  Americas (FTAA) negotiations. Top U.S. Ports The service ports of New York and Los Angeles were the top two recipients  of textile and apparel imports into the United States in 2002.  Together they  accounted for more than 40 percent of imports.  Furthermore, the top 10  U.S. service ports accounted for about 77 percent of textile and apparel  imports in 2002 (see fig. 12).  Overall, Customs has 42 service ports,",
      "  encompassing more than 300 individual ports of entry.  For example, the  New York service port encompasses the individual ports of JFK Airport;  Newark, New Jersey; and New York City. On the West Coast, Los Angeles receives a large portion of its imports from  Asian suppliers such as China and Hong Kong; while in the South, Miami  and Laredo receive a large portion of their imports from Caribbean  countries.  In-land ports, such as Columbus, Ohio, receive imports shipped  across country by truck or rail from other ports or flown directly into the  airports in its district. Textile and Apparel  Products Affected by  Quotas Under the WTO\u2019s 1995 Agreement on Textiles and Clothing (ATC), the  United States and other WTO members agreed to gradually eliminate quota  barriers to textile and apparel trade during a 10-year transition period,",
      "  ending by January 1, 2005.  By 1995, the United States, the European  Union, Canada, and Norway were the only WTO members to maintain  quotas on textile and apparel.  Each agreed, however, to remove a share of  their quotas by January 1 in 1995, 1998, 2002, and 2005.  Based on 2002  Department of Commerce import statistics and our analysis, the United  States still maintains quotas on products that account for about 61 percent  of its textile and apparel imports by value.  Not all of these imports,",
      "  however, are subject to quotas because not all U.S. trade partners are  subject to quotas on these products.  For instance, U.S. textile and apparel  categories 338 and 339 (men and women\u2019s cotton knit shirts and blouses)  account for over 12 percent of U.S. imports of textile and apparel products,  and categories 347 and 348 (men and women\u2019s cotton trousers and shorts)  account for about another 13 percent.  Although several countries face U.S.  quotas in each of these categories, not all countries are restricted.   Therefore, quotas only limit a portion of the 25 percent of imports  accounted for by products in these categories.",
      "  Customs, though, is  concerned with the trade flows relating to all the products under quotas,  despite which country they originate in because the country of origin may  be misrepresented. Future Barriers to  Trade in Textile and  Apparel Under the ATC, the United States agreed to remove by 2005 textile and  apparel quotas maintained against other WTO members.  These quotas  have created significant barriers to imports of certain types of textile and  apparel products from quota-restricted countries.  For example, in 2002,  the U.S. International Trade Commission estimated that quota barriers  amounted to an approximately 21.",
      "4 percent tax on apparel imports and a  3.3 percent tax on textile imports.  However, these estimates were  calculated across all textile and apparel products and countries.  Therefore,  actual barriers may be significantly higher for certain highly restricted  products.  Upon removal of these quotas, trade patterns are likely to  change, with more efficient foreign suppliers that were formerly restricted  under the quotas capturing a larger share of the U.S. market. FTAs, though, will still provide preferential access to products that meet  rules of origin requirements from FTA partners.  FTAs generally provide  tariff-free access, while 2002 tariff rates on more restricted textile and  apparel products ranged from 15 to 33 percent.",
      "  Also, the United States  provides similar preferential access unilaterally to countries from the  Caribbean Basin, sub-Saharan Africa, and the Andean region under the  CBTPA, AGOA, and ATPDEA preferential programs.  Officials and experts  that we spoke with said they believed these tariff differentials to be a  significant incentive for continued illegal textile transshipment because  they act as a tax on textile and apparel products from non-FTA partners.   Also, under WTO rules, the United States may impose antidumping or  countervailing duties on imports from certain countries if it can be shown  that these products have either been \u201cdumped\u201d in the U.S.",
      " market or were  subsidized.  Furthermore, under China\u2019s accession agreement with the  WTO, members may impose a special safeguard mechanism on imports  from China if they are shown to cause market disruption.  In fact, in  December 2003 the United States imposed this mechanism against imports  from China of certain types of knit fabrics, dressing gowns and robes, and  brassieres. U.S. Textile and Apparel  Production and  Employment U.S. textile and apparel employment has declined over the past decade  (1993 through 2002), while production has declined from 1995 through 2001  (latest year statistics were available for production data).  Production of  apparel (and textiles to a lesser extent)",
      " in the United States tends to be  relatively intensive in its use of labor.  Consequently, the U.S. industry has  faced strong competition from developing countries, such as China and  India, where labor rates are significantly lower than in the United States.   Employment in the U.S. apparel sector is higher than in the textile sector,  overall; however, employment declines in the U.S. textile and apparel  industry have primarily been due to declines in the apparel sector.  As  figure 13 shows, employment in the overall textile and apparel industry fell  from about 1,570,000 jobs in 1993 to about 850,",
      "000 jobs in 2002.  The  majority of this decline was due to the fall in apparel employment from  more than 880,000 workers in 1993 to about 360,000 workers in 2002.   However, employment in the other sectors of the industry\u2014textile mills  (yarns, threads, and fabrics) and textile product mills (carpets, curtains,  bedspreads, and other textile products besides apparel)\u2014also declined. Regarding U.S. production (as measured by shipments) in the textile and  apparel sectors, figure 14 shows overall textile and apparel production  declined between 1997 and 2001.",
      "  During that period, the value of U.S.  shipments of textile and apparel products (either to the U.S. market or  overseas) fell from nearly $158 billion to about $132 billion.  This decline  was due to contraction in the apparel and textile mills sectors.  However,  the textile product mills sector remained relatively stable during the same  time period. Comments from the Department of Homeland  Security GAO Contacts and Staff Acknowledgments GAO Contacts Staff  Acknowledgments In addition to those individuals named above, Margaret McDavid, Michelle  Sager, Josie Sigl, Tim Wedding, Stan Kostyla,",
      " Ernie Jackson, and Rona  Mendelsohn made key contributions to this report. GAO\u2019s Mission The General Accounting Office, the audit, evaluation and investigative arm of  Congress, exists to support Congress in meeting its constitutional  responsibilities and to help improve the performance and accountability of the  federal government for the American people. GAO examines the use of public  funds; evaluates federal programs and policies; and provides analyses,  recommendations, and other assistance to help Congress make informed  oversight, policy, and funding decisions. GAO\u2019s commitment to good  government is reflected in its core values of accountability, integrity, and  reliability.",
      " Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost is  through the Internet. GAO\u2019s Web site (www.gao.gov) contains abstracts and full- text files of current reports and testimony and an expanding archive of older  products. The Web site features a search engine to help you locate documents  using key words and phrases. You can print these documents in their entirety,  including charts and other graphics. Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as \u201cToday\u2019s Reports,\u201d on its Web  site daily.",
      " The list contains links to the full-text document files. To have GAO e- mail this list to you every afternoon, go to www.gao.gov and select \u201cSubscribe to  e-mail alerts\u201d under the \u201cOrder GAO Products\u201d heading. Order by Mail or Phone To Report Fraud,  Waste, and Abuse in  Federal Programs Public Affairs\n"
    ],
    "length": 25148,
    "hardness": null,
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  },
  {
    "id": 111,
    "question": null,
    "answer": "President Obama's budget request for FY2017 included $152.333 billion for research and development (R&D), an increase of $6.195 billion (4.2%) over the estimated FY2016 enacted R&D funding level of $146.138 billion.  Funding for R&D is concentrated in a few departments and agencies. Under President Obama's FY2017 budget request, seven federal agencies would have received 95.6% of total federal R&D funding, with the Department of Defense (47.8%) and the Department of Health and Human Services (21.5%) accounting for nearly 70% of all federal R&D funding.  In dollars, the largest increases in agency R&D funding in President Obama's request would have gone to the Department of Energy (up $2.755 billion, 19.1%), the Department of Defense (up $1.953 billion, 2.8%), and the Department of Health and Human Services (up $772 million, 2.4%). President Obama's FY2017 request sought to continue support for a number of multiagency R&D initiatives: the National Nanotechnology Initiative, Networking and Information Technology Research and Development program, U.S. Global Change Research Program, Brain Research through Advancing Innovative Neurotechnologies (BRAIN) initiative, Precision Medicine Initiative, Cancer Moonshot, Materials Genome Initiative, National Robotics Initiative, and National Network for Manufacturing Innovation.  As of September 28, 2016, Congress had not completed action on any of the 12 regular appropriations bills for FY2017. The House Committee on Appropriations had reported all nine of the regular appropriations bills that provide R&D funding, and the House had passed three of them. The Senate Committee on Appropriations had reported all nine of the regular appropriations bills that provide R&D funding, and the Senate had passed three of them. On September 29, 2016, President Obama signed into law the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act (P.L. 114-223). This act, among other things, provided full-year funding for military construction and the Department of Veteran's Affairs, as well as continuing appropriations for most federal agencies through December 9, 2016, at about 99.5% of FY2016 funding. On December 10, President Obama signed into law the Further Continuing and Security Assistance Appropriations Act, 2017 (P.L. 114-254). Division A, Further Continuing Appropriations Act, 2017, generally provides continuing appropriations for most federal agencies at 99.8% of FY2016 funding through April 28, 2017, subject to other provisions in the act, pending final action on the remaining 11 regular appropriations acts for FY2017. Division B, Security Assistance Appropriations Act, 2017, included additional funding for DOD RDT&E, designated by Congress as Overseas Contingency Operations/Global War on Terrorism funding.  In May 2017, Congress enacted the Consolidated Appropriations Act, 2017 (P.L. 115-31). The act provides FY2017 funding for most federal agencies, except those already provided for in P.L. 114-223. Where possible, R&D funding provided under this act is identified in the following sections of this report. For some agencies, however, funding for R&D is included in appropriations line items that also include non-R&D activities; therefore, it is not possible to identify precisely how much of the funding provided in appropriations laws is allocated to R&D specifically. No further updates of this report are anticipated. Completion of the annual appropriations process after the start of the fiscal year and the use of continuing resolutions can affect agencies' execution of their R&D budgets, including the delay or cancellation of planned R&D activities and acquisition of R&D-related equipment. \n",
    "docs": [
      "Introduction The 115 th Congress continues to take an interest in U.S. research and development (R&D) and in evaluating support for federal R&D activities. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the Internet to communications satellites, shale gas extraction, and defenses against disease. However, widespread concerns about the federal debt and recent and projected federal budget deficits drove difficult decisions about the prioritization of R&D, both in the context of the entire federal budget and among competing needs within the federal R&D portfolio.  The U.S. government supports a broad range of scientific and engineering R&D.",
      " Its purposes include specific concerns such as addressing national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness in the global economy. Most of the R&D funded by the federal government is performed in support of the unique missions of individual funding agencies. The federal R&D budget is an aggregation of the R&D components of each federal agency. There is no single, centralized source of funds that is allocated to individual agencies. Agency R&D budgets are developed internally as part of each agency's overall budget development process and may be included either in accounts that are entirely devoted to R&D or in accounts that include funding for non-R&D activities.",
      " These budgets are subjected to review, revision, and approval by the Office of Management and Budget (OMB) and become part of President Obama's annual budget submission to Congress. The federal R&D budget is then calculated by aggregating the R&D components of each federal agency.  Congress plays a central role in defining the nation's R&D priorities as it makes decisions about the level and allocation of R&D funding\u2014overall, within agencies, and for specific programs. Some Members of Congress have expressed concerns about the level of federal spending (for R&D and for other purposes) in light of the current federal deficit and debt. As Congress acted to complete the FY2017 appropriations process,",
      " it faced two overarching issues: the extent to which federal R&D investments could grow in the face of increased pressure on discretionary spending and the prioritization and allocation of the available funding. Budget caps may have limited overall R&D funding and may have required movement of resources across disciplines, programs, or agencies to address priorities. Moving funding between programs/accounts/agencies can be complex and difficult because the funding for different programs/accounts/agencies is often provided through different appropriations bills. This report begins with a discussion of the overall level of President Obama's FY2017 R&D request, followed by analyses of the R&D funding request from a variety of perspectives and for selected multiagency R&D initiatives.",
      " The report concludes with discussion and analysis of the R&D budget requests of selected federal departments and agencies that, collectively, account for nearly 99% of total federal R&D funding. Selected terms associated with federal R&D funding are defined in the text box on the next page. The Appendix provides a list of acronyms and abbreviations. President Obama's FY2017 Budget Request On February 9, 2016, President Obama released his proposed FY2017 budget. This report provides government-wide, multiagency, and individual agency analyses of President Obama's FY2017 request as it relates to R&D and related activities, as well as House and Senate action on President Obama's budget request through appropriations bills that provide funding for R&D and related activities.",
      " For FY2017, President Obama's budget request included both discretionary and mandatory funding. As presented in the \"Research and Development\" chapter of the Analytical Perspectives volume of the Budget of the U.S. Government FY2017, the discretionary and mandatory funding are combined into a single figure for each agency. In addition, a change in the Department of Energy's reporting of administrative expenses led to an increase in reporting of R&D investments \"on the order of $2 to $3 billion a year.\" Factors such as these can complicate the analysis of year-to-year changes in R&D funding, both in aggregate and for selected agencies.  For FY2017,",
      " President Obama proposed $152.333 billion for R&D, an increase of $6.195 billion (4.2%) over the estimated FY2016 enacted R&D funding level of $146.138 billion. Adjusted for anticipated inflation of approximately 1.8%, President Obama's FY2016 R&D request represented a constant dollar increase of 2.4% from the estimated FY2016 enacted level. President Obama's R&D request included continued funding of existing single-agency and multiagency programs and activities, as well as new initiatives. Single-agency initiatives are discussed in their respective sections of this report. Multiagency initiatives are discussed in the section \" Multiagency R&D Initiatives.\" Analysis of federal R&D funding is complicated by several factors,",
      " such as inconsistency among agencies in the reporting of R&D and the inclusion of R&D activities in accounts with non-R&D activities. As a result, figures reported by OMB and the White House Office of Science and Technology Policy (OSTP), including those shown in Table 1, may differ from the agency budget analyses that appear later in this report. Federal R&D Funding Perspectives Federal R&D funding can be analyzed from a variety of perspectives that provide different insights. The following sections examine the data by agency, by the character of the work supported, by a combination of these two perspectives, and by whether R&D is defense-related or not.",
      " Federal R&D by Agency Congress makes decisions about R&D funding through the authorization and appropriations processes primarily from the perspective of individual agencies and programs. Table 1 provides data on R&D by agency for FY2015 (actual), FY2016 (estimate), and FY2017 (request).  Under President Obama's FY2017 budget request, seven federal agencies would have received more than 95% of total federal R&D funding: the Department of Defense (DOD), 49.5%; Department of Health and Human Services (HHS) (primarily the National Institutes of Health [NIH]), 21.3%; Department of Energy (DOE), 8.",
      "6%; National Aeronautics and Space Administration (NASA), 8.4%; National Science Foundation (NSF), 4.3%; Department of Agriculture (USDA), 2.0%; and Department of Commerce (DOC), 1.5%. This report provides an analysis of the R&D budget requests for these agencies, as well as for the Department of Homeland Security (DHS), Department of the Interior (DOI), Department of Transportation (DOT), Department of Veterans Affairs (VA), and Environmental Protection Agency (EPA). In total, these 12 agencies accounted for more than 98% of current and requested federal R&D funding.",
      "  The largest agency R&D increases in President Obama's FY2017 request (as measured in dollars), compared with FY2016, were for DOE, up $2.755 billion (19.1%); DOD, up $1.953 billion (2.8%); HHS, up $772 million (2.4%); NSF, up $412 million (6.7%); and USDA, up $249 million (9.3%). NASA would see a decrease in R&D funding of $367 million (3.0%) and DOC funding would drop by $25 million (1.3%).  Federal R&D by Character of Work,",
      " Facilities, and Equipment  Federal R&D funding can also be examined by the character of work it supports\u2014basic research, applied research, or development\u2014and by funding provided for construction of R&D facilities and acquisition of major R&D equipment. (See Table 2.) President Obama's FY2017 request included $34.485 billion for basic research, up $975 million (2.9%) from FY2016; $38.361 billion for applied research, up $2.922 million (8.2%); $76.704 billion for development, up $2.238 million (3.0%); and $2.",
      "783 billion for facilities and equipment, up $60 million (2.2%). Federal Role in U.S. R&D by Character of Work A primary policy justification for public investments in basic research and for incentives (e.g., tax credits) for the private sector to conduct research is the view, widely held by economists, that the private sector will, left on its own, underinvest in basic research from a societal perspective. The usual argument for this view is that the social returns (i.e., the benefits to society at large) exceed the private returns (i.e., the benefits accruing to the private investor, such as increased revenues or higher stock value). Other factors that may inhibit corporate investment in basic research include long time horizons for commercial applications (diminishing the potential returns due to the time value of money), high levels of technical risk/",
      "uncertainty, shareholder demands for shorter-term returns, and asymmetric and imperfect information.  The federal government is the nation's largest supporter of basic research, funding 47.0% of U.S. basic research in 2013. Industry funded 26.4% of U.S. basic research in 2012, with state governments, universities, and other non-profit organizations funding the remaining 26.7%. In contrast to basic research, industry is the primary funder of applied research in the United States, accounting for an estimated 51.1% in 2013, while the federal government accounted for an estimated 36.",
      "8%.  Industry also provides the vast majority of funding for development. Industry accounted for 80.6% of development in 2013, while the federal government provided 17.8%. Federal R&D by Agency and Character of Work Combined Combining these perspectives, federal R&D funding can be viewed in terms of each agency's contribution to basic research, applied research, development, and facilities and equipment. (See Table 3.) The overall federal R&D budget reflects a wide range of national priorities, including supporting advances in spaceflight, developing new and affordable sources of energy, and understanding and deterring terrorist groups. These priorities and the mission of each individual agency contribute to the composition of that agency's R&D spending (i.e., the allocation among basic research,",
      " applied research, development, and facilities and equipment). In President Obama's FY2017 budget request, the Department of Health and Human Services, primarily NIH, accounted for nearly half (47.3%) of all federal funding for basic research. HHS would have also been the largest federal funder of applied research, accounting for about 42.1% of all federally funded applied research in President Obama's FY2017 budget request. DOD would have been the primary federal funder of development, accounting for 85.6% of total federal development funding in President Obama's FY2017 budget request. Defense-Related and Nondefense-",
      "Related R&D Federal R&D funding can also be characterized as defense-related or nondefense-related. Defense-related R&D is provided for primarily by the Department of Defense, but also includes some activities at the Department of Energy and the Federal Bureau of Investigation. Defense-related R&D has fluctuated between 50% and 70% of total federal R&D funding for more than three decades. Defense-related R&D grew from 52.7% of total federal R&D funding in FY2001 to 60.5% in FY2008, then declined over several years to 52.5% in FY2015. President Obama's FY2017 budget included $80.",
      "0 billion in defense-related R&D funding (about 52.5% of the total R&D request) and $72.4 billion for non-defense R&D (about 47.5% of the total R&D request). Multiagency R&D Initiatives President Obama's FY2017 budget request supported several multiagency R&D initiatives. These initiatives are presented below in order of the size of the FY2017 budget requests. Networking and Information Technology Research and Development Program12 Established by the High-Performance Computing Act of 1991 ( P.L. 102-194 ), the Networking and Information Technology Research and Development (NITRD)",
      " program is the primary mechanism by which the federal government coordinates its unclassified networking and information technology R&D investments in areas such as supercomputing, high-speed networking, cybersecurity, software engineering, and information management. President Obama requested $4.542 billion in NITRD funding for FY2017, $48.8 million (1.1%) more than the FY2016 estimate level of $4.494 billion (see Table 4 ). The largest agency increases in NITRD funding under the Administration's FY2017 request are for the DOE (up $38.3 million, 5.3%) and NIST (up $13.",
      "6 million, 9.2%). President Obama's budget would have reduced NITRD funding at DOD by $19.6 million (1.5%), though Defense Advanced Research Projects Agency (DARPA) funding would have increased by $14.8 million (3.5%). U.S. Global Change Research Program14  The U.S. Global Change Research Program (USGCRP) coordinates and integrates federal research and applications to understand, assess, predict, and respond to human-induced and natural processes of global change. The program seeks to advance global climate change science and to \"build a knowledge base that informs human responses to climate and global change through coordinated and integrated Federal programs of research,",
      " education, communication, and decision support.\" Thirteen departments and agencies participate in the USGCRP. President Obama's request for USGCRP funding for FY2017 was $2.8 billion.  National Nanotechnology Initiative17 Launched by President Clinton in his FY2001 budget request, the National Nanotechnology Initiative (NNI) is a multiagency R&D initiative to advance understanding and control of matter at the nanoscale, where the physical, chemical, and biological properties of materials differ in fundamental and useful ways from the properties of individual atoms or bulk matter. Federal nanotechnology efforts are coordinated by the National Science and Technology Council (NSTC)",
      " Subcommittee on Nanoscale Science, Engineering, and Technology (NSET). President Obama requested $1.443 billion in funding for the NNI in FY2017, an increase of $8.7 million (0.6%) over the FY2016 level of $1.435 billion. The largest agency increase in NNI funding under FY2017 request was for the DOE (up $31.3 million, 9.5%), while the largest decreases in agency NNI funding were for the Department of Homeland Security (down $19.5 million, 92.9%) and NASA (down $4.9 million,",
      " 44.5%). NNI funding in FY2017 under the request was down $469.4 million (24.5%) from the NNI's peak funding level in FY2010. Advanced Manufacturing Partnership In June 2011, President Obama launched the Advanced Manufacturing Partnership (AMP), an effort to bring together \"industry, universities, and the Federal government to invest in emerging technologies that will create high-quality manufacturing jobs and enhance our global competitiveness.\" Two R&D-focused components of the AMP are the National Robotics Initiative (NRI) and the National Network for Manufacturing Innovation (NNMI). National Robotics Initiative The National Robotics Initiative seeks to \"develop robots that work with or beside people to extend or augment human capabilities.\" Among the goals of the program are increasing labor productivity in the manufacturing sector,",
      " assisting with dangerous and expensive missions in space, accelerating the discovery of new drugs, and improving food safety by rapidly sensing microbial contamination. According to OSTP, the NITRD efforts in robotics and intelligent systems reflect most of the activity in the NRI. FY2016 funding for the NRI is $225 million. President Obama requested $221 million for FY2017, including $44 million for NSF, $103 million for DOD, $12 million for DOE, $8 million for NIST, $54 million for NASA, and $1 million for the Department of Justice. National Network for Manufacturing Innovation23 President Obama first proposed the establishment of a National Network for Manufacturing Innovation (NNMI)",
      " in his FY2013 budget, which requested $1 billion in mandatory funding to support the establishment of up to 15 institutes. As originally conceived, the Administration described the NNMI as a network of institutes where researchers, companies, and entrepreneurs can come together to develop new manufacturing technologies with broad applications. Each institute would have a unique technology focus. These institutes will help support an ecosystem of manufacturing activity in local areas. The Manufacturing Innovation Institutes would support manufacturing technology commercialization by helping to bridge the gap from the laboratory to the market and address core gaps in scaling manufacturing process technologies. In the absence of explicit congressional authorization and appropriations for the NNMI,",
      " the Obama Administration awarded several institutes for manufacturing innovation using the broad agency authorities and appropriations of the DOD and DOE. In December 2014, Congress passed the Revitalize American Manufacturing and Innovation Act of 2014 (RAMI), as Title VII of Division B of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ). President Obama signed the bill into law on December 16, 2014. The RAMI Act provides a statutory foundation for the effort, directing the Secretary of Commerce to establish a Network for Manufacturing Innovation (NMI) program within the Commerce Department's NIST.",
      " For FY2017, President Obama requested more than $250 million in discretionary spending to create or sustain manufacturing innovation institutes. The budget would have supported the establishment of five manufacturing institutes in FY2017, joining the seven institutes that have been awarded to date, two that are currently being competed, and four others that are to be funded in FY2016. In addition, President Obama's request included $1.9 billion in mandatory funding to establish 27 additional institutes over 10 years that would complete the Administration's vision for a 45-institute network. Cancer Moonshot In his 2016 State of the Union address, President Obama announced a cancer \"moonshot\"",
      " initiative to \"cure cancer once and for all.\" In his FY2017 budget, President Obama requested an increase in federal spending of $755 million to accelerate progress in the prevention, diagnosis, and treatment of cancer. Of this amount, $680 million would go to NIH and $75 million to FDA. A key target of these additional funds was research \"to help realize the promise of cancer immunotherapy.\" Other agencies, including the Department of Defense and Department of Veterans Affairs, were expected to participate in the effort as well, but dedicated initiative funding was not requested for those agencies for FY2017. BRAIN Initiative In April 2013,",
      " President Obama launched the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative, asserting that  There is this enormous mystery waiting to be unlocked, and the BRAIN Initiative will change that by giving scientists the tools they need to get a dynamic picture of the brain in action and better understand how we think and how we learn and how we remember. And that knowledge could be\u2014will be\u2014transformative. Among the agencies participating in the BRAIN Initiative are DARPA, NIH, NSF, and the Food and Drug Administration (FDA). The research supported under this initiative seeks to facilitate a better understanding of \"how the brain records,",
      " processes, uses, stores, and retrieves vast quantities of information, and shed light on the complex links between brain function and behavior,\" and to help improve the prevention, diagnosis, and treatment of brain diseases such as Parkinson's and Alzheimer's. President Obama requested more than $439 million in FY2017 for the BRAIN Initiative, approximately $139 million (46%) more than the effort's estimated FY2016 funding level of $300 million. Proposed FY2017 funding included an estimated $195 million in funding for NIH, $118 million for DARPA, $74 million for NSF, $9 million for the DOE Office of Science, and $43 million for the Intelligence Advanced Research Projects Activity (IARPA). IARPA is an organization with the Office of the Director of National Intelligence.",
      " Precision Medicine Initiative In his January 2015 State of the Union address, President Obama announced the Precision Medicine Initiative (PMI), an undertaking among HHS agencies. The PMI seeks to build on research and discoveries that allow medical treatments to be tailored to \"specific characteristics of individuals, such as a person's genetic makeup, or the genetic profile of an individual's tumor.\" Total funding for PMI in FY2016 is $200 million. President Obama's FY2017 request for the PMI was $309 million, including $300 million for NIH, $4 million for the Food and Drug Administration (FDA), and $5 million for the Office of the National Coordinator for Health Information Technology (ONC). ONC is located in the Office of the Secretary of Health and Human Services.",
      " The Department of Veterans Affairs also notes in its FY2017 request that it was prioritizing its research portfolio toward precision medicine, including a substantial $50 million investment in genomic sequencing. Materials Genome Initiative Announced in June 2011 by President Obama, the Materials Genome Initiative (MGI) is a multiagency initiative  to create new knowledge, tools, and infrastructure with a goal of enabling U.S. industries to discover, manufacture, and deploy advanced materials twice as fast than is possible today. Agencies are currently developing implementation strategies for the Materials Genome Initiative with a focus on: (1) the creation of a materials innovation infrastructure, (2)",
      " achieving national goals with advanced materials, and (3) equipping the next generation materials workforce. The purpose of the Materials Genome Initiative is to \"speed our understanding of the fundamentals of materials science, providing a wealth of practical information that American entrepreneurs and innovators will be able to use to develop new products and processes\" in much the same way that the Human Genome Project accelerated a range of biological sciences by identifying and deciphering the human genetic code. According to the White House, such research may contribute to the identification of substitutes for critical minerals that are in short supply or have at-risk supply chains; the design, development, and use of materials that could reduce the number and severity of traumatic brain injuries resulting from blasts,",
      " impacts, and collisions incurred in military engagements, motor vehicle accidents, and athletics; and the development of new lightweight materials for vehicles that could enable new energy storage and propulsion systems and improve fuel efficiency. Like President Obama's FY2015 and FY2016 budgets, the FY2017 budget did not include a table of agency funding for the MGI. The NSTC Subcommittee on the Materials Genome Initiative (SMGI) coordinates the initiative's activities. Among the agencies participating in MGI R&D are DOE, DOD, U.S. Geological Survey, NSF, NIST, NASA, and NIH. MGI also coordinates its efforts with two other multiagency initiatives,",
      " the NNI and NITRD. Doubling Federal Funding for Clean Energy R&D In November 2011, President Obama and other world leaders announced Mission Innovation, a global effort to accelerate public and private clean energy innovation. Under the initiative, 20 countries\u2014representing 80% of the world's clean energy R&D investment\u2014committed to doubling their government's clean energy R&D over five years. President Obama's FY2017 budget proposed a five-year doubling of federal clean energy R&D that would increase funding from $6.4 billion in FY2016 to $12.8 billion in FY2021. The initiative included the efforts of 12 federal agencies,",
      " including the Department of Energy, National Science Foundation, NASA, and Department of Agriculture. The Administration asserted that the FY2017 budget would have increased the federal investment in clean energy to $7.7 billion. FY2017 Appropriations Status The remainder of this report provides a more in-depth analysis of R&D in 12 federal departments and agencies that, in aggregate, receive nearly 99% of total federal R&D funding. Agencies are presented in order of the size of their R&D budgets, with the largest presented first. Annual appropriations for these agencies are provided through 9 of the 12 regular appropriations bills. For each agency covered in this report,",
      " Table 6 shows the corresponding regular appropriations bill that provides primary funding for the agency, including its R&D activities.  As of September 28, 2016, Congress had not completed action on any of the 12 regular appropriations bills for FY2017. The House Committee on Appropriations had reported all nine of the regular appropriations bills that provide R&D funding, and the House had passed three of them. The Senate Committee on Appropriations had reported all nine of the regular appropriations bills that provide R&D funding, and the Senate had passed three of them. On December 10, President Obama signed into law the Further Continuing and Security Assistance Appropriations Act,",
      " 2017 ( P.L. 114-254 ). Division A, Further Continuing Appropriations Act, 2017, generally provides continuing appropriations for most federal agencies at 99.8% of FY2016 funding through April 28, 2017, subject to other provisions in the act, pending final action on the remaining 11 regular appropriations acts for FY2017. Division B, Security Assistance Appropriations Act, 2017, includes additional funding for DOD RDT&E, designated by Congress as Overseas Contingency Operations/Global War on Terrorism funding.  On September 29, 2016, President Obama signed into law the Continuing Appropriations and Military Construction,",
      " Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act ( P.L. 114-223 ). This act, among other things, had provided continuing appropriations for most federal agencies through December 10, 2016, at about 99.5% of FY2016 funding.  On December 10, 2016, President Obama signed into law the Further Continuing Appropriations Act, 2017 (CR; Division A, P.L. 114-254 ), providing continued funding for agencies through April 28, 2017, generally at the FY2016 level, less an across-the-board reduction of 0.",
      "1901%. The act generally funded continuing projects and activities, under the same authority and conditions, and to the same extent and manner, as for FY2016. In May 2017, Congress passed and President Trump signed into law the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The act provides FY2017 funding for most federal agencies, except those already provided for in P.L. 114-223. Where possible, R&D funding provided under this act is identified in the following sections of this report. For some agencies, however, funding for R&D is included in appropriations line items that also include non-R&D activities;",
      " therefore, it is not possible to identify precisely how much of the funding provided in appropriations laws is allocated to R&D specifically. In general, R&D funding levels are known only after departments and agencies allocate their appropriations to specific activities and report those figures.  In addition to this report, CRS produces individual reports on each of the appropriations bills. These reports can be accessed via the CRS website at http://www.crs.gov/cli/Clis?cliId=73. Also, the status of each appropriations bill is available on the CRS web page, Status Table of Appropriations, available at http://www.crs.gov/AppropriationsStatusTable/Index.",
      "  Because of the way that agencies report budget data to Congress, it can be difficult to identify the portion that is R&D. Consequently, R&D data presented in the agency analyses in this report may differ from R&D data provided by OMB. Funding for R&D is often included in appropriations line items that also include non-R&D activities; therefore, it is not possible to identify precisely how much of the funding provided in appropriations laws is allocated to R&D specifically. In general, R&D funding levels are known only after departments and agencies allocate their appropriations to specific activities and report those figures.  Department of Defense39 Congress supports R&D in the Department of Defense (DOD)",
      " primarily through its Research, Development, Test, and Evaluation (RDT&E) appropriation. The appropriation supports the development of the nation's future military hardware and software and the technology base upon which those products rely. Nearly all of what DOD spends on RDT&E is appropriated in Title IV of the defense appropriations bill. (See Table 7.) However, RDT&E funds are also appropriated in other parts of the bill. For example, RDT&E funds are appropriated as part of the Defense Health Program, Chemical Agents and Munitions Destruction Program, and the National Defense Sealift Fund. The Defense Health Program (DHP) supports the delivery of health care to DOD personnel and their families.",
      " DHP funds (including the RDT&E funds) are requested through the Defensewide Operations and Maintenance appropriations request. The program's RDT&E funds support congressionally directed research on breast, prostate, and ovarian cancer; traumatic brain injuries; orthotics and prosthetics; and other medical conditions. Congress appropriates funds for this program in Title VI (Other Department of Defense Programs) of the defense appropriations bill. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program are requested through the Defensewide Procurement appropriations request.",
      " Congress appropriates funds for this program also in Title VI. The National Defense Sealift Fund supports the procurement, operation and maintenance, and research and development of the nation's naval reserve fleet and supports a U.S. flagged merchant fleet that can serve in time of need. The RDT&E funding for this effort is requested in the Navy's Procurement request and appropriated in Title V (Revolving and Management Funds) of the appropriation bill. The Joint Improvised-Threat Defeat Fund (JIDF, formerly the Joint Improvised Explosive Device Defeat Fund) also contains RDT&E monies. However, the fund does not contain an RDT&E line item as do the programs mentioned above.",
      " The Joint Improvised-Threat Defeat Organization (JIDO), which administers the fund, tracks (but does not report) the amount of funding allocated to RDT&E. JIDF funding is not included in the table below. RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support efforts in what the Bush Administration termed the Global War on Terror (GWOT), and what the Obama Administration refers to as Overseas Contingency Operations (OCO). Typically, the RDT&E funds appropriated for GWOT/OCO activities go to specified Program Elements (PEs) in Title IV.",
      " However, they are requested and accounted for separately. The Bush Administration requested these funds in separate GWOT emergency supplemental requests. The Obama Administration, while continuing to identify these funds uniquely as OCO requests, has included these funds as part of the regular budget, not in emergency supplementals. However, the Obama Administration has asked for additional OCO funds in supplemental requests, if the initial OCO funding is not enough to get through the fiscal year. The OCO budget declined as operations in Iraq and Afghanistan were reduced.  In addition, GWOT/OCO-related requests/appropriations often include money for a number of transfer funds. These have included in the past the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund,",
      " the Afghanistan Security Forces Fund, and the Pakistan Counterinsurgency Capability Fund. Congress typically makes a single appropriation into each of these funds and authorizes the Secretary to make transfers to other accounts, including RDT&E, at his discretion. These transfers are eventually reflected in Title IV prior year funding figures.  For FY2017, the Obama Administration requested $71.392 billion for DOD's baseline Title IV RDT&E. This is $1.423 billion (2.2%) above the enacted FY2016 level.  In addition to the baseline Title IV RDT&E request, the Administration requested $823 million in RDT&E through the Defense Health Program and $389 million in RDT&E through the Chemical Agents and Munitions Destruction program for FY2017.",
      " President Obama requested no RDT&E funding in FY2017 for the National Defense Sealift Fund.  RDT&E funding can be analyzed in different ways. Each of the military departments request and receive their own RDT&E funding. So, too, do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), collectively aggregated within the Defensewide account. RDT&E funding also can be characterized by budget activity (i.e., the type of RDT&E supported). Those budget activities designated as 6.1, 6.2, and 6.3 (basic research, applied research,",
      " and advanced technology development, respectively) constitute what is called DOD's Science and Technology Program (S&T) and represent the more research-oriented part of the RDT&E program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components (e.g., the Joint Strike Fighter or missile defense systems), for which an operational need has been determined and an acquisition program established. Budget activity 6.6 provides management support, including support for test and evaluation facilities. Budget activity 6.7 supports the development of system improvements in existing operational systems.  Many congressional policymakers are particularly interested in S&T funding since these funds support the development of new technologies and the underlying science.",
      " Some in the defense community see ensuring adequate support for S&T activities as imperative to maintaining U.S. military superiority into the future. The knowledge generated at this stage of development may also contribute to advances in commercial technologies. President Obama's FY2017 request for Title IV baseline S&T funding was $12.501 billion, $495 million below the FY2016 enacted baseline level ($535 million below the FY2016 level including OCO funding). Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research when compared to NIH or NSF.",
      " However, over half of DOD's basic research budget is spent at universities, and it represents the major source of funds in some areas of science and technology (such as electrical engineering and materials science). The Administration is requesting $2.102 billion for DOD basic research for FY2017. This is $207 million (9.1%) less than what was enacted for FY2016.  On December 10, President Obama signed into law the Further Continuing and Security Assistance Appropriations Act, 2017 ( P.L. 114-254 ). Division A, Further Continuing Appropriations Act, 2017, generally provides continuing appropriations for most DOD activities at 99.",
      "8% of FY2016 funding through April 28, 2017, subject to other provisions in the act, pending final action on the remaining 11 regular appropriations acts for FY2017. Division B, Security Assistance Appropriations Act, 2017, includes additional funding for DOD RDT&E, designated by Congress as GWOT/OCO funding. This funding includes $78.7 million for Army RDT&E and $3.0 million for Defense-wide RDT&E, as well as $87.8 million for the Joint Improvised Explosive Device Defeat Fund, a portion of which may be used to support RDT&E.",
      " On June 16, 2016, the House passed the Department of Defense Appropriations Act, 2017 ( H.R. 5293 ). The bill provides baseline funding and GWOT/OCO funding. The House bill designates part of the OCO funding as being intended to meet GWOT/OCO requirements and a portion to meet baseline requirements. The House-passed bill would provide $70.293 billion in funding for baseline RDT&E, $325 million (0.5%) more than the FY2016 baseline funding level and $1.099 billion (1.5%) less than the FY2017 request.",
      "  The House\u2013passed bill would provide $497 million in GWOT/OCO funding for FY2017, of which $163 million is intended to address baseline requirements. The balance of GWOT/OCO funding, $334 million, is $103 million (44.4%) more than the FY2016 GWOT/OCO funding level and $40 million (10.8%) below the request.  The House-passed bill would provide $1.467 billion for RDT&E for the Defense Health Program for FY2017, $654 million (30.8%) below the FY2016 level and $644 million (78.",
      "3%) above the FY2017 request; $389 million for RDT&E for Chemical Agents and Munitions Destruction for FY2017, $190 million (32.9%) below the FY2016 level and equal to the request; and $3 million for RDT&E work of the Inspector General for FY2017, $1 million above the FY2016 level and equal to the request. With respect to S&T funding (budget activities 6.1-6.3), the House-passed bill would provide essentially the same funding for FY2017 as the enacted FY2016 level and $529 million (4.2%) more than the request.",
      "  On May 26, 2016, the Senate Committee on Appropriations reported the Department of Defense Appropriations Act, 2017 ( S. 3000 ). Like the House bill, S. 3000 provides both baseline funding and GWOT/OCO funding. The Senate-reported bill would provide $70.801 billion in funding for baseline RDT&E, $833 million more than the FY2016 baseline funding level, $591 million less than the request, and $508 million more than the House-passed bill. The Senate-reported bill would provide $374 million in GWOT/OCO funding for FY2017,",
      " $143 million more than the FY2016 level and equal to the request. The Senate-reported bill includes: $1.730 billion for RDT&E for the Defense Health Program for FY2017, $391 million below the FY2016 level, $907 million above the request, and $263 million above the House-passed level; $389 million for RDT&E for Chemical Agents and Munitions Destruction for FY2017, $190 million below the FY2016 level, and equal to the request and House-passed levels; and $3 million for RDT&E work of the Inspector General for FY2017, $1 million above the FY2016 level and equal to the request and House-passed levels.",
      " With respect to S&T funding (budget activities 6.1-6.3), the Senate-reported bill would provide $13.364 billion, $328 million above the FY2016 level, $863 million above the request, and $335 million above the House-passed level.  In early May 2017, Congress passed and President Donald Trump signed the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), which provides funding for the Department of Defense for FY2017, among other things. The act provides both baseline funding and GWOT/OCO funding. The act provides $72.",
      "302 billion in baseline Title IV RDT&E funding for FY2017, an increase of $2.334 billion (3.3%) above the FY2016 enacted level. For FY2017, the act also $2.102 billion in RDT&E funding for the Defense Health Program, down $19 million (0.9%) from the FY2016 funding level, and $389 million in RDT&E funding for Chemical Agents and Munitions Destruction, a decrease of $190 million (32.8%) from the FY2016 funding level.  In addition, the act provides $1.397 billion of OCO/",
      " GWOT RDT&E funding for FY2017, up $1.166 billion (504.8%) from the FY2016 funding level. FY2017 funding for the S&T portion of Title IV RDT&E (baseline and OCO/GWOT) is $14.029 billion, an increase of $953 million (7.3%) from the FY2016 funding level.  Department of Health and Human Services The Department of Health and Human Services (HHS) is the federal government's \"principal agency for protecting the health of all Americans and providing essential human services, especially for those who are least able to help themselves.\" This section focuses on HHS R&D funded through the National Institutes of Health,",
      " an HHS agency which accounts for more than 95% of total HHS R&D funding. Other HHS agencies that provide funding for R&D include the Centers for Disease Control and Prevention (CDC), the Food and Drug Administration (FDA), the Agency for Healthcare Research and Quality (AHRQ), Health Resources and Services Administration (HRSA), and the Administration for Children and Families (ACF). National Institutes of Health43 The National Institutes of Health (NIH) is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. It also has major roles in training biomedical researchers and disseminating health information. The NIH mission is \"to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health,",
      " lengthen life, and reduce illness and disability.\" The agency's organization consists of the Office of the NIH Director and 27 institutes and centers. NIH supports and conducts a wide range of basic and clinical research, research training, and health information dissemination across all fields of biomedical and behavioral sciences. About 81% of NIH's budget goes out to the extramural research community in the form of grants, contracts, and other awards. This funding supports research performed by more than 30,000 non-federal scientists and technical personnel who work at more than 2,500 universities, hospitals, medical schools, and other research institutions. The NIH Office of the Director (OD)",
      " sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The institutes and centers (ICs) focus on particular diseases, areas of human health and development, or aspects of research support. Each IC plans and manages its own research programs in coordination with OD. As shown in Table 8, separate appropriations are provided to 24 of the 27 ICs, to OD, and to an intramural Buildings and Facilities account. The other three centers, which perform centralized support services, are funded through assessments on the IC appropriations. Funding for NIH comes primarily from the annual Labor,",
      " HHS, and Education (LHHS) appropriations bill, with an additional amount for Superfund-related activities from the Interior/Environment appropriations bill. Those two bills provide NIH's discretionary budget authority. In addition, NIH receives mandatory funding of $150 million annually that is provided in the Public Health Service (PHS) Act for a special program on type 1 diabetes research and funding from a PHS Act transfer. The total funding available for NIH activities, taking account of add-ons and transfers, is known as the NIH program level. President Obama's FY2017 budget requested an NIH program level total of $33.136 billion, an increase of $825 million (2.",
      "6%) over FY2016 (see Table 8 ). The FY2017 program level request for NIH included $77 million for Superfund-related research, and $150 million in mandatory funding for research on type 1 diabetes. The FY2017 request also included $1.825 billion in additional mandatory funds, of which $825 million is for the following targeted increases: $680 million for the National Cancer Moonshot, $100 million for the Precision Medicine Initiative (PMI) Cohort, and $45 million for the Brain Research through Application of Innovative Neurotechnologies (BRAIN) Initiative. Aside from these targeted increases, the remainder of the NIH FY2017 budget request \"is at the same overall program level as FY2016,",
      " but $1 billion of that is from mandatory funds.\" Generally, mandatory spending is not controlled by the annual appropriations process; new mandatory spending would usually occur as a result of authorizing legislation. The FY2017 program level request also proposed $847 million in funding transferred to NIH by the PHS Program Evaluation Set-Aside, also called the evaluation tap. NIH and other HHS agencies and programs authorized under the PHS Act are subject to a budget assessment found in Section 241 of the PHS Act (42 U.S.C. \u00a7238j). This provision authorizes the Secretary to use a portion of eligible appropriations to study the effectiveness of federal health programs and to identify improvements.",
      " Although the PHS Act limits the tap to no more than 1% of eligible appropriations, in recent years the annual LHHS appropriations act has specified a higher amount (2.5% in FY2016) and has also typically directed specific amounts of funding from the tap for transfer to a number of HHS programs. The set-aside has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. NIH, with the largest budget among the PHS agencies, has historically been the largest \"donor\" of program evaluation funds; until recently, it had been a relatively minor recipient.  Under President Obama's FY2017 budget request,",
      " the ICs would not have received an increase compared to FY2016 except, as discussed above, the $680 million (13%) increase for the National Cancer Institute targeted for the National Cancer Moonshot and a $145 million (9.2%) increase for OD targeted for the PMI Cohort and the BRAIN Initiative.  The House Appropriations Committee-reported version of the FY2017 LHHS appropriations bill ( H.R. 5926 ) would have provided NIH with a total of $33.334 billion, including $792 million provided by the evaluation tap. Adding to this total the amounts for Superfund-related activities ($77 million)",
      " and the mandatory type 1 diabetes program ($150 million) would have brought the FY2017 NIH program level to $33.561 billion. The Senate Appropriations Committee-reported version of the FY2017 LHHS appropriations bill ( S. 3040 ) would have provided NIH with a total of $34.084 billion, including $857 million provided by the evaluation tap and an estimated $300 million in new funding from the HHS Non-recurring Expenses Fund (NEF). Adding to this total the amounts for Superfund-related activities ($77 million) and the mandatory type 1 diabetes program ($150 million) would have brought the FY2017 NIH program level to $34.",
      "311 billion. The explanatory statement accompanying the FY2017 LHHS appropriation (Division H of H.R. 244 ; P.L. 115-31 ) states that it provides $34.084 billion for NIH activities, which is a $2 billion (6.2%) increase over FY2016. This amount is calculated by including the $824 million from the evaluation tap as well as $352 million for the NIH Innovation account that was previously appropriated to the agency for FY2017 (see text box and Table 8 ). Adding the amounts for Superfund-related activities ($77 million in Division G of H.R. 244 ; P.L.",
      " 115-31 ) and the mandatory type 1 diabetes program ($150 million) brings the FY2017 NIH program level to $34.311 billion.  Except for the mandatory type 1 diabetes funding, Congress has not usually specified amounts for particular diseases or research areas. Congress generally has appropriated specific amounts to each IC and has left it to NIH and its scientific advisory panels to allocate funding to different research areas in order to allow maximum flexibility to pursue scientific opportunities that are important to public health. Some bills may propose authorizations for designated research purposes, but funding generally has remained subject to the NIH peer review process as well as the overall discretionary appropriation to the agency.",
      " This pattern has changed in recent years, most notably with Alzheimer's disease research. The overview below outlines research priorities highlighted by the Administration in the FY2017 NIH budget request and selected responses from  congressional report language. Basic Research. About 52% of the proposed NIH budget was targeted for basic biomedical and behavioral research. One example of basic research is the BRAIN Initiative, a collaborative effort with the National Science Foundation, Defense Advanced Research Projects Agency, and Food and Drug Administration. The BRAIN Initiative develops and applies new tools for the study of complex brain functions. Insights into brain circuitry and activity gained via the BRAIN Initiative are expected to help reveal the underlying problems in brain disorders and may provide therapeutic or prevention approaches for neurological and psychiatric conditions.",
      " The request would have provided the NIH portion of the BRAIN Initiative with $195 million in FY2017, an increase of $45 million over FY2016. The House Appropriations Committee recommended the same amount for NIH as the request; the Senate Appropriations Committee recommended a total of $250 million for the NIH portion of the BRAIN Initiative. The explanatory statement accompanying H.R. 244 ( P.L. 115-31 ) states it increases funding for the BRAIN Initiative by $110 million; $10 million was previously appropriated to the NIH Innovation account (see text box).  Translating Discovery into Health. NIH estimated it would spend $910 million on Alzheimer's disease research in FY2017,",
      " the same amount as in FY2016. The House Appropriations Committee recommended \"an increase of $350 million\" within the National Institute on Aging \"to support a total of at least $1.26 billion on Alzheimer's disease research.\" The Senate Appropriations Committee recommendation included \"an increase of $400 million for Alzheimer's disease research, bringing the total available in FY2017 to approximately $1.391 billion.\" The explanatory statement says it provides a total of $1.391 billion for Alzheimer's disease research in FY2017. NIH would target $413 million in FY2017, the same level as FY2016, to respond to the growing public health threat posed by antimicrobial resistance bacteria.",
      " The Senate Appropriations Committee recommended an increase of $50 million in funding for antibiotic resistance research and this same increase was included in the explanatory statement. NIH plans to spend a total of $6.3 billion on cancer research in FY2017; of this amount, $5.894 billion is the budget for the National Cancer Institute. The FY2017 request proposed $755 million for the Cancer Moonshot; $680 million in mandatory funding was to be allocated for the National Cancer Institute at NIH and $75 million was to be transferred from NIH to the Food and Drug Administration. The Senate Appropriations Committees did not provide a recommended amount for the Cancer Moonshot.",
      " The House Appropriations Committee stated that it \"strongly supports the goals of the Cancer Moonshot initiative\" and that it \"continues the $195 million used in FY2016 for this initiative.\" The House committee also stated that it \"looks forward to... spending details once the taskforce completes its work at the end of the calendar year.\" The explanatory statement mentions the amount previously appropriated for cancer research in the NIH Innovation account (see text box) but does not direct any additional funds for such research. Precision Medicine Initiative. The FY2017 budget request proposed a total of $309 million for PMI, a multiagency effort: $4 million to the Food and Drug Administration to support the development of the necessary regulatory approaches,",
      " $5 million to the Office of the National Coordinator for Health Information Technology for developing relevant data privacy and sharing requirements, and $300 million (a $100 million increase) to support research at NIH. The $100 million increase, to come from mandatory funds, would support a scale-up of the national research cohort, composed of 1 million or more volunteers, whose health, genetic, environmental, and other data would be collected and used in research studies to identify novel therapeutics and prevention strategies. Funding would continue for the National Cancer Institute's efforts on elucidating the genetics of cancer. Both the House and Senate Appropriations Committees recommend a $100 million increase in FY2017 for PMI at NIH,",
      " but this would be provided in discretionary not mandatory funds. The explanatory statement mentions the amount previously appropriated for PMI in the NIH Innovation account (see text box). Biomedical Research Workforce. NIH estimated it would spend $849 million to support 16,421 individuals in its major research training program, the Ruth L. Kirschstein National Research Service Awards, with a 2% stipend increase in FY2017 for predoctoral and postdoctoral trainees. The House Appropriations Committee \"expects NIH to support an increased number of Ruth L. Kirschstein National Research Service Awards and other training grants in proportion to at least the general IC level funding increase.",
      " NIH is also expected to provide a stipend level increase to training grantees that is consistent with any FY2017 Federal employee pay raise.\" The explanatory statement directs that the number of NIH training grants in FY2017 should be \"in proportion to at least the general IC level funding increase\" of 3%. In addition, the \"agreement expects NIH to provide a stipend level and inflationary increase to grantees that is at least consistent with any fiscal year 2017 Federal employee pay raise.\" Research Project Grants. The main funding mechanism for supporting extramural research is research project grants (RPGs), which are competitive,",
      " peer-reviewed, and largely investigator-initiated. The FY2017 budget requested total funding for RPGs of $18.2 billion, representing about 55% of NIH's proposed budget. The request would have supported an estimated 36,440 RPG awards. Within that total, 9,946 would have been new RPGs and competing RPGs (renewals of existing grants), a decrease of 807 grants compared with FY2016. The Senate Appropriations Committee recommendation was \"estimated to support over 11,200 new and competing grants in FY2017.\" The House Appropriations Committee expected its recommendation to support \"at least 11,",
      "175 new RPGs. It also stated that the Committee strongly urges NIH to restore extramural support to at least 90% of all NIH funding.\" As stated earlier, currently about 81% of NIH's budget goes out to the extramural research community as grants, contracts, and other awards. The explanatory statement addresses the number of RPGs in FY2017 as follows: \"The agreement expects the 6.2 percent increase of funds over the fiscal year 2016 level to support an increase in the number of new and competing Research Project Grants.\"  Department of Energy53 The Department of Energy (DOE) was established in 1977 by the Department of Energy Organization Act ( P.L.",
      " 95-91 ), which combined energy-related programs from a variety of agencies with defense-related nuclear programs that dated back to the Manhattan Project. Today, DOE conducts basic scientific research in fields ranging from nuclear physics to the biological and environmental sciences; basic and applied R&D relating to energy production and use; and R&D on nuclear weapons, nuclear nonproliferation, and defense nuclear reactors. The department has a system of 17 national laboratories around the country, mostly operated by contractors, that together account for about 40% of all DOE expenditures. The Administration requested $14.705 billion for FY2017 for DOE R&D and related activities,",
      " including programs in three broad categories: science, national security, and energy. This request was 14.4% more than the enacted FY2016 amount of $12.858 billion. Unusually, $750 million of the request was for mandatory funding. Considering only discretionary funding, the request was $13.955 billion, an increase of 8.5%. The House bill ( H.R. 5055 as reported by the House Committee on Appropriations, with H.Rept. 114-532 ) would have provided $12.857 billion. The Senate bill ( H.R. 2028 as passed by the Senate,",
      " with S.Rept. 114-236 ) would have provided $13.007 billion. Neither bill would have included any mandatory funding. The final appropriation was $13.140 billion, all of it discretionary. (See Table 9 for details.) The request for the DOE Office of Science was $5.672 billion, an increase of 6.1% from the FY2016 appropriation of $5.347 billion. The request included $100 million in mandatory funding for a program of grants to universities. Without this mandatory funding, the request for discretionary appropriations was $5.572 billion, an increase of 4.2%. The House and Senate bills would each have provided $5.",
      "400 billion. The final appropriation was $5.392 billion. There is no authorized funding level for the Office of Science for FY2017. The most recent authorization act (the America COMPETES Reauthorization Act of 2010, P.L. 111-358 ) authorized appropriations through FY2013. The Office of Science includes six major research programs. The request for the largest program, Basic Energy Sciences (BES), was $1.937 billion, an increase of 4.8%. Within BES, a requested increase of $33 million for Energy Frontier Research Centers was to support five new awards for centers in the field of subsurface geochemistry and geophysics.",
      " A new activity in computational chemical sciences was to receive $14 million. Funding for the continued construction of the Linac Coherent Light Source II (LCLS-II) was to decrease by $10 million, in line with the previously projected construction schedule. The House bill would have provided $1.860 billion, and the House committee report \"strongly caution[ed] the Department against assuming an ever-increasing budget when planning the balance among facility runtime, construction, and research funding.\" The Senate bill would have provided $1.913 billion. The final appropriation was $1.872 billion.  The request for High Energy Physics was $818 million,",
      " an increase of 2.9%. Construction funding for the Long Baseline Neutrino Facility/Deep Underground Neutrino Experiment (LBNF/DUNE) was to increase by $19 million. Following a review in July 2015, DOE approved a revised conceptual design for LBNF/DUNE in November 2015. The projected total project cost range is now $1.260 billion to $1.860 billion, up from the range of $805 million to $1.110 billion reported in FY2016 budget documents. The projected start of operations has slipped from FY2027 to FY2030. The House bill would have provided $823 million,",
      " including $5 million more than the request for LBNF. The Senate bill would have provided $833 million, including $10 million more than the request for LBNF. Both the House and Senate committee reports expressed \"strong support\" for the strategic planning recommendations of the Particle Physics Project Prioritization Panel. The final appropriation was $825 million. The request for Biological and Environmental Research (BER) was $662 million, an increase of 8.7%. This program consists of two roughly equal parts: Biological Systems Science and Climate and Environmental Sciences. In the Biological Systems Science program, funding for Genomic Science was to increase by $43 million.",
      " Funding for Radiological Sciences was to be eliminated. In Climate and Environmental Sciences, funding for Climate and Earth System Modeling was to increase by $5 million. The House bill would have provided $595 million. The Senate bill would have provided $637 million. The final appropriation was $612 million. The House and Senate committee reports and the final explanatory statement all directed DOE to give priority to optimizing the operation of BER user facilities. The request for Nuclear Physics was $636 million, an increase of 3.1%. The proposed increase was spread across most areas of research and operations. No additional funding was requested for construction of the Continuous Electron Beam Accelerator Facility (CEBAF)",
      " upgrade because that project was expected to move from the construction phase in FY2016 to the commissioning phase in FY2017. The House bill would have provided $620 million. The Senate bill would have provided $636 million. The final appropriation was $622 million. The request for Advanced Scientific Computing Research (ASCR) was $663 million, an increase of 6.8%. A new Exascale Computing program (part of the DOE-wide Exascale Computing Initiative) was to receive $154 million. According to DOE, this program would consolidate ongoing activities currently funded through other ASCR programs, and the requested funding would represent a net decrease of $4 million for those activities.",
      " Proposed decreases in other ASCR programs mostly reflected activities transferred to the new program. The House bill would have provided $621 million, including $151 million for Exascale Computing. The Senate bill would have provided $656 million, including the requested $154 million for Exascale Computing. The final appropriation was $647 million, including $164 million for the exascale initiative. The request for Fusion Energy Sciences was $398 million, a decrease of 9.1%. Funding for most elements of the program was to decrease, but funding for U.S. contributions to the construction of the International Thermonuclear Experimental Reactor (ITER)",
      " was to increase to $125 million from $115 million in FY2016. The House bill would have provided $450 million, including the requested amount for ITER. The Senate bill would have provided $280 million, including no funds for ITER. The Senate committee report explained this decision by stating that ITER funding \"continues to crowd out other Federal science investments, including domestic fusion research.\" The final appropriation was $380 million, including $50 million for ITER and reprogramming authority to allocate up to an additional $50 million to ITER. The cost of U.S. participation in ITER\u2014and especially its impact on the availability of funding for the rest of the fusion program\u2014has long been controversial.",
      " Project delays, design and scope changes, and other factors have delayed formal approval of a revised cost and schedule estimate. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) required that not later than May 2, 2016, the Secretary of Energy shall submit to the Committees on Appropriations of both Houses of Congress a report recommending either that the United States remain a partner in the ITER project after October 2017 or terminate participation, which shall include, as applicable, an estimate of either the full cost, by fiscal year, of all future Federal funding requirements for construction, operation, and maintenance of ITER or the cost of termination.",
      " Submitted in late May 2016, the DOE report recommended continued U.S. partnership in ITER through FY2018 and a reevaluation of U.S. participation prior to submittal of the FY2019 budget. The House committee report directed DOE to submit a follow-up report by December 1, 2016. The final explanatory statement directed DOE to hold additional workshops and report to Congress on the fusion energy science community's continued long-term planning efforts. The request for DOE national security R&D was $3.702 billion, a 1.8% increase from $3.636 billion in FY2016. In the Weapons Activities account,",
      " a proposed decrease of $53 million for Component Manufacturing Development was more than offset by proposed increases in other areas, the largest being an increase of $40 million for Advanced Simulation and Computing. In the Naval Reactors program, a proposed overall increase of $45 million included an increase of $27 million for development of replacement reactor systems for Ohio class submarines. Funding for Defense Nuclear Nonproliferation R&D was to decrease by $25 million. The House bill would have provided $3.753 billion for national security R&D, including $97 million more than the request for Defense Nuclear Nonproliferation R&D, for development and demonstration activities to reduce the use of highly enriched uranium in high-performance research reactors and molybdenum-",
      "99 production. The Senate bill would have provided $3.631 billion, including $68 million less than the request for Naval Reactors operations and infrastructure. The final appropriation of $3.760 billion included $53 million for the development of new fuels for high-performance research reactors and the requested amount for the Naval Reactors program. The FY2017 request for DOE energy R&D was $5.332 billion, up 37.6% from $3.875 billion in FY2016. The requested total included $650 million in mandatory funding. Considering only discretionary funding, the request was $4.442 billion, an increase of 14.",
      "6%. Discretionary funding for R&D on Energy Efficiency and Renewable Energy (EERE) was to increase by 42.6%, with increases requested for all major EERE programs. Within EERE, the largest requested increases were for Vehicle Technologies ($469 million, up from $310 million) and a new Crosscutting Innovation Initiatives program ($215 million). The latter was to support new regional and small business partnerships, business accelerators that leverage the capabilities of the national laboratories, and funding opportunities for \"off-roadmap\" R&D projects. The request for $500 million in mandatory funding for EERE was to support R&D on clean transportation,",
      " biofuels, and smart mobility. Discretionary funding for the Advanced Research Projects Agency\u2013Energy (ARPA-E) was to increase by 20.3%. The request proposed to maintain a 60:40 split between ARPA-E project funding in the areas of Stationary Power Systems and Transportation Systems. A proposed five-year ARPA-E trust was to provide $150 million in mandatory funding in FY2017, rising to $650 million in FY2021, with the goal of reaching total ARPA-E funding of $1 billion per year. In the Fossil Energy program, the request included an increase for natural gas technologies,",
      " mostly directed toward carbon capture, from $43 million in FY2016 to $58 million in FY2017. The House bill would have provided $3.704 billion for energy R&D. The Senate bill would have provided $3.977 billion. For EERE, both bills would have provided less than the FY2016 amount (and much less than the requested amount). Both would have provided a smaller than requested increase for ARPA-E, and more than the request for fossil energy R&D overall. For natural gas technologies, the House bill would have provided $25 million, while the Senate bill would have provided $46 million. The final appropriation was $3.",
      "988 billion, including slightly more than the FY2016 amount for EERE (but much less than the request), the House amount for ARPA-E, more than either the House or Senate bill for fossil energy R&D overall, and $43 million for natural gas technologies. National Aeronautics and Space Administration58 The National Aeronautics and Space Administration was created in 1958 by the National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. NASA has research programs in planetary science, Earth science, heliophysics, astrophysics,",
      " and aeronautics, as well as development programs for future human spacecraft and for multipurpose space technology such as advanced propulsion systems. In addition, NASA operates the International Space Station as a facility for R&D and other purposes. The Administration requested $15.890 billion for NASA R&D in FY2017. This amount was 2.4% less than the FY2016 level of about $16.282 billion. Unusually, the FY2017 request included $763 million in mandatory funds. The House bill ( H.R. 5393 as reported) would have provided about $16.483 billion. The Senate bill ( S.",
      " 2837 ) would have provided about $16.274 billion. Neither bill would have provided any mandatory funds. The final appropriation provided about $16.657 billion. For a breakdown of these amounts, see Table 10. NASA R&D funding comes through five accounts: Science, Aeronautics, Space Technology, Exploration, and the International Space Station and Commercial Crew portions of Space Operations. The FY2017 request for Science was $5.601 billion, an increase of 0.3%. Within this total, funding for Earth Science, Astrophysics, and Heliophysics were to increase, while funding for Planetary Science and the James Webb Space Telescope were to decrease.",
      " The House bill would have provided $4 million less than the request, while the Senate bill would have provided $206 million less. Relative to the request, the House bill would have shifted more than $300 million from Earth Science to Planetary Science. In contrast, most of the Senate bill's decrease would have been in Planetary Science. The final appropriation was $5.765 billion. It included the House bill's level of funding for Planetary Science, but with less reduction for Earth Science. Within Earth Science, the request included $131 million (up from $100 million in FY2016) for the Landsat-9 land imaging satellite.",
      " Launch is anticipated \"as early as\" 2021. NASA previously proposed the Thermal Infrared Free Flyer, a lower-cost satellite intended to reduce the risk of a gap in data availability prior to the launch of Landsat-9. Congress rejected funding for the Thermal Infrared Free Flyer in the FY2016 appropriations cycle, and the mission was not included in the FY2017 request. The House report directed NASA to prioritize funds for Landsat-9 and to evaluate commercially available data in the event of a data gap in the Landsat program. The Senate report recommended the requested amount for Landsat-9 and directed NASA to provide a plan detailing the technical and schedule progress needed for a 2020 launch date.",
      " The final explanatory statement also included the requested amount. Within Planetary Science, the request included $50 million (down from $175 million in FY2016) for a mission to Jupiter's moon Europa. Although a mission to Europa was a high priority of the 2011 National Research Council (NRC) decadal survey of planetary science, the NRC expressed reservations about its anticipated cost. For several years, Congress has appropriated more for formulation of a Europa mission than NASA has requested. As directed by the Consolidated Appropriations Act, 2016, NASA's FY2017 congressional budget justification included a five-year estimate of the funding required assuming a 2022 launch.",
      " The justification stated that \"the notional outyear profile in the Budget may support a launch as early as the late 2020s, assuming the mission concept and scope remain stable.... Acceleration of the launch to 2022 is not recommended, given potential impacts to the rest of the Science portfolio.\" The House report recommended at least $260 million for Europa orbiter and lander missions, with the orbiter launch no later than 2022 and the lander launch no later than 2024. The Senate report called for \"an expeditious launch and reduced travel time\" in order to maximize the scientific return of a Europa mission,",
      " but it did not specify a funding level or a launch date. It directed NASA to provide a report on options for the mission \"to assist the Committee in evaluating potential mission configurations.\" The final explanatory statement provided $275 million \"as outlined by the House\" and explicitly omitted the Senate language regarding an analysis of options. The FY2017 request for Aeronautics was $790 million, an increase of 24.7% from FY2016. The request included New Aviation Horizons (NAH), a new initiative of experimental aircraft and systems demonstrations. NAH projects on subsonic aircraft were to receive $100 million in mandatory funding from the proposed 21 st Century Clean Transportation Plan.",
      " An additional $56 million in mandatory funding was to fund a low-boom supersonic flight demonstrator. The House bill would have provided $78 million less than the request for Aeronautics, while the Senate bill would have provided $189 million less. The House committee's recommendation included $61 million (of discretionary funds) for a low-boom demonstrator. The House and Senate committee reports both directed NASA to work with the Federal Aviation Administration on research related to the integration of unmanned aerial systems in the National Airspace System. The final appropriation was $660 million. The explanatory statement did not mention the low-boom flight demonstrator;",
      " it supported the House language on unmanned aerial systems. The FY2017 request for Space Technology was $827 million, an increase of 20.4% from FY2016. Space Technology was first established as a separate account in FY2011. Each year since then, the Administration has proposed to increase Space Technology funding. Congress has provided increases each year except FY2014, but always less than the Administration's request. Proposed mandatory funding of $136 million accounted for almost all of the requested increase in FY2017. The bulk of the mandatory funding was to support technology demonstration missions, including the Restore-L satellite servicing mission for which Congress appropriated $133 million in FY2016.",
      " The House bill would have provided $88 million less than the request for Space Technology, or $48 million more than the FY2016 appropriation, while the Senate bill would have provided the FY2016 amount. The Senate committee report recommended $130 million (of discretionary funds) for Restore-L. The House and Senate committee reports both identified nuclear propulsion research and a small launch technology demonstration platform as funding priorities. The final appropriation for Space Technology was the FY2016 amount. Within this total, the explanatory statement allocated funding for both nuclear propulsion and small launch capabilities. It did not mention Restore-L. The FY2017 request for Exploration was $3.",
      "337 billion, a decrease of 16.5% from FY2016. The Exploration account primarily funds development of the Orion Multipurpose Crew Vehicle and the Space Launch System (SLS) heavy-lift rocket, the capsule and launch vehicle mandated by the NASA Authorization Act of 2010 for future human exploration beyond Earth orbit. The account previously also funded development of a commercial crew transportation capability for U.S. astronaut access to the International Space Station (ISS), but Congress transferred this activity to Space Operations in FY2016. Within Exploration, the FY2017 request for Orion, the SLS, and related ground systems (known collectively as Exploration Systems Development)",
      " was $2.860 billion, a decrease of 21.5% from FY2016. The bulk of the proposed reduction was for SLS launch vehicle development, which was to receive $1.263 billion, down 34.3% from $1.922 billion in FY2016. At the time of the FY2017 budget release, NASA was targeting a first test flight of SLS carrying Orion but no crew (known as EM-1) in November 2018; that schedule has since slipped to 2019. The launch readiness date for the first flight of Orion and the SLS with a crew on board (known as EM-",
      "2) continues to be FY2023. The House and Senate bills would have provided $4.183 billion and $4.330 billion, respectively, for Exploration. These increases relative to the request would have funded the SLS at the FY2016 level (in the House bill) or higher (in the Senate bill). The House and Senate reports both recommended funding for development of the SLS Exploration Upper Stage (EUS)\u2014$250 million and $300 million, respectively\u2014which was not included in the Administration request. The House report specified that none of the funds in the House bill were for the Asteroid Redirect Mission, which was proposed in the FY2014 budget but faced ongoing opposition in Congress.",
      " The final appropriation for Exploration was $3.324 billion. The explanatory statement directed NASA to continue developing certain technologies associated with the Asteroid Redirect Mission, but also directed that these activities \"should not distract from the overarching goal of sending humans to Mars.\" In the Space Operations account, the request for the ISS was $1.431 billion, a decrease of 0.4% from FY2016, and the request for Commercial Crew was $1.185 billion, a decrease of 4.7%. The FY2017 budget was the first to request Commercial Crew funding within Space Operations. Commercial Crew is now part of the Space Transportation budget item,",
      " which also includes the cost of U.S. commercial cargo flights to the ISS and payments to Russia for Soyuz flights carrying ISS crews. The House and Senate bills would have provided $186 million less and $125 million less, respectively, than the request for Space Operations. For the most part, the committee reports did not specify how the recommended funding should be allocated. However, the Senate report did note that its total included $1.185 billion for Commercial Crew, the same as the request. The enacted bill provided the same amount as the Senate for Space Operations overall and for Commercial Crew, again without specifying funding for the ISS. National Science Foundation63 The National Science Foundation (NSF)",
      " supports basic research and education in the non-medical sciences and engineering. Congress established the foundation as an independent federal agency in 1950 and directed it to \"promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes.\" The NSF is a primary source of federal support for U.S. university research, especially in mathematics and computer science. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. NSF has six major appropriations accounts: Research and Related Activities (RRA,",
      " the main research account), Education and Human Resources (EHR, the main education account), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), the National Science Board (NSB), and the Office of Inspector General (OIG). FY2016 and FY2017 funding for these accounts are tracked in Table 11. Overall. The Obama Administration requested $7.964 billion for the NSF in FY2017, a $501 million (6.7%) increase over the FY2016 estimate of $7.463 billion. This request included $7.564 billion in discretionary budget authority and $400 million in new one-time mandatory budget authority (excluding new mandatory funding,",
      " the total NSF request is $101 million [1.3%] greater than the FY2016 appropriation). The request would have increased budget authority in three accounts relative to the FY2016 estimate: RRA by $392 million (6.5%), EHR by $73 million (8.3%), and AOAM by $43 million (13%). The request would have provided NSB and OIG accounts with about the same amount as in FY2016 and decreased funding for the MREFC account by $7 million (3.6%).  As reported by the Senate, S. 2837 would have provided a total of $7.",
      "510 billion to NSF for FY2017, which is $46 million (0.6%) above the FY2016 estimate and $54 million (0.7%) below the FY2017 discretionary request. As reported by the House, H.R. 5393 would have provided a total of $7.406 billion to NSF for FY2017, which is $57 million (0.8%) below the FY2016 estimate, and $158 million (2.1%) below the FY2017 discretionary request. Neither bill would have provided mandatory funding. The Consolidated Appropriations Act, 2017 ( P.L. 115-",
      "31 ), signed by the President on May 5, 2017, provides $7.472 billion in discretionary funding to NSF, 0.1% above the FY2016 enacted amount. The increase of nearly $9 million for NSF is provided entirely within the MREFC account. The FY2017 NSF budget justification identifies two areas of major emphasis, four cross-foundation investments, and six ongoing NSF-wide priorities. The two areas of major emphasis are Clean Energy R&D and strengthening support for core activities. The FY2017 request would have increased funding for Clean Energy R&D by $141 million to $512 million (37.",
      "9%). Strengthening support for core services would have been funded by new mandatory budget authority of $400 million. NSF identifies four cross-foundation activities that aim to bring researchers from different fields of science and engineering together to address cross disciplinary questions. These activities are Understanding the Brain (UtB, $142 million requested, 3.6% decrease); Risk and Resilience ($43\u00a0million requested, 4.9% increase); Innovations at the Nexus of Food, Energy, and Water Systems (INFEWS, $62 million requested, 27.7% increase); and NSF Inclusion across the Nation of Communities of Learners of Underrepresented Discoverers in Engineering and Science (NSF INCLUDES,",
      " $16 million requested, 3.2% increase).  NSF identifies six foundation-wide priorities for FY2017. These are Cyber-Enabled Materials, Manufacturing, and Smart Systems (CEMMSS, $257 million requested, 0.3% increase); Cyberinfrastructure Framework for 21 st Century Science, Engineering, and Education (CIF21, $100 million requested, 24.4% decrease); Innovation Corps (I-Corps, $30 million requested, no change); Research at the Interface of Biological, Mathematical, and Physical Sciences (BioMaPS, $30 million requested, 4.8% decrease); Science,",
      " Engineering, and Education for Sustainability (SEES, $52 million requested, 29.8% decrease); and Secure and Trustworthy Cyberspace (SaTC, $150 million requested, 15.4% increase). The report to accompany S. 2837, S.Rept. 114-239 (Senate report), expressed support for the I-Corps program but did not specify a funding level. The report to accompany H.R. 5393, H.Rept. 114-605 (House report), recommended $5 million above the requested level for the program. The explanatory statement accompanying P.L. 115-",
      "31 directs NSF to provide $30.0 million for I-Corps. Research. The Obama Administration sought a $392 million (6.5%) increase in funding for RRA in FY2017, for a total of $6.425 billion. Of this total, the request included $6.079 billion as discretionary funding and $346 million as new mandatory budget authority. The FY2017 request included increases for all of the RRA subaccounts except for the U.S. Arctic Research Commission (USARC), which would not have changed. The largest percentage increase would have gone to Engineering (ENG, 9.4%). The largest increase in dollars would have gone to Mathematical and Physical Sciences (MPS,",
      " $87.3 million). The other subaccounts would have received increases between 6.0% and 6.5%, except for International and Integrative Activities (IIA), which would have received a 2.9% increase. The FY2017 request included an increase for the widely tracked RRA program Experimental Program to Stimulate Competitive Research (EPSCoR) from $160 million to $171 million (6.7%), of which $8.56 million was requested as new mandatory funding. The explanatory statement accompanying P.L. 115-31 specifies no less than $160 million for EPSCoR. In recent years,",
      " policymakers have actively debated congressional funding directives at the major subaccount level within RRA. Some analysts assert that legislators have a role in establishing funding priorities by scientific field within RRA, as part of the legislative oversight function and in order to assure accountability for taxpayer funds. Other analysts argue that the scientists who manage NSF ought to determine the distribution of funding by field, based on their deeper knowledge of research needs and scientific possibilities within each field, and of how these needs are best balanced across the NSF portfolio. For FY2016, P.L. 114-113 did not specify the funding distribution within RRA, except to limit the budget authority for Social,",
      " Behavioral and Economic Sciences to its FY2015 level. For FY2017, S. 2837 and H.R. 5393 did not specify allocations within RRA, though the accompanying reports specified funding amounts for a subset of programs. Similarly, the Consolidated Appropriations Act, 2017, which provides $6.033 billion overall for RRA, does not specify allocations at the RRA subaccount level but does specify that $544 million remain available for polar research and operations support, including activities for the U.S. Antarctic program. Education. The FY2017 request included a $73 million (8.3%) increase for EHR,",
      " for a total of $953 million. Of that total, $54 million was requested as mandatory budget authority. As reported by the Senate and House Committees on Appropriations, both S. 2837 and H.R. 5393 would have kept EHR funding at the FY2016 enacted level of $880 million. Similarly, P.L. 115-31 provides $880 million in discretionary funding with no mandatory funding. By program, the largest increase in the FY2017 EHR request was for EHR Core Research (ECR): STEM Learning, within the Division of Research on Learning in Formal and Informal Settings. The FY2017 request for ECR:",
      " STEM Learning was $52 million, or double the FY2016 estimate of $26 million. Congress did not fund a similar requested increase for FY2016.  EHR programs that are widely tracked by congressional policymakers include the Graduate Research Fellowship (GRF) and National Research Traineeship (NRT). The FY2017 request for GRF was $332 million, which was essentially the same as the FY2016 estimate. GRF funding would have been split equally between RRA and EHR, which would each have contributed $166 million. The FY2017 request for NRT was $59 million, a $4 million (8.",
      "3%) increase from FY2016. Funding for the NRT would have been split between EHR and RRA, but not equally. The RRA contribution would have been $21 million, $2 million below the FY2016 estimate. The EHR contribution would have been $35 million, $6 million above the FY2016 estimate.  Other widely tracked EHR programs include Advanced Technological Education ($66 million requested, no change); Robert Noyce Teacher Scholarship Program ($61 million requested, no change); Cybercorps: Scholarships for Service ($70 million requested, 40.0% increase); Advancing Informal STEM Learning (AISL,",
      " $63 million requested, no change in total but $8 million was requested as mandatory funding); Science, Technology, Engineering, and Mathematics + Computing Partnerships (STEM+C, $52 million requested, no change in total but $31 million was requested as mandatory funding); Historically Black Colleges and Universities Undergraduate Program (HBCU-UP, $35 million requested, no change); Tribal Colleges and University Programs ($14 million requested, no change); and the Louis Stokes Alliance for Minority Participation ($46 million requested, no change). The Senate report recommended $55 million for the CyberCorps program (10% increase); the House report did not specify an amount.",
      " The Senate and House reports additionally recommended $5 million and $30 million, respectively, for broadening participation in STEM fields at Hispanic Serving Institutions (HSIs). The explanatory statement accompanying P.L. 115-31 directs NSF to provide funding levels for numerous programs at the requested levels, including the HBCU Program, STEM+C Partnerships, Tribal Colleges and University Programs, and AISL. For the CyberCorps:Scholarships for Service program, the explanatory statement specifies $55 million, which is $15 million below the NSF requested amount, equal to the Senate report recommendation, and 10% above the FY2016 funding level for that program.",
      " Further, though NSF reports ~$226.3 million in investments to HSIs in FY2015 through various agency programs, the explanatory statement directs NSF to establish a specific HSI program at no less than $15 million and encourages the foundation to \"use this program to build capacity at institutions of higher education that typically do not receive high levels of NSF grant funding.\" Construction. Other accounts that fund R&D at NSF include the MREFC account, which supports large construction projects and scientific instruments. The Obama Administration sought just over $193 million for MREFC in FY2017, $7 million less than the FY2016 estimate. In FY2017,",
      " MREFC funding would have supported continued construction of the Large Synoptic Survey Telescope ($67 million requested, 32.7% decrease) and Daniel K. Inouye Solar Telescope ($20 million requested, no change). Most of this request ($106 million) would have funded the Regional Class Research Vessels (RCRV) program to build two ships to support science in U.S. coastal waters.  The Senate report recommended increasing MREFC funding to $247 million ($54 million above the request), including $159 million to build three ships for the RCRV program. In contrast, the House report recommended decreasing funding to $87 million ($106 million below the request)",
      " and did not discuss the RCRV program. The Consolidated Appropriations Act, 2017, provides $209 million, 4.3% more than the FY2016 estimate. The accompanying explanatory statement directs NSF to provide $122 million to build three RCRVs. This amounts to $41 million per ship, compared to the FY2017 request of $53 million per ship.  Historically, the MREFC account has typically supported between four and six projects at a time. The FY2015-FY2017 requests for three projects were lower than the historical trend, which could indicate that some potentially scientifically valuable projects have been delayed or overlooked.",
      " On the other hand, when these large projects come online their operations costs must be shouldered by research accounts. For example, NSF requested $65 million to operate and maintain a MREFC project that received its final construction funding in FY2016, the National Ecological Observatory Network (NEON). This represented 8.2% of the FY2017 RRA Biological Sciences (BIO) request. In a constrained budget environment, this dynamic could precipitate difficult choices between funding for research and funding for research facilities and equipment. Other accounts and initiatives. The Obama Administration sought $373 million for AOAM, a $43 million (13.",
      "0%) increase. A multi-year plan to relocate NSF headquarters accounts for the majority of this increase. Funding for NSB ($4 million) and OIG ($15 million) would not have changed significantly between FY2016 and FY2017 under the request. In line with the recommendations from the House and Senate reports, P.L. 115-31 provides approximately the same levels as in FY2016 for these accounts: $330 million for AOAM (including $41 million for relocating the NSF headquarters), $4 million for NSB, and $15 million for OIG. The FY2017 NSF budget request included funding for three multiagency initiatives.",
      " The National Nanotechnology Initiative would have received $415 million, about the same as in FY2016. The Networking and Information Technology Research and Development would have received $1.254 billion, an increase of $59 million (4.9%). Most of this increase ($56 million) was requested as mandatory budget authority. The U.S. Global Change Research Program would have received $348 million, $9 million (2.6%) more than the FY2016 estimate. The House and Senate reports did not include recommendations for these initiatives, nor does P.L. 115-31 specify funding for them. Department of Agriculture71 The U.S.",
      " Department of Agriculture (USDA) was created in 1862 in part to support agricultural research in an expanding, agriculturally dependent country. USDA conducts intramural research at federal facilities with government-employed scientists, and supports external research at universities and other facilities through competitive grants and formula-based funding. The breadth of contemporary USDA research spans traditional agricultural production techniques, organic and sustainable agriculture, bioenergy, nutrition needs and composition, food safety, animal and plant health, pest and disease management, economic decisionmaking, and other social sciences affecting consumers, farmers, and rural communities.  Four agencies carry out USDA's research and education activities, grouped together into the Research,",
      " Education, and Economics (REE) mission area. The agencies are the Agricultural Research Service (ARS), National Institute of Food and Agriculture (NIFA), National Agricultural Statistics Service (NASS), and Economic Research Service (ERS). For FY2017, the enacted Agriculture appropriation is in the Consolidated Appropriations Act, P.L. 115-31. Both the House and the Senate Appropriations Committees reported their Agriculture appropriations bills ( H.R. 5054, S. 2956 ) in April and May 2016. In addition to discretionary appropriations, agricultural research is also funded by state matching contributions and private donations or grants, as well as mandatory funding from the farm bill.",
      " The enacted FY2017 appropriation provides $2.891 billion for agricultural research, down $45 million from the enacted FY2016 total (-1.5%). This overall change is comprised of $67 million more for research programming across the four agencies, and $112 million less for buildings and facilities than in FY2016. The enacted bill is less of a reduction than either the House or Senate bills, generally providing more to research programs than the House bill proposed, and reducing building and facilities by less than the Senate bill proposed. (See Table 12.) Agricultural Research Service The Agricultural Research Service is USDA's in-house basic and applied research agency.",
      " It operates approximately 90 laboratories nationwide with about 6,600 employees. ARS also operates the National Agricultural Library, one of the department's primary information repositories for food, agriculture, and natural resource sciences. ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective controls for pest management, and support of USDA regulatory and technical assistance programs.  For FY2017, the enacted appropriation provides $1.170 billion for ARS salaries and expenses, $26 million more than FY2016 (+2.3%; Table 12 ). The House-reported bill would have increased this amount by $8 million and the Senate-reported bill by $34 million.",
      " ARS had proposed increases across several programmatic areas for prioritized research projects, coupled with reductions in funding for several existing programs. The enacted appropriation, via the explanatory statement, expressly rejects those specific reductions and reprogramming. The enacted appropriation does not include concerns that were mentioned in the FY2016 appropriation about animal care are ARS research facilities. However, the Animal and Plant Health Inspection Service (APHIS) is instructed in the explanatory statement to continue its inspections of ARS facilities and post the results online.  For the ARS buildings and facilities account, the enacted appropriation provides $99.6 million in FY2017, a decrease from the $212 million appropriated in FY2016.",
      " USDA had requested $94.5 million for FY2017. The appropriation directs that funding be used for priorities identified in the \"USDA ARS Capital Investment Strategy.\" ARS's priorities include completion of the Foreign Disease and Weed Science Research Unit in Fort Detrick, MD ($30.2 million) and Phase I of the Agricultural Research Technology Center in Salinas, CA ($64.3 million). National Institute of Food and Agriculture  The National Institute of Food and Agriculture provides federal funding for research, education, and extension projects conducted in partnership with the State Agricultural Experiment Stations, the State Cooperative Extension System, land grant universities, colleges, and other research and education institutions,",
      " as well as individual researchers. These partnerships include the 1862 land-grant institutions, 1890 historically black colleges and universities (HBCUs), 1994 tribal land-grant colleges, and Hispanic-serving institutions. Federal funds enhance capacity at universities and institutions by statutory formula funding, competitive awards, and grants. For FY2017, the enacted appropriation provides $1.363 billion for NIFA, an increase of $36 million over FY2016 (+2.7%; Table 12 ). The President had requested slightly more discretionary funding for NIFA plus an increase in mandatory funding as described below.  The Agriculture and Food Research Initiative (AFRI)\u2014USDA's flagship competitive grants program with 25%",
      " of NIFA's total budget\u2014received the Administrations requested increase of $25 million, for a $375 million appropriation. The Administration had also requested an additional $325 million of new mandatory money to \"fully fund\" AFRI at its farm-bill authorized level of $700 million. New mandatory funding is generally more germane to the authorization process (such as the farm bill) rather than the annual appropriations, and the House and Senate did not include this request in their bills or the final appropriation. Formula-funded programs in both research and extension are held constant under the FY2017 appropriation, though the Administration had requested an increase for the Evans-",
      "Allen program that supports historically black colleges of agriculture.  The FY2017 appropriation continues to direct that at least 15% of NIFA's competitive grant funding be available for research enhancement awards such as USDA-EPSCoR. The President's request again proposed to consolidate federal science, technology, engineering, and mathematics (STEM) education funding so that USDA would no longer fund Higher Education Challenge Grants, Graduate and Post-graduate Fellowship Grants, the Higher Education Multicultural Scholars Program, the Women and Minorities in STEM Program, Agriculture in the Classroom, and Secondary/Postsecondary Challenge Grants. As in prior years, the enacted appropriation rejected that proposal and continues to fund these STEM programs in USDA.",
      " In fact, an additional $500,000 was appropriated to Rural Development to develop a plan to increase access to STEM education in rural areas via the Distance Learning and Telemedicine program. For more on efforts to reorganize federal STEM education programs, see CRS In Focus IF10229, The Changing Federal STEM Education Effort, by Heather B. Gonzalez. National Agricultural Statistics Service  The National Agricultural Statistics Service conducts the Census of Agriculture and provides official statistics on agricultural production and indicators of the economic and environmental status of the farm sector. For FY2017, the enacted appropriation provides NASS $171 million, an increase of $2.8 million over FY2016 (+2.",
      "7%). Most of that increase ($1.6 million) is targeted to expand a feed cost survey at the national level. Economic Research Service  The Economic Research Service supports economic and social science analysis about agriculture, rural development, food, commodity markets, and the environment. It collects and disseminates data concerning USDA programs and policies. For FY2017, the enacted appropriation provides ERS $86.8 million, a $1.4 million increase over FY2016 (+1.6%). The increase is supposed to support additional research on groundwater modeling and drought resilience. Department of Commerce Two agencies of the Department of Commerce have major R&D programs:",
      " the National Institute of Standards and Technology and the National Oceanic and Atmospheric Administration.  National Institute of Standards and Technology76 The mission of the National Institute of Standards and Technology (NIST) is \"to promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life.\" NIST research provides measurement, calibration, and quality assurance methods and techniques that support U.S. commerce, technological progress, product reliability, manufacturing processes, and public safety. NIST's responsibilities include the development, maintenance, and custodial retention of the national standards of measurement; providing the means and methods for making measurements consistent with those standards;",
      " and ensuring the compatibility of U.S. national measurement standards with those of other nations. President Obama requested $1.015 billion in discretionary funding for NIST in FY2017, an increase of $50.5 million (5.2%) over the FY2016 enacted appropriation of $964.0 million. (See Table 13.) NIST discretionary funding is provided through three accounts: Scientific and Technical Research and Services (STRS), Industrial Technology Services (ITS), and Construction of Research Facilities (CRF). In addition, President Obama requested $2.0 billion in mandatory funding for NIST, including $1.9 billion for the National Network for Manufacturing Innovation (NNMI)",
      " to complete the development of a network of 45 institutes by FY2025, and $100.0 million to supplement the Construction of Research Facilities discretionary funding request to renovate and modernize NIST facilities to maintain and improve current R&D capabilities. President Obama's FY2017 discretionary request included $730.5 million for R&D, standards coordination, and related services in the STRS account, an increase of $40.5 million (5.9%) above the FY2016 level. Funding for laboratory programs would have increased by $33.5 million (5.5%) to $638.7 million, corporate services by $4.",
      "0 million (23.1%) to $21.3 million, and standards coordination and special programs by $3.0 million (4.4%) to $70.5 million. President Obama requested $189.0 million for the ITS account for FY2017, up $34.0 million (21.9%) from the FY2016 level. The ITS request included $142.0 million for the Manufacturing Extension Partnership (MEP) program, up $12.0 million (9.2%) from FY2016, and $47 million for the NNMI, up $22.0 million (88.0%). P.L.",
      " 114-113 provided NIST $25.0 million for the NNMI in FY2016, and the explanatory language accompanying the act directed NIST to merge its Advanced Manufacturing Technology (AMTech) Consortia program with the NNMI; President Obama's FY2017 request includes no separate funding for AMTech. President Obama requested $95.0 million for FY2017 for the NIST CRF account, down $24.0 million (20.2%) from the FY2016 level. President Obama's mandatory funding request (discussed above) would have, in part, provided supplementary funding for activities funded by this account.",
      " The House and Senate Committees' on Appropriations reported their respective Commerce, Justice, Science, and Related Agencies appropriations bills\u2014 H.R. 5393 ( H.Rept. 114-605 ) and S. 2837 ( S.Rept. 114-239 )\u2014on June 7, 2016, and April 21, 2016, respectively. The House-reported funding levels included $680.0 million for STRS, a decrease of $10.0 million from the FY2016 level and $50.5 million less than the request; $135.0 million for ITS, $20 million below the FY2016 level and $54.",
      "0 million below the request; and $50.0 million for CRF, $69.0 million below the FY2016 level and $45 million below the request. The Senate-reported funding levels included $700.0 million for STRS, $10.0 million above the FY2016 level, $30.5 million below the request, and $20.0 million above the House-reported level; $155.0 million for ITS, equal to the FY2016 level, $34.0 million below the request, and $20 million below the House-reported level; and $119.0 million for CRF, equal to the FY2016 level,",
      " $24 million above the request, and $69.0 million above the House-reported level. In May 2017, Congress enacted P.L. 115-31, providing $954.0 million in discretionary funding for NIST in FY2017, a decrease of $10.0 million (1.0%) from the FY2016 enacted appropriation of $964.0 million. The act provides $690 million for the STRS account, the same as provided for FY2016. According to the explanatory statement, NIST may spend up the FY2016 enacted level for its \"Lab to Market activities and for Standards Coordination and Special Programs,\" and no less than the FY2016 level for its \"biomanufacturing activities and for the Urban Dome program.\" In addition,",
      " the explanatory statement for the act acknowledges a transfer of $3.0 million from the Department of Justice to NIST to support ongoing interagency forensics programs.  The act provides $155.0 million for the ITS account, the same as provided for FY2016. This amount includes $130.0 million for the MEP program and $25.0 million for the NNMI, to include funding for center establishment and up to $5,000,000 for coordination activities. The act provides $109.0 million for the CRF account, $10.0 million (8.4%) below the FY2016 level.",
      " According to the explanatory statement, no less than $60.0 million of this funding is to be used for the design and renovation of NIST's \"outdated and unsafe radiation physics infrastructure.\" National Oceanic and Atmospheric Administration86 The National Oceanic and Atmospheric Administration (NOAA) conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; collects and provides data on the oceans and atmosphere; and manages coastal and marine organisms and environments. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization was intended to unify elements of the nation's environmental programs and to provide a systematic approach for monitoring,",
      " analyzing, and protecting the environment. One of the agency's main challenges is related to its diverse mission of science, service, and stewardship. A review of research undertaken by NOAA found, \"The major challenge for NOAA is connecting the pieces of its research program and ensuring research is linked to the broader science needs of the agency.\"  NOAA's Research Council has developed a five-year plan (2013-2017) to guide the agency's R&D efforts. These R&D efforts are intended to support the long-term goals and enterprise objectives of NOAA's Next Generation Strategic Plan. The strategic plan is organized into four categories of long-term goals including (1)",
      " climate adaptation and mitigation, (2) a weather-ready nation, (3) healthy oceans, and (4) resilient coastal communities and economies; and three groups of enterprise objectives including (1) stakeholder engagement, (2) data and observations, and (3) integrated environmental modeling. To achieve the strategic plan's goals and objectives, NOAA has identified gaps in knowledge and capabilities. NOAA's R&D plan attempts to address these gaps by asking key questions to help frame and organize R&D objectives and to identify tasks associated with achieving these objectives. The R&D plan notes that it \"contains many elements to pursue and efforts must be prioritized as funding will likely not be available for all topics at all times.\" The plan also describes how priorities are set during the annual planning season.",
      " Although the plan identifies many different NOAA R&D efforts, it does not consider the relative importance of these efforts and related funding needs. Another challenge identified in the NOAA R&D plan is the need to integrate the diverse perspectives and professional expertise required by the agency's mission. The plan states that \"holistically understanding the earth system [requires] not only understanding its individual components, but understanding and interpreting the way each of the components interact and behave as an integrated composite that is more than the sum of its parts.\"  For FY2017, the Consolidated Appropriations Act ( P.L. 115-31 ) provided $848.0 million for NOAA R&D,",
      " an increase of $173.0 million (25.6%) over the FY2016 funding level of $675.0 million, and $33.2 million (4.1%) more than the FY 2017 request of $814.8 million. R&D funding for FY2017 consisted of $497.8 million for research (58.7% of total R&D funding), $86.9 million for development (10.3%), and $263.3 million for R&D equipment (31.0%). R&D accounted for 14.9% of NOAA's total FY2017 enacted discretionary budget of $5,",
      "675.4 million, an increase from 11.7% of NOAA's enacted budget in FY2016. NOAA's administrative structure includes seven line offices that reflect its diverse mission. Five of the line offices are divided according to general program areas including the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); National Environmental Satellite, Data, and Information Service (NESDIS); National Weather Service (NWS); and the Office of Oceanic and Atmospheric Research (OAR). The Office of Marine and Aviation Operations (OMAO) and Mission Support (formerly Program Support) provide general support and services across the agency. OMAO is responsible for the agency's ships and aircraft that collect data in support of NOAA's environmental and scientific missions.",
      " Mission Support is a cross-cutting budget activity that funds the Office of Education and administrative functions related to planning, procurement, information technology, human resources, and infrastructure.   Table 14 provides FY2016 enacted R&D funding, the Administration's FY2017 R&D request, and FY2017 enacted R&D funding. Funding for NOAA R&D is included in budget line items that also include non-R&D activities; therefore, it is not possible to identify precisely how much of the funding provided in appropriations legislation is allocated to R&D. In general, R&D funding levels are known only after NOAA allocates its appropriations to specific activities and reports those figures.",
      " Thus R&D funding levels for House and Senate committee-reported appropriations bills are not available. Most of NOAA's R&D activities are conducted by OAR and in most years OAR accounts for over half of NOAA's R&D funding. In FY2017, P.L. 115-31 includes $480.1 million for OAR R&D, an increase of $76.7 million (19.0%) over the FY2016 funding level of $403.4 million, and $2.4 million (0.5%) less than the FY2017 request of $482.5 million.  OAR conducts research in three major areas:",
      " weather and air chemistry; climate; and oceans, coasts, and the Great Lakes. A large portion of these efforts are undertaken through partnerships with cooperative research institutes. NOAA supports 16 cooperative research institutes that work with NOAA's seven research laboratories in OAR's research areas. The President's FY2017 request would have provided $171.0 million for laboratories and cooperative institutes, $3.0 million (1.8%) more than the FY2016 enacted funding level of $168.0 million. The House committee-reported bill would have funded laboratories and cooperative institutes with a total of $155.0 million, $16.0 million (9.",
      "4%) less than the FY2017 request and $13 million (7.7%) less than the FY2016 enacted funding level. The Senate committee-reported bill would have funded laboratories and cooperative institutes with a total of $164.7 million, $9.7 million (6.3%) more than the House committee-reported bill, $6.3 million (3.7%) less than the FY2017 request, and $3.3 million (2.0%) less than the FY2016 enacted funding level. P.L. 115-31 funds the cooperative institutes with a total of $172.0 million, $7.",
      "3 million (4.4%) more than the Senate committee-reported bill, $17.0 million (11.0%) more than the House committee-reported bill, $1.0 million (0.6%) more than the FY2017 request, and $4.0 million (2.4%) more than the FY2016 enacted funding level. The National Sea Grant College Program is composed of 33 university-based state programs. Sea Grant programs support scientific research and engage constituents to identify and solve problems faced by coastal communities. The President's FY2017 request would have provided the National Sea Grant College Program $68.9 million,",
      " $4.1 million (5.6%) less than the FY2016 enacted funding level of $73.0 million. The House committee-reported bill would have funded Sea Grant with a total of $66.0 million, $2.9 million (4.2%) less than the FY2017 request, and $7.0 million (9.6%) less than the FY2016 enacted funding level. The Senate committee-reported bill would have funded Sea Grant with a total of $74.0 million, $8.0 million (12.1%) more than the House-committee-reported bill, $5.1 million (7.",
      "4%) more than the FY2017 request, and $1.0 million (1.4%) more than the FY2016 enacted funding level. P.L. 115-31 funds Sea Grant with a total of $72.5 million, $1.5 million (2.0%) less than the Senate committee-reported bill, $6.5 million (9.8%) more than the House committee-reported bill, $3.6 million (5.2%) more than the FY2017 request, and $0.5 million (0.7%) less than the FY2016 enacted funding level. Climate research includes funding for laboratories and cooperative institutes,",
      " regional climate data and information, and competitive research. The President's FY2017 request would have provided climate research $189.9 million, $31.9 million (20.2 %) more than the FY2016 enacted funding level of $158.0 million. The House committee-reported bill would have funded climate research with a total of $128.0 million, $61.9 million (32.6%) less than the FY2017 request, and $30 million (19.0%) less than the FY2016 enacted funding level. The Senate committee-reported bill would have funded climate research with a total of $158.",
      "0 million, $30.0 million (23.4%) more than the House committee-reported bill, $31.9 million (16.8%) less than the FY2017 request, and an amount equal to the FY2016 enacted funding level. P.L. 115-31 funds climate research with a total of $158.0 million, an amount equal to the Senate committee-reported bill, $30.0 million (23.4%) more than the House committee-passed bill, $31.9 million (16.8%) less than the FY2017 request, and an amount equal to the FY2016 enacted funding level.",
      " Department of Veterans Affairs99 The Department of Veterans Affairs (VA) operates programs to provide America's veterans with medical care, benefits, social support, and memorials. VA provides a broad range of primary care, specialized care, and related medical and social support services. VA seeks to advance medical R&D in areas that most directly address the diseases and conditions that affect veterans and eligible beneficiaries.  Funding for VA R&D is generally included in line items that also include non-R&D funding. Therefore it is not possible to know precisely how much of the funding provided for in appropriations legislation will be allocated to R&D unless funding is provided at the precise level of the request.",
      " In general, R&D funding levels are known only after the VA allocates its appropriations to specific activities and reports those figures. President Obama proposed $1.252 billion for VA R&D in FY2017, up $32 million (2.6%) from FY2016. The VA request for FY2017 included $663 million for its Medical and Prosthetic Research account, up $32.6 million (5.2%), and $589 million in funding for research supported by its Medical Services account, equal to its FY2016 funding. The VA's medical and prosthetics research is managed by the Veterans Health Administration's Office of Research and Development,",
      " which consists of four main research services: Biomedical laboratory R&D supports preclinical research to understand life processes at the molecular, genomic, and physiological levels. Clinical science R&D administers investigations, including human subject research, to determine the feasibility or effectiveness of new treatments such as drugs, therapy, or devices. Health services R&D supports studies to identify and promote effective and efficient strategies to improve the organization, cost-effectiveness, and delivery of quality health care. Rehabilitation R&D develops novel approaches to restore full and productive lives to veterans with traumatic amputation, central nervous system injuries, loss of sight or hearing, or other physical and cognitive impairments.",
      "  Each service oversees a number of research centers of excellence and is headed by a director. These directors report to the Chief Research and Development Officer, who in turn reports to the Deputy Under Secretary for Health for Policy and Services. The House-passed Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2017 ( H.R. 4974 ) would have fully funded the Medical and Prosthetic Research request at $663 million, $33 million (5%) more than the FY2016 enacted level of $631 million. Division B (Military Construction, the Department of Veterans Affairs, and Related Agencies) of the Military Construction,",
      " Veterans Affairs, and Related Agencies Appropriations Act, 2017 ( H.R. 2577 ), as passed by the Senate, included $675.4 million for the Medical and Prosthetic Research account, $45 million (7%) more than the FY2016 enacted level and $12 million (2%) more than the House-passed level.  On June 23, 2016, the House approved the conference report on H.R. 2577 ( H.Rept. 114-640 ). The bill would have provided $675.4 million in FY2017 funding for the Medical and Prosthetic Research account.",
      " On September 28, 2016, the House and Senate passed the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act ( P.L. 114-223 ). On September 29, 2016, President Obama signed the bill into law. Division A of the act, designated as the Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, provides funding for the Department of Veterans Affairs, including $675.4 million for the Medical and Prosthetic Research account.  Table 15 summarizes R&D program funding for VA,",
      " in the Medical and Prosthetic Research account and Medical Services account. Table 16 provides amounts to be spent in Designated Research Areas (DRAs) which VA describes as \"areas of particular importance to our veteran patient population.\" Funding for research projects that span multiple areas may be included in several DRAs; thus, the amounts in Table 16 total to more than the appropriation or request for the VA Medical and Prosthetic Research account.  Department of the Interior101 The Department of the Interior (DOI) was created to protect and manage the nation's natural resources and cultural heritage and to provide scientific and other information about those resources. DOI's responsibilities include,",
      " among other things, mapping, geological, hydrological, and biological science; migratory bird and wildlife conservation; endangered species preservation; surface-mined lands protection and restoration; and historic preservation. President Obama requested $1.048 billion in DOI R&D funding for FY2017, $84.5 million (8.8%) above its FY2016 enacted level of $963.5 million.  According to DOI,  Activities supported include scientific analysis of natural systems and applied field research to address specific problems, such as thawing permafrost, invasive species, and flooding. The Department's scientific research is used by land managers, for example,",
      " to support conservation efforts on the front lines of a changing climate and to confront the unpredictable nature of its impacts. Of President Obama's FY2017 DOI R&D funding request, 5.7% was for basic research, 79.0% was for applied research, and 15.4% was for development. The U.S. Geological Survey (USGS) is the only DOI component that conducts basic research. Funding for DOI R&D is generally included in appropriations line items that also include non-R&D activities; therefore, it is not possible to identify precisely how much of the funding provided in appropriations legislation is allocated to R&D specifically unless funding is provided at the precise level of the request.",
      " In general, R&D funding levels are known only after DOI components allocate their appropriations to specific activities and report those figures. The House passed H.R. 5538, the Department of the Interior, Environment, and Related Agencies appropriations act for FY2017 on July 14, 2016. The Senate Committee on Appropriations reported its version of the act, S. 3068, on June 16, 2016.  On May 5, 2017, President Trump signed into law P.L. 115-31, providing FY2017 funding for the Department of the Interior and other departments and agencies. U.S.",
      " Geological Survey The USGS accounts for more than two-thirds of all DOI R&D funding. A single appropriations account, Surveys, Investigations, and Research (SIR), provides all USGS funding. USGS R&D is conducted under seven SIR activity/program areas: Ecosystems; Climate and Land Use Change; Energy, Minerals, and Environmental Health; Natural Hazards; Water Resources; Core Science Systems; and Science Support. President Obama's total FY2017 budget request for USGS was $1.168 billion. Of this amount, $736.3 million was for R&D, an increase of $59.4 million (8.",
      "8%) over the FY2016 level of $676.9 billion. This total included $173.9 million for Ecosystems, up $13.7 million (8.6%); $120.3 million for Climate and Land Use Change, up $18.6 million (18.3%); $99.5 million for Energy, Minerals, and Environmental Health, up $5.0 million (5.3%); $121.2 million for Natural Hazards, up $7.9 million (6.9%); $130.8 million for Water Resources, up $9.9 million (8.",
      "2%); $90.1 million for Core Science Systems, up $4.3 million (5.1%); and $0.5 million for Science Support, up $12,000 (2.5%). The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provides $1.085 billion for USGS for FY2017, essentially the same as FY2016 funding of $1.082 billion and $83 million (7.6%) below the request. No additional details are available that would allow for an assessment of how much of the FY2017 funding will be devoted to R&D.",
      "  Other DOI Components President Obama's FY2017 request also included R&D funding for the following DOI components: Bureau of Reclamation (BOR): $91.9 million in applied research and development funding for FY2017, up $3.3 million (3.8%) from FY2016. Bureau of Ocean Energy Management (BOEM): $73.3 million in applied research and development funding for FY2017, up $0.5 million (0.6%) from FY2016. Fish and Wildlife Service (FWS): $38.6 million in applied research for FY2017, up $6.1 million (18.",
      "9%) from FY2016. Bureau of Land Management (BLM): $30.5 million in applied research and development for FY2017, up $6.9 million (29.4%) from FY2016. National Park Service (NPS): $28.7 million in applied research and development for FY2017, up $1.7 million (6.3%) from FY2016. Bureau of Safety and Environmental Enforcement (BSEE): $26.7 million in applied research for FY2017, equal to the FY2016 level. Bureau of Indian Affairs (BIA): $11.0 million in applied research for FY2017,",
      " up $1.5 million (15.3%) from FY2016. Wildland Fire Management (WFM): $6.0 million in applied research for FY2017, equal to the FY2016 level. Office of Surface Mining Reclamation and Enforcement (OSMRE): $5.0 million in applied research for FY2017; the office received no funding for R&D in FY2016.  Table 17 summarizes FY2016 R&D funding and President Obama's FY2017 R&D funding request for DOI components. As discussed above, it is not possible to ascertain how much of the funding provided in the House-passed and Senate-reported versions of the Department of the Interior,",
      " Environment, and Related Agencies appropriations acts for FY2017, or in P.L. 115-31, is intended for R&D activities, due to the inclusion of R&D funding in accounts that also include non-R&D funding. Department of Transportation108 The Department of Transportation (DOT) seeks to ensure a fast, safe, efficient, accessible, and convenient transportation system. DOT's goals include improving public health and safety by reducing transportation-related fatalities and injuries; ensuring that the United States maintains critical transportation infrastructure in a state of good repair; promoting transportation policies and investments that bring lasting and equitable economic benefits; fostering livable communities by integrating transportation policies,",
      " plans, and investments with housing and economic development policies; and advancing environmentally sustainable policies and investments that reduce carbon and other emissions from transportation sources. President Obama requested $1,188.8 million for DOT R&D and R&D facilities in FY2017, an increase of $305.7 million (34.6%) from the FY2016 enacted level. (See Table 18.) In FY2016, two DOT agencies\u2014the Federal Highway Administration (FHWA) and the Federal Aviation Administration (FAA)\u2014account for more than three-fourths of the department's R&D funding (79%). Under the request, three agencies (FAA,",
      " FHWA, and the National Highway Traffic Safety Administration [NHTSA]) would account for 88% of DOT R&D in FY2017. Funding for DOT R&D is generally included in appropriations line items that also include non-R&D activities; therefore, it is not possible to identify precisely how much of the funding that would be provided by appropriations legislation is allocated to R&D unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOT agencies allocate their final appropriations to specific activities and report those figures.  Federal Aviation Administration The President requested $367.1 million for R&D and R&D facilities funding in FY2017 for the Federal Aviation Administration,",
      " a decrease of $12.1 million (3.2%) from the FY2016 enacted level. The FY2017 request included $334.9 million for R&D, a decrease of $12.0 million (3.5%), and $32.2 million for R&D facilities, essentially the same as in FY2016.  President Obama's FY2017 request included $167.5 million for the FAA's Research, Engineering, and Development (RE&D) account (up $1.5 million, 0.9%). All RE&D account funding is classified as R&D. The RE&D funding seeks to improve aviation safety,",
      " improve efficiency, and reduce environmental impact through research in fields such as wake turbulence, human factors, and clean aircraft technologies, as well as in fire safety, propulsion systems, advanced materials, aircraft icing, and continued airworthiness. On May 19, 2016, the Senate passed H.R. 2577 incorporating both the Transportation-HUD and Military Construction-Veterans Affairs appropriations bills. The Senate-passed bill would have provided $176.0 million for the RE&D account, $8.5 million (5.1%) above the request, and $10.0 million (6.0%) above the FY2016 enacted level.",
      " The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) includes $176.5 million for the RE&D account, an increase of $10.5 million (6.3%) from the FY2016 level and $9.0 million (5.4%) above the request. National Highway Traffic Safety Administration NHTSA R&D focuses on crashworthiness, crash avoidance, regulatory analysis, alternative fuels vehicle safety, vehicle electronics, and emerging technologies.  The President requested $344.7 million in R&D and R&D facilities funding in FY2017 for the National Highway Traffic Safety Administration, $258.",
      "1 million (298.2%) above the FY2016 enacted level of $86.6 million. The FY2017 request included $200 million to initiate an autonomous vehicle development pilot. The agency anticipated $3.9 billion for this initiative over 10 years. According to NHTSA,  This pilot will deploy safe and climate smart autonomous vehicles to create better, faster, cleaner urban and corridor transportation networks. To accelerate the development and adoption of autonomous vehicles, this program would fund large-scale deployment pilots to test connected vehicle systems in designated corridors throughout the country; and work with industry to ensure a common multi-state interoperability framework for connected and autonomous vehicles.",
      " In addition, NHTSA's FY2017 budget request included an increase of $52.2 million for vehicle electronics and emerging technology R&D. Federal Highway Administration The President requested $329.8 million in R&D and R&D facilities funding in FY2017 for the Federal Highway Administration, an increase of $7.4 million (2.3%) above the FY2016 enacted level. President Obama's request would have provided $85.0 million for highway safety R&D, down $0.4 million (0.5%); $80.0 million for Intelligent Transportation Systems R&D, up $4.1 million (5.",
      "4%); $149.9 million for State Planning and Research, up $3.5 million (2.4%); and $14.9 million for R&D-related administrative expenses. Other DOT Components Several other DOT components also support R&D activities. The President requested FY2017 R&D and R&D facilities funding for the Federal Railroad Administration (FRA), totaling $82.5 million, $39.4 million (91.4%) above the FY2016 enacted level of $43.1 million; the Pipeline and Hazardous Materials Safety Administration (PHMSA), totaling $23.7 million, $2.2 million (10.",
      "4%) above the FY2016 enacted level of $21.5 million; the Office of the Secretary of Transportation (OST), totaling $22.5 million, $8.6 million (61.5%) above the FY2016 enacted level of $13.9 million; the Federal Motor Carrier Safety Administration (FMCSA), totaling $10.9 million, $2.0 million (22.6%) more than the FY2016 enacted level of $8.9 million; and the Federal Transit Administration (FTA), totaling $7.5 million, equal to the FY2016 enacted level.  Table 18 summarizes R&D funding for the DOT components.",
      " Department of Homeland Security113 The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development can contribute to all these goals. The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. The Domestic Nuclear Detection Office (DNDO) is responsible for R&D relating to nuclear and radiological threats. Other components, such as the U.S. Coast Guard,",
      " conduct R&D relating to their specific missions. In its FY2017 budget request, DHS proposed incorporating DNDO, including its R&D responsibilities, into a new Chemical, Biological, Radiological, Nuclear, and Explosives (CBRNE) Office. Congress ultimately did not accept this proposal for the FY2017 appropriations cycle. The President's FY2017 budget request for DHS included $654 million for activities identified as R&D. This would have been a reduction of 4.5% from the comparable amount for FY2016. The total included $470 million for the S&T Directorate, $152 million for the proposed CBRNE Office (entirely for activities currently part of DNDO), and smaller amounts for five other DHS components.",
      " The House bill ( H.R. 5634 ) would have provided $665 million for these activities. The Senate bill ( S. 3001 ) would have provided approximately $703 million. The final appropriation was $678 million. See Table 19. Directorate of Science and Technology (S&T) The S&T Directorate is the primary DHS R&D organization. Led by a Senate-confirmed Under Secretary for Science and Technology, it performs R&D in several laboratories of its own and funds R&D performed by the DOE national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components.",
      " The Administration's FY2017 request of $470 million for the S&T Directorate R&D account was a decrease of 5.4% from the comparable FY2016 amount. Funding for some R&D topics was to increase or decrease by substantially larger percentages. For example, R&D on border security technologies was to increase by 71%, while R&D on detection of explosives and bioagents was to decrease by 31% and 28% respectively. Funding for University Programs, which primarily funds the S&T Directorate's university centers of excellence, was to decrease by 21%. The House bill would have provided $9 million more than the request for the S&T Directorate R&D account.",
      " The entire increase was allocated to university centers of excellence. The Senate bill used the FY2016 account structure for the S&T Directorate, not the Common Appropriations Structure introduced in the Administration's FY2017 request and used in the House bill. The amounts that the Senate bill would have provided for the S&T Directorate are therefore not directly comparable to amounts in the request and the House bill. After adjusting for these differences, it appears that the Senate bill would have provided $31 million more than the requested amount for activities requested in the S&T Directorate R&D account, including $22 million more for Research, Development, and Innovation and $9 million more for University Programs.",
      " The final appropriation was $471 million, including $7 million less than requested for Research, Development, and Innovation and $8 million more than requested for University Programs. Domestic Nuclear Detection Office (DNDO) DNDO is the DHS organization responsible for nuclear detection research, development, testing, evaluation, acquisition, and operational support. It is led by a presidentially appointed Director. In addition to its responsibilities within DHS, it is charged with coordinating federal nuclear forensics programs and the U.S. portion of the global nuclear detection architecture. The Administration's FY2017 request for the proposed CBRNE Office included $152 million for the R&D account,",
      " entirely for activities currently part of DNDO. This was a decrease of 3.2% from the comparable FY2016 amount. At the level of detail shown in Table 19, the request showed few changes from FY2016; however, priorities within Detection Capability Development were to shift: increased R&D related to international rail and aerial detection was to be mostly offset by decreased R&D related to radiation portal monitor replacement and on-dock rail. The House bill would have provided the requested amount for the CBRNE Office R&D account. The Senate bill did not support establishment of the CBRNE Office. Moreover, because it used a different account structure,",
      " the amounts it would have provided for DNDO are not directly comparable to amounts in the request or the House bill. After adjusting for these differences, however, it appears that the Senate bill would have provided funding for DNDO R&D at the same level as the request. The final appropriation did not support establishment of the CBRNE Office, but it did adopt the Common Appropriations Structure. It provided $155 million for DNDO. It allocated somewhat less than requested to each of the four DNDO R&D programs identified in the request but provided funding for a fifth program, Architecture Planning and Analysis. Coordination of DHS R&D Activities DHS-wide coordination of R&D activities has been an issue for several years.",
      " In September 2012, the Government Accountability Office (GAO) reported that although the S&T Directorate, DNDO, and the Coast Guard were the only DHS components that reported R&D activities to the Office of Management and Budget (OMB), several other DHS components also funded R&D and activities related to R&D. The GAO report found that DHS lacked department-wide policies to define R&D and guide reporting of R&D activities, and as a result, DHS did not know the total amount its components invest in R&D. The report recommended that DHS develop policies and guidance for defining, reporting, and coordinating R&D activities across the department,",
      " and that DHS establish a mechanism to track R&D projects.  DHS has made some progress on this issue. In the FY2013 and FY2014 appropriations cycles, Congress responded to GAO's findings by directing DHS to develop new policies and procedures. In September 2014, GAO testified that DHS had updated its guidance to include a definition of R&D, and that efforts to develop a process for coordinating R&D across the department were ongoing though not yet complete. In April 2015, GAO's annual report on fragmented, overlapping, or duplicative federal programs stated that its concerns about DHS R&D had been \"partially addressed.\" In December 2015,",
      " however, the explanatory statement for the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) stated that: The Department lacks a mechanism for capturing and understanding research and development (R&D) activities conducted across DHS, as well as coordinating R&D to reflect departmental priorities. The act authorized DHS to establish a Common Appropriations Structure under which each DHS component would have a standardized set of appropriations accounts. The FY2017 budget request implemented such a structure for all components except the Coast Guard. One of the standardized account titles is Research and Development. While having an account with this title might provide some new insight into the question of which DHS components conduct R&D and how much,",
      " it might also give an incomplete picture of some R&D-related activities, especially the construction and operation of R&D facilities. For example, the FY2017 request included $134 million for laboratory facility operations in the S&T Directorate Operations and Support account, not the Research and Development account. Similarly, FY2017 DHS budget documents showed $300 million in FY2015 funds for construction of the National Bio and Agro-Defense Facility as part of the S&T Directorate Procurement, Construction, and Improvements account, not the Research and Development account. Appropriations bills and reports in the FY2017 cycle did not explicitly address the issue of DHS R&D coordination.",
      " As noted above, the Senate bill did not follow the Common Appropriations Structure, but the enacted bill did. Proposed Reorganization In 2013, Congress directed DHS to review its programs relating to chemical, biological, radiological, and nuclear threats and to evaluate \"potential improvements in performance and possible savings in costs that might be gained by consolidation of current organizations and missions, including the option of merging functions of the Domestic Nuclear Detection Office (DNDO) and the Office of Health Affairs (OHA).\" The report of this review was completed in June 2015. In July 2015, DHS officials testified that DHS planned to consolidate DNDO,",
      " OHA, and smaller elements of several other DHS programs into a new office, led by a new Assistant Secretary, with responsibility for DHS-wide coordination of chemical, biological, radiological, nuclear, and explosives (CBRNE) \"strategy, policy, situational awareness, threat and risk assessments, contingency planning, operational requirements, acquisition formulation and oversight, and preparedness.\" A provision in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) prohibited DHS from using FY2016 funds to establish an Office of CBRNE Defense \"until such time as Congress has authorized such establishment.\" The provision did,",
      " however, give DHS the authority to transfer funds for the establishment of such an office, if authorized. In December 2015, the House passed the Department of Homeland Security CBRNE Defense Act of 2015 ( H.R. 3875 ), which would have restructured DHS CBRNE activities and established a CBRNE Office, but the Senate did not take up this bill or pass a similar one. The FY2017 budget request assumed the establishment of a CBRNE Office, and appropriations as requested would have effectively authorized its establishment. The House bill followed the request in this regard, but the Senate bill did not, and the Senate committee report referred in several places to \"a new CBRNE Office that is not yet authorized by the Congress.\" The final explanatory statement noted that \"As this proposed CBRNE consolidation was not authorized by Congress,",
      " the amounts appropriated for these activities for fiscal year 2017 are provided to the component for which the funds were appropriated in prior years.\" Environmental Protection Agency123 The U.S. Environmental Protection Agency (EPA), the federal regulatory agency responsible for implementing a number of environmental pollution control laws, funds a broad range of R&D activities to provide scientific tools and knowledge that support decisions relating to preventing, regulating, and abating environmental pollution. Beginning in FY2006, Congress has funded EPA through the Interior, Environment, and Related Agencies appropriations.  Funding for EPA R&D is generally included in line items that also include non-R&D activities; therefore,",
      " it is not possible to identify precisely how much of the funding provided in appropriations bills is allocated to R&D alone unless funding is provided at the precise level of the request. In general, R&D funding levels are determined after EPA allocates its appropriations to specific activities and reports those amounts. The agency's Science and Technology (S&T) account funds much of EPA's scientific research activities. These activities include R&D conducted by the agency at its own laboratories and facilities, and R&D and other related scientific research conducted by universities, foundations, and other non-federal entities that receive EPA grants. The S&T account receives a base appropriation and a transfer from the Hazardous Substance Superfund (Superfund)",
      " account. The transferred funds are authorized for research on more effective methods to clean up contaminated sites.  The EPA's Office of Research and Development (ORD) is the primary manager of R&D at EPA headquarters and laboratories around the country, as well as external R&D. A large portion of the S&T account funds EPA R&D activities managed by ORD, including the agency's research laboratories and research grants. Many of the programs implemented by other offices within EPA have a research component, but the research component is not necessarily the primary focus of the program. Title II of Division G of the Consolidated Appropriations Act, 2017 ( P.L.",
      " 115-31 ; H.R. 244 ) provides $721.9 million for the EPA S&T account for FY2017 including a $7.4 million rescission within the S&T account and transfers ($15.5 million) from the Superfund account. Including the account rescission and the transfer, the FY2017 total for the S&T account represents 9.0% of the $8.06 billion FY2017 appropriations for the agency overall. P.L. 115-31 stipulates that the rescission of unobligated balances of prior fiscal years appropriations within the S&T account is to be applied to program project areas to \"...reflect changes to funding projections due to routine attrition...\" during FY2017.",
      " In the Explanatory Statement accompanying H.R. 244, the House Committee on Appropriations noted that EPA's current workforce was below FY2016 levels and therefore included separate rescissions within the S&T and the Environmental Programs and Management (EPM) accounts to \"...capture expected savings\" as a result of the changes. The Act further stipulates that this rescission is not to be applied to \"Research: National Priorities\" within the S&T account. As in previous fiscal year requests, the President's FY2017 budget request did not include funding for these \"national priorities.\" The $4.1 million for these national priorities for FY2017 is for competitively awarded extramural research grants to fund \"high-priority water quality and availability research by not-for-profit organizations.\" The same level of funding for these types of grants was included for FY2016.",
      " The FY2017 enacted appropriations did not include an additional $10.0 million provided in FY2016 for further EPA research on oil and gas development in the Appalachian Basin ($3.0 million, including $2.0 million for extramural funding) and for certification and compliance activities related to vehicle and engine emissions ($7.0 million). As noted earlier in this report Congress did not complete action on 11 of the 12 regular appropriations bills for FY2017 prior to the end of FY2016, including the Interior, Environment, and Related Agencies appropriations. The Senate and House Committees on Appropriations had reported their respective Interior,",
      " Environment, and Related Agencies FY2017 appropriations bills during the 114 th Congress\u2014 S. 3068 ( S.Rept. 114-281 ) and H.R. 5538 ( H.Rept. 114-632 )\u2014on June 16, 2016, and June 21, 2016, respectively. H.R. 5538 passed in the House on July 14, 2016, but no action was scheduled on the Senate bill. Title II of each of the bills proposed funding for EPA, including the S&T account.   Table 20 at the end of this section presents the FY2017 amounts for program activities within EPA's S&T account as enacted compared to the President's FY2017 budget request,",
      " the FY2016 enacted level, as well as, the proposed levels included in the 114 th Congress House-passed H.R. 5538 and Senate Committee-reported S. 3068. As indicated in the table, the FY2017 enacted total appropriations for EPA's S&T account is a decrease compared to the amounts enacted for FY2016, requested for FY2017 and proposed in H.R. 5538, but an increase above the proposed level included in S. 3068. As shown in Table 20, there is some variability when comparing the enacted FY2017 base amount for the S&T account for individual EPA program and activity line items with the FY2016 enacted and FY2017 proposed funding levels,",
      " dependent on the specific activity. The FY2017 Consolidated Appropriations Explanatory Statement provides additional guidance within the S&T account including two directives adopted from the Senate report, S.Rept. 114-281, accompanying S. 3068 as reported during the 114 th Congress. The Explanatory Statement includes the Senate Committee on Appropriations direction for the agency's National Center for Computational Toxicology [NCCT] \"to develop data use guidance for ToxCast and other computational data...,\" as well as the Senate Committee recommendation that EPA support research efforts to establish a best practices approach for Enhanced Aquifer Recharge [EAR]",
      " in coordination with the U.S. Geological Survey. The Explanatory Statement includes the Committee's recommendation that EPA contract with the National Academy of Sciences to peer review the agency's revised draft Integrated Risk Information System assessment of formaldehyde should the review be completed in FY2017.  Title IV of Division G, \"General Provisions,\" contains provisions that would generally restrict or prohibit the use of FY2017 funds by EPA for implementing or proceeding with a number of regulatory actions, including in some instances conducting research to support these actions. Most of these general provisions have been included in previous fiscal year appropriations. Additional directives have been included in the form of administrative provisions within Title II of Division G.",
      " The 114 th Congress House-passed and Senate-reported bills had proposed a number of additional general and administrative provisions, but most were not included in the FY2017 consolidated appropriations. The proposed administrative provisions can be found in Title II and the general provisions in Title IV House-passed H.R. 5538 and Senate Committee-reported S. 3068. Appendix. Acronyms and Abbreviations\n"
    ],
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  },
  {
    "id": 112,
    "question": null,
    "answer": "The federal government provides assistance aimed at helping people with low-incomes who may earn too little to meet their basic needs, cannot support themselves through work, or who are disadvantaged in other ways. With fiscal pressures facing the federal government and the demands placed on aid programs, GAO was asked to examine federal low-income programs. This report (1) describes federal programs (including tax expenditures) targeted to people with low incomes, (2) identifies the number and selected household characteristics of people in poverty, (3) identifies the number, poverty status, and household characteristics of selected programs' recipients, and (4) examines research on how selected programs may affect incentives to work. For a list of low-income programs that were $100 million in obligations or more in fiscal year 2013, GAO consulted with the Congressional Research Service; surveyed and interviewed officials at relevant federal agencies; and reviewed relevant federal laws, regulations, and agency guidance. GAO also conducted analyses on low-income individuals using Census data on the SPM and official poverty measure and microsimulation data from the Urban Institute that adjusts for under-reporting of benefit receipt in Census survey data. To examine labor force effects, GAO reviewed economic literature. Selected low-income programs were large in dollars and helped meet a range of basic needs. GAO is not making new recommendations in this report. GAO clarified portions in response to comments from one agency. More than 80 federal programs (including 6 tax expenditures) provide aid to people with low incomes, based on GAO's survey of relevant federal agencies. Medicaid (the largest by far), the Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), and the refundable portion of the Earned Income Tax Credit (EITC) comprised almost two-thirds of fiscal year 2013 federal obligations of $742 billion for these programs. Aid is most often targeted to groups of the low-income population, such as people with disabilities and workers with children. Survey responses showed that criteria used to determine eligibility vary greatly; most common were variants of the federal poverty guidelines, based on the Census Bureau's official poverty measure. In 2013, 48.7 million people (15.5 percent), including many households with children, lived in poverty in the United States, based on Census's Supplemental Poverty Measure (SPM). This measure takes into account certain expenses and federal and state government benefits not included in the official poverty measure. The SPM is not used to determine program eligibility; however, it does provide more information than the official measure on household resources available to meet living expenses. In 2013, the SPM poverty threshold ranged from $21,397 to $25,639 for a family of four, depending on housing situations. Based on six mutually exclusive household types GAO developed, individuals in a household headed by a person with a disability or a single parent had the highest rates of poverty using the SPM, while childless or married parent households had larger numbers of people in poverty using the SPM. In 2012, the most recent year of data available, GAO estimated that 106 million people, or one-third of the U.S. population, received benefits from at least one or more of eight selected federal low-income programs: Additional Child Tax Credit, EITC, SNAP, SSI, and four others. Almost two-thirds of the eight programs' recipients were in households with children, including many married families. More than 80 percent of recipients also lived in households with some earned income during the year. Without these programs' benefits, GAO estimated that 25 million of these recipients would have been below the SPM poverty threshold. Of the eight programs, EITC and SNAP moved the most people out of poverty, however, the majority of recipients of each of the programs were estimated to have incomes above the SPM threshold, after accounting for receipt of benefits. Research suggests that assistance from selected means-tested low-income programs can encourage people's participation in the labor force, but have mixed effects on the number of hours they work. Changes in certain low-income programs through the years, including the EITC, have enhanced incentives for people to join the labor force, according to studies. While workers who receive means-tested benefits face benefit reductions as their earnings rise, research shows that various factors limit how much people change their work behavior in response. For example, people may not be aware of such changing interactions in a complex tax and benefit system or be able to control the number of hours they work, according to studies. Research also shows that enhancing work incentives can create difficult policy trade-offs, including raising program costs or failing to provide adequate assistance to those in need.\n",
    "docs": [
      "Background Program Overview The programs discussed in this report are very diverse. The various  programs we discuss were created at different times, to serve different  populations, and in response to different policy issues (see box on next  page). Programs also vary greatly in terms of how they are structured and  funded. In addition, programs are administered through a varying  combination of federal, state, and local agencies, and sometimes private  organizations. Some programs require state or local agencies to  contribute a share of nonfederal funds, while others are entirely federally- funded. Federal funding structures for low-income programs also vary.  For instance, programs may be funded through program authorization  acts (mandatory spending)",
      " or through appropriations acts (discretionary  spending). Spending for these programs may be indefinite (in that there is  no pre-determined ceiling and federal payments will be made for all  eligible recipients for eligible expenses) or definite (in that the law limits  the amount of federal spending). Tax expenditures\u2014such as tax credits,  deductions, or exclusions\u2014are generally measured as the estimated  reduction in tax revenue and are generally considered separately from  other federal spending, with the exception of some refundable tax credits  in which credit in excess of tax liability results in a cash refund. Examples of Low-Income Programs Established over Time  1930s-",
      " Great Depression and the New Deal: Major social insurance programs  (not discussed in this report) were created to protect workers against old age and  unemployment. Assisted housing programs, such as public housing, also started  during this time.   1960s- The War on Poverty: Various programs were created aimed at educating  low-income children, youth, and adults to help address the causes of poverty (e.g.,  Head Start, Job Corps, aid to help low-income students in elementary and  secondary schools). The Food Stamp Program (now known as the Supplemental  Nutrition Assistance Program (SNAP)), which had been a pilot program,",
      " was made  permanent. Medicare (another social insurance program) and Medicaid were also  established.   1970s- Welfare reform proposed, EITC created: Due to rising caseloads of  recipients of Aid to Families with Dependent Children (AFDC), which provided  cash assistance to low-income families, reform was proposed, but did not occur.  However, major changes to other programs occurred. Aid to low-income  individuals who were aged, blind, or had a disability evolved into a federally-run  program: Supplemental Security Income. Section 8 rental housing assistance was  established, as was the Earned Income Tax Credit (EITC).   1980s-",
      " Tax reform and promotion of work: EITC and Medicaid were expanded.  The Tax Reform Act of 1986 removed federal income taxes for many of the  working poor, and the Family Support Act of 1988 was passed to encourage work  among AFDC recipients.  1990s- Decentralization and welfare reform: AFDC was replaced with  Temporary Assistance for Needy Families (TANF), a block grant to states that  emphasizes work and time-limited cash assistance and gives states wide  discretion on how to use TANF funds, including for various noncash services.  2000s-",
      " Great Recession, federal stimulus, healthcare reform: In response to  the recession, the American Recovery and Reinvestment Act of 2009 expanded  federal spending for low-income aid, particularly for SNAP and Medicaid. The  Patient Protection and Affordable Care Act expanded Medicaid eligibility (although  a Supreme Court decision subsequently made Medicaid expansion an option for  states) as well as established new refundable tax credits for lower-income  households to subsidize their purchase of private health insurance on health  insurance exchanges. Poverty Measurement The official measure used today to provide information on how many  people are \u201cin poverty\u201d in the United States was developed in the 1960s,",
      "  based on the cost of food at that time. The official poverty thresholds\u2014 the income thresholds by which households are considered to be in  poverty depending on their size\u2014are updated annually by Census to  reflect current prices. HHS uses the official poverty thresholds to update  the \u201cfederal poverty guidelines\u201d each year, which are the basis for  determining financial eligibility or funding distribution for certain low- income programs. The official poverty measure has not changed substantially since it was  developed, and concerns about its inadequacies resulted in efforts to  develop a new measure starting in 1990. For instance, the threshold for  the official poverty measure (the income level that is used to determine  who is \u201cin poverty\u201d each year)",
      " is based on three times the cost of food  and does not take into account the cost of other basic necessities, such  as shelter and utilities. Additionally, in determining a household\u2019s income,  the official measure considers cash income, but does not include  additions to income based on the value of noncash assistance (e.g., food  assistance) or reductions based on other necessary living expenses (e.g.,  medical expenses or taxes paid). A panel on poverty was established by  the National Academy of Sciences and, later, an interagency technical  working group suggested ways a new poverty measure could address  some of these concerns. Based on these suggestions,",
      " Census, with  support from the Bureau of Labor Statistics, developed the SPM in 2010. Each year since, Census has released annual poverty statistics on the  SPM along with the official measure. The SPM did not replace the official  measure, which is still used for determining federal poverty guidelines  that could affect eligibility for some programs. Instead, the SPM is   primarily used as a research measure, designed to provide information on  economic need at the aggregate level, nationally or within subpopulations  or areas. The SPM differs from the official measure in various ways. In defining a  family unit that shares resources,",
      " in addition to related individuals, the  SPM household includes unrelated children cared for by the family (such  as foster care children) and cohabiting unmarried partners (see table  1).The SPM also defines the threshold of need differently from the official  measure. Also, in determining if a family has sufficient resources to meet necessary  living expenses, it looks more holistically at a family\u2019s resources and  expenses (see fig. 1). Individuals or families whose household incomes  are below 100 percent of the SPM threshold are considered to be in  poverty based on current levels of need. About 80 Programs  Provide an Array of  Supports for Low-",
      " Income Individuals  and Households Over $700 Billion in  Federal Obligations in  Fiscal Year 2013 Was  Concentrated in Large  Programs Aimed at  Meeting Basic Needs We identified 82 federal programs, including several tax expenditures,  that target low-income individuals, families, and communities to help them  meet basic needs or provide other assistance. For 78 of these  programs, fiscal year 2013 federal obligations totaled about $742 billion.  This amount includes federal obligations for two tax expenditures: the  ACTC and the refundable portion of the EITC.expenditures that assisted people with low income,",
      " plus the  nonrefundable portion of the EITC, totaled an estimated $14 billion in  reduced federal tax revenues for fiscal year 2013. Four additional tax  These programs include those sometimes referred to as \u201cpublic  assistance\u201d programs or \u201cmeans-tested\u201d programs, but are broader and  more diverse than those terms imply. For instance, while many of the  programs, often referred to as public assistance or means-tested  programs, help people with low incomes meet basic needs (income  support, health care, food, housing, or utilities), some of the programs in  this report provide other types of services, such as child care,",
      " services for  children in foster care, or support services for older individuals. Other  programs provide education assistance or employment and training  support with the goal of helping disadvantaged individuals better  independently support themselves. (See app. II for information from our  survey on each program\u2019s purpose and benefit or service provided.) Federal obligations for these low-income programs were concentrated in  a few large programs (see fig. 2).  Medicaid accounted for 39 percent of  the fiscal year 2013 federal obligations for the programs we reviewed,followed by SNAP, the refundable portion of the EITC, and SSI. In total,",
      "  these four programs comprised almost two-thirds (65 percent) of federal  low-income obligations in fiscal year 2013 or about $480 billion. For some  programs, states or other entities also contribute funding, which means  billions more in nonfederal funds are spent on such programs. For  example, state expenditures for Medicaid were $194 billion in fiscal year  2013, accounting for around 40 percent of total Medicaid expenditures.  For TANF, state expenditures totaled almost $15 billion in fiscal year  2013, accounting for about 47 percent of total expenditures for the  program. Social insurance programs,",
      " including Social Security Old-Age and  Survivors Insurance (Social Security) and Medicare, are not included in  the programs we reviewed because they are not targeted solely to those  with low-income. These programs are generally financed by  contributions from workers and employers, and eligibility for benefits is  determined, at least in part, on the basis of an individual\u2019s work history.  These programs are intended to more universally protect workers from  lost wages and related benefits due to retirement, disability, or a  temporary period of unemployment. Some of these programs are very  large. For example, in fiscal year 2013, Social Security alone totaled $674  billion in obligations,",
      " which is equal to about 90 percent of the total in  obligations for the 78 low-income programs (see fig. 3). The 10 largest low-income programs in terms of federal obligations  accounted for about $600 billion in fiscal year 2013 (82 percent of  obligations for 78 low-income programs) and served millions of people  (see table 2). However, according to our survey, while these 10\u2014and  most of the other 72 programs\u2014collect some information on numbers  served, programs varied in how they track this information, making it  difficult to compare information across programs or to know precisely how  many people are helped overall.",
      " (In the next section, we provide an  estimate of the overall number of recipients in selected programs.) As  also shown in table 2, agencies reported the number served using  different units (such as individuals, households, or tax returns) and a  variety of time periods (annual, monthly; fiscal, calendar, school year;  cumulative or point-in-time) for each program. See appendix III for  information on federal obligations, number served, and time periods for all  82 programs. In addition to the $742 billion in obligations reported in our survey, in  fiscal year 2013, the federal government incurred $14 billion in reduced  tax revenues for the nonrefundable portion of the EITC and four other tax  expenditures,",
      " according to estimates from the Department of the  Treasury (Treasury) (see table 3). These selected tax expenditures  directly or indirectly serve low-income people. For instance, the EITC  goes directly to low-income people by lowering their taxes based on  individual tax returns filed. The Low-Income Housing Tax Credit, on the  other hand, goes to housing developers who provide a certain portion of  housing units for low-income people. Most Programs Target  Specific Low-Income  Populations, Including the  Elderly, People with  Disabilities, Children and  Their Families, and a  Range of Other Groups Target Populations Based on our analysis of agency responses,",
      " most low-income programs  target specific sub-populations and do not serve low-income people  generally. Eligibility for a benefit or service can be based on being part  of a target population. Broad population groups targeted by these  programs include children or families with children, the elderly, people  with some earnings, and students. Programs may target multiple groups,  according to our survey. For example, the Child and Adult Care Food  Program supports the provision of free or reduced-priced meals and  snacks to low-income children and low-income chronically impaired and  elderly adults, who are in nonresidential group care settings, such as day  care homes or institutions.",
      " In addition, a number of low-income programs  target narrower population groups, based on agency survey responses,  such as veterans, disadvantaged youth, people who are homeless, Native  Americans, migrants, refugees, or rural communities. These tend to be  smaller programs in terms of dollars, according to our survey. (See table  4.) Although these programs serve many different populations, relatively few  target groups account for a large portion of the spending. For example,  almost two-thirds of the federal expenditures for Medicaid for fiscal year  2012, the most recent detailed data available, went to people with  disabilities (42 percent)",
      " and elderly individuals (21 percent), according to  HHS administrative data. Additionally, a recent CRS report examined  spending amounts for the 10 largest low-income programs in fiscal year  2011 (the most recent available information at the time for analysis on  target groups). CRS reported that federal spending for these 10 in 2011  was $623 billion and accounted for over 80 percent of spending for low- income programs that year. According to CRS analysis, which estimated  spending across target groups primarily using program data, people with  disabilities received almost a third of this amount, or $208 billion (primarily  from Medicaid and SSI). Working families with children received the  next largest share,",
      " about $170 billion, with the refundable tax credits  accounting for a large portion. The elderly received $96 billion, with a  large contribution from Medicaid and the low-income Medicare subsidy for  prescription drugs. Less than 12 percent of the spending in fiscal year  2011 for the 10 largest programs went to low-income adults who were not  working, elderly, or had a disability, according to CRS. Financial Eligibility Criteria federal poverty guidelines (gross income  minus certain exclusions and deductions,  such as certain child care expenses) determine eligibility, although the income limits varied greatly among  the programs and sometimes within a program.",
      " For example, to be  eligible for the Community Service Employment for Older Americans  program, individuals must be unemployed, age 55 or older, and have  incomes no higher than 125 percent of the federal poverty guidelines.  Within a program, different populations may have different limits. For  instance, SNAP generally requires eligible households to have gross  income no higher than 130 percent of the federal poverty guidelines,  but households with members who are elderly or have a disability may  have higher income limits. account) < $2,000 (for most households)   In general, households must meet all  three tests to be eligible for SNAP.",
      "  However, the specific financial eligibility  criteria may vary, depending on the  circumstances. For example, some  households with a member who is elderly  or has a disability are subject to different  requirements. Nine programs used area median income to determine eligibility. The  measure is based on specified percentages of median family incomes  for states and metropolitan and nonmetropolitan areas within states.  For example, in the Department of Housing and Urban Development\u2019s  (HUD) Section 8 Housing Choice Vouchers program, eligible families  generally must have incomes no higher than 50 percent of area  median income, and 75 percent of newly available vouchers each  year must go to families with incomes no higher than 30 percent of  area median income.",
      " In fiscal year 2013, according to information  from HUD, the median family income for states for a family of four  ranged from $48,300 (Mississippi) to $88,400 (Maryland) with  variation between metropolitan and nonmetropolitan areas within  states. Seven programs used specific dollar amounts as a threshold to  determine eligibility. For example, in general, individuals receiving SSI  in 2013 had to have monthly incomes no higher than $1,505 if their  countable income was only from wages, and $730 if their countable  income was not from wages. The two refundable tax credits are  based,",
      " in part, on earned income and adjusted gross income. For  example, in tax year 2013 working families with children that had  annual incomes below $37,870 to $51,567\u2014depending on filing  status and the number of dependent children\u2014may have been eligible  for the EITC. Also, childless people with earnings that had incomes  below $14,340 ($19,680 for a married couple) could have received a  small EITC benefit. Depending on the program, income thresholds  may be adjusted annually, for inflation or other factors. Three educational programs used a needs analysis to determine  eligibility:",
      " Federal Pell Grants, Federal Work Study, and Federal  Supplemental Educational Opportunity Grants. This analysis  calculates the amount a family can be expected to contribute toward a  student\u2019s college costs and uses that amount to determine the  student\u2019s eligibility for aid. According to budget information from the  Department of (Education), about three-fourths of Pell Grant  recipients in the 2012-2013 school year had annual incomes below  $30,000. Seven programs allow states or localities to determine financial  eligibility criteria for individuals or households, generally within certain  federal limits. For instance, federal law requires that families receiving  cash assistance funded by the TANF block grant must have a minor  child;",
      " however, states determine financial eligibility criteria and benefit  amounts, and there is a large amount of variation among states. Three programs determined financial eligibility for individuals or  households in other ways not captured above, according to agency  survey responses. Specifically, for the Transitional Cash and Medical  Services to Refugees, eligible participants include adult refugees,  asylees, and other specified groups, who meet the income and asset  tests for TANF or Medicaid, but who are not categorically eligible for  those programs. The tax exclusion of cash public assistance benefits  is dependent on the receipt of aid from public cash assistance  programs. The Work Opportunity Tax Credit provides a tax credit to  employers who hire people from certain specified disadvantaged  groups,",
      " including certain recipients of SNAP, SSI, and TANF, among  others. HHS publishes a compilation of state TANF policies and updates it each year. See HHS,  Welfare Rules Databook: State TANF Policies as of July 2013, OPRE Report 2014-52  (Washington, D.C.: September 2014). Thirty-three programs target assistance to low-income communities,  groups, or other entities, rather than individuals or households, based on  agency survey responses. Twenty-five of these programs targeted or prioritized services to low- income groups, generally based on a measure of low-income.",
      "  However, these programs may also serve people more broadly and  not only those who are low-income. For example, funds for the  Education for the Disadvantaged \u2013 Grants to Local Educational  Agencies (Title I, Part A) program are allocated to school attendance  areas and schools based on the number of children from low-income  families. Depending on the percentage of low-income students in a  school, schools funded by this program may serve all students, or  must focus services on low-achieving students in the school. Eight programs that do not have a measure of low or limited income  are included as low-income programs because they targeted special  populations who tend to be disproportionately low-income or are  presumed to be low-income (e.g., Native Americans or homeless  individuals and families).  (See app.",
      " IV for information on all programs by type of financial eligibility.) Among all of the programs identified, 11 provide for automatic eligibility  (also referred to as categorical eligibility), according to our survey.  Although specific eligibility requirements may vary, some programs allow  automatic eligibility for people who have already qualified for another,  specified income-tested program, or if they are a member of a specified  target population. (See table 5 for a summary of our survey results.) In  prior work, we have looked at automatic eligibility and similar provisions  for programs, including SNAP, WIC, and the school meals programs. For example, in 2012 we looked at the prevalence of households  receiving SNAP under expanded automatic eligibility rules,",
      " called \u201cbroad- based categorical eligibility.\u201d Under these rules, states can allow  households receiving noncash services funded by TANF (such as a toll- free number or brochure) to be automatically eligible for SNAP. States  that adopt a broad-based categorical eligibility policy may increase limits  on household income to up to 200 percent of federal poverty guidelines,  and remove limits on assets for these households. In that report, we  found that a relatively small percentage of households in 2010 were  eligible for SNAP under broad-based categorical eligibility that would not  have otherwise been eligible (under 3 percent). We also found that these  households\u2019 incomes were modestly higher (around 150 percent of  federal poverty guidelines,",
      " instead of 130 percent). In addition to eligibility requirements related to income or target  population, some programs impose work requirements (participants must  be engaged in work or work-related activity in order to receive benefits or  services) or time limits (program participation is limited to a specified  period of time), although most do not, according to our analysis of agency  survey responses. For three programs\u2014TANF, SNAP, and Transitional  Cash and Medical Assistance for Refugees\u2014agencies reported both  work requirements and time limits for at least a portion of program  recipients, as follows: TANF requires states to engage a certain percentage of families with  a work-",
      "eligible individual receiving cash assistance in specified work- related activities (such as job search and job readiness assistance) or  face potential financial penalties. In general, TANF also limits  federally-funded assistance for families with an adult member to 5  years. States may extend families beyond this 60-month period for  reasons of hardship for up to 20 percent of their caseloads. Unless otherwise exempt, SNAP requires participants who are  mentally and physically able to work and between the ages of 16 and  59 to work at least 30 hours per week, register for work, or participate  in an employment and training program if assigned by the state SNAP  agency.",
      " Additionally, able-bodied adults between the ages of 18 and  49 without dependents are limited to 3 months of SNAP benefits in a  36-month period, unless they work or participate in a work program for  at least 20 hours per week. A large portion of SNAP participants are  not, however, subject to these requirements. Many participants are  exempt from the program\u2019s work requirements because of age or  disability. Also, the Department of Agriculture (USDA) has granted waivers to many states from the 3-month time limit in recent years due  to low numbers of available jobs. Cash assistance under the Transitional Cash and Medical Services  for Refugees Program is conditioned on the refugee registering with  an employment agency or service,",
      " participating in available job  training services, and accepting appropriate offers of employment.  Both cash assistance and medical assistance are limited to 8 months,  although other types of assistance for refugees may be available for a  longer period of time, as described below. For prior work on refugees\u2019 employment outcomes, see GAO, Refugee Assistance:  Little Is Known about the Effectiveness of Different Approaches for Improving Refugees\u2019  Employment Outcomes, GAO-11-369 (Washington, D.C.: March 31, 2011). For the purposes of this analysis, we excluded a few programs in which the agency  responded that the program had a work requirement,",
      " but the program purpose or the  program benefit or service was to provide some sort of employment opportunity, such as  Federal Work Study. Our purpose was to include programs that in effect required a  recipient to work or prepare for work in exchange for benefits or services not directly  linked to work, such as food assistance, housing assistance, or supplemental income. Service Employment for Older Americans) specify a maximum length  of time for receipt of assistance. Under two housing programs, there  are time limits for providing temporary shelter (Homeless Assistance  Grants and Housing Opportunities for Persons with AIDS). Also,  refugees may receive various services, such as social adjustment  services or citizenship and naturalization services,",
      " for up to 5 years  under the Social Services and Targeted Assistance for Refugees  Program. Federal, State, and Local  Agencies Administer  These Programs Through  a Complex System That  Can Be Inefficient and  Difficult to Oversee As a whole, the administration of these programs is complex and involves  many different agencies and entities at the federal, state, and local levels.  Thirteen federal agencies administer the 82 programs, with three-quarters  of them overseen by HHS, HUD, Education, and USDA. A relatively small  number of programs are entirely or mostly federally run (that is, these  programs are direct benefits provided by federal agencies or are tax  expenditures administered through the federal income tax system). These  include some of the largest programs,",
      " such as SSI, the refundable tax  credits, and Federal Pell Grants. For many other programs, various state  and local agencies, and in some cases private entities, are involved in  program administration and the provision of benefits and services.  Additionally, at least 12 different congressional committees are  responsible for program oversight. Based on this report and a review of our prior work, we identified several  issues that pose difficulties for administering and overseeing this complex  system of programs as well as efforts to address them. These issues are  based on our prior reviews of specific low-income program areas and on  our broader government-wide work.",
      " More specifically:  In a 2011 testimony, we summarized our work that found the array of  human services programs was too fragmented and overly complex\u2014 for clients to navigate, for program operators to administer efficiently,  and for program managers and policymakers to assess program  performance.longstanding challenges, such as simplifying and streamlining policies   We identified potential approaches to address these  and processes across programs, improving technology,fostering innovation and evaluation to improve services and reduce  costs. In our government-wide work on fragmentation, overlap, and  duplication, we have recommended that certain agencies responsible  for low-income program areas take actions, such as increased  collaboration with other agencies and additional study,",
      " to help  minimize administrative inefficiencies among multiple programs.  Some of these recommendations have been addressed. See the box  on page 36 for more information on our open recommendations in  relevant areas. In our work on the role of evaluation in federal programs, we found  that evaluations can help program administrators and policymakers  understand what programs and practices are working and how to  improve the use of scarce resources, yet federal agencies often do  not evaluate their programs. For this report, we reviewed the efforts  of federal agencies responsible for five of the largest programs\u2014 SNAP, SSI, TANF, EITC, and the Section 8 Housing Choice Vouchers  program\u2014to conduct or sponsor recent evaluations regarding  participant outcomes.",
      " We found that for the four spending programs,  agencies were engaged in recent evaluation efforts that focused on  participant outcomes, including employment and self-sufficiency, food  security, and family outcomes. Unlike the four spending programs we  examined, Treasury officials said the agency does not conduct  program evaluations related to program or policy outcomes on the  EITC or any other tax expenditure. (See app. V.) In our previous  reports on tax expenditures, we concluded that because tax  expenditures are not evaluated for performance, it is difficult to  evaluate their costs and benefits and the extent to which they meet  intended policy goals. We have recommended that the Office of  Management and Budget (OMB)",
      " set up a performance evaluation  framework for tax expenditures. This recommendation has not been  addressed. In a 2014 report assessing aspects of the GPRA Modernization Act of  2010, we concluded that the act\u2019s requirement for OMB to publish  on a central website a list (inventory) of all federal programs along  with related budget and performance information would be useful for  better government management. Such information could help  decision makers determine the scope of the federal government\u2019s  involvement, investment, and performance in a particular area, as well  as provide critical information that could be used to better address  crosscutting issues,",
      " among other purposes. We recommended that  OMB take several actions to improve the existing program inventory  information to make it more useful for decision makers, such as  including tax expenditures in the inventory and directing agencies to  collaborate when defining and identifying programs that contribute to  a common outcome. OMB generally agreed with most of these  recommendations, but has not yet addressed them. GAO is statutorily mandated to identify and report annually to Congress on federal programs, agencies,  offices, and initiatives\u2014either within departments or government-wide\u2014that have duplicative goals or  activities.   \"Fragmentation\" refers to those circumstances in which more than one federal agency (or more than one  organization within an agency)",
      " is involved in the same broad area of national need and there may be  opportunities to improve how the government delivers these services.   \"Overlap\" occurs when multiple agencies or programs have similar goals, engage in similar activities or  strategies to achieve them, or target similar beneficiaries.  \"Duplication\" occurs when two or more agencies or programs are engaged in the same activities or provide  the same services to the same beneficiaries. In recent years, GAO has identified fragmentation, overlap, and duplication among some of the low-income  programs reviewed in this report. See below for the areas identified, the focus of recommendations, and  whether the recommended actions have been completely,",
      " partially, or not addressed. We also include the  year the program area was first identified by GAO for fragmentation, overlap, or duplication. This information  was last updated March 6, 2015. Training, Employment, and Education: Early Learning and Child Care  Greater coordination efforts across early learning and child care programs could mitigate the effects of  program fragmentation, simplify children\u2019s access to these services, collect the data necessary to coordinate  operation of these programs, and identify and minimize any unwarranted overlap and potential duplication.  Identified 2012; addressed  Training, Employment, and Education: Employment and Training Programs  Providing information on colocating services and consolidating administrative structures could promote  efficiencies.",
      "  Identified 2011; addressed  Social Services: Domestic Food Assistance  Multiple actions could reduce administrative overlap among domestic food assistance programs.  Identified 2011; partially addressed  Social Services: Housing Assistance  Examining the benefits and costs of housing programs and tax expenditures that address the same or similar  populations or areas, and potentially consolidating them, could help mitigate overlap and fragmentation and  decrease costs.  Identified 2012; not addressed or consolidated. Social Services: Homelessness Programs:   Better coordination of federal homelessness programs could minimize fragmentation and overlap.  Identified 2011; addressed. Based on the SPM,  About One-Sixth of  the U.S.",
      " Population  Lived in Poverty in  2013, When  Considering Certain  Government Benefits  and Living Expenses SPM Provides Information  on the Economic Well- Being of the U.S.  Population by Taking into  Account Certain  Government Assistance  and Living Expenses and  Other Factors In 2013, 48.7 million people in the United States (15.5 percent of the  population) lived in poverty according to the SPM, based on our analysis  of Census data (see fig. 4). These people lived in households with  incomes below the SPM poverty threshold, which measures whether they  have sufficient resources to meet their basic needs,",
      " after taking into  account government benefits and necessary expenses. The SPM  threshold in 2013 for two adults and two children ranged from $21,397 to  $25,639, depending on their housing situation, according to Census. In 2013, the SPM poverty rate was slightly higher than the official  measure\u2019s poverty rate of almost 15 percent. Compared with the official  measure, the SPM showed more people with incomes in the 50 to 199  percent range and fewer people with incomes in the lowest and highest  groups (see fig. 5). Various factors account for the differences in  distribution.",
      " For instance, unlike the official measure, SPM includes the  value of certain noncash benefits and tax credits, which would increase  household income. On the other hand, the SPM subtracts necessary  living expenses, such as taxes paid, medical costs, or work expenses,  which would reduce household income. The SPM also includes  cohabitors (unmarried partners), who could affect income by bringing  additional earnings and expenses into the household. Moreover, the  poverty thresholds used by each measure\u2014the income level necessary  to avoid poverty\u2014are different, so the same household could be  considered below poverty under the SPM and above poverty under the  official measure.",
      " Also, while Census data show that both measures had  similar trends over time\u2014with overall poverty rates falling slightly from  \u2014the poverty rates of sub-populations varied more. For  2010 to 2013example, under the SPM children had a lower rate of poverty and elderly  individuals had a higher rate in 2013, compared to the official measure. Our analysis provides a point-in-time perspective and does not depict  variation in people\u2019s economic circumstances during the year or over  multiple years, which may move households in and out of poverty. For  instance, we looked at annual income and expenses for 2013,",
      " but  household incomes may have fluctuated within that year. A 2014 Census  report estimated that from 2009 through 2011, almost one-third of the  population experienced poverty (based on the official measure) for at  least 2 months; however, over 40 percent of these periods of poverty  ended within 4 months. Additionally, poverty rates in 2013 may reflect  some of the longer-term effects of the recent recession; more current data  could reflect improved economic conditions. Poverty rates also vary among the states. For example, the SPM poverty  rate ranged from a low of 8.",
      "7 percent (Iowa) to a high of 23.4 percent  (California), using a 3-year average over 2011, 2012, and 2013 (see fig.  6). In 2013, Many Types of  Households Experienced  Poverty Based on the  SPM, Including 10 Million  People in Married Families  with Children Individuals below the SPM poverty threshold lived in a variety of types of  households, according to our analysis of household types using Census  data (see fig. 7). We found that the highest rates of poverty (SPM) were  among single parent households (30 percent)",
      " and households headed by   However, the largest numbers of  a person with a disability (29 percent).people below the SPM poverty line were in other types of households.  About half were in households without children (14.3 million), or married  households with children (10.4 million). This is in part because these two  groups are the largest among the overall population. For this analysis, we categorized households into six mutually-exclusive types,  as follows. Headed by elderly persons: Households (with or without children) headed by a  person who is 65 or over, regardless of whether he or she has a disability.",
      " The  head of household may live alone, with a spouse, or with a cohabiting partner. Headed by persons with disabilities: Households (with or without children)  headed by a person under 65 with a disability. The head of household may live  alone, with a spouse, or with a cohabiting partner. We used a Census Bureau  definition of disability, which includes any serious difficulty hearing, seeing,  concentrating/remembering/making decisions, walking/climbing stairs,  dressing/bathing, or doing errands alone. Without children: Households without children headed by a person under 65  without a disability.",
      " The head of household may live alone, with a spouse, or  with a cohabiting partner. Married with children: Households with at least one child headed by a married  person under 65 who does not have a disability. Cohabiting with children: Households with at least one child headed by an  unmarried person under 65 who has a cohabiting partner and does not have a  disability. Single parent: Households with at least one child headed by an unmarried  person under 65 who does not have a disability or a cohabiting partner. Households headed by a person who is elderly or has a disability may have  children,",
      " but are not counted as a household with children for this analysis.  According to our estimates, 7.2 percent (+/-0.5) of all children in the United  States in 2013 were in these two household types. We relied on the U.S.  Census Bureau\u2019s Current Population Survey, Annual Social and Economic  Supplement data to determine whether a household fell into a particular  category. Because program definitions and eligibility requirements vary, these  categories may not be used to determine eligibility for programs. Most people in poverty (SPM) lived in households with at least some  earnings. About 31 million people, or almost two-thirds of those with  incomes below the SPM threshold,",
      " were in households with earnings\u2014 defined as having at least one member who earned any income at some  point during the year. Another 19 percent were in households without  earnings in which the household head was elderly or had a disability. Of  the remaining 19 percent without earnings, about half were in childless  households. Poverty rates were much higher for those who did not work or worked  less during the year. Figure 8 shows that among households headed by  someone who was not elderly and did not have a disability, households  without earnings experienced much higher poverty rates than those with  earnings (62 percent versus 12 percent). Also,",
      " over one-third of those  without earnings had incomes below 50 percent of the SPM threshold. Our data do not distinguish the amount of time people worked. However,  Census analysis of SPM data for people aged 18 to 64 who worked at  least 1 week in 2013 shows that the poverty rate (SPM) among people  who worked full-time year round was 5.4 percent (nearly 5.5 million  people), but was 19.6 percent (nearly 8.9 million people) among those  who worked less than that amount of time. Program Recipients\u2019  Income Levels  and Household  Characteristics  Reflected Differences  in Program Purpose  and Design An Estimated One-",
      "Third of  the U.S. Population  Received a Low-Income  Benefit at Some Time in  2012 An estimated 106 million people, or about one-third of the U.S.  population, received benefits from at least one of eight selected federal  low-income programs at some point during 2012 (see fig. 9). This is  based on our analyses of the most recent TRIM3 microsimulation data for  these programs: ACTC, EITC, housing assistance, LIHEAP, SNAP, SSI,  TANF cash assistance, and WIC.perspective from national survey data,",
      " which often underreport the   The results provide a different  number of low-income program recipients.allow for unduplicated counts of the total number of people receiving aid  from more than one program, which is often not possible when using data  from individual programs. Some programs\u2019 administrative data (e.g.,  federal agency data we reviewed for SNAP, TANF, and WIC) include the  number of people served each month, but do not track an unduplicated  count of recipients for the year. The data for low-income programs also  count recipients in different ways (e.g., individuals, households, families,  tax filing units), making it difficult to compare receipt of assistance  consistently across multiple programs.",
      " For many of these reasons, the  results of our analysis in this section will differ from program information  based on administrative data. Program Recipients Were  Often in Households with  Children and Households  with Earnings Almost two-thirds of the recipients of the eight programs combined were  in households with children, including married, cohabiting, and single  parent households (see table 6). These households also received 58  percent of the nearly $241 billion in benefits provided by these eight   An  programs combined in 2012, according to our TRIM3 analysis.estimated 81 percent of recipients lived in households with at least some  annual earnings and received an estimated two-thirds of the combined  benefit spending.",
      " Selected Programs  Reduced Poverty for  Millions in 2012, Based on  Estimates Using the SPM In total, an estimated 25.4 million people moved above the SPM poverty  threshold due to combined benefits from the eight programs. An  additional 13.4 million who did not cross over the SPM threshold moved  out of the lowest income group (below 50 percent of poverty). Moreover,  10 million who were already above the SPM threshold moved to a higher  income group (e.g., moved from 100 to 149 percent of poverty to 150 to  199 percent of poverty). To obtain these estimates,",
      " we subtracted the  value of these benefits from beneficiaries\u2019 incomes and recalculated their  incomes as a percent of the SPM threshold. Overall, fewer people were  in the lowest income groups (those below poverty) when the value of  benefits from the eight programs was included (see fig. 10). Program effects varied by household type as well (see fig. 11). The  largest numbers of people avoiding poverty based on the SPM because  of selected federal benefits were in households with married parents (9.2  million) or single parents (7.9 million). Over one-third of program  recipients living in single parent households were kept out of poverty by  the combined benefits of the eight selected programs.",
      " SNAP and EITC Moved  the Most People above  Poverty; However, All  Selected Programs Had a  Majority of Recipients with  Incomes above the SPM  Threshold after Accounting  for Benefits Each of the eight programs lifted a number of recipients above the SPM  threshold, ranging from 340,000 (LIHEAP) to nearly 8.7 million (SNAP)  (see fig. 12). Variation in programs\u2019 effects on reducing poverty was due  to a combination of factors, including the number of recipients in each  program and value of each benefit. For instance, SNAP and EITC served  the most people in 2012 and,",
      " accordingly, had large effects on moving  people out of poverty among our eight programs. Housing assistance, on  the other hand, served many fewer people but provided a higher dollar  amount of benefits than most other programs, moving almost 37 percent  of all housing recipients that year out of poverty. Our estimates are consistent with Census analyses using the SPM to  measure the effects of program benefits on poverty. Census found that  refundable tax credits (EITC and ACTC combined, along with other  refundable federal and state tax credits) and SNAP had the largest effect  on reducing poverty for the population in 2012.",
      " Of the different age  groups (children, adults, and the elderly), Census found that children  benefited the most from low-income programs, particularly from the  refundable tax credits. Census also looked at the effects of several social  insurance programs and reported that Social Security had, by far, the  biggest effect on reducing poverty for the population\u2014more than any low- income program\u2014especially among the elderly. While each of the programs\u2019 benefits moved some individuals above the  SPM threshold, the income status of each programs\u2019 recipients\u2019 still  varied from 50 percent below poverty to more than twice the SPM poverty  threshold after taking into account the program\u2019s benefits and other  benefits received (see fig.",
      " 13). Figure 13 shows that, for example, 62  percent of individuals who were eligible for and received SNAP benefits  for at least one month in 2012 had annual incomes above the SPM  threshold, after including the value of SNAP and other benefits received,  which may have included other low-income benefits such as TANF or the  EITC as well as other benefits such as Social Security or unemployment  insurance. Some variation among the programs in terms of recipients\u2019  incomes as a percentage of the SPM reflects differences in program  targeting and design. For instance, the tax credits, ACTC and EITC had  larger percentages of recipients above the SPM threshold (82 percent  and 75 percent,",
      " respectively), as would be expected since these credits  are designed to phase out gradually over higher levels of earned income.  Under the EITC, for example, certain married families with two qualifying  children may have had nearly $50,000 in earned income in 2013 before  they became completely ineligible for the credit. A majority of ACTC and  EITC recipients also lived in households with two adults (married or  cohabiting) and children, as we will discuss later. In contrast, TANF cash  assistance had the smallest percentage of people above the SPM poverty  threshold among our selected programs (57 percent). Generally,",
      " TANF  recipients must have very low incomes to qualify for benefits. In  addition, the amount of aid from TANF programs tends to be relatively  small, although TANF recipients often receive assistance from other  programs, particularly SNAP.TANF recipients lived in single parent households and did not have  income from another individual for support. Research Suggests  Selected Programs  Have Generally  Encouraged Labor  Force Participation  and Had Mixed  Effects on Hours  Worked The receipt of benefits from means-tested low-income programs (i.e.,  those with financial eligibility tests for individuals or families) may affect  an individual\u2019s willingness to seek and accept employment in two key  ways.",
      " One is the decision on whether or not to work, called the labor  force participation decision. The second, which applies to those who have  decided to work, is on the number of hours to work. For many people, the  decision on whether to work depends on the incomes available under  each alternative, including income or assistance from means-tested  benefits. The decision of how many hours to work may be influenced by  the extent to which an increase in earnings (through more hours worked  or a higher wage) is offset by higher taxes and reduced benefits. Whether  moving from not working to working or from fewer to more hours worked,",
      "  the combined effect of taxes and the reduction in means-tested benefits  as earnings increase is called the worker\u2019s effective marginal tax rate,  referred to as the marginal tax rate in this report. A Hypothetical Example of How Marginal  Tax Rates Can Reduce Benefits When  Earnings Increase   If a single parent with three children living in  Wisconsin in 2000 who was earning $6.25 an  hour received a raise to $9.25 an hour, based  on 2,000 hours of work a year, her earnings  would increase by $6,000. If she received  SNAP benefits, those benefits would be  reduced by $81 a month due to her earnings  increase.",
      " If she received housing assistance,  this assistance would be reduced by $177 a  month. She would also owe an extra $38 a  month in payroll taxes and if she worked full- time for the year, lose $1,848 (or $154 a  month) due to reduced EITC benefits. As a  result, out of her $500 a month raise, she  would keep $50--a nearly 90 percent marginal  tax rate on the earnings gain. If her earnings  continue to rise, her marginal tax rates will fall  greatly, as SNAP and EITC benefits will  phase out entirely.",
      " With no remaining benefits  to reduce, her marginal tax rate will depend  solely on income and payroll taxes. earnings, these programs\u2019 benefits made work more financially rewarding  (in terms of earnings plus benefits), in comparison to the benefits  available to those who do not work. The EITC, in particular, has  increased incentives for people with children to join the labor force, based  on our review of studies. Many factors are taken into consideration in calculating SNAP benefits, including  earnings, assets, household size, age, and others. However, the basic benefit reduction  rate is 24 percent, based on a reduction in the benefit equal to 30 percent of net income,",
      "  mitigated by a 20 percent earned income deduction. ranging from 27 percent to over 100 percent, depending on the state of  residence. (The average marginal tax rate among states was about 50  percent.) That is, if the parent lived in Nevada, he or she would lose 27  cents of each dollar in increased earnings; if he or she lived in  Connecticut, the parent would actually have fewer total resources for  each dollar in increased earnings due to the loss of benefits. The study\u2019s  authors noted that marginal tax rates vary greatly among states due to,  among other things, differences in state tax systems and state rules for  TANF and SNAP.",
      " CBO, Effective Marginal Tax Rates for Low- and Moderate-Income Workers, Publication  No. 4149 (Washington, D.C.: November 2012). or ACTC. CBO had similar findings looking at a different set of programs  using 2010 Census CPS data. Of households that received assistance  from Medicaid or Children\u2019s Health Insurance Program (CHIP), SNAP,  TANF, or housing assistance, the majority participated in one program,  most commonly Medicaid/CHIP or SNAP, and few participated in more  than two programs. While studies we reviewed showed that some benefit recipients may face  relatively high marginal tax rates,",
      " available research suggests these rates  do not strongly affect people\u2019s actual behavior regarding how many hours  they decide to work. Ideally, an analysis should consider all the programs  in which an individual participates. A 2011 review of research found that  the aggregate behavioral impact on people\u2019s incentive to work from  multiple means-tested programs was very small. A more recent review  of studies in 2015 concluded that \u201cit is very hard to find large labor supply  reductions for any major transfer program.\u201d Eissa and Hoynes, \u201cBehavioral Responses to Taxes;\u201d and T. Hungerford and R. Thiess,  The Earned Income Tax Credit.",
      " studies we reviewed, though for some groups the effects may be large.  Changes in marginal tax rates associated with reduction in TANF benefits  based on increased earnings were found to have little effect on either  labor force participation or hours of work, according to studies we  reviewed. On the other hand, receipt of housing assistance may create  work disincentives, although available research is limited. One study  looking at the Section 8 Housing Choice Vouchers program found that,  based on a sample of program participants and nonparticipants in  Chicago, the program had a negative effect on labor force participation  and earnings (possibly due to reduction in hours worked for some  recipients), but a positive effect on supporting incomes.",
      " In other words,  people may work more without a housing benefit but their overall incomes  are higher with the benefit. Another study of recipients in Wisconsin found  that housing vouchers had little effect on labor force participation and a  negative effect on earnings, which faded over time. Medicaid could also  create work disincentives, since a modest pay increase could result in a  total loss of benefits for those near the program\u2019s income threshold.However, other programs or policies could offset potential work  disincentives. For example, an increase in earnings in a new job may also  be accompanied by employer-provided group health insurance, and  children may lose eligibility for Medicaid but gain eligibility under CHIP.",
      "  As noted, we did not review the literature on work incentives related to  health insurance programs. In addition, although, we did not review the  literature on the effect of child care subsidies on work incentives for this  report, we have looked at this in prior work. Specifically, in a 2010 report,  we found that research has linked access to child care subsidies to  increases in the likelihood of low-income mothers\u2019 employment. In that  report, experts we consulted suggested that when child care prices  increase (such as when a parent loses a child care subsidy), mothers  may change their work hours or shift to lower-cost providers,",
      " for example,  rather than exiting the labor force altogether, although other research has  shown that child care problems contribute to job loss and returns to  welfare for low-wage workers. While high marginal tax rates occur, people may not respond to them for  various reasons. For instance, for a worker to change behavior, he or she  must be aware of the marginal tax rates and the income levels at which  they apply. However, these rates can be difficult for the lay person to  understand and calculate, especially when multiple programs and tax  provisions are involved. As discussed, high marginal tax rates are the  result of interactions among programs and the tax system and vary  greatly depending on the specific benefit or combination of benefits  received,",
      " individual situation, and state of residence. These interactions  are not transparent. Studies that have focused on interviews with low- income households indicate they often do not understand marginal tax  rates associated with increased earnings or how these may affect their  benefits. This may be particularly relevant with the EITC because of a  long time lag between a change in work and the receipt of the tax refund  at tax time. Additionally, a worker is not necessarily able to control the  number of hours he or she works in response to different marginal tax  rates, given constraints in work schedules or other factors such as child  care. Research indicates that low-wage workers have less discretion  and control over their work schedules than higher-wage workers,",
      " and that  this is particularly true for those working part-time or in temporary  positions. Further, reacting to high marginal tax rates that apply over narrow income  ranges would not necessarily make sense for a worker over the long  term. If a worker expects to have continual pay increases over his or her  lifetime he or she would not necessarily decide to reduce his or her work  hours because of high marginal tax rates that would attenuate as  earnings grew beyond the effective income range of those rates. Behavioral effects can be difficult to isolate from other factors, and not all  effects are observable. For example, not all labor supply behavior can be  found in data.",
      " A worker who knowingly faces a high marginal tax rate for  additional hours may seek earnings in the underground economy.  Additionally, program provisions are not the only factors that may affect  labor supply. The overall state of the labor market is central, in terms of  the availability of employment opportunities and pay. Research also shows that inherent policy trade-offs exist for means- tested benefit programs attempting to meet multiple objectives. Work  incentives and disincentives in means-tested benefit programs are  intrinsically linked. When benefits are available to those who work or  when benefits are tied to work (such as with the EITC), working becomes  more attractive as people\u2019s total incomes in benefits and earnings are  higher than they would be without work.",
      " However, benefits are reduced  and ultimately phased out as earnings rise, creating potential work  disincentives. To lessen the role of work disincentives and avoid abrupt  benefit cutoffs (known as cliff effects), benefits can be phased out more  slowly (i.e., resulting in lower marginal tax rates). Yet a slower phase-out  of benefits means increased program costs. Program costs could be  contained if benefits are reduced for those with the lowest income;  however, another common policy goal is to maintain adequate assistance  for the least fortunate. In short, research shows that to limit program  costs, it is necessary to either reduce benefits (by reducing the number of  people eligible or the benefit amount)",
      " or phase benefits out more rapidly.  These trade-offs pertain to assistance provided by any level of  government\u2014federal, state, or local. Agency Comments  and Our Evaluation We provided a full draft of this report for comment to the Departments of  Agriculture, Health and Human Services, Housing and Urban  Development, Treasury, and the Social Security Administration. We  provided relevant sections of the draft report to eight other federal  agencies that administer programs included in this report as well as  Census for technical comments. Most agencies that we sent the full draft  or excerpts of the draft provided technical comments, which we  incorporated as appropriate.",
      " USDA, HHS, Treasury, and SSA did not have additional comments; HUD  provided written comments, reproduced in appendix VI. In its comments,  HUD discussed the usefulness of the SPM in assessing economic  conditions and people\u2019s level of need, but stated concerns that  information in this report may be interpreted erroneously, particularly  because the SPM is a relatively new concept. Specifically, HUD noted  that readers may interpret information we presented on program  recipients\u2019 incomes as a percentage of the SPM as evidence that  programs are not targeting people in need, when, as we describe in the  report, these income levels include the value of certain federal,",
      " state, and  local assistance that a household receives, as well as account for various  household expenses. As we explain in the report, the SPM provides  information on a household\u2019s resources\u2014including assistance from  certain government programs\u2014to meet basic needs, and is not a  measure used to determine program eligibility. HUD also noted  differences in terms of recipient household types between our estimates  of housing assistance using TRIM3 and HUD\u2019s estimates using HUD  program data, due to the fact that TRIM3 estimates can include recipients  of housing assistance from other federal, state or local agencies. Based  on HUD\u2019s comments, we took steps to clarify the information we present  on our estimates of program recipients\u2019 incomes as a percentage of the  SPM and on our estimates of recipients of housing assistance using  TRIM3,",
      " and addressed other comments from HUD, 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, Secretaries of Agriculture, Health and Human  Services, Housing and Urban Development, and Treasury; the  Commissioner of the Social Security Administration; other federal  agencies that administer programs included in this report, and other  interested parties. In addition, the report is available at no charge on the  GAO website at http://www.gao.gov. If you or your staffs have any questions concerning this report,",
      " please  contact me at (202) 512-7215 or brownke@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 who made key contributions to  this report are listed in appendix VII. Appendix I: Objectives, Scope, and  Methodology The objectives of this report were to examine: (1) what federal programs  (including tax expenditures) are targeted to low-income individuals; (2)  what are the number and selected household characteristics of people in  poverty based on the Supplemental Poverty Measure (SPM); (3)",
      " what are  the incomes (as a percent of the SPM) and household characteristics of  people receiving benefits from selected programs; and (4) what is known  about how selected low-income programs affect work incentives? To  address the objectives of this request, we used a variety of methods.  Specifically, we:  reviewed relevant federal laws, regulations, and agency guidance;  and interviewed agency officials;  collected information on 82 federal low-income programs by surveying  13 federal agencies that administer these programs; analyzed 2013 data from Census Bureau\u2019s (Census) Current  Population Survey (CPS) to describe low-income households;",
      " analyzed 2012 data, the most recent available, from the Transfer  Income Model, version 3 (TRIM3) microsimulation model maintained  by the Urban Institute to describe recipients of eight large federal low- income programs; and  conducted an economic literature review on work incentives and  disincentives related to assistance from selected federal low-income  programs. We conducted our work between April 2014 and July 2015 in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives.",
      " We believe the evidence obtained provides  a reasonable basis for our findings and conclusions based on our audit  objectives. Federal Programs for  Low-Income Individuals To address our first question, we identified federal programs, including  tax expenditures, that (1) used a measure of low or limited income to  determine eligibility, priority for assistance, or to target resources, or (2)  have target populations that are disproportionately poor or have program  purposes that presume that participants will be low-income. This included  programs that targeted individuals, families, and communities. Due to  their small size, we excluded programs less than $100 million in federal  obligations or reduced tax revenue in fiscal year 2013.",
      " These criteria  were developed by the Congressional Research Service (CRS), which  has maintained a list of low-income programs for many years. To  identify programs in its current list, CRS officials told us that they took  various steps, including searching the Catalog of Federal Domestic  Assistance for relevant programs. We augmented CRS\u2019s list by asking  relevant agencies to suggest program additions or deletions consistent  with the criteria, consulting with CRS and program area experts within  GAO, and adding relevant tax expenditures. We consulted with internal  subject matter experts and the Department of the Treasury (Treasury) to  identify relevant tax expenditures. We included tax expenditures that base  an individual\u2019s eligibility on a measure of low or limited income,",
      " or that  indirectly benefit low-income individuals (for example, the Low-Income  Housing Tax Credit, which allows developers and owners of qualified low- income housing projects to claim a tax credit for construction or  rehabilitation costs). We excluded tax expenditures which indirectly  benefit low-income individuals based on income measures for a  geographic area. We also excluded tax expenditures for which the  average reduction in revenue for the past 5 years was less than $100  million. To collect program information, we sent a questionnaire (or survey) on  each program to the federal agencies responsible for administering it that  included questions on federal obligations, numbers served,",
      " the program  purpose, type of benefit or service, eligibility requirements, and other  topics. To ensure that questions were understandable and that we  collected the desired information, we pre-tested the survey with two  federal agencies, and asked a third agency to review it. We revised it  based on agencies\u2019 feedback. We sent the survey to agencies in  September 2014 and, ultimately, obtained a 100 percent response rate.  We did not independently verify the legal accuracy of the information  provided by the agencies, such as program purposes, eligibility  requirements, or benefits or services provided. Because this was not a sample survey,",
      " there are no sampling errors. To  minimize other types of errors, commonly referred to as nonsampling  errors, and to enhance data quality, we employed recognized survey  design practices in the development of the questionnaire and in the  collection, processing, and analysis of the survey data. For instance, as  previously mentioned, we pretested the questionnaire with federal officials  to minimize errors arising from differences in how questions might be  interpreted and to improve the likelihood that variation in responses  across agencies are attributable to substantive differences between  programs rather than aspects of the data collection process. We further  reviewed the survey to ensure the ordering of survey sections was  appropriate and that the questions within each section were clearly stated  and easy to comprehend.",
      " To reduce nonresponse, another source of  nonsampling error, we sent out e-mail reminder messages to encourage  officials to complete the survey. We reviewed the data for missing or  ambiguous responses and followed up with agency officials when  necessary to clarify their responses. In some cases, we also checked  other sources, such as the Office of Management and Budget\u2019s Appendix,  Budget for the U.S. Government, Fiscal Year 2015, to confirm information  was generally consistent and reliable. On the basis of our application of  recognized survey design practices and follow-up procedures, we  determined that the data were of sufficient quality for our purposes.",
      " Number and Household  Characteristics of  People in Poverty To answer our second question, we analyzed data from the Census\u2019  Current Population Survey (CPS) for 2013 (calendar year), the most  recent year available. Specifically, we used the public use and replicate  weight files from the March 2014 CPS Annual Social and Economic  Supplement, which covers 2013, to obtain demographic information about  respondents and their households and calculate standard errors of our  estimates. We merged this information with the Census\u2019 SPM  Research Data file for 2013, which contains microdata derived from the  CPS that allows users to calculate SPM rates.",
      " Because the CPS uses  a household-based data collection, its data do not include individuals  living outside of a household residence, such as homeless people or  those living in institutional group quarters (e.g., correctional facilities,  nursing homes). As many individuals in these groups may be low-income,  estimates of the size of the low-income population in this report are likely  to be undercounts of the low-income population in the United States. To determine the number of people in poverty according to the SPM, we  first calculated each household\u2019s income as a percent of the relevant  SPM poverty threshold. To define a household,",
      " we followed the Census  definition of an \u201cSPM Resource Unit,\u201d which includes related individuals  living together, plus unrelated children who are living with the family (such  as foster children) and any cohabitors (i.e., unmarried partners) and their  children. An SPM unit could consist of a single individual. Census defines  a household\u2019s SPM resources\u2014which we call its income\u2014to include its  cash income plus the value of certain noncash benefits minus estimated  expenses related to work, child support, taxes, and medical care. Each  household\u2019s SPM threshold represents the amount of income it should  have available to sufficiently pay for food,",
      " housing, clothing, and utilities,  plus 20 percent more for miscellaneous necessary expenses. The Bureau  of Labor Statistics derives SPM thresholds from actual expenditures on  these items averaged over the previous five years. Thresholds are set at  the amount that approximately two-thirds of households spent or  exceeded and vary by household size, homeownership, and geographic  location. To describe the number of people with household incomes above and  below the SPM poverty threshold, we categorized individuals into five  income groups based on their household\u2019s income as a percent of its  SPM threshold: household resources less than 50 percent of its SPM threshold;",
      " household resources from 50 percent to less than 100 percent of its household resources from 100 percent to less than 150 percent of its household resources from 150 percent to less than 200 percent of its household resources 200 percent of its SPM threshold or greater. The first two income groups are considered to be in poverty according to  the SPM, and the latter three groups are considered to be above the  poverty line. We calculated each individual\u2019s income group according to the official  poverty measure in a similar fashion, except that we used their family  income rather than their SPM unit income. Census\u2019 official poverty  statistics use the family\u2014defined as related individuals living together\u2014 as the unit of measurement and do not include children under the age of  15 who are living with nonrelatives,",
      " such as foster children. We also  followed Census procedures to define family income to include its cash  income only, and we used official poverty thresholds, which vary by size  of family and age of family members, but not by geographic location or  homeownership. For this analysis, we categorized households into six mutually-exclusive  types, as follows: Headed by elderly persons: Households (with or without children)  headed by a person who is 65 or over, regardless of whether he or  she has a disability. The head of household may live alone, with a  spouse, or with a cohabiting partner. Headed by persons with disabilities:",
      " Households (with or without  children) headed by a person under 65 with a disability. The head of  household may live alone, with a spouse, or with a cohabiting partner.  We used a Census Bureau definition of disability, which includes any  serious difficulty hearing, seeing, concentrating/remembering/making  decisions, walking/climbing stairs, dressing/bathing, or doing errands  alone. Without children: Households without children headed by a person  under 65 without a disability. The head of household may live alone,  with a spouse, or with a cohabiting partner. Married with children:",
      " Households with at least one child headed by a  married person under 65 who does not have a disability. Cohabiting with children: Households with at least one child headed  by an unmarried person under 65 who has a cohabiting partner and  does not have a disability. Single parent: Households with at least one child headed by an  unmarried person under 65 who does not have a disability or a  cohabiting partner. For each of the datasets we used in this analysis (CPS, its Annual Social  and Economic Supplement, and the SPM Research file), we conducted a  data reliability assessment of selected variables including those used in  our analysis.",
      " We reviewed technical documentation and related  publications and websites with information about the data and spoke with  Census officials knowledgeable about these datasets to review our plans  for analyses, as well as to resolve any questions about the data and any  known limitations. We also conducted electronic testing, as applicable, to  check for logical consistency, missing data, and consistency with data  reported in technical documentation. We determined that the variables  that we used from the data we reviewed were reliable for the purposes of  this report. Throughout this report, when we present estimates from survey data, we  also present the applicable margins of error (i.e., the maximum half-width  of the 95 percent confidence interval around the estimate). In some  cases,",
      " the confidence intervals around our estimates are asymmetrical;  however, we present the maximum half-width for simplicity and for a  consistent and conservative representation of the sampling error  associated with our estimates. Estimating the Number  and Characteristics  of Selected Programs\u2019  Recipients To address our third question, we used data for calendar year 2012 on  recipients of selected programs from the Transfer Income Model, version  3\u2014a microsimulation model known as TRIM3. TRIM3 is developed and  maintained by staff at the Urban Institute with funding primarily from the  Department of Health and Human Services, Office of the Assistant  Secretary for Planning and Evaluation.",
      " The TRIM3 model simulates major  governmental tax, transfer, and health programs using data from the  CPS, which contains detailed information on the demographic  characteristics and economic circumstances of U.S. households,  including their benefits from many federal programs. However, CPS data  substantially underreports the receipt of these benefits. For example,  Urban Institute staff found that CPS data captured about 61 percent of  Temporary Assistance for Needy Families (TANF) benefits received in  2012 and about 57 percent of Supplemental Nutrition Assistance Program  (SNAP) benefits, when comparing CPS data with program administrative  data (data collected by agencies used to administer the program). TRIM3  corrects for this undercounting by creating new variables for each survey  respondent indicating their program eligibility,",
      " amount of benefits  received, and tax liability, following the same steps that a caseworker  would use to determine eligibility, as explained below. We studied eight of the low-income programs that TRIM3 modeled for  calendar year 2012, the most recent year that data were available.  In  addition to being included in the TRIM3 model, selected programs were  generally large and covered a range of basic needs.the programs we selected, along with the program unit that TRIM3 used  to calculate benefits and caveats about interpreting the data. Economic Literature  Review To address our fourth question, we conducted an economic literature  review on whether receipt of assistance from selected programs,",
      "  including EITC, SNAP, TANF, and the Section 8 Housing Choice Voucher  program, affects recipients\u2019 incentive to work. We conducted a literature  search of various databases for peer-reviewed journal articles, and other  publications to identify relevant studies that were published in recent  years (2009 through 2014) and also reviewed some studies that were  published earlier. We also inquired with agency officials for relevant  studies and reviewed policy and research organization websites.  Additionally, we reviewed citations of other relevant work discussed in  studies. In describing findings from the literature, we included studies that  were determined to be methodologically sound.",
      " Based on our review of  studies, we identified reasonable conclusions about likely work incentives  related to selected low-income programs. We did not do an exhaustive  review of the literature on this topic. Appendix II: Information Provided by  Agencies on Program Purpose and Type of  Benefit or Service for Low-Income Programs Program purpose To assist eligible parents with dependent children whose  tax liability is not sufficient to receive the full benefit of  the regular nonrefundable Child Tax Credit. Refundable tax credit. To offset the burden of taxes, including Social Security  taxes; provide an incentive to work; and provide income  support to low-income families.",
      " Tax credit to reduce the amount of income  taxes owed; an eligible worker may receive  the credit regardless of whether taxes are  owed (i.e., the credit is refundable). To allow exclusion of public assistance benefits from  taxable income. Cash assistance. To provide a minimum income for aged, blind or disabled  individuals who have very limited income and assets. Cash assistance. The basic federal SSI  benefit is the same for all beneficiaries  nationwide (reduced by any countable  income). States may supplement the federal  benefit. To accomplish one or more of the following: (1) provide  assistance to needy families so that children may be  cared for in their own homes or in the homes of relatives;",
      "  (2) end the dependence of needy parents on government  benefits by promoting job preparation, work, and  marriage; (3) prevent and reduce the incidence of out-of- wedlock pregnancies and establish annual numerical  goals for preventing and reducing the incidence of these  pregnancies; and (4) encourage the formation and  maintenance of two-parent families. Noncash services, including child care, work  activities, child welfare services, and various  social services directed toward the statutory  goals of family formation and reduced  nonmarital pregnancies. Cash assistance  benefit levels are defined by the individual  states. To enable nonresidential day care institutions to integrate  a nutritious food service with organized care services for  enrolled children and adults.",
      " Breakfasts, lunches, suppers and snacks  that meet minimum federal nutrition  standards. To improve the health of low-income elderly persons at  least 60 years of age by supplementing their diets with  nutritious Department of Agriculture (USDA) Foods,  which are distributed through public and nonprofit private  local agencies such as food banks and community action  organizations. Food packages and nutrition education. To provide USDA foods to low-income households living  on or near Indian reservations. Income eligible households receive a  supplemental monthly food package and  nutrition education. To provide free fresh fruits and vegetables to elementary  school children. The goal is to create healthier school  environments by providing healthier food choices.",
      " Selected schools receive reimbursement for  the cost of making free fresh fruits and  vegetables available to students during the  school day. Program purpose  To safeguard the health and well-being of the nation\u2019s  children and to encourage the domestic consumption of  nutritious agricultural commodities and other food. Benefit or service provided  Lunches that meet minimum federal nutrition  standards and are served free or at reduced  price by participating public and private  elementary and secondary schools and  residential child care institutions. To improve diets of needy persons living in Puerto Rico.  Nutrition assistance benefits. Benefits are  provided through electronic benefit  transfers, and at least 75% must be used for  food purchases.",
      " To reduce hunger and food insecurity, promote  socialization, and promote the health and well-being of  older individuals and delay adverse health conditions  through access to nutrition and other disease prevention  and health promotion services. Meals served in congregate settings, home- delivered meals, and related nutrition  services (nutrition screening, education and  assessment and counseling). To promote learning readiness and healthy eating  behaviors through provision of nutritious breakfasts. Breakfasts that meet minimum federal  nutrition standards and are served free or at  reduced price by participating public and  private elementary and secondary schools  and residential child care institutions. To provide supplemental food and nutrition education to  eligible women and children to serve as an adjunct to  good health care during critical times of development,",
      " to  prevent the occurrence of health problems, including  drug abuse, and improve the health status of  beneficiaries. Food assistance (provided through cash  value vouchers or electronic benefit transfer  card for the purchase of specifically  prescribed food packages), nutrition risk  screening, and related services (e.g.,  nutrition education and breastfeeding  support, medical care referral). To help children in low-income areas get necessary  nutrition during the summer months when they are out of  school. Meals and snacks. To alleviate hunger and malnutrition and permit low- income households to obtain a more nutritious diet by  increasing their food purchasing power. Benefits are provided through an electronic  benefit transfer card to purchase food from  authorized retailers.",
      " Allotments are  determined on the basis of a low-cost model  diet plan. To supplement the diets of low-income Americans,  including elderly people, by providing them with  emergency food and nutrition assistance at no cost. Food commodities that are distributed to  local feeding programs and the  administrative costs necessary to store and  transport the commodities. To provide low-income, uninsured, and underserved  women access to timely breast and cervical cancer  screening and diagnostic services. Clinical breast examinations, mammograms,  Pap tests, pelvic examinations, diagnostic  testing, and referrals to treatment. No fees  for services may be charged for women with  incomes below 100%",
      " of federal poverty  guidelines. Program purpose  To provide comprehensive, culturally competent, quality  primary health care services to medically underserved  communities and vulnerable populations. Benefit or service provided  Primary and additional health care services  defined in statute, delivered by community  health centers, migrant health centers,  health centers for the homeless, and health  centers for residents of public housing. To assist individuals to determine freely the number and  spacing of their children through the provision of  education, counseling, and medical services. A broad range of family planning methods  and services. Family planning services  include clinical family planning and related  preventive health services;",
      " information,  education and counseling related to family  planning; and referral services. To elevate the health status of the Indian population to a  level at parity with the general U.S. population. Hospital, medical, and dental care,  behavioral health, environmental health and  sanitation services as well as outpatient  services and the services of mobile clinics  and public health nurses, and preventive  care, including immunizations and health  examinations of special groups, such as  school children. To improve the health of all mothers and children  consistent with applicable health status goals and  national health objectives established by the Secretary of  Health and Human Services (HHS). Preventive and primary health care services  (excluding inpatient services with some  exceptions)",
      " for women, infants, and  children, including children with special  health care needs. To provide medical assistance to qualifying individuals,  and to provide rehabilitation and other services to help  such families and individuals achieve independence and  self-care. Federal law provides two primary medical  benefit packages for state Medicaid  programs: traditional benefits and alternative  benefit plans (ABPs). To provide necessary hospital care and medical services  to eligible veterans. Standardized medical benefits package  including preventive services; primary care,  specialty care, prescription drugs,  comprehensive rehabilitative services,  mental health services; and emergency care  in VA facilities and in non-",
      "VA facilities by  contract or as authorized by 38 U.S.C. \u00a7\u00a7  1728 or 1725. To address the unmet care and treatment needs of  persons living with HIV/AIDS who are uninsured or  underinsured, and therefore are unable to pay for  HIV/AIDS health care and vital health-related supportive  services. Benefits include a wide range of medical  and supportive services to help persons  living with HIV/AIDS who are uninsured or  underinsured. To provide health coverage to uninsured, low-income  children in an effective and efficient manner that is  coordinated with other sources of health benefits  coverage for children.",
      " Benefits vary by state, but all benefits  provide health coverage to uninsured, low- income children. Program purpose  To provide for the effective resettlement of refugees and  to assist them to achieve economic self-sufficiency as  quickly as possible. Benefit or service provided  Cash payments to eligible individuals that  are at least equal to the payment rate to a  family of the same size under the state\u2019s  Temporary Assistance for Needy Families  (TANF) program; and medical benefits,  through payments to doctors, hospitals and  pharmacists. Those eligible for  Supplemental Security Income (SSI) may  receive refugee cash assistance while their  SSI applications are pending.",
      " To provide low-income seniors and people with  disabilities with comprehensive prescription drug  benefits. Prescription drug coverage with reduced  premiums, copayments and other out of- pocket expenses. To transform neighborhoods of poverty into viable mixed- income neighborhoods with access to economic activities  by revitalizing severely distressed public and assisted  housing and investing and leveraging investments in  well-functioning services, effective schools, and  education programs, public assets, public transportation,  and improved access to jobs. Funds to rehabilitate or replace distressed  public and assisted housing; provide  supportive services for residents, such as  those focused on self-sufficiency, health,",
      "  safety, and education; and support  community improvements, such as  environmental, retail, or transit  improvements. To develop viable urban communities by providing  decent housing and a suitable living environment and  expanding economic opportunities, principally for  persons of low to moderate income. Assistance with the acquisition of real  property, relocation and demolition,  rehabilitation of residential and  nonresidential structures, construction of  public facilities and improvements, public  services within certain limits, activities  related to energy conservation and  renewable energy resources, and  assistance to nonprofit entities and to profit- motivated businesses to carry out economic  development and job creation/retention  activities.",
      " To increase the number of families served with decent,  safe, sanitary and affordable housing and expand the  long-term supply of affordable housing; and to strengthen  the ability of states and local governments to provide for  housing needs. Assistance with the real estate development  and construction activities to increase the  supply of affordable housing. Promote the goal of ending homelessness; provide  funding for nonprofits, states, and local governments to  quickly re-house the homeless; promote use of  mainstream programs and optimize self-sufficiency  among those experiencing homelessness. Transitional housing for homeless  individuals and families, permanent housing  for disabled homeless individuals, and  supportive services.",
      " Renovation,  rehabilitation, or conversion of buildings into  homeless shelters, services such as  employment counseling, health care and  education, assistance with rent or utility  payments to prevent homelessness. Program purpose  To devise long-term comprehensive strategies for  meeting the housing needs of persons with AIDS. Benefit or service provided  Housing assistance and related supportive  services; real estate and construction  assistance; project- or tenant-based rental  assistance; short-term rent, mortgage, and  utility payments to prevent homelessness;  supportive services such as health services,  drug and alcohol abuse treatment, day care,  nutritional services, and aid in gaining  access to other public benefits.",
      " (1) To promote quality, affordable housing on Indian  reservations and areas; (2) to ensure access to private  mortgage markets for Indian tribes; (3) to coordinate  activities to provide housing for Indian tribes; (4) to plan  for and integrate infrastructure resources with housing  development for tribes; and (5) to promote the  development of private capital markets in Indian country. Housing development, assistance to  housing developed under the former Indian  Housing Program, housing services to  eligible individuals and families, crime  prevention and safety, and model activities  that provide creative approaches to solving  affordable housing problems. To allow developers and owners of qualified low-income  housing projects to claim a tax credit for construction or  rehabilitation costs.",
      " Tax credit to reduce amount of taxes owed. To provide cost-effective, decent, safe and affordable  rental housing for eligible low-income families, the  elderly, and persons with disabilities. Subsidized publicly-owned rental housing  units. In general, assisted households pay  30 percent of their income for rent. To allow holders of rental housing bonds to exclude  interest from taxable income. Tax exclusion to reduce amount of taxes  owed. To reduce the rent paid by low-income households in  eligible units financed under certain Rural Housing  Service programs. Rental subsidies for low-income tenants  provided through payments to eligible  property owners; payments make up the  difference between the tenant\u2019s rental  payment to the owner and the approved rent  for the unit.",
      " To provide very low-income families with decent, safe  and affordable housing in the private market. Tenant-based vouchers that can be used to  help recipients afford privately-owned rental  housing. In general, recipients pay 30  percent of their \u201cadjusted\u201d income for rent,  with the Department of Housing and Urban  Development (HUD) providing a subsidy for  the difference up to a maximum limit based  on local Fair Market Rents. To provide very low-income families with decent, safe  and affordable housing in the private market. Rent subsidies tied to units in privately- owned multifamily housing properties. In  general, tenants pay 30 percent of their  adjusted income for rent,",
      " with HUD  providing a subsidy for the remaining  amount up to the contract rent level. To allow persons with disabilities to live as independently  as possible in the community by increasing the supply of  rental housing with the availability of supportive services. Financial assistance for development of  supportive housing for persons with  disabilities, and rent subsidies for eligible  tenants. Program purpose  To help expand the supply of affordable housing with  supportive services for the elderly. Benefit or service provided  Financial assistance for development of  supportive housing for the elderly, and rent  subsidies for eligible tenants. To provide basic human amenities, alleviate health  hazards, and promote the orderly growth of the nation\u2019s  rural areas by meeting the need for new and improved  rural water and waste disposal facilities.",
      " Long-term low-interest loans and grants to  support the construction, repair,  improvement or expansion of rural water  facilities. To assist low-income households, particularly those with  the lowest incomes, that pay a high proportion of their  income for home energy, primarily in meeting their  immediate home energy needs. Assistance to households in paying their  heating and cooling costs, crisis  intervention, home weatherization, and  services (such as counseling) to help reduce  energy costs. To increase the energy efficiency of homes owned or  occupied by low-income persons to reduce their total  residential energy costs, and improve their health and  safety.",
      " Computerized energy audits and diagnostic  equipment to determine the most energy- efficient measures for each individual home;  labor and materials necessary to install such  energy-efficient measures. To facilitate the timely placement of children whose  special needs (which may include age, membership in a  large sibling group or a racial/ethnic minority group,  physical or mental disabilities or other circumstances as  determined by the state) would otherwise make it difficult  to place them with adoptive families. One-time nonrecurring payments to assist  with the costs of adopting a special needs  child (e.g., adoption fees, court costs,  attorney fees) and ongoing monthly  payments to adoptive families;",
      "  administrative and child placement services  intended to promote child safety,  permanency and well-being. To strengthen and improve the programs and activities  carried out under Title V; to improve coordination of  services for at-risk communities; to identify and provide  comprehensive services for families who reside in at-risk  communities. Home visiting services during pregnancy  and to parents with young children up to age  five. To help current and former foster youth achieve self- sufficiency. Educational assistance, vocational training,  employment services, life skills training,  mentoring, preventive health activities,  counseling, and (subject to certain  limitations) room and board.",
      " To develop child care programs that best suit the needs  of children and parents in each state, to empower  working parents to make their own decisions on the child  care that best suits their family\u2019s needs, to provide  consumer education to help parents make informed  decisions, to provide child care to parents trying to  achieve independence from public assistance, and to  help states implement their child care regulatory  standards. Subsidized child care services that may  include center-based care, group home  care, family care, and care provided in the  child\u2019s own home. States also use a portion  of funds for quality improvement activities,",
      "  such as professional development and  training, and quality rating and improvement  systems. Program purpose  To enforce the support obligations owed by noncustodial  parents to their children and the spouse (and former  spouse) with whom such children are living through  locating noncustodial parents, establishing paternity,  obtaining child and spousal support, and assuring that  assistance in obtaining support will be available to all  children who request such assistance. Benefit or service provided  Noncustodial parent location, paternity  establishment, establishment of child  support orders, review and modification of  child support orders, collection of child  support payments,",
      " distribution of child  support payments, and establishment and  enforcement of medical support. To reduce poverty, revitalize low-income communities,  and empower low-income individuals and families in rural  and urban areas to become fully self-sufficient. A wide range of activities may be supported  to help low-income individuals and families  become self-sufficient; address the needs of  youth in low-income communities; and  effectively use and coordinate with related  programs. To provide shelter, food, and supportive services for  homeless individuals nationwide. Mass shelter, mass feeding, food  distribution through food pantries and food  banks, one-month utility payments to  prevent service cutoff,",
      " one-month  rent/mortgage payments to prevent evictions  or help people leaving shelters to establish  stable living conditions. To provide temporary out-of-home care for children who  cannot safely remain in their own homes, until the  children may be safely returned home; placed  permanently with adoptive families, in a legal  guardianship, or with a fit and willing relative; or placed in  another planned permanent living arrangement. Payments to foster care providers to cover  the costs of children\u2019s maintenance (e.g.,  room and board, clothing and supplies,  liability insurance, certain travel expenses);  and support for administrative and child  placement services intended to promote  safety and permanency for children and  well-being for children and their families.",
      " To promote school readiness by enhancing the social  and cognitive development of children through the  provision of educational, health, nutritional, social and  other services to children and their families; and (for  Early Head Start) to promote healthy prenatal outcomes,  enhance the development of infants and toddlers, and  promote healthy family functioning. Comprehensive child development services,  including educational, dental, medical,  nutritional, and social services to children  and their families. Services may be center  based, home-based, or a combination, and  may be full- or part-day or full- or part-year. To provide financial assistance for needy American  Indians who live on or near reservations;",
      " to support tribal  programs to reduce substance abuse and alcoholism; to  promote stability and security of American Indian tribes  and families; and to improve Indian housing for low- income Indians. Assistance in processing welfare  applications, foster care assistance  services, operation of emergency shelters  and similar services; cash payments to meet  basic needs; counseling and family  assistance services, protective day care,  after-school care; and renovations, repairs,  or additions to existing homes. To provide equal access to the justice system for  individuals who seek redress of grievances and to  provide high quality legal assistance to those would be  otherwise unable to afford legal counsel.",
      " Legal services in civil cases. Program purpose  To provide multifaceted systems of support services for  family caregivers and grandparents or older individuals  who are relative caregivers. Benefit or service provided  Assistance to caregivers in gaining access  to services; individual counseling, support  groups, and caregiver training in the areas  of health, nutrition, and financial literacy;  and supplemental services, on a limited  basis, to complement the care provided by  caregivers. To secure and maintain maximum independence and  dignity in a home environment for older individuals  capable of self-care with appropriate supportive services,  to remove individual and social barriers to economic and  personal independence for older individuals,",
      " and to  provide a continuum of care for older individuals. A large variety of services including health,  mental health, education, transportation,  housing, legal, abuse prevention,  employment, and counseling for older  individuals. Social Services Block Grants  To promote economic self-sufficiency; prevent abuse or  neglect of children; refer individuals into institutional care  only when appropriate. Variety of social services for children,  families, the aged, the mentally retarded, the  blind, the emotionally disturbed, the  physically disabled, and alcoholics and drug  addicts. To enable eligible low-income individuals over age 55 to  become self-sufficient through placement in community  service positions and job training.",
      " Part-time temporary community service jobs  that pay at least minimum wage, job-related  training, and supportive services that are  necessary to enable an individual to  participate in the program. Foster Grandparent Program  To provide opportunities for older low-income people to  have a positive impact on the lives of children in need. Volunteer service (between 15 and 40 hours  weekly), with hourly stipend, providing  services to children with special or  exceptional needs or with conditions or  circumstances that limit their academic,  social or economic development. To assist eligible youth who need and can benefit from  an intensive program, operated in a group setting in  residential and nonresidential centers,",
      " to become more  responsible, employable, and productive citizens. Education and vocational training, including  advanced career training; work experience;  recreational activities; physical rehabilitation  and development; job placement and  counseling; and child care. To provide for the effective resettlement of refugees and  to assist them to achieve economic self-sufficiency as  quickly as possible. Employability and other services that  address participants\u2019 barriers to employment  such as social adjustment services,  interpretation and translation services, day  care for children, citizenship and  naturalization services. Services are  designed to enable refugees to obtain jobs  within 1 year of becoming enrolled.",
      " To assist eligible individuals in finding and qualifying for  meaningful employment, and to help employers find the  skilled workers they need to compete and succeed in  business. Services range from career counseling, job  training, and supportive services such as  transportation and child care. Program purpose  To improve educational and skill competencies of youth  and develop connections to employers, mentoring  opportunities with adults, training opportunities,  supportive services, incentives for recognition and  achievement, and leadership opportunities. Benefit or service provided  Strategies to complete secondary school,  alternative secondary school services,  summer employment, work experience,  occupational skill training, leadership  development opportunities,",
      " supportive  services, adult mentoring, follow-up  services, and comprehensive guidance and  counseling. To increase job opportunities for specified groups of  disadvantaged individuals. Reduces the net cost to employers of hiring  individuals who belong to specified groups. To create community learning centers that provide  academic enrichment opportunities during non-school  hours (i.e., before school, after school, or during summer  sessions) to help students meet academic achievement  standards, particularly for children who attend high- poverty and low-performing schools. Also offers families  of participating students opportunities for literacy and  related educational development. . Academic enrichment programs including  math, science,",
      " arts, music, recreational,  technology, and entrepreneurial education  programs; activities for limited-English- proficient students; promoting parental  involvement and family literacy; drug and  violence prevention programs; counseling  and character education programs. To assist adults to become literate and obtain the  knowledge and skills necessary for employment and  economic self-sufficiency; to assist adults who are  parents to obtain the education and skills necessary to  become full partners in the educational development of  their children, and that lead to sustainable improvements  in their family\u2019s economic opportunities; to assist adults  in completing a secondary school education and in  making the transition to postsecondary education and  training;",
      " and to assist immigrants and other English  language learners in improving their English reading,  writing, speaking, and comprehension skills and  mathematics skills, and in acquiring an understanding of  the American system of government, individual freedom,  and the responsibilities of citizenship. Adult education and literacy activities,  including adult education, literacy,  workplace adult education and literacy  activities, family literacy activities, English  language acquisition activities, integrated  English literacy and civics education,  workforce preparation activities, and  integrated education and training. To ensure that all children have a fair, equal and  significant opportunity to obtain a high-quality education  and reach,",
      " at a minimum, proficiency on challenging  state academic achievement standards and state  academic assessments. Additional academic support and learning  opportunities for students in prekindergarten  through grade 12 that attend schools with  high numbers or high percentages of  children from low-income families to help  low-achieving children master challenging  curricula and meet state standards in core  academic subjects. To promote access to postsecondary education for low- income students. Need-based grants (size of grant is capped  by law) to eligible students at participating  institutions of higher education. To promote access to postsecondary education for low- income undergraduate students. Grants to help students with the costs of  postsecondary education.",
      " Program purpose  To motivate and assist students from disadvantaged  backgrounds through outreach and support programs  designed to help them move through the academic  pipeline from middle school to post baccalaureate  programs. Benefit or service provided  Academic instruction; personal, academic  and career counseling; tutoring; exposure to  cultural events and academic programs;  stipends; and grant aid. To assist students in financing the costs of  postsecondary education. Federally subsidized part-time employment  for students. To assist low-income students attain a secondary school  diploma or equivalent and prepare for and succeed in  postsecondary education. Special teacher training and early  intervention services;",
      " e.g., counseling,  mentoring, academic support, outreach, and  supportive services designed to better  promote high school graduation. Also  college scholarships and other financial  assistance needed for students served to be  able to attend an institution of higher  education. To assist institutions of higher education that serve high  percentages of low-income and minority students in  improving their management, fiscal operations, and  educational quality, to ensure access and equal  educational opportunity for low-income and minority  students. Possible activities are broad and depend on  the specific program. They may include, but  are not limited to, assistance in planning;  administrative management;",
      " development of  academic programs; equipment and  facilities assistance; staff development and  tutoring. To increase student achievement through improving  teacher and principal quality and increasing the number  of highly qualified teachers, principals and assistant  principals in classrooms and schools. State and local activities include  professional development, support for  educator evaluation systems, provision of  recruitment and retention bonuses to highly  qualified teachers, and other means of  improving teacher quality. At the school  district level, also hiring highly qualified  teachers to reduce class size. To provide comprehensive education programs and  services for American Indians and Alaska Natives; to  provide quality education opportunities from early  childhood through life in accordance with the tribes\u2019  needs for educational,",
      " cultural and economic wellbeing in  keeping with the wide diversity of Indian tribes and  Alaska Native villages as distinct cultural and  governmental entities. Preschool, elementary, secondary,  postsecondary and adult education at BIE- funded institutions, public schools, and  postsecondary institutions; financial  assistance for postsecondary education at  accredited institutions. To support local educational agencies in their efforts to  reform elementary school and secondary school  programs that serve Indian students in order to ensure  that such programs: (1) are based on challenging state  academic content and student academic achievement  standards that are used for all students; and (2) are  designed to assist Indian students in meeting those  standards.",
      " Grant funds supplement the regular school  program, and support comprehensive  programs to meet the culturally related  academic needs of Indian children. Funds  support such activities as after-school  programs, early childhood education,  tutoring, and dropout prevention. Program purpose  To improve the content knowledge of teachers and the  performance of students in the areas of mathematics and  science. Benefit or service provided  Enhanced professional development of  math and science teachers, promotion of  strong teaching skills, and summer  workshops or institutes. To address the unique needs of rural school districts that  frequently lack the personnel and resources needed to  compete effectively for federal competitive grants,",
      " and  receive formula grant allocations in amounts too small to  be effective in meeting their intended purposes. A wide range of services to improve rural  education through enhanced services for  children, teacher training, and academic  programs, including for limited English  proficient children. To help ensure that migratory children are afforded the  same educational quality, opportunities, and assistance  as other students. Supplemental education and support  services, tutoring, summer and extended- day instructional services, language  development services, career education  services and counseling; and other services. Appendix III: Information Provided  by Agencies on Federal Obligations  (Fiscal Year 2013)",
      " and Number Served for  Low-Income Programs (Time Periods Vary) Appendix III: Information Provided  by Agencies on Federal Obligations  (Fiscal Year 2013) and Number Served for Low- Income Programs (Time Periods Vary) Program  (type of assistance)   Medicaid (health care) Fiscal year 2013  obligations  (in millions) Number served   Average of 57.4 million individuals  (including 27.9 million children) per  month; total of 72.8 million individuals  were enrolled during the year (including  35 million children). Average monthly based on fiscal  year 2013   $57,",
      "513  27.9 million tax returns claimed the  EITC (of these, 24.3 million had a credit  that exceeded their tax liability) Cumulative total for calendar year  2012   $56,486  9.1 million individuals who received at  least 1 payment during the year, not  including those who only receive a state  supplementary payment. Single point-in-time (August 2014) Average of 3.5 million individuals  receiving cash assistance per month  (caseload average without state  supplemental funds) Single point in time (March 2013) Fiscal year 2013  obligations  (in millions)",
      " Average number of individuals  served at any time during this time  period-July 2013 to October 2014. Average monthly for fiscal year  2013a (preliminary data) Cumulative total for fiscal year  2013   $3,255  Approximately 6.4 million households   Cumulative total for fiscal year  2013 (preliminary data) Fiscal year 2013  obligations  (in millions) Cumulative total for fiscal year  2013   Cumulative total for 2012- 2013  school year   $919  5,100 multifamily rental units developed  or rehabbed per year,",
      " with 463,000 total  from the program inception (1992).  Affordability terms are generally for 20  years. Single point in time for fiscal year  2014-Sept. 2014   Cumulative total for fiscal year  2013   $779  Agency does not track annual number  (not all for low- income) Cumulative total for program year  2012 (July 1, 2012-June 30, 2013) Fiscal year 2013  obligations  (in millions) Cumulative total for fiscal year  2013   Cumulative total for program year  (July 1,",
      " 2013-June 30, 2014) Single point in time fiscal year  2013 (March 2013) New enrollees in fiscal year 2013  plus those who enrolled in  previous years and received  services at any point in fiscal year  2013. Cumulative total for 2012 school  year   (not all for low- income) Fiscal year 2013  obligations  (in millions) Time Period for number served  (vary based on information  provided by agencies)  n/a  (not all for low- income) Cumulative total for calendar year  2012   Average number of approved  certifications for fiscal year 2012  and fiscal year 2013.",
      " The Additional Child Tax Credit is the refundable portion of the Child Tax Credit.  No federal spending in obligations.  No federal spending in obligations for the tax credit. However, in fiscal year 2013, the Department of  Labor provided about $18 million in grants to states to process certification requests for the Work  Opportunity Tax Credit, according to the agency. Appendix IV: List of Programs Based on  Types of Income Eligibility or Targeting Based on our analysis of agency responses to our survey, 49 of the 82  federal low-income programs we identified include income or financial  eligibility requirements for potential recipients at the individual,",
      " household,  or related level (see table 8). Thirty-three programs do not assess income  eligibility at the individual (or related) level. Instead these programs  allocate resources based on a measure of financial need, but offer  services more broadly; give priority to those who are low-income; or serve  a group that is presumed low-income or which tends to be  disproportionately low-income. The table is not meant to be a  comprehensive list of program eligibility criteria. For example, for certain  programs, agencies reported that states have some flexibility to set  specific financial eligibility criteria. Any such state-determined criteria are  not shown in this table.",
      " The table also does not show any information  provided on automatic or categorical eligibility. Additionally, agencies  reported that some programs use other criteria, such as age, to determine  eligibility in addition to income or financial requirements, which are not  included in this table. If an agency reported that a program used more  than one type of income eligibility criteria, we counted it only in one  category. Appendix V: Federal Agencies\u2019 Evaluation  Efforts for Five Selected Programs We collected descriptive information on the recent efforts of federal  agencies to evaluate five selected programs: the Earned Income Tax  Credit (EITC), Section 8 Housing Choice Vouchers (Section 8 Vouchers),  Supplemental Nutrition Assistance Program (SNAP), Supplemental  Security Income (SSI), and Temporary Assistance for Needy Families  (TANF). We selected these programs because they are financially large  programs,",
      " meet basic needs through different types of assistance, and  vary in how benefits are administered. We focused on impact  evaluations conducted or sponsored by the respective agencies,  published in 2010 or later, that were related to participant outcomes  (excluding, for example, those related to program processes, operations,  or integrity). In addition to evaluations, we looked at other recent  research conducted or sponsored by the respective agencies that  provided information on program participants. For each program, we also  looked at performance measures, focusing on those related to participant  outcomes. In addition, we reviewed agency information available online  (e.g., evaluations,",
      " research, and annual performance reports) and  conducted semi-structured interviews with knowledgeable agency  officials. Federal administering agencies are: the Department of the  Treasury (Treasury) for EITC, the Department of Housing and Urban  Development (HUD) for Section 8 Vouchers, the Department of  Agriculture (USDA) for SNAP, Social Security Administration (SSA) for  SSI, and Department of Health of Human Services (HHS) for TANF. Evaluations Four of the five agencies conducted or sponsored recent evaluations  related to participant outcomes for their respective selected programs.  Evaluations focused on a range of subjects,",
      " including employment  practices and self-sufficiency (TANF, SSI, Section 8 Vouchers), food  security and healthy food consumption (SNAP), and family outcomes  (Section 8 Vouchers), among others (see table 9; see table 10 at the end  of this section for full names of evaluations). Unlike the four spending  programs we examined, the Department of the Treasury (Treasury) does  not conduct program evaluations related to program outcomes on the  EITC or any other tax expenditure. In our prior work, we have  recommended that the Office of Management and Budget (OMB)",
      " set up a  performance evaluation framework for tax expenditures, which represent  a substantial federal commitment. However, Treasury staff are aware  of and contribute to the academic research on participant outcomes  related to the EITC, such as on work, poverty, and household income. Agencies administering Section 8 Vouchers, SNAP, SSI and TANF  generally did not evaluate their respective programs as a whole, with the  exception of USDA\u2019s evaluation of SNAP\u2019s effect on food security and  food spending. Instead, these agencies typically evaluated different  practices within the program, often experimenting with new and  innovative practices. For example, the SNAP Healthy Incentives Pilot  Evaluation was aimed at testing new types of financial incentives  designed to make fruits and vegetables more affordable for SNAP  participants.",
      " Another example is TANF\u2019s Pathways to Advance Career  Education evaluation, which is currently testing promising strategies for  increasing employment and self-sufficiency among low-income families.  Many evaluations across the four programs were also conducted to study  the effects of the program on particular sub-populations of participants.  For example, SSA\u2019s Youth Transition Demonstration tested strategies  designed to help youth with disabilities who were receiving SSI to  transition to economic self-sufficiency as adults, while USDA had  evaluations looking at food security among the elderly and working poor  populations. For each of the four programs, the agencies conducted evaluations for a  variety of reasons.",
      " Some of the programs\u2019 evaluations were required by  law. For example, HUD was required by law to conduct the Moving to  Opportunity for Fair Housing demonstration program evaluation, which  presented the long-term impacts of moving people, including Section 8  Voucher recipients, from high-poverty neighborhoods in large inner cities   Other evaluations we reviewed were  to lower-poverty neighborhoods.determined by the agencies, often in line with a larger evaluation plan or  strategy aimed at supporting certain agency goals, according to officials  from the HHS, USDA, and HUD. For example, USDA\u2019s evaluations on  education programs to promote healthier eating for low-income children,",
      "  women, and seniors was based on USDA\u2019s goals, according to officials. Officials told us findings from evaluations have helped inform program  design and administration at the federal and state level. For example,  based on findings from the Ticket to Work and Self-Sufficiency  Evaluations, SSA officials said the agency changed the program\u2019s design  to incentivize service providers to serve disability beneficiaries who are  more difficult to employ. Agency officials told us they frequently share  findings and best practices with state agencies administering the  programs to inform their program or policy decisions. For example, USDA  officials stated that the SNAP Education and Evaluation studies have  helped several states develop their own SNAP education programs.",
      "  Agencies disseminated findings to administrators and other interested  parties through various channels, including research clearinghouses,  journals, conferences, and agency websites. Officials from these four  agencies told us that evaluation findings also helped them determine  financial decisions, such as resource allocation, or to provide support for  budget requests to Congress. Agencies faced a number of challenges with regards to their evaluation  efforts, including financial, methodological, and administrative limitations.  Agency officials informed us that large-scale, multi-year evaluations are  resource intensive, and limited or short-term funding can make it difficult  to perform these evaluations, particularly for program wide research.  Officials from USDA informed us that it is helpful when money is  designated by law for specific evaluations,",
      " as was the case with the  Healthy Incentives Pilot, which was designated funding in the Food,  Conservation, and Energy Act of 2008 (2008 Farm Bill). According to  officials, methodological challenges can also limit their evaluation efforts.  For example, SNAP and SSI benefits generally must be provided to  eligible applicants, which makes it difficult to establish a control group.  Under TANF, states generally design and administer their own programs,  making it difficult to assess the program more broadly. Furthermore, HHS  officials informed us that state and local TANF administrators are not  required to participate in evaluations.",
      " Therefore, it can be difficult to  persuade them to participate because of the burden of additional work  and costs that evaluations may create for them. We recently found that  the structure of TANF can present challenges for HHS to conduct  evaluations and how this may leave TANF recipients without access to  promising approaches for employment. Other Related Research Agencies administering SNAP, SSI, TANF, and Section 8 Vouchers also  sponsored other recent research\u2014that were not impact evaluation  studies\u2014that informed their understanding of program participants,  including when participants receive benefits from other similar programs.  Some research we reviewed provides information on participants,",
      " such as  their demographic characteristics and economic circumstances. For  example, USDA conducted research on the characteristics and  circumstances of SNAP participants with zero income by using Census\u2019  Survey and Income Program Participation (SIPP) data to conduct cross- sectional and longitudinal analysis that would not have been possible with  USDA administrative data alone. Other studies provided information on  participants\u2019 or potential participants\u2019 experiences with the programs,  such as need for assistance or reasons for participating, leaving, or  returning to the program (Section 8 Vouchers, SNAP, SSI, TANF).  Agency research also identified experiences and challenges that  participants faced outside of the program,",
      " such as crime (Section 8  Vouchers), education (Section 8 Vouchers, SSI), and health issues (SSI).  Agencies also conducted cross-program research, which included  examining the extent to which program participants received other  benefits, such as HHS\u2019s annual Indicators of Welfare Dependence  reports, which analyze statistics indicating and predicting welfare  dependence among TANF, SNAP, and SSI recipients.work across programs to conduct research regarding large cross-cutting  goals, such as interagency research related to ending or preventing  homelessness. Performance Measures The four selected direct spending programs also track program  performance measures, including those related to participant outcomes  as well as performance measures related to administrative performance.",
      "  Examples of outcome focused performance measures include those  related to employment (TANF, SSI, Section 8 Vouchers), food security  (SNAP), and the level of poor housing situations (Section 8 Vouchers).  Measures focused on administrative performance include those related to  payment accuracy (SSI, SNAP), participation rates (TANF), and utilization  rates (Section 8 Vouchers). Selected GAO Reports on Program Evaluation  Program Evaluation: Some Agencies Reported that Networking, Hiring, and   Involving Program Staff Help Build Capacity, GAO-15-25 (Washington, D.C.:  November 13,",
      " 2014). Program Evaluation: Strategies to Facilitate Agencies' Use of Evaluation in Program  Management and Policy Making, GAO-13-570 (Washington, D.C.: June 26, 2013). Performance Measurement and Evaluation: Definitions and Relationships (Supersedes  GAO-05-739SP), GAO-11-646SP (Washington, D.C.: May 2, 2011). Program Evaluation: Experienced Agencies Follow a Similar Model for Prioritizing  Research, GAO-11-176 (Washington, D.C.: July 14, 2011). Program Evaluation: A Variety of Rigorous Methods Can Help Identify Effective  Interventions,",
      " GAO-10-30 (Washington, D.C.: November 23, 2009). Program Evaluation: An Evaluation Culture and Collaborative Partnerships Help Build  Agency Capacity, GAO-03-454 (Washington, D.C.: May 2, 2003). Selected GAO Reports Related to Selected Programs  TANF: Action Is Needed to Better Promote Employment-Focused Approaches,   GAO-15-31 (Washington, D.C.: November 19, 2014). Rental Housing Assistance: HUD Data on Self-Sufficiency Programs Should Be  Improved, GAO-13-581  (Washington,",
      " D.C.: July 9, 2013). Moving to Work Demonstration: Improved Information and Monitoring Could Enhance  Program Assessment, GAO-13-724T (Washington, D.C.: June 26, 2013). TANF Potential Options to Improve Performance and Oversight, GAO-13-431  (Washington, D.C.: May 15, 2013). Tax Expenditures: Background and Evaluation Criteria and Questions GAO-13-167SP  (Washington, D.C.: November 29, 2012). Social Security Disability: Participation in the Ticket to Work Program Has Increased,  but More Oversight Needed,",
      " GAO-11-828T (Washington, D.C.: September 23, 2011). Domestic Food Assistance: Complex System Benefits Millions, but Additional Efforts  Could Address Potential Inefficiency and Overlap among Smaller Programs,   GAO-10-346 (Washington, D.C.: April 15, 2010). Government Performance and Accountability: Tax Expenditures Represent a  Substantial Federal Commitment and Need to Be Reexamined, GAO-05-690  (Washington, D.C.: September 23, 2005). Section 8 Housing Choice Vouchers  Evaluation of the Family Self-Sufficiency Program:",
      " Prospective Study  http://www.huduser.org/portal/publications/FamilySelfSufficiency.pdf  Family Options Study http://www.huduser.org/portal/family_options_study.html  Moving to Opportunity for Fair Housing Demonstration Program - Final Impacts Evaluation  http://www.huduser.org/portal/publications/pubasst/MTOFHD.html  Rent Reform Demonstration http://www.mdrc.org/project/rent-reform-demonstration#overview   Supplemental Nutrition Assistance Program (SNAP) Reaching Underserved Elderly and Working Poor SNAP Evaluation  http://www.fns.usda.gov/reaching-",
      "underserved-elderly-and-working-poor-snap-evaluation-findings-fiscal-year-2009-pilo ts   SNAP Education and Evaluation Study  http://www.fns.usda.gov/snap-education-and-evaluation-study-wave-i-final-report   Supplemental Security Income (SSI) Improving Access to Benefits for Persons with Disabilities Who Were Experiencing Homelessness: An Evaluation of  the Benefits Entitlement Services Team Demonstration Project  http://www.ssa.gov/policy/docs/ssb/v74n4/v74n4p45.html  Promoting Readiness of Minors in SSI (PROMISE)- Evaluation Design Report  http://www.ssa.gov/disabilityresearch/promise.htm    TANF/",
      "SSI Disability Transition Project,  http://www.acf.hhs.gov/programs/opre/research/project/tanf/ssi-disability-transition-project   Ticket to Work Evaluations http://www.ssa.gov/disabilityresearch/twe_reports.htm    Youth Transition Demonstration Evaluation http://www.ssa.gov/disabilityresearch/youth.htm  Youth Transitioning Out of Foster Care: An Evaluation of a Supplemental Security Income Policy Change  http://www.ssa.gov/policy/docs/ssb/v73n3/v73n3p53.html  Temporary Assistance for Needy Families (TANF) Employment Retention and Advancement Project http://www.ssa.gov/policy/docs/ssb/v73n3/v73n3p53.html.",
      " Time Period  of  Evaluation(s)  Name and Website of Evaluations  2013-2018* Job Search Assistance (JSA) Strategies  http://www.acf.hhs.gov/programs/opre/research/project/job-search-assistance-evaluation  Pathways to Advance Career Education (PACE)  http://www.acf.hhs.gov/programs/opre/research/project/innovative-strategies-for-increasing-self-sufficiency   Subsidized and Transitional Employment Demonstration (STED)  http://www.acf.hhs.gov/programs/opre/research/project/job-search-assistance-evaluation  TANF/",
      "SSI Disability Transition Project (listed above under SSI) Appendix VI: Comments from the  Department of Housing and Urban  Development Appendix VII: GAO Contact and Staff  Acknowledgments GAO Contact Staff  Acknowledgments In addition to the contact named above, Gale Harris (Assistant Director),  Theresa Lo (Analyst-in-Charge), Matthew Hunter, Brittni Milam, Rhiannon  Patterson, Max Sawicky, Rosemary Torres Lerma made significant  contributions to this report. Also contributing significantly to this report  were Chuck Bausell, James Bennett, Ted Burik, David Chrisinger, Sarah  Cornetto,",
      " and Kirsten Lauber.\n"
    ],
    "length": 25899,
    "hardness": null,
    "role": null
  },
  {
    "id": 113,
    "question": null,
    "answer": "The Department of Homeland Security (DHS) has primary responsibility for securing air cargo transported into the United States from another country, referred to as inbound air cargo, and preventing implements of terrorism from entering the country. GAO examined (1) what actions DHS has taken to secure inbound air cargo, and how, if at all, these efforts could be strengthened; and (2) what practices the air cargo industry and foreign governments have adopted that could enhance DHS's efforts to strengthen inbound air cargo security, and to what extent DHS has worked with foreign governments to enhance their air cargo security efforts. To conduct this study, GAO reviewed relevant DHS documents, interviewed DHS officials, and conducted site visits to seven countries in Europe and Asia. Within DHS, the Transportation Security Administration (TSA) and U.S. Customs and Border Protection (CBP) have taken a number of actions designed to secure inbound air cargo, but these efforts are still largely in the early stages and could be strengthened. For instance, TSA completed a risk-based strategic plan to address domestic air cargo security, but has not developed a similar strategy for addressing inbound air cargo security, including how best to partner with CBP and international air cargo stakeholders. In addition, while TSA has identified the primary threats to inbound air cargo, it has not yet assessed inbound air cargo vulnerabilities and critical assets. Moreover, TSA's air cargo security rule incorporated a number of provisions aimed at enhancing the security of inbound air cargo. This final rule also acknowledges that TSA amended its security directives and programs to triple the percentage of cargo inspected on domestic and foreign passenger aircraft. However, TSA continues to exempt certain types of inbound air cargo transported on passenger air carriers from inspection. Further, TSA inspects domestic and foreign passenger air carriers with service to the United States to assess whether they are complying with air cargo security requirements, but currently does not conduct compliance inspections of all air carriers transporting inbound air cargo. Moreover, TSA has not developed performance goals and measures to determine to what extent air carriers are complying with security requirements. In addition, CBP recently began targeting inbound air cargo transported on passenger and all-cargo aircraft that may pose a security risk and inspecting such cargo once it arrives in the United States. TSA and CBP, however, do not have a systematic process in place to share information that could be used to strengthen the department's efforts in securing inbound air cargo, such as the results of TSA air carrier compliance inspections and foreign airport assessments. The air cargo industry and foreign governments have implemented various security practices that could provide opportunities for strengthening DHS's overall air cargo security program. TSA officials acknowledged that compiling and analyzing security practices implemented by foreign air cargo stakeholders and foreign governments may provide opportunities to enhance U.S. air cargo security, and have begun an initial review of practices in select foreign countries. TSA has also begun working with foreign governments to coordinate security practices to enhance security and improve oversight, referred to as harmonization, but these efforts may be challenging to implement. For example, some foreign countries do not share the United States' view regarding air cargo security threats and risks, which may make the harmonization of air cargo security practices difficult to achieve.\n",
    "docs": [
      "Background The transportation of air cargo between global trading partners provides  the world economy with critical goods and components. Air cargo valued  at almost $400 billion entered the United States in fiscal year 2004.  According to TSA, approximately 200 U.S. and foreign air carriers  currently transport cargo into the United States from foreign countries.  During calendar year 2005, almost 9.4 billion pounds of cargo was shipped  by air into the United States. About 40 percent of this amount, or 4 billion  pounds, traveled onboard passenger aircraft. Typically, about one-half of  the hulls of each passenger aircraft transporting cargo are filled with  cargo.",
      " Air cargo includes freight and express packages that range in size from  small to very large, and in type from perishables to machinery, and can  include items such as electronic equipment, automobile parts, clothing,  medical supplies, other dry goods, fresh cut flowers, fresh seafood, fresh  produce, tropical fish, and human remains. Cargo can be shipped in  various forms, including large containers known as unit loading devices  that allow many packages to be consolidated into one container that can  be loaded on an aircraft, wooden crates, assembled pallets, or individually  wrapped/boxed pieces, known as break bulk cargo. Participants in the international air cargo shipping process include  shippers,",
      " such as individuals and manufacturers; freight forwarders or  regulated agents, who consolidate shipments and deliver them to air  carriers; air cargo handling agents, who process and load cargo onto  aircraft on behalf of air carriers; and passenger and all-cargo carriers that  store, load, and transport air cargo. International air cargo may have been  transported via ship, train, or truck prior to its loading onboard an aircraft.  Shippers typically send cargo by air in one of two ways. Figure 1 depicts  the two primary ways in which a shipper may send cargo by air to the  United States. A shipper may take its packages to a freight forwarder,",
      " or regulated agent,  which consolidates cargo from many shippers and delivers it to air  carriers. The freight forwarder usually has cargo facilities at or near  airports and uses trucks to deliver bulk freight to air carriers\u2014either to a  cargo facility or to a small-package receiving area at the ticket counter. A  shipper may also send freight by directly packaging and delivering it to an  air carrier\u2019s ticket counter or sorting center where either the air carrier or  a cargo handling agent will sort and load cargo onto the aircraft. The  shipper may also have cargo picked up and delivered by an all-cargo  carrier, or choose to take cargo directly to a carriers\u2019 retail facility for  delivery.",
      " As noted in figure 1, the inspections of air cargo can take place at  several different points throughout the supply chain. For example,  inspections can take place at freight forwarders or regulated agent\u2019s  consolidation facility, or at the air carrier\u2019s sorting center. TSA and CBP  Responsibilities for  Ensuring the Security of  Inbound Air Cargo TSA\u2019s Responsibilities Related  to Securing Inbound Air Cargo The Aviation and Transportation Security Act (ATSA) charged TSA with  the responsibility for ensuring the security of the nation\u2019s transportation  systems, including the transportation of cargo by air into the United  States. In fulfilling this responsibility,",
      " TSA (1) enforces security  requirements established by law and implemented through regulations,  security directives, TSA-approved security programs, and emergency  amendments, covering domestic and foreign passenger and all-cargo  carriers that transport cargo into the United States; (2) conducts  inspections to assess air carriers\u2019 compliance with established  requirements and procedures; (3) conducts assessments at foreign airports  to assess compliance with international aviation security standards,  including those related to air cargo; and (4) conducts research and  development of air cargo security technologies. Air carriers (passenger and all-cargo) are responsible for implementing  TSA security requirements,",
      " predominantly through a TSA-approved  security program that describes the security policies, procedures, and  systems the air carrier will implement and maintain in order to comply  with TSA security requirements. These requirements include measures  related to the acceptance, handling, and inspection of cargo; training of  employees in security and cargo inspection procedures; testing employee  proficiency in cargo inspection; and access to cargo areas and aircraft. If  threat information or events indicate that additional security measures are  needed to secure the aviation sector, TSA may issue revised or new  security requirements in the form of security directives or emergency  amendments applicable to domestic or foreign air carriers. The air carriers  must implement the requirements set forth in the security directives or  emergency amendments in addition to those requirements already  imposed and enforced by TSA.",
      " Under TSA regulations, the responsibility for inspecting air cargo is  assigned to air carriers. TSA requirements, described in air carrier security  programs, security directives, and emergency amendments, allow air  carriers to use several methods and technologies to inspect domestic and  inbound air cargo. These include manual physical searches and  comparisons between airway bills and cargo contents to ensure that the  contents of the cargo shipment matches the cargo identified in documents  filed by the shipper, as well as using approved technology, such as X-ray  systems, explosive trace detection systems, decompression chambers,  explosive detection systems, and TSA explosives detection canine teams.  (For an example of X-ray technology used by air carriers to inspect air  cargo prior to its transportation to the United States,",
      " see fig. 2). TSA  currently requires passenger air carriers to randomly inspect a specific  percentage of non exempt air cargo pieces listed on each airway bill.  Under TSA\u2019s inbound air cargo inspection requirements, passenger air  carriers can exempt certain cargo from inspection. TSA does not regulate  foreign freight forwarders, or individuals or businesses that have their  cargo shipped by air to the United States. To assess whether air carriers properly implement TSA inbound air cargo  security regulations, the agency conducts regulatory compliance  inspections of foreign and domestic air carriers at foreign airports.  Currently, TSA conducts compliance inspections of domestic and foreign  passenger carriers transporting cargo into the United States,",
      " but does not  perform such inspections of all air carriers transporting inbound air cargo.  TSA inspects air cargo procedures as part of its broader international  aviation security inspections program, which also includes reviews of  regulations such as aircraft and passenger security. Compliance  inspections can include reviews of documentation, interviews of air  carrier personnel, and direct observations of air cargo operations. Air  carriers are subject to inspection in several areas of cargo security,  including accepting cargo from unknown shippers, access to cargo, and  security training and testing. Appendix II contains a detailed description of  TSA\u2019s efforts to assess air carrier compliance with inbound air cargo  security requirements.",
      " In addition, TSA assesses the effectiveness of the security measures  maintained at foreign airports that serve U.S. air carriers, from which  foreign air carriers serve the United States, or that pose a high risk of  introducing danger to international air travel. To conduct its assessments,  TSA must consult with appropriate foreign officials to establish a schedule  to visit each of these foreign airports. TSA assessments evaluate the  security policies and procedures in place at a foreign airport to ensure that  the procedures meet baseline international aviation security standards,  including air cargo security standards. For further information on TSA\u2019s  foreign airport assessments including the results of its assessment  conducted during fiscal year 2005,",
      " see appendix III. CBP\u2019s Responsibilities Related  to Inbound Air Cargo Security CBP determines the admissibility of cargo entering the United States and  is authorized to inspect inbound air cargo for security purposes.  Specifically, CBP requires air carriers to submit cargo manifest  information prior to the aircraft\u2019s arrival in the United States. CBP also  has authority to negotiate with foreign nations to place CBP officers  abroad to inspect persons and merchandise prior to their arrival in, or  subsequent to their exit from, the United States, but has not yet negotiated  arrangements with foreign host nations to station CBP officers overseas  for the purpose of inspecting high-risk air cargo shipments.",
      " At U.S.  airports, CBP officers may conduct searches of persons, vehicles, baggage,  cargo, and merchandise entering or departing the United States. Since  September 11, 2001, CBP\u2019s priority mission has focused on keeping  terrorists and their weapons from entering the United States. To carry out  this responsibility, CBP employs several systems and programs. CBP\u2019s  Automated Targeting System (ATS) is a model that combines manifest and  entry declaration information into shipment transactions and uses  historical, specific enforcement, and other data to help target cargo  shipments for inspection. ATS also has targeting rules that assign a risk  score to each arriving shipment based in part on manifest information,",
      " as  well as other shipment information, and potential threat or vulnerability  information, which CBP staff use to make decisions on the extent of  inspection to be conducted once the cargo enters the United States. To  support its targeting system, CBP requires air carriers to submit cargo  manifest information prior to the flight arriving in the United States. CBP  officers use the ATS risk scores to help them make decisions regarding the  extent of inspection to be conducted once the cargo arrives in the United  States. Shipments identified by CBP as high risk through its ATS targeting  system are to undergo mandatory security inspections. CBP officers may  also inspect air cargo if they determine that a particular shipment is  suspicious or somehow poses a threat.",
      " CBP uses a variety of non intrusive technologies and methods to inspect  some air cargo once it arrives in the United States. For example, CBP  officers carry personal handheld radiation detectors, as well as handheld  radioactive isotope identification devices which can distinguish between  different types of radiological material, such as that used in medicine or  industry from weapons-grade material. Other technologies and methods  CBP uses to inspect inbound air cargo include mobile X-ray machines  contained in vans, pallet X-ray systems, mobile vehicle and cargo  inspection systems (VACIS), and canine teams. The results of the  nonintrusive inspections determine the need for additional measures,",
      "  which could include physical inspections conducted by CBP officers.  Figure 3 shows an example of CBP officers using nonintrusive technology  to inspect inbound air cargo upon its arrival in the United States. To strengthen the security of the inbound cargo supply chain, the U.S.  Customs Service (now CBP) initiated the voluntary Customs-Trade  Partnership Against Terrorism (C-TPAT) program in November 2001. This  program provides companies that implement CBP-defined security  practices a reduced likelihood that their cargo will be inspected once it  arrives in the United States. To become a member of C-TPAT,",
      " companies  must first submit signed C-TPAT agreements affirming their desire to  participate in the voluntary program. Companies must also provide CBP  with security profiles that describe the current security procedures they  have in place, such as pre-employment screening, periodic background  reviews, and employee training on security awareness and procedures. CBP reviews a company\u2019s application to identify any weaknesses in the  company\u2019s security procedures and work with the company to resolve  these weaknesses. Once any weaknesses are addressed, CBP signs an  agreement stating that the company is considered to be a certified C-TPAT  member, eligible for program benefits.",
      " After certification, CBP has a process for validating that C-TPAT members  have implemented security measures. During the validation process, CBP  staff meet with company representatives to verify supply chain security  measures. The validation process includes visits to the company\u2019s U.S. and  foreign sites, if any. Upon completion of the validation process, CBP  reports back to the company on any identified areas that need  improvement and suggested corrective actions, as well as a determination  of whether program benefits are still warranted for the company.  According to CBP officials, they use a risk-based approach for identifying  the priority in which C-",
      "TPAT participants should be validated. International Air Cargo  Security Standards and  Recommended Practices The International Civil Aviation Organization (ICAO) is a specialized  agency of the United Nations in charge of coordinating and regulating  international air transportation. ICAO was established by the Convention  on International Civil Aviation (also known as the Chicago Convention) in  1944 and is composed of over 180 member nations with aviation service  capabilities. In 1974, ICAO established aviation security standards and  recommended practices to ensure a baseline level of security. These  standards are aimed at preventing suspicious objects, weapons,  explosives, or other dangerous devices from being placed on board  passenger aircraft either through concealment,",
      " in otherwise legitimate  shipments, or through gaining access to air cargo shipments via cargo- handling areas. The standards call for member nations to implement  measures to ensure the protection of air cargo being moved within an  airport and intended for transport on an aircraft, and to ensure that  aircraft operators do not accept cargo on passenger flights unless  application of security controls has been confirmed and accounted for by  a regulated agent or that such cargo has been subjected to appropriate  security controls. ICAO standards also provide that except for reasons of  aviation security, member states should not require the physical inspection  of all air cargo that is imported or exported.",
      " In general, member states  should apply risk management principles (such as targeting higher-risk  cargo) to determine which goods should be examined and the extent of  that examination. While compliance with these standards is voluntary, all  180 ICAO members, including the United States, have committed to  incorporating these standards into their national air cargo security  programs. The International Air Transport Association (IATA) represents about   260 air carriers constituting 94 percent of international scheduled air  traffic. Building upon ICAO\u2019s standards, IATA issued voluntary  recommended practices and guidelines to help ensure that global air cargo  security measures are uniform and operationally manageable.",
      " For  example, IATA published a manual that, among other things, encourages  air carriers to implement measures and procedures to prevent explosives  or other dangerous devices from being accepted for transport by air,  conduct pre-employment checks on individuals involved in the handling or  inspection of air cargo, and ensure the security of all shipments accepted  from persons other than known shippers or regulated agents through  physical inspection or some type of screening process. IATA also  developed guidelines to assist air carriers in developing security policies  by providing detailed suggestions for accepting, handling, inspecting,  storing, and transporting air cargo. The World Customs Organization (WCO)",
      " consists of 166 member nations,  representing 99 percent of global trade, including cargo transported by air. In June 2005, WCO established its Framework of Standards to Secure and  Facilitate Global Trade that, among other things, sets forth principles and  voluntary minimum security standards to be adopted by its members. The  framework provides guidance for developing methods to target and  inspect high-risk cargo, establishes time frames for the submission of  information on cargo shipments, and identifies inspection technology that  could be used to inspect high-risk cargo. Applying a Risk-Managed  Approach for Securing  Inbound Air Cargo Risk management is a tool for informing policy makers\u2019 decisions about  assessing risks,",
      " allocating resources, and taking actions under conditions  of uncertainty. In recent years, the President, through Homeland Security  Presidential Directives (HSPD), and Congress, more recently through the  Intelligence Reform and Terrorism Prevention Act of 2004, required  federal agencies with homeland security responsibilities to apply risk- based principles to inform their decision making regarding allocating  limited resources and prioritizing security activities. The National  Commission on Terrorist Attacks Upon the United States (also known as  the 9/11 Commission), recommended that the U.S. government identify  and evaluate the transportation assets that need to be protected, set risk- based priorities for defending them,",
      " select the most practical and cost- effective ways of doing so, and then develop a plan, budget, and funding to  implement the effort. In addition, DHS issued the National Strategy for  Transportation Security in 2005 that describes the policies DHS will apply  when managing risks to the security of the U.S. transportation system.  We have previously reported that a risk management approach can help to  prioritize and focus the programs designed to combat terrorism. As  applied in the homeland security context, risk management can help  officials make decisions about resource allocations and associated trade- offs in preparing defenses against acts of terrorism and other threats. We  have recommended that TSA apply a comprehensive risk-based approach  for securing the domestic air cargo transportation system.",
      " The Homeland Security Act of 2002 also directed the department\u2019s  Directorate of Information Analysis and Infrastructure Protection to use  risk management principles in coordinating the nation\u2019s critical  infrastructure protection efforts. This includes integrating relevant  information, and analysis and vulnerability assessments to identify  priorities for protective and support measures by the department, other  federal agencies, state and local government agencies and authorities, the  private sector, and other entities. Homeland Security Presidential  Directive 7 and the Intelligence Reform and Terrorism Prevention Act of  2004 further define and establish critical infrastructure protection  responsibilities for DHS and those federal agencies given responsibility for  particular industry sectors, such as transportation.",
      " In June 2006, DHS  issued the National Infrastructure Protection Plan (NIPP), which named  TSA as the primary federal agency responsible for coordinating critical  infrastructure protection efforts within the transportation sector, which  includes all modes of transportation. The NIPP requires federal agencies  to work with the private sector to develop plans that, among other things,  identify and prioritize critical assets for their respective sectors. In  accordance with the NIPP, TSA must conduct and facilitate risk  assessments in order to identify, prioritize, and coordinate the protection  of critical transportation systems infrastructure, as well as develop risk- based priorities for the transportation sector. TSA officials reported that  work is now under way on specific plans for each mode of transportation,",
      "  but as of January 2007, they were not completed. To provide guidance to agency decision makers, we have created a risk  management framework, which is intended to be a starting point for  applying risk-based principles. Our risk management framework entails a  continuous process of managing risk through a series of actions, including  setting strategic goals and objectives, assessing risk, evaluating  alternatives, selecting initiatives to undertake, and implementing and  monitoring those initiatives. DHS\u2019s NIPP describes a risk management  process that closely mirrors our risk management framework. Setting strategic goals, objectives, and constraints is a key first step in  applying risk management principles and helps to ensure that management  decisions are focused on achieving a purpose.",
      " These decisions should take  place in the context of an agency\u2019s strategic plan that includes goals and  objectives that are clear and concise. These goals and objectives should  identify resource issues and other factors to achieving the goals. Further,  the goals and objectives of an agency should link to a department\u2019s overall  strategic plan. The ability to achieve strategic goals depends, in part, on  how well an agency manages risk. The agency\u2019s strategic plan should  address risk-related issues that are central to the agency\u2019s overall mission. Risk assessment, an important element of a risk-based approach, helps  decision makers identify and evaluate potential risks so that  countermeasures can be designed and implemented to prevent or mitigate  the effects of the risks.",
      " Risk assessment is a qualitative and/or quantitative  determination of the likelihood of an adverse event occurring and the  severity, or impact, of its consequences. Risk assessment in a homeland  security application often involves assessing three key elements\u2014threat,  vulnerability, and criticality or consequence. A threat assessment identifies  and evaluates potential threats on the basis of factors such as capabilities,  intentions, and past activities. A vulnerability assessment identifies  weaknesses that may be exploited by identified threats and suggests  options to address those weaknesses. A criticality or consequence  assessment evaluates and prioritizes assets and functions in terms of  specific criteria, such as their importance to public safety and the  economy,",
      " as a basis for identifying which structures or processes are  relatively more important to protect from attack. Information from these  three assessments contributes to an overall risk assessment that may  characterize risks on a scale such as high, medium, or low and provides  input for evaluating alternatives and management prioritization of security  initiatives. The risk assessment element in the overall risk management  cycle may be the largest change from standard management steps and can  be important to informing the remaining steps of the cycle. For further  details on our risk management framework, see appendix IV. DHS Has Taken Initial  Steps to Secure  Inbound Air Cargo,  and Opportunities  Exist to Strengthen  These Efforts The two components within DHS responsible for air cargo security,",
      " TSA  and CBP, have initiated efforts to better secure inbound air cargo, but  these efforts are in the early stages and could be enhanced. While TSA and  CBP have taken some preliminary steps to use risk management principles  to guide their decisions related to inbound air cargo security, most of  TSA\u2019s and CBP\u2019s efforts to enhance inbound air cargo security are still  largely in the planning stages. For instance, TSA has completed a strategic  plan to address domestic air cargo security and has identified the primary  threats associated with inbound air cargo. However, the agency has not  identified goals and objectives for addressing inbound air cargo security,",
      "  such as how it will coordinate with CBP to ensure that all relevant areas of  inbound air cargo security are addressed. Further, TSA has not assessed  which areas of inbound air cargo are most vulnerable to attack and which  assets are deemed most critical to protect. Another action TSA has taken  is the publication of its final air cargo security rule in May 2006 that  included a number of provisions aimed at enhancing the security of  inbound air cargo. However, TSA\u2019s inbound air cargo inspection  requirements continue to allow for a number of exemptions for cargo  transported on passenger air carriers, which could be exploited to  transport an explosive device.",
      " In addition, TSA conducts compliance  inspections of domestic and foreign passenger air carriers transporting  cargo into the United States, but the agency has not developed an  inspection plan that would establish goals and measures for its inspection  program to evaluate air carriers\u2019 performance against expected results.  Also within DHS, CBP has recently initiated efforts to mitigate the threat  of a WMD entering the United States by targeting inbound air cargo  transported on passenger and all-cargo aircraft that may pose a security  risk and inspecting such cargo once it arrives in the United States. CBP  also manages the C-TPAT program, which encourages those businesses  involved in the transportation of cargo into the United States to enhance  their security practices.",
      " However, CBP is still in the early stages of  developing specific security criteria for air carriers participating in the  program. In addition, DHS is in the early stages of researching, developing,  and testing technologies to enhance the security of air cargo, but has not  yet assessed the results or determined whether these technologies will be  deployed abroad. Finally, TSA and CBP have taken steps to coordinate  their responsibilities to safeguard air cargo transported into the United  States, but the two agencies do not have a systematic process in place to  share information that could be used to strengthen their efforts to secure  inbound air cargo. TSA and CBP Have Taken  Preliminary Steps to  Incorporate Risk  Management Principles  into Their Decision Making  to Secure Inbound Air  Cargo,",
      " but Most Efforts  Are in the Planning Stages Within DHS, TSA and CBP have begun incorporating risk management  principles into their inbound air cargo security programs, but these efforts  are in the early stages and more work remains to be done. Applying a risk  management framework to decision making is one tool to help provide  assurance that programs designed to combat terrorism are properly  prioritized and focused. Thus, risk management, as applied in the  homeland security context, can help decision makers to more effectively  and efficiently prepare defenses against acts of terrorism and other  threats. Risk management principles can be incorporated on a number of  different levels within an agency\u2019s operations.",
      " For example, CBP\u2019s ATS  system uses information from various sources to assign risk scores to  cargo, as part of its risk-managed approach to cargo security. Another  example of a risk management activity is considering risk when allocating  resources. TSA has underscored the importance of implementing a risk- based approach that protects against known threats, but that is also  sufficiently flexible to direct resources to mitigate new and emerging  threats. According to TSA, the ideal risk model would be one that could be  used throughout the transportation sector and applicable to different  threat scenarios. As part of TSA\u2019s risk-based approach, the agency issued an Air Cargo  Strategic Plan in November 2003 that focused on securing the domestic air  cargo supply chain and transportation system.",
      " However, this plan does not  describe how the agency plans to secure inbound air cargo. TSA\u2019s Air  Cargo Strategic Plan describes an approach for screening or reviewing  information on all domestic air cargo shipments to determine their level of  relative risk, ensuring that 100 percent of cargo identified as posing an  elevated risk is physically inspected, and pursuing technological solutions  to physically inspect air cargo. This approach to target elevated risk  domestic air cargo for inspection, however, is not yet in place. In  developing its Air Cargo Strategic Plan, TSA coordinated with air cargo  industry stakeholders representing passenger and all-cargo carriers, as  well as with CBP to assist in developing a system for targeting domestic  air cargo.",
      " TSA\u2019s Air Cargo Strategic Plan, however, does not include goals  and objectives for addressing inbound air cargo security, which presents  different security challenges than domestic air cargo. According to CBP, the agency has begun a comprehensive review of its  current air cargo security strategy, including how C-TPAT as well as  relevant TSA programs can be incorporated into this strategy. As part of  its risk management efforts, CBP developed a strategic plan covering fiscal  years 2007-2011 focusing on securing the nation\u2019s borders at ports of entry,  including airports. This plan includes a discussion on how CBP will use  risk-based principles to guide decisions related to securing inbound air  cargo.",
      " For example, to achieve CBP\u2019s strategic objective of screening all  goods entering the United States by air, CBP plans to develop an approach  to increase the percentage of goods for which it receives advance  information. By increasing the amount of information available, CBP can  better identify low-risk goods and move them quickly through the port of  entry, while focusing its resources on inspecting cargo that represents  higher risks. As TSA develops a strategy for inbound air cargo, it will be important to  work with CBP to ensure that the two agencies coordinate their respective  responsibilities for securing inbound air cargo and leverage available  information to ensure vulnerabilities are addressed.",
      " For example, during  discussions with TSA and CBP officials, we determined that, due in part to  a lack of coordination between the two agencies, neither agency was  addressing an area that both considered a potential threat to air cargo  security. Although TSA and CBP have not stated whether this issue results  in a vulnerability to the cargo\u2019s transport to the United States, some air  cargo industry stakeholders with whom we spoke told us it represents a  security vulnerability. TSA officials acknowledged that it is important to partner with CBP,  foreign governments, and international air cargo stakeholders in  developing a strategy for securing inbound air cargo. TSA officials stated  that they plan to revise their existing domestic air cargo strategic plan and  will consider incorporating a strategy for addressing inbound air cargo  security at that time.",
      " However, as of January 2007, agency officials had not  set a time frame for when TSA will complete this revision, and the extent  to which this plan will address inbound air cargo is unclear. CBP officials  stated that their input could contribute to any strategy developed by TSA,  and that CBP is in the initial stages of developing its own air cargo  strategic plan, scheduled for completion by the end of 2007. In addition to developing a strategic plan, a risk management framework  in the homeland security context should include risk assessments, which  typically involve three key elements\u2014threats, vulnerabilities, and  criticality or consequence (for more information on our risk management  framework,",
      " see app. IV). Information from these three assessments  provides input for setting priorities, evaluating alternatives, allocating  resources, and monitoring security initiatives. TSA has completed an  assessment of air cargo threats, but has not assessed air cargo  vulnerabilities or critical assets. In September 2005, TSA\u2019s Transportation Security Intelligence Service  (TSIS) completed an overall threat assessment for air cargo, which  identified general and specific threats related to both domestic and  inbound air cargo. According to TSA, the primary threats to inbound air  cargo focus on the introduction of an explosive device in cargo loaded on  a passenger aircraft, and the hijacking of an all-cargo aircraft resulting in  its use as a weapon to inflict mass destruction.",
      " As stated previously, TSA,  CBP, and industry stakeholders have also identified the introduction and  transport of a WMD or its component parts as a potential threat. TSA has  characterized the threats to inbound air cargo as high and has identified  air cargo as a primary aviation target for terrorists in the short term.  However, TSA has not evaluated the relative security risk presented by  inbound air cargo compared to other areas of aviation security, such as  passengers and checked baggage. While TSA has acknowledged that the vulnerabilities to inbound air cargo  would likely be similar to those of domestic air cargo, TSA has not  conducted a vulnerability assessment,",
      " nor has it identified vulnerabilities  specific to inbound air cargo. TSA officials stated that the agency is first  planning to conduct an assessment of domestic air cargo vulnerabilities  before initiating an assessment of inbound air cargo vulnerabilities. TSA  does not plan to complete its assessment of domestic air cargo  vulnerabilities until late in 2007, thus potentially delaying the start of an  assessment of the inbound air cargo vulnerabilities until 2008. According  to TSA officials, limited resources and competing priorities have delayed  agency efforts to conduct an assessment of inbound air cargo security  vulnerabilities. Nevertheless, TSA officials acknowledge that  vulnerabilities to inbound air cargo exist and that these vulnerabilities are  in some cases similar to those facing the domestic air cargo supply chain.",
      " TSA officials stated that conducting vulnerability assessments for inbound  air cargo will be difficult because these assessments require an  understanding of the inbound air cargo supply chain, and while the agency  has some information on the supply chains of several foreign countries, it  does not have access to that information for many others. Although agency  officials reported that they have taken initial steps toward developing a  methodology for assessing inbound air cargo security vulnerabilities, they  have not established a time frame for completing the methodology or  determined when the vulnerability assessments will be conducted. TSA  officials acknowledged that conducting assessments to identify  vulnerabilities associated with inbound air cargo, and analyzing the results  of such assessments,",
      " could help to strengthen the agency\u2019s efforts to  secure inbound air cargo by providing information that could be used to  develop measures to address identified vulnerabilities. Air cargo industry  stakeholders we spoke with, including those representing domestic and  foreign air carriers, agreed that TSA-led vulnerability assessments could  help to identify air cargo security weaknesses and develop measures to  mitigate these weaknesses. TSA also has not developed a methodology or schedule for completing an  assessment to identify those inbound air cargo assets deemed most critical  to protect, or whose destruction would cause the most severe damage to  the United States. TSA officials stated that inbound air cargo assets mirror  domestic air cargo assets,",
      " and could include workers, facilities, and  aircraft. According to TSA, factors that could be used to define critical  inbound air cargo assets include the number of fatalities resulting from a  terrorist attack on a domestic or foreign cargo facility or aircraft; the  economic or political importance of the asset; and consequences that an  attack would have on the public\u2019s confidence in the U.S. government\u2019s  ability to maintain order, among other things. According to TSA officials,  the agency will conduct an assessment of critical inbound air cargo assets  once it has completed its vulnerability and criticality assessments for  domestic air cargo expected in 2007.",
      " The need for an assessment of critical transportation infrastructure, which  could include inbound air cargo assets, has been identified by various  sources, including DHS\u2019s NIPP and National Strategy for Transportation  Security, and a number of Presidential Directives. The 9/11 Commission  also recommended that the U.S. government identify and evaluate the  transportation assets that need to be protected, set risk-based priorities  for defending them, select the most practical and cost-effective ways of  doing so, and develop a plan, budget, and funding to implement the effort.  TSA officials we spoke with acknowledged that such assessments could  better enable the agency to prioritize its efforts by focusing on high-",
      " priority or high-value inbound air cargo assets, and by targeting resources  to address the most critical inbound air cargo security risks. Moreover,  TSA officials agreed that analyzing the results of a criticality assessment  could provide the basis for taking immediate protective actions depending  on the threat environment, and guiding future agency decisions related to  securing the inbound air cargo transportation system. TSA Revised its Security  Programs to Require Air  Carriers Transporting  Cargo into the United  States to Implement  Additional Air Cargo  Security Measures, but the  Programs Do Not Address  Some Areas of Inbound Air  Cargo Security In May 2006, TSA issued a final rule that revised some of the requirements  air carriers need to follow to ensure air cargo security.",
      " While TSA\u2019s air  cargo security rule is focused primarily on domestic air cargo, it also  includes more stringent security requirements for passenger and all-cargo  carriers transporting cargo into the United States. For example, TSA  created a new mandatory security regime for domestic and foreign all- cargo air carrier operations. The final rule also acknowledges that TSA  amended its security directives and programs to triple the percentage of  cargo inspected on domestic and foreign passenger aircraft. TSA  currently requires foreign and domestic all-cargo carriers to inspect a  different percentage of nonexempt items prior to the cargo\u2019s loading. While the air cargo security rule establishes general requirements air  carriers must follow to secure inbound air cargo,",
      " TSA is currently drafting  and revising security programs to incorporate applicable elements of the  rule and with which air carriers will need to comply. These security  programs will address inbound, outbound, and domestic air cargo  operations. TSA regulations require that each air carrier, foreign or  domestic, adopt a security program that incorporates applicable security  requirements and that is approved by TSA. Once TSA finalizes revisions to  the security programs\u2014which for domestic passenger air carriers is  known as the Aircraft Operator Standard Security Program (AOSSP) and  for foreign passenger air carriers is known as the Model Security   Program (MSP)\u2014TSA will require air carriers to amend their security  programs to reflect TSA\u2019s new requirements.",
      " TSA also drafted new  security programs for domestic all-cargo carriers, referred to as the Full  All-Cargo Aircraft Operator Standard Security Program (FACAOSSP), and  for foreign all-cargo carriers, referred to as the All-Cargo International  Security Program (ACISP). As of January 2007, TSA had yet to issue the  final security programs. Air carriers will be required to be in full  compliance with the revised and new security programs on a date to be  established by the agency. However, TSA officials could not provide a time  frame for when these programs would be finalized, nor has the date that  air carriers will be required to be in compliance with the new and revised  security programs been announced.",
      " After TSA issued its final air cargo security rule and released its draft  security programs for comment, the agency held eight listening sessions in  five cities to provide industry an opportunity to share its views on the  proposed requirements before the final security programs are issued. At  these listening sessions, some air carriers were pleased that TSA had taken  action to strengthen air cargo security. Other air carriers, however,  expressed concerns regarding the cost and feasibility of implementing  TSA\u2019s air cargo security requirements contained in the agency\u2019s draft  security programs. Air carriers present at these listening sessions also  stated that given the operational changes they would need to make to  implement TSA\u2019s new air cargo security requirements,",
      " TSA should provide  air carriers sufficient time to fully comply with the new and revised  security programs. Although passenger air carriers expressed concern  regarding the implementation of measures contained in the final rule and  draft security programs, most of their comments relate to domestic air  cargo security. Domestic and foreign all-cargo carriers cited several  challenges related to TSA\u2019s draft security programs for all-cargo carriers.  These included    new requirements for inspecting 100 percent of certain nonexempt  inbound air cargo viewed as unnecessary, burdensome to  implement, and costly;    proposed revisions to existing inspection exemptions based on  weight and packaging viewed as negatively affecting delivery of  specific cargo shipments;",
      "    application of new inspection and other requirements viewed as not  consistent with identified threats to the air cargo industry;    difficultly determining which TSA requirements apply to all-cargo  carriers versus which apply to cargo transferred from an all-cargo  aircraft to a passenger aircraft; and    a proposed requirement to train carrier personnel to screen  individuals and their property transported on an all-cargo flight  viewed as unwarranted because very few individuals other than  crew members fly on these aircraft. Among other things, the draft security programs for foreign and domestic  passenger carriers would require the physical inspection of air cargo  shipments, including manual searches and the use of technology,",
      " in  addition to other methods currently in use. The primary concern  expressed by all-cargo carriers about the draft security programs focus on  air cargo inspection requirements. Specifically, some all-cargo carriers did  not understand TSA\u2019s rationale for requiring them to inspect 100 percent  of certain types of nonexempt cargo and noted that this would require  them to inspect three times more cargo than passenger carriers are  required to inspect. According to some all-cargo carriers, TSA has not  adequately explained any additional risk to all-cargo carriers that would  justify the new inspection requirements. TSA officials stated that the  agency will review the comments submitted by industry stakeholders  regarding the new and revised security programs prior to issuing the final  security programs.",
      " Inspection Exemptions  Pose a Potential  Vulnerability for Air Cargo  Transported into the  United States In our October 2005 report, we noted that TSA\u2019s inspection requirements  allowed carriers to exempt certain types of air cargo from inspection.  These exemptions may leave the air cargo transportation system  vulnerable to terrorist attack. We reported that a terrorist could place an  explosive device in an exempt piece of cargo, which would not be  detected prior to its loading onto aircraft because such cargo is not  subject to inspection. We recommended that TSA assess the rationale for  the exemptions, determine whether these exemptions pose vulnerabilities,  and determine whether adjustments were needed.",
      " According to TSA  officials, the agency originally chose to exempt certain cargo from the  inspection requirements because it did not view the exempted cargo as  posing a significant security risk and because the time required to inspect  certain cargo could adversely affect the flow of commerce. TSA recognized, however, that some of the inspection exemptions could  pose a potential vulnerability, and convened an internal cargo policy  working group in February 2006 to examine air cargo policies and  regulations that apply to inbound, outbound, and domestic air cargo,  including inspection exemptions, to identify requirements that may allow  for unacceptable security gaps. In March 2006, the working group made  several recommendations to TSA related to the inspection exemptions for  cargo transported on passenger aircraft.",
      " The working group\u2019s  recommendations included more stringent inspection requirements for  passenger carriers. In October 2006, TSA issued a security directive and  emergency amendment to domestic and foreign passenger air carriers  operating within and from the United States that implemented elements of  the recommendations of the internal working group. However, these new  requirements do not cover all air carriers. In addition to the actions TSA took to address the working group\u2019s  recommendations, the agency is also considering limiting some of the  inspection exemptions for all-cargo carriers, and has drafted security  programs for foreign and domestic all-cargo carriers aimed at  strengthening the security of inbound,",
      " outbound, and domestic air cargo. The draft programs for all-cargo carriers would require all-cargo carriers  to inspect 100 percent of certain nonexempt air cargo. TSA officials  stated that prior to issuing the final security programs, the agency will  consider comments by all-cargo carriers on this proposed requirement. Under TSA\u2019s revisions to the inspection exemptions for passenger air  carriers transporting cargo from and within the United States, and TSA\u2019s  proposed changes to the inspection exemptions contained in the draft  security programs for all-cargo carriers, certain types of air cargo will  remain exempt from inspection. These remaining exemptions for both  all-cargo and passenger air carriers transporting cargo into the United  States continue to represent potential vulnerabilities to the air cargo  transportation system.",
      " According to TSA officials, the agency has not  established a time frame for completing its assessment of whether existing  inspection exemptions pose an unacceptable security vulnerability. Some all-cargo carriers expressed concern over TSA\u2019s proposal to  eliminate the inspection exemption for certain types of cargo, and  recommended that this proposal be reconsidered. TSA officials stated  that the proposed revisions to the inspection requirements are aimed at  increasing the overall security of air cargo transported on all-cargo  aircraft. According to TSA officials, the agency is still evaluating industry\u2019s  comments to the proposed security programs, including those related to  removing the inspection exemption for certain types of cargo transported  on all-cargo carriers.",
      " TSA officials noted that the agency is also holding  discussions with the air cargo industry to determine whether or not the  current inspection exemptions leave the air cargo transportation system  vulnerable to attack and what impact further revisions to the inspection  exemptions would have on air carriers\u2019 operations. According to TSA  officials, while ongoing discussions with industry are focused on the  domestic air cargo transportation system, any decisions made as a result  of these discussions could affect inbound air cargo. TSA officials added  that while industry stakeholder concerns are considered, decisions  regarding what requirements will be issued will be based on the agency\u2019s  assessment of air cargo risks and security needs.",
      " TSA Developed a Program  to Assess Passenger Air  Carrier Compliance with  Inbound Air Cargo  Security Requirements, but  This Program Could Be  Strengthened by  Developing an Inspection  Plan That Includes  Performance Goals and  Measures TSA currently inspects domestic and foreign passenger air carriers  transporting cargo into the United States to assess their compliance with  TSA inbound air cargo security requirements. The agency, however, does  not perform compliance inspections of all air carriers transporting cargo  into the United States. Between July 2003 and February 2006, TSA conducted about 1,000  inspections of domestic and foreign passenger air carriers that included a  review of air cargo security procedures.",
      " TSA\u2019s inbound air cargo security  inspections differ from its domestic air cargo security inspections in that  the agency does not have an inspection plan that focuses solely on air  cargo security regulations. Instead, TSA inspectors evaluate inbound cargo  security procedures as a part of its international aviation security  inspection program, which also includes reviews of areas such as aircraft,  passenger, and baggage security. TSA\u2019s five international field offices are  responsible for scheduling and conducting the international air carrier  inspections. TSA inspections may include areas of cargo security, such as  cargo acceptance procedures, security testing and training, and ensuring  that foreign air carriers implement a cargo security plan that is consistent  with TSA standards.",
      " According to TSA records, inspectors have found instances where  passenger air carriers were not complying with inbound air cargo security  procedures. For example, TSA found that some passenger air carriers  were accepting cargo from unknown shippers, not physically screening  cargo in accordance with TSA regulations, and failing to search empty  cargo holds on an aircraft to prevent unauthorized access prior to loading  and unloading. If not corrected, these problems could create  vulnerabilities in the security of inbound air cargo. For information on  TSA\u2019s inspections conducted, including inspection results from July 2003  to February 2006, see appendix II. TSA has a domestic aviation security inspection plan that,",
      " among other  things, describes how the agency will ensure that air carriers that use  domestic airports are complying with TSA security requirements,  including those that apply to passengers, baggage, and air cargo. However,  TSA has not developed a similar inspection plan for international aviation  security. As a result, there is no inspection plan that would establish  performance goals and measures that provide a clear picture of the  intended objectives and performance of its inspections of passenger and  all-cargo carriers that transport cargo into the United States. The  Government Performance and Results Act of 1993 (GPRA), among other  things, requires agencies to prepare an annual performance plan for their  programs and directs executive agencies to articulate goals and strategies  for achieving those goals.",
      " These plans should include performance goals  and measures to determine the extent to which agencies are achieving  their intended results. TSA\u2019s annual domestic inspection plan describes  how the agency will ensure air carrier compliance with federal aviation  security requirements, including those related to air cargo security. The  domestic inspection plan includes goals, such as the number of air cargo  inspections of air carriers each inspector is to conduct for the year. TSA  officials stated that the agency applied risk management principles that  considered threat factors, local security issues, and input from law  enforcement to target key vulnerabilities and critical assets to develop its  domestic inspection plan goals. According to TSA,",
      " its plan for conducting  domestic cargo inspections also takes into account how to use the  agency\u2019s limited inspection resources most effectively. Within the context of TSA\u2019s international inspections program, an  inspection plan should describe the agency\u2019s approach for conducting  compliance inspections of air carriers that transport cargo into the United  States. This plan should include performance goals and measures to gauge  air carriers\u2019 compliance with inbound air cargo security requirements.  Developing such indicators is also recommended by our standards for  internal control in order for agencies to compare and analyze actual  performance data against established goals. For example, we reported  that successful organizations try to link performance goals and measures  to the organization\u2019s strategic goals and,",
      " to the extent possible, have  performance goals that will show annual progress toward achieving their  long-term strategic goals. With regard to TSA\u2019s inspection plan, a goal  could be to ensure that passenger and all-cargo air carriers transporting  cargo to the United States are meeting an acceptable level of compliance  with air cargo security requirements. Another goal could be to assess all- cargo carriers transporting inbound air cargo within a specified time frame  based on the identified risk posed by these carriers to the United States. In  addition, we reported that a successful agency focuses its goals on the  results it expects the program to achieve. For example, TSA could  measure the achievement of a compliance inspection goal by establishing  the number and type of inspections the agency wants to conduct,",
      " and  determining appropriate measures to gauge air carrier compliance with air  cargo security requirements. TSA officials stated that the agency uses its foreign airport assessment  schedule as its plan for determining where it will conduct compliance  inspections of passenger air carriers during each fiscal year. Officials  added that they select passenger air carriers for inspection based on  factors such as the results of previous inspections, when the air carrier  was last inspected, and the availability of inspection resources. While  TSA\u2019s schedule for completing airport assessment is an important step in  focusing TSA\u2019s international compliance inspection efforts, this schedule  does not include goals or measures for evaluating passenger carrier  compliance with TSA\u2019s inbound air cargo security requirements.",
      " Further,  the schedule does not include inspections of all-cargo carriers. Without an  inspection plan, TSA may not be able to clearly show the relationship  between its inspections efforts and its longer-term goals to secure inbound  air cargo. Moreover, without establishing performance goals and  measures, TSA is limited in its ability to assess the agency\u2019s performance  and the performance of the air carriers it regulates against expected  outcomes. While we understand that TSA has competing demands and  must address numerous areas of aviation security with limited resources,  developing a risk-based plan would help the agency better plan for and  articulate how it intends to address inbound air cargo security inspections  using its limited resources.",
      " Further, developing goals and measures to  benchmark its performance would demonstrate the effectiveness of its  inbound air cargo security efforts and help TSA determine the extent to  which the inspections are contributing to the agency\u2019s overall aviation  security goals and objectives. TSA Implemented a Risk- Based Scheduling System  to Assess Certain Foreign  Airports\u2019 Security  Measures, but Not All  Foreign Airports Have  Been Assessed TSA is authorized by U.S. law to assess the effectiveness of security  measures maintained at foreign airports that serve U.S. air carriers or from  which foreign air carriers serve the United States, or that pose a high risk  of introducing danger to international air travel.",
      " TSA staff located at five  international field offices conduct these assessments. During an  assessment, TSA inspectors are to evaluate the security policies and  procedures in place at a foreign airport to determine whether procedures  meet ICAO aviation security standards and recommended practices. TSA  consults with foreign government officials to schedule these assessments.  According to TSA officials, however, some foreign governments are  sensitive to permitting the United States to come into their country and  assess their airport security and may put conditions on the assessments,  such as limiting the number of days that TSA has to conduct its  assessments. TSA supplements its limited international inspection  resources by using inspectors that are assigned to conduct aviation  security inspections inside the United States to help international aviation  security inspectors conduct foreign airport assessments.",
      " In October 2006,  TSA implemented a risk-based methodology to prioritize which foreign  airports to assess based on an analysis of the risk of an attack at an airport  as determined by credible threat information, the vulnerability of the  airport\u2019s security based on previous airport assessments, and the number  of flights coming to the United States from a foreign airport. TSA officials  stated that this approach will allow the agency to focus its limited  resources on airports that pose the most significant risk to the United  States and aviation security. TSA officials stated that the agency has not performed assessments of all  foreign airports with service to the United States, in part because of  political sensitivities associated with foreign airport assessments and  because limited international oversight resources may affect whether TSA  assesses additional airports.",
      " Therefore, TSA cannot determine whether  cargo transported from foreign airports at which it has not performed an  airport assessment poses a security risk. CBP Has Begun Efforts to  Address the Security of  Inbound Air Cargo, but  These Efforts Can Be  Expanded To prevent WMD and other elements of terrorism from unlawfully entering  the United States, CBP uses its automated targeting system, referred to as  ATS, and other information to identify cargo that may pose a relatively  high security risk, so it can undergo inspection once the cargo arrives in  the United States. In July 2006, CBP began using ATS to target inbound air  cargo on passenger and all-cargo aircraft that may pose a security risk.",
      " As  discussed previously, ATS uses weighted rules or criteria that assign a risk  score to each arriving shipment based on a variety of factors. This includes  the submission of cargo manifest information required by CBP either at an  aircraft\u2019s time of departure for the United States or no later than 4 hours  prior to arrival, as specified in regulation. Inbound air cargo transported  by passenger and all-cargo air carriers that is targeted for security reasons  by ATS is inspected by CBP personnel stationed at airports in the United  States. CBP officials stated that the extent to which a cargo shipment is  inspected depends on the risk score it receives,",
      " as well as the type of  commodity that is shipped. CBP\u2019s targeting policy describes the roles and responsibilities of CBP  personnel involved in targeting air cargo transported on passenger and all- cargo air carriers that may pose a security risk and inspecting such cargo  once it enters the United States. CBP\u2019s targeting policy also includes  details on the risk scores given to shipments that require inspection by  CBP personnel. The policy also describes what an inspection of high-risk  air cargo should include, such as the use of X-rays; inspection with  radiation detection technology, such as personal handheld radiation  detectors; and physical inspection. CBP has also established performance  goals related to its efforts to target and inspect air cargo transported into  the United States on passenger and all-cargo aircraft.",
      " Specifically, these  performance goals relate to (1) targeting, controlling, inspecting, and  interdicting high-risk air cargo shipments that may pose a threat to the  national security of the United States, including instruments of terror or  any commodity with a link to terrorism, narcotics, and other contraband,  and agriculture risks, and (2) the accountability and reconciliation of all  identified high-risk air cargo shipments. To gauge its effectiveness of  meeting these goals, CBP recently drafted performance measures in  conjunction with its targeting policy. According to CBP, many of the  measures are new and will first be tested at selected airports to assess  their feasibility,",
      " utility, and relevancy. These performance measures  include the number of shipments identified by CBP as having direct ties to  terrorism, the number of shipments that have been identified for further  examination based on an anomaly in a nonintrusive inspection, the  number of shipments that CBP holds, and the type of inspection findings.  CBP did not provide us with a time frame for when these performance  measures would be fully implemented. Our previous reports identified challenges that CBP faced when targeting  oceangoing cargo shipped in containers for inspection. Specifically, we  reported that CBP did not have a comprehensive, integrated process for  analyzing inspection results of oceangoing cargo and incorporating these  results into its targeting system.",
      " We also identified limitations with the  information CBP used to target oceangoing cargo, such as vague or  incomplete cargo manifests. We concluded that without complete and  accurate information on shipments, it was difficult for CBP\u2019s targeting  system to accurately assess the risk of shipments and to conduct thorough  targeting. We also found that CBP did not yet have a system in place to  report sufficient details of the results of security inspections nationwide  that could allow management to analyze those inspections and  systematically adjust its targeting system. We noted that without a more  comprehensive feedback system, the effectiveness of CBP\u2019s targeting  system could be limited.",
      " CBP officials acknowledged that the problems  identified with ATS\u2019s effectiveness in targeting oceangoing cargo would  also apply to CBP\u2019s efforts to target inbound air cargo. For example, CBP  uses cargo manifests as a data source to identify high-risk cargo  shipments, but according to some air carrier representatives, the  information contained in these manifests is not always complete or  accurate. CBP\u2019s new effort to target and inspect inbound air cargo  transported on passenger carriers that may pose a security risk provides  CBP an opportunity to strengthen its targeting activities by addressing the  issues with its targeting system that we previously identified. DHS\u2019s strategy for addressing the threat of nuclear and radiological  terrorism includes deploying radiation detection equipment at U.S.",
      " ports  of entry, including airports. CBP plans to deploy radiation portal monitors  at international airports by September 2009 in order to inspect 100 percent  of inbound cargo for radiation. We have previously reported that  currently deployed radiation portal monitors have limitations and that  CBP is behind schedule in deploying radiation portal monitors at U.S.  ports of entry, including airports. Specifically, we reported that the portal  monitors are limited by the type of radioactive materials they are able to  detect and they cannot differentiate naturally occurring radiological  material from radiological threat material. We also reported that meeting  DHS\u2019s goal to deploy over 3,",
      "000 radiation portal monitors at U.S. ports of  entry, including U.S. airports, by September 2009 was unlikely. As of  December 2005, CBP had deployed 57 radiation portal monitors at U.S.  facilities that receive international mail and express consignment courier  facilities in the United States, but had not yet deployed monitors at U.S.  airports that receive inbound air cargo. CBP officials cited a lack of  resources as the primary reason for not being able to purchase and deploy  more monitors, including those at U.S. international airports. Until CBP  fully deploys radiation portal monitors at international airports that  receive inbound air cargo,",
      " CBP\u2019s efforts to effectively inspect air cargo  once it enters into the United States for radiological weapons or the  materials to build such a weapon may be limited. Another effort CBP has under way to secure the security of inbound air  cargo is the voluntary C-TPAT program. This program is aimed at  strengthening the international supply chain and U.S. border security. In  exchange for implementing security policies and procedures, such as pre- employment screening, periodic background reviews, and employee  training on security awareness and procedures, CBP provides C-TPAT  participants, including foreign and domestic air carriers, with a reduced  likelihood that their cargo will be inspected once it arrives in the United  States.",
      " According to CBP, while there are more than 6,000 participants in  the C-TPAT program, as of June 2006, only 31 of the approximately   200 foreign and domestic air carriers that transport cargo into the United  States, and only 52 of the potentially thousands of freight forwarders that  consolidate cargo departing by air for the United States, are participating  in the program. Some foreign air carriers and foreign freight forwarders we spoke with  stated that although CBP has made them aware of C-TPAT benefits, they  have not applied for program membership because they do not see the  value of participating in C-",
      "TPAT. Specifically, these air carriers and freight  forwarders noted that participation in C-TPAT does not ensure quicker  delivery times of their shipments and therefore does not benefit them.  According to CBP officials, while C-TPAT offers participants a wide range  of benefits, such as a reduced number of inspections and priority  processing for inspections, CBP cannot compel air carriers to participate  in the program because the C-TPAT program is voluntary. CBP has,  however, identified expanding the number C-TPAT participants, including  air carriers, as one of its objectives in CBP\u2019s fiscal years 2007-",
      "2011  Strategic Plan for Securing America\u2019s Borders at Ports of Entry. At present, the requirements to become a member of C-TPAT are more  broadly written for air carriers and freight forwarders than they are for  importers, sea carriers, and highway carriers because CBP has not yet  finalized specific security criteria for air carriers and freight forwarders  participating in the program. According to CBP officials, they have drafted  specific security criteria for air carriers. However, the finalization of the  air carrier criteria has been placed on hold, as CBP is in the process of  conducting a comprehensive review of its current air cargo strategy,",
      "  including how CBP will incorporate C-TPAT. DHS Is in the Early Stages  of Testing Technologies to  Strengthen Air Cargo  Security DHS has taken some steps to incorporate new technologies into  strengthening the security of air cargo, which will affect both domestic  and inbound air cargo. However, TSA and DHS\u2019s Science and Technology  (S&T) Directorate are in the early stages of evaluating available aviation  security technologies to determine their applicability to the domestic air  cargo environment. TSA and S&T are seeking to identify and develop  technologies that can effectively inspect and secure air cargo with minimal  impact on the flow of commerce.",
      " DHS officials added that once the  department has determined which technologies it will approve for use on  domestic air cargo, they will consider the use of these technologies for  enhancing the security of inbound air cargo shipments. According to TSA  officials, there is no single technology capable of efficiently and effectively  inspecting all types of air cargo for the full range of potential terrorist  threats, including explosives and WMDs. As such, TSA, together with S&T,  is conducting a number of pilot programs that are testing a variety of  different technologies that may be used separately or in combination to  inspect and secure air cargo. These pilot programs seek to enhance the  security of air cargo by improving the effectiveness of air cargo  inspections through increased detection rates and reduced false alarm  rates,",
      " while addressing the two primary threats to air cargo identified by  TSA\u2014hijackers on an all-cargo aircraft and explosives on passenger  aircraft. DHS\u2019s pilot programs are testing a number of currently employed  technologies used in other areas of aviation and transportation security, as  well as new technologies. These pilot programs include    an air cargo explosives detection pilot program implemented at  three airports, testing the use of explosive detection systems,  explosive trace detectors, standard X-ray machines, canine teams,  technologies that can locate a stowaway through detection of a  heartbeat or increased carbon dioxide levels in cargo, and manual  inspections of air cargo;",
      "    an explosive detection system (EDS) pilot program, which is testing  the use of computer-aided tomography to compare the densities of  objects to locate explosives in air cargo and to determine the long- term feasibility of using EDS equipment as a total screening process  for break bulk air cargo;    an air cargo security seals pilot, which is exploring the viability of  potential security countermeasures, such as tamper-evident security  seals, for use with certain classifications of exempt cargo;  the use of hardened unit loading devices, which are containers  made of blast-resistant materials that could withstand an explosion  on board the aircraft;",
      " and  the use of pulsed fast neutron analysis (PFNA) which allows for the  identification of the chemical signatures of contraband, explosives,  and other threat objects (see appendix V for more detailed  information on DHS\u2019s and TSA\u2019s air cargo security pilot tests). TSA anticipates completing its pilot tests by 2008, but has not yet  established time frames for when it might implement these methods or  technologies for the inbound air cargo system. As noted, some of the  technologies being pilot-tested are currently employed or certified for use  in other areas of aviation security, to include air cargo. According to DHS  and TSA officials,",
      " further testing and analysis will be necessary to make  determinations about the capabilities and costs of these technologies  when employed for inspecting inbound air cargo at foreign locations. TSA and CBP Have Taken  Some Steps to Coordinate  Efforts Related to Inbound  Air Cargo Security, but Do  Not Have Processes in  Place to Communicate  Important Information Pursuant to Homeland Security Presidential Directive 7, TSA is  responsible for coordinating with relevant federal agencies, such as CBP,  to secure the nation\u2019s transportation sector, including the air cargo  system. TSA and CBP have taken a number of steps to coordinate their  respective efforts to safeguard air cargo transported into the United  States.",
      " For example, CBP shared its experience in targeting international  cargo shipments with TSA to help the agency develop a system to target  elevated-risk domestic air cargo shipments for inspection. Moreover, in  2003, interagency working groups were established to share information  on TSA\u2019s technology development programs and CBP\u2019s air cargo targeting  activities, among other things. In addition, TSA and CBP officials at the  three U.S. airports we visited told us that both agencies discuss aviation  security issues, including inbound air cargo, during weekly or monthly  meetings with airport representatives and other aviation industry  stakeholders. These officials also stated that TSA and CBP staff located at  U.S.",
      " airports participate in operational planning and compliance  inspection activities, and that these task forces and inspection activities  may include inbound air cargo security issues. While these collaborative efforts are important, the two agencies do not  have a systematic process in place to ensure that they are communicating  information on air cargo security programs and requirements, such as the  results of compliance oversight and targeting activities that could be used  to enhance the security of inbound air cargo. Both collect information that  each other could use. For example, if TSA\u2019s compliance inspection results  indicated that certain air carriers were in violation of TSA air cargo  inspection requirements, CBP could use this information to assess the risk  of inbound air cargo shipments from these particular air carriers.",
      "  Moreover, if air carrier inspections revealed routine problems with certain  types of shipments or certain shippers, CBP could use this information to  apply greater scrutiny to those types of shipments or shippers. Likewise, if  TSA\u2019s foreign airport assessments identify airports that are not meeting  international security standards, CBP could use this information to  improve its inbound air cargo targeting efforts. TSA also requires air  carriers transporting cargo into the United States to randomly inspect a  certain percentage of inbound cargo and compile information on these  inspections. These inspection results could indicate which shipments were  inspected, the outcome of those inspections, and the location at which the  inspections took place.",
      " Similarly, CBP collects information that could be  useful to TSA\u2019s efforts to secure inbound air cargo. For example,  information gathered from CBP\u2019s inbound air cargo targeting and  inspection activities could be used by TSA to help focus its compliance  oversight efforts on those air carriers whose shipments have been  identified by CBP as posing an elevated security risk. In addition, the  results of CBP officers\u2019 inspection of inbound air cargo could be used by  TSA to make risk-based decisions regarding the types of cargo air carriers  should be required to inspect, based on its contents and points of origin,  prior to its departure to the United States.",
      " Without a systematic process to communicate relevant air cargo security  information, TSA and CBP are limited in their ability to most effectively  secure inbound air cargo. TSA and CBP officials agreed that a process to  improve information sharing could provide opportunities for enhancing  their respective efforts to secure inbound air cargo. Specifically, CBP  officials stated that information on the results of TSA\u2019s compliance  inspections of air carriers and assessments of foreign airport security, as  well as the results of air carrier inspections of air cargo prior to its  transport to the United States, could potentially help CBP in targeting  high-risk inbound air cargo shipments for inspection upon its arrival in the  United States.",
      " TSA officials also stated that having access to the results of  CBP\u2019s inbound air cargo targeting and inspection activities could be used  to potentially strengthen existing TSA air cargo security requirements.  Although both agencies agree that sharing relevant air cargo information  could help to more effectively secure inbound air cargo, neither TSA or  CBP has plans to establish a process to share information on the other\u2019s  air cargo security programs and requirements and the results of  compliance oversight and targeting activities that could be used to  enhance the security of inbound air cargo. Foreign Air Cargo  Security Practices and  International  Harmonization Efforts  Have Potential to  Enhance Air Cargo  Security,",
      " but May Be  Challenging to  Implement While some of the security practices employed by foreign governments  that regulate airports with high volumes of cargo and domestic and foreign  air carriers that transport large volumes of cargo are similar to those  required by TSA, we identified some security practices that are currently  not used by TSA that could have potential for strengthening the security of  inbound and domestic air cargo supply chains. Although TSA has  initiated a review of select countries\u2019 air cargo security practices, the  agency has not systematically compiled and analyzed information on  actions taken by foreign countries and foreign and domestic air carriers to  determine whether the benefits that these practices could potentially have  in strengthening the security of the U.S.",
      " and inbound air cargo supply  chain are worth the cost. In addition, DHS has begun working with foreign  governments to develop uniform air cargo security standards and to  mutually recognize each other\u2019s security standards, referred to as  harmonization. However, challenges to harmonizing security practices  may limit the overall impact of TSA\u2019s efforts. Foreign Governments and  Air Cargo Industry  Stakeholders Have Taken  Some Actions That Might  Provide Opportunities to  Strengthen U.S. Domestic  and Inbound Air Cargo  Security, but TSA Has Not  Systematically Compiled  and Analyzed This  Information TSA, foreign governments, and foreign and domestic industry stakeholders  employ some similar air cargo security practices,",
      " such as inspecting a  specific percentage of air cargo or the use of specific technologies to  inspect air cargo. However, 18 of the 22 industry stakeholders and 9 of the  11 countries we compiled information on reported that they have  implemented security practices that differ in some way from those  required by TSA to ensure the security of air cargo they transport both  within their own countries and into the United States. Some of these  practices could potentially be used to mitigate terrorist threats and  strengthen TSA efforts to secure inbound air cargo when employed in  conjunction with current TSA security practices. While we observed a  range of security practices used by foreign countries,",
      " we identified four  categories of security practices implemented by foreign governments and  foreign and domestic air carriers that could potentially enhance the  agencies\u2019 efforts to secure air cargo. These practices include (1) the use of  air cargo inspection technologies and methods, (2) the percentage of air  cargo inspected, (3) physical security and access control methods for air  cargo facilities, and (4) procedures for validating known shippers. We  focused on these practices based on input from air cargo industry  stakeholders. We did not compare the effectiveness or cost of foreign  practices with current TSA requirements and practices. Rather, we  determined whether the use of these security practices differed from  existing TSA efforts to secure domestic and inbound air cargo and could  have the potential to augment the department\u2019s current efforts to secure  domestic and inbound air cargo.",
      " For additional information on actions  taken by domestic and foreign air carriers with operations overseas and  air cargo industry stakeholders to secure air cargo, see the table in  appendix VI. Additional information about the actions taken by foreign  governments to secure air cargo is included in the table in appendix VII. Air Cargo Inspection  Technologies and Methods Three of the 17 air carriers and 1 of the 7 countries we visited require the  use of large X-ray machines to inspect entire pallets of cargo transported  on passenger aircraft. These machines allow for cargo on pallets to  undergo X-ray inspection without requiring the pallet to be broken down  and reconfigured.",
      " Government officials from the country that uses large   X-ray machines stated that this technology allows for the expedited  inspection of high volumes of large cargo items, without impeding the flow  of commerce. CBP also uses this technology to inspect inbound air cargo  once it enters the United States. While DHS\u2019s S&T and TSA have recently  begun to research large X-ray technology, TSA officials stated that the  agency has not established time frames for developing and testing X-ray  technology capable of inspecting large pallets of cargo transported  domestically or at a foreign location prior to its transport to the United  States. Without further consideration of the use of large X-ray technology,",
      "  which may have been enhanced over the past 8 years, TSA may be limited  in its ability to make such determinations regarding its effectiveness in the  post-September 11 air cargo environment. In addition, three domestic all-cargo carriers with operations overseas  have independently chosen to employ radiation detection technologies to  inspect air cargo for potential WMD and other radiological items prior to  the cargo being transported on an all-cargo aircraft. Specifically, one all- cargo air carrier determined that the introduction of a WMD onto aircraft  poses a significant threat. As a result, this carrier inspects cargo shipments  using radiation detection portals and handheld radiation detectors.",
      "  According to TSA officials, the agency does not currently require air  carriers to conduct inspections of air cargo to detect WMD prior to its  transport into the United States because the agency considers mitigating  the threat of WMD to be the responsibility of CBP. Further, two European countries are currently using canines in a different  manner than TSA to inspect air cargo for explosives. Specifically, these  countries are using the Remote Air Sampling for Canine Olfaction  (RASCO) technique, which involves the use of highly trained dogs to sniff  air samples collected from air cargo or trucks through a specially designed  filter.",
      " The dogs sniff a series of air samples to determine whether or not  there is a trace of explosives and indicate a positive detection by sitting  beside the sample. According to foreign government officials representing  two of the countries that use this technique, tests to determine the  effectiveness of this practice have shown that RASCO has a very high rate  of effectiveness in detecting traces of explosives in cargo. According to  foreign government officials, this inspection method can be used on cargo  that is difficult to inspect using other methods, due to size, density, or  clutter, and does not require the breakdown of large cargo pallets. Further,  officials stated that the dogs used in RASCO do not tire as easily as dogs  involved in searching cargo warehouses,",
      " and can therefore be used for a  longer period of time. Both TSA and CBP have certified canine teams for  use in detecting explosives in baggage and currently use dogs for air cargo  inspection. These canine teams are currently used to search narrow and  wide-body aircraft, vehicles, terminals, warehouses, and luggage in the  airport environment. According to TSA officials, while the results of  previous agency tests of RASCO raised questions about its effectiveness,  they continue to work with their international counterparts to obtain  information on the feasibility of using RASCO to inspect air cargo. TSA  officials stated that the agency has not yet determined whether RASCO is  sufficiently effective at finding explosive in quantities that could cause  catastrophic damage to an aircraft and whether this technique will be  approved for use in the United States.",
      " Percentage of Air Cargo  Inspected The majority of the countries we visited and the majority of air carriers we  spoke with have taken several actions to increase the percentage of air  cargo that is inspected as well as using threat information to target certain  cargo for inspection prior to transport. For example, 6 of the 17 foreign  and domestic air carriers we met with are either required by their host  government or have independently chosen to inspect a higher percentage  of air cargo shipments, with X-ray technology or other inspection  methods, than is currently required by TSA. Air carrier officials stated  that the decision to inspect a higher percentage of air cargo is based on  several considerations,",
      " including concerns about the terrorist threat to  passenger aircraft, as well as concerns regarding the security of the air  cargo supply chain in their host country. In addition, in 4 of the 7 countries  we visited, air cargo inspections are conducted earlier in the supply chain  prior to the cargo\u2019s consolidation and delivery to airports. Specifically, the  governments in these 4 countries permit inspections to be conducted by  regulated agents who meet certain government requirements, such as  maintaining an approved security program. Foreign government officials  we spoke with stated that this practice contributed to the security of air  cargo because it increased the total amount of cargo inspected and  facilitated the inspection of cargo earlier in the supply chain.",
      " Finally, the  majority of air carriers we spoke with have independently chosen to use  available threat information to determine how much scrutiny and what  methods to apply to certain cargo prior to its transport on aircraft.  Specifically, 9 of the 17 passenger and all-cargo air carriers we interviewed  target their air cargo inspection efforts based on analyses of available  threat information, among other factors that could affect air cargo  security. TSA recently increased the amount of cargo air carriers are required to  inspect and initiated efforts to require freight forwarders to inspect  domestic air cargo earlier in the supply chain. The agency, however, has  not evaluated the procedures foreign countries and air carriers use to  inspect a higher percentage of air cargo without affecting the flow of  commerce to determine whether the cost of using these procedures would  be worth the potential benefits of enhanced security.",
      " Moreover, unlike the  majority of foreign and domestic air carriers we interviewed, TSA does not  adjust the percentage of air cargo air carriers are required to inspect based  on threat information related to specific locations. While TSA requires  passenger air carriers to implement additional security requirements for  inspecting checked baggage and passengers for flights departing from  high-risk locations, the agency has not implemented additional  requirements for air cargo departing from these same locations. Agency  officials stated that new air cargo security requirements, contained in the  agency\u2019s air cargo security rule, are adequate to safeguard all air cargo  transported into the United States, including cargo transported from high-",
      " risk locations. TSA officials added that the agency would consider  implementing additional air cargo security requirements for high-risk  locations if intelligence information became available that identified air  cargo transported from these locations as posing a high risk to the United  States. CBP, however, currently considers information on high-risk  locations to identify cargo that should undergo inspection upon its arrival  in the United States. In October 2006, TSA issued an emergency  amendment requiring indirect air carriers, under certain conditions, to  inspect a certain percentage of air cargo prior to its consolidation. While  TSA\u2019s efforts to require freight forwarders to inspect domestic air cargo  earlier in the supply chain have the potential for enhancing domestic air  cargo security,",
      " we have previously identified problems with TSA\u2019s  oversight of freight forwarders to ensure they are complying with air cargo  security regulations. Physical Security and Access  Controls for Air Cargo  Facilities In addition to inspecting air cargo prior to its transport on aircraft, we  identified additional security practices implemented by air carriers and  foreign governments to physically secure air cargo and air cargo facilities.  For example, two foreign governments require that all air cargo be stored  in a secured terminal facility located within a restricted area of the airport  to prohibit tampering to the cargo prior to its loading onto an aircraft. At  some airports with restricted areas, individuals accessing these areas must  first undergo physical screening through the use of walk-through metal  detectors or biometric identification systems.",
      " For instance, one all-cargo  air carrier uses a biometric hand-scanning identification system to grant  employees access to air cargo storage facilities. In addition, 10 of the 17 air  carriers we interviewed are subject to audits of the access controls at air  cargo facilities to assess security vulnerabilities at such a facility. If the  test results in a breach of security, all cargo contained within the breached  facility must be inspected before it is permitted to be loaded onto a  passenger or all-cargo aircraft. TSA acknowledged the importance of  enhancing the security of air cargo and air cargo facilities, and included  provisions in the agency\u2019s air cargo security rule for applying or expanding  the secure identification display area (SIDA)",
      " requirements at U.S. airports  to include areas where cargo is loaded and unloaded. However, TSA has  no plans to require additional air cargo access control measures. Procedures for Validating  Known Shippers Two of the 7 countries we visited employ stringent programs for validating  known shippers that differ from the program used in the United States.  For example, 1 country we visited requires its known shippers or those  shippers that have met certain criteria and have an established shipping  history, referred to as known consignors in the country, to be validated by  government-approved contractors. Prior to implementing this  requirement, the country\u2019s consignor program allowed regulated agents  and airlines to assess and validate their own consignors with whom they  did business.",
      " However, according to government officials, the previous  program was ineffective because it allowed for breaches in the security of  the air cargo supply chain, such as the implementation of weak security  programs by shippers and conflicts of interest among air carriers and their  customers. We previously reported on the limitations of TSA\u2019s current  known shipper program, such as the relative ease of TSA\u2019s requirements  for becoming a known shipper. Under this foreign country\u2019s new  program, validations of known consignors are conducted by independent  third parties that have been selected, trained, and accredited by the  government. The government maintains the authority to remove a  validator from an approved list,",
      " accompany a validator on a site visit, or  conduct unscheduled spot visits to known consignor sites. To become known in this particular country, the consignor can choose  from a list of over 100 validators to schedule a validation inspection. The  validation process is conducted using a checklist of security requirements  that includes the physical security measures in place at the site, staff  recruitment, personnel background checking and security checks, access  control to the site, air cargo packing procedures, and storage of secure  cargo, among other things. After the initial validation inspection,  consignors must be reassessed every 12 months to retain their known  status.",
      " During the first round of assessments conducted, 70 percent of  existing known customers failed to become known consignors because of  the stricter security requirements in place under the new scheme. Since  the new validation program requires program participants to implement  stricter security practices for securing air cargo before it is delivered to  the air carrier, it helps to ensure that cargo coming from known  consignors has been adequately safeguarded. While TSA\u2019s air cargo security rule contains provisions for enhancing the  agency\u2019s known shipper program, such as making air carrier and indirect  air carrier participation in the agency\u2019s centralized database mandatory, it  did not modify TSA\u2019s current process for validating known shippers,",
      " which  remains the responsibility of indirect air carriers and air carriers.  Accordingly, passenger, all-cargo, and indirect air carriers will continue to  be responsible for entering shipper information into TSA\u2019s central known  shipper database, which may allow for potential conflicts of interest  because air carriers who conduct business with shippers will also  continue to have the authority to validate these same shipping customers.  TSA officials stated that the agency will continue to rely on its mandatory  centralized known shipper database that allows air carriers and indirect  air carriers to validate shippers as known until it develops a system that  would enable TSA to validate known shippers.",
      " According to TSA officials,  however, the agency is not considering implementing a program that relies  on an independent third party to validate shippers because high  administrative costs, combined with the large number of shippers located  within the United States, may make it difficult to implement a third-party  validation program. Foreign government officials stated that using third  parties to validate shippers has enhanced the countries\u2019 air cargo security  by reducing the number of shippers that are considered known and by  introducing more security controls at an earlier point in the supply chain.  Although the implementation of a third-party validation program may be  challenging in the United States,",
      " without further analysis of such a  program, TSA may be missing an opportunity to determine the extent to  which all or parts of a similar scheme could be incorporated into the  agency\u2019s current air cargo security practices. TSA Is Exploring the  Applicability of Some  Foreign Air Cargo Security  Practices to the United  States, but the Agency Has  Not Systematically  Compiled and Analyzed  These Practices to Assess  Their Viability We previously reported that in order to identify innovative security  practices that could help further mitigate terrorism-related risk to  transportation sector assets\u2014especially as part of a broader risk  management approach discussed earlier\u2014it is important to assess the  feasibility as well as the costs and benefits of implementing security  practices currently used by foreign countries.",
      " However, DHS has not  taken systematic steps to compile or analyze information that could  contribute to the security of both domestic and inbound air cargo. In  response to a recommendation made by DHS\u2019s Science and Technology  Directorate, TSA has taken initial steps to learn more about foreign air  cargo security technologies and practices that could be applied in the  United States. For example, according to TSA officials, the agency  collects information on the security measures implemented by countries  from which air carriers transport air cargo into the United States. In  addition, the United States has agreements with several countries that  allow TSA to visit and compile information on their aviation security  efforts,",
      " including those related to air cargo. Likewise, officials from these  countries are allowed to visit the United States to learn about DHS\u2019s  aviation security measures. TSA officials acknowledge that further examination of how foreign air  cargo security practices may be applied in the United States could yield  opportunities to strengthen the department\u2019s overall air cargo security  program. While TSA has obtained some information on foreign air cargo  security efforts, TSA officials acknowledged that the agency has not  systematically compiled and analyzed information on foreign air cargo  security practices to determine those, if any, that could be used to  strengthen the agency\u2019s efforts to secure air cargo. TSA officials stated  that while some foreign air cargo security practices may hold promise for  use in the United States,",
      " the agency and the air cargo industry face  challenges in implementing some of these practices because the U.S. air  cargo transportation system involves multiple stakeholders and is  responsible for transporting large amounts of cargo on both passenger and  all-cargo aircraft. While large amounts of air cargo are transported to and  from U.S. airports on a daily basis, we identified air cargo security  practices implemented at foreign airports that also process large volumes  of air cargo shipments that may have application to securing domestic and  inbound air cargo operations. For example, we observed the security  practices at 8 foreign airports, 4 of which rank among the world\u2019s   10 busiest cargo airports.",
      " In addition, some of the security practices we  identified are being implemented by air carriers that transport large  volumes of air cargo. Specifically, we spoke with air carrier officials  representing 7 of the world\u2019s 10 largest air cargo carriers. DHS Is Working with  Foreign Governments and  Air Cargo Stakeholders to  Harmonize Air Cargo  Security Efforts, but  Inherent Challenges May  Affect Their Progress In addition to taking initial steps to collect information on foreign air  cargo security practices, DHS has also begun efforts to work with foreign  governments to develop uniform air cargo security standards and to  mutually recognize each other\u2019s air cargo security practices\u2014referred to  as harmonization.",
      " Harmonization has security as well as efficiency  benefits, including better use of resources and more effective information  sharing. However, working with foreign governments to achieve  harmonization may be challenging because these efforts are voluntary.  Additionally, many countries around the world may lack the resources or  infrastructure needed to develop an air cargo security program as  developed as that of the United States. TSA and CBP Are Working with  Foreign Governments to  Develop Uniform Standards One way TSA is working with foreign governments is by collaborating on  the drafting of international air cargo security standards. For example,  according to TSA officials, agency representatives worked with foreign  counterparts to develop Amendment 11 to ICAO\u2019s Annex 17,",
      " issued in  June 2006, which sets forth new standards and recommended practices  related to air cargo security. In addition, TSA is working with the  European Union to develop a database containing information on shippers  and freight forwarders that will be shared between the United States and  European Union member states. As of January 2007, TSA was negotiating  with the European Union on (1) how information in the databases will be  shared, (2) what information will be shared, and (3) how the shared  information will be used by each entity. Currently, the European Union  database can transmit data to the TSA system as part of the development  and testing of the European Union system.",
      " However, TSA\u2019s system will not  be able to transmit data to the European Union\u2019s database until TSA\u2019s new  known shipper and indirect air carrier databases are online, which TSA  expects to occur sometime in late 2007. CBP has also engaged in efforts to develop uniform air cargo security  standards with select foreign countries. Specifically, CBP undertook a  study with the Canadian Border Services Agency (CBSA) to identify  similar air cargo security practices being carried out by CBP and CBSA  and areas in need of improvement. The study made recommendations to  enhance both agencies\u2019 efforts to secure air cargo that included specific  steps the agencies can take to harmonize security measures.",
      " For example,  the study recommended that CBP and CBSA explore harmonizing air  cargo targeting and inspection protocols, including the use of detection  technology. The study also recommended that the two agencies share  knowledge of emerging technologies. CBP\u2019s fiscal years 2007-2011  Strategic Plan for Securing the Nation\u2019s Borders at Ports of Entry  recognizes the need to partner with foreign governments to share relevant  information in an effort to improve cargo security, including cargo  transported by air. According to foreign government and international air cargo industry  representatives, the development of uniform air cargo security  requirements and measures could provide security benefits by eliminating  ineffective requirements and practices and focusing on automated or  nonintrusive inspection technologies that could be universally employed  to reduce the potential for human error.",
      " The cargo security mission of the  International Air Transport Association, according to the association\u2019s  cargo security strategy 2006/2007, is to simplify cargo security by  developing an integrated approach that involves all key supply chain  stakeholder groups, and which is proportionate to the threat, effective,  harmonized, and sustainable. The World Customs Organization\u2019s  Framework of Standards to Secure and Facilitate Global Trade has also  called for aviation and customs security requirements to be harmonized  into one integrated solution, to the extent possible. Foreign air carrier officials we spoke with also stated that developing  uniform air cargo security standards related to performing background  checks on air cargo workers,",
      " training air cargo workers, and controlling  access to air cargo facilities would increase security levels in these areas.  These officials added that uniform air cargo security requirements could  facilitate industry compliance with security requirements. Further, foreign  air carrier representatives and foreign government officials discussed the  need to harmonize the terms used in the air cargo environment. For  example, TSA uses the term \u201cindirect air carriers\u201d when referring to  certified freight forwarders, whereas most other countries refer to these  entities as \u201cregulated agents.\u201d In addition, TSA uses the term \u201cknown  shipper\u201d to refer to certified shippers, while most other nations use the  term \u201cknown consignor\u201d when referring to these same entities.",
      " Harmonized terminology would provide air cargo industry stakeholders  clarification on which security requirements apply to them. Foreign and U.S. air cargo industry representatives and foreign  government officials added that there is currently too much variation  among countries regarding what type of air cargo must be inspected, what  types of cargo are exempt from inspection, which entities should conduct  the inspections, and what methods or technologies should be used to  inspect air cargo. These representatives and officials stated that a  harmonized inspection process would reduce duplicative efforts to inspect  cargo shipments in order to meet different countries\u2019 security  requirements. According to industry officials, having to implement  duplicative security requirements,",
      " particularly those related to air cargo  inspections, can impede the flow of commerce, expose air cargo  shipments to theft, and damage high-value items. For example,  representatives from a U.S. air carrier stated that in one Asian country,  government employees inspect 100 percent of outbound air cargo  transported on a passenger air carrier. However, to meet U.S.  requirements, TSA requires passenger air carriers transporting air cargo  into the United States to inspect a certain percentage of nonexempt cargo  shipments, which would have already been inspected by the foreign  government. Air carrier representatives stated that meeting TSA  inspection requirements is problematic in certain foreign countries  because air carriers are not permitted to re-inspect air cargo shipments  that have already been inspected by foreign government employees and  deemed secure.",
      " These conflicts and duplication of effort could be avoided  through mutually acceptable uniform air cargo security standards  developed jointly between the United States and foreign countries.  However, we recognize that because foreign countries\u2019 requirements are  so varied, and the threats to certain foreign airports are less than to others,  TSA would have to consider accepting other countries\u2019 inspection  requirements on a case-by-case basis to determine the viability of such an  option. According to TSA officials, developing stronger uniform  international standards would improve the security of inbound air cargo  and assist TSA in performing its mission. For example, TSA officials stated  that the harmonization of air cargo security standards would provide a  level of security to those entities not currently regulated by the agency,",
      "  such as foreign freight forwarders and shippers. TSA and CBP Are Partnering  with Foreign Governments to  Begin Mutual Recognition of  Air Cargo Security  Requirements TSA has taken additional steps to begin mutual recognition of foreign air  cargo security requirements in an effort to enhance the security of  inbound air cargo. For example, TSA officials stated that the agency  approved amendments to air carriers\u2019 security programs in November 2001  permitting those carriers operating out of the United Kingdom, France,  Switzerland, Israel, and Australia to implement the air cargo security  requirements of these foreign countries, in lieu of TSA\u2019s. TSA officials  stated that these five countries were selected based on agency officials\u2019  recommendations and a review of the countries\u2019 security programs to  determine if country requirements and practices met or exceeded TSA  requirements.",
      " In contrast, those air carriers operating out of a foreign  country other than the five previously identified must implement their host  government\u2019s requirements in addition to TSA\u2019s. Officials added that in  order for these countries\u2019 air cargo security programs to remain  recognized by TSA, they must have met or exceeded TSA\u2019s air cargo  security requirements, including new requirements set forth in the air  cargo security rule. TSA officials further stated that they do not currently  have plans to review other countries\u2019 air cargo security measures and that  such reviews would be predicated on a host countries\u2019 request. In addition, air carriers may seek TSA\u2019s approval of amendments to their  security programs that would enable the air carrier to implement  alternative air cargo security measures that satisfy TSA\u2019s minimum  security requirements while maintaining compliance with the security  requirements of the host government.",
      " According to TSA officials, the  agency will approve these alternative measures as long as TSA deems that  they meet ICAO\u2019s standards and TSA\u2019s minimum requirements. For  example, officials noted that some foreign governments allow cargo from  unknown shippers to be transported on passenger aircraft after that cargo  is inspected. Although this measure differs from the requirements in place  in the United States that do not permit cargo from unknown shippers to be  transported on passenger aircraft, TSA officials stated that the ICAO  standards are being met and air carriers operating out of such countries  are permitted to transport cargo into the United States. Foreign government officials,",
      " embassy officials, and foreign industry  members with whom we met also stated that to lessen the burden on  airports and air carriers, TSA should consider accepting the results of  ICAO or European assessments of airports with passenger air carrier  service to the United States, and air carrier compliance inspections  conducted by the European Union in lieu of conducting their own  assessments and inspections. According to foreign government officials, in  addition to TSA air carrier inspections and foreign airport assessments, air  carriers located at foreign locations and airports around the world are  subject to inspections by ICAO, as well as their host country. The  European Union has also recently begun to conduct its own assessments  of the security of airports located within its member states.",
      " Officials from  one country told us that TSA should consider accepting the results of  European Union assessments in light of the progress the European Union  has made in developing its oversight program. Foreign government officials also expressed concern over TSA\u2019s  inspections of foreign air carriers, saying that TSA lacks the authority  under host government or international laws to assess foreign air carriers\u2019  compliance with TSA\u2019s security requirements that exceed ICAO\u2019s  standards. Notwithstanding this view, TSA is authorized under U.S. law to  ensure that all air carriers, foreign and domestic, operating to, from, or  within the United States maintain the security measures included in their  TSA-approved security programs and any applicable security directives or  emergency amendments issued by TSA.",
      " Although TSA security  requirements support the ICAO standards and recommended practices,  TSA may subject air carriers operating to, from, or within the United  States to any requirements necessary and assess compliance with such  requirements, as the interests of aviation and national security dictate. TSA officials acknowledged that they have discussed the possibility of  using European Union airport assessment results to either prioritize the  frequency of TSA\u2019s assessments or to conduct more focused TSA  assessments at European Union airports. According to TSA officials, the  agency may also be able to use host government or third-party  assessments to determine the aviation security measures to focus on  during TSA\u2019s own airport assessments in foreign countries.",
      " TSA is also  considering reducing the number of assessments conducted at airports  that are known to have effective security measures in place and focus  inspector resources on airports that are known to have less effective  security measures in place. In addition, TSA is considering having a TSA  inspector shadow a European Union inspection team for 1 or 2 days to  validate the results of European Union assessments. Another option would  be for TSA and the European Union to leverage their resources by  conducting joint airport assessments. According to a European Union  official, however, member states recently met to discuss sharing European  Union assessment results with TSA. Specifically, member states  determined that until the European Union and TSA agree on how they will  share sensitive security information with each other and how they will  conduct joint assessments of each other\u2019s airports,",
      " that at this time they  will not share the results of European Union airport assessments with  TSA. The European Union official further stated that member states will  not share their European Union airport assessment results with TSA  unless TSA reciprocates. The official added that member states may share  the results of airport assessments conducted by their own internal auditing  entities with TSA, but it would be illegal for member states to share their  European Union assessment results with TSA. TSA is also working closely with the European Union to develop mutually  acceptable air cargo security measures. For example, in March 2005 a  bilateral meeting on air cargo security was held between the European  Union and the United States.",
      " An objective of this meeting was to share  information on the air cargo security policies being developed by both,  which, in turn, may encourage mutual acceptance. The development of the  European Union/United States joint air cargo database was a focus of this  meeting. The meeting also provided the European Union an opportunity to  comment on TSA\u2019s notice of proposed rule making on air cargo security  before the rule was finalized. Challenges to DHS\u2019s  Harmonization Efforts May  Affect Progress Despite DHS\u2019s efforts to harmonize international air cargo security  practices, a number of key obstacles, many of which are outside of DHS\u2019s  control,",
      " may impede their progress. For example, because international  aviation organizations, such as ICAO, have limited enforcement authority,  they can only encourage, but generally not require, countries to implement  air cargo security standards or mutually accept other countries\u2019 security  measures. In addition, the implementation of uniform air cargo security  standards may require the expenditure of limited resources. For example,  according to European Union and air cargo industry officials, those  countries with air cargo security programs that are less advanced than  those of the European Union and the United States may not have the  resources or infrastructure necessary to enhance their air cargo security  programs.",
      " In addition, some foreign governments do not share DHS\u2019s view regarding  the threats and risk associated with air cargo. For example, CBP has  identified the introduction of terrorist weapons, including a WMD, as the  primary threat to cargo entering the United States. Government officials  from one country we met with, however, stated that they do not view the  introduction of a WMD as a significant threat to air cargo security.  Officials from another country stated that, unlike DHS, they do not  consider stowaways as a primary threat to air cargo, while an official from  a third country noted that it does not differentiate between the threats to  passenger air carriers and those to all-cargo carriers.",
      " In addition, while  TSA prohibits cargo from unknown shippers from being transported on  passenger aircraft, the European Union and one Asian country we  obtained information from allows cargo from unknown shippers to be  transported on passenger aircraft after the cargo is inspected. These  countries also inspect 100 percent of cargo from unknown shippers that is  transported on all-cargo aircraft, while TSA requires all-cargo air carriers  to randomly inspect a portion of the air cargo they transport. These  differing approaches to air cargo security may make the harmonization of  inspection requirements difficult to achieve. Further, TSA faces legal challenges in mutually accepting the results of  other entities\u2019 airport assessments.",
      " According to TSA officials, the agency  interprets its statutory mandate to conduct assessments of foreign airports  to mean that TSA must physically observe security operations at a foreign  airport. This interpretation, according to TSA, precludes TSA from relying  solely on third-party or host government assessments. If the Secretary of  DHS, on the basis of the results of a TSA assessment, determines that a  foreign airport does not maintain and carry out effective security  measures, the Secretary must take further action. Such actions include,  among others, notifying appropriate authorities of the foreign government  of deficiencies identified, providing public notice that the airport does not  maintain and carry out effective security measures,",
      " or suspending service  between the United States and the airport if it is determined a condition  exists that threatens the safety or security of the passengers, aircraft, or  crew, and such action is in the public interest. TSA officials noted that  unlike DHS, ICAO has limited enforcement capabilities. However, TSA  officials stated that the agency is taking steps to further emphasize  reciprocity with other governments by encouraging them to assess  airports within the United States. Such an effort could help facilitate the  agency\u2019s foreign airport assessments and air carrier inspections. TSA officials also stated that although they are working with the European  Union to develop a process to share airport assessment and inspection  results,",
      " the agency currently does not have an agreement with either the  European Union or ICAO to share assessment results. TSA officials added  that even if they obtain access to these results, TSA is still legally required  to conduct its own assessments of airports at which air carriers have  operations into the United States and will continue with inspections of air  carriers that transport cargo into the United States. Information on the  results of other governments\u2019 airport assessments and air carrier  inspections could help TSA focus its oversight resources on those  countries and carriers that may pose a greater risk to the United States. In  addition, foreign government and embassy officials noted that it will be  difficult to harmonize air cargo security standards and requirements until  the international community develops an approach for sharing sensitive  information,",
      " such as security requirements. Developing a process for  sharing sensitive information could help the United States and other  countries improve their understanding of each others\u2019 security measures  and identify overlapping or contradicting security requirements. Conclusions While DHS has made significant strides in strengthening aviation security,  it is still in the early stages of developing a comprehensive approach to  ensuring inbound air cargo security. Until TSA and CBP take additional  actions to assess the risks posed by inbound air cargo and implement  appropriate risk-based security measures, U.S.-bound aircraft transporting  cargo will continue to be vulnerable to terrorist attack. In October 2005,  we recommended that TSA take a number of actions designed to  strengthen the security of the nation\u2019s domestic air cargo transportation  system.",
      " Similar actions, if effectively implemented, could also strengthen  the department\u2019s overall efforts to enhance the security of inbound air  cargo, both before the cargo has departed a foreign nation and once it has  arrived in the United States. We are encouraged by TSA\u2019s initial efforts to  use a risk-based approach to guide its investment decisions related to  inbound air cargo security while at the same time addressing other  pressing aviation and transportation security priorities. However, risk  management efforts should begin with a strategy that includes specific  goals and objectives, which TSA has not yet identified. Likewise, TSA\u2019s  efforts to prioritize inbound air cargo assets and guide decisions about  protecting them could be strengthened by establishing a methodology and  time frames for completing risk assessments of inbound air cargo and  determining how to use the results to target security programs and  investments.",
      " Further, while TSA has drafted new requirements for  securing inbound air cargo, without reexamining the rationale for existing  inspection exemptions specific to air cargo transported into the United  States on passenger aircraft and making any needed adjustments to these  exemptions, there will continue to be a vulnerability that could be  exploited by terrorists. Moreover, without developing an inspection plan  that includes performance goals and measures to gauge air carrier  compliance with air cargo security requirements, TSA cannot readily  identify those air carriers that are achieving an acceptable level of  compliance and focus the agency\u2019s inspection resources on those air  carriers with higher levels of noncompliance that may pose a greater risk.",
      " Coordination and communication between TSA and CBP is also important  to ensuring that gaps do not exist in the security of inbound air cargo.  Without effectively sharing information, TSA\u2019s and CBP\u2019s inbound air  cargo security activities may be less efficient and effective. While TSA and  CBP have separate missions within DHS, their responsibilities for the  security of air cargo are complementary. A strategy that clearly defines  TSA\u2019s and CBP\u2019s roles and responsibilities with regard to securing inbound  air cargo could help ensure that all areas of inbound air cargo security are  being addressed. TSA and CBP also lack a systematic process to share  relevant air cargo security information,",
      " such as the results of air carrier  compliance inspections and foreign airport assessments that could  enhance both agencies\u2019 efforts to secure air cargo. Such a process could  provide opportunities for enhancing TSA\u2019s and CBP\u2019s respective efforts to  secure inbound air cargo. TSA\u2019s efforts to coordinate with foreign governments and air cargo  stakeholders are an important step toward developing enhanced and  mutually agreeable international air cargo security standards. While TSA  has taken steps to obtain information on foreign air cargo security  practices, further examination of how these practices may be applied in  the United States could yield opportunities to strengthen the department\u2019s  overall air cargo security program. Doing so could also enable the United  States to leverage the experiences and knowledge of foreign governments  and international air cargo industry stakeholders and help identify  additional innovative practices to secure air cargo against a terrorist  attack in this country.",
      " Recommendations for  Executive Action To help ensure that the Transportation Security Administration and  Customs and Border Protection take a comprehensive approach to  securing air cargo transported into the United States, in the restricted  version of this report we recommended that the Secretary of Homeland  Security direct the Assistant Secretary for the Transportation Security  Administration and the Commissioner of U.S. Customs and Border  Protection to take the following two actions:  (1) Develop a risk-based strategy, either as part of the existing air cargo  strategic plan or as a separate plan, to address inbound air cargo security,  including specific goals and objectives for securing this area of aviation  security.",
      " This strategy should clearly define TSA\u2019s and CBP\u2019s  responsibilities for securing inbound air cargo, as well as how the agencies  should coordinate their efforts to ensure that all relevant areas of inbound  air cargo security are being addressed, particularly as they relate to  mitigating the threat posed by weapons of mass destruction.  (2) Develop a systematic process for sharing information between TSA  and CBP that could be used to strengthen the department\u2019s efforts to  enhance the overall security of inbound air cargo, including, but not  limited to, information on the results of TSA inspections of air carrier  compliance with TSA inbound air cargo security requirements and TSA  assessments of foreign airports\u2019 compliance with international air cargo  security standards.",
      " To help strengthen the Transportation Security Administration\u2019s inbound  air cargo security efforts, we recommend that the Secretary of Homeland  Security direct the Assistant Secretary for the Transportation Security  Administration to take the following four actions:  (3) establish a methodology and time frame for completing assessments of  inbound air cargo vulnerabilities and critical assets, and use these  assessments as a basis for prioritizing the actions necessary to enhance  the security of inbound air cargo;  (4) establish a time frame for completing the assessment of whether  existing inspection exemptions for inbound air cargo pose an  unacceptable vulnerability to the security of air cargo, and take steps, if  necessary,",
      " to address identified vulnerabilities;  (5) develop and implement an inspection plan that includes performance  goals and measures to evaluate foreign and domestic air carrier  compliance with inbound air cargo security requirements; and  (6) in collaboration with foreign governments and the U.S. air cargo  industry, systematically compile and analyze information on air cargo  security practices used abroad to identify those that may strengthen the  department\u2019s overall air cargo security program, including assessing  whether the benefits that these practices could provide in strengthening  the security of the U.S. and inbound air cargo supply chain are cost- effective, without impeding the flow of commerce. Agency Comments  and Our Evaluation We provided a draft of this report to DHS for review and comments.",
      " On  April 19, 2007, we received written comments on the draft report, which  are reproduced in full in appendix VIII. DHS generally concurred with the  report and recommendations. With regard to our recommendation to develop a risk-based strategy to  address inbound air cargo security which clearly defines TSA\u2019s and CBP\u2019s  responsibilities for securing inbound air cargo, particularly as they relate  to mitigating the threat posed by weapons of mass destruction, DHS stated  that CBP is in the preliminary stages of developing its Air Cargo Security  Strategic Plan. According to DHS, the draft plan includes goals and  objectives, such as capturing accurate advance information to effectively  screen air cargo shipments;",
      " accounting for and reconciling all high-risk air  cargo shipments arriving from foreign destinations; developing and  enhancing partnerships to strengthen air cargo security while continuing  to facilitate the movement of legitimate trade; and controlling, inspecting  and interdicting all air cargo that may pose a threat to national security of  the United States. DHS also stated that CBP is coordinating with TSA in  the refinement of CBP\u2019s Air Cargo Security Strategic Plan. Current efforts  include discussions with TSA management and the review of relevant  information in the classified TSA air cargo threat assessment. DHS further  stated that CBP plans to collaborate with TSA during the vetting stage of  CBP\u2019s Air Cargo Strategic Plan to ensure coordination of efforts and  seamless implementation.",
      " Further, DHS stated that TSA plans to revise its  existing Air Cargo Strategic Plan in fiscal year 2007, and will consider  including a strategy for addressing inbound air cargo transported on  passenger and all-cargo aircraft. DHS stated that TSA will identify and  include specific goals and objectives for securing this area of aviation  security and will work with CBP to share best practices in mitigating  threats posed by weapons of mass destruction. While DHS has recognized  the need for CBP and TSA to work together to address inbound air cargo  security threats, DHS has not indicated whether the Air Cargo Strategic  Plan CBP is developing or TSA\u2019s revised Air Cargo Strategic Plan will  provide a risk-based strategy for how the agencies will coordinate their  respective efforts to ensure the security of air cargo transported into the  United States,",
      " particularly as they relate to mitigating the threat posed by  weapons of mass destruction. Taking such action would be necessary to  fully address our recommendation. Concerning our recommendation to develop a systematic process for  sharing information between TSA and CBP that could be used to  strengthen the department\u2019s efforts to enhance the overall security of  inbound air cargo, DHS stated that CBP and TSA plan to meet monthly to  continue working on ensuring air cargo security and to determine whether  they can work more collaboratively to ensure air cargo security. DHS  stated that these meetings will also focus on its air cargo security strategy,  including proposed DHS definitions for the terms \u201cscreen,\u201d \u201cscan\u201d and  \u201cinspection.\u201d DHS also noted that TSA and CBP have previously  collaborated on air cargo security initiatives and efforts through their  ongoing participation in the Aviation Security Advisory Committee Air  Cargo Working Group,",
      " and CBP has shared information on its Automated  Targeting System with TSA staff who are developing a Freight Assessment  System to target elevated risk domestic cargo. DHS further stated that TSA  recognizes that CBP\u2019s Customs-Trade Partnership Against Terrorism  program may include some information that could help TSA in its efforts  to strengthen the security requirements for individuals and businesses that  ship air cargo domestically. While CBP\u2019s and TSA\u2019s efforts to collaborate  on their air cargo security activities are worthwhile, it is also important  that TSA and CBP develop a system to share information\u2014such as the  results of TSA inspections of air carrier compliance with TSA inbound air  cargo security requirements and TSA assessments of foreign airports\u2019  compliance with international air cargo security standards\u2014that could be  used to strengthen the department\u2019s efforts to secure inbound air cargo.",
      "  Ensuring that TSA and CBP incorporate systematic information sharing  into their ongoing coordination efforts would more fully address our  recommendation. Regarding our recommendation to establish a methodology and time  frame for completing assessments of inbound air cargo vulnerabilities and  critical assets, and use these assessments as a basis for prioritizing the  actions necessary to enhance the security of inbound air cargo, TSA  acknowledged that assessments of inbound air cargo vulnerabilities and  critical assets can assist in the prioritization of programs and initiatives  developed to enhance air cargo security. While TSA stated that it has taken  steps to develop a methodology and a framework to complete  vulnerability assessments of the domestic air cargo supply chain,",
      " TSA  does not plan to begin work on assessments of vulnerabilities of the  inbound air cargo supply chain until after the domestic assessments are  completed. TSA stated that it will pursue partnerships with foreign  countries to assess the security vulnerabilities associated with U.S.-bound  air cargo. TSA\u2019s efforts to complete a vulnerability assessment for  domestic air cargo are an important step in applying a risk management  approach to securing air cargo. However, TSA did not provide a time  frame for completing the domestic vulnerability assessments and therefore  could not provide a schedule for when it will conduct an assessment of  inbound air cargo security vulnerabilities. Moreover, TSA has not  determined whether it will conduct a criticality assessment of inbound air  cargo assets or indicated how it plans to use information resulting from  these assessments of inbound air cargo to prioritize the agency\u2019s efforts to  enhance the security of inbound air cargo.",
      " Taking these steps would be  necessary to fully address our recommendation. With regard to our recommendation to establish a time frame for  completing the assessment of whether existing inspection exemptions for  inbound air cargo pose an unacceptable security vulnerability, and taking  steps, if necessary, to address identified vulnerabilities, TSA  acknowledged that air cargo inspection exemptions represent a security  risk and described several actions it had taken to revise the air cargo  inspection exemptions. For example, TSA stated that in October 2006, the  agency issued a series of security enhancements in the form of a security  directive, removing air cargo inspection exemptions. While TSA\u2019s actions  are an important step in addressing a recommendation we made in our  October 2005 report on domestic air cargo security,",
      " TSA\u2019s recent security  directive does not remove all inspection exemptions for air cargo.  Specifically, TSA\u2019s action only applies to air cargo transported from and  within the United States and not to air cargo transported into the United  States from a foreign country, and only applies to air cargo transported on  passenger air carriers, not all-cargo carriers. Until TSA assesses whether  existing inspection exemptions for cargo transported on passenger and all- cargo aircraft into the United States pose an unacceptable vulnerability,  and takes any necessary steps to address the identified vulnerabilities,  TSA cannot be assured that the agency\u2019s inbound air cargo inspection  requirements for air carriers provide a reasonable level of security.",
      " Taking  this important step is necessary to fully address our recommendation. Concerning our recommendation to develop and implement an inspection  plan that includes performance goals and measures to evaluate foreign  and domestic air carrier compliance with inbound air cargo security  requirements, TSA stated that it recognizes the importance of evaluating  air carrier compliance using performance measures and goals. TSA also  stated that its international and domestic field offices establish  comprehensive inspection schedules for field staff to visit air carriers  based on risk factors, inspection histories, and security determinations. In  addition, TSA noted that it is hiring 10 dedicated international air cargo  inspectors, who will be deployed to four international field offices to  inspect all-cargo operations at last points of departure to the United States  on an annual basis to ensure that they are in compliance with relevant all-",
      " cargo security programs and applicable security directives or emergency  amendments. TSA stated that it will also track the progress on these  inspections utilizing the tracking system developed for its Foreign Airport  Assessment Program. Hiring additional inspectors to conduct compliance  inspections of all-cargo carriers that transport cargo into the United States  is an important step for enhancing the agency\u2019s oversight of such carriers.  However, TSA has not indicated whether it will develop an inspection plan  that includes performance goals and measures to evaluate foreign and  domestic air carrier compliance with inbound air cargo security  requirements. Developing such a plan will be important to fulfilling the  agency\u2019s oversight responsibilities and is a necessary action in addressing  our recommendation.",
      " Regarding our recommendation to collaborate with foreign governments  and the U.S. air cargo industry and compile and analyze information on air  cargo security practices used abroad to identify those that may strengthen  the department\u2019s overall air cargo security program, TSA stated that it  recognizes the importance of collaborating with foreign governments and  U.S. industry to identify best practices and lessons learned for enhancing  air cargo security. Specifically, TSA stated that it has taken numerous  steps to increase collaboration with foreign governments and industry,  including developing relations with United Kingdom and Irish officials to  better understand their air cargo security practices and programs. TSA  also noted that it actively coordinates with Canadian transportation  security officials to share lessons learned and improve air cargo security  between the two countries.",
      " Moreover, TSA stated that it is continuing to  build relationships with foreign governments, including European Union  members and southeast Asian nations. TSA also stated that it is  collaborating with U.S. industry through the Aviation Security Advisory  Committee Air Cargo Working Group to partner with air cargo supply  chain stakeholders on new initiatives and existing programs and pilot  programs. TSA\u2019s efforts to collaborate with foreign governments and  industry are important steps toward improving inbound air cargo security.  However, TSA has not indicated whether it plans to compile or analyze  information on air cargo security practices used abroad to identify those  that may strengthen the department\u2019s overall air cargo security program,",
      "  including assessing whether the benefits that these practices could  provide in strengthening the security of the U.S. and inbound air cargo  supply chain are cost-effective, without impeding the flow of commerce.  Taking such actions would be necessary to fully address the intent of this  recommendation. DHS also offered technical comments and clarifications, which we have  considered and incorporated where appropriate. As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  issue date. At that time, we will provide copies of this report to the  Secretary of Homeland Security, the Assistant Secretary of the  Transportation Security Administration,",
      " the Commissioner of U.S.  Customs and Border Protection, and interested congressional committees. If you have any further questions about this report, please contact me at  (202) 512-3404 or berrickc@gao.gov. Key contributors to this report are  listed in appendix IX. Appendix I: Objectives, Scope, and  Methodology This report addresses the following questions: (1) What actions has the  Department of Homeland Security (DHS) taken to secure inbound air  cargo, and how, if at all, could these efforts be strengthened? (2) What  practices have the air cargo industry and select foreign countries adopted  that could potentially be used to enhance DHS\u2019s efforts to strengthen air  cargo security,",
      " and to what extent have the Transportation Security  Administration (TSA) and the U.S. Customs and Border Protection (CBP)  worked with foreign government stakeholders to enhance its air cargo  security efforts? To determine what actions DHS has taken to secure inbound air cargo,  and how, if at all, these efforts could be strengthened, we reviewed TSA\u2019s  domestic air cargo strategic plan, proposed and final air cargo security  rules, air cargo-related security directives and emergency amendments,  aircraft operator security programs, and related guidance to determine the  requirements placed on air carriers for ensuring inbound air cargo  security. We also interviewed TSA and CBP officials to obtain information  on their current and planned efforts to secure inbound air cargo.",
      " Further,  we reviewed CBP\u2019s programs and performance measures related to  targeting and inspecting air cargo once it reaches the United States.  Specifically, we reviewed CBP\u2019s Customs and Trade Partnership Against  Terrorism (C-TPAT) program and its Automated Targeting System (ATS)  related to air cargo to obtain information on CBP\u2019s efforts to secure,  target, and inspect inbound air cargo. We analyzed TSA foreign airport  assessment reports conducted during fiscal year 2005, compliance  inspection data from July 2003 to February 2006, and performance  measures to determine the agency\u2019s progress in evaluating air carriers\u2019  compliance with existing air cargo security requirements.",
      " We also  discussed the reliability of TSA\u2019s compliance inspection data for the  period July 2003 to February 2006 with TSA officials. Although our initial  reliability testing indicated that there were some inconsistencies in the  data provided by TSA, we were able to resolve most of the discrepancies  and concluded that the data were sufficiently reliable for the purposes of  this review. For example, we found spelling variations in the inspections  for the same air carrier, which we identified and made uniform in the  dataset. We found that some records contained duplicate information. We  removed these records based on a comparison of information such as the  inspection record number,",
      " the date of the inspection, the specific  requirement the TSA inspector assessed, and the determination of the air  carriers\u2019 compliance with the requirement. We also found some  inspections in the dataset that had occurred at U.S. airports. We identified  these by the airport name and removed them from the data. To identify  DHS\u2019s plans for enhancing inbound air cargo security, we reviewed DHS  Science and Technology Directorate, TSA, and CBP documents to identify  pilot programs for inspection technology, including program funding  levels, time frames, results, and implementation plans. We discussed how,  if at all, DHS efforts could be strengthened to secure inbound air cargo  with TSA and CBP officials and air cargo industry stakeholders.",
      " To identify any challenges DHS and its components may face in  strengthening inbound air cargo security, we interviewed TSA and CBP  officials about how they coordinate and share information on their  respective inbound air cargo security efforts. We obtained information on  DHS\u2019s, TSA\u2019s, and CBP\u2019s efforts to apply risk management principles to  inform their decisions related to securing inbound air cargo and compared  these actions against our risk management framework. Our complete risk  management framework includes a specific set of risk management  activities: setting strategic goals and objectives, assessing risk (threat,  vulnerabilities, and criticality), evaluating alternatives, selecting initiatives  to undertake,",
      " and implementing and monitoring those initiatives. This  report examines the two risk management efforts TSA has focused on thus  far related to inbound air cargo security\u2014setting strategic goals and  objectives and assessing risk. With regard to establishing strategic goals  and objectives, we reviewed DHS\u2019s Strategic Plan, National Infrastructure  Protection Plan, and National Strategy for Transportation Security. We  also reviewed TSA\u2019s strategic plan and TSA\u2019s air cargo strategic plan to  determine DHS\u2019s strategy for addressing the security of inbound air cargo.  Regarding risk assessments, we interviewed DHS officials to discuss the  department\u2019s plans to conduct assessments of the vulnerabilities and  critical assets associated with inbound air cargo.",
      " In addition, we  interviewed TSA and CBP officials, foreign government officials, and air  cargo industry stakeholders to identify efforts to develop international air  cargo security standards, and DHS\u2019s efforts to work with foreign  governments to develop uniform air cargo security standards that would  apply to participant countries, including a structure for mutually  recognizing and accepting other countries\u2019 air cargo security practices. To identify actions the air cargo industry and select foreign countries have  taken to secure air cargo and whether such actions have the potential to  be used to strengthen air cargo security in the United States, we  interviewed foreign and domestic air carrier (passenger and all-cargo)",
      "  officials, foreign freight forwarder representatives, airport authorities, air  cargo industry associations, and DHS and foreign government officials. We  also conducted site visits to 3 U.S. airports to observe inbound air cargo  security operations and industry and CBP efforts to inspect inbound air  cargo using nonintrusive inspection technologies, including radiation  detection systems. We selected these airports based on several factors,  including airport size, the volume of air cargo transported to these airports  from foreign locations, geographical dispersion, the presence of CBP  officers, and TSA international field office officials. Because we selected a  nonprobability sample of airports, the results from these visits cannot be  generalized to other U.S.",
      " airports. Further, we conducted site visits to   7 countries in Europe and Asia to observe air cargo facilities on and off  airport grounds, observe air cargo security processes and technologies,  and obtain information on air cargo security measures implemented by  foreign governments and industry stakeholders. During our international  site visits, we also met with officials from the European Union and TSA\u2019s  international field offices. We selected these countries based on several  factors, including geographical dispersion; TSA threat rankings; and  discussions with DHS, State Department, and foreign government officials  and air cargo industry representatives and experts regarding air cargo  security practices that may have application to DHS\u2019s efforts to secure air  cargo.",
      " We also considered information on 4 additional countries whose air  cargo security practices differ from those used in the United States.  According to TSA and air cargo industry stakeholders, these countries  have implemented stringent air cargo security programs. Specifically, we  observed security practices at 8 foreign airports, 4 of which rank among  the world\u2019s 10 busiest cargo airports. We also obtained information on the  air cargo security requirements implemented by 4 additional foreign  countries. In addition, some of the security practices we identified are  being implemented by air carriers that transport large volumes of air  cargo. Specifically, we spoke with air carrier officials representing 7of the  world\u2019s 10 largest air cargo carriers.",
      " We also discussed the feasibility of  applying foreign air cargo security measures in the United States with TSA  officials. We did not, however, evaluate the effectiveness of the foreign  measures we identified during this review. We also discussed efforts to  develop, harmonize, and mutually recognize international air cargo  security standards with TSA, foreign government, and air cargo industry  officials. TSA\u2019s and CBP\u2019s roles and responsibilities for securing air cargo  transported from the United States to a foreign location were not included  in the scope of this review. TSA\u2019s requirements for outbound air cargo are  similar to those governing the security of air cargo transported within the  United States.",
      " For a review of TSA\u2019s practices related to securing domestic  air cargo, GAO-05-446SU. We conducted our work from October 2005 through February 2007 in  accordance with generally accepted government auditing standards. Appendix II: TSA\u2019s Efforts to Assess Air  Carrier Compliance with Inbound Air Cargo  Security Requirements TSA\u2019s inspections at foreign airports are conducted by aviation inspectors  who are responsible for reviewing aviation security measures of foreign  and domestic passenger air carriers to determine their compliance with a  variety of TSA aviation security requirements, including those related to  inbound air cargo. These inspectors are responsible for conducting foreign  airport assessments as well as domestic and foreign air carrier inspections  at foreign airports.",
      " According to international field office officials, the  agency usually conducts inspections and foreign airport assessments  during the same visit to an airport. The agency also trains and utilizes  domestic aviation security inspectors to conduct inspections under the  supervision of the international field offices to supplement its  international inspection resources. TSA uses its automated Performance and Results Information System  (PARIS) to compile the results of its aviation inspections and the actions  taken when violations are identified. As shown in figure 4, our analysis of  PARIS inspection records determined that between July 2003 and  February 2006, TSA conducted 1,020 international compliance inspections  of domestic and foreign carriers that included a review of one or more  areas of cargo security.",
      " TSA data also show that inspectors conducted   747 inspections at 452 separate domestic air carrier stations and   273 inspections at 177 separate foreign air carrier stations. TSA has taken initial steps to compile information on the violations found  during its inspections of inbound air carrier cargo security requirements.  For example, from July 2003 to February 2006, TSA inspectors identified  57 air cargo security violations committed by foreign and domestic  passenger air carriers at foreign airports in several areas of air cargo  security responsibility. Specifically, as shown in figure 5, these violations  covered areas such as cargo acceptance procedures, cargo screening  procedures,",
      " and air carrier cargo hold search procedures. Appendix III: TSA\u2019s Assessments of Foreign  Airport Security Procedures During fiscal year 2005, TSA conducted 128 foreign airport assessments at  the approximately 260 airports that service passenger air carriers  departing for the United States. As part of the foreign airport assessment  process, TSA develops a report that identifies recommendations for the  airport to improve its airport security to meet ICAO standards, which  include air cargo security standards. Of the 128 assessments TSA  conducted during fiscal year 2005, the agency made 28 recommendations  to improve air cargo security. As of October 2005,",
      " 2 cargo security  recommendations were adopted by the airports and 26 recommendations  remained to be addressed. Examples of TSA recommendations include  developing a national cargo security program to establish government  authorities and air cargo industry responsibilities for securing air cargo,  among other things. When TSA inspectors identify a deficiency that requires immediate action,  they work with the airport and government officials to resolve the  deficiency. If TSA inspectors determine that effective security is still not  being maintained, the law prescribes steps and actions available for  encouraging compliance with the standards used in TSA\u2019s assessment.  Such actions include, among other things, notifying appropriate  authorities of the foreign government of deficiencies identified,",
      " providing  public notice that the airport does not maintain and carry out effective  security measures, or suspending service between the United States and  the airport if it is determined a condition exists that threatens the safety or  security of the passengers, aircraft, or crew, and such action is in the  public interest. The agency has not issued a travel advisory or suspended  service solely for air cargo security deficiencies at an airport since its  inception. Appendix IV: Description of GAO\u2019s Risk  Management Framework GAO\u2019s risk management framework is intended to be a starting point for  risk management activities and will likely evolve as processes mature and  lessons are learned.",
      " A risk management approach entails a continuous  process of managing risk through a series of actions, including setting  strategic goals and objectives, assessing risk, evaluating alternatives,  selecting initiatives to undertake, and implementing and monitoring those  initiatives. Figure 6 depicts a risk management cycle. Risk assessment, a critical element of a risk management approach, helps  decision makers identify and evaluate potential risks so that  countermeasures can be designed and implemented to prevent or mitigate  the effects of the risks. The risk assessment element in the overall risk  management cycle may be the largest change from standard management  steps and is central to informing the remaining steps of the cycle.",
      " Table 1  describes the elements of a risk assessment. Another element of our risk management approach\u2014alternatives  evaluation\u2014considers what actions may be needed to address identified  risks, the associated costs of taking these actions, and any resulting  benefits. This information can be provided to agency management to assist  in the selection of alternative actions best suited to the unique needs of the  organization. An additional step in the risk management approach is the  implementation and monitoring of actions taken to address the risks,  including evaluating the extent to which risk was mitigated by these  actions. Once the agency has implemented the actions to address risks,",
      " it  should develop criteria for and continually monitor the performance of  these actions to ensure that they are effective and also reflect evolving  risk. Appendix V: DHS and TSA Air Cargo Security  Technology Pilot Tests According to DHS officials, the department\u2019s ongoing pilot programs seek  to enhance the physical security of air cargo and improve the effectiveness  of air cargo inspections by increasing detection rates and reducing false  alarm rates. DHS officials stated that its air cargo technology pilot  programs focus on securing domestic air cargo, and while these pilot  methods have yet to be implemented, the results of these tests could be  applied to securing inbound air cargo against similar threats.",
      " These  technology pilots focus on addressing the two primary threats to air cargo  identified by TSA\u2014hijackers on an all-cargo aircraft and explosives on  passenger aircraft\u2014but do not include tests to identify weapons of mass  destruction. DHS\u2019s pilot programs are described below. Air Cargo Explosives  Detection Pilot Program Of the amounts appropriated to DHS in fiscal year 2006, $30 million was  allocated to the Science and Technology (S&T) Directorate to conduct  three cargo screening pilot programs. DHS\u2019s S&T, working in conjunction  with TSA, selected San Francisco International Airport, Seattle-Tacoma  International Airport, and Cincinnati/Northern Kentucky International  Airport as the sites for the pilot and commenced cargo inspection  operations at all three airports in September 2006.",
      " The pilots will test  different concepts of operation at each of the airports. At San Francisco  International Airport, the program will test the use of approved inspection  technologies, including explosive detection systems, such as CTX 9000,  explosive trace detectors, standard X-ray machines, canine teams, and  manual inspections of air cargo, in attempts to determine the  technological and operational issues involved in explosives detection. The  pilot at San Francisco International Airport will further examine how the  use of these existing checked baggage inspection technologies at a higher  rate than is currently required by TSA will affect air cargo personnel and  operations on, for example,",
      " throughput. The pilot at Seattle-Tacoma  International Airport will use canines and stowaway detection  technologies, for example, technologies that can locate a stowaway  through detection of increased carbon dioxide levels in cargo, to detect  threats in freighter air cargo, while the Cincinnati/Northern Kentucky  International Airport pilot program will test existing passenger  infrastructure for inspecting air cargo, including explosive detection  systems (EDS) technology. The projected benefits of these pilots include  the following: increases in the amount of cargo inspected, increases in  detection reliability without adversely affecting commerce, and a better  understanding of the necessary procedures and costs associated with  greater cargo security.",
      " Pilot Program Evaluating  Explosives Detection  System Technology EDS is a form of X-ray technology that can be highly automated to screen  several hundred bags an hour. EDS machines, in contrast to explosive  trace detection technology, are much larger, up to the size of a minivan  and cost in excess of $1 million. EDS technology uses computer  tomography to scan objects and compare their density to the density of  known objects in order to locate explosives. According to TSA, EDS  provides an equivalent level of security as explosive trace detection (ETD)  technology. However EDS provides a higher level of efficiency.",
      " TSA\u2019s EDS Cargo Pilot Program is currently in the third phase of a three- phased program testing the use and effectiveness of explosive detection  systems at 12 participating sites. While the Air Cargo Explosives  Detection Pilot Program will test a range of explosives detection  technologies, the EDS pilot focuses specifically on EDS technology for its  use in the air cargo environment. Phase I, referred to as Developmental  Test and Evaluation, was conducted using live explosives to test the  detection capability and technical performance of the systems screening  simulated break bulk air cargo. Phase II, referred to as Operational Utility  Evaluation, was conducted in cargo facilities to test the system\u2019s  effectiveness in the air cargo environment,",
      " in addition to determining the  operational alarm and false alarm rates of the technology. Phase III of  TSA\u2019s testing is referred to as the Extended Field Test and is designed as a  longer-term evaluation of available EDS technologies in the air cargo  environment. According to TSA officials, the extended time frame of Phase  III (a minimum of 1 year) will allow TSA to evaluate the reliability,  maintainability, and availability of the EDS technology, in addition to  establishing operational parameters and procedures within a realistic  operational environment. Air Cargo Security Seals  Pilot Program TSA officials stated that the agency is exploring the viability of potential  security countermeasures,",
      " such as tamper-evident security seals, for use  with certain classifications of exempt cargo. Traditionally used in the  maritime environment, container seals include a number of tamper-evident  technologies that range from tamper-evident tape to more advanced  technologies used to secure air cargo on aircraft. Tamper-evident tape can  identify cargo that requires further screening and inspection to safeguard  against the introduction of explosives and incendiary devices. Indicative  seals are made of plastic and show signs of tampering. Ranging in price  from 5 to 20 cents, they provide the cheapest solution to air cargo security.",
      "  Barrier seals, which cost between 50 cents and $2 or more, are stronger  seals that are generally used on more sensitive cargo because they require  bolt cutters to remove. The most advanced seal technology allows  shipping companies to track a container through the entire shipping  process through a radio frequency identification (RFID) tag that is  embedded in the seal. Average RFID seals can range in cost from $1 to $10,  with the most sophisticated models costing upward of $100. Security seals  could be used in combination with known shipper protocols to insure that  known shippers provide security in their packaging facilities and deter  tampering during shipping and handling.",
      " In 2003, the Congressional Research Service reported that the utility of  electronic seals in air cargo operations has been questioned by some  experts because currently available electronic seals have a limited  transmission range that may make detecting and identifying seals difficult.  In 2006, GAO reported that container seals provide limited value in  detecting tampering with cargo containers. However, according to TSA  officials, such countermeasures could provide an additional layer of  security and warrant further examination. In January 2006, the agency  issued a public request for information regarding security seals. Although  the agency has since acquired information on seals from five vendors,",
      "  officials stated that efforts to begin the pilot program have been delayed  due to funding issues, among other things. TSA officials stated that the  agency plans to implement the pilot at four airports by the first quarter of  2007. These airports include Portland International Airport, John F.  Kennedy International Airport, Chicago O\u2019Hare International Airport, and  Ronald Reagan Washington National Airport. Hardened Unit Load  Devices/Hardened Cargo  Containers While the Federal Aviation Administration, TSA, and DHS have been  involved in testing hardened unit load devices since the mid-1990s, testing  of these devices has increased since the 9/",
      "11 Commission recommended  that all U.S. airliners deploy at least one hardened cargo container in the  hold of every passenger aircraft to carry suspect passenger baggage or air  cargo. Hardened unit load devices are blast-resistant containers capable  of transporting passenger baggage or air cargo within the lower deck  cargo holds of wide-body aircraft. These containers are required to  withstand an explosive blast up to a certain magnitude while maintaining  the integrity of the container and aircraft structure. The container must  also be capable of extinguishing any fire that results from the detonation  of an incendiary device. In accordance with the Intelligence Reform and Terrorism Prevention Act  of 2004,",
      " TSA began a pilot program in June 2005 to conduct airline  operational testing of the ability of hardened or blast-resistant containers  to minimize the potential effects, including explosion or fire, of a  detonation caused by an explosive device smuggled into the belly of an  aircraft. TSA officials stated that the start up of the pilot program was  slow because one of the two participating vendors dropped out of the  program and because there were few available domestic wide-body flights  in which to conduct the tests. TSA officials added that the agency has  since made progress in conducting the pilot and is collecting test data.  TSA officials stated that the agency expects to conclude the data  collection phase of the program by summer 2007 and make policy  decisions regarding the possible implementation of hardened unit loading  devices by December 2007.",
      " In addition, TSA has been working with  vendors and airlines to develop and test a hardened unit load device that  would satisfy industry\u2019s request for a lighter, less cost-prohibitive model  while still providing the necessary level of security to the aircraft. Pulsed Fast Neutron  Analysis Testing TSA officials reported that the agency\u2019s efforts to test pulsed fast neutron  analysis (PFNA) are currently in the proof-of-concept design stage, which  is focusing on the development of the technology. PFNA technology  allows for bulk inspection of containerized air cargo by measuring the  reaction to injected neutrons and identifying elemental chemical  signatures of contraband,",
      " explosives, and other threat objects. The agency  plans to complete the proof-of-concept phase of testing by March 2007, at  which point TSA and DHS will evaluate the technology on its technical,  environmental, operational, and performance specifications. Testing of  this technology will then proceed to the Development Testing and  Evaluation phase. Agency officials project that the next two phases,  Development Testing and Evaluation and Operational Testing and  Evaluation, will take another 2 to 3 years (after the completion of the  proof-of-concept design phase) to fully determine the operational  readiness and maturity of the technology. Agency officials were unable to  provide us with a time frame for when PFNA would be operational at the  George Bush Intercontinental Airport.",
      " Appendix VI: Actions Taken by Select  Domestic Air Carriers with Operations  Overseas and Foreign Air Cargo Industry  Stakeholders to Secure Air Cargo Passenger Air Carriers Inspect a higher  percentage of cargo  placed on passenger  aircraft than is required by  TSA or host government. 100 percent inspection  performed on:  passenger aircraft bound for  the United States. Freight forwarders, also  known as regulated  agents, are validated by  the government and are  responsible for conducting  inspections. 100 percent of air cargo  loaded onto passenger  aircraft bound for the  United States required to  undergo inspection. (cash paying)",
      " customers.  air cargo shipped in or out  of locations deemed high-risk  by the air carrier is inspected  via X-ray. decompression chambers  are used to inspect cargo  that cannot be X-rayed. Large palletized cargo is  broken down in order to  pass cargo through X-ray  machines. fee when use of  decompression chamber  is required. Canines used to sniff air  passenger flights to the  United States are inspected  via X-ray. samples taken from cargo  shipments. Limited or no air cargo  inspection exemptions. Large X-ray machines  used to inspect entire  pallets of cargo bound for  passenger craft.",
      " Additional targeted  inspections are conducted  based on analysis of  available threat  information, among other  things. assessment system  indicates when air cargo  should be inspected and  when other procedures  should apply. The color  assigned (red, amber, or  green) is based on the  cargo\u2019s point of origin,  destination, and other  relevant intelligence  information.  technology is used to  inspect cargo transported  to the United States and  differentiate between  legitimate and illegitimate  sources of radiation. Canines used to sniff air  samples from cargo  shipments. cosigners to prepare for  annual audits; new  identification numbers are  given post-audit to ensure  security of cosigner  identity.",
      " Air cargo workers undergo  additional and stringent  background checks,  including criminal and  employment history  checks. completed by employees;  employees are not  permitted to enter facility if  training lapses or  requirements are not met. Program provides  monetary incentives to  employees in order to  increase employee  awareness of access  controls, including  rewards for reporting  suspicious individuals. Managers are required to  remain knowledgeable on  security policies and  regulations in destination  countries. All personnel are trained  to identify and handle  security risks; quarterly  training is provided to  security personnel on a  range of issues, including  security updates and the  use of new technology.",
      " Threat information is  derived from public/private  intelligence. This  information includes data  on the  sociopolitical/economic  conditions of countries. Annual audits of carrier  facilities are conducted  using an online  questionnaire; facilities  undergo a certification  process that is linked to  the audits. provided to CBP earlier  than is required by CBP. Independent risk  assessments are  conducted based on  internal testing to identify  cargo security  weaknesses. Security incident database  tracks worldwide security  issues. air carrier industry meet to  identify best practices in  aviation security. Truck drivers entering  carrier facilities to deliver  air cargo are escorted by  an airline representative at  all times.",
      " All employees/visitors are  required to pass through a  metal detector before  entering/exiting cargo  facility. cargo facilities, including  testing of access controls  to identify security  weaknesses. Security guards control  access to freighters at  every stop made by the  aircraft. Secured cart system  transports cargo within  cargo storage facility. Assessments are  conducted of security  conditions in foreign  destinations where staff  are located; armed  security personnel are  assigned to those  locations deemed high  risk. Seals and plastic straps  are applied to all cargo  crates, containers, and  boxes to prevent  tampering.",
      " Pallets are locked and  sealed in a completely  enclosed chain-like  container after they are  built to prevent the  possibility of tampering. whenever possible into  larger units and sealed  with steel banding to limit  the possibility of  tampering. surveillance system  monitor all-cargo areas 24  hours a day. Biometric badge required  to gain access to secured  areas. Biometric identification  system that scans the  hand to grant access air  carrier facilities and cargo  areas. employees are permitted  to pick up, pack, and  transport cargo to cargo  facilities and the airport. Strategic placement of air  cargo in the aircraft to  secure the cockpit and  minimize the potential for  a hijacking by a  stowaway.",
      " Fingerprints and  photographs of all truck  drivers that transport  cargo are taken, kept on  file, and used to authorize  access. cargo brought directly to  the ticketing or check-in  counter by an unknown  shipper. Thorough security review  is conducted of potential  customers prior to  acceptance of their  business or cargo. documented that could  pose a potential security  threat. Palletized cargo is refused  unless airline security  personnel are present  when pallet is built. brought directly to the  counter.  outbound cargo from  unknown shippers. Examining use of  inspection technology  capable of detecting  traces of explosives.",
      " Pilot testing the use of  bees to detect explosive  traces in air cargo  shipments. Appendix VII: Actions We Identified That  Select Foreign Governments Are Taking to  Secure Air Cargo Actions Taken by Select Foreign Governments to Secure Air Cargo Twenty-four hour holding period  used as form of inspection. Government, airport, or  methods to avoid detection of  inspection patterns. freight forwarder  representatives are  responsible for  inspecting air cargo. unknown cargo loaded  on either passenger or  all-cargo aircraft is  physically inspected. Canines used to sniff air samples  from air cargo shipments\u2013Remote  Air Sampling for Canine Olfaction  (RASCO). air cargo inspections.",
      " between cargo placed  on passenger aircraft  versus all-cargo aircraft  in regards to type or  degree of inspection.  undergoes inspection  becomes known and is  permitted on passenger  aircraft. No, or limited number  of, air cargo inspections  exemptions. Palletized cargo from  unknown shippers,  broken up, inspected,  and re-palletized before  being loaded unto  aircraft. Process to become a regulated agent is strict and costly; decertification for unsatisfactory performance. Third-party validation required to become a known shipper/consignor; annual third-party compliance  inspections conducted of known shippers/cosigners.",
      " Regulated agents are validated by aviation authority prior to regulating and auditing shippers and conducting  inspections of air cargo. Air cargo handlers and workers attend government-certified schools to receive mandatory training in air  cargo security awareness and quality control. Air cargo workers undergo background checks that include a criminal history records check before being  granted access to cargo facilities. Air cargo workers must be of native descent to be hired. Developing multicountry database containing information on all known consignors and regulated agents  to facilitate the exchange of information among countries. Actions Taken by Select Foreign Governments to Secure Air Cargo  Security personnel accompany and surround  aircraft upon landing to guard aircraft and its  contents,",
      " including cargo. Biometric technologies used to control access  to cargo facilities. Cargo is stored in secured terminal facility,  located within a \u201crestricted\u201d area of the airport. All individuals accessing cargo facilities are  required to pass through a walk-through metal  detector. attempt to gain access to cargo  warehouses/facilities; if successful, all cargo in  the breached facility is considered unknown  and must be inspected before being loaded  unto aircraft. Government and airport authority subsidize the costs of purchasing X-ray equipment to inspect air cargo. Appendix VIII: Comments from the  Department of Homeland Security Appendix IX: GAO Contact and Staff  Acknowledgments Acknowledgments In addition to the contact named above,",
      " John C. Hansen, Assistant  Director; Susan Baker; Charles W. Bausell; Katherine Davis;   Jennifer Harman; Richard Hung; Cathy Hurley; Tom Lombardi;   Jeremy Manion; Linda Miller; Steve D. Morris; and Meg Ullengren made  key contributions to this report.\n"
    ],
    "length": 31652,
    "hardness": null,
    "role": null
  },
  {
    "id": 114,
    "question": null,
    "answer": "September 11 exposed the vulnerability of U.S. financial markets to wide-scale disasters. Because the markets are vital to the nation's economy, GAO assessed (1) the effects of the attacks on market participants' facilities and telecommunications and how prepared participants were for attacks at that time, (2) physical and information security and business continuity plans market participants had in place after the attacks, and (3) regulatory  efforts to improve preparedness and oversight of market participants' risk reduction efforts. The September 11 attacks severely disrupted U.S. financial markets, resulting in the longest closure of the stock markets since the 1930s and severe settlement difficulties in the government securities market. While exchange and clearing organization facilities were largely undamaged, critical broker--dealers and bank participants had facilities and telecommunications connections damaged or destroyed. These firms and infrastructure providers made heroic and sometimes ad hoc and innovative efforts to restore operations. However, the attacks revealed that many of these organizations' business continuity plans (BCP) had not been designed to address wide-scale events. GAO reviewed 15 organizations that perform trading or clearing and found that since the attacks, these organizations had improved their physical and information security measures and BCPs to reduce the risk of disruption from future attacks. However, many of the organizations still had limitations in their preparedness that increased their risk of being disrupted. For example, 9 organizations had not developed BCP procedures to ensure that staff capable of conducting their critical operations would be available if an attack incapacitated personnel at their primary sites. Ten were also at greater risk for being disrupted by wide-scale events because 4 organizations had no backup facilities and 6 had facilities located between 2 to 10 miles from their primary sites. The financial regulators have begun to jointly develop recovery goals and business continuity practices for organizations important for clearing; however, regulators have not developed strategies and practices for exchanges, key broker-dealers, and banks to ensure that trading can resume promptly in future disasters. Individually, SEC has reviewed exchange and clearing organization risk reduction efforts, but had not generally reviewed broker-dealers' efforts. The bank regulators that oversee the major banks had guidance on information security and business continuity and reported examining banks' risk reduction measures annually.\n",
    "docs": [
      "Introduction Thousands of market participants are involved in trading stocks, options,  government bonds, and other financial products in the United States. These  participants include exchanges at which orders to buy and sell are  executed, broker-dealers who present those orders on behalf of their  customers, clearing organizations that ensure that ownership is  transferred, and banks that process payments for securities transactions.  Although many organizations are active in the financial markets, some  organizations, such as the major exchanges, clearing firms, and large  broker-dealers are more important for the overall market\u2019s ability to  function because they offer unique products or perform vital services. The  participants in these markets are overseen by various federal securities and  banking regulators whose regulatory missions vary.",
      " Financial markets also  rely heavily on information technology systems and extensive and  sophisticated communications networks. As a result, physical and  electronic security measures and business continuity planning are critical  to maintaining and restoring operations in the event of a disaster or attack. Various Organizations  Participate in Stock  and Options Markets Customer orders for stocks and options, including those from individual  investors and from institutions such as mutual funds, are usually executed  at one of the many exchanges located around the United States. Currently,  stocks are traded on at least eight exchanges, including the New York  Stock Exchange (NYSE), the American Stock Exchange, and the NASDAQ.",
      "  Securities options are traded at five exchanges, including the Chicago  Board Options Exchange and the Pacific Stock Exchange. Trading on the  stock exchanges usually begins when customers\u2019 orders are routed to the  exchange floor either by telephone or through electronic systems to  specialist brokers. These brokers facilitate trading in specific stocks by  matching orders to buy and sell. For stocks traded on NASDAQ, customers\u2019  orders are routed for execution to the various brokers who act as market  makers by posting price quotes at which they are willing to buy or sell  particular securities on that market\u2019s electronic quotation system. Some  stocks traded on NASDAQ can be quoted by just a single broker making a  market for that security,",
      " but others have hundreds of brokers acting as  market makers in a particular security by buying and selling shares from  their own inventories. Orders for options are often executed on the floors  of an exchange in an open-outcry pit in which the representatives of  sometimes hundreds of brokers buy and sell options contracts on behalf of  their customers. The orders executed on the various markets usually come from broker- dealers. Individual and institutional investors open accounts with these  firms and, for a per-transaction commission or an annual fee, the broker- dealer buys and sells stocks, bonds, options, and other securities on the  customers\u2019 behalf. Employees of these firms may provide specific  investment advice or develop investment plans for investors.",
      " Although  some firms only offer brokerage services and route customer orders to  other firms or exchanges for execution, some also act as dealers and fill  customer orders to buy or sell shares from their own inventory. In addition to the exchanges, customers\u2019 orders can also be executed on  electronic communications networks (ECN), which match their customers\u2019  buy and sell orders to those submitted by their other customers. The  various ECNs specialize in providing different services to their customers  such as rapid executions or anonymous trading for large orders. After a securities trade is executed, the ownership of the security must be  transferred and payment must be exchanged between the buyer and the  seller.",
      " This process is known as clearance and settlement. Figure 1  illustrates the clearance and settlement process and the various  participants, including broker-dealers, the clearing organization for stocks  (the National Securities Clearing Corporation or NSCC), and the  Depository Trust Company (which maintains records of ownership for the  bulk of the securities traded in the United States). The Options Clearing Corporation plays a similar role in clearing and  settling securities options transactions. After options trades are executed,  the broker-dealers on either side of the trade compare trade details with  each other, and the clearing organization and payments are exchanged on  T+1.",
      " Banks also participate in U.S. securities markets in various ways. Some  banks act as clearing banks by maintaining accounts for broker-dealers and  accepting and making payments for these firms. Some banks also act as  custodians of securities by maintaining custody of securities owned by  other financial institutions or individuals. Government Securities  and Money Market  Instruments Are  Traded Differently  from Stocks The market for the U.S. government securities issued by the Department of  the Treasury (Treasury) is one of the largest markets in the world. These  securities include Treasury bills, notes, and bonds of varying maturities.  Trading in government securities does not take place on organized  exchanges.",
      " Instead, these securities are traded in an \u201cover-the-counter\u201d  market and are carried out by telephone calls between buying and selling  dealers. To facilitate this trading, a small number of specialized firms,  known as inter-dealer brokers (IDB) act as intermediaries and arrange  trades in Treasury securities between other broker-dealers. The use of the  IDBs allows other broker-dealers to maintain anonymity in their trading  activity, which reduces the likelihood that they will obtain disadvantageous  prices when buying or selling large amounts of securities. Trades between the IDBs and other broker-dealers are submitted for  clearance and settled at the Government Securities Clearing Corporation  (GSCC). After trade details are compared on the night of the trade date,",
      "  GSCC provides settlement instructions to the broker-dealers and their  clearing banks. Settlement with these banks and the clearing organization\u2019s  bank typically occurs one business day after the trade (T+1) with  ownership of securities bought and sold transferred either on the books of  clearing banks or the books of the Federal Reserve through its Fedwire  Securities Transfer System. Two banks, JPMorgan Chase and the Bank of  New York, provide clearing and settlement services for many major broker- dealers in the government securities market. Many of the same participants in the government securities markets are  also active in the markets for money market instruments.",
      " These are short- term instruments that include federal funds, foreign exchange  transactions, and commercial paper. Commercial paper issuances are debt  obligations issued by banks, corporations, and other borrowers to obtain  financing for 1 to 270 days. Another type of money market instrument  widely used for short-term financing is the repurchase agreement or repo,  in which a party seeking financing sells securities, typically government  securities, to another party while simultaneously agreeing to buy them  back at a future date, such as overnight or some other set term. The seller  obtains the use of the funds exchanged for the securities, and the buyer  earns a return on their funds when the securities are repurchased at a  higher price than originally sold.",
      " Active participants in the repo market  include the Federal Reserve, which uses repos in the conduct of monetary  policy, and large holders of government securities, such as foreign central  banks or pension funds, which use repos to obtain additional investment  income. Broker-dealers are active users of repos for financing their daily  operations. To facilitate this market, the IDBs often match buyers and  sellers of repos; and the funds involved are exchanged between the  government securities clearing organization and the clearing banks of  market participants. According to data reported by the Federal Reserve,  repo transactions valued at over $1 trillion occur daily in the United States.",
      " Payment Systems  Processors Transfer  Funds for Financial  Markets and Other  Transactions Payments for corporate and government securities transactions, as well as  for business and consumer transactions, are transferred by payment  system processors. One of these processors is the Federal Reserve, which  owns and operates the Fedwire Funds Transfer System. Fedwire connects  9,500 depository institutions and electronically transfers large dollar value  payments associated with financial market and other commercial activities  in the United States. Fedwire is generally the system used to transfer  payments for securities between the banks used by the clearing  organization and market participants. Another large dollar transfer system  is the Clearing House Inter-bank Payments System (CHIPS). CHIPS is a  system for payment transfers,",
      " particularly for those U.S. dollar payments  relating to foreign exchange and other transactions between banks in the  United States and in other countries. Certain Market  Participants Are  Critical to Overall  Functioning of the  Securities Markets Although thousands of entities are active in the U.S. securities markets,  certain key participants are critical to the ability of the markets to function.  Although multiple markets exist for trading stocks or stock options, some  are more important than others as a result of the products they offer or the  functions they perform. For example, an exchange that attracts the greatest  trading volume may act as a price setter for the securities it offers,",
      " and the  prices for trades that occur on that exchange are then used as the basis for  trades in other markets that offer those same securities. On June 8, 2001,  when a software malfunction halted trading on NYSE, the regional  exchanges also suspended trading although their systems were not  affected. Other market participants are critical to overall market  functioning because they consolidate and distribute price quotations or  information on executed trades. Markets also cannot function without the  activities performed by the clearing organizations; and in some cases, only  one clearing organization exists for particular products. In contrast, disruptions at other participants may have less severe impacts  on the ability of the markets to function.",
      " For example, many of the options  traded on the Chicago Board Options Exchange are also traded on other  U.S. options markets. Thus if this exchange was not operational, investors  would still be able to trade these options on the other markets, although  certain proprietary products, such as options on selected indexes, might be  unavailable temporarily. Other participants may be critical to the overall functioning of the markets  only in the aggregate. Investors can choose to use any one of thousands of  broker-dealers registered in the United States. If one of these firms is  unable to operate, its customers may be inconvenienced or unable to trade,",
      "  but the impact on the markets as a whole may just be a lower level of  liquidity or reduced price competitiveness. But a small number of large  broker-dealers account for sizeable portions of the daily trading volume on  many exchanges and if several of these large firms are unable to operate,  the markets might not have sufficient trading volume to function in an  orderly or fair way. Various Regulators  Oversee Securities  Market Participants,  but Approaches and  Regulatory Goals Vary Several federal organizations oversee the various securities market  participants. The Securities and Exchange Commission (SEC) regulates the  stock and options exchanges and the clearing organizations for those  products.",
      " In addition, SEC regulates the broker-dealers that trade on these  markets and other participants, such as mutual funds, which are active  investors. The exchanges also have responsibilities as self-regulatory  organizations (SRO) for ensuring that their participants comply with the  securities laws and the exchanges\u2019 own rules. SEC or one of the depository institution regulators oversees participants in  the government securities market, but Treasury also plays a role. Treasury  issues rules pertaining to that market, but SEC or the bank regulators are  responsible for conducting examinations to ensure that these rules are  followed. Several federal organizations have regulatory responsibilities over banks  and other depository institutions,",
      " including those active in the securities  markets. The Federal Reserve oversees bank holding companies and state- chartered banks that are members of the Federal Reserve System. The  Office of the Comptroller of the Currency (OCC) examines nationally  chartered banks. Securities and banking regulators have different regulatory missions and  focus on different aspects of the operations of the entities they oversee.  Because banks accept customer deposits and use those funds to lend to  borrowers, banking regulators focus on the financial soundness of these  institutions to reduce the likelihood that customers will lose their deposits. Poor economic conditions or bank mismanagement have periodically led to  extensive bank failures and customer losses in the United States.",
      " As a  result, banking and the other depository institution regulators issue  guidance and conduct examinations over a wide range of financial and  operational issues pertaining to these institutions, such as what  information security steps these institutions have taken to minimize  unauthorized access to their systems and what business continuity  capabilities they have. In contrast, securities regulators have a different mission and focus on  other aspects of the operations of the entities they oversee. Securities  regulation in the United States arose with the goal of protecting investors  from abusive practices and ensuring that they were treated fairly. To  achieve this, SEC and the exchanges, which act as self regulatory  organizations (SRO)",
      " to oversee their broker-dealer members, focus  primarily on monitoring securities market participants to ensure that the  securities laws are not being violated; for example, restricting insider  trading or requiring companies issuing securities to completely and  accurately disclose their financial condition. As a result, few securities  regulations specifically address exchange and broker-dealer operational  issues, and securities regulators have largely considered the conduct of  such operations to be left to the business decisions of these organizations. Telecommunications  and Information  Technology Are Vital to  Securities Markets Information technology and telecommunications are vital to the securities  markets and the banking system. Exchanges and markets rely on  information systems to match orders to buy and sell securities for millions  of trades.",
      " They also use such systems to instantaneously report trade  details to market participants in the United States and around the world.  Information systems also compile and compare trading activity and  determine all participants\u2019 settlement obligations. The information  exchanged by these information systems is transmitted over various types  of telecommunications technology, including fiber optic cable. Broker-dealers also make extensive use of information technology and  communications systems. These firms connect not only to the networks of  the exchanges and clearing organizations but may also be connected to the  thousands of information systems or communications networks operated  by their customers, other broker-dealers, banks, and market data vendors.  Despite widespread use of information technology to transmit data,",
      "  securities market participants are also heavily dependent on voice  communications. Broker-dealers still use telephones to receive, place, and  confirm orders. Voice or data lines transmit the information for the system  that provides instructions for personnel on exchange floors. Fedwire and  CHIPS also rely heavily on information technology and communications  networks to process payments. Fedwire\u2019s larger bank customers have  permanent network connections to computers at each of Fedwire\u2019s data  centers, but smaller banks connect via dial-up modem. CHIPS uses fiber- optic networks and mainframe computers to transfer funds among its 54  member banks. Financial  Organizations Manage  Operations Risks by  Protecting Physical  and Information  Security and Business  Continuity Planning Because financial market participants\u2019 operations could be disrupted by  damage to their facilities,",
      " systems, or networks, they often invest in  physical and information security protection and develop business  continuity capabilities to ensure they can recover from such damage. To  reduce the risk that facilities and personnel would be harmed by  individuals or groups attempting unauthorized entry, sabotage, or other  criminal acts, market participants invest in physical security measures  such as guards or video monitoring systems. Market participants also  invest in information security measures such as firewalls, which reduce the  risk of damage from threats such as hackers or computer viruses. Finally,  participants invest in business continuity capabilities, such as backup  locations, that can further reduce the risk that damage to primary facilities  will disrupt an organization\u2019s ability to continue operating.",
      " Objectives, Scope, and  Methodology To describe the impact of the September 11, 2001, attacks on the financial  markets and the extent to which organizations had been prepared for such  events, we reviewed studies of the attacks\u2019 impact by regulators and  private organizations. We also obtained documents and interviewed staff  from over 30 exchanges, clearing organizations, broker-dealers, banks, and  payment system processors, including organizations located in the vicinity  of the attacks and elsewhere. We toured damaged facilities and discussed  the attacks\u2019 impact on telecommunications and power infrastructure with  three telecommunications providers (Verizon, AT&T, and WorldCom)",
      " and  Con Edison, a power provider. Finally, we discussed the actions taken to  stabilize the markets and facilitate their reopening with financial market  regulators. To determine how financial market organizations were attempting to  reduce the risk that their operations could be disrupted, we selected 15  major financial market organizations that included many of the most active  participants, including 7 stock and options exchanges, 3 clearing and  securities processing organizations, 3 ECNs, and 2 payment system  processors. For purposes of our analysis, we also categorized these  organizations into two groups: seven whose ability to operate is critical to  the overall functioning of the financial markets and eight for whom  disruptions in their operations would have a less severe impact on the  overall markets.",
      " We made these categorizations by determining whether  viable immediate substitutes existed for the products or services the  organizations offer or whether the functions they perform were critical to  the overall markets' ability to function. To maintain the organizations\u2019  security and the confidentiality of proprietary information, we agreed with  these organizations that we would not discuss how they were affected by  the attacks or how they were addressing their risks through physical and  information security and business continuity efforts in a way that could  identify them. However, to the extent that information about these  organizations is already publicly known, we sometimes name them in the  report. To determine what steps these 15 organizations were taking to reduce the  risks to their operations from physical attacks,",
      " we conducted on-site  \u201cwalkthroughs\u201d of these organizations\u2019 primary facilities, reviewed their  security policies and procedures, and met with key officials responsible for  physical security to discuss these policies and procedures. We compared  these policies and procedures to 52 standards developed by the  Department of Justice for federal buildings. Based on these standards, we  evaluated these organizations\u2019 physical security efforts across several key  operational elements, including measures taken to secure perimeters,  entryways, and interior areas and whether organizations had conducted  various security planning activities. To determine what steps these 15 organizations were taking to reduce the  risks to their operations from electronic attacks,",
      " we reviewed the security  policies of the organizations we visited and reviewed documentation of  their system and network architectures and configurations. We also  compared their information security measures to those recommended for  federal organizations in the Federal Information System Controls Audit  Manual (FISCAM). Using these standards, we attempted to determine  through discussions and document reviews how these organizations had  addressed various key operational elements for information security,  including how they controlled access to their systems and detected  intrusions, what responses they made when such intrusions occurred, and  what assessments of their systems\u2019 vulnerabilities they had performed. To determine what steps these 15 organizations had taken to ensure they  could resume operations after an attack or other disaster,",
      " we discussed  their business continuity plans (BCP) with staff and toured their primary  facilities and the backup facilities they maintained. In addition, we  reviewed their BCPs and assessed them against practices recommended  for federal and private-sector organizations, including FISCAM, bank  regulatory guidance, and the practices recommended by the Business  Continuity Institute. Comparing these standards with the weaknesses  revealed in some financial market participants\u2019 recovery efforts after the  September 2001 attacks, we determined how these organizations\u2019 BCPs  addressed several key operational elements. Among the operational  elements we considered were the existence and capabilities of backup  facilities,",
      " whether the organizations had procedures to ensure the  availability of critical personnel and telecommunications, and whether they  completely tested their plans. In evaluating these organizations\u2019 backup  facilities, we attempted to determine whether these organizations had  backup facilities that would allow them to recover from damage to their  primary sites or from damage or inaccessibility resulting from a wide-scale  disaster. We also met with staff of several major banks and securities firms  to discuss their efforts to improve BCPs. We also reviewed results of a  survey by the NASD\u2014which oversees broker-dealer members of  NASDAQ\u2014that reported on the business continuity capabilities of 120 of  its largest members and a random selection of 150 of approximately 4,",
      "000  remaining members. To assess how the financial regulators were addressing physical security,  electronic security, and business continuity planning at the financial  institutions they oversee, we met with staff from SEC, the Federal Reserve,  OCC, and representatives of the Federal Financial Institutions Examination  Council. In addition, we met with NYSE and NASD staff responsible for  overseeing their members\u2019 compliance with the securities laws. At SEC, we  also collected data on the examinations SEC had conducted of exchanges,  clearing organizations, and ECNs since 1995 and reviewed the examiners\u2019  work program and examination reports for the 10 examinations completed  between July 2000 and August 2002.",
      " In addition, we reviewed selected SEC  and NYSE examinations of broker-dealers. To determine how the financial markets were being addressed as part of  the United States\u2019 critical infrastructure protection efforts, we reviewed  previously completed GAO work, met with staff from Treasury and  representatives of the Financial and Banking Information Infrastructure  Committee (FBIIC), which is undertaking efforts to ensure that critical  assets in the financial sector are protected.   We also discussed initiatives to  improve responses to future crises and improve the resiliency of the  financial sector and its critical telecommunications services with  representatives of industry trade groups, including the Bond Market  Association and the Securities Industry Association,",
      " as well as regulators,  federal telecommunications officials, telecommunications providers, and  financial market participants. The results of this work are presented in  appendix II. We conducted our work in various U.S. cities from November 2001 to  October 2002 in accordance with generally accepted government auditing  standards. September 11 Attacks Severely Disrupted U.S.  Financial Markets The terrorist attacks on September 11, 2001, resulted in significant loss of  life and extensive property and other physical damage, including damage to  the telecommunications and power infrastructure serving lower  Manhattan. Because many financial market participants were concentrated  in the area surrounding the World Trade Center,",
      " U.S. financial markets  were severely disrupted. Several key broker-dealers experienced extensive  damage, and the stock and options markets were closed for the longest  period since the 1930s. The markets for government securities and money  market instruments were also severely disrupted as several key  participants in these markets were directly affected by the attacks.  However, financial market participants, infrastructure providers, and  regulators made tremendous efforts to successfully reopen these markets  within days. Regulators also took various actions to facilitate the reopening  of the markets, including granting temporary relief from regulatory  reporting and other requirements and providing funds and issuing  securities to ensure that financial institutions could fund their operations.",
      "  The impact on the banking and payments systems was less severe, as the  primary operations of most banks and payment systems processors were  located outside of the area affected by the attacks, or because they had  fully operational backup facilities in other locations. Although many  factors affected the ability of the markets to resume operations, the attacks  also revealed limitations in many participants\u2019 BCPs for addressing such a  widespread disaster. These factors included not having backup facilities  that were sufficiently geographically dispersed or comprehensive enough  to conduct all critical operations, unanticipated loss of  telecommunications service, and difficulties in locating staff and  transporting them to new facilities.",
      " Attacks Caused  Extensive Damage and  Loss of Life and  Created Difficult  Conditions That  Impeded Recovery  Efforts On September 11, 2001, two commercial jet airplanes were hijacked by  terrorists and flown into the twin towers of the World Trade Center. Within  hours, the two towers completely collapsed, resulting in the loss of four  other buildings that were part of the World Trade Center complex. As  shown in figure 2, the attacks damaged numerous structures in lower  Manhattan. The attacks caused extensive property damage. According to estimates by  the Securities Industry Association, the total cost of the property damages  ranges from $24 to $28 billion.",
      " According to one estimate, the damage to  structures beyond the immediate World Trade Center area extended across  16 acres. The six World Trade Center buildings that were lost accounted for over 13 million square feet of office space, valued at $5.2 to $6.7 billion.  One of these buildings was 7 World Trade Center, which was a 46-story  office building directly to the west of the two towers. It sustained damage  as a result of the attacks, burned for several hours, and collapsed around  5:00 p.m. on September 11, 2001. An additional nine buildings containing  about 15 million square feet of office space were substantially damaged and  were expected to require extensive and lengthy repair before they could be  reoccupied.",
      " Sixteen buildings with about 10 million square feet of office  space sustained relatively minor damage and will likely be completely  reoccupied. Finally, another 400 buildings sustained damage primarily to  facades and windows. A study by an insurance industry group estimated  that the total claims for property, life, and other insurance would exceed  $40 billion.   In comparison, Hurricane Andrew of 1992 caused an  estimated $15.5 billion in similar insurance claims. The loss of life following the attacks on the World Trade Center was also  devastating with the official death toll for the September 11 attacks  reaching 2,795,",
      " as of November 2002. Because of the concentration of  financial market participants in the vicinity of the World Trade Center, a  large percentage of those killed were financial firm employees. Excluding  the 366 members of the police and fire departments and the persons on the  airplanes, the financial industry\u2019s loss represented over 74 percent of the  total civilian casualties in the World Trade Center attacks. Four firms  accounted for about a third of the civilian casualties, and 658 were  employees of one firm\u2014Cantor Fitzgerald, a key participant in the  government securities markets. The loss of life also exacted a heavy  psychological toll on staff that worked in the area,",
      " who both witnessed the  tragedy and lost friends or family. Representatives of several organizations  we met with told us that one of the difficulties in the aftermath of the  attacks was addressing the psychological impact of the event on staff. As a  result, individuals attempting to restore operations often had to do so  under emotionally traumatic conditions. The dust and debris from the attacks and the subsequent collapse of the  various World Trade Center structures covered an extensive area of lower  Manhattan, up to a mile beyond the center of the attacks, as shown in figure  3. Figures 4 and 5 include various photographs that illustrate the damage to  buildings from the towers\u2019 collapse and from the dust and debris that  blanketed the surrounding area.",
      " This dust and debris created serious environmental hazards that resulted in  additional damage to other facilities and hampered firms\u2019 ability to restore  operations in the area. For example, firms with major data processing  centers could not operate computer equipment until the dust levels had  been substantially reduced because of the sensitivity of this equipment to  dust contamination. In addition, dust and other hazardous materials made  working conditions in the area difficult and hazardous. According to staff  of one of the infrastructure providers with whom we met, the entire area  near the World Trade Center was covered with a toxic dust that contained  asbestos and other hazardous materials. Restrictions on physical access to lower Manhattan,",
      " put into place after the  attacks, also complicated efforts to restore operations. To facilitate rescue  and recovery efforts and maintain order, the mayor ordered an evacuation  of lower Manhattan, and the New York City Office of Emergency  Management restricted all pedestrian and vehicle access to most of this  area from September 11 through September 13, 2001. During this time,  access to the area was only granted to persons with the appropriate  credentials.   Federal and local law enforcement agencies also restricted  access because of the potential for additional attacks and to facilitate  investigations at the World Trade Center site. Figure 6 shows the areas with  access restrictions in the days following the attacks.",
      " Some access restrictions were lifted beginning September 14, 2001;  however, substantial access restrictions were in place through September  18. From September 19, most of the remaining restrictions were to cordon  off the area being excavated and provide access for heavy machinery and  emergency vehicles. Damage from Attacks  Significantly Disrupted  Telecommunications  and Power The September 11 terrorist attacks extensively damaged the  telecommunications infrastructure serving lower Manhattan, disrupting  voice and data communications services throughout the area. (We discuss  the impact of the attacks on telecommunications infrastructure and  telecommunications providers\u2019 recovery efforts in more detail in appendix  I of this report.) Most of this damage occurred when 7 World Trade Center,",
      "  itself heavily damaged by the collapse of the twin towers, collapsed into a  major telecommunications center at 140 West Street operated by Verizon,  the major telecommunications provider for Manhattan. The collateral  damage inflicted on that Verizon central office significantly disrupted local  telecommunications services to approximately 34,000 businesses and  residences in the surrounding area, including the financial district.  Damage to the facility was compounded when water from broken mains  and fire hoses flooded cable vaults located in the basement of the building  and shorted out remaining cables that had not been directly cut by damage  and debris. As shown in figure 7, the damage to this key facility was  extensive.",
      " Because of the damage to Verizon facilities and equipment, significant  numbers of customers lost telecommunications services for extended  periods. When Verizon\u2019s 140 West Street central office was damaged, about  182,000 voice circuits, more than 1.6 million data circuits, almost 112,000  private branch exchange (PBX) trunks, and more than 11,000 lines serving  Internet service providers were lost. As shown in figure 8, this central  office served a large part of lower Manhattan. The attacks also damaged other Verizon facilities and affected customers in  areas beyond that served directly from the Verizon West Street central  office.",
      " Three other Verizon switches in the World Trade Center towers and  in 7 World Trade Center were also destroyed in the attacks. Additional  services were disrupted because 140 West Street also served as a transfer  station on the Verizon network for about 2.7 million circuits carrying data  traffic that did not originate or terminate in that serving area, but that  nevertheless passed through that particular physical location. For example,  communications services provided out of the Verizon Broad Street central  office that passed through West Street were also disrupted until new  cabling could be put in place to physically carry those circuits around the  damaged facility. As a result,",
      " a total of about 4.4 million Verizon data  circuits had to be restored. Other telecommunications carriers that serviced customers in the affected  area also experienced damage and service disruptions. For example, in 140  West Street, 30 telecommunications providers had equipment that linked  their networks to Verizon. Other firms lost even more equipment than  Verizon. For example, AT&T lost a key transmission facility that serviced  its customers in lower Manhattan and had been located in one of the World  Trade Center towers. The attacks also caused major power outages in lower Manhattan. Con  Edison, the local power provider, lost three power substations and more  than 33 miles of cabling;",
      " total damage to the power infrastructure was  estimated at $410 million. As a result, more than 13,000 Con Edison  business customers lost power, which required them to either relocate  operations or use alternative power sources such as portable generators. To restore telecommunications and power, service providers had to  overcome considerable challenges. Access restrictions made this work  more difficult\u2014staff from WorldCom told us that obtaining complete  clearance through the various local, state, and federal officials, including  the National Guard, took about 2 days. In some cases, environmental and  other factors also prevented restoration efforts from beginning. According  to Verizon staff,",
      " efforts to assess the damage and begin repairs on 140 West  Street initially were delayed by concerns over the structural integrity of the  damaged facility and other nearby buildings; several times staff had to halt  assessment and repair efforts because government officials ordered  evacuations of the building. In some cases, infrastructure providers employed innovative solutions to  restore telecommunications and power quickly. For example, these  providers placed both telecommunications and power cables that are  normally underground directly onto the streets and covered them with  temporary plastic barriers. Con Edison repair staff also had tanks of liquid  nitrogen placed on street corners so that their employees could freeze  cables, which makes them easier to cut when making repairs.",
      " To work  around the debris that blocked access to 140 West, Verizon staff ran cables  over the ground and around damaged cabling to quickly restore services.  Because of damage to the reinforced vault that previously housed the  cables at Verizon\u2019s facility, a new cable vault was reconstructed on the first  floor, and cables were run up the side of the building to the fifth and eighth  floors, as shown in figure 9. Attacks Severely  Affected Financial  Markets but Heroic  Efforts Were Made to  Restore Operations Although the facilities of the stock and options exchanges and clearing  organizations in lower Manhattan were largely undamaged by the attacks,",
      "  many market participants were affected by the loss of telecommunications  and lack of access to lower Manhattan. As a result, many firms, including  some of the broker-dealers responsible for significant portions of the  overall securities market trading activity, were forced to relocate  operations to backup facilities and alternative locations. To resume  operations, these new facilities had to be prepared for trading and provided  with sufficient telecommunications capacity. Some firms had to have  telecommunications restored although they thought they had redundant  communications services. Regulators and market participants delayed the  opening of the stock and options market until September 17, until the key  broker-dealers responsible for large amounts of market liquidity were able  to operate and telecommunications had been tested.",
      " Most Securities Exchanges  and Market Support  Organizations Were Not  Directly Damaged Although several securities exchanges and market support organizations  were located in the vicinity of the attacks, most did not experience direct  damage. The NYSE, Depository Trust and Clearing Corporation, Securities  Industry Automation Corporation (SIAC), International Securities  Exchange, and the Island ECN all had important facilities located in close  proximity to the World Trade Center, but none of these organizations\u2019  facilities were damaged.   The American Stock Exchange (Amex) was the  only securities exchange that experienced incapacitating damage. Amex  was several hundred feet from the World Trade Center towers,",
      " but  sustained mostly broken windows and damage to some offices. However,  its drainage and ventilation systems were clogged by dust and debris and  the building lost power, telephones, and access to water and steam. The  loss of steam and water coupled with the inadequate drainage and  ventilation meant that Amex computer systems could not run due to a lack  of air conditioning. As a result, the Amex building was not cleared for  reoccupation until October 1, 2001, after inspectors had certified the  building as structurally sound and power and water had been fully  restored. Although the remaining exchanges were not damaged,",
      " U.S. stock  and options exchanges nationwide closed the day of the attacks and did not  reopen until September 17, 2001. However, regulators and market  participants acknowledged that if the major exchanges or clearing  organizations had sustained damage, trading in the markets would have  likely taken longer to resume. Damage to Financial  Institutions\u2019 Facilities and  Telecommunications Forced  Relocations and Made  Recovery Efforts  Challenging Although most exchanges and market support organizations were not  damaged by the attacks, several key firms with substantial operations in  the area sustained significant facilities damage. As a result of this damage  and the inability to access the area in the days following the attacks,",
      " many  financial institution participants had to relocate their operations, in some  cases using locations not envisioned by their BCPs. They then faced the  challenge of recreating their key operations and obtaining sufficient  telecommunications services at these new locations. For example, one  large broker-dealer with headquarters that had been located across from  the World Trade Center moved operations to midtown Manhattan, taking  over an entire hotel. To resume operations, firms had to obtain computers  and establish telecommunications lines in the rooms that were converted  to work spaces. Another large broker-dealer whose facilities were damaged  by the attacks attempted to reestablish hundreds of direct lines to its major  customers after relocating operations to the facilities of a recently  purchased broker-dealer subsidiary in New Jersey.",
      " The simultaneous  relocation of so many firms meant that they also had to establish  connections to the new operating locations of other organizations.  Although Verizon managers were unable to estimate how much of its  restoration work in the days following the attacks specifically addressed  such needs, they told us that considerable capacity was added to the New  Jersey area to accommodate many of the firms that relocated operations  there, including financial firms. Restoring operations often required innovative approaches. According to  representatives of the exchanges and other financial institutions we spoke  with, throughout the crisis financial firms that are normally highly  competitive instead exhibited a high level of cooperation. In some cases,",
      "  firms offered competitors facilities and office space. For example, traders  who normally traded stocks on the Amex floor obtained space on the  trading floor of NYSE, and Amex options traders were provided space at  the Philadelphia Stock Exchange. In some cases, innovative approaches  were used by the exchanges and utilities to restore lost connectivity to  their customers. For example, technicians at the Island ECN created virtual  private network connections for those users whose services were  disrupted. Island also made some of its trading applications available to its  customers through the Internet. In another example, SIAC, which  processes trades for NYSE and the American Stock Exchange,",
      " worked  closely with its customers to reestablish their connectivity, reconfiguring  customers\u2019 working circuits that had been used for testing or clearing and  settlement activities to instead transmit data to SIAC\u2019s trading systems. The Bond Market Association, the industry association representing  participants in the government and other debt markets, and the Securities  Industry Association (SIA), which represents participants in the stock  markets, played critical roles in reopening markets. Both associations  helped arrange daily conference calls with market participants and  regulators to address the steps necessary to reopen the markets. At times,  hundreds of financial industry officials were participating in these calls.  These organizations also made recommendations to regulators to provide  some relief to their members so that they could focus on restoring their  operations.",
      " For example, the Bond Market Association recommended to its  members that they extend the settlement date for government securities  trades from the day following trade date (T+1) to five days after to help  alleviate some of the difficulties that were occurring in the government  securities markets. Through a series of conference calls with major banks  and market support organizations, SIA was instrumental in helping to  develop an industrywide consensus on how to resolve operational issues  arising from the damage and destruction to lower Manhattan and how to  mitigate operational risk resulting from the destruction of physical (that is,  paper) securities, which some firms had maintained for customers.",
      " SEC also took actions to facilitate the successful reopening of the markets.  To allow market participants to focus primarily on resuming operations,  SEC issued rules to provide market participants temporary relief from  certain regulatory requirements. For example, SEC extended deadlines for  disclosure and reporting requirements, postponed the implementation date  for new reporting requirements, and temporarily waived some capital  regulation requirements. SEC implemented other relief measures targeted  toward stabilizing the reopened markets. For example, SEC relaxed rules  that restrict corporations from repurchasing their own shares of publicly  traded stock, and simplified registration requirements for airline and  insurance industries so that they could more easily raise capital.",
      " Stock and Options Markets  Opening Was Delayed until  Sufficient Connectivity and  Liquidity Existed Partially because of the difficulties experienced by many firms in restoring  operations and obtaining adequate telecommunications service, the  reopening of the markets was delayed. Although thousands of broker- dealers may participate in the securities markets, staff at NYSE and  NASDAQ told us that a small number of firms account for the majority of  the trading volume on their markets. Many of those firms had critical  operations in the area affected by the attacks. For example, 7 of the top 10  broker-dealers ranked by capital had substantial operations in the World  Trade Center or the World Financial Center,",
      " across from the World Trade  Center. In the immediate aftermath of the attack, these and other firms  were either attempting to restore operations at their existing locations or at  new locations. In addition, financial market participant staff and the  financial regulators told us that their staffs did not want to return to the  affected area too soon to avoid interfering with the rescue and recovery  efforts. For example, the SEC Chairman told us that he did not want to  send 10,000 to 15,000 workers into lower Manhattan while the recovery  efforts were ongoing and living victims were still being uncovered. Because of the considerable efforts required for broker-dealers to restore  operations,",
      " insufficient liquidity existed to open the markets during the  week of the attacks. According to regulators and exchange staff, firms able  to trade by Friday, September 14, accounted for only about 60 percent of  the market\u2019s normal order flow. As a result, securities regulators, market  officials, and other key participants decided that, until more firms were  able to operate normally, insufficient liquidity existed in the markets.  Opening the markets with some firms but not others was also viewed as  unfair to many of the customers of the affected firms. Although  institutional clients often have relationships with multiple broker-dealers,  smaller customers and individual investors usually do not;",
      " thus, they may  not have been able to participate in the markets under these  circumstances. In addition, connectivity between market participants and exchanges had  not been tested. For this reason, it was unclear how well the markets would  operate when trading resumed because so many critical  telecommunication connections were damaged in the attacks and had been  either repaired or replaced. Staff from the exchanges and market  participants told us that the ability to conduct connectivity testing prior to  the markets reopening was important. Many firms experienced technical  difficulties in getting the new connections they had obtained to work  consistently as telecommunication providers attempted to restore  telecommunications service. According to officials at one exchange,",
      "  restoring connections to its members was difficult because existing or  newly restored lines that were initially operational would erratically lose  their connectivity throughout the week following September 11.  Representatives of the exchanges and financial regulators with whom we  met told us that opening the markets but then having to shut them down  again because of technical difficulties would have greatly reduced investor  confidence. Because of the need to ensure sufficient liquidity and a stable operating  environment, market participants and regulators decided to delay the  resumption of stock and options trading until Monday, September 17. This  delay allowed firms to complete their restoration efforts and use the  weekend to test connectivity with the markets and the clearing  organizations.",
      " As a result of these efforts, the stock and options markets  reopened on September 17 and traded record volumes without significant  operational difficulties. Disruptions in  Government Securities  and Money Markets  Severely Affected  Clearance and  Settlement, Liquidity,  and Trade Volumes The attacks also severely disrupted the markets for government securities  and money market instruments primarily because of the impact on the  broker-dealers that trade in the market and on one of the key banks that  perform clearing functions for these products. According to regulatory  officials, at the time of the attacks, eight of the nine IDBs, which provide  brokerage services to other dealers in government securities,",
      " had  operations that were severely disrupted following the attacks. The most  notable was Cantor Fitzgerald Securities, whose U.S. operations had been  located on several of the highest floors of one of the World Trade Center  towers. Because much of the trading in the government securities market  occurs early in the day, the attacks and subsequent destruction of the  towers created massive difficulties for this market. When these IDBs\u2019  facilities were destroyed, the results of trading, including information on  which firms had purchased securities and which had sold, also were largely  lost. These trades had to be reconstructed from the records of the dealers  who had conducted trades with the IDBs that day.",
      " In addition, with the loss  of their facilities, most of the primary IDBs were not able to communicate  with the Government Securities Clearing Corporation (GSCC), which also  complicated the clearing and settlement of these trades. Staff from  financial market participants told us that reconciling some of these  transactions took weeks, and in some cases, months. Two banks\u2014the Bank of New York (BONY) and JP Morgan Chase\u2014were  the primary clearing banks for government securities. Clearing banks are  essentially responsible for transferring funds and securities for their dealer  and other customers that purchase or sell government securities. For  trades cleared through GSCC,",
      " the clearing organization for these  instruments, instructs its dealer members and the clearing banks as to the  securities and associated payments to be transferred to settle its members\u2019  net trade obligations. As a result of the attacks, BONY and its customers experienced  telecommunications and other problems that contributed to the disruption  in the government securities market because it was the clearing bank for  many major market participants and because it maintained some of GSCC\u2019s  settlement accounts.   BONY had to evacuate four facilities including its  primary telecommunications data center and over 8,300 staff, because they  were located near the World Trade Center. At several of these facilities,",
      " BONY conducted processing activities as part  of clearing and settling government securities transactions on behalf of its  customers and GSCC. The communication lines between BONY and the  Fedwire systems for payment and securities transfers, as well as those  between BONY and its clients, were critical to BONY\u2019s government  securities operations. Over these lines, BONY transmitted data with  instructions to transfer funds and securities from its Federal Reserve  accounts to those of other banks for transactions in government securities  and other instruments. BONY normally accessed its Federal Reserve  accounts from one of the lower Manhattan facilities that had to be  abandoned. In the days following the attacks,",
      " BONY had difficulties in  reestablishing its Fedwire connections and processing transactions.   In  addition, many BONY customers also had to relocate and had their own  difficulties in establishing connections to the BONY backup site. As a result  of these internal processing problems and inability to communicate with its  customers, BONY had problems determining what amounts should be  transferred on behalf of the clients for whom it performed clearing  services. For example, by September 12, 2001, over $31 billion had been  transferred to BONY\u2019s Federal Reserve account for GSCC, but because  BONY could not access this account,",
      " it could not transfer funds to which  its clients were entitled. BONY was not able to establish connectivity with  GSCC and begin receiving and transmitting instructions for payment  transfers until September 14, 2001. The problems at the IDBs and BONY affected the ability of many  government securities and money markets participants to settle their  trades. Before a trade can be cleared and settled, the counterparties to the  trade and the clearing banks must compare trade details by exchanging  messages to ensure that each is in agreement on the price and amount of  securities traded. To complete settlement, messages then must be  exchanged between the parties to ensure that the funds and ownership of  securities are correctly transferred.",
      " If trade information is not correct and  funds and securities are not properly transferred, the trade will be  considered a \u201cfail.\u201d As shown in figure 10, failed transactions increased  dramatically, rising from around $500 million per day to over $450 billion  on September 12, 2001. The level of fails also stayed high for many days  following the attacks, averaging about $100 billion daily through September  28. The problems in the government securities markets also created liquidity  problems for firms participating in and relying on these markets to fund  their operations. Many firms, including many large broker-dealers, fund  their operations using repurchase agreements,",
      " or repos, in which one party  sells government securities to another party and agrees to repurchase  those securities on a future date at a fixed price.   Because repos are used  to finance firms\u2019 daily operations, many of these transactions are executed  before 9:00 a.m. As a result, by the time the attacks occurred on September  11, over $500 billion in repos had been transacted. With so many IDB  records destroyed, many of the transactions could not be cleared and  settled, causing many of these transactions to fail. As a result, some firms  that relied on this market as a funding source experienced major funding  shortfalls.",
      " Although trading government securities was officially resumed within 2  days of the attacks, overall trading activity was low for several days. For  example, as shown in figure 11, trading volumes went from around $500  billion on September 10 to as low as $9 billion on September 12, 2001.    Similarly, repo activity fell from almost $900 billion on September 10 to  $145 billion on September 13. The attacks also disrupted the markets for commercial paper, which are  short-term securities issued by financial and other firms to raise funds.  According to clearing organization officials, the majority of commercial  paper redemptions\u2014when the investors that originally purchased the  commercial paper have their principal returned-- that were scheduled to be  redeemed on September 11 and September 12 were not paid until  September 13.",
      " Firms that relied on these securities to fund their operations  had to obtain other sources of funding during this period. The Federal Reserve took several actions to mitigate potential damage to  the financial system resulting from liquidity disruptions in these markets.  Banking regulatory staff told us that the attacks largely resulted in a  funding liquidity problem rather than a solvency crisis for banks. Thus, the  challenge they faced was ensuring that banks had adequate funds to meet  their financial obligations. The settlement problems also prevented broker- dealers and others from using the repo markets to fund their daily  operations. Soon after the attacks, the Federal Reserve announced that it  would remain open to help banks meet their liquidity needs.",
      " Over the next  4 days, the Federal Reserve provided about $323 billion to banks through  various means to overcome the problems resulting from unsettled  government securities trades and financial market dislocations. For  example, from September 11 through September 14, the Federal Reserve  loaned about $91 billion to banks through its discount window, in contrast  to normal lending levels of about $100 million. It also conducted securities  purchase transactions and other open market operations of about $189  billion to provide needed funds to illiquid institutions. Had these actions  not been taken, some firms unable to receive payments may not have had  sufficient liquidity to meet their other financial obligations,",
      " which could  have produced other defaults and magnified the effects of September 11  into a systemic solvency crisis. Regulators also took action to address the failed trades resulting from the  attacks. From September 11 through September 13, the Federal Reserve  loaned $22 billion of securities from its portfolio to broker-dealers that  needed securities to complete settlements of failed trades. According to  Federal Reserve staff, the Federal Reserve subsequently reduced  restrictions on its securities lending that led to a sharp increase in  borrowings at the end of September 2001.   Treasury also played a role in  easing the failed trades and preventing a potential financial crisis by  conducting an unplanned,",
      " special issuance of 10-year notes to help address  a shortage of notes of this duration in the government securities markets.  Market participants typically use these securities as collateral for financing  or to meet settlement obligations. To provide dollars needed by foreign institutions, the Federal Reserve also  conducted currency swaps with the Bank of Canada, the European Central  Bank, and the Bank of England. The swaps involved exchanging dollars for  the foreign currencies of these jurisdictions, with agreements to re- exchange amounts later. These temporary arrangements provided funds to  settle dollar-denominated obligations of foreign banks whose U.S.  operations were affected by the attacks. The Federal Reserve,",
      " Federal Deposit Insurance Corporation, OCC, and the  Office of Thrift Supervision issued a joint statement after the attacks to  advise the institutions they oversee that any temporary declines in capital  would be evaluated in light of the institution\u2019s overall financial condition.  The Federal Reserve also provided substantial amounts of currency so that  banks would be able to meet customer needs. Impact of Attacks on  the Banking and  Payments Systems Was  Less Severe With a few exceptions, commercial banks were not as adversely affected as  broker- dealers by the attacks. Although some banks had some facilities  and operations in lower Manhattan, they were not nearly as geographically  concentrated as securities market participants.",
      " As discussed previously,  BONY was one bank with significant operations in the World Trade Center  area, but only a limited number of other large banks had any operations  that were affected. According to regulatory officials that oversee national  banks, seven of their institutions had operations in the areas affected by  the attacks. Most payment system operations continued with minimal disruption. The  Federal Reserve Bank of New York (FRBNY) manages the Federal  Reserve\u2019s Fedwire securities and payments transfer systems. Although the  FRBNY sustained damage to some telecommunications lines, Fedwire  continued processing transactions without interruption because the actual  facilities that process the transactions are not located in lower Manhattan.",
      "  However, Federal Reserve officials noted that some banks experienced  problems connecting to Fedwire because of the widespread damage to  telecommunications systems. Over 30 banks lost connectivity to Fedwire  because their data first went to the FRBNY facility in lower Manhattan  before being transmitted to Fedwire\u2019s system\u2019s processing facility outside  the area. However, most were able to reestablish connections through dial- up backup systems and some began reporting transfer amounts manually  using voice lines. Federal Reserve officials noted that normal volumes for  manually reported transactions were about $200\u2013$400 million daily, but  from September 11 through September 13, 2001,",
      " banks conducted about  $151 billion in manually reported transactions. A major private-sector  payments system, CHIPS, also continued to function without operational  disruptions, although 19 of its members temporarily lost connectivity with  CHIPs in the aftermath of the attacks and had to reconnect from backup  facilities. Retail payments systems, including check clearing and automated clearing  house transactions, generally continued to operate. However, the  grounding of air transportation did complicate and delay some check  clearing, since both the Federal Reserve and private providers rely on  overnight air delivery to transport checks between banks in which they are  deposited and banks from which they are drawn.",
      " Federal Reserve officials  said they were able to arrange truck transportation between some check  clearing offices until they were able to gain approval for their chartered air  transportation to resume several days later. According to Federal Reserve  staff, transporting checks by ground slowed processing and could not  connect all offices across the country. The staff said that the Federal  Reserve continued to credit the value of deposits to banks even when it  could not present checks and debit the accounts of paying banks. This  additional liquidity \u2014normally less than $1 billion\u2014peaked at over $47  billion on September 13, 2001. Attacks Revealed  Limitations in  Financial Market  Participants\u2019 Business  Continuity Capabilities The terrorist attacks revealed that limits that existed in market  participants\u2019 business continuity capabilities at the time of the attacks.",
      "  Based on our discussions with market participants, regulators, industry  associations and others, the BCPs of many organizations had been too  limited in scope to address the type of disaster that occurred. Instead,  BCPs had procedures to address disruptions affecting a single facility such  as power outages or fires at one building. For example, a 1999 SEC  examination report of a large broker-dealer that we reviewed noted that in  the event of an emergency this firm\u2019s BCP called for staff to move just one- tenth of a mile to another facility. By not planning for wide-scale events,  many organizations had not invested in backup facilities that could  accommodate key aspects of their operations,",
      " including several of the large  broker-dealers with primary operations located near the World Trade  Center that had to recreate their trading operations at new locations.  Similarly, NYSE and several of the other exchanges did not have backup  facilities at the time of the attacks from which they could conduct trading. The attacks also illustrated that some market participants\u2019 backup facilities  were too close to their primary operations. For example, although BONY  had several backup facilities for critical functions located several miles  from the attacks, the bank also backed up some critical processes at  facilities that were only blocks away. According to clearing organization  and regulatory staff, one of the IDBs with facilities located in one of the  destroyed towers of the World Trade Center had depended on backup  facilities in the other tower.",
      " Additionally, firms\u2019 BCPs did not adequately take into account all necessary  equipment and other resources needed to resume operations as completely  and rapidly as possible. For example, firms that occupied backup facilities  or other temporary space found that they lacked sufficient space for all  critical staff or did not have all the equipment needed to conduct their  operations. Others found that their backup sites did not have the most  current versions of the software and systems that they use, which caused  some restoration problems. Some firms had contracted with third-party  vendors for facilities and equipment to conduct operations during  emergencies, but because so many firms were disrupted by the attacks,",
      "  some of these facilities were overbooked, and firms had to find other  locations in which to resume operations. Organizations also learned that their BCPs would have to better address  human capital issues. For example, some firms had difficulties in locating  key staff in the confusion after the attacks. Others found that staff were not  able to reach their backup locations as quickly as their plans had  envisioned due to the closure of public transit systems, bridges, and roads.  Other firms had not planned for the effects of the trauma and grief on their  staff and had to provide access to counseling for those that were  overwhelmed by the events.",
      " The attacks also revealed the need to improve some market participants\u2019  business continuity capabilities for telecommunications. According to  broker-dealers and regulator staff with whom we spoke, some firms found  that after relocating their operations, they learned that their backup  locations connected to the primary sites of the organizations critical to  their operations but not to these organizations\u2019 backup sites. Some  financial firms that did not have damaged physical facilities nonetheless  learned that their supporting telecommunications services were not as  diverse and redundant as they expected. Diversity involves establishing  different physical routes in and out of a building, and using different  equipment along those routes if a disaster or other form of interference  adversely affects one route.",
      " Redundancy involves having extra capacity  available, generally from more than one source, and also incorporates  aspects of diversity. Therefore, users that rely on telecommunications  services to support important applications try to ensure that those services  use facilities that are diverse and redundant so that no single point in the  communications path can cause all services to fail. Ensuring that carriers  actually maintain physically redundant and diverse telecommunications  services has been a longstanding concern within the financial industry. For  example, the President\u2019s National Security Telecommunications Advisory  Committee in December 1997 reported, \u201cdespite assurances about diverse  networks from the carriers, a consistent concern among the financial  services industry was the trustworthiness of their telecommunications  diversity arrangements.\u201d This concern was validated following the September 11 attacks when firms  that thought they had achieved redundancy in their communications  systems learned that their network services were still disrupted.",
      " According  to regulators and financial market participants with whom we spoke, some  firms that made arrangements with multiple service providers to obtain  redundant service discovered that the lines used by their providers were  not diverse because they routed through the same Verizon switching  facility. Other firms that had mapped out their communications lines to  ensure that their lines flowed through physically diverse paths at the time  those services were first acquired found that their service providers had  rerouted some of those lines over time without their knowledge,  eliminating that assurance of diversity in the process. Observations The attacks demonstrated that the ability of U.S. financial markets to  remain operational after disasters depends to a great extent on the  preparedness of not only the exchanges and clearing organizations but also  the major broker-dealers and banks that participate in these markets.",
      " The  various financial markets were severely affected and the stock and options  exchanges were closed in the days following the attacks for various  reasons, including the need to conduct rescue operations. However, the  markets also remained closed because of the time required for several  major broker-dealers that normally provide the bulk of the liquidity for  trading in the stock, options, and government securities markets to become  operational. Although the attacks were of a nature and magnitude beyond  that previously imagined, they revealed the need to address limitations in  the business continuity capabilities of many organizations and to mitigate  the concentration of critical operations in a limited geographic area. Many  organizations will have to further assess how vulnerable their operations  are to disruptions and determine what capabilities they will need to  increase the likelihood of being able to resume operations after such  events.",
      " Financial Market Participants Have Taken  Actions to Reduce Risks of Disruption, but  Some Limitations Remain Since the attacks, exchanges, clearing organizations, ECNs, and payment  system processors implemented various physical and information security  measures and business continuity capabilities to reduce the risk that their  operations would be disrupted by attacks, but some organizations  continued to have limitations in their preparedness that increases their risk  of disruption. With threats to the financial markets potentially increasing,  organizations must choose how best to use their resources to reduce risks  by investing in protection against physical and electronic attacks for  facilities, personnel, and information systems and developing capabilities  for continuing operations.",
      " To reduce the risk of operations disruptions, the  15 financial market organizations\u2014including the 7 critical ones\u2014we  reviewed in 2002 had taken many steps since the attacks to protect their  physical facilities or information systems from attacks and had developed  plans for recovering from such disruptions. However, at the time we  conducted our review, 9 of the 15 organizations, including 2 we considered  critical to the functioning of the financial markets, had not taken steps to  ensure that they would have the staff necessary to conduct their critical  operations if the staff at their primary site were incapacitated\u2014including 8  organizations that also had physical vulnerabilities at their primary sites.",
      "  Ten of the 15 organizations, including 4 of the critical organizations, also  faced increased risk of being unable to operate after a wide-scale  disruption because they either lacked backup facilities or had backup  facilities near their primary sites. Finally, although many of the 15  organizations had attempted to reduce their risks by testing some of their  risk reduction measures, only 3 were testing their physical security  measures, only 8 had recently assessed the vulnerabilities of their key  information systems, and only 7 had fully tested their BCPs. In Climate of  Increasing Risk,  Organizations Often  Have to Choose How to  Best Use Resources Faced with varying and potentially increasing threats that could disrupt  their operations,",
      " organizations must make choices about how to best use  their resources to both protect their facilities and systems and develop  business continuity capabilities. September 11, 2001, illustrated that such  attacks can have a large-scale impact on market participants. Law  enforcement and other government officials are concerned that public and  private sectors important to the U.S. economy, including the financial  markets, may be increasingly targeted by hostile entities that may have  increasing abilities to conduct such attacks. For example, the leader of the  al Qaeda organization was quoted as urging that attacks be carried out  against the \u201cpillars of the economy\u201d of the United States.",
      " Press accounts of  captured al Qaeda documents indicated that members of this organization  may be increasing their awareness and knowledge of electronic security  techniques and how to compromise and damage information networks and  systems, although the extent to which they could successfully conduct  sophisticated attacks has been subject to debate. A recent report on U.S.  foreign relations also notes that some foreign countries are accelerating  their efforts to be able to attack U.S. civilian communications systems and  networks used by institutions important to the U.S. economy, including  those operated by stock exchanges. The physical threats that individual organizations could reasonably be  expected to face vary by type and likelihood of occurrence.",
      " For example,  events around the world demonstrate that individuals carrying explosive  devices near or inside facilities can be a common threat. More powerful  explosive attacks by vehicle are less common but still have been used to  devastating effect in recent years. Other less likely, but potentially  devastating, physical threats include attacks involving biological or  chemical agents such as the anthrax letter mailings that occurred in the  United States in 2001 and the release of a nerve agent in the Tokyo subway  in 1995. Faced with the potential for such attacks, organizations can choose to  invest in a range of physical security protection measures to help manage  their risks.",
      " The Department of Justice has developed standards that  identify measures for protecting federal buildings from physical threats.  To reduce the likelihood of incurring damage from individuals or  explosives, organizations can physically secure perimeters by controlling  vehicle movement around a facility, using video monitoring cameras,  increasing lighting, and installing barriers. Organizations can also prevent  unauthorized persons or dangerous devices from entering their facilities by  screening people and objects, restricting lobby access, and only allowing  employees or authorized visitors inside. Organizations could also take  steps to prevent biological or chemical agents from contaminating facilities  by opening and inspecting mail and deliveries off-site. To protect sensitive  data,",
      " equipment, and personnel, organizations can also take steps to secure  facility interiors by using employee and visitor identification systems and  restricting access to critical equipment and utilities such as power and  telecommunications equipment. Organizations can also reduce the risk of operations disruptions by  investing in measures to protect information systems. Information system  threats include hackers, who are individuals or groups attempting to gain  unauthorized access to networks or systems to steal, alter, or destroy  information. Another threat\u2014known as a denial of service attack\u2014 involves flooding a system with messages that consume its resources and  prevent authorized users from accessing it. Information systems can also  be disrupted by computer viruses that damage data directly or degrade  system performance by taking over system resources.",
      " Information security  guidance used for reviews of federal organizations recommend that  organizations develop policies and procedures that cover all major systems  and facilities and outline the duties of those responsible for security.   To  prevent unauthorized access to networks and information systems,  organizations can identify and authenticate users by using software and  hardware techniques such as passwords, firewalls, and other filtering  devices. Organizations can also use monitoring systems to detect  unauthorized attempts to gain access to networks and information systems  and develop response capabilities for electronic attacks or breaches. Investing in business continuity capabilities is another way that  organizations can reduce the risk that their operations will be disrupted.  According to guidance used by private organizations and financial  regulators,",
      " developing a sound BCP requires organizations to determine  which departments, business units, or functions are critical to operations.  The organizations should then prepare a BCP that identifies capabilities  that have to be in place, resources required, and procedures to be followed  for the organization to resume operations. Such capabilities can include  backup facilities equipped with the information technology hardware and  software that the organization needs to conduct operations. Alternatively,  organizations can replace physical locations or processes, such as trading  floors, with electronic systems that perform the same core functions. Many  organizations active in the financial markets are critically dependent on  telecommunications services for transmitting the data or voice traffic  necessary to operate.",
      " As a result, organizations would have to identify their  critical telecommunications needs and take steps to ensure that services  needed to support critical operations will be available after a disaster.  Finally, BCP guidance such as FISCAM, which provides standards for  audits of federal information systems, also recommends that organizations  have backup staff that can implement BCP procedures. To the extent that  an organization\u2019s ability to resume operations depends on the availability of  staff with specific expertise, the organization has to maintain staff capable  of conducting its critical functions elsewhere. Given that most organizations have limited resources, effectively managing  the risk of operations disruptions involves making trade-offs between  investing in protection of facilities,",
      " personnel, and systems or development  of business continuity capabilities. For example, organizations must weigh  the expected costs of operations disruptions against the expected cost of  implementing security protections, developing facilities, or implementing  other business continuity capabilities to ensure that they would be able to  resume operations after a disaster. Risk management guidance directs  organizations to identify how costly various types of temporary or  extended outages or disruptions would be to parts or all of their  operations. Such costs stem not only from revenues actually lost during the  outage, but also from potential lost income because of damage to the  organization\u2019s reputation stemming from its inability to resume operations.",
      "  In addition to estimating the potential costs of disruptions, organizations  are advised to identify potential threats that could cause such disruptions  and estimate the likelihood of these events. By quantifying the costs and  probabilities of occurrence of various disruptions, an organization can then  better evaluate the amount and how to allocate the resources that it should  expend on either implementing particular protection measures or attaining  various business continuity capabilities. For example, an organization  whose primary site is located in a highly trafficked, public area may have  limited ability to reduce all of its physical security risks. However, such an  organization could reduce the risk of its operations being disrupted by  having a backup facility manned by staff capable of supporting its critical  operations or by cross-training other staff.",
      " All Financial Market  Organizations Were  Taking Steps to Reduce  the Risks of Operations  Disruptions The 15 exchanges, clearing organizations, ECNs, and payment system  processors we reviewed in 2002 had invested in various physical and  information protections and business continuity capabilities to reduce the  risk that their operations would be disrupted. Each of these 15  organizations had implemented physical security measures to protect  facilities and personnel. To establish or increase perimeter security, some  organizations had erected physical barriers around their facilities such as  concrete barriers, large flowerpots, or boulders. To reduce the likelihood  that its operations would be disrupted by vehicle-borne explosives,",
      " one  organization had closed off streets adjacent to its building and had guards  inspect all vehicles entering the perimeter. Some organizations were also  using electronic surveillance to monitor their facilities, with some  organizations having 24-hour closed circuit monitoring by armed guards.  Others had guards patrolling both the interior and exterior of their facilities  on a 24-hour basis. In addition, all of these organizations had taken  measures to protect the security of their interiors. For example, the  organizations required employee identification, electronic proximity cards,  or visitor screening. All 15 organizations had taken measures to reduce the risk that electronic  threats would disrupt their operations.",
      " The securities markets already use  networks and information systems that reduce their vulnerability to  external intrusion in several ways. First, the securities exchanges and  clearing organizations have established private networks that transmit  traffic only to and from their members\u2019 systems, which are therefore more  secure than the Internet or public telephone networks. Second, traffic on  the exchange and clearing organization networks uses proprietary message  protocols or formats, which are less vulnerable to the insertion of  malicious messages or computer viruses. Although rendering the securities  market networks generally less vulnerable, these features do not  completely protect them and the prominence of securities market  participants\u2019 role in the U.S.",
      " economy means that their networks are more  likely to be targeted for electronic attack than some other sectors. The 15  organizations we reviewed in 2002 had generally implemented the elements  of a sound information security program, including policies and procedures  and access controls. Thirteen of the 15 organizations were also using  intrusion detection systems, and the remaining 2 had plans to implement or  were considering implementing such systems. All 15 of the organizations  also had procedures that they would implement in the event of systems  breaches, although the comprehensiveness of the incident response  procedures varied. For example, 2 organizations\u2019 incident response plans  involved shutting down any breached systems,",
      " but lacked documented  procedures for taking further actions such as gathering evidence on the  source of the breach. Developing business continuity capabilities is another way to reduce the  risk of operations disruptions, and all 15 of the organizations we reviewed  in 2002 had plans for continuing operations. These plans had a variety of  contingency measures to facilitate the resumption of operations. For  example, 11 organizations had backup facilities to which their staff could  relocate if disruptions occurred at the primary facility. One of these  organizations had three fully equipped and staffed facilities that could  independently absorb all operations in an emergency or disruption. In  some cases,",
      " organizations did not have backup facilities that could  accommodate their operations but had taken steps to ensure that key  business functions could be transferred to other organizations. For  example, staff at one exchange that lacked a backup facility said that most  of the products it traded were already traded on other exchanges, so  trading of those products would continue if its primary site was not  available. In addition, this exchange has had discussions with other  exchanges about transferring trading of proprietary products to the other  exchanges in an emergency situation. These organizations all had  inventoried critical telecommunications and had made arrangements to  ensure that they would continue to have service if primary lines were  damaged.",
      " Some Financial  Organizations Had  Preparedness  Limitations That  Increased Their Risk of  an Operations  Disruption Although all 15 organizations we reviewed had taken steps to address  physical and electronic threats and had BCPs to respond to disruptive  events, but at the time of our review many had limitations in their  preparedness that increased the risk of an operations disruption. Nine of  the 15 organizations, including 2 critical organizations, were at greater risk  of experiencing an operations disruption because their BCPs did not  address how they would recover if a physical attack on their primary  facility left a large percentage of their staff incapacitated.",
      " Although 5 of  these 9 organizations had backup facilities, they did not maintain staff  outside of their primary facility that could conduct all their critical  operations. Eight of the 9 organizations also had physical security  vulnerabilities at their primary sites that they either had not or could not  mitigate. For example, these organizations were unable to control  vehicular traffic around their facilities and thus were more exposed to  damage than those that did have such controls. Most of the organizations we reviewed also had faced increased risk that  their operations would be disrupted by a wide-scale disaster. As of August  2002, all 7 of the critical organizations we reviewed had backup facilities,",
      "  including 3 whose facilities were hundreds of miles from their primary  facilities. For example, 1 organization had two data centers located about  500 miles apart, each capable of conducting the organization\u2019s full scope of  operations in the event that one site failed. The organization also has a  third site that can take over the processing needed for daily operations on a  next-day basis. However, the backup facilities of the other four  organizations were located 2 to 5 miles from their primary sites. If a wide- scale disaster caused damage or made a region greater than these distances  inaccessible, these 4 organizations would be at greater risk for not being  able to resume operations promptly.",
      " Many of the other 8 organizations also had faced increased risk that their  operations would be disrupted by wide-scale disasters. At the time we  conducted our review, 2 of the 8 organizations had backup facilities that  were hundreds of miles from their primary operations. The remaining 6  organizations faced increased risk of being disrupted by a wide-scale  disaster because 4 lacked backup facilities, while 2 organizations had  backup facilities that were located 4 to 10 miles from their primary  operations facilities. Of the 4 organizations that lacked a backup facility,  one had begun constructing a facility near its primary site. Four of the organizations that lacked regionally dispersed backup facilities  told us that they had begun efforts to become capable of conducting their  operations at locations many miles from their current primary and backup  sites.",
      " For example, NYSE has announced that it is exploring the possibility  of creating a second active trading floor some miles from its current  location. In contrast to the backup trading location NYSE built in the  months following the attack, which would only be active should its current  primary facility become unusable, the exchange plans to move the trading  of some securities currently traded at its primary site to this new facility  and have both sites active each trading day. However, if the primary site  were damaged, the new site would be equipped to be capable of conducting  all trading. In December 2002, NYSE staff told us that they were still  evaluating the creation of this second active trading floor.",
      " For the organizations that lacked backup facilities, cost was the primary  obstacle to establishing such capabilities. For example, staff at one  organization told us that creating a backup location for its operations  would cost about $25 million, or as much as 25 percent of the organization\u2019s  total annual revenue. Officials at the 3 organizations without backup sites  noted that the products and services they provide to the markets are largely  duplicated by other organizations, so their inability to operate would have  minimal impact on the overall market\u2019s ability to function. Although cost can be a limiting factor, financial market organizations have  some options for creating backup locations that could be cost-effective.",
      " At  least one of the organizations we reviewed has created the capability of  conducting its trading operations at a site that is currently used for  administrative functions. By having a dual-use facility, the organization has  saved the cost of creating a completely separate backup facility. This  option also would seem well suited to broker-dealers, banks, and other  financial institutions because they frequently maintain customer service  call centers that have large numbers of staff that could potentially be  equipped with all or some of the systems and equipment needed for the  firm\u2019s trading or clearing activities. Some Financial Market  Organizations Not Fully  Testing Security Measures  or Business Continuity  Capabilities Organizations can also minimize operations risk by testing their physical  and information security measures and business continuity plans,",
      " but we  found the 15 exchanges, clearing organizations, ECNs, and payment system  processors were not fully testing all these areas. In the case of physical  security, such assessments can include attempting to infiltrate a building or  other key facility such as a data processing center or assessing the integrity  of automated intrusion detection systems. In the case of information  security, such assessments can involve attempts to access internal systems  or data from outside the organization\u2019s network or by using software  programs that identify, probe, and test systems for known vulnerabilities.  For both physical and information security, these assessments can be done  by the organization\u2019s own staff,",
      " its internal auditors, or by outside  organizations, such as security or consulting firms. The extent to which the 15 exchanges, clearing organizations, ECNs, and  payment system providers that we reviewed had tested their physical  security measures varied. Only 3 of the 7 critical financial organizations  routinely tested their physical security; the tests included efforts to gain  unauthorized access to facilities or smuggle fake weapons into buildings. None of the remaining 8 organizations routinely tested the physical security  of their facilities. To test their information security measures, all 7 of the critical  organizations had assessed network and systems vulnerabilities. We  considered an organization\u2019s assessment current if it had occurred within  the 2 years prior to our visit,",
      " because system changes over time can create  security weaknesses, and advances in hacking tools can create new means  of penetrating systems. According to the assessments provided to us by  the 7 critical organizations, all had performed vulnerability assessments of  the information security controls they implemented over some of their key  trading or clearing systems within the last 2 years. However, these tests  were not usually done in these organizations\u2019 operating environment but  instead were done on test systems or during nontrading hours. Seven of the  remaining 8 organizations we reviewed also had not generally had  vulnerability assessments of their key trading or clearing networks  performed with the 2 years prior to our review.",
      " However, in the last 2 years,  all 15 organizations had some form of vulnerability assessments performed  for their corporate or administrative systems, which they use to manage  their organization or operate their informational Web sites. Most of the 7 organizations critical to overall market functioning were  conducting regular tests of their business continuity capabilities. Based on  our review, 5 of the 7 critical organizations had conducted tests of all  systems and procedures critical to business continuity. However, these  tests were not usually done in these organizations\u2019 real-time environments.  Staff at one organization told us that they have not recently conducted live  trading from their backup site because of the risks,",
      " expense, and difficulty  involved. Instead, some tested their capabilities by switching over to  alternate facilities for operations simulations on nontrading days. One  organization tested all components critical to their operations separately  and over time, but it had not tested all aspects simultaneously. Of the 8  other financial market organizations we reviewed, only 2 had conducted  regular BCP tests. One organization, however, had an extensive disaster  recovery testing regimen that involved using three different scenarios:  simulating a disaster at the primary site and running its systems and  network from the backup site; simulating a disaster at the backup site and  running the systems and network from the primary site;",
      " and running its  systems and network from the consoles at the backup site with no staff in  the control room at the primary site. Organizations also discovered the benefits of conducting such tests. For  example, because of lessons learned through testing, one organization  learned vital information about the capabilities of third-party applications,  identified the need to configure certain in-house applications to work at the  recovery site, installed needed peripheral equipment at the backup site,  placed technical documentation regarding third-party application  installation procedures at the backup site, and increased instruction on  how to get to the backup site if normal transportation routes were  unavailable. An official at this organization told us that with every test,",
      " they  expected to learn something about the performance of their BCP and  identify ways to improve it. Observations The exchanges, clearing organizations, ECNs, and payment system  providers that we reviewed had all taken various steps to reduce the risk  that their operations would be disrupted by physical or electronic attacks.  In general, the organizations we considered more critical to the overall  ability of the markets to function had implemented the most  comprehensive physical and information security measures and BCPs.  However, limitations in some organizations\u2019 preparedness appeared to  increase the risks that their operations could be disrupted because they  had physical security vulnerabilities not mitigated with business continuity  capabilities.",
      " The extent to which these organizations had also reduced the  risk posed by a wide-scale disruption also varied. Because the importance  of these organizations\u2019 operations to the overall markets varies, regulators  are faced with the challenge of determining the extent to which these  organizations should take additional actions to address these limitations to  reduce risks to the overall markets. Financial Market Regulators Lack Recovery  Goals for Trading and Could Strengthen Their  Operations Risk Oversight Although banking and securities regulators have begun to take steps to  prevent future disasters from causing widespread payment defaults, they  have not taken important actions that would better ensure that trading in  critical U.S. financial markets could resume smoothly and in a timely  manner after a major disaster.",
      " The three regulators for major market  participants, the Federal Reserve, OCC, and SEC are working jointly with  market participants to develop recovery goals and sound business  continuity practices that will apply to a limited number of financial market  organizations to ensure that these entities can clear and settle transactions  and meet their financial obligations after future disasters. However, the  regulators\u2019 recovery goals and sound practices do not extend to  organizations\u2019 trading activities or to the stock exchanges. The regulators  also had not developed complete strategies that identify where trading  could be resumed or which organizations would have to be ready to  conduct trading if a major exchange or multiple broker-dealers were  unlikely to be operational for an extended period.",
      " Individually, these three  regulators have overseen operations risks in the past. SEC has a program\u2014 the Automation Review Policy (ARP)\u2014for reviewing exchanges and  clearing organizations efforts to reduce operations risks, but this program  faces several limitations. Compliance with the program is voluntary, and  some organizations have not always implemented important ARP  recommendations. In addition, market participants raised concerns over  the inexperience and insufficient technical expertise of SEC staff, and the  resources committed to the program limit the frequency of examinations.  Lacking specific requirements in the securities laws, SEC has not generally  examined operations risk measures in place at broker-dealers.",
      " The Federal  Reserve and OCC are tasked with overseeing the safety and soundness of  banks\u2019 operations and had issued and were updating guidance that covered  information system security and business continuity planning. They also  reported annually examining information security and business continuity  at the entities they oversee, but these reviews did not generally assess  banks\u2019 measures against physical attacks. Regulators Are  Developing Recovery  Goals and Sound  Business Continuity  Practices for Clearing  Functions but Not for  Trading Activities Treasury and the financial regulators have various initiatives under way to  improve the financial markets\u2019 ability to respond to future crises (we  discuss these in app.",
      " II) and assess how well the critical assets of the  financial sector are being protected. As part of these initiatives, certain  financial market regulators have begun to identify business continuity  goals for the clearing and settling organizations for government and  corporate securities. On August 30, 2002, the Federal Reserve, OCC, SEC,  and the New York State Banking Department issued the Draft Interagency  White Paper on Sound Practices to Strengthen the Resilience of the U.S.  Financial System. The paper presents sound practices to better ensure  that clearance and settlement organizations will be able to resume  operations promptly after a wide-scale,",
      " regional disruption. The paper  proposes these organizations adopt certain practices such as   identifying the activities they perform that support these critical   developing plans to recover these activities on the same business day;  and  having out-of-region resources sufficient to recover these operations  that are not dependent on the same labor pool or transportation,  telecommunications, water, and power. The regulators plan to apply the sound practices to a limited number of  financial market organizations whose inability to perform certain critical  functions could result in a systemic crisis that threatens the stability of the  financial markets. If these organizations were unable to sufficiently recover  and meet their financial obligations, other market participants could  similarly default on their obligations and create liquidity or credit  problems.",
      " According to the white paper, the sound practices apply to \u201ccore  clearing and settlement organizations,\u201d which include market utilities that  clear and settle transactions on behalf of market participants and the two  clearing banks in the government securities market. In addition, the  regulators expect firms that play significant roles in these critical financial  markets also to comply with sound practices that are somewhat less  rigorous. The white paper indicates that probably 15 to 20 banks and 5 to 10  broker-dealers have volume or value of activity in these markets sufficient  to present a systemic risk if they were unable to recover their clearing  functions and settle all their transactions by the end of the business day.",
      " The regulators also sought comment on the appropriate scope and  application of the white paper, including whether they should address the  duration of disruption that should be planned for, the geographic  concentration of backup sites, and the minimum distance between primary  and backup facilities. After considering the comments they receive, the  regulators intend to issue a final version in 2003 of the white paper that will  present the practices to be adopted by clearance and settlement  organizations for these markets. Based on our analysis of the comment letters that have been sent to the  regulators as of December 2002, market participants and other  commenters have raised concerns over the feasibility and cost of the  practices advocated by the white paper.",
      " The organizations that have  commented on the paper include banks, broker-dealers, industry  associations, information technology companies and consultants, and  many of these organizations complimented the regulators for focusing  attention on a critical area. However, many commenters have urged the  regulators to ensure that any practices issued balance the cost of  implementing improved business continuity capabilities against the  likelihood of various types of disruptions occurring. For example, a joint  letter from seven broker-dealers and banks stated that requiring  organizations to make costly changes to meet remote possibilities is not  practical. Other commenters urged regulators not to mandate minimum  distances between primary sites and backup locations for several reasons.",
      "  For example, some commenters noted that beyond certain distances, firms  cannot simultaneously process data at both locations, which the regulators  acknowledged could be between 60 to 100 kilometers. Rather than specify  a minimum distance, others stated that the practices should provide  criteria that firms should consider in determining where to locate their  backup facilities. One broker-dealer commented that it had chosen the  locations of its two operating sites to minimize the likelihood that both  would be affected by the same disaster or disruption. It noted that its two  sites were served by separate water treatment plants and power grids and  different telecommunication facilities support each.",
      " A third commonly  cited concern was that the regulators should implement the practices as  guidelines, rather than rules. For example, one industry association stated,  \u201cRegulators should not impose prescriptive requirements, unless  absolutely necessary, in order to enhance the firms\u2019 ability to remain  competitive in the global market.\u201d Ensuring that organizations recover their clearing functions would help  ensure that settlement failures do not create a broader financial crisis, but  regulators have not begun a similar effort to develop recovery goals and  business continuity practices to ensure that trading activities can resume  promptly in various financial markets. Trading activities are important to  the U.S. economy because they facilitate many important economic  functions,",
      " including providing means to productively invest savings and  allowing businesses to fund operations. The securities markets also allow  companies to raise capital for new ventures. Ensuring that trading  activities resume in a smooth and timely manner would appear to be a  regulatory goal for SEC, which is specifically charged with maintaining fair  and orderly markets. However, Treasury and SEC staff told us that the  white paper practices would be applied to clearing functions because such  activities are concentrated in single entities for some markets or in very  few organizations for others, and thus pose a greater potential for  disruption. In contrast, they did not include trading activities or  organizations that conduct only trading functions,",
      " such as the securities  exchanges, because these activities are performed by many organizations  that could substitute for each other. For example, SEC staff said that if one  of the exchanges was unable to operate, other exchanges or the ECNs  could trade their products. Similarly, they said that individual broker- dealers are not critical to the markets because others firms can perform  their roles. Although regulators have begun to determine which organizations are  critical for accomplishing clearing functions, identifying the organizations  that would have to be ready for trading in U.S. financial markets to resume  within a given period of time is also important. If key market participants  are not identified and do not adopt sound business continuity practices,",
      " the  markets may not have sufficient liquidity for fair and orderly trading. For  example, in the past when NYSE experienced operations disruptions, the  regional exchanges usually have also chosen to suspend trading until NYSE  could resume. SEC staff have also previously told us that the regional  exchanges may not have sufficient processing capacity to process the full  volume usually traded on NYSE. If the primary exchanges are not  operational, trading could be transferred to the ECNs, but regulators have  not assessed whether such organizations have sufficient capacity to  conduct such trading or whether other operational issues would hinder  such trading. SEC has begun efforts to develop a strategy for resuming stock trading for  some exchanges,",
      " but the plan is not yet complete and does not address all  exchanges and all securities. To provide some assurance that stock trading  could resume if either NYSE or NASDAQ was unable to operate after a  disaster, SEC has asked these exchanges to take steps to ensure their  information systems can conduct transactions in the securities that the  other organization normally trades. SEC staff told us each organization will  have to ensure that its systems can properly process the varying number of  characters in the symbols that each uses to represent securities. However,  as of December 2002, SEC had not identified the specific capabilities that  the exchanges should implement.",
      " For example, NASDAQ staff said that  various alternatives are being proposed for conducting this trading and  each would involve varying amounts of system changes or processing  capacity considerations. In addition, although each exchange trades  thousands of securities, NYSE staff told us that they are proposing to  accommodate only the top 250 securities, and the remainder of NASDAQ\u2019s  securities, which have smaller trading volumes, would have to be traded by  the ECNs or other markets. NASDAQ staff said they planned to trade all  NYSE securities if necessary. NYSE staff also said that their members have  been asked to ensure that the systems used to route orders to NYSE be  ready to accept NASDAQ securities by June 2003.",
      " Furthermore, although  some testing is under way, neither exchange has completely tested its  ability to trade the other\u2019s securities. Strategies for other exchanges and  products also have not been developed. As noted in chapter 2 of this report, trading was not resumed in U.S. stock  and options markets after the attacks until several key broker-dealers were  able to sufficiently recover their operations. Resuming operations after  disruptions can be challenging because large broker-dealers\u2019 trading  operations can require thousands of staff and telecommunications lines. In  some cases, organizations that may not appear critical to the markets in  ordinary circumstances could become so if a disaster affects other  participants more severely.",
      " For example, in the days following the attacks,  one of the IDBs that previously had not been one of the most active firms  was one of the few firms able to resume trading promptly. Program, Staff, and  Resource Issues  Hamper SEC Oversight  of Market Participants\u2019  Operations Risks Lacking specific requirements under the securities laws, SEC uses a  voluntary program to oversee exchange, clearing organization, and ECN  information systems operations. U.S. securities laws, rules, and regulations  primarily seek to ensure that investors are protected. For example,  securities laws require that companies issuing securities disclose material  financial information,",
      " and SRO rules require broker-dealers to determine  the suitability of products before recommending them to their customers.  The regulations did not generally contain specific requirements applicable  to physical or information system security measures or business continuity  capabilities. However, as part of its charge to ensure fair and orderly  markets and to address information system and operational problems  experienced by some markets during the 1980s, SEC created a voluntary  program\u2014ARP\u2014that covered information technology issues at the  exchanges, clearing organizations and, eventually, ECNs. SEC\u2019s 1989 ARP  statement called for the exchanges and clearing organizations to establish  comprehensive planning and assessment programs to test system  capacities,",
      " develop contingency protocols and backup facilities,  periodically assess the vulnerability of their information systems to  external or internal threats, and report the results to SEC. SEC issued an  additional ARP statement in 1991 that called for exchanges and clearing  organizations to obtain independent reviews\u2014done by external  organizations or internal auditors\u2014of their general controls in several  information system areas. SEC ARP Reviews Address  Some Operations Risks but  Some Key  Recommendations Not  Addressed SEC\u2019s ARP staff conducted examinations of exchanges, clearing  organizations, and ECNs that addressed their information security and  business continuity. The examinations are based on ARP policy statements  that cover information system security,",
      " business continuity planning, and  physical security at data and information systems centers, but do not  address how organizations should protect their entire operations from  physical attacks. SEC\u2019s ARP program staff explained that they analyze the  risks faced by each organization to determine which are the most  important to review. As a result, the staff is not expected to review every  issue specific to the information systems or operations of each exchange,  clearing organization, and ECN during each examination. We found that  SEC ARP staff were reviewing important operations risks at the  organizations they examined. Based on our review of the 10 most recent  ARP examinations completed between January 2001 and July 2002,",
      " 9  covered information system security policies and procedures, and 7  examinations covered business continuity planning. Only one  examination\u2014done after the September 11, 2001, attacks\u2014included  descriptions of the overall physical security improvements. SEC ARP staff  told us that telecommunications resiliency was a part of normal  examinations, but none of the examination reports we reviewed  specifically discussed these organizations\u2019 business continuity measures  for ensuring that their telecommunications services would be available  after disasters. However, ARP staff said that all of these operations risk  issues would be addressed as part of future reviews. Although SEC\u2019s voluntary ARP program provides some assurance that  securities markets are being operated soundly,",
      " some of the organizations  subject to ARP have not taken action on some important  recommendations.   Since its inception, ARP program staff  recommendations have prompted numerous improvements in the  operations of exchanges, clearing organizations, and ECNs. ARP staff also  reviewed exchange and clearing organization readiness for the Year 2000  date change and decimal trading, and market participants implemented  both industrywide initiatives successfully. However, because the ARP  program was not implemented under SEC\u2019s rulemaking authority,  compliance with the ARP guidance is voluntary. Although SEC staff said  that they were satisfied with the cooperation they received from the  organizations covered by the ARP program,",
      " in some cases, organizations  did not take actions to correct significant weaknesses ARP staff identified.  For example, as we reported in 2001, three organizations had not  established backup facilities, which SEC ARP staff had raised as significant  weaknesses. Our report noted, \u201cSecurities trading in the United States  could be severely limited if a terrorist attack or a natural disaster damaged  one of these exchange\u2019s trading floor.\u201d In addition, for years, SEC\u2019s ARP  staff raised concerns and made recommendations relating to inadequacies  in NASDAQ\u2019s capacity planning efforts, and NASDAQ\u2019s weaknesses in this  area delayed the entire industry\u2019s transition to decimal pricing for several  months.",
      " NASDAQ staff told us they have implemented systems with  sufficient capacity, and SEC staff said they are continuing to monitor the  performance of these systems. We also reported that exchanges and  clearing organizations sometimes failed to submit notifications to SEC  regarding systems changes and outages as expected under the ARP policy  statement, and we again saw this issue being cited in 2 of 10 recent ARP  examination reports we reviewed. ARP staff continue to find significant operational weaknesses at the  organizations they oversee. In the 10 examinations we reviewed, SEC staff  found weaknesses at all 9 organizations and made 74 recommendations for  improvement. We compared these weaknesses to the operational elements  we used in our analysis of financial market organizations (as discussed in  ch.",
      " 3 of this report). Our analysis showed that the ARP staff made at least  22 recommendations to address significant weaknesses in the 9  organizations\u2019 physical or information system security or business  continuity planning efforts\u2014including 10 recommendations to address  significant weaknesses at organizations critical to the functioning of the  markets. For example, in an examination conducted in 2000, ARP staff  found that personnel at one exchange did not have consistent information  system security practices across the organization and lacked a centrally  administered, consolidated information system security policy. In  addition, although SEC recommends that organizations subject to ARP  have vulnerability assessments performed on their information systems,",
      "  ARP staff found that this exchange had not assessed its information  systems. In three other reviews, the ARP staff found that the organizations  had not complied with ARP policy expectations to fully test their  contingency plans. ARP staff noted other significant weaknesses, including  inadequate BCPs or backup facilities. ARP staff said that they considered  all the recommendations they make to be significant, including the 74  recommendations made in these 10 reports. These recommendations will  remain open until the next time the ARP staff review the organization and  can assess whether they have been acted upon. Because the ARP program was established through a policy statement and  compliance is voluntary,",
      " SEC lacks specific rules that it can use to gain  improved responsiveness to recommendations to the exchanges and  clearing organizations subject to APP.  SEC staff explained that they chose  not to use a rule to implement ARP because rules can become obsolete and  having voluntary guidance provides them with flexibility. SEC staff also  told us that an organization\u2019s failure to follow ARP expectations could  represent a violation of the general requirement that exchanges maintain  the ability to operate, and therefore they could take action under that  authority. However, they noted that the use of such authority is rare.  However, SEC has issued a rule requiring the most active ECNs to comply  with all the ARP program\u2019s standards.",
      " In 1998, SEC issued a regulation that  subjected alternative trading systems such as ECNs to increased regulatory  scrutiny because of their increasing importance to U.S. securities markets.  Included in this regulation was a rule that required ECNs whose trading  volumes exceeded certain thresholds to comply with the same practices as those contained in the ARP policy statements.  In its explanation of the  regulation, SEC noted that its ARP guidelines are intended to ensure that  short-term cost cutting by registered exchanges does not jeopardize the  operation of the securities markets, and therefore it was extending these  requirements to the ECNs because of their potential to disrupt the  securities markets.",
      " We previously recommended that SEC develop formal criteria for assessing  exchange and clearing organization cooperation with the ARP program and  perform an assessment to determine whether the voluntary status of the  ARP program is appropriate. Although they were generally satisfied with  the level of cooperation, SEC staff told us that they were reviewing the  extent to which exchanges and clearing organizations complied with the  ARP program and planned to submit the analysis to SEC commissioners in  2003. In addition to possibly changing the status of the program for the 22  exchanges and clearing organizations subject to ARP, SEC staff also told us  that they were considering the need to extend the ARP program to those  broker-dealers for whom it would be appropriate to adopt the sound  business continuity practices that will result from the joint regulatory white  paper.",
      " SEC ARP Program Faces  Resource and Staff Limitations Limited resources and challenges in retaining experienced ARP staff have  affected SEC\u2019s ability to oversee an increasing number of organizations and  more technically complex market operations. Along with industrywide  initiatives discussed earlier, ARP staff workload has expanded to cover 32  organizations with more complex technology and communications  networks. However, SEC has problems retaining qualified staff, and market  participants have raised concerns about the experience and expertise of  ARP staff. As SEC has experienced considerable staff losses overall, the  ARP program also has had high turnover. As of October 2002, ARP had 10  staff, but SEC staff told us that staff levels had fluctuated and had been as  low as 4 in some years.",
      " As a result, some ARP program staff had limited  experience, with 4 of the 10 current staff having less than 3.5 years\u2019  experience, including 3 with less than 2 years\u2019 experience. During our work  on SEC resource issues in 2001, market participants and former SEC staff  raised concerns that the level of resources and staff expertise SEC has  committed to review technology issues is inadequate to address  complexmarket participant operations. For example, officials from  several market participants we interviewed in 2001 told us that high  turnover resulted in inexperienced SEC staff, who lacked in-depth  knowledge, doing reviews of their organizations.",
      " SEC staff told us that they  continue to emphasize training for their staff to ensure that they have the  proper expertise to conduct effective reviews. Resource limitations also affect the frequency of ARP reviews. With current  staffing levels, SEC staff said that they are able to conduct examinations of  only about 7 of the 32 organizations they oversee as part of the ARP  program each year. Although standards for federal organizations\u2019  information systems require security reviews to be performed at least once  every 3 years, these standards recommend that reviews of high-risk  systems or those undergoing significant systems modifications be done  more frequently. Although our analysis of SEC ARP examination data  found that SEC had conducted recent reviews of almost all the  organizations we considered critical to the financial markets,",
      " long periods  of time often elapsed between ARP examinations of these organizations.  Between September 1999 and September 2002, SEC examined 6 of the 7  critical organizations under its purview. However, as shown in figure 12,  the intervals between the most recent examinations exceeded 3 years for 5  of the 7 critical organizations, including an organization that was not  reviewed during this period. Our analysis of ARP report data showed that the intervals between reviews  of critical organizations averaged 39 months, with the shortest interval  being 12 months and the longest 72 months. Since September 1999,",
      " the SEC  ARP staff had reviewed 7 of the 8 less critical exchanges, clearing  organizations, and ECNs that we visited during this review. However, SEC  staff told us that the ARP program also may be tasked with reviewing the  extent to which broker-dealers important to clearing and trading in U.S.  securities markets are adhering to sound business continuity practices.  Such an expansion in the ARP program staff\u2019s workload would likely  further reduce the ability of the SEC staff to frequently review all the  important organizations under its authority. Increased Appropriations Could  Provide SEC an Opportunity to  Improve ARP Program  Resources The potential increase in SEC\u2019s appropriations could provide the agency an  opportunity to increase the level and quality of the resources it has  committed to the ARP program.",
      " The Sarbanes-Oxley Act of 2002, which  mandated various accounting reforms, also authorized increased  appropriations for SEC for fiscal year 2003. Specifically, the act  authorized $776 million in 2003, an increase of about 51 percent over the  nearly $514 million SEC received for fiscal year 2002. The act directs SEC  to devote $103 million of the newly authorized amount to personnel and  $108 million to information technology. If appropriated, these additional  funds could allow SEC to increase resources devoted to the ARP program.  Increased staffing levels also could allow SEC to conduct more frequent  examinations and better ensure that significant weaknesses are identified  and addressed in a timely manner.",
      " The additional resources could also be  used to increase the technical expertise of its staff, further enhancing SEC\u2019s  ability to review complex information technology issues. SEC and SROs Generally  Did Not Review Physical  and Information System  Security and Business  Continuity at Broker- Dealers SEC and the securities market SROs generally have not examined broker- dealers\u2019 physical and information system security and business continuity  efforts, but planned to increase their focus on these issues in the future.  SEC\u2019s Office of Compliance Inspections and Examinations (OCIE)  examines broker-dealers, mutual funds, and other securities market  participants. However,",
      " for the most part, OCIE examinations focus on  broker-dealers\u2019 compliance with the securities laws and not on physical  and electronic security and business continuity, which these laws do not  generally address. After some broker-dealers that specialized in on-line  trading experienced systems outages, OCIE staff told us that they began  addressing information system capacity, security, and contingency  capabilities at these firms. SEC predicated its reviews of these issues on  the fact that these firms, as a condition of conducting a securities business,  would need to have sufficient operational capacity to enter, execute, and  settle orders, and deliver funds and securities promptly and accurately.",
      " In  addition, the Gramm-Leach-Bliley Act (GLBA) required SEC to establish  standards for the entities it oversees to safeguard the privacy and integrity  of customer information and prevent unauthorized disclosure. As a result,  in some reviews done since July 2001, OCIE staff discussed the controls  and policies that firms have implemented to protect customer information  from unauthorized access. However, SEC OCIE staff acknowledged that  their expertise in these areas is limited. OCIE staff told us that few of the  approximately 600 examiners they employ had information technology  backgrounds. During the work we conducted for our report on SEC\u2019s  staffing and workload,",
      " staff at several broker-dealers told us that the SEC  staff that review their firms lacked adequate technology expertise. SROs also generally have not addressed these issues at broker-dealers.  Under U.S. securities laws, exchanges acting as SROs have direct  responsibility for overseeing their broker-dealer members. NYSE and  NASD together oversee the majority of broker-dealers in the United  States. According to officials at these two SROs, staff as often as annually  conduct examinations to review adherence with capital requirements and  other securities regulations. However, staff at both organizations  acknowledged that, in the past, their oversight generally did not focus on  how members conducted their operations from physical or information  systems security or business continuity perspectives.",
      " Representatives of  the SROs told us they plan to include aspects of these issues in future  reviews. For example, they plan to examine their members\u2019 information  system security to ensure compliance with GLBA customer information  protection provisions. NYSE and NASD plan to focus on business continuity issues in future  reviews because, in August 2002, both submitted similar rules for SEC  approval that will require all of their members to establish BCPs. The areas  the plans are to address include the following:  backup for books and records,  procedures for resuming operations of critical systems,  alternate means for communicating with the members\u2019 staff and their   regulatory reporting and communications with regulators.",
      " NYSE and NASD officials told us that once these rules were adopted, their  staff would include these matters in the scope of their examinations after  allowing sufficient time for firms to develop the required BCPs. Bank Regulators Have  Authority to Oversee  Operational Risk As part of their mandate to oversee banks\u2019 safety and soundness, the  banking regulators, including the Federal Reserve and OCC, issued  guidance that directs depository institutions or banks to address potential  operations risks with physical and information system security and  business continuity measures. The guidance includes recommended steps  that banks should take to reduce the risk of operations disruptions from  physical or electronic attacks and for recovering from such events with  business continuity capabilities.",
      " For example, in 1996 these regulators  jointly issued a handbook on information systems, which calls for banks to  conduct an analysis of their risks and implement measures to reduce  them. Banks were also to have access controls for their systems and  programs. Regarding physical security, the banking regulators expect  banks to ensure the safety of assets and to physically protect data centers  used for information systems processing. For example, the Federal  Reserve\u2019s guidance directs banks to take security steps to protect cash and  vaults and ensure that bank facilities are protected from theft. The banking  regulators\u2019 joint 1996 handbook discussed measures to secure data centers  and information system assets.",
      " However, the bank regulators\u2019 guidance did  not specifically address measures to protect facilities from terrorist or  other physical attacks. Regarding business continuity, the joint handbook  expects banks to have plans addressing all critical services and operations  necessary to minimize disruptions in service and financial losses and  ensure timely resumption of operations in a disaster. Banks also were to  identify the critical components of their telecommunications networks and  assess whether they were subject to single points of failure that could  occur, for example, by having all lines routed to a single central switching  office, and to identify alternate routes and implement redundancy. The Federal Reserve and OCC, in conjunction with the other depository  regulators,",
      " are also developing expanded guidance on physical and  electronic security and business continuity planning. They are planning to  issue separate handbooks on information system security and business  continuity in early 2003. Bank regulatory staff provided us with a draft of  the information system security guidance, which expects banks to have  programs that include security policies, access controls, and intrusion  monitoring; vulnerability assessments; and incident response capabilities.  The draft guidance also covers physical security from an overall facility  perspective and suggests that banks use appropriate controls to restrict or  prevent unauthorized access and prevent damage from environmental  contaminants. Banks will also be instructed to assess their exposure risks  for fire and water damage,",
      " explosives, or other threats arising from  location, building configuration, or neighboring entities. According to bank  regulatory staff, they are also currently drafting a separate guidance  handbook addressing business continuity issues. Bank Regulators Reported  Reviewing Operations Risks  but Not Banks\u2019 Measures  Against Physical Attacks Bank regulators reported regularly examining how banks are addressing  physical and information system security and business continuity issues.  The Federal Reserve and OCC oversee over 3,100 institutions combined,  including the largest U.S. banks, and are required to examine most  institutions annually. At the end of fiscal year 2002, the Federal Reserve  had over 1,",
      "200 examiners and OCC over 1,700. As part of these staff, the  agencies each had between 70 and 110 examiners that specialized in  reviewing information systems issues. Using a risk-based approach, these  regulators\u2019 examiners tailor their examinations to the institution\u2019s unique  risk profile. As a result, some areas would receive attention every year, but  others would be examined only periodically. Staff at the Federal Reserve  and OCC told us that their examiners consider how their institutions are  managing operations risks and review these when appropriate. For  example, Federal Reserve staff told us that under their risk-based  examination approach,",
      " information security is considered as part of each  examination, particularly since regulations implementing section 501(b) of  GLBA require that the regulators assess how financial institutions protect  customer information. They said that the extent to which information  security is reviewed at each institution can vary, with less detailed reviews  generally done at institutions not heavily reliant on information technology.  They also said that business recovery issues were addressed in most  examinations. Both Federal Reserve and OCC staff told us that physical  security was considered as part of information security in reviewing  protections at data centers. Both regulators also expect banks\u2019 internal  auditors to review physical security for vault and facilities protection.",
      "  However, the focus of these reviews has not generally been on the extent to  which banks are protected from terrorist or other physical attacks. In light  of the September 2001 attacks, these regulators stated that their scrutiny of  physical and information system security and business continuity policies  and procedures would be reviewed even more extensively in future  examinations. Because we did not review bank examinations as part of our  review, we were unable to independently determine how often and how  extensively these two bank regulatory agencies reviewed information  security and business continuity at the entities they oversee. Conclusions Financial market regulators have begun to develop goals and a strategy for  resuming operations along with sound business continuity practices for a  limited number of organizations that conduct clearing functions.",
      " The  business continuity practices that result from this effort will likely address  several important areas, including geographic separation between primary  and backup locations and the need to ensure that organizations have  provisions for separate staff and telecommunications services needed to  conduct critical operations at backup locations. If successfully  implemented, these sound practices should better ensure that clearing in  critical U.S. financial markets could resume and settlement would be  completed after a disaster, potentially avoiding a harmful systemic crisis. However, trading on the markets for corporate securities, government  securities, and money market instruments is also vitally important to the  economy, and the United States deserves similar assurance that trading  activities would also be able to resume when appropriate and without  excessive delay.",
      " The U.S. economy has demonstrated that it can withstand  short periods during which markets are not trading. After some events  occur, having markets closed for some time could be appropriate to allow  for disaster recovery and reduce market overreaction. However, long  delays in reopening the markets could also be harmful to the economy.  Without trading, investors lack the ability to accurately value their  securities and would be unable to adjust their holdings. The attacks  demonstrated that the ability of markets to recover could depend on the  extent to which market participants have made sound investments in  business continuity capabilities. Without identifying strategies for recovery,  determining the sound practices needed to implement these strategies,",
      " and  identifying the organizations that would conduct trading under these  strategies, the risk that markets may not be able to resume trading in a fair  and orderly fashion and without excessive delays is increased. Goals and  strategies for recovering trading activities could be based on likely disaster  scenarios that identify the organizations that could be used to conduct  trading in the event that other organizations were unable to recover within  a reasonable time. These would provide market participants with  information to make better decisions about how to improve their  operations and provide regulators with sound criteria for ensuring that  trading on U.S. markets could resume when appropriate. Strategies for resuming trading could involve identifying which markets  would assume the trading activities of others or identifying other venues  such as ECNs in which trading could occur.",
      " To be viable, these strategies  would also have to identify whether any operational changes at these  organizations would be necessary to allow this trading to occur. Although  SEC has begun efforts to ensure that trading can be transferred between  NYSE and NASDAQ, these efforts are not complete and not all securities  are covered. Because of the risk of operational difficulties resulting from  large-scale transfers of securities trading to organizations that normally do  not conduct such activities, testing the various scenarios would likely  reduce such problems and ensure that the envisioned strategies are viable. Expanding the organizations that would be required to implement sound  business continuity practices beyond those important for clearing would  better ensure that those organizations needed for the resumption of  smooth and timely trading would have developed the necessary business  continuity capabilities.",
      " As discussed in chapter 3, exchanges, clearing  organizations, and ECNs we reviewed had taken many steps to reduce the  risks that they would be disrupted by physical or electronic attacks and  have mitigated risk through business continuity planning. However, some  organizations still had limitations in their business continuity measures  that increased the risk that their operations would be disrupted, including  organizations that might need to trade if the major exchanges were unable  to resume operations. In addition, the attacks demonstrated that  organizations that were not previously considered critical to the markets\u2019  functioning could greatly increase in importance following a disaster.  Therefore, identifying all potential organizations that could become  important to resuming trading and ensuring they implement sound  business practices would increase the likelihood of U.S financial markets  being able to recover from future disasters.",
      " Given that the importance of  different organizations to the overall markets varies, any recovery goals  and business continuity practices that are developed could similarly vary  their expectations for different market participants but with the ultimate  goal of better ensuring that organizations take reasonable, prudent steps in  advance of any future disasters. For example, broker-dealers could be  expected to take steps to ensure that their customer records are backed up  frequently and that these backup records are maintained at considerable  distance from the firms\u2019 primary sites. This would allow customers to  transfer their accounts to other broker-dealers if the firm through which  they usually conduct trading is not operational after a major disaster.",
      " Given the increased threats demonstrated by the September 11 attacks and  the need to ensure that key financial market organizations are following  sound practices, securities and banking regulators\u2019 oversight programs are  important mechanisms for ensuring that U.S financial markets are resilient.  However, SEC\u2019s ARP program\u2014which oversees the key clearing  organizations and exchanges and may be used to oversee additional  organizations\u2019 adherence to the white paper on sound practices\u2014currently  faces several limitations. Because it is a voluntary program, SEC lacks  leverage to assure that market participants implement important  recommended improvements. An ARP program that draws its authority  from an issued rule could provide SEC additional assurance that exchanges  and clearing organizations adhere to important ARP recommendations and  any new guidance developed jointly with other regulators.",
      " To preserve the  flexibility that SEC staff see as a strength of the current ARP program, the  rule would not have to mandate specific actions but could instead require  that the exchanges and clearing organizations engage in activities  consistent with the practices and tenets of the ARP policy statements. This  would provide SEC staff with the ability to adjust their expectations for the  organizations subject to ARP as technology and industry best practices  evolve while providing clear regulatory authority to require prudent actions  when necessary. SEC already requires ECNs to comply with ARP guidance;  extending the rule to the exchanges and clearing organizations would place  them on similar legal footing. Additional staff,",
      " including those with technology backgrounds, could better  ensure the effectiveness of the ARP program\u2019s oversight. SEC could  conduct more frequent examinations, as envisioned by federal information  technology standards, and more effectively review complex, large-scale  technology operations in place at the exchanges, ECNs, and clearing  organizations. If the ARP program must also begin reviewing the extent to  which broker-dealers important to clearing and trading in U.S. securities  markets are adhering to sound business continuity practices, additional  staff resources would likely be necessary to prevent further erosion in the  ability of the SEC staff to oversee all the important organizations under its  authority.",
      " The increased appropriations authorized in the Sarbanes-Oxley  Act, if received, would present SEC a clear opportunity to enhance its  technological resources, including the ARP program, without affecting  other important initiatives. Recommendations So that trading in U.S. financial markets can resume after future  disruptions in as timely a manner as appropriate, we recommend that the  Chairman, SEC, work with industry to   develop goals and strategies to resume trading in securities;  determine sound business continuity practices that organizations would  need to implement to meet these goals;  identify the organizations, including broker-dealers, that would likely  need to operate for the markets to resume trading and ensure that these  entities implement sound business continuity practices that at a  minimum allow investors to readily access their cash and securities;",
      " and  test trading resumption strategies to better assure their success. In addition, to improve the effectiveness of the SEC\u2019s ARP program and the  preparedness of securities trading and clearing organizations for future  disasters, we recommend that the Chairman, SEC, take the following  actions:  Issue a rule requiring that the exchanges and clearing organizations  engage in activities consistent with the operational practices and other  tenets of the ARP program; and  If sufficient funding is available, expand the level of staffing and  resources committed to the ARP program. Agency Comments and  Our Evaluation We requested comments on a draft of this report from the heads, or their  designees,",
      " of the Federal Reserve, OCC, Treasury, and SEC. The Federal  Reserve and SEC provided written comments, which appear in appendixes  III and IV, respectively. The Federal Reserve, OCC, and SEC also provided  technical comments, which we incorporated as appropriate. SEC generally agreed with the report and the goals of its recommendations.  The letter from SEC\u2019s Market Regulation Division Director noted that SEC  has been working with market participants to strengthen their resiliency  and that the SEC staff agreed that the financial markets should be prepared  to resume trading in a timely, fair, and orderly fashion following a  catastrophe, which is the goal of our recommendations that SEC work with  the industry to develop business continuity goals,",
      " strategies, and practices.  SEC\u2019s letter expressed a concern that this recommendation expects SEC to  ensure that broker-dealers implement business continuity practices that  would allow trading activities to resume after a disaster. The SEC staff  noted that broker-dealers are not required to conduct trading or provide  liquidity to markets. Instead this would be a business decision on the part  of these firms. However, SEC\u2019s letter noted that broker-dealers are required  to be able to ensure that any completed trades are cleared and settled and  that customers have access to the funds and securities in their accounts as  soon as is physically possible. SEC\u2019s letter stated that the BCP expectations  for these firms must reflect these considerations.",
      " We agree with SEC that the business continuity practices they develop with  broker-dealers should reflect that the extent to which these firms\u2019 BCPs  address trading activities is a business decision on the part of a firm\u2019s  management. In addition, SEC would need to take into account the  business continuity capabilities implemented by broker-dealers that  normally provide significant order flow and liquidity to the markets when it  works with the exchanges and other market participants to develop goals  and strategies for recovering from various disaster scenarios. To the extent  that many of these major broker-dealers may be unable to conduct their  normal volume trading in the event of some potential disasters without  extended delays,",
      " the intent of our recommendation is that SEC develop  strategies that would allow U.S. securities markets to resume trading, when  appropriate, through other broker-dealers such as regional firms that are  less affected by the disaster. However, to ensure that such trading is orderly  and fair to all investors, SEC will have to ensure that broker-dealers\u2019  business continuity measures at a minimum are adequate to allow prompt  transfers of customer funds and securities to other firms so that the  customers of firms unable to resume trading are not disadvantaged. Regarding our recommendations to ensure that SEC\u2019s ARP program has  sufficient legal authority and resources to be an effective oversight  mechanism over exchanges,",
      " clearing organizations, and ECNs, SEC\u2019s  Market Regulation Division Director stated that they will continue to assess  whether rulemaking is appropriate. In addition, the letter stated that, if the  agency receives additional funding, they will consider recommending to  the Chairman that ARP staffing and resources be increased. SEC\u2019s letter also commented that physical security beyond the protection  of information technology resources was not envisioned as a component of  ARP when the program was initiated. They indicated that they may need  additional resources and expertise to broaden their examinations to  include more on this issue. In the letter from the Federal Reserve\u2019s Staff Director for Management, he  noted that the Federal Reserve is working to improve the resilience of the  financial system by cooperating with banking and securities regulators to  develop sound practices to reduce the system effects of wide-scale  disruptions.",
      " They are also working with the other banking regulators to  expand the guidance for banks on information security and business  continuity.\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 115,
    "question": null,
    "answer": "This report examines human rights conditions in the People's Republic of China (PRC) and policy options for Congress. The PRC government under the leadership of Chinese Communist Party General Secretary and State President Xi Jinping has implemented a clampdown on political dissent, civil society, human rights activists and lawyers, and the religious, cultural, and linguistic practices of Tibetans and Uyghurs. Other major human rights violations in China include the practice of incommunicado detention, torture of persons in custody, censorship of the Internet, and restrictions on the freedoms of religion, association, and assembly.  The era of Hu Jintao, Xi's predecessor, who was China's leader from 2002 to 2012, was marked by serious human rights abuses, but also by an emerging civil society of nongovernmental organizations and advocacy groups, a growing number of human rights activists and lawyers, and the rise of limited investigative reporting and public discourse on social media platforms. Despite moving forward with some policies aimed at reducing rights abuses and making the government more transparent and responsive, Xi has implemented new laws that appear to strengthen the role of the Communist Party and the state over a wide range of social and civil society activities in the name of national security, and instated greater government controls over the media and the Internet. Since July 2015, over 250 human rights lawyers and activists have been temporarily detained, arrested, sentenced to prison terms, or placed under heavy surveillance in what is known as the \"7-09 Crackdown.\" Human rights conditions in the PRC long have been a central issue in U.S.-China ties. According to some analysts, the Trump Administration has indicated a partial departure from the Obama Administration's approach toward human rights in China, which some analysts say suggests less emphasis on human rights in U.S. dealings with Beijing. The issue of human rights is not among the \"four pillars\" of the new U.S.-China Comprehensive Dialogue that was established during discussions between President Trump and President Xi at Mar-a-Lago in April 2017. In a speech to State Department employees in May 2017, Secretary of State Rex Tillerson stated that \"guiding all of our foreign policy actions are our fundamental values: our values around freedom, human dignity, the way people are treated.\" He also said, \"If we condition too heavily that others must adopt this value that we've come to over a long history of our own, it really creates obstacles to our ability to advance our national security interests, our economic interests.\" Congress and successive Administrations have developed an array of means for promoting human rights and democracy in China, often deployed simultaneously. Policy tools include open censure of China; quiet diplomacy; congressional hearings and legislation; funding for rule of law and civil society programs in the PRC; support for dissidents and prodemocracy groups in China and the United States; sanctions; bilateral dialogue; Internet freedom efforts; public diplomacy; and coordinating international pressure. Another high-profile policy practice is the U.S. government issuance of congressionally mandated country reports, including reports on human rights, religious freedom, and trafficking in persons.  Many experts and policymakers have sharply disagreed over the best policy approaches and methods to apply toward human rights issues in China. Possible approaches range from supporting incremental progress and promoting human rights through bilateral and international engagement, to conditioning the further development of bilateral ties on improvements in human rights in China. Some approaches attempt to balance U.S. values and human rights concerns with other U.S. interests in the bilateral relationship. Other approaches challenge the underlying assumption that U.S. human rights values and policies may involve trade-offs with other U.S. interests, arguing instead that human rights are fundamental to other U.S. objectives.  For additional information, including policy recommendations, see CRS Report R41007, Understanding China's Political System; the Congressional-Executive Commission on China's Annual Report 2016; the U.S. Department of State's Country Reports on Human Rights Practices for 2016; and other resources cited in the report. \n",
    "docs": [
      "Introduction Human rights conditions in the People's Republic of China (PRC) long have been a central issue in U.S.-China relations. The two governments' different perceptions of human rights are an underlying source of mutual misunderstanding and mistrust. Frictions over human rights issues affect other issues in the bilateral relationship, including those related to economics and security. China's weak rule of law and restrictions on the Internet affect U.S. companies doing business in the PRC. People-to-people exchanges, particularly educational and academic ones, and collaboration among U.S. and PRC nongovernmental organizations (NGOs) are hampered by periodic Chinese government campaigns against \"Western values\"",
      " and restrictions on foreign NGOs, as well as on the freedoms of speech, association, and assembly. For some U.S. policymakers, human rights conditions in China represent a test of the success of overall U.S. policy toward the PRC. They argue that the U.S. policy of cultivating diplomatic and economic ties with China has failed to promote meaningful political reform and improvements in human rights, and that without progress in these areas, China's foreign policy is likely to become more aggressive, and mutual trust and cooperation in other areas of the bilateral relationship will remain difficult to achieve. They contend, furthermore, that the long-standing, overarching policy of U.S.",
      " engagement with China, which they say focuses on other U.S. interests, particularly economic ones, at times acts at cross purposes with U.S. efforts to support human rights. Others opine that U.S. economic engagement with China has helped to strengthen the communist regime through the legitimacy and resources that economic development has provided, and thereby lessened the impetus for fundamental political reform. Other experts, by contrast, maintain that U.S. engagement has helped to accelerate economic and social transformations that create the necessary conditions for political reform and improvements in rights protections in China, particularly over the long term. They add that change in China's human rights policies will come mostly from within,",
      " and that Washington has little direct leverage over such developments and Beijing's actions. Since the end of the 1980s, following the 1989 military suppression of prodemocracy demonstrators in and around Tiananmen Square in Beijing, successive U.S. Administrations have employed broadly similar strategies for promoting human rights in China. Some analysts have referred to the U.S. foreign policy approach of promoting human rights and democracy in China through diplomatic and economic engagement, without directly challenging Communist Party rule, as a strategy of seeking China's \"peaceful evolution.\" PRC leaders long have been suspicious of any U.S. efforts that they perceive as part of a long-term plan to subvert their rule through \"peaceful evolution.\" President Bill Clinton favored an approach that he and members of his Administration called \"constructive engagement\"\u2014furthering diplomatic and economic ties while pressing for open markets,",
      " human rights, and democracy\u2014calling it \"our best hope to secure our own interest[s] and values and to advance China's.\" President George W. Bush also came to view U.S. engagement as the most effective means of promoting U.S. interests as well as freedom in the PRC. Both Bush and President Barack Obama emphasized that China's respect for international human rights norms would benefit China's own success and stability.  The Obama Administration attempted to forge bilateral cooperation on many fronts, while \"managing differences\" with China on issues including human rights. Then-Secretary of State Hillary Clinton described the Administration's human rights policy as one of \"principled pragmatism.\" This approach was based upon the premise that tough but quiet diplomacy is both less disruptive to the overall relationship and more effective in producing change than public censure.",
      " Nonetheless, the Obama Administration publicly criticized China's human rights policies on many occasions. Some human rights groups and policymakers have criticized the Trump Administration's \"transactional\" focus on U.S. security and economic interests in foreign affairs, while appearing to downplay human rights issues or preferring to raise them quietly. They criticized Secretary of State Rex Tillerson for not appearing in person as his predecessors had done to publicly announce the release of the Department of State's annual Country Reports on Human Rights Practices in March 2017, and the Trump Administration for not signing a joint letter, signed by 11 other countries, that denounced China over its alleged torture of detained human rights lawyers and activists.",
      " In a speech to State Department employees on May 3, 2017, Tillerson stated that \"guiding all of our foreign policy actions are our fundamental values: our values around freedom, human dignity, the way people are treated.\" He also stated, \"If we condition too heavily that others must adopt this value that we've come to over a long history of our own, it really creates obstacles to our ability to advance our national security interests, our economic interests.\" Some observers criticized this approach. In an opinion piece published on May 8, 2017, for example, Senator John McCain stated: In a recent address to State Department employees,",
      " Secretary of State Rex Tillerson said conditioning our foreign policy too heavily on values creates obstacles to advance our national interests.... To view foreign policy as simply transactional is more dangerous than its proponents realize. Depriving the oppressed of a beacon of hope could lose us the world we have built and thrived in. It could cost our reputation in history as the nation distinct from all others in our achievements, our identity and our enduring influence on mankind. Our values are central to all three.  In March 2017, Tillerson, on his first official trip to China, stated in closing remarks that he was there to forge a \"constructive and results-oriented relationship between the United States and China\"",
      " and that he \"made clear that the United States will continue to advocate for universal values such as human rights and religious freedom.\" Senators Ben Cardin and Marco Rubio, in a letter to the Secretary of State, noted that Tillerson made \"only one public mention of human rights concerns in the context of the bilateral relationship\" during his visit to Beijing, and urged him to make human rights a \"top priority\" in discussions with PRC officials during the meeting between President Trump and President Xi in April 2017 at Mar-a-Lago. Secretary Tillerson, in a briefing to reporters following the Trump-Xi meeting, stated that during the talks, which some observers described as \"coldly transactional,\" Trump \"noted the importance of protecting human rights and other values deeply held by Americans.\" While no mention was made of specific issues,",
      " Tillerson added that human rights \"occupied a core of all of our discussions.\" The issue of human rights, however, was not listed among the \"four pillars\" of the new U.S.-China Comprehensive Dialogue that was established during the discussions.  During his March 2017 visit to Beijing, Secretary Tillerson reportedly pressed Chinese officials on the case of U.S. citizen Sandy Phan-Gillis, who had been detained in China since March 2015 on espionage charges. A few weeks after the April 2017 meeting between Trump and Xi, Phan-Gillis, a business consultant and cultural ambassador from Houston who had made frequent trips to China,",
      " was sentenced by PRC authorities to three-and-a-half years in prison and then deported to the United States. Some observers believe that the case of Phan-Gillis may signal a shift in U.S. human rights policy that may emphasize U.S. citizens detained in China and focus less on Chinese dissidents and prisoners of conscience. In February 2017, U.S. officials reportedly assisted the family of Chinese human rights attorney Xie Yang, whose youngest daughter is a U.S. citizen by birth, as his wife and two daughters were attempting to leave Thailand for the United States. The U.S. government has employed an array of efforts and tactics aimed at promoting human rights,",
      " democracy, and the rule of law in China. The effects of these efforts primarily have been evident along the margins of the PRC political system. Congressional policy tools include open letters to the Administration and to Chinese leaders in support of human rights or critical of PRC policies; hearings; funding for foreign assistance programs in China and U.S.-based groups that promote human rights; meetings with Chinese dissidents and human rights lawyers; raising human rights issues during official visits to China; and sanctions. Executive branch options include diplomatic negotiations and formal dialogues focused on human rights issues; public diplomacy programs; international broadcasting; and coordination of international pressure. Another high-profile practice is the issuance of congressionally mandated country reports,",
      " including reports on human rights, religious freedom, and trafficking in persons. Many analysts have observed that China's leaders have become less responsive to international pressure on human rights in recent years. Other experts, however, have emphasized that the treatment of some prominent Chinese dissidents and rights activists by PRC authorities may have been less severe than it might otherwise have been in part as a result of international attention and pressure. Assessing Human Rights and Democracy in China The PRC government is led by the Chinese Communist Party (CCP), whose rule is referenced in the preamble to China's Constitution. The PRC Constitution provides for many civil and political rights, including,",
      " in Article 35, the freedoms of speech, press, assembly, association, and demonstration. Other provisions in China's constitution and laws circumscribe or condition these rights and freedoms, however, and the state restricts these freedoms in practice. China's leaders typically view these rights as subordinate to their own authority and to the policy goals of maintaining state security and social stability, promoting economic development, and providing for economic and social rights. They assert that perspectives on human rights vary according to a country's level of economic development and social system, implying that human rights are not \"universal,\" in contrast to statements by some U.S. government officials that have emphasized \"universal rights.\" PRC leaders frequently denounce foreign criticisms of China's human rights record and policies as interference in China's sovereign,",
      " internal affairs. Nearly 30 years after the 1989 demonstrations for democracy in Beijing and elsewhere in China and the subsequent military crackdown, the Communist Party remains firmly in power, through both coercive measures and highly publicized efforts to improve governance. Many Chinese citizens have attained living standards, educational and travel opportunities, access to information, and a level of global integration that few envisioned in 1989. Little progress, however, has been made in most areas of political freedom and civil liberties. China's leaders have rejected institutional reforms that they perceive might undermine the CCP's monopoly on power, and continue to respond forcefully to signs and instances of autonomous social organization,",
      " independent political activity, and social instability. They seek to prevent the development of linkages among individuals, social groups, and geographical regions that they perceive as having potential political impact. The government maintains severe restrictions on unsanctioned religious, ethnic, and labor activity and groups, political dissidents, and human rights lawyers. Government authorities have imposed harsh policies against Tibetans, Uyghurs, and practitioners of Falun Gong.  As CCP General Secretary and State President Xi Jinping took over the reins of power in 2012 and early 2013, there was a period of cautious optimism and discussion in intellectual circles in China about the need for political reform and how to address these issues.",
      " However, Xi has carried out a crackdown on political dissent and civil society, reversing what appeared to some observers to be a trend toward increased tolerance of mild criticism of government policies, the exchange of some news and opinion on social media, some advocacy by nongovernmental organizations (NGOs), and legal actions against officials on behalf of some aggrieved citizens. Many citizens who had openly discussed political issues, engaged in political or social activism, attempted to defend dissidents or human rights activists in court, or tried to expose some corrupt officials have been punished. Xi's focus on national security and the perception of civil society as a threat to Communist Party rule appear to be driven in part by the daunting political challenges that he faces,",
      " including persistent political corruption; a slowing national economy; rising popular expectations; severe environmental pollution; unrest in Tibet and violent clashes in Xinjiang; and the growing popular attraction to organized religions, which some of China's leaders contend may undermine their authority. In some ways, the PRC central government has continued to demonstrate a measure of responsiveness toward popular and expert opinion, reflecting a style of rule that some experts refer to as \"responsive authoritarianism\" or \"consultative authoritarianism,\" and what PRC leaders refer to as \"consultative democracy.\" The CCP has striven to meet the demands and expectations of many Chinese citizens for competent and accountable governance and fair application of the laws,",
      " while some policymaking processes have become more inclusive. In recent years, the PRC government has implemented some legal and institutional reforms aimed at preventing some rights abuses and making the government more transparent and responsive. The state has limited repressive measures largely to selected key individuals and groups, although the scope of those targeted has widened under President Xi. Many citizens continue to enjoy \"everyday freedoms\" and appear to remain supportive of the regime. Although public protests in China are common, they largely are focused upon local economic and environmental issues rather than national political ones. Public Opinion and Democracy Some experts believe that, over the long term, economic development will lead to democratization in China,",
      " as it already has in other East Asian societies, such as South Korea and Taiwan. They posit that the growing urban middle class, a manifestation of such development, will likely be a key agent of political change. According to other analysts, however, China's burgeoning middle class has not yet become a catalyst for democracy, despite its members' growing awareness of their interests and in some cases their participation in public protests.  Some public opinion polling suggests that in China, economic development has been weakly correlated with democracy, and that Chinese define democracy differently from most Americans. In a study published in 2016, one U.S. scholar found that a plurality (27%) of Chinese respondents in a survey viewed democracy as government that is \"governed by and for the people,\" but fewer than 40%",
      " perceived of democracy in terms of either competitive elections, rights and freedoms, or equality and justice. In many ways, according to some studies, members of China's middle class are dependent upon the state for their material well-being and are not prone to agitate for democracy if they perceive that their economic needs are being met. They value social and political stability, which they believe the Communist Party can provide, and have expressed some fear of grassroots democracy. Many Chinese reportedly are generally satisfied with the level of democracy in their country and are optimistic that the level of democracy they enjoy will rise in the future. This sentiment causes some Chinese to resent foreign criticism of human rights conditions and to withhold sympathy for democracy activists.",
      " U.S. Policy Questions and Options Debates about what policies the U.S. government should pursue in order to promote human rights in China tend to revolve around the following principal sets of questions: To what extent should the U.S. government expend time and resources promoting human rights in other countries, including China? How do such efforts relate to and advance U.S. interests and policy objectives? Which human rights issues and developments in China most warrant U.S. attention, and why? Should human rights issues be prioritized? How might improvements in some human rights lead to improvements in other human rights? Approaches to promoting human rights vary. Some are more (or less)",
      " confrontational, public, or punitive. Which approaches have been more effective in promoting human rights in China? How have U.S. approaches changed over time? What is the range of possible policy tools for promoting human rights in China? Which options are the most effective, and over what time frame are they most effective? How much importance should the United States attach to multilateral efforts to promote human rights in China? Should international approaches be focused on the United Nations, or be coordinated directly with like-minded governments? How are possible U.S. human rights policies constrained, if at all, by other U.S. policies and interests related to China? How are they constrained,",
      " if at all, by the institutions and mechanisms that form the basis of U.S.-China relations? Should the United States' interest in human rights be the subject of negotiation, and, if so, should the United States be willing to match improvements in China's human rights conditions with actions valued by China? In what areas might such matching \"action for action\" be explored? Should the U.S. government press China to abide by international human rights standards and covenants in a separate bilateral human rights dialogue, or as part of other dialogues?  Some human rights advocates argue that promoting human rights in China should be viewed as a national interest and elevated to first order importance in U.S.",
      " policy toward China. They contend that U.S. foreign policy should be more values-focused, and that other areas of the bilateral relationship, such as security and trade, would benefit from prioritizing human rights. Some experts recommend a \"whole-of-government\" approach, whereby human rights policy is coordinated among all agencies dealing with China, and suggest that the Administration and Congress work together to consider legislative and other measures. They favor placing human rights conditions upon Beijing before satisfying China's desire for international cooperation in many areas, and imposing sanctions when necessary.  Other specialists contend that open censure and efforts to place human rights-related conditions upon further development of the bilateral relationship have not been very effective.",
      " They suggest that it is more useful, particularly in the long run, to take a more cooperative and flexible approach toward promoting human rights in China. In this way, U.S. policies to promote human rights in the PRC are less likely to meet resistance among CCP hardliners and more likely to find agreement among Chinese governmental and nongovernmental leaders who also may be pursuing human rights and related objectives. A less confrontational approach, they add, is also more compatible with the myriad ongoing forms of U.S. engagement and cooperation with China. They urge U.S. policymakers to seek common ground with their Chinese counterparts and to appeal as much as possible to China's own interests on human rights issues.",
      " The following are possible steps put forward by a diverse group of experts that the U.S. government and other actors could take, or that Congress could mandate or otherwise require, to promote human rights in the PRC. The U.S. government has attempted to put some of these recommended policies and efforts into practice. For a discussion of U.S. government human rights activities related to China, see \" U.S. Efforts to Advance Human Rights in China,\" below. Support congressional hearings, legislation, resolutions, letters, and statements expressing concerns about human rights developments in China and individuals and groups persecuted in China for exercising internationally recognized human rights that are protected in the PRC Constitution.",
      " Increase U.S. government support for rule of law, civil society, and political participation programs in China. Provide funding to the National Endowment for Democracy to support human rights and democracy groups based in the United States and Hong Kong. Support nongovernmental actors, including umbrella organizations that coordinate the efforts of disparate groups focused on human rights issues in China. Formulate a code of conduct for U.S. civil society organizations, including think tanks, universities, and cultural-exchange entities, for interacting with Chinese officials and policies when faced with human rights restrictions. Provide financial assistance to dissidents and victims of religious and ethnic persecution in China and Chinese political and religious refugees.",
      " Support research and documentation of human rights conditions and abuses in China. Link U.S. economic and human rights policies. Impose restrictions upon Chinese trade and investment ties with the United States unless human rights conditions improve. Link permanent normal trade relations (PNTR) status and low import tariffs with improvements in human rights conditions in China. Challenge Chinese security regulations and restrictions on Internet use as barriers to trade under the World Trade Organization (WTO). Tighten U.S. export controls in response to human rights violations or reduce the export of U.S. technologies and services that can be used to violate human rights, such as Internet, surveillance, and law enforcement products and equipment.",
      " Encourage U.S. companies in China to speak out against policies that affect both business interests and human rights. Impose sanctions on China and PRC officials in response to Chinese human rights abuses. Deny U.S. visas to, or freeze the U.S. banks accounts of, Chinese officials responsible for severe human rights violations (see \" Global Magnitsky Act,\" below). Apply provisions of the International Religious Freedom Act that deny U.S. visas to foreign officials responsible for particularly severe violations of religious freedom. Impose penalties on PRC officials for human rights violations, including placing holds on their foreign bank accounts. Suspend U.S. engagement and exchanges with China's Ministry of Justice and Ministry of Public Security until all human rights lawyers are released from detention or prison or their constitutional rights are restored.",
      " Suspend U.S. engagement and exchanges with Chinese officials from provinces where egregious incidents of religious persecution have been reported. Noting the rise in detentions of some U.S. citizens and green card holders in China, some advocacy groups urge the State Department to issue a travel advisory, warning U.S. citizens and green card holders that there is a risk of arbitrary detention if they travel to China. Invoke the principle of reciprocity as a means of promoting human rights in China. Demand that U.S. journalists, academics, and media outlets enjoy the same level of access to China that Chinese journalists, academics, and media outlets have in the United States.",
      " Call for mutual treatment in issuing visas for journalists and oppose the PRC government's denial of visas to U.S. and other foreign journalists who write critically of CCP leaders or sensitive policy issues. Grant the PRC an additional consulate in the United States if and only if the PRC government agrees to a U.S. consulate in Lhasa, Tibet. Raise human rights in bilateral interactions. Raise human rights issues, not only in State Department-led dialogues and meetings with Chinese officials, but also in discussions and meetings led by other U.S. departments and agencies. Support a separate U.S.-China human rights dialogue. Make official human rights discussions more transparent,",
      " and open them up to include representatives from civil society, including human rights organizations. Include civil society representatives in human rights discussions. Bolster international efforts. Support collective statements and resolutions critical of Chinese human rights policies in the United Nations and other international fora. Field a larger and more active U.S. delegation at the United Nations Human Rights Council (UNHRC). Hold China to its UNHRC Universal Periodic Review commitments. Coordinate with Asian and European democracies in engaging in diplomatic and other forms of pressure on the Chinese government to improve human rights conditions. Back internet freedom efforts. Increase funding to the Department of State and Broadcasting Board of Governors for the development of software applications that enable Chinese Internet users to circumvent censorship.",
      " Support efforts aimed at enabling Chinese audiences to circumvent Internet censorship and access Voice of America (VOA) and Radio Free Asia (RFA) online programming. Oppose the PRC government's efforts to promote the concept of \"Internet sovereignty,\" by which each country applies its own rules on issues of Internet freedom. Strengthen public diplomacy. Provide greater funding for VOA and RFA broadcast and online programs in Mandarin, Cantonese, Tibetan, Uyghur, and English. Strengthen the International Visitor Leadership Program, which brings established and potential leaders from China to the United States for short-term stays that include study tours in the areas of government,",
      " media, education, economics, environment, labor, and rule of law.  Crackdown on Dissent Less than one year into the 2012 leadership transition that brought Xi Jinping to power, PRC authorities began to carry out a clampdown on political dissent, free expression, and civil society. While the PRC government has engaged in many cycles of reform and repression in the nearly three decades since the 1989 Tiananmen military crackdown, recent security measures have been striking for their scope and severity, say observers. Xi's policies have included detentions and arrests of hundreds of human rights attorneys, investigative journalists, prominent bloggers, members of ethnic minorities,",
      " and civil society leaders. Freedom House reported that in China, which it deems to be among the bottom 20 \"unfree\" countries in the world, \"[a] renewed push for party supremacy and ideological conformity has undermined rule of law reforms and curtailed civil and political rights.\" In May 2013, the CCP issued a classified directive (Document No. 9) identifying seven \"false ideological trends, positions, and activities,\" largely aimed at the media and liberal academics. According to the document, topics to be avoided in public discussion include universal values, constitutional democracy, freedom of the press, civil society, civil rights, an independent judiciary,",
      " and criticism of the CCP.  In 2016, a liberal journal, Yanhuang Chunq iu, under pressure from conservatives within the Communist Party, ceased publication. For 25 years, the periodical reportedly had been a mouthpiece for political reformers and exercised relative independence, as long as it did not broach the most sensitive political topics. A former editor stated that its patrons in the Party \"had grown politically weak under the current leadership.\" In January 2017, Beijing authorities shut down two websites run by a liberal Chinese think tank, reportedly after its founder criticized the Supreme People's Court's top judge for publicly rejecting the ideal of judicial independence.",
      "  Arrests of Rights Lawyers and Activists Since July 2015, over 250 human rights lawyers and activists have been detained, arrested, or placed under surveillance or house arrest in what is known as the \"7-09 Crackdown.\" Launched on July 9, 2015, some observers say this campaign against the growing number of human rights lawyers in China has been unprecedented in scale. PRC authorities have targeted, in particular, staff of the Fengrui Law Firm in Beijing, which had represented Uyghur rights advocate Ilham Tohti, dissident artist Ai Weiwei, Falun Gong practitioners, and victims of alleged government misconduct.",
      "  Of the hundreds of rights lawyers and activists whom Chinese authorities have detained, most have been released, although from 15 to over 30 have been sentenced to prison terms, released on bail, or given suspended sentences usually of three years of home detention. At least two rights lawyers and one activist\u2014Xia Lin, Zhou Shifeng, and Hu Shifeng\u2014have received lengthy prison terms. Some lawyers and activists who were released on bail or suspended sentences reportedly have disappeared. Some rights attorneys reportedly suffered torture and psychological abuse by security personnel, were held incommunicado or at unknown locations, or were coerced into making televised confessions.",
      " Some have had their freedom of movement restricted or been prevented from travelling abroad. Spouses of detained lawyers have been subjected to surveillance and restrictions on movement and travel. Authorities reportedly have installed cameras or posted guards at spouses' homes, cut off their telephone service, frozen their bank accounts, and warned them not to give interviews.  Selected Prominent Cases Guo Feixiong is the pen name of Yang Maodong, a legal rights advocate arrested in 2013 for demonstrating against the censorship of a progressive publication, Southern Weekend. In 2015, Guo was sentenced to six years in prison for \"gathering a crowd to disrupt social order.\" In December 2016,",
      " Chinese authorities suspended the legal license of Li Jinxing, Guo's defense lawyer, for one year allegedly for \"interfering with court proceedings.\" Guo Hongguo, a rights activist and member of an unregistered Christian church, was convicted of subversion and given a three-year suspended sentence. Hu Shigen, a democracy advocate and Christian church leader with ties to the Fengrui Law Firm, was detained in July 2015 and formally arrested in January 2016 on the charge of subverting state power. He was convicted in August 2016 and sentenced to seven-and-one-half years in prison. Hu had formerly served a 16-year sentence for spreading information about the June 4,",
      " 1989, military crackdown in Beijing. Jiang Tianyong, a human rights lawyer who had legally defended or assisted Falun Gong practitioners, Tibetans, and other rights lawyers and advocates, including Xie Yang, Chen Guangcheng, and Gao Zhisheng, was detained in November 2016 and held incommunicado for six months. In May 2017, Jiang was formally charged with subversion of state power. Li Heping, an attorney and antitorture advocate who had represented Falun Gong practitioners, members of unregistered Christian churches, and environmental activists, and had provided assistance to Chen Guangcheng and Gao Zhisheng,",
      " was held incommunicado between July 2015 and January 2016. In April 2017, a Tianjin Court, in a closed trial, sentenced Li to a three-year suspended jail term for subverting state power. \u00a0 Pu Zhiqiang, a human rights lawyer and government critic, was detained in 2014, along with other attendees of a small gathering to mark the 25 th anniversary of the 1989 military crackdown. In 2015, a Beijing court handed Pu a three-year suspended sentence for the crimes of \"inciting ethnic hatred\" and \"disturbing public order,\" based in part on comments that he had made online.",
      " Wang Quanzhang, a member of the Fengrui Law firm, defended Falun Gong practitioners, human rights lawyers, and victims of illegal land takings. After being detained during a trial reportedly for refusing a judge's command, Wang wrote a legal manual on judicial detention for other rights lawyers. Wang was held incommunicado for 18 months and indicted on subversion charges in January 2017. Wang Yu, a rights lawyer at the Fengrui Law Firm who had defended Uyghur scholar Ilham Tohti as well as Chinese feminists, was detained in July 2015 and charged with subversion in January 2016.",
      " Wang was released on bail in August 2016 after she gave a televised confession that included a denunciation of her colleagues, which observers believe was coerced. Wang's husband and colleague, Bao Longjun, and their son, Bao Zhuoxuan, were detained in July 2015 as they attempted to board a flight for Australia so that Bao Zhuoxuan could attend high school there. Xia Lin, an attorney who had assisted human rights lawyers such as Pu Zhiqiang and government critics such as Ai Weiwei, was found guilty of fraud and sentenced to 12 years in jail in September 2016. At his trial,",
      " Xia's lawyers raised numerous legal and procedural violations in his case. Xie Yang, an attorney who defended rights advocates, was detained in July 2015. In January 2017, Xie's lawyers released a transcript of him describing various forms of torture that he stated he had endured during a period in which he was held incommunicado. During a court hearing on May 8, 2017, Xie, in what supporters say was a forced confession, pleaded guilty to charges of inciting subversion of state power, and denied that he had been tortured. Xie was released on bail on May 9, 2017,",
      " before a verdict was announced. Zhai Yanmin, a rights activist who worked for the Fengrui Law Firm, was convicted of subversion and handed a three-year suspended sentence in August 2016. Zhou Shifeng headed the Fengrui law firm, which had taken on many politically sensitive cases. In August 2016, Zhou was found guilty of subverting state power and sentenced to seven years in prison. Civil Society In the past decade, the impact of nongovernmental organizations, also known in China as \"social organizations\" or \"civil society organizations,\" has grown. The PRC government increasingly has contracted the public provision of social services to NGOs,",
      " and nonstate entities have played a small but growing role in social advocacy and policy input. Environmental groups were at the forefront of civil society development, and some of them were met with resistance or repression by state authorities. Other types of social organizations have emerged in the areas of public health, education, rural development, legal aid, and policy research. China has over 650,000 registered NGOs, according to the Ministry of Civil Affairs, while the number of unregistered NGOs ranges from 1 million to 7 million. In addition, in 2016, several thousand foreign NGOs operated in China, of which about 1,000 had an established presence and 4,",
      "000-6,000 engaged in short-term projects, according to official and unofficial Chinese sources. In 2013, the PRC government announced that the process by which domestic NGOs could register to operate would be simplified, allowing them to apply directly to the Bureau of Civil Affairs to acquire legal status without also obtaining an official sponsor or supervisory unit. The government released draft legislation allowing direct registration for some types of NGOs in 2016.  Many experts view civil society broadly\u2014the nonstate, nonbusiness component or \"third sphere\" of society that includes NGOs, grass-roots groups, religious congregations, academia, trade unions, political and other organizations\u2014as a vital agent through which human rights and democracy are defended and exercised.",
      " Under Xi Jinping, the PRC government increasingly has tried to manage civil society, which he and other leaders apparently view as a potential security threat, while attempting to harness its value. Many individuals and NGOs working in areas previously deemed acceptable or even praiseworthy by the government have faced growing restrictions. Many U.S.-based and other international NGOs in China, particularly those engaged in rule of law programs and social advocacy work, have faced increasing scrutiny, and new regulations have placed additional constraints on foreign NGOs. Although the number of civil society organizations may still be growing, according to one expert, the \"space in which civil society may operate is actually shrinking.\" In January 2016,",
      " state security officers detained and then deported Peter Dahlin, a Swedish national who had cofounded the Beijing-based Chinese Urgent Action Working Group, which provided legal aid and trained Chinese rights defenders. In a later interview, Dahlin stated, \"I think the era for effecting change in China seems to be over for now for NGOs.\" New PRC Laws At the end of the Fourth Plenum of the CCP's 18 th Party Congress, held in October 2014, the CCP Central Committee issued a communique proclaiming that it was essential to \"comprehensively advance the law-based governance of the country,\" including the need to \"improve the system for ensuring independent and impartial exercise of judicial and procuratorial powers in accordance with the law.\" The statement,",
      " however, also stressed that \"[u]pholding the Party's leadership is fundamental to socialist rule of law....\" Although the PRC government under Xi Jinping has furthered the development of the law in some areas related to human rights and civil society, such as criminal justice, domestic violence, and philanthropy, it largely has developed the law to strengthen CCP rule. The National People's Congress (NPC) has passed new laws that appear to strengthen the role of the state over a wide range of social activities in the name of national security, place additional restrictions on defense lawyers, and authorize greater government controls over the Internet and ethnic minority groups. According to one analyst,",
      " \"Under Xi Jinping the government is creating a more coherent legal framework to enforce the preservation of the party-state.\" In January 2016, the ambassadors of the United States, Canada, Germany, Japan, and the European Union, in a \"rare joint response,\" signed a letter to China expressing concerns about the new laws. The letter stated, \"While we recognize the need for each country to address its security concerns, we believe the new legislative measures have the potential to impede commerce, stifle innovation, and infringe on China's obligation to protect human rights in accordance with international law.\" National Security Law In July 2015,",
      " China's National People's Congress passed a new National Security Law that provides legal grounds for greater scrutiny and state control over many social, ethnic, and cultural activities as well as speech. Some critics argue that the law's expansiveness and vague wording may grant the government the authority to violate human rights in \"almost every domain of public life\" in the name of national security. According to the law, the state resists \"negative cultural influences,\" punishes \"activities dividing ethnicities,\" and opposes \"foreign influences\" that interfere with domestic religious affairs, among other mandates. Article 25 establishes a system for securing the Internet, including preventing illegal activity such as network attacks,",
      " cybertheft, and the dissemination of unlawful and harmful information.  Cybersecurity Law In November 2016, the NPC passed the Cybersecurity Law. A Chinese government official stated, \"The law fits international trade protocol and its purpose is to safeguard national security.\" Analysts say that while most policies promoted by the law are not new, the law provides a legal framework for the centralization and coordination of China's efforts to control the Internet.  The cybersecurity law gives the government broad powers to control the flow of online traffic, including blocking the dissemination of unlawful information and temporarily restricting network communications for the purposes of protecting social order or national security.",
      " Its detractors say that the law establishes categories of illegal Internet use that can be interpreted broadly for political purposes. While Article 12 provides that the state \"protects the rights of citizens, legal persons, and other organizations to use networks in accordance with law,\" it outlaws activities in a number of vague areas that may result in infringements upon freedom of speech. Prohibited online activities include those that endanger \"national security, national honor and interests\"; incite \"subversion of national sovereignty,\" \"the overturn of the socialist system,\" \"separatism,\" and \"ethnic hatred and ethnic discrimination\"; undermine \"national unity\"; advocate \"terrorism or extremism\"; and create or disseminate \"false information to disrupt the economic or social order.\" The law also places greater legal burdens upon private Internet service providers (\"network operators\") to monitor content,",
      " obtain information on the real identity of their customers, participate in the state's network security protection system, and assist public security organs.  Counterterrorism Law New counterterrorism legislation, passed in December 2015, contains provisions that critics say potentially may be used to stifle free speech, particularly among Uyghur Muslims. In particular, some analysts note that the definition of terrorism contained in the law includes not only actions but also \"propositions.\" Article 19 restricts media coverage of terrorist incidents, and \"where information with terrorist or extremist content is discovered, its dissemination shall immediately be halted.\" Although Article 6 states that counterterrorism efforts \"be conducted in accordance with law\"",
      " and \"respect and protect human rights,\" some analysts assert that the law grants \"enormous discretionary powers\" to the state and that the government has not passed corresponding safeguards against potential human rights violations. Overseas NGO Law A new law regulating foreign and overseas nongovernmental organizations, which went into effect in January 2017, has raised international concern. Foreign observers believe that the law reflects the PRC leadership's suspicion of foreign influences on civil society, by placing overseas NGOs under the jurisdiction of the Ministry of Public Security, and no longer the Ministry of Civil Affairs. The new law tightens registration requirements on foreign NGOs, many of which have been operating without official ties and status,",
      " by mandating that they find a government agency (\"professional supervisory unit\") to sponsor them. New regulations also impose greater supervision and potentially greater controls upon their activities, funding, and staffing. Experts contend that PRC leaders fear the kinds of political uprisings, aided by civil society and the support of foreign NGOs and governments, that they perceive fueled popular demonstrations and toppled governments in Eastern Europe and Central Asia in the early 2000s and the Middle East in 2010-2011.  Many observers say the foreign NGO law's vague and broad provisions have created an air of uncertainty. Some experts argue that while local authorities may enforce the law with flexibility,",
      " foreign NGOs that fail to comply potentially may face civil or criminal penalties. Furthermore, foreign NGOs that work in politically sensitive areas may be especially vulnerable to arbitrary applications of the law. Article 47, for example, prohibits NGOs from engaging in any act that \"endangers national security\" or \"harms national interests.\" Other illegal activities under the law include engaging in or funding political or religious activities.  Human rights groups assert that the law may deal \"a very severe blow\" to foreign NGOs and the domestic NGOs with which they often support, train, and partner, thus causing a \"ripple effect\" throughout Chinese civil society. Some foreign NGOs have suspended or ceased operations,",
      " while domestic social organizations have reported a drop in foreign funding. Some observers contend that the new law may prove too burdensome or pose too many risks for many foreign NGOs, particularly smaller ones or those involved in human rights and related activities. Others worry that the law may hamper people-to-people exchanges, including cultural, business, and professional interactions. Some fear that many foreign NGOs may have difficulties finding appropriate professional supervisory units, or that official PRC entities may decline to partner with foreign NGOs due to possible political risks. In response to U.S. government and other criticism of the foreign NGO law, an NPC official asserted that \"We have always held a welcoming and supportive attitude toward overseas NGOs that are engaged in friendly activities in China.... But an extremely small number of NGOs attempt to,",
      " or have already engaged in, activities that endanger China's social stability and state security. Therefore, we need to apply the rule of law to overseas NGOs' activities in China.\"  Charity Law In 2016, the NPC passed China's first Charity Law. The law eases registration requirements for charitable organizations and allows them to engage in public fundraising, but also strengthens government oversight. Backers of the legislation say that tougher reporting requirements are designed to improve transparency, protect donors, and improve public trust in charitable organizations. Some human rights groups have expressed concern that provisions of the law prohibiting the funding of activities that contravene national security may be used broadly against politically sensitive activities.",
      " Some critics contend that the law potentially restricts informal fund-raising, such as online crowdsourcing, which has become a means by which some citizens have provided financial support to Chinese dissidents and their families.  Family Violence Law China's first national law on domestic violence, the culmination of years of efforts by Chinese women's rights advocates, went into effect in March 2016. The Anti-Domestic Violence Law covers physical and mental abuse between family members and cohabitating couples. It provides stronger legal mechanisms by which to protect women from domestic abuse. Although the legislation was heralded as a \"significant step forward\" in the area of women's rights,",
      " the government has placed some restrictions on women's rights advocates during the recent crackdown on civil society. In 2016, authorities ordered the closure of the Beijing Zhongze Women's Legal Counseling and Service Center, reportedly without providing a reason. The Center had provided services in the areas of anti-domestic violence litigation and rural women's land rights for over two decades.  Frequently Raised Human Rights Issues  The following sections discuss prominent human rights concerns that frequently have been raised by human rights organizations and some Members of Congress. The bullet points below provide selected examples of ongoing human rights issues in China, some of which are discussed at greater length elsewhere in this report.",
      " For more detailed descriptions of human rights topics, see the Congressional-Executive Commission on China, Annual Report 201 6 and the Department of State, Country Reports on Human Rights Practices for 2016. The PRC government has attempted to reduce rights violations in some of these areas. However, the lack of checks on state power and the CCP's subordination of the law to its objective of maintaining its authority and \"social stability\" continue to lead to human rights abuses and violations of China's own constitution. Jerome Cohen, an expert on Chinese law and politics, suggests that although China has made progress in some legal areas, fundamental human rights problems endure:",
      "  The lesson of the past twenty-five years seems to be that economic and social progress, enactment of better legislation, improvements in legal institutions, and reformist official policy statements do not guarantee either the enjoyment of civil and political rights or the protection of political and religious activists and their lawyers against the arbitrary exercise of state and party power. Ongoing Human Rights Issues: Selected Examples108 Harassment, detention, house arrest, prison terms, and residential surveillance of protest leaders, civil society activists, journalists covering stories that authorities deem to be politically sensitive, petitioners, and political dissidents and their family members. Arbitrary use of state security and \"social stability\"",
      " laws against political dissidents. Holding dissidents incommunicado for long periods and failing to comply with legal provisions that require authorities to notify family members of their detention. Strict controls and punishments for speech that authorities deem to be politically sensitive; heavy censorship of online communication and expression. Forced closure of law offices and suspension or revocation of attorneys' law licenses; physical assaults, detention, house arrest, prison terms, and residential surveillance of attorneys who take on cases authorities deem to be politically sensitive. Physical and mental abuse against criminal suspects and administrative detainees, in some cases resulting in forced confessions and sometimes resulting in death. Harsh religious and ethnic policies and the arbitrary use of state security laws against Tibetans and Uyghurs.",
      " Harassment and arrests of some Christians worshipping in unregistered churches; demolition or forced alterations of church properties in some localities. Detention of Falun Gong adherents and forced renunciations of their beliefs. Repatriation of North Korean nationals residing in China, who may face severe forms of punishment after returning to North Korea, in violation of U.N. conventions. Government harassment, intimidation, and obstruction of independent or non-CCP candidates and their supporters in local elections; alleged manipulation of ballots and electoral procedures in order to exclude independent candidates. Violations of international labor rights, including the right to form independent labor unions, limitations on collective bargaining,",
      " and arrests of strike leaders and labor activists. Constraints on foreign journalists in China, including restrictions on movement and cases of harassment and intimidation by state security agents when journalists attempt to report on events that authorities deem to be politically sensitive or interview local citizens. Trafficking in persons, including reports of forced labor in Xinjiang, drug rehabilitation facilities, and administrative and extrajudicial detention centers, forced labor and sex trafficking, and the forced labor in China and forcible repatriation of North Koreans. In 2017, the Department of State downgraded China to Tier 3, for not \"fully meet[ing] the minimum standards for the elimination of trafficking\"",
      " and \"not making significant efforts to do so.\"  Rule of Law Many experts believe that strengthening the rule of law is a key means of protecting human rights and an important area of U.S. engagement in China. The lack of judicial independence, adequate legal protections, and due process guarantees for many dissidents, protest leaders, rights lawyers, activists, journalists, and ordinary aggrieved citizens, as well as the people and interests that they represent, undermines progress in human rights conditions in the PRC. Some policy experts argue that calling on PRC leaders to abide by provisions in China's own constitution and laws is one of the most effective ways for international actors to promote human rights in the PRC.",
      " In recent years, the Chinese government has enacted some measures aimed at reducing arbitrary applications of the law and some patterns of human rights abuse as well as making the government more transparent. However, the Communist Party and its main policy objectives generally remain above the law, particularly in areas that China's leaders deem politically sensitive.  Since 2014, the PRC government has announced some policies aimed at reducing government influence over the courts, particularly at the local level. Reforms include transferring power over budgets and personnel appointments of basic level courts from local to provincial governments. In 2015, the Supreme People's Court (SPC) issued an opinion directing judges to record instances of Party and state interference.",
      " In addition, the SPC has made efforts to retry cases of wrongful conviction and reduce the rate of pretrial detention. Some experts contend, however, that China's leaders may want to reduce corruption of the judicial branch at the local level, but not to subject the national government to judicial oversight. In January 2017, Zhou Qiang, President of China's Supreme People's Court, who is known as a reformer, publicly denounced the \"Western\" notion of judicial independence. Some experts say that Zhou's speech reflected pressure from Xi Jinping.  Criminal Justice China's criminal justice system remains rife with abuses, especially in human rights cases.",
      " The rate of legal representation remains low, the role of lawyers is severely constrained, and there is a heavy presumption of guilt and alleged reliance upon forced confessions. In recent years, government funding for legal aid has increased, and access to legal counsel reportedly has improved. However, the rate of legal representation in criminal cases has dropped to roughly 20%, and although the acquittal rate has increased, the conviction rate remains at over 99% in criminal trials. Judges retain significant discretion over whether witnesses or accusers must appear in court, and only a small percentage of trials reportedly involve witnesses, thus weakening the defense in many cases. In 2015,",
      " the government announced new regulations to \"safeguard lawyers' rights,\" including the rights for lawyers to meet with their clients and collect evidence. Legal experts say, however, that other revisions to the law further curtail the role of defense lawyers in sensitive cases. Under new laws and regulations, lawyers may face penalties for \"insulting, defaming, or threatening judicial officers,\" \"severely disrupting courtroom order,\" disclosing client or case information to the media, or using the media and other public means to influence court decisions. Some Chinese lawyers openly opposed the changes.  Forms of Detention The PRC government practices various forms of detention in violation of China's obligations under international law and in some cases its own laws.",
      " The Criminal Procedure Law permits suspects of serious crimes, including \"endangering state security\" and terrorism, to be placed at a \"designated location\" (residential surveillance) for up to six months, and the law does not require the family to be notified of the place of detention (Article 73). Although the government formally abolished the Re-education Through Labor (RETL) system in 2013, in practice public security bureaus continue to administratively detain many citizens for minor political offenses, such as \"creating a disturbance and causing trouble,\" without trial. Many people are held in quasilegal and extralegal forms of detention,",
      " such as \"Legal Education Centers,\" said to hold many Falun Gong members; psychiatric (ankang ) facilities; and \"black jails.\" These and other forms of incarceration can be even more secretive and prone to abuses than the former RETL facilities. In April 2016, the U.N. Working Group on Arbitrary Detention criticized Chinese authorities for their detention and treatment of U.S. citizen Sandy Phan-Gillis, stating that they had violated \"international norms relating to the right to a fair trial and to liberty and security.\"  Torture China's criminal justice system has continued to utilize torture, particularly as a means to extract confessions.",
      " Amendments to the Criminal Procedure Law (CPL), which went into effect in 2013, prohibit the use of confessions obtained under torture as evidence and require audio or video recordings of interrogations in major criminal cases. The United Nations Committee against Torture concluded in late 2015, however, that despite these legal reforms, China had failed to eliminate torture and numerous other forms of ill treatment, particularly during the pretrial period and in cases of extralegal detention. The committee also expressed concern over the lack of a legal guarantee for the right of detained persons to immediately meet with a lawyer.  In 2016, a joint statement issued by China's judicial,",
      " procuratorial, and public security bodies reiterated that suspects must not be forced into confessing crimes and that any evidence collected through coercion should be excluded from their cases. The Ministry of Public Security issued disciplinary regulations aimed at holding police officers accountable for misconduct, including for obtaining confessions through torture, and subjecting them to criminal, administrative, and disciplinary punishments. However, reports of torture, including some that have caused public outrage, have continued. The Communist Party's internal disciplinary system, known as shuan g gui, has swelled with cases as part of Xi Jingping's anticorruption drive. Human rights groups and relatives of CCP members subjected to the process,",
      " in which the accused do not have the right to legal counsel, have alleged widespread use of torture to extract confessions.  Prisoners of Conscience  The number of political prisoners in China is difficult to determine, although thousands of citizens are estimated to have been detained and incarcerated for exercising internationally recognized freedoms of speech and assembly, engaging in religious activities that are not officially approved, or promoting ethnic minority rights in cases involving grievances against the state. The Dui Hua Foundation, a U.S.-based human rights organization that focuses on the treatment of prisoners, criminal justice reforms, and women's rights in China, estimated that there were 6,",
      "700 political and religious prisoners as of June 2016. These numbers include practitioners of Falun Gong and many Tibetans and Uyghurs. The Congressional\u2013Executive Commission on China (CECC) maintains a Political Prisoner Database that contains information on over 1,400 cases of political and religious prisoners known or believed to be detained or imprisoned, noting that there are considerably more cases than those documented in the database. According to the Department of State, those held in prison or administrative detention in China for reasons related to politics and religion number in the tens of thousands. Some of the most prominent cases are discussed below. Liu Xiaobo On July 13,",
      " 2017, Liu Xiaobo, a political dissident, writer, activist, and winner of the Nobel Peace Prize, died while serving an 11-year prison term. In December 2008, Liu helped draft \"Charter 08,\" commemorating the 60 th anniversary of the United Nations' adoption of the Universal Declaration of Human Rights, and inspired by \"Charter 77\" of the Czechoslovakian democracy movement that began in 1976. Charter 08, initially signed by over 300 PRC citizens, called for civil and political rights, legislative democracy, an independent judiciary, and a new Chinese Constitution,",
      " and urged the Chinese people to join to \"work for major changes in Chinese society and for the rapid establishment of a free, democratic, and constitutional country.\" The Charter eventually garnered roughly 10,000 additional signatures online.  On December 8, 2008, a day before Charter 08 was published online, Liu was detained by the Beijing police, and on December 25, 2009, a Chinese court sentenced him to 11 years in prison for \"inciting subversion of state power\" for his writings and use of the Internet, including coauthoring, signing, and distributing the Charter. Liu's indictment also included reference to six political essays that he wrote between 2005 and 2007.",
      " In October 2010, the Nobel Committee awarded Liu the Nobel Peace Prize for his \"long and non-violent struggle for fundamental human rights.\" PRC authorities barred members and representatives of Liu's family from traveling to Oslo in December 2010 to accept his Nobel award, and placed Liu Xia, Liu Xiaobo's wife, effectively under house arrest. Liu earned a reputation as an incisive critic of the Chinese Communist Party, an eloquent commentator on the harmful and \"cruel\" effects of many CCP policies on PRC society and citizens, and a supporter of gradual political reform driven \"from below\" through the raising of popular awareness about democracy.",
      " He had undergone other periods of incarceration and house arrest for his writings and activism, including a 20-month sentence in prison following his participation in the 1989 Tiananmen demonstrations for democracy and three years in a Re-education Through Labor camp (1996-1999). Liu advocated for the families of those killed in the Tiananmen military crackdown and for an official reassessment of the events of June 1989. In May 2017, Liu Xiaobo was granted medical parole, having been diagnosed with advanced-stage liver cancer. Liu Xiaobo's family asked the PRC government for permission for both Liu Xiaobo and Liu Xia,",
      " who also reportedly is ill, to seek medical treatment abroad. Chinese authorities did not reduce Liu's sentence nor allow him to travel abroad for treatment, although they agreed to invite foreign medical experts to join a team of Chinese doctors treating Liu. A German and an American doctor who examined Liu on July 8, 2017, stated at that time that they believed Mr. Liu could be safely transported to Germany or the United States for treatment \"with appropriate medical evacuation care and support, while Chinese authorities asserted that Liu's condition made him too ill for such a trip. U.S. government officials urged Beijing to allow Liu to travel abroad for medical treatment and to free Liu Xia from house arrest and to allow her to go abroad as well.",
      "  Following Liu Xiaobo's death, Secretary of State Rex Tillerson called on the Chinese government \"to release Liu Xia from house arrest and allow her to depart China, according to her wishes.\" Tillerson also stated that \"I join those in China and around the world in mourning the tragic passing of 2010 Nobel Peace Prize Laureate Liu Xiaobo, who died while serving a lengthy prison sentence in China for promoting peaceful democratic reform. Mr. Liu dedicated his life to the betterment of his country and humankind, and to the pursuit of justice and liberty.\" Several members of the Congressional-Executive Commission on China released statements that they were \"deeply saddened\"",
      " by the loss of Liu Xiaobo and expressed their continued support for the promotion of human rights and peaceful democratic change in China, which Liu had advocated. They urged the PRC government to grant Liu Xia permission to leave China for a country of her choosing. Following and prior to Liu's death, some Members of Congress introduced resolutions honoring Liu's life and legacy, urging the PRC government to allow Liu Xiaobo and Liu Xia to seek medical treatment abroad, and designating the vicinity of the Chinese Embassy in Washington, DC, \"Liu Xiaobo Plaza\" (see Appendix ). Gao Zhisheng Gao Zhisheng, a prominent rights lawyer,",
      " was named one of China's top 10 lawyers by the Ministry of Justice in 2001. However, as his rights advocacy expanded to protect citizens who had run afoul of policies that authorities deemed to be sensitive, including family planning, religious practice, and Falun Gong, Gao was detained numerous times. In late 2011, he reportedly began serving a three-year prison term that had been handed down in 2006, but was suspended for five years. During his periods of detention, prison officials reportedly tortured him, denied him access to legal counsel and regular visits from his family, and withheld information about his location. Authorities released Gao in August 2014 but he remains under house arrest and constant surveillance by security agents.",
      " Xu Zhiyong In January 2014, constitutional rights advocate Xu Zhiyong was tried and convicted of \"gathering a crowd to disturb public order\" and sentenced to four years in prison. Xu, a lawyer, scholar, Haidian district people's congress deputy, and rights activist, helped found the New Citizen's Movement, a loosely organized network numbering roughly 5,000 people that promoted the rule of law, government transparency, citizens' rights, civic engagement, and social justice. Its members, some of whom also have been arrested, reportedly met informally across the country to discuss politics and engaged in small street rallies in 2012 and 2013.",
      " The Open Constitution Initiative, which Xu also helped organize, was a nongovernmental legal research and aid organization that the government shut down in 2009, ostensibly for tax evasion.  Media Freedom  Most major media outlets in China are owned or controlled by the government. Although in some ways the government exercises less direct control over news and information than it did in the early 2000s, due to the commercialization of the media, private financing of some media companies, and the rapid growth of popular use of the Internet and social media, the Chinese government continues to severely restrict the press, broadcasting, publishing, and online communication. China ranked 176 th out of 180 countries on Reporters Without Borders'",
      " 2017 World Press Freedom Index, and nearly 40 journalists and dozens of \"netizens\" reportedly were incarcerated in 2016. According to the CECC, the Chinese government has \"used a variety of legal and extralegal measures to target journalists, editors, and bloggers who covered issues authorities deemed to be politically sensitive,\" including cyberattacks, dismissal or disciplinary action, harassment, physical violence, detention, and prison sentences. Publications that broach topics related to political reform have faced growing harassment by state authorities and the independent reporting of official corruption and misconduct has been curtailed. Under an amendment to the PRC Criminal Law that became effective in November 2015,",
      " journalists may be held criminally liable for ''fabricating false reports'' in their coverage of ''hazards, epidemics, disasters, and situations involving police.'' Meanwhile, the trend toward the commercialization of the press has begun to reverse, according to some analysts, while reliance upon government support, particularly by the print media, has increased.  The Internet China has the world's largest number of Internet users, estimated at over 700 million people, and one of the most extensive Internet censorship systems in the world, although its implementation remains uneven. At times, the Internet has served as an outlet for many citizens to express opinions and \"let off steam,\" provided a lifeline to political dissidents and liberal thinkers,",
      " enabled social activists to organize, and helped to publicize corrupt practices and negligent behavior on the part of government officials. Internet users have developed ways to circumvent censorship, and politically sensitive news and opinion sometimes get widely disseminated, if only fleetingly, online. Under Xi Jinping, the Chinese government has treated the Internet, like civil society, as a rising security threat. Since 2014, President Xi has attempted to established greater, centralized control over the Internet with the formation of the Central Leading Group for Cyber Security and Informatization, which he heads. The Chinese government reportedly blocks access to 172 out of 1,000 of the world's top websites,",
      " according to the nonprofit countercensorship service GreatFire.org, including 8 of the 25 most trafficked global sites. Continuously inaccessible websites, social networking sites, and file sharing sites include Radio Free Asia, Voice of America (Chinese language), international human rights websites, including those related to Tibet and Falun Gong, many Taiwanese news sites, Facebook, Pinterest, Twitter, and YouTube. Some English language news sites, including the Washington Post, the Voice of America (English), and Yahoo homepage, are generally accessible or occasionally censored. The Wall Street Journal and Wikipedia are blocked. The New York Times and Bloomberg websites have been inaccessible since 2012,",
      " when they reported on the personal wealth of Chinese leaders. Google services, including Gmail, have been intermittently blocked since 2014.  In addition to international websites, the government often shuts down Chinese websites that broach sensitive topics. The state also has blocked news of major events and shut down the Internet almost entirely in some places. Authorities blocked nearly all Internet traffic in Xinjiang for 10 months following unrest in 2009 and continue to do so in selected areas of the country from time to time. Commonly filtered keywords, Internet searches, and microblog and social media postings include those with direct and indirect or disguised references to Tibetan policies;",
      " the Tiananmen crackdown of 1989; Falun Gong; PRC leaders and dissidents who have been involved in recent scandals or issues that authorities deem to be politically sensitive; and discussions of democracy. Other areas that authorities occasionally have targeted for censorship include the following: controversial government policies and cases of misconduct; public health and safety; sensitive foreign affairs issues; and media and censorship policies. The government reportedly has employed or enlisted students, public employees, and volunteers to post progovernment comments online and to divert public discussion from politically sensitive topics.  For Chinese Internet users in search of information beyond the PRC's Internet gateways, or \"Great Firewall,\" accessing filtered sites is made possible by downloading special software applications,",
      " such as virtual private networks (VPNs). The government occasionally has attempted to disrupt VPN services or impose new restrictions, but either has allowed, or has not been able to stop, the continuation of many circumvention efforts. In 2015, the PRC government launched a cyberattack on some countercensorship sites, which disrupted access to them. In January 2017, the Ministry of Industry and Information Technology announced that domestic VPN services would require government approval, although some observers say that the new regulations may be implemented flexibly. According to some experts, the Chinese government does not intend for its censorship of the Internet to be total.",
      " Many foreigners staying in China for business, academic and cultural exchanges, international development programs, and other purposes, as well as their Chinese counterparts, depend upon VPNs to access the global Internet. Chinese leaders view limited online discussion of political and social issues as valuable for monitoring public opinion and providing people a \"safety valve\" through which to air their views. According to some experts, China's leaders appear to be especially worried about the Internet as a tool for engaging in collective action, and are relatively less concerned about it as a medium for sensitive words.  VPNs allow some motivated Internet users to bypass censorship, but impose just enough inconvenience, such as slower browsing speeds and in some cases a small financial cost,",
      " to discourage most Chinese Internet users from utilizing them. The number of Chinese netizens who utilize VPNs has grown rapidly in the past several years, from under 5% to 29%, according to a 2015 survey of Chinese Internet users. Some studies have shown, however, that the vast majority of Internet users in China do not go online for political purposes, and that many of them accept the government's justifications for regulating the Internet or do not feel unduly affected by censorship. In one Chinese survey, 6% of respondents answered that they both \"encountered censorship\" and \"were angry about it.\"  Weibo and WeChat Chinese versions of microblogging services ( weibo ), similar to Twitter,",
      " and social networking sites became important sources of news and platforms for public opinion until the government imposed restrictive measures on them. Between around 2009 and 2012, Sina Corporation's weibo quickly became the \"most prominent place for free speech,\" and the country's \"most important public sphere,\" where netizens posted both news and commentary. Due in part to growing restrictions on blogging, including government harassment against bloggers with large followings, weibo declined significantly in popularity and influence and become more entertainment-oriented, while Tencent Holdings' weixin (\"microchannel\"), also known as WeChat, exploded in popularity. WeChat, an instant messaging app launched in 2011,",
      " offers its users a platform for voice and video chats, posting messages and photographs, e-commerce, online gaming, and following celebrities. Unlike weibo, WeChat connects an individual account holder with a private circle of friends rather than a public audience, and thus has less potential political impact.  Less than two years after it was released, however, China's leaders became alarmed as some of WeChat's users began posting politically sensitive comments and news stories, and some users with public accounts designed for companies and celebrities gained millions of followers. In December 2012, the government enacted a new law requiring those who apply for Internet, mobile service, and social networking accounts to use their real names.",
      " In 2013, the Supreme People's Court issued a judicial interpretation by which bloggers can face up to three years in prison if content deemed defamatory is reposted 500 times or viewed 5,000 times. These policies reportedly had a \"chilling effect on online discourse.\" Several dozen WeChat public accounts were shut down by authorities, and prominent online political commentators and whistle-blowers were harassed, detained, or arrested. New regulations in 2014 mandated that microblogging and instant messaging services as well as web portals could only repost, and not report, news on current events, and only after they obtained a permit from the State Internet Information Office.",
      " Other regulations placed restrictions on WeChat groups, such as limiting the number of people belonging to a group chat. According to one observer, \"Critical voices are still there, but it is less likely they will coalesce into a broader form of protest.\" Religious Freedom and Ethnic Minority Issues The extent of religious freedom and activity in China varies widely by religion, region, ethnic group, and jurisdiction, largely depending on \"the level of perceived threat or benefit to party interests, as well as the discretion of local officials.\" Article X of the PRC Constitution guarantees freedom of \"religious belief,\" but not freedom of religious practice as it explicitly protects only \"normal\"",
      " religious activities and those that do not \"disrupt public order, impair the health of citizens or interfere with the educational system of the state.\" At a conference on \"religious work\" in April 2016, President Xi Jinping emphasized that the \"legitimate rights of religious peoples must be protected,\" but also stated, \"We must resolutely guard against overseas infiltrations via religious means and prevent ideological infringement by extremists.\" By contrast, Xi has been relatively supportive of Chinese Buddhism and folk religions, Daoism, and Confucian philosophy, which China's leaders apparently perceive to be more compatible with CCP rule.  Some observers say that, despite government restrictions and the avowed atheism of the PRC's Communist leaders,",
      " religious life in China continues to grow, due in part to a yearning for spirituality in Chinese society. An estimated 350 million PRC citizens openly practice one of five officially recognized religions (Buddhism, Protestantism, Roman Catholicism, Daoism, and Islam). Furthermore, religious organizations in China are playing growing roles in providing social and charitable services. A 2017 report by Freedom House on religious practice and government policies in China states that since Xi came to power, \"authorities have intensified many of their restrictions,\" including codifying previously informal restrictions and increasing measures to prevent children from participating in religious activities. The report emphasizes,",
      " however, that \"believers have responded with a surprising degree of resistance....\" The PRC government often has imposed harsh and arbitrary policies and measures upon many unregistered Christian churches, Tibetan Buddhists, Uyghur Muslims, and Falun Gong practitioners. This is largely due to the perceived potential for these groups to become independent, organized social forces or cultivate foreign support. Chinese authorities increasingly have persecuted Tibetan Buddhists and Uyghur Muslims for carrying out religious and cultural activities that they have regarded as \"extremist,\" \"separatist,\" and \"terrorist\" acts.  The Department of State has identified China as a \"country of particular concern\"",
      " (CPC) for \"particularly severe violations of religious freedom\" for 16 consecutive years (2000-2015). Due in part to China's designation as a CPC, the U.S. government restricts the U.S. export of crime control and detection instruments and equipment to the PRC. In 2016, the Department of State reported that \"there continued to be reports that the government physically abused, detained, arrested, tortured, sentenced to prison, or harassed adherents of both registered and unregistered religious groups for activities related to their religious beliefs and practices.\" In April 2017, the USCIRF recommended that the Department of State again designate China as a CPC for 2016.",
      "  In August 2015, then-U.S. Ambassador at Large for International Religious Freedom David Saperstein traveled to China to discuss religious freedom issues with government officials, religious leaders, and civil society representatives. While in China, Saperstein called for an end to the campaign of cross removals and church demolitions in Zhejiang province, urged Chinese authorities to \"reassess counterproductive policies,\" particularly restrictions on Tibetan Buddhist and Uyghur Muslim religious practices, and expressed deep concern over detentions of religious leaders and human rights defenders. Saperstein also noted some positive developments, including the growth in numbers of religious adherents and activities and faith-based charitable and social services organizations.",
      "  Christians Christianity is the second-largest religion in China after Buddhism. Between 70 million and 90 million Chinese Christians worship in officially registered and unregistered churches, split roughly evenly between the two. Membership in both types of churches continues to grow steadily and somewhat haphazardly, according to observers. Some experts estimate that about one-quarter of China's human rights lawyers are Christian.  Many Chinese Protestants have rejected the official church, known as the Three Self Patriotic Movement, for political or theological reasons. \"Three Self\" refers to \"self-governance,\" \"self-support,\" and \"self-propagation,\" or independence from foreign missionary and other religious groups and influences.",
      " Some independent or \"house\" church leaders claim that they have attempted to apply for official status and been rejected by local government Religious Affairs Bureaus. Although in many localities, unsanctioned religious congregations reportedly experience little state interference, many house churches have faced harassment by government authorities, their leaders have been harassed, detained, or imprisoned, and their properties have been confiscated or demolished. The U.S.-based China Aid Association reported worsening levels of persecution in 2016, including 303 Christians who were sentenced to prison. The government issued new religious regulations in 2016 that impose restrictions on Chinese contacts with overseas religious organizations and require government approval for religious schools and websites.",
      " The new rules also officially allow Chinese religious organizations to set up charities and provide social services.  Since 2014, authorities in Zhejiang province, where there is a large and growing Christian population, have carried out efforts against \"excessive religious sites\" and \"illegal\" structures. Zhejiang officials, apparently fearful of the influence and foreign connections of Christian groups, reportedly have ordered crosses to be removed from more than 1,200 churches, or an estimated 90% of all church crosses, and 20 church structures have been destroyed as part of a provincial crackdown. Although many churches had received government approvals in the past, local officials stated that they did not comply with zoning regulations.",
      " This policy has been met by resistance among not only parishioners of unregistered churches but also leaders of some registered churches.  Catholics in China are divided among those expressing allegiance to the Pope and those heeding the government-affiliated Chinese Catholic Patriotic Association (CCPA), which does not recognize Papal authority. Tensions between the Vatican and Beijing include disagreements over the appointment of bishops, religious freedom, and the Vatican's diplomatic ties with Taiwan. Most Chinese bishops have received approval from both Beijing and the Holy See; however, since 2010, the CCPA has ordained several bishops without Rome's consent, which has been a key source of contention between the Vatican and Beijing.",
      " The two sides resumed dialogue in 2014 with the aim of improving relations, and some bishops have received joint approval since 2015. Under a draft agreement reported in October 2016, the PRC government would select candidates for bishops, and the Pope would then choose among those candidates. However, the Vatican and the PRC government have not resolved issues related to 30 Vatican-approved Chinese bishops in unregistered churches and 8 bishops ordained by the Chinese government without the Vatican's permission. In 2012, Thaddeus Ma Daqin, a new bishop approved by both the Vatican and Beijing, renounced his ties to the CCPA.",
      " The government stripped Ma of his title and confined him to a seminary outside Shanghai, and in 2016 reportedly shut down his microblogging account.  Tibetans202 Although Beijing has controlled Tibet since 1951, Tibetan grievances over Beijing's rule persist, with some Tibetans in the Tibet Autonomous Region (TAR) and other Tibetan areas in China viewing PRC government policies as hostile to their religion, culture, language, and identity. The TAR, formally established in 1965, constitutes just under half of the area that Tibetan exile groups consider to be historical Tibet, and it is home to about 2.7 million out of China's total ethnic Tibetan population of 6 million.",
      " Most of China's remaining ethnic Tibetan population (just over 3 million) lives in Tibetan autonomous prefectures and counties outside the TAR, in Sichuan and Yunnan provinces, which border the TAR, and in Qinghai province.  Tensions between the PRC government and many Tibetans have been high, particularly since a period of unrest in 2008, when waves of protest swept across the Tibetan plateau. At the same time, talks between envoys of the Tibetan spiritual leader, the 14 th Dalai Lama Tenzin Gyatso, and Beijing have stalled. PRC officials and representatives of the Dalai Lama participated in nine rounds of talks between 2002 and 2010 on issues related to Tibetan autonomy and the return of the Dalai Lama.",
      " The ninth round reportedly failed to bring about fundamental progress. The Dalai Lama's envoys pledged respect for the authority of the PRC central government, but continued to push for \"genuine autonomy\" for the Tibetan people, while a senior Chinese official dismissed the proposal as tantamount to \"half independence.\" China's leaders have emphasized social and economic development in Tibet and continued to condemn the Dalai Lama's \"separatist activities\" and \"Middle Way approach.\"  A heightened police presence in the TAR and the imposition of more intensive controls on Tibetan religious life and culture have exacerbated grievances in Tibetan areas, according to some observers. The Department of State reported \"severe repression of Tibet's unique religious,",
      " cultural, and linguistic heritage by, among other means, strictly curtailing the civil rights of China's ethnic Tibetan population, including the freedoms of speech, religion, association, assembly, and movement.\" Government measures include political education campaigns in monasteries and villages and limitations on use of the Tibetan language in schools, despite a provision in China's Regional Ethnic Minority Law that stipulates that schools with a majority of ethnic minority students \"should, whenever possible, use textbooks in their own languages and use these languages as the media of instruction\" (Article 37). In recent years, authorities in Tibetan areas reportedly have searched some Tibetan homes and businesses for photographs of the Dalai Lama,",
      " examined cell phones for \"reactionary music\" from India, and monitored correspondence and Internet posts for political content.  Tibetan religious and community leaders, academics, writers, artists, and those involved in social and cultural activities have been targeted for persecution, including arbitrary arrests and extrajudicial detentions and killings by state agents. Many Tibetans have been detained for participating in protests, disseminating information or images online, and engaging in other activities that previously were tolerated or are considered relatively minor offenses in other parts of China. The CECC has documented the cases of 650 Tibetan political prisoners and detainees as of August 2016, the vast majority of whom were apprehended following the 2008 protests.",
      " In addition, many Tibetans complain of the domination of the local economy by Han Chinese, particularly in urban areas; forced resettlement; and the adverse environmental effects of Beijing's development projects in the region. Officially, Hans, the country's majority ethnic group, form a minority in the TAR, or about 8% of the region's total population, according to Chinese census figures. However, some observers believe that Han people actually constitute over half of the population of Lhasa, the TAR capital, as many Han laborers, business persons, officials, police, and paramilitary forces have migrated there, many of whom remain registered as residents of other parts of China.",
      " Larung Gar In the past year, authorities continued efforts to demolish structures and homes of the Larung Gar Buddhist Academy in Sichuan Province, restrict the number of Tibetan Buddhists living there, and install surveillance equipment. The government states that it intends to make Larung Gar \"more orderly, beautiful, safe and peaceful.\" Some local residents say that the government fears a loss of social control and aims to reduce the number of lay and monastic practitioners living there, including Tibetan Buddhist monks and nuns, Han Chinese, and foreign students, from 20,000 to 5,000 people. Founded in 1980, the religious center has become known as one of the world's largest and most important centers for the study of Tibetan Buddhism.",
      " In November 2016, six U.N. special rapporteurs on human rights issues issued a joint statement, sent to the PRC government, expressing \"deep concern\" about expulsions of monks and nuns and demolitions of monastic dwellings at Larung Gar and Yachen Gar in Sichuan Province. Self-Immolations Since 2009, about 150 Tibetans within China are known to have self-immolated, many apparently to protest PRC policies or to call for the return of the Dalai Lama, and 119 are known to have died. Most of the self-immolations were committed during 2012-",
      "2013 in Tibetan areas in China outside the TAR. Additional self-immolations by Tibetans have occurred in India and Nepal. The PRC government has implemented policies that punish relatives, friends, and other associates of self-immolators, including prison terms or death on \"intentional homicide\" charges for allegedly \"aiding\" or \"inciting\" others to self-immolate. Dr. Lobsang Sangay, elected head (Sikyong) of the Dharamsala, India-based Central Tibetan Administration and a leader of the Tibetan exile community, stated that \"[w]e have consistently and categorically urged the Tibetan community not to resort to any kind of drastic action,",
      " including self-immolations,\" and blamed PRC repression. Although PRC officials often have blamed the Dalai Lama and \"hostile foreign forces,\" self-immolations have not been limited to Tibetans. Other PRC citizens, including farmers protesting land takings by the government, have self-immolated as well.  U.S. Policy on Tibetan Issues  The U.S. government has expressed support for Tibetan people's rights and traditions while recognizing that \"Tibet is a part of China.\" Presidential and congressional meetings with the 14 th Dalai Lama have been among the most high-profile expressions of U.S. support for Tibetans.",
      " Presidents Bill Clinton and George W. Bush met with the Dalai Lama on several occasions. Barack Obama met with the Dalai Lama four times during his presidency, and expressed support for the Tibetan spiritual leader's \"commitment to peace and nonviolence\" and \"Middle Way\" approach. China's Foreign Ministry expressed Beijing's opposition to Obama's meetings with the Dalai Lama, objecting to U.S. interference in China's internal affairs. After President Obama's 2016 meeting, China said the Dalai Lama is \"not simply a religious figure but a political figure in exile who has been conducting secessionist activities internationally under the pretext of religion....\"",
      "  The Dalai Lama and exiled Tibetan officials have regularly met with Members of Congress, many of whom have openly expressed support for Tibetan aspirations. In 2016, the Tom Lantos Human Rights Commission (TLHRC), in letters to the Chinese Ambassador to the United States, urged the PRC government to repeal policies related to the demolitions at Larung Gar and the persecution of relatives and communities associated with self-immolators. In August 2016, Representative Jim McGovern, TLHRC cochair, sponsored a letter, signed by 72 Members of Congress, calling on the U.S. government to \"redouble efforts in support of the Tibetan people.\" In November 2015,",
      " a congressional delegation led by House Minority Leader Nancy Pelosi travelled to Beijing, the TAR, and Hong Kong. While in Tibet, members of the delegation raised issues related to human rights, the preservation of Tibetan religious and cultural traditions, greater autonomy for Tibetan areas, the environment, the Dalai Lama, and renewing the dialogue between representatives of the Dalai Lama and PRC authorities. In May 2017, Pelosi led a congressional delegation to Dharamsala, India, where they met with the Dalai Lama and spoke in support of human rights and greater autonomy in Tibetan areas in China. In April 2017, Senator Steve Daines led a congressional delegation to China and Japan,",
      " including a visit to Lhasa, Tibet.  Uyghur Muslims  In the past decade, Chinese authorities have carried out harsh religious and ethnic policies against Uyghur Muslims, exacerbating tensions in the Xinjiang Uyghur Autonomous Region (XUAR) in China's northwest, according to many human rights experts. Uyghurs, who speak a Turkic language and practice a moderate form of Sunni Islam, have complained of arbitrary harassment by public security forces, restrictions on religious and cultural practices, the regulation and erosion of their ethnic identity, economic discrimination, and a lack of consultation on regional policies. The PRC government's encouragement of Han migration also has intensified grievances among many Uyghurs.",
      " Once the predominant ethnic group in the XUAR, Uyghurs now number around 10.5 million or roughly 45% of the XUAR's population of 24 million, as many Han Chinese have migrated there, particularly to Urumqi, the capital. According to many observers, economic development in Xinjiang has disproportionately benefitted Hans more than Uyghurs.  Official repression of many freedoms of Uyghurs in the XUAR, including of religion, speech, Internet communication, association, assembly, and movement, is more severe than that of other groups and in other parts of China. Although the government stated that it \"opposes linking terrorism with specific ethnic groups,\" it has justified many repressive measures on security grounds.",
      " The XUAR reportedly accounts for the largest proportion of \"endangering state security\" trials of any region in the PRC. International human rights organizations say that many Uyghurs accused of criminal acts have been deprived of procedural protections provided under China's constitution and laws. Human rights groups describe excessive government restrictions on Uyghur religious and ethnic traditions and practices, including the training and role of Muslim clerics, observance of Ramadan, and use of the Uyghur language. Uyghur children and minors may be forbidden from entering mosques or studying the Koran, while CCP members, civil servants, teachers, and students are not allowed to openly practice Islam or participate in some religious customs,",
      " such as fasting during Ramadan. Uyghurs, including those wishing to make the pilgrimage to Mecca, frequently are denied permission to travel abroad. In 2016, Xinjiang authorities required residents to turn in their passports for \"annual review.\" In March 2017, the XUAR government passed laws prohibiting the wearing of veils in public places and the growing of long or \"abnormal\" beards. Many experts contend that current tensions stem from events of July 2009, in which police reportedly attacked Uyghur demonstrators in Urumqi, which led to rioting, Uyghur attacks on Han people, roughly 200 deaths,",
      " and a harsh security crackdown. In 2013 and 2014, clashes involving Uyghurs and Xinjiang public security personnel resulted in hundreds of deaths, the majority of them of Uyghurs, while several attacks purportedly or in some cases confirmed to have been carried out by Uyghurs killed roughly 80 people in China, mostly Han civilians. Since 2015, roughly one dozen reported violent incidents, including raids by security forces and purported Uyghur attacks, have resulted in the deaths of over 100 people, including Uyghurs, Hans, alleged Uyghur perpetrators, and police, in the XUAR.",
      " PRC authorities claim that public security officers responded to Uyghurs engaged in separatist activities or carrying out or preparing to launch terrorist attacks on government property, public security facilities, and civilian targets. Human rights groups assert that many incidents began as peaceful Uyghur protests against repressive state policies or coercive police actions. In recent years, hundreds, and possibly thousands, of Uyghurs reportedly have fled China, many to escape persecution and seek political asylum.  PRC officials assert that Islamic fundamentalism, jihad, and terrorist techniques, much of it promoted over the Internet, have contributed to violence in Xinjiang and elsewhere in China. The Chinese government has blamed the East Turkestan Islamic Movement (ETIM)",
      " for terrorist attacks in China since the 1990s. PRC and international sources estimate that between 100 and 300 Uyghur Muslims have joined ISIS in the Middle East, while the Syrian government claims that over 4,000 Uyghurs have joined various jihadist groups in Syria.  New PRC counterterrorism legislation expands police authority under broad definitions of terrorism, say human rights experts. The XUAR government, furthermore, has passed regional measures that are more stringent than the national law, including harsher punishments and more explicit prohibitions related to the use of the Internet and social media to disseminate information that officials deem to be extremist or terrorist.",
      " For example, the XUAR government has implemented regulations that punish netizens for spreading \"false information\" online, especially content \"advocating religious fanaticism or undermining religious harmony.\"  The PRC government has implemented a three-pronged strategy in response to Uyghur grievances and unrest: developing the XUAR economy; carrying out a \"strike hard\" campaign against religious extremism, separatism, and terrorism; and introducing policies to assimilate Uyghurs into Han society. In 2016, thousands of new police stations reportedly were set up in the XUAR, furnished with antiriot and high-tech surveillance equipment and manned by tens of thousands of police recruits.",
      " Assimilation policies include placing greater emphasis on Chinese language instruction in schools, providing monetary incentives for mixed Uyghur-Han marriages, and promoting the migration of Uyghur workers to other provinces. Some experts contend that assimilation policies may contribute to the erosion of Uyghur identity and breed further resentment. Others say that government attempts to discourage or abolish Uyghur religious and cultural traditions have backfired, and instead fueled trends toward more conservative Islam, such as Salafism, and popularized some Muslim practices, such as the wearing of veils.  Ilham Tohti In September 2014, a Beijing court sentenced Ilham Tohti,",
      " a Uyghur economics professor, to life in prison for the state security crime of separatism. Tohti was known abroad as a moderate advocate for Uyghur rights who promoted dialogue and mutual understanding between Hans and Uyghurs and did not call for the creation of an independent East Turkestan. However, Uyghur Online, a website that he established in 2005 to serve as a platform for Uyghur issues, interviews that he gave to the foreign press, and articles that he published critical of the government's ethnic policies, appear to have prompted PRC leaders to order his arrest in January 2014.  Falun Gong  Falun Gong combines an exercise regimen with meditation and the stated aim of attaining the virtues of \"truthfulness,",
      " compassion, and forbearance.\" Practitioners believe that the spiritual practice brings benefits to the body and mind. Falun Gong is derived from traditional Chinese qigong, a set of movements said to stimulate the flow of qi \u2014vital energies or \"life forces\"\u2014throughout the body. The practice also combines Buddhist and Daoist concepts, and precepts formulated by Falun Gong's founder Li Hongzhi. Practitioners who have reached a high level of \"self-cultivation\" say that they have attained \"true health,\" a higher level of being, and freedom from worldly attachments. Some adherents also may believe that suffering helps them to develop spiritually.",
      " During the mid-1990s, the spiritual exercise gained tens of millions of adherents across China, including members of the Communist Party.  On April 25, 1999, thousands of Falun Gong adherents gathered in Beijing, near Zhongnanhai, the Chinese leadership compound, to protest the government's growing restrictions on their activities. Apparently in an effort to preempt the development of a fervent, broad-based social movement, the CCP established an office, which became known as the \"610\" office because it was established on June 10, 1999, to coordinate and administer the eradication of Falun Gong.",
      " In October 1999, the Supreme People's Court issued interpretations by which Falun Gong activities were punishable under Article 300 of the PRC Criminal Law, which makes organizing \"superstitious sects, secret societies, and evil religious organizations\" (cults) or using them for illegal purposes a crime. In 2015, an amendment to the PRC Criminal Law increased the maximum possible sentence for cult crimes from 15 years to life in prison. H undreds of thousands of practitioners who refused to renounce Falun Gong were sent to Re-education Through Labor (RETL) centers until they were deemed \"transformed.\" Falun Gong members constituted a large portion,",
      " and at times a majority, of detainees in RETL facilities, where there were allegations of abuse, force-feeding of hunger strikers, and torture. Many adherents who remained \"non-transformable\" spent multiple terms in RETL facilities. Since the formal dismantling of the RETL system was announced in 2014, many Falun Gong detainees reportedly have been sent to Legal Education Centers to undergo indoctrination, or to mental health facilities. Roughly 900 practitioners reportedly have been sentenced to prison terms since Xi Jinping assumed power. Falun Gong overseas organizations claim that over 3,800 adherents died in custody between 1999 and 2015,",
      " and 80 died in 2016.  Some recent reports indicate that enforcement of the CCP's objective to eliminate Falun Gong, whose numbers are estimated now to range from a few million to 20 million adherents, has loosened. Reported examples include fewer government directives restricting Falun Gong, and some practitioners being allowed to practice Falun Gong while in detention, released from detention after a short period, or dealt with leniently by police officers. The Dui Hua Foundation suggests that a recent joint interpretation by the Supreme People's Court and Supreme People's Procuratorate raises the criteria for serious offenses under Article 300,",
      " which may result in a larger number of relatively minor cases of cult activity and thus lighter penalties. Organ Harvesting Allegations Some reports allege that Falun Gong practitioners held in detention facilities of various kinds were victims of illegal organ harvesting\u2014the unlawful, large-scale, systematic, and nonconsensual removal of body organs for transplantation\u2014while they were still alive, resulting in their deaths. There also have been reports that Tibetan and Uyghur prisoners have been sources for organ harvesting, but to a lesser degree. Some advocates argue that the number of transplanted organs in China in recent years\u2014roughly 10,000 annually based on official reports and many more according to other estimates\u2014cannot be fully accounted for by other purported sources of organs,",
      " such as executed prisoners and volunteer donors, and that Falun Gong detainees are the likely primary source. They contend that many prisoners on death row are not viable candidates for organ donation, and that the number of executions in China has been declining. They argue, furthermore, that the high number of people in China in need of organs, estimated to be about 300,000 people, compared to the supply of organs from other sources, helps fuel the ongoing practice of organ harvesting from Falun Gong detainees. The claims of organ harvesting from Falun Gong detainees are based largely upon circumstantial evidence and interviews. Advocates point to purportedly large numbers of apparently healthy Falun Gong detainees and their disappearances,",
      " suspicious physical examinations and regular blood testing of detainees, short wait times for transplants, and telephone recordings of Chinese hospital officials acknowledging the practice. In their most recent research, the authors of several publications alleging organ harvesting in China assert that the number of transplants performed in the PRC has been much higher than officially reported and previously believed\u2014between 60,000 to 100,000 per year since 2000\u2014and that the discrepancy between the probable number of transplants and donations by executed prisoners and voluntary donors \"leads us to conclude that there has been a far larger slaughter of practitioners of Falun Gong for their organs than we had originally estimated.\" They cite indications of a surge in organ transplantation facilities and surgeries throughout the country.",
      "  In 2017, Freedom House reported that there was \"credible evidence suggesting that beginning in the early 2000s, Falun Gong detainees were killed for their organs on a large scale.\" Other international human rights groups have neither confirmed nor denied the existence of organ harvesting from Falun Gong practitioners. An investigation by the Department of State in 2006 cast some doubt on allegations of a Falun Gong concentration camp and organ harvesting center in Shenyang, Liaoning Province.  PRC officials have admitted problems in China's organ donation and transplantation practices, but denied the existence of organ harvesting from Falun Gong practitioners. In 2006,",
      " in response to foreign and domestic pressure, some Chinese authorities acknowledged that the transplantation of organs from executed prisoners had been prone to abuses, including nonconsensual removal, and announced measures to reform China's organ transplantation system. Regulations enacted in 2007 created national oversight mechanisms and banned transplant tourism. In 2011, the PRC Criminal Law was revised to declare organ trafficking a crime, and in 2012 the government announced that China would phase out the use of organs from executed prisoners. In 2014, Huang Jiefu, director of the China Organ Donation and Transplantation Commission, announced that no organs from executed prisoners would be permitted beginning in 2015.",
      "  Some foreign observers have raised doubts about China's pledge to end organ transplants from executed prisoners. According to some reports, Chinese prisoners have continued to be a source of organs, classified as \"citizen donations,\" although some PRC officials have denied this. Some international human rights and medical groups have raised concerns about how the right of death-row prisoners to consent to organ donation is ensured in China. They have urged the PRC government to provide greater transparency regarding its organ donation and transplantation systems, and to permit independent verification that China is carrying out its policies as stated.  Other international experts have noted a decrease in organs from inmates and a commitment to reform among PRC transplantation and medical experts.",
      " The number of voluntary, nonprisoner organ donors in China is growing, but remains small compared to other countries. The traditional Chinese value placed upon the deceased's body remaining intact and popular distrust of the country's medical system continue to hinder government efforts to promote organ donation. Experts estimated that China would have 4,000 voluntary donors and 15,000 organ transplants in 2016.  China's Family Planning Policies China's \"One-Child Policy\" began in 1980 to curb population growth. It led to many human rights abuses as well as demographic and related problems, including a skewed gender ratio and a surplus in men,",
      " trafficking in women, and an accelerated aging of the population. Implementation of the policy varied somewhat by province. Many jurisdictions long have allowed some couples to have more than one child, for example, ethnic minorities, rural couples for whom the first child is a girl, and couples in which both parents are an only child. In response to demographic trends and popular pressure, reforms to the policy began in 2013. In December 2015, the National People's Congress amended the PRC Population and Family Planning Law to allow all married couples to have two children. However, human rights groups have continued to express concerns about the persistence of coercive family planning measures.",
      "  China's Population and Family Planning Law does not explicitly condone abortion as a means of dealing with violations of policy, stating, \"Family planning shall be practiced chiefly by means of contraception\" (Article 19). However, the One-Child Policy led to many abuses by local officials attempting to enforce the law, including forced contraceptive use and sterilizations and coercive abortions, in some cases late-term abortions. Furthermore, the law authorized other penalties for violators of the policy, including heavy fines (\"social compensation fees\") and job-related sanctions, as well as the denial of public health and education benefits to offspring beyond the first child.  The amended Population and Family Planning Law,",
      " which allows married couples to have two children, contains a provision stating that government officials \"may not infringe upon the legitimate rights and interests of citizens.\" Punishable actions by state personnel involved in implementing the law include \"infringing on a citizen's personal rights,\" \"abusing [one's] power,\" \"demanding or accepting bribes,\" and misappropriating social compensation fees. Social compensation fees are to remain, however, for most couples who have more than two children, and human rights groups fear that coercive measures may persist for those who violate the new two-child policy. The one-child policy, along with a historical preference for boys based upon cultural and economic influences,",
      " spurred the illegal but widespread practice of sex-selective abortions, particularly in rural areas. By the mid-2000s, according to Chinese census data, 121 boy babies were born for every 100 girl babies. In part due to greater enforcement of the ban on sex-selective abortions and relaxations of the one-child policy, the gender imbalance has declined to 115 boys for every 100 girls born in China, compared to the global ratio of 103 to 100. Despite the loosening of the law, however, many Chinese couples, especially in urban areas, have chosen to limit their families to one child, due to the high costs of raising children,",
      " the commitments of both parents toward their careers, and the difficulty of finding childcare. U.S. Efforts to Advance Human Rights in China Congress and successive Administrations have developed an array of means for promoting human rights and democracy in China, often deploying them simultaneously. Principal policy tools include open criticism of PRC human rights policies and practices; quiet diplomacy; hearings; foreign assistance; support for dissident and prodemocracy groups in China and the United States; sanctions; bilateral dialogue; Internet freedom efforts; public diplomacy; and the coordination of international pressure. In the past year, human rights advocates praised two milestone U.S. efforts aimed at promoting human rights globally and in China:",
      " legislation that would impose penalties upon foreign individuals considered to have committed egregious human rights violations and a collective international statement critical of China's human rights record. Legislation and Hearings Congress has played a prominent role in U.S. human rights policy toward China. Related congressional activities include sponsoring legislation, holding hearings, and authorizing reports that call attention to human rights abuses globally and in the PRC; writing letters to the Administration and to PRC leaders in support of human rights in China, Chinese prisoners of conscience, and ethnic minority groups; and Members and staff raising human rights issues while on official travel to China. In 2017, the CECC and the Africa,",
      " Global Health, Global Human Rights, and International Organizations subcommittee of the House Committee on Foreign Affairs held hearings on the plight of detained Chinese rights lawyers and their families and on Liu Xiaobo. During the 114 th Congress, subcommittees of the House Committee on Foreign Affairs held hearings on global religious freedom, organ harvesting in China, and PRC influence on academic freedom in U.S. universities. The CECC has held over 10 hearings on a range of topics related to human rights in China since 2014. The Tom Lantos Human Rights Commission held hearings on Tibet in 2015 and 2017 and on the United Nations Human Rights Council in 2016.",
      " The CECC, Tom Lantos Human Rights Commission, U.S. Commission on International Religious Freedom, and other congressional and congressionally mandated bodies and fora investigated, publicized, and reported on human rights conditions in the PRC.  Global Magnitsky Act In December 2016, Congress passed the Global Magnitsky Human Rights Accountability Act, as part of the National Defense Authorization Act for Fiscal Year 2017 ( P.L. 114-328 ). Some human rights activists reportedly have begun to collect information on PRC officials who allegedly have committed egregious human rights violations, in order to invoke sanctions under the new law. The act,",
      " hailed as \"groundbreaking\" by its supporters, was named after Russian lawyer Sergei Magnitsky, who in 2008 spoke out against Russian government corruption and died in prison one year later. The law grants the President authority to prohibit or revoke U.S. entry visas to foreign individuals deemed guilty of targeting whistle-blowers, and freezing or prohibiting those individuals' U.S. property transactions. The act allows the President to impose such sanctions on foreign persons for whom credible evidence exists showing that they are responsible for extrajudicial killings, torture, or other gross violations of internationally recognized human rights, committed against individuals in any foreign country who seek to expose illegal activity carried out by government officials or promote internationally recognized human rights and freedoms.",
      " Human Rights, Rule of Law, and Civil Society Programs The U.S. government does not provide assistance to Chinese government entities or directly to Chinese NGOs. The direct recipients of State Department and USAID grants have been predominantly U.S.-based nongovernmental organizations (NGOs) and universities. U.S. foreign assistance efforts in China primarily have aimed to promote sustainable development and environmental conservation and preserve indigenous culture in Tibetan areas in China and to support human rights, democracy, rule of law, and environmental programs in the PRC. Between 2001 and 2016, the United States government provided an estimated $78 million for Tibetan programs;",
      " $77 million for rule of law and environmental efforts in the PRC; $220 million for programs administered by the Department of State's Bureau of Democracy, Human Rights, and Labor (DRL); and $6.2 million for criminal justice reform. DRL has administered programs that support the development of the legal profession, civil society, government transparency, public participation in government, and Internet Freedom.  Some policymakers assert that the U.S. government should not support foreign assistance programs in China because the PRC has significant financial resources of its own and can manage its own development needs. Other critics argue that U.S. democracy and governance programs have had little effect in China.",
      " Some human rights activists state that some U.S. stakeholders involved in assistance programs may refrain from supporting tougher U.S. approaches toward China's human rights abuses in order to protect their programs and policy interests. Some proponents of U.S. programs in China point out that U.S. assistance does not provide support to the PRC government, and contend that U.S. programs benefit U.S. interests, and they operate in areas where the PRC government has lacked sufficient capacity or commitment. Others assert that U.S. efforts in the PRC have responded to broad public interest and support, helped to build foundations for the rule of law and civil society,",
      " promoted the protections of some rights, and tempered the effects of periodic political crackdowns.  National Endowment for Democracy Established in 1983, the National Endowment for Democracy (NED) is a private, nonprofit foundation \"dedicated to the growth and strengthening of democratic institutions around the world.\" Funded primarily by an annual congressional appropriation, NED has played an active role in promoting human rights and democracy in China since the mid-1980s. A grant-making institution, the endowment\u00a0has supported projects carried out by grantees that include its core institutes; Chinese, Tibetan, and Uyghur human rights and democracy groups based in the United States and Hong Kong;",
      " and a small number of NGOs based in mainland China. NED grants for China and Tibetan programs have averaged about $6.7 million per year during the past decade. This support was provided using NED's regular congressional appropriations (an estimated $170 million in FY2016), apart from some additional congressionally directed funding. Program areas include the following: rule of law; public interest law; civil society; prisoners of conscience; rights defenders; freedom of expression; Internet freedom; religious freedom; government accountability and transparency; political participation; labor rights; promoting understanding of Tibetan, Uyghur, and other ethnic concerns in China; public policy analysis and debate;",
      " and rural land rights. Sanctions China is subject to some U.S. economic sanctions in response to its human rights conditions. Their effects, however, have been limited and largely symbolic. Many U.S. sanctions imposed upon China as a response to the 1989 Tiananmen military crackdown are no longer in effect. Remaining Tiananmen-related sanctions suspend Overseas Private Investment Corporation (OPIC) programs and restrict export licenses for U.S. Munitions List (USML) items and crime control equipment. Originally imposed under the Tiananmen sanctions, the U.S. government maintains restrictions on U.S. exports of crime control and detection equipment to the PRC due to China's designation as a \"country of particular concern\"",
      " for religious freedom. Foreign operations appropriations legislation also may impose restrictions or conditions. For example, U.S. representatives to international financial institutions by law may support projects in Tibet only if they do not encourage the migration and settlement of non-Tibetans into Tibet or the transfer of Tibetan-owned properties to non-Tibetans, due in part to the potential for such activities to erode Tibetan culture and identity. In addition, countries, such as China, that the Department of State designates as \"Tier 3\" in its Trafficking in Persons Report may be subject to restrictions on U.S. assistance, in particular nonhumanitarian and nontrade-related foreign assistance.",
      " The United States limits its support for international financial institution lending to China for human rights reasons. Other U.S. laws that can be invoked to deny foreign assistance on human rights grounds include Sections 116 and 502B of the Foreign Assistance Act of 1961 (P.L. 87-195).  The Trump Administration, invoking the Kemp-Kasten amendment, has ceased U.S. contributions to the United Nations Population Fund (UNFPA), due to its determination that the UNFPA supports PRC family planning policies, which allegedly have involved coercive abortion and involuntary sterilization. The Obama Administration provided funding to the UNFPA under the Kemp-Kasten amendment.",
      " At the same time, Congress enacted legislation requiring that no U.S. funding to the UNFPA could be used for a country program in China, and that for the UNFPA to receive U.S. funding, it could not fund abortions. Human Rights Dialogue The 19 th and most recent round of the U.S.-China Human Rights Dialogue took place in Washington, DC, in August 2015. Beijing suspended the human rights dialogue in 2016, possibly in response to the U.S.-led joint statement at the UNHRC criticizing China's human rights record. The issue of human rights is not among the \"four pillars\"",
      " of the new U.S.-China Comprehensive Dialogue that was established during talks between President Trump and President Xi in April 2017. Secretary of State Rex Tillerson stated that human rights are \"embedded in every discussion,\" and that \"I don't think you have to have a separate conversation, somehow separate our core values around human rights from our economic discussions, our military-to-military discussions, or our foreign policy discussions.\"  The U.S.-China Human Rights Dialogue, established in 1990, has never been fully embraced by Beijing. It is one of several government-to-government human rights dialogues between China and other countries; China also conducts a human rights dialogue with the European Union.",
      " The Obama Administration participated in five rounds between 2010 and 2015. The PRC government suspended the human rights dialogue in 2014, presumably in retaliation for former President Obama's meeting with the Dalai Lama, and in 2016. Beijing previously had suspended the dialogue in 2004 after the George W. Bush Administration sponsored an unsuccessful U.N. resolution criticizing China's human rights record. The Chinese government has become increasingly resistant to making concessions on human rights through diplomatic engagement, and more assertive about raising human rights violations in the United States, according to experts. Since 2013, PRC officials rarely have accepted prisoner lists or requests for information on cases of concern from foreign governments.",
      " The 19 th dialogue included a meeting with senior staffers of the Senate Foreign Relations Committee and a roundtable with human rights groups. The roundtable reportedly marked the first time that a Chinese delegation to the talks engaged critics from civil society. Then-Assistant Secretary of State for Democracy, Human Rights, and Labor Tom Malinowski expressed concerns regarding the crackdown on human rights lawyers and presented a list of over 100 \"cases of concern.\" Other issues reportedly raised by the U.S. side included China's new foreign NGO law, the campaign to remove crosses from Christian churches in Zhejiang province, repression in Tibet and Xinjiang, and restrictions on U.S.",
      " and other foreign journalists in China. The PRC delegation, led by Li Junhua, Director-General of the Department of International Conferences and Organizations of the PRC Ministry of Foreign Affairs, noted human rights problems in the United States, including racial discrimination, excessive use of force by police, and the \"violation of the human rights of other countries through massive surveillance activities.\"  During the Obama Administration, some experts criticized the human rights dialogue for providing both governments with opportunities for claiming progress on human rights in China through the talks themselves, without establishing benchmarks for progress, offering incentives for producing results, or imposing penalties for failing to do so. They argued that separating the human rights dialogue from the main U.S.-China Strategic and Economic Dialogue marginalized human rights issues,",
      " and reduced opportunities for linking human rights to other areas of the bilateral relationship. Critics also urged that the talks be more transparent and open to a greater number of stakeholders, particularly nongovernmental participants. Obama Administration officials responded to critics by arguing that the Human Rights Dialogue was an important means of regularly expressing U.S. positions on human rights, and not an arena for negotiation. They argued that the talks enabled the U.S. government to focus on human rights within one forum, and did not preclude the raising of human rights in other fora. Even some critics of the dialogue have suggested that the talks nonetheless may effectively be used to press the PRC government on human rights issues prior to bilateral summits and other events.",
      " \u00a0Some U.S.-based human rights groups have contended that the dialogue \"remains the best forum for raising the cases of imprisoned activists.\" Some Chinese rights activists believe that the dialogue has had long-term benefits through raising human rights awareness in China. A related bilateral dialogue, the Legal Experts Dialogue (LED), was launched in 2003. The Obama Administration convened the fourth round in 2011, after a six-year hiatus. The LED brings together governmental and nongovernmental legal experts from the United States and China. It is designed to serve as a forum to discuss the benefits and practical implementation of the rule of law. The seventh LED took place in Beijing in October 2015.",
      " Topics of discussion included Chinese lawyers' access to clients, interrogation techniques used by police officers, and administrative law reforms. Internet Freedom The U.S. government has undertaken efforts to promote global Internet freedom. U.S. congressional committees and commissions have held hearings on the Internet and China, including the roles of U.S. Internet companies in China's censorship system, market access for U.S. Internet companies, intellectual property rights, and cybersecurity. The George W. Bush Administration established the Global Internet Freedom Task Force, continued under the Obama Administration as the NetFreedom Task Force, whose mission was to coordinate policy within the State Department on Internet freedom efforts. The Department of State's Bureau of Democracy,",
      " Human Rights, and Labor administers Global Internet Freedom programs in the following areas: countercensorship and secure communications technology; training in secure online and mobile communications practices; advocacy; and policy research. The primary target countries for such efforts, particularly censorship circumvention and secure communications programs, have been China and Iran. Congress appropriated $13 million for DRL Internet freedom efforts in FY2016. International Broadcasting The Broadcasting Board of Governors (BBG) identifies China as one of five \"critical areas\" for investment in the area of international broadcasting. Voice of America (VOA) and Radio Free Asia (RFA) provide external sources of independent or alternative news and opinion to Chinese audiences.",
      " The two media services play small but unique roles in providing U.S.-style broadcasting, journalism, and public debate in China. VOA, which offers mainly U.S. and international news, and RFA, which serves as an uncensored source of domestic Chinese news, often report on important world and local events. VOA \"Learning English\" international news programs, aimed at intermediate learners of English, are popular with many young, educated, and professional Chinese.  The PRC government regularly jams and blocks VOA and RFA Mandarin, Cantonese, Tibetan, and Uyghur language radio and television broadcasts and Internet sites, while VOA English services have received less interference.",
      " VOA and RFA have made efforts to enhance their Internet services, develop circumvention or countercensorship technologies, and provide access to their programs on social media platforms such as weibo and WeChat. In 2014, RFA Mandarin launched a blog featuring a daily compilation of posts by Chinese \"celebrity bloggers\" that had been deleted by state censors. United Nations Human Rights Council (UNHRC) The 47-member United Nations Human Rights Council (UNHRC) was created in 2006 to replace the U.N. Commission on Human Rights (UNCHR), which had been faulted for being unduly influenced by countries widely perceived as having poor human rights records.",
      " The United States had sponsored several resolutions at the UNCHR criticizing China's human rights record, but none were successful; China was able to thwart voting on nearly all such resolutions through \"no-action motions.\" The PRC continues to employ its soft power\u2014diplomatic and economic influence\u2014in global fora in order to reduce international pressure to improve its human rights conditions.  Members of the UNHRC are elected by a majority vote in the U.N. General Assembly for three-year terms and may not be reelected for more than two consecutive terms. The United States was elected to the Human Rights Council in 2009 and was reelected in 2012 and 2016.",
      " China has been elected to the UNHRC four times (2006, 2009, 2013, and 2016). Some Members of Congress have opposed China's membership on the UNHRC.  As part of the restructuring related to the formation of the UNHRC, the U.N. General Assembly established the Universal Periodic Review (UPR), a mechanism by which the human rights records of all U.N. members are assessed once every four years. In addition, every member of the Human Rights Council is required to undergo a review while a member. The review is based upon reports compiled by the Office of the High Commissioner for Human Rights (OHCHR), including input from independent experts and NGOs,",
      " and a report submitted by the state under review. Some observers complain that the UPR process provides countries with poor human rights records with opportunities to criticize those with good records, the recommendations are nonbinding, and the input of NGOs often is restricted. Supporters of the UPR contend that it highlights human rights issues and produces pledges from countries under review to address them, and that the process is a more transparent and inclusive exercise than bilateral dialogues. The first UPR of China was conducted in 2009 and the second one was held in October 2013. During China's second UPR, many U.N. member states urged China to ratify the International Covenant on Civil and Political Rights (ICCPR). Some countries called on China to ensure greater protections of the rights of ethnic minorities,",
      " particularly Tibetans, Uyghurs, and Mongolians, although other countries supported China's ethnic policies. Austria, Slovakia, and Switzerland recommended that China facilitate a visit by the U.N. High Commissioner for Human Rights. The United States reportedly was the only participant in the UPR dialogue to provide names of Chinese citizens when raising the issue of human rights abuses against dissidents and civil society activists. China's next periodic review is to take place in November 2018. Of the recommendations made by the Human Rights Council at its second UPR, China adopted 204 of them and rejected 48. A number of recommendations that China rejected related to human rights activists,",
      " extrajudicial detention, freedom of belief, freedom of expression, and the rights of ethnic minorities. PRC officials asserted ethnic minority groups were treated fairly, adding that China's priority was to reduce poverty. They stated that Beijing was willing to work with other countries on human rights \"as long as it was in the spirit of mutual respect.\" The PRC government declined to set a timetable for ratifying the ICCPR and agreed to meet with the U.N. High Commissioner for Human Rights \"at a mutually convenient time.\" China's National Human Rights Action Plan for 2016-2020 pledges to implement recommendations of its first and second UPRs and to \"conduct exchanges and cooperation\"",
      " with the OHCHR. The Network of Chinese Human Rights Defenders reported \"large discrepancies\" between China's 2013 promises and its implementation of UPR recommendations. The Network found that 43 recommendations were partially implemented and only 3 were fully implemented. The New York-based organization Human Rights in China (HRC) submitted a mid-term assessment in which it noted a \"steep deterioration of rights\" in the PRC and provided recommendations to the PRC government in order for it to meet its UPR commitments. HRC also made recommendations to U.N. member states to encourage China to comply with international human rights processes and meet universal human rights standards.",
      " Joint Statement on Human Rights in China In March 2016, a group of 12 countries, led by the United States, openly expressed serious concerns about human rights abuses in China at a gathering of the United Nations Human Rights Council. The declaration was the first collective statement on China in the history of the council. It expressed concerns about China's \"deteriorating human rights record,\" including the arrests of rights activists, civil society leaders, and lawyers for \"peacefully exercising their freedom of expression or for lawfully practicing their profession.\" Appendix. Selected Legislation Related to Human Rights in China 115 th Congress H.Res. 445 : Honoring the Life and Legacy of Liu Xiaobo (Meadows,",
      " introduced July 13, 2017). H.Con.Res. 67 : Urging the Government of the People's Republic of China to unconditionally release Liu Xiaobo, together with his wife Liu Xia, to allow them to freely meet with friends, family, and counsel and seek medical treatment wherever they desire (Smith (NJ), introduced June 28, 2017). S.Con.Res. 21 : Urging the Government of the People's Republic of China to unconditionally release Liu Xiaobo, together with his wife Liu Xia, to allow them to freely meet with friends, family, and counsel and seek medical treatment wherever they desire.",
      " (Rubio, introduced June 29, 2017). H.R. 2537 : To designate the area between the intersections of International Drive Northwest and Van Ness Street Northwest and International Drive Northwest and International Place Northwest in Washington, District of Columbia, as \"Liu Xiaobo Plaza,\" and for other purposes (Meadows, introduced May 18, 2017). S. 1187 : To designate the area between the intersections of International Drive, Northwest and Van Ness Street, Northwest and International Drive, Northwest and International Place, Northwest in Washington, District of Columbia, as \"Liu Xiaobo Plaza,\" and for other purposes (Cruz,",
      " May 18, 2017). H.R. 1872 : Reciprocal Access to Tibet Act of 2017 (McGovern, introduced Apri; 4, 2017). S. 821 : Reciprocal Access to Tibet Act of 2017 (Rubio, introduced April 4, 2017). H.Res. 65 : Urging the President to seek an independent investigation into the death of Tibetan Buddhist leader and social activist Tenzin Delek Rinpoche and to publicly call for an end to the repressive policies used by the People's Republic of China in Tibet (Capuano,",
      " introduced January 27, 2017). 114 th Congress H.R. 4452 (Not passed): To designate the area between the intersections of International Drive Northwest and Van Ness Street Northwest and International Drive Northwest and International Place Northwest in Washington, District of Columbia, as \"Liu Xiaobo Plaza,\" and for other purposes (Meadows, February 3, 2016). S. 2451 (Not passed): A bill to designate the area between the intersections of International Drive, Northwest and Van Ness Street, Northwest and International Drive, Northwest and International Place, Northwest in Washington, District of Columbia, as \"Liu Xiaobo Plaza,\" and for other purposes (Cruz,",
      " January 20, 2016). H.Res. 584 (Not passed): Urging the President to seek an independent investigation into the death of Tibetan Buddhist leader and social activist Tenzin Delek Rinpoche and to publicly call for an end to the repressive policies used by the People's Republic of China in Tibet (Capuano, January 11, 2016). H.Res. 343 ( Passed on June 13, 2016 ): Expressing concern regarding persistent and credible reports of systematic, state-sanctioned organ harvesting from non-consenting prisoners of conscience in the People's Republic of China, including from large numbers of Falun Gong practitioners and members of other religious and ethnic minority groups (Ros-Lehtinen,",
      " June 25, 2015). H.Res. 337 ( Passed on 7/8/2015 ): Calling for substantive dialogue, without preconditions, in order to address Tibetan grievances and secure a negotiated agreement for the Tibetan people (Engel, June 24, 2015). H.R. 2621 (Not passed): China Human Rights Protection Act of 2015 (Smith (NJ), June 2, 2015). H.R. 2242 (Not passed): World Press Freedom Act of 2015 (Smith (NJ), May 5, 2015). H.R. 1112 (Not passed): Reciprocal Access to Tibet Act of 2015 (McGovern,",
      " February 26, 2015). H.Res. 105 (Not passed): Calling for the protection of religious minority rights and freedoms worldwide (Bridenstine, February 11, 2015). S.Res. 69 (Not passed): A resolution calling for the protection of religious minority rights and freedoms worldwide (Inhofe, February 5, 2015). S. 284 and H.R. 624 ( Passed on 12/23/16 as part of S. 2943, National Defense Authorization Act for Fiscal Year 2017 [ P.L. 114-328, \u00a71261]): Global Magnitsky Human Rights Accountability Act:",
      " To impose sanctions with respect to foreign persons responsible for gross violations of internationally recognized human rights, and for other purposes (Cardin, January 28, 2015; Smith (NJ), January 30, 2015).  113 th Congress H.R. 5379 (Not passed): China Human Rights Protection Act of 2014 (Smith (NJ), July 31, 2014). S.Res. 482 (Not passed): A resolution expressing the sense of the Senate that the area between the intersections of International Drive, Northwest Van Ness Street, Northwest International Drive, Northwest and International Place, Northwest in Washington, District of Columbia,",
      " should be designated as \"Liu Xiaobo Plaza\" (Cruz, June 24, 2014). H.R. 4851 (Not passed): Reciprocal Access to Tibet Act of 2014 (McGovern, June 12, 2014). H.Res. 599 ( Passed on 5/28/2014 ): Urging the Government of the People's Republic of China to respect the freedom of assembly, expression, and religion and all fundamental human rights and the rule of law for all its citizens and to stop censoring discussion of the 1989 Tiananmen Square demonstrations and their violent suppression (Smith (NJ), May 27,",
      " 2014). S.Res. 451 ( Passed on 6/4/2014 ): A resolution recalling the Government of China's forcible dispersion of those peaceably assembled in Tiananmen Square 25 years ago, in light of China's continued abysmal human rights record (Barrasso, May 15, 2014). S.Res. 361 ( Passed on 4/8/2014 ): A resolution recognizing the threats to freedom of the press and expression in the People's Republic of China and urging the Government of the People's Republic of China to take meaningful steps to improve freedom of expression as fitting of a responsible international stakeholder (Cardin,",
      " February 24, 2014). H.Res. 327 (Not passed): Expressing the sense of the House of Representatives regarding China's membership in the United Nations Human Rights Council (UNHRC) (Bentivolio, August 2, 2013). H.Res. 281 (Not passed): Expressing concern over persistent and credible reports of systematic, state-sanctioned organ harvesting from non-consenting prisoners of conscience, in the People's Republic of China, including from large numbers of Falun Gong practitioners imprisoned for their religious beliefs, and members of other religious and ethnic minority groups (Ros-Lehtinen, June 27,",
      " 2013). H.Res. 245 (Not passed): Recognizing the 24 th anniversary of the Tiananmen Square massacre, calling for the release of Dr. Wang Bingzhang, and for other reasons (Bentivolio, June 4, 2013).\n"
    ],
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    "hardness": null,
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  },
  {
    "id": 116,
    "question": null,
    "answer": "Federal law requires the President to submit an annual budget to Congress no later than the first Monday in February. The budget informs Congress of the President's overall federal fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President's relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President's budget may also include legislative proposals for spending and tax policy changes. While the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law (i.e., mandatory spending), such changes are generally included in the budget. President Obama submitted his FY2014 budget to Congress on April 10, 2013. The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of Health and Human Services (HHS) that is responsible for administering Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP), among other activities. CMS is the largest purchaser of health care in the United States, with expenditures from CMS programs accounting for roughly one-third of the nation's health expenditures. In FY2014, it is estimated that one-in-three Americans will be provided coverage through Medicare, Medicaid, and CHIP. CMS is also responsible for implementing many of the private health insurance provisions in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148). The CMS budget includes a mixture of both mandatory and discretionary spending. However, the vast majority of the CMS budget is mandatory spending, such as Medicare benefits and grants to states for Medicaid. For budgetary purposes, CMS is divided into the following sections: Medicare, Medicaid, CHIP, program integrity, state grants and demonstrations, private health insurance protections and programs, the Center for Medicare and Medicaid Innovation, and program management. The President's FY2014 budget contains a number of legislative proposals that would affect the CMS budget. Some are program expansions, and others are designed to reduce federal spending. The President's proposed budget for CMS would be $854.3 billion in net mandatory and discretionary outlays for FY2014. This would be an increase of $60.2 billion, or 7.6%, over the net outlays for FY2013. This estimate includes the cost of the Medicare physician payment adjustment ($15.4 billion), the estimated savings of the legislative proposals (-$5.8 billion), and the estimated savings from program integrity investments (-$0.1 billion). This report summarizes the President's budget estimates for each section of the CMS budget. Then, for each legislative proposal included in the President's budget, this report provides a description of current law and the President's proposal. The explanations of the President's legislative proposals are grouped by the following program areas: Medicare, Medicaid, program integrity, private health insurance, and program management. A table summarizing the estimated costs or savings for each legislative proposal is at the end of each of these sections.\n",
    "docs": [
      "Introduction Federal law requires the President to submit an annual budget to Congress no later than the first Monday in February. The budget informs Congress of the President's overall federal fiscal policy based on proposed spending levels, revenues, and deficit (or surplus) levels. The budget request lays out the President's relative priorities for federal programs, such as how much should be spent on defense, education, health, and other federal programs. The President's budget may also include legislative proposals for spending and tax policy changes. While the President is not required to propose legislative changes for those parts of the budget that are governed by permanent law (i.e., mandatory spending), such changes are generally included in the budget.",
      " President Obama submitted his FY2014 budget to Congress on April 10, 2013. The Centers for Medicare & Medicaid Services (CMS) is the division of the Department of Health and Human Services (HHS) that is responsible for administering Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP). In January 2011, CMS became responsible for much of the implementation of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended) when the Center for Consumer Information and Insurance Oversight (CCIIO) was established within CMS.  CMS is the largest purchaser of health care in the United States with Medicare and federal Medicaid expenditures accounting for 29.",
      "7% of the total national health expenditures in 2011. In 2010, CMS provided health insurance to 114 million individuals through Medicare, Medicaid and CHIP, which is roughly one in three Americans. This report summarizes the President's budget estimates for each section of the CMS budget. Then, for each legislative proposal included in the President's budget, this report provides a description of current law and the President's proposal. The explanations of the President's legislative proposals are grouped by the following program areas: Medicare, Medicaid, program integrity, private health insurance, and program management. At the end of each of these sections, there is a table summarizing the estimated costs or savings for each legislative proposal.",
      "  Budget Summary The CMS budget includes a mixture of both mandatory and discretionary spending. However, a vast majority of the CMS budget is mandatory spending, such as Medicare benefits and grants to states for Medicaid. The President's budget estimates that under current law CMS mandatory and discretionary net outlays would amount to $845.5 billion in FY2014. This is an increase of $51.2 billion, or 6.4%, over the estimated net outlays for FY2013.  The President's FY2014 budget increases the baseline for Medicare spending by assuming that Congress will block a proposed reduction in physician payments. The President's budget estimates this adjustment will increase CMS's net outlays by $15.",
      "4 billion in FY2014. With this adjustment, CMS's total net outlays are estimated to be $860.9 billion in FY2014. The President's FY2014 budget proposes to make a number of legislative changes to Medicare, Medicaid, program integrity, private health insurance, and program management. The President's budget estimates that if these legislative proposals were implemented, CMS's total net outlays would increase by $0.3 billion in FY2013 and decrease by $5.8 billion in FY2014.  With the Medicare physician payment adjustment, the estimated impact of the legislative proposals, and the estimated savings net of the program integrity and Health Care Fraud and Abuse Control (HCFAC)",
      " investments ($0.4 billion), the President's budget estimates CMS's net outlays will be $854.3 billion in FY2014, which is an increase of $60.2 billion, or 7.6%, over the net outlays for FY2013. For budgetary purposes, CMS is divided into the following sections: Medicare, Medicaid, CHIP, program integrity, state grants and demonstrations, private health insurance, the Center for Medicare and Medicaid Innovation (CMMI), and program management. The President's budget estimates for each of these budget sections are summarized below.  Medicare Medicare is a federal program that pays for covered health care services of qualified beneficiaries.",
      " It was established in 1965 under Title XVIII of the Social Security Act as a federal entitlement program to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65. Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services. The President's FY2014 budget estimates that under current law Medicare outlays net of offsetting receipts will be $522.1 billion in FY2014 (see Table 1 ). The President's budget makes adjustments to the baseline assuming Congressional action preventing a reduction in Medicare physician payments,",
      " which increases the FY2014 baseline outlays net offsetting receipts by $15.4 billion. The budget includes a number of legislative proposals for Medicare. If implemented, these legislative proposals are estimated to decrease Medicare outlays by $6.0 billion during FY2014 and $371.0 billion over the next 10 years. With the baseline adjustments and the estimated impact of the legislative proposals, the President's budget estimates that Medicare's total net mandatory and discretionary outlays for FY2014 will be $531.5 billion, which is an increase of $20.0 billion, or 3.9%, over the estimated net outlays for FY2013.",
      " The \" Medicare Legislative Proposals \" section below includes a description of each legislative proposal pertaining to the Medicare program. This section includes an explanation of current law and each of the President's legislative proposals. At the end of the section, there is a table summarizing the costs or savings for each of the President's legislative proposals. Medicare Quality Improvement Organizations (QIOs) CMS contracts with private organizations, now known as QIOs, to improve efficiency, effectiveness, economy, and quality of services delivered to Medicare beneficiaries. CMS contracts with one organization in each state, the District of Columbia, Puerto Rico, and other jurisdictions to serve as a QIO contractor to perform a range of activities.",
      " The QIO's most recent contract cycle or 10 th Statement of Work (SOW) began August 1, 2011 and will end July 31, 2014. The 10 th SOW provides $1.6 billion in funding over the three year timeframe, and this funding is used to fund clinical quality improvement priorities ($449.3 million), beneficiary center care ($181.0 million), value based purchasing support ($404.2 million), infrastructure and other special initiatives ($405.4 million), and other support contracts ($207.6 million).  The 11 th SOW begins August 1, 2014,",
      " and this SOW will implement certain changes to the QIO program that were included as part of the Trade Adjustment Assistance Extension Act of 2011 (which was incorporated into the bill to extend the Generalized Systems of Preferences and for other purposes, P.L. 112-40 ). These changes include providing flexibility to determine the geographic scope of a QIO contract, permitting contracts with a broader range of entities, awarding certain QIO tasks to specialty contractors, terminating QIO contracts for poor performance among other changes, and extending the length of the existing three year contract to five years.  Medicaid Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care.",
      " Medicaid is jointly funded by the federal government and the states. Participation in Medicaid is voluntary for states, though all states, the District of Columbia, and the territories choose to participate. Each state designs and administers its own version of Medicaid under broad federal rules. While states that choose to participate in Medicaid must comply with all federal mandated requirements, state variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. Historically, eligibility was generally limited to low-income children, pregnant women, parents of dependent children, the elderly, and people with disabilities; however, recent changes will soon add coverage for individuals under the age of 65 with income up to 133%",
      " of the federal poverty level (FPL). The federal government pays a share of each state's Medicaid costs; states must contribute the remaining portion in order to qualify for federal funds. The President's FY2014 budget estimates that under current law Medicaid total net outlays will amount to $303.8 billion, which is an increase of $37.2 billion, or 14.0%, over estimated net outlays for FY2013 (see Table 1 ). The President's budget includes a number of legislative proposals that would impact Medicaid. If these proposals are implemented, the President's budget estimates that total net outlays for Medicaid would decrease by $0.",
      "1 billion in FY2014 and $22.1 billion over the next 10 years. Including the estimated impact of the legislative proposals and savings from program integrity investments, the President's budget estimates FY2014 net outlays for Medicaid will amount to $303.7 billion, which is an increase of $37.1 billion, or 13.9%, over the estimated net outlays for FY2013. The \" Medicaid Legislative Proposals \" section below includes a brief discussion of current and proposed law for each of the legislative proposals for the Medicaid program. At the end of the section, there is a table summarizing the costs or savings for each of these proposals.",
      " CHIP The Balanced Budget Act of 1997 ( P.L. 105-33 ) established CHIP to provide health insurance coverage to low-income, uninsured children in families with incomes above applicable Medicaid income standards. Authorization and funding for CHIP has been extended a number of times, and most recently, the ACA extended federal funding for CHIP through FY2015. CHIP is jointly funded by the federal government and the states, and federal CHIP funding is capped on a state-by-state basis according to annual allotments. In general, CHIP allows states to cover targeted low-income children with no health insurance in families with income above Medicaid eligibility levels. States may also extend CHIP coverage to pregnant women when certain conditions are met.",
      "  The President's FY2014 budget estimates that under current law CHIP's total outlays will amount to $10.1 billion, which is an increase of $0.1 billion, or 0.7%, over the estimated outlays for FY2013 (see Table 1 ). While there are no specific CHIP legislative proposals, two proposals in another part of the CMS budget will have an impact on CHIP. One proposal would prevent the use of federal funds to pay a state's share of Medicaid or CHIP expenditures, and the other proposal would strengthen penalties for illegal distribution of beneficiary identification numbers. These legislative proposals are discussed in the \" Program Integrity Legislative Proposals \" section of this report.",
      " Program Integrity Title II of the Health Insurance Portability and Accountability Act of 1996 ( P.L. 104-191 ) established the HCFAC program to detect, prevent, and combat health care fraud, waste, and abuse. HCFAC has traditionally focused on Medicare fraud, waste, and abuse through activities such as medical review, benefit integrity, and provider audits. In FY2009, discretionary funding was appropriated, which allowed HCFAC to expand its activities to Medicare Advantage and Medicare Part D among other things. In addition, HCFAC mandatory and discretionary funding is used to prevent fraud, waste, and abuse in the Medicaid program.",
      " The budget estimates for the program integrity activities are built into the budget summaries discussed above for Medicare and Medicaid. However, when the funding for program integrity activities are broken out, the President's FY2014 budget estimates total budget authority for program integrity activities will amount to $2.0 billion in FY2014. This is an increase of $52 million, or 2.7%, over FY2013. Funding for program integrity consists of both mandatory and discretionary funding. In FY2014, the mandatory funding for program integrity activities is estimated to be $1.7 billion, and the discretionary funding is estimated to be $0.3 billion.",
      "  The \" Program Integrity Legislative Proposals \" section below includes a description of current and proposed law for each of the program integrity legislative proposals. At the end of the section, there is a table summarizing the costs or savings for each of the President's legislative proposals. State Grants and Demonstrations The state grants and demonstrations portion of the budget funds a diverse set of grant programs and other activities. The grants and activities funded through this portion of the budget include the following: Money Follows the Person Demonstration, Medicaid Integrity Program, incentives for prevention of chronic diseases in Medicaid, CHIP Outreach and Enrollment Grants, Medicaid Emergency Psychiatric Demonstration, and emergency services for undocumented aliens.",
      " The President's budget estimates that under current law FY2014 total outlays for state grants and demonstrations will amount to $0.7 billion, which is a decrease of $40 million, or -4.9%, from FY2013 (see Table 1 ). The President's budget does not include any legislative proposals impacting the state grants and demonstrations portion of the CMS budget. Private Health Insurance Protections and Programs The ACA includes reforms that focus on restructuring the private health insurance market by creating new programs (e.g., Health Insurance Exchanges) and by imposing requirements on private health insurance plans. Certain reforms require the participation of public agencies and officials in order to facilitate administrative or operational functions.",
      " The Center for Consumer Information and Insurance Oversight (CCIIO) within CMS is charged with helping implement the provisions of the ACA related to private health insurance. The President's FY2014 budget proposal includes estimates of the effects of ACA provisions that are currently in effect and the implementation of the health insurance exchanges, which are to be operational and offering coverage on January 1, 2014. The President's FY2014 budget estimates that under current law FY2014 total outlays for the health insurance programs will amount to $7.3 billion, which is an increase of $3.2 billion, or 76.4%, from FY2013 (see Table 1 ). The President's budget includes one legislative proposal that impacts the health insurance program,",
      " but the President's budget estimates this proposal will not have a budgetary impact. The \" Private Health Insurance Legislative Proposals \" section below includes a description of current and proposed law for the President's legislative proposal. Centers for Medicare & Medicaid Innovation (CMMI) CMMI was established by Section 3021 of the ACA and is tasked with testing innovative health care payment and delivery models with the potential to improve quality of care and reduce Medicare and Medicaid expenditures. The ACA appropriated $10 billion to support CMMI activities from FY2011 through FY2019. CMMI initiatives include Partnership for Patients, Health Care Innovation Awards, Pioneer Accountable Care Organizations (ACO), Advance Payment ACO Model,",
      " the Federally-Qualified Health Center Advanced Primary Care Practice demonstration, and state demonstrations to integrate care for dual eligible individuals. The President's budget estimates that under current law FY2014 total outlays for CMMI will amount to $1.4 billion, which is an increase of $0.1 billion, or 7.6%, from FY2013 (see Table 1 ). The President's budget does not include any legislative proposals impacting CMMI. Program Management The program management portion of the CMS budget includes funding for the administration of Medicare, Medicaid, CHIP, and other CMS activities. The budget estimates for the program management activities are built into the budget summaries discussed above.",
      " However, when the funding for program management activities are broken out, the President's budget estimates that under current law the FY2014 budget for program management activities will be $6.4 billion. The President's budget includes a few legislative proposals that would impact program management activities. If these proposals are implemented, the President's budget estimates that total program level funding for program management activities would increase by $0.4 billion in FY2014 and $0.5 billion over the next 10 years.  Funding for program management consists of both discretionary and mandatory funding. The discretionary funding for program management activities is estimated to be $5.2 billion in FY2014,",
      " which is an increase of $1.4 billion, or 35.8%, over FY2013 funding. The discretionary funding for program management activities is broken into five different budget lines\u2014program operations, federal administration, survey and certification, research, and state high risk pools.  In FY2014, under current law, the mandatory funding for program management activities is estimated to be $0.3 billion, which is a $34 million decrease from the FY2013 funding. The President's budget estimate includes legislative proposals that impact program management activities. If these proposals are implemented, the President's budget estimates that mandatory program management funding would increase by $0.",
      "4 billion in FY2014. The legislative proposals impacting program management are discussed in the \" Program Management Legislative Proposals \" section of the CMS budget. Including the impact of the legislative proposals, the President's FY2013 budget estimates total program level funding for program management activities would amount to $6.9 billion in FY2014. This is an increase of $2.2 billion, or 47.8%, over FY2013. Legislative Proposals The President's FY2014 budget contains a number of proposals that would impact the CMS budget. Some are program expansions, and others are designed to reduce federal spending. For each proposal,",
      " this report provides a description of current law and the President's proposal. This report groups these legislative proposals by program areas: Medicare, Medicaid, program integrity, private health insurance, and program management. At the end of each of these sections, there is a table summarizing the costs or savings for each legislative proposal, and the tables classify each proposal as new, modified from the President's FY2013 budget, or repeated from the President's FY2013 budget. Medicare Legislative Proposals Medicare Part A Reduce Medicare Coverage of Bad Debts Current Law Medicare reimburses providers for beneficiaries' unpaid coinsurance and deductible amounts after reasonable collection efforts. Historically,",
      " Medicare has reimbursed 100% of these bad debts. BBA97 had scheduled bad debt in acute care hospitals to be reduced from 100% reimbursement to 75% reimbursement in FY1998, to 60% reimbursement in FY1999, and to 55% reimbursement in subsequent years; however, BIPA froze the reduction at 70% reimbursement in FY2001 and for subsequent years. DRA reduced the payment amount for Medicare-allowable skilled nursing facility (SNF) bad debt from 100% to 70%, except for the bad debt attributable to beneficiaries eligible for both Medicare and Medicaid (i.e., dual eligibles), effective for cost reporting periods beginning on or after October 1,",
      " 2005. For other Medicare providers, allowable beneficiary bad debt had been reimbursed at 100%. Other Medicare providers that receive bad debt reimbursement are: critical access hospitals, rural health clinics, federally qualified health clinics, community mental health clinics, dialysis facilities, health maintenance organizations reimbursed on a cost basis, competitive medical plans, and health care prepayment plans. The MCTRJCA reduced Medicare bad debt reimbursement to 65% for all providers. Providers who were reimbursed at 70% would receive 65% bad debt reimbursement beginning in FY2013. Other providers who were reimbursed at 100% of bad debt are reimbursed at 88%",
      " in FY2013 and will be reimbursed at 76% in FY2014 and 65% in FY2015 and subsequent years. President's Proposal The President's budget would reduce bad debt reimbursement to 25%. The scheduled reduction would be phased-in over three years beginning in FY2014 for all providers that receive bad debt payments. This proposal was included in the President's FY2013 budget proposal. Better Align Graduate Medical Education Payments with Patient Care Costs Current Law Medicare pays hospitals with approved medical residency programs an additional amount to support the higher costs of patient care associated with training physicians. These indirect medical education (IME) payments are calculated as a percentage increase to Medicare's inpatient payment rates.",
      " The IME payments vary depending on the size of the hospital's teaching program (subject to Medicare's cap) as measured by the hospital's ratio of residents to hospital beds. Generally, teaching hospitals receive a 5.5% increase in IME payments for every 10% increase in their resident-to-bed ratio. The Medicare Payment Advisory Commission (MedPAC) has found that less than half of the IME payments can be empirically justified. In its June 2010 report, MedPAC recommended that Medicare's funding of graduate medical education be changed to support necessary workforce skills and that the Secretary of HHS, henceforth referred to a Secretary,",
      " set standards for receiving such funds. President's Proposal The President's budget would reduce IME funding by a total of 10%, starting in FY2014. The Secretary would be given the authority to set standards for teaching hospitals to encourage the training of primary care residents and develop necessary workforce skills. This proposal was included in the President's FY2013 budget proposal. Reduce Critical Access Hospital Reimbursements to 100% of Costs Current Law As established by BBA97, critical access hospitals (CAHs) are limited-service rural facilities that meet certain distance criteria or have been designated as a necessary provider, offer 24-hour emergency care,",
      " have no more than 25 acute care inpatient beds, and have no more than a 96-hour average length of stay. Generally, CAHs receive enhanced cost-based Medicare payments, rather than the fixed-fee payments paid to acute care hospitals under the Medicare's prospective payment systems (PPS). Since FY2004, CAHs receive 101% of reasonable, cost-based reimbursement for inpatient care, outpatient care, ambulance services, and skilled nursing facility care provided in swing beds to Medicare beneficiaries. Prior to this date, CAHs received Medicare payment based on 100% of reasonable costs for these services. President's Proposal The President's budget would reduce Medicare's reimbursement to CAHs to 100%",
      " of reasonable costs, beginning in FY2014. This proposal was included in the President's FY2013 budget proposal. Prohibit Critical Access Hospital Designation for Facilities That are Less Than 10 Miles from the Nearest Hospital Current Law In order to be certified as a CAH, a rural entity must meet certain distance criteria or have been designated as a necessary provider by the state. Under federal distance standards, a CAH must meet one of the following criteria: (1) be located 35 miles from another hospital or (2) be located 15 miles from another hospital in areas with mountainous terrain or with only secondary roads. Until January 1,",
      " 2006, states could waive these federal mileage requirements for those entities determined to be necessary providers. Existing necessary providers maintained their status as CAHs. President's Proposal The President's budget would rescind state's ability to waive federal mileage requirements for entities less than 10 miles from another hospital or CAH, thus eliminating their Medicare enhanced payment beginning in FY2014. This proposal was included in the President's FY2013 budget proposal. Adjust Payment Updates for Certain Post-Acute Care Providers Current Law MedPAC has found that Medicare payments generally exceed providers' costs for post-acute services. Each year, MedPAC makes recommendations for provider payment increases for the next fiscal or rate year.",
      " In its March 2013 report, MedPAC recommended that the Medicare payment updates for SNFs, inpatient rehabilitation facilities (IRFs), long term care hospitals (LTCHs), and home health agencies (HHAs) be eliminated for the upcoming year. MedPAC projected the 2013 aggregate Medicare margin (the amount that Medicare payments exceed costs) to be 12% and 14% for SNFs, 8.5% for IRFs, 5.9% for LTCHs, and 11.8% for HHAs. The ACA amended the annual update policy for these post-acute providers to include an adjustment to account for economy-wide productivity increases for cost savings.",
      " The productivity adjustment for SNFs, IRFs and LTCHs was implemented on October 1, 2011. The productivity adjustment for HHAs will be implemented on January 1, 2015. The annual updates for IRFs, HHAs, and LTCHs are subject to other reductions as well. The amount and the timing of such reductions vary by provider. Every post-acute provider may have an update less than 0.0 which would result in lower payment rate than in the preceding year. President's Proposal The President's budget would implement additional update reductions for these post-acute providers (i.e., IRFs,",
      " LTCHs, SNFs, and HHAs) of 1.1 percentage points from FY2014 through FY2023. Payment updates for these providers would not drop below 0.0 due to the 1.1 percentage point reduction. This proposal was included in the President's FY2013 budget proposal. Encourage Appropriate Use of Inpatient Rehabilitation Facilities Current Law IRFs are either freestanding hospitals or distinct units of other hospitals that are exempt from Medicare's inpatient prospective payment system (IPPS), which is used to pay acute care, general hospitals. Until recently, the Medicare statute gave the Secretary the discretion to establish the criteria that facilities must meet in order to be considered IRFs.",
      " Starting October 1, 1983, CMS has required that a facility must treat a certain proportion of patients with specified medical conditions in order to qualify as an IRF and receive higher Medicare payments. IRFs were required to meet the \"75 percent rule,\" which determined whether a hospital or unit of a hospital qualified for the higher IRF payment rates or was paid as an acute care hospital. According to the rule, at least 75% of a facility's total inpatient population must be diagnosed with one of 13 pre-established medical conditions for that facility to be classified as an IRF. This minimum percentage is known as the compliance threshold.",
      " The rule was suspended temporarily and reissued in 2004 with a revised set of qualifying conditions and a transition period for the compliance threshold as follows: 50% from July 1, 2004 and before July 1, 2005; 60% from July 1, 2005 and before July 1, 2006; 65% from July 1, 2006 and before July 1, 2007 and at 75% from July 1, 2007 and thereafter. During the transition period, secondary conditions (comorbidities) were to be considered as qualifying conditions.",
      " The DRA extended the 60% threshold an additional year beginning on July 1, 2006. As established by MMSEA, starting July 1, 2007, the IRF compliance threshold is set at 60% and comorbidities are included as qualifying conditions.  President's Proposal The President's budget would reinstitute the 75% threshold, starting in FY2014. This proposal was included in the President's FY2013 budget proposal. Equalize Payments for Certain Conditions Treated in Inpatient Rehabilitation Facilities and Skilled Nursing Facilities Current Law Patients receiving treatment for certain conditions such as hip and knee replacements can receive rehabilitative care in a variety of post-",
      "acute care settings, including SNFs and IRFs. Generally, care provided in an IRF is paid at a higher rate than care provided in a SNF. President's Proposal The President's budget would adjust reimbursement rates in the different post-acute care settings for certain overlapping conditions treated in multiple settings. Beginning in FY2014, the proposal would limit payment differentials for three conditions involving hips and knees, pulmonary conditions, as well as additional conditions the Secretary considers applicable. IRFs that provide intensive rehabilitation services to patients with relatively uncomplicated conditions would be paid as SNFs. This proposal was included in the President's FY2013 budget proposal.",
      "  Adjust Skilled Nursing Facilities Payments to Reduce Hospital Readmissions Current Law As established by the ACA, acute care hospitals with relatively high readmission rates are subject to penalties starting in FY2013. The penalties are capped at 1% of the Medicare payment in FY2013, at 2% in FY2014, and at 3% in FY2015 and beyond. SNFs with high readmission rates are not subject to such penalties. In its March 2012 report, MedPAC recommended that Congress reduce Medicare payments to SNFs with relatively high risk-adjusted rehospitalization rates to improve care coordination across different health care settings.",
      " President's Proposal The President's budget would reduce payments to SNFs with high rates of preventable hospital readmissions by up to 3% beginning in FY2017. This proposal was included in the President's FY2013 budget proposal. Implement Bundled Payment for Post-Acute Care Providers Current Law Post-acute care services primarily include nursing and rehabilitation services following a beneficiary's inpatient hospital stay. These services can be offered in institutional settings, such as LTCHs, IRFs, SNFs, as well as in community-settings by HHAs. Many post-acute care providers furnish similar services; however, Medicare payment rates are not the same across settings due to different provider cost structures and unique Medicare payment system differences.",
      " Use of post-acute care services is dramatically different across states. The Institute of Medicine (IOM) has noted that geographic variation in overall Medicare spending is heavily influenced by the use of post-acute care services, particularly SNFs and home health services.  To encourage a more efficient use of post-acute care and improve care coordination, MedPAC's June 2008 report suggested a single predetermined payment for an episode of care that includes the beneficiary's inpatient hospital stay as well as physician services, post-acute care services, and any hospital readmissions. The details of MedPAC's bundled payment proposal are still under development;",
      " however, CMS recently launched a Bundled Payment for Care Improvements (BPCI) Initiative to test different bundling payment models. In Model 2 of the BPCI, participants in the initiative will manage a beneficiary's episode (either 30, 60, or 90 days) that includes the acute-care hospital services, physician services, and post-acute care services. Participants that achieve a reduction in episode spending when compared to a pre-determined spending benchmark will be allowed to share in the savings.  President's Proposal The President's budget would implement a bundled payment for post-acute care providers (LTCHs, IRFs,",
      " SNFs, and HHAs) beginning in FY2018. The bundled payment would be based on patient characteristics and other factors and be set to reduce Medicare expenditures by 2.85% by FY2020. Payments would be bundled for at least half of the total payments for post-acute care providers, but little detail was provided about how this would work. This proposal was not included in the President's FY2013 budget proposal. Clarify the Medicare Disproportionate Share Hospital (DSH) Statute Current Law Medicare DSH funds are paid to qualifying hospitals through an adjustment within the applicable PPS. Generally, DSH hospitals receive the additional payments based on a DSH patient percentage (DPP)",
      " which is the sum of two fractions. The Medicare fraction is calculated by dividing the number of hospital inpatient days provided to patients who are eligible for Supplemental Security Income (SSI) and entitled to Medicare Part A benefits divided by the total number of hospital days provided to patients who are entitled to Medicare Part A benefits. This is added to the Medicaid fraction which is calculated as the number of hospital days for patients who (for such days) are eligible for medical assistance under an approved state Medicaid plan and who are not entitled to Part A benefits divided by the total number of hospital days. A few urban acute care hospitals receive DSH payments under an alternative formula.",
      " The Medicare DSH payment adjustment has been the subject of substantial litigation. President's Proposal The President's budget would clarify that hospital days for beneficiaries' who have exhausted their inpatient Medicare Part A benefits and who are enrolled in Medicare Advantage plans under Part C of Medicare should be included in the Medicare fraction of the hospitals' DSH DPP calculation. This proposal was not included in the President's FY2013 budget proposal. Medicare Part B Reduce Overpayment of Part B Drugs Current Law Medicare covers certain drugs (i.e., drugs provided in physicians' offices and normally administered by physicians) under Medicare Part B, rather than under Medicare's Part D outpatient prescription drug benefit.",
      " Medicare reimburses physicians for most Part B drugs based on the formula of 106% of the manufacturer's Average Sales Price (ASP) for each drug, regardless of the price at which physicians are able to purchase the drug. Physicians negotiate with drug wholesalers, pharmaceutical manufacturers, and other entities to purchase Part B drugs. Large physician practices or hospital outpatient departments that can purchase Part B drugs in larger volumes often are able to get prices considerably lower than 106% of ASP, thereby earning profit each time they administer the drug. Smaller physician practices and other lower volume purchasers are unable to receive comparable discounts to the higher volume purchasers, so they make less profit and may sometimes lose money on Part B drug transactions.",
      "  President's Proposal The President's budget would reduce Medicare Part B drug reimbursements to providers (i.e., physicians, hospital outpatient departments, clinics, and other entities) from 106% of the manufacturer ASP to 103% of ASP. The drug manufacturers would be required to pay a rebate for some drugs in certain instances as determined by the Secretary. This proposal was not included in the President's FY2013 budget proposal. Modernize Payments for Clinical Laboratory Services Current Law Clinical lab services are paid on the basis of area-wide fee schedules. The fee schedule amounts are updated for each calendar year. There is a ceiling on each payment amount set at 74%",
      " of the median of all fee schedule amounts for that laboratory test. Generally, the Secretary is required to adjust payments annually by the percentage change in the consumer price index for all urban consumers (CPI-U) together with other adjustments as the Secretary deems appropriate. Updates were eliminated for 1998 through 2002, and MMA eliminated updates for 2004-2008. Under current law, the annual clinical laboratory test fee schedule update adjustment for 2009-2013 is the percentage change in the CPI-U minus 0.5 percentage points. President's Proposal The President's budget would lower the payment rates under the Clinical Laboratory Fee Schedule (CLFS)",
      " by \u22121.75 percent every year from 2016 through 2023. The proposal would also provide the Secretary with the authority to adjust payment rates under the CLFS in a budget-neutral manner, precluding administrative or judicial review of these adjustments. Additionally, the proposal would support policies to encourage electronic reporting of laboratory results. This proposal was not included in the President's FY2013 budget proposal. Exclude Certain Services from the In-Office Ancillary Services Exception Current Law Limitations on physician self-referrals were enacted into law in 1989 under the Ethics in Patient Referrals Act, commonly referred to as the \"Stark law.\" The Stark law,",
      " as amended, and its implementing regulations prohibit certain physician self-referrals for designated health services (DHS) that may be paid for by Medicare or Medicaid. In its basic application, the Stark law provides that if a physician (or an immediate family member of a physician) has a financial relationship with an entity, the physician may not make a referral to the entity for the furnishing of DHS for which payment may be made under Medicare or Medicaid. It also provides that the entity may not present (or cause to be presented) a claim to the federal health care program or bill to any individual or entity for DHS furnished pursuant to a prohibited referral.",
      " It has been noted that the general idea behind the self-referral prohibitions is to limit physicians from making referrals based on financial gain, thus preventing overutilization and increases in health care costs.  The Stark law includes a general exception permitting physicians and group practices to order and provide certain DHS in their offices when they meet certain statutory requirements. Although it was intended to protect the convenience of patients and to allow patients to receive certain services during their doctor visits, concerns have been raised that this exception promotes the overuse of these services. President's Proposal Beginning in 2015, this proposal would exclude radiation therapy, therapy services, and advanced imaging from the in-office ancillary services exception to the Stark law,",
      " except when a practice meets certain accountability standards, as defined by the Secretary. This proposal was not included in the President's FY2013 budget proposal. Modify Part B Deductible for New Enrollees Current Law In addition to paying monthly premiums for Medicare Part B, Medicare beneficiaries also pay certain out-of-pocket cost-sharing amounts for their Part B services including an annual deductible. Prior to 2003, the amount of the Part B deductible was set in statute. MMA set the 2005 deductible level at $110 and required that the deductible be increased each year by the annual percentage increase in the Part B expected per capita costs for enrollees aged 65 and over beginning with 2006 (rounded to the nearest $1). The 2013 Part B annual deductible is $147.",
      " President's Proposal The President's budget would increase the annual deductible by an additional $25 in 2017, 2019, and 2021 for new Medicare enrollees. Specifically, under this proposal, there would be two categories of beneficiaries; and, the members of one group would pay a different annual deductible amount than the members in the second. The first group, comprised of beneficiaries who enroll in Medicare prior to January 1, 2017, would not be affected by this proposal and their annual Part B deductible would continue to be adjusted each year according to the current methodology. The deductible for Medicare beneficiaries in the second group,",
      " those who enroll in Medicare beginning in January 1, 2017 and thereafter, would pay deductibles that would be subject to both the annual adjustments based on expected costs (current method) plus an additional increase of $25 starting in 2017, another $25 increase in 2019, and a third $25 increase in 2021. For example, in a scenario under which the deductible amount remained the same through 2021 (unlikely), in 2021, new beneficiaries would pay a $75 higher deductible than those who had been enrolled in Medicare prior to 2017. However, because deductibles are expected to grow each year due to expected growth in annual per capita costs,",
      " the application of the annual growth rate adjustments to the incrementally larger deductible amounts would mean that the difference in deductible amounts paid by individuals in the two groups would likely be higher than $75. This proposal was included in the President's FY2013 budget proposal. Introduce Home Health Copayments for New Beneficiaries Current Law For beneficiaries who are eligible for Medicare-covered home health care, Medicare provides payment for a 60-day episode of home health care under a prospective payment system. The 60-day episode covers in-home skilled nursing, therapy, medical social services, and aide visits as well as medical supplies. Medicare, originally, required a 20%",
      " coinsurance for home health services covered under Part B in addition to having met the annual Part B deductible; however, legislative changes (P.L. 92-603 and P.L. 96-499 ) eliminated Medicare cost-sharing for home health services. There are currently no Medicare cost-sharing requirements for home health services; however, beneficiaries may be responsible for copayments associated with Medicare-covered durable medical equipment and osteoporosis drugs provided during a home health episode of care. In its March 2013 report, MedPAC recommended that Congress establish a per episode copayment for home health episodes that are not preceded by hospitalization or post-",
      "acute care use. President's Proposal Beginning in FY2017, the President's budget would institute a $100 copayment for new beneficiaries for each home health 60-day episode with five or more visits that is not preceded by a hospital or inpatient post-acute stay. This proposal was included in the President's FY2013 budget proposal. Introduce Part B Premium Surcharge for New Beneficiaries that Purchase Near First-Dollar Medigap Coverage Current Law Medigap is private health insurance that supplements Medicare coverage. It typically covers some or all of Medicare's deductibles and coinsurance, and may also include additional items or services not covered by Medicare,",
      " such as foreign travel. Medigap is available to Medicare beneficiaries who have fee-for-service Medicare Part A and voluntarily enroll in Medicare Part B by paying the monthly premium.  Individuals who purchase Medigap must pay a monthly premium which is set by the insurance company selling the policy. While the federal government does not contribute to Medigap premiums, former employers may make contributions.  There are 10 standardized Medigap plans with varying levels of coverage. Two of the 10 standardized plans cover Parts A and B deductible and coinsurance in full (i.e., offer \"first-dollar\" coverage). In 2010, over 60%",
      " of all Medigap beneficiaries were covered by one of these two plans. President's Proposal Beginning in FY2017, the President's budget would impose a Part B premium surcharge for new Medicare beneficiaries who select a Medigap plan with low cost-sharing requirements (i.e., offer \"near first-dollar\" coverage). The surcharge would be equal to approximately 15% of the average Medigap premium (or about 30% of the Part B premium). This proposal was included in the President's FY2013 budget proposal. Medicare Parts A and B Increase Income-Related Premiums Under Part B and Part D Current Law Most Medicare beneficiaries pay Part B premiums which are set at 25%",
      " of the program's estimated (projected) costs per aged enrollee (i.e., enrollees who are age 65 or older). Since January 2007, higher-income beneficiaries pay a larger share of premiums\u201435%, 50%, 65%, or 80%, depending on income. In 2010, the income thresholds for those premium shares are $85,000, $107,000, $160,000, and $214,000, respectively for single filers. (For married couples, the corresponding income thresholds are twice those values.) The ACA also imposed a similar income-related premium for Part D services.",
      " In addition, the ACA suspended inflation-indexing of income thresholds for Parts B and D through 2019 at 2010 levels. In 2011, about 4% of current Part B enrollees were estimated to pay these higher income-related premiums. President's Proposal Beginning in FY2017, the President's budget would increase the applicable percentage of the program's cost per aged enrollee for higher income beneficiaries to between 40% and 90%, replacing the current 35% to 80% range under current law. The proposal would also further suspend inflation-indexing of the income thresholds until 25% of beneficiaries under Parts B and D are subject to these premiums.",
      " This proposal was included in the President's FY2013 budget proposal. Medicare Advantage Increase the Minimum Medicare Advantage Coding Intensity Adjustment Current Law Medicare Advantage (MA or Medicare Part C) is an alternative to original fee-for-service Medicare wherein beneficiaries who choose to enroll can receive all Medicare covered benefits (except hospice) through a private health plan such as a health maintenance organization (HMO) or preferred provider organization (PPO). MA plans are paid a per person monthly amount to provide the Medicare covered benefits to enrolled beneficiaries regardless of how many services the beneficiaries actually use. In general, MA plan payments are risk-adjusted to account for the variation in the cost of providing care.",
      " Risk adjustment is designed to compensate plans for the increased cost of treating older and sicker beneficiaries, and thus discourage plans from preferential enrollment of healthier individuals.  The DRA required the Secretary to adjust MA plan risk scores for patterns of diagnosis coding differences between MA plans and providers under Parts A and B of Medicare for plan payments in 2008, 2009, and 2010. The ACA required the Secretary to conduct further analyses on the differences in coding patterns and adjust for those differences after 2010. Starting in 2014, the ACA specifies minimum coding intensity adjustments, which were subsequently amended by ATRA. In 2014,",
      " the coding intensity adjustment is to be at least the value of the adjustment in 2010 plus 1.5 percentage points; for 2015 to 2018, the adjustment is to be not less than the adjustment for the previous year increased by 0.25 percentage points; and starting in 2019, the coding intensity adjustment is to be not less than 5.9%. The minimum required adjustments are be applied to risk scores until the Secretary implements risk adjustment using MA diagnostic, cost, and use data. President's Proposal The President's budget would increase the minimum coding intensity adjustment; starting in 2015, the yearly increase to the minimum coding intensity adjustment would be increased from the current law level of 0.",
      "25 percentage points to 0.67 percentage points until the minimum adjustment reached a 7.59 percent adjustment in 2018 and would be held at that level thereafter. This proposal was not incl uded in the President's FY2013 b udget proposal. Align Employer Group Waiver Plan Payments with Average Medicare Advantage Plan Bids Current Law Under the Medicare Advantage program, employers and unions may sponsor Medicare Advantage plans for their Medicare-eligible employees, retirees, and/or their Medicare-eligible spouses and dependents. The Secretary has statutory authority to waive or modify requirements that may hinder the design, offering, or enrollment in these plans, which are referred to as Employer Group Waiver Plans or (EGWPs). Like other MA plans,",
      " the EGWPs are paid a per person monthly amount to provide all Medicare covered benefits except hospice, and the method for determining the payment is the same for all plans. Payments to MA plans are based on a comparison of each plan's estimated cost of providing Medicare covered services (a bid) relative to the maximum amount the federal government will pay for providing those services in the plan's service area (a benchmark). If a plan's bid is less than the benchmark, its payment equals its bid plus a rebate. Starting in 2012, the size of the rebate is dependent on plan quality, ranging from 50% to 70%",
      " of the difference between the bid and the benchmark. The rebate must be returned to enrollees in the form of either additional benefits, reduced cost-sharing, reduced Part B or Part D premiums, or some combination of these options. If a plan's bid is equal to or above the benchmark, its payment is the benchmark amount and each enrollee in that plan pays an additional premium, equal to the amount by which the bid exceeds the benchmark. President's Proposal Beginning in payment year 2015, the President's budget would establish payment amounts for EGWPs based on average MA plan bids in each individual market. This proposal was not incl uded in the President's FY2013 b udget proposal.",
      " Medicare Part D Align Medicare Drug Payment Policies with Medicaid Policies for Low-Income Beneficiaries Current Law Medicare Part D provides coverage of outpatient prescription drugs to beneficiaries who choose to enroll in this optional benefit. About 60% of eligible Medicare beneficiaries are currently enrolled in Part D. Some beneficiaries with limited income and resources may qualify for the low-income subsidy (LIS), which provides assistance with their Part D premiums, cost-sharing, and other out-of-pocket expenses. In 2013 an estimated 11.4 million Medicare beneficiaries qualified for low-income subsidies. Medicare beneficiaries who qualify for Medicaid based on their income and assets (dual-eligibles), who are recipients of Medicare Savings Programs,",
      " or who receive Supplemental Security Income are automatically eligible for the full LIS. Others who do not qualify for one of the above, but who have limited assets and incomes below 150% of FPL may also be eligible for the LIS and receive assistance for some portion of their premium and cost sharing charges. About 40% of Part D enrollees receive the LIS. Prescription drug coverage is provided through private prescription drug plans (PDPs), which offer only prescription drug coverage, or through MA prescription drug plans which offer prescription drug coverage that is integrated with the health coverage provided under Part C. Part D plan sponsors determine payments for drugs and are expected to negotiate prices with drug manufacturers,",
      " which may involve an agreement from the manufacturer to provide a rebate. Under Medicaid, basic prescription drug rebates are determined by the larger of either a comparison of a drug's quarterly average manufacturers' price (AMP) to the best price for the same period, or a flat percentage (23.1%) of the drug's quarterly AMP. The basic rebate percentage for multi-source, non-innovator and all other drugs is 13% of AMP. President's Proposal Beginning in 2014, the President's budget would require drug manufacturers to pay the difference between rebates provided to Part D plans and the corresponding Medicaid rebate levels for brand name and generic drugs provided to LIS beneficiaries.",
      " This proposal was incl uded in the President's FY2013 b udget proposal. Accelerate Manufacturer Drug Discounts to Provide Relief to Medicare Beneficiaries in the Coverage Gap Current Law The Medicare Part D standard drug benefit includes a coverage gap or \"doughnut hole\"\u2014a period when enrollees who have reached the plan's initial coverage limit, but haven't yet spent enough to qualify for more generous catastrophic coverage\u2014face higher out-of-pocket costs. In 2013, an enrollee in a standard plan pays a $325 deductible, and 25% coinsurance or copayments on drug spending up to the initial coverage limit of $2,",
      "970. Between $2,970 and the catastrophic threshold of $6,733.75 \u2013 the current coverage gap\u2014a beneficiary faces higher cost sharing. Prior to the ACA, Part D enrollees who did not receive a low-income subsidy generally paid the full cost of drugs in the coverage gap. The ACA gradually phases out the coverage gap through a combination of manufacturer discounts on brand-name drugs, and federal subsidies for brand-name and generic drugs. By 2020, enrollees in Part D standard plans will have a 25% cost-share for all prescriptions from the time they meet the deductible until they reach the catastrophic limit, after which cost-sharing is negligible.",
      "  In accordance with the ACA, manufacturers in 2011 began providing a 50% discount for brand-name drugs purchased in the coverage gap. From 2011 to 2020, the federal government is providing gradually increasing subsidies for brand name and generic drugs. By 2020, the government will subsidize 25% of the cost of brand-name drugs (in addition to the manufacturer's 50% discount) and 75% of the cost of generic drugs in the coverage gap.  President's Proposal The President's budget would increase the manufacturer discount for brand-name drugs to 75% from 50%, beginning in 2015.",
      " The change would effectively eliminate the coverage gap for brand-name drugs in 2015, though federal generic drug subsidies continue to be phased in through 2020. This proposal was not included in the President's FY2013 bu dget proposal. Encourage the Use of Generic Drugs by Low Income Beneficiaries Current Law LIS beneficiaries enrolled in Medicare Part D may qualify for additional assistance with some, or all, of their prescription drug cost-sharing. LIS beneficiary cost sharing varies by income, and is adjusted annually. For 2013: Dual-eligible beneficiaries (who qualify for both Medicare and Medicaid) who are institutionalized or are receiving home and community-based services have no drug co-pays or coinsurance;",
      " Full-benefit, dual-eligible LIS beneficiaries with income less than 100% of FPL have a $1.15 co-pay for generic drugs and $3.50 for brand-name drugs, until they reach the catastrophic threshold, when their copayment is zero; Full-benefit, dual eligible LIS beneficiaries with income above 100% of FPL, and other LIS beneficiaries with incomes up to 135% of FPL and limited assets, pay $2.65 for a generic drug prescription and $6.60 for a brand-name drug until they reach the catastrophic threshold, when their co-payment is zero. Other beneficiaries with incomes up to150%",
      " of FPL and limited assets pay a flat 15% coinsurance rate for all drugs up to the catastrophic threshold, cost-sharing above that level of $2.65 for a generic drug or preferred, multiple-source drug prescription, and $6.60 for a brand-name drug. LIS beneficiaries are more likely to have multiple, chronic ailments than other Part D beneficiaries and also are more likely to have higher drug costs. At the same time, a smaller share of LIS beneficiary prescriptions is filled with lower-cost, generic drugs, as compared to non-LIS beneficiaries. In its March 2012 report, MedPAC found that, in 2009,",
      " non-LIS enrollees had a generic dispensing rate of 72% compared to 68% for LIS enrollees. Part D plan sponsors often use incentives, such as higher co-payments for expensive drugs, to persuade enrollees to switch to cheaper generics. Because LIS beneficiaries pay a set amount, regardless of the price of a drug, such incentives may be less successful with the LIS population. President's Proposal The President's budget proposes reducing co-payments for generic drugs by more than 15%, to 90 cents per prescription, for LIS beneficiaries with incomes below 100% of poverty, and to $1.80 for beneficiaries with incomes below 135%",
      " of FPL. At the same time, the proposal would double co-payments for brand- name drugs to twice the level under current law. The Secretary would have discretion to exclude certain therapeutic classes of drugs if generic substitution was not clinically appropriate or a generic substitute was not available. LIS beneficiaries could also submit an appeal to continue buying drugs at the current rates. The proposed cost-sharing change would not apply to LIS beneficiaries who are in an institution or receiving certain community-based services. Part D beneficiaries with incomes between 135% and 150% of FPL would face higher cost-sharing only if they reached their plan's catastrophic coverage limit. This proposal was not incl uded in the President's FY2013 b udget proposal.",
      " Ensure Retroactive Part D Coverage of Newly-Eligible Low Income Beneficiaries Current Law Generally, there is a two-step process for low-income persons to gain a LIS for their Part D coverage. First, a determination must be made that they qualify for the assistance; second, they must enroll, or be enrolled, in a specific Part D plan. Some LIS individuals who have not elected a Part D plan are automatically enrolled into one by CMS. CMS identifies plan sponsors offering basic prescription drug coverage with a premium at or below the Part D low-income premium subsidy amount, set annually through a formula. If more than one sponsor in a region meets the criteria,",
      " CMS auto-enrolls beneficiaries on a random basis among available plans. There is also a \"facilitated enrollment\" process for enrollees in Medicare Savings programs (MSPs), SSI enrollees, and persons who applied for and were approved for low-income subsidy assistance. The basic features applicable to auto-enrollment are the same for facilitated enrollment. President's Proposal The President's budget would allow CMS to contract with a single Part D plan to provide coverage for LIS beneficiaries while their eligibility is being processed, rather than assigning them to plans through the current, random process. This would mean that one plan would serve as the contact point for LIS beneficiaries,",
      " who must often seek reimbursement for retroactive drug claims. The single plan would be paid by CMS through an alternative method. This proposal was not included in the President's FY2013 b udget proposal. [This proposal impacts both the Medicare and Medicaid budgets.] Administrative Proposals Strengthen the Independent Payment Advisory Board (IPAB) to Reduce Long-Term Drivers of Medicare Cost Growth Current Law The ACA established IPAB to develop and submit detailed proposals to Congress and the President to reduce Medicare spending. Proposals are to focus primarily on payments to MA and PDP plans and reimbursement rates for certain providers. The Board will be prohibited from developing proposals related to Medicare benefits,",
      " eligibility, or financing. Proposals, which will only be required in certain years when the CMS Chief Actuary determines that the projected Medicare per capita growth rate exceeds certain spending targets, will have to meet specific savings targets. Recommendations made by the Board automatically go into effect unless Congress enacts specific legislation to prevent their implementation. The first year the Board's proposals can take effect is 2015 (which ties to the 2013 determination year). For the first five years of implementation, the target growth rate will depend on changes in consumer price indices. However, beginning with the sixth year of implementation, the Medicare target per capita growth rate will be the projected five-year average percentage increase in nominal Gross Domestic Product (GDP)",
      " per capita plus 1.0 percentage point. In its February 2013 Medicare baseline, the Congressional Budget Office (CBO) estimated that the conditions for activating the IPAB trigger would not be met in any of the next 10 fiscal years. While the CMS Actuary makes the official determination that would trigger IPAB activity, estimates consistent with those from CBO would mean that the IPAB would have no effect on federal budget outlays in FY2013 through FY2023 under current law. President's Proposal The President's budget would lower the target rate applicable for 2020 and after from GDP per capita growth plus 1 percentage point to GDP per capita growth plus 0.",
      "5 percentage points. This proposal was included in the President's FY2013 b udget proposal. Establish an Integrated Appeals Process for Medicare-Medicaid Enrollees Current Law The Medicare and Medicaid appeal processes differ significantly. Even within Medicare, although the processes are conceptually similar, the appeals process varies depending on whether it is for Medicare Parts A, B, C, or D. These appeal variations can produce confusion, inefficiency, and increased administrative cost for beneficiaries, providers, and states. The difficulty navigating the different appeals processes is especially troublesome for dual eligibles, who are lower-income Medicare beneficiaries who also are eligible for Medicaid.  For dual eligibles,",
      " Medicaid is the payer of last resort, meaning that if services are covered by Medicare, Medicare pays for dual eligibles first, and Medicaid is the secondary payer. If services are only covered by Medicaid, then Medicaid is the only and primary payer. Dual eligibles sometimes are in the situation where coverage of an item or service under one program is possible only after the other program has denied coverage. The Medicare and Medicaid appeal process variances are important for dual eligibles because duals might face delays in receiving medical services and may experience care interruptions due to the differences in the appeals processes. In addition, these coordination issues can be expensive for both programs,",
      " potentially adding administrative costs and duplicative treatments. President's Proposal The President's budget proposes to introduce legislation that would create an integrated Medicare and Medicaid appeals process for dual eligibles. This proposal was not incl uded in the President's FY2013 b udget proposal. [This proposal impacts both the Medicare and Medicaid budgets.] Other  Expand Medicare Data Sharing with Qualified Entities Current Law The ACA includes a provision that allows CMS to make standardized extracts of Medicare Parts A, B, or D claims data available to qualified entities for the purpose of publishing reports evaluating the performance of providers of services and suppliers. The ACA also required that qualified entities combine claims data from sources other than Medicare with the Medicare data when evaluating the performance of providers and suppliers.",
      " President's Proposal This President's budget would expand the scope of how qualified entities could use Medicare data beyond that of performance measurement. The Administration proposes that entities be allowed to use the data for fraud prevention activities and for value-added analysis for physicians. Also, qualified entities would be able to release raw claims data, instead of simply summary reports, to interested Medicare providers for care coordination and practice improvement. This proposal would make claims data available to qualified entities for a fee equal to Medicare's cost of providing the data. This proposal was not included in the President's FY2013 budget proposal. Prohibit Brand and Generic Drug Manufacturers from Delaying the Availability of New Generic Drugs and Biologics  Current Law The Drug Price Competition and Patent Term Restoration Act of 1984 ( P.L.",
      " 98-417, commonly known as the Hatch-Waxman Act), established the Abbreviated New Drug Application (ANDA), an expedited marketing approval pathway at the Food and Drug Administration (FDA). An ANDA allows a generic applicant to obtain marketing approval based upon safety and efficacy data provided to the FDA by the brand name firm. The filing of an ANDA with a paragraph IV certification (that the patent is invalid or not infringed) constitutes a \"somewhat artificial\" act of patent infringement under the act. A 180-day market exclusivity is provided by the FDA to the first paragraph IV filer(s). Brand name and generic firms engaged in litigation within the Hatch-Waxman statutory framework have sometimes concluded their litigation through settlement,",
      " rather than awaiting a formal decision from a court. In some settlements, the brand name company pays the generic firm in exchange for the generic firm's agreement not to market the patented pharmaceutical. These arrangements have been termed \"reverse payment\" agreements or \"pay-for-delay\" agreements. President's Proposal Beginning in FY2014, under the President's budget, the Federal Trade Commission would be authorized to prohibit \"pay-for-delay\" agreements between brand and generic pharmaceutical companies that delay entry of generic drugs and biologics into the market. This proposal was included in the President's FY2013 bud get proposal. [This proposal impacts both the Medicare and Medicaid budgets.] Modify Length of Exclusivity to Facilitate Faster Development of Generic\u00a0Biologics Current Law The Biologics Price Competition and Innovation Act of 2009 (incorporated into the ACA)",
      " establishes a licensure pathway for competing versions of previously marketed biologics. In particular, the legislation creates a regulatory regime for two types of follow-on biologics, termed \"biosimilar\" and \"interchangeable\" biologics. The FDA is afforded a prominent role in determining the particular standards for biosimilarity and interchangeability for individual products. In addition, the legislation created FDA-administered periods of data protection and marketing exclusivity for certain brand name drugs and follow-on products. Brand name biologic drugs receive four years of marketing exclusivity during which time other companies are prevented from filing an application for approval of a follow-on product.",
      " Brand biologics also receive 12 years of data exclusivity during which time the follow-on manufacturer cannot rely on the clinical data generated by the innovator firm in support of FDA approval of a competing version of the drug. Unlike market exclusivity, data protection does not block competitors that wish to develop their own clinical data in support of their application for marketing approval. In addition, applicants that are the first to establish their product is interchangeable with the brand name biologic are provided a term of marketing exclusivity.  President's Proposal Effective in FY2014, the President's budget would award brand biologics seven years of exclusivity rather than the current 12 years,",
      " and there would be no additional exclusivity periods for \"minor\" changes in product formulations. This proposal was included in the President's FY2013 Budget. [This proposal impacts both the Medicare and Medicaid budgets.] Extend the Qualified Individuals Program Current Law The BBA97 required states to pay Medicare Part B premiums for a new group of low-income Medicare beneficiaries\u2014Qualifying Individuals (QIs)\u2014whose income was between 120% and 135% of FPL. BBA97 also amended the Social Security Act to provide for Medicaid payment for QIs through an annual transfer from the Medicare Part B Trust Fund to be allocated to states. States (and the District of Columbia)",
      " receive 100% federal funding to pay QI's Medicare premiums up to the federal allocation, but no additional matching beyond this annual allocation. There were approximately 523,000 QI individuals in CY2011. Since it was first funded in October 1, 1998, the QI program has been extended 13 times. The ATRA authorized the QI program through December 31, 2013, and appropriated $485 million for the second through the fourth quarters of FY 2013 and $300 million for the first quarter of FY2014. President's Proposal The President's budget would extend QI authorization through December 31,",
      " 2014. This proposal would authorize an additional 12 months of funding. This proposal was included in the President's FY2013 Budget. Medicaid Legislative Proposals Medicaid Payments Rebase Future DSH Allotments Current Law Under federal law, states are required to make Medicaid DSH payments to hospitals treating large numbers of low-income and Medicaid patients. States receive federal matching funds for making DSH payments up to a capped federal allotment that generally equals the previous year's allotment increased by the percentage change in CPI-U. In FY2012, federal Medicaid DSH allotments to states totaled $11.3 billion. The ACA requires the Secretary to make aggregate reductions in Medicaid DSH allotments for each year from FY2014 to FY2020.",
      " The MCTRJCA and ATRA applied the FY2020 Medicaid DSH reduction to FY2021 and FY2022. Under current law, in FY2023, states' DSH allotments will rebound to their pre-ACA reduced levels with annual inflation adjustments for FY2014 through FY2023. President's Proposal The President's budget proposes to \"rebase\" the Medicaid DSH allotments for FY2023 and subsequent years by calculating the Medicaid DSH allotments for these years based on the ACA reduced levels. The FY2023 Medicaid DSH allotments would be each state's FY2022 allotment increased by the percentage change in CPI-U,",
      " and the allotments for subsequent years would be the previous year's allotment increased by the percentage change in CPI-U. This proposal was included in the President's FY2013 Budget. Begin ACA DSH Reductions, One Year Later, in FY2015 Current Law As mentioned above, the ACA requires the Secretary to make aggregate reductions in Medicaid DSH allotments for each year from FY2014 to FY2020. Specifically, these reductions equal to $0.5 billion in FY2014, $0.6 billion in FY2015, $0.6 billion in FY2016, $1.8 billion in FY2017,",
      " $5.0 billion in FY2018, $5.6 billion in FY2019, and $4.0 billion in FY2020. The MCTRJCA and ATRA apply the $4.0 billion reduction from FY2020 to FY2021 and FY2022. President's Proposal The President's budget proposes to delay the Medicaid DSH reductions for one year (i.e., the Medicaid DSH reductions will begin in FY2015) and apply the reduction of $0.5 billion currently slated for FY2014 over the years FY2016 and FY2017. This proposal was not included in the President's FY2013 Budget.",
      " Limit Medicaid Reimbursement of Durable Medical Equipment (DME) Based on Medicare Rates Current Law States are generally free to set payment rates for items and services provided under Medicaid as they see fit, subject to certain exceptions and a general requirement that payment policies are consistent with efficiency, economy, and quality of care and are sufficient to provide access equivalent to the general population's access. Providers for which federal upper payment limits (UPLs) apply under Medicaid include hospitals and nursing homes; federal regulations specify that states cannot pay more in the aggregate for inpatient hospital services or long-term care services than the amount that would be paid for the services under the Medicare principles of reimbursement.",
      " No UPL currently applies to DME under Medicaid. Historically, Medicare has paid for most DME on the basis of fee schedules. Unless otherwise specified by Congress, fee schedule amounts are updated each year by a measure of price inflation. MMA established a Medicare competitive acquisition program (i.e., competitive bidding) under which prices for selected DME sold in specified areas would be determined not by a fee schedule but by suppliers' bids. The first round of the competitive bidding program began in July 2008 in 10 areas, but was halted due to implementation concerns. A new first round of competition began in October 2009, and contracts and payments for the competitive bidding areas went into effect in January 2011.",
      " Implementation of the second round of competition started in 2011 in 91 additional areas, and CMS expects that payments and contracts under the second round will start in July 2013. The Secretary is required to extend the competitive acquisition program, or use information from the program to adjust fee schedule rates in remaining areas by 2016. President's Proposal The President's budget would limit federal reimbursement for a state's Medicaid spending on certain DME to what Medicare would have paid in the same state for the services. This proposal was included in the President's FY2013 Budget. Clarify the Medicaid Definition of Brand Drugs Current Law For the purpose of determining prescription drug rebates,",
      " Medicaid distinguishes between two types of drugs: (1) single source drugs (generally, those still under patent) and innovator multiple source drugs (drugs originally marketed under a patent or original new drug application but for which generic equivalents now are available); and (2) all other, non-innovator, multiple source drugs. Rebates for the first category of drugs (i.e., drugs still under patent or those once covered by patents) have two components: a basic rebate and an additional rebate. Medicaid's basic rebate is determined by the larger of either a comparison of a drug's quarterly Average Manufacturer Price (AMP) to the best price for the same period,",
      " or a flat percentage (23.1%) of the drug's quarterly AMP. Drug manufacturers owe an additional rebate when their unit prices for individual products increase faster than inflation. For innovator multiple-source and all other non-innovator multiple source drugs, manufacturers' Medicaid rebates are 13% of AMP.  Manufacturers sometimes market their patented products, or versions of their patented products, as over-the-counter (OTC) products, before their patents expire. When AMP for OTC sales are combined with AMP for patented product sales, it can reduce manufacturers' Medicaid rebate obligations for those products. President's Proposal The President's budget proposes to clarify that certain drugs still be considered brand drugs (i.e., innovator multiple source products)",
      " even though manufacturers have converted them to OTC products. The proposal also would remove the \"original\" from the definition of single source and innovator multiple source drugs. Moreover, this proposal would close other technical loopholes that might have enabled drug manufacturers to pay lower Medicaid drug rebates than otherwise would be required under Medicaid law. This proposal was not included in the President's FY2013 Budget. Exclude Brand and Authorized Generic Drug Prices from the Medicaid Federal Upper Limits Current Law The ACA refined the definition of Medicaid multiple-source, generic, drugs. The ACA increased the number of drugs considered by the FDA as therapeutically and pharmacologically equivalent products from two to three which requires the Secretary to establish federal upper limits (FULs)",
      " for those products. Medicaid prescription drug FULs are used to limit reimbursement for certain multiple source drugs. Medicaid drug FULs are calculated based on the weighted average price of all drugs, brand, authorized generic, and generic drugs, in each product code. President's Proposal The President's budget would specify that the amounts paid for brand and authorized generics would be excluded from the Medicaid prescription drug FUL calculations. This proposal was not included in the President's FY2013 Budget. Exclude Authorized Generics from Medicaid Brand Name Rebate Calculations Current Law Outpatient prescription drugs are an optional Medicaid benefit, but all states cover prescription drugs for most beneficiary groups.",
      " Medicaid law requires prescription drug manufacturers who wish to sell their products to Medicaid agencies to enter into rebate agreements with the Secretary on behalf of states. Under these agreements, drug manufacturers pay a rebate to state Medicaid agencies for drugs purchased for Medicaid beneficiaries.  Authorized generics are drugs that the original patent holder has licensed to a generic drug manufacturer to sell at a negotiated, reduced price. It is argued that authorized generics raise prices for consumers and reduce incentives for generic manufacturers to challenge single source drug patents. Including authorized generic sales with brand product sales has the effect of lowering a product's AMP, thereby decreasing manufacturers' Medicaid rebate obligations for those products (both the basic and the additional rebate might be decreased). President's Proposal The President's budget would change the calculation of Medicaid rebates for single source (i.e., brand name)",
      " products to exclude sales of authorized generic drugs. By removing authorized generic sales from the single source product's AMP calculation, the AMP would be higher thus increasing the rebate owed by manufacturers on brand name drugs. This proposal was not included in the President's FY2013 Budget. Correct the ACA Medicaid Rebate Formula for New Drug Formulations Current Law Under previous law, modifications to existing drugs\u2014new dosages or formulations\u2014generally were considered new products for purposes of reporting AMPs to CMS. As a result, when drug makers introduced new formulations of existing products they sometimes would have lower additional rebate obligations for these line-extension products. For example, manufacturers have developed extended-release formulations of existing products which,",
      " because they were considered new products under previous Medicaid drug rebate rules, were given new base period AMPs. The new base period AMPs for line-extension products would be higher than the original product's AMP. For line-extension products, manufacturers are less likely to owe additional rebates since the product's AMP would not have had time to have risen faster than the rate of inflation. ACA included a provision that required manufacturers to pay Medicaid rebates (both basic and additional rebates) on line-extension products as if they were the original product on which the line extension was based.  President's Proposal The President's budget would make a technical correction to the ACA provision to amend the statute and correct rebate formula for line-extension drugs.",
      " This proposal was not included in the President's FY2013 Budget. Medicaid Benefits Expand State Flexibility to Provide Benchmark Benefit Packages Current Law As an alternative to traditional Medicaid benefits, states may enroll certain Medicaid beneficiaries into benchmark benefit plans that include four choices: (1) the standard Blue Cross/Blue Shield preferred provider plan under the Federal Employees Health Benefits Program, (2) a plan offered to state employees, (3) the largest commercial health maintenance organization in the state, and (4) other coverage appropriate to the targeted population, subject to approval of the Secretary. Additionally, states may opt for benchmark-equivalent coverage, which must have the same actuarial value as one of the benchmark plans and must also include certain services (e.g., inpatient care,",
      " physician services, prescribed drugs, among others). The ACA established a new Medicaid eligibility group for non-elderly, non-pregnant adults with income up to 133% of FPL beginning in 2014, or sooner at state option. Such individuals will be enrolled in benchmark plans rather than traditional Medicaid (with some exceptions for subgroups with special medical needs). President's Proposal The President's budget would allow benchmark-equivalent coverage for non-elderly, non-disabled adults with income that exceeds 133% of FPL. This proposal was included in the President's FY2013 Budget. Medicaid Coverage Extend the Transitional Medical Assistance (TMA)",
      " Program through CY 2014 States are required to continue Medicaid benefits for certain low-income families who would otherwise lose coverage because of changes in their income. This continuation of benefits is known as transitional medical assistance (TMA). Federal law permanently requires four months of TMA for families who lose Medicaid eligibility due to (1) increased child or spousal support collections, or (2) an increase in earned income or hours of employment. Congress expanded work-related TMA benefits in 1988, requiring states to provide at least six, and up to 12, months of TMA coverage to families losing Medicaid eligibility due to increased hours of work or income from employment,",
      " as well as to families who lose eligibility due to the loss of a time-limited earned income disregard (such disregards allow families to qualify for Medicaid at higher income levels for a set period of time). Congress created an additional work-related TMA option in ARRA. Under the ARRA option, states may choose to provide work-related TMA for a full 12-month period rather than two six-month periods. Congress has acted on numerous occasions to extend these expanded TMA requirements (which are outlined in Section 1925 of the Social Security Act) beyond their original sunset date of September 30, 1998. Most recently, the ATRA extended the authorization and funding of expanded TMA requirements through December 31,",
      " 2013. President's Proposal The President's budget would extend authorization and funding of expanded TMA requirements through December 31, 2014, and would adopt the Medicaid and CHIP Payment and Access Commission recommendation to permit states that adopt the ACA Medicaid expansion to opt out of TMA. This proposal is a modification of a legislative proposal from the President's FY2013 Budget. Establish Hold-Harmless for Federal Poverty Guidelines Current Law The HHS poverty guidelines (also referred to as the FPL) are a simplified version of the poverty thresholds that the Census Bureau uses to prepare its estimates of the number of individuals and families in poverty. The HHS poverty guidelines are published annually in the Federal Register (usually in January)",
      " and are used for administrative purposes such as determining financial eligibility for certain federal programs, including Medicaid. Federal law requires the Secretary to update the poverty guidelines at least annually by increasing the latest published Census Bureau poverty thresholds by the relevant percentage change in the CPI-U as calculated by the Bureau of Labor Statistics. After this inflation adjustment, the guidelines are rounded and adjusted to standardize the differences between family sizes. The 2013 poverty guidelines reflect actual price changes between calendar years 2011 and 2012. President's Proposal The President's budget would establish a permanent hold harmless provision to ensure that the HHS poverty guidelines are only adjusted when there is an increase in the CPI-U.",
      " The provision would impact social programs that rely on the poverty guidelines for administrative purposes (such as Medicaid, Supplemental Nutrition Assistance Program, Women, Infants and Children, etc.). This proposal was included in the President's FY2013 Budget. Other Extend Supplemental Security Income Time Limits for Qualified Refugees Current Law SSI, which provides means-tested cash benefits to aged, blind, and disabled persons, is generally only available to U.S. citizens and in some limited cases, certain legal permanent residents of the United States. However, certain classes of refugees; asylees; and other humanitarian immigrants, such as Cuban and Haitian entrants or Iraqi and Afghan special immigrants may receive SSI benefits for up to seven years after entering the United States or attaining refugee status.",
      " If, after the conclusion of this seven-year period, a refugee, asylee, or humanitarian immigrant has not attained citizenship or permanent resident status, then he or she is ineligible for any future SSI benefit payments. President's Proposal The President's budget proposes to extend the current seven-year period of SSI eligibility for refugees, asylees, and humanitarian immigrants to nine years through the end of FY2015. At the end of FY2015, the eligibility period for refugees, asylees, and humanitarian immigrants would return to seven years. This proposal was included in the President's FY2013 Budget. Eliminate Medicaid Recoupment of Birthing Costs from Child Support Current Law Currently,",
      " if a custodial parent has no private medical coverage at the time of her child's birth, the father can be held financially responsible for payment of the birth costs. Federal law (Section 1902(a)(25)(F) of the Social Security Act) permits states to use the Child Support Enforcement program to collect money from noncustodial fathers to reimburse the Medicaid agency for birth costs of children receiving Medicaid benefits. President's Proposal The President's budget proposes to prohibit the use of child support to repay Medicaid costs associated with giving birth\u2014a practice retained by several states. This proposal was not included in the President's FY2013 Budget. Program Integrity Legislative Proposals Medicare Require Prepayment Review or Prior Authorization for Power Mobility Devices Current Law Under current law,",
      " Medicare covers DME, including power wheelchairs and other power mobility devices (PMDs), when it is determined to be medically necessary. There is a history of fraud and abuse associated with DME and PMDs. PMDs are expensive items that are sometimes prescribed for beneficiaries when not medically necessary, or when a less expensive device, such as a cane or walker, would be more advisable. With an estimated 3-10% of Medicare spending lost to fraud, there has been increasing attention focused on stopping inappropriate or fraudulent Medicare claims. The ACA added a number of new program integrity tools, including a requirement that Medicare beneficiaries have a face-to-face examination with providers before DME may be prescribed (PMDs already required a face-to-face examination by the provider). In addition,",
      " CMS is focusing enhanced scrutiny on areas at high-risk for improper payments and fraud, which include areas of higher expenditure and utilization of services. Recently, CMS announced a demonstration that would require that PMDs in seven states receive prior authorization, before beneficiaries receive equipment. Medicare's FY2010 expenditures for PMDs in these states were 43% ($261 million) of the $606 million of Medicare's total PMD expenditures. The demonstration originally was to commence January 1, 2012 but was delayed until September 1, 2012. CMS revised the original scope, and the demonstration is slated to end August 31, 2015.",
      " President's Proposal The President's budget proposal would continue the Medicare PMD prior-authorization demonstration. This proposal was incl uded in the President's FY2013 b udget proposal. Allow Civil Monetary Penalties for Providers and Suppliers Who Fail to Update Enrollment Records Current Law Participating Medicare providers and suppliers are required to submit updated enrollment information within specified time frames. CMS uses provider/supplier enrollment records to monitor provider status. Current provider records help to ensure that providers who could pose a higher risk of fraudulent activity receive greater scrutiny when applying and afterwards in submitting reimbursement claims. President's Proposal The President's budget would authorize the Secretary to impose civil penalties when providers and suppliers fail to update enrollment records on a timely basis.",
      " This proposal was incl uded in the President's FY2013 b udget proposal. Allow the Secretary to Create a System to Validate Practitioners' Orders for Certain High Risk Items and Services Current Law Claims processing systems currently do not contain data that could be used to determine if a patient actually saw a practitioner or whether services billed on a claim were determined to be medically necessary. This information could be useful in determining whether a federal health care claim is valid prior to payment. In order to validate whether high-risk services were determined to be medically necessary and whether practitioners ordered those services, additional information would need to be required with the reimbursement claim.  Many providers and health systems are implementing electronic health records (EHR)",
      " systems. Provisions in ARRA and the ACA provided financial incentives to providers to invest in EHR. Many EHR systems either are linked or have the capability to interact with clinical decision support systems and electronic claims processing. Electronic patient records may contain information on what services practitioners ordered, whereas claims processing systems only have information necessary to request reimbursement from payers, such as Medicare, Medicaid, or CHIP. As these EHR and claims processing systems become the standard of practice, it may be possible for program integrity systems to routinely validate that practitioners ordered specific treatments, tests, or other procedures at high risk for fraud.  Current law does not specifically require the Secretary to develop or implement a system for validating practitioner orders for high-risk services.",
      " President's Proposal The President's budget would implement an electronic Medicare claims ordering system that could validate whether practitioners determined high-risk services were medically necessary and whether patients received those services. This proposal was incl uded in the President's FY2013 b udget proposal. Increase Scrutiny of Providers Using Higher-Risk Banking Arrangements to Receive Medicare Payments Current Law There is no restriction or increased oversight when providers employ banking arrangements, such as sweep accounts and wire-transfers to off-shore accounts that might be at higher risk of fraudulent activities. In some cases, Medicare has been unable to recover improper payments because providers quickly transferred Medicare's payments to other jurisdictions.",
      " These providers were able to shield large Medicare payments from recovery actions because the improper payments were deposited into accounts where federal prosecutors had limited authority. President's Proposal The President's budget proposes to authorize the Secretary to require Medicare providers and suppliers to report the use of accounts that immediately transfer funds to sweep accounts in other jurisdictions where it might be difficult for Medicare to recover improper payments from these providers. This proposal was incl uded in the President's FY2013 b udget proposal. Require Prior Authorization for Advanced Imaging Current Law Over the last decade, the growth of imaging services provided under the Medicare program has exceeded those of most other Part B services. From 2000 through 2006,",
      " the Government Accountability Office (GAO) has found that \"spending on advanced imaging, such as CT scans, MRIs, and nuclear medicine, rose substantially faster than other imaging services such as ultrasound, X-ray, and other standard imaging.\" More recently, another GAO study found that \"[f]rom 2004 through 2010, the number of self-referred and non-self-referred advanced imaging services\u2014magnetic resonance imaging (MRI) and computed tomography (CT) services\u2014both increased, with the larger increase among self-referred services.\" These and other findings raise concerns about whether advanced imaging services are being used appropriately in the Medicare program.",
      " President's Proposal The President's Budget would adopt prior authorization for the most expensive imaging services. This proposal was incl uded in the President's FY2013 b udget proposal. Medicaid Expand Medicaid Fraud Control Unit (MFCU) Review to Additional Care\u00a0Settings Current Law MFCUs are separate state government entities certified to investigate and prosecute health care providers suspected of defrauding the state's Medicaid program. MFCUs also have authority to review nursing home residents' neglect or abuse complaints and patient abuse complaints in other health care facilities receiving Medicaid payments. MFCUs may review complaints alleging misappropriation of patient funds. MFCUs may not receive federal matching funds for patient abuse or neglect investigations that occur in non-institutional settings.",
      " MFCUs are responsible for investigating fraud in administration of the state Medicaid program itself and in collecting overpayments they identify in the course of their work. MFCUs have authority, with the Inspector General's approval, to investigate fraud in other federally-funded health care programs, such as Medicare or CHIP, that are primarily related to Medicaid. MFCUs are prohibited from investigating beneficiary fraud, unless it is part of a conspiracy with a provider. In 2011, the Office of the Inspector General (OIG) issued proposed regulations that would permit MFCUs to receive federal financial participation (FFP, i.e., federal Medicaid matching funds)",
      " for \"data mining,\" which is computer screening of Medicaid claims to help identify potentially fraudulent activity. MFCUs are funded partially through a grant from the HHS OIG (75%) and partially with matching state funds (25%).  President's Proposal The President's budget would expand the range of care settings where MFCUs would have authority to receive FFP for investigation of patient complaints. These settings might include home- and community-based services and providers. This proposal was not incl uded in the President's FY2013 b udget proposal. Strengthen Medicaid Third-Party Liability Current Law Under third-party liability (TPL) rules, Medicaid is the payer of last resort.",
      " If another insurer or program (e.g., private health insurance, Medicare, employer-sponsored health insurance, settlements from a liability insurer, workers' compensation, long-term care insurance, and other state and federal programs) has the responsibility to pay for medical costs incurred by Medicaid-eligible individuals, generally that entity is required to pay all or part of the bill before Medicaid makes any payment. Third parties are not responsible for reimbursing Medicaid for services not covered under Medicaid state plans. States are required to determine if third parties exist, and to ensure that providers bill the third-party first, before billing Medicaid. Whenever states pay Medicaid claims and then discover that a third party exists,",
      " they are required to recover overpayments from the third parties. The DRA strengthens states' TPL authority to identify and recover Medicaid payments for which third parties were liable by clarifying what entities are considered third parties and requiring states to pass laws that require insurers to comply with Medicaid TPL rules. President's Proposal The President's budget would expand Medicaid's TPL authority by allowing states to (1) delay payment of costs for prenatal and preventive pediatric costs/expenditures when third parties are responsible; (2) collect medical child support from non-custodial parents when these parents have health insurance; and (3) recover costs from beneficiary liability settlements.",
      " This proposal was incl uded in the President's FY2013 b udget proposal. Track High Prescribers and Utilizers of Prescription Drugs in Medicaid Current Law Medicaid statute gives states broad authority to implement a variety of prescription drug monitoring activities; not all states have adopted such activities. A number of states have implemented voluntary or mandatory \"lock-in\" programs that require Medicaid beneficiaries who use prescription drugs at levels above certain medically necessary utilization guidelines, to obtain services from designated providers only (i.e., one pharmacy or a specific primary care provider). Other states have linked Medicaid data with statewide prescription drug monitoring programs. In addition to Medicaid authority to impose restrictions,",
      " some states have passed laws to increase penalties on individuals who participate in diverting Medicaid drugs from medically necessary uses to drug abuse or fraudulent activities.  President's Proposal The President's proposal would require states to monitor high risk Medicaid drug billing to identify and remediate prescribing and utilization patterns that could indicate potential abuse or excessive prescription drug utilization. States would have discretion to tailor their programs, for example, by choosing one or more drug classes subject to overuse or abuse. States would be required to develop or review and update their high-utilization remediation plan to reduce excessive utilization and preventable abuse episodes and improve Medicaid integrity, but without reducing beneficiary quality of care.",
      " This proposal was incl uded in the President's FY2013 b udget proposal. Require Manufacturers that Improperly Report Items for Medicaid Drug Coverage to Fully Repay States Current Law Drug manufacturers that want to sell their products to Medicaid programs must agree to pay rebates for drugs provided to Medicaid beneficiaries. Under the terms of the Medicaid drug rebate program, manufacturers must make their entire product line available, and Medicaid must cover all of a manufacturer's products, except certain drugs or drug classes identified in law on an \"excluded drug list.\" Rebates paid by manufacturers to Medicaid are calculated based on each manufacturer's AMP for a drug. AMP is defined in law.",
      " Studies and legal settlements between drug manufacturers and state Medicaid programs have shown some irregularities in how manufacturers interpreted CMS guidance on what sales transactions should be included in AMP. States are permitted to exclude coverage of drugs on the excluded drug list, but they also may cover these drugs. Manufacturers sometimes include sales transactions for excluded drugs in their calculation of AMP. By including these excluded drug sales in the calculation of AMP, rebates owed to states can be reduced.  President's Proposal The President's budget proposal would require manufacturers that improperly reported drugs (that Medicaid does not cover) in their AMP calculations to fully compensate states for the drug rebates they would have received if the manufacturer had properly excluded drugs not covered by Medicaid.",
      " This proposal was incl uded in the President's FY2013 b udget proposal. Enforce Manufacturer Compliance with Drug Rebate Requirements Current Law CMS has authority to survey drug manufacturers, and HHS OIG has authority to audit drug manufacturers. CMS and OIG monitor Medicaid prescription drug prices submitted by manufacturers and the rebates these companies pay to the Medicaid program, which are shared between states and the federal government. CMS conducts automated data checks on the drug prices reported by manufacturers and notifies manufacturers when it identifies discrepancies or errors. There is substantial variation in the methodologies and assumptions drug manufacturers follow in reporting drug price data to CMS. Even though drug manufacturers'",
      " methodologies and assumptions for reporting drug prices can have a great impact on rebates, CMS does not generally verify that manufacturers' documentation supports their prices and does not routinely check that their price determinations are consistent with the Medicaid statute, regulations, or the rebate agreement. Studies have found and False Claims Act settlements have shown irregularities in manufacturers' drug price reporting. The ACA made a number of changes to Medicaid prescription drug pricing policies, including provisions to create more uniform manufacturer drug reporting standards.  President's Proposal The President's budget would require, to the extent they are cost effective, that regular audits and surveys of drug manufacturers be conducted to evaluate manufacturers'",
      " compliance with drug rebate agreements, the Medicaid statute, and regulations. This proposal was incl uded in the President's FY2013 b udget proposal.  Require Drugs Be Electronically Listed with FDA to Receive Medicaid\u00a0Coverage Current Law Under federal law and regulation, outpatient prescription drugs may be covered by Medicaid if the drugs were approved for safety and effectiveness by the FDA under the Federal Food Drug and Cosmetics Act (P.L. 75-717). The FDA approves drugs when a manufacturer obtains a New Drug Approval, generally for sole source brand name drugs, or where a manufacturer obtains an ANDA, generally for multiple source, generic drugs.",
      " Federal regulations limit Medicaid reimbursement for outpatient drugs prescribed off label to those indications where a drug is listed in one or more of several named compendia, which are reference documents that list how most drugs could be used both on-label and off-label. Even though current law requires drug manufacturers to list their products with the FDA, not all drugs on the market are properly listed. CMS published a Notice of Proposed Rule Making that proposed a number of regulatory changes that were authorized by the ACA.  President's Proposal The President's budget would require that drug manufacturers list their products electronically with the FDA in order to be covered and reimbursed by Medicaid. This proposal also would align Medicaid drug coverage requirements with Medicare's requirements.",
      " This proposal was incl uded in the President's FY2013 b udget proposal. Increase Penalties for Fraudulent Noncompliance on Rebate Agreements Current Law Drug manufacturers that want to sell products to state Medicaid programs must agree to offer rebates to states, which are shared with the federal government. As part of the Medicaid rebate agreement, drug manufacturers are required to report accurate drug price information to CMS so it can compute or verify drug rebates. CMS guidance permits manufacturers to make \"reasonable assumptions\" consistent with the \"intent\" of the law, regulations, and rebate agreement. Thus, manufacturers determine which sales transactions to include when reporting prices to CMS.",
      " Provisions in the ACA amended the Medicaid drug rebate statute, and CMS published a proposal that would implement ACA's Medicaid drug rebate changes. Individuals (including an organization, agency, or other entity) who knowingly make or cause to be made false statements, omissions, or misrepresentations of material fact in applications, bids, or contracts could be subject to fines, program exclusions, and/or criminal penalties. However, the civil monetary and criminal provisions applicable to all federal health care programs are not specifically designed to address Medicaid drug rebate reporting violations.  President's Proposal The President's budget proposed to increase penalties on drug manufacturers that knowingly report false information under Medicaid drug rebate pricing agreements that are used to calculate Medicaid rebates.",
      " This proposal was incl uded in the President's FY2013 b udget proposal. Prevent Use of Federal Funds to Pay State Share of Medicaid or CHIP Current Law Medicaid and CHIP are jointly funded by the federal government and the states. Federal reimbursement for the cost of Medicaid services is provided on an open-ended basis to states that meet federal program requirements. The federal government's share of most Medicaid expenditures is called the federal medical assistance percentage (FMAP) rate. However, exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, services, and administration. Federal matching funds for CHIP are provided to states according to an enhanced FMAP (E-FMAP)",
      " rate, which is calculated by reducing the state share under the regular FMAP rate by 30%. The E-FMAP is provided for both services and administration under CHIP, but federal CHIP matching funds are capped on a state-by-state basis according to annual allotments. In general, federal regulations prohibit states from using other federal sources to fund the state share of Medicaid, unless authorized by law. President's Proposal The President's budget would codify the principle that states are prohibited from using federal funds to pay the state share of Medicaid or CHIP, unless specific exceptions were authorized in law. This proposal was incl uded in the President's FY2013 b udget proposal.",
      " Consolidate Redundant Error Rate Measurement Programs Current Law The Improper Payments Information Act of 2002 (IPIA, P.L. 107-300 ) required federal agencies to annually review the programs they oversee that may be susceptible to erroneous payments, in order to estimate improper payments and report the estimates to Congress before March 31 of the following year. In addition, if estimated improper payments exceeded $10 million per year, IPIA required federal agencies to identify ways to reduce erroneous payments. In response to IPIA, CMS implemented the Medicaid Payment Error Rate Measurement (PERM), which estimates improper Medicaid and CHIP payments. In addition to PERM,",
      " federal Medicaid law requires states to assess Medicaid eligibility and quality control (MEQC). MEQC requires each state to calculate and report erroneous Medicaid payment and eligibility determination rates. States have discretion to develop and implement their own MEQC methodologies. Under CMS PERM regulations, states now have the option to use PERM to fulfill the MEQC requirement. President's Proposal The President's budget would authorize the Secretary to create a streamlined audit program that consolidated the MEQC and PERM programs. This proposal was incl uded in the President's FY2013 b udget proposal. Medicare and Medicaid Retain a Portion of Recovery Audit Contractors (RAC)",
      " Recoveries to Implement Actions That Prevent Fraud and Abuse Current Law RACs receive a percentage of any improper payments they recover. Congress initially authorized RACs as limited demonstrations for Medicare Parts A and B fee-for-service, but expanded the program nationally. Then, under the ACA, Congress authorized further RAC expansion to Medicare Parts C and D and Medicaid. Total RAC fee-for-service corrections for FY2010 through the first quarter of FY2013, including overpayment collections and underpayments returned, were $4.2 billion, of which $3.9 billion were for overpayment collections and $302.6 million were returned underpayments.",
      " Under current law, RAC recoupments, net of the percentage payments to contractors and other administrative expenses are returned to the Medicare Trust Fund. President's Proposal The President's budget would authorize CMS to retain a portion of RAC recoveries from Medicare and Medicaid to fund corrective actions, such as new processing edits and provider education and training, to prevent future improper payments. This proposal was incl uded in the President's FY2013 b udget proposal. Permit Exclusion from Federal Health Care Programs if Affiliated with Sanctioned Entities Current Law HHS OIG has authority to exclude health care providers (individuals and entities) from participation in federal health care programs.",
      " HHS OIG exclusion authority is mandatory in some circumstances and optional in others. The ACA extended HHS OIG authority to include individuals or entities that make false statements or misrepresentations on federal health care program enrollment applications, including explicit applicability to MA plans, PDPs, and these organization's providers and suppliers. President's Proposal The President's budget would expand HHS OIG authority to exclude individuals and entities from federal health programs if they are affiliated with sanctioned entities. The proposal would eliminate a loophole that allows the officers, managing employees, or owners of sanctioned entities to evade exclusion from federal health programs by resigning their positions or divesting their ownership interests.",
      " This proposal's exclusion authority also would be extended to entities affiliated with sanctioned entities. This proposal was incl uded in the President's FY2013 b udget proposal. Strengthen Penalties for Illegal Distribution of Beneficiary Identification\u00a0Numbers Current Law There are no specific penalties for selling, trading, bartering, or otherwise distributing beneficiary or identification numbers or billing privileges. Beneficiary identification numbers and provider/supplier billing privileges could be used to submit fraudulent claims to Medicare, Medicaid, or the CHIP programs. President's Proposal The President's budget proposal would strengthen penalties for knowingly distributing Medicare, Medicaid, or CHIP beneficiaries' identification or billing privileges. This proposal was incl uded in the President's FY2013 b udget proposal.",
      " Improve Prisoner Database to Determine Eligibility for Improper Payments Current Law Medicare and Medicaid limit or preclude federal coverage of health services for individuals who are in custody or incarcerated. In Medicare, payment for medical services delivered to beneficiaries who are in custody (for example, on parole, probation, bail, or incarcerated) can only be made if certain conditions are met. In Medicaid, in general, no federal financial participation (i.e., federal Medicaid matching dollars) are available for medical services delivered to inmates of public institutions. Inmates of non-federal correctional facilities are wards of the state. Thus, states are responsible for their care, not the federal government.",
      " Specifically, while serving time for a criminal offense or confined involuntarily in state or federal prisons, jails, detention facilities or other penal facilities, no federal matching funds are available to pay for Medicaid services delivered to that inmate. However, the federal statute provides for an exception to the prohibition on federal matching funds when an inmate becomes an inpatient in a medical facility (e.g., hospital) and the inmate is otherwise eligible for Medicaid. President's Proposal The President's budget includes a multi-agency proposal increasing federal and state access to the Prisoner Update Processing System, which is the Social Security Administration's database containing federal, state, and local prisoner data.",
      " This proposal also expands the type of information prisons are required to report to SSA, such as release dates, so that programs responsible for providing federal or state benefits can prevent improper payments to or on behalf of incarcerated individuals. This proposal was not incl uded in the President's FY2013 b udget proposal. Private Health Insurance Legislative Proposals Accelerate Issuance of State Innovation Waivers Current Law Under section 1332 of the ACA, a state may apply to the Secretaries of HHS and Treasury for waivers of certain ACA requirements with respect to health insurance coverage in that state for plan years beginning on or after January 1, 2017.",
      " A state may apply for a \"state innovation waiver\" for all or any of the following ACA requirements: Title I, subtitle D, Part I (relating to the establishment of qualified health plans); Title I, subtitle D, Part II (relating to consumer choice and insurance competition through health benefit exchanges); Section 1402 (relating to reduced cost sharing for individuals enrolling in qualified health plans); Section 36B of the Internal Revenue Code (relating to refundable tax credits for coverage under a qualified health plan offered through an exchange); 4980H of the Internal Revenue Code (relating to shared responsibility for employers regarding health coverage); And 5000A of the Internal Revenue Code (relating to the requirement to maintain minimum essential coverage). The Secretaries have the authority to grant a request for one or more state innovation waivers if the Secretaries determine that the state has legislation in place that creates a system or plan that will provide health insurance coverage that is at least as comprehensive and affordable as coverage provided under the ACA;",
      " will provide that coverage to a comparable number of its residents as provisions of the ACA would provide; and will not increase the federal deficit. President's Proposal The President's budget would allow states to apply for state innovation waivers beginning in 2014, three years earlier than is currently permitted. This proposal was incl uded in the President's FY2013 b udget proposal. Program Management Legislative Proposals Provide Mandatory Administrative Resources for Implementation Current Law CMS's Program Management account funds the majority of Medicare's administrative and oversight functions, and Program Management activities include both discretionary and mandatory appropriations. Discretionary Program Management includes the following five account categories: program operations,",
      " federal administration, survey and certification, research, and state high-risk pools. The largest Program Management expenditure category is program operations, which funds a range of contractor and information technology activities necessary to administer Medicare, Medicaid, CHIP, implementation of new private health insurance protections created by the ACA, and additional activities required by legislation. Mandatory program management appropriations ($279 million) were established by the following four laws: ACA, ARRA, MIPPA, and ATRA. In addition, the President's FY2014 budget for Program Management includes reimbursable administration ($951 million) and provisions for new legislative initiatives ($410 million).  President's Proposal The President's budget would increase mandatory funding for Program Management by $400 million to fund implementation of the mandatory health care proposals in the President's budget.",
      " The Administration estimated that the $400 million expenditure for this proposal over the next few years would decrease federal expenditures by approximately $393 billion over ten years. This proposal was not incl uded in the President's FY2013 b udget proposal.  Survey Revisit User Fee Current Law Federal and state governments share responsibility for ensuring that many Medicare providers and suppliers provide quality care and meet certain safety standards. The federal government sets quality and safety requirements that these entities must meet to participate in the Medicare and Medicaid programs. In general, CMS contracts with organizations (often state survey agencies) to conduct periodic inspections and investigate quality or safety complaints. Survey organizations follow federal regulations in conducting inspections or investigations;",
      " though some survey activities and policies are set by the surveyors, state agencies, or contractors, including hiring and retaining a surveyor workforce, training surveyors, reviewing deficiency citations, and managing regulatory interactions with the industry and public.  The Medicare and/or Medicaid programs, through state survey agencies, contractors, or other entities, surveys and certifies at least the following providers and suppliers:  Long-term care facilities, Home health agencies, Accredited and non-accredited hospitals, Organ transplant facilities, Dialysis facilities, Ambulatory surgical centers, Community mental health centers, Hospices, and Outpatient physical therapy, outpatient rehabilitation, rural health clinics,",
      " and portable X-Ray facilities.  The number of participating facilities has continued to grow increasing by 4.3% from FY2012 to FY2014, from 55,800 to 58,200. CMS estimated that in FY2014 survey and certification entities will complete over 24,000 initial surveys and re-certifications and investigate over 55,000 complaints. All facility providers must undergo initial survey and certification inspections when they enroll as providers in Medicare or Medicaid, and on a regular basis thereafter. CMS intends to add inspection requirements for community mental health centers in FY2014. President's Proposal The President's budget includes two proposals for new user fees:",
      " a Survey and Certification Revisit Fee and a fee to share Medicare data with qualified entities. The Revisit Fee would provide CMS with additional resources to revisit poor performers, while also creating financial incentives for organizations to ensure continuing quality of care. The Revisit Fee would be phased in over a number of years. Fees for expanded data sharing would allow CMS to broaden qualified entities' use of Medicare data for activities such as fraud prevention, care coordination practice improvement, and other value-added analyses. This proposal was not incl uded in the President's FY2013 b udget proposal. Extension of CMS Quality Measurement Current Law Under current law, two provisions authorize specified quality and performance measurement duties for a contracted consensus-based entity.",
      " Section 183 of MIPPA requires the Secretary to have a contract with a consensus-based entity (e.g., National Quality Forum) to carry out specified duties related to performance improvement and measurement. These duties include, among others, priority setting; measure endorsement; measure maintenance; convening multi-stakeholder groups to provide input on the selection of quality measures and national priorities; and annual reporting to Congress.  Section 3014 of the ACA requires the Secretary to establish a pre-rulemaking process, to include a series of six steps to select quality measures, including gathering multi-stakeholder input; making measures under consideration available to the public;",
      " transmission to, and consideration by, the Secretary of the input of multi-stakeholder groups; and the publication of the rationale for the use of any quality measure in the Federal Register; among others. The Secretary must establish a process for disseminating the selected quality measures and periodically review and determine whether to maintain the use of a measure or to phase it out. President's Proposal The President's budget would extend funding for both of the provisions authorizing specified quality and performance measurement duties for a contracted consensus-based entity. The President's budget would fund MIPPA Section 183 at $10 million per year for each of the fiscal years FY2014 through FY2017.",
      " It would also fund ACA Section 3014 at $20 million per year for each of the fiscal years FY2015 through FY2017. This proposal was not incl uded in the President's FY2013 b udget proposal. Comparison to House and Senate Budget\u00a0Resolutions Usually, the President's budget request is the first step in the federal budget process. However, this year, both the House and the Senate agreed to budget resolutions prior to the President submitting his budget request. As shown in Figure 1, the President's budget for Function 550 (which includes Medicaid, CHIP, and the health insurance exchanges among a number of other health care programs and activities)",
      " varies from both the House and Senate budget resolutions, but as shown in Figure 2, the President's budget for Function 570 (which consists of the Medicare program) is similar to funding levels in the House and Senate budget resolutions. The following provides a brief description of the policies included in the House budget resolution and the Senate budget resolution, as compared with the President's FY2014 budget. House Budget Resolution On March 12, 2013, House Budget Committee Chairman Paul Ryan released the chairman's mark of the FY2014 House budget resolution together with his report entitled The Path to Prosperity: A Responsible Balanced Budget, which outlines his budgetary objectives.",
      " The House Budget Committee considered and amended the chairman's mark on March 13, 2013, and voted to report the budget resolution to the full House. H.Con.Res. 25 was introduced in the House on March 15, 2013 and was accompanied by the committee report ( H.Rept. 113-17 ). H.Con.Res. 25 was agreed to by the House on March 21, 2013 by a vote of 221 to 207. Chairman Ryan's budget proposal, as outlined in his report and in the committee report, suggests short-term and long-term changes to federal health care programs including Medicare,",
      " Medicaid, and the health insurance exchanges established by the ACA. Within the 10-year budget window (FY2014-FY2023), the House budget resolution assumes that certain ACA provisions would be repealed, including those that expand Medicaid coverage to the non-elderly with incomes up to 133% of FPL, and those provisions that establish health insurance exchanges. The budget proposal also suggests restructuring Medicaid from an individual entitlement program to a block grant program. Additionally, the House resolution assumes a fix to the Sustainable Growth Formula (SGR) used to establish Medicare physician rates, and a repeal of the IPAB. According to the House Budget Committee estimates,",
      " the House resolution would reduce health care spending by $2.7 trillion over the 10-year budget window in comparison to current policies. Beyond the 10-year budget window, beginning in FY2024, the budget proposal assumes an increase in the age of eligibility for Medicare and the conversion of Medicare to a fixed federal contribution program. Senate Budget Resolution On March 13, 2013, Senate Budget Committee Chairman Patty Murray released a report outlining the FY2014 Senate budget resolution entitled Foundation for Growth: Restoring the Promise of American Opportunity. The Senate Budget Committee considered and passed the budget resolution on March 14, 2013. S.Con.Res.",
      " 8 was introduced in the Senate on March 15, 2013 and was accompanied by the committee print (S. Prt. 113-12). The Senate passed S.Con.Res. 8 on March 23, 2013 with a vote of 50-49. In contrast to the House budget resolution, the Senate budget resolution maintains all the changes included in the ACA, including the ACA Medicaid expansion and the health insurance exchanges. According to Senate Budget Committee estimates, the Senate resolution includes $275 billion in health care savings, which are derived from encouraging health care delivery system reforms (i.e., bundled payments or value-based reimbursement programs)",
      " and reducing fraud and abuse. In addition, the Senate budget resolution assumes the costs of a permanent fix to the SGR physician payment system and eliminates the Medicare sequestration cuts. Comparison Figure 1 and Figure 2 compares the outlays provided for Function 550 and Function 570 in the President's budget, the House resolution, and the Senate resolution.  Function 550: Health Function 550 includes most direct health care services programs, most notably Medicaid. Other health programs in this function fund anti-bioterrorism activities, national biomedical research, activities to protect the health of the general population and workers in their places of employment, health services for under-served populations,",
      " and training for the health care workforce. Some of the HHS agencies in this function include the National Institutes of Health, Centers for Disease Control and Prevention, Health Resources and Services Administration, and the Food and Drug Administration. The major mandatory programs in this function are Medicaid, CHIP, federal and retirees' health benefits, and health care for Medicare-eligible military retirees. A vast majority of the spending in Function 550 is attributable to Medicaid. In FY2012, Medicaid accounted for 72.3% of the Function 550 expenditures. As shown in Figure 1, over the next 10 years, the funding for Function 550 varies by budget plan with the House resolution providing significantly less funding for Function 550 when compared to the President's budget and the Senate resolution.",
      " This difference is largely attributable to the House resolution including reductions to Medicaid in the amount of $1.4 trillion over the 10-year budget window, which includes $636 billion in savings from repealing the ACA Medicaid expansion. The Senate resolution did not specify any Medicaid legislative proposals, while the President's budget includes a number of legislative proposals impacting the Medicaid program (see the \" Medicaid Legislative Proposals \" and \" Program Integrity Legislative Proposals \" sections of this report). Function 570: Medicare Function 570 consists of the Medicare program, which pays for covered health care services for individuals age 65 or older and certain persons with disabilities. Nearly 99%",
      " of spending in this function is mandatory, and almost all of the mandatory spending consists of payments for Medicare benefits. Congress provides an annual appropriation for the costs of administering and monitoring the Medicare program. Figure 2 shows estimated outlays for Medicare, from FY2014 through FY2023, under the President's budget, the House resolution, and the Senate resolution. The figure shows relatively little difference between the budgets and the funding for Medicare, with the Senate resolution providing slightly more funding than the others, particularly in the later years. Both the President's budget and the Senate resolution assume that the SGR physician payment system would be fixed, and that the 2%",
      " reduction in Medicare benefit spending under sequestration would not take place; these assumptions were incorporated into their respective Medicare spending baselines. The President's budget also includes a number of specific legislative proposals (see the \" Medicare Legislative Proposals \" and \" Medicaid Legislative Proposals \" sections of this report) that the Administration estimates will save a net of $371 billion compared to the baseline over the next ten years. The Senate resolution did not include specific cost-reduction proposals, but the Senate resolution includes savings of $265 billion over the next ten years through delivery system changes, increased efforts to reduce fraud and abuse, and greater engagement across the health care system.",
      " The House budget resolution assumes a fix to the SGR physician payment system plus a repeal of the IPAB, however the resolution did not indicate how the cost increases associated with these two proposals were reflected in their Medicare spending baseline estimates. While the House resolution assumes a slight decrease in Medicare spending ($129 billion) over the next ten years compared to current CBO baseline projections (which is based on current law and assumes future reductions in physician payments and continuation of the 2% Medicare spending reductions under sequestration), the resolution did not provide specifics on how spending would be reduced to these lower levels, nor whether the 2% benefit reductions under sequestration would continue."
    ],
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    "id": 117,
    "question": null,
    "answer": "FY2001 Treasury, Postal Service, Executive Office of the president, and General Government funding was enacted through P.L. 106-554 , the ConsolidatedAppropriations Act for FY2001, December 21, 2001. Partial funding for a select few of the accounts and somegeneral provisions of the Treasury, Postal Service,Executive Office of the President, and General Government FY2001 Appropriations are included in the Departmentof Transportation FY2001 Appropriation( P.L. 106-346 , Title V, October 23, 2000) and the continuing funding resolution ( P.L. 106-275 , as amended). Twenty-one continuing resolutions providedstopgap funding during the period October 1 through December 21, 2000. There were four appropriations billswhich would have funded all or some of theaccounts usually funded through the Treasury, Postal Service and General Government FY2001 appropriations acts. The House had passed, on July 20, H.R. 4871 . The Senate had reported, on July 20, S. 2900 and, on July 26, had voted to invoke clotureto proceed with debate on H.R. 4871 . The third version, H.R. 4985 , was introduced on July 26 as a new bill and reported fromthe Legislative Branch( H.R. 4516 ) appropriations conference committee as section 1001, Division B of that conference. This billwas vetoed October 30, 2000.The Houseagreed to the conference report on H.R. 4516 September 14. On October 6, the House and Senate approvedand sent to the President, a conferenceagreement for Department of Transportation appropriations ( H.R. 4475 ). Title V partially funds ($348.4million) several of the accounts. P.L. 106-554 funds the accounts at $30.4 billion ($14.7 in mandatory funding and $15.6 in discretionary accounts). The FY2001 budget, submitted to Congresson February 7, 2000, requested $31.2 billion. The FY2000 funding totals $28.3 billion, including mandatoryfunding (reflecting scorekeeping by theCongressional Budget Office (CBO)). Incorporating the CBO scorekeeping for FY2001, the budget would havemandatory accounts funded at $14.7 billion anddiscretionary funding set at $16.5 billion. The House and Senate Appropriations Committees approved allocationsto the various appropriations:House--discretionary budget authority at $14.402 billion with outlays at $14.751 billion; and Senate--$14.3 billionfor budget authority and $14.566 billion foroutlays. While the congressional allocations were in disagreement with one another, they were consistently lowerthan the requested funding. P.L. 106-346 ( H.R. 4475 ) adds $348 million. The Budget and Key Policy Issues section of the report discusses both the funding provisions and policy initiatives in the funding statutes. The funding provisionsin Title V of the Department of Transportation appropriations act were critical to the success of passage of the mainfunding provisions in that compromises werereached on the main bill based on commitments to funding for the Department of the Treasury, principally theInternal Revenue Service's (IRS) STABLE programand for IRS information technology. Table 4 details the funding, in the various versions of the FY2001appropriations proposals, by account. Key Policy Staff  Division abbreviations: G&F = Government and Finance; DSP = Domestic Social Policy; RSI=Resources, Science, and Industry.\n",
    "docs": [
      "Most Recent Developments P.L. 106-554, signed December 21, 2000, is the law through which, H.R. 5658, the Treasury, PostalService, Executive Office of the President, andGeneral Government Appropriations, 2001 was enacted.  P.L. 106-275, the FY2001 continuing funding resolution, as amended by 20 further continuing funding resolutions, provided funding for most Treasury andGeneral Government accounts at the FY2000 level. However, there was funding provided to the General ServicesAdministration to administer the transition andto the Executive Residence for the purpose of preparing for the transfer of families in the White House.",
      "  On October 23, the President signed P.L. 106-346 ( H.R. 4475 ), the Transportation appropriations bill, Title V of which partially funds a selectgroup of accounts from the Treasury, Postal Service, and General Government primary funding measure.  Note to Reader Prior to enactment of P.L. 106-554, through which the FY2001 Treasury and General Governmentappropriations were enacted, there were several measureswhich either would have, or actually did, fund affected accounts. Because the discussions in this report will referto various measures, the following key isprovided as a guide. House bill or H.R.",
      " 4871 (Reported by House Committee on Appropriations and passed the House) Senate bill or S. 2900 (Reported by Senate Committee onAppropriations) Legislative Branch Appropriation--conference report or H.R. 4516 / H.R. 4985 (Vetoed October 30) Transportation Appropriations or P.L. 106-346 ( H.R. 4475 ) (TitleV, partial funding and some general provisions) FY2001Continuing Funding Resolution or P.L. 106-275, as amended. ( P.L. 106-426, provides funding for the presidential transition and P.L.",
      " 106-520 authorizes use of White House funds for transition moving expenses)  The Act or P. L. 106-554 (Enacts H.R. 5658, Treasury and GeneralGovernment) Introduction The bulk of the accounts within the Treasury, Postal Service, Executive Office of the President, and GeneralGovernment FY2001 are funded through P.L.106-554 ( H.R. 4577 / H.R. 5658 ). However, P.L. 106-346, signed by the President October 23, providessupplemental funding for certainof those accounts (Title V).  The President,",
      " through the Office of Management and Budget (OMB) is required to submit to Congress, annually, the Budget of the United States Government. On February 7, 2000, the budget for FY2001 was submitted. (1) Congress has established a procedure by which it passes a concurrent resolution establishing the congressional budget for the government and setting forthbudgetary levels for several years in the future. (2) TheHouse and Senate Appropriations Committees then allocate the discretionary funding levels (302(b))allocations to each of the subcommittees. See the section of this report entitled \"Major Funding Trends\" for adiscussion of the FY2001 allocations for Treasuryand General Government appropriations.",
      " Appropriations for the Department of the Treasury, in addition to funding the operations of the department, fund the work of a group of law enforcementorganizations, which include the Bureau of Alcohol, Tobacco, and Firearms; the Customs Service; the SecretService; the Financial Crimes Enforcement Network;and the Federal Law Enforcement Training Center. Treasury appropriations also cover the Internal RevenueService, the Financial Management Service, and theBureau of the Public Debt.  For the most part, the U. S. Postal Service has become self-supporting. Federal contributions are limited to payments to the Postal Service Fund tocompensate for revenues foregone ( e.g., free postal service for the blind.) Appropriations for the Executive Office of the President provide salaries and expenses for the White House Office,",
      " operations of the residences of the Presidentand Vice President, and most other agencies within the Executive Office of the President (EOP). Organizations suchas the Council of Economic Advisers, theNational Security Council, the Office of Management and Budget, and the Office of National Drug Control Policy(ONDCP) are funded through these provisions. Specific funding for drug control initiatives is appropriated for distribution to other entities by the ONDCP. Among the independent agencies financed through this appropriation are the Federal Election Commission, the General Services Administration, the NationalArchives and Records Administration, the Office of Personnel Management, the Office of Special Counsel, and theUnited States Tax Court.",
      " The Treasury and General Government appropriation always has at least two titles in addition to the four covering the funding for specific agencies. These generaltitles apply restrictions or \"rules of the road\" governmentwide and, quite often, contain authority for defined actions. For example, each year, there is standardlanguage which prohibits the use of any appropriated funds for the purpose of employing individuals who are notU.S. citizens or citizens of nations eitherspecified in that section of the act or on the State Department list of nations covered by treaties; which requires thatall agencies maintain drug-free workplaces;and which authorizes the expenditure of funds appropriated under any act to be used to pay the travel expenses ofimmediate family members if a federalemployee serving overseas has died or has a life-threatening illness.",
      " See below for a presentation of new provisionsin titles V and VI. Rescissions As part of the Consolidated Appropriations Act of 2001, P.L. 106-554, there will be a.22% across-the-board rescission of FY2001 discretionary budget authorityand obligation limitations funds (section 1403, H.R. 4577 / H.R. 5666 ). (3) All accounts in the Treasury and General Governmentappropriations will be affected. The Office of Management and Budget (OMB) is required to report on theimplementation of the rescission when the FY2002budget is submitted. On January 5,",
      " 2001, the Office of Management Budget issued guidelines to the agencies. (4) The rescission applies to all net positive discretionary budget authority and obligation limitations. Advanceappropriations for FY 2001 provided in FY 2000 or earlier years are subject to the rescission. Advanceappropriations provided in FY 2001 appropriations acts forFY 2002 and future years are not subject to the rescission. Discretionary emergency appropriations are subject tothe rescission. The Act requires that the 0.22 percent reduction be applied equally to each program, project, and activity subject tothe rescission. \"Programs, projects,",
      " and activities\" (PPA) are defined as that level of appropriations detail specifiedin the appropriations act or accompanyingreport for the relevant fiscal year covering each account, including earmarks and directives, or, for accounts anditems not included in appropriations acts, asspecified in the program and financing schedules in the FY 2001 President's budget. There is no discretion to change the allocation of the rescission among discretionary PPA; each must be reduced by0.22 percent. The rescission cannot be applied to mandatory PPA, or transfers of mandatory funds to discretionaryPPA.... Required actions. Agencies will be separately provided with their rescission amounts by account by their OMBrepresentative.",
      " Agencies must allocate the reduction on a pro-rata basis to every program, project, and activitysubject to the rescission, without exception. Please note that the Act requires that all reductions be made from discretionary budget authority and obligationlimitations only. Subsequent to passage of FY2000 Treasury and General Government appropriations, (5) the FY2000 Consolidated Appropriations Act (6) provided for a so-calledacross-the-board rescission of 0.38%. As part of the FY2001 budget submission, the Office of Management andBudget (OMB) reported specific reductions in theaccounts. (7) OMB issued a fact sheet (2000-",
      "01-10OMB Fact Sheet, January 10, 2000) in which the administration stated that the law stipulated that 0.38% insavings was to be realized by each and every department. However, within each department, it provided latitudeto protect high-priority programs as long as thedollar figure amounting to 0.38% was achieved and certain other conditions were met. The FY2001 rescissionprovisions specifically exempts certain programs,none in the accounts discussed in this report, but otherwise is to be universally applied. The FY2001 Military Construction Appropriations Act is the vehicle for the FY2000 Supplemental funding provisions.",
      " (8) Some of the accounts covered by theTreasury/Postal Service measure are affected by that language. For example, section 6 provides that the pay datefor federal civilian personnel which had beenpushed into FY2001, will revert to the original scheduled date in FY2000. That will alter the \"enacted\" fundinglevel for FY2000. When the term \"net,\" is usedin this report, it means the FY2000 appropriated levels reduced by the rescinded amount as reported by OMB andthe supplemental.  Table 4 is designed to provide summary information for FY2000 enacted funding, for House and Senate reported or passed funding,",
      " and for FY2001 enacted, asappropriate. Although not all accounts are represented, those with significant funding levels or subject to criticaldiscussion can be found in the table. TheFY2000 enacted levels reflect the application of the rescissions and the supplemental. Status and Legislative History In addition to the 21 FY2001 continuing funding resolutions, (9) there were four legislative measures designed to provide appropriations for all the Treasury andGeneral Government accounts and one to provide partial funding for selected accounts. In summary, H.R. 4871 passed the House and the Senate had begun debate; S. 2900 was reported by the Senate Committee onAppropriations;",
      " H.R. 4985 was included as a section in Division B of the Legislative Branch appropriations( H.R. 4516 ) conferenceagreement, which was vetoed (October 30); P.L. 106-346 ( H.R. 4475 ), Title V of which partially fundsselected Treasury and General Governmentaccounts and includes some of the general provisions from other versions; and P.L. 106-554 ( H.R. 4577 )through which FY2001 Treasury andGeneral Government Appropriations Act ( H.R. 5658 ) is enacted. The House Bill. The House Committee on Appropriations Subcommittee on Treasury,",
      " Postal Service, andGeneral Government held 10 days of hearings during March and April 2000. The Subcommittee markup was July11, with the full Appropriations Committeereporting H.R. 4871 on July 18, H.Rept. 106-756. (10) The bill was approved in committee through a voice vote.  The House passed H.R. 4871, amended, July 20, 2000, by a vote of 216-202. (11) H.R. 4871 was considered under an open rule, H.Res. 560. (12) The Senate Bill.",
      " The Senate Committee on Appropriations Subcommittee on Treasury, Postal Service, andGeneral Government held five days of hearings during February, March, and April. The subcommittee sent the billto the full Appropriations Committee on July19. The full committee ordered S. 2900 to be reported on July 20. (13) On July 24, 2000, the Senate Majority Leader requested that a cloture motionbefiled against H.R. 4871, Treasury, Postal Service, and General Government appropriations bill. (14) On July 26, cloture was invoked by a vote of 97-0(Rollcall Vote No.",
      " 277) and the Senate began consideration of the measure. (15) Debate on H.R. 4871 was pending at the time the Senate adjourned,July 27, for the August recess/work period. Legislative Branch Appropriation. On July 26, 2000, Treasury Appropriations Subcommittee Chairman, JimKolbe, introduced H.R. 4985, \"Making appropriations for the Treasury Department, the United States PostalService, the Executive Office of thePresident, and certain Independent Agencies, for the fiscal year ending September 30, 2001, and for otherpurposes.\" (16) That same day,",
      " the conference reporttoaccompany the Legislative Branch FY2001 appropriations bill ( H.R. 4516, H.Rept. 106-796 ) was filed. (17) On July 27, 2000, H.Rept. 106-797 wasfiled, to accompany H. Res. 565, waiving points of order against the conference report to accompany H.R. 4516. (18) The House agreed to the rule,subsequent to debate, by a recorded vote of 214 ayes to 210 noes, with one voting \"present\" (Roll No. 448). (19)",
      " Prior to adjourning, for the August recess/workperiod, there was no further debate on the issue. On September 14, 2000, the House agreed to the conference report for H.R. 4516 (FY2001 legislative branch funding), which included funding forthe Treasury and General Government accounts. (20) The House vote (Roll No. 476) was 212 yeas to 209 nays, with 13 not voting. (21) On September 20, the Senaterejected the conference report, by a vote of 28 to 69 (Vote No. 253). (22)",
      " On October 12, the Senate agreed to the conference report by a vote of 58to 37 (Vote No.273) (23) The bill was presented to the PresidentOctober 18 and subsequently vetoed by him on October 30. The House agreed, by voice vote, to recommit the billand veto message to the House Committee on Appropriations October 31. (24) FY2001 Continuing Funding Resolution. Most of the accounts were being funded, at FY2000 levels, throughthe series of continuing funding resolutions. (25) Those accounts which are new for FY2001 had no funding during the period October 1 through December 21,",
      "2000. The exception is the General Services Administration account through which the presidential transition isadministered. It was funded through a furthercontinuing resolution ( P.L. 106-426, November 3, 2000). Although no additional funding was involved, the WhiteHouse was authorized to use funds for thepreparations involved in the transfer of families during the transition. That authorization came through the16th continuing funding resolution, P.L. 106-520 (November 15, 2000). Transportation Appropriations. On October 5, the conference committee for the Transportation FY2001appropriation, H.R. 4475 came to agreement and filed a report.",
      " (26) Title V of the conference agreement contains partial funding provisions forsomeof the accounts usually funded within the Treasury and General Government appropriation, as well as some relatedgeneral provisions. On October 6, both theHouse and Senate agreed to the conference language. (27) P.L. 106-346 was signed by the President October 23, 2000. The Act. P.L. 106-554 (28) enacts, through reference, H.R. 5658, theTreasury and GeneralGovernment Appropriations, FY 2001. P.L. 106-554 is a two-page statute which acts as a ConsolidatedAppropriation and enacts several funding and legislativebills through reference.",
      " H.R. 5658 was introduced December 14, 2000 as a new bill, with funding levelsidentical to those in H.R. 4985. The conference report for H.R. 4577 contains the legislative text and explanatory remarks for H.R. 5658. (29) Table 1 shows the status of each of the bills which would affect the accounts.   Table 1. Status of FY2001 Appropriations for the Treasury, Postal Service, Executive Office of the President, and GeneralGovernment (See Table 4 for breakdown of accounts within bills.) Treasury and General Government Appropriations, 2001 (Public Law106-",
      "554) Budget and Key Policy Issues Department of the Treasury The Department of the Treasury has both financial and law enforcement functions. The financial functions are carried out by the Financial Management Service;the Mint; and the Bureau of Public Debt. The law enforcement functions are carried out by the Customs Service;the Secret Service; the Bureau of Alcohol,Tobacco and Firearms (ATF); the Financial Crimes Enforcement Network; and the Federal Law EnforcementTraining Center. The Internal Revenue Service hasboth a financial function--to determine and audit tax obligations--and a law enforcement function--to enforcecollection of tax revenue. The single largest account within the Department of Treasury appropriation is that for the Internal Revenue Service (IRS). The department's FY2000 net fundingwas $12.",
      "352 billion, with the IRS funded at $8.217 billion, or 66.7% of the total. P.L. 106-554 funds the departmentat $13.598 billion. The IRS is funded at$8.639 billion, or 63% of the departmental total. Combined with the funding in P.L. 106-346, the total Departmentof Treasury enacted FY2001 funding is $13.89billion, with $8.86 billion for the IRS. If the.22% rescission is applied to all accounts, the departmental reductionwill equal approximately $30 million. The FY2001 budget request is $14.",
      "520 for the department. The request would more than double the account for department-wide systems and capitalinvestments, add funding for the Money Laundering Strategy; increase interagency crime and drug enforcement by40%; eliminate funding for the Violent CrimeReduction Program as previously defined; and increase Secret Service, ATF, and Customs Service funding. Theincrease for the IRS would be just under 10%. Five FY2001 key priorities are identified in the department's budget justification:  Support continued IRS reform; Strengthen the department's ability to fight drugs and crime; Enhance financial reporting and resource accountability; Invest in community development and economic growth;",
      " and Maintain support for management operations. The House Appropriations committee reported H.R. 4871, providing $13.225 billion for the department. As passed by the House, H.R. 4871 would reduce the Office of the Treasury Inspector General for Tax Administration by $950,000 in order tofund a pilot project to check for radioactivematerials in scrap metal imported into the United States. It also would offset an additional $25 million for the HighIntensity Drug Trafficking Areas program byreducing the IRS Processing Assistance and Management Account. S. 2900, as reported by the SenateCommittee on Appropriations,",
      " would haveprovided a total of $13.161 billion for the department. Under the vetoed Legislative Branch conference agreement, H.R. 4516 / H.R. 4985 would have funded the Department at $13.598 billion. The IRS would be funded at $8.639 billion, or 63% of thedepartmental total.  Several Department of Treasury accounts have been provided with additional funding through the Department of Transportation funding bill ( P.L. 106-346 ). Those accounts include:  Departmental Offices, $6.4 million to establish a new interagency National Terrorist Asset TrackingCenter, to fund detailees to the Center,and to increase staff in the Office of Foreign Assets Control.",
      " The Department is directed take action towardestablishing a centralized vehicle acquisition programbefore further funding is provided. Department-wide systems and capital investments programs, an additional $15 million for theIntegrated Treasury (WirelessNetwork). Expanded Access to Financial Services, an additional $8 million. Federal Law Enforcement, Salaries and Expenses, an additional $5 million to establish and operate ametropolitan area law enforcementtraining center to be accessible by the Treasury Department, other federal agencies, the United States Capitol Police,and the Washington, D.C. MetropolitanPolice Department. Federal Law Enforcement, Acquisition, Construction, Improvements and Related Expenses, $25million for the design and construction of ametropolitan area law enforcement training center.",
      "  Bureau of Alcohol, Tobacco, and Firearms, see discussion below. U.S. Customs Service (salaries and expenses), see discussion below. Internal Revenue Service (three accounts--tax law enforcement, information technology investments,and staffing tax administration forbalance and equity), see discussion below.  U.S. Secret Service (salaries and expenses), see discussion below.  Bureau of Alcohol, Tobacco, and Firearms (ATF). The ATF is a law enforcement agency that regulates themanufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. The ATF also enforcesfederal laws related to arson. ATF's mission isfocused on three goals:",
      " 1) reducing crime, 2) collecting revenue, and 3) protecting the public. In FY1999, ATFcollected $12,135,929,000 in taxes, penalties,fines, and other related revenues. From FY1992 to FY2000, Congress increased ATF's direct appropriations from$336,040,000 to $604,573,000, (30) an 80%increase. For FY2001, Congress has appropriated $772,843,000 in direct funding for ATF, a 28% increase over the agency's FY2000 appropriation and $12,792,000 morethan the administration's FY2001 request.",
      " For the salaries and expenses account, Congress provided $768,695,000in P.L. 106-554. For counter-terrorism,Congress also provided ATF with $4,148,000 in P.L. 106-346. With the exception of $5,521,000 for the tobaccocompliance initiative, Congress fully funded theadministration's FY2001 request for ATF. Like the enacted FY2001 measure, the vetoed Legislative Branch conference agreement ( H.R. 4516 / H.R. 4985 ), would have providedthe ATF with $768,695,000. By comparison, the House bill (H.R.",
      " 4871) would have provided ATF with$731,325,000, while the Senate version( S. 2900 ) would have provided $724,937,000. The administration's FY2001 request included $105,298,000 in program budget increases to expand ongoing initiatives, such as the Integrated ViolenceReduction Strategy ($41,322,000), the Youth Crime Gun Interdiction Initiative ($19,078,000), expanded gun tracing($9,990,000), enhanced ballistic imaging($23,361,000), tobacco compliance ($5,521,000), and the national laboratory center transition ($6,026,",
      "000). Inaddition, the administration also requested fundingto relocate the ATF headquarters ($7,290,000).  To expand the Integrated Violence Reduction Strategy (IVRS) in FY2001, Congress provided an additional $41,322,000 to fund 224 agents, 112 inspectors, and59 support staff. This increase will bring total funding for IVRS to $62,200,000. With these additional resources,ATF reported in its FY2001 budget submissionthat the agency would: intensify local firearm initiatives, like Boston's Ceasefire and Richmond's Project Exile;  review all Federal Bureau of Investigation (FBI)",
      " referrals where Brady law background checks indicatethat a prohibited person receivedfirearms as result of a delayed denial; investigate cases where intelligence data indicate that prohibited persons are engaging in multipleattempts to purchase firearms fromdifferent federal firearm licensees; investigate cases where prohibited persons with a history of violent crime are known to have acquired firearms through legitimate or illegalmarkets; and review the records of federal firearm licensees to ensure that instant checks are being performed onall firearm transfers and that requiredrecords are being maintained.  To expand the Youth Crime Gun Interdiction Initiative (YCGII) to 12 additional cities in FY2001, Congress has provided ATF with $19,",
      "078,000 to hire 72 agentsand 98 inspectors. This increase will bring total funding for this program to $76,400,000 and expand its presenceto 50 cities. The objective of the YCGII is toreduce youth firearm violence and firearms trafficking among youth by making federal resources like ATF's firearmstracing and ballistics technology available tostate and local law enforcement agencies, and by providing coordination of these efforts. In addition, Congress alsoprovided $16 million for the Gang ResistanceEducation and Training (GREAT) program, under which ATF agents and uniformed policy officers teach ananti-violence curriculum to fourth and seventhgraders.",
      " To continue the Comprehensive Crime Gun Tracing Initiative in FY2001, Congress provided ATF with $9,990,000 and 20 additional positions. This increasebrings total funding for this initiative to $25,000,0000. This initiative provides nationwide, comprehensive tracingcapability for state and local law enforcement. The added resources will provide for faster trace results and indexing of gun identification information frombusiness records. For the Expanded Ballistics Identification Initiative, Congress has provided $23,361,000 and 20 additional positions. This increase will bring total funding forthis initiative to $26,400,000. On December 2, 1999,",
      " the ATF and FBI signed a memorandum of understanding thatwill provide for the further development ofthe Integrated Ballistics Identification System (IBIS) as the federal system that will compare images of ballisticevidence (projectiles and cartridge casings). From1993 to 1997, the ATF and FBI operated two parallel, but incompatible, systems. Congress also provided funding for the national laboratory transition and the relocation of the ATF headquarters, but it did not fund the Administration's requestfor the Tobacco Compliance/Diversion initiative of $5,521,000 and 88 additional positions. According to ATF, thisincrease was needed to monitor new permitand revenue requirements for importers of tobacco products that were enacted as part of the Balanced Budget Actof 1997.",
      " Among ATF's activities, the regulation and enforcement of laws related to firearms commerce and possession have been the most controversial. Both the Houseand the Senate bills included language that would prohibit the Department of the Treasury from giving preferencesregarding the acquisition of firearms to anymanufacturer or vendor that enters into agreements with any federal department or agency that set out codes ofconduct, operating practices, product designspecifications, and other requirements related to the importation, manufacture, or dealing in firearms that are greaterthan what is currently required under federalstatute. The Smith & Wesson Corporation entered into such an agreement with the Department of Housingand Urban Development (HUD). Shortly thereafter,",
      "HUD announced that 411 governments around the nation had joined the Communities for Safer Guns Coalition,and had pledged to give preferences tomanufacturers who enter into agreements similar to the one with Smith & Wesson. This language, however,was dropped from the Legislative Branch conferenceagreement, nor was it included in the enacted Labor-HHS appropriations act. (For further information on guncontrol-related legislation and issues, see CRS Issue Brief IB10014, Gun Control Legislation in the 106th Congress. ) Customs Service. The U.S. Customs Service, the federal government's oldest revenue collecting agency, isresponsible for regulating the movement of persons,",
      " carriers, merchandise, and commodities between the UnitedStates and other countries. In FY1999, Customscollected $22,405,800,000 in trade-related duties, taxes, and fees. From FY1992 to FY2000, Congress has increaseddirect appropriations for the U.S. CustomsService from $1,454,337,000 to $1,935,915,000 (31),a 33% increase. In addition to appropriated funding, the Customs Service collects COBRA fee receipts thatare available to the agency for expenditure ($299,000,000 in FY2000).  For FY2001,",
      " Congress has appropriated $2,281,327,000 in direct funding for Customs. This amount represents an 18% increase over the agency's FY2000appropriation. For the salaries and expenses account, Congress provided $1,863,765,000 P.L. 106-554. Forcounter-terrorism in FY2001, Congress provided anadditional $18,934,000 in P.L. 106-346. These amounts togther are $5,167,000 less than the Administration'srequest. Also, included in the FY2001 Customsappropriation are monies provided in other accounts and a line item in P.L.",
      " 106-554. For the air and marineinterdiction account for FY2001, Congress provided$133,228,000. Under another line item, Congress provided an additional $7,000,000 for the air and marineinterdiction account. These amounts together are$16,647,000 less than the Administration's request. In lieu of a new fee proposed by the Administration, Congressprovided $258,400,000 for the modernizationof Customs' automated systems. This amount is nearly $80,000,000 less than the offsetting fee receipts projectedby the Administration. Also appropriated forobligation, but not included in the total appropriation cited above,",
      " are $3,000,000 in offsetting fee receipts in theharbor maintenance fee account. Like P.L. 106-554, the vetoed Legislative Branch appropriations ( H.R. 4516 / H.R. 4985 ) conference agreement would have providedCustoms with $1,863,725,000. The House bill ( H.R. 4871 ) would have provided Customs with$1,822,365,000, while the Senate bill( S. 2900 ) would have provided $1,804,687,000. For the air and marine interdiction account, the LegislativeBranch measure would have providedCustoms with $133,",
      "228,000. The House bill would have provided $125,778,000, while the Senate AppropriationsCommittee recommended $128,228,000. The Administration's FY2001 budget request for Customs' salaries and expenses account included $41,517,000 in program budget enhancements. Theseenhancements included: (1) $25,000,000 for the drug investigations initiative, (2) $10,000,000 for the narcoticsillicit proceeds strategy initiative, (3) $5,000,000for the forced child labor initiative, and (4) $1,517,000 for Customs' airborne support for the United States SecretService.",
      " The remaining $119,188,000 inincreased funding for the salaries and expenses account was requested for various budget adjustments that,according to the Administration, would allow Customsto maintain current levels of service associated with various FY1999 and FY2000 budget increases.  Regarding these initiatives, the vetoed conference agreement included earmarks in report language ( H.Rept. 106-796 ) of $13,700,000 for the Southwest borderinitiative, $10,000,000 for security enhancement on the northern border, $11,000,000 for vehicle replacement,$3,700,000 for money laundering, $9,",
      "500,000 fordrug investigations, and an additional $5,000,000 for the forced child labor initiative. By comparison, reportlanguage accompanying the House bill( H.R. 4871 ) earmarked increases of $9,500,000 for the drug investigations initiative and $2,000,000 for theforced child labor initiative. In recent years, Customs' Automated Commercial System (ACS), the system Customs uses to track, control, and process all commercial goods imported into theUnited States, has proven inadequate and has suffered from \"brownouts\" that inhibit international commerce. Earlier in the year, GAO testified that the currentimport processes handled by ACS are \"paper-intensive,",
      " error-prone, and transaction based, and out of step withjust-in-time inventory practices of the tradecommunity.\" (32) Since 1994, Congress appropriatedlarge infusions of funding for Customs to upgrade ACS and continue development of its replacement, theAutomated Commercial Environment (ACE), but Customs has struggled with the upkeep of ACS and thedevelopment of ACE. In the FY2000 conference report,Congress directed Customs to provide a revised blueprint, schedule, and budget for ACE. This report was deliveredto the Appropriations committees, but late inthe fiscal year.  For FY2001, the Administration's request included a new Customs budget account for automation modernization,",
      " for which the administration requested $338million. To offset the ACE developmental costs, the Administration requested authorization for a new user fee thatwas similar to a fee proposal rejected byCongress in the FY2000 appropriations cycle. Of this amount, $123 million was requested for the continuedoperation and maintenance of ACS, $5 million forthe International Trade Data System (ITDS), and $210 million for the development of ACE. Once again, Congressrejected the fee proposal. Instead, Congressprovided over $258 million in a direct appropriation, which includes $5 million to continue the development of theITDS and at least $130 million to continue thedevelopment of ACE.",
      " It was reported in Government Executive magazine that the development,operation, and maintenance of ACE over 7 years will costbetween $1.4 and $1.8 billion, and that Customs would begin taking bids to develop the new system in FY2001. (33) GAO has also testified that Customs had taken deliberate steps to implement recommendations made in previous audits by reducing duplication of effort,developing an enterprise systems architecture, and improving acquisition and investment management. GAOcautioned, however, that the development of ACE isa complex and high-risk endeavor that supports the agency's ability to collect billions of dollars in revenue generatedby imports.",
      " In addition to appropriated funding, Customs generates offsetting receipts from two user fee programs. The first fee program consists of seven conveyance- andpassenger-related user fees established by the 1985 Consolidated Omnibus Budget Reconciliation Act (COBRA)and the user fee for processing bulk cargo fromMexico and Canada established by the 1986 Tax Reform Act. The second fee program consists of thecommerce-related merchandise processing fee (MPF)established by the 1986 Omnibus Budget Reconciliation Act (OBRA). Customs generally has no control over theallocation of MPF fee receipts. COBRA feereceipts,",
      " on the other hand, are not appropriated for obligation by Congress, and they account for a substantialportion of funding available to Customs forexpenditure each year. From FY1992 to FY2000, COBRA fee receipts have increased from about $176,000,000to $299,000,000. There are codified limitations on the use of COBRA fee receipts, and initially they were used principally to pay overtime costs for inspectors and canineenforcement officers. Surplus revenues could be and were carried over from one year to the next. Such carryovercould be, and is, used to fund recurring costs inpositions and equipment from previous years.",
      " As a result, COBRA fee receipts have funded an increasing shareof permanent inspector positions and informationtechnology costs. In recent months, however, there have been reports of a drop-off in air passenger processing feereceipts. Consequently, the growing reliance onCOBRA fee receipts to fund base positions in conjunction with a drop-off in receipts may prove problematic in thecoming year, as Customs may not haveallocated enough to pay overtime for Customs officers. It is also notable that the authorization for the COBRA feesexpires at the end of FY2003. Internal Revenue Service (IRS). The FY2001 request for IRS was $8,",
      "986,084,000. The request represented a9.36% increase over the net funding for FY2000 of $8,216,489,000. The net funding takes into account the 0.38%rescission in the IRS Processing, Assistance,and Management account required by Congress in the consolidated funding act. The request for that account was12.78% higher than the net funding for FY2000. The IRS budget increases focus on maintaining current operations and modernization. IRS Commissioner CharlesO. Rossotti has testified that the maintenance ofoperations will require additional staffing for enforcement and customer service. He has explained that refersparticularly to the need for a state-of-the-artcomputer system to replace 1960s era computers.",
      " As passed by the House, H.R. 4871 would have funded the IRS programs at $8.453 billion. This would represent a net increase of $236.5 million. There would be $140 million which would continue to be available for organizational modernization. Prior topassage, amendments were adopted which wouldreduce funding for the IRS Processing Assistance and Management account by $25 million (to offset $25 for theHigh Intensity Drug Trafficking Areas (HIDTA)program) and funding for the Office of Treasury Inspector General for Tax Administration by $950,000 ( to createa pilot project to check for radioactive materialsin scrap metal imported into the United States.)  As reported by the Senate Appropriations Committee ( S.",
      " 2900 ), IRS funding would total $8.535 billion. With the exception of the Earned IncomeTax Credit Compliance Initiative account ($145 million in all versions), the Senate would fund the IRS accountsat levels higher than passed by the House. P.L. 106-554 funds, with that same exception, the IRS accounts at levels higher than both the House or Senate versions, at a total of $8.639 million. Processing,Assistance and Management received $3,567.0 million. Tax Law Enforcement is funded at $3,382.4 million andInformation Systems at $1,545 million. Thevetoed conference agreement ( H.R.",
      " 4516 / H.R. 4985 ), was the same as the final version. FY2001 IRS funding was a major point of objection as the conference report for the Legislative Branch Appropriations ( H.R. 4516 / H.R. 4985 ) was considered in both the House and Senate. Although the White House did not issue a Statement of Policy,there were remarks by executive branch staffand congressional minority leaders that there would be a veto if those accounts, and others, were not funded at ahigher level. On October 23, the President signed P.L. 106-346 which contains partial funding for selected accounts in the Treasury/",
      "General Government bill. In spiteof that accommodation, the Presidentsubsequently vetoed the Legislative Branch Appropriations on October 30. The IRS supplemental provisions areas follows: Processing, Assistance and Management--IRS is instructed to delay implementing no-cost Internet tax filing service until a reportaddressing concerns has been submitted to Congress. Tax Law Enforcement--$7.974 million, including $3.135 for support of the money laundering strategy,and an additional $4.839 million for35 agents to participate in Joint Terrorism Task Forces. Information Technology Investments--$71.751 million, subject to conditions. Staff Tax Administration for Balance and Equity--$141million in a new account,",
      " subject to approvalof a staffing plan by the Department,Office of Management and Budget, and the Committees on Appropriations. IRS had earlier proposed the establishment of a Staffing Tax Administration for Balance and Equity (STABLE) initiative. The STABLE initiative, which is acollective effort within IRS to improve service to the taxpayers while carrying out statutory mandates, would includestaff increases throughout IRS. One of themost significant increases requested is in the Tax Law Enforcement account, an increase of full-time equivalent(FTE) staffing by 158 (41.6%) over the FY1999actual level. IRS staff have described the initiative as being an organizing plan to ensure that additional staff (newhires)",
      " would be placed in IRS where they aremost needed--in auditing, enforcement, and customer relations. H.R. 4985 would provide no funding for the STABLE initiative. However, theconferees agreed to fully fund the Tax Law Enforcement account with respect to adjustments required to maintaincurrent levels of service and operationalcontract support. While higher than both the House and Senate versions, the conference version is lower than thePresident's request. Secret Service. For FY2001, the President requested $829.5 million for the Secret Service. Of this total,$824.5 is for salaries and expenses related to protective functions, research and development,",
      " and the purchase ofvehicles; and $5 million for acquisition andconstruction costs. FY2000 net funding for the Secret Service was $691.5 million. The rescission was $738,000from the acquisition and construction account. P.L. 106-554 funds the Secret Service salaries and expenses account at $823.8 million. The acquisitions, construction, improvement, and related expensesaccount is funded at $8.941 million. That includes $3.920 million for security enhancement a the Vice President'sresidence. P.L. 106-346 provides supplemental funding of $2.9 million for the salaries and expenses account.",
      " These funds are for 21 agents to participated in Joint TerrorismTask Forces. Section 506 stipulates that $2 million of the FY2001 Secret Service funding be available, untilSeptember 30, 2001, for forensic and related supportof investigations of missing and exploited children. H.R. 4871, as reported by the House Appropriations Committee and as passed by the House, would have funded the agency's salaries and expensesaccount at $823.8 million. This total is $156.5 million above the amount appropriated in FY2000, and $700,000.below the President's budget request. Of thisamount,",
      " $36,266,000 would fund activities previously funded elsewhere. Included would be $1,767,000 for supportof the National Threat Assessment Center,that was not requested in the President's budget request. Also included in H.R. 4871, as passed, was $24.2million for additional protectiverequirements of the Secret Service during the Presidential election and transition period. S. 2900, as reported,would fund the salaries and expensesaccount at $778.3 million. The vetoed conference agreement ( H.R. 4516 / H.R. 4985 ) on would havefunded the account at the samelevel as H.R.",
      " 4871, as passed.  Both the President's request and H.R. 4871 would have funded the Acquisition, Construction, Improvements, and Related Expenses account at $5million. The Senate-reported version would have funded it at $4.3 million. However, H.R. 4516 / H.R. 4985 would have funded it at$8.9 million, providing the requested $5 million and adding $3.9 million for security enhancements at the VicePresident's residence.  U.S. Postal Service The U.S. Postal Service (USPS) generates most of the funding through the sale of products and services.",
      " It also receives an appropriation from the federalgovernment to pay for revenue foregone on free and reduced rate mail (for the blind and visually impaired andoverseas voting). To fund payment to the PostalService Fund for revenue foregone during FY2001, the President requested $96.1 million, of which $67.1 millionwould not be available until October 1, 2001. P. L. 106-58 provided funding for revenue foregone at $93.4 million for FY2000, with only $29 million to beavailable during FY2000. The FY2000appropriation, however, was subsequently reduced by.",
      "38% ($380,000) due to the across-the-board cut mandatedby the Consolidated Appropriations Act ofFY2000. Accordingly, the appropriation for the fiscal year was $93.1 million P.L. 106-554 provides FY2001 funding at $29 million with an advance appropriation of $67.1 million for FY2002. The rescission of.22% applies only toFY2001 funding. Therefore, funds appropriated in FY2000 for use in FY2001 would be affected. However, theFY2002 advance appropriation in this legislationwould be exempt. H.R. 4871, as reported and passed,",
      " would have been in accord with the request, holding $67.1 million for FY2002. S. 2900, as reported,however, would have funded the Postal Service at a total of $67.1 million. The vetoed measure would haveprovided $96.1 million, as proposed by the House. Ofthis amount, $67.1 million would have been held as an advance appropriations for free and reduced-rate mail and$29 million would be for reimbursement inFY2001 to the Postal Service for prior year losses. All versions would continue the general provision requiring the Postal Service to use appropriated funds to make available sufficient funds to cover theemployment of guards for all properties and areas owned,",
      " occupied, controlled, or in charge of by the agency. Theguards would be granted the same powers asthose granted special policemen by the Act of June 1, 1948, amended (62. Stat. 281; 20 U.S.C. 318a and 318b),attaching thereto penal consequences under thatauthority and within the limits provided in the act. Executive Office of the President and Funds Appropriated to the President The Treasury and General Government appropriations act funds all but three offices in the Executive Office of the President (EOP). Of the three exceptions, theCouncil on Environmental Quality (including Office of Environmental Quality)",
      " and the Office of Science andTechnology are funded under the Veterans Affairs,Housing and Urban Development, and Independent Agencies appropriations act; and the Office of the United StatesTrade Representative is funded under theCommerce, Justice, State, and the Judiciary and Related Agencies appropriations act. The President's FY2001 budget proposed an appropriation of $702,245,000 for the EOP, an 7.3% increase over the $654,422,000 appropriated in FY2000. Almost 70 % of these appropriations would be for accounts in the Office of National Drug Control Policy, and forFederal Drug Control Programs, andunanticipated needs, and would be transferred to agencies outside of the EOP,",
      " and to state and local entities. TheFY2001 appropriation request for these \"transferaccounts\" amounts to $474,900,000 (67.6%); for FY2000 it amounted to $441,250,000 (68%). The specific accounts are discussed below. In those cases in which there are no differences among the proposed and enacted funding levels, the enacted level isgiven. The.22% rescission is not factored into the funding data provided below. However, it will likely be appliedto each account. Compensation of the President. P.L. 106-554 provides an appropriation of $390,000 for compensation of thePresident,",
      " including an expense allowance of $50,000. This amount is a 56% increase over the $250,000appropriated in FY2000. The increase is due to the raisein presidential salary from $200,000 to $400,000 per year, effective January 20, 2001. White House Office. P.L. 106-554 was in accord with the FY2001 budget proposal of an appropriation of$53,288,000 for salaries and expenses in the White House Office, an increase of 2% over the $52,443,000appropriated in FY2000, of which $201,",
      "000 wassubsequently rescinded. H.R. 4871 would have provided $52,135,000, which is $1,153,000 below thePresident's request. The House denied therequests to restore the $201,000 rescinded in FY 2000, $450,000 for anticipated severance payments, $500,000 forcosts associated with replacing equipmentduring the transition, and $2,000 in unspecified increases for other services. The House also assumed a transfer of$500,000 to the Office of Administration forcosts associated with upgrading the web page of the Executive Office of the President. S.",
      " 2900, as reported,and H.R. 4516 / H.R. 4985, as vetoed, would fund the White House Office at the requested level. Executive Residence (White House). The Act provided the requested appropriation of $10,900,000 foroperating expenses, an 17.7% increase over the $9,258,000 appropriated in FY2000, from which $33,000 wassubsequently rescinded. While the appropriationfor repairs and restoration is $968,000, the request had been $5,510,000, an 581.2% increase over the $808,",
      "000appropriated in FY2000. H.R. 4871 would have appropriated $10,286,470 for operating expenses, and would have denied several requests, including$300,050 for an additional 4 FTEs; and $658,000for repairs and restoration. The House Appropriation Committee recommended denying $4,542,000 for renovationand replacement of the concrete racewaycontaining communication lines, while expressing concerning over the total estimated costs of the project. S. 2900, as reported, and H.R. 4516 / H.R. 4985, as vetoed, would have funded the accounts at the requested level,",
      " but the latterwould limit the repairs andrestoration account to $968,000. The repairs and restoration funding includes $458,000 for design and replacement of the existing the concrete raceway containing voice and communicationslines serving the East Wing and the Executive Residence. A completed design, including an estimate of totalconstruction costs associated with the project, mustbe submitted to the Committees on Appropriations. The FY2001 continuing funding resolution ( P.L. 106-275, as amended by P.L. 106-520 ) the Executive Residence at the White House \"is authorized to makeexpenditures to provide for the orderly transition and moving expenses following the election on November 7,",
      "2000.\" House Appropriations CommitteeChairman C.W. Bill Young stated that this would provide \"approximately $200,000...that were contained in thevetoed Treasury, Postal Service, GeneralGovernment appropriations act.\" (34) Maintenance and repair costs for the White House are also funded by the National Park Service as part of that agency's responsibility for national monuments. Entertainment costs for state functions are funded by the Department of State. Reimbursable political events in theExecutive Residence are to be paid for inadvance by the sponsor, and all such advance payments are to be credited to a Reimbursable Expenses account. Thepolitical party of the President is to deposit$",
      "25,000 to be available for expenses relating to reimbursable political events during the fiscal year. The Actrequires those reimbursements be separatelyaccounted for and the sponsoring organizations be billed, and charged interested, as appropriate. The staff of theExecutive Residence is to report to theCommittees on Appropriations, after the close of each fiscal year and maintain a tracking system related to thereimbursable expenses. Special Assistance to the President (Office of the Vice President) and Official Residence of the Vice President. The Act, as proposed in the budget, appropriates $3,673,000 for salaries and expenses, an increase of 1.",
      "5% over the$3,609,000 appropriated in FY2000, and$354,000 for the Official Residence of the Vice President, a 2.6% increase over the $345,000 appropriated inFY2000, from which $15,000 was rescinded. TheHouse would have appropriated $3,664,000 for salaries and expenses, and $354,000 for operating expenses. S. 2900, as reported, would have fundedthe accounts at the requested level, and H.R. 4516 / H.R. 4985, as vetoed, would have funded the salariesand expenses and the operatingexpenses accounts at the requested level.",
      " Council of Economic Advisers. P.L. 106-554 appropriates $4,110,000, an increase of 7% over the $3,840,000appropriated in FY2000; of which $15,000 was subsequently rescinded. The House approved an appropriation of$3,997,000, denying the request of $106,000 fortwo additional FTE and $7,000 for increased travel expenses. Both S. 2900, as reported, and H.R. 4516 / H.R. 4985, asvetoed, would have funded the account at the requested level.",
      " Office of Policy Development. As the FY2001 budget proposed, P.L. 106-554 appropriates $4,032,000, thesame as appropriated in FY2000; $15,000 was rescinded from the FY2000 appropriation. The House approved anappropriation of $4,030,000, denying therequest of $2,000 for increased travel expenses. Both S. 2900, as reported, and H.R. 4516 / H.R. 4985, as vetoed, wouldhave funded the account at the requested level. National Security Council. The FY2001 budget proposed and P.L.",
      " 106-554 appropriated, $7,165,000, anincrease of 2.4% over the $6,997,000 appropriated in FY2000, of which $27,000 was rescinded. The Houseapproved an appropriation of $7,148,000, denying therequest of $17,000 to partially restore the $27,000 rescinded in FY2000. Both S. 2900, as reported, and H.R. 4516 / H.R. 4985, as vetoed, would have funded the account at the requested level. Office of Administration. The FY2001 budget proposed and the Act appropriated $43,",
      "737,000, an increase of11.6% over the $39,198,000 appropriated in FY2000, of which $148,000 was rescinded. The House approved anappropriation of $41,185,000, denying severalfunding requests, including $406,000 and five FTE for additional information technology staff, $360,000 in newmoney for upgrading the EOP web page,$660,000 and five FTE for implementation of the Chief Financial Officers Act. While the House also would havedelayed the implementation of the ChiefFinancial Officers Act from January 20, 2001 to May 1,",
      " 2001, the Act dropped that proposal. Both S. 2900,as reported, and the H.R. 4516 / H.R. 4985, as vetoed, would fund the account at the requested level. Office of Management and Budget. The Act fully funded the FY2001 budget request at $68,786,000, anincrease of 8.3% over the $63,495,000 appropriated in FY2000, of which $239,000 was rescinded. The Houseapproved an appropriation of $67,143,000, denyingthe request of $613,000 for an additional nine FTE as well as the request of $1,",
      "030,000 for information technologyenhancements. S. 2900, asreported, would have funded OMB at $67,935,000, and H.R. 4516 / H.R. 4985, as vetoed, would havefunded the account at the requestedlevel. Section 624 of the Act makes permanent the provision directing OMB to provide a yearly accountingstatement and report on the costs and benefits ofFederal regulatory programs. Office of National Drug Control Policy. The Act appropriates $24,759,000 for the salaries and expensesaccount. The FY2001 budget requested an appropriation of $25,400,",
      "000, a 10.7% increase over the $22,951,000appropriated in FY2000, of which $128,000 wasrescinded. The House had, in H.R. 4871, approved an appropriation of $24,759,000, denying the request of$641,000 for communications,equipment, and other services. S. 2900, as reported, would have funded the account at $24,312,000. Thevetoed H.R. 4516 / H.R. 4985 would have funded the account at $24,759,000. P.L.",
      " 106-346 provides an additional$7,000,000, of which $5,000,000 is forcontinued operation of the technology transfer program, and $2,000,000 is for a counternarcotics research anddevelopment project in Colorado. For the Counterdrug Technology Assessment Center, the Act provides $29,053,000, while the FY2001 budget had proposed $20,400,000, a 37.6% decrease fromthe $32,052,000 appropriated in FY2000, of which $198,000 was rescinded. The House approved an appropriationof $29,750,000.",
      " S. 2900, asreported, would fund the account at $29,052,000. The vetoed H.R. 4516 / H.R. 4985 would have fundedthe account at $29,053,000. Theappropriation includes $15,803,000, for the counterdrug research and development projects and which must beavailable for transfer to other federal departmentsand agencies, and $13,250,000 for the continued operation of the counterdrug technology transfer program.  The Act maintains the current level of funding for the counterdrug technology transfer program, and includes funding to support CTAC's core research programsand to continue support for the U.S.",
      " Olympic Committee's anti-doping program.  Federal Drug Control Programs. For the High Intensity Drug Trafficking Areas Program, the Act provides$206,500,000, while the FY2001 budget proposed $192,000,000, the same amount as appropriated for FY2000,from which $730,000 was rescinded. The HouseAppropriations Committee stated that given F2001 resource constraints, it would be best not to earmark the fundsand expects that ONDCP will make itsdesignation and funding decisions based on performance measures of effectiveness. The House bill would haveappropriated $217,000,000, and the Senate,",
      " inreporting S. 2900, would have funded the account at $196,000,000. The vetoed H.R. 4516 / H.R. 4985 would have fundedthe account at $206,500,000, of which 51% would be for transfer to state and local entities and 49% for federalagencies and departments. In the conference report for P.L. 106-554, the conferees stated that they were fully funding the Administration's request and providing an additional $14,500,000to increase funding or expand existing HIDTAs, or to fund newly designated HIDTAs.",
      " If existing HIDTAs arefunded at levels other than those established for theFY2000 programs, justification must be sent to Congress. Likewise, no funds may be obligated for new programsuntil a justification is sent to Congress. Theconferees restated the congressional interest in the work of the HIDTA Performance Management Working Group. The conferees directed ONDCP to reviewseveral specific geographic areas to be considered for new funding, others to receive increases, and full minimumfunding for three named areas. The confereesurged ONDCP to consider using funds provided above the budget request for designating new HIDTAs from areaswhich had previously submitted requests.",
      " For the Special Forfeiture Fund, the Act provides $233,600,000 rather than the FY2001 budget proposal of $259,000,000, which was a 19.9% increase over the$216,000,000 appropriated for FY2000, of which $703,000 was rescinded. The House bill would have providedan appropriation of $219,000,000, which wouldinclude $185,000,000 for the National Youth Anti-Drug Media Campaign; $30,000,000 to carry out the Drug FreeCommunities Act (DCFA); $1,000,000 for theNational Drug Court Institute;",
      " and $3,000,000 for the costs of space and operations of the counter drug intelligenceexecutive secretariat established as part of theGeneral Counterdrug Intelligence Plan. The House Appropriations Committee, in reporting H.R. 4871,recommended denying $10,000,000 forincreased funding for the Youth Media Campaign, $5,000,000 for the DCFA, and $25,000,000 for additionalfunding for a national criminal justice treatmentdemonstration project. S. 2900, as reported, would have funded the account at $144,300,000, of which$90,700,",
      "000 would be for the anti-drugmedia campaign, and $40,000,000 would be for the DCFA. The vetoed H.R. 4516 / H.R. 4985 wouldhave funded the account at$233,600,000.  The funding measure provides that $185,000,000 is for the anti-drug media campaign, $40,000,000 to carry out the DCFA, $3,000,000 for the counter drugintelligence executive secretariat, $3,300,000 for the U.S. Olympic Committee's anti-doping efforts, $1,300,000 forthe Metro Intelligence Support and TechnicalInvestigative Center,",
      " and $1,000,000 for the National Drug Court Institute. With regard to the administration ofthe National Youth Anti-Drug Media Campaign,the conferees provide direction to the ONDCP. Unanticipated Needs. Although the Act provided no funding for this account, P.L. 106-346 appropriated$1,000,000 for the unanticipated needs. The FY2001 budget proposed $1,000,000, the same as was appropriatedfor FY2000, of which $4,000 was rescinded, forexpenses necessary to enable the President to meet unanticipated needs, in furtherance of the national interest,",
      "security, or defense, which might arise at home orabroad. The FY2001 budget also proposed $2,500,000 to be provided to the Elections Commission of theCommonwealth of Puerto Rico as a transfer to be usedfor citizens' education and a choice by voters regarding the island's future status.  P.L. 106-346 appropriates $2,500,000 to be provided to the Elections Commission. None of the funds may be obligated until 45 days after the ElectionsCommission submits to the Committees on Appropriations for approval an expenditure plan developed jointly bythe Popular Democratic Party, the NewProgressive Party, and the Puerto Rican Independence Party.",
      " The expenditures plan is to include additional viewsfrom any party that does not agree with theplan. (No funding of the Unanticipated Needs account had been provided by the earlier appropriations bills.) Independent Agencies Federal Election Commission (FEC). The FEC administers federal campaign finance law; oversees disclosurerequirements, limits on contributions and expenditures, and the presidential election public funding system; andretains civil enforcement authority. P.L. 106-554 provides $40,500,000, of which no less than $4,689, 500 shall be available for internal automated data processingsystems and no more than $5,000 may be usedfor reception and representation expenses.",
      " The FY2000 appropriation of $38,152,000 for the FEC was subject to an across-the-board.38% government rescission under the Consolidated AppropriationsAct, reducing the appropriation by $144,000, to $38,008,000.  For FY2001, the President's budget requested an appropriation of $40,500,000, allowing for 352 full-time equivalents (FTEs). This reflected a 6.6% increase, or$2,492,000, above the FY2000 level. As a concurrent submission agency, the FEC submitted its own request toCongress, calling for a funding level of$",
      "40,960,000 and for 356 FTEs. The House adopted its Appropriations Committee's recommendation for an appropriation of $40,240,000, a reduction of $260,000 from the Administration'srequest and $720,000 from the FEC's request. Specifically, the committee refused the agency's requests of $100,000for legal document imaging, $100,000 forcompletion of Voting Systems Standards, $60,000 for a national conference on the standards, and $460,000 for anadditional 4 FTEs within the Commissioners'offices. The committee stipulated that no less than $4,",
      "689,500 be used for internal automated data processingsystems and no more than $5,000 be used forreception and representation expenses. The House bill ( H.R. 4871, section 637), as passed, included certain clarifications of federal election law, largely based on FEC recommendations:requiring election cycle-based reporting of certain expenditures; allowing 24-hour notices of large contributionsor independent expenditures in the last 20 days ofan election to be filed by FAX or electronic mail; allowing candidates to use lines of credit for campaign funds ifmade under commercially reasonable terms bylenders in the normal course of business; changing the deadline for submitting notices of large contributions in thelast 20 days of an election from 48 to 24 hoursafter receipt,",
      " and requiring the receipt, rather than the filing, of late independent expenditure notices within 24 hoursof being made. Finally, the House billincluded a committee amendment requiring House and Senate candidates who use federal aircraft to travel to acampaign event to report to the FEC the type ofaircraft used, the number of individuals who used the aircraft, and the amount the candidate paid to reimburse thefederal government for the aircraft's use(together with the methodology used to determine such amount). These provisions would take effect in 2001. The Senate accepted its Appropriations Committee's recommendation for an FEC appropriation of $39,755,000, $745,",
      "000, or 1.8%, less than the Administrationproposed and $485,000, or 1.2%, less than the House approved. The Senate bill included the same stipulations asthe House bill regarding internal automateddata processing systems and reception and representation expenses. No legislative provisions concerning FECoperations were contained in the Senate measure. The vetoed conference agreement would have appropriated $40,500,000 for the FEC, the same figure as recommended by the Administration and more than ineither the House or Senate bills. It would have included the stipulation that no less than $4,689,500 be used forinternal automated data processing systems and nomore than $5,",
      "000 be used for reception and representation expenses. No legislative provisions concerning FECoperations or candidate use of government aircraftwere contained in the vetoed measure. Federal Labor Relations Authority (FLRA). P.L. 106-554 provides funding of $25,058,000 for FLRA. Thismatches the amount recommended by the House Appropriations Committee, passed by the House, recommendedby the Senate Appropriations Committee, andrequested by the President in his FY 2001 budget. The law also provides for a 0.22% or $55,127 across-the-boardcut in the FY 2001 funding. After thisreduction, the FY 2001 funding is $25,",
      "002,873. The agency serves as a neutral party in the settlement of disputesthat arise between unions, employees, andagencies on matters outlined in the Federal Service Labor Management Relations Statute; decides major policyissues; prescribes regulations; and disseminatesinformation appropriate to the needs of agencies, labor organizations, and the public. The agency's FY 2000appropriation was $23,828,000. P.L. 106-113 mandated a 0.38% or $91,000 rescission in the FY 2000 funding. (35) According to the FLRA, the cut was to be absorbed by postponing an office move andmanaging positions that are vacant by filling them more slowly and at lower grade levels.",
      " After the reduction, theFY 2000 funding was $23,737,000. The FY2001 appropriation, after the rescission, is 5.3% above this amount. General Services Administration (GSA). P.L. 106-554 provides $632,211,000 for GSA. Of this total,$464,154,000 is appropriated for the Federal Buildings Fund; $123,920,000 for policy and operations; $34,520,000for the Office of Inspector General;$2,517,000 for benefits to former Presidents; and $7,100,000 for the presidential transition. An additional$",
      "2,070,000 is to be deposited into the Federal BuildingsFund. An advance FY2002 appropriation of $276,400,000 is also provided for the Federal Buildings Fund. Thereis also a.22% rescission of FY2001 FederalBuildings funds.  Federal Buildings Fund. P.L. 106-346 appropriated $11,350,000 to the Federal Buildings Fund. Of this total,$3,000,000 was to be provided for non-prospectus construction projects; and $8,345,000 for repair of a courthouseannex located in Columbia, SC. On July 20, 2000,",
      " the House passed H.R. 4871, which largely reflected the July 18, 2000 recommendations of the Appropriations Committee. H.R. 4871, as passed, would have appropriated $152,471,000 to the GSA accounts. The Senate-reportedversion ( S. 2900 ) totaled$167,557. The vetoed H.R. 4516 ( H.R. 4985 ) would have funded GSA at $632,211, the first versionto appropriate funds to the FederalBuildings Fund.  H.R. 4871, as passed, would have provided $5,502,",
      "333,000 in new obligational authority for the Federal Buildings Fund. S. 2900, asreported, authorized $5,502,333,000. The vetoed measure would have provided $5,971,509,000 in new obligationalauthority, and directly appropriated$464,154,000 into the Fund to cover a portion of the Fund's new obligational needs.  Under H.R. 4871, no funds would be appropriated to the Federal Buildings Fund for FY2001. In addition, there would be no provision for the$477,484,000 in the President's budget request for advanced appropriations.",
      " The Committee specifically stated thatthere would not be any appropriations forreimbursing the Federal Buildings Fund for moving costs incurred by GSA associated with relocating the FCC toa new location in Washington, D.C. TheCommittee stated that these expenses are the responsibility of the agency being moved. (36) S. 2900, as reported, would not provide directappropriations to the Fund but would provide $374,345,000 in advance appropriations. H.R. 4516, as vetoed,was silent on the moving costs butwould have provided $276,400,000 advance appropriations. The House committee also recommended no new obligational authority for construction and acquisition,",
      " which is a decrease of $54,197,000 from FY2000, and adecrease of $779,788,000 from the President's budget request. The committee stated that it is essential for GSA tomaintain, to the greatest extent possible, theinventory of existing federal properties. The Senate version would allow an obligational authority of $3,000,000for construction and acquisition. The conferees,on H.R. 4516, determined that there would be a obligational authority of $472,176,000 and stipulated thatthe authority was to be directed to nineprojects. GSA would be required to provide a written report to the Appropriations Committees showing theproposed allocations.",
      " $3,500,000 would be earmarkedfor the design and site acquisition of a combined law enforcement facility in Saint Petersburg, Florida. With regard to new courthouse construction, the House committee noted, with disappointment, that it was not able to provide any funds for this effort. TheCommittee expressed concerned about aspects of the President's budget's submission, since it so greatly differedfrom the initial request of GSA and the JudicialConference in both funding amounts and new construction priorities. (37) In addition, H.R. 4871, as passed, had a provision requiring thejudicial andexecutive branches to reach an agreement on new courthouse construction before GSA formally submits its budgetrequest.",
      " S. 2900, as reported,would have authorized $671,193,000 to be made available from the Federal Buildings Fund for repairs andalterations (including three courthouse projects); andan additional amount of $374,345,000 to be deposited into the Fund for construction of additional projects(including four courthouse projects). H.R. 4516, as vetoed, would have provided $472,176,000 for nine new construction projects (including four courthouseprojects); and $276,400,000 in advance fundingfor courthouse construction projects.  The House committee recommended a limitation of $490,592,000 for repairs and alterations,",
      " a decrease of $108,082,000 below the enacted limitation level forFY2000 and a decrease of $230,601,000 below the President's budget request. S. 2900, as reported, and theconferees would authorize obligationauthority for the repairs and alternations account at $671,193,000. The House and Senate committees, as well asthe conferees, recommended a limitation of$2,944,905,000 for rental of space, which is an increase of $162,719,000 above the enacted limitation level forFY2000, and the same as the budget estimate. Alimitation of $1,",
      "580,909,000 would be provided, under H.R. 4871, as passed the House, for FY2001 buildingoperations, which is the same level asprovided for FY2000, and a decrease of $43,862,000 below the budget estimate. The Senate version, as reported,and H.R. 4516, as vetoed, wouldlimit obligations to the same level as the requested $1,624,771,000.  Presidential transition. The only account, within the vetoed H.R. 4516, which has been fundedspecifically in the CR was that through which the General Services Administration was to administer the presidentialtransition.",
      " On November 2, Congress agreedto a continuing funding resolution ( H.J.Res. 123 ) which was amended to include the $7.1 million providedin the vetoed legislation. (38) There was norecorded vote on the amendment but the resolution, which amended P.L. 106-275, was agreed to through a vote of310 to 7 (Roll No. 592). The Senate agreed to H.J.Res. 123 by unanimous consent. (39) P.L.106-426 was signed November 3, 2000. Policy and operations. P.L. 106-346 provided $13,",
      "789,000 for policy and operations. The House would haveappropriated $115,434,000, which was a decrease of $4,089,000 less than the amount appropriated in FY2000, anda decrease of $21,546,000 less than the amountin the President's budget request. S. 2900, as reported, provided $123,420,000. The vetoed version wouldhave provided the policy and operationsaccount with $123,920,000.  Office of Inspector General. S. 2900, as reported, and H.R. 4516, as vetoed, funded theaccount at $34,",
      "520,000. Allowances and office staff for former Presidents. H.R. 4871, as passed, would have appropriate$2,517,000 for allowances and office staff for former Presidents, an increase of $276,000 above the FY2000 enactedlevel and the same as the President's budgetrequest. S. 2900, as reported, and the conference version would also have funded that account at $2,517,000. In addition, while the House did notprovide funding for presidential transition, S. 2900 would provide $7,100,000, the amount requested. H.R. 4516,",
      " as vetoed, would havefunded this account at the same level.  Merit Systems Protection Board (MSPB). P.L. 106-554 provides funding of $29,437,000 for the MSPB. Inaddition, $2,430,000 will be transferred from the Civil Service Retirement and Disability trust fund to provide foradministrative expenses to adjudicate retirementappeals. This total, $31,867,000, was the amount recommended by the Senate Appropriations Committee andrequested by the President in his FY 2001 budgetproposal and in a June 5, 2000 request for an additional $580,",
      "000. The House Appropriations Committeerecommended and the House passed an appropriation of$28,857,000 for the MSPB, including the additional $2,430,000 for administrative expenses. The law also providesfor a 0.22% or $70,107 across-the-board cutin the FY 2001 funding. After this reduction, the FY 2001 funding is $31,796,893. The MSPB assists federalagencies in running a merit-based civil servicesystem. The agency's FY 2000 appropriation, not including the trust fund transfer, was $27,586,000. P.L.",
      " 106-113 mandated a 0.38% or $105,000 rescission inthe FY 2000 funding. (40) The reduction was to beabsorbed, said the MSPB, by reducing the funding dedicated to its 5-year information technology improvementplan which includes establishment of a system for filing cases electronically. After the reduction, the FY 2000funding for salaries and expenses was $27,481,000. When the trust fund transfer was added, the total FY 2000 funding was $29,911,000. The FY 2001 appropriation,including the trust fund transfer and after therescission,",
      " is 6.3% above this amount. As stated in the Senate Appropriations Committee report, the recommended appropriation includes $703,000 for mandatory cost increases including required payadjustments, $673,000 for the next installment for the ongoing information technology plan, $138,000 foranticipated costs of additional appeals cases, and$442,000 for increased lease costs. (41) National Archives and Records Administration (NARA). The custodian of the historically valuable records ofthe federal government since its establishment in 1934, NARA also prescribes policy and provides both guidanceand management assistance concerning theentire life cycle of federal records.",
      " It also administers the presidential libraries system; publishes the laws,regulations, and presidential and other documents; andassists the Information Security Oversight Office (ISOO), which manages federal security classification anddeclassification policy; and the National HistoricalPublications and Records Commission (NHPRC), which makes grants nationwide to help nonprofit organizationsidentify, preserve, and provide access tomaterials that document American history. P.L. 106-554 funds NARA at $305,395,000, with no advance appropriation for use in the next fiscal year. The allocation of those funds is $209,393,000 foroperating expenses, $95,",
      "150,000 for repairs and restoration, and $6,450,000 for the National Historical Publications& Records Commission grants program. P.L.106-346 allocates $6,610,000 for repairs to the John F. Kennedy Presidential Library. The President's FY2001 budget requested $209,393,000 for NARA operating expenses, which was $28,995,000 greater than the $180,398,000 appropriated forFY2000. (With the FY2000 rescission applied, the net funding for operating expenses was $179,674,000.) H.R. 4871, as passed by the House,",
      " wouldhave provided $195,119,000. The Senate bill, as reported, and the vetoed conference agreement would haveprovided the requested amount. Under the vetoedagreement ( H.R. 4516 / H.R. 4985 ), up to $5 million could have been used for the Implementation ofthe Nazi War Crimes Disclosure Act(112 Stat. 1859; 5 U.S.C. 552 note), including preservation and restoration of declassified records, public accessand dissemination activities, and necessarysupport services for the Nazi War Criminal Records Interagency Working Group. (42) In addition, $99,560,",
      "000 was sought for repairs and restoration of NARA facilities, an increase of $77,264,000 over the $22,418,000 appropriated for the currentfiscal year. (The FY2000 rescission in this account resulted in net funding of $22,296,000.) H.R. 4871, aspassed by the House, would haveappropriated $5,650,000, with the Senate bill recommending $92,950,000, with $4,950,000 to be available inFY2001 and $88,000,000 to be available in FY2002. The vetoed conference agreement would have funded the account at $95,",
      "150,000 in FY2001. The conference reportstipulated that $4,950,000 would be for thegeneral repairs and restoration program and $88,000,000 \"for the major repair and restoration project at the mainArchives building, $1,500,000 for theconstruction of a new Southeast Regional Archives facility, and $700,000 for the design of a 10,000-square-footextension to the Gerald R. Ford museum.\" (43) P.L. 106-346 allocates $6,610,000 for repairs to the John F. Kennedy Presidential Library, but no other amounts forany NARA programs or operations.",
      " The $6,000,000 requested for the National Historical Publications and Records Commission (NHPRC) for FY2001 was $250,000 less than the amountappropriated for FY2000. H.R. 4871, as passed the House, would appropriate $6,000,000. The Senate billand the vetoed conference agreementwould appropriate $6,450,000.  No new funding was sought for the NARA Records Center Revolving Fund, which was initially capitalized with a $22 million appropriation in FY2000. Section 514 of P.L. 106-554 instructs the Archivist of the United States to transfer land in Grand Rapids,",
      " Michigan to the Gerald R. Ford Foundation. The grant isto be held in trust for the purpose of supporting the Gerald R. Ford Museum in Grand Rapids and the Gerald R. FordLibrary in Ann Arbor, Michigan. The parcelsare described and the terms and conditions set out. Office of Government Ethics (OGE). The Office of Government Ethics, a small agency within the executivebranch, was established by the Ethics in Government Act of 1978. Originally part of the Office of PersonnelManagement, OGE became a separate agency onOctober 1, 1989, as part of the Office of Government Ethics Reorganization Act of 1988.",
      " The Office ofGovernment Ethics exercises leadership in the executivebranch to prevent conflicts of interest on the part of government employees, and to resolve those conflicts of interestthat do occur. In partnership with executivebranch agencies and departments, OGE fosters high ethical standards for employees and strengthens the public'sconfidence that the Government's business isconducted with impartiality and integrity. P.L. 106-554 provides $9,684,000, as was requested in the budget, a6.25% ($570,000) increase from the $9,114,000originally appropriated for FY2000. However, the appropriation for FY2000 was subsequently reduced by.",
      "038%($34,000), the across the board cut mandated bythe consolidated appropriations act of FY2000. Accordingly, the FY2000 net funding for OGE was $9,080,000,and the FY2001 request of $9,684,000 was anactual increase of $604,000 (6.6%) over the FY2000 appropriations. As vetoed, H.R. 4516 would havefunded OGE at the requested level of$9,684,000. Office of Personnel Management (OPM). The budget for OPM is comprised of budget authority for bothpermanent and current appropriations. This report discusses the budget authority for current appropriations.",
      " P.L.106-554 provides funding of $14,609,403,000for the agency, which is responsible for administering personnel management functions. This total includesdiscretionary funding of $94,095,000 for salaries andexpenses and $1,360,000 for the Office of Inspector General (OIG). It also includes mandatory funding of$5,427,166,000 for the government payment forannuitants of the employees health benefits program, $35,000,000 for the government payment for annuitants ofthe employee life insurance program, and$8,940,051,000 for payment to the civil service retirement and disability fund.",
      " Included in this total as well areproposed trust fund transfers of $101,986,000 forsalaries and expenses and $9,745,000 for OIG salaries and expenses. The law also provides for a 0.22% or $455,000across-the-board cut in the FY 2001 funding. After this reduction, the FY 2001 funding is $14,608,948,000. The House Appropriations Committee recommended, and the House passed, an appropriation of $14,608,779,000 for the agency. This total includeddiscretionary funding of $93,471,000 for salaries and expenses and the amounts stated above for the OIG,",
      " healthbenefits, life insurance, and retirement accounts. Included in this total as well were proposed trust fund transfers of $101,986,000 for salaries and expenses and$9,745,000 for OIG salaries and expenses. TheHouse-passed amount was $7,087,000 below the $14,615,866,000 proposed by the President in his FY2001 budget;the reduction applies to the salaries andexpenses account (the President proposed $100,558,000). The House Appropriations Committee report stated that\"the Committee denies without prejudice thePresident's request of $6,150,000 for the Federal Cyber-",
      "Service program; $300,000 to develop a workforce planningmodel; $300,000 for improvements in settingcompensation rates; and $100,000 to research best practices in compensation systems.\" (44) The President's budget also requested a one million dollarsupplemental to \"help agencies meet a critical need for highly trained information security personnel.\" (45) The House Appropriations Committee did notaddressthis issue. The Senate Appropriations Committee recommended an appropriation of $14,607,000,000. This total included discretionary funding of $94,095,000 for salariesand expenses; $1,356,000 for the OIG;",
      " and the amounts stated above for health benefits, life insurance, andretirement accounts. Included in this total as wellwere proposed trust fund transfers of $99,624,000 for salaries and expenses and $9,708,000 for OIG salaries andexpenses. The Senate recommendation was$6,467,000 below the $14,615,866,000 proposed by the President in his FY 2001 budget. P.L. 106-113 mandated a 0.38% or $756,000 rescission in the FY2000 funding. (46) OPM did not provide details as to how the cut was being absorbed.",
      " OPM'sFY2000 appropriation, including the trust fund transfers and after the reduction, was $14,458,081,000. The FY2001 appropriation, including the trust fundtransfers, and after the rescission, is 1% above this amount. As stated in the House Appropriations Committee report, the recommended appropriation included $237,000 for expanded oversight of non-Title 5 agency meritsystems; $400,000 for new qualification standards to simplify hiring and assessment; $313,000 to maintain currentlevels; $800,000 for on-going informationtechnology support; $700,000 for agency wide information technology architecture;",
      " $181,000 for NARA (NationalArchives and Records Administration) costs;and $1,900,000 for administrative financial systems support to ensure an unqualified audit opinion. (47) The House Appropriations Committee report \"directs OPM to provide a report on options for addressing federal employees' elder care needs, including anylegislative recommendations that may be appropriate, to the Committee no later than March 1, 2001.\" (48) As stated in the Senate Appropriations Committee report, the recommended appropriation included $1,500,000 for investment technology infrastructure andarchitecture, $1,900,000 for administrative financial systems support and improvements,",
      " $1,574,000 for humanresources initiatives, and $181,000 for mandatorycost increases including required pay adjustments. (49) The Senate Committee report \"recommends that the pilot project permitting Executive agencies to use their appropriated funds to help subsidize child careexpenses for their lower paid employees be extended until September 30, 2001.\" (50) H.R. 5658, as enacted through Public Law 106-554, directs OPM to conduct a study to develop one or more alternative means for providing federalemployees with at least six weeks of paid parental leave in connection with the birth or adoption of a child (apartfrom any other paid leave). OPM is required toreport its findings and recommendations to Congress by September 30,",
      " 2001. This was an amendment to H.R. 4871 (Section 650) which was offeredby Representative Carolyn Maloney and agreed to by the House by voice vote. Section 516 of H.R. 5658 provides that OPM may accept and utilize funds made available to the agency pursuant to court approval to resolvelitigation and implement any settlement agreements for the nonforeign area cost-of-living allowance program. Thiswas section 513 of S. 2900, asreported. President Clinton proposed a 3.7% pay adjustment for federal employees in his FY 2001 budget. This amount is the overall average increase,",
      " including localitypay adjustments. The conference agreement incorporating H.R. 5658 (as well as the vetoed H.R. 4516 conference agreement, H.R. 4871, as passed by the House, and S. 2900, as reported) is silent on this issue. However, theprogram funding in the legislationassumes a 3.7% pay adjustment in January 2001 for federal employees. Section 140 of H.R. 5666, alsoenacted through Public Law 106-554,specifies a 3.7% pay adjustment, \"consistent with the alternative pay plan submitted by the administration onNovember 30,",
      " 2000.\" (51) Locality Pay Designations. Section 637 of H.R. 5658 includes \"a new provision authorizing thePresident's Pay Agent to use appropriate data from sources other than the Bureau of Labor Statistics in making newlocality pay designations\" and \"directs thePresident's Pay Agent to report on the status of efforts to resolve the methodological concerns with the NCS(National Compensation Survey) program and on theefficacy of utilizing non-BLS (Bureau of Labor Statistics) data in making comparability paymentrecommendations.\" (52) The report must besubmitted to theSenate and House Committees on Appropriations,",
      " the Senate Committee on Governmental Affairs, and the HouseCommittee on Government Reform by May 1,2001. This was section 639 of H.R. 4871, as passed by the House and section 637 of the vetoed H.R. 4516 / H.R. 4985 conference report. Section 645 of H.R. 5658 includes a provision which makes the compensation of administrative appeals judges and administrative law judgescomparable. This was an amendment to H.R. 4871 (Section 647) offered by Representative ConstanceMorella and agreed to by the House by voicevote. Section 641 of H.R.",
      " 5658 (Section 641 of the vetoed H.R. 4516 / H.R. 4985 conferenceagreement and Section 642 of H.R. 4871, as passed) provides that overtime pay for a firefighter for hours in a regular tour of duty will beincluded in any computation of pay under5 U.S.C. 8114 related to compensation for work injuries. Section 642 of H.R. 5658 (Section 642 of thevetoed H.R. 4516 / H.R. 4985 conference agreement and Section 643 of H.R. 4871, as passed)",
      " provides that theminimum charge for military leave(without loss in pay or time) for the reserves and National Guardsmen under 5 U.S.C. 6323(a) will be one hour andadditional charges will be in multiples thereof. Office of Special Counsel (OSC). P.L. 106-554 provides funding of $11,147,000 for the OSC. This was theamount requested by the President in his FY 2001 budget proposal. The House Appropriations Committeerecommended, and the House passed, an appropriationof $10,319,000 for the OSC. The Senate Appropriations Committee recommended an appropriation of $10,",
      "733,000. The House amount was $828,000 below,and the Senate amount was $414,000 below, the law and the President's request. The law also provides for a 0.22%or $24,523 across-the-board cut in the FY2001 funding. After this reduction, the FY 2001 funding is $11,122,477. The agency investigates federal employeeallegations of prohibited personnel practicesand, when appropriate, prosecutes before the Merit Systems Protection Board; provides a channel for whistleblowing by federal employees; and enforces theHatch Act. The agency's FY2000 appropriation was $9,",
      "740,000. P.L. 106-113 mandated a 0.38% or $37,000rescission in the FY2000 funding. (53) The OSCsaidthat it will absorb the reduction by delaying the scope of the planned reconstruction of office space which wouldhave provided the agency's lawyers andinvestigators with private offices. After the reduction, the FY 2000 funding was $9,703,000. The FY 2001appropriation, after the rescission, is 14.6% above thisamount. The President's budget stated that, \"The request will enable OSC to reduce its long-standing case-processing backlogs,",
      " and will ensure that OSC's customersreceive prompt and timely service in accordance with the time frames laid out in [law]... (240 days to processprohibited practice complaints) and... (15 days tomake initial determination on whistleblower disclosure).\" (54) The House Appropriations Committee report stated that \"the Committee denies without prejudicethePresident's request of $772,000 for additional personnel to reduce case backlog, and $56,000 for related equipment,travel, and training.\". (55) As stated in theSenate Appropriations Committee report, the recommended appropriation included $616,000 for mandatory costincreases, including required pay adjustments,and $414,",
      "000 for five new full-time equivalent positions and the related equipment. (56) The report also urges the OSC to complete an investigation of allegationsmade by a State Department employee \"in a timely manner.\" General Provisions This section of the report calls attention, briefly, to some of the law enacted under the general provisions titles of the Treasury and General Government FY2001appropriation (see H.R. 5658 ). Both Title V and Title VI provide general government-wide guidance on basicinfrastructure-like policies, such asrequiring provisions related to the Buy America Act (sections 506 and 507), drug-free federal workplaces (section602), and authorizing agencies to pay GSA billsfor space renovation and other services (section 606). Title V.",
      " With the exception of the sections relating to the Federal Employees Health Benefits Program, whichcontinue provisions already in effect from previous years, the sections noted here are either new or contain modifiedpolicies. Federal Employees Health Benefits Program. See discussion of sections 509, 510, and 513 under the \"FederalPersonnel Issues\" section below. Gerald R. Ford Museum and Library. See discussion of section 514 under National Archives and RecordsAdministration above. Data Quality. Section 515 of the bill requires the director of the Office of Management and Budget (OMB), by notlater than September 30, 2001, and with public and federal agency involvement,",
      " to issue guidelines under 44 U.S.C.3504(d)(1) and 3516 that provide policy andprocedural guidance to federal agencies for ensuring and maximizing the quality, objectivity, utility, and integrityof information, including statistical information,disseminated by the agencies in fulfillment of the purposes and provisions of chapter 35 of Title 44, United StatesCode--the Paperwork Reduction Act. Suchguidelines shall (1) apply to the sharing by federal agencies of, and access to, information disseminated by suchagencies, and (2) require that each federal agencyto which the guidelines apply: issue guidelines ensuring and maximizing the quality,",
      " objectivity, utility, and integrity of information, including statistical information,issued by the agency, by not later than one year after the date of issuance of the OMB guidelines; establish administrative mechanisms allowing affected persons to seek and obtain correction of information maintained and disseminated bythe agency that does not comply with the OMB guidelines; and report periodically to the OMB director (1) the number and nature of complaints received by the agency regarding the accuracy ofinformation disseminated by the agency, and (2) how such complaints were handled by the agency. Kyoto Protocol. Section 517 provides that no funds appropriated by the Act may be used for any aspect ofimplementation of the December 17,",
      " 1997 Kyoto Protocol on climate changes, which has not been submitted to theSenate for ratification. Paperwork Reduction Effectiveness. Under the provisions of section 518, the Office of Management and Budgetmust, by July 1, 2001, submit to the appropriate House and Senate committees a report that evaluates, for eachagency, the extent to which the implementation ofpaperwork burden reduction legislation (31 U.S.C. chapter 35) has been effective and discusses the need foradditional procedures to effect the goals. There is tobe an evaluation of the burden imposed by each major rule that imposes more than 10,000,",
      "000 hours of burden andan identification of specific reductionsexpected to be achieved, in FY2001 and FY2002, in the burden imposed by all rules issued by each agency thatissued such a major rule.  Title VI. Unless noted, all the provisions set out here are new or modified policies.  Regulatory Costs Accounting. Section 624 modifies, and makes permanent, the requirement that OMB annually,beginning for FY2002, submit, with the budget, an accounting statement and associated report containing anestimate of the total annual costs and benefits offederal rules and paperwork; an analysis of impacts of federal regulations on state, local,",
      " and tribal government,small business, wages, and economic growth; andrecommendations for reform.  Dept. of Treasury Canine Certification. Section 626 continues, and makes permanent, the authorization for theSecretary of the Treasury to establish scientific certification standards for explosives detection canines. It alsoprovides, on a reimbursable basis, for thecertification of explosives detection canines employed by federal agencies, or other agencies providing explosivesdetection services at airports in the UnitedStates. National Science and Technology Council. Although section 610 is a continued provision prohibiting interagencyexpenditures on boards, committees, councils or commissions without prior statutory authorization,",
      " section 635 isa new provision which provides that fundsappropriated in this act, or others, for FY2001 shall be available for the interagency funding of specific projects,workshops, studies, and similar efforts to carryout the purposes of the national Science and Technology Council (Executive Order 12881). OMB is required toprovide a report describing the budget of, andresources connected to, the Council to specific congressional committees by March 21, 2001. Law Enforcement Retirement. See discussion, in \"Law Enforcement --Washington Area Airport Authority\"section below, of section 636 retirement provisions relating to members of the police force of the MetropolitanWashington Airports Authority.",
      " Federal Employee Locality Pay Designations. See \"Locality Pay Designations\" in the OPM section above, for adiscussion of the new provisions in section 637. Mandatory Removal of Law Enforcement Officers. Section 639 provides for the mandatory removal fromemployment of federal law enforcement officers who are convicted of felonies. Details of the policy are set out inthe section and will be codified at 5 U.S.C.7371. The policy will be effective January 21, 2001 and will apply to any conviction of a felony entered by a federalor state court on or after that date. Statutory Correction. Section 640 of P.L.",
      " 106-554 provides correction to FY2001 provisions enacted earlier. Section 640 of the Legislative Branch and Treasury FY2001 appropriation ( H.R. 4516 /4985, vetoed) wouldhave rolled back the increased rates ofcontributions federal employees make to the retirement funds. Section 505 of P.L. 106-346 (Department ofTransportation FY2001) provided for the rollback andSection 504 provided that section 640 of H.R. 4516 / H.R. 4985 would have no effect. At the time P.L.106-346 was signed, H.R. 4516 / H.R.",
      " 4985 was pending approval by the President and it was presumed it would beapproved. It was subsequently vetoed andnormally the language of P.L. 106-346, section 504, would have been rendered moot.  However, section 504 does not refer to the measure by bill number but refers to the \"Treasury and General Government Appropriations Act, 2001.\" That is theshort title of H.R. 5658, enacted by P.L. 106-554. If P.L. 106-554 had not contained language, as found insection 640, any section in P.L. 106-",
      "554, which carried the designation \"640,\" would be rendered not in effect because of the language of section 504 of P.L.106-346. Section 644 of P.L. 106-554 repeals section 501 of P.L. 106-346 for the similar purpose of preserving the integrity of any section numbered 644 in the Treasuryand General Government Appropriations Act, 2001.  Federal Firefighter Workmen's Compensation. Section 641 provides that overtime paid to federal firefighters willbe used in the computation of the benefits to federal firefighters for work-related injuries. Military Leave. Section 642 provides that military leave taken by federal employees must be in increments of onehour.",
      " Federal Child Caregiver Background Checks. See \"Federal Child Care\" below for a discussion of the provisions ofsection 643. Administrative Appeals Judge -- Salary. See discussion of section 645 in \"Administrative Appeals Judge --Salary\" subsection of the OPM presentation above. IG Reports on Individual Data Through Internet Use. Section 646 requires that, by February 19, 2001, the InspectorGeneral of each department or agency will submit to Congress a report that discloses any activity relating to thecollection or review of singular data or thecreation of aggregate lists that include personally identifiable information about individuals who access anydepartment or agency's Internet site.",
      " The reports arealso to include activities relating to entering into agreements with third parties of collect, review, or obtain suchinformation or lists relating to any individual'saccess or viewing habits for governmental and nongovernmental Internet sites. Department of Transportation Appropriations, 2001 -- P.L. 106-346 During the debates in both the House and Senate on the Legislative Branch Appropriations conference report,several Members indicated that they supportedhigher levels of funding for some of the accounts under discussion. They were assured in floor exchanges thatfunding would be provided in subsequentappropriations measures to come before them. Partial funding is provided for the following accounts:",
      "  Department of the Treasury: Departmental Offices, Department-wide systems and capital investments programs, Expanded Access toFinancial Services, Federal Law Enforcement (both the salaries and expenses and the acquisition, construction,improvements and related expenses accounts),Bureau of Alcohol, Tobacco, and Firearms, U.S. Customs Service (salaries and expenses), Internal Revenue Service(three accounts--tax law enforcement,information technology investments, and staffing tax administration for balance and equity), and the U.S. SecretService (salaries andexpenses). U.S. Postal Service (no funding) Executive Office of the President: Office of National Drug Control Policy (Counterdrug TechnologyAssessment Center)",
      " and FundsAppropriated to the President--Unanticipated Needs. Independent Agencies: General Services Administration (Federal Buildings Fund and Policy andOperations) and National Archives andRecords Administration (Repairs and Restoration) In addition to partially funding some of the accounts, P.L. 106-346 ( H.R. 4475 ) also addresses general provisions, such as privacy, federal employeeretirement changes, and U.S. Secret Service assistance for investigations related to missing and exploited children. The retirement language was intended as anamendment to the language in H.R. 4516 / H.R. 4985, which has since been vetoed.",
      " Also, in effect, thefunding was intended assupplemental funding for the accounts within that measure. The supplemental has been enacted prior to the baseaccount funding. Privacy Provisions Section 501 of P.L. 106-346 prohibits funds appropriated by the legislation to be used by any executive agency (1) to collect, review, or create any aggregate list,derived by any means, that includes the collection of any personally identifiable information relating to anindividual's access to or use of any federal governmentInternet site of the agency, or (2) to enter into any agreement with a third party, including another governmentagency, to collect,",
      " review, or obtain any aggregatelist, derived from any means, that includes the collection of any personally identifiable information relating to anindividual's access to or use of anynon-governmental Internet site. These limitations do not apply to (1) any record of aggregate data that does notidentify particular persons; (2) any voluntarysubmission of personally identifiable information; (3) any action taken for law enforcement, regulatory, orsupervisory purposes, in accordance with applicablelaw; and (4) any action that is a system security action taken by the operator of an Internet site and is necessarilyincident to the rendition of the Internet siteservices or to the protection of the rights or property of the provider of the Internet site.",
      " The first limitation may be viewed as a response to the June press revelation that the National Drug Control Policy Office, an agency within the Executive Officeof the President, was secretly tracking visitors to its website through the use of computer software known as\"cookies.\" (57) In response, OMB issued a June 22,2000, memorandum to the heads of all executive departments and agencies indicating that \"'cookies' should not beused at Federal web sites, or by contractorswhen operating web sites on behalf of agencies, unless, in addition to clear and conspicuous notice, the followingconditions are met: a compelling need to gatherthe data on the site;",
      " appropriate and publicly disclosed privacy safeguards for handling of information derived from\"cookies\"; and personal approval by the headof the agency.\" The second limitation may be regarded as a response to a September GAO report indicating that,in a survey of online privacy protections atfederal websites, it had been found that 23 of 70 agencies had disclosed personal information gathered from theirwebsites to third parties, mostly other agencies. However, at least four agencies were discovered to be sharing such information with private entities--tradeorganizations, bilateral development banks, productmanufacturers, distributors, and retailers. The offending agencies were not identified by GAO. Responding to thesefindings,",
      " some privacy advocates called forupdating the Privacy Act, while others urged better oversight and enforcement of the statute. (58) On October 5, the conference report to accompany H.R. 4475 was filed. (59) On October 6, it was brought up under the rule, H. Res. 612. (60) The voteto adopt the rule was unrecorded. The conference report was agreed to by the House on a vote of 344-50 (Roll no.516) and by the Senate on a vote of 78-10(Record Vote No. 267). (61) The President signed P.L.",
      " 106-346 on October 23, 2000. Continuing Resolution P.L. 106-275, (62) as amended, is the statutoryvehicle through which all government programs and agencies, which have not been funded through regular FY2001appropriations, are being funded. Most are being funded at FY2000 funding levels. Most programs or accountsnew in FY2001 are receiving no funding. Subsequent to the passage of P.L. 106-275, there were 20 additional continuing funding resolutions (CR) forFY2001, most of which amend P.L. 106-275 toprovide daily continuations One account,",
      " within the vetoed funding measure, was funded specifically in the November 3 ( P.L. 106-426 ) CR is that through which the General ServicesAdministration will administer the presidential transition. On November 2, Congress agreed to a continuing fundingresolution ( H.J.Res. 123 ) whichwas amended to include the $7.1 million provided in the vetoed legislation. (63) There was no recorded vote on the amendment but the resolution, whichamended P.L. 106-275, was agreed to through a vote of 310 to 7 (Roll No. 592). The Senate agreed to H.J.Res.",
      " 123 by unanimous consent. (64) P.L. 106-520 ( H.J.Res. 125 ), in addition to extending the funding, amends the FY2001 continuing funding resolution to authorize the ExecutiveResidence at the White House to \"make expenditures to provide for the orderly transition and moving expensesfollowing the election on November 7, 2000.\" (65) That authorization was also in H.R. 4871, as passed the house, and in H.R. 4516 / H.R. 4985, asvetoed. H.J.Res. 125 was adopted in the House November 13 (66)",
      " and in the Senate November 14. (67) Legislative Branch Conference Report Treasury and General Government Provisions Inclusion of the Treasury, Postal Service and General Government funding provisions in the legislative branch appropriations (68) caught many by surprise. Thereare no minority signatures on the conference report. The text of the floor debate on the rule would indicate thatsome knew about the strategy and others werecaught unaware. (69) The debate on the rule, agreedto in the House July 27, seemed to focus more on the protocol than on the substance of the provisions of H.R. 4985, as introduced and as included in the conference report.",
      " The House had passed H.R. 4871 and the Senate had begun debateon that measure, as well as having reported their own version, S. 2900. H.R. 4985 has received nostand-alone committee or floor actionby either chamber. The House, having already agreed to the rule, proceeded to debate the conference report, andsubsequently agreed to the report, on September14, 2000. The Senate rejected the conference report on September 20.  There was substantial objection to the procedural protocol of bringing into a conference report, provisions of a bill which had been introduced the legislative daybefore it became part of the report and which contained spending levels considerably in excess of the House-passedand Senate-reported versions.",
      " Therecontinued to be contention with regard to the adequacy of the funding levels for IRS accounts and for courthouseconstruction. Although there was not a formalpress release nor a Statement of Administration Policy threatening a veto, the probability of a veto was suggestedby both administration representatives andDemocratic Members. The funding levels in H.R. 4985, as introduced and as section 1001 of Division B of the H.R. 4516 conference report, are markedlydifferent than those in the House-passed and Senate-reported versions. Table 4 provides the details by account. Insummary, the conference version would havefunded the accounts at $30,",
      " 309.5 million. The FY2001 request was for $31,208.4 million. The House approved$29,081.6 million and the Senate AppropriationsCommittee reported their bill at $29,180.6 million. There are four accounts which would have exceeded thePresident's request as well as both the House andSenate versions (Federal Law Enforcement Training Center, Financial Management Service and the Bureau ofAlcohol, Tobacco and Firearms, and the U.S.Secret Service, all in the Department of the Treasury). There are two accounts which would have exceeded thePresident's request and would be equal to, or lowerthan,",
      " either the House or Senate versions (Financial Crimes Enforcement Network in the Department of the Treasuryand the National Historical Publications andRecords Commission Grants Program in the National Archives and Records Administration). There are 17 accountsin which the conference version would haveexceeded both the House and Senate versions, but would be equal to (two), or below the President's request. Thereare 26 accounts in which the conferenceversion would have exceeded the funding level proposed by either the House or the Senate. In most of thoseinstances, the funding level would have matched thePresident's request and whichever congressional version was higher. Other than the mandatory accounts, there areeight accounts in which the conference fundinglevel is in agreement with the President's request and both the House-passed and Senate-reported versions.",
      " (Noteto Reader: These differentials are in P.L.106-554, as well.) Data Quality. Section 515 of the Treasury and General Government provisions would require the director ofthe Office of Management and Budget (OMB), by not later than September 30, 2001, and with public and federalagency involvement, to issue guidelines under44 U.S.C. 3504(d)(1) and 3516 that provide policy and procedural guidance to federal agencies for ensuring andmaximizing the quality, objectivity, utility, andintegrity of information, including statistical information, disseminated by the agencies in fulfillment of the purposesand provisions of chapter 35 of Title 44,",
      "United States Code--the Paperwork Reduction Act. Such guidelines (1) would apply to the sharing by federalagencies of, and access to, informationdisseminated by such agencies, and (2) would require that each federal agency to which the guidelines apply: issue guidelines ensuring and maximizing the quality, objectivity, utility, and integrity of information, including statistical information,issued by the agency, by not later than one year after the date of issuance of the OMB guidelines; establish administrative mechanisms allowing affected persons to seek and obtain correction of information maintained and disseminated bythe agency that does not comply with the OMB guidelines; and report periodically to the OMB director (1)",
      " the number and nature of complaints received by the agency regarding the accuracy ofinformation disseminated by the agency, and (2) how such complaints were handled by the agency. Excise Tax. The repeal of the telephone excise tax, although in Division B, is not part of the Treasury andGeneral Government text. That provision can be found in Section 1003 of Division B, H.R. 4516. For adiscussion of the issue, see CRS Report RS20119, Telephone Excise Tax, by Louis Alan Talley. Veto and Subsequent Action On October 30, 2000, President Clinton vetoed H.R.",
      " 4516, sending the FY2001 funding for the legislative branch and the Treasury and generalgovernment accounts back to Congress. In the veto message, the President noted that the \"business of the Americanpeople remains unfinished\" and stated that hecould not \"in good conscience sign a bill that funds the operations of the Congress and the White House beforefunding our classrooms, fixing our schools andprotecting our workers.\" (70) On October 31, theHouse discussed the veto and referred the veto and bill to the Committee on Appropriations. (71) Many press reports have indicated that the President vetoed the congressional pay raise. His statement does not mention that issue.",
      " There is no provision in H.R. 4516 for a pay raise; the raise goes into effect automatically unless there is language denying it and H.R. 4516 is silent on the issue. (See \"Federal Pay\" below.) Federal Personnel Issues Pay General. Under the Federal Pay Comparability Act of 1990 (FEPCA), federal white collar employees, paidunder the General Schedule and related salary systems, are to receive annual adjustments based on two separatemechanisms. The first is the adjustment to basepay which is based on changes in private sector salaries as reflected in the Employment Cost Index (ECI). The rateof pay adjustment is supposed to be thepercentage rate of change in that element of the ECI,",
      " minus.5. For January 2001, the base pay adjustment shouldbe 2.7%. At this time there are no legislativeproposals to change that rate. Since the President sent no alternative plan to Congress by the end of August, the basepay adjustment will be 2.7% Since the budget recommendation is for 3.7% and since the assumption in this legislation is that the programs are funded to accommodate that rate, it follows thatthe second tier of the adjustment would be 1%. Locality-based payments are calculated based on the results ofsurveys of occupations in specific localities withinthe continental United States.",
      " [See discussion under OPM above with regard to the designation of those localities.]The surveys show that locality-based paymentswould have to average about 16% in order to meet the expectations of FEPCA. On December 1, 2000, PresidentClinton sent an alternative plan to Congresswhich provides that locality payments equal 1% of payroll. Federal Wage System. The Federal Wage System (FWS) is designed to compensate the federal blue collar, orskilled labor, force at rates prevailing in local wage areas for like occupations. If the statutory system were allowedto be managed as planned, the wage rates andthe rates of adjustment in the over 130 wage areas would vary,",
      " according to the labor costs and compensation in theprivate sector. For the last several years,Congress has limited the rates of adjustment, based on the rates of adjustment for the General Schedule. Part of therationale for that decision is that, in certainhigh costs areas, the some FWS wages would exceed the salaries paid to General Schedule supervisors. Section613 of the FY2001 appropriations continues thelimitation. Wages in lower cost areas will be allowed to increase according to the findings of the wage surveys butthe high cost area wages will be capped. Members of Congress, Judges, and Other Officials. Under the Ethics Reform Act of 1989,",
      " as amended, payadjustments for federal officials, including Members of Congress and judges, is also based on ECI calculations, butfor a different 12-month period. The ECIcalculations would dictate a pay adjustment in January 2001 of 3%. However, the statute limits those adjustmentsto the rate of adjustment for base pay of theGeneral Schedule. Therefore, if General Schedule base pay is adjusted at the rate of 2.7%, that will be the maximumrate of adjustment in salaries of federalofficials.  Although there has been substantial journalistic reporting that the President vetoed the Legislative Branch/Treasury and General Government in order to eliminatea January 2001 pay raise for Members of Congress,",
      " the pay raise would go into effect regardless of that action. Neither of those bills has any section in itproviding for a pay increase. The increase, under the statute discussed above, is automatic unless there is specificlanguage in some legislative measure denying it. The language to deny that pay increase has often been placed in the Treasury and General Government fundingmeasure. However, both the vetoed bill and P.L.106-554 are silent on the matter.  Unlike that for Members of Congress and executive branch officials, the annual pay increase must be specifically authorized for judges. The authorization for theJanuary 2001 pay increase is in the Commerce,",
      " State, Justice and Judiciary appropriation ( P.L. 106-554, section309).  President. Pursuant to the Treasury and General Government Appropriations Act, 2000 ( P.L. 106-58 ), theincoming President will receive a salary of $400,000 per annum. Since 1969, Presidents have been paida salary of $200,000. Federal Employees Health Benefits Program Section 630 of H.R. 5658, as enacted through P.L. 106-554 is that same provision as section 631 of H.R. 4871, as passed the House. Itrequires health insurance plans participating in the Federal Employees Health Benefits Program (FEHBP)",
      " to includecoverage of prescription contraceptives undertheir prescription drug benefit. It exempts from this requirement three specific health maintenance organizationsfor religious reasons as well as \"any existing orfuture plan [participating in the FEHBP] if the carrier for the plan objects to such coverage on the basis of religiousbeliefs.\" It also prohibits discriminationagainst \"any individual who refuses to prescribe or otherwise provide for contraceptives because such activity wouldbe contrary to the individual's religiousbeliefs or moral convictions.\" A requirement that FEHBP plan cover prescription contraceptives was first includedin the FY1999 appropriations legislation. Theprovision in the FY2001 act is similar to that included in the FY2000 Treasury and General Governmentappropriations act.",
      " As reported, S. 2900 contains a similar provision. It would have exempted two additional plans from the program.  Section 509 of H.R. 5658 prohibits funds appropriated through this Act to be used to pay for an abortion or the administrative expenses in connectionwith any health plan under FEHB which provides any benefits or coverage for abortions. An exception, in section510 would be if the mother's health wereendangered or if the pregnancy were the result of rape. Section 513 exempts contracts under FEHBP from the cost accounting standards promulgated under the Office of Federal Procurement Policy Act (41 U.S.C.",
      "422). Federal Retirement Repeal of Temporary Increase in Retirement Contributions. The Balanced Budget Act of 1997 (BBA, P.L.105-33 ) mandated a temporary increase of 0.5% in employee contributions under both Civil Service RetirementSystem (CSRS) and Federal Employee RetirementSystem (FERS), which was to be phased in over 3 years. Employee contributions increased by 0.25% on January1, 1999; by a further 0.15% on January 1, 2000;and were scheduled to rise by another 0.1% on January 1, 2001.",
      " Employee contributions were to revert to theirprevious levels on January 1, 2003. The highercontributions do not increase the benefit accruals of federal employees under either CSRS or FERS. The President'sproposed budget for FY2001 included alegislative initiative to repeal the increase in employee contributions required by the BBA and two bills wereintroduced in the 106th Congress for that purpose( H.R. 2631 / S. 1472 ). The higher contribution rates were repealed for all federal employees with theexception of Members of Congressby P.L. 106-346, the FY2001 Department of Transportation Appropriations Act.",
      " Law Enforcement --Washington Area Airport Authority. Section 636 of H.R. 5658 designatesqualified members of the Metropolitan Washington Airports Authority as eligible to be treated as law enforcementofficer under CSRS or FERS, as applicable. Federal law enforcement officers are permitted under both CSRS and FERS to receive an immediate, unreducedretirement annuity at age 50 with 20 years ofservice. Under FERS, employees in these positions are authorized to receive a retirement annuity at any age after25 years of service. Law enforcement officersmust retire upon reaching age 57 or after completing 20 years of service, if later.",
      " Federal law enforcement officersearn a larger retirement benefit for each yearof service than regular federal employees. Under both CSRS and FERS, law enforcement officers contribute anadditional 0.5% of pay over the amountcontributed by regular federal employees.  Increase in maximum allowable contributions to the Thrift Savings Plan. The Thrift Savings Plan (TSP) wascreated by the Federal Employees' Retirement System Act of 1986 ( P.L. 99-335 ) as a retirement savings plan forcivilian federal employees. Under the terms ofFERS Act, employees covered by the Federal Employees' Retirement System are permitted to contribute to the TSPthe lesser of 10%",
      " of pay or the maximumdeferral permissible under section 402(g) of the Internal Revenue Code ($10,500 in 2001). Employees covered bythe Civil Service Retirement System arepermitted to contribute the lesser of 5% of pay or the maximum deferral permissible under IRC \u00ef\u00bf\u00bd 402(g). Asamended by P.L. 106-554, the maximum allowableemployee contribution to the TSP will increase by 1 percentage point each year for five years. Thepercentage-of-pay limitations on contributions to the TSP willthen be eliminated. However, employee contributions to the TSP will remain subject to the limits applicable underIRC \u00ef\u00bf\u00bd 402(g).  Beginning with the open season that starts May 15,",
      " 2001, employees covered by FERS will be allowed to contribute up to 11 percent of pay to the TSP, and thoseunder CSRS will be allowed to contribute up to 6 percent of pay to the TSP. These maximum permissiblecontributions will rise by 1 percentage point each yearuntil they reach 15 percent for FERS and 10 percent for CSRS in fiscal year 2005. In fiscal 2006, the percent-of-paylimits on TSP contributions will beabolished, and employees will be subject only to the contribution limits then prevailing under IRC \u00ef\u00bf\u00bd 402(g). Federal Child Care Section 633 of H.R.",
      " 5658, as enacted through P.L. 106-554 continues and modifies the provisions authorizing agencies to provide child care infederal facilities. Section 643 is a new provision requiring criminal background checks for employees atfederally-provided day care facilities of the executivebranch, as proposed in H.R. 4871. The provisions in H.R. 4871 pertaining to federal child care resemble those included in last year's House version of the FY2000 Treasury, Postal, andGeneral Government appropriations bill ( H.R. 2490 ), and ultimately in law ( P.L. 106-58 ). H.R. 4871,",
      "as passed by the House on July20, 2000, includes a provision (Sec. 634) that would have continued to permit executive branch agencies (notincluding the General Accounting Office) to useagency funds (otherwise available for agency salaries and expenses) to provide child care services, in a Federal orleased facility, or through contract, for civilianemployees of the agency. These funds would be used to improve the affordability of child care for lower incomefederal employees using or seeking to use thechild care services offered by the agency facility or contractor. The bill stipulated that amounts paid to licensed orregulated child care providers would be paid inadvance of child care services rendered,",
      " covering agreed upon periods as appropriate. The House also agreed to anamendment ( H.Amdt. 1019 )which would have required that all current and newly hired workers in all child care centers located in federallyowned or leased facilities undergo criminalbackground checks in compliance with the Crime Control Act of 1990. The Senate's bill ( S. 2900 ), as approved by the Senate Appropriations Committee on July 20, 2000, included language identical to H.R. 4871 with respect to the use of funds for improving affordability of child care for lower income federal employees(Sec. 634), but did not include the H.R.",
      " 4871 provision regarding the timing of payments to child care providers, nor the House amendmentlanguage requiring that current and newlyhired child care workers in federal child care centers undergo criminal background checks.  The vetoed Legislative Branch Appropriations conference report included federal child care provisions ( H.R. 4985, Sec. 633 and 643) identical tothose in H.R. 4871, as passed, with respect to using funds to improve affordability of federal child care andrequiring criminal background checks ofchild care workers. However, unlike H.R. 4871, the conference version ( H.R. 4516 / H.R.",
      " 4985 )would not have providedfor advance payment of salaries to providers. P.L. 106-554 enacted the language from the conference version. Major Funding Trends The House and Senate Appropriations Committees have approved the allocations to the various appropriations. The House, on May 9, 2000, approveddiscretionary budget authority at $14.088 billion, with outlays at $14.563 billion. On July 19, the HouseAppropriations Committee reported a revised allocation( H.Rept. 106-761 ) of $14.402 billion in budget authority and $14.751 in outlays. The Senate,",
      " on May 4, 2000, allocated $14.3 billion for budget authority and$14.566 billion for outlays. While the congressional numbers are in disagreement with one another, they areconsistently lower than the requested funding. Theadministration's request for discretionary funding was for $14.678 billion in budget authority (according to CBOcalculations). H.R. 5658, as enactedthrough P.L. 106-554, funds the Treasury, Postal Service, and General Government accounts at $30.31 billion. Themandatory accounts are funded at $14.68billion and the discretionary accounts at $15.",
      "63 billion. P.L. 106-346 provides supplemental funding for theTreasury/General Government accounts in theamount of $348 million. The sum of mandatory and discretionary funding requested, before CBO scorekeeping, is $30.8 billion. CBO calculates that total at $31.2 billion.  Table 2. Appropriations for the Treasury, Postal Service, Executive Office of the President, and General Government, FY1996to FY2000 (in billions of current dollars) a Source for FY2000: U.S. Congress, House, Committee on Appropriations, as of July 26 2000.",
      "  a These figures, in current dollars, include CBO adjustments for permanent budget authorities, rescissions, and supplementals, as well as other elements factoredinto the CBO scorekeeping process. For a brief presentation on CBO scorekeeping see: U.S. Congressional BudgetOffice, Maintaining Budgetary Discipline:Spending and Revenue Options (Washington: GPO, 1999). The appendix beginning on p. 281 provides the\"Scorekeeping Guidelines,\" as found in the conferencereport to the Balanced Budget Act of 1997. Also available at http://www.cbo.gov/.  Table 3. Treasury,",
      " Postal Service, Executive Office of the President, and General Government Appropriations, FY2001, byTitle (In millions, without CBO scorekeeping) Sources:  Conference Report on H.R. 4516, Legislative Branch Appropriations Act, 2001, Congressional Record, vol. 146, Jan. 14,2000, p. H7608-7626. Chart showing Treasury and General Government accounts in detail appears onH7609-7611. Funding information for H.R. 4475 provided by staff of House Committee on Appropriations,Oct. 3,2000. P.L. 106-",
      "554 --Conference Report on H.R., 4577, Departments of Labor, Health and Human Services,and Education, and Related AgenciesAppropriations Act, 2001, Congressional Record, vol. 146, Dec. 15, 2000, H.Rept. 106-1033, pp.H12100-12439. The act is to be known as the ConsolidatedAppropriations Act, 2001. Section 1(a)(3) enacts the Treasury and General Government Appropriation ( H.R. 5658 ) by reference. Legislative textand explanatory remarks for H.R. 5658 appear on pages H12230-H12258.",
      " Chart showing Treasury andGeneral Government accounts in detailappears on H12249-H12258.  Table 4. Department of the Treasury, Postal Service, Executive Office of the President, and General GovernmentAppropriations (in thousands of dollars) Sources:  Conference Report on H.R. 4516, Legislative Branch Appropriations Act, 2001, CongressionalRecord, vol. 146, Jan. 14, 2000, p. H7608-H7626. Chart showing Treasury and General Government accounts in detail appears on H7609-H7611.  Funding information for H.R. 4475 provided by staff of House Committee on Appropriations,",
      " Oct. 3,2000. Conference Report on H.R. 5658,as enacted through P.L. 106-554, Congressional Record,vol. 146, Dec. 15, 2000, p. H12230-H12258. Chartshowing Treasury and General Government accounts in detail appears on p. H12249-H12258. Table 4 Notes :  a The totals provided include the funding reductions pursuant to the 0.38% rescission required by P.L. 106-113. Those individual accounts noted with \"*\" reflectthe appropriated sum reduced by the rescission. Not all of the rescissions are at the.",
      "38% rate, because agencies haddiscretion as to how to apply the reductions. b Title V of P.L. 106-346 ( H.R. 4475 ), Department of Transportation Appropriation, 2001,provides partial funding for selected accounts which aregenerally covered under the Treasury and General Government appropriation legislation. C P.L. 106-520 ( H.J.Res. 125 ), a further continuing funding resolution which amends P.L.106-275, the FY2001 continuing funding resolution,provides an authorization for the use of funds to support the moving of families to and from the White House.",
      " Nospecific amount is named, however, it isestimated that it will be about $200,000. Glossary of Budget Process Terms The following definitions are selected from the \"Glossary of Budgetary Terms,\" as found in Manual onthe Federal Budget Process, a CRS report (98-720) by[author name scrubbed] in consultation with Alan Schick. Account. A control and reporting unit for budgeting and accounting.  Appropriation. A provision of law providing budget authority that permits federal agencies to incur obligations and to make payments, of the Treasury forspecified purposes. Annual appropriations are provided in appropriations acts; most permanent appropriations areprovided in substantive law.",
      " Authorization. A provision in law that authorizes appropriations for a program or agency.  Budget Authority. Authority provided by law to enter into obligations that normally result in outlays. The main forms of budget authority are appropriations,borrowing authority, and contract authority. Budget Resolution. A concurrent resolution passed by both Houses of Congress, but not requiring the signature of the President, setting forth the congressionalbudget for at least the next five fiscal years. The budget resolution sets forth various budget totals and functionalallocations, and may include reconciliationinstructions, to designated House or Senate committees. Continuing Resolution. An act (in the form of a joint resolution) that provides budget authority to agencies or programs whose regular appropriation has not beenenacted after the new fiscal year has started.",
      " A continuing resolution usually is a temporary measure that expireson a specified date or is superseded by enactmentof the regular appropriations act. Some continuing resolutions, however, are in effect for the remainder of the fiscalyear and are the means of enacting regularappropriations. Direct Spending. Budget authority, and the resulting outlays, provided in laws other than annual appropriations acts. Appropriated entitlements are classified asdirect spending. Direct spending is distinguished by the Budget Enforcement Act from discretionary spending andis subject to the PAGO rules. It is also referredto as \"mandatory spending.\" Discretionary Spending. Budget authority, and the resulting outlays,",
      " provided in annual appropriations acts, but not including appropriated entitlements. Federal Funds. All monies collected and spent by the federal government other than those designated as trust funds. Federal funds include general, special, publicenterprise, and intragovernmental funds. Mandatory Spending. See \"Direct Spending.\"  Obligation. A binding agreement (such as through a contract or purchase order) that will require payment.  Outlays. Payments made (generally through the issuance of checks or disbursement of cash) to liquidate obligations. Outlays during a fiscal year may be forpayment of obligations incurred in prior years or in the same year. PAGO (Pay-as-",
      "You-Go) Process. The procedure established by the Budget Enforcement Act to ensure that revenue and direct spending legislation does not addto the deficit or reduce the surplus. PAGO requires that any increase in the deficit or reduction in the surplus dueto legislation be offset by other legislation orsequestration. PAGO is enforced by estimating the five-year budgetary effects of all new revenue and directspending laws. Reconciliation Process. A process established in the Congressional Budget Act by which Congress changes existing laws to conform tax and spending levels tothe levels set in a budget resolution. Changes recommended by committees pursuant to a reconciliation instructionare incorporated into a reconciliation bill.",
      " Revolving Fund. An account or fund in which all income derived from its operations is available to finance the fund's continuing operations without fiscal yearlimitation. Scorekeeping. Procedures for tracking and reporting on the status of congressional budgetary actions affecting budget authority, receipts, outlays, the surplus ordeficit, and the public debt limit. Supplemental Appropriation. Budget authority provided in an appropriations act in addition to regular or continuing appropriations already provided. Supplemental appropriations acts sometimes include items not included in regular appropriations acts for lack oftimely authorization. Trust Funds. Accounts designated by law as trust funds for receipts and expenditures earmarked for specific purposes.",
      " User Fees. Fees charged to users of goods or services provided by the federal government. In levying or authorizing these fees, Congress determines whether therevenue should go into the U.S. Treasury or should be available to the agency providing the goods or services. For Additional Reading CRS Issue Briefs CRS Issue Brief IB10053, Federal Employees and the FY2001 Budget, by [author name scrubbed].  CRS Issue Brief IB95035, Federal Regulatory Reform: An Overview, by Roger Garcia.  CRS Issue Brief IB10014, Gun Control, by [author name scrubbed].  CRS Issue Brief IB89148, Item Veto and Expanded Impoundment Proposals,",
      " by [author name scrubbed]. CRS Info Packs CRS Info Pack 517G, Government Performance and Results Act: Implementing the Results.  CRS Reports CRS Report 98-648, Appropriations Bills: What Are \"General Provisions?\", by [author name scrubbed].  CRS Report 98-558, Appropriations Bills: What is report language? by [author name scrubbed].  CRS Report RL30202, Appropriations for FY2000: Treasury, Postal Service, Executive Office of the President, and General Government, coordinated by SharonS. Gressle. CRS Report RL30512, Appropriations for FY2001:",
      " Legislative Branch, by Paul Dwyer.  CRS Report 97-635(pdf), The Balanced Budget Act of 1997: Retirement and Health Insurance Provisions for Postal and Federal Personnel, by Carolyn L. Merck. CRS Report RL30458, The Budget Reconciliation Process: Timing of Legislative Action, by [author name scrubbed]. CRS Report RS20255, Civil Service Retirement Bills in the 106th Congress, by Patrick J. Purcell. CRS Report RL30023(pdf), Civil Service Retirement Programs: Financing and Budget Status, by [author name scrubbed]. CRS Report 97-684, The Congressional Appropriations Process:",
      " An Introduction, by [author name scrubbed]. CRS Report RL30343, Continuing Appropriations Acts: Brief Overview of Recent Practices, by [author name scrubbed]. CRS Report 98-157 GOV, Congressional Overrides of Presidential Vetoes, by [author name scrubbed].  CRS Report RL30353, Discretionary Spending Limits and Social Security Surplus, by [author name scrubbed].  CRS Report 96-329, Federal Civilian Employment Reduction, by [author name scrubbed].  CRS Report RL30336, The Federal Employees Health Benefits Program, by Carolyn L. Merck.  CRS Report RL30698,",
      " Federal Employees' Overtime Pay: 106th Congress Legislation, by [author name scrubbed]. CRS Report 98-956, Federal Pay: FY2000 Salary Adjustment, by [author name scrubbed].  CRS Report RL30359, Federal Pay: FY2001 Salary Adjustment, by [author name scrubbed].  CRS Report 98-558, Government Performance and Results Act and the Appropriations Process, by [author name scrubbed]. CRS Report RS20257(pdf), Government Performance and Results Act: Brief History and Implementation Activities During the First Session of the 106th Congress, by[author name scrubbed]. CRS Report 97-",
      "382, Government Performance and Results Act: Implications for Congressional Oversight, by [author name scrubbed] and [author name scrubbed]. CRS Report 98-4, Implementation of P.L. 105-206: Personnel Management Flexibility for the Internal Revenue Service, by [author name scrubbed]. CRS Report 98-721, Introduction to the Federal Budget Process, by [author name scrubbed].  CRS Report RL30536, IRS Restructuring and Tax Law Compliance, by [author name scrubbed].  CRS Report RS20278, Judicial Salaries: Current Situation, by [author name scrubbed].  CRS Report RS20644,",
      " Long-term Care Insurance for Federal Personnel, by Carolyn L. Merck.  CRS Report RL30254, Long-term Care: The President's FY2001 Budget Proposals and Related Legislation, by Carol V. O'Shaughnessy, [author name scrubbed], and CarolynL. Merck. CRS Report 98-720(pdf), Manual on the Federal Budget Process, by [author name scrubbed].  CRS Report RL30194, Merit Systems Protection Board: Background, Strategic and Performance Plans, and Congressional Oversight, by [author name scrubbed]. CRS Report 98-773, Office of Personnel Management:",
      " Background, Strategic and Performance Plans, and Congressional Oversight, by [author name scrubbed]. CRS Report 94-971, Pay and Retirement Benefits for Federal Civil Service and Military Personnel: Increases from 1969 to 2000, by [author name scrubbed]. CRS Report 98-147 GOV, President Clinton's Vetoes, by [author name scrubbed].  CRS Report RS20709, Presidential Transition 2000-2001: Background and Federal Support, by [author name scrubbed].  CRS Report 98-156 GOV, The Presidential Veto and Congressional Procedure, by [author name scrubbed].  CRS Report 98-",
      "148 GOV, Presidential Vetoes, 1789-Present: A Summary Overview, by [author name scrubbed]  CRS Report RS20212, Restructuring of the IRS: Where Does It Stand?, by [author name scrubbed].  CRS Report 98-53, Salaries of Federal Officials, by [author name scrubbed].  CRS Report RL30014, Salaries of Members of Congress: Current Procedures and Recent Adjustments, by [author name scrubbed]. CRS Report 97-1011, Salaries of Members of Congress: Payable Rates and Effective Dates, 1789-1999,",
      " by [author name scrubbed]. CRS Report RS20388, Salary Linkage: Members of Congress and Other Federal Officials, by [author name scrubbed]. CRS Report RS20114, Salary of the President Compared with That of Other Federal Officials, by [author name scrubbed]. CRS Report RS20115, Salary of the President: Process for Change, by [author name scrubbed].  CRS Report RL30363(pdf), The Sequestration Process and Across-the-Board Spending Cuts for FY2000, by [author name scrubbed]. CRS Report 98-844, Shutdown of the Federal Government: Causes, Effects,",
      " and Process, by [author name scrubbed]. CRS Report RL30443, The 0.38 Percent Across-the-Board Cut in FY2000 Appropriations, by [author name scrubbed]. CRS Report RS20111, Travel Costs of the President, Vice President, and First Lady, by [author name scrubbed]. CRS Report RL30450, United States Office of Special Counsel: Background, Strategic and Performance Plans, and Congressional Oversight, by Barbara L.Schwemle. CRS Report RS20719, Vetoed Annual Appropriations Acts: Presidents Carter through Clinton, by [author name scrubbed]. Other Readings Syracuse University,",
      " Maxwell School of Citizenship and Public Affairs, Government Performance Project, Grading Government, (Syracuse, NY: SyracuseUniversity, February 1999). U.S. Congress, Senate, Committee on Appropriations, Treasury and General Government Appropriation Bill, 2000, report to accompany S. 1282, 106thCong., 1st sess., S.Rept. 106-5887 (Washington: GPO, 1999). U.S. Congressional Budget Office, Maintaining Budgetary Discipline: Spending and Revenue Options (Washington: GPO, 1999). [Available on CBO Web site.] U.S.",
      " Department of the Treasury, U.S. Customs Service, U.S. Customs Service Strategic Plan (FY97-02), by Commissioner of Customs George Weiss,(Washington: U.S. Customs Service, August 1, 1997). U.S. General Accounting Office, High Risk Series: An Update, GAO report GAO-01-263, (Washington: January 2001) -----, High Risk Series, IRS Management, GAO Report HR 97-8 (Washington: February 1997).  -----, Customs Service: Comments on Strategic Plan and Resource Allocation Process, GAO Report GGD-98-15,",
      " (Washington: October 16, 1998). -----, Major Management Challenges and Program Risks: Department of the Treasury, GAO report OCG-99-14, (Washington: October 21, 1998).  -----, Performance and Accountability Series, Major Management Challenges and Program Risks: A Governmentwide Perspective, GAO report GAO-01-241,(Washington: January 2001). ----- Major Management Challenges and Program Risks: Department of the Treasury, GAO report GAO-01-254, (Washington: January 2001).  -----, Major Management Challenges and Program Risks: U.",
      " S. Postal Service, GAO report GAO-01-262, (Washington: January 2001).  Selected World Wide Web Sites Important information regarding current and past budgets (including budget documents), the federal budget process, and duties and functions are available at thefollowing web sites. Congressional Budget Office (CBO) http://www.cbo.gov  General Accounting Office (GAO) http://www.gao.gov  National Commission on Restructuring the Internal Revenue Service http://www.house.gov/natcommirs/main.htm  Office of Government Ethics http://www.usoge.gov  Office of Management and Budget (OMB) http://www.whitehouse.Gov/",
      "OMB/index.html  Office of Management and Budget, Statements of Administration Policy (SAPS) http://www.whitehouse.Gov/OMB/legislative/sap/index.html \n"
    ],
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    "hardness": null,
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  },
  {
    "id": 118,
    "question": null,
    "answer": "The Export-Import Bank (Ex-Im Bank) facilitates U.S. exports by extending credit to foreign governments and corporations, mostly in developing countries. The Federal Credit Reform Act requires Ex-Im Bank to estimate its net future losses, called \"subsidy costs,\" for budget purposes. Beginning with fiscal year 2003, the Office of Management and Budget (OMB) significantly changed its methodology for estimating a key subsidy cost component: the expected loss rates across a range of risk ratings of U.S.-provided international credits. In response to a congressional mandate, GAO agreed to (1) describe OMB's current and former methodologies and the rationale for the recent revisions, (2) determine the current methodology's impact on Ex-Im Bank, and (3) assess the methodology and how it was developed. OMB changed its method for determining expected loss rates for U.S. international credits, with one basis being that emerging finance literature indicated the former approach might overstate losses to the government. While it formerly used only interest rate differences across bonds to derive expected loss rates, it now uses corporate bond default data, adjusted for trends in interest rates, to predict defaults and makes assumptions regarding recoveries to estimate expected loss rates. As the figure shows, expected loss rates fell under the new approach: they were higher across risk rating categories in fiscal year 2002 (the last year that the former method was used) than in fiscal year 2005. This drop has contributed to lower Ex-Im Bank projections of subsidy costs and budget needs. OMB's current method for estimating expected loss rates involves challenges and lacks transparency. Estimating such losses on developing country financing is inherently difficult, and OMB's shift to using corporate default data has some basis, given the practices of some other financial institutions and limitations in other data sources. However, the corporate default data's coverage of developing countries has historically been limited, and their predictive value for Ex-Im Bank losses is not yet established. OMB's method generally predicts lower defaults than the corporate default data it used, whereas more recent corporate data show higher default rates. At the same time, OMB has assumed increasingly lower recovery rates, which serve to somewhat offset the lower default expectations, but the basis for the recovery rates and the changes over time has not been transparent. In addition, despite the method's complexity, OMB developed it independently and provided affected agencies with limited information about its basis or structure.\n",
    "docs": [
      "Background Established in 1934, Ex-Im Bank is an independent U.S. government  corporation that serves as the official ECA of the United States. Its mission  is to support the export of U.S. goods and services overseas, thereby  supporting U.S. export sector jobs. Ex-Im Bank\u2019s mandate states that it  should not compete with the private sector but rather assume the credit  and country risks that the private sector is unable or unwilling to accept.  Ex-Im Bank offers various financial products, such as direct loans, loan  guarantees, export credit insurance, and working capital guarantees, to  foreign buyers of U.S.",
      " goods and services and to U.S. exporters. In the last  decade, new Ex-Im Bank authorizations of loans, guarantees, and  insurance averaged nearly $12 billion per year. Because of its mandate, a large percentage of Ex-Im Bank\u2019s business is with  developing country borrowers that are typically considered more risky  than borrowers in developed countries. Nearly 80 percent of Ex-Im Bank\u2019s  medium- and long-term exposure at the end of fiscal year 2003 was to  borrowers from low- and middle-income countries. According to Ex-Im  Bank officials, the types of borrowers it finances within countries have  shifted over the last decade:",
      " whereas Ex-Im Bank historically financed  foreign government (sovereign) purchases of U.S. exports, its new  financing is now primarily for purchases by private sector borrowers. This  shift is gradually being reflected in Ex-Im Bank\u2019s portfolio of outstanding  credits, which at the end of fiscal year 2003 included about 36 percent in  financing to sovereign governments, about 46 percent in financing to  foreign corporations, and about 18 percent in financing to public sector,  nonsovereign borrowers. Both sovereign and private borrowers present some risk of failing to meet  payment obligations (i.e., defaulting), potentially causing a financial loss  for Ex-",
      "Im Bank and the U.S. government.In 1990, to more accurately  measure the cost of federal credit programs, the government enacted credit  reform, which required agencies that provide domestic or international  credit, including Ex-Im Bank, to estimate and request appropriations for  the long-term net losses, or subsidy costs, of their credit activities.According to credit reform, Ex-Im Bank incurs subsidy costs when  estimated payments by the government (such as loan disbursements)  exceed estimated payments to the government (such as principal  repayments, fees, interest payments, and recovered assets), on a present  value basis over the life of the loan.",
      " For each credit activity, Ex-Im Bank  assesses the potential future losses based on the risk of the activity. It  collects up-front fees or charges borrowers higher interest rates, or both, to  offset that loss and receives subsidy appropriations to cover remaining  losses. Credit reform requires credit agencies to have budget authority to cover  subsidy costs before entering into loans or loan guarantees. Credit  agencies, in their annual appropriations requests, estimate the expected  subsidy costs of their credit programs for the coming fiscal year. Credit  reform also requires agencies to annually reestimate subsidy costs of  previous financing activity based on updated information. When  reestimated subsidy costs exceed agencies\u2019 original subsidy cost estimates,",
      "  the additional subsidy costs are not covered by new appropriations but  rather are funded from permanent, indefinite budget authority. To estimate their subsidy costs, credit agencies estimate the future  performance of direct and guaranteed loans. Agency management is  responsible for accumulating relevant, sufficient, and reliable data on  which to base these estimates. To estimate future loan performance,  agencies generally have cash flow models, or computer-based  spreadsheets, that include assumptions about defaults, prepayments,  recoveries, and the timing of these events and are based on the nature of  their own credit program. Agencies that provide credit to domestic  borrowers generally develop these cash flow assumptions,",
      " which OMB  reviews, based on their historical experiences. For U.S. international  credits, OMB provides the expected loss rates, which are composed of  default and recovery assumptions, that agencies should use to estimate  their subsidy costs. The determination of expected loss rates for federal agencies that provide  international credit has two components: the assignment of risk ratings for  particular borrowers or transactions and the determination of loss rates for  each rating category, according to the maturity of the credit. Both of these  components, and their relationship to one another, are important in  determining overall expected losses. For Ex-Im Bank, risk ratings are  determined partly through an interagency process and partly by Ex-",
      "Im  Bank\u2019s risk management division. The appropriateness of these ratings is a  key determinant in the overall appropriateness of Ex-Im Bank\u2019s subsidy  cost estimations. Through the Interagency Country Risk Assessment System (ICRAS),which OMB chairs, ICRAS agencies determine risk ratings that will be in  effect each fiscal year (see box 1 in fig. 1). There are two types of ICRAS  ratings\u2014one for foreign government (sovereign) borrowers and one for the  private sector climates in foreign countries. Ratings range from 1 (least  risky) to 11 (most risky). Ratings for sovereign borrowers are based on  macroeconomic indicators,",
      " such as indebtedness levels; balance-of\u00ad payments factors; and political and social factors. In determining ratings,  the agencies take into account country risk ratings assigned by private  sector ratings agencies and by the Organization for Economic Cooperation  and Development (OECD). Private sector ratings assigned through the  ICRAS process also take into account factors such as the banking system  and legal environment in a country. Ex-Im Bank generally authorizes, with  few exceptions, new business for borrowers with ICRAS ratings of 8 or  better. (App. IV contains more information about the ICRAS risk rating  process.) For Ex-",
      "Im Bank\u2019s financing with foreign governments, the ICRAS sovereign  risk rating applies. For Ex-Im Bank\u2019s private sector lending, Ex-Im Bank  officials assign risk ratings. According to Ex-Im Bank officials, they use  private rating agency ratings for a corporation when the ratings are  available, which is the case for a minority of borrowers. For most private  sector borrowers, Ex-Im Bank officials use the private sector ICRAS rating  as a baseline and adjust that rating depending on their assessment of the  borrower\u2019s creditworthiness. For the second component, OMB plays a key role. It determines expected  loss rates for each ICRAS risk rating and maturity,",
      " which U.S. agencies that  provide international credit use in preparing their subsidy cost estimates  (see fig. 1, box 2). OMB provides these loss rates to ICRAS agencies each  fiscal year, in time to be used in preparing budget submissions. To  estimate future cash flows, ICRAS agencies use OMB\u2019s expected loss rates  in their cash flow models. The loss rates are also used to allocate subsidy  costs during the fiscal year and to calculate subsidy cost reestimates at the  end of the fiscal year. OMB also provides agencies with a credit subsidy  calculator, which has been audited,",
      " that agencies use to convert agency\u00ad estimated cash flows into present values. The credit reform act resulted in the establishment of a special budget  accounting system to track inflows and outflows associated with agencies\u2019  lending activities. Expected long-term subsidy costs for financing activities  in a fiscal year appear in an agency\u2019s annual budget submission and are  subject to congressional approval. However, any increases over time in  expected subsidy costs for financing that took place in earlier years are  financed from permanent indefinite budget authority and do not have to be  appropriated in the annual appropriations process. In the case of Ex-Im  Bank, such changes could result,",
      " for example, from changes in the risk  assessment for certain countries or changes in loss assumptions for a given  risk level. (App. V contains additional information about the credit reform  budget accounting system.) In addition to estimating expected losses for budgetary purposes, Ex-Im  Bank measures the expected loss of its portfolio in its own annual audited  financial statements. As a government corporation, Ex-Im Bank is required  to follow \u201cprinciples and procedures applicable to commercial corporate  transactions.\u201d Ex-Im Bank\u2019s financial statements are prepared according  to private sector generally accepted accounting principles (GAAP) that  require Ex-Im Bank to follow Financial Accounting Standards Board  (FASB)",
      " accounting guidance when establishing allowances for future  expected credit losses. OMB Developed New  Method That Lowered  Expected Loss Rates OMB developed its current methodology for determining expected loss  rates for ICRAS agencies, which lowered these rates, based in part on  evidence that its former approach overstated likely defaults and losses. For  fiscal years 1992-2002, OMB based its expected loss estimates on  differences between interest rates on bonds of different risk levels. In  developing its current approach, OMB cited emerging academic literature  that indicated its former approach may have overestimated likely costs to  the government. Ex-Im Bank officials also said they believed,",
      " based on  their reestimates, that their subsidy cost appropriations had been too high  relative to their loss experience since the beginning of credit reform. OMB\u2019s  current approach uses historical corporate bond default data, adjusted for  trends in interest rate spreads, to predict defaults and applies an  assumption regarding recovery rates to estimate expected loss rates. Under  the current approach, loss rates across most risk categories dropped  significantly. OMB\u2019s Former Methodology  Based Expected Loss  Estimates on Differences in  Bond Interest Rates The method that OMB used in fiscal years 1992-2002 based expected loss  rates for ICRAS agencies on interest rate spreads between publicly traded  U.S.",
      " corporate or foreign government bonds and low-risk bonds such as  U.S. Treasury bonds.Under this method, estimates of expected loss  shifted as the underlying spread data shifted. Interest rate spreads are an  indicator of expected loss, in that the size of a spread tends to widen as the  perceived risk increases. For example, when interest rates on a foreign  bond are 6 percent and U.S. Treasury bond interest rates are 5 percent, the  spread between the two is 1 percentage point. The foreign bond in this  example provides a higher rate of interest than the U.S. Treasury bond  because creditors require a higher return on their capital,",
      " at least in part  because they perceive that foreign bonds carry a higher risk of non\u00ad repayment. Spreads fluctuate over time depending in part on changes in market views  of borrowers\u2019 creditworthiness. Figure 2 shows interest rate spreads for  Argentine, Russian, and Mexican government bonds over U.S. Treasury  bonds from 1999-2003, illustrating how spreads can fluctuate. Spreads  increased sharply in 2001 for the Argentine bonds, as Argentina\u2019s default on  those bonds was imminent. Conversely, the spread for the Russian bonds  shown narrowed over the period as Russia\u2019s economy improved, while the  spreads for the Mexican bonds were consistently the smallest of the three  countries.",
      " OMB has used varying underlying instruments to calculate bond spreads  and expected losses for ICRAS agencies. In the beginning of credit reform,  OMB used the spreads on U.S. corporate bonds at different risk levels to  estimate risk premia (and thus expected loss). That is, OMB determined  the interest rate spread for U.S. corporate bonds within a risk rating  category and used those spreads to compute a risk premium for each  ICRAS category. In fiscal year 1997, OMB began using the interest rate  spreads on other instruments, including foreign government bonds. After interest rates on some types of international bonds rose in the late  1990s,",
      " OMB determined that basing expected loss rates only on interest  rate spreads resulted in estimates that were too high. According to OMB, it  was decided in the discussions within the executive branch and with  Congress leading to credit reform that only the expected cost to the  government was relevant for estimating default losses to the government  under credit reform. OMB decided to change its method for determining  default losses, primarily because emerging research showed that factors  other than expected losses from defaults account for a significant portion  of interest rate spreads. According to this literature, differences in  liquidity and tax considerations, and an aspect of credit risk that OMB  termed \u201cportfolio risk,\u201d affect interest rates on international bonds.",
      " Studies cited by OMB and other related literature indicate that factors  other than expected losses from defaults account for a high proportion of  interest rate spreads\u2014in some cases, most of the spread\u2014especially on  higher-quality bonds. For bonds with risk ratings that correspond to the  riskier ICRAS rating categories, 5 and higher (riskier), conclusions from the  literature that OMB cited and other literature that we reviewed are less  clear. One study cited by OMB found that differences in tax treatment, and  compensation for risk beyond expected losses, explained most of interest  rate spreads; however, because of limited data, that study did not include  bonds in risk categories higher than those corresponding to ICRAS  category 4.",
      " A second study cited by OMB found that market interest rate  spreads on bonds were greater than those that would be predicted based  on corporate default data. The differences were particularly apparent for  bonds in investment-grade categories and were smaller for speculative\u00ad grade bonds. For the fiscal year 2002 budget, OMB imposed an across-the-board  reduction in the expected loss estimates for ICRAS risk categories 1  through 8. OMB said that it did this to eliminate part of the spread  between other bonds and U.S. Treasury bonds to come closer to measuring  only default cost. The risk factors and expected loss estimates for the  bottom three categories did not change.",
      " A further rationale for adjusting the expected loss rates, according to Ex- Im Bank officials, was that the bank had calculated several downward  reestimates of its subsidy costs since the inception of credit reform. They  viewed this as evidence that the bank\u2019s original subsidy cost estimates were  conservative. According to Ex-Im Bank officials, several factors influence  the bank\u2019s subsidy cost reestimates, including changes in the outstanding  balance of its cohorts (the term \u201ccohort\u201d refers to the financing extended in  a given fiscal year, which Ex-Im Bank further subdivides by product type);  changes in cohort performance or average riskiness;",
      " and changes in OMB\u2019s  expected loss rates. Ex-Im Bank calculated a net downward reestimate of  about $368 million in fiscal year 1999, followed by a larger net downward  reestimate of about $1.4 billion in fiscal year 2000 and a subsequent net  downward reestimate of about $300 million in fiscal year 2001. (In these  years, upward reestimates of some cohorts were more than offset by larger  downward reestimates of other cohorts.) There were small net downward  and upward reestimates in fiscal years 1992 through 1995, and Ex-",
      "Im Bank  did not calculate reestimates in fiscal years 1996 through 1998. Ex-Im  Bank\u2019s reestimates represent the bank\u2019s ongoing assessment of the  riskiness of its post-credit reform financing at a given point in time and are  not a final assessment of the performance of cohorts that have not reached  maturity at the time of the reestimate. An Ex-Im Bank official noted that  future claims or defaults could occur on cohorts that have not reached  maturity, possibly causing upward reestimates to certain cohorts in the  future. OMB\u2019s Current Methodology  Bases Expected Loss Rates  on Corporate Default Data,",
      "  Interest Rate Spreads, and  Recovery Assumptions OMB\u2019s current methodology uses rating agency corporate default data and  interest rate spreads to estimate default probabilities and makes  assumptions about recoveries after default to estimate expected loss rates.  The methodology estimates default rates for federal international credits  using a complex model that OMB developed. These rates were generally  lower for fiscal years 2004 and 2005 than the underlying corporate default  rates that OMB used in estimating its rates. OMB introduced its current  methodology, which estimates expected loss rates for ICRAS categories 1  through 8, for use in fiscal year 2003,",
      " and made modifications for fiscal  years 2004 and 2005. (App. VI contains a technical description of the  methodology.) OMB Model Bases Default  Estimates on Corporate Default  Data and Spreads OMB uses rating agency corporate default data and information on interest  rate spreads to determine expected defaults through a complex model. The  model has two empirical relationships, one between ratings and defaults  and the other between interest rate spreads and defaults. The model  combines the relationships to arrive at OMB\u2019s expected default rates across  ICRAS risk categories. Historical default rates on corporate bonds by risk  rating category are the key inputs to both components of the model.",
      " The first component of the model bases the probability that ICRAS agency  borrowers will default on default rates for corporate bonds published in  2000 by a nationally recognized private rating agency, Moody\u2019s Investors  Service. The risk categories associated with the Moody\u2019s corporate default  probabilities are converted to ICRAS risk categories. OMB\u2019s model uses  two Moody\u2019s data series on U.S. corporate bond defaults, which OMB  combined into a single series. The data series used for the four lowest-risk  ICRAS categories (1-4) includes default rates on rated corporate bonds by  risk rating category during 1920-",
      "1999. The data series used for the next four  (higher risk) ICRAS categories (5-8) includes default rates on rated  corporate bonds by risk rating category during 1983-1999. The second component of the model uses data on interest rate spreads to  make adjustments to the same Moody\u2019s historical default data. The current  method does not use spread information as the primary indicator of default  risk, as OMB\u2019s former method did. Instead, it uses spread information as a  signal of how current market conditions might differ from those reflected  in the Moody\u2019s historical data. The model is designed to adjust historical  default rates by rating category up or down in cases where interest rate  spreads in a category are unusually high or low relative to the average  spreads for that category.",
      " The adjustment in the model gives greater  weights to more recent spreads in calculating the averages. To estimate this  relationship, OMB used interest rate data on international bonds from  Bloomberg. The default probabilities reflected in OMB\u2019s expected loss rates for fiscal  years 2004 and 2005 were generally lower than the corporate default rates  that OMB used in its model. Figure 3 illustrates OMB\u2019s fiscal year 2004 and  2005 default probabilities for 1-8 years for three ICRAS ratings categories  and the Moody\u2019s corporate default rates for corresponding risk  categories. The graph shows that OMB default probabilities are somewhat  lower than the corporate default rates for the ratings categories shown.",
      "  (App. VII presents similar comparisons for ICRAS categories 1-8.) Based on  information we obtained on OMB\u2019s model, this difference would be  expected to result from interest rate spreads\u2019 trending significantly  downward for some rating and maturity categories. It could also result  from features of the model specification. We could not determine the  reasons for the difference because we did not replicate OMB\u2019s model and,  in response to our questions, OMB did not identify specific reasons for the  differences. (App. VI contains more information about model specification  issues.) After determining expected default rates, OMB combines the default rates  with an assumption about the recovery rate\u2014the percentage of defaulted  principal and interest that will be recovered over time\u2014to obtain expected  loss rates.The assumed recovery rate is a key driver of the expected loss  rates.",
      " OMB assumed an across-the-board recovery rate of 17 percent for  the fiscal year 2003 budget\u2014that is, the government was expected to lose  $830 and recover $170 for every $1,000 in defaulted credits. It assumed  lower recovery rates of 12 percent for the fiscal year 2004 budget and 9  percent for the fiscal year 2005 budget. OMB\u2019s Current Methodology  Lowered Expected Loss  Rates OMB\u2019s current methodology reduced the loss rates that U.S. credit agencies  are expected to incur on international credits they provide. Between fiscal  years 2002 and 2005,",
      " expected loss rates fell across ICRAS risk categories 1  through 8. As shown in figure 4, expected loss rates for credits of 8-year  maturity were, on average, about 58 percent lower on a present value basis  in fiscal year 2005 than 2002 (the last fiscal year in which OMB used its  former approach to develop the loss rates).The largest declines were in  risk categories 1 through 5. Expected loss rates for ICRAS agencies have  varied over the credit reform period. (See app. VIII for information on  trends in expected loss rates for ICRAS agencies between fiscal years 1997  and 2005.) fiscal year 2004 would be expected to push loss rates upward.",
      " Expected  loss rates in fiscal year 2005 were generally similar to those in fiscal year  2004, with slight declines for some risk categories. Although OMB\u2019s model  generated lower default rates for fiscal year 2005 than for fiscal year 2004, a  further decrease in its recovery rate assumptions resulted in little change to  expected loss rates in fiscal year 2005. Current OMB  Methodology Has  Lowered Ex-Im Bank\u2019s  Projected Subsidy  Costs and Budgetary  Needs By lowering loss rates for most ICRAS risk categories, OMB\u2019s current  methodology has contributed to lower Ex-",
      "Im Bank projections of subsidy  costs and, therefore, lower budgetary requirements. Ex-Im Bank\u2019s  obligation of budget authority for new subsidy costs declined significantly  for fiscal year 2003, when the current methodology took effect. In addition,  Ex-Im Bank calculated a large downward reestimate of the subsidy costs of  its outstanding portfolio at the end of fiscal year 2002 using the new loss  rates. With lower loss rates, Ex-Im Bank\u2019s fees are generally projected to  provide greater coverage of expected losses, fully offsetting losses in some  budget categories. Finally, during this period, Ex-Im Bank modified its  approach for calculating loss allowances in its financial statements.",
      " This  involved making certain changes to be more in line with applicable  accounting standards and, because of the changed nature of OMB\u2019s loss  rates, using different and higher loss rates than it used in its budget  documents to calculate subsidy costs. Lower OMB Loss Rates  Reduce Ex-Im Bank Budget  Authority Needed to Cover  Subsidy Costs Partially because of OMB\u2019s lower loss rates, Ex-Im Bank required less  budget authority to cover its lower subsidy costs. Estimates and obligation  of budget authority for subsidy costs are determined by the amount and  risk of business the bank expects to, or does, undertake in a year,",
      " as well as  expected loss rates and fees charged to borrowers. Changes in any one of  those factors can alter budget needs. According to Ex-Im Bank officials,  OMB\u2019s lower loss rates were a key determinant in the declines in its subsidy  cost estimates, its budget authority obligated for new subsidy costs, and its  2002 reestimate of subsidy costs. amount of budget authority carried over from the previous fiscal year. Ex- Im Bank requested no new subsidy budget authority in fiscal year 2004 but  anticipated $460 million in new subsidy cost obligations.The amount of  budget authority carried over from previous fiscal years was seen as  sufficient to cover anticipated fiscal year 2004 subsidy costs.",
      " Ex-Im Bank  requested $126 million for subsidy budget authority in fiscal year 2005, but  it anticipated $491 million in obligations for subsidy costs. The bank  continued to have a significant amount of budget authority carried over to  fund the difference. In addition, Ex-Im Bank\u2019s obligation, or usage, of budget authority for new  subsidy costs dropped when the current methodology took effect, as  shown in figure 5. The bank\u2019s obligation of subsidy budget authority had  dropped in fiscal years 2001 and 2002, in part because of reductions in new  financing in those years. Its obligation of budget authority for new subsidy  costs in fiscal year 2003 was about 55 percent lower than in fiscal year  2002,",
      " even though the total amount of its new financing, and Ex-Im Bank\u2019s  estimate of its average risk level, in these two fiscal years was similar. According to Ex-Im Bank officials, OMB\u2019s lower loss rates also contributed  to a significant downward reestimate of the subsidy costs of the bank\u2019s  outstanding credits, based on its first subsidy cost reestimate that used the  lower rates. At the end of fiscal year 2002, using the OMB loss rates for  fiscal year 2004, Ex-Im Bank calculated a net downward reestimate of  about $2.7 billion, significantly lowering its estimated subsidy costs for  outstanding credits.",
      " Downward reestimates on long-term guarantees  represented about 72 percent of the reestimate. About 63 percent of the  reestimate was calculated on financing extended between fiscal years 1997  and 2001, much of which has likely not yet matured. With Lower Loss Rates, Ex- Im Bank Fees Are Projected  to Provide Greater Coverage  of Losses With the decline in OMB\u2019s loss rates, Ex-Im Bank\u2019s exposure fees are  projected to generally provide greater coverage of its expected losses.The determination of the relationship between exposure fees and expected  losses and, thus, the calculation of budget subsidy cost,",
      " depends on the risk  rating for specific Ex-Im Bank transactions. Ex-Im Bank generally sets its  exposure fees at, or in the case of some corporate transactions slightly  above, the minimum level required by an agreement among certain OECD  member countries. This agreement among OECD countries was designed to increase  transparency and provide common benchmarks for ECA exposure fees,  thereby reducing fee competition among exporters. Participating ECAs  may charge fees above the OECD minimum if they do not view the fees as  sufficient to cover their expected losses on a given transaction, but they are  expected to charge at least the minimum. For private sector transactions,",
      "  participating ECAs that we spoke with often charge fees above the OECD  minimum fees. (See app. II for additional information on the OECD  minimum fee determination process.) Using fiscal year 2005 expected loss rates, Ex-Im Bank exposure fees at the  OECD minimum fee level would be projected to fully cover expected losses  in ICRAS categories 1\u20135 in certain cases (see fig. 6). In comparison, using  fiscal year 2002 expected loss rates, Ex-Im Bank exposure fees at the  OECD minimum fee level were projected to cover expected losses only for  ICRAS category 1.",
      " The degree to which Ex-Im Bank\u2019s exposure fees are projected to cover its  expected losses may differ from this illustration, depending on the type of  borrower or transaction. For example, when Ex-Im Bank assigns a  corporate borrower a higher risk rating than that of the country where the  borrower is located, the bank may incur subsidy costs in more risk  categories or may incur larger subsidy costs for corporate borrowers rated  in categories 6 through 8. This is because Ex-Im Bank charges fees for  corporate transactions that are close to the OECD minimum fee for the  country in which the corporate borrower is located, even when the  transaction has a higher (riskier)",
      " rating than the country. In addition, the  OECD guidance does not apply to some transactions, notably aircraft  financing. In generally setting exposure fees at or near the OECD minimum level, Ex- Im Bank charges fees that are among the lowest of ECAs. Ex-Im Bank\u2019s low  pricing relative to other ECAs has been noted for some time. According to  U.S. and OECD officials, whereas Ex-Im Bank previously appeared to face  some pressure to charge higher fees because of its budget costs (and  appeared to support raising the minimum OECD fees as well), the lower  budgetary costs of Ex-Im Bank\u2019s activities have lessened this pressure.",
      " Ex-Im Bank Modified Its  Method for Determining  Financial Statement Loss  Estimates, Generally Using  Higher Loss Rates Than for  Budget Calculations Beginning with its 2002 financial statements, Ex-Im Bank modified its  approach for calculating loss allowances, which involved segmenting its  portfolio in line with applicable accounting standards and diverging from  its former practice of using OMB loss rates to calculate these allowances.  Because Ex-Im Bank prepares its financial statements according to private  sector, rather than federal, accounting principles, there has always been  some difference between the bank\u2019s subsidy cost and loss allowance  estimates. This is because of differences in the treatment of fee income  between private sector and federal accounting approaches.",
      " While Ex-Im  Bank is not required to use OMB loss rates when calculating financial  statement loss allowances, Ex-Im Bank officials said that they had  historically chosen to do so in order to link the loss estimates prepared for  budget purposes with the financial statement loss allowances. However, in  its 2002 financial statement, Ex-Im Bank began applying higher loss rates  than OMB\u2019s loss rates to most of its portfolio. Ex-Im Bank officials said that  with the modification, its approaches to calculating subsidy costs and loss  allowances differ not only in fee treatment but also in their expectations of  loss. According to Ex-",
      "Im Bank officials, the bank modified its financial  statement loss allowance methodology for two reasons. First, Ex-Im Bank  discussed with its new auditors, Deloitte & Touche, the bank\u2019s approach for  accounting for guarantees and insurance, which comprise a majority of the  bank\u2019s portfolio. They determined that relevant accounting standards  suggested that it would be appropriate to record these credits at their fair  market value. This called for using different loss rates than those derived  using OMB\u2019s current methodology, which focuses on credit loss. Second,  the bank determined that it should value its impaired credits in a manner  more consistent with relevant accounting standards.",
      " Deloitte & Touche  observed that Ex-Im Bank had not historically separated its portfolio into  impaired and unimpaired groupings in accordance with accounting  guidance, even though a significant portion of these loans and claims were  likely impaired. Total loans and claims represented, on average, about 24  percent of the bank\u2019s total exposure during fiscal years 1999-2003. In addition, when initially estimating its 2002 loss allowances using its  former approach and OMB\u2019s fiscal year 2003 loss rates, Ex-Im Bank  determined that its allowances would have dropped substantially, from  about $10 billion for 2001 to about $6 billion for 2002,",
      " a decrease of about  40 percent. Because of the size of the reduction and the importance of loss  allowances as an overall reflection of an institution\u2019s expected loss from  year to year, the bank\u2019s auditor identified this as a key area to be reviewed. Ex-Im Bank\u2019s approach for calculating its loss allowances, beginning with  the 2002 financial statement, used different loss rate methodologies for  different parts of its portfolio and distinguished between impaired and  unimpaired credits. To determine the loss allowances for its impaired  loans and claims and for all of its loan guarantees and medium- and long\u00ad term insurance, Ex-Im Bank applied higher loss rates than those that were  used in 2001.",
      " These higher rates were used to calculate about 95 percent of  the 2002 loss allowance. Ex-Im Bank had asked OMB to provide these  higher rates using its former, spread-based methodology. Ex-Im Bank  officials stated that the spread-based loss rates were more appropriate for  its outstanding guarantees and insurance because they provided a more  market-based valuation that was better suited to a fair value presentation.  To determine the 2002 loss allowances for its unimpaired loans and claims,  Ex-Im Bank applied OMB\u2019s expected loss rates for the fiscal year 2004  budget. These rates were generally lower than the rates used to calculate  the loss allowance in 2001.",
      " For 2002, the bank\u2019s loss allowances were about  6 percent higher than their 2001 level. For 2003, loss allowances were about  4 percent lower than their 2002 level. Loss Estimation  Involves Challenges  and OMB Methodology  Is Not Transparent OMB\u2019s methodology for estimating the expected loss rates for international  credits provided by U.S. agencies involves challenges, and it is not  transparent. Assessing the risk of such credit activity, particularly in  developing countries, is inherently difficult. Corporate default data similar  to those used by OMB are also used by other financial institutions to assess  risk,",
      " because of the data\u2019s broad coverage and limitations in other data  sources. However, historically, the data have been based largely on the  default experiences of U.S. firms, and the data\u2019s historical coverage of  developing countries has been limited. In addition, more recent Moody\u2019s  data than were used in estimating OMB\u2019s model show higher defaults in  some risk categories. In choosing this data to predict default, OMB  analyzed Ex-Im Bank defaults over a somewhat narrow period. In addition,  while OMB has assumed increasingly lower recovery rates since  implementing its method, its basis for the recovery rates and changes in  them has not been transparent.",
      " Finally, despite its complexity and the  changes it implied, OMB developed the current methodology  independently and provided ICRAS agencies with limited information  about the methodology. Assessing ECA Financing  Risk is Difficult, and Data  Used by OMB May Have  Inherent Limitations for  Predicting Ex-Im Bank Risk Assessing ECA financing risk presents data challenges. Available indicators  of default risk, including certain financial institutions\u2019 own financing  histories, often have limitations. Historical data on corporate bond  defaults, while used by many institutions, may also have inherent  limitations for assessing risk in developing countries, because these data  have historically been based primarily on corporations in higher-income  countries.",
      " In addition, corporate default data now show higher defaults in  certain higher-risk categories than the data OMB used. OMB\u2019s analysis  showing comparability between those data and Ex-Im Bank default  experience was based on Ex-Im Bank credits primarily from a relatively  narrow period in the 1990s and did not include other ICRAS agencies. OMB  representatives, in providing oral technical comments on a draft of this  report, said that they inquired about available default data at other ICRAS  agencies but were unable to obtain it. OMB\u2019s staff paper noted the  desirability of adding data from other agencies to its analysis in the future.",
      " Assessing ECA Financing Risk Is  Data limitations and changing environments present challenges for  Difficult  estimating the risk of ECA financing, according to experts and officials  with whom we spoke. Some noted that ECA risk may differ from private  bank risk, in that ECAs may be more exposed to emerging markets and  may have less diversified portfolios, in part because of concentrations of  exposure to particular industries. Officials said that many ECAs incurred  large losses during the 1980s debt crisis, and some did so in the 1990s  during the Asian financial crisis and other instances of sovereign default.  Moreover,",
      " the move among some ECAs, including Ex-Im Bank, toward  extending more credit to corporate or other nonsovereign borrowers,  rather than primarily providing financing to sovereign governments, adds  further complexity to estimating risk. According to several ECA officials,  corporate activity may involve different risks, which include potentially  greater difficulty in recovering assets in cases of default. Some ECAs and other financial institutions lack data on their own  financing that are of sufficient historical coverage and reliability for  predicting the risk of future financing activities. In addition, a lack of risk  ratings for financing in earlier decades can complicate the use of available  historical data.",
      " Historical data on the default experience of sovereign bond  issuers might be useful in estimating ECA credit risk, and ratings agencies  now publish such data. However, according to several experts, the limited  risk rating history of sovereign bond issuers is a significant limitation to  relying on this data to assess risk in developing countries. Almost no  developing country sovereign bond issuers have ratings histories that begin  before the early 1990s. Corporate Bond Default Data  Are Widely Used but Lack Broad  Historical Coverage of  Developing Countries Corporate bond default rates from nationally recognized rating agencies  are widely used by financial institutions in assessing risk but may have  certain inherent limitations for predicting defaults in developing countries.",
      "  Institutions use the data because of the large number of firms and long  historical coverage in the rating agencies\u2019 databases. However, while  international corporations are now well represented in these data, the data  historically have included primarily U.S. firms. For data with international  coverage, the coverage has historically been largely of high-income country  borrowers. One study of a major rating agency database found, for  example, that 94 percent of the nonbank firms rated were in high-income  countries, 5 percent were in upper-middle-income countries, and 2 percent  were in lower-middle-income countries. The data\u2019s more limited historical  coverage of developing country default experiences may limit the  predictive value of the data for such countries,",
      " according to some officials.  Officials from one institution said that although they used corporate bond  data in determining expected default rates, whether countries were in  emerging markets was a consideration in their adjustments of the default  rates to reflect their own performance expectations. More Recent Moody\u2019s Data Show  Higher Defaults in Some Risk  Categories More recent Moody\u2019s bond default rates are higher for some higher-risk  categories than the Moody\u2019s data for 1983-1999 that OMB\u2019s model uses to  estimate default rates. The more recent data show higher default rates for  risk levels that correspond to ICRAS categories 7 and 8, the highest risk  categories in which Ex-",
      "Im Bank undertakes new business. For example, for  fiscal year 2005, OMB\u2019s model predicted a default rate for ICRAS category  8, assuming a maturity of 8 years, of 41 percent. The Moody\u2019s default rate  for 1983-1999 was 48 percent, whereas the rate was 52 percent for 1983\u00ad 2001, and 58 percent for 1983-2003. Based on our review of available  information on OMB\u2019s default model, the model would be expected to  generate higher default rates for these categories if these more current  Moody\u2019s data were used.",
      " OMB Used Ex-Im Bank Data  That Primarily Covered a Limited  Period to Establish  Comparability with Corporate  Data In deciding to use corporate default data to predict U.S. international credit  agencies\u2019 defaults, OMB compared data on Ex-Im Bank historical defaults,  primarily from a limited period, with corporate default rates. Among ICRAS  agencies, Ex-Im Bank generally extends the largest portion of the U.S.  government\u2019s new foreign credit exposure each year. OMB did not  compare other ICRAS agencies\u2019 defaults with the corporate data. OMB  representatives, in providing oral technical comments on a draft of this  report,",
      " said they inquired at other ICRAS agencies about default data but  were unable to obtain additional data. OMB recognized in its staff paper the  value of adding other agencies\u2019 data to its analysis in the future. The Ex-Im Bank credits that OMB analyzed were primarily from a relatively  narrow historical period in the 1990s. OMB examined the default  probabilities of certain Ex-Im Bank transactions, sorted by risk rating, and  concluded that Ex-Im Bank default rates were generally somewhat lower  than those of corporate bonds across comparable rating categories.However, a comparison based primarily on lending activity over a relatively  short time frame may not be representative of Ex-",
      "Im Bank\u2019s overall default  risk. In addition, according to several experts and officials, data that  reflected only the international business climate of the 1990s would not be  representative of the risk of international lending. For this comparison, OMB used data from an Ex-Im Bank database  covering guarantees and medium-term insurance transactions from fiscal  years 1985-1999. This data set did not include loans, which comprised a  significant part of Ex-Im Bank financing through the early 1980s, and which  experienced substantial defaults during an international debt crisis that  began in the early 1980s.",
      " While we could not determine the specific data  that OMB analyzed,our analysis of the 1985-1999 database indicated that  the majority of observations in the overall database, and a strong majority  of observations for which risk ratings were available, were from the mid- to  late-1990s. Recovery Rate Assumptions  Have Not Been Transparent The basis for OMB\u2019s recovery rate assumptions and the changes over time  has not been transparent. During our audit work, OMB did not respond to  questions about the specific basis for its recovery rate assumptions of 17  and 12 percent, respectively, for fiscal years 2003-",
      "2004. OMB further  reduced assumed recovery rates to 9 percent for fiscal year 2005. In  discussing recovery rate assumptions during the audit work, OMB cited its  staff paper, which contained a recovery rate of 20 percent that OMB said  was based generally on the ratio of aggregate recoveries to aggregate  claims in Ex-Im Bank historical data. However, in discussions on a draft of  this report, OMB representatives said that the market price of credits with  the lowest ICRAS rating (category 11) was the predominant basis for  recovery rates, although they did initially also consider data on Ex-",
      "Im Bank  recoveries. OMB representatives said using the market price of the lowest\u00ad rated credits is based on the assumption that this value represents the most  the U.S. government would recover in the event of a default. They provided  information to show that changes in OMB\u2019s calculation of market prices of  these credits accounted for drops in the recovery rate assumptions over  time. Changes in OMB\u2019s calculation of these prices resulted in part from  technical comments by Treasury officials. Our analysis of the 1985-1999 Ex-Im Bank data indicates that the ratio of  aggregate recoveries to aggregate claims in that database is about 19  percent.",
      " Recovery rates that were based on aggregate data over a limited  time period would tend to underrepresent actual recoveries because of the  limited period for recoveries to be observed, especially those associated  with defaults occurring at the end of the period. According to financial institution officials and rating agency analysis,  recovery rates tend to vary by borrower type and risk and can fluctuate  cyclically. OMB\u2019s recovery rates assumptions appear to be conservative  compared with recovery rates assumed by other financial institutions.  Institutions we talked to generally assumed higher recovery rates than  OMB, and some tailored their recovery rate assumptions according to the  type of borrower.",
      " According to rating agency analysis, recovery rates are  generally lower for riskier credits and fall during periods when defaults are  higher. If recovery rates assumed by OMB are lower than likely Ex-Im Bank  recoveries, they will offset, to some degree, lower expected defaults in the  calculation of expected losses. Because expected losses are calculated by  combining expected default and expected recovery rates, an unrealistically  low recovery rate would necessarily offset an unrealistically low expected  default rate, within certain ranges. OMB Developed Method  Independently and Provided  Agencies Limited  Information Because of OMB\u2019s unique role in developing the loss rates that ICRAS  agencies use to calculate subsidy costs,",
      " these agencies rely on OMB to  comply with credit reform requirements that address the agencies\u2019  responsibilities for assuring the reliability of their subsidy cost estimates.  Despite the complexity of the current methodology and its implications for  ICRAS agencies\u2019 subsidy costs, OMB developed the current methodology  predominantly on its own, receiving some input from one ICRAS agency.  Some ICRAS officials said that OMB provided agencies with limited  information about the methodology\u2019s basis or structure. Credit reform guidance on developing credit subsidy estimates addresses  the procedures and internal controls that agencies should have in place to  ensure that their estimates are reliable. It states that any changes in  factors and key assumptions,",
      " such as default and recovery rates, should be  fully explained, supported, and documented. The purpose of thorough  documentation is to enable independent parties to perform the same steps  and replicate the same results with little or no outside explanation or  assistance. OMB representatives said that the current methodology was reviewed  within OMB and circulated among the ICRAS agencies, although several  ICRAS agency officials told us OMB had provided them limited  information. According to these officials, OMB presented its methodology  as an essentially completed approach and held several meetings during  2001 and early 2002 to discuss it. Officials who received information and  attended certain meetings told us that it was difficult to understand or  evaluate the methodology based on the information provided.",
      " For example,  prior to one meeting, OMB circulated a two-page discussion paper that  discussed OMB\u2019s rationale for adopting the current methodology and  generally described its approach and a technical appendix to a staff paper  that contained numerous equations describing a theoretical model. However, OMB representatives told us that some of the equations in this  appendix were not actually used in the methodology while other equations  not contained in the appendix were used. At one meeting, according to a  Department of Agriculture economist, OMB provided only the expected  loss rates for fiscal year 2003 and a graph that predicted a decline in Ex-Im  Bank subsidy rates.",
      " This official said it was not possible to understand the  methodology by only examining its results. She said that although she and  other ICRAS agencies representatives posed various questions about the  method\u2019s underlying data and assumptions, OMB representatives did not  provide substantive responses and stated that the method was too complex  to explain. OMB representatives said the methodology was not reviewed  outside the U.S. government. After presenting the methodology, OMB received comments on the  methodology from at least one ICRAS agency. Treasury officials told us that  when they examined the proposed expected loss rates for fiscal year 2003,  they objected to the substantially lower loss rates for the riskiest countries,",
      "  those in ICRAS categories 9 through 11; asked to see the underlying data  used; and raised methodological issues regarding how those rates were  calculated. The Treasury officials said that while they had some questions  about the expected loss rates for other ICRAS categories, they focused  their attention on the treatment of the riskiest countries. The reason, they  said, was that planned drops in expected loss estimates for these countries  would sharply increase the cost to the United States of forgiving existing  debt, such as through international agreements to forgive the debt of highly  indebted poor countries. According to Treasury officials, OMB revised its  approach for estimating expected losses in ICRAS categories 9 through 11,",
      "  which resulted in loss rates that were not significantly changed from those  in effect before fiscal year 2003. We found that some financial institutions used outside experts or  consultants in developing their loss estimation methodologies. Some also  described procedures that exist to ensure their methodology\u2019s ongoing  objectivity and reliability. For example, other government agencies, audit  organizations, and outside experts have been involved in developing or  reviewing the methodologies of two foreign ECAs that we contacted. Also,  regulatory bodies, audit organizations, and internal risk management  groups are involved in overseeing bank loss estimation methodologies. Conclusions In passing the Federal Credit Reform Act in 1990,",
      " Congress required  agencies to develop reasonable estimates about the long-term cost to the  government of federal credit programs, to ensure a sound basis for  decisions regarding program budgets. For international credit agencies  such as Ex-Im Bank, which finances activities in relatively risky markets,  predicting long-term costs and determining appropriate budget subsidy  amounts is especially challenging. Because of the importance of reasonable  program cost estimates under credit reform, such estimates need to be  made with appropriate data and using appropriate analytical techniques.  While ICRAS agency subsidy costs have several determinants, including the  particular risk ratings assigned to different borrowers, OMB\u2019s directions to  ICRAS agencies regarding loss rates across risk levels are an important  element of estimating subsidy costs.",
      " OMB\u2019s shift to using historical corporate default data in its methodology for  estimating loss rates of ICRAS agency activities has some basis, given the  practices of other financial institutions and limitations in available  historical data. However, the predictive value of those corporate default  data for the financing undertaken by Ex-Im Bank or other ICRAS agencies  has not yet been established. Obtaining additional information on agencies\u2019  default and repayment experiences over time will allow better assessments  of the suitability of using data such as corporate bond default rates. The lack of transparency of OMB\u2019s current loss rate methodology raises  questions about how it determines expected loss rates.",
      " Because of this lack  of transparency, combined with the method\u2019s complexity, the multiple  ICRAS agencies that use the loss rates have incomplete information about  how those rates are determined and what factors are driving changes over  time. OMB\u2019s unique role in setting ICRAS agency loss rates suggests that  greater transparency would be appropriate. In addition, other credit reform  tools that multiple credit agencies use to calculate subsidy costs, such as  OMB\u2019s credit subsidy calculator, have been audited to assure users about  their accuracy. Independent review of OMB\u2019s methodology would provide  similar assurance about the reliability of the loss rates and the subsidy  costs developed from these rates,",
      " and could help facilitate ICRAS agency  financial statement audits. Recommendations for  Executive Action To improve the transparency of the subsidy cost estimation process and  help ensure the validity of estimates over time, we recommend that the  Director of the Office of Management and Budget take the following five  actions: Provide ICRAS agencies and Congress a technical description of OMB\u2019s  expected loss methodology, including the default model, the key  assumptions OMB made, and the data it used. Provide similar information in the event of significant changes in its  method of calculating expected loss rates. Ensure that data from nonagency sources\u2014for example, rating  agencies\u2019 corporate default data,",
      " which are used to estimate expected  loss rates\u2014be updated as appropriate. Request from Ex-Im Bank and other U.S. international lending agencies  the most complete and reliable data on their default and repayment  histories and periodically obtain updated information, so that the  validity of the data on which the current methodology is based can be  assessed as sufficient agency data are available. Arrange for independent methodological review of OMB\u2019s expected loss  rate model and assumptions and document that review. Agency Comments and  Our Evaluation We provided a draft of this report for formal comment to the Director,  Office of Management and Budget; the Chairman, Export-",
      "Import Bank; the  Secretary of the Treasury; the Chairman, Board of Governors of the Federal  Reserve System; the Comptroller of the Currency; and the Chairman,  Federal Deposit Insurance Corporation. We also provided a copy of the  draft report for technical review to the Chairman, Securities and Exchange  Commission, and officials at the Foreign Agricultural Service of the  Department of Agriculture. OMB provided written comments on the draft  report, which are reprinted in appendix IX. OMB, Ex-Im Bank, the  Comptroller of the Currency, and the Securities and Exchange Commission  provided technical comments, which we incorporated as appropriate.",
      "  Other agencies reviewed the report but had no comments. We also  obtained technical comments from bank and foreign ECA officials on our  descriptions of their practices. OMB generally agreed to implement the report\u2019s recommendations to make  more information available on its expected loss methodology, update the  nonagency data used in the model, obtain additional agency default data  over time, and obtain technical review. OMB also expressed concern about  the report\u2019s statement that OMB\u2019s method for determining loss rates was  not transparent, observing that our report generally describes the method.  We believe that, while we do present in this report a substantial amount of  information on OMB\u2019s loss methodology,",
      " obtaining that information  required considerable resources and effort with certain information  provided only during the agency comment period despite repeated  inquiries by GAO, and that similar information should be more readily  available to affected agencies and Congress on an ongoing basis. We are sending copies of this report to appropriate Congressional  Committees. We are also sending copies of this report to the Director,  Office of Management and Budget; the Chairman, Export-Import Bank; the Secretary of the Treasury; the Chairman, Board of Governors of the Federal  Reserve System; the Comptroller of the Currency; the Chairman, Federal  Deposit Insurance Corporation; the Chairman, Securities and Exchange  Commission;",
      " and the Administrator, Foreign Agricultural Service of the  Department of Agriculture. We also will make copies available to others  upon request. In addition, the report will be available at no charge on the  GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me  on (202) 512-4346. Additional GAO contacts and staff acknowledgments are  listed in appendix X. Objectives, Scope, and Methodology The Export-Import Bank Reauthorization Act of 2002 directed GAO to  report to the House of Representatives Committee on Financial Services  and the Senate Committee on Banking,",
      " Housing and Urban Affairs on the  reserve practices of the Export-Import Bank (Ex-Im Bank) as compared  with the reserve practices of private banks and foreign export credit  agencies (ECA). The committees were specifically interested in Ex-Im  Bank\u2019s method for estimating the subsidy costs of its financial activities for  budgetary purposes in accordance with the Federal Credit Reform Act of  1990. Ex-Im Bank subsidy costs are determined, in part, on the basis of a  methodology established by the Office of Management and Budget (OMB);  OMB\u2019s methodology changed substantially in fiscal year 2003. In response to the mandate,",
      " we agreed to (1) describe OMB\u2019s current and  former methodologies for estimating expected loss rates for international  credits and the rationale for the recent revisions, (2) determine the impacts  of the current OMB methodology on Ex-Im Bank, and (3) assess the current  methodology and the process by which it was developed. We also agreed to  provide information on the reserve practices of foreign ECAs and  commercial banks. To describe OMB\u2019s current and former methodologies for estimating  expected loss rates for U.S. credit agencies\u2019 international credit and the  rationale for the recent revisions, we reviewed OMB descriptions of the  methodologies and discussed the rationale for the changes to the  methodology with OMB staff and Ex-",
      "Im Bank, Treasury, and Congressional  Budget Office officials. We also reviewed finance literature that OMB cited  as a basis for modifying its approach, as well as related literature, and  examined Ex-Im Bank information about trends in its subsidy cost  reestimates (discussed later). Our description of the former methodology is  also based on prior GAO work, on OMB memoranda to agencies that  participate in the Interagency Country Risk Assessment System (ICRAS)  announcing the risk premiums or expected loss rates to be used in  preparing budget estimates for upcoming fiscal years, and on our analysis  of expected loss rates for fiscal years 1997-",
      "2002, as described later. We  generally describe how ICRAS risk ratings are established and how Ex-Im  Bank rates private borrowers, and while we recognize that the assignment  of risk ratings is an important element in the overall reasonableness of  expected loss estimates, evaluating the reasonableness of the risk ratings  process and of specific ratings was beyond this scope of this engagement. several occasions through their Office of General Counsel, and held some  discussions with OMB staff about the methodology. The information and  documentation we obtained enabled us to generally understand and  describe the methodology and the underlying data, but did not explain all  aspects of the methodology or the specific reasons for certain results.",
      " We  note in the report where our description of certain aspects of the  methodology is incomplete. However, these areas were not material to our  conclusions. The primary documentation we initially reviewed, an OMB paper entitled  \u201cProposal for modification of the ICRAS system,\u201d describes (1) OMB\u2019s  rationale for adopting its new methodology, (2) analysis OMB performed in  developing the methodology, and (3) certain assumptions and equations  that describe a general theoretical model. However, because the paper  describes a theoretical model and includes limited information on specific  analyses performed, data used, key assumptions, and results, and because  not all of the elements of the model described in the paper were used by  OMB,",
      " we required additional information from OMB. To obtain additional  information from OMB, we were required to submit written questions to an  attorney in OMB\u2019s Office of General Counsel for transmission to OMB  technical staff. The attorney also reviewed the responses that the technical  staff prepared before they were provided to GAO. OMB staff provided a  combination of oral and written responses to our initial set of questions,  but because we still lacked important information, we sought additional  clarification from OMB. At OMB\u2019s request, we provided OMB staff with a  Statement of Fact that (1) described our understanding of OMB\u2019s expected  loss methodology based on information provided to that point and (2)",
      "  identified remaining questions. We met again with the OMB attorney and  technical staff, who responded to our questions. We requested an  electronic version of the methodology, which OMB did not agree to  provide. We attempted to further clarify certain issues, but OMB provided  limited responses. OMB representatives provided certain additional  technical information in comments on a draft of this report. OMB provided to ICRAS agencies by dividing each rate by one minus the  recovery rate OMB assumed for each year. We confirmed that process with  OMB. To determine the extent to which the default probabilities estimated  by OMB\u2019s default model differed from the rating agency corporate default  rates used as inputs to the model,",
      " we statistically compared the model\u2019s  outputs for fiscal year 2004 and 2005 with the corporate default rates used. We also determined the current methodology\u2019s output in terms of expected  loss rates across the ICRAS risk categories. To do so, we obtained  electronic copies of Ex-Im Bank\u2019s cash flow spreadsheets for guarantees as  well as copies of the OMB Credit Subsidy Calculator, which converts  agency cash-flow payments into present value terms. To isolate the default  or expected loss component of Ex-Im Bank subsidy costs from other  components (including fees and interest rate subsidies), we entered  consistent information into the Ex-",
      "Im Bank cash flow worksheets for each  ICRAS risk category for fiscal years 2002 through 2005 and conducted this  analysis for 5-year, 8-year, and 10-year credits. We conducted similar  analysis for 8-year credits for fiscal years 1997 through 2002. We  determined the present value of the results, based on a constant discount  rate, using OMB\u2019s credit subsidy calculator. We discussed our analysis with  Ex-Im Bank officials, who generally confirmed our approach and output. Supplement about the bank\u2019s reestimates. Both sources of information  portrayed similar overall trends,",
      " but the Ex-Im Bank internal  information covered a longer period of time than the credit supplement  information. We also discussed with Ex-Im Bank officials the bank\u2019s  process for calculating reestimates, and we examined auditor  workpapers for the 2002 audit of Ex-Im Bank\u2019s financial statement, in  which the auditors examined and verified the bank\u2019s reestimate for  fiscal year 2002. Thus, we determined that the Ex-Im Bank information  was sufficiently reliable for the purpose of showing trends in the bank\u2019s  reestimates since the start of credit reform, as well as the magnitude of  the bank\u2019s reestimates following the implementation of OMB\u2019s current  methodology.",
      " To determine the impact of the current methodology on the changing  relationship between Ex-Im Bank\u2019s projection of expected losses and its  fee income, we compared our analysis of expected loss rates for fiscal  years 2002-2005 with the minimum fees that Ex-Im Bank can charge  under an agreement among participating Organization for Economic  Cooperation and Development\u2019s (OECD) member countries. We  determined these fees using Ex-Im Bank\u2019s Exposure Fee Calculator,  available on its Internet site. Ex-Im Bank officials confirmed our  analysis. To identify how the relationships between expected losses and  fee income could be different for corporate borrowers,",
      " we identified the  way that corporate ratings are assigned and fees determined, based on  interviews with Ex-Im Bank officials and on fee information from Ex-Im  Bank\u2019s Internet site. To determine the impact of the current methodology on Ex-Im Bank\u2019s  financial statement loss allowances, we reviewed Ex-Im Bank\u2019s audited  financial statements for fiscal years 2002 and 2003 and the auditor\u2019s  workpapers supporting its audit of the 2002 financial statement. We  determined that the data in the audited financial statements were  reliable for the purposes of our analysis. We discussed the modification  in Ex-Im Bank\u2019s methodology for calculating financial statement loss  allowances,",
      " including the impact of the current methodology\u2019s lower  loss rates in calculating those loss allowances, with officials from Ex-Im  Bank and its auditor, Deloitte Touche. representatives from OMB, Ex-Im Bank, Treasury, and certain other  agencies that participate in the ICRAS process. We did not replicate or  validate the methodology because we lacked complete documentation and  did not have access to the computer programs that were used to estimate  OMB\u2019s default model. We also did not determine the reasonableness of  specific loss rates that OMB has estimated. To assess the methodology, we interviewed cognizant U.S.",
      " and foreign  officials and experts and reviewed relevant studies. For example, we  discussed loss estimation methodologies with credit experts and officials  from certain financial institutions, including commercial banks, foreign  export credit agencies, and other foreign officials. On the basis of these  discussions and this review, we identified challenges, concerns, and  practices, such as potential limitations in using certain data for projecting  future defaults and the degree to which institutions followed similar or  different practices in estimating default and loss. To determine whether the corporate bond default rates used in OMB\u2019s  default model have varied significantly since the model was created, we  compared the specific Moody\u2019s Investors Service corporate bond default  rates used in OMB\u2019s analysis with updated published versions of those  Moody\u2019s rates.",
      " We obtained information from OMB regarding its comparison of Ex-Im  Bank default rates to the corporate default data used in its model, and we  obtained from Ex-Im Bank the historical data sets that Ex-Im Bank said it  gave OMB. We obtained certain information from OMB about how it  analyzed the Ex-Im Bank data, and while we were able to determine the  time period primarily covered by this analysis, we were not able to  determine the specific data that OMB analyzed because we were unable to  reconcile certain information that OMB provided. In assessing the time  period covered by OMB\u2019s analysis,",
      " we obtained historical country ratings  data from Moody\u2019s and Standard & Poor\u2019s documents and historical ICRAS  ratings information from Ex-Im Bank. We used these to determine the  proportion of observations in the Ex-Im Bank data sets for which risk  ratings at the time of the transaction were available. the underlying systems used to create the data with Ex-Im Bank officials,  who said they view the data they have compiled to be a reasonable  representation of their historical experiences and adequate for its intended  purposes, which were initially to provide information about Ex-Im Bank\u2019s  activities to a potential private sector partner. The officials stated that the  reliability of data about individual transactions is considerably greater for  transactions initiated in 1996 and later because of changes that improved  data entry and verification.",
      " We determined the data were sufficiently  reliable for our purpose of comparing aggregate recovery rate information  in the datasets with the recovery rate assumptions used by OMB. To broadly assess the technical features of OMB\u2019s default model, we  evaluated information provided by OMB that described the model\u2019s  equations and how they were estimated, based on standard econometric  criteria. We did not conduct a complete technical review because we did  not have access to full documentation of the model or the model in  electronic format. To assess the process by which the current methodology was developed,  we discussed with OMB representatives and certain other ICRAS officials  the respective agencies\u2019 role and degree of involvement in developing and  providing comment on the methodology.",
      " We also reviewed documents that  OMB had distributed to ICRAS agencies about its methodology and  discussed with ICRAS officials the general time frames in which the  methodology was developed and the nature of certain meetings that OMB  held to present information about its methodology. The ICRAS officials we  interviewed received information about the methodology\u2019s development  and implementation and have had continuing participation in the ICRAS  process. We also reviewed credit reform guidance on preparing and  auditing subsidy costs. To provide information on the reserve practices of foreign ECAs, we  judgmentally selected a sample of four ECAs that are key competitors of  Ex-",
      "Im Bank or that were identified by knowledgeable U.S. and private  sector officials as entities that had examined or changed their reserve  practices in recent years. These included Compagnie Fran\u00e7aise  d\u2019Assurance pour le Commerce Ext\u00e9rieur in France, Euler Hermes  Kreditversicherungs-Aktiengesellschaft in Germany, the Export Credits  Guarantee Department in the United Kingdom, and Export Development  Canada. In each case, we discussed with officials, and reviewed available  documentation on, the ECA\u2019s statutory mandate, financial activities, and  reserve practices. We also reviewed public financial statements where  available. We also met with officials from other government organizations  in these countries,",
      " including treasury or finance ministries. We met with  officials from the Office of the Auditor General of Canada, France\u2019s Cours  des Comptes, and the U.K.\u2019s National Audit Office, because those offices  audit the financial statements of the Canadian, French, and U.K. ECAs,  respectively. We obtained the perspectives of officials from ECAs and other  government agencies on the difficulties associated with developing loss  estimation methodologies and using available data. In addition, we  discussed these issues with an official from the export credit group of the  OECD, and officials at the Office National du Ducroire/Nationale  Delcrededienst in Belgium,",
      " including the chair of a group of OECD export  credit country risk experts. To provide information on the reserve, or loan loss allowance, practices of  commercial banks, we judgmentally selected a sample of three U.S.  commercial banks with large lending portfolios totaling approximately  $800 billion, including large international exposures. For each bank, we  spoke with management involved in international lending and the  calculation of the bank\u2019s loan loss allowance. In addition, we reviewed the  banks\u2019 financial statements and any documentation that was provided. We  also met with several U.S. banking regulators\u2014the Federal Reserve Board,  Office of the Comptroller of the Currency,",
      " and the Federal Deposit  Insurance Corporation\u2014to discuss the loan loss allowance guidance banks  are required to follow. We reviewed both regulatory and accounting  guidance governing the calculation of the loan loss allowance by  commercial banks. Loss Estimation Practices of Foreign Export  Credit Agencies Significant variation exists among the loss estimation, or reserve, practices  of foreign export credit agencies (ECA) that we consulted. Differences in  mission, structure, and accounting approaches help explain this variation.  Some of these ECAs are expected to avoid competing with private sector  financial institutions, which may result in more exposure to emerging  market borrowers and riskier portfolios as compared with other ECAs.",
      "  These ECAs\u2019 financial relationships with their governments differed, as did  their individual responsibility for covering any losses that might result from  their activities. Some ECAs follow an accounting approach that prescribes  estimating probable losses over time, while others follow an accounting  approach that precludes such estimation. ECAs in Canada and the United  Kingdom (U.K.) have recently adopted or plan to implement new  methodologies for estimating the likelihood of default and loss associated  with their activities. ECAs in France and Germany follow a simpler  approach in which the fees they collect on a given transaction, in  accordance with an international agreement among export credit agencies,",
      "  are regarded as sufficient to cover any likely losses on the transaction. The  French ECA is studying a new accounting system that would enable it to  more closely align its loss expectations with its historical repayment  experiences. (App. I contains information about our objectives, scope, and  methodology for examining the reserve practices of foreign ECAs.) ECAs in Canada and  the United Kingdom  Have Methodologies to  Estimate Future  Defaults and Losses in  Determining Reserve  Levels have similar elements but differ in important respects. The new approaches  have been reviewed by specialists outside the ECA. Mission, Structure, and  Accounting Approaches  Affect Reserve Practices The Canadian and U.K.",
      " ECAs\u2019 mission is to help facilitate national exports,  but their particular methods and structure for doing so differ. The Canadian  ECA is a wholly owned government corporation that was capitalized with  funds from the Canadian government and operates with the full faith and  credit of the Canadian government. According to officials of this ECA, the  entity is self-sustaining, in that it does not receive annual infusions of  budgetary support for its operations or losses. Its largest business activity  in terms of volume is short-term export insurance, but it also offers loans  and medium-term insurance and loan guarantees. According to the  Canadian ECA,",
      " it takes a commercial approach to managing its risks to  ensure its long-term financial health. This institution makes its own  decisions about the credits it will offer and is not prohibited from  competing with private sector financial institutions. Long-term  transactions that it determines are beyond its risk capacity and are  inconsistent with its long-term health may be referred to the government of  Canada for consideration. The Canadian government may accept and  manage those risks provided that there is sufficient national benefit to  Canada. confidence, that it will break even financially. Simultaneous attainment of  these two objectives suggests this ECA has to strike a balance in the types  of transactions and the nature of risks it shall undertake.",
      " The ECA\u2019s risk  premia and larger transactions are subject to approval by the U.K. treasury  department. The level of treasury department control increased following  certain losses the ECA incurred in the late 1990s. Plans are under way to  convert the U.K. ECA into a separately capitalized, self-sustaining entity  that would operate at arm\u2019s length from the U.K. government, responsible  for managing its own financial losses. expected losses. In comparison, the U.S. Export-Import Bank\u2019s (Ex-Im  Bank) loss allowances have averaged about 18 percent of its total exposure  since fiscal year 1999.",
      " Moreover, different degrees of government support affect the extent to  which ECAs are responsible for managing their own financial risk and  protecting taxpayers from loss. For example, as a self-sustaining entity, the  Canadian ECA does not receive annual budgetary support from its  government and would be expected to cover any losses it incurs. In  contrast, although the U.K. ECA is expected to break even over time, it  receives appropriations from the U.K. Parliament to cover anticipated  losses and administrative expenses. It also operates with a treasury  department guarantee of the obligations arising from its guarantees. Both the Canadian and the U.K.",
      " ECAs follow accrual-based accounting  standards, in which revenue and expenses are recorded in the period they  are earned or incurred, even though they may not have been received or  paid. Under such accounting, loss reserves are an estimate of probable  losses in a portfolio as a whole. The reserves are normally recorded long  before actual defaults occur. This contrasts with cash flow accounting, in  which revenue is recognized when it is received and expenses when they  are paid. As discussed in the section on the French and German ECAs, this  method of accounting precludes the matching of revenue and expenses  over time. Canadian and U.K.",
      " ECAs  Have Recently Adopted, or  Will Implement, New  Reserve Methodologies The Canadian and U.K. ECAs have recently revised their existing reserve  practices by adopting or moving toward implementing methodologies that  are designed to more precisely measure risk in their portfolios and ensure  that their reserves reflect those risks. In 2001, the Canadian ECA and the  Canadian Office of the Auditor General, who audits the ECA\u2019s financial  statements, undertook a review of the ECA\u2019s reserve methodology with the  goal of making it reflect current best practices. The ECA studied the  reserve practices of several leading U.S.",
      " and Canadian banks and other  ECAs, including Ex-Im Bank, and examined new developments in bank  regulatory and accounting guidance. According to Canadian ECA  officials, it adopted a new risk assessment model that follows the risk  assessment approaches used by some other financial institutions with  international risk exposures. The new methodology did not have a  substantial impact on the ECA\u2019s level of reserves, although the entity  changed the process by which it calculated its reserves, specifically its  components and what it covers. For example, it began establishing  reserves for committed undisbursed credits, which it had not done  previously. In 1999 the U.K.",
      " treasury department hired a private consulting firm with  credit risk expertise to review the effectiveness of the ECA\u2019s risk  management systems because of concerns about the ECA\u2019s financial  condition, given the larger than expected losses it incurred during the  Asian financial crisis. According to U.K. ECA officials, the consulting firm  concluded that the ECA\u2019s process for estimating expected loss was  reasonable but recommended, among other things, that the U.K. ECA  should better assess the risk of, and establish capital to buffer against,  unexpected losses. The U.K. ECA is upgrading its existing risk assessment  models and processes in response to the review.",
      " Determining Risk Ratings and  Calculating Probability of  Default Standard & Poor\u2019s when they are available; when these ratings are not  available, the Canadian ECA\u2019s risk department assigns ratings using  standard rating agency criteria. They place credits into seven risk  categories. The Canadian ECA then estimates its default probabilities for  its corporate borrowers using published default rates from Moody\u2019s  Investors Service and Standard & Poor\u2019s, taking into account the maturity  of the credits. The Canadian ECA rates sovereign borrowers based on its  own research and country knowledge. Once these ratings are assigned, the  Canadian ECA uses the default probabilities associated with those ratings  from Standard & Poor\u2019s and Moody\u2019s in determining default probabilities.",
      "  For both corporate and sovereign borrowers, the Canadian ECA adjusts  rating agency default probabilities where it believes such adjustments are  necessary. For determining sovereign default probabilities and risk ratings, the U.K.  ECA uses a model it developed in 1991 that assesses countries\u2019 likelihood  of default, using macroeconomic data such as borrower country  indebtedness. Its analysts consider the model\u2019s output and additional  factors, including other country data, rating agency sovereign ratings and  interest rate spreads, in the final assignment of sovereign ratings. For  determining expected loss, the expected duration of default periods and  the recovery rates when defaults occur are taken into account,",
      " along with  the probability of default. For rating corporate transactions, the U.K. ECA uses rating agency  corporate risk ratings where they are available. For corporations that are  not rated by the major rating agencies, the U.K. ECA assigns ratings using  templates developed with a major rating agency. In both cases, once these  ratings are obtained, U.K. ECA officials adjust them, in some cases, based  on a comparison with country sovereign ratings. For assigning expected  losses to different risk ratings, U.K. ECA officials use a Standard & Poor\u2019s  tool that is based on that rating agency\u2019s historical data on ratings  transition and default rates and that incorporates other information such as  recovery rates.",
      " U.K. ECA officials are moving toward a new modeling process that will  directly assess, not only the risk of expected loss, but also the capital  needed to cover unexpected losses or the risk of having greater losses  concentrated in certain periods. This model was developed in consultation  with a U.K. credit risk expert and uses a combination of private ratings  agency data on sovereign bond defaults from the 1990s and U.K. ECA data  on the 1980s default experience of the U.K. ECA. Calculating Expected Loss Once default probabilities have been determined, determining the expected  losses from the defaults involves determining the likely amount of loss  when defaults occur,",
      " based on expected recoveries. The Canadian ECA  uses its own historical data, where sufficient, to estimate recoveries for  sovereign and nonsovereign borrowers. The U.K. ECA determines its own  recovery rates for sovereign borrowers; for corporate borrowers, it makes  some use of rating agency recovery data. Both ECAs assume higher losses  (lower repayments) for corporate than sovereign defaults. The Canadian  ECA also assumes that higher losses will be incurred from defaults on  unsecured credits than on collateralized credits. The calculation of  expected loss forms these entities\u2019 base reserves amount, to which certain  upward adjustments are made.",
      " These adjustments reflect the potential  unexpected losses that are affected by the portfolio effects of  concentration and correlation of financing activities. Adjusting for Portfolio Risk The Canadian ECA follows a portfolio approach in estimating loss and  calculating reserves. In such an approach, the base reserve amount is  adjusted upward because of additional risks related to concentrations of  exposure and correlations among credits. The Canadian ECA adds reserve  amounts for significant exposures to single borrowers, countries, or  industries. It also adjusts upward for the possibility that problems in one  area (for example, in one country) will spread to other parts of its portfolio. The U.K. ECA\u2019s current approach includes some judgmentally determined  upward adjustments to its base expected loss calculations for certain  concentrations of risk.",
      " These include upward adjustments for public,  nonsovereign borrowers, as well as certain systemic risks related to other  countries or industries. Its new risk management approach will make such  adjustments more systematically, as part of its loss model. Determining Fees jointly develop country risk ratings for the purposes of determining the  minimum fees to be charged at each risk rating. (More information about  this agreement is provided below.) However, according to Canadian and  U.K. ECA officials, they may apply higher fees if they determine that the  fees do not adequately reflect their own assessment of the potential loss on  a transaction. Officials from both ECAs stated that setting fee levels in  relation to expected loss is an important component of their financial  stability over time.",
      " Canadian and U.K. Reserve  Methodologies Were Subject  to Internal and External  Review According to officials from the Canadian and U.K. ECAs, their reserve  methodologies (including key assumptions and computer models) have  been or are being reviewed extensively, both internally and externally,  before being adopted. The Canadian ECA\u2019s new methodology was  positively reviewed by an independent national accounting firm with  significant experience in reviewing loan loss methodologies. The U.K.  ECA\u2019s current reserve practices were subject to review by a private  consulting firm. In responding to the consulting firm\u2019s recommendations,  the ECA has worked with the U.K.",
      " treasury, a prominent academic and  credit risk expert, and a private rating agency to develop its new approach.  Its new risk assessment model is based on a well-known credit risk model  that was developed by a leading U.S. bank. ECAs in France and  Germany Use Fees to  Offset Loss ECAs collect constitute these countries\u2019 reserve against future loss. The  government ministries that oversee the ECAs conduct independent  assessments of country risk in setting or adjusting the risk thresholds that  specify the degree to which they will offer credit in certain countries.  Further, the French ECA is developing a method, not yet in place,",
      " to more  independently estimate future losses on the government\u2019s export credit  activities and to track the actual losses incurred over time. French and German ECAs  Provide Export Insurance  and Guarantees on Behalf of  Their Governments and  Follow Government  Accounting Methods France and Germany provide and account for their official export credit  business in similar ways. In both countries, the official ECA is a private  enterprise that insures or guarantees exports on behalf, and at the  direction, of the government. In addition to managing their government\u2019s  export credit business (referred to in both cases as the state account), the  French and German ECAs also engage in business for their own account.",
      "  The French and German state accounts extend primarily medium- and  long-term export credit insurance, whereas the private enterprises that  manage the state accounts primarily sell short-term insurance. The ECAs  are not responsible for any profit or loss incurred on the state account,  which transfers to the government. The French and German ECAs both  receive administrative fees from the government for their services. The government ministries that oversee the ECAs make decisions about  the degree to which the state accounts will offer export credits in certain  countries or to certain borrowers (exposure limits are discussed further  below). French and German state accounts are expected to operate in  riskier markets where private export credit insurance cannot be obtained.",
      "  In both countries, the government ministries can also direct the ECA to  undertake certain transactions, even if doing so will cause it to exceed  established exposure limits, if the government believes the transactions to  be in the country\u2019s best interest. because both governments\u2019 budgets are accounted for on a cash flow basis.  Under cash flow accounting, revenue is recognized when it is received, and  expenses are recognized when they are paid. Thus, revenue in a given year  is compared with expenses in that same year, regardless of when the  underlying transactions occurred. Under this system, it can be difficult to  know the degree to which the fees collected in a given year from providing  export credit insurance cover any claims made against that insurance in  later years.",
      " French and German ECA officials acknowledged that this  accounting practice limits their ability to fully analyze actual or potential  losses on the state account. The French ECA has been developing an  alternative accounting approach that would enable such analysis, as  discussed later. French and German ECAs  Follow Government- Determined Risk  Thresholds and Use Fees to  Cover Loss The French and German approaches to evaluating risk are based primarily  on assessing country risk for the purpose of setting exposure limits and  using fees to cover losses. The French and German ECAs are not expected  to estimate expected losses in advance of undertaking transactions, but the  French ECA provides informal risk assessments to the oversight ministry  for it to consider when making decisions about undertaking transactions.",
      "  The French and German governments do not provide budgetary funds at  the beginning of a year to cover any losses that might be incurred during  the year, but any losses incurred on the state account are automatically  covered. The government ministries that oversee the French and German ECAs  analyze borrower countries\u2019 risk profiles when making their annual  decisions about the exposure limits that will be in effect for a given year.  This analysis may consider macroeconomic factors, OECD country risk  ratings, and the ECA\u2019s experiences with other countries\u2019 repayment  histories on previously extended credit. In France, the ECA also provides  input to this analysis.",
      " These exposure limits, or ceilings, are developed to  ensure portfolio diversification and constrain the accumulation of  excessive risk levels. In both countries, the government determines risk  ceilings and provides these to their ECAs to follow in operating the state  account. Country risk ceilings can be exceeded only at the government\u2019s  direction. The German ECA also faces a statutory limit on the total  exposure it can undertake in a given year. In both countries, the fees collected on the export credit business are  viewed as a reasonable approximation of the amount of loss likely to be  incurred. In setting fees, both ECAs follow the guidance agreed to by the  participating OECD countries for assigning risk ratings to sovereign  borrowers and charging premium rates.",
      " These ECAs add surcharges to the  OECD minimum fee rates for corporate borrowers, recognizing the higher  risk of corporate business. As discussed below, the OECD fees were  politically determined, and both entities have considered whether the  premia are sufficient to cover actual losses. France and Germany differ in how they manage their fee revenue. In both  countries, the revenue belongs to the government. However, in France,  some fee revenue is kept with the French ECA for the purpose of paying  expenses that are incurred on the state account, such as paying a claim on  a defaulted credit. Officials of the French ministry that oversees the ECA  told us that the amount left on deposit with the ECA is based on their best  estimate of the losses that the ministry expects will materialize in a given  year.",
      " A German ECA official said that all fee revenue it collects is  immediately transferred to the German government. When the German  ECA has to pay a claim, it must request funds from the German  government. French ECA and government officials told us that the French ECA is  developing a new accounting system for the state account that will enable  it to analyze, for each underwriting year, the collected fees and the claims  corresponding to the transactions covered during the same year. This  system will provide the ECA with historical data on payment experience in  order to calculate expected losses on a statistical basis. However, the  process is not complete,",
      " and the information it has produced is not used for  official purposes. The approach in development still uses OECD minimum  fees as the baseline for estimating loss but will add surcharges to take  account of increased risk, for example, when a default is pending.  Surcharges will also be added for risks other than sovereign risks.  According to French ECA and government officials, a key challenge in  developing this approach was compiling payment histories for individual  transactions. They also stated that before the French state account would  develop a reserve system that does not rely on the OECD minimum fees,  further accumulation of historical data on payment experiences will be  necessary,",
      " a process they expect will take some time. OECD Participating  Countries\u2019 Risk  Assessment and Fee  Arrangement The agreement of the participating OECD countries regarding country risk  classifies countries into seven risk categories on the basis of a country risk  assessment model. The model ranks countries according to which is most  likely to default, considering indicators of countries\u2019 financial and  economic situations. It also uses data provided since 1999 by export credit  agencies on their payment experiences with countries. Quantitative scores  for each country determine its initial risk classification, which can be  adjusted by participating countries based on an assessment of political risk  and other factors not considered in the model itself.",
      " While the model scores provide some indicator of default probabilities for  each country, they are not used in determining what the risk premiums, or  fees, should be to cover expected loss for financing to sovereign buyers in a  risk category. The fees result from a political agreement, an averaging of  fees in place in 1996 across member export credit agencies. Thus, the fees  reflect the expected loss of lending to sovereign borrowers at various risk  levels only to the extent that the average of 1996 fees across participating  countries reflect those expected losses. The minimum common fees are  not intended to reflect the generally higher risk of lending to nonsovereign,",
      "  or private, borrowers within the same country, according to OECD and  ECA officials. Participating OECD countries are collecting data from their ECAs on their  financing and repayment experiences since 1999, in order to assess the  validity of the current fees as indicators of expected loss. According to an  ECA official who chairs a group of country risk expert from OECD  countries, collecting enough data to assess the current premiums will take  at least 10 years. Loan Loss Allowance Guidance and Select  Commercial Bank Practices Loans are the largest component of most depository institutions\u2019 assets;  therefore, the loan loss allowance is critical to understanding the financial  condition of a depository institution and changes in credit risks and  exposures.",
      " Given the importance of the loan loss allowance as an indicator  of financial condition, and because adjustments to the allowance affect an  institution\u2019s earnings, the loan loss allowance is scrutinized by regulatory  agencies. Regulators and the accounting profession acknowledge that  calculating the loan loss allowance requires significant judgment and that  accounting and regulatory guidance are not prescriptive. For the past  several years, the organizations involved in developing U.S. private sector  accounting standards\u2014the Financial Accounting Standards Board (FASB)  and the American Institute of Certified Public Accountants \u2014have been in  the process of reviewing current loan loss allowance guidance. Likewise,  the U.S.",
      " federal banking regulators\u2014the Federal Reserve Board (FRB),  Office of the Comptroller of the Currency (OCC), Federal Deposit  Insurance Corporation (FDIC), Office of Thrift Supervision, and the  National Credit Union Administration\u2014and the Securities and Exchange  Commission have been updating regulatory guidance governing the loan  loss allowance. While the commercial banks we contacted follow the basic  concepts of accounting and regulatory guidance, specific aspects of these  banks\u2019 allowance methodologies differ. Regulatory guidance requires U.S.  banks involved in international lending to address additional risks, in  addition to the accounting and loan loss allowance concepts that apply to  domestic lending.",
      " Loan Loss Allowance Is  an Important Factor in  an Institution\u2019s  Financial Condition the amount of estimated losses that have occurred in the loan portfolio but  have not yet been realized. The loan loss allowance, according to bank  regulatory guidance, must be appropriate to absorb estimated credit losses  inherent in the loan portfolio. When changes are made in the loan loss  allowance, these changes directly affect an institution\u2019s earnings. The loan  loss allowance is established and maintained by charges against the bank\u2019s  operating income, which reduces earnings, or by reversals of the  allowance that would increase earnings. Given the loan loss allowance\u2019s effect on earnings and the role the  allowance plays in allowing banks to cover probable and estimable losses,",
      "  U.S. financial regulatory agencies pay close attention to a bank\u2019s loan loss  allowance. These regulators require banks to establish and regularly review  the adequacy of their allowance, and bank examiners assess the asset  quality of an institution\u2019s loan portfolio and the adequacy of the loan loss  allowance. Because regulatory guidance is not prescriptive, bank  regulators told us that, through examinations, they assess the  \u201creasonableness\u201d of a bank\u2019s loan loss allowance by comparing a bank\u2019s  loan loss allowance level with industry standards and looking for  justification for any methodology that could be considered an outlier. As  part of their assessment of public company filings,",
      " the Securities and  Exchange Commission also reviews banks\u2019 loan loss allowance  disclosures. Accounting and  Regulatory Guidance  Are Not Prescriptive;  the Loan Loss  Allowance Requires  Significant Judgment banks follow Statement of Financial Accounting Standards (SFAS) 114,  Accounting by Creditors for Impairment of a Loan, in estimating losses  from individual impaired loans. Further, SFAS 5, Accounting for  Contingencies,provides guidance to banks in their calculation of losses  for pools of loans, impaired or performing, which are evaluated  collectively. The bank regulators we spoke with\u2014FRB, OCC, and FDIC\u2014stated that  regulatory guidance is coordinated across all the banking regulatory  agencies and is consistent with GAAP.",
      " On March 1, 2004 the banking  regulators issued an Update on Accounting for Loan and Lease Losses,  which addresses recent developments in accounting for the loan loss  allowance and presents a list of the current sources of GAAP and  supervisory guidance for accounting for the loan loss allowance. One of the  sources it lists is The Interagency Policy Statement on the Allowance for  Loan and Lease Loss, which was issued by FRB, OCC, FDIC, and the Office  of Thrift Supervision in 1993. This document discusses the nature and  purpose of the loan loss allowance, the responsibilities of a bank\u2019s board of  directors and management,",
      " how banks should determine the adequacy of  their allowance and the factors that should be considered in their  estimates, and examiners\u2019 responsibilities with regard to the loan loss  allowance. Prior to the March 2004 Update on Accounting for Loan and  Lease Losses, the 1993 interagency policy was supplemented by the 2001  Federal Financial Institutions Examination Council Policy Statement,  discussed later. In addition to the interagency policy, OCC and FDIC issue their own loan  loss allowance policy statements that they distribute to banks under their  supervision. These statements are in line with the interagency policy. Table 1 provides a summary of the relevant accounting and regulatory  guidance governing the loan loss allowance.",
      " Additional Guidance on  International Lending additional risk that banks face when providing international loans is  \u201ccountry risk,\u201d or the risk that economic, social, and political conditions  and events might adversely affect a bank\u2019s interests in a country. A specific  component of country risk is \u201ctransfer risk,\u201d or the possibility that a loan  may not be repaid in the currency of payment because of restricted  availability of foreign exchange in the debtor\u2019s country. To address country risk, banks are expected to have country risk  management methodologies in place. A 1998 study by the Interagency  Country Exposure Review Committee (the \u201cCommittee\u201d) found that all U.S.",
      "  banks conducting international lending had developed formal country risk  management programs and policies. The Committee also found that these  banks had formal internal country risk monitoring and reporting  mechanisms and that country risk management was typically integrated  with credit risk management. To address transfer risk, banks that lend to  specific countries must allocate additional allowances, called the Allocated  Transfer Risk Reserve. Transfer risk is one component of the broader concept of country risk and  the only component specifically regulated by the bank regulators. The  International Lending Supervision Act of 1983 required banks to set up an  allocated allowance for assets subject to transfer risk, and the banking  regulators accordingly published regulations implementing the  requirement.",
      " The Committee is responsible for providing an assessment of  the degree of transfer risk in cross-border and cross-currency exposure of  U.S. banks and sets the minimum amount of the allocated transfer risk  reserve. The Committee bases its assessments and ratings on information  collected from a number of sources, including country analysis prepared by  economists at the Federal Reserve Bank of New York and discussions with  U.S. banks. Bank regulators emphasized that the Committee\u2019s transfer risk ratings are  primarily a supervisory tool and should not replace a bank\u2019s own country  risk analysis process. FRB officials also told us that the allocated transfer  risk reserve is \u201cnarrowly prescribed\u201d in that it applies only to a small  number of countries.",
      " U.S. commercial bank lending is primarily domestic,  and the international lending that is conducted by banks is concentrated in  the G-10 countries and Switzerland. The FRB officials stated that only  approximately 30 U.S. banks\u2014a small portion of the total number of banks  in the United States\u2014receive allocated transfer risk reserve statements. Regulatory Guidance on  Portfolio Segmentation and  Risk Ratings In addition to loan loss allowance guidance, banks must also follow  regulatory guidance regarding loan portfolio segmentation and risk  classification. Segmenting the bank\u2019s loan portfolio into groups of loans  with similar characteristics, such as risk classification, past-due status,",
      "  type of loan and industry, or the existence of collateral, is the first step in  calculating the loan loss allowance for the SFAS 5 portion. Regulatory  guidance states that banks may segment their loan portfolios into as many  components as practical. Bank regulators do not prescribe the way that  banks should segment their loans; however, regulatory guidance states that  loan segmentations should be separately analyzed and provided for in the  loan loss allowance. Bank regulators do provide guidance on risk  classification, a characteristic by which loan portfolios can be segmented.  Table 2 provides definitions of the risk classifications, which are shared by  all of the banking regulatory agencies.",
      " A pass asset presents no inherent loss (no formal  regulatory definition exists for \u201cpass\u201d credits). A special mention asset has potential weaknesses that  deserve management\u2019s close attention. If left uncorrected,  these potential weaknesses may result in deterioration of  repayment prospects for the asset or in the institution\u2019s  credit position at some future date. Special mention assets  are not adversely classified and do not expose an  institution to sufficient risk to warrant adverse  classification. A substandard asset is inadequately protected by the  current sound worth and paying capacity of the obligor or  of the collateral pledged, if any. Assets so classified must  have a well-defined weakness,",
      " or weaknesses, that  jeopardize the liquidation of the debt. They are  characterized by the distinct possibility that the bank will  sustain some loss if the deficiencies are not corrected. An asset classified doubtful has all the weaknesses  inherent in one classified substandard with the added  characteristic that the weaknesses make collection or  liquidation in full, on the basis of currently existing facts,  conditions, and values, highly questionable and  improbable. Assets classified loss are considered uncollectible and of  such little value that their continuance as bankable assets  is not warranted. This classification does not mean that the  asset has absolutely no recovery or salvage value,",
      " but  rather that it is not practical or desirable to defer writing off  this basically worthless asset even though partial recovery  may be effected in the future. Bank regulatory guidance states that a bank\u2019s rating system should reflect  the complexity of its lending activities and the overall level of risk involved;  the guidance also states that no single credit risk rating system is ideal for  every bank. Large banks typically require sophisticated rating systems with  multiple rating grades within the above broad risk classifications. One bank  regulator stated that some banks might have a 10-point rating system based  on the risk classifications, whereas other banks may have up to 25 different  ratings.",
      " Regulatory Agencies  and Accounting  Organizations Have  Been Reviewing Loan  Loss Allowance  Guidance For the past several years, financial regulatory agencies and accounting  organizations have updated and continued reviewing U.S. private sector  accounting standards and regulatory guidance governing the loan loss  allowance. Regulatory Agencies  Supplement Existing  Guidance In the late-1990s, Securities and Exchange Commission staff noted in their  normal reviews of filings by financial institutions, including banks, that  there were inconsistencies between the disclosures about the credit quality  of registrant\u2019s loan portfolios and the changes in the loan loss allowances  reported in the financial statements. The Securities and Exchange  Commission staff\u2019s review was aimed at determining whether the  institutions were complying with GAAP for loan loss allowances.",
      " Securities  and Exchange Commission staff was concerned, as were some of the bank  regulators, that financial institutions were (1) not using procedural  discipline in developing loan loss allowance estimates; (2) not  documenting their evaluation of loan credit quality or their measurement of  loan impairment; or (3) not providing clear disclosure, in the financial  statements and management\u2019s discussion and analysis, about the  provisioning process and allowance analysis. As a result of the Securities and Exchange Commission staff\u2019s review of  filings, one bank restated its financial results to reflect a reduction in its  loan loss allowance. According to a bank regulator, although the credit  quality of the bank\u2019s loan portfolio was increasing,",
      " its loan loss allowance  was not decreasing. Policy Statement was intended to provide further guidance on the design  and implementation of loan loss allowance methodologies and supporting  documentation practices. Securities and Exchange Commission staff  issued parallel guidance on this topic for public companies in Staff  Accounting Bulletin No. 102. Accounting Guidance for  the Loan Loss Allowance is  Under Review FASB is charged with establishing authoritative private sector accounting  principles for financial reporting.These accounting principles (GAAP) are  promulgated primarily through the SFAS issued by FASB. In the past, the  American Institute of Certified Public Accountants (the \u201cInstitute\u201d) has  issued industry and auditing guides to provide accounting implementation  guidance,",
      " subject to clearance by FASB. of the financial community who commented on the draft. In January 2004,  after review of these comment letters, the Institute decided to proceed only  with guidance to improve disclosures. Reviewed Banks  Follow Basic Concepts  in Accounting and  Regulatory Guidance  but Vary in Allowance  Methodologies We spoke with three U.S. commercial banks with large lending portfolios  totaling approximately $800 billion, including large international  exposures. The three banks we spoke with follow the basic accounting  and regulatory concepts outlined earlier but vary in specific loan loss  allowance methodologies, including the sources of and amount of  observable data on which their allowance calculations are based.",
      " FRB,  which is conducting a study to establish \u201ccore reserving practices\u201d among  banks, confirmed that loan loss allowance practices among banks are not  universal. The loan loss allowance varies depending on the type of lending  done by the bank and its associated levels of risk. In addition, each bank  has a unique historical loan loss experience on which their reserve  calculation is based. Despite specific differences in loan loss allowance methodologies, banks  follow the same basic steps in determining their loan loss allowance levels  for both domestic and international loan portfolios. These steps are  illustrated in figure 7. Allowances for  classified loans  greater than a  specific dollar  amount (which  varies among  banks)",
      " are  calculated on  an individual  basis according  to accounting  guidance in  SFAS 114. Allowances for  classified loans  less than the  specified dollar  amount are  pooled and  calculated  according to  accounting  guidance in  SFAS 5, using  a formula  based on  historical  information. Assignment of Risk Ratings All three banks stated that their loan portfolios are divided between their  commercial and consumer businesses. We focused on the commercial side  of the loan loss allowance process of these banks, as it was most relevant  to the business of the Export-Import Bank. Within their commercial loan  portfolios (including both domestic and international lending), regulatory  guidance allows banks to segment their loans according to various factors  but risk classification is a primary factor.",
      " The banks assign loans different  risk classifications, as defined by the bank regulators (see table 2), based  on the creditworthiness of the loan. The calculation of the loan loss reserve is dependent on the risk ratings  assigned to loans. The assignment of risk ratings is based on an assessment  that includes evaluating an obligor\u2019s credit risk based on the company or  project and also on external factors, such as country risk for international  lending. The three banks\u2019 approaches to the risk rating assignment and review  process are multilayered and performed by multiple units within the banks.  The banks we spoke with have risk management groups that are divided  into specific risk units.",
      " The groups charged with evaluating credit risk are  involved in assigning risk ratings. Ongoing analysis of the loan portfolio is  performed to ensure that risk ratings continue to be accurate. Units within  the risk management groups conduct reviews of selected loans in their  portfolios throughout the year, sometimes focusing on credits in certain  risk ratings ranges. Factors that banks and bank examiners take into consideration when  analyzing risk in a credit exposure include industry risk; financial  indicators such as quality of cash flow, balance sheet, debt capacity, and  financial flexibility; and management. Officials at one bank told us that they  use agency ratings as benchmarks to test the reasonableness of their  internal credit risk grading system;",
      " however, the agency ratings are  considered but not specifically weighted into their rating decision. All three banks we spoke with have committees that evaluate the country  risk levels of their lending portfolios and establish country risk ratings and  sometimes geographic exposure limits. Officials at one bank stated that  they have a formal model that assigns risk ratings to countries. The model  is based on economic, financial, social, and other factors. The three banks  incorporate information from external sources\u2014for example, private  companies and ratings agency data\u2014into these ratings. However, two  banks told us that, although they use external sources for data and  qualitative information, all of their analysis is internal.",
      " Officials at one bank told us that their committee holds bimonthly meetings  and adjusts ratings monthly. Countries are placed on watch lists when  economic conditions are unstable. The watch list is based on triggers,  which include economic factors such as the pricing of debt, exchange  rates, and other political and social factors. foreign obligor is first rated based on the obligor\u2019s creditworthiness,  according to the banks we interviewed, then the country risk rating is  incorporated to produce an overall rating for that loan. Both the banks and  the bank regulators stated that, for international loans, the rating assigned  to a loan generally will be no better than the country risk rating for the  country in which the debtor is located.",
      " However, if a loan is collateralized  or guaranteed by a third party, the loan may receive a rating better than the  country risk rating. FRB officials stated that Interagency Country Exposure Review  Committee\u2019s (the \u201cCommittee\u201d) country risk ratings and the allocated  transfer risk reserve requirements often lag behind the ratings of the  ratings agencies and changes already made by the banks in their reserve  levels. The three banks stated that they make their own internal judgments  regarding the allocated transfer risk reserve and can decide to have a  higher allowance than the allocated transfer risk reserve requirement,  although they cannot have a lower allowance. The banks,",
      " as did FRB  officials, also stated that the allocated transfer risk reserve is a lagging  indicator and that many specific losses have already been incurred by the  time the allocated transfer risk reserve is issued by the Committee. Calculation of Loan Loss  Allowance and accounting guidance require that support for these adjustments be well  documented. Calculation of the General  Allowance In calculating the general allowance, loans are grouped into pools based on  similar characteristics\u2014risk classification being a primary factor\u2014and  collectively evaluated for impairment. The three banks we spoke with  generate expected loss factors for each loan pool by estimating such  factors as the probability of default,",
      " loss given default, and expected  exposure at default. The three banks use internal and external data to  estimate the probability of default and loss given default components. FRB  officials told us that banks tend to use external data to calculate the  probability of default and internal data to calculate the loss given default.  The practices of the three banks in our study for the most part conformed  to this view. The three banks primarily used internal data to calculate the  loss given default, sometimes validated by looking at external data or  supplemented with external data, and they primarily used external data  sources to calculate the probability of default. With respect to the probability of default component,",
      " the banks weighted  external sources differently and used different time periods of analysis.  Officials at the three banks told us that they relied on external sources;  however, officials at one bank told us that they also internally adjusted the  data in their calculation. The length of the historical loss experience under analysis for the banks we  interviewed varied among the loss given default components of the loan  loss allowance calculation. The three banks we spoke with used an average  of 16 years worth of data for the loss given default component. Calculation of the Specific  Allowance the loan became nonperforming. The three banks periodically update their  analysis of expected loss factors.",
      " A bank regulator told us that in the SFAS  114 calculation, banks may develop best-, base-, and worst-case scenarios  in order to make their best estimate. The three banks pool loans that are for less than the aforementioned dollar  amount threshold and estimate losses for the loan pools. The calculation  follows guidance in SFAS 5. Two of the banks we spoke with estimate the  loss factors used in this calculation based on internal statistical studies of  historical loss experience. Review of the Loan Loss  Allowance The three banks we spoke with review their loan loss allowance at least  quarterly, as part of the quarterly financial disclosure statements required  by the Securities and Exchange Commission.",
      " However, the banks told us  that they review large impaired loans monthly but make allowance  decisions quarterly. The risk management groups within the three banks  have the responsibility for estimating and formulating the allowance  parameters and establishing the loan loss allowance. The  recommendations and the basis of their formulation are reviewed by senior  management, whose conclusions as to the appropriateness of the loan loss  allowance, as well as the supporting analysis, are then reviewed quarterly  by the bank\u2019s board of directors. Interagency Country Risk Assessment System Following enactment of the Federal Credit Reform Act in 1990, the  Interagency Country Risk Assessment System (ICRAS)\u2014a working group  of executive branch agencies engaged in international credit activities\u2014  was formed to provide uniformity to the process for evaluating country risk  and estimating the program costs.",
      " The Export-Import Bank (Ex-Im Bank)  uses ICRAS ratings in determining the program costs of its sovereign  financing and as a factor in its own rating process for its nonsovereign, or  private, financing. The determination of expected loss rates under the  ICRAS system has two components: (1) the assignment of risk ratings for  particular borrowers or transactions and (2) the determination of loss rates  for each risk category. Both Ex-Im Bank and the Office of Management and  Budget (OMB) play key roles in the ICRAS process\u2014OMB chairs ICRAS,  and Ex-",
      "Im Bank provides country risk assessments and risk rating  recommendations, which are then distributed to, and agreed on, by all the  ICRAS agencies. OMB is then responsible for determining the expected  loss rates associated with each ICRAS risk rating and maturity level. Overview of the ICRAS  Framework become binding when OMB puts into effect the recommendations of a  \u201cgroup\u201d of country papers. This occurs twice each year. Based on the results of this interagency process, OMB publishes two risk  ratings for each country\u2014a sovereign rating and a nonsovereign, or private,  rating. Each sovereign borrower or guarantor is rated on an 11-category  scale,",
      " ranging from A through F- - (or their numerical counterparts,  categories 1-11). Category 1 (or A) is the most creditworthy and category  11 (or F- -) is the least creditworthy. According to Ex-Im Bank, four  categories, A through C-, are considered to be roughly equivalent to  creditworthy private bond ratings. The bottom three categories, F through  F- -, are used for countries that are insolvent or unwilling to make  payments. Categories in-between represent various degrees of repayment  difficulties. These ratings must be used in calculating the risk subsidy  charged to each agency\u2019s budget when it undertakes a foreign transaction.",
      "  Each agency is free to set its own policies with respect to fees for different  risk categories and cover policy (which specifies the risk levels at which it  will undertake new business). Under credit reform, OMB is responsible for determining the expected loss  rates associated with each ICRAS risk rating and maturity level. OMB  provides updated expected loss rates to the ICRAS agencies for them to use  each year in preparing budget submissions, calculating reestimates, and  allocating subsidy costs during the fiscal year. Country Risk Assessments In terms of extending export credits, country risks represent risks that  threaten the repayment of obligations, apart from the financial viability of  the transaction.",
      " In general terms, the degree of risk is measured as the  product of the probability of payment delays and the probability of  subsequent nonrecovery. A payment delay is any failure to make payments  of principal or interest on original contract terms. Nonrecovery occurs in  the event of default or debt forgiveness or when there are recurring or  extended arrears. burden, the government\u2019s ability to acquire foreign exchange to repay  foreign obligations, macroeconomic environment, and political or social  constraints. In addition to indicators reflecting those factors, ICRAS  sovereign ratings are also based on ratings of private rating agencies and a  group of Organization for Economic Cooperation and Development  member countries,",
      " as well as information on a country\u2019s payment arrears  history with the United States and other foreign creditors. ICRAS ratings for private transactions in a country are based on qualitative  and quantitative assessments of the depth of private sector business  activity in a country and the strength of private sector institutions. In  addition to factors related to vulnerability to foreign exchange crises, the  ratings focus on a country\u2019s banking system, legal system, foreign exchange  availability, business climate, and political stability. They can be either  higher or lower than ICRAS sovereign ratings. Credit Reform Budgeting The Federal Credit Reform Act of 1990 required that budget authority to  cover the cost to the government of new loans and loan guarantees (or  modifications to existing credits)",
      " be provided before the credits are made.  Credit reform requirements specified a net present value cost approach  using estimates for future loan repayments and defaults as elements of the  cost to be recorded in the budget. This permits policy makers to compare  the costs of credit programs with each other and with noncredit programs  in making budget decisions. The credit reform act defines the subsidy cost of direct loans as the present  value of disbursements\u2014over the loan\u2019s life\u2014by the government (loan  disbursements and other payments) minus estimated payments to the  government (repayments of principal, payments of interest, other  recoveries,",
      " and other payments). It defines the subsidy cost of loan  guarantees as the present value of cash flows from estimated payments by  the government (for defaults and delinquencies, interest rate subsidies, and  other payments) minus estimated payments to the government (for loan  origination and other fees, penalties, and recoveries). Credit programs have a positive subsidy\u2014that is, they lose money\u2014when  the present value of estimated payments by the government exceeds the  present value of estimated receipts. Conversely, negative subsidy programs  are those in which the present value of estimated collections is expected to  exceed the present value of estimated payments; in other words,",
      " the  programs make money (aside from administrative expenses.) lives. It finances loan disbursements and the payments for loan guarantee  defaults with (1) the subsidy cost payment from the program account, (2)  loans from the Treasury, and (3) collections received by the government.  Figure 8 diagrams this cash flow. Each year, as part of the President\u2019s budget, agencies prepare estimates of  the expected subsidy costs of new lending activity for the coming year.  Agencies are also required to reestimate this cost annually. The Office of  Management and Budget (OMB) has oversight responsibility for federal  credit program compliance with credit reform act requirements and also  has responsibility for approving subsidy estimates and reestimates.",
      " In  addition, for international credits extended by U.S. agencies, OMB provides  agencies with specific guidance, including estimated defaults and  recoveries by risk rating category, to be used in determining expected  losses for financing activities. All credit programs automatically receive any additional budget authority  that may be needed to fund reestimates. Thus, for discretionary programs,  original subsidy cost estimates receive different budget treatment than  subsidy cost reestimates. The original estimated subsidy cost must be  appropriated as part of the annual appropriation process. However, upward  reestimates of subsidy costs are financed from permanent indefinite budget  authority and do not have to be appropriated in the annual appropriations  process.",
      " Technical Description of OMB Model for  Estimating Expected Loss of U.S.  International Credit Activities The Office of Management and Budget (OMB) determines expected losses  for international credit activities through (1) a complex model that  includes two estimates of default probabilities by ratings category and a  rule for combining them and (2) an assumption about how much of the  value of defaulted credits will be recovered. The default rate estimates use  a statistical concept from finance literature that OMB terms \u201cdistance to  default.\u201d The first estimated relationship\u2014the spread-default  relationship\u2014is between interest rate spreads on international bonds and  historical default rates of corporate debt.",
      " The second estimated  relationship\u2014the ratings-default relationship\u2014is between ratings on  corporate debt and the historical default rates of that debt. Historical  corporate default data are used in estimating both relationships. The model  is structured so that the overall estimates of default for different ratings  and maturities would be expected to be close to the underlying corporate  default rates used. They will differ from the underlying historical default  rates when interest rate spreads are higher or lower than their average over  the historical period of the data used in the analysis. In addition, available  information on the model suggests that there may be certain technical  biases in the model\u2019s forecasts.",
      " Distance to Default OMB\u2019s modeling approach uses a mathematical concept called \u201cdistance to  default,\u201d a concept used in some finance models, which is a statistical  representation of the safety of a credit. The statistical variable has an  inverse relationship with default probability\u2014the larger the distance to  default, the smaller the probability of default. OMB\u2019s model, in common  with many models in academic finance journals, assumes that changes in  this variable follow a normal statistical distribution, with a mean of zero,  and that changes occur randomly with each time period. Using the  assumption of a normal distribution, and given an estimated standard  deviation,",
      " each distance to default implies a time pattern of annual default  rates. Distance to default is estimated by finding the default cost implied by  each distance to default and matching that cost to the prices at which  bonds of a given rating are trading. neutral distance to default,\u201d which is related to interest rate spreads, refers  to default rates (and recovery rates on defaulted credits) that are  consistent with observed interest rates, assuming that interest rate spreads  are attributed only to expected default costs. Finance theory attributes the  difference between actual and risk-neutral distance to default to  components of the interest rate beyond those that are related purely to  default.",
      " For example, if lenders are risk averse, rather than risk neutral,  they may need to be compensated with more than $1 of extra interest to  bear a risk of loss that may, on average, be $1, but that may in some cases  be substantially more. Given OMB\u2019s estimated standard deviation of 3.79,a default rate of 25  percent for a 1-year bond implies an actual distance to default of 2.57. This  can be calculated from a standard normal distribution table. Thus, for a  given maturity, risk-free rate of interest, and standard deviation, knowledge  of any of the following factors\u2014spread,",
      " risk-neutral distance to default, or  time pattern of default probabilities\u2014allows the calculation of the other  two factors. Spread-Default Relationship\t The spread-default relationship is an estimated relationship between  interest rate spreads on international bonds and historical default rates of  corporate debt, by rating and maturity. The relationship is structured so  that its estimated default rates will be close to the historical default rates  used when observed spreads are near their average levels and higher (or  lower) than the historical default rates when spreads are higher (or lower)  than average. The spread-default relationship is estimated with a regression that uses  monthly observations on about 400 sovereign bonds and historical default  rates on corporate bonds from Moody\u2019s Investors Service.",
      " The dependent  variable (the spread-related variable) is the risk-neutral distance to default,  which is calculated as a function of the monthly interest rate spreads on the  bonds in the sample. The independent variables are (1) the actual distance  to default in historical data (the default-related variable), which is  calculated for each rating and maturity as a function of the historical  corporate default rates used, and (2) the remaining maturity of each bond. The data used for the spread-related variable in the regression, the risk\u00ad neutral distance to default, are Bloomberg\u2019s monthly observations on  foreign sovereign bonds, denominated in U.S.",
      " dollars and issued in 1987 or  later. The spread on each monthly observation was calculated and  transformed into an implied distance to default to be predicted by the  regression. The key independent variable, based on a security\u2019s rating, was calculated  as follows: ratings from Moody\u2019s and two other private ratings firms,  Standard & Poor\u2019s and Fitch Ratings, were linked to each monthly  observation. The average rating was calculated and used to link each  observation to an independent variable, the actual distance to default,  calculated as a function of historical default rates obtained from Moody\u2019s.  The remaining maturity of each bond, the second independent variable,",
      "  was also taken from the Bloomberg data for each monthly observation. rate and the losses are discounted by the prevailing risk-free interest rate.  Thus, a given standard deviation and a mean \u201cdistance to default\u201d will  generate a time pattern of default rates. This mean is chosen so that the  present value of the implied dollar losses equals the risk-neutral expected  loss. The default-related independent variable, actual distance to default, is  calculated from Moody\u2019s data on corporate defaults. Two Moody\u2019s tables  showing cumulative defaults by risk rating category and maturity were  used, one for 1920-1999, and another for 1983-",
      "1999. The tables were  combined into one table with a default rate for each combination, using the  larger of the two default rates for each rating/maturity category. Missing  table entries, or reversals (such as a higher-rated category having a higher  default rate than the next lowest category) were handled by averaging table  entries. A calculation similar to that for the dependent variable is made,  finding a mean distance to default for each Moody\u2019s rating category that  will generate a time pattern of defaults similar to that in the Moody\u2019s tables. Estimation of the regression produces the following parameters:  Risk-neutral distance to default = -0.",
      "26 - 0.0074 * maturity + 0.73 * actual  (Spread-related variable) distance to default  (Default-related variable) averaged to produce an estimated distance to default for that bond. The  weights, derived from the autoregressive parameter, are used to construct  the weighted average. The weights are calculated so that more recent  months have more weight when taking the average. The actual distance to default predicted by this regression depends on the  interest spread on each bond relative to the average spread for its rating  category in the Bloomberg data used in the analysis. If the spread on a  particular bond is larger than the historical average spread in the database,",
      "  then the predicted actual distance to default will be smaller than the  historical average. This would imply that the projected defaults will be  larger than the historical average, because projected defaults move  inversely with distance to default. Because this part of the OMB model  bases default risk on a mixture of both current spreads and past spreads,  default risk estimates will change more slowly than will the market  assessment of risk, as reflected in changes in interest rate spreads. Rating-Default Relationship The relationship between ratings on corporate debt and the historical  default rates of that debt is estimated using the Moody\u2019s corporate default  tables described above. The relationship is structured so that it predicts  cumulative default rates by ratings category and maturity that are almost  exactly the same as those in the combined Moody\u2019s tables.",
      " As with the  spread-default relationship, it is assumed that distance to default is a  normally distributed variable whose mean and standard deviation  corresponds to a pattern of defaults over time. A mean for each rating  category is estimated, along with a common standard deviation for all  rating categories, that minimizes the sum of squared errors between the  cumulative default rates predicted by the means and standard deviation  and the actual data contained in the Moody\u2019s corporate default database. A  different standard deviation is estimated for the first year than for  subsequent years. This allows the actual distance to default for any given  bond in a rating category to differ from the average distance to default for  all bonds within a rating category,",
      " in addition to allowing a bond\u2019s distance  to default to change over time. Aggregating the Estimates The estimated actual distances to default for each bond from the spread\u00ad default relationship are averaged together so that there is one estimated  distance to default for each rating category. The estimated mean distance  to default for each rating category obtained from the spread data is then  combined with the estimated mean distance to default from the rating data.  A Bayesian (type of statistical) weighting scheme is used, giving more  weight to the spread-default relationship. According to OMB, weights vary  by rating category, but generally a weight of about two-thirds is given to the  spread-default relationship and a weight of about one-third is given to the  rating-default relationship.",
      " The result is a single actual distance to default number for each rating  category. This average value, combined with the common estimated  standard deviation for all ratings, is used to estimate annual default rates  for each rating category. An illustration of how spread changes can affect  OMB\u2019s final default estimates is shown in figure 9. Recovery Rates To derive expected loss rates for each risk and maturity category from the  expected default rates generated by the model, OMB uses an assumption  about the percentage of defaulted credits that will be recovered. According  to OMB, a common recovery rate of 17 percent was used for fiscal year  2003,",
      " a common recovery rate of 12 percent was used for fiscal year 2004,  and a common recovery rate of 9 percent was used for fiscal year 2005. Observations on Potential  Technical Limitations of the  Model minimized. Using the regression to predict the risk-neutral distance to  default and then inverting the estimated relationship to predict actual  distance to default may result in greater errors in the projected  distances to default than estimating the regression with actual distance  to default as the dependent variable. The relationships between risk-neutral distance to default and the two  independent variables\u2014actual distance to default and maturity\u2014may  not be linear.",
      " If this is the case, then spreads might provide an adequate  forecast of default probabilities near the means of the Bloomberg data  set used in the regression but not for values of spreads that depart from  the mean spread in the regression data. This issue could be important  for the reliability of estimates for credits with ratings several categories  below the average in the Bloomberg data. With sufficient data, the  potential for quantitatively important nonlinearities can be assessed by  estimating alternative specifications, such as including the squares and  cross-products of the independent variables. Comparison of OMB Default Probabilities for  Fiscal Years 2004 and 2005 with Corporate  Default Rates Used in OMB Model In fiscal year 2003,",
      " the Office of Management and Budget (OMB)  introduced its current methodology for estimating the expected loss rates  of international financing provided by U.S. credit agencies. This  methodology is used to estimate loss rates for 8 of the 11 risk-rating  categories established by the Interagency Country Risk Assessment System  (ICRAS). OMB\u2019s methodology includes two components that are used to estimate  default probabilities by ICRAS rating category. One component uses default  rates for corporate bonds published in 2000 by a nationally recognized  private rating agency, Moody\u2019s Investors Service, to calculate the  probability that ICRAS agency borrowers will default.",
      " It estimates default  probabilities for each ICRAS rating category by using one or more  underlying Moody\u2019s risk category. The other component uses data on  interest rate differences, or spreads, to vertically adjust the Moody\u2019s  corporate default rates by rating category when interest rate spreads are  unusually high or low relative to average spreads in that rating category.  Once it has determined default probabilities by ICRAS rating category, the  methodology applies a recovery rate assumption to derive expected loss  rates by rating category. We compared the default probabilities underlying OMB\u2019s fiscal year 2004  and 2005 expected loss rates for ICRAS categories 1 through 8 with the  Moody\u2019s corporate default data that OMB used in estimating these rates.",
      "  We determined that the OMB default probabilities were lower for each  ICRAS rating category in both fiscal years than were the underlying  Moody\u2019s default rates. Figures 10 through 17 compare OMB\u2019s default  probabilities for fiscal years 2004 and 2005 in a given ICRAS rating category  with the Moody\u2019s corporate default rates used in OMB\u2019s model that  correspond to each rating category. The figures show that the OMB default  rates were generally similar in fiscal years 2004 and 2005, with somewhat  lower rates in 2005 for certain ICRAS categories. Trends in Interagency Country Risk  Assessment System Expected Loss Rates Through the Interagency Country Risk Assessment System (ICRAS), the  Office of Management and Budget (OMB)",
      " annually provides expected loss  rates to ICRAS agencies to use in preparing their budget submissions and  subsidy cost estimates. The expected loss rates, issued for each of the 11  ICRAS risk categories, have changed in percentage terms over time. Figure  18 shows the trends in expected loss rates for ICRAS categories 1 through 8  for credits of 8-year maturity, expressed in present value terms, for fiscal  years 1997 through 2005. Comments from the Office of Management  and Budget GAO Contacts and Staff Acknowledgments GAO Contacts Staff \t Acknowledgments In addition to those individuals named above,",
      " Allison Abrams, Nathan  Anderson, Dan Blair, Patrick Dynes, Reid Lowe, Ernie Jackson, Austin Kelly, Bruce Kutnick, Berel Spivack, and Roger Stoltz made major  contributions to this report. GAO\u2019s Mission The Government Accountability Office, the audit, evaluation and  investigative arm of Congress, exists to support Congress in meeting its  constitutional responsibilities and to help improve the performance and  accountability of the federal government for the American people. GAO  examines the use of public funds; evaluates federal programs and policies;  and provides analyses, recommendations, and other assistance to help  Congress make informed oversight,",
      " policy, and funding decisions. GAO\u2019s  commitment to good government is reflected in its core values of  accountability, integrity, and reliability. Obtaining Copies of  GAO Reports and  Testimony The fastest and easiest way to obtain copies of GAO documents at no cost  is through GAO\u2019s Web site (www.gao.gov). Each weekday, GAO posts newly released reports, testimony, and correspondence on its Web site. To  have GAO e-mail you a list of newly posted products every afternoon, go to  www.gao.gov and select \u201cSubscribe to Updates.\u201d Order by Mail or Phone To Report Fraud,",
      "  Waste, and Abuse in  Federal Programs Congressional\t Relations Public Affairs\n"
    ],
    "length": 27792,
    "hardness": null,
    "role": null
  },
  {
    "id": 119,
    "question": null,
    "answer": "The National Flood Insurance Program (NFIP) has been on GAO's high-risk list since March 2006 because of concerns about its long-term financial solvency and related operational issues. Significant management challenges also affect the Federal Emergency Management Agency's (FEMA) ability to administer NFIP. This report examines (1) the extent to which FEMA's management practices affect the administration of NFIP; (2) lessons learned from the cancellation of FEMA's attempt to modernize NFIP's insurance management system; and (3) limitations on FEMA's authority that could affect NFIP's financial stability. To do this work, GAO reviewed internal control standards and best practices, analyzed agency documentation, reviewed previous work, and interviewed relevant agency officials. FEMA faces significant management challenges in areas that affect NFIP, including strategic and human capital planning; collaboration among offices; and records, financial, and acquisition management. For example, because FEMA has not developed goals, objectives, or performance measures for NFIP, it needs a strategic focus for ensuring program effectiveness. FEMA also faces human capital challenges, including high turnover and weaknesses in overseeing its many contractors. Further, FEMA needs a plan that would ensure consistent day-to-day operations when it deploys staff to federal disasters. FEMA has also faced challenges in collaboration between program and support offices. Finally, FEMA lacks a comprehensive set of processes and systems to guide its operations, in particular a records management policy and an electronic document management system. FEMA has begun to address some of these challenges, including acquisition management, but the results of its efforts remain to be seen. Unless it takes further steps to address these management challenges, FEMA will be limited in its ability to manage NFIP's operations or better ensure program effectiveness. FEMA also faces challenges modernizing NFIP's insurance policy and claims management system. After 7 years and $40 million, FEMA ultimately canceled its latest effort (NextGen) in November 2009 because the system did not meet user expectations. As a result, the agency continues to rely on an ineffective and inefficient 30-year old system. A number of acquisition management weaknesses led to NextGen's failure and cancellation, and as FEMA begins a new effort to modernize the existing legacy system, it plans to apply lessons learned from its NextGen experience. While FEMA has begun implementing some changes to its acquisition management practices, it remains to be seen if they will help FEMA avoid some of the problems that led to NextGen's failure. Developing appropriate acquisitions processes and applying lessons learned from the NextGen failure are essential if FEMA is to develop an effective policies and claims processing system for NFIP. Finally, NFIP's operating environment limits FEMA's ability to keep the program financially sound. NFIP assumes all risks for its policies, must accept virtually all applicants for insurance, and cannot deny coverage for high-risk properties. Moreover, additional external factors--including lapses in NFIP's authorization, the role of state and local governments, fluctuations in premium income, and structural and organizational changes--complicate FEMA's administration of NFIP. As GAO has previously reported, NFIP also faces external challenges that threaten the program's long-term health. These include statutorily required subsidized premium rates, a lack of authority to include long-term erosion in flood maps, and limitations on FEMA's authority to encourage owners of repetitive loss properties to mitigate. Until these issues are addressed, NFIP's long-term financial solvency will remain in doubt.\n",
    "docs": [
      "Background Overview of the National  Flood Insurance Program The National Flood Insurance Act of 1968 established NFIP as an  alternative to providing direct disaster relief after floods. NFIP, which  makes federally backed flood insurance available to homeowners and  businesses, was intended to reduce the federal government\u2019s escalating  costs for repairing flood damage after disasters. Floods are the most  common and destructive natural disaster in the United States. In fact,  according to NFIP statistics, 90 percent of all national disasters in the  United States have involved flooding. However, flooding is generally  excluded from homeowners\u2019 policies that typically cover damages from  other losses,",
      " such as wind, fire, and theft. Because of the catastrophic  nature of flooding and the inability to adequately predict flood risks,  historically, private insurance companies have largely been unwilling to  underwrite and bear the risk that results from providing primary flood  insurance coverage. Under NFIP, the federal government assumes the  liability for the insurance coverage and sets rates and coverage limitations,  among other responsibilities, while the private insurance industry sells the  policies and administers the claims for a fee determined by FEMA. As of January 2011, 21,361 communities across the United States and its  territories participated in NFIP by adopting and agreeing to enforce state  and community floodplain management regulations to reduce future flood  damage.",
      " In exchange, NFIP makes federally backed flood insurance  available to homeowners and other property owners in these  communities. Homeowners with mortgages from federally regulated  lenders on property in communities identified to be in high-risk special  flood hazard areas (SFHA) are required to purchase flood insurance on  their dwellings for at least the outstanding mortgage amount. Optional  lower-cost coverage is also available under NFIP to protect homes in areas  of low to moderate risk. To insure furniture and other personal property  items against flood damage, homeowners may purchase separate NFIP  personal property coverage. Although premium amounts vary according to  the amount of coverage purchased and the location and characteristics of  the insured property,",
      " the average yearly premium was around $620 as of  October 2010. NFIP is designed to pay operating expenses and flood insurance claims  with premiums collected on flood insurance policies rather than with tax  dollars. However, FEMA has statutory authority to borrow funds from  Treasury to keep NFIP solvent in years when losses are high. NFIP, by  design, is not actuarially sound because Congress authorized subsidized  insurance rates to be made available for policies covering certain  structures to encourage communities to join the program. As a result,  NFIP is not able to build reserves to cover losses that exceed the historic  averages. Management of the  National Flood Insurance  Program NFIP is managed by FEMA\u2019s Federal Insurance and Mitigation  Administration (FIMA), with administrative support from FEMA\u2019s Mission  Support Bureau (see fig.",
      " 1). DHS provides management direction by  issuing guidance and working to integrate its various management  processes, systems, and staff within and across its management areas.  Around 350 FEMA employees, assisted by contractor employees, manage  and oversee NFIP and the National Flood Insurance Fund, into which  premiums are deposited and from which claims and expenses are paid.  Their management responsibilities include establishing and updating NFIP  regulations, analyzing data to determine flood insurance rates, and  offering training to insurance agents and adjusters. In addition, FIMA and  its program contractors are responsible for monitoring and overseeing the  performance of the WYO insurance companies to help ensure that NFIP is  administered properly.",
      " FIMA receives administrative and management support as well as  direction on program operations from FEMA\u2019s Mission Support Bureau  offices, including the Office of the Chief Administrative Officer (OCAO),  Office of the Chief Component Human Capital Officer (OCCHCO), Office  of the Chief Financial Officer (OCFO), Office of the Chief Information  Officer (OCIO), and Office of the Chief Procurement Officer (OCPO). In  addition, FEMA\u2019s Office of Policy and Program Analysis (OPPA) serves a  collaborative support role to provide leadership, analysis, coordination,  and decision-making support on agency policies, plans, programs, and key  initiatives.",
      " While Mission Support and OPPA provide important services to  FIMA, their responsibilities do not include comprehensive oversight of  FIMA or NFIP. Opportunities Exist to  Improve FEMA\u2019s  Management of NFIP We found a number of management practices that could be improved to  help FEMA more effectively administer NFIP. First, FEMA has not  provided FIMA with strategic direction and guidance for administering  NFIP and therefore lacks the starting point necessary to develop  performance measures for assessing the program\u2019s effectiveness. Second,  FEMA faces a number of human capital challenges, including developing a  strategic human capital plan that addresses mitigating high turnover,  hiring,",
      " and overseeing contractors that play a key role in NFIP. Moreover,  it has yet to adequately address managing the day-to-day operations when  deploying staff to respond to federal disasters. Third, collaboration among  offices within FEMA that are responsible for administering NFIP has at  times been ineffective, leading to challenges in effectively carrying out  some key functions. In particular, FIMA, the office that administers NFIP,  and FEMA Mission Support, which provides mission-critical functions  such as information technology (IT), acquisition, and financial  management, have had difficulties collaborating on these functions.  Finally, FEMA does not have a comprehensive set of policies,",
      " procedures,  and systems to guide its operations. Specifically, it lacks an updated  records management policy, procedures to effectively manage  unliquidated obligations, and a fully developed and implemented  documentation of its business processes. FEMA has begun taking steps to  improve its acquisition management and document some of its business  processes, but as they were recently implemented or still in progress, the  results of these efforts have yet to be realized. Unless it takes further steps  to address these management challenges, FEMA will be limited in its  ability to manage NFIP\u2019s operations or ensure program effectiveness. A More Comprehensive  Strategic Framework  Would Improve FEMA\u2019s  Administration of NFIP FEMA published its most recent agencywide strategic plan in February  2011,",
      " but the plan did not clearly lay out how and where NFIP\u2019s mission  and activities fit within FEMA\u2019s own goals and objectives. The  Government Performance and Results Act of 1993 (GPRA) requires  agencies to submit a strategic plan containing a number of components,  including a comprehensive mission statement, long-term goals and  objectives for major operations, and strategies for achieving these goals  and objectives. Further, we have reported that an agency\u2019s strategic  planning effort is the most important element in results-oriented  management and serves as the foundation for defining what the agency  seeks to accomplish, identifying strategies to achieve desired results, and  determining how well it succeeds in reaching its goals and objectives.",
      "  Leading results-oriented organizations focus on the dynamic and inclusive  process of strategic planning, rather than on a strategic planning  document, to provide a foundation for day-to-day activities and foster  communication between the organization and its stakeholders. Moreover,  the committee report accompanying GPRA stated that clear and precise  goals enable an organization to maintain a consistent sense of direction  regardless of the leadership changes that can occur frequently across the  federal government. NFIP is a major operation with $1.2 trillion in coverage and $17.8 billion in  debt that has remained on GAO\u2019s high-risk list since 2006. FEMA officials  told us that FEMA chose not to prescribe goals and objectives for specific  programs in its strategic plan as required by GPRA.",
      " They said that the  agency chose a different strategic approach that would allow for more  flexibility, something that was needed because FEMA must respond to  emergencies as they occur. While FEMA may require flexibility in its  operating environment, as a federal insurance program NFIP requires a  more structured framework to help ensure that its operations are properly  managed and allow for the development of effective performance  measures. Unless FEMA provides FIMA with strategic direction and  guidance for administering NFIP, the program risks not having a strategic  focus that is aligned with agency goals and objectives or effective  performance measures. FIMA officials told us they were in the process of developing a strategy for  mitigation and insurance but did not provide a specific timeline for  completing or implementing it and did not provide details of what it might  include.",
      " FIMA officials said they began developing the strategy in June  2010 and had created a steering committee with about 15 members  representing various areas within FIMA. The committee held a summit  with a number of stakeholders in November 2010 to validate the proposed  mission, goals, and objectives of the organization before entering the  drafting process and expect to eventually publish the final strategy in the  summer of 2011. Because these efforts have not yet been completed,  whether the strategy will include adequate goals and objectives for  administering and managing NFIP remains to be seen. Without goals and  objectives and a firm timeline for completing them,",
      " NFIP will continue to  lack a strategic direction. FIMA officials said they had relied on other documents for strategic  guidance, including FEMA- and DHS-level guidance and the agency\u2019s  general mission\u2014managing risks from all natural hazards to help free  America from the burden of such disasters. However, without specific  agency- or program-level goals, FIMA cannot ensure that any performance  measures it develops for NFIP properly and adequately measure the  program\u2019s success. According to GPRA, agencies should establish  performance indicators to be used in measuring and assessing the relevant  outputs, service levels, and outcomes of each program activity.",
      " Moreover,  GAO\u2019s Standards for Internal Control in the Federal Government states  that management should ensure that agencies establish and review  performance measures and indicators. As we have reported, performance  goals and measures that successfully address important and varied aspects  of program performance are key to a results-oriented work environment.  Measuring performance allows organizations to track the progress they  are making toward their goals and gives managers critical information on  which to base decisions for improving their programs. We have also  reported that successful performance measures are, among other things,  linked to core program activities. FIMA officials said that in recent years they had generally relied on five  performance measures for NFIP that they reviewed quarterly:",
      "    Percentage of the U.S. population (excluding territories) covered by  local hazard mitigation plans that had been approved or were pending  adoption. Percentage of the national population whose safety had been improved  through the availability of flood risk data in Geospatial Information  System (GIS) format. Number of communities taking or increasing actions to reduce their  risk from natural disasters. Potential property losses, disasters, and other costs avoided. NFIP premium income per $100 dollars of combined operating expense  and historical losses paid. However, FIMA recently revised its operating plan, which FIMA officials  said aligns resources to major activities and provides transparency to  FIMA\u2019s performance.",
      " In this revision, FIMA replaced the five measures  with 11 new performance measures aligned with DHS\u2019s mission and  relevant DHS goals. FIMA said that these measures are still under  development but that it began testing these measures in fiscal year 2011  and plans to officially require and report them in fiscal year 2012. They are  grouped into three levels\u2014strategic, management, and activity\u2014indicating  how they are expected to be used and which units will be gathering and  reporting information in support of these performance measures. The  measures relate to a range of FIMA\u2019s activities including mitigation  effectiveness, mapping progress,",
      " and NFIP operating efficiency. However, FIMA has not had a set of strategic goals and objectives to guide  its administration of NFIP. FIMA officials plan to include long-term goals  and objectives in its upcoming strategic plan, but until this plan is  complete and effectively implemented, FIMA will continue to be  challenged by a lack of strategic focus and direction. Further, FIMA  officials will be limited in their ability to understand and assess their  effectiveness in administering NFIP and properly allocate its resources.  Further, without a strategic plan specific to FIMA that incorporates  specific goals and objectives for NFIP, determining whether FIMA\u2019s  performance measures are aligned with and appropriately support FEMA\u2019s  goals for NFIP is not possible.",
      " Without a robust set of goals and  performance measures that are aligned and appropriately supported, FIMA  is limited in its ability to monitor and hold management and staff  accountable for program performance and take corrective actions as  needed. FEMA Lacks a Strategic  Human Capital Plan That  Meets Statutory  Requirements and  Addresses the Agency\u2019s  Human Capital   Challenges, Including  Those Affecting NFIP The Post-Katrina Emergency Management Reform Act of 2006 (PKEMRA)  required FEMA to develop a strategic human capital plan that included an  assessment of the critical skills and competencies required for its  workforce. While FEMA developed a 2008-",
      "2012 Strategic Human Capital  Plan, we found that the plan did not meet PKEMRA\u2019s requirements.  PKEMRA required that the plan include an assessment of (1) the critical  skills and competencies that would be needed in the workforce during the  10-year period after the law was enacted; (2) the skills and competencies  of the FEMA workforce and projected trends in that workforce based on  the expected losses due to retirement and other attrition; and (3) staffing  levels for each category of employee and gaps that should be addressed to  ensure that FEMA has continued access to the necessary critical skills and  competencies.",
      " In addition, PKEMRA requires FEMA to develop a \u201cPlan of  Action\u201d to address gaps in critical skills and competencies, including:    specific goals and objectives for recruiting and retaining employees,  such as recruitment and retention bonuses;    specific strategies and program objectives to develop, train, deploy,  compensate, motivate, and retain employees;    specific strategies for recruiting staff with experience serving in  multiple state agencies responsible for emergency management; and    specific strategies to develop, train, and rapidly deploy a surge capacity  force. FEMA\u2019s plan\u2014including a 2010 Human Capital Operational Plan\u2014did not  address all PKEMRA requirements.",
      " For example, it did not define the  critical skills and competencies that FEMA would need in the coming  years or provide specific strategies and program objectives to motivate,  deploy, and retain employees, among other things. In an October 2009  report, NAPA also stated that FEMA\u2019s plan did not meet certain PKEMRA  requirements, which the report described as being focused on  understanding and planning for the current and future workforce. NAPA  also recommended that FEMA strengthen its human capital planning.  One NAPA official noted that the 2008-2012 Strategic Human Capital Plan  is essentially a \u201cplan to develop a workforce plan.\u201d We have noted in previous work that agencies should develop human  capital strategies\u2014including succession planning,",
      " training, and staff  development\u2014to eliminate gaps between current skills and competencies  needed for mission success. FEMA\u2019s human capital plan does not have  strategies to address retention challenges or contractors, among other  things. For example, FEMA experiences frequent turnover in key positions  and divisions that can result in lost productivity, a decline in institutional  knowledge, and a lack of continuity for remaining staff. Within the past  several years, key leadership has also changed within several key FEMA  offices that support FIMA in some NFIP activities. For example OCCHCO  has hired its third chief in the last 2 years. Further, FEMA has experienced  turnover in several of the offices that provide critical mission support  services to NFIP.",
      " For example, OCPO, which had 88 permanent full-time  (PFT) staff at the beginning of FY 2007, had lost 59 employees as of August  2010. FEMA staff told us the high turnover had resulted in the loss of  institutional knowledge, specialized skills, and management continuity and  efficiency. FEMA also faces challenges in hiring, which has been a major focus of its  workforce operations. As of the third quarter of fiscal year 2010,  approximately 876 of FEMA\u2019s 4,916 funded positions were unfilled.  Further, both FEMA program officials and OCCHCO, which screens  candidates,",
      " said that OCCHCO often sent candidates without the requisite  skills forward to the program offices that typically make the final hiring  decisions. OCCHCO officials told us that in several instances program  offices had not properly aligned announcements and position descriptions,  so that candidates appearing to meet the requirements of the position  description did not meet the actual requirements of the position. OCCHCO  officials added they were working to improve the situation. FEMA also lacks accurate data on its current staffing levels, largely  because of IT issues, exacerbating the difficulties of workforce planning.  In a 2009 review of OCCHCO, NAPA found that frequent shifting of  organizational resources over the previous 6 years,",
      " the lack of a single  system to track and account for the workforce, complexities associated  with tracking multiple workforce categories, and problems with FEMA\u2019s  human resource management system had hindered efforts to obtain  complete and accurate human capital data for review. According to  NAPA, these shortcomings had significant consequences in 2009, when  FEMA established an informal hiring freeze because the number of staff  hired exceeded authorized levels. In 2010, the Homeland Security Studies  and Analysis Institute also found a discrepancy of around 700 filled  positions between FEMA\u2019s manpower database and National Finance  Center data. The institute found that the two most common discrepancies  in employee data were errors involving on the employees\u2019 work unit and  activities.",
      " OCCHCO officials said they had also experienced difficulties  with human resource management systems. Most recently, in 2010 DHS  deployed the Talent Link system to manage its human resource needs, but  the system was found to be incompatible with government human  resource systems and processes. As a result, a few months after Talent  Link was deployed DHS phased it out and moved FEMA to the USA  Staffing system. In addition, in spite of the importance of the work of contractors to NFIP\u2019s  activities, FEMA does not centrally track the number of contractors or the  type of work they do. For example, FIMA staff estimated that one of its  divisions had as many as 10 contractors per FIMA staff member,",
      " and other  FEMA staff said that they were unable to estimate the number of  contractors. According to a FEMA Workforce Baseline Assessment  conducted by the Homeland Security Studies and Analysis Institute,  examining the federal workforce alone cannot fully assess FEMA\u2019s full  human capital capability. The assessment went on to note that contract  support must be considered in any discussion of FEMA staffing because  contractors do not just supplement staff efforts but perform a substantial  amount of FEMA\u2019s work. Unless FEMA tracks its contractors, it is severely  limited in its ability to assess the total workforce and their respective roles  and to plan for future staffing needs. However, pursuant to the  Consolidated Appropriations Act of 2010,",
      " the head of DHS, which includes  FEMA, is now required to prepare an annual inventory of service contracts  it awards or extends through the exercise of an option. The initial  inventory was due not later than December 31, 2010, and annually  thereafter. As part of the inventory, DHS must include the number and  work location of contractor and subcontractor employees expressed as  full-time equivalents for direct labor, compensated under the contract. FEMA told us it had begun developing an initial workforce assessment  that it planned to complete in 2012, but the agency is uncertain whether it  will include contractors in this study. According to FEMA staff,",
      " a new  strategic human capital plan is also under review, and therefore, FEMA  could not provide us with a copy. As a result, we were unable to determine  whether it addressed PKEMRA\u2019s requirements and the human capital  challenges that NFIP faces. Without a human capital plan that, at a  minimum, meets PKEMRA\u2019s requirements, includes a comprehensive  workforce assessment that identifies staffing and skills requirements,  addresses turnover and staff vacancies, and analyzes the use of  contractors, FEMA will continue to have difficulty hiring and retaining  staff and managing its contractors. Neither FEMA nor FIMA  Has a Plan to Ensure That  Key NFIP Operations Are  Maintained When Staff   Are Deployed During a  Disaster As we have previously reported,",
      " neither FEMA nor FIMA has a plan to  help ensure that agency operations, including NFIP\u2019s, are maintained when  a federal disaster is declared and staff are required to respond to it.  Without such a plan, FEMA faces the risk that some critical day-to-day  functions may not be performed while staff are deployed, limiting the  agency\u2019s ability to provide the necessary support for disaster relief  missions. In addition to their responsibilities for day-to-day operations,  FEMA employees are also expected to be on call during disasters for  potential assignment to disaster-related activities, including deployment to  field operations. FEMA staff told us that neither FIMA nor FEMA had a  program-specific or agencywide plan that covered all of its staff and  functions,",
      " including NFIP. According to a FEMA official, while program  offices have some ability to make decisions about how many mission- critical staff to deploy to the field during a disaster and how many to keep  in their office positions, the current administrator has made it clear that  when a disaster hits, the priority is to deploy staff to the field. As was the case with Hurricane Katrina, FEMA staff can be deployed for  weeks or months and, during that time, are often performing duties in the  field that take them away from their day-to-day responsibilities. According  to a recent study by the Homeland Security Studies and Analysis Institute,  FEMA staff found that operating normally during and immediately after a  disaster was problematic due to staff deployment and an increased  workload due to the disaster.",
      " For this reason, planning for business  continuity management and deployment planning are particularly  important for the agency. We previously reported that FEMA did not have  guidelines on what constitutes a mission-critical position, had not  conducted an assessment of the minimum level of support that would be  necessary to keep the agency fully operational, and thus had limited  guidelines for deciding who should be deployed. In addition, the report  found that nearly 57 percent of FEMA\u2019s permanent employees who are  deployable do not have assigned deployment job titles or roles that would  facilitate deployment during a disaster. Without a plan for deploying staff  during a disaster, FEMA faces the risk that critical functions,",
      " such as  managing NFIP operations, may not be performed while staff are deployed  to the field during a natural disaster, increasing the likelihood that the  agency will be unable to provide the necessary support for disaster relief  missions. Instances of Ineffective  Collaboration between  FIMA and Mission Support  Have Complicated FEMA\u2019s  Administration of NFIP FIMA relies on Mission Support for a variety of mission-critical functions,  including IT, acquisition, and financial management, but FIMA and Mission  Support have faced challenges in collaborating with one another. In our  prior work, we have identified eight practices that agencies can use to  enhance and sustain their collaborative efforts:",
      "    Define and articulate a common outcome. Establish mutually reinforcing or joint strategies. Identify and address needs by leveraging resources. Agree on roles and responsibilities. Establish compatible policies, procedures, and other means to operate  across agency boundaries. Develop mechanisms to monitor, evaluate, and report on results. Reinforce agency accountability for collaborative efforts through  agency plans and reports. Reinforce individual accountability for collaborative efforts through  performance management systems. While these practices were originally developed for collaboration among  federal agencies, they can apply to collaboration between FIMA and the  offices that support it. Information Technology  Systems Were Developed  without Full Collaboration  between FIMA and the   Office of the Chief   Information Officer OCIO\u2019s stated function is to assist FEMA offices in IT development and to  help ensure they follow the agency\u2019s established processes for IT system  implementation.",
      " However, FIMA and OCIO faced challenges in agreeing  on roles and responsibilities and establishing mutually reinforcing or joint  strategies. For example, FIMA officials said they had experienced  difficulty in the past getting timely approvals from OCIO for IT programs  and contracts for NFIP and had sought ways to streamline the process,  including using contractors rather than OCIO staff. FIMA officials also said  that OCIO\u2019s certification and accreditation (C&A) process\u2014which  determines whether systems are certified to become operational\u2014could  be lengthy. They said they had to wait months for C&A approval for at  least two mission-critical systems,",
      " one of which had been held up for  about 9 months as of February 2010. One official said this problem had  arisen because the C&A process lacked a formalized structure and  communication between FIMA and OCIO was inadequate. OCIO officials  acknowledged that some communication problems existed and said they  were aware of FIMA\u2019s concerns. OCIO\u2019s primary concern, however, was  that at times FIMA would perform IT functions independently from OCIO  and believed that involving OCIO would help streamline IT development.  For example, an OCIO official said that assessing and approving a $1  million investment would require 30 to 45 days.",
      " OCIO officials also said that 95 percent of FEMA\u2019s known systems were  certified but noted that other systems, including some of FIMA\u2019s that  affect NFIP, might have been developed independently of OCIO and thus  lacked its approval. For example, in the past year OCIO discovered five  FEMA human resources programs that were developed without its  knowledge or involvement. OCIO now requires that all systems on FEMA\u2019s  network complete the C&A process and be approved by the CIO, because  undocumented systems can create risks that are difficult to correct. In  accordance with the Federal Information Security Management Act of  2002 (FISMA), OCIO is creating an inventory of IT systems for each of  FEMA\u2019s offices.",
      " OCIO officials said that once the portfolio lists had been  verified, OCIO would address the backlog of pending C&As. FEMA also  developed an Acquisition Review Board (ARB) to help ensure that IT  systems within the agency are developed with the CIO\u2019s involvement,  because the acquisition system requires the CIO\u2019s approval at key points in  the IT development process. OCIO is also taking steps to improve collaboration with FEMA\u2019s program  offices, but it is too early to determine if the issues with FIMA have been  fully addressed. For example, in January 2008 OCIO began assigning a  customer advocate to each program office to help it better understand the  IT needs of FEMA\u2019s program offices and to act as liaisons.",
      " The customer  advocates are responsible for understanding all of the systems that are  needed to support their assigned program offices and for regularly  updating the CIO. FIMA\u2019s customer advocate said he met frequently with  FIMA officials to resolve IT issues that arose and he was aware of only one  major issue\u2014the need to replace the legacy policy and claims processing  system. While FIMA officials have mentioned a number of processes that  could benefit from greater automation, including document management  and budget formulation, it is unclear whether they have communicated  these needs to their customer advocate. Until cooperation between FIMA  and OCIO improves, FEMA will be unable to ensure that FIMA\u2019s and  NFIP\u2019s IT needs are adequately met.",
      " FIMA and the Office of the  Chief Procurement Officer  Have Differed on Implementing  a Policy for Small Business  Contracts FEMA has exceeded its goals for awarding contracts to small businesses,  but FIMA and OCPO have differed on the question of how the policy for  setting aside these contracts should be implemented. The federal  government\u2019s goal for participation by small business concerns is at least  23 percent of the total dollar value of all prime contract awards for each  fiscal year. By comparison, FEMA\u2019s fiscal year 2010 goal of 31.9 percent  was higher because, according to OCPO officials,",
      " DHS noticed that FEMA  was exceeding its previous targets and wanted to provide incentives for  continuing to exceed them. In general, before setting aside a contract for  competition among small businesses, an agency must conduct market  research to determine whether there is a reasonable expectation of  obtaining offers from at least two small businesses that could meet the  contract\u2019s requirements. OCPO officials make this determination within  FEMA. If the program office objects to the decision, OCPO generally asks  the office to support its position. If a disagreement persists, the Head of  Contracting Activity has traditionally resolved the disagreement  informally. No formal process exists for resolving these disagreements or  appealing decisions.",
      " FIMA officials said that in several instances the use of small business  contracts has caused inefficiencies for NFIP. According to these officials,  flood insurance work is better suited to large businesses. For instance, in  2007 OCPO decided to split one of FIMA\u2019s contracts\u2014which covered many  areas of NFIP, including marketing, training, and data management\u2014into  five smaller contracts that were more conducive to small business  involvement. According to FIMA officials, OCPO did not involve FIMA  sufficiently in this decision and did not sufficiently consider how it would  affect FIMA, which would need additional staff to monitor the contractors  and would lose experienced contractors.",
      " OCPO officials disagreed, noting,  among other things, that the requirements for each contractor were  outlined in the contract\u2019s solicitation and only contractors that could meet  the requirements were considered. No formal process exists for resolving  the disagreement, and whether OCPO effectively communicated to FIMA  how it could justify its position is unclear. Such disagreements indicate a  need for those involved to improve their collaboration by establishing  mutually reinforcing or joint strategies to achieve common outcomes. According to FIMA officials, these disagreements have created  inefficiencies that have required extra work to resolve\u2014for instance,  lengthening the time required to complete certain processes. Recognizing  that it needed to improve its relationship with program offices,",
      " OCPO  management appointed an individual to reach out to and help them  recognize the value of OCPO\u2019s services. OCPO officials said that program  offices now understand they must work with OCPO, and OCPO hopes to  improve the relationship and help the program offices to better  understand how beneficial the procurement office can be. OCPO officials  said that the office now acts as an advocate for the program offices to DHS  and helps improve communication by explaining to program offices the  reasoning behind DHS\u2019s various requirements. Without further  improvements in this area, however, FEMA cannot fully ensure that NFIP\u2019s  acquisition needs are being met.",
      " Coordination between the  Office of the Chief Financial  Officer and FIMA on Budgetary  Needs Was Limited FIMA and OCFO have not fully coordinated solutions to FIMA\u2019s budget  formulation process. FIMA officials said they could benefit from greater  automation of the budget formulation process, which currently relies on  FEMA\u2019s Integrated Financial Management Information System (IFMIS). In  particular, FIMA officials have said they need a system for building their  budget, a process that involves estimating expected policy fee revenue and  identifying and allocating funds from six appropriations. OCFO currently  provides FIMA with spreadsheets for formulating the budget that contain  templates for the spending plans detailing the resources required to  execute programs,",
      " projects, and activities. OCFO officials acknowledged  that the current process was more time consuming and prone to data entry  errors than an automated system would be. FIMA officials noted that using  these spreadsheets was particularly challenging because of fluctuations in  NFIP premium revenues. To address some of these concerns, OCFO developed an automated  budget formulation tool and is customizing it to meet the agency\u2019s needs.  OCFO expects that the new tool will act as an interface with its current  systems and ease budget formulation by eliminating the use of  spreadsheets and allowing FIMA and other program offices to develop  spend plans directly in the system.",
      " The tool became operational within  OCFO in March 2011, and OCFO plans to implement it FEMA-wide on a  rolling basis throughout fiscal year 2011 to allow time to train staff.  However, both OCIO and FIMA said they did not have adequate input into  the development of the new system, and the extent to which OCFO ever  defined and documented system needs and requirements is unclear. In  particular, FIMA officials said that OCFO may not have fully understood  FIMA\u2019s needs regarding formulation and execution of NFIP\u2019s budget and  the challenges created by fluctuating premium revenues. Officials from KPMG,",
      " the auditor retained by DHS, also said they had  noticed communication challenges within FEMA, particularly between  FIMA and OCFO. For instance, KPMG found that FIMA had changed its  method for estimating its deferred revenue, and as DHS reported in 2008,  had not communicated this change to OCFO. While KPMG reports that  this condition was corrected in fiscal year 2009, to prevent future  problems the auditor recommended that FEMA develop better methods of  communicating such changes. KPMG also found that FEMA had not  completed its documentation of formal business policies and procedures  for several of the roles,",
      " responsibilities, processes, and functions  performed within FEMA. Without better collaboration and  communication between FIMA and OCFO, FEMA will be unable to fully  ensure that NFIP\u2019s financial and budgetary needs are being met. FEMA Lacks Electronic  Systems and Related  Policies That Could  Improve Its Administration  of NFIP FEMA is a paper-based agency and has no centralized electronic  document management system that would allow its administrative,  regional, and program offices\u2014including FIMA\u2014to easily access and store  documents. According to the National Archives and Records  Administration (NARA), a record enters the document life cycle at its  creation and remains in the system through its use,",
      " maintenance, and  disposition. Records enable and support an agency\u2019s ability to fulfill its  mission, and because records contain information, taking a systematic  approach to managing them is essential. According to NARA, effective  records management helps deliver services in a consistent and equitable  manner; facilitates effective performance throughout an agency; protects  the rights of the agency, its employees, and its customers; and provides  continuity in the event of a disaster. According to NARA, from a strategic  perspective, agencies lacking effective records management policies and  procedures can hinder their ability to respond swiftly to opportunities,  events, incoming requests, and investigations,",
      " and to effectively implement  policy. From an operational perspective, such agencies may waste internal  resources searching for or recreating records, while at the same time  incurring storage costs for records that are not properly purged. From a  regulatory standpoint, such agencies can face fines, sanctions, and  convictions from noncompliance with federal statutes, rules, and  regulations. Finally, from a legal perspective, such agencies can use  excessive time, costs, and resources during discovery in order to retrieve  needed materials from poorly organized records. According to a FEMA official, while there is broad consensus on the need  for a centralized electronic document management system,",
      " currently no  such system is in use. According to FEMA staff, FIMA has electronic  systems in place for claims processing and correspondence  recordkeeping, and FIMA\u2019s Risk Insurance Division has a system in place  that is used for document archiving for its division. FEMA\u2019s Records  Management Division told us it had instructed program offices needing a  records management system immediately to continue the use of existing  document management systems until DHS implements such a system.  However, the agency has no policies or procedures in place for  implementing such electronic systems. FEMA officials told us they had not  implemented an agencywide system, even on an interim basis,",
      " because  they were waiting for a decision from DHS on a centralized system. Further, FEMA lacks effective and systematic procedures to fully ensure  that it appropriately retains and manages its records. While DHS has an  overall records management directive, FEMA\u2019s agency-specific guidance is  outdated. For example, the guidance does not provide clear direction on  electronic recordkeeping but does contain direction on file cabinet sizes  and the use of candles in file rooms. FEMA Records Management officials  were unable to tell us when an updated directive would be forthcoming.  FEMA officials also said they had a plan for annually updating file plans  that staff were supposed to follow but did not have processes in place to  ensure that the plans actually were updated.",
      " As result of this lack of updated policy and guidance, FEMA\u2019s  recordkeeping practices, which apply to NFIP, may not conform with the  requirements of federal records management laws and regulations and  may not adhere to Standards for Internal Controls in the Federal  Government, which state that management should ensure that relevant,  reliable, and timely information is available for decision making and  external reporting. For example, in our review, FEMA staff told us they  were storing documents using a system of file rooms, personal file  cabinets, and document-sharing software with limited staff access.  According to FIMA staff, documents can be difficult to locate and at times  have been lost or thrown away when staff separate from the agency.",
      "  FEMA staff also told us they had faced decreased productivity due to lost  packages, delays in budget execution and policy decisions, destroyed  documents, and duplicated efforts. In addition, because FEMA staff are  currently spread across several different locations in the Washington, D.C.,  area and 10 field offices across the country, progress in meeting NFIP  goals can be slowed by staff\u2019s inability to locate, transfer, and archive  documents across all of these locations. FEMA has taken two actions that could help to ensure that its current  paper-based records are effectively managed. First, in fiscal year 2010 DHS  required all staff to take records management training on their individual  responsibilities for maintaining agency records.",
      " FEMA officials told us this  training was the first of its kind that the agency had offered. Second,  FEMA has begun identifying staff to act as records liaison officers in each  program office. Records liaison officers are responsible for helping ensure  that records are kept in accordance with the agency\u2019s file plan. Agency  officials told us they relied heavily on records liaison officers to provide  oversight in these areas. However, FEMA has not yet identified records  liaison officers for each section of the agency and has not yet conducted a  review or audit to fully ensure that records were being systematically  retained and managed. Until FEMA addresses the agency\u2019s immediate  need for a centralized document management system and develops  effective policies guiding the use of electronic systems,",
      " staff will continue  to face challenges maintaining records, affecting FEMA\u2019s ability to make  effective decisions and report accurately on its finances and operations. FEMA\u2019s Outdated Financial  Management Systems and  Processes Have Created  Challenges and Left  Unliquidated Obligations  Unresolved Our review of FEMA\u2019s financial management found that staff faced  multiple challenges in their day-to-day operations due to limitations in the  systems they must use to perform these operations. OCFO staff told us  that one of the greatest challenges they faced in carrying out their financial  management responsibilities was using unautomated and often disparate  systems. For example, they said that some of their systems for invoicing,",
      "  travel management, and debt collection did not interface with FEMA\u2019s  financial management system and, as a result, they had to manually enter  data in FEMA\u2019s system. In addition, OCFO staff said that because their  current travel management system was difficult and time consuming to  use, they employed a paper-based process for staff travel. While FEMA has  plans to implement a new system, a FEMA official told us the new system  would also be time consuming to use\u2014for example, it would not allow  staff to process multiple travel orders in a short period of time, as would  be required during emergency deployment. Finally, OCFO staff said that  both the current debt collection and Department of Justice grant systems  for nondisaster grants required that grant obligations be entered manually.",
      "  According to FEMA officials, DHS is currently in the process of developing  a DHS-wide grants management system; however, they estimated the  system would take roughly a few more years to fully develop and  implement. The lack of automated systems for budget formulation and execution  helped to make these tasks two of its biggest challenges. As we have seen,  FIMA currently uses a system of spreadsheets to formulate fiscal year  budgets and to track overall budget expenditure and specific line-item  expenses. According to FIMA officials, spreadsheets can be corrupted and  data are prone to errors because staff work on multiple versions. In  addition, FIMA staff also told us they faced challenges with the paper-",
      " based tracking of requisition orders, which are sent between departments.  In order to determine what was approved or not approved in the system  on a daily basis, staff must manually track requisition packages through  various offices. An agency official told us that the risks associated with  this paper-based process were high and there had been instances in which  packages were lost or signed for by unauthorized staff. These issues have  been raised in past audits by the DHS\u2019s Office of the Inspector General  (OIG). While FIMA has begun to implement an automated tracking  system, according to FEMA staff, the process was delayed due to IT  challenges.",
      " We have previously reported on weaknesses in FEMA\u2019s financial  management processes. For example, we reported that internal control  weaknesses had impaired FEMA\u2019s ability to maintain transaction-level  accountability; that FEMA\u2019s broader oversight structures such as WYO  company audits, the triennial operational reviews of WYOs, and FEMA\u2019s  claims reinspection program were limited in their effectiveness; and that  FEMA\u2019s initiative to improve specific internal control weaknesses and the  overall NFIP environment has done little to address many of the NFIP  financial data deficiencies highlighted by the 2005 Gulf Coast hurricanes.  In addition, we reported that the design of FEMA\u2019s financial reporting  process increased the risk of inaccurate or incomplete data because it did  not include transaction-level data and places an over reliance on manual  data entry.",
      " Furthermore, our testing of transactions from the Bureau and  Statistical Agent database found that many transactions either lacked or  had incomplete insured names, addresses, or policy effective dates. As a  result, we were unable to test the accuracy of reported insured premium  amounts or whether policy premium information was complete. Recent external audits of DHS\u2019s financial statements, performed by KPMG,  have also identified material weaknesses in the area of unliquidated  obligations. As of March 2011, FEMA had a total of $3.3 million in  unliquidated obligations for NFIP-related funds that had been inactive for  at least 5 years.",
      " According to a FEMA official, around $3.0 million of these  funds could potentially be deobligated and used for new obligations  consistent with the purposes for which the funds were appropriated.  According to GAO\u2019s Standards for Internal Control in the Federal  Government, transactions should be promptly recorded to maintain their  relevance and value to management in controlling operations and making  decisions. This applies to the entire process or life cycle of a transaction o event from the initiation and authorization through its final classification  in summary records.\u201d Further, \u201ccontrol activities help to ensure that all  transactions are completely and accurately recorded.\u201d In addition,  \u201cinternal control and all transactions and other significant events need to  be clearly documented,",
      " and the documentation should be readily avai for examination.\u201d All documentation and records should be properly  managed and maintained. KPMG cited the unliquidated obligations issue as a material weakness i 2008 and as a significant deficiency in the 2009 and 2010 Consolidated  DHS Audits. According to a FEMA official, in 2009 the agency issued an  interim directive and procedures for addressing the unliquidated  obligations issue. For example, it has started to verify the age of  obligations older than 365 days and is working with points of contacts in  program offices to certify that the unliquidated accounts are still open.",
      "  However, OCFO told us that staff had sent memos to FIMA regarding this  issue but that FIMA staff responded they were unaware of the amount of  the unliquidated obligations and the potential amount that might be  returned to FIMA. Unless FEMA implements processes to better monitor  unliquidated obligations, including within FIMA, it could lead to inaccurate  financial statements and affect DHS\u2019s overall budget. FEMA Has Begun to  Implement Changes in Its  Acquisition Management  Activities but Needs to  Complete Key Steps FEMA has also identified a number of weaknesses in its oversight and  management of acquisitions, and DHS and FEMA have taken a number of steps to improve these functions.",
      " However, because many of these steps  have either been recently implemented or are still under developmen extent to which they will improve FEMA\u2019s acquisition management  remains to be seen. FEMA\u2019s acquisition management has traditiona guided by DHS\u2019s investment review process, which had four main  objectives:  Identify investments that perform poorly, are behind schedule or o budget, or lack capability, so officials can identify and implement  corrective actions. Integrate capital planning and investmen allocation and investment management. Ensure that investment spending directly supp orts DHS\u2019s mission and  identify duplicative efforts for consolidation. Ensure that DHS conducts required management, oversight, control,  reporting,",
      " and review for all major investments. FEMA performs three types of acquisition activities: (1) acquisition  programs, which typically provide a tangible capital asset; (2) enterprise  service contracts, which provide a service with a direct impact on FEMA\u2019s  ability to carry out its mission; and (3) nonenterprise service contracts,  which provide a service but do not have a direct impact on FEMA\u2019s ability  to carry out its mission. Historically, some FEMA investments have been  funded despite not receiving adequate review or oversight. Most notably,  the NextGen system went forward without the necessary reviews and  failed after 7 years and an investment of $40 million.",
      " Further, the $1  billion Risk Mapping Assessment and Planning (RiskMAP) program, which  is an effort to modernize flood hazard mapping, was funded without  receiving approval from the review board. OCPO officials said that this  former DHS review board did not sufficiently meet the department\u2019s  acquisition oversight needs, leading DHS to issue an interim acquisition  directive in November 2008 and a final directive in January 2010. The  directive provides an overall policy and structure for acquisition  management within DHS describing the Acquisition Life Cycle  Framework, Acquisition Review Process, and ARB, and outlines  management procedures and responsibilities related to various aspects of  acquisition.",
      " Because the DHS acquisition directive allows its component agencies to  set internal acquisition processes and procedures as long as they are  consistent with the DHS directive, in August 2010 OCPO began drafting its  own acquisition directive and a handbook explaining how to implement it.  FEMA had circulated its directive, for comments, and OCPO officials  expect it will be completed within 30 days after comments have been  collected and incorporated. One important component of acquisition management is reviewing  programs through an ARB. FEMA created its ARB in July 2009 and had  held four meetings as of January 2011. FEMA\u2019s ARB includes two co-chairs  (the Deputy Administrator and the Component Acquisition Executive),  representatives from FEMA\u2019s various program offices,",
      " heads of Mission  Support\u2019s various offices, and others. While FEMA can choose to review  any acquisition activity, it requires that certain items be presented to the  ARB, including all acquisition programs with life cycle costs of more than  $50 million and enterprise service contracts with annual expenditures  greater than $20 million. As of January 2011, DHS recognized nine FEMA  programs requiring FEMA ARB review. Seven of these\u2014including the $1  billion RiskMAP program\u2014had gone through the FEMA ARB as of January  2011, and FEMA plans to review the other two, as well as others, in fiscal  year 2011.",
      " As it continues to review its portfolio of programs, it expects to  add additional programs to this list. In particular, OCPO is examining  FIMA\u2019s acquisition activities and considering adding NFIP operations to its  ARB list. FEMA has also faced challenges in the acquisition and oversight of its  contractors, which are critical to NFIP. Both OCPO and FIMA officials  said there had been communication challenges between contracting  officers who were part of OCPO and Contracting Officer\u2019s Technical  Representatives (COTR) who report to the contracting officers but also  work in the program offices. OCPO officials said that many COTRs were  loyal to their program office and communicated with contracting officers  only when a problem arose.",
      " FIMA officials said that contracting officers  had at times been unresponsive to them, particularly when reporting  contractor discrepancies. Moreover, both we and KPMG previously noted  weaknesses in FEMA\u2019s oversight of contractors. For example, we reported  that a lack of monitoring records, an inconsistent application of  procedures, and a lack of coordination diminished the effectiveness of  FEMA\u2019s monitoring of NFIP-related contracts. Further, KPMG officials  said that FIMA did not provide sufficient oversight of its contractors,  something that is of particular concern because FIMA has a relatively high  proportion of contractor staff. Moreover, DHS\u2019s OIG found that acquisition  personnel could not locate a number of contract files that were part of its  review including one for a $3 million flood risk assessment contract.",
      " The  report said that missing contract files created uncertainties, including  whether proper contracting procedures were followed, contractors were  held accountable for goods and services, and tax dollars were  appropriately spent. To correct some of its acquisition challenges, FEMA issued a directive in  September 2009 to clarify the roles, responsibilities, and requirements of  COTRs in contract administration. This directive includes, among other  things, a COTR Tiered Certification Program consisting of credentialing  and compliance, and FEMA plans to train all of its COTRs to their  appropriate certification levels by March 2011. Providing further guidance,  FEMA also issued a COTR handbook in February 2009.",
      " Among other  things, the handbook includes training requirements, duties, monitoring  and surveillance procedures, and documentation requirements. In May  2010, OCPO began a technical review of COTRs\u2019 Contract Administration  Files to better ensure that COTRs were adequately documenting their  contracts. OCPO officials also said that, realizing the importance of  outreach to FEMA\u2019s program offices, they had developed and funded a  \u201cHow to Work with Us\u201d training course and held the agency\u2019s first annual  program management seminar. Moreover, officials from FIMA\u2019s Risk  Insurance Division said they had changed their process for monitoring  contractors, including requiring the contractors to submit monthly  monitoring reports.",
      " As we have seen, most of these actions are relatively  new, and some have not been fully implemented. While these steps need to  be taken, the extent to which they will ensure effective oversight of  FEMA\u2019s acquisition activities remains to be seen. Unless FEMA sets a firm  timeline for implementing these actions, the agency will continue to have  difficulty determining whether its acquisition processes are cost-effective,  particularly those involving contractors. FEMA\u2019s Emergency  Response Culture May  Make Implementing New  Processes a Challenge,   but Efforts to Improve  Business Processes,  including within FIMA,  Have Been Initiated Several FEMA officials and staff told us that the emergency response  culture within the agency could create resistance to implementing formal  business processes,",
      " many of which involve NFIP. For example, several  staff suggested that difficulties in following business processes were in  part linked to FEMA\u2019s emergency response culture\u2014that is, its  commitment to responding to disasters rather than strategically planning  how its response could be improved by implementing more efficient office  systems, policies, and processes. Further, agency officials told us that  FEMA staff generally believed that formal or bureaucratic processes could  impede their progress. Officials suggested that these cultural issues had  led to both a general unwillingness to follow business processes at the  staff level and limited commitment to planning and oversight at the  management level. One FEMA official said that while FEMA\u2019s culture was  part of the challenge,",
      " the agency had expanded after September 11 and has  doubled in size since the 2005 Gulf Coast Hurricanes without  commensurate adjustments in processes and systems. FEMA staff also  told us that because many of FEMA\u2019s processes were manual, FEMA\u2019s  culture had become dependent on people, with staff relying on personal  relationships to accomplish tasks. However, FEMA\u2019s Mission Support Bureau told us it had begun a business  process improvement effort in early 2009 that involved mapping the  current processes, analyzing them, and determining what changes and  improvements were needed. FEMA officials stated that the business  process issues arose because FEMA expanded significantly after  September 11,",
      " 2011, and the agency added new processes to existing ones  without making necessary adjustments to ensure that the new processes  were efficient. For example, the process for staff who were separating  from the agency was mapped as having 117 steps and was streamlined to  88 steps. The bureau also determined that personnel actions for the  regions were done differently than they were for FEMA headquarters.  Mission Support officials said that as of July 2010 they had completed  process maps and new internal control frameworks that affect NFIP. FEMA staff stated that Mission Support had completed several processes  in areas such as COTR appointment and reappointment,",
      " printing, Freedom  of Information Act requests for contract-related records, personnel  actions, access control to headquarters facilities, hiring and separating for  headquarters employees, workers compensation, annual property  inventory, and the 40-1 requisition process. A FEMA official told us that  staff had discovered numerous processes that either they did not realize  they had, were different than those previously assessed, or were needed  but did not exist. Mission Support staff said they had also found many  work-around processes and processes that were poorly documented or  duplicated at different places in the agency. FEMA officials told us they  had tentative plans to roll out the initial changes to processes throughout  relevant mission teams in 2011.",
      " In addition, FIMA officials told us they had  plans to undertake a separate effort to map seven other business  processes, including those for requisitions, hiring, congressional  correspondence, and salaries and benefits. Until these mapping processes  are complete and related internal control processes are developed, a risk  exists that certain functions will be inconsistently or incompletely carried  out and adversely affect FEMA\u2019s management of NFIP. Acquisition  Management  Weaknesses Led to  Cancellation of NFIP\u2019s  System Modernization  Project and Offer  Lessons for Future  Modernization Efforts An important example of weaknesses in NFIP\u2019s acquisition management  activities is the cancelled development of the Next Generation Flood  Insurance Management System (NextGen). Despite investing roughly 7  years and $40 million,",
      " FEMA cancelled this project in November 2009  because it failed to meet user expectations. As a result, NFIP must now  continue to rely on a 30-year old flood insurance management system that  does not fully support NFIP\u2019s mission needs and is costly to maintain and  operate. A number of acquisition management weaknesses contributed to  the project\u2019s failure and cancellation, and as FEMA begins anew to  modernize the existing legacy system, it plans to apply lessons learned  from its NextGen experience. As mentioned earlier in this report, FEMA  has already implemented some changes to its acquisition management  practices. However, whether these changes will better enable FEMA to  avoid the problems that derailed the development and implementation of  the NextGen system remains to be seen.",
      " FEMA Cancelled Its  NextGen Project in  November 2009 and  Continues to Rely on  Outdated Existing System NFIP currently uses a flood insurance policy and claims processing system  that was developed 30 years ago. The system is designed to (1) collect data  to determine flood insurance premium rates for specific properties, (2)  collect data on claims made on properties that have had flood-related  damage, (3) track the progress of policies and claims, and (4) prepare  legislatively mandated reports for Congress. According to FEMA officials,  this system is neither efficient nor effective and does not adequately  support the program\u2019s mission needs.",
      " For example:    Staff must manually input data, potentially increasing the possibility of  data errors that can take as long as 6 months to correct. The system provides limited access to data needed to manage the  program, including policy and claims data provided by WYO insurers,  which currently requires time-consuming and laborious steps to view  and change a given file. The system employs 1980s mainframe technology and uses  programming languages that were current in the 1960s but are not  widely used today. As a result, the system is costly and difficult to  maintain. The system can enforce restrictions on policies or claims only at the  end of each processing cycle.",
      " As a result, the number of errors that  occur during policy or claim processing is higher than it would be if  such restrictions were enforced earlier. Correcting these errors can add  as much as 2 to 3 months to the processing cycle. NFIP\u2019s attempts to modernize the existing system date back to at least the  mid-1990s, when NFIP tried to move the system\u2019s applications and data  onto a more modern hardware and software infrastructure. However, this  effort was not successful and was cancelled in the late 1990s. According to  NFIP officials, the effort failed in part because system users were not  sufficiently involved in the design process and project management  capabilities were inadequate.",
      " In 2002, NFIP awarded a contract for the development of the NextGen  system, which was to be deployed and operational by April 2007.  According to program plans, NextGen was to employ modern technology  and reengineered business processes to, among other things, improve the  accuracy and completeness of policy and claims data and provide 24-hour- a-day transaction processing and customer service. To meet these goals,  five system applications were to be developed, all of which were to be  supported by a new centralized database.  1.  Transaction Record Reporting Process (TRRP), which was to  collect data from the WYO insurers and flood insurance vendors on  policies and claims,",
      " conduct front-end balancing of financial data,  perform checks for errors in issued policies and processed claims, and  develop financial and statistical reports.  2.  Simple and Quick Access Net (SQANet), which was to permit  standardized and customized reporting of NFIP data.  3.  Flood Rating Engine Environment (FREE), which was to generate  online flood insurance rates and quotes.  4.  Flood Financial Management (F2M), which was to provide an  interface for NFIP financial stakeholders (NFIP bureaus, WYO  companies, and vendors) to enter, update, submit, and process  monthly financial data.",
      "  5.  ezClaims, which was to provide an interface for authenticated  claimants to view, edit, and process disaster and claims data. To deliver the system, the contractor adopted a spiral development  methodology, which involves the development of prototype applications  that are tested and assessed by users and refined accordingly. Between  2004 and 2007, the five NextGen system applications and the supporting  centralized database were prototyped, pilot tested, and modified. In May  2008, a production version of NextGen was placed into operational use.  Shortly thereafter, however, users began reporting serious problems with  the system\u2019s performance,",
      " such as inaccurate calculations and erroneous  data. For example, the system showed no claims received or processed for  the entire state of Alaska, despite the fact that the legacy system showed  numerous claims. Shortly thereafter, NFIP decided to revert to its legacy system, and as a  result was forced to extend this system\u2019s operations and maintenance  contract. At the same time, NFIP decided to conduct user testing on  NextGen in late 2008 and early 2009. During this testing, system users  identified additional problems, causing FEMA leadership to establish an  Executive Steering Committee to decide how best to proceed. The  committee included FEMA\u2019s Director for Acquisition Management,",
      " Chief  Information Officer (CIO), Assistant Administrator for Mitigation, and  other senior-level executives. To support the steering committee, two  assessments were performed: one by the DHS Emergency Management  Inspector General that focused on FIMA\u2019s management and oversight of  both the legacy system contractor and the NextGen contractor; and one by  OCIO that focused on what could be salvaged from NextGen. In November  2009, based on interim results from the assessments, FEMA leadership  decided to cancel NextGen. In June 2010, FEMA leadership transferred responsibility for modernizing  NFIP\u2019s legacy system to OCIO.",
      " According to the CIO, the next attempt to  modernize NFIP\u2019s legacy system will begin with a determination of the  \u201cdegree of fit\u201d between the NextGen applications and NFIP\u2019s business  requirements. To meet this goal, OCIO intends to first develop a clear  understanding of NFIP\u2019s business requirements. Next, it will test the  NextGen software applications against these requirements to determine  what gaps exist. During this time, OCIO also intends to establish a project  office capable of managing the effort. As of March 2011, OCIO has hired a  new project executive and project manager and is in the process of  developing project management documentation,",
      " such as a mission needs  statement and capability development plan. NFIP will now have to rely on its legacy system for an unspecified period  of time. As a result, NFIP\u2019s ability to manage its flood insurance operations  will continue to be hampered by this system\u2019s limitations. In addition,  NFIP will have to continue to invest in the operations and maintenance of  this system, which between June 2009 and June 2010 cost approximately  $9.35 million to operate and maintain. According to the FEMA Acting  Assistant Administrator for Mitigation, NFIP is currently in the process of  negotiating a 2-year contract extension for operating and maintaining the  legacy system.",
      " Acquisition Management  Weaknesses Led to the  Cancellation of NextGen Weaknesses in several key system acquisition areas led to NextGen\u2019s  failure and cancellation. Specifically, business and functional requirements  were not sufficiently defined; system users did not actively participate in  determining the requirements for the development of system prototypes or  in pilot testing activities; test planning and project risks were not  adequately managed; and project management office staffing was limited.  These weaknesses can, in turn, be attributed in large part to a general lack  of executive-level oversight and attention to the project\u2019s status. NextGen Requirements Were  Not Well Defined Well-defined requirements are a cornerstone of effective system  acquisition.",
      " According to recognized guidance, documenting and  implementing a disciplined process for developing and defining  requirements can help reduce the risk of developing a system that does not  perform as intended and does not meet user needs. Such a process  includes, among other things, (1) establishing a complete and  unambiguous set of high-level requirements that can form the basis for  defining the more detailed requirements that guide system development,  and (2) involving users throughout the development process. For  NextGen, neither of these conditions were met. According to industry practices, high-level system requirements become  the basis for the development of more detailed requirements that,",
      " in turn,  can be used to develop specific software. Without complete and clear  high-level requirements, sufficiently defining the more detailed  requirements will be unlikely, in turn creating the risk that the resulting  system will not meet users\u2019 needs. While NFIP did conduct activities  intended to elicit NextGen requirements, these requirements\u2014which NFIP  refers to as \u201cbusiness requirements\u201d\u2014were neither complete nor clear.  Specifically, NFIP established five working groups to review and refine  business processes and provided the NextGen system developer with  NFIP operational manuals. These five groups, which were associated with  five business areas\u2014claims, marketing,",
      " financial management,  underwriting, and information technology\u2014were each expected to  produce a set of recommended business requirements. However, FEMA  officials described the groups\u2019 efforts as largely based on oral  communications, resulting in misunderstandings and poorly documented  requirements. For example, one working group produced four different  models of business processes, all of which were provided to the system  developer as a basis for defining more detailed system requirements.  According to the system developer, reconciling differences in these  models contributed to the challenges in defining the requirements for  NextGen. NFIP also provided the system developer with its operational manuals  (e.g., flood insurance manuals,",
      " specific rating guidelines, and transaction  reporting process manuals). However, none of these manuals were  current and complete, according to NFIP officials. For example, officials  told us the manuals were constantly changing and did not fully reflect  actual flood insurance underwriting practices. According to these officials,  only the NFIP subject matter experts had sufficient knowledge about the  practices actually being employed. However, the subject matter experts  were not sufficiently involved in defining business requirements. As a  result of this inadequate information, the system developer had to  interpret the business requirements, leading to the development of more  detailed requirements that were later found to be incomplete and  inaccurate.",
      " Specifically, an assessment done by FEMA\u2019s CIO found that  NextGen\u2019s business and functional requirements were not sufficiently  complete or decipherable and were otherwise not captured in accordance  with industry standards. Further, users were not sufficiently involved in defining requirements.  Best practices for defining and managing system requirements also include  eliciting user needs and involving users throughout the development  process. Continued user involvement is particularly essential to a project  for which high-level operational or business requirements have not been  well defined, as was the case with NextGen. Recognizing the limitations in  the business requirements, and consistent with practices associated with  the spiral development methodology employed on NextGen,",
      " the system  developer conducted a series of application prototyping and pilot testing  activities between 2004 and 2006. According to officials from both FIMA  and its contractor, these activities were intended to, among other things,  discover new system requirements and clarify existing requirements by  having groups of users interact with the system developers on early  versions of the applications. However, according to FIMA and the contractor, key subject matter  experts did not participate in these prototyping and piloting efforts,  particularly in the area of NFIP\u2019s underwriting process. Instead, user  participation was largely confined to the WYO insurance companies and  flood insurance agents that participated in NFIP.",
      " To increase user  participation, NFIP established the NextGen Executive Decision Group in  January 2006. However, minutes of the group\u2019s meetings during 2006 and  2007 indicate that limited involvement of key NFIP internal users  continued to hinder efforts to define NextGen system requirements.  Moreover, the CIO assessment found that stakeholders were not  adequately engaged in efforts to develop requirements. In particular, the  assessment found that NFIP stakeholders\u2019 needs and concerns had not  been adequately solicited and their approval of and commitment to  requirements were not obtained. NextGen Testing Was Not  Effectively Managed Effective testing of a system like NextGen is essential to ensuring that the  system functions as intended and meets mission needs and user  expectations.",
      " As we have previously reported, an overarching test plan or  strategy is critical for effective system testing. Among other things, this  overall test management plan should    define the type and timing of the developmental and operational test    allow for detailed test planning and execution and ensure that the  progress of the tests can be tracked and results reported and  addressed;    define the roles and responsibilities of the various groups that are  responsible for the test events; and    provide a high-level schedule for planned events and activities. Without such a plan, a risk exists that system testing will occur in an ad  hoc and undisciplined fashion and that problems will not be discovered  until late in the system\u2019s development cycle,",
      " when they are more difficult  and costly to correct. NFIP did not develop an overall NextGen test management plan or create  a high-level schedule of the testing activities that would be performed.  Instead, NFIP allowed its system development contractor to determine  which tests to perform and how and when they would take place.  According to the NextGen COTR, the types of testing events that were  actually performed by the contractor were application prototyping and  pilot tests between 2004 and 2006, followed by functional, regression, and  system usability testing in 2006 and 2007. NextGen testing also included  user testing conducted by NFIP in 2008 and 2009.",
      " Individual Test Events Were  Not Well Planned Along with an overarching plan, specific, well-defined test plans are  necessary if testing is to be effective. According to relevant guidance, test  plans should specify each of the following key elements:    Roles and responsibilities: Identifies individuals or groups that are  to perform each aspect of the specific test event, such as test operators  and witnesses, and the functions or activities they are to perform. Environment and infrastructure: Identifies the physical facilities,  hardware, software, support tools, test data, personnel, and anything  else necessary to support the test event. Tested items and approach: Identifies the object of testing (such as  specific software or hardware attributes or interfaces)",
      " and describes  the method used to ensure each feature of these objects is tested in  sufficient detail. Traceability matrix: Consists of a list of the requirements that are  being tested and maps each requirement to its corresponding test  cases, and vice versa. Risk and mitigation strategies: Identifies issues that may adversely  affect successful completion of testing, the potential impact of each  issue, and contingency plans for mitigating or avoiding these issues. Testing schedule: Specifies milestones, duration of testing tasks, and  the period of use for each testing resource (e.g., facilities, tools, and  staff). Quality assurance procedures: Defines a process for ensuring the  quality of testing,",
      " including steps for recording anomalies or defects  that arise during testing and steps for making changes to approved  procedures. Test plans were not developed or used for prototype and pilot testing  performed by the contractor between 2004 and 2006. According to the  NextGen COTR, formal system testing was not considered necessary  during prototyping and pilot efforts under the spiral system development  approach. While testing performed during such efforts is understandably  less formal, the absence of any test plan is not consistent with relevant  guidance. As we have previously reported, system pilots should be guided  by a documented test plan that includes, for example,",
      " the type and source  of data and the associated analysis necessary to determine the success of  the pilot test. The contractor did develop test plans for the functional, regression, and  usability testing of the NextGen applications that occurred in 2007 and  2008. Specifically, the contractor prepared, and the COTR approved, test  plans for each test event for each application. However, none of these  plans had all of the key elements of effective test planning. In particular,  while most of the plans addressed roles and responsibilities, environment  and infrastructure, test items and approach, and quality assurance, only  two included a testing schedule,",
      " and none included a traceability matrix or  the risks to be mitigated (see table 1). Roles and responsibilities: All of the test plans addressed roles and  responsibilities for each application. Specifically, they identified either  individuals or groups of individuals, such as the test lead or subject  matter experts that were to perform specific functions, such as  reviewing test results, providing detailed test findings, and allocating  testing resources. Environment and infrastructure: All of the test plans addressed  environment and infrastructure. Specifically, they described the types  of environments, such as a lab or the pilot program environment, as  well as the hardware, software,",
      " and support tools needed for testing.  Further, test data and personnel were also identified in each plan. Tested Items and approach: Four out of the five test plans identified  the objects to be tested and described the methods used to ensure that  each feature of these objects was tested in sufficient detail. For  example, the FREE test plan included the test scripts, test cases, and  sample test result log that would be used to test the application and  record the results. Traceability matrix: None of the test plans listed the specific  requirements that were being tested or mapped those requirements to  the corresponding test cases. Rather, the test plans cited a single  overarching requirement.",
      " For example, the SQANet test plan cited the  requirement that NextGen provide NFIP reporting capabilities.  However, this requirement was not broken down into subordinate  requirements or mapped to corresponding test cases. Risk and mitigation strategies: None of the test plans identified  issues that might adversely affect successful completion of testing.  Although the TRRP test plan identified assumptions and constraints\u2014 for example that the subject matter experts would be available to  provide documentation and rationale for identified discrepancies\u2014the  plan did not identify any assumptions or constraints as risks or provide  plans for mitigating or avoiding their impacts. Testing schedule: Two of the five test plans (TRRP and F2M)",
      "  included a detailed testing schedule. For example, both test plans cited  the test name, tasks, timeframes, and durations (estimated number of  hours). The other test plans referred to the NextGen project  management plan and the project schedule for a testing schedule.  However, neither of these project-level documents contained detailed  information about these test events. Quality assurance procedures: All of the test plans included quality  assurance procedures. Specifically, the plans described a process,  including steps, for identifying and documenting issues or defects that  arise during testing and for making changes to approved procedures.  For example, the SQANet test plan defined a process for identifying  and documenting test anomalies that included explaining each  defect/",
      "issue found, capturing screenshots depicting the defect/issue,  describing the testing environment or special testing method used to  identify the defect/issue, and reviewing and resolving the defect/issue. According to the NextGen COTR, risk mitigation strategies were not  included in the test plans because they had already been addressed in a  risk list that the contractor developed and maintained, and test schedules  were not included because they were already in the NextGen project  management plan. However, the contractor did not effectively implement  the risk management activities, and as we have seen, the NextGen project  management plan did not include a schedule that detailed specific test  activities.",
      " The COTR also told us that traceability matrices were not  included because DHS did not require them at the time the test plans were  developed and executed. But according to industry best practices,  traceability matrices are essential to helping ensure that the scope of test  activities is adequate. In addition, no user acceptance test plans were developed for the user  testing that NFIP conducted in 2008. Instead, the program\u2019s branch chiefs  selected eight NFIP subject matter experts to separately and individually  test the system using system queries (test cases and procedures) of their  own choosing based on their respective knowledge. In doing so,",
      " they were  also told to compare their respective query results with results of similar  queries of the legacy system. According to the NextGen COTR, user  acceptance test plans were not developed because the tests performed by  the subject matter experts were considered to be sufficiently specific and  limited, focusing on finding the few \u201cglitches\u201d remaining after the initial  deployment. As a result, user test plans were considered at the time to be  unnecessary. Without well-defined test plans, however, the effectiveness  of the testing performed could not be determined. Problems Found During User  Acceptance Testing Were Not  Effectively Managed Effective test management includes not only capturing,",
      " prioritizing,  tracking, and resolving any problems identified during testing, but also  disclosing to stakeholders when and how problems are resolved.  According to relevant guidance and best practices, this element of test  management should be governed by a defined process and should ensure  that those who are responsible for correcting the problems understand the  full scope of system problems and the status of their resolution. The problems identified during NFIP\u2019s user acceptance testing of NextGen  in 2008 were not governed by a defined and disciplined process for  capturing, prioritizing, tracking, and resolving these problems.  Specifically:    The NextGen contractor was tasked with maintaining a list of problems  identified.",
      " However, users participating in the testing told us they were  not required to capture problems using a standard format and that the  NFIP project office did not centrally merge and transmit the problems  they identified to the contractor. Instead, these users said they  separately and individually communicated the problems they each  found either orally in meetings or via emails. However, NFIP officials  also told us the NextGen contractor did not attend all of these meetings  and the issues raised in these meetings were not always documented or  provided to the contractor. As a result, NFIP and contractor officials  agreed that the contractor\u2019s list of problems requiring resolution was  incomplete.",
      " The NextGen project office did not maintain its own centralized list of  problems requiring resolution. As a result, the project office did not  know the universe of problems requiring resolution and could not track  the status of each problem\u2019s resolution. Users participating in the system testing told us they were not told  whether the problems they had identified were ever resolved or when  and how resolution of those that were resolved took place. They said  that this lack of communication regarding the resolution of system  problems ultimately resulted in their rejection of the NextGen system. Because of these weaknesses in how NFIP managed the resolution of  problems identified during user acceptance testing,",
      " the NextGen project  office was unable to demonstrate to the FEMA Acting Assistant  Administrator that NextGen met NFIP mission needs and user  requirements. This inability, in combination with the other acquisition  management weaknesses, contributed to NextGen\u2019s cancellation. FEMA Could Have More  Effectively Managed NextGen  Risks According to federal guidance, proactively managing project risks can  increase the chances of delivering promised system capabilities and  benefits on time and within budget. We have reported that effective risk  management, among other things, includes defining and implementing a  process that identifies, analyzes, and mitigates risks and periodically  examines the status of the identified risks and mitigation steps.",
      " NFIP did  not define and implement its own risk management process for its  NextGen acquisition but instead delegated risk management to the  NextGen system development contractor. NFIP officials said they did not  conduct their own risk management activities because the NextGen  project office was not staffed to do so. They said they expected the  contractor to manage all project risks and believed they did not need to  duplicate these efforts. The contractor did follow a process of identifying and analyzing risks and  developing plans for implementing them that involved actions on the part  of both NFIP and the contractor. However, not all of these plans were  effectively implemented,",
      " in some instances because NFIP did not take the  appropriate action, and in others because the contractor did not receive  devoted resources to implement the action. In total, the contractor\u2019s risk management efforts identified 72 risks over  the life of the project, of which 47 (about 65 percent) remained open at the  time the project ended. Of these 47 open risks, 36 (about 77 percent)  related to the contractor\u2019s inability to gain access to NFIP staff or obtain  information from NFIP staff or the legacy contractor. Specifically, 11 risks,  the first of which was identified in July 2003,",
      " were associated with the lack  of participation by NFIP subject matter experts in the prototyping and  piloting of system applications. While FEMA established an executive-level  decision group in 2006 to address this category of risks, risk related to lack  of participation by subject matter experts continued to be identified and  remained open at the time the project was cancelled. Twenty-five risks were related to a lack of timely delivery of information  from NFIP to the development contractor. For example, NFIP did not  provide timely delivery of comments on deliverables and the legacy system  that NextGen was to replace. According to the contractor\u2019s risk  management documentation,",
      " these delays affected the development and  pilot testing of key applications and thus the entire NextGen schedule.  However, this documentation also shows that little or no action was taken  by NFIP to address the risks. The NextGen project also faced risks beyond those identified by the  NextGen contractor. However, some of these risks were never captured  and mitigated because they were outside the contractor\u2019s control. For  example, documentation shows that NFIP officials were aware that  representatives from both the NFIP NextGen office and the legacy  contractor resisted NFIP\u2019s earlier attempt to move the NFIP system onto a  new platform. However,",
      " the risk that this resistance posed to the new  system was not included in the NextGen contractors\u2019 risk list, and steps to  mitigate this risk were not taken. Later in the development of NextGen,  this ongoing resistance was cited as having impaired NFIP\u2019s ability to  develop the NextGen system. Specifically, the DHS Emergency  Management IG reported that 14 NFIP staff in key positions relative to  approving NextGen favored the legacy contractor and helped to promote a  divisive atmosphere that limited NFIP\u2019s ability to develop NextGen. The NextGen Project Office  Would Have Benefited from  Additional Staff As we have previously reported,",
      " having sufficient project office staff with  the requisite capabilities is essential to effectively managing a system  acquisition like NextGen. Establishing such an office requires, among  other things, an assessment of the core competencies and associated  knowledge, skills, and abilities needed to perform key project  management functions. It also requires an understanding of the  knowledge, skills, and abilities of those assigned to the project, so that any  gaps can be identified and a plan for filling those gaps can be developed  and executed. The NextGen project office was not adequately staffed, having only one  full-time government employee, the COTR, assigned from 2006 to the  project\u2019s cancellation.",
      " No project management staff were assigned to  perform such critical system acquisition management functions as  developing and managing system requirements, managing system testing,  and managing risk. Instead, NFIP relied almost exclusively on the NextGen  contractor to perform these and other project management functions. According to a FEMA official, the NextGen project office requested  additional staff in 2006, but the Acting Assistant Administrator for  Mitigation denied the request because of resource constraints. Moreover,  the request was for only one part-time person and was not based on a  project management human capital assessment, which generally should  include an analysis of needs and existing capabilities,",
      " the associated gap,  and a plan for addressing identified gaps. NextGen Needed More  Effective Executive Oversight As we have previously reported, successfully acquiring IT systems requires  the oversight and informed decision making of a senior-level investment  review board. Among other things, such a board is responsible for  selecting among competing IT investments and overseeing those  investments throughout their respective life cycles to help ensure that  project cost, schedule, and performance commitments are met, benefit  expectations are realized, risks are minimized, and project managers are  held accountable for results. DHS has recognized the need for such a  system investment oversight body. Specifically, DHS established a  department-wide investment review board in 2003.",
      " In November 2008,  DHS revised its acquisition review process to include updating this board,  which became the ARB, as the department\u2019s highest review body and  charging it with reviewing and approving all investments with life cycle  costs above $300 million. In addition, it established working groups and  other boards, such as the Enterprise Architecture Board and the Program  Review Board, to provide subject matter expertise to the ARB, and the  Joint Requirements Council to validate the results of the strategic  requirements planning process. Further, DHS required each of its  component organizations, including FEMA, to establish and operate  review boards to oversee their respective investments.",
      " However, neither FEMA nor DHS provided effective executive-level  oversight of NextGen. Specifically, no FEMA review board or executive  office, such as the CIO and Chief Financial Officer (CFO), ever held an  oversight or milestone-decision review for NextGen. The DHS review  board\u2019s last oversight of NextGen occurred in 2007. At that time, the ARB  conditionally approved NextGen and delegated future oversight of the  project to FEMA. However, FEMA did not have a review board in place at  the time of the ARB\u2019s decision, having recently disbanded it because the  demands of Hurricane Katrina made attendance at board meetings a low  priority for members.",
      " The current FEMA CIO stated that OCIO and OCFO  had not been more involved in NextGen because FIMA was not responsive  to their requests for information about the project. NFIP\u2019s Operating  Environment and  External Factors  Complicate  Administration of the  Program, and FEMA  Lacks Authority in  Areas Critical to Its  Long-term Financial  Health NFIP\u2019s operating environment differs from that of traditional insurers and  limits FEMA\u2019s ability to keep the program financially sound. In particular,  NFIP assumes and retains all of the risks for the policies it sells, is  required to accept virtually all applicants for insurance,",
      " and cannot deny  coverage for potentially high-risk properties. Moreover, additional external  factors continue to complicate the administration of NFIP and affect its  financial stability. These include lapses in NFIP\u2019s authorization, the role of  state and local governments, fluctuations in premium income, and  structural and organizational changes that have been made. Finally, as  noted in past GAO reports, NFIP also faces external challenges that will  continue to threaten the program\u2019s long-term financial health if they are  not addressed. These include statutory requirements that NFIP charge  subsidized premium rates for many properties, a lack of authority to  include long-term erosion in the flood maps used to determine rates,",
      " and  limitations on FEMA\u2019s ability to take action when some owners of  repetitive loss properties refuse to mitigate or accept FEMA\u2019s mitigation  offers. NFIP\u2019s Operations Differ  from Those of Private  Insurers Any discussion of the challenges that FEMA faces in administering NFIP  must take into account important differences between the government\u2019s  flood insurance program and private insurers. For example, by design  NFIP does not operate like a private insurer but must instead meet a  public policy goal\u2014to provide flood insurance in flood-prone areas to  property owners who otherwise would not be able to obtain it. At the  same time, it is expected to cover its claims losses and operating expenses  with the premiums it collects,",
      " much like private insurers. In years when  flooding has not been catastrophic, NFIP has generally managed to meet  these competing goals. But in years of catastrophic flooding, such as 2005,  it has not. During those years, it has exercised its authority to borrow from  Treasury to pay claims and, as of April 2011, NFIP owed approximately  $17.8 billion to Treasury, mostly for the 2005 hurricane season. NFIP will  likely not be able to meet its interest payments in all years, causing the  debt to grow in certain years as FEMA may need to borrow to meet the  interest payments in some years and potential future flood losses in  others.",
      " This arrangement results in much of the financial risk of flooding  being transferred to the U.S. Treasury and ultimately the taxpayer. Further, NFIP is also required to accept virtually all applications for  insurance and cannot deny coverage or increase premium rates based on  the frequency of losses. Private insurers, on the other hand, may reject  applicants or increase rates if they believe the risk of loss is too high. As a  result, NFIP is less able to offset the effects of adverse selection\u2014the  phenomenon that those who are most likely to purchase insurance are  also the most likely to experience losses. Adverse selection may also lead  to a concentration of policyholders in the riskiest areas.",
      " This problem is  further compounded by the fact that those at greatest risk are required to  purchase insurance from NFIP if they have a mortgage from a federally  regulated or insured lender. Finally, by law, FEMA is prevented from raising rates on each flood zone  by more than 10 percent each year. While most states regulate premium  prices for private insurance companies for other lines of insurance, they  generally do not set limits on premium rate increases, instead focusing on  whether the projected losses and expenses justify them. A Variety of External  Factors Complicate  FEMA\u2019s Administration of  NFIP As previously reported, FEMA also faces a number of external factors that  are not necessarily within its control but that also must be considered  when discussing the administration of the program.",
      " First, FEMA relies on  private insurers to sell and service policies and adjust claims under the  Write-Your-Own (WYO) Program, but multiple lapses in program  authorization in recent years have strained NFIP\u2019s relationship with WYO  insurers. In particular, NFIP\u2019s legal authorization has lapsed multiple times  since it expired in 2008, leaving FEMA and WYO insurers unable to renew  policies that expired during these lapses. Recent reauthorizations of the  program have been for periods of time as short as 5 days. FIMA officials  said these lapses in reauthorization created a significant burden for WYO  insurers.",
      " For example, the insurers were forced to reallocate resources to  communicate with agents and customers about how program lapses would  affect them. In part for this reason, the largest WYO insurer left the  program, and NFIP is transitioning the 840,000 policies that the insurer  had been selling and servicing to NFIP\u2019s Direct Servicing Agent. Second, like some other federal programs, FEMA relies on state and local  governments and communities to implement parts of the program, which  can limit the effectiveness of some of FEMA\u2019s efforts. For example,  communities enforce building codes and other floodplain management  regulations in an effort to reduce the flood risk that insured structures  face,",
      " but some communities may not have sufficient resources to enforce  existing regulations. FEMA also relies on communities to administer grant  funds that are intended to mitigate high-risk properties. However certain  types of mitigation, such as relocation or demolition, might be met with  resistance by communities that rely on those properties for tax revenues,  such as coastal communities with significant development in areas prone  to flooding. Finally, communities and individuals have sometimes  mounted challenges to and resisted flood map revisions that place homes  in higher-risk flood zones and would thus raise premium rates. Third, the financial resources that NFIP uses to fund much of its  operations have fluctuated in recent years.",
      " NFIP divides the premiums  paid by policyholders into \u201cmandatory\u201d and \u201cdiscretionary\u201d dollars. Most  premium dollars are considered mandatory and are used to pay flood  claims and other budget items such as WYO fees and advertising. The  remaining premium dollars are allocated to discretionary uses and are  used to fund NFIP operations. FIMA staff have noted that lower-than- expected policy fee income in recent years has forced them to cut back on  certain functions, including contract and WYO oversight, field office  management, and community outreach. For example, FEMA officials said  that in 2009 FEMA based NFIP\u2019s budget on expectations that the program  would collect $156 million in policy fees,",
      " $107 million of which the  President\u2019s budget required to be spent on mapping. By the end of the  fiscal year, NFIP had collected only $144 million in policy fees, leaving  NFIP with only $37 million, instead of the expected $49 million, to pay  salaries and other operating expenses. NFIP received approval from  Congress to redirect $4.9 million in mandatory funds from the advertising  budget into the discretionary budget to pay for these expenses, and it  compensated for the remaining $7.1 million shortfall with spending cuts,  largely from staff attrition and a hiring freeze. Finally, both FEMA and FIMA have faced many significant changes to their  organizational structures and responsibilities since 2001,",
      " creating  challenges in implementing consistent and effective business processes.  FEMA underwent several organizational changes in 2001 and 2002, but the  most significant change occurred in 2003, when FEMA transitioned from  an independent agency to a component of the newly created DHS. At that  time, FEMA became part of DHS\u2019s Emergency Preparedness and Response  Directorate, and some of its functions were moved to other organizations  within DHS. In addition, functions that had formerly been part of other  agencies were incorporated into the new Emergency Preparedness and  Response organization. From 2003 through 2005, over $1.3 billion in new  or significantly expanded programs came into FEMA,",
      " while programs with  funding of nearly $1.5 billion were transferred out. Although these changes  nearly balance in dollar terms and the number of employees remained the  same, they created considerable disruption to FEMA\u2019s operations and  uncertainty about the availability of resources. After the 2005 hurricanes  and the widespread perception that FEMA had failed to effectively meet  its mission, the agency faced changes that created further uncertainty and  affected employee morale. In 2007, PKEMRA expanded FEMA\u2019s mission  by integrating preparedness with protection, recovery, response, and  mitigation to address all hazards. FEMA was reorganized again in 2009 at  the direction of a new FEMA Administrator.",
      " At the same time, FIMA has  also faced considerable organizational changes\u2014both through the overall  FEMA reorganizations and additional reorganizations that occurred with  successive FIMA administrators, most significantly in 2006. Policies and  processes are often specific to the organizational and oversight structures  that are in place when they are created, and when those structures change,  the policies and processes may no longer be relevant or complete. FEMA Lacks Authority in  Areas Critical to Its Long- term Financial Health FEMA Lacks Authority to  Charge Full-Risk Rates on  Many Properties and Is under  Pressure to Allow  Grandfathered Rates on Others As we have pointed out in previous reports,",
      " FEMA is required by law to  charge many policyholders less than full-risk rates, otherwise known as  subsidized rates. These rates are intended to encourage property owners  to purchase flood insurance, and today nearly one out of four NFIP  policies are based on a subsidized rate. These rates allow policyholders  with structures that were built before floodplain management regulations  were established in their communities to pay premiums that represent  about 40 percent to 45 percent of the actual risk premium. Moreover,  FEMA estimates that properties covered by policies with subsidized rates  experience as much as five times more flood damage than compliant new  structures that are charged full-risk rates.",
      " One difficulty in analyzing the  effect of subsidized premium rates is that, while they affect the overall  financial stability of NFIP and can potentially increase borrowing from the  Treasury, the subsidy is not recognized in FEMA\u2019s budget. As we have  reported in the past, the cost of federal insurance programs is often not  accurately reflected in agencies\u2019 budgets. As a result, Congress may not  have adequate information about the potential claims on the federal  budget when it establishes or reviews federal insurance programs. This  lack of information may be especially problematic in the case of NFIP  because of the continued growth in the subsidy. As we have pointed out,",
      "  the number of policies receiving subsidized rates has grown steadily in  recent years, and without changes to the program, will likely continue to  grow, increasing the potential for future NFIP operating deficits. In addition, NFIP may \u201cgrandfather\u201d properties when new flood maps  place them in higher-risk zones. Unlike private insurers that charge risk- based rates, FEMA made a policy decision to allow certain properties  remapped into riskier flood zones to keep their previous lower rates.  While FEMA is not statutorily required to grandfather these policies,  FEMA officials told us that they made the decision because of resistance  to rate increases and based on considerations of equity,",
      " ease of  administration, and goals of promoting floodplain management. However,  homeowners who are remapped into high-risk areas and do not currently  have flood insurance may be required to purchase it at the full-risk rate.  Further, FEMA recently introduced a new rating option called the  Preferred Risk Policy (PRP) Eligibility Extension that is, in effect, a  temporary grandfathering of premium rates. While PRPs traditionally  would have to be converted to more expensive standard-rated policies  when they were renewed, FEMA extended PRP eligibility to 2 years after a  new flood map\u2019s effective date or January 1, 2011,",
      " whichever is later.  FEMA made the decision to offer these lower rates in response to  significant community resistance to remapping and the resulting increased  rates as well as concern expressed by Congress. As we have reported, to  the extent that NFIP charges less than full-risk rates on many properties, it  adds to the risk that the program will need to borrow from Treasury to pay  claims. FEMA Is Not Authorized to  Account for Long-term Erosion  in Developing Flood Maps While FEMA is in the process of updating the flood maps used to set  premium rates for NFIP, it is not authorized to account for long-term  erosion in developing these maps.",
      " The purpose of these maps is to  accurately estimate the likelihood of flooding in specific areas given  certain characteristics including elevation and topography. Despite these  modernization efforts, some maps can quickly become inaccurate because  of changes from long-term erosion, particularly in coastal areas. However,  FEMA is not authorized to map for these changes\u2014that is, it is not allowed  to take into account situations in which long-term erosion might increase  the risk of flooding in certain areas. Not accurately reflecting the actual  risk of flooding increases the likelihood that even full-risk premiums will  not cover future losses and adds to concerns about NFIP\u2019s financial  stability.",
      " FEMA Is Limited in Its Ability  to Encourage Property Owners  to Undertake Mitigation Efforts In reforming NFIP in 2004, Congress noted that repetitive loss  properties\u2014generally, those that FEMA defines as having had two or more  flood insurance claims payments of $1,000 or more over 10 years\u2014 constituted a significant drain on NFIP resources. While Congress has  made efforts to address this issue through mitigation activities, repetitive  loss properties continue to be a drain on NFIP. Many of these properties  are part of the subsidized property inventory, and thus receive subsidized  rates, further contributing to NFIP\u2019s financial instability.",
      " This situation  exposes the federal government and ultimately taxpayers to greater risks  and is not consistent with several of the public policy goals (e.g., limiting  exposure to the federal government and the taxpayer) that we have  previously identified for disaster programs. As previously reported,  FEMA will offer premium discounts for efforts to mitigate high-risk  structures including raising the elevation of, relocating, or demolishing a  property, but these efforts are for the most part voluntary. FEMA does  have some authority to raise premium rates for property owners who  refuse mitigation offers made by local authorities, such as an offer to  elevate the property, in connection with the severe repetitive loss pilot  program.",
      " Specifically, if a property owner refuses a mitigation offer, FEMA  can increase premiums to up to 150 percent of their current amount and  by a similar amount later on if the property owner is paid a claim of  greater than $1,500. However, FEMA is prohibited from charging more  than the current full rate and as a result cannot increase premiums on  property owners are paying the full rate but who refuse a mitigation offer.  In addition, FEMA is not allowed to discontinue coverage for those who  refuse mitigation offers. As a result, FEMA has some limitations on its  ability to compel owners of properties with repetitive losses to undertake  flood mitigation efforts.",
      " Further, while Congress has made efforts to  reduce the number of repetitive loss properties, their number has grown,  making them an ongoing challenge to NFIP\u2019s financial stability.  Specifically, these properties account for about 1 percent of all policies  but are estimated to account for up to 30 percent of all NFIP losses. Unless  FEMA is able to effectively encourage owners of severe repetitive loss  properties to undertake mitigation efforts, the potential losses associated  with such properties continues to threaten the financial stability of the  NFIP. Recognizing that NFIP faces a variety of structural challenges that need to  be reformed, FIMA began a three-phase effort to develop  recommendations to reform the program by addressing some of the  program\u2019s external challenges.",
      " The process began with a listening session  in November 2009 to capture concerns and recommendations from about  200 stakeholder participants and to better understand the need for NFIP  reform. The second phase included adopting a policy analysis framework,  analyzing existing stakeholder input, developing and agreeing on guiding  principles to direct the NFIP reform effort, and creating evaluation criteria  to be used in scoring each of the proposed policy alternatives. The final  phase, which began in June 2010 and includes evaluating the policy  alternatives, will result in a reform proposal package that FIMA will  submit to FEMA leadership. To inform this phase,",
      " FIMA conducted two  additional stakeholder meetings in December 2010. This process may  provide some helpful ideas to address some of the major challenges facing  FEMA in its administration of NFIP. But as we have noted in earlier  reports, comprehensive legislative reform will be needed to stabilize its  financial condition. Conclusions While FEMA has begun to take steps to address its issues, it faces  significant management challenges in areas that affect NFIP, including  strategic planning, human capital planning, collaboration among offices,  records management, financial management, acquisition management, and  business processes. Effectively addressing these challenges would require  program improvements at all levels within FIMA,",
      " FEMA, and DHS and  would not only help improve the administration of NFIP but also help to  more effectively deal with financial and operational challenges that NFIP  faces\u2014challenges over which FEMA often has limited direct control.  While FEMA has not yet addressed many of these issues, in part because  of the demands of its key mission of responding to emergencies, it is  beginning to take certain steps to address its challenges. While some  efforts are under way, FEMA has much work ahead of it in beginning to  plan and execute the day-to-day activities necessary to effectively manage  both the agency and NFIP and to ensure effective collaboration between  program and support offices.",
      " As we have seen, for example:    FEMA has not provided FIMA with strategic direction and guidance for  administering NFIP, and FIMA has not developed a comprehensive  strategy with goals and objectives for the program. GPRA states that  strategic plans should include such guidance and strategies for major  programs like NFIP. Without this direction, NFIP lacks a strategic  focus, and the agency is limited in its ability to develop effective  performance measures to measure NFIP\u2019s progress. Without a robust  set of performance measures and an established process for  management to regularly review them, the agency cannot monitor and  hold accountable management and staff involved in the program.",
      " FEMA lacks a strategic human capital plan (as required by PKEMRA)  that addresses the critical competencies required for its workforce.  Such a plan is critical for FEMA because of its heavy reliance on  contractors. Without such a plan, FEMA is limited in its ability to  assess its staffing and workforce needs, manage turnover, fill  vacancies, and oversee its contractor workforce. FEMA lacks a plan to ensure that agency operations are maintained  when federal disasters are declared and staff are deployed to respond.  Without such a plan, FEMA faces the risk that some critical day-to-day  functions may not be performed while staff are deployed, limiting the  agency\u2019s ability to provide the necessary support for disaster relief  missions.",
      " FIMA relies on Mission Support for a variety of mission-critical  functions, including IT, acquisition, and financial management, but  FIMA and Mission Support have faced challenges in collaborating with  one another. For example, FIMA and OCFO have had limited  communication regarding FIMA\u2019s budget formulation needs. Without  better collaboration and communication between FIMA and Mission  Support\u2019s various offices, FEMA will be unable to fully ensure that  NFIP\u2019s IT, acquisition, and financial and budgetary needs are being  met. Further, FEMA still lacks comprehensive systems, policies, and processes  that would help ensure sound records, financial,",
      " and acquisition  management as they relate to NFIP. In particular:    FEMA has no centralized electronic document management system  that would allow its various offices to easily access and store  documents. As a result, the offices have faced problems with lost or  destroyed documents, decreased productivity, and duplicated effort.  While there is broad consensus for the need for a centralized electronic  document management system, FEMA is currently awaiting an overall  DHS decision on a system to be used for this process. However, until  such a system is provided, FEMA will continue to face document  management challenges that impede program effectiveness. In previous audits, KPMG found weaknesses within FEMA\u2019s  management of unliquidated obligations.",
      " The agency has issued an  interim directive for addressing the issue, but FIMA staff said they did  not know the amount of these obligations and the extent to which they  have been inactive. Until FEMA reviews FIMA\u2019s unliquidated  obligations, FIMA may be foregoing funds that could otherwise be  returned and used for other program needs. Recognizing a number of weaknesses in its oversight and management  of acquisitions, FEMA has taken steps to improve these functions,  including drafting an acquisition directive and a handbook explaining  how to implement it. However, most of these actions have either been  recently implemented or are still under development. While they are  the kinds of steps that need to be taken,",
      " the extent to which they will  ensure effective oversight of FEMA\u2019s acquisition activities remains to  be seen. FEMA Mission Support staff told us that in early 2009 they began a  business process improvement effort that involved mapping current  processes, analyzing them, and determining how they could be  improved. Until this mapping process is complete and related internal  control processes are developed, a high risk exists that certain  functions will be inconsistently or incompletely carried out. In addition, FEMA has spent about 7 years and $40 million in its latest  attempt to modernize NFIP\u2019s insurance policy and claims management  system. FEMA ultimately canceled the effort in November 2009 because it  failed to meet user expectations,",
      " forcing the agency to continue relying on  an outdated system that is neither effective nor efficient. Any further  attempts to modernize the program\u2019s existing system must recognize the  root causes of NextGen\u2019s failure, which include:    FEMA\u2019s and DHS\u2019s failure to provide sufficient oversight of the project  and to allow these acquisition weaknesses to go unchecked for years.  Without sufficient management oversight, FEMA will be limited in its  ability to ensure that future modernization attempts are completed  efficiently and effectively. Weaknesses in several key system acquisition areas that led to  NextGen\u2019s cancellation, including poorly defined and managed  requirements, poorly planned and executed system testing,",
      "  insufficiently mitigated program risks, and an inadequately staffed  program office. Unless FEMA learns from these mistakes, future  modernization attempts could face the same fate. In addition to management challenges, FEMA still faces challenges related  to its financial operations and rate structure. The hurricanes of 2005  required a massive response from FEMA as it worked to help thousands of  individuals recover from sometimes devastating damage to their property.  The scope of the damages and total claims paid, which were unparalleled  in NFIP\u2019s history, highlighted challenges with the program\u2019s financial  structure. These challenges, along with the debt incurred by NFIP as a  result of the 2005 hurricanes,",
      " remain today. As we have indicated in previous reports, FEMA can take some actions to  improve NFIP\u2019s financial stability, such as ensuring that NFIP\u2019s full-risk  premium rates accurately reflect the risk of loss and ensuring that WYO  insurers justify and document their claims for payment. However, fully  addressing other challenges to the long-term financial stability of the  program will require congressional action. For example, as we have  pointed out, congressional action to allow NFIP to charge full-risk  premium rates to all property owners would decrease the potential for  future NFIP operating losses. Authorizing the inclusion of long-term  erosion in future rate maps and providing FEMA with the authority to  require owners of repetitive loss properties to mitigate or impose penalties  for not doing so would also reduce the risks of future NFIP losses.",
      " We  recognize that these potential changes involve tradeoffs. Increasing  premium rates and requiring homeowners to mitigate flood-prone  properties could, for example, reduce participation and create hardship  for some property owners. Nevertheless, until these and related issues are  resolved, the program will continue to present a significant financial risk  to the government and taxpayers. Recommendations for  Executive Action To improve strategic planning, performance management, and program  oversight within and related to NFIP, we recommend that the Secretary of  DHS direct the FEMA Administrator to take the following four actions:    Provide strategic direction and guidance to the process for developing  a comprehensive strategy for FIMA operations;",
      " establish a firm  timeframe for and complete the development of this strategy; and take  steps to ensure that this strategy has appropriate performance goals  and measures to track NFIP\u2019s progress. Develop a comprehensive workforce plan according to PKEMRA that  identifies agency staffing and skills requirements, addresses turnover  and staff vacancies, and analyzes FEMA\u2019s use of contractors. Direct the FEMA Administrator to develop guidance for continuing  operations when staff are deployed to respond to federal disasters and  direct FIMA Acting Assistant Administrator to develop such a plan. Direct the FIMA Acting Assistant Administrator and the FEMA Mission  Support Associate Administrator to develop protocols to encourage  and monitor collaboration between FIMA and relevant support offices,",
      "  including those for information technology, acquisition management,  and financial management. To improve FEMA\u2019s policies, procedures, and systems for achieving  NFIP\u2019s program goals, we recommend that the Secretary of DHS direct the  FEMA Administrator to take the following four actions:    While waiting for DHS to implement an agencywide electronic  document management system, consider the costs and benefits of  implementing an interim system for FEMA and updating its document  management policies and procedures. Ensure that FEMA regularly reviews unliquidated obligations within  NFIP-related funds. Establish timelines for and complete the development and  implementation of FEMA\u2019s revised acquisition process, in line with the  DHS Acquisition Directive 102-",
      "01, including a rollout process with staff  training and a mechanism to better ensure that all acquisitions undergo  the necessary reviews. Ensure that FEMA Mission Support\u2019s business process improvement  efforts are expeditiously completed. To improve the usefulness and reliability of NFIP\u2019s flood insurance policy  and claims processing system, we recommend that the Secretary of DHS  take the following two actions:    Direct the DHS Deputy Secretary, as the Chair of DHS\u2019s ARB, to  provide regular oversight of FEMA\u2019s next attempt to modernize this  system. Direct the FEMA Administrator to ensure that FEMA\u2019s CIO applies  lessons learned from the NextGen experience to the next  modernization attempt.",
      " At a minimum, this effort should ensure that  (1) all levels of system requirements are complete and clear and that  key stakeholders are adequately involved in requirements development  and management, (2) key test events are effectively planned and  executed and problems identified during testing effectively managed,  (3) project risks are proactively identified and mitigated, and (4)  project office staffing needs are properly assessed and met. Matters for  Congressional  Consideration As Congress considers NFIP reforms and reauthorization, it should  consider ways to better ensure the long-term financial stability of the  program, such as 1) allowing NFIP to charge full-risk premium rates to all  property owners and providing assistance to some categories of owners to  pay those premiums;",
      " 2) authorizing NFIP to account for long-term flood  erosion in its flood maps; and 3) clarifying and expanding FEMA\u2019s ability  to increase premiums or discontinue coverage for owners of repetitive loss  properties who do not mitigate their properties or refuse FEMA\u2019s  mitigation offers. Agency Comments  and Our Evaluation We provided the Secretary of Homeland Security with a draft of this report  for review and comment. DHS provided written comments that we  summarize below. DHS\u2019s letter is reproduced in Appendix II. FEMA also  provided us with technical comments, which we have incorporated as  appropriate. DHS concurred with all of our 10 recommendations and identified actions  taken or plans made to implement them.",
      " Specifically, DHS agreed with our  recommendations to:    Provide strategic direction and guidance to the process for developing  a comprehensive strategy for FIMA operations; establish a firm  timeframe for and complete the development of this strategy; and take  steps to ensure that this strategy has appropriate performance goals  and measures to track NFIP\u2019s progress. DHS stated that FEMA had  recently released its strategic plan for fiscal years 2011-2014 and had  begun requiring its directorates and offices to submit annual operating  plans with goals, measures to track the goals, and links to FEMA\u2019s plan.  However, until such a plan and accompanying performance measures  are complete and fully implemented,",
      " whether such a plan will provide  the necessary strategic framework for managing NFIP remains to be  seen. Develop a comprehensive workforce plan according to PKEMRA. DHS  noted that FEMA had obtained a contractor to conduct a workforce  assessment and had completed Phase I of the process. However, when  the entire workforce plan will be completed given the challenges FEMA  faces in identifying the number and categories of FEMA staff positions  and contractors as cited in the Phase I study is unclear. In addition, as  we cited in the report, the Strategic Human Capital Plan that FEMA  developed in response to PKEMRA did not fulfill the requirements of  the mandate.",
      " These requirements include:    specific goals and objectives for recruiting and retaining employees,  such as recruitment and retention bonuses;    specific strategies and program objectives to develop, train, deploy,  compensate, motivate, and retain employees;    specific strategies for recruiting staff with experience serving in  multiple state agencies responsible for emergency management; and    specific strategies to develop, train, and rapidly deploy a Surge  Capacity Force. Develop a plan for continuing NFIP operations when staff are deployed  to respond to federal disasters. DHS stated that it agreed to provide  guidance to FEMA and its components for developing such a plan,  however it does not identify time frames for providing such guidance.",
      " Develop protocols for collaboration between program and support  offices. DHS noted that Mission Support had begun some such  efforts, including holding listening sessions and responding to  problems that surface. Consider the costs and benefits of implementing an interim  electronic records management system while awaiting an overall  DHS system and update its document management policies and  procedures to ensure records are being adequately managed. DHS  indicated that they have been providing interim policies and  guidance to program offices; however, the policies and procedures  they provided us during our review had not been updated. Have FEMA regularly review unliquidated obligations within NFIP- related funds. DHS stated that FEMA had published an interim  directive in 2009 that applied to open FEMA obligations including  those within FIMA.",
      " While this directive provides useful criteria, our  recommendation is that FEMA follow this guidance and better  ensure that regular reviews are completed. Establish timelines for and complete the development of FEMA\u2019s  revised acquisition process. DHS listed a number of ongoing efforts  in this area including training, certification, and recruitment, among  others. While we are encouraged by the steps taken, establishing  timelines and completing these efforts are critical to establishing a  well functioning contract and acquisition management program. Ensure that Mission Support\u2019s business process reengineering plans  are expeditiously completed. DHS stated that Mission Support had  begun the process of incorporating lessons learned into its day-to-",
      " day operations. However, we recommend that the plans be fully and  expeditiously implemented, given their importance to helping  FEMA\u2019s improve its overall procedures. Finally, DHS concurred with our last two recommendations for improving  NFIP\u2019s flood insurance policy and claims processing system. Specifically,  DHS stated it was preparing to elevate NFIP\u2019s status and ensure that the  program was designated for regular oversight by DHS\u2019s ARB. DHS restated  its commitment to ensuring that FEMA applies lessons learned from the  NextGen experience to its efforts to replace its current system. We are providing copies to the Chairman and Ranking Member, Senate  Committee on Banking,",
      " Housing and Urban Affairs; the Chairman and  Ranking Member, House Committee on Financial Services; and other  interested committees. We are also sending a copy of this report to the  Secretary of Homeland Security and other interested parties. In addition,  the report will available at no charge on our Web site at  http://www.gao.gov. If you or your staff have any questions regarding this report, please  contact me at (202) 512-8678 or williamso@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix III.",
      " Appendix I: Objective, Scope, and  Methodology Significant management challenges affect the Federal Emergency  Management Agency\u2019s (FEMA) ability to administer the National Flood  Insurance Program (NFIP). GAO undertook this current review to identify  root causes of these deficiencies and to clarify how to address them. Our  objectives were to (1) analyze the extent to which FEMA\u2019s key  management practices\u2014including strategic planning, human capital  planning, records management, financial management, acquisition  management, and intra-agency collaboration\u2014affect the agency\u2019s ability to  administer NFIP; (2) identify lessons to be learned from the Next  Generation Flood Insurance Management System (NextGen)",
      " program\u2019s  cancellation, including to what extent key acquisition management  processes were followed on NextGen; and (3) describe factors that are  relevant to NFIP operations and analyze limitations on FEMA\u2019s authority  that could affect its financial stability. To determine the extent to which FEMA\u2019s management practices affected  its ability to meet its program goals as well as congressional goals for  NFIP, we collected available data from FEMA and conducted over 80  interviews with representatives from FEMA\u2019s Federal Insurance and  Mitigation Administration (FIMA), Office of Policy and Programs Analysis  (OPPA), and the Mission Support Bureau\u2019s offices for administration,  finance,",
      " human capital, information, and procurement. We also  interviewed representatives of the Department of Homeland Security\u2019s  (DHS) Office of the Inspector General (OIG), the National Association of  Public Administration (NAPA), and KPMG LLP. In addition, we analyzed  FEMA planning documents, policies, directives, materials, and data related  to key aspects of program management: strategic planning, human capital  planning, records management, acquisition management, and financial  management. Due to the nature of the audit work in these areas, we  conducted a data reliability assessment in the areas of human capital and  financial management. Both were found to be sufficiently reliable for the  purposes of our report.",
      " Further, we reviewed relevant legislation, internal  control standards, best practices, and external studies of FEMA\u2019s  management challenges. More specifically:    Strategic planning: To assess FEMA\u2019s strategic plans and  performance measures, we obtained and analyzed materials and  documents including FEMA\u2019s 2008 strategic plan and FIMA  performance measures. We assessed these documents against our past  reports on the Government Performance and Results Act of 1993  (GPRA) and the Standards for Internal Controls in the Federal  Government. To further understand the strategic planning process and  assessment of performance measures, we met with key FIMA and  OPPA officials to discuss FEMA\u2019s and FIMA\u2019s past and future strategic  planning efforts.",
      " Human capital: To assess FEMA\u2019s workforce planning efforts, we  reviewed the 2008-2012 Strategic Human Capital Plan and compared it  with the requirements in the Post-Katrina Emergency Management  Reform Act of 2006. We also evaluated FEMA\u2019s efforts based on  guidelines on workforce planning from the National Aeronautics and  Space Administration, our past reports on key principles for workforce  planning, and written responses provided by FEMA\u2019s human capital  office to questions we submitted. In addition, we analyzed the  Consolidated Appropriations Act of 2010 to assess its contractor  tracking requirements for December 2010.",
      " To determine turnover in  key positions, we interviewed key FEMA staff regarding turnover in  their departments and obtained and analyzed attrition data from the  human capital office. To assess challenges in hiring, we reviewed  documentation and interviewed human capital and other FEMA staff.  In order to understand the information technology (IT) issues that the  human capital office faces, we interviewed key human capital staff and  analyzed reports and documents by the DHS OIG and NAPA. We also  reviewed standards for continuity of operations plans and past GAO  reports on business continuity plans. Collaboration: To assess FEMA\u2019s efforts to encourage coordination  between FIMA and the Mission Support offices,",
      " we compared the  practices of these two offices to key practices that we identified in  previous work for enhancing and sustaining a collaborative  relationship among federal agencies. Records management: To assess FEMA\u2019s records management  efforts, we reviewed the National Archives and Records Administration  standards, the Federal Records Act, the Paperwork Reduction Act, and  the Standards for Internal Controls in the Federal Government. We  reviewed FEMA and FIMA records management procedural  documents, training materials, FEMA\u2019s previous records management  policy, DHS\u2019s records management policy, and DHS OIG reports. We  met with the Office of the Chief Administrative Officer, staff from the  Records Management Division,",
      " and other relevant FEMA staff to  further understand records management efforts. Financial management: To assess FEMA\u2019s financial management  processes for NFIP, we reviewed policy documents, training materials,  reference materials, spreadsheets used in budget formulation, data  information on past audits, and data on unliquidated obligations and  compared them to findings in past KPMG LLC audits, DHS OIG reports,  and our past reports on FEMA\u2019s financial management. We interviewed  relevant staff from FIMA\u2019s and FEMA\u2019s financial offices to further  understand financial management processes and efforts. Acquisition: In order to assess FEMA\u2019s acquisition efforts, we  obtained and analyzed FEMA\u2019s guidance for acquisition management  and contractor oversight and compared them to the Federal  Acquisition Regulation and to findings in the DHS OIG reports and our  previous reports related to FEMA\u2019s acquisition efforts.",
      " We interviewed  FEMA\u2019s Chief Procurement Officer and other relevant FEMA staff to  assess acquisition efforts. We also attended contractor oversight  meetings to better understand day-to-day contractor oversight  activities. In addition, we worked at a FEMA audit site in its Arlington, Virginia,  offices from January to April 2010. During that time, we held meetings  with FIMA staff, obtained relevant documents, and attended day-to-day  operational and contractor oversight review sessions. In order to gather  additional information about NFIP reform efforts, we attended the NFIP  Listening Session in November 2009 and the NFIP Reform Public Meeting  in December 2010,",
      " both of which were held in Washington, D.C. To determine the extent to which the NextGen program\u2019s acquisition was  effectively managed and overseen, we focused on the following acquisition  management areas: (1) requirements development and management, (2)  test management, (3) risk management, (4) human capital planning, and  (5) program oversight. In doing so, we analyzed a range of program  documentation, such as requirements documentation, test plans and  reports, risk documentation, program management plan, and related  documentation, and interviewed relevant program and contractor officials. To determine the extent to which the program had effectively  implemented requirements development and management,",
      " we  reviewed relevant program documentation, such as the concept of  operations document, NFIP operational manuals, requirements and  design documents on NextGen applications, joint working group  recommendation reports, change request forms, and the program  management plan, and evaluated them against relevant guidance.  Moreover, we reviewed briefing slides and meeting minutes from the  NextGen Executive Decision Group. In addition, we interviewed  program and development contractor officials to discuss the  requirements development and management process. To determine the extent to which the program effectively implemented  test management activities we reviewed test plans for functional,  regression, and usability testing and NextGen application summary test  reports and compared them with best practices to determine whether  test activities had been adequately documented and implemented.",
      " In  addition, we interviewed program and contractor officials to discuss  the test management process. To determine the extent to which NextGen risks were effectively  managed, we reviewed the most current NextGen risk management  plan, risk lists, and monthly program status report. We also interviewed  program and development contractor officials to discuss the risk  management process. To evaluate whether FEMA was adequately providing for the NextGen  program office\u2019s human capital needs, we compared the program\u2019s  efforts against relevant guidance. We also interviewed key officials to  discuss workforce analysis and human capital planning efforts. To determine the level of oversight given over NextGen we reviewed  DHS\u2019s acquisition directive and guidebook and met with officials  responsible for NextGen executive-level oversight to determine if  oversight was effectively provided.",
      " To identify external factors that affected NFIP\u2019s ability to carry out its  mission, we reviewed previous GAO reports that analyzed various aspects  of NFIP\u2019s policies, practices, and organizational structure, identifying  factors that affected NFIP\u2019s operations but over which NFIP did not have  control. For example, we reviewed our reports on the oversight of the  Write-Your-Own program, the financial impact of subsidized premium  rates, and the rate-setting process for flood insurance premiums. To  determine whether and to what extent the factors identified in these  reports were still affecting NFIP\u2019s operations and to identify any additional  factors,",
      " we interviewed FEMA representatives and reviewed relevant  testimony of officials from FEMA and several interested associations  before Congress. We conducted this performance audit from July 2009 to June 2011 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: Comments from the Department  of Homeland Security Appendix III: GAO Contact and Staff  Acknowledgments GAO Contact Orice Williams Brown,",
      " (202) 512-8678 or williamso@gao.gov. Staff  Acknowledgments In addition to the contact named above, Randy Hite (retired), Director;  William Woods, Director; Patrick Ward, Assistant Director; Tonia Johnson,  Assistant Director (in memoriam); Nima Patel Edwards; Christopher  Forys; Elena Epps; and Emily Chalmers made significant contributions to  this report. Other contributors included Tania Calhoun; William R.  Chatlos; Jim Crimmer; Marc Molino; Freda Paintsil; Karl Seifert; and  Christy Tyson.",
      " Related GAO Products Flood Insurance: Public Policy Goals Provide a Framework for Reform.  GAO-11-429T. Washington, D.C.: March 11, 2011. FEMA Flood Maps: Some Standards and Processes in Place to Promote  Map Accuracy and Outreach, but Opportunities Exist to Address  Implementation Challenges. GAO-11-17. Washington, D.C.: December 2,  2010. National Flood Insurance Program: Continued Actions Needed to  Address Financial and Operational Issues. GAO-10-1063T. Washington,  D.C.: September 22, 2010. Homeland Security:",
      " US-VISIT Pilot Evaluations Offer Limited  Understanding of Air Exit Options. GAO-10-860. Washington, D.C.:  August 10, 2010. Department of Homeland Security: Assessments of Selected Complex  Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010. National Flood Insurance Program: Continued Actions Needed to  Address Financial and Operational Issues. GAO-10-631T. Washington,  D.C.: April 21, 2010. Financial Management: Improvements Needed in National Flood  Insurance Program\u2019s Financial Controls and Oversight. GAO-",
      "10-66.  Washington, D.C.: December 22, 2009. Homeland Security: Despite Progress, DHS Continues to Be Challenged  in Managing Its Multi-Billion Dollar Annual Investment in Large-Scale  Information Technology Systems. GAO-09-1002T. Washington, D.C.:  September 15, 2009. Flood Insurance: Opportunities Exist to Improve Oversight of the WYO  Program. GAO-09-455. Washington, D.C.: August 21, 2009. Results-Oriented Management: Strengthening Key Practices at FEMA  and Interior Could Promote Greater Use of Performance Information.",
      "  GAO-09-676. Washington, D.C.: August 17, 2009. Information on Proposed Changes to the National Flood Insurance  Program. GAO-09-420R. Washington, D.C.: February 27, 2009. High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January  2009. Homeland Security: U.S. Visitor and Immigrant Status Indicator  Technology Program Planning and Execution Improvements Needed.  GAO-09-96. Washington, D.C.: December 12, 2008. Department of Homeland Security: A Strategic Approach Is Needed to  Better Ensure the Acquisition Workforce Can Meet Mission Needs.",
      "  GAO-09-30. Washington, D.C.: November 19, 2008. Department of Homeland Security: Billions Invested in Major Programs  Lack Appropriate Oversight. GAO-09-29. Washington, D.C.: November 18,  2008. Flood Insurance: Options for Addressing the Financial Impact of  Subsidized Premium Rates on the National Flood Insurance Program.  GAO-09-20. Washington, D.C.: November 14, 2008. Tax Administration: IRS Needs to Strengthen Its Approach for  Evaluating the SRFMI Data-Sharing Pilot Program.",
      " GAO-09-45.  Washington, D.C.: November 7, 2008. Flood Insurance: FEMA\u2019s Rate-Setting Process Warrants Attention.  GAO-09-12. Washington, D.C.: October 31, 2008. Secure Border Initiative: DHS Needs to Address Significant Risks in  Delivering Key Technology Investment. GAO-08-1086. Washington, D.C.:  September 22, 2008. National Flood Insurance Program: Financial Challenges Underscore  Need for Improved Oversight of Mitigation Programs and Key Contracts.  GAO-08-437. Washington,",
      " D.C.: June 16, 2008. Natural Catastrophe Insurance: Analysis of a Proposed Combined  Federal Flood and Wind Insurance Program. GAO-08-504. Washington,  D.C.: April 25, 2008. National Flood Insurance Program: Greater Transparency and  Oversight of Wind and Flood Damage Determinations Are Needed.  GAO-08-28. Washington, D.C.: December 28, 2007. National Disasters: Public Policy Options for Changing the Federal Role  in Natural Catastrophe Insurance. GAO-08-7. Washington, D.C.:  November 26,",
      " 2007. Business Systems Modernization: Department of the Navy Needs to  Establish Management Structure and Fully Define Policies and  Procedures for Institutionally Managing Investments. GAO-08-53.  Washington, D.C.: October 31, 2007. Federal Emergency Management Agency: Ongoing Challenges Facing the  National Flood Insurance Program. GAO-08-118T. Washington, D.C.:  October 2, 2007. National Flood Insurance Program: FEMA\u2019s Management and Oversight  of Payments for Insurance Company Services Should Be Improved.  GAO-07-1078. Washington, D.C.: September 5,",
      " 2007. Information Technology: FBI Following a Number of Key Acquisition  Practices on New Case Management System, but Improvements Still  Needed. GAO-07-912. Washington, D.C.: July 30, 2007. National Flood Insurance Program: Preliminary Views on FEMA\u2019s  Ability to Ensure Accurate Payments on Hurricane-Damaged  Properties. GAO-07-991T. Washington, D.C.: June 12, 2007. Coastal Barrier Resources System: Status of Development That Has  Occurred and Financial Assistance Provided by Federal Agencies.  GAO-07-356. Washington, D.C.: March 19,",
      " 2007. Budget Issues: FEMA Needs Adequate Data, Plans, and Systems to  Effectively Manage Resources for Day-to-Day Operations. GAO-07-139.  Washington, D.C.: January 19, 2007. National Flood Insurance Program: New Processes Aided Hurricane  Katrina Claims Handling, but FEMA\u2019s Oversight Should Be Improved.  GAO-07-169. Washington, D.C.: December 15, 2006. Enterprise Architecture: Leadership Remains Key to Establishing and  Leveraging Architectures for Organizational Transformation.  GAO-06-831. Washington, D.C.: August 14,",
      " 2006. Information Technology: Customs Has Made Progress on Automated  Commercial Environment System, but It Faces Long-Standing  Management Challenges and New Risks. GAO-06-580. Washington, D.C.:  May 31, 2006. Homeland Security: Progress Continues, but Challenges Remain on  Department\u2019s Management of Information Technology. GAO-06-598T.  Washington, D.C.: March 29, 2006. GAO\u2019s High-Risk Program. GAO-06-497T. Washington, D.C.: March 15,  2006. Federal Emergency Management Agency:",
      " Challenges for the National  Flood Insurance Program. GAO-06-335T. Washington, D.C.: January 25,  2006. Results-Oriented Government: Practices That Can Help Enhance and  Sustain Collaboration among Federal Agencies. GAO-06-15. Washington,  D.C.: October 21, 2005. Federal Emergency Management Agency: Improvements Needed to  Enhance Oversight and Management of the National Flood Insurance  Program. GAO-06-119. Washington, D.C.: October 18, 2005. Framework for Assessing the Acquisition Function at Federal Agencies.  GAO-",
      "05-218G. Washington, D.C.: September 2005. Information Technology Investment Management: A Framework for  Assessing and Improving Process Maturity. GAO-04-394G. Washington,  D.C.: March 2004. Human Capital: Key Principles for Effective Strategic Workforce  Planning. GAO-04-39. Washington, D.C.: December 11, 2003. Information Technology: A Framework for Assessing and Improving  Enterprise Architecture Management (Version 1.1). GAO-03-584G.  Washington, D.C.: April 2003. Tax Administration:",
      " IRS Needs to Further Refine Its Tax Filing Season  Performance Measures. GAO-03-143. Washington, D.C.: November 22,  2002. Internal Control Management and Evaluation Tool. GAO-01-1008G.  Washington, D.C.: August 2001. Determining Performance and Accountability Challenges and High  Risks. GAO-01-159SP. Washington, D.C.: November 2000. Standards for Internal Control in the Federal Government.  GAO/AIMD-00-21.3.1. Washington, D.C.: November 1999. Budget Issues:",
      " Budgeting for Federal Insurance Programs.  GAO/T-AIMD-98-147. Washington, D.C.: April 23, 1998. Budget Issues: Budgeting for Federal Insurance Programs.  GAO/AIMD-97-16. Washington, D.C.: September 30, 1997. Agencies\u2019 Strategic Plans under GPRA: Key Questions to Facilitate  Congressional Review. GAO/GGD-10.1.16. Washington, D.C.: May 1997.\n"
    ],
    "length": 28766,
    "hardness": null,
    "role": null
  },
  {
    "id": 120,
    "question": null,
    "answer": "In January 2017, the House and Senate adopted a budget resolution for FY2017 (S.Con.Res. 3), which reflects an agreement between the chambers on the budget for FY2017 and sets forth budgetary levels for FY2018-FY2026. S.Con.Res. 3 also includes reconciliation instructions directing specific committees to develop and report legislation that would change laws within their respective jurisdictions to reduce the deficit. These instructions trigger the budget reconciliation process, which may allow certain legislation to be considered under expedited procedures. The reconciliation instructions included in S.Con.Res. 3 direct two committees in each chamber to report legislation within their jurisdictions that would reduce the deficit by $1\u00a0billion over the period FY2017-FY2026. In the House, the Committee on Ways and Means and the Energy and Commerce Committee are directed to report. In the Senate, the Committee on Finance and the Committee on Health, Education, Labor, and Pensions are directed to report.  In response to the reconciliation instructions, there was activity in four different House committees\u2014Ways and Means, Energy and Commerce, Budget, and Rules\u2014during the first quarter of 2017. The result of this activity was H.R. 1628, the American Health Care Act (AHCA) of 2017. The version of the AHCA as passed by the House on May 4, 2017 (which incorporated eight amendments referenced in H.Res. 228 and H.Res. 308), is the topic of this report. The bill includes a number of provisions that would repeal or modify parts of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended). For example, the bill would repeal the ACA's cost-sharing subsidies for lower-income individuals who purchase health insurance through the exchanges, and it would substitute the ACA's premium tax credit for a tax credit with different eligibility rules and calculation requirements. The bill also would repeal some of the ACA's Medicaid provisions, such as the changes the ACA made to presumptive eligibility and the state option to provide Medicaid coverage to non-elderly individuals with income above 133% of the federal poverty level (FPL).  The AHCA also includes a number of provisions that do not specifically relate to aspects of the ACA. For example, the bill would establish a late-enrollment penalty for certain individuals who do not maintain health insurance coverage, and it would create a new fund to provide funding to states for specified activities intended to improve access to health insurance and health care in the state. The bill would convert Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) starting in FY2020, and states would have the option to receive block grant funding (i.e., a predetermined fixed amount of federal funding) instead of per capita cap funding for non-elderly, nondisabled, non-expansion adults and children starting in FY2020.  This report contains three tables that, together, provide an overview of all the AHCA provisions. Table 1 includes provisions that apply to the private health insurance market, Table 2 includes provisions that affect the Medicaid program, and Table 3 includes provisions related to public health and taxes. Each table contains a column identifying whether the AHCA provision is related to an ACA provision (e.g., whether the AHCA provision repeals an ACA-related provision). In addition to the three tables, the report includes more detailed summaries of each AHCA provision and two graphics showing the effective dates of AHCA provisions. Figure 1 covers AHCA provisions related to the private health insurance market, public health, and taxes. Figure 2 covers AHCA provisions related to the Medicaid program.  The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) issued a cost estimate for the AHCA, as passed by the House on May 4, 2017. According to the estimate, the AHCA would reduce federal deficits by $119 billion over the period FY2017-FY2026. With respect to effects on health insurance coverage, CBO and JCT project that, in CY2018, 14 million more people would be uninsured under the AHCA than under current law, and in CY2026, 23 million more people would be uninsured than under current law. \n",
    "docs": [
      "Private Health Insurance Medicaid Public Health and Taxes Title I Energy and Commerce Subtitle A\u2014Patient Access to Public Health Programs Section 101. Prevention and Public Health Fund Current Law ACA Section 4002 established the Prevention and Public Health Fund (PPHF), to be administered by the Secretary of the Department of Health and Human Services (HHS), and provided the PPHF with a permanent annual appropriation. Amounts for each fiscal year are available to the HHS Secretary beginning October 1, the start of the respective fiscal year. Congress may explicitly direct the distribution of PPHF funds and did so for FY2014 through FY2017.",
      "  Under the ACA, the PPHF's annual appropriation would increase from $500 million for FY2010 to $2 billion for FY2015 and each subsequent fiscal year. Congress has amended the provision two times, using a portion of PPHF funds as an offset for the costs of other activities. Annual appropriations to the PPHF in current law are as follows:  $500 million for FY2010; $1.0 billion for each of FY2012 through FY2017; $900 million for each of FY2018 and FY2019; $1.0 billion for each of FY2020 and FY2021;",
      " $1.5 billion for FY2022; $1.0 billion for FY2023; $1.7 billion for FY2024; and $2.0 billion for FY2025 and each fiscal year thereafter. Explanation of AHCA Provision Section 101 would amend ACA Section 4002(b) by repealing all PPHF appropriations for FY2019 and subsequent fiscal years. It also would rescind any unobligated PPHF balance remaining at the end of FY2018. Section 102. Community Health Center Program Current Law ACA Section 10503 created the Community Health Center Fund, which provided mandatory appropriations to the health center program from FY2011 through FY2015.",
      " These appropriations provided in subsection (a)(1)\u2014of $3.6 billion annually\u2014subsequently were extended through FY2017 by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ), Section 221(a).  Prior to the ACA, the health center program had received only discretionary appropriations, which made up the entirety of the program's appropriated funds. Since the Community Health Center Fund's creation, the fund has made up an increasing percentage of the health center program's appropriation, ranging from 39% for FY2011 to 71% for FY2016. Under current law,",
      " for FY2018, the Community Health Center Fund will not receive a mandatory appropriation.  Explanation of AHCA Provision Section 102 would provide an additional $422 million for FY2017 to the Community Health Center Fund.  Section 103. Federal Payments to States Current Law The Planned Parenthood Federation of America (PPFA) is an umbrella organization supporting 59 independent affiliates that operate approximately 661 health centers across the United States. Government funding\u2014which includes federal, state, and local funds\u2014constitutes the PPFA's largest source of revenue, an estimated 43% in the year ending June 30, 2015. The Congressional Budget Office (CBO)",
      " estimates that federal funds accounted for about one-third of PPFA's total revenue in 2013. PPFA receives federal grants (either directly or through another entity, such as a state) and reimbursements for providing services to beneficiaries enrolled in federally funded programs (e.g., Medicaid). It does not receive a direct annual appropriation of any kind. CBO and the U.S. Government Accountability Office (GAO) found that PPFA's largest source of federal funding is reimbursements for covered services provided to Medicaid beneficiaries. Specifically, CBO estimated that PPFA's federal Medicaid revenue was approximately $390 million in 2013. GAO examined FY2012 PPFA reimbursements and expenditures and found that PPFA had either received reimbursements or expended funds from discretionary programs and from direct spending (as defined in the Balanced Budget and Emergency Deficit Control Act of 1985,",
      " 2 U.S.C. 900(c)(8)). Direct spending refers to budget authority provided by laws other than through appropriations acts, entitlement authority, and the Supplemental Nutrition Assistance Program (SNAP). PPFA's reimbursements or expenditures from direct spending include reimbursements from Medicaid, Medicare, and the State Children's Health Insurance Program (CHIP) (listed in order of the amount of reimbursements received, according to GAO), as well as certain expenditures from the Social Service Block Grant, the Crime Victims Assistance Program (administered by the Department of Justice), the Personal Responsibility and Education Program, and SNAP (administered by the Department of Agriculture). PPFA also received funds from a number of discretionary programs,",
      " either directly or through another entity (e.g., a state). For example, in FY2012, GAO found that PPFA had expended discretionary funds from the Maternal and Child Health Block Grants programs, which are provided to states; some states provided these funds to PPFA entities to provide services.  Under federal law, federal funds generally are not available to pay for abortions, except in cases of rape, incest, or endangerment of a mother's life. This restriction is the result of statutory and legislative provisions such as the Hyde amendment, which has been added to the annual HHS appropriations measure since 1976. Similar provisions exist in the appropriations measures for foreign operations,",
      " the District of Columbia, the Department of the Treasury, and the Department of Justice. Other codified restrictions limit the use of funds made available to the Department of Defense and the Indian Health Service. Explanation of AHCA Provision Section 103 would prohibit federal funds made available to a state through direct spending from being provided to a prohibited entity (as defined), either directly or through a managed care organization, for a one-year period beginning upon enactment of the AHCA. The provision specifies that this prohibition would be implemented notwithstanding certain programmatic rules (e.g., the Medicaid freedom of choice of provider requirement, which requires enrollees to be able to receive services from any willing Medicaid-participating provider and stipulates that states cannot exclude providers solely on the basis of the range of services they provide).  Section 103 does not explicitly specify that certain federal funds would not be made available to PPFA or its affiliated entities;",
      " instead it refers to and defines a prohibited entity as an entity that meets the following criteria at enactment: (1) it is designated as a not-for-profit by the Internal Revenue Service (IRS); (2) it is described as an essential community provider that is primarily engaged in family planning services, reproductive health, and related medical care; (3) it is an abortion provider that provides abortion in cases that do not meet the Hyde amendment exception for federal payment; and (4) it received more than $350 million in Medicaid expenditures (both federal and state) in FY2014. When evaluating nearly identical language included in H.R. 3762 during the 114 th Congress,",
      " CBO determined that the prohibited entity likely would be PPFA because few other health care providers would meet the bill's definition.  Subtitle B\u2014Medicaid Program Enhancement Section 111. Repeal of Medicaid Provisions Section 111(1)(A) and 111(3). Federal Payments to States:Presumptive Eligibility Current Law Prior to the enactment of the ACA, states were permitted to enroll certain groups (e.g., children, pregnant women, certain women with breast and cervical cancer, and individuals eligible for family planning services) for a limited period of time before completed Medicaid applications were filed and processed, based on a preliminary determination of likely Medicaid eligibility by certain specified Medicaid providers (i.e., qualified entities ). Qualified entities had to be certified by the state Medicaid agency as entities that were capable of making presumptive-",
      "eligibility determinations. The type of entity that could make presumptive-eligibility determinations depended on the beneficiary's Medicaid eligibility category. For example, certain providers of clinic and outpatient hospital services could determine presumptive eligibility for pregnant women. Agencies that served low-income children under federal programs, such as the Special Supplemental Nutrition Program for Women, Infants, and Children or school lunch programs (under the Richard B. Russell National School Lunch Act) could make presumptive-eligibility determinations for children. Individuals who were determined to be presumptively eligible for Medicaid then had to formally apply for coverage within a given time frame to continue receiving Medicaid benefits.",
      "  The ACA expanded the types of entities that are permitted to make Medicaid presumptive-eligibility determinations as well as the groups of individuals for whom presumptive-eligibility determinations may apply. Specifically, the ACA allowed states to permit all hospitals that participate in Medicaid to elect to make presumptive-eligibility determinations for all Medicaid eligibility groups, beginning January 1, 2014. In addition, states that elected the option to provide a presumptive-eligibility period to children or pregnant women are permitted to provide a presumptive-eligibility period for (1) the ACA Medicaid expansion group, (2) the mandatory coverage group for individuals currently or formerly in foster care who are under the age of 26,",
      " (3) low-income families eligible under Section 1931 of the Social Security Act (SSA), or (4) the state option for coverage for individuals with income that exceeds 133% of the federal poverty level (FPL). Explanation of AHCA Provision Section 111(1)(A) would no longer allow hospitals that participate in Medicaid to elect to make presumptive-eligibility determinations effective January 1, 2020, and would terminate hospitals' ability to make such an election after that date by modifying SSA Section 1902(a)(47)(B). On January 1, 2020, Section 111(",
      "3) would terminate the authority of certain specified states (i.e., those that elected to provide a presumptive-eligibility period to children or pregnant women) to elect to make presumptive-eligibility determinations for the ACA Medicaid expansion group or the state option for coverage for individuals with income that exceeds 133% of FPL by modifying SSA Section 1920(e). The provision would not modify the authority of such states to elect to make presumptive-eligibility determinations for the mandatory foster care group under the age of 26 or for low-income families eligible under SSA Section 1931 based on a preliminary determination of likely Medicaid eligibility by a specified Medicaid provider.",
      " Section 111(1)(B). Federal Payments to States: Stairstep Children Current Law Eligibility for Medicaid is determined by federal and state law. States set individual eligibility criteria within federal standards. Individuals must meet both categorical (e.g., elderly, individuals with disabilities, children, pregnant women, parents, certain non-elderly childless adults) and financial (i.e., income and sometimes asset limits) criteria. In addition, individuals must meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them; others are optional.",
      " States are permitted to apply to the Centers for Medicare & Medicaid Services (CMS) for a waiver of federal law to expand health coverage beyond the mandatory and optional groups listed in federal statute.  The ACA changed the mandatory Medicaid income eligibility level for poverty-related children aged 6 through 18 from 100% of FPL to 133% of FPL, beginning January 1, 2014. These children sometimes are referred to as stairstep children. For the 21 states that transitioned these children from the State Children's Health Insurance Program (CHIP) to Medicaid due to the ACA, coverage continues to be financed with states'",
      " CHIP annual allotment funding (i.e., state-specific annual limits) at the higher enhanced federal medical assistance percentage (E-FMAP), which is the CHIP federal matching rate.  Explanation of AHCA Provision Section 111(1)(B) would repeal the stairstep children provision by amending SSA Section 1902(l)(2)(C) to specify the end date to the requirement to cover children up to 133% of FPL effective December 31, 2019. After that date, states would still be required to cover children in this group with household incomes of up to 100% of FPL. Section 111(",
      "2). Federal Medicaid Matching Rate for Community FirstChoice Option Current Law Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP) rate, which varies by state and is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services.  The ACA Section 2401 established the Community First Choice option under SSA Section 1915(k), which allows states to offer community-based attendant services and supports as an optional Medicaid state plan benefit and receive a six-percentage-point increase to the FMAP rate for covered services.",
      " The Community First Choice option provides community-based attendant services and supports to assist eligible aged and disabled Medicaid beneficiaries in accomplishing activities of daily living, instrumental activities of daily living, and health-related tasks. In addition, states may provide transition expenses when a beneficiary moves from a nursing facility to a community-based setting or other services that increase independence. According to CMS, eight states have received approval for this option (California, Connecticut, Maryland, Montana, New York, Oregon, Texas, and Washington) as of January 2017. CMS also is providing technical assistance to states that are considering offering the Community First Choice option. Explanation of AHCA Provision Section 111(",
      "2) would repeal the increased FMAP rate for the Community First Choice option on January 1, 2020, by modifying SSA Section 1915(k)(2).  Section 112. Repeal of Medicaid Expansion Section 112(a)(1)(A)(i) and (iii). ACA Medicaid Expansion Current Law Eligibility for Medicaid is determined by federal and state law. States set individual eligibility criteria within federal standards. Individuals must meet both categorical (e.g., elderly, individuals with disabilities, children, pregnant women, parents, certain non-elderly childless adults) and financial (i.e., income and sometimes asset limits)",
      " criteria. In addition, individuals must meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them; others are optional. States are permitted to apply to the CMS for a waiver of federal law to expand health coverage beyond the mandatory and optional groups listed in federal statute.  The ACA established 133% of FPL as the new mandatory minimum Medicaid income-eligibility level for most non-elderly adults beginning January 1, 2014. On June 28, 2012, the U.S. Supreme Court issued its decision in National Federation of Independent Business v.",
      " Sebelius, finding that the enforcement mechanism for the ACA Medicaid expansion violated the Constitution, which effectively made the ACA Medicaid expansion optional for states. On January 1, 2014, 24 states and the District of Columbia implemented the ACA Medicaid expansion. Since then, seven additional states have decided to implement the expansion.  Explanation of AHCA Provision Section 112(a)(1)(A)(i) and (iii) would codify the ACA Medicaid expansion as optional for states after December 31, 2019, by specifying the end date of the ACA Medicaid expansion (at SSA Section 1902(a)(10)(A)(i)(VIII)) as December 31,",
      " 2019, and adding a new Medicaid optional eligibility group (at SSA Section 1902(a)(10)(a)(ii)(XXIII)) beginning January 1, 2020.  Section 112(a)(1)(A)(ii). State Option for Coverage for Non-elderly Individuals with Income That Exceeds 133% of FPL Current Law In addition to the ACA Medicaid expansion, the ACA created an optional Medicaid eligibility category for all non-elderly individuals with income above 133% of FPL up to a maximum level specified in the Medicaid state plan (or waiver), effective January 1, 2014.",
      " As of January 2017, the District of Columbia is the only state that has implemented this option. Explanation of AHCA Provision Section 112(a)(1)(A)(ii) would repeal the state option to extend coverage to non-elderly individuals above 133% of FPL (SSA Section 1902(a)(10)(A)(ii)(XX)) by specifying an end date of December 31, 2017. Section 112(a)(1)(B). Existing ACA Definition of Expansion Enrollees and New Definition for Grandfathered Expansion Enrollees Current Law Under the ACA, an expansion enrollee is defined as an individual who is a non-",
      "elderly, nonpregnant adult with annual income at or below 133% of FPL and who is not entitled to or enrolled for benefits in Medicare Part A or enrolled for benefits under Medicare Part B.  Explanation of AHCA Provision Section 112(a)(1)(B) would incorporate the existing ACA expansion enrollee definition for the purposes of the new optional Medicaid eligibility group for expansion enrollees. It also would define a grandfathered expansion enrollee as an expansion enrollee who was enrolled in Medicaid (under the state plan or a waiver) as of December 31, 2019, and does not have a break in eligibility for more than one month after that date.",
      " The provision also would apply these definitions to existing provisions in Medicaid statute that currently reference the ACA Medicaid expansion group (i.e., SSA Section 1902(a)(10)(A)(i)(VIII)), including provisions related to payments to states, medical assistance, alternative benefit plan coverage, presumptive eligibility, and so on. Section 112(a)(2)(A). Newly Eligible Federal Matching Rate Current Law The ACA added a few FMAP exceptions, including the newly eligible federal matching rate (i.e., the matching rate for individuals who are newly eligible for Medicaid due to the ACA Medicaid expansion). The newly eligible individuals are defined as expansion enrollees who would not have been eligible for Medicaid in the state as of December 1,",
      " 2009 (or were eligible under a waiver but were not enrolled because of limits or caps on waiver enrollment). States received 100% federal matching rate (i.e., full federal financing) for the cost of providing Medicaid coverage to newly eligible individuals, from CY2014 through CY2016. The rate for newly eligible individuals phases down to 95% in CY2017, 94% in CY2018, 93% in CY2019, and 90% for CY2020 and subsequent years. Explanation of AHCA Provision Section 112(a)(2)(A) would maintain the current structure of the newly eligible matching rate for expenditures before January 1,",
      " 2020, for states that covered newly eligible individuals as of March 1, 2017. However, after December 31, 2019, the newly eligible matching rate would apply only to expenditures for newly eligible individuals who are enrolled in Medicaid as of December 31, 2019, and do not have a break in eligibility for more than one month after that date (i.e., grandfathered expansion enrollees). Section 112(a)(2)(B). Expansion State Federal Matching Rate Current Law The ACA added a few FMAP exceptions, including the expansion state federal matching rate, which is the federal matching rate available for expansion enrollees without dependent children in expansion states who were eligible for Medicaid on March 23,",
      " 2010.  The expansion state federal matching rate varies from state to state. The formula used to calculate the expansion state federal matching rates is based on each state's regular FMAP rate and annual transition percentages set in statute. The annual transition percentages for the expansion state matching rate formula are 50% in CY2014, 60% in CY2015, 70% in CY2016, 80% in CY2017, 90% in CY2018, and 100% for CY2019 and subsequent years.   Table 4 shows the range for the expansion state matching rate. From CY2014 through CY2018,",
      " the expansion state federal matching rate is lower than the newly eligible federal matching rate and higher than each state's regular FMAP rate. The expansion state federal matching rate phases up until CY2019, when the expansion state federal matching rate will match the newly eligible federal matching rate for CY2019 and subsequent years.  Explanation of AHCA Provision Section 112(a)(2)(B) would amend SSA Section 1905(z)(2) by amending the formula for the expansion state matching rate so that the matching rate would stop phasing up after CY2017 and the transition percentage would remain at the CY2017 level for each subsequent year.",
      " In addition, after December 31, 2019, the expansion state matching rate would apply only to expenditures for eligible individuals who were enrolled in Medicaid as of December 31, 2019, and do not have a break in eligibility for more than one month after that date (i.e., grandfathered expansion enrollees). Section 112(b). Sunset of Essential Health Benefits Requirement Current Law As an alternative to providing all the mandatory and selected optional benefits under traditional Medicaid, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) gave states the option to enroll state-specified groups (with exceptions for selected special-needs subgroups)",
      " in what previously was referred to as benchmark or benchmark-equivalent coverage but currently is called alternative benefit plans (ABPs). States that choose to implement the ACA Medicaid expansion are required to provide ABP coverage (with exceptions for selected special-needs subgroups), rather than traditional Medicaid, to the individuals eligible for Medicaid through the ACA Medicaid expansion. In addition, states have the option to provide ABP coverage to other subgroups.  The ACA made significant changes to both ABP design and ABP requirements. Among these changes, the ACA required such packages to provide at least the 10 essential health benefits (EHB), which are (1)",
      " ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services, including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care. Explanation of AHCA Provision Section 112(b) would specify that SSA Section 1937(b)(5) would not apply after December 31, 2019. This means that Medicaid ABP coverage would no longer be required to include the EHB after that date.",
      " Section 113. Elimination of Disproportionate Share Hospital Cuts Current Law SSA Section 1923 requires states to make Medicaid disproportionate share hospital (DSH) payments to hospitals treating large numbers of low-income patients. This provision is intended to recognize the disadvantaged financial situation of those hospitals because low-income patients are more likely to be uninsured or Medicaid enrollees. Hospitals often do not receive payment for services rendered to uninsured patients, and Medicaid provider payment rates generally are lower than the rates paid by Medicare and private insurance. Whereas most federal Medicaid funding is provided on an open-ended basis, federal Medicaid DSH funding is capped. Each state receives an annual DSH allotment,",
      " which is the maximum amount of federal matching funds that each state is permitted to claim for Medicaid DSH payments. The ACA reduced the number of uninsured individuals in the United States through its health insurance coverage provisions. Built on the premise that with fewer uninsured individuals there should be less need for Medicaid DSH payments, the ACA included a provision directing the HHS Secretary to make aggregate reductions in Medicaid DSH allotments for FY2014 through FY2020. However, multiple subsequent laws have amended these reductions. Under current law, the aggregate reductions to the Medicaid DSH allotments are to impact FY2018 through FY2025. After FY2025,",
      " allotments will be calculated as though the reductions never occurred, which means the allotments will include the inflation adjustments for the years during the reductions. Explanation of AHCA Provision Section 113 would amend SSA Section 1923(f) by eliminating the Medicaid DSH allotment reductions after FY2019. This would mean that the aggregate reductions to the Medicaid DSH allotments would impact FY2018 and FY2019. Under Section 113, after FY2019, allotments would be calculated as though the reductions never occurred, which means the allotments would include the inflation adjustments for the years during the reductions. In addition, non-expansion states would be exempt from the ACA Medicaid DSH allotment reductions.",
      " For this provision, expansion state would be defined as a state that provides eligibility under the ACA Medicaid expansion or the state option for coverage for individuals with incomes that exceed 133% of FPL as of July 1 of the previous fiscal year. A non-expansion state would be defined as a state that is not an expansion state. Section 114. Reducing State Medicaid Costs Section 114(a). Letting States Disenroll High-Dollar Lottery Winners Current Law Internal Revenue Code (IRC) Section 36B, as established under the ACA, provides premium assistance tax credits for individuals to purchase coverage through the health insurance exchanges, among other purposes.",
      " IRC Section 36B includes a definition of household income, based on modified adjusted gross income (MAGI), which is used to determine eligibility for various federal health programs, including Medicaid. As of January 1, 2014, MAGI rules are used in determining eligibility for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion. Medicaid's MAGI income-counting rule is set forth in law and regulation. Under the Medicaid MAGI counting rule, the state looks at each individual's MAGI, deducts 5%, which the law provides as a standard disregard for individuals at the highest income limit for coverage,",
      " and compares that income to the income standards set by the state in coordination with CMS. For Medicaid, MAGI is defined as the IRC's adjusted gross income (AGI, which reflects a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments) increased by certain types of income (e.g., tax-exempt interest income received or accrued during the taxable year and the nontaxable portion of Social Security benefits). In addition, under Medicaid regulations certain types of income are subtracted (e.g., certain scholarships and fellowships) to arrive at MAGI. Also under Medicaid regulations, irregular income received as a lump sum (e.g., state income tax refund,",
      " lottery or gambling winnings, one-time gifts or inheritances) is counted as income only in the month received. In addition to specifying the types of household income that must be considered during eligibility determinations, the regulations also define household. The income of any person defined as a part of an individual's household must be counted when determining that individual's income level for purposes of a Medicaid eligibility determination. Medicaid program regulations make a distinction with regard to the budget period when determining income eligibility for applicants and new enrollees as compared to eligibility redeterminations for current enrollees. Specifically, income eligibility for applicants and new enrollees is based on current monthly household income.",
      " When redetermining eligibility for current Medicaid enrollees, states are permitted to use current monthly income and family size or projected annual income and family size for the remaining months of the calendar year. For states that choose the latter measure when redetermining eligibility, Medicaid requires the applicant to predict income and household size for the remaining months of the calendar year. Explanation of AHCA Provision Section 114(a) would amend SSA Section 1902(a)(17) to require states to consider \"qualified lottery winnings\" and/or \"qualified lump sum income\" received by an individual on or after January 1, 2020, when determining eligibility for Medicaid based on MAGI for each such individual.",
      " Such income would not be counted as household income when determining Medicaid eligibility for other members (aside from the individual's spouse) of the individual's household.  Winnings and/or income in an amount less than $80,000 would be considered in the month that such winnings and/or income are received. Amounts greater than or equal to $80,000 but less than $90,000 would be prorated over a period of two months. Amounts greater than or equal to $90,000 but less than $100,000 would be prorated over a period of three months. For purpose of prorating winnings and/or income in amounts greater than or equal to $100,",
      "000, one additional month would be added for each increment of $10,000 received, not to exceed 120 months (or 10 years) for winnings and/or income of $1,260,000 or more.  The provision would establish a state option for a hardship exemption for individuals for whom the denial of Medicaid eligibility based on such income would cause an undue medical or financial hardship as determined by criteria established by the HHS Secretary. In addition, it would require states to inform individuals in advance of their loss of Medicaid eligibility, as well as the date that such individual would be permitted to reapply. The provision would define qualified lottery winnings as winnings (including amounts awarded as a lump-sum payment)",
      " from a state-conducted sweepstakes, lottery, or pool, or from a lottery operated by a multistate or multi-jurisdictional lottery association. The bill would define qualified lump - sum income as income received as a lump sum (1) from monetary winnings from gambling (as defined by the HHS Secretary and including monetary winnings from gambling activities described in Section 1955(b)(4) of Title 18 of the United States Code ) or (2) as liquid assets from the estate of a deceased individual (as defined in Section 1917(b)(4) of SSA). The bill would specify that states may recover lottery winnings awarded to the individual to pay for Medicaid medical assistance furnished to the individual.",
      " Section 114(b). Repeal of Retroactive Eligibility Current Law Eligibility for Medicaid is determined by federal and state law. States set individual eligibility criteria within federal standards. Once an individual is determined eligible for Medicaid, coverage is effective either on the date of application or the first day of the month of application. Benefits must be covered retroactively for services provided in or after the third month before the month of application for individuals who are subsequently determined eligible, if the individual would have been eligible during that period had he or she applied (or had someone applied for him or her), regardless of whether the individual is alive when application for Medicaid is made.",
      " Coverage generally stops at the end of the month in which a person no longer meets the requirements for eligibility. Explanation of AHCA Provision Section 114(b) would amend SSA Sections 1902(a)(34) and 1905(a) to limit the effective date for retroactive coverage of Medicaid benefits to the month in which the applicant applied. This provision would apply to Medicaid applications made (or deemed to be made) on or after October 1, 2017. Section 114(c). Updating Allowable Home-Equity Limits in Medicaid Current Law DRA established SSA Section 1917(f), which required limitations on the amount of home equity that an applicant could shield from asset limits that otherwise would disqualify the applicant from Medicaid eligibility for nursing facility services or other Medicaid-covered long-term services and supports (LTSS). Prior to enactment of the DRA,",
      " Medicaid deferred to asset-counting rules under the Supplemental Security Income (SSI) program and excluded the entire value of an applicant's home for the purposes of Medicaid LTSS eligibility. Under current law, Medicaid bars eligibility if the applicant's equity interest in the home exceeds a statutorily determined limit, which is annually adjusted. Initially, the minimum and maximum home-equity dollar limits specified in statute were $500,000 and $750,000, respectively. Beginning in 2011, these dollar amounts were updated annually to reflect the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), rounded to the nearest $1,",
      "000. In 2017, the minimum home-equity limit is $560,000. However, a state may elect to substitute an amount that exceeds $560,000 but does not exceed $840,000 in 2017. In doing so, states may choose to apply a higher home-equity limit to specific geographic areas within a state. Individuals who have a spouse, child under the age of 21, or child who is blind or disabled (under SSI or as defined by SSA Section 1614) and lawfully residing in the individual's home are able to exempt the home as a countable asset. Also,",
      " states can choose not to apply this rule if the state determines that doing so would cause an undue hardship in a given case. In addition to the District of Columbia, the following 10 states choose a home-equity limit that is above the minimum amount: California, Connecticut, Hawaii, Idaho, Maine, Massachusetts, New Jersey, New Mexico, New York, and Wisconsin. Explanation of AHCA Provision Section 114(c) would repeal the authority for states to elect to substitute a higher home-equity limit amount that is above the statutory minimum amount (SSA Section 1917(f)(1)(B)). It would apply to Medicaid eligibility determinations that are made more than 180 days after enactment.",
      " In situations where the HHS Secretary determines that state legislation would be required to amend the state plan, then states would have additional time to comply with these requirements. Section 115. Safety-Net Funding for Non-expansion States Current Law On January 1, 2014, when the ACA Medicaid expansion went into effect, 24 states and the District of Columbia included the expansion as part of their Medicaid programs. Since then, seven additional states have implemented the expansion at different times: Michigan (April 1, 2014), New Hampshire (July 1, 2014), Pennsylvania (January 1, 2015), Indiana (February 1,",
      " 2015), Alaska (September 1, 2015), Montana (January 1, 2016), and Louisiana (July 1, 2016). For the most part, states establish their own payment rates for Medicaid providers. Federal statute requires that these rates are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that covered benefits will be available to Medicaid enrollees at least to the same extent they are available to the general population in the same geographic area. In some cases, states make supplemental payments to Medicaid providers that are separate from, and in addition to, the standard payment rates for services rendered to Medicaid enrollees.",
      " Medicaid DSH payments are one type of supplemental payment, and federal statute requires that states make Medicaid DSH payments to hospitals treating large numbers of low-income patients. Explanation of AHCA Provision Section 115 would add a new Section 1923A to the SSA to establish safety-net funding for non-expansion states. For FY2018 through FY2022, each state (defined as the 50 states and the District of Columbia) that has not implemented the ACA Medicaid expansion (through the state plan or a waiver) as of July 1 of the preceding year may receive safety-net funding to adjust payment amounts for Medicaid providers. For these payment adjustments using the safety-net funding,",
      " non-expansion states would receive an increased matching rate of 100% for FY2018 through FY2021 and 95% for FY2022. The maximum amount of safety-net funding for all non-expansion states would be $2.0 billion for each year, for a total of $10 billion from FY2018 through FY2022. Each non-expansion state's allotment for each year would be determined according to the number of individuals in the state with income below 138% of FPL in 2015 relative to the total number of individuals with income below 138% of FPL for all the non-expansion states in 2015.",
      " The 2015 American Community Survey one-year estimates as published by the Bureau of the Census would be used to determine the portion of each state's population that is below 138% of FPL. The payment adjustments to providers may not exceed the provider's costs incurred to furnish health care services for Medicaid enrollees or the uninsured. The provider's costs would be determined by the Secretary, and the costs would be net of other Medicaid payments and payments from uninsured patients. If a non-expansion state implements the ACA Medicaid expansion, the state would no longer be treated as a non-expansion state for safety-net funding for subsequent years. Section 116.",
      " Providing Incentives for Increased Frequency of Eligibility\u00a0Redeterminations Section 116(a). Frequency of Eligibility Redeterminations Current Law As of January 1, 2014, SSA Section 1902(e)(14) requires states to determine income eligibility based on MAGI for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion and the state option for coverage for individuals with income that exceeds 133% of FPL. For such individuals, states are required to redetermine Medicaid eligibility once every 12 months, except in the case where the Medicaid agency receives information about a change in a beneficiary's circumstances that may affect eligibility.",
      " In this case, the Medicaid agency must redetermine Medicaid eligibility at the appropriate time based on such changes. Explanation of AHCA Provision Beginning October 1, 2017, Section 116(a) would amend SSA Section 1902(e)(14) to require states to redetermine Medicaid eligibility at least every six months (or sooner in the case where the Medicaid agency receives information about a change in a beneficiary's circumstances that may affect eligibility) for individuals eligible for Medicaid through (1) the ACA Medicaid expansion or (2) the state option for coverage for individuals with income that exceeds 133% of FPL. Section 116(b). Increased Administrative Matching Percentage for Eligibility\u00a0Redeterminations Current Law Medicaid is jointly financed by the federal government and the states.",
      " The federal government's share of a state's expenditures for most Medicaid services is called the FMAP rate, which varies by state and is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. Most administrative activities receive a 50% federal matching rate. Explanation of AHCA Provision Section 116(b) would increase the federal match for the administrative activities attributable to carrying out the increased frequency of Medicaid eligibility redeterminations required under Section 116(a)",
      " by five percentage points. This increased federal match would be available from October 1, 2017, through December 31, 2019. Section 117. Permitting States to Apply a Work Requirement for Nondisabled, Non-elderly, Nonpregnant Adults Under Medicaid Section 117(a). State Option for Work Requirements Current Law Medicaid is a program that pays for certain medical services furnished to low-income individuals. It is jointly financed by the federal government and participating states. Generally, participating states must have a state medical assistance plan that complies with SSA Section 1902. Among other things, Section 1902(a)(10)(A)(i)",
      " identifies specific categories of beneficiaries that must be covered under a state plan, as well as a requirement in Section 1902(a)(10)(B) that medical assistance offered to any individual in such a mandatory eligibility group may not be less in amount, duration, or scope than assistance made available to any other person under the state plan.  The Medicaid statute does not appear to expressly address whether a state plan may permissibly impose work requirements as a condition of receiving benefits for most beneficiaries. However, SSA Section 1931 authorizes states to terminate Temporary Assistance for Needy Families (TANF) recipients' eligibility for medical assistance under Medicaid if the individuals'",
      " TANF benefits are denied for failing to comply with work requirements imposed under the TANF program.  Explanation of AHCA Provision Section 117(a) would modify SSA Section 1902 by adding a new Section at 1902(oo) to permit states, effective October 1, 2017, to require nondisabled, non-elderly, nonpregnant adults to satisfy a work requirement as a condition for receipt of Medicaid medical assistance. The provision would define work requirements as an individual's participation in work activities for a specified period of time as administered by the state. The provision would incorporate, by reference, the definition of work activities as they appear in SSA Section 407(d)",
      " under Part A of Title IV (Block Grants to States for TANF), and would include unsubsidized employment; subsidized private-sector employment; subsidized public-sector employment; work experience (including work associated with the refurbishing of publicly assisted housing) if sufficient private-sector employment is not available; on-the-job training; job search and job readiness assistance; community service programs; vocational educational training (not to exceed 12 months with respect to any individual); job skills training directly related to employment; education directly related to employment, in the case of a recipient who has not received a high school diploma or a certificate of high school equivalency; satisfactory attendance at secondary school or a course of study leading to a certificate of general equivalence,",
      " in the case of a recipient who has not completed secondary school or received such a certificate; and the provision of child-care services to an individual who is participating in a community service program. Participating states would be required to exempt the following groups from participation in the work requirement: (1) pregnant women (for the duration of the pregnancy and through the end of the month in which the 60-day postpartum period ends); (2) individuals under 19 years of age; (3) an individual who is the sole parent or caretaker relative in the family of (a) a child who is under the age of 6 or (b)",
      " a child with disabilities; or (4) an individual who is less than 20 years of age, who is married or a head of household and who (a) maintains satisfactory attendance at secondary school or the equivalent or (b) participates in education directly related to employment. Section 117(b). Increase in Matching Rate for Implementation of Work\u00a0Requirement Current Law Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the FMAP rate, which varies by state and is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Exceptions to the regular FMAP rate have been made for certain states,",
      " situations, populations, providers, and services. Most administrative activities receive a 50% federal matching rate. Explanation of AHCA Provision Section 117(b) would increase the federal match for administrative activities to implement the work requirement under Section 117(a) by five percentage points in addition to any other increase to such federal matching rate. Subtitle C\u2014Per Capita Allotment for Medical Assistance Section 121. Per Capita Allotment for Medical Assistance Current Law Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports. Medicaid is a federal and state partnership. The states are responsible for administering their Medicaid programs,",
      " and Medicaid is jointly financed by the federal government and the states. In FY2015, Medicaid is estimated to have provided health care services to 70 million individuals at a total cost of $552 billion (including federal and state expenditures). Participation in Medicaid is voluntary, though all states, the District of Columbia, and the territories choose to participate. The federal government sets some basic requirements for Medicaid, and states have the flexibility to design their own version of Medicaid within the federal government's basic framework. In addition, there are several waiver and demonstration authorities that allow states to operate their Medicaid programs outside of federal rules. States incur Medicaid costs by making payments to service providers (e.g., for beneficiaries'",
      " doctor visits) and performing administrative activities (e.g., making eligibility determinations). The federal government reimburses states for a share of each dollar spent in accordance with their federally approved Medicaid state plans. The federal government's share of most Medicaid expenditures is called the FMAP. Generally determined annually, the FMAP formula is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. After a state has made Medicaid expenditures,",
      " it can draw down federal matching funds. CMS makes quarterly grant awards to states to cover the federal share of Medicaid expenditures based on the quarterly estimates states submit to CMS on the Form CMS-37. Each state must submit a Form CMS-64 no later than 30 days after the end of each quarter with the state's accounting of actual recorded expenditures. CMS then reviews the expenditures reported on the Form CMS-64 to reconcile the states' estimates from the CMS-37 with the actual documented expenditures to ensure that the reported expenditures are allowable under the Medicaid statute and the Medicaid state plan. Medicaid is an entitlement for both states and individuals. The Medicaid entitlement to states ensures that,",
      " so long as states operate their programs within the federal requirements, states are entitled to federal Medicaid matching funds. Medicaid is also an individual entitlement, which means that anyone eligible for Medicaid under his or her state's eligibility standards is guaranteed Medicaid coverage. Federal Medicaid funding to states is open-ended. Explanation of AHCA Provision Section 121 would reform federal Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) starting in FY2020. Specifically, each state's spending in FY2016 would be the base to set targeted spending for each enrollee category in FY2019 and subsequent years for that state.",
      " Each state's targeted spending amounts would increase annually by the applicable annual inflation factor, which varies by enrollee category. Starting in FY2020, any state with spending higher than its specified targeted aggregate amount would receive reductions to its Medicaid funding for the following fiscal year. One provision would reduce the target amount for New York if certain local government contributions to the state share are required. States would have the option to receive block grant funding (i.e., a predetermined fixed amount of federal funding) instead of per capita cap funding for non-elderly, nondisabled, non-expansion adults and children starting in FY2020. Some statutory requirements would not apply under the block grant option.",
      " States would elect this option for a 10-year period. Section 121(1) would add references to the new SSA Section 1903A (explained below) in SSA Section 1903, which is the section of statute that lays out how the federal government makes payments to states for the Medicaid program. Section 121(2) would add a new SSA Section 1903A. The following provides a description of what would be the new SSA Section 1903A. Section (a). Application of Per Capita Cap on Payments for Medical Assistance\u00a0 Expenditures Under Section (a) of the new SSA Section 1903A,",
      " beginning in FY2020, if a state has excess aggregate medical assistance expenditures for a fiscal year, the state's quarterly Medicaid payments from the federal government for the following fiscal year would be reduced by one-quarter of the excess aggregate medical assistance payments for the previous fiscal year. This section would be applicable to the 50 states and the District of Columbia. Excess aggregate medical assistance expenditures for the state and fiscal year would be the amount by which the adjusted total medical assistance expenditures (defined under Section (b) of the new SSA Section 1903A) exceeds the amount of target total medical assistance expenditures (defined under Section (c) of the new SSA Section 1903A). Excess aggregate medical assistance payments would be the product of the excess aggregate medical assistance expenditures and the federal average medical assistance matching percentage.",
      " The federal average medical assistance matching percentage for each state and fiscal year would be the ratio of (1) the amount of federal payments made to the state under SSA Section 1903(a)(1) for medical assistance expenditures in the fiscal year prior to any potential reduction applied under this section to (2) the amount of the state's total medical assistance expenditures for the fiscal year (including both federal and state expenditures). Section (b). Adjusted Total Medical Assistance Expenditures Under Section (b), there would be two formulas for adjusted total medical assistance expenditures : one formula for FY2016 and another formula for FY2019 and subsequent years.",
      " Both formulas for adjusted total medical assistance expenditures would exclude expenditures for Medicaid DSH payments under SSA Section 1923, Medicare cost-sharing payments under SSA Section 1905(p)(3), and safety-net provider payment adjustments in non-expansion states.  The FY2016 formula for adjusted total medical assistance expenditures would be the product of (1) the amount of medical assistance expenditures for a state reduced by the amount of any excluded expenditures in FY2016 and (2) the 1903A FY2016 population percentage, which is the HHS Secretary's calculation of the percentage of actual medical assistance expenditures attributable to 1903A enrollees in a state in FY2016 (discussed below,",
      " under Section (e)). The FY2019 or subsequent fiscal years formula for adjusted total medical assistance expenditures for a state and fiscal year would be the amount of medical assistance expenditures attributable to 1903A enrollees reduced by any excluded expenditures. Medical assistance expenditures would be defined as medical assistance payments as reported under the medical services category on the Form CMS-64 quarterly expense report (or successor to such form) for which payment is made pursuant to SSA Section 1903(a)(1).  The language specifies that the medical assistance expenditures for FY2019 and subsequent years would include non-DSH supplemental payments (including certain waiver expenditures for delivery system reform incentive pools,",
      " uncompensated care pools, and designated state health programs). The medical assistance expenditures for FY2019 and subsequent years would not include expenditures for the Vaccines for Children program.  Section (c). Target Total Medical Assistance Expenditures Under Section (c) of the new SSA Section 1903A, target total medical assistance expenditures for a state and fiscal year would be the sum of the following formula for each 1903A enrollee category (defined under Section (e) of the new SSA Section 1903A): (1) target per capita medical assistance expenditures for the enrollee category times (2) the number of 1903A enrollees for such 1903A enrollee category.",
      "  For FY2020, the target per capita medical assistance expenditures for each 1903A enrollee category would be the provisional FY2019 target per capita amount (defined in Section (d) of the new SSA Section 1903A) for such enrollee category for the state increased by the applicable annual inflation factor. For subsequent years, the target per capita medical assistance expenditures for each 1903A enrollee category would be the target per capita medical assistance expenditures for the previous year for such enrollee category for the state increased by the applicable annual inflation factor. The applicable inflation factor would vary by 1903A enrollee category.",
      " For the children; expansion enrollee; and other non-elderly, nondisabled, non-expansion adult categories, the applicable inflation factor would be the percentage increase in the medical care component of the CPI-U from September of the previous fiscal year to September of the fiscal year involved. For the elderly and disabled categories, the applicable inflation factor would be the percentage increase in the medical care component of the CPI-U from September of the previous fiscal year to September of the fiscal year involved plus one percentage point. Beginning in FY2020, there would be a decrease in the target total medical assistance expenditures for states that (1) have a Medicaid DSH allotment in FY2016 that was more than six times the national average and (2)",
      " require political subdivisions within the state to contribute funds toward medical assistance or other expenditures under Medicaid (including under a waiver) for the fiscal year involved. The decrease would be the amount that political subdivisions in the state are required to contribute under Medicaid without reimbursement from the state other than the following required contributions: (1) from political subdivisions with a population of more than 5 million that impose local income tax upon their residents and (2) for certain administrative expenses required to be paid by the political subdivision as of January 1, 2017. Section (d). Calculation of FY2019 Provisional Target Amount for Each 1903A\u00a0Enrollee\u00a0 Category The HHS Secretary would calculate for each state the provisional FY2019 per capita target amounts for each 1903A enrollee category.",
      " The formula for the provisional FY2019 per capita target amounts would be the average per capita medical assistance expenditures for the state for FY2019 for such enrollee category multiplied by the ratio of (1) the product of the FY2019 average per capita amount for the state and the number of 1903A enrollees for the state in FY2019 to (2) the amount of FY2019 adjusted total medical assistance expenditures for the state. This calculation would be subject to treatment of states expanding coverage after FY2016 (discussed in Section (f) of the new SSA Section 1903A). The average per capita medical assistance expenditures for FY2019 for each 1903A enrollee category would be the FY2019 adjusted total medical assistance expenditures for the state divided by the number of 1903A enrollees for the state in FY2019.",
      " The FY2019 adjusted total medical assistance expenditures would exclude non-DSH supplemental expenditures (including certain waiver expenditures for delivery system reform incentive pools, uncompensated care pools, and designated state health programs) for FY2019 and would be increased by the non-DSH supplemental payment percentage for FY2016, which is the ratio of the total amount of non-DSH supplemental payments for FY2016 to adjusted total medical assistance expenditures for FY2016.  For each state, the FY2019 average per capita amount would be the FY2016 average per capita medical assistance expenditures increased by the percentage increase in the medical care component of the CPI-U from September 2016 to September 2019.",
      " The FY2016 average per capita medical assistance expenditures would be the amount of the FY2016 adjusted total medical assistance expenditures (discussed in Section (b)) divided by the number of 1903A enrollees for the state in FY2016. Section (e). 1903A Enrollee; 1903A Enrollee Category This section would define 1903A enrollees as Medicaid enrollees (i.e., individuals eligible for medical assistance under Medicaid and enrolled under the Medicaid state plan or waiver) for the month in a state that is not covered under the block grant option and does not fall into one of the following categories:",
      " individuals covered under a CHIP Medicaid expansion program (SSA Section 2101(a)(2)), individuals who receive medical assistance through an Indian Health Service facility (the third sentence under SSA Section 1905(b)), individuals entitled to medical assistance coverage of breast and cervical cancer treatment due to screening under the Breast and Cervical Cancer Early Detection Program (SSA Section 1902(a)(10)(A)(ii)(XVIII)), or the following partial-benefit enrollees: unauthorized (illegally present) aliens eligible for Medicaid emergency medical care (SSA Section 1903(v)(2)), individuals eligible for Medicaid family planning options (SSA Section 1902(a)(10)(A)(ii)(XXI)), individuals infected with tuberculosis (SSA Section 1902(a)(10)(A)(ii)(XII)), dual-",
      "eligible individuals eligible for coverage of Medicare cost sharing (SSA Section 1905(p)(3)(A)(i) or (ii)), or individuals eligible for premium assistance (SSA Section 1906 or 1906A). The enrollment count would be based on the average monthly amount reported through the Form CMS-64 as required under Section (h).  The 1903A enrollee categories would be (1) elderly; (2) blind and disabled; (3) children; (4) expansion enrollees; and (5) other non-elderly, nondisabled, non-expansion adults. Section (f). Special Payment Rules Section (f)",
      " of the new SSA Section 1903A would provide special payment rules for (1) payments made under Section 1115 waivers or Section 1915 waivers, (2) states that did not have ACA Medicaid expansion in FY2016 and later implement the expansion, and (3) states that fail to satisfactorily submit data in accordance with Section (h)(1) of the new SSA Section 1903A. Section (g). Recalculation of Certain Amounts for Data Errors Section (g) of the new SSA Section 1903A would allow for the recalculation of certain amounts for data errors. Any adjustment under this section would not result in an increase of the target total medical assistance expenditures exceeding 2%. Section (h). Required Reporting and Auditing of CMS-",
      "64 Data; Transitional Increase in Federal Matching Percentage for Certain Administrative Expenses In addition to the required reporting for ACA Medicaid expansion on the Form CMS-64 report as of January 1, 2017, Section (h) of the new SSA Section 1903A would impose additional reporting requirements on states starting October 1, 2018. The additional reporting requirements would include data on medical assistance expenditures within categories of services and categories of enrollees (including each 1903A enrollee category and the enrollment categories excluded from the definition of 1903A enrollees). In addition, Section (h) would require reporting of the number of enrollees within each enrollee category.",
      " The HHS Secretary would determine the specific reporting requirements. The HHS Secretary also would conduct audits of each state's enrollment and expenditures reported on the Form CMS-64 for FY2016, FY2019, and subsequent years. These audits may be conducted on a representative sample, as determined by the HHS Secretary. This section would provide a temporary increase to the federal matching percentage for the administrative activities related to improving data reporting systems. The temporary increases would impact expenditures on or after October 1, 2017, and before October 1, 2019. Section (i). Flexible Block Grant Option for States Section (i) would provide states with an option to receive block grant funding instead of per capita cap funding for a portion of their Medicaid program starting in FY2020.",
      " States would elect this option for a 10-year period. When a state uses the block grant option, the enrollees covered under the block grant would not be counted as 1903A enrollees for the per capita limitations. If the block grant option were not extended after the 10-year period, then the per capita limitations would apply as if the block grant option had never taken place.  The block grant funds could be used only to provide coverage of the health care assistance specified in the block grant state plan, and the coverage provided to the enrollees under the block grant option would be instead of other Medicaid coverage. No payment would be made through the block grant option unless the state has an approved block grant state plan.",
      " A block grant state plan would be deemed approved by the HHS Secretary unless within 30 days of receipt the Secretary finds the plan incomplete or actuarially unsound. For the block grant state plan, some statutory requirements would not apply. These requirements are as follows: statewide operation, which requires a state pan to be in effect throughout the state, with certain exceptions (SSA Section 1902(a)(1)); comparability, which means services available to the various population groups must be equal in amount, duration, and scope within a state (SSA Section 1902(a)(10)(B)); reasonable standards for income and resources,",
      " meaning states must use eligibility standards and methodologies that are reasonable and consistent with the objectives of Medicaid, with certain exceptions (SSA Section 1902(a)(17)); and freedom of choice, which means enrollees must be able to obtain services from any qualified Medicaid provider that undertakes to provide services to them, with certain exceptions (SSA Section 1902(a)(23)). The block grant state plan would be required to specify who is covered under the block grant, the conditions of eligibility for the block grant, and the services covered under the block grant. Under their block grant, states could cover either  children and other non-elderly,",
      " nondisabled, non-expansion adults or only other non-elderly, nondisabled, non-expansion adults.  Under the block grant option, states would be able to specify the conditions of eligibility. However, states would be required to provide coverage to pregnant women that are currently required to be covered by Medicaid programs under SSA Section 1902(a)(10)(A)(i). If children are included in a state's block grant, the state would be required to provide coverage to children that are currently required to be covered by Medicaid programs under SSA Section 1902(a)(10)(A)(i) and SSA Section 1902(e)(4). This would include the poverty-related populations of pregnant women with income up to 133%",
      " of FPL, children aged 0 through 5 with income up to 133% of FPL, and children aged 6 through 18 with income up to 100% of FPL. In addition, this would include deemed newborns, foster care children, and former foster care children up to the age of 26, among others. States using the block grant option would be able to determine the types of items and services covered under the block grant (with the exception of some required services) in addition to the amount, duration, and scope for those services. Also, states would be able to specify the cost-sharing and delivery model for the block grant.",
      " This coverage could differ from the Medicaid coverage provided outside of the block grant, but states would be required to provide coverage of the following services under the block grant: hospital care; surgical care and treatment; medical care and treatment; obstetrical and prenatal care and treatment; prescribed drugs, medicines, and prosthetic devices; other medical supplies and services; and health care for children under the age of 18. The block grant funding for the initial fiscal year in the 10-year period would be equal to the sum of the following formula for each block grant category (i.e., children or other, non-elderly, nondisabled,",
      " non-expansion adults). The formula for each block grant category would be (1) the target per capita medical assistance expenditures for such state and fiscal year times (2) the number of 1903A enrollees for the state for FY2019 times (3) the federal average medical assistance percentage for the state for FY2019. For subsequent fiscal years within the 10-year period, the block grant amount would be equal to the previous year's block grant amount increased by the annual increase in the CPI-U for the fiscal year involved.  Block grant funds for a fiscal year would remain available to a state in the succeeding fiscal year as long as the state is still using the block grant option in the succeeding fiscal year.",
      " The federal payment to states under the block grant option would be made from the block grant amount. Quarterly payments would be made to states using the enhanced FMAP (E-FMAP) rate used for CHIP as the matching rate for block grant expenditures. The state would be responsible for the balance of the funds necessary to carry out the block grant state plan. As a condition of receiving funds under the block grant option, a state would be required to contract with an independent entity to conduct annual audits of its expenditures made with respect to the activities under the block grant to ensure that the block grant funds are used consistent with the block grant requirements. The audits would need to be made available to the HHS Secretary upon request.",
      " Subtitle D\u2014Patient Relief and Health Insurance Market Stability Section 131. Repeal of Cost-Sharing Subsidy Current Law ACA Section 1402 authorized subsidies to eligible individuals to reduce the cost-sharing expenses for health insurance plans offered in the individual market through health insurance exchanges. Cost-sharing assistance is provided in two forms. The first form of assistance reduces the out-of-pocket limit applicable for a given exchange plan; the second reduces actual cost-sharing requirements (e.g., lowers the deductible or reduces a co-payment) applicable to a given exchange plan. Both types of assistance provide greater subsidy amounts to individuals with lower household incomes. Individuals who meet applicable eligibility requirements may receive both types of cost-sharing subsidies.",
      " Explanation of AHCA Provision Section 131 would repeal ACA Section 1402, terminating the cost-sharing subsidies (and payments to issuers for such reductions), effective for plan years beginning in 2020. Section 132. Patient and State Stability Fund Current Law Over the years, Congress has taken different actions intended to provide financial assistance for individuals with high-cost medical needs. For example, Congress made appropriations available to fund high-risk pools (HRPs) through legislation enacted prior to the ACA. Prior to the ACA, 35 states established HRPs to provide health insurance options to individuals who sought coverage in the individual market; many such individuals were denied coverage,",
      " offered coverage with premiums that exceeded those found in the HRPs, or offered coverage that excluded services to treat preexisting health conditions. The coverage provided through state HRPs generally reflected coverage available in the private individual insurance market in those states. Congress first authorized and provided appropriations for state grants, for the purpose of funding HRPs, during the 107 th Congress. Additional appropriations were made available during the 109 th, 110 th, and 111 th Congresses.  Congress also made appropriations available for HRPs under the ACA. The ACA required the HHS Secretary to establish a temporary HRP, known as the Pre-Existing Condition Insurance Plan (PCIP). The intent of the PCIP was to provide transitional coverage for uninsured individuals with preexisting conditions until January 1,",
      " 2014, when most private health insurance plans would be prohibited from having preexisting condition exclusions. The ACA provided appropriations, beginning in 2010, to fund the PCIP program, which terminated at the end of 2013. In another example, Congress established a transitional reinsurance program under the ACA, which was designed to provide payment to non-grandfathered individual market plans that enrolled high-risk enrollees for 2014 through 2016. Under the program, the HHS Secretary collected reinsurance contributions from health insurance issuers and from third-party administrators on behalf of group health plans. The HHS Secretary then used those contributions to make reinsurance payments to issuers who enrolled high-cost enrollees in their non-grandfathered individual market plans both inside and outside of the exchanges.",
      " (Statutes required the HHS Secretary to determine how high-risk enrollees are identified, and the HHS Secretary in turn defined high-risk enrollees as high-cost enrollees.) The program covers a portion of the claims costs for these enrollees based on payment parameters set by the HHS Secretary. Explanation of AHCA Provision Section 132 would add a new Title XXII to the SSA. Section 2201 of the new title would establish the Patient and State Stability Fund, which is to be administered by the CMS Administrator. The fund's purpose is to provide funding to the 50 states and the District of Columbia from January 1,",
      " 2018, to December 31, 2026. Per Section 2202(a) of the new title, states may use payments allocated from the Patient and State Stability Fund for any of the following activities:  a new or existing mechanism that provides financial assistance to certain high-risk individuals who do not have access to employer-sponsored insurance to enroll in the individual market; providing incentives to entities to enter into arrangements with the state for the purpose of stabilizing premiums in the individual market; reducing health insurance costs in the individual and small-group markets for individuals who have or are projected to have high health care utilization (as measured by cost) and individuals who face high costs of health insurance coverage due to low population density in the state;",
      " promoting health insurance issuer participation and increasing insurance options in the individual and small-group markets; promoting access to preventive, dental, or vision services, or any combination of such services; maternity coverage and newborn care; prevention, treatment, or recovery services for individuals with mental or substance abuse disorders that focus on inpatient or outpatient clinical care of treatment of addiction and mental illness and early identification and intervention for children and young adults with mental illness; providing payments, directly or indirectly, to health care providers for the provision of services specified by the CMS Administrator; and providing assistance to reduce out-of-pocket costs (including premiums) for individuals with health insurance coverage in the state.",
      "  Section 2203 of the new title would specify the application process for states to become eligible to receive payments from the Patient and State Stability Fund. The application would include a description of how payments would be used for allowed activities; a certification that states would make required contributions for allowed activities; and other information as required by the CMS Administrator. A state would need to apply only once to be treated as providing applications for subsequent years.  Section 2204(b)(2)(A) of the new title would specify a formula for allocations to states for 2018 and 2019 for one or more of the allowed activities. The formula relies on the medical claims incurred by health insurance issuers in the state,",
      " the number of uninsured individuals in the state whose income is below 100% of FPL, and the number of issuers offering coverage through the state's exchange. For 2020 through 2026, Section 2204(b)(2)(B) of the new title would authorize the CMS Administrator to develop a method by which Patient and State Stability Fund payments would be allocated among the states, requiring that the Administrator take into account medical claims incurred by issuers in the state, the number of uninsured individuals in the state whose income is below 100% of FPL, and the number of issuers participating in the state's insurance market.",
      " The CMS Administrator would be required to consult with various stakeholders (e.g., health care consumers, issuers, state insurance commissioners) prior to establishing the allocation method for 2020-2026, and the method is to reflect the goals of improving the health insurance risk pool, promoting competition, and increasing choice for health care consumers.  Section 2203(b) would provide that if a state does not have an approved application for the allowed activities for a year, the CMS Administrator, in consultation with the state insurance commissioner, is to use the state's allocation for the year for market stabilization payments to issuers offering coverage in the individual and small-group markets in the state.",
      " These payments would be paid to such issuers for claims that exceed $50,000 but do not exceed $350,000 in 2018 and in 2019, in an amount equal to 75% of the claims. The dollar thresholds and the payment percentage are to be specified by the CMS Administrator for years 2020 through 2026. Section 2204(c) would provide for the reallocation of unused funds to states. Section 2204(e) would require states, as a condition of receipt of Patient and State Stability Fund allocations, to make contributions toward the activities or programs for which the application was approved. The state contributions would equal a certain percentage of the fund allocation.",
      " For those states carrying out allowed activities, the contributions begin at 7% in 2020 and increase annually to 50% in 2026. For those states with market-stabilization programs, state contributions begin at 10% in 2020, increase to 50% by 2024, and remain at 50% through 2026.  Section 2204(a) would authorize appropriations for the Patient and State Stability Fund and provide specific appropriation amounts. For 2018 and 2019, the appropriation would be $15 billion each year, and states would be able to use appropriated funds for any of the allowed activities.",
      " For 2020-2026, the appropriation would be $10 billion each year for any allowed activities. Amounts appropriated and allocated to states are to remain available for expenditure through December 31, 2027. Section 2204(a) also would provide for two additional appropriations for specified activities. For 2020, there would be an additional $15 billion appropriated that states could use only for maternity coverage and newborn care and prevention, treatment, or recovery services for individuals with mental or substance abuse disorders. For 2018-2023, there would be an additional $8 billion that could be allocated to certain states. The only states that could receive funds from the $8 billion would be those with a waiver in effect under new Public Health Service Act (PHSA)",
      " Section 2701(b)(1)(C), as would be established by AHCA Section 136. The new PHSA Section 2701(b)(1)(C) would allow states to waive the continuous coverage penalty, as would be implemented under AHCA Section 133, and instead allow issuers to use health status as a factor when developing premiums for individuals subject to an enforcement period. The additional $8 billion would be allocated to states with these waivers in effect according to a methodology specified by the HHS Secretary. States would be required to use the allocations to provide assistance in reducing premiums or out-of-pocket costs for individuals in the state subject to an increase in premiums as a result of the state's waiver.",
      " Section 2204(e)(3) would prohibit the CMS Administrator from making an allocation to a state if the state were to use the allocation for purposes not permitted under SSA Section 2105(c)(7), related to abortion. Section 2205 of the new title would establish a Federal Invisible Risk Sharing Program within the Patient and State Stability Fund. Like the fund, the program is to be administered by the CMS Administrator. The purpose of the Federal Invisible Risk Sharing Program would be to provide payments to health insurance issuers to help them offset the medical claims costs of high-cost enrollees (referred to as eligible individuals ). The CMS Administrator would be required to establish the parameters for the Federal Invisible Risk Sharing Program,",
      " including defining eligible individuals ; developing and using health status statements for eligible individuals; identifying health conditions that would automatically qualify individuals as eligible individuals at the time they apply for health insurance; creating a process health insurance issuers could use to voluntarily qualify enrollees who do not automatically qualify as eligible individuals; determining a percentage of an enrollee's paid premiums that would be collected for the program's use; and determining the program's attachment point\u2014the dollar amount of claims for an eligible individual after which the program would make payments to the issuer\u2014and determining the portion of such claims the program would pay. The CMS Administrator must establish the parameters of the Federal Invisible Risk Sharing Program for plan year 2018 no later than 60 days after enactment,",
      " and the CMS Administrator must establish a process for state operation of the program beginning in plan year 2020.  Section 2205 of the new title would appropriate $15 billion to be used for the Federal Invisible Risk Sharing Program from January 1, 2018, to December 31, 2026. Section 133. Continuous Health Insurance Coverage Incentive Current Law IRC Section 5000A, as added by ACA Section 1501, created an individual mandate, a requirement for most individuals to maintain health insurance coverage or pay a penalty for noncompliance. To comply with the mandate, most individuals need to maintain minimum essential coverage,",
      " which includes most types of private (e.g., employer-sponsored) coverage and public coverage (e.g., Medicare and Medicaid). Certain individuals are exempt from the mandate and its associated penalty. Section 2701 of the PHSA, as amended by ACA Section 1201, provided that premiums for certain plans offered in the individual and small-group markets may vary only by self-only or family enrollment, geographic rating area, tobacco use (limited to a ratio of 1.5:1), and age (limited to a ratio of 3:1 for adults). The age rating ratio means that a plan may not charge an older individual more than three times the premium that the plan charges a 21-year-old individual.",
      "  PHSA Section 2702, as amended by ACA Section 1201, provides that most plans offered in the individual, small-group, and large-group markets must be offered on a guaranteed-issue basis. In general, guaranteed issue in health insurance is the requirement that a plan accept every applicant for health coverage, as long as the applicant agrees to the terms and conditions of the insurance offer (e.g., the premium).  PHSA Section 2704(a), as amended by ACA Section 1201, prohibits most private health insurance plans from excluding coverage of preexisting health conditions. Plans cannot exclude benefits based on health conditions for any individual.",
      " A preexisting health condition is a medical condition that was present before the date of enrollment for health coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date. Explanation of AHCA Provision As described elsewhere in this report, Section 204 would effectively eliminate the annual penalty associated with IRC Section 5000A, the individual mandate, retroactively beginning CY2016. Section 133 would add a new Section 2710A to the PHSA. Under the new section, issuers offering plans in the individual market are to assess a penalty on applicable policyholders by increasing monthly premiums by 30%",
      " during an enforcement period. (In essence, the penalty is a variation in premiums.) The requirement would apply to enrollments beginning in plan year 2019, and it also would apply to enrollments that occur in special enrollment periods in plan year 2018. Applicable policyholders are (1) individuals who had a gap in creditable coverage, as currently defined in PHSA Section 2704(c), that exceeded 63 days in the 12 months prior to enrolling in current coverage and (2) individuals who aged out of their dependent coverage (i.e., young adults up to the age of 26) and did not enroll in coverage during the first open enrollment period following the date they aged out of their coverage.",
      " The enforcement period, with respect to enrollment beginning plan year 2019, is a 12-month period beginning the first day an individual enrolls in a plan. The enforcement period, with respect to enrollments during a special enrollment period in 2018, is the first month the individual is enrolled in coverage and ends in the last month of the plan year. Section 134. Increasing Coverage Options Current Law ACA Section 1302 required certain plans offered in the individual and small-group markets to meet a generosity level. The generosity level (i.e., actuarial value, or AV) is a summary measure of a plan's generosity of coverage.",
      " It is expressed as the percentage a given health insurance plan will pay for covered medical expenses, for a standard population. Plans must meet one of the following AV levels: bronze (60% AV), silver (70% AV), gold (80% AV), or platinum (90% AV). On average, as AV increases, consumer cost sharing decreases. For example, for a silver-level plan, on average, a plan pays for 70% of covered services and a consumer pays for 30% of covered services out-of-pocket. Explanation of AHCA Provisions Section 134 would amend ACA Sections 1302(a)(3) and 1302(d)",
      " to provide that plans offered after December 31, 2019, no longer need to meet a certain generosity level. Section 135. Change in Permissible Age Variation in Health Insurance Premium Rates Current Law PHSA Section 2701(a)(1), as amended by ACA Section 1201, provided that premiums for certain plans offered in the individual and small-group markets may vary only by self-only or family enrollment, geographic rating area, tobacco use (limited to a ratio of 1.5:1), and age (limited to a ratio of 3:1 for adults). The age rating ratio means that a plan may not charge an older individual more than three times the premium that the plan charges a 21-year-old individual.",
      " PHSA Section 2701(a)(5), as amended by ACA Section 10103, provides that if a state permits large-group coverage to be sold through the state's health insurance exchange, then the rating restrictions apply to all fully insured plans offered in the state's large-group market.  Explanation of AHCA Provision Section 135 would amend PHSA Section 2701(a)(1)(A)(iii) and establish that for plan years beginning on or after January 1, 2018, the HHS Secretary may implement, through rulemaking, an age rating ratio of 5:1 for adults. That is, a plan would not be able to charge an older individual more than five times the premium that the plan would charge a 21-year-old individual.",
      " States would have the option to implement a ratio for adults that is different from the 5:1 ratio. Section 136. Permitting States to Waive Certain ACA Requirements to Encourage Fair Health Insurance Premiums Section 137. Constructions Current Law Current federal law includes a number of restrictions related to the factors that can be used for determining an individual's eligibility for private health insurance coverage and the premium for such coverage. As described earlier, PHSA Section 2701(a)(1), as amended by ACA Section 1201, provided that premiums for certain plans offered in the individual and small-group markets may vary only by self-only or family enrollment,",
      " geographic rating area, tobacco use (limited to a ratio of 1.5:1), and age (limited to a ratio of 3:1 for adults). Premiums for such plans cannot vary for any other factors, such as gender or health status.  PHSA Section 2704(a), as amended by ACA Section 1201, prohibited most private health insurance plans from excluding coverage of preexisting health conditions. Plans cannot exclude benefits based on health conditions for any individual or group. A preexisting health condition is a medical condition that was present before the date of enrollment for health coverage, whether or not any medical advice, diagnosis,",
      " care, or treatment was recommended or received before such date. PHSA Section 2705(a), as amended by ACA Section 1201, prohibited most private health insurance plans from basing eligibility for coverage on health status-related factors. Such factors include health status, medical condition (including both physical and mental illness), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence), disability, and any other health status-related factor determined appropriate by the HHS Secretary.  PHSA Section 2705(b)(1) prohibited private health insurance plans from requiring an individual to pay a larger premium than any other similarly situated enrollees of the plan on the basis of a health status-related factor of the individual or any of the individual's dependents.",
      " PHSA Section 2705(b)(2) provided that such plans may offer premium discounts or rewards based on enrollee participation in wellness programs. PHSA Section 2705(b)(3) prohibited all group plans from adjusting premiums for the covered group on the basis of genetic information. ACA Section 1302 required certain plans offered in the individual and small-group markets to offer a core package of health care services, known as the\u00a0EHB. The ACA did not specifically define this core package. Instead, ACA Section 1302(b) listed 10 categories from which benefits and services must be included and required the HHS Secretary to further define the EHB.",
      " The 10 categories are ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory service; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. ACA Section 1252 required all standards and requirements adopted by a state pursuant to Title I of the ACA, or any amendments to Title I, to apply uniformly within applicable health insurance markets in the state. ACA Section 1324(a) provides that private health insurance issuers are not subject to federal or state laws (specified under ACA Section 1324(b)) if the laws do not apply to qualified health plans offered under ACA Section 1322 (Consumer-",
      "Operated and Oriented Plan [CO-OP] Program) or ACA Section 1334 (Multistate Plan [MSP] Program).  Explanation of New Provisions Section 136 would amend PHSA Section 2701 by adding a new subsection (b) that would allow states to apply for waivers from certain federal health insurance requirements. The new subsection (b)(1) would allow states to apply for a waiver for one or more of the following purposes. States could apply for a waiver to implement an age rating ratio for individuals aged 21 and older for plans purchased in the individual and small-group markets that is higher than the ratio specified in PHSA Section 2701(a)(1)(A)(iii), as would be amended by AHCA Section 135.",
      " This waiver could apply to plan years beginning on or after January 1, 2018. States could apply for a waiver from the EHB as specified in ACA Section 1302(b), and instead the state could specify its own EHB for plans purchased in the individual and small-group markets. This waiver could apply to plan years beginning on or after January 1, 2020. States could apply for a waiver of the continuous coverage penalty, as would be implemented under AHCA Section 133. The continuous coverage penalty would require issuers offering coverage in the individual market to assess a penalty on individuals who have a gap in health insurance coverage (i.e., are subject to an enforcement period). A state could apply to waive the application of the penalty and instead allow issuers to use health status as a factor when developing premiums for individuals subject to an enforcement period.",
      " Specifically, the new subsection (b)(1)(C)(ii) would provide that PHSA Section 2701(a) would be applied as if health status were included as a factor and PHSA Section 2705(b) would not apply. To obtain this type of waiver, a state must have a program in effect that carries out at least one of the purposes described in (1) or (2) of SSA Section 2202(a) (as would be added under AHCA Section 132) or the state must participate in the Federal Invisible Risk Sharing Program established under SSA Section 2205 (as would be added under AHCA Section 132). This waiver could apply to coverage obtained during special enrollment periods for plan year 2018 and for all coverage beginning plan year 2019.",
      " The new subsection (b)(3) would specify the waiver application requirements. The HHS Secretary would determine the timing and manner for submitting waiver applications. A state's application would be required to explain how approval of the application would provide for one or more of the following outcomes in the state: reducing average premiums for health insurance, increasing enrollment in health insurance, stabilizing the health insurance market, stabilizing premiums for individuals with preexisting conditions, or increasing the choice of health plans. The application also would have to include information about what the state would put in place of the waived provision. For example, if the state applied for a waiver to define the EHB,",
      " the application would have to specify the EHB that would be put in place in the state under the waiver. Per new subsection (b)(2), a state's application for a waiver would be approved unless the HHS Secretary notifies the state that the waiver has been denied (and provides the reason for denial) no later than 60 days after the application is submitted. New subsection (b)(4)(A) would provide that a state's waiver cannot extend longer than 10 years unless a state requests continuation. If a state requests continuation, such a request would be granted unless the HHS Secretary denies the request or asks the state for additional information within 90 days of the state's submission of a continuation request.",
      "  New subsection (b)(5)(A) would provide that the waivers allowed under the new PHSA Section 2701(b) cannot apply to the following ACA sections: 1301, regarding requirements for qualified health plans (QHPs), to the extent it applies to QHPs offered under ACA Section 1322 (CO-OP program) or ACA Section 1334 (MSP program); 1312(d)(3)(D), regarding health insurance coverage for Members of Congress; 1331, regarding the Basic Health Program; 1332, regarding state innovation waivers; 1333, regarding health care choice compacts;",
      " and 1334, regarding the MSP program. New subsection (b)(5)(B) would provide that any standards and requirements a state adopts pursuant to an approved waiver would be deemed compliant with ACA Sections 1252 and 1324(a). Section 137 would provide that nothing in the AHCA is to be construed as allowing issuers to vary health insurance rates by gender or as permitting issuers to limit access to coverage for individuals with preexisting conditions. Subtitle E\u2014Implementation Funding Section 141. American Health Care Implementation Fund Current Law Section 1005 of the Health Care and Education Reconciliation Act of 2010 (HCERA;",
      " P.L. 111-152 ) established the Health Insurance Reform Implementation Fund (HIRIF) within HHS and appropriated $1 billion to the HIRIF to help cover the federal administrative costs of implementing the ACA. Through the end of FY2016, a total of $994.9 million had been obligated from the HIRIF. The obligated amounts, by agency, are as follows: IRS, $542.8 million; HHS, $440.9 million; Office of Personnel Management, $6.1 million; Department of Labor, $4.5 million; and Social Security Administration, $0.6 million.",
      " Explanation of New Provision Section 141 would establish an American Health Care Implementation Fund within HHS to be used to implement the following AHCA provisions: per capita allotment for medical assistance (Section 121); Patient and State Stability Fund (Section 132); additional modifications to the premium tax credit (Section 202); and refundable tax credit for health insurance coverage (Section 214). Section 141 would appropriate $1 billion to the American Health Care Implementation Fund. Title II\u2014Committee on Ways and Means Subtitle A\u2014Repeal and Replace of Health-Related Tax Policy Section 201. Recapture Excess Advance Payments of Premium Tax Credits Section 202.",
      " Additional Modifications to Premium Tax Credit Current Law IRC Section 36B, as added by ACA Section 1401, and related amendments authorized premium tax credits to help eligible individuals pay for health insurance. The tax credits apply toward premiums for qualified health plans (QHPs) offered in the individual market through health insurance exchanges. QHPs are allowed to be offered outside of exchanges (off-exchange plans), but the premium credits may not be used toward the purchase of such plans. The premium credit is refundable, so individuals may claim the full credit amount when filing their taxes, even if they have little or no federal income tax liability. The credit also is advanceable,",
      " so individuals may choose to receive the credit on a monthly basis to coincide with the payment of insurance premiums. ACA Section 1411 generally makes the premium tax credit available to those who do not have access to subsidized public coverage (e.g., Medicaid) or employer-sponsored coverage that meets certain standards. The amount of the premium tax credit varies from individual to individual. The ACA specifies formulas for calculation of the premium tax credit amount and the amount that the individual (or family) must contribute toward the premium. That latter amount\u2014the required premium contribution\u2014is calculated according to a formula that incorporates a certain percentage ( applicable percentage ) of a given individual's (or family's)",
      " household income (MAGI) and the premium for the standard plan (i.e., the second-lowest-cost silver plan) in that individual's (or family's) local area. The required premium contribution is capped according to MAGI, with such income measured relative to FPL. A smaller cap applies to lower-income individuals\u2014compared to the cap applicable to higher-income persons\u2014meaning such individuals generally receive greater tax assistance.  ACA Section 1412 establishes an advance payment program, for making the credits available during the year. The advanced amounts are reconciled when individuals file income-tax returns for the actual year in which they receive the credits.",
      " If a tax filing unit's income decreases during the tax year, and the filer should have received a larger credit, this additional credit amount will be included in the tax refund for the year. By contrast, any excess amount that was overpaid in credits to the filer will have to be repaid to the federal government as a tax payment. IRC Section 36B(f)(2)(B) imposes limits on the excess amounts to be repaid under certain conditions. For households with incomes below 400% of FPL, the specific limits apply to single and joint filers separately. ACA Section 1414 authorizes the disclosure of taxpayer information by amending IRC Section 6103(l). IRC Section 6055,",
      " as added by ACA Section 1502, requires every entity (including employers, insurers, and government programs) that provides minimum essential coverage (including QHPs) to an individual to report that information to the IRS and provide a statement to the covered individual. Explanation of AHCA Provisions Section 201 would not apply IRC Section 36B(f)(2)(B), relating to limits on the excess amounts to be repaid with respect to the ACA premium tax credits, to taxable years beginning after December 31, 2017, and before January 1, 2020. In other words, for tax years 2018 and 2019,",
      " any individual who was overpaid in premium tax credits would have to repay the entire excess amount, regardless of income. Section 202 would disregard certification, plan choice, and regulatory compliance requirements applicable to QHPs and the requirement for QHPs to be offered through an exchange for ACA premium tax credit purposes. Advance payments of the credit, however, would not be allowed for plans offered outside of exchanges. Section 202 would allow the ACA credits to be applied toward the purchase of catastrophic plans but not grandfathered plans, grandmothered plans, or abortion coverage (except if necessary to save the life of the mother or if the pregnancy is the result of rape or incest). The section would allow an individual to purchase abortion-only coverage or a plan that includes abortion coverage,",
      " and would allow a health insurer to offer such coverage or plan, but would prohibit ACA premium tax credits to be used to pay for either. Section 202 would amend IRC Section 6055, relating to the reporting of minimum essential coverage, to require an entity that offers an off-exchange QHP to report certain specified information. With respect to the formula for calculating required premium contributions, Section 202 would specify age and income-adjusted applicable percentages for tax year 2019. The applicable percentages would range from 2% for those in the lowest income band to 11.5% for those in the highest income band and the oldest age band,",
      " which generally would provide greater tax assistance to lower-income individuals. Beginning in tax year 2019, the applicable percentages would be adjusted to take into account premium growth in comparison with other specified economic measures.  Section 202 would go into effect beginning tax year 2018, unless otherwise specified. Section 203. Small Business Tax Credit Current Law Section 45R of the IRC, as added by ACA Section 1421, provided for a small business health insurance tax credit. The credit is intended to help make the premiums for small-group health insurance coverage more affordable for certain small employers. The credit generally is available to nonprofit and for-profit employers with fewer than 25 full-time-equivalent employees with average annual wages that fall under a statutorily specified cap.",
      " To qualify for the credit, employers must cover at least 50% of the cost of each of their employees' self-only health insurance coverage. As of 2014, small employers must obtain insurance through a Small Business Health Options Program (SHOP) exchange to receive the credit, and the credit is available for two consecutive tax years only. The two-year period begins with the first year an employer obtains coverage through a SHOP exchange. For example, if an employer first obtains coverage through a SHOP exchange in 2017, the credit will be available to the employer only in 2017 and 2018. Explanation of AHCA Provision Beginning in tax year 2018,",
      " Section 203 would amend IRC Section 45R to indicate that the small business health insurance tax credit amount is to be determined based on QHPs that do not include coverage for abortion, except abortions necessary to save the life of the mother or abortions for pregnancies that are a result of rape or incest. The provision further states that an employer would not be prohibited from purchasing for its employees separate coverage for abortion, so long as no tax credit under IRC Section 45R is allowed with respect to employer contributions for such coverage. Section 203 would provide that the small business health insurance tax credit would not be available beginning tax year 2020.",
      " Section 204. Individual Mandate Current Law IRC Section 5000A, as added by ACA Section 1501, created an individual mandate, a requirement for most individuals to maintain health insurance coverage or pay a penalty for noncompliance. To comply with the mandate, most individuals need to obtain minimum essential coverage, which includes most types of private (e.g., employer-sponsored) coverage and public coverage (e.g., Medicare and Medicaid). Certain individuals are exempt from the mandate and its associated penalty.  The individual mandate went into effect in 2014. Individuals who are not exempt from the mandate are required to pay a penalty for each month of noncompliance.",
      " The annual penalty is the greater of a percentage of income or a flat dollar amount (but not more than the national average premium of a specified health plan). The percentage of income increased from 1.0% in 2014 to 2.5% in 2016 and beyond. The flat dollar amount increased from $95 in 2014 to $695 in 2016 and is adjusted for inflation thereafter.  Explanation of AHCA Provision Section 204 would effectively eliminate the annual penalty associated with IRC Section 5000A, the individual mandate, by reducing the percentage of income to 0% and the flat dollar amount to $0,",
      " retroactively beginning CY2016. Section 205. Employer Mandate Current Law IRC Section 4980H, as added by ACA Section 1513, required that employers either provide health coverage or face potential employer tax penalties. The potential employer penalties apply to all common-law employers, including government entities (such as federal, state, local, or Indian tribal government entities) and nonprofit organizations that are exempt from federal income taxes. The penalties are imposed on firms with at least 50 full-time-equivalent employees if one or more of their full-time employees obtain a premium tax credit through a health insurance exchange. The total penalty for any applicable large employer is based on the employer's number of full-time employees (averaging 30 hours or more per week)",
      " and whether the employer offers affordable health coverage that provides minimum value. Explanation of AHCA Provision Section 205 would modify the tax penalty associated with IRC Section 4980H, effectively eliminating it by reducing the penalty to $0 retroactively beginning in CY2016. Section 206. Repeal of the Tax on Employee Health Insurance Premiums and Health Plan Benefits Current Law IRC Section 4980I, as added by ACA Section 9001, created a new excise tax on high-cost employer-sponsored coverage (the so-called Cadillac tax). Under the ACA, the tax was scheduled to take effect in 2018; however, the Consolidated Appropriations Act,",
      " 2016 ( P.L. 114-113 ) delayed implementation of the tax until 2020. When it is implemented, the tax is to be imposed at a 40% rate on the aggregate cost of employer-sponsored health coverage that exceeds a specified dollar limit. If a tax is owed, it is levied on the entity providing the coverage (e.g., the health insurance issuer or the employer). Explanation of AHCA Provision Section 206 would delay implementation of IRC Section 4980I (the so-called Cadillac tax) until taxable periods beginning January 1, 2026. Section 207. Repeal of Tax on Over-the-",
      "Counter Medications Current Law Under the IRC, taxpayers may use several different types of tax-advantaged health accounts to pay or be reimbursed for qualified medical expenses: health flexible spending accounts (health FSAs), health reimbursement accounts (HRAs), Archer Medical Savings Accounts (MSAs), and health savings accounts (HSAs). ACA Section 9003 amended the relevant IRC provisions (IRC Sections 106, 220, and 223) to provide that, for each of these accounts, amounts paid for medicine or drugs are qualified expenses only in the case of prescribed drugs and insulin. Explanation of AHCA Provision Section 207 would repeal the language in IRC Sections 106,",
      " 220, and 223 stipulating that a medicine or drug must be a prescribed drug or insulin to be considered a qualified expense in terms of spending from a tax-advantaged health account. The provision would be generally effective beginning tax year 2017. Section 208. Repeal of Increase of Tax on Health Savings Accounts Current Law ACA Section 9004 imposed a 20% tax on distributions from Archer MSAs and HSAs that are used for purposes other than paying for qualified medical expenses. Prior to the ACA, IRC Section 220 applied a 15% rate on such distributions if made from an Archer MSA and IRC Section 223 applied a 10%",
      " rate on such distributions if made from an HSA. Explanation of AHCA Provision Section 208 would amend IRC Sections 220 and 223 to reduce the applicable rate to 15% and 10% for Archer MSAs and HSAs, respectively. The lower rates would apply to distributions made after December 31, 2016. Section 209. Repeal of Limitations on Contributions to Flexible Spending\u00a0Accounts Current Law IRC Section 125 allowed employers to establish cafeteria plans, benefit plans under which employees may choose between receiving cash (typically additional take-home pay) and certain normally nontaxable benefits (such as employer-paid health insurance)",
      " without being taxed on the value of the benefits if they select the latter. (A general rule of taxation is that when given a choice between taxable and nontaxable benefits, taxpayers will be taxed on whichever they choose because they are deemed to be in constructive receipt of the cash.) ACA Section 9005 amended IRC Section 125(i) to provide that a health FSA cannot be a nontaxable benefit under a cafeteria plan unless the cafeteria plan provides that an employee may not elect for any taxable year to have a salary reduction contribution in excess of $2,500 made to such arrangement. Also, the $2,500 limit is indexed for cost-of-living adjustments for plan years beginning after December 31,",
      " 2013. Explanation of AHCA Provision Section 209 would repeal IRC Section 125(i), the contribution limit for health FSAs, effective beginning tax year 2017. Section 210. Repeal of Medical Device Excise Tax Current Law Section 1405 of the HCERA created a new excise tax that is imposed on the sale of certain medical devices. The tax is codified in IRC Section 4191. The tax is equal to 2.3% of the device's sales price and generally is imposed on the manufacturer or importer of the device. The tax took effect on January 1, 2013.",
      " The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) provided a two-year moratorium on the tax. The tax does not apply to sales in the period beginning January 1, 2016, and ending December 31, 2017.  Explanation of AHCA Provision Section 210 would provide that the medical device excise tax does not apply to sales after December 31, 2016. Section 211. Repeal of Elimination of Deduction for Expenses Allocable to Medicare Part D Subsidy Current Law Employers that provide Medicare-eligible retirees with prescription drug coverage that meets or exceeds set federal standards are eligible for federal subsidy payments.",
      " The subsidies are equal to 28% of plans' actual spending for prescription drug costs in excess of $400 and not to exceed $8,250 (for 2017). The subsidies were created as part of the Medicare Part D prescription drug program (Medicare Modernization Act of 2003; P.L. 108-173 ) to provide employers with an incentive to maintain drug coverage for their retirees.  Employers are allowed to exclude qualified retiree prescription drug plan subsidies from gross income for the purposes of corporate income tax. Prior to implementation of the ACA, employers also were allowed to claim a business deduction for their qualified retiree prescription drug expenses,",
      " even though they also received the federal subsidy to cover a portion of those expenses. ACA Section 9012 amended IRC Section 139A, beginning in 2013, to require employers to coordinate the subsidy and the deduction for retiree prescription drug coverage. The amount allowable as a deduction for retiree prescription drug coverage is reduced by the amount of the federal subsidy received.  Explanation of AHCA Provision Section 211 would repeal the ACA change to IRC Section 139A and reinstate business-expense deductions for retiree prescription drug costs without reduction by the amount of any federal subsidy. The change would be effective for taxable years beginning after December 31,",
      " 2016. Section 212. Reduction of Income Threshold for Determining Medical Care\u00a0Deduction Current Law Under IRC Section 213, taxpayers who itemize their deductions may deduct qualifying medical expenses. The medical-expense deduction may be claimed only for expenses that exceed 10% of the taxpayer's adjusted gross income (AGI), which was reduced for taxable years ending before January 1, 2017, to 7.5% if the taxpayer or spouse was aged 65 or older. The 10% threshold was imposed by ACA Section 9013. Prior to the ACA, the AGI threshold was 7.5%",
      " for all taxpayers. Explanation of AHCA Provision Section 212 would amend IRC Section 213(a) to reduce the AGI threshold to 5.8% for all taxpayers, effective tax year 2017. Section 213. Repeal of Medicare Tax Increase Current Law ACA Sections 9015 and 10906 imposed a Medicare Hospital Insurance (HI) surtax at a rate equal to 0.9% of an employee's wages or a self-employed individual's self-employment income. The surtax, which is found in IRC Sections 1401 and 3101, applies only to taxpayers with taxable income in excess of $250,",
      "000 if married filing jointly; $125,000 if married filing separately; and $200,000 for all other taxpayers. The tax is in addition to the regular Federal Insurance Contributions Act and Self-Employment Contributions Act taxes that generally apply (i.e., Social Security and Medicare taxes). Explanation of AHCA Provision Section 213 would amend IRC Sections 1401(b) and 3101(b) to repeal the 0.9% Medicare surtax, effective for remuneration received and taxable years beginning after December 31, 2022. Section 214. Refundable Tax Credit for Health Insurance Coverage Current Law The federal tax code currently allows two credits to help eligible individuals and dependents pay for health insurance that meets specified standards.",
      " The Health Coverage Tax Credit, codified in IRC Section 35, was reauthorized under the Trade Preferences Extension Act of 2015 with a sunset date of January 1, 2020. In addition, the ACA authorized a premium tax credit for eligible individuals enrolled in exchange coverage, codified in IRC Section 36B, with no sunset date.  Explanation of AHCA Provision Section 214 would amend IRC Section 36B by replacing the text with completely new language, effective beginning tax year 2020. It would establish a refundable, advanceable tax credit for health insurance purposes. To be eligible for the tax credit,",
      " an individual would be required to be covered under a state-certified QHP; to not be eligible for private or public coverage as specified in the section; to be a citizen, national, or qualified alien of the United States; and to not be incarcerated (except incarceration pending disposition of charges). For tax credit purposes, a QHP would be any coverage offered in the individual health insurance market; such coverage would exclude grandfathered plans, grandmothered plans, abortion coverage (except if necessary to save the life of the mother or if the pregnancy is the result of rape or incest), and coverage that consists substantially of either excepted benefits or short-term limited-duration insurance (as defined under current law).  Qualifying family members would include only the individual's spouse,",
      " any dependent of the individual, and any child (aged 26 or younger) of the individual who is enrolled in the same QHP as the individual (or other parent). A qualifying spouse must file a joint tax return with the eligible individual if married to that individual at the end of the tax year (with exceptions). A credit would be allowed for a dependent only by the individual who claims such a dependent for income-tax purposes. The credit amount would be the lesser of flat credit amounts adjusted by age for an eligible individual and that individual's qualifying family members or the amounts equal to the premiums paid by an eligible individual and that individual's qualifying family members for a QHP.",
      " The age-adjusted credit amounts for 2020 would be $2,000 for eligible individuals under the age of 30; $2,500 for those between 30 and 39 years of age; $3,000 for those between 40 and 49 years of age; $3,500 for those between 50 and 59 years of age; and $4,000 for those who aged 60 and older.  The calculation of a given family's credit would take into account the age-adjusted credit amounts applicable to the five oldest individuals only. The total credit amount would be reduced (but not below zero) by 10%",
      " of any amount that MAGI (as defined in the section) exceeds $75,000, or $150,000 for a joint tax return (MAGI limitation). The maximum tax credit amount allowed for an eligible individual and qualifying family members for a given tax year ( aggregate dollar limitation ) would be $14,000. Beginning in 2021, the age-adjusted credit amounts, the dollar amounts under the MAGI limitation, and the aggregate dollar limitation would be adjusted annually by the CPI-U, as specified. If an eligible individual or qualifying family member has a qualified small - employer health - reimbursement arrangement, the age-adjusted credit amount would be reduced (but not below zero)",
      " by the permitted benefit provided under such an arrangement. For any month in which an individual elects to receive the Health Coverage Tax Credit, authorized under IRC Section 35, such an individual would not be eligible to receive the tax credit authorized under IRC Section 36B. The current deduction allowed for health insurance premiums paid by self-employed individuals for coverage for such individuals (and their families), authorized under IRC Section 162(l), would be reduced (not below zero) by the new tax credit amounts (including advance payments) provided to such individuals. An individual who makes an erroneous claim for an excessive tax credit amount would be liable for a penalty equal to 25%",
      " of the excessive amount. Section 214 would amend ACA Section 1412, relating to the advance payment program, to require the HHS Secretary and the Treasury Secretary to promulgate regulations that they deem necessary relating to protection of taxpayer information, verification of eligibility, proper and timely payments, and program integrity.  Section 214 would go into effect beginning tax year 2020. Section 215. Maximum Contribution Limit to Health Savings Account Increased to Amount of Deductible and Out-of-Pocket Limitation Current Law IRC Section 223 provided for HSAs, which are tax-exempt trusts or custodial accounts established for paying the health-related expenses of an account beneficiary.",
      " HSAs are established and owned by individuals. Eligible individuals can establish and fund HSAs when they have a qualifying high-deductible health plan (HDHP) and no other health plan, with some exceptions. To be HSA-qualified, the HDHP must have a minimum deductible, it must limit out-of-pocket expenditures for covered benefits to no more than a certain maximum level, and only preventive care services can be covered prior to the deductible being met. The minimum deductible amounts and out-of-pocket limits are set by statute and adjusted for inflation. For 2017, the minimum deductible is $1,300 for single coverage and $2,",
      "600 for family coverage. The out-of-pocket limit is $6,550 for single coverage and $13,100 for family coverage. Contributions to HSAs are subject to an annual limit, which is adjusted for inflation. In 2017, the contribution limit is $3,400 for account holders enrolled in self-only coverage and $6,750 for account holders enrolled in family coverage. HSA contributions are either deductible as an above-the-line deduction or excluded from an account holder's gross income.  Explanation of AHCA Provision Section 215 would increase the HSA annual contribution limits for self-only and family coverage to match the out-of-pocket limits for HSA-",
      "qualified HDHPs for self-only and family coverage. The change would go into effect beginning in tax year 2018.  Section 216. Allow Both Spouses to Make Catch-Up Contributions to the Same Health Savings Account Current Law IRC Section 223 established HSAs, which are tax-exempt trusts or custodial accounts established for paying the health-related expenses of the account beneficiary. Eligible individuals can establish and contribute to HSAs when they have a qualifying HDHP and no other health plan, with some exceptions. Contributions to HSAs may be made by eligible individuals, as well as by other individuals or entities on their behalf. Thus,",
      " individuals may contribute to accounts of eligible family members, and employers may contribute to accounts of eligible employees. HSA contributions are deductible as an above-the-line deduction if made by individuals. Contributions made by employers, including through salary-reduction agreements, are excluded from income, Social Security, and Medicare taxes. The aggregate contributions to HSAs are subject to an annual limit, which is adjusted for inflation each year. In 2017, the contribution limit is $3,400 for self-only coverage and $6,750 for family coverage. Individuals aged 55 and older who are not yet eligible for Medicare are allowed to contribute an additional $1,",
      "000 each year. This \"catch-up\" contribution is not adjusted for inflation.  IRC Section 223(b)(5) established contribution rules for married couples. In the case of a married couple, if either spouse has HSA-qualified family coverage and both spouses have their own HSAs, then both spouses are treated as if they have only one family plan for purposes of the HSA contribution limit. In other words, the spouses' aggregate contributions to their respective HSAs cannot be more than the annual contribution limit for family coverage. Their annual contribution limit is first reduced by any amount paid to Archer MSAs of either spouse for the taxable year,",
      " and then the remaining contribution amount is divided equally between the spouses unless they agree on a different division. Each spouse is allowed to make catch-up contributions to his or her respective HSA, provided each spouse is eligible to do so.  Explanation of AHCA Provision Section 216 would amend IRC Section 223(b)(5) to provide that, with respect to the contribution limit to an HSA, married persons do not have to take into account whether their spouse is also covered by an HSA-qualified HDHP. In other words, spouses' aggregate contributions to their respective HSAs could be more than the annual contribution limit for family coverage.",
      " Their annual contribution limit would be reduced by any amount paid to Archer MSAs of either spouse for the taxable year, and then the remaining contribution amount would be divided equally between the spouses unless they agreed on a different division. If both spouses are eligible to make catch-up contributions before the close of the taxable year, then each spouse's catch-up contribution is included when dividing up the contribution amounts between the spouses. This provision would effectively allow both spouses to make catch-up contributions to one HSA and would apply to taxable years beginning in 2018. Section 218. Special Rule for Certain Medical Expenses Incurred Before Establishment of Health Savings Account Current Law In general,",
      " withdrawals from HSAs are exempt from federal income taxes if used for qualified medical expenses described in IRC Section 213(d), except for health insurance. However, withdrawals from HSAs are not exempt from federal income taxes if used to pay qualified medical expenses incurred before the HSA was established. Explanation of AHCA Provision Section 217 would amend IRC Section 223(d)(2) to provide a circumstance under which HSA withdrawals can be used to pay qualified medical expenses incurred before the HSA was established. If an HSA were established within 60 days of when an individual's coverage under an HSA-qualified plan begins, then the HSA would be treated as having been established on the date the coverage begins for purposes of determining whether an HSA withdrawal is used for a qualified medical expense.",
      " Section 217 would apply to coverage beginning after December 31, 2017. Subtitle B\u2014Repeal of Certain Consumer Taxes Section 221. Repeal of Tax on Prescription Medications Current Law ACA Section 9008 imposed an annual tax on covered entities engaged in the business of manufacturing or importing branded prescription drugs. In general, the tax is imposed on covered manufacturers and importers with aggregated branded prescription drug sales of more than $5\u00a0million to specified government programs or pursuant to coverage under these programs. Explanation of AHCA Provision Section 221 would amend ACA Section 9008 to provide that the tax would not be imposed effective calendar year 2017.",
      " Section 222. Repeal of Health Insurance Tax Current Law ACA Section 9010 imposed an annual fee on certain health insurers beginning in 2014. The ACA fee is based on net health care premiums written by covered issuers during the year prior to the year that payment is due. The aggregate ACA fee is set at $8.0 billion in 2014, $11.3 billion in 2015 and in 2016, $13.9 billion in 2017, and $14.3 billion in 2018. After 2018, the fee is indexed to the annual rate of U.S.",
      " health insurance premium growth. Each year, the IRS apportions the fee among affected insurers based on (1) their net premiums written in the previous calendar year as a share of total net premiums written by all covered insurers and (2) their dollar value of business. Covered insurers are not subject to the fee on their first $25 million of net premiums written. The fee is imposed on 50% of net premiums above $25 million and up to $50 million, and it is imposed on 100% of net premiums in excess of $50 million.  Certain types of health insurers or insurance arrangements are not subject to the fee,",
      " including self-insured plans; voluntary employees' beneficiary associations; and federal, state, or other governmental entities, including Indian tribal governments and nonprofit entities incorporated under state law that receive more than 80% of their gross revenues from government programs that target low-income, elderly, or disabled populations. In addition, only 50% of net premiums written by tax-exempt entities are included in determining an entity's market share. ACA Section 9010(j) made these provisions effective for calendar years beginning after December 31, 2013. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) provides a one-year moratorium on the tax for calendar year 2017.",
      " Explanation of AHCA Provision Section 222 would amend ACA Section 9010 to provide that the annual fee would not be imposed effective calendar year 2017.  Subtitle C\u2014Repeal of Tanning Tax Section 231. Repeal of Tanning Tax Current Law ACA Section 10907 created a new excise tax on indoor tanning services. The tax is equal to 10% of the amount paid for such services. The provision is codified in Chapter 49 of the IRC. Explanation of AHCA Provision Section 231 would repeal the tax on indoor tanning services (IRC Chapter 49), effective for services performed after June 30,",
      " 2017. Subtitle D\u2014Remuneration from Certain Insurers Section 241. Remuneration from Certain Insurers Current Law Generally, employers may deduct the remuneration paid to employees as \"ordinary and necessary\" business expenses under IRC Section 162, subject to any statutory limitations. ACA Section 9014(b) added a statutory limitation for certain health insurance providers. Under the provision, which is codified at IRC Section 162(m)(6), covered health insurance providers may not deduct the remuneration paid to an officer, director, or employee in excess of $500,000. Explanation of AHCA Provision Section 241 would terminate IRC Section 162(m)(6), effective beginning tax year 2017.",
      " Subtitle E\u2014Repeal of Net Investment Income Tax Section 251. Repeal of Net Investment Income Tax Current Law HCERA Section 1402 imposed a net investment tax on high-income taxpayers. The tax, which is codified in Chapter 2A of Subtitle A of the IRC, applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts with income above amounts specified in the statute.  Explanation of AHCA Provision Section 251 would repeal the net investment tax (Chapter 2A of IRC Subtitle A), effective beginning tax year 2017. Appendix.",
      " List of Abbreviations ABPs: Alternative benefit plans  ACA: Patient Protection and Affordable Care Act ( P.L. 111-148, as amended)  AGI: Adjusted gross income  AHCA: American Health Care Act ( H.R. 1628 ) AV: Actuarial value CBO: Congressional Budget Office  CHIP: State Children's Health Insurance Program CMS: Centers for Medicare & Medicaid Services CO-OP: Consumer Operated and Oriented Plan  CPI-U: Consumer Price Index for All Urban Consumers CY: Calendar year DSH: Disproportionate share hospital  E-FMAP : Enhanced federal medical assistance percentage  EHB:",
      " Essential health benefits  FMAP : Federal medical assistance percentage FPL: Federal poverty level  FQHCs: Federally Qualified Health Centers  FY: Fiscal year GAO: U.S. Government Accountability Office  HCERA: Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) HDHP : High-deductible health plan H ealth FSAs : Health flexible spending accounts  HHS: Health and Human Services  HI: Hospital Insurance  HIRIF: Health Insurance Reform Implementation Fund  HRAs: Health reimbursement accounts  HRPs: High-risk pools  HSA: Health savings account IRC:",
      " Internal Revenue Code  IRS: Internal Revenue Service  JCT: Joint Committee on Taxation  LTSS: Long-term services and supports  MACRA : The Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ) MAGI: Modified adjusted gross income  MSAs : Medical savings accounts  MSP : Multistate plan PCIP: Pre-Existing Condition Insurance Plan  PHSA: Public Health Service Act PPFA: Planned Parenthood Federation of America  PPHF: Prevention and Public Health Fund  QHPs: Qualified health plans  SHOP: Small Business Health Options Program  SNAP: Supplemental Nutrition Assistance Program SSA:",
      " The Social Security Act  SSI: Supplemental Security Income  TANF: Temporary Assistance for Needy Families\n"
    ],
    "length": 26069,
    "hardness": null,
    "role": null
  }
]